Strategic Perspective to Fleet’s Total Cost of Ownership

Most Organizations Struggle to Stay Competitive While a few seem to find ways to become truly exceptional!

The DIFFERENCE? Becoming Principle Focused Correct Principles! Traditional wisdom is frequently based on: Incorrect or outdated principles Only one principle at a time

Becoming PRINCIPLES Driven THINKING BELIEFS BEHAVIORS OPERATIONAL EXCELLENCE Culture A WAY OF THINKING WHICH IS GUIDED BY THE UNDERLYING PRINCIPLES. The Toyota thinking system is created by these core lean principles. Behavior depicts the organizational culture, this is why we assess to the behavior – you can’t fake it.

Example If it’s not broke, don’t fix it. Traditional ‘common sense,’ that doesn’t make any sense at all

Shigeo Shingo This is one of Dr. Shingo’s proudest moments although it is not apparent. Shigeo Shingo was one of the most prominent thinkers and practitioners as it related to the principles of Lean Certainly the most prolific at capturing his experiences and learning and writing them for the benefit of others Utah State University honored Dr. Shingo’s life work in 1988 by bestowing the honorary Doctorate degree upon him This really was one of his proudest moments Shortly after this event the Shingo Prize as a recognition program was developed and launched

WHY HOW KNOW- Shigeo Shingo IF IT’S NOT BROKE, BREAK IT CHALLENGING THE STATUS QUO – PRINCIPLE FOCUSED Dr. Shigeo Shingo new a simple truth that seemed to escape so many…sustaining a culture of continuous improvement was not about being an expert in using the tools and systems, but asking the deeper questions “what’s the need”, “why are you doing it this way.” He had a nervous itch to always seek out areas where problems didn’t seem to exist. And challenged the paradigm “if its not broke don’t fix it.” His philosophy was “if it’s not broke, brake it”, that way we can see how to improve and fix any thing that might interrupt flow in the future. (RI-4)

Cost Management/Control How is it that so many organizations focused on lower costs, never achieve greatness (or real significant cost reduction, for that matter)?

Cost Management/Control Narrow focus? Wrong focus?

What is the Correct Principle? Accelerate the FLOW of VALUE And its converse – Identify and Eliminate Waste

Focus on Flow of Value What is value? What is waste? What is flow? Flowing Value – Principle based Focus! Identify and Eliminate Waste – Everyone can contribute – every day

7 Wastes Over-Production Inventory Waiting Defects Motion Transportation Over-Processing

Economies of Flow Reduced Lead Time Increased reliability and predictability of results Reduces Flow Time Matches supply to demand and sustains pricing levels Improves responsiveness to demand and product changes Reduces overall customer inventory Reduces customer time to market (or similar)

Economies of Flow Cost Quality Productivity Reduced costs of poor quality – inspection, rework, scrap, etc. Quality must improve as flow velocity increases Less inventory makes defects more obvious Productivity Decreases work time that is non-value added Reduced overhead functions like: Purchasing Planning & Control All accounting for these Reduced inventory control points and complexity Decreases needless movement of product

Economies of Flow Cost (cont.) Increased Value Lower capital investment Less space Smaller equipment & less complexity Lower inventory costs Significantly improved operational equipment availability Increased Value Less Feedback Delay speeds improvement rate Closer positioning improves communication and feedback Complex systems improve rapidly Clear determination of value added and non-value added

Necessary but NOT Sufficient The principle - Flowing Value - is absolutely necessary There are other principles that are also required to achieve greatness The other principles magnify the impact of Flowing Value

WHAT ARE THE PRINCIPLES OF OPERATIONAL EXCELLENCE?

SHINGO MODEL EXCELLENCE for OPERATIONAL THE SHINGO MODEL for OPERATIONAL EXCELLENCE Represents a major transition for The Shingo Prize Have spent 20 years promoting, teaching, encouraging and recognizing in manufacturing sector Name change from Manufacturing Excellence to Operational Excellence is critical in defining our future Will share details of what has changed Why it has changed Information about the new model developed to assist with Lean transformations Finally where we are going in the near future

10 Principles Nurture humility and respect for the individual. All value is created through processes. Maintain constancy of purpose. Seek perfection. See complex systems holistically, dynamically, and as closed loops. Seek to understand value from the customer’s point of view. Value can only be created with demand. Accelerate the flow of value. Embrace Jidoka: Separate people from machines and  Stop and Fix Ingrain scientific methods throughout the organization. (Everyone is a scientist)

High Velocity Organizations Imbed all of the principles of ‘operational excellence’ Recognize the interdependence of the of the principles Nurture a culture of total employee involvement in rapid continuous improvement Achieve incredible results consistently

Principles Apply Everywhere Management Planning Quality Delivery Cost Financial Human Resource Information Administrative Product/Service Development Supply Operations Customer Relations Concepts derived from Hino's book, "Inside the Mind of Toyota" MIDDLE MANAGERS: Develop systems in accordance with top management's direction Internal Support Systems TOP MANAGEMENT: Exerts leadership through principle based paradigms and culture, Business Systems EVERYONE: Quietly engages in work system improvement (kaizen) Leaders P 80% Managers S 80% Employees T 80% (FLIP CHART)

ADDITIONAL TOPICS AS TIME PERMITS

Mental Models Traditional Mental Models (Not based on Principles) Standard Costing Managers/Engineers make all improvements Keep moving even if we are going in the wrong direction Empowering workers is giving up control Cost control systems control costs

Application of the model — like real transformation — is not a sequential, well-cadenced progression throughout a company. The Shingo levels of transformation can vary within a dimension or business process, and, further still, some aspects of a business process might be developed to an Enabler dimension while others operate at a more advanced Process-Focused Improvement dimension. II. The Shingo Prize Model a. Levels of Transformation

LEADERS MANAGERS EMPLOYEES T LEADERS MANAGERS EMPLOYEES S PRINCIPLES T P SYSTEMS S P TOOLS Misconception is that a Lean organization is ONLY Principle focused…not true. They need to have all 3 Focuses.

THE PERFECT SYSTEM… can not be designed into its work from the start…no brain trust could ever figure out in advance all the little things that could go wrong. Share story Three Mile Island, pg 46-47 Chasing the Rabbit.

3 Mile Island Story COMPLEXSYSTEMS