Ten Ways Lean Systems Can Improve Your Organization MicroSkills Session: This section of the Lean Champion was updated in November of 2004 Ten Ways Lean Systems Can Improve Your Organization ©2014 MMTC Michigan Manufacturing Technology Center

Lean Systems Improve Profits by Decreasing Time and Costs! What is it? A philosophy that demands short lead times to deliver defect-free low cost products and/or services A Lean system is achieved by eliminating waste in all aspects of product or service delivery processes. What it is not…. A headcount reduction strategy Demanding more from workers without providing the tools and strategies to achieve more Lean Systems Improve Profits by Decreasing Time and Costs!

The Pricing Model Today Why Lean Systems? The Pricing Model Today Profit = Price - Cost Our Challenge! Our Goal Fixed (Set By The Customer) Profit Burden Any increase in these areas of cost squeezes the profit! Price (Fixed) Labor Materials

Strategic Planning MicroSkill 1 Company Vision A Measurable Strategic Plan is lacking in most organizations. It is impossible to ‘begin with the end in mind’ if the end hasn’t been defined. When people know what is truly important, their behaviors can help you close the ‘execution gap’. A strategic plan can typically be crafted in a day and can fit on one piece of paper. Company Vision Breakthrough Objective TODAY

8 Types of Waste in ANY Process MicroSkill 2 8 Types of Waste in ANY Process Defects Overproduction Waiting Non-utilized talent Transportation Inventory Motion Extra processing Value Added Would it be difficult to train everyone to recognize these wastes in their daily work? Would memorizing this be asking too much?

What Is Meant by Value Added? MicroSkill 3 What Is Meant by Value Added? Value Added (CPR): Those activities that deliver a product or create a service or information that meets customer requirements. Work that the Customer is willing to pay for (will they ever see it?) Work that Physically transforms the product, service or information (Are the before and after ‘pictures’ any different?) Work that is done Right the first time Non-Value Added Activities Those activities that consume time, resources or space, but do not add to the value of the product or service itself. Non-Value Added but Necessary” Does not add value to the product or service but is CURRENTLY NECESSARY (Required by:) Customer Contract or specification QS 9000 or customer standard Government regulation Current “state of the art” of the work method or technology Non-Value Added but Necessary Activities Those activities that do not add value but are CURRENTLY NECESSARY (legal, statutory, regulatory, etc.) Would it be difficult to train everyone to recognize this in their daily work? Would memorizing this be asking too much?

Why is Process Mapping Important? MicroSkill 4 Why is Process Mapping Important? A process map is the best way to understand a process all the way through… not just the pieces that we are already experts on. Every step in every process probably made perfect sense at one time, but rarely are they questioned in terms of value added. We trust everyone is doing their best and they don’t try to make errors, however the ‘magic’ is often what happens in-between the value added work. “If you can’t describe what you’re doing as a process, you don’t know what you’re doing.” W. Edwards Deming

Process Mapping Example: Hospital Inpatient Surgery MicroSkill 4 Process Mapping Example: Hospital Inpatient Surgery Red = Non-Value Added Yellow = Necessary, but Non-Value Added Green = Value Added Purple = Review, Approve or Inspect Blue (diamond) = Decision point

Impact of Batch Size Reduction MicroSkill 5 Impact of Batch Size Reduction 10 minutes • Batch & Queue Processing Lead Time: 21+ minutes for first piece Process A B C 30+ minutes for total order • One-Piece Flow Processing “Make one - Move one!” Process Say: In this example the lead time for first piece of with the batch process is 21 minutes. That 21 minutes is reduced to just 3 minutes if the batch size is reduced from 10 to 1. You will also notice that the large batch size results in lots of WIP. Look at the piles of WIP between operations A, B, and C in the 10 piece batch example. Does it remind you of our company Buzz Electronics? Ask: Large batch size also impact quality. How? It allows defects to pile up between operations, without being discovered by the next process (internal customer). By contrast in a small batch operations, problems are likely to be discovered much more quickly. A B C 12 min. for total order Local departmental efficiencies often come at the expense of the system… 3 min. for first part

5S Workplace Organization MicroSkill 6 5S Workplace Organization A Simple Concept: If we expect our people to be as efficient and effective as possible, we must ensure that the workplace is as efficient and effective as possible. The 5S Recipe: Sort Set-in-Order Shine Standardize Sustain The ‘Hidden’ Week: What if we waste 10 minutes per day because we are disorganized..? Say: In this example the lead time for first piece of with the batch process is 21 minutes. That 21 minutes is reduced to just 3 minutes if the batch size is reduced from 10 to 1. You will also notice that the large batch size results in lots of WIP. Look at the piles of WIP between operations A, B, and C in the 10 piece batch example. Does it remind you of our company Buzz Electronics? Ask: Large batch size also impact quality. How? It allows defects to pile up between operations, without being discovered by the next process (internal customer). By contrast in a small batch operations, problems are likely to be discovered much more quickly.

Standardized Work MicroSkill 7 The Scientific Method: A method or procedure that has characterized natural science since the 17th century, consisting in systematic observation, measurement, and experiment, and the formulation, testing, and modification of hypotheses. Standardized Work: The documented best known method or procedure to produce quality outcomes. When our process deviates from it’s standard, we should expect variable outcomes. Variation is the enemy of any process… Standardization World Class Continuous Improvement Change Say: In this example the lead time for first piece of with the batch process is 21 minutes. That 21 minutes is reduced to just 3 minutes if the batch size is reduced from 10 to 1. You will also notice that the large batch size results in lots of WIP. Look at the piles of WIP between operations A, B, and C in the 10 piece batch example. Does it remind you of our company Buzz Electronics? Ask: Large batch size also impact quality. How? It allows defects to pile up between operations, without being discovered by the next process (internal customer). By contrast in a small batch operations, problems are likely to be discovered much more quickly.

Error Proofing MicroSkill 8 Three States of an Error: Assumption: People do not intentionally make errors, but they are capable of them. Three States of an Error: State 1 The Error is about to occur State 2 The Error occurred but no defect was recognized (yet). State 3 The Error has resulted in a defect. Where we should be focusing Say: In this example the lead time for first piece of with the batch process is 21 minutes. That 21 minutes is reduced to just 3 minutes if the batch size is reduced from 10 to 1. You will also notice that the large batch size results in lots of WIP. Look at the piles of WIP between operations A, B, and C in the 10 piece batch example. Does it remind you of our company Buzz Electronics? Ask: Large batch size also impact quality. How? It allows defects to pile up between operations, without being discovered by the next process (internal customer). By contrast in a small batch operations, problems are likely to be discovered much more quickly. Lots of attention is usually paid here, because this is where the “pain” occurs.

Activity-Based Costing MicroSkill 9 Activity-Based Costing Resources Building, Wages, Benefits, Vehicles, Machines, Offices, Computers, Warehouses, Quality Lab, etc. Activities Case Management, Order Taking, Workforce Training, Documentation, Meetings, Making Something, Performing a service , etc. Objects of Work Case # 12345, Job # 6789, Customer XYZ, Service ABC Say: In this example the lead time for first piece of with the batch process is 21 minutes. That 21 minutes is reduced to just 3 minutes if the batch size is reduced from 10 to 1. You will also notice that the large batch size results in lots of WIP. Look at the piles of WIP between operations A, B, and C in the 10 piece batch example. Does it remind you of our company Buzz Electronics? Ask: Large batch size also impact quality. How? It allows defects to pile up between operations, without being discovered by the next process (internal customer). By contrast in a small batch operations, problems are likely to be discovered much more quickly. Not understanding true costs at the activity level often leads to poor decision making and excessive expense. Most accounting systems are not designed to answer these questions, therefore critical business questions are typically never truly answered.

Kaizen MicroSkill 10 Assumption: There is always room for improvement Realities: There is rarely an established improvement methodology in most organizations. This is typically because there is no strategic plan that dictates what must be improved (i.e. ‘how much’ and ‘by when’ is never discussed or written down). Most people already have great ideas and they are DYING for you to ask!!! Kaizen is a rapid process improvement methodology with a simple premise... Improvement cannot be made and sustained without the full cooperation of the people who must do the work. Dictating improvement is what most organizations do… and it rarely works. Say: In this example the lead time for first piece of with the batch process is 21 minutes. That 21 minutes is reduced to just 3 minutes if the batch size is reduced from 10 to 1. You will also notice that the large batch size results in lots of WIP. Look at the piles of WIP between operations A, B, and C in the 10 piece batch example. Does it remind you of our company Buzz Electronics? Ask: Large batch size also impact quality. How? It allows defects to pile up between operations, without being discovered by the next process (internal customer). By contrast in a small batch operations, problems are likely to be discovered much more quickly.

The Michigan Manufacturing Technology Center (MMTC) QUESTIONS? Robert Stauffer Lean Program Manager The Michigan Manufacturing Technology Center (MMTC) rstauffer@mmtc.org 734-634-8296