Issue 3 Volume 2
| April 2012 | www.leanmj.com
Get with the schedule Examining the importance of structured flow.
IN THIS ISSUE: The meaning of flow: Planning and scheduling should be part of any lean transformation. Kate Mackle of Thinkflow and John Darlington of Value Flow Consulting share their thoughts on why these functions are essential if a business is to achieve results. Standard work: how Weetabix does it: Jon Parry, performance improvement manager at cereal manufacturer Weetabix, discusses the implementation of standard work for front line team leaders. Sustaining lean in a financial institution: Reuben Karuna-Nidhi of Deutsche Bank shares with LMJ readers the main topics being discussed at the bank as it embarks on a lean programme in its Global Technology Production organisation. Lean, a must-do: This month LMJ looks at lean in Germany, focusing in particular on an increasingly popular improvement methodology, the Toyota Kata. Designing the system: In this month’s update on SCGM for the Lean Diary, Sandra Cadjenovic talks about the Pilot Phase of the company’s continuous improvement programme. CI? Not good enough anymore: Most continuous improvement programmes fail, and yet we seem not to be able to stop following the old ways. Ýr Gunnarsdóttir of Nimbus and Brenton Harder of Credit Suisse discuss why CI as we know it needs to change, and how this can be accomplished. The Lean Management Journal is supported by the Lean Enterprise Research Centre, Cardiff Business School
to t h e lean
jo u rnal
Dear reader, Toyota Motor Corporation demonstrated the supremacy of a lean production system over conventional mass production decades ago. Back then American and European car makers held excessive inventory and did all they could to avoid halting the production line, favouring rework over a structured approach root cause analysis. By contrast, the Japanese understood the importance of creating real flow.
Editorial director John Bicheno
By analysing demand and knowing the needs of customers, a lean company can effectively understand where to allocate resources, in terms of people, equipment and time. It is no coincidence that flow is a core lean principle: it helps identify problems, which are nothing but opportunities to eliminate waste and improve processes.
Contributors Tim Brown Sub-editor
Yet, scheduling is not as easy as many assume. This issue of LMJ will help you to understand this important activity better.
Contributions in the April issue come from John Darlington and Kate Mackle (page 11), who explain the importance of coupling flow and pull with planning and scheduling in order to create a business-wide lean system. On page 7, Mark Spearman looks at the characteristics of a dynamic risk-based scheduling system.
E d itorial
Commissioning editor Roberto Priolo email@example.com
Art Editor Martin Mitchell
Designers Vicky Carlin, Alex Cole
In order to receive your copy of the Lean Management Journal kindly email b.walsh@ sayonemedia.com, telephone 0207 4016033 or write to the address below. Neither the Lean Management Journal or SayOne Media can accept responsibilty for omissions or errors. Terms and Conditions Please note that points of view expressed in articles by contributing writers and in advertisements included in this journal do not necessarily represent those of the publishers. Whilst every effort is made to ensure the accuracy of the information contained in the journal, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrieval system or transmitted in any form or by any means without prior written consent of the publishers.
Our Process Focus this month concentrates on financial services. Reuben Karuna-Nidhi of Deutsche Bank shares the institution’s approach to change (page 24), while Brenton Harder of Credit Suisse talks about how BPM can help banks to react better to increasingly stringent regulation (page 19). For It’s a lean world LMJ travels to Germany to examine how the “Toyota Kata movement” for practising creativity is gaining momentum in the country (p29). Expanding on this theme, this month’s special feature proposes a new improved model for continuous improvement for, despite constant advances in lean research and the refining tools and approaches, too many programmes still fail to achieve real, sustainable results for businesses. I hope you enjoy reading this issue of the journal and look forward to meeting old and new faces at LMJ’s annual conference in Birmingham on May 29th. We have great things in store for this year’s event, with a number of headline speakers already confirmed and sessions devised which will guarantee food for thought. For more information, go to the Events pages at the end of the issue. Happy reading,
Commissioning Editor, Roberto Priolo
contents APRIL 2012
04 Lean News 05 Introducing the editors 06 What planning can do
Jacob Austad introduces this issue of LMJ, which focuses on how important scheduling is to develop a truly lean enterprise.
P rinciples & p u rpose 07 Scheduling, before and after lean Mark L. Spearman of Factory Physics explains how a system that works in rich mix/low volume environments, reduces waste and stock and increases throughput can be developed.
11 The meaning of flow
Planning and scheduling should be part of any lean transformation. Kate Mackle of Thinkflow and John Darlington of Value Flow Consulting share their thoughts on why these functions are essential if a business is to achieve results.
14 Standard work: how Weetabix does it
Jon Parry, performance improvement manager at the cereal manufacturer, discusses the implementation of standard work for front line team leaders.
P rocess foc u s 19 Managing the regulatory onslaught using BPM
Strict regulations are an issue companies in many sectors are familiar with, banks perhaps being the most targeted. In this article, Brenton Harder of Credit Suisse explains how BPM and the development of flexible operations can help them to respond to new requirements.
24 Sustaining lean in a financial institution
Reuben Karuna-Nidhi of Deutsche Bank shares with LMJ readers the main topics being discussed at the bank as it embarks on a lean programme in its Global Technology Production organisation.
2 8 B ook revie w
John Bicheno reviews Kevin Duggan’s Design for Operational Excellence, McGraw Hill, 2012
2 9 I t ’ s a lean w orl d Lean, a must-do
This month, LMJ looks at the deployment of lean in Germany, the most virtuous country in the EU and one that has made of excellence a way of life. It’s not just a strong manufacturing heritage supporting the development of new technologies and competitive products, but also the adoption of alternative “approaches” to improvement like the Toyota Kata.
3 4 L etters an d comment
Contributions in this issue come from Richmond Hulse, managing director of XONITEK Consulting, who shares with readers an interesting discussion he witnessed at an Operational Excellence Society meeting in New York; and Roddy Martin of Competitive Capabilities International, who suggests an interesting model for management.
3 7 L ean d iary
In this column, LMJ observes the lean journey of Serbian manufacturer SCGM. Director Sandra Cadjenovic gives the most recent update on the company’s progress in its continuous improvement programme.
4 0 S pecial feat u re CI? Not good enough anymore
Most CI programmes fail, and yet we stick to the old ways. Ýr Gunnarsdóttir of Nimbus and Brenton Harder of Credit Suisse discuss why continuous improvement as we know it needs to change.
4 4 T h e F ift h C ol u mn
This regular column, written by John Bicheno, discusses some of the most interesting and controversial topics keeping the debate within the lean community alive.
4 6 E vents
Find out about the latest lean events coming your way
Elizabeth House, Block 2, Part 7th Floor, 39 York Road, London, SE1 7NQ T +44 (0)207 401 6033 F + 44 (0)207 202 7488 www.sayonemedia.com. Lean management journal: ISSN 2040-493X. Copyright © SayOne Media 2012.
www.leanmj.com | April 2012
LMJ T ri d ent la u nc h es contin u o u s improvement programme The Social Investment Group, which provides homes to 6,000 people across the Midlands, has adopted a new, bespoke continuous improvement model, Sight, Insight, Foresight, which places the views of customers and communities, collected by a research and scrutiny programme, at the core of service development and delivery. Trident has developed the new model to augment existing customer scrutiny approaches, to underpin its new social investment ethos and to maximise value for money to customers and other stakeholders. Sight, Insight, Foresight includes a virtuous feedback loop through deployment of a range of qualitative and quantitative research techniques to help customers shape services on an ongoing and co-production basis. It also captures a range of value for money and community impact data.
T raining pays off for A lbis Albis, a Knutsford-based thermoplastic compounder and distributor, managed to save over £350,000 and 3,000 hours in machine time and to increase its manufacturing capacity by about 10% after undertaking training with The Manufacturing Institute. Continuous improvement project leader Mark Norbury led a team to implement business improvements which have increased the company’s capacity, streamlined operation processes and improved employee engagement within the business. Norbury said: “The tools and techniques we have learned have already made a significant impact in terms of savings, increased capacity and improved efficiency and this is reflected in our profits which are increasing year-on-year. We’re now integrating lean thinking across the whole business, not only in production but in areas like finance and sales.”
G aming mac h ines man u fact u rer w ins operational e x cellence a w ar d International Game Technology was honoured with the Operational Excellence Award as part of the 2012 Manufacturing Leadership 100 Awards programme with the Manufacturing Executive organisation. The ML 100 Awards honour top manufacturing organisations worldwide for their achievements in transformational business projects and innovation. IGT was praised for its project to transform its production processes and systems with a keen focus on reducing costs and enhancing agility. Matthew LaBranch, vice president of manufacturing operations at IGT, said: “The integration of hard work and dedication by IGT’s engineering, manufacturing and supply chain teams has allowed us to be more flexible and responsive to our global customers’ needs,” said.
If you have any news that you think would interest and benefit the lean community please let us know. Send submissions to the commissioning editor Roberto Priolo: firstname.lastname@example.org
T esco to create 2 0 , 0 0 0 jobs in t h e U K In what PM David Cameron deemed a “massive confidence boost” to the economy, supermarket giant Tesco announced it will create 20,000 jobs over the next two years. The company, often considered a lean champion, will particularly focus on offering opportunities to young unemployed people. Jobs (in the form of full- and part-time placements, but also apprenticeships) will be created by improving existing stores and opening new ones. The announcement came after Tesco issued its first profit warning in 20 years. Tesco’s move will help give more young people access to customer service skills and team skills. Tesco UK chief executive Richard Brasher commented: “This announcement is a huge shot in the arm for the UK economy. At the core of this investment is our determination to deliver the best shopping experience for our customers, bar none.”
I ntro d u cing
yo u r
editor s Jacob Austad LeanTeam, Denmark
Articles for LMJ are reviewed and audited by our experienced editorial board. They collaborate on comment against articles and guide the coverage of subject matter.
Professor Zoe Radnor
Cardiff Business School
Bill Bellows Pratt & Whitney Rocketdyne
Lean Enterprise Research Centre, Cardiff Business School
Ebly Sanchez Volvo Group
Peter Watkins GKN
Dr Keivan Zokaei
Warwick Manufacturing Group, University of Warwick
More information on our editorial board, their experience, and views on lean is available on the LMJ website: www.leanmj.com
www.leanmj.com | April 2012
I N T R O DU C T I O N WRITTEN
A u sta d
What planning can do S
omeone once said, “Failing to plan is planning to fail.” Looking around, it seems that organisations have been listening, as there is a lot of planning going on. Project planning, demand and supply planning, logistics planning, career planning, traffic planning, and so on. The interesting question is whether we pay too much attention to planning instead of designing processes capable of dealing with demand variation. Planning is (to a large extent) at the heart of lean and influences lead time, process performance, costs and quality and should therefore be subject to a thorough focus. As lean successfully expanded across industries, it is surprising to see planning play such a small part in the mind of senior management. Planning is often delegated to specialists, who are of course very good at it, but most of the times don’t see the bigger picture. This might lead to silo thinking and evidently to planning for the wrong reasons.
In all simplicity, planning is no more than guessing on the future (some do it better than others) and this is the reason why it is also good for learning – which is the heart of Deming’s (and Shewhart’s) PDCA cycle. If this is forgotten, there is a risk that planning is done for the wrong reasons, namely optimising in functions. All the lean planning tools seem to be very simple and easy to implement, but before using them the nature of the problems to be solved must be understood. Take for instance takt time: some people believe it’s the pace of your production process – but that is your cycle time. Takt time might be better explained as the customer demand rate and because customer demand (always) varies over time the takt time also needs to be seen (calculated) in the same period. The goal is not to make cycle time match takt time but to ensure that stable processes including its waste meet customer demand. Then the focus would be on eliminating waste in the process to improve process capability. A good place to start is to study demand, as this will help you to reduce guessing and to be better in using PDCA.
The two main reasons for planning should be ensuring value flow and learning.
Don’t be a tool head! Instead use planning for learning and use the learning to improve your system and make it flexible enough to deal with variation in demand. Once you understand your problem (root causes) you can learn about the lean tools and apply the one that is best placed to solve your problem.
Value can only flow when it is considered from a customer perspective as well as end-to-end in the supply chain. This should be the focus, instead of planning per department.
Scheduling is a broad topic and I recommend that you spend some time understanding the principles and general elements before jumping to solutions. Be pragmatic and curious before setting off, as this will help you not to fail.
p u rpose
principles & p u rpose
Scheduling, before and after lean S c h e d u ling before lean Modern efforts dating back to the early 20th century dealt with inventory control, efficiency, and timely delivery. Computers were first used by Joseph Orlicky in the development of material requirements planning (MRP) at IBM in the mid 1960s. MRP lived up to its name and planned material requirements without considering the capacity available. Thus, the basic problem with MRP is twofold:
In this article, Mark L. Spearman explains how to develop a system that works in rich mix/low volume environments and, just like the Toyota Production System, minimises waste and stock while maximising throughput.
It assumes the time to traverse the production facility depends only on the part being produced and not on the current work in process within or utilisation of the facility. Consequently, planned lead times must be inflated to account for the times when the facility is overloaded resulting in inflexible, long lead times along with high inventories.
Lot sizes are determined without considering capacity. Instead, the classic lot sizing problem considered the trade-off between an inventory carrying cost and a setup cost. The setup cost provides a clumsy alternative to a capacity constraint and was typically overstated, resulting in high inventories and a loss of flexibility.
MRP II (manufacturing resources planning) attempted to address these problems by adding additional modules to MRP in the form of rough-cut capacity planning and capacity requirements planning. Sadly, these additional modules were essentially a patch that could identify a capacity deficit after the plan was produced by MRP and offered few suggestions of how to remedy the problem. Even so, MRP and its variants continue to form the core of most modern ERP systems, including the high-end offerings of Oracle and SAP. For this reason, almost all companies that use MRP (in ERP) also have ad hoc spreadsheets to massage the MRP output before using the results on the shop floor. More recently, ERP companies have offered a â€œsolutionâ€? to the deficiencies of MRP in the form of advanced planning and scheduling (APS) or advanced planning and optimisation (APO). APS and APO are impressive in their ability to model complex situations and provide a means to generate a deterministic schedule for hundreds of jobs running on scores of machines. Nonetheless, there are at least three problems with this approach:
www.leanmj.com | April 2012
sc h e d u ling , before an d after lean M ark L . S pearman
1 2 3
APO/APS systems do not directly consider a lack of knowledge (e.g., forecast) nor do they consider randomness in production or demand. Such systems require an enormous amount of basic data to specify run rates, setup times, labor availability, shop schedules, etc.
Because scheduling problems are typically large and almost always NP hard, it is impossible for the fastest supercomputer imaginable to find an optimal solution within a reasonable time (i.e., less than a year). For this reason, many of the offerings do not attempt to develop a schedule but instead leave it to the planner to use the APO as a “what-if” tool to evaluate different alternatives.
While using APO has helped with some particularly difficult scheduling problems, many companies we have dealt with have found few benefits from a system that requires an enormous effort to keep running.
T h e T oyota P ro d u ction S ystem While America was increasingly experimenting with the use of the computer in the factory, Toyota was developing means to control production that were simple, effective, and did not use computers. It is now known as the Toyota Production System, the focus of which is to operate with the minimum resource required to consistently deliver just what is needed, in just the required amount, at just the right time. A number of elements are key to making TPS work:
Takt time production. The takt time is simply the average time between outputs of the line. For an assembly line, it is the cycle time of each station on the line something that is easy to control in an assembly environment. It is considerably less straight forward to implement such a takt time in an asynchronous line consisting of separate process centers. Much mystery is removed, however, when one realises that for any given production period there are only so many takts. If the takt time is 30 seconds then in 8 hours there should be 960 units produced. A production quota may not sound as fashionable as a takt time, but the two are equivalent. Nonetheless, it is much easier to implement a takt time/production quota on a paced assembly line than it is on a multi-flow job shop. Indeed, this is one of the primary challenges facing the use of the TPS in manufacturing environments facing a high mix/low volume demand. The use of a takt time or a production quota implies the existence of a virtual queue. Such a queue need not contain material but only the information regarding jobs to be released. We are guaranteed such a queue because, under random demand, production never exactly equals demand. Consequently, when demand exceeds production, the virtual queue increases and when it falls below production, the queue falls. Recognising the existence of this queue and then providing direct controls is an important constituent of dynamic resource scheduling.
Figure 1: Elements of the Toyota Production System
Takt Time Releases
Supermarket Stock For make-to-stock For “pull” protection
One-piece flow. A goal of the TPS is to be able to produce one part of a kind at a time. This is a worthy goal because, as Factory Physics shows, one piece flow with no variability results in minimum cycle time with maximum throughput. Of course, when there is variability, as there always is in the real world, there must be some form of buffer. Thus, almost all assembly lines run with a takt time that is significantly longer than the average process time of the bottleneck operation. Longer takt times imply lower production rates. So if a process that requires 25 seconds on average has a 30 second takt time, it is effectively running at 83% utilisation. This is equivalent to scheduling five days of work in a six day period. When understood in this way, one-piece flow becomes more understandable and less of a magic trick. When there are significant setups, it gets even trickier. The “solution” is to reduce setup times to 10 minutes or less. When this can be done, onepiece flow can be very good subject to the qualifications given above. However, there are many situations in which this simply is not possible (for example, a furnace). In such a case, one-piece flow would result in a severe increase in waste in the form of under-utilised equipment.
Recourse capacity. An important benefit of a production quota is the triggering of make-up time. The classic formulation of the Toyota Production System would schedule 10 hours of work for every 12 hour period. If any problems occurred during the 10 hours, there would be two extra hours to catch up. Of course, such a setup implies a maximum utilisation of only 83%. But the use of this capacity buffer does a great deal to make achieving production goals more feasible without requiring enormous amounts of inventory. The DRS system will employ a similar capacity buffer but one that is dynamic in that it does not require idle time if the make-up time is not needed.
principles & p u rpose
Dynamic risk base d sc h e d u ling The basic idea is this: Instead of creating a detailed schedule for a single situation that will never occur, create a set of dynamic policy parameters that works for a range of situations. The TPS uses one such system. The dynamic policy parameters are the takt time, the kanban levels, and the make-up time. No schedule is created for lines feeding the assembly line. Those lines are controlled by kanban squares. Whenever a square is unfilled, fill it! Likewise, there is not a schedule of the use of make-up times. When make-up time is needed, use it! However, to make it work in a low volume/rich mix environment one needs to understand the essence of pull production.
CONWIP also provides many of the benefits of takt time production. This is because the entire line will run at the rate of the bottleneck naturally, that is, without scheduling. Consider the example of the dynamically controlled system shown in figure 2, where we can sell all we can make. The second machine from the left in the top fab line is the bottleneck for the entire factory. Thus that fab line is controlled with a bottleneck CONWIP loop that initiates the start of a new job as soon as the WIP falls below the CONWIP level regardless of how much stock is present. The bottom line has abundant capacity and can always keep up with the bottleneck. For this reason it is controlled with a non-bottleneck CONWIP loop which starts the next job only when the WIP plus stock level falls below the CONWIP level. The result is a factory in which every machine runs at the bottleneck rate.
Fab Line 1 (BN)
Assembly Fab Line 2
Figure 2: Dynamically controlled system with bottleneck
Pull production. The word â€œpullâ€? has caused vast confusion, but what it means is the control of work-in-process (WIP) as opposed to trying to control the start of new jobs. Knowing this, it becomes easy to implement a generalised pull system known as CONWIP that will work in a wide variety of manufacturing situations - even those with high mix and low volumes.
Obviously the machines in the top fab line must run at the bottleneck rate since they are directly linked to it. Assembly must run at the bottleneck rate since it cannot assembly parts faster than Fab Line 1 can create them. Therefore, the bottom fab line also runs at the bottleneck rate because it is receiving a start signal from the assembly operation that is running at the rate of the bottleneck. Thus, every machine is running at the bottleneck rate, with no scheduling. Regrettably, simple configurations like the Toyota Production System and the one described above have limited applicability and are not generally applicable to a wide variety of manufacturing environments such as job shops and instances with a high mix of parts that may have low volumes. Moreover, some of the dynamic parameters are not optimised for performance. For instance, kanban levels are usually set with a simple heuristic formula and lot sizes are set as close to one as is possible. Neither approach is optimal and can be very important in high mix, low volume environments.
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sc h e d u ling , before an d after lean M ark L . S pearman
The good news is that we have all the elements to create a generalised TPS that considers risk and randomness dynamic risk-based scheduling. The elements are:
b. Instead of takt time production we apply the CONWIP release strategy. CONWIP naturally provides a smooth flow at the rate of the bottleneck as well as limiting WIP. This means that planned work orders become active work orders (WIP) only when the WIP level in the line falls below the maximum CONWIP level. WIP is calculated in terms of “equivalent WIP units” in order to account for routings with different lengths in a single flow.
Production planning is performed using traditional MRP to generate planned work orders with some important differences. Although MRP has a poor reputation, it does provide a hierarchical planning and scheduling system. Its deficiencies are addressed by periodically optimising the traditional parameters such as lot size, safety stock and planned lead time in ways that consider capacity, customer service, and inventory.
c. Recourse capacity is managed using a virtual queue and a capacity trigger. When planned work orders exceed a pre-determined maximum virtual queue level, the make-up time is authorised. This is done in such a way as to prevent late jobs without requiring a large capacity buffer at all times. In other words, instead of keeping an extra two hours for every 12 hour shift, we provide for a weekend shift for every week. Thus, if the weekend shift is not needed, it is not used.
a. Instead of insisting on a lot size of one, we compute optimal lot sizes that minimise inventory and out-of-pocket setup costs subject to capacity and service constraints. b. Instead of a fixed assignment of jobs to lines, we dynamically assign jobs to minimise the maximum utilisation of any machine in the system. This results in lower overall cycle times and less WIP.
If demand rises to the point where the system can no longer meet it, the virtual queue will increase to the point where the make-up time is needed. If this happens too often, the system will be re-optimised (shift schedules, workforce, lot size, etc.). If demand falls, the virtual queue will be empty indicating the need to reduce capacity. If there is no make-up time available (for example in a 24/7 schedule), then the only remaining buffer is time. Consequently, due dates will be pushed out to match what the system is capable of meeting. The use of dynamically quoted due dates is a key part of the dynamic risk-based scheduling strategy.
c. Rather than using heuristic inventory policies such as those used in kanban, we compute optimal levels of safety stock, days-of-supply, and planned lead times that require the minimum amount of inventory for the available capacity and desired customer service level. d. Instead of establishing a WIP level for every part at every work station as in kanban, WIP levels for an entire flow are optimised resulting in minimum WIP and cycle time while maintaining a given throughput.
The result is a system that: e. As opposed to the fixed lead times in traditional MRP systems, we periodically compute planned lead times based on anticipated load levels. Process centres with higher loads have longer lead times while those with low loads have much shorter lead times. The planned lead times include time spent in the virtual queue.
Dynamic execution is performed without a published schedule. a. Planned work orders from the optimised MRP are not started on the “start date” (i.e., due date less planned lead time) unless allowed by the generalised pull system, CONWIP. Instead these are placed in a virtual queue awaiting the CONWIP pull signal. Thus, when demand drops, production goes down and when demand increases, production rises, within limits.
Achieves the goals of the Toyota Production System in that it eliminates as much waste as is possible by minimising WIP, maximising throughput, maintaining on-time delivery and minimising inventory.
Eliminates the need to create detailed schedules of every job on every process during its time through the facility.
Works in a rich mix, low volume environment.
The system has been successfully implemented in a number of installations including one in textiles that managed more than 120,000 SKUs in which dye lot integrity must be maintained. The result has been lower inventory, better on-time delivery, and a higher utilisation of labor and equipment. It appears that the dynamic risk-based scheduling system can be applied to a much wider range of environments than the traditional Toyota Production System.
p u rpose
principles & p u rpose
The meaning of flow T
he five Lean Principles have been with us for a few years now. For many, they have been a useful if somewhat abstract guide to how to apply lean in their environment. However, we’ve seen many more businesses struggle to move beyond the application of tools and techniques and create a lean enterprise. We’ve also seen a breakthrough in organisational performance when these businesses start to apply lean at a system level. This caused us to reflect on the wording of the Lean Principles and to consider whether they could be reinterpreted to help more organisations achieve better results faster in their lean implementations. Value and value stream are a good start. Generally speaking, no-one has trouble recognising the requirement to deliver value to the customer and we’ve all had enough experience of failure at the boundary of one silo and another to accept that true improvement must consider the end-to-end process to serve the customer.
Kate Mackle of Thinkflow and John Darlington of Value Flow Consulting talk about the importance to relate the lean principles of flow and pull to planning and scheduling. Without this, they say, it won’t be possible to move from applying lean tools to create a lean enterprise.
Then we have flow. This is easy to imagine: keep value flowing smoothly from one process to another. It’s also easy to achieve if we think of examples like co-locating all the stages of production in one manufacturing cell and working to one-piece flow. Flow has been improved by removing travel and delay between successive stages of value-adding work. In environments with shared resources and more complexity, flow might be attractive to aspire to but harder to achieve. It’s easier to spot where the flow stops because that’s where the waste becomes obvious: inventory, delays, over-processing. And that’s where lean practitioners often fall into the trap of applying tools to attempt local waste reduction rather than redesigning a lean system to eliminate the cause of the waste. Because the failure to flow means that the necessary resources or materials are not available to keep the value-adding work going: either the resources don’t have the capacity or they are already occupied on other activities. The flow stops and we see waste. If we want a continuous flow of value, we have to ensure that the resources have the capacity to accommodate the demand for valueadding activity: where parts, people or materials are needed, we need to ensure their availability. This process is called planning and is the creator of flow. In a lean system, we need planning processes that ensure that we can commit our capacity and materials in line with the customer’s requirement for value. Then we get flow.
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T h e meaning of flo w K ate M ackle & J o h n Darlington
The next principle tells us we need to pull by creating value at the rate which the customer wants, not how it suits us to deliver. Again, this is easily illustrated by tools such as kanban, but is harder to translate to environments where value is created through a complex sequence of processes or multiple resources are required and we need to ensure that their availability is synchronised. Here we need to know when to start the value-adding work and what to do to ensure we deliver value to the customer on time. This process is called scheduling and is the executor of flow. In a lean system, we need scheduling processes that inform resources what to do to keep value flowing: the more self-regulating these processes are, the more responsive we will be to changes in real customer demands.
P lanning as t h e creator of flo w
involved in planning what new markets to be in, what new product features will be required to satisfy them and maybe acquisitions or investments needed. The time buckets for these activities tend to be years. It is not unusual for companies to produce five-year plans and update them annually. If you have ever been involved in constructing a budget for your business or department you will appreciate it is an annual event often broken down into monthly buckets of time.
C omple x ity an d sync h ronisation A lot has been written on lean around the lessons learnt in assembly environments where the primary capacity was people. This is not always the case and the product process characteristics play an important role in determining the success of your system intervention; consider the following types of manufacturing resources:
Every organisation plans and schedules and we all do it in our personal lives. The distinctive differences between the two are the time buckets involved and the fact that scheduling is characterised as a sequence of events. Most people can see why there is a need for planning. Demand is a mercurial thing and putting resources in place takes time. In order to recruit the right amount of resources some sort of estimation of the future is necessary. This is tricky business: there is even a saying, “If you want to give God a laugh tell him your plans”. However, in the absence of divine intervention we must commit to capacity before we build or recruit it and to get it right requires a guess about future demand. This is called risk and, putting bankers to the side for a moment, for those individuals prepared to take it the rewards are large. To enjoy the reward the capacity must be installed at an acceptable cost considering the revenue customers are willing to pay. Generally speaking, the higher up the organisation you go the more likely those individuals are to be involved with planning. For instance, the main board of a manufacturing PLC are likely to be
These processes are difficult to plan and schedule, particularly if you predetermine that takt time and kanban will be the “solution”
S c h e d u ling as t h e e x ec u tor of flo w Scheduling tends to be undertaken lower down the organisation at the operational level and there are a plethora of often expensive tools to assist. Scheduling of resources whether they are processes, machines or people tends to be done over much shorter horizons of time. So you might receive a schedule for the week and there will be a sequence to it. You could expect or hope that having done your planning well, incorporating demand and capacity management, the scheduling would be easy? It is not easy and you can often judge the quality of the scheduling by how frequently the schedule is changed. Being able to hold to a schedule for, say, five days is a quantitative indicator that planning and scheduling are being done well. The more frequently the schedule changes the more likely it is that something is remiss in either the planning or scheduling phases or sometimes both. So what is the problem? In a word, sequencing. A glib response to flow problems is to suggest you simply have to follow the due date sequence of the customer orders or conceivably the works order sequence derived from them. But this ignores the complicating conditions of scheduling which can derail this primary consideration:
Differing lead times from the capacity constrained resource to the due dates;
Changeover on the constraining resource and perhaps dependency of changeover;
Where a constraining resource produces more than one part and both are required by a product;
Where a constraint resource feeds another constraint resource, or one close to being constrained.
Lean principles still apply but we have to be wary of doling out solutions more appropriate to lightweight assembly operations.
principles & p u rpose
F rom a sc h e d u le to p u ll an d sync h ronisation Unfortunately, “pull” in lean circles almost always gives rise to the tool called kanban. This is but one pull mechanism and good though it is in some circumstances it does not fit well in some environments. It is fair to say you can never know enough about your demand and as the customer is the final arbiter of performance a good place to start is with the demand profile. Here we must note that not all customers will have the same service requirements. Some may want instant order fulfilment whilst others are perfectly happy with the lead time response from your system. This helps define make-to-stock as opposed to maketo-order segments of your business; you are likely to experience both. Runners repeaters and strangers (RRS) is a popular lean methodology but if this is your only mechanism for demand analysis you are going to condemn your organisation to make to stock. Why? Well, because demand is never going to arrive in patterns conducive to the RRS order of producing it. Better to analyse the demand frequency pattern, break up the bill of material to look for component commonality or lack of it and understand the product process characteristics before committing to which pull system(s) is the best fit for your business. VAT analysis is also an important consideration. This is a constraint-based mechanism to determine the dominant flow characteristics of the business. VAT Analysis. Plants classified by BOM/Route Shape
S elf reg u lation If the above suggests that sections of the lean movement appear to have turned their backs on sound planning and scheduling principles it begs the question “why?” We would speculate that these misgivings have come about through the frustrations that developed because of expectations that computing power was going to solve scheduling complexity. This seductive idea has been around since the 1970s and many of today’s ERP implementations are still built around the promise of reduced inventories and higher levels of customer service. Failure to live up to the expectations set is beyond the scope of this short article but suffice to say clever IT is “necessary but not sufficient”. The solution lies in the sub-title “self regulation”. Recognise the shortcomings of computer-based scheduling, get people who are responsible for planning and production really engaged in the design of their system and they will respond faster to issues with flow than even the latest real time data capture system. The transformation is often breathtaking and our experience is that by applying intelligent planning and scheduling to organisations attempting a step up from tool-based thinking to system intervention, the bottom line impact is in the region of 5% to 25%.
to concl u d e
Drum buffer rope and CONWIP (Constant Work In Progress) and variations on these themes offer more robust mechanisms for pull in more complex environments.
We believe that it is the failure of many practitioners to relate the Lean Principles of flow and pull to the traditional disciplines of planning and scheduling that prevents them from making the step from applying lean tools to creating a lean system, with the attendant failure to achieve real business results. Planning and scheduling are essential functions in all complex enterprises and we do damage the reputation of lean if we fail to incorporate them in a lean transformation. What can we say about the 5th principle? Perfection is a worthy aim but pragmatism is a good start.
by J acob A u sta d
Kate Mackle and John Darlington remind us of the power of scheduling but also of the pitfalls of doing it wrong. Using the 5 Lean Principles as the storyline helps the reader to keep track and relate the article to something every lean practitioner from time to time - needs to be reminded of.
need for us all not to rely on tools. In a simple and common sense explanation, Kate and John remind us that (a lot of) re-planning should actually make us think whether we could simplify business processes and that scheduling and planning should be used for learning.
The article headline implies the overall aim and highlights some of the basic elements to support flow, especially the
This article and the lessons it contains deserve a second reading.
www.leanmj.com | April 2012
Jon Parry, performance improvement manager at the breakfast cereal manufacturer, presents a model for the implementation of standard work for front line team leaders.
he team leader supervises the process and packing operation and between 10 and 30 operators, technical operators and agency staff. The current role has a strong element of what traditionally would have been termed ‘shift manager’. The team leader conducts the daily review meeting, a key step in the current performance improvement cycle. A literature survey revealed some common themes that are relevant to the implementation of standard work for front line leaders. Having a daily routine is one element, but maintaining process control by ensuring that operators know and follow standard procedures is a stronger requirement. They must uphold and participate in a structured management system and ensure that there is a constant focus on improvement.
p u rpose
Standard work: how Weetabix does it During the course of the research, which covers six different manufacturing business units at Weetabix, I set out to answer these specific questions:
What proportion of team leaders’ time is focused on the value added performance and improvement?
Would the introduction of standard work change this pattern?
What would the driver for implementing standard work for team leaders be?
What would the barriers be?
Can a generalised model be created for the introduction of standard work for team leaders in a manufacturing environment?
To carry out the research a mixed method approach was adopted, which included interviews and focus group workshops. In addition, team leaders completed daily dairies.
principles & p u rpose
A number of key findings emerged, indicating the need for developing a standard work approach in this environment: Disparity between the balance of how the team leaders spend their time and what they believe their priorities should be;
Disparity between the team leaders’ view and their managers’ view of what they believe the priorities should be;
Several ‘distractions’ take the focus of the team leader away from their core role;
Broad agreement on the importance of short interval control and daily review meetings;
Agreement that team leaders should both understand the process and spend time on the plant focusing on keeping the process in control;
Agreement that team leaders should spend time on team development and continuous improvement;
Concern that the team leader group do not all have the required coaching or CI skills required; Desire of both managers and team leaders to move from a reactive to a proactive environment.
Developing a mo d el Combining the information gathered from the literature with the distillation of all the common themes developing in the workshops, questionnaires and interviews, a model for standard work for team leaders in a continuous manufacturing environment is proposed. This model, rather than being a set daily routine for a team leader to follow, is more of a standard approach to what is important. It attempts to define the areas that the team leader must maintain focus on to achieve the maximum production output (or plan conformance in mixed SKU plants) at minimum cost without risk to the safety of people or the quality of the product. Areas of activity that are not entrained in this standard work model will by definition distract the focus away from the standard work and risk the goal attainment. Within the model there is clearly a need for some element of fixed routines, audits, standards and checklists that will aid the execution of the standard work and these can be developed to suit a particular value stream. Short interval control and daily review meetings will be a common feature across business units. At the current lean maturity of the business it is more important to define and agree the philosophy of the model than the absolute detail.
S TA N D A R D W O R K F O R L I N E L E A D E R S
T H E M A N U FA C T U R I N G A N D PA C K I N G P R O C E S S • Regular line walking • Are there any safety, quality or cost risks? • Are the operators carrying out their tasks to the SOP? If not, what is the problem? • Is the process in control? Are the key process and product parameters correct? If not, what is the problem? • Is the workplace organised and visual? • Regular attendance at SIC board • Is it being completed correctly? Are reasons for missing cases being addressed? How can you help? • What is the performance against plan – is there a customer service risk? • Daily review meeting • Reconciliation of lost cases – Identify improvement actions and follow them up – liason with engineering and quality support teams
F O R WA R D PLANNING
• Do we have everything for what is coming next?
• Skills matrix
• Next hour, this shift, next shift, next week?
• Job relations
• Participation in scheduling meeting
• Problem solving skills
• Behavioural standards • What good looks like • Performance management
IMPROVEMENT ACTIVITY • Participating with teams in improvement activities • See, think, plan, do approach • SOP improvements • Problem solving • Learning
Figure 1: The full model for team leader standard work
The model comprises areas of focus that address the key areas of the standard work. These are:
The key inputs to the manufacturing and packing process and monitoring the outputs as early as possible;
Forward planning over the short and medium term horizon to ensure that all materials and labour needs for the next changeover, next shift, next day, next week are covered;
Team development: ensuring that the team as a unit has the skills required to meet production needs and that individuals are developed to their full potential, coached in WGLL and encouraged to take responsibility;
Improvement activity: coaching and working with their teams to improve systems, processes and tasks.
A detailed outline of the model is shown in Figure 1.
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stan d ar d w ork : h o w w eetabi x d oes it J on P arry
T eam lea d er d evelopment
At the current lean maturity of the business it is more important to define and agree the philosophy of the model than the absolute detail
A formal training and development programme needs to be developed that gives the team leaders the skills they require to fulfil their newly defined role. This programme would include the requirements of the standard work model, safety, quality and cost awareness, leadership, coaching and facilitation skills, the principles of SIC and daily review, technical awareness, problem solving and CI skills. Team leaders should have a thorough knowledge of the processes they supervise and the SOPs that their operators are required to follow. Consideration should be given to reward and recognition within the team leader group.
T eam d evelopment
I mplementing t h e mo d el Data were scrutinised again to understand what would need to be put in place to enable the implementation of the model. This has been done using the case study but with the intention to create a generic model. The implementation requirements have been grouped into eight areas:
Role and goal alignment;
Team leader development;
Removing distractions to focus;
Process reliability and robustness;
Integration of engineering support with the standard work model.
R ole d efinition an d goal alignment There needs to be a clear definition of the team leader role that is agreed and understood by both the team leader and the business unit manager. The adoption of the standard work model would in effect define the majority of the role requirement. Goals and KPI targets must be clearly aligned with the business requirements and how these will be achieved. A mutual understanding of the priorities will assist the team leader in decision making.
A formal structured training and development programme needs to be in place for the operator and technical operator groups. This would be over and above the required SOP and job skills. Areas such as team-based problem solving, 5S and visual management should be included alongside behavioural standards. Developing the teams to take more responsibility will allow the team leader to focus on the execution of the standard work model.
R eso u rce availability
People, time and finance need to be available for the team development and improvement elements of the standard work to be executed without jeopardising the primary focus on the manufacturing and packing process. The process needs to be in control before improvements can be implemented. How can the process be kept in control if no-one is focusing on it?
R emoving d istractions Removing or at least managing distractions would create time for the team leader to follow the standard work. Minimising, streamlining and automating administration tasks, reporting procedures and the like will help to release time for standard work. Team leaders need to have good personal time management skills and be effective in their management of ‘time-stealers’ (dealing with a high volume of e-mails frequently came up in the research). Being reactive to the outputs of the system rather than being proactive on the inputs to the system is a major distraction. Getting involved in firefighting is a double edged sword. It takes the focus away from the inputs to the process at the very time when this focus is most needed to regain control. Maintaining the standard work is most important at these times. Similarly, engaging the teams in determining the root causes of these situations and implementing effective countermeasures are also encompassed in the standard work model.
principles & p u rpose
Transfer of information between operators and engineers on different shifts is equally essential to ensure that learnings are captured. The ability to rapidly update procedures and training is also vital. The collection, provision and use of the necessary and appropriate data and reports on which to base decisions must also be standardised.
R ob u st processes an d e q u ipment reliability
The appropriate autonomous and preventative asset care programmes need to be in place to maintain equipment in the best condition. Ensuring that the SOPs are fit for purpose and that operators are trained to a high standard and have the necessary skills and experience to operate the processes is a requirement within this enabler. The team leaders need to know the SOPs for their processes to be able to ensure that they are being carried out effectively and if improvements are needed.
The engagement of the teams in improvement and CI activities can only be sustained if the resources are available to address the issues raised. Comments from the team leader research suggest that their teams are quickly demotivated if the issues they raise are not addressed. Making the planned engineering work visible to operators is one approach being adopted. Indeed training operators to be able to assist engineers in these tasks would be a major step forward to integrating the teams and addressing this area. Engineering issues are clearly not the only factors affecting performance, but they do seem to be significant feature in the interview responses.
S TA N D A R D W O R K F O R L I N E L E A D E R S
F O C U S O N T H E M A N U FA C T U R I N G A N D PA C K I N G P R O C E S S
FOCUS ON F O R WA R D PLANNING
FOCUS ON TEAM DEVELOPMENT
FOCUS ON IMPROVEMENT ACTIVITY
CLEAR ROLE DEFINITION AND ALIGNMENT OF GOALS FORMAL LINE LEADER DEVELOPMENT PROGRAMME FORMAL TEAM DEVELOPMENT, UNDERPINNING KNOWLEDGE AND CI SKILLS AVAILABILITY OF RESOURCES
REMOVE DISTRACTIONS FROM STANDARD WORK ROBUST PROCESSES AND EQUIPMENT RELIABILITY
FORMAL COMMUNICATION CHANNELS
INTEGRATION OF ENGINEERING SUPPORT FUNCTION
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Figure 2: Standard work model showing enablers
Even if the team leader is focused on the process, the process needs to be robust and reliable. The process settings and product specifications need to be well defined and achievable. The team leader cannot ask the appropriate questions required in the standard work model if the process is not defined. It is essential that all shifts operate to the same process protocols. This requires standard work for the operators.
Engineering support needs to be available on the line to supplement operator skills. Not only to anticipate, identify and fix issues that are likely to cause safety, quality or process downtime, but also to pass on their knowledge, experience and skills to operators. Engineering engagement and active participation in the SIC and daily review process is vital to address issues quickly and ascertain the root causes of factors affecting safety, quality and performance.
Development of the SIC board and a formal standardised shift report must be the basis for such a process. This must be backed up by support and coaching from the business unit managers. They must actively confirm that the team leaders are following the standard work and provide help and direction. They must also ensure that any non-conformances raised are addressed effectively, getting to root causes and applying the best available countermeasure. This process confirmation, regular checking that everyone in the chain has done what they are responsible for, begins to form the basis for a tiered approach to standard work through the management levels. Making this visible to all in the plant reinforces the message that everyoneâ€™s role in the system is vital to maintaining control and achieving the goals.
I ntegration of engineering f u nction w it h pro d u ction teams
Good communication channels between team leaders on different shifts are essential. Good reporting tools and a standardised effective handover process will enable this. There needs to be a good process whereby team leaders can catch up on learnings from events on shifts they have missed.
EN AB LERS
C omm u nication
stan d ar d w ork : h o w w eetabi x d oes it J on P arry
S tan d ar d w ork mo d el w it h enablers
A standard work model including the enabling requirements is shown in Figure 2.
T eam lea d er an d team d evelopment mo d el The team leader standard work model requires that the team leader is able to focus on the actual inputs to the process; are raw materials correct, are the operators following SOPs and raising problems and non-conformances, are process settings and interim specifications correct? It is clear from the interviews and discussions that the business currently requires the team leaders to carry out additional duties over and above the standard work; project work, risk assessments, audits and the like. The ability of the team leader to be able to do this additional work without risk to the process stability is determined by both the team leader’s own development and experience and also the development of their team both in terms of skills and attitudes and behaviours. I have developed a simple
The model is expanded to include the primary and secondary focus of the team leader standard work together with the enabling requirements. This now becomes a useful generic model or tool for those in a continuous manufacturing operation environment wishing to implement standard work for their front line leaders. The model creates a virtuous circle as the standard work itself will identify areas where the enablers are lacking or weak and focus attention on them. The stronger the enabler platform the more effective the standard work will be. For example, if the standard work is to ensure that a process is to be controlled to a set point and the indicator is faulty, this will be raised as a non-conformity and corrective action put in place thus reinforcing the ‘robust processes and equipment reliability’ enabler. Similarly, requests to pull the team leader’s focus away from the standard work can be challenged and discussed with the unit management and the appropriate course of action taken.
LINE LEADER AND TEAM DEVELOPMENT MODEL
Ability to allow team to focus on the process stability. Opportunity for Line Leader self development, training and coaching from manager
Ability for Line Leader to take on extra ‘project work’ or additional duties without risk to the process stability
High risk to process stability. High requirement for the Line Leader to follow standard work focusing on the process inputs and outputs Support required for Line Leader
Medium risk to process stability but Line Leader able to concentrate on team development and training
Line Leader Self Development Figure 3: Team leader and team development model model to describe this and assist the business unit manager in assessing the risk to the process and identify where support is required.
Transfer of information between operators and engineers on different shifts is essential to ensure that learnings are captured. The ability to rapidly update procedures and training is also vital
The model defines the level of risk the process is exposed to. A high risk suggests that the process is likely to drift out of control and the team leader’s attention to the primary focus in the standard work model is vital to maintain control. Conversely, a low risk implies that the process will remain in control because all the elements of the standard work model are in place and working effectively and that the team leader can allow their focus to be lessened to allow other work to be tackled. The focus on standard work however must never be dropped completely. I believe the model presents a practical solution for the implementation of standard work for front line team leaders in a manufacturing environment and combines the best practices drawn from the literature with local specific requirements drawn from the research. The standard work model for team leaders as presented here will change as the lean maturity of the organisation develops.
Managing the regulatory onslaught using BPM Firms operating in the financial sector are constantly subject to new, demanding regulations. Brenton Harder of Credit Suisse discusses how banks can respond to this ongoing “attack” by implementing a flexible operating model and management structure.
inancial policies are designed to enforce sufficient regulatory structure and adherence to a set of core requirements, restrictions, and guidelines in order to create an acceptable degree of transparency between banking institutions, individuals and corporations. Given the interconnectedness of the banking industry and the potential impact of large-scale failure on the global economy, it is vitally important for regulatory agencies to maintain control over the standardised practices of banking institutions. Supporters of such regulation often hinge their arguments on the “too big to fail” notion. This holds that many financial institutions (particularly international commercial investment banks) hold too much control over the economy to fail without enormous consequences. Global governmental regulatory reaction to the recent financial crisis has been particularly uncoordinated across nations and jurisdictions. Even before 2008, just in the USA there were 77 major pieces of new regulations containing 27.7 provisions, on average, increasing to 48.8 in the past two decades. Some of these policies and provisions will have a huge impact on the viability and profitability of existing banking models, while other policies will die a slow death due to complexity, governmental
bureaucracy or coordinated corporate resistance. Whatever the case, without transparent and flexible operating models and management structures, many international banks and financial institutions are finding it increasingly difficult to profitably respond to the pace and scale of necessary change to stay ahead of the fragmented regulatory onslaught. To survive, some banks will just add more people and additional committee bureaucracy in an effort to force required reporting and operating transparency, while others will take a more practical and sustainable route to success.
T h e backgro u n d t h e B asel A ccor d s By leveraging simple BPM planning, banks can quickly organise and manage a coordinated response to the regulatory onslaught they face. To illustrate, it is helpful to study one bank’s response to just one of the many regulatory initiatives undergoing live implementation around the world – Basel III. Banks fund their assets through a combination of liabilities and equity. If the total value of a bank’s assets exceeds that bank’s liabilities, the amount of that difference is referred to generally as
the bank’s capital. Besides preventing insolvency, capital is especially important to protect against the risk of loss that is inherent in banks’ assets, and to protect against the volatility in a bank’s liabilities. Banks fund much of their assets through customer deposits. However, such deposits are a risky source of funding because depositors can generally demand that the bank repay them at any time. If depositors withdraw large amounts of money within a short timeframe, the bank could find itself paying such withdrawals with its capital because most of a bank’s assets, such as loans, cannot be liquidated quickly. If the withdrawals are large enough, the bank may exhaust its capital and find itself insolvent. In the recent global financial crisis, the risk of insolvency was an important issue confronting several important banks in the United States. Because of their importance, these banks were considered “too big to fail”, as their failure would have posed systemic risk to the financial system. As a result, the government had to intervene and inject capital into these banks in order to prevent the collapse of the entire financial system. Up until the 1970s, bank regulation lacked, for the most part, international reach. Nations were left to decide for
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M anaging t h e reg u latory onsla u g h t u sing B P M B renton Har d er
Road Map Rules Basel III Requirements
Management Information (MI) Reporting
Inventory of Current Data Sources and Information Systems
Current state assessment
Gap closure recommendations
themselves how to best regulate the banks that did business within their borders. This all changed in 1974, when the Herstatt Bank in Germany failed, highlighting the significant risks that accompany international banking and exposing the need for coherent international cooperation between nations to minimise future risks associated with international banking. In response, the member nations of the G-10 established the Basel Committee on Bank Supervision (BCBS) to focus on matters relating to bank supervision and regulation. The BCBS serves as a forum for its members to discuss issues and problems relating to bank regulation. In the course of these discussions, if the members come to a common understanding or agreement on an issue, the BCBS will issue supervisory guidance and standards relating to that issue. However, the issuances of the BCBS are only advisory in nature and are not binding on the members or any other nation. As a matter of best practice, though, the members of the BCBS, as well as many non-members, usually
Work stream Definitions
Phase 1: Planning
Target Operating Model
Target system architecture
adopt its recommendations in whole or in part. Thus, the promulgations of the BCBS form a type of “soft law”. One such issue, and one that played an important role in the recent global financial crisis, is the regulation of bank capital. Addressing this issue has been an ongoing process for the BCBS over the past 20 years, and has resulted in the promulgation of capital adequacy standards that national regulators can implement. These standards are known collectively as the Basel Accords, named after the city in Switzerland where the BCBS resides. The Basel Accords have caused disagreement at times, but they are nevertheless important to the formulation of regulatory policy relating to bank capital. In all, the BCBS has produced three such accords. Basel III, published in 2010, is the most recent Accord. Each Accord has purported to improve upon the previous one, but early indications suggest that Basel III is not flawless and so it is not likely to be the last one.
Critical Path Plan and Key dependencies
Program Governance and Project Mgmt
Resource Plan and Deliverables by Project
Formally titled A Global Regulatory Framework for More Resilient Banks and Banking Systems, Basel III reflects the BCBS’ attempts to apply lessons learned from the financial crisis and apply them to the existing framework of banking regulation. The primary goal of Basel III is to improve the ability of banks to absorb asset losses without affecting the rest of the economy through a focus on regulatory capital, which is more restrictive and emphasises greater quality. Under Basel III, Tier 1 capital must be mostly of “core capital”, which consists of equity stock and retained earnings. In addition, many items that were formerly included in a bank’s capital calculation under Basel II, including some forms of subordinated debt, will be excluded under Basel III. Those capital instruments that will no longer qualify as capital under Basel III will be phased out of a bank’s capital calculation over a 10-year period starting in 2013. This transition period will help those banks that do not currently possess the sufficient amount and types of capital comply with the new requirements.
c a s e
s t u d y
one bank ’ s response to t h e B asel A ccor d s u sing B P M
For proactive banks, the transition period has also allowed for the opportunity to implement a process-based infrastructure (BPM) for both project management of short-term tactical changes and the longer-term strategic components necessary for sustained competitive advantage. A large Europeanbased international bank leveraged a four-step process to manage the end-to-end rollout of Basel III across the globe:
Phase 1 – Planning A basic BPM framework is established to build development plan:
Use existing BIII rules, business requirements and gap assessments to develop a comprehensive target operating model (TOM) and capability design;
Define a high-level TOM architecture that structures primary flow around key processes and work streams and gaps;
Charter projects to close gaps;
Construct each work stream/key process to include: detailed business requirements (KPIs), calculations, system design, data sources, process flows, detailed project plans, and governance framework;
Assign process owner to each key process or work stream accountable for end-to-end delivery.
Basel III Leadership Team Change Management • Risk change function • Finance change function • Ensure effective and cohesive change management of enhanced and new business process, IT systems and data requirements • Support smooth transition to change
Programme Management • Facilitate programme structure and status • Critical path, dependency, issues, and risk management and tracking • Stakeholder communication • Addresses programme level issues that may impact critical milestones
Design Authority • Ensure continued alignment and refinement of the TOM • Consistent application of design authority framework
Basel III Qualification • Basel III rule interpretation and compliance • Gap resolution and closure, traceability and certification • Other Policy • Model Validation • Regulatory Feedback
Phase 2 – Governance
Programme level sponsorship, sets direction, defines approach and overall programme strategy
Basel Exec III Steering Commitee
Regulatory bodies • FINMA • FDIC • FSA
• Representation across Basel workstreams • Support detailed development of the BASEL III framework and its components • Manage ongoing cross functional business, and technology Basel III issues and resolution & provide clarity on business requirements • Act as a technical forum to provide model and non model based, calculation and adjustment guidance • Recommend issues to Exec steering commitee for resolution
Other B3 work streams that would be linked into holistic governance structure Proposed work streams Other Basel work streams aligned to Basel III governance
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M anaging t h e reg u latory onsla u g h t u sing B P M B renton Har d er
Data management / collation
Reporting / analysis
Proxy mapping control
• Normal and stressed EPE profiles results • Counterparty reference data
• Risk data storage, exception management, enrich and adjust, mapping, retrieval • Proxy mapping control
• CEM results, maturity, counterparty reference data
• Regulatory CS01 calculation • Normal and stress VaR calculation • CVA results storage
• Regulatory standardised CVA calculation
Phase 3 – Process structure and systems landscape Phase 2 – Governance It is critical to build strong connectivity between the strategic and tactical components of the BPM structure to ensure speed of execution and accountability for actions. Strategic steering elements are necessary in the early phases of structure, and then less so during implementation:
Build clear line-of-sight between strategic decision-making and tactical work stream execution to ensure implementation speed and minimal change-based resistance;
Focus on four elements of leadership in speeding the implementation: Change management Project management Design management BIII expertise
Checks and adjustments
• Credit spread curves and counterparty mapping • Eligible hedges • Other (market LGD, discount factors etc)
• Market risk VaR adjustments
• Ad hoc investigation tools • Risk reporting • Front office reporting
• Regulatory numbers reporting
Phase 4 – Process Control Work Packages (Executive Leader)
FO Executive leader accountable for the delivery and success of the workstream and sub-projects
Project Manager - each workstream will have a dedicated PM to manage end to end delivery of workstream/projects. PM will actively manage project plans, and escalate material issues to PMO
Functional SME – primary lead from risk, finance and treasury responsible for providing business requirements for specific projects
IT lead - Manage the delivery of the workstream / project technology solution
Business - support functional SME to produce and deliver work-package content Technical analyst - support technical lead to produce and deliver technology requirements e.g. technical and data requirements
Phase 3 – Process structure and systems landscape The basic operating structure, maps, and system designs for the BPM platform are put in place following the planning and governance phases. It is very important for management to have a play in the rollout and execution of the structure and landscape stages for consistency.
Phase 4 – Process Control Steady state control of the process infrastructure is possible only with clearly identified roles and responsibilities. A variety of tools (RACI, RR Maps) can be used to ensure there is consistent coverage for most major contingencies:
Each work stream breaks down into subprojects with assigned project managers, functional leaders, IT leaders, and clearly identified project teams;
Connect all organisational units involved with customer interface and regulatory reporting;
The executive leader for each work package has overall accountability for delivery and success of each work stream and subproject;
Map all process flows and system designs.
Project managers actively manage all aspects of the work stream implementation projects;
Functional SMEs are essential to the understanding and integration of the work into the project and processes;
The IT and project teams ensure all elements of the project plans are consistently executed.
Ensure end-to-end connectivity of all processing components with system interfaces;
Without transparent and flexible operating models and management structures, many international banks and financial institutions are finding it increasingly difficult to profitably respond to the pace and scale of necessary change to stay ahead of the fragmented regulatory onslaught
C oncl u sion By implementing a Business Process Management (BPM) structure, banks can more easily merge disparate technologies and data sources, align operating platforms, and converge management structures in order to function as single operating units with real authority, meaningful controls, and common metrics. Successful banks understand that operating transparency and process accountability have become absolutely essential in providing a coordinated, timely, and viable response to the myriad global governmental agencies demanding meaningful change in the way banks transact services and trades, manage and control risk, protect client confidentiality, prevent criminal activity, and allocate credit.
www.leanmj.com | April 2012
Sustaining lean in a financial institution In this article, Reuben Karuna-Nidhi of Deutsche Bank highlights some of the key concepts that are being discussed at the bank as it embarks on a lean programme in its Global Technology Production organisation, giving an insight into the types of challenges that financial institutions face when implementing lean.
or the last 10 to 15 years financial institutions have been adopting lean techniques to help improve the quality of the services they provide to their customers and increase client satisfaction, in the face of tightening costs. Particularly driven by regulatory controls and trading conditions, lean is being increasingly used as a cost play, as organisations focus on driving down the internal cost of the services provided. Early implementations have been a mixed bag: for every example of a project or group with a strong adoption of lean, there are several examples of failed programmes that have either gotten caught up in trying to simplify extremely complex business processes or departments or become victims of the â€œyet another improvement programmeâ€? syndrome many of us are so familiar with.
In more recent years, as various financial companies and their partners (for example other technology companies that provide services or client partners that either supply or are the recipients of services) learnt by trial and error how lean can help in service industries, weâ€™ve seen the focus shift to some more mature applications. This is a key step change for the industry as companies are now focusing on the longer term aspects of not just maintaining continuous improvement and sustaining lean initiatives, but also considering the true end-to-end process, both internal and related to suppliers and clients. So how does a newcomer to the lean game set up, and sustain, a successful programme navigating some of the pitfalls and avoiding potential hurdles that are out there waiting to strike?
Here is a list of the most common challenges financial institutions face as they try to sustain lean.
S u stainability Sustainability is a fundamental concept in lean. How does one sustain and maintain the improvements that are being implemented? A common mistake when setting off on the lean journey is to leave sustainability as something to be tackled later on. The valid argument often proposed is, why think about sustainability when you are not sure what it is that you want sustained? While discussing with colleagues in the industry who had embarked on lean programmes, this featured on everyone’s list of things they would do differently. They would now think about sustainability at the outset. Additionally, in financial institutions that are used to dealing with front-office clients or to providing back-office support functions dealing with major outages, the culture is focused on short, sharp projects aimed at solving the current problem before moving on to the next one. This mindset can be difficult to change while introducing not just a lean project to improve the area but a sustained continuous improvement culture. The key to understanding sustainability is concentrating not on what we are sustaining, but on who. The emphasis we’ve placed on lean is about making the right tools available to people so they can deliver the right product, of the right quality and at the right time. Therefore, the operational team that are providing the service undergoing a lean transformation is a key element. In our programme, alongside this are the management team owning the service and the senior management team, often called the ExCo (Executive Committee). Other groups involved are clients and suppliers (vendor partners) that deliver elements of the service to the customer. Each of these groups has the potential on its own to jeopardise the sustainability of a programme either at the very beginning or further down the line. For example, if clients don’t buy in or don’t see any benefit to service quality, then they do
not understand why the operational teams are spending time and effort on using lean techniques. A commonly used concept is the WIIFM - What’s in it for me? We found this is a beneficial approach to use for each of the groups that we felt were impacted by the programme or would be a critical part of it.
S u stainment from a c u stomer perspective As in many other industries, engaging with the client in a financial institution can be tricky, depending on the type of relationship and the nature of the programme. For our projects, the Voice of the Customer tool has been particularly beneficial for both launching a lean initiative and helping us to sustain it in the eyes of the customer. There are two key reasons why the Voice of the Customer has worked well for us. The first is due to the engagement with customers and with the idea of establishing a relationship with them. The programmes in which this has been particularly effective are those where there was no regular communication with the clients. Engaging with them has contributed to opening up channels of communication and developing strong relationships. The second reason is that the VOC helps to start the discussion on business benefits/quality KPIs. In back-office support type functions, we have noticed a tendency of teams to focus on operational and productivity KPIs, such as turnaround time of tickets or number of tickets per person that are closed. From a client’s perspective, however, whether tickets are closed in 20 minutes or two hours is not important. If tickets relating to a particular business process like the generation of risk reports are closed more quickly and we can use a KPI like delivery time with accurate figures as a metric, a client will find this meaningful in terms of measuring quality and will see a business benefit. This has been an area in which implementing metrics and looking at the project from a client’s perspective has proved challenging. Early projects tend to focus on the operational metrics, which result in the customer asking, “So what’s the benefit to me?” or in a situation where customer satisfaction surveys are the only way to assess the quality of service. These surveys are less meaningful in a production support service, where 30 days of stability followed by an outage on the 31st day can impact the client’s perception of the whole month. Implementing metrics which capture quality and business benefits is a key focus for all of our projects and the teams are starting to see how engaged clients are when improvements levers can be tied back to business benefit/quality KPIs.
www.leanmj.com | April 2012
S u staining lean in a financial instit u tion R e u ben K ar u na - N i d h i
S u stainment from t h e operational team ’ s perspective A simple approach is required here: daily huddles. Over 800 daily huddles are in place across the project teams, and we have yet to come across a team which doesn’t want to use them. Teams appreciate the opportunity to get together to discuss the problems of the day, perform shift handovers and review the customer’s quality KPIs. Several team members said that they like the opportunity to discuss problems as a team (and the transparency the huddles facilitate) related to the key business priorities for the day, and the use of metrics to scientifically measure the quality of their work. In a test of sustainability, I recently asked a couple of the teams that have been implementing huddles for 18 months what they would say if we suggested that they should no longer use them. They were extremely concerned and appeared very keen to continue using them. The real challenge for the team is to think about how they can continually evolve the huddles to keep them fresh and interesting. A recurring theme is how they can start focusing the discussions on predictive demand and capacity, moving on from just analysing the day’s priorities and any backlogs from the previous shifts.
S u stainment from t h e manager ’ s perspective
A common mistake when setting off on the lean journey is to leave sustainability as something to be tackled later on. The valid argument often proposed is, why think about sustainability when you are not sure what it is that you want sustained?
The middle management layer in organisations is sometimes suspicious of lean and questions the potential benefit that can be brought in by deploying it. The approach we took at Deutsche Bank was the traditional show and tell: we chose a couple of areas where we knew the management team was supportive of process improvement in general. We ran the first three projects in these areas, to demonstrate and prove the concept of lean and the positive impact to the management team. This allowed us to show how, if a function adopts the lean methodology and a continuous improvement culture, the manager sees an improvement in the selfsufficiency of that team and in the quality of delivery. This results in the managers spending less time fire-fighting, for example being called in to tackle incidents or specific tickets, and being able to focus their efforts on proactive problem prevention.
S u stainment from t h e E x C o ’ s perspective A world class IT service is one of the drivers of lean. Alongside this, as well as the improvement of the quality of delivery to our clients, there is a focus on the bottom line. The expectation is that by simplifying our processes and removing waste, we will see a clear financial benefit. This was one of the key areas I needed advice on at the start of our lean journey. The balance between implementing quality improvements and efficiency/capacity gains is difficult to strike. If there’s too much focus on capacity gains, the programme is viewed merely as headcount reduction. On the other hand, if all of the focus is on improving quality, then any financial savings may have been forgotten about. Additionally, teams might think that the programme is really about reducing headcount without mentioning it. The approach we took was to only report on financials to the ExCo. Each of the project leads and programmes focused on quality benefits for each improvement lever, and where they measured capacity benefits we used man-months as the metric, so as not to concentrate on financials or headcount. Overall, the lean programme saved €14m last year. This is not a metric we widely report internally, focusing instead on the quality benefits and capacity generated in each team.
S u staining t h e overall programme It’s important to ensure buy-in from each of the groups above in order to sustain the programme. However, this can still fail from a sustainability point of view, if the teams are not working in a continuous improvement culture. Without it, any effort will prove useless and people will eventually lose interest. The objective we’ve focused on is to ensure lean behaviours become second nature to the operational teams, so that they are not making the decision to use a certain lean tool but adopting the methodology on a daily basis. The clearest example of this is the daily huddles, which have been widely adopted by the operational teams. Those who implemented them at the start of our journey say that they wouldn’t be able to operate without them. We named our programme Muri, as the overburden concept captured what we are looking to do with the operational teams. We have recently branded and launched the Muri Way.
A world class IT service is one of the drivers of lean. Alongside this, as well as the improvement of the quality of delivery to our clients, there is a focus on the bottom line. The expectation is that by simplifying our processes and removing waste, we will see a clear financial benefit
Finally, to measure sustainability we have implemented the use of an assessment scorecard. However, we are still trying to understand how to get the balance right between measuring sustainability and ensuring the scorecard doesn’t become a governance process. If the teams are using the tools and adopting continuous improvement just to gain a higher score, then we have failed. The opinions or recommendations expressed in this article are those of the author and are not necessarily representative of Deutsche Bank AG.
www.leanmj.com | April 2012
BOOK REVIEW John Bicheno reviews Kevin Duggan’s Design for Operational Excellence, McGraw Hill, 2012
his terrific book, already on the prescribed list for the MSc in Lean Operations, follows Kevin’s earlier work on mixed model scheduling. It is not a book about product design but about the ‘tough questions’ and principles that should be considered when designing ‘dynamic business operations’, in general and scheduling in particular. An early point is the ‘myth of continuous improvement’. The myth is that CI will simply deliver results. But it won’t unless the direction is clear. Clarification is management’s task. This sentiment seems to echo Mike Rother’s comment in Toyota Kata and Stephen Covey’s ‘start with the end in mind’. Specifically, the exact destination must be made clear and that ‘every employee can see flow of value to the customer and to fix that flow before it breaks down’. Hence, Kevin believes that every team should be charted not to improve an area but to ‘create flow’. In this, Kevin uses the same words as Kate Mackle. Rugby fans will appreciate Kevin’s comparison between American football and rugby. The former is more ‘command and control’ with managers that set the plays, train the players, and make decisions on which play to execute next. In rugby, while coaches do develop skills and strategies, the leader on the field is whoever has to be. That is the spirit of lean. A main section of the book is Kevin’s challenging questions. Try answering a sample before looking further down the page for the correct responses. ‘Why do we do continuous improvement? How do we know where to improve? What causes the death of flow?
The eight principles of operational excellence, needed to create ‘engine design’ for excellence, form the second part of the book (‘engine design’ because today’s drivers simply expect their car to start first time – so what is needed to achieve this?) The principles are an extension of Womack and Jones’ classic five but usefully, each comes with a ‘what would you expect to see?’ section. A sample: for the second principle ‘Make Lean Value Streams Flow’ you would expect to see, on the shop floor, one piece flow cells, different potential configurations, based on demand; for the cells, standard configurations for materials and operators based on different demands; and where appropriate, FIFO lanes, kanbans, supermarkets, and heijunka – telling clearly what to produce next. The responses? CI: not to eliminate waste, increase efficiency, free up capacity and the like, but ‘to grow the business’. Where: not where we can get quick wins, or where problems lie, but ‘by following the road map’. The causes of death of flow: not because the leader has departed, there is no-buy in, there are no resources, and the like, but because we don’t understand why we created flow in the first place. The reason we created flow is to be able to see when it stops, knowing that it will stop and what to do when it stops. Very thought provoking! A great set of new angles on topics that I thought I knew about, but for which I now have a new perspective. Dammit, will I ever know all about lean? Sadly (or gladly?), no.
it ’ s a lean w orl d germany
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Lean, a must-do Bodo Wiegand, president of the Lean Management Institut, introduces LMJ’s special on lean in Germany, looking at how widespread the methodology is in the country.
ean in Germany cannot be stopped anymore. It started 15 years ago in the car-making industry, automotive supplier being the first ones to be “infected” by lean. Today, there is not a single automotive supplier without a lean production system in place. Lean has developed to a management philosophy which cannot be thought away. In some companies, however, there is no further development after reaching a certain lean standard: the level of lean development depends on current management and on single managers. That means that when a manager responsible for implementing lean leaves a company, the lean factor in the business will lose power. It will increase its revelance in the company the manager moves to. This phenomenon shows that lean has not been completely embedded in the mindset of the employees. Sustainability was not achieved. The Lean Management Institut is working on this phenomenon: a combination of intelligent e-learning and training could be the solution to this problem. Another important step towards a lean enterprise is the expansion of the lean methodology from production to further areas and industries. The Institut is a member of the Lean Global Network, and a comparison is easily made - Germany is far ahead of other industrialised countries when it comes to spreading lean thinking in non-manufacturing sectors and new business areas. Lean Administration, which was developed by the Lean Management Institut, is considered as the next step by both the automotive industry and its suppliers - a lot of companies are already implementing Lean Administration successfully and generate positive effects in terms of efficiency increase and process optimisation, for example in the engineering area. On the one hand, by implementing Lean Administration companies do not only have the possibility to uncover efficiency potential in the administrative area, but also to improve processes and increase quality. On the other hand, it is obvious that there still is a distinctive
silo-thinking mentality in most companies and that just a few businesses are strictly focused on the optimisation of their processes. Other concepts developed by the Lean Management Institut, like Lean Maintenance and Lean Service, are used in many German firms, especially in the process industry and in banks and insurance companies. In these areas, a combination of Lean Administration and Lean Service becomes important in order to increase the efficiency of internal organisation and to offer customeroriented services. In manufacturing companies, the alignment of maintenance with value creation is a large and important field of development in addition to optimisation of business processes. These potentials, however, are used by just a few market leaders today. The goal is not only to save costs, but also to increase availability of a company’s facilities as well as process stability in order to stabilise and make usage of product capacities reliable. There are initial attempts to use lean in the public sector and hospitals, but not a broad movement yet.
www.leanmj.com | April 2012
it ’ s a lean w orl d germany
Down with Jörg Göhl, managing director of Kirson, talks about the obstacles the company encounters and how the Toyota Kata methodology helps it to overcome them.
t Kirson we face unique challenges. Not only do we operate in a very niche market (we have only a handful of competitors), but we also have processes that can be difficult to lean out. We produce laid scrims (grids made from yarns and used to reinforce different materials and products, from roofs to sails), and sometimes the production of a single piece can last 72 hours. Takt is long and changeovers take a long time. Whereas many manufacturers assemble, we operate in the process industry: for us one piece flow is not easy to achieve. With such processes in place, we had to find a way to become more efficient. About 11 years ago we started to look at downtime and how to reduce it in order to increase capacity. Eight-hour changeovers were too long compared to a production time of two or three days. We started implementing lean after visiting a few seminars and after everybody in management had read “Lean Thinking”. We soon identified the need for us to take it to the next level, and that’s when we looked at Toyota Kata, an improvement methodology discussed in depth by Mike Rother. The Kata is based on the idea of making small improvements and learnings by identifying and fixing problems as you strive towards a challenging
target condition. People blindly started to copy Toyota using tools such as Kanban and JIT, thinking they had found solutions to their problems. The reality is that Kanban is used to see obstacles that hinder you to reach a desired state – and not to fix problems. Regular development and people empowerment are the two main features of the Kata methodology. Coaching is fundamental: we have made every worker on our shopfloor an inventor. The Kata helps them to continuously do something about the problems that arise while striving to achieve their target conditions or standards. What prevents development in companies is not working consistently as a result of missing challenging target conditions and a learning routine or Kata to achieve them. In Germany we always want the great ideas and inventions, but the Kata is about slow improvement by everyone and every day. I am convinced that you cannot innovate without using it. When Gerd Aulinger started to work with us two years ago as a Kata coach, he looked at our improvement (we had reduced downtime on some machines from 60 minutes to 8 minutes) and challenged us, saying: “I am sure you can reduce it to five minutes.” Protesting is dangerous, because you can be proved wrong: in the next shift we managed to reduce it to five minutes. That’s only because we were building on already existing improvement. We still have a long way to go. Changing from one pattern to another can involve 100 to 150 jobs, and simply cannot be done quickly. That is why we practice the improvement and coaching Kata on a daily basis. Engineers are used to big plans: you often see six-month plans and then problems at the point of implementation. With Kata you have no big plans, just challenging targets and small steps or PDCAs. Now we really understand what continuous improvement is.
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Kata: step by step ith over 200 employees, we are one of Germany’s largest Electronic Manufacturing Services providers. We produce components and devices for industries ranging from wind energy to housing.
We first deployed lean three and a half years ago, and started using Toyota Kata about two years ago, to help people to identify problems and tackle them while making processes more stable. We coach our employees every day and put them in charge of improving production step by step. At Ihlemann, we always apply what we learn from constantly trying to move beyond our current knowledge threshold. Thus we ask ourselves questions all the time, because you need to understand a problem in order not to jump to solutions too fast. If we have a problem, we stop production. It makes sense to stop the line for 10 minutes rather than having to do rework for two hours at a later stage. We apply PDCA, step by step, and this way we manage to eliminate issues once and for all. Our main challenge is reacting to constantly-changing demand. We have seen several benefits from the application of lean and Kata: less quality issues, better output, more happy customers and a faster value stream. We don‘t produce from stock: we only make what we can sell. As a result, we have more free capacity to answer demand. Our value stream is now over 50% quicker. If you want to implement the Kata, leadership needs to be aware and convinced. They have to be good Kata coaches, because it is quite hard to start from the bottom up. Coaching is very important for the improvement Kata to become second nature, and leaders have to be Kata experiences to become good coaches. It’s like driving school: you don‘t learn how to drive a car by reading a book, but through practice. No matter what sector you operate in, you can only reach challenging targets if you practice a learning routine or Kata every day, involving everybody in step by step improvement, thereby developing an “explorative” mindset, motivating people and making the company more adaptive and competitive in the long run.
by G er d A u linger , kata coac h
Christian Berlinecke, production manager at Ilhemann AG, talks about the benefits the firm reaps from deploying the improvement Kata in order to better react to a constantly changing demand.
Companies tend to concentrate on deepening their core competencies, which are essential for profitability today and in the near future. But should they assume these competencies, will this also keep them profitable in the long run? Many companies are overrun by competitors who, by developing innovative solutions to old problems, force them out of business. To survive in the long run organisations must also concentrate on their “core INcompetencies” – those non-existing capabilities that will be indispensable for long-term competitiveness and survival. Moving out of our comfort zone, even leaving behind much of our current knowledge and experience, calls for a different way of managing in which everybody is motivated by challenge and, at the same time, taught how to learn in a scientific, concerted way. Moving beyond our knowledge threshold is not easy, because it needs an “explorative” mindset, one that seeks learning, enjoys experimenting and striving toward difficult-to-achieve target conditions. Unfortunately, as a result of repeatedly applying ROI (cost-benefit analysis), most companies have developed a conservative mindset, which tends to prefer predictability, exactly the opposite of what we can expect of scientific work. The improvement and coaching Kata (routine) allow us to develop an explorative organisational culture by having every member of the company strive step by step towards challenging target conditions and tackling the obstacles that arise as they move ahead.
www.leanmj.com | April 2012
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smooth processes and we can fulfil market demand. We grow very fast (with over 20% increases for some products).
Pfeiffer Vacuum develops, produces, sells and services vacuum solutions. Here, chief operating officer Matthias Wiemer discusses the company’s lean journey.
Our main goal is to fulfil demand, and we achieve this with short lead times (for certain products as short as three days), low inventory levels and no overdue orders. It’s not easy to compare our performance today with our performance before lean was implemented, because we now produce twice as many products.
hen we talk about our lean project, we refer to a part of our product line, which is related to high vacuum and represents about 27% of our total sales. Our core product, the turbopump (which Pfeiffer invented over 50 years ago) is mainly produced in Asslar, central Germany, but we have other facilities in France, Korea and Romania.
The motivation for starting our lean project for turbopumps in 2009 was the construction of a new logistics centre in Asslar. We changed the direction of our production to let the material flow directly into the new facility. A second reason for developing a lean project was the necessity to respond to increased demand for our turbopumps in the market. The project started as an evolution process, but it ended up being a revolution as we changed nearly everything in our bid to become more efficient. Besides the difficulties of installing the new equipment and to move the machines in a short period of time, the main problem we faced was with our employees and the way they coped with the newly-changed processes. It’s all a question of education, and the months right after the introduction of the new processes were very challenging. A number of employees went through a dedicated training, but perhaps we started with it a bit too late – a month after when had installed everything. It was very difficult to change the mentality and to get all employees involved, but since then we have not fallen back. Everyone is now convinced that we are working with
The main production plant for turbopumps is the one in Asslar, while in France we mainly manufacture backing pumps. Our facility in Korea is dedicated to the Asian market. We started with lean in Asslar in 2009, and the main outcome of the project was that production started to run smoothly and we could concentrate on other activies (like acquisitions). We did not extend our lean project to other facilities, mainly because we needed to organise the structure of the newly-acquired businesses. Their processes were already working well: it was then a matter of enhancing communication between different plants (the French one manufactures modules it then ships to Korea, where they are assembled). Our lean efforts didn’t come from pressure of a profit and loss sheet, but directly from demand, which is always important to understand (especially for dynamic sectors like the semi-conductors market). We were astonished at the opportunities for improvement we identified in 2009.
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B Y Daniel T J ones , t h e L ean E nterprise A ca d emy
C omment F U R T H E R
Initially, lean had a hard time in Germany, where it was translated as mager (“mean”) and threatened the Trade Unions’ campaign to push autonomous working and hence increase their power. But the German automakers really woke up when Toyota introduced the Lexus and they experienced their first post war downturn in 1991. Fortunately for us this was just when The Machine that Changed the World was published, which became a big seller.
In the run up to the Euro, wages costs became uncompetitive and lean, together with agreements to moderate wage costs, helped to maintain manufacturing jobs in Germany rather than losing them to low wage locations. But more recently, as German industry began to prosper selling luxury cars and machinery to China, Russia and India, the focus shifted to improving the productivity of their scarcest resource, skilled engineering talent.
Since then they have led the way in introducing significant lean programmes, as have many other leading German manufacturers. Key to raising the profile in Germany was involving the prestigious Technical Universities in Aachen, Berlin, Munich etc. and the Frauenhofer Institutes that educate most of the business leaders in Germany.
The German approach to lean is cautious to start with but when the basic concepts are understood the disciplined follow through is impressive, even if the reality is not quite as good as the glossy, complicated Powerpoint presentations they present at conferences.
R E A D I N G
For more information, read Mike Rother’s book Toyota Kata: Managing People for Improvement, Adaptiveness and Superior Results
www.leanmj.com | April 2012
L E T T E R S
Effectively engaging leadership Richmond J Hulse, managing director of XONITEK Consulting, looks at the characteristics a leader must have if an operational excellence programme is to succeed.
recently attended a meeting of New York City chapter of the Operational Excellence Society and had the great pleasure of listening to a discussion by Michael Johns, a senior executive at FSBO (a consultancy) and former continuous improvement leader at Honeywell/ Allied-Signal, entitled “Effectively Engaging Leadership”. Johns did an outstanding job netting-out the fundamentals that a CEO and his/her leadership-team need to have in place to ensure the highest probability of success for an operational excellence programme. Leveraging the acronym “CEO”, he highlighted what he believes these letters truly stand for: C for Commitment, E for Engagement and O for Ownership and creating a resultant “action plan” for defining and executing in each area. He went to great lengths to convey that solid and obvious commitment from the company’s leadership to the improvement initiative was a prerequisite to success. This commitment cannot be just in the form of words, but must also be in deeds. There needs to be a collaborative approach to developing the charter for the operational excellence programme with stakeholders having the opportunity to contribute so that a sense of ownership, and the resultant accountability, can be established. And,
above all else, there must be tangible commitment as demonstrated by the allocation of proper resources and appropriate budget. But the role of company leadership is not over once the programme has been defined and deployment has commenced. For the initiative to maintain, even increase, momentum, leaders must continuously practice active engagement with those directly involved with effecting OpEx as well as those who will be incrementally influenced, and ultimately transformed, by the efforts of the programme. Johns shared an anecdote which highlighted the impact of a CEO randomly engaging a Black-Belt at one of the facilities and showing interest in his work within earshot of as many people as possible. This seemingly random act of showing overt support incrementally energised those directly or indirectly involved – and helped in the transformation of the company culture so that each employee became consciously aligned towards the achievement of excellence. It is at this point that ownership, and the subsequent benefits of a successfully deployed operational excellence programme, needs to occur; ownership of the role by the individual professional, ownership of the objectives and means of the initiatives, and ownership of the results. Johns stressed that ownership is never given, but rather taken. If the leadership creates a programme in a vacuum and then thrusts it upon people to implement, when it fails there exists a credible argument that it failed because of a lack of commitment and engagement – and the transfer of ownership never occurred. During the meeting, I saw a lot of heads nodding - the audience could find little fault with the major hypotheses of the discussion, but rather focused
the follow-on discussion and debate in exploring the details of CEO - with a great emphasis placed on deployment and the pitfalls to avoid. One of the biggest (and most energetic) debates was related to how much involvement - and how much latitude and power - does the leadership relinquish to the stakeholders in the initial stages when the objectives and programme are being defined. There is a fine line where the leadership must make a decision to stop the analysis and begin to implement; but at the same time they need to ensure the ownership transfer occurs successfully. If leadership gives too much control of the process away in hopes of building ownership, the operational excellence team might have a tendency to over-engineer the development of the programme until it is all-consuming. The risk is a programme definition and plan that is too big to approve and which is delivered too late. And, once proposed, any significant change will be interpreted as disrespect of the efforts and the necessary taking of ownership will not occur. However, if leadership retains too much control of the process, the result will be an operational excellence team which feels disenfranchised. This will result in a delay in the programme development, as participation will be half-hearted, and a failed transfer in ownership. By the end of the evening, it was generally settled that this transfer of ownership will not happen unless the OpEx group generally agrees with the integrity of the structure of the programme. And in the end, it became obvious that this is the most critical and also the most subjective point in the programme development. Proper navigation requires expert leadership.
LETTERS & COMMENT
Responsibility lies with leaders Following up from his article in the March issue of LMJ, Roddy Martin, senior vice president, global supply chain at Competitive Capabilities International, proposes a four-layer management system model and explains why alignment between these four layers is so critical.
s continuous improvement and supply chain performance improvement practitioners, we know that aligning business operating strategy and business performance improvements, and building end-to-end supply chain capabilities to achieve competitive advantage are merging to achieve one goal: to sustainably and profitably grow while weathering the dynamics of market change. In reality, however, “disconnects” and “project based approaches” in these initiatives highlight cross functional gaps that stand in the way of collaboratively building an end-to-end business with demand-driven process capabilities. “Disconnects” are characterised in the following leadership questions: 1. What is the challenge involved in translating and aligning the business operating strategy into end-to-end business processes and SC design, and in achieving sustainable performance improvement capabilities by aligning with continuous improvement?
T h e 4 L ayers Three of the layers are more heavily vested in technology and data management and one is business process capability based. These layers evolved bottom up as they were largely developed functionally and were reinforced by the development and deployment of information technology. These bottom layers grew by necessity as the business realised the need to operate holistically as an integrated end-to-end set of demand driven processes but needed to start at a low level control of integrated data and event management . From the lowest (Layer 1 - real time) event, data, and activity management these layers evolved from:
Layer 1 Systems of Control (real time data; for example process control) to….
2. What factors are in the way of aligning and synchronizing IT with business and supply chain transformation?
Layer 2 Systems of Record (transaction and data processing applications like ERP) to …
3. How is leading and managing the transformational change embedded into every maturity stage of the transformation journey?
Layer 3 Systems of Process (work flow management systems like integrated quality, governance, and compliance, sales and operations planning).
4. Is there a model that helps us understand the different management systems operating in the business so we can reduce complexity and institute a governance model with a change leadership process to ensure sustainable and effective progress on the journey? These fundamental executive level questions must be understood and answered if the business performance improvement outcome of endto-end supply chain transformation is to be sustainable in delivering measurable and improved business results. The most fundamental issue, and the one that embeds much of the complexity, is the understanding of the four layers of management system that run the business. In the following section, I propose a 4 Layer model that leading executives have found useful in understanding and managing this issue.
Unfortunately, investments into these bottom three layers of management systems were dominated by technologyoriented requirements that were indicative of the low levels of data and information integration. Investments were not made into Layer 4 Systems of Venture and Sufficiency because the business “didn’t know what it didn’t know” as a Layer 4 that represented business actually operates as a set of operation and management processes comprised of people, process, and technology. While layers 1-2-3 are important in the data and transaction efficiency and effectiveness of the business, they do not holistically represent the way the business actually operates effectively with people, process and technology. The bottom three layers also generally do not
www.leanmj.com | April 2012
L E T T E R S
Responsibility lies with leaders reflect or align to the stage of the businesses performance improvement and operating process maturity (Stages 1-5) as I described in the article appeared in the previous issue of LMJ. With the best intentions, the IT organisation designs and deploys systems for best in class end-to-end value network capabilities. The business typically still at a stage 2-3 of maturity in its process operating capabilities (project-based improvement) cannot operate as a Stage 5 value network process-based operating system and, to make the investment usable in its current Stage, the business customises the Stage 5 value network based design to fit the current Stage 2 of business operating capabilities. This vicious cycle of continually adapting and fitting Stage 1-3 systems to the business as it evolves becomes a major source of business disruption and a hurdle to integrative performance improvement initiatives. Furthermore, today’s global businesses operate across many cultures, business product lines, and geographies – the reality is that there are many different stages of process capability maturity and not just one! Again, the business must continually adapt and re-implement its layer 1-3 Systems to fit different stages of maturity across the business. The net impact is that customisation, the lack of business standards, and the continual adaptation and redeployment of technology and information management systems combined with the lack of a decoupling layer from the way the business actually operates represent serious constraints to learning, sharing best practices, process development, and sustainable continuous improvement across the business.
W h y is t h is S it u ation a P roblem ? An operational excellence executive from a leading global life sciences company stated the issue very succinctly when she attended an IT systems design and blue printing meeting to deploy a major vendor’s application. She noted that the IT-based “blue printing” and systems design in layers 1-3 did not represent the way the business actually works but was being done that way because the IT system required it. Secondly, one simple transaction or workflow process in layers 2-3 designs could involve five to nine different departments in the business to be successfully executed. This was not reflected in the systems design. This means that businesses are encapsulating IT, data management, and process automation into layers 1-3 but not taking account of the real people, process, and stage of organisational and process maturity implications in layer 4 (the way the business actually operates). This means that many technology investments are not necessarily leading to organisational and process effectiveness across the business as a whole. This approach is also not developing integrative improvement capabilities and end-to-end value network process capabilities as found in the requirements the business has in layer 4. After billions of dollars of IT investments in Layers 1-3, the business is still not at a proficient level of process capabilities that enable it to operate as a demand-driven value network across people, process and technology components in a way that performance improvements are sustainable and the business is agile to change.
W h at ’ s t h e C oncl u sion ? The strategic alignment and integration of continuous improvement, change management, strategic planning, enterprise architecture planning, enterprise data warehousing and advanced process analytics are a leadership, top down business responsibility. These investments will not achieve the same objectives cost effectively if they are allowed to evolve bottom-up. The first conclusion is that responsibility lies firmly in the hands of the business executive leadership team and must include IT. Secondly, the business and IT must collaboratively discover, plan, build and deploy a flexible information management and analytics layer between layers 3 and 4 that allows decoupling of technology from the way the business operates in processes without disconnecting the two critical pieces! The flexible analytics and performance management layer and information model must support different levels of maturity and be able to grow to support different levels of process and operating maturity found across the business. These flexible model based capabilities already exist with vendors like EveryAngle, Aegis Analytics, Rockwell Incuity, Kinaxis, SoftwareAG, and Vecco. The key principle in the second conclusion is that companies must institute this reference layer for information and process performance management to support the way the business actually operates and be agile and adaptable to support new questions that the business is asking as the level of process maturity evolves. Investment in this layer must have the outcome that the business does need to continuously change, redesign, and redeploy technology applications at layers 1-3 to support evolving business capability maturity in layer 4. It is a leadership and strategic planning responsibility to synchronise change management across layers 1-3 to align it with the business operating system in layer 4. The combination of the decoupling information layer and the leader’s top-down alignment strategy (between the business operating system and IT investment) in Layers 1-3 means that prioritised technology, work flow initiatives, and IT architectural planning must be driven top-down by the process maturity of the business and governed by its performance improvement needs. For example, a business can only leverage applications like network planning and master data management when they are aligned and synchronised with its process capabilities and integrative improvement priorities at that point of maturity in the evolution of the demand-driven business operating strategy.
LEAN D I A RY
Designing the system Through the last three articles on SCGM, you have had a chance to read about the company’s lean implementation project in its Foundation Phase. Director Sandra Cadjenovic tells what’s happening now
which they have had many ups, but also several downs. What they have been doing so far is collecting the material needed for building their own, profitable and loss-proof ‘house’, brick by brick. It will take them three years to complete it - they are aware of this, but also very confident. Besides the material, they need steady ground to build the construction on: this was already (partly) provided for, through the application of 5S. You saw a lot of before-and-after situations in last month’s article. Once the space was cleared, it was evident where the sporadic losses were. One of them is downtime during tool changeover, as you can see from the Figure 1. One of the causes for downtime was the fact that only three people on the shop floor were able to perform the tool change. Aside from spending a lot of time on the tool changeover, they were also wasting time explaining the process to others individually, but still doing it by themselves. The solution was training staff on SMED, which takes place every Saturday and aims at involving people and familiarising them with
www.leanmj.com | April 2012
Figure 1: SMED data collection
e have seen SCGM staff trying hard to
the system, see and calculate the W understand losses, start up the improvement processes in
lean d iary Designing t h e system
February Machine: TM 1000/350
Figure 2: OEE Data Collection
the process. Furthermore, for some tool changes, preparation was inadequate. We purchased a device to check the water in the tool, thus substantially decreasing unnecessary waste of time in having to move the tool to check it. To reduce time waste, all the hand tools for changeover will be put close to each machine. The objective is a reduction in time loss, and the result will be a satisfied customer. Once the tool is changed, it produces parts. Our job is to track the number of parts produced, collect data, understand why breakdowns happen and decrease their number to the lowest possible level. Thus, OEE charts have to become an integral part of operators’ every-day activities. Until they do, we track progress. We have identified some initial resistance. People fill in the charts when they realise they are essential, but do it irregularly; they mark the stoppages, but don’t write why the stoppages occur. That’s the reason for fluctuations in the reports on machine effectiveness and for the presence of many unidentified losses. A note to ourselves: always have the operators write down the reasons for stoppages in order to identify the losses.
We have identified some initial resistance. People fill in the charts when they realise they are essential, but do it irregularly; they mark the stoppages, but don’t write why the stoppages occur
P ilot p h ase Turning to the next step, we are now on the Pilot Phase of the process. It is a time in which leadership is directly involved in leading the first projects with the methodological help of the consultant. Pilot teams will be created to attack some of the most critical problems of the company and to improve performance, but also to acquire the experience on “how to improve”. In the last meeting, a masterplan was created.
LEAN D I A RY
Figure 3: The 3 year masterplan
HSE - Health Safety Environment
LOGISTICS & FLOW MANAGEMENT
EDUCATION & TRAINING
CONTINUOUS IMPROVEMENT EMPLOYEES
T h e masterplan From the blueprint one can see that the “house” has solid foundations, of which people represent the first layer, carrying the whole construction. Without them, the rest of the house would be impossible to imagine. The next level is continuous improvement.
As it was mentioned, the building process itself will last for three years. We will continue updating you monthly on the stages until the very completion. Stay with us and keep up with the latest update on SCGM Way!
Health and safety environment - Safety (and environment) first! As we said, we need people, and we need them safe, so that they can perform the activities with zero fear of danger.
2 3 4
Cost management – To deploy and reduce the cost.
5 6 7 8
Quality management – It focuses on the customer’s delight in having a defectfree manufactured product.
Early management – To establish the systems to shorten the development period, and to enable one-short start up. Advanced maintenance – It combines planned maintenance and autonomous maintenance, with the aim to have zero failure equipment and prevention at minimum cost and to make sure employees are capable of using the equipment proficiently and maintaining machines when necessary.
Focused improvement – Improvements of equipment efficiency via the pursuit of zero loss, and improvement of technical capabilities. Logistics and flow management – Satisfying the customer demands for on-time delivery. Education and training - Establishment of systems to systematically develop personnel proficiency in equipment and work.
Overlapping small groups TPM Steering Commitee Pillar Committee Section Teams
Figure 4: Overlapping Small Groups
The “house” has 8 pillars, representing different model areas to work on. For each of them, a leader, together with his/ her team, must be identified. Therefore, we need to select the pillars, form the teams, create a KPI for each pillar and give the “building” teams responsibilities which they will be carrying out over the next six months. After this period of time, an audit will take place. If all the operations marked in KPIs are successful, a brick will be added to the pillar. We will need five bricks for each pillar to get to the roof.
www.leanmj.com | April 2012
C I ? N ot goo d eno u g h anymore
Not good enough anymore Despite the fact that six out of ten improvement projects fail, we seem not to be able to transform the way we approach these initiatives, while the world around us never stops evolving. Ýr Gunnarsdóttir of Nimbus and Brenton Harder of Credit Suisse discuss why continuous improvement as we know it needs to be taken to the next level.
early 60% of all corporate quality and process improvement initiatives fail to yield desired results. Yet we continue to lead continuous improvement deployments that seem to be all about training employees to become Green Belts and Black Belts, and pushing more and more projects that suffer from meaningless measurements with no tangible customer impact or otherwise compelling business case. Quality and continuous improvement
in the last century were defined by control and process improvement, but this is no longer sufficient for the 21st century. Today’s need for speed requires organisations to better anticipate the future and be prepared to immediately respond to customer feedback. The cost of missing a cue from the market and losing competitive advantage, at today’s pace of change, could mean disaster. It’s time for continuous improvement to be improved – we call it CI2.
But the reality is that perfect CI does not happen by accident. Sooner or later, all businesses, even the most successful, run out of room to grow and are compelled to reinvent themselves in order not to face dire consequences. Yet businesses fail to reinvent themselves not necessarily because they are bad at fixing what’s broken, but because they wait much too long before repairing the deteriorating bulwarks of the company.
A w ake - u p call Why do we keep doing it the same way, but expect a different outcome? Even while the fundamentals and foundation of continuous improvement remain the same, the environment in which it needs to be implemented has dramatically changed. We’ve known for years that the world is transforming at a rapidly accelerating pace and the new economic environment is less about process rigidity and control, and more about agility and speed to market – two factors that speak directly to the role of the CI executive. Yet we remain in our safe Ways of Working (WoW) bubble, repeating the ways we know by comfortably pushing aside or even ignoring the core challenges which do remain around real deployment and sustainability. Is it any wonder that nearly 60% of all corporate quality initiatives fail to yield desired results? So why do we continue to think it’s all about the number of projects, senior management buy-in, or simply teaching CI tools for the tools’ sake? Without a single structure linking corporate vision, goals, and objectives with CI deployments, our efforts are at risk of becoming fundamentally disconnected from overall business strategy. We often find ourselves fighting turf wars with other internal improvement teams, and repeatedly “re-selling” our value to a skeptical senior management. We are doomed to repeat the same mistakes if we continue to implement CI as we’ve done for the past 30 years. There is a continued reliance on static classroom-based training, 1:1 coaching and engagement, and hard copy memory joggers. And this is in a world where our clients and employees use online technology to build networks, drive collaboration, and sustain community. It’s as if we are building and selling digital 4G smart phones while using analog phones with dials to collaborate and work with one another. It’s time to wake up. The ongoing financial crisis and poor business environment have provided distractions that took the emphasis off the impact of CI to keep pace with market and customer demands. It is no longer enough to have a perfect product or service. It is now a basic requirement in the marketplace making CI more important than ever to drive and sustain perfection.
T h e nee d for c h ange
Quality and continuous improvement in the last century were defined by control and process improvement, but this is no longer sufficient in the 21st century
The CI profession is at a watershed. The ability to reinvent and drive innovation, as well as showing C-suite executives how CI tools can be used to build sustained competitive advantage, will test the relevancy of CI executives in the future. To make it work, we must push CI beyond traditional tools and thinking with a renewed focus on three critical success factors:
Commit to strengthen and build customer intelligence: accelerated product obsolescence and more sophisticated consumers make it imperative that companies know what their customer wants with increased speed and accuracy.
Improve operational excellence and speed to market: there was a time when low-cost products or services may have been enough for consumers. Not anymore. Today products and services have to be better, less expensive, and brought to market faster than ever before as the maturity curve and expectations of the consumer continually evolves.
Build the next generation of customer advocates: companies must focus on engaging consumers to maintain and increase their loyalty. In a global economy, this requires more emphasis on systems thinking by using technology to enable and sustain competitive advantage.
To deliver the next generation of CI, we must first radically accelerate how CI responds to the increasingly dynamic nature of business objectives by linking vision, objectives, and KPIs to corporate priorities that are addressed through engaged communities of empowered employees.
www.leanmj.com | April 2012
C I ? N ot goo d eno u g h anymore
Next, we focus project effort and stop trying to train and manage hundreds of individuals leading one-off, disconnected projects. Finally, we need to accelerate and redefine BPM and traditional process improvement methodologies to deliver a single dynamic, interactive, collaborative, and self-enabling management platform that truly drives and sustains continuous improvement (see figure 1). The technology to build and sustain large scale CI platforms and secure internal social applications is readily available and well proven across a variety of industries and sectors. For example:
Figure 1: A new platform for continuous improvement Corporate Vision
KPIs Long-term Goals
BPM solutions are enterprise platforms that enable operational excellence by providing visibility and accountability for end-to-end processes by: a. Engaging people with process so that employees can play their part in continuous process and performance improvement;
CO R P O R AT E P R I O R I T I ES
b. Embedding compliance, risks and controls within the operational processes; c. Providing a collaborative framework for process stakeholders; C I P L AT FO R M d. Setting the governance framework for managing change and version control.
Analytics solutions equip everyone in the enterprise whether in business, technical, or scientific roles to easily analyse complex data, customise their discovery experience, or share their story through mash-ups, portals or interactive dashboards. Social enterprise solutions provide social computing platforms specifically built for the workplace that allows the right information to find you. Designed so that people can create â€œsubjectsâ€?, like the activities of their department, or a special project among people in different places. Thus allowing anyone in the organisation to define a selfperpetuating portal that allows people to continually post, build and collaborate on content in context of their job.
C I D E P LOY M E N T
In todayâ€™s highly competitive environment, consumer behaviour and engagement move literally at the speed of the electron and demand instant access to knowledge
It is through the combination of such existing technologies that we can easily start to build and leverage a new generation CI platform that is designed to truly support operational efficiency in a relevant, tangible and sustainable manner in a way that makes sense to the business. There are seven simple steps we call IMPROVE, which collectively leverage proven techniques with readily available collaborative technology:
Initiate the re-energising of efforts that leverage the foundational concept behind annual hoshin planning to ensure a coordinated focus of daily activity and energy on annual organisational objectives with tangible impact on longterm strategic goals;
Mandate and establish high level KPIs to link strategic objectives with long-term strategic goals;
Review, identify and target key functional and crossfunctional processes with direct and tangible connection to corporate priorities. Work with senior leaders (process owners) to identify improvement opportunities, need for risk mitigation, breakdown supply chain impediments, or other signs of inefficiency or waste;
Operationalise CI to drive improvement opportunities rather than it becoming a standalone purpose in itself and therefore not perceived as tangible value add by senior leaders.
Venture and radically redesign traditional CI deployments by going beyond simple project management and tracking by building and deploying a dynamic and collaborative BPM platform powered by a virtual CI “social network” of communities of practice for each key process and business area. Like Facebook or other social networks, encourage employees to work together in virtual, secure internal communities of practices to enable real-time collaboration and sharing. Provide Just in Time (JIT) training and coaching to these virtual teams to help drive innovation, change, and improvement. Driven by what is needed, when it is needed and in the amount needed in order to be able to focus and achieve desired results.
Energise efforts and prioritise changes required by the business by simply adding new communities to the “CI network” to continually evolve with the business and deliver a comprehensive and easily accessible view of the way a company works without building libraries of cumbersome and static process maps, extensive project databases, or complex knowledge management applications just for the sake of it.
Prioritise and break down KPIs to actionable corporate priorities and empower a broad spectrum of users with the ability to analyse data visually, seamlessly use data and/ or models to better answer business questions, therefore enabling the business to learn and improve as they operate within the process;
The internet made information widely available, but it is the combination of structured information and social media that makes knowledge instantly available and trustworthy. In today’s highly competitive environment, consumer behaviour and engagement move literally at the speed of the electron and demand instant access to knowledge. The CI community is at a critical juncture, and needs to make the leap from simply enabling process control and driving process improvements to a new paradigm of truly leading and driving innovation, building robust communities of practices, and finally delivering the mindset necessary to compete in the 21st century. The new paradigm - the new CI mindset - needs to be all about innovation. The new role of CI, which we are calling CI2, is to provide the thought leadership and structure that allows a company to anticipate customer needs, expressed or unexpressed, known or unknown, and bring products and services to the marketplace that go beyond simply meeting expectations to truly exciting customers. In their book The Two-Second Advantage, Vivek Ranadivé and Kevin Maney wrote: “A little bit of the right information just a little beforehand - whether it is a couple of seconds, minutes or hours - is more valuable than all of the information in the world six months after the fact… this is the two-second advantage.”
www.leanmj.com | April 2012
Written by John Bicheno
The Fifth Column
scheduling Scheduling is at the heart of lean. Flow scheduling is, or should be, the reason why we do all those activities - cells, changeover reduction, 5S, policy deployment, standard work, visual management, and so on. Flow scheduling â€˜brings home the baconâ€™ in terms of lead time competitiveness, cash flow, and quality.
THE FIFTH COLUMN
Thousands of pages have been written about lean. But does flow scheduling enjoy top priority attention? Ask a senior operations manager these ‘obvious’ questions:
What is a pull system?
Is MRP push or pull?
Is pull the same as make to order?
What are the advantages of pull over push?
Is kanban the best pull system?
Limitations of kanban?
What variables affect flow?
Where are your bottlenecks?
What is your possible bottleneck rate compared with your demand rate (and where does the ‘danger zone’ of queue instability begin?)
We would hope that an experienced lean manager would have the answers to these at his or her fingertips. Test this out and see…
The ‘answers’ – such as they are – are given below in the form of questions:
What is the essential difference between a pull system and a push system in terms of when orders or work are released? Since work-in-process is directly related to lead time, what does a pull system achieve that a push system does not?
Does an MRP system consider the status of work in process before orders are released?
The same questions as above should be asked for the third question. Surely, yes, make-to-order is preferable in a lean system, but how is a surge of orders to be dealt with?
Certainly cost, quality, delivery. But how is that achieved? Surfacing problems is a central idea in lean, so how does pull help make this possible? (There are a few reasons….)
Kanban requires both look-ahead authorisation, and look-back at part availability. So what might cause throughput to go down, and what are possible causes of this? Is Drum-Buffer-Rope and CONWIP push or pull?
Toyota has words that relate to the first two – Mura and Heijunka. Contrast a stable order regime with unstable demand. Which will work best in terms of lead time? (And who causes this instability? Customers or self?) Why spend so much time and effort on activities such as 5S, standard work, six sigma? (What is the real and common aim of these activities?) When you know that Heathrow has a runway utilisation in the high 90%’s what is your experience in delays? And utilisation is determined by a numerator and a denominator. Each can have a significant effect. By the way, is the statement ‘Lean is about freeing up capacity’ entirely correct – in terms of scheduling?
Many organisations, perhaps as part of ‘leader standard work’, hold daily shop floor meetings. Where on the shop floor is that meeting held?
Goldratt told a story about this in The Goal. Of course the answer depends on variation, but do you believe in 100% loading? See Heathrow comment above. Toyota has a word for this – it is called Muri.
www.leanmj.com | April 2012
There is currently an expanding pool of events available for the development of the lean community. They offer both general and sector specific opportunities to renew your enthusiasm and gain new perspectives through communicating with lean contemporaries.
2 n d I n d u strial L ean P ro d u ct an d P rocess Development ( L ean P P D ) Works h op June 14, Cranfield University The objective of the workshop is to showcase the state-of-the-art methods and tools, as developed by Cranfield University (sponsored by EU-FP7) based on action research with the industry. This can enable the organisations to introduce and implement lean thinking in product design and development. The main topics are: Set-Based Concurrent Engineering, Lean Knowledge Life Cycle, Lean Design, A3 Thinking for Problem Solving and Change Management toward LeanPPD Environment. Several industrial perspectives and case studies will also be presented by speakers from BAE Systems, Elekta, Rolls-Royce and Visteon Engineering Services. For more information, please send an email to email@example.com or contact Dr Ahmed Al-Ashaab on firstname.lastname@example.org
N or d ic E nterprise an d P rocess E x cellence F or u m
2 0 1 2 S h ingo P ri z e I nternational C onference April 30 – May 4, Hyatt Regency Riverfront, Jacksonville, Florida The 2012 Shingo Prize International Conference will focus on the Shingo transformation process, featuring keynote addresses from leading experts who will share how sustainable cultural transformation is achieved through principle-based leadership. The mission of The Shingo Prize is to create excellence in organisations through the application of universally accepted principles of operational excellence, alignment of management systems, and the wise application of improvement techniques across the entire enterprise. For more information visit www.shingoprize.org/2012conference
O perational E x cellence S ociety Meet leaders and professionals from your local business community and discuss the most common problems companies experience in trying to achieve excellence. You will go home with many ideas and a lot to think about, and with new interesting contacts. April’s highlight: New York City, April 16, 5pm Venue: I tre merli. Eliot Fumagalli, former corporate director of supply chain performance at Emerson, will give a presentation entiled “Lean & Six Sigma in the Supply Chain” For information, please contact Richmond Hulse on email@example.com or Trinity De Mars on firstname.lastname@example.org
May 30-June 1, Stockholm, Sweden
Other Operational Excellence Society chapter meetings include:
If you are unclear on how to maximise efficiency within your processes, you wonder what actions other businesses take to ensure efficiency and effectiveness and what is happening with enterprise and process excellence in Scandinavia, this IQPC event is right for you. In its 4th edition, the Forum will include 16 sections and will feature speakers like Martin Hoffman, VP of operations development at SAS Scandinavian Airline, and Roger Johansson, VP commercial aftermarket BRE at Volvo Buses. In this turbulent economic climate no business can afford not to be utilising modern and effective processes: in 2011 H&M’s net profit fell by 11%, but Volvo reported a phenomenal 63% growth. Attend this event to know what processes companies like Volvo have used to ensure this success.
Dubai, April 9, 5pm Venue: Dusit Thani Hotel (tentative) For information, please contact Andy Gibbins on email@example.com Munich, April 10, 7pm Venue: Restaurant Ludwigs, “Marktsalon” For information, please contact Martin Haack on firstname.lastname@example.org Warsaw, April 11, 6pm Venue: TERERE Tea Restaurant For information, please contact Malgorzata Krukowska on email@example.com Frankfurt, April 26, 7pm Venue: Restaurant Steinernes Haus The inaugural meeting of the Operational Excellence Society Frankfurt chapter will be run by Joseph Paris and Klaus H. Merz. For information, please contact Martin Haack on firstname.lastname@example.org
fort h C O M I N G EVENTS
March 14, call for entries The Manufacturer of the Year Awards 2012 is a rare chance for you, your team and your company to receive industry-wide recognition for your achievements. The World Class Manufacturing Award is one of the most heavily competed categories of the awards and recognises the manufacturing plant that is achieving the highest levels of operational excellence. The Awards programme entry deadline is July 31, site visits will take place in October and the Awards Ceremony and Gala Dinner in November. For award enquiries and further details, contact Laura Williams on +44 (0) 1603 327006 or email@example.com
Worl d C lass M an u fact u ring F actory T o u r May 22, New Holland Agriculture, Basildon Winner of the 2011 World Class Manufacturing award, New Holland Agriculture (part of the CNH Group) will be providing a unique oneday event combining a best practice site tour together with a deep dive development session to illustrate the World Class Manufacturing Pillars that have helped the company to achieve world class status and to be crowned winners of this coveted award. Delegates will have the opportunity to see how New Holland Agriculture has and continues to implement WCM - and to be on the never ending road to developing a continuous improvement culture within its plant. By seeing the tools in action and talking to the pillar champions, delegates will have a clear understanding of the building blocks the plant is using to construct a truly world class manufacturing operation. To register a place, please contact Benn Walsh on +44 (0)207 202 7485 or firstname.lastname@example.org
L M J A nn u al C onference 2 0 1 2 May 29-31, The Hilton Metropole, Birmingham NEC www.leanmj.com/annualconference Lean Management Journal invites you to the flagship event for lean and continuous improvement professionals. Speakers from North America, UK, Europe and South Africa will give an international dimension to this year’s conference as they share the latest insights, best practice and thinking in three days of unrivalled personal development. New features of the 2012 Annual Conference include:
Ideas Exchange Sessions, informal group sessions to exchange best practice tools and techniques;
Post-conference workshops followed by site assessment visits;
Lean Leaders Networking Dinner on Tuesday 29th May.
Now in its third year, the LMJ Conference helps you understand the fundamental concepts you need in order to improve your way of doing business and achieve excellence, drawing on best practice from organisations and lean leaders and focusing on the integration of both lean and systems thinking. Day One – May 29: Main Conference Speakers include: Steve Welch, group continuous improvement manager, Yeo Valley; Peter Watkins, global lean enterprise and excellence director, GKN; John Bicheno, director of MSc Lean Operations, Lean Enterprise Research Centre; Gwendolyn Galsworth, president of Visual Thinking Inc.; Richard Holland, managing director, TBM, UK, India & South Africa; Bob Hafey, president, RBH Consulting; Bill Bellows, president, In2In Thinking; and Dr Nick Rich, honorary fellow, Cardiff Business School. Day Two and Three – May 30 & 31
Thinking for Lean Workshop – 30th May
Lean Accountancy Workshop – 30th May
Lean Safety Workshop and Site Assessment Visit – 30th & 31st May
Visual Thinking Workshop and Site Assessment Visit 30th & 31st May
For delegate enquiries, please contact Benn Walsh on 0207 202 7485 or email email@example.com
www.leanmj.com | April 2012
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L M J events incl u d e :
T h e M an u fact u rer of t h e Y ear 2 0 1 2
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