Figure 14-1: In serial engineering, one task is done before another is started. In concurrent engineering, all functions are performed collaboratively and in parallel.
Chapter 14
Lean within the Enterprise
In This Chapter
Recognizing that Lean applies in all areas — not just manufacturing
Understanding Lean at the enterprise level
Identifying how Lean is practiced within different business activities and functions
Lean is an enterprise methodology. Some organizations have believed (mistakenly!) that it is only for the “production” part of their business, but it’s applicable to all of the business. Take your supply chain, for example: if it takes you ten times longer to get your stuff from suppliers, you will not be able to supply your customer any faster. Also, by applying Lean across the enterprise, the multidisciplinary views and experiences help the core businesses better serve the customer. Because Lean principles apply to processes in general, any process in any area of your organization can be improved using Lean.
Practicing Lean anywhere benefits the practice of Lean everywhere. As we stress throughout this book, Lean is not a sideshow — it’s not just something done by Lean experts or worker bees off in a corner of the organization. The more widely you practice Lean across the enterprise, and the greater understanding, acceptance, and support you achieve in each area, the better you will serve your customer and improve your business.
In this chapter, you see how to apply Lean from top to bottom and from wall to wall in an organization. From the support areas to the operational floor, and from the procurement office to the customer-service center, Lean practices reduce waste, time, and mistakes, and improve overall customer satisfaction and enterprise performance.
Lean Enterprise Management
Implement Lean across all functions and departments within the organization: Permeate the entire enterprise. Enable everyone across the organization to look for ways to eliminate waste. Encourage everyone to continuously and incrementally improve work processes — always doing it better, making it better, and bettering themselves and the whole organization to enable the core business.
In the Lean enterprise, people look at the whole business system. They conduct improvement activities at all levels with a complete view — seeing not just their own value stream and their own customers, but everyone’s customers, the organization’s customers, and the end consumers. Everyone examines the processes that influence outcomes — causes and effects — and sees the organization through the lenses of kaizen:
Kaizen maintenance: Always maintaining performance levels by following standardized work
Kaizen improvement: Continuously improving the existing standards and processes or innovating new ones
Across the Lean enterprise, people apply all their training and knowledge, utilize their materials and tools, and provide the support and supervision to both the improvement and the maintenance of standards. This business philosophy calls for never-ending efforts that involve everyone — executives, managers and workers alike.
It’s a Lean, Lean, Lean, Lean world
Lean fuels a passionate emphasis on waste reduction and value creation anywhere and everywhere across the enterprise. It’s in the excitement of enablement — the exuberance that comes from recognizing you have both the power and the ability to conquer obstacles that would otherwise frustrate you.
Lean above and beyond the floor
Don’t look now, but most of what happens in many organizations isn’t in hard-core physical manufacturing at all. While Lean was growing up in places like the automotive assembly arena, many organizations were evolving to deliver customer value in non-manufacturing realms. Nowadays, many enterprises conduct most of their business activities above and beyond what’s known as the “ops floor.” For operations to be successful, you must also improve all of the other activities. (In Chapters 15 and 16 you can find out more about how Lean is applied in non-manufacturing industries.)
Transactional Lean
Practice Lean in the transaction processes — business processes whose primary role is to transact information or process data. Just because you’re not making something physical doesn’t mean your processes are free of waste or you’re effectively satisfying the customer. Transaction processes typically don’t waste much material, but they can waste things that can be worth a lot more, including:
Time: Poor transaction management wastes huge amounts of time. Apply the Lean practice of cycle-time reduction in these areas.
Facilities: Transaction processes use facilities just like physical processes do — office buildings and data centers, mostly. Reduce excess square footage by managing transactions more effectively.
Energy: When you’re wasting space and churning more transactions, chances are you’re wasting energy, too. Offices are big energy consumers, and data centers are even bigger energy consumers. Overtime, excess travel, rework — these all consume energy needlessly.
People: Worst of all, by not engaging and utilizing people properly, organizations fall well short of their potential.
Waste is harder to see in transactional areas. You can easily see waste in the physical areas: parts, inventory, material, people who aren’t working, and so on. But waste is harder to recognize in transactions. Is that person sitting in front of his computer adding value? Is the computer program he’s running adding value? Is the process that’s consuming the results of that program adding value? Are the data providing value? You have to look more closely — go to gemba!
The value-stream manager
The Lean enterprise has a unique role called the value-stream manager. The value-stream manager is responsible for end-to-end improvements and performance across one or more value streams. This role is important because it’s focused on how to most effectively deliver overall value to the customer. It’s a multifunctional role — integrating multiple disciplines and functional areas. A product-line manager, who owns the profit and loss (P&L) for a family of products or services, is a candidate to fill the value-stream manager role, because they oversee the many value streams for those products or services. A project or program manager with a focus on a single program or project could also fill the role. The value-stream manager might also be a uniquely assigned role within an operational area.
It’s All about the Customer
Lean principles lead to organizational behavior changes in many ways. At the epicenter of this change is the customer. In Lean, the customer is the primary focus — it’s not that the customer is always right; it’s that the customer is everything. The customer defines value (see Chapter 6); the customer stimulates the demand for a product or service; the customer defines the requirements; the customer evaluates the results. Optimize all processes and activities within the enterprise to deliver customer value.
Within this philosophy, using the Lean toolkit enables you to flow information back from the customer to provide the products and services throughout the enterprise. Design information, customer usage information, demand information, operational information — it all flows to and from the customer.
But what about the direct relationship with the customer? How do you manage this in a Lean environment? Who touches the customer? What’s different about Lean customer management?
Manage the customer following the same rules and protocol, and philosophy, as other Lean enterprise activities. Take the waste out of customer relationship activities; optimize the value stream of customer-facing functions; shorten the cycle-time of customer response; take a holistic systems view of the customer; and understand the customer’s customer. Optimize the customer-facing functions just as you would for any function across the enterprise using kaizen.
Most organizations suffer from similar customer management challenges:
Too many front-end processes and systems interacting with the customer
Too many contacts, too many interfaces, and too many handoffs and delays in managing customer relationships
Disconnected customer feedback from the rest of the organization
Errors in selection, configurations, pricing, quoting, and fulfillment of customer orders
Transactional customer relationships without intimacy or longevity
With Lean, customers are for life. The customer relationship is where their expectations meet your abilities, where you address their goals and desires by the outcomes of your enterprise and the capacity of your systems of development, production and support. Your Lean solutions will deliver high levels of satisfaction for both the customer and the enterprise.
Marketing the customer
Marketing is the dance — the arena where you and the customer develop mutual interest and excitement. It’s what the dreams of future value are made of. Lean in marketing is the process of conceiving and refining the basis for exchange — what the customer might want, and what the enterprise might deliver. Tools like Quality Function Deployment (QFD) and Kano modeling are part of the transition between marketing and design.
When implementing Lean in marketing, the value stream is a flow of concepts and ideas; the products are emotions. Customer value is measured as demand. Waste is anything that doesn’t stimulate this value stream. Companies that obtain market research faster and more accurately, and process it thoroughly, have an edge over their competition.
Integrate Lean marketing with the enterprise through systems and processes of capability, capacity, and profitability. Help your organization satisfy the customer interest you’ve generated by producing, producing timely, and producing profitably. The customer is telling you what they want, and your internal processes must effectively hear it — even if the customer’s message is a message they don’t necessarily want to hear.
Selling the customer
Sales processes are often transactional and systems-based, and they tend to be focused on the transaction process and revenue. Applying Lean to the sales process enables you to focus on customer value and ensure the right customers receive the right offer.
Selection and configuration
Customers need to quickly evaluate options in order to make selections and buy. Their ability to select and configure a solution quickly and easily is not simply a matter of efficiency; it’s the enabler to a buying decision. Think about the experience of shopping for anything from shoes to computers. You need to find what you want quickly and easily, or you’ll just become exasperated and go elsewhere. Sales managers ensure the customer has a fast, accurate, and focused path through the maze by applying Lean.
In the online world, tools like product configurators and guided selling tools enable customers to move quickly and easily through the buying process. These tools match supply and production capacity with customer buying preferences. Computer companies exemplify this process. If production of 600GB laptop hard drives is temporarily halted due to a typhoon in Malaysia, the Dell online tool will quickly entice buyers to select the 800GB drive through special pricing and incentives. The customers are getting a deal, while Dell turns a production problem into a marketing opportunity.
Quoting and pricing
In sales, apply Lean to remove waste and cycle time from the description, quoting and pricing processes. Use Lean practices to more effectively describe and demonstrate your products and services consistently; likewise with the quoting and pricing of products and services. Pricing sheets, price lists, complex bills of material, pricing changes based on options and configurations — these issues confuse both the customer and the sales team. Apply standardize work principle to product offerings. How can you best meet or delight the customer, while minimizing variation?
Lean organizations tend to have fewer, higher value product configurations. This enables reduced product variation and avoids end-of-season “fire sales” to get rid of unwanted inventory.
Ordering and fulfillment
Fulfillment processes are ideal candidates for Lean optimization because they are typically a combination of both physical and transactional processes that suffer from errors and delays. To avoid angry customers and high costs of rework and repair, apply Lean practices to the order processing and fulfillment operations at every level of the enterprise. Define the value-stream map, and optimize for cycle time, inventory levels, and defect prevention.
Servicing the customer
Service after the sale is the make-or-break function of the long-term customer relationship. It’s likely the longest period of direct customer interaction — longer than the spikes of marketing or sales activity. It brings the customer back for more — or it drives the customer away, perhaps never to return. Because good service keeps customers coming — and poor service kills the customer relationship rapidly and permanently — you must apply significant energy and attention to optimizing the customer service function. Design your customer service process as part of the whole value stream and apply Lean techniques to ensure it’s designed to best serve your direct customer, and is well-integrated with your marketing and sales processes.
The customer service process is markedly different in business-to-business (B2B) environments than it is in direct business-to-consumer (B2C) relationships. Design your customer service process to best serve the needs of you direct customers — whoever they may be.
Satisfying the Customer Through Products and Services
More than ever, the pressure is on businesses of all types and sizes to rapidly develop and bring innovative, high-quality products and services to market. New product development efforts are now characterized by ever-shortening product-development cycles, lower budgeted development costs, and required increases in product quality. More demanding customer requirements are constantly pushing the envelopes of features, customization, energy efficiency, environmental compatibility, reliability, maintainability, and life-cycle cost of ownership.
Lean development processes enable the enterprise to produce products and services faster, with fewer resources, and at higher levels of quality, while using less capital and making happier customers. Lean development practices help managers address a myriad of challenges that conspire against them, including uncertain requirements, chaotic work environments, non-reusable designs, increasing product complexity, prohibitively expensive prototyping and test regimes, last-minute design changes, and more.
Most of this section relates to a physical product, yet the fundamentals also apply to the service sector. Imagine your business is a call center or a retail floor. How will the customer interact with you? What tools and environments are you providing to your employees to best serve the customer? Imagine that you have a petite clothing department, but all of the clothing displays are at a “tall” person’s height. Or a call center where the system does not allow the service representative to quickly and effectively respond to the specific customer situation. Design and development are just as important in the service world.
What happens during the design and development process affects what happens in the manufacturing, production, distribution and support processes. Development is near the headwaters of the enterprise value stream. When development is well-integrated in the value stream, greater efficiencies, reduced variation and higher quality outcomes occur throughout the life cycle.
Table 14-1 summarizes some of the techniques of Lean product development.
Table 14-1 Lean Development Techniques
|
Technique |
Description |
|
Kano modeling (must/should/could) |
Understand customer requirements in terms of needs, wants, and delighters. |
|
QFD – Quality Function Deployment |
Capture and translate voice of the customer; value-based designs. |
|
3P |
Production Preparation Process starts at the design process to build Lean methods into the products/ services and processes. |
|
Design limits |
Set high and low limits for performance, features, quality, or price. |
|
Task linking |
Use templates and checklists to manage the links and interrelationships among development tasks. |
|
Delivery road map |
Envision the schedule development deliverables. |
|
Standard work |
Produce recipes for performing tasks identically and consistently. |
|
Reference standards |
Follow established guidelines. |
|
Short-cycle approvals |
Manage by exception; provide value-added approvals and support. |
|
Reuse |
Identify where reuse of designs, production, and other life-cycle elements reduces time, complexity, or cost. |
|
Meeting management tools |
Hold standing briefings with defined outcomes; conduct waste-free meetings. |
|
Complexity reduction |
Optimize product quality, cost, and manufacturing by reducing complexity. |
|
Visuals |
Use status boards, Gantt charts, intranets; create visual pull systems for Engineering Change Notices (ECNs), Change Review Boards (CRBs), etc. Apply help sheets for exceptions to plan. |
|
Formal freeze points |
Enable parallel task execution. |
|
Critical path management |
Pull the development project through the critical path points on the development schedule. |
|
Critical core management |
Focus resources on core tasks that drive overall schedule, cost, and/or quality. |
|
Brainstorming |
Conduct events to address challenges and improve processes and outcomes. Refine the ideas to implement fewer, better solutions using PDCA. |
|
Periodic process assessments |
Continuously improve the effectiveness of the development process. |
The systems approach
The first rule of development in Lean is to bring a complete, holistic view to the development process. Integrate the three major components of the development world — people, processes, and technology — and make sure they’re mutually supportive. Keep them in alignment, not only with one another, but with the goals and strategies of the organization as a whole.
People are the heart of the development environment. Lean dictates they are well trained in their disciplines and in Lean behaviors. They should also be highly skilled and intelligently organized.
Development processes must be designed, standardized and followed. These processes must both minimize waste and maximize the capability of the people who use them.
Supporting technology must be available, properly sized and configured, and focused on the solution. Technology should be selected to enhance and enable the performance of the people and the processes.
Hearing the voice of the customer
Every developer should hear that little birdie on his shoulder . . . chirp-chirp! That’s the voice of the customer, singing in your ear, as you contemplate your next move. Are you listening? Can you hear the customer talking? What do you hear the customer saying? Can you say it? Can you explain it?
Use Lean tools to closely connect the development process with the customer. The customer’s voice not only tells the developers what to design, but the customer’s notion of value reveals much about the design process — and thereby helps the developers eliminate non-value-added steps and activities. Listen closely for details — any nuance that can further elucidate a requirement or specification that you can then translate into functional design for products and/or services. The Lean process hears the customer’s voice first, foremost, and louder than any other voice.
The application of Lean to development comes from an intimate understanding of customer-defined value. Tune the people, process, and technologies to understand customer-defined value from the start. And to deliver on the value promise, product development must produce a product design that accomplishes the multiple goals of manufacture-ability and service-ability, as well as meeting and supporting the customer needs.
Front-loading the engineering process
Most of the cost of any final product or service is locked in long before the product is produced. Overly complex designs cannot be “leaned out” in the manufacturing process. Meanwhile, slow design efforts delay market readiness, and negatively impact sales and profitability. You cannot market and sell your way past products designed without the voice of the customer!
Suffice it to say that poor planning for design and development undermines Lean manufacturing. But short-changing the engineering cycle is just as counterproductive because rushing to production creates more problems than it solves. Designs arriving late to production cause poor yields, major manufacturing deficiencies and lingering engineering problems.
You can reduce the pressure on design and development time by applying Lean tools and practices like 3P (see Chapter 10) and DFM/A (later in this chapter) during the product-development process and by involving the manufacturing or service suppliers in the design process — this is called concurrent engineering. By taking the broader view of product (or service) development, you can also reduce manufacturing lead times, avoid assembly and service issues, maximize the life-cycle performance and product (or service) cost.
Concurrent engineering (also sometimes called concurrent product development or simultaneous execution) is the rational practice where all the enterprise functions are aware of the activities occurring beyond the borders of their own department. Concurrent engineering (see Figure 14-1) replaces a traditional serial product development process. In concurrent engineering (CE), everyone, including support areas, collaborates on each aspect of the product’s life-cycle process, enabling more robust products and quicker reactions to changing conditions.
Apply product and service life-cycle rigor upfront, during the first design and development phases. This way, you maximize the effectiveness of the product development process and provide the most leverage through early problem solving, designed-in countermeasures, and cross-functional participation across the value stream. Furthermore, with this approach, you can reduce inherent uncertainty from the execution phase, reducing the downstream process variation that’s critical to both speed and quality.
Rigorous standardization — for maximum flexibility
A constant knock on rigorous methodologies like Lean is that they’re supposedly too rigid. Especially in the quirky, inventive culture of the design world, people think that standards and processes do nothing more than take the art out of the practice. After all, where’s the creativity, if all you’re doing is following someone else’s best practice process, right? Nothing could be more wrong.
Lean is not about becoming a robot, programming yourself to perform repetitive tasks with machine-like precision. Lean work standards, best practices, and waste-reduction initiatives in no way imply you’re limiting creativity and flexibility. In fact, just the opposite is true.
The development processes in Lean organizations are far more predictable, effective, and value-added than is otherwise possible. This is because the development teams are supported by tools and resources (refer to Table 14-1). They eliminate the noise factor of unnecessary randomness and chaos in the support frameworks, enabling teams to focus more time and energy on the creative elements. Redeveloping infrastructure on every project or at every step is wasteful and distractive — it saps creative energy. Elements such as work protocols, reference designs, and standard processes enable designers and developers to spend more of their time being creative and applying their precious energies on the truly value-added tasks such as developing customer solutions. Such standards are also crucial to innovating new downstream Lean manufacturing capabilities.
People fear that systems like Lean are somehow confining or limiting. They’re not — they’re enabling and innovative! Without them, developing anything would take more time and effort — and time and effort are exactly what’s in shortest supply.
Designing for manufacture
The practice of Design for Manufacturability (DFM) — or Design for Assembly (DFA) — is an important part of Lean practice. It isn’t unique to Lean; DFM is part of concurrent engineering — it’s recognizing that it doesn’t matter how beautiful and elegant a design is if you can’t actually build it. DFM is a collaboration between the design and manufacturing functions of an enterprise who ensure the product as-designed can be developed within reasonable manufacturing limitations.
Designing for Manufacturability helps you greatly improve product quality and reduce fabrication costs. You involve the manufacturing representatives early in the design process. After completing preliminary designs, you meet with the manufacturing team and review the product requirements and design intent. At that point the team can determine the manufacturing process requirements, and the manufacturing team can determine the process capabilities implied by the design in order to meet product quality, cost, and availability targets; they also share lessons learned based on past experiences, especially with similar products.
One of the most harrowing problem areas for physical products is tolerancing (the practice of defining tolerance limits on components, parts, and assemblies). Historically, designers define tolerance limits too casually — and in the process, inadvertently dictate the capital and process needs of production. Avoid tolerances that are beyond the natural capability of the manufacturing processes: too tight or too generous that they create stacking problems; both conditions can result in products that cannot be made or won’t last. In addition, the manufacturing team should identify to the designers any manufacturing tolerance challenges and suggest design or requirements revisions. When new production process capabilities are needed, identify these needs early.
Simplify design and assembly so that the assembly process is unambiguous. Design components using poka-yoke so that they can only be assembled or utilized in one way.
Built-in learning
In the Lean enterprise, ensure learning and continuous improvement are fundamental parts of every job. Although certain work skills require special outside training, make acquiring and refining Lean process and improvement skills a regular and routine part of everyday work. Build in learning into your organization by including such practices as:
During projects, reviews, and events, encourage everyone to learn and update their work standards and practices.
Use reviews at project milestones and completion to provide additional opportunities for learning.
Go to gemba (see Chapter 13) regularly to gain and validate knowledge.
Make learning and continuous improvement a part of the problem-solving process. Focus multiple potential solutions on root cause, and design solutions to stop future reoccurrence.
When the product is software
Lean practices apply to the process of software development, just as they do to the development of physical goods and services. Developing so-called virtual products, like software, has its idiosyncrasies, but remember that kaizen is an all-encompassing philosophy, and that Lean improves all processes.
All the behaviors, practices, characteristics, and techniques of Lean that enable the continuous improvement of hard, physical goods also apply to software. These include the focus on the elimination of waste, customer value-added, engaged developers, reduced cycle time, and improved quality.
The most important Lean technique for software development is to simplify before you code — in other words, fix it in the design first.
Some of the other important Lean software development techniques include
Hearing the customer: Particularly in corporate software environments, understand the customer. And understand what your customer is doing for their customer. Capabilities, timeframes, cost — understand your customer’s issues and what’s important to them. Genchi genbutsu!
Avoiding bloatware: Pareto’s Law applies to software utility: 80 percent of the value in most software is provided by 20 percent of the features. Don’t waste time and energy designing and developing mainstream features that most users don’t find useful.
Feeling the need for speed: How quickly can you respond to a customer’s need for new features or functionality? How much non-value-added activity churns while the clock is ticking? Software should be modular, flexible, and extendible; teams should be small, fast, and focused.
Maintaining “agile-ability”: Software development teams should be agile — modular design and system integration should enable work on any layer, feature, or capability. To do this, the team needs to be engaged, communicate, and collaborate constantly throughout the development process. The goal is just-in-time performing software, with information and control available on demand by any customer.
Simplifying the interfaces: The key to modularity and extensibility is to keep the interfaces clean and simple. Examples include: interfaces between code modules; functional interfaces between applications and systems; usage interfaces between departments.
Working continuously, incrementally: Add capabilities and new features regularly. Lean-agile software techniques call for continuously developing and deploying software in small feature sets.
Maintaining standards and standard practices: Software shops really struggle with internal discipline, and yet it’s an environment where discipline and control is as important as anywhere. Everything from filenames to coding standards, documentation practices, configuration management, change control, backups, upgrades and release management, and 5S (see Chapter 11) in the workplace.
Providing visual feedback: The visual status, reporting, metrics, and controls are fully applicable in software environments. Use them liberally!
Lean Production Processes
The Lean movement began in the production arena, on the operational floor, in Japanese automotive manufacturing and assembly plants. This is where the Lean philosophy, Lean behaviors, and Lean techniques were first developed and later honed. There’s a reason why so much of the language of Lean sounds like you’re “making” a new Toyota!
This section is about production processes — that infamous “ops floor.” This is the historical core of Lean.
Safety, often referred to as The 6th S (see Chapter 11), comes before everything else for all production activities. In the words of Taiichi Ohno at Toyota:
“Never forget that safety is the foundation of all our activities. There are times when improvement activities do not proceed in the name of safety. In such instances, return to the starting point and take another look at the purpose of that operation.”
Lean production techniques are much different from those used for 20th-century-style industrial mass manufacturing. The key principles are:
The customer defines value, and all production people, systems, and processes are focused on adding to that value.
Reduce and eliminate waste — wasted time, energy, space, people, materials, facilities, and equipment.
Instead of focusing only on outcomes, focus on the processes that create value across the entire value chain that produce those outcomes. Use value-stream mapping, kaizen, and standardized work as key enabling tools.
Safety is the foundation of all activities. People must be able to deliver value to the customer without being injured. Evaluate all processes to ensure the safety of all.
Practice continuous flow — even if you have to rearrange facilities and systems and put in new control and measurement systems. Produce to a cadence, as measured by takt time.
Through shortened equipment setup times, move to producing small lots, “every product every day,” and ideally to single-piece flow.
Reduce and eliminate inventory and storage. Move to a demand pull system that’s initiated by customer action.
Define standard work processes, and adhere diligently to them until you make a formal change.
Create quality at the source.
Production is that place in the value stream where you create value for the customer via your product or service. It’s where the action is — gemba — and where it’s easiest to see the process in action. Apply visual tools for quickly seeing status and reference. Go there often to ensure you are delivering in the most effective way.
Lean in the production area has always been about doing more with less — improving quality and effectiveness while consuming less time, fewer resources, less energy, time, inventory, people, and capital. The classic title “Lean manufacturing” has been applied to the greater movement that eliminates waste (muda, mura, and muri), streamlines processes, and speeds up overall production, while enabling and respecting the people and delighting the customer.
The production arena is where most companies start their Lean efforts. Unfortunately, it’s also where many stop them. Don’t let this happen to you!
In the Lean enterprise, the quality function shifts from reactive to preventive; you develop quality “at the source.” Quality at the source is a Lean principle where quality output is not measured just at the end of a process, but at every step along the way; and also, quality is the responsibility of everyone who contributes to the production or delivery of a product or service. The quality group analyzes cause and effect, works to predict failure modes, and prevents them from happening. This is a key role shift — from one of reaction to one of prevention. The focus shift to be active in poka-yoke (mistake-proofing) as well. As a result, the quality organization will move from inspection of product to a process/product auditing focus.
Leaning Up the Support Functions
In Lean terms, it’s easy to see that overhead functions and departments typically add little or no value to the customer. Where’s the customer value in a contract, an accounting procedure, expense report or database management system? Technically speaking, it’s all non-value-added. As a result, enterprises tend to direct their improvement energies on core value-added processes and treat support functions as necessary evils, thinking of them as type-1 muda. Big mistake!
You have two reasons why your support functions are vitally important to the Lean enterprise:
1. Because indirect and overhead departments typically total over half of all costs, support areas should receive massive internal process-improvement attention. Like everyone else, they should Lean themselves.
2. Support functions must be in step with the core value creation operations. These functions provide people, parts, materials, and other resources to productive areas. If their processes impede delivery to the customer, then you are not delivering the most value to your customer.
You can introduce Lean in support areas by facilitating kaizen events, coupled with a modest amount of training. Support them with the following management behaviors:
Facilitate a broad understanding of the function’s contribution to the enterprise and how it delivers value to its customers.
Define and measure the function’s standardized work processes.
Build VSMs that show how the processes align to the value stream and generation of customer value.
Use performance measures to motivate Lean actions; reward Lean behaviors; incentivize the elimination of unnecessary overhead.
Cross-train, enabling the shifting of work for rotations and peak load management.
Define internal business measures in terms of customer value.
As a support function, declaring yourself type-1 muda does not excuse you from being part of the value stream. Applying Lean practice internal to your function is important, but you are not an island. Go to gemba and look for ways to contribute to the continuous improvement of customer value.
Lean in human resources
The Lean enterprise depends most of all on people; “respect for people” is one of the two pillars of Lean practice. We also know that Lean stimulates transformational and disruptive change in how people work, team, and communicate. This must be well-managed and supported through the short-term bumps and over the longer-term evolution. As a result, the human resources (HR) function has a critical enabling role in the Lean enterprise.
Talent acquisition and retention: HR helps provide the right resources to teams and ensures they have proper skills and competencies, the necessary tools, and the ability to work in environments that reward improvement in a supportive atmosphere. HR uses hiring strategies to employ both permanent workers and temporary staff to handle fluctuations in business demand. And HR is even more critical in volatile market conditions, like emerging markets and high retiree rates, to hire and retain the workforce.
Culture facilitators to sustain Lean: The HR function helps provide the tools and means by which employees at all levels create the culture that will sustain the Lean improvements. They facilitate communication across functional and hierarchical boundaries. This can include everything from role definitions, principles and values, issues and challenges, behavior expectations, cross-functional forums, celebration of successes, and more.
Compensation and reward systems: HR implements the employee compensation systems and facilitates the reward mechanisms consistent with Lean principles and practices.
Training and development: By closely aligning with the lines of business, understanding strategic directions, and supporting the staff, HR plays a key role in organizational readiness and performance through its training and development function. The goal is knowledge delivered in the most effective way, to the right people at the time when they need it.
By driving waste from its own internal processes, HR will also have more time to deliver value to its key customer: the employees. The greatest opportunities include recruiting, new-hire cycle time, training and development, benefits administration, satisfaction, and retention. In Chapter 16, you see how one company applied Lean to their on-boarding process in order to retain more of the people they hired.
Lean finance and administration
An enterprise Lean initiative requires you to transform the mindset of the finance and administrative professionals so they can better participate in delivering customer value. This goes beyond the practical insights and applications of applying Lean techniques to improve internal financial processes; your Lean journey requires a different type of accounting — an accounting that motivates the Lean practices throughout the enterprise.
Process teams need information that correctly measures customer value and waste. Managers need metrics for assessing the financial impact of kaizen events and Lean improvements. In addition, they need this information to be available simply and visually. Lean finance and administration delivers this.
Orientation to customer value: Lean accounting is a transition from traditional budgeting and transactional-based financial management systems, which are oriented around process controls. Because these new systems presume that processes are in control, they measure costs and contribution margins from the value stream.
Metrics and measures: Get the financial measures of performance in line with practices of creating customer value and the reduction of the seven forms of waste. It is best when you combine these in a balanced scorecard with the customer, process, and people measures.
Ease of understanding: Use short, clear, visual reports and dashboards to convey status and results in value-stream terms that everyone can understand.
Lean IT
New programming tools and frameworks are enabling Information Technology (IT) to Lean itself and better fulfill its responsibility to provide the right technology and information systems to enable information flow within the value stream and the delivery of customer value. IT’s role in the enterprise continues to evolve rapidly as technology evolves. Technology is now underpinning nearly every business function, enabling new business opportunities and facilitating closer interfaces with both the customer and consumer. The IT industry has developed platforms, tools, and capabilities that better enable Lean practices and is now better able to play a central role in the development and ongoing maturity of the Lean enterprise.
Lean across the extended enterprise: Lean practices have been effective without technology in local environments and workgroups, but only IT can effectively integrate the full gamut of Lean practice across value chains that transcend multiple geographies and corporate boundaries. IT can enable processes, information, people, systems, and materials in the global domain.
Customer focus: Chief information officers (CIOs) and IT practitioners have long recognized the need to improve their customer focus, but systems and applications have typically been designed to perform isolated functions. Newer technologies for business process management and service-oriented architectures can tie the signals of customer demand and other customer events and measures through the value stream, giving IT managers improved customer awareness as well as management controls over their applications and systems.
As an example, a large manufacturing company had an understaffed purchasing department and was unable to provide manufacturing with the right parts at the right time. To keep supplying the customer, manufacturing continuously deviated from plan and substituted other components to build and ship the product. Manufacturing’s solution was to have IT improve the deviation process so they could substitute parts faster. Instead of focusing improvement at the source of the problem (purchasing), the IT team was asked to improve a “work-around” process for manufacturing.
Internally, IT has a lot of house-cleaning to do and can improve itself considerably following Lean practice. A few examples:
Reduce non-value-added activity: Streamline IT processes and eliminate outdated processes, paper reports, redundant processing, and multiple handling of information (internally in IT and externally in the business).
Customer pull: Support customer and consumer needs on an individualized basis using IT tools which process and deliver information at the rate of customer demand. Avoid building software that tries to be all things to all users.
The end of batching: Eliminate batch data runs by using systems that can support more real-time integrated and continuous-flow data processing.
Lean Supplier Management
The Lean journey within the enterprise is just that: It’s within the enterprise. However, supplier performance — outside the enterprise — is of course a key part of the value stream, and it significantly and materially affects the performance of the enterprise. Working with suppliers within the Lean framework helps you optimize the value-stream across the complex interfaces between organizations.
Lean supplier management requires you involve multiple functions and departments within both organizations. It’s the concurrent, cross-functional management operation — now extended through organizational boundaries. From a Lean perspective, your key suppliers are long-term partners. You form long-term relationships and recognize that their success is ultimately your success. Sometimes, it will require you to redefine the entire architecture around the supply process. It’s worth it, though, because you can:
Add value: Providing products and services effectively, with less waste, fewer defects, and undue costs
Flow information rapidly: Smoothly, completely, bi-directionally, flowing both developmental and operational information
Administrate effectively: Making contractual arrangements more easily, and performing effective change management
Continuous material flow: Connecting and delivering goods and services without interruptions in support of your facilities and processes
Manage inventory: Striking a balance of inventory across the supply chain co-create global inventory strategies and contingency plans
Behaving as one: The architecture of supply
Supply chains tend to tier according to volume and commoditization. The automotive industry, for example, has a first tier of suppliers who provide major components and assemblies to the vehicle brands. In turn, those suppliers have a second tier that provides sub-assemblies and smaller components. A third tier provides piece-parts. The computer industry is similarly tiered — as are most large, mature and global industries.
The number of tiers in an industry, and the number of providers in each tier, is based on the degree of product complexity and extent of both the commoditization of the product and the volume of product in the market. Consequently, there are many players in each tier of industries like automotive or computers, fewer in the oil and gas industry, and very few in an industry like running shoes.
Supply architectures tend to balance themselves naturally based on a variety of pressures and constraints, including:
Drive for simplicity towards the fewest number of suppliers to manage, as well as the fewest number of parts to design, assemble, and support.
Leverage strategic competencies around what you choose as your core versus what you bring in from outside providers.
Take advantage of price either when you can make something for less than what the supplier can, or when the supplier can provide it for less than it costs you to make it.
Use readily available commodities or near-commodity parts and supplies when they are easily available in the marketplace.
Binding the links
Because organizations connect on many levels, be sure you connect with your suppliers technically, contractually, and methodologically. Don’t just leave it to your procurement staff to work the best deal as they see it.
Contractual ties
Lean organizations view suppliers as long-term partners, critical to their own success, and their contracts reflect this view. Try to bind supplier relationships with the longest possible contractual instruments. Short, re-competed contracts went out of vogue in the 1990s. Supply chains are most effective when everyone is part of a stable consortium. With this collaborative approach, the supply players can lower fixed costs and focus on continuously lowering variable costs. That, in turn, enables everyone to base performance measures on quality and delivery. Longer-term contracts and trusted relationships also facilitate improved demand management and production smoothing.
The purchase price is seldom the true cost of a product or service. The true cost contains logistics, quality defects, rework, product returns, warranty, legal and administrative costs – and profit. The more your procurement staff understands the true costs of their actions the leaner the supply chain can be.
Shared methods and models
Be sure to align your methods and approaches with your suppliers. As a Lean organization, you want your suppliers to practice Lean also. You want them to speak the same language, use the same tools, and measure value and waste the same way. If you’ve modeled your supply chain according to a reference model like the SCOR® model (Supply Chain Operations Reference model) from the Supply Chain Council, you can take mutual advantage of the process definitions, best practices and metrics to accelerate changes and improve performance.
Conduct kaizen activities together with your key suppliers. As they become better, you are contributing to your success through products that are more consistent and to their success and longevity as your supplier.
Technologies
You will need to exchange extensive information with your suppliers regarding products, orders, ship notices, invoicing, billing, and more. Integration technologies, exchanges and hubs, and protocols like RosettaNet enable enterprises to interface with their suppliers more effectively.
Let it flow
Flow information freely with your suppliers to build and optimize your value-stream map. Development and demand information are both part of the customer-supplier relationship. The more free-flowing the information, the more effective these relationships can be.
Development information includes design data, manufacturing information, expertise, consumer data, and other background information that assists the players in the supply chain in developing effective products and services. Often, this information is proprietary, and sharing requires trust — trust that you won’t share it with one another’s competitor or use it maliciously. However, sharing of information is one of the key leverage points of supplier management in a Lean organization.
Demand information is critical to the ordering and delivery of materials and services. For many years, electronic data interchange (EDI) facilitated the flow of demand information. More recently, online exchanges and other electronic systems have facilitated the nearly real-time flow of demand data. This includes long-term forecasting and replenishment data, as well as order and delivery data.
Logistics
In Lean, you manage the flow of supplies to minimize stocking, inventory, and cycle time — anything that wastes your resources. Lean logistics include the following:
Top-up systems: Have commodity items delivered and managed at the customer’s site — right at the point of use. Have the customer manage stock-outs.
Third-party kitting: Subcontract the kitting process, usually to one of the commodity suppliers. This requires effective traceability management. Third-party kitting is popular in the aerospace and automotive industries.
Milk runs: Instead of having multiple a supplier deliveries to your facility, you send one truck to collect from several suppliers according to a set schedule and route. You control the flow of materials to your facility.
Strategic global agreements: Work strategically with your suppliers to create agreements about shipping methods and inventory levels in the global pipeline.
Distribution centers: Have suppliers deliver to a central facility where the redistribution can occur in a way that best suits the customer. This provides a type of buffering against shortages, but it also enables assemblers to kit more effectively.
Don’t just move the muda! Apply Lean techniques as you implement these strategies. Using third-party kitting? Work with the supplier to maximize effectiveness and eliminate waste through Lean.
Positioning stock strategically in the chain
When taken to its extreme, Lean has no stock, no inventory! But if there were a hiccup anywhere in the system, the entire supply chain would fall apart. You head off this doomsday scenario by positioning minimal stock strategically along the supply chain, according to risk scenarios.
In Lean, you prefer to hold stock toward the customer end of the chain — so that it’s available immediately on demand. But keep in mind that this limits your flexibility because the stock tends to be committed to that customer. You can hold it earlier in the supply chain and increase flexibility, but it will have less added value.
Work with your suppliers to have a global strategy for your supply chain. Jointly plan contingencies for natural, economic, and accidental disruptions.
..................Content has been hidden....................
You can't read the all page of ebook, please click here login for view all page.