Chapter 15

Lean across Industries

In This Chapter

Seeing how Lean applies in any industry, not just manufacturing

Recognizing that Lean works especially well in service businesses

Creating the case for Lean in Healthcare

You will find Lean in every industry — from manufacturing to healthcare, pharmaceuticals, logistics, banking, retail, high-tech, construction, education and even government. Companies large and small, public and private, commercial and non-profits. It’s clear now that enterprises in every industry are benefitting from applying Lean.

In this chapter, you discover more about Lean across industries, including, possibly, your own industry. You will also see that Lean is Lean — meaning that Lean is so fundamental that it’s basically the same in any industry. You adjust the language to reflect the industry, but the same philosophy and principles apply; the same methods and techniques apply; all the same tools apply.

Starting with What’s Common

Every business in every industry has issues — for-profit or nonprofit, public or private. In one form or another, all ventures have customers. They all have processes, whether formally documented or not. All employers have employees who generally want to do a good job, use their knowledge and skills, improve their quality of life, and feel good about what they do. Every endeavor has a place where it conducts its business — an office, a factory, a car, a computer, or even a table at Starbucks.

The commonalities are important because they help you to translate Lean from its manufacturing roots to “Wow, this all applies to me!” Follow this common framework to begin your path to Lean implementation, regardless of your industry:

Understand your customers. What do they really want and need? What’s their rate of demand? What constitutes satisfaction?

Characterize your most pressing issues. What’s going wrong? What are the priorities? Where are the mistakes and challenges coming from?

Map your value streams. What are your work processes? Which are routine? How do material and transactions flow through them?

Calculate takt time. What is the rate of customer demand? How frequently do they use your services or buy your product?

Clearly identify your goals and objectives. Be specific; what are you trying to accomplish this year; in three years; in ten years?

Engage your people. The people in your organization have great ideas for solving issues and satisfying customers. Leverage their wisdom. What are you already doing that engages them? What else can you do?

Identify wastes, and reduce them. Look at your processes to find waste, contributing to muda, mura, and muri.

Implement kaizen. Enable everyone to practice PDCA and participate in everyday improvement.

5S your work environment. Clean up your act; then keep it clean and safe. (See Chapter 11.)

Apply the Lean toolbox. Using a broad interpretation, pick the right tool for what you’re trying to improve.

Lean Manufacturers

The manufacturing industry is Lean’s heritage. The Toyota Production System (TPS) is the automotive manufacturing incubator where all the principles and practices of Lean were hatched and have matured over the past 50 years. If you’re in manufacturing, it doesn’t matter what your product is, how many you make, or how sophisticated your processes are (high tech, low tech, or even no tech): Lean is the world’s most effective manufacturing operations strategy. Manufacturers may choose to implement Lean in response to any of the following strategies and challenges:

Customer-driven initiatives

Competitive pressures

Quality issues and defect prevention

Capital spending avoidance

Inventory and cash-flow issues

Regardless of the reasons why a manufacturer begins a Lean journey, after committing to Lean, they see improvement on all these fronts.

From batch to flow

Traditional methods of production work with batches, usually large in size and organized by function. This method of production is wrought with the seven wastes. Lean is not traditional. Lean is based on flow — single-piece flow, ideally. To achieve single-piece flow, you must change how you do business and remove all obstacles to flow.

Creating work cells

Organize manufacturing according to product groups or families. Lay out work in cells so that material flows counterclockwise. Have all equipment and fixtures required to manufacture a part or family of parts inside each work cell. Keep equipment as small and flexible as possible. (See Chapter 11.)

Base the operating pace on takt time. In the best cell designs, support personnel never need to enter the main production area to replenish material or repair equipment — this is performed from the backside of the equipment. This approach improves both safety and productivity, because no one but the trained production team is in the direct production area.

Quality at the source

No large inspection stations are at the end of a process; quality is everyone’s job along the way. In each operation, people perform standardized work, including steps to verify their own work as well as the work of the previous operation. Error-proofing “gadgets” (poke-yoke) prevent operators from performing incorrectly and advancing poor quality to the next operation.

An error-proofing gadget, or poka-yoke, can come in many forms: a physical guide that helps material positioning; software that monitors key characteristics and stops equipment if specifications are violated; or high-tech solutions like infrared cameras — or whatever you can dream up! If it prevents errors, it’s poka-yoke.

Working as teams

Lean operators work as a team, performing standardized work. The team is responsible for customer satisfaction and quality. They’re responsible for production and routine maintenance of their equipment and tools. The team runs the show!

Changing from batch to flow affects not only the physical layout of a facility, but also the organizational support structure. Lean organizations tend to use fewer layers of management, fewer managers, and fewer support people. With the hands-on team responsible for some of the tasks traditionally associated with first-line supervision or maintenance department, the roles of the individuals in those areas change. Supervisors act as coaches, mentors, and roadblock removers. The ratio of supervisors to team members is established so that supervisors have sufficient time to truly mentor and build capability in the team. Maintenance workers focus on preventive maintenance, equipment improvements to support kaizen, and error-proofing mechanisms.

Reducing inventory

Flow manufacturing changes how you treat inventory because inventory is waste. It ties up cash and it’s at risk for obsolescence. Every time inventory is touched, it can be damaged or destroyed. Inventory consumes energy and space and it stops the flow of production.

When you transition from traditional department-oriented manufacturing to cells, you no longer need the work-in-process (WIP) inventory that waited until it could be transported to the next step, sometimes located in another building. Equipment is close; pull systems reduce inventories required in a process. “Point of use” becomes the design philosophy for in-process material storage. What is the absolute minimum amount — based on takt usage — that can be stored where you use it?

Sometimes process constraints or risk mitigation prevent perfect cell designs, and you need in-process inventory stores (type-1 muda — see Chapter 6). In this case, you install controlled inventory stores, or “supermarkets.” Your goal is to always reduce inventory, but unless you can figure out a different way to remove the constraint or risk, implement a well-managed and controlled solution with planned, standardized, minimized in-process stores, located as close to the point of use as possible.

To handle inventory, you need material handling equipment. But instead of fork trucks to move large gondolas weighing tons or conveyor systems connecting buildings housing different functional areas, go smaller: Consider using bins, hand trucks, and push carts. This improves safety — no more speeding lift trucks ready to run you over or take out a building column! Costs go down — no building repairs and fewer high-tech pieces of equipment to maintain. And quality improves — less risk of transit damage.

Proclaiming that you’ll reduce inventory isn’t effective. You must use all the elements and practices of Lean, working together. If you cherry-pick one technique of Lean, such as inventory reduction, you’re more likely to use it out of context — and make the situation worse.

Kanban, just-in-time, and the pull system

The Lean system of consumption-driven replenishment has long-proven itself in manufacturing, across tiers of supplier and distribution networks. It is now a compelling alternative to traditional push systems like material requirements planning (MRP) for a few reasons.

Push-style systems rely on forecasts to determine what and how much to replenish. Forecasts can be useful indicators of general demand, but they’re poor predictors of precisely which products will be needed and when. In multi-tiered supply chains, push-systems distance manufacturers farther from their customers and push forecasts farther from reality. Information is diluted in each layer of the system. As a result, excessive inventory builds and costly last-minute change orders create ripples and bullwhips through the supply chain.

Push systems cause manufacturers to incur large inventory-carrying costs. Over-buying creates excess inventory, which must be carried and managed. And push systems still run out of parts! Stock-outs, of course, wreak havoc in production systems, delaying customer shipments, increasing premium freight charges, and disrupting plant operations by forcing unnecessary and expensive changeovers. Errors in MRP also cause people to work outside the system to expedite materials and to conduct repeated physical inventories. It becomes a vicious cycle.

Lean pull-type systems are not like forecast-driven replenishment systems. Pull-based manufacturing synchronizes production with consumption in real time, increasing on-time delivery performance, and reducing stock-outs and costly last-minute changes. A kanban system (see Chapter 11) reorders parts and components based on actual consumption at the point of use. As orders arrive, material is pulled from the end of final assembly, which instantly sends an order to the final assembly production module to produce more.

The “two-bin” method: An operator has two bins of material: One is being consumed and the other is full. When the first bin empties, the operator keeps working, using the second bin. The empty bin, which acts as a kanban or signal, is sent out for replenishment. A full one returns before the operator runs out.

The kanban-card method: A kanban card travels with the inventory, containing information such as the description of the item or part number, and its location. When inventory is consumed the card triggers replenishment.

Volume and variety

Lean applies in manufacturing whether you make one a month, a hundred a day, or thousands every hour. A custom cabinet facility may look different from a commercial wood bookcase manufacturer, but both use wood, cut to a specific dimension, sand, and finish — and they both do it over and over again. The starting place for implementation is the same: Understand the customer, map the flow, 5S, identify value, and standardize work. Beyond the basics, the manufacturers may choose a different tool to apply first, but it all applies.

High volume, low customization

Numerous books and case studies describe high-volume Lean production; after all, it’s where Lean started. When you make the same thing, the same way, every day, you have a great foundation for implementing any of the Lean techniques, like standardized work, work cells, error-proofing or pull systems. Lean is perfect for high-volume, consistent environments.

Low volume, high customization

In contrast to the high-volume production environments of a Toyota, Motorola, or Dell are thousands of companies who specialize in low-volume, highly customized manufacturing. Whether your company is a machine shop, sign maker, cabinetmaker, or salad maker, the concepts of Lean apply to your business. It’s not a question of how few you make, or the differences from one item of design or production to the next. The details may include different ingredients or different dimensions, but you’re still performing similar processing steps each time.

Look for elements of commonality and repetition in what you do — there are more than you may think. Standardize all that is common, and compartmentalize what is unique. If you focus only on how different you are, and how new everything is, you’ll make it difficult to see how standardized work can help your situation. The more you can define standardized work, the more benefits you can begin to accrue from Lean practices.

Applying Lean to the office is also important, because your customer interacts mostly with sales, service and accounting. Your product may be unique, but your office functions are the same, regardless of what your customer orders. How will you eliminate waste from business processes?

The getting-started tools are the same, regardless of what you do. After you have the basics, examine your processes with an eye toward eliminating waste. A Formula-1 pit crew changes tires very differently from your local service station, but they’re both doing the same job. The Formula-1 crew eliminated waste from the real-time process and creatively developed different techniques. Wouldn’t you, the consumer, like to have your tires changed that fast?

When you’re producing in a high-mix, low-volume environment, Lean can actually be more valuable. Customers get their orders faster and margins are improved. Think about this: If a low-volume producer builds a bad product, they don’t have the volume over which to amortize mistakes. So if you’re building one satellite that doesn’t work or you’re a gourmet food provider that has to throw out spoiled ingredients, your margins are reduced. Lean can help you.

Lean in Services

Nearly 80 percent of the U.S. economy and increasing percentages of the global economy are now services, rather than manufacturing. Lean provides some of the greatest opportunities and most powerful results in service businesses. Although service organizations have different processes, different key metrics, and different root causes of problems and challenges, Lean methods are just as effective.

Lean practices improve service business performance, by

Reducing the time spent performing business activities

Reducing the total cost of doing business by eliminating wasted time and effort

Increasing customer satisfaction by improving the timeliness and quality of deliverables

Improving employee morale and increasing enthusiasm by engaging staff in the development and implementation of improvements

By applying concepts that until recently had been alien to most service businesses — attacking speed and quality, simplifying complexity, scaling differentiation, and empowering employees — service organizations can share in some of the productivity gains already enjoyed by the makers of autos, planes, trains, appliances, and other products. Savings will vary significantly by company and industry, but it is realistic to expect reductions of 25 percent in costs and 50 percent or more in response times and in-process errors by implementing Lean practices in service businesses. In addition, revenue gains of 5 percent annually are not uncommon.

Commercial services vs. internal services

Commercial services are those businesses that offer their services to other businesses and the general public. The services they offer represent their core competence and form the basis for their profit and loss (P&L). By contrast, internal service providers are company overhead departments and functions that provide support to other profit-generating departments. (We address the internal group in Chapter 14.)

Examples of commercial service businesses include everything from airlines, communications (voice, cellular, data) companies, cable and satellite TV providers, computer services, and mail and shipping services, finance and mortgage companies, education and training services, repair and maintenance services, and much more. Some of these services are labor and equipment based, while others are transaction based. In addition, most government agencies are in the service business, but they’re a special case and we address them later in this chapter, in the “Lean Government” section.

In all service businesses, Lean is an attitude and approach anyone can understand, and it’s a set of practices and tools everyone can apply. The Lean techniques don’t require extensive employee training or complex technical support. In a service context, going Lean means getting back to the reason why everyone got into the service business in the first place: to serve people!

Embedding Lean practices within a service organization is not a quick fix or rapid overhaul. It requires the same diligent and holistic approach to transformation as in manufacturing or any other industry. Lean in services means:

Improving service processes to focus on the customer and deliver more customer value

Empowering your people to deliver outstanding customer service

Decreasing waste in the service value stream

Reducing batch processes and moving increasingly toward a flow of activities to deliver the service

Striving for the perfect service

Because service businesses are often even more labor intensive and dependent than manufacturing businesses, the respect for people in the service value chain is of utmost importance.

A service is a product!

Services are like products in many ways. Services begin with a customer need or want, and they end when it’s delivered to them in a satisfactory manner — at the right time, in the right way, and at the right price. The service is the result of a process or series of processes acting in a coordinated fashion to produce the desired results. There’s a value stream of activities and support information. The service is a result of design, development, and delivery. And the service is prone to defects and rework — just like products.

You must think of a service as a product, because

Services are architected and designed to meet customer requirements and to fit the “manufacturability” of a production and delivery system.

Services have specifications — for quality, performance, timeliness, and price.

Services have a value chain comprised of components on both the supply side and delivery end.

The seven forms of service waste

Service process waste is waste, just like product or material process waste is waste. Service-business waste may look a little different, but it happens the same way:

Transportation: Transportation waste in a service environment is the unnecessary and non-value-added movement of people, goods, and information in order to fulfill the service obligation to a customer.

Waiting: If people, systems, materials, or information are waiting, that’s waste.

Overproduction: Are your services producing sooner, faster, or in greater quantities than the customer is demanding or requiring?

Defects: Defective services are those that do not deliver the correct requirements to the customer, the first time.

Inventory: Do you have service products no one wants? Do you have an excess to capacity to deliver services?

Movement: Are activities, paperwork, and other efforts unnecessarily juggled?

Extra processing: How much extra paperwork or effort do people go to in order to deliver the service? Could any of these steps be eliminated?

Improving services the Lean way

Services naturally benefit from one of Lean’s fundamental tools: the pull system. In most cases, the delivery of a service to a customer is based on the action of the customer requesting the service, which stimulates the value chain to assemble and deliver it. The key to Lean service is in common services — the building blocks that permit flexible assembly in real time as the customer requests it. All other Lean fundamentals also apply.

5S in services

The 5S of the workplace applies to service businesses:

Sort: Workplace organization is universal. Sorting office materials, maintenance materials, or other tools is fundamental to the delivery of quality and timely services.

These days, many service businesses are computer-based or computer-facilitated. Sorting your computer environment — your e-mails, your files — is a Lean activity. Keep your computer desktop and file system Lean and clean.

Straighten: The tools of services should be arranged in standard locations for consistent and easy access. This includes desk items, databases, repositories, references, operating procedures, or process definitions. Information, including file and system names, should be consistent.

Scrub: Maintain service tools in a neat and clean condition. This includes any work areas, whether in the office or in the field.

Systematize: As always, don’t wait for things to build up. As part of your regular routine, go through your work environment and maintain it. Define a certain time or regular event as the basis. This includes both private and common areas.

Standardize: Exercise discipline in maintaining your workplace, and institute processes that ensure that this regular maintenance occurs, in a standard manner to standardized levels. Don’t overdo it — just do it.

Speed and quality

As a Lean service organization, always be moving to deliver customer value ever more quickly with consistent quality. By consistently increasing the speed of operations, service businesses are more flexible and can respond with greater agility to changing customer demands and market conditions. Faster services are delivered by fewer hands, and by streamlining and eliminating unnecessary steps. In processing more quickly, the organization reduces opportunity costs. And, of course, the customers are more satisfied to receive services faster. Ensure that the customer has the same quality experience regardless of where they receive your services or from whom.

Focus equally on quality. Lean service businesses significantly reduce the time spent on reworking deliverables. Be sure to establish specification limits and collect metrics on quality, applying tools to reduce variance, prevent failures, and attack root cause.

Checking variety and reducing complexity

Service complexity arises from providing a well-meaning effort to become an intimate, highly-tailored or engineered service. But any increase in complexity directly increases the risk of both slower and defective services, and indirectly increases support and maintenance costs — in the form of overtaxed back-office processing procedures, too many customer-service systems, and too much staff training.

Analyze service processes for variety and complexity. Sort the routine, commodity services from the specialized services and treat them differently. Standardize the routine services, and manage the lower-volume, higher- complexity services as specialty items. Where necessary, assemble these services in a value chain.

Frontline power

To enable services to deliver on the promise of both quality and speed, shift decision-making closer to the customer. The segmentation and production of highly structured service components enable frontline staff to engage customers more independently — with less management oversight.

Lean service operations enable people to make more of their own customer-facing decisions. Frontline employees are empowered to operate, instead of having to seek approval for decisions. This setup also frees them from focusing solely on basic transactions and allows them to give more, personal attention to customers, which ultimately increases revenue.

Nothing better exemplifies frontline empowerment than the Ritz-Carlton Hotel Company chain, where every member of the staff has a discretionary budget for settling disputes. Each staff member has the personal authority to provide such perks as room upgrades, complementary food, and other amenities on a case-by-case basis. When a guest has an issue, staff is both enabled and required to break away from regular duties and immediately address the customer concern.

Transactional Lean

Transaction businesses are a specific form of service businesses, where the product is purely data and information, and it’s processed according to specific procedures. Examples include reservations and online order businesses, select banking businesses, payroll processing, and insurance claims. Success in transaction processing businesses is based on speed and accuracy. How can Lean help?

Once again, the fundamentals of Lean apply: focusing on the customer, improving the value stream, focusing on flow, striving for perfection, and maintaining a high respect for people. Transaction businesses are typically professional office environments, with a highly educated workforce, using computers and data processing capabilities to perform the tasks. Lean transaction businesses do the following:

Explicitly map the value stream to understand precisely what is required to complete the process task for the customer. Use this map as the basis for continually eliminating wasteful practices.

Understand that information transactions are products. Design, develop, source, assemble, and deliver transactions.

Regularly employ kaizen to examine and optimize your transaction processing processes. Keep the changes small, local, continuous, and practical. Ensure that management responds and implements changes quickly, and rewards the employees quickly.

Lean in Healthcare

The healthcare field is one of the most exciting frontiers of Lean. In an environment where patient care needs are climbing, and the availability of skilled resources and reimbursement for services are shrinking, Lean is helping. Lean Healthcare focuses on the needs of the patient (the customer) and strives to improve turnaround time, contain costs, reduce space, increase speed of delivery, and eliminate mistakes — in short, improve the quality of care. Although no definitive data exists on the global impact of errors and preventable diseases, consider these two statements from the World Health Organization (WHO), “Errors in medical care affect up to 10 percent of patients worldwide,” and “At any one time, some 1.4 million people worldwide suffer from hospital-acquired infections.”

Improving healthcare through Lean

Lean healthcare is not about eliminating people or eliminating assets. Lean healthcare is improving activities and processes within the system. This is accomplished by identifying and removing wasteful activities and focusing on patient value-based activities. Health industries applying Lean principles across their organization are experiencing increases in benefits and performance:

Reduced incidents of mistakes

Improved patient education

Reduced wait times for patients

Improved clinical outcomes

Increased staff productivity

Reduced clinic and management costs

Improved employee satisfaction for nurses and staff

Defining waste in healthcare

Open any paper in just about any country and you’ll find an article about healthcare. Public or private, they all have issues. If you’ve ever encountered a healthcare establishment, you know some of these issues firsthand. Consider some of the ways that the classic seven forms of waste translate into a healthcare environment:

Transportation: Patients are moved excessively for testing and treatment. Samples and specimens needing analysis travel excessively to reach the labs and within the labs.

Waiting: Patients wait for diagnosis, treatment, discharge, beds, or testing. Physicians wait for patient lab results. Teams wait for specialists.

Overproduction: Excess testing is performed for the convenience (and liability protection) of the organization, not to meet customer demand.

Inventories: Equipment, materials, medicines, testing regimes, beds, appointment times, lab samples and specimens for analysis, lab results awaiting distribution, dictation ready for transcription . . . the system is replete with inventory!

Movement: Unnecessary and excess movement of equipment, materials, charts, and medicines is common in healthcare. Doctors and staff have excess motion while performing procedures. Even patients themselves are moved unnecessarily!

Defects: Mistakes are widespread: wrong patient, wrong procedure or medicine, misdiagnosis, unsuccessful treatments, re-sticks, redraws.

Excess processing: Staff makes multiple bed moves, retests, data entry, excessive paperwork, and so on.

In healthcare when evaluating the value stream, you look at seven specific areas of flow: patient flow, family flow, provider flow, medicine flow, equipment flow, and information flow.

According to WHO, “there are 234 million operations performed globally each year. At least half a million deaths per year would be preventable with effective implementation of the WHO Surgical Safety Checklist worldwide. This Surgical Safety Checklist has gone from a good idea recognized in a 2008 pilot study to a global standard of care, which already has saved many thousands of lives.” In addition to the Checklist improving outcomes, it also improves communication among the surgical team, and ultimately the quality of care.

Lean in Government

Of all industrial sectors outside of manufacturing, Lean practices are taking hold in government as strongly as any other. At first, this might seem a paradox. After all, most governmental entities seem to be the opposite of Lean! Like any institution, governmental agencies face constant budget restrictions. At the same time, they’re being asked to fulfill greater needs on the part of their constituents. Sounds a lot like doing more with less, doesn’t it?

The choices are limited. Delivering less isn’t received well by voters. And it’s not a matter of simply working harder. The challenges are not solved by any singular approach like defect reduction, constraint management, or measurement and reporting, although those are all useful tools that have a role. And any viable solutions must be a workable cultural fit into the nature of the government environment.

Lean is ideal for implementation in the public sector, especially when you consider that governments at all levels need to plan for the long term, whether planning services, infrastructure or defense. With many factions competing for the same limited resources, Lean enables governments to deliver more effectively to more people. Kaizen has been used globally to standardize processes, create regular policy reviews, improve natural resource utilization, repair military vehicles damaged by war, just to name a few examples.

In the public sector, Lean practices help organizations:

Shorten cycle times to completing and delivering services

Improve service quality

Increase productivity and resource utilization

Dramatically increase customer (constituency) satisfaction

Reduce waste in all forms, including bureaucracy

The largest barrier to implementing Lean in government exists only in terms of providing the appropriate skills, capabilities, and experiences to those responsible for carrying out the processes.

Lean in Retail

The retail environment is where the value stream meets that last customer — the consumer. Retailers experience customer needs and wants firsthand: exactly what the customer wants, where they want it, when they want it, and in the desired quantity and quality. In today’s world, consumers have become more demanding than ever: innovation has set high expectations, access is global, brands and SKU’s have proliferated.

It’s been difficult for retailers to keep up with delivering value from the standpoint of the consumer. Retailers are challenged with layouts and store flow, product categorization, packaging, backroom storage, backroom push, corporate marketing initiatives, leftover seasonal stock, and of course pricing. Consumers experience product proliferation, duplication, and complexity, confusing promotions, ineffective signage, clutter and hard-to-find merchandise, poor service, and long checkout lines. No wonder consumers feel stress, procrastinate about making purchases, and shop less often or on-line!

Lean practice is helping retailers cope with these challenges and customers improve their experience. Lean retailers define the process in five steps, as shown in Figure 15-1. Examine each step for the seven forms of waste. 5S/6S is critical in retail.

Lean practices improve customer service, by decreasing wait times and ensuring that the right products are on the right shelves at the right time. Point-of-sale data directly stimulate supply and delivery based on real-time purchases. Lean helps them with flow to the store shelves and in minimizing inventory levels.

The next time you go to a retail store, look for evidence of Lean practices, and you’ll be likely to find it. Figure 15-1 shows an example of visual standard work instruction for something as simple as cleaning the restroom. See what other Lean techniques you notice, from customer service to products on the shelves.

Graphic provided by Diversity, Inc., now part of Sealed Air

Lean Everywhere

The future of Lean across all industries is limitless. The principles, methods, tools, and techniques apply in any situation. Looking at a business, organization, or industry through Lean eyes will open up new pathways for improvement opportunities. In the following Chapter 16 are several case studies.