DISCIPLINE:
WASTE ELIMINATION
The buck may stop with the CEO, but waste elimination ends up on the desk of the implementer. No matter how successful the company, waste is still abundant, and the goal of all employees needs to be to eliminate this waste. Just like all important initiatives, implementing the solution can prove very challenging, but it must be accomplished. The three strategic focus areas for Waste Elimination are:
Quality at the Source
Continuous Improvement
Execution
These three areas will be discussed in this chapter.
QUALITY AT THE SOURCE
Truism: There is a significant difference between an operational error and a customer defect.
Initiatives are often doomed before they start because we fail to build quality into our products, services, and processes. The trick is to define quality up front and not allow design or operational errors to pass down the line, ultimately turning into customer defects.
A key Lean concept is that an error is very different from a defect. Errors happen because people and machines are involved. The exciting news is that errors do not have to turn into a customer defect. This is the foundation of the quality at the source concept. The challenge is to build error-proof processes into our procedures and manufacturing systems. Error proofing (or mistake proofing) allows us to catch errors before they turn into defects. To support this concept, Figure 19.1 describes the difference between an error and a defect.
To most people, quality is about manufacturing and the quality of products built. Most manufacturing companies use inspections and rework to fix quality issues before they reach the customer. What we want to emphasize is that quality is more than shipping a defect-free product. Quality is about having superior products, superior services, and superior processes. Quality begins at the source.
Before we design a product or service, we first need to define what “quality” means to that product or service, and then we need to ensure that quality is built in from the beginning. In the event of quality issues, we must make certain that poor quality is not passed on to the next step in the process. This is vital because quality issues compound in severity as they travel through an organization on their way to the customer.
For example, picture a salesperson doing a setup for a new customer. Assume, for the moment, that this salesperson takes no pride in the work and is careless when inputting the new customer information. Consequently, inaccurate data are recorded. In this case, the salesperson enters the customer’s address incorrectly. The customer places the first order, which is sent out to the wrong address. The customer calls the salesperson, and the salesperson starts firefighting. A second order is sent to the customer, but it arrives late. When the company invoices the customer, the invoice goes to the wrong address, and the rest is a series of comical errors that are anything but comical
Figure 19.1. Error Versus Customer Defect.
to the customer. It sounds absurd, but it happens every day in business. Many big problems start with little mistakes. The challenge is to focus on quality and to integrate quality into all procedures from the very beginning. We need to do the following:
Understand that quality needs to begin at the source.
Look for processes that need quality improvement at the source.
Define what “quality” means and build it in at the beginning of any process.
The Benefits of Quality at the Source
Many aspects and features of Lean production address the capacity of a company to implement a quick response to defects and to develop processes that check the process itself or the immediate result of the process. This concept of self-checking is mistake proofing. Somehow, we need mechanisms that detect errors before they turn into defects. Mistake proofing, or poka-yoke (see also Chapters 12 and 22), is important in order to develop flow and it is a key to variation reduction.
The ambition of any business goal is to deliver 100 percent conforming product to every customer. This goal cannot be accomplished by inspecting each product after the fact. Quality must be built into the product by giving processes and employees the means to correct problems as they occur. Mistake-proofing designs and processes to prevent defects from occurring in the first place need to be implemented. If we can accomplish this, we will:
Reduce rework: Developing the ability to manufacture a product correctly the first time is a key component of continuous flow. It prevents interruptions in product movement and reduces the wasteful consumption of resources. It focuses resources on building just what is needed to supply the customer. In other words, quality at the source will eliminate the hidden factory.
Reduce scrap: The very purpose of quality at the source is to reduce scrap and rework. Scrap and rework are items that create process variation, diminish the ability to achieve standard work, and simply increase cost and lead time.
Reduce risk: Quality at the source reduces issues where the product is created (or the point where true value is added). This alleviates the potential for costly issues and disruptions further along the process of an operation or further down the total value stream. It reduces the risk of more cost and the possibility of the customer finding the defect. It also creates an environment where problems are discovered and dealt with at the point where they take place, which can uncover and remove the root cause or allow for the placement of a countermeasure.
Reduce variation: Variations of any type disrupt flow. Defects create significant forms of variation, resulting in inventories and additional resources. For continuous flow, the removal of variation from the system is critical, and this requires detection of defects as well as a speedy determination of root cause.
Reduce complexity: Implementing quality at the source reduces system complexity. The more defects that a system generates, the more complexity the system must maintain in order to deal with finding, fixing, and understanding the root cause of the defect. Applying quality at the source simplifies the system, which ultimately is a reduction in complexity.
Logistics and Quality at the Source
Initiating a quality at the source program can be intimidating. How to begin is the first question that must be answered. To develop a quality at the source implementation map, draw from the “perfect order” in logistics management. The perfect order is described as the five rights: The right part in the right quantity at the right time in the right quality at the right cost. With this definition in mind, we need to ensure that we have quality at the source or mistake-proofing methods in place to realize the perfect order. For practical purposes, we will examine an example.
For the perfect supplier order to come about in a Lean manufacturing environment, we need to ensure that suppliers are shipping the right parts in the right quantity and condition at the right time to the right place and at the right cost. One approach that Lean manufacturers use to guarantee quality at the source for the perfect order is to have order verification completed at the supplier prior to the order being loaded on the outbound truck. This verification process is completed by the truck driver who is responsible for picking up the parts. Acting as an agent for the manufacturer, the driver is trained to verify all perfect order components of the supplier order. To accomplish this, the driver is armed with a detailed manifest that outlines what the supplier is to ship that day. Prior to the freight being loaded on the truck, the driver verifies that the order staged for shipping has the right parts in the right quantity in the right packaging with the proper labeling and any other variables critical to quality of the process. By doing this, the driver recognizes any issues with the process. For example, if the supplier is supposed to ship twenty steering wheels and there are only eighteen on the rack, then the process is stopped immediately by the driver. Called jidoka in the Lean lexicon, this is the act of stopping the process immediately when an abnormality is detected. Hence, we uncover an error and avoid a defect. In this case, the driver would inform the supplier of the parts shortage and a solution would be developed right there on the spot.
Compare this process to one that has no mistake-proofing mechanism in place. The driver would arrive at the supplier and have the truck loaded with whatever the supplier had ready to ship at the time. The trailer would arrive at the manufacturing facility, where, upon inspection, it would be determined that two steering wheels are missing (if detected at all!). However, at this point, it is too late, and a parts shortage will likely result, possibly shutting down the manufacturing line, resulting in an expensive expedite at the very least.
Quality at the source teaches us to detect errors as quickly as possible. In logistics, this means that we need to have mistake-proofing tools in place for all critical processes. In practice, this means that we should look at processes as far up the supply chain as possible. The goal is to detect and resolve issues prior to their becoming a burden on the organization.
CONTINUOUS IMPROVEMENT
Truism: Continuous improvement is neither an initiative nor a “flavor of the month.” Continuous improvement must be the foundation of the organizational culture.
It is fair to say that the concept and principles of continuous improvement are not completely understood by many organizations. In fact, in multiple surveys, continuous improvement is one of the key deficiencies among logistics service providers (third-party logistics companies and carriers) when serving their customers. In other words, logistics providers need to improve on their improvement skills!
That much said, customers also need to improve their internal improvement capabilities. Why is it such a struggle to develop and sustain a culture of continuous improvement? The answer to this question is not simple, and as is the case with most difficult questions, the journey begins with more questions. A few of these are:
What is continuous improvement?
Why is continuous improvement so hard to understand and implement?
How can we develop an organizational culture that embraces and drives continuous improvement?
Continuous Improvement: The Bare Facts
Simply put, continuous improvement is about improving organizational performance. It is surprising that many companies do not have a formal process for improvement. In the absence of a formal process, continuous improvement is nonexistent.
These days, continuous improvement is part of the Lean Six Sigma lexicon. In Lean, it is known as kaizen, and in Six Sigma, the drive for 3.4 defects per million opportunities has continuous improvement imbedded and implied in the process of Define-Measure-Analyze-Improve-Control. Consequently, any initiative in Lean or Six Sigma will eventually lead to organizing around a continuous
Figure 19.2. The Continuous Improvement Quadrants
improvement infrastructure, which is instrumental in the development and sustainability of corporate continuous improvement. We will discuss this in more detail later.
The first thing to understand about continuous improvement is that it is not an event. The term “kaizen event” has damaged the principles and values of true kaizen. Although focused improvement initiatives are important and should be completed, continuous improvement needs to flow continuously through an organization, not in isolated, sporadic bursts of development. Figure 19.2 shows the simple, but powerful, quadrants of continuous improvement.
When continuous improvement flows through an organization, we immediately recognize that continuous improvement does not happen in larger-than-life re-engineering initiatives. Instead, improvements come from small, incremental upgrades. The paradox of true continuous improvement is that, at times, the improvements can be so small that they appear inconsequential. A tiny improvement may not be quantifiable; it may not have a return on investment or an operational dynamic that is obvious or even visible. However, these small incremental improvements will, over time, create processes and operations that are highly efficient and effective.
Over time, incremental improvements create best practices, and continuous improvement eliminates the challenges that come with change management around larger re-engineering initiatives. This is a critical point. Organizations that do not embrace continuous improvement will follow destructive patterns of reorganization, restructuring, layoffs, and other reactionary management techniques that make executives feel they are doing what is right. These executives do not understand their business as a total system, and consequently their actions are usually unwarranted tampering with the natural system at work.
To draw an analogy, consider that an organization is like a ferry trying to move from point A to point B by crossing a river. Clearly, the shortest and fastest way to reach point B is to move in a straight line. However, when traversing against a strong current, we are forced to adjust our course. These forces may be external or internal dynamics to the system. Uncertain economics, changing customer requirements, and staffing shortages all represent dynamics that change our course throughout a fiscal year.
An organization that embraces continuous improvement will see and act on these changing dynamics and, like a good ferry operator, will make small incremental adjustments to the course. These adjustments may go unnoticed. In keeping with our analogy, the ferry would appear to be continuing in a straight line. In contrast, organizations that do not have continuous improvement infrastructures will be blind to the force of change, and dramatic, reactionary changes eventually will be necessary. Now picture a sailboat attempting to cross the same body of water in a straight line by continuously tacking at forty-five-degree angles. Unfortunately, a perfect forty-five-degree angle is hard to sustain, and eventually the organization will be making ninety-degree turns or may be going in circles, if not going under.
The Challenges of Continuous Improvement Implementation
Leaders of organizations do not publicly state that continuous improvement is bad for their organizations, yet the harsh reality is that many fail to strive for improvement in the day-to-day activities. This is the continuous improvement paradox. We believe in continuous improvement, but do very little to achieve it. Leadership theory would suggest this happens for one of two reasons. The first is that we are capable (we have the skills and knowledge) of continuous improvement, but consciously choose not to improve. The second possible reason is that we truly want to improve, but do not possess the skills and knowledge to develop, implement, and sustain an effective continuous improvement strategy. Although the former may be true in environments with poor labor relationships and impoverished employees, the latter is by far the reason why continuous improvement does not flourish inside our organizations. We want to improve. We do not know how. Consequently, we need to uncover and address the key drivers that prevent us from reaching our organizational and personal potential.
Among the many reasons for the lack of continuous improvement are the following problems:
Lack of a problem-solving and continuous improvement model
Lack of time and trained resources to commit to continuous improvement
Lack of discipline and corporate infrastructure to sustain improvements
Bridging the Gap
In order to improve, organizations need a model that provides a common language that all members can use to articulate the value and work plan of any specific improvement initiative. Although there are many models available to us (such as Plan-Do-Check-Act from Lean and Define-Measure-Analyze-Improve-Control from Six Sigma), they all drill down to a similar approach to problem solving. This approach is to look at a situation where we intuitively know improvement is required and answer the following questions:
What is the current condition of this process?
What is the desired condition of this process?
What is the actual-desired gap?
What can be done to close the gap?
How can we sustain the improvement over time?
Depending on the complexity of the problem, answering these questions may be simple and require very few analytical tools, or we may require special skills and intricate analytical tools. However, the ultimate goal is to be able to communicate where we are today, where we want to go, and how we will get there. This takes time and resources. Executives can be misguided when they roll out continuous improvement strategies without taking into consideration the time, energy, and skill required to improve. Simply declaring that continuous improvement is the new way will undoubtedly result in frustration and failure.
Continuous improvement and problem solving require trained people with the proper tools and time. This is no different than any process inside our organizations. Indeed, continuous improvement is a process and needs to be managed in the same way as we manage other important processes. Consequently, if we expect people to work on improvement initiatives, they must have the time to do it. Far too often, managers will get a team together, sell the merits of continuous improvement, and then send the team back to the floor with the mandate to improve the operation. Yet the team members have full-time responsibilities that have not changed and no spare time to work on continuous improvement initiatives. This point is even more pronounced in the logistics industry, where many of our day-to-day activities require urgent and immediate attention. In this environment, it is virtually impossible to manage regular activities and complete any improvement projects.
Perhaps this is a self-fulfilling prophecy in that if you take the time to initiate improvements, you will prevent the firefighting or urgent issues from happening. This argument has merit in theory, but experience shows that we will never eliminate urgent issues, particularly in the logistics function. Consequently, for any continuous improvement program to be successful, employees must be given the time to work on continuous improvement projects. This is precisely why the Six Sigma movement has been so successful. In a true Six Sigma environment, companies will train as many as 2 percent of their employees and pull them out of their full-time jobs to work exclusively on improvement initiatives.
Getting People Trained
Training people for continuous improvement can be a daunting task. In what should we train them? What skills do they need? Do we need engineers and statisticians on staff? Although these are good questions, the reality is that the skills required for successful continuous improvement are often overprescribed. At first glance, we think we need process engineers and mathematicians to design processes and measure data to analytical limits. It is true that these skills may be required in complex problems, but most of the business problems that we are experiencing do not require that level of sophistication. In fact, in many cases, employees know the answers to a problem, yet they do not change the way things are done. This is not to say that rigorous analysis is not required or important. It surely is. However, in most cases, particularly in service industries (trucking and third-party logistics operations), the processes are not always so complicated that advanced statistics techniques are required to analyze a problem.
So, what is required? The training needed to sustain a continuous improvement program includes the development of people skills along with project management, teamwork, change management, and leadership. Working through any continuous improvement program requires project management skills. The ability to create and manage time lines and Gantt charts is crucial in order to keep a project on task and hold all stakeholders accountable. In-depth understanding of teamwork is required. People need to be involved to ensure that the initiative spans departmental and functional borders. Leadership skills are crucial in order for significant, sustained change to occur.
Sustaining improvement initiatives is the most difficult part of any continuous improvement program. The unfortunate truth is that people and processes are inclined to a natural resiliency that physically draws processes back to the old ways. One famous CEO said, “The system wants to be a bureaucracy. Every day, we need to fight to keep the bureaucracy from taking over.” Although this may sound like science fiction, there is no question that natural forces are at work challenging the sustainability of continuous improvement. Consequently, all employees, from the CEO down, need to be educated in leadership and change management issues. Significant improvement will happen when all the stakeholders recognize, understand, and believe that continuous improvement has an important place in bringing success to the organization.
EXECUTION
Truism: Talk is cheap. In logistics, you have to get the job done!
We have all been involved in initiatives that seem like great ideas in the beginning, only to have a project die miserably in implementation. Indeed, Six Sigma and the DMAIC process highlight the importance of sustained improvement. Sustained improvement is accomplished only when we execute successfully and then sustain the improvements over the long term. This is not easy; the natural force of resiliency makes it difficult to change and maintain the new ways of doing work. The logistics profession faces these challenges. In fact, most logistics professionals know exactly what needs to be done inside their organizations; the actual challenge is to get corporate support for logistics priorities. Progressive organizations that are embracing Lean and Six Sigma fully recognize the importance of logistics and are doing something about it. However, overall as a profession, logistics has a long way to go.
At this time, our vision and dreams of world-class logistics and supply chain management have outpaced the operational realities inside most organizations. Let’s call it an ingenuity gap, where our ability to execute is lagging behind our ideas, innovations, and recognition of what needs to be. Figure 19.3 describes the relationships of the key variables needed for successful execution.
We do not need to be surprised or overly concerned; all significant changes and mental model shifts start out with an ingenuity gap. As the adage says, “There is nothing like an idea whose time has come.” Clearly, Lean Six Sigma Logistics’ time has come. What is needed now is leadership.
Acting as Lean Six Sigma Logistics Leaders
There are literally thousands of books that promote their particular definition of leadership. They might emphasize vision, passion, drive, or the ability to
Figure 19.3. Lean Six Sigma Logistics Execution.
influence others. These are all accurate; however, they amount to nothing without action. The ability to act, to get things done, is not just one aspect of leadership; it is the glue that holds it together. No leadership style can survive without action. Action is what drives logistics into the executive boardrooms of our companies. Assertive action followed by effective execution will champion the impact that Lean Six Sigma Logistics can have on organizational performance. Again, where do we start?
As leaders, we need to focus and then act on three key areas. That is, we need to ask the tough questions, seek the facts, develop strategies, and pursue the three principles of:
Logistics Capability: Is our logistics system capable?
Logistics Flow: Have we designed a logistics system that flows?
Logistics Discipline: Are the logistics processes grounded in disciplined principles?
Capability means that the logistics leader is focused on ensuring that the logistics system is predictable, stable, and visible.
Flow relates to the logistics professional’s ability to describe and articulate how the system performs relative to asset flow, information flow, and cash flow.
Discipline is crucial to sustaining stability and flow, with major disciplines including collaboration, systems optimization, and a steadfast commitment to waste elimination.
When logistics and supply chain executives focus on capability, flow, and discipline, it will become clear that supply chain activities are indeed the corporate actions that bridge the organization successfully to the customer, rising above the wastes in which our competitors are quagmired. It will not be easy, but in the end, organizations that embrace Lean Six Sigma Logistics will be the victors. As logistics professionals, we have painted the vision and set the stage, and what is needed now is action, action, and more action.
Now that we have the vision, structure, and call for action set forth by the Logistics Bridge Model, let’s continue in the next section by examining key tools that can help close the gaps between current and desired conditions in the logistics system. Tools and methods from Lean and Six Sigma will help to guide continuous improvement initiatives and measure their effectiveness.
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