Highlighting Waste and Creating Visibility

Waste is everywhere. In fact, if we think of our work processes, one could argue that the process itself is alive and its goal is to create waste. That is, organizational processes have inherent forces that create waste. Indeed, there are days when it seems the system is happiest when waste is being created. Our job is to fight the natural tendencies toward waste creation by designing, implementing, and sustaining an organized workplace.

Waste happens! Once we face this brutal fact, we can begin to eliminate it. The first step in waste elimination is to locate the problem. Although this sounds easy and intuitive, it is much easier said than done. Many of our organizations are so inundated with inventory, equipment, and facilities that it is virtually impossible to differentiate what is required and what is waste. Organizing the workplace is a necessary step. Figure 14.1 shows us how being organized helps one to understand any situation.

Figure 14.1. The Organized Workplace. (Adapted from material by Art Smalley, Lean Enterprise Institute.)

The organized workplace can be defined as a place for everything and everything in its place, a concept most of us were taught in kindergarten. This definition leads to disciplined predictability. The goal is to plan (anticipate needs of the operation) and then organize the workplace according to the plan. When the operation is in motion, any deviation from the plan will make waste visible.

A logistics example that highlights the importance of the concept of an organized workplace is inventory. Inventory levels should be planned. We should know exactly how much of what inventory we want in the system at any given time. This inventory will, in turn, take up a certain amount of space or tracking. The organized workplace will anticipate this need and allocate exactly that amount of space for the inventory. The space will be labeled and identified in order to understand visibly what the space is for. With this type of organization in place, during the course of the day a manager can easily identify an abnormal condition by looking at the allocated space and labeling. For example, if too much inventory was received, the inventory will be using more than its allocated space, or perhaps no inventory was received, which means that the space will be empty when the labeling clearly shows there should be inventory in the space at that time. There must be a place for everything and everything in its place.

Standardized Operations and Setting Priorities

Standardized operations are a significant part of the Lean lexicon. A standard operation is one where we know the input requirements, the procedure of the process, the time for each step in the procedure, and the expected output of the operation. To have these standards firmly in place requires an organized workplace. For example, let’s review the process of filling out bills of lading for daily outbound shipments to customers. An organized workplace would have a place for all bills of lading. In the morning, required bills of lading would be in a tray, visible and well labeled. Throughout that day, the bills of lading would be completed and the container would be replenished with the work for the next day. Yes, this sounds obvious and simple, but many traffic functions in reality are disorganized, and the disorganization causes mistakes and creates waste. To be sure, mistakes happen; the goal is to have the workplace organized so that mistakes are found and corrected before they produce a defective product or service. To succeed and sustain its success, a standard operation requires an organized workplace.

Once standard operations are firmly in place within an organized workplace, priorities can be set. Let’s go back to our bills of lading example. The visible inbox can now provide valuable information about the operation. In the morning, we would fill the container with the required bills of lading for the day. As the day progresses, we can monitor the processing of the bills of lading. If processing is inadequate or problematic for any reason, this will be a signal to go to the shipping area and check schedules. This go see technique may result in a correction, but if that is not possible, at least there will be an opportunity to notify the customer as quickly as we can. The corollary of this example is perhaps all bills of lading are used by noon, and traffic coordinators are now filling in bills that were not planned for that day. This should result in questions that may highlight that we are pulling shipments ahead or shipping product that has no firm order. Once again, this will highlight priorities and events that need immediate attention.

The Organized Workplace: Clutter, Complexity, and Quality

Clutter creates complexity, and complexity creates waste. This is the most intuitive yet least managed element of 5S and the organized workplace. The intuitive part is that clutter is a form of waste, and it is the first waste that needs to be eliminated. This is because the clutter is hiding the real and significant waste that is our target of elimination. This clutter may be paperwork, boxes of old files, or obsolete inventory and equipment. Waste could be processes that do not add value to the operation. Accepting clutter means accepting complexity.

For example, when we stock obsolete inventory, the inventory is physically in our facility and the information for the inventory is in our systems (or so it should be). When new and required inventory comes into the facility, we may not have a place to put it because the facility is full of other inventory, some of which may be clutter. We can move the clutter around to make room for the new inventory, and that requires handling material and updating management systems. These movements are wastes and exist because we have not organized the workplace by eliminating all clutter in the facility.

Complexity will, in turn, affect quality. Certainly, the process described above (moving obsolete inventory around) does not represent a quality process. Quality processes are described as processes that create value for the customer. Clutter and a disorganized workplace will eventually cause product quality issues. Excessive material handling, errors in product identification, and misshipments can all cause damage to product. Products can be rendered useless and returns cause waste.

Measurement and the Organized Workplace

We will discuss measurement at length in this chapter, but it is important to highlight the relationship between measurement and the organized workplace. Measurement is crucial for success. Whether or not you embrace Lean or Six Sigma initiatives, survival in the future depends on having effective measurement systems. Before we can eliminate waste, we need an effective measurement system.

Prior to putting a measurement system in place, we must organize the workplace. How can we have effective measurement if we have a disorganized workplace? For example, before you can measure a trailer yard, any broken-down trailers sitting in the yard need to be cleared. Before we determine our optimal office space, we need to confirm that each person working in this area is adding value. In other words, how can we know our current condition (the first step in measurement) if the business is inundated with clutter? How do we begin to organize the workplace?

One Lean tool that is useful in highlighting waste in the workplace is the red tag initiative. Effective and fun for all employees, a red tag initiative is a blitz technique to rid the business of clutter. Simple in concept and application, all employees are given the opportunity to eliminate clutter in the workplace. This is accomplished by creating a red tag that can be placed on paper, boxes, inventory, equipment, and anything that does not have value in the workplace. For instance, you can red tag the box of old paperwork that you have been “walking around” for the last few years. The red tag will indicate clutter. The tag will give all employees forty-eight hours to justify keeping the box. Unclaimed boxes go into the garbage. The red tag initiative is simple, fun, and effective.

Coordination and Value Stream Mapping

One of the most powerful tools in the Lean tool kit is the value stream map. Although the mapping of all processes would seem like basic management protocol, many organizations are operating without it since most start as small businesses and their processes have evolved over time. This incremental evolution of process is what creates confusion and redundancy within the processes of companies. In contrast, a coordinated and planned environment can easily be documented and mapped to identify process owners and critical touch points of the processes. These critical touch points can be called the “moments of truth” for the particular process. Moments of truth are extremely important and need to be coordinated, managed, and measured. One example is the process of moving raw materials into a production facility.

In the absence of coordination, processes are not mapped or documented and, consequently, are not understood by all logistics partners. When we order raw materials in this environment, we cannot be sure of what will arrive at our manufacturing facility. Quite literally, when we open the doors of an inbound trailer, it is like opening a surprise package. Why is this and how can it be managed?

Lean systems are coordinated. Coordinated systems are value stream mapped and documented. In our example, the Lean inbound system value stream map will identify critical moments of truth:

1. Did the supplier receive the order and can the supplier support the request? 

2. Did the order get shipped in full and on time?

3. Did the order arrive in full and on time?

An infrastructure must be created to manage these three events. It is foolish to think that critical processes will manage themselves. A well-thought-out plan is needed to manage the moments of truth throughout each step of the process.

Coordination and Detailed Planning

Even though business seems to be moving at the speed of light, we should never lose sight of the intrinsic value of effective planning. Effective planning focuses on coordinating processes; each step of the process itself must be efficient and effective. Efficiency is doing things right and effectiveness is doing the right things; both are required to coordinate logistics activities. Drawing from the previous example, how can we plan to ensure coordination of the process?

After looking at the value stream map, we quickly recognize that a critical moment of truth occurs when the supplier actually ships the product from its facility. In other words, once the supplier has loaded the truck and shipped from its facility, the process is at the mercy of what was shipped. Recognizing this, we understand that coordination of the process relies on ensuring that what is shipped is what was ordered. The traditional Advanced Shipping Notice (ASN) attempts to manage this; however, the fact is that the ASN is generally nothing more than an electronic reply to the original order. Consequently, even though an ASN is sent saying an order was shipped in full, we are still not sure that what was loaded is what was ordered.

Clearly, the solution to successful coordination is a planned process around the moment of truth. In this case, the answer is to coordinate with the carrier and connect the carrier with the pickup procedure at the supplier. Known in the Lean environment as point of pickup verification, this is a process where the drivers on the pickup routes are trained and equipped with the tools to verify what suppliers are to ship. When the driver shows up at a supplier, the driver will have a pickup manifest that details what the supplier is to ship on that order. Part number, part description, part quantity, packaging, and labeling requirements will all be verified by the driver prior to the parts being loaded on the truck. This process coordinates the moment of truth with the value stream map of the order process. Continuing this example, if the driver identifies a discrepancy between what is being shipped and what was ordered, the driver will stop the process and immediately call a dispatcher to report the noncompliant condition. The manufacturer will receive this information while the driver waits at the supplier for further direction. The manufacturer will call the supplier and sort out the confusion immediately, and the supplier can then correct the order and load the truck in compliance with the original agreement.

In contrast, in an uncoordinated environment, the supplier will load the truck, and the shipment may or may not reflect what was ordered. If there are discrepancies, they will not be caught until the trailer is unloaded at the manufacturing facility, which is too late.

In summary, the key aspects leading to the successful design of the process are:

1. Documenting and mapping the process

2. Isolating the moment of truth

3. Coordinating logistics partners to ensure that there is quality built into the process at the exact point of the moment of truth

Once we understand the moments of truth and coordinate around them, measurement systems become the next step to ensure that coordination is effective and that continuous improvement is happening. Figure 14.2 supports the concept of managing the moment of truth.

Figure 14.2. Coordination: Detailed Planning on the Moments of Truth.

Coordination and Measurement

Ultimately, we want logistics processes to be capable. For a process to be capable, it must be predictable. As discussed, for a process to be predictable, it must be coordinated. Coordination relies on managing the moments of truth, and therefore, it is only logical that measurement systems should start by measuring the moments of truth in any process.

Coordination is critical in all business processes, but in particular it is a major component of the logistics process. Logistics processes have a high level of complexity relative to process steps, handoffs, information requirements, and opportunities for process defects. This is not to say that logistics processes are complex conceptually, but rather that the sheer number of steps in logistics processes creates significant opportunities for a process to break down.

This concept of opportunities for defects is embedded in Six Sigma principles. When combined with the Lean tool of value stream mapping, we find the path to creating coordinated processes. Why is this? Value stream mapping identifies the process moments of truth, and the Six Sigma processes allow us to measure the opportunities for process defects, which, when accomplished, allows us to initiate improvement in the process. True coordination of process will develop and be sustained once this cycle of renewal is established.

Complexity of Products

Products can represent any inventory stockkeeping unit (SKU), which may be finished goods, subassemblies, or raw materials. Products can also include fixed assets, packaging materials, or repair items. In fact, products that have complex dynamics surround us. For example, let’s look at a manufacturer of everyday batteries. Not only are there different sizes (D cell, C cell, AA, AAA, etc.), but there are multiple packages available as well. You can get 2-packs, 4-packs, 8-packs, 16-packs, bonus packs, and the list goes on. The packaging can be so complex that it takes a frugal consumer many minutes to figure out which package is the most economical. Significant cost is created by the complexity.

Complexity of products and packaging configurations increases the number of finished goods SKUs. With the addition of each SKU, the manufacturer is forced to forecast sales at the SKU level. Each forecast introduces a margin of error because demand and forecast will never quite match. The variability between demand and forecast increases inventories, and these inventories cost the organization real dollars. Not only is there a real cost to SKU proliferation complexity, but it also creates an environment where Lean and Six Sigma disciplines are difficult to initiate and sustain.

Lean is about flow and the elimination of waste through the reduction of inventories. Six Sigma is about reducing defects by understanding, eliminating, and controlling variation. Consequently, product and SKU proliferation goes against all disciplines within Lean and Six Sigma. This is precisely the reason why successful manufacturers manage products very consciously and deliberately, rigorously scrutinizing attempts at SKU proliferation and ensuring that the increased complexity is absolutely necessary.

Complexity of Processes

Complexity has significant impact on processes. The implications of this impact are waste of energy, waste of resources, and increased opportunities for errors that may result in process and product defects. Complexity in process results from the number of steps that it takes for processes to be completed properly. This is especially important in logistics as not only will processes have multiple steps, but often they will have many elements of paperwork as well. Each process step and paperwork requirement creates complexity that, in turn, creates an opportunity for defect. This is based on the mathematical principle of cumulative probabilities.

Cumulative probabilities show us that overall performance of a process is equal to the multiplied performance of each process step. In other words, overall performance is at the mercy of each step in the process. This relates to the concept of throughput yield, or defect-free processed volume, which is used to measure “effective efficiency” in many manufacturing settings.

Consider a logistics process such as shipping a pallet to a customer. This process may have twenty steps and five pieces of paper involved with the entire process. These steps may include building the pallet, staging the pallet for shipping, loading the carrier, completing a packing slip, completing a bill of lading, and other steps associated with shipping a pallet. Consequently, the overall performance of the process is a function of the success of each step. For instance, if each step has a performance level of 99.5 percent, then a process with twenty steps would have an overall performance of 90 percent. This describes the power of the multiplying effect of process performance. The key is to eliminate process steps and paperwork requirements in order to reduce the number of opportunities for defects. Figure 14.3 outlines the power of the multiplier effect.

Complexity of process is becoming even more critical as we globalize our supply chains. Importing and exporting material requires multiple process steps and a large amount of paperwork. In addition to all this complexity of process, logistics security issues create another dynamic that adds to complexity. Consequently,?

Figure 14.3. Complexity and Perfect Order Completion.

it is imperative that we value stream map processes to isolate the process and paperwork requirements in order to measure each leg of the process. Organizations must have a full appreciation of the importance of process to their organization.

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