Lean Implementation The Good, The Bad and The Ugly

Lean Implementation The Good, The Bad and The Ugly Madison ASQ February 11, 2014 Wil Cox Wisconsin Manufacturing Extension Partnership cox@wmep.org 608-335-3203

Manufacturing is Vital to Wisconsin 8,939 Manufacturing Establishments 459,636 Jobs (direct)* 15.6% of Private, Non- Farm Employment* $50 billion Gross State Product* (20% of state GSP) *Bureau of Economic Analysis, US Dept. of Commerce, 2011

Wisconsin Manufacturing Extension Partnership (WMEP)

NGM 6 Success Attributes

Defining Lean A systematic approach to identifying and eliminating waste (non value-added activities) through continuous improvement by flowing the product at the pull of the customer in pursuit of perfection. The MEP Lean Network

Lean Thinking 1 value 2 perfect value stream 5 Key Principles of Lean pull flow 3 4 In adopting a holistic approach to Lean which encompasses the 5 Principles and deploying Lean tools and techniques to gradually eliminate waste, an organization gets progressively Lean. Lean solutions and tools can be customized to cater to any potential situation in an organization. Lean can be applied in a flexible manner to achieve effective results every time. 5 Though there are no boundaries to the potential of Lean, the way to Lean Thinking is driven by the 5 key principles.

Defining Waste Waste is anything other than the minimum amount of equipment, materials, parts, space, and worker s time which are absolutely necessary to add value to the product. - Shoichiro Toyoda, Toyota President 1980 s

Two Types of Work Activity Value Added Any activity that increases the market form or function of the product or service. (These are things the customer is willing to pay for.) Non-Value Added (Waste!) Any activity that does not add market form or function or is not necessary. (These activities should be eliminated, simplified, reduced, or integrated.)

Typically, 95% of total factory time is non-value added Total Factory Time 5% 95% V a l u e Order Processing, Engineering Change Orders, Raw Material Purchasing Delays, Waiting, Set-up, Rework, Scrap, Machine Breakdowns, Inspection, Transport (excess), Storage (multiple locations), etc.

Lean = Eliminating Waste DEFECTS any aspect of the service/part that does not conform to customer needs OVERPRODUCTION making more, earlier or faster than required by the next process WAITING idle time waiting for such things as manpower, materials, machinery, measurement or information NON-VALUE ADDED PROCESSING extra effort that adds no value to the product (or service) from the customer s point of view TRANSPORTATION unnecessary movement of materials, products or information INVENTORY WASTE any supply in excess of a one-piece flow through the process, whether it is raw materials, work in process or finished goods MOTION any movement of people, tooling and equipment that does not add value to the product or service EMPLOYEES UNDER UTILIZED not fully utilizing people s mental and creative skills and experience

The most dangerous kind of waste is the waste we do not recognize. ~Shigeo Shingo

Lean Building Blocks Identify and Eliminate the 8 Wastes Culture

How Does Lean Apply to Non- Manufacturing Settings? Every core lean principle applies just as strongly, if not more so, beyond the shop floor. In fact, many of the most exciting breakthroughs are taking place in areas such as: Services Healthcare Government?

Top misconceptions of the Lean movement, according to founder Jim Womack Misconception No. 1: People heard that Lean is a cost-cutting exercise, a headcount reduction system. People heard the less, but they didn t hear the more. Misconception No. 2: People thought it (The Machine that Changed the World) was a book about factories. You have to read the other four-fifths of the book. Misconception No. 3: Most people think Lean is a within-the-walls activity to fix your company. It is impossible for you to get very far when the people in your value stream don t get any better. Financial Post (Canada) - October 24, 2013

Top misconceptions of the Lean movement, according to founder Jim Womack Misconception No. 4: Lean is an improvement process production people can do management doesn t have to do anything. Management can check the box and move on. Lean requires continual co-operation at all levels, with upper management building two-way communications and trust with staff, restructuring to support decision-making at lower levels, shepherding investment in Lean projects, and generally championing Lean initiatives. Financial Post (Canada) - October 24, 2013

Benefits of Lean Lean can provide an organization with a clear competitive advantage since the correct application of the Lean principles will realize substantial benefits that include: Greater productivity Greater throughput Improved quality Reduced cycle times Less fire-fighting Smoother operation Reduced operating costs Additional capacity for new business

Convergence of Six Sigma and Lean Six Sigma Objectives Lean Objectives Shift process average Reduce process variation Reduce: Waste Nonvalue added work Cycle time Improve process flow Reduce process complexity Lean Six Sigma improves quality, cost and delivery Snee & Hoerl, Six Sigma Forum Magazine, May 2007

Holistic Approach to Improvement Works in all areas of the business Works in all cultures, providing a common language toolset Addresses key measure of performance Addresses all aspects of process management Addresses all types of improvement Includes a management process for improvement Snee & Hoerl, Six Sigma Forum Magazine, May 2007

Snee & Hoerl, Six Sigma Forum Magazine, May 2007

Lean and Six Sigma are Complementary Achieving comprehensive improvement requires both the ability of Lean to achieve simplicity and the ability of Six Sigma to manage complexity. Harnessing their mutually reinforcing power most effectively requires a holistic improvement system that: 1. Focuses on improvement of the entire business 2. Uses a careful project improvement process that identifies the right projects and the right improvement strategies for each project Snee & Hoerl, Six Sigma Forum Magazine, May 2007

Lean and Six Sigma are Complementary 3. Uses a generalized DMAIC framework to guide projects 4. Encompasses robust improvement methods that can handle the wide variety of problems an organization experiences as well as the wide variety of problems encountered in individual projects 5. Employs analysis of process variation as part of any improvement project 6. Strives for process understanding using Y=f(X) thinking to sustain improvement Snee & Hoerl, Six Sigma Forum Magazine, May 2007

Lean Six Sigma Spans the Value Chain Six Sigma Lean Six Sigma Mktg Engr Mfg Sales Service Sales Mktg Development Manufacturing Engr Supply chain Sales Service Customer Six Sigma Project LSS Project Discrete projects for specific problems Reduce defects to deliver quality & productivity Individual project approach Value stream map Reduce waste to deliver speed & quality Cross functional team approach

2006 Aberdeen Lean Benchmark Report Executive Summary Use of Lean techniques has expanded well beyond the automotive industry to delivering dramatic results into other sectors including aerospace, consumer goods, and industrial equipment among others. Large performance gap between those companies that are simply using Lean techniques on the shop floor versus those that have built a culture based on Lean thinking. Of the 300 manufacturers that participated in this study, 90% reported that they are committed to Lean. However, further analysis found that less than 20% of these companies can be considered best-in-class.

2006 Aberdeen Lean Benchmark Report

Recommendations for Action

WMEP Next Generation Manufacturing Study

Critical Elements for Effective Lean Deployment 1. Executive ownership and commitment with a strong passion to make it happen. 2. Leadership alignment. 3. Building the proper infrastructure and selecting the right people as Champions, Value Stream Managers, and Leadership Team members. 4. Understanding what is valuable to your customers and focus on maximizing value from their perspective. 5. Selecting the right projects, project teams, and project contracts. Air Academy Associates

Critical Elements for Effective Lean Deployment 6. Financial accountability and proactive participation by Finance. 7. The right training in the right tools with the best trainers/motivators. 8. Knowledge sharing and communication. 9. Customer and supplier involvement. 10. Rewards and recognition system. 11. Continuous assessment of projects and deployment/implementation issues. Air Academy Associates

Developing a Critical To Tree Identify the deployment customers those who make the decision to allocate organization resources for lean or have the power to affect that decision. Go through a structured process to thoroughly understand customer requirements. Use the standard quality, delivery and cost categories. Get measures and specifications. If saving money is expected, find out how much and by when. If culture change is required, determine what this means to the customer and how it should be measured. Customers won t always know what they want, so use this process to help them figure it out. Robin Gates, Quality Progress, Aug. 2007

Developing a Critical To Tree Robin Gates, Quality Progress, Aug. 2007

An Integrated Management System is Key Key to Success Integrate your QMS Lean Six Sigma Environmental Safety etc. into an Integrated Management System

Lean Metrics are Key to Success Performance Measures Cost Customer Satisfaction Cost of Poor Quality Effectiveness Lead Time

Teams Teamwork Is Fundamental To Lean Why Do Teamwork? Multi-skilled, involved employees produce the best products at the best value!

Financial Benefits Creates additional/new revenue Enables cost avoidance Faster return on investments Increases cash flow Increases profitability of existing products/services Increases revenue of existing sources Increases stock price/shareholder value Lowers cost of production Lowers cost of servicing

Operational Benefits Decreases employee work loads for undesirable work Eliminates non-value added activities Improves employee morale/team spirit Improves internal communication between departments and groups Improves use of workspace Increases employee and process productivity Reduces cycle time

Organizational Benefits Higher quality products and services Substantial cost savings Improved customer satisfaction Creates new customer opportunities Fosters company vision and mission Improves market position relative to competitors Increases competitiveness and ability to charge a premium

Suggested Reading Gemba Kaizen: A Commonsense, Low-Cost Approach to Management, Masaaki Imai, McGraw-Hill, March 1997, ISBN: 0070314462 Lean Production Simplified: A Plain-Language Guide to the World's Most Powerful Production System, Second Edition, Pascal Dennis, Productivity Press Inc, September 2007, ISBN: 9781563273568 Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Second Edition, James P. Womack and Daniel T. Jones, Free Press, June 2003, ISBN: 0743249275 Learning to See: Value Stream Mapping to Create Value and Eliminate Muda, Mike Rother and John Shook, Lean Enterprise Institute, June 2003, ISBN: 0966784308 Lean Office and Service Simplified: The Definitive How-to Guide, Drew Locher, CRC Press, 2011, ISBN: 978-1-4398-2031-5 Creating a Lean Culture: Tools to Sustain Lean Conversions, David Mann, Productivity Press Inc, 2005, ISBN: 1-56327-322-5