Strategic KAIZEN: Example and Results
Alin Posteuc?
Author of Strategic KAIZEN concept | Author | Performance Improvement Consultant | The ”Traian Vuia” Prize Laureate of the Romanian Academy
Implementing a company's vision, mission and intentions at every level of the organization is an essential ongoing activity that improves year after year. Without this continuous activity, a company may suffer from a lack of direction and identity in action, from the multiplication of non-value added activities and from many other negative aspects that create the premises of a weakened competitiveness from day to day.
The basic purpose of Strategic KAIZEN through Speed-Based Target Profit (SBTP) and Manufacturing Cost Policy Deployment (MCPD) is to mitigate or eliminate the lack of direction and provide robust operational improvements that are continuously visible at the financial level.
1)????Strategic KAIZEN Example: The Structural Reform of the Profitability Based on the Productivity
a) Study the Potential for Cost Improvement Based on the Productivity?
The first step in the Strategic KAIZEN approach within the Speed-Based Target Profit (SBTP) paradigm and within the strategic framework called Manufacturing Cost Policy Deployment (MCPD) is to see how much costs can be improved by quantitatively understanding the potential for productivity improvement. In other words, by accurately understanding the current situation of Takt Profit and comparing it to the ideal state of Takt Profit, it is possible to predict the outcome of cost improvement activities by increasing productivity to achieve annual and multiannual target profit. In the figure below, you can see that the identified unit potential for cost improvement is $ 354 - please see "SBTP: 3 years ago". This is the total KAIZENshiro costing (the total improvement target value of the unit cost) or the value to be improved in striving for the ideal unit cost.
b) Reconciling Cost and Productivity Improvement with Long-Term Company Policies
Starting from the current state defined in the first step, we move to the Setting Cost Improvement Goal considering the feasibility of improving productivity. In order to translate the Cost Improvement Goal into specific strategic improvement activities, the Development of the Cost Improvement Strategy is made in order to seek to plan the most effective and efficient Strategic KAIZEN - this in continuous and consistent convergence with the company's mission and vision, according to the annual target for Takt Profit, continuously striving towards the ideal state of Takt Profit and implicitly with the targets of Key Performance Indicator (KPIs) and with the targets of Overall Management Indicators (OMIs).
The development of Strategic KAIZEN projects in striving for ideal costs or the stratification of the strategic intention of cost improvement in Strategic KAIZEN is based on Basic Cost Policy, on Cost Strategy Framework, on KPI's targets considered strategic, on identifying the key processes of cost of losses and waste, on the specific organization of the company to support Strategic KAIZEN and on the plan to promote Strategic KAIZEN. In our example, the Target Takt Profit at 3 years is $ 150/320seconds/unit. The need for Internal Profit is obtained by achieving the successive annual Cost Improvement Goal (from $ 354 to $ 256) and by lowering the Average Unit Price from $ 1,150 to $ 1,000.
In fact, through Strategic Kaizen projects, it is continuously feasible to achieve the concomitant competitiveness through Price and Profit through the continuous increase of Productivity.
c) Planning to Improve Productivity for Synchronous Profitable Operations
In this step, the predicted value for improving productivity to achieve the annual and multiannual Cost Improvement Goal that was clarified in the previous step is achieved in accordance with the Strategic KAIZEN Program. For this, achieving the successive targets of Takt Profit requires Generating Strategic Kaizen Possibilities and Themes by running the Preliminary Strategic Kaizen Screen. This step ends with Strategic KAIZEN Analysis for Ranking and Selection to reach the Annual Target of Takt Profit and meet the Annual Targets of KAIZENshiro Budgets (for new products, existing products and for the related cash flow Strategic KAIZEN).
d) Specific Productivity Improvement Activities to fulfill Takt Profit
In this step, the implementation of the Strategic Kaizen projects itself is done by improving the way of working itself and without investments. In order to fulfill the Takt Profit target, in addition to Strategic KAIZEN, specific Industrial Engineering (IE) activities and KAIKAKU actions are planned and implemented. As can be seen in the figure above, “SBTP: this period”, the results of the Strategic KAIZEN projects fully meet the target of Takt Profit at 3 years by strategically approaching the increase of productivity regardless of the sales trend, increasing or decreasing.
The results of the profitability reform were: about 30% profitability growth over 3 years; reaching the Annual Strategic Target Profit of 10%. SBTP increased from $ 8,159,940 to $ 11,826,000 mainly based on the effective and efficient implementation of Strategic KAIZEN projects, even though in the second year the sales volume decreased compared to the previous year.
e) Productivity Measurement - Cost Management System Implementation
To sustain the consistency of the Speed-Based Target Profit (SBTP) (based on Manufacturing Cost Policy Deployment - MCPD) and Strategic KAIZEN it is essential to set the standard for Productivity Measurement with objectivity and consistency to promote productivity measurement or real challenges to be solved . At the same time, the Audit of Productivity for Strategic Kaizen is a phase of continuous learning from past challenges.
In general, company-wide productivity indicators show only the results of efforts to increase productivity within the company, as well as the level of productivity. However, given that the goal of Strategic KAIZEN is to increase the competitiveness of companies by continuously achieving the Cost Improvement Goal, specific Strategic Kaizen KPIs are constantly compared to the outside world (market share and profitability).
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Productivity Measurement and Audit of Productivity for Strategic Kaizen are essential to continuously keep the direction of Strategic Kaizen projects in striving for the ideal cost with both market and internal challenges.
2) Strategic KAIZEN results (via MCPD and SBTP)
In line with the above, a pertinent question arises:
What kind of tangible and intangible results can be expected by introducing the SBTP/MCPD systems and Strategic Kaizen?
In order to answer this question simply, one must start from the premise that
the continuous fulfillment of the takt proft is the main necessary output of the systems of the companies that apply SBTP.
In general, these results are at the level of:
Tangible Financial Effects: compliance with the target operating profit by reaching the takt profit; Cost down; Cash up;
Tangible Operational Effects: compliance with the delivery time by reaching the takt time (especially in the capacity bottleneck operation); Reducing all types of inventory and stocks; Reducing lead time; Compliance with the planned production number of parts; Man * hour planned compliance (especially in the capacity bottleneck operation); OEE planned compliance (especially in the capacity bottleneck operation);
3) The concept of Strategic KAIZEN was published in 4 books
The concept of?Strategic KAIZEN?has over?20 practical applications?and?over 230 explicit appearances?in the texts of?the 4 books.
Thank you very much for your attention to the 10 episodes of the Strategic KAIZEN approach through MCPD and SBTP!
Dr. Alin Posteuc? ?– CEO, Exegens; the author of the concept of?Strategic KAIZEN,?of the MCPD system?and?of the SBTP paradigm.
4 Books on?Strategic KAIZEN:?https://lnkd.in/gtGNWtJ