Vol. 16 – A Primer on Lean

The Business Transformation 101 series is built around People, Plans, and Processes. Prior volumes of the series focused on People and Plans. The third component, Processes, focuses on the Lean Processes that are utilized to execute the business plans, both short-term and long-term, and deliver results for the customers and shareholders.

Click HERE for a podcast version of this volume.

This article provides a Primer on Lean and the philosophy of Lean.  Many people think of manufacturing when the topic of Lean is brought up but Lean applies to any process and therefore should be applied across the entire enterprise. It applies in the office as well as in manufacturing. It applies to product businesses as well as service businesses – “service” can be substituted for “product” anywhere in this discussion. Ensure that the application of Lean is embraced in all aspects of the business – if there is a process lean it out, if there is not a process, create a lean one.

The principles of Lean were developed at Toyota following World War II led by Taiichi Ohno. At its core, Lean is centered around Respect for People and Continuous Improvement. It is a mixture of organic and mechanistic organizations. A true lean system is about thinking and learning how to tailor the application of lean to your specific business not about slavishly copying what Toyota or another “lean” company has done. Having these two components in your business are necessary for success.

Respect for People refers to taking a team approach as opposed to an individual approach while ensuring respect is shown to and expected from each individual member of the team. Some signs that an organization really has Respect for People:

• Safety is the #1 priority – the Leadership team ensures that safety comes before all else and there are processes in place to build a safety culture, proactively identify potential safety issues before they happen e.g., a near miss program, and quickly report and countermeasure any safety incidents. Safety should also be proactively reviewed and addressed in all improvement activities.
• Leadership Walks the Talk – they consistently minimize talk and maximize action and any talk is directly and immediately linked to action
• There is no “I” in Team – the focus is on a team approach to problem-solving and improving, 100 brains are always better than 1 brain. Kaizen improvement events are built on cross-functional teams that have a stake in the area being improved allowing employees to have a voice in improving their work areas.
• Leadership fosters a blameless environment – when a problem arises, 85%+ of the time it is due to a poor process rather than a poor employee. People inherently want to do a good job. At the same time, people need to understand blameless does not mean a lack of accountability.
• Leadership goes to Gemba – leadership walks the facilities and meets the teams, utilizes the Socratic method to engage the team in dialog to get their improvement ideas, does not give them answers or solutions but leads them there through appropriate questions. The team lives the work and know where the problems are.
• Shared gains – when the company wins, the entire team should win. Pete Stavros of KKR gives a great presentation on one way of implementing shared gains: Pete Stavros - Incentivizing Employees Creating Value.
• Participation and Engagement – clearly communicate on a timely schedule (monthly or quarterly) to the entire organization the company’s direction, expectations, and performance results. Be transparent and if possible, be open-book.
• Training – ensure all employees have the appropriate tools and skills

Ultimately business success comes down to having an engaged, motivated workforce that is aligned, with everyone pulling in the same direction. A culture that is built around respect for people maximizes the probability that your business succeeds.

In addition to having respect for people, the business and the people making up the business need to have a Continuous Improvement, or Kaizen in Japanese, philosophy that continually works to eliminate waste and non-value add portions of a process.  The success of the business depends upon having a continuous improvement philosophy to stay ahead of customer expectations and competitor improvements.

Mark DeLuzio in his book Flatlined, Why Lean Transformations Fail and What to Do About It talks about the Lean Trilogy. There are three primary stakeholders in the business that must be effectively satisfied to have business success: the customer, the employees, and the shareholders. Continuous improvement must happen to satisfy the Lean Trilogy.

• Customers have expectations and those expectations continually increase over time to satisfy their customers and stay ahead of their competitors. Your competitors are also constantly striving to improve to take your customers.
• Employees have expectations and those expectations continually increase. They are looking for better compensation and benefits to ensure their standard of living is improving. They have alternative job opportunities presented to them by your competitors and by non-competitor companies.
• Shareholders have expectations of receiving a return on their investment and that the returns improve over time. Like employees, shareholders have options and can decide to invest their money elsewhere.

To keep the Lean Trilogy invested, the business needs to ensure it is continually improving to stay ahead of the competition and the other alternative opportunities that exist in the marketplace.

Lean provides an effective, proven approach to ensure the business is continually improving. It is about quick, incremental improvement with a bias toward action. Kaizen or improvement events are not planned and executed over weeks or months. A kaizen event is typically 3 to 5 days in duration utilizing a team of 5 to 9 people but can also be 2 or 3 people implementing a small local improvement in a day. A 3-to-5-day event includes training on the improvement tool being utilized.

The schedule of what kaizen events to implement is driven primarily by the short-term and long-term plans as described in prior volumes of this series. The Short-Term Plan should define the SQDCG (Safety, Quality, Delivery, Cost, Growth) KPIs (Key Performance Indicators) that are priorities for daily management of the business to maintain the foundation of the business while also driving incremental improvements. The Long-Term Plan should define the year-one strategic improvement priorities and their associated TTIs (Targets-To-Improve) as documented in the Strategy Deployment Matrix.

James P. Womack and Daniel T. Jones authors of Lean Thinking: Banish Waste and Create Wealth in Your Corporation, described 5 Principles of Lean:

1. Utilize VOC (Voice Of Customer) to define value from the customer’s viewpoint
2. Identify the Value Streams that provide value to the customers
3. Eliminate batching and make the process flow striving to achieve one-piece flow
4. Use pull systems to connect customers to your production, downstream processes to upstream processes, and production to suppliers
5. Drive toward perfection, but do not let perfect get in the way of better

At the beginning of a Lean Transformation, it is advisable to communicate to the entire organization the reason for making this transformation. People want to know how it impacts them. Stress the Respect for People aspect, the value to the Lean Trilogy, and the 5 Principle of Lean. There will be a lot of skepticism so the Leadership Team will need to act quickly and walk the talk to overcome the skepticism.

Plan to provide a 4 to 6 hour Lean 101 training course for all employees. This training should review the reasons for implementing lean and describe the kaizen approach along with some of the key tools being used to improve the business. It is remarkably effective to include simulations in the training using Lego assemblies or similar, interactive, hands-on demonstrations.

The Leadership team should all go through a more in-depth, one-week Lean Leadership training session that incorporates the Lean 101 training but at a more detailed level. This session should include train-the-trainer work, facilitation training, examples of successful kaizen events, and do’s and don’ts.

Lean is focused on continuous improvement through the reduction or elimination of waste. There are 7 forms of waste that can occur in a process and they can be easily remembered by the acronym TIMWOOD:

T – Transportation: the movement of items, goods, materials, or people between process steps

I – Inventory: items, goods, or materials held by the business as part of its processes

M – Motion: the movement of people done as part of the process

W – Waiting: people or processes waiting for materials, items, or information to proceed with their work

O – Overproduction: producing more items, goods, or materials than required by the next process step or the customer at the time

O – Overprocessing: including processes steps that do not add value from the customer’s viewpoint

D – Defects: imperfect items, goods, materials that must be reworked or scrapped

Below is a list of some of the key lean tools that are useful in most businesses. Each tool is aimed at eliminating waste or non-value add activities in the business and will be covered in more depth in future articles.  There will also be podcasts describing real-world examples of the results obtained by using these tools.

80/20

This tool is also known as the Pareto Principle and it is used to determine the significant few items in a data set. The 80/20 name arises from the fact that for many outcomes 80% of the results are produced by 20% of the causes. For example, in many businesses 20% of the products sold account for 80% of the revenue. This tool is used by the team to simplify the business, remove complexity and variance, and identify the best improvement opportunities.

VSM (Value Stream Mapping)

Value Stream Mapping is a tool for mapping the material flow and information flow through an entire value stream. The map covers the value stream starting at suppliers and ending with customers. It shows the total value-add time and total lead-time through the process. A current state map is created which is used to identify the improvement opportunities. The team then defines a set of kaizen events to improve the value stream from the current state to the future state. The kaizen events represent the kaizen roadmap the team uses to improve the value stream and achieve the future state.

Standard Work

Standard work is a tool that allows processes to be designed to optimize the flow of material, eliminate non-value-add, and properly load the work to the operators. It provides a structured playbook that describes in detail the way a value stream, cell, or process should operate under different levels of demand.

Kanban

Kanban is a tool used to create pull for material and information. This tool is designed to reduce inventory, waiting, overproduction, and defects. It can be utilized to pull material from suppliers or for a downstream process to pull material from an upstream process. It can also be used by customers to pull product from the business. Pull systems are the opposite of push systems. A pull system only makes product as it is consumed while a push system makes product to a schedule based upon a forecast.

SMED (Single Minute Exchange of Die)

This tool is designed to reduce change-over time. The focus is to move internal set-up (set-up that occurs while the machine is stopped) to external set-up (set-up that can occur while the machine is running) and eliminate transportation, motion, waiting, and defects.

5S

5S is a tool for organizing such that every item needed in an area has a defined location and visual indication if it is not in its location. 5S refers to: Sort, Set in order, Shine, Standardize, Sustain. This tool is aimed at eliminating waste by removing clutter and improving general housekeeping.

Visual Management

Effective Visual Management allows anyone visiting the business to quickly ascertain the current performance of a department, cell, value stream, product line, business unit, or the entire business. The dashboard of a car is a great example of visual management. In a quick glance at the dashboard, the driver knows their speed, fuel level, engine temperature, battery voltage, mileage, headlights high or low beam, etc. This same approach is used to provide a dashboard of the business’ performance.

3P

This is the Product Preparation Process which utilizes lean tools to simultaneously develop a product and its associated manufacturing process. Using 3P lowers the overall new product development investment, reduces the time-to-market, and reduces initial quality issues.

In summary, Lean provides a powerful approach for building a business. The approach recognizes that the success of a business is tied to assembling a team of people to execute the business plans through the implementation of lean tools.  By showing mutual respect between all the individuals on the team and ensuring all individuals walk the talk, the business creates a highly motivated, effective workforce. The suite of lean tools allows the team to create and continually improve the processes needed to operate the business. These lean tools are aimed at identifying waste and non-value-added activities so they can be reduced or eliminated to provide a better value proposition than its competitors and win its unfair share of the market. Lean is a journey not a destination and the team must relentlessly and unceasingly drive improvements to maintain the health and future success of the business and its employees. 

References

Liker, Jeffrey K. (2020 2nd Edition). The Toyota Way, 14 Management Principles from the World’s Greatest Manufacturer. New York, NY. McGraw Hill Education.

DeLuzio, Mark C. (2020). Flatlined, Why Lean Transformations Fail and What to do About It. New York, NY. Routledge.

Byrne, Art. (2013). The Lean Turnaround, How Business Leaders Use Lean Principles to Create Value and Transform Their Company. New York, NY. McGraw Hill Companies.

Womack, James P. and Jones, Daniel T. (2003).  Lean Thinking, Banish Waste and Create Wealth in Your Corporation. New York, NY. Free Press, A Division of Simon & Schuster, Inc.

Next Volume – Wednesday 10-Mar-21: Vol. 17 Value Stream Mapping