Lean Transformation to improve the Value Proposition

What is Value?

Value is something a customer is willing to pay for:  processes that change or improve the product or service offered add value.  Anything else is considered waste.  It may be work, but it does not add value.  The 8 forms of waste we strive to eliminate are:

  • Over Production:  The mother of all wastes, overproduction is producing more than is required.  We strive to build what is needed, when it is needed.
  • Lack of Standardized Work:  Leads to variations in the product or service (quality problems) or variation in productivity (cost problems).
  • Queue (Waiting) Time: Products or services which have been invested in but are not ready for sale.
  • Transportation (handling) – Wasted trips around the factory or to the filing cabinet.
  • Inventory = Frozen Assets.  Cash is king!
  • Unnecessary motions:  Movements back and forth, up and down, twisting and turning.  Source of productivity losses and the root cause of most accidents.
  • Defective product:  Even if it can be reworked, it is sold as a liability and profit potential has been lost.
  • Under-utilized skills:  this is the biggest of all waste.  It turns out when you hire a back and a pair of hands, a head comes with it!  Unlocking the gray matter of your employees will lead to no end of Continuous Improvement.

In the Traditional Business Model only a small fraction of processes actually physically transform the product.  The rest of the processes fall into one of the categories of waste identified above.
Valueadded1 Valueadded2traditional

In the Traditional Growth Model s sales increase more resources are added in proportion to support the growth.  Additional manpower, machines, inventory, etc. are necessary to support the increased activity.

Valueadded3lean

In the Lean Enterprise, efforts are focused on process improvement and elimination of waste.  As sales increase, effort is spent on those processes that add value, reducing costs and increasing productivity.  The result:  increased profits.

 

 

Lean Cultural Transformation:

pyramid1

In the Traditional, Employee Centered Organization, Information flows from Top to Bottom.  Dpyramid2irectives are passed to those who actually add value to the product, and little information flows back upward.  Change is identified and implemented by Management.

 

 

In the Process Centered Organization, information flows both up and down the organization.  Management finds itself in the position of asking their employees, “How can I help you do your job better?”  Opportunities for improvement are readily identified and implemented across the organization, resulting in a continuous cycle of improvement.  Leaders still lead, managers still manage, and the entire organization is in step.

In Lean Culture, the process that provides value is the center of attention.  Organizations become focused around identifying and solving problems that keep the organization from achieving its target conditions (more below).

Lean Six Sigma:

Lean Six Sigma combines Lean Enterprise tools from the Toyota Production System with Six Sigma data analysis tools.  Lean tools help organizations quickly remove waste, streamline processes, and help focus on value added activities.  As Peter Drucker stated: “There is nothing so useless as doing efficiently that which you shouldn’t do to begin with.”  Once the processes are sorted out judicious use of six sigma tools then serves to reduce variability.

A simplified Lean Transformation model is as follows:  Identify your current condition and your long term Vision.  The Vision might read something like “Zero defects, 100% value added, and One Piece Flow”.  Combined with the companies values, this vision becomes True North for the entire company – overarching goals for all to aspire, and a framework for all decisions and policies.  A comparison between the Current Condition and the Long Term Vision will likely reveal big gaps.  Just remember, Rome was not built in a day.  Break the process down into realistic achievable steps.  If you are driving to New York from LA, your first step is to plan your route and look at some stops along the way.  We will call each major milestone a Target Condition.  As each Target Condition is achieved, we will set our sights on the next Target Condition.

Next, specify value from the standpoint of the end customer by product family, or Value Stream.   For each value stream, work through the following 4 Lean Drivers, building one on top the other.  The first Target Condition might be establish Workplace Organization in one department, and then go from there.

  1. Workplace Organization – remove non value added processes and items, arrange the processes for ease of product flow, clean and organize the workplace, standardize all remaining process steps, and repeat! Often referred to as 5S, Workplace Organization establishes a discipline and structure to the workplace, including visual management and standardized work.  A lot of low hanging fruit is identified and harvested at this stage.
  2. Establish Uninterrupted Flow – once work is started, it is completed. The focus on continuous flow identifies and eliminates both physical and information bottlenecks in the process, from vendor to customer.  As flow increases, lead times drop considerably and efficiencies rise rapidly.
  3. Error Free Processing through mistake proofing processes, small lot sizes, and quick feedback. This step resolves quality issues at their source, be they internal, external, or through weak or faulty product design.
  4. Single Minute Exchange of Die (SMED) – reduce setup time and increase flexibility of all operations to drive lot size to match demand size, eliminating excess inventory at all levels. As setup times decrease, lot sizes diminish to the order quantity.  No more odd extra inventories throughout the plant.  Optimize production resources to produce only what is needed, when needed.

Continuous Improvement and the PDCA Wheel

 continuousimprovementwheelContinuous improvement is just that:  continuous.  As the organizational culture flips from a people centered one to a process centered one, people improve their problem solving abilities at all levels of the plant to achieve the organizations’ True North. The process is done in steps.   Conflicts and turf battles dry up in favor of joint collaboration to resolve problems using Deming’s PDCA wheel.

 

  1. Plan: Define what you expect to do and expected results (hypothesis).
  2. Do: Make the planned changes to test the hypothesis.  Try to do in the work environment, but on a small scale.  Observe the results closely.
  3. Check: compare actual outcome against the expected outcome.
  4. Act: based on the results, what is next?  What adjustments need to be made?  Either start the cycle again or standardize and stabilize the new process, documenting the process and monitoring results going forward.

Organizations which are adept to problem solving techniques will rely less and less on a formalized Kaizen Event change model and towards a continuous improvement model employing such tools as A3 (see separate post).

copyright 2012 Paul Yandell

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