Lean – A Philosophy that Changed the Business World – Part 2
Lean for Production, Services or any Other Business:
A popular misconception is that lean is suited only for manufacturing, which is absolutely not at all true. Lean applies in every business and every process. It is not a tactic or a cost reduction program, but a way of thinking and acting for an entire organization.
Businesses in all industries and services, including even healthcare and governments, are also using lean principles as the way they think and do. Many organizations choose not to use the word lean, but to label what they do as their own system, such as, Toyota Production System or Danaher Business System or Caterpillar Production System. Why? To drive home the point that lean is not a program or short term cost reduction program, but the way the company think and operates.
The word transformation or lean transformation is often used to characterize a company moving from an old way of thinking to lean thinking. It requires a complete transformation on how a company conducts business. This takes a long-term perspective and perseverance.
The characteristics of a lean organization and supply chain are described in ‘The Machine That Changed the World’, by Womack and Jones, in 1990 and in later book ‘Lean Thinking’, by Womack and Dan Jones, in 1996, founders of Lean Enterprise Institute (US) and Lean Enterprise Academy (UK), respectively. While there are many very good books about lean techniques, ‘Lean Thinking’ remains one of the best resources for understanding ‘what is lean’ because it describes the thought process, the overarching key principles that must guide your actions when applying lean techniques and tools.
Purpose, Process, People:
Womack and Jones recommended that managers and executives embarked on lean transformations must think about three fundamental business issues that should guide the transformation of the entire organization:
- Purpose: What customer problem will the enterprise solve to achieve its own purpose of prospering?
- Process: How will the organization assess each major value stream to make sure each step is valuable, capable, available, adequate, flexible, and that all the steps are linked by flow, pull, and leveling?
- People: How can the organization ensure that every important process has someone responsible for continually evaluating that value stream in terms of business purpose and lean process? How can everyone touching the value stream be actively engaged in operating it correctly and continually improving it?
Just as an ‘Engineer’ needs a vision of what to ‘Build’ in order to get the full benefit of a ‘Hammer’, ‘Lean Thinkers’ need a vision before picking up any ‘Lean Tools’. And, thinking deeply about purpose, process, and people is the key to doing this.
Lean Implementation Procedure:
Lean caught the imagination of business people in many countries. Today, lean processes are still at the heart of most of the business operations worldwide and are increasingly important in the industry sectors, including logistic, distribution and financial services. In light of today’s changing market demands, engineers, managers and business leaders are working hand-in-hand while reviewing and refining continuously the lean strategies, which is making lean more and more popular among the business community. Hence, lean implementations are now becoming commonplace. The knowledge and experience base is also expanding rapidly.
Every company has specific applications and it differs from each other. Just as many firms copied Ford techniques in slavish and unthinking ways, many firms copy Toyota’s techniques in slavish and unthinking ways. The results, in many cases, are not what they should be and could be.
In fact, there is no unique cookbook for Lean Implementation for sort of Industries. Each firm has its own unique set of products, processes, people, and history. While certain principles may be immutable, their application is not. Lean Strategy will always be a difficult, uncertain, and individual process. Strategy (‘The General’s Art’) is still, largely, an art. But, that should not prevent the organization from bringing the available science to bear on the problem.
Lean experts have learned that successful lean transformation calls for a situational approach that is based on innovating key dimensions of any organization through addressing a series of questions. These questions are fractal – meaning that the same questions apply whether working at the macro enterprise level or the level of individual responsibility as you dive progressively deeper into each dimension. But, while the transformation model that has emerged through years of experience is situational, the nature of the questions represent a clear point of view: if an organization fails to address each question, and with a sense of how each relates to the others, the transformation will struggle to sustain its momentum.
Questions of the Lean Transformation Model
- What is the purpose of the change – what true north and value are we providing, or simply: what problem are we trying to solve?
- How are we improving the actual work?
- How are we building capability?
- What leadership behaviors and management systems are required to support this new way of working?
- What basic thinking, mindset, or assumptions comprise the existing culture, and are we driving this transformation?
Fundamentally, the process of successful lean transformation rests on applying PDCA (Plan-Do-Check-Act) cycles of experimentation (the art and craft of science) at every level, everywhere, all the time. Being situational means that every story is going to be specific and different (each situation has a different aim or purpose). Being grounded in a common set of principles yet situational in application provides rich opportunity for the development of truly profound wisdom. Lean thinking and practice also propose a specific point of view around each question. We believe that there are certain approaches to answering each of the five questions that will yield greater success in the Lean Implementation/Transformation journey.
To understand Lean Implementation/Transformation better, it is important to understand the Lean Transformation Framework along with the ‘First Lean Implementation’ i.e. ‘Toyota Production System’. A lean transformation model has been developed and shown below, is an accurate representation of how Toyota developed the Toyota Production System concurrently with the Toyota way over many years.
The Lean Transformation Model
It is very important to recognize that the ‘Basic Way of Thinking’ is the foundation for success. Too many business leaders lack this ‘Basic Way of Thinking’, and, as a result, are unable to emulate Toyota in even the most simplistic of ways. Their Lean efforts fall far short of expectations and usually do harm to people. Effective Lean Transformations must begin with many big changes in the ‘Basic Way of Thinking’ for entire senior leadership teams.
The thought process of lean is described in the book ‘The Machine That Changed the World’, by James P. Womack and Daniel T. Jones, in 1990. In a later book, ‘Lean Thinking’, in 1996, Womack and Jones stressed five principles. In fact, those lean principles are nothing but the guidelines to Lean Implementation.
The first step of Lean Implementation/Transformation starts with establishing a foolproof ‘Plan of Action’ also called as a ‘Road Map’. However, a ‘Road Map’ can be used with common sense. In fact, Lean has also been called as ‘Common-Sense’, although not always ‘Common Practice’.
Here are 6 steps that comprise a Lean Implementation/Transformation ‘Road Map’, which also involves certain sub-steps into each broad step:
Step 1: Form Team
- - Perform a third party Lean Enterprise Diagnostic assessment of the company, which basically reveals, how the company’s current processes are compared to the world class lean practices.
- - Form a strong, high performance, go-getter, energetic, flexible, collaborative & proactive team with diverse levels of expertise; preferably a mix of lean manufacturing and relevant business experience. Train the team on lean thinking principles and benefits.
- - Let team starts meeting with everyone and explain the initiative of organization towards lean thinking. Develop communication and feedback channel for everyone, so that every message can be percolated at every corner of the organization.
- -Begin to convince each of the employees on, why there is a dire need of lean thinking in the organization? And, subsequently take them in confidence by educating the importance & benefits of it for every individual employee.
- -Train all the employees from experts on lean overview, eight wastes, standard operations, kanban, kaizen, just-in-time, RCPS (Root Cause Problem Solving), PDCA (Plan, Do, Check and Act) and allow them to adapt with cultural change.
- -Benchmark the company with the successfully lean implemented companies by visiting them to get clear ideas and understanding on how lean organization works, what benefits it transfers to the organization, individual employees & customers, and how it is useful in today’s business world?
- -Set up a Lean Enterprise Steering Team, which will be responsible to provide support in the planning, resourcing, implementation, and follow-up accountability for lean implementation.
- -Prepare beforehand for the resistance from middle management during lean implementation, as it is very much evident from the past experience that middle management resistance to change is the number one obstacle while implementing lean.
- -As everybody is aware that different companies will require different approaches to implementing lean depending on where they are currently at and what they have in place already. Hence, prepare for at least three plans, so that, on the surprise of previous plan, the other plan can immediately take the first place.
- -As a first stepping stone towards lean implementation, it is always better to start with 5S (Sort, Set, Shine, Standardize, Sustain) implementation. It can be a standalone implementation (with or without lean), and it will most likely starts showing the major benefits for the largest part of the company in the least amount of time. It can be applied to all areas of organization by helping to get things organized and keeping it that way.
- -During 5S activity, every employees of the organization will start identifying areas of excessive waste/losses and can make plans to remove/eliminate it. This change in the organization will help to build momentum for moving forward.
- -As a second step towards lean implementation, it is always recommended to implement TPM (Total Productive Maintenance) in the organization. Like 5S, it can also be a standalone implementation (with or without lean), which will create a system of maintaining and improving the integrity of production and quality systems through the machines, equipment, processes, and employees that add business value to the organization.
- -TPM focuses on keeping all equipment in top working condition to avoid breakdowns and delays in manufacturing processes. And, one of the main objectives of TPM is to increase the productivity of plant and equipment with a modest investment in maintenance.
- -TPM helps in improving Performance of the Machine, Availability of the Machine, Quality of the Product, which is nothing but the improvement in Overall Equipment Effectiveness (OEE = Performance x Availability x Quality). And, very importantly, all the three factors, Performance, Availability & Quality can be improved by identifying and prioritizing the cause of the waste/ losses on all process & equipments and subsequently removing/eliminating it.
- Step 2: Define Value
- -Define value of the product or services from the perspective of the final customer, which is nothing but the benefit to the customer over cost he/she pays, and it can be expressed in equation form, Value = Benefit – Cost.
- -Express value in terms of a specific product, which meets the customer’s needs at a specific price and at a specific time. That means, ‘Cost’ is not quite as simple as the money amount listed on the invoice.
- -When we are considering the idea of cost, think a little broader about the opportunity cost our client pays, to do business with us instead of our competitors. In that regard, are they sacrificing savings, convenience or Quality? Every decision has a trade-off, and there is sure to be something, we offer that our competitors don’t.
- -Cutting costs shouldn’t just be about keeping the money amount low. It should be about minimizing any negative factors customer pays, when they choose to do business with our organization.
- Step 3: Map Value Stream
- -Allocate Value Stream Managers; in most organizations, management is organized by process or function. In other words, managers own certain steps in a process but nobody is responsible for the entire value stream. Hence, better to create a matrix organization, where there are still heads of departments but also value stream managers, someone with real leadership skills and a deep understanding of the product & process, must be responsible for the process of creating value for customers and must be accountable to the customer.
- -Identify the value stream, the set of all specific actions required to bring a specific product through the three critical management tasks of any business: the problem-solving task, the information management task, and the physical transformation task. Create a map of Current State and Future State of the value stream.
- -Value stream mapping (VSM) analyzes a product flow to determine where waste (Transport, Inventory, Motion, Waiting, Over-Processing, Overproduction, Defects, Under-utilizing Skills) exists.
- -The process involves tracing the product from customer order to product delivery, including all material movements and information flows. The result is a complete and thorough map of product, material and information flows, as it currently exists. The next step is to develop a future-state map and perform the gap analysis to determine the gap between present and future state of the value stream.
- -Identify, categorize and prioritize waste in the Current State, and eliminate it from the process, along with, fulfill the gap as obtained during the gap analysis. Typical results from VSM are reductions in inventories, material handling, and lead time.
- -Similarly, process mapping is also performed, which gives rise to a more detailed map of each process. The detailed analyses of each process are performed to find the waste associated and subsequently all the processes are corrected by removing all such non-value added wastes from it.
- -One of the key tools used to find this waste is a ‘Value Stream Map’ (VSM). It looks at how actions and departments are connected, and it highlights the waste.
- -For each waste identified in the first stage, figure out what is causing it by using ‘Root Cause Analysis’ tool. Other effective tools for finding a root cause include ‘Brainstorming’ and ‘Cause & Effect Diagrams’.
- -After identifying such waste from value stream mapping process, there are several tools that can be used to eliminate/reduce the waste, includes, ‘Zero Defects’, ‘Kanban’, ‘Single Minute Exchange of Die’ (SMED) and ’5S System’, TPM and ‘Just-in-Time’.
- -As the lean implementation progress through the different stages, new areas of waste will be highlighted. Identify, prioritize and accordingly start eliminating all of those wastes, with the priority to more costly sources of waste. Be sure to document the activity in order to report it to top management. Also, by displaying this activity for the whole organization to see, it may encourage more of the same activity. This will be an on-going process during and after all stages of lean implementation.
- Step 4: Create Flow
- -Flow is all about, how items and people, are involved and dealing within a process, moves from the first step to the last. Obviously, the intention in lean flow is to move the item or product through the process as quickly as possible, increasing the throughput/productivity of work undertaken in the process, without any risk to quality and customer satisfaction. The lean flow concept, which emanated from the Toyota Production System, can be used in any industry and in any business that has a process.
- -Through the improvement of productivity, there will be increase in capacity to process more items using less resource, which also improves on-time delivery, and therefore customer satisfaction and competitive advantage in the market place.
- -Based on Value Stream Mapping, make the remaining steps in the value stream flow, which allows the product and material to flow smoothly and continuously in the process. Eliminate functional barriers and develop a product-focused organization that dramatically improves cycle time, lead-time and takt time.
- -To highlight some of the not-so-obvious areas of waste, put the things into a logical flow order and that will reveal the waste that wasn’t easy to notice before.
- -To achieve standardized operations/work, production areas need to start performing tasks in a repetitive manner as much as possible in order to identify the inherent waste in the process and remove it. Work instructions need to be created to ensure each operator understands the work sequence for performing the job duties correctly. The work load needs to be balanced to eliminate major gaps in the production cycle. But, standardized operations/work creation is highly impossible, unless and until the other modules such lean flow, line balance, layouts, SMED is been concurrently implemented along.
- -To achieve standardized operations/work, line balancing is a very important step in the lean flow concept. Sometimes it is used in concurrence with takt time and OEE improvement as well.
- -One of the major wastes occurs during changeover involving exchange of die. This waste can be address using a tool called as ‘Single-Minute-Exchange-of-Dies’ (SMED), which helps to build flexibility into the production system and allows smooth value stream flow. For example, in the automotive industry, it could take days to change a line to produce a different car model. With SMED, the assembly process and machinery are such designed to support quick and efficient changeovers, which reduces setup time down to reduce cycle time, increase batch quantity and lower cost.
- -Once the standardized operations/work areas have been addressed, standardized material handling process has to be taken into consideration. In fact, material handling along with inventory management can nicely be covered while kanban system implementation, and is a part of pull production system implementation i.e. next stage of lean implementation.
- Step 5: Establish Pull
- -A pull system is a lean manufacturing strategy used to reduce waste in the production process. In this type of system, components used in the manufacturing process are only replaced once they have been consumed, so companies only make enough products to meet customer demand. This means all of the company’s resources are used for producing goods that will immediately be sold and return a profit.
- -Essentially, a pull system works backward, starting with the customer’s order then using visual signals of kanban to prompt action in each previous step in the process. The product is pulled through the manufacturing process by customer’s demand, eliminating the need for a sales forecast.
- -There are several advantages of pull system, includes, reduces waste, no overproduction, reduces inventory, frees up space in the workplace, reduces the cost of storing excess inventory, increases quality, saves time, increases flexibility, reduces total cost, improves cash flow, reduces order turnaround time, increases customer satisfaction.
- -Pull System/One-Piece-Flow/Continuous-Flow system is based on kanban and supermarket principles as explained above, that means, process of production of the product starts in the factory, only when there is a product pull detected from the customer in any showroom or sales centre located anywhere in the world.
- -The complex pull production system requires an advance scheduling system. Kanban is such an advance scheduling system for lean manufacturing and just-in-time manufacturing, and is also an inventory-control system to control the supply chain. Kanban improves manufacturing efficiency. Kanban is not everything about the lean but just one of the method to achieve Just-In-Time manufacturing.
- Kanban is an effective tool to support running a production system as a whole, and an excellent way to promote improvement. Problem areas are highlighted by reducing the number of kanban in circulation. One of the main benefits of kanban is to establish an upper limit to the work in progress inventory, avoiding overloading of the manufacturing system.
- -Kanban is one of the key ways to involve people in the lean process. It support Just-In-Time model by developing queue in the system to signal that there is a need to replace, order, or locate something. The focus is on reducing overproduction, so that production has what it needs, only when production need it.
- -Lean recommends analyzing quality of the product at the source of production itself and poor quality of product should be stopped at the source accordingly. This can be achieved by implementing autonomation (Jidoka) in the system, an intelligent automation, typically used in machine/process design, which promotes reduction of defective production by stopping at any abnormalities. It concentrates on building supervisory functionalities in machines/processes rather than mere production/service functionalities. In other words it means built in quality. The tool used to signal abnormality is called as Andon.
- -As per one of the lean principles, waste from production of defective products because of incorrect operation by the operator can be avoided/prevented by implementing error-proofing ideas in lean. There are several tools, such as, Poka-yoke & Zero Defects System, focuses on getting the product right the first time, rather than spending extra time and money fixing poor-quality products. Their purpose is to eliminate product defects by preventing, correcting, or drawing attention to human errors as they occur. By using Poka-yoke & Zero Defects System, one can reinforce the notion that no defect is acceptable, and encourage people to do things right the first time that they do something.
- -To improve further on lean flow and reduce the waste due to waiting, cellular manufacturing process is one of the best methods in lean implementation. Cellular manufacturing is a process of manufacturing, which is a subsection of just-in-time manufacturing and lean manufacturing encompassing group technology with the goal to move the product as quickly as possible, make a wide variety of similar products, while making as little waste as possible. Cellular manufacturing involves the use of multiple ‘cells’ in an assembly line fashion. Each of these cells is composed of one or multiple different machines, which accomplish a certain task. The product moves from one cell to the next, each station completing part of the manufacturing process. The most frequently used machines in a cell include lathes, milling machines, drill presses, etc.
- -After establishing kanban and the loops set up, the production in all areas has to be smooth out. It can be best achieved by Levelized Production (Heijunka) implementation. It is nothing but the leveling of production by volume or product mix to promote better resource utilization. Through heijunka implementation, production can achieve the same output in far lesser time, promotes optimal utilization of resources, savings in manpower, which can be deployed elsewhere. Each pull from a downstream process triggers a production signal upstream. Kanban is the tool used to initiate the build. The levelized production ensures the same amount of work is required each hour, day or week thus enabling to stabilize manpower. For example, a system which requires 10 boxes one day and none the next leaves many people standing around waiting for work. This is waste and must be eliminated. Through the use of kanban and levelized production, it would be easier to control the production when product is being built.
- -Just-in-Time implementation is the core idea of lean and is based on the ‘pull’ model. To minimize stock and resources, JIT states, build the right quantity of the right parts at the right time. The production needs to ensure that operators are not building ahead but building only what kanban calls for. Use of components prior to when they are needed could lead to shortage of these parts for similar products required now. The production of small but continuous batches of products helps production run smoothly and efficiently. By reducing batch size, quality can be monitored and corrected for defects if any. This reduces the likelihood of quality being poor in future batches.
- -Implementation of Six-Sigma in lean thinking is an optional approach. Lean is better at establishing a bigger picture for organizational development and for establishing a firm foundation through things like 5S, knban, standard operations/works and JIT, while Six-Sigma is a statistical approach towards process improvement, quality enhancement and variations/defects control. It is a disciplined, structured, data-driven, methodology to solve problems using tools, such as, DMAIC and various other statistical tools. Most of the experts think that both the principles compete with each other rather they complement each other in the lean thinking implementation. This is why one can often observe companies promoting ‘Lean Sigma’ or ‘Six-Sigma Lean’ or ‘Lean Six-Sigma’.
- Step 6: Pursuit Perfection
- -There is no end to the process of reducing effort, time, space, cost, and mistakes. Continuous improvement is an ongoing effort to improve products, services or processes. These efforts can seek ‘incremental’ improvement over time or ‘breakthrough’ improvement all at once.
- -Among the most widely used tools for continuous improvement is a four-step quality model called as Plan-Do-Check-Act (PDCA) cycle, also known as Deming Cycle or Shewhart Cycle.
- -Other widely used methods of continuous improvement, includes, kaizen, Six Sigma, and Total Quality Management, which emphasizes employee involvement & teamwork; measuring & systematizing processes; and reducing variation, defects & cycle time.
- -Also, there is another best method of continuous improvement is to return to the first step and begin the next lean transformation, offering a product, which is even more nearly what the customer wants.
The specific implementation plan should be developed from the facility analysis. The analysis identifies areas of opportunity in every area of the business, including sales, service, engineering, maintenance, production, quality, shipping, human resources, finance and administrative functions.
Some lean manufacturing projects within a lean initiative require the tools of Six Sigma to find the improvement answers. The lean manufacturing team needs to be trained to understand, when the lean tools must be supplemented to either solve the problem or maximize the improvement.
Kaizen events may use all of the lean tools (and some Six-Sigma tools) to meet the team’s objective. Kaizen events are conducted on an ongoing basis to achieve a state of ‘lean’. For example, a process may need a quick throughput improvement. The kaizen blitz could include focused SMED and OEE analysis. The kaizen might have an objective to reduce setup time from 60 minutes to 30 minutes in three days.
It is important to keep an enterprise view with the analysis and road map. No single operation should be improved at the expense of the entire system. For example, if a bottleneck is happening at Process B, improving Process A prior to B only hurts the system worse. A larger-scale example is improving throughput if shipping cannot handle the volume. Although many improvements cause bottlenecks elsewhere, forcing a larger known problem is rarely a good idea.
The road map above is only one example. It could be shown with many different variations. However, there is a logical sequence to many of the tools. Value stream mapping is almost always conducted very early on in the process. The 5S system provides a foundation for most other tools. TPM is large and plays an important role in OEE improvement and, therefore, must be started early.
The key is to have a plan and get started. The path to lean will not be straight and it never ends. Don’t let the pursuit of ‘perfection’ get in the way of being ‘better’ today.
Guest post: Author: Dr. Subhash Dev Hiwase, Ph.D. (Mechanical Engineering), IIT Kharagpur, India