LEAN ENTERPRISE SELF ASSESSMENT TOOL

Transcription

1 LEAN ENTERPRISE SELF ASSESSMENT TOOL Version 1.0 AUGUST 2001 FACILITATOR S GUIDE

2 LEAN ENTERPRISE SELF-ASSESSMENT TOOL (LESAT) Version 1.0 Facilitator s Guide August 2001

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4 Table of Contents Foreword...2 Acknowledgements...5 Part I - Introduction...7 Part II Lean Enterprise Architecture...11 Part III - Development of Lean Maturity Matrices...14 Part IV Assessment Methodology...22 Part V - LESAT Maturity Matrices...32 Appendix A The What and Why of Lean...86 Appendix B LESAT Glossary Appendix C TTL Tutorial Appendix D Comparison of LESAT to Other Assessment Approaches Appendix E LESAT Assessment Aids Copyright Massachusetts Institute of Technology, 2001

5 Foreword The Lean Aerospace Initiative (LAI) is a collaborative effort among major elements of the United States Air Force and related government organizations, leading companies within the aerospace industry, and the Massachusetts Institute of Technology. LAI was formed to identify and implement Lean principles and practices throughout the aerospace industry. published as a three volume set. This guide (called the TTL Guide) describes a logical sequence of actions required for transitioning an enterprise to a Lean state. Both the TTL Guide and the LEM may be accessed from the LAI web site, or by contacting the MIT LAI office. An early LAI product, the Lean Enterprise Model (LEM) provided a convenient framework for integrating lean principles and practices. In providing a taxonomy of lean principles and practices, the LEM addresses the issue of the whats of lean, but does not address the hows of implementation. Another LAI product was developed to address the broad issues of implementation. Called Transitioning to a Lean Enterprise: A Guide for Leaders, it is The tool described in this document is called the Lean Enterprise Self-Assessment Tool (LESAT). It is closely aligned with the structure and content of the TTL Guide. Therefore, the TTL Guide is highly recommended as read-ahead material for the enterprise performing a Lean self-assessment. The relationships between the LEM, the TTL Guide and LESAT are illustrated in Figure 1. Figure 1. LAI Enterprise Tool Triad IMPLEMENTATION LEM Principles and Practices BEST PRACTICES TTL Guide and Roadmap LESAT Self Assessment ASSESSMENT Page 2 of 166 Copyright Massachusetts Institute of Technology, 2001

6 Western manufacturers were slow to comprehend the significant paradigm shift initiated by Toyota s new model of production operations. The awareness occurred in bits and pieces as some of the practices became known. As more and more of the lean practices were uncovered, the principles underlying those practices began to be perceived. Many of the principles and practices of lean are captured and organized within LAI s Lean Enterprise Model (LEM). Acquiring an understanding of the fundamental principles of lean was a necessary prerequisite for being able to conceive and develop a process for converting an enterprise organized and managed under the mass production mind set to one based on lean principles and practices. The LAI consortium developed the Transitionto-Lean (TTL) Model and Roadmap that provides an organizing framework for achieving a lean transformation. As consortium members gained experience with TTL, they began to acquire an understanding of what it means to be a lean organization. They perceived that a lean organization not only must change its practices, it must also change its behavior. It is much more difficult to change behavior than to change practices. The lean transformation is a lengthy journey for any company. After launching upon the journey there are typically some quick successes as well as some setbacks, and frequently some initiatives take longer than expected. Enterprise executives are naturally anxious for a successful transition and may begin asking How much progress have we made? How much farther is it to lean? How do we compare to others in getting lean? These types of questions led LAI to realize that consortium members needed a means of assessing their progress relative to the TTL Roadmap and of determining the extent to which lean principles, practices and behavior have become the way we do business across the enterprise. The Lean Enterprise Self-Assessment Tool (LESAT) was developed and field-tested over an 18-month period, resulting in the release of LESAT Version 1.0 in August As the name implies, LESAT was designed for use in self-assessment by enterprise leaders. LESAT is not intended to provide any basis for comparison between different organizations. Each organization is unique and will have distinct goals and objectives. These varying objectives will translate into different levels of desired lean maturity for each enterprise. LESAT is also not intended to be used for comparative evaluation or source selection. It is important to note that LESAT facilitates self-assessment of an organization at the enterprise level and is intended to highlight the key integrative practices at the uppermost levels of an enterprise. Other assessment tools have been developed that focus on specific process or functional areas, such as production operations, product development, and supply chain management. Copyright Massachusetts Institute of Technology, 2001 Page 3 of 166

7 The LESAT material is contained in two volumes: LESAT Guide (this volume) has been written for Lean Change Agents and others who are deeply involved in facilitating lean transformations within their organizations. It describes the rationale underlying the development of LESAT, a suggested outline of steps for conducting an assessment, and several assessment aids for analyzing and presenting the assessment data. The LESAT Maturity Matrices are also included for completeness. LESAT Maturity Matrices contains only the maturity matrices and minimal auxiliary discussion. It is designed as a workbook for the assessment participants, to be marked up while performing the assessments. LESAT Facilitators within each organization are expected to provide guidance and assistance to those participating in the assessment. Both volumes of LESAT may be accessed from the LAI web site, or by contacting the MIT LAI office. Page 4 of 166 Copyright Massachusetts Institute of Technology, 2001

8 Acknowledgements This Lean Aerospace Initiative (LAI) product utilizes elements of the Enterprise Transition To Lean (TTL) Roadmap and the Lean Enterprise Self-Assessment Tool (LESAT Version 1.0) to provide a structure and implementation reference for the self-assessment process. This LESAT Guide has been developed at the Massachusetts Institute of Technology (MIT) to assist members of the U. S. Lean Aerospace Initiative in the use of the Lean Enterprise Self-Assessment Tool (LESAT) and addresses the specific needs of the U. S. Lean Aerospace Initiative members. Members of the U.S. LAI LESAT Guide Development Team included: Professor Deborah Nightingale (MIT Co-Lead), Mr. Chris Cool, Northrop Grumman (Industry Co-Lead), Mr. Kelly Brown, Aeronautical Systems Center,WPAFB (Government Co-Lead), Dr. Joe Mize, MIT, Mr. Thomas Shields, MIT, and Mr. Cory Hallam, MIT. All facts, statements, opinions, and conclusions expressed herein are solely those of the core team members in their capacity as principal co-authors of the Guide. and all members of both the U.K. and U.S. LAI are hereby acknowledged and thanked. The U.S. Lean Aerospace Initiative is a consortium consisting of 25 industry, 13 government, and 2 labor union members joined with the Massachusetts Institute of Technology. The consortium is a 50%-50% cost share partnership with industry, MIT and government. The Air Force Aeronautical Systems Center with the Air Force Research Laboratory s Manufacturing Technology program provides government leadership. The U.K. Lean Aerospace Initiative is a consortium consisting of the University of Bath, Cranfield University, the University of Nottingham, the University of Warwick and some 40 participating company members of the Society of British Aerospace Companies (SBAC). The initiative has 50%-50% joint funding by participating SBAC members and IMI Aerospace (Link) Sector, Engineering and Physical Sciences Research Council. The Massachusetts Institute of Technology (MIT) and the Warwick Manufacturing Group of the University of Warwick under the auspices of the U.K. and U.S. Lean Aerospace Initiatives have developed the current version of the Lean Enterprise Self-Assessment Tool (LESAT). The tool development was a result of active participation by many members of the U.K. and U.S. Lean Aerospace Initiatives. The contributions of member organizations were critical to this development The core team consisting (alphabetically) of Mr. Trevor Broughton, Mr. Kelly Brown, Mr. Chris Cool, Dr. Valerie Crute, Mr. Mike James-Moore, Dr. Joe Mize, Prof. Deborah Nightingale, Mr. Tom Shields, and Dr. Martin Womersley developed the current and Beta versions of the LESAT. We would also like to acknowledge the valuable inputs received from the rest of the U. S. LAI research team and staff and the U. K. LAI research team and staff in the preparation of the cur- Copyright Massachusetts Institute of Technology, 2001 Page 5 of 166

9 Acknowledgements Continued rent version of LESAT and previous assessment versions. All facts, statements, opinions, and conclusions expressed herein are solely those of the core team members in their capacity as principal co-authors of the tool. The contributions and/or feedback from real-life testing by the following companies alphabetically: AIR- BUS (UK), BAE SYSTEMS, Boeing Helicopters, Dowty Propellers, FR HiTemp, GenCorp Aerojet, Hurel Dubois (UK), Lockheed Martin Aeronautics, Lockheed Martin Space Systems, Matra BAe Dynamics, Northrop Grumman, Pratt & Whitney, Raytheon, Rockwell Collins, Rolls Royce, Sikorsky Helicopters, Smiths Industries Aerospace, Textron Systems, TRW Aeronautical Systems and the United States Air Force (USAF) in the development of LESAT are gratefully acknowledged. Page 6 of 166 Copyright Massachusetts Institute of Technology, 2001

10 Part I - Introduction Part I provides an introduction to assessment processes in general, a discussion of how the LESAT format was selected, and a brief description of how the LESAT was developed and tested. Assessment Processes As management practices have evolved over the past century, organizations have learned that to be successful they must become adept at continuously defining and re-defining their directions and goals. They must also develop means of determining the degree to which their goals are being achieved. Traditional performance measures are employed to display financial performance, operational efficiency, etc. These traditional measures are inadequate, however, in portraying progress toward achieving behavior changes or in showing the effectiveness of comprehensive improvement strategies. A variety of assessment tools have emerged which facilitate initiatives aimed at implementing continual improvement strategies. A variety of organizational survey instruments are available (Kraut 1996) for assessing employee morale, determining customer satisfaction, and aligning the key stakeholders of an enterprise. The Total Quality movement has also spawned a number of performance based assessment tools (Wilson and Pearson 1994). Assessment processes are imbedded in several programs which encourage competition among companies and which result in national awards and/or certification or qualification. Examples of such programs include: Malcolm Baldridge National Quality Award: An overall performance award governed by the Department of Commerce and the National Institute of Standards and Technology (NIST). An independent, external assessment is conducted by evaluating 7 categories of performance and scoring them against a 1000 point scale. The categories include: Leadership, Strategic Planning, Customer/Market Focus, Information & Analysis, Human Resource Focus, Process Management, and Business Results. ISO 9000: The ISO 9000 quality series represents a set of international quality management standards and guidelines. They are based on eight quality management principles that are considered by the international quality community to represent best management practices. A third party assessment is usually performed to provide customers assurance that the enterprise establishes and maintains a quality system that meets the requirements of the ISO 9001, Quality Management Systems-Requirements standard. European Quality Award (EFQM): The European Foundation for Quality Management grants an award annually based upon criteria related Copyright Massachusetts Institute of Technology, 2001 Page 7 of 166

11 Part I - Introduction Continued to the EFQM Excellence Model. The nine categories assessed include Leadership, Policy & Strategy, People, Partnerships & Resources, Processes, Customer Results, People Results, Society Results, and Key Performance Areas. In Appendix D, LESAT is compared to these three models. An important category of assessment tools has emerged in recent years called Capability Maturity Matrix (CMM). The basic concept underlying the CMM is to first determine the most important factors relative to an organization s performance. Then for each factor, a series of levels are defined, such that progressively greater levels of capability are reflected as an organization matures in its performance on that factor. Selection of the LESAT Approach The LESAT Development Team first gathered extensive input from LAI consortium members regarding their needs relative to assessment. The needs were analyzed and consolidated into a set of user requirements: Must assess degree of leanness for an enterprise and all its core processes Must provide feedback for improvement, guidance for next steps Assessment must be data driven, based on documentable evidence Should be consistent with other LAI tools, i.e. LEM and TTL Should require minimal time and effort to create Should be flexible to allow assessment of varying organizational scope Should be understandable and easy to apply Should align with Business Planning Process Several alternative approaches to performance assessment were examined and compared. The various assessment tools were grouped into three categories for comparison purposes: Capability Maturity Matrix Baldridge Type (quality of documented processes) Outcome based (measured change in performance over time, e.g. financial scorecard) Page 8 of 166 Copyright Massachusetts Institute of Technology, 2001

12 The several user requirements were assigned weights corresponding to their relative importance in determining which of the three approaches is best for LESAT. By a substantial margin, the Capability Maturity Matrix approach was judged to best fit the needs of LESAT. The basic concept underlying the Capability Maturity Matrix is to first determine the most important factors relative to an organization s performance. An organization progresses through several levels of maturity on each performance factor. (For LESAT, five levels of maturity are employed. Level 1 indicates least capable; level 5 indicates most capable, or world-class performance.) Accordingly, for each performance factor, statements are constructed that characterize an organization s maturity at each of the five levels of achievement. As an example, one of the factors considered very important in an enterprise s transition to Lean is a Lean Enterprise Vision. The five capability levels for this factor are: Level 1 - Senior leaders have varying visions of Lean, from none to well defined Level 2 - Senior leaders adopt common vision of Lean Level 3 - Lean vision has been communicated and is understood by most employees Level 4 - Common vision of Lean shared by the extended enterprise Level 5 - All shareholders have internalized the Lean vision and are an active part of achieving it An organization, at any given point in time, can assess itself on this particular performance factor and determine the means for elevating the organization to the next level of capability. Development and Testing of LESAT The LESAT Development Team engaged in a series of meetings, conference calls, and exchanges to develop the initial set of lean practices that were included in the assessment matrices. More than a dozen members of the LAI consortium companies participated in this effort. For each lean practice, five maturity levels had to be defined. A three-day session was held at MIT during the summer of 2000, at which knowledgeable industry, government and university representatives developed the level descriptions. This LESAT Prototype was reviewed by a small number of companies to obtain a Copyright Massachusetts Institute of Technology, 2001 Page 9 of 166

13 Part I - Introduction Continued quick read on its usefulness. Another three-day session was held at MIT in August 2000 to finalize the Alpha version, which was then field-tested or reviewed by more than 10 LAI members. Following the Alpha field test, a workshop was conducted at MIT in November 2000 to further refine the assessment tool, resulting in the LESAT Beta version. Concurrently, LAI researchers discovered that the U.K. LAI was also developing an enterprise level assessment tool. Following discussions and with input from several U.S. LAI consortium members, it was decided to attempt to develop a common set of assessment matrices. The LESAT Beta version was field tested in both the U.S. and U.K. during the winter and spring of A LESAT Workshop was conducted at MIT on June to consider numerous suggestions for refinements that were offered during the field-testing. The field-testing in the U.K. also generated numerous suggestions for refinement. The U.S. and U.K. LESAT Development Team conducted an intensive three-day session (June 19 21, 2001) at the University of Warwick, with the objective of deriving a common set of LESAT Maturity Matrices, LESAT Version 1.0, for release in August Page 10 of 166 Copyright Massachusetts Institute of Technology, 2001

14 Part II Lean Enterprise Architecture Many of the early lean initiatives focused on picking the low hanging fruit primarily at the factory floor level. Viewed as a collection of practices with names such as Kaizen, Kanban, and Poka-yoke, lean is frequently implemented in production operations with little or no integration with other enterprise functions or processes. While some benefits were gained with these efforts, the results were often less than had been hoped for. In-depth analysis reveals that the practices were being implemented in a bottom-up fashion within an incompatible enterprise environment. The full benefits of lean can be realized only by rethinking the entire enterprise: its structure, policies, procedures, processes, management practices, reward systems, and external relationships with customers and suppliers. Both the Transition-to-Lean Roadmap and LESAT focus on the key integrative practices at the uppermost level of an enterprise. A generic lean enterprise architecture is used as the organizing framework, as shown in Figure 2. The architecture is organized into three basic groups, each consisting of a number of enterprise level processes. All of these processes must be transformed in order to achieve a lean enterprise. Enterprise Leadership Processes: These processes are developed and maintained by leadership to guide the activities of the enterprise. They cut across all of the entities that make up the enterprise. Enterprise leadership provides the direction and resources to break down barriers among and within Life Cycle Processes that result in wasted resources and reduced value to customers and stakeholders. They also provide the leadership to transform the Enabling Processes to eliminate waste and improve responsiveness to the rest of the enterprise. Life Cycle Processes: These processes define the product life cycle, from initial conception through operational support and ultimate disposal. They directly determine the value provided to customers and stakeholders alike. The degree to which an enterprise is successful in making these processes Lean is one measure of its effectiveness and efficiency in delivering value to the customer and the other stakeholders. Enabling Infrastructure Processes: These support the execution of Enterprise Leadership and Life Cycle processes. The enabling processes provide supporting services to other organizational units whom they serve as internal customers. Since they enable rather than directly result in enterprise success, they can be easily overlooked as sources of waste within the value stream. However, waste that is inherent in these processes can negatively impact the enterprise as a whole and the life cycle processes, and therefore they should be attacked vigorously. Copyright Massachusetts Institute of Technology, 2001 Page 11 of 166

15 Part II Lean Enterprise Architecture Continued In a Lean Enterprise, Lean principles and practices (e.g. pull, flow, waste minimization, etc.) are implemented in all processes. The Life Cycle processes are aligned horizontally along the customer value stream. They begin with defining customer value and translating this into requirement definitions. These, in turn, provide the basis for product and process design, involving customers and key suppliers. The production process is organized and managed according to lean production practices. Suppliers are integral to the extended enterprise. Distribution and post-delivery support are the final processes in the life cycle. Figure 2 - Generic Lean Enterprise Process Architecture Life Cycle Processes Business Acquisition and Program Management Requirements Definition Develop Product and Process Supply Chain Management Produce Product Distribute and Service Product Enabling Infrastructure Processes Finance Information Technology Human Resources Quality Assurance Facilities and Services Environment, Health and Safety Enterprise Leadership Process Strategic Planning Business Models Managing Business Growth Strategic Partnering Organizational Structure and Integration Transformation Management Page 12 of 166 Copyright Massachusetts Institute of Technology, 2001

16 Lean principles and practices also must be implemented in all enabling infrastructure processes, but only after these processes have been re-defined and re-structured consistent with the fundamental nature of the Lean paradigm. For example, the Human Resources process in a Lean Enterprise not only applies Lean thinking to its traditional operations, it re-defines those operations to support Lean throughout the remainder of the enterprise. When HR recruits new employees for production, selection criteria must now recognize that Lean production requires a multiskilled workforce that is capable of performing a wide array of tasks, many of which were performed by specialists in a mass production situation. Likewise, HR must facilitate continuous just-in-time education and training consistent with the Lean paradigm. Similar modifications must be made to all other HR functions, such as employee benefits, incentives, etc. Analogous modifications are required in all the enabling infrastructure processes: Finance, Information Technology, Facilities & Services, Environment/ Health/Safety. In general, there are three aspects involved in transforming the above processes to lean: First, the mission, procedures, practices, processes, and metrics of each organizational unit must be re-created, consistent with the requirements of a lean business model. Second, the fundamental principles of lean behavior (waste elimination, balanced flow, etc.) must be implemented within a framework of on-going continuous improvement. Third, the enterprise must be integrated across all the important dimensions: organizations, information, processes, and enabling infrastructures. Copyright Massachusetts Institute of Technology, 2001 Page 13 of 166

17 Part III - Development of Lean Maturity Matrices The Lean Enterprise Self-Assessment Tool (LESAT) has been designed to assist an organization assess its progress in its transformation to a Lean enterprise. It is expected that the assessment will be performed on a regular, periodic schedule. The outcomes of a particular assessment should provide guidance to the organization in refining/adjusting its continuous improvement plans. As described in Part I, several alternative approaches to performance assessment were examined and compared. The approach that best satisfies the user requirements is called a Capability Maturity Matrix. There are two primary steps in developing a Capability Maturity Matrix. The first is to determine the particular factors against which the organization will be assessed. Once the factors are specified, the progressive maturity levels related to each factor must be carefully constructed Generic Capability Level Definitions A significant number of factors are considered important in transitioning to Lean. Five maturity statements were developed for each factor, ranging from least capable (Level 1) to world class (Level 5). It was considered important to develop generic definitions or characterizations of each capability level. These definitions served as a reference for the teams who developed the specific maturity statements for each of the Lean practices included in the assessment. These generic definitions are shown in Figure 3. Figure 3. Generic Level Definitions Generic Definition Level 1 Some awareness of this practice; sporadic improvement activities may be underway in a few areas. Level 2 General awareness; informal approach deployed in a few areas with varying degrees of effectiveness and sustainment. Level 3 A systematic approach/methodology deployed in varying stages across most areas; facilitated with metrics; good sustainment. Level 4 On-going refinement and continuous improvement across the enterprise; improvement gains are sustained. Level 5 Exceptional, well-defined, innovative approach is fully deployed across the extended enterprise (across internal and external value streams); recognized as best practice. Page 14 of 166 Copyright Massachusetts Institute of Technology, 2001

18 These levels are intended to depict a progression in the capability of the organization relative to the particular performance factor being evaluated. The enterprise must have fully satisfied all elements of a particular level before it can progress to the next higher level. It is important to recognize that an organization may not aspire to attain Level 5 in all the performance factors. It is management s prerogative and responsibility to decide the level it wishes to ultimately attain on each factor. These decisions should collectively reflect the strategic objectives of the organization. In performing the assessment exercise, an organization should not be overly concerned with determining a precise measure of its current state (e.g., deciding whether it is currently at a high Level 2 or a low Level 3). Rather, it should recognize that its present state is either matching its desired level for that factor or that further improvement is needed. It is also important to recognize that the competitive environment is very dynamic and therefore Lean practices will continue to evolve and improve. Level 5 is not the end of the Lean journey, because one of the key tenets of Lean is continuous improvement. The definition of Level 5 (and for all other levels as well) for the various factors (Lean practices) will evolve through time as competitive enterprises develop ever-higher standards for worldclass performance. The Lean Maturity Matrix Form A Lean Maturity Matrix form has been designed for organizing the information contained in the assessment exercise. A blank copy of this form is presented in Figure 4. The contents of each portion of the form are described in italics. A sample, completed form is shown in Figure 5. It is instructive to compare the five capability levels in the sample form with the generic capability level definitions presented in the previous section. The progressive nature of the five capability levels for each Lean practice should be obvious to the reader. Copyright Massachusetts Institute of Technology, 2001 Page 15 of 166

19 Section #: Section name Figure 4. Blank LESAT Maturity Matrix Definition: Brief description of the primary characteristics of the process contained in this section Section, Group # and Group Name: Brief description of this Group number. In Section I, The Group is one of the Primary Activities from the Transition-to-Lean (TTL) Roadmap. Diagnostic Questions Generic questions regarding the performance of the enterprise relative to this Group of practices LP# LEAN PRACTICES CAPABILITY LEVELS A specific lean practice associated with this Group Level 1 Level 2 Level 3 Level 4 Level 5 Statement describing little awareness of this lean practice Statement describing world-class behavior for this lean practice Sound bite phrase C D C D C D C D C D Lean Indicators (Examples) Outcomes and lean behaviors that an enterprise will exhibit as it proceeds on its Lean transformation Evidence Opportunities Supporting data utilized in assessing the current capability level of the Enterprise on this lean practice Inputs to plans of action to leverage opportunities or to move to the desired level of capability Check the box with C for current capability or box D for desired capability Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 16 of 166

20 LIFE-CYCLE PROCESSES Figure 5. Sample LESAT Maturity Matrix Definition: Implement lean practices across life-cycle processes for defining customer requirements, designing products and processes, managing supply chains, producing the product, distributing product and services, and providing post delivery support. II.A. Business Acquisition and Program Management To be successful in the globally competitive environment of the twenty-first century, enterprises must develop and manage partnerships with their customers and be able to dynamically re-configure and align core competencies among suppliers, the enterprise and its partners in order to deliver best life cycle value to customers. Diagnostic Questions Are new business opportunities arising from lean enabled capabilities being fully exploited? Does customer feedback and usage data drive new business process development? Are assets allocated across the value stream in a consistent and balanced manner? Are program risks and resource requirements balanced to assure optimal flow throughout the product life cycle? Are skills and resources drawn from across the extended enterprise to enhance program development efforts? LP# LEAN PRACTICES CAPABILITY LEVELS II.A.1 Leverage Lean Capability for Business Growth Exploiting new business opportunities arising from lean enabled capabilities Level 1 Level 2 Level 3 Level 4 Level 5 Business improvement initiatives are ad hoc and are focused on operational efficiency. Improvement gains provide resources to facilitate future improvements. Potential business opportunities from applying lean thinking across core competences are recognized and plans have been developed. Benefits sustained from applying lean thinking within the enterprise are used to retain current business and/or win new business. There is full use of the enhanced capabilities and customer knowledge throughout the enterprise to leverage opportunities for competitive advantage. The strategic plan dynamically incorporates extended enterprise capabilities and stakeholder interests to identify and leverage opportunities. C D C D C D C D C D Lean Indicators (Examples) Reduced cost, increased quality and faster response times from waste eliminated are used to maintain or win new business. The ability to improve and refine processes quickly is used extensively to respond to changing customer requirements. A process is used to scan the competitive environment to exploit opportunities arising from the enhanced capabilities of the lean enterprise. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 17 of 166

21 Structure of LESAT Assessment Matrices The LESAT Development Team solicited input from a wide variety of LAI consortium members to determine the set of factors considered most important in transitioning to a Lean enterprise. The Team determined an overarching organizing structure for the LESAT matrices consisting of three major sections (See Figure 6), consistent with the Lean Enterprise Architecture described in Part II. Figure 6 - LESAT Architecture Section I Lean Transformation/ Leadership Section II Life Cycle Processes Section III Enabling Infrastructure The Enterprise Level Assessment Architecture is the basis for the Lean Enterprise Self-Assessment Tool (LESAT). It provides the generic process definition found in most aerospace enterprises. The LESAT is organized into these three assessment sections: Lean Transformation/Leadership the processes and leadership attributes nurturing the transformation to lean principles and practices Life Cycle Processes the processes responsible for the product from conception through post delivery support Enabling Infrastructure the processes that provide and manage the resources enabling enterprise operations Page 18 of 166 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative)

22 Consequently, the Lean maturity matrices for LESAT are organized as shown in Figure 7. Figure 7. Organization of LESAT Maturity Matrices Section I - Lean Transformation/Leadership I.A. Enterprise Strategic Planning (3 Lean Practices) I.B. Adopt Lean Paradigm (4 Lean Practices) I.C. Focus on the Value Stream (4 Lean Practices) I.D. Develop Lean Structure and Behavior (7 Lean Practices) I.E. Create and Refine Transformation Plan (3 Lean Practices) I.F. Implement Lean Initiatives (2 Lean Practices) I.G. Focus on Continuous Improvement (5 Lean Practices) Section II - Life-Cycle Processes II.A. Business Acquisition and Program Management (4 Lean Practices) II.B. Requirements Definition (2 Lean Practices) II.C. Develop Product and Process (3 Lean Practices) II.D. Manage Supply Change (3 Lean Practices) II.E. Produce Product (2 Lean Practices) II.F. Distribute and Service Product (4 Lean Practices) Section III - Enabling Infrastructure Processes III.A. Lean Organizational Enablers (5 Lean Practices) III.B. Lean Process Enablers (3 Lean Practices) A total of 54 Lean practices are included in the LESAT Maturity Matrices (see Part V). Each of these is to be assessed according to the five level scale presented. Section I Lean Transformation/Leadership, assesses the leadership of an enterprise and their ability to effect a transformation to a Lean enterprise. The focus is on the Lean practices and processes that are developed and maintained at the top level to guide the activities of the organization. These overarching practices cut across all of the entities that make up the organization, and so the emphasis is on how well Lean has been integrated across the enterprise. Copyright Massachusetts Institute of Technology, 2000 Page 19 of 166

23 Structure of LESAT Assessment Matrices Continued Section II Life Cycle Processes, are defined by the product life cycle, from initial conception through operational support and ultimate disposal. These processes directly determine the value provided to customers and stakeholders alike. The degree to which an enterprise is successful in making these processes Lean is a measure of its effectiveness and efficiency. Enterprise leadership provides the direction and resources to break down barriers among and within Life Cycle processes that result in wasted resources and reduced value to customers and stakeholders. This section of the LESAT addresses the level of Lean implementation applicable to these Life Cycle Processes. Section III - Enabling Infrastructure Processes, supports the execution of enterprise leadership and life cycle processes. These enabling processes provide supporting services to other organizational units whom they serve as internal customers. Since they enable rather than directly result in enterprise success, they can be easily overlooked as sources of waste. However, waste that is inherent in these processes can negatively impact the enterprise as a whole in a manner hidden from view. The focus in these sections is at the Enterprise level and is meant to highlight the key integrative practices at the uppermost level of an enterprise. A set of Lean practices is identified for each of these sections. These practices are not meant to be all-inclusive but do represent some of the more important behaviors that Lean organizations exhibit. Assessing the enterprise against this subset of leading indicator practices will provide a good snapshot of how well an organization is progressing along the Lean journey. Linkage of LESAT Section I to TTL Roadmap The Section I practices are directly linked to the Transitioning To A Lean Enterprise (TTL) Guide. They are closely aligned with the TTL Roadmap, shown in Figure 8. Page 20 of 166 Copyright Massachusetts Institute of Technology, 2000

24 Copyright Massachusetts Institute of Technology, 2000 Figure 8 Enterprise Level Roadmap Initial Lean Vision Detailed Lean Vision Environmental Corrective Action Indicators Detailed Corrective Action Indicators Outcomes on Enterprise Metrics Lean Transformation Framework Enterprise Level Transformation Plan Page 21 of 166

25 Part IV Assessment Methodology For those who have the responsibility for facilitating the assessment process within their organization, it is important to recognize that the assessment methodology consists of several steps that need to be carefully planned and scheduled. A general overview of the LESAT methodology is shown in Figure 9. Figure 9 LESAT Methodology Step 1: Facilitated meeting to introduce tool and pass out materials. Enterprise Leader Champions. Step 2: Enterprise leaders (with staff as needed) examine LESAT and conduct assessment. Step 3: Leadership reconvenes to discuss results and determine present maturity level. Step 4: Leadership determines desired level and measure gap. Step 5: Develop action plan and prioritize resources. Prior to the assessment, a number of issues need to be addressed. The first decision that needs to be made has to do with the timing of the assessment. The assessment will likely be performed on an annual or semi-annual basis. Some companies have found that conducting the assessment about one month prior to their annual business planning exercise allows for greater impact on setting the annual business objectives. Another issue that needs to be addressed is the definition of the boundaries of the enterprise to be assessed. The enterprise may be a division of a major corporation, a particular site, a business unit, or other appropriate entity. The distinguishing characteristic of an enterprise is that it should have profit/loss or other performance accountability. Another characteristic of an enterprise is that it usually includes the life cycle core processes (program management, requirement definition, product development, supply chain, production and support) and the enabling processes (finance, human resources, information systems, etc.). The particular nature of the enterprise to be assessed will define its senior leadership, customers, suppliers, and other stakeholders at an enterprise level. Page 22 of 166 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative)

26 Pre-assessment Preparation Those companies that have been involved with the Lean Aerospace Initiative at MIT will likely have a good understanding of the Lean Enterprise Model (LEM) and how it can be used to identify lean practices. A more recent LAI product, the Transition-to-Lean (TTL) Guide and Roadmap may be new to many managers. It is strongly recommended that the Lean Focus Group of each company re-familiarize themselves with the three volumes of the TTL Guide. It is also recommended that the enterprise leaders/managers who will participate in the self-assessment read Volume I of the TTL Guide, which is an executive overview and Volume II, that provides details about the TTL Roadmap. (A brief overview of Lean is presented in Appendix A and a brief introduction to TTL is presented in Appendix C.) It is also highly recommended that a Lean Advocate be named who is responsible for planning, coordinating, and facilitating the LESAT self-assessment. The LESAT Facilitator should assemble the materials that will be used in the assessment. A LESAT Workbook (known as the Blue Book ) containing the maturity matrices will be required for each participant. The time horizon for achieving the Desired Level for the various lean practices should be specified. This not only will make the choices for desired levels easier to determine, it will assure that there is consistency among those who participate in the assessment. LESAT Kick-off Session A facilitated kick-off meeting is suggested as a means of introducing LESAT and bringing everyone to a common level of understanding of the tool, its terminology, the assessment process, the time schedule and anticipated utilization of the results. A set of PowerPoint slides has been prepared by MIT that are available for use in this meeting. The slides can be tailored to fit a particular company if desired. Attending this meeting should be the Enterprise Leader and his/her management team. Each attendee will normally perform the assessment in collaboration with their own direct reports and key staff. The facilitator should make clear the ground rules for performing the assessment, distribute materials and indicate the timetable for completion. Although the meeting should be facilitated by the appointed LESAT Facilitator, the announcement of the meeting should come from the Enterprise Leader. It should be clear to all that the Enterprise Leader is championing the transition to lean and this assessment. Group Completion of the Assessment Each of the Enterprise Leader s management team will meet with his/her own direct reports and key staff to complete the LESAT assessment matrices. As the assessment is performed, it must be remembered that the assessment is being made of the entire enterprise, not individual organizational units. Each group is to address all of the 54 lean practices in LESAT, not just those directly applicable to the group s mission. Prior Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 23 of 166

27 Part IV Assessment Methodology Continued to actually doing the assessment, it is highly recommended that each participant spend some time reviewing the entire set of LESAT matrices so that their overall intent is better understood. The group manager will schedule a meeting with his/her direct reports and key staff to perform the assessment. Clarification of any questions should be sought from the LESAT Facilitator. Each lean practice in LESAT is analyzed and evaluated to determine the current maturity level for the entire enterprise relative to that practice In arriving at the assessed current maturity level, a determination is made as to which capability level depicts the organization s present Lean status for that practice. The rationale and supporting evidence for each assessment level should be recorded. This documentation will help provide an ability to create corrective action plans and will provide inputs for the continuous improvement effort. Additionally, it will help provide consistency for comparison of performance in subsequent assessments. A determination is then made to specify the capability level the organization is striving to attain in each of the practices. Although attaining Level 5 in all practices would be an indication of a very Lean enterprise, it may not be achievable given the fact that all enterprises have limited resources. Also, some practices may not be applicable for a particular enterprise. The organization must look at its strategic goals and objectives, competitive advantages, available resources and other factors, then decide its desired competitive level on each lean practice. The group reaches consensus on current and desired levels for each of the 54 practices contained in LESAT. It is sometimes helpful to have the LESAT Facilitator present during the assessment. Facilitation of Assessment The LESAT Facilitator, as the resident expert, will normally be available to assist the various groups in completing the assessment matrices. This assistance may range from attending and facilitating the group meetings to simply being available to answer questions and provide guidance. Initial Summarization The LESAT Facilitator will gather the consensus inputs from the various groups and consolidate them for the entire enterprise. The inputs are typically entered into spreadsheets for summarization. The usual calculations for each practice include high, low and range of current level and high, low and range of desired level. Average current and average desired are calculated, along with the gap between average current and average desired. Sub-totals by major groupings of lean practices are sometimes useful. Pareto analyzes on current levels and gaps can reveal the key pressure points. Several examples of LESAT rollups are presented in Appendix E. LESAT Wrap-up Meeting The Enterprise Leader, with the assistance of the LESAT Facilitator, will schedule a meeting of the same management team who attended the LESAT Kick-off Meeting. Page 24 of 166 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative)

28 Assessment results across the entire enterprise will be presented, discussed and analyzed. The primary interest in the results is not so much that specific lean practices were scored high or low, but in learning the regions of the Transition-to-Lean Roadmap that need special attention. It is not uncommon, for example, for a particular organization to assess itself at a low capability level on several of the practices within the Roadmap grouping Adopt Lean Paradigm. In addition, the meeting can be used to seek clarification on lean practices having a wide range of responses. Scores of level 1 (lowest capability) and level 5 (highest capability) should be clarified and explained. It is usually helpful at this meeting to identify and discuss all lean practices having an average current capability level less than some value that the organization feels is a threshold minimum. For example, the team may wish to identify those practices scoring below, say 1.8 to determine if there are common root causes underlying these low scores. The executive may also wish to challenge average current capability levels greater than, say 3.5 by asking certain managers to convince him/her that their capability is really this great. Gap analysis is commonly performed to identify lean practices for which the gap between the calculated average lows and average highs is greater than 2. These indicate those practices for which much opportunity for improvement exists. Concentration of low current values within certain LESAT sections and grouping of practices often signify high priority areas for improvement. Indepth examination of the assessment results will typically involve a comparison to current business plans and initiatives. Appropriate adjustments can be determined. Post-assessment Analysis and Action Planning The use of the LESAT assessment results will vary among different organizations. There will usually be some short term quick hits that are suggested by the results. These can be programmed and incorporated into on-going initiatives as appropriate. Care should be taken to assure that any such short-term fixes are not inconsistent with the long-term lean vision. The principle use of the results will be to identify the more critical gaps that exist between current and desired maturity levels and to determine their impact on the Enterprise Level Lean Transformation Plan. Changes to the Enterprise Level Plan will almost certainly affect one or more Detailed Lean Implementation Plans. The enterprise should look at the results from all the practices, not each practice in isolation, to determine future courses of action. The key here is to analyze gaps against the enterprise business objectives so that becoming Lean is not the goal but the means to achieve strategic objectives. It is important to identify enterprise wide resources available and then compare this against the estimate of resources needed so that the plans can be prioritized. Leadership can determine which of the practices are most crucial to their enterprise performance and attack these first. Particular attention should be paid to additional education and training needs. Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 25 of 166

29 Part IV Assessment Methodology Continued Improvement plans should become an integral part of the Enterprise culture. The initial planning for a Lean transformation will not be perfect and modifications may be required. The self-assessment results will highlight areas for improvement. Some of these improvements may be effected fairly quickly within the existing enterprise structure. Others will require significant structural modifications. The TTL Roadmap and Guide contains further guidance for the enterprise on how to develop corrective action plans and to foster continuous improvement. It suggests a framework in which the organization learns from past behavior, strives to increase the focus on providing value to the customer and continually adapts the plans to continue the Lean journey. Figure 10 is included, courtesy of Northrop Grumman, as an illustration of how the TTL Roadmap is linked to the LESAT assessment, which in turn provides the basis for modifications to the Enterprise Level Lean Implementation and Action Plans. The Continuous Improvement/Assessment Cycle One of the fundamental principles of the lean paradigm is that waste elimination and process improvements are never-ending endeavors. The Lean Enterprise Model (LEM) is a repository of best practices that have been collected and organized according to the Overarching Practices of lean. Today s best practices will be improved further or replaced as better means are developed for performing fundamental tasks. The Transition-to-Lean (TTL) Roadmap provides a structure and overall general flow for transforming an organization over time. There is no ultimate lean state beyond which improvements are no longer possible, so the Roadmap reflects a never-ending journey. Figures 11 and 12 are included as aids to visualizing these processes and their on-going relationships. LESAT Checklist The several stages of the LESAT assessment process that are explained above have been collected and shown as a checklist in Figure 13. It is recommended that all steps be followed, although a few are marked as optional. LESAT Assessment Aids Appendix E contains a number of forms, formats, sample meeting agendas, spreadsheet programs, etc. that are intended to provide guidance and suggestions for the LESAT Facilitator. Rather than prescribing one single approach, alternatives are included for selection or modification. The examples shown in Appendix E were among those that were utilized by the companies who participated in the field tests of the LESAT Beta version. Page 26 of 166 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative)

30 Figure 10 Figure 8 Enterprise Level Roadmap Detailed Lean Vision Initial Lean Vision Environmental Corrective Action Indicators I.A. Lean Transformation/Leadership Lean Transformation Detailed Corrective Framework Action Indicators Definition: Develop, deploy, and manage lean implementation plans throughout the enterprise, leading to: (1)- long-term sustainability, (2)- acquiring competitive advantage, and (3)- satisfaction of stakeholders; along with a continuous improvement in all three parameters. Outcomes on Enterprise Metrics Enterprise Level I.A. Enterprise Transformation Strategic Plan Planning The decision to pursue a lean transformation is strategic in nature. Its impact throughout the enterprise is profound and pervasive, affecting all business practices and processes. The lean enterprise will behave in a fundamentally new manner, significantly eliminating waste and enhancing relationships with all stakeholders. Diagnostic Questions Are enterprise leaders familiar with the dramatic increases in competitiveness that many companies have realized as a result of transitioning to lean? Are enterprise leaders fully aware of the potential opportunities (i.e. greater growth, profitability and market penetration) that can be realized within their own organization as a result of transitioning to lean? Has a suitable strategy for growth been identified to utilize resources freed up by improvements? Does customer value strongly influence the strategic direction? Has full leverage of the extended enterprise stakeholders been incorporated into the strategic plan? PROGRAM: Section I.A. Lean Transformation/Leadership LP# LEAN PRACTICES CAPABILITY LEVELS Integration of Lean Level 1 Level 2 Level 3 Level 4 Level 5 in Strategic Concepts and benefits of Lean is recognized, but The growth implications of Transitioning to lean is Strategic plans leverage Planning Process lean principles and practices relegated to lower levels lean are understood and adopted as a key enterprise the results of lean are not evident in culture of the enterprise and lean implementation plans strategy and included in the implementation to achieve Lean impacts growth, or business plans. application is fragmented. are formulated, but not integrated strategic plan. growth, profitability and profitability and into the strategic plan. market position. market penetration Lean Roadmap Action Plan Objective Impacts/Issues (to be completed by responsible person The decision to pursue a lean transformation is Impact: strategic in nature. Its impact throughout the enterprise is profound and pervasive, affecting all business practices and processes. The lean enterprise will behave in a fundamentally new manner, significantly eliminating waste and Issues: C D C D enhancing C D relationships C with D all stakeholders C D Lean Indicators (Examples) Evidence Opportunities Lean implementation is included explicitly in the enterprise strategic plan. Strategic planning makes allowance for anticipated gains from lean improvements. Responsibility: Success Criteria Major Milestones Enterprise leaders are aware of the strategic opportunities associated with transitioning to a Task lean enterprise. The enterprise is involved in defining and Understanding Need documenting the best methods for contributing for Change to customer success. Build Awareness Within Senior The strategic planing process includes key Leadership Team stakeholder s needs form across the enterprise Establish Enterprise Strategy Copyright Massachusetts Institute of Technology, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. Page 27 of 166

31 Figure 11 Continuous Improvement/Assessment Cycle External Forces Strategic Planning Changing Customer Values/Needs External Inputs, Benchmarking Assess Current Assess Current Maturity Level Specify Desired Level Identify Gaps/Prioritize Actions Create Future State Vision Prepare the Organization for Change Create/Refine Enterprise Changing Customer Values/Needs Utilize Best Execute Next Cycle of Plan LESAT TTL ROADMAP LEM Copyright Massachusetts Institute of Technology, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. Page 28 of 166

32 Figure 12 Relationship of LEM, TTL and LESAT to Lean Transformation External Input LEM Principles and Practices Best Practices Lessons Learned Calibration Lean Transformation Best Practices Preparation Staging Results TTL Guide & Roadmap Assessment (Lean Principles, Practices & Behaviors) LESAT Self Assessment Copyright Massachusetts Institute of Technology, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. Page 29 of 166

33 Figure 13 LESAT ASSESSMENT PROCESS Pre-assessment Preparation Determine timing of the assessment Administer a test of management s understanding of Leanidentify areas for education prior to using LESAT Conduct management Lean Education event TTL Exposure/Familiarization Facilitator Enterprise leaders/managers who will participate in assessment Assemble Assessment Material Enterprise leadership defines boundaries for assessment Define time horizon for Desired Level determinations LESAT Kick-off Session Introductory presentation Define Ground Rules for assessment Distribute assessment materials Provide schedule for completion Provide contact point for assistance Group Completion of the Assessment Read entire LESAT before starting Seek clarification from Facilitator Analyze each lean practice, determine current maturity level for the entire enterprise. Note evidence to support this determination For the time horizon specified, determine the desired maturity level Discuss among members of the group to arrive at consensus Provide group results to LESAT Facilitator Essential X X X X X X X X X X X X X X X Optional X X X Page 30 of 166 Copyright Massachusetts Institute of Technology, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved.

34 Facilitation Attend group assessment sessions Provide guidance, answer questions Essential X Optional X Initial Summarization Consolidate inputs Prepare summaries, prepare for Wrap-up Meeting X X LESAT Wrap-up Meeting Review of LESAT process Clarification of results Consensus on future direction Interpretation Alignment with other initiatives Areas for further study Next steps/actions indicated X X X X X X X Post-assessment Analysis and Action Planning Suggested quick hits Impact on Enterprise Level Lean Implementation Plan Adjustments to Detailed Lean Implementation Plans Re-deployment of resources Additional education and training Preparation for Next Assessment X X X X X X Copyright Massachusetts Institute of Technology, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. Page 31 of 166

35 Part V - LESAT Maturity Matrices This part of the LESAT Facilitator s Guide contains the Lean Maturity Matrices used in assessing the current status of the enterprise in its lean transformation. The version included here includes the complete set of 54 lean practices, the five level descriptions for each practice, Diagnostic Questions and Lean Indicators. The version of the matrices contained in the LESAT Maturity Matrices follows the same organization, but contains all the information for each practice as shown in Figure 4 in Part III. The LESAT Maturity Matrices version is designed for actually entering data, marking up, etc. Linkage of LESAT Section I to TTL Roadmap The LESAT contains three major sections: Section I Enterprise Transformation/Leadership Section II Life-cycle Processes Section III Enabling Infrastructure Processes Section I is tied directly to the Transition-to-Lean Roadmap. A TTL Roadmap diagram is included before each major segment of Section I to indicate the Major Tasks that are being assessed at that point. Page 32 of 166 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative)

36 LESAT Maturity Matrices Section I: Lean Transformation/Leadership I.A. I.B. I.C. I.D. I.E. I.F. I.G. Enterprise Strategic Planning Adopt Lean Paradigm Focus on the Value Stream Develop Lean Structure and Behavior Create and Refine Transformation Plan Implement Lean Initiatives Focus on Continuous Improvement Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 33 of 166

37 Section I Lean Transformation/ Leadership Enterprise Strategic Planning Adopt Lean Paradigm Focus on the Value Stream Develop Lean Structure and Behavior Create and Refine Transformation Plan Implement Lean Initiatives Focus on Continuous Improvement Section II Life Cycle Processes Section III Enabling Infrastructure Lean Transformation/Leadership consists of the major elements contained within the Transition to Lean (TTL) Roadmap. The TTL Roadmap describes a logical sequence of Primary Activities and the Major Tasks required to complete each of these Primary Activities. The TTL Roadmap portrays the overall flow of action steps necessary to initiate, sustain, and continuously refine an Enterprise Transformation based upon Lean principles and practices. Page 34 of 166 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative)

38 Transition-To-Lean Roadmap: Enterprise Level The Enterprise Level Transition-to-Lean Roadmap provides a general framework for assisting companies in their transition to Lean. It portrays an overall flow of action steps that can initiate, sustain, and continuously refine the transformation of an Enterprise based upon Lean principles and practices. The Roadmap comprises three cycles. First is the Entry/Re-entry Cycle, which specifies the actions associated with the decision to adopt the Lean paradigm. This cycle is closely linked to the Enterprise Strategic Planning cycle. The second cycle is called the Long Term Cycle, in which the environment and conditions necessary for a successful Lean transformation are created. The organization is then prepared for launching into detailed planning and implementation. The third cycle is the Short Term Cycle, in which detailed implementation is planned, executed, and monitored. This cycle has a fast clock speed, with ongoing action-monitoring-corrective action phases. The Long Term Cycle is re-entered periodically to capitalize on lessons learned during implementation and to accommodate changes occurring in the dynamic external environment. Copyright Massachusetts Institute of Technology, 2000 Page 35 of 166 TRANSITION-TO-LEAN ROADMAP: ENTERPRISE LEVEL

39 Enterprise Strategic Planning Significant, fundamental shifts in the competitive environment cause each affected enterprise to undertake a comprehensive review of its collective mental model. This amounts to a thorough analysis and evaluation of its fundamental structure and its relationship with the external environment. Many of the traditional assumptions underlying the Enterprise s processes, practices, policies, and behavior will no longer be valid. A lean enterprise has a far different look and feel; indeed, it will do business (both internally and externally) in fundamentally new ways. Lean implementation activities are enablers for achieving strategic objectives and as such must be an integral part of strategic and operational plans. Full benefits of lean implementation are achieved when they encompass the extended enterprise. Copyright Massachusetts Institute of Technology, 2000 Page 36 of 166 SECTION I - ENTERPRISE STRATEGIC PLANNING

40 I.A. Lean Transformation/Leadership Definition: Develop, deploy, and manage lean implementation plans throughout the enterprise, leading to: (1)- long-term sustainability, (2)- acquiring competitive advantage, and (3)- satisfaction of stakeholders; along with a continuous improvement in all three parameters. I.A. Enterprise Strategic Planning The decision to pursue a lean transformation is strategic in nature. Its impact throughout the enterprise is profound and pervasive, affecting all business practices and processes. The lean enterprise will behave in a fundamentally new manner, significantly eliminating waste and enhancing relationships with all stakeholders. Diagnostic Questions Are enterprise leaders familiar with the dramatic increases in competitiveness that many companies have realized as a result of transitioning to lean? Are enterprise leaders fully aware of the potential opportunities (i.e. greater growth, profitability and market penetration) that can be realized within their own organization as a result of transitioning to lean? Has a suitable strategy for growth been identified to utilize resources freed up by improvements? Does customer value strongly influence the strategic direction? Has full leverage of the extended enterprise stakeholders been incorporated into the strategic plan? LP# LEAN PRACTICES CAPABILITY LEVELS Integration of Lean in Strategic Planning Process Lean impacts growth, profitability and market penetration Level 1 Level 2 Level 3 Level 4 Level 5 Concepts and benefits of lean principles and practices are not evident in culture or business plans. Lean is recognized, but relegated to lower levels of the enterprise and application is fragmented. The growth implications of lean are understood and lean implementation plans are formulated, but not integrated into the strategic plan. Transitioning to lean is adopted as a key enterprise strategy and included in the strategic plan. Strategic plans leverage the results of lean implementation to achieve growth, profitability and market position. C D C D C D C D C D Lean Indicators (Examples) Lean implementation is included explicitly in the enterprise strategic plan. Strategic planning makes allowance for anticipated gains from lean improvements. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) SECTION I.A. - ENTERPRISE STRATEGIC PLANNING Page 37 of 166

41 LP# LEAN PRACTICES CAPABILITY LEVELS I.A.2. Focus on Customer Value Customers pull value from enterprise value stream Level 1 Level 2 Level 3 Level 4 Level 5 Means of defining value to customer(s) is informal and unstructured. Structured process for defining value is applied to selected customers. How the enterprise can best contribute to customer s success is well defined and incorporated into most projects/programs. Customer definition of value strongly influences the strategic direction. Competitiveness is enhanced, as customer value becomes the predominant driving force throughout the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Enterprise employs a formal process for determining customer value. The enterprise understands what constitutes success for its customers. A formal process exists to measure and assess customer satisfaction. Customer value strongly influences policies, practices and behavior. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.A.3. Leveraging the Extended Enterprise Value stream extends from customer through the enterprise to suppliers Level 1 Level 2 Level 3 Level 4 Level 5 Relations with customers and suppliers reflect a We-They mentality. Initial opportunities identified for establishing extended enterprise linkages. Strategic planning process explicitly includes consideration of key stakeholders in value streams. Integration and balancing of stakeholder values are achieved via collaborative supplier relations and strategic partnering. Integration of the extended enterprise contributes to innovation, growth, increased profitability and market position. C D C D C D C D C D Lean Indicators (Examples) Strategic planning is strongly influenced by stakeholder and customer value. Strategic planning encompasses the total enterprise, including customer, alliances/partners, employees and suppliers. Risk and responsibilities are apportioned when leveraging the extended enterprise suppliers and partners. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 38 of 166 SECTION I.A. - LEAN TRANSFORMATION/LEADERSHIP

42 Adopt Lean Paradigm The Lean paradigm consists of many concepts, principles, and practices that are counter-intuitive and diametrically opposed to those of mass production. Most of today s business leaders climbed the ladder of success while following the same mass-production practices they are now being asked to abandon. Lean requires a deep understanding of the fundamental aspects of an Enterprise and a vision for its interactions with the rest of the world. This segment of the Roadmap provides a framework for acquiring an in-depth understanding of Lean and for obtaining full commitment from Senior Managers to launch a Lean transformation. Copyright Massachusetts Institute of Technology, 2000 Page 39 of 166 SECTION I.B. - ADOPT LEAN PARADIGM

43 I.B. Adopt Lean Paradigm Transitioning to lean requires a significant modification to the business model of the enterprise. It is imperative that the enterprise leadership understands and buys into the lean paradigm since they will be required to create a vision for doing business, behaving and seeing value in fundamentally different ways. Diagnostic Questions Do enterprise leaders and senior managers understand the lean paradigm at the enterprise level? Do all senior leaders and management enthusiastically support a transformation to lean? Has a common vision of lean been communicated throughout the enterprise and within the extended enterprise? Has a compelling case been developed for the Lean transformation? LP# LEAN PRACTICES CAPABILITY LEVELS I.B.1. Learning and Education in Lean for Enterprise Leadership Unlearning the old, learning the new Level 1 Level 2 Level 3 Level 4 Level 5 Little interest in learning lean principles is evident among enterprise leadership. Leaders are actively seeking opportunities to learn about lean. There is an initial grasp of the extent of the paradigm shift for the enterprise. The leaders are adopting lean learning and continuously applying lean principles across the enterprise. Leaders contribute to the development / refinement of the body of knowledge about lean. Lessons learned in implementing lean are actively shared across the organization and within the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) A formal lean education process for senior leaders has been established. Leaders regularly apply and use lessons learned in lean. Majority of enterprise leaders have received significant exposure and education in lean principles, practices and behavior. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 40 of 166 SECTION I.B. - ADOPT LEAN PARADIGM

44 LP# LEAN PRACTICES CAPABILITY LEVELS I.B.2. Senior Management Commitment Senior management leading it personally Level 1 Level 2 Level 3 Level 4 Level 5 Level of commitment among senior leaders and management is variable some endorse while others may actively resist. Senior management buys into group commitment; senior leaders / managers who cannot or will not adapt are replaced. Lean is integral to enterprisewide meetings, senior staff meetings, etc.; senior managers personally and visibly lead lean transition. Senior leaders are championing the transformation to lean within the enterprise. Senior leaders and management mentor and foster lean champions internally and through the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) There is a consensus commitment supporting a transformation to lean. Management provides support and recognition for positive actions Senior management are champions in transforming the enterprise. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.B.3. Lean Enterprise Vision New mental model of the enterprise Level 1 Level 2 Level 3 Level 4 Level 5 Senior leaders have varying visions of lean, from none to well-defined. Senior leaders adopt common vision of lean. Lean vision has been communicated and is understood by most employees. Common vision of lean is shared by the extended enterprise. Stakeholders have internalized the lean vision and are an active part of achieving it. C D C D C D C D C D Lean Indicators (Examples) The role that lean plays in achieving the vision is clearly defined. The vision has been communicated to all levels and has extensive buy-in by most employees. The vision incorporates a new mental model of how the company would act and behave according to lean principles and practices. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 41 of 166 SECTION I.B. - ADOPT LEAN PARADIGM

45 LP# LEAN PRACTICES CAPABILITY LEVELS I.B.4. A Sense of Urgency The primary driving force for Lean Level 1 Level 2 Level 3 Level 4 Level 5 Scan of environment identifies competitive threats and need for action. Enterprise senior leaders develop an urgent and compelling case for the lean transformation. Urgent and compelling case for lean transformation has been communicated and the organization rallies behind it. Urgent and compelling case for lean is expanded to and accepted by key suppliers. Urgent and compelling case for lean is expanded to and accepted throughout the extended enterprise. - C D C D C D C D C D Lean Indicators (Examples) A compelling business case for lean has been developed and communicated. The implications and time scales of the vision have been translated for each area of the enterprise. Lean transformation progress is integral to leadership discussions and events. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 42 of 166 SECTION I.B. - ADOPT LEAN PARADIGM

46 Focus On The Value Stream A primary concept of Lean thinking is that all actions and resources of a firm should be focused on creating value for its customers. Any action or resource expenditure that cannot be associated with this goal is regarded as waste and should be eliminated. It is helpful to visualize customers pulling value from the company, resulting in cascaded pulling actions back upstream across all Enterprise functions. The pulling action extends beyond the Enterprise to suppliers and other external agencies. Enterprise goals and metrics should also be expressed in terms of valueadded, thereby better defining for the Enterprise how to capture the customer s perception of value. In a complex Enterprise, it is useful to visualize and consider the balance of the primary value streams that flow to all of the primary stakeholders. It is important to optimize across these value streams by taking a global systems view. Copyright Massachusetts Institute of Technology, 2000 Page 43 of 166 SECTION I.C. - FOCUS ON THE VALUE STREAM

47 I.C. Focus on the Value Stream Value creation with minimal waste becomes the primary driving force of the enterprise. The current means of delivering customer value are documented, followed by improving the value stream by minimizing waste. Lean metrics are specified and stakeholder involvement clarified. Diagnostic Questions Is a formal process utilized to explicitly determine value to the customer? Have the value streams of all stakeholders been mapped, integrated and balanced? Does the enterprise understand how material and information flow throughout the various elements of the enterprise? Are enabling infrastructure processes being aligned to value stream flow? Does the enterprise understand clearly how it currently delivers value to customers? Has a system of balanced performance measures been established that reflect progress towards strategic business objectives? LP# LEAN PRACTICES CAPABILITY LEVELS I.C.1. Understanding the Current Value Stream How we now deliver value to customers Level 1 Level 2 Level 3 Level 4 Level 5 The documented process flow differs from the actual flow. There is an initial understanding of the need for formal mapping and analysis. Key stakeholders and what they value are identified. Present processes are mapped and initial analysis is underway. Principal current value stream(s) are defined, allowing the identification of critical interactions. Significant opportunities for eliminating waste and creating value are identified and aligned with the strategic objectives. Depth and breadth of knowledge of value stream elements and supporting processes exposes interdependencies across the enterprise. Updated value streams and their independencies are evaluated across the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) A formal process has been established for identifying customer and stakeholder value. The practice and language of value stream mapping is recognized as an important part of an iterative improvement process. Current value streams of major customers/product lines have been mapped, and hand off points and interfaces clearly defined. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 44 of 166 SECTION I.C. - FOCUS ON THE VALUE STREAM

48 LP# LEAN PRACTICES CAPABILITY LEVELS I.C.2. Enterprise Flow Single piece flow of materials and information Level 1 Level 2 Level 3 Level 4 Level 5 Material and information flows are disjointed and optimized process by process. Push mentality prevails. Some primary flow paths have been overhauled to overcome significant barriers to flow. Primary flow paths are simplified and aligned to the value stream(s), which allows information and material to flow as required. Material and information flow seamlessly throughout the enterprise. Material and information flow seamlessly and responsively throughout the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Information flows have been rationalized to assure interoperability among enterprise elements. Material flow paths have been simplified and shortened to enhance flow. Information and material flows are responsive to stakeholder needs. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.C.3. Designing the Future Value Stream Value stream to meet the enterprise vision Lean Indicators (Examples) Level 1 Level 2 Level 3 Level 4 Level 5 Management understands that the present processes do not meet the future lean enterprise objectives. A concept for future value stream(s) design has been created based on balanced stakeholder requirements. Future value stream(s) are developed, which encompass future enterprise goals and satisfy stakeholder requirements. Future value stream(s) are refined to accommodate a changing environment. Future value stream(s) are refined to dynamically accommodate a changing environment across the extended enterprise. C D C D C D C D C D A formal process has been established to identify how the enterprise can best deliver value to customers and stakeholders. The future value stream(s) reflects new and improved ways to realize value and minimize non-value adding activities. Future value stream(s) designs have been generated for the primary value stream(s) and their supporting processes. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 45 of 166 SECTION I.C. - FOCUS ON THE VALUE STREAM

49 LP# LEAN PRACTICES CAPABILITY LEVELS I.C.4. Performance Measures Performance measures drive enterprise behavior Level 1 Level 2 Level 3 Level 4 Level 5 Performance measures are ad hoc, inconsistent and focused on functional areas rather than value streams. Baseline performance measures are established to stimulate progress towards the lean future state and are visible throughout the enterprise. Performance measurement system uses a minimal and balanced set of measures based on strategic objectives and aligning local with enterprise metrics. Measurement systems and target setting pulls performance improvement throughout the enterprise. A common target setting and measurement process pulls performance improvement across the extended enterprise. - C D C D C D C D C D Lean Indicators (Examples) A balanced and minimal set of performance measures are used to track lean implementation progress towards the strategic direction. Performance measures used assure that local and enterprise measures are aligned. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 46 of 166 SECTION I.C. - FOCUS ON THE VALUE STREAM

50 Develop Lean Structure and Behavior This section of the Roadmap deals with creating the mental model and conditions within the Enterprise that will enhance the successful implementation of Lean principles and practices. mindset, must be relentlessly rooted out and banished. Lean principles and practices must be learned, practiced, and perfected through continuous improvement efforts, facilitated by change agents. Both the structure and the behavior of Lean organizations are significantly different from those of mass-production organizations. The mass-production mentality, so firmly embedded in the organization s collective Lean may have an impact on organizational structure. Incentives must be rationalized with the new behavior desired. There will be an impact on most business systems, processes, and policies. Copyright Massachusetts Institute of Technology, 2000 Page 47 of 166 SECTION I.D. - DEVELOP LEAN STRUCTURE AND BEHAVIOR

51 I.D. Develop Lean Structure and Behavior Organization infrastructure must be assessed and modified prior to launching a lean initiative as well as throughout the transformation. Organizational structure, incentives, policies, business systems and processes must be aligned and coordinated to elicit the behavior required for successful implementation of lean principles and practices. Diagnostic Questions Has an organizational structure been implemented that focuses on core processes along the customer value stream? Is organizational structure designed for flexibility and responsiveness to changes in the external environment? Are relationships with stakeholders based on mutual respect and trust? Have policies and procedures been revised to promote and encourage lean behavior? Have incentives been developed which are consistent with the behavior desired? Has decision-making been delegated to the lowest practical level? Is prudent risk taking encouraged? Are lean change agents positioned and empowered to provide guidance and leadership for the lean transformation? LP# LEAN PRACTICES CAPABILITY LEVELS I.D.1. Enterprise Organizational Orientation Organize to support value delivery Level 1 Level 2 Level 3 Level 4 Level 5 The enterprise operates as functional silos. Initial efforts are underway to identify functional barriers and understand their full implications. Partially deployed crossfunctional organizational processes are aligned with enterprise value stream(s). Extensive cross-functional processes are implemented across the enterprise. Functional units now serve as knowledge centers for skill retention. Cross-functional, processbased orientation is aligned across the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Functional barriers have been minimized. There is extensive use of cross-functional processes across the enterprise. Career progression potential exists across both processes and functions. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 48 of 166 SECTION I.D. - DEVELOP LEAN STRUCTURE AND BEHAVIOR

52 LP# LEAN PRACTICES CAPABILITY LEVELS I.D.2. Relationships Based on Mutual Trust Win-win vs. we-they Level 1 Level 2 Level 3 Level 4 Level 5 Relationships tend to be determined by organizational role, resulting in a we-they perspective. Selective application of enterprise perspective results in breaking down of organizational barriers and developing mutual trust. Stable and cooperative relationships exist across the enterprise; cooperative relations are established with some enterprise partners. Mutual respect and trust exists across the extended enterprise with equitable sharing of benefits from continuous improvement initiatives. Stakeholders modify behavior so as to enhance extended enterprise performance (win-win). C D C D C D C D C D Lean Indicators (Examples) Communication barriers based upon organizational position have been significantly reduced. Stable and cooperative relationships exist among most enterprise stakeholders. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.D.3. Open and Timely Communications Information exchanged when required Level 1 Level 2 Level 3 Level 4 Level 5 Communication is largely top-down, limited and lagging. Basic communication mechanisms are employed but are not uniform; communication strategy is under development. Enterprise leaders are accessible and visible, developing two-way communications in open, concise and timely form. Communication processes are undergoing continuous refinement and information is exchanged or can be pulled as required. Comprehensive system of two-way communication is employed throughout the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Open and timely communications exist among stakeholders. i.e. regular meetings with employees, newsletters, etc. Technology has been leveraged to speed communications flow and accessibility, while filtering unnecessary communications. Employee input is valued and plays a key part in decision-making. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 49 of 166 SECTION I.D. - DEVELOP LEAN STRUCTURE AND BEHAVIOR

53 LP# LEAN PRACTICES CAPABILITY LEVELS I.D.4. Employee Empowerment Decision-making at lowest possible level Level 1 Level 2 Level 3 Level 4 Level 5 Centralized decision-making occurs in a hierarchical structure with limited delegation of authority. Appropriate structure and training is being put in place to enable empowerment. Organizational environment and management system supports limited decisionmaking at point of application and need. Decision processes are continually refined to promote increased accountability and ownership at point of use. Decision-making across the extended enterprise is delegated to the point of application. C D C D C D C D C D Lean Indicators (Examples) Managers and supervisors serve as mentors and educators, promoting lower level decision-making. The extent and types of empowerment are tailored to match the environment and people empowered. Empowerment enables swift and effective decision-making closest to the point of use. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.D.5. Incentive Alignment Reward the behavior you want Level 1 Level 2 Level 3 Level 4 Level 5 There is sporadic use of incentives and an awareness that some incentives discourage lean behavior. Incentives that reward and encourage lean behavior are deployed in some areas. Executive compensation and employee incentives are linked directly to attainment of lean objectives. Incentive systems successfully contribute to achievement and sustainability of lean objectives. Lean incentives are deployed, with measurable success across the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Incentives include a balance of money and non-monetary rewards / recognition to encourage lean activity. Incentives are based on performance measures that encourage lean activity. Incentives encourage local improvements that will benefit multiple processes or value steam performance. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 50 of 166 SECTION I.D. - DEVELOP LEAN STRUCTURE AND BEHAVIOR

54 LP# LEAN PRACTICES CAPABILITY LEVELS I.D.6. Innovation Encouragement From risk aversion to risk rewarding Level 1 Level 2 Level 3 Level 4 Level 5 Innovation initiatives are sporadic and ad hoc; security, stability and risk aver sion drive most decisionmaking. Initial efforts are underway to develop systems, processes and procedures for fostering innovations. Innovation initiatives are underway in selected areas; measures for assessing impact are in use. Innovation initiatives are flourishing across the enterprise; prudent risk taking is encouraged and rewarded. Comprehensive innovation program is implemented and positive results recognized across the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) The review process for suggestions has been streamlined and gives clear visibility of the progress of each suggestion. Suggestion programs have been properly incentivized to give recognition to originators of innovative ideas. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.D.7. Lean Change Agents The inspiration and drivers of change Level 1 Level 2 Level 3 Level 4 Level 5 Change agents are sporadically distributed, but without change authority. There is formal identification of change agents, along with role definition, authority delegation and program of education and training for change agents. Appropriately skilled change agents are assigned to key areas with the authority to effect changes. Change becomes self-generating, initiated by employees as well as change agents. Change agents are providing a critical resource of lean knowledge, skill and experience in transforming the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Lean change agents have been designated and empowered. Lean change agents operate throughout all areas and cross-transfer lean implementation experience. Process for developing lean masters and other change agents has been established. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 51 of 166 SECTION I.D. - DEVELOP LEAN STRUCTURE AND BEHAVIOR

55 Create & Refine Transformation Plan Having prepared the organization for implementing the Lean paradigm, we are now in a position to develop, implement, and monitor a comprehensive Enterprise-Level Plan to achieve the desired transformation. The Enterprise-Level Plan must be designed to address the explicit need previously established, thereby aligning the strategic and Lean visions. It will also draw heavily from the enterprise-level value-stream mapping performed in the Focus on Value Stream block. Key enterprise transformation activities must be identified and prioritized. Critical resources (including education and training) must be assured. Copyright Massachusetts Institute of Technology, 2000 Page 52 of 166 SECTION I.E. - CREATE AND REFINE TRANSFORMATION PLAN

56 I.E. Create and Refine Transformation Plan Identify, prioritize and sequence a comprehensive set of lean initiatives that collectively constitute the plan for achieving the desired transformation. Diagnostic Questions Is the enterprise level lean transformation plan prioritized and aligned with strategic business objectives? Have adequate resources been provided to facilitate lean transformation? Does the current education and training program adequately support the strategic direction(s) and lean transformation? Have lessons learned and best practice been effectively incorporated within lean transformation planning? LP# LEAN PRACTICES CAPABILITY LEVELS I.E.1. Enterprise-Level Lean Transformation Plan Charting the course across the extended enterprise Level 1 Level 2 Level 3 Level 4 Level 5 Individual planning efforts are mostly bottom up initiatives with little priority or coordination established at enterprise level. Enterprise-level view identifies lean implementation projects, which are prioritized to meet long and short-term strategic objectives. Enterprise improvement plans are coordinated and prioritized across enterprise value stream(s), with a timeline for expected measurable results. Lean transformation plan is continuously refined through learning from implementation results and changing strategic requirements. Lean transformation plan balances mutual benefits of stakeholders across the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) A process is in place to incorporate lessons learned into the enterprise-level lean transformation plan. The milestone targets of the lean transformation plan are broken-down by section and deployed across the enterprise. Plans balance long-term and short-term stakeholder objectives for the best overall solution. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 53 of 166 SECTION I.E. - CREATE AND REFINE TRANSFORMATION PLAN

57 LP# LEAN PRACTICES CAPABILITY LEVELS I.E.2. Commit Resources for Lean Improvements Resource provision for lean Level 1 Level 2 Level 3 Level 4 Level 5 Little or no resources are provided for process improvement or waste elimination. Limited enterprise-level resources are committed and often applied to the symptom rather than the root cause. Resources are allocated as required for execution of the lean transformation plan and prioritized across the value stream. A pool of earmarked resources is provided for lean initiatives with minimal justification required. A pool of earmarked resources is provided for lean initiatives across the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Resources are committed to support the level and speed of lean transformation required. Time to build on improvements by personal contribution is given at all levels. The procedure to apply for improvement resources has been simplified, and gives priority to improvements that benefit multiple areas. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.E.3. Provide Education and Training Just-in-time learning Level 1 Level 2 Level 3 Level 4 Level 5 There is little coordination of education and training programs to facilitate change. Education and training covers a set of skills required to support the lean transformation projects. Education and training program is comprised of a balanced and sequenced set of elements to support the coordinated transformation plan. Education and training at all levels is periodically reviewed to check alignment and suitability to the lean transformation plan. Education and training program supports the upcoming needs of the extended enterprise transformation plan. C D C D C D C D C D Lean Indicators (Examples) Education and training programs, including refreshers, are provided on a just-in-time basis. Education and training has a balanced and sequenced set of elements to support the lean transformation plan. The application of lean principles learned in training and education is formally appraised. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 54 of 166 SECTION I.E. - CREATE AND REFINE TRANSFORMATION PLAN

58 Implement Lean Initiatives The Enterprise-Level Transformation Plan created in the previous segment provides the broad parameters and directions for achieving the changes required to respond to the identified critical needs. Within these parameters and overall schedule, specific short-term action plans and programs are now developed. Detailed plans at the Enterprise level are linked to lower-level plans. The lower-level plans are prioritized and time-phased resources are provided within the framework of a comprehensive schedule. These plans are executed and monitored. Short-term corrective action is determined and incorporated as necessary. Copyright Massachusetts Institute of Technology, 2000 Page 55 of 166 SECTION I.F. - IMPLEMENT LEAN INITIATIVES

59 I.F. Implement Lean Initiatives Flow down the enterprise-level plan into specific actions, programs and projects that are executed within each process organizational area and determine how they are integrated at the enterprise level. Diagnostic Questions Has the enterprise level lean transformation plan been translated into detailed execution projects? Has a uniform system been established to track the progress of lean initiatives with respect to the overall plan? Do lean initiative plans contain a feedback mechanism for revision and to share lessons learned? LP# LEAN PRACTICES CAPABILITY LEVELS I.F.1. Development of Detailed Plans Based on Enterprise Plan Coordinating lean improvements Level 1 Level 2 Level 3 Level 4 Level 5 Improvements are generally optimized for individual areas and employees can not clearly see the links between localized and enterprise goals. Key goals of the enterprise lean transformation plan are understood by most employees. Process owners are involved in developing detailed plans linked to the goals/strategic objectives of the enterprise plan. Detailed lean implementation plans supporting the enterprise level plan are developed and coordinated across processes. Detailed lean implementation plans accounting for any interdependencies are refined and integrated across the enterprise. Best practices are shared. Implementation plans from extended enterprise are coordinated with and support the lean transformation plan. C D C D C D C D C D Lean Indicators (Examples) Detailed implementation plans are aligned to milestone targets of the enterprise-level plan. A process is in place to incorporate lessons learned in detailed implementation plans. Detailed improvement plans are coordinated throughout the enterprise where shared implications exist. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 56 of 166 SECTION I.F. - IMPLEMENT LEAN INITIATIVES

60 LP# LEAN PRACTICES CAPABILITY LEVELS I.F.2. Tracking Detailed Implementation Assessing actual outcomes against goals Level 1 Level 2 Level 3 Level 4 Level 5 Results of process improvement initiatives are observed but not quantified. Process is under development to permit tracking and quantification of progress of the detailed lean implementation. Data from some projects is being reviewed. There is a project management process implemented to track progress of detailed lean projects against milestones, with feedback provided to enterprise level. Appropriate corrective action is initiated within individual projects. The project management process can readily assess detailed plans and can accommodate revisions mandated by changes to the enterprise level lean transformation plan. The project management process is deployed across the extended enterprise to enable real-time tracking. C D C D C D C D C D Lean Indicators (Examples) Lean initiatives are coordinated and tracked, with the individual results rolled up and assessed against enterprise level milestones and targets. The responsibility and accountability for improvement success is assigned locally to enable fast corrective action on deviations from the plan. Changes to processes / value stream map(s) are documented and updated regularly. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 57 of 166 SECTION I.F. - IMPLEMENT LEAN INITIATIVES

61 Focus On Continuous Improvement This oversight segment is critically important for long-term effectiveness and continuity. Only when the activities in this segment become a natural part of the Enterprise s culture can the organization achieve a significant state of being Lean. The organization will learn from various implementation initiatives. Modifications will be required and fed back through the Create and Refine Transformation Plan segment. On those occasions when significant structural modifications seem to be called for, the flow will proceed along a second path, to the segment Focus on the Value Stream, taking us back to the Long Term Cycle. When the Lean transformation process becomes recognized as a keystone within the Enterprise s strategic plan, a third flow path may occur through the segment Enterprise Strategic Planning in the Entry/Re-entry Cycle. This occurs when the results of lean implementation directly impact the strategic planning process. Copyright Massachusetts Institute of Technology, 2000 Page 58 of 166 SECTION I.G. - FOCUS ON CONTINUOUS IMPROVEMENT

62 I.G. Focus on Continuous Improvement Successful execution of lean implementation plan forms the basis for further improvement. The improvement process is monitored and nurtured, lessons learned are captured, and improved performance becomes a strong driving force for future strategic planning by enterprise executives. Diagnostic Questions Are guidelines for continuous improvement sufficiently developed for effective facilitation of enterprise-wide transformation plans? Are enterprise participants being challenged to build-on and sustain existing improvements? Are senior managers actively involved in monitoring progress of lean implementation at all levels? Is appropriate support and encouragement being provided to all participants in lean implementation? Are lessons learned being captured in a consistent, systematic manner? Are lean implementation results impacting strategic planning? LP# LEAN PRACTICES CAPABILITY LEVELS I.G.1. Structured Continuous Improvement Processes Uniformity in how we get better Level 1 Level 2 Level 3 Level 4 Level 5 Improvement initiatives are ad hoc and not data driven. An improvement process for the enterprise is broadly defined and being selectively applied. Systematic, structured methodology for continuous improvement and value creation is developed and deployed across many areas. Structured continuous improvement process is deployed at all levels across the enterprise, using value analysis to target improvements. Structured continuous improvement process is fully ingrained throughout the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) A consistent improvement/transformation approach is implemented, sustaining improvements gained. The continuous improvement process challenges people to tackle the root cause, rather than the symptom. Lean principles are being applied to most enterprise systems and processes, utilizing lessons learned. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 59 of 166 SECTION I.G. - FOCUS ON CONTINUOUS IMPROVEMENT

63 LP# LEAN PRACTICES CAPABILITY LEVELS I.G.2. Monitoring Lean Progress Assessing progress toward achieving enterprise objectives Level 1 Level 2 Level 3 Level 4 Level 5 Enterprise leaders are not actively involved in the review of overall lean implementation plan progress. Implementation plan progress is reviewed against enterprise level milestones and success criteria, for some projects. A formal methodology is used by enterprise leaders to analyze the overall progress across all lean implementation projects. Current plans are adjusted based on learning from lean implementations. Results of implementation projects are aggregated to permit reallocation of resources and to ensure on-going alignment with strategic objectives. Senior managers monitor lean progress throughout the extended enterprise. Results are impacting future enterprise strategic planning. C D C D C D C D C D Lean Indicators (Examples) Lean transformation progress is judged by the aggregate benefits, not individual or localized improvements. Leaders actively participate in monitoring implementation progress and addressing deficiencies within the transformation plan. Lean progress reviews are documented in a common format and disseminated. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.G.3. Nurturing the Process Assure executive level involvement Level 1 Level 2 Level 3 Level 4 Level 5 There is growing awareness that successful lean implementation is highly dependent upon senior management support and encouragement. Some senior managers are providing encouragement, support and recognition, which is not consistent across the enterprise. Managers seek to identify and remove barriers to lean implementation. Teams and individuals who successfully implement lean practices are recognized and rewarded. Senior managers across the entire enterprise are highly visible in their involvement, support and encouragement of the lean initiative. An enthusiastic atmosphere is evident. Senior executives and managers champion and nurture a culture of continuous improvement in the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Management actively supports and is involved in ensuring the success of improvements. Positive actions and the effort taken are recognized and rewarded, even if improvements are not fully successful. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 60 of 166 SECTION I.G. - FOCUS ON CONTINUOUS IMPROVEMENT

64 LP# LEAN PRACTICES CAPABILITY LEVELS I.G.4. Capturing Lessons Learned Ensuring that successes lead to more successes Level 1 Level 2 Level 3 Level 4 Level 5 Lessons learned from improvement activities are not documented, residing only in the memories of participants. Lessons learned in some areas are documented and maintained in paper files, design rulebooks, etc. A formal process for readily capturing and communicating lessons learned is being applied. Employee contributions are actively sought. Lessons learned are consistently captured, communicated and regularly used in a structured manner. An enterprise knowledge base is created. A formal knowledge management process is adopted. Lessons learned are routinely and explicitly incorporated into the formulation of new lean initiatives. C D C D C D C D C D Lean Indicators (Examples) Best practice, suggestions and lessons learned are maintained in a concise and clear standard format. A formal process has been established throughout the enterprise for capturing and reusing lessons learned. Lessons learned are periodically reviewed to maintain relevance of information kept. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS I.G.5. Impacting Enterprise Strategic Planning Results lead to strategic opportunities Level 1 Level 2 Level 3 Level 4 Level 5 Results of lean implementation are not fed back to strategic planning process. Benefits of lean implementation are beginning to influence the strategic planning process. Executive management considers potential impact of performance improvement initiatives in its assessment of new business opportunities. Forecasted improvements from lean implementation are incorporated into enterprise planning and budgeting decisions. Executive management integrates forecasted future results of lean implementation in its assessment of new business opportunities and potential market impact. C D C D C D C D C D Lean Indicators (Examples) Business results reflect improvements resulting from lean implementation. Strategic planning makes allowance for anticipated gains from lean improvements. Gains realized from lean implementation are leveraged to achieve growth, profitability, market position and employment stability. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 61 of 166 SECTION I.G. - FOCUS ON CONTINUOUS IMPROVEMENT

65 LESAT Maturity Matrices Section II: Life Cycle Processes II.A. Business Acquisition and Program Management II.B. Requirements Definition II.C. Develop Product and Process II.D. Manage Supply Chain II.E. Produce Product II.F. Distribute and Service Product Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 62 of 166 SECTION II - LIFE CYCLE PROCESSES

66 Section I Lean Transformation/ Leadership Section II Life Cycle Processes Section III Enabling Infrastructure Business Acquisition and Program Management Requirements Definition Develop Product and Process Manage Supply Chain Produce Product Distribute and Service Product Life Cycle Processes are defined by the product life cycle, from initial conception through operational support and ultimate disposal. As shown above, these processes directly determine the value provided to customers and stakeholders alike. The degree to which an enterprise is successful in making these processes lean is a measure of its effectiveness and efficiency. Enterprise Leadership provides the direction and resources to break down the barriers among and within Life Cycle processes that result in wasted resources and reduced value to customers and stakeholders. This section of the LESAT addresses the level of lean implementation applicable to these Life Cycle processes. Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 63 of 166 SECTION II - LIFE CYCLE PROCESSES

67 LIFE-CYCLE PROCESSES Definition: Implement lean practices across life-cycle processes for defining customer requirements, designing products and processes, managing supply chains, producing the product, distributing product and services, and providing post delivery support. II.A. Business Acquisition and Program Management To be successful in the globally competitive environment of the twenty-first century, enterprises must develop and manage partnerships with their customers and be able to dynamically re-configure and align core competencies among suppliers, the enterprise and its partners in order to deliver best life cycle value to customers. Diagnostic Questions Are new business opportunities arising from lean enabled capabilities being fully exploited? Does customer feedback and usage data drive new business process development? Are assets allocated across the value stream in a consistent and balanced manner? Are program risks and resource requirements balanced to assure optimal flow throughout the product life cycle? Are skills and resources drawn from across the extended enterprise to enhance program development efforts? LP# LEAN PRACTICES CAPABILITY LEVELS II.A.1 Leverage Lean Capability for Business Growth Exploiting new business opportunities arising from lean enabled capabilities Level 1 Level 2 Level 3 Level 4 Level 5 Business improvement initiatives are ad hoc and are focused on operational efficiency. Improvement gains provide resources to facilitate future improvements. Potential business opportunities from applying lean thinking across core competences are recognized and plans have been developed. Benefits sustained from applying lean thinking within the enterprise are used to retain current business and/or win new business. There is full use of the enhanced capabilities and customer knowledge throughout the enterprise to leverage opportunities for competitive advantage. The strategic plan dynamically incorporates extended enterprise capabilities and stakeholder interests to identify and leverage opportunities. C D C D C D C D C D Lean Indicators (Examples) Reduced cost, increased quality and faster response times from waste eliminated are used to maintain or win new business. The ability to improve and refine processes quickly is used extensively to respond to changing customer requirements. A process is used to scan the competitive environment to exploit opportunities arising from the enhanced capabilities of the lean enterprise. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 64 of 166 SECTION II.A. - BUSINESS ACQUISITION AND PROGRAM MANAGEMENT

68 LP# LEAN PRACTICES CAPABILITY LEVELS II.A.2. Optimize the Capability and Utilization of Assets (People, equipment, facilities, etc.) Lean enables business growth through the redeployment of assets Level 1 Level 2 Level 3 Level 4 Level 5 Utilization of people and material assets is optimized within functional units. There is evidence of ad hoc cooperation between functional units to eliminate waste and share resources. An enterprise approach provides consistent and balanced asset allocation across the value stream. As a result of the application of lean concepts and techniques, assets are freed up to be applied across the enterprise to support current or growth activities. The ability exists to easily and quickly shift or divest resources to new opportunities. C D C D C D C D C D Lean Indicators (Examples) Assets freed up from lean implementation are readily redeployed. Workforce and its knowledge is nurtured, reallocated and maintained where possible. Available assets and resources are coordinated throughout the enterprise to leverage resources to the maximum. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS II.A.3. Provide Capability to Manage Risk, Cost, Schedule and Performance Success follows effective risk management Level 1 Level 2 Level 3 Level 4 Level 5 Programs are managed and staffed as independent entities. There is a management system to monitor and control program performance and staffing. Regular reviews focus on cost, schedule and performance of individual programs. Program reviews assess risk within individual programs and staffing is adjusted as necessary to mitigate risk. The programs are reviewed assessing the risk across the portfolio of programs with appropriate reallocation of resources. Risk abatement processes are used to optimize performance of the portfolio of programs. C D C D C D C D C D Lean Indicators (Examples) Programs and process reviews have a portfolio approach to achieve enterprise balance. A risk management process is fully integrated across the enterprise. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 65 of 166 SECTION II.A. - BUSINESS ACQUISITION AND PROGRAM MANAGEMENT

69 LP# LEAN PRACTICES CAPABILITY LEVELS II.A.4 Allocate Resources for Program Development Efforts Teaming for success Level 1 Level 2 Level 3 Level 4 Level 5 Program development efforts rely on functional units for allocation of the required skills. Some but not all skills / resources necessary are dedicated and assigned to program development. Skilled resources are narrowly guarded within programs. Some of the skilled resources are routinely shared across programs. Formal methods are being developed for determining team makeup and assignment of necessary skills. Resources and skills are routinely balanced and shared across the portfolio of programs. Virtual organizations are created as needed from the extended enterprise and provided with the skills and resources necessary to execute the development effort(s). C D C D C D C D C D Lean Indicators (Examples) A process is defined and used to ensure that cross-disciplinary skills are represented on teams. Resources and skills are easily and quickly shifted or divested to balance requirements across all program development efforts. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 66 of 166 SECTION II.A. - BUSINESS ACQUISITION AND PROGRAM MANAGEMENT

70 II.B. Requirements Definition Customer needs and values must be assessed continuously and translated into requirement statements that form the basis for product and process design. Diagnostic Questions Are the customer s needs continually evaluated in determining product and process requirements? Is a data collection and customer feedback process defined and deployed? Is product life-cycle data used in determining requirements and subsequent specifications? Are product and process capability data matched to design criteria? LP# LEAN PRACTICES CAPABILITY LEVELS II.B.1. Establish a Requirement Definition Process to Optimize Lifecycle Value Stakeholder pull vs. technology/product push Level 1 Level 2 Level 3 Level 4 Level 5 Requirements are defined internally based on past experience, rather than on a formal requirements definition process. Requirements definition process, which balances cost, schedule and performance, is partially developed, deployed and documented. Requirements definition process leverages value chain capabilities and focuses on overall life cycle implications. An iterative requirements definition process spans the value chain resulting in a minimal set of requirements that balances cost and performance. The requirements process is a strategic advantage for the extended enterprise contributing to increased responsiveness and new business opportunities. C D C D C D C D C D Lean Indicators (Examples) There is a process in place to determine clear and concise product and life cycle requirements, with acceptable ranges. The process ensures a balanced representation from all disciplines across the value chain. Structured methods are used to elicit and gather needs from the different stakeholders/customers. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 67 of 166 SECTION II.B. - REQUIREMENTS DEFINITION

71 LP# LEAN PRACTICES CAPABILITY LEVELS II.B.2. Utilize Data from the Extended Enterprise to Optimize Future Requirement Definitions Closed loop processes are in place to capture operational performance data Level 1 Level 2 Level 3 Level 4 Level 5 Warranty claims and deficiency reports represent the primary source of data that is collected and analyzed for impacts to present requirements. A proactive process is being developed to collect product usage data as the basis for future requirements. Data are collected on usage, maintenance, disposal and future needs from across the present value chain and fed into future design solutions and requirement definitions. Process allows real-time access, collection and dissemination of data from across the extended enterprise for analysis by stakeholders for future use. The process is established across the extended enterprise to actively seek data on needs, usage and process capability to populate a data repository that can be mined for future requirements. C D C D C D C D C D Lean Indicators (Examples) Customer feedback is actively sought and provided as input to the requirements definition process. A database of usage, maintenance and disposal data is maintained and extensively used to establish future requirements definitions. Enhanced knowledge of customer and stakeholder requirements and desires is used to leverage future requirements. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 68 of 166 SECTION II.B. - REQUIREMENTS DEFINITION

72 II.C. Develop Product and Process Product and process design decisions must be based upon value quantifications and tradeoffs that incorporate inputs from affected stakeholders. Diagnostic Questions Is the product development process formalized and understood? Are customers and other lifecycle stakeholders regularly involved in product and process development? Are downstream stakeholder issues in design and development considered and incorporated as early as possible in the process? Have most of the unnecessary iterations in the development cycle been removed? Has the development cycle been simplified and aligned to the critical path? Are products and processes being developed concurrently? LP# LEAN PRACTICES CAPABILITY LEVELS II.C.1. Incorporate Customer Value into Design of Products and Processes Understanding customer value allows continuous improvement of product and process Level 1 Level 2 Level 3 Level 4 Level 5 Customer inputs are captured only at the beginning of the development. Customer inputs are considered qualitatively through top-level liaison and occasional reviews. The customer(s) are formally represented on Integrated Product Teams (IPT) and feedback mechanisms exist to facilitate timely design iterations. The customer(s) are actively involved with the IPT at multiple levels to jointly improve the effectiveness and quality of the product and process design. The customer(s) are routinely involved with IPT with effective, continuous communication. Sharing of benefits is well established; value quantification and tradeoffs are a continuous and automatic part of the process. C D C D C D C D C D Lean Indicators (Examples) Customer inputs are sought and used actively throughout the development process. Designs satisfy customer value requirements, without unnecessary functionality. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 69 of 166 SECTION 11.C. - DEVELOP PRODUCT AND PROCESS

73 LP# LEAN PRACTICES CAPABILITY LEVELS II.C.2 Incorporate Downstream Stakeholder Values (Manufacturing, Support, etc.) into Products and Processes Understanding downstream stakeholders allows value to flow seamlessly to customer Level 1 Level 2 Level 3 Level 4 Level 5 Manufacturing issues are considered late in design. Manufacturing and assembly issues are considered earlier in projects, but in an ad hoc manner. Supplier and cost considerations are limited. Multi-functional teams include some downstream disciplines and key suppliers. Priorities of downstream stakeholders are quantified as early as possible in design, and used for process evaluation and improvement. Downstream stakeholders values in the extended enterprise are quantified, and balanced via tradeoffs, as a continuous part of the process. C D C D C D C D C D Lean Indicators (Examples) There is early consideration and incorporation of downstream stakeholders issues throughout design development. The scope of considerations integrated into designs has been extended to include manufacturing, assembly, serviceability and cost implications. Products are easier to produce and have lower life-cycle costs. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS II.C.3 Integrate Product and Process Development Breaking down of functional silos enables seamless communication and value flow Level 1 Level 2 Level 3 Level 4 Level 5 Development is performed in functional organizations. Multidisciplinary development is used to a limited extent. Multidisciplinary development is used extensively; metrics are established for process evaluation. Multidisciplinary techniques are deployed for most programs/product development efforts; metrics are used for process evaluation and improvement. Product and process definition is seamlessly integrated both internally and with the upstream and downstream stakeholders. C D C D C D C D C D Lean Indicators (Examples) Resources and skills are balanced across projects and programs, to aid maximum re-use and sharing of knowledge. Suitability and timing of design information released, is matched to the requirements of subsequent processes. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 70 of 166 SECTION 11.C. - DEVELOP PRODUCT AND PROCESS

74 II.D. Manage Supply Chain Internal enterprise core competencies are aligned with those of suppliers such that the customer value chain is optimized throughout the extended enterprise. Diagnostic Questions Have the number of suppliers been reduced to a level that can be effectively managed? Do contractual arrangements enable supplier flexibility and adaptation to both expected and unexpected changes? Are in-house capabilities balanced with supplier capabilities to optimize network-wide performance? Have opportunities for supply chain development been fully exploited? Are constraints and bottlenecks throughout the extended enterprise identified and rapidly resolved to ensure continuous flow? Are supplier partnerships and strategic alliances established to strengthen dynamic competitive advantage? LP# LEAN PRACTICES CAPABILITY LEVELS II.D.1 Define and Develop Supplier Network Core competencies aligned across supplier network Level 1 Level 2 Level 3 Level 4 Level 5 Large number of direct suppliers in an hierarchical structure. There is little evidence of a defined supplier strategy and limited knowledge of the relationships within the supplier network. The supplier base has been rationalized to focus on key suppliers with high impact on strategic objectives. Supplier network is defined based on strategic analysis of value creation processes internally and across suppliers. Strategic outsourcing and make-buy decisions focus on achieving an optimal combination of core competencies both within the enterprise and across the supplier network. Supplier network is defined, developed and integrated to ensure efficient creation of value for enterprise stakeholders over the entire product lifecycle. C D C D C D C D C D Lean Indicators (Examples) The supplier network is defined and developed in line with the strategic plan to ensure efficient creation of value for all enterprise stakeholders. Supplier expertise and capabilities complement enterprise core competencies; unnecessary overlap and duplication has been removed. Supplier network is flexible and can quickly adapt to changing requirements and unanticipated disruptions. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 71 of 166 SECTION II.D. - MANAGE SUPPLY CHAIN

75 LP# LEAN PRACTICES CAPABILITY LEVELS II.D.2. Optimize Network- Wide Performance Partnering with key suppliers and optimizing processes to achieve customer value Level 1 Level 2 Level 3 Level 4 Level 5 Supplier relationships are at arm s length and adversarial. Purchasing department manages a large number of short-term, lowest-bid contracts. Formal processes are in place for supplier assessment and approval. Longterm purchase agreements focus on cost reduction. Limited visibility into supplier business processes. Common objectives, roles and responsibilities are established and communicated, with a few supplier partnerships or strategic alliances in place. Early involvement of key suppliers in design and development. Strategic alliances with key suppliers emphasize a high degree of information- sharing, risk-sharing & benefit sharing. For others a differentiated set of strategies and practices are in place. Production and delivery are synchronized across the supplier network. Supplier capabilities are dynamically optimized to ensure efficient value creation and building durable competitive advantage, creating flexibility and responsiveness to shifts in the marketplace. C D C D C D C D C D Lean Indicators (Examples) Formal processes are in place for supplier assessment and approval. Roles and responsibilities are clearly defined in contractual relationships, and risk and reward shares agreed upon. Production and delivery are synchronized throughout the supplier base to ensure continuous flow, with minimal waste. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS II.D.3. Foster Innovation and Knowledge- Sharing Throughout the Supplier Network Incentivizing innovation & technology transfer Lean Indicators (Examples) Level 1 Level 2 Level 3 Level 4 Level 5 Primary focus on internal capabilities, with little cognizance of tacit (experience-based) or explicit (formal) knowledge across suppliers. Internal organizational structures and processes are established to leverage supplier-based knowledge and innovation. Technology roadmaps include suppliers in pursuance of common strategic vision. Shared metrics for continuous improvement are utilized. Knowledge transfer mechanism is created for open and rapid access throughout the supplier network. Mutually-beneficial arrangements are established to foster innovation across suppliers. A process for on-going communication of needed changes in vision, strategy, metrics and implementation is in place. C D C D C D C D C D Long-term collaborative relationships are established and maintained where possible. Processes to facilitate sharing and transfer of innovation, knowledge and technology are deployed. Evidence Opportunities A mutually beneficial continuous improvement process is established throughout the supplier network over the entire product lifecycle. Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 72 of 166 SECTION II.D. - MANAGE SUPPLY CHAIN

76 II.E. Produce Product The production system must be designed and managed according to the principles and practices of the lean production paradigm. Diagnostic Questions Is production knowledge and capability regarded as a strategic competitive advantage? Has enterprise strategy been aligned with manufacturing capability? Are products pulled in accordance with customer demand in real-time? Have the production processes been ordered and adapted for flow? Are inventories maintained at minimal levels throughout the production process? LP# LEAN PRACTICES CAPABILITY LEVELS II.E.1 Utilize Production Knowledge and Capabilities for Competitive Advantage Strategic leveraging of manufacturing capability Level 1 Level 2 Level 3 Level 4 Level 5 Production capability is not understood outside the manufacturing organization. Production knowledge and capabilities are captured and used to influence manufacturing strategy including make/buy decisions. Production capabilities are understood and utilized across the enterprise. Enterprise strategy and manufacturing capabilities are aligned. Manufacturing system design is integrated with strategic make/buy decisions across the enterprise and aligned with enterprise strategy to create competitive advantage. Production knowledge is leveraged across the extended enterprise to generate strategic opportunities for value creation. C D C D C D C D C D Lean Indicators (Examples) Production capability constitutes a major consideration in enterprise level long-range, strategic planning. Knowledge of production capabilities are maintained and shared throughout the extended enterprise. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 73 of 166 SECTION II.E. - PRODUCE PRODUCT

77 LP# LEAN PRACTICES CAPABILITY LEVELS II.E.2. Establish and Maintain a Lean Production System Defect free production pulled by the customer Level 1 Level 2 Level 3 Level 4 Level 5 Production system operates on a batch and queue schedule with high inprocess inventory, with quality based on inspection rather than prevention. Production system operates with a batch and queue schedule with limited cellular or in-line layouts to improve flow. Product flow paths are identified and key elements of the layout have been reordered enhancing flow and reducing in-process inventory, with some suppliers delivering to point of use where appropriate. Selected products are produced using a flow system pulled directly by customer demand (take time), which includes key suppliers. Work is segmented and organized along the value stream flows to achieve defect free production upon demand through the implementation of pull from customer through material suppliers. C D C D C D C D C D Lean Indicators (Examples) Conversion to lean has freed up floor space, equipment, human resources and capital for re-deployment. Inventory levels have been reduced in line with gains made to process stability and variation reductions. Work is performed only when pulled from subsequent customers in the value chain. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 74 of 166 SECTION II.E. - PRODUCE PRODUCT

78 II.F. Distribute and Service Product On-time deliveries of defect free products are complemented by superior post delivery service, support and sustainability. Diagnostic Questions Are production schedules and capacity considered prior to making a sales/contract commitment? Are product delivery data flowed throughout the value chain? Does the organization satisfy customer maintenance requirements effectively? Are in-service usage data deployed to appropriate personnel? Are customer rejects/returns treated as opportunities? LP# LEAN PRACTICES CAPABILITY LEVELS II.F.1. Align Sales and Marketing to Production Matching demand and capabilities Level 1 Level 2 Level 3 Level 4 Level 5 Marketing pushes product sales/bids with little consideration of current production capacity. Marketing provides production with partial visibility to current and future potential order base. Order base not aligned to production capacity. Products are supplied in smaller more frequent batches, balancing orders to current production capacity. Most running orders are fully visible to production. Matching real-time customer demand and delivery requirements with production capabilities, using extensive knowledge base of customer preferences. Actual and future prospective orders are matched in real-time with production capabilities throughout the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Sales / bids are aligned to current and future production capacity and capabilities. There is constant feedback and input between sales/marketing and production elements across the enterprise. Sales / bids commit product delivery to real-time customer demand, without the use of buffer stocks. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 75 of 166 SECTION 11.F. - DISTRIBUTE AND SERVICE PRODUCT

79 LP# LEAN PRACTICES CAPABILITY LEVELS II.F.2. Distribute Product in Lean Fashion Right product, right quantity at the right time Level 1 Level 2 Level 3 Level 4 Level 5 Distribute from inventories by batch; customer inspects products upon receipt. Distribute in smaller batch sizes more frequently in line with increased reliability. There are programs in place to reduce customer receipt inspection. Product distribution from low stock levels is triggered by an internal pull system; some products are delivered directly to point of use with limited inspection. Defect free items are produced and delivered without receipt inspection to real-time customer usage; customers are given access to databases for order status visibility. Defect free distribution on demand is achieved via the implementation of customer pull from end customer through material suppliers. C D C D C D C D C D Lean Indicators (Examples) Point of use delivery to customers with minimal receipt inspection has become standard practice. Deliveries are synchronized to minimize goods in transit and transportation requirements. Delivery cycle is shorter and more reliable. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS II.F.3 Enhance Value of Delivered Products and Services to Customers and the Enterprise Responding to the voice of the customer Lean Indicators (Examples) Level 1 Level 2 Level 3 Level 4 Level 5 Product support system reacts to customer needs, usually on-time and from inventory. Support system delivers products / services on time, but with disruptions to production flow and associated resources. Support system flow paths are identified and are beginning to be integrated with lean product development and production flows. Standardized customer and product support processes provide responsive information and product flow fully integrated with development and production flows. Customer needs for postdelivery products / services are anticipated in enterprise plans and fulfilled by adaptation and extension of capabilities already provided. C D C D C D C D C D Solutions to product / service issues are coordinated throughout the extended enterprise to find fast, cost effective solutions. Customer and product support processes have been standardized and are regularly reviewed against customer feedback. Disruptions to design and production flow from support services has been minimized. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 76 of 166 SECTION 11.F. - DISTRIBUTE AND SERVICE PRODUCT

80 LP# LEAN PRACTICES CAPABILITY LEVELS II.F.3 Provide Post Delivery Service, Support and Sustainability Providing customer solutions Level 1 Level 2 Level 3 Level 4 Level 5 High level of spares necessary because of unknown failure rates and long lead times for spare replenishment. Collection of data on failure trends permits both determination of service interval points for preventative maintenance and a reduction of spare part levels. The enterprise is increasingly involved in addressing customer maintenance solutions. Spare levels are reduced through common platforms; root cause analyses are fed back into product design. The enterprise is part of the customer s maintenance solution by ensuring availability through replacement of critical components before failure. The enterprise has become part of customer s business solution via warranting of product performance. C D C D C D C D C D Lean Indicators (Examples) Customer feedback is proactively maintained and used to predict any emerging service issues and enhance future designs. Spares levels are reduced in line with short predicable lead times for replacement spares. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 77 of 166 SECTION 11.F. - DISTRIBUTE AND SERVICE PRODUCT

81 LESAT Maturity Matrices Section III: Enabling Infrastructure III.A. Lean Organizational Enablers III.B. Lean Process Enablers Page 78 of 166 SECTION III - ENABLING INFRASTRUCTURE

82 Section I Lean Transformation/ Leadership Section II Life Cycle Processes Section III Enabling Infrastructure Lean Organizational Enablers Lean Process Enablers Enabling Infrastructure supports the execution of enterprise leadership and life cycle processes. These enabling processes provide the means for managing the resources to the organizations they serve as internal customers. Since they enable rather than directly result in enterprise success, they can be easily overlooked as a source of waste. However, waste that is inherent in these processes can negatively impact the enterprise as a whole in a manner hidden from view. This section of the LESAT addresses the level of lean implementation applicable to the Enabling Infrastructure. Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 79 of 166 SECTION III - ENABLING INFRASTRUCTURE

83 Section III - Enabling Infrastructure Definition: To achieve a successful lean transformation, the enterprise infrastructure must support the implementation of lean principles, practices and behavior. III.A. Lean Organizational Enablers The support units of an enterprise must themselves become lean in executing their assigned function, but they must also redefine what they do such that they support lean implementation within the life cycle processes and the lean transformation/leadership processes. Diagnostic Questions Do the finance and accounting measures support the implementation of lean? How well have the financial and accounting systems been integrated with non-financial measures of value creation? Can stakeholders retrieve financial information as required? Are human resource practices reviewed to assure that intellectual capital matches process needs? Are the information technology systems compatible with stakeholder communications and analysis needs? Do processes create the least amount of environmental hazards practical? LP# LEAN PRACTICES CAPABILITY LEVELS III.A.1. Financial System Supports Lean Transformation Lean requires appropriate financial data Level 1 Level 2 Level 3 Level 4 Level 5 Finance system provides basic balance sheet and cost accounting data; there is little awareness and exploration of broader support roles for finance. Initial efforts are underway to adapt or modify systems to compensate for the inadequacies of the formal financial system. Finance system is overhauled to provide data and financial information to support and enable a lean transformation at any level. Financial system scope is expanded to integrate with non-traditional measures of value creation (e.g., intellectual capital, balanced scorecard, etc.). Financial systems provide seamless information exchange across the extended enterprise, with emphasis on value creation for all stakeholders. C D C D C D C D C D Lean Indicators (Examples) Financial measures that conflict with lean activity are no longer used to measure progress and performance. The financial system handles a balanced set of financial and non-financial measures to assist decision-making. The financial system has been overhauled to ensure fast and efficient processing of information as required. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 80 of 166 SECTION III. A. - LEAN ORGANIZATIONAL ENABLERS

84 LP# LEAN PRACTICES CAPABILITY LEVELS III.A.2. Enterprise Stakeholders Pull Required Financial Information Data on demand Level 1 Level 2 Level 3 Level 4 Level 5 Lagging financial information is reported through regularly scheduled standardized reports. Specific requests for measures require extraordinary effort. Finance actively provides traditional financial information to assist users in planning and programming activities. Users are able to directly access and use financial information to make tradeoff decisions. Users are able to pull financial and other value creation information to support decision analysis in the format desired. Users across the extended enterprise generate and share timely financial and performance data. Data reflects extended enterprise results. C D C D C D C D C D Lean Indicators (Examples) Financial and performance measurement data can be accessed as needed in user-defined format. Financial information can be extrapolated to forecast outcomes. System provides up to date information on request and rationalizes information no longer used. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS III.A.3. Promulgate the Learning Organization Learning Organizations create a flexible workforce Level 1 Level 2 Level 3 Level 4 Level 5 The human resources processes concentrate on recruiting, placement and benefits. Personnel training is ad hoc and not aligned to organizational needs. A well-defined personnel development process, aligned with organizational needs, is applied for selected employees. Personnel development process is extended to all employees and incorporates the anticipated future needs of the lean enterprise. Resources and facilities are dedicated for learning. A learning climate is promoted within the enterprise through ready access to information and input to strategy/ policy making. Opportunities for extending learning experiences are provided. A learning climate is promoted throughout the extended enterprise by the sharing of capabilities, knowledge, skills and best practice. C D C D C D C D C D Lean Indicators (Examples) Intellectual capital is regarded as a corporate asset. Employees have individual training plans, which are aligned to the current and projected skill base requirements. Employees actively capture and incorporate lessons learned into future training and practices. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 81 of 166 SECTION III. A. - LEAN ORGANIZATIONAL ENABLERS

85 LP# LEAN PRACTICES CAPABILITY LEVELS III.A.4. Enable the Lean Enterprise with Information Systems and Tools Facilitate the flow of information and knowledge Lean Indicators (Examples) Level 1 Level 2 Level 3 Level 4 Level 5 The information infrastructure consists mainly of stand-alone systems. The need for systems integration is recognized but no improvement plan exists. Elements of a common information infrastructure have been determined, and an implementation plan is under development. Maintenance of legacy systems consume most IT resources. The information infrastructure has been formalized and is in use in selected locations. Legacy systems are rationalized and aligned across the value stream. An information infrastructure is deployed that supports seamless information exchange across the enterprise. Information systems are fully interoperable and the pertinent information is easily accessible and usable across the extended enterprise. C D C D C D C D C D Compatible information systems and tools exist across the extended enterprise. Information systems facilitate fast and effective transfer and retrieval of information required. Information systems and tools complement lean processes and practices and are easily adapted to accommodate change. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS III.A.5. Integration of Environmental Protection, Health and Safety into the Business Cleaner, healthier, safer Level 1 Level 2 Level 3 Level 4 Level 5 The enterprise complies with all known legal and regulatory requirements and reacts if issues are identified. Consideration is given to means of mitigating conditions that cause environmental, health and safety issues. A process is in place to proactively identify Environmental protection, Health and Safety (EHS) risks and manage them appropriately, with a preference for source prevention. Forward thinking solutions to potential life cycle EHS risks are implemented early in product (service) design and throughout the value stream. EHS risk prevention and mitigation is part of the natural way business is conducted across the extended enterprise, creating a sustainable environment and creating a competitive advantage. C D C D C D C D C D Lean Indicators (Examples) Health and safety issues are routinely addressed in employee driven improvement activities. Processes and designs are proactively adapted to minimize environmental, health and safety issues at source. Designs meet current environmental regulations and are capable of easy adaptation to meet projected changes over the life cycle of the product. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 82 of 166 SECTION III. A. - LEAN ORGANIZATIONAL ENABLERS

86 III.B. Lean Process Enablers A number of enablers can facilitate lean implementation via consistent application throughout the enterprise. Diagnostic Questions Have the full benefits from process standardization been realized across the enterprise? Has process standardization and reuse been imbedded in enterprise policies and procedures? Are common tools and systems used throughout the enterprise? Is process variation continually reviewed and reduced in all processes throughout the enterprise? LP# LEAN PRACTICES CAPABILITY LEVELS III.B.1. Process Standardization Strive for consistency and re-use Lean Indicators (Examples) Level 1 Level 2 Level 3 Level 4 Level 5 Processes vary by program or product line. Key processes in the organization have been identified that could benefit from standardization, with initial efforts underway. Selected processes are standardized across the enterprise. Process standardization and reuse is consistently employed across the enterprise. Extended enterprise interface processes have been standardized. C D C D C D C D C D The workforce plays a significant role in devising standard processes and practices, which are adhered to and periodically updated. Process improvements are documented in a concise and easy to use standard format and transferred. Processes are standardized where applicable throughout the extended enterprise. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 83 of 166 SECTION III.B. - LEAN PROCESS ENABLERS

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88 LP# LEAN PRACTICES CAPABILITY LEVELS III.B.2. Common Tools and Systems Assuring compatibility, reducing costs Level 1 Level 2 Level 3 Level 4 Level 5 Tools and systems vary by program or work center. Have identified high leverage opportunities for common tools and systems; initial deployment in a few areas. Plans are in place for achieving common tools and systems and have been implemented to varying degrees across the enterprise. Common tools and systems have been implemented throughout the enterprise. Compatibility of tools and systems with those of enterprise partners in the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Policies have been established and deployed that require the use of common tools and systems throughout the enterprise. Common tools and systems provide easy access and reuse of knowledge across the product life cycle. Enterprise-wide use of common tools and systems provides enhanced compatibility between processes and aids employee transfer. Evidence Opportunities LP# LEAN PRACTICES CAPABILITY LEVELS III.B.3. Variation Reduction Reduce uncertainty by reducing variation Level 1 Level 2 Level 3 Level 4 Level 5 There is limited use of variation reduction tools and methods. There is some evidence of variation understanding in parts of the organization. There is evidence that sources of variation are being identified and analyzed. Initial efforts are underway to reduce variability. A formal approach that balances customer value and variation reduction is implemented in many parts of the enterprise. Considerable benefits are realized from reduced variation in processes and practices across the enterprise. Benefits of reduced variation are realized across the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) Process ownership and visual displays of process variation enable quick and easy identification of adverse trends. High levels of process stability are maintained by utilizing mistake proofing and root cause identification techniques to the fullest. Variation reductions achieved enable short predicable lead times for information and material flow. Evidence Opportunities Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 85 of 166 SECTION III.B. - LEAN PROCESS ENABLERS

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90 Appendix A The What and Why of Lean LEAN IS ABOUT BEHAVIOR First and foremost, it is important to understand that Lean is not merely a set of practices usually found on the factory floor, but rather a fundamental change in how the people within an organization think and what they value, thus transforming how they behave. Positive results are achieved from the supporting practices that follow once a common set of beliefs and principles are understood and adopted. A Lean organization understands and believes in the fundamental virtue of its basic Lean principles. Within that Lean organization, everyone is focused on identifying and eliminating sources of waste and inefficiency. They look at the world through the eyes of their customer and seek to fulfill customer expectations. They value what the customer values. They anticipate change and learn how to be responsive to make change their ally. They understand the concept of flow, the power of sharing information, and the criticality of relationships. Because Lean is about beliefs and behavior, it is applicable beyond the factory floor to encompass the entire Enterprise. Its benefits pervade the organization. Employees who adopt a focus on eliminating waste, and who see the world through their customers eyes, can improve whatever flows and whatever is produced in terms of cycle time, quality, and efficiency. Unfortunately, too many people have been introduced to a very narrow perspective of Lean. Often viewed as a collection of practices with names such as Kaizen, poka-yoke, and kanban, Lean has also been relegated to being appropriate mainly on the factory floor. As a result, the true transformational power of adopting Lean has often been lost, with organizations desiring to improve realizing only a fraction of its potential. The true transformational power of Lean lies in its inherent ability to unlock the potential of the entire organization: It can transform everyone and everything that an Enterprise does. In fact, when totally adopted, Lean extends its transformational power both upstream to the supplier base as well as downstream to customers! The following pages offer insights into the benefits and characteristics of Lean, designed to help you understand Lean more concretely. Above all, Lean is about how an organization thinks and behaves. This belief is what leads to applying the correct Lean practices and sustaining the dynamic, continuous improvement process. BENEFITS OF LEAN What benefits can a company expect to realize as it transitions from a mass-production mentality to one based on Lean principles and practices? Benefits accrue both in factory operations and in areas beyond the production floor. Companies that have attempted to convert their factory operations to Lean, without simultaneously adopting Lean principles and practices throughout the entire organization, have not realized Lean s full potential. In fact, many such Page 87 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

91 companies have viewed their Lean transformation as a failure. Companies that have enjoyed the greatest success in transitioning to Lean are those that take a holistic approach and view the transformation as a fundamental restructuring of the Enterprise, including its organizational structure, business and information systems, workforce policies, incentive systems, and relationships with customers and suppliers. Benefits in Factory Operations Factories that convert to Lean production typically achieve the following results. There is a dramatic improvement in responsiveness to customers. Shipments are rarely late; the number of defects reaching customers drops significantly, and overall customer satisfaction is much greater thereby increasing market share. Most of the factory-floor chaos is eliminated. Rather than aisles clogged with batch production orders waiting for processing at banks of identical machines grouped together, individual parts and assemblies move smoothly within the Lean factory s synchronized manufacturing cells, never stopping until processing and inspection are completed. Production flow times are reduced by 80 percent to 90 percent. Workstations are well organized and neat; no idle parts or carts clutter the workspace. No expeditors are needed to push through late production orders by brute force. Storage racks for work-in-process are largely eliminated. Material handling is simplified, often with manual methods replacing automation. Re-work stations are gone. Scrap is significantly reduced, and the factory floor is much cleaner. Labor productivity is double or triple that of the past. Production control systems and their associated information systems are greatly simplified. Shipments from certified suppliers arrive shortly before needed, are organized in the correct sequence, and move directly to the point of use with no need for incoming inspection. Warehouse space for purchased parts and materials is reduced by 80 percent to 90 percent in many cases. Completed orders are shipped immediately to customers upon completion of the last stage in the internal value chain, rather than accumulating in large warehouses. Orders are shipped to customers in small quantities (often single units) rather than in large lots. The total floor space needed in Lean factories is typically 55 percent to 65 percent of that needed in massproduction factories for the same level of production. Inventory levels at all stages (raw materials, in-process, and finished goods) are dramatically lower, often by greater than 90 percent. Page 88 of Copyright? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 88 of 166

92 Appendix A The What and Why of Lean Continued To support these claims, the book Lean Thinking (Womack and Jones 1996, p. 27) reports the following improvements from converting to Lean: INITIAL LEAN CONTINUOUS CONVERSION IMPROVEMENT LABOR PRODUCTIVITY Double Double again PRODUCTION THROUGHPUT TIMES 90% reduction 50% reduction INVENTORIES (THROUGHOUT) 90% reduction 50% reduction ERRORS REACHING CUSTOMERS 50% reduction 50% reduction SCRAP 50% reduction 50% reduction TIME TO MARKET, NEW PRODUCT 50% reduction 50% reduction Values in the Initial Lean Conversion column are the results that can be expected from the initial conversion effort. Values in the Continuous Improvement column are the further improvements that can be expected from continuous improvement efforts within two to three years. Improvements can be expected to continue indefinitely, but at a declining rate. (These values represent rough averages in the companies studied by Womack and Jones; they have not been validated and are obviously not precise.) Benefits Beyond Production Operations We would be missing a great opportunity were we to confine our application of Lean principles and practices to the factory floor. Lean thinking can and should be applied to all functions in the enterprise. Consider, for example, the Lean principle of one piece flow. Here is how this principle should be implemented across several enterprise functions. PRODUCTION Parts and assemblies never stop moving until order is shipped PRODUCT DESIGN Design never stops moving forward until it is in production BUSINESS PROCESSES Paperwork (or electronic equivalent) never stops moving until processing is completed Page 89 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

93 Similarly, the same Lean principles associated with material flow and processing should be applied to information flow and processing: minimize material/information flow times; minimize material/ information content; shorten and straighten material/information flow to the maximum extent possible, and so on. Using still another analogy from Lean production, the monolithic office should be converted to cellular offices, just as the monolithic factory is modularized into smaller production cells. Office equipment should be right sized (for example, huge, centrally located, monolithic printing machines should be replaced with smaller document processors dispersed among the cellular offices.) While there are no reported studies that quantify all the benefits of Lean beyond production, the following general outcomes logically can be expected. The voice of the customer becomes the primary driving force in the enterprise. This has an impact on product quality, organizational structure, production processes, policies, and overall behavior. New product development time is greatly reduced. Customers, suppliers, and enterprise specialists are involved in product design from the outset. Relationships with suppliers have been revolutionized. Adversarial posturing has been replaced by winwin cooperative practices. Target costing results in continuously lower prices for purchased items, with equitable sharing of savings. Responsiveness to changing market conditions is enhanced. Production rates can be adjusted much more rapidly to meet fluctuating market demand. New products are introduced rapidly, with minimal disruption. The organizational structure shifts from a vertical to a horizontal focus, aligning value-adding activities with the customer value stream. Decision-making is decentralized, contributing to enterprise responsiveness. The organization is flattened, greatly reducing overhead. The workforce is empowered. Integrated product/process teams function as self-managed work units, reducing the cost and clumsiness of supervision. The workforce is multi-skilled, contributing greatly to the flexibility and responsiveness of the Enterprise. Employees perform inspection and maintenance, and also determine work methods and workplace arrangement taking on tasks once the purview of highly paid specialists. These specialists are now freed to focus on the overall Enterprise. Improved operating margins and increased flexibility provide enhanced business opportunities in existing or new markets. Page 90 of Copyright? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 90 of 166

94 Appendix A The What and Why of Lean Continued Specific Benefits in Aerospace Between 1996 and 1999, LAI consortium members made several site visits to facilities of LAI sponsor-companies to observe progress toward implementing Lean principles and practices. The site visit report s Executive Summary speaks to the potential benefits of Lean implementation in aerospace by posing two questions: What if an aerospace company and its key suppliers had mastered the application of Lean practices to the point where they approached Toyota as a practitioner of the art? What if all of the best results the team saw on various LAI site visits were achieved in every operation throughout a single aerospace enterprise? According to those who participated in the site visits, Enterprises that met these two criteria would be able to achieve tremendous improvements in product development and production: Product Development Cycle time down 50% Product development man-hours down 50% Software development cost down 50% Prototypes made without tools No physical mockups Engineering changes after release reduced by 50% ECP paperwork virtually eliminated CDRLs down 80% Production Assembly touch hours down 49% Nonconformance costs down 70% Assembly support labor down 80% Inventory reduced by 90% Assembly cycle time down 47% Engineering changes reduced by 60% Fabrication costs reduced 50% Part lead-time down 69% DPMO down 90% It is envisioned that an enterprise could develop a new aircraft in four to six years (versus today s twelve- to fifteenyear standard) at half the current development cost. It may also be able to deliver aircraft and missiles with a production lead-time of less than one year and at half the current production costs. That Enterprise does not exist today, but the achievement does not appear to be out of reach for an Enterprise with the right motivation. Every element of this level of performance has been demonstrated at one or another of the LAI companies visited; what is needed is the leadership to implement them all. Page 91 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

95 COSTS OF LEAN The remarkable improvements resulting from converting to the Lean paradigm cannot be achieved without a considerable investment. The primary investment required, however, is the time of the entire management team and workforce. smaller machines to serve the same function will also require capital expenditures, as will mistake-proofing manufacturing equipment and processes. Similarly, there may be some expenditures in information technology to increase information flow across the Enterprise (e.g., integrated CAD/CAM systems). Experience has shown that Lean conversion does not typically require extensive capital investments. Lean is not necessarily high technology, but rather reduces the need for sophisticated, complex approaches to production management and information systems. Lean does require a considerable investment in education and training. There may also be the costs of acquiring new tooling to reduce set-up times. Replacing large monument machines with several Typically, the savings from reduced inventory levels alone are greater than all the costs of converting to Lean. Freed-up floor space becomes available for future expansion, or may be rented or sold. Shortened product development lead times also result in reduced resource requirements. On balance, implementing Lean actually reduces capital investment and other resources over the long run. OVERARCHING STRATEGIC CONCEPTS OF LEAN Six core strategic concepts of the Lean paradigm capture the principal nature of Lean. Customer Value and Value Stream Waste Minimization and Continuous Improvement Flow and Pull Near Perfect Product Quality Horizontal Organizational Focus Relationships Based on Mutual Trust and Commitment These six concepts clearly distinguish Lean from mass production. The manner in which these concepts are addressed in Lean organizations is fundamentally different from the approach in traditional organizations, as discussed in the following sub-sections. Page 92 of Copyright? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 92 of 166

96 Appendix A The What and Why of Lean Continued Customer Value and Value Stream The starting point for Lean thinking is value as defined by the end customer. Defining value requires thinking from the customer s perspective and working inward to the company s capabilities and core processes. Ultimately, value is defined in terms of specific products and services having specific capabilities/functionalities, offered at specific prices to specific customers, to be delivered defect-free at specific times. Value must be viewed in terms of the entire customer experience. The goal is to streamline the entire experience, thereby delighting the customer with a complete solution (Gunneson 1997). Once customer value is defined, the Enterprise must determine specifically how that value can be created and delivered in the most efficient and cost-effective manner. A value stream is an end-to-end, linked set of actions, processes, and functions necessary to transform inputs (information, raw materials, labor, energy, etc.) into a finished product delivered to the customer. The value stream includes service after the sale. Customers pull value from the value stream. Waste Minimization and Continuous Improvement Defining the value stream as indicated above provides a basis for performing an in-depth analysis of each individual action in that value stream. Each action is classified into one of the following categories: 1. It is an action that unambiguously creates value. 2. It is an action that creates no value but is unavoidable given the current capabilities within the company. 3. It is an action that creates no value and should be eliminated immediately. Actions in categories (1) and (2) are analyzed further in an effort to improve the actions as much as possible and eliminate unnecessary resource expenditures. This process never ends. The organization implements a formal Continuous Improvement process that relentlessly seeks to reduce waste of all kinds and continually improve the product and service delivered to the customer. Consequently, Lean Enterprises realize ongoing reductions in response cycle times, production times, costs, required production space, and errors. The workforce is heavily involved in the Continuous Improvement process and is the primary source of ideas and initiatives that generate improvements. This applies to the entire organization, not just production operations. Page 93 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

97 Flow and Pull Once wasteful actions along the value stream are eliminated to the maximum extent possible at a given time, the next Lean principle is put into practice: making the remaining value-creating steps flow. Here the primary challenge is to discard the batch-and-queue mentality prevalent in mass production and implement small-lot production, with batch sizes of a single unit as the ultimate goal. Flow is best achieved by discarding traditional functional organizational structures, to be replaced with integrated product/process teams organized along the value stream (see the Horizontal Organization discussion below). It is important to note that the concept of flow and small batch size applies not only on the factory floor but also throughout the organization (e.g., the flow associated with administrative procedures). Near-Perfect Product Quality A Lean production system operates like a fine-tuned watch, with each element highly dependent upon other elements with which it interacts. Since there are no buffers, any part delivered from one work unit to another must meet specifications. Defects cannot be tolerated. Consequently, much effort is expended in designing processes that turn out near-perfect (within tolerances) parts every time. Also, there are no re-work stations to compensate for defective production. If a defective part is produced, it must be detected immediately (not passed to the next workstation) and the situation resulting in the defect must be determined and corrected before production is resumed. This same tight adherence to very high quality standards carries through fabrication, assembly, and final product completion. While these principles are expressed in terms of production systems, they should also be implemented and rigorously enforced in all areas of the Enterprise. TQM programs have demonstrated the benefits of implementing high quality standards pervasively throughout the Enterprise. Customer pull is an important conceptual breakthrough in the creation of the Lean paradigm. Customers pulling value from the value stream (rather than the Enterprise pushing products onto customers) results in subsequent pulling actions that cascade up the value chain, stage by stage, through the Enterprise and all the way to the supply chain. Horizontal Organization Focus The traditional organizational structure (a silo with the various units representing the functions of a mass production organization) is incompatible with the value stream flow. Its design supports long production runs of standardized parts in large batches but does not support one-piece flow and just-in-time (pull) production. Companies that have successfully transitioned to the Lean paradigm have found that Integrated Product/Process Design (IPPD) teams organized as self-managed work teams to be an effective structure. In this structure, work teams focus horizontally on a linked set of activities along the value stream, rather Page 94 of Copyright? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 94 of 166

98 Appendix A The What and Why of Lean Continued than reporting up a chain of command through many layers. IPPD teams include members from engineering design, production operations, industrial engineering, quality assurance, purchasing (supply chain management), human resources, suppliers, and most important, the customer. In addition to using IPPD, many of these same companies are structuring their organizations around other core processes, shedding their traditional organizational silos. continuous improvement efforts. Provisions are made for mutual sharing of benefits that accrue from the implementation of Lean practices and continuous improvement activities. Decision authority is decentralized. Decisions are made at the point of knowledge, application, and need. People are empowered to make appropriate decisions at the point of work. Relationships Based on Mutual Trust and Commitment In the mass-production world, many relationships are adversarial. For example, it is common to engage a large number of suppliers who compete against each other for the firm s business. Suppliers are rarely engaged in product development. Relationships tend to be short-lived, one year at a time. The Enterprise maintains a large staff of incoming inspectors to catch defects. Similarly, relationships with the workforce are often adversarial, especially if it is unionized. In Lean Enterprises, win-win arrangements are the norm, as are long-term relationships with a few suppliers. Qualified suppliers are involved in product development. Target costing is used to achieve continual reductions in costs, with the savings shared. The supplier ensures the quality of the supplies delivered; no incoming inspection is necessary. It is desirable in most cases to establish labor-management partnerships that stress win-win arrangements. The workforce is multi-skilled and supports Increasingly, Lean Enterprises operate in a virtual mode. Non-core functions are outsourced. Temporary strategic partnerships, formed (sometimes with direct competitors) to capitalize on a particular opportunity, are disbanded when the opportunity is exhausted. Enterprises operating in this manner must learn to share data, knowledge, and expertise considered highly proprietary in the mass-production mindset. Two recent developments are having a dramatic impact on the manner in which companies may interact with customers, suppliers, partners, and other potential stakeholders. Electronic commerce (e-commerce) is changing the manner in which enterprises deal with suppliers. The cycle time for ordering, shipping, receiving, and paying for supplies has been reduced from weeks to days (or, in some cases, even to hours). Equally dramatic change is unfolding in business-to-business (B2B) interactions, both in terms of their nature and speed. Strategic partnerships can be formed very rapidly in response to business opportunities that may be available only briefly. To play in Page 95 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

99 this fast-paced game, enterprises must become much more forward-focused, ever ready to move swiftly and deftly into the fray. It is interesting to note that Enterprises that have transitioned to the Lean paradigm are much better prepared to capitalize on the new capabilities offered by the Internet than are companies that continue to operate with a mass-production mentality. The horizontal organizational orientation facilitates the agility and responsiveness required for the new mode of enterprise functioning. In short, the brave new world is upon us. New approaches, new assumptions, new structures, and new mental models are required to guide us through the largely uncharted waters of the future. There is no alternative. The mass production mental model is passé. CHARACTERISTICS OF A LEAN ENTERPRISE The general nature of a Lean Enterprise is still being formulated as we enter the 21st century. Indeed, there is much confusion and inconsistency in terminology used to characterize the concepts of lean, agile, and so on. Some argue (Gunneson 1997) that agile is the ultimate end state, with lean an intermediate state between mass and agile. We do not subscribe to this view. The view of Lean in this Guide encompasses the characteristics that some authors assign to agile, and includes additional elements. The principal difference is that some authors view Lean as applicable only at the production level. Our view, however, is that Lean is applicable throughout the Enterprise. We have attempted to be as precise as possible with our terminology to avoid adding to the existing confusion. Webster s Dictionary offers several definitions of enterprise. The most pertinent for our purposes is as follows: Enterprise a unit of economic organization or activity, especially a business organization. Similarly, Webster s offers this definition of lean : Lean thin, spare; containing little or no fat;... suggests a sinewy frame without any superfluous flesh. Combining elements of these definitions provides this useful definition of Lean Enterprise : Lean Enterprise a business organization that delivers value to its stakeholders, with little or no superfluous consumption of resources (materials, human, capital, time, physical plant, equipment, information, energy). Page 96 of Copyright? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 96 of 166

100 Appendix A The What and Why of Lean Continued Lean companies are more alert, agile, and responsive than their heftier cohorts. In a dynamic, global, and competitive business environment, companies must not only achieve a high state of agility and responsiveness, but must continuously and relentlessly search for ways to reduce consumption of all required resources while delivering superb value to their customers and other stakeholders. We will explore the characteristics of a Lean Enterprise across these dimensions: Strategy Customer Focus Organizational Structure Incentives and Performance Scorecards Lean Management Workforce Issues Enterprise Business Systems Organizational Learning Page 97 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

101 Strategy Factors associated with Lean principles and practices are incorporated explicitly into the Enterprises strategic planning process: customer response cycles; customer satisfaction; rationalized supply chain; flexibility and adaptability; service after the sale; strategic use of information/communication technologies. The business need for Lean has been clearly determined, articulated, and conveyed throughout the organization. Strategic business goals, along with Lean enterprise metrics, are conveyed to all levels of the organization. Flexible strategies and relationships exist with suppliers and even with direct competitors, allowing rapid formation and disbanding of partnerships as opportunities arise. Competitive benchmarking is performed regularly relative to delivery of customer value. Customer Focus Everyone in the Enterprise is focused continuously on the goal of delivering best life cycle value to the customer. The primary driving force is the voice of the customer, with tangible evidence of this found in every corner of the Enterprise. Each individual understands his or her personal impact on customer value, and how he or she adds values to the Enterprise. The company has an ongoing customer research program that gathers information on what constitutes success for the end customer and how well the organization is performing relative to customer expectations and competitor performance. Customer value streams are mapped and optimized to ensure that all resource deployment decisions are directed to the primary goal of delivering superb customer value. Integrated Product and Process Development (IPPD) teams include customers, suppliers, marketing, purchasing, human resources, business systems, and manufacturing. These teams are organized horizontally Page 98 of Copyright? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 98 of 166

102 Appendix A The What and Why of Lean Continued along the customer value stream, thereby ensuring concurrency and collaborative input to product and process design decisions. The IPPD teams may be geographically distributed, functioning as virtual teams. Organizational Structure Ideally, the Lean Enterprise has evolved into an agile, rapidly reconfigurable, customer-focused, supplierintegrated, virtual organization. The horizontal axis dominates the organizational structure, with IPPD teams aligned along the customer value stream; there is a minimum number of management levels; and decision authority is at the point of action. Large, bloated, indirect staff functions are mostly gone, and any remaining staff is redeployed to value-adding activities in the horizontally oriented structure. A majority of the resources previously concentrated in the functional silos of the vertical organization are now redeployed and integrated into the IPPD teams and other core processes. A relatively small contingent of managers in each functional (core process) area may remain centrally located at the Enterprise level to enforce necessary standards across multiple product families and to facilitate professional development and career-path planning for the various specialty employees now dispersed among the process teams. Team-based management is implemented in all areas of the Enterprise, following a comprehensive education and training program. The workforce consists of multi-skilled workers, organized in properly sized work cells to optimize one-piece flow and accommodate fluctuations in market demand. This concept applies to support functions as well as to production. All work activities, both direct and indirect, are organized to support the optimization of multiple customer value streams. Customers and suppliers are involved in all phases of the product life cycle, from concept development through product delivery and support. Cross-functional interdisciplinary teams support and continuously improve all core processes in the Enterprise. Page 99 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

103 Incentives and Performance Visibility Value-added metrics are determined and deployed, since all performance is evaluated against customer value and world-class performance. Any activity that does not measure up is improved or outsourced. Metrics that portray process performance relative to the value stream are communicated to appropriate levels and made visible. Visible scorecards are posted in all areas so that employees can see immediately the impact of their performance on the Lean metrics, and how their own rewards are a function of their performance against those metrics. An integrated set of metrics are designed and deployed to reflect performance outcomes central to the primary goals of the Lean Enterprise: (1) delivering superb value to the customer and other stakeholders; (2) maintaining the capability to respond rapidly to changes in the global business environment; (3) continuously eliminating non-value-adding activities; (4) continuously upgrading workforce skills and knowledge in preparation for future challenges and opportunities. These metrics should distinguish between output (enabling), such as hours of training, and outcome (results), such as ROI, market share, and so on. Incentives are designed to reward both individual and team performance that contributes to the achievement of the primary goals of the Lean Enterprise, as stated above. An equitable arrangement is in place for the mutual sharing among all stakeholders of benefits gleaned from overall Enterprise performance and from continuous improvement activities. Employee compensation accounts for the degree to which multi-functional skills and knowledge have been acquired and demonstrated. Both individual and team performance appraisals are based upon contributions to the achievement of strategic business goals and operating results. Lean Management The Enterprise Leader and Senior Managers have a deep knowledge and understanding of Lean principles, practices, and behaviors, not only as applied in production operations, but throughout the entire Enterprise. The leadership is visibly involved in promoting Lean initiatives and in evaluating the results of these initiatives. The leadership ensures the provision of required resources. The Enterprise Leader involves the Stakeholder Leaders in the formulation, implementation, and review of Lean initiatives. Special attention is paid to the relationship between management and the workforce. Page 100 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 100 of 166

104 Appendix A The What and Why of Lean Continued Enterprise Leaders optimize the value across all Enterprise stakeholders: customers, employees, suppliers, stockholders, and the community. A shared vision of the Lean enterprise is created and communicated to the entire organization. The Lean transformation involves leaders at all levels, who nurture the change process and remove barriers to implementation. Relationships based on mutual trust and commitment are developed with customers, suppliers, and the workforce. Management spends most of its time developing employees to the point that they can organize and manage their own work and improve the capability of the organization to respond to the market faster than before, with solutions of higher market value. Employees are empowered after appropriate training to make their own work decisions. Employees are given general directions, resources, and guidance, and then expected to run their processes and strive for continuous improvement through the implementation of creative solutions. Lean principles, practices, and behavior are business as usual ( This is the way we do business; this is the way we operate. ) within the Enterprise. Workforce Issues The workforce is multi-skilled. Ideally, every employee is capable of performing every task within his or her work unit. This is necessary to ensure that the throughput rates of work units may be adjusted dynamically in response to changes in market demand. There is a heavy emphasis on continuous education, training, and skill building. Risk taking, leadership, and innovation are encouraged and rewarded at all levels. Employees are involved actively in planning and goal setting for their own work units. They perform their own inspection, maintenance, and workplace design, tasks once handled by professional/technical staff. Employees are considered critical to problem-solving, cycle-time reduction, and continuous improvement. Page 101 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

105 Enterprise Business Processes and Systems Flow is optimized across the processes. All non-value-added activities and resources are eliminated. Processes, because they are flexible and dynamic, can be adapted to changing markets, customer expectations, and competitive pressures. Process teams continuously redesign and streamline all business processes to reduce cycle times, while improving quality and customer service. Processes are networked and interlinked to facilitate concurrency, speed, and handoffs, and to minimize inter-process gaps and disconnects. Process designers are capable of continuously renewing processes to accommodate rapidly shifting strategies and capitalize on unanticipated opportunities. Databases are integrated, interactive, and seamless, providing consistent information to all elements of the extended enterprise. Employees share information that is available at the precise time and place that decisions need to be made. Information flows seamlessly across all processes of the extended Enterprise. Information is shared without regard for geographic distance or corporate boundaries. Information is created and maintained in a Lean fashion: entered once into common databases in an open architecture. Organizational Learning Organizational learning is fostered to enhance the creation, capture and rapid diffusion of knowledge. The enterprise captures lessons learned and incorporates the derived general principles in its decision rules, design guides, and other appropriate elements. Page 102 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 102 of 166

106 Appendix A The What and Why of Lean Continued Knowledge is retained in electronic knowledge bases managed by a Chief Knowledge Officer (CKO), as well as in documented processes, training materials, individual employees, and teams. The Enterprise knowledge bases provide input to a family of reusable simulation models that can be retrieved and executed in various configurations. These models are the basis for optimizing the many processes across the Enterprise and for assessing the likely outcomes of a wide variety of what-if questions asked by executives during the strategic planning process and by managers during normal business operations. Page 103 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

107 Reference Material There is a substantial body of material available that explores various elements of the subject of Lean. In the following two sections, we have identified materials that we believe would be most useful to Enterprise Leaders serious about lean transformation. In the first section, we have listed a set of available materials that we consider as essential for anyone wishing to acquire a substantive understanding of the subject of Lean. In the second section, we recommend additional materials that provide greater depth of understanding especially regarding specific facets of lean. ESSENTIAL READING Kochan, T., R. Lansbury, and J. MacDuffie, After Lean Production (Ithaca: ILR Press, 1997) Kotter, J., Leading Change (Boston: Harvard Business School Press, 1996) Liker, J., (editor), Becoming Lean (Portland: Productivity Press, 1998) Nunez, J. and S. Babson (editors), Confronting Change: Auto labor and lean production in North America (Puebla, Mexico: Benemerita Universidad Autonoma de Puebla, 1998) Ohno, T., Toyota Production System: Beyond Large-Scale Production (Portland: Productivity Press, 1988) Pine, B., Mass Customization (Boston: Harvard Business School Press, 1993) Shingo, S., A Study of the Toyota Production System (Portland: Productivity Press, 1989) Womack, J., Daniel Jones and Roos, D., The Machine that Changed the World (New York: Rawson Associates, 1990) Womack, J. and Daniel Jones, Lean Thinking (New York: Simon & Schuster, 1996) RECOMMENDED READING Berggren, C., Alternatives to Lean Production (Ithaca: ILR Press, 1992) Cooper, R., When Lean Enterprises Collide (Boston: Harvard Business School Press, 1995) Cutcher-Gershenfeld, J. et al., Knowledge-Driven Work (New York: Oxford University Press, 1998) Dimancescu, D., Peter Hines, and Nick Rich, The Lean Enterprise (New York: American Management Association, 1997) Green, Wm. and E. Yanarella (editors), North American Auto Unions in Crisis: Lean Production as Contested Terrain (Albany: State University of New York Press, 1996) Greif, M., The Visual Factory (Cambridge: Productivity Press, Inc., 1991) Gunneson, A., Transitioning to Agility (Reading, MA: Addison-Wesley Publishing Company 1997) Hounshell, D., From the American System to Mass Production, (Baltimore: The Johns Hopkins University Press, 1984) Kaplan, R., and David Norton, The Balanced Scorecard (Boston: Harvard Business School Press, 1996) Monden, Y., Toyota Production System, 3rd ed. (Norcross, GA: Engineering and Management Press, 1998) Ostroff, F., The Horizontal Organization (New York: Oxford University Press, 1999) Papows, J., enterprise.com (Reading, MA: Perseus Books, 1998) Porter, M., Competitive Advantage (New York: The Free Press, 1985) Senge, P., The Fifth Discipline (New York: Doubleday, 1990) Page 104 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 104 of 166

108 Appendix B LESAT Glossary Activity - A unit of work that has a beginning and an end, occurs over a period of time, and consumes input(s) and produces output(s). (Ref. 2) Backflow - A condition in which a part/product being processed is returned to a previous stage due to a defective condition, a missing operation, or other anomalous situation. Balanced Scorecard - An analysis technique and management instrument that translates an enterprise s mission and strategy into a comprehensive set of performance measures to provide a framework for strategic action. The scorecard may gauge organizational performance across several perspectives such as: financial, customers, internal business processes, and learning and growth. (Ref. 2) Baseline - A standard for comparison used as a reference for measuring progress. Often used as representation of the current state to be used to assess performance against benchmarks and/or to assess future states. (Ref. 2) Batch-and-queue - The mass-production practice of making large lots of a part and sending the batch to wait in the queue before the next operation in the production process. Contrast with single-piece flow. (Ref. 1) Best Practice A method of accomplishing a business function or process that is considered superior to other known methods. (Ref. 2) Business Case - Justification for an improvement. Serves as a decision package for enterprise executives. Typically includes such information as an analysis of current problems or future needs, a proposed solution, assumptions and constraints, alternative solutions, life-cycle investment costs, quantified benefits, an analysis of costs versus benefits, and an analysis of risks involved. Within Department of Defense (DoD), a business case for a business process improvement project is called a Functional Economic Analysis (FEA). (Ref. 2) Cellular layouts The layout of machines of different types performing different operations in a tight sequence, typically in a U-shape, to permit singlepiece flow and flexible deployment of human effort by means of multi-machine working. (Ref. 1) Consensus - A state where group members support an action or decision, even if some do not fully agree with it. A consensus decision is made after aspects of an issue, both positive and negative, have been reviewed or discussed to the extent that everyone openly understands, supports, and participates in the decision. (Ref. 2) Core Competency - The particular capabilities (knowledge, demonstrated proficiency and experience) of an enterprise that satisfy existing strategy and serves as the basis for growth or diversification into new lines of business. (Ref. 2) Cross Functional Management A process designed to encourage and support interdepartmental communication and cooperation throughout an enterprise, as opposed to command and control through narrow departments or divisions. The purpose is to achieve enterprise targets such as quality, cost, and delivery of products and services by optimizing the sharing of work. (Ref. 6) Page 105 of 166 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited Copyright copies. Massachusetts All other Institute rights are of reserved. Technology, (Supported 2000 jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 105 of?

109 Culture - Shared characteristics such as values, behaviors, and beliefs that distinguish the members of one group from those of another. Organizational culture includes the common set of beliefs, sentiments, priorities, attitudes, perceptions, operating principles, and accepted norms shared by individuals within an organization. Cultural change is a major shift in these organizational characteristics. (Ref. 2) Customer - A stakeholder who is a recipient of a product or service produced by an enterprise. Customers may be internal or external to the organization. External customers, those in the marketplace, are the reason an enterprise exists. Internal customers are the reason a functional area or department exists an interdependent department, or a downstream user in the value chain. When services rather than products are provided, customers are often called clients. (Ref. 2) Cycle Time - The time required to complete one cycle of an operation. If cycle time for every operation in a complete process can be reduced to equal takt time, products can be made in single-piece flow. (Ref. 1) Employees All of the individuals employed by the organization including full time, part time, temporary and contract employees. (Ref. 5) Enterprise - Any corporate or business-unit organization with a distinct mission, market segment, suite of products or services, customer base, profit/loss responsibility, and set of competitors. The purpose for the organization s existence is to perform its mission and achieve associated goals. (Ref. 2) Extended Enterprise All businesses along the value stream that contributes to providing value to a customer. (Adapted from Ref. 1.) Flow The progressive achievement of tasks along a value stream so that a product proceeds from design to launch, order to delivery, and raw materials into the hands of the customer with no stoppages, scrap, or backflows. (Ref. 1) Continuous Flow Production Items are produced and moved from one processing step to the next one unit-at-a-time. Each process makes only the one piece that the next process needs, and the transfer batch size is one. Also called single-piece flow or one-piece flow. Contrast with batch-and-queue. (Ref. 4) Gap Analysis - The difference between a current state or position and a desired state or position. (Ref. 2) Innovation The practical transition of ideas into new products, services, processes, systems and social interactions. (Ref. 5) Just-in-Time Producing or conveying only the items that are needed by the next process when they are needed and in the quantity needed. (Ref. 4) Lead-time The total time a customer must wait to receive a product after placing an order. When a production system is running at or below capacity, leadtime and throughput time are the same. When demand exceeds the capacity of a system, there is additional waiting time before the start of production, lead-time exceeds throughput time. (Ref. 1) Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce of unlimited? copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 106 Copyright Massachusetts Institute of Technology, 2000 Page 106 of 166

110 Appendix B LESAT Glossary Continued Non-value Added - Any product, process, or service that does not add value to the ultimate customer. (It is important to note that non-value added is not the same as not necessary, since some activities are required by law or are necessary for process control, such as inspection. These may not add value but are used to assess processes for control and improvement.) (Ref. 3) Partnerships A working relationship between two or more parties. Partners can include suppliers, distributors, joint ventures, and alliances. (Ref. 5) Performance Measure - A dimension of an activity or process quality, cost, cycle time, or other characteristic that can be used to judge the effectiveness or efficiency of the process against a target or standard value. (Ref. 2) Process A sequence of activities that adds value by producing required outputs from a variety of inputs. (Ref. 5) Productivity - An overall measure of the ability to produce a good or service. It is the actual output of production compared to the actual input of resources. Productivity is a relative measure across time or against common entities. In economics, the ratio of output in terms of dollars of sales to an input such as direct labor in terms of total wages. (Ref. 3) Pull System - A planning system based on communication of actual real-time needs from downstream operations - ultimately final assembly or the equivalent - as opposed to a push system. (Ref. 3) Push System - A planning system that schedules upstream operations according to theoretical downstream needs based on a plan, which may not be current as opposed to a pull system. (Ref. 3) Single-Piece Flow A situation in which units proceed, one at a time, through operations in design, order-taking, production and assembly, without interruptions, backflows, or scrap. (Ref. 1) Stakeholders All those who have an interest in an organization, its activities and its achievements. These may include customers, partners, employees, shareholders, owners, government, and regulators. (Ref. 5) Strategic Plan - A comprehensive statement of an organization s overall mission, objectives, and strategy. A detailed roadmap of the direction the organization intends to follow in conducting its activities. Provides direction, concentration of effort, consistency of purpose, and flexibility as a business moves to maintain and improve its competitive position. (Ref. 2) Strategic Planning - The top-level management decision process that focuses on the overarching, long-range direction of the enterprise and establishes the means by which that direction is reached. Includes defining top-level and subordinate missions, goals, and supporting objectives, i.e., how the enterprise sees its purpose and where it wants to go. Provides the big picture along with a description of how goals and objectives are to be achieved and the indicators that will be used to measure performance and outcomes. (Ref. 2) Page 107 of 166 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited Copyright copies. Massachusetts All other Institute rights are of reserved. Technology, (Supported 2000 jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 107 of?

111 Takt Time - The available production time divided by the rate of customer demand. For example, if customers demand 240 widgets per day and the factory operates 480 minutes per day, takt time is two minutes; if customer wants two new products designed per month, takt time is two weeks. Takt time sets the pace of production to match the rate of customer demand and becomes the heartbeat of any lean system. (Ref. 1) Value A product or service s capability provided to a customer at the right time, at an appropriate price, as defined in each case by the customer. (Ref. 4) Value-added Activity - Value-added is the difference between dollar sales and the cost of raw materials and purchased parts. Value-added activity is an activity or step in a process that adds value to an output product or service. Such an activity merits the cost of the resources it consumes in production. These are the activities that customers would view as important and necessary. A value-added activity contributes directly to the performance of a mission, and could not be eliminated without impairing the mission. (Ref. 2) Value Added Time Time for those work elements that transform product into value the customer is willing to pay for. (Ref. 4) Value Stream - The specific activities required to design, order, and provide a specific product, from concept to launch, order to delivery, and raw materials into the hands of the customer. (Ref. 1) Value Stream Mapping/Analysis - Involves defining a product families / business processes material and information flows from beginning to end utilizing a visual representation of every process. This facilitates understanding of current state and the development of the proposed future state. The difference between the two states becomes the basis for the Lean Transformation plan. Virtual Organization - An assemblage of core competencies from (perhaps) previously unassociated participants; on a temporary basis for a defined purpose and for an indefinite period of time; has profit/loss or other accomplishment responsibility; upon completion of the original purpose, the organization is dissolved. Vision - A guiding theme that articulates the nature of the business and the enterprise s intent for its future. A description of what senior management wants to achieve. Usually refers to the medium to long term and is often expressed in terms of a series of objectives. (Ref. 2) Waste - Any product, process, or service, which does not add value to the ultimate customer. Waste in business processes/production can be broken down into seven types; Waiting, Unnecessary Motion, Processing, Inventory, Moving Items, Making Too Much, Fixing Defects. (Ref. 3) Ref. 1 Lean Thinking, James P. Womack and Daniel T. Jones, Simon & Schuster, 1996 Ref. 2 Techniques for Enterprise Management, Software Productivity Consortium, SPC MC, Feb Ref. 3 Internal Glossary of Rockwell Collins Corp., Lean Electronics Division Ref. 4 Training to See, Mike Rother and John Shook, The Lean Enterprise Institute, Feb Ref. 5 The EFQM Excellence Model Glossary of Terms Ref. 6 The Lean Enterprise, Dan Dimancescu, Peter Hines and Nick Rich, American Management Association, 1997 Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce of unlimited? copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Copyright Initiative Massachusetts and the U.S. Institute Lean of Aerospace Technology, Initiative) Page Page 108 of 166

112 Appendix C TTL Tutorial Overview of Transition-to-Lean Roadmap: Enterprise Level We have developed a conceptual framework the Transition-to-Lean Roadmap to assist firms in their efforts to transform into Lean enterprises. The framework portrays the overall flow of action steps necessary to initiate, sustain, and continuously refine an Enterprise transformation based upon Lean principles and practices. This particular Transition-to-Lean Roadmap was developed from an Enterprise perspective, with particular attention paid to strategic issues, internal and external relations with all key stakeholders, and structural issues that must be addressed during a significant change initiative. Eight pairs of sheets comprise the Transition-to-Lean Roadmap, providing an introductory, high-level overview of the complete framework. These are a snapshot of the overall transition process. The accompanying text provides further detail and elaboration. Figure 1 is a schematic representation of the Transition-to-Lean Roadmap. The following principles and concepts were important in the team s creation of this Roadmap: The Enterprise Leader must lead the transition. Since Lean principles and practices are fundamentally different from those of mass production, Senior Leaders must open their minds to new concepts that may seem counter-intuitive and even contradictory to common sense. Until Senior Leadership understands, embraces, and commits to a full conversion to Lean, any initiative will have little chance of succeeding. Figure 1 depicts three basic cycles of activity: the Entry/Reentry Cycle (Adopt Fundamental Change); the Long Term Cycle (Create the Environment); and the Short Term Cycle (Detailed Implementation). The Entry/Reentry Cycle links to the Enterprise Strategic Planning activity, and specifies the actions associated with the strategic decision to adopt the Lean paradigm. It is energized when a significant commitment is undertaken to adopt Lean in the Enterprise or when the Enterprise s basic strategic approach is reshaped in part by the changes enabled by a Lean transformation. The Long Term Cycle includes those actions that set the stage for the Enterprise transformation and that prepare the organization for launching into detailed planning and implementation. Once the activities in this cycle are implemented, the Enterprise remains in this cycle for some time. This cycle is re-entered periodically as significant changes occur in the external environment. The Short Term Cycle includes those actions that actually achieve the transformation. This cycle has a fast clock speed, with ongoing action-monitoring-corrective action phases. The following sections examine in detail each segment of the Roadmap. Page 109 of 166 Copyright Massachusetts Institute of Technology, 2000 Page 109 of?

113 Copyright Massachusetts Institute of Technology, 2000 Page 110 of? The Enterprise Level Transition-to-Lean Roadmap provides a general framework for assisting companies in their transition to Lean. It portrays an overall flow of action steps that can initiate, sustain, and continuously refine the transformation of an Enterprise based upon Lean principles and practices. organization is then prepared for launching into detailed planning and implementation. The third cycle is the Short Term Cycle, in which detailed implementation is planned, executed, and monitored. This cycle has a fast clock speed, with ongoing action-monitoring-corrective action phases. The Long Term Cycle is re-entered periodically to capitalize on lessons learned during implementation and to accommodate changes occurring in the dynamic external environment. Enterprise Level Roadmap The Roadmap comprises three cycles. First is the Entry/Reentry Cycle, which specifies the actions associated with the decision to adopt the Lean paradigm. This cycle is closely linked to the Enterprise Strategic Planning cycle. The second cycle is called the Long Term Cycle, in which the environment and conditions necessary for a successful Lean transformation are created. The Copyright Massachusetts Institute of Technology, 2000 Page 110 of 166

114 Transition-to-Lean Roadmap: Enterprise Level ADOPT LEAN PARADIGM Implementing the Lean paradigm requires revisiting every assumption, practice, and process associated with customer interactions, product design, production, quality assurance, human resources, work supervision, organizational structure, business systems, and supplier relations. We must learn to do business, behave, and see value in fundamentally different ways. FOCUS ON THE VALUE STREAM A primary concept of Lean thinking is that all actions and resources of a firm should be focused on creating value. Any action or resource expenditure that does not contribute directly to the goal of creating value is waste and should be eliminated to the greatest extent possible. Value stream definitions and analysis will identify the highest leverage areas that should be pursued in the Lean transformation. DEVELOP LEAN STRUCTURE AND BEHAVIOR Both the structure and behavior of Lean organizations are significantly different from those of mass-production organizations. This segment of the Roadmap deals with creating the mental model and conditions necessary for the implementation of Lean principles and practices. Incentives, structures, systems, and policies of the Enterprise must be aligned with the desired behavior. CREATE & REFINE TRANSFORMATION PLAN Moving to the Short Term Cycle, we now must identify and prioritize those Lean initiatives that collectively constitute the Enterprise Level Plan for achieving the desired transformation. Resources must be committed to the plan. An extensive program of education and training will be required. IMPLEMENT LEAN INITIATIVES It is here that the changes in practices and procedures are actually implemented. As a flow-down from the Enterprise Level Plan, we now define the specific actions, programs, and projects that will be executed within each organizational area and determine how they will be integrated at the system level. These detailed action plans are executed, monitored, and modified as required. FOCUS ON CONTINUOUS IMPROVEMENT As progress is made on the detailed action plans, the results of the changes are measured and assessed. Corrective actions are part of the continuous improvement process. Opportunities for further improvements are identified. Detailed corrective actions become input for the Create & Refine Transformation Plan segment, to be incorporated into the next iteration of the Enterprise Level Plan. Corrective action indicators of more fundamental change drive the need to revisit the Long Term Cycle for further modifications to the structure and behavior of the enterprise. Page 111 of 166 Copyright Massachusetts Institute of Technology, 2000 Page 111 of?

115 Lean requires a deep understanding of the fundamental aspects of an Enterprise and its interactions with the rest of the world. This segment of the Roadmap provides a framework for acquiring an in-depth understanding of Lean and for obtaining full commitment from Senior Managers to launch a Lean transformation, or to elevate local Lean initiatives to the Enterprise level. Adopt Lean Paradigm Adopting the Lean paradigm is an issue of passion as well as logic. One must have an absolute and abiding belief that the implementation of Lean principles and practices is of essential importance to the Enterprise. Lean is not just the way things are done, but is the way the Enterprise thinks, what it believes, how it behaves, and what it values. Copyright Massachusetts Institute of Technology, 2000 Page 112 of? Copyright Massachusetts Institute of Technology, 2000 The Lean paradigm consists of many concepts, principles, and practices that are counter-intuitive and diametrically opposed to those of mass production. Most of today s business leaders climbed the ladder of success while following the same mass-production practices they are now being asked to abandon. A large number of movements and initiatives have been pushed on managers over the past several years, including re-engineering, TQM, and others. While it is tempting to believe that the sum of all these initiatives add up to Lean, that is not the case. In fact, some of these initiatives may require modification to be compatible with Lean principles. Page 112 of 166

116 Major Tasks within Adopt Lean Paradigm Build Vision Create a new mental model of how the enterprise would function if it acts and behaves according to Lean principles and practices. Extend the vision of Lean to all aspects of the Enterprise. Make the Lean vision an integral part of the company s strategic business plan. Convey Urgency Identify the strategic imperative, the forcing function for transitioning to Lean. Understand the long-term competitive threats. Establish that Lean is the most promising alternative for addressing the strategic imperative. Foster Lean Learning Have all senior managers acquire an in-depth understanding of the Lean paradigm and make site visits to successful Lean companies. Understand the full implications of transitioning to Lean. Learn that lean is about behavior, not just practices and activities. Make the Commitment Enterprise Leader must make the final decision to transition the company to Lean. Make the commitment irrevocable. Commit the significant resources required (primarily time, energy, and personal capital). Obtain Senior Management Buy-in Full buy-in is required from all senior managers. In-depth education and training is required. Managers who are unwilling or unable to change must be replaced. Page 113 of 166 Copyright Massachusetts Institute of Technology, 2000 Page 113 of?

117 created and communicated across the Enterprise and to important external constituents. Focus on the Value Stream Enterprise goals and metrics should also be expressed in terms of valueadded, thereby better defining for the Enterprise how to capture the customer s perception of value. Lean transformation initiatives will have a significant impact on all stakeholders. At a minimum, consideration must be made for: customers, employees, union (if any), corporate entity, management and supervision at all levels, suppliers, partners, stockholders, community, and regulators. It is important to optimize across the value streams of all those stakeholders by taking a global systems view. Copyright Massachusetts Institute of Technology, 2000 Page 114 of? Copyright Massachusetts Institute of A primary concept of Lean thinking is that all actions and resources of a firm should be focused on creating value for its customers. Any action or resource expenditure that cannot be associated with this goal is regarded as waste and should be eliminated. It is helpful to visualize customers pulling value from the company, resulting in cascaded pulling actions back upstream across all Enterprise functions: product design, marketing, business systems, accounting, information/communications systems, human resource management, and so on. The pulling action naturally extends beyond the Enterprise to suppliers and other external agencies. The vision of the company operating and behaving in this manner must be Page 114 of 166

118 Major Tasks within Focus on the Value Stream Map Value Stream Elicit definition of value from the end customer. Move from customer inward to Enterprise core processes; continue externally to suppliers. Realize that the end-to-end chain of actions, resources, and decisions required to deliver defined value is the customer s value stream. Optimize the value stream by eliminating non-value-adding actions (waste); continuous improvement efforts never end. Realize that the Enterprise must optimize across multiple stakeholder value streams (customer, employees, shareholders, and suppliers). Internalize the Vision Create a characterization of how customers pull value from the value stream; communicate this vision across the Enterprise. Organize the internal value stream such that downstream units pull value from preceding upstream units; cascade the process backwards, extending to the supply chain. Focus upon continuous improvement process to achieve ongoing waste elimination. Create the future value stream. Set Goals and Metrics Derive goals & metrics directly from identified strategic needs. Determine baseline measures of how the Enterprise brings value to the customer. From the Lean vision, specify target measures of anticipated gains based upon adoption of Lean principles and practices. Tie goals and metrics to improvements in value-adding activities and elimination of waste; these are the key Enterprise-level measures of progress in transitioning to Lean. Identify and Involve Key Stakeholders Recognize the key stakeholders: customers, employees, stockholders, union (if any), management, suppliers, and community. Give special consideration to the workforce in implementing Lean initiatives. Make stakeholders who are potentially affected by Lean initiatives especially aware and involved in their development. Page 115 of 166 Copyright Massachusetts Institute of Technology, 2000 Page 115 of?

119 sive re-education effort will likely be required for the entire Enterprise. Lean may have an impact on organizational structure. Incentives must be rationalized with the new behavior desired. There will be an impact on most business systems, processes, and policies. Systems Dynamics modeling has demonstrated that structure drives behavior and that behavior, in turn, drives results. An Enterprise transformation of this magnitude will require careful planning, phasing and execution. The change process itself must be carefully monitored, managed, and modified as required in light of actual outcomes. Develop Lean Structure and Behavior Copyright Massachusetts Institute of Technology, 2000 Page 116 of? Copyright Massachusetts Institute of Technology, 2000 This section of the Roadmap deals with creating the mental model and conditions within the Enterprise that will enhance the successful implementation of Lean principles and practices. Both the structure and the behavior of Lean organizations are significantly different from those of mass-production organizations. The mass-production mentality, so firmly embedded in the organization s collective mindset, must be relentlessly rooted out and banished. Mass-production principles and practices must be unlearned. Lean principles and practices must be learned, practiced, and perfected through continuous improvement efforts. An exten- Page 116 of 166

120 Major Tasks within Develop Lean Structure and Behavior Organize for Lean Implementation Shift the organizational structure from a vertical focus (that supports the mass-production mentality) to a horizontal focus (that supports a Lean mindset). Establish Integrated Product/Process Development (IPPD) teams, aligned horizontally with the customer value chain. Eliminate unnecessary layers of management; decentralize decision-making. Establish and empower a Lean Focus Office for facilitating the Lean initiative. Identify and Empower Change Agents Identify those in the organization who can effect positive transformational change. Recognize the need to act at both the Enterprise and local levels. Enlist the best and brightest who are most likely to develop a passion for the Lean transformation. Communicate a common Lean vision and coordinated approach. Align Incentives Structure incentives to reward Lean behavior. Remove disincentives. Consider both monetary and non-monetary incentives. Consider both individual and group (team) incentives. Tie incentives to Lean metrics through visual scorecards. Tie executive compensation to Lean performance metrics. Adapt Structure and Systems Apply Lean principles to redesign all Enterprise systems and processes. Use the inherently simpler requirements of a Lean organization to reduce the complexity of information/communication systems. Redesign financial/accounting systems to be compatible with the Lean paradigm and to be aligned with appropriate Lean metrics. Bring policies and procedures into compliance with Lean. Page 117 of 166 Copyright Massachusetts Institute of Technology, 2000 Page 117 of?

121 ing the strategic and Lean visions. It will also draw heavily from the enterprise-level value-stream mapping performed in the Focus on Value Stream block. Create and Refine Transformation Plan Organizations embarking upon a Lean transformation initiative should consider establishing and chartering a Lean Focus Office (or an office with a similar name and function) to facilitate and coordinate the extensive set of projects, programs, and activities that will be required. The Lean Focus Office, reporting directly to the Enterprise Leader, is responsible for exercising configuration control of the Enterprise-Level Plan Copyright Massachusetts Institute of Technology, 2000 Page 118 of? Copyright Massachusetts Institute of Technology, 2000 We are now transitioning from the Long Term Cycle to the Short Term Cycle of the Roadmap. Having prepared the organization for implementing the Lean paradigm in the Long Term Cycle, we are now in a position to develop, implement, and monitor a comprehensive Enterprise-Level Plan to achieve the desired transformation. In the Adopt Lean Paradigm block, the need to transition to the Lean paradigm comes from the relentless pressures to deliver value to customers who demand ever lower costs, ever shorter response cycles, ever higher quality, and ever higher service after the sale. The Enterprise-Level Plan must be designed to address the explicit need previously established, thereby align- Page 118 of 166

122 Major Tasks within Create and Refine Transformation Plan Identify and Prioritize Lean Initiatives Develop/refine descriptions of current state. Develop/refine characteristics of the desired future state. Create an Enterprise-level transition path based upon gap analysis. Extend/translate needs (from gap analysis) to Enterprise-level activities. Prioritize and sequence the activities. Develop a time-phased schedule for the collective set of Enterprise Lean initiatives, with due consideration to resource limitations. Critically review all ongoing movements and initiatives for compatibility with Lean. Commit Resources Recognize that the primary resource required is the time of all individuals in the Enterprise. Plan to meet all production commitments during the Lean transformation. Allocate special resources as needed to accommodate increased workloads due to the Lean initiative. Make a firm commitment to all resource needs. Provide Education and Training Establish a comprehensive, cohesive program of education and training for the entire Enterprise. Pay attention to its careful phasing. Follow just-in-time principles in scheduling education and training events. Modify the program and provide re-training as needed, based upon feedback. Page 119 of 166 Copyright Massachusetts Institute of Technology, 2000 Page 119 of?

123 oped. Detailed plans at the Enterprise level are linked to lower-level plans. The lower-level plans are prioritized and time-phased resources are provided within the framework of a comprehensive schedule. These plans are executed and monitored. Short-term corrective action is determined and incorporated as necessary. Implement Lean Initiatives As we iterate through the Short Term Cycle, sub-level decomposition of the Enterprise-Level Plan will change as the organization moves more and more toward a Lean state. Copyright Massachusetts Institute of Technology, 2000 Page 120 of? Copyright Massachusetts Institute of Technology, 2000 The second segment of the Short Term Cycle is where the process implementation and transformation begins. All previous stages have focused on setting the stage and preparing the organization for the changes in the value-stream activities that will now be affected. The Enterprise-Level Plan created in the previous segment provides the broad parameters and directions for achieving the changes required to respond to the identified critical needs. Within these parameters and overall schedule, specific short-term action plans and programs are now devel- Page 120 of 166

124 Major Tasks within Implement Lean Initiatives Develop Detailed Plans Map appropriate elements of Enterprise-Level Implementation Plan to core processes (horizontal organizational orientation). Structure short-term action plans/projects that are detailed and specific. Estimate time-phased resource requirements for each detailed plan. Integrate the several detailed plans, generate prioritized schedule. Provide resources. Assign responsibility and accountability. Incorporate needed education and training into the plans. Implement Lean Activities Launch detailed action plans, with coordination and facilitation provided by Lean Focus Office. Challenge change agents and senior managers to identify and remove barriers to implementation. Track progress against schedule milestones, display outcomes visibly, and broadcast successes. Determine and implement short-term corrective action as required and modify overall plan as appropriate. Resolve conflicts. Provide just-in-time education and training. Page 121 of 166 Copyright Massachusetts Institute of Technology, 2000 Page 121 of?

125 for, the flow will proceed along a second path, to the segment Focus on the Value Stream. This path takes us back to the Long Term Cycle. When the Lean transformation process becomes recognized as a keystone within the Enterprise s strategic plan, a third flow path may occur through the segment Enterprise Strategic Planning in the Entry/Reentry Cycle. This occurs when the interaction of Enterprise-level strategy and Lean transformation become interdependent and strategic planning, now shaped by Lean implementation, itself may alter the Lean implementation process. Focus on Continuous Improvement Clearly, the overall Roadmap represents a never-ending process. It suggests a framework in which the organization learns from its past behavior, continually strives to become increasingly focused on delivering value to the customer, and is prepared to enter whatever cycle is required to continue its journey toward its continuously updated vision. Copyright Massachusetts Institute of Technology, 2000 Page 122 of? Copyright Massachusetts Institute of This oversight segment is the third in the Short Term Cycle, and is critically important for long-term effectiveness and continuity. Only when the activities in this segment become a natural part of the Enterprise s culture can the organization achieve a significant state of being Lean. This final segment in our Roadmap is in many ways the most critical. The first attempt to create an Enterprise-Level Plan will not yield a categorical plan. The organization will learn from various implementation initiatives. Modifications will be required. The flow from this segment may go in one of three directions. Ordinarily, it is back through the Create and Refine Transformation Plan segment, which exercises the short-term corrective action loop. At specified intervals and on those occasions when significant structural modifications seem to be called Page 122 of 166

126 Major Tasks within Focus on Continuous Improvement Monitor Lean Progress Aggregate results from the implementation of detailed plans back to the Enterprise-Level Implementation Plan. Measure implementation progress against schedule and budget. Detect significant deviations and determine their causes. Institute corrective actions. Direct senior managers to participate visibly in monitoring the metric performance and in heralding successes. Nurture the Process Gain the support and encouragement of the Enterprise Leader and senior managers. These are essential, especially when the transformation encounters significant difficulties. Pay special attention to modified incentives and rewards: Are they working? Are they understood? Do they need further modification? Encourage entire workforce to offer suggestions for further improvements. Benefits gained from Lean implementation should be shared equitably between management and the workforce. Make sure that specific issues/problems are dealt with by the Lean Focus Office. Emphasize positive reinforcement. Refine the Plan Assess each element of the Enterprise-Level Implementation Plan. Incorporate prescribed corrective actions; re-level resources if necessary. Revise, eliminate, and add elements to the plan as appropriate. Determine when a significant change or high-level re-think is needed; in such cases, revisit the Long Term Cycle to determine the necessary modifications. Capture and Adopt New Knowledge Capture lessons learned (from both internal and external sources) and add to the Enterprise Knowledge Base. Translate and generalize lessons learned for incorporation into Enterprise decision processes, design rules, operating rules, etc. Provide input to the Enterprise Strategic Planning Page 123 of 166 Copyright Massachusetts Institute of Technology, 2000 Page 123 of?

127 Bringing it All Together: The Complete Roadmap Page 124 of? Figure 8 Enterprise Level Roadmap Detailed Lean Vision Initial Lean Vision Lean Environmental Transformation Corrective Action Detailed Corrective Framework Indicators Action Indicators Outcomes on Enterprise Level Enterprise Metrics Transformation Plan Copyright Massachusetts Institute of Technology, 2000 The most formidable obstacles on the road to Lean are likely to be peoplerelated rather than technology-related. In fact, Lean is mostly about people and processes. That is why this Roadmap places great emphasis on preparing the organization for change by focusing on organizational and people issues that need to be addressed prior to launching lower-level initiatives. Eventually, the Entry zone of the Roadmap goes away. The ultimate goal is to embed Lean principles, practices, and behavior to such an extent that they become business as usual (see next diagram). The complete Enterprise-Level Transition-to-Lean Roadmap is reconstructed here. It illustrates a general flow of actions, decisions, and initiatives that an organization may follow in pursuit of its own Lean transformation. Every company has its own particular starting point and circumstances that will dictate how it approaches its Lean transition. The amount of time and effort required to accomplish the various segments may vary considerably from company to company. Copyright Massachusetts Institute of Technology, 2000 Page 124 of 166

128 Bringing it All Together: The Ongoing Lean Enterprise Response to the voice of the customer Detailed Lean Vision Lean Transformation Framework Environmental Corrective Action Indicators Detailed Corrective Action Indicators Copyright Massachusetts Institute of Technology, 2000 Enterprise Level Transformation Plan Outcomes on Enterprise Metrics illustrates the important concept of capitalizing on lessons learned that are being accumulated in the Enterprise Knowledge Base on an ongoing basis, and acknowledging that ultimately the Lean transformation will become an integral part of the Enterprise s success strategy. Also, the significant impact that Lean implementation is now having on total Enterprise performance can be reflected in future strategic opportunities and plans. Enterprise Strategic Planning and Lean are now linked explicitly to the ongoing and never-ending process of continually fine-tuning the way the Enterprise delivers value to its customers. Once there is a critical mass of Lean behavior in the Enterprise, Lean becomes a way of life the way things are done. This final Roadmap diagram eliminates the segment called Adopt Lean Paradigm, since this has now been accomplished. Lean has become the fundamental, collective mental mindset of the Enterprise. However, it is important that new Enterprise leaders and senior managers individually enter the Adopt Lean Paradigm block, so that they understand and enthusiastically embrace the Lean paradigm. The Roadmap now includes a feedback loop from the Short Term Cycle back to Enterprise Strategic Planning, now called the Reentry Cycle. This Copyright Massachusetts Institute of Technology, 2000 Page 125 of 166 Page 125 of?

129 Appendix D Comparison of LESAT to Other Assessment Approaches This appendix presents comparisons of LESAT to other approaches that are currently being used to evaluate the overall performance of organizations. The first set of tables compares LESAT to the Malcolm Baldrige Criteria and the ISO 9004 Quality Management Systems Guidelines. The second set of tables compares LESAT to the European Foundation for Quality Management Excellence Model criteria. This comparison was performed by Dr. Martin Womersley of the University of Warwick and the U.K. Lean Aerospace Initiative and is included here with permission. Baldrige National Quality Program 2001 Criteria for Performance Excellence and ISO 9004:2000 Quality Management Systems-Guidelines A comparison of the practices of the LESAT self-assessment tool was performed against the Baldridge categories/items and the ISO 9004 guideline paragraphs. The purpose of the review was to highlight areas of commonality and also to demonstrate that there are areas that the LESAT practices address that are not covered by the other standards. Each of the models may be used by an organization simultaneously without detriment because of the different focus being applied in each model. LESAT is the only model specifically targeting the highest levels of management and the practices associated with the transformation to a Lean enterprise. An enterprise that develops and deploys lean practices should find that their Baldridge assessment scores would improve significantly. The enterprise will also improve the overall quality of their processes with an attendant increase in effectiveness and efficiency. It is also significant that there are no areas or practices where there is a conflict. The below comparisons are by no means definitive. Different organizations performing the same comparison might record slight differences in the paragraphs referenced against the lean practices since each model will be interpreted and applied as most appropriate for that enterprise. Page 126 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 126 of 166

130 Comparison of Lean Enterprise Self-Assessment Tool (LESAT) with Baldridge National Quality Program 2001 Criteria for Performance Excellence and ISO 9004:2000 Quality management systems-requirements LESAT Baldridge ISO 9004:2000 Section I- Lean Transformation/Leadership I.A. Enterprise Strategic Planning I.A.1 Integration of Lean in Strategic Planning Process 2.1.a,b 5.4; 5.6 I.A.2 Focus on Customer Value 3.1.a.(2) 5.2; 7.2; I.A.3 Leveraging the Extended Enterprise NSA* 6.6 I.B. Adopt Lean Paradigm I.B.1 Learning and Education in Lean for Enterprise Leaders 5.2.a.(3) I.B.2 Senior Management Commitment 1.1.a.(1)&(2) 5.1.1; I.B.3 Lean Enterprise Vision 1.1.a.(1) I.B.4 A Sense of Urgency 1.1.b.(1) 5.1 I.C. Focus on the Value Stream I.C.1 Understanding the Current Value Stream NSA* 5.1.2; 7.1 I.C.2 Enterprise Flow NSA* 5.1.2; 7.1 I.C.3 Designing the Future Value Stream NSA* 7.1 I.C.4 Performance Measures 1.1.b.(1); 2.2.a.(4); 4.1.a 5.1.1; 8.2 I.D. Develop Lean Structure and Behavior I.D.1 Enterprise Organizational Structure NSA* NSA* I.D.2 Relationships Based on Mutual Trust NSA* 5.2; 5.3.3; 6.6 I.D.3 Open and Timely Communication NSA* 5.1.1; 5.2.2; I.D.4 Employee Empowerment 1.1.a.(2) 5.5.1; 6.2.1;8.5.4 I.D.5 Incentive Alignment 5.1.a.(3) NSA* I.D.6 Innovation Encouragement 1.1.b.(2); 5.1.a.(1) 6.2.1; I.D.7 Lean Change Agents NSA* NSA* I.E. Create and Refine Transformation Plan I.E.1 Enterprise Level Lean Implementation Plan NSA* I.E.2 Commit Resources for Lean Implementation NSA* 6 I.E.3 Provide Education and Training 5.2 (all) I.F. Implement Lean Initiatives NSA* I.F.1Development of Detailed Plans Based on Enterprise Plan 2.2.a.(1) NSA* I.F.2 Tracking Detailed Implementation 2.2.a.(4) 8.4 I.G. Focus on Continuous Improvement I.G.1 Structured Continuous Improvement Processes NSA* I.G.2 Monitoring Lean Progress 1.1.b.(2)&(3); 2.2.b.(3) 5.1; 8.4 I.G.3 Nurturing the Process 1.1.a.(2) 5.1; I.G.4 Capturing Lessons Learned NSA 5.2.4; I.G.5 Impacting Enterprise Strategic Planning 2.1 all 5.6.1; 5.6.2; * Not specifically addressed (NSA) Page 127 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

131 LESAT Baldridge ISO 9004:2000 Section II-Life-Cycle Processes II.A. Business Acquisition and Program Management II.A.1 Leverage Lean Capability for Business Growth 6.2.a.(6) 5.6.3; 7.2 II.A.2 Optimize the Capability and Utilization of Assets 6.1.b.(5); 6.2.a.(6); 6.3.a.(7); 6; 8.2.4; II.A.3 Provide Capability to Manage Risk, Cost, Schedule and Performance 4.1.a&b; 5.6.3; 6.1.2; 7.1.3; II.A.4 Resource and Empower Program Development Efforts NSA* 6.1.2; 7.3 II.B. Requirements Definition II.B.1 Establish a Requirement Definition Process to Optimize Life-cycle Value 3.1.a 5.2.2; 7.2; 7.3 II.B.2 Utilize Data from the Extended Enterprise to NSA* 8.2.3; 8.4; Optimize Future Requirements Definitions II.C Develop Product and Process II.C.1 Incorporate Customer Value into Design of Products and Processes 6.1.a; 6.2.a.2; 6.3.a 5.2; 7.2; 7.3 II.C.2 Incorporate Downstream Stakeholder Values (Manufacturing, Support, etc.) 6.1; 6.2; ; 7.2; 7.3 into Products and Processes II.C.3 Integrate Product and Process Development 6.1; 6.2; ; II.D. Supply Chain Management II.D.1 Define and Develop Supplier Network 2.1.a.(2); 7.4.a.(1) 5.2.2; 5.6.2; 6.6;7.4 II.D.2 Optimize Network-wide Performance 6.1.b.(3)&(5); 6.2.a.(4); 5.2.2; 5.6.2; 6.6; 8.2.4; 7.4.a.(1) 8.4 II.D.3 Foster Innovation and Knowledge-sharing throughout the Supplier Network 6.2.a.(2) 6.6; 7.4; II.E Produce Product II.E.1 Utilize Production Knowledge and Capabilities for Competitive Advantage 1.1.b; 6.1.b.(3)&(5) 7.1.2; 8.2.2; 8.4; II.E.2 Establish and Maintain a Lean Production System 6.1.b ; 7.2; II.F Distribute and Service Product II.F.1 Align Sales and Marketing to Production 3.1; ; II.F.2 Distribute Product in Lean Fashion 6.1.b.(2)&(5) NSA* II.F.3 Enhance Value of Delivered Products and Services 3.1a.(2); 6.1.b.(5) 5.2; 5.6; 7.2; 8.2 to Customers and the Enterprise II.F.4 Provide Post-Delivery Service, Support and Sustainability NSA* 7.2; 7.3 Section III-Enabling Infrastructure III.A. Lean Organization Enablers III.A.1 Financial System Supports Lean Transformation 7.2.a 6.8; III.A.2 Enterprise Stakeholders Pull Required Financial Measures 4.2.a.1&7.2.a 6.8; ; 8.2.4; 8.4 III.A.3 Promulgate the Learning Organization 5.1.a.(5)&5.2 all 5.4; 6.1; 6.2; 7.1; III.A.4 Enable the Lean Enterprise with IT Systems and Tools 4.2 all 6.1.2; 6.3; 6.5 III.A.5 Integration of Environmental Protection, Health and Safety into the Business 5.3.a.&1.2 all 5.2.2; 5.2.3; 6.3 III.B Lean Process Enablers III.B.1 Process Standardization 6.1& ; 7.1.3; 7.5; 8.1 III.B.2 Common Tools and Systems NSA* 4.1; 5.4; 7.1; 7.3; 6.6 III.B.3 Variation Reduction ; 8.5 * Not specifically addressed (NSA) Page 128 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 128 of 166

132 Note 1: Comparison of LESAT to Baldridge: LESAT is focused on the use of lean principles and practices to achieve the best value for the enterprise and its stakeholders. LESAT was written to emphasize the lean principles and practices, recognizing that they must be used in conjunction with good business practices to achieve the optimal value. Baldridge does not have a lean practice and principal focus. The Baldridge criteria are built on a set of interrelated Core Values and Concepts embedded in the beliefs and behaviors of high-performing organizations. These beliefs and behaviors would of course include lean practices and behaviors but are not written using the LAI lean terms and definitions. They both are meant to assess and encourage continual organizational improvement. The comparison was performed by evaluating the 18 Item descriptions and 29 areas of Baldridge to the practices and maturity levels of the LESAT. In some cases the wording was very similar, while in others the Baldridge wording was different but the same intent could be derived. Credit was given if there was partial mapping. It was also found that in some cases where Not Specifically Addressed (NSA) was indicated that the Baldridge explanatory comments might encompass the lean practice but the item and area words did not. There were no areas where the LESAT and Baldridge disagreed since they were both accepting of innovation and different approaches if positive results could be attained. Note 2: Comparison of LESAT to ISO 9004:2000: ISO 9004, Quality management systems- Guidelines for performance improvements gives guidance on a wide range of objectives for a quality management system and is written with an emphasis on developing, implementing and improving the effectiveness and efficiency of the quality system. It promotes a process approach and a global view of quality management systems that encompass the entire enterprise. Additionally, ISO 9004 promotes a self-assessment by management for use in continual improvement. This focus clearly aligns with the intent of the practices of the LESAT self-assessment tool. ISO 9004 utilizes a different set of terminology than LESAT but does encourage the adoption of practices and behaviors that are similar to those included in lean. ISO 9004 is based on the following eight quality management principle: Customer focus, leadership, involvement of people, process approach, systems approach to management, continual improvement, factual approach to decision making, and mutually beneficial supplier relationships. These are also consistent with the LESAT tool. The comparison revealed a great similarity in the topics covered but LESAT had practices and maturity level considerations that were not addressed by the ISO standard. There is no conflict between the two and they are in fact complementary. Page 129 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

133 Attachment 1a and 1b: Contents lists for Baldridge and ISO 9004: These attachments contain the paragraph headings for the Baldridge and ISO 9004 documents. Attachment 1a Baldridge National Quality Program, Criteria for Performance Excellence, -Item Listing: 1 Leadership Organizational Leadership Public Responsibility and Citizenship 2 Strategic Planning 2.1 Strategy Development 2.2 Strategy Deployment 3 Customer and Market Focus 3.1 Customer and Market Knowledge 3.2 Customer Relationships and Satisfaction 4 Information and Analysis 4.1 Measurement and Analysis of Organizational Performance 4.2 Information Management 5 Human Resource Focus 5.1 Work Systems 5.2 Employee Education, Training and Development 5.3 Employee Well-Being and Satisfaction 6 Process Management 6.1 Product and Service Processes 6.2 Business Processes 6.3 Support Processes 7 Business Results 7.1 Customer-Focused Results 7.2 Financial and Market Results 7.3 Human Resource Results 7.4 Organizational Effectiveness Results Page 130 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 130 of 166

134 Attachment 1b ISO 9004, Quality management systems- Guidelines for performance improvements- Contents: 1 Scope 2 Normative Reference 3 Terms and definitions 4 Quality management system 4.1 Managing systems and processes 4.2 Documentation 4.3 Use of quality management principles 5 Management responsibility 5.1 General guidance 5.2 Needs and expectations of interested parties 5.3 Quality policy 5.4 Planning 5.5 Responsibility, authority and communication 5.6 Management review 6 Resource management 6.1 General guidance 6.2 People 6.3 Infrastructure 6.4 Work environment 6.5 Information 6.6 Suppliers and partnerships 6.7 Natural resources 6.8 Financial resources 7 Product realization 7.1 General guidance 7.2 Processes related to interested parties 7.3 Design and development 7.4 Purchasing 7.5 Production and service operations 7.6 Control of measuring and monitoring devices 8 Measurement, analysis and improvement 8.1 General guidance 8.2 Measurement and monitoring 8.3 Control of nonconformity 8.4 Analysis of data 8.5 Improvement Page 131 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

135 European Foundation for Quality Management (EFQM) Excellence Model (EM) The cross-comparison shown here provides companies with a common starting point for the adoption of LESAT in a business excellence environment, as defined by the European Foundation for Quality Management (EFQM). This is intended to facilitate the use of the information contained in LESAT in either a business excellence environment or ease the transition between the two models. In the former case the business excellence assessment criteria can be supplemented by LESAT practices important for a transition to lean and the five competence levels for each practice used to help define long and short-term targets. In the later case a company using LESAT can display their lean competence in an EFQM format if desired by an external supplier / customer. Our conclusions of the significant and subsidiary relationships that exist between the EFQM Excellence Model and LESAT are shown in a comparison grid and practice table below. Where the primary intent or focus of a LESAT practice matches with an EFQM practice, the relationship is marked in black text or by a black square. Where the primary intent of a LESAT practice does not match directly with an EFQM practice, but strongly influences the achievement of success of that practice, the relationship is marked in gray text or by a gray square. EFQM EM vs. LESAT Practice Table EFQM Practices Related LESAT Practices 1. Leadership (10%) EFQM Criteria 1a. Leaders develop the mission, vision and values and are role models of a culture of excellence. 1b. Leaders are personally involved in ensuring the organization s management system is developed, implemented and continually improved. 1c. Leaders are involved with their customers, partners and representatives of society. 1d. Leaders motivate, support and recognize the organization s people. I.B.1. Learning and education in lean for enterprise leadership I.B.3. Lean enterprise vision I.B.4. A sense of urgency I.D.1. Enterprise organizational orientation I.D.2. Relationships based on mutual trust I.D.3. Open and timely communications I.F.2. Tracking detailed implementation I.G.1. Structured continuous improvement process II.A.3. Provide capability to manage risk, cost, schedule and performance II.A.4. Allocate Resources for program development efforts I.B.1. Learning and education in lean for enterprise leadership I.G.2. Monitoring lean progress III.B.1. Process standardization II.C.2. Incorporate downstream stakeholder values into products and processes I.B.2. Senior management commitment I.G.3. Nurturing the process I.B.4. A sense of urgency Page 132 Copyright of? Massachusetts Institute of Technology, Copyright 2001Massachusetts Institute of Page 132 of 166

136 EFQM Practices Related LESAT Practices 3. People (8%) 2. Policy & Strategy (9%) EFQM Criteria 2a. Policy and strategy are based on the present and future needs and expectations of stakeholders. 2b. Policy & strategy are based on information from performance measurement, research, learning and creativity related activities. 2c. Policy & strategy are developed, reviewed and, updated. I.G.2. Monitoring lean progress 2d. Policy & strategy are deployed through a framework of key processes. 3a. People resources are planned, managed and improved. 3b. People s knowledge and competencies are identified, developed and sustained. 3c. People are involved and empowered. I.D.4. Employee empowerment 3d. People and the organization have a dialogue. 3e. People are rewarded, recognized and cared for. I.D.5. Incentive alignment I.A.1. Integration of lean in strategic planning process I.A.2. Focus on customer value I.E.1. Enterprise level lean transformation plan II.D.1. Define and develop supplier network II.A.1. Leverage lean capability for business growth II.D.3. Foster innovation and knowledge-sharing throughout the supplier network I.G.5. Impacting enterprise strategic planning I.C.4. Performance measures I.E.1. Enterprise level lean transformation plan II.A.1. Leverage lean capability for business growth II.D.2. Optimize network-wide performance III.A.3. Promulgate the learning organization II.A.1. Leverage lean capability for business growth II.E.1. Utilize production knowledge and capabilities for competitive advantage III.B.2. Common tools and systems I.A.1. Integration of lean in strategic planning process I.A.3. Leveraging the extended enterprise III.B.1. Process standardization I.E.2. Commit resources for lean improvements I.E.3. Provide education and training 2e. Policy & strategy are communicated and implemented. I.F.1. Development of detailed plans based on enterprise plan II.A.2. Optimize the capability and utilization of assets I.F.1. Development of detailed plans based on enterprise plan II.A.4. Allocate Resources for program development efforts II.C.3. Integrate product and process development III.A.3. Promulgate the learning organization I.D.7. Lean change agents I.E.3. Provide education and training I.D.6. Innovation encouragement I.D.2. Relationships based on mutual trust I.D.3. Open and timely communications I.G.3. Nurturing the process Page 133 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

137 EFQM Practices Related LESAT Practices 4. Partnership & Resources (9%) EFQM Criteria 4a. External partnerships are managed. 4b. Finances are managed. 4c. Building equipment and material are managed. 4d. Technology is managed. 4e. Information and knowledge are managed. I.A.3. Leveraging the extended enterprise II.D.2. Optimize network-wide performance I.D.2. Relationships based on mutual trust I.D.3. Open and timely communications II.A.4. Allocate Resources for program development efforts II.C.2. Incorporate downstream stakeholder values into products and processes II.D.1. Define and develop supplier network I.C.4. Performance measures I.E.2. Commit resources for lean improvements III.A.1. Financial system supports lean transformation III.A.2. Enterprise stakeholders pull required financial information II.A.2. Optimize the capability and utilization of assets II.F.2. Distribute product in lean fashion I.C.2. Enterprise flow II.E.2. Establish and maintain a lean production system II.A.3. Provide capability to manage risk, cost, schedule and performance II.D.3. Foster innovation and knowledge-sharing throughout the supplier network I.G.4. Capturing lessons learned II.B.2. Utilize data from the extended enterprise to optimize future requirement definitions II.D.3. Foster innovation and knowledge-sharing throughout the supplier network II.F.1. Align sales and marketing to production III.A.2. Enterprise stakeholders pull required financial information I.C.2. Enterprise flow II.A.4. Allocate Resources for program development efforts II.C.2. Incorporate downstream stakeholder values into products and processes II.C.3. Integrate product and process development II.F.4. Provide post delivery service, support and sustainability III.A.1. Financial system supports lean transformation III.A.4. Enable the lean enterprise with information systems and tools III.B.2. Common tools and systems Page 134 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 134 of 166

138 EFQM Practices Related LESAT Practices 5. Processes (14%) EFQM Criteria 5a. Processes are systematically designed and managed. 5b. Processes are improved as needed using innovation in order to fully satisfy and generate increasing value for customers and other stakeholders. 5c. Products and services are designed and developed based on customer needs and expectations. 5d. Products and services are produced, delivered and serviced. II.F.4. Provide post delivery service, support and sustainability 5e. Customers relations are managed & enhanced. I.C.1. Understanding the current value stream I.C.3. Designing the future value stream I.C.4. Performance measures II.C.3. Integrate product and process development II.E.2. Establish and maintain a lean production system II.F.3. Enhance value of delivered products and services to customers and the enterprise III.A.1. Financial system supports lean transformation III.A.4. Enable the lean enterprise with information systems and tools III.A.5. Integration of environmental protection, heath and safety into the business I.G.1. Structured continuous improvement process II.B.1. Establish a requirement definition process to optimize lifecycle value I.C.2. Enterprise flow I.C.3. Designing the future value stream I.D.6. Innovation encouragement I.D.7. Lean change agents III.B.1. Process standardization III.B.3. Variation reduction I.A.2. Focus on customer value I.C.1. Understanding the current value stream I.F.1. Development of detailed plans based on enterprise plan III.A.5. Integration of environmental protection, heath and safety into the business II.B.1. Establish a requirement definition process to optimize lifecycle value II.C.1. Incorporate customer value into design of products and processes II.C.2. Incorporate downstream stakeholder values into products and processes II.B.2. Utilize data from the extended enterprise to optimize future requirement definitions III.A.5. Integration of environmental protection, heath and safety into the business III.B.2. Common tools and systems II.D.2. Optimize network-wide performance II.E.2. Establish and maintain a lean production system II.F.1. Align sales and marketing to production II.F.2. Distribute product in lean fashion II.F.3. Enhance value of delivered products and services to customers and the enterprise III.B.2. Common tools and systems I.D.2. Relationships based on mutual trust I.D.3. Open and timely communications II.C.1. Incorporate customer value into design of products and processes II.F.3. Enhance value of delivered products and services to customers and the enterprise II.F.4. Provide post delivery service, support and sustainability 6. Customer Results 6a. Perception Measures. 6b. Performance Indicators (internal indictors) I.C.4. Performance measures III.A.1. Financial system supports lean transformation Page 135 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

139 EFQM Criteria EFQM Practices Related LESAT Practices 7. People Results (9%) 8. Society Results (6%) 7a. Perception Measures. 7b. Performance Indicators (internal indictors) 8a. Perception Measures. 8b. Performance Indicators (internal indictors) I.C.4. Performance measures III.A.1. Financial system supports lean transformation I.C.4. Performance measures III.A.1. Financial system supports lean transformation II.D.2. Optimize network-wide performance 9. Key Performance Results (15%) 9a. Key performance outcomes. 9b. Key performance indicators (internal indictors) I.F.2. Tracking detailed implementation I.G.2. Monitoring lean progress I.C.4. Performance measures III.A.1. Financial system supports lean transformation Reference: Introducing Excellence European Foundation for Quality Management, 2001 Page 136 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 136 of 166

140 Appendix E LESAT Assessment Aids E.1 - Sample Agenda and Guidelines for Enterprise LESAT Sessions E.2 - LESAT Summary Sheets - Single Page Summary Sheet - Multiple Page Summary Sheet E.3 - LESAT Calculator for Data Entry/Consolidation E.4 - Site Visit Alternatives for Analyzing and Displaying Data Page 137 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

141 E.1 - Sample Agenda and Guidelines for Enterprise LESAT Sessions On the following pages are sample agendas and guidelines prepared by one of the LAI consortium member companies during the LESAT Beta testing in the spring of All information that might identify the company has been removed. Some of the information references the LESAT Beta version and may not agree with page numbers, section numbers, etc. of LESAT Version 1.0. Page 138 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 138 of 166

142 Guidelines for LESAT Kickoff Meeting Preparation Make sure meeting is set up to include the Business Unit Executive and the Level I and the Level II Managers Schedule the meeting for 2 hours. Decide ahead of time with the Lean director whether the level II s should complete the scoring form on line, or on paper. Review meeting with Lean director. Make sure the Lean director knows that the data will come back to them and that they should put it together. Assist as needed. Make sure you or the Lean director have prepared packets (LESAT Materials) for each level II. The packets should include: 1 copy of the scoring sheets (Part V LESAT Assessment Aids) 1 copy of the Lean assessment guidelines ( our document) # of copies of LESAT booklet. Number defined by number of reports the level II will have at the assessment meeting. 1 set of instructions for completing the assessment 1 clear schedule of the delivery dates and the dates of the final meeting Running the meeting 1. At the meeting use the following agenda: Opening remarks Slide presentation of what the tool is and why we use it Outline booklet and score keeping methods (elec. or paper) Review logistics, where to send scores, when, etc. Things to remember In the opening remarks make sure they understand that this assessment is being done to prepare them for their input to their 2002 Lean plan that we will be reviewing with their Manager in August. During the slides show the other companies who contributed to the assessment, how the pages are arranged, and how to do the scoring. I have a good set of the materials, come by and borrow them. Depending on whether the Lean director wants electronic responses or paper, instruct the level II s in how to complete and return the score. Put the onus on the Lean director to tabulate the scores and take care of the data. Let s get them thinking of this as their assessment. Give them a clear idea of the deliverable dates. Remember to offer help with their questions later. Refer to the Lean assessment guidelines, make sure everyone agrees on the meaning of the terms. Page 139 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

143 Instructions for Completing LESAT Assessment Notes: Determine time for team to meet. One or more meetings may be required. Total time usually takes approx. 5-8 hours. The tool has three sections. Section I has 28 items, Section II has 18 items, and Section III has 8 items. Refer to the Lean assessment guidelines for definitions and scoring conventions. Provide everyone with copies of the LESAT (lean enterprise self-assessment tool) Version 1.0. They will need this to read from. Section I begins on page 15 of the LESAT Section II begins on page 32 of the LESAT Section III begins on page 43 of the LESAT The assessment: Complete the assessment by sections. Read the Lean attribute, diagnostic questions, and Lean indicators. Then read the Lean practices and descriptions of levels 1-5 for that particular practice. Discuss the levels among the group and develop consensus on a score. Record the score in the appropriate location in the scoring sheets. Be sure to place the actual score in the present level location. Discuss and reach consensus on the desired level and record that score in the position for desired in the scoring sheet. Record evidence for your scores in the area provided in the scoring sheets. Complete the scoring for each of the Lean practices in the section. Once the scores are entered for a section, determine the averages for that section and record in the appropriate spot in the scoring sheets. Develop and record some ideas for suggested actions for making improvements for your business units. Continue to work by sections until complete. Send the finished data to (Name of Lean Facilitator) Page 140 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 140 of 166

144 Guidelines for LESAT Wrap-up Meeting Preparation Have Lean director set up logistics, room, food, etc. Plan on 6 hours with the following general agenda: 7:30-7:45 Introductions/overview of the day 7:45-9:00 Compositing score of section 1 9:00-9:15 Break 9:15-10:30 Compositing score of section 2 10:30-11:00 Compositing of section 3 11:00-12:00 Review of suggested improvements 12:00-12:45 Lunch 12:45-1:30 Review of overall composite data 1:30-2:30 Align with 2002 Lean plan/next steps Work with the Lean director to determine presentation of composite data and improvement ideas. Some groups have graphs or spreadsheets, etc. It is a good idea to composite the suggested improvements from the scoring sheet to speed the meeting Running the meeting 1. Follow the agenda 2. Get a consensus 3. Make sure they understand that this is their tool for preparing 2002 plan 4. Ask for feedback on the assessment process Page 141 of 166 Copyright Massachusetts Institute of Technology, 2000 Copyright Massachusetts Institute of Technology, Page of?

145 Agenda for LESAT Wrap-up Meeting 7:30-7:45 Introductions/overview of the day 7:45-9:00 Compositing score of Section 1 9:00-9:15 Break 9:15-10:30 Compositing score of Section 2 10:30-11:00 Compositing of Section 3 11:00-12:00 Review of suggested improvements 12:00-12:45 Lunch 12:45-1:30 Review of overall composite data 1:30-2:30 Align with 2002 Lean plan/next steps Section 1 has 28 items Section 2 has 18 items Section 3 has 8 items My initial take is that we crunch the data from the 5-6 different groups, facilitating it tightly to a schedule that allows a maximum of 5 minutes discussion per item. Then we run the rest similar to a value stream future state. We brainstorm what we learned from the assessment and then tie it into an overall Lean plan for the Business Unit for fiscal Now we are doing the assessment 4 months prior to the start of fiscal 2002, so we may want to amend it to final quarter 2001 and all of Compositing- each of the direct reports will have a score sheet covering all of the Business Unit. So if we ask each of the 6 managers to give their scores, write them down and then allow 2-3 minutes resolution discussion, we can move through the items in a timely manner. Each person can keep score as we go along. Brainstorming- having just finished the assessment, we can move into trying to isolate the ? areas that we need to focus on to make credible improvements in the next 15 months. Not too detailed, but to a degree where this group of leaders can verbalize in their minds what the whole BU is going to try and improve. Next steps- A discussion to mate together the areas for improvement, with their existing Lean plan (for alignment), followed by a plan for modifying/developing a plan of value streams/lean events to pursue over the 15 months, with a clear set of metrics to follow to determine success or midstream changes needed. Page 142 Copyright of? Massachusetts Institute of Technology, 2001 Copyright Massachusetts Institute of Technology, 2000 Page 142 of 166

146 E.2 - LESAT Summary Sheets The LESAT summary sheets provide a means for organizing the LESAT results into a comprehensive list for review by the enterprise leadership. In this section of Appendix D two options are presented as helpful ways of summarizing the LESAT data. The first option is a single page summary that contains all of the LESAT practices. The lean practice and the average current enterprise level for each practice are presented. The use of scoring bins allows the entry of the data to act as a visual indicator of where the enterprise ranks itself high or low in the assessment process. While the type is small on this page, it can easily be enlarged to fit an 11 x 17 sheet and has the benefit of being a single piece of paper to carry around. A blank version of this single page summary sheet and a sample version with some example data are provided for your convenience. The second option presented in this section is a multiple page version of the summary sheet. This option has the benefit of containing the current and desired results along with a characteristic indicator for each practice. This helps the enterprise leaders understand what characteristic they should be trying to achieve in their transformation process. Additionally, the use of multiple pages makes the document easier to read due to the larger print than in the single page version discussed above. The downside to this option is that it requires multiple pages to account for all of the data. A blank version of the multiple page summary sheet and a sample version with some example data are also included in this section. Copyright Massachusetts Institute of Technology, 2001 Page 143 of 166

147 LESAT SUMMARY SHEET Sub-Sections Lean Practices I.A. Enterprise Strategic Planning I.A.1. Integration of lean in strategic planning process I.A.2. Focus on customer value I.A.3. Leveraging the extended enterprise Lean Competence Level Level Level Level Level I.B. Adopt Lean Paradigm I.C. Focus on the Value Stream I.D. Develop Lean Structure & Behavior I.E. Create & Refine Transformation Plan I.F. Implement Lean Initiatives I.G. Focus on Continuous Improvement I.B.1. Learning and education in lean for enterprise leadership I.B.2. Senior management commitment I.B.3. Lean enterprise vision I.B.4. A sense of urgency I.C.1. Understanding the current value stream I.C.2. Enterprise flow I.C.3. Designing future value stream I.C.4. Performance measures I.D.1. Enterprise organizational orientation I.D.2. Relationships based on mutual trust I.D.3. Open and timely communications I.D.4. Employee empowerment I.D.5. Incentive alignment I.D.6. Innovation encouragement I.D.7. Lean change agents I.E.1. Enterprise-level lean transformation plan I.E.2. Commit resources for lean improvements I.E.3. Provide education and training I.F.1. Development of detailed plans based on enterprise plan I.F.2. Tracking detailed implementation I.G.1. Structured continuous improvement processes I.G.2. Monitoring lean progress I.G.3. Nurturing the process I.G.4. Capturing lessons learned I.G.5. Impacting enterprise strategic planning (I) LEAN TRANSFORMATION / LEADERSHIP Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 144 of 166 LESAT SUMMARY SHEET

148 LESAT SUMMARY SHEET Sub-Sections Lean Practices I.A. Enterprise Strategic Planning I.A.1. Integration of lean in strategic planning process I.A.2. Focus on customer value I.A.3. Leveraging the extended enterprise Lean Competence Level Level Level Level Level I.B. Adopt Lean Paradigm I.C. Focus on the Value Stream I.D. Develop Lean Structure & Behavior I.E. Create & Refine Transformation Plan I.F. Implement Lean Initiatives I.G. Focus on Continuous Improvement I.B.1. Learning and education in lean for enterprise leadership I.B.2. Senior management commitment I.B.3. Lean enterprise vision I.B.4. A sense of urgency I.C.1. Understanding the current value stream I.C.2. Enterprise flow I.C.3. Designing future value stream I.C.4. Performance measures I.D.1. Enterprise organizational orientation I.D.2. Relationships based on mutual trust I.D.3. Open and timely communications I.D.4. Employee empowerment I.D.5. Incentive alignment I.D.6. Innovation encouragement I.D.7. Lean change agents I.E.1. Enterprise-level lean transformation plan I.E.2. Commit resources for lean improvements I.E.3. Provide education and training I.F.1. Development of detailed plans based on enterprise plan I.F.2. Tracking detailed implementation I.G.1. Structured continuous improvement processes I.G.2. Monitoring lean progress I.G.3. Nurturing the process I.G.4. Capturing lessons learned I.G.5. Impacting enterprise strategic planning (I) LEAN TRANSFORMATION / LEADERSHIP Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 145 of 166 LESAT SUMMARY SHEET

149 LESAT SUMMARY SHEET Sub-Sections Lean Practices II.A. Business Acquisition and Program Management II.A.1. Leverage lean capability for business growth II.A.2. Optimize the capability and utilization of assets II.A.3. Provide capability to manage risk, cost, schedule and performance II.A.4. Allocate resources for program development efforts Lean Competence Level Level Level Level Level II.B. Requirements Definition II.C. Develop Product & Process II.D. Manage Supply Chain II.E. Produce Product II.F. Distribute & Service Product II.B.1. Establish a requirement definition process to optimize lifecycle value II.B.2. Utilize data from extended enterprise to optimize future requirement definitions II.C.1. Incorporate customer value into design of products and processes II.C.2. Incorporate downstream stakeholder values into products and processes II.C.3. Integrate product and process development II.D.1. Define and develop supplier network II.D.2. Optimize network-wide performance II.D.3. Foster innovation and knowledge-sharing throughout the supplier network II.E.1. Utilize production knowledge and capabilities for competitive advantage II.E.2. Establish and maintain a lean production system II.F.1. Align sales and marketing to production II.F.2. Distribute product in lean fashion II.F.3. Enhance value of delivered products and services to customers & the enterprise II.F.4. Provide post delivery service, support and sustainability III.A.1. Financial system supports lean transformation III.A.2. Enterprise stakeholders pull required financial information III.A.3. Promulgate the learning organization III.A.4. Enable the lean enterprise with information systems and tools III.A.5. Integration of environmental protection, heath and safety into the business III.B.1. Process standardization III.B.2. Common tools and systems III.B.3. Variation reduction (III) ENABLING INFRASTRUCTURE (II) LIFE-CYCLE PROCESSES III.A.Lean Organizational Enablers III.B.Lean Process Enablers Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 146 of 166 LESAT SUMMARY SHEET

150 LESAT SUMMARY SHEET Sub-Sections Lean Practices II.A. Business Acquisition and Program Management II.A.1. Leverage lean capability for business growth II.A.2. Optimize the capability and utilization of assets II.A.3. Provide capability to manage risk, cost, schedule and performance II.A.4. Allocate resources for program development efforts Lean Competence Level Level Level Level Level II.B. Requirements Definition II.C. Develop Product & Process II.D. Manage Supply Chain II.E. Produce Product II.F. Distribute & Service Product II.B.1. Establish a requirement definition process to optimize lifecycle value II.B.2. Utilize data from extended enterprise to optimize future requirement definitions II.C.1. Incorporate customer value into design of products and processes II.C.2. Incorporate downstream stakeholder values into products and processes II.C.3. Integrate product and process development II.D.1. Define and develop supplier network II.D.2. Optimize network-wide performance II.D.3. Foster innovation and knowledge-sharing throughout the supplier network II.E.1. Utilize production knowledge and capabilities for competitive advantage II.E.2. Establish and maintain a lean production system II.F.1. Align sales and marketing to production II.F.2. Distribute product in lean fashion II.F.3. Enhance value of delivered products and services to customers & the enterprise II.F.4. Provide post delivery service, support and sustainability III.A.Lean Organizational Enablers III.B.Lean Process Enablers III.A.1. Financial system supports lean transformation III.A.2. Enterprise stakeholders pull required financial information III.A.3. Promulgate the learning organization III.A.4. Enable the lean enterprise with information systems and tools III.A.5. Integration of environmental protection, heath and safety into the business III.B.1. Process standardization III.B.2. Common tools and systems III.B.3. Variation reduction (III) ENABLING INFRASTRUCTURE (II) LIFE-CYCLE PROCESSES Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 147 of 166 LESAT SUMMARY SHEET

151 LESAT Enterprise Self-Assessment Tool (LESAT) SECTION I SUMMARY SHEET - LEAN TRANSFORMATION/LEADERSHIP Process Definition: Develop and deploy lean implementation plans throughout the enterprise leading to (1) long-term sustainability, (2) acquiring competitive advantage and (3) satisfaction of stakeholders. CAPABILITY LEVEL TTL Link Lean Practice Lean Characteristic Current Desired I.A. Enterprise Strategic Planning I.A.1 Integration of Lean in Lean impacts growth, profitability and market strategic planning process penetration I.A.2 Focus on customer value Customers pull value from enterprise value stream I.A.3 Leveraging the extended enterprise Value stream extends from customer through the enterprise to suppliers Average I.B. Adopt Lean Paradigm I.B.1 Learning and education in Lean Unlearning the old, learning the new for enterprise leaders I.B.2 Senior management commitment Senior management leading it personally I.B.3 Lean enterprise vision New mental model of the enterprise I.B.4 A sense of urgency The primary driving force for Lean Average I.C. Focus on the Value Stream I.C.1 Understanding current value stream How we now deliver value to customers I.C.2 Enterprise flow Single piece flow of materials and information I.C.3 Designing future value stream Value stream to meet the enterprise vision I.C.4 Performance measures Performance measures drive enterprise behavior Average I.D. Develop Lean Structure and Behavior I.D.1 Enterprise organizational orientation Organize to support value delivery I.D.2 Relationships based on mutual trust Win-win vs. we-they I.D.3 Open and timely communications Information exchanged when required I.D.4 Employee empowerment Decision-making at lowest possible level I.D.5 Incentive alignment Reward the behavior you want I.D.6 Innovation encouragement From risk aversion to risk rewarding I.D.7 Lean change agents The inspiration and drivers of change Average Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 148 of 166 SECTION I - LESAT SUMMARY SHEET

152 LESAT SECTION I SUMMARY SHEET - Continued Section I - Lean Transformation/Leadership Continued Process Description: Develop and deploy lean implementation plans throughout the enterprise leading to (1) long-term sustainability, (2) acquiring competitive advantage and (3) satisfaction of stakeholders. CAPABILITY LEVEL TTL Link Lean Practice Lean Characteristic Current Desired I.E. Create & Refine Transformation Plan I.E.1 Enterprise-level Lean transformation plan Charting the course across the extended enterprise I.E.2 Commit resources for Lean Resource provision for lean improvements I.E.3 Provide education and training Just-in-time learning Average I.F. Implement Lean Initiatives I.F.1 Development of detailed plans Coordinating lean improvements based on enterprise plan I.F.2 Tracking detailed implementation Assessing actual outcomes against goals Average I.G. Focus on Continuous Improvement I.G.1 Structured continuous Uniformity in how we get better improvement processes I.G.2 Monitoring lean progress Assessing progress toward achieving enterprise objectives I.G.3 Nurturing the process Assure executive level involvement I.G.4 Capturing lessons learned Ensuring that successes lead to more successes I.G.5 Impacting enterprise strategic planning Results lead to strategic opportunities Average Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 149 of 166 SECTION I - LESAT SUMMARY SHEET

153 SUMMARY SHEET - LESAT SECTION II Section II - Life-Cycle Processes Definition: Implement Lean practices across life-cycle processes for defining customer requirements, designing products and processes, managing supply chains, producing the product, distributing product and services and providing post delivery support. CAPABILITY LEVEL TTL Link Lean Practice Lean Characteristic Current Desired II.A. Business Acquisition and Program Management II.A.1 Leverage Lean capability for Exploiting new business opportunities arising from business growth lean enabled capabilities II.A.2 Optimize the capability and Lean enables business growth through the redeployment utilization of assets of assets II.A.3 Provide capability to manage risk, Success follows effective risk management cost, schedule and performance II.A.4 Allocate resources for program Teaming for success development efforts Average II.B. Requirements Definition II.B.1 Establish a requirements definition Stakeholder pull vs. technology/product push process to optimize lifecycle value II.B.2 Utilize data from the extended enterprise to Closed loop processes are in place to capture operational optimize future requirement definitions performance data Average II.C. Develop Product and Process II.C.1 Incorporate customer value into design Understanding customer value allows continuous of products and processes improvement of product and process II.C.2 Incorporate downstream stakeholder Understanding downstream stakeholders allows value to values into products and processes flow seamlessly to customer II.C.3 - Integrate product and process development Breaking down of functional silos enables seamless communication and value flow Average Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 150 of 166 SECTION II - LESAT SUMMARY SHEET

154 SUMMARY SHEET - LESAT SECTION II Continued Section II - Life-Cycle Processes Continued Definition: Implement Lean practices across life-cycle processes for defining customer requirements, designing products and processes, managing supply chains, producing the product, distributing product and services and providing post delivery support. CAPABILITY LEVEL TTL Link Lean Practice Lean Characteristic Current Desired II.D. Manage Supply Chain II.D.1 Define and develop supplier network Core competencies aligned across supplier network II.D.2 Optimize network-wide performance Partnering with key suppliers and optimizing processes to achieve customer value II.D.3 Foster innovation and knowledge-sharing Incentivizing innovation & technology transfer throughout the supplier network Average II.E. Produce Product II.E.1 Utilize production knowledge and Strategic leveraging of manufacturing capability capabilities for competitive advantage II.E.2 Establish and maintain a Lean Defect free production pulled by the customer production system Average II.F. Distribute and Service Product II.F.1 Align sales and marketing to production Matching demand and capabilities II.F.2 Distribute product in Lean fashion Right product, right quantity at the right time II.F.3 Enhance value of delivered products Responding to the voice of the customer and services to customers and the enterprise II.F.4 Provide post delivery service, support Providing customer solutions and sustainability Average Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 151 of 166 SECTION II - LESAT SUMMARY SHEET

155 SUMMARY SHEET - LESAT SECTION III Section III - Enabling Infrastructure Definition: To achieve a successful lean transformation, the enterprise infrastructure must support the implementation of Lean principles, practices and behavior. CAPABILITY LEVEL TTL LInk Lean Practice Lean Characteristic Current Desired III.A.Lean Organizational Enablers III.A.1 Financial system supports Lean requires appropriate financial data Lean transformation III.A.2 Enterprise stakeholders pull required Data on demand financial information III.A.3 Promulgate the Learning Organization Learning organizations create a flexible workforce III.A.4 Enable the Lean enterprise with Facilitate the flow of information and knowledge information systems and tools III.A.5 Integration of environmental protection, Cleaner, healthier, safer health and safety into the business Average III.B.Lean Process Enablers III.B.1 Process standardization Strive for consistency and re-use III.B.2 Common tools and systems Assuring compatibility, reducing costs III.B.3 Variation reduction Reduce uncertainty by reducing variation Average Copyright Massachusetts Institute of Technology and University of Warwick, Copyright permission granted only for the right to use and reproduce unlimited copies. All other rights are reserved. (Supported jointly by the U.K. Lean Aerospace Initiative and the U.S. Lean Aerospace Initiative) Page 152 of 166 SECTION III - LESAT SUMMARY SHEET

156 E.3 - LESAT Calculator for Data Entry/Consolidation The LESAT Calculator is a Microsoft Excel workbook pre-programmed to perform statistical calculations, data grouping, and graph generation to help enterprise leaders manage and use their LESAT data. The workbook contains seven linked spreadsheets, as follows: 1. Data Entry Sheet 2. Calculator Sheet 3. Current State Summary 4. Desired State Summary 5. Gap Summary 6. Section X.X. Averages 7. Graphs The Data Entry Sheet is a listing of all of the LESAT practices. The user simply enters the current and desired state for each respondent (or group representative). The Figure below shows the layout of the Data Entry Sheet. Section 1 - Lean Transformation Leadership TTL Link I.A.Enterprise Strategic Planning I.A.1 I.A.2 Lean Practice Integration of Lean in strategic planning process Focus on customer value Current Desired Current Desired Respondent/Group Number I.A.3 Leveraging the extended enterprise Current Desired I.B. Adopt Lean Paradigm I.B.1 I.B.2 Learning and education in Lean for enterprise leaders Senior management commitment Current Desired Current Desired I.B.3 Lean enterprise vision Current Desired I.B.4 A sense of urgency Current Desired The Calculator Sheet is dynamically linked to the Data Entry Sheet and is the main computational spreadsheet in the workbook. The data is used to generate values for the LESAT gaps and to create tallies of the scores for each LESAT practice. The tallies are useful for visualizing the spread in the responses and allow for identifying multi-modal distributions in the results. This spreadsheet should not be used for data entry, as it will destroy the formulas that have been imbedded in the file. The Calculator Sheet presents overall data for each of the LESAT practices as shown in the figure below: Copyright Massachusetts Institute of Technology, 2001s Page 153 of 166

157 Section 1 - Lean Transformation Leadership TTL Link Lean Practice State Mean Variance Range Level 1 Level 2 Level 3 Level 4 Level5 I.A.Enterprise Strategic Planning I.A.1 Integration of Lean in strategic planning process Current Desired Gap I.A.2 Focus on customer value Current Desired Gap I.A.3 Leveraging the extended enterprise Current Desired Gap I.B. Adopt Lean Paradigm I.B.1 Learning and education in Lean for enterprise leaders Current Desired Gap I.B.2 Senior management commitment Current Desired Gap I.B.3 Lean enterprise vision Current Desired Gap I.B.4 A sense of urgency Current Desired Gap The next three spreadsheets in the workbook essentially represent the same data that exists in the Spreadsheet Calculator, but are grouped by their state. Thus the Current State Summary would contain all of the data on the current state results as shown in the figure below: Section 1 - Lean Transformation Leadership TTL Link Lean Practice State Mean Variance Range Level 1 Level 2 Level 3 Level 4 Level 5 I.A.Enterprise Strategic Planning I.A.1 I.A.2 I.A.3 Integration of Lean in strategic planning process Focus on customer value Leveraging the extended enterprise Current Current Current I.B. Adopt Lean Paradigm I.B.1 I.B.2 Learning and education in Lean for enterprise leaders Senior management commitment Current Current I.B.3 Lean enterprise vision Current I.B.4 A sense of urgency Current The Desired State Sheet and Gap Summary look the same as this figure except they say Desired and Gap in the State column respectively. At the top of each of these spreadsheets there is also a summary block that calculates the overall section statistics as shown in the figure on the following page: Page 154 of 166 Copyright Massachusetts Institute of Technology, 2001

158 Current State - Overall LESAT Score Mean Variance Range Current Section I - Lean Mean Variance Range Current Section II - Life Cycle Processes Mean Variance Range Current Section III - Enabling Infrastructure Mean Variance Range Current The Section X.X. Averages spreadsheet takes all of the data and averages the results at the LESAT X.X level. Thus for Section I.A - Enterprise Strategic Planning, the number generated will be the average of I.A.1, I.A.2, and I.A.3. This spreadsheet presents the current state, desired state, and gap, along with the variances on these values, as shown in the figure below: Section 1 - Lean Transformation Leadership TTL LINK Section X.X Averages Current Desired Gap Section X.X Average Variances Current Desired Gap I.A. Enterprise Strategic Planning I.B. Adopt Lean Paradigm I.C. Focus on the Value Stream I.D. Develop Lean Structure and Behavior I.E. Create and Refine Implementation Plan I.F. Implement Lean Initiatives I.G. Focus on Continuous Improvement Copyright Massachusetts Institute of Technology, 2001 Page 155 of 166

159 The final spreadsheet in the LESAT Calculator for Data Entry/Consolidation generates two graphs for use in reviewing the results of the assessment. The first bar graph shows the value for the current state, desired state, and gap I.A I.B I.C I.D I.E I.F I.G II.A II.B II.C II.D II.E II.F III.A III.B for each of the LESAT practices. The graphs are cumulative, thus the lower bar (in black) represents the current state, the upper bar (lighter) represents the gap and the sum of the two (value of the top of the gap bar) represents the desired state. The second graph is in the same format, but represents the data at the X.X-level. Data was entered into a sample spreadsheet to develop a sample graph, as shown in the figure below: The user of the spreadsheet may wish to sort the data in ascending order to get a better view of the lowest ranking LESAT sections and practices as was done with the data in the graph above to create the following figure: III.B III.A II.A I.B II.C I.D II.B II.F I.C I.G II.E I.A II.D I.E I.F Page 156 of 166 Copyright Massachusetts Institute of Technology, 2001

160 E.4 - Site Visit Alternatives for Analyzing and Displaying Data The Alpha and Beta testing of the LESAT tool provided insight into the many ways results were analyzed and reported by the participating companies. The following pages provide an overview of some of these reporting options. There are pros and cons associated with each individual method, but they do provide useful examples of how your enterprise may choose to review its LESAT results. Copyright Massachusetts Institute of Technology, 2001 Page 157 of 166

161 QPS QA SM&P Engineering People Legal Tng & Dev. Adv. Prog Communication Business Mgmt. Business Dev. TOTALS Desired Level Gap Lean Element I Lean Transformation/Leadership I.A Enterprise Strategic Planning I.A.1 Integration of Lean in strategic planning process I.A.2 Focus on customer value I.A.3 Leveraging the extended enterprise I.B Adopt Lean Paradigm I.B.1 Learning and education in Lean for enterprise leaders I.B.2 Senior management commitment I.B.3 Lean enterprise vision I.B.4 A sense of urgency I.C Focus on the Value Stream I.C.1 Understanding current value stream I.C.2 Enterprise flow I.C.3 Designing future value stream I.C.4 Performance measures I.D Develop Lean Structure and Behavior I.D.1 Enterprise organizational orientation I.D.2 Relationships based on mutual trust I.D.3 Open and timely communications I.D.4 Employee empowerment I.D.5 Incentive alignment I.D.6 Innovation encouragement I.D.7 Lean change agents I.E Create and Refine Transformation Plan I.E.1 Enterprise-level Lean transformation plan I.E.2 Commit resources for Lean improvements I.E.3 Provide education and training I.F Implement Lean Initiatives I.F.1 Development of detailed plans based on enterprise plan I.F.2 Tracking detailed implementation I.G Focus on Continuous Improvement I.G.1 Structured continuous improvement processes I.G.2 Monitoring lean progress I.G.3 Nurturing the process I.G.4 Capturing lessons learned I.G.5 Impacting enterprise strategic planning Copyright Massachusetts Institute of Technology, 2001 Page 158 of 166

162 Lean Aerospace Initiative Company A - LESAT Report Out Lean Aerospace Initiative Company A - LESAT Report Out I.A. Enterprise Strategic Planning I.B. Adopt Lean Paradigm Overall Site Score 1.8 out of 5 Overall Site Score 2.3 out of 5 Desired Level 4.2 Desired Level 4.5 Gap 2.4 Gap 2.2 Definition of 2 - Lean is recognized but relegated to lower levels and is fragmented. Structured process for defining value is applied to selected areas. Definition of 5 - Strategic plans leverage the results of Lean implementation to achieve growth, profitability and market position. Customer value predominant driving force throughout enterprise Definition of 2 - Actively seeking opportunities to learn about lean, initial grasp. Senior managers but into group commitment with common vision of lean and have developed and urgent case for lean transformation Definition of 5 - Senior leader advance knowledge of lean, mentoring lean champions internally and through the extended enterprise Lean Aerospace Initiative Company A - LESAT Report Out Lean Aerospace Initiative Company A - LESAT Report Out I.C. Focus on the Value Stream I.D. Develop Lean Structure and Behavior Overall Site Score 2.2 out of 5 Overall Site Score 2.2 out of 5 Desired Level 4.5 Desired Level 4.4 Gap 2.3 Gap 2.1 Definition of 2 - Key stakeholders and what they value have been identified. Key internal value streams have been revised to overcome the main constraints for information and product flow. Baseline performance measures established to reflect progress toward lean vision and visible throughout the enterprise Definition of 2 - Initial efforts underway to identify functional barriers, understand implications, fostering innovations, identification of change agents. Breaking down organizational barriers and developing mutual trust Definition of 5 - Value streams (present and future) are continually monitored and updated with agreements on performance measures and goals across the extended enterprise. Definition of 5 - Process based organizational structure aligned across the extended enterprise. Decision making is delegated to the point of application. Lean incentives deployed across the extended enterprise Copyright Massachusetts Institute of Technology, 2001 Page 159 of 166

163 Lean Aerospace Initiative Company A - LESAT Report Out Lean Aerospace Initiative Company A - LESAT Report Out I.E. Create and Refine Transformation Plan I.F. Implement Lean Initiatives Overall Site Score 2.2 out of 5 Overall Site Score 2.1 out of 5 Desired Level 4.3 Desired Level 4.1 Gap 2.1 Gap 2.0 Definition of 2 - Enterprise level view identifies Lean transformation projects to meet strategic objectives. Some enterprise level resources committed but often applied to symptom rather than root cause. Definition of 2 - Key goals of the enterprise Lean implementation projects are understood by a majority of employees. Progress of detailed lean implementation projects are tracked within operational units Definition of 5 - Lean transformation plan balances mutual benefits of stakeholders, pool of resources provided for lean initiatives, education and training supports the needs across the extended enterprise Definition of 5 - Lean transformation plans and interrelated implementation projects are coordinated with and support the lean transformation plan and are throughout the extended enterprise Lean Aerospace Initiative Company A - LESAT Report Out I.G. Focus on Continuous Improvement Overall Site Score 1.7 out of 5 Desired Level 4.5 Gap 2.8 Definition of 2 - Some senior managers are providing encouragement support and recognition on Lean but is not consistent across enterprise. Lessons learned documented in some areas. Benefits of lean are beginning to influence strategic planning Lean Aerospace Initiative Company A - LESAT Report Out II.A. Business Acquisition and Program Management Overall Site Score 1.9 out of 5 Desired Level 4.5 Gap 2.6 Definition of 2 - Understanding the core competencies but business pursuits are uncoupled form enterprise planning. Management system to monitor and control performance and staffing Definition of 5 - Senior manager monitor Lean progress throughout extended enterprise. They champion and nurture a culture of Lean. Forecast future results of lean in assessment of new business opportunities Definition of 5 - Virtual organizations are created from the extended enterprise resources to execute the development efforts. Ability to easily shift resources to new opportunities Copyright Massachusetts Institute of Technology, 2001 Page 160 of 166

164 Lean Aerospace Initiative Company A - LESAT Report Out Lean Aerospace Initiative Company A - LESAT Report Out II.B. Requirements Definition II.C. Develop Product and Process Overall Site Score 2.0 out of 5 Overall Site Score 2.1 out of 5 Desired Level 4.4 Desired Level 4.6 Gap 2.4 Gap 2.5 Definition of 2 - Requirements definition process which balances cost, schedule, and performance is partially developed deployed and documented Definition of 2 - Customer inputs considered qualitatively through top-level liaison and occasional reviews. Multidisciplinary development is used to a limited extent. Definition of 5 - The requirement process is a strategic advantage for the extended enterprise contributing to increased responsiveness and new business opportunities. Process established to actively seed data on needs. usage, and process capability across the marketplace. Definition of 5 - Customer is routinely involved with IPT with effective continuous communication. Product and process definition is seamlessly integrated both internally and with the upstream and downstream stakeholders. Lean Aerospace Initiative Company A - LESAT Report Out Lean Aerospace Initiative Company A - LESAT Report Out II.D. Supply Chain Management II.E. Produce Product Overall Site Score 3.0 out of 5 Overall Site Score 2.5 out of 5 Desired Level 4.4 Desired Level 4.7 Gap 1.4 Gap 2.2 Definition of 2 - The supply base has been rationalized to focus suppliers who have high impact on strategic objectives. Long term purchase agreements are introduced focusing on affordability and cost reduction Definition of 5 - Integrated supplier value stream is optimized to create and deliver best value to the customer over the entire product life cycle and maintain long-term sustainable competitive advantage. Definition of 2 - Production System Operates with a batch and queue schedule with limited cellular or inline layouts to improve flow. Definition of 5 - Work segmented and organized along the value stream flow to achieve defect free production upon demand through the implementation of pull from customer through material suppliers. Copyright Massachusetts Institute of Technology, 2001 Page 161 of 166

165 Lean Aerospace Initiative Company A - LESAT Report Out Lean Aerospace Initiative Company A - LESAT Report Out II.F. Distribute and Service Product III. Enabling Infrastructure Overall Site Score 1.5 out of 5 Overall Site Score 2.0 out of 5 Desired Level 4.5 Desired Level 4.8 Gap 3.0 Gap 2.8 Definition of 2 - Distribute in smaller batch sizes in line with increased reliability. Programs in place to reduce customer receipt inspection. Collection of data on failure trends for preventative maintenance and reduction of spare part levels. Definition of 5 - Defect free distribution on demand by implementation of customer pull from end customer through material suppliers. Definition of 2 - Identified high leverage opportunities for common tools and systems with initial deployment in a few areas. Personal management process is in early stage of development. Maintenance of legacy systems consume most of IT resources. Sources of variation are being identified and analyzed with initial efforts underway Definition of 5 - Stakeholders across the extended enterprise generate and share timely financial and performance data. Information is easily accessible/usable. Copyright Massachusetts Institute of Technology, 2001 Page 162 of 166

166 Lean Assessment Summary Section I - Lean Transformation/ Leadership Average Present Level Average Desired Level I.A.Enterprise Strategic Planning I.A.1 Integration of Lean in strategic planning process I.A.2 Focus on customer value I.A.3. Leverage the Extended Enterprise Average Level Gap 2.3 Suggested Actions: I.B. Adopt Lean Paradigm I.B.1 Learning and education in Lean for enterprise leaders I.B.2 Senior management commitment I.B.3 Lean enterprise vision I.B.4 A sense of urgency Average Level Gap 2.5 Suggested Actions: Copyright Massachusetts Institute of Technology, 2001 Page 163 of 166

167 SECTION I - Lean Transformation/Leadership I A Enterprise Strategic Planning B Adopt Lean Paradigm C Focus on the Value Stream D Develop Lean Structure 1 and Behavior E Create and Refine 1 Transformation Plan 2 3 F Implement Lean Initiatives 1 2 G Focus on Continuous 1 Improvement I.A.1 Integration of Lean in strategic planning process I.A.2 Focus on customer value I.A.3 Leveraging the extended enterprise Average Level I.B.1 Learning and education in Lean for enterprise leaders I.B.2 Senior management commitment I.B.3 Lean enterprise vision I.B.4 A sense of urgency Average Level I.C.1 Understanding current value stream I.C.2 Enterprise flow I.C.3 Designing future value stream I.C.4 Performance measures Average Level I.D.1 Enterprise organizational orientation I.D.2 Relationships based on mutual trust I.D.3 Open and timely communications I.D.4 Employee empowerment I.D.5 Incentive alignment I.D.6 Innovation encouragement I.D.7 Lean change agents Average Level I.E.1 Enterprise-level Lean transformation plan I.E.2 Commit resources for Lean improvements I.E.3 Provide education and training Average Level I.F.1 Development of detailed plans based on enterprise plan I.F.2 Tracking detailed implementation Average Level I.G.1 Structured continuous improvement processes I.G.2 Monitoring lean progress I.G.3 Nurturing the process I.G.4 Capturing lessons learned I.G.5 Impacting enterprise strategic planning Average Level Team Avg Current Level Team Avg Desired Level Gap Current L-H Desired L-H Copyright Massachusetts Institute of Technology, 2001 Page 164 of 166

168 LESAT - Pareto Analysis of the Present State Sub-category Lean Practice Average Present Level I.B. Adopt Lean Paradigm I.B.4. A Sense of Urgency I.E. Create and Refine Transformation Plan I.E.1. Enterprise Level Lean Transformation Plan Section III: Enabling Infrastructure III.F. Enterprise Flow I.C. Focus on the Value Stream I.C.1. Current Value Stream II.A. Business Acquisition and Program Management II.A.1. Leverage Lean Capability for Business Growth II.A. Business Acquisition and Program Management II.A.2. Optimize the Capability and Utilization of Assets II.B. Requirements Definition II.B.2 Utilize the Data from the Extended Enterprise II.D. Supply Chain Management II.D.1. Develop/ Manage Supplier Network II.F. Distribute and Service Product II.F.4. Provide Post Delivery Service, Support, and Sustainability Section III: Enabling Infrastructure III.G. Enable the Lean Enterprise with IT Tools and Systems I.C. Focus on the Value Stream I.C.2. Future Value Stream II.F. Distribute and Service Product II.F.3. Enhance Value of Delivered products and Services to Customers and the Enterprise I.F. Implement Lean Initiatives I.F.1. Development of Detailed Plans Based on Enterprise Plan II.F. Distribute and Service Product II.F.2. Distribute Product in Lean Fashion I.E. Create and Refine Transformation Plan I.E.3. Provide Education and Training Section III: Enabling Infrastructure III.C. Enterprise Stakeholders Pull Required Financial Measures I.A. Enterprise Strategic Planning I.A.2. Focus on Customer Value I.D. Develop Lean Structure and Behavior I.D.6. Innovation Encouragement I.F. Implement Lean Initiatives I.F.2. Tracking Implementation I.G. Focus on Continuous Improvement I.G.5. Feedback to Enterprise Strategic Planning I.B. Adopt Lean Paradigm I.B.3. Lean Enterprise Vision LESAT - Pareto Analysis of the Gap (Desired Level - Current Level) Sub-category Lean Practice Average Present Level I.B. Adopt Lean Paradigm I.B.4. A Sense of Urgency I.D. Develop Lean Structure and Behavior I.D.4. Employee Empowerment II.D. Supply Chain Management II.D.1. Develop/Manage Supplier Network Section III: Enabling Infrastructure III.F. Enterprise Flow I.A. Enterprise Strategic Planning I.A.3. Leveraging the Extended Enterprise I.D. Develop Lean Structure and Behavior I.D.3. Open and Timely Communications I.E. Create and Refine Transformation Plan I.E.3. Provide Education and Training I.G. Focus on Continuous Improvement I.G.5. Feedback to Enterprise Strategic Planning I.F. Implement Lean Initiatives I.F.1. Development of Detailed Plans Based on Enterprise Plan I.C. Focus on the Value Stream I.C.1. Current Value Stream I.E. Create and Refine Transformation Plan I.E.1. Enterprise Level Lean Transformation Plan II.A. Business Acquisition and Program Management II.A.2. Optimize the Capability and Utilization of Assets I.A. Enterprise Strategic Planning I.A.2. Focus on Customer Value I.C. Focus on the Value Stream I.C.2. Future Value Stream I.C. Focus on the Value Stream I.C.3. Performance Measures Section III: Enabling Infrastructure III.C. Enterprise Stakeholders Pull Required Financial Measures II.F. Distribute and Service Product II.F.4. Provide Post Delivery Service, Support, and Sustainability II.F. Distribute and Service Product II.F.2. Distribute Product in Lean Fashion II.F. Distribute and Service Product II.F.3. Enhance Value of Delivered products and Services to Customers and the Enterprise I.B. Adopt Lean Paradigm I.B.3. Lean Enterprise Vision Copyright Massachusetts Institute of Technology, 2001 Page 165 of

169 I.E. Create and Refine Transformation Plan Identify, prioritize and sequence a comprehensive set of lean initiatives that collectively constitute the plan for achieving the desired transformation. Diagnostic Questions Is the enterprise level lean transformation plan prioritized and aligned with strategic business objectives? Have adequate resources been provided to facilitate lean transformation? Does the current education and training program adequately support the strategic direction(s) and lean transformation? Have lessons learned and best practice been effectively incorporated within lean transformation planning? MEAN TALLY LP# LEAN PRACTICES CAPABILITY LEVELS I.E Enterprise-Level Lean Transformation Plan Charting the course across the extended enterprise Level 1 Level 2 Level 3 Level 4 Level 5 Individual planning efforts are mostly bottom up initiatives with little priority or coordination established at enterprise level. Enterprise-level view identifies lean implementation projects, which are prioritized to meet long and short-term strategic objectives. Enterprise improvement plans are coordinated and prioritized across enterprise value stream(s), with a timeline for expected measurable results Lean transformation plan is continuously refined through learning from implementation results and changing strategic requirements. Lean transformation plan balances mutual benefits of stakeholders across the extended enterprise. C D C D C D C D C D Lean Indicators (Examples) A process is in place to incorporate lessons learned into the enterprise-level lean transformation plan. The milestone targets of the lean transformation plan are broken-down by section and deployed across the enterprise. Plans balance long-term and short-term stakeholder objectives for the best overall solution. Evidence Opportunities Copyright Massachusetts Institute of Technology, 2001 Page 166 of 166

170 Lean Aerospace Initiative Massachusetts Institute of Technology 77 Massachusetts Avenue Room Cambridge, MA web.mit.edu/lean