Lean Systems Thinking: A Roadmap for Operational Excellence
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- Ronald Chambers
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1 Lean Systems Thinking: A Roadmap for Operational Excellence Professor Peter Hines BCCC 2011 Annual Conference 6 th & 7 th April 2011 Inspiring success through pioneering, process-based solutions S A Partners 2011
2 Muda, Mura & Muri Muda (Waste) Mura (Unevenness) Muri (Burden)
3 How we see Lean Implementation Research conducted by Professor Peter Hines and the Lean Enterprise research centre identified 5 key elements of success:- Focus on customer value through policy deployment Deploying through cross functional processes Value stream management aligned to business goals Lean tools and techniques aligned to need Application in the extended enterprise The Lean Business Model S A Partners has learned, adapted, recognised a blind spot about people and created: The Lean Business Model
4 Strategy Deployment The vision, goals and strategy are clearly communicated throughout the organisation with key measures, targets and activities appropriately deployed Strategic Direction Alignment & Engagement Management Process
5 Strategy Deployment - The Acid Test In any function, at the lowest level. could we get answers to the following questions? What is the plan for this business over the next few years? What are you doing that is different to contribute to this plan? If not, then how do we expect our people to help?
6 DIVISIONAL/REGIONAL/MARKET SECTOR FINANCIAL SUMMARY THE BASE CASE Historic Results In constant 1999 values Annualised Actual Forecast Plan Plan Plan RATIOS #DIV/0! Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Sales/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! PROFIT AND LOSS Sales Gross Profit General Overhead 0 0 Trading Profit Other Income Exceptional Items 0 0 Operating Profit CASH FLOW Operating Profit Depreciation Capital Expenditure Working Capital Other 0 0 Net Operating Cash Flow DIVISIONAL/REGIONAL/MARKET SECTOR FINANCIAL SUMMARY THE BASE CASE Historic Results In constant 1999 values Annualised Actual Forecast Plan Plan Plan RATIOS #DIV/0! Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Sales/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! PROFIT AND LOSS Sales Gross Profit General Overhead 0 0 Trading Profit Other Income Exceptional Items 0 0 Operating Profit CASH FLOW Operating Profit Depreciation Capital Expenditure Working Capital Other 0 0 Net Operating Cash Flow DIVISIONAL/REGIONAL/MARKET SECTOR FINANCIAL SUMMARY THE BASE CASE Historic Results In constant 1999 values Annualised Actual Forecast Plan Plan Plan RATIOS #DIV/0! Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! DIVISIONAL/REGIONAL/MARKET Operating Profit Growth (%) SECTOR FINANCIAL SUMMARY #DIV/0! #DIV/0! THE #DIV/0! BASE CASE #DIV/0! #DIV/0! #DIV/0! Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Historic Operating Results Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! In #DIV/0! constant 1999 values #DIV/0! #DIV/0! 1997 Operating 1998 Profit/Employee #DIV/0! #DIV/0! #DIV/0! 1999 #DIV/0! #DIV/0! #DIV/0! AnnualisedSales/Employee Actual #DIV/0! #DIV/0! #DIV/0! Forecast #DIV/0! Plan Plan Plan #DIV/0! #DIV/0! Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! RATIOS PROFIT #DIV/0! AND LOSS Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! Sales #DIV/0! DIVISIONAL/REGIONAL/MARKET Operating Profit Growth (%) SECTOR FINANCIAL SUMMARY #DIV/0! #DIV/0! THE #DIV/0! BASE CASE #DIV/0! #DIV/0! Gross #DIV/0! Profit Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! General #DIV/0! Overhead Historic Operating Results Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! In #DIV/0! constant 1999 values 0 0 #DIV/0! Trading #DIV/0! Profit 1997 Operating 1998 Profit/Employee 0 0 #DIV/0! 0 #DIV/0! 0 #DIV/0! 1999 #DIV/0! #DIV/0! Other #DIV/0! IncomeAnnualisedSales/Employee Actual #DIV/0! #DIV/0! #DIV/0! Forecast #DIV/0! Plan Plan Plan #DIV/0! Exceptional #DIV/0! Items Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0 0 Operating Profit RATIOS PROFIT #DIV/0! AND LOSS Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! CASH FLOW Sales #DIV/0! DIVISIONAL/REGIONAL/MARKET Operating Profit Growth (%) SECTOR FINANCIAL SUMMARY #DIV/0! #DIV/0! THE #DIV/0! BASE CASE #DIV/0! Operating Profit #DIV/0! Gross #DIV/0! Profit Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! Depreciation #DIV/0! General #DIV/0! Overhead Historic Operating Results Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! In #DIV/0! constant 1999 values 0 Capital 0Expenditure #DIV/0! Trading #DIV/0! Profit 1997 Operating 1998 Profit/Employee 0 0 #DIV/0! 0 #DIV/0! 0 #DIV/0! 1999 #DIV/0! Working Capital#DIV/0! Other #DIV/0! IncomeAnnualisedSales/Employee Actual #DIV/0! #DIV/0! #DIV/0! Forecast #DIV/0! Plan Plan Plan Other #DIV/0! Exceptional #DIV/0! Items Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! Net Operating 0 Cash FlowOperating Profit 0 0 RATIOS PROFIT #DIV/0! AND LOSS Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! CASH FLOW Sales #DIV/0! Operating Profit Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit #DIV/0! Gross #DIV/0! Profit Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! Depreciation #DIV/0! General #DIV/0! Overhead Operating Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0 Capital 0 Expenditure #DIV/0! Trading #DIV/0! Profit Operating Profit/Employee 0 0 #DIV/0! 0 #DIV/0! 0 #DIV/0! #DIV/0! Working Capital#DIV/0! Other #DIV/0! Income Sales/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! Other #DIV/0! Exceptional #DIV/0! Items Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! Net Operating 0 Cash FlowOperating Profit PROFIT AND LOSS CASH FLOW Sales Operating Profit Gross Profit Depreciation General Overhead 0 Capital 0Expenditure Trading Profit Working Capital Other Income Other Exceptional Items Net Operating 0 Cash FlowOperating Profit CASH FLOW Operating Profit Depreciation Capital Expenditure Working Capital Other 0 0 Net Operating Cash Flow DIVISIONAL/REGIONAL/MARKET SECTOR FINANCIAL SUMMARY THE BASE CASE Historic Results In constant 1999 values Annualised Actual Forecast Plan Plan Plan RATIOS #DIV/0! Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Sales/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! PROFIT AND LOSS Sales Gross Profit General Overhead 0 0 Trading Profit Other Income Exceptional Items 0 0 Operating Profit CASH FLOW Operating Profit Depreciation Capital Expenditure Working Capital Other 0 0 Net Operating Cash Flow DIVISIONAL/REGIONAL/MARKET SECTOR FINANCIAL SUMMARY THE BASE CASE Historic Results In constant 1999 values Annualised Actual Forecast Plan Plan Plan RATIOS #DIV/0! Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Sales/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! PROFIT AND LOSS Sales Gross Profit General Overhead 0 0 Trading Profit Other Income Exceptional Items 0 0 Operating Profit CASH FLOW Operating Profit Depreciation Capital Expenditure Working Capital Other 0 0 Net Operating Cash Flow DIVISIONAL/REGIONAL/MARKET SECTOR FINANCIAL SUMMARY THE BASE CASE Historic Results In constant 1999 values Annualised Actual Forecast Plan Plan Plan RATIOS #DIV/0! Sales Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit Growth (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Gross Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Sales (%) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Operating Profit/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Sales/Employee #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! Capex/Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! PROFIT AND LOSS Sales Gross Profit General Overhead 0 0 Trading Profit Other Income Exceptional Items 0 0 Operating Profit CASH FLOW Operating Profit Depreciation Capital Expenditure Working Capital Other 0 0 Net Operating Cash Flow Cascading the strategy into the business Issues Key Strategic Issues Recruitment Exchange rate I.T. System New Facility Emerging Issues Far East economic slowdown New competitor September 11 th events Measures & Targets Cust Perc. Sales Lead Time Strategic Programmes DecemberJanuary February March April May June July August Se ID Progress v Milestones and Forecasts to Completion Financials Business Level Cockpit O.E.E. Cost Emp Sat Issues Strategic Programmes Issues Strategic Programmes Issues Strategic Programmes Issues Strategic Programmes Key Strategic Issues Recruitment Exchange rate I.T. System New Facility Emerging Issues Far East economic slowdown New competitor September 11 th events Measures & Targets DecemberJanuary February March April May June July August Se ID Progress v Milestones and Forecasts to Completion Financials Key Strategic Issues Recruitment Exchange rate I.T. System New Facility Emerging Issues Far East economic slowdown New competitor September 11 th events Measures & Targets DecemberJanuary February March April May June July August Se ID Progress v Milestones and Forecasts to Completion Financials Key Strategic Issues Recruitment Exchange rate I.T. System New Facility Emerging Issues Far East economic slowdown New competitor September 11 th events Measures & Targets DecemberJanuary February March April May June July August Se ID Progress v Milestones and Forecasts to Completion Financials Key Strategic Issues Recruitment Exchange rate I.T. System New Facility Emerging Issues Far East economic slowdown New competitor September 11 th events Measures & Targets DecemberJanuary February March April May June July August Se ID Progress v Milestones and Forecasts to Completion Financials Cust Perc. Sales Lead Time Cust Perc. Sales Lead Time Cust Perc. Sales Lead Time Cust Perc. Sales Lead Time O.E.E. Cost Emp Sat O.E.E. Cost Emp Sat O.E.E. Cost Emp Sat O.E.E. Cost Emp Sat Operations Cockpit Issues Sales Cockpit Strategic Programmes Key Strategic Issues DecemberJanuary February March April May June July August Se Recruitment Issues ID Strategic Programmes Exchange rate 4 I.T. System Key Strategic Issues DecemberJanuary February March April May June July August Se New Facility 12 Recruitment Issues ID Exchange rate Strategic Programmes Emerging Issues 28 4 I.T. System Key Strategic Issues DecemberJanuary February March April May June July August Se Far East economic slowdown 38 New Facility 12 New competitor Recruitment Issues ID Strategic Programmes September Emerging 11 th events Exchange rate Issues Progress 28v Milestones 4 and Forecasts to Completion I.T. System Key Strategic Issues DecemberJanuary February March April May June July August Se Measures Far & East Targets economic slowdown 38 New Facility 12 Financials ID New competitor Recruitment 19 1 September 11 th events Exchange rate Progress v Milestones and Forecasts to Completion Emerging Issues 28 4 I.T. System Measures Far & East Targets economic slowdown 38 New Facility 12 Financials New competitor 19 September 11 th events Emerging Issues Progress 28v Milestones and Forecasts to Completion Cust Perc. Sales Lead Time Measures Far & East Targets economic slowdown 38 Financials New competitor September 11 th events Progress v Milestones and Forecasts to Completion Cust Perc. Sales Lead Time Measures & Targets Financials O.E.E. O.E.E. Cust Perc. Cost O.E.E. Sales Emp Sat Cust Perc. Cost Cost Sales Emp Sat Lead Time Emp Sat Lead Time Product Development Cockpit Marketing Sales (Key Accounts) Customer Service HRM Cockpit O.E.E. Cost Emp Sat
7 Sustaining the Improvement Drive CI FOCUS Weekly Audit Audit Trend KPI Targets KPI Project Status Housekeeping Standards Re-layout Plan
8 People Enabled Processes Inspiring success through pioneering, process-based solutions S A Partners 2011
9 People Enabled Processes Accountabilities are clear at all levels and leaders motivate and develop their team in an environment where they can realise people potential Clear Accountabilities Leading in a Lean context Realising People Potential
10 Typical Current Activity State Executives Middle Managers Front Line Strategic Improvement Fire Fighting Day Job
11 Ideal State Executives Middle Managers Front Line Strategic Improvement Day Job
12 Value Stream Management Inspiring success through pioneering, process-based solutions S A Partners 2011
13 Value Stream Management Improvement is managed through processes and value streams to deliver outstanding customer value with minimum bureaucracy and waste Understand Strategy and Customer Value Mapping to identify Waste Managing to the Future State Result
14 Value Stream Management An Example Process Manufacturing Big Picture Value Stream Map Customer Value Cross-functional Team Select Value Stream Map the Current State Understand Customer Value Identify Waste & Unevenness Process Steps t t Major Wastes Demand Amplification To identify unevenness in supply-chain demand t t t 500 t 0 t Sep 04 Okt 04 Nov 04 Dez 04 Jan 05 Feb 05 Mrz 05 Apr 05 Mai 05 Jun 05 Jul 05 Aug 05 Sep 05
15 VSM - Managing to the Future State Result Performance Level Targeted Future State 1) Envision the most advanced position Feasible Future State Ideal State 2) Back off to what is currently possible 3) Back off to chosen target Implementation Projects Achieve Target New Targeted Future State 4) Establish new target Current State From mapping to management Time
16 Tools & Techniques Inspiring success through pioneering, process-based solutions S A Partners 2011
17 Tools & Techniques The organisation has a daily habit of continuous improvement that uses simple, visual tools and techniques that have been chosen and adapted for effective use Workplace Foundations Specific Tools & Techniques Continuous Improvement Process
18 The Lean Toolkit Model of Excellence Delivery High Engagement Best quality, cost, lead time, safety Sustainable continuous improvement People and teamwork Environmental Quality Flow Pull Takt time Quick changeover Workload balancing 3Rs: Reduce, Reuse, Recycle Stress Point Management CO 2 budgets Technology solutions Authority to stop Error proofing In-station quality control Root cause solutions Standardised and stable process Workplace organisation and visual management Manage by fact using appropriate tools Clear strategic foundations 18
19 Extended Enterprise Inspiring success through pioneering, process-based solutions S A Partners 2011
20 Extended Enterprise The organisation develops integrated strategies & trusting relationships with the best external partners to deliver customer value and eliminate waste across the boundaries between organisations End to End Supply Chain Strategy Supply Chain Deployment Collaborative Development
21 A Lean Supply Chain Information Bottom tier Supplier Goods or Services Consumers The Supply Chain is the upstream and downstream set of organisations that create and deliver the product / service to the end customer There are two types of activity in the Supply Chain Value Adding Activities Non Value Adding Activities Waste is found at boundaries The bigger the boundaries the greater the Waste The biggest boundaries are between companies
22 Tesco One Touch Replenishment Tesco Back of of Store Tesco Tesco Store Cola RDC Tesco RDC Cola Production Tesco Back of of Store Tesco Tesco Store Cola RDC Tesco X Dock Cola Production 30% Lower Logistics Costs
23 Tesco One Touch Replenishment
24 Creating a Roadmap Inspiring success through pioneering, process-based solutions S A Partners 2011
25 Creating your Roadmap a 3 step process. Envision a compelling Future Understand Current levels of Maturity Develop the roadmap Step 3 Step 2 Step 1 Lean Leadership 25
26 Step 1 - Understand Current Maturity Stage 1 Reactive Some dispersed activity may be going on in pockets. This may be driven by individuals but is not yet a formalised standard or shared across the business The Milestones of LEAN MATURITY Stage 2 Formal A structured approach is in place and being used in some pilot areas. Knowledge is held in a small pool of resource with plans to roll-out after proven success Stage 3 Deployed The approach is clear, agreed and aligned with business goals. The systems, roles and behaviours are established and are found throughout the organisation Stage 4 Autonomous Continuous improvement of this process is happening at all levels of the organisation. Teams work to not only maintain standard but to improve the process and approach taken. Stage 5 Way 0f Life Continuous Improvement is a way of life at every level and in every part of the organisation. The organisation extends learning and improvement across the entire value stream Lean Leadership 26
27 Lean Maturity Assessment Where are we now, where will we be in 3 Years time and after the 1 st Roadmap? Milestone Attribute 1 Ways of Working 2 Associate Autonomy 3 Share Best Practice Maturity Level Index Reactive Formal Deployed Autonomous Way of Life 1 Reactive approach 1 Goal Oriented 1 Formal Structure 1 Managed Autonomy 1 Daily habit of CI 2 Little / No 2 Selected Teams 2 Only Specialists 2 Majority Involvement 2 Full Empowerment involvement 3 Value Stream 3 Team Learning 3 X-Process Learning 3 External Learning 3 Adhoc Learning Learning Strategy Deployment Value Stream People Tools & Techniques Extended Enterprise Current: Own team Current: External view 1 st Roadmap: April 2011 Future State: November 2012 [27]
28 Corporate Lean Activity 1 2 Other UK Management Review Strategy Review Needs Multi Site Straw Man 7 Middle Manager Awareness 8 Site Lean Comms & Strategy Deployment Identified Key Value Streams & Processes For Improvement 9 Undertake Value Stream Mapping Identified Projects & Targets Act Phase Check Potential Projects Deliver Strategy Agreed Projects 10 & Targets Undertake Lean Change Projects Review Results Of Projects & Lean Change Awareness For Senior Supply Chain Management Team Operations Manager Briefing Site Senior Mgr Awareness & Roadmap Workshops Identified Skilled Trained Further/ Coaches & Lean Wider Other Team Coaches Training Members Identify Identify Needs 5 Lean Lean Champions Coaches Lean Roadmap Planning Lean Champions Iceberg Training Undertake Lean Coach Iceberg Training & Mentoring Wider Training Needs MS Academy Pre-Plan Phase Plan Phase Site level UK level Do Phase M.S. Academy level 1 Key for Detailed Input Check Phase Key Lean Leadership 28
29 Further Information For further information please contact: Professor Peter Hines Please also join Peter in his Linked In groups: Lean Business System Lean Business System Food & Drink
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