Applying Lean to Internal Auditing. Chris Baker B App Sc (Applied Physics) AIMM Principal Consultant Kallista Consulting

Transcription

1 Applying Lean to Internal Auditing Chris Baker B App Sc (Applied Physics) AIMM Principal Consultant Kallista Consulting

2 Relevance to Auditing Value Stream Mapping Core Lean Concepts

3 Internal audit is a dynamic profession involved in helping organisations achieve their objectives. It is concerned with evaluating and improving the effectiveness of risk management, control and governance processes in an organisation. SOPAC Website Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Institute of Internal Auditors

4 Lean Thinking Term coined in 1990 s (Womack, Jones & Roos)

5 Lean has seen a rapid and highly successful adoption into many fields of human endeavour. Lean is about process! Health Agriculture Automotive General Manufacturing Logistics Administrative Government Finance

6 .our Lean in Audit approach is an example of genuine innovation that strengthens audit quality and thereby benefits organizations and ultimately their stakeholders. Larry Bradley, Global Head of Audit at KPMG International

7 Lean Auditing Concepts The audit should: assist the organisation to improve value to it s customers / stakeholders by providing insights that can: strengthen control (process reliability & quality) improve productivity improve delivery on time provide clear, concise reports that identify key opportunities for improvement and provide a path for executing change.

8 The aim of the lean organisation is to deliver the required quality, in full and on time and at the lowest cost QUALITY (Zero Defects) COST DELIVERY (DIFOT)

9 Pursue perfection VALUE The customer determines the value PERFECTION VALUE STREAM The customer should be able to pull value from the organisation Work must flow without interruption The value stream must be fully mapped and understood PULL FLOW

10 3 CRITERIA OF VALUE The work must transform the product or service The customer must want the transformation The work must be right first time

11 From a lean perspective, work done can be divided into 3 classifications; Product or Service Value Add Business Value Add Pure Waste

12 Time Value Chart Observe the work Value Add Time Total Process Lead Time Activity with Waste White Space (idle time)

13 Focus on the Waste The real opportunity is here Most organisations focus here 5 % Total Lead Time

14 A Product or Service can undergo four activities: Storage Transport Inspection Processing Typical Business World Class Business Storage 70 80% <18% Transport 10% <2% Inspection/Checking 5-10% 0% Processing 1-5% >80% Reasons for work waiting in storage Completion of a batch Completion of IP Pending a management decision

15 The 7 Wastes of Operations Waiting Overproduction Motion Transport Over- Processing Defects Inventory

16 Transparency & Measurement Flexibility and Fast Changeover Perfect Quality Standardisation Work Flow & Pull Systems Process Orientation Best Quality Lowest Cost DIFOT The Lean Organisation Visual Management (5S) / Value Stream Mapping / Process Levelling

17 Value Stream Mapping Creates a visual map of how work and information flow across an organisation Basis for identifying opportunity for improvement Highly effective at revealing opportunities for improvement and increasing stakeholder value Engages teams and provides momentum for change

18 DEPARTMENT SUPPLIERS & CUSTOMERS CONTROL VALUE STREAM MAP CURRENT STATE CASE PROCESSING CONTROL ERP POLICY What is delivered & to whom? CUSTOMER

19 DEPARTMENT SUPPLIERS & CUSTOMERS CONTROL VALUE STREAM MAP CURRENT STATE CASE PROCESSING What Triggers the process to start CONTROL ERP POLICY Request for service SUPPLIER What is delivered & to whom? CUSTOMER

20 DEPARTMENT SUPPLIERS & CUSTOMERS CONTROL VALUE STREAM MAP CURRENT STATE CASE PROCESSING CONTROL ERP POLICY Request for service SUPPLIER Approval CUSTOMER What are the inputs and steps I STEP 1 2 days STEP 2 STEP 3 CT = 30 min VA = 15 min DEFECT = 10% CT = 60 min VA = 60 min DEFECT = 5% CT = 20 min VA = 0 min DEFECT = 8%

21 DEPARTMENT SUPPLIERS & CUSTOMERS CONTROL VALUE STREAM MAP CURRENT STATE CASE PROCESSING Add in Kaizens CONTROL ERP POLICY Request for service SUPPLIER Long Approval Delay Approval High inspection contributes to high Non Value Add CUSTOMER What are the inputs and steps I STEP 1 2 days STEP 2 STEP 3 CT = 30 min VA = 15 min DEFECT = 10% CT = 60 min VA = 60 min DEFECT = 5% CT = 20 min VA = 0 min DEFECT = 8% High defects = risk

22 I STEP 1 2 days STEP 2 STEP 3 CT = 30 min VA = 15 min DEFECT = 10% CT = 60 min VA = 60 min DEFECT = 5% CT = 20 min VA = 0 min DEFECT = 8% CT = 590 min 60 VA = 75 min NVA = 30 min 15 15

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25 Management & Leadership benefits Highly effective at revealing opportunities for improvement Engagement / Empowerment / Ownership Lays platform for successful change

26 For More Information: Contact: Chris Baker Lean Training Process Improvement Project Support