The Incredible Journey From Fat to Lean

Transcription

1 The Incredible Journey From Fat to Lean Larry Giunipero, Ph.D., C.P.M., A.P.P. Florida State University 850/ , Larry Giunipero, R. David Nelson, C.P.M., A.P.P. Vice President, Global Supply Management, Delphi Corporation 248/ , Robert A. Kemp, Ph.D., C.P.M., President Kemp Enterprises 515/ , 91 st Annual International Supply Management Conference, May 2006 Abstract. This presentation chronicles the incredible journey that organizations must take to move from the old and archaic world of fat and high cost operations to the new world of lean, low cost, high quality, agile, adaptable and highly productive world-class operations. We must all take the same journey from fat to. This workshop provides supply managers and others knowledge and supply management tools to build more effective global supply chains and operations. Our discussions include problem identification, solution techniques, waste, constraint theory, mapping, best practices and the incredible short and long-term benefits available to everyone. Specifically, our discussions include: 1) analyzing the situation before beginning your lean journey, 2) leadership requirements, 3) training and development, 4) quality development and quality requirements, 5) supplier development programs, 6) changes in operational efficiencies and cost management; and 7) a brief analysis of the incredible payback in terms of value created for customers, suppliers and organizational stakeholders. Objectives. Our five objectives for this workshop presentation and the paper are: 1. Understand the benefits of lean thinking and operations in your supply chains. 2. Learn how to make lean thinking work in your supply chain. 3. Understand how lean thinking reduces or eliminates waste in all operations. 4. Understand how to evaluate current processes to apply lean thinking and operations and how to complete a process map for the process. 5. Understand the potential for customer satisfaction from better service and the incredible potential for cost reductions in supply chain processes. Lean thinking holds great potential for any organization to improve all operations, eliminate most waste, reduce cycle time, reduce and control costs, enhance quality and process productivity along with supply chain operations and performance. Like people, fat organizations become lean by undergoing significant change culturally and behaviorally! The Incredible Journey From Fat to Lean. The process of converting traditional organizations to lean is a five-step process. Each step requires significant organizational culture and process change. Owners, leaders and organizational members must agree with and support 1

2 the makeover of the fat organization to lean. This makeover requires a total organizational commitment to be new and increasingly better on a continual basis. Equally important, managers must realize that this incredible journey will never be completed. Indeed, organizational operations and processes can always be improved! Here managers need to ask, What is a lean organization? Lean organizations are quick and fast adaptability and agility are key to speed. They have the capability of the lean organization to meet its demand with no shortages or excesses. Lean organizations know that knowledge, creativity and change can improve all processes. Lean organizations continually strive to reduce and eliminate all forms of waste. Step One. Understand the benefits of lean thinking and operations in the supply chains. Lean works everywhere. Every organization has waste and excess profit, not for profit, governments and institutions. Similarly, if they have the will to change, all organizations can reap the benefits of being lean. The strategic benefits are listed here. Absolute quality, first time and every time, Absolute lowest total cost, Absolute capability to meet demand with no excesses or shortages, Absolute efficiency and effectiveness maximizing returns to all stakeholders, Respect and fairness for employees, customers, suppliers and other stakeholders. In most business environments today, it s either lean or die! All organizations must take the incredible journey from fat to lean. Step Two. Learn how to make lean thinking work in the supply chain. To learn how to make lean thinking work in organizational supply chains, leaders must convince employees and others that the lean process can be learned and that the organization and its supply chains will reap the benefits. Becoming lean requires disciplined learning, hands-on experience and drastic cultural change. Senior leaders must decide that the organization will become lean and set progressive and exacting strategic objectives and implementation goals that are meaningful to all elements of the organization. Simultaneously, senior leaders must establish a Lean Command and Control Center (LCCC). The LCCC establishes organization-wide learning programs for the lean process, recruits or develops Lean Masters and trains the Trainers. This chart shows the lean leader development program. Science Based On Five Principles: Right Things, Right Time Short Lead Time Build Quality High Capacity Utilization High Resource Utilization Mind and Cultural Sensitivity Break Hierarchy, Go To Gemba Bad News First Respect People, Sympathy Kaizen Spirit (Eliminate Muda) Open Minded, Respect the Doers Support Culture and Discipline Sense of Urgency Art Creativity = Innovation Create New Methods Create New Tools Create New Operating Systems and Processes Life-Long Regeneration Process New Science New Learning New Creation More Change 2

3 These Trainers or Lean Masters, sometimes called Sensei, must be dedicated teachers with great leadership ability. Management rolls the plans for change out to the organization when the plan and the trainers are ready. The trained Trainers then take the lean process organization-wide, on schedule. This lean type of learning does not happen automatically. It requires leaders being sponsors for others as well as mentors. Leaders must be willing to have their people make a long-term commitment of time and then they must also provide both the additional people and budget resources. Leaders must identify specific new requirements for knowledge, skills, metrics and measuring processes. A wide range of techniques proven to drive continuous improvement in manufacturing, with emphasis on quality, waste elimination, cost reduction and operations flow, exist and organizations must learn to use the tools as appropriate to the organization and operational processes. Several of these programs or processes are listed in this table. Selected Tools of the Lean Organization Flawless Product Launch Should Cost Analysis and Control Kaizen Poka Yoke Pull System Continuous Flow Standard Work Teams Housekeeping Error Proofing Empowerment JIT Delivery Open-Book Management Value Stream Analysis Brainstorming Sessions Recognition for People SOS Quality Gates with First-Time Quality and PPM Fishbone Charts 5 Whys Six Sigma Constraint Theory Visual Factory Supplier Development Quick Set-Up SPC Add-on Boards Set Up Reduction TPM Quality Circles Scorecards or Scoreboards Problem Solving Value Stream Mapping Suggestion Programs Kanban WCT Order Point Build to Order (BTO) The LCCC must also establish organization-wide metrics and standards for measuring progress toward goal achievement. Progress toward the goals must be measured in stages. Simultaneously, the objective is not to induce competition between elements; rather, leaders need to measure and certify levels of progress toward the Standard of Perfection. The names and levels of standards or certification should be uniform and rewards must fit the levels of achievement and increase with progress and sustainability of operations. Delphi Global Supply Management sent one of its engineers to Toyota on a two-year executive exchange program to study lean operations and processes. Upon arriving, the Toyota sensei 3

4 asked him to evaluate his general knowledge of lean operations and lean processes on a scale of 1 to 100. The Delphi engineer rated himself at about 70. After a period of working with the sensei and Toyota processes and operations, the sensei once again asked the student to reconsider his initial response of 70. The Delphi engineer said he should have only rated himself about 20. This example suggests two important lessons, 1) most people are not as good as they think, and 2) and much more important is the idea that even the best of people have much to learn by stepping outside their historical environment and opening their minds to other ideas, challenges and processes. The Internet provides a great resource to build a list of creative ideas and tools. One such site is the Lean Enterprise Institute, LEI. Step Three. Understand how lean thinking reduces or eliminates waste in all operations. Unfortunately much of what is done in the fat organization is waste. It is important to understand how lean thinking and operations reduce or eliminate waste. Waste and wasteful processes are everywhere and often they are supported by policy and operational procedures. Taiichi Ohno, the great Japanese production and quality thinker and CEO of Toyota, defined seven forms of waste as targets in the Toyota Production System. His list included these production-oriented results of operations. 1. Waste of producing more than you need. 2. Waste of inventory (anything that is excess to current needs). 3. Waste of waiting (idle operator time or machine time). 4. Waste of motion (movement of people or machines that does not add value). 5. Waste of transportation (any materials movement not directly tied to value-adding operations). 6. Waste of making defective parts. 7. Waste of processing (any process that does not add value to a product). Managers can easily extrapolate these wastes to staff or service type processes and operations in all walks of life. For example, preparing excess food in a restaurant, holding excess perishable fruits and vegetables in a grocery store are examples encountered daily. Examples in supply management include: 1) too many steps in the purchase approval system and paper processes, 2) isolation of design engineering, 3) antiquated information systems or accounting procedures, 4) uncoordinated supply management and supplier processes uncoordinated from each other or customers, and 5) resistance to a P-Card program and, 6) resistance to early supplier involvement (ESI), change in design processes, etc. Remember, by definition, all waste is non-value adding. The impact of all of waste is unnecessary cost. Managers must control or eliminate these costs. Professor Rajan Suri challenges people to think about and control five-sets of costs in terms of waste. These cost are generated by 1) poor quality, 2) obsolescence or loss, 3) longlead times, 4) unresponsiveness to customers and 5) increasing response times. Clearly, the response to waste and its costs in all operations is important and includes the opportunity for significant positive financial impact for organizations. The lean leadership team should always ask four important questions; 1) Is there an organizational element with overall waste reduction responsibilities? 2) Have realistic waste reduction objectives and authority been established? 3) Are waste reduction goals been measured and scored? and 4) Is progress being achieved? 4

5 The Hino Auto Body Company builds a special truck. They have been applying the lean concept of learning, creating and changing for several years. In 2003 they designed and created a new process using Build to Order (BTO) process. The BTO process provided production capabilities to ensure capacity and speed. The finished truck inventory went from 3000 to 400. That was a monumental cost reduction. Shortly after the BTO changes, they decided the assembly line could be replaced by a large turntable. Now a truck is assembled during the one-hour rotation of the table. The turntable provided additional savings. Now the learning, creating and change process is working to create a flow system that will bring completed modular units to the truck assembly point for mounting, insertion and testing. The significant savings from this third creation should also be remarkable. Hino shows us that we should never think that process change is done. The true thinker has additional tools, the mindset and creativity to think about and do things in a different way. Literally managers should never stop thinking and creating to further define and improve their lean processes! Step Four. Understand how to evaluate current processes to apply lean thinking and operations and how to complete a process map. All organizations are value streams with tributary value streams feeding into the main value stream. All lean processes start by understanding the current processes, and then we apply lean learning, creative thinking and make changes in operations. The key tool for understanding any value stream (operation or process) is the value stream map. This map identifies and isolates every single action for analysis for [is for the correct word?] critical information. For example this critical information is identified by the map, 1) the sequencing of events, 2) movement, 3) work time, movement time, storage time and wait time, 4) events creating value or adding to waste and 5) the size of the work area. The value stream mapping process should be learned, developed and improved like every other process. The value stream mapping process must do these five things for all operations. 1. Thoroughly depict the steps and sequence of actions or processes, including information flow required in the current state of the specific operation under study. 2. Accurately measure the exact time required for every step or action. 3. Specify the metrics used to measure activity in the current status. 4. Show the same detail and information flow for the course of action selected for the future state of the specific operation. 5. Identify all action items and information flow required to move from the current state to the future state, the person responsible for each action, required metrics and the exact time schedule required to move from the current to the desired state. The study process associated with mapping considers site layout, space used, work flow, work batches, movement batches, containers used, work sequencing and organization along with flow. It also considers how work is handled. For example are small parts in big boxes on the floor on skids waiting for forklift trucks, or are things on flow racks? Is the site in the traditional linear pattern of a long straight line with no corners? Hopefully, managers can see the arrangement as the smallest possible cell with work in a continuous one-piece flow that moves from step to step with no handling. A team with visual management, proper ergonomics, First Time Quality (FTQ), flawless launches and improved Parts Per Hour (PPHR) performs the 5

6 work. One supplier of window regulators for the auto industry used these processes and helped a major customer. Anyone can learn and utilize process mapping and lean thinking to create operations with even better processes and become a lean hero! Benchmarking, research and study will help managers select the best mapping process for their operations and processes. Considerable literature and consulting services are available to support the mapping process. Step Five. Understand the potential for improved customer satisfaction with better service and the incredible potential for cost reductions in supply chain processes through adopting lean thinking. It is imperative that managers know and completely understand exactly what their customers expect. Lean thinking can help your customers by helping them: 1. Gain competitive advantage in their markets from what has been accomplished. 2. Supply the specified requisite quality with flawless launches first time and every time. 3. Provide absolute on-time delivery with the shortest possible sequencing. 4. Realize the lowest total all in costs with knowledge of organizational cost structure. 5. Meet unexpected changes in demand with agility and adaptability. 6. Obtain assistance and support for R&D, design and development of new products, etc. An organization s supply chains and logistics systems must all be combined into a cohesive, competitive, and cost-effective system to maximize value for the market. All training and organizational development processes must include customers, employees and operations along with those of suppliers and the logistical system that supports the lean operation. To maximize the benefits for everyone, the lean process must be system-wide. REFERENCES Giunipero, Larry, A Skill Based Analysis of the World Class Purchaser, Center for Advanced Research Studies, NAPM, April LePore, Domenico, and Oded Cohen, Deming and Goldratt, The North River Press, Great Barrington, MA, Goldratt, Eliyahu M., The Goal: A Process of Ongoing Improvement, North River Press, Great Barrington, MA, Womack, James P., and Daniel T. Jones, Lean Thinking, Simon & Schuster, New York, NY, Suri, Rajan, Quick Response Manufacturing, Productivity Press, Portland, OR, Nelson, Dave, Patricia E. Moody and Jonathan R. Stegner, The Incredible Payback, Amazon, New York City, NY, Womack, James P., and Daniel T. Jones, Lean Solutions,