The Thinking Approach LEAN CONCEPTS , IL Holdings, LLC All rights reserved 1

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1 The Thinking Approach LEAN CONCEPTS All rights reserved 1

2 Basic Thinking to Manage the Journey MANAGEMENT TACTICS OF A LEAN TRANSFORMATION All rights reserved 2

3 LEAN MANAGEMENT Two key questions What is it? How do we use it? Role of Lean Management UNDERSTANDING Fundamentals of Lean Management SKILLS LEAN TRANSFORMATION All rights reserved 3

4 Basic Thinking to Manage the Journey FUNDAMENTALS OF LEAN MANAGEMENT All rights reserved 4

5 FUNDAMENTALS OF LEAN MANAGEMENT 1. Define Our Goals 2. Grasping Current Condition 3. Support Kaizen Improvements 4. Control with Standardization 5. Sustainable Improvement 6. Fundamentals Summary All rights reserved 5

6 1 DEFINING GOALS How do we accomplish this? CUSTOMER FIRST THINKING WE MUST UNDERSTAND: Who is the customer? What is my customer s demand? How will I meet this demand? All rights reserved 6

7 WHO IS THE CUSTOMER? Any person, group, process, or system that requires information or material from you should be considered the customer DEFINING GOALS All rights reserved 7

8 WHAT IS MY CUSTOMER S DEMAND? Demand is: What the customer wants When they want it In the quantity they want it At the price they want to pay for it Qualify Demand: Customer Demand GOALS DEFINING GOALS All rights reserved 8

9 TRANSLATE DEMAND TO GOALS The PERFORMANCE MATRIX aligns goals with demand Goals meet demand of higher process KEY POINT: Goals drive targets of lower process DEFINING GOALS Goal alignment moves an organization forward together! All rights reserved 9

10 HOW WILL I MEET THIS DEMAND? Goals TARGETS Targets MUST be quantifiable Targets MUST have a completion timeline Vague or behavioral targets cannot be achieved DEFINING GOALS All rights reserved 10

11 CONDITION HOW TO SET A TARGET Gap between target and ideal closed with future activity CONTINUOUS IMPROVEMENT Ideal Condition Target Condition Target Gap Total Problem Gap Current Condition TIME DEFINING GOALS All rights reserved 11

12 WHAT MAKES A GOOD TARGET? Use the ACORN TEST to ensure achievable targets A. Is the target an Accomplishment or a behavior? Create 10 more reports per hour VS. Work longer hours C. Do those working on the target have Control over it? Can a machine operator improve sales directly? O. Does the target contribute to the overall Objective(s)? Does it align with higher goals or is it stand alone? R. Can the target be Reconciled with outside goals? Does meeting this target negatively impact something else? N. Can the target be measured with a Number? Improve number of reports hourvs. Improve throughput DEFINING GOALS All rights reserved 12

13 Production Lead Time in Days 2 GRASPING CURRENT CONDITION Start measuring performance Establish the current condition Analyze the gap between current condition and the target Determine the improvement Weekly BT Chamber Production Lead Time By Month New schedules introduced Cabinet, FA, Test rebalanced Expanded Attempted ambient room cabinet operational Eliminated rebalance process downtime Apr-Jun '10 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Month All rights reserved 13

14 Percent of On Time Shipments Production Lead Time in Days MEASURE OUR PERFORMANCE WHY DO WE MEASURE? 1. To understand performance over time 2. To establish a base line 3. To track progress HOW DO WE MEASURE? Weekly BT Chamber Production Lead Time By Month New schedules introduced Cabinet, FA, Test rebalanced Expanded Attempted ambient room cabinet operational Eliminated rebalance process downtime Apr-Jun Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov '10 Month KPI: A visual means to track 100.0% 90.0% New performance over time BT Weekly On Time Shipments We use Key Point Indicators (KPI) 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% Inventory Chambers 10.0% KEY POINT: 0.0% Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec There MUST be some means to track progress toward every target that is set Month GRASPING CURRENT CONDITION All rights reserved 14

15 DEFINE CURRENT CONDITION WHAT IS THE CURRENT CONDITION? Our performance today Yesterday s Condition WHY CURRENT CONDITION? Today s Condition WHAT ABOUT HISTORY? Gives insight to stability Shows long term trends A NIMBLE ORGANIZATION Improving Yesterday May not improve today HOW CURRENT IS CURRENT? The goal is to check performance as frequently as possible GRASPING CURRENT CONDITION All rights reserved 15

16 MEASURE OUR STABILITY HOW STABLE IS OUR CURRENT PROCESS? A STABLE process must be leveled up to improve performance An UNSTABLE process can be improved by controlling variation First Shift PIP STABILITY 20 Second Shift HOW DO WE MEASURE OUR STABILITY? We use Potential to Improve Performance (PIP) Compares the average to the best performance PIP = Best Performance Average Performance PIP = = 1.6 STABILITY PIP PIP = = 1.01 A PIP of 1 = Perfectly Stable Process GRASPING CURRENT CONDITION All rights reserved 16

17 Production Lead Time in Days ANALYZE THE GAP Weekly BT Chamber Production Lead Time By Month Quantify the gap between current condition and our target How far do we have to go to reach our target? Develop a tangible metric Days Hours Sales dollars Etc New schedules introduced Cabinet, FA, Test rebalanced Expanded Attempted ambient room cabinet operational Eliminated rebalance process downtime Apr-Jun Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov '10 Month CURRENT CONDITION GRASPING CURRENT CONDITION TARGET CONDITION All rights reserved 17

18 PRIORITIZE TARGETS The PERFORMANCE AUDIT helps understand what targets to work toward first DEFINE 1. Identify goals 2. Develop targets 3. Understand the impact of not meeting targets MEASURE 1. Best performance 2. Average performance 3. Unit value or cost 4. Quantity of units 5. Calculate total and PIP ANALYZE 1. Stability -ORlevel up 2. Which targets yield biggest gains GRASPING CURRENT CONDITION PRIORITIZE BIG GAINS All rights reserved 18

19 SAMPLE AUDIT ANALYZE THE RESULTS Chase the big fish Two Goals Measure the process stability Find the total current cost Calculate PIP and values Five Targets Quantify unit cost and volume GRASPING CURRENT CONDITION Value of Stability = Total 1 1 PIP All rights reserved 19

20 Production Lead Time in Days DETERMINE THE IMPROVEMENT Weekly BT Chamber Production Lead Time By Month New schedules introduced Attempted cabinet rebalance Cabinet, FA, Test rebalanced Eliminated process downtime Expanded ambient room operational QUANTIFIED GAP Apr-Jun Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov '10 Month CURRENT CONDITION Eliminating the gap achieves targets and meet goals TARGET CONDITION How do we accomplish this? KAIZEN GRASPING CURRENT CONDITION All rights reserved 20

21 3 KAIZEN IMPROVEMENT Motivate Management Develop HUMAN RESOURCE MATERIALS METHODS TOOLS Improvements ENGAGE RESOURCES TO KAIZEN Target DIRECT MANAGEMENT KAIZEN [Continuous Improvement] Gap Current Condition Time SUPPORT KAIZEN IMPROVEMENTS All rights reserved 21

22 EFFECTIVE HUMAN KAIZEN HOW DO WE CHANGE BEHAVIOR? S STIMULUS R RESPONSE S D R S R The BEHAVIOR MODEL builds processes that create competent performance Understand the stimulus Be capable of responding Reinforce the correct response WELL DESIGNED ENVIRONMENT DEVELOPED PEOPLE COMPETENT PERFORMANCE SUPPORT KAIZEN IMPROVEMENTS All rights reserved 22

23 Percent of On Time Shipments CONFIRMING RESULTS ASSESS PERFORMANCE AFTER KAIZEN Kaizen Event BT Weekly On Time Shipments 100.0% 90.0% New 80.0% 70.0% 60.0% 50.0% Inventory Chambers 40.0% 30.0% 20.0% 10.0% 0.0% Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Month YES Did we meet our target? NO Quantify Gap BEFORE AFTER 1. Kaizen creates before and after condition 2. Determine a point in time to check results Control Success Correct the Defect(s) SUPPORT KAIZEN IMPROVEMENTS All rights reserved 23

24 4 CONTROL WITH STANDARDIZATION Why standardization? How do we sustain the standard? Standardization summary All rights reserved 24

25 Improvement WHY STANDARDIZATION? Key Point Standardization helps sustain current improvements while creating a foundation to support future improvements S = Standardization K = Kaizen S K S K K S S K K K K K K Lean Thinking Time Traditional Thinking All rights reserved 25

26 WHAT IS STANDARDIZATION? Defines what is required to perform a job task (Who/What/Where/Why/When) The standard is a common language between processes Makes problems easy to see Create Standardized Work STANDARDIZATION All rights reserved 26

27 WHAT IS STANDARDIZED WORK? The most efficient work flow Safety Quality Lead Time Quantity Cost Human Movement STW Components Takt Time Work Sequence Element Times In-process Stock STANDARDIZATION All rights reserved 27

28 WHAT MAKES A GOOD STANDARD? Use the RUMBA TEST to ensure sustainable standards R. Reasonable: Is the standard based on a realistic assessment? Does is relate directly to the customer s needs? U. Understandable: Is the standard clearly defined so there can be no disagreement over interpretation? M. Measurable: Can we objectively measure performance against the standard? B. Believable: Can people buy into the standard? Is it something team members can strive to meet? A. Attainable: Is the standard something that can be reached? STANDARDIZATION All rights reserved 28

29 SUSTAIN THE STANDARD Confirm Expectations Process Audits Support both ways Visual Management KEY POINT: Frequently confirming expectations creates sustainment All rights reserved 29

30 AUDIT EXPECTATIONS Accountability: TOP DOWN What is an Audit? A scheduled review of condition(s) that checks: 1. Is condition normal or abnormal 2. Is status ahead or behind BENEFITS Constant feedback to T/M s Visibility for management Confirmation of expectations MANAGEMENT Audit of Processes PRODUCTION STANDARDIZATION Create accountability All rights reserved 30

31 VISUAL MANAGEMENT Visual Management facilitates the audit 1. Normal <> Abnormal Can we SEE problems? ABNORMAL NORMAL 2. Ahead <> Behind Can we SEE status? BENEFITS Identify small problems at the point of occurrence Prevent development of big problems 1 UNIT Behind Condition 2 UNITS Normal Condition 2+ UNITS Ahead Condition PROACTIVE PROBLEM SOLVING STANDARDIZATION All rights reserved 31

32 STANDARDIZATION SUMMARY KEY POINTS 1. A standard that is managed by correcting abnormal conditions creates stability 2. An improvement is not permanent until it is stable and repeatable! STANDARDIZATION All rights reserved 32

33 5 SUSTAINABLE IMPROVEMENT How do we reach our ultimate goals? Small improvements create large improvements Sustainability summary All rights reserved 33

34 CONDITION HOW TO REACH ULTIMATE GOALS? We know where we are but how do we get to where we ultimately want to be? Continue to improve with repeated Kaizen Target Condition Target Gap Ideal Condition Total Problem Gap 1. We can t always reach our goal in one step 2. If we change too much too fast we can t judge what worked and what didn t Current Condition TIME SUSTAINABLE IMPROVEMENT All rights reserved 34

35 Production Lead Time in Days SMALL IMPROVMENTS ADD UP MAKE A GRADUAL SERIES OF SMALL IMPROVEMENTS SUSTAINABLE IMPROVEMENTS STABILITY 1. Start with a stable process 2. We quantify how much the improvement will help 3. Make the improvement 4. Reestablish a stable process after making the change 5. Confirm we reached our expected results with KPI s STABILITY KAIZEN STABILITY KAIZEN Must have stable starting condition to build from Weekly BT Chamber Production Lead Time By Month New schedules introduced Cabinet, FA, Test rebalanced Expanded Attempted ambient room cabinet operational Eliminated rebalance process downtime Apr-Jun '10 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov SUSTAINABLE IMPROVEMENT Month All rights reserved 35

36 SUSTAINABILITY SUMMARY Making small improvements, reestablishing stability, confirming results with KPI s, and then repeating builds sustainable improvement! STABLE PROCESS [PLAN] KAIZEN IMPROVEMENT [DO] CONFIRM RESULTS [ADJUST] ESTABLISH STABILITY [CHECK] SUSTAINABLE IMPROVEMENT All rights reserved 36

37 6 FUNDAMENTALS SUMMARY 1. Customer First Thinking Define the Customer Quantify Demand Set Targets 2. Grasp the Current Condition 3. Kaizen Improvement 4. Standardize Success Measure Performance Establish Baseline Quantify Gap Eliminate Gap Confirm Improvement Create New Standard Audit Standard All rights reserved 37

38 FUNDAMENTALS SUMMARY CONTINUOUS REPETITION 1. Customer First Thinking Define the Customer Quantify Demand Set Targets 2. Grasp the Current Condition Measure Performance Establish Baseline Quantify Gap 3. Kaizen Improvement 4. Standardize Success Eliminate Gap Confirm Improvement Create New Standard Audit Standard CONTINUOUS IMPROVEMENT All rights reserved 38

39 FINAL THOUGHT - RESPECT FOR PEOPLE - Stay focused from the ground up T/M s own their processes [Experts] T/M s are empowered to solve their problems Organization benefits the most from a factory full of problem solvers The feedback, perspective, and expertise of an engaged work force is critical to creating Effective Sustainable Improvements All rights reserved 39

40 CLOSING DISCUSSION QUESTIONS All rights reserved 40