Lean Six Sigma

Thinking of Lean as Your Business Model 0

Art Byrne has been implementing Lean strategy in various U.S.-based manufacturing and service companies, such as Danaher Corporation, for more than 30 years, including The Wiremold Company, which he ran for 11 years. He now serves as Operating Partner at the private equity firm J. W. Childs Associates L.P.

In a podcast (Lean as a Business) , I asked Art

Joe: Point of reference that really struck me in the book, the one big overall thought I had from it, is you view Lean from just about an appreciative inquiry point of view, what you do well, what are the value adding activities? That’s practically like heresy sometimes, what many consider Lean thinking. I think the first thing when someone thinks about Lean, they think about waste reduction. But, you talk about value adding.

Art: That’s correct. There’s a simple definition of, what is a business in the first place, not just a manufacturing business, but any business? It’s really a very simplistic thing. It’s a collection of people, and a bunch of processes all working to try and deliver value to customers. That’s true for any business. It doesn’t have to be just manufacturing. Unfortunately, the traditional approach that we’ve evolved to when we run these businesses, we started out with strategy, and more often than not the strategy is to create shareholder value, which I think starts out by having it all backwards because shareholder value, to me, is a result, not a strategy. It’s a result of what you do, and the value that you deliver to customers over long periods of time is what’s going to improve your shareholder value.

You can’t just say, “I’m going to do shareholder value.” That’s backward. The other thing that occurs in almost all traditional approaches to a business is we take the value adding part of the business as a given. For example, if you’re running a company and you have a six?week lead time, and you’ve always had a six?week lead time, then that’s taken as a given, “OK we’ve got a six?week lead time. How do we do our strategy around that?”

What we try and do instead is we try and get our customers to conform to what we do, to the fact that we have a six-month lead time. Then, of course, we focus very, very heavily on making the month. The traditional management approach is focus on the numbers and make the month, make the quarter, that kind of thing.

Unfortunately, when you’re focused on make the month; you’re focusing on something that already happened. You can’t do anything about that anymore. That already occurred. That happened last month.

In fact, for most companies, by the time they get the results of last month, they’re three weeks into this month. Effectively, we’re always trying to drive the car through the rear-view mirror when you look at it that way. The reality, however, is the opposite of that.

The value is created by a couple of things, one, by improving your own value adding activities. Two, by delivering more value to your customer than your competitors can. Three, by conforming what you do to your customers to satisfy them and make you stand out versus your competition. It’s really this opposite…value is created by the opposite of the traditional approach if you will.

I always like to use the example of a simple thing that productivity equals wealth. Productively, this is true for countries, for companies, for anything. Productivity always equals wealth. If you think of the industrial revolution in England if you think about why the United States has become so powerful, it’s all really because of productivity.

A Lean strategy allows you to get big improvements in your value adding activities, which is basically productivity. It’s a way to get productivity by focusing on your value adding activities. As you get these, this creates the opportunity for you to grow and to gain to gain market share, which is particularly important in times like this when the economy is really flat and slow and people are struggling to get any kind of sales growth.

The Lean approach gives you the opportunity to do that by focusing on your value adding. I look at Lean really as the greatest wealth creator that was ever invented. But most people just look at it as a bunch of tools, as I said before. It’s a whole bunch of tools in a tool kit.

We can roll then out when we want to use them. If we don’t feel like using them…if you look at most manufacturing companies, they say they’re going to do Lean, and most of them will start where they’re trying to do Kanban, just because they can understand Kanban a little bit better than some of the other stuff. They won’t do setup reduction.

They won’t do some of the other fundamental things. They’ll try and do Kanban, without doing all the other things first; you don’t get much cane out of doing Kanban. But, that’s the approach that a lot of people take.

I think you have to understand Lean as strategic to understand what’s possible here. I can give you a simple example of that, which is, if I just gave you an example that said, we got Company A and Company B, they buy the same equipment from the same manufacturer, so they run at the same speed. Everything is equal. They don’t have anything different…as Company B can change the equipment over in one minute, and Company A takes an hour.

If each of them can only afford an hour a day to change that equipment over, then if I asked you who has the lowest cost, and who has the best customer service, A or B, it becomes pretty clear to most people that the guy with the one minute setup is going to have lower cost. He’s going to have tremendously better customer service because of his ability to respond quickly.

He decides to leverage that by offering a two?day lead time, when Company A and the rest of the industry has a six?week lead time. He’s going to start to gain market share. Company A’s first reaction is probably going to be to build more inventory so that he can offer a short lead time. That’s just going to drive his cost up. Or, if that doesn’t work, he’s going to start to cut the price which also hurts his cost structure and his profitability.

Something that most people would look at clearly as a manufacturing thing, setup reduction, turns out that it’s going to give me lower cost and better customer service, two very strategic things. That might give you a little insight into why, Lean at its core, is a very, very strategic thing. That’s part of the point that we’re trying to make in the book, here is applying the Lean tools and doing this…there’re some tremendous results you can get from this.

Joe:  You talk about leadership as being a real focus in Lean. But, you talk about it more in a participatory sense than what I think traditional thought leads us. We think of Lean as empowering the workforce. But, you really do take it that leadership has to participate, and practically, at that ground level. Can you explain that?

Art: Right. Well, if you don’t have the leader of the business…and that doesn’t have to be the CEO, it can be the leader of a plant. It can be the leader of the division, or anybody that’s leading any business, a business owner if you will. My experience with Lean…It’s easy to tell you the facts about Lean and tell you the concepts. But, it’s very difficult to do. As a result, if the leader isn’t leading it, and I don’t mean managing it, but I mean leading it hands?on, out front, showing the way, then you’re not going to really get very far with this. It’s really interesting to me over many, many years…when I’ve given talks at national conferences on this stuff, or whatever, afterwards, people come up to me and say, “Gee, that was great. Can you come and talk to my CEO and see if you can get him to do this stuff?”

Because, the people down in the trenches that are trying to do Lean, they understand that without the CEO backing it, not much is going to change. The reality is, what’s very, very common is that you’ll see companies that say, “Oh, yeah? We’re going to do Lean,” and they think of it as some element of their strategy.

Mostly, they attempt Lean for things like reducing headcount, or improving their inventory turns or something like that. They don’t look at it as a strategic thing. They don’t look at it as, “How do I grow and gain market share by using this stuff…beat the heck out of my competition?” They just want to cut the headcount.

As a result, they delegate it down to their VP of operations. Then, they try and drop Lean on top of an existing batch structure, leave everything else the same. The reality is you can’t do that. You can try it, but you’re not going to be very successful for very long.

If you want to do this and use it as a strategic weapon, you have to change everything over time. It doesn’t do you any good, for example, if you’re in manufacturing, it doesn’t do you any good to try and do Lean at the manufacturing level and let your sales force continue running around doing big batch order taking, or have sales terms that call for you shipping 45 percent of your monthly sales for the last week of the month, and the manufacturing guys are trying to level load production. You’re at odds with yourself.

You have to have the leadership to do this. If you can’t get the leader to participate, it’s something that isn’t going to work very well. One of the main thrusts of this book is really to try and help the leaders understand what it is they have to do, and how they have to behave, and what they have to know in order to be successful at doing this.

I give some examples of; you just start out with as to, “Why do you want to do this in the first place?” Well, the results that you can get are fantastic. If I can digress for a second, I could just give you some of the results that we achieved at Wiremold.

There’s a whole long list here. Basically, we dropped our lead time from four to six weeks down to one to two days. That gave us the ability to increase customer service from 50 percent to 98 percent, and allowed us to quadruple the size of the business over eight years. We improved our gross profit margin from 38 percent to 51 percent.

Improved productivity by 162 percent. Inventory turns went from three times to 18 times. Our operating income improved by 13.4 times over the course of about nine years. The net result was, our value, our enterprise value, if you will, increased by just about 2500 percent over the course of about nine years. We went from a company valued at around $30 million to a company that we sold in 2000 for $770 million. That ought to give people plenty of incentives.

I can’t imagine someone leading a business and I said, “Gee, if I show you how to use these tools, and you can increase the value of your enterprise by 2500 percent over the next 10 years.” If you look at me and say, “Well, that’s interesting, but I don’t really want to do that.” Then, to me, you’re in the wrong job. You shouldn’t be in that position because you should want to do it.

The book really tries to say, “Look, this is what you can get from this. These are the steps you need to take. These are the things that need to be present. These are the things you need to know. This is how you go about implementing this, and the actions that the CEO or the leader has to take to make it happen.” Because, without the CEO driving this, you can really kind of forget about being successful, I think.

Wiremold was an interesting example. After we got written up in a number of books, we were a chapter in the book, “Lean Thinking.” We were a chapter in Gemba Kaizen. We were written up in articles. All the industrial tourists started coming. They wanted to come see what we had done.

That was starting to cause a problem because we had a business to run, and it was taking too much time. I basically put in a simple rule. I said look, we should be able…we should want to help other companies do this, but if they don’t bring their CEO, then we know that they’re not going to do it.

Let’s put in a simple rule that you can still come and visit Wiremold, but only if you bring your CEO. Guess what? All the tours stopped immediately.

Art: No one could get the CEO to come.

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Business901 Podcast of 2014 0

Yesterday’s post, Top 10 Business901 Podcasts of 2014, was somewhat misleading. I only listed Adam Zak, one time, even though his interview was separated into 2 podcasts. The truth is that both podcast rated in the top 4 and one of them was clearly ahead of all others in viewership.

Related Podcast #1: Secrets on Learning about PeopleAdam-Zak

Related Podcast #2: Secrets on Learning about People, Part 2

You can download a PDF transcription or read the content on line at: Learning about People with Adam Zak

Adam Zak is the founder and CEO of Adam Zak Executive Search. He is an accomplished senior executive with more than 25 years of experience spanning the areas of management, consulting, financial and operations management and talent acquisition. He co-authored the book, Simple Excellence: Organizing and Aligning the Management Team in a Lean Transformationclip_image001 detailing the role of senior management in achieving a successful transformation to organizational excellence.

Using The Big Picture Map 0

A few other maps that can be used in Lean was explained by Steven Borris in his book Strategic Lean Mapping. It includes Big Picture Map, Process Mapping, Capacity Mapping, Value-Stream Mapping, and closing with how to use this information for better problem solving and decision making.

Related Podcast and Transcription: Lean Mapping

An excerpt from the podcast:

Joe:   I thought what was interesting about your book when I picked it up is that Value Stream Mapping is a powerful tool but people really think that is the only mapping tool in Lean and they have a tendency to, “Oh, we need to value stream map this…” like out of the blocks or something, but you wait pretty far in the book to introduce it.

Steven Borris:   Yes. I’d have to be honest; I use Value Stream Mapping less than most. What I find is that when you have got the other map itself laid out, you can use that map for anything at all. You can use it for risk analysis, you can use it for manpower, you can use it for looking at capacity problems and bottlenecks, and you can use it for process mapping. Even with what I call the Big Picture Map, once you’ve got the Big Picture Map, and you find all the issues, you can then just add the VSM part in the bottom. Because really the VSM part is just a little castle- wall part where it either adds value or it doesn’t. I usually find that people don’t know how much time they spend doing stuff or how much time they spent waiting, so it tends to be quite hard. You got to go in and get rough ideas to make some measurements. I think the Value Stream Map comes at the end of doing the mapping.

Joe: Can you talk about the flow of your book? You start out with what you call…I think a Big Picture Map.

Steven:   Yes. The Big Picture Map is the one that Agnes Pollock taught us. When I worked for SMAS, it was different when I worked for National Semiconductor. We used to do process maps and analyze what we were actually doing. But the Big Picture Map was trying to see how the whole company operates. I used to have to go into a company, and I’d have a day, originally it was a day, basically we had a day to try and analyze their issues. We were government based, so we had to save the company money. If you do a map, you don’t really save any money. The map tells you what you will save, but it doesn’t actually save anything. I was going into companies, and I was struggling to find all of the issues we had. We had to do more gamble work, more talking to directors and eventually what would happen is that if a company was good enough and it would accept to go for some project, we would try and start with the map.

We could do a Big Picture Map with all the senior managers in a day, possibly two, and that way you can call up all of the issues that we have because it looks at the customers, it looks at the suppliers, it looks at all of the admin, and then all of the production plus goods and shipping. It looks at every part of the company, but what it doesn’t do is look at people.

If you’ve got all of the managers in there, one guy is doing something, it was maybe a company and they all think that if we do this modification, they would be able to wake up the productivity. Usually that can happen but you have no idea that the next place down the line suddenly gets flooded with what they can’t handle. When you’re doing a Big Picture Map, somebody can say, “Well when you did that, we had these problems…” and suddenly it gets things into perspective.

Whenever I try and analyze a company, the best place to start is with a Big Picture Map. That way you can find all the key issues, you find the ones that you know about, but you can usually bring up a few that they don’t know about. Some of the things they’ve discovered have been quite amazing, and these are only the superficial problems. The sort of bigger problems that people have an idea are there, but a lot of them they don’t even think exist as problems.

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Can Lean Help you Co-Exist with Regulatory Bodies? 0

I asked Jerry Rosenthal this question in last week’s podcast: A few years ago, Lean sort of butted heads with ISO and it was like we kept 2 separate books. Is that what happens with food safety and the USDA and FDA protocols or are you explaining that there is common ground because they have given us that flexibility to operate Lean and meet the requirements?

The answer is an excerpt from this Related Podcast and Transcription: Using Lean in Food Processing

Jerry Rosenthal: I’ve seen over time on a company by company basis that compromise if you will the collaboration that these things can work hand in hand without being too much of a burden to a company. The example I like to talk about is, in any manufacturing site you go to, almost anyone, you certainly see there’s a certain level of conflict between production and quality. Right, production says, “We need to make a thousand cases of X today” and quality sometimes has the perception of “what, I’m the police force here. I’m going to look on that production line and I’m going to see, anytime I see something that’s a defect, I’m going to stop the production line and we’re going to get it fixed because we want to make it right. In more mature organizations, they find ways to be collaborative. How can production quality work together to ensure they get that thousand cases out every day, that is the finest product possible that the consumer is going to pay for that’s of value because it’s a good price and the company can be profitable.

I see the same thing co-existing here, with me with the different regulatory bodies. I think they go hand in hand. I think again if you go to ISO and the different standards that are out there, again, they set out the guidelines of what you should do, you should have a recall program in place. They don’t tell you how to do it. They certainly set out the elements of a recall program, but it’s up to a company to put a process together, that should there be an unfortunate event such as a recall, great, what are we going to do? How are we going to stop production? Who do we notify? Where do we pull our batch records or our documentation for, when was this lot made, what were the raw materials that came in, who are the employees that worked that day, where are the sanitation records located? How can we gather the documentation in the most efficient cost-effective way possible to address the needs of the agency? I think as time goes on, there’s a tremendous amount of balance out there. Is it perfect? No, but it’s trending in my opinion in the right direction and, certainly, I can see over the last 10 or 15 years tremendous strides moving in the right direction.

Joe: In manufacturing, I’ve seen where continuous improvement, especially with TPS, has just become the way we do the work, and that’s how it’s driven. In the food industry, I still see in food safety a process that is event-driven, “Oh, I have an audit.” Maybe we’re not there yet, but are we moving towards where it’s just part of the way we do business.

Jerry: That’s a big philosophy shift for a lot of companies. I mean, I’ve certainly touched base, either consulting or had an engagement with companies. They’re certainly in that reactive mode. They’ve called me up, and they’ve said, “We’ve got an audit coming up. We know AIB is coming in a month. Can you help us get ready?” It’s a scramble until 5 minutes they walk in the door. Certainly, a mindset of always being prepared, always doing the right thing is much less stressful, that should anybody an agency walk-in; everything is in place, it’s no, it’s minimal stress. There’s certainly some stress. Nobody wants the agency to just walk in his or her door. I mean they certainly think, “What happened? Something’s wrong.”

If you can get management and leadership to a point of being always ready, it’s certainly more advantageous and I do see a trend of more and more companies being less reactive, being more proactive, always having their documentation ready, and doing the right things all the time. If our procedure says we’re going to do internal audits on our incoming fruit, process, whatever that might be, if our SOP says we’re going to do it every month, great, let’s do it every month and let’s document it and not worry about it. Again, the agency doesn’t say “You will do it every month.” It would be a self-determined process. You can say you’re going to do it every week. You can say you’re going to do it every month. You can say you can do it, at quarterly but whatever you set out. Do what you said you were going to do. When the agency comes in, that’s what they’re going to look at. If your procedure says we’re going to do it weekly, but then, your documentation shows you’ve had weeks and weeks of weeks of not doing anything. Make the change ahead of time. Don’t set yourself out for failure. This is the trend a lot more companies are going towards.

Another trend that we see is, you’re hearing the news more and more the USDA, the FDA, they just simply don’t have enough auditors to do all the work that’s out there and there’s more agencies that are going along the lines of what’s called risk-based auditing. If they get phone calls, if they get complaints, if they get letters that, “Hey, I had this product, and it just wasn’t right. I could smell bleach. It didn’t taste right. The company didn’t respond to my request.” The FDA, they’re trying to, the USDA, they’re trying to get to the point of risk-based auditing. They’re going to look and see where are the complaints, what’s the information they’re hearing, “I better go visit that peanut plant in Georgia because there’s been a lot of complaints about product coming out of that environment.”

If there are companies that are quite compliant, they’re doing what they need to do. They’re staying on top of their documentation. There are no customer issues; they’re reducing their frequency; they’re going to reduced inspection if you will, of those facilities. Those facilities that are having challenges, having issues, they’re going to spend more time and more attention on those areas, to protect food supply in the United States. It really has been a long time coming. But, I’ve seen within the last year or 18 months that gaining a little more steam and heading in that direction, and I think that’s really good for all of us.

Jerry Rosenthal started on his process improvement journey where he entered the world of medical device and worked with such companies like Cardinal Health. Jerry’s expertise is primarily in regulated environments such as food, beverage and pharmaceutical production and packaging. He also has experience in plastics, printing, logistics and IT in both local and enterprise-wide organizations. Jerry has been successful at taking principles and tools from manufacturing and applying them to a commercial business practice, and he does that at Lean Six Sigma Expert.

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Lean Mapping Consists of More Than 1 Tool 0

I found Steven Borris use of Lean Mapping quite different in his book Strategic Lean Mapping. One that included Big Picture Steven BorrisMap, Process Mapping, Capacity Mapping, Value-Stream Mapping, and closing with how to use this information for better problem solving and decision making. The tools within the maps are quite common for a Lean Practitioner. Listen and enjoy the Scottish Accent.

Steve is a manufacturing advisor and continuous improvement expert and does this at Productivity Jigsaw.

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Can You Spend 50% of Your Time Thinking about a Problem? 0

I asked Mike Osterling, “Does it really happening where people are spending 50 percent of their time on defining a problem?”  Mike has worked full time for over 15 years applying the Lean concepts in manufacturing and office environments. He can be found at Osterling Consulting.

Related Podcast and Transcription: Lean and A3 Thinking

An excerpt from the podcast:

Mike Osterling:  I think people in organizations need to be convinced that it’s a good investment of time. Let me tell you a recent experience. We weren’t formally using the A3 form, but we were walking through these guys, these groups through A3 thinking. There was a team that we were taking through a development program was looking…They had a project that they voted to be on, this project team, and they opted in on it. The project team was looking at what this company called Asset Recovery.

So, when an employee leaves the organization, the problem that was perceived upfront was that they weren’t always getting laptops back or employee ID badges or cell phones or pagers or whatever these different assets might be. One of the senior managers was saying we need to improve that process, we’re losing stuff. As part of the program we were taking them through this thinking process of, let’s define the problem first.

When the team went in and started talking to the different parties engaged in mapping the process and collecting data, a very interesting thing that happened was everybody who was engaged in the process, and all of the data that was out there showed that they were at a 99 percent or better rate of asset recovery. It was a very, very rare occurrence when something wasn’t recovered, and the exposure was not significant from an information or nondisclosure…proprietary information, disclosure loss or something like that. And the dollar loss was very insignificant.

Historically?in fact, where this team was going initially, they were going to come up with a completely new process. After they did the current process math, they were ready to come up with a new process definition and have different checkpoints and things like that. Once they started getting the data and really talking to the people, they found out that there’s no problem! This was a really, really good experience, because before we would not have challenged anybody on what the problem was and they would have gone right to the solution.

So as part of the project report out 15 weeks after we started or 13 weeks after we started, these guys said, well, we learned a really good thing. There is no problem. On one level, it seems like it was a waste of time. But, these guys said the value of going out there and talking to the people that do the job and walking the process numerous times, numerous times, this isn’t go to Gemba and walk it once, this is go to Gemba and walk it 15 or 20 times, really understand what’s going on-was invaluable.

They said, “Whenever we’re going after a problem again, we’ve got to talk to the people. We’ve got to walk the process numerous times.” So those guys get it. They get that problem definition, root cause analysis, and measure the current state. They get that.

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Middle Managers: A Key in Any Transformation 0

Paul Yandell is President of  Value Stream Focus and has successful and varied manufacturing and operations experience in companies ranging from startups to multinationals. He led a Lean Transformation driven by middle management and I ask him the following question:

Related Podcast and Transcription: Speak to Middle Managers

Joe:  I think that’s what’s so important because I  always hear this top-down driven type culture and these mandates that we’re going to be a Lean company and it’s got to be the vision from leadership and it’s got to be this saying we’re going to become Lean and everything and I flat out don’t think that works. In certain circumstances, it might work, but…

Paul:  Of course, it does work but let’s agree that the middle management makes it work. So if the top management says, “This is how we’re going,” and he’s able to get the alignment within his company top to bottom. Then he’s got it. The real problem is alignment. If you say, you’re going to change, but you don’t change your structure…I mean, Lean is all about turning the triangle upside down. If you look at a triangle, a normal triangle with the apex at the top, this is in a people-centered organization, the classic organization where the boss tells everybody else what to do. If you are continuously, that’s how all your information flows, then what happens is it’s hard to drive change through that organization. You’re going to tell people what to do, but they may or may not buy into it. They’re kind of waiting for you to go away or for the wind to change.

Now, if you can through continuous improvement, through Lean techniques, if you can switch that, flop that triangle around so the apex is at the bottom, now what happens…you have a flat part of the triangle at the top, if you will. Now you have a situation where the supervisor in saying, “OK, I need you to make green ones, 200 of them, and then I need you to make a bunch of red ones, 200 of them.” Instead, now the conversation is, the supervisor is at the bottom of the triangle, and the center of the work is now the operator. Now the conversation is, “OK, operator, how can I help you do your work better? How can I help you improve your operations? How can I help you do a better job?”

Suddenly, the conversation has changed, and it will never go back because the operator goes, “Oh, well you know, my back hurts every day. If you could raise this desk another two inches, this table, or if you could improve my chair, they’d give me a back to my chair, I’d be a lot better.”

Now the operator makes 15 percent more work and then their back doesn’t hurt and now, all their friends, they want you to pay attention to them too. Because, “You helped Mary, why don’t you come over and look at me? I need a better light over here. And you think I could get a new knife? This one has a bad blade, and it takes me forever to cut this item.”

You’d find out all this stuff that you never knew. If you just walk through the area and look at it, everyone looks busy, everyone looks like they know what they’re doing, and no one tells you what they need, because no one ever listened before, why should they listen now? You don’t want to be a complainer. That’s middle management right there.

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