Growing Your Business Through Lean Process Improvement
Applying Lean to any Type of Business
The Cost Reduction Principle
Traditional thinking dictates that you set your selling
price by calculating your cost and adding on a margin for profit In todays competitive market the customer sets the price and you dont have the luxury of adding a profit margin The only way to remain profitable and grow your business is to eliminate waste from your value stream, thereby reducing costscost reduction principle
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The Cost Reduction Principle
Traditional Thinking
Cost + profit = price
Lean Thinking
Price cost = profit
Price Price Price Price
Profit
Profit
Cost
Cost
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The Cost Reduction Principle
Determine the price customers are willing to
pay, and subtract your cost to determine what your profit will be Eliminating waste is important because customers not only set the price, but they also demand price reductions
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What is Lean Process Improvement?
Is it skinny? Is it less people? Is it working harder? Is it making less? What is Lean?
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What is Lean Process Improvement?
Lean is a continuous improvement methodology
focused on managing processes, and improving them by compressing time, rather than sweating assets Every business is a collection of processesprimary processes that create value and secondary processes that support them (office and administrative functions) Processes are sequences of steps that must be carried out to create value for customers and managed as a whole, not separately
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Lean and Profitability
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Growth Through Lean
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Total Costs
Sales/Product Family
Lean reduces total costs enabling you to maintain or lower your prices and increase market share, thereby growing your business.
What is Lean Process Improvement?
Lean emphasizes the prevention of waste:
any extra time, labor or material spent producing a product or service that doesnt add value to it. Leans unique tools, techniques, and methods can help you reduce costs, achieve faster delivery and shorten lead times Lean fosters a culture in which all employees continually improve their skill levels and processes thereby increasing morale Quantum Associates, Inc
What is Lean Process Improvement?
Because lean systems are customer driven,
products and services are created and delivered in the right amounts, to the right location, at the right time, and in the right condition Products and services are produced only for a specific customer order rather than being added to inventory
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Goals of Lean Process Improvement
Improve Quality
Eliminate Waste
Reduce Lead Time
Reduce Total Costs
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Goals of Lean Process Improvement
Improve Quality Quality is the ability of your product or services to meet or exceed your customers requirements
Eliminate Waste Waste is the activities that take up time, resources and space but does not add value to a product or servicecustomers do not want to pay for non-value-added activities
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Goals of Lean Process Improvement
Reduce Lead Time Lead time is the total time it takes to complete a series of tasks within a process. Some examples:
Period between the receipt of a sales order and the time
payment is received The time it takes to transform raw materials into finished goods The time it takes to introduce new products after the design phase is completed The time it takes to complete a quote or submit a proposal Long lead times undermines your business. Reducing lead times can help you dominate your market.
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Goals of Lean Process Improvement
Reduce Total Costs Total costs are the direct and indirect costs
associated with the production of a product or service
You must continually balance your products and
services prices and your operating costs to succeed. If your prices and operating costs are too high you will lose market share and profits To reduce total cost a Lean process must eliminate waste and reduce lead times.
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Benefits
Implementing lean tools and techniques will enable
your company to meet customer demand for a quality product or service at the time they need it and for a price they are willing to pay. Lean management methods create flexible and efficient business and manufacturing processes. Lean practices will help your company manage its total costs and provide a fair ROI to its stakeholders.
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Waste
Waste is anythingtime, cost or work that
adds no value in the eyes of the customer Waste exists at all levels and in all activities Lean shows us how to recognize and eliminate waste and not simply accept it as the way work is done around here
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The Seven Deadly Wastes
The ultimate lean target is the total elimination of waste. Waste, or muda, is anything that adds cost or time without adding value. Seven deadly waste have been identified over the years. Recently an eighth waste has been identifiedunderutilization of people.
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The Seven Deadly Wastes
Inventory
Excess inventory that is not directly required
for current customer orders
Manufacturingexcess raw materials, WIP and
finished goods Office/Serviceunneeded files, extra supplies, unnecessary copies, excessive unread emails, etc.
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The Seven Deadly Wastes
Overproduction
Excessive use of resourcesproducing too
much of something, faster than needed, or before it is needed
Manufacturingunits made for stock or inventory Office/ServiceProducing reports before they are
needed, performing more analysis than required
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The Seven Deadly Wastes
Over-processing
Extra operations, such as rework, reprocessing,
handling and storage that occurs because of defects, overproduction, and too much or too little inventory, includes redundant activities, such as checking someone elses work. Obtaining multiple signatures, or excessive reviews The time spent producing product/service features which are irrelevant to the customer
Manufacturingreworking defective product
Office/servicemultiple approval signatures, entering data
in multiple systems and or stand alone spreadsheets for reporting purposes
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The Seven Deadly Wastes
Transportation
Unnecessary movement of materials such as WIP,
materials being transported from one operation to another. Transporting something further than necessary, or temporarily locating, filing, stocking, stacking, or moving materials, people, information or paper.
Manufacturingmoving sub components from one work
process to another Office/serviceFiling/saving documents that will never be used again, updating customer records in different systems
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The Seven Deadly Wastes
Motion
Extra steps taken by employees and equipment to
accommodate inefficient process layout, defects, reprocessing, overproduction. More walking, reaching or bending than necessary Any movement of people which does not contribute added value to the product or service
Manufacturingoperators having to walk back and forth to retrieve
tools or materials not stored in the immediate work area Office/serviceselecting additional keystrokes and fields to retrieve previous information, searching for misplaced files
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The Seven Deadly Wastes
Waiting
The period of inactivity in a downstream process
that occurs because an upstream activity does not deliver on time.
Manufacturingwaiting for parts or subcomponents to
complete a job Office/servicedelays in getting feedback/approvals/decisions from peers or top management
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The Seven Deadly Wastes
Defects (Rework)
Refers to all processing required creating a
defect or mistake and the additional work required to correct it
Manufacturingdefective units of product Office/serviceincorrect/missing information on a
form, handling a report numerous times
Do it again!
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Eighth Waste
Underutilization of People - is a result of not placing
people where they can (and will) use their knowledge, skills, and abilities to the fullest
Assigning an employee to two jobs due to understaffing
Having employees perform a task that is politically motivated Not cross training employees
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Three Types of Process Activities
Value-added activities Business value-added
activities Non-value added activities
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Value-added Activities
Those steps the customer is willing to pay for
To qualify as value-added an activity must
meet the following criteria:
It changes the form, feature, or function that the
customer desires It must be done right the first time The customer is willing to pay for it
It is the customer who determines what a business is. What the customer thinks he is buying, what he considers value, is decisive it determines what a business is, what it produces and whether it will prosper. Peter Drucker
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Business Value-added Activities
Activities the customer isnt willing
to pay for but must be done to comply with regulations, organizational policies, and so on You must periodically examine these activities to make sure they are necessary, if not eliminate them
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Non-value-added Activities
Those activities the customer is not
willing to pay for and can be avoided Your goal should be to eliminate these activities because they are WASTE
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Understanding Waste
What would you be willing to pay for when ordering a hamburger?
___ Meat ___ Dough ___ Ketchup ___ Cost of radio, TV, web ads ___ Cost of delivery truck signs ___ Cost of store manager ___ Cost of cleaning ___ Cost of menus ___ Employee training ___ Profit
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___ Electricity to run ovens
___ Electricity to run outdoor lights left on accidentally ___ Person paid to inspect takeout orders ___ Cost of hamburgers not sold
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___ Distribution Center
What Are Value Streams?
A Value Stream is all the actions, both value-added and non-value-added required to bring a product or service from concept to launch and from order to delivery.
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Types of Value Streams
Whenever there is a product (or service) for a customer, there is a value stream. The challenge lies in seeing it.
There are three value streams for each product family that overlap and flow together:
Concept to Launch (engineering/design) Raw Materials to Customer (manufacturing) Order to Cash (administrative functions )
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Value Stream Mapping
Value Stream Mapping the process of identifying and charting the flows of information, processes, and goods or services across the entire supply chain from the supplier to customer possession
Includes both value-added and non value-added activities Allows for seeing areas of waste in current state Future state is roadmap and apt to change Create icons specific to your business or industry Maps should be the plan for 6 months 2 years Maps many types
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Value Stream Mapping
Customer Queue/Wait
Data Box
Information Flow
Processe s
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Step Graph
Attributes
Value Stream Map
30 Year Fixed Mortgage Application Value StreamCurrent State Map
Client
Pre-application
8 hrs.
Application
80 hrs.
Approval/Title
80 hrs.
Closing Prep
40 hrs.
Financial data Credit Report Determine prgm
15 15 120
min min min
Verify emply & assets Underwriting Yield
60 120 70
min min %
Oder appraisal & title File paperwork pending Yield
20 5 80
min min %
Notify parties & confirm Schedule location Print docs
120 5 120
min min min
(1 day) 8 hrs
(10 days) 80 hrs
(10 days) 80 hrs
(5 days) 40 hrs
150 min
180 min
25 min
245 min
Queue time = 208 hrs Value-added time=10 hrs (600 minutes) Total lead time = 218 hrs (27.25 days)
Gadget Data
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PCE = 4.6%
Value Stream Map
Orthopedic Patient Current State Value Stream Map
Wait time = 200 minutes Value-added time = 104 minutes Total Lead time = 304 minutes (5.06 hours) Shift = 12 hours
Patient
Registration
15 mins
Triage
35 mins
Emergency Room
20 mins
Radiology
45 mins
Emergency Room
45 mins
ER Casting
40 mins
Discharge
Verify Ins Update Info Process
3 4 3
min min min
Vitals Chief cmpl Mini evl Dispense meds
3 2 4 4
min min min min
Recheck vitals Mini assmt Chief cmpl Assess
3 3 2 5
min min min min
Post pst Obtain xray Process
3 5 15
min min min
Reassess Obtain xray Ict hc Diagnosis
3 3 5 5
min min min min
Cast pt Pt educ
30 5
min min
Return Appt Discharge recpt
2 5
min min
15 mins
35 mins
20 mins
45 mins
45 mins
40 mins
10 mins
13 mins
13 mins
23 mins
16 mins
35 mins
7 mins
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PCE =34%
Value Stream Map
Current State: 6-day lead time as shown
Weekly shipments: 700,000 lineal 50,000 pieces
5,350 finished pieces/day 5% From F/J: 90 % 5% 10% 90%
Staging
Lam #1
I Crew size: 4 Run speed 58 ft/min Output: 500 pieces/hr
268 pieces
4,500 C/T= 7.2 sec pieces C/O= 5 - 25 min % Crew:days= 100% swing = 0% % Reliability = 98% Waste = 1/2% Sec available 27,000 Weekly hr = 5
I Crew size: 1 1/3 Run speed 184 ft/min. Output:1,584 pieces/hr 9000 C/T= 2.3 sec pcs C/O= 7 - 30 min % Crew Days =100% Swing =0% % Reliability = 95% Waste = Sec available 108,000 Weekly hr = 31.6
Resaw (4 saws)
Molder #4
Crew size: 4 Run speed 300 ft/min Output:1,285 pieces/hr I
Prime
Crew size: 3 Run speed: 3,15 l ft/min Output: 1,350 pieces/hr
9,000 C/T= 2.8 sec pieces C/T= 1.3 sec C/O= 5 - 45 min C/O= 1 min - 1 hr % Crew:days= 100% % Crew:days =100% swing = 0 % swing = % Reliability = 98% Waste = 1/2% Sec available27,000 Weekly hr = 38.9 % Reliability =73% Waste = 3% Sec available 27,000 Weekly hr = 18.5 48 hr
VA Ratio 1:311
Production lead time = 521,874 sec Value-added time 1,674 sec
.5 hr
48 hr
48 hr
1,034 sec
230 sec
280 sec
130 sec
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Value Stream Map
Future State: 1-day lead time as shown
Free up $50,625 inventory 96% improvement in lead time Instant quality feedback
95% From F/J: 5% Staging
Weekly shipments: 700,000 lineal 50,000 pieces
5,350 finished pieces/day
Lam #1
I Crew size: 4 Run speed 58 ft/min Output: 500 pieces/hr C/T= 7.2 sec C/O= 5 -25 min % Crew:days= 100% swing = 0% % Reliability = 98% Waste = 1/2% Sec available 27,000
Primed lineal cell
Crew size: 6 Run speed 300 ft/min Output: 1,285 pieces/hr C/T= 2.8 sec C/O= 10 - 20 mins % Crew days =100% % Reliability = 95 % Waste = 1.2% Sec available 27,000
268 pieces
4,500 pieces
VA Ratio =1:12
.2 hr Production lead time = 3.7 hr Value-added time 1,233 sec
Weekly hr = 5
.5 hr 1,034 sec 3 hr
Weekly hr = 38.9
199 sec
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DecisionsDecisionsDecisions
Is my company too small for Lean Process
Improvement? Isnt Lean a manufacturing process? I am a service business. Can I afford to implement Lean Process Improvement?
All of these industries have successfully applied Lean to their processes
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Lean Success Stories
Lean Dentist--A dentist in Jacksonville, FL used Lean Tools to achieve the following benefits
Year Hrs/Wk Patient available time for to dentists complete treatment 77 hours 99 days Hygienist s Assistants Dentists Cubicles
2005
10
2006
140 hours
38 days
Benefits
+82%
+81%
+33%
+40%
No Change
+40%
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Lean Success Stories
Lean Landscapersan Atlanta landscaping
company used Lean tools to achieve the following results:
Reduced the cycle time of financial statements from
22 days to 5 days and critical errors from 7 to zero Boosted productivity of its maintenance crews 36% at a 60 residential home complexreduced man hours from 56.2 hours/week to 35.9 hours/week
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Lean Success Stories
Construction Veridian Homes, Madison, WI
Veridians Lean efforts have accomplished the following: Model-homes sold cycle time reduced from 32 to 15 days Drafting time per model reduced by more than one hour Estimating time per home reduced by 32% Material variance reduced 20% for lumber, 24% for siding ,and 30% for trim Paperwork processing decreased by 208 hours per year Person hours reduced by 200 per year through escrow and warranty process improvements Reduced inspection (and inspection costs) by 50% while reducing defects by more than 50%
They achieved all this with a very small investment in kaizen events.
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Lean Success Stories
Lean Office
RB Royal, Fond-du-Lac, WI used Lean tools to
improve their quote process from 15 30 days to an average of 3 days. Some quotes are completed in 24 hours.
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We Offer the Following Lean Implementation Options
Fast Track Lean 2 days For the tight budget- occasional help from a Lean facilitator who works
with your designated process expert. Train-the Trainer 4 - 6 months Lean expert teaches and mentors in-house Lean Agent and improvement team Rapid Improvement Events 1 week
3-5 day commitment of your in-house team facilitated by a Lean expert and
focused on improving a particular process/value stream. Quick results method.
Walking the Gemba 3 weeks Lean assessment of your organization by Lean experts and your in-house process expert to identify the improvement opportunities. This approach is useful when staffing is tight. Lean Office Simulation It is estimated that 90% of administrative activities are waste. This highly interactive, role playing simulation will teach your administrative/office staff how to use Lean in the office to improve their processes. Contact us for details:
[email protected] or 847.919.6127
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Getting Started
Value Stream Maps
The roadmap to problem identification Going from the current state to the future state is
the driver for eliminating waste Your ultimate goal is to achieve the ideal state-once you reach your future state let that become the new current state and create a new future state, and so on Waste is the enemy. Always strive to eliminate waste from your value streams
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Getting Started
Value Stream Maps
For support and administrative processes Determine what data to include by the question you are trying to answer about your value stream or process Define the product produced by the process
Example: If your goal is to reduce days in receivable, you would define invoices as the product and identify the total number of invoices issued, cycle time and queue time for processing and collection, and total cycle time.
From this information you can determine where the
bottlenecks most likely occur and eliminate areas of waste in your future state map.
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Getting Started
Kaizen
Synonymous with continuous improvement Associated with events that Quickly implement Lean tools and techniques to eliminate waste Improve work flow Improve productivity Train workers in lean tools and techniques It is the Lean technique that will move your value
stream from current state to future state
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Conclusion
Lean is a proven, company-wide systematic
approach to eliminate/minimize waste resulting in the production of a good or service at the lowest possible cost It is not just a manufacturing program confined to shop floor employees Lean is every system, every process, and every employee within the organization
If you are the low cost producer of a good or service you have a competitive advantage and will be able to grow your business. Lean is the tool to reduce your costs.
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DO NOT BE AFRAID, MY FRIEND
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