The Remedy Bringing Lean Thinking Out of the Factory to Transform the Entire Organization Pascal Dennis ©2010 by Lean Productivity Network Adapted by permission of John Wiley & Sons, Inc. ISBN: 978-0-470-55685-6
Although Lean thinking has traditionally been applied to manufacturing, it has great potential to improve other areas of operation as well. It can even benefit organizations that are not involved in manufacturing. The difficulty lies in the fact that, unlike production, business processes are not visible. In The Remedy, Pascal Dennis illustrates how Lean thinking can be utilized to improve organizations in areas other than manufacturing. Individuals who gain a solid understanding of Lean principles will learn how to apply them to any area in need of improvement. The book follows the rejuvenation of the fictional automotive company, Taylor Motors, as plant manager Tom Papas and other high ranking officials apply lean practices throughout the organization.
LEAN FUNDAMENTALS
New Jersey Motors Manufacturing (NJMM) is a successful division of the automaker Taylor Motors. It struggled like the rest of the organization until Tom Papas, plant manager, utilized Lean methods to revitalize it. Lean is not merely a system but a way of thinking and existing; Papas studied Lean principles under sensei Andy Saito. Visual tools are employed to connect processes and to improve flow. They also help to show problems, which are simply a deviation from what is normal. Lean thinking encourages people to appreciate problems because they show how operations can improve. After improving the manufacturing operations at NJMM, Papas began trying to apply the same concepts to improve productivity in other departments at the plant.
Taylor Motors’ difficulties were mainly due to the collapse of the economy and the organization’s internal culture. Rachel Armstrong, the Executive Vice President of Operations, approached Papas to help the organization win back the trust of the public. His track record at NJMM made him a clear choice for the job; he had been able to resurrect the plant because he possessed strong leadership skills and an aptitude for thinking creatively. The organization was planning to initiate a reintegration project, which calls for focusing innovation efforts on a preexisting platform. Taylor Motors was going to concentrate on the Defiant, a hybrid-electrical vehicle (HEV). Papas was to assume the role of Shusa, or chief engineer. He would be accountable for the Defiant project’s development and success, implementing Lean methods in every area within his responsibility.
In companies that utilize Lean practices, the Shusa holds a position of great power and respect. Lean organizations also include a functional general manager. This individual is responsible for the more traditional tasks, such as leadership development and the relevant administrative work. Value stream thinking is important in Lean organizations. A value stream encompasses every activity that is necessary to deliver a product or service to the consumer, from the time of order. Value streams also apply to designs, from conception to delivery. Lean organizations utilize a concept called value stream mapping, which analyzes the flow of material and information. The goal is to be able to improve the various elements of customer satisfaction by identifying which steps are value added and which are not. It is essential to understand the proper level at which to examine a value stream. Analyzing too closely will cause people to miss important details that will help in making significant improvements.
Discovering a problem reveals where there are weaknesses within a system. Lean organizations approach these issues utilizing a four step problem solving process. The first step is to determine if there is in fact a problem. To do this, a person looks at what is happening and compares it to what should be happening. Step two looks for the problem’s cause, utilizing Five Why Analysis. The Five Why method involves asking why repeatedly until one is able to find the problem’s origin. Understanding the cause entails determining the following:
* Point of Cause–when and where the problem was noticed.
* Direct Cause–generally one why away from the point of cause.
* Root Cause–typically poor standards, poor adherence to standards, or insufficient system.
The third step seeks confirmation of cause and effect; executing quick experiments will determine the root cause. The final step is to confirm the countermeasure, by implementing Lean tools that will prevent the problem’s recurrence.
Lean organizations seek continuous improvement by monitoring processes and dealing with problems. A key method is to utilize a four step cycle called Plan-Do-Check-Adjust (PDCA). In the planning phase, leaders must define the current problem and create a possible solution. The next phase is to implement this plan. Next, individuals must monitor progress, carefully studying the available metrics. This will show them the aspects of the plan that do and do not work, and then to standardize the aspects that work.
Visuals are an important aspect of Lean. NJMM applies simple visual standards to content, sequence, timing, and expected outcome. These standards include basic tests, such as torque checks, to ensure the plant does not ship bad products. Standards allow for comparison and stability; as processes improve standards get better. Visual management utilizes visual aids, such as charts and traffic lights, to allow people to quickly note the status of anything that is significant.
Flow and pull are also important concepts of Lean. Producing single units is more economical than creating mass quantities. Also, when production is limited it is easier to spot quality issues and consumers are able to receive products sooner. Achieving flow requires the simple act of placing the value added steps on either side of a unit. Maintaining flow requires continuous improvement. Pull is a response to customer demand, producing an item only when a customer requests it. Pull utilizes the kanban, a small visual sign that provides instructions to produce or supply a specific item or service. Kanbans connect customers and suppliers who are separated.
The initial innovation in the Defiant project was the creation of the obeya, or big room. The purpose of an obeya is to create an environment where pertinent information can be shared quickly and easily. Critical, current information is displayed on charts and graphs on the walls. The room is also used for short, stand up meetings on pressing issues. Taylor Motors also set up desks for project leaders in the obeya and uses the room to manage schedules and to identify issues that need attention. The organization had to focus on kaizen, or gradual improvement.
Leaders on the Defiant project realized that everyone had to change their thinking and adopted the theme “neither too rigid, nor too loose.” If leaders are too controlling it limits creativity; however, people tend to lack creativity when there is too little structure. An important aspect to the organization’s plan to change thinking was to establish development programs. These consisted of learning sessions where attendees learned about Lean, beginning with the basics. The ultimate goal was to create a network of Lean thinking individuals across the organization. They also recognized the need to establish a similar program geared directly to executives, to help them tackle issues specific to their level.
STRATEGY DEPLOYMENT
Developing a strategy requires individuals to understand where they are going and how they will get there. Papas planned to teach strategy deployment, a method he learned from Saito during the NJMM revitalization. Strategy deployment consists of four basic steps: develop the plan, deploy the plan, monitor the plan, and improve the system. Before starting the process the organization must define True North, its strategic and philosophical goal. True North includes goals the company must achieve, as well as its hoshin, a brief statement describing purpose, direction, commitment, or values. The NJMM hoshin is “Take Action to Build Our Future.”
To begin step one it is necessary to understand the organization’s current condition. Visual aids, such as dashboards, are very useful. Then individuals must reflect on the issues that are preventing the group from achieving True North. NJMM’s strategy focuses on four key areas: people, quality, delivery, and cost. Each area has an A3 mother strategy, which is a one page storyboard on a sheet of 11″x17″ paper. Each area also has a key thinker, an individual who is responsible for understanding situations, coming up with solutions, and then creating buy-in for these ideas. As key thinkers gain experience, they create stronger solutions.
To execute step two, people must use the A3 strategies to choose specific tactics for each business zone. Each team should have a small, specific number of items to work on. A process called Catchball is effective in determining tactics that will support the leader’s key objectives. The leader and team engage in a frank discussion, which produces an activity tree connecting possible actions to True North. Leaders use two types of metrics to determine the effectiveness of the activities: process and end-of-pipe. End-of-pipe metrics denote ultimate goals. Process signifies the activities that can be employed to reach the goals.
Monitoring the system, step three, involves check meetings, as well as the leader’s standardized activities. These are his regular actions that keep the teams running smoothly. He must remember that spotting problems is a good thing, so this must be his focus of monitoring. He must also be mindful of the fact that, in North America, checking up on people is viewed as negative. Therefore, all efforts to monitor must be conducted in a manner that is respectful to the teams.
The final step, improving the system, requires everyone involved to reflect honestly about existing weaknesses. This enables them to make improvements. NJMM had difficulty with this step during their revitalization because they only wanted to acknowledge the good things they had accomplished. They were able to overcome this tendency once they understood that recognizing and fixing problems changed the organization for the better.
Senior leaders involved with the Defiant project were invited to attend a two-day Spew Out session at the company’s Design Center. The session’s purpose was to determine where the organization was going on the project. The issues up for debate were modifying the car and gaining a better understanding of the customers and market. Also, leaders needed to understand and address the issue of Big Company Disease. Organizations often suffer from Big Company Disease after they grow so large they can no longer see their customers and suppliers, causing individuals to focus on enhancing only what they can see. A serious problem was the faulty development process. The organization needed a new process that was less bureaucratic and more collaborative.
The session was designed to be a deep learning experience requiring participation, because people learn by doing. Participants experienced practices such as Waste Walks, by walking through and recording observations in areas such as shop prototypes. They also participated in an activity called a teach back. Individuals were charged with preparing short, timed lessons on specific issues; they were only allowed to use images. Participants were learning to respect time. A yellow card indicated when there was one minute left and a red card indicated it was time to stop. Attendees also participated in feedback sessions at the end of each day. They were asked to examine what they had and had not learned, and to determine where there was room for improvement. The Spew Out resulted in a vehicle name change. The Defiant, which was chosen by the Finance department, was overturned in favor of Chloe. The new name better captured the essence of this HEV, because it was another name for Demeter, the Greek goddess of the earth. In addition to the name change the group also analyzed needed innovations, based on customers’ dislikes of the vehicle.
The role of the leader is to build capability and reinforce values in order to achieve business results. Effective leaders model the actions and ideals necessary for success within the organization; other members will take note of this behavior and mirror it. They create an open and inquisitive environment, because strong leadership is a process of discovery. This atmosphere encourages people to examine problems they have discovered and to seek solutions, and then to share this learning with other areas of the organization. This spreading of knowledge throughout the company is the solution to Big Company Disease.
To see problems and discover solutions requires that people understand how to discover the problems. There are four rules that enable organizations to achieve order and stability: standards, connections, pathways, and problem solving. Standards deals with standardized work and clearly specifies all activity, such as how long something should take. Connections must be clearly defined between customers and suppliers. Pathways must also be clearly defined, being simple and direct. Understanding the first three rules will help one to identify where a problem exists. The fourth rule, problem solving, indicates how to fix the problem.
MANAGEMENT SYSTEM KAIZEN
Taylor Motors was ready to begin kaizen activity across the platform, beginning in marketing. A kaizen team has two leaders, a sensei and an internal facilitator who learns the process. Teams consist of six to eight members. A Kaizen Workshop Profile Sheet and a Target Sheet can be utilized to help determine objectives. Kaizen workshops were created around Four-Step-Problem Solving. Step one, deciding if there is a problem, required the team to consider two issues: what should be happening (WSBH) and what is actually happening (WAH). The team determined the problem was a delay in promotion research, which stalled decision making. The sensei explained Takt time to help the team define WSBH. Takt time is the operating time divided by demand. Takt is controllable and represents the regularity with which something leaves the end of the line. It helps to understand customer demand and to see bottlenecks.
In step two, finding the cause, they determined the point of cause was when the decision maker realized she did not have the proper information. The direct cause and root causes were difficult to determine because the promotion research process was overly complex. They used a Yamasume chart and a Supplier-Inputs-Process-Outputs-Customer (SIPOC) to display the information necessary to think around the problems. The team was not immediately able to tackle step three, but in subsequent sessions they progressed further as they learned the process.
Saito asked leaders to consider the state of Design and Engineering utilizing the Four Rules. On examination, implementation of the first three rules was weak. Looking at rule one–standards–showed that content, sequence, and expected outcome were unclear. Also, people frequently ignored embedded tests. Examining rule two revealed weak customer connections. Customer priorities and requirements were unclear; projects were treated equally. And there was no process in place to predict what was coming. Considering rule three–pathways–revealed an overly complex process that resulted in poor flow. If they gained better understanding of customer demand they could establish minimum and maximum inventory levels and cut test lead times in half. Examining rule four, improvement, exemplified the importance of the first three rules. When the first three are weak, problems are not visible, making improvement difficult. There was little sign of root cause problem solving because no one was sure where the problems were.
The purpose of Design and Engineering is to create useful knowledge and profitable value streams. Knowledge waste is a critical issue. There are two main causes of this type of waste: disrupting flow and absorption. Considering this in context of Taylor Motors, leaders pointed to physical barriers as an obvious disruption to knowledge flow, which is why they created their obeya to be barrier free. They also singled out the lack of personal relationships and trust as a result of frequent reorganization. Examining disruptions to knowledge absorption, leaders agreed PowerPoint was the most obvious culprit. They also singled out issues such as never-ending review meetings and inadequate lab test reports. Leaders concluded their design process was forcing decisions on basic design concept too early, in an attempt to reduce uncertainty. According to Saito, the Design leader’s job is to prevent this error. It is cheaper and more effective to experiment with multiple solutions to determine the best option.
Papas was forced to tend to a family emergency at the hospital. His father, a heart patient, was being kept overnight for observations when a nurse accidently gave him an injection of the wrong drug. While at the hospital, Papas observed how Lean practices could prevent similar errors and save lives. He conceded the error was the result of a poor system, not the people working in the system; the lack of standardized work made it easy for people to make mistakes. A serious issue in most hospitals is they are not operating in a system that enables people to learn and then to share that knowledge. Four capabilities, related to the four rules, are fundamental to learning:
* C1: Design standards such that they make problems visible.
* C2: Stop and fix problems made visible.
* C3: Share the learning laterally (yokoten).
* C4: Leaders develop people, and, in particular, their ability to solve problems.
C1 relates to rules one through three: standards, connections, and pathways. C2 establishes a help chain, connecting management levels so problems can be fixed quickly. C3 shares learning across the organization so a single problem does not have to be solved repeatedly; it is particularly useful in large organizations because the sharing can bridge great distances. C4 establishes that, when the other capabilities are utilized, the leader’s main responsibility is to develop people.
Supply chain was going to be a difficult issue for Taylor Motors, because Purchasing had a long history of treating the company’s suppliers poorly. Creating a true partnership was essential because suppliers represented a significant portion of the supply chain’s cost. Partners take care of each other and share the same goals; each party depends on the other and they either succeed together or fail together. The company and suppliers needed to work jointly to share ideas on improving safety, quality, and cost.
Saito was teaching this area of the company heijunka, also known as production leveling. It is an aspect of just-in-time production. This does not mean producing what the customer consumes; that would introduce waste into the value stream. Rather, heijunka mimics demand from the customer and upstream. Under traditional scheduling logic, companies produce to fixed inventory. Using heijunka, inventory fluctuates between predetermined minimum and maximum levels, creating a steady production schedule. It is vital to trust the system and not panic when production is near the minimum level. It is also necessary for the suppliers to understand if they are ahead or behind and to see what the customers consume. The bullwhip effect exemplifies the importance of a strong connection between customer and supplier. When the connection is weak and coupled with long lead times, a small variation in demand from the customer will cause a tidal wave upstream. Reducing the bullwhip effect requires sharing information along the supply chain, cooperating with partners on issues regarding demand and capacity, and reducing lead times for material and information.
Supply chain had a three phase plan for the Chloe project: stabilize, flow, and pull. They began this plan working with their top 10 suppliers and utilizing the learn-by-do principle. Phase one, stabilize, required implementing basics of Lean, particularly focusing on standards and problem solving. Creating stability was essential to implementing the other phases. Flow, phase two, dealt with reducing batch sizes and making connections stronger. They introduced pattern production so suppliers would learn through repetition and be able to solve problems. The final phase, pull, was heijunka and connecting to the customers. They leveled production and control points. The plan was expected to bring several benefits: reduction of inventory and scrap, improved lead time and customer service benefits, and a better cost structure.
Taylor Motors had issues with its dealerships. There was a general sense of disconnect between the dealers and Taylor Motors. Also, customers preferred to avoid dealers because they were turned off by the salesmen and poor service. Sales is the most important part of a Lean environment because it is closest to the customers. The leaders of dealer-related activities shared their learning on the concept of Lean provision and how it could help the organization deal with its sales issues. The essence of Lean provision is that all goods and services work together, enabling them to provide exactly what the customer wants, when and where they want it with minimum hassle. Lean provision maps are a simple tool that can be used to show problems. They are like a value stream map that outlines a process, from the viewpoint of both the customer and the provider.
The company planned to approach its sales issues by working with the Quigley Family of Dealerships, who had a long history with Taylor Motors. They determined that dealerships had to get better at solving mobility problems for customers. They had to reduce customer hassles. Quigley adopted a hoshin that coincided with Lean provision, “Solve My Problem Completely.” They developed mother A3 strategies to focus on people, customer service, delivery, and cost. Leaders developed and implemented a pilot that allowed for advanced scheduling for repair and maintenance services, modeled after the airline industry’s practice of selling spaces on an airplane. Quigley would sell slots in the repair schedule and customers would receive better prices for booking early. This tactic was also extended into production, allowing customers to order cars earlier for better prices.
Taylor Motors leaders were also interested in moving to adopt Lean accounting methods and plain language financial statements. The organization was using standard costing, which was created for the world of mass production. It allows organizations to classify inventory, or overproduction, as an asset and to put off recognizing the cost until it is sold. In a Lean environment, this method can be misleading. And because Taylor Motors had a great deal of unsold Defiant inventory, standard costing would make it appear as though the Chloe was losing money.
POLITICS AND ETHICS
While implementing Lean practices has strong potential to turn an organization around, it is important to understand that politics within the organization may interfere. Attempting to undergo a radical change will inevitably meet resistance; this is particularly true when dealing with issues so fundamental to an organization as its culture and process. The situation can be further complicated when individuals in positions of leadership are not on board. The Chloe project had leaders who consistently opposed the changes. The CFO, J. Ed Morgan, held the firm position that Taylor Motors had its own history of culture and tradition and did not need to copy Lean. He refused to consider evidence in support of adopting the system. Fred May, SVP of Finance, also did not support Lean implementation. He was in charge of production scheduling and would not attend Lean training sessions. This was problematic because production scheduling was in dire need of improvement. Production was turning out too much of the wrong things.
Clearly, Lean practices need the full cooperation of leadership to create effective change. Good leaders are motivated by a strong sense of ethics. Papas made the observation that PDCA is supported by the cardinal virtues: temperance, prudence, courage, and justice. In other words leaders must be able to exercise restraint, they must be able to grasp situations and the appropriate actions, they cannot be easily intimidated, and they must not put their self-interest ahead of what is best for the organization. The virtues also guide a leader in maintaining purpose. A strong leader understands that power is not obtained through fear but rather through the creation of an environment that encourages openness and consideration.
FEATURES OF THE BOOK
Reading Time: 6-8 hours, 252 pages
Lean principles are not exclusive to manufacturing. The methods and ideas can be applied to any area of any organization, whether or not the business is involved in production. Applying Lean to an office environment is particularly difficult because the processes are sometimes invisible. The key is that leaders must extensively study Lean under a capable teacher to understand its intricacies. This is a process that can take years.
Dennis acquired his extensive knowledge of Lean through his many years working with Toyota and its senseis. Business leaders will appreciate the novel format of The Remedy, which helps illustrate Lean concepts in action. Each chapter contains an implementation checklist to assist the reader in executing its ideas. Dennis also includes end of chapter summaries, intended to help readers test their understanding of the concepts as applied to their organizations. Numerous sketches aid the reader in comprehending the various concepts. Finally, Dennis directs readers to downloads for numerous templates that will aid them in acting on specific ideas and methods.
Applying Lean concepts in areas other than manufacturing is difficult because business processes are not visible; however, learning how to do this can be greatly beneficial to an organization that needs dramatic change to survive. Gaining a solid understanding of the following will empower leadership to begin the process of implementing Lean thinking across the organization:
1. Lean Fundamentals–Seek continuous improvement while increasing value and minimizing waste.
2. Strategy Deployment–Creating, deploying, and monitoring a plan, leading to system improvement.
3. Management System Kaizen–Gradual improvement throughout the various areas of the organization.
4. Politics and Ethics–Leadership attitude can help or hinder the implementation of new systems.
Information about the author and subject: www.lean.org
Information about this book and other business titles: www.wiley.com
To Purchase This Book: www.amazon.com
Related summaries in the BBS Library:
Going Lean Busting Barriers to Patient Flow By Amy C. Smith, Robert Barry, and Clifford E. Brubaker The Lean Machine How Harley-Davidson Drove Top-Line Growth and Profitability with Revolutionary Lean Product Development By Dantar P. Oosterwal
Pascal Dennis is a professional engineer and President of the international consultancy Lean Pathways, Inc. Clients include Fortune 500 companies, health care, construction, and financial services firms. Dennis has also written three books about Lean management, each of which has won the Shingo Prize for outstanding research in the field of operational excellence.
Acknowledgments
About the Author
Preface
Chapter 1: Motor City Sadness
Overview of Lean fundamentals
How Lean looks different in white-collar environments vs. the factory
Waste in health care and the restaurant business
Chapter 2: Lotus Land
The nature of big companies
Big Company Disease
Obstacles to transforming big companies
Role of the Shusa
Chapter 3: What Have I Learned?
Lean fundamentals
Lean thinking–core mental models
Waste in business processes
Introduction to problem solving
Nature of transformation
Chapter 4: How Will We Change Their Thinking?
Reflections on how to deepen and extend mental models
The nature of value and waste in knowledge work
Grasping the situation by going to see for yourself
Basics of system thinking
Chapter 5: Focus and Alignment–When You’re a Jet, You’re a Jet
Fundamentals of strategy development
Defining True North, our strategic and philosophical objective
How strategy making actually works in organizations
How the New York Jets might apply strategy development
Chapter 6: Cluing into Chloe
Politics in large organizations
Creating a shared vision
Strategy deployment in action
Deploying targets and tactics through Catchball
Chapter 7: A Trip to Boston to Dispel the Fog
Role of the leader
The Water Ring model
How complex systems fail–and succeed
The Four Rules–Standards, Connections, Pathways, Improvement
The Remedy to Big Company Disease
Chapter 8: Marketing–Leaning Out the Mad Men
Marketing basics
Mental models in marketing
Waste and value in marketing
Yamazume
Takt, flow, and pull in Marketing
Expected, Specified, and Delightful Value
Chapter 9: Design and Engineering–Making Knowledge Flow
Mental models in Design
Value and waste in Design and Engineering
Production physics–implications for Design
Small batch learning
Takt, flow, and pull in Design
Set-based concurrent engineering
Chapter 10: Nick Papas Falls into the Abyss
Mental models in health care
Value and waste in health care
Lean fundamentals in health care
Our health-care mess–root causes and countermeasures
The Four Capabilities
The remedy to Big Company Disease–reprise
Chapter 11: My Beautiful Mind–Leaning Out Our Supply Chain
Mental models in supply chain
The Nash equilibrium
The importance of information flow
The Groundhog Day effect
The bullwhip effect–causes and countermeasures
What is heijunka?
Process and system kaizen
Chapter 12: Dealers, Spielers, and Concealers
Mental models in retail
Principles of Lean provision
Provision/consumption maps
Politics in large organizations
Financial aspects of Lean
Possible effects of standard cost accounting
Lean in Human Resources
Chapter 13: Scylla and Charybdis
Politics in large organizations
Chapter 14: Be My Phenomena
Nature of transformation
Ethics
The cardinal virtues
Lean leadership
Glossary
References
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