what to measure? lean initiative or outcome of lean strategy...lean initiative or outcome of lean...

8/29/2017

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What to Measure? Lean Initiative or

Outcome of Lean Strategy

with Jean Cunningham

Managing Times Press, 2003 Shingo Prize, 2004

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Productivity Press, 2007 Shingo Prize, 2008

Le

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IT

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Wiley Publishing, 2008

Building LEAN Beyond Manufacturing

© 2017 by Jean Cunningham Consulting All rights reserved

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Why Adopt Lean thinking? H

L H

Need to

justify Lean

Understands Lean as a way to achieve results

© 2017 by Jean Cunningham Consulting All rights reserved

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Lean Transformation Core Actions

Lean Transformation

Strategic Deployment

Value Stream

Management

Manage for Daily

Improvement (MDI)

Huddles Andon Boards Continuous Improvement Problem Solving

Kaizen Events

Flow: Cross-silo customer value

Active Daily Improvement (reduce waste)

Executive Responsibility, “True North”

Hoshin Kanri

Fixed Resources Break-even

Loss

Profit

© 2017 by Jean Cunningham Consulting All rights reserved

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Five Sources of Lean Financial Value

What are they?

How are they different?

© 2017 by Jean Cunningham Consulting All rights reserved

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Profit Model

Invested Capital • Fixed Assets • Inventory • Receivables

Fixed Resources Break-even Loss

Profit

Volume $

© 2017 by Jean Cunningham Consulting All rights reserved

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Profit Model

Invested Capital • Fixed Assets • Inventory • Receivables

Break-even Loss

Profit

Accelerated Profit

Volume $

© 2017 by Jean Cunningham Consulting All rights reserved

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Profit Model

1. Reduce Costs

Break-even Loss

Profit

Accelerated Profit

Volume $

© 2017 by Jean Cunningham Consulting All rights reserved

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Profit Model

2. Create Capacity

Break-even Loss

Profit

Potential Profit

Volume $

© 2017 by Jean Cunningham Consulting All rights reserved

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Profit Model

3. Increase Demand

Break-even Loss

Profit

Accelerated Profit

Volume $

© 2017 by Jean Cunningham Consulting All rights reserved

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Profit Model

4. Improve Contribution to Profit Margin

Break-even Loss

Profit

Accelerated Profit

Volume $

© 2017 by Jean Cunningham Consulting All rights reserved

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Contribution Margin

Revenue 10,000

Variable Costs 3,000

Contribution Margin 7,000

Margin % 70%

Contributors to Margin:

- Pricing

- Quantity of Materials

- Price of Materials

© 2017 by Jean Cunningham Consulting

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5. Improve capital structure…for all the accountants out there!

Invested Capital • Fixed Assets • Inventory • Receivables

Fixed Resources Break-even Loss

Profit

Volume $

Profit Model

© 2017 by Jean Cunningham Consulting All rights reserved

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Profit Model: with Traditional Outcome Linkage

Invested Capital • Fixed Assets • Inventory • Receivables

$

Fixed Resources Break-even

Profit

Volume

Sales

Operating Margin %

Working Capital

Return on Invested Capital

Loss

© 2017 by Jean Cunningham Consulting All rights reserved

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Check Out the Spreadsheet!

Give me your card if you would like it

© 2017 by Jean Cunningham Consulting All rights reserved

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Financial Impact Depends

• Commitment

• Investment

• Drive

• Senior leadership

• Current culture

• And so many more …

• Depth of the initiative(s)

• Breadth

• Speed of change

• Size of organization

• Financial situation

• Strategic focus

© 2017 by Jean Cunningham Consulting All rights reserved

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Experimenting, Actions and Learning

Process Performance Outcomes

• Safety: Customers, Employees, Visitors

• Quality: Performs, Right the First Time,

• Delivery: Reduce lead time for everything!

• Cost: Spending on value creation

• Employee stability

• Vendor performance

• Customer delight

• Better than last year

• Financial security

17 © 2017 by Jean Cunningham Consulting

All rights reserved

It is not about what to do.

It is about the environment you create for progress.

© 2017 by Jean Cunningham Consulting All rights reserved

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© 2017 by Jean Cunningham Consulting All rights reserved

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What does this mean for your organization?

© 2017 by Jean Cunningham Consulting All rights reserved

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Creating A Lean Culture

Support Change

Eliminate Waste

Optimize Information START

TODAY!

© 2017 by Jean Cunningham Consulting All rights reserved

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• JCC founder and president

• Lean Accounting, Lean Business Management, Lean Office pioneer

• Original Thought Leader for Lean Accounting, Lean IT, Lean HR Summits

• Lean accounting lecturer for The Ohio State University, Masters of Business Operations Excellence program

Building LEAN Beyond Manufacturing

• Former CFO:

Lantech, Inc. Marshfield Door Systems

Association of Manufacturing Excellence Stiles Associates

• Board member: Lean Enterprise Institute Lean Education Advancement Foundation

© 2017 by Jean Cunningham Consulting All rights reserved

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Contact

Jean Cunningham

Email: jean.cunningham@leanjcc.com

Phone: 224.688.3504

© 2017 by Jean Cunningham Consulting All rights reserved

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What to Measure? Lean Initiative or

Outcome of Lean Strategy

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