creating lean solutions
DESCRIPTION
by Daniel T Jones of Lean Enterprise Academy shown at the Manufacturer Live in Telford, UK on 28th September 2005TRANSCRIPT
Lean Enterprise Academy www.leanuk.org1
Creating Lean Solutions:The Next Steps for Lean
Daniel T JonesChairman
Lean Enterprise Academy
Manufacturer Live – Telford – 28 September 2005
Lean Enterprise Academy www.leanuk.org2
Who am I?
• A Missionary – for applying lean process thinking to every human activity
• An Author – of The Machine that Changed the World, Lean Thinking and now Lean Solutions
• The Founder – of the Lean Enterprise Academy in the UK, part of the Lean Global Network
• My Activities – include Mentoring, Training the Trainers, Workshops, Workbooks, Lean Summits, Networks and eletters – details at www.leanuk.org
Lean Enterprise Academy www.leanuk.org3
Toyota’s Lean Strategy
“Brilliant process management is our strategy.
We get brilliant results from average people managing brilliant processes.
We observe that our competitors often get average (or worse) results from brilliant people managing broken
processes.”
Lean Thinking is Process Thinking
Lean Enterprise Academy www.leanuk.org4
Lean Principles
• Specify value from the standpoint of the consumer - (not from your assets and organisation)
• Identify the value stream through the steps required to create and deliver each product and remove the wasted steps
• Make the process of value creation flow smoothly and quickly to the customer
• But only in line with the pull of the consumer • While pursuing perfection by constantly improving
the product and the value stream
As a result products are getting better and cheaper
Lean Enterprise Academy www.leanuk.org5
The Changing Context
• Wage costs are probably now at an all time low –although they are now rising in China
• This is forcing manufacturers to squeeze waste out of their processes and think how and where to make products in the future
• Western manufacturers’ potential is: • Being close to their customers – that is us!• Developing the right technology, products and
services to solve their problems • Developing the right processes to rapidly
respond to their needs
But we need to do a lot better at all of these
Lean Enterprise Academy www.leanuk.org6
The Lean Frontier
• What is happening to your customers?• How are they buying your products?• How are you responding to their needs?
• How would a lean thinker think about these questions?
• What implications does this have for manufacturers?
These questions are key to your survival
Lean Enterprise Academy www.leanuk.org7
Lean Consumption and Provision
• We now understand that Production (including design and supplier management) is a process. A series of actions manufacturers must perform in the proper sequence to create value for customers
• Consumption is also a process. A series of actions consumers must perform in the proper sequence to obtain the value they seek
• Provision is a third process. The actions that someone must perform between the factory and the customer to achieve the objectives of both partiesThere is a yawning gap between the last two
Lean Enterprise Academy www.leanuk.org8
What’s Happening to Consumers?
• Mass customisation has added to their choices • The end of regulation has extended the number of
things they have to make choices about • The self-service economy enables them to buy
more personal capital goods to replace services • Two-income and single-parent households have
less time to manage consumption• Ageing households have more time - but less
energy• The internet is blurring production and
consumption and has opened access to a global supply baseThey have more choices to make and products to manage but less time and energy to do so
Lean Enterprise Academy www.leanuk.org9
What is Happening to Consumption?
• If products are getting better why is consumption still so frustrating? • Why does the new computer fail to work with the rest of
our kit? • Why do “help lines” not help?• Why do we waste so much time in hub airports and
general hospitals? • Why do we fail to find exactly what we are looking for on
a trip to the supermarket?• Is it because of bad people or broken processes?
Why do we think and act differently as consumers to how we do in our lives as providers?
Lean Enterprise Academy www.leanuk.org10
Provision Processes are also Broken
• Growing spending on “new” products, features and options that fail to attract new customers
• Growing spending to increase customer loyalty as customers become less loyal
• High out of stocks, lost sales and remaindering• Larger investments in bigger assets which have a
shrinking ability to create competitive advantage• Outsourcing customer support so direct contact
with the consumer is lost• Employee dissatisfaction and high staff turnover
How can we improve provision and consumption?
Lean Enterprise Academy www.leanuk.org11
The Consumption Process
• The answer begins by seeing consumption not as an isolated transaction between strangers
• But by seeing consumption as a process of steps to enable the consumer to solve their problem
• It involves searching, selecting, obtaining, integrating, maintaining, upgrading, disposing and replacing many items over time
• Interacting with several providers of goods and services in a parallel provision process
• Add this up and you realise that managing(household) consumption processes is complicated and takes a lot of “unpaid” time and mind share
So what do consumers really want?
Lean Enterprise Academy www.leanuk.org12
Principles of Lean Consumption
1. Solve the consumer’s problem completely 2. Don’t waste the consumer’s (or the
provider’s) time3. Provide exactly what the consumer wants4. Deliver it where it’s wanted5. Supply it when it’s wanted6. Continually reduce the consumer’s time
and hassle in solving their problemsAll this can be done with lower costs
Lean Enterprise Academy www.leanuk.org13
1 Solve the Problem• Consumers want the use they get from the product
in combination with other products and services• What happens when things don’t work? Call a call
centre! Whose objective is to “solve” the problem at the lowest cost – maybe outsourced or abroad
• Instead turn every customer contact into a Kaizen opportunity – discover and eliminate root causes!
• Fujitsu Services reversed the logic of outsourced customer service and technical support – getting experienced staff to ask about customer purpose, offer a fix, redesign to eliminate the root cause and discover additional value for future productsIntelligent Feedback leads to better products and processes for using them while cutting costs
Lean Enterprise Academy www.leanuk.org14
2 Don’t Waste Time
• The assumption is “The consumer’s time is free” • In reality the consumer and the providers time is
wasted by a poorly designed and disconnected consumption and provision processes
• Mapping both processes and their interactions reveals this wasted time and cost and identifies opportunities for win-win collaboration to cut wasted time and cost for both parties
• Make customers partners to level demand and pre-diagnose problems, separate types of work, create standard work flows and material supplySaves employee time and increases throughput
Lean Enterprise Academy www.leanuk.org15
Car Repair Before Lean
8 Drive Home
7 Queue, and Pay1 Search for
Repairer
2 Book Appt.
5 Wait for Loaner
3 Drive to Facility
4 Queue, Discuss Problem
6 Authorise Repairs
25m 5m 45m 10m 35m
2 Book Appt1 Answer Enq 3 Check in 12 Pass to SA
4 Car to store5 Fetch loaner6 Pass to WC
7 Pass to Tech
8 Diagnose problem
9 Check parts10 Car to store11 Pass to WC
14 Pass to WC
13 Ring Customer
21 Pass to SA15 Pass to Tech16 Collect parts
17 Repair car
18 Road test
19 Car to store20 Pass to WC
25 Park loaner
22 Invoice
23 Hand over
24 Fetch car
5m 5m 25m 38m 14m 85m 35m
Lean Enterprise Academy www.leanuk.org16
Lean Car Repair
12 Road test
1 Appointment 15 Hand over16 Park loaner2 Discuss
Problem3 Order Parts
6 ConfirmDiagnosis
4 Park Loaner5 Hand over
7 Park car8 Update Plan
9 Deliver Parts10 Collect car
11 Repair car
14 Invoice13 Park car
5m 15m 20m 54m 7m
7 Drive Home
6 Hand over1 Appointment 2 DiscussProblem
5 Wait for Confirmation
3 Drive to Facility
4 Handover
5m 10m 32m 22m
120m
69m
60%RightFirstTime
Wait
2nd
Visit
%Fulfilment
Provider
Consumer
101m
201m
LeanFulfilment
95%RightFirstTime
Lean Enterprise Academy www.leanuk.org17
Provide What’s Wanted
• Fulfilment levels are poor in most systems• 98.5% availability drops to 92% on the shelf and
55% for a basket of 40 items in the grocery store• 80% availability for the shoe with 150 day order
window leads to 40% being remaindered• 52% of consumers get the cars they wanted on
time and 64% of service jobs are completed RFTOT
• Better IT, RFID and stocks are not the answer – but rapid, reflexive, replenishment loops back upstream
• And compressing the length of the supply chainWhat is your right first time on time?
Lean Enterprise Academy www.leanuk.org18
Lessons from Toyota
• Toyota spent 30 years developing lean in house and spreading it up and down its supply chain
• The most impressive example is aftermarket parts distribution – supplying 500,000 SKUs to dealers
• It operates as a series of tight replenishment loops • Dealers call off parts from Distribution Centres every day• These shipments trigger daily orders to be picked up from
suppliers the next day• Most of whom can also make every part that is required in
a day every day• The result is the highest availability, lowest stock
levels and the smoothest order signals
Lean Enterprise Academy www.leanuk.org19
Lessons from Tesco
SupplierSupplier RDCRDC StoreStoreNDCNDC
Continuous Continuous ReplenishmentReplenishment
FlowFlowThroughThrough
StoreStore
FlowFlowThroughThrough
ProductionProduction
LeanLeanSchedulingScheduling
CustomCustomStoreStore
RangingRanging
LoyaltyLoyaltyCardCardDataData
HomeHomeShoppingShopping
MultiMulti--FormatFormat
ConvenienceConvenience
FlowFlowThroughThrough
WarehouseWarehouse
PrimaryPrimaryDistributionDistribution
Continuous Continuous ReorderingReordering
ConsolidationConsolidationWarehousesWarehouses
Lean Enterprise Academy www.leanuk.org20
A Lean Factory?
• How responsive could your factory be?• Guideline – less than 1 hour value creating time
should be completed within 1 day• By creating flow through your plant linking:
• Capable steps (6 Sigma)• Available equipment (TPM)• Adequate capacity (right sized equipment)• Flexible operations (Every Product Every Cycle)
• By eliminating short term plan changes by levelling the workload and moving to replenishment pull wherever possibleBut different starting points in different industries
Lean Enterprise Academy www.leanuk.org21
Getting to Lean
• In machining and assembly:• By using Chaku-chaku lines and cells instead
of monster machines and automated lines• In process industries:
• By flowing high volume products separately from low volume products
• In build to order industries:• By creating flow in the quotation process, in
the installation process and a rhythm in production
But a lean island is not enough!
Lean Enterprise Academy www.leanuk.org22
A Lean Supply Chain
• Having created level flow and pull for your volume products you need to pull just what you need from your suppliers every day
• And your customers need to pull products from you every day
• By each taking responsibility for picking up products rather than waiting for deliveries
• So you can consolidate and synchronise mixed product loads in daily milk runs and reduce the noise in the order signal
Little and often works better than pushing batches
Lean Enterprise Academy www.leanuk.org23
Rapid, Reflexive Replenishment
• Toyota distinguish between cognitive and reflexive decision making systems
• They separate capacity and materials planning from production and shipping instructions
• Lean, rapid, reflexive replenishment is based on four key principles:-• Only one scheduling point or pacemaker• Greatly increased frequency of replenishment• Replenish only exactly what was sold • Where possible compress the vale stream
The objective is to optimise the flow not each asset
Lean Enterprise Academy www.leanuk.org24
Where to Produce What
• Calculate “factory gate” costs at different locations • Germany, Romania and China?
• Calculate freight costs to supply the factory and to reach all your customers • Including all the expedited shipments!
• Add in all the overhead costs of:• Management and engineering time and travel• Quality (warranty costs etc.)• Extra inventories, lost sales, out-of-stocks, write-offs, etc.• Currency and country risks
Then decide what to make where – which might also change over the product life cycle
Lean Enterprise Academy www.leanuk.org25
4 Deliver Where it’s Wanted
• All consumers use different types formats depending on their circumstances – time pressure places a growing premium on convenience
• The convenience store revolution is changing retailing - signalling the end of the “big box” dominant mass retailing format
• The key to serving multiple channels is a common fulfilment system and a “water spider” replenishment system for all formats – including local stores and home shopping
• Convenience does not need to cost moreMultiple channels will replace “one best way” for most products and services
Lean Enterprise Academy www.leanuk.org26
5 Supply When it’s Wanted
• Is everything purchased on impulse? Is there any incentive to plan ahead?
• The consequence is that production must be infinitely flexible, every event must be planned and we have to dispose of unwanted stock
• Reversing this logic – How can we plan ahead with most consumers while offering price incentives to smooth the demand for production slots?
• This stability creates the possibility of responding to the “got-to-have-it-now” consumers at much lower cost?This realistically takes us beyond “build to order”
Lean Enterprise Academy www.leanuk.org27
6 Continuing Solutions
• Why are consumers increasing the number of suppliers – often one off strangers – to acquire the elements of the solution to their problems?
• While lean producers are decreasing the number of suppliers, each with a deeper knowledge to solve bigger problems on a continuing basis?
• When will someone provide continuing solutions to integrate the elements to solve my bigger problems? • Communications• Mobility• Shelter• Healthcare• Financial management • Personal Logistics (routine shopping)
Lean Enterprise Academy www.leanuk.org28
Conclusions
• Intelligent Feedback leads to better products and processes for using them while cutting costs –out-sourcing and off-shoring are not the answer
• Collaboration with customers to eliminate waiting and queues frees employee’s time, cuts cost and increases throughput – banish queues
• Rapid replenishment improves availability while lowering costs – little and often is cheaper but“low cost” sourcing may not be the answer either
• Several convenient channels will replace one route to market – for every kind of product
• Planning ahead with key customers provides the stability that enhances responsiveness – build-to-order is not the answer and flexibility is a curse
• Think about providing complete solutions
Lean Enterprise Academy www.leanuk.org29
Creating Lean Solutions:The Next Steps for Lean
Daniel T JonesChairman
Lean Enterprise Academy
Manufacturer Live – Telford – 28 September 2005