lean kaikaiku
TRANSCRIPT
The “lean” model is delivering huge operational improve-
ments in a range of industries. But there are several ways
to implement lean tools and techniques, each with its own
benefits and drawbacks. Choose carefully before embarking
on the lean journey.
So You Want to Get LeanKaizen or Kaikaku?
Aviation, Aerospace, and Defense
With the half-life of business designsgrowing shorter, improvements to oper-
ations can make a huge impact on the return afirm earns on its investment in a particularbusiness design. One of the most effectiveapproaches to operational improvement hasbeen to use “lean” tools and techniques. Butthere are different ways to implement the leanmodel, and taking the wrong path can severelydisrupt an organization without yielding anappropriate return. In short, managers need todecide: Should they embrace Kaizen or Kaikaku?
For those new to the lean model, this is a busi-ness philosophy pioneered by Toyota after WorldWar II. It harnesses a set of standard tools andtechniques to design, organize, and manageoperations, support functions, suppliers, andcustomers. Compared with the traditionalsystem of mass production, the lean modelmeets or exceeds customer requirements whileusing less labor, space, capital, and time. Leantechniques cut costs by eliminating waste—those items and process steps the customerdoesn’t value. These reductions paradoxicallyincrease quality as production problems becomemore visible and root causes more easily identi-fied and remedied in simplified work processes.
Lean implementation benefits from aholistic approach that addresses all elementsfrom operational strategy to the shop floor.Some of these steps, such as objective-set-ting, need to be performed annually to ensure
constant calibration. Others are iterativeprocesses that drive waste out of the systemand deliver continuous improvement. Stillothers nurture the lean culture.
While it spread first throughout manufac-turing sectors, the lean model has since beentaken up by a variety of service companies aswell, ranging from utilities to aircraft mainte-nance to financial services.
Most managers contemplating organiza-tion-wide lean methods are aware of only oneimplementation approach—the Kaizenapproach popularized by Toyota, Pella,Maytag, and other leading manufacturers.Kaizen roughly translates to “continuousincremental improvement.” It is most suitablewhen applied tactically to a product line, afunction, or an entire organization that is rel-atively mature and stable.
Kaikaku, which translates to “radicalimprovement or change,” is a more transforma-tional process. It starts with customers’ priori-ties and links directly to the business strategy.Correct application of Kaikaku can help anorganization move ahead of competitors bydramatically reducing the time required formajor improvements in quality, cost, anddelivery. It is suited to companies facing mergerand integration issues, intense cost pressures,major new growth opportunities, a turnaroundsituation, or other cases demanding an enter-prise-level transformation (Exhibit 1).
KaizenContinuous incremental
improvement
KaikakuLarge-scale, radical change
• Lean initiatives or events withcumulative planning and exe-cution timelines of hours toweeks
• Smaller project scope
• Small to medium staff andresource allocation
• Quicker results with small,individual contributions to thebottom line of the organiza-tion or value stream
• Tactical
• A lean initiative or event witha planning timeline of weeksto months and an executiontimeline of hours to weeks(value stream dependent)
• Larger project scope
• Medium to large staff andresource allocation
• Results realized more slowlybut with larger, concurrent,multiple contributions to thebottom line of the organiza-tion or value stream
• Strategic
Exhibit 1 Two approaches
2
3
Kaikaku encompasses more activities andaddresses systemic waste, whereas Kaizen ismore tactical and addresses process waste.Accordingly, Kaikaku requires more planning,as shown in Exhibit 2, though the magnitudeof the gains typically justify the additionalresources. When executed well, Kaikaku cre-ates a momentum that transforms the entire“value stream” of material, information,people, and actions required to bring aproduct from concept to launch to delivery,step by step, whereas Kaizen does not neces-sarily afford that momentum.
While Kaikaku may seem at first blush sim-ilar to business process redesign (BPR), thereare significant differences. Kaikaku applieslean principles and tools to change a valuestream based on the pull of customer demandor customer requirements, whereas BPR tendsto start at the beginning of a value stream andpush through the system. Moreover, Kaikakutends to have a cultural component, whereasBPR focuses strictly on operations and thephysical infrastructure of the business.
Weighing the TradeoffsDeciding which approach to take will
depend on a firm’s cultural readiness, tech-nical readiness, and degree of managementengagement. Each methodology also has par-ticular challenges.
To succeed with Kaizen, managers mustaddress several issues:
� Linking islands of excellence. A Kaizen eventcan apply to a single work center or even asingle machine. Efforts that are small inscope do not address the entire valuestream, so there will be sub-optimal areasof the value stream. Linking these islandsof excellence is the logical step to create atruly lean value stream or enterprise.
� Moving quickly up the learning curve. Becauseof the narrow scope and short time-frameof Kaizen, organizations may struggle toaccept lean methodologies into daily rou-tines. Employees must be able to find per-sonal value in these efforts, which comes
Exhibit 2 Kaikaku proceeds in phases
• Develop high-level valuestream maps of keyproducts/services
• Evaluate facility andshop-level flow
• Understand currentoperational andfinancial measures
• Determine areas of opportunity
• Conduct interviewsand surveys to estab-lish the organiza-tion’s readiness forchange
• Conduct rigorous,company-wide leanstrategy planningsession
– Determine 3- to 5-year goals
– Define break-through objectivesto achieve goals
– Develop annualimprovement pri-orities (AIPs) toestablish one-yearplan
– Determineresources necessaryto achieve AIPs
• Iterate until anachievable plan isestablished
• Determine progressmeasurement process
• Determine eventschedule based on AIPs
• Identify teams anddefine timelines
• Define tools andtraining necessary
• Define lean produc-tion system that willachieve objectives
• Identify and addressorganizational system shortfalls
• Create detailed plansto communicatechanges
• Provide awarenesstraining
• Execute designimprovements toflows of material,people, and informa-tion using lean techniques
• Implement rapidresponse protocols
• Deploy focused product teams
• Communicateprogress
• Provide training toworkers on the floorand in the office
• Change systems andstructures to cementchange
– Adjust organiza-tion design asneeded
– Ensure metricsdrive the desiredbehaviors
– Create a rewards and awards system
• Celebrate successes
• Drive continuousimprovement
Cultural and technical readinessassessment
Lean strategydeployment
Lean transformationsupport
Lean implementationLean design
Diagnostic and planning
1-3 months 6-12 months Ongoing
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from understanding not just what to do,but also why to do it.
� Increasing system inventories. When a firmcannot physically link its islands of excel-lence, it may rely on inventory buffers.This undercuts the overall effort.
� Sustaining the effort. To continually improveby executing a series of events, Kaizenrequires a intense discipline and accounta-bility among employees; without thateffort, it will be difficult to permanentlychange systems and structures.
Kaikaku brings different challenges,notably a much greater commitment of timeand resources:
� Ensuring dedicated resources. Seriousorganizations permanently dedicateresources to lean efforts, including theengagement of senior managers, becauseof the major implications for strategy.
� Committing capital. “Creativity before cap-ital” is a popular mantra in lean circles, butsometimes a firm must expend capital.Since both the scope of the project and theresidual benefits are large with Kaikaku,you can realize high returns on investmentor assets in a reasonable period.
For companies that have some experiencewith the lean model, it is also possible toselectively apply both Kaizen and Kaikaku,as shown conceptually in Exhibit 3. Toyota,for instance, has used both methods suc-cessfully. Taichii Ohno, who pioneered thelean model at Toyota, recognized that incre-mental improvements would not be enoughto allow Toyota to compete in the U.S. Heapplied Kaikaku to make radical, strategicchanges, and then moved to Kaizen events forcontinuous improvement. When introducinga new car line or creating a new factory,Toyota still uses the Kaikaku-like productionpreparation process (3P); Kaizen events followto improve individual areas along the value
stream. This integrated approach not onlyplayed a central role in Toyota’s steady rise inautomotive manufacturing, it also impactedthe hundreds of Toyota suppliers and othercompanies in the West that, with a 10- or 20-year lag, began to rethink and change theirmanufacturing processes.
Kaikaku in PracticeFor a sense of what Kaikaku looks like in
practice, consider the case of an aviationmaintenance, repair, and overhaul (MRO)provider. Because of increased fleet usage anda desire to keep current and overflow work in-house that was being done by a supplier, thisMRO firm faced a large productivity challengethat could not be addressed through incre-mental improvement. The firm decided to useKaikaku to catalyze the lean transformation,and it accomplished the project in phases:
1. Diagnostic, planning, and lean design. Theteam defined several value streams thatdeliver the product groups, then undertookextensive data collection and analysis to char-acterize the state of each product group valuestream.Where possible, the team defined areasof flow and designed operational layouts thatcould meet the customer demand rate.Operating capacities, demand, and staffinglevels were determined through mixed modelcalculations. Where different products withdifferent work content run through the same
Exhibit 3 Integrating the two
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facility at once, mixed model calculations forcesome semblance of predictability.
Also during this phase, a cross-functionalteam initiated a communication and trainingprogram for key people within the organiza-tion. Training included production simula-tions, which helped to promote discussionand lower resistance to the new methods.
2. Lean implementation. This phase involvedmajor physical changes to the MRO shop. Theplant had been laid out as functional processcenters—all products were routed throughdisassembly, then through cleaning, and so onthrough the various process steps. As a result,lead times were quite long and large amountsof work in progress would pile up betweenprocesses.
The team changed that layout to group prod-ucts that previously were spread throughoutthe plant into logical families, with each family
worked on by one dedicated team “cell.” All ofthe inventory required for that product familywas located at the cell. These changes dra-matically reduced the amount of work inprogress.
To avoid production interruption, physicalmoves were made on nights and weekends.Next, the cells were linked by material distri-bution and visual management systems,which place in plain view all the tools, parts,activities, and indicators of performance, sothat the status of the system can be under-stood at a glance by everyone involved.Standard work combinations were deter-mined by working with the hourly associates.
Once physical changes began, despite priortraining, some employees started to resistchanging how they do their jobs. Their con-cerns were further addressed through tar-geted education, participation, and jointproblem-solving.
Exhibit 4 Kaikaku in aircraft maintenance
Beginning of project Current % change
Standard labor
Footprint
WIP
Overhaul cycle time
Units produced
247 hours
2,011 sq. ft.
46 units
95 days
27 per quarter
151 hours
634 sq. ft.
7 units
9 days
105 per quarter
-39%
-68%
-85%
-91%
74%
Bottom line impact
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3. Lean transformation support. To supportthe physical changes, the MRO firm redefinedits organizational structure by creating focusedproduct teams that could help align supportpersonnel. These teams of salaried employeesmoved their desks onto the shop floor in orderto interact more immediately and effectivelywith the production group. Supervisors andline managers went through training thathelped improve their management skills in thenew environment. QCDS (quality, cost,delivery, and safety) boards and 5S systems(workplace systems conducive to visual con-trol) measured staff performance and instilled
more discipline throughout the process.By deploying a rigorous Kaikaku approach,
this MRO provider was able to achieve a sus-tained 39% labor productivity improvement, areduction in work-in-process inventory by85%, a 91% reduction in overhaul lead time,and a 68% reduction in floor space used with a74% improvement in throughput (Exhibit 4).Kaikaku was the right choice in this casebecause it brought more process disciplineand integration to the firm.
Companies in other industries as well haveused Kaikaku with great success. For instance,one precision manufacturing firm tackled an
Kaikaku Addresses Construction Problems at a Utility
A major electric utility needed to reduce oper-ating and maintenance (O&M) costs and lead timeassociated with construction projects. In particular,the company aimed to improve O&M direct andindirect labor productivity, reduce overtime andcontractor utilization, and shorten the lead time forpreparation of construction project work packages.
Oliver Wyman started the project by character-izing current processes in sales, technical services,engineering, distribution, and service. The teamalso measured work streams relative to industrybenchmarks in the areas of engineering, planning,and scheduling. What we found were crew produc-tivity levels of less than 40% and lead times greaterthan 50 days for the preparation constructionproject work packages.
Oliver Wyman redesigned the process, includingnew work standards and a master schedule andcapacity loading model that would improve theuse of support resources and distribution andservice crews. Many of the recommendationsaimed to streamline the hand-offs between sales,engineering, technical services, and field opera-tions and maintenance personnel. The utility alsoinstalled a structured management review processwith scorecard to ensure that the initial effortwould be sustained over time.
Over the subsequent 18 months, this Kaikakueffort yielded a 15% improvement in crew laborproductivity, a 37% reduction in work orderpackage processing lead time, and a cycle timereduction of 40%.�
Exhibit A streamlined process
organization-wide supply chain challenge byusing Kaikaku. Over the course of 18 months,the firm was able to reduce the number ofplants by one-third and customer lead time byhalf, and it increased the number of units pershift by half.
At an electric and gas utility, the distribu-tion, service, and engineering functions wereconsistently rated in the lowest quartile ofthe utility’s peer group. Kaikaku methodshelp lay the roadmap to 15% overall cost
reductions and a 40% reduction in overallwork order process cycle time.Kaizen may initially feel like the safe choicefor many managers. Yet Kaikaku may in factbe the better choice in situations thatdemand a major transformation. And insome cases, Kaikaku leading Kaizen willlead to the greatest improvements inquality, cost, and delivery—moving beyondthe incremental to make a noticeable impacton the bottom line.�
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Improving Performance at a Fashion Eyewear Manufacturer
In 2002, a U.S. eyewear manufacturer was oper-ating well below its peers along such dimensionsas cycle time, productivity, and cost. OliverWyman helped the firm apply the Kaikakuapproach to determine the current configurationof work and provide reconfiguration options thatwould improve performance across the board.
The project proceeded along these steps:
� Assess and characterize the current state con-figuration of work, policies, assets, and orga-nizational structure by mapping the valuestream of representative parts
� Develop recommendations to reconfigurework in ways that dramatically reduce theamount of assets and labor required
� Quantify facility requirements for each reconfiguration option from a lean design standpoint
� Simulate the benefits associated with eachoption
� Transfer knowledge and application of lean principles to employees
� Sustain the efforts by implementing quality,cost, delivery and safety metrics to ensure thatall employees, from production floor throughsenior management, work to the samestrategic objectives
The Kaikaku approach delivered strong oper-ating results, including a 23% reduction in overallcosts, a 33% to 70% reduction in cycle timedepending on product family, and a 30% reduction in headcount and facility space.�
Exhibit Costs look better at the eyewear plant
Oliver WymanOliver Wyman’s Aviation, Aerospace, and Defense practice helps passenger and cargo carriers, OEM and parts manufacturers, aerospace/defense firms, and MRO and otherservice providers develop value growth strategies, improve operations, and maximizeorganizational effectiveness. Oliver Wyman has completed hundreds of engagements for aviation, aerospace, and defense industry clients in the past five years alone and has consulted to nearly three-quarters of the Fortune 500 firms in these sectors. OliverWyman serves these firms worldwide with consultants in the Americas, Europe, Asia,and the Middle East.
This white paper was prepared by John Seeliger, a Dallas-based director,Ketan Awalegaonkar, a Chicago-based principal, and Christopher Lampiris,a Dallas-based associate of Oliver Wyman. Greg Bellomo, a Chicago-based associate of Oliver Wyman, contributed to this article.
For more information on Oliver Wyman’s lean expertise within the Aviation, Aerospace, and Defense practice, please contact:
John Seeliger
Ketan Awalegaonkar
www.oliverwyman.com