The Thinking Approach LEAN CONCEPTS , IL Holdings, LLC All rights reserved 1

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5 ROLE OF LEAN MANAGEMENT Create vision of the ideal condition What can we do? What should we do? CURRENT CONDITION EVERY MINUTE EVERY DAY IDEAL CONDITION 1. Customer First Thinking 0 Defects 100% Efficiency 100% On Time 2. Human Development Career Opportunities Security Safety EVERY PERSON All rights reserved 5

6 DEVELOP THE CULTURE Develop a shop floor that can manage itself How do we accomplish this? 1. Create the need 2. Respond to the need 3. Motivate and structure to achieve the ideal 4. Reinforce ideal thinking though Organizational Culture All rights reserved 6

7 1 CREATE THE NEED Don t Increase CAPACITY Increase EFFICIENCY Demand Increase Kaizen Closer to ideal OA improvement Cost Profit Current Demand Future Demand Reduce waste Increase human capability All rights reserved 7

8 2 RESPOND TO THE NEED Efficiency focus brings problems to the surface The Shop Floor must manage itself by: Quality Problems People Sick Break Down New Hires Part Shortages 1. Solving problems quickly, effectively, and permanently Repairs Volume Change 2. Developing all team members to able to respond to any situation Requires urgency to correct All rights reserved 8

9 EFFECTIVE PROBLEM SOLVING See the problem Actively expose problems 2 1 Call for help 3 Quick Response Find the point of occurrence and determine true root cause Solve the problem Solve problems 1x1 4 Countermeasure All rights reserved 9

10 HUMAN DEVELOPMENT Effective problem solving creates developed people Practical Problem Solving Supplie r Interna l Process Bad Compo nent POINT OF CAUSE Human capacity is a priceless asset ROOT CAUSE: Why did this happen? ROOT CAUSE: Why was this passed? KEY POINT: Maximum benefit from an organization full of capable problem solvers All rights reserved 10

11 DEVELOPING TEAM MEMBERS Short term [New hires, Transfers, etc] Team Leader Role of Team Leader Directly support work process to maintain quality, on time delivery, and safety until Team Member is leveled up All rights reserved 11

13 HUMAN DEVELOPMENT Long term development of capability Role of Team Leader Plan to create full cross functional skill set on team Role of Group Leader Plan to create full cross functional skill set in group T/L Team Leader G/L Team Leader Create broader understanding of organization 2. Create flexibility in quickly learning new things All rights reserved 13

16 ACCURATE MOTIVATION True performance indicators Represent full production picture Capture all potential waste Sample Indicator Production Efficiency = UNIT TIME Time required to produce each unit 0.25 hours/unit UNITS PRODUCED Total production quantity per interval 50 units/batch TOTAL HOURS WORKED Unit Time X Units Produced Total Hours Worked Example Work time per interval 13 hours Production Efficiency = 0.25 X = 96% All rights reserved 16

17 REPRESENT THE FULL PICTURE UNIT TIME TRADITIONAL THINKING Wait on machine MAN MACHINE UNIT TIME = Man + Machine = 0.25 hours LEAN THINKING Can do other work MAN MACHINE UNIT TIME = Man = hours All rights reserved 17

19 REPRESENT THE FULL PICTURE TOTAL HOURS WORKED TRADITIONAL THINKING TOTAL HOURS = Direct labor only = 13 hours LEAN THINKING TRADITIONAL THINKING Customer Order FABRICATION Prod Wthdwl LEAN THIN KING TOTAL HOURS = System labor = 17 hours ASSEMBLY LINE SHIPPING Wthdwl Prod All rights reserved 19

20 REPRESENT THE FULL PICTURE Sample Indicator Production Efficiency = Unit Time X Units Produced Total Hours Worked TRADITIONAL THINKING Production Efficiency = 0.25 X = 96% LEAN THINKING Production Efficiency = X = 31% All rights reserved 20

21 ADDITIONAL SUPPORT SUPPORT: Production Control Quality Control Maintenance HR Materials Purchasing PRODUCTION: Team Members Team Leaders Group Leaders Asst Managers Lean Office LEAN COORDINATOR Lean Planning Team Kaizen Team SAMPLE ORG CHART PLANT MANAGEMENT OPERATIONS MANAGEMENT TOP MANAGEMENT KEY ROLES Planning team develops ideal condition vision Kaizen team can make it happen All rights reserved 21

22 VALUE OF THE LEAN OFFICE SUPPORT THE SHOP FLOOR Create focus on stability and efficiency Support discipline needed to manage system Technical support HUMAN DEVELOPMENT Develop and share knowledge through organization Develop enthusiasm for a Lean culture All rights reserved 22

23 4 REINFORCE IDEAL THINKING Through ORGANIZATIONAL CULTURE 1. What is Organizational Culture? 2. What is needed for a Lean Culture? 3. How can we change Culture? DISCUSSION POINTS All rights reserved 23

29 FUNDAMENTALS OF LEAN MANAGEMENT 1. Define Our Goals 2. Grasping Current Condition 3. Support Kaizen Improvements 4. Control with Standardization 5. Sustainable Improvement 6. Fundamentals Summary All rights reserved 29

32 WHAT IS MY CUSTOMER S DEMAND? Demand is: What the customer wants When they want it In the quantity they want it At the price they want to pay for it Qualify Demand: Customer Demand GOALS DEFINING GOALS All rights reserved 32

33 TRANSLATE DEMAND TO GOALS The PERFORMANCE MATRIX aligns goals with demand Goals meet demand of higher process KEY POINT: Goals drive targets of lower process DEFINING GOALS Goal alignment moves an organization forward together! All rights reserved 33

35 CONDITION HOW TO SET A TARGET Gap between target and ideal closed with future activity CONTINUOUS IMPROVEMENT Ideal Condition Target Condition Target Gap Total Problem Gap Current Condition TIME DEFINING GOALS All rights reserved 35

36 WHAT MAKES A GOOD TARGET? Use the ACORN TEST to ensure achievable targets A. Is the target an Accomplishment or a behavior? Create 10 more reports per hour VS. Work longer hours C. Do those working on the target have Control over it? Can a machine operator improve sales directly? O. Does the target contribute to the overall Objective(s)? Does it align with higher goals or is it stand alone? R. Can the target be Reconciled with outside goals? Does meeting this target negatively impact something else? N. Can the target be measured with a Number? Improve number of reports hourvs. Improve throughput DEFINING GOALS All rights reserved 36

37 Production Lead Time in Days 2 GRASPING CURRENT CONDITION Start measuring performance Establish the current condition Analyze the gap between current condition and the target Determine the improvement Weekly BT Chamber Production Lead Time By Month New schedules introduced Cabinet, FA, Test rebalanced Expanded Attempted ambient room cabinet operational Eliminated rebalance process downtime Apr-Jun '10 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Month All rights reserved 37

38 Percent of On Time Shipments Production Lead Time in Days MEASURE OUR PERFORMANCE WHY DO WE MEASURE? 1. To understand performance over time 2. To establish a base line 3. To track progress HOW DO WE MEASURE? Weekly BT Chamber Production Lead Time By Month New schedules introduced Cabinet, FA, Test rebalanced Expanded Attempted ambient room cabinet operational Eliminated rebalance process downtime Apr-Jun Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov '10 Month KPI: A visual means to track 100.0% 90.0% New performance over time BT Weekly On Time Shipments We use Key Point Indicators (KPI) 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% Inventory Chambers 10.0% KEY POINT: 0.0% Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec There MUST be some means to track progress toward every target that is set Month GRASPING CURRENT CONDITION All rights reserved 38

39 DEFINE CURRENT CONDITION WHAT IS THE CURRENT CONDITION? Our performance today Yesterday s Condition WHY CURRENT CONDITION? Today s Condition WHAT ABOUT HISTORY? Gives insight to stability Shows long term trends A NIMBLE ORGANIZATION Improving Yesterday May not improve today HOW CURRENT IS CURRENT? The goal is to check performance as frequently as possible GRASPING CURRENT CONDITION All rights reserved 39

40 MEASURE OUR STABILITY HOW STABLE IS OUR CURRENT PROCESS? A STABLE process must be leveled up to improve performance An UNSTABLE process can be improved by controlling variation First Shift PIP STABILITY 20 Second Shift HOW DO WE MEASURE OUR STABILITY? We use Potential to Improve Performance (PIP) Compares the average to the best performance PIP = Best Performance Average Performance PIP = = 1.6 STABILITY PIP PIP = = 1.01 A PIP of 1 = Perfectly Stable Process GRASPING CURRENT CONDITION All rights reserved 40

41 Production Lead Time in Days ANALYZE THE GAP Weekly BT Chamber Production Lead Time By Month Quantify the gap between current condition and our target How far do we have to go to reach our target? Develop a tangible metric Days Hours Sales dollars Etc New schedules introduced Cabinet, FA, Test rebalanced Expanded Attempted ambient room cabinet operational Eliminated rebalance process downtime Apr-Jun Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov '10 Month CURRENT CONDITION GRASPING CURRENT CONDITION TARGET CONDITION All rights reserved 41

42 PRIORITIZE TARGETS The PERFORMANCE AUDIT helps understand what targets to work toward first DEFINE 1. Identify goals 2. Develop targets 3. Understand the impact of not meeting targets MEASURE 1. Best performance 2. Average performance 3. Unit value or cost 4. Quantity of units 5. Calculate total and PIP ANALYZE 1. Stability -ORlevel up 2. Which targets yield biggest gains GRASPING CURRENT CONDITION PRIORITIZE BIG GAINS All rights reserved 42

43 SAMPLE AUDIT ANALYZE THE RESULTS Chase the big fish Two Goals Measure the process stability Find the total current cost Calculate PIP and values Five Targets Quantify unit cost and volume GRASPING CURRENT CONDITION Value of Stability = Total 1 1 PIP All rights reserved 43

44 Production Lead Time in Days DETERMINE THE IMPROVEMENT Weekly BT Chamber Production Lead Time By Month New schedules introduced Attempted cabinet rebalance Cabinet, FA, Test rebalanced Eliminated process downtime Expanded ambient room operational QUANTIFIED GAP Apr-Jun Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov '10 Month CURRENT CONDITION Eliminating the gap achieves targets and meet goals TARGET CONDITION How do we accomplish this? KAIZEN GRASPING CURRENT CONDITION All rights reserved 44

45 3 KAIZEN IMPROVEMENT Motivate Management Develop HUMAN RESOURCE MATERIALS METHODS TOOLS Improvements ENGAGE RESOURCES TO KAIZEN Target DIRECT MANAGEMENT KAIZEN [Continuous Improvement] Gap Current Condition Time SUPPORT KAIZEN IMPROVEMENTS All rights reserved 45

46 EFFECTIVE HUMAN KAIZEN HOW DO WE CHANGE BEHAVIOR? S STIMULUS R RESPONSE S D R S R The BEHAVIOR MODEL builds processes that create competent performance Understand the stimulus Be capable of responding Reinforce the correct response WELL DESIGNED ENVIRONMENT DEVELOPED PEOPLE COMPETENT PERFORMANCE SUPPORT KAIZEN IMPROVEMENTS All rights reserved 46

47 Percent of On Time Shipments CONFIRMING RESULTS ASSESS PERFORMANCE AFTER KAIZEN Kaizen Event BT Weekly On Time Shipments 100.0% 90.0% New 80.0% 70.0% 60.0% 50.0% Inventory Chambers 40.0% 30.0% 20.0% 10.0% 0.0% Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Month YES Did we meet our target? NO Quantify Gap BEFORE AFTER 1. Kaizen creates before and after condition 2. Determine a point in time to check results Control Success Correct the Defect(s) SUPPORT KAIZEN IMPROVEMENTS All rights reserved 47

49 Improvement WHY STANDARDIZATION? Key Point Standardization helps sustain current improvements while creating a foundation to support future improvements S = Standardization K = Kaizen S K S K K S S K K K K K K Lean Thinking Time Traditional Thinking All rights reserved 49

50 WHAT IS STANDARDIZATION? Defines what is required to perform a job task (Who/What/Where/Why/When) The standard is a common language between processes Makes problems easy to see Create Standardized Work STANDARDIZATION All rights reserved 50

51 WHAT IS STANDARDIZED WORK? The most efficient work flow Safety Quality Lead Time Quantity Cost Human Movement STW Components Takt Time Work Sequence Element Times In-process Stock STANDARDIZATION All rights reserved 51

52 WHAT MAKES A GOOD STANDARD? Use the RUMBA TEST to ensure sustainable standards R. Reasonable: Is the standard based on a realistic assessment? Does is relate directly to the customer s needs? U. Understandable: Is the standard clearly defined so there can be no disagreement over interpretation? M. Measurable: Can we objectively measure performance against the standard? B. Believable: Can people buy into the standard? Is it something team members can strive to meet? A. Attainable: Is the standard something that can be reached? STANDARDIZATION All rights reserved 52

54 AUDIT EXPECTATIONS Accountability: TOP DOWN What is an Audit? A scheduled review of condition(s) that checks: 1. Is condition normal or abnormal 2. Is status ahead or behind BENEFITS Constant feedback to T/M s Visibility for management Confirmation of expectations MANAGEMENT Audit of Processes PRODUCTION STANDARDIZATION Create accountability All rights reserved 54

55 VISUAL MANAGEMENT Visual Management facilitates the audit 1. Normal <> Abnormal Can we SEE problems? ABNORMAL NORMAL 2. Ahead <> Behind Can we SEE status? BENEFITS Identify small problems at the point of occurrence Prevent development of big problems 1 UNIT Behind Condition 2 UNITS Normal Condition 2+ UNITS Ahead Condition PROACTIVE PROBLEM SOLVING STANDARDIZATION All rights reserved 55

56 STANDARDIZATION SUMMARY KEY POINTS 1. A standard that is managed by correcting abnormal conditions creates stability 2. An improvement is not permanent until it is stable and repeatable! STANDARDIZATION All rights reserved 56

58 CONDITION HOW TO REACH ULTIMATE GOALS? We know where we are but how do we get to where we ultimately want to be? Continue to improve with repeated Kaizen Target Condition Target Gap Ideal Condition Total Problem Gap 1. We can t always reach our goal in one step 2. If we change too much too fast we can t judge what worked and what didn t Current Condition TIME SUSTAINABLE IMPROVEMENT All rights reserved 58

59 Production Lead Time in Days SMALL IMPROVMENTS ADD UP MAKE A GRADUAL SERIES OF SMALL IMPROVEMENTS SUSTAINABLE IMPROVEMENTS STABILITY 1. Start with a stable process 2. We quantify how much the improvement will help 3. Make the improvement 4. Reestablish a stable process after making the change 5. Confirm we reached our expected results with KPI s STABILITY KAIZEN STABILITY KAIZEN Must have stable starting condition to build from Weekly BT Chamber Production Lead Time By Month New schedules introduced Cabinet, FA, Test rebalanced Expanded Attempted ambient room cabinet operational Eliminated rebalance process downtime Apr-Jun '10 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov SUSTAINABLE IMPROVEMENT Month All rights reserved 59

60 SUSTAINABILITY SUMMARY Making small improvements, reestablishing stability, confirming results with KPI s, and then repeating builds sustainable improvement! STABLE PROCESS [PLAN] KAIZEN IMPROVEMENT [DO] CONFIRM RESULTS [ADJUST] ESTABLISH STABILITY [CHECK] SUSTAINABLE IMPROVEMENT All rights reserved 60

61 6 FUNDAMENTALS SUMMARY 1. Customer First Thinking Define the Customer Quantify Demand Set Targets 2. Grasp the Current Condition 3. Kaizen Improvement 4. Standardize Success Measure Performance Establish Baseline Quantify Gap Eliminate Gap Confirm Improvement Create New Standard Audit Standard All rights reserved 61

62 FUNDAMENTALS SUMMARY CONTINUOUS REPETITION 1. Customer First Thinking Define the Customer Quantify Demand Set Targets 2. Grasp the Current Condition Measure Performance Establish Baseline Quantify Gap 3. Kaizen Improvement 4. Standardize Success Eliminate Gap Confirm Improvement Create New Standard Audit Standard CONTINUOUS IMPROVEMENT All rights reserved 62

63 FINAL THOUGHT - RESPECT FOR PEOPLE - Stay focused from the ground up T/M s own their processes [Experts] T/M s are empowered to solve their problems Organization benefits the most from a factory full of problem solvers The feedback, perspective, and expertise of an engaged work force is critical to creating Effective Sustainable Improvements All rights reserved 63