Leaning Your Organisation


by Joe Aherne - Date: 2006-12-21 - Word Count: 1677 Share This!

The Institute of Certified Public Accountants recently published its first tracking research report - CPA Business Barometer - on the state of the economy and the issues facing Irish business. Some real concerns emerged around costs and competitiveness for all European Businesses. There was specific evidence that subsidiaries of foreign companies are under significant scrutiny regarding costs that they incur. There is also concern in European political circles about the pace of growth in labour costs and productivity versus the emerging states in Europe and the Far East. These are big issues in assessing competitiveness.

The impact of all of this is clearly seen in the reduction of manufacturing jobs in the old Europe. Company closures have largely been brought about as a result of Central Europe's high cost base and a change in global trading conditions. These factors will have an ever-increasing impact on Small and Medium Enterprises (SME's) servicing the manufacturing sector in the old EU.

Public and semi-state sectors are also coming under increased competition as a result of EU regulatory changes. Some operations in these sectors are run on traditional and outmoded practices. Increased competition both within Ireland and across the EU will have a significant impact on the viability of these concerns.

Financial Controllers and Managers in SMEs and service sectors are, however, successfully fighting back through a number of initiatives that include:

- Moving business activities up the value chain
- Developing and marketing 'knowledge centres of excellence' within their own organizations
- Initiating programs for streamlining their core processes

These organizations have embarked on what we term Lean improvement initiatives using concepts and tools associated with the Lean Thinking philosophy.

What is Lean?

Lean Thinking was introduced by Toyota in the 1960's as a systematic approach to identifying and eliminating waste or non-value-add activities in an organization through continuous improvement with the goal of creating value.

The term "Lean" is used because a Lean organization or business:
Optimizes human effort
Uses less space
Reduces the need for capital investment
Decreases amount of raw materials/supplies bought and consumed
Uses less time to produce and deliver products and services

Lean is therefore a strategy or system for remaining competitive through identifying and eliminating wasteful steps in products, services, or processes. The key principles of Lean are based on identifying 'waste' from the customer perspective, and determining how to eliminate it. Waste is defined as the activity or activities that a customer would not want to pay for and do not add value to the product or service from the customer's perspective. Once waste has been identified in the current or existing state, a plan is formulated to eliminate this waste and attain a desired future State in as effective and efficient a manner as possible.

Types of Wastes

Wastes can be typically divided into the following:

The 7 Wastes Examples
1. Waiting Employee or equipment idle time
2. Transportation Any movement that does not add value
3. Processing Itself Doing more work than necessary
4. Motion Wasted walking or movement
5. Poor "Quality" Errors or rework
6. Inventory Storing excess inventory
7. Overproduction Producing more, sooner, faster than required by the next step in the process

Lean Tools and Techniques

There are a number of techniques and tools available to achieve the objectives associated with Lean Thinking. The most popular and effective of these include Value Stream Mapping, Kaizen, and 5S.

Value Stream Mapping (VSM):

Value Stream Mapping (VSM) follows a product or service from beginning to end, and draws a visual representation of every step in the process that the product or process goes through, from receipt of raw materials or source of information from your supplier; to the processing of that product or service; to its final distribution to the end customer. A value stream encompasses all the value-add and non-value-added actions required to bring a product or service to a customer.

VSM provides a means for identifying non-value-add activities within a value stream and a platform to improve quality, efficiency, and productivity. As a result, process flow for that product or service is improved, while also inventory and floor space requirements are optimized.

The initial step in the VSM exercise is the development of a current state map that provides a detailed account of how a selected process works. Based on the findings of this current state analysis, a future state map is generated. This map provides a vision of what the organization could aspire to in improving flow, efficiency, and productivity. The future state map is subsequently implemented through a detailed plan that is tied to the organization's business objectives.

Example of a Future Value Stream Map

Source: Stryker Orthopaedics, Limerick

Kaizen:

Kaizen is a philosophy focused on problem solving to achieve gradual, orderly, and continuous improvement throughout all the elements of a process. It is based on analyzing a process or system with a view to developing an understanding of how it works, and working out how it can be continually improved. Kaizen activities are aimed at adding value to every operating step in a process, and eliminating any waste from that process.

A Kaizen Event is a carefully planned, well structured team-based activity focused on solving problems in a process. The Event should be customer-driven, in that the improvements that it initiates and implements are aimed at getting a product or service of the highest quality to a customer in the least amount of time.

The Event is based on a Plan, Do, Check, Act approach to problem solving and achieving continuous improvement.

5S:

5S is a methodology aimed at removing waste from the workplace by means of improved workplace organization, visual communication, and overall cleanliness. The methodology is based around a number of activities or stages that are focused on cleaning and organizing the workplace to enable employees to carry out their daily tasks in as safe and efficient a manner as possible.

The 5S stages or pillars and the order in which they should be implemented are as follows:

- Sort
- Set in
- Shine
- Standardise
- Sustain

Your management and staff need to be familiar with all aspects of the 5S methodology before you commit fully to the concept. All your relevant staff should receive appropriate training in the 5S aims, stages and implementation methods before commencing any pilot program.

Example of 5S Visual Display Cabinet

Source : Stryker Orthopaedics, Limerick

Benefits of Lean

All types of organizations are discovering the advantages of educating their people on Lean and applying its principles within their own organization. Some of these organizations are trying to function effectively in the face of mounting challenges such as a high cost base relative to their competition; declining market share due to process or cost problems, and limited capacity. In all of these cases, Lean can have an immediate, positive impact on business. Through the process of implementing Lean, the organization can find ways to achieve a number of benefits. Results will vary, but here are some typical savings and improvements:

- More operational flexibility
- Increased turnover
- Consistent product or service delivery
- Reduced lead times
- Reduced space
- Improvement in quality
- Reduction in operating costs

SME Case Study

Founded in 1986 Reagecon manufactures and distributes a comprehensive range of reagents, standards and laboratory equipment aimed at providing the correct result for analysts and technicians in all sectors. The company employs over 70 staff primarily in Shannon and reaches customers in some 30 countries through a network of European and Asian distributors. The business has grown strongly in recent years and expects to break the 10m turnover this year.

Early in 2005 Reagecon was introduced to the concept of Lean by one of its key customers. To begin that process they sent a small team to their customer's site to see how it was done and on their return one of their members went on to get formal accreditation in the principles of Lean.

The application of the Lean program began with the introduction of a 5S program in all areas of the business. This included the manufacturing floors, the distribution warehouses, the customer care function and the administration functions. This was followed with an initial Kaizen blitz to begin addressing wasted time. Those first two programs saved the company approximately 2,500hours. This additional time released from their processes was extremely valuable as the business was growing and more needed to be done with the same resources.

So successful was the program that they have now invested in putting eight more Reagecon team members through formal accredited training on the principles of lean. That team has just now completed its studies and has been tasked with reviewing all business processes with a goal of using what they have learnt to drive more waste from the business.

The practical nature of the training coursework has meant that the team has already saved a further 500 man-hours as they completed the various modules of the course. Experience to date has convinced Reagecon that Lean is not just for large organizations and they expect much more to come from the program in the coming months.

Conclusion

On their own, the individual Lean concepts and tools will provide certain measurable benefits, but it is the combination of them and their systematic implementation that will lead to more dramatic gains. Successful Lean implementation requires commitment and involvement across all levels as an organization-wide change initiative.

The first step to any Lean initiative is to gain top management support. Effective communication of Lean Thinking throughout the organization is seen as a vital ingredient in its successful implementation. This has to begin at senior management level in any company. Management must appreciate and understand the financial opportunity and long-term business benefits of converting from traditional ways of doing business to a streamlined Lean approach. It is imperative to educate and train core staff in Lean Thinking, and to appoint a number of internal Lean Champions to drive improvements across the organisations core business processes.

Without significant change in how businesses organize and arrange the way that they work, any piecemeal change will do little more than maintain the status quo. The maxim should be that every process can be improved and, therefore, even if you think 'it isn't broke', fix it anyway.

Finally, remember that Lean can be applied equally to all activities as diverse as manufacturing, logistics, financial services, construction, and government departments. Indeed anywhere where a business process exists.


Related Tags: lean, lean manufacturing, six sigma, kaizen, process improvement, process flow, vsm

Author: Joe Aherne

Joe established the Leading Edge Group in 1995 as a niche boutique consulting and education company supporting the multi-national sector. The Group is now recognized as one of the largest independent consulting organizations in Europe with over 600 projects completed successfully since its inception.

In April 2005, Joe launched the new International Standard in Lean comprising 4 levels of certification commencing with a Yellow Belt certification and leading to a Lean Master Black Belt. He is currently leading a major international drive in the use of Lean Healthcare philosophies and practices.

Joe is the chairperson and founder of the Supply Chain and Operations Court of Experts that comprises some of the top global corporations (http://www.courtofexperts.com). He is also a member of the CPA executive council.

Joe Aherne Lean Empowerment Lean Healthcare Services

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