1.4 Lean

Welcome back. I’m Dave Nagy, and I would like to talk to you and help share with you one of the concepts, one of the drivers of business and their organizational behavior, and that is lean. There’s a lot of confusion on what lean is. When somebody, when a company says, we are going to go lean, employees oftentimes get scared and they run with fear and worry and wondering what’s going to happen. So I would like to clear up some of those misconceptions first and then address what is lean, what are the fundamental requirements for a lean organization from my viewpoint. So what is lean and what lean is not. So lean is not about eliminating people. In fact, in my experience, the opposite is true. An organization that embarks upon a lean journey often has the ability to improve processes, to take time out of their process. One example that I would like to share with you is with one of my clients where they put together a process improvement team. They announced lean, they looked at improving the process and could they take time out of their cycle time? And the team came up with a redesign, moving the machines around differently in the manufacturing environment. Moving the material locations around differently. Moving the staging around differently. And they were able to take a process that took five weeks to develop from end to end, from the time they got the raw material till they shipped it out the door. And they were able to cut that down to just two weeks. That created a tremendous amount of saving within the organization. Saving of time, it allowed them to more than double their capacity. That additional capacity also drove down the cost of the product, which made them more attractive to outside customers. This company in nine years tripled their revenue and doubled their workforce by going lean. Lean also is not a flavor of the month. It involves a new way of thinking, new habits, new behaviors. A total change in our mentality of how we are going to approach the business. And lean is not for executives only. This is for the entire organization. The entire organization needs to buy into process improvement, doing things differently. So, what is lean? Well, lean is really, in my opinion and my experience, based upon four cornerstones. These cornerstones provide the essence on which we build our lean journey. So first, a philosophy. A philosophy, a way of thinking. How do we think about business and customers and what’s going on? Culture. How do we interact together? How do we do this lean journey together? Tools and technology. Are they in place for us to do process improvement? To do more sophisticated, you know, application planning, resource planning? Can we scan documents rather than create paper documents? And commitment, the fourth cornerstone. Commitment from the top to the bottom. So let’s look at each one of these cornerstones. First, philosophy. The philosophy. How can we increase value with fewer resources? How can we decrease the amount of time it takes us to do something? Every time we decrease the amount of time it takes us to do something, that adds more room for us to do something else. That additional capacity may make the difference between attracting new customers and not. Continual improvement. Are we always willing to be able to look at improving departments, and processes, and forms, and procedures? And looking at it from a holistic approach. Not just looking at one isolated problem or one isolated process, but when we make adjustments, refinements, and improve a process, how will that process affect what’s before that process and after that process, upstream and downstream? If we say we are going to shorten the cycle time from five weeks to two weeks, is the next department downstream ready to handle that increased flow of capacity? Can we get the material, the resources, the equipment, the parts from the supply chain in order to handle that increased capacity? So it has to be a holistic thinking. And we have to think about the flow from end to end. Then, how do we get this done internally, within the organization? The culture. What are the values, the work ethics, the trust, all of these things that have to be part of the culture? What kind of habits do we have? What kind of behaviors do we have? How about the accountability? Are we an accountable organization? And how about waste? How do we view waste? Is it a concern? Do we try to eliminate? Accountability and waste I am going to further address before the end of this lesson. The third cornerstone is tools and technology. We have to have the right tools in place in order to improve, to move along this journey to high performance. Applications, systems that allow us to do MRP, material requirements planning, or ERP, enterprise requirements planning. Or how about problem solving? What kind of problem solving methodology do we use? If you have a problem, what do you do? Do you solve it yourself, do you gather a team? If a team is gathered, is there a process? The PDCA process, Plan Do Check Act, goes back to the Deming days and it is based upon the scientific method. How about value stream mapping? Have you ever looked at a process, something that you do in your department? Stop and think for a moment about any process. Making the coffee, filling out paperwork, filing an expense report. What are all of the steps from the time you start thinking about filling out your expense report until you can file your expense report? How much time do you actually touch the process? How much time is thinking? How much time is waiting? How much time in that process is distracted time where you’re actually doing something else? You might find, and research tells this, that in manufacturing 93% of the value time from start to finish is actually wasted. Touch time may only be 7%. Huge amounts of opportunity for improvement. Six Sigma and and Kaizen. Six Sigma is a statistical approach to near-perfection. How close can we get to only having 3.4 defects out of every 1 million products that we produce? Kaizen. Taking one department, the customer service department or the reception area, and looking at only that area, totally focusing from start to finish, and is there a way to make it more efficient, cleaner, provide more value to the customers? And, of course, commitment. All commitment, all the way from the top to the bottom. Executives. Champion. Is there a person that is responsible for this lean initiative, whether it be in a hospital, an organization, a bank, a lawyer’s office? How about training? Who needs to be trained on what? This lean concept is not an automatic. Training needs to happen. And for an organization to be a lean organization, it needs to be a commitment from everybody. All in, top to bottom. These provide the basis for the cornerstones. Philosophy, culture, tools, technology, and commitment. This lean is not about a program, it is about a way of life built upon these cornerstones.