creating lean solutions

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


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


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 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


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


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 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


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


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?


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?


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?


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


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


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


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 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


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?


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


Lessons from Tesco

SupplierSupplier RDCRDC StoreStoreNDCNDC

Continuous Continuous ReplenishmentReplenishment

FlowFlowThroughThrough

StoreStore


ProductionProduction

LeanLeanSchedulingScheduling

CustomCustomStoreStore

RangingRanging

LoyaltyLoyaltyCardCardDataData

HomeHomeShoppingShopping

MultiMulti--FormatFormat

ConvenienceConvenience


WarehouseWarehouse

PrimaryPrimaryDistributionDistribution

Continuous Continuous ReorderingReordering

ConsolidationConsolidationWarehousesWarehouses


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


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!


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


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


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


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


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”


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)


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


Creating Lean Solutions:The Next Steps for Lean

Daniel T JonesChairman

Lean Enterprise Academy

Manufacturer Live – Telford – 28 September 2005

creating lean solutions

Education

supply chain

plan ahead

lost sales

lean daniel

lean thinking

creating flow

proper sequence

consumers