enterprise interactions and waste - mit opencourseware...supply chain management scm determine...

Enterprise Interactions and Waste

Professor Deborah NightingaleOctober 17, 2005

Objectives

• Enterprise Interactions• Process • Stakeholder

• X- Matrix to assess alignment of • Strategic Objectives • Metrics • Key Processes • Stakeholder Values

• Enterprise-level Wastes

ESD.61J / 16.852J: Integrating the Lean Enterprise © Deborah Nightingale, 2005 Massachusetts Institute of Technology

Enterprise Interactions

• Process Interactions

• What flows in interactions between processes? • Material • Information • Resources (people, $s, etc.)


Interaction Performance Parameters

• Reactive vs. Proactive

• Stability

• Timeliness

• Accuracy

• Completeness


© Deborah Nightingale, 2005 Massachusetts Institute of TechnologyESD.61J / 16.852J: Integrating the Lean Enterprise

Interaction Checklist Template

What flows in this interaction?InformationMaterialResources

Goes from:_______________ to _______________

Note:_________________________________

Is this interaction Reactive ProactiveRate each of the following as: Lo Med Hi

StabilityTimelinessAccuracyCompleteness

Red, yellow, or green dot

Blue dot for cross-

organization handoff

Mapping Enterprise Interactions


© Deborah Nightingale, 2005 Massachusetts Institute of TechnologyESD.61J / 16.852J: Integrating the Lean Enterprise

Interactions

Supply Chain Management

SCM Determine Excess

Buy Distribute Assets

AnalProblTech

Orders

Mfg. AF DRMO

MA

AFMCBasesBase Tech

System Engineering

Pl Production QualityMaterial Execution i

Req’s Dispose

Repair

ysis em

Tracking

Contracting Repair

Contracting Other ALC

Support Information Contracting

anning Scheduling Support Depot

Maintenance

Budget Req’s

Report ng


Supply Chain Management

SCM Excess Buy Distribute

Assets

AnalProblTech

Orders

MA

System Engineering

Pl Production

Dispose Repair

ysis em

Tracking

Other ALC

Contracting

anning


Process Interactions Analysis Supply Chain Management

Supply Chain •Management (Overall)

Low

Incoming Interactions High Medium

Supply Chain • Management (Overall)

Low

Outgoing Interactions High Medium •

Incoming Interaction Most low assessed interactions occur in sub-processes • Analysis & Problem Tracking (46%) &

Determine Requirements (31%) • Timeliness largest driver (54%) with

remaining split evenly Stability, Accuracy, & Completeness

Outgoing Interaction Most low assessed interactions occur in sub-processes • Buy/Repair (75%) • Dispose of Excess Assets (25%)

Stability largest driver (38%)Timeliness (25%) & Accuracy (25%)


Objectives





Metrics StakeholderValues

Key Processes

StrategicObjectives

X-MATRIX 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

0 0 0

Strategic Objective

Strategic Objective

Strategic Objective

Strategic Objective

Strategic Objective

Strategic Objective

Strategic Objective

Strategic Objective

Strategic Objective

Strategic Objective

Metrics Stakeholder Values

Key Processes

Strategic Objectives

Stak

ehol

der V

alue

Enterprise Process

Enterprise Process

Enterprise Process


X-Matrix Assessment Process

• The grids in each corner of the matrix represent potential interaction between the row and column they connect: • Strategic objectives • Enterprise metrics • Enterprise processes • Stakeholders values


X-Matrix Completion Process

• Start in the upper left quadrant and move aroundthe matrix in a counter-clockwise direction

• The following questions will help fill in the matrix with either, strong, weak, or no interaction.

1. Is this strategic objective measured by thismetric?

2. Does this metric measure performance of thisprocess?

3. Does this process contribute to delivering thisstakeholder value?

4. Is this stakeholder value represented by thisstrategic objective?


Metric Alignment with Strategic Objectives

• Do the metrics currently employed align to the strategic objectives?

• What is the relationship between the metrics and the strategic objectives?

• Do the metrics accurately evaluate enterprise performance and achievement of strategic objectives?


Metrics Alignment with Processes

• Do the enterprise metrics measure the performance of the enterprise processes?

• What is the relationship between the metrics and the processes?

• Do the metrics flow down through the organization in a logical manner to measure process performance?


Process Alignment with Stakeholder Values

• Do the enterprise processes deliver the stakeholder values for the enterprise?

• How well do the enterprise processes deliver value to the stakeholders?

• Which processes deliver the most value? which deliver the least?


Strategic Objectives Alignment with Stakeholder Values

• Do the strategic objectives represent the stakeholder values?

• Are the strategic objectives well aligned with the stakeholder values?

• How many stakeholder perspectives are represented by the strategic objectives?


chusetts Institute ologyJ: In he Lean

Metrics StakeholderValues

Key Processes

StrategicObjectives

iEnterprise

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Metrics

Key Processes

Strategic Objectives

Objectives





Production Wastes

Waiting: Idle time in which no value is added

Transportation: Excessive movement of material, tools or parts

Over-processing: Effort expended which does not add customer value

Inventories: Accumulations of materials beyond JIT requirements

Unnecessary Motion: Any human movement that does not add value

Product Defects: Any item that does not meet specifications

Over Production: Producing more or sooner than required


Information Wastes Waiting: Idle time due to unavailable information

Transportation: Unnecessary movement of paper, people, or bits

Excess-processing: Processing information beyond requirements, e.t., unneeded precision

Inventory: Information that is unused or is “work in progress”

Unnecessary Motion: Any local human movement necessitated by poor Information System design

Defects: Any element of data, information or intelligence that is erroneous

Over Production: Producing, duplicating and distributing more information to more people than is needed


Enterprise Level Wastes

• Waiting/Delays • Excessive Transportation • Inappropriate Processing/Ineffectual Effort • Inventory • Excessive Motion • Defects/Rework • Over Production • Structural Inefficiencies • Opportunity Costs


Waiting/Delays

Idle time due to late decisions, cumbersome and excessive approvals, and unsynchronized

enterprise processes


Waiting/Delays Idle time due to late decisions, cumbersome and excessive

approvals, and unsynchronized enterprise processesExamples Causes

In making decisions Unnecessary levels/steps in decision structure and approval processes Multiple handoffs Information unavailable or inaccessible Risk aversion mentality Inflexible policies and procedures Excessive rules and regulations

In administrative processes

Undisciplined processes and practices Variability in enterprise processes Lack of standardization Lack of common tools and systems Errors in data Linear, serial task sequencing Batch and queue mentality in enterprise processes Lack of flow—lack of level scheduling of administrative processes Unsynchronized enterprise processes Delays in information processing, dissemination and consequent actions Ineffective, inefficient business systems Lack of connectivity and interoperability


Excessive Transportation

Unnecessary movement (including electronically) of administrative information and people; multiple

approvals and handoffs


Excessive Transportation Unnecessary movement (including electronically) of

administrative information and people; multiple approvals and handoffs

Examples Causes

Movement of forms, reports, Poor design of business other paperwork processes

Multiple handoffs Unsynchronized enterprise processes

Expediting administrative Poor design of business paperwork processes

Dispersed facilities Poor location decisions


Inappropriate Processing/Ineffectual Effort

Effort expended that does not increase value to any of the enterprise’s stakeholders; can occur

within the workforce, within management ranks, or across the entire enterprise


Inappropriate Processing/Ineffectual Effort (cont.)

Effort expended that does not increase value to any of the enterprise’s stakeholders; can occur within the workforce, within

management ranks, or across the entire enterprise

Examples Causes

Poor enterprise Inefficient, ineffective process interfaces performance Physical, information and conceptual disconnects—lack of connectivity

and interoperability Lack of standardized processes; lack of common tools, systems and platforms Bloated middle management Outdated, counterproductive financial systems & performance measures Enterprise managers not on the same page Inflexible policies and procedures, excessive rules and regulations Organizational rigidity, lack of responsiveness and adaptability Unsynchronized enterprise processes Wrong metrics Poor strategy execution Business systems are cumbersome and disconnected


Inventory

Unnecessary levels of any enterprise resource: capacity, space, workforce, suppliers,

information/data


Inventory

Unnecessary levels of any enterprise resource: capacity, space, workforce, suppliers, information/data

Examples Causes

Excessive capacity Poor planning

Excessive space Poor planning, redeployment of freed-up resources

Excessive workforce Poor planning, redeployment of freed-up resources

Excessive technical staff Poor staffing planning

Excessive suppliers Lack of rationalized lean supply chain network


Excessive Motion

Any human effort that does not increase stakeholder value.


Excessive Motion

Any human effort that does not increase stakeholder value.

Examples Causes

Redundant activities Poor integration

Excessive and uncoordinated Chasing fads initiatives

Wasted effort Excessive number of meetings, status reporting

Unsynchronized enterprise processes


Defects/Rework

Erroneous results from defective enterprise processes and decisions


Defects/Rework Erroneous results from defective enterprise processes and decisions

Examples Causes

Errors Physical information and conceptual disconnects—lack of connectivity Undetected errors in data entry and processing Out-of-date policies and procedures—lack of configuration control Variation in enterprise processes Misinterpretation of data

Incorrect, Optimizing within one function causes sub-optimal enterprise performance inappropriate decisions

Errors (defects) in enterprise processes Unsynchronized enterprise processes Misinterpretation of processes information Confusion regarding roles and responsibilities Lessons learned are not captured and archived Decisions re-decided or changed later Excessive metrics, inappropriate metrics Poorly prepared and facilitated meetings Multiple handoffs


Overproduction

Any creation of enterprise outputs that does not increase stakeholder value


Overproduction Any creation of enterprise outputs that does not increase

stakeholder valueExamples Causes

Excessive dissemination “Push” mentality prevails of data, reports Outdated policies and procedures

Wrong metrics Over-managing Lack of appropriate delegation, employee empowerment

Command and control mentality prevails

Exuberant pursuit of illogical initiatives

Too many “movements” (initiatives) being pushed, some at cross purposes, leading to diffusion of commitment Failure to stay grounded in fundamentals Over-reliance on “solutions of the month”

Marketing campaign Belief that “pushing” sales via incentives will result in overall increase in sales volume, but usually results in short term demand amplification and then sharp drop in demand


Structural Inefficiencies

Waste resulting from inappropriate organizational structure, policies, business model structure,

alignment, or strategies


Structural Inefficiencies Waste resulting from inappropriate organizational structure, policies, business model structure, alignment, or strategies

Examples Causes Organizational structure

Redundant activities, overlapping command and control Failure to deploy critical resources horizontally along the value stream Bloated middle management Unclear chain of command Unsynchronized enterprise processes

Supplier relations

Tendency to view suppliers in an adversarial way Failure to create “win-win” relationships Reluctance to share detailed operations data

Partner relations

Lack of interconnectivity and interoperability Reluctance to share detailed internal data

Customer relations

Failure to focus on customer needs and values Failure to anticipate how we can help our customers be successful


Opportunity costs

Wastes resulting from lost opportunities, e.g., untapped talent in the workforce


Opportunity costs Wastes resulting from lost opportunities, e.g., untapped

talent in the workforce

Examples Causes Customer disconnects

Remoteness from customer Failure to focus on what customer values

Untapped talent in workforce

Failure to capitalize on the whole person by helping each employee grow to full potential; underutilization of people Inappropriate reward/incentive systems

Failure to view knowledge as a corporate asset

Managers unaware of potential of knowledge management No tradition of capturing lessons learned, of growing corporate knowledge base, lack of knowledge transfer internally

Unmotivated workforce

Workforce not empowered, people have no authority or accountability


Enterprise Monuments

• Centralized command and control structure • Fragmented, multiple legacy information systems • Highly bureaucratic and/or stagnant rules, regulations and

procedures • Excess layers of management • Highly concentrated, centralized headquarter facilities • Excessive, bloated corporate staff functions • Monolithic functional organizations (Silos): Purchasing, H.R.,

Finance, Engineering, etc. • Facilities in disparate locations • Strategic objectives not in alignment


enterprise interactions and waste - mit opencourseware...supply chain management scm determine...

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