The Principles Of The Lean Business System

  • Published on
    16-Jul-2015

  • View
    199

  • Download
    3

Embed Size (px)

Transcript

<ul><li><p> Page1of23 SAPartners19932010</p><p>ProfessorPeterHines1Chairman,SAPartnersCoFounder&amp;HonoraryProfessor,LeanEnterpriseResearchCentreatCardiffUniversity</p><p>TheLeanPrinciplesThebookLeanThinkingbyJamesP.WomackandDanielT.Jones(1996)providedtheworldwithavisionofwhatLeanwasabout.Theauthorscommented:LeanThinkingcanbesummarizedinfiveprinciples:precisely specifyvalueby specificproduct, identify thevalue stream foreachproduct,makevalue flowwithout interruptions, let thecustomerpullvalue from theproducer,andpursueperfection(page10).Theydefinedeachoftheseprinciplesinmoredetailasfollows:Value: The critical startingpoint for Lean Thinking is value. Value canonlybedefinedby theultimatecustomer. And itsonlymeaningfulwhenexpressed intermsofaspecificproduct(agoodor a service, and often both at once)whichmeets the customers needs at a specific price at aspecifictime(page16)ValueStream:Thevaluestreamisthesetofallthespecificactionsrequiredtobringaspecificproduct (whether a good, a service, or, increasingly, a combination of the two) throughthe.problemsolving task from concept through detailed design and engineering to productionlaunch,theinformationmanagementtaskrunningfromordertakingthroughdetailedschedulingtodelivery,andthephysicaltransformationtaskproceedingfromrawmaterialstoafinishedproductin2thehandsofthecustomer(page19).Flow:Oncevaluehasbeenpreciselyspecified,thevaluestreamforaspecificproductfamilyfullymappedbytheLeanenterprise,andobviouslywastefulstepseliminated,itstimeforthenextstepinLeanThinking.maketheremaining,valuecreatingstepsflow(page21).Pull:Pullinsimplesttermsmeansthatnooneupstreamshouldproduceagoodorserviceuntilthecustomerdownstreamasksforit(page67).Perfection:Asorganisationsbegintoaccuratelyspecifyvalue, identifytheentirevaluestream,makethevaluecreatingstepsforspecificproducts flowcontinuously,and letcustomerspullvaluefromtheenterprise,somethingveryoddbeginstohappen.suddenlyperfection.doesntseemlikeacrazyidea(page25). 1Iamgratefulforthedebate,inputandassistanceofthefollowingtothiswhitepaper:colleaguesatSAPartnersespeciallyChrisButterworth,KevinEyre,GaryGriffithsandJillWhinfrey;membersoftheLeanBusinessSystemandotherspecificLeanBusinessSystemLinkedIngroupsthatIrunandparticipantsatthe2009LERCannualconference. </p><p>THEPRINCIPLESOFTHELEANBUSINESSSYSTEM </p></li><li><p> Page2of23 SAPartners19932010</p><p>RethinkingtheLeanPrinciplesSinceLeanThinkingwaspublishedin1996,ourunderstandingofwhatLeanishasmovedon3.Leanhasalsobeenappliedacrossawiderrangeofmanufacturingandserviceindustries4andtheissueofsustaining change has become more central5. As a result I believe it is now time to revisit theWomack&amp;Jonesfiveprinciples. Inordertodothis, itwillbehelpfultounderstandwhatthemainareasofconcernsmightbe.Theseincludethefacts: Manyorganisationshavefailedtointerprettheoriginalprincipleswell Inhindsight,therearegapsorweaknessesintheoriginalset Theworldhasmovedon,and OurunderstandingofhowLeanworkshasimproved.These areas of concern lead to a number of specific problems (see Table 1). The first problemrevolves aroundhow Leanworks indifferent industries and the fact that classic Lean texts tend,explicitly or implicitly, to assume that we all work in high volume, repetitive manufacturingenvironmentssuchascarcomponentsorelectronicsindustries.There appears to be little allowance for people in low volume or more variable manufacturingindustriesortheservicesector.WhatwehaveobservedisthatthefurtheryoutakeLeanfromitscarmakingorigins,themorestrainedsomeoftheclassicprinciplesbecome.Forinstance,inhighvarietymanufacturingorserviceindustriesmanystrugglewiththeconceptofkanbanstylepullsystems.Asa result, organisations such as FlindersMedical, anAustralian hospital, have redefined their ownprinciples including: Focus on the Patient, Understand our Processes, Social &amp; Technical Flows,ResponsiveTeams&amp;LearnandSpread.</p><p>Table1:ProblemswiththeOriginalLeanPrinciples 3See:PeterHinesetal,LearningtoEvolve:AReviewofContemporaryLeanThinking,InternationalJournalofOperations&amp;ProductionManagement,24,10,pp.9941011,20044See:PeterHines,MustDoBetter:ApplyingLeaninthePublicSector,PublicSectorExecutive,Sept/Oct,pp.3445,20095See:PeterHines,PaulineFound,GaryGriffiths&amp;RichardHarrison,StayingLean:Thriving,NotJustSurviving,LeanEnterpriseResearchCentre,Cardiff,2008 </p></li><li><p> Page3of23 SAPartners19932010</p><p>Thenextsetofproblems revolvesaround the fact that theoriginalprincipleshavebeengenerallyinterpretedatanoperational level. Many firmsuseLeanasa focus forpointkaizen improvementactivitieson theshop floor. Indeed,almostall theorganisationswemeet tend to lookatphysicalflowsonlyintheOrderFulfilmentprocess(customerordertodeliveryofproductorservice).AsaresultLean isoftenusedasashorttermcostcuttingorwastereductionmechanism. Indeed,manyrefertoLeanasacostreductiontoolkit,aninitiativeoraprogramme.EvenWomack&amp;Jonesopen theirbookwith: Muda. Its theonewordof Japanese you reallymust knowmudameanswaste.IncontrastifyouseekouttheToyotacorporatewebsiteyouwillfindthatTaiichiOhnohasadifferentperspective:Eliminatemuda,mura,muri.completely6.WhatappearstobemissingintheLeanThinkingbookisthefocusonlevellingandmakinglifeeasyforpeople.Linkedtothiswastereductionfocus, isanothersignificantgap,the lackofanappropriatefocusonqualityandrisk.FundamentaltothecreationofacompleteLeanBusinessSystem7isachievingwhatthecustomerwants,whentheywantit.Thisimpliesthepursuitof100%qualityaswellas100%ontimedelivery.Italsoimpliesthatriskisatanabsoluteminimum.Rarelydowe see Lean appliedwithin the contextof thebusinessneeds,widerenvironmentalorsocialconcerns,strategyformationordeployment.Itisusuallyatacticalactivityrunbyfull,orparttime,improvementagents.Thislackofseniormanagementinvolvementmeansthatthereisrarelyappropriateseniorlevelleadershipand,asaresult,insufficientattentiontoemployeeengagement.Theresultofthisisthatthesustainabilityofchangeispoor.ThereasonforthisisthattheclassicLeanPrinciplesalmosttotallymissedtheimportanceofpeople.Specifically, little attention was drawn to the importance of communication, supportive humanresourcepolicies,stafftraininganddevelopment.Inaddition,inadequateattentionwaspaidtotheimportanceofresourcingthechangeprocessand individual jobdesign. It is interestingtocontrastthatwithsomekeyreasonswhyLeantransitionsfailasshowninTable2.</p><p>Table2:ReasonsWhyLeanTransitionsFailSource:Lucey,Bateman&amp;Hines,2005Finally,theclassicLeanprinciplesappear(orhavebeeninterpretedasbeing)toofocusedinsidetheorganisation. Asa result, feworganisationsoutsideof theautomotivesectorappear to take their</p><p> 6http://www.toyota.co.jp/en/vision/traditions/jul_aug_04.html7 FormoredetailsoftheLeanBusinessSystem,pleaseseethewhitepaperCreatingaLeanBusinessSystemathttp://www.sapartners.com/content/blogsection/6/87/lang,/</p></li><li><p> Page4of23 SAPartners19932010</p><p>Leanactivities into their supply chain. The result isagainoftenpointkaizenactivitywhere singlefirmsarethefocusofimprovementratherthanthecompletesupplychain.To summarise: the traditional Leanapproach is toopiecemeal, too short term innatureandwithlittlefocusontheareasrequiredtomakeitsustainableinmostorganisations.Whatiscalledforisamoresystemicapproach.RedefiningtheLeanPrinciplesTakingalltheseconcernsandissuesintoaccountwehaveredefinedtheoriginalprinciplesintoanewholisticframeworkthe8PsoftheLeanBusinessSystem.Thisframeworkhelpscompaniesinanyindustry,andatanystageofLeanmaturity,toreflectonhowtheyaredeployingLeanintheirbusiness.Ithelpstotakethefocusawayfrompointkaizenactivitytowards a more contingent approach, a more aligned approach, a more human approach andultimately,amore sustainableapproach. Indeed it ispartofamove toLeanbecomingaculturaljourney towards everyone in theorganisation activelyworking towards a fully aligned tomorrowbetterthantodaysystem.</p><p>Figure1:The8PsoftheLeanBusinessSystemWebelievethatthisnew8Psapproachwillalso,atleasttosomedegree,overcometheshortcomingoftheclassicWomack&amp; Jonesapproachasshown inTable 3. In the table the darker the shading, themore impact the particular principle will have ontheexistingproblems.</p><p>Table3:CounteringProblemswiththe8PsofLeanThinking</p><p>PURPOSE</p><p>PULL</p><p>PROCESS</p><p>PEOPLEPLANET</p><p>PARTNERING</p><p>PERFECTION</p><p>PREVENTION</p><p>The 8Psof Lean Thinking</p><p>PURPOSE</p><p>PULL</p><p>PROCESS</p><p>PEOPLEPLANET</p><p>PARTNERING</p><p>PERFECTION</p><p>PREVENTION</p><p>The 8Psof Lean Thinking</p></li><li><p> Page5of23 SAPartners19932010</p><p>The8PrinciplesoftheLeanBusinessSystemadetailedlook1. Purpose Before starting any activity it is important to understand the purpose and to align the</p><p>organisation.Askyourself,howmanypeopleinorganisations:</p><p> Reallyunderstandwhattheyaresupposedtoachieve? FeeltheyhaveanappropriatesetofKPIs? Areworkingontoomanythingsatonce? Canpointtohowtheyaremakingtomorrowbetterthantoday?Sowhatdoyouneedtotakeintoaccountindevelopingapurpose?TraditionalmanagementhastaughtustofocusontheVoiceoftheOwner.TraditionalLeanThinkinghasextendingthattoincludetheVoiceoftheCustomer(althoughwerarelyfindthatthisisthestartingpointforaLeantransformation).Eventhisdualfocusisnotenough,asweseeinFigure2.Figure2:AchievinganEffectiveandSustainablePurposeFocuson theVoiceof theOwnerandVoiceof theCustomer fails to focuson themuri thefrustrationsandproblemsthatindividualpeoplefaceintheirwork.Itfailsthereforetoaddressthewhatsinitforme?objectiontochange.ItfailstofocusadequatelyontheVoiceoftheEmployee.ThisconcerniskeyandwewillreturntoitinthesectiononPeople.</p><p> Asourcollectivethinkinghasmovedon,wenowneedtofocusalsoontheVoiceofSociety.</p><p>Specificallyour roleascorporatecitizensand inparticular theenvironmental impactsofouractivities.WewillagainreturntothisareainthePlanetsectionbelow.</p><p> Codifyingthepurposeisakeyjoboftheseniormanagementteam.Itisawayofcapturingthe</p><p>WHAT, the direction, the focus and ideas about the destination. If done well it is also apowerfultoolinestablishingtheWHY.Focusingonthesetwoareasisnotonlyessential,butitwill help senior managers start moving away from simply HOW based thinking. In myexperience,predefinedsolutions fromseniormanagers,oftenwithoutmuch thinkingabout</p><p>Effective andsustainable </p><p>purpose</p><p>Voice of the Customer</p><p>Voice of the Owner</p><p>Voice of Society</p><p>Voice of the Employee</p><p>Effective andsustainable </p><p>purpose</p><p>Voice of the Customer</p><p>Voice of the Owner</p><p>Voice of Society</p><p>Voice of the Employee</p></li><li><p> Page6of23 SAPartners19932010</p><p>WHATandWHY,oftenhaveonlyapoorchanceofbeingacceptedbythebusinessandanevenpoorerchanceofleadingtosustainablechange.</p><p> Notonlydoorganisationsneedtohaveapurpose,theyalsoneedtocommunicateitinaway</p><p>thatengagestheworkforce.Thisalmostcertainlyneedstobedoneinavisualwaytranslatingthepurpose intoa languagethat isaccessibletopeopleattheir leveloftheorganisation. Itneeds tobemore thanmerevisualdisplaysused to impressvisitors,buta living,breathingmanagementtoolthat isthefocusofhowtheorganisation isrun. Itneedstobeacompletevisualmanagementapproach.AnexamplefromCogentPowerisdepictedinFigure3.</p><p>Figure3:SalesteamvisualmanagementatCogentPowerThekeyelementsrequiredinclude: Apurposefortheteam ArelevantsetofKPIs Ateamselected(bottomup)setof</p><p>problemsolvingactionplans Asetofteamselectedcelebrationsof</p><p>success</p><p>Indeed inherworkonsustainability,NicolaBateman foundthatthis typeofdeployedvisualmanagementwasoneofthemostimportantelementsofachievingsustainablechange8.</p><p>2. Process</p><p>Afternearly20yearsworkingwithLeanIfindthatthemajorityoffirmsstillonlyapplyLeaninoneprocess:OrderFulfilment.OrderFulfilmentstartswiththecustomersneed,istranslatedintoan informationflow intheorganisationandresults inareverseflowtothecustomeroftheendproductorservice. This istheprocessthatalmostallorganisationsaddress in theirLean journey,either inwholeor inpart 95%nevergetany further. Inaddition these95%tendtobeaddressingcostreductionhavingdonesomeValueStreamMapping.</p><p>Sowhy is this aproblem? Mainlybecause they areonly scratching the surfaceofwhat ispossiblewith a Lean Business System. Businesses havemany processes that they need tomanage, and manage well including ones that stretch across internal departments. Ingeneraltherearethreetypes(seeFigure4):</p><p> DirectionalProcesses CoreProcessesand EnablingProcesses</p><p>ThereisusuallyonlyoneDirectionalProcessinabusiness,oftencalledstrategicmanagementand it isoftenonly inthisprocessandatthis levelthatacrossfunctionalapproach istaken.Thereareusually36CoreProcessesthatdeliverthemaintangibleoutputsandoutcomesforthe business. These might include Innovation, Order Creation and Order Fulfilment. Inadditiontothesethereare36EnablingProcessesthatsupporttheCoreProcessestodeliverthekeybusinessresult.</p><p> 8See:NicolaBateman,Sustainability:AGuidetoProcessImprovement,LeanEnterpriseResearchCentre,2001</p></li><li><p> Page7of23 SAPartners19932010</p><p>Figure4:GenericProcessFramework</p><p>Eachprocesshasitsownparttoplay,butitistheCoreProcessesthatarelikelytodeliveronthemajorityofthetoplevelstrategyandKPIset.However,acrossdifferentorganisations,thismaybeinradicallydifferentways.</p><p>Improvements in theOrderFulfilmentprocessare likely todeliveran increase incapacity inorder to achieve a cost benefit. Many businesses gowrong here, however, because theyassume that is thegoalofLean. Inmanycases there isadislocationbetween thebusinessstrategyand this Leancostreduction. Worse than this,manyof thecostsavingsareoftenillusory. What for instance isthecostsavingofmerely freeingup20%ofa factoryorofficeblockonitsown?Theremaybesome,butitusuallyfarfrom20%ofthetotalcosts.</p><p>Ifwe instead thinkof Leanmoreholistically, as an approach todeliver improved customerserviceandwastereduction,thentheoutcomeshouldbeanincreaseinprofitablegrowth9.Inotherwords leanshoulddeliveranoptimalbalancebetween these twoareasaligned to thebusinessgoalsandpurpose.However,howcanorganisationsdothisiftheyareusuallyonlyaddressingonesingleprocesswhoseimprovementislikelytobelargelyaboutreducingcost?Theansweris,ofcourse,thattheycant,notunlesstheyseektoimprovearangeofotherprocessessuchasOrderCreationand Innovation. The improvementoftheseprocesses is less likelytobeaboutreducingcostand more about improving customer value. In other words they are about growing thebusinessorfillingcapacity.</p><p>IcallthisXand2Xthinkingasthis linkstotheprofitpotentialofLean inanorganisation(seeFigure5).BycreatingcapacitythroughtheimprovementofprocesseslikeOrderFulfilmentabusinessmayachievesomecostreductionandhencedeliveronsomeprofitpotential itmayhavehad.However,itisonlywhenthiscapacityisutilisedwhenprocessessuchasInnovationandOrderCreationareaddressedthatthefullbenefitwillbereapedbythebusiness. Inmy</p><p> 9Inapublicsectorenvironmentthismightbeseenasimprovedvalueformoneywherevalue(inwhateverterms)tocustomersisimprovedandcostsarereduced.</p><p>Strategic ManagementDirectional ProcessDirectional Process</p><p>Con</p><p>tinuo</p><p>us Im</p><p>prov</p><p>emen</p><p>t</p><p>Enab</p><p>ling </p><p>proc</p><p>ess</p><p>Enab</p><p>ling </p><p>proc</p><p>ess People Process</p><p>Enabling processEnabling process</p><p>Environmental Systems Management</p><p>Enabling ProcessEnabling Process</p><p>Innovation Process</p><p>Order Creation</p><p>Order Fulfilment</p><p>Core ProcessesCore Processes</p><p>Core ProcessesCore Processes</p><p>Strategic Manage...</p></li></ul>