Advanced Lean Strategies for Office & Service Environments

Lean Webinar Series: Advanced Lean for Office & Service November 9, 2010 Company LOGO

Webinar Content How and when to use takt time to balance work. How to approach the need for load leveling. How cross-training and co-location is an essential step in a transformation. The vital role and responsibilities for process owners. How to achieve value stream alignment. How to translate operational metrics into financial terms. © 2010 Karen Martin & Associates 2

Creating a Lean Enterprise Initial Lean focus  Eliminate muda – Waste Advanced Lean   Eliminate muri – Overburden (people or equipment) Eliminate mura – Uneveness © 2010 Karen Martin & Associates 3

Your Instructor  Early career as a scientist; migrated to quality & operations design and management in the mid-80’s.  Launched Karen Martin & Associates in 1993.  Specialize in Lean transformations in nonmanufacturing environments.  Co-author of The Kaizen Event Planner; co-developer of Metrics-Based Process Mapping: An Excel-Based Solution.  Instructor in University of California, San Diego’s Lean Enterprise program. © 2010 Karen Martin & Associates Karen Martin, Principal Karen Martin & Associates 4

Most Advanced Lean Tool(s) None Visual management A3 Value stream mapping 5S Kaizen events Kanban © 2010 Karen Martin & Associates Layout/cells Root cause analysis Metrics-based process mapping Takt time Critical-to-Quality Tree PDCA and DMAIC 7

Building a Lean Enterprise Process Stabilization Tools

Building a Lean Enterprise FlowEnhancing Tools

Building a Lean Enterprise

Multi-Functional Workers / Cross-Training Eases scheduling / more flexibility Improves employee value to organization Greater job satisfaction Better problem-solving and decision-making Required for one-piece flow or a pull system to function properly If work is segmented, rotate frequently enough to keep skills and satisfaction up  Based on work volume and complexity 11

Problems with Poor Layout Sales Estimating Design Engineer Materials Purchasing Scheduling  Internal suppliers and customers are not connected   Difficult to solve problems Difficulty innovating / sharing best practices  Difficult to find work and track progress 13

Office Cell Linking people and processes into the most efficient combination to maximize value-added content while minimizing waste. Cross-functional One piece flow  Balanced -- waste removed  Cross-trained team  Standard work  Staffed to meet demand Forms Shared files In Out More efficient communication Single point scheduling 14

Loan Processing Flow 1 Legend Work-In-Process (WIP) (Before) Account Executive (AE) Sequence Number 2 Account Manager (AM) Underwriter (UW) Elevators & Restrooms 4 UW 5 5 AE 6 Funder (FD) 1 4 AE 2 AM 4 1 2 AM 4 3 Set-Up (SU) 6 FD

Loan Processing Flow (After) Customer Customer Shared Resource 1 AE Elevators & Restrooms 2 AM 2 1 AM AE 2 3 2 1 AE AM Set-Up AM AE 5 4 3 4 5 FD UW Set-Up UW FD Customer Customer 1

Mortgage Application Process Improvement Results Metric Before After Time to process a loan 5 Days 1.5 Days Customer complaints 4/Loan 1/Loan WIP 60 Loans 25 Loans 17

Pull Systems A method of controlling the flow of work and/or material by replenishing work/material only as it is consumed Types   One-Piece Flow FIFO lanes (first-in-first-out)  Visual system authorizing supplier to send next “order”  Note: FIFO in and of itself is not a pull system  Kanban  Visual card system authorizing supplier to replenish stock/supplies/parts If flow stops at a single point (no consumption), everything upstream stops as well (no replenishment) 19

Pull System Flow Diagram Closed loop Customer RFQ Verify In In Complete Completed Enter info. quote per Quote Box in QEF log Box Quote QEF Customer Information Request Document Flow WIP Locations © 2008 Karen Martin & Associates

Pull Systems Concepts If a bottleneck occurs, everything upstream must stop! Resource re-allocation must occur.  Cross-trained workers are essential. Highlights problems and makes corrective action mandatory. © 2008 Karen Martin & Associates

Pull System in Admin Processes Step A Step B Step C Step D Color coded folders or cards  quick status of WIP at each process step Maximum number of visual indicators between each process  full queue indicates resources must be re-diverted Monitor WIP at first process to estimate current throughput time © 2010 Karen Martin & Associates Step E

Single Bin Kanban System Cardboard Divider Kanban Card Place card on top of parts immediately under divider (1) Appropriate Sized Bin (kanban quantity fits into one bin) (2) (3) Draw Line Inside Insert Cardboard Pan at Order Divider to Create Point Level Physical Barrier

Two-Bin Color-coded System

Tape Kanban Do not replenish Replenish

Before / After Excessive inventory; Unclear who is responsible for management/replenishment Controlled inventory; Color-coding identifies who is responsible for management/replenishment 26

Creating a Lean Enterprise Eliminate muda – Waste Eliminate muri – Overburden (people or equipment) Eliminate mura – Uneveness 28

Unbalanced Work 20 18 Takt Time Process Cycle Time 16 = 15 Min. 14 12 10 8 6 4 2 0 Order Entry Sales Review Design Estimating 29

Takt Time Application German word being “pace” or “drumbeat” Used for balancing work and reducing bottlenecks (especially for high volume work) Best when workers are dedicated to one type of activity (even if for only a portion of the day)  Tough to use when workers are multi-tasked Will vary based on heavier or lower demand periods 30

Takt Time Example: Continuous Production Available work time Takt time = Customer demand “Touch down” 480 minutes/day Takt time = 45 new accounts = 10.6 mins Each process step must have a process time of 10 minutes or less to avoid development of a backlog – OR more people to perform the task. 31

Balanced Work Process Cycle Time 20 Takt Time = 15 Min. 15 10 5 0 Order Entry & Review Standard Design Complex Design Estimating 32

Work Balancing Considerations  Avoid creating excessively narrow scopes of responsibility.  “Production line” vs. one-stop-shop    Assess “between work item” mental setup (switching) required – if redundant mental setup, consider one-stop-shop Assess “within work item” mental setup (switching) required – if too much, consider production line Assess skill requirements – can one person easily do it all?  Who’s job is it?  Be willing to challenge paradigms  Segment the work when necessary © 2010 Karen Martin & Associates 33

Use Work Segmentation in High Variation Environments Segment work based on process time needed to complete the tasks (e.g. degree of complexity). Cross-train workers to do all levels of complexity. Rotate staff from team to team frequently to keep interest and skill level high.  Creates organizational flexibility © 2010 Karen Martin & Associates 34

Task-level FTE Requirements Process Time # FTEs Required = 20 mins # FTEs = 10 mins Takt Time 2 FTEs required to = meet customer demand 35

Creating a Lean Enterprise Eliminate muda – Waste Eliminate muri – Overburden (people or equipment) Eliminate mura – Uneveness 36

Load Leveling Three product types: A, B, C Weekly customer demand: 12 A’s, 9 B’s, 3 C’s Traditional Production Model  AAAAAAAAAAAA—BBBBBBBBB—CCC Better  AAAA-BBB-C-AAAA-BBB-C-AAAA-BBB-C Best  ACABABAB ACABABAB ACABABAB © 2008 Karen Martin & Associates 37

Production Smoothing (Heijunka) Leveling of: Volume of production  The same quantity is produced each “interval” for each product family Variety of production (product mix)  Every (high-volume) model is produced every “interval” © 2010 Karen Martin & Associates

Load Leveling Tips  First seek the root cause!  When external customers are creating unlevel incoming load   We have much more influence over external customer behavior than we think. Incentives:  Information – e.g. add peak times to ACD phone recordings  Financial – provide discounts, etc. for making requests during certain time periods – e.g. sunset dinner specials  When sales team creates unlevel incoming load  Change commission period/schedule.  When internal department creates unlevel load, find out why and apply a countermeasure or incentive that works for all. © 2010 Karen Martin & Associates 39

Prerequisites to Production Smoothing 1. 2. 3. 4. Connect the processes where possible (cells) Create pull Create flow (balance the work) Achieve predictability (level output produced daily for the cell or the line) 5. Reduce work type changeover time 6. Increase number of changeovers per day so can increase the number of each type of work produced per day © 2010 Karen Martin & Associates

Heijunka for the Office 42

Heijunka Wheel 44

Process Ownership & Value Stream Alignment  Value Stream Champion / Manager   Sole individual responsible for the performance of an entire value stream across multiple departments or divisions. Often carry P & L responsibility.  Process Owner  Sole individual responsible for the performance of a process across many functions, regardless of the org chart.  Ongoing monitoring  Ongoing improvement  Org chart management   Direct reporting lines for day-to-day operation Dotted lines to subject matter/policy expertise. © 2010 Karen Martin & Associates 46

Creating Lean Leaders & Culture The improvement professional’s primary role is to sell and teach.  Many leaders aren’t improvement savvy.  Help them understand the process, the resources required, etc. – answer Why? Why? Why?  Many individuals have been “burned” by previous improvement approaches and are fearful in today’s economy.  Help them see what’s in it for them.  Most people – from leadership to frontlines – aren’t proficient problem solvers.  Teach them to fish. © 2010 Karen Martin & Associates 47

Looking for Stuff: Time is Money Organization with 1,500 employees   Earn average of $22 per hour Work 250 days per year Each employee spends an average of 10 minutes per day looking or waiting for stuff  Individual impact  = 41.7 hours wasted time per year  = 0ver a week of frustrating, unfulfilling, nonproductive time  Organizational impact  = 62,550 hours of nonproductive time  30 FTEs worth of wasted resources  = $1.4 unnecessary direct expense per year © 2010 Karen Martin & Associates 48

Monetizing Results – Expense Reduction Possibilities  Payroll   Paid overtime Attrition (if flat or losing market share)  In-sourcing previously outsourced services  Supplies (one-time gain when implementing kanban)  Software licenses  Shipping expenses  Facility-related   Leases Utilities  Borrowing expenses (due to improved cash flow) © 2010 Karen Martin & Associates 50

Monetizing Results – Cost Avoidance Possibilities Freed capacity / hiring expenses Turnover reduction / hiring expenses Regulatory fines Not scrapping nonreturnable material/supplies Not ordering duplicate material/supplies Not having to borrow money (due to improved cash flow) © 2010 Karen Martin & Associates 51

Monetizing Results – Revenue Gains, Revenue Loss Avoidance, and Profit Gains Freed capacity   Ability to absorb additional work without additional labor or equipment New revenue streams Revenue gains   Shorter time to market Sales team fully functional more quickly Market share gains Retaining high risk (“jeopardy”) accounts © 2010 Karen Martin & Associates 52

For Further Questions 7770 Regents Road #635 San Diego, CA 92122 858.677.6799 ksm@ksmartin.com Free webinars and monthly newsletter: www.ksmartin.com/subscribe Connect with us: 54

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