Lean 101

Lean Webinar Series: Lean 101 for Office & Service November 8, 2010 Company LOGO

Webinar Content Key Lean principles Eight office/service wastes Key metrics for identifying & eliminating waste Elements for a typical improvement cycle Basic Lean tools needed to stabilize processes Stages of a Lean transformation © 2010 Karen Martin & Associates 2

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 3

Processes: The Basics Process – The steps you take to accomplish anything. Four types of non-manufacturing processes:     Service (to a live being or equipment) Transactional Analytical Creative © 2010 Karen Martin & Associates 4

The History of Lean 1950’s 1910 1929 1996 1995 2005 2002 Lean Leadership & Culture 2009 Service Sector 6

Toyota’s Two Key Tenets  Kaizen - Continuous Improvement.   Relentless waste elimination. Seek perfection. Plan Act Do Check  Respect for people.  Poorly designed processes are disrespectful.   Reducing waste reduces stress. Frontlines are authorized to solve problems. © 2010 Karen Martin & Associates 7

Building a Lean Enterprise

Key Principles 1. 2. 3. 4. Only do what the customer values. Design work so it flows through the system. Make problems visible. Solve problems using disciplined methodology. 5. The people doing the work know best. 6. Seek perfection; continuously improve. © 2010 Karen Martin & Associates 10

Key Principles 1. Only do what the customer values. 2. Eliminate all obstacles that prevent work from flowing through the system. 3. Make problems visible. 4. Solve problems using disciplined methodology. 5. The people doing the work know best. 6. Seek perfection; continuously improve. © 2010 Karen Martin & Associates 11

Customer-Defined Value Value-Adding (VA) - any operation or activity your external customers value and are (or would be) willing to pay for. Non-Value-Adding (NVA) - any operation or activity that consumes time and/or resources but does not add value to the product (good or service) the customer receives.   Necessary – support processes, regulatory requirements, etc. Unnecessary – everything else - WASTE © 2010 Karen Martin & Associates 12

Work Effort as Defined by the External Customer Unnecessary Non-value adding Necessary non-valueadding Value-adding

Examples of Office/Service Waste Overproduction     PO’s for waiting to be ordered Contracts waiting to be signed Radiology reports waiting to be transcribed The symptom - WIP Inventory   Office supplies Unnecessary hard copies being stored © 2010 Karen Martin & Associates Waiting     For meetings to begin For approvals For shared equipment to become available For the system to respond Over-processing    Excessive reporting Excessive reviews & approvals Redundant data entry 15

Examples of Office/Service Waste (continued)  Errors    Sending hard copies that could Any input that’s not “usuable be electronic as is”  Sending docs overnight that Input that has to be can go two-day corrected, missing information added, or  Underutilization of people clarified by a downstream (Knowledge, Skills, Aptitude, customer Creativity)  Motion    Transportation Walking to shared equipment Walking hard copies to downstream customers © 2010 Karen Martin & Associates    Narrow scopes of responsibility Not properly trained Not used for designing improvements 16

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 equipment or material  Individual impact  = 41.7 hours wasted time per year  = Over a week of frustrating, unfulfilling, nonproductive time  Organizational impact  = 62,550 hours of nonproductive time  30 FTEs worth of valuable resources doing non-value-adding work  = $1.4 unnecessary direct expense per year (unloaded) © 2010 Karen Martin & Associates 17

Excess Office Supplies 6 mos. supply 1 year supply … Yet they received daily deliveries! $18,732 of inventory; $6,322 of it is obsolete cartridges 18

Shared Equipment Causes Excess Motion Distance traveled to printer   Dept A = 92 ft. per trip Dept B = 696 ft. per trip 120 occurrences / day = 4656 miles/year Walk pace = 1 mile per hour = 582 days/year of unproductive, non-value-adding time = 2.2 FTEs © 2010 Karen Martin & Associates 19

Value Stream Defined Value Stream: All of the activities, required to fulfill a customer request from order to delivery (and beyond to cash received). Value Stream Process Process Process Custom er Customer Request © 2010 Karen Martin & Associates Customer Receipt 22

Current State Value Stream Map Outpatient Imaging Services Pre-register Patient Customer Demand: 15 patients per Day (Takt Time 1920 seconds) 8 hours per day Schedule Appointment Referring Physician Hospital 4 3 5 Lead Time = 24 days 2 6 Lead Time = 990 mins. Cycle Time = 30 mins. Lead Time = 990 mins. % C&A = 100 % Demand = 15 per day 1 Lead Time = 12 mins. Cycle Time = 11 mins. Lead Time = 12 mins. % C&A = 98 % % C&A = 65 % CT=Cycle Time LT=Lead Time %C&A=% Complete & Accurate Symposium E Pay Excel ADS Internet Meditech Fax Order Solutions Waiting Room Management System PACS Auto Fax 50% Us Mail 25% MD Mailbox 25% Rework Loop via Fax 25% of the time Check-in Patient (Admitting) Prep Patient (Tech) Check-in Patient (Imaging) Complete Exam (Tech) Transmit Images (Tech) Read/Dictate Exam (Radiologist) Transcribe Report (MDI) Review Draft/Sign (Radiologist) Print Reports (Imaging) Send Reports (Imaging) 5 mins. 5 5 5 mins. Cycle Time = 2 mins. % C&A = 90 % 3 6 45 mins. Cycle Time = 1 mins. % C&A = 98 % 5 minutes 2 7 45 minutes 2 minutes 11520 minutes 1 minutes 30 mins. Cycle Time = 10 mins. % C&A = 100 % 2 8 30 minutes 10 minutes 5 mins. Cycle Time = 15 mins. % C&A = 90 % 2 5 minutes 15 minutes 9 248 mins. Cycle Time = 3 mins. % C&A = 100 % 2 10 248 minutes 3 minutes 365 mins. Cycle Time = 15 mins. % C&A = 95 % 6 11 365 minutes 15 minutes 960 mins. Cycle Time = 5 mins. % C&A = 75 % 2 12 960 minutes 5 minutes 110 mins. Cycle Time = 1 mins. % C&A = 95 % 2 13 110 minutes 1 minutes 120 mins. Cycle Time = 1 mins. % C&A = 99 % 6 14 Cycle Time = 3 mins. % C&A = 90 % 120 minutes 1 minutes L/T = 13464 minutes 3 minutes VA/T = 11576 minutes Rolled First Pass yield = 29%

Equipment Servicing Value Stream Request to Cash Source Refrigeration & HVAC, Inc. Current State Value Stream Map Serv ice Deliv ery Created February 11, 2009 CONFIDENTIAL Customer Great Plains Verisae (Customer) Special Order Part Excel Spreadsheet (Customer) Supplier Tech Upload time card Close call in Verisae Process Time Cards Tech Account Manager (West) Payroll Admin PT = 0 mins. %C&A = 70% Batch: 1x/day PT = 1 mins. %C&A = 90% Batch: 1x/day Complete Call in GP Pick up Part at Parts Store Review Service Call Data ?% Tech 40% Receive customer call Select & Dispatch Tech Call Center Dispatcher & Service Manager 5 m. 120 m. PT = 2 mins. %C&A = 60% 0.0833 hours PT = 5 mins. %C&A = 60% Tech PT = 90 mins. %C&A = 90% PT = 0 mins. 640 m. 240 m. PT = 5 mins. %C&A = 80% PT = 120 mins. %C&A = 40% 2 hours 75 minutes Dispatcher Tech 120 m. 1.25 hours 90 minutes Make Repair; Call to raise the NTE Get Part from Truck 75 m. 1.5 hours 5 minutes ?% Tech 90 m. 2 hours 2 minutes Assess Problem PT = 75 mins. %C&A = 95% 5 minutes PT = 15 mins. %C&A = 85% Batch: 1x/day Billing Admin 6 days PT = 25 mins. %C&A = 75% Posting Admin 240 mins. PT = 3 mins. %C&A = 98% Batch: 1x/day 640 m. Account Manager 3 minutes Enter Invoices into Verisae & Excel; Mail Invoices Billing Admin 120 m. PT = 10 mins. %C&A = 85% Batch: 3-5x per wk 10.7 hours 4 hours 25 minutes Review Invoices; Close in Verisae (Pac) Review & Post Invoices Review Open Ticket Report 48 hours 10 minutes A/P Admin PT = 10 mins. %C&A = 90% Batch: 1x/day PT = 10 mins. %C&A = 50% Batch: 2x/day 10.7 hours 4 hours 120 minutes Service Manager Process A/P Receive Cash; Post Payment Collections 60 days PT = 4 mins. %C&A = 95% Batch: 1x/week 480 hours 2 hours 10 minutes 4 minutes Lead Time = 572 hours Process Time = 349 minutes Acronym Key %C&A %Complete and Accurate AR Activity Ratio FTE Full Time Equivalent LT Lead Time PT Process Time RFPY Rolled First Pass Yield Lead Time to invoice = 86.2 hrs Process Time =5.9 hrs. NOTE: Business hours Activity Ratio = 6.8% RFPY = 1.1% Lead time to cash = ? days

Key Metrics: Time Process time (PT)    The time it takes to actually perform the work, if one is able to work on it uninterrupted Includes task-specific doing, talking, and thinking aka “touch time,” work time, cycle time Lead time (LT)    The elapsed time from the time work is made available until it’s completed and passed on to the next person or department in the chain aka throughput time, turnaround time, elapsed time Includes Process Time, not merely waiting time. © 2010 Karen Martin & Associates 26

Summary Metrics: Time Percent Activity (aka Activity Ratio)      The percentage of time anything is being done to the work passing through the system (whether value-adding or non-value-adding) % Activity = (∑PT ÷ ∑LT) × 100 100 – %Act = % Time Work is Idle Common current state finding = 1-10% Could also calculate %VA to determine how much activity is value-adding (typically lower than % Activity). © 2010 Karen Martin & Associates 29

Key Metrics: Quality %Complete and Accurate (%C&A)   The percentage of incoming work (input) that’s deemed “usable as is” by the recipient (downstream customer). % of incoming work where the recipient can perform task without having to “CAC”:  Correct information or material that was supplied  Add information that should have been supplied  Clarify information that should have or could have been clearer  Measured by the immediate downstream customer and all subsequent downstream customers. © 2010 Karen Martin & Associates 30

Summary Metrics: Quality Rolled First Pass Yield (RFPY)     The percent of value stream output that passes through the process “clean,” with no “hiccups,” no rework required. RFPY = %C&A x %C&A x %C&A… Common finding = 0-15% Multiply ALL %C&A’s, even if parallel processes © 2010 Karen Martin & Associates 31

Outpatient Imaging Value Stream Current State Findings Metric Total Lead Time Total Process Time Activity Ratio (PT/LT) Rolled First Pass Yield (Multiply %C&A’s) Other** Current State Future State* % Improvement 32.5 hrs 56 mins 2.9% 29% Other** Other** * Projected until validated ** Other = Metrics for individual blocks, financials, survey or audit results, turnover, market share, system downtime, inventory turns, hold times, work volume, etc. 32

Future State Value Stream Map Outpatient Imaging Services Standard Work Work Balance Customer Demand: 15 patients perDay (Takt Time1920 seconds) 8 hours per day Co-locate Schedule appt Pre-register Referring Physician Hospital 3 Lead Time = 15 days 2 6 Demand = 15 per day 1 Lead Time = 45 mins. Cycle Time = 11 mins. Lead Time = 45 mins. % C&A = 98 % % C&A = 85 % Risk Reduction (Joint Commision) Symposium E Pay Excel Internet Waiting Room Management System Work Balancing Standard Work 3 35 mins. 4 Cycle Time = 1 mins. % C&A = 98 % 0.0833 hrs. 2 Complete Exam (Tech) 5 20 mins. Cycle Time = 10 mins. % C&A = 100 % 0.583 hrs. 1 mins. 2 Transmit Images (Tech) 6 5 mins. Cycle Time = 10 mins. % C&A = 90 % 0.333 hrs. 10 mins. Visual Workplace Set-up Reduction Prep Patient (Tech) Check-in Patient (Imaging) Fax Order Solutions PACS Auto Fax 80% Us Mail 15% MD Mailbox 5% 5S Value Stream Alignment Pull System (Supplies Kanban) Remove Check in and Reduce System Access 5 mins. Meditech CT=Cycle Time LT=Lead Time %C&A=% Complete & Accurate 2 7 120 mins. 2 Review Draft/Sign (Radiologist) 420 mins. Cycle Time = 15 mins. % C&A = 95 % 2 hrs. 2 mins. 8 Batch Reductions Voice Recognition Read/Dictate Exam (Radiologist) Cycle Time = 2 mins. % C&A = 100 % 0.0833 hrs. 10 mins. Continuous Flow 2 Print Reports (Imaging) 9 2 mins. Cycle Time = 1 mins. % C&A = 95 % 7 hrs. 15 mins. Rework Loop via Fax 10% of the time 2 30 mins. Cycle Time = 1 mins. % C&A = 99 % 0.0333 hrs. 1 mins. 10 Send Reports (Imaging) 6 0.5 hrs. 1 mins. 11 Cycle Time = 3 mins. % C&A = 90 % LT = 11.3 hrs. 3 mins. CT = 43 mins. CT/LT Ratio = 6.32% Rolled First Pass VSM Champion: Paul Scanneryield = 40% Created: July 18, 2007

Outpatient Imaging Value Stream Improvement Results Current State Future State % Improvement 32.5 hrs 56 mins 11.3 hrs 43 mins 65% 23% Activity Ratio Rolled First Pass Yield 2.9% 29% 6.3% 40% 117% 38% Annual turnover 100% 25% 75% 14 11 21% Metric Total Lead Time Total Process Time # handoffs Note: Freed capacity (reduced PT) allowed the facility to collect an add’l $500,000 in revenue without adding equipment or staff. 34

What is a Metrics-Based Process Map? A visual process analysis tool, which integrates:   Functional orientation of traditional swim lane process maps Key Lean time and quality metrics Tool which highlights the disconnects / wastes / delays in a process.  Keeps the improvement focus properly directed Documents standardized work for more effective workforce training and process monitoring. © 2010 Karen Martin & Associates 36

Metrics-Based Process Mapping

Metrics-Based Process Mapping Resources Chapter 12 Click here to order from Amazon Click here to order from Amazon

Root Cause Analysis: 4 Key Tools Cause-and-Effect Diagram 5 Why’s People Material / Info Lack of experience Budgets Submitted Late Forecast in other system Manual vs. PC System avail. Quality issue requiring rework Staffing/absenteeism Order entry error Changing customer requirements w/ no adjustment to expected delivery Equipment failure Tally ||||| || ||||| ||| ||||| ||||| ||||| ||||| ||| | No standard work Email vs. FedEx Check Sheets Quantify Occurrences Material shortage Changing schedule Input rec’d late No sense of import Machine Reason No stnd spread sheet Time availability Why? Why? Why? Why? Why? Method No milestones $ vs. units Measurement Weather delays Dispersed sales force Environment

Future State Design Considerations  Improve quality  Eliminate steps / handoffs  Combine steps  Create parallel paths  Alter task sequencing and/or timing  Implement pull  Reduce / eliminate batches  Create an organized, visual workplace  Reduce interruptions, setup and changeover  Eliminate motion & transportation  Standardize & errorproof work  Eliminate unnecessary approvals / authorizations  Stop performing nonvalue adding (NVA) tasks  Co-locate functions based on flow; create cells (teams of crossfunctional staff)  Balance work to meet takt time requirements 41

Building a Lean Enterprise Process Stabilization Tools

Building a Lean Enterprise FlowEnhancing Tools

PACE Prioritization Matrix Easy 4 5 13 23 8 22 17 3 10 21 1 16 15 20 19 14 6 7 11 2 18 12 Difficult Ease of Implementation 9 High Anticipated Benefit Low

Create an Action Plan: Who, What, When, Where, and How? Future State Implementation Plan Value Stream Outpatient Imaging Implementation Plan Review Dates Executive Sponsor Allen Ward 11/1/2007 Value Stream Champion Sally McKinsey 11/21/2007 Value Stream Mapping Facilitator Dave Parks 12/13/2007 Date Created 10/18/2007 Block # 2 Goal / Objective Improve quality of referral Improvement Activity Type KE Implement standard work for referral process Owner Sean O'Ryan PROJ 1/10/2008 Implementation Schedule (weeks) 2 3 4 5 6 7 8 9 10 11 12 Dianne Prichard 3, 4 Reduce lead time beween schedulingand Cross-train and colocate work teams preregistration steps 5, 6 Eliminate the need for two patient checkins Collect copays in Imaging KE Michael O'Shea 6 Eliminate bottleneck in waiting area Balance work / level demand KE Dianne Prichard 9 Eliminate lead time associated with transcription step Implement voice recognition technology PROJ Sam Parks 10 Eliminate batched reading Reduce setup required KE Sam Parks 7 Reduce inventory costs, regulatory risk and storage needs 5S CT supplies area; implement kanban KE Michael O'Shea 12 Reduce delay in report delivery Implement additional fax ports PROJ Martha Allen 12 Reduce delay in report delivery Increase percentage of physicians receiving electronic delivery (rather than hard copy) KE 1 Martha Allen Approvals Executive Sponsor Value Stream Champion Value Stream Mapping Facilitator Signature: Signature: Signature: Date: Date: Date: Type: KE = Kaizen Event; PROJ = Project; JDI = Just do it Date Complete

Kaizen Events & Projects • Document & analyze the current state • Design future state • Brainstorm & prioritize solutions • Design & develop improvements Plan Act • Refine & finalize improvements • Implement improvements • Train workforce Macro PDCA Plan Check • Test improvements Do Act Do Check 46

The Improvement Process Plan • Adjust process as needed • Prepare for next round of improvement Act • Measure results • Design improved approach if further improvement is needed © 2010 Karen Martin & Associates • Gain a deep understanding about the current state • Create hypothesis • At least 50% of the total improvement cycle Do • Brainstorm solutions • Create miniexperiments to test theories • Select & finalize countermeasures • IMPLEMENT Check 47

Where do you begin? Issue A complex problem linked to annual business goals is identified. Approach • A3 • May need do use VSM to understand the current state. Better performance is needed across a • Value Stream Mapping to create the value stream. improvement strategy. • Kaizen Events, projects, and just-doits to implement improvements. • Metrics-based process mapping may be needed to identify waste and document new standard work. Small, localized problems within a department. © 2010 Karen Martin & Associates • Just-do-its or mini-projects • Metrics-Based Process Mapping may be needed to identify waste and document new standard work. 48

Building a C.I. Culture “Life is Good” Stage Years 5 & Beyond Company-wide engagement – everywhere, all the time Support needed only for audits, bandwidth gaps, continued learning • Daily kaizen is the norm • “Action now” dominates • Most processes are stabilized with minimal waste and output variation “Settling In” Stage Years 3 & 4 More staff engagement – reduced need for formal Kaizen Events Light support from seasoned improvement professionals • Demonstrating learned competencies • Process owners manage performance • Becoming more proactive “Disruption” Stage Years 1 & 2 Small percentage of staff engaged – project-based Heavy support from seasoned improvement professionals • Sensei-dominated • Much mentoring & learning • Heavy use of Kaizen Events • Many issues to be resolved 49

Capability Development Needs Frontlines   Problem-solving skills - PDCA & root cause analysis (RCA) Basic lean principles & tools Middle management    Problem-solving skills & tools (PDCA, RCA & A3) More advanced lean philosophy, principles & tools Process monitoring and sustainability © 2010 Karen Martin & Associates 50

Capability Development Needs (continued)  Senior leadership         Problem-solving skills (PDCA, RCA, A3 & Hoshin Kanri) Highly advanced lean philosophy, principles & tools Setting organization-wide clear improvement strategies Delegating tactical details to the people who do the work Establishing an improvement culture Lean accounting, lean product development, etc. The psychology of change The effort involved in making improvement  Improvement professionals     Full complement of improvement skills & Lean tools The psychology of change Converting results into financial terms Selling results; building improvement momentum © 2010 Karen Martin & Associates 51

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: 52

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