Lean Thinking by Operational Excellence Consulting

2. © Operational Excellence Consulting. All rights reserved. 2 Learning Objectives 1. Understand the principles and key concepts of Lean 2. Acquire knowledge on the common Lean methods and tools and their applications to eliminate waste, create more value for customers and improve personal effectiveness 3. Identify ways to develop “Kaizen eyes” to look for improvement opportunities 4. Describe the various Lean roles Copyrights of all the pictures used in this presentation are held by their respective owners

3. © Operational Excellence Consulting. All rights reserved. 3 Outline 1. Introduction to Lean Thinking 2. Key Concepts of Lean Thinking 3. Overview of Common Lean Methods & Tools 4. Ways to develop “Kaizen Eyes” 5. Lean Roles 6. Sustaining a Lean Culture NOTE: This is a PARTIAL PREVIEW. To download the complete presentation, please visit: http://www.oeconsulting.com.sg

4. © Operational Excellence Consulting. All rights reserved. 4 Lean has been adopted in many different environments since its creation Toyota Automotive Industrial products High fashion Medical devices Consumer products Aerospace Shipbuilding Pharma Food production Pulp and paper Chemicals Airlines Railways Naval operations & maintenance Healthcare Insurance Banking Retail Store Upstream E&P High Tech Consulting Law Firms Hospitality ITO/BPO Services Process industries Manufacturing Time Complexity

5. © Operational Excellence Consulting. All rights reserved. 5 Impact of Lean Principles in Industry Source: Virginia Mason Medical Center Performance Metrics Results* Direct labor / Productivity Improved 45 – 75% Cost reduced 25 – 55% Throughput / Flow Increased 60 – 90% Quality (Defects/Scrap) Reduced 50 – 90% Inventory Reduced 60 – 90% Space Reduced 35 – 50% Lead Time Reduced 50 – 90% *Summarized results, subsequent to a five-year evaluation, from numerous companies. Companies ranged from 1 to >7 years in lean principles application/execution.

6. © Operational Excellence Consulting. All rights reserved. 6 What does Lean in a service environment look like? (1/2) Banks •Mergers and acquisitions •Loans application IT •Outsourced managed services Application Common Issues Typical Solutions •Differences in business practices •Loans approval process •Complicated tasks •Unbalanced capacity •Manpower utilization •Process integration and streamlining •Fast track processing for low-risk loans •Segmenting complexity •Pooling resources for economies of scale •Flexible manpower systems Telco • Procurement • Call centre operations •Cost-based and capex management •Customer service •Inventory management •Network sharing •Channels efficiency Source: Operational Excellence Consulting Research

7. © Operational Excellence Consulting. All rights reserved. 7 What is Lean? • Value streams or processes • Focused on improving process performance • Clear view of end state • Wide range of Lean techniques & tools are available • Learn-by-doing approach • Culture of continuous improvement • Lean is a management philosophy based on the Toyota Production System (TPS) • Eliminate everything that does not add value (waste) in the customer’s eyes Objective Focus and scope Approach and tools

8. © Operational Excellence Consulting. All rights reserved. 8 What Lean IS NOT • Laying off employees by the bus load • Only applies to manufacturing companies • A cost cutting program • Delivering less or working harder • Just a set of “tools” like 5S, kaizen events, etc. • Automation or implementing an IT system • Another “extracurricular activities”

10. © Operational Excellence Consulting. All rights reserved. 10 Traditional Culture vs. Lean Culture Traditional Culture Lean Culture  Function silos  Interdisciplinary teams  Managers direct  Managers teach/enable  Benchmark to justify not improving: “just as good”  Seek the ultimate performance, the absence of waste  Blame people  Root cause analysis  Rewards: individual  Rewards: group sharing  Supplier is enemy  Supplier is ally  Guard information  Share information  Volume lowers cost  Removing waste lowers cost  Internal focus  Customer/Patient focus  Expert driven  Process driven Source: A.P. Byrne, O.J. Fiume

11. © Operational Excellence Consulting. All rights reserved. 11 Lean Management Framework (a.k.a. Toyota Production System) Source: Adapted from Toyota Production System Stability Heijunka Standardized Work Kaizen Just-In-Time • Continuous flow • Takt time • Pull system • Flexible workforce Jidoka • Separate man & machine work • Abnormality Identification • Poka yoke Goals: highest quality, lowest cost, shortest lead times Involvement Stability Standardization Just-In-Time Jidoka Involvement 1 2 3 4 5 1 2 3 4 5 Focuses on Quantity and “Flow” Focuses on Quality and Prevention

12. © Operational Excellence Consulting. All rights reserved. 12 Methods to Increase Productivity How to Increase Productivity? Quantitative Approach More Staff More Machines Work Longer Qualitative Approach Work Harder Eliminate Waste & Simplify Focus of Lean Let’s work smarter!

13. © Operational Excellence Consulting. All rights reserved. “Waste is anything other than the minimum amount of equipment, materials, parts, space, and worker’s time which are absolutely essential to add value to the product.” Shoichiro Toyoda President, Toyota Definition of Waste

15. © Operational Excellence Consulting. All rights reserved. 15 Value Defined  Transform or shape material or information  Customer wants it and willing to pay for it  Done right the first time  No value created but required by current thinking  No value created but required by process limitations  No value created but required by current technology  No value created but required by government/ business regulations  Consume resources but creates no value for the customer  Could be stopped and it would be invisible to the customer Value-Added Activities Non-Value Add: Incidental Waste Non-Value Add: Pure Waste

16. © Operational Excellence Consulting. All rights reserved. 16 Cost Reduction Principle Cost Plus Principle COST 1 SALES PRICE 1 PROFIT 1 Present COST 2 PROFIT 2 Future SALES PRICE 2 Cost Reduction Principle COST 1 SALES PRICE 1 PROFIT 1 Present COST 2 PROFIT 2 Future SALES PRICE 2 Higher profit is achieved by increasing sales price Higher profit is achieved by reducing cost (waste) while maintaining sales price

17. © Operational Excellence Consulting. All rights reserved. 17 Eight Types of Waste Over-production Producing more than what the customer needs Inventory Building and storing extra services/products the customer has not ordered Transportation Moving product from one place to another Defect Reprocessing, or correcting work Over-processing Adding excess value when the customer does not require it Motion Extra physical/mental motion that doesn’t add value Intellect Not using employees full intellectual contribution Waiting Employees waiting for another person, process or equipment Waste

18. © Operational Excellence Consulting. All rights reserved. 18 Lean Thinking Philosophy Identify and eliminate all activities that are waste. Focus on optimal flow throughout the process. Focus on creating value for customers. “True North” Value Added Time = Lead Time Full of Waste, Variation, and Rigidity Current State Future State Eliminate Waste Identify Waste

19. © Operational Excellence Consulting. All rights reserved. 19 Activities that do not add value Workload that is not balanced Overloading creates burden for the team members or processes Source: Toyota Motor Company The 3 MU’s: Muda, Mura, Muri

23. © Operational Excellence Consulting. All rights reserved. 23 What is Visual Management? • Visual management is a technique where information is communicated by using visual signals instead of texts or other written instructions • Examples include signs, labels, photographs, trend charts and displays Note: Visual management IS NOT decoration

24. © Operational Excellence Consulting. All rights reserved. 24 Three Types of Visual Management • Label to make it perfectly clear where things belong and what the procedures are Visual Displays • Quantify the path to targets for success • Graphs and Pareto charts Visual Metrics • Create an mistake-proofed environment to promote easy adherence to standards Visual Controls

25. © Operational Excellence Consulting. All rights reserved. 25 Daily Management Meetings Agenda • Yesterday’s issues • Lessons learned • Manpower status • Update from top management • 5S & Kaizen activities • Today’s target & actions

26. © Operational Excellence Consulting. All rights reserved. 26 • Creates an end-to-end view of the system • Demonstrates interaction between material/work and information flow • Provides a common visual language for understanding a complex system Supplier/ Customer Management Control Customer Work & Information Flow Information flow Value stream mapping provides an overview of the end-to-end business process

27. © Operational Excellence Consulting. All rights reserved. 27 Standard Work Make it the only way: • No alternatives left Warning: • Warns for abnormalities Showing: • One-point-lesson • Visual information Reading: • Manuals • Procedures • instructions Fail-safe Visual control tools Visual aids Procedures, Instructions and Manuals The Compliance Pyramid

29. © Operational Excellence Consulting. All rights reserved. 29 Flexible Workforce (Multi-skilling) • The ability of the workforce to “flex” to other jobs as demand fluctuates within the system, and the efforts the organization undertakes to ensure this occurs • Improve staff skill set • Maximize organizational flexibility • Focused training and development plans • Allow the ability to flex to our customer’s demands

30. © Operational Excellence Consulting. All rights reserved. 30 The source of good quality lies in Prevention. . . . through:  PRODUCT DESIGN  PROCESSES  MATERIALS  PEOPLE . . . Not in Inspection or Correction Make It Right First Time, Every Time Quality At Source

31. © Operational Excellence Consulting. All rights reserved. 31 Poka Yoke (Mistake-proofing) • Mistake-proofing refers to techniques that make it impossible to make mistakes • Also known as Poka Yoke in Japanese • Mistake-proofing helps people and processes work right the first time

32. © Operational Excellence Consulting. All rights reserved. 32 Kaizen Event • Rapid, focused application of Lean to reduce waste to improve cost, quality, delivery, speed, flexibility and responsiveness to customer needs • 3-5 day dedicated event • Clear objective and scope • Continuous small improvements • Changes are implemented quickly • Everyone gets involved Source: "The Idea Generator” by Norman Bodek

33. © Operational Excellence Consulting. All rights reserved. 33 Example: Kaizen Summary Project type: 5S Area: Sales & Marketing Office Team Leader: John Smith Before After Reasons project chosen: • Difficult to move around a cluttered office • Difficult to find information and supplies Tools used on project: • Cleaning equipment and tools • 5S principles Results: • Unwanted materials were discarded • Less waste – e.g. transportation, motion, waiting, etc. • Improved staff morale Next steps: • Conduct monthly 5S audits • 5S for other common areas

34. © Operational Excellence Consulting. All rights reserved. 34 PDCA Five–step problem solving process Define the Problem Analyze the Root Causes Define Solutions Implement Solutions Check & Evaluate Results

35. © Operational Excellence Consulting. All rights reserved. 35 Example of 5 Whys Why? Because… 1 Why is Tom injured? …he had a fall 2 Why did he fall? …the floor was wet 3 Why was the floor wet? …there was a leaking valve 4 Why was the valve leaking? …there was a seal failure 5 Why did the seal fail? …it was not maintained 1 3 4 52 A continuum of causes

37. © Operational Excellence Consulting. All rights reserved. 37 A Simple Lean Implementation Roadmap Create Awareness Build Capability Operations Management & Improvement Lean Thinking Training Lean Leadership Training Build Lean Activity Board Kaizen #1: 5S Kaizen #2: Waste Elimination Value Stream Mapping for Key Processes Train-the- Trainer Training Information Sessions for Whole Organization Senior Management Awareness Kaizen #3: Standardization Month 1 Lean Methods & Tools Training Month 3Month 2 Daily Management Meeting Lean Update in Monthly Newsletter & Intranet

39. © Operational Excellence Consulting. All rights reserved. 39 About Operational Excellence Consulting • Operational Excellence Consulting is a management training and consulting firm that assists organizations in improving business performance and effectiveness. • The firm’s mission is to create business value for organizations through innovative operational excellence management training and consulting solutions. • OEC takes a unique “beyond the tools” approach to enable clients develop internal capabilities and cultural transformation to achieve sustainable world-class excellence and competitive advantage. For more information, please visit www.oeconsulting.com.sg

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