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


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.

Karen Martin,
Principal
Karen Martin &
Associates

4

Webinar Participants’ Experience
60
49%

50
39%

40

30
20
9%

10
3%

0
True Beginner


Basic
Understanding

Skilled

Highly Skilled
5

Value Stream Mapping Proficiency
60
48%

50
40

35%

30
20
10

12%
5%

0
Never created one

Just learning

Skilled

Highly skilled
6

Most Advanced Lean Tool(s)
None
Visual management
A3
Value stream mapping
5S
Kaizen events
Kanban


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

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


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.


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

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

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


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


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


34

Task-level FTE Requirements

Process Time
# FTEs Required =

20 mins
# FTEs =

10 mins

Takt Time
2 FTEs required to
=
meet customer demand

35


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


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”


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.

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


Lean Management


45

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.


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.


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


48

Translating Office/Service
Improvements into Financial Terms
(aka “Monetizing Results”)


49

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)


50

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)


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


52

Revenue Loss Possibilities
Reducing PT in T&M Environments


Overcome by market share gains & new revenue
streams


53

For Further Questions

7770 Regents Road #635
San Diego, CA 92122
858.677.6799
ksm@ksmartin.com
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