Webinar
March 31, 2015
Kaizen Event
Case Studies

© 2015 The Karen Martin Group, Inc. 2 t . o
f S o c i a l a n d H e Welcome to all from across the globe!

© 2015 The Karen Martin Group, Inc. 3 Kaizen Kai = Change Zen = Good
Continuous Improvement

Tie Kaizen Events to
Something Larger
(A3 Problem Solving or Value Stream Transformation)

Customer %C&A = 99% Dispatcher
Create W.O. Dispatch Tech PT = 7 mins. %C&A = 85% Supplier Tech Assess Problem PT = 75 mins. %C&A = 90% Billing Admin Review W.O., payroll, AP & invoice; post immediately PT = 25 mins. %C&A = 95% Billing Admin Compare invoice register to invoices and mail invoices PT = 5 mins. %C&A = 99% 1xdaily Collections Receive Cash; Post Payment 2 hrs. 0.117 hrs. 1.25 hrs. 1.25 hrs. 1.25 hrs. 1.25 hrs. 2 hrs. 2 hrs. 24 hrs. 0.417 hrs. 4 hrs. 0.0833 hrs. 480 hrs. Lead Time = 520 hrs. Process Time = 5.12 hrs. Tech Make Repair; Complete call on handheld PT = 120 mins. %C&A = 75% Verisae (Customer) Great Plains Tech Pickup Part at Parts Store PT = 75 mins. %C&A = 95% ` Excel Spreadsheet (Customer) Billing Admin Enter data into Verisae and Excel from Daily Report PT = 5 mins. %C&A = 99% 1xdaily Tech Special Order Part 10% 60% Tech Contact Tech Support As Needed Tech Get Part from Truck PT = 0 mins. 30% EDI Interf ace 120 mins. 75 mins. 75 mins. 2 hrs. 24 hrs. 4 hrs. 60 days Create Tech Support Center Create EDI Interface w/ Customers Centralize Dispatch Improve Tech Onboarding Standardize Truck Inventory Improve Tech Training; Create Sub-levels Install kanban on trucks Create Customer Billing Teams Create stnd work for invoicing Create invoice exception report Explore flat rate pricing Create Tech performance report Implement GPS Define preferred T & C's Separate labor & payroll Create EDI Interface w/ Verisae Establish parameters for time & parts by service type Lead Time to Invoice = 34.5 biz hrs Lead Time to Cash = 67 biz days Process Time = 5.1 biz hrs. ActivityRatio = 14.8% RFPY = 45.4% Project Kaizen Event Service Future State Value Stream Map

© 2015 The Karen Martin Group, Inc. 7 Improvements designed, tested, refined, and
implemented during a Kaizen Event

© 2015 The Karen Martin Group, Inc. 8 Nested PDSA Cycles: Macro to Micro Strategy Deployment
Value Stream Transformation Kaizen Events & Projects

© 2015 The Karen Martin Group, Inc. 9 3‐Day Kaizen: Typical Structure Day 1 (Plan)
Day 2 (Do, Study) Day 3 (Study, Adjust) Kick‐off Understand the current state Determine root cause(s) Design future state Interim briefing Design & test improvements Obtain buy‐in Interim briefing Finalize improvements Train process workers & stakeholders Present results CELEBRATE!

5‐Day Kaizen Event: Typical Structure Day 1 & 2 (Plan) Day 3 & 4 (Do, Study)
Day 5 (Study, Adjust) Kick‐off Analyze current state Perform root cause analysis Design future state Interim briefing Design & test improvements Obtain feedback Interim briefing Refine & finalize improvements Train process workers & stakeholders 10

Case Study
Tied to Value Stream Transformation
Problem: Uneven Customer Orders

Customer 3.0 hrs. 21.0 days
1.0 hrs. 5.0 days 3.6 hrs. 0.6 days 0.0 hrs. 0.5 days 15.0 hrs. 30.0 days 0.0 hrs. 7.0 days 8.0 hrs. 0.0 hrs. 5.0 days 0.1 hrs. 26.0 days 0.0 hrs. 0.2 days Total LT = 98.2 days Total PT = 30.7 hrs. ActivityRatio = 4% SAP Collect Order From Customer Sales LT = 15 mins. PT = 15 mins. %C&A: 99% 2 Collect Customer Orders Order Mgmt LT = 15 mins. PT = 15 mins. %C&A: 99% 2B Review & Release Credit Holds Sales LT = 4 hrs. PT = 10 mins. 3 Issue DO To Transporter Warehouse 10 LT = 4 hrs. PT = 1 mins. 4 Load & Prepare Invoice Warehouse 10 LT = 4 hrs. PT = 15 hrs. 5 Collect POD from Customer Transporter LT = 2 days 6 Enter POD Warehouse 10 LT = 7 days PT = 1 mins. %C&A: 99% 7 Deliver POD to Accounting Messenger LT = 1 days 8 Rev iew POD for Accuracy; Email Receipt to Sales Accounting LT = 5 days PT = 2 mins. 9 Produce Product Plant 1 LT = 285 mins. PT = 215 mins. %C&A: 99% 3B Pick & Stage Warehouse 10 PT = 15 mins. %C&A: 95% 4B Create Production Plan Production Planning LT = 5 days PT = 1 hrs. %C&A: 99% 2C 2% Produce Product Plant 2 LT = 285 mins. PT = 215 mins. %C&A: 99% 3C Accept Customer e-Payment Bank LT = 30 days PT = 0 hrs. %C&A: 99% 6B Enter Payment, Clear Billing Accounting LT = 2 hrs. PT = 1 mins. 11 Invoice 80%20% Hold S&OP Meeting LT = 1 mo. PT = 3 hrs. 1 40 Days1.5 Days Order Receipt to Ship MonthlyOrders Wk1 = 25% Wk2 = 25% Wk3 = 25% Wk4 = 25% Prod. Plan Prod. Plan Pick List Inventory Report Deliver Receipt & Collect from Customer Sales Batch = 1x monthly LT = 26 days PT = 5 mins. 10 POD 50% 50% Pick & Stage KL PT = 15 mins. %C&A: 95% 4C Reduce CIP time from 4 to 3 hrs (actual: 2.5 hrs) Explore transitioning OM to CS Level customer demand to 25% orders each week Resolve date discrepancyon invoice (so 30 days begins at POD date) Reduce soaking time from 90 to 30 mins Obtain VOC re shipment, OE, payments Create web- based ordering for distributors Direct ship from W H 10 Reduce FG inventoryfrom 5 to 3 days Analyze COGS & SG&A expenses to discover opportunities for add'l reductions Increase OEE on VMC from 62% to 70% Increase volume of ETF customer payments from 2% to 50% Reduce formulation C/O from 4 hrs to 2.5 hrs Reduce # credit holds from 10% to 2% of orders Reduce label/pkg C/O from 20 to 10 mins BLOCK COLOR LEGEND Logistics / W arehouse Sales Order Management Production Accounting BURST COLOR LEGEND Pilot launched In progress Complete; goal met Not started yet Complete; goal exceeded Implement pull-based inventory& production scheduling 98% Create mobile sales tool Get tablet image Incent customers to use E-pay Increase OEE on VMD from 60% to 70% Future State Value Stream Map

Day 1 • Team introductions • Kaizen Event Overview
• Charter review • Understand the current state • Data analysis • Voice of the customer • Root cause analysis • Interim briefing

Weekly Shipments for Two Key Customers

0 10000 20000 30000 40000
50000 60000 70000 80000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 Ordering & Shipping Patterns for Customer A Ordered Shipped Rebate Rebate Rebate

0 10000 20000 30000 40000
50000 60000 70000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2014 Ordering & Shipping Patterns for Customer B Ordered Shipped Rebate Rebate Rebate

Plan = Discover 80% of the reasons for uneven customer orders are internally driven 10% Consumer
Promotions 70% Customer Incentives 20% Sales Incentives

We’ve met
the enemy
and it is us!

Day 2 • Design new sales incentive program •
Design new customer incentive program • Vet with senior leadership

New Customer Incentives to Reduce Quarter‐End Order Spikes 20% Operations 80% Target*
50% Operations 10% Target* Current State Future State Monthly invoice promotions No more monthly promotions Rebates 3x per year No more rebates NEW PROMOTION: 2% possible discount each month • 1% from level orders in (25% ±10% = 22.5‐27.5%) • 1% from moving product

Sales Commission Customer OOS Returned Goods Must‐have SKUs Effective Outlet
Future State 50% Operations 10% Sales Target* 40% Even Flow Week 1: 25% Week 2: 25% Week 3: 25% Week 4: 25% 20% Operations 80% Sales Target* Current State Customer OOS Returned Goods Must‐have SKUs Effective Outlet Planned Pilot May 1 – June 30 Region 3 $15,000 if reach 100% of target $18,000 if reach 110% of target Added $5,000 to base salary $10,000 if reach 100% target $15,000 if reach 110% target Week 1: 10% Week 2: 20% Week 3: 30% Week 4: 40%

Day 3 • Develop “talking points” document for conversations with customers •
Develop new incentive plan detail document for sales people • Develop pilot monitoring plan • Roll out to sales people • Train re: how to talk with customers • Final presentation and celebration!

Next Steps • Monitor pilot – status calls every other week with full Kaizen Event team
• Begin planning two Kaizen Events for June • Implementing pull‐based production • Continue solving value stream problems using A3 management (as defined by transformation plan)

© 2015 The Karen Martin Group, Inc. 25 Your Questions • How did the events sustain? How did they
communicate the new process to other team members? • When planning for a Kaizen (Event), what are the criteria for selecting a swimlane or VSM as the best process clarification/definition tool? • How do we decide that it is necessary to do a Kaizen event? Which indicators do we have to know/have to make the decision?

Document / Analyze the Current State • Go to Gemba / observation • Spaghetti diagrams
• Work breakdown structure (manufacturing) or Metrics‐Based Process Mapping (office/service) • Root Cause Analysis • Surveys / audits • Videotape • “Product” samples • Floor plans / blueprints • Review of existing procedures, job aids, etc. • Interviews 26

27
Metrics‐Based Process Mapping:
Eliminate Waste and Define Standard Work
www.ksmartin.com/MBPM

© 2015 The Karen Martin Group, Inc. 28 Karen Martin, President 858.677.6799 @karenmartinopex
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