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The Myriad Benefits of Value Stream Mapping

Hoping that it will go away is like hoping you won’t have to pay taxes. The pressures associated with increasing cost of inputs, customer expectations and competitive pressures reducing the market price, will be there with every sunrise.

Japanese manufacturers have been systemically synchronising the value stream processes for decades to target cost reductions, improve quality and reduce lead times to customers.

The team at Shinka Management has had a long and close relationship with the best of Japanese manufacturing. Our strong relationships enables us to see and work with high calibre organisations that use forms of value stream mapping to gain a complete understanding of their operations. It is evident that they use this tool to focus discipline in targeting and extracting costs whilst also improving quality and service.

In helping organisations to implement lean manufacturing principles across their business, we see previous attempts that have been unsuccessful. Often, we see companies that have tried to bite off more than they can chew or start somewhere that just doesn’t make sense for them. This is sometimes at the guidance of others that suggest the first place to start is the development of a complete value stream map.

Our advice is to be persistent and continually try again. Learning from your mistakes, that what it’s all about. Value stream mapping will ultimately provide the one source of truth your team will need to systemically improve.

All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect the cash. And we are reducing the time line by reducing the non-value adding wastes.

Taiichi Ohno

An industrial engineer, Taiichi Ohno is considered the father of the Toyota Production System, which ultimately became the basis for lean manufacturing. He also created the 7 wastes principle.

Value Stream Map

Starting with a simple map will help everyone involved understand

Why use Value Stream Mapping?

So why go to all the effort to identify and create a value steam map of your processes. Shouldn’t we just get on with applying the principles of lean manufacturing? Well the basic principle is that if your organisation just consists of you, you’re already reasonably lean. However, as soon as the business grows in the number of employees, you have two problems. The first is that waste flows into your business. Secondly, you need a mechanism to communicate and work with others to reduce that waste. If you have been part of a small growing organisation, you would have seen and be frustrated by these two points.

Below are the primary benefits of value stream mapping.

The Value Stream Map as a Strategic Management Tool

Value stream mapping activities can get everyone onto the same page from senior management, though middle management to the operations, administration, sales and logistics teams. The process places focus and priority on improving the core process that generates revenue. Value stream mapping can even help remove political agendas – now that’s a great outcome by itself.

Enhancing Sales and Operation Planning through Value Stream Mapping

Value stream mapping helps identify, manage and eliminate bottlenecks to improve demand management and customer service. A fully developed sales and operation planning process involves monthly capacity reviews and the development of mitigation strategies. It is easy to see how a well-defined value stream map will help sales and operations maximise customer service, reduce inventory and create that level load so important in the development of a just-in-time (JIT) operation. Takt time will be easily calculated from confirmation of demand, and then used to create a balanced workforce plan for the period.

The Value Stream Map as a Dash Board for the Operations of the Business

The standards for developing a value stream map help you identify, communicate and define solutions to eliminate waste. To improve, each process should have a number of key performance indicators (KPIs), demonstrating that the process is in control and improvements are being implemented to achieve targets. Incorporate these and suddenly you have an operations dashboard.

Labour Planning and Workforce Development Planning through Value Stream Mapping

Using the principles of value stream mapping in the development of step changes will improve planning and impact favourably on project budget control, and will assist in realising the benefits that have been more effectively quantified. In addition, the step change will demonstrate the new relationship between man, material, machine and method. A gap analysis will then be able to be more effectively conducted, with plans to close skills gaps executed in a timely manner.

Value Stream Mapping for Resource Prioritisation

The cost and prioritisation of support functions is a challenge for most businesses. In manufacturing, the maintenance activity is typically a constant form of debate. A maintenance regime for every piece of the value stream to ensure its success is what total productive maintenance (TPM) is all about. Using the value stream in a logical manner could cut the debate waste. Also, the seemingly uncontrolled activities and costs associated with IT management seem to be a common problem in many organisations today. It would be hard to argue alternative agendas over initiatives and resources that are logically prioritised and directed towards streamlining, improving and supporting the key processes.

So, these are five reasons to start using value stream mapping as a mechanism to focus resources in the adoption of lean manufacturing principles. There are a number of ways to start recording your value stream map. Good old pen and paper is a great start. We recommend transitioning to Microsoft Excel at some stage, especially when you introduce KPI’s. Finally, there are several specialised software tools available that can make the mapping process more efficient.

Kanban Example

Mapping helps integrate information systems with the physical process

Where to Start with Value Stream Mapping

The first place to start is the use of standard work and 5S. Just through using basic flowcharts and organising your work area you will start visualising problems, synchronising work and getting into good habits.

Look at the principle goals of JIT and really understand and define how these principles will be applied to your business. Don’t say JIT isn’t for our business. The principles can be adopted for any business.

Once this is defined, it’s time to start integrating all those workflows and overlay value stream mapping principles and tools. Here is the key. It will require some team effort. But don’t worry, the process has been around for a while and standards have been set. No need to reinvent the wheel.

How to Prepare a Value Stream Map

  1. List all of the steps in a process from start to finish. All the steps, including simple things like using a forklift to move a pallet from one spot to another. It’s important to capture all the complete waste that should be targeted for reduction if not elimination.
  2. Select an image for each step from the standard that represents the type of activity being demonstrated. Use the template as a reminder of all the types of steps to look for and include in the value stream map.
  3. Get your team to work out the required time to process a batch through each process. If your batch is only one piece, fantastic. Now add that information to the value stream map and when you add all the times together to process the batches through your value stream, you will know the total throughput time. It is important to remember there is a difference between throughput time, cycle time and takt time. Throughput time could be the same as lead time, depending on how you manage customer demand.
  4. Now it is time to identify the wastes in and between every step. For those new to lean manufacturing, the wastes refer to the 7 types of waste; over-production, transport, inventory, motion, waiting, over-processing and defects. Any activity that is not directly related to adding value in the eyes of the customer is considered waste.
  5. This next step is probably the most important and why you take the time and effort to create a value stream map. Once you have identified all or most of the wastes, you and your team will need to start somewhere. The goal is to select a small number of processes to focus improvement on. By bringing the team together, you will be able to use the value stream map to gain consensus, keep focused, allocate resources and priorities
  6. Suggest improvement initiatives. At first keep these simple. Improvements can be made through the correct adoption of 5S and further creation of standard work. Whilst the team are making these improvements, the team responsible for the actual design of the process can be brainstorming in the background solutions to implement concepts such as one-piece flow, cellular manufacturing, line balancing, kanban, quick change over and error proofing (poka-yoke).
  7. Once the key target areas have been agreed, it’s time to add some relevant KPIs to enable your value stream map to become a dashboard. Things to consider about the KPIs include that they need to be relevant to the specific process and demonstrate control and improvement in safety, quality, cost and lead time reductions. Don’t overdo it, just include KPIs that are important and will help get to the root cause when looking to eliminate waste.
  8. Now it is time to put together a plan and make it visible to all. Ensure that your team understands the continuous improvement process that they will be a part of. Be disciplined in the regular reviews and question/challenge distractions that are taking you away from developing the core process that generates revenue for your business.

So, start small. Create your value stream map for your core process. Whether that be the production of physical goods or service tasks. Map it and start using it to target improvements in safety, quality, cost, lead time and employee skill/engagement. Practice, practice, don’t give up. Get it right. Get everyone to refer to it.

Then make it grow, bring in all the support processes. Get your entire system aligned to maximise those key objectives. Consider how you will perform in the market when you are succeeding and setting the benchmark in quality, cost and delivery.

Don’t stop. Keep it growing. Incorporate the processes between your suppliers and customers. Make your organisation so predictable and easy to deal with that your customer won’t want to look elsewhere to save a couple of percent and your suppliers will want to work with you to maximise value.

Benefits of Value Stream Mapping

By focusing your team and efforts specifically on improving your value stream you will be surprised at what will result.

  • Targeted and systematic waste reduction that in most circumstances will deliver significant cost reductions through low cost or no cost improvements. A lot of the continuous improvement (kaizen) focused on eliminating the 7 wastes, typically require rethinking current practices and not significant capital investment.
  • The disciple that will be gained in the control of your value stream will have significant qualitative benefits for your customer. As you reduce your lead-times and become reliable, your service reputation will grow. Dealing with the challenges of growth is so much more enjoyable.
  • It will become obvious which organisations are creating difficulty in your ability to improve and maintain consistency of your value stream. Show them what you mean. Show them how you know. Show them what the benefits are to using value stream mapping as a tool to focus efforts on continuous improvement using lean principles. Show them what need to do. Ask them if they need a little guidance. This is how strong supply chain partnerships develop.
  • Work with others to maximise efficient larger/longer value streams. This concept of working together is evident across Japanese industry. Value stream mapping is used as a tool to facilitate JIT principles across many different supply chains.
  • For a non-automotive example, consider organisations in the paddock to plate supply chain where consumers purchase every day, yet the raw materials are produced annually. How much would each partner in the supply chain benefit when working together to systemically apply JIT principles in order to achieve improvement?
  • Finally, there are benefits when your organisation wants to introduce a new product range. The skill sets developed will enable your team to reverse engineer the costs of the supply chain. This will enable effective negotiations required to develop a good cost base for the new product. Plus this will enable you to select high-caliber partners in providing this new product.

Summary

The pressures of profit squeeze are not going away. Organisations (including your competitors) are systemically targeting improvements in safety, quality, cost, lead time and employee skill/engagement.

They do this by understanding the relationship between each process and pursuing the principles of JIT. Organisations that use value stream maps are able to plan and monitor the successful introduction of lean manufacturing tools such as quick changeover (SMED), error proofing (poka-yoke), kanban, one-piece flow, and cellular manufacturing in a very structured manner to reduce waste. It is easy to see how changes affect the entire value stream and can therefore be managed and capitalised on. Through this disciplined approach to continuous improvement, organisations achieve incredible results without spending excessive capital on technology.

The value stream map also becomes a tool for strategic planning, enhancing sales and operation planning, a dash board for the operations of the business, labour planning, work force development plan, IT resource prioritisation and more. A single source of truth.

The process of getting to know your value stream through mapping is very logical and has been around for a long time.

It won’t happen overnight, but you probably do need to start. Start small with the end game in sight.

If you’re looking for some support in getting started or progressing to the next step contact the team at Shinka Management. There are several ways we can help.

Daryl Kelly is a Senior Consultant with Shinka Management, a lean training and consulting firm with clients in 48 countries. Daryl is a hands-on lean practitioner with 24 years of solid experience applying lean principles across all operational elements of an organisation. He has a high level of expertise in distribution network optimisation and supply chain planning and execution systems, and has successfully implemented improvements across all aspects of sales and operations planning, forecasting, distribution planning, production planning, constraint management shop floor execution, inbound control, dispatch execution and exception management.

Daryl is responsible for the development and leadership of Shinka Management’s Certificate IV in Competitive Systems and Practices training and support program.

What is the Role of a Team Leader within Toyota?

We all know team leaders play an important role within a manufacturing shop floor in shaping the team’s effectiveness. However, specific roles and responsibilities given to a team leader are often different from company to company. So, how does Toyota approach this? What is the role of a team leader within a Toyota final assembly plant? Certainly, this is one of the questions we often get asked. As this is the case, I took the opportunity to ask this very question to Toyota lean management guru and Shinka Management Senior Consultant Akinori Hyodo during his recent visit to Australia. Hyodo-sensei is a long-time Toyota Production System leader and a veteran factory manager at the Toyota factory in Japan responsible for manufacturing the HiAce vehicle.

Shop Floor Management Team Structure

Before we take a look at any details of the role and responsibilities of a team leader, it is crucial for us to understand how Toyota structures the organization of their workforce on the shop floor. According to Hyodo-sensei, the HiAce plant’s entire production force is divided into a number of teams for each shift based on different shops (i.e. stamping, welding, paint shops) and assembly lines. Each team is typically made up of 15 to 20 people with a team leader at the top with a number of operators below. Immediately below the team leader is a sub-leader followed by relief and annual-leave persons as well as a trainer. In most cases, they are multi-skilled operators themselves who have at least four to five years of shop floor experience. While the relief person acts as back-up for when issues occur within the team’s operation, the annual-leave person is dedicated to take care of the work of operators on leave. The trainer is in charge of training the required standard work to the operators and makes sure that this is properly implemented on the line. Depending on the size and the functionality of the team, there may be a slight variation in this picture such as having two sub-leaders within a team who also take on the relief and annual leave personnel’s role concurrently instead and so forth.

An example of the Toyota shop floor team structure 

The Principle of Abnormality Control

Either way, an important point for us to note here is that team leaders are not assigned to daily production line work and they are “free” from such tasks so that they can respond quickly when an abnormality occurs in the area they oversee. One of the key principles of the Toyota Production System is “abnormality control” and Toyota’s shop floor teams are structured with this in mind. Essentially, abnormality control means appropriate actions are taken in a prompt manner in order to respond in the event of an abnormal situation (any violation of standard method of operation) and team leaders are free to float around the shop floor to do exactly that. In the same light, operators are trained to call for assistance from the support team when an abnormality occurs. The support team may stop the machine or the line if the abnormality warrants it. It is essential that this idea of “abnormality control” is understood clearly and followed thoroughly amongst everyone on the shop floor and every team functions on this basis.

Team Leader Role and Responsibilities

So, we have learnt that Toyota’s shop floor team leaders can be described as “free floaters” and they make sure any abnormalities are controlled. Then, what specific roles and responsibilities do they have?

Team leaders have the responsibility of ensuring all aspects of safety, quality, productivity and cost reduction are fulfilled. Towards this aim, Hyodo-sensei says one of the biggest roles of a team leader is to monitor and control the genba. In English, genba is often translated as “the real place” or more precisely “the place where the actual work is done, or value is created”. For manufacturing companies like Toyota, genba essentially means their factory shop floor. Without fully understanding what’s really going on at the shop floor, team managers cannot fulfill their responsibilities. They monitor their team’s operation with particular focuses on 4M factors (man, material, machine and method) to detect any potential abnormalities and to identify matters to improve so that the operators can carry out their assigned standard work according to the plan.

As part of the team leaders’ daily routine, they spend the first 30 minutes to one hour of the shift to review any issues that occurred during the previous shift, confirm changes to 4M factors and go through the KPIs to fully grasp the state of the genba. They have all necessary data visualized on their management board and this can also be viewed and shared with other members of the team and factory.

During the course of the shift, team leaders dedicate themselves to respond to any issues immediately to enable good control of the shop floor production activities.

According to Hyodo-sensei, when asked by their higher management, Toyota’s team leaders can provide accurate answers to numerous questions regarding the latest operation and production on the spot. This shows their level of understanding of the shop floor.

Another key role of the team leader is to drive and manage kaizen within their team. As the gatekeeper of kaizen ideas from their teams members, they work with their team when necessary to suggest adjustments to ideas so that they will positively contribute to the team’s kaizen targets for the year.

Requirements and Desired Characteristics of a Team Leader

After understanding the team structure and the role and responsibilities of a team leader, the next question that comes to mind is how you can become a team leader.

There is a long list of criteria an operator has to satisfy before he or she can become a team leader within Toyota. The HR section keeps records of each employee with their years of experience, specific skills and training programs they have successfully completed etc. When suitable candidates are identified within the organization based on their individual record, they are approached by the HR section and encouraged to fulfill further requirements if they are interested in this career path. However, fulfilling further requirements is not the only thing candidates have to worry about. Whether they possess the right characteristics is as important as having a great performance record.

Hyodo-sensei points out three key characteristics that are desired for good team leaders. Firstly, possess the ability to use people effectively. When running a big operation like Toyota does, one cannot do everything by oneself. A good team leader has to be able to extract the best quality out of each member and use them for the benefit of everyone. That’s why having the ability to utilize people effectively, efficiently and comfortably is crucial. Secondly, have a positive and willing mindset. A good leader must hold an attitude of “give it a go” and “give them a go” and little fear of making mistakes. They must be adaptive and flexible and be able to guide the team in the right direction to move forward. Having a positive and willing frame of mind will provide a good foundation to do so. Last but not least, they must own the power to exercise leadership. People can assume a leadership role but without this important attribute, they cannot grow to be a good team leader.

 Key Attributes of a Great Team Leader

To conclude my interview, I requested Hyodo-sensei to give some advice to aspiring young leaders. The advice he gave was simple and rather humbling – never forget a sense of gratitude and gain trust and support from those surrounding you. After all, a team is made up of different people and without their trust and support, you cannot maximize the team’s outcome. An autocratic approach doesn’t last long. Hyodo-sensei stressed this point by sharing a saying in Japanese, “Behind every great company is a great leader, behind every great leader is a great supporter.” This saying pretty much sums up Toyota’s approach and there is no doubt that the role of team leader on the shop floor is indispensable to the success of the company.

Eri Dennis is a Consultant of Shinka Management, a lean training and consulting firm with clients in over 50 countries. Eri is a regular leader of the Shinka Management Lean Japan Tour. Eri graduated with a Master of Arts in Japanese Interpreting and Translation from the University of Queensland and is NAATI accredited as a Professional Level Interpreter and Professional Level Translator.

 

Lean Health Care Interview with Virginia Mason Medical Center

This blog is also available in Japanese. 日本語はこちら。

The Virginia Mason Medical Center is based in Seattle, Washington. Since the Virginia Mason leadership’s first visit to Japan in 2002 to seek insights from Japanese manufacturing, the hospital has evolved into a leader in the application of lean principles to health care.

The development and implementation of the Virginia Mason Production System is a standout case study that holds lessons for any leader looking to adapt the principles of the Toyota Production System to a non-automotive environment. Virginia Mason’s journey has been the subject of a number of books on the topic of lean management in health care, including the excellent Transforming Health Care by Charles Kenney (the book we have gifted most often to our clients at Shinka Management).

Whilst the application of Total Quality Management and adoption of Kaizen culture has a longer history in Japan, with evidence of Quality Circle and related improvement-focused activities in Japanese hospitals dating back to the 1970′s (Tateishi, 1994), the Virgina Mason Medical Center deserves attention for its success in learning from the Toyota Production System and implementing an organization-wide management system that influences Virginia Mason’s entire approach to patient care.

There are few environments and workforces that present more complexity to the task of organizational transformation than a hospital, and yet by all accounts Virginia Mason is achieving impressive success on this journey. Since a crisis period with financial losses in both 1998 and 1999, Virginia Mason has since achieved positive margins every year since implementing the Virginia Mason Production System. Together with the significant improvements achieved in efficiency across the organization, safety, quality and patient satisfaction metrics have also seen impressive improvement. The Virginia Mason Medical Center has subsequently been recognized as a Leapfrog Top Hospital every year since the award has existed.

Virginia Mason’s achievements to date adds another chapter in the story of the development of lean, with the various exchanges of ideas between the US, Europe and Japan over the last several decades. Following W. Edwards Deming’s influence on post-war Japanese manufacturing quality, and Taiichi Ohno’s leadership in developing the Toyota Production System and its subsequent export to the West, we are now seeing the Japanese health care industry turning its attention to the progress being made abroad in organizations such as Virginia Mason.

The following interview with Chairman and CEO Dr Gary Kaplan and Transformation and Executive Sensei Dr Henry Otero, was conducted at a lean health care conference held in Kyushu, Japan, to share learnings between Virginia Mason and the Japanese health care industry.

In sharing their experiences on Virgina Mason’s lean health care transformation journey, Dr Kaplan and Dr Otero provide insights that holds lessons for any of us seeking to lead effective transformation and culture change within our own organizations.

Paul Smith, PhD
Director, Shinka Management

View this page in Japanese/日本語

Dr Henry Otero and Dr Gary Kaplan of Virginia Mason Medical Center

Dr Henry Otero and Dr Gary Kaplan, Kyushu, Japan

Dr Gary Kaplan is a practicing internal medicine physician, and has served as the Chairman and CEO of Virginia Mason Medical Center since 2000. Dr Kaplan has led the adaption of the Toyota Production System to transform health care delivery within Virginia Mason, and has been the recipient of numerous awards and recognition for this work, including the John M. Eisenberg Patient Safety and Quality Award issued by the National Quality Forum and the Joint Commission.

Dr Henry Otero, is a medical oncologist, and is a Transformation and Executive Sensei at the Virginia Mason Institute. Dr. Otero has led many process improvement events at Virginia Mason, with a focus on improving physician and executive engagement and creating ambulatory flow.

Paul Smith: What is the Virginia Mason Production System and what does it seek to achieve?

Dr Henry Otero: It’s a management system by which we direct all our activities and align the goals of the organization and the work we do every day.

It’s also a robust organizational system which guides us in understanding who we are as an organization, what goals we are trying to achieve and how those goals align with the work that we are doing throughout the organization, with a view of achieving world-class management.

One mistake is to believe that we only need to learn the tools and methods to become a lean organization. The other is to believe that leaders don’t have to lead or understand the methods deeply. The leaders must be the most committed to understanding and utilizing the methods in order to be role models for the rest of the organization.

There’s a big difference between lean as a project improvement method whereby we just use it to solve problems with tools and ideas, versus a management system which aligns the work we do every day and helps us to accomplish the goals we want to accomplish within our organization.

Smith: Why did Virginia Mason look to a Japanese management methodology to be its guiding light?

Dr Gary Kaplan: We don’t think of it as a Japanese system but as a system that was started and perfected in Japan; in some ways it goes back to Deming and others. A lot of people ask us why we go to Japan to learn – if we want to learn the very best surgical technique, we go to the place that does it the best to learn. That’s how we think about management.

I think the bigger question was why did we, health care professionals, go to manufacturing? Because that was a big departure. Historically in medicine, we’ve always thought that we had all the answers, and that those answers were somewhere in the health care industry. But, when we were looking for a management method, we didn’t find it. Nobody in the U.S. had one in health care.

Smith: And when you did have a look at manufacturing…

Dr Kaplan: We saw Boeing. We heard what Boeing had been doing. We met somebody who had been working at Boeing, John Black. He had been leading the Toyota Production System development at Boeing. So, we went to Boeing to learn from them. Before we ever came to Japan, we went to a company called Wiremold, and met with Art Byrne. The whole executive team visited Wiremold in December of 2001. It was amazing. Unlike Henry or myself, most of the executives had never been in a factory. So, we were beginning to think that maybe the answers were outside of the health care industry. That was a big departure for us.

Smith: When did you decide to take your executive team over to Japan? What was the purpose of doing that?

Dr Kaplan: Well, the people at Boeing said that if you were really serious, you need to go to the source, you need a deep immersion experience. We came home totally different – we were thinking differently – that’s why we continue to take people to Japan almost every year.

Smith: What was the difference? Was it knowledge or attitude, or was it belief, a change of thinking about what’s possible?

Dr Otero: We have lots of answers to that. One answer is that it was learning in a different culture, looking at something that you were not familiar with seeing; Toyota’s history, Toyota’s production, working on a line in Hitachi; and then each night was a debrief, a very long debrief of what we saw, what did it mean to what we were doing at Virginia Mason, and what is the relevance to health care? And those discussions were the best when people started to talk about what their real hopes were for themselves and when we started to realize that things could be different. There was a way to do it differently. You didn’t have to be stuck in the way it was currently being done. You could aspire to do something different. You could see in front of you, what you are aspiring to. That was very motivational to people. For some people, it was that switch – they just caught on fire. That was the most important trip I have taken in my life. It fundamentally changed the way I think about health care and what my motivations were.

Dr Kaplan: I think the best aspect of that is to take people out of their comfort zone. Being in our comfort zone keeps us from processing information. We always fall back on what we know to be true and our foundations. Here, we are out of our comfort zone. We levelled the hierarchy. When you have a surgeon dependant on a nurse or medical assistant to help them understand what’s going on in the assembly line it flattens the hierarchy that exists in health care.

As Henry says, a big part of the trip is being away from home and in the deep conversations we have with each other, many of which are structured fundamentally – I lead those – and many of them are also impromptu conversations including confronting our own weaknesses or things at home that aren’t going well that we are hesitant to talk about. These trips have been powerful enough that we continue to do them.

Smith: Fast forward to today and looking back over the journey and some of the outcomes, what is it that you feel most strongly about in terms of what’s been achieved?

Dr Otero: As I look across the organization, it is people’s focus on the patient and how they approach problems. Their questions about what benefits the patients. What you keep seeing and hearing at Virginia Mason is people asking what’s best for the patient, and this guides us to which ideas we are going to implement and in what direction. I think this is the culture piece that I don’t see or hear anywhere else.

A lot of people say that they are patient-centered, but you have to hear it from the leaders. Can they give up their own self-guided interests to those of the patient? When you see that happen, you know you are in a special place, as that doesn’t happen very often.

Dr Kaplan: Yes, I would agree and it’ is the hardest thing to change and the most important. The management system is really important, the tools and creating flow, providing hope, but it’s the cultural change and the willingness that is key. I think we challenge some really deeply held assumptions about our culture and it sounds like such a no brainer, so obvious. But it’s really, very profound when you think about changing the culture in medicine. Some people say, well if the patient is first, if the patient is at the top, does that mean that the doctor is at the bottom? And there are a lot of conversations about things like that. Some people had to leave the organization because they couldn’t go there.

Virginia Mason Production System - Lean Health Care

Smith: Was that because of a shift from a doctor-centric model to a patient-centric model? Is that part of what the shift was?

Dr Kaplan: Uh-huh.

Dr Otero: Yes, I would say we were like most organizations. We designed process around the physician and that was the way it was.

Dr Kaplan: And, we were proud of it too.

Dr Otero: Yes, we recruited people based on that. The shift away from that to patient first was challenging. The rhetoric of “patient first” is easy. You know what “patient first” is but then, looking at patients’ experience, per se, and asking each other, “Are we really patient first? What does it mean to put the patient first?” I think that was really the challenging part.

Dr Kaplan: We are still learning about that but, do we really understand what it means? In the old days, because we were also patients, we thought we knew, but we didn’t. Then we did surveys and figured out what patients wanted. We focused on what we heard from patients. Until we really engaged them as equal partners in the design of care, we really didn’t know what they wanted.

How do we do this? We have patients on our improvement teams. We engage in co-design. For example, we may have a team of six health care people and a team of six patients designing new processes in care.

Smith: You mentioned that the cultural change is something you look back on with pride. What do you look for in people that are able to promote that culture internally? What do you look for in leaders of the Virginia Mason Production System?

Dr Otero: I think the attribute of a leader that is most challenged by the Virginia Mason Production System is growing from a great problem solver, which is generally what people get into leadership positions for in that they can solve problems for their people, to reframing yourself as a coach and mentor and a great problem framer, and being able to know how to encourage, coach, pull and engage people in solving. They solve the problems and you frame the problems, and give them the resources, and ask the right questions. You become a great questioner as opposed to a solver. And that’s a very hard journey, I would say, for leaders, to transition from problem solver to problem framer.

Smith: Does that involve them needing to bite their tongue when they see a solution in their mind as sub-optimal?

Dr Otero: Sometimes you will be in an improvement event and you and even your whole team know the answer. You just want to blurt it out to this team that seems like it is struggling with coming up with an idea, or they come up with an idea and you just know that it’s not as good as the idea you have. Yet, it’s not the idea, it’s the process of improvement that you’re trying to get to. This is the hard thing as a leader. You are not trying to get the answer. You are trying to engage the worker in the process so that they can continue to come up with many answers over the span of time that they are working for you.

The more important thing is to let them go through the process, generally PDSAs (Plan-Do-Study-Act), and almost invariably they find an answer that is better than the one you had in your mind and that’s the humbling part of it. At the end of it, letting the process go, you will find people will come to an answer that’s even better than the one you had.

Smith: I think it’s a great point. Often people forget that the process of kaizen is not necessarily about finding an immediate answer to a problem. It’s more about developing your people to be problem solvers over the long term.

Dr Kaplan: Yes, building capabilities amongst team members so that they can imbed problem solving into their daily life and daily work, and not all traditional health care leaders are able to lead that. They are used to hierarchical decision making, (leaders) swooping in and solving the problem. You also have to have a high tolerance of ambiguity and the ability to use humble inquiry when asking questions. Asking questions because you genuinely don’t know the answers, and you want to know. That’s a big levelling opportunity that we have as leaders that I don’t think we take advantage of enough.

Smith: Some of the biggest mistakes you made on the journey?

Dr Otero: I think one of the things is that we could have been quicker in is moving to the aspects of daily management. The elements of being able to sustain change and engage workers ties into the elements of daily management. That might be something we could have moved to earlier. On the other hand, we may not have known if people were ready and understood enough about it.

Smith: What were you doing in place of that?

Dr Otero: I think it was more top-down leadership driven as opposed to having that structure at that level of the group. How do we engage our teams every day and make the work that they have to do visual? Our daily management structures were more focused around making the work visual for things like production management.

Dr Kaplan: We were focused more on training I think in the early years. We should have moved more quickly to daily management. I also think we needed, and still need, more rigor around 30-60-90 day follow up, going deeper.

I think we have learned a lot about scoping. In early years, we might have scoped things too big, too small. I think we are getting better at that. A lot of people accused me of having too much patience for people, and not moving people along fast enough. I wanted to bring everybody along, but not everybody could come.

Smith: What would be your advice for a hospital considering starting on this journey? Where do they start?

Dr Kaplan: The C-Suite.

Dr Otero: Yes, it has to start at the top. And, there are a lot of ways to learn. One way is to read the book, Transforming Health Care and I think this helps give a little better sense of the potential impact. And, I think a visit to an organization that is doing lean and lean health care is a really great way to get people exposed and understanding what they are getting themselves into and to see if they have the culture and the motivation, and if the leadership have the willpower to go on the journey.

There is nothing worse than to start a journey and not know what you are getting into and then say that lean doesn’t work. Better to do the background work of investigating some organizations that have been successful, especially if you are in the health care industry. Visit one or two of those organizations to see how the leaders behave differently, how they are embedding it throughout the organization, how does it translate to the front line.

Then have an honest discussion with your own leadership team; asking, “Can we go on this journey, do we have the motivation, do we have the interests and alignment?” It’s not an easy journey, but it’s a very rewarding journey, probably the most rewarding journey you can go on. You have to go up against a lot of cultural norms.

That’s where I think people should get started. Then, if there is interest, look at who could they work with to get training and to find a sensei that can help guide both their executive teams and also help them with training within their organization in lean management and lean practices.

Smith: Do you find more resistance or more challenges to this type of thinking in the public sector as opposed to the private sector?

Dr Otero: There are pros and cons but I think it’s very applicable to both. We work with many organizations in the public sector and they have been some of our most successful clients at adopting it across national health care systems. They have different resources and constraints compared to the private sector, but we find that they can be successful if the leadership is interested and committed, and truly whether they are private or public doesn’t make that much of a difference as long as they have a leadership and government that are interested in going in that direction.

Virginia Mason Institute

Smith: Dr Otero, on the topic of leadership, what are some of the attributes that you see in people like Dr Kaplan as the leader of the organization and the leader of the culture that they do well that enables this to succeed.

Dr Otero: A visionary leader. Someone who leads with vision, and finds the passion behind the work we do. Someone who uses things like economics as urgency but not as mission, focuses and continues to bring you back to the mission of your organization – what you value, and tie that into the improvement activities and the management methods.

Through connecting the dots a leader creates a vision for the organization that you buy into and knows how to create that as a shared vision within the organization. That’s a real leadership skill that leaders who are very successful, like Dr Kaplan, adopt; it’s called “adaptive leadership.” It’s a skill that Ronald Heifetz identified in the Harvard Business Review regarding being able to allow people to solve problems and recognize that sometimes we shouldn’t shield our people from problems but should expose them to problems, let them struggle sometimes so that they can come up with the solutions, not the leader coming up with the solutions. So, they have great adaptive leadership skills to engage people and they have the ability to be vulnerable, the ability to listen to the voices from many different areas when they are making decisions.

Smith: Finally, what’s next for the Virginia Mason Production System and for Virginia Mason?

Dr Otero: I think we are on a journey, we are babies on the journey. We are infants. So, we still see this as something that will develop beyond our lifetime and beyond the leaders that are here today. We continue to work at how we can better integrate our processes across many different silos that we still have and to really focus on the care of our patients. I would say in our work, there is no finish line. It’s a journey and there is a lot of room still to go where health care is regarded. We are humbled by where we have come from and we are humbled by the amount of work that still has to be done to create a terrific patient experience, which is our main motivation.

Smith: Thank you very much.

Virginia Mason Interview

Paul Smith with Dr Henry Otero and Dr Gary Kaplan of Virginia Mason Medical Center

Paul Smith is a Director of Shinka Management, a lean training and consulting firm with clients in 48 countries. Paul completed his engineering studies with a masters and PhD from Kyoto University, and has been mentored in lean management by some of Japan’s most notable lean practitioners including former Toyota factory managers.

Paul runs lean training courses with Shinka Management and is a regular leader of the Shinka Management Lean Japan Tour.

References

Transforming Health Care
Virginia Mason Medical Center
Charles Kenney, 2011

Transforming Health Care - Charles Kenney

TQM Activity Within Hospitals
[病院におけるTQM活動]
Haruo Tateishi, 1994

Hospital TQM

Images of Virginia Mason Medical Center and staff used with permission of Virginia Mason Medical Center and Virginia Mason Institute.

 

Book Review – Zero Quality Control – Shigeo Shingo

Shigeo Shingo is an icon with the early development of SMED (Single Minute Exchange of Die) and Poke-yoke (mistake-proofing), and a key developer of the Toyota Production System. Shingo urged his audiences to call themselves Improvement Engineers and, called himself Dr. Improvements. He used to say, “My medicine works but only if the patient takes it.”

This book by Shingo refers to three critical and interrelated aspects of quality control.

Zero QC is the ideal production system – one that does not manufacture any defects. To achieve this, two things are necessary:

  • Poke-yoke (mistake proofing) looks at the defect and stops the production, and gives immediate feedback to help find the root cause of the defect.
  • Source Inspection looks at errors before they become defects.

Using Poke-yoke devices and Source Inspection systems can virtually eliminate the need for statistical quality control. A word of caution though; although this looks simplistic, you will need to read the book slowly to allow the logical thinking of Shingo’s ideas to deeply penetrate.

The book provides a detailed explanation of Shingo’s “three critical aspects of quality control” and it also presents many actual examples that show a wide range of applications.

I consider this book a “Must Read” if you are going to have true success with Lean Manufacturing.

Zero Quality Control – Source Inspection and the Poka-yoke System
Shigeo Shingo
Productivity Press ISBN 0-915299-070
Original Japanese version 1985 (Furyo = 0 e no chosen)
English translation 1986 by Productivity Press

Other books by Shigeo Shingo that are well worth having in your library include “A Revolution in Manufacturing: The SMED System” and “Non-Stock Production: The Shingo System for Continuous Improvement.”

Peter Gardner is a Senior Consultant with Shinka Management focusing on business profit improvement utilizing lean manufacturing practices. Peter has been involved in leading lean manufacturing programs for the past three decades. In his previous role as Global Manufacturing Engineering Director at TI Automotive, Peter had responsibility for manufacturing operations at 80 factories.

Shinka Management provides lean consulting, kaizen training and lean study missions to Japan which include Toyota assembly plant tours and visits to several plants in the Toyota supply chain to learn about the application of TPS, SMED, Poka-yoke and other key concepts.

Book Review – 20 Keys to Workplace Improvement – Iwao Kobayashi

Attempting to improve competitiveness as you become aware of problems will end in haphazard improvements and lack of unity. Improvement must occur across the whole business and close the gaps between the current situation and the business objectives. This book introduces a method for making significant improvement across your entire manufacturing business. A structure as laid out in “20 Keys” can provide the platform for activities that add flexibility and adaptability.

On an initial read, this book may appear to be a very simplistic guide about how to be successful in your factory/business. You may even be tempted to say “We are already very advanced with most of that.” However, the content of the book is deep and thorough, and I strongly believe there are few businesses that can claim they are very advanced in all the areas down the excellence path prescribed by Iwao Kobayashi.

The “20 Keys” shows the relationship between all the keys which lead to better quality, lower cost and faster manufacturing time. The four principle keys are:

  • Key 1. Cleaning and Organizing
  • Key 2. Rationalizing the System/Management of Objectives
  • Key 3. Small Group Activities
  • Key 20. Leading Technology/Site Technology

I suggest one way to use 20Keys to Workplace Improvement is to treat it as the basis of a thorough audit guide for your manufacturing business. Each of the 20 Keys has 5 levels and each of these levels can be taken just-as-written or modified to best suit your own business. I would be cautious with any modifications and losing the intent of the Key.

This book “20 Keys” is nearly 30 years old now and it is still very relevant today. I recommend this book as a valuable addition to your library.

20 Keys to Workplace Improvement
Iwao Kobayashi
Productivity Press ISBN 0-915299-61-5
Original Japanese version 1988
English translation 1990 by Productivity Press

Peter Gardner is a Senior Lean Consultant with Shinka Management focusing on business profit improvement utilizing lean manufacturing practices. Peter has been involved in leading lean manufacturing programs for the past three decades. In his previous role as Global Manufacturing Engineering Director at TI Automotive, Peter had responsibility for manufacturing operations at 80 factories.

Shinka Management provides lean consulting, lean training and Japan study tours including Toyota factory visits and tours to several plants in the Toyota supply chain to learn about the application of TPS.

Your Lean Factory as a Showroom – Using Lean to Drive Sales

We have again had the pleasure of visiting one of our favourite companies in Japan – and one that clients on our regular Japan study mission continuously rate as a standout experience of their time in Japan. As a lean factory, this company is an excellent example, and the benefits flowing from their lean culture in terms of safety, quality, productivity, shortened lead times and improvement in market share are impressive (more on this below!). However there is another angle to the company that is equally impressive and has a strong positive contribution to its sales – its formal strategy to hospitality and showcasing its factory.

The Isuzu Group – Metal One

The Isuzu Group is the steel service division of the Japanese multi-national giant Metal One, specializing in the processing and sales of cold rolled steel. The company has several regional service centres across Japan that process (typically slitting and cutting) steel coil of various grades and thicknesses for distribution to a range of industries, including automotive, that demand reliable and timely service.

Lean Factory

Isuzu believes that coil distribution is old economy and that in order to remain profitable in this mature industry the company must focus on cutting costs by boosting business efficiency. To tackle this challenge, Isuzu has developed a very special culture focusing on staff development and continuous improvement – and the results show in the quality of their products and services, the morale of their young and vibrant workforce, and the market share held by their company.

Amongst the various programs the company has in place, its “factory as a showroom” vision is one that often flies under the radar, but in my opinion, is tremendously valuable and should be held up as an example for our clients to mimic. I’d like to highlight the value in this approach of leveraging a strong culture of continuous improvement and lean manufacturing to support corporate brand development and increase sales.

See below a video snapshot of the hospitality provided by Isuzu on a lean factory tour.

Factory Presentation – A Strong First Impression

Our first visit to an Isuzu Group service center with our clients was in 2014 following a fortunate introduction whilst implementing a lean manufacturing program at one of Metal One’s off-shore processing facilities. The ex-pat Japanese CEO described Isuzu’s service centers as a must see example of what an engaged workforce could achieve through continuous improvement. Even with these high expectations we were amazed by what we encountered on our first and every subsequent visit.

The presentation of the factory is the most obvious initial wow-factor for many of our clients. In comparing with the presentation (or lack there-of) of metal processing facilities in our own countries, the Isuzu Group service center was a standout for its clean, attractive and well-organized environment.

On closer inspection we could see the hallmarks of a thorough 5S program, something we discovered that they are extremely dedicated to – with a 5S Patrol and Safety Patrol carried out daily, with the responsibility for these audits shared across every member of their factory, office and logistics staff.

Lean Factory Staff Meeting
Safety and 5S audit report results shared with all staff at morning meeting by the staff members responsible for carrying out the patrols the previous day

With time we were noticing the depth to which their program was implemented. On one occasion, we noted that they had even run their 1S “sort” filter across the buttons on their machines and control panels, dividing buttons into “necessary” and “unnecessary” categories, and uninstalling and blanking out those that were not required. They explained to us the benefits that resulted from less buttons, dials and levers, in terms of easier training and less operational errors.

Lean Control Panel

The results of a strong culture of lean manufacturing and continuous improvement have been well documented, in terms of safety, quality, productivity, staff morale, lead time, company profitability and sustainability, and other metrics. All of these factors are on show during our visits.

As we walk into the factory, we first pass the board tracking their safety record – a subtle reminder to staff each day of the need for safe work practices. Impressively, the service center we most often visit has achieved a record 2496 days straight (nearly 7 years) without a paper-cut level injury.

Part of the secret to this is the approach to safety training taken by the company. Recognizing the limited value in lecturing staff on safety in a meeting room, all safety training takes place on the shop floor with each staff member responsible for creating incident demonstrations that can be experienced by all employees. Rather than talk about the danger of a coil suddenly unraveling, metal sheets falling from a crane, a worker being crushed by moving equipment, etc., they choose to create these safety incidents, often with a hapless mannequin bearing the full force of the impact or incident.

The photo below shows our team experiencing the result a small, lightweight coil accidentally being nudged – a domino effect capable of crippling a worker. Feeling the impact of that last coil slamming into the ground, the importance of stacking and securing coils correctly immediately hit home.

Lean Safety Demonstration

Other experiments witnessed demonstrated lessons that are not immediately intuitive. For example, the value of a safety helmet’s harness can easily be dismissed – however an impact to an up-turned terra cotta pot protected by a helmet fitted with and without a harness, quickly demonstrates how the impact resistant nature of a helmet is severely compromised in the latter case. These lessons, when experienced, stick – and the program has been so successful that Isuzu now regularly invites clients – those staff that handle and use their product, to join these training sessions together with Isuzu Group staff.

From a productivity perspective, the Isuzu Group has been benchmarked against rival companies in Japan, with findings showing that on a factory area basis, they are on average processing twice as much volume as their competitors with half the number of staff. In other words, their productivity on a per person basis is four times that of the remaining industry!

Quality KPIs are similarly impressive with an extremely low number of customer claims relating to order errors or damaged products. Efficient operations supported by a high level of standardized work and their enterprise resource planning system developed in-house, not only allowed them to achieve a high processing volume, but in conjunction with their internal logistics division, has enabled them to respond to urgent orders with a lead time of between 2 to 3 hours from receipt of order to dispatch to their customer, without compromising their day’s production schedule.

What appeared to be high levels of inventory of finished product, not what you would expect from a lean factory, turned out to represent only 1.5 days of stock, a level which they continue to work on to bring down (on a recent visit we witnessed them tracking (on a daily basis – on a whiteboard for all staff to see) reductions in the volume of inventory held on their premises – a KPI that one of their staff was leading the charge on).

Behind a truly Lean Factory is an Empowered Workforce

A hallmark of a strong lean culture, and one of the aspects that differentiates the Toyota Production System apart from the historical approach to industrial engineering, is the approach to staff development. The Isuzu Group’s approach is called Zenin Sankaku, or loosely translated, All-In Management. This fundamental philosophy is an approach that emphasizes the role that every staff member has in management and company improvement, and guides the company’s approach to teamwork, information sharing, 5S, etiquette and manners, and a sense of ownership and autonomy in leading initiatives within the company. Their approach is quite the opposite to a command and control hierarchical workforce structure, and differs in feel to the approach taken by many other companies we visit in Japan, including what we experience on our Toyota tours.

Lean Factory Tour Hospitality

Related to this philosophy is Isuzu’s annual General Employee Meeting which brings together all 800 staff from across Japan. Younger members of the workforce act as moderators for the meeting, which is carried out without any formal script and draws on many different employees taking the stage to share their ideas, thoughts and projects. Being dynamic in nature, and morphing to meet the current needs and transformation aspirations of the group, the meeting is different year to year, with no-one knowing what kind of meeting they will experience until it actually starts. Although an internal event, typically more than 100 shareholders and customers choose to join each year to witness the meeting.

The results of this philosophy are evident in the vibrancy of the staff and effectiveness of the young workforce that are often called on to take leading roles in new initiatives and projects. It is this opportunity for development that makes The Isuzu Group an attractive choice for employment among the dwindling pool of young workers in Japan. All-In Management as a philosophy has been so successful that Isuzu has formalized the approach through a consulting and training program that it now provides to companies outside of the Metal One group.

The Visitor Experience – Hospitality as a Strategy

The Isuzu Group strives towards its goal of being a “Visionary Company,” taking inspiration from Jim Collins and Jerry Porras’ business classic Built to Last. Among the many programs that have been driven by their workforce in pursuit of this goal, is the concept of “Factory as a Showroom.” In its most simplistic form this could be interpreted from the viewpoint of merely maintaining a well-presented, pleasing to the eye factory, however in Isuzu’s case this is taken much further with the strategy including standardization and training for all of their staff in hospitality.

Nice touches include the greetings received from staff as we enter their work areas, coffee served immediately on arrival, name plates to help us with seating, explanations given by different team leaders at each stop within the factory and office, attentiveness of staff and clear preparation for our arrival, prepared explanations accompanied by explanation boards, right through to our hosts waving us farewell until we are out of sight.

Lean Office Greeting

Standardization and training extends to the bow given by operators to visitors on the shop floor.

Driving Sales through Showcasing your Factory

What we experience when visiting Isuzu as part of each Japan study tour was initially created to host visits by Isuzu’s current and prospective clients. The sales team invites prospective clients to meet with them at the service centers. Rather than a laborious, chest-beating sales presentation, the sales representative takes a prospect through their factory, introducing factory staff and letting them and the presentation of the factory do the talking.

Japanese have a reputation of being particularly risk adverse, and are incredibly thorough when evaluating prospective suppliers. Is this company capable of consistent, high quality supply? Are they capable of achieving agreed lead-times? Are their operations appropriately managed and covered by standardized work? Do they take pride in their work? Will they let me down and my company down?

The answers to these questions cannot be found in a sales presentation, especially for a manufacturing culture that prides itself on genchi, genbutsu (essentially, going and seeing for yourself). Walking out of an Isuzu service center, one can’t help but feel a desire to introduce this group as a trusted supplier for their company.

For existing clients, a factory visit is often followed by a stroll past Isuzu’s visual Service Menu, which maps value-add services against those customers currently utilizing those offerings. This helps create conversations that leads to additional value-added services being considered by visitors.

Service Menu

A desire to create such an experience is not the driving force behind Isuzu’s culture of manufacturing excellence, but instead is an outcome that is being utilized to build the group’s reputation and drive sales. Recognizing the value of this experience, Isuzu has formalized a strategy for showcasing their operations, which has culminated in their “Factory as a Showroom” program.

This program has been so successful that in recent years they have harnessed staff (freed up from operations over the years through productivity improvements and automation) to consult to businesses outside their group, both domestically and internationally, to develop similar programs for their organization (if this is of interest, let us know and we’ll put you in touch).

Preparing your Lean Factory Showroom Experience

So, do you currently showcase your factory environment to clients? Are your operations at a high enough level that you can confidently invite prospective customers to walk the shop floor at any time? Are your people at every level and function within your organization confident and capable of interacting with visitors, dressed appropriately and well-versed in explaining their work content? Do you have a formal strategy in place for hosting visitors, or is this carried out in an ad-hoc manner?

For both B2B and B2C companies, harnessing your factory as a showroom presents an enormous opportunity to build your company brand, develop stronger relationships with clients and support the business development team in driving sales.

Shinka Management is a lean consulting and lean training firm with clients in over 40 countries. The Isuzu Group is one of the generous companies hosting Shinka Management clients on the Lean Japan Tour. To learn more about our lean study missions and to see video of other factories see: Lean Japan Tour.

Book Review – Toyota Production System – Taiichi Ohno

If you only ever read one book on the Toyota Production System or Lean Manufacturing then this book by Taiichi Ohno is the one.

There are hundreds of books and articles written about TPS / Lean Manufacturing but none provide the foundations that this book by Taiichi Ohno does. There were cultural developments about performance improvement occurring within Toyota from the 1930s in Japan, however Taiichi Ohno is credited with the true hands-on work at the “coal face”, on the factory floor, to develop the foundations of TPS and drive the benefits in a most uncompromising way. The fundamental message was simple; “look for and eliminate waste.”

Chapter 1 introduces the need for focusing on waste. Much of this is still applicable today. Also, the basis for the Toyota Production System is clarified; that is the absolute elimination of waste and the two pillars to support this are “just-in-time” and “autonomation” or automation with a human touch.

Chapter 2 looks at the evolution of TPS, in particular, problem solving by asking WHY five times – or 5 Why Analysis. The concepts of Standard Work, Teamwork, Kanban, Flow and Leveling are introduced.

Chapter 3 extends the above concepts in more depth.

Chapter 4 talks about the background to the development of TPS and provides a clearer view of how the elimination of waste became entrenched in Toyota from very early in Toyota’s life through to today.

Chapter 5 discusses the differences between the Ford system (mass production from early in the 20th century) and the Toyota Production System and highlights where the respective upsides and downsides may apply.

Chapter 6 covers the use of TPS in a low growth environment and making use of available resources.

This book is not a text book on how to do or implement TPS. This book is about the philosophy that underpins TPS and Lean. It will help you set your baseline on where to start when considering if the concepts developed for TPS are likely to be suitable for your business. Highly recommended!

Toyota Production System – Beyond Large-Scale Production
Taiichi Ohno
Productivity Press ISBN 0-915299-14-3
Original Japanese version 1978
English translation 1988 by Productivity Press

Other books by Taiichi Ohno include “Taiichi Ohno’s Workplace Management” and “Just-in-Time for Today and Tomorrow.”

Peter Gardner is a Senior Lean Consultant with Shinka Management focusing on business profit improvement utilizing lean manufacturing practices. Peter has been involved in leading lean manufacturing programs for the past three decades. In his previous role as Global Manufacturing Engineering Director at TI Automotive, Peter had responsibility for manufacturing operations at 80 factories.

Shinka Management provides lean consulting, lean training and Japan study mission week-long training courses which include Toyota factory tours and visits to several plants in the Toyota supply chain to learn about the application of TPS.

Leadership during Crisis

Handling of Takata Recall Points to Issues at the Top

The big news in the automotive industry last month was the escalation of the ongoing Takata airbag affair. The fault in the airbag inflators was initially brought to the public’s attention with a recall of a limited number of vehicles in 2013. We have since had Takata state that it is does not know which airbags have been supplied for use in which vehicles, with worldwide recalls following involving dozens of models from several car manufacturers. Issues with Takata airbags resulted in at least 139 injuries across all automakers, and at least two deaths and 30 injuries in Honda vehicles.

Last month I received a request from a London-based journalist for comment on the issue. She asked if the Japanese had lost control over production processes implemented by their suppliers and factories abroad. I did not consider this the case in general, and given when the defective inflators were manufactured, we can only comment on the state of the automotive supply chain from more than ten years ago.

I think the bigger issue here, and the one that the US Government and press have been pointing to, is the response from Takata and Honda. It is difficult to know if the allegations of cover-ups levelled at Takata are true, and given the “anonymous sources” cited, it is difficult to credit these claims. However that Honda didn’t report 1700 incidents related to the airbags when it was required to do so is quite surprising. Each year we visit auto manufacturers in Japan, and the approach to quality and safety is certainly not lip service – they take these very seriously. Their priorities are safety and quality and only after those do they consider productivity – that is always the order.

I’m not sure if it has been noted by the mass media over the past month, but a quick look at the list of Takata shareholders shows Honda with a 1.2% holding. It might be questioned if there was any additional motivation not to report because of this; however as it is common for Japanese companies to hold stakes in their peers, I personally don’t think this had anything to do with it.

Takata’s Response to the Airbag Recall

In the case of Takata, I’m really surprised that Shigehisa Takada, Chairman and CEO, has hidden from the press throughout the recall debacle – this is one of the most critical junctures in the history of this company (a seat belt recall in 1995 having been the other, again involving Honda and at the time being the second largest recall in the 30 year history of the Japanese Department of Transportation). Apart from some reshuffling of senior staff and a token pay cut in late December, the best the company has been able to do is a Chairman’s Statement which leads out with “We’re sorry – but don’t forget our products save more people than they kill.” Classy.

Toyota’s Handling of the Sticky Pedal Recall

Toyota experienced a similar setback in 2010 with their electronic accelerator pedal issue, but Akio Toyoda, President and CEO (who is widely respected by his staff in Japan, and the automotive industry in general) stepped up and showed real leadership. Despite not being behind the wheel at the time the quality issues occurred, he apologised profusely to all concerned and famously admitted “we pursued growth over the speed at which we were able to develop our people and our organization.” In short, Toyoda made sure Toyota took full responsibility and instructed his staff to provide complete transparency and full cooperation with investigators throughout. He didn’t play the blame game, and instead pointed the finger squarely at his own company. He gave a nod to his company’s lean manufacturing philosophy with regards to handling defects “…its a long-standing tradition and pride, we never run away from our problems or pretend we don’t notice them,” and in closing gave his personal commitment to restore the trust of Toyota’s customers, noting that his name was on every car.

It is a shame to see Takata not following Toyota’s lead in this case. In the case of Honda, they have been doing a bit better following a bumpy start, however I’d expect much pressure on President Ito to step down at the end of the financial year in March.

Too Big to Fail

An interesting question that arises from all of this is the impact on the global automotive industry should Takata go out of business. They’re currently number two in an industry with only three large airbag makers. There would be incredible strain on the supply chain if Takata did meet its demise. The resulting duopoly would not be welcomed by auto makers for a number of reasons, not least for the risk to the supply chain. Takata’s share price has plummeted and I’d expect huge losses in the years to come, but it will be in the interest of the industry as a whole to make sure they survive. We can expect the industry to come to their rescue in some form.

Good Judgement, Quick Action

It is an unfortunate reality that no matter how good a company’s product development, production management and quality control systems are, a zero defect level is always going to be extremely difficult to achieve. For companies the size of Takata, Honda and Toyota, recalls are still going to be a fact of life. Rather than point to deficiencies in the management of the supply chain, what these incidents cast light upon is the effectiveness of the company leader to have good judgement and take quick action in times of crisis. This is what Takata and Honda should be reflecting on at this time.

Paul Smith is Director of Shinka Management, a lean training company specialising in Japanese lean manufacturing practices.

How learning lean management can lift the bottom line

Lean Management | Rick Wallace | The Australian | 26th Aug 2014

View full size article | Original article in The Australian | Japanese version

JAPANESE management techniques drawn straight from the production lines of that country’s industrial giants are making a surprising contribution to Australian firms as diverse as tech darling REA Group and transport operator Metro Trains.

Lean Management Article

So-called “lean” production methods are exemplars of the rigour and consistency that Japanese industry — and indeed society — is known for.

Lean philosophies have passed in and out of vogue in the western world and offshoots of lean — such as Lean Six Sigma — have been derided as fads.

But thanks in part to tours run by an Australian management consultancy and the Australian Industry Group, these methods are revamping operations in a range of Australian firms in the embattled manufacturing sector and beyond.

Shinka Management director Paul Smith, a devotee of lean who has been running increasingly popular tours to Japan to study production processes, says the list of firms putting them into practice is growing.

“For the first five years we were averaging 10 to 12 people per tour per year,’’ he said. “This financial year we have taken three groups with 37 people all up.

“Interest in the last couple of years has been outstanding.”

Executives and managers from Lion, Coopers and NZ building giant Calder Stewart are among those to have taken the tours to see operations at Toyota, Rinnai, Kirin, Sekisui and other Japanese industrial giants.

“The lessons that can be learned are not just for manufacturing and food processors … governments, financial services businesses and white-collar industries can benefit too,” Mr Smith said.

Lean is a catch-all term for a variety of industrial and managerial techniques and philosophies drawn from Japan — many from Toyota — on perfecting industrial processes and empowering the involvement of workers in problem solving.

It has a vocabulary of its own — kanban, kaizen, 5S, just-in-time production — but loosely encompasses visualisation, waste minimisation and standardisation to deliver the kind of quality, efficiency and attention to detail Japan is famed for.

Some of it can be seen as commonsense or even trivial. 5S, for example, is essentially about keeping workspaces clean and well ordered. But combine it with passion and commitment and you get monozukuri, the art of making things that defines Japan.

The lack of understanding of these concepts in Australia is what some say finally convinced Toyota to pull the plug on manufacturing in Australia.

It is the antithesis of the she’ll-be-right mentality, the emphasis on individuality and the disdain or lack of passion for perfecting superficially simple processes that exists here where management sometimes be more like herding cats.

This, though, is beginning to change, according to Shinka co-­director Ben Sparrow who said Japanese firms, Toyota notwithstanding, were investing heavily in Australia and would want to implement their own methods.

“Japanese investors are looking to transfer the lean management approach which is considered a given within Japanese Industry,’’ he said.

AIG chief executive Innes Willox said the need for change was clear. “The need to strengthen productivity and develop leaders with process improvement capability is an urgent issue within Australian industry,’’ he says.

“The Lean Japan Tour is providing a connection with Japanese companies that have decades of experience in sustaining continuous improvement cultures.”

Superficially, it’s surprising to see the name of the REA Group, a creatively-charged disrupter that has revolutionised the buying and selling of real estate through the realestate.com.au website and other property portals, pop up on the tour attendees list.

But REA’s Herry Wiputra, a participant in one of the lean tours, said there were many principles, if not practices, that translated into the software field.

He said the firm had applied the just-in-time production theory of the auto industry to software development and this tied in with the customer-focused, agile model of programming or development prevailing in the IT industry.

“We make sure that we make decisions based on the right information at the right time. We avoid doing big upfront planning or documentation because it is a waste,’’ he said. “In my eyes, lean is actually promoting human creativity.”

Melbourne’s metro operator Metro Trains — straddling rising customer demand and an ageing rail network — is another convert to lean methods. Greg Curcio, head of the company’s improvement support team, is another tour participant who’s applied the theory to his firm through visualisation of problems and breaking down barriers between the shop floor and management.

“The line between management and employee is blurred when it comes to striving for continuous improvement. The principles are about leadership through enabling and empowering workers,’’ he said.

“Much, if not all, of the knowledge about how something works lies with the workers themselves.

“And if there are problems, inefficiencies or unsafe work practices, management get involved and assist, but don’t dictate what the fix is,” he said.

Shinka’s Paul Smith said the theory was easy enough to understand but it took leadership, time and commitment from the top to implement lean in a business.

“Many companies we talk to in Australia fall into one of two categories: either they’ve tried lean for a while and haven’t seen results, or they’ve had some quick wins, patted themselves on the back, and now consider it done.

“This misses the point that lean is about creating a culture of continuous improvement. While companies here are quick to tell us how well they are doing, Toyota, Rinnai and Kikkoman — who are absolutely dominant in their industries in terms of innovation, production, quality and marketing — emphasise how much improvement they still have to achieve.

“They never let themselves feel satisfied. They have faced many of the same constraints as Australian companies relating to labour costs, exchange rates, foreign competitors — with the added stresses of importing raw materials and energy — but these companies are thriving despite the GFC and the 2011 disaster.

“But there are some companies in Australia that are leading lights — such as the REA Group (which is majority-owned by News Limited, the publisher of The Australian) — where they have embraced lean as a culture and they are doing well.

“In these successful cases you usually find the firm’s leadership is driving the change. You need those at the top to drive the process and make sure the culture endures.”

This article was authored by Rick Wallace and originally appeared in The Australian on Tuesday 26th August 2014. The original article can be found here.

For further information regarding our Lean Japan Tours see: Lean Japan Tours | Kaizen Training

Introduction to Lean Manufacturing – Guest Lecture – Carnegie Mellon University Australia Guest Lecture

The following is a partial transcript of a guest lecture given at Carnegie Mellon University Australia on the 18th of July 2014. The lecture was delivered by Paul Smith as an Introduction to Lean Manufacturing for students undertaking the Master of Science in Information Technology course. The talk focuses on removing waste from business processes to improve productivity, quality and safety, and includes insights from the kaizen training and lean tours that Shinka Management runs in Japan.

As part of the lecture a discussion was held on the relevance of lean to the role of the CIO. As the most senior executive in an enterprise responsible for the information technology and systems, the CIO often plays a central role in business transformation projects. An understanding of the fundamentals of lean is relevant in this role, as more and more we are seeing business transformation projects being labeled as lean or agile. These projects often miss the point that lean is a culture that is developed over years, not a one-off undertaking.

Lean Manufacturing

Lean is a continuous improvement philosophy which is Synonymous with Kaizen or the Toyota Production System. The history of lean management or lean manufacturing is traced back to the early years of Toyota and the development of the Toyota Production System after Japan’s defeat in WWII when the company was looking for a means to compete with the US car industry through developing and implementing a range of low-cost improvements within their business.

In brief, lean management seeks to implement business processes that achieve high quality, safety and worker morale, whilst reducing cost and shortening lead times. This in itself is not unique to Japan. What sets lean management apart, and makes it particularly effective, is that it has at its core a laser-sharp focus on the elimination of all waste from all processes.

The Seven Wastes

So what do we mean by waste? Here we are referring to any expenditure of resources that doesn’t add value for the customer. In lean manufacturing there are generally considered to be seven types of waste.

  1. Over-production against plan
  2. Waiting time of operators and machines
  3. Unnecessary transportation
  4. Waste in the process itself
  5. Excess stock of material and components
  6. Non value-adding motion
  7. Defects in quality

Whilst we discuss these in terms of their origins in the automotive manufacturing industry, this same thinking can apply to almost all industries. These wastes can all be applied, for example, to the preparation and serving of a hamburger, logistics operations or a call center – this thinking is not limited to manufacturing.

Labour and Equipment Effectiveness

We can typically look at the waste within a business process by considering the labour and equipment effectiveness. For example for labour, there’s usually a stark difference between the paid time for a resource and the time that the resource is actually adding value for the customer. We can define this difference through a series of losses.

Labour and Equipment Effectiveness

Social Loss, for example losses due to meetings, is typically the responsibility of management

Utilisation Loss is generally the supervisor’s responsibility, and may occur if parts are not available or the operation is not setup such that the operator can perform at their best.

Performance Loss is the operator’s responsibility. This includes not meeting standard times and not following standard operating procedures.

Method Loss is the responsibility of engineering and management across the organisation. For example, if a product was not designed to be easily manufactured then this would be the R&D team’s responsibility.

We’re often also interested in the availability and effectiveness of equipment being used.

Plan Loss results from scheduling equipment not to run

Stop Loss results from a changeover or breakdown

Speed Loss results from running equipment below the design speed of the machine

Quality Loss results from producing defective parts and materials

Analysis of equipment effectiveness is especially important to focus on when dealing with high-cost equipment, such as in drilling, mining or the airline industry. In these cases a business is only making money or providing value when its equipment is operating.

Field Inspections

Rather than talk about theory, let’s look at a couple of examples from industry. I’ve chosen this first example as an introduction to two fundamental approaches used in lean management, time studies and work sampling. This example is for an Australian power utility and focuses on the field asset inspection process. Utility companies, whether they be power, water, gas, or telecommunications have a responsibility to continually assess the condition of their assets, and this is especially true for utilities operating in a regulated environment. A power utility typically has dozens of asset inspectors operating in the field.

The task of the asset inspector, in simple terms, is to carry out a series of visual inspections for a pole and its associated infrastructure (wires, insulators, transformers, etc.) and report on the current condition and any abnormalities. This task involves differing levels of complexity depending on terrain, configuration at the top of the pole, and reporting requirements and can take anywhere from 5 to 40 minutes for a single pole.

Time studies

Time studies and work sampling can be used to analyse asset inspection process. Time studies involve analysing individual cycles of a process, in this case the inspection of a single pole. The motion of the inspector and movement of tools is recorded and each individual element (step) in the process is listed along with the time required to complete it.

…a technique of establishing an allowed time standard for performing a given task, based on measurement of the work content of the prescribed (standard) method, with due allowance for fatigue and for personal or unavoidable delays.

Definition of time study, from: Salvendy, G. Handbook of Industrial Engineering, Second Edition, John Wiley & Sons, New York, 1992.

Time studies can be carried out manually or with video-based time and motion study software to help us understand:

- What elements (steps) exist within the process?
- What order are they performed?
- Does a standard operating procedure exist, and is it being adhered to?
- Is there variability in the way the process is run from cycle to cycle, or between inspectors?

We can then use the results of the time study, either manually or using time study software, to understand where improvements can be made to reduce the time required for the task and improve consistency. Improvements are found through analysing each element and then working through a process of eliminate, combine, rearrange and simplify.

Eliminate – Question whether or not the work or operation can be omitted, and eliminate those which are unnecessary. It is necessary to consider elimination before any other improvements.

Combine and Separate – For those operations which cannot be eliminated, study the manner in which they should be performed. The study should be done without bias from accepted ideas or prejudice. Attempt to reorganize work in as simple a way as possible. This is combination and separation.

Rearrange and Substitute – Consider questions such as when to do, in what order, how can work be done easily, etc.

Simplify – Consider improvements to make each operation simple and easy, to shorten distances, to lessen weight etc.

An example of each in the context of the asset inspection example is given here:

Eliminate – Remove the need for the inspector to walk around the car to fetch tools, by storing tools on the same side of the car as the inspector.

Combine and Separate – Merge the tasks of wire inspection by binoculars and photographing top of pole by providing inspector with binoculars that include a camera function.

Rearrange and Substitute – This can refer to changing the order of the elements or changing the layout of the work area. An example of the later would be to attach lighter tools required for the inspection to the inspector and attach other tools to a board which can be easily attached and detached to the pole (e.g. by use of magnets).

Simplify – Reduce the time required to upload photos during each inspection by using wireless upload to laptop rather than wired upload.

Through some simple changes and low-cost improvements, its possible to develop a standard layout and procedure that allows the inspector to complete 58% more inspections in the same amount of time.

Standard Work

Time studies play a role in the development of standard work, often defined as standard operating procedures (SOPs). Standard work plays a critical role in achieving the following:

- Determine the capacity of equipment and facilities
- Enable effective work scheduling, maximizing output and utilization
- Give management data to trace the difference between standard and actual times
- Compare the time needed for different work methods
- Evaluate the productivity of equipment to be purchased
- Facilitate efficient layout of the production floor
- Balance work force with the available work
- Facilitate accurate cost determination in advance of actual production
- Identify and resolve safety and quality issues

Work Sampling

Work sampling is often used together with time studies. The purpose of work sampling is to understand how an operator uses his or her time during the course of a day’s work. A record of activities is taken at a set interval, for example every minute, and a day is summarised according to time spent performing main tasks, performing auxiliary tasks and idle.

The purpose of work sampling is to help identify how more time can be allowed for performing main (value-adding) tasks as opposed to auxiliary tasks such as setup and shutdown, and tasks that are not work-related.

Although not the main role of work sampling, the mere act of carrying out a work sampling activity can help in identifying a wide range of improvement topics relevant to the task be studied.

Dealership Process Improvement

The second example I’d like to show is for an Automotive Dealership. This example is based on the Dealership Process Improvement offering that has been implemented in quite a number of countries with the purpose of improving customer experience and dealership productivity.

The typical customer experience in taking one’s car for a service involves dropping the car off at a dealership or mechanic in the morning and picking it up in the evening. As part of the Dealership Process Improvement program, a One Hour Express Service offering can be provided.

During the lecture we looked at an analysis that focuses on movement and tasks performed as part of a standard service. The changes include the move to using two mechanics working in unison, and other improvements that are simple and not capital intensive. The ordering and assignment of tasks allows each mechanic to reduce the amount of walking they do, and the design of the express service trolleys allows for more convenience and less movement away from the work area. The result is that the service can be carried out with two mechanics in under a third of the time it originally took with one mechanic.

Benefits associated with these improvements include
- Customer convenience associated with maximum one hour wait time
- Standardised process has positive impacts on quality
- Better utilisation of space – a greater number of cars can be serviced without having to increase the number of service bays
- The planned approach has many benefits that extend beyond just the service itself

The example relates only to the service component, but there are many other aspects to the Dealer Process Improvement offering. These include:

- Pro-active customer contact
- Customer appointment
- Personalised customer reception
- Confirming price and delivery time
- Customer care (Coffee, showroom tour, etc.)
- Workshop scheduling
- Parts stocking & Picking
- Repair order and processing of quality work
- Repair order completion and invoicing
- Customer Information and car return
- Customer after-service contact
- Concern prevention and resolution

Dealership Process Improvement

The Dealership Process Improvement offering has been customised and implemented for a large number of automotive companies.

Lean Concepts and Tools

So these were just a couple of examples, with a focus on wasted movement (6th in the list of wastes above) because it is easy to visualise. Lean management and lean manufacturing encompasses so much more. Some of the concepts and tools that are commonly encountered in lean are shown here.

- Process Levelling and Flow
- Performance Management
- Push vs Pull Production
- Visual Management
- Standardisation
- Target Setting

- 5S
- TPM
- SMED
- Kanban
- Pokayoke
- Just-In-Time

Kaizen Terms

However, lean is not so much about using a set of tools to implement spot changes, but more about how to foster continuous and sustained improvement across companies – and this is an area that Japanese companies are particularly strong in and an area where much of the English literature available on lean is lacking.

5S

5S is a set of practices that is the foundation of a lean company. A simple definition of the five practices follows:

Seiri (Sort) – Identify and separate the necessary, occasionally used and unnecessary items.

Seiton (Set in Order) – Arrange necessary and occasionally used items into clear designated storage positions.

Seiso (Shine) – Thoroughly clean the workplace and equipment. Cleaning is an inspection.

Seiketsu (Standardise) – Visual aids, 5S manuals, 5S audits. Standardise 1-3S.

Shitsuke (Sustain) – Practice 5S to the point where it is a natural part of your work.

In Japan there are entire books devoted to the practice of 5S, and different companies have different interpretations and implementations of these practices to suit their own requirements and philosophy. A few visual examples follow:

Seiri Seiton Tools

Above: The process of simply carrying out 2S, that is Sort and Set in Place, makes it easier to find tools when needed, and with less chance of injury.

Standard-Layout

When there is a defined place for everything, such as in the example above, or when using shadow boards, it is very easy to understand if something is missing with one glance. This helps avoid stoppages to search for tools in a manufacturing environment, and in some environments such as hospitals, can mean the difference between life and death in an emergency situation.

Lean Hospital Nurse Station

Simply setting and maintaining a defined order for manuals in this nurse’s station in Japan reduced the amount of document-related work time by more than half. Note the use of the yellow and pink tape, which allows us to tell if anything is missing or in the wrong place with one glance.

5S Visual Management

The above photo is from a foundry in Japan, the use of standard layouts here helps shop floor managers determine with one glance if production is ahead or behind. If there are no completed products at the position where the flags are, this represents a situation whereby production is behind.

5S Lean Factory Example

This steel coil handling facility near Nagoya represents a fine example of 5S achievement. The productivity, quality and safety outcomes of such a work environment are significant. This provides a foundation allowing for standard work, visual management, and other elements of lean management to be applied effectively.

Kanban

Toyota is one of the largest companies in the world, ranking at about 14th in terms of revenue and with 300,000 employees globally. The company manufactures approximately 10 million cars per year. If we were to assume 30,000 parts to each car on average, that’s 300 billion parts handled annually as part of Toyota’s global operations.

It may be surprising to learn that the scheduling and inventory management system at the heart of these operations is not a complex enterprise resource planning system, but a remarkably simple concept – that of the kanban card. There’s a lesson here for the future CIO or CTO that the best solution for handling complexity isn’t always going to be a high-cost cutting edge information system. By considering process first and then system, Toyota could identify this tool as being an appropriate solution to help manage their supply chain.

Kanban Example

The use of kanban is governed by a simple set of rules. The kanban rules are as follows:

  1. Take kanban off container when you use the first part
  2. Next process gets kanban from previous process
  3. Only produce the product and volume specified on the triggered kanban
  4. Don’t produce anything without a kanban
  5. Always transport product with a kanban
  6. Don’t use anything without a kanban attached

Whilst the concept is simple, use of kanban is not recommended for most companies. Proper implementation of kanban requires strict discipline to be effective, and without a good foundation of 5S and other lean fundamentals, implementation of kanban is destined for failure. Some of the best lean companies in Japan, such as Rinnai, waited 10 years after commencing their lean journey before considering the use of kanban – without the lean fundamentals and culture properly established, a kanban system can be damaging.

Successful Lean Companies

Here we have a summary of the hallmarks of companies that are succeeding with lean. These point to the role of the person at the top of the company as being of utmost importance in terms of developing and fostering a lean culture.

Successful Lean Companies

As our own benchmark for a successful lean company, we keep turning back to Rinnai under the leadership of Chairman Susumu Naito. The company’s motto is “Quality is our Destiny” and the 87-year-young Chairman continues to spend time on the shop floor every day together with his employees in a never-ending push towards perfection.

Agile Management

Related topics worth being aware of are that of agile management and agile software development. Richard Durnall, Chief Technology Officer for REA Group, credits lean thinking and agile management for much of REA Group’s success over recent years.

Richard Durnall CTO REA Group

Amongst other benefits, lean and agile help REA Group’s staff to collaborate more effectively and shorten their lead times for releasing new services and features for their customers.

Agile Management REA Group

Key Takeaways

In summary, some of the key takeaways from this session, especially for the aspiring CIO or CTO, are the following points.

- Lean management is not a project, it’s a culture
- The philosophy of lean is that of continuous improvement through eliminating waste
- Standards enable the improvement process
- Lean moves us away from putting out fires to a discipline of working on the business
- Remember: process before system

Paul Smith, PhD, is a Director and lean consultant with Shinka Management Pty Ltd, specialising in the transfer of of Japanese lean management know-how to Australian industry. Shinka Management provides lean training services focusing on practical, implementable solutions for improving business processes and increasing productivity and competitiveness. With the support of the Australian Industry Group, Shinka Management runs lean study tours to Japan to promote consciousness of Japanese management practices amongst Australian and New Zealand industries.

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