Leaning Your Boss

What do top managers need to learn to be able to lead a lean transformation? I get asked this question frequently. The answer is the same at every level of management. It boils down to three key things — learning to see the end-to-end processes or value streams they lead or contribute to, learning to prioritize and focus lean improvement efforts to generate real bottom line results and learning how people actually develop the problem solving skills necessary to sustain lean improvements over time. In each case understanding the true significance of these new skills only comes through experiencing them in practice.

One of the most immediate ways to teach senior managers how to really see a process is to take them for a walk with an experienced Sensei, starting with the end customer and walking back up the value stream as far as you can go. As they follow a product, a patient or a transaction all the way back upstream they will be shocked how many steps there are, how much rework goes on, how excessively long it takes and how unclear it is to everyone just what they should be doing next. This should be the trigger for a more detailed value stream mapping and data gathering exercise using the methodology outlined in Learning to See to flush out what is really going on.

But this is just the start. Back in the conference room after the walk ask the managers to describe what they saw during the walk and then compare this with what the Sensei saw. The managers will quickly realise they have only been looking at obvious symptoms of waste, such as piles of inventories, while the Sensei has been looking for the root causes of the instability and overburden causing all the waste in the value stream and the relatively poor performance at the end of it. Indeed managers are often shocked not just how oblivious they were of the process but also how blind they were to the causes of the way the process actually operates.

While this wake-up call is still fresh in their minds ask the Sensei to take them on a second walk to really learn to see what to look for in diagnosing what is wrong with today’s process and to see what the next steps should be. Do this on a regular basis along different value streams and at the same time the Sensei can introduce them to all the theory and tools step by step as they become relevant to the actions that need to be taken.

Once senior managers begin to see for instance how much cash could be freed up by streamlining core processes the next step is to work out how to go about releasing it. What actions in what value streams would release the most cash, if that is the key business objective? A second “walk” led by a Sensei would introduce Toyota’s policy or strategy deployment process, described in Ge fling the Right things Done. Step by step they will learn how to agree to only focus on a vital few business objectives or performance gaps that need to be closed and to deselect everything that does not contribute to closing these gaps (which is perhaps the hardest thing to do). They will learn how to conduct a dialogue with each layer of management right down the organisation to develop plans for the actions that will close these gaps. And they will monitor and adjust these plans as events unfold. In the process they will come to learn that good results come from good processes, not from issuing targets without an agreed method for achieving them.

Creating lean value streams involves progressively removing all the buffers that previously insulated every activity from any failures elsewhere. Although the performance of the process improves dramatically, so does its vulnerability to any kind of disturbance. Even in Toyota they assume that their lean processes will be continually subject to interruptions. So the key to sustaining these lean processes is the ability of the people running the process to respond quickly to interruptions as they happen and to track and eliminate the root causes of persistent problems. In other words developing the problem solving skills of employees at every level is at least as important as redesigning the value stream itself. This is why Toyota spends so much time training all their staff to think about planning actions and problem solving in a common way, using the A3 thinking process described in Managing to Learn.

So in Learning to See, Getting the Right things Done and Managing to Learn you have the basis for developing the initial insights top managers need to begin their own lean journeys.

Yours sincerely

Professor Daniel T Jones

A Recession Action Plan

A recession is a good time for lean. Organisations can either postpone lean and resort to traditional cost cutting, or they can accelerate and redouble their progress with lean. I doubt the former will last the course. But the latter stand a good chance of surviving and laying the foundations for future prosperity as they turn the tables on their competitors. There is no time to lose and no more time for excuses! So how should we make best use of this important moment? Here is my five point action plan for turning this recession to your advantage.

First correctly define the business problems you are trying to solve right at the top. In this case business problems are about closing performance gaps in order to survive and to take market share from competitors in challenging times. These gaps are now almost certainly bigger than they were. I recently asked the CEO of a large multinational why he wanted his company to go lean. He gave me a very general answer about rising input prices and squeezing margins. However the potential of lean is best understood in relation to specific value streams. 

So what are your main value streams creating value for customers and what are the key support value streams that enable them to flow? From examples elsewhere what is the potential for significantly improving their performance – getting new products to market in half the time, producing 30% more with existing equipment and no additional capital, meeting every delivery on-time and in full and with no invoice errors, responding to customer problems in hours rather than weeks, reducing length of stay in a hospital by half, compressing the supply chain from 200 days to 20, eliminating 80% of errors and effort to process approvals or payments in the back office, getting changes to the IT system in days rather than many months etc.? What improvements in which of your value streams with which customers and suppliers will make the biggest contribution to closing your performance gaps? What are your vital few projects – you cannot do everything?

Second give strong value stream managers end-to-end responsibility for each of these value stream projects. Their role is to gain agreement on the right things to do for their value streams from all the functions and departments involved who retain the authority over their resources). They also co-ordinate the implementation using all the lean visual project management tools and surface conflicts between functional and value stream objectives.

Third establish a Lean Council (like Toyota’s Quality and Cost Councils) of key function heads and value stream project leaders to initiate all cross functional projects, co-ordinate them, review progress and resolve conflicting agendas. They should also have responsibility for developing the lean experts to support these value stream projects and for spreading lean knowledge through networks of peers, workshops and an intranet data base of projects. 

Fourth prepare for the future now by getting a high potential group to think outside the box and make the currently impossible possible using lean. This means thinking back from the customer’s use of the product or service and exploring alternative routes to market. It also means challenging the design of the product or service, the right-sized tooling to make it, the right IT systems to run it in the right location with a co-located supply base. 

Fifth use these value stream projects to teach everyone how to see the right things to do using A3 planning. This is also a great opportunity to teach line managers how to use visual management to track progress in real time and to respond quickly to problems. It is also a great opportunity for line managers to develop the capabilities of their staff to diagnose and solve problems – by using A3 thinking. This means asking the right questions to help them learn rather than telling them what to do!

None of these steps are easy but they are all focused on solving the most important problems facing the business while developing the capabilities to sustain and significantly improve this performance into the future. This path will also begin to make sense of some of the apparent paradoxes of the lean management system pioneered by Toyota. 

Yours sincerely
Professor Daniel T Jones

Lean Action Research

Last month I concluded that simply overlaying lean tools and rapid improvement events on an existing management system using traditional change management techniques is unlikely to be sustainable. Indeed if we go no further than this there is a real danger that lean could well become another wave or programme of the moment that would inevitably subside like so many other waves. Consultants would inevitably look elsewhere for the next thing to sell their clients. Meanwhile the gap between Toyota and the rest would continue to grow and we would have missed a huge opportunity. 

I get asked to look at lean transformations in all kinds of sectors. And I come to the same conclusion every time – the crucial missing element that determines the likely success or failure is management and leadership. Tools and engaging employees in seeking out waste is not enough. Over the years we have spent a lot of time learning how to use the right lean principles in the right sequence to redesign value streams in all kinds of situations – from discrete assembly to process industries and from transactions processing to call centres and from grocery distribution to flows of patients through hospitals. Finally we are beginning to see lean breaking out of operations to true end-to-end value stream redesign. This is very powerful but even this is not enough. It is certainly necessary but it is not sufficient. 

So our challenge is how to describe and create a lean management system that goes beyond what we might call traditional modern management. We have all learnt a great deal from reading about and hearing first hand experiences of how Toyota’s management system actually works. This must be the starting point and the continuing reference point for such a journey – but there is still a lot of work to do before we have a functional equivalent and a lean transition path that will create the management behaviour and leadership roles that go with lean. We know this knowledge cannot be generated in a classroom or by desk research. It is also difficult to do through traditional consulting. The only  way I know to do this is by engaging in real experiments in real situations and systematically reflecting on what works and what does not. Jim Womack and I were fortunate in being able to observe experiments by others in writing Lean Thinking.  Now it is time to get involved in what I call lean action research. 

Lean action research goes beyond traditional consulting in its intent, its execution and in the reflections on its results. The clear intent of lean action research is to generate knowledge that can be acted upon by others. We can draw on Toyota’s example for our questions and hypotheses but the problem to be solved is how to make them operational in other organisations. This is very different objective to selling a repeat product to many clients to make as much money as possible. Yes it is more risky and top management has to sanction the experiments and be willing to learn from the results of both successes and failures. But if the joint intent is clear from the outset it can be a very powerful win-win for both parties. 

To generate real knowledge about what not only creates progress with lean but what sustains and builds on it over time the execution phase is also very different. Right from defining the business problem to be solved and scoping the experiment it has to be based on a mentoring and do-it-yourself approach rather than an expert led roll out. 

The final step is to reflect on the results and to write up the lessons from several similar experiments in order to make them public so others can act on the results themselves. Of course the host organisation for this lean action learning is interested in stealing a march on its competitors. What distinguishes the winners and losers is not the knowledge itself but the ability to act on it over time. Consultants will no doubt play an important role in disseminating these results but only if we are able to create self sustaining exemplar organisations to act as role models for others to follow. 

Yours sincerely
Professor Daniel T Jones

Changing Gear with Lean

I am convinced that it is a mistake to roll lean out across an organisation using traditional change management techniques. They may work for a while – but beyond a certain point they can become a hindrance to further progress. Just as we have to rethink the design of key processes and the role and behaviour of lean managers, so we also have to rethink the change management process to deliver lasting results with lean. 

This can be seen most clearly in the most active sectors embracing lean in the UK today – consumer goods, all kinds of service providers (financial, utilities, telecoms, IT etc) and the public sector including healthcare. All of these are well into the first phase of lean and face a big challenge if lean is to really make a lasting impact. 

The characteristics of the traditional change model are very familiar. Many of you will have used them to deploy Six Sigma through your organisations. Top management is convinced that the deployment of a set of new tools may improve the performance of their business. They hire outside experts and train an internal staff group to fan out across the organisation to identify and run as many projects as possible using one best way and probably with lean using week long rapid improvement events or Kaizen blitzes. The early results generate lots of good stories, and employees become truly engaged and enthusiastic as they identify and eliminate low hanging fruit in their areas. This builds credibility for the methods and techniques. All well and good.

But the flip side is not so rosy. Improvements are not so easy to sustain once these experts leave on another assignment, as they inevitably will. With only loose direction from top management it is difficult to trace the results from these islands of improvement to the bottom line or to better customer service. And no one really checks to evaluate the true success of these rapid improvement events. We recently did an assessment of a hospital that had done 93 Kaizen events. The success rate was less than 20% and none of these had impacted the core A&E process that really kept the CEO awake at night! No wonder they were looking for a change of direction. 

The next phase of lean starts with top management learning to see the vital few actions, on the right products and service lines and with the right customers that would have the biggest impact on the performance of the organisation. In the hospital getting the chaotic flow of patients through A&E under control is the key to establishing stability and a common rhythm across the rest of the hospital. From then on all improvement activities should be resolutely focused on just these vital few projects. 

These projects must also be end-to-end and maybe even involve key customers and be focused around a clear business problem or opportunity. This could be selling more product by marketing, planning, production and logistics working together to improve on-time delivery by producing and shipping more frequently in line with demand. 

Absolutely critical to the success of these projects is a cadre of lean value stream and line managers with the right skills to build agreement between all the involved parties on the right course of action and then to see it through. Because lean removes all the buffers between steps these lean project and line managers need to also spend a lot of their time  developing and focusing the A3 thinking and problem solving skills of employees running the process.

The core of a lean transformation model is the use of the scientific method to define key business objectives and to develop the planning and problem solving knowledge of employees. However unfamiliar the language it is right to think of lean as a series of controlled experiments. For any experiment you need to clearly define the (in this case business) problem you are seeking to solve, with a clear way of measuring success or failure. As well as identifying the root causes a good experiment will not just pursue one possible countermeasure but several. And most important of all you spend time reviewing, writing up and reflecting on the lessons learnt, successful or not. If we are honest none of these are common practice in business. 

Yours sincerely
Professor Daniel T Jones

Doing Lean Yourself

I used to think lean was something best begun at work. I listened to friends who enthusiastically embraced lean in their homes, but I hesitated to recommend those new to lean to follow their example. Replenishing kitchen cupboards using Kanban cards and purchasing two dishwashers so you never have to put the dishes away works for some people, but it can also lead to domestic disputes for others. 

Better to get some hands on experience of lean at work first before trying to convince the rest of your family. Once the lean infection has taken, then by all means think about taking it home. I certainly did warn those taking the lean medicine that there was no antidote and that they would begin to see lean opportunities everywhere. As you go off on your holidays you will no doubt see more Mura (variation), Muri (overburden) and Muda (waste) in new surroundings on your travels. 

Perhaps the best place to start at home in my experience is doing 5S in the home office – managing the flow of paper in and out, using visual management to store everything etc. However I now think we would all make more progress with lean if we really begin using a lot more lean management in running our own personal lives, both at home and at work, particularly if you are a manager.  

This was brought home to me recently in redesigning the complex flow of patients through a hospital. With our team’s guidance they introduced the core elements of visual management – a Plan For Every Patient and Patient Progress Boards - to track the progress of patients from step to step, to respond quickly when things did not go according to plan and to identify recurrent problems that needed tackling. Variability in each step in the process was reduced and overall performance improved significantly. We had begun to create some stability before we began to redesign the process itself. 

However we then walked away to work elsewhere and the discipline of using visual management tailed off things quickly went backwards again and normal chaos was resumed. Not surprising really as the staff were new to this, but much more significantly there was no effective management to make it work. We had made our point and the stability quickly returned when we came back a few weeks later. We have repeated this experiment of walking away on several other projects, with the same results. In these hospitals we were only seeing a more vivid example of what happens time and time again with lean projects in every factory or office. The key to sustaining lean is always management. 

We have always said that learning lean is an experiential journey. The same is true with lean management. So this year I have been experimenting with using the tools of lean management in running my life. One of the hardest things is to do is to use simple policy deployment to focus on just doing the most important things and to deselect the many other things you would also like to do but don’t have time for. The second is using A3 planning to really define what you are trying to accomplish and what actions might get you there.

Next comes using a plan by the day or at least plan by the week board to visually manage your workload. My office calls this “Dan’s No Board” – as it is really beginning to level out my workload and reduce my natural tendency to say yes to too many things. Then if you can, do a little reflection every week on your effectiveness – how many hours per week are you really being effective and how much time is really not very productive. If you are honest you will be surprised how much of your time – and that of your employees - is wasted in unnecessary meetings, fire fighting, travelling etc. Being able to answer emails while on move for instance goes a long way to making this time more productive. 

I wish I could say all this is easy – it is not. It is genuinely difficult to sustain. But keep at it and you will see it makes a huge difference to your life.

Yours sincerely
Professor Daniel T Jones

Lean Homework

The consumer goods industry is waking up to lean in a hurry. With rising input prices and powerful retailers trying to keep the lid on prices they have few other places to go. It is finally time to try lean. But they may be disappointed if they just think lean is another form of cost cutting. No question that applying lean tools like TPM can improve asset utilization. But the real potential of lean is much greater than this.

I get frequent requests to go and explain lean to senior management groups. Before I go I usually set the lean enthusiasts in the organization (and there are always some early adopters of lean in these companies) some homework to do which will help us together to make a powerful case for lean. 

The starting point is to discover the degree to which you are currently disappointing your customers today - how many orders do you satisfy completely on time, in full and invoiced correctly? Then go and talk to your marketing folks and ask how much more they think they could sell if you met every delivery on time, in full and invoiced correctly. They may not believe this is possible - but persevere. 

Ask them how much more they could sell if you were also able to produce 30 per cent more of your high volume products with your existing resources. Then ask them what difference it would make if production could be varied to respond to changes in demand in days rather than weeks. And finally ask them whether supplying much fresher products to the market could also increase sales.

The next step is to analyze your product mix using the methodology explained in Breaking Through to Flow. You simply can't do lean on all your product lines at once - so start with the few high volume products that account for most of your production and sales. Treat these differently to all the other products using levelled production, or as Toyota originally called it “patterned production”. 

Then check the per cent variation in demand for these products and you will see you need much less buffer stock of these products than you think. So you can let this buffer stock absorb the variation in demand which is how you can implement leveled production for these items rather than constantly changing the production schedule as invariably happens now. By so doing you could create the essential precondition to really go to town with lean - basic stability - even where you did not think it is possible.

The next step is to walk the physical flow back from the end customer for these products - counting the steps, time, touches and inventories as you go. Wherever the product stops ask why - is it because you can't rely on getting product when you need it? Or is it because you only make and ship the product once every few weeks? Or is it to buffer against fluctuating demand? Or all three - but how much of each?

Turning these observations into a value stream map for these products following Learning to See and particularly asking the questions outlined in that book will reveal all the improvements to make this product flow from door to door.

Next ask how often production ships its orders on time and in full as planned to the warehouse. Ask planning how often they issue a production schedule - maybe once a week for batches every several weeks. Then find the data to see the gap between what was planned and what was actually produced. 

What you are seeing is the degree to which the planning system rather than buffer stocks are being changed in line with customer orders. You are also seeing the degree of order amplification being passed upstream. If you look at the electronic point of sale data for these products and compare it with the orders your company receives you will see most of this amplification is caused by the way data is handled and not end customer demand. This amplification is an invisible curse created by the algorithms in the planning systems requiring extra buffer stocks and capacity to meet artificial peaks and troughs in demand.

Now you have the basics to establish the business opportunity for lean and a series of actions that could be implemented to meet it. Put this into an A3 proposal so we can begin the dialogue to refine the plan before presenting it to top management. 

Yours sincerely
Professor Daniel T Jones

Lean Consulting

Some time ago I worked alongside a team of super sleuths from a large  consulting firm who were very skilfully looking for opportunities to cut costs – unnecessary activities and surplus heads when compared with their benchmark data from other clients. Our mission was very different – to engage some of this brainpower to create a process out of a set of activities in three locations to speed up the engineering changes on a large project that was way behind schedule. I was impressed by their skills and they were fascinated and enjoyed the intellectual puzzle involved in creating this process and the war room to coordinate the flow of work. 

But my reflection on their original and ongoing mission was what it revealed about traditional management. The reason top management spends such large sums on these super sleuths is that this is a powerful way of challenging the budgets of departmental and function heads or business unit managers playing the traditional game of bidding for resources in the annual planning round. On the one hand department heads are rewarded for “making their numbers” each quarter and on the other hand how they do this is up to them – so don’t pry into how they do it. Which is why the dream of an all seeing financial control system is so appealing to top management – and so are the services of these outside sleuths. This is just one example of how traditional consulting models are a product of traditional management practices. 

Recently I also meet several top managers who want to hire a seasoned lean expert to head a team to deploy lean across their organisations. This form of deployment is another characteristic of traditional management – and the way Six Sigma was rolled out at GE and elsewhere – as a central staff driven change programme. The obvious danger of this approach is that it is seen as another wave which will come and go so it does not matter if experts come and do it for us or even to us because things will revert to normal again when they go. 

It does not matter whether these are internal experts from a central expert group or from an outside consulting firm, the results are similarly difficult to sustain. And yet despite the rhetoric this is the way many are trying to implement lean in their organisations or in their clients. However trying to sell a different path of lean implementation to traditional managers is an uphill struggle, particularly if they believe lean is something for operations to do that does not mean they have to change their own behaviour in any way. So it is easier to sell a lot of Rapid Improvement Workshops and hope they will learn. 

So if lean involves a fundamentally different management model it also means a very different model for implementing lean (maybe implanting lean is a better word) and a very different way of using outside experts and consultants. I am now convinced that we should think about every lean intervention as an experiment as well as an opportunity to build lean knowledge amongst those who will run the process. 

Top management has to grant permission to conduct the experiments and to act on the results. The initial experiments ought to focus on primary value streams that reach the customer and involve the relevant departments, like marketing, logistics and operations. A value stream manager needs to lead the tem to learn to see real demand, to see the verifiable net benefits from the investment in this experiment and to create the future state process design and action plan. And the value stream manager also needs to engage every manager, section leader and employee in a dialogue with their superior using A3 thinking to solve problems that contribute to realising the plan. 

Just like a scientific experiment we need to be prepared from the start to be able to evaluate the success of the experiment and to write up and reflect on the results. Outside experts and Senseis should be judged on how good they are at asking the right questions to guide this learning process rather than how many Kaizen events they can run. 

Yours sincerely
Professor Daniel T Jones

Rethinking IT

I have been through Terminal 5 at Heathrow three times since it opened. Although in each case the plane was late arriving and leaving, the flow of passengers through the building is impressive. With no checked in bags it took me less than 10 minutes from standing up in the plane to driving away in my taxi, and not much more than that to get to the gate from the taxi when I left the day before.

Compare this with the 20 minute walk from the furthest gate in Terminal 1, let alone the long trek to or from the gate in Amsterdam, Frankfurt or Munich airports. At Terminal 5 they have clearly got something right. When they have ironed out the bugs in the baggage system it might even become a lean experience I could look forward to.

This reminded me of another thing they got right with this building – they completed what is one of the biggest construction projects in the world on time and on budget. This is almost unheard of in the UK, and I understand some of this team went on to work on the stunning renovation of St Pancras station and are now working on the London Olympics for 2012.

The foundations of this success were laid by Sir John Egan when he was chairman of British Airports Authority which runs Heathrow airport. In preparation for taking the lead role in building Terminal 5 he pioneered partnerships with his construction suppliers to define precise specifications up front, to standardise where possible and to speed up the flow of work involved in planning, fabricating and assembling each project. It took suppliers a while to get used to this new way of working. Initially they complained that they could not make any money on these contracts because BAA made no changes after the contract was agreed!

The construction of Terminal 5 is an impressive story. Everything arrived through one access road to the site, with up to 1,000 tightly scheduled deliveries a day and many parts of the building were actually fabricated in two on-site factories just prior to erection. Sir John also chaired the UK government’s Rethinking Construction task force comprising major repeat clients, involved in building supermarkets, hotels, roads, offices, hospitals etc. Most of them began to adopt this new lean business model with their construction suppliers.

But one thing that let everyone down at Terminal 5 – and delayed my flights – was the IT driving the baggage system. As usual it was trumpeted as the biggest and most advanced system of its kind in the world! To me this signals an unnecessarily complicated and unproven prototype that will not be ready on time and cost twice as much to fix. In other words a product of the same old broken business model that prevailed in construction - bid low and over promise to get the business and then make all the money on all the changes and fixes.

I see exactly the same problems with every monster SAP system in manufacturing – they caused a lot of pain to install and have left a big and expensive legacy of fixers to keep them running. I also remember the state of the art ordering system and massive automated warehouse that nearly brought Sainsburys to its knees a few years ago. It has now been completely written-off and dismantled and sales have recovered. It looks like the massive IT system that was supposed to bring the NHS into the space age is suffering similar problems.

At two big conferences recently I began to detect a very significant change of tone. Gone are the bold assertions I was told several years ago by a leading pharmaceutical firm that all change in the organisation was driven by technology and by the IT department. Now I hear talk of technology no longer being the driver but an important enabler of the kind of fundamental process changes driven by lean. And for the first time I heard a leading IT provider openly state that the industry needed to industrialise, standardise and simplify their products so that they actually work on time and on budget.

It seems to me that the core process in IT that needs to be leaned is the basic business model itself – how both parties negotiate and manage projects to mutual advantage. Once this is cracked it opens up all the lean opportunities in planning, developing, installing and maintaining IT systems. Without it these improvements are difficult to sustain.

Rethinking Construction led to significant changes in construction. It worked because it was led by clients fed up with the way construction firms in the past let them down, as they struggled to make money with a broken business model. I think it is high time for another major repeat-client led initiative to rethink the business model for selling IT. Until this happens IT will continue to be a constraint on progress rather than an enabler, in both the public and private sector.

Yours sincerely
Professor Daniel T Jones

Unscrambling Supply Chains

The other day I was with a group of senior executives puzzling over an end-to-end value stream map. In this case it happened to be for an automotive component, stretching from raw materials to the car assembly line, but it could equally have been for many other products, such as medical devices supplied into a hospital. Surprisingly this was the first time these executives had looked at all the end-to-end flows involved in making this product. They were shocked at what it revealed.

It apparently takes between 26 and 97 weeks – or between six months and nearly two years - to perform a total of 156 production steps in 21 plants spread across four continents. We estimated that it took no more than 200 minutes – or just under three and half hours - to carry out these forging, machining and assembly steps. Moreover these parts travel literally tens of thousands of miles across the globe before the final six assembly steps are performed close to the final customer, in this case in the USA. 

Calculating the total inventory cost in this long pipeline is a dramatic wake up call. But this is just the tip of the iceberg of unnecessary costs in this supply chain. Does it really need to take nearly two years to perform three and a half hours of value creating work? While these senior executives may have been shocked, this situation is unfortunately very common. What is surprising is that they and many other automotive suppliers have gone so far in the wrong direction in recent years, despite starting to introduce lean inside their plants more than a decade ago. 

So, they asked, how did we get into this mess? What does this reveal about the thinking behind the way we manage our supply chains? 

Eleven of the 21 plants are owned by this supplier and each of them specialises in a different set of activities, performed on many different parts for different customers across the globe. These are the traditional "focused factories" popular before the rise of lean and still being peddled by some consultants - shame on them. The thinking behind this is to concentrate skills and machines in fewer locations in order to benefit from economies of scale (bigger and faster machines) and to improve asset utilisation.  

However their experience of this focused factory thinking, like that of many others, is quite the opposite - a more complex product mix in each plant results in lower rather than higher OEEs and asset utilisation than before – as well as lots of additional costs throughout the much longer supply chain. 

Like many others this supplier tried to address this problem by buying an SAP ERP scheduling system to plan each production step and each shipment. This not only caused the usual chaos when it was introduced, but it did not get rid of all the short term plan changes to the schedule and the resulting fire-fighting, indeed both of these seem to have got worse, as did their OEEs.

In the face of relentless price pressure from their customers this supplier, again like many others, moved a lot of its production to low wage locations in Brazil and China. In private these executives described going to China in retrospect as "a disaster". Cheap direct labour costs were more than offset by a whole host of unforeseen additional costs.

The lean alternative is to try to co-locate as many production steps as possible for each product family in one location (either close to the customer or at a lower cost location in trucking distance within the region), using right sized equipment to flow the right products quickly through each step as triggered by Kanban pull signals from the customer. This simplifies the planning and scheduling process at the same time as compressing the total lean time through the supply chain.

But focused factories, ERP systems and low wage sourcing are actually symptoms of an underlying management system. Unless the mental models behind this management system are challenged these mistakes will be repeated time and time again and lean initiatives will never get off the ground.

Traditional management focuses on the vertical organisation of work, careers, technologies and budgets in plants and in departments. No one sees or is responsible for the horizontal flow of value across the entire organisation to the customer for each product family value stream.  

So the first thing to do is put someone in charge of the end-to-end value streams for each product family. Their job is to articulate the needs of the process, to shout when departments are tempted to act on their own behalf rather than in the interests if the overall process, and to lead the action to streamline these value streams.

Traditional management also tells facilities and department heads to “make their numbers” during each reporting period, which is often easiest to do off-loading costs on up-stream and down-stream portions of the value stream. What is needed instead is agreement to use lean methods to streamline the flow and to make progress at each point visible to everyone involved.

Traditional management allocates resources and makes investment decisions based on these numbers. This effectively means they are flying blind about the real situation and have no way to understand the total costs of different locations.

The whole point of a lean value stream is to discover exactly what resources are needed to flow products to customers quickly. This is the right basis on which to build a true cost of location model based on total costs and not just on factory gate costs plus slow freight. This in turn will reveal the huge potential from compressing value streams in time and distance. 

The moral of this example is that it is not enough to think about better process design when thinking about supply chains of the future, but it is also necessary to challenge the mental models on which your management system is based.

Yours sincerely
Professor Daniel T Jones

Jumping to Solutions

We are all guilty of one of the greatest sins with lean – not having the patience to really understand the problem we are trying to solve and then jumping to a solution that may or may not be the right way to solve this problem. This results in lots of Muda – wasted effort that does not really make a difference – to your organization or to your consumers.

We see this all the time. Analysing the enquiries we get tells us this problem is not getting any better. When people ask for our help with their lean efforts we ask them what problem they are trying to solve using lean. Often the answer is “we have been told to do lean and we need some training”. When we ask what this training is going to accomplish and how, they say you tell us - you are the lean experts!

If we then suggest they go back and clarify why their management wants to do lean and what they want to accomplish with lean so we can then look at alternative ways of learning lean rather than sitting in a classroom, things get more interesting. The answers we get tell us a lot about the organisation – after all the shop floor really is a reflection of management.

If the answer is “but I have a training budget to use up by the year end” or “we have been told to do so many rapid improvement events” we know they are not yet really serious about lean. If it prompts a dialogue with their management, this usually suggests a quite different course of action, such as working with senior management to design their lean transformation back from the needs of the business. As is often the case the real problem is very different to what they thought and so are the possible solutions.

Being cynical about this misses the point. This behaviour reflects the management systems we currently work in. Unless we recognise we need to change this the problem will reoccur time and time again – maybe in more sophisticated guises that are not so easy to spot.

In some situations we have to make judgements quickly. Doctors are doing this all the time. Indeed it only takes doctors an average of 19 seconds to come up with a diagnosis – with an 85% success rate! This is pretty impressive and of course their initial hypothesis may or may not be modified by subsequent tests. The real, sometimes fatal danger here is being unwilling to challenge the initial incorrect diagnosis in those 15% of cases, even in the face of subsequent evidence to the contrary.

Managers trying to improve a process requiring collaboration between people from different areas face a trickier situation – how to know what is really going on and what the causes are of things going wrong. In my experience the initial success rate in these circumstances is nearer 15%. Collecting data and running simulations may be useful, but as Taiichi Ohno said “facts are better than data”. The real situation can only be grasped by going to the Gemba – to the place where the value creating work is actually done – and asking the right questions. If problems are hidden and management is all about “making (read gaming) the numbers” it is not so easy and you are unlikely to get straight answers.

Indeed the truth is that it takes two parties to diagnose a problem and to evaluate alternative solutions. Senior management understands the context of the problem while the shop floor understands the details of how work is actually done. This is true at every level in the organisation. Hence the need for a common language for the dialogue that brings together the context and the details, that helps to frame the problem correctly and then to plan and monitor the experiments to test alternative solutions.

This is what Toyota’s A3 thinking process is all about. Knowing how to ask the right questions to provoke the right kind of thinking about the right things is a challenge for managers used to people looking upwards to them for the answers. Giving answers is not only dangerous but it takes away the opportunity for employees to learn how to think. Getting everyone in the organisation to think in the right way about the right things and to continually challenge the way things are done is one of the most powerful results of lean thinking.

Yours sincerely
Professor Daniel T Jones

Where to do Lean?

The beginning of a new year is a great time to look ahead to new challenges. One of the key challenges facing lean thinkers is to focus on doing the right things and getting the right results. In the past when I asked people why they are doing lean the answer was often “to eliminate waste” or Muda. Well and good – but how much of the Muda being eliminated was actually low hanging fruit and how much effort was really going into eliminating the causes of this Muda in the first place?

The next answer I heard was “to create flow” through the value stream. Now we are getting somewhere. This would involve addressing at least some of the causes of Muda. But it is still not the right answer. A better answer is “to solve an important problem or to seize a critical opportunity facing the business”. Unless we can identify measurable benefits for customers, employees, shareholders and the environment – ideally for all four – we should question whether we are doing the right things.

This questioning starts at the top of the organization as it debates which of the hundreds of projects and activities to pursue. One of the toughest parts of a policy management process is to deselect worthy initiatives in order to focus on the handful of objectives that will make the biggest contribution to the business in the year ahead. But this need to select and focus on doing some things and not others is a critical skill at every level of the business. The other side of the coin is that one solution does not fit all – so different answers may be needed for different customers or different product lines even if they share a common process route or value stream.

It all starts with correctly framing the problem to be solved. Then through a dialogue with superiors and subordinates making sure that this is the most important problem you could be solving and that it is consistent with the overall needs of the business. Then it is about developing the right plan to solve the right problem.

In truth it is hard to please every customer all of the time. Things go wrong, competitors get their act together and change happens. But looking beyond the day-to-day hiccups, on whom should we focus our efforts? Clearly on our most important and most profitable customers or types of customers (which may not be the same). How many of these customers or customer groups account for half of your sales? I bet not many. If so, how do their requirements differ from the rest?

Retailers and service providers are learning how to serve different types of customers in different ways by knowing much more about how they use their products and services. Manufacturers ought to do the same - build a real time picture of how key customers use your products (rather than how they order them). This should in turn enable you to offer win-win improvements that help them while at the same time streamlining your processes.

This also applies to products. The same product flowing to different types of customers may have very different demand characteristics. Some are built to replenishment pull while some are built to order. We also learnt that focusing on the few high volume products and managing them separately from the rest is the fastest way to make progress in plants with a complex product mix. Separating routine tasks from infrequent or more complex tasks is also the way to improve flows in the office.

The same also applies to streamlining the value stream. I hope we are beyond using newly discovered tools everywhere. Does it make sense to do TPM and SMED on every machine and develop standard work at every work station? Well not really. Use them on the key steps that need to be performed accurately, reliably and frequently and to solve the most important problems that are obstructing the flow.

Finally apply the same focus to reshaping your supply base. Work with the most important suppliers to align their activities with yours and to explore ways of compressing those value streams in time and maybe distance. In other words – don’t do lean everywhere! At least not all at once! Heretical maybe. But it makes sound business sense. Why else would you be doing lean?

Yours sincerely
Professor Daniel T Jones