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

The Truth about Lean

Lean thinkers always take the time to reflect on what works and what does not. This yields very powerful insights. Some things really work as you expect and the results are evident for all to see. But other things you think ought to work just don't. In my experience this is often because we are reading what we want to see into our perception of what Toyota actually does. Once we realize that what they actually do is quite different from our initial expectations then we can begin to see the right way forward. 

On the other hand I also see common misunderstandings distracting us from doing the right things over and over again. I am reminded of this by questions I am asked at Lean Summits around the world. This prompted me to summarize my answers and my conclusions on what makes a successful lean transformation.

The first conclusion is that the only lean things that stick are those done by the organization themselves, not those done to it by outsiders. Consultants can help you learn but it is an illusion to think they can do it for you. Moreover lean progress only lasts if it is led by managers who have clearly defined the business problem that needs to be solved, have understood enough about lean to know how lean can help to solve that problem and who have then developed a plan of action that they will lead and follow up on.

The skill of the lean thinker is to help to solve this specific business problem by using the right tools in the right places in the right sequence to achieve the desired improvements in value stream performance. Whether the specific business problem has been achieved should be clearly visible to everyone.

This contrasts with applying lean tools everywhere to eliminate waste or traditional cost cutting by removing heads from departmental budgets. Neither of these fundamentally changes the processes that create value for customers. Toyota knows from long experience that performance improvement that lasts is the result of improving processes.

The second conclusion is that lean can only really be learnt by doing, not by training in a classroom. Lean knowledge is learnt through successive learning cycles solving ever more difficult problems. It requires a common visual language for planning and problem solving and it needs mentoring and reflection. 

For the organization this means being able to capture the learning from every lean initiative, probably on an intranet available to every employee, so that this knowledge can be accessed quickly in bight sized chunks just when it is needed. At Unipart they talk about learning at 10 and doing by 11. This common knowledge base is essential to spread best lean practice across a dispersed organization.

The third conclusion is that there are many layers of lean. There is always much more to learn and do. Once you improve the quality, delivery and free up capacity in your existing process you will see new opportunities for redesigning it next time. Ultimately you will be able to use the capabilities created by lean processes to offer additional value for customers at a price your competitors will not be able to match.

But there is a real danger in this iterative learning process. Once you have done the first successful project you think you know lean! A classic example of this "instant expert" problem is in healthcare. Two years ago there were almost no experts in lean healthcare in the UK. Yet there were 86 expert bidders for a recent tender to help a big hospital!

Listen to any lean pioneer and they will tell you that what they learnt in year one was tiny compared to what they learnt by year four. By this time they realize how much more there is still to learn - and they are still learning in year twelve!

Fourth it is important to find the appropriate trigger points to overcome the mental models blocking lean in different situations. A non machine-paced environment or a complex product mix in process manufacturing is very different to discrete fabrication, machining and assembly. Likewise an office, a call centre or a service and repair environment needs different starting points.

Fifth lean changes the whole organization, not just operations. The opportunities are even greater in the office, in planning processes, in new product introduction and engineering change processes. And it changes top management behavior as much as it does the shop floor. This is why it really is a new business model. The true significance of what Toyota has done is that it is a market disrupter in a mature market. Would you not want to be the one to shake up your industry?

I wish you a happy Christmas and a successful New Year.

Yours sincerely
Professor Daniel T Jones

Thinking back from the Customer

Lean thinkers know that you can learn a great deal about an organisation by finding a good spot on the shop floor or office floor (the Gemba) from which to spend time observing what is going on. From here you can see just how the work is organised and how management thinks. The shop floor really is a reflection of management.

But there is another very good place where everyone should spend some time observing what is going on – and that is at the point where the end customer buys or uses the product or service. This might be the hospital ward, the call centre handling telecom breakdowns, the supermarket (particularly at the back of the store) or the car dealer. The supply chain really is a reflection of the interface with the end customer. 

We have spent a lot of time studying these kinds of situations and it is remarkable what you can learn from this vantage point. Unfortunately most manufacturing folks do not get to see beyond the shipping dock, because what happens downstream is not their responsibility. Likewise those at the customer interface spend little time thinking about the supply chain that feeds them. This is a big mistake, because what happens at the interface with the customer has profound effects all the way back up the value stream and vice versa.

In our experience efforts to spread lean beyond the factory and across the supply chain cannot realise their full potential unless they start by working back from the end user or customer. Developing suppliers upstream from manufacturing is only half the story. It is at the customer interface that the initial Mura (variation not caused by the customer) is created that causes lots of Muri (overburden) that in turn causes all the Muda (waste) throughout the supply chain. 

Mura feeds on Mura all the way upstream (triggering the well known Forrester effect) and unless the root causes of Mura are addressed the supply chain will be much longer, less responsive, more expensive and less able to deliver the right products on time. Buffering against Mura upstream helps a lot, but is only a sub-optimal solution. We discovered that you can only really address the root causes of Mura passed upstream by collaborating with those who deal directly with the end customer. The good news is that this actually opens up a very powerful win-win-win opportunity to serve customers better while at the same time improving the efficiency and profitability of the retailer, distributor or service provider as well as the manufacturers up the supply chain.   

This is where value stream managers should begin their work – by thinking back from the customer, understanding the root causes of Mura and working out the win-win-win opportunities for working together with their customers and their retailers, distributors or service providers. There is as much potential for lean dealer/distributor development as there is for lean supplier development upstream.

The new Creating Lean Dealers workbook by Dave Brunt and John Kiff is the first step by step guide to unlocking this win-win-win potential. Once you begin measuring real customer fulfilment it is surprising how few cars are serviced and repaired right-first-time-on-time – typically between 30 to 70%. This level of service is very common across industries if you could but see it.

However as almost no attempt is made to diagnose the work to be done until the customer turns up it is not surprising that they then have to scramble to find the necessary parts, have to hold lots of parts in stock, can’t really plan the time it will take to do the work and can’t streamline the flow of work through the workshop. An unreliable and infrequent parts supply system just adds to the problems.

Turn this round by developing a structured dialogue with customers a few days ahead of their arrival to pre-diagnose the work. This changes unpredictable work into predictable work, for which you can pre-order the kit of parts and accurately plan the time to do the work. This makes it possible to segment the types of work, standardise the sequence and flow cars through the workshop, doubling the productivity of the same staff.

It also makes it possible to order kits of parts for each job as they are needed rather than holding lots of parts in stock. And this signal of true demand makes it possible to create very cost effective rapid replenishment loops back upstream all the way to the manufacturer, with minimum Mura. The end result is 90% plus customer fulfilment, doubled productivity in the workshop and levelled orders making it possible to produce and ship in line with demand.

Creating Lean Dealers shows how this same logic can transform all the other activities of a dealership – from new and used car sales to body shop and customer account management. It will be a wake up call to the auto industry still wedded to customer satisfaction scores and in denial about how poorly their sales and service processes actually perform. But it also has some very practical lessons for many other activities, from sales and service of all kinds of equipment and infrastructure to managing diagnostic and treatment processes in healthcare.

The car dealership turns out to be a great place to learn to see customer fulfilment and what drives the supply chains that feed them. If we are serious about redesigning end-to-end value streams to create more value for customers using less resources and generating higher profits we all need to find our own spot at the interface with our customers.

Yours sincerely
Professor Daniel T Jones

PS. Creating Lean Dealers will be available from LEA at the end of next week – from www.leanuk.org