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

The Next Ten Years of Lean

Attending the 10th anniversary celebrations of Jim Womack's Lean Enterprise Institute in the USA set me thinking about the next ten years of lean. The lean movement around the world has achieved great things in the last decade. Between us all we have infected organizations in almost every sector across the globe with lean. Some are well down the path while others like services and healthcare are in the early stages.

We have figured out how to break the mental models blocking progress with lean in sectors like distribution, process industries, healthcare, construction and the public sector. And we have written down much of the core lean knowledge to enable us to design value streams in all kinds of situations. We have also created a huge army of lean practitioners and lean consultants and have established 14 Lean Institutes in each of the main economies to support the dissemination of lean.

Those who say the glass is half empty rather than half full - and I think this reflects different temperaments - rightly say there is still a huge amount to be done. They ask how many organizations even remotely approach Toyota's level of lean performance. The answer is not many. But in most industries outside automotive what counts is using lean to leap ahead of your competitors.

So what are the challenges ahead and what should our agenda be for the next decade? One way to look at this is to imagine looking back from 2017 and asking what we would like to see done by then. Here is my list - I would be interested to hear yours.

First I would like to see one organization in every sector that has progressed far enough in their lean journey to be using lean to change the business model in their industry. By this I mean building on their newly developed lean capabilities to rethink the product, the service, the processes and the location of what they do to serve their customers in a very different way. A bank that could custom manage all my cash, investments, pensions, insurance policies etc. conveniently with little hassle and for a reasonable price. A car company who could manage all my needs for personal mobility. A retailer who could search for and deliver all the things I need to run my household etc. Some firms like Tesco are thinking this way - most are still asleep to these opportunities.

Second I would like to see as large a body of knowledge and publications on lean leadership, lean management and lean strategy as we now have on lean process design and lean operations. Part of this will involve the systematic evaluation of the different transformation models being used by firms and by consultants, to distil what works from what does not. Part of it involves working out what managing a process focused organization will involve. In part it will also mean rethinking lean strategy back from the customer rather than forwards from our existing assets.

Third I would like to see lean thinking as a core part of the curriculum - from teaching problem solving in primary schools to teaching lean management in executive education courses. Because lean knowledge is only really learnt experientially this will entail fundamentally rethinking the way education is delivered.

Fourth we have not been very good at reaching out beyond the lean movement to articulate the potential societal benefits of lean. For instance economists and liberal commentators still think management is a black box where firms must be efficient to maximize their profits. They really do not understand the powerful dynamic lean introduces in every sector which transcends arguments about structures and ownership.

The HR community is still suspicious about whether lean enhances or diminishes the experience of work. Again we need to document those lean work practices and experiences that unlock the enthusiasm we have all seen and dispel myths like standardization kills creativity - when done right it does exactly the opposite.

Lean also has a lot to contribute to environmental movement as it is increasingly driven by evidence rather than often incorrect emotional responses. In almost every case a new lean business model will involve less unnecessary human effort, transport, energy use and pollution.

If we can do all this then lean will be well on the way to becoming the dominant business model, replacing the mass production business model developed by Alfred Sloan and Jack Welch.

Yours sincerely
Professor Daniel T Jones

PS. More talks – at Manufacturer Live in Coventry on 17 October and at the Human Resource Society in London on 13 November as well as Lean Summits in Utrecht, Holland on 5-6 November, Zurich, Switzerland on 7 November, Aachen, Germany on 8-9 November, Wroclaw, Poland on 20-21 November, Paris, France on 27 November and Istanbul, Turkey on 3-4 December.

PPS. We will be launching a new Creating Lean Dealers workbook next month and have added the Mapping to See training kit, the Getting the Right Things Done and Lean Product and Process Development books, the Lean Administration 2 and Lean Maintenance workbooks and the CD of the proceedings of the first Global Lean Healthcare Summit to our bookstore on www.leanuk.org

What is lean?

I am always surprised how many times top managers ask me “So what is  Lean?” This is depressing when they come from automotive or  manufacturing firms whose operations folks have been struggling with  Lean for a decade or more without their help or understanding. On the  other hand it is encouraging when they come from healthcare or service  organisations hungry to make progress and ready to lead from the top. For me Lean is actually about a new business model that delivers far superior performance for customers, employees, shareholders and society at large. Initially this superior performance is delivering exactly what customers want without any problems, delays, hassles, errors and fire-fighting. Very quickly it is also freeing up the capacity to deliver a third more value from existing resources with few additional costs. 

But really it is about learning how to reconfigure these assets and relationships with supply chain partners to make a step change in creating additional value for customers. Being able for instance to organise the diagnosis and treatment of a non-urgent medical condition in a matter of hours when everyone else takes several months. Or being able to compress the typical supply chain from raw materials to end consumer from 11 months to 30 days, while hitting every delivery on time and in full.

Over the next decade I have no doubt that this lean business model will replace the prevailing business model originally developed by Alfred Sloan at General Motors, analysed and described in many books by Peter Drucker and later refined by Jack Welch at GE. The power of lean is the growing recognition by leading organisations in all kinds of sectors that Toyota, the lean pioneer, is the reference model for our age. Quite rightly their common aspiration is to become the Toyota of their industry. 

This is given added urgency as corporations well down their own path to lean demonstrate their ability to fundamentally redefine the nature of competition in their industry, as their competitors struggle to keep up. Just look at the big strategic rethink going on at WalMart even before Tesco opens its first Fresh and Easy store in the US market, and the growing success of the acquisition and turnaround strategy of early lean pioneer Danaher. 

The fundamental insight behind lean is seeing that customer value is created by the actions of lots of different people across many departments and organisations. Linking these together into a seamless end-to-end process or value stream for each product family reveals literally hundreds of opportunities for streamlining the flow, eliminating non value creating steps and aligning the rate of flow with customer demand. This is lean in operations that most people are familiar with. 

But it applies throughout the organisation, not just on the shop floor. All the support activities in the office can be redesigned using the same principles and tools. Indeed we need to learn to see our organisations as a collection of horizontal processes or value streams as well as the more familiar vertical organisation of functions and departments. Vertical functions are the right way to organise knowledge but value is created by horizontal value streams. 

This focus on processes requires a very different form of lean management. Someone needs to turn these separately managed activities into end-to-end value streams and to manage the process of improving them over time, maybe through several product generations. Instead of managing using the rear view mirror of last month’s results lean managers frequently go and observe the current progress at every point in their value streams in order to help employees meet the current plan for the hour or the day and to plan further improvements. It is also their responsibility to lease with the relevant functions for the resources to do so, within a policy management process that aligns all these activities with the needs of the organisation and its customers. 

The growing interdependence of each step in every value stream will reveal all the underlying problems and the challenges from a changing marketplace. To solve the root causes means problems must be visible and not hidden. The true power of a lean organisation is when every employee can take the initiative to solve problems and improve their job, in a way that provides value for customers and prosperity for organisation. 

Yours sincerely
Professor Daniel T Jones

What to Teach the Kids

As we take a summer break I was wondering how we should help the next generation to compete in the increasingly global economy. Experts looking at the rise of China and India conclude that we need to teach our children more maths and science, because that is what they are doing. This may be part of the answer. 

But lean has also taught us that all of us live and work in many quite complicated interdependent processes (value streams). We are spending more of our “own” time managing the consumption processes to run our households. We are also spending more of our “work” time trying to straighten out value streams that cross departments and other organisations across the globe.  

As a result of this we discover that working together (with colleagues and suppliers) to improve these end-to-end processes can actually have a much greater impact on competitiveness (and living standards) than point improvements in the way work is done or in technology. So the first thing we need to teach them is how to see the world in terms of processes rather than discrete activities.  

Lean process thinking requires a different consciousness of the purpose of each value stream and how it actually works in practice. But it also needs a common way of thinking and working together with others up and down these value streams to manage and improve them. Therefore possibly the most important thing we can help the next generation to learn is not just science and technology, but how to use the scientific method itself to improve all the processes in their lives. 

The experimental, scientific method is of course fundamental to solving scientific and technical problems. Shewhart, Deming and others in the quality movement showed the power of the Plan, Do, Check, Act problem solving cycle in understanding and removing the causes of variance in all kinds of situations. But it was Toyota who took this one step further and built their whole management system around the use of the scientific method to plan every action, to solve every problem and to develop every employee. 

Common use of the scientific method is the glue that makes a process focused organisation work. It also turns out that a process focused environment is the most likely to ensure continued and widespread use of the scientific method. They actually go hand in hand. One without the other does not work for very long. 

Knowledge of the scientific method is best developed through the repeated experience of solving ever more challenging problems and planning ever more ambitious process improvements. But it needs to be guided by a sensei or teacher who challenges the pupil to develop their thinking by asking the right questions, rather than simply telling them the answers.

The place to begin this journey is to give each pupil a problem to solve that is within their scope to address (not how to solve the greenhouse effect!), and to show them a common way of summarising the steps in solving the problem on one A3 sheet of paper. Then ask the pupil to go away and come back with an accurate description of the problem and the situation. The teacher’s job is to get the pupil to really understand the problem and to think about how they would know when it had been truly solved, avoiding the natural instinct to jump to solutions that may or may not be relevant.

Then through a series of iterations the teacher helps the pupil to systematically brainstorm several alternative ways of solving the problem and once these are agreed to develop a plan to try these out, if possible one at a time, measuring the results as they proceed. Once they have the evidence of which actions do solve the problem and which do not, then they need to reflect on the lessons learnt, how these could be incorporated into common procedures and who else might benefit from these findings.

Change the words pupil and teacher for manager and their subordinates and you can see what should be happening at every level in your organisation too. But is it? We all know PDCA, but is it only actually used by your quality people? Is it part of a common A3 language for problem solving and planning? Is it the key language for the development of your people? 

Do your managers really understand enough about their processes by going there frequently (rather than waiting for someone to bring them the numbers) so they can ask the right questions to guide their subordinates? Do they have time for this or are they more interested in (repeated) quick fixes to fight today’s fires or make this month’s numbers? Are your problems visible or hidden?

I am convinced that we will hear more about the use of Toyota style A3 planning and problem solving in the months ahead. Indeed I doubt that any firm can really make and sustain their lean journeys without making this a fundamental part of the way their management works. 

Developing the abilities of our employees and citizens to use the scientific method to plan effective action and to solve problems together with others is probably the best investment we could make to improve the competitiveness of our organisations and the living standards of the population. 

Have a good summer break.

Best wishes
Professor Daniel T Jones

One Third of the Way to Lean?

I often get asked how far down the lean journey we are and what comes after lean. My answer used to be that lean is a never ending journey and that there is more than enough lean work for us all to do through our working lifetimes, without worrying about what comes next. Which is probably correct. The truth is no one knows what if anything comes after lean – or whether there really is a third alternative to managing activities or managing processes. But we probably won’t know until it happens! It took over 20 years before people recognized Toyota was doing something fundamentally different to everyone else. 

I also used to think that we were at least within sight of the end of our journey through the long list of human activities in which we needed to plant lean seeds, challenge existing mental models, water repeatedly to help pioneering examples to grow and then watch everyone else begin to follow their example – through machin ing, assembly, job-shop, process, consumer goods, electronics, warehousing, distribution, retail, call centres, administration, repair and maintenance, construction, utilities, government departments and healthcare. Whew! Maybe I could retire at that point! 

Fat chance! First I am getting calls to go back to several of these sectors to have a second go. Second lean thinkers know that as soon as you begin to think you are done, the next set of issues that need tackling come into focus. 

Jim Womack and I always say that lean thinking ought to start with correctly defining purpose or value. Then we can design the process or value streams to deliver that purpose. And then we can organize the people to manage the process that delivers the purpose. Purpose comes before process, which comes before people. 

Which is fine – and again correct - but it’s not the way most of us actually go about lean! We always start with process because the mental leap from thinking about activities to thinking about processes is bigger than we expect and this new thinking has to be discovered and reinforced through repeated experimentation. It is only after we are some way down this path that we are ready to think about the other two – people and purpose! Or not – in which case process thinking will be almost impossible to sustain. It is not just us but this is also the way successful organizations progress towards lean. 

Taiichi Ohno and his team began by spending several years carrying out what were in retrospect proof-of-concept experiments to develop the process principles we now know as lean production. These were mirrored by other teams carrying out similar experiments in activities like product development, process engineering, supplier development etc. At the same time Eiji Toyoda was the genius who combined all these elements and built the business system and the way of managing the process focused enterprise, that we now call the Toyota Way. 

But many years down the road in 1990 he was also the genius who recognized that Toyota had to respond to the growing concerns about CO2. He challenged the company to use their lean design and engineering capabilities to develop new engine technologies, which would if successful transform the business model of their industry. The result today is the third generation hybrid that is but the forerunner of a host of new green technologies of the future. The rest of the industry is trying to follow their lead as fast as they can, often against the instincts of many of their engineers and managers. 

This was also the sequence at Tesco. In the early days we carried out a series of experiments with them to create the building blocks of a lean supply chain, while at the same time Tesco pioneered new ways of understanding their customers from their loyalty card data and their on-line shopping channel Tesco.com. What made them come together so effectively is a management system driven by the needs of their customers (not by their existing formats), geared to making things simpler and easier for their staff and focused on creating flow through their operations. Tesco is also very good at operationalizing and rolling out new developments fast across their growing international business. 

But the true significance of what they have done is that they are now using these capabilities to fundamentally transform the retail business model, in a way their competitors are still struggling to understand. This began in the UK by modernizing convenience stores and developing a range of different formats to match their customers’ circumstances. The next wave is just about to roll across the USA with their new Fresh and Easy channel – which will do just that, sell freshness and convenience to busy time-poor customers. And there are more opportunities beyond this. But none of this would be possible without lean supply chains. 

We are going through the same sequence in healthcare right now. Many pioneering clinicians are developing best practice pathways for diagnosing and treating their patients – by for instance creating cells to carry out all the diagnostic tests in one visit shortly before treatment. Pioneering hospitals are beginning to see opportunities from a common entry system directing patients to the right pathway, from redesigning and managing the common process routes (or value streams) shared by several pathways, from a lean approach to scheduling shared resources like theatres and beds, from synchronizing all the support activities such as pathology, radiology, pharmacy and from eliminating huge amounts of unnecessary stock throughout the healthcare supply chain. 

The next challenge, which we will discuss at the first Global Lean Healthcare Summit, is to build a shared vision of what a lean hospital might look like, the kind of leadership that will be required to make it happen and the lean management system necessary to sustain and improve it over time. But as you see the possibilities of flow in healthcare you also begin to see new possibilities for integrating right-sized pieces of equipment into the flow itself eliminating time wasting detours to other departments and even for relocating whole diagnosis and treatment processes into dedicated facilities and or closer to where people live and work. The opportunities for using lean to rethink the business models of healthcare service delivery are as great as in any other industry. 

So I conclude that if you now understand what the primary and supporting value streams should look like across your organization you have cracked one third of the lean challenge. If you have or are on the way to creating a lean management system to manage your process focused enterprise you have another third under your belt. The final third is about thinking back from the circumstances of your consumers and thinking forward from the capabilities of your lean processes to redesign the business model for your industry. There is indeed a lot more to lean than you think. And the strategic implications of lean may in the end be far more significant than the tactical activities to improve your operations. 

Yours sincerely
Professor Daniel T Jones

From Supply Chains to Value Streams

Fifteen years ago I first began to study lean supply chains, by observing Toyota’s inbound parts supply chain and later their aftermarket parts distribution system. This was the beginning of a fascinating journey with Unipart, Tesco and many other firms, during which we learnt a great deal about assembling all the elements that transform a supply chain into a value stream that flows towards the consumer in line with demand. 

It is very encouraging that interest in lean supply chains is growing again. Many manufacturers are now ready to extend their lean efforts to their suppliers. Leading retailers are also challenging their suppliers to produce and ship in line with their lean distribution systems. As lean takes root in healthcare delivery organizations their suppliers will also come under similar pressures. Despite their differences, the issues to be addressed in turning their supply chains into value streams are very similar. Here is my list of six questions that need to be addressed in any supply chain.

First ask why, if it only takes minutes of value creating time to make a product and only a few days to ship it to consumers, are our supply chains typically several months (or even years) long? Even if we add a few days buffer stock to cope with real variations in demand from end consumers the gap is still huge – a few days compared with several months. You only need to walk and then map your supply chain from end-to-end to see the scale of the opportunity. 

Second, ask what can be done to close the gap between the use of the product and when and how it is ordered or purchased? For example, we have been staggered to see the amount of supplies hidden away in cupboards in every hospital ward – literally thousands of pounds worth - all because of the rather chaotic reordering and unreliable and infrequent delivery from central stores. This is not only extremely wasteful but means reorder signals sent to suppliers bear very little relationship to actual use in the ward or theatre. The closer the order signal is to actual use the less volatility is passed upstream and the smaller the buffer stock required to guarantee availability.

Third, ask what can be done to increase the frequency of production or delivery at every point down the chain? Picking up just the right amount of products from several suppliers on milk rounds rather than waiting for several days for suppliers to send you a full truck means you need to carry less cycle stock. It also levels the workload, improves the accuracy of picking and delivery and results in much better truck utilization. 

Fourth, ask how to synchronize the rate of production with the pattern of demand? In our experience this begins with digging behind the point optimization, the short-term plan changes and the fire-fighting to discover the underlying stability in our order and product flows. Then it involves establishing a common rhythm to make and to ship Every Product Every Cycle (EPEC). Then it involves using the lean tools to speed up the cycle from roughly every month to exactly every week and ultimately to making and shipping every product required by consumers every day. And finally, it involves linking every step in a dramatically compressed flow that responds quickly and accurately to demand. As a result you need to carry less safety stock at each point down the value stream.

Fifth, ask what are the win-win gains that will encourage partners to work together that can only be achieved through collaboration – both between functions and between firms? The biggest win-win is often smoother order signals in return for closer synchronization of production with demand. 

Sixth, ask who is going to be the architect of this end-to-end value stream redesign? Who is going to put all the pieces of the value stream together?  Who will take the tough decisions about the appropriate division of labour, the right degree of risk-sharing and the correct location of suppliers to enable the value stream to flow? 

Being able to respond quickly and exactly to local customers is a critical competitive advantage for all kinds of manufacturers in advanced economies. It is interesting that this responsiveness is achieved by focusing on stability and time compression, rather than flexibility and fire-fighting. And it ends up costing less rather than more!

Turning supply chains into value streams does not happen overnight. It takes time and requires a clear overall vision of where you are going and an understanding of the most effective sequence of actions to get there. 

To help plan your lean supply chain journey we decided to bring our knowledge and experiences together for the first time at our first Lean Supply Chain Forum. This will take place in Birmingham one month from now on June 5th.

Those booking early will also be able to join us to visit one of the best lean warehouses at Unipart in Bagington, near Coventry, the day before, followed by dinner. We look forward to seeing many of you there.   

Yours sincerely
Professor Daniel T Jones

Making Healthcare Lean

A conference like no other you have attended. For the first time those involved in taking lean into healthcare across the world are coming together to brainstorm what a lean future for healthcare will look like. The fact that almost every one of the experts I invited immediately said they were enthusiastic to come, tells me that The First Global Lean Healthcare Summit on 25-26 June is timely (http://www.leanuk.org/pages/lean_summit.htm). It also gave me a challenging juggling act to fit them all into the programme.

In my experience the early wins from creating flow through value streams in hospitals will not be sustained unless we go further to build the right kind of leadership and management systems to manage what are collections of processes that need careful synchronisation, and the right kind of support from supply chain partners.

For the first time we are bringing the whole industry together - connecting pioneering lean stories in hospitals with similar stories from the supply industry feeding the healthcare system. Enriched by insights into leading lean transformations in two of the best lean examples in the UK, Unipart in distribution and Tesco in retailing.

This is not an awareness raising conference, but a chance for those really interested in lean healthcare to join a serious and structured brainstorming and vision sharing exercise. This will begin with briefing papers ahead of the conference and a summary of the discussions afterwards. Our objective is that every delegate will go away from the Summit with their own action plan and vision.

The best way to gain most from this very rich material is to bring a group of colleagues with you, who can continue to implement lean together after the Summit. For this reason we are offering groups a discount - bring five and only pay for four, bring ten and only pay for eight etc.

Attending The First Global Lean Healthcare Summit will probably be the best investment you will make in your lean journeys this year. We look forward to seeing you in June. If you have any further questions do not hesitate to contact us at LEA.

Best wishes
Professor Daniel T Jones 

P.S. LEA has taken this initiative on behalf of our Lean Global Network of 12 lean institutes across the world. Interest in lean healthcare is now global and it will be a truely global summit. Please alert anyone you know who might be interested in coming.

Crossing the Lean Threshold

Lean transformations are increasingly bumping up against a common threshold. We may be very familiar with most of the lean tools. We may also have learnt to see our value streams and how to redesign them, at least within our own organisations, which is a big step forward. But until recently we have had less clarity about what lean management and lean leadership really looks and feels like. 

 

It is therefore not surprising that while management is often keen to encourage lean campaigns to eliminate waste and to create flow, they often balk at the point when it becomes necessary for them to fundamentally change the way they run the business. Once this threshold is reached however employees quickly spot that they are being asked to change the way they work while management continues as before. The inevitable result is that the campaign loses stem, momentum is lost and those determined to do lean begin to jump ship for leaner challenges elsewhere.  

 

In my experience the only way to really understand how lean managers successfully lead a continuing and deepening transformation is by watching them at work and by getting them to reflect on what they are doing and why. It is not something you can learn from theory or in the abstract, but only from practice. And there are still only a very few places where you can see it. The most obvious example and the unique strength underlying the lean movement is of course Toyota. Another example in the UK is Unipart. 

 

Fortunately a growing number of senior ex Toyota managers like John Shook, who have also spent some time in traditional organisations, are now beginning to reflect on their experiences. Recent books like Satoshi Hino’s Inside the Mind of Toyota and Pascal Dennis’s Getting the Right Things Done also throw a great deal of light on the subject. Once again we are trying to describe an interlocked set of thoughts, mental models and practices that fit together into a new management system. This is my attempt to begin to summarise them. 

 

• All value is the result of a value stream. Every value stream needs a manager with a future state plan. They need to convince the functions and  top management to give them the resources to achieve their plan. Key tools for this are the value stream map and the A3 plan. 
• The strategic direction of the business needs to be clear and visible to everyone – as the driver for a policy management process to align planning and problem solving activities throughout the organisation. Top management must also take responsibility for reducing overburden and unnecessary variation so that value streams can flow quickly in line with demand. 
• Brilliant results come from managing today’s process, not from juggling metrics of past performance. Good visual management should enable everyone to very quickly grasp the current progress of every value stream. Management must frequently “go and see” whether the plan is being met and what help is needed to do so, rather than fight fires. 
• Every value stream, however lean, will be always be subject to changes and interruptions. The problems revealed by these interruptions point to the opportunities for improvement and should be made as visible as possible. Responsibility for tracking the root causes and solving these problems, using the scientific method, should be given to those close to the problem itself. 
• The most important task of a lean leaders at every level in the organisation is to develop the capabilities of their people, in particular deepening their knowledge of their value streams and the process of solving problems to improve it. The most effective way to do this is by asking the right questions, rather than giving instructions and answers. This however is just the beginning.

 

All these elements knit together to build an organisation that is continually learning, improving and adapting to changing circumstances. What makes lean so powerful is that it is much more than a set of tools or even a set of principles for redesigning value streams. It is about fundamentally changing the way we manage and work together at every level in the business. The challenge is to learn to act ourselves into this new way of managing. 

Best wishes

Professor Daniel T Jones

 

Little and Often

I still encounter a degree of confusion about one of the key mental models that gets in the way of lean thinking. Making products in batches and accumulating a full load before dispatching a truck are fundamental to mass production thinking. It also intuitively fits with our distant memory of harvesting crops and storing them to last through the winter. But you can find it everywhere, from seeing and treating patients in batches to flying as many passengers as possible in ever larger aircraft. 

We have through the years seen regular accusations that smaller deliveries just-in-time make producers more vulnerable to disruptions in supply. We have also seen the assertion that little and often is worse for the environment, with many half-empty smaller trucks replacing fewer fully-loaded larger trucks. Unfortunately life is not as simple as this and to really understand what is going on you need to look at real facts in real situations, not at simulation models. It is also necessary to shift our focus beyond our own activities in order to look at the supply chain as a whole. 

One flaw in this argument is the experience that focusing on asset utilisation and keeping equipment as busy as possible does not actually achieve the desired result! Otherwise why would we typically find equipment in a mass production system only producing good products 30% of the time? And why is it that by focusing on improving capability, availability and flexibility lean producers can regularly increase this to 85% and above? 

Exactly the same applies to truck utilisation. A few years ago, when supermarkets waited for suppliers to deliver full truck loads to them, truck utilisation was no more than 50%. Now that most supermarkets are picking up products from their suppliers more frequently, truck utilisation is also much higher. 

There is a common myth that congestion in Toyota City is because they send lots of little trucks to their suppliers to pick up parts very frequently. In fact Toyota works with fewer direct suppliers, each of whom supplies five times more part numbers than western suppliers. It sends the largest trucks allowed on Japanese roads on regular milk rounds to these suppliers, arriving back at the assembly plant completely full. The congestion comes from trying to produce so many cars in one town. Indeed the congestion would be much worse if truck utilisation was as poor as in most mass production systems. 

This kind of thinking also overlooks the costs incurred elsewhere in the supply chain from making and shipping in big batches. It is often associated with a belief that demand is chaotic and unpredictable, rather than self-inflicted volatility from the way our planning systems work.

Forecast driven batch production inevitably leads to continuous short term plan changes to respond to spikes and shortages despite warehouses full of stock and to overtime and expedited shipments. The costs of all this is in someone else’s budget or in overheads, but they are not in the plan. 

This is however the tip of the iceberg, when you factor in lost sales, discounted or obsolete stock, rework, inspection and the extra capacity and stocks to meet demand spikes and supply failures. The ideal supply chain is one in which lead times are as short as possible, production is driven by actual demand and production is capable of making every product as frequently as possible in line with demand. 

But how can you justify more frequent deliveries from your suppliers? Probably only when you learn how to level your production and make every product frequently. Then you will begin to see the savings through your supply chain. It might then make sense to cooperate with other firms to pull products from your suppliers on more frequent and predictable shared deliveries.   

On the other hand as on-line shopping grows regular deliveries to homes will replace the most environmentally damaging trip of all – consumers driving to pick up products from the store.   

Lean thinking is not about zero inventories or the smallest trucks. It is about developing a common steady rhythm across the supply chain in line with demand, guarded from supply disruptions and real fluctuations in demand by just the right amount of standard inventories, possibly held off-line. Little and often is right thinking despite being counterintuitive.

Yours sincerely
Professor Daniel T Jones

Wasting Customers Time

Have you ever thought of sending an invoice to companies you have bought things from, for the amount of your time they caused you to waste trying to get their product or service to work properly? If you were to add up all this wasted time over the year and change it at your daily rate you would be owed a considerable sum! More important if many people began to do this it might prompt these providers to fundamentally rethink how they design their products and how they serve their customers. 

Think also what you would do if your customers started doing this to you, particularly if you could see that their wasted time is mirrored in wasted time (and hence additional unnecessary cost) in your organisation. In most cases we simply can not see this potential win-win opportunity, preferring a quick and cheaper (possibly outsourced) fix we can forget about. Which is fine until your competitor sees how to turn this opportunity to their advantage. 

Two very simple examples illustrate the point, but I am sure you can think of many others that you have experienced recently. First, try changing the name on a business bank account. This sounds incredibly simple. But after receiving three letters followed by four new but unusable cheque and paying-in books all with the right name on the cover and the wrong name on the cheques and you wonder whether this organisation can really be trusted to look after your money! 

Almost certainly this is the result of a broken process rather than incompetent staff. Try to fix the problem in person the next time you visit the local branch and all they can suggest is that you waste even more of your time (and money) by sending the whole lot back with a letter of complaint! You can bet that no one is going to find the root cause of this probably often repeated error so that it stops happening. 

This is not surprising when you realise that the right first time on time capability of most office processes as opposed to production processes is incredibly low, often between 10 and 30%. Yet this kind of problem happens all the time within and between businesses. How much of your and your customers’ and your suppliers’ time is spent on invoice reconciliation? 

Second, the delight in getting a new PDA with all the latest functionality turns sour when you give up after two frustrating hours trying to get the software to synchronise with your other computers. You feel a bit better when the technical expert you call in (and pay for) takes a further three hours before finally getting it to work. Although it often feels like it, I am sure I am not alone in suffering these problems. 

Which is staggering, when you think how many thousands of unnecessary hours must be being wasted installing the thousands of PDAs and other devices being sold every week. The problem here is that the feedback loop from the installation problem back to the designers does not work. Each expert tries to fix the problem and move on, carrying their knowledge with them till they come across this problem again. We have all experienced help lines that don’t help. In many cases they are not even part of the problem solving loop back to product development. 

Just as you can tell a great deal about an organisation and its management by observing what goes on the shop floor, you can also learn a great deal about how they think about their customers from observing the detail of your experience of using them. As customers we know there is little we can do to fix these problems apart from complaining. So we learn to quickly forget all the problems we encounter as we get on with managing our lives. 

However for an organisation seeking to improve customer service and at the same time reduce its cost to serve this information is gold dust. Just think what you could do if you could get direct feedback from every problem from every customer. You could turn each of their problems into a Kaizen opportunity in your organisation. 

Yours sincerely
Professor Daniel T Jones