Page 83 - Linkline Yearbook 2017

We should be focused on the bottom line, and as we move towards world class or best in class performance, we earn greater profits while spending less. As we reduce and eliminate waste we affect the bottom line.
I want to start off by saying that what I am about to outline in this article is from an operational/manufacturing perspective for a lean initiative. We all know that the tools of lean that have been used extensively in manufacturing across the world are now also finding their way into the service sector and health care industry, not to mention countless other industries. I will also focus on more of a general approach to lean and not dive into the statistical complexity of Six Sigma. My hope is that this quick review and highlight of success will help kick off your start to lean thinking.
The lean journey typically starts with the need to cut or reduce costs or to increase revenue. If we diligently go after removing and eliminating waste in our value stream we should also see a reduction in cost. Increasing revenue can take on many variables but in some cases if we can increase our efficiency, and thereby increase our capacity to produce more of our product/service, we can effectively increase the revenue stream and add to the bottom line profits of the company.
As lean champions, our path for making our business case or the start of the lean journey looks, initially, like this:
1. Current Situation: Describe the situation in terms
of high-level processes, performance gaps, business drivers, and the sense of urgency.
2. Trends/Best Practices: Describe trends and best practices such as performance benchmark data for competitors.
3. Statement of Need: Describe the gap between current state and future state. Address the risks associated with not closing the gap.
4. Scope: Describe the project boundaries with included and excluded components.
5. Benefits/Objectives: Describe the benefits with
a direct link to business strategies, objectives, and measurements.
6. Cost/Resources: Describe the time-phased costs of the project. This is best broken into specific phases with milestones, deliverables, and specific resources.
7. Justification: Provide the benefit and cost analysis consistent with standard company practice such as return on investment (ROI) and/or payback period.
8. Success Factors: Describe the specific commitments required for success & additional assumptions.
We need to start with the business case so that we
can ensure buy-in from all levels, especially from the top management. As we go through the exercise of preparing the case, we have the opportunity to focus on our key issues and following this structure will ensure that nothing is left out. Many times I have seen projects, goals, and improvements fail or fall short due to very poor planning or lack of structure. There is a discipline and diligence around all aspects of lean, from the planning stage, to use of the tools themselves, to sustainability and lean success.
Waste reduction is central to all the tools of lean. Learning to identify waste forces you to question and improve the process along the way.
Today we will summarise the five fundamentals that take any organisation to world class operations. The five principles of lean:
1. Specify value in the eyes of the customer.
2. Identify the value stream (eliminate waste and
variation).
3. Make value flow at the pull of the customer. 4. Involve, align and empower employees.
5. Seek perfection (continuous improvement
cycle).
These are specific in activity and sequence. These can and should be done with suppliers and customers – not in a vacuum.
Let’s start with the value proposition:
• Value must be defined in terms of specific products, at specific prices, at specific times.
• The customer must perceive/recognise the value and be willing to pay for it.
• For it to be truly value added – it must be done correctly the first time.
• The cost of producing the product/service waste-free should help to define the target cost.
If the value stream is properly mapped out then we can ensure that we have identified all wasteful activity. We must map the current state (finding all the waste) and then move into mapping the future state (lean state).
We use the tools within lean but we must challenge the team at this point to move towards lean thinking, moving away from the assumption that we intimately know our process to questioning everything along the way. All value streams have internal (departments or plants)
and external (vendors, suppliers and even customers) components that must be correctly identified.
Waste likes to hide in plain sight and disguise itself as work and value
It is imperative to remember that in a lean organisation the value and value stream are determined solely by the customer. If we can truly be lean and eliminate waste, we have the ability to allow the customer to pull the value and allow it flow in a timely fashion (just in time) as much as possible. The best or optimal flow/pull system will have the shortest cycle time, no defects, no waste, and little to no inventory or work in progress.
Empowerment
The one crucial factor that I cannot emphasise enough in a lean start up is the engagement and empowering of all employees. Once there is a plan and a vision from top
FOCUS ON VALUE ADDED
Value Added: Activities necessary for meeting customer requirements.
ELIMATE WASTE
Waste: Activities that consume resources but do not add value.
The CharTered InsTITuTe of LogIsTICs & TransporT 83
LEAN MANAGEMENT