Lean Articles

Understanding Customer Value

Ride sharing UBER
Uber has taken global disruption to a new level with their ride sharing platform

The recent Best Practice Network National Summit with its theme of “People, Technology and Business” has provoked a lot of discussion at TXM. Two key themes emerged for me. These are, the ways in which technology will transform how business is done and the way in which established industries will be disrupted by technology and other forces. David Platt provided particularly interesting insights in to the way industries are disrupted and will be disrupted in the future.

My summit presentation was on the theme “Does Industry 4.0 Mean the End of Lean”. This made me think hard about the way in which new technology is changing industry and the relevance of Lean in that context.

Finally, I was fortunate to go to the Innovate Expo recently in Geelong and hear from a range of interesting speakers on Industry 4.0 and innovation, including Gus Balbontin, former CTO of Lonely Planet.

What Does All This Mean for Lean?

I run a lot of Lean workshops and when I ask most groups “What is Lean”, they will generally tell me that it is about the elimination of waste. This is correct, but only part of the story. The problem with a focus on waste elimination is that it focuses us on the things that DON’T add value to the customer. Eliminating waste will save money and it will improve competitiveness, however it tends to assume that the value we add to the customer and the way in which we add it will stay the same.

When I consider companies that have disrupted established industries, there seem to be two common themes:

  • A unique or different insight in to what constituted value for the customer.
  • The use of technology to deliver that value more effectively.

Whether you think of the iPhone, Uber, digital photography or TripAdvisor the winner in disruption has understood the customer need better and then applied technology to better meet that need. In the process they have created more value for customers at lower cost. Businesses in these industries who were focused on improving existing business models and just “eliminating waste” found themselves being overwhelmed by the change brought on by the disruptors.

How Do You Apply Lean Thinking In this New World Order?

First Understand Value

Another question I often ask workshop participants is “How do you create value for your customers?”. Surprisingly many people struggle to answer this. They tend to think in terms of their corporate goals so that “on time delivery” and “first time quality” are “value”. These goals, however laudable are simply measures of how well you do what you do.

In most industries today, delivering a quality product on time is simply taken as a given and does not confer any competitive advantage to the company providing it.

I often frame the question differently along the lines of “what is the customer buying when they buy your product?”. Again, I often get vague answers like “peace of mind” or “experience”. If you believe that is what your customer views as value, then expect to be disrupted.

In fact, the answer to the “what is value” question is closely related to the “what business are we in?” question.

TXM Article: What is a Value Stream Map

3d Printer
3d printers have risen in prominence in recent years.

The keynote I saw from Gus Balbontin, formerly of Lonely Planet brought this in to focus. Gus joined Lonely Planet at a difficult time, when it had just been purchased by BBC and was starting to be disrupted by the rise of the internet in the early 00’s.

At that time, Lonely Planet believed that it was in the travel books business. If you accept this definition, then every step-in converting paper and ink into a book and getting that book to the customer is a value-added step.

First, you would draw a value stream map for book production and distribution and try and eliminate waste from that flow. As a frequent traveller and one-time owner of many Lonely Planet guides, I believe that what customers valued from Lonely Planet was relevant and up to date information about the place that they were in.

Whether this was delivered through a smart phone or a travel book did not matter. In fact, the smart phone was a lot more convenient as the information was constantly up to date and took up a lot less space in the luggage than half a dozen travel books.

Now Lonely Planet is a great company and their travel books are still great. Their information is probably more accurate than the sometimes hit and miss reviews on TripAdvisor. However, it would seem that Lonely Planet have missed a massive opportunity to convert their position as a world leader in travel books in to a world leader in travel. A better understanding  of customer value might have delivered this transformation, but it is instead TripAdvisor that has achieved this change.

Likewise, newspapers and television thought they were selling their advertisers “access to eyeballs” and so pricing and availability was driven by the sheer numbers of people likely to see the content surrounding the advertising. Google instead provided access to buyers, dramatically increasing the cost effectiveness of advertising.

How to Apply This to Your Business?

I think the key to this is asking a series of questions about your business. The first are really strategic marketing questions.

  • “What business are we really in?”
  • “What is the customer need that we are meeting?”
  • “What is the problem that our customer has that our product or service solves?”

Answering these questions might involve asking customers, observing what competitors large and small are doing and looking for analogues in other industries.  Don’t rush it, be prepared to get advice from outside your industry.

TXM Case Study: Value Stream Mapping to Drive Lean Transformation

Once you have an understanding of this, then you need to ask my “Lean” question “What is it that we do in our business that adds value to the customer?”. This might be very challenging. In the Lonely Planet example, it would be arguable whether the book production and distribution process added any value at all in meeting the customer’s need of accurate and timely information.

Another question might be to ask, “Is there a better way to deliver this value to the customer?”. In this context look at available technology and how it could be used to meet that customer need. Insights from other similar industries can help.

Map the New Value Stream

Once you have defined what is value in your business, you can then define your new value stream and map your flow. This usually means defining a series of process steps. For each step you need to really challenge “Does this step add value, or can it be eliminated?”

TXM Article: Overcoming the Stumbling Blocks of Value Stream Mapping

For example, if I was to map the flow for a taxi service a few years ago, the taxi owner and the dispatcher service would each have been seen as part of the value stream and each would have believed they were adding value. However, if I redefine the customer need from a “Taxi” to a “safe, convenient and cost-effective form of individual public transport” then the value of the taxi owner and dispatcher company becomes more dubious. Enter ride sharing platforms that connect the passenger directly with the driver and allow the passenger to rate every ride to ensure quality of service. So, challenge hard at every step in your process whether that step REALLY adds value in helping you meet your customer need.

Consider Technology in the Future State

In developing a future state, Lean coaches often assume that the key processes will remain unchanged, but instead the focus is on how product and services flow between processes and the waste that occurs there. In redefining your process to meet customer needs, you need to challenge the current technology and processes. Using a creative process such as “3P” can help you imagine different ways of delivering customer value, using new technology and applications. Ask questions like “What if we were able to…?” and don’t be quick to throw out “crazy” suggestions.

What you are then aiming to do is to design a new process from the ground up to deliver your product or service. This will include how the product or service will be created, how it will be delivered to the customer, the communication and information flows that will guide it through the process and the technology and process changes needed to make it all happen.

Move Fast and Be Prepared to Fail

Business is about taking risk, but in many cases, companies don’t reward risk. Instead they punish failure. As a result, employees tend to default to “the way we have always done things” because it is safer. In leveraging technology to change your business, you may have to face failure. Therefore, be prepared to try things, fail and learn. The mistake is if you don’t learn from your failures, not failure itself.

What About Waste?

Re-designing your process from the ground up and focusing on how you create value will inevitably eliminate waste. When we eliminate a process step because it does not add value, we are eliminating waste.

Industry 4.0 is here. Don’t get left behind.

What About Industry 4.0?

The clear conclusion I arrived to at listening to the range of innovation speakers over the past month is that focusing on technology before you understand customer need is a recipe for wasteful investment. The companies that have transformed their industries have used technology as an enabler, not as an end in itself.

TXM Article: Does Industry 4.0 Mean the End of Lean

In fact, there is a risk that some industrial technologies risk making your business more vulnerable to disruption rather than less. For example, spending a lot of money to automate existing processes might lock you in to those processes. Likewise, heavy investment on process monitoring and optimisation might divert resources and focus from the need to completely change the underlying process you are trying to optimise. On the other hand, better process control through advanced optimisation or a lower cost base from automating, might enable you to compete in new markets where you were previously uncompetitive.

Overview

Predicting exactly where technology and social change will take us and our industries in the next few years is impossible. We have seen so many surprises in the past two decades, there are no doubt many more to come. However, the Lean message of “start with the customer and work back” has never been more important. While eliminating waste will remain an important part of Lean Thinking, I am convinced that understanding and maximising customer value will be the key to success for businesses.

Lean Strategies for Uncertain Economic Times

Stock figures for the year
Volatility in the market can be seen as a opportunity if you are positioned correctly to capitalise.

Too often the response of business in uncertain times is to do nothing and “wait and see”. This approach unfortunately means that the business is unprepared when the underlying direction of the economy (upwards or downwards) becomes clear.

Instead we recommend businesses take proactive steps during uncertain time to prepare them for whatever future conditions they might be facing.

Reduce Lead Time

The “father” of the Toyota Production System, Taiichi Ohno, is once reputed to have said “all we are trying to do is reduce the lead time”. Which lead times do I mean? Every lead time! Obviously, the lead time from receiving inputs to shipping finished goods, but also design lead times, quote lead times and supplier lead times. When you reduce lead times in your business you bring your business closer to its customers. You then can respond more quickly to rapid changes in demand and meet those unexpected customer needs. Remember, if the economy slows, customers become more demanding as they usually have more choice of who to buy from. Therefore, reducing lead time now will give you a competitive edge that can protect your business in slow times and provide you an advantage if the economy improves.

Reducing lead times will free up cash by reducing the overall time from outlaying cash to purchase materials to receiving payment from customers. Inevitably this involves reducing inventory at every stage of the process. Working with suppliers to reduce order lead times is also the most effective way to reduce your inventory of materials.

To reduce your lead time, start by mapping your end to end process using the Manufacturing Agility Process® You will then understand the drivers of your lead time and can develop a future state plan to radically reduce it.

Increase Your Capacity – Without Capital Investment

Uncertain times mean that the risks around major fixed capital investment are increased. Therefore, taking steps to get the maximum out of your current equipment and facilities is one of the best ways to make your business more robust.

A Total Productive Maintenance (TPM) program based around improvement of your Overall Equipment Effectiveness (OEE) is the best way to get more out of your assets without the need to invest more. Most businesses will find that when they honestly measure OEE that it is very low. However increasing OEE from 40% to just 50% represents a 25% increase in your available capacity. That can have a radical impact on your business.

Read How TXM increased OEE from 45% to 75% at a leading Pharmaceutical Plant

Another key strategy is to make the most of your facilities. Creating a Lean layout using the Facility Layout Development Process can free up at least 30% additional space in your current facility as well as delivering higher productivity as waste of motion and transport is eliminated. This extra space can then be used as room for growth if the economy improves or an opportunity to introduce another revenue stream if business slows.

Read How TXM Increased productivity by 25% by introducing a new layout and work cells.

Get Everyone Involved in Solving Problems

Cost reduction programs are often driven from the top down. This usually involves reducing people and breeds fear and poor morale. When times are uncertain you need your people engaged and on your site. Harnessing ideas at every level of the business and empowering people to make improvements can help you get both – lower costs and engaged people.

Your front-line people see how your business wastes money every day. Therefore, if you can get them to share these observations and even help fix some of the problems themselves, you can significantly reduce costs without anyone needing to lose their job.

The Lean Daily Leadership Process® provides an effective framework for leaders at all levels to engage their teams in improving performance. The Lean Daily Leadership Process® Methodology brings together three key elements:

  • Visual Workplace Management so that daily performance is recorded by front line leaders and displayed in the workplace so that every team can see how they are performing every day.
  • Ten minute daily stand up meetings where leaders at every level meet with their teams to briefly review daily performance, recognise success and highlight problems. The teams can then use simple problem-solving tools such as Solving Problems Every Day® to find and fix the root causes of many of these problems themselves.
  • Daily routine tasks for leaders creates a structured menu of activities that leaders need to perform every day. This ensures that leaders get in to positive habits that support and engage their teams, prevent problems (rather than fire-fighting them) and drive improvement.

Implement a Strategy Deployment Process

One of the biggest issues that businesses face when economic conditions change is that they are too slow to respond. While senior leaders may see the direction that the business needs to take, many lack the mechanisms to ensure that the rest of the business follows that direction.  For this reason, now is a good time to establish an effective process of strategy deployment.

An effective strategy deployment process based on A3 plans enables senior leaders to set a simple and clear direction. This can then be quickly and effectively cascaded through the organisation as each business unit or function develops their own A3 plan in response to the overall strategy. An effective strategy deployment process must also incorporate a “catch ball” process so that feedback can be given up the organisational structure. The strategy can then be adjusted based on this feedback ensuring that the strategy process is adaptive to market conditions and making sure that there is complete strategic alignment through the business. Once this process is established then, strategic change can be quickly communicated up and down the organisation in an effective and consistent way. This will enable your business to respond much quicker to any change in your market conditions.

Sign at T Intersection
Uncertain economic times need strategic decisions to be well thought out and clearly developed across teams to be effective.

Summary

Times are uncertain around the world, but “wait and see” is the worst possible strategy to respond to this uncertainty. Instead, apply some Lean thinking to increase the resilience and agility of your business. That way you can face whatever conditions that emerge from these uncertain times with confidence.

What Are Metrics and How Do You Define Them?

Metrics are a key ingredient for improved communication in a visual Lean workplace and are essential for good Lean Daily Leadership (LDLP) Whether you are well established in using daily metrics, or just starting to set up your visual management board, it’s important to review your metrics to make sure they are still supporting your goals; remember, measuring data without action is waste! Here we will look into different types of metrics that may be suitable to support you, and discuss the importance of understanding which metrics are leading and which are lagging, and how to determine a balance between the two.

Important Metrics For Your Visual Management Board

At TXM we insist you cover the basic metrics for your visual control board (also called a Production board) The metrics need to support the key factors that influence our business – Cost, Quality, Delivery, Safely and Morale. The order of these five parameters and the importance you place on them will depend on your industry, as well as your maturity along our Lean journey. In many workplaces, Quality and Safety will be considered the top priority to review each shift, with the other three following close behind. The order your company prefers is not as important as checking that all five are represented. The important issue is that each is given due consideration and included in the agenda for the daily review each shift.

Example of Visual Management Board
Well presented visual management boards are functional and efficient. Providing all relevant information within a 31-second scan.

When initially determining your team metrics, there isn’t a perfect formula to guarantee success. Choose simple metrics that are meaningful to your team. Aim for metrics that can be easily measured. We prefer items that can be counted, for example, the number of widgets completed this shift, over ratios or percentages. Also, we prefer to avoid metrics that require data to be delivered from other departments, managers or retrieved from a computer system. Ownership of the metrics will increase when your cell leader can get the needed information and then update the graph at a time that suits them.

Sometimes we are asked about using a computer screen to display visual controls. We prefer to keep it simple and in the control of the team by using paper graphs or graphs on a whiteboard. The act of gathering the data and filling in a graph gives the team control and ownership, and this makes the metrics meaningful to the team.

As your team continues to improve your metrics will need to be reviewed to determine if they are still meaningful and aligned with the goals of each area. If the current metrics still help the team meet it’s goals each shift, then they can stay. If the metrics are no longer helping the team, it is time to change them to a metric that is more meaningful.

What Is the Difference Between Lead and Lag Metrics?

As we have discussed the overall importance of metrics, we can now focus on understanding whether our metrics are lead or lag metrics. A lag metrics is one that focusses on past performance, indicating where we have been or what has been completed over a period of time. Leading metrics are ones that show us the factors that can then influence our process and are based around input metrics.

Lag metrics are easy to measure, for example, how many widgets have we completed this shift? But lag metrics are hard to influence due to the complexity of our processes and the many inputs that are needed to complete our work. By contract, lead metrics are harder to measure but are easier to influence, and we can figure out the best ones to monitor to ensure out outcomes are on track.

Here are some examples of lead and lag metrics for the key factors of Cost, Quality, Delivery, Safely and Morale

Lead Lag Metrics Table

Balancing Between Lead and Lag Metrics

When you review your daily metrics for each area, how do they look? Do you have an equal number of leading and lagging metrics? It is important to have a balance as the lagging metrics provide an overview of how the business is going, while the leading metrics give us an indication of how individual processes are performing. Understanding your processes and value streams will help you see where the leading metrics fit and how they can help to influence your lagging metrics.

TXM Article: Five Tips to Designing an Effective Team Visual Management Board

Conclusion

Getting the metrics right for your production control boards in an important part of implementing visual controls in a Lean workplace. Check you have a metric to cover the five key business factors of Cost, Quality, Delivery, Safely and Morale. Then review the metrics to make sure you have a balance of lead and lag metrics, and that the metrics support your team in achieving their goals each shift.

There is a revolution coming to manufacturing. It is called Industry 4.0, a fourth industrial revolution based on emerging technologies such as “the internet of things”, “big data”, advanced automation and additive technologies.

What is Industry 4.0?

Industry 4.0 is a term developed by the German government to describe its high technology strategy for manufacturing. Like all trendy new buzzwords, however it has been quickly grabbed by consultants and the media and turned in to a “catch all” term used to describe, well, whatever people want it to describe!

How is Industry 4.0 Changing Manufacturing?

3d Printer
3d printers are becoming front and center to the 4th Industrial revolution.

What is new and different about it, what does it change and what should you be doing about it? We have become accustomed to a blistering pace of technological change in manufacturing over the past 20 years. Industries as old and traditional as metalworking and printing have been transformed by the combination of highly automated digitally controlled machinery and highly integrated computer aided digital workflows.

The cumulative effect of these changes are, however, quite significant. Firstly, in many sectors of manufacturing, the degree of automation and complexity has increased significantly. As a result, there is far less labour involved in actual production and (frequently) far more labour involved in what I call “pre-production” activities such as sales, design, specification, programming, artwork preparation etc.

The “pre-production” labour tends to be highly skilled (often engineers). With manual tasks increasingly replaced with automated machines, the days of manufacturing being an attractive career choice for people without a good education are long over. This also means that increasingly the focus for improvement and efficiency needs to be on these pre-production processes rather than the actual production process.

In many advanced manufacturers the combined number of people involved in engineering, procurement, programming, sales, sales support and design far exceeds the number of people on the factory floor. As well, the value delivered to customers is increasingly related to software, after sales support and design rather than the physical product. Therefore an improvement focus solely on productivity in production will miss the largest opportunities to reduce waste and increase value in your business.

Another key change enabled by Industry 4.0 is the increase in customization. Technology is enabling businesses to offer customers a “one off” product at comparable cost to a standard “off the shelf” product. The internet allows customers to “design their own” product in many cases. This is already happening in industries such as commercial printing and apparel. Customization means that traditional approaches to lead time, inventory, supply chain and order processing are being stretched and challenged. This is a trend which is highly desirable to customers and it will continue.

In summary, manufacturing businesses need to keep up to date with emerging technologies to stay competitive. Their business improvement focus needs to go beyond the factory floor and encompass all pre-production processes such as sales, design, procurement etc.

Some of the key lessons I have learned about automation and technology over my years in manufacturing have become more important as Industry 4.0 starts to have more impact:

1. People

The team developing a Lean Factory Layout
People will always be front and center in your business, technology will help enhance their roles.

No matter how automated your factory or engineering processes are, no matter how much data you collect or how well you analyse it, the performance of your business depends entirely on the performance of the people your business. It is people who develop your technology, people who install and commission it, people who operate it and people who improve it. Therefore, the key to success in Industry 4.0 is the same as it has always been – excellent leadership. You need an effective daily management system to drive the day to day achievement of targets and every day improvement and problem solving.

You also need a strategy deployment process to align every level of your organisation with your strategy. Finally, and perhaps most importantly, you as a leader need to demonstrate Lean Leadership behaviours in everything you do. This means things such as always showing respect for people and their work, expecting high standards (and living by those standards yourself) asking questions before you give directions and noticing improvement or problems on your frequent visit to the workplace.

2. Complexity Costs

The problem I have always had with automation is that engineers (like me) are very good at quantifying the benefits of automation and technology, but not so good at defining the costs. Increasing automation can increase the complexity of your business. As processes and systems become more interconnected, a risk of a failure at one point can impact the whole process. Therefore, maintenance is critical, as is ensuring that staff have the skills to operate equipment properly. As equipment becomes more complex, problem solving also becomes more difficult. Expensive specialized resources may be required to diagnose and fix problems. This expertise may not always be available (may not even be in your country) and so long delays can result.

Likewise, systems to collect and manage data require resources to maintain the integrity of that data and to interpret it. I have seen factories that have become so automated that no-one really understands them. Then when something goes wrong, the consequences can be severe. Often when all these costs are added up, technology which looks superficially attractive, is actually not. More commonly, the factors listed above mean that when the whole business process (value stream) is considered, the investment in automation at one point in the process fails to deliver the expected returns. This is very common with software such as ERP systems and Business Intelligence Systems. Indirect maintenance costs such as data cleansing are not factored in to the investment calculation and savings in areas such as inventory are often based on heroic assumptions on customer forecast accuracy.

3. Shareholder Value is Driven by Return on Assets

In business most managers are very focused on profit and return on sales. However, for banks and shareholders, what matters is the return achieved on the money invested in the business. Businesses usually have choices how to invest that cash. Capital intensive improvements such as automation and software may appear to offer an easy path to cost savings, but they come at a price on the company’s balance sheet. Applying Lean thinking, solving problems every day and engaging your people can create cost savings that are well above what automation has to offer and can delivered at a fraction of the cost.

Beware of purchasing technology that will become obsolete or unusable in the future.

4. Beware Stranded Assets

The very change that is driving the move to Industry 4.0 is also a key risk to investments in new technology. Business is changing and products are changing constantly. The products that you make today may not be what you make tomorrow and the customers you have today, may find an alternative to you tomorrow. Modern automation is flexible, but this flexibility has its limits. In robotics, for example the majority of investment is usually in application specific elements such as grippers, enclosures, programming and fixtures. If your product changes, often this investment is no longer usable. I have seen a lot of dusty robots sitting idle over the years.

5. Purchased Technology Rarely Provides a Sustainable Competitive Advantage

The competitive advantage you gain from new automated equipment or systems only lasts as long as it takes for your competitor to buy the same piece of equipment. The only know-how that will deliver sustainable competitive advantage is the know-how your business owns exclusively, which usually means know-how you have developed yourself. I have worked in many industries where competitors have engaged in an “arms race” to purchase and install the best, fastest and most automated equipment. Competition then means that cost savings from these investments are inevitably passed on to customers as lower prices. The winners are the customers and the technology suppliers, never the companies installing the technology. You may be forced to invest in technology to stay in the game, but don’t expect purchased technology to keep you ahead of the game.

Drone technology has moved forward in leaps and bounds with potential industrial applications growing daily.

Summarising Industry 4.0

To answer the question posed at the start of this blog, Industry 4.0 is definitely something new. A wave of new internet enabled highly intelligent technologies that will transform your business. If your business does not understand the new technologies entering your market and is not ready to invest in the right technology at the right time, then you will struggle to stay competitive.

However, remember five basic rules:

  • People are the real driver of the success of your business, not machines or software.
  • Recognize the true cost of any technology you install as well as the benefits.
  • Process improvement through Lean will often deliver equal or better business performance improvements than automation, without the massive investment.
  • Make sure that your technology investment will not be “stranded” if your products or customers change.
  • Recognize that competitive advantage comes from know-how you develop yourself, not know-how you buy. Your competitor can (and often will) buy the same automated technology and match what you can offer.

In every manufacturing process, our aim is to add value to a product that the customer will pay for. While adding value to our products, there are tasks that must be done to complete the work but don’t directly add value; set-ups and inspection, to name a few. Then there are the other activities that occur during production that are waste.

According to Lean Manufacturing principles, waste is anything that creates no value that the customer is willing to pay for. Waste is defined in terms of value therefore we can only know the waste by first knowing the value first. Waste, therefore, is relative to the customers’ needs.

How Do We Begin to “See” the Waste in Our Production Systems?

Cartons on Pallets
Knowing where the waste is in your process is a must for any manufacturing business.

We begin to investigate the value-adding steps and cycle times in our process, through a Value Stream Mapping process. Out of this process, we now understand how long the value-adding steps take and the overall lead time it takes to get a part all the way through to the customer.

We realise that there is always a BIG difference between these two times.  The difference between value-adding time and the lead-time time provides us with the opportunity to remove the hidden wastes in the value stream. The difference in times is where we can begin to focus on and discover where wastes are hidden.

The 7 Wastes

The 7 wastes (or Muda) have been defined by Taiichi Ohno, the father of the Toyota Production System, and they have become known as the 7Ws.

The original seven Muda (Wastes) are:

  • Transport (moving products that are not actually required to perform the processing)
  • Inventory (all components, work in progress and the finished product not being processed)
  • Motion (people or equipment moving or walking more than is required to perform the processing)
  • Waiting (waiting for the next production step)
  • Overproduction (production ahead of demand)
  • Over Processing (resulting from poor tool or product design creating activity)
  • Defects (the effort involved in inspecting for and fixing defects)

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In order to remind us of these concepts, Acronyms can be a very effective tool and here a few examples,

An easy way to remember the 7 wastes is TIMWOOD

T: Transportation

I: Inventory

M: Motion

W: Wait

O: Over-processing

O: Over-production/Excess-processing

D: Defects

Another easy way is NOW TIME: It’s now time to eliminate Mudas:

N: Non-Quality

O: Over-production

W: Wait

T: Transportation

I: Inventory

M: Motion

E: Excess-processing

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With the 8 wastes use the acronym DOWNTIME is a useful memory aid.

D: Defects

O: Over-production

W: Waiting

N: Non-utilized  Human Resources/Talent

T: Transportation

I: Inventory

M: Motion

E: Excess Processing

*Note this has now been expanded to include an eighth waste of “Non-utilized  Human Resources/Talent”.

What are the 8 Wastes?

Paint cans
Waste must be identified and removed if you are to make your business as efficient as possible.
  1. Defects – The simplest form of waste is components or products that do not meet the specification.  The Toyota quality achievement came with the switch from Quality Control to Quality Assurance – efforts devoted to getting the process right, rather than inspecting the results.
  2. Over-Production – A key element of JIT was making only the quantity required of any component or product. This is the main challenging point to the Western premise of the Economic Order Quantity (EOQ) upon which MRP system is built on. This defines the fixed ordering costs, built around set-up times, and thus the need to spread these fixed costs over large batches. The Toyota production system moved from long set-ups to Single Minute Exchange of Die (or SMED).
  3. Waiting – Time that is not being used effectively can only be a waste – we are incurring the cost of wages and all the fixed costs of rent, rates, lighting, and heating so we should use every minute of every day productively. The Toyota production system is focused on the reasons why machines or operators are under-utilised and set about addressing them all. Thus we have new tools for preventive maintenance, the creation of flow and the emphasis on takt time.
  4. Transportation Waste – Moving items between areas, buildings or factories incurs a cost, in energy to initiate the movement – such as the petrol absorbed by a forklift truck. However, there is much more than just the accounting costs; the movement brings other costs. Managing a factory with operations spread apart is much more difficult than when the subsequent stages are located in the same work cell adjacent to one another.
  5. Excessive Movement – Separate from the transporting of items is movement. People spending time moving around the plant or cell is equally wasteful. The time a machine operator wastes walking around in order to find a piece of tooling or spanner could be better utilised if we improve housekeeping by locating every needed in a place that is close at hand.
  6. Over Processing – A good example from my own experience relates to surface finishes requirements on the component. The original drawing required a cyclonical grinding to improve the surface finish after turning. When a new CNC machine was installed the required surface finishes could now be achieved with a finished path of the new lathe.  Thus the grinding operation was removed. A basic principle of the TPS is doing only what is needed.
  7. Excess Inventory – Now everyone understands that a key element of the Toyota production system is that a JIT production system reduces the cost of inventory. By lowering the inventory we can then see the problems in resupplying the inventory in short lead times. Thus lean is a continual process of improvement.
  8. The eighth waste – Non-utilized Human Resources/Talent – The waste of not using people to the best of their unique abilities. How can we involve everyone in developing ideas to generate improvements and new products?

Now you have an understanding of the 8 Wastes and how to identify them you can start to learn about Value Stream Maps and how to create your own Value Stream Maps to identify where the wastes in your processes. Value Stream Mapping sessions are some of the most powerful Lean tools you can use to enhance your business, it’s people and process.

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I recommend you catch this webinar. Jim is a good speaker and understands the Toyota leadership way.

The good thing about being in our time zone is we can watch the replay. Simply register, and then receive a link by email and watch it next week at your convenience.  Webinar start at 4am Friday morning is a bit difficult (2 am in China). If you have any questions, just ask this forum and Jim might test our understanding.

There is also a big awareness push on this topic, check out John Shook’s Newsletter

Link to John Shook’s newsletter is : Select here

 

It has almost been a sourcing certainty over the past 10 years that, whatever it is, “you can make it cheaper in China”. While there have been exceptions and problems (Intellectual property protection, Quality etc.), overall the past decade has seen a huge transfer of the world’s production in to China.  However, if you have been watching

TXM Analysis in the China Sourcer Article shows that the total cost of sourcing many products from China will overtake local sourcing in this decade

closely over the past two years things have changed. the next two decades looks like the ones where we will see a change in China’s position from the low cost factory to the world to a de- veloped country and major market in its own right. this process is not new, we have seen it on a smaller scale in japan, South Korea and Taiwan. However this change has profound implications for buyers across the world…. To read more please sign up to download the full article:

 

By Tim McLean, Founder and Managing Director of TXM

Article by Anthony Clyne

The TXM SPED™ (Solving Problems Every Day) method is about solving many small problems every day. Most problems can be simply analysed using 5 Whys. The outcome your staff need is to have common language about Concern, Containment, and Corrective Action. (ref “Getting The Right Things Done” by Pascal Dennis)

Engage your staff by asking “What are your frustrations?” I learnt this from an innovation consultant, Roger La Salle. This simple question brings real problems to the spotlight.

Provide a platform for your staff and a standardised leader support process. Conduct a daily workplace team meeting (10 minutes). Have standard work for managers to review each team every day through a ‘Gemba Walk’ The site leadership team should meet and connect each day for maximum efficiency.

Staff Daily Meeting:

  • Simple Visual Indicators
  • Hand Draw Updates
  • Follow Morale, Safety, Quality, Delivery, Cost, Problem PDCA agenda
  • Limit Time (e.g. 10 minutes)
  • Have Defined Roles (facilitator, scribe, etc)

Lean Manufacturing problem solving

Gemba Walk:

  • Display Routine
  • Focus on Positives
  • Act on Problems
  • Standardise Agenda
  • Fix Routine of Team Sequence
  • Flexible Time of Each Meeting

Site Leadership Meeting:

  • 10 Minutes
  • Standard Agenda.
  • Discuss Issues (do not repeat problem solving from work place)
  • Communicate Activities

Conclusion

Jeffrey Liker and David Meier use a very good metaphor for solving problems. They show problems as rocks and shows many small rocks with a few medium rocks and two or three boulders. The six sigma approach is to train high caliber problem solving people and focus on the big problems. A lean tools approach driven by lean “experts” generally focus on medium sized and a few big problems. The true lean approach is to focus management on big and medium rocks and  everybody on many small rocks. The lean method achieves true cultural change and will get down to the level you need for true process stability and excellence.