UCSD Class: Lean Office

Lean Office

Lean Enterprise Program

UCSD Extension

Instructor: Karen Martin

Learning Objectives

• You will learn how to:

– Identify and eliminate the eight wastes as they

exist in office and service processes.

– Use key metrics to improve office and service

processes.

– Create metrics-based process maps to identify

waste, design improved processes and

standardize office and service work.

© 2011 Karen Martin & Associates 3

The Impact of Pre-Production

Processes on Total Lead Time

Pre-Production Processes Prod.

Order Entry

Design/configuration

Documentation

Work order management

Material preparation

Fabrication

Assembly

Test

Package

Total Lead Time

© 2011 Karen Martin & Associates 4 4

5%

65%

25%

Materials

Direct Labor

Overhead

Common Product Cost Components


“White Collar” Challenges

• Defining value through the external customer’s eyes.

• Identifying the “product.”

• Not used to cross-functional problem solving.

• Not used to being measured.

• Resistance to standardization.

• Dependence on inspection.

• Not used to quick decisions and execution.

• Challenging overkill re: regulatory compliance.

• Challenging policy and VERY long-standing paradigms.

• Change is more emotional than mfg.

Cultural Differences – Mfg vs. Office

Shop Floor Traits Office Traits

Sense of urgency Less urgent

Time scarce resource Time expands to complete the

task

Production quotas Excessive work waits

Standard times and methods Few processing standards

Real time performance

measurements

Few to no real time

measurements

Daily production meetings Weekly staff meetings

Desire for change Desire to maintain


Lean in the Office

• Lean principles are the same

– Define value

• This is the most shocking element initially

– Create flow by eliminating waste

• Eight wastes are the same

• Metrics differ slightly

• VSMs differ slightly

• Lean tools used to make improvements are

basically are the same

• The environment/culture is significantly different.


Customer-Defined Value

• Value-Add (VA) - any operation or activity the

customer values and is (or would be) willing to

pay for if he/she knew the incremental cost of

that activity.

• Non-Value-Add (NVA) - any operation or activity

that consumes time and/or resources but does

not add value to the service provided or product

sold to the customer.

– Necessary – regulatory requirements, etc.

– Unnecessary – everything else


Eight Wastes (Muda)

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors

• Motion (people)

• Transportation

(material/data)

• Underutilized

people

© 2011 Karen Martin & Associates

Eight Wastes

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors

• Motion (people)

• Transportation (material/data)

• Underutilized

people

10


Overproduction

• Producing too much, too fast, too soon – More than required by next process

– Earlier than required by next process

– Faster than required by next process

• Creating or providing anything before it can be consumed or acted upon by the downstream customer

• Results in wastes of inventory and waiting

• What are the reasons for overproduction?

11

Work-in-process (WIP) is a symptom

of overproduction


Three Types of WIP

• Waiting to be processed

• Currently being worked on

• Completed, but not yet passed on

13

Step 1 Step 2 Step 3

WIP

WIP WIP

Step 2’s WIP


Eight Wastes

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors

• Motion (people)


• Underutilized

people

14


Inventory Woes

• Stockout problems

– Extended lead times to complete the job

– Additional labor and expenses to deal with it

• Non-material inventory expenses

– Space

– Labor to manage it

– Risk of obsolescence or damage

– Risk of customer changing his/her mind

– Reduced cash flow

• Per unit price becomes less relevant in a Lean

enterprise

15

No Control over Inventory


Eight Wastes

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors

• Motion (people)


• Underutilized

people

18


Over-Processing

• Effort that adds no value from the customer’s point of view – Unnecessary handoffs

– Re-entering data

– Multiple approvals / signatures

– Audits / inspections (verifying the work of others)

– Creating excessive documentation

– Excessive reporting

– Redundancies

– Unnecessary meetings

– Excess features / making it “too good”

– Over-specified plans and materials

– Excess approval sign-offs

19

Current State

20

SNAP

Main

Tech

DEPT

HEAD

C.O.

SK

DAAS

BO1

ITEM

MGR

ISEA

SUPV

CRANE

SUPPLY

PEO

IWS2

CRANE

DEPOT

STOCK

POINT

Handoffs= 47

Lead Time = 486 hrs (60.7 days)

Process Time = 108 hrs (13.5 days)

Main

Tech

C.O.

ISEA

SUPV PEO

IWS2

STOCK

POINT

SNAP DEPT

HEAD

SK

DAAS

BO1

CRANE

SUPPLY

DOCKSIDE

Future State

Handoffs= 10 (78% improvement)

Lead Time = 90 hrs (11.3 days)

Process Time = 58 hrs (7.3 days)

Eliminating Over-Processing


Excessive Approvals & Authorizations

• Is the approval redundant? (same skill set and

perspective as another approver)

• Is the approval a “rubber stamp”?

• Does the approver have the technical skills and

experience to understand what they are signing?

• Does the approver have the authorization to

approve or deny?

• Is the approver accessible?

• Is the approver on the routing list merely to stay

informed?

21


Eight Wastes

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors

• Motion (people)


• Underutilized

people

22


Waiting

• Types of waiting – People waiting for information, material or equipment

– Information, material or equipment waiting for people

– People waiting for people

• Idle time created when waiting for… – Information, input, decisions, approvals or authorization

to proceed

– Supplies and material

– Handoff

– Next batch

– Meetings to begin

– System to function properly

– Looking for stuff

23


Looking for Stuff: Time is Money

• Organization with 1,500 employees – Earn average of $22 per hour

– Work 250 days per year

• Each employee spends an average of 10 minutes per day looking or waiting for stuff – Individual impact

• = 41.7 hours wasted time per year

• = 0ver a week of frustrating, unfulfilling, nonproductive time

– Organizational impact • = 62,550 hours of nonproductive time

• 30 FTEs worth of wasted resources

• = $1.4 unnecessary direct expense per year

24


Eight Wastes

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors/Defects

• Motion (people)


• Underutilized

people

25


Errors

• Errors become defects that require rework

• Key metric - % Complete & Accurate

(%C&A)

26


Eight Wastes

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors

• Motion (people)


• Underutilized

people

27


Motion (people)

• Traveling to remote locations

• Walking to shared equipment

• Walking material/information to downstream customer

• Walking to offices for approvals, signatures, exchange of information, etc.

• Walking to and from supplies

• Looking for supplies, equipment, documents

• Ergonomic issues

• Risks: Time, Morale, Safety

28

Spaghetti

Diagram ECN Process

• Visualize

travel of:

– People

– Product

(“the thing”)

12.5 miles

per ECN

Desk

Table

Desk

Desk

Desk

Desk

Table

Desk

Table

Desk Desk

Table Table Staging Area

6, 7

, 8, 9

6

, 7, 8

, 9

Desk

6, 7

, 8, 9

6

, 7, 8

, 9

6, 7

, 8, 9

6

, 7, 8

, 9

Desk Desk

Table

Table

Start

Table Table

1

12

4c

4a

3

2

11 10

cart

4b

Spaghetti Diagram – Mail Room (Shows people or product travel)

Motion Waste

Shared

equipment


Impact of Shared Equipment

• Distance traveled to printer

– Dept A = 92 ft. per trip

– Dept B = 696 ft. per trip

• 120 occurrences / day = 4656 miles/year

• Walk pace = 1 mile per hour = 582 days/year of

unproductive, non-value-adding time = 2.2 FTEs

32


Eight Wastes

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors

• Motion (people)


• Underutilized

people

33


Transportation (product)

• Transporting material, paperwork or

information between individuals,

departments, buildings, regional/corporate

offices, customer locations, etc.

– Is hard copy really needed?

– Does it have to be shipped overnight?

34


Eight Wastes

• Overproduction

• Inventory

• Waiting

• Over-Processing

• Errors

• Motion (people)


• Underutilized

workforce

35


Under-utilized Workforce

• Not utilizing the full skill set and potential of each worker (KSAC = Knowledge, Skills, Aptitude/Ability, Creativity)

– Not training workers to their maximum capacity

– Occupying staff with work that doesn’t need to be done, limiting time for creativity

– Narrow scopes of responsibility; over-specialization

– Not utilized for improvement design and implementation

36


Key Metrics


Task-Level Metrics: Time

• Process time (PT)

– The time it takes to actually perform the work, if one is

able to work on it uninterrupted

– Includes task-specific doing, talking, and thinking

– aka “touch time,” work time, cycle time

• Lead time (LT)

– The elapsed time from the time work is made available

until it’s completed and passed on to the next person or

department in the chain

– aka throughput time, turnaround time, elapsed time


• Critical Path PT

• Critical Path LT

• Activity Ratio (AR)

– The percentage of time work is being done to the

patient/item/data passing through the process

– AR = (∑ CP PT ÷ ∑ CP LT) × 100

– 100 – AR = Idle time

Summary Metrics: Time


Key Lean Metric: Quality

• %Complete and Accurate (%C&A)

– % time downstream customer can perform task

without having to “CAC” the incoming work:

• Correct information or material that was supplied

• Add information that should have been supplied

• Clarify information that should or could have been

clear

– This output metric is measured by the

immediate downstream customer and all

subsequent downstream customers.


• Rolled First Pass Yield (RFPY) =

– %C&A × %C&A × %C&A × …

– The percentage of occurrences where the

information/data/people being processed pass

through the entire process with no rework

required

– Example: (0.95 x 0.60 x 0.85 x 0.75) x 100 =

36.3% RFPY

Summary Metrics: Quality


• Total PT

– Sum of all activities, not just critical path

• Labor Requirements

Summary Metrics: Labor Requirements

Total PT (in hrs) X # occurrences/year

# FTEs Available work hrs/year

=

* FTE = Full-time Equivalent (2 half time employees = 1 FTE)

Freed

Capacity = CS FTEs - FS FTEs


What do you do with freed capacity?

• Absorb additional work without increasing staff

• Reduce payroll through natural attrition

• Innovate – create new revenue streams

• Conduct ongoing continuous improvement activities

• Do a better job with fewer errors and higher safety

• Talk and work with your customers and suppliers

• Mentor staff to create career growth opportunities

• Provide additional workforce development; cross-train

• Better work/life balance

• Slow down & think

• Get/stay caught up

• Do the things you haven’t been able to get to

• Collaborate with other areas

43


Dinner DVD

Time: The Next Dimension of

Quality


Value Stream Mapping

in the Office

Narrowing the Scope: Example

Order

Fulfillment

Process

International

Domestic

Service Parts

Consumables

Units

Non-

Warranty

Warranty

Service Parts

Consumables

Units

Non-

Warranty

Warranty

Current State Value Stream Map

Purchasing — Non-repetitive purchases less than $5,000 Supplies Purchasing - Current State VSM

Finance

Review

Budget

PT = 5 mins.

C&A = 60%

6

Corp Purchasing

Manager

Approve in

ERP

PT = 5 mins.

C&A = 90%

1

0.25 days

5 mins.

0.5 days

5 mins.

5 days

5 mins.

1 days

5 mins.

1 days

10 mins.

0.5 days

15 mins.

3 days

5 mins.

7 days

15 mins.

10 days LT = 28.4 days

PT = 65 mins.

AR = 0.477%

Supervisor

Review Req.

PT = 5 mins.

C&A = 95%

2

Sys Engineer

Review

Requisition

PT = 5 mins.

C&A = 90%

1

IS Manager

Review

Requisition

PT = 5 mins.

C&A = 100%

1Financial Mgr

Review

Requisition

PT = 10 mins.

C&A = 95%

1

Admin Asst

Enter

Requisition

PT = 15 mins.

C&A = 98%

1

4 hrs. 40 hrs. 8 hrs. 8 hrs. 24 hrs. 56 hrs.

Originator

Inititate Req.

PT = 10 mins.

C&A = 10%

31

2 hrs.

Form File

File Maker

ERP

Quicken

Vendor

Website

Excel

4 hrs.

Customer Demand:

615 requisitions per y ear

20 ReqsExternal

Supplier

PT = 20 mins.

Hard CopySupplies

Data Entry

Corp Purchasing

Submit PO

to Supplier

PT = 15 mins.

C&A = 98%

6

10 Reqs 63 Reqs

1

2 3 4 5 6 7 8 9 10

RFPY = 4.2%

PT = Process Time

LT = Lead Time

C&A = % Complete & Accurate

AR = Activ ity Ratio (PT/LT x 100)

RFPY = Rolled First Pass Y ield

80 hrs.

Supplies Purchasing - Future State VSM

Customer Demand:

615 requistions per year

Dept.

Manager

Approve

in ERP

PT=5 mins.

C&A = 90%

1

0.5 days

5 mins.

0.75 days

5 mins.

1 days

20 mins.

10 days LT = 12.3 days

PT = 30 mins.

AR = 0.508%

Supervisor

Review

Req.

PT=5 mins.

C&A = 95%

28 hrs.

Originator

Enter Req.

in ERP

PT=30 mins.

C&A = 85%

31

File Maker

ERP

Vendor

Websites

6 hrs.

Standard

Work for

review

Additional

IT access

Requisition

Checklist

Cross

Training

Additional

IT access

External

Supplier

PT=20 mins.

Supplies

4 hrs.

Auto Notify

Integrate Form

File with File

Maker

Use budget in place

of Quicken

Dedicated

Buyers

Corp Purchasing

Place

Order

PT=20 mins.

C&A = 98%

6

Approval

1

2 3 4 5

PT = Process Time

LT = Lead Time

C&A = % Complete & Accurate

AR = Activity Ratio (PT/LT x 100)

RFPY = Rolled First Pass Yield

RFPY = 71%

80 hrs.

Future State Value Stream Map

Purchasing — Non-repetitive purchases less than $5,000


Projected Improvements

Purchasing Process

49

Metric

Current State

Projected

Future State

%

Improvement

LT 28.4 days 12.3 days 56.7%

PT 65 mins. 30 mins. 53.8%

AR (PT/LT x 100) 0.48% 0.51% 6.3%

RFPY 4.2% 71.0% 1,590%

# Steps 10 5 50%

# IT Systems 6 3 50%

Projected freed capacity = 358.8 hrs = 9 business weeks

Typical Differences - Manufacturing vs. Office VSMs

Manufacturing Office

Customer icon Upper right Center

Supplier icon Upper left None

“The thing” we’re

following

Raw material, sub-

assemblies, finished goods

Paper and electronic

Information

Information Flow More structured /

formalized I.T. systems

Multiple I.T. systems and

work-arounds

Schedule notification Multiple points across VSM Work not scheduled

WIP icon Inventory triangle In-bin (if preferred)

Quality Metric

First Pass Yield (FPY)

Percent Complete &

Accurate (%C&A)

Takt Time

Typically can be applied

Only applicable with

dedicated resources

LT determination for

each block

Based on WIP between

process blocks

Based on a single item

passing through

Scope / Product

family definition

Straight forward Much more refined (due to

excessive variation)


Metrics-Based Process

Mapping (MBPM)

51


The Improvement Process

52

Plan

Do

Check

Act

Traditional Method Used:

Process Flow Chart

Look up Customer

in Eclipse

SALES

New

Customer?

Enter Order

SALES

Print Ship Ticket

SALES

Load Trucks

SHIPPING

Enter Customer

Information

ADMIN

Perform Credit

Check

FINANCE

Okay?

Notify Sales COD

Only; Notify Admin

to update

Customer Profile

FINANCE

Yes

No

No

YesProduct in

Stock?

Yes

Order Material

PURCHASING

No

Receive Material

RECEIVING

Where’s the quality? Where’s the time?


What is a Metrics-Based Process Map?

• Cross-functional process map

• A visual process analysis tool which integrates: – Functional orientation of traditional swim lane

process maps

– Key Lean metrics: • Lead Time

• Process Time

• Quality (Percent Complete and Accurate)

• Tool which highlights the disconnects / wastes / delays in a process – Keeps the improvement focus properly directed

• Becomes standard work for workforce training and process monitoring


When Do We MBPM?

• Value Stream Driven – VSM is the strategic tool that identifies when

we need to perform a more detailed analysis of a process

– MBPM is a tactical tool used to flesh out the details at each step to see the “waste behind the waste”

• Enables a team to “drill down” from a few targeted blocks on the VSM

• Effective analytical tool for “white collar” Kaizen Events (usually Day 1)

Functions Step

1 Step

2 Parallel Steps

Process Time Lead Time

Who

Activity (Verb/Noun)

Percent Complete and Accurate

(%C&A)

For each step, document:

Add’l Barriers to Flow

Summary Data

PT = 85 min LT = 28.7 hrs

Timeline


1. Label the map in upper right corner. Process name, date, facilitator and/or team members

2. List the functions involved in left column.

3. Document all activities/steps. Verb/noun; concise language; include function as well.

4. Number the activities. One number per column; concurrent activities are labeled A,

B, C, etc.

5. Add activity-specific metrics (PT, LT, %C&A), barriers to flow, and number of staff involved (if relevant). Include units of measure (mins, hrs, days, etc.)

Creating the Current State MBPM

Phase I


Creating the Current State MBPM

Phase II

6. Define the critical path. Longest LT unless “dead-end” step; use colored marker

7. Create the timeline.

8. Calculate the summary metrics CP PT Sum, CP LT Sum, AR, RFPY, Total PT, Labor

Required

9. Define the value-adding and necessary non-value-adding activities Use small colored post-it labeled with “VA” and “N.”

10. Circle the step-specific metrics that indicate the greatest opportunity for improvement. Use red marker.

Longest LTs, Low %C&As, High PTs, Low step-specific ARs

Metric Current State Projected

Future State

Projected %

Improvement

CP LT Sum

CP PT Sum

AR

RFPY

# Steps

Total PT

Labor

requirements

Freed capacity

Metrics-Based Process Mapping

Key Metrics


Metrics-Based Process

Mapping (MBPM)

Simulation

Building a Lean Enterprise

Process

Stabilization

Tools

Standardized Work Job Aids

• Simple

• Visual

• Physical

• Posted at

point of use

• Created by

people who

do the work

and tested

by others


The Rings of Knowledge (ROKs)

Job Aids


Standardized Work for Electronic

Data Entry

66

Checklists

assure all

critical tasks

are done

within defined

timeframes

Building a Lean Enterprise

Flow-Enabling

Tools


Metrics-Based Process Map (MBPM)

Critical Path

Auto-Calculated Results


Lean in the Office – Summary

• Lean principles are the same

– Define value

• This is the most shocking element initially

– Create flow by eliminating waste

• Eight wastes are the same

• Metrics differ slightly

• VSMs differ slightly

• Lean tools used to make improvements are

basically are the same

• The environment/culture is significantly different.

72

Learning Objectives

• You will learn how to:

– Identify and eliminate the eight wastes as they

exist in office and service processes.

– Use key metrics to improve office and service

processes.

– Create metrics-based process maps to identify

waste, design improved processes and

standardize office and service work.

74

7770 Regents Road #635

San Diego, CA 92122

858.677.6799

[email protected]

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UCSD Class: Lean Office