9 KEYS TO INCREASING COMPETITIVENESS THROUGH LEAN

IMPROVE YOUR PRODUCTIVITY & ENGAGE YOUR TEAM

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INTRODUCTION

If you’ve been thinking about introducing Lean but aren’t sure where to start, then this ebook is for you.

And if you’ve attempted to introduce Lean, this book will help you assess what may be done better to ensure a smooth and profitable implementation.

Some businesses do struggle to adopt Lean, usually because these 9 keys to Lean success aren’t followed consistently. Other businesses realise they need to do something to arrest worrying trends in their business, but they’re not sure what to do.

• IS LEAN THE ANSWER? • WHAT BENEFITS CAN THEY EXPECT?• HOW MUCH WORK IS INVOLVED?• WHAT IS THE RIGHT APPROACH?

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ABOUT THE AUTHOR

DAMIEN LACEY HAS SPENT HIS ENTIRE CAREER LOOKING AT WAYS FOR COMPANIES TO

REDUCE WASTE AND IMPROVE THEIR OPERATIONS.

His 15 years of experience with Lean, has included the roll out of Lean with the Bosch Production System (BPS) team in Australia, product & process development with Toyota Technical Centre Australia (including a 3 year posting in Toyota Motor Corporation HQ, Aichi, Japan), then with Vative as a Lean consultant and now as Sales and Marketing Director.

The three years spent with Toyota in Japan, in particular, sharpened his focus on how to reduce costs and improve efficiencies. It was a transformative experience in a culture where new ideas and better ways of doing things were constantly sought to reduce waste and boost productivity.

“Continuous Improvement was genuinely lived and breathed through the company, from the secretary who was organising documents for a meeting through to engineers and middle management to the board,” Damien says.

“Every single aspect - product development, testing, production, the supply chain, sales, marketing and distribution – is looked at and improved relentlessly. When I came back, I could see the opportunities for Australian companies - how they should operate, how they can improve and do better.”

He has managed many major Lean initiatives with Bosch, Toyota & then with Vative clients, working with senior managers, company owners, frontline management and operations staff to implement Lean systems.

Damien holds a Bachelor of Engineering (Mechanical) with Honours. He is also fluent in Japanese (JLPT2), holding a Bachelor of Arts with a major in Japanese.

CONTACT DAMIEN:Damien LaceySales & Marketing DirectorVative - Truly Innovative260A Blackburn Road, Glen Waverley VIC 3150

T: 1300 VATIVE (82 84 83) or +61 3 9886 3852 M: +61 408 416 242E: damien.lacey@vative.com.au W: www.vative.com.au

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INTRODUCTION

• Are you struggling to cope with increasing competition domestically or overseas?

• Is poor productivity pushing up your prices to uncompetitive levels?

• Are you introducing a new product or moving premises and want the most efficient process possible?

IF YOU ANSWER ‘YES’ TO ANY OF THE FOLLOWING QUESTIONS, THEN LEAN IS A MINDSET AND APPROACH WHICH CAN HELP YOU IMPROVE

YOUR ORGANISATION’S PERFORMANCE FOR THE LONG TERM:• Do you want greater efficiencies

in your administrative processes?

• Is there a lot of waste in your organisation, but you would like to better identify or quantify it?

• Do you need to cut lead times, labour costs or raw material costs?

• Is your profitability falling?

• Are your staff disengaged?

• Is your culture: “that’s the way it’s always been done”, rather than “how can we do it better?”

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INTRODUCTION

• Black Duck Canvas’ production line capacity increases by more than 30%

• Kmart cuts operational costs by more than $3 million

• La Trobe University achieves $2.6M in savings and average ROI of 250% on ICT projects

WHEN INTRODUCED THE RIGHT WAY, LEAN DELIVERS SIGNIFICANT RESULTS. HERE ARE SOME OUTCOMES OUR LEAN CLIENTS HAVE ACHIEVED:

• Mackay Multilink’s process efficiency improves by up to 20% within six months

• Health service achieves an 11% improvement in patient arrival times

• New Touch Laser’s delivery performance lifts from 60% to 90% of jobs on time

• Peninsula Health cuts delays to first case surgery start times by 37%

• Sayfa Systems cuts production lead time by 46% and achieves process improvements of 33%

• Abigroup project achieves productivity gains of up to 17%

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YES NO

Q: PEOPLE:Are all relevant skills and capabilities of team members known and visualised?

Is there an active plan to cross skill team members to A: ensure critical processes are sufficiently covered and B: to provide individuals professional development opportunities?

Is there an accurate understanding of workload requirements and from this, active workload balancing applied to all operations?

Q: PULL SYSTEMS: Is material replenishment and core value-add operational processing being triggered based on genuine customer demand?

(In other words is “what we’re ordering” or “what we’re doing” really needed by a customer today or being ordered/done just in case?)

YES NO

INTRODUCTION

Q: WORKPLACE ORGANISATION: Are all tools, materials and information kept in an organised manner?

Do team members know where to find things?

Is equipment, materials etc. put back in their defined and labelled location and is the workplace kept clean and tidy?

Q: VISUAL MANAGEMENT:Is the performance of the workplace visualised? Can you tell by looking how the area/dept. is performing?

Are the goals of the business defined, cascaded and visualised to the department & to the individual level?

Is the status of major projects easily understood by all in the workplace with next steps & progress clearly defined?

HERE’S A QUICK HEALTH CHECK TO ESTABLISH WHETHER YOUR BUSINESS IS LEAN OR UNDER-PERFORMING

YES NO

YES NO

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YES NO

INTRODUCTION

Q: PROCESS DESIGN & ORIENTATION:Has the development of work processes and the physical layout of the workplace been designed along Lean principles?

Are processes reviewed to ensure work load balancing is optimised?

Are batch sizes minimised?

Are people and processes as much as possible grouped together in work cells?

HERE’S A QUICK HEALTH CHECK TO ESTABLISH WHETHER YOUR BUSINESS IS LEAN OR UNDER-PERFORMING (CONT)

YES NO

Q: QUALITY & STANDARDISATION:Are quality levels understood by all and acted upon on a daily basis to ensure customer satisfaction?

Have standard operating procedures been developed for critical processes and are they being followed?

Is the team using a common language and set of tools when addressing quality issues (5 Why, Fishbone diagrams, 8D etc.)?

Do they come together regularly as a team to solve issues?

Are lessons learnt being actively documented and shared?

Q: CONTINUOUS IMPROVEMENT Do team members actively come up with and work on improvement ideas?

Is it generally understood and accepted that if something needs to change to improve then this will happen?

YES NO

NO# OF “YES” ANSWERS

1-8 : you are in the same state as most Australian organisations

9-16: you are well progressed on your Lean journey

16+: you are ahead of the pack and a benchmark Lean organisation

HOW WE CAN HELP YOU

The above list of questions is not meant to be exhaustive, merely to be thought provoking. Lean can help you cut waste and improve profitability. You can contact us now for a no-obligation discussion & assessment of the opportunity for improvement within your organisation or read on and discover the 9 factors to sustaining a successful Lean enterprise.

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LEADERSHIP

1. Lean is a top-down and bottom-up process, the leadership team must decide Lean is a priority for the business and make a firm, long term commitment to the change process. If as a leadership team you haven’t decided to stick with it as a 2-3 year initiative then perhaps pause the activity until you can garner that priority and focus. If the attitude is “let’s try this Lean thing and see how it goes” then I would suggest not bothering because the resolve will most likely falter once things get tough.

LEAN STARTS WITH GOOD LEADERSHIP AND THESE 5 STEPS

2. The leadership team needs to have a good understanding of what it actually means to be Lean. You can read books, attend a seminar or undertake a workshop, but you must have some level of Lean understanding yourself.

3. With this understanding the Leadership should have a level of enthusiasm and excitement about the opportunity to improve the organisation that Lean delivers. This passion for change needs to be communicated to your people via the vision (see next step).

4. The Leadership team must participate visibly in the change process, e.g. chairing a committee, getting amongst your staff and asking them to contribute ideas, or recognising their success in implementing improvements.

LEAN STARTS WITH GOOD LEADERSHIP AND THESE 5 STEPS

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LEADERSHIP

5. The old adage “you don’t get something for nothing” also holds true for Lean implementation. You will more than likely need to make some investment in order to get Lean off the ground and sustained. This may include investment in your staff’s time, training, Lean project investment in tools & equipment, paying for some outside help etc.. However rest assured that this is an investment decision that every business embarking on Lean makes. Also it is no coincidence that the most successful companies in the world are adopting and sustaining Lean principles. You can expect a positive Return on Investment (ROI) but you also need to commit.

LEADERSHIP CHECKLIST

Have we come together as a Leadership team and decided that Lean is a strategic goal?

Is Lean implementation and continuous improvement on our short, medium and long term business plans?

How have I allocated responsibilities for Lean implementation to all team members?

What responsibilities do I have myself?

What is our follow up & review process to ensure that the Lean initiative is tracking towards success?

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VISION

1. Why are you in business? What is your purpose? What is the business’ purpose? We are defining a vision here not developing a set of KPIs. We need to think more broadly and deeply than “It’s our vision to be a $20M company!”. We want something that both yourselves as leaders and your team can get excited about. “To be the largest exporter of quality, 100% Australian owned & grown breakfast cereals!” “Delivering vibrant & uniquely Australian fashion to the world” “Helping our customers unlock their productivity potential through our innovative storage solutions”

2. Why are you thinking about implementing Lean? (By the way “I want to increase gross profit by an extra 5%” won’t cut it as a basis for your Lean vision.)

3. What are your strengths, what do you do well? Can you build on your strengths and improve them? Eg if your lead time is 7 days, and you could get it down to 5 days, would that give you a real competitive advantage? What would an extra 20% of released productive capacity mean to your business. Would you be able to process more orders and grow the business?

4. What are your weaknesses? Where is the organisation falling down? Are you getting a high number of returns or complaints, are you losing customers? Are your operating costs or stock levels too high? Do you need to cut clerical errors or increase the number of orders processed? Do you have poor staff engagement, a lack of ownership of processes or a lack of ideas?

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DESIRE AND ENTHUSIASM TO BE MORE COMPETITIVE AND EFFICIENT IS A GREAT START. YOU NEED TO CLARIFY THIS IN TO A CLEAR VISION OR IMAGE OF HOW YOU WANT THE

ORGANISATION TO BE. THE FOLLOWING 6 STEPS CAN HELP YOU CLARIFY THIS VISION

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VISION

5. How would you measure the success of your Lean initiative in terms of quality, costs, delivery performance, culture and safety? How would you like to see your Quality performance improve? How are you measuring your operating costs and what shift would you like to see? What would you like to see your delivery performance get to? How would you assess your culture currently and what would you like to see change? Is your safety record good or can it be improved?

6. Value stream Mapping & Lean Business Health Check Fact and data based business analysis tools like Value Stream Mapping and a Lean Business Health Check can provide a business an unbiased and objective view on what is possible to improve and where. This clear view on the organisation’s potential can contribute strongly to an overall business vision. For more info on Value Stream Mapping visit our website or click here.

SO TO REITERATE, BY ANSWERING THESE

QUESTIONS WE SHOULD BE ABLE TO DISTIL WHY WE NEED

TO ADOPT LEAN THINKING AND WHAT WE WANT THE

ORGANISATION TO BECOME.

For organisations looking to adopt a Lean culture and adopt Lean practices, this generally represents a significant change. A vision of what this change looks like needs to be defined by the leadership group. Where is the business now, and where it can be in the future?

Do you have a clear idea of where you want the business to be next year, in three years or in five? Or are you mostly caught up in day to day management? And if you do have a vision, has this been communicated to your team?

As a leadership team you need to come together and define…

• WHY are we embarking on Lean?

• WHAT do we want to achieve?

• WHAT do we want the business to look/feel like as a result?

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STRATEGY & PLANNING

LEAN IS A JOURNEY AND IT TAKES A WHILE FOR LASTING

CHANGE TO BED DOWN. YOU NEED TO PLAN THE JOURNEY,

SET MILESTONES AND THEN REVIEW HOW FAR YOU HAVE

COME. YOU SHOULD HAVE QUARTERLY AND ANNUAL

GOALS WHICH ALIGN WITH YOUR 2 OR 3 YEAR

BUSINESS PLAN.

Some critical questions at this step are:

HOW are we going to proceed with this Lean initiative? What will the process be? What are the milestones?

WHAT IF we encounter some difficulties and roadblocks? How will we react as an organisation?In the first year, for most organisations embarking on Lean your main goal should be introducing the concept of Lean, the wastes that can exist within a process, and ensuring it is well understood throughout the organisation.

By and large, a first good step to take is the implementation of 5S or Workplace Organisation. Better organisation of your workplace immediately improves efficiencies and normally provides a quick win justifying to everyone that “Lean is a great idea!”. Some other Lean projects may also be introduced in Year 1, but introducing only a few and sustaining them is the key. If you

had a choice between a sustained productivity improvement of 5% or a 40% improvement in productivity that disappears in a couple of months because the change wasn’t sustained… well the answer is obvious. Small sustained changes are more favourable than ‘large’ changes that don’t get maintained.

Year 1 will require the most intensive work for an organisation implementing Lean, but it’s critical you don’t lose momentum in the following years. Most likely, ideas such as “continuous improvement”, “Lean projects”, “you mean I have to stop what I’m currently doing to make changes?” etc., will be new concepts for the organisation. The organisation may react slowly and painfully to these challenges, however think of it as the organisation developing their ‘Continuous Improvement’ muscles. You will need a plan to chart through this process.

YEAR 1 What will your goals and actions for the next four quarters look like?

YEAR 2 You need to ensure the momentum from Year 1 is continued. Your level of 5S must be maintained, and new projects implemented. New staff must be trained in Lean concepts and participate in change.

YEAR 3 Is the time to focus on really shifting the key performance indicators you set for the business. By this stage, Lean will have become the new way of thinking in your organisation, and you’ll really see your efforts paying off. Lean will require less intensive activity than in Years 1 and 2, and you’ll find your staff coming up with ideas which have been costed and which have a clear ROI.

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MINDSET NOT TOOLS

LEAN IS NOT JUST A BUNCH OF ESTABLISHED TOOLS

LIKE 5S, KANBAN OR VALUE STREAM MAPPING THAT ARE

USED TO IMPROVE YOUR PROCESS. USING THESE TOOLS

IS A GOOD THING AND YOU WILL GET A BENEFIT.

However becoming Lean really means adopting a continuous improvement mindset. To use an analogy, the Lean tools themselves are like the fruit on the tree. Those established Lean tools are simply the result of a number of (mainly Toyota) people, over time, continually looking and re-looking at the manufacturing processes and trying to improve. The tree itself, which produces the fruit, is the drive and attitude to continually improve. Incidentally, after spending a number of years in Toyota, including a few years in head office in Japan, I never once heard the word ‘Lean’ used. Discussions about improvement centred mainly on tangible objectives such as ‘time saving’, ‘cost reduction’, ‘material reduction’ etc.. The word Kaizen or Continuous Improvement was commonly used and was a strongly held principle for everyone in the business. Continuous improvement is an idea that genuinely lives in the hearts and minds of their employees.

So, from time to time I get a question about Lean principles from clients… “Should I change from batch production to single piece flow?” “Should we implement Kanban in this area to control stock?” “Should I store less stock on the line and implement a milk run to replenish stock?”etc. The simple answer is “I don’t know”. A better question to ask “As a result of this change how much time will be saved? How much will stock reduce by? How will delivery lead-times improve?” etc.. If you know the answer to that question, then most likely you don’t require anyone’s 2nd opinion.

Teaching people Lean principles and how to use Lean tools is good and useful. However, more important than this is for team members to gain a mindset of “there must be a better way” or “how can we do this better?”

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MANAGING EXPECTATIONS

IF YOU ARE DOING THINGS RIGHT, YOU AND THE TEAM SHOULD BE EXCITED & MOTIVATED TO TRANSFORM YOUR BUSINESS. However, and this is where the long term plan comes in, you need to be realistic about what can be sustainably achieved in a short period of time. Expect resistance and some difficulty. You need to meet that with a calm and consistent approach.

Most Lean initiatives go through the following cycle:

B: Realisation of the complexity and effort needed to make and sustain the change. Once teams are formed and tasks assigned, people begin to realise more concretely what they are required to do. Some struggle with the new Lean ideas initially, some may feel overwhelmed with the requirement to do something outside their normal day to day role. “Oh no this is going to take some time and effort- argh!” At this point the leadership needs to be calm and consistent and stay the course.

A: Excitement and positivity about the potential for change. Team members are enthusiastic about the change. The vision and the strategy have been communicated and the leadership team have demonstrated the importance of the initiative by actively participating themselves. Everyone has been assigned some level of responsibility and there is a sense of team. “It’s all upside from here, right? What’s not to like?”

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MANAGING EXPECTATIONS

KEY TAKEAWAYS

Be aware of the emotional cycle that individuals & the business will go through on the Lean journey

Be realistic about how much change can be effectively implemented and sustained by the business & plan accordingly

Stay the course when things get tough

C: Breakthrough occurs and some results begin to show.

Eventually with persistence, strong leadership and support, the results of your Lean initiative will begin to show.

Perhaps 5S is delivering some less cluttered and more organised workplaces. A couple of the easier projects are being implemented and are working well. These initial quick wins should be celebrated loudly and widely within the organisation.

The support and positive reinforcement by the leadership group at this time is critical and it provides the impetus and momentum for the rest of the team to continue their efforts.

D: Things are clearly better than before. With continued effort by all the teams and ongoing support & mentoring the Lean initiative will yield results. The process has improved and there are clear benefits to the organisation. The results achieved should be summarised, documented and communicated. You want to use this success to justify further activity to continue the momentum for your Lean journey.

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FORMALITY & STRUCTURE

CLEARLY DEFINED AND SIMPLE FOLLOW UP & REPORTING

STRUCTURES PLAY A LARGE ROLE IN ENSURING THAT THE

ENTHUSIASM AND ENERGY GENERATED AT THE START OF YOUR LEAN PROGRAM IS FOCUSED AND APPLIED CONSISTENTLY OVER THE

ENTIRE TIME FRAME.

3. Defined Frequency of when Project Team Leader will communicate with team

4. Defined Frequency of when Project Team Leaders report to Management

5. Visualisation in workplace of Project Progress. We should be able to tell at a glance how all projects are tracking (ahead? behind?) and what the next action is.

Even if it is only quarterly the leadership team should be overseeing and & steering the activity that is making your organisation more Lean. There needs to be a plan with a start, a finish and expected outcomes along the way. It is recommended to regularly review progress of your Lean initiative based on the plan, regardless of whether its good, bad or otherwise. Good governance is your friend!

Do people know what’s expected of them? Has everyone been assigned to a team with a clearly defined project? How are we progressing? Doing well? Falling behind? Are there follow up & review meetings? Does management actually care if I continue to work on my Lean projects or should it be 2nd or 3rd priority?

There are many different methods of setting these structures up, in most cases they should include the following:

1. Clear Definition of Project Team Leader, Team Members and Task Responsibilities

2. Defined Frequency of when Project Team Leaders report to Project Coach

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ENGAGE ALL LEVELS

THE BEST RESULTS OF LEAN IMPLEMENTATION COME WHEN YOU INVOLVE, IN SOME WAY, ALL LEVELS OF THE ORGANISATION.

Lean is most effective when it is driven from the top down and the bottom up. The leadership team need to set the strategy and approve time and resources to spend implementing. The frontline management team need to be responsible for specific and clearly defined project activity. The operations level of the business need to understand, participate and implement the changes.

Naturally the amount of time and hands-on effort the CEO of the business puts into Lean will be far less than a Lean project champion. However everyone in the organisation needs to be engaged and taking part.

If we only engage with one level of the organisation then division and conflicting priorities can quickly develop. For example a common and usually less than successful approach to Lean can be to engage only the

frontline team leaders. Perhaps as an initiative of a particular department manager or HR function. The team leaders are trained and then made accountable for the change. However Lean isn’t on the business’ strategic plan so senior management aren’t actively engaged and resources don’t get deployed. The operations level don’t understand what Lean is all about and are sluggish to respond to their team leaders’ requests. Resistance can set in and results stagnate. Any results that do eventuate, generally come down to the ability of the individual team leader to sell the particular project or change to management and his team. It relies on a degree of bull dozing and the hurdle to clear for success is set high.

We need all members of the team understanding the part they need to play and pulling in the same direction.

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DON’T BE TIMID

A TEPID APPROACH WILL PRODUCE A TEPID RESULT. BY ALL MEANS, IF YOU NEED TO, TRY APPLYING LEAN IN A SMALL

AND CONTROLLED AREA/PART OF THE BUSINESS. THAT’S FINE; HOWEVER THE PURPOSE OF THIS TRIAL SHOULDN’T BE…

If you exclude parts of the organisation then you create division.

People who understand Lean versus people who don’t, people who are motivated to change versus people who aren’t. This makes things harder. So to be specific you need to include admin processes, sales processes, management, purchasing, HR etc. Opportunities for improvement don’t stop at the borders of departments.

For an overall and sustained result you eventually need to reach a tipping point in terms of number of people and departments involved.

“Let’s see if this Lean stuff is worthwhile”.

This is the wrong question. Lean works, it is effective, and is being used by your competitors to get ahead.

If a controlled trial is necessary then its purpose should be “Let’s trial the implementation approach and refine it before a broader roll out”Lean isn’t only for the operational part of the organisation (the manufacturing area, the nursing staff, the call centre personnel etc.) and should be adopted company wide. You want all parts of the business speaking the same language and understanding the need to improve.

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WE’RE GREAT! WHAT’S NEXT?

LASTLY WHEN SUCCESS WITH LEAN DOES COME, YOU WANT TO MAKE SURE THAT IT’S NOT SEEN AS A ONE OFF PROJECT

AND FORGOTTEN. IT CAN HAPPEN THAT WITH A GOOD RESULT PEOPLE WILL QUICKLY ‘PAT THEMSELVES ON THE BACK’ AND

BECOME COMPLACENT.Keys to ensure complacency doesn’t set in:

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The standards of 5S may start to slip slightly, no new Lean initiatives are kicked off, some old habits may resurface.

Don’t be surprised if this happens, and also don’t be too hard on yourself if this does occur. At this point some of the original “nay sayers” can latch onto the fact that things have slipped and hold it up to say “you see I told you it wouldn’t work!”

This kind of negativity can start a downward spiral of even further regression.

What’s important is to notice the overall long term trend. Things are more than likely still better than they were before you began your Lean journey.

Lean needs to be included on your strategic plan and embedded in people’s roles and what’s expected of them

Ensure some Lean Projects are always in progress in the business

Continue 5S activity and audits, however reduce to an appropriate frequency (perhaps only monthly or once a quarter)

Train new starts on Lean thinking and make sure they participate in improvement

Don’t let the ‘nay sayers’ hijack the agenda.

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WHAT YOU’VE JUST READ HAS BEEN INFORMED BY MANY YEARS OF LEAN IMPLEMENTATION EXPERIENCE

AND LITERALLY HUNDREDS OF CLIENT ENGAGEMENTS. I HOPE YOU’VE FOUND IT USEFUL.

If you’re interested to know more about how we help organisations just like yours implement Lean successfully & sustainably…

OPTION A :Take me up on a free offer to discuss where your organisation is currently on its Lean journey and how Vative can help you to achieve its improvement goals. We may even be able to get some government support & grants Damien Lacey damien.lacey@vative.com.au 0408 416 242 or 1300 VATIVE

OR

OPTION B :Keep doing what you are doing.