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January 2, 2010

Making a Start with Lean. How to begin improving your business processes

There are many books on lean available and some complicate their message with obscure Japanese terms and complex formulas. They seem to expect years of understanding of the philosophy of lean. Very few books that I am aware of give a clear, simple “how to get started” guide, so here is my attempt at getting you started:

 

1       Understand your business processes

         The key starting point to lean is to understand your business processes. It sounds simple but, with a good cross-functional team, ask who your organisation’s customers are; and what it is that you do that they value. It’s worth spending a day on this. What does your organisation really do that adds value for the customer. Is it quality ? Level of service ? Speed of response ? Unique technology ? Think of it from your customers’ point of view.

 

         Once you have made a good list of what you do well for the customer, then ask what your organisation does that the customer does not value. What do you do wrong ? Late deliveries ? Quality problems ? Poor information ? Make sure the sales and marketing people are involved. As well as planning to improve customer value, it is worth starting to remove the simple mistakes that annoy customers.

 

         Once you understand what you do to add customer value, start to map out the business processes that deliver the products and services that create that value. At this stage just consider the high level processes – delivery, inspect and pack, assemble/ manufacture, prepare production/ project plan, process order etc. Do this for each product/ service family or grouping.

 

         Identify six to eight top level metrics that show how well you deliver the right thing at the right time. We will review these later, but often measures include quality (right first time); delivery performance (on time in full); speed of response (order to delivery days); cashflow (accounts receivable – accounts payable days); stock levels (inventory days) etc.

 

         Once you understanding the process flow for each product or service family, and you have basic performance measures for these, you can start to group them together into Value Streams – those products and services which go through similar process flows.

 

 

2       Map each Value Stream

         There are no rules on how many Value Streams you should have. As a general guide, operational Value Streams will usually have at least 25 people in them, but rarely more than 150; and they will usually account for at least 10% of revenue each. Thus a company with a total workforce of 150 to 200 people might have between two and six Value Streams.

 

         It doesn’t really matter how many Value Streams you define as long as they can be identified as having distinct business processes and activities with a group of people that can be formed into a cross functional team that can work together for improvement.

 

         Ten to fifteen people from that cross functional team should be brought together to map their Value Stream in detail. The team should represent a true cross-section of the Value Stream and will usually include the Value Stream manager, at least one supervisor, operators, someone from despatch, at least one person from marketing, someone from supplier management, someone from purchasing, engineering and maintenance representatives, a finance person, a customer services representative and so on,

 

         The team’s task is to map the Value Stream in detail, and assemble data on its performance. This may take a week or more. Each step, stage and activity in all the processes that form the Value Stream needs to be included in the map, in sequence. Data on the performance of each step also needs to be collected. Key items of data to collect include:

  • Total time per work day
  • Regular planned downtime, meetings etc
  • Available time
  • Number of people in process
  • Number of items processed per day (with standard deviation)
  • Cycle time (average time to perform the activity, with standard deviation if possible)
  • Average time (with standard deviation) waiting in queue to be processed
  • Frequency at which work arrives (pattern of arrivals)
  • Delivery schedules
  • Inventory levels
  • Equipment used
  • Quality level (% right first time) and quality issues
  • Distance travelled for jobs
  • Information/ paperwork required and completed

 

 

         Putting this information together for every step in your business processes and Value Streams will take time, but it will provide a wonderful insight into how your business works, where the problems and constraints are, and how you might start improving the process.

 

         To finish their work the Value Stream mapping team should put together an improvement action plan, prioritising the areas for improvement and the resources needed for this. This plan should be reviewed by management with implementation coordinated by a cross functional team from the Value Stream and closely involving those people in the areas needing improvement.

 

 

It will probably take two to three months from the start of the project to the position where you have detailed current state Value Stream maps and a first step improvement plan. The activity to get their will have built a great deal of trust and cooperation between staff and will have resulted in a detailed understanding of business process. Build on this momentum by quickly approving the improvement plans and setting up cross functional teams to implement them. Set a fairly tight deadline for the improvements to be implemented (three to four months is common, with monthly feedback), and then work with the teams to plan the next stage of improvements. After nine to twelve months it will probably be appropriate to form new Value Stream mapping teams to map the improved Value Streams and develop the next phase of improvements.

 

Throughout this whole period keep everyone in the organisation informed with progress and post key performance indicators visually in every area of the business.

 

There is nothing complicated about getting started with improvement, it simply requires a time commitment and some facilitation. This investment will more than repay itself in improved performance and much greater teamworking.

 

Good luck.