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“ Costs do not exist to be calculated. They exist to be reduced. ”
Taiichi Ohno
Creater of the Toyoda
Production System
“ The most dangerous kind of waste is the waste we do not recognize ”
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Lean Implementations
Higher customer expectations, cost-cutting pressures, slimmer margins, and reduced lead times are challenges that continue to frustrate both private and public sector organizations. Lean is a business operating philosophy in which customer value drives manufacturing and/or service delivery processes. By focusing on process and the elimination of non-value-added activities, Lean has helped countless businesses reduce costs, increase productivity, improve quality, accelerate delivery, and provide better customer service.
Lean should not be thought of as a kind of cost reduction program or management strategy, but rather as a way of thinking and acting for an entire organization. A Lean organization understands customer value and focuses its key processes to continuously increase it. To accomplish this, Lean thinking changes the focus of management from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams flowing horizontally across technologies, assets, and departments to customers.
A popular misconception is that Lean is a just manufacturing program. Actually, Lean concepts have been effectively applied to every kind of business and every kind of process. Businesses in all industries and services, including healthcare and governments, are using Lean concepts to streamline operations, reduce operating costs, and improve customer delivery of products and services.
Typical gains* achieved with Lean include:
Reduced:
- Throughput / Lead Time up to 50%
- Set-up / Changeover Time up to 80%
- Inventory Investment Up to 40%
- Non-Value Activities up to 60%
- Quality Costs up to 90%
Improved:
- On-Time Delivery up to 70%
- Productivity up to 50%
- Floor Space Utilization up to 50%
- Responsiveness and Flexibility up to 75%
* Average gains based on a 10-year NIST study of companies that have adopted Lean
The Process:
All of profit Miner's Lean engagements consist of the following elements:
- development of implementation strategy
- establishment of a Lean Champion and Team
- development of appropriate measures & metrics
- customized Lean Concepts training
- Value Stream Mapping of targeted process
- application of Lean concepts
- implementation of improved process
- establishment of continuous improvement initiative
We have found that the most effective means of ensuring a successful Lean initiative is to establish an internal company Champion and Lean Team who will be responsible for the company's ongoing Lean program.
The Champion, supported by a Lean Team, identifies new Lean project opportunities, develops and implements Kaizen events, and manages the company's continous improvement activities.
The Lean Team is composed of representatives from each of the company's departments such as Accounting, Purchasing, Human Resources, Engineering, Scheduling, Marketing, Customer Service, and Production. This helps ensure that all aspects of a particular process or lean opportunity under review are considered, and that potential collaterial issues and opportunities are captured.
The principle tool associated with Lean is Value Stream Mapping (VSM). Essentially, VSM is a not unlike flow charting a process to capture all of the various elements involved from beginning to end. Where it differs is that we identify and assign a "cost" to each process element, capturing the time, added value, resource requirements, inventory value, etc., so we can gain an understanding of the true "costs" of the process. We then apply various Lean concepts as appropriate to improve the process and remove any "non-valued added" elements.
Other Lean "tools" include:
- Workplace Organization - 5S
- Predictability & Consistancy (Quality)
- Set-Up Reduction (SMED)
- Total Productive Maintenance (TPM)
- Visual Workplace (Displays & Controls)
- Support Processes (Purchasing, Scheduling, Accounting, etc.)
- Kaizen Events
- Continuous Improvement
Key to Success
The requirements for a successful Lean initiative implementation are:
- Complete, visible, and active management participation
- An empowered Lean Champion
- A managmement-supported Lean Team
- Open employee communications - no secrets
- No sacred cows - everything must be on the table
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Types of Lean Initiatives
We routinely utilize various elements of Lean to help our clients improve their flexibility and profitability depending on their particular needs and situation. There are basically four "kinds" of Lean, each of which applies Lean concpets in different ways to acheive the desired results.
Lean Accounting
As a company moves to Lean, they soon learn that many of their accounting, control, and measurement methods become unsuitable. Mass production-oriented Standard Cost Accounting principles have no good way to identify the financial impact of the lean improvements taking place throughout the company. In fact, traditional financial reporting often shows that bad things are happening when very good Lean change is being made, such as showing a reduction in profitability when inventory is reduced.
Lean Accounting provides accurate, timely, and understandable information that gives clear insight into the company's performance - both operational and financial. Having a clearer understanding of the true costs associated with their products, processes, and value streams, companies can make better decisions and improve profitability.
Lean Government
Government agencies are faced with unique problems when it comes to managing their operations. Unlike the private sector, they are somewhat restricted as to how they can deal with fiscal issues. Typically, they tend to rely on hiring freezes, travel restrictions, delaying maintenance, etc., to keep within their budgetary requirements. Utilizing Lean concepts is a proven strategy to help government agencies at all levels improve efficiencies, cut costs, reduce backlogs, and better serve their constituents.
Much like Lean Office, Lean Government focuses on the key processes in all agencies and departments, the services that they provide, the way those services are delivered, and identifies opportunities to eliminate unnecessary elements in the process. The main difference is that work in most governmental agencies is designed around functions rather than processes, tends to cross more departmental boundaries, and is typically focused on meeting statutory-driven requirements rather than customer demand.
Lean Manufacturing
Traditional manufacturing philosophies stress high utilization of machinery and manpower with little consideration for cycle time or manufacturing waste. Conversely, Lean Manufacturing focuses on creating greater production efficiencies through maximizing value-added activities while minimizing waste.
Lean focuses on identifying and eliminating non-value added or wasteful practices typically found in the manufacturing environment that lead to overproduction, excess inventory, defects, underutilized people, excess processing, motion, and transportation. By applying Lean concepts, company management can achieve such benefits as the reduction/elimination of waste, fewer defects, shorter lead times, increased manufacturing capacity, lower production costs, inventory reduction, increased on-time delivery and improved customer satisfaction.
Lean Office
Approximately 60 to 80 percent of all cost-related activities associated with meeting a customer demand are an administrative or non-production-related function. A common complaint is that lead times are eaten up on the front end of the process, that is, by transactional processes including order entry, procurement, engineering, and redundant approval requirements. There can be issues with customer service, accounts receivable, and collections on the back end as well. Together, these hidden wastes cost businesses significant amounts of money in terms of lost productivity, unnecessary expense, and customer satisfaction.
By applying Lean concepts to an office environment, activities such as order entry, customer service, accounts payable/receivable processing, marketing/sales, purchasing, product development, engineering, and distribution can be streamlined and accelerated. This allows management to focus on objectives, reduce costs, eliminate unnecessary effort, increase responsiveness to customer needs, and improve the overall profitability of the business.
Call us today to learn how we can help you increase profits through implementing Lean.
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