How to Beat the Recession Implementation Tips for Top Management
You’ve Read the Headlines <ul><li>The Drumbeat of Bad News: </li></ul><ul><ul><li>US job losses in November  alone  will b...
Specifically...India <ul><li>Production and Growth projections were slowing  before  the current collapse </li></ul><ul><l...
The Best Defense is a Good Offense An Aggressive Pro-Active Response is Essential to Survival
Upside <ul><li>Global pressures on cost give an advantage to low cost producers </li></ul><ul><li>Slowing growth provides ...
Challenges <ul><li>Traditional approaches: </li></ul><ul><ul><li>“ Cost cutting” vs. achieving  real efficiencies </li></u...
What is Needed? <ul><li>Strategic Performance Management to drive down costs while increasing value </li></ul><ul><li>Oper...
IMS* 9001, 18001, 14001 Lean Six Sigma Performance-Driven Culture Systems & Tools Employee Attitudes Integration of System...
BOS: Alignment of Customer Requirements & Quality Objectives Copyright Omnex 2008 An Example
The Basic Operation of a BOS Copyright Omnex 2008
Basic Elements of a BOS Copyright Omnex 2008
Data Driven – Cascade To All Levels Copyright Omnex 2008 Key performance objectives cascade down while performance data pa...
Operations Excellence <ul><li>Combines Lean, Six Sigma and a Problem Solving “Kaizen” Culture </li></ul><ul><li>Creates a ...
Operations Excellence Core Values <ul><li>Excellence is: </li></ul><ul><li>Customer Success </li></ul><ul><li>Value-Added ...
Copyright Omnex 2008 Profits Performance Process Projects People Scorecard Scorecard Scorecard Scorecard Scorecard Operati...
Copyright Omnex 2008 Profits Process Projects People Scorecard Scorecard Scorecard Scorecard B.O.S. – Business Operating S...
Copyright Omnex 2008 Profits Process Projects People Scorecard Scorecard Scorecard Scorecard Achieving Improvement New Kno...
Copyright © Omnex 2008. Accounting Human Resources Operations Purchasing Sales Strategic Objective & Measures –  V oice  O...
Balanced Scorecards <ul><li>Performance measures must address the concerns of  ALL  Stakeholders. </li></ul><ul><ul><li>We...
What is Lean? <ul><li>Maximizes “value-added” content </li></ul><ul><ul><li>Define value in the eyes of the Customer </li>...
Copyright Omnex 2008 Extra Handling & Storage Costs Expediting Costs Premium Freight  Charges  Late Deliveries  Long Lead-...
Lean Strategies   Copyright Omnex 2008 <ul><li>Implement Continuous Flow Processing </li></ul><ul><ul><li>Manufacturing an...
Operational Benefits of Lean Copyright Omnex 2008 General Motors Framingham Assembly Plant versus Toyota Takaoka Assembly ...
Cost Savings from Continuous Flow <ul><li>30 to 50% reduction in direct and in-direct labor </li></ul><ul><li>50 to 75% re...
Copyright Omnex 2008 Example: Inventory Carrying Costs Inventory Cost Categories: Cost of Money 6-12% Taxes 2-6% Insurance...
What is Six Sigma? <ul><li>A systematic, scientific, fact based, data-driven problem solving process </li></ul><ul><li>Pro...
Six Sigma Deliverables <ul><li>An understanding of the product – process relationship </li></ul><ul><li>Key Product Output...
Copyright Omnex 2008 Cost of Poor Quality (COPQ) We See Only the Tip of the Iceberg Quality engineering and administration...
Sigma is Directly Correlated to Cost of Poor Quality Copyright Omnex 2008 Industry average is 20% COPQ for a 4 Sigma Company
What is Process Review? Systematic approach to analyzing and keeping “live” our Process Flows,  PFMEAs, Control Plans,  an...
What is a Process Review? <ul><li>A systematic approach to analyzing and making “live” our Process Flows, PFMEAs, Control ...
What is a Process Review? <ul><li>A  discipline  that updates the FMEA regularly using information regarding customer, war...
The Objectives of Process Review <ul><li>Process Review… </li></ul><ul><ul><li>enforces standardization (definition and ac...
<ul><li>Process Review… </li></ul><ul><ul><li>identifies areas where engineering changes may be required </li></ul></ul><u...
What is Problem Solving? <ul><ul><li>Creative Thinking </li></ul></ul><ul><ul><li>Rational Thinking </li></ul></ul><ul><ul...
Root Cause Analysis and Methodologies Copyright 2008 Omnex. All rights reserved FMEA Disciplined  Problem Solving DMAIC (D...
Team Based Problem Solving… <ul><li>Addresses Complicated Problems </li></ul><ul><ul><li>The team approach works best when...
Team Based Problem Solving… <ul><li>Uses Cross-Functional Inputs </li></ul><ul><ul><li>Working in a cross-functional team ...
The Problem  Solving Process Copyright 2007 Omnex. All Rights Reserved. “ No Problem”  Is  a Problem
In Summary <ul><li>The current economic climate, while threatening, also provides opportunities to achieve and sustain com...
In Summary <ul><li>Operations Excellence will aggressively attack the costs of inefficiency and defects: </li></ul><ul><ul...
Copyright 2008 Omnex. All Rights Reserved. [email_address] Any Questions? Thank You! Dave Watkins [email_address]
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How To Beat The Recession: BOS, Operations Excellence and a Problem Solving Culture

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A discussion of management systems solutions to creating and sustaining competitive advantage in a global and regional economic crisis.

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  • How To Beat The Recession: BOS, Operations Excellence and a Problem Solving Culture

    1. 1. How to Beat the Recession Implementation Tips for Top Management
    2. 2. You’ve Read the Headlines <ul><li>The Drumbeat of Bad News: </li></ul><ul><ul><li>US job losses in November alone will be 200,000 </li></ul></ul><ul><ul><li>Dow Jones has fallen from nearly 14,000 to under 8,000 </li></ul></ul><ul><ul><li>Oil is below US$50 bbl, from a high of over US$145 six months ago, demand off 5+% </li></ul></ul><ul><ul><li>Euro Zone Purchasing Manager Index at 43.60, lowest ever, sign of full-blown recession </li></ul></ul><ul><ul><li>Slump in auto sales projected to continue </li></ul></ul><ul><ul><li>Beginnings of broad-based deflation as demand continues to weaken </li></ul></ul>Copyright Omnex 2008
    3. 3. Specifically...India <ul><li>Production and Growth projections were slowing before the current collapse </li></ul><ul><li>Rupee to dollar Rs.50.28 vs. Rs.39.34 a year ago* </li></ul><ul><li>Sensex at 8,400, off 52% for year, lowest in three years </li></ul><ul><li>Exports to Europe, US and Japan will weaken further (The World in 2009—Economist) </li></ul><ul><li>Pressure on costs will accelerate </li></ul>* The Economist, 20/11/08 Copyright Omnex 2008
    4. 4. The Best Defense is a Good Offense An Aggressive Pro-Active Response is Essential to Survival
    5. 5. Upside <ul><li>Global pressures on cost give an advantage to low cost producers </li></ul><ul><li>Slowing growth provides an opportunity to improve </li></ul><ul><li>We know how to do it, it’s not by accident: </li></ul><ul><ul><li>Use BOS/TQM to target and manage strategically critical improvement </li></ul></ul><ul><ul><li>Use Lean to radically increase efficiency, shorten lead times </li></ul></ul><ul><ul><li>Use Six Sigma to eliminate systemic defects </li></ul></ul><ul><ul><li>Use Process Review to continually improve capability </li></ul></ul><ul><ul><li>Create and sustain a Problem Solving culture </li></ul></ul>Copyright Omnex 2008
    6. 6. Challenges <ul><li>Traditional approaches: </li></ul><ul><ul><li>“ Cost cutting” vs. achieving real efficiencies </li></ul></ul><ul><ul><li>Correcting defects rather than preventing systemic causes of defects </li></ul></ul><ul><ul><li>Fixing blame rather than fixing problems </li></ul></ul><ul><ul><li>Demanding performance rather than enabling it </li></ul></ul><ul><ul><li>Controlling products rather than processes </li></ul></ul><ul><ul><li>Focusing on the factory floor rather than integrated systems of business processes </li></ul></ul><ul><ul><li>Reacting rather than anticipating </li></ul></ul><ul><ul><li>Aiming too low! </li></ul></ul>Copyright Omnex 2008
    7. 7. What is Needed? <ul><li>Strategic Performance Management to drive down costs while increasing value </li></ul><ul><li>Operations Excellence: </li></ul><ul><ul><li>Efficient —minimal waste </li></ul></ul><ul><ul><li>Capable ― <3 ppm defect levels </li></ul></ul><ul><ul><li>Fast —extremely short lead times, true JIT performance </li></ul></ul><ul><li>Problem Solving Culture and Discipline </li></ul><ul><ul><li>“ No Problem” is a problem—use problems to learn </li></ul></ul><ul><li>Efficient & Effective Process Control </li></ul><ul><ul><li>Minimal use of non-value-added, ineffective inspection/detection controls </li></ul></ul>Copyright Omnex 2008
    8. 8. IMS* 9001, 18001, 14001 Lean Six Sigma Performance-Driven Culture Systems & Tools Employee Attitudes Integration of Systems, Methods & Tools 5S TPM Error- Proofing CRM BOS DFSS LPA SPC Problem Solving *IMS: Integrated Management System Copyright Omnex 2008
    9. 9. BOS: Alignment of Customer Requirements & Quality Objectives Copyright Omnex 2008 An Example
    10. 10. The Basic Operation of a BOS Copyright Omnex 2008
    11. 11. Basic Elements of a BOS Copyright Omnex 2008
    12. 12. Data Driven – Cascade To All Levels Copyright Omnex 2008 Key performance objectives cascade down while performance data pass upward for analysis and action at each operating level.
    13. 13. Operations Excellence <ul><li>Combines Lean, Six Sigma and a Problem Solving “Kaizen” Culture </li></ul><ul><li>Creates a discipline of continual improvement </li></ul><ul><li>Engages and empowers process owners </li></ul><ul><li>Focuses on Processes rather than Functions </li></ul><ul><li>Pushes decision making to the lowest possible level; does not rely on “Command and Control” </li></ul><ul><li>Involves leadership at the Gemba , rather than the conference room. </li></ul>Copyright Omnex 2008
    14. 14. Operations Excellence Core Values <ul><li>Excellence is: </li></ul><ul><li>Customer Success </li></ul><ul><li>Value-Added Content </li></ul><ul><li>Consistency </li></ul><ul><li>Built-In </li></ul><ul><li>Continuous Improvement </li></ul>Copyright Omnex 2008 SS 20% 10% 50% 30% 10% Lean 30% 60% 20% 20% 40% LSS 50% 70% 70% 50% 50% LSS – Complimentary Strategies
    15. 15. Copyright Omnex 2008 Profits Performance Process Projects People Scorecard Scorecard Scorecard Scorecard Scorecard Operations Excellence – Linked Scorecards Aligning Goals, Projects & People Planning Improving
    16. 16. Copyright Omnex 2008 Profits Process Projects People Scorecard Scorecard Scorecard Scorecard B.O.S. – Business Operating System Value Stream Maps Continuous Flow Supermarket Pull Six Sigma Breakthru SMED/TPM/Five S Standards Education Training Resources Feedback Planning for Improvement Performance Scorecard GAPS (PROJECT SELECTION)
    17. 17. Copyright Omnex 2008 Profits Process Projects People Scorecard Scorecard Scorecard Scorecard Achieving Improvement New Knowledge, Skill, Attitudes and Behaviors New Methods, Policies & Procedures Lean Productivity & Six Sigma Quality Improved Satisfaction Increased Sales Increased Margins Performance Scorecard
    18. 18. Copyright © Omnex 2008. Accounting Human Resources Operations Purchasing Sales Strategic Objective & Measures – V oice O f the C ustomer Process Variation Process Measures V oice O f the P rocess Leadership Team Objectives Lean Six Sigma Aligned with B.O.S. Projects
    19. 19. Balanced Scorecards <ul><li>Performance measures must address the concerns of ALL Stakeholders. </li></ul><ul><ul><li>We can’t afford to optimize one measure at the expense of the others. </li></ul></ul>Copyright © Omnex 2005 <ul><li>Cost </li></ul><ul><li>Quality </li></ul><ul><li>Delivery </li></ul><ul><li>Technology </li></ul><ul><li>Sales </li></ul><ul><li>Margins </li></ul><ul><li>Satisfaction </li></ul>
    20. 20. What is Lean? <ul><li>Maximizes “value-added” content </li></ul><ul><ul><li>Define value in the eyes of the Customer </li></ul></ul><ul><ul><li>Eliminate waste </li></ul></ul><ul><li>Optimizes “flow” </li></ul><ul><ul><li>Cost of Poor Flow </li></ul></ul><ul><ul><li>Pull systems </li></ul></ul><ul><ul><li>One piece flow </li></ul></ul><ul><li>Process approach </li></ul><ul><li>Pursue perfection (the pit crew) </li></ul>Copyright Omnex 2008
    21. 21. Copyright Omnex 2008 Extra Handling & Storage Costs Expediting Costs Premium Freight Charges Late Deliveries Long Lead-times Cost to Customer Excess Inventory Excess Scrap & Rework Excess Capacity Lost Customer loyalty Excess Labor Costs Opportunity cost if sales Potential is greater than Current capacity Cost of Poor Flow (COPF)
    22. 22. Lean Strategies Copyright Omnex 2008 <ul><li>Implement Continuous Flow Processing </li></ul><ul><ul><li>Manufacturing and Assembly Cells </li></ul></ul><ul><li>Use Pull not Push Scheduling </li></ul><ul><ul><li>Supermarket Pull With Kanban </li></ul></ul><ul><li>Level Demand </li></ul><ul><ul><li>Heijunka </li></ul></ul><ul><li>Control Quality at the Source </li></ul><ul><ul><li>Source Control & Error proofing </li></ul></ul><ul><li>Develop Flexible Production Equipment </li></ul><ul><ul><li>Quick changeovers - SMED </li></ul></ul><ul><li>Manage Overall Equipment Effectiveness </li></ul><ul><ul><li>Total Productive Maintenance </li></ul></ul>
    23. 23. Operational Benefits of Lean Copyright Omnex 2008 General Motors Framingham Assembly Plant versus Toyota Takaoka Assembly Plant, 1986 Note: Gross assembly hours per car are calculated by dividing total hours of effort in the plant by the total number of cars produced. “ Adjusted assembly hours per car” incorporates the adjustments in standard activities and product attributes described in the text. Defects per car were estimated from the J.D. Power Initial Quality Survey for 1987. Assembly space per car is square feet per vehicle per year, corrected for vehicle size. Inventories are a rough average for major parts. GM Framingham Toyota Takaoka Gross Assembly Hours per Car 40.7 18.0 Adjusted assembly Hours per Car 31 16 Assembly Defects per 100 Cars 130 45 Assembly Space per Car 8.1 4.8 Inventories of parts (average) 2 weeks 2 hours
    24. 24. Cost Savings from Continuous Flow <ul><li>30 to 50% reduction in direct and in-direct labor </li></ul><ul><li>50 to 75% reduction in WIP inventories </li></ul><ul><li>75 to 90% reduction in process lead time </li></ul><ul><li>30 to 40% reduction in floor space </li></ul><ul><li>Significant improvements in quality due to fast feedback </li></ul><ul><li>Increased flexibility to adjust to volume or mix variation </li></ul>Copyright Omnex 2008
    25. 25. Copyright Omnex 2008 Example: Inventory Carrying Costs Inventory Cost Categories: Cost of Money 6-12% Taxes 2-6% Insurance 1-3% Warehouse 2-5% Handling 2-5% Clerical 3-6% Obsolescence 6-12% Loss 3-6% Total 25-55% Source: Strategic Logistics Management, 2 nd edition, 1987, Stock & Lambert, Irwin, Homewood Illinois.
    26. 26. What is Six Sigma? <ul><li>A systematic, scientific, fact based, data-driven problem solving process </li></ul><ul><li>Projects are led by Black belts </li></ul><ul><li>Corporate culture and structure </li></ul><ul><li>Process capability = 3.4 defects/million </li></ul>Copyright Omnex 2008 2 σ 308,537 3 σ 66,807 4 σ 6,210 5 σ 233 6 σ 3.4
    27. 27. Six Sigma Deliverables <ul><li>An understanding of the product – process relationship </li></ul><ul><li>Key Product Output Variables (KPOV) as a function of Key Process Input Variables (KPIV) </li></ul>Copyright Omnex 2008 Y =  (X 1 , X 2 , X 3, X 4 . . . ) Output Input Variables Process Variables
    28. 28. Copyright Omnex 2008 Cost of Poor Quality (COPQ) We See Only the Tip of the Iceberg Quality engineering and administration Inspection/test (materials, equipment, labor) Expediting Scrap Rework Rejects Warranty claims Maintenance and service Cost to customer Excess inventory Additional labor hours Longer cycle times Quality audits Vendor control Lost customer loyalty Improvement program costs Process control Opportunity cost if sales greater than plant capacity
    29. 29. Sigma is Directly Correlated to Cost of Poor Quality Copyright Omnex 2008 Industry average is 20% COPQ for a 4 Sigma Company
    30. 30. What is Process Review? Systematic approach to analyzing and keeping “live” our Process Flows, PFMEAs, Control Plans, and Plant Floor Controls Copyright Omnex 2008
    31. 31. What is a Process Review? <ul><li>A systematic approach to analyzing and making “live” our Process Flows, PFMEAs, Control Plans, and Plant Floor Controls </li></ul><ul><li>A discipline for determining and defining linkages between FMEA, Control Plan, and Plant Floor Controls </li></ul><ul><ul><li>Use error proofing and layered process audits to ensure control </li></ul></ul>Copyright Omnex 2008
    32. 32. What is a Process Review? <ul><li>A discipline that updates the FMEA regularly using information regarding customer, warranty, and internal failure history </li></ul><ul><ul><li>The process then updates the mistake proofing worksheet, the control plan and the layered process audit </li></ul></ul><ul><li>A process for empowering employees on the shop floor to take ownership and manage “Process Control” </li></ul><ul><ul><li>Work the hand-off from “quality” to “manufacturing” </li></ul></ul><ul><li>An approach to ensure employees know how their actions affect customer perception of quality and company expectations of performance </li></ul>Copyright Omnex 2008
    33. 33. The Objectives of Process Review <ul><li>Process Review… </li></ul><ul><ul><li>enforces standardization (definition and actions) </li></ul></ul><ul><ul><li>simplifies processes </li></ul></ul><ul><ul><li>provides a knowledge base for Advance Product Quality Planning (APQP) </li></ul></ul><ul><ul><li>guarantees employee involvement </li></ul></ul><ul><ul><li>provides for cross-functional communication </li></ul></ul><ul><ul><li>provides an understanding of shared problems </li></ul></ul>Copyright Omnex 2008 Process Review is a Vehicle for Knowledge Management & CIP
    34. 34. <ul><li>Process Review… </li></ul><ul><ul><li>identifies areas where engineering changes may be required </li></ul></ul><ul><ul><li>highlights areas needing improvement </li></ul></ul><ul><ul><li>identifies the methods that will be used to achieve improvements </li></ul></ul><ul><ul><li>focuses attention on processes </li></ul></ul>The Objectives of Process Review Copyright Omnex 2008 The Goal of Process Review is Zero Defects
    35. 35. What is Problem Solving? <ul><ul><li>Creative Thinking </li></ul></ul><ul><ul><li>Rational Thinking </li></ul></ul><ul><ul><li>Decision Analysis </li></ul></ul><ul><ul><li>Risk Analysis </li></ul></ul><ul><ul><li>Checksheets and Work Instructions </li></ul></ul><ul><ul><li>Pareto Diagrams and Trend Charts </li></ul></ul><ul><ul><li>Process Flow Diagrams, FMEA and Control Plans </li></ul></ul><ul><ul><li>Cause and Effect Diagrams </li></ul></ul><ul><ul><li>Dot Plots and Histograms </li></ul></ul><ul><ul><li>Scatter Plots and Analysis of Variation </li></ul></ul><ul><ul><li>Control Charts </li></ul></ul><ul><ul><li>Simulation </li></ul></ul><ul><ul><li>Regression Analysis </li></ul></ul><ul><ul><li>Designed Experiments </li></ul></ul>Copyright 2007 Omnex. All Rights Reserved. <ul><li>A disciplined process used to identify root causes of problems and provide permanent corrective actions to eliminate them </li></ul><ul><li>Strictly fact based </li></ul><ul><li>Uses various tools: </li></ul>
    36. 36. Root Cause Analysis and Methodologies Copyright 2008 Omnex. All rights reserved FMEA Disciplined Problem Solving DMAIC (DOE) Root Cause Known Root Cause Found yes no no Basic Intermediate Advanced yes
    37. 37. Team Based Problem Solving… <ul><li>Addresses Complicated Problems </li></ul><ul><ul><li>The team approach works best when the problem – and its associated information – is complicated and beyond what one member is reasonably capable of knowing </li></ul></ul><ul><li>Addresses Special Cause and Common Cause Problems </li></ul><ul><ul><li>Designed to work best with special cause problems </li></ul></ul><ul><ul><li>Can also be used with common cause problems and improvement actions </li></ul></ul>Copyright 2007 Omnex. All Rights Reserved.
    38. 38. Team Based Problem Solving… <ul><li>Uses Cross-Functional Inputs </li></ul><ul><ul><li>Working in a cross-functional team means: </li></ul></ul><ul><ul><ul><li>Each problem solver no longer needs to know all the technical details about how things work </li></ul></ul></ul><ul><ul><ul><li>Necessary information is available from a variety of team members </li></ul></ul></ul><ul><li>Promotes Standardization </li></ul><ul><ul><li>A team approach to problem solving leads to: </li></ul></ul><ul><ul><ul><li>A common language </li></ul></ul></ul><ul><ul><ul><li>Effectiveness, consistency, time savings, and change control </li></ul></ul></ul><ul><li>Designed for Problems with Unknown Root Causes </li></ul><ul><ul><li>Used to identify root causes of problems and provide corrective actions </li></ul></ul><ul><li>Facilitates Timely Solutions </li></ul>Copyright 2007 Omnex. All Rights Reserved.
    39. 39. The Problem Solving Process Copyright 2007 Omnex. All Rights Reserved. “ No Problem” Is a Problem
    40. 40. In Summary <ul><li>The current economic climate, while threatening, also provides opportunities to achieve and sustain competitive advantage via: </li></ul><ul><ul><li>Sustained Strategic Performance Management </li></ul></ul><ul><ul><li>Creating an “Excellence Culture” that drives down cost while sustaining or increasing value </li></ul></ul><ul><ul><li>Employing Operations Excellence to maintain a focused, disciplined approach to radically improve efficiency and capability </li></ul></ul><ul><ul><li>Becoming a knowledge management and problem solving culture. </li></ul></ul>Copyright Omnex 2008
    41. 41. In Summary <ul><li>Operations Excellence will aggressively attack the costs of inefficiency and defects: </li></ul><ul><ul><li>BOS/TQM Strategic Improvement Management </li></ul></ul><ul><ul><li>Integrated Lean/Six Sigma in Process & Product Development </li></ul></ul><ul><ul><li>Process Review targeting Zero Defects </li></ul></ul><ul><ul><li>Disciplined Problem Solving Culture </li></ul></ul><ul><ul><li>Effective Supplier Development and Supply Chain Management, to develop and sustain these methodologies throughout the value stream. </li></ul></ul>Copyright Omnex 2008
    42. 42. Copyright 2008 Omnex. All Rights Reserved. [email_address] Any Questions? Thank You! Dave Watkins [email_address]

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