Creating Lean Solutions

Lean Enterprise Academy www.leanuk.org1
Creating Lean Solutions:
The Next Steps for Lean
Daniel T Jones
Chairman
Lean Enterprise Academy
Manufacturer Live – Telford – 28 September 2005

Who am I?
• A Missionary – for applying lean process thinking
to every human activity
• An Author – of The Machine that Changed the
World, Lean Thinking and now Lean Solutions
• The Founder – of the Lean Enterprise Academy in
the UK, part of the Lean Global Network
• My Activities – include Mentoring, Training the
Trainers, Workshops, Workbooks, Lean Summits,
Networks and eletters – details at www.leanuk.org

Toyota’s Lean Strategy
“Brilliant process management is our
strategy.
We get brilliant results from average
people managing brilliant processes.
We observe that our competitors often
get average (or worse) results from
brilliant people managing broken
processes.”
Lean Thinking is Process Thinking

Lean Principles
• Specify value from the standpoint of the consumer
- (not from your assets and organisation)
• Identify the value stream through the steps
required to create and deliver each product and
remove the wasted steps
• Make the process of value creation flow smoothly
and quickly to the customer
• But only in line with the pull of the consumer
• While pursuing perfection by constantly improving
the product and the value stream
As a result products are getting better and cheaper

The Changing Context
• Wage costs are probably now at an all time low –
although they are now rising in China
• This is forcing manufacturers to squeeze waste out
of their processes and think how and where to
make products in the future
• Western manufacturers’ potential is:
• Being close to their customers – that is us!
• Developing the right technology, products and
services to solve their problems
• Developing the right processes to rapidly
respond to their needs
But we need to do a lot better at all of these

The Lean Frontier
• What is happening to your customers?
• How are they buying your products?
• How are you responding to their needs?
• How would a lean thinker think about these
questions?
• What implications does this have for
manufacturers?
These questions are key to your survival

Lean Consumption and Provision
• We now understand that Production (including
design and supplier management) is a process. A
series of actions manufacturers must perform in
the proper sequence to create value for customers
• Consumption is also a process. A series of
actions consumers must perform in the proper
sequence to obtain the value they seek
• Provision is a third process. The actions that
someone must perform between the factory and
the customer to achieve the objectives of both
parties
There is a yawning gap between the last two

What’s Happening to Consumers?
• Mass customisation has added to their choices
• The end of regulation has extended the number of
things they have to make choices about
• The self-service economy enables them to buy
more personal capital goods to replace services
• Two-income and single-parent households have
less time to manage consumption
• Ageing households have more time - but less
energy
• The internet is blurring production and
consumption and has opened access to a global
supply base
They have more choices to make and products to
manage but less time and energy to do so

What is Happening to Consumption?
• If products are getting better why is consumption
still so frustrating?
• Why does the new computer fail to work with the rest of
our kit?
• Why do “help lines” not help?
• Why do we waste so much time in hub airports and
general hospitals?
• Why do we fail to find exactly what we are looking for on
a trip to the supermarket?
• Is it because of bad people or broken processes?
Why do we think and act differently as consumers
to how we do in our lives as providers?

Provision Processes are also Broken
• Growing spending on “new” products, features
and options that fail to attract new customers
• Growing spending to increase customer loyalty as
customers become less loyal
• High out of stocks, lost sales and remaindering
• Larger investments in bigger assets which have a
shrinking ability to create competitive advantage
• Outsourcing customer support so direct contact
with the consumer is lost
• Employee dissatisfaction and high staff turnover
How can we improve provision and consumption?

The Consumption Process
• The answer begins by seeing consumption not as
an isolated transaction between strangers
• But by seeing consumption as a process of steps
to enable the consumer to solve their problem
• It involves searching, selecting, obtaining,
integrating, maintaining, upgrading, disposing
and replacing many items over time
• Interacting with several providers of goods and
services in a parallel provision process
• Add this up and you realise that managing
(household) consumption processes is
complicated and takes a lot of “unpaid” time and
mind share
So what do consumers really want?

Principles of Lean Consumption
1. Solve the consumer’s problem completely
2. Don’t waste the consumer’s (or the
provider’s) time
3. Provide exactly what the consumer wants
4. Deliver it where it’s wanted
5. Supply it when it’s wanted
6. Continually reduce the consumer’s time
and hassle in solving their problems
All this can be done with lower costs

1 Solve the Problem
• Consumers want the use they get from the product
in combination with other products and services
• What happens when things don’t work? Call a call
centre! Whose objective is to “solve” the problem
at the lowest cost – maybe outsourced or abroad
• Instead turn every customer contact into a Kaizen
opportunity – discover and eliminate root causes!
• Fujitsu Services reversed the logic of outsourced
customer service and technical support – getting
experienced staff to ask about customer purpose,
offer a fix, redesign to eliminate the root cause and
discover additional value for future products
Intelligent Feedback leads to better products and
processes for using them while cutting costs

2 Don’t Waste Time
• The assumption is “The consumer’s time is free”
• In reality the consumer and the providers time is
wasted by a poorly designed and disconnected
consumption and provision processes
• Mapping both processes and their interactions
reveals this wasted time and cost and identifies
opportunities for win-win collaboration to cut
wasted time and cost for both parties
• Make customers partners to level demand and pre-
diagnose problems, separate types of work, create
standard work flows and material supply
Saves employee time and increases throughput

Car Repair Before Lean
8 Drive Home
7 Queue,
and Pay1 Search for
Repairer
2 Book Appt.
5 Wait for
Loaner
3 Drive to
Facility
4 Queue,
Discuss
Problem
6 Authorise
Repairs
25m 5m 45m 10m 35m
2 Book Appt1 Answer Enq
3 Check in
12 Pass to SA
4 Car to store
5 Fetch loaner
6 Pass to WC
7 Pass to Tech
8 Diagnose
problem
9 Check parts
10 Car to store
11 Pass to WC
14 Pass to WC
13 Ring
Customer
21 Pass to SA
15 Pass to Tech
16 Collect parts
17 Repair car
18 Road test
19 Car to store
20 Pass to WC
25 Park loaner
22 Invoice
23 Hand over
24 Fetch car
5m 5m 25m 38m 14m 85m 35m

Lean Car Repair
12 Road test
1 Appointment 15 Hand over
16 Park loaner2 Discuss
Problem
3 Order Parts
6 Confirm
Diagnosis
4 Park Loaner
5 Hand over
7 Park car
8 Update Plan
9 Deliver Parts
10 Collect car
11 Repair car
14 Invoice
13 Park car
5m 15m 20m 54m 7m
7 Drive Home
6 Hand over1 Appointment 2 Discuss
Problem
5 Wait for
Confirmation
3 Drive to
Facility
4 Handover
5m 10m 32m 22m
120m
69m
60%
Right
First
Time
Wait
2nd
Visit
%
Fulfilment
Provider
Consumer
101m
201m
Lean
Fulfilment
95%
Right
First
Time

Provide What’s Wanted
• Fulfilment levels are poor in most systems
• 98.5% availability drops to 92% on the shelf and
55% for a basket of 40 items in the grocery store
• 80% availability for the shoe with 150 day order
window leads to 40% being remaindered
• 52% of consumers get the cars they wanted on
time and 64% of service jobs are completed
RFTOT
• Better IT, RFID and stocks are not the answer – but
rapid, reflexive, replenishment loops back upstream
• And compressing the length of the supply chain
What is your right first time on time?

Lessons from Toyota
• Toyota spent 30 years developing lean in house
and spreading it up and down its supply chain
• The most impressive example is aftermarket parts
distribution – supplying 500,000 SKUs to dealers
• It operates as a series of tight replenishment loops
• Dealers call off parts from Distribution Centres every day
• These shipments trigger daily orders to be picked up from
suppliers the next day
• Most of whom can also make every part that is required in
a day every day
• The result is the highest availability, lowest stock
levels and the smoothest order signals

Lessons from Tesco
SupplierSupplier RDCRDC StoreStoreNDCNDC
ContinuousContinuous
ReplenishmentReplenishment
FlowFlow
ThroughThrough
StoreStore
FlowFlow
ThroughThrough
ProductionProduction
LeanLean
SchedulingScheduling
CustomCustom
StoreStore
RangingRanging
LoyaltyLoyalty
CardCard
DataData
HomeHome
ShoppingShopping
MultiMulti--
FormatFormat
ConvenienceConvenience
FlowFlow
ThroughThrough
WarehouseWarehouse
PrimaryPrimary
DistributionDistribution
ContinuousContinuous
ReorderingReordering
ConsolidationConsolidation
WarehousesWarehouses

A Lean Factory?
• How responsive could your factory be?
• Guideline – less than 1 hour value creating time
should be completed within 1 day
• By creating flow through your plant linking:
• Capable steps (6 Sigma)
• Available equipment (TPM)
• Adequate capacity (right sized equipment)
• Flexible operations (Every Product Every Cycle)
• By eliminating short term plan changes by levelling
the workload and moving to replenishment pull
wherever possible
But different starting points in different industries

Getting to Lean
• In machining and assembly:
• By using Chaku-chaku lines and cells instead
of monster machines and automated lines
• In process industries:
• By flowing high volume products separately
from low volume products
• In build to order industries:
• By creating flow in the quotation process, in
the installation process and a rhythm in
production
But a lean island is not enough!

A Lean Supply Chain
• Having created level flow and pull for your volume
products you need to pull just what you need from
your suppliers every day
• And your customers need to pull products from
you every day
• By each taking responsibility for picking up
products rather than waiting for deliveries
• So you can consolidate and synchronise mixed
product loads in daily milk runs and reduce the
noise in the order signal
Little and often works better than pushing batches

Rapid, Reflexive Replenishment
• Toyota distinguish between cognitive and reflexive
decision making systems
• They separate capacity and materials planning from
production and shipping instructions
• Lean, rapid, reflexive replenishment is based on
four key principles:-
• Only one scheduling point or pacemaker
• Greatly increased frequency of replenishment
• Replenish only exactly what was sold
• Where possible compress the vale stream
The objective is to optimise the flow not each asset

Where to Produce What
• Calculate “factory gate” costs at different locations
• Germany, Romania and China?
• Calculate freight costs to supply the factory and to
reach all your customers
• Including all the expedited shipments!
• Add in all the overhead costs of:
• Management and engineering time and travel
• Quality (warranty costs etc.)
• Extra inventories, lost sales, out-of-stocks, write-offs, etc.
• Currency and country risks
Then decide what to make where – which might
also change over the product life cycle

4 Deliver Where it’s Wanted
• All consumers use different types formats
depending on their circumstances – time pressure
places a growing premium on convenience
• The convenience store revolution is changing
retailing - signalling the end of the “big box”
dominant mass retailing format
• The key to serving multiple channels is a common
fulfilment system and a “water spider”
replenishment system for all formats – including
local stores and home shopping
• Convenience does not need to cost more
Multiple channels will replace “one best way” for
most products and services

5 Supply When it’s Wanted
• Is everything purchased on impulse? Is there any
incentive to plan ahead?
• The consequence is that production must be
infinitely flexible, every event must be planned and
we have to dispose of unwanted stock
• Reversing this logic – How can we plan ahead with
most consumers while offering price incentives to
smooth the demand for production slots?
• This stability creates the possibility of responding
to the “got-to-have-it-now” consumers at much
lower cost?
This realistically takes us beyond “build to order”

6 Continuing Solutions
• Why are consumers increasing the number of
suppliers – often one off strangers – to acquire the
elements of the solution to their problems?
• While lean producers are decreasing the number of
suppliers, each with a deeper knowledge to solve
bigger problems on a continuing basis?
• When will someone provide continuing solutions to
integrate the elements to solve my bigger problems?
• Communications
• Mobility
• Shelter
• Healthcare
• Financial management
• Personal Logistics (routine shopping)

Conclusions
• Intelligent Feedback leads to better products and
processes for using them while cutting costs –
out-sourcing and off-shoring are not the answer
• Collaboration with customers to eliminate waiting
and queues frees employee’s time, cuts cost and
increases throughput – banish queues
• Rapid replenishment improves availability while
lowering costs – little and often is cheaper but
“low cost” sourcing may not be the answer either
• Several convenient channels will replace one
route to market – for every kind of product
• Planning ahead with key customers provides the
stability that enhances responsiveness – build-to-
order is not the answer and flexibility is a curse
• Think about providing complete solutions

Creating Lean Solutions:
The Next Steps for Lean
Daniel T Jones
Chairman
Lean Enterprise Academy
Manufacturer Live – Telford – 28 September 2005

Creating Lean Solutions

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