Lean Applications Beyond Manufacturing for AmCham Beijing March 18, 2008

Dr. Marcus Chao

President, Lean Enterprise China

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Dr. Marcus Chao

• Born in China • Grew up in Taiwan with a B.S. in chemistry• Obtained Ph.D. and MBA degrees in US• 30 years industry experience in US

3 years pharmaceutical industry 27 years in auto industry Delphi China President 1995-2001 Delphi Global Supplier Quality Director Retired in Dec. 2005

• President, Lean Enterprise China since 2006

www.leanchina.orgwww.leanchina.org

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Lean Beyond Manufacturing

• What is “lean”?• What does “lean” mean “beyond

manufacturing”?• How can we go about making lean change

beyond manufacturing?

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What is “lean”?

• Lean is to use less to make more– Less time– Less material– Less man power– Less capital

• Making more revenue and profit via customer satisfaction

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What does “lean” mean “beyond manufacturing”?

• Lean is a business system from end to end– Product development– Fulfillment (manufacturing, supply

management, ship to customer)– Customer support (after market services)

• Provide a total solution

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Lean: From the “Gemba” to the Office

• What’s so different, really, between the “Gemba” (the plant floor or the “real place”) and the office?

• The office is also a “Gemba”!• Can Value Stream Mapping work in the

office?

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What To Do?

Reduce Lead Time!– Get each process to produce only what the next process needs

when it needs it.– Orchestrate (control, manage, regulate) operations to get ever

closer to this ideal, ever shortening the lead time.

ORDER CASH

“All we’re trying to do is shorten the time line…”Taiichi Ohno

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Kent SearsVice PresidentGeneral MotorsGlobal Powertrain Operations

Architect of the company’s massive effort to bring Lean to non-manufacturing areas of the enterprise.

“The only difference between work in the office and work in factories is that office work is more difficult to see.”

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Insurance Claim Processing

CompileFolder

withDocs

Receiving:Open &

Array Docs

VerifyClaim

CalculateAmount &Address

Print,Stuff &

MailCheck

Policy Holder’sFamily

Insurance Compay

FIFO FIFO FIFO

2 Min 5 Min 10 Min 1 Min 1 Min

P/T =

L/T =

# inputs =

Reliability =

P/T =

L/T =

%C&A =

# ops =

P/T =

L/T =

% rejects =

Reliability =

P/T =

L/T =

% rework =

# ops =

P/T =

L/T =

Reliability =

% errors =

7 Days7 Days7 Days7 Days

FIFO

26 Days

19 Min

email mail

manualfinan

Process Box

Process DataBox

Inbox Queue

Customer/Supplier

TechnologyUsed

Work Priority:

Key System Metric

Information

System Output

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Current State Value Stream Map Analysis

CompileFolder

withDocs

Receiving:Open &

Array Docs

VerifyClaim

CalculateAmount &Address

Print,Stuff &

MailCheck

Policy HolderInsurance Co

5 Mins 60 Mins

P/T = 2 min

W/T =0

FTQ = 99%

Avail = 25%

5 Days5 Days7 Days7 Days

email mail

manualfinan

P/T = 5 min

W/T = 0-5 days

FTQ = 80%

P/T = 60 min

W/T = 2-10 days

FTQ = 50%

Avail = 50%

P/T = 5 min

W/T = 0 min

FTQ = 99%

Avail = 20%

P/T = 3 min

W/T = 0 min

FTQ = 75%

Avail = 25%

Customer Requirements: 2-3 days

Customer Demand: 13 per day

7 Days

Avail = 20%

0-5 Days

2 Mins

7 Days

2-10 Days

5 Days

5 Mins

1 Min

5 Days

3 Mins 75 Minutes

1 Min

Total Leadtime = 26 days 75 minutes – 39 days 75 mins

Wait Time

Process Time

Lead

time

Total

26 days– 39 days

Combine Steps

Include Checklist

with Policy #1

Combine Steps

FIFO FIFO

Use Small FIFO

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Future State Value Stream Map Analysis

Receiving:Open &

Array DocsCompile Folder

VerifyClaim

CalculateAmount & addressPrint Stuff&Mail

Policy HolderInsurance Co

30 Mins

P/T = 7 min

W/T =0-5 Days

FTQ = 95%

Avail = 80%

1 Days1 Days0-5Days

email mail

P/T = 60 min

W/T = 2-10 days

FTQ = 90%

Avail = 50%

P/T = 8 min

W/T = 0 min

FTQ = 85%

Avail = 25%

Customer Requirements: 2-3 days

Customer Demand: 13 per day

2 Mins

1 Day

8 Mins 40 Minutes

Total Leadtime = 3 Days 40 minutes – 8 Days 40mins

Wait Time

Process TimeLead

time

Total

3 days– 8days

FIFO FIFO

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Experience with Value Stream Mapping in non-manufacturing environments so

far…

• VSM is proving to be even more powerful in the office than it is in the factory.

• One example: General Motors

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The Office VSM Process

• VSM in the office works much the way it does in the plant

• GM tried a three-phase process that contained a three-day workshop– Phase One – Strategic scoping, tactical

preparation– Phase Two – Three-day workshop– Phase Three – Implementation (90-day

chunks)

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Applying the Value-Stream Mapping Tool

Preparation

Current State

Future State

Planning

Agreeing on what process to study (product family), how to map it, who will participate, and logistics.

Agreeing on a well understood map of the current situation.

Agreeing on a shared vision of a Lean future state.

Agreeing on how to implement the future state vision.

Implementation

3 days

90 day chunks

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TOYOTA PRODUCTION SYSTEMEliminate Waste cost and profit

What is Value?

What is Waste ?

Anything that adds cost without adding value

Defined by the customer

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TYPES TYPES OFOF

WASTEWASTE

II

CC

OO

MMWW

PP

MM

ConventionalThinking

•WASTE NOT DEFINED, NOT EASY TO SEE•REACTIVE IMPROVEMENT•CAN’T DISCERN SOURCES OF WASTE•PROBLEMS REPEAT

More usefulThinking

CorrectionCorrection

OverProduction

OverProduction

MotionMotion

MaterialMovementMaterial

Movement

WaitingWaiting

InventoryInventory

ProcessingProcessing

•WASTE IS "TANGIBLE"•IDENTIFY MANY SMALL OPPORTUNITIES•LEADS TO LARGE OVERALL CHANGE•CONTINUOUS IMPROVEMENT

Learning to See Waste

WASTEWASTE

Unreasonable-ness

Unreasonable-ness

UnevennessUnevenness

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Lean Supply Stream

• In today’s world, most value streams flow horizontally toward customers across many companies: Retailer, distributor, manufacturer, first-tier supplier, second-tier supplier, and raw materials supplier.

• Companies along value streams are organized vertically (with many departments) and naturally try to optimize their portion of the value stream.

• Creating a lean supply stream – a lean value stream flowing across many companies to the end customer (in order to minimize waste and maximize value) -- can be a key competitive advantage!

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What Is a Lean Supply Stream?

• A lengthy process – for product development, fulfillment, or customer support – in which:

Every step is:

Valuable – Henry Ford, Taiichi Ohno, Business Process Re-engineeering.

Capable – Total Quality Management, Six Sigma.

Available – Total Productive Maintenance.

Adequate – Theory of Constraints.

Flexible – Toyota Production System.

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What Is a Lean Supply Stream?

• A lengthy process – for product development, fulfillment, or customer support – in which:

The many steps are linked and coordinated by:

Flow

Pull

Leveling

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Old• Multiple Rounds of Bidding• “Poker-Playing”

New• Logic• Scientific data• Win-win

Example:

Hunting Farming

Supply Management Models

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What Company Has Most Advanced Lean Supply Stream?

Toyota!:

Dramatically de-integrated in late 1940s under President Kiichiro Toyoda.

300 companies -- mostly first and second tier -- in stable group for last 60 years.

Equity interlocked -- to create a private group of publicly-traded companies -- but with independent financial performance.

A tremendous advantage for Toyota that other companies around the world are now trying to match.

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How Can We Create Lean Supply Streams?

• Critical enabler is for customer companies to change traditional relations with supplier companies.

• Typically these are:

Short-term.

Price-based, in competitive markets with many potential suppliers for each part.

With minimum information exchange and visibility by each firm into the other firm’s portion of the value stream.

Based on factory price plus cheap freight versus “total cost of ownership.”

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How Can We Create Lean Supply Streams?

• Create lean relationships with suppliers:

Small, stable group of suppliers with little turnover.

Need for supplier profitability taken as a given.

Two or three suppliers per category of need, with many part numbers assigned to each supplier.

Target pricing to achieve lowest total cost of ownership.

Joint supply stream analysis to make sure every step is valuable, capable, available, adequate, and flexible.

Joint supply stream analysis to make sure that every step is linked and coordinated by flow, pull and leveling.

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A Lean Supply Stream Requires

• Firm closest to end customer taking the lead.

• Clear rules on sharing savings.

• Technical skills for analysis.

• “Gemba walk” involving every company and department touching the supply stream to verify the “current state” and envision a short term “future state” and a longer term “ideal state”.

• Willingness by senior managers in all firms to admit that traditional methods produce poor results and there firm will need to change its behavior to create a smooth flowing lean supply stream.

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Lean Enterprise China (LEC) Introduction

• Established in 2006 in Shanghai• A non-profit organization aimed at promoting and

educating lean in China• An alliance with Lean Enterprise Institute (LEI) led

by Dr. James Womack• www.lean.org

Lean EnterpriseLean Enterprise ChinaChina

26Lean EnterpriseLean Enterprise ChinaChina

LEC Missions

• Translate LEI lean books into Chinese• Provide training, on-site workshops• Consulting on lean transformation• A knowledge based website www.leanchina.org• Monthly Lean Salon in Shanghai to build a lean

community network• Organize annual Lean Summit

2008 Theme: Lean Transformation

September 18-19 Shanghai

27Lean EnterpriseLean Enterprise ChinaChina

Lean Books in China

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• Lean Concept (1 day) • Value Stream Mapping (1 day)• Creating Continuous Flow (1 day)• Standardized work (1 day)• Lean Leadership (1 day)• Lean Manufacturing (University of Michigan course, 3-5

days)• Other tailored courses

Lean EnterpriseLean Enterprise ChinaChina

Training Programs

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Summary

• Lean Thinking has been applied in many manufacturing companies including auto, airplane, shipping, chemical, consumer products etc during the past two decades.

• Lean concept can also be applied in office for administration and product development

• Lean supply stream is more complicated because it involves many different organizations, however it can be used as your company’s business advantage

• LEC is willing to be your partner in your lean journey

30Lean EnterpriseLean Enterprise ChinaChina

• www.leanchina.org• Address:

Unit 1802 Design Building

No.63 Chi Feng Rd.

Shanghai China P.R. 200092

• Tel: 86 – 21 – 65979076 / 65979079

Fax: 86 – 21 – 65986165

LEC Contacts