Balle Advance Business Case for Lean (1)

8/12/2019 Balle Advance Business Case for Lean (1)

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Michael Ball, PhD

The Business Case for

Lean


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Housekeeping

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Todays PresenterMichael Ball

Studied lean transformations for 18 years as abusiness researcher, consultant, & author

Co-author of The Lean ManagerandThe Gold Mine

Gemba Coach columnist at lean.org/balle

Associate Researcher: Tlcom ParisTech

Co-founder: French Lean Institute & Projet LeanEnterprise

Coach to CEOs & sr. executives in lean culture

change Ph.D. from the Sorbonne in Social Sciences and

Knowledge Sciences


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Books from Todays Speaker

The Gold Mine, also available as an ebookor audio book

The Lean Manager, also available as anebook
http://www.lean.org/Bookstore/ProductDetails.cfm?SelectedProductId=261


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Michael has asked me to share the benefits of our lean journey. I

believe the following numbers will be self explanatory: in the last three

years, our total turnover increased 93%and our EBITDA 173%

while we financed our growth without decreasing our cash level.

Inventory has reduced from 600 days to 80 and

turnover/sqm has increased from 1900 to 4000 with an increase of

20% manpower only.Jean-Claude BIHR president of Alliance-MIM

specialized in high-tech metallurgy for watches,medical devices, and aviation


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A $ 120 M company

12 x EBIT


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Or a > $ 1 B company

3 x Value


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The question I most get:

How can I convince my senior executives?


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Accept it!

Savings are not convincing


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Verdict: not convinced

Indicators Before 1 week 2 weeks 3 months

Ergonomic issues 6 0 0 -100%

PPH Base +54% +54% +73%PPM Base -1% -15% -49%

Lead Time NA NA NA NA

Environmental

issues

3 0 0 -100%


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Verdict: not convinced

Indicators Before 1 week 2 weeks 3 months

Ergonomic issues 16 6 4 -100%

PPH Base +47% +55% +80%

PPM Base -50% -63% -81%

Lead Time Base - 33% - 33% -33%

Environmental

issues

NA NA NA NA


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My biggest misconception

- 50% rejects

- 80% Lead-time

+ 30% productivity


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Easy!


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And again


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The blind spot in mathematical

conclusions

Savings dont translate at budget level

Spot results not sustained

Expensive way to support improvement


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What is really going on:


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The business case for lean

Sales

CashEBIT

Cap Ex


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Sales

Thanks to lean manufacturing and lean engineering, our

company has become the undisputed leader in theEuropean market.

Patrick Berthon, President


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Stable tech, saturated market:

+ 50% market share, 2 x EBIT

70000

60000

50000

40000

30000

20000

10000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


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Engage operators and engineers in:

First, focus on customer complaints to:

Understand what customers value

Stop value waste

Second, deeply understand value to:

Offer value features

Lock out the competition


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At final control

2008Defects

per

dispenser

Chart Title

0 . 0 0 0

0.050

0.100

0.150

0 . 2 0 0

0.250

0 . 3 0 0

0.350

0 . 4 0 0

0.450

0.500

J an -0 8 F eb - 0 8 M a r- 0 8 A p r- 0 8 M a y- 0 8 J un- 0 8 J ul - 0 8 A ug - 0 8 S ep - 0 8 O ct - 0 8 N o v- 0 8 D e c- 0 8

Tota l fa ul ts/unit Line ar (Tota l fa ults/ uni t)

Chart Title

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

J an-0 9 Feb-0 9 Mar -0 9 Apr-09 May -0 9 Jun-09 J ul -0 9 Aug-09 Sep-09 Oct -0 9 N ov -0 9 De c-09

Total faults/100 units Linear (Total faults/100 units)

2009 Defects

per 100

dispensers

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10

Total faults/100 units Linear (Total faults/100 units)

2010 defects per 100 dispensers

2011 defects per 1000 dispensers


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Value improvement: no drift meter


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Sales engine

How can each new sale generate additional sales?


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Cash

I was CFO before COO, after doing lean for five years, Ino longer worry about cost control. I look at the cash curveand indicators of operational performance to know howwere doing.

Frederic Fiancette, COO


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Involve operators and procurers in:

First pull and flow internal operations to create just-in-timeconditions:

Level the plan

Set up kanban

Follow the cards Reduce batch size

Then reducing lead-time in the overall supply chain


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Lead-time: 91 days

Lead-time: 32 days


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Cash machine

Liberated cash is invested in cash-generatinggrowth


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EBIT

By using lean thinking in our construction business, overthe past 3 years, the company has increased sales by 62%,cash by 61% and profit margins by 74% at a time wherethe overall industrys growth zeroed. In doing so we

created 16% more jobs. From these data, I estimate thevalue of the company has more than doubled in themeantime.

CEO of PO Construction

Wh I l j th b


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When I no longer enjoy the gemba,itstime to sell the company


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F tli d k


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Frontline managers and workersfocused on:

Better orders intake levelling 30%

Improving right first time and quicker reaction to correct mistakes 20%

Better hand-over between trades, shorter rotations for concrete 20%

Better supplier selection (to avoid conflict and/or default) 20%

More attention to customers (to avoid rework due to mutual annoyance) 10%


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Sustained profits

Three good scenes, no bad sceneHoward Hawks


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Capex

Flow at takt time leads to a very different form ofinvestment and considerably reduces capital expenditure.


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Group Capex evolution (-33%)


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Build on operators ideas

Cardboard cells

Technical minimalsolutions

No investment on lowOEE machines

L i # 1


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Learning # 1(to Continuous Improvement officers)

Take a finance class


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Learning # 1

1. Profit = PriceCost, not Price = Cost + Profit

2. Profit is an opinion, cash is a reality

3. Company value is driven by the business financialconditions:

ROCE = EBIT/Sales x Sales/Capital Employed

Profit margin Capital turns


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Learning #2

The CEOs that have spectacular lean results dont seekstrategies to maximize profits

They face their business challenges and seek to prove theirstrategies generate sustainable profits


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Learning #3

Simple, work-level wall-to-wall lean practices havea strategic impact


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On the gemba

Are we asking the right

questions? Are we

focusing on the right

challenges? What are we

learning from kaizen

efforts? Do we have the

right standards?

Are we spotting every

abnormal situation?

What are the root

causes? Whatcountermeasures can be

attempted?


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To get started:


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Keep the Conversation Going

Read Michael Ballscolumn

Gemba Coach

and share your thoughtsat Lean.org/Balle


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Learn More!

The Gold Mine, also available as an ebookor audio book

The Lean Manager, also available as anebook
http://www.lean.org/Bookstore/ProductDetails.cfm?SelectedProductId=261


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Train with Michael Ball

Making a Business Case for

Lean WorkshopNov. 6, 2012 in Cambridge, MA


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Questions & Answers

Ask the Gemba Coach

Balle Advance Business Case for Lean (1)

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