BUSINESS EXCELLENCE

WITH

LEAN

MICHAEL ORAN 2

VALUE to SHAREHOLDERSand

VALUE to CUSTOMERS

WITH

LEAN BUSINESS

EXCELLENCE

MICHAEL ORAN 3

BUSINESS EXCELLENCE VISION

•EXCELLENCE is achieved when:a company continuouslyIMPROVES and EXCEEDSthe “Quality, Cost, and Delivery Requirements to its Customers.

•COMPONENTS for EXCELLENCE are:1. Leadership & Culture

2. Lean, Flexible & Disciplined Organization

3. Proper Tools, Methods, Techniques

MICHAEL ORAN 4

BUSINESS EXCELLENCE OBJECTIVE

To create and implement business solutions with:

• Systems thinking

• Customized to the needs of our Clients

• Achieve top and bottom-line results, such as:

– Increased Profits, Revenue

– Reduced Cost, Improved Cash Flow

– Improved Quality & Productivity

– Improved Equipment Management

– Better Customer Focus

MICHAEL ORAN 5

DEFINITION OF LEAN• LEAN means that we continuously REDUCE WASTE

– Waste in Concept To Launch

– Waste In Manufacturing

– Waste in Order to Cash

• LEAN means that we consistently RENEW THE BUSINESS

– Flexible to adapt and diffuse new technologies

– Change methods for the better

– Become modular and scalable - right sized machines & designs

– Launch faster with consistent quality – time to market

• LEAN means that we are SUSTAINING & CONSISTENT

– Working according to the policies and schedules

– Delivering according to schedules

From START to FINISH

MICHAEL ORAN 6

• (Cont’d)

• LEAN means that groups of CAPABLE, ENABLED, and Continuously LEARNING PEOPLE are working together

– Motivated and

– Capable and enabled people for independent decision making

• LEAN means CONSISTENTLY EXCEEDING CUSTOMER EXPECTATIONS

– Exceeding the Known requirements

– Anticipating the Unknown requirements

– Understanding the Latent requirements

DEFINITION OF LEAN

MICHAEL ORAN 7

WHY CANADA NEEDS CHANGE• Canadian controlled plants are 30% less productive than

foreign controlled Companies operating in Canada

• Canadian firm’s profit margin is about 75% of US counterparts

• Profits need to be generated through cost reduction,not only through price increase and margin squeezing

• Customers want “Solutions on their terms, according to their Timeline, Quality & Quantity Delivery”

• Over time, organizations have become unsuspecting of their own “Waste – Hidden Factories”

• We cannot depend on the old “Success Formulas”

– Improving Economies

– Returning Reasonable Customers

– Exchange Rates

– Exit of weak competitors Source;Consortium for Advanced Manufacturing,Next generation Manufacturing Systems, Leaders for Manufacturing Program, MIT

MICHAEL ORAN 8

FOUNDATION

BUSINESSEXCELLENCE

STRATEGYLean Leadership Culture

STRUCTURELean Organization

STRENGTHLean Techniques & Methods

Methods & Tools

Goals& Targets

People & Teams

MICHAEL ORAN 9

• From “Policy Deployment” to “Policy Management”

• From “Top-down Cascade of Tasks” to Emergence of policies based on “cascade of responsibility”

• Gets the desired direction without anyone telling anyone exactly what to do

• Maximum Flexibility with Maximum Control

• Flexibility with responsibility to think and initiate

• Control with need to justify each action

STRATEGY

MICHAEL ORAN 10

STRATEGY (cont’d)

LEADERSHIP & CULTURE:Evaluate to define the New Behaviors Required by the Strategy

CREATING VALUE:• Customer-focused; Understands customer; solves customer problems

• Innovative; Challenges assumptions; proposes new ways

• Delivers Results; Produces results for Customers and Shareholders

EXECUTING STRENGTH:• Understands Strategy; understands the mission, vision, values, and strategy

• Accountable; Defines direction, targets, and accountability

• Open Communications; creates clear communications and feedback

• Teamwork; works across boundaries, shares knowledge

MICHAEL ORAN 11

PEOPLE

InvolvementPrograms

Human ResourcesManagement

Work Systems andStandardization

Suggestion Programs

QC Circles

Empowerment Programs, (Enabling)

Employees as Citizens

Employee Development

Rewards and Recognition

Standardized Work/Kaizen

Responsibility pushed down

JIT/Automation with Human TouchRespect for People

PEOPLE SYSTEMS FOR BUSINESS RENEWALLEAN EXCELLENCE

MICHAEL ORAN 12

ALIGNMENT

Plans are things that change

Plans are things to adhere to

CONVENTIONAL BUSINESS EXCELLENCE

•GOAL Oriented

•Responsibility Focus

•Individual Initiative

•System or ProcessLevel Response

•TASK Oriented

•AUTHORITY Focus

•Upper-Level Control

•IndividualLevel Response

TARGETS vs. GOALS

MICHAEL ORAN 13

HIGH TECHNOLOGY

LOW TECHNOLOGY

TECHNOLOGYLEVEL

PREFERREDPROCESS

END PRODUCT

PEOPLE ORIENTED

LEAN

LEAN ORIENTED PRODUCT

TECHNOLOGYORIENTED

INNOVATION

TECHNOLOGYORIENTED

LEAN

INNOVATIVEPRODUCT

With LEAN ORIENTATION

RENEWAL

TECHNOLOGY & BUSINESS RENEWAL

MICHAEL ORAN 14

REASONING

COST

ProfitProfitProfitProfit

COST

DIMINISH AND ELIMINATE YOUR HIDDEN FACTORY

COST

ProfitProfitProfitProfit

COST

Profit = Price – Cost

Work = Capacity – WastePrice = Cost + Profit

Capacity = Work + Waste

TRADITIONAL THINKING

LEAN BUSINESS EXCELLENCE THINKING

HIDDEN

MICHAEL ORAN 15

EFFECTS OF WASTE REDUCTION

1.0 M

REVENUES

PROFITS

Waste = 100,000

200,000

To get 200,000Into Bottom Line@ 10% Margin

Without Reducing Waste

2.0 M

REVENUESNEED

TODOUBLED

1.0 M

100,000

PROFITS

MICHAEL ORAN 16

EXCELLENCE TARGETS

IdealState

CurrentState

FutureState

Identify Value, Eliminate Waste

Create Flow

Create PULLLevel the Load

Waste = ZeroResponse Time = Zero

ONE PIECE FLOW(6 Sigma)(TPM)(right-sized tools)

UPSTREAMDOWNSTREAMLEVELED LOADONE PIECE FLOW(6 Sigma)(TPM)(right-sized tools)

FOR PROCESSES

Capable – right every time (6 Sigma)Available – always able to run (TPM)Adequate – with capacity to avoid bottlenecks (right-sized tools)

MICHAEL ORAN 17

DO YOU ASK THE RIGHT QUESTIONS?

• Does my value-added activity consumeless than 5% of the total process time?

• What is my competitive advantage gainif I deliver in 50 to 80% less time?

• What financial gain would I realize witha 20% reduction in cost of quality?

• What cash infusion / debt reduction wouldI gain with a 50-80% reduction in work-in- process and finished good inventory?

• What revenue growth would I realize byreducing delivery time and time-to-market?

MICHAEL ORAN 18

PLANT SUPPLY CHAIN

CURRENT STATE FLOW & PULLCOMPRESSED LEAN (Process Lead Time)

BEYOND THE WALLS

A “price of admission” to the value stream team, requiring little time and practically no capital. (1% to 3% of existing staff)

A logical step that requires a lot of knowledge (training-workshops and execution) but not much capital.

A logical step that requires a some additional knowledge (training-workshops and execution) and some capital, but not too high.

Huge undertaking requiring capital, cost reduction and strong collaboration between Customer’s and Suppliers but potentially a “change in strategic position in the market, and Customer Perception” for every company participating in the value stream!

FROM BATCH TO DEMAND DRIVEN

MICHAEL ORAN 19

1. DAY 1

• Plant Tour (Initial, pre-assessment)

• Team Assessment

• Assessment Compilation

2. DAY 2

• Second Plant Tour for Waste

• Waste Recommendations

• Report and Presentation to Management

INITIAL VISIT - ASSESSMENT

MICHAEL ORAN 20

THE ASSESSMENT

Tools &

Techniques

(strength)

Organization

(structure)

Leadership &

Culture

(strategy)

1

2

3•Production•Equipment•Engineering

•Managing the Renewal•Employee & Supplier Partnering •Information Architecture

•Customer Focus•Business Renewal•Culture of Improvement

MICHAEL ORAN 21

THE ASSESSMENT EXPLAINEDS

UB

-HE

AD

ING

SU

B-H

EA

DIN

G

-

DE

SC

RIP

TIO

N

ExcellenceMaturityDevelopStartMass

EACH “CUBE” HOLDS A UNIQUE STATEMENT

WHICH DESCRIBES THE CONDITION

AT EACH LEVEL BETWEEN

MASS & EXCEL

YELLOW - BLUE - TURQUOISE CUBES

HAVE “NO” SIGNIFICANCE

OTHER THAN

TO SIMPLIFY THE OVERALLSURVEY READING

INTRO

ExcellenceMaturityDevelopStartMass

MAJOR HEADING

1

ExcellenceMass

MICHAEL ORAN 22

ASSESSMENT SAMPLE

There is a clear link between long

and mid range plans and all is

supported by Plan Do Check Act

cycle application

Short and mid term plans and their execution are consistently

successful but the link to long-range

is weak

Policies define clearly targets and

means but the results to targets of

the whole work environment as a team is not there

yet

Policies are not clear and plans

are not streamlined yet

No long range plans

Core Competencies are

understood - capabilities and

fitting the market is much more

aligned

Core Competency Analysis starts

Limited knowledge of

core competencies

Company is in tune with its

capabilities and core

competencies - leading in core competencies

Company easily assimilates new

methods, systems and technologies - Benchmarking is

above industry average

3 or 5 year strategic plans are based on modeling and

scientific

Information gathering process

for the 3 year plans is started

Vision is constant, no change, it is

single model

Management is efficient and a subject matter

expert in modeling

Management is fully competent in "what-

if and change scenarios" (may

include the use of computer modeling)

Top management starts to "anticipate

changes" in business as a result

of strategic response

(alignment)

Top Management starts the "what if

scenarios" for better business

models

The future is not modeled or modeling of

future is very unsystematic;

Bu

sin

ess

Ren

ewal

Co

ntin

uo

us

Imp

rove

me

nt

to B

usi

ne

ss

1

Mass Start Develop Maturity Excellence

BUSINESS RENEWAL (Flexibility / Agility)

MICHAEL ORAN 23

REPORT-CARD ON GAP

0.73

0.39

1.59

1.36

1.19

1.20

0.89

1.40

0 0.5 1 1.5 2 2.5 3 3.5 4

Customer Focus(Information Management Loop)

Business Renewal(Flexibility, Agility)

Culture of Improvement(Problem Solving Loop & People)

Managing Renewal(People, Organization, Pay-Performance &

Reward-Recognition Systems)

Information Architecture(People & Performance)

Production(VA-process, Lgstc&Info-Management,

Physical-Transformation Loop

Equipment Management(Physical Transformation Loop)

Engineering(Concept to-Launch-Product & Process

Problem Solving Loop)TO

OL

S &

TE

CH

NIQ

UE

Ss

tre

ng

thO

RG

AN

IZA

TIO

Ns

tru

ctu

reL

EA

DE

RS

HIP

& C

UL

TU

RE

str

ate

gy

MASS START DEVELOP MATURITY EXCEL

Business Excellence Gap

GAP

MICHAEL ORAN 24

PLANT

CURRENT STATE FLOW & PULL COMPRESSED LEAN (Process Lead Time)

A “price of admission” to the value stream team, requiring little time and practically no capital. (1% to 3% of existing staff)

A logical step that requires a lot of knowledge (training-workshops and execution) but not much capital.

A logical step that requires a some additional knowledge (training-workshops and execution) and some capital, but not necessarily too high when machinery and equipment modifications are not required.

•25% in FGI

•50% in WIP

•25% in Lead Time

•60% in FGI

•80% in WIP

•50% in Lead Time

•The entire value stream is now running make-to-order rather than make-to-forecast.

•50% to 75% of wasted steps are eliminated

•Throughput time reduced by 80 to 90% of the of initial-state time,

•Acceptable wait time of the customer;

•20% increase in productivity

•30% increase in Productivity

•High Visibility

•Low number of Transactions

•Make LEAN STANDARD

•LEAN INFRA-STRUCTURE

•Demand amplification is virtually nil.

•Quality is higher and consistent from start to finish, (Detect and Prevent, 5.5 sigma +).

•Transport links and information needs shrink dramatically (triggers and information).

THE SCORECARD FOR BUSINESS EXCELLENCE

MICHAEL ORAN 25

END OF ASSESSMENT DELIVERABLES

• Assessment – recommendations on the Gap to Excellence

• Report on Observed Waste, including the savings

• Blueprint for Excellence Program, Future State

• Training Plan for Excellence

• Documents & Metrics Verification Report

THE BUSINESS EXCELLENCE PROGRAM

WE PRESENT THE BUSINESS EXCELLENCE PROGRAM

WE PERFORM

BUSINESS EXCELLENCE ASSESSMENT &

WASTE AUDIT

WE RECOMMEND IMMEDIATE PROJECTS

TRAINING & WORKSHOPS

LEANPROGRAMS

WE BLUEPRINTFUTURE STATE

CO

NTIN

UO

US

LEA

RN

ING

& G

RO

WTH

MICHAEL ORAN 26

7% No Answer

4% EXCELLENCE - AdvancedLean has become the standard way of operating; employees, supervisors,

and managers understand and use Lean concepts; Lean is being extended

to Strategic Suppliers

28% MATURITY - ExtensiveImplementation is underway; many areas of the business are applying many

Lean concepts and tools; solid progress being made

46% DEVELOPMENT - EarlyJust starting to implement in pilot areas; some positive results

18% START - PlanningNo implementation

PHASES OF LEAN BUSINESS EXCELLENCE

CURRENT INDUSTRY PROFILE

(LEI Survey 2003, 2004)

MICHAEL ORAN 27

TEAMING UP for EXCELLENCE

Kaizen Focus

5S5S Set-upSet-up FlowFlow

Defect/Variation

Defect/Variation

TPMTPMBusinessProcess

BusinessProcess

Site Assessment

Value StreamMapping

Vision/Strategy Business

Objectives

360 DegreeCommunication

Agenda

Lean Training1) Executive 2) Champion 3) Lean Consultant

CEO and Senior Management

MICHAEL ORAN 28

BENEFITS OF OUR SERVICES

FINANCE YOUR OWN CONVERSION

TO EXCELLENCE

WITH US

RESPOND TO CHANGING

CUSTOMER VALUES

MICHAEL ORAN 29

OUR OWN - SCORE CARDSome of our Lean, Supplier Development and Continual Improvement

efforts;

• QFD, Design Review 2004 Canada, US

• TPS - Project Management 2003, 2004 Canada

• Controlled Shipping 2003 GM, 3rd Party, US&CDN

• 5S-Visual and Blitz 2002, 1996, 1997 US, Canada, England

• Corrective Actions 2001 Canada

• New Plant Launch - Engines 2001 Canada

• Constraints Management 1999 US

• Process re-engineering (JIT) 1996 - 97 Canada, England

• Process Start Ups (JIT) 1996 – 97& 98 Canada, China

• JIT- Kanban & Pull 1996 – 97& 98 Canada, England, China

• QS 9000 (Q1, Q101) 1996 – 97& 98 Canada, Italy, China

• TPM 1996 Canada

• Training 1987 to date US, Canada, China

• Continuous Improvements 1985 to date US, Canada, England, China

• Error-Proofing (Prevention) 1995 to date US, Canada, England

• Problem Solving 1985 to date US, Canada, England

MICHAEL ORAN 30

TRAINING - KNOWLEDGE TRANSFER

• Customer Focus

• Reach the Person

• Match the Next Economy

• Train for Business Impact

• Build the Capacity to Learn

• Pre-Post Assessment forKnowledge Inventory

• Post Training Action Plan Evaluations for Achievementsbased on knowledge learned

• Technology is central

– For going to scale

– Consistency

– System Preparedness

MICHAEL ORAN 31

SERVICES FOR BUSINESS EXCELLENCESCOPE FOCUS ACTION ITEMS – OUR DELIVERABLES

BUSINESS CONSULTING

EXECUTIVE AUDITS BUSINESS EXCELLENCE ASSESSMENT

STRATEGIC - POLICY DEPLOYMENT CONTINUOUS IMPROVEMENT (CI) DEPLOYMENT

LEAN BUSINESS SUPPORT – HRM SYSTEMS

REWARDS & RECOGNITION SYSTEMS IMPLEMENTATION PROGRAM

SUGGESTION SYSTEMS IMPLEMENTATION PROGRAM

PERFORMANCE EVALUATION SYSTEMS IMPLEMENTATION PROGRAM

LEAN LAYOUT DESIGN

OFFICE & ADMIN LAYOUTS DEPARTMENT LAYOUTS & OFFICE CELLS

MANUFACTURINGFACILITY PLANNING & DESIGN

WORKCELLS AND LINES PLANNING & DESIGN

LEAN MANUFACTURING EXCELLENCE

KAIZEN EVENTS FOCUSED EVENT TO REDUCE WASTE or CI

MANAGING THE SHOP FLOOR IMPLEMENTATION PROGRAM

VALUE STREAM MAPPING CLASSROOM TRAINING & WORKSHOPS

REDUCING THE WASTEQUICK CHANGE OVERS, ERROR PROOFING, LEAD TIME REDUCTION WITH CLASSROOM TRAINING -WORKSHOP AND IMPLEMENTATION PROGRAM

5S SYSTEMSCLASSROOM TRAINING -WORKSHOP AND IMPLEMENTATION PROGRAM

VISUAL SYSTEMSCLASSROOM TRAINING -WORKSHOP AND IMPLEMENTATION PROGRAM

FLOW - PULL – LEVEL SYSTEMSKANBAN – SUPERMARKET SYSTEMS WITH CLASSROOM TRAINING -WORKSHOP AND IMPLEMENTATION PROGRAM

LEAN QUALITY SYSTEMS

DEFECT REDUCTION & ERROR PROOFING; SPC, PFMEA

CLASSROOM TRAINING & WORKSHOPS

LEAN ENGINEERING SYSTEMS

QFD – QUALITY FUNCTION DEPLOYMENT & DR – DESIGN REVIEW PROCESS; APQP, DFMEA; CONCURRENT ENGINEERING

CLASSROOM TRAINING -WORKSHOP AND IMPLEMENTATION PROGRAM