Week 06_Operations (Part 2)

1
Lean Thinking
Subtitle
ean Thinkingean Thinkingean Thinkingean Thinkingean Thinkingean Thinkingean Thinkingean Thinking
“Hidden Waste in Your Processes” (Part 1) +
“Successfully Implementing Operational Enhancements” (Part 2)
Chris Piccin

3
Introductions
▪  Tell us your name and company
▪  What’s your biggest operations issue?
▪  What are you hoping to get out of this class?
Copyright © Vox Datum LLC (2016-2017). All Rights Reserved. 3

4
Day One Topics
The Four Big Ideas of Lean
Customer Focus
Value Stream
Value Add Analysis
By the end of this session you will:
•  know the four principle concepts for Lean thinking
•  understand how to build a Customer Journey map that
describes Moments of Truth and Customer Critical to
Quality Dimensions
•  be able to identify different types of waste and non-
value add activities in a value stream

5
Why Lean?
“We missed another deadline.”
“Too many complaints.”
“The work keeps piling in, we’re all working overtime, we can’t keep up.”
“This was our best year ever and we can’t afford to hire more people.”
“I’m always waiting for something before I can do my job.”

7
What is Lean Thinking?
Four Big Ideas:
1 Customer Focus Understand value from your customer’s perspective.
2 Value Stream Concentrate on the path through your processes. Find
and reduce activities that do not add value (waste).
3 Continuous Flow Move products or transactions through the process as
fast as value can be added, no waiting.
4 Perfection Keep improving until processes produce exactly what
the customer wants, when they need it - no delays,
errors or wasted effort.

8
1. Customer Focus
Deliver value from the
customer’s perspective
•  Design Features and Customer
Benefits
•  Moments of Truth and ServQual
•  Customer Journey Maps

9
Customer Focus:
Design Features Deliver Customer Benefits
What Apple Built
(Another) MP3 Player
What Apple Sold
Put 1000 Songs in Your Pocket
KEY FEATURES
•  5 GB hard drive
•  10 hour rechargeable battery
•  Scroll wheel
•  iTunes software and catalogue
CUSTOMER BENEFITS
•  Availability – All my songs, right now
•  Simplicity – No instructions required
•  Cool
Portable Music
Circa 2000

10
Customer Focus:
Moments of Truth and ServQual
1Carlzon, Jan: Moments of Truth, 1987
2Zeithaml, Parasuraman & Berry, "Delivering Quality Service; Balancing Customer Perceptions and Expectations," Free Press, 1990.
Process Gaps
1.  Does the provider understand what the
customer expects?
2.  Has the provider specified features required
to meet customer expectations?
3.  Does the finished product or service meet
specifications?
4.  Are all customer communications consistent
with the specifications?
Moment of Truth1 An interaction where customers form a positive or negative opinion based on experience.
ServQual2 Defining the gaps between Customer Expectation and Customer Experience.
Customer (Critical to Quality) Dimensions
Reliability Availability, dependability and
accuracy
Assurance Trust, confidence, safety and ease
of use
Tangibles Physical appearance
Empathy Caring, individualized experience
Responsiveness Prompt help or service

11
Segment: Work-from-home Wilsons
The Wilsons are a two income family of four. Their Internet Service Provider (ISP)
supplies the digital oxygen for their daily lives. Mrs. Wilson owns a small business and
has a dedicated workstaBon with a mulBline VOIP phone in the home. Mr. Wilson
frequently accesses corporate email and applicaBons via his laptop.
Thinking This can’t happen. I have
work to do tonight.
Updates must be in team’s
inboxes first thing in the am
Resolved: That wasn’t bad!
Transferred: Waste of Bme.
Are they going to show up?
Will they fix it tonight?
Best case: Wow!
Worst case: I want a new ISP
Feeling Concern Angst Relief or FrustraBon Doubt Pleasant Surprise or Betrayal
Moments of Truth
Very SaBsfied
SaBsfied
Neither
DissaBsfied
Very DissaBsfied
Phases of Journey Discovery No?fica?on Diagnos?c Schedule Service Call
Descrip?on Mrs. Wilson cannot log on
aSer dinner. She reboots, no
luck. She waits 10 minutes
and tries again.
Mrs. Wilson calls ISP 800
number. She navigates IVR
screens seeking service
support.
Mrs. Wilson encounters IVR
prompts instrucBng her to
check her equipment before
speaking to a service rep.
Mrs. Wilson gets transferred
to a representaBve who
schedules a service call and
tries to miBgate issues.
Service Crew arrives at the
Wilsons home. They inspect
lines and equipment, repair
or replace as necessary.
Cri?cal to Quality
Dimension
Reliability – 24/7/365
Internet access
Assurance – ease and speed
to find appropriate support
Accuracy - percent of issues
resolved by automaBon
Empathy – alt soluBons
Responsive – acceptable Bme
Tangibles – competence of
service team
Problem logging on
Assume internet problem
Contact ISP
Internet Service Interrup?on
7:00 pm Tuesday Night
IVR trouble shooBng
Problem resolved
Transfer to Service Rep
Service scheduled
On-Bme arrival
Late arrival
Problem resolved quickly
Delayed
resoluBon
Customer Focus: Customer Journey Example

12
Simulation Round 1:
Setting the Scene
•  Your products are made from domestically sourced, 100%
sustainable hardwood veneers of the highest quality.
•  Your customers work in small spaces and cannot store large
quantities of materials. They often purchase less than full
sheets and depend on fast deliveries.
•  Your costs are out of control and, worse, delivery performance is
faltering. Your customers are complaining. LOUDLY.
•  Your bank is concerned and raised the possibility of reducing
your credit line. Your jobs: convince the bank that the operation
can be run effectively and efficiently.
You work for a specialty plywood supplier that caters to artists and
makers in the New York metro area.

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Simulation Round 1:
The Rules
•  Follow your job descriptions to the letter – do not adapt the process you
have been instructed to perform
•  Follow your reporting lines. You may only talk to your Supervisor or your
Subordinates
•  By all means ask questions for clarification, but you may not always get an
answer. Sound familiar?
•  No computers may be used during the simulation.
•  You may find yourself confused or frustrated with the process. This is
normal.

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Value Stream
2. Value Stream
Find and reduce activities that
do not add value
•  Eight Wastes
•  Five S
•  Value Added Analysis
Customer Journey

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Value Stream Schematic:
Commercial Loans
Origination
“up to the proposal”
Collections
Deal Structure
“proposal to booking”
Loan Servicing
“booking to termination”
Cash
Application
Customer
ServiceLegalUnderwriting
Business
Development
Value Stream – End to End
“Close the deal fast!” “Minimize risk” “Fix problems” “Get the cash on the books”

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Value Stream:
The Eight Wastes
D
O
W
N
T
I
M
E
Customer
Focus
Value
Stream
Continuous
Flow
Perfection

17Example: Extreme Transportation R
Transportation Reduction
for Auto Manufacturing
This structure is a 20-story storage facility for
new Volkswagen cars in Wolfsburg, Germany

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Transportation Reduction Example:
Enrollment Packages
69
Example: Use of work cells and Kanban
Production of Benefit Kits
BindBind
AssembleAssemble
ShipShip
Store & PickStore & Pick
PrintPrint
Copyright © Vox Datum LLC (2016-2017). All Rights Reserved.
18
70
NewProcess:ContinuousFlowthroughworkcells
PickBindAssembleShipPrint
PickAssembleBindShip
70
70
Print

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Sort Set in Order Shine Standardize Sustain
Keep only the
necessary items
Arrange items for
efficient workflow
Clean the work
area
Document and
conduct checks.
Maintain and
review standards
Motion Reduction up Close and Personal
Work Area: Five S

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Five S in Action
Sort?
Set in Order?
Shine?

21
No
Value Added
Value Added Analysis:
Three Questions
Task
Customer
Requirement?
Right First
Time?
Business
Requirement?
Real
Value Added
Business
Value Added
No
No
NoYes Yes
Yes
Defects Motion
Talent
Inspection
Review & Approval
Waiting / Inventory
Tasks to reduce or eliminate. They exist because the
process is inadequately designed or functioning poorly.

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Real Value Add Analysis:
Computer Rack Manufacturing Example
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Steel Coil Inventory
Stamp Steel
Construct Cabinet
Buffer Stock
Paint Cabinet
Inspect and Rework
Buffer Inventory
Final Assembly
Test and Rework
Inspect and Rework
Buffer Inventory
96.0
0.3
8.0
0.2
0.1
3.0
0.5
0.2
5.0
3.0
0.2
Cycle-time: 116.5 hours
Stamp Steel
Construct Cabinet
Buffer Stock
Paint Cabinet
Inspect and Rework
Buffer Inventory
Final Assembly
Test and Rework
Inspect and Rework
Buffer Inventory
0.3
0.2
0.5
3.0
Real Value Add: 4.0 hours
Stamp Steel
Construct Cabinet
Buffer Stock
Paint Cabinet
Buffer Inventory
Final Assembly
Test and Rework
4.0
0.3
0.2
0.5
0.5
1.0
2.5
0.1
Real Value Add: 3.5
Cycle-time: 9.1

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Real Value Analysis Exercise
•  Using the criteria you learned, analyze each process step and
identify add value and which do not
•  Be prepared to justify your choices
•  Remember to think about the process from the Customer’s
perspective

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Simulation Round 2:
Improving the Value Stream
•  Owner is responsible for final decisions
•  Changes must be reversible
•  No changes that involve customers
•  No elimination of staff
•  Facilitator has final approval
•  Implement changes and train if necessary
Objective: identify and implement two changes to improve the process.

26
Last session we covered
Lean = giving customers exactly what they want, when they want it as efficiently as possible.
Customer Focus
•  Customers buy benefits – problems solved, a new opportunity, enhanced image
•  Your offerings deliver features – Reliability, Assurance, Tangibles, Empathy,
Responsiveness
Value Streams cross functional silos to deliver customer experience
•  The eight wastes erode productivity and quality
•  Value add analysis helps identify wasteful activities to eliminated or improve

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Session One Value Add Analysis

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How are we doing?
Name Company Expected Class Outcomes
Kyley Bonbite Weed out inefficiencies
Steph & Jocelyn Steph Mantis Design TBD
Trevor Underground Signs Efficiency, particularly for packaging and shipping
Ashley Luxholdups Scaling operations
Corrin Patina Studios Efficient processes
Kyiesha Hip Hop Closet Lower packaging and shipping costs (free service)
Akiko Atsuyo et Akiko Operational changes - Wholesale to Retail
Paul Made by Wood Move from one offs to multiple, smaller products
Owen VOM Carpentry Logistics – transport vs time on site
David & Kelly Stitch NYC Systems for Efficiency

29
Simulation Recap – Round One Metrics

30
Thinking about continuous flow…..

31
Day Two Topics
Continuous Flow
Theory of Constraints
Cost of Poor Quality
Continuous Improvement / Six Sigma
By the end of this session you will:
•  know how to identify and relieve production
constraints
•  understand the cost of poor quality and the DMAIC
improvement framework
•  have learned facilitation and problem solving skills

32
3. Continuous Flow
move as fast as value can be
added, no waiting.
Little’s Law
Theory of Constraints
Set-up Time Reduction
Takt Time
Kanban

33
Measuring the Flow of Processes
with Little’s Law
Work in Progress
Output
Work in Progress / Output = Cycle-time
120 gallons / 60 gallons per minute = 2 minutes

34
Continuous Flow
The Theory of Constraints
CB BA
•  Constraints produce the fewest outputs per unit of time.
Often they will have a stack of work in front of them
•  Constraints govern the output for the whole process – an
hour lost at the bottleneck is lost for the whole process.
•  Efficiency gains at any other location don’t improve
productivity of the process.
Managing the Constraint
1.  Identify it
2.  Exploit it
3.  Subordinate everything else
4.  Increase output of constraint
5.  Rinse and repeat

35
Set-up Time
Reduction
https://vimeo.com/98796938

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Set-up Time Reduction
(Single Minute Exchange of Die)
1 Separate
Elements
Identify tasks that can be performed
during production and make them
“external” to the change over
2 Parallel
Work
Identify tasks performed
sequentially and, where possible,
complete them simultaneously
3 Convert
Elements
Review remaining internal elements
and ask what it would take to make
them external. Convert as many as
possible
4 Streamline Review all elements for
simplification to shorten both
external and change over time.

38
Production Systems
Takt Time Example: Willow Run
68
Flow, Takt Time and Cellular Design
1940 – A bomber per hour at Willow Run
34,500 Employees
488,000 Discrete parts
33,000 Components
24 Assemblies
1 B-24 per hour

39
Production Systems
Kanban Overview
Copyright © Vox Datum LLC (2016-2017). All Rights Reserved. 34Source: http://logisticsglobal.blogspot.com/2011/10/kanban-system-parts-procurement-toyota.html

40
Production Systems
Kanban Board Example: Hiring Process
1.  Define Value Stream
2.  Set Work in Process Limit
3.  Establish the Backlog
4.  Start Pulling Work
Application
Received Phone Screen
Manager
Interview
Interview
Complete Decision
G. Martin
Declined
M. Taylor
Offer
B. Miller
W. Jones
F. Brown
C. Williams
A Johnson
C. Smith
M. Jackson
3
M. Garcia
2 Rodriguez
AndersonJ. Davis
1
A. Thomas
Declined
Hernandez
Declined
T. Moore
Declined
D. Jones
No Go
R. Martinez
Offer
A. Richards
Start 15th
G. Wilson
4

41
Simulation Round 3:
Continuous Flow
Objective: identify and relieve constraints in the process.

42
4. Perfection
produce exactly what the
customer wants…
•  Cost of Poor Quality
•  The Case for Continuous
Improvement
•  Simple Six Sigma
37Copyright © Vox Datum LLC (2016-2017). All Rights Reserved.

43
The Cost of Poor Quality
Estimated Costs for American Companies
Non-conformance
“The cost of getting it wrong”
Conformance
“The cost of getting it right”
Internal Failures (20% to 40%) Controls (10% to 50%)
•  Scrap materials
•  Rework – doing work twice
•  Lost production time
•  Inspecting for errors, defects
•  Delays waiting for approval
External Failures (20% to 40%) Prevention (0% to 5%)
•  Fines, Penalties
•  Warranties, Concessions
•  Lost revenue
•  Measurement and tracking
•  Root cause analysis
•  Mitigation
Source: The Quality Engineer Primer by Bill Wortman, 1997

45
The Limits of Inspection Controls
(and The Case for Continuous Improvement)
“Finished files are the result of years
of scientific study combined with the
functional experience offered by
many Financial Services experts.”

46
Another Different Approach to Cost of Quality:
Continuous Improvement
Total Costs
Control / Inspection Costs
Non-conformance Costs
Quality
Cost
Prevention Costs
(Continuous Improvement)

47
Conventional wisdom: “This is good enough.”
Six Sigma:
What is it? When is it useful?
Sigma Defects per Million % Good
6 3 99.99966%
5 233 99.977 %
4 6,210 99.4 %
3 66,807 93.3 %
2 308,537 69.2 %
Condition: 99% Good (4 sigma) 99.99966% Good (6 sigma)
High Risk 4 plane crashes per day 1 accident every 5 years
High Volume 2,800 lost packages per hour Less than 2 lost items per day
High Complexity 4,000 surgical mistakes per year Less than 2 mistakes per year
Three conditions when “good enough” isn’t:

48
Continuous Improvement:
Will Six Sigma work for us?
“Too Complicated”
“Bureaucratic”
“It’s a Black Box”

49
Six Sigma works for Dabbawallas
“There is a service called FedEx that is
similar to ours but they don’t deliver hot
lunches.”
Dhondu Kondaji Chowdhury

50
How Dabba Deliveries Work
10C
VP
M
Collection Codes
VP Residential Location
(Vile Parle)
C Residential Railway Station
(Cooper Hospital)
Red Dabbawalla teams color
Destination Codes
10 Destination Railway Station
(Nariman Point)
9 Dabbawalla team number
M Building Identification
(Mittal Tower)
12 Floor number
“The unavoidable price of reliability is simplicity.”
C. Hoare

51
Six Sigma
DMAIC Improvement Methodology
Process Optimization
(People Driven)
Process Characterization
(Fact Driven)
MEASURE
Record performance in a
measurement system
CONTROL
Ensure sustainability
IMPROVE
Agree and make required
changes
ANALYZE
Find the critical few
factors
DEFINE
Document issue, allocate
resources

52
Define:
Tips for Starting an Improvement Project
Define the objective •  Articulate the compelling need for change
•  Define goals tied to business objectives
•  Get buy-in from the critical stakeholders
Build the right team •  Ensure stakeholder representation
•  Keep the team small and co-located where possible
•  Hold frequent, timely, informal communications
Freeze the target •  Set specific, measurable success metric(s)
•  Set stretch targets. When in doubt, 50% improvement
•  Make the metrics visible for all and the target hard to change
Invent offline •  Make the most of existing or proven technology
•  Use technical innovation only when it’s fully tested
Be time driven •  80% of target is a win, celebrate success and move on
•  Iterate often, plan multi-generation releases
•  Use parallel work streams where possible

53
Measure:
Record Performance with Run Charts

54
Analyze:
Find Critical Few Factors with Pareto Charts

55
Analyze:
Using the Five Whys to Find Root Cause
Where the Failure Occurred - Process Gaps
1.  Understand what the customer expects
2.  Design the process to meet customer
expectations.
3.  Follow the process as designed
4.  All communications are consistent with
how the process operates
Why? A solid rocket booster exploded.
Why? Hot gasses escaped from the rocket booster.
Why? O-ring seals failed in at least one of the
booster’s joints.
Why? The shuttle launched when the air temperature
was below design specifications for the O-rings
Why? “…NASA’s structure permitted internal flight
safety problems to bypass key shuttle
managers.”
Rogers Commission Report
On January 28, 1986 the Space Shuttle Challenger disintegrated over the Atlantic Ocean 73
seconds into its flight, leading to the deaths of its seven crew members. What went wrong?

56
Improve:
Better Quality with Error Proofing
Risk Priority Number = Severity * Occurrence * Detection
Shut down Lock out Warning
Severity Occurrence Detection
5 Harm a customer or employee
Trigger legal or regulatory action
5 Very High (greater than 10%) 5 No controls
4 Cause significant reputational or
financial risk
4 High (1% to 10%) 4 Low
QC/QA sampling
3 Result in a customer complaint 3 Moderate (1/10,000 to 1%) 3 Moderate
100% manual inspection
2 Minor effect on performance 2 Low (1/10,000 to 1/Million) 2 High
Statistical Process Control
1 Unnoticed by customer
Internal waste or rework
1 Very Low (less than 1/Million) 1 Very High
100% auto inspection

57
Control:
Standard Work for Consistency
Elements of Standard Work
1.  Inventory – material types and
quantities required to keep the process
operating smoothly
2.  Work Sequence – order of tasks an
operator must perform within takt time
3.  Takt Time - the rate at which
components must be made to meet
customer demand
Prep. Time 15 min.

58
Control:
Monitoring Key Metric(s) Over Time
Trend – Six consecutive data points in
either direction
Shift – Eight consecutive points on
one side of the median

59
Process Optimization
Facilitation for Results
The problem is often about the process…
“85% of the reasons for failure to meet customer expectations
are related to deficiencies in systems and process…change
the process rather than badgering individuals to do better.”
Dr. W. Edwards Deming
…solutions are ALWAYS about people
Results = Solution * Acceptance

61
Open: Idea Generation
Brain Writing
•  One idea per Post-it note
•  In order, each person
reads an idea and puts it
on a wall
•  Team uses what the hear
to modify or generate new
ideas
•  Keep going until ideas dry
up.
Assumption Busting
•  Identify rules or behaviors
that lead to the current
state
•  Surface assumptions
underlying rules or
behaviors (ask why 5x)
•  Challenge assumptions –
existing exceptions?
Premortem
•  Ask, “How can we ensure
the problem happens ALL
the time?”
•  Run like Brain Writing

62
Narrow: Affinity Grouping Adds Clarity
Group
A
Others
Group
B
Group
C
Group
D
•  Go through the ideas to see where they can be
meaningfully grouped
•  Move the ideas that belong in the same group
together
•  Look for duplicate ideas. Get permission from each
idea author to consolidate duplicates so that they
overlap
•  Work with the group to define a title post-it that
succinctly describes each group
•  Place all single ideas under the title “Others”

63
Narrow: n/3 to Focuses on Best Ideas
2
Group
A
5
4
31
1
1
Others
Group
B
Group
C
Group
D
2
11
•  Count the total number of ideas or groups
•  Divide this number by three
•  Each person on the team gets this number of votes
•  Each person puts dots on the ideas they think are
best
•  Count the number of votes per idea and rank them in
descending order

64
Close: Payoff Matrix Drives Consensus and Actions
•  The group agrees precise definitions for Benefit and
Effort
•  Each person rates each idea on a scale of 1 to 5
against potential benefits and effort to implement
•  Check assumptions for ideas with big variation in
scores
•  Average the scores for each idea
•  Apply Post-its in corresponding location on the grid
•  Confirm groups commitment to the results
•  Agree deliverables, next steps, timing and
responsibilities
1
1
1
5
31
4
2
Effort
Benefit
Low
High
High
2
1

65
Simulation Round 4:
Defect Reduction
Objective: identify and mediate root causes of highest impact errors.

Week 06_Operations (Part 2)

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