The purpose of conducting management review is for the management team to get together at determined intervals to
discuss how effective its business is. This included looking for “opportunities for improvement and the need for changes” to how the business is run.
To some organizations, holding management reviews is as dreaded and avoided as going to the dentist. Even dentist trips should occur twice a year for cleaning, so I recommend against annual reviews.
So how often should “Management Review” be held?
When should management review “results of audits”?
Why not within 5 working days after the audit is held?
When should management review “customer feedback”?
Why not the same or the same day received or the following day?
Or why not at a weekly management meeting and review applicable items? How often should management review open “action items”?
How often should management review key performance results (aka Quality Objectives)?
Certainly not annually.
You may have picked up on the recurring theme in the examples above. The answer to “How often the activities listed in “5.6, Management Review” (ISO 9001:2008) need to be reviewed?” is, it depends. It depends on how timely and effective you want your appropriate action to be. The ISO 9001:2008 standard does not say that all the activities listed in “5.6, Management Review” have to be reviewed at the same time. As long as all items of 5.6 are covered and records are kept, whatever frequency of management reviews enables the organization to run its business most effective is acceptable.
How often do you review?
The opening of GE’s new GeoSpring Hybrid Electric Water Heater plant in Kentucky isn’t just a great endorsement for American Manufacturing but an affirmation of Lean’s ability to help improve a company’s competitive edge in today’s global marketplace. The events that have taken place at GE and GE’s Appliance Park in Louisville read like a case study straight out of a Lean handbook.
In the 1980s America was in an industrial decline and when the GE facility could no longer compete with production costs in Asia, for reasons such as an increase in wages and a decrease in the selling price of products, GE began moving production to the Asian plants. As expected GE was able to reduce labor cost and save on materials, but over time the cost savings from outsourcing was outweighed by the negative impact on GE’s competitiveness. The following examples are just a few problems GE encountered:
What did GE do to address these problems? They invested millions of dollars in Appliance Park. In addition to the problems brought on by outsourcing, two major events helped initiate the investment. The first was the availability of job-creation incentives from the state and federal governments and the second was a competitive labor costs as a result of the 2009 Competitive Wage Agreement between GE and IUE-CWA Local 761. But according to GE the company had not invested in Appliance Park because the culture “wasn’t right to invest”. How did GE address the culture problem? They embarked on a lean initiative that “maximizes customer value while minimizing waste and identifies employees as the most valuable resource a company has”, said a GE spokesperson.
GE’s upper management is showing their commitment to changing the company’s manufacturing culture by investing not just in the building with a multimillion dollar renovation but in their people. Investment in the people has been done through lean training and employee empowerment. The empowerment has removed barriers that would keep any employee from taking positive action that would lead to better quality and/or performance. According to GE’s Appliance Lean Leaders and employees, the way of thinking and the way things are done at Appliance Park have changed:
Using lean practices and tools, GE has reported cutting cycle time by 50%, eliminated 20% of the parts included in the GeoSpring final assembly, and reduced equipment investment by 30%. GE’s lean journey is demonstrating that Global competitiveness can be accomplished when the right tools are used in the right way.
According to a report by Boston Consulting Group (BCG), labor cost in China have risen dramatically and shipping and fuel costs have skyrocketed, this means China is not as cheap as it used to be and the United States is poised to bring back jobs from China. The report also points out that by 2015, it will only be about 10% cheaper to manufacture in China. If the BCG report is correct then the question for the United States will not be what company’s want the jobs but what companies have the capability (structure and culture) to compete in a global market.
With the freedom that a consumer has, in today’s global market, to go almost anyplace for a product that meets their quality and price requirements companies must be agile enough to meet consumers changing needs. As GE is showing us, the place can be the United States and the way to get it done can be through American Manufacturing.
Too often, companies are quick to implement new equipment in order to meet increased customer demand for products, without maximizing the utilization of their current equipment. Equipment changeover time is one area of the business that is often ignored and companies accept long changeover as a part of doing business. The changeover time of equipment can be a Hidden Factory just waiting to be uncovered. It is very common for equipment changeover from one product to the next product, to take a couple hours for completion. Companies often make several product changeovers per week, consuming hours of potential production time. If we could somehow reduce the changeover time from hours to minutes, we could have a dramatic effect on providing additional production capacity. This is what Dr. Shigeo Shingo discovered while helping to develop the Toyota Production System. Dr. Shingo terms his discovery SMED (Single Minute Exchange of Dies), and it prescribe that changeover time should be less than ten minutes for a given product.
What does SMED Involve?
Companies can systematically reduce changeover time on their equipment by following a simply four step method.
SMED Four Step Process
Finally, after completing the SMED four-step process a new changeover standard can be developed using the remaining internal and external steps. The new changeover standard should prescribe the changeover sequence and operators required to complete the changeover on the equipment.
For most companies that have not participated in any formal changeover reduction process on their equipment, applying the SMED approach typically reduces the changeover time by 50% when first applied. By continuing to work as a team, planning changeovers, practicing, being innovative and standardizing changeover methods equipment changeover times can continue to be reduced. Companies should strive to achieve the goal of single-minute changeover times and recapture the loss capacity due to long changeover times.
Historically, most companies have viewed their EHS department as a necessary evil that must be retained to avoid regulatory infractions. However, some companies have shifted their thinking to include their EHS departments as profit centers through re-classifying wastes as revenue streams and identifying opportunities for cost reductions and cost avoidance. This transition is becoming more noticeable as companies implement ISO programs, look for ‘Greener’ products and attempt to reduce the use of raw materials. The following include techniques to demonstrate to executive managers that an EHS department can serve as more than just an overhead expense:
And, as always, DOCUMENT, DOCUMENT, DOCUMENT. Without an accurate baseline, results are hard to demonstrate.
What are the benefits of running your business systematically?
The ISO family of standards (ISO 9001, AS9100, AS9110, ISO 14001, etc.) provides guidelines for conducting and managing business systematically, efficiently and effectively.
There are several elements that can affect the time to complete an Improvement Project (IP). The following is a partial list than can influence the time to finish a project:
As GB/BB concludes their training, they are assigned an IP that they would facilitate and take to fruition. Some belts think that Lean Six-Sigma (LSS) is about using as many tools as possible for each phase of the DMAIC methodology. This is where the coach can provide feedback on what tools make sense to use and provide a direction on the next steps.
The coach can also lead the facilitations of the first kaizen events and have the belts participate on the event, and learn from it, so that they can lead such event.
The coach does not need to be an expert on the process but needs to have a vast experience on the DMAIC or DFLSS methodology. The coaching sessions should not be prescriptive, meaning guiding the belt step by step, but rather should be treated like a sounding board where the belt can bounce ideas.
Coaching should take place on a biweekly basis and should last for about one hour. The coaching is more efficient if the belt provide information before each coaching session.
The bottom line is not to overlook coaching sessions.
Do you use coaching in your company? Have you seen a difference in the impact of project completed?
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Some Lean practitioners have promoted the use of a third type of value-add: Non-Value-Add Required (NVAR).
Also known as Business Non-value Add, these activities are those that must be performed for legal or regulatory requirements. Another consideration is whether the process would fail altogether if the process step were eliminated. It is important to keep in mind that these activities are still a form of Non-Value Add. So the goal from a Lean practitioner standpoint for NVAR activities is to minimize or (if possible) to eliminate these process steps.
A Fundamental Lean Measure: Process Cycle Efficiency
Once you have agreed on the definition of CVA a key measure to understand for any Lean practitioner is the Process Cycle Efficiency (PCE – also called value-add ratio). This is simply the ratio of the total customer value add time for a single item (or transaction) divided by the total process lead time to deliver the product (or service). This is the key performance measure of any process.
A number of Lean writers estimate that a typical process has a PCE of 5% or less. In other words, 95% of the time required to move a product (or information) from start to finish are due to non-value add activities. Common examples of such activities include waiting, performing rework, reviewing information, dealing with defects / errors / mistakes, moving items, and watching.
Past research for a variety of types of business processes resulted in the following figures for a typical PCE, and ‘world class’ PCE (George Group, 2004):
|Type of Process||Typical PCE||World Class PCE|
|Continuous Process/ Assembly
(Continuous /One Piece Flow)
My own experience is that the values in the table above for ‘typical’ processes are somewhat generous. That is, the values are too high. I have seen PCE values well below 1% for many processes. In short, while the practice of determining the PCE for any process is an important one, it can also be very humbling.
The Challenge of Defining Value
As noted previously, both new and experienced Lean practitioners sometimes struggle with defining value. I hope the guidelines covered in Parts 1 and 2 of this blog will help to make this task a little easier. But even if you still find it challenging, I would suggest that the time spent discussing, debating, and arguing over how to categorize each process step in terms of CVA is exactly the sort of thing you should be doing as a lean practitioner. Working through this categorization is fundamental to developing Lean thinking, and hence is always worth the extra time required.
Finally, from a Lean practitioner standpoint you should always keep in mind the following rule of thumb when working on various types of activities:
In part 1 of this topic the fundamental concept of customer value was discussed. Before applying lean methods to improve a process, the first step is to define exactly what value means for that process. Or more accurately, to define what value means for the customers of that process.
This understanding of what adds value – which comes from an understanding of customer requirements – can then be used to categorize each process step as either Customer Value-Add (CVA) or Non-Value-Add (NVA). Once this categorization is performed a lean practitioner can focus on eliminating or minimizing non-value-add activities. Sounds simple, and for many lean projects it can be that straightforward.
As was explained in Part 1 of Defining Value, there are two key characteristics of process steps that add customer value:
1) Change to materials OR information
2) Something for which a customer will pay
So to be clear: A customer value-add process step must cause both a change to materials (OR information) AND be something for which customers will pay. Examples of such activities in manufacturing include cutting metal, assembling a wiring harness, and painting a panel. In a transactional process CVA activities include analyzing data, writing a report, approving a loan, performing a credit check, and answering customer questions.
The Second Time Around
Not covered in Part 1 was the situation where any of these activities are done a second time due to a mistake made the first time. In this case the process step should not be categorized as customer value-add. Such an activity is a form of rework, and although it may meet the first part of the definition of customer value-add (a change to materials or information) it fails the second part (activities for which a customer will pay). Think about it: If you purchase a new television, would you want to pay for rework performed on that TV? Or if you submit an application to refinance your home loan do you want to pay for mistakes made by the staff of the bank?
One easy way to check if an activity is non-value-add is to see if the letters “re” are used in describing the task. Some NVA examples include: rework, review, rewrite, repaint, retest, recheck, return, recall, retype, retrain, reissue, reship, redesign. Always keep in mind the lean goal to ‘do it right the first time’.
Assessing Value in Internal Processes
This approach to classifying activities as CVA or NVA seems pretty straightforward for most manufacturing processes, and even most service processes. Where many lean practitioners struggle is when they are working to improve internal processes that may not directly impact the external customer. Examples of such processes include payroll, month-end close, hiring/HR, and regulatory processes. Clearly such processes do result in a change to materials or information. But just as clearly, external customers are not willing to pay for these types of activities.
There are two keys to assessing value in such processes. The first is the previously mentioned question of who is the customer of the process. But the second consideration is to answer the question: Are we looking at the process level, or at the organization level? The answers to these questions will help in characterizing the process steps.
To be clear, when speaking of organization level I am referring to the value stream used to meet the needs of the external customer by the organization. This value stream – sometimes referred to as the order fulfillment process – is really made up of a series of sub-processes including order entry, scheduling, operations, packaging, and delivery. The customer at the organization level is the customer who pays for the product or service they receive.
On the other hand, the process level refers to any process within an organization whether it is part of the order fulfillment process (such as operations) or is a support process (such as payroll or hiring). The customer of the hiring process is the department that needs a new employee. The customer of the month-end-close process is the management team.
Now let’s look more closely at a process like payroll. Does the external customer – i.e., the paying customer – care about payroll of their supplier? No, they do not. So at the organizational level, the payroll process does not contain any CVA activities.
But now consider the customers of the payroll process: employees (who want to be paid), managers (who need to track costs), and the government (who need the information to tax the company and its employees). Each of these entities do value the activities required to provide them with the various products (checks, reports, information) of the payroll process. So at the process level, there are CVA activities.
And here is the clincher: What if the company decided to outsource payroll? That is, what if they asked a third party to perform the process of payroll. Would the company pay the third party to perform this process? Absolutely. Therefore, one can infer that the company values the critical activities performed in the payroll process. So now we have met the two requirements of a CVA activity covered in Part 1: (a) Change to material OR information, and (b) Something for which a customer will pay.
Do you have non-value add elements in your processes? What are you doing to make your processes more efficient?
According to Masaaki Imai in his book Gemba Kaizen – A Common Sense, Low-Cost Approach to Management, management’s two major functions are maintenance and improvement of processes. A basis for both is establishing standards.
Standardization is required to build a viable quality system. If you choose to depend on “tribal knowledge”, improvement, consistency and continuity of processes are only as good as our memories.