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August 6, 2012

Why Review?

By rhernandez August 6, 2012

The purpose of conducting management review is for the management team to get together at determined intervals to

Management review meetings are critical to the success of the organization.

Is everyone on the same page?

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?

April 10, 2012

GE and Lean Innovation

By Esteban Pedraza April 10, 2012

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:

  • A longer and more complex supply chain emerged; this slowed the information feedback loop and impaired the company’s ability to respond to problems and customer needs in a timely manner.
  • Cycle time was affected.
  • GE had to carry more inventory in the U.S. for products made in China.
  • A lack of communication due to functional departmentalization led to some loss of overall product knowledge (core competencies) by employees.

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:

  • Everyone is involved in the manufacturing process setup from Engineering to sourcing to production. (cross functional approach)
  • We focus on removing non-value added work from the design process through production
  • One team with one goal mindset
  • Communication is essential (information boards, visual tools, etc.)
  • Everything is built around supporting the operator getting the product out the door
  • Focused on greater customer satisfaction
  • Renewed emphasis on quality and technology
  • We Learn by doing and leverage the power of collaboration
  • Operators take pride in what they do

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.

March 13, 2012

Uncovering the Hidden Factory through SMED

By Rodney Reddic March 13, 2012
Stopwatch

Is time on your side?

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.

  1. Document the current changeover process and break the process into elemental steps.  This is typically done through the shooting of a changeover video of the process and reviewing the video to document the steps and times associated with each step.  The steps are also classified as internal (Step occurs while the equipment is not running) or external (Step occurs while the equipment is running and producing product).
  2. Review each process step: Is it necessary or can it be eliminated.  During the review, ideas are generated on how to convert internal steps to external steps.  Internal steps in the changeover process are the driving factor for the overall changeover time on the equipment.   Thus, reducing the internal steps has a dramatic effect on the overall changeover time for the equipment.
  3. Re-examine the remaining internal steps with the goal of (Streamlining, Combining or Eliminating) the steps.   Often steps can be performed in parallel with the addition of Assist Operator during the equipment changeover.  Working as a team and performing parallel operations can have a dramatic effect on reducing the time on the equipment changeover.
  4. Focus on eliminating adjustments for the remaining internal setup steps.  In this step, the reliance on “Tribal Knowledge” is significantly reduced or eliminated through the development of hard settings for the equipment.  Often the equipment is updated with scales, gauges, and visual controls that can be used to establish initial settings for running a particular product on the equipment.  By establishing initial settings based on past production runs, the trial and error time at start-up can be significantly reduce and the equipment can produce good product much faster.

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.

  • Planning
  • Practice
  • Innovation
  • Standardization
  • Continuous Improvement

March 8, 2012

EHS: Profit Center or Circumstantial Overhead?

By christophermeeks March 8, 2012

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:

  • Lighting Upgrades – improve the quality of lighting in work areas, reduce cost, reduce certain pollutants emitted when generating electricity
  • Finding Markets for ‘Wastes’ – re-classify ‘wastes’ as feedstock in another company’s process to eliminate disposal costs, receive revenue, reduce regulatory requirements
  • Searching for Product Alternatives – compare ‘real’ price of existing materials versus ‘real’ price of using less hazardous materials
  • Deploy ‘Source Reduction’ – evaluate processes to implement procedures that significantly reduce or completely eliminate waste before it is created

And, as always, DOCUMENT, DOCUMENT, DOCUMENT.  Without an accurate baseline, results are hard to demonstrate.

February 7, 2012

ISO Excited!

By rhernandez February 7, 2012
Quality Control 4

Image via Flickr

What are the benefits of running your business systematically?

  1. Setting goals and establishing a culture of customer satisfaction and continual improvement enables an organization to maintain and grow.
  2. Working with employees and gaining consensus of the best way to conduct different processes (procedures) and activities (work instructions) ensures buy in, efficiency and productivity.
  3. Documenting best practices ensures consistency (all perform processes and activities in the same, accepted best way) and continuity (both current and future employees perform processes and activities in the same, accepted best way).
  4. Monitoring and measuring processes to prevent problems from occurring and taking long term corrective actions when problems do occur leads to increased productivity and profitability.
  5. Effectively training and enabling employees ensures highly qualified and motivated employees and results in higher productivity, increased customer satisfaction and improved profitability.

The ISO family of standards (ISO 9001, AS9100, AS9110, ISO 14001, etc.) provides guidelines for conducting and managing business systematically, efficiently and effectively.

February 2, 2012

Coaching To Accelerate Improvement Projects

By ayanez February 2, 2012

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:

  • Project selection that is relevant and linked to corporate goals
  • Type of project (e.g., Kaizen, Lean, Six Sigma or Design for Lean Six Sigma (DFLSS))
  • Scope of project
  • Project financial impact
  • Ease of implementation
  • Roles & Responsibilities of Stakeholders
  • Project sponsor support or engagement
  • Training
  • Coaching Green (GB) or Black Belts (BB) candidates
Coach Fitz

Image via Flickr

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?

January 17, 2012

Top 10 reasons to attend the 2012 Texas Manufacturers Summit

By Jennifer Wilson January 17, 2012

Manufacturing is an exceedingly important industry sector in our state – maintaining our strength is a key economic driver. We’ve rewritten the rules regarding ROI on conferences. Gone are the days when you spent three days out of the office only to return with fragments of useful information. Join us this coming February for an informative day of learning that impacts every facet of your business!

  1. Competitive advantage. You need to figure out how to evolve your business and this Summit is an important gathering for people like you – people figuring out how to make their business succeed in challenging times.
  2. See all the best tools in one place. You will meet with established leaders, Texas resources and creative innovators to find the right tools and technologies to take your business to the next level.
  3. Real-world solutions to your real-world problems. Summit sessions and keynote presentations are designed to highlight how forward-thinking users are accessing current and new technologies to drive change in their organizations.
  4. Stay ahead of the curve. Leaders who understand how to be collaborative, flexible and transparent will be the most sought-after employers.
  5. Topnotch Keynote Speakers. Dr. F. Barry Lawrence, Director, Industrial Distribution Program at Texas A&M University System; Representative Joe Straus, Speaker of the House and Mr. Richard Fisher, President & Chief Executive Officer, Federal Reserve Bank of Dallas.
  6. Breakout Sessions. Three tracks: Mix and match or stick with one track all day! Choose from informative tracks on Policy & Regulatory Issues, The Business of Manufacturing, and Innovation & Growth during four sessions.
  7. Case studies from experts detailing practical advice and best practices for all manufacturers, large, medium and small.
  8. Meet & Greet. Network with fellow senior-level manufacturers and manufacturing support organizations in an interactive environment throughout the Summit.
  9. Exhibitors. Visit Summit exhibitors for a taste of the latest and greatest resources and technologies to support your manufacturing operations.
  10. We’ll be there – of course! TMAC is a proud sponsor of this important inaugural event. Join us for the Welcome Reception on February 14th and stop by our booth and breakout sessions during the Summit on the 15th. But don’t wait! Registration ends soon!

Planning on attending? Use #txmfgsummit2012 on Twitter and share the event on LinkedIn and Facebook.

December 6, 2011

But we have to…

By raikman December 6, 2011

Some Lean practitioners have promoted the use of a third type of value-add: Non-Value-Add Required (NVAR).

Value-Add Ratio

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
Machining 1% 20%
Fabrication 10% 25%
Assembly

(Batch Transfer)

15% 35%
Continuous Process/ Assembly

(Continuous /One Piece Flow)

30% 80%
Business Processes

(Transactional)

10% 50%
Business Processes

(Creative/Cognitive)

5% 25%

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:

  • Customer Value-Add : Optimize
  • Non-Value-Add Required: Minimize
  • Non-Value Add : Eliminate

December 1, 2011

Defining value, part deaux

By raikman December 1, 2011

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.

Does your process contain too many non-value added activities?

What's the value?

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?

October 20, 2011

Is “Tribal Knowledge” good enough?

By rhernandez October 20, 2011

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.

Don't kill the tribal knowledge

Is your tribal knowledge good enough?

Standards:

  1. Represent the best, easiest and safest way to do a job.
  2. Are the best way to preserve knowledge and expertise thereby ensuring consistency and continuity.
  3. Provide a way to measure performance.
  4. Provide a way to improve. Maintenance means following the established standard; upgrading standards is improvement.

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.

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