In today’s manufacturing arena equipment reliability is paramount, thus we are seeing more and more companies trying to implement Total Productivity Manufacturing (TPM). TPM is not a program that can be implemented over night and takes commitment at all levels of the organization to be successful. One major indicator of a successful TPM program is Overall Equipment Effectiveness (OEE). This OEE number can be challenging to obtain for most companies and involves six major areas of equipment losses: Setups and Adjustments, Breakdowns, Idling and Minor Stoppages, Start-ups, running at Reduce Speed, Defects and Rework.
As a kid, I was never really into wondering how stuff was made or where it came from (which I probably why I’m in marketing & not manufacturing, but I digress) – I’d like to blame my lack of curiosity on my parents and after reading about the Top 10 Cool U.S. Factory Tours, I may have a pretty good case against them.
Our family vacations were always fun, exotic and a mixture of stress/rest so I can’t blame my parents too much… I did have amazing vactions! Now, I’m on the look-out for more than beautiful beaches! Working with TMAC has opened my eyes to how “stuff” is made and even though I’ve been on a handful of plant tours (all of which were ah-mazing!) since I started here - it seems like a great way to spend some down-time too.
Have a sweet tooth? Visit the Jelly Belly Factory in Fairfield, California!
Have a need for speed? Visit the Bowling Green Assembly Plant in Bowling Green, Kentucky!
A country boy (or girl)? See the John Deere Pavilion in Moline, Illinois and experience equipment past and present!
Baseball fans, Artists, Aviators and Dentisits Coca-Cola Addicts can each experience their favorite brands from behind the scenes. Don’t see anything that peaks your interest? Check out the Watch It Made in the USA website for their suggestions and if you decide you’d rather not brave the crowds – you can always tune in to the Science Channel and catch up on episodes of “How It’s Made“!
What are your favorite factories to tour?
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?
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!
Furthermore, what does moving a barn (click link for video) have to do with Lean?
TMAC’s emphasis in Lean deployment is the ability to identify and prepare the different roles to fulfill their respective responsibilities to move the organization along the journey to achieve the vision. Tools are integral to the journey but in themselves are insufficient. Working in ‘the white space’ beyond the punctuated activities related to training, events, and projects requires that we develop each role to fulfill their responsibilities.
What are you doing to work in the white space?
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?
When implementing Lean transformation projects one concept that I have always included in the training material is R=Q X A:
(R)esults = the (Q)uality of the solution times the (A)cceptance.
Recently I have worked on a large transformation project that includes a significant quantity of classroom training and Rapid Improvement Events (RIE) over several months. In the past there have been some disappointing experiences with companies that seem to want to implement Lean only to go through the motions - and ending up in a place where they could not sustain the improvements they made. The culture of the company that I am currently working with is very traditional and relatively resistant to change. The management is knowledgeable of the benefits that can be achieved by using Lean practices but they are reluctant to make significant changes. My working partner and I are helping the RIE teams develop Lean processes. We agree the changes the teams have come up are low risk and are very doable. In fact, since we began working with this company we have always agreed that common Lean techniques such as cellular flow could be applied to almost all the customer’s value-streams.
However my partner and I do disagree significantly on our approach.
Since this organization has proven to be very conservative, I have taken the approach of supporting the limited changes they approve whereas my colleague continues to try and persuade them to embrace larger changes. In some cases his approach has intensified their resistance. I see it as a “human relations” issue. I agree that the company will get better results with more significant changes, but since management is very conservative I support their limited approvals. So far this has worked well and is continuing to improve. Once the employees gain experience with the limited changes they are taking more initiative to continue improving their processes. The teams have actually continued the changes to some processes to the point we originally estimated could have been achieved by making the larger change initially. I think either approach could be the most appropriate depending of the situation. I would like to hear from others who have had similar experiences and your success using one or the other approach:
A) Accepting a limited amount of change to begin with, relying that the small successes will help continuous change become part of the culture
B) Pushing for higher expectations and risk that larger changes will be resisted or not approved.
Which has worked better for you?
How to get Results: R=Q x A
Does that activity add value? The answer can provoke friendly debates, heated arguments, tears, hurt feelings, and the occasional fist fight. And that’s just among lean project team members! It can be even worse between lean practitioners and front-line workers, whether they are in a factory, warehouse, retail store, or office.
Think about it from this perspective: How would you feel if someone told you ‘What you do all day long is not a value-add activity’? That is the reason it is important to make a distinction between the person performing an activity, and the activity itself.
Yet despite the difficulty of defining value, it is a key skill for any successful lean practitioner. In the book Lean Thinking by Womack & Jones (1996) they proposed a basic approach to implementing lean that consisted of a five step process. The authors stated that “Specifying value accurately is the critical first step in defining lean thinking”.
In other words, before you can move forward in applying various lean concepts it is important to begin with a clear understanding of what constitutes a value-add – and non-value-add – activity. In the book mentioned above the authors address this topic further by noting that:
“Value can only be defined by the ultimate customer. And it’s only meaningful when expressed in terms of a specific product (a good or a service, and often both at once) which meets a customer’s needs at a specific price at a specific time.”
Several years ago I investigated the topic of value in order to make a presentation at an engineering conference. What I discovered was that different writers had different explanations of value-add. Consider these definitions from that research:
Value is added by changing the form of something or by moving it closer to the customer
Activities that must be performed to meet customer requirements
Value-added time may be thought of as any time spent on actually transforming the product toward its final configuration.
Value-added steps (or activities) are those that matter to the customer (external or internal); all others are nonvalue added. If there is disagreement over whether a step is value or nonvalue-added, it is best to err on the side of calling it value-added.
Any activity that increases the market form or function of the product or service. (These are things the customer is willing to pay for.)
The overarching themes seen in these definitions are two-fold:
1) Change to materials OR information
2) Something for which a customer will pay
In other words, if an activity results in a change to materials OR information AND if a customer would be willing to pay for that activity, then said activity should be classified as value-add. Examples in the world of manufacturing include tasks such as cutting, welding, assembling, and painting. In terms of service processes, examples include checking in a person at a hotel, answering technical questions via a helpdesk, mowing a lawn, and assisting a customer with the use of a new product. In the world of transactional processes, examples of value-add activities include capturing customer requirements, analyzing data, writing reports, making key decisions, and communicating needed information.
Of course, there are always some activities that fall into a ‘grey zone’ in terms of value-add. In the manufacturing arena two examples are tooling costs and setup charges. Many firms routinely charge fees associated with activities associated with these two process steps. Yet neither of them result in a physical change to materials.
Another such example is inspection. In some industries a supplier is required by contract to inspect their product before sending it to the customer. So in essence the customer is willing to pay for this activity. Yet inspection does not result in a physical change to a product. In office processes inspection or review activities are very common. Such steps are often put in place due to some problem that may have occurred months or years ago.
So should these tasks that fall into the ‘grey zone’ be classified as value-add activities? From a lean purist standpoint, I would say no. But from a practical standpoint I would be willing to accept that they are value-add. At the end of the day, it is more important that you agree on a definition of value-add at your firm, and are consistent in how it is used.
In Part 2 of Defining Value we will explain a fundamental lean measure to use when examining the level of value-add in a process: Process Cycle Efficiency. Also covered is an explanation of this measure in terms of both typical and world-class firms for various types of business processes. Finally, Part 2 will include a discussion of how to categorize activities performed due to regulatory and similar requirements.