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Module #12 - Lean Communities. Agenda. What is “ lean? ” The origins of lean operations in industry Why it is important to businesses and other organizations Steps to a lean transformation What is a lean community? Characteristics of a lean community
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Agenda • What is “lean?” • The origins of lean operations in industry • Why it is important to businesses and other organizations • Steps to a lean transformation • What is a lean community? • Characteristics of a lean community • Economic development advantages of lean • Examples of lean in the public and service sectors • Conclusion
The Old Way: Mass Production On The Assembly Line • Pioneered by Henry Ford in the early 1900s – • Brought Model T’s to the masses • Reduced labor cost through automation • Lower skilled workers doing repetitive tasks • Limitations of assembly line • Suitable for producing large amounts of the same product without variation • Inflexible, lots of waste, high incidence of defective products “Customers can have any color they want as long as its black” --Henry Ford
The New Way: Flexible, Lean Production • Modern consumers want high-quality, customized products, not mass-produced goods • The Toyota Production System (TPS) was developed in the 50s and 60s • Production cells, empowered workers and “autonomation” • Flexible for customized products • Minimizes waste and product defects • Lowers cost by reducing inventories and eliminating non-value added activities • Introduced to business world by Womack, Jones and Roos in 1990
Eliminate Waste And Add Value Lean distinguishes between value-adding activities that transform information and materials into products and services the customer wants, and non value-adding activities that consume resources but don’t directly contribute to the product or service Lean can be described as “the minimization of waste while adding value to the product or process” --Womack, Jones and Roos 1996
Types Of Waste In Production Scrap Materials, labor and overhead due to defects and product rework Motion Non-value added movement of workers and production machines Waiting Waiting for instructions, material, tools, machinery, people, etc. Underutilized Employees Not using their full physical and mental capabilities Overproduction Producing more than the customer wants Inventory Excess materials, parts and assemblies purchased or produced in advance of when they are needed Transportation Unnecessary movement of material or product Processing Unnecessary or inefficient processing
Lean Example: Satisfying Automobile Customers Imagine that you are an automaker and that three American customers have ordered blue cars with black seats and four Canadian customers have ordered white cars with red seats. The orders arrive while the factory is holding just enough red seats and black seats, blue paint and white paint, and car bodies and power trains to assemble the seven cars and ship them out the same day. As the materials are consumed, they signal supply stations to replenish them at once. The supply stations then alert the suppliers whose trucks are driving several “milk runs” each day to deliver parts moments before they are needed. The whole supply chain runs like clockwork, perfectly synchronized no matter how variable the demand from customers. In this perfectly demand-driven world, there is no waste. The assembly lines make no more and no less than is needed right then and there. Source: Kerr 2006
Lean Is Continuous Flow • An even flow of work free from starts & stops, bottlenecks, and large inventories of parts, materials, and work-in-progress • Production is driven by the customers’ needs (pull production or kanban) as opposed to internal production goals and rigid schedules Lean is focused on “getting the right things to the right place at the right time in the right quantity to achieve perfect work flow while minimizing waste and being flexible and able to change” --Wikipedia
Existing receiving and inventory layout: Components are received, cataloged and re-cataloged Handled and laid down multiple times (7) which increases probability of damage of misclassification Material flow is non-linear with backflows Proposed layout: Linear, no backflows Less handling and cataloging Saves time, inventory, errors and real estate Production Flow Case Study Electronics manufacturer purchases thousands of different kinds of parts to produce a variety of products Parts must be carefully handled and cataloged to prevent damage and installation in wrong product Source: Process Quality Associates
5-step Approach To Lean • Specify value • Value of product or service is defined solely by what the end-use customer wants and will pay for • In the case study, the customer simply wants a reliable electronic product at the lowest cost • Identify the value stream • What is the process for design, development, production, distribution and sales of the product or service satisfying the customers’ needs? • In the case study, excessive parts cataloging and movement does not add value for the customer • Make the process flow • Identify bottlenecks, backflows, waste in process • In service organizations, contradictory or confusing instructions or actions by supervisors or fellow employees interrupts smooth flow
5-step Approach To Lean • Supply at the pull of the customer • Production should respond to the pull or demand of the customers • The car example showed a continuous flow, just-in-time inventory system that responds throughout the production process and supply chain to changing customer demands • Practice continuous improvement • Lean transition is a never-ending process of adapting new tools and techniques and striving for perfection • Many organizations adopt lean only in certain business units or departments; a chain is only as strong as its weakest link • Lean is not just about tools, it is a mindset Source: Womack and Jones 1996; Abdi, Shavarini and Hoseini 2006
Some Lean Terms Kaizen: Continuous, incremental improvement of an activity to create more value with less waste. Flow: The progressive completion of tasks along the value stream, so that a product or service proceeds from design to launch, order to delivery, and raw materials into the hands of the customer with no stoppages, scrap or backflows Value Stream: The specific activities required to design, order and provide a specific product (or service) from concept launch to order to delivery into the hands of the customer. Value: A capability provided to the customer at the right time at an appropriate price, as defined in each case by the customer. Pull: A system of cascading a product or service in which nothing is produced by the supplier until the customer signals a need. Waste: Anything that does not add value to the final product or service. Value Stream Mapping: The identification of all the specific activities occurring along a value stream for a product or product family (or service). Source: Radnor and Walley 2006
A Tale Of Two Communities(A Story of Economic Development in the 21st Century) • Advanced Medical Devices (AMD) was looking for a location for a new production facility for heart pacemakers • Must haves: • Skilled labor force • Good electricity service with redundancy and no interruptions • High quality of life to attract and retain key personnel • Fast start-up (existing building, quick permitting, etc.) • After a multi-state search, decision came down to Pleasantville and Newtown, both of which met the “must have” criteria. • AMD team traveled to both communities to meet with city officials, utility economic development officials, and representatives from the community college
Pleasantville City: We have procedures we have to follow, permits will take 2 months Utility: Power and equipment requirements are unusual, I’ll have to check and see what the timetable might be College: We have regulations and schedules for establishing any new training programs Newtown City: We can expedite the permits in about a week Utility: Redundant power supply will be in place by the time your equipment is installed College: We can begin specialized training for immediately The Responses Which community won the project? Which community understands lean?
Lean CommunityWhere lean principles are practiced in government and across the spectrum of community sectors – health care, education, business support services, etc. Benefits of a Lean Community • Advantage in recruiting new businesses • Be a Newtown, not a Pleasantville • Advantage in business retention and expansion • Lean in government, education, and all sectors will give existing businesses a competitive advantage • Lean training can help ensure that all local businesses are lean and therefore globally competitive • High quality life for all citizens • Excellent services from government and private sector • Low taxes • Attract educated knowledge workers and entrepreneurs
Characteristics Of A Lean Community • A strategic plan that promotes and supports lean organizations in all sectors; milestones should be set and regular progress assessments performed • A “Lean City” organization that serves as the focal point and coordinator for all lean activities in the community that offers assistance in lean transformation . As a public/private partnership “Lean City” should: • Advocate lean in all sectors and educate all on its importance • Work with local businesses and organizations to help them make the lean transformation • Support national lean certification programs for industry and encourage and help local businesses attain certification • Offer certification for organizations that do not fall under existing certification programs • Stay abreast of latest research and practices in lean and communicate this to local businesses and organizations
Characteristics Of A Lean Community (The “Lean City” organization should, continued): • Offer a directory of lean tools, resources and training opportunities • Revise and update the lean strategic plan and provide regular progress reports • Identify sources of grants and funding for lean research and transformation; serve as the main fund-raising entity for lean • A lean community should maintain a close working relationship (through its Lean City organization) with the state’s Lean Center of Excellence • One state center cannot serve all cities and parishes • Local Lean City organizations know the local players and can better serve the local market
Services And Benefits A Lean Community Can Offer New And Existing Businesses • Excellent government services responsive to needs of businesses and citizens • Low tax rates through lean, efficient government • One-stop shops for business services including permits, incentives, etc. • Assistance with lean assessments and transformations through the lean clearinghouse; most businesses can’t do this by themselves • Strong partnership among government, businesses and educational institutions to provide workforce development programs for changing business needs • Strong business retention and expansion services to local companies through lean assistance
Example Of Lean In Government: Connecticut Department Of Labor • CTDOL initiated a lean transformation to better serve businesses and employees • Used lean process and teams to address a problem of duplicate systems for unemployment claims forms • Successfully merged and streamlined the system with the following documented benefits: • 10,000 duplicate forms to employers per year eliminated • 3,387 staff hours per year eliminated • $151,158 in staff cost per year eliminated and redirected to fighting fraud (this is customer value added!) • 10,000 satisfied employers through savings in time, money and frustration • Enhanced worker respect and an empowered staff Source: Hasenjager 2006
Implementation • A lean community initiative is like an ambitious economic development program and should follow the principles and processes of community development • Recommended steps to implement lean in a community: • Form a broad-based committee to begin public education and: • Become knowledgeable about lean and begin dialog with LCE • Hold public meetings to discuss lean – advantages and implementation • Explore funding options for establishing Lean City organization • Produce a report with recommendations and blueprint • Committee should consider whether and when to hire consultant or outside facilitator • Follow the plan and begin implementation • Lean is a new concept in many service and pubic sector organizations • There is no “tried and true” blueprint for a lean community • Louisiana will be on the cutting-edge and this module and process will be modified over time
Conclusion • No perfect lean community (or company) will ever exist because lean is an on-going process, not a one-time event • Lean transformations in government and service organizations have already begun in many places • Lean transition is not easy and it is unique for every organization • Dozens of books and hundreds of articles on lean • Organizations usually need outside help on lean • Louisiana communities can contact State Lean Center of Excellence and LED for assistance in getting started
Why Should My Community Consider Lean? • For all the benefits mentioned in this presentation, the Lean Module and much, much more • Economic development benefits – recruitment, business retention and expansion • Attract and retain the best and brightest workers and entrepreneurs • Higher quality of life for all citizens • Application in the government and service sectors is the new frontier for lean • States and communities that adopt lean will be considered international leaders • Shouldn’t your community be a leader in the 21st Century?
