Implementing Innovative Process Improvement & Lean Practices

1. Implementing Innovative Process Improvement & Lean Practices January 23, 2014

2. Agenda • Introduction: Challenges facing the Public Sector • Laying the groundwork for a successful implementation • Developing well defined goals & objectives • Team Selection • Getting organizational buy-in

3. 1. Introduction: Challenges facing the Public Sector Public organizations face at least five key challenges: • Creating a truly transformational government • Meeting heightened constituent expectations • Managing workforce transitions • Minimizing the risks of implementing new technologies, and, • Monetary issues, which are much moreof operating realities that color all decisions, are the fifth challenge. Lean manufacturing processes have emerged as a means to help break the politicized cycle and short term pressures

4. 2. Laying the Groundwork LEAN THINKING The relentless effort to systematically reduce waste while improving the flow of value to the customer” • Focused on eliminating waste • Provides principles, for improving work • Provides levers to drive system improvements

5. 2. Laying the Groundwork - The Six Overarching Principles & Practices: • LEAN WORK METHODS • Tactical shop-floor policies used to implement Lean • Service oriented production • Standard work • Visual control • Good housekeeping/5S • Set-up time reduction • Total Preventive Maintenance • FLOW • Maximizing value by producing only what is desired in the shortest time possible with the least resources • Single piece flow • Physically and visually linked operations • Consolidated operations • Simplified and standardized processes • U-shaped lines • Autonomation • Line stops and andons • Error proofing • PULL • Everything produced at the rate of production of the final product -- “pull” production control • Just-In-Time production and delivery • Linked production at Takt time • Kanbans • Level scheduling • Machines available on demand • ORGANIZATION & CULTURE • Progressive employee relations and change leadership • Workplace safety • Multi-skilled, flexible workforce • Worker job security • Improvement incentives • Education and development • Flat organizations • Decentralized management SOURCING & SUPPLIER INTEGRATION • PURSUING PERFECTION • Continuous improvement attitude and empowerment • Kaizen events and continuous improvement • Self-inspected quality, not inspected in quality • Process ownership and responsibility • Advanced quality concepts and measures • Hardware Variability Control (HVC) • Statistical Process Control (SPC) • Partnership between supplier and producer • Fewer, better managed suppliers • Quality at the source • Shared destiny relationships • Supplier development Some lean operations principles and tools may not apply, but the methodology will identify and help you to eliminate waste, thereby making your value streams leaner

6. 2. Laying the Groundwork However, adopting Lean means getting past some of the misunderstandings and misperceptions surrounding Lean: • “Another management fad that will disappear within a year” • “Cost cutting” • “Headcount reduction” • “Won’t work in my area” e.g. Engineering department

7. 2. Laying the Groundwork The Benefits of Lean • The percentage of patients being met within the target of 62 days rose from around 40% to 75-80%. • A reduction in the average time to first appointment from 23 to 12 days. • The average time taken for processing a planning application was reduced from 5 days to 2 days. • A reduction in flow time of patients of 48%. • More calls answered at first attempt (30% - 85%) • More queries answered without the need for passing the customer to another department • Cutting end-to-end time for adaptations to housing for disabled people from over 200 days to 12 days. • Reducing payroll errors from 75% to 2%. • Reducing backlogs in lost and found departments by 80%. • Reducing the time taken in report preparation in the Justice system from 77 to 6 days. Source: International Public Sector Research & Case studies

8. 3. Developing well-defined Goals & Objectives: Setting the Stage • What is the overall business challenge? What problems does the business need to resolve? • What is the local problem you’re trying to resolve? • How will you measure this problem? • Did the solution work or not?

9. 3. Developing Well-defined Goals & Objectives - Current State: • Managers count the “value added” by an organization • “Value added is the cost of inputs from outside the organization subtracted from the selling price (or fees, tax collected, costs recovered) of an organization’s products and services. • But much of the “value” being added is actually waste: Rework, excess handling, excess processing, wait time, inventories (to be picked up, put down and stored), etc.

10. 3. Developing Well-defined Goals & Objectives – Future State: • We want to increase value and minimize waste, so what can managers and finance people do to count value and waste separately and more usefully? • For a start, perhaps we can all start by talking about “value created”– the useful activities in organizations from the standpoint of their customers- instead of “value added” – which is the cost (including waste) plus recoveries and margins added by the provider. • What managers need and want is a way to think about the future so a business can be managed & improved. • This can only be done by creating, sustaining and improving better processes that engage the people actually creating value

11. 3. Developing Well-defined Goals & Objectives - Current State: Starts with an assessment of current performance – where are we now? Seven Deadly Wastes TIMWOOD e.g. Fire Inspection Services “Violation Orders” Transportation Searching for information Other Inventory Motion Approval Wait Time Value-Added Waiting ~35% Over-Production Meetings & Conference Calls Over-Processing Defects/Rework Defects

12. 3. Developing Well-defined Goals & Objectives: Current State Facilities Management Services e.g. Opportunity Mechanic: • Client sets the expectation on how much of the gap they want to close • Bench mark against “best in class” Electrician: Opportunity KCB’s experience is that clients can recover a minimum of 50% of the Non Value Add activity Operator:

13. 3. Developing Well-defined Goals & Objectives: Current State Supervisory Study - Facilities Management Services Typical “Day-in-the-Life

14. 3. Developing Well-defined Goals & Objectives: Current State Information space maps reveal complexity added to the value stream through inefficient system and data flows

15. 3. Developing Well-defined Goals & Objectives So what types of objectives should be developed that can help managers envision and and implement better processes that create more value and less waste? • Physical measures of the current state to spur improvement • Changes in these physical measures in the future state – determined in the C step PDCA – to confirm improvement?

16. 3. Developing Well-defined Goals & Objectives Lean goals & measures need to reinforce the new configuration of work and encourage the minimization of “distance, friction, space and time”. Sample Lean Metrics • Cycle times • Customer service levels (e.g., late orders, delivery performance) • Total product throughput time • Resources consumed per unit of output • Resources employed per unit of output • Inventory / working capital turns • Return on assets • Hand-offs in critical processes • Distance parts/materials, travel • % of workforce cross-trained

17. 4. Team Selection • Cross-functional and include customers and suppliers • People who have a “stake” in the value stream • Customers: e.g. Hospital Patients, Building owners (Fire Prevention Services) • Suppliers e.g. Facilities maintenance, Procurement • People who actually “do” the work • Managers who are prepared to go the gemba and “roll up their sleeves” (you may have to “help” prepare them) • Ideally, people who are familiar with the PDCA cycle • Plan, Do, Check, Act (See Appendix for explanation of the PDCA cycle) • People who’ve had some exposure and training on the application Lean tools & techniques, in particular • Value stream mapping • Observations (Day-in-life)

18. 5. Organizational Buy-in: The Roots of Engagement So what is it that prevents an organization from implementing its Lean Strategy? In our experience responses can generally be categorized into one of the two following gaps: • The first gap occurs when an organization tries to execute its lean strategy despite its people, rather than through them. • The second gap is formed by the organization’s failure to create a process that clearly outlines how the strategy will be executed, and most important, connects the people to each other in that execution.

19. 5. Organizational Buy-in: The Engaged Difference So: • How do we convince an entire organization to think and act differently? • How do we encourage those discretionary efforts so critical to success? • How do we get the full workforce to become engaged?

20. 5. Organizational Buy-in: The Engaged Difference • PEOPLE WANT TO BE PART OF SOMETHING BIG. • PEOPLE WANT TO FEEL A SENSE OF BELONGING • PEOPLE WANT TO GO ON A MEANINGFUL JOURNEY • PEOPLE WANT TO KNOW THAT THEIR CONTRIBUTIONS MAKE A SIGINIFICANT IMPACT OR DIFFERENCE

21. 5. Organizational Buy-in: An Engagement Technique “Oranging” it: An innovative Problem Solving and Value Stream Improvement Technique Michael Rosenberg – Author of “The Flexible Thinker”