THE LEAN BUSINESS SYSTEM IS A PERFORMANCE IMPROVEMENT TOOL THAT FOCUSES ON ENHANCING

1. THE LEAN BUSINESS SYSTEM IS A PERFORMANCE IMPROVEMENT TOOL THAT FOCUSES ON ENHANCING QUALITY, COST, DELIVERY & PEOPLE CONTRIBUTION PROVIDES CONTINUOUS IMPROVEMENT IMPROVES COMPETITIVENESS WORKS ON THE CULTURE & THE SYSTEM OF YOUR BUSINESS DELIVERS COST REDUCTION THROUGH WASTE ELIMINATE CREATES WORLD CLASS PROCESSES DELIVERS RESULTS FAST THROUGH THE APPLICATION OF SIMPLE BUT WORLD CLASS BUSINESS PRINCIPLES REMOVE THE WASTE TO THEN IMPROVE YOUR PROCESSES

2. ALL ASPECTS OF WASTE COST`S TIME & MONEY

3. Costs Are Within Our Control Waste Reduction allows you to give Price reduction. While still making a Profit £ Profit Profits to achieve Quality Delivery & Management Targets Profit To invest In New Equipment To invest In staff Training & Continuous Improvement We Are Paying For This Waste Every Hour Of Every Day POOR PROCESSES DELAYS, INVENTORY WAITING, RE-WORK LONG LEAD TIMES OVER TIME SCARP / DEFECTS DOUBLE HANDLING OF PRODUCTS. POOR QUALITY POOR PRODUCTIVITY CUSTOMER RETURNS. We are Passing These Cost On To our Customers Our Customers For Not Much Longer Our prices Reflect our process Lean in action CUSTOMER'S WILL NOT PAY FOR OUR WASTE CUSTOMER PAYS FOR Value added STANDARD MINUTE VALUE THE COST £ OF LABOUR THE COST OF MATERIALS 90% Waste 50% Waste 20% Waste

4. Perfection Pull Flow Value Stream Value from Customer’s Perspective WORKING TOWARDS OPERATING EXCELLENCE

5. M F G Order Entry Order Coding Order Coding Scheduling Engineering Delivery Sales Customer M F G Order Entry Order Coding Order Coding Engineering Sales Delivery Scheduling The Elimination Of Waste Is The Most Effective Ways To Increase Profitability In Business. In Order To Eliminate Waste, It Is Important To Understand What Waste Is And Where It Exists Within Hammonds

6. REDUCING PROCESS VARIATION & WASTE THROUGHOUT YOUR ORGANISATION IN YOUR OFFICES ON YOUR PRODUCTION LINES IN YOUR STORES & WAREHOUSES IN YOUR PURCHASING & LOGISTICS DEPARTMENTS FROM THE SOLE TRADER OPERATION TO THE MULTI-NATIONALS THE NEEDS ARE THE SAME YOUR CUSTOMER & MARKET ARE CHANGING & WILL CONTINUED TO CHANGE. REDUCED YOUR COST'S & IMPROVE QUALITY REDUCE INNOVATORY WHILE IMPROVING PRODUCTIVITY BECOME MORE FLEXIBLE TO CUSTOMERS REQUIREMENTS DEVELOPING A CONTINUOUS IMPROVEMENT CULTURE WINNING NEW ORDERS WHILE DEVELOPING EXISTING CUSTOMERS. HOW?

7. The Elimination Of Waste Is The Most Effective Ways To Increase Profitability In Business. In Order To Eliminate Waste, It Is Important To Understand What Waste Is And Where It Exists In Your Business S = Scrap / Defects W = Waiting I = Inventory M = Motion T = Transportation & Walking O = Over processing O = Over production REMOVE THE WASTE TO THEN IMPROVE YOUR PROCESSES

8. ELIMINATE THE CORE WASTE, THEN WORKING TO IMPROVE & WHERE REQUIRED RE-DESIGN RE-ENGINEER OUR CURRENT PROCESSES TO IMPROVE THE SEVEN KEY PERFORMANCE MEASUREMENT Poor Process Discipline Inadequate Training, Poor Design Of Facilities And Equipment, Poor Levels Of Process Stability & Capability, Careless Handling Of Material, Can All Contribute To Forms Of Waste. S = Scrap / Defects W = Waiting I = Inventory M = Motion T = Transportation O = Over processing O = Over production Right First Time People Productivity Stock Turns Delivery Schedule Achievement Overall Equipment Effectiveness Value Added Per Person Floor Space Utilization

9. OUR PROCESSES MUST •Minimise Waste •Minimise Lead Time •Minimise Variation •Maximise Flexibility •Maximise Quality •Maximise Workers Contribution •Continually Improve

10. The Importance Of Waste Identification & Elimination Every element of lean pursues waste elimination. Many western businesses have overall levels of waste of up to 90% World class businesses have levels of waste of 20% or less ALL ASPECTS OF WASTE COSTS YOU TIME & MONEY LEAN ABS WILL ACHIEVING MAJOR COST REDUCTIONS ACROSS ALL AREAS OF HOLOPHANE BY WORKING & TRAINING YOU & YOUR STAFF ADDING VALUE & ACCELERATE OUR COMPANIES PERFORMANCE

11. You must see your organisations from a process perspective. Every organization is a collection of several primary processes (design and production) and a host of supporting processes (such as finance and maintenance). A process is a sequence of steps that must be carried out in proper order to create value for the customer and managed as a whole and not separately. The best way to learn to see your processes is to take a product / order invoice and follow its path from beginning to end - from order entry to delivery to the customer. Value stream mapping reveals how the current process of information & materials operates Today – Now Compare that against how it is supposed to operate. It also reveals all the wasted time and effort in the process.

12. What Lean Means To Me Value added process Flow Waste elimination seeing our organisation from a process perspective. Workplace Safety Order & Cleanliness JIT Fast Flexible Flow 6σ Quality. (Right first Time) Empowered Teams Visual Management OEE / TPM Pursuit of Perfection Lean Accounting A place for everything & everything in it's place 5`s Visual management to track performance kpi`s & open the company to all There is a relentless pursuit of perfection in all areas of the business Focus on Cost reduction The aim to achieve Six sigma quality in all processes Across business Production teams are empowered to make key decisions Products are built just in time only to customers demand

13. The main reason for the move toward lean enterprise is increased pressure on business to hold down their prices. “No longer can you pass along price increases, Bosses are now saying, If I don't get my costs down I'll go out of business” Everybody's in the mode of reducing costs to stay competitive. MANY COMPANIES ARE PRODUCING MORE CHEAPLY TODAY THAN A DECADE AGO. DUE TO THE CUSTOMER DRIVE FOR COST DOWNS.

14. A senior Toyota executive recently summarized the reason for the company’s relentless progress over the years. “Brilliant process management is our strategy. We get brilliant results from average people managing brilliant processes. We observe that our competitors often get average (or worse) results from brilliant people managing broken processes.” This sums up the real challenge of lean manufacturing: how to progress beyond eliminating waste in broken processes to creating brilliant processes. Why would you not want to be the Toyota for your industry, creating solid revenue growth through the business cycle by creating real value for customers.

15. Waste Reduction allows You to give Price reduction While still making a Profit Profit To invest In New Equipment Profits to achieve Quality Cost Delivery & Management Targets To invest In staff Training & Continuous Improvement We Are Paying For This Waste Every Hour Of Every Day Your Passing These Cost On To Your Customers You Customers For Not Much Longer Your prices Reflect your process Get Control CUSTOMER PAYS FOR THIS STANDARD MINUTE VALUE THE COST £ OF LABOUR CUSTOMER'S WILL NOT PAY FOR YOUR WASTE THE COST OF MATERIALS Cost's Are Within Our Control

18. Value-added Activities • Activities where the product or service is transformed into a state required by the customer • Activities which, when asked, the customer is willing to pay for… Non Value-added – Needed Activities • Activities causing no value to be created but which cannot be eliminated based on current state of technology or thinking • Required (regulatory, customer mandate, legal) • Necessary (due to non-robustness of process, currently required; current risk tolerance Non Value-added Activities • Activities that consume resources but create no value in the eyes of the customer • Pure waste • If you can’t get rid of the activity, it turns to yellow.

20. Versions of a Process Any Process Has At Least Three Versions What you think it is What it actually is What it should be “To Be” By policy, procedure or what you’ve been told This is the ‘future state’ This is the ‘current state’

21. “AS IS” Elapsed Time = 187 Days Value Added = 1.83 Days Non-Value Added Activity = 6.54 Days Non-Value Added Wait = 179 Days Inspect How Much Waste Is Out There? Time Value Analysis Reveals the Opportunity! Value is being added only 1% of the time “TO BE” = 20 Days = 1.83 Days = 5.17 Days = 13 Days Elapsed Time Value Added Non-Value Added Activity Non-Value Added Wait Most of the Lead Time is Product Waiting Time!

22. VSM Reveals Eight Types of Wastes ….. Non-Value Added But Required Non-Value Added But Not Required Value Added • Transportation • Waiting • Over-Production • Excess Inventory • Over Processing • Defects • Unnecessary Motion • Injury Lockheed Martin Proprietary Information

23. - The Waste of Inventory Cost's Are Within The Control Of Your Company. Defined: More product on hand than required to meet customer requirements Examples: • More raw material than needed. • More work-in-process (WIP) than needed. The use of a filing system for “items in process” • Excess components or paperwork in the work area. • Large storage areas required warehouse. • The control & managements of stock • Less floor space. • Cash tied up in stock. • Obsolete stock Inventory waste - sorting out what is not sold costs money and ties up company resources without adding any value to the product. • Declining quality - storing unsold inventory increases the chance that it will have to be scrapped or reworked, which adds cost • over order to meet poor processes

24. - The Waste of Transportation Cost's Are Within The Control Of Your Company. Defined: Unnecessary movement of the item Example: • Having three storage locations for the same material • Poorly lay out resulting in excessive distance from stores to point of use • Moving raw materials to an offsite warehouse • Transporting a drawing from one location to another • Locating test reports or data away from point of use • Products and parts which are left standing around such as WIP or finished goods is a major cause of waste, • The usual cause of excessive transportation is poor plant layout. • Fork lift trucks one way trips. • The layout of the equipment may not have been considered or optimised. Push production

25. - The Waste of Waiting Defined: Unnecessary wait time between value added tasks Examples: • Waiting for materials at point of use • Waiting for a predecessor operation • Waiting for a report, Email, fax, phone, orders customer Lack of communication • Waiting for a decision, approval • Waiting for a resource, late to a meeting • Waiting for a “bottleneck” resource • Waiting for machine repair • Not having an agenda for a meeting • Work imbalance • Order entry delays • Waiting for any kind of data translation Products and parts which are left standing around such as WIP or finished goods is a major cause of waste. • WIP is usually cause by producing large batches rather than what is actually needed. Cost's Are Within The Control Of Your Company.

26. - The Waste of Overproduction Defined: Producing more of an item than the customer orders Examples: • Running a machine for 16 hours when only 10 are required • Making 2 days worth of product in 1 day required • Performing more tests than the specification calls for • Issuing more reports than are requested • Reports too detailed or lengthy to meet the need • “Too much” project planning • Daily status report when monthly is adequate

27. - The Waste of Motion…WASTE ENEMY No 1 Cost's Are Within The Control Of Your Company. Defined: Any extra motions required by the resource to perform the process task Examples: • Unnecessary operator movement within the production cell / line • Walking to the copy machine Searching for documents • Leaving the workplace to get data to complete the task Searching for parts, tools, prints, etc. Lifting boxes of parts • Good practices often reduces motion. Putting materials in set locations, • keeping a area tidy will remove the need to move parts and materials around to simply make space for More. The best solution is to lay the plant out to reduce motion and the distance travelled.

28. - The Waste of Over processing Cost's Are Within The Control Of Your Company. Defined: Any activity performed upon the item that is not required by the process or customer Examples: • None value added operations building a product for four hours when only two are required • Testing a product three times when the specification calls for one test • Over-tight tolerances • Reformatting data for multiple report formats • Studies that are not needed, more detail than is necessary or required to solve a problem • Including extra data in a report • Measuring extra dimensions on a drawing • Rework is one of the biggest causes of over processing. • Poor setup of machine operations and their effectiveness will extend cycle times and reduce output

29. - The Waste of Scrap / Rework Correction Cost's Are Within The Control Of Your Company. Defined: Any task that is not performed right the first time or done more than once. Examples: • Scrap & rework • Field failure • Missing parts • Re-torque a bolt • Sorting incoming materials • Checking a key dimension • Trimming thread or flash from a component • Rewrites / reformats of data • Design or project reviews • Entering data into a computer more than once • Incapable machines • Miss-loaded part • Any inspection steps • Any design or specification changes

30. - The Waste of People & Creativity / behavior Cost's Are Within The Control Of Your Company. Defined: Not acting upon the good ideas of employees, not incorporating labor saving devices or systems when feasible Examples: • Lack of a formal suggestion system • Lack of a timely response to requests • Separate, incompatible systems for process tasks • Re-assignment of resources before tasks are completed • Poor Discipline Inadequate Training • Not listening to ideas • No involvement from workforce; • not capturing improvement ideas • Not taking action on them • Poor morale.

31. Reduce your cost by • Helping you to understand how to improve your processes. • Improve your capacity. Reduce work in progress. Improve your value added ratio. • Improve quality cost deliver & people contribution. • Understand the variation in your processes. • Become pro-active rather than re-active. • 5`s A place for ever thing & every thing in it's place. • Improve your supplier & Impress your customer. • Win new orders. • Meet cost down targets & still make a profit. • Make cost reduction through waste elimination. • Increased labour flexibility & productivity. • Introduce flexible manpower systems. • Operators & shop floor loaded to takt. • One piece product flow. • Multi skilled work force. • Improve your RFT. • Reduce lead time & inventory. • Reduce inventory turn stock back into cash. • Production Catch back ability. • Set up kpi`s performance monitor • Display & understand variation. • Improve your quality performance to customer.

32. REDUCE COST BY PROCESS IMPROVEMENT STEPS Define Current Status Bench mark Date Collection Set Up Kpi`s. Standardise & Process Ownership VSM Process Mapping Materials & Information flow Walk Attach Yourself To The Process Define the true cost Element (SMV) Target cost Introduce Lean Training. Waste Elimination Introduce Lean Tools Remove the 8 waste Develop A Continuous Improvement Culture. Introduce Problem Resolution. Get to Root cause Costs & Over Heads Target cost down Multi skilled Work force. Remove temps Over time & shifts New Systems & Processes Establish Processes For All Operations. Audits processes Complete Lean Training. Increased labour flexibility & productivity. Inverts in new Machines & Technology Lean Accounting Plan For Growth Achieve Milestones For Quality Cost Delivery Development & Management Targets. Increase Sales by Improve quality Training staff Investors in people Value Engineering Value analysis Develop New Markets Reduce over head LEAN = FAST FLEXIBLE FLOW

33. Perfection Pull Flow Value Stream Value from Customer’s Perspective WORKING TOWARDS OPERATING EXCELLENCE

34. Cost's Are Within Our Control

35. REDUCING LEAD TIME & NON-VALUE-ADD COST • TO ELIMINATE CAPACITY CONSTRAINTS IN A PROCESS TO ENSURE THAT THE PROCESS CAN MEET CUSTOMER DEMAND • Office lean

36. Benefits of One-piece Flow One-piece flow also does the following: Builds in quality. When doing one-piece flow, every worker is an inspector.  Each piece is looked at by the next process (the customer) very soon, so defects that are passed on are caught before too many more are made. Reduces inventory cost. Cash is freed up when inventory is reduced. The money to move, store, and manage is saved.  Also the less inventory you have, the less obsolescence you have. Improves productivity.  Many non value-activities associated with batch production go away with one-piece flow.  Multi-process handling becomes possible when cycle times are balanced to takt time. Frees up floor space. One-piece flow gets rid of work in process and the space used for storage is opened up.  Flow requires processes to be connected and space between equipment to be reduced. Simplifies material replenishment. One-piece flow paced at takt time allows material replenishment to be done by milk runs, timed deliveries or set quantity deliveries.  Continuous flow and line balancing make the material usage rate (line speed) more reliable and material delivery easier. 

37. Improves flexibility. One-piece flow reduces the time through the process. So you can wait longer to schedule the order and still deliver on time.  This lets you respond to last minute changes easier. Improves scalability. One-piece flow equipment can be designed smaller, slower (paced to takt time), and generally at lower costs.  Rather than making a process fast as technically possible, often resulting in local optimization and batch processing, very simple processes can be used. Improves safety. According to insurance studies the number one cause of workplace injuries in the is overexertion.  Lifting heavy containers is and moving large pallets of materials is reduced when lot sizes are one-piece. With fewer or no forklifts you also reduce forklift accidents, a major cause of injuries in factories (90 deaths and 90,000 accidents per year in the ). Improves morale. People can see the effect of the work they do when they perform more processes in one-piece flow.  People learn new skills when they are cross trained.  People work as a team when departmental barriers are removed.  People can see problems right away are given the authority to call for help or stop the line.  Problems are solved sooner and the culture shifts from one of finding blame to finding solutions. 

38. COST REDUCTION Product Development Processes ■ What engineering really does ■ Measuring performance of knowledge workers ■ Determining to create designs internally or externally ■ Reducing the design cycle and improving time-to-market ■ How design costs get into product line P&Ls Production Processes ■ Improving production effectiveness ■ Reducing production cycle times ■ Factory utilization and mixed model production line costs ■ Flow production methods ■ Eliminating non-moving Work in Process (WIP) ■ Eliminating defects and costs ■ Using value-engineering tools to identify and prioritize waste ■ Choosing on-shore or off-shore sources Material Acquisition Processes ■ Cost of material acquisition ■ Reducing material acquisition costs ■ Replacing procurement transaction costs with annualized agreements

39. Reducing Inventories and ‘Inventing’ Capital ■ Why inventory is NOT an asset and how it impedes growth and reduces opportunities ■ Dramatically reducing inventory ■ Sales growth and inventory growth ■ Setting safety stock levels, order points, and lot sizes ■ Reducing WIP inventory investment ■ The relationship of lead-time to inventory investment What is a Manufacturing Cost Strategy? ■ How a company satisfies its shareholders ■ Operational strategies supporting shareholder value ■ How asset, cash, quality, and customer service management relate to cost management ■ Linking cost management to shareholder value ■ Approaching the ‘virtual factory’ ■ How cost management can fund your future Describing the Real Cost of Your Products ■ Eight elements of financial costing ■ Three elements of competitive costing ■ Three elements of managerial costing ■ Eight ‘litmus test’ questions every cost accountant must answer

40. Needed Changes to Cost Accounting Processes ■ Five relevant reasons for cost accounting ■ Three additional requirements of a truly informative cost accounting system ■ Accounting for time and waste ■ Allocating burden and overhead to individual products properly ■ Implementing value-based cost accounting in a manufacturing environment ■ Cost accounting systems that change behaviours ■ Why net contribution management is more important than gross margin management ■ Using new P&L formats and value engineering for real cost reduction Mounting an Effective Cost Reduction Initiative ■ What is a cost driver ■ Identifying serious cost drivers in your company ■ Distinguishing controllable and control resistant cost drivers ■ Costs of the virtual factory ■ The link between cost drivers and shareholder value ■ Cost reduction responsibilities Development and Production Costs ■ Escalating product development and production cost symptoms ■ Addressing both costs simultaneously

41. Cost of Logistics ■ Why store inventory ■ Defining logistics cost elements ■ Identifying cost trade-offs in logistics ■ Using time-to-shelf as a competitive weapon ■ Price and cost relationships in logistics ■ Finished goods inventory, customer service, and shareholder value Information Management and Transaction Processes ■ Information system cost drivers ■ Mainframe, mini, client server, or PC LAN ■ Improving information systems ■ Outsourcing opportunities in IS ■ Responsibility for input data quality Designing an Ongoing Cost Reduction Process ■ Overcoming technical, organizational, and cultural barriers ■ Designing a successful cost reduction initiative ■ Addressing behavioural pushback during implementation ■ A 10-step plan for implementing cost reductions ■ Documenting and justifying cost reduction initiatives ■ Cost management critical success factors ■ Rewarding for significant cost reduction initiatives

49. THANK YOU