1 Lean Office Overview

2 Outline 1. What is Lean? 2. 5S & Visual Controls 3. Kaizen 4. Value Streams 5. Pull Manufacturing 6. Mistake Proofing 7. Quick Changeover 8. Six Sigma 9. Lean Accounting 10. Theory of Constraints 11. Human Factors

3 Eight Service Industry Wastes 1. Errors in documents 2. Transport of documents 3. Doing unnecessary work not requested 4. Waiting for the next process step 5. Process of getting approvals 6. Unnecessary motions 7. Backlog in work queues 8. Underutilized employees

4 Examples of Office Process Waste Too many signature levels Unclear job descriptions Obsolete databases/files/folders Purchase Orders not matching quotation Errors – typo’s, misspelling, wrong data Waiting – for information, at meetings, etc. Poor office layout Unnecessary s

5 5S and Visual Control 5 Elements of 5S 5 Elements of 5S Why 5S? Why 5S? Waste Waste Workplace observation Workplace observation Sort Sort Straighten Straighten Shine Shine Standardize Standardize Sustain Sustain Visual Factory Visual Factory

6 What is Kaizen? Kaizen (Ky’zen) Kaizen (Ky’zen) “Kai” means “change” “Kai” means “change” “zen” means “good (for the better)” “zen” means “good (for the better)” Gradual, orderly, and continuous improvement Gradual, orderly, and continuous improvement Ongoing improvement involving everyone Ongoing improvement involving everyone

7 Outline What are Value Streams? What are Value Streams? Identifying the Value Streams Identifying the Value Streams Value Stream Mapping Value Stream Mapping The Current State The Current State The Future State The Future State Implementing Change Implementing Change Roadblocks Roadblocks

8 Push Vs. Pull Scheduling Push Scheduling Push Scheduling traditional approach traditional approach “move the job on when finished” “move the job on when finished” problems - creates excessive inventory problems - creates excessive inventory Pull scheduling Pull scheduling coordinated coordinated driven by demand (pulled through system) driven by demand (pulled through system) extensive use of visual triggers extensive use of visual triggers (production/withdrawal kanbans) (production/withdrawal kanbans)

9 Management philosophy of continuous and forced problem solving (forced by driving inventory out of the system) Management philosophy of continuous and forced problem solving (forced by driving inventory out of the system) Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed. Supplies and components are ‘pulled’ through system to arrive where they are needed when they are needed. What is Just-in-Time? Goal: Achieve the minimal level of resources required to add the necessary value in the system.

10 Japanese word for card Japanese word for card Authorizes output from downstream operations based on physical consumption Authorizes output from downstream operations based on physical consumption May be a card, flag, verbal signal, etc. May be a card, flag, verbal signal, etc. Used often with fixed-size containers Used often with fixed-size containers Kanban quantities are a function of lead-time and consumption rate of the item being replenished (min qty=(demand during lead-time + safety stock)/ container quantity) Kanban quantities are a function of lead-time and consumption rate of the item being replenished (min qty=(demand during lead-time + safety stock)/ container quantity) Kanban

11 A philosophy that rejects batch, lot or mass processing as wasteful. A philosophy that rejects batch, lot or mass processing as wasteful. States that product should move (flow) from operation to operation, only when it is needed, in the smallest increment. States that product should move (flow) from operation to operation, only when it is needed, in the smallest increment. One piece is the ultimate (one-piece-flow) One piece is the ultimate (one-piece-flow) One Piece Flow

12 Standardized work consists of three elements: Standardized work consists of three elements: Takt time Takt time Matches the time to produce an itemwith the rate of sales. It is the basis for determining workforce size and work allocation. Matches the time to produce an itemwith the rate of sales. It is the basis for determining workforce size and work allocation. Standard in-process inventory Standard in-process inventory The minimum number of parts, including units in machines, required to keep a cell or process moving. The minimum number of parts, including units in machines, required to keep a cell or process moving. Standard work sequence Standard work sequence The order in which a worker performs tasks for various processes. The order in which a worker performs tasks for various processes. Once a standard work is set, performance is measured and continuously improved Once a standard work is set, performance is measured and continuously improved Standardized Work

13 What is Mistake Proofing? The use of process or design features to prevent errors or their negative impact. The use of process or design features to prevent errors or their negative impact. Also known as Poka yoke, Japanese slang for “avoiding inadvertent errors” which was formalized by Shigeo Shingo. Also known as Poka yoke, Japanese slang for “avoiding inadvertent errors” which was formalized by Shigeo Shingo. Inexpensive. Inexpensive. Very effective. Very effective. Based on simplicity and ingenuity. Based on simplicity and ingenuity.

14 Changeover Time Defined Changeover time is the total elapsed time between the last good unit of the previous run, at normal efficiency, to the first good unit of the succeeding run, at full efficiency.

15 l A Vision and Philosophical commitment to our consumers to offer the highest quality, lowest cost products l A Metric that demonstrates quality levels at % performance for products and processs l A Benchmark of our product and process capability for comparison to ‘best in class’ l A practical application of statistical Tools and Methods to help us measure, analyze, improve, and control our process What is Six Sigma?

16 Activity-Based Costing Allocates overhead to multiple activity cost pools and assigns the activity cost pools to products by means of cost drivers Allocates overhead to multiple activity cost pools and assigns the activity cost pools to products by means of cost drivers An activity is any event, action, transaction, or work sequence that causes the incurrence of cost in producing a product or providing a service An activity is any event, action, transaction, or work sequence that causes the incurrence of cost in producing a product or providing a service A cost driver is any factor or activity that has a direct cause- effect relationship with the resources consumed A cost driver is any factor or activity that has a direct cause- effect relationship with the resources consumed

17 Lean Accounting Lean Accounting is intended to replace traditional accounting and measurement systems; it is not intended be an additional analysis. Lean Accounting is right for companies that are well on the path toward lean. Lean Accounting is intended to replace traditional accounting and measurement systems; it is not intended be an additional analysis. Lean Accounting is right for companies that are well on the path toward lean. Lean Accounting is more than a set of tools relating to measurement, capacity usage, value, and continuous improvement. Together these tools become a lean business management system that is radically different from traditional management. Lean Accounting is more than a set of tools relating to measurement, capacity usage, value, and continuous improvement. Together these tools become a lean business management system that is radically different from traditional management.

18 Theory of Constraints Based on the concepts of drum, buffer and ropes Based on the concepts of drum, buffer and ropes Drum Drum Output of the constraint is the drumbeat Output of the constraint is the drumbeat Sets the tempo for other operations Sets the tempo for other operations Tells upstream operations what to produce Tells upstream operations what to produce Tells downstream operations what to expect Tells downstream operations what to expect

19 WHAT IS ERGONOMICS? - It is the practice of arranging the environment to fit the person working in it. working in it. - Ergonomic principles help reduce the risk of potential injuries from : injuries from : * Overuse of muscles * Bad Posture * Overuse of muscles * Bad Posture * Repetitive motion * Repetitive motion - Objective of ergonomics is to accommodate workers through the design of: through the design of: * Tasks * Controls * Tools * Tasks * Controls * Tools * Work stations * Displays * Lighting & equipment * Work stations * Displays * Lighting & equipment

20  The cutting edge of organizational success (Nonaka, 1991)  The engine transforming global economies (Bell, 1973, 1978)  Leading us toward a new type of work with new types of workers (Blackler, Reed and Whitaker, 1993)  The element that will lead to the demise of private enterprise capitalism (Heilbruner, 1976)  The sum total of value-added in an enterprise (Peters, 1993)  The “mobile and heterogeneous [resource that will end the] hegemony of financial capital [and allow employees to] seize power” (Sveiby & Lloyd, 1987) Why Knowledge Management? Knowledge is fast becoming a primary factor of production (e.g., Handy, 1989, 1994; Peter, 1993; Drucker, 1992) Knowledge is: Knowledge results in: Conclusion  The “learning organization” (Mayo & Lank, 1995)  The “brain-based organization” (Harari, 1994)  Intellectual capital” (Stewart, 1994)  “Learning partnerships” (Lorange, 1995)  Obsolete capitalists economies and radically different societies (Drucker, 1993) Source: Theseus International Management Institute, February 2000

21 Cost of Accidents Direct Costs Direct Costs Medical Costs (including worker’s comp) Medical Costs (including worker’s comp) Indemnity Payments Indemnity Payments Indirect costs Indirect costs Time Lost (by worker and supervisor) Time Lost (by worker and supervisor) Schedule delays Schedule delays Training new employees Training new employees Cleanup time / equipment repairs Cleanup time / equipment repairs Legal fees Legal fees

22 Conducting Effective Meetings Preparing for the Meeting Preparing for the Meeting Set Objectives – problems to solve, issues to address, decisions to be made Set Objectives – problems to solve, issues to address, decisions to be made Select Participants Select Participants Set a Time and Place Set a Time and Place Plan the Agenda Plan the Agenda Distribute the Agenda and Relevant Materials in Advance Distribute the Agenda and Relevant Materials in Advance Consult with Participants Before the Meeting Consult with Participants Before the Meeting