Flowing toward business growth

Published on October 15, 2012

Flowing toward business growth

By Kevin J. Duggan

Published by Industrial Management

In the 1970s, the car engine was not the most reliable machine. We pumped the gas pedal, pulled the choke, and perhaps pushed the vehicle downhill and popped the clutch to get it started. In today’s automobiles, this ritual is no longer needed.  We simply turn the key or push a button, and the engine fires up the first time. We don’t have to think about it. The same should be true in our operations.

Design the Operation to Run

When we have an operation that starts every time, customers give us orders and we don’t even think about it. The orders are produced and delivered when the customer wants it, with no worries, no stress, and no management jump-starting the operation. Just like our new car engine that fires up reliably every time, so does the operation. But like our new car engine, in order for our operations to start every time, they have to be designed to do so. 

Like the engineer who designs an engine, an organization must consider both its static design (the design at rest) and its dynamic design (the design in motion). While most companies spend a good deal of time on the static design – the right building, equipment, layout, and so on – the many questions on the dynamic design – the day-to-day activities it must carry out to get its product to the customer – go unanswered, or unasked.

What will we do when we get an order?  How will everyone know what to work on next?  How will each employee know if we are on time? How often will they know we are on time? What will it do if there’s a problem? These more important questions are left up to managers, who make decisions to keep things moving in the right direction and continually improve the organization.

Setting a Destination

Over the past few decades, almost every company has embarked on a journey of continuous improvement, with the goal of eliminating waste. The organization follows a process of improve an area, sustain the improvement, then improve another area.  This cycle is repeated over and over again, resulting in a “journey” of continuous improvement. With this approach, the best our progress can be, if all goes right, is a “staircase” of continuous improvement. (See figure 1).

However, today’s car engine does not start every time because it was continuously improved. Instead, it was redesigned using the laws of physics with the goal of starting each time. The same idea applies in achieving Operational Excellence, where we set an exact destination for the operation, then put a plan in place to get there. And that destination is when “Each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.”

By setting a destination of Operational Excellence, every employee can understand exactly where the company is going and how to get there. They know the steps along the way and can see for themselves the signposts that tell them that they are going in the right direction. They can tell when they have arrived at the destination.  And since they know exactly where they are going, they will get there faster. (See Figure 2)

8 Steps to OpEx

To achieve Operational Excellence, a detailed process, or road map, is needed. Just as an engineer uses the laws of physics to design a car engine, an organization needs to follow principles, too. The principles will create a process to achieve Operational Excellence in many areas of the company, from sales and marketing to finance and engineering.

There are eight principles to achieving Operational Excellence:

1. Design lean value streams.

2. Make lean value streams flow.

3. Make flow visual.

4. Create standard work for flow.

5. Make abnormal flow visual.

6. Create standard work for abnormal flow.

7. Have employees in the flow improve the flow.

8. Perform offense activities.

Much has been written on establishing flow, standardized work, and the visual factory.  However, to grow the business, management needs to be freed up from the day-to-day operations. And that happens by setting standard work for normal flow, making abnormal flow visual, and creating standard work for abnormal flow so employees, not managers, can fix it. Management, then, can work on activities that will grow the business.

Designing Visual Flow

Just like a pilot goes through a structured checklist before flight, we need to do the same in our operations: set a de­sign for flow, show the employees working in the flow how to use a structured process to see how the flow is performing, and then teach them to initiate corrective action when the flow starts to become abnormal.

In our design of flow, product should move from a process to a connection then to the next process. Material movement should support processes by being moved at preset times. The result is the establishment of a “normal flow” that everyone knows. A

“visual checklist” can reveal if the flow is abnormal flow simply by verifying the timing of product and material moves as per the design. This approach provides a physical method for gauging abnormal flow (rather than production counts on a whiteboard or a schedule attain­ment monitoring system) that is easy to see, anticipated (employees know when the physical activity will hap­pen), and binary.

In addition, strong visual indicators should let us know whether the amount of material that is present at a process or product in a connection is normal or abnormal. The space required for normal flow can be identified as “green zones.” When product is in the green zone, flow is normal. Every green zone should have an ac­companying “red zone,” that tells us an abnormal condition has occurred and employees need to react (think “red equals reaction”).

Having a robust system of visuals that des­ignate normal and abnormal flow sets up the framework for our crucial next step. If we don’t get the next step right, we will fall into the trap that will forever limit how much offense and business growth we can deliver:  management dependency.

Kaizen for Flow

While the traditional use of  Kaizen or rapid improvement events is to eliminate waste, the tool is used differently in Operational Excellence.  Instead of bringing people together to improve an area through waste elimination, we bring them together to apply the design guidelines.  In other words, once the design is roughed in on paper, Kaizen is used to engage the workforce to develop the methods to practically implement the design guidelines.   

During the Kaizen event, operators work together to figure out exactly how to apply these guidelines, not just in their respective areas, but from receiving deck to shipping deck.   

The result is the establishment of a “normal flow” that everyone knows and agrees to. A “visual checklist” can reveal if the flow is abnormal flow simply by verifying the timing of product and material moves as per the design. This approach provides a physical method for gauging abnormal flow (rather than production counts on a whiteboard or a schedule attain­ment monitoring system) that is easy to see, anticipated (employees know when the physical activity will hap­pen), and binary.

In addition, strong visual indicators should let us know whether the amount of material that is present at a process or product in a connection is normal or abnormal. The space required for normal flow can be identified as “green zones.” When product is in the green zone, flow is normal. Every green zone should have an ac­companying “red zone,” that tells us an abnormal condition has occurred and employees need to react (think “red equals reaction”).

Having a robust system of visuals that des­ignate normal and abnormal flow sets up the framework for our crucial next step. If we don’t get the next step right, we will fall into the trap that will forever limit how much offense and business growth we can deliver:  management dependency.

Create Standard Work for Abnormal Flow

Our designed flow along with our visual checklist is intended to do one thing: remove management from running the day-to-day delivery of product to the customer, or the management dependency.  But no matter how robust the design and how strong the visuals, flow will still break down. That’s the reality, and what we do about it counts.

The key is to have a course of action that an operator would take or a diagnostic that he would use before calling a supervisor, and standard work es­tablished to get the flow back on track. How? At key points in our process­es, we have to ask questions about our operational design: What happens when this FIFO lane gets empty? What are we going to do? What happens when we have a critical process but the process that it’s feed­ing breaks down? Should we stop the critical process as well?

Answering these questions before the problem occurs alleviates the need for manage­ment to make decisions to correct the flow. It also allows us to enter the stage of Operational Excellence in which the flow evolves into a “self-healing” flow where employees see abnormalities begin to occur, and correct them before they become catastrophic. Exactly how do we do this?  The answer lies in another great use of  Kaizen. 

We will use Kaizen to  determine exactly what to do when that flow breaks down. During this event, employees and management should perform some of the following activities:

  • Record the types of abnormal flow that have occurred and management’s responses to them (think of this as the top 10 list of things we do when abnormal flow occurs).
  • Review these responses.
  • Assign the responses to the types of abnormal flow that could occur.
  • Create standard work for those responses (draft these as a prototype).
  • Create a visual response.
  • Decide exactly at what point (make it binary) is management needed.

By using Kaizen events to address the majority of the abnormal flow conditions with standard work, we free up significant time for man­agement to work on offense, or business growth.  We can measure the success of events by tracking “management interventions needed,” a good indicator to tell if our standard work for abnormal flow is working.

Does it work?

Companies who have discovered that the best use of Kaizen is to establish flow have not only jumped their performance, they have also set a strong foundation with their customers and potential new ones. At a high tech medical device component producer in the northwest, who changed their philosophy from Kaizen for wasted elimination to first designing value streams that flowed product to the customer and then using Kaizen to implement the new design, their on-time delivery jumped to near perfect within weeks – and it was sustained. And that was only the beginning.  They continued the thought process to establish normal and abnormal flow, and began to use Kaizen to establish standard work for abnormal flow.  Next they removed management from running the operation and put them on the road with sales people to determine how the components they produced were used with the customer product.  The end result: the company stopped producing components for the customer and started developing complete products that were solutions. Their customer relationships grew along with their business.   

Business Growth

Operational Excellence is about leveraging operations for business growth. It gives us the ability to take time away from running the operation and put it into growing the business. This is done by reducing, or perhaps even eliminating, the activities that operations management performs when delivering the product to the customer. 

What does operations management do then? They become the operations experts and interface with Sales, R&D, and even the customer. Through a formal innovation process, the operations management team now provides the “walls of the innovation funnels.” They know exactly what the operation can do, and work with product development to design products that fit within the walls, yielding quick product launches.  They work with sales and customers to become solutions providers instead of part suppliers.  And they work also on the supply chain to deliver future products.  

The end result is an operation that is a strategic advantage in the marketplace – an operation that thrives on Operational Excel­lence.


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