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Nov 2010 Innovation Management Page 2

Lean Doing More with

less Lean Definition

Principles of Lean

Value Stream Mapping

Exercise on VSM


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What is Lean?

The Machine that Changed the

World

The Machine that Changed the

World

MIT researchers coined the

term Lean in this 1990 book

to describe the principles of

the Toyota Production System

This is the manufacturing system

developed by Toyota which pursues

optimum streamlining throughout the entire

system through the thorough elimination of

waste and aims to build quality in at themanufacturing process while recognizing

the principle of [ongoing] cost reduction. It

also includes all the accompanying

technology [tools] necessary to accomplish

those aims

Taiichi Ohno

Lean IS . . .

An integrated system of

principles, practices, and

techniques for operational

excellence based on

empowering the front-line and

driving relentless pursuit of

perfect customer value creation

Lean IS NOT. . .

Just process redesign

Limited to repetitiveassembly A one-time improvement

program A menu of tools and

techniques


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What is Value?

Value is something found very importantby the customer

Something the customer is willing to pay for Value is defined by the user or customer

listen to your customers! (internal/external)

If the goal of Lean is to maximize VALUE

and minimize WASTE, we must be ableto recognize the difference Can Value look like Waste? Yes!

Can Waste look like Value? Yes!4


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Eliminate Waste

Every process, task, product or serviceis a combination of VALUE + WASTE

In most processes, HUGE amounts ofwaste add unnecessary cost and time

To maximize value,waste must be eliminated

5

Incidental Work

Value

Added Work

Waste


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Lean is underpinned with 5 principles

Reduce/

eliminatewaste

Reduce/

eliminate

variability

Reduce/

eliminate

inflexibility

Instill rigorousperformance

management

Involve front-

line

colleagues in

improvements

Non-value added activities(i.e., eight sources of waste)

Variability of demand (e.g., changes over time,differences in complexity)

Delivery/supplier reliability

Full-time vs. part-time vs. over-time labor mix Labor pools Cross training

Balanced, real-time operational metrics

Systematic action planning process Driven to front-line

A workforce that is waste aware and skilled incontinually reducing/eliminating waste

Problem-solving processes, skills, and tools

1

2

3

4

5


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Typical sources of waste in IT service delivery1Overproduction

Customer requirements nottied to business priorities

Resolving lower prioritydefects as quickly as highpriority ones

Waiting

Idle time or process delayscaused by wait time between

Dev and Test environment

Slow system response times

Motion Excessive switching across

multiple tools and build

environments

Lack of standard Dev and Testprotocols

Transportation

Low in-tier resolution or sub-optimal dispatch and routing

Knowledge loss duringhandoffs

Inventory Excessive delay between

original programming and

testing that uncovers defects

Unused people capacity (e.g.,staffing to peak)

Multiple repositories for similarinformation

Rework

Inadequate testing beforeproduction

Unclear customer requirementscauses churn clarifying requests

or issues

Over processing Similar service levels

regardless of customer value

No cross-group sharing of best-practice automation/ scripts

Excessive metrics reporting

Intellect

Mismatched activities with skillsets (e.g., highly skilled

developers resolving simple

defects)

Failure to leverage front-lineideas for improvement


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Typical sources of variability2

External

Variability of activity

Variability of individual performance

Variations in the number ofservice requests entering

system over a period of time

Variations in businessrequirements (e.g., end of

month peak volume)

Difference in the

difficulty of theactivities of the

various technicians

Difference in the timeneeded by the technicians

to carry out the same

activity (e.g., response time

to close ticket)

Variability of demand

Average =

144 tickets/day

Average =

72 tickets/day

7 am 7 pm 6 am

A B C

A CB

Internal

Activity composition

Operator processing time

CBA

CBA


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Eliminate inflexibility3

From To

Managing inflexibility

Flexibly adapt resources capacity to activity volume

Manage complexity and improve customer service by Segmenting activities by complexity, for example, sequencing test script runs in one session Aligning resources against segmented activities to create skill pools

Create segmented pathways to better align effort (e.g., requirements gathering and prioritizationshould be tailored to customers business needs)

TT

TT

642

531TT

TT

Operator 2Operator 1

456

321


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Instil rigorous performance management4

Filtering capability to

create customizereports by participant

Dattrac

sho

perf

Filtering capability to

create customizereports by participant

Dattrac

sho

perf

Visual

process aids

coordinate

activities of

teams and

individuals

THE TEAM KPIs

Efficiency

ReworkPerformanceefficiency

THE TEAM KPIs

Efficiency

ReworkPerformanceefficiency

Performance

managementtools tools

for tracking

KPIs, as well

as action plans

for following up

on KPIs that

are

below target

Service support scripts

rigorous SOPs to perform

repetitive activities

Coaching

cards

include tools

for managers

to haveproductive

dialogues with

teams on

productivity

and quality


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Create a waste aware workforce5

Continuous

improvement

Complex

issues

=

Major

kaizen

simple

issues=

Minor

Kaizen

(possible to

solve issue

within 5

minutes)

1

2

3

5

6

Data

analysis

Generate

solutionsPlan

Imple-

ment

Sustain

4

?2003

M M

MM

Problem definition

Process A B C


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When done right, Lean empowers the frontline and increases theirenthusiasm for work

Elimination of select non-value addedactivities through improved value streams

Eliminate

frustrations

Frontline is protected from interruptions Swing-capacity system put in place to

enable better management of peaks

Cross-training increases personal value

Stabilize

environment

Work segmentation allows frontline to focuson one task at a time (vs. task switching)

Dedicated team executes project work withminimal interruptions

Create work

rhythm

1st & 2nd line managers are coached tospend more time on the floor and become

more effective people managers Better management tools implemented

Improve line

management

Frontline generally positive to

operating in Lean environment

Better visibility of how theirwork links to overall

performance and quality

Sense that they become moreproductive

Environment more conducive

to continuous improvementand self-managed teams

Improved career progression Balanced metrics allows frontline to better

understand their own importance and link

this to overall objectives

Increase result

visibility

Career path for technical resources is

created with multiple level poolsClearer career

path

Sample activities driving frontline job satisfaction


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13

Lean is proven and is now being applied to Technology

Manufacturing

Processindustries

Services

Toyota

Automotive

Industrial products

High fashion

Medicaldevices

Consumerproducts

Aerospace

ShipbuildingPharma

Food production

Pulpand paper

Chemicals

Airlines

Railroads

Naval operations andmaintenance

Hospital

Insurance

Banking

Store retail

Upstream E&P

High Tech

Consulting

Law FirmsHospitality

Technology

IT Infrastructureoperations

ApplicationDevelopment &Maintenance

R&D

EmbeddedSoftware

Lean has progressivelybeen extended fromManufacturingenvironments to IT,overcoming 2 majorhurdles:

Work is less repeatable

Work is less directlyobservable ormeasurable with astopwatch

For both differences, wehave created tools (e.g.,unit of work) that enable us

to adapt Lean to ITenvironments


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Principles of Lean - valid for IT as well

Principles of Lean

Eliminates all unnecessaryactivities that do not add value:waste, variability, and rigidity

Does this by optimizing not only theOperating Procedure but alsoManagement Infrastructure andMindsets, Behaviors & Capabilities

Places a strong emphasis on ensuring acontinuous improvement mindsetamong the frontline

Allows to simultaneously improveproductivity, quality, risk, andsatisfaction by attacking root causes

Follows a learn-by-doing approach(through sequenced pilots) toperformance improvement andcapability-building

Before

After


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Applying the Value-StreamMapping

Preparation

Current State

Future State

Planning

What process to study (product family),

Understanding the current situation,

Creating a Lean future state vision.

Planning how to implement the future

state,

Implementation Achieving the future state.


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What is Value? Customer Value-Added (CVA) Activities which directly produce

products or services that yourcustomer actually pays for insoftware development

Software Product Development :Only the production ofspecifications, code and manualscounts as Customer Value-Added

Non-Value-Added (NVA) Quality Control

Quality Assurance Metrics gathering Rework due to defect repair

Business Value-Added (BVA) Required by regulation or law,

reduces the financial risks ofowners

Support financial reportingrequirements

Required to avoid abreakdown of the process

Risk Management, ProjectManagement, Requirements

Management, andConfiguration Management.

Note: Really part of NVA!


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Value

StreamEvaluate your processes from a value perspective.


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Process Cycle Efficiency

Value-Added-TimeProcess Cycle Efficiency =

Total Lead Time

A process is considered LEAN if its

process cycle efficiency is more than 25%.


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Reduction Mill

2 weeks store20 min process

2 weeks store

Hot Roller

2 weeks store

1 min process

4 weeks store

Cold Roller

2 weeks store


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Activity CVA BVA NVA (Waiting)Other NVA

Project Vision 0 1 day 0 0

Project Approval 0 1 hour 4 wks 0

Gather Requirements 0 3 wks 2 wks 1 wk

Sign-off 0 1 hour 1 wk 0

Architecture Design 3 wks 0 3 days 8 days

Architecture Review 0 0 1 day 1 wk

Detailed Design 4 wks 0 1 wk 2 wks

Detailed DesignReview

0 0 2 days 7 days

Coding 5 wks 0 0 0

Unit Testing 0 0 wks 0 5 wks

System Test 0 0 0 10 wks

Documentation 8 wks 0 0 4 wks

Software Value StreamMapping


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Process Cycle Efficiencies

Domain Typical World-Class

Machining 1% 20%

Fabrication 10% 25%

Assembly 15% 35%

Continuousmanufacturing

30% 80%

Business Processes- Transactional

10% 50%

Business Processes

- Cognitive

5% 25%

Source: Lean Six Sigma, Michael L. George


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22

Policy Holder

P/T = 2 mins

D/T = 0

%C&A = 99%

Bobs Avail. = 25%

Customer Demand: 13 per dayRequired Lead Time: 2 3 days

Disputes: 35%

Receive & Arrange

DocumentsReview Policy

InformationIN IN

Verify Claim

IN

Calculate

PaymentIN

Print & Mail

Check

InsProManual Phone/Fax Manual FinSys

1 day 1 day 1 day 3 days

1 day 1 day1 day 3 days

15 mins60 mins 5 mins5 mins2 mins

3 days 3 days L/T=12 days

P/T=87 mins

Claim

CheckAdditional Info.

%C&A = 76%

Value Stream Example

P/T = 5 mins

D/T = 0

%C&A = 90%

Anns Avail. = 20%

P/T = 30-90 mins

L/T = 1 -5 days

%C&A = 85%

Erics Avail. = 50%

P/T = 15 mins

D/T = 0

%C&A = 100%

Anns Avail. = 20%

P/T = 5 mins

L/T = 1 5 days

%C&A = 100%

Bobs Avail. = 25%

Insurance Claim Processing


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23

&

What is a Lean Value

Stream?

Value

from the perspectiveof the customer

FlowNo waitingNo rework

Information availableWork

Standardized

Built in qualityManaging

Improving

& LearningMilestones and Checkpoints

Learning embedded


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P/T = 2 mins

D/T = 0

%C&A = 99%

Bobs Avail. = 25%

P/T = 5 mins

D/T = 0

%C&A = 90%

Anns Avail. = 20%

P/T = 30-90 mins

L/T = 1 -5 days

%C&A = 85%

Erics Avail. = 50%

P/T = 15 mins

D/T = 0

%C&A = 100%

Anns Avail. = 20%

P/T = 5 mins

L/T = 1 5 days

%C&A = 100%

Bobs Avail. = 25%

Policy Holder

Customer Demand: 13 per day

Required Lead Time: 2 3 days

Disputes: 35%

Receive & Arrange


InformationIN IN

Verify Claim

IN

Calculate

PaymentIN

Print & Mail

Check






P/T=87 mins

Claim


%C&A = 76%

Insurance Claim

ProcessingReceive Verify Send


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P/T = 2 mins

D/T = 0

%C&A = 99%

Bobs Avail. = 25%

P/T = 5 mins

D/T = 0

%C&A = 90%

Anns Avail. = 20%

P/T = 30-90 mins

L/T = 1 -5 days

%C&A = 85%

Erics Avail. = 50%

P/T = 15 mins

D/T = 0

%C&A = 100%

Anns Avail. = 20%

P/T = 5 mins

L/T = 1 5 days

%C&A = 100%

Bobs Avail. = 25%

Policy Holder



Disputes: 35%

Receive & Arrange


InformationIN IN

Verify Claim

IN

Calculate

PaymentIN

Print & Mail

Check






P/T=87 mins

Claim


%C&A = 76%

Insurance ClaimProcessing

Receive Verify Send

Combine Steps

Include Checklist

with Policy #1

Combine Steps

Use Small FIFO

FIFO FIFO


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26

Receive & Review

Policy Holder



Disputes: 35%

Verify ClaimCalculate, Print & Mail

Check

Phone/Fax FinSys

1 day1 day 1 days

60 mins 20 mins7 mins

3 days L/T=6 days

P/T=87 mins

Claim


%C&A = 84%

Insurance ClaimProcessing Include Checklist

with Policy #1

FIFO FIFO

P/T = 7 mins

D/T = 0

%C&A = 99%

Bobs Avail. = 80%

P/T = 30-90 mins

L/T = 1 -5 days

%C&A = 85%

Erics Avail. = 50%

P/T = 20 mins

L/T = 1

%C&A = 100%

Anns Avail. = 80%


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Project work

Value Stream Mapping exercise Existing and Improved processes

1. Student Enrollment Process

2. Placement Process3. Course Design

4. Course Execution

5. Customer Satisfaction

Other Project work Design a Survey for Innovation process and do it

internally What else?


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Project work content

Introduction

Objective

As is Process Data collection

Lean process

Conclusion

Submission date - 4th Dec 2010