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LEANMANAGEMENT
Get the right advice: Renowned expert, Daniel Jones leads your comprehensive guide to successfully implementing lean.
MAKE YOUR BUSINESS SMARTER
Better practicesHow lean is helping the NHS improve its patient care
A brighter futureWhy softwareis boosting productivity and logistics planning
Business mattersThe leanprofessionals share their trade secrets
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For many trusts this is a shock con-trast to the past decade where the economy was growing and so fund-ing was not deemed as big an is-sue as today and performances were marked against targets. The shift to achieving efficiencies could well mean undoing some of the work that was put in to hitting government targets, claims Chris Lloyd, Head of Healthcare Practice at Simpler, a lean consultancy which has worked with more than twenty trusts in the past couple of years.
For the NHS lean represents a com-plete re-evaluation of working prac-tices as managers and staff are trans-formed in to thinking about a patient’s entire journey through the system.
“A lot of what was done to hit tar-gets involved using third parties for
some procedures which may well have achieved the aim, but in the over-all scheme of things are an expensive way round a problem,” he says.
“Our big message to trusts, when we begin working with them is that they must alter their mind set and not concentrate on just hitting de-partmental targets but think of the patient journey through their care because hitting targets in one area can actually lead to extra cost and in-efficiency elsewhere.”
Shorter staysSoftware normally used for map-ping work flows through manufac-turing plants is actively being used in the NHS now, Lloyd reports, allow-ing managers, healthcare profession-als and administrative staff to antic-ipate what is needed for a patient’s treatment to run smoothly.
“We’ve done a lot of work with the Royal Bolton where the flow of a pa-tient through their care is monitored and events are anticipated so the right people are in place at the right time,” says Lloyd.
“For respiratory conditions, for ex-ample, the lean system has seen a 35 per cent drop in the average length of stay, which is great for releasing beds and maximising revenue.”
Chris LloydLean is helping NHS managers to think beyond de-partmental barriers.
Although funding for the NHS has been ring-fenced by the coalition government, the NHS is still being expected to drive home efficiency savings which can then be ploughed in to front line services.
EXAMPLE
A STEADY IMPROVEMENTLean is boosting efficiency in NHS services, which benefits both patient and hospitalPHOTO: ALDER HEY HOSPITAL
Lean drives transformation in the NHS
SEAN HARGRAVE
NEWS IN BRIEF
Julian MosqueraDirector of LCP Consulting
Small teams need to think big
Lean professionals will nor-mally agree the main challenge with transformation is changing a company’s way of thinking and then keeping it on track to deliver a new strategy.
Certainly Julian Mosquera, Di-rector of LCP Consulting believes the greatest challenge is in com-panies not being daunted by the enormous task ahead of them which is best tackled through mul-tiple small teams taking responsi-bility for well-defined tasks.
“The major challenge for or-ganisations is generally the sheer scale of the transformation – from training and education, through to the deployment of improvement teams, to actually landing projects that deliver real long term value,” he says.“So first, there is a need to really focus the effort through small tight teams that can quickly pin-point the root cause and then deploy equally small teams to im-plement a permanent solution.”
2 · JUNE 2010
Asking questions key to learn Lean’s lessons
The real challenge for Lean is one of changing the mindset to one where continuous improvement through wide participation, becomes the norm. In short, creating a questioning culture.
‘Lean’ has been around for a long time, but under dif-ferent guises. Hen-ry Ford was an ear-ly Lean thinker. During World War
II several Lean initiatives took place including B-29 bombers, liberty ships, and the development of TWI (Training within industry).
So, let us be sure, Lean is not particu-larly Japanese. Its roots are very much in West.
For many years, and continuing to-day, Lean was thought of as a collec-tion of tools, particularly ‘just in time’ and kanban. These were the easy-to-see and (it was thought) easy-to-copy activities.Results were often disap-pointing.
Maturing thinkingToday, twenty years later, Lean has ma-tured. We now recognise that Lean has, at root, customer need or pur-pose, systems thinking, the creation and maintenance of flow, and con-tinual improvement. This is achieved through involving people at all levels,
and direct observation of operations – or the case of call centres, direct listen-ing. Lean involves both top-down and bottom-up participation.
Let us explore these. Customer need takes a wide view – are we in the en-gine business or the power business? Rolls Royce has revolutionised their business by changing from selling en-gines to selling ‘power by the hour’. In short, doing the right thing, rath-er than doing wrong things right – as Drucker said 50 years ago.
Systems thinking involves an end-to-end (or value stream) perspective. Should a study of a hospital pharma-cy be concerned with dispensing medicines, or should we question the whole process by which drugs are prescribed, ordered, delivered, used, and stocked?
Flow: The word Lean is perhaps un-fortunate, carrying the connotation of ‘working harder’. Nothing could be further from he truth. The real oppor-tunity lies in the reduction of all those things that get in the way of the flow of work. In short, waste. Real value add-ing time is typically less than 2 per cent of total elapsed time.
Constant improvementThis leads to thinking about improve-ment. The big improvements grab the headlines. They can be dramatic. But it is the many small improvements, done day in and day out that are really sig-nificant. Perhaps the greatest differ-ence between Toyota and GM over the years was the rate at which improve-ments were made, and who made them. Literally millions of improve-ments cannot be made without wide participation. And improvement op-portunities need to be ‘surfaced’. Back to direct observation, direct listening, and the many concepts that help iden-tify bottlenecks and other constraints. But, why did the problems arise in the first place? Why was it not done right first time? Perhaps the cause was in-appropriate targets or rewards that re-sulted in inappropriate stocking lev-els, purchasing, reporting, commu-nication, and other forms of resource wastage. Recent examples of such be-haviour abound in areas from banking to defence, and from the NHS to edu-cation. Mining, construction, and local government are prominent current examples.
“If you design something from the top down and tell your people ‘there it is, get on with it’, it will never work.”
Get aheadThe world’s leading lean expert, Daniel Jones shares his ideas for implementing lean.
WE RECOMMEND
PAGE 8
Fixing our hospitals p. 041. How lean is making waves in the structure and quality of the NHS.
On the way up p. 122. The advancements being made in logistics planning
LEAN MANAGEMENT, 2ND EDITION, JUNE 2010
Country Manager: Willem De GeerEditorial Manager: Danielle StaggBusiness Developer: Chris Emberson
Responsible for this issueProject Manager: Matthew DemainPhone: 0207 6654411E-mail: [email protected] with: The Daily Telegraph, June 2010Print: Telegraph Media Group
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John BichenoDirector of the MSc in Lean Operations, Cardiff Business School
Listen to customers
1Don’t rely on market research. Go to the point of use and ob-
serve and listen directly. How do they use your products and services? How much demand is arising because we failed to do it right the first time?
Utilise staff
2Your employees are your best source of improvement ideas.
Obvious? Of course, but why are we not getting several ideas per em-ployee per month?
MY BEST TIPS
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4 · JUNE 2010
Question: How is lean being affected by the current economic landscape?
Answer: There are huge op-portunities in cutting waste but al-so a risk of being linked to unpop-ular cost-cutting programmes.
The current economic climate repre-sents a huge opportunity for the lean sector with the added risk of the prac-tice being unfairly linked to cost cut-ting and redundancies.
On the one hand there is a clear need for companies to cut waste and streamline processes so they achieve the same, or improved, pro-ductivity with the same or fewer re-sources. On the other, though, there is the risk of being linked to manag-ers wrongly packing up cuts as ‘lean’, according to Keith Bissett, Chair-man of lean management consul-tancy, Bourton.
“It happened in the ‘90s in manu-facturing where people cutting costs would wrongly call what they were doing ‘lean’ and the whole process got a really bad name,” he says.
“I fear we could see the same again as people don’t embrace the philoso-
phy of cutting waste to add value to the customer but instead use it as a label for cutting costs and reduce head count.
“In some cases head count reduc-tion might be the result of a lean pro-gramme, if your biggest cost is labour and you make the process more effi -cient, but it shouldn’t be the driving purpose of the process. People who want to cut costs should be brave enough to call it what it is.”
Public lean?The public sector would also, at fi rst inspection, appear to be an area ripe for lean transformation because huge savings are expected within all departments – even those with ring fenced budgets are expected to make back offi ce savings to divert more re-sources to front line services.
However, Bissett is again cautious.
While there is a need for lean trans-formation programmes across the civil service, there are potential ob-stacles too.
“A lot of civil service work is being put on hold because consultant ex-penditure over £20,000 is having to be approved by a minister,” he says.
“So although the civil service is go-ing to need a lot of lean work, I can’t see how they’re going to be able to fund it. I suspect that a lot of work will be centred on lean training so departments can build up their own internal resource.
“A problem is going to be that de-partments will want quick fi xes but lean’s far more long term. We’ve done a lot of really good work with HMRC but it’s part of a fi ve year programme so any civil servant project is going to need the full life time of the current parliament but they’re looking for quicker fi xes.”
The extent to which departments will need to make savings, and by when, should become a little clearer in today’s emergency budget.
Keith Bissett“People who want to cut costs should be brave enough to call it what it is.”
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Managing risk and effi ciencies in fi nancial services
The retail arms of most fi nancial in-stitution generally embraced lean management techniques sever-al years ago. With vast volumes of customer data and forms to wade through before making decisions over loans, claims and new accounts or policies, lean processes have been designed to take the lead time out of handling applications and claims.
The big change in the past year or so has been within the capital markets sides of the large fi nancial institu-tions. Following the global recession and government bail outs, the indi-viduals who were previously making enormous sums for their employers are now being asked to think and act along leaner lines. It is a process that has come, for some, as a sharp wake up call, according to Nicola Milne, Senior Manager at Deloitte’s consulting practice who works daily with fi nan-cial institutions of all sizes.
“The guys in the capital markets had trodden around the edges of lean, but not done much, in the past
because they always had the blanket of huge profi ts,” she says.
“Now, though, they have a very ob-vious imperative to ensure that they work in standardised ways to ensure their processes are watertight and they have a common approach to risk. Traders in the capital markets can be
a little resistant to this and they have always prided themselves on acting alone so it’s proving a fascinating fi eld to get more involved with.”
Streamlining staffLean is being driven across the entire fi nancial services industry by the
simple economics of reduced head counts requiring remaining staff to become more effi cient to handle the same amount of work. In the pub-lic-facing side of banking and insur-ance, this is leading to detailed work on streamlining process and reduc-ing inactive ‘dead time’ to speed up administrative activity.
“The retail banks are taking a lead in the area by having members of staff responsible for change, pro-viding colleagues opportunities to point out where and how things could be done more effi ciently,” says Milne.
“There is a lot of work done in the back offi ce where employees know how things could easily be done more effi ciently. With one company when employees were going through loan procedures on the phone with appli-cants there was a crucial question or two quite a way in to the procedure which some people would fail on and so the entire call time was wasted. The staff got their scripts reworked to cover the crucial things most peo-ple might fail an application on at the start.”
Such seemingly obvious effi cien-cy improvements can give lead time savings on handling claims and ap-plications by, typically, 20 per cent to 30 per cent.
“The guys in the capital markets had trodden around the edges of lean, but not done much, in the past.”
Nicola MilneSenior Manager, Deloitte
SEAN HARGRAVE
Question: How is lean be-ing implemented in the fi nancial services sector?
Answer: It is gathering pace in retail and being introduced to bankers and traders in global markets to bring in effi ciencies and manage risk.
TIME FOR CHANGELean is making a significant difference to a wide range of industries.PHOTO: ISTOCK PHOTO
SHOWCASE
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FACTS
Six Sigma is the process of elimi-
nating defects in processes which are
hold back effi ciency. It developed at
Motorola in the 1980s and signifi es a
range of excellence where, originally,
One Sigma, meant a third of what is
produced have defects, to Six Sigma,
where 99.9% (recurring) of production
is error free
In the 1990s, advances at Toyota
formed much of the philosophy and
terminology behind lean management
which, in essence, seeks to cut waste
and concentrate on only adding value
to a product or service so long as it is
valued by the customer
Kaizen is a term often associated
with lean. It is Japanese for ‘improve-
ment’ and effectively sums up a philoso-
phy that ‘ok’ is never good enough and
processes always need to be constantly
evaluated for improvements to be made
Cruically, these improvements can only be made, the philosophy
maintains if all in a company, from the
top all the way down, are involved
TOP TIPS
Identify ‘service gaps’By applying principles of lean processing and Just-in-Time
delivery to how Customer Service is produced, fi nancial services can identify and rectify ‘service gaps’ which result in missed sales op-portunities and delayed response times to customers. By thinking of customer experience delivery like a lean-running production line that operates across the enterprise, they can increase customer value and quickly boost productivity by up to 25 per cent.
Task – not just job – completion
Central or automated distribu-tion of tasks focuses employees
on completion, not organisational si-los. With this approach, HUK Coburg Insurance Group of Germany has re-duced the average closing time per task by nearly 2 days, while increas-ing service levels by 38 per cent.
Optimise employees’ skills
The volume of products and services that retail banks of-
fer has resulted in multi-tasking employees. Instead, allocating skilled employees to what they’re best at signifi cantly increases their impact. Bank Hapoalim, Israel’s largest bank, identifi ed that sales were highest in its branch offi ces. Through a lean management ap-proach, it reduced branch employ-ee task allocation by 28 per cent, giving them more time to focus on sales and increasing revenue.
Deliver results Just-in-Time
A customer service production line approach for tasks – such
as mortgage applications or new credit cards – enables closer moni-toring of delivery against SLAs and Just-In-Time completion. This pro-motes service level adherence across a tiered structure – which means that Platinum or Gold customers are defi nitely treated as such and that Bronze customers don’t get Gold-level service.
In addition, by attributing pri-ority to tasks and using the ‘lean’ production line to push priority jobs to the right employee, service levels can be precisely met and not over- or under-serviced.
Mark TurnerNorthern European Vice President of the Alcatel-Lucent Enterprise Market-ing Group
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Business in the driver’s seat
The National Business Awards inpartnership with Orange are open for entries to public and private sector or-ganisations until the 1st July 2010. To enter the Awards or to book a table atthe National Business Awards Ceremo-ny in London on the 9th November vis-it nationalbusinessawards.co.uk or call 0207 234 8755.
ALEX EVANS
Editorial Director, National Business Awards
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Question: What can top management get out of lean and what can they do to ensure programmes work well and sustained? Answer: Top management are the lynchpin of lean, though they must refi ne their approach to lead from the top a programme that has designed from the bottom up.
If you were to ask the average member of a board a simple question, such as how the cherries gets on the cakes they sell, or something more apt for their industry, it is unlikely most would know.
However, if top management are going to devise lean programmes and inspire their work force to see them through, they have to become acquainted with such detail because they have to live the programme themselves.
That is the advice from Daniel Jones, founding Chairman of the Lean Enter-prise Academy. He believes that while many top managers have heard of lean, and may have at some time been involved in a programme, not all take on board how much of a change they will need to make themselves if they are to lead and inspire transformation in others.
“For too long a lot of top managers have known about lean and thought it meant they could get in a team of consult-ants and some tools and then a lean pro-gramme would deliver without them re-ally needing to get too involved,” he says.
“Managers have to understand that won’t work. They need to actively engage in drawing up the strategy for a lean programme. They need to understand what’s not working as well as they would like, identify where the processes broken and how might they be fi xed. Crucially they have to know why they are being fi xed and why they are getting involved in lean.”
Bottom upOnce it is established exactly why a com-pany is going to transform itself through a lean change programme, Jones cau-tions managers that this is where they need to combine designing a strategy with actively encouraging ideas to fl oat up to the top.
“If you design something from the top down and tell your people ‘there it is, get on with it’, it will never work,” he says.
“You may fi nd some temporary im-provement but the moment you’re not looking people will go back to how things were. You can’t dictate these things from the top because most of the time people in the board room don’t know how things
are done. That’s why the most power-ful thing managers can do is take a walk through their entire process, starting from the customer and working back-wards to see where the waste is, where things could be done better, where lead times could be cut.”
Lean programmes that deliver in the long term share a common princi-ple of top management taking this walk through their processes and then asking people on the shop fl oor how things could be done better, Jones insists. Getting the people who will be implementing the transformation programme in their daily work lives to advise on what that change should look like is an empowering mana-gerial method which pays long term divi-dends.
“You can’t just tell people to do some-thing in a diff erent way, you have to get their buy-in from the start of the proc-ess,” he says.
“You have to be very clear and open about what you’re hoping to achieve and you will normally fi nd they are only too happy to help identify the areas where you can improve processes. These are the
people who have to grapple with the proc-esses that are broken and they are normal-ly only too happy to have those bug bears taken out of their daily work routine. You have to ask them, though, you have to see what they would do because they normal-ly hold many of the answers and it’s them you’re relying on to carry on with the new processes in the long term.”
Visualise changeOnce the shop fl oor, or equivalent, is con-sulted the key is to identify key personnel who can work across departments and es-tablish where units within the compa-ny may be blocking change for their own good but to the potential detriment of the company and customer.
The fi nal key, Jones shares, is a room dedicated to the lean programme where transformation changes can be visual-ised, on the walls, and ‘stand-up’ meet-ings to discuss success and challenges can be held without a single PowerPoint presentation.
Lean managers must lead and listen
SEAN HARGRAVE
LEADER TO LEADER
“If you design something from the top down and tell your people ‘there it is, get on with it’, it will never work.”Daniel Jones. Chairman, Lean Enterprise Academy
INSIGHT
In the coming 12 months and beyond, all public and private sector
organisations will have to make substantial cost savings and design
efficiencies to operate profitably, or within new budget settings.
Applying Lean thinking to these challenges will help achieve this.
However, applying a lean model without taking into consideration
an organisation’s unique culture, leadership and goals, at the outset
will not deliver the desired, far reaching results. Alturos has worked
across a range of sectors and applies a unique blend of frameworks
that are customised to the client organisation.
Alturos is focused on skills transfer so that the staff within a client
organisation develop their own lean ability. This helps perpetuate
on-going continuous improvement projects that deliver the required
return on investment.
Current clients of Alturos report impressive results in many areas in-
cluding, financial, market share, responsiveness and improved quality
of services and products.
These include:
£15.8 million savings over three years in a mental health • foundation trust coupled with a dramatic rise in capacity and
satisfaction ratings.
£89,000 savings in an Arms Length Management Organisation • (ALMO) of a local authority, plus waiting times to complete
minor adaptations to properties ,were reduced by 41 per cent.
£1.17million audited savings, increased capacity, reduced wait-• ing times and deferred capital expenditure achieved in a radiol-
ogy department of an NHS acute trust.
$0.81 million saved through faster sales cycles with an oil ex-• ploration client combined with increase in repeat business and
client retention.
Alturos has recently launched a Lean-Six Sigma programme (LeSS)
specifically developed for staff who have already gained some con-
tinuous improvement experience. This is aimed at organisations that
need to achieve even greater continuous improvement in an identi-
fied area or project.
The Alturos LeSS programme involves ten days of high impact skills
development guaranteeing a minimum 10:1 return on investment.
Delivered by a seasoned Master Black Belt in Lean and Six Sigma, it is a
blend of mentoring, training and specialist support. Most importantly,
it is training harnessed to an identified improvement project within the
delegate’s organisation rather than training for trainings sake.
Delegates graduate only when they have demonstrated that the
agreed improvement project objectives have been met. This creates
both internal capability and capacity coupled with staff engagement
for sustainable continued improvement in critical areas such quality,
speed of response and targeted cost reductions.
For further information on Alturos Ltd,
its work within your sector or the LeSS
programme visit www.alturos.co.uk or
telephone Tim Franklin on 0870 471 7127
Alturos Ltd Leads The Way in Lean Continuous Improvement and Cost Savings
A DIFFERENT APPROACHLean is a process that needs to be implemented and understood across all levels of a business, says Daniel JonesPHOTO: PRIVATE
TOP TIPS
5Focus on biggest gaps
1Lean eff orts should be fo-cused on closing the vital
few performance gaps that would make the biggest diff erence to your organisation.
Talk a walk
2Walk the end-to-end proc-esses causing these gaps to
see the opportunities for elimi-nating wasted time and eff ort, particularly between depart-ments.
Assign ownership
3Make someone responsible for improving these process-
es by gaining agreement on the facts, the gaps and the actions to close them.
Step in to resolve
4Be prepared to resolve genu-ine confl icts and trade-off s
between Departmental objectives and the actions to redesign each process.
Picture the process
5Use lean visual project man-agement to review progress
frequently and to save wasted ex-ecutive time spent fi re-fi ghting rather than solving problems.
DANIEL JONES,
Chairman, Lean Enterprise Academy
WWW.LEANUK.ORG
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Why lean programmes need Lean thinkers
An issue that preoccupies both experi-enced and novice Lean practitioners is how they can make Lean a ‘way of life’ in their organisation – the new busi-ness as usual. Professor Peter Hines, chairman of S A Partners, explains: “Businesses often procure Lean tools randomly in a drive to reduce costs, or try to replicate the Toyota or Tesco ap-proach assuming this will secure their future. When they don’t sustain the gains, or successfully embed the think-ing into everyday life, Lean can get a bad name. What we, as Lean consult-ants, can do is help companies to focus on strategy first, to see with fresh eyes where they are today, where they want to get to and to map the journey they will need to take to get there.”
You mentioned Toyota and Tesco – what lessons can we learn from these world-class performers in Lean? “To focus on strategy, even before a single Lean tool is used, and on people. Noth-ing will work unless you include and in-spire your people. When you ask some-one on the shop floor what the com-pany’s strategy is and they can answer correctly, then Lean is working. If they
know what contribution they are mak-ing today and how they can change to-morrow, then it’s truly flourishing.”
This focus on people has extended the interest in Lean beyond its tra-ditional heartland of manufactur-ing. One example is eyecare provid-er Specsavers, which has seen signif-icant improvements from applying
Lean in its corporate tax office. Direc-tor of tax and treasury Gill Morris ex-plains: “S A Partners helped the team to see what was really going on in our process and to redesign both the process and the workspace in a way that would support continuous im-provement. Creating a leaner process removed a lot of the frustration that
people were feeling and so had a posi-tive impact on employee engagement. The success of the programme has in-spired other departments within the organisation to start using Lean ideas in their areas too.”
S A Partners’ approach has been for-malised in its Lean Business Model®, a proven operating system for sustaina-ble Lean improvement. The model ad-dresses the five key elements of strat-egy deployment, value stream man-agement, tools and techniques, people enabled processes and extended enter-prise. It is a blueprint that businesses can use to design the improvement roadmap that is right for them.
Major home improvement retail-er B&Q is currently three years into a Lean journey with S A Partners. HR di-rector, Liz Bell comments: “Our imple-mentation of Lean is aimed at stream-lining our core processes of ‘buy it’, ‘move it’ and ‘sell it’. As a people busi-ness, our aim is to free up time for our people so they can spend more time helping customers.” Richard Lynch, partner at S A Partners, adds: “The results so far are very encouraging. Lead times on customer queries have halved and customer issue resolution rates are up by 25 per cent.”
Professor Hines concludes: “What these companies have in common is the goal to embed Lean Thinking within their business and within the hearts and minds of their workforce. It is this ambition that sets apart the world-class performers in Lean.”
“Our aim is to free up time for our people so they can spend more time helping customers.”Liz BellHR director
Question: How do you em-bed Lean in to the collective thinking of an organisation?
Answer: As part of a long term Lean programme, you need to engage staff in the process to alter attitudes at all levels.
PROFESSIONAL INSIGHT: Consulting lean experts can prove significantly successful.PHOTO: PANTHERMEDIA.NET
INSPIRATION
FACTS
Although lean has evolved from
its 1990s roots within Toyota, the main
four goals remains the same.
Improve quality, eliminate waste,
reduce time and reduce total cost
Within the eliminating waste aim,
there are seven types of unnecessary
work which lean experts should tackle:
Transport (materials should move
the least amount possible)
Inventory (should be just what is
needed as encapsulated by the ‘just in
time’ approach to stock levels)
Motion (workers and machines
should move as little as possible)
Waiting (a major part of lean in ad-
ministration is tackling dead time when
processes are routinely halted while
waiting for external input)
Overpoduction (production
should be stopped at the optimum
time)
Overprocessing (minimise unnec-
essary additions)
Defects (which do not conform to
standards and are wasted.
CHANGE
In which areas are you noticing the most Lean activity?
!The North East of England has seen tremendous de-
velopments in adoption of Lean. One NorthEast, the Regional De-velopment agency, has support-ed the implementation of Lean in a very wide range of compa-nies through the North East Pro-ductivity Alliance and the Man-ufacturing Advisory Service, which were both established to help manufacturing firms achieve large improvements in their productivity and competi-tiveness.
There are some notable suc-cesses, for example Corus Energy at Hartlepool operates in a very challenging industry. It has dra-matically improved its produc-tivity through the application of Lean. This has helped it to win the North East Exports award in 2008 and a pipeline contract worth £200m in March 2010.
NHS North East is the first Strategic Health Authority that has embarked on the widespread application of Lean thinking throughout all areas of its activi-ties. The main focus has been on further improving patient safety and reducing waiting times. This work is currently being evaluat-ed by the Universities of New-castle and Durham.
Are universities collaborating around Lean?
!At Newcastle University postgraduate students have
participated in the ‘Plug Game’, which is a hands-on, interactive simulation that is delivered by practitioners from the Manufac-turing Advisory Service.
In terms of research, academ-ics are investigating and eval-uating the application of Lean. For example, Newcastle Univer-sity is part of the European Re-gions for Innovative Productiv-ity project that involves part-ners in six European countries. The purpose of this €3.3m EU funded Interreg project is to im-prove the productivity and com-petitiveness of SME companies throughout the North Sea region of Europe.
QUESTION & ANSWER
Christian HicksProfessor of Operations Management, Subject Group Head (Strategy and Operations)
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Logistics operators are among the most hard-pressed businesses in the current economic climate. With fuel prices regularly hitting record highs and transport taxes following suit, it is understandable why lean holds great appeal.
Any company moving their own, or a third party’s, goods from one place to another wants to ensure that they are starting up with the most effi ciently planned networks of warehouses and delivery hubs and that every lorry load is packed effi ciently and follows the most cost-eff ective route.
Agile strategiesAndrea Harris, an agile logistics con-sultant at Davies Robson, whose cli-ents include Wickes and Tate & Lyle, reveals now that many of the ‘dark art’ skills of a lean logistics expert are available through software. Howev-er, as ever with any IT system, the re-sults are only ever as good as the data put in.
“At a strategic planning level a company just starting up or look-ing to grow will need to input where their products are manufactured and
where their main markets are and the system can work out a distribu-tion network for them,” she says.
“It can often suggest modes of
transport they’ve no considered be-fore, such as barge or train. At the same time, you can also feed in fac-tors such as markets you hope to
move in to or underutilised facili-ties that have to be included in the plans.”
Lean routesOnce the strategy is in place, IT can then be used on a daily basis to ensure that, typically, lorries drive the most cost-eff ective route and are packed effi ciently to get the most out of that journey. At the same time, planning software systems can fi nd a load for the return journey so a business is maximising revenue and minimis-ing ‘empty miles’.
“One of the huge improvement soft-ware can provide is slimming down a fl eet or allowing a company to grow without the extra expense of new trucks and trailers,” Harris explains.
“This is what really appeals to logis-tics providers. By planning loads care-fully they get the most out of their fl eet and they can also cut down on unex-pected downtime by using telemat-ics systems which alert the business when maintenance is needed so it can be planned and you don’t end up with a lorry out of action unexpectedly.”At the same time RFID tags are also be-ing extensively used to tag items and allow mangers to track assets so they can keep to lean ‘just in time’ strategy where goods are normally kept at point of manufacture until ordered .
How software is bringing lean thinking to logistics
A HELP FOR STRATEGISING. Technology is allowing for improvements to be made across the board. PHOTO: PRIVATE
SEAN HARGRAVE
Question: How is software be-ing used to make logistics more agile?
Answer: Tools are being used in two areas; strategic planning as well as in for day to day trip and load planning.
NEWS
FACTS
Infor research suggests only a
third of lean plants have a strategy or
policy deployment practice in place to
identify where improvements are nec-
essary
Only 10% practice value-stream
mapping, a technique to understand
how product fl ows from design to cus-
tomers, and to spot waste and enhance
value throughout that value stream
Only 8% use Kaizen events and
blitzes, which are organised ap-
proaches to make quick improvements
Only 10% focus on elimination of
the “seven wastes,” a set of ills iden-
tifi ed by Toyota that encompass the
countless ways organisations lose
time, resources, and money
Only 34% use PDCA (plan, do,
check, act), a problem-solving cycle
for identifying the root causes of prob-
lems, experimenting with solutions,
and then continually repeating the cy-
cle and bettering performance.
RESEARCH
Software helps deliver projects Research by software ven-dor Infor shows that deliver-ing projects to time and on budget are a major concern for engineering and manu-facturing companies.
In fact, after profi tability, fears over bidding and then eff ectively man-aging a project are their next biggest fear, confi rms Andrew Kinder, Direc-tor at sotware company, Infor.
Hence many businesses are turning to project management software to gain guidance on their bid price and, crucially, a realistic delivery date.
“Everyone wants to be aggres-sive with price and delivery date but it can then lead to problems,” says Kinder.
“Unless you use project manage-ment software to calculate capac-ity, you will never know if you tru-ly can meet a delivery schedule or whether meeting it will involve bring in so much extra resource that it hits your margin.”
By calculating when materi-als can be expected to arrive and then looking at shift patterns and machinery capacity, the software can build a realistic timeline for a project. This not only means all involved are working within the same framework, it can also fl ag up straight away if extra resources need to be brought in and calculate the extra cost
SEAN HARGRAVE
UTILISE TECHNOLOGY
4TIP
The informed-compliance
culture, established in the
US in the 1990s through
the Customs Modernisation Act
and successive amendments by
the Federal Maritime Commis-
sion of the Shipping Act of 1984,
has been adopted globally post
9/11 and is being aggressively
implemented in the EU currently.
The customs regime is increas-
ingly complex and the penalties
for non-compliance can be se-
vere. UK Customs are increasing
the number of audits and visits to
traders, with fines of up to £2,500
for each individual error. Even so,
few organisations have in-house
compliance experts, which is
where Charles Kendall can pro-
vide assistance.
AVOIDING PENALTIES
Serious infractions, such as re-
bating or illegal discounting,
regularly incur severe penalties.
A multi-national agent was fined
$1million in 1980 for accepting il-
legal rebates from ocean carriers.
SOLUTIONS
Analysis of customs procedures
can benefit businesses in many
ways from duty and demurrage
savings to fiscal representation
which can improve your cash
flow, and provide consistent
delivery lead times. Drawing on
more than 30 years’ experience,
they provide technical assist-
ance and advice on all aspects
of supply chain and freight
management, including on-site
audit of current import and ex-
port practices by former sen-
ior Customs staff, and product
classification advice and follow-
up with Customs for rulings to
establish correct rates of duty.
Charles Kendall recently advised
a client to use an alternative
Customs Procedure Code (CPC)
which has produced savings of
€2 million per annum through
improved cash flow, and reduc-
tions in clearance and freight
costs.
When a multi-national pro-
ducer of consumer goods
decided to launch a new
distribution-centre (DC) facility near
Saltillo, Coahuila, in Mexico, the chal-
lenges of operating in a volatile region,
marked by an escalating narco-civil war,
soon became apparent. They turned to
Charles Kendall to provide the essential
risk-management advice needed for
the shipment in 2010-11 of 5,000 TEU
shipping containers of highly pilfer-
able consumer goods. Charles Kendall
undertook a disciplined approach to
risk management through a four-step
process of assessment, quantification,
mitigation and ongoing audit.
ASSESSMENT
‘Assessing the risk is an important first
step. Charles Kendall quickly deter-
mined that there was a significant,
ever-present risk of theft, hi-jacking and
smuggling. The customer’s product
range falls within the five highest risk
categories for theft in Mexico.
QUANTIFICATION
Additional risks exist in the form of
federal penalties, fines, and damage
to brand image and reputation. Cargo
theft was the most prevalent property
crime in Mexico in 2008 and led to the
cost of road transport increasing by 40
per cent in three years. Insurance pre-
miums increased by $1 million year-on-
year between 2007 and 2008. Overall,
the cost of road transport in Mexico is
20 per cent higher than in the United
States.
RISK MITIGATION
Charles Kendall made specific recom-
mendations including undertaking
background checks on all drivers, no
weekend or Friday deliveries, routing
through Houston to a secure, private-
security compound on the Laredo bor-
der, escorts with radio control to central
law enforcement, and use of steel-bolt
seals. Charles Kendall re-designed
the supply chain to mitigate specific,
pre-quantified threats, and have put a
check-and-balance system in place to
ensure that these are maintained.
ONGOING AUDIT
Quarterly site visits occur to inspect
infrastructure, ensure adherence to
standard operating procedures (SOPs)
and to audit the process. Charles Ken-
dall also source daily high-level security
briefings on the Mexican market to en-
sure that the customer is briefed imme-
diately on any relevant developments.
Since implementation in March 2009, a
zero-loss record has been maintained.
Supply chains can be vulnerable to more than just the
financial pressures of the global downturn. As well as
the possibility of a supplier defaulting, there are risks of
compliance, ethical responsibility, cultural and political
issues and supply chain disruption, such as physical
or natural disasters. Companies such as Charles
Kendall are increasingly asked to produce significant
cost savings through tailored risk management and
compliance programmes. Charles Kendall is a highly
experienced global company, which provides supply
chain solutions tailored supply chain solutions through
the procurement cycle from sourcing to delivery to the
end customer
SPONSORED FEATURE
Managing your risk in the supply chain
Since implementation
in March 2009,
a zero loss record has
been maintained
Customs advisory & complianceMexican Lock-down
Middle-East markets: opportunity or risk?
Entering the Middle-East markets can seem a daunting
prospect but there are solutions which make it more
than worthwhile. One solution is to use the Jebel Ali
Free Zone (JAFZA) in Dubai where companies, such
as CH Field, have established import services. CH Field
holds a General Trading Licence issued by the Dubai
Government and this allows them to offer a rare serv-
ice by acting as your company in JAFZA and provid-
ing a low-cost, low-risk entry point for a wide range
of products, with no duty due at the time of import
into the valuable markets of the Middle East and be-
yond. More information about CH Field can be found
at www.charleskendallfreight.com/solutions/ch-field
AEO Status
Authorised Economic Operator status (AEO), plays a vital role in
the security amendment of the Customs Code (Regulation (EC)
648/2005) which came into force on 1 July 2009. The amend-
ment aims to ensure an equivalent level of protection through
customs controls for all goods going through EU customs terri-
tory and stipulates that relevant security data must be provided
electronically by economic operators before the goods enter or
leave the Community customs territory. With the transition pe-
riod due to close at the end of 2010, all importers and exporters
operating in the EU zone must comply with the changes in EU
law or face potentially hefty government fines. As one of the
relatively few companies to hold this standard in the UK, Charles
Kendall have a lower risk score within HM Revenue and Cus-
toms systems and in turn they benefit from a fast track service
through Customs controls. They are also ready for the changes
due later in 2010 with ICS (Import Control System).
www.charleskendall.com/ telegraph Contact Peter Sunderland 0208 831 1300
AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE DAILY TELEGRAPH14 · JUNE 2010
Develop a Lean Transformation road-map: 1) Establish a business case for Lean and measurable outcomes it will enable.2) Diagnose operations and / or support functions to populate a prioritised project portfolio. 3) Focus on change management through broad organisational awareness, communications planning and Lean Lead-ership skills. 4) Create process improve-ment capability. 5) Deliver value through se-quenced and prioritised project execution.
1) Establish a Centre of Excellence ac-countable for business outcomes and cul-tural transformation. 2) Deploy a Perform-ance Management model holding proc-ess owners accountable for results against stretch targets. 3) Drive process transfor-mation toward a desired end-state (proac-tive improvement) rather than only reac-tive fi re fi ghting. 4) Align and synchronise projects in disparate areas toward desired business outcomes (North Star Objectives).
1) Create a broad understanding of what drives Profi table Growth and Sharehold-er Value Creation (Return on Invested Cap-ital minus the cost of Capital) and link all Lean projects back to the creation of value. 2) Measure program success in terms of its direct and objective contributions to Enter-prise Speed, Agility, Process Cycle Effi ciency and Total Cost (not in terms of the number of people involved or sheer quantity of projects completed).
Start with a clear answer to the ques-tion; “What’s the point?”. The entire organ-isation must understand how the strategic objectives of the programme link to their role. Use Lean to tackle something mean-ingful; a real business priority, and form an infl uential “coalition of the willing” to cre-ate role models. Ensure they understand Lean suffi ciently to remain consistent, and as early benefi ts arise, capture results and publicly celebrate success.
Success breeds success, but reward-ing those who have supported the pro-gramme will reinforce the message. Collab-oration across the organisation on tackling tough issues will drive team behaviour and help spread the word, as will asking those with lean experience to “coach” the level be-low. Consistency of process helps maintain purity of approach which, supported by strong communications, will create a feel that “this is the way to improve things”.
It’s important to remember that Lean is about more than just the “bot-tom line”. Clearly, converting wasted capac-ity into a reduced workforce or greater out-put can be measured in fi nancial terms. But don’t overlook the opportunity to use lean to drive out other improvements, such as re-ductions in a carbon footprint or improved consistency, and combined with other tech-niques such as six sigma, reduced errors and quality improvements.
Accept the need for change and re-duced complexity. Create the expectation that Lean is a long-haul activity but sprin-kled with ‘quick-wins’. Lean is ‘bottom up’ improvement and change, supported by strong ‘top down’ Lean leadership from di-rectors, which diff ers from traditional lead-ership. Lean needs to be communicated and established as the new way of ‘doing things around here’, and not an optional activity. Lean needs to start with leadership.
25 per cent of staff should undergo lean training. After priority analysis, 30 per cent should be scheduled for lean over 2 years. Re-wards are there for those brave enough to do this. Sustaining lean involves ‘hands on’ leadership, creating a culture that supports Lean, incorporating Lean into the organi-sational infrastructure, adopting organisa-
tional objectives as Lean ones, allocat-ing these to individual directors,
communicating and celebrating improvements.
Systems flows ‘horizontally’ through organisations so we apply
specifi c Lean accounting and fi nance methods to measure ROI from Lean. ROI varies from 50:1 upwards. We have seen ROI of 500:1. ROI stems from cost reduction, re-duced recruitment costs and staff turnover, lower inventory levels, faster stock turns, in-creased internal capacity and throughput of existing services, new market opportu-nities and stabilised demand due to quality improvement.
Question 1:What is the best way to embed and diff use Lean in an organisation?
Question 2:What is best way to sustain a Lean approach within an organisation?
Question 3:How can an organisation measure the on-going eff ect of the Lean approach on its bottom line?
Mark GeorgeManaging Partner, Process
and Innovation Performance
at Accenture
Jonathan GuppyPartner, KPMG Performance
and Technology
Tim FranklinDirector, Alturos
PANEL OF EXPERTS
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