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© Pyramid Consulting International

Pyramid Consulting International

MLC 6TH ANNUAL CONFERENCE

STRATEGIC LEANPhil Berry

Pyramid Consulting InternationalAugust 3, 2016

© Pyramid Consulting International Page 2

Introductions Introduction to “Strategic Lean” Objectives Method #1: Idea Generation, Prioritization, and Follow-up (“Tailgate Sessions”)

Case Study Interactive Presentation Application Discussion

Method #2: Strategic Prioritization Case Study Interactive Presentation Application Discussion

SESSION AGENDA


Let’s get to know each other before we get started…

Advised internal and external clients on continuous improvement, quality, Lean, Six Sigma, manufacturing strategy and planning, and product development. Utilized expertise and LSS Black Belt certification to complete projects/initiatives in automotive, aerospace, electronics, healthcare insurance, industrial, and utility industries. Highlighted experience: CI strategy and leadership, Lean Six Sigma application and mentoring, International perspectives and development.

Proven success in improving processes and performance through disciplined improvement strategies and hands-on problem solving. Prior to joining Pyramid, directed the Lean Continuous Improvement effort at BCBSM. Served at Acument Global Technologies as Executive Director, Continuous Improvement. Served for two years as charter board member for the MLC.

What About You?

Phil Berry Pyramid Consulting International

INTRODUCTIONS

Pyramid Consulting International, headquartered in Michigan, was established to help organizations successfully develop and implement their strategies. We assist a diverse client base in meeting the demands of today’s challenging markets. Our unique proprietary approach has resulted in rapid growth of the company and our client base. Our clients include Fortune 500 companies in all sectors: private, public, and government. We have performed Lean/CI cultural transformation engagements in the Midwest.

Quick Introductions Name Company/Organization Level of Lean Expertise– Beginner– Intermediate– Advanced


Basics of Lean – Maximize Customer Value Minimize/Eliminate Waste Efficiency Employee Involvement & Empowerment True North

Lean Thinking – Optimizing the flow of products and services through entire value streams

Toyota Kata Improvement Kata Coaching Kata

Why do we need “Strategic Lean”? Do not the other Lean tools and methodologies address focusing in on the “right things” already? INTRODUCTION TO “STRATEGIC LEAN” – BACKGROUND NEED


Strategic Lean Focusing limited resources on strategically aligned ideas, investments, and projects Provides leadership clarity on the “right” Challenges Allows employees a voice in the process of identifying/prioritizing the Challenges Applies two (2) methods of Strategic Lean:– Idea Generation, Prioritization, and Follow-up (“Tailgate Sessions”)– Strategic Prioritization

Key Advantages of Strategic Lean Systematic way of focusing resources on the activities tied to the key strategic goals Improvement ideas originating from the people doing the work (Gemba) Objective analysis of what was previously a subjective evaluation Ability to compare dissimilar projects/approaches with ease Empower middle management to prioritize efforts to impact strategy achievement All efforts and investments are totally aligned with strategic priorities

Strategic Lean ultimately provides discreet shape to True North INTRODUCTION TO “STRATEGIC LEAN” – WHAT IS IT?


Strategic Lean addresses an often vague area in the improvement kata process that is currently established subjectively at most organizations…WHERE DOES “STRATEGIC LEAN” FIT IN THE OVERALL PICTURE?

Source: Gray Construction website Gray.com


Colleague implementing LSS at a $5 billion revenue, 5000 employee, global mining company based in the Midwest experienced… Culmination of LSS effort saved $150 million over 3 years Grew fast primarily through mergers & acquisitions Results today

I worked for a company with $2 billion revenues, 9000 employees, one of world largest manufacturer of mechanical fasteners. Today they are only a North American/South American company at 1/8 the original size LSS effort saved $45 million over 3 years High dependence on domestic automakers; move to low cost labor mfg. sites

Many Lean practitioners have experienced instances when an organization they have been associated with focuses on improvement efforts by employing Lean Six Sigma but does not practice fiscal responsibility in other key ways

REAL LIFE EXAMPLES


Define and detail the use of two Strategic Lean methods Share a successful Midwest Utility case study example Answer any questions regarding the methods Provide way to learn more about them and where to find assistance

OBJECTIVES


Company Profile: Midwest Utility Company - Electricity generation Annual Revenue: $700 million Total Employees: 800 Fuel Type: Coal Environmental Controls: latest technology (flue gas desulfurization (FGD)) Three main locations:

Plant #1 in Southern Ohio Plant #2 in Southern Indiana System Office (Headquarters)

Engagement Objective: Cultural Transformation via Lean Results in the two years post start of our engagement:

$18 million in annualized savings (30% of operating cost) Transition from 0.3 to 2.0 on a 0-4 Lean/CI maturity scale

Before we dive into the Strategic Lean methods, let’s first understand the company which is the subject of this presentation’s case study…THE PROFILE OF THE CASE STUDY COMPANY


At the onset of Lean engagement, set up idea generation workshops with groups of 8-15 employees at a time Solicit improvement ideas versus complaints by framing a “good idea” Like any brainstorming session, no judgement of the ideas when provided Build on the ideas of others, encourage participation from each individual Some start with each person writing down 1 idea on a post-it note Vary the ways of engaging the audience is recommended

Most successful when 90+% of employees have a chance to be involved Utilize the Continuous Improvement/Lean Development team from the client and encourage input from local leadership in the rating of the ideas Rate each idea anonymously on all three dimensions:

Impact (Low, Medium, High) Complexity (Low, Medium, High) Urgency (Low, Medium, High)

Prioritize by sorting by Impact (H-L), then Complexity (L-H), then Urgency (H-L)

Simple yet effective method to achieve employee engagement and provide immediate focus areas in a Lean deploymentSTRATEGIC LEAN METHOD #1 – IDEA GENERATION/PRIORITIZATION OVERVIEW


A good idea for a group is…1. A specific change action that…2. The company/organization can implement and realize its benefits within 24 months and that…3. Has a positive impact on its own baseline

There are three principles that characterize a good idea…IDEA GENERATION PRINCIPLES


Continuous Improvement Focus Area (CIFA)FIRST TWO DAYS OF IDEA GENERATION SESSIONS: 54 PARTICIPANTS (16%)

10 Quick Hitters Identified and Assigned toCIP Team Members

Source: Actual Midwest Utility example


Top Priority Ideas – Quick Hits

In the absence of a full strategic prioritization (discussed later in this session), ideas should be simply prioritized first by Impact, then by Complexity, and finally by Urgency…METHODOLOGY OF PRIORITIZING IDEAS

IMPAC

T

COMPLEXITY

High

Mediu

mLow

HighMediumLow

321 6

54 987

121110 15

1413 181716

27262524

2322212019

URGENCYLow

Medium

High


Collect all of the ideas generated, group similar idea concepts, rate/prioritize the ideas and sort by three aspects: Impact, Complexity, and UrgencyGATHERING OF THE IDEA LIST, PRIORITIZING, AND ASSIGNING

H L HIDEA GENERATION - DESCRIPTIONS ASSIGNED LEAD STATUS

IMPACT COMPLEXITY URGENCY 1 Safety Meetings on Overtime 1 H L H Jim Nida Complete2 Optimize Trona Usage 1 H L H Tim In progress3 Too Many Free Meals & Anniversary Dinner Excessive 1 H L H Lynn In progress4 Contractor Vacuuming Gypsum 1 H L H Ben/ Craig In progress

52 CPT resulting in jobs taking too long, esp. during outages 1 H L H Lynn In progress123 Onsite nursing - no need - end contract NCI, costs 70,000/yr 1 H L H Lynn 5/15177 Start,Break,Lunch,Shower times 1 H L H Tom 5/1519 Too many trucks, gators, mules – everybody doesn’t need one 1 H L M Craig 5/1524 Bottled water - 4500 $/mo 1 H M H Jim 5/156

Explosive deslagging process is wasteful - return to waterblasting process (history of an injury) 1 H M H Craig 5/15

9 NH3 injection needed? Reduce and stay within limits (Reduce Urea use also) 1 H M H Tim 5/1510 Money saving - use of company owned Vac truck 1 H M H Ben/ Scott 5/1513

Too much cleaning by contractors in Fuel Supply - could be done with own employee H M H

14 Spare parts are not available for planned work H M HPart of bigger outage management project

54Contractors deficiencies

H M HBreak into sizable pieces to

work under Contractor Management

179 Supervisors in meeting holds up jobs H M H20 No accountability for misc. items- hard hats, coveralls H M H

21Flyash removal and dewatering – cut to 12 hrs from 24 hrs based upon future dry ash system H M M

39 JSA process 1 H M M Matt 5/15

PRIORITY MEASURES



Idea Generation PipelineTracking Every Quick Hit Idea to CompletionIDEA GENERATION PIPELINE

$1.75M



The Myths and Facts of Performing a JSA JSA Myths and Urban Legends:

A JSA can only be given to me by my Supervisor If I am working on Boiler Feed Pump A in the morning and Boiler Feed

Pump B in the afternoon, I cannot start the afternoon job until I find my supervisor and he/she gives me a new JSA

Each separate job performed, regardless of the scope, requires it own separate JSA.

A JSA and a JHA are redundant documents and are a waste of time. My supervisor is always in a meeting, so conducting a JSA takes forever

because we have to track them down and wait on them to get out of the meeting before a new work assignment can be performed.

The topics listed above are just a handful of the myths and urban legends surrounding the performance of JSAs. The FACTS below are designed to help debunk these myths.

FACT: A JSA performed at the beginning of the work day can cover more than one job assignment. If an employee or group of employees is assigned multiple tasks similar in nature, there is no reason why the morning JSA cannot cover the hazards, proper PPE, and other precautions necessary to work the jobs safely. In some cases, it may make more sense from a safety standpoint to have separate JSAs if the work, PPE requirements and safety risk is fundamentally different; however, it is not required, nor is it very efficient to perform a separate JSA for each and every task/job assignment if they are similar in nature.

FACT: Employees can conduct their own JSA – and should be encouraged by their front-line supervisor to do so. This can provide the supervisor with an opportunity to coach and provide constructive feedback, and it helps the employee develop the skills to objectively assess hazards and safety risks associated with their assigned work.

FACT: An employee can assist with another job without first finding their supervisor. Assuming they are properly qualified to offer help (i.e. some jobs like welding, crane operation or lifting and rigging require specific training and qualifications), they can STOP, review the JSA performed for the other job with the crew performing that work, sign on onto the JSA and help as appropriate – all without the need to find their supervisor first.

The Myths and Facts of Performing a JSA JSA Myths and Urban Legends:

A JSA can only be given to me by my Supervisor If I am working on Boiler Feed Pump A in the morning and Boiler Feed

Pump B in the afternoon, I cannot start the afternoon job until I find my supervisor and he/she gives me a new JSA

Each separate job performed, regardless of the scope, requires it own separate JSA.

A JSA and a JHA are redundant documents and are a waste of time. My supervisor is always in a meeting, so conducting a JSA takes forever

because we have to track them down and wait on them to get out of the meeting before a new work assignment can be performed.

The topics listed above are just a handful of the myths and urban legends surrounding the performance of JSAs. The FACTS below are designed to help debunk these myths.

FACT: A JSA performed at the beginning of the work day can cover more than one job assignment. If an employee or group of employees is assigned multiple tasks similar in nature, there is no reason why the morning JSA cannot cover the hazards, proper PPE, and other precautions necessary to work the jobs safely. In some cases, it may make more sense from a safety standpoint to have separate JSAs if the work, PPE requirements and safety risk is fundamentally different; however, it is not required, nor is it very efficient to perform a separate JSA for each and every task/job assignment if they are similar in nature.

FACT: Employees can conduct their own JSA – and should be encouraged by their front-line supervisor to do so. This can provide the supervisor with an opportunity to coach and provide constructive feedback, and it helps the employee develop the skills to objectively assess hazards and safety risks associated with their assigned work.

FACT: An employee can assist with another job without first finding their supervisor. Assuming they are properly qualified to offer help (i.e. some jobs like welding, crane operation or lifting and rigging require specific training and qualifications), they can STOP, review the JSA performed for the other job with the crew performing that work, sign on onto the JSA and help as appropriate – all without the need to find their supervisor first.

Idea Generation prioritized the issues that the team focused on with Kaizen events and other tools to heighten awareness and generate improvement savings…SAMPLE RESULTING ACTIONS AND RESULTS



Review areas of your CI effort that could benefit from additional focus Go to the Gemba and pull together a cross-functional group of individuals that work in that focus area Remind them of what a good idea consists of and open up the discussion…

Track the ideas that come up on a flipchart so all participants can see Rank the ideas using the Impact, Complexity, Urgency scale or compare against the Strategic Priorities (if they have been established) Bring the improvement ideas back to the theme owner (many would empower the employees that work in the area to make the changes that come up)

Well into the engagement when Huddles, Visual Management boards, and Kaizen events mature and become routine, “TailGate Sessions” can be implemented to reinvigorate ideas…STRATEGIC LEAN METHOD #1 – LATER FOLLOW-UP WITH “TAILGATE SESSIONS”



Reengage the workforce in focused idea generation that is then aligned and prioritized…RESULTS OF “TAILGATE SESSION” WITH OPERATIONS DEPARTMENT D-SHIFT



Tailgate sessions answer questions about CI while providing savings and improvement ideas!“TAILGATE SESSION” OVERVIEW



YOUR QUESTIONS PLEASE…


Strategic Prioritization is a systematic method of the following: Identifying the key strategic values for the corporation/organization developing relative valuation weights between priorities at a certain point in time Relating all major capital spend, initiatives, and key challenges to the strategy Comparing dissimilar objectives & provide relative value towards achieving True North Transforming subjective priorities into quantifiable, objective priorities

Strategic Prioritization can be used to prioritize many things: Capital budgeting/investment Merger & acquisition focus Major corporate/organizational initiatives The “right” challenges Improvement ideas Lean Initiatives

Strategic Prioritization provides a way to objectively analyze what was previously a subjective evaluation

Provides prioritization of efforts from leadership to the rest of the organizationSTRATEGIC LEAN METHOD #2 – STRATEGIC PRIORITIZATION


Pre-work is provided to the executive leadership team to brainstorm the key values for the organization Pyramid conducted a benchmarking analysis comparing this utility to others The leadership team then meets to solidify on the 3 to 6 key strategic priorities for the organization in the coming 3-5 years with Pyramid benchmarking input Then the key strategic objectives are brainstormed by the leadership team

The Leadership team dedicates some time and effort to establish a usable vision for the company/organization…HOW TO START STRATEGIC PRIORITIZATION

Strategic Priorities

Strategic Objectives

Source: Actual Midwest Utility example of Pyramid proprietary process


Once developed the leadership team is asked a series of questions to establish the spectrum from least to most desirable outcome for each objective Additionally Complexity and Urgency are further characterized to provide dimensions for prioritization A series of comparison questions were provided to develop the relative weights and ultimately the priorities for the organization Finally, in this instance all the capital projects were prioritized against those strategic values to both mathematically and visually prioritize the investments

This method is an alternative to the more time consuming Hoshin Kanri (Goal/Strategy Deployment) and associated Nemawashi (catchball)…NEXT STEPS IN STRATEGIC PRIORITIZATION


Using comparison we assigned relative weights to the five Focus Areas (Strategic Priorities). We also established measurable goals (strategic objectives) under each one of the Focus Areas and assigned relative weights to those goals.

STRATEGIC VALUE SCORECARD

% Relative WeightStrategic Value ScorecardSafety excellence Operational Excellence Environmental Stewardship

Cost Competitiveness & Cash Optimization

Create a safety Create a safety culture of commitment

Process safety improvements

OSHA compliance

Reduce EFOR

Increase EAF

Optimize Strategies Optimize Predictive Strategies

Meet regulatory requirements (no NOV’s)

Optimize

reliability

Optimize performance of controls and reliability Increase

education

Increase community awareness and education

Manage fuel/energy costs

Optimize inventory Reduce operating expenses

27% 17% 5% 45%

21.5% 87.5% 42%

8% 10% 12.5%5%

41% 68.5%

44%

Organizational Excellence6%

Top quartile Top quartile peer ranking in safety Optimize use factors to meet to sponsor needs

Improve budget adherence

Create continuous Improvement culture

Train and people

Train and develop people Manage human capital

43%

24%

Manage knowledge

Manage organizational knowledge Comply with procedures

Comply with processes and procedures

12%

21%

9%

6%

Eliminated due to irrelevancy

Hazard Elimination45%



Additionally, we discussed factors influencing complexity and urgency of the capital projectsCOMPLEXITY AND URGENCY

Complexity Scorecard

Scope Time Constraints Estimates Change Management Outside Group Involvement

Urgency ScorecardRegulatory Compliance Safety Revenue Impact Obsolescence Legal Timing



Strateg

ic Valu

e

ComplexityLow High

LegendLow UrgencyMedium UrgencyHigh Urgency

KCP-RP-01

KCP-RP-02

KCP-RP-03

KCP-RP-04KCP-RP-05&KCP-RP-06

KCP-RP-07 KCP-RP-08

KCP-RP-09

KCP-RP-11

KCP-RP-10KCP-AF-01

KCP-AF-02

KCP-RP-12 & KCP-RP-13 & KCP-RP-14KCP-AF-03

KCP-AF-04

KCP-RP-15

CAPITAL PROJECT PORTFOLIO COMPARISON – POWER PLANT #1



Strateg

ic Valu

e

ComplexityLow High


CCP-RP-01CCP-RP-02

CCP-RP-03

CCP-RP-02

CCP-RP-04

CCP-RP-02

CCP-RP-06

CCP-RP-07

CCP-RP-08

CCP-RP-09CCP-RP-10

CCP-AF-01CCP-RP-11

CCP-RP-12&CCP-RP-13

CCP-AF-02

CCP-RP-14&CCP-RP-15

CCP-AF-03

CCP-RP-16&CCP-RP-17CCP-RP-18

CCP-RP-19 & CCP-RP-20CCP-AF-04

CCP-RP-21

CCP-AF-05

CCP-RP-22

CAPITAL PROJECT PORTFOLIO COMPARISON – POWER PLANT #2



Strateg

ic Valu

e

ComplexityLow High


SYS-AF-01SYS-AF-02SYS-RP-01

SYS-AF-03SYS-RP-02

SYS-AF-04

SYS-RP-03

SYS-AF-05 & SYS-RP-04

SYS-AF-06SYS-RP-05

SYS-AF-07SYS-RP-06

SYS-RP-07 & SYS-RP-08 & SYS-RP-09SYS-RP-10

SYS-RP-11SYS-AF-08SYS-RP-12

CAPITAL PROJECT PORTFOLIO COMPARISON – SYSTEMS OFFICE (HQ)



8%

44%6%

15%

27%

Kyger

Safety Excellence Operational Excellence Environmental Stewardship Cost Competitiveness and Cash Optimization Organizational Excellence

Distributing projects’ costs across the defined focus areas enables comparison between original strategic vision and proposed capital projects portfolio to determine alignment with vision.

STRATEGIC EVALUATION

Strategic Value Category Original Strategic Vision Capital Project Survey DifferenceSafety Excellence 27% 38% +11%Operational Excellence 17% 37% +20%Environmental Stewardship 5% 2% -3%Cost Competitiveness and Cash Optimization 45% 12% -33%Organizational Excellence 6% 11% +5%

41%

36%

2% 11% 10%

Plant #212%

27%

1%

44%

16%SystemPlant #1



Strategic Lean ultimately provides discreet shape to True North…Results are no effort, money, or resources applied without aligning to Strategic Priorities…STRATEGIC LEAN SUMMARY

Idea Generation; “TailGate”StrategicPrioritization

Challenges(Improvement Kata)Bottoms Up Top Down


YOUR QUESTIONS PLEASE…

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