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THIS IS LEAN: RESOLVING THE EFFICIENCY PARADOX by Niklas Modig and Par Ahlstrom

see also http://thisislean.com and [amazon]

PROLOGUE

Compare the results in a healthcare environment when patient goes through 42 days of doctor visits and testing procedures to get a diagnosis vs. patient goes to specialty center that does all the exams and testing and delivers a diagnosis in 2 hours -- 500x faster. This is the difference between organizing for resource efficiency and organizing for flow efficiency (lean)


1. FROM RESOURCE FOCUS TO CUSTOMER FOCUS

resource efficiency - focus on utilizing resources efficiently, action movie w/ camera mounted on shoulder of the doctor, ratio: value hours / total hours = low, maximizing value adding time of individual resources, measured as % of value adding time per time period

flow efficiency - focus on satisfying needs (delivering value), camera mounted on shoulder of patient, ratio : value hours / total hours = HIGH, maximizing value receiving time of customer, measured as % of value-receiving time per total throughput time


2. PROCESSES ARE CENTRAL TO FLOW EFFICIENCY


3. WHAT MAKES A PROCESS FLOW?

Little’s Law

Law of Bottlenecks

Law of Effect of Variation on Processes

Taken together

How to improve flow efficiency?

  1. reduce total # flow units in the process by eliminating the causes of lines and waiting
  2. work faster, to reduce cycle time per unit
  3. add more resources to increase capacity and reduce cycle time
  4. eliminate, reduce, and manage different forms of variation

Focus on Resource Efficiency => decreases flow efficiency AND increases problems, creates extra work throughout process


4. THE EFFICIENCY PARADOX

Three Sources of Inefficiency cause secondary needs and extra work to snowball

long throughput times

many flow units

many restarts per flow unit

efficiency paradox = focus or resource efficiency automatically lowers flow efficiency => local optimization and whole process sub-optimization

inefficiencies, wasted time, energy, resources, on sub-optimal processes scales to societal level, implies huge losses across all organizations and countries.


5. Toyota Production System (TPS) Story

Post WWII scarcity in Japan drove focus:

A. Doing/Making? THE RIGHT THINGS, investment in right equipment and making right products... required seeing and optimizing the whole, big picture

B. Doing THINGS RIGHT


6. WILD WEST – MANY DEFINITIONS OF LEAN

Ohno: All we are doing is looking at the timeline from the moment the customer gives us the order to the point where we collect the cash.

Four Core Principles (accdg to Womack, Jones, Roos: Machine that Changed the World)

  1. teamwork
  2. communication
  3. efficient use of resources + elimination of waste
  4. continuous improvement

Lean Thinking (Womack, Jones)

  1. specify value from the view of teh customer
  2. identify the value stream + eliminate all steps that don’t add value
  3. make the remaining value steps flow smoothly toward the customer
  4. when flow is established, let the customer pull value upstream from the next upstream activity
  5. rinse + repeat => perfection, perfect value w/ no waste

Evolution of Manufacturing Systems at Toyota (Fujimoto)

Decoding DNA of TPS (Spear, Bowen) - one of most frequently quoted views of tacit Toyota knowledge

  1. all work shall be highly specified in terms of content, sequence, timing, outcome
  2. every customer-supplier connection must be direct and there must be unambiguous yes/no way to send requests and receive responses
  3. the pathway for every product and service must be simple and direct
  4. any improvement must be made in accordance with the scientific method, under guidance of a teacher, at the lowest possible level of the organization

TOYOTA WAY (is only sixteen pages long, illustrated with a testimonial for each point from Toyota employees)

FOURTEEN PRINCIPLES (Liker)

I. long-term philosophy

  1. base your management decisions on a long-term philosophy, even at the expense of short-term financial goals

II. the right process will produce the right results

  1. create a continuous process flow to bring problems to the surface
  2. use “pull” systems to avoid overproduction
  3. level out the workload
  4. stop the process if necessary to fix problems in order to get the quality right the first time
  5. standardize tasks and processes for continuous improvement and for employee empowerment
  6. use visual control so that no problems are hidden
  7. use only reliable, thoroughly tested technology that serves your people and processes

III. develop your people and your partners

  1. grow leaders who thoroughly understand the work, live the philosophy, and teach it to others
  2. develop exceptional people and teams that follow the company’s philosophy
  3. respect your partners and suppliers by challenging them and helping them improve

IV. continuously solve root problems to drive organizational learning

  1. go and see with your own eyes in order to understand the situation thoroughly
  2. develop exceptional people and teams that follow the company’s philosophy
  3. become a learning organization through relentless reflection and continous improvement

===> No single, solid, common definition of Lean. Successfully applied at...


7. WHAT LEAN IS NOT

“Lean” suffers from fragmentation at level of abstraction makes “lean” more or less applicable to other areas/organizations beyond manufacturing, matters greatly for success or failure of adoption

“Lean” mischaracterized as means rather than an end

“Lean” generalized to mean everything good and all good is “lean”


8. THE EFFICIENCY MATRIX

efficiency matrix:

high                        |                => perfection
res eff                     |      
=> efficient islands   |
_________________|___________________
                              |
low                         |
res eff                     |      => efficient ocean
=> wasteland           |

    low flow eff              high flow eff

 ===========

Strategy for Moving within the Matrix

examples: ryan air - low cost and high resource efficiency (planes flying all the time, barely on ground) vs. luxury hotel with high flow efficiency (personalized service) and fire department (excess capacity, always ready)

Movement within the matrix, examples

  1. startups move from wasteland toward upper right by standardizing roles, procedures, processes
  2. bathroom refinisher decides to charge a premium for faster service, shifting to more flow efficiency, swarming workers
  3. manufacturing company transformed production processes/layout, shifted from specialization to teams, moved up and right
  4. luxury hotel shifted from 5 stars to 4 stars, lowered rates, increased utilization/occupancy traded flow for resource efficiency to increase profitability

resource efficiency can be shifted up or down. flow efficiency, same. no best solution. depends on competitive environment, customers’ needs, employees skills, business strategy


9. THIS IS LEAN?

Lean is the operations strategy that prioritizes flow efficiency over resource efficiency, to move UP and RIGHT in the matrix.

Example: auto inspection service. Move from perceived efficient islands, to realizing wasteland, to efficient ocean toward perfection.

Lean is... highest level focus on flow efficiency over resource efficiency.


10. REALIZING A LEAN OPERATING STRATEGY

...today's organizations are built like a soccer field covered in hundreds of small tents, where matches are played with many different balls at the same time. the players are rewarded for kicking the ball as many times as they can, and think they score a goal when they succeed in kicking the ball out of their own tent. they play at different times and barely know the names of the other players. no one sees the big picture. no one hears the whistle.

in practice:

no fixed methods. every organization has to learn and develop its own way.


11. ARE YOU LEAN? LEARN TO FISH.


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Last edited November 5, 2017 11:44 am CentralTimeUSA by MichaelHerman
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© 1998-2017 Michael Herman and www.michaelherman.com, unless signed by another author or organization. Please do not reprint or distribute for commercial purposes without permission and full attribution, including web address and this copyright notice. Permission has always been granted gladly to those who contact me and say something about themselves, their work, and their use of these materials. Thank you and good luck! - Michael