Each year in the United States, 7 out of 10 new products fail. This series is about the methodology and process of delivering successful new products on time, on budget and building the three year sales plan.

Please join us for six information packed sessions (series schedule below).

Series Schedule

All sessions are Thursdays at 2:00PM EDST, and are approximately 45 minutes long with time for Q&A at the end.

 
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About Your Hosts

Mark DeLuzio	Paul Rowean
The series is hosted by Mark Deluzio. He was mentored by the originators of the Toyota Production System. He has directed the implementation of lean principles and strategies the last 25 years in many businesses and industries. Mark is President and CEO of Lean Horizons Consulting. He was inducted into the Shingo Academy for his contribution to the Lean movement.	Paul Rowean will lead the discussion on new products. He earned a Master Black Belt in Ideation as well as VOC in a 25 year career at Danaher Corporation. He is considered an expert facilitator and implementer of lean new product development. He has mentored over 20 Master Black Belts. Paul leads the lean growth tools practice for Lean Horizons Consulting.

Administrative Lean methodology skills are in great demand. The only way to ensure you get to the top of the ladder is to achieve a Green Belt Lean Administration Certification.

Our workshops will take place over three sessions this March, April and May. Participants are encouraged to attend all three sessions, but may choose to attend individual sessions if they wish.

All three sessions will take place at the DoubleTree Suites, in Phoenix Arizona.

Module 1: March 20-22

LEAN AND PROCESS THINKING

• Defining project scope
• Fundamentals of waste
• VSMi® (Value Stream Mapping for Information in administrative environment

Module 2: April 17-19

BREAKTHROUGH FOR THE FUTURE

• VSMi® Future State
• TPI® Transactional Process Improvement Methodology for administrative Processes
• SIPOC and RACI charts

Module 3: May 15-17

SUSTAINMENT

• Standard Work Management
• Visual Management
• A3 Thinking
• Dashboard Creation

To learn more information, and download our brochure, please click here.

To register to attend the workshop, please click here.

There appears to be a hospital in India, which seems to know the answer to this question.

That’s Aravind Eye Hospital in India. When you walk in here and visit the hospital without an appointment, you get your diagnosis the same day and when you want a surgery you are asked: When would you like your surgery? Tomorrow?

They probably have a lot of overcapacity? This, however, is not the case. Their mission is as follows: “a social organisation committed to the goal of elimination of needless blindness through comprehensive eye care services”. They operate mostly poor people. Furthermore, people can decide for themselves how much money they can pay for their surgery. 60% of their patients are not able to pay and get the surgery for free. The other 40% have more money and take care of the other 60%. In this way they are able to achieve their mission.

At their location called Madurai, they performed 581.000 outpatient consultations and 91.000 surgeries in 2008. For comparison, the largest eye hospital in the Netherlands is in Rotterdam and performed 139.000 outpatient consultations and 12.600 operations that year. International benchmarks show they can compete with Western hospitals. They provide excellent quality.

“In that case, they probably have more staff?” The same international benchmarks show that they need significantly fewer people to provide the same quality and to realise an even better flow. In Madurai Aravind 983 people work, including 46 senior doctors and 94 junior doctors. In contrast, 313 people, including 29 senior doctors, work in the eye hospital in Rotterdam. While Aravind carries out seven times more operations.

Standardization

• Standardization at the highest level: everyone performs the same actions in the same manner. Individual preferences are subordinate to the interests of the whole.
• Far-reaching task delegation: specialists are only doing specialist work. A cataract operation takes five to ten minutes (this varies indeed per surgeon). A specialist operates 60 patients in one morning.
• Processes are being improved step by step and this refinement process continues. They reduced the time between the end of an operation and the start of the next operation to only a few seconds.

Plan, Do, Check & Act

• Strong Planning: from previous experience (numbers) they try and work out how many patients will come at what month and at what day of the week. They prepare for this by increasing capacity at busy days.
• Excellent feedback loop through Visual Controls: the planning processes are designed in such a way that it is immediately visible when demand is greater than predicted at a moment in time. The employee who sees this gives a signal to people from other departments who are asked to come and help immediately.

Agility

• Team Work and Leadership Alignment : people need to work together to ensure that the patients gets what he needs. Not self-interest, not their own department, but demand determines who works at what place (according to knowledge and skills).

AEH is committed to work constantly using the lean principles to reduce the waiting time and enhance the throughput of the Hospital. “AEH is open to adopt technology that allows us to increase the productivity,” says Dr S Aravind, Administrator, AEH.

Like many other countries, cost is the biggest barrier to medical treatment in India. Of the 22.5 million Indians in need of heart surgery annually, less than 3.5 percent can afford it. The ripple effects are enormous: when a poor family loses its primary breadwinner, the whole family is made destitute. In other words, affordability of healthcare is a pre-requisite for emerging out of poverty. But less than 15 percent of Indians have access to health insurance, including the 2 percent that can afford private insurance.

The Aravind Eye Care System and Narayana Hrudalaya

It’s the Toyota of eye care. Despite treating seven out of 10 patients for free or at minimal charges (it screens 2 million patients and performs 2.7 lakh surgeries a year), Aravind Eye Care System operates on a 40% profit margin. How? Thanks to big and small improvement. It has reduced the time of surgery for each surgeon by using paramedical staff for the preparatory and post-operative work on each patient, and allowing the surgeons to perform only a 10-20 minute long surgery. Operation theatres are equipped with two tables so that the doctor can perform two surgeries without a loss in momentum. It also manufactures in-house intra-ocular lenses, driving their cost down from $100 to $2-3 apiece. Says Dr. Namperumalsamy, Director, Aravind: “Innovation need not be some big discovery-any small change like time management that helps to serve patients better is innovation.” Aravind’s patients will more than agree.

If Aravind eye is the Toyota of eye care, then Narayana Hrudayalaya is the Wal-Mart of cardiac care.

The Dr Devi Shetty-founded hospital performs 23-25 heart surgeries a day-one of the largest in Asia-simply because it has restricted the surgeon’s job only to surgery and not the entire patient process.

Such “Wal-Martisation of healthcare”, as the hospital executives describe the strategy, has enabled Dr Shetty to offer heart surgeries at a cost as low as Rs 65,000 ($1480) compared to Rs 1.50 lakh ($3400) at other hospitals-and that despite offering 70 per cent of the treatments below cost or for free.

There’s always a better way, the only challenge is to find it or to create a new one.

The earthquake-tsunami that hit northeast Japan has rocked global supply chains that will be changed forever. Who knew (I didn’t) that so much of the world’s production could be so devastated by disruption from a single region? Instead of simple knee-jerk responses, let us commit to leverage these events to initiate a new and total revolution in sourcing strategy. First, a quick look at how we got here.

What happened?

A trend that started in the auto industry in the 1990s and became a tsunami that has now hit the whole industrial world: a radical supply model that outsourced, offshored, and “single sourced” from a single suppler often at a single plant thought to be the cheapest location in the world. (And tooling costs were saved too by installing capacity at only one supplier location.)

Twenty years ago, Inaki Lopez at GM and then VW kicked off this revolution in automotive supply chains that quickly expanded to the whole industrial world. To be sure, a revolution was needed at that time. OEM-supplier relations in the auto industry were often too cozy and OEMs had so many suppliers they could barely identify them all. Lopez made the First Commandment of Sourcing: Lowest Global Piece Price. All previous considerations of how parts related to operations went out the window. Cozy buyer-seller relationships vanished – that’s good – but sensible considerations such as total cost, quality, logistics, and partnering for mutual prosperity also disappeared.

Before long, even internal operations were held to the same pricing standards. “Outsourcing” grew along with “offshoring,” under the edict, “Match the price I can get in China or your contract goes up for bid.” And up for bid they did go, and out of business they went. First, smaller suppliers closed their doors, at huge cost to OEMs to replace the lost supply of parts and materials. They were followed by larger ones. Eventually all major automotive-dedicated suppliers based in the USA filed for bankruptcy.

As a result, supply chain logistics became increasingly complex. Other trends contributed: more sophisticated software and transportation systems, for example, led to the rise of “3PL” or third-party logistics specialists. Logistics and even supply chain strategy became outsourced. Outsourcing begat outsourcing. Not unlike the specter of machines designing machines (as in “the Terminator“), a monster was created. In the end, yet another key competence of manufacturers was lost to specialists whose interests were their own, not the OEM’s. Not the customer’s.

There is nothing inherently wrong with sourcing globally. But a single-minded focus on lowest piece-price with no regard to broader regional strategies leads to unneeded complexities. And, as we see from the catastrophe in northeast Japan, unneeded risk. Who knew (I didn’t) that 40% of the auto industry’s microchips were being produced in one relatively small region, most of them in one factory.

The simplistic and predictable reaction of some critics to question just-in-time is, of course, not the real issue here – supply chain strategy and configuration are. In fact, semiconductors weren’t being produced via JIT anyway – large batches still hold sway in the electronic components industry. And yet as usual, the catastrophe in Japan has given rise to cries for the end of JIT. Minimal buffer stocks caused immediate production losses so surely the answer, according to critics, is more production and more stock. Increasing buffer stocks or finished goods inventory to buffer against a 100 year interruption is absurd (See: Nonsense about JIT by Jim Womack).

A car has thousands of discrete parts and doesn’t become a car until it has each and every one of them. “Tuxedo Black” is Ford’s name for a color dependent on a unique pigment from a Merck plant close to the Fukushima Daiichi nuclear plant. It isn’t produced anywhere else. Merck says the plant wasn’t damaged but, due to radiation, engineers won’t be able to even reenter the plant for weeks and once they do it will take six to eight weeks to set things back to order and begin producing Zirallic, Merck’s name for the pigment. In the meantime, Ford can still build a truck for you, just not one in Tuxedo Black.

The deeper problem is that most companies didn’t know the full extent of their exposure to risk. Buyers know their suppliers, but usually not their suppliers’ suppliers, or the suppliers of those suppliers. Toyota has demonstrated remarkable ability to recover from supply disruptions in the past (See: Aisin factory fire in 1997). Honda too: when US tariffs disrupted their steel supply ten years ago, Honda airlifted carbon sheet steel from Japan to the U.S.

A New Model for Sourcing and Logistics – Regional and Rational

Similarly, the solution isn’t just a matter of exiting northeast Japan, another knee-jerk reaction of some supply-chain companies. Rather, the solution lies in totally rethinking supply chains. In general, it makes most sense to produce close to where you sell. And in general it makes most sense to engineer close to where you produce. And it certainly makes most sense to procure as close as possible to where you produce for your customers. For most large firms, that means we need regional supply strategies.

So let’s use the current crisis to signal an end to 20 years of madness in sourcing strategies. Single sourcing is dangerous. That much is obvious. And 100 sources all competing for the next contract based on piece price is also dangerous, in a different way. When that single source is continents away from production facilities, the danger is magnified.

A new sourcing model is needed. The wisdom of ‘dual supplier’ strategies of many lean thinking supply chain managers is clear – avoid both single source and “numerous source” situations. When Deming advocated what he called “single sourcing,” he was promoting OEM-supplier relationships based on partnership, not zero-sum negotiation; and on cost of quality, not price of transaction. Toyota’s traditional approach was to pursue dual sourcing for first and second tier suppliers (unfortunately this did not always extend to often small third-fourth tier suppliers – thus Toyota is especially suffering from the global supply crisis since 80% of their in-vehicle computer chips were being supplied by one facility in northeast Japan with no easy re-sourcing possible). With dual-sourcing, risk is avoided, such as when one supplier facility goes down, and competition is encouraged, with two suppliers in the game.

Anyone anywhere who wants to make their country a competitive manufacturing location needs to practice lean math. That’s total cost — including the potential cost of disruption on long-distance supply chains — rather than the piece price plus slow freight cost calculation done by most manufacturing firms today. The USA, specifically, is already a much more “competitive” manufacturing location than most senior managers seem to think, based on the continuing decisions to send manufacturing to locations far and wide. For an example of a simple total cost model, from the Reshoring Initiative, go here: http://www.reshoringmfg.com/ .

But, be careful. Any costing model will be based on assumptions, and while risk can be included, no risk model could account for the disruption that began on March 3, 2011. Rather than a cost model that we hope will spit out the perfect answer every time, it’s more practical to work from some simple principles of lean supply chain configuration. Shorter lead times are better than long. Closer proximity between suppliers and customers is better – shipping regionally better than shipping across oceans. Less inventory with more frequent delivery is better than large inventories that move infrequently. Single sourcing, especially single location sourcing, is bad – it’s risky and doesn’t leverage natural, healthy competition tension. Maintaining hundreds of suppliers for the same part is also bad – it generates complexity, confusion, and costs of redundancy.

Also, the challenge of adopting a total cost view is more than resistance to the basic concept. Companies are inept at understanding true total costs, let alone how to make decisions accordingly. As costs are broken down and allocated across functional lines, ownership and even understanding become murky. That’s where the lean math comes in. Matt Lovejoy is CEO of Acme Alliance, a casting machining company outside of Chicago. Acme has operations that produce the same goods in Illinois, Brazil, and China, so Acme knows the actual cost – not price but cost – of producing in each country. Buyers often approach Matt and Acme in Chicago with an edict to source products in China, for example, when it makes more sense – in every way – to produce closer to the OEM, closer to the customer.

Matt has found that many Lopez-ized buyers who want to shift sourcing from Illinois to China fail to consider a plentitude of costs and consequences (consider and considerations are very close in the sentence). Metal can cost more (surprise) in China than the USA (see Shanghai Metal Index versus London Metal Exchange). Energy costs more in China than the USA. Same with high-quality equipment, which may be more costly in China than the USA (due to high import duties for European or Japanese machinery). And, since labor comprises a tiny portion of the cost of making most casting products, these items alone are worth careful scrutiny. And then what about the time and cost of managers’ time to visit global locations, along with the communication challenges of late night conference calls with difficulty understanding those on the other end of the phone? And here’s a key point to consider: What reductions in total cost could be realized if the time, effort, and energy of sourcing across the planet were actually invested in the local supplier through kaizen?

The point here, to repeat for emphasis, is NOT that sourcing in China or Brazil is a bad idea. The emergence of China and Brazil as productive sources for the global production community is a positive phenomenon of historical importance. But, each sourcing decision needs to be made on its own merits.

Stop the Madness

Lean thinking brings things together, emphasizing the connectedness of all parts, organizationally and physically: suppliers that are close to OEM factories that are close to customers. It will be no easy task to unravel the unneeded complexity caused by 20 years of piece price optimization. We can start making progress in that task by going back to the basics of starting with the customer, defining value, and working backwards from there. Working together, we can create supply chains that flow value from raw material to customer with ever shortening lead times, profiting both OEMs and suppliers.

Just as JIT is not the practice to challenge here, neither is the practice of sourcing globally. And the problem is far greater than being unable to order your vehicle in Tuxedo Black. “You need a crisis,” we like to say, to spark your transformation. Global supply chain managers should be happy – they have a crisis of epic proportions. The catastrophe in northeast Japan is tragic enough in its own right and needn’t have been made more so by things within our control: convoluted, high-risk, high total-cost supply chains generated by the lunacy of a narrow focus on lowest global piece price. Now is the time to rethink and reconfigure supply chains so they are rational, regional, practical, low in total cost and risk and high in fostering quality – in short, lean supply chains.

John

John Shook
Chairman and CEO
Lean Enterprise Institute, Inc.

© Copyright 2011 Lean Enterprise Institute, Inc. All Rights reserved. www.lean.org

I like to think of measurements as either Daily Management as measured by Key Performance Indicators (KPI’s) and Strategy Deployment (SD) measures that are tied to the strategies of the company. I think that all functional departments should develop their own KPI’s to monitor and improve their specific functions.

Strategy Deployment targets however, are cross-functional and need to be worked on by multi-functional teams. These are the measures that are found in the “Target” section of the SD Matrix. Also, SD targets are set to “breakthrough” measures requiring the focus on the fundamental processes that deliver the desired, repeatable, consistent, breakthrough results. I feel that the Strategic Deployment process does a better job at identifying the underlying business processes that need to be implemented/changed/improved. True sustainability is had by focusing on repeatable business processes that drive breakthrough results.

One of the biggest challenges faced by IT has been to convey the business value of IT in terms of alignment with overall business strategy and defining the value provided to business processes as part of the software development and implementation process.

Lean can be effectively applied to IS/IT following the same principles applied in other business areas. When analyzing an end to end software development life cycle, Value added in software development and applications represents only 1% to 5% of total Lead Time in respect of value added processing/touch time.

Here are some examples of MUDAS in the IT environment:

• Transportation: unnecessary information transfers, creating excessive hand offs among different stakeholders.
• Over Processing: using different platforms and manually processing reports.
• Waiting Delays: Decisions are made almost constantly in every software development project, this is one of the biggest Mudas in IT, and if developers are not available it will cause a big delay impacting total development lead time.
• Over Production: Over generation and creation of non-value added reports not aligned to the business needs.
• Motion: Multiple uses of screens and navigations, including back and forth from manual to electronic reports.
• Inventory: Unnecessary data storage using valuable memory/assets with no value added information.
• Defects: excessive reprocessing and rework loops. Too much development time spent is rework.

The following Lean principles are key to keep in mind in software development:

• Design MUDA free applications
• Build in Quality at the source
• Deliver fast and efficient value added information
• Optimize the whole. Lean principles deliver on their potential when backed by effective leadership and changes in behavior.

I would be interested to know your thoughts about the current challenges you are facing with IT and how you are responding to this issue.

Click here to listen to Mark DeLuzio on The Lean Nation.

The Lean Nation is on 790AM (Citadel Broadcasting, ABC Affiliate) in Providence, RI every Tuesday from 3-5pm.  The show features real world examples and actionable advice from lean and business thought leaders on how to reinvent yourself into a lean operation in business and in life.  The show’s host, Karl Wadensten, is the president of VIBCO, a Rhode Island manufacturing company, which has created a Lean Revolution using lean methodologies based on the Toyota Production System.

That’s a huge challenge because today, half the R&D dollars that companies spend yield no return at all. Why? Because they: lack market knowledge; mis-reading customer needs; portfolio misalignment; poorly managed requirements; Incorrect timing. And the list goes on.

Sustained profitability in hyper-competitive markets requires companies to balance product innovation investments, cost efficiency, visibility, and predictability. It’s a very complex product management processes. So how can you consistently bring winning products to market faster and more profitably? By applying Lean Growth solutions aligning your product portfolio with customer needs and your company’s strategy and by tying product planning to execution.

I would be interested to know if you are facing similar challenges and how you are responding to the need for rapid exploitation of products to generate a sustainable competitive advantage.

1. Six Sigma is a problem solving tool. Problem Solving is a subset of Lean (which is comprised of many tools), and it makes no sense to build a culture around a tool like Six Sigma. Lean culture should be developed around Lean principles, and never around a tool.
2. Many companies try to solve all problems using the Six Sigma process. This is inappropriate. When the only tool you have in your tool box is a hammer, all of your problems look like nails.
3. We believe that a large majority of all problems can be solved using basic problem solving methodologies. There is no need for an elaborate approach like Six Sigma for most of an organization’s problems.
4. The Six Sigma methodology is usually a long, drawn-out process, where projects can take 6 to 9 months. Lean is much quicker in terms of results. Lean zealots have the view of not letting “perfect” get in the way of “better”.
5. Lean rests on the input of the all associates within an organization. Due to the complexity of Six Sigma, not all associates can meaningfully participate in the process. I have seen Six Sigma “cliques” form in an organization, which is rather elitist and dysfunctional.
6. By starting with Six Sigma first, there is a danger of improving a process that should not exist in the first place. Lean is all about process improvement, creating flow, etc. and many times help identify processes that are non-value adding and should be eliminated. Why improve a process that should not exist in the first place?

So, where does this lead us? I firmly believe that Six Sigma works nicely within a Lean transformation, but the key is to use the right tool at the right time. I would be interested on your opinion, your successes and your challenges.

Lean Horizons started in 2001 with just four consultants, who were led by the company’s President and CEO, Mark DeLuzio.  Today Lean Horizons is a global company serving markets in North and South America, Europe, China, and India.

One of our customer success stories comes out of Lean Horizons’ work with GE Money.  Lean Horizons was tasked with improving a non-manufacturing process, where a highly complex consumer finance dealer enrollment process was becoming a barrier to completing new transactions.  Lean Horizons deployed their proprietary suite of Lean assessment processes, diagnostics, and waste removal techniques in order to rapidly quantify dealer enrollment breakpoints and lost-profit sinkholes.

By deploying the complete suite of Lean tools, disciplines and practices, GE reaped a $200 million annual benefit and removed critical bottlenecks from their growth road map.

This is just one of the many success stories that Lean Horizons’ customers has been able to achieve over the past decade.  We look forward to helping many more customers build their own success stories.