Implementing Lean Management

Systems
January 2017
Traditional house of Lean
House of lean management.
Lean Activity Model
Different activity models can be considered when constructing your own
unique application of the HOLM. The most useful and common approach
we have found is in the generic Create a Lean System deployment model,
shown in Figure 3.3.
Framework for Lean Management Implementation

1. Step 1 is to specify value: What do your clients and customers want? When and how do they want it? What types
of combinations of features, capabilities, availability, and price will be preferred by them both today and a year or
two from now?
2. Step 2 is to perform a value stream analysis: A value stream is defined as the collection of processes and
activities required to bring a product to the customer, in its totality from beginning to end. The value stream is not
limited by normal boundaries that exist between companies. Hence, this is the reason to strive to integrate
suppliers, manufacturers, distributors, and even retailers in the efforts to recognize and analyze the value stream
and lower the overall cost, improve quality, and speed up fulfillment. Also, three main categories of activities are
distinguished: (1) activities and tasks that add value, (2) those that do not add value but cannot be currently
avoided as they are needed by the organization to stay in business, and (3) those that do not add value to either the
customer or the organization and should therefore be eliminated.
3. Step 3 is to document continuous flow: All types of organizations should try to make value flow continuously, not
in batches. In
this paradigm, the term one-piece flow has great appeal and is a highly desirable component of the Lean
management system. Also,
traditional functional organizations do not help but usually impede continuous flow; therefore, a focused-team cross-
functional
approach is closer to the product and is normally recommended.
4. Step 4 is to visualize customer pull: A principle originally made popular by JIT concepts that states that companies
should not push their products to customers, but rather let customers pull value packages (products or services) and
link all the production chain, including the suppliers, in such a way that materials are not releasedand activities
are not doneuntil they are needed. As previously mentioned, the discipline of pull is established and enforced by
using Kanbans, which are physical or electronic mechanisms to transmit the need for parts and subassemblies from
one point in the process to the preceding one.
These implementation activities should lead to improvement in five dimensions, which are the
concepts the company is trying to put into action:

Elimination of waste
Continuous improvement
Continuous flow and pull-driven systems
Multifunctional teams
Information systems
Inclusion of Lean Management System Indicators and Metrics
For each of the five improvement dimensions, there are several indicators that can show the company the
evolution of the line in its Lean Management System (LMS) evolution:
Elimination of waste: As previously outlined, waste is everything that does not add value to the product, like
inventories, machine setups, machine downtime, movement of parts, and scrap. Therefore, the metrics should
reflect those categories of waste:
Work in process (WIP): value of WIP in the line.
Setup time: time spent in setups/total productive time (percentage).
Machine downtime: hours lost by the machine because of malfunction/ total machine hours scheduled
(percentage).
Transportation: number of parts (trips) transported as in distance.
Space utilization: how much area does the line need, including its WIP and tools?
Continuous improvement: It represents the discipline of considering evolution as the normal state of a system.
Some ideas to measure this include the following:
Number of suggestions per employee per year.
Percentage of suggestions that get implemented.
Scrap: percentage of the products that need to be scrapped.
Rework: percentage of the units that need to be sent to rework.
Continuous flow and pull-driven systems: It is the ability to abandon the batch mentality and adjust the processes
to accept smoother movement of products through the line, which are going to be triggered by the pull of the
customer of each process. Some metrics are the following:
Lot sizes: average lot size for each product.
Order flow time: time an order spends being processed in the shop floor.
Order lead time: average time from the placement of an order (by a customer) to its delivery.
Pulling processes: percentage of the line processes that pull their inputs from their predecessors.
Pull value: percentage of the total annual value or throughput of the system that is scheduled through pull
Inclusion of Lean Management System Indicators and Metrics
For each of the five improvement dimensions, there are several indicators that can show the company the
evolution of the line in its Lean Management System (LMS) evolution:

Multifunctional teams: In Lean management system implementations, teams have more responsibility and
autonomy, so improvement and problem solving can happen closer to the source. Also, to make flexibility in the
line feasible it is necessary to have a multiskilled workforce.
Some metrics for these aspects are the following:
Autonomous control: percentage of quality inspection carried out by the team.
Work-team task content: percentage of the tasks required to make the product performed by the team.
Cross training: average over team members of number of skills a team member possesses/number of skills
needed in a team.
Number of employees capable of assignment rotation.
Information systems: The reduction of vertical levels in the structure and the autonomous operation that teams
have to reach makes necessary that employees have timely access to better information to enable problem solving
and decision making. It does not necessarily mean, but it certainly does not exclude, computerized information
systems.
Some metrics include the following:
Frequency with which information is given to employees.
Percentage of procedures that are documented in the company.
Frequency with which the line or cell progress boards are updated.
Conditions of a Lean Learning Enterprise

The six conditions of a Lean enterprise* and its supporting activities are
(1)one-piece continuous flow,
(2) capable processes with few or no defects,
(3) reliable processes with high uptime,
(4) pull versus push scheduling,
(5)a trained and engaged workforce, and
(6) visual control.
Lean Socio-Technical System
It has been long known that the social system or company culture plays a key role in the relative success or failure of
improvement efforts. The Lean socio-technical system is the collective belief system or company
culture on which decisions are made daily by employees at all levels.
Lean Educational System
Regardless of the industry you are in, your product type, and the type of service you deliver (be it healthcare, heavy
manufacturing, government agencies, or nonprofit organizations), there is a common thread among Lean
organizations of all industries. They all profess and practice an open Lean learning environment where :
1-observation and experimentation with improvement is encouraged; supported; and, more importantly, rewarded.
2-In these organizations, employees are constantly developing deeper knowledge of the processes that they use to
create value for the customer and
3-constantly refining their understanding of customer requirements and expectations.
Lean Change Management
The ability of an organization to understand and manage change is critical to becoming a Lean organization. To
change, we must know what we are changing from and what we are changing into. The three-step change process
includes the following:
Shedding old beliefs: this means that all employees develop their personal ability to let go of old beliefs. This can be
a difficult challenge for many employees.
Moving your frame of mind to a neutral zone where employees are receptive to new ideas, new ways of thinking and
working, or new points of view. This is where the Lean learning environment exists and all employees begin to adopt
a fundamental Lean belief system. This is where observation, experimentation, and transitions begin to
be formulated, tested, and refined.
Starting the new beginning: this is where individual employees and the organization at large begin to expose the
new Lean identity and live Lean on a daily basis.
Four Pillars of the Lean Management Model
The four pillars of the Lean management system model teach us to observe our processes with a Lean
eye. As we do, we will recognize the importance of living these behaviors on a daily basis and develop a
deeper understanding
of what it means to be a Lean organization, that is, to identify and eliminate these wastes across the
organization:
Pillar 1: Waste identificationLearning to see The first step is learning to see waste. What is waste?
What causes waste? How could we possibly see today what we could not see yesterday? This is the most
important pillar; after all, we cannot change what we cannot see.
Pillar 2: Waste quantificationLearning to measure Once we can see a waste and have identified what
the waste is and where it is occurring, we should quantify it, if we can. Most wastes can be quantified.
With others, it is sufficient to recognize and document the nature of the waste. The key in measurement is
to begin to distinguish between Lean measures and non-Lean measures. Non-Lean measures are typically
dead costs or non-flowing
measures, such as raw materials cost or labor cost. Lean measures are those that are first externally
focused on customer requirements, are performance in nature, or contain qualitative or quantitative
aspects of one of the nine wastes.
Pillar 3: Waste eliminationLean concepts, tools, and methods Armed with the tools of observation and
quantification, we are now positioned to address how to go about improving. At this point, employees are
becoming Lean practitioners and will never look at or measure your processes as they did before being in
the Lean learning environment. Your Lean management system is taking shape, and your employees are
building your Lean
organization, one that is fundamentally strong and will achieve higher levels of productivity and
profitability than previously possible.
Pillar 4: Sustain and innovate (Kaizen) Many companies today are struggling with sustaining process
FIVE FOUNDATION STONES OF THE LEAN MANAGEMENT SYSTEM
The five foundation stones are
1. Process management excellence
2. Project management excellence
3. Change management excellence
4. Knowledge management excellence
5. Resource management excellence
We need to manage our processes and continuously improve them for they are the way we do
business.
We need to manage our projects for they are the way we obtain major improvements in our
processes and, today, most organizations are doing a very poor job of project management as
demonstrated by the high failure rate of projects.
We need to manage the organization so that it is prepared for the chaos that it is being subjected to
because of the magnitude and quantity of changes that must be implemented.
We need to manage the organizations knowledge, which is the organizations most valuable asset.
(It is the organizations knowledge that gives an organization its competitive advantage, as technology
can easily be reverse engineered and transferred to any place in the world almost overnight.)
We need to manage our resources and assets for they drive our business results.
5 Ps of Lean management:
1. Pride: Everyone is proud of the work they do and the organization they work for.
2. Performance: The entire organization operates at very high levels of Lean efficiency and
effectiveness.
3. Profit: The organization is very profitable, so it can pay its employees a good salary and pay higher-
than-average dividends to its investors.
4. Prestige: The organization is viewed as an admired place to work, and it is known for providing
Foundation Stone I: Process Management Excellence. Two Approaches to Process
Management
There are two basic approaches to managing processes. They are :
1. The microlevel approach, which is directed at managing processes within a natural work team or
an individual department
2. The macrolevel approach, which is directed at managing processes that flow across departments
and/or functions within the organization
Most of the work that quality professionals do is related to continuously improving processes. Some
of the tools we use include design of experiments, process capability studies, root cause analysis,
document control, quality circles, suggestions, Six Sigma, Shewharts cycles, ISO 9000, JIT
manufacturing, and supplier qualification, among many others. Lean management in excellent
organizations requires each natural work team (department) to continuously improve (refine) the
processes they use.

Foundation Stone II: Project Management Excellence

Lean project management excellence focuses on how to use project management tools
(PMI) to effectively manage the organizations projects in a Lean manner, and to integrate
them into the organizations total operations, which means the effective integration of
projects, resources, and knowledge to obtain business intelligence.

Foundation Stone III: Change Management Excellence

Change management excellence is made up of three distinct elements. They are
1. Defining what will be changed
Foundation Stone IV: Knowledge Management Excellence

Knowledge management is defined as a proactive, systematic process by which value is generated

from intellectual or knowledge-based assets and disseminated to stakeholders. Six phases are
required to implement an effective KMS, which is integrated with the Lean management system
deployment. These phases are
1. Phase I: Requirements definition
2. Phase II: Infrastructure evaluation
3. Phase III: KMS design and development
4. Phase IV: Pilot
5. Phase V: Deployment
6. Phase VI: Continuous improvement

Foundation Stone V: Resource Management Excellence

Stakeholder Management supported by:
Documents Needed for the Lean Management System Strategic Vision. There are 11 kinds
of documents that are needed in a Lean management system comprehensive strategic vision:
1. Mission statement 6. Objectives
2. Value statements 7. Goals
3. Organizations vision statements 8. Strategies
4. Strategic focus 9. Tactics
5. Critical success factors 10. Budgets
11. Performance plans
Lean management system
An effective Lean management system model is one that allows for the education,
application, and
communication of Lean activities at all levels of an organization

FIVE FOUNDATION STONES OF THE LEAN MANAGEMENT SYSTEM

1. Process management excellence

2. Project management excellence
3. Change management excellence
4. Knowledge management excellence
5. Resource management excellence
Lean Management System Scorecard
At the heart of any Lean management system is an effective scorecard. Your scorecard is used
as a guide or reference to gauge the relative effectiveness of improvement activities.
In Chapter 4, The Laws of the Fifth Discipline, Senge (* From Peter M. Senge. The Fifth Discipline, Century Business,
1992, The five disciplines are (1) systems thinking, (2) personal mastery, (3) mental models, (4) building shared
vision, and (5) team learning), suggests some systems laws that help us understand systems better, which are as
follows:
1. Todays problems come from yesterdays solutions. We humans are happy when we solve problems. We often do
not think much about consequences. Surprisingly, our solutions could, and often do, strike back and create new
problems.
2. The harder you push, the harder the system pushes back. We have this stubborn reaction to push our way
through when things are not working out as we want. We charge without taking (the time to stop, think, and find
better alternatives. Sometimes we solve problems, but often we find ourselves up to ears in the swamp of other
problems.
3. Behavior grows better before it grows worse. Short-term solutions give us a short break and temporary
improvement
but do not eliminate fundamental problems. These problems will make the situation worse in the long run.
4. The easy way out usually leads back in. We learn a few solutions that bring easy success. We try to vigorously
apply them in any situation disregarding particular context and people.
5. The cure can be worse than the disease. Sometimes the easy or familiar solution is not only ineffective but also
addictive and dangerous. It may even induce dependency.
6. Faster is slower. When we get a taste of success, we start to advance at full speed without much caution.
However, the optimal rate of growth is usually much slower than the fastest growth possible.
7. Cause and effect are not closely related in time and space. We are good at finding causes to our problems, even if
they are just
symptoms and far from being real root causes.
8. Small changes can produce big results, but the areas of highest leverage are often the least obvious. Most
obvious grand solutions such as changing company policy, vision, or tagline often do not work. Small, ordinary but
consistent changes could make a huge difference.
9. You can have your cake and eat it toobut not at once, without guilt or blame. We often face rigid either-or
choices. Sometimes, they are not dilemmas if we change our perspective and rules of the system. Because we like
Lean Socio-Technical System:
On Developing a Lean Culture
A Lean culture would then consist of the beliefs and behavior characteristics of employees that:
understand what their companys goals and objectives are,
why they are important,
understand the purposes of Lean improvements,
have had the necessary Lean tools and techniques training to effect improvements, and
are then given a reasonably free hand to do so on an ongoing basis.

A true Lean transformation must begin with the people. This starts with the senior management
group.

First and foremost, managements highest responsibility is to adopt and live Lean on a daily basis.
Second, possible Lean leaders must be identifiedthose that can initially drive Lean and
communicate a complete distaste for all forms of waste in everything they doand also be
empowered to make quick changes.
Once Lean is under way all employees will have to be brought into the fold. They need to be
trained on how to recognize waste, how to use the tools to drill down o the underlying causes of
waste, and how to get rid of it.

Adopting a Lean philosophy is much more than learning a set of new tools. It is about
adopting a new belief system, one that is rooted in a Lean operational philosophy.
Measures Drive Behavior

Measures are one of the three primary

forces driving employee behavior.
Developing a true Lean measurement
system is not only one of the foundations of
a Lean management system but also a key
component in promoting Lean behaviors.

The Shingo model presents an

organizational set of measures that direct,
encourage, and support the deployment of
a true Lean management system.

During a transformation to a Lean

management style, dead cost measures
should be replaced with customer-
focused performance measures as
business drivers. These are recognized
by their external focus on customer
requirements (e.g., lead time, or on-time in-
full, and inspecification).
Beliefs Drive Behavior
No matter what level in the organization, individual beliefs drive behavior. For management, those
beliefs shape the entire organization. Their management style, how they interact with subordinates,
how they set policy and procedure, and how they develop organizational measurement systems, all
shape the overall management system.
Do you believe that people are trustworthy?
Do you believe that people seek responsibility and accountability?
Do you believe that people seek meaning in their work?
Do you believe that people naturally want to learn?
Do you believe that people do not resist change but they resist being changed?
Do you believe that people prefer work to being idle?
KEY SOCIAL SYSTEM IMPLEMENTATION CHALLENGES
Transforming an organization into a Lean management
environment is a complex and difficult challenge.

First, Management must be committed to this

transformation from traditional beliefs to Lean beliefs.
Both management and employees in the organization
have to begin to let go of old ways as they are
learning their new belief system.
Second, they have to be willing to begin to change
their belief system to adopt new Lean ideas and
concepts.
Third, they need to learn how to live Lean on a daily
basis going into the future
 RULES OF TRANSITION:

MANAGEMENT DIRECTS VERSUS MANAGERS TEACH

Traditional organizations: Focus on directives for departments, and employees. This is commonly
referred to as top-down or command and control management. Management directs and controls
initiatives, projects, and employees. Management knows all, sees all, hears all, and controls all.

Lean organizations: Managers act as teachers, coaches, and mentors for employees. They teach
employees Lean concepts and tools and allow them to apply these concepts and tools within the context
of their position. This is commonly described as an empowered employee environment. Employees
understand company MVV and all organizational measures are aligned with customer expectations.
Employees are the primary drivers of process improvement, service delivery, and product
quality.

FUNCTIONAL FOCUS VERSUS BUSINESS PERFORMANCE FOCUS

Traditional organizations: Focus on functions, departments, and employees as vertically

aligned independent entities. Many traditional measures on these functional areas are viewed in a
tunnel without consideration of customer requirements. As a consequence, these measures are often
conflicting and the organization ends up
rewarding behavior by the employee, function, or department that is not aligned with customer
requirements.

Lean organizations: Focus on business performance from the customer viewpoint. All
Lean Educational System
 Six Sigma deployment process outline
3. Determine metrics and current performance levels
1. Deployment goals 3.1. How will we measure key value streams?
1.1. Business level 3.2. Are our measurements valid, accurate, and reliable?
1.1.1. Increase shareholder value 3.3. Are the processes stable (i.e., in statistical control)?
1.1.2. Increase revenues 3.3.1. If not, why not?
1.1.3. Improve market share 3.3.2. What are the typical cycle times, costs, and quality
1.1.4. Increase profitability and ROI opportunities
1.2. Operations level of these processes?
1.2.1. Eliminate hidden factory (i.e., resources used because 3.3.3. What is the short- and long-term process capability?
things 3.4. Detailed as-is and should-be process maps for critical
were not done right the first time) processes
1.2.2. Improve rolled throughput yield and normalized yield 3.5. How does current performance relate to benchmark or best-
1.2.3. Reduce labor costs in-class
1.2.4. Reduce material costs performance?
1.3. Process level 4. Breakthrough to new performance levels
1.3.1. Improve cycle time 4.1. Which variables make the most difference?
1.3.2. Reduce resource requirements 4.2. What are the best settings for these variables?
1.3.3. Improve output volume 4.3. Can the process be redesigned to become more robust?
1.3.4. Improve process yield (ratio of inputs to outputs) 4.4. Can product be redesigned to become more robust and/or
1.3.5. Reduce defects more easily
1.3.6. Reduce variability produced?
1.3.7. Improve process capability 5. Standardize on new approach
2. Identify key value streams 5.1. Write procedures describing how to operate the new
2.1. Which processes are critical to business performance? process
2.2. How do processes deliver value to customers? 5.2. Train people in the new approach
5.3. When necessary, use SPC to control process variation
5.4. Modify inventory, cost accounting, and other business
systems to
assure that improved process performance is reflected in bids,
order
FIVE PHASES OF AN LSS IMPROVEMENT PROJECT
There are five phases that an LSS improvement project must go
through:
Phase I: The selling phase
Phase II: The planning and training phase
Phase III: The rollout phase
Phase IV: The measurement of results phase
Phase V: Sustaining the concept and holding the gain phase
Lean Management System: Organizational Master Plan

Phase I, you evaluate the methodology. This means, beginning to generate interest in
the development and deployment of a Lean management system.
Phase II, you will begin to define the opportunities within your organization.
Phase III, you develop an implementation plan.
Phase IV, you implement the Lean management system plan.
Phase V, we define and deploy an effective measurement system.
Phase VI, after standardizing the process, we turn our focus to continuous improvement
activities.
PHASE I: EVALUATE THE LEAN MANAGEMENT SYSTEM METHODOLOGY
Activity 1: Starting the interest in Lean management systems
Activity 2: Search for knowledge on Lean management
Activity 3: Complete the Lean management system assessment (LMA)
Activity 3.1: Identify gaps between current organizational activities and LMA criteria
Activity 3.2: Evaluate current socio-technical system
Activity 3.3: Evaluate current Lean educational system
Activity 3.4: Evaluate current Lean change management system
Activity 4: Analyze application of a Lean management system ( conceptual evaluation)
Activity 5: Prepare management report (deploying a Lean management system)
Activity 6: Present findings to top management

PHASE II: DEFINE OPPORTUNITIES WITHIN THE ORGANIZATION

Activity 1: Define the KCFs and develop as-is statements for each
Activity 2: Conduct a study to define and quantify the opportunities
Activity 3: Compare to presentapprovedimprovement plan projects to be sure there is no
overlap
Activity 4: Present the results to the top management
Activity 5: Assign a project manager and project team
Activity 6: Approve Phase III budget

Key Controllable Factors (KCFs), which are sometimes called Key Business Drivers (KBDs), are
the things within the organization that management can change that control and/or
PHASE III: DEVELOP THE IMPLEMENTATION PLAN
Activity 1: Develop vision statements for each of the KCFs
Activity 2: Define desired behaviors
Activity 3: Prepare individual improvement plans
Activity 4: Combine the individual improvement plans
Activity 5: Prepare a costbenefit analysis (ROI)
Activity 6: Develop a set of performance goals
Activity 7: Prepare the Lean management systems project plan
Activity 8: Present the Lean management systems project plan to management
Activity 9: Include the Lean management systems project plan in the strategic business plan
and the organizations annual operating plan

PHASE IV: IMPLEMENT THE LEAN MANAGEMENT SYSTEM PLAN

Activity 1: Assign implementation teams
Activity 2: Define what will be done with surplus people
Activity 3: Assign a project manager to all stand-alone projects starting in the next 6 months
Activity 4: Measure and/or define the as-is status
Activity 5: Form and train the implementation project team and the subproject team members
Activity 6: Conduct an organizational change management assessment and develop
appropriate mitigation plans
Activity 7: Train the people who are impacted by the change
Activity 8: Implement the change
Activity 9: Conduct Phase III tollgate
PHASE V: MEASURE THE RESULTS
Activity 1: Define what measurement should be affected by each of the Lean management system
projects.
Activity 2: Define what, where, and how improvement will be measured.
Activity 3: Define how changes in behavioral patterns will be observed.
Activity 4: Develop and implement the reporting system.
Activity 5: Train the related personnel in how to collect data.
Activity 6: Collect and analyze the data.
Activity 7: Conduct the Phase V tollgate.
Activity 8: Reward the installation and Lean management system teams based on their Impact.

PHASE VI: CONTINUOUS IMPROVEMENT

Activity 1: Sustaining the gains
Activity 2: Ongoing improvement