Lean Benchmarking and value chain optimisation

www.LeanBenchmark.org

Business Growth Opportunitiesthrough

Value Chain Optimisation

Presented byMark Knowlton MBA (KPS Ltd)

SUBCON 2012 NEC Birmingham Wednesday 13th June


My Background

1979 Engineering Apprentice ,Draughtsman

1998 Plant Manager, Manufacturing Director

1990 Engineering, Project Mgt. + Lean training Uni’ of Michigan

2006 Lean Consulting

2003 Business Adviser, gained MBA

2012 Clients


Contact Details

Contact:Mark Knowlton MBA

KPS Ltd

Tel 01843 292681Mob 07880 721471Email [email protected] Blog www.knowlton.org.ukTwitter @MarkKnowlton

http://www.knowlton.org.uk/


Lean/Cash flow 5 golden rulesThe 8 Lean CompetenciesSupply Chain Case Study

Benchmarking for Growth

Lean & Business Growth


Lean/Cash flow 5 Golden rulesThe 8 Key CompetenciesSupply Chain Case Study

Benchmarking for GrowthYour Next steps?


Time

£

Profit

Cost Plus (In the past)

ManufacturingCost

Company Asking Price Global

Market Price

Cost Down (Now)

Profit

Value Chain Cost

End Customer Price Reductions

Internal Cost Increases

+Supplier Cost

Increases

Need for Continuous

Improvement

Pressure to reduce Costs and “Do More with Less”

Growth vs. squeeze on profit

1. Improve

2. Do nothing

3. Decline

Time

Improvement

= Your Company

= Competitor

7Do nothing = fall behind the competition as they improve !

Improve or die


Business GrowthDefined as:

Generating significant positive cash flows for future reinvestment.

There are only two ways to grow a business…Increase turnover or Reduce costs

(or both)

So…how can ‘Lean’ be a driver for growth?

• Increase Capacity• Remove Unnecessary Cost.• Improve Customer Lead Times.• Control Inventory.• Optimise Workplace Layout & Space. • Deliver Better Quality & Service.• Empower Staff and Increase Morale • And…Improve cash flow!

A low cost approach to improvement thatallows companies to:

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Lean…a driver for growth


Lean improves Cash FlowHow can Lean improve cash flow?The production batch size affects everything:

Large batch sizes = higher WIP and Stock levelsMore cash required.

Small batch sizes = less WIP and less stockLess cash required.

…try the ‘Lego’ – lean simulation exercise


Lean/Cash flow 5 golden rulesThe 8 Lean CompetenciesSupply Chain Case Study




Lean – impact on Cash FlowFive Golden Rules

Rule # 1 - Speed up the Order Fulfilment cycle

• From order receipt to cash in the bank• Streamline (faster) sales order processing• Map process, Identify and eliminate Waste



Rule # 2 - Only make what you can sell

• Talk to your customers – what is their real demand?• Make to Order• Work towards zero stock (reduce gradually to expose hidden issues)



Rule # 3 - Only buy what you need

• Local supply where possible (JIT)• Kanban replenishment system (demand driven)• Smaller quantities, greater delivery frequency



Rule # 4 - Reduce Work In Progress (WIP)

• Apply lean principles, reduce batch sizes, WIP and create balance flow• Don’t start production until you have all materials• Work towards ‘single piece flow’



Rule # 5 - Collect what you are owed

• Invoice immediately • Identify and fix reasons for non payment• Rigorous debt management process

Lean is a business improvement technique

focused on delivering Value to the customer

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Lean Principles – a quick reminder…

Continuous Improvement

Respect for

People

Best Quality + Lowest Cost + Shortest Lead Time Best Safety + Highest Morale

Plan - Do – Check – Act

Lean Principles

PDCA Cycle repeated to create continuous improvement

Time

Performance

“Continuous”improvement

Plan

Do

Check

Act

1. Customer Value

2. Map the Value Stream

3. Making Value flow

4. Pull System

5. Pursue

Perfection

Lean Principles

Principles Tools & Techniques1. Customer Value SIPOC, Enhance Value Add Activity. Quality

Improvement Tools, Root Cause Analysis.

2. Value Stream Value Stream Mapping, Process Mapping, 8 Wastes, Hand off Charts, Spaghetti Diagrams.

3. Flow Load Levelling, waste reduction, 5S Workplace Organisation, Line Balancing, TPM, OEE, SMED, SOP’s

4. Pull Takt, Kanban, Visual Management

5. Perfection Continuous Improvement, PDCA, 6-Sigma, KPI’s , Knowledge Transfer

Applying Lean Tools

Overproduction

Waiting & Delays Movement of People

Inventory Over Processing Defects

Transport

Skills!

8 Wastes

TRANSPORT INVENTORYMOVEMENT

WAITING AND DELAYSOVERPRODUCTIONOVER PROCESSINGDEFECTSSKILLS

The 8 WASTES


Cash flow 5 Golden rulesThe 8 Lean CompetenciesSupply Chain Case Study




8 Key CompetenciesLean is NOT just about tools and techniques!


8 Key Competencies1. Lean Leadership2. Customer Focus3. Empowerment4. Communication5. Core Processes6. Machines and Equipment7. Support Processes8. Supply Chain


1. Leadership• Lean strategy & objectives linked to business plan• Management visibility – “GEMBA” walks• Recognise and celebrate success.

MAS –SE Best Practice winners 2010 (Williams Renault Oxford)


2. Customer Focus• Quality – Be proactive ,fix the root cause• Schedule completion - On Time In Full (OTIF)• Industrial marketing - Factory is a “Showroom”


3. Empowerment• Develop motivated, Self Directed teams• Shop floor ownership of continuous improvement• Allow staff to redesign their own processes


4. Communication• Open – two way, encourage feedback• Communications plan, daily - weekly - monthly• Team display boards


5. Core Processes• Begin with 5S – workplace disciplines• Value Stream Mapping to identify savings

VALUE STREAM MAPPING

Step 1 Map the ‘Current State’ - Capture ideas - Identify Quick wins

Step 2 Agree the ‘Future State’ vision

Step 3 Map the ‘Future State’ processStep 4 Project ScopingStep 5 Implementation


6. Machines and Equip’• Maintenance Plan• Daily Operator checks and Technician?• SMED + TPM


7. Support Processes

• HR ,IT, Engineering’s role = support Manufacturing• KPI’s Balanced Score Card Approach

www.LeanBenchmark.orgBalanced Score Card example


8. Supply Chain• Procurement Strategy, Portfolio Planning• Develop appropriate supply solutions:

Kanban - Consignment - Vendor Managed – JIT

Low

High

CRITICAL

Contingency Planning

STRATEGIC

Build Partnership

TACTICAL

Contract Out / Kanban

LEVERAGE

Short term agreements

High

VOLUME

VALUE


Cash flow 5 Golden rulesThe 8 Key CompetenciesSupply Chain Case Study



Supply Chain improvement in action

with

MAS South EastFacilitated by Mark Knowlton

(2011)

Supply Chain Optimisation


Background

• Request from Kent Best Practice Club members• Need to address supply chain issues• “Win-Win” opportunity• Impartial facilitator

BackgroundSupply Chain Optimisation

Group 1 – MEPSteve Poulten – MEPMark Foord -Abbey Precision Janine Jarrett -Abbey PrecisionJason Pither - Turner Tools

Group 2 – CumminsJon Huxtable - CumminsSiddharth Raote - CumminsEmma Booth - CumminsChris Johnston - Stevens & Carlotti Ian Hobbs - Stevens & Carlotti(

Group 3 – Silent GlissPaul Head – Silent GlissRob Moore - Spa Aluminium Richard Godbolt - Spa AluminiumJulie Shilling - Euromark Mark Durley – Euromark

Group 4 – Johnston SweepersSarah Hester - Jonson sweepersRichard Cardwell Jonson sweepersPhil Chapman - Kent Metal DevelopmentsMark Edge ABT - Products John Gough - ABT Products Mark Hignett - ABT ProductsDavid Simmons Hydraquip Alan Scott HydraquipGlen Baker Raker - Eng Services

Supply chain groups

1. Lean Awareness training for Suppliers2. Supplier issues identified3. Map the Value Stream4. Supply Chain issues identified.5. Agree an improvement plan

Aims and Objectives

Step 1Lean Awareness trainingfor Suppliers

Step 2Suppliers identify their own (internal)opportunities

Step 3Together identify Supply Chainopportunities.

Supply Chain Optimisation

42

Frequent deliveries Rapid deliveries JIT Service Kanban System Our new equipment Good Packing / labelling Quality Long term relationship Repeat Orders Quality of service Reliability Online Ordering

Late payment Our Suppliers Long winded ordering process Poor quality drawings Customers chasing orders Miss-picking Lack of order numbers Communication Picking errors To many people involved Order process not measured Partnership Sales order process Lack of Tooling investment

Supplier Perspective

43

Good Quality Fast turnaround Reactive Flexibility Knowledge and skills Internal improvements Lean Production Team work Low cost products Factory layout investing in equipment Good Reputation Technical Support

Reactive not proactive Some late suppliers Unreliable suppliers Stock control / ordering Slow machines Wasted movement of parts Too much paperwork Communication Scheduling Shop floor Layout Equipment reliability Need to delegate SOP’s

Customer Perspective

44

Area Issue Impact

Lead time Request to change Duplicated work + waste

Quantity Changes Increase or decrease Cost impact / Storage space

Drawing accuracy Change control, Spec, clarity Cost / Lead time / errors

Systems / Process Incompatible Lost time / Duplication

Information Missing or incomplete Lost time

Payment Late or delayed ‘On Stop’ Delays/cash flow

Key Issues Summary

“A good system to bring suppliers and customers together to improve future prospects.” Mark Edge, ABT Products.

“A great fresher – we now need to transfer to action both within our business and between our business and our customer.” Mark Hignett, ABT Products.

“Good interaction by the host companies and within the groups and subgroups.” David Symons, Hyrdaquip.

Benefits and Feedback


SummaryInvolve your customers & suppliers in a VSM workshop

…what’s in it for them?

Health warning!• Start internally first – control the direction.• Need good customer / supplier relationships• Group session or individual workshops?


Supply Chain OptimisationEmployee BenefitsMulti skilled team

Better sense of ownershipHigher Moral

Customer BenefitsIncreased flexibility

Fewer defects and errorsFaster, high quality of service

Supply Chain benefitsReduced cost of poor quality

Increased capacityIncreased throughput

Reduce Cost


Cash flow 5 Golden rulesThe 8 Key CompetenciesSupply Chain Case Study




‘If you don’t know where you are going …any road will lead you there’

Lewis Carol

Benchmarking


To compare against a standard point of reference

A systematic process for identifying and implementing best practice.

In practical terms…It’s about learning from the experiences of others

Purpose of Benchmarking


Research data kindly provided by : Terry Schilling (Director) GBN

www.globalbenchmarking.org

http://www.globalbenchmarking.org/


450 Responses 44 countries Report published by GBN in 2010

Research Sample Group


INFORMAL - Comparing with Peers and ColleaguesActively encouraging employees to learn from the experience and expertise of other colleagues and organisations through comparing practices and processes e.g. through best practice visits, conferences, best practice websites, networking

FORMAL(a) Performance BenchmarkingComparing performance levels of a process/activity with other organisations

(b) Best Practice Benchmarking Following a structured process for comparing performance levels and learning why better performers have higher levels of performance and adapting/implementing those better practices

Types of Benchmarking


Benchmarking vs. other Tools

Tools that are likely to increase significantly in popularity over the next three years are: • Performance Benchmarking,• Informal Benchmarking• SWOT Analysis• Best Practice Benchmarking.

Most used out of the 20 improvement tools are Mission and vision statements and Customer surveys (77%). Closely followed SWOT (72%) and then Informal Benchmarking (68%)


• 56% Use Benchmarking

• Performance Benchmarking is the most used tool

Benchmarking Trends


Benchmarking Trends

Growing interest in China, the Middle east and Africa


Business Benefits

1. Improved Performance2. Improved processes3. Learning from Others4. Strategic issue addresses5. New Products and Service6. Encourage Cultural Shift7. Business Excellence


Critical successes factors

1. Management Support.

2. Reliable comparative data.

3. Understanding own processes.

4. Clear project objectives.

5. Organisations readiness to change


1. Management commitment is vital.2. Requires a structured approach with clear objectives3. Reliable comparative data / willing Partners essential4. Business benefits both Qualitative (Culture shift) and

Quantitative (Measurable performance gain)Benchmarking…a business improvement tool that is growing in

popularity.


Current Users - sample


Comparative data Manufacturing 178 (245)Healthcare 28Automotive 21Furniture 16Aerospace and defence 15Finance / Professional services 11Food and Horticulture 9Construction products 8Printing 3Marine 2Other 35

Total 295


9%

48%

32%

11%

0 to 9

10 to 99

100 to 999

1000 to 9999

Company Size mix


What is LeanBenchmark?

• An online tool comparing Lean performance• Assessment, Analysis, Recommendations• Personalised LeanBenchmark™ Report

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There were a number of benefits to our organisation; this gave us independent feedback on the status of our lean implementation, it also allowed us to compare and highlight strengths and weaknesses with others in the lean community and analyse our current status.

The gap analysis offered useful suggestions for improvement projects. The assessment also focused on cultural and organisational transformation rather than just the individual uses of lean tools.

Philipp Schuell (Lean Specialist) Trumpf GmBH & SPI Lasers Ltd.

Responses from businesses…cultural transformation

Users comments

67

If you are interested in making improvements within your business then I would seriously recommend that you consider using this tool as a part of your continuous improvement tool kit. It really helped to put my company’s Lean competencies into perspective so that we could look into the future with clear goals ahead of us. Overall I am very happy with the online Lean Benchmarking tool and with the after service provided.

The questions are clear and understandable. The report generated after the questionnaire is submitted is very in-depth. All of the information and help provided is clear, down-to-earth and informative.

Keiven Smith (Project Engineer) Cobham Microwave Ltd

…clear and understandable


Users comments

68

The benchmarking process has been really valuable, it enabled us to consider how well we are doing and where we need to focus next. It wasn’t just about seeing how well our score compared to others (although obviously this was very interesting) the recommendations within the report meant we could identify what we needed to do next.

We have now started to build our lean road map with lean objectives linked directly to the Genzyme businesses goals.

Lesley Coombes (Lean Transformation Manager) Genzyme Ltd

…see where to focus next


Users comments


Step 1 - Register


Step 2 – self assessment

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Step 3 View Results



Step 4 – Download your Report


and finally…Applying Lean principles for growth:• Remember the 5 golden rules to improve cash flow:

1. Speed up the order fulfilment cycle2. Only make what you can sell3. Only buy what you need4. Reduce WIP5. Collect what you are owed

• Value Stream Mapping – with Suppliers / Customers• Benchmark performance against sector competitors• Develop a growth plan, focus on 8 Lean Competencies


Thank you…Questions?

10 FREE LeanBenchmark™ Vouchers codes available for today's delegates

(Normal online cost £99)Contact:Mark Knowlton MBA

KPS Ltd

Tel 01843 292681Mob 07880 721471Email [email protected] Blog www.knowlton.org.ukTwitter @MarkKnowlton

http://www.knowlton.org.uk/

Lean Benchmarking and value chain optimisation

Business

Transcript of Lean Benchmarking and value chain optimisation