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LEAN Process Innovation & Sustainable Continuous Improvement… Our Most Formidable Competitive Weapons

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Volume 01, Issue 07 May 19, 2014

CONTENT

THE LEAN EXCHANGE: HELP TO ACCELERATE TO YOUR LEADING EDGE

3Investigating

LEAN Accounting

4Seeing the Waste

We Live In

5Helpful Tips

6Building capability

2Mississauga 2014 LEAN Conference

ends on a high note

A vision is only part of a successful company’s business plan.

Produced by:� Dave HoggTelephone:� 519-741-9732

Email:� dhogg@rogers.com

Thank you to our partner:

The ATJTake…

Things are stirring. While CETA has Canadians dreaming of a bright future — so, too, is the US thinking about US‑Asian possibilities. We’re now surrounded with impressive opportunities and initiatives such as Saskatchewan’s province‑wide Manufacturing Action Plan, not to mention their LEAN pioneering in healthcare, education and government. Last week in Newfoundland, a full house came together around enhancing manufacturing productivity — and became very animated when five companies demonstrated their LEAN improvements.

Last week’s AME Canadian Lean Conference in Mississauga — complete with astronaut Chris Hadfield —

connected with Manitoba CME’s Dare to Compete leaders to accelerate the preparation of their co-delivery of the 2015 AME/CME LEAN Conference next June 1-4 in Winnipeg.

Check out this issue — especially if you see value in driving more waste out, accel-erating change or even investigating LEAN Accounting. Yes, we have a long way to go but it is refreshing to finally see LEAN in the middle of conversations where survival, customers, waste and sustainability issues are involved.

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Canadian astronaut Chris Hadfield brought this year’s AME Canadian Regional LEAN Conference to a

stellar conclusion last Thursday with his keynote presentation The Sky Is Not The Limit. His most unique and personal style had a standing room only crowd hanging on his words and images right to the final standing ovation.

For those who were not there — our best recommendation is to acquire his book An Astronaut’s Guide to Life on Earth: What going to space taught me about ingenuity, determination, and being prepared for anything. It’s been on the Toronto Star’s bestseller list for 16 weeks and it has solid depth and value. And besides, what manufacturer could not benefit from an out-of-this-world perspective on ingenuity, determination, and being prepared for anything?

But Hadfield was not the only star. Although attendance was down this year because of last October’s huge LEAN International Conference in Toronto, every attendee ATJ interviewed said they took away value and knew where they were going to deploy it. Since the evaluation surveys have not gone out yet, Here are some highlights of the key elements of this high quality event for practitioner-to-practitioner exchange.

Practitioner PresentationsThe calibre and diversity of presenters provided the differing perspectives necessary to yield highly innovative attributes. Just scan the participants from the US and Canada who openly shared their practices. For more information check out the website at www.measureupforsuccess.com while it is still up.

Autoliv: Teachers as trainers — Boeing Canada: Build a True Learning Organization with Lean Leadership — Bombardier Aerospace: Nurturing a Continuous Improvement Culture — City of Mississauga: Developing a Performance Measurement Culture — COM DEV International Ltd.: Low-Tech, High-Touch Visual Process Management — Winnipeg Police Service: Cops & Kaizens — S&C Electric: Daily PDCA Coaching/Toyota KATA — Symcor: Establish a Stable Culture Committed to Excellence — St. Boniface Hospital: Transformational Leadership for Lean Health Care — SigmaPoint Technologies Inc.: Connect PDCA to your True North Vision — Etratech Inc.: Getting Started on Your Organization’s New Work Culture — Ontario Drive & Gear: Stabilize Processes through A3 and Daily Management — Rouge Valley Health System: Linking Process Improvement & People Development — ShawCor Ltd.: Value Stream Mapping in Finance

High Value Workshops •  W3 Group Canada & US:� Toyota Kata: A better

way to lead, manage, and develop people. This workshop drew the highest attendance. They delivered Mike Rother’s research revealing the powerful — and unseen dimensions — of the Toyota Production System (TPS) which generated quite a buzz when Rother explained the power of the Routines and Thinking at the Toronto AME lean Conference last October

•  HPS Inc.:� Training Within Industry: Engage people, create a structure for standardized work and continuous improvement. This workshop demonstrated the increasingly popular Training Within Industry (TWI) solution for companies looking to develop specific skills that they will be able to sustain.

•  Tremco Commercial Sealants & Waterproofing:� Lean Management Systems — making daily improvements a way of life

•  Fujitsu Canada:� Innovation through Collaboration — tapping into the creative power of your workforce to achieve lean transformation

•  LeanCor:� Building the Lean Fulfillment Stream: Supply Chain and Logistics Management — How to shorten your organization’s order–to–cash cycle

•  Pinnacle Partners Inc.:� Choose the Right Measures — Link metrics and values throughout the organization

Area Tours •  Boehmer Box — Bombardier Aerospace

— CGL Manufacturing — Celestica Inc. — Ontario Drive & Gear Limited

Mississauga 2014 LEAN Conference ends on a high note

Preparation for 2015 AME/CME LEAN Conference in Winnipeg is underway

You CAN Help! The organizers for 2015 are now scouring the world for best practices for next year’s conference in Winnipeg. If you see a spectacular example of LEAN thinking in action,

please email Ian Marshall at ian.marshall@cme‑mec.ca. Or, for more

information call 224‑232‑5980 or email AME at conference@ame.org

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THE LEAN EXCHANGE: HELP TO ACCELERATE TO YOUR LEADING EDGE

Investigating LEAN AccountingCatching up with Practical LA author Brian Maskell

In the early 90s, North American Manufacturing Consortia members investigated LEAN Accounting (LA)

because it promised value based on the use of value streams, LEAN thinking and process simplification. One of the leading experts on LA, Brian Maskell, brought it to a nervous group of companies in existing Canadian consortia in 1999. In those days, accounting firms had little tolerance for anything that differed from preexisting accounting practices so acceptance was slow.

In the midst of the huge recession, at an AME meeting of 45 Canadian and US manufacturers in Orlando, a very ani-mated discussion broke out when it was discovered that only three companies felt they were in good shape. They attributed their success to prior adoption of LA. In the course of the discussion companies like Parker Hannifin, (one of Maskell’s clients) were profiled. Since then, regular LA summits have been held as it contin-ues to grow, albeit slowly.

If there is genuine leverage to be gained from adopting LA, now may be a good time to consider implementing it. For those who are interested, you have only two to three years to put it in place in time to take advantage of what Canadian Manufacturers & Exporters President and CEO Jayson Myers refers to as the “Wayne Gretzky of economic trade deals,” CETA. It’s logical that those who will win will probably be those who’ve gained an edge through their accounting and financial savvy.

Last week, Maskell presented his key-note Making More Money with LEAN at the Canadian AME Regional Conference in Mississauga. To bring us up-to-date, we asked Maskell for the straight goods on LA in 2014. We thank him for sharing his current thinking.

ATJ: Why should companies consider LEAN accounting?

BM: You’ll have heard this many times before, but the reason is very simple: by using LEAN accounting you will make a lot of money!

LEAN principles and methods are of course a powerhouse for making money. The purpose of LEAN accounting is to achieve all the financial potential of your company’s LEAN strategy. In fact, LA is designed to motivate, monitor, and maximize LEAN thinking so we achieve the greatest financial benefit both short term and long term.

ATJ: Just to clarify, how do you define LEAN Economics? Most LEAN companies know by now that focusing on LEAN does eliminate waste from their processes. Doesn’t this cut costs?

BM: Yes, to a certain extent but, generally, not a great deal. Mostly, when you eliminate waste you still have the same people, the same machines, the same plant, the same overheads, etc.

Not much of the major costs have gone away. But what has really happened is that you have freed up a whole bunch of capacity. The financial impact of LEAN improvement is based not so much on the waste you’ve removed, but on what you do with the newly freed up capacity.

LEAN Economics works like this: Eliminating waste frees up capacity, which in turn enables the use of this capacity to design, make, and sell more products and services. If you can go from selling 1000 units a week to 1200 a week, what’s

the cost of the extra 200 units? Nothing. We have increased our productivity with no additional cost. That’s LEAN Economics. Grow the business without increasing your costs (besides the costs of materials.)

ATJ: OK, so LA supports and motivates LEAN Economics. But where is the significant impact?

BM: LA is itself LEAN and low-waste because of the many transaction reductions. For a quick look at how this works, here are five important aspects of LA:

1. Fast Information:� LA provides informa-tion that everybody in the company can immediately understand and use. This means that you have much better control over, and improvement of, costs. — especially when you have weekly or even daily financial reports. Because, unlike standard costing, people understand what the numbers mean, and can use this to control their spending.

2. Decision Making:� LA gives you better information, which leads to better deci-sions, which in turn leads to better sales and higher profits. When making deci-sions and pondering ‘what-ifs’, we have information showing the true bottom line impact of these decisions. It does not have all the complicated accounting methods like allocations, overheads, absorption, and so on; these things distort decisions in standard costing.

3. Grows People:� LA motivates people to keep LEAN improvement moving forward. And, to make improvements

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day-by-day and week-by-week. If, for example, they work to cut batch sizes to single-piece-flow, improve the rate of flow, reduce inventory, and only make to customer pull — the LEAN accounting and measurements will show the benefits of those changes.

4. Matched to LEAN:� Traditional management accounting is designed for mass production where you have large batches, long lead times, high inventories and the so-called economies of scale. The traditional measurements and financial information show that bad things are happening when in fact, excellent LEAN improvement is be-ing made and the company is prospering. Traditional management accounting pushes back against LEAN and can undermine your LEAN strategy.

5. It’s Simpler for All:� LA also has simple methods that show the actual bottom-line financial benefits of the LEAN improvement projects people are working on. This means that LEAN companies can maximize the financial benefits of their LEAN improve-ment work by selecting the right kaizen events and other changes.

LEAN accounting is a lot less work. LEAN accounting does not need the 1000’s and1000’s of computer transactions required by standard

costing and variance analysis — and yet the business is under better control and making increasingly more money.

ATJ: Can you touch on LA’s impact on overheads and transactions and how they are handled?

BM: LEAN accounting does not have compli-cated allocations and overheads. And that’s because we manage the business around the value streams, not the individual production work orders, products, or cost centers. The business is under better control because we use timely and local visual tracking and problem solving.

Eliminating these wasteful and confusing transactional systems frees up people’s time so they can create more value and grow the business. One plant controller I was speaking to at the AME Conference in Toronto recently told me that he now spends half the time he used to spend on financial reports. LA has given him the time to do analyses and help the operations people with their LEAN im-provements. In fact, he is now designated a LEAN leader as well as a controller.

LA also enables people at lower levels in an organization to make more decisions,

which leads to better decisions, and frees up the managers and leaders to focus on strategic issues and customer value instead of being heavily involved in day-to-day tactical problems.

We all must keep in mind that LA fully adheres to GAAP (Generally Accepted Accounting Practice) and is completely compliant with all external reporting requirements in the US and other countries.

ATJ: It sounds like LA, properly implemented, could help motivate everybody in a com-pany to accelerate LEAN growth.

BM: Yes.

ATJ: So LEAN accounting monitors and controls the value stream processes in timely and effective ways and lets LA maximize revenue, profits and cash?

BM: Absolutely! That’s a good way to look at it. And what’s more, it is not a one-time gain. LEAN companies continue to work year after year to eliminate waste, free-up capacity and then design, make, and sell more products and services, that in turn, lead to unprecedented financial benefit.

Seeing the Waste We Live In Getting Intimate with Muda — Mura — Muri

A few years ago, a CME Innovation Insights tour brought 24 Canadian manufacturers into a UK factory.

They were welcomed by the managing director with the words: “we are so glad you are here. We know that 75 per cent of the waste in our plant is here, not because we want it but because we cannot see it. We live in it every day, to us it is invisible. We need your eyes to help us see what we cannot.”

We were not expecting this sudden reception and it gave us much to think about. As we flew home over the Atlantic, the simple concept of looking for waste

we can’t see made us resolve to make our plants tour ready to accelerate the enthusiastic elimination of waste.

If you corporately define LEAN simply as the elimination of waste everywhere while continuously adding value for your customer, waste will begin to melt. But by closely seeking different kinds of waste,

you can accelerate its elimination. For starters, the Lean Enterprise Institute reminds us to look deeper into type two waste (those you can’t eliminate quickly), and a type two waste (those you can get rid of quickly, using Kaizens).

But if you really want to delve into waste, and perhaps become a Boeing

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wastologist, then Muda, Mura and Muri will become your best friends. Muda is simply waste that comes from any activity that consumes resources without creating value for the customer. Mura is any form of waste arising from uneven-ness in an operation. It creates a lack of flow. Muri is waste derived from over-loading equipment, processes or people. It’s all about stressing of overburdening things beyond their normal performance limits. Overburdening leads to situations that are not sustainable.

How About Muda, Mura and Muri in the Kitchen?By now, you know LEAN can apply in any  sector. Emmanuel Jallas’ musings caught our eye at http://www.lean.org. As he explains it, for more than 40 years he has had difficulties separating the egg yolks from the egg whites. He keeps seeing three kinds of waste while attempting the process.

The Muri (overburden) waste lies in the inability of the process to break the egg into two equal parts every time. Mura

(variation) wastes occur both when shell parts mix with egg whites or yolks, and, when spots of egg yolk appear in the white when the yolk is tossed from one half-shell to the other. The Muda wastes include his time and of course, the wasted eggs.

So how do we deal with these three evil wastes (overburden, variation and waste) and how they interact with each other? If you’re curious, click on this neat link to see one solution: here’s the how‑to on separating egg whites from yolks.

Tips for transforming cultures from an authentic leader Practical advice from Ingersoll Rand’s Dan McDonnell

At last week’s AME LEAN Conference, keynote speaker Dan McDonnell, operational excellence vice president for the Ingersoll Rand Corporation, shared some very

practical advice for anyone attempting a cultural change in their corporate environment. McDonnell was previously in charge of the LEAN transformation at the General Electric diesel locomotive plant in Erie, Pa.

During that assignment they drove the manufacturing cycle time for their 420,000 pound monster locomotives down from 40 days to 10 days. This clearly indicates that a cultural transformation occurred. As CME so often states, “Leadership makes the difference” — which is the stuff that is needed for a successful outcome.

The following 2 slides provide insight into the leadership style being unreservedly driven by Michael Lamach, the hands-on-CEO of Ingersoll Rand. In fact, Jim Womack feels he is the most knowledgeable corporate leader alive when it comes to understanding LEAN. You will find Lamach comfortably walking his company’s shop floors or in the midst of Gemba walks, talking with those who add value for the customer. One of his KATA routines is to follow John Shook’s pattern of “Go See — Ask Why — Show Respect” to everyone.

When Change meets Culture… Culture Wins Every Time!After more than 30 years of dealing with organizations of all kinds, I believe this to be true. But how does one

start changing a culture? It is one of the most difficult and challenging things to do to turn around a company. Culture is a huge barrier and it will take time to change it. In his keynote presentation, McDonnell emphasized both the thinking that a manager must come to grips with and acquire, and the behaviours he or she must adopt as well. The bottom line is that leaders must be prepared to change their thinking and their behaviours. This is a feat not all leaders will be able to stomach, which is why not everyone is cut out to lead.

This slide captures McDonnell’s first message, which is to flip the pyramid. In other words, if you are a leader, your role

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THE LEAN EXCHANGE: HELP TO ACCELERATE TO YOUR LEADING EDGE

BUILDING CAPABILITY

Books: .................. Practical LA: A proven system for measuring and managing the lean enterprise, second edition, Brian H. Maskell, Bruce Baggaley, Larry Grasso Real Numbers — Management Accounting in a Lean Organization, Jean Cunningham Orest Fiume, www.ocapt.com Managing to Learn, John Shook — Using A3 management process to solve problems, gain agreement,mentor, and lead, www.lean.org, in Canada www.ocapt.com

Websites .............. http://maskell.com and www.Maskell.com for free information and Blog www.ocapt.com, for more books and resources on LEAN and LA

Webinar ............... June 3rd, 2:00 pm. A Toyota KATA case study for lessons learned and results so far at GKN http://www.industryweek.com/webinar/kata‑lean‑journey?partnerref=e1

is to support those who actually add value for the customer. You are no longer the one who orders others about, but rather someone who brings brings water to your value-adders need so they can do their work. And while that can be quite a change in thinking for some, at Ingersoll Rand they do it every day with increasing comfort.

As McDonnell put it, “you have to look at operators as skilled surgeons. Your role is to provide them with what is needed such as resources, training and support.” In your new role, you are a developer of people!

Your transition begins by becoming comfortable with the five leadership principles shown on the following slide. Take a moment to carefully think about each of them.

But, thinking is one thing and behaving is another. Keep the words of John Shook in mind (you might stick them on the wall for a while) when he said, “You cannot think your way to a new way of acting. You can only act your way to a new way of thinking.”

After the the previous slide is fully digested and has become part of a leader’s persona, the next step is to consider behav-iours. We talk about the need to walk-our-talk as leaders. This is fundamental — if we are to be seen as an authentic person capable of building trust. Leadership behavior is the key to moving cultures in the right direction.

McDonnell has captured some of the key behaviours, which will come naturally once a leader is comfortable with the previous thinking.

You are getting close to the new way of leading when a problem happens and your reflexive KATA propels you to the site of the problem to get the facts, to help and support your staff and to see the problem in its natural state. Once there, you ask questions to understand what happened — never to judge.

Ask the right questions and — explore the responses. If you are expecting to build trust that encourages people to share their thinking, get good at being ‘genuine’ and ‘authentic’ as you listen generously to pick up on emotions as well as the facts. Get excited with your staff as they uncover solutions and data, and always show your respect by thanking them for the value they have provided. As John Shook put it, “People do the work and must be developed with expectations of habitual practice and pattern (KATA), along with an ever present mindset of Kaizen and continuous problem solving.”