Lean Transformation in Office, Service, and Knowledge Work Enviroments

Lean Transformation in Office,
Service, and Knowledge Work
Environments
July 13, 2010
Company

LOGO

Your Instructor
 Early career as a scientist; migrated to
quality & operations design in the mid-80’s.
 Launched Karen Martin & Associates in
1993; applied Total Quality Management.
 Introduced to Lean in 2000.
 Specialize in Lean transformations in nonmanufacturing environments.
 Co-author of The Kaizen Event Planner;
co-developer of Metrics-Based Process
Mapping: An Excel-Based Solution.
 Instructor in University of California, San
Diego’s Lean Enterprise program.
© 2010 Karen Martin & Associates

Karen Martin,
Principal
Karen Martin &
Associates

2

Learning Objectives
Participants will learn:









Organizational benefits of Lean and timeframes for
achieving them.
Lean as an overall business management philosophy
vs. “Lean Lite” for process improvement.
Core Lean principles and tools.
How Lean shifts culture.
Key success factors in the transformation process.


3

What Lean Is….
A proven business management approach that
results in fiscal strength, customer and
employee loyalty, and organizational agility.


4

Typical Benefits Realized

0%

25%

50%

75%

100%

Lead Time Reduction
Productivity Increase
WIP Reduction
Quality Improvement
Space Utilization

WIP = Work in process


5

5

Lean Financial Benefits
5 Year Net Income - Toyota vs. GM



Toyota: + $48.7 billion
GM:
– $ 81.3 billion

DJO – medical brace manufacturer


Increased inventory turns from 7 to 22 in 4 years
 $7 million cash conversion




Grew market share from 20% to 40% in 3 years
Tripled revenues with doubled costs in 4-year period

Bank of America – $2 billion in benefits* directly
tied to Lean Six Sigma efforts over 3 years.


* Includes cost avoidance


6

Lean Financial Benefits (continued)
Park Nicollet Healthcare – Saved $7.5
million in expenses, which they reinvested in
patient care.
Global investment management firm – $3M
labor expense reduction over 18 month period


Attritted workforce/freed capacity

Medical Device Manufacturer



Pre-lean – 3.00 per share
Purchased – $78 per share (12 yrs later)


7

The Lean Enterprise
Based on the Toyota Production
System



Spawned by weaving process
Modeled after U.S. grocery stores

Popularized by Jim Womack in Lean
Thinking (1996)
Key tenets





Minimum effort and expense necessary
to achieve maximum results.
Reduce waste to create flow.
Primary metric - time


8

Performance Measures

Quality
Morale

Cost
Optimal
Performance

Safety

Delivery
9

The Toyota Way – Key Principles
 Think long term
 Have respect for people
 Standardize work
 Error-proof work
 Make problems visible
 Fix problems immediately
 Develop exceptional people
 Gain consensus
 Go and see (gemba)
 Continuously improve (kaizen)


50% effort working in the business; 50% on the business

 Reflect relentlessly (hansei)

10

Problem-Solving Steps

{

Plan

50-80%
of the
total
time

Do
Check
Act


1. Identify the problem
2. Explore the problem


What’s the true root cause?

3. Consider potential solutions


Hypothesize

4. Test solutions


Confirm hypothesis

5. Implement solution(s)
6. Measure results


Did the hypothesis prove out?

7. Adjust as needed
11

Most People…
Underestimate the power of Lean.
Underestimate what it takes to “become”
Lean.


12

Transforming Takes Time

Lean is a
long-term
business
strategy.


13

Journey to a Lean Enterprise
“Life is Good” Stage

Years 5 & Beyond
Company-wide engagement –
everywhere, all the time

Support needed only for
audits, bandwidth gaps,
continued learning

• Daily kaizen is the norm
• “Action now” dominates
• Most processes are
stabilized with minimal waste
and output variation

“Settling In” Stage

Years 3 & 4
Greater staff engagement –
reduced need for formal
Kaizen Events

Light support from
seasoned improvement
professionals

• Demonstrating learned
competencies
• Process owners manage
performance
• Becoming more proactive

“Disruption” Stage

Years 1 & 2
Small percentage of staff
engaged – project-based

Heavy support from
seasoned improvement
professionals

• Sensei-dominated
• Much mentoring & learning
• Heavy use of Kaizen Events
• Many issues to be resolved
14

Competencies That Must Be
Developed
Lean Leadership





Problem-solving
Setting clear strategies
Developing and entrusting the frontlines with tactics
Modeling Lean behaviors

Improvement Professionals




Problem-solving
Technical skills – Lean tools
Change management / psychology

Workforce


Problem-solving


15

Where to Begin?
Systematic Approach






Define product families
Select one for improvement
Create Value Stream Maps
Begin implementing improvement

The “Fire” Approach


Select a problem to be solved
 Tied to business goals



Use A3 Problem-Solving to solve it


16

Customer-Defined Value
Value-Adding (VA) - any operation or
activity your external customers value
and are (or would be) willing to pay for.
Non-Value-Adding (NVA) - any operation
or activity that consumes time and/or
resources but does not add value to the
product (good or service) the customer
receives.




Necessary – support processes, regulatory
requirements, etc.
Unnecessary – everything else - WASTE
18

Work Effort as Defined by the
External Customer

Unnecessary Non-value
adding
Necessary Non-valueadding
Value-adding

Eight Wastes (Muda)

Overproduction
Inventory
Waiting
Over-Processing
Errors


Motion (people)
Transportation
(material/data)

Underutilized
people

20

Value Stream Defined
Value Stream: All of the activities, required to
fulfill a customer request from order to delivery
(and beyond to cash received).
Value Stream
Process

Process

Process

Custom er

Customer
Request


Customer
Receipt

21

Why Value Stream Mapping?
To set strategy before diving into
tactics.
Enables us to SEE the process.
Promotes systems thinking /
seeing the whole


Helps us avoid sub-optimizing


22

VSM Goal: System Efficiency

Value Stream
Management Creates
System Efficiency

Traditional Improvement
Creates Point Efficiency
(Sub-optimization)


23

Current State Value Stream Map
Outpatient Imaging Services
Pre-register
Patient

Customer Demand:
15 patients perDay
(Takt Time 1920seconds)
8 hours per day

Schedule
Appointment

Referring
Physician

Hospital

4

3

5

Lead Time = 24 days

2

6

Lead Time = 990 mins.

Cycle Time = 30 mins.
% C&A = 100 %

Demand = 15 CTs per day

1


% C&A = 98 %

% C&A = 65 %

CT=Cycle Time
LT=Lead Time
%C&A=% Complete & Accurate

Symposium

E Pay

Excel

ADS

Internet

Meditech

Fax Order
Solutions

Waiting Room
Management
System

PACS

Auto Fax 50%
Us Mail 25%
MD Mailbox 25%
Rework Loop
via Fax 25% of
the time

Check-in
Patient
(Admitting)

Prep
Patient
(Tech)

Check-in
Patient
(Imaging)

Complete
Exam
(Tech)

Transmit
Images
(Tech)

Read/Dictate
Exam
(Radiologist)

Transcribe
Report
(MDI)

Review
Draft/Sign
(Radiologist)

Print
Reports
(Imaging)

Send
Reports
(Imaging)

5 mins.
5

5

5 mins.

% C&A = 90 %
0.0833 hrs.

3

% C&A = 98 %

0.0833 hrs.
2 mins.

6

45 mins.

2

0.75 hrs.
1 mins.

7

30 mins.

% C&A = 100 %

2

0.5 hrs.
10 mins.

8

5 mins.

% C&A = 90 %

2

0.0833 hrs.
15 mins.

9

248 mins.

% C&A = 100 %

2

10

4.13 hrs.
3 mins.

365 mins.

% C&A = 95 %

6

11

6.08 hrs.
15 mins.

960 mins.

% C&A = 75 %

2

12

16 hrs.
5 mins.

110 mins.

% C&A = 95 %

2

1.83 hrs.
1 mins.

13

120 mins.

% C&A = 99 %

6

2 hrs.
1 mins.

14

% C&A = 90 %

LT = 32.5 hrs.
3 mins.

CT = 56 mins.
CT/LT Ratio = 2.87%
Rolled First Pass
yield = 29%

Key Metrics: Time
Process time (PT)






The time it takes to actually perform the work, if one is
able to work on it uninterrupted
Includes task-specific doing, talking, and thinking
aka “touch time,” work time, cycle time

Lead time (LT)





The elapsed time from the time work is made available
until it’s completed and passed on to the next person or
department in the chain
aka throughput time, turnaround time, elapsed time
Includes Process Time, not merely waiting time.


25

Lead Time vs. Process Time

Lead Time

Process Time
Work passed
to next step

Work
Received

LT = PT + Waiting / Delays

Activity Ratio = (LT ÷ PT) x 100

26

Key Metrics: Quality
%Complete and Accurate (%C&A)




The percentage of input that’s deemed “usable as is”
by the person doing the work
% of incoming work where the downstream customer
can perform task without having to “CAC”:
 Correct information or material that was supplied
 Add information that should have been supplied
 Clarify information that should have or could have been
clearer





Measured by the immediate downstream customer
and all subsequent downstream customers.
Similar to first pass yield in manufacturing.


27

Summary Metrics: Quality
Rolled First Pass Yield (RFPY)







The percent of value stream output that passes
through the process “clean,” with no “hiccups,”
no rework required.
RFPY = %C&A x %C&A x %C&A…
Common finding = 0-15%
Multiply ALL %C&A’s, even if parallel processes


28

Outpatient Imaging
Projected Results

Metric

Current
State

Lead Time

%
Improvement

32.5 hrs

Process Time

Projected
Future State

56 mins

Percent Activity

2.9%

Rolled First Pass Yield

29%

Labor requirements
# Handoffs
Tech Turnover


1.9 FTEs
14
100% (6 mos)

29

Future State Value Stream Map
Outpatient Imaging Services
Standard
Work

Work
Balance

Demand = 15 CTs per day

Customer Demand:
15 patients perDay
(Takt Time1920 seconds)
8 hours per day

Co-locate
Schedule appt
Pre-register

Referring
Physician

Hospital

3
Lead Time = 15 days

2

6

1


% C&A = 98 %

% C&A = 85 %

Risk
Reduction
(Joint
Commision)

Symposium

E Pay

Excel

Internet

Waiting Room
Management
System

Work
Balancing

Standard
Work

3

35 mins.

4

% C&A = 98 %
0.0833 hrs.

2

Complete
Exam
(Tech)

5

20 mins.

% C&A = 100 %

0.583 hrs.
1 mins.

2

Transmit
Images
(Tech)

6

5 mins.

% C&A = 90 %

0.333 hrs.
10 mins.

Visual
Workplace

Set-up
Reduction

Prep
Patient
(Tech)

Check-in
Patient
(Imaging)

Fax Order
Solutions

PACS

Auto Fax 80%
Us Mail 15%
MD Mailbox 5%
5S

Value Stream
Alignment

Pull System
(Supplies
Kanban)

Remove
Check in
and Reduce
System Access

5 mins.

Meditech

CT=Cycle Time
LT=Lead Time
%C&A=% Complete & Accurate

2

7

120 mins.

2

Review
Draft/Sign
(Radiologist)
420 mins.

% C&A = 95 %

2 hrs.
2 mins.

8

Batch
Reductions

Voice
Recognition

Read/Dictate
Exam
(Radiologist)

% C&A = 100 %

0.0833 hrs.
10 mins.

Continuous
Flow

2

Print
Reports
(Imaging)

9

2 mins.

% C&A = 95 %

7 hrs.
15 mins.

Rework Loop
via Fax 10% of
the time

2

30 mins.

% C&A = 99 %

0.0333 hrs.
1 mins.

10

Send
Reports
(Imaging)

6

0.5 hrs.
1 mins.

11

% C&A = 90 %

LT = 11.3 hrs.
3 mins.

CT = 43 mins.
CT/LT Ratio = 6.32%
Rolled First Pass
yield = 40%

Outpatient Imaging
Projected Results
Current
State

Projected
Future State

%
Improvement

Lead Time

32.5 hrs

11.3 hrs

65%

Process Time

56 mins

43 mins

23%

Percent Activity

2.9%

6.3%

117%

Rolled First Pass Yield

29%

40%

38%

1.9 FTEs

1.6 FTEs

16%

14

11

21%

100%

25%

75%

Metric

* Labor requirements
# Handoffs
Tech Turnover (6 mos)

* Created the capacity to generate $500,000 in additional annual revenue with no
increase in labor or equipment expense.

31

Future State Implementation Plan
Value Stream Outpatient Imaging

Implementation Plan Review Dates

Executive Sponsor Allen Ward

11/1/2007

Value Stream Champion Sally McKinsey

11/21/2007

Value Stream Mapping Facilitator Dave Parks

12/13/2007

Date Created 10/18/2007
Block
#
2

Goal / Objective
Improve quality of referral

Improvement Activity

Type
KE

Implement standard work for referral
process

Owner
Sean O'Ryan

PROJ

1/10/2008
Implementation Schedule (weeks)
2 3 4 5 6 7 8 9 10 11 12

Dianne
Prichard

3, 4

Reduce lead time beween schedulingand
Cross-train and colocate work teams
preregistration steps

5, 6

Eliminate the need for two patient checkins

Collect copays in Imaging

KE

Michael
O'Shea

6

Eliminate bottleneck in waiting area

Balance work / level demand

KE

Dianne
Prichard

9

Eliminate lead time associated with
transcription step

Implement voice recognition technology

PROJ

Sam Parks

10

Eliminate batched reading

Reduce setup required

KE

Sam Parks

7

Reduce inventory costs, regulatory risk
and storage needs

5S CT supplies area; implement kanban

KE

Michael
O'Shea

12

Reduce delay in report delivery

Implement additional fax ports

PROJ

Martha Allen

12

Reduce delay in report delivery

Increase percentage of physicians
receiving electronic delivery (rather than
hard copy)

KE

1

Martha Allen

Approvals
Executive Sponsor

Value Stream Champion

Value Stream Mapping Facilitator

Signature:

Signature:

Signature:

Date:

Date:

Date:

Date
Complete

Kaizen Defined

KAIZEN
Kai

Zen

Break apart

Study

To change

Make better

Kaizen = Continuous Improvement
Kaizen Event = Rapid Improvement

34

Improvement Roles

Strategic

Who?

Accountability

Tool

Leadership

“What has to happen”

Value Stream
Mapping

“How it will happen”

Kaizen Events,
Just-do-its,
and Projects

Tactical

Middle
Management
Workforce


35

Kaizen Event – Definition

A two- to five-day focused improvement
activity during which a sequestered,
cross-functional team designs and fully
implements improvements to a defined
process or work area, generating rapid
results and learned behavior.
Karen Martin & Mike Osterling
The Kaizen Event Planner, 2007


36

When do you need a Kaizen Event?
Rapid change is desired.
Hands-on learning is desired.
You want to “bake” the improvement
process into the organizational DNA
You want to shift culture by engaging the
frontlines in problem solving.


Leadership stays out of tactical details.


5-Day Kaizen: Sample Structure
Day 1 & 2
(Plan)

Day 3 & 4
(Do, Check)
Day 5
(Check, Act)


Kick-off (executive presence)
Analyze current state
Perform root cause analysis
Design future state
Interim briefing
Design & test improvements
Obtain buy-in
Interim briefing
Finalize improvements
Train process workers & stakeholders
Present results
CELEBRATE!
38

Building a Lean Enterprise

Process
Stabilization
Tools

Building a Lean Enterprise

Flow Enabling
Tools

Kaizen Event Results
Reduced medication delivery interruptions by 75%.
Secured an exclusive 2-year contract with key
customer.
 Freed 1.4 FTEs in streamlined discharge process.
Reduced scrap by $6,876 per year.
Produced twice as much “road mix” at half the
cost.
Reduced lead time for purchasing process from 10
to 2.5 days.


41

Lean Transformation vs. “Lean Lite”
Lean Transformation

“Lean Lite”

Full leadership engagement &
development

1 or 2 leaders leading the way

Improvement heavily strategic;
closely tied to business goals

“Random acts of kaizen”

Full adoption of the Lean philosophy Selective use of the tools
Dedicated internal resources

Shared resources

Significant investment in skill
development

Expected to “figure it out”

Heavy use of external support for
first 1-2 years

Internal resources only

Holistic approach to improvement

Silo’d thinking & behaving

Frontlines heavily engaged in the
improvement process

Improvement resources or
leadership drive improvement
43

The Transformation Process:
Key Success Factors
 Strong sense of urgency / burning platform
 Leadership alignment around strategy


Improvement priorities are closely tied to organizational strategy
and annual business goals.

 Value-stream driven improvements.


To avoid change fatigue, improve one value stream at a time.

 Heavy use of Kaizen Events in first 1-3 yrs.


4 Events per 100 employees per year

 Dedicated improvement resources.


1 FTE: 100 employees

 Entire workforce receives exposure to Lean and becomes
skilled in problem-solving.
 Concurrent leadership development.

44

Lean Benefits - Financial
Reduced expenses




Reduced requirements for equipment and supplies
Reduced space requirements
Reduced head count for existing work

Improved cash flow


Faster billing and collections

Increased revenue




Recaptured lost revenue
New revenue sources
Greater market share – customers want the highest
quality products, delivered the fastest, at lowest cost.


45

Lean Benefits - People
 Improved productivity
 Reduced sick time, workers’ comp,
etc.
 Better safety
 Less stress / frustration
 Reduced interpersonal and
interdepartmental tension
 Greater engagement / higher
satisfaction
 Improved ability to attract and
retain talent
 Greater innovation

46

Lean Benefits – Risk Mitigation
Improved compliance
(regulatory / accreditation)
Reduced litigation
Reduced risk of unionization
or strikes
Improved safety – customers,
employees, and community


47

Lean Benefits – Happier Customers


48

Learning Objectives
Participants will learn:









Organizational benefits of Lean and timeframes for
achieving them.
Lean as an overall business management philosophy
vs. “Lean Lite” for process improvement.
Core Lean principles and tools.
How Lean shifts culture.
Key success factors in the transformation process.


49

Upcoming Webinars
Topic

Kanban Pull Systems
Work Standardization & MetricsBased Process Mapping
Error-Proofing
Kaizen Events – Part I
Kaizen Events – Part II
A3 Problem-Solving – Part I
A3 Problem-Solving – Part II

Date

Tuesday, July 20
Tuesday, August 10
Thursday, August 12
Tuesday, August 31
Thursday, September 2
Tuesday, September 28
Thursday, September 30

Register at www.ksmartin.com/webinars

50

For Further Questions

Karen Martin, Principal
7770 Regents Road #635
San Diego, CA 92122
858.677.6799
ksm@ksmartin.com
To register for our newsletter:
www.ksmartin.com/subscribe


51

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