Future State Implementation Plan Value Value Stream Mapping in Office & Service Setttings

Lean Webinar Series Value Stream Mapping in Office & Service Environments November 4, 2009 Company LOGO

Learning Objectives Participants will learn:       What a Value Stream Map is – and what it is not. Best practices for holding a Value Stream Mapping activity. How to define office & service product families. Step-by-step approach for creating current and future state maps. Key differences between manufacturing and office/service VMSs. How to create an implementation plan from the future state VSM. © 2010 Karen Martin & Associates 2

Value Stream Mapping’s Beginnings Mike Rother & John Shook

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 © 2010 Karen Martin & Associates Customer Receipt 5

The Work We Do: Degrees of Granularity Rooftop View (Strategic) Value Stream Process In the Weeds (Tactical) © 2010 Karen Martin & Associates Step Step Value Stream Map Process Process Step Metrics-Based Process Map 6

Types of Value Streams Product Value Streams Support Value Streams     Recruiting and Hiring Process Tech Support Accounts Receivable Payroll Value Stream “Segments”    The order fulfillment segment of a product line The product development cycle New account set-up © 2010 Karen Martin & Associates 7

Current State VSM – ABC Product Family Production Control Forecast Supplier Forecast Customer PO PO Supplier Loop Work Order & Schedule Order Entry Sales PO 25 5 Schedule PT = 20 mins. %C&A = 90% PT = 2 mins. %C&A = 75% Weekly Shipper Production Loop Order Fulfillment Loop 2x weekly On-time Delivery=55% Fabrication 19 days 5 Assembly 12 days PT = 3 minutes C/O = 2.2 hrs. Uptime = 85% FPY: 93% 19 days 22 Test & Pack 3 days PT = 42 mins. C/O = 0.1 hrs. Uptime = 60% FPY: 98% 12 days 3 mins. Value Stream: Product Family ABC Current State Value Stream Map Customer Demand: 200 units / day 4 34 days PT = 2 mins. FPY: 100% 3 days 42 mins. 34 days 2 mins. PT = Process Time LT = Lead Time C&A = % Complete & Accurate AR = Activity Ratio (PT/LT x 100) RFPY = Rolled First Pass Yield Total LT = 68.1 days Total PT = 47 mins. AR = 0.144% RFPY = 91.1%

Current State VSM - Order Fulfillment Loop Customer %C&A = 70% PO Excel SAP System 2x weekly Account data Sales Order Sales 2 hrs. Review & approve PO 25 5 4 hrs. 15 mins. 2 hrs. PT = 5 mins. %C&A = 90% PT = 15 mins. %C&A = 90% 2 hrs. Enter Order Run Credit 1 Check Value Stream Loop: Domestic Order Fulfillment Current State Value Stream Map Customer Demand: 150 orders / day Warehouse On-time delivery = 55% 2 hrs. PT = 20 mins. %C&A = 99% 2 hrs. 5 mins. Shipper Finance Order Entry 4 hrs. Approval Pick and ship order 5 2 hrs. 20 mins. 10 hrs. PT = 15 mins. %C&A = 99% 10 hrs. 15 mins. PT = Process Time LT = Lead Time C&A = % Complete & Accurate AR = Activity Ratio (PT/LT x 100) RFPY = Rolled First Pass Yield Total LT = 20.9 hrs. Total PT = 55 mins. AR = 4.38% RFPY = 55.6%

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 © 2010 Karen Martin & Associates 10

Why Value Stream Mapping? (continued) Shows the linkage between information and material flow. Makes the disconnects and obstacles to flow visible at a macro level Metrics-based decision making: What are you going to do to affect the numbers? © 2010 Karen Martin & Associates 12

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. © 2010 Karen Martin & Associates 13

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. © 2010 Karen Martin & Associates 17

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 © 2010 Karen Martin & Associates 18

Summary Metrics: Time Percent Activity (%Act) (also referred to as Activity Ratio)      The percentage of time anything is being done to the work passing through the system (whether value-adding or non-value-adding) %Act = (∑PT ÷ ∑LT) × 100 100 – %Act = % Time Work is Idle Common finding = 1-10% Could also calculate %VA to show much activity is value-adding – is typically lower than % Act. © 2010 Karen Martin & Associates 19

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. Lead Time = 990 mins. % C&A = 100 % Demand = 15 per day 1 Lead Time = 12 mins. Cycle Time = 11 mins. Lead Time = 12 mins. % 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. Cycle Time = 2 mins. % C&A = 90 % 0.0833 hrs. 3 Cycle Time = 1 mins. % C&A = 98 % 0.0833 hrs. 2 mins. 6 45 mins. 2 0.75 hrs. 1 mins. 7 30 mins. Cycle Time = 10 mins. % C&A = 100 % 2 0.5 hrs. 10 mins. 8 5 mins. Cycle Time = 15 mins. % C&A = 90 % 2 0.0833 hrs. 15 mins. 9 248 mins. Cycle Time = 3 mins. % C&A = 100 % 2 10 4.13 hrs. 3 mins. 365 mins. Cycle Time = 15 mins. % C&A = 95 % 6 11 6.08 hrs. 15 mins. 960 mins. Cycle Time = 5 mins. % C&A = 75 % 2 12 16 hrs. 5 mins. 110 mins. Cycle Time = 1 mins. % C&A = 95 % 2 1.83 hrs. 1 mins. 13 120 mins. Cycle Time = 1 mins. % C&A = 99 % 6 2 hrs. 1 mins. 14 Cycle Time = 3 mins. % C&A = 90 % LT = 32.5 hrs. 3 mins. CT = 56 mins. CT/LT Ratio = 2.87% Rolled First Pass yield = 29% VSM Champion: Paul Scanner Created: July 17, 2007

Future State Value Stream Map Outpatient Imaging Services Standard Work Work Balance Demand = 15 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 Lead Time = 45 mins. Cycle Time = 11 mins. Lead Time = 45 mins. % 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 Cycle Time = 1 mins. % C&A = 98 % 0.0833 hrs. 2 Complete Exam (Tech) 5 20 mins. Cycle Time = 10 mins. % C&A = 100 % 0.583 hrs. 1 mins. 2 Transmit Images (Tech) 6 5 mins. Cycle Time = 10 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. Cycle Time = 15 mins. % C&A = 95 % 2 hrs. 2 mins. 8 Batch Reductions Voice Recognition Read/Dictate Exam (Radiologist) Cycle Time = 2 mins. % C&A = 100 % 0.0833 hrs. 10 mins. Continuous Flow 2 Print Reports (Imaging) 9 2 mins. Cycle Time = 1 mins. % C&A = 95 % 7 hrs. 15 mins. Rework Loop via Fax 10% of the time 2 30 mins. Cycle Time = 1 mins. % C&A = 99 % 0.0333 hrs. 1 mins. 10 Send Reports (Imaging) 6 0.5 hrs. 1 mins. 11 Cycle Time = 3 mins. % C&A = 90 % LT = 11.3 hrs. 3 mins. CT = 43 mins. CT/LT Ratio = 6.32% Rolled First Pass yield = 40% VSM Champion: Paul Scanner Created: July 18, 2007

Outpatient Imaging Projected Results Metric Current State Projected % Future State Improvement Lead Time 32.5 hrs 11.3 hrs 65% Process Time Percent Activity Rolled First Pass Yield # Macro Steps Tech turnover (annual) 56 mins 2.9% 43 mins 6.3% 23% 117% 29% 40% 38% 14 11 21% 100% 25% 75% Note: Freed capacity (PT reductions) allowed the organization to earn $500,000 additional annual revenue with no additional headcount © 2010 Karen Martin & Associates 22

Summary Metrics: Measuring Productivity Gains Labor Effort # FTEs = Total PT (in hrs) X # occurrences/year Available work hrs/year/employee Freed = Current State FTEs – Future State FTEs Capacity Note: Improvement can be expressed as Freed Capacity (FTEs), Time, or Labor Expense (or all) # FTEs = Full Time Equivalents; 2 half-time people = 1 FTE © 2010 Karen Martin & Associates 23

What do you do with freed capacity?  Absorb additional work without increasing staff  Reduce payroll through natural attrition  Innovate – create new revenue streams  Conduct ongoing continuous improvement activities  Do a better job with fewer errors and higher safety  Talk and work with your customers and suppliers  Mentor staff to create career growth opportunities  Provide additional workforce development; cross-train  Better work/life balance  Slow down & think  Get/stay caught up  Do the things you haven’t been able to get to  Collaborate with other areas © 2010 Karen Martin & Associates 24

Value Stream Mapping Activities Team-based Heavily weighted with those who can authorize an innovative future state.  The team goes to the gemba to obtain the metrics from those doing the work. Three day activity; three deliverables. Leadership learning is huge. Interim briefings are a key success factor. © 2010 Karen Martin & Associates 25

HR Value Stream Mapping Charter Event Scope Value Stream Recruiting, Hiring, & Onboarding Process Leadership / Coordination Schedule Executive Sponsor Sherrye Hutcherson Event Date(s) Oct 27, 28 & 29, 2009 Value Stream N/A Champion Specific Conditions External hires Start/End Times Oct 27, 28 8:00 am - 4:30 pm Oct 29 7:30 am - 2:00 pm Customer Demand 100 per year Facilitator Karen Martin Location 9 West Seminar Trigger Vacancy First Step Hiring manager completes VPA Meals Lunch, morning & afternoon Provided? snacks Team Lead N/A Last Step Employee completes NEI Boundaries & N/A Limitations Interim Oct 27 & 28 3:30-4:30 pm Briefing(s) Oct 29 1-2 pm Coordinator Andrew Peacock Improvement Future state will be fully implemented by 2/15/2009 Timeframe Briefing Tim Burke, Sherrye H and other Attendees Division Managers Event Drivers Mapping Team 1 Cumbersome process as perceived by the customer. Function Name Contact Information 2 Need to free capacity and operate more effectively. 1 Staffing Paula Pittman 3 2 FCS HR Patty Yager 4 3 Talent Management Tad Leeper 4 HRIS Chris Ritz 5 HR Compliance Carl Olsen 1 Reduce LT from req to offer acceptance from 45-55 days to 30 days. 6 Comp & Benefits Nyla Cork 2 7 Recruiting Sheila Love 3 8 Diversity / Affirmative Action Joyce Cooper 4 9 Hiring Manager, Call Ctr Deb Emerson 5 Measureable Objectives 5 10 Hiring Manager, Production Ops Planned Deliverables On-Call Support 1 Current State VSM Function Name Contact Information 2 Future State VSM 1 IT Gary Van Osdel 3 Implementation Plan 2 Fort Calhoun - Security Herb Childs 4 3 5 4 Potential Obstacles Approvals 1 Executive Sponsor Value Stream Champion Facilitator 2 3 Signature: Signature: Signature: 4 Date: Date: Date: 26

Value Stream Mapping Process Products (good or services) with common process steps Document Current State Repeat Define Product Family Foundation (the basis) for the future state; 70-80% accurate is acceptable (directionally correct) Design Future State Create flow by eliminating waste it is now obvious from your current state map); typically 3-6 months out Create Implementation Plan Implement! 3 Day Event Include accountability and timeframes for completion The goal of mapping!

One VSM per Product Family Group Product Families by similar downstream processes, steps or equipment. Process Steps & Equipment Step A Step C Product ABC X X Product XYZ Products Step B X X Product AWR X Step F X X X 50 X X X 73 X X X Product ACC Product SUB X X X X X © 2010 Karen Martin & Associates 2 X X 5 15 X X X Product IDR Vol. Step E X Product IBM Step D X X X 12 X 1 28

Narrowing the Scope: Selecting Specific Conditions Units Domestic Consumables Warranty Service Parts Order Fulfillment Process NonWarranty Units International Consumables Warranty Service Parts NonWarranty 30

Value Stream Mapping Facilitator Range of Necessary Traits  Skills / Knowledge     Improvement tools (root cause analysis, flow-enhancing tools, etc.) Project & time management Mediation; consensus building People effectiveness – from front line workers to execs  Authority / Respect    Designated change agent / influence leader Trustworthy Comfortable removing obstacles & reaching out to senior leadership  Personality / Energy     Naturally curious Challenging, yet supportive Positive, upbeat, energetic Pushy without irritating  Objectivity / Fairness  No attachment to the work being improved © 2010 Karen Martin & Associates 32

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 © 2010 Karen Martin & Associates 33

The VSM Event 3 days Sequestered team composed primarily of those who can authorize change Schedule  Day 1 – Document and analyze the current state  Go to the Gemba!   Day 2 – Design the future state (3-6 months out) Day 3 – Create the implementation plan Interim briefings (preferably daily) to non-team leadership © 2010 Karen Martin & Associates 34

Interim Briefings Day 1 – here’s what we’ve learned  Establishes a mental framework for embracing improvements; “sells” the need for improvement Day 2 – here’s what we plan to do   Does anyone object? If so, why? Challenge policies Day 3 – here’s how we’re going to execute   Priorities, approach, timeframes, accountability Obtain final buy-in right then and there © 2010 Karen Martin & Associates 35

Order Initiation Current State Map Demand = XXXX May 8, 2008 Robert Parker Information Flow 2 3 Timeline 1 Product Flow Key VSM Components Production Control SUPPLIER Process 1 I Process 2 Hours Hours Minutes I Process 3 Hours Minutes CUSTOMER I Hours Minutes Process 4 LT Minutes PT

3 Product Flow 2 Timeline 1 Information Flow Key VSM Components Office / Service ABC Value Stream Current State Map Demand = XXXX/yr Date Key Contact CUSTOMER I.T. Process 1 Process 2 Hours Minutes I.T. I.T. Process 3 Hours Minutes Process 4 Hours Minutes LT Minutes PT

The timeline is the most important of the three defining characteristics of a VSM: 1) information flow 2) product flow 3) timeline If your map doesn’t include a timeline, it is not a VSM. If your map has swim lanes, it’s not a VSM. © 2010 Karen Martin & Associates 39

Basic Mapping Icons External Organization Push Arrow Operator / Employee I Work-in-Process Material receipts & shipments Go See Scheduling Process Block PT= 25 m C/O= 40 m 2 Shifts Takt= 60m Manual Information Flow In-box Data Block Hours Lead Time Process Time Minutes Movement by Truck Electronic Information Flow Hours Minutes Timeline Hours Minutes Minutes

Concurrent Work / Parallel Flows Process Process LT = 8 hrs Process Process Process LT = 4 hrs Bring longest lead time to the timeline, unless it’s a “dead end step.” © 2010 Karen Martin & Associates 41

Step 1 Label your map       Value stream name Current or future state Customer demand (volume of work per time period) Takt time (if relevant) Date Facilitator’s name (and/or team) © 2010 Karen Martin & Associates 42

Takt Time: The Key to Continuous Flow Available work time Takt time = “Touch down” Customer demand 480 minutes/day Takt time = 45 new accounts = 10.6 mins OR… Time Available divided by what Kustomer Takes © 2010 Karen Martin & Associates 43

Step 2  Identify all blocks in the process (target 5-15 blocks)  Customer icon is placed in upper right or middle  Upper right if supplier exists (supplier is placed in upper left)  Middle position if a separate supplier doesn’t exist        Supplier (if relevant) is placed in upper left Each block (post-it) contains an activity or group of activities that occurs before a break in the timeline occurs (typically WIP or handoff) Activity format is verb/noun – what happens to what Include the function who performs the task Include number of workers who perform the task Include any obstacles to flow – batches, shared/inaccessible resources, system downtime, etc. Consider walking the process © 2010 Karen Martin & Associates 44

Post-it Conventions Process (Verb/Noun) Function # Staff (if relevant) Barriers to flow

Step 3 Identify all I.T. systems used in the process and information flow     For most VSMs, these are placed above the process blocks In very complicated VSMs with two rows of process blocks, I.T. systems can be placed between the rows, if necessary. Note any scheduling that occurs (rare in current state) Who tells whom to do what? © 2010 Karen Martin & Associates 46

Current State Value Stream Map Supplies Purchasing - Current State VSM Purchasing — Non-repetitive purchases less than $5,000 Inititate Req. 1 Originator 31 PT = 10 mins. C&A = 10% Supplies Hard Copy Form File File Maker Quicken Vendor Website Excel ERP Data Entry Review Budget 2 Review Req. Finance PT = 5 mins. C&A = 60% 0.25 days 4 hrs. PT = 5 mins. C&A = 95% 0.5 days 5 mins. 20 Reqs Review 4 Requisition 40 hrs. PT = 5 mins. C&A = 90% 8 hrs. PT = 5 mins. C&A = 100% 1 days 5 mins. 8 hrs. 7 10 Reqs 1 PT = 10 mins. C&A = 95% 4 hrs. PT = 15 mins. C&A = 98% 0.5 days 10 mins. Approve in ERP 24 hrs. PT = 5 mins. C&A = 90% 3 days 15 mins. Submit PO to Supplier 8 63 Reqs 9 10 External Supplier Corp Purchasing Manager 1 Admin Asst Financial Mgr 1 1 days 5 mins. Enter Requisition Review 6 Requisition IS Manager 1 1 5 days 5 mins. Review 5 Requisition Sys Engineer Supervisor 2 6 2 hrs. 3 Corp Purchasing 6 56 hrs. PT = 15 mins. C&A = 98% 7 days 5 mins. 80 hrs. PT = 20 mins. 10 days 15 mins. LT = 28.4 days PT = 65 mins. AR = 0.477% RFPY = 4.2% Customer Demand: 615 requisitions per y ear PT = Process Time LT = Lead Time C&A = % Complete & Accurate AR = Activ ity Ratio (PT/LT x 100) RFPY = Rolled First Pass Y ield

Step 4 Number the process blocks Connect the customer and supplier, process blocks and I.T. systems    “Lightning bolt” arrow for electronic/automatic information flow Regular arrow for push systems “Hollow” arrow for product flow If parallel processes exist, use alpha modifiers – e.g. 8A, 8B, etc. © 2010 Karen Martin & Associates 48

Post-it Conventions Process Block # Process (Verb/Noun) Function # Staff (if relevant) Barriers to flow PT (process time) % Complete & Accurate LT (Lead time)

How to Treat Lead Time in Office/Service Environments (new slide) Lead Time Process Time Process 1 LT Process 2 LT PT PT Office/Service Lead Time ― • From the time work is made available until it’s been completed AND passed on to the next person/work group/department in the process. • Placed on the peak of the timeline to the left of the process block it refers to. • Represents total throughput time, including process time; not merely wait time. © 2010 Karen Martin & Associates 53

Value Stream Mapping OPPD Recruiting, Hiring, Onboarding Process Results Metric Projected Projected % Current State Future State Improvement Lead Time Process Time % Activity Rolled First Pass Yield Other? © 2010 Karen Martin & Associates 54

Typical Current State Findings Unnecessary NVA Available to work on Value Add Necessary NVA Available to next step Islands of activity (process times) within long lead times. © 2010 Karen Martin & Associates 55

Step 7 Identify all value-adding (VA) and necessary non-value-adding (N) steps   Add “VA” or “N” smaller post-it to relevant process blocks All unnecessary non-value-adding blocks remain unlabelled © 2010 Karen Martin & Associates 56

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 © 2010 Karen Martin & Associates 57

Work Effort as Defined by the External Customer Unnecessary Nonvalue adding Necessary non-valueadding Value-adding

Future State Design Goal: Removing all obstacles to flow (“the thing” should never stop)        Batches Rework WIP / Bottlenecks Handoffs Setup / changeover Physical layout Motion & transportation © 2010 Karen Martin & Associates 62

Eight Questions for Future State VSM 1. What are the customer requirements? What’s the takt time? 2. With goods, will we produce to order or to finished goods inventory? (With services, you’re almost always producing to order.) 3. Where can continuous flow be put in place? 4. Where should pull systems be implemented? 5. What is the single point of scheduling? 6. How do we level the load and the mix? 7. What should the management time frame be? 8. What process improvements are necessary to achieve the future state? -- Rother & Shook, Learning to See © 2010 Karen Martin & Associates

Future State Design Considerations  Eliminate steps / handoffs  Combine steps  Create parallel paths  Alter task sequencing and/or timing  Implement pull  Reduce / eliminate batches  Improve quality  Create an organized, visual workplace  Reduce changeover  Eliminate motion & transportation  Standardize work  Eliminate unnecessary approvals / authorizations  Stop performing nonvalue adding (NVA) tasks  Co-locate functions based on flow; create cells (teams of crossfunctional staff)  Balance work to meet takt time requirements 64

The Right Process Standardize work Mistake proof work Make problems visual Fix problems immediately Create continuous flow Level demand Balance work Create pull systems © 2010 Karen Martin & Associates 65

Building a Lean Enterprise Process Stabilization Tools

Building a Lean Enterprise Flow Enabling Tools

Future State Icons Withdrawal Combined Steps Kanban Arriving in Batches Eliminated Step Max 8 “things” FIFO First-In First-Out (max WIP defined) Production Kanban Withdrawal Kanban Signal Kanban Buffer Stock OXOX Kaizen Burst Supermarket Leveling, Mix and/or Volume Kanban Post Kanban Path

Value Stream Mapping OPPD Recruiting, Hiring, Onboarding Process Results Metric Projected Projected % Current State Future State Improvement Lead Time Process Time Activity Ratio Rolled First Pass Yield © 2010 Karen Martin & Associates 70

Current State Value Stream Map Supplies Purchasing - Current State VSM Purchasing — Non-repetitive purchases less than $5,000 Inititate Req. 1 Originator 31 PT = 10 mins. C&A = 10% Supplies Hard Copy Form File File Maker Quicken Vendor Website Excel ERP Data Entry Review Budget 2 Review Req. Finance PT = 5 mins. C&A = 60% 0.25 days 4 hrs. PT = 5 mins. C&A = 95% 0.5 days 5 mins. 20 Reqs Review 4 Requisition 40 hrs. PT = 5 mins. C&A = 90% 8 hrs. PT = 5 mins. C&A = 100% 1 days 5 mins. 8 hrs. 7 10 Reqs 1 PT = 10 mins. C&A = 95% 4 hrs. PT = 15 mins. C&A = 98% 0.5 days 10 mins. Approve in ERP 24 hrs. PT = 5 mins. C&A = 90% 3 days 15 mins. Submit PO to Supplier 8 63 Reqs 9 10 External Supplier Corp Purchasing Manager 1 Admin Asst Financial Mgr 1 1 days 5 mins. Enter Requisition Review 6 Requisition IS Manager 1 1 5 days 5 mins. Review 5 Requisition Sys Engineer Supervisor 2 6 2 hrs. 3 Corp Purchasing 6 56 hrs. PT = 15 mins. C&A = 98% 7 days 5 mins. 80 hrs. PT = 20 mins. 10 days 15 mins. LT = 28.4 days PT = 65 mins. AR = 0.477% RFPY = 4.2% Customer Demand: 615 requisitions per y ear PT = Process Time LT = Lead Time C&A = % Complete & Accurate AR = Activ ity Ratio (PT/LT x 100) RFPY = Rolled First Pass Y ield

Future State Value Stream Map Supplies Purchasing - Future State VSM Purchasing — Non-repetitive purchases less than $5,000 Additional IT access Enter Req. in ERP Integrate Form File with File Maker 1 Originator 31 PT=30 mins. C&A = 85% Supplies Requisition Checklist Vendor Websites File Maker Cross Training Approval Additional IT access 2 4 hrs. 6 hrs. 0.75 days 5 mins. Place Order 3 4 5 External Supplier 6 PT=20 mins. 80 hrs. PT=20 mins. C&A = 98% 1 days 5 mins. Dedicated Buyers Corp Purchasing 8 hrs. PT=5 mins. C&A = 90% PT=5 mins. C&A = 95% 0.5 days Approve in ERP Dept. Manager 1 Supervisor 2 Use budget in place of Quicken Auto Notify Standard Work for review Review Req. ERP 10 days 20 mins. LT = 12.3 days PT = 30 mins. AR = 0.508% Customer Demand: 615 requistions per year PT = Process Time LT = Lead Time C&A = % Complete & Accurate AR = Activity Ratio (PT/LT x 100) RFPY = Rolled First Pass Yield RFPY = 71%

Purchasing Process Projected Results Metric Lead Time Process Time % Activity Rolled First Pass Yield # Handoffs # IT Systems Freed capacity © 2010 Karen Martin & Associates Current State Projected Future State % Improvement 28.4 days 12.3 days 56.7% 65 mins 0.48% 30 mins 0.51% 53.8% 6.3% 4.2% 71.0% 1,590% 10 6 5 3 50% 50% 2.1 FTEs 10%

Current State Value Stream Map Service Organization Source Refrigeration & HVAC, Inc. Current State Value Stream Map Serv ice Deliv ery Created February 11, 2009 CONFIDENTIAL Customer Great Plains Verisae (Customer) Special Order Part Excel Spreadsheet (Customer) Supplier Tech Upload time card Close call in Verisae Process Time Cards Tech Account Manager (West) Payroll Admin PT = 0 mins. %C&A = 70% Batch: 1x/day PT = 1 mins. %C&A = 90% Batch: 1x/day Complete Call in GP Pick up Part at Parts Store Review Service Call Data ?% Tech 40% Receive customer call Select & Dispatch Tech Call Center Dispatcher & Service Manager 5 m. 120 m. PT = 2 mins. %C&A = 60% 0.0833 hours PT = 5 mins. %C&A = 60% Tech PT = 90 mins. %C&A = 90% PT = 0 mins. 640 m. 240 m. PT = 5 mins. %C&A = 80% PT = 120 mins. %C&A = 40% 2 hours 75 minutes Dispatcher Tech 120 m. 1.25 hours 90 minutes Make Repair; Call to raise the NTE Get Part from Truck 75 m. 1.5 hours 5 minutes ?% Tech 90 m. 2 hours 2 minutes Assess Problem PT = 75 mins. %C&A = 95% 5 minutes PT = 15 mins. %C&A = 85% Batch: 1x/day Billing Admin 6 days PT = 25 mins. %C&A = 75% Posting Admin 240 mins. PT = 3 mins. %C&A = 98% Batch: 1x/day 640 m. Account Manager 3 minutes Enter Invoices into Verisae & Excel; Mail Invoices Billing Admin 120 m. PT = 10 mins. %C&A = 85% Batch: 3-5x per wk 10.7 hours 4 hours 25 minutes Review Invoices; Close in Verisae (Pac) Review & Post Invoices Review Open Ticket Report 48 hours 10 minutes A/P Admin PT = 10 mins. %C&A = 90% Batch: 1x/day PT = 10 mins. %C&A = 50% Batch: 2x/day 10.7 hours 4 hours 120 minutes Service Manager Process A/P Receive Cash; Post Payment Collections 60 days PT = 4 mins. %C&A = 95% Batch: 1x/week 480 hours 2 hours 10 minutes 4 minutes Lead Time = 572 hours Process Time = 349 minutes Acronym Key %C&A %Complete and Accurate AR Activity Ratio FTE Full Time Equivalent LT Lead Time PT Process Time RFPY Rolled First Pass Yield Lead Time to invoice = 86.2 hrs Process Time =5.9 hrs. NOTE: Business hours Activity Ratio = 6.8% RFPY = 1.1% Lead time to cash = ? days 75

Future Future State Value Stream Map Map State Value Stream Source Refrigeration & HVAC, Inc. Service Organization Service Delivery T&M Target example, refrigeration component repair, non-peak season (35 w ork orders per day) Created February 13, 2009 CONFIDENTIAL Create Source preferred T & C's Explore flat rate pricing Customer %C&A = 99% Establish parameters for time & parts by service type EDI Interf ace Create EDI Interface w/ Customers Create Tech performance report Create EDI Interface w/ Verisae Supplier Great Plains No EDI Special Order Part Improve Tech Training; Create Sub-levels Improve Tech Onboarding Tech Create Tech Support Center Implement GPS Contact Tech Support As Needed Install kanban on trucks ? Centralize Dispatch 10% Assess Problem Dispatcher 120 mins. PT = 7 mins. %C&A = 85% 2 hrs. Make Repair; Complete call on handheld Tech PT = 75 mins. %C&A = 90% PT = 0 mins. ` 24 hrs. PT = 120 mins. %C&A = 75% 2 hrs. 1.25 hrs. Create stnd work for invoicing PT = 5 mins. %C&A = 99% 1x daily Billing Admin Compare invoice register to invoices and mail invoices 4 hrs. PT = 25 mins. %C&A = 95% 24 hrs. 2 hrs. Create Customer Billing Teams Review W.O., payroll, AP & invoice; post immediately Tech 2 hrs. 1.25 hrs. 1.25 hrs. Create invoice exception report Get Part from Truck 75 mins. 1.25 hrs. 0.117 hrs. ? Enter data into Verisae and Excel from Daily Report Billing Admin Standardize Truck Inventory PT = 75 mins. %C&A = 95% Tech 75 mins. Separate labor & payroll Pick up Part at Parts Store Tech Tech Create W.O. Dispatch Tech Excel Spreadsheet (Customer) Verisae (Customer) Billing Admin Receive Cash; Post Payment Collections 60 days PT = 5 mins. %C&A = 99% 1x daily 4 hrs. 0.417 hrs. 480 hrs. 0.0833 hrs. Lead Time = 520 hrs. Process Time = 5.12 hrs. Acronym Key %C&A %Complete and Accurate AR Activity Ratio FTE Full Time Equivalent LT Lead Time PT Process Time RFPY Rolled First Pass Yield Lead Time to invoice = 34.5 hrs NOTE: Business hours Process Time = 5.1 hrs. Activity Ratio = 14.8% RFPY = 45.4% Lead time to cash = 67 days 76

Repair Value Stream Findings and Projected Results Metric Lead Time (request to invoice) Process Time % Activity Rolled First Pass Yield Parts store trip required © 2010 Karen Martin & Associates Projected Projected % Current State Future State Improvement 10.8 days 4.3 days 60.2% 5.9 hours 5.1 hours 13.6% 6.8% 14.8% 117.6% 1.1% 45.4% 4027.3% 40% 10% 75% 77

Future State Implementation Plan - CONFIDENTIAL Executive Sponsor Lauren Abrams Implementation Plan Review Dates Value Stream Champion Lisa Baldewin Value Stream Mapping Facilitator Karen Martin Date Created 3/4/2009 Kaizen Burst # Objective / Projected Results Type Owner Integrate call center and dispatch. PROJ 2 Create and implement tech suport center. PROJ Bill V 3 Explore EDI with customers for work PROJ orders & invoicing 4 Implement GPS. 4,7 Improvement Activity Implementation Schedule (months) J F M A M J J A S O N D Bill V 1 Pre-req 6 7 35 WO/day = 735 WO/month. 40% to parts store = 294 WO x 75 mins = 367.5 hrs. If 3.25 hrs/repair = add'l 113 repairs per month x X avg labor charge/invoice = X potential add'l rev. X X X Steve M X X PROJ Curtis C X X Create 90-day onboarding process. KE Justin C KE Rich T X Revise tech level criteria. 5,6 X Develop & roll-out tech training for existing employees. DOW 5 X KE Husein A X X Create standardization plan for trucks (e.g. tools, equipment, parts, PROJ PPE). PROJ Fred S Revise reason codes for credit memos. JDI Lisa B Design & pilot flat rate pricing PROJ Draft preferred Source T & C's (MAC). PROJ Mark K 13 Centralize key customers billing; create billing standard work. PROJ Renae H 14 Separate labor & payroll. PROJ Lisa B X 15 Create Target summary invoice. JDI Renae H Resolve missing invoice situation. JDI Lisa B Create standard work for billing and PROJ collections process. Lauren 19 Explore EDI for tech "complete" status with Verisae PROJ Steve M PROJ Rich B X X X X X X X X X X X X X KE Complete working on 30 day List X X 17 X X 16 X Shawn C 12 X X Fred S 5S and pilot kanban on tech trucks; pilot water spider function for parts. X Date Complete 8 9 8* 10 11 20 24* 24* Create technician performance X X X Done X X X X X X X In Testing X In Process X X X X X X X X X X X X X X 78

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

PACE Prioritization Matrix Policy 10 5 Easy I.T. 15 6 13 2 23 18 17 7 16 Process 20 9 8 1 14 25 26 12 22 27 Difficult Ease of Implementation 21 24 4 19 11 3 High Anticipated Benefit Low 81

Common VSM Facilitation Issues Keeping the team focused on the macro view (rooftop level); it’s tempting to go into the weeds Keeping the team focused on the current state Assuring the team and leadership that directionally correct data is good enough Time management  Schedule Gemba time and conference room time very tightly Getting the right people on the team Getting the right people at the interim briefings © 2010 Karen Martin & Associates

Common Differences - Manufacturing vs. Office VSMs Manufacturing Office Upper right Center Upper left None “The thing” we’re following Raw material, subassemblies, finished goods Paper, verbal, and electronic Information Information Flow More structured / formalized I.T. systems Multiple I.T. systems and work-arounds Multiple points across VSM Work not scheduled Yes Sometimes Inventory triangle In-bin (if preferred) First Pass Yield (FPY) Percent Complete & Accurate (%C&A) Takt Time Typically can be applied Only applicable with dedicated resources LT determination for each block Based on WIP between process blocks Based on a single item passing through Customer icon Supplier icon Schedule notification Material flow (via hollow arrow) WIP icon Quality Metric

Recommended Resources The Complete Lean Enterprise, Beau Keyte & Drew Locher Value Stream Management for the Lean Office, Don Tapping & Tom Shuker

Learning Objectives Participants will learn:       What a Value Stream Map is – and what it is not. Best practices for holding a Value Stream Mapping activity. How to define office & service product families. Step-by-step approach for creating current and future state maps. Key differences between manufacturing and office/service VMSs. How to create an implementation plan from the future state VSM. © 2010 Karen Martin & Associates 85

Future State Implementation Plan Value Value Stream Mapping in Office & Service Setttings

TKMG, Inc.

Future State Implementation Plan Value