1. Operational Excellence
Framework
For The Lean Enterprise
Created and Proven by Phil Williford

2. Traditional Operational Business Structure
Research & Development
Planning and Purchasing
Shipping and Receiving
Sales & Marketing
Customer Service
Manufacturing
Engineering
Finance
Quality CUSTOMERS
Value
A traditional operational business structure is made up of individual business
departments or “silos”, which are not aligned with the creation of value for the
customers. Each department is focused on departmental objectives and goals
instead of the creation of overall customer value.

3. Lean Enterprise Operational Business Structure
Value Stream #1
Support Functions
Value Creation
HR Value Stream #2
Customer Facing
QA/RA Functions
Value Stream #3
Sales & Marketing
Finance EXTERNAL
Value Stream #4
Customer Service CUSTOMERS
I.T.
Value Stream #5 R&D / NPD
Facilities
Value Stream #6
Receiving
Distribution #7 Value Creation
The Lean Enterprise operational structure replaces the traditional “silo” structure
with product Value Streams, where the focus is the elimination of waste and the
creation of value for the customer. Support functions are aligned with the value
streams in the creation of value and the value streams in turn are aligned with the
customer facing functions which interact directly with external customers.

4. Elements of the Lean Enterprise Operational Excellence Framework
Operational Excellence Framework
Lean Operational Analytics
Continuous Improvement
DMAIC Problem Solving
Visual Replenishment
Visual Management
Lean Standard Cost
Operational Excellence Framework
Lean operational excellence is not achieved by superficial imitation or the
isolated and random use of lean tools & techniques and systems, but instead
requires an understanding of the underlying principles and how those systems
are applied as a unified framework with a clear strategy to drive financial
results.

5. Lean Enterprise Visual Management System
P
Visual Leadership Center
Policy Deployment
Board
Value Stream Visual Leadership Center
Daily Departmental Boards &
Boards Support Boards
The Lean Enterprise Visual Management System is the primary Enterprise communication
systems to manage operations on a daily basis. The system consists of individual Value
Stream Boards and a Visual Leadership Center for a centralized daily operational debrief.

6. Lean Enterprise DMAIC Problem Solving
The Lean Enterprise Operational Excellence Framework focuses on employee knowledge
creation through problem solving with the Lean DMAIC approach.
Lean DMAIC is a structured problem solving approach that breaks
problem solving into five phases. Define , Measure , Analyze,
Implement and Control. Lean DMAIC directly involves employees
in problems solving activities and encourages them to “Learn
by Doing”.
Under the Lean Enterprise Operational Excellence Framework, employees are developed
by teaching them to continuously solve problems with Lean DMAIC to improve their
processes. Because the employees are directly involved in the problem solving activities,
the employee themselves become agents of changes. The acceptance of changes
introduced through problem solving activities is directly proportional to the level of
employee participation and involvement. Once employees apply Lean DMAIC and begin to
develop skills through “Learning by Doing”, continuous improvement becomes an integral
employee activity that does not need to be pushed onto them.

7. Lean Enterprise Continuous Improvement System
Employees
LEAN
DMAIC
Ideas & Creativity
A3 Report
Continuous Improvements activities are documented using the Standard A3 Report which
captures all of the phases of the Lean DMAIC problem solving approach.

8. Lean Enterprise Visual Replenishment System
Two Bin System KV (Kanban-Visual) Loop
For Raw Materials and Subassemblies For Finished Goods
The Two Bin system for raw materials/subassemblies and the KV Loop for finished
goods, allow for visual inventory management and visual production control which
is directly tied to customer demand. Build what you need, when you needed.

9. Lean Enterprise Lean Standard Cost System
Value Stream Map Std. Flat Labor Routing Earned Hours
@ Standard
Labor and Standard
Overhead Rates Product
Plus
Materials @
Cost
Standard Work Standard cost
In the Lean Enterprise Standard Cost System; products are organized by Value Streams
and “Standard Work” is captured in Value Stream Maps, from which the corresponding
Standard Flat Labor Routings are calculated. “Standard Work” results in “Standard
Costing”, which forms the baseline for continuous improvement measurements. As the
Standard Work is improved, the Standard Flat Labor Router is improved, which results in
a reduction of manufacturing lead times, inventories and product costs. Improving
standardized work is a never-ending process.

10. Lean Enterprise Operational Analytics
If Variance = Above STD Gross
Positive Profit Margin
Labor
Mfg.
Work Material @ STD Gross
Variance If Variance = 0
Orders Burden Profit Margin
Analysis
@ Standard
If Variance = Below STD Gross
Continuous Negative
Improvement Profit Margin
The Lean Enterprise Operational Analytics System, provides weekly, month to date, and
year to date Value Stream operational reports with the necessary information to measure
Value Stream performance against the Standard Gross Profit Margin that is expected from
the Standard Work processes. If the standard processes are generating negative
manufacturing variances, the Value Streams will engage in Continuous Improvement
activities to resolve the cause of the manufacturing variances. Once the processes are
capable of maintaining the Standard Gross Profit Margin, continuous improvements
activities are focused on generating positive manufacturing variances to increase the Gross
Profit Margin. The Value Stream Reports include, Labor Efficiency, Cost Center Spending,
Price Purchase Variance, Material Usage, Scrap, Raw Material / Finished Goods Inventory ,
Shipping Revenue and Back Orders / Back Log.

11. Lean Enterprise and The Role of ERP
ERP
Lean Operational
Database Reports
ERP Transactions Visual Management
Visual Replenishment
ERP
System
Mfg. Work Orders
Inventory Mgmt.
In the Lean Enterprise Operational Excellence Framework, the ERP system functions as the
core database and transaction engine. Daily operational management is executed using the
Visual Management and Visual Replenishment Systems. Manufacturing work orders,
purchase orders, receiving transactions and shipping transactions are captured daily by the
ERP System and data is stored in the ERP database.

12. About Phil and Lean Enterprise
Operational Excellence
The Lean Enterprise Operational Excellence Framework is the result of Phil Williford’s
20+ years of combined experience in Lean Management within the Automotive and Medical
Device industries; with the goal of creating a clearly defined path to a successful and
sustainable implementation of an Enterprise Wide Lean Program.
The Lean Enterprise Operational Excellence Framework has been proven in both Domestic
and International sites.
(North Carolina, Florida, Texas, California, Connecticut, Missouri, Puerto Rico, France, Germany and the Czech Republic)
• It was used as the foundation for the Medtronic Corporate Lean Sigma Platform.
• Utah State University (School of Business) case study in the Shingo Prize modeling for
Operational Excellence.
• Including the awarding of both the Shingo Prize for Operational Excellence in 2003 and
The Shingo Silver Medallion in 2010.