Lean and Sustainability

Senge waste 1

Graphic excerpted from Senge (2001)1

[click on image for clear view]

[Originally published 3/2/14 as “Lean is Part of the Story – A New Paradigm?”]

As a proponent and practitioner of lean methodologies, I can point to many benefits of pursuing lean initiatives, but there is another story as well.  In lean initiatives we typically work on reducing the “Waste From Production” component of the above graphic.  This is an important endeavor which saves the organization time and money and makes it more competitive, but we don’t address the “Waste From Use” or “Discard” waste elements.

 If we expand our paradigm to include the elements not typically covered in our lean initiatives, we enter the realm of “Sustainability” and “Green”.  These terms have, unfortunately, come to have a negative connotation for many due to high cost legislative mandates and blatant “green washing” marketing campaigns.

What if we could change our paradigm and embrace the concepts of sustainability and green in ways that not only benefit society and the environment, but at the same time make us more profitable and competitive?  I submit that this is not only possible, but necessary for our continued survival.

 So what is the “Paradigm” that offers not only profitability, but economic, social, and environmental sustainability?

 A concept discussed by Hawken (1993)2 and further developed by McDonough & Braungart (2002)3 is the sustainable concept of:

 waste equals food 

If, as in natural biological systems, energy is cycled through a systematic loop where the waste from one portion of the cycle becomes food for the next portion of the cycle, we get a picture more like this: 

Ultimate goal is 100 percent cycled through the blue loops = Zero Waste!

Senge waste 2

Graphic excerpted from Senge (2001)

[click on image for clear view]

In this paradigm, Waste From Production becomes “food” for other Goods In Production, and Waste From Use becomes “food” for other Goods In Production or returns to the Natural Resources biological system that has proven so effectively sustainable for millennia.  The result of this recycling of materials and energy is reduced natural resource consumption and pollution.  Mining of previously used resources from our downstream waste (or re-use in its pure form as raw material) results in reduced costs of mining raw materials and the associated extensive downstream processing costs, generating greater efficiencies and profits.  Reduced social and environmental degradation is simply a byproduct of this paradigm.

 Where is the leverage, and how do we implement this system?

The true leverage is in upfront planning and design so that all of our “natural resources” are preserved in a natural state and can re-enter the natural biological system, and all of our “technological resources” can be returned to a technological recycling system.  Implementation is possible with planning and communication among our community so we identify, produce, and link processes whose wastes can be used as food for other processing cycles.

1Senge, P. (Winter 2001).  Innovating Our Way to the Next Industrial Revolution, MIT Sloan Management Review, 24-38.

2Hawken, P. (1993). The Ecology of Commerce: A Declaration of Sustainability. HarperCollins Publishers. New York.

3McDonough, W., & Braungart, M. (2002). Cradle to Cradle: Remaking the Way We Make Things. North Point Press. New York.

 

Automation and Process Efficiency

Automation

[Originally published 2/1/14 as “Is Automation The Answer?”]

I am sometimes questioned about automation and its role in improving efficiencies.  To be honest, I don’t think automation is “the answer” though it is an answer.  The following case study demonstrates my reasoning regarding the role of automation in improving efficiencies:

 Working with a client, we defined and documented their current state production process rate and capacity.  By automating their production process we determined they could realize a 20% increase in production rate and capacity.

We did not implement the automation

By changing the process without automation we were able to increase their production rate and capacity by 60%!

Once the new production process was implemented, we found we could increase production rate and capacity a total of 220% from the original state by implementing the “capital investment” automation initially identified.

Brown and Hellerstein1 take a position regarding automation that is interesting given that it is in IT operations, stating in the Abstract “We take the heretical position that automation does not necessarily reduce the cost of operations”, following up with a claim in the Introduction that “… automation can increase cost if it is applied without a holistic view of the processes used to deliver IT services.”  When considering automation in the Abstract, they further state:

 Our analysis provides a quantitative framework that captures several traditional rules of thumb: that automating a process is beneficial if the process has a sufficiently long lifetime, if it is relatively easy to automate (i.e., can readily be generalized from a manual process), and if there is a large cost reduction (or leverage) provided by each automated execution of the process compared to a manual invocation.

 The moral of the story:  Automation is not necessarily beneficial, and automating a bad process does not make it a good process, only an automated bad process.  As stated by Bill Gates2 (Quote 34):

 The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.

Bill Gates

 First look at the process itself, then consider automation to see if the gains warrant the cost. 

You will save time and money.

References:

1Brown, A., and Hellerstein, J. Reducing the Cost of IT Operations—Is Automation Always the Answer? IBM Thomas J. Watson Research Center, Hawthorne, New York.  Retrieved from: https://www.usenix.org/legacy/event/hotos05/final_papers_backup/brown/brown_html/

2Retrieved from:  http://www.investinganswers.com/education/famous-investors/50-quotes-wealthiest-man-america-3088

Integrating ISO with Lean = Synergy?

ISO

I sometimes hear people say they don’t think ISO (International Organization for Standardization) is worth pursuing.  This may be true relative to certification, but having been involved with both Lean Initiatives and ISO Certification I am convinced the process of implementing ISO is compatible with, and may provide synergies when combined with Lean. 

 Stated benefits of the ISOProcess Approach1 (pp. 1-2) are:

  • Integration and alignment of processes to enable achievement of desired outcomes.
  • Ability to focus effort on process effectiveness and efficiency.
  • Provision of confidence to customers, and other interested parties, about the consistent performance of the organization.
  • Transparency of operations within the organization.
  • Lower costs and creation of shorter cycle times, through the effective use of resources.
  • Improved, consistent and predictable results.
  • Provision of opportunities for focused and prioritized improvement initiatives.
  • Encouragement of the involvement of people and the clarification of their responsibilities.

 These benefits can be compared to Womack  and Jones (1996)2 description of the benefits of lean thinking (p. 15):

It [lean thinking] provides a way to specify value, line up value-creating actions in the best sequence, conduct these activities without interruption whenever someone requests them, and perform them more and more effectively.  In short, lean thinking is lean because it provides a way to do more and more with less and less—less human effort, less equipment, less time, and less space—while coming closer and closer to providing customers with exactly what they want.

 ISO and Lean are clearly both initiatives with a goal of improving efficiencies and effectiveness.  Lean’s approach defines certain principles–value, value stream, flow, pull, perfection, and associated elements including standardization, visual controls, and accountability.  ISO provides a disciplined process approach assuring responsibility, accountability (audits), and control of documents (procedures).                              

Andrea Chiarini (2011)3 takes a look at integration of ISO 9001 and Lean based on a study of 107 manufacturing companies from different European countries.  She links the PDCA (Plan Do Check Act) Deming Cycle to ISO and Lean principles (p. 101) as follows [click on image for clear view]:

Iso Lean

Though too lengthy to include here, Table IV of her article (pp. 106-113) associates specific ISO 9001 requirements with Lean tools and principles, and suggests guidelines for integration.

As a final reference, Bolea (2012)4 relates Lean and ISO as follows:

The implementation of Lean is clearly linked to the innovative spirit of the organizations, based on essential principles that focus on creativity, commitment to change and continuous improvement. Therefore, it could even be considered as a process [the ISO approach], specifically in the group framing Process Measurement, analysis and improvement (related to Chapter 8 of ISO 9001), while all the activities involved, interact and cause changes in the product realization processes (Chapter 7 of the standard), Resource Management (Chapter 6) and Management Responsibility (Chapter 5).

 Here is the  Synergy!

Lean Gives ISO Context — ISO Gives Lean Discipline!

 References:

1ISO 2008. ISO/TC 176/SC 2/n 544R3, ISO 9000 Introduction and Support Package: Guidance on the Concept and Use of the Process Approach for Management Systems.

2Womack, J., Jones, D. (1996). Lean Thinking: Banish Waste and Create Wealth in Your Corporation. New York: Simon & Schuster.

3Chiarini, A. (2011).  Integrating Lean Thinking Into ISO 9001: A First Guideline, International Journal of Lean SixSigma,2(2), 96-117.

4Bolea, L. (2012).  Lean and ISO 9001. Are They Compatible? Innovation and Technology (Featured Knowledge).  Retrieved from: http://www.iat.es/2012/05/lean-and-iso-9001-are-they-compatible/?lang=en

 

 

Supply Chain or Value Chain?

Truck on freeway

[Originally published 12/2/13 as “Supply Chain or Value Chain – What’s the Big Deal?”]

Aren’t supply chain and value chain talking about the same thing?  Receiving something from upstream vendors, adding value using your processes, then sending product/service downstream for the benefit of the consumer while addressing timing, volume, and all other issues associated with making sure the process is seamless and cost effective.

 So what is the difference?

The difference is a matter of perspective – a paradigm!

In Supply Chain Management our goal is to optimize efficiencies, from supplier to consumer, based on constraints imposed by resource availability and cost, production and transportation logistics, and quality to assure deliveries of the right product — at the right place — at the right time — and at the right price.                                        

In Value Chain Management, all of the above apply.  The difference is the starting point of the measurement system: 

 WHAT ADDS VALUE FOR THE CUSTOMER!

 Feller, Shunk and Callarman (2006)1 say that “… the key difference between a value chain and a supply chain [is that] they flow in opposite directions” (p. 1).  When we begin our quest for efficiencies based on value to the customer (customer perceived value) the orientation of the endeavor changes.  Are we designing in complexity or features that have no value to the customer?  Are we purchasing based on cost and ignoring other important considerations?  Are we transporting, holding, inventorying, and handling in ways that add no value to the customer? 

When every step in the process is viewed through the lens of value to the customer we get a “reality check” perspective that helps determine what waste is.  Any process that does not add value from the customers perspective is waste, and to the extent possible should be eliminated.  Any process that adds value from the customer perspective should be retained, and provided in a manner that costs less than the value added – if the customer is willing to pay for it, it is added value.  “In common parlance, a supply chain and a value chain are complementary views of an extended enterprise with integrated business processes enabling the flows of products and services in one direction, and of value as represented by demand and cash flow in the other” (Feller et.al., p. 4).

 1Feller, A., Shunk, D., & Callarman, T. (2006).  Value Chains versus Supply Chains. BPTrends, 1-7. Retrieved from:  http://www.bptrends.com/publicationfiles/03-06-ART-ValueChains-SupplyChains-Feller.pdf

Six Sigma – Computer Modeling and Simulation

screenshot.8[click on image for clear view]

[Originally Published 11/20/2013 as “Can Computer Modeling and Simulation Save You Money?”]

Computer Modeling and Simulation is a great tool to understand current processes, and is used to explore and test alternatives for improvement without incurring the downtime and risk associated with making changes to, and interrupting the flow of critical operations.  It is also a tool that can be used in the Six Sigma quality methodology for improving efficiencies. 

 Six Sigma is well-tested and proven, having generated substantial savings for many companies, including Motorola and GE who have saved billions of dollars using the Define, Measure, Analyze, Improve, and Control (DMAIC) methodology that is the cornerstone of Six Sigma (savings noted in the following portion of Table 2 excerpted from iSixSigma1).

Table 2: Six Sigma Cost And Savings By Company

Year

Revenue ($B)

Invested ($B)

% Revenue Invested

Savings ($B)

% Revenue Savings

Motorola

1986-2001

356.9(e)

ND

16

4.5

GE

1996-1999

382.1

1.6

0.4

4.4

1.2

Key:$B = $ Billions, United States(e) = Estimated, Yearly Revenue 1986-1992 Could Not Be Found ND = Not Disclosed Note: Numbers Are Rounded To The Nearest Tenth

 Computer Modeling and Simulation has application in the Analyze and Improve phases of Six Sigma implementation.  There are certain criteria that are well suited for the use of Computer Modeling and Simulation as noted by Fleming and Manson under the heading “When to apply process simulation”2:

As with all extremely powerful tools, process simulation must be used correctly and only in appropriate situations. Process simulation can be a real aid in the following circumstances:

  The process is very complex and difficult to visualize. With a simple process, process mapping combined with brainstorming techniques will usually generate improvement ideas. With complex and hard-to-visualize processes, however, a working model will help you understand where your efforts will provide the largest payback.

  The process involves many decision points. The more decisions a process requires, the harder it is to visualize all of the possible paths that may be encountered.

  The project goal is to optimize the use of resources for a process. Resource utilization is hard to visualize, especially when the same resources are used in a variety of actions throughout a process or when one resource is used for some portions of the process and another resource is used later on.

  The goal of the project is to establish optimum-lot (“kanban”) sizing for a manufacturing process. Many manufacturing organizations use demand-flow technology, which involves formulas to calculate kanban sizes. These work well with simple manufacturing processes, but the formulas can be much more difficult to implement when several suppliers are linked in the chain. A process model allows you to visualize the flow of material through the factory floor. (pg. 2)

Computer Modeling and Simulation is a powerful, valid tool for Lean Continuous Improvement Initiatives, and should be considered for use when appropriate.

References:

1Retrieved from: www.isixsigma.com/implementation/financial-analysis/six-sigma-costs-and-savings/

2Fleming, S., Manson, L. (2002).  Six Sigma and Process Simulation.  Quality Digest. Retrieved from:  http://www.qualitydigest.com/mar02/html/sixsig.html

 

Located in Portland, Oregon