Yet another part of “enterprise thinking” calls for businesses to demon- strate the application of lean values and improvement in areas beyond manufacturing. This turns out to be a surprisingly powerful and valuable requirement. Process industries are intensely focused on the operation and performance of our core equipment; thus, we generally have a pretty good idea of the opportunities for improvement that exist in those areas and, for comparison purposes, a good idea of how our competitors are performing in similar operations. However, because of this intense focus on the critical operations, we often lose sight of opportunities that exist in other parts of our business.
As we seek to use lean values and practices to engage everyone in improve- ment, we will find highly valuable opportunities for improvement outside manufacturing. These indirect opportunities have surprising potential for positive impact on costs and performance. Engineers who design and deliver new facilities can make them increasingly fit for that purpose; contract administrators can establish more supportive relationships with
suppliers; supply chain managers can ensure adequate availability of spare parts; and support functions, such as Information Technology and Human Resources, can improve the morale of the workforce through improved performance. All these and more provide real improvement opportunities to the entire business.
case study: nonmanufacturing Improvement Potential
At Exxon in 1987, I encountered a classic example of just such an oppor- tunity. At that time, when an employee relocated from one city to another, a small group inside the human resources organization was charged with administering a self-insurance program for losses or damage to the employee’s personal property that occurred during the move. At that time, Exxon was spending in excess of $70,000 each for domestic moves to relo- cate executives very gracefully, with the goal that the move would be so uneventful that the executive would become immediately productive in the new location. That money was well spent. Executives routinely arrived at their new location and fully engaged within a few days following the announcement of the transfer—that is, unless there was important damage to their personal property during the move, at which time the HR self- insurance group became involved.
Their best elapsed time to process a claim for damages exceeded 6 months and some claims required far longer. In comparison, the Texas Insurance Code specified for the regulated insurance industry that a delay of 90 days constituted “prima facie evidence of intentional misconduct.” To be specific, in this situation the best efforts of the insurance administrators in the Exxon HR organization were twice as bad as performance that the legislature and industry professionals considered to represent intentional misconduct. These were not bad people. They were simply people who were doing work that was so far from the mind of management that liter- ally no one recognized the extent of the poor performance. However, the outcome was important because people upon whom we counted to hit the ground running in a new location were frequently distracted for months by unresolved personal problems.
More recently, I encountered another memorable example of the oppor- tunity for improvement away from the plant floor. Suncor became very cost conscious when the price of oil dropped from more than $150 per barrel in the summer of 2008 to less than $40 per barrel in January 2009. Among other things, we sought to reduce a relatively large expenditure on company-owned light vehicles (cars and pickup trucks usable on the public streets).
Despite several weeks of serious talk with senior managers, it appeared that they all considered every vehicle critical to the operation. One day, the
supervisor of our snow removal team appeared at my office door with a list of 147 vehicles that had not moved during both of the two most recent snowfalls. With that information in hand, we were able to break the back of the resistance and we ultimately saved more than $20 million in annual costs for light vehicles. It was a great reminder to me that when everyone knows precisely what you are trying to do, everyone can help.
Key idea: Throughout any organization, there are always a great many
examples of this sort that can provide savings or improved perfor- mance or simply demonstrate to everyone that all parts of the company are on the same path toward excellence.
The lean tools apply to improvements in the indirect areas of the busi- ness in precisely the same way that they apply to the work in the plant. The eight muda exist in the front and back offices just as they do on the plant floor. The critical issue is to organize the people who work in the indirect areas to think about their work in the same disciplined manner that we think about work in the plant. A manufacturing tool that is especially use- ful in this regard is “value stream mapping.”
In either manufacturing or indirect operations, the essential concept of value stream mapping is to identify clearly the value to be created and to understand clearly each element of work as a contribution to that value. In manufacturing, this practice is used to identify work that does not con- tribute to the intended value of products and therefore is an appropriate target for waste elimination. Value stream mapping has precisely the same effect for indirect work. Further, in indirect areas, value stream mapping may be the first time that the people performing that work ever stop to consider formally the intended value of what they create as differenti- ated from the routine tasks of their assignments. The assessment and the knowledge gained in that assessment often have surprising impact.
case study: the value of value stream mapping
I once helped Exxon Chemical’s vice president of technology with a prob- lem in one of Exxon’s technology centers. Although this was purely a research activity in a facility dedicated purely to science, it proved Thomas Edison correct when he observed that invention is “10% inspiration and 90% perspiration.”
The problem involved PhD-level scientists but it soon became clear that the nature of the problem was activities that looked more like perspira- tion than inspiration. The development of new molecules (business value) was being harmed by waste in the planning, scheduling, and execution of standard laboratory support activities (value stream). Because the scientists believed that their only important function was to be creative, the other work, which enabled their creativity, was not well organized or managed. When we understood this issue and got the routine work right, the creative process proceeded much better. Value stream mapping, or understanding the flow of value as it relates to the flow of work, can help you with efforts of this sort. There are many great stories of surprising improvements in the indirect areas of business attributable to lean thinking and value stream mapping. As you learn about applying lean tools to the manufacturing functions, you should remember that they apply equally in other areas as well.1