Creating a sustainable competitive position through a world class operating system

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Creating a sustainable

competitive position through a

world class operating system

Jean-Claude Savard Montreal, Quebec, Canada

August 2008

1 To survive on the long run, we must embrace world class management systems: Enable us to Stay ahead of competition and continually generate superior results Enable us to Stay ahead of competition and continually generate superior results Market share Profits

1.Profitability: costs, margins, contribution, returns 2.Productivity: efficiency, effectiveness, usage,

consumption, labor, time losses

3.Product quality: 1st_{class, product innovation}

4.Clients service: satisfaction, service level 5.Human Resources development: H&S,

succession planning, training

6.Business Development & Growth: top line

growth, market share, new businesses

7.Business compliance: environment: (water,

discharges, noise), business rules (contractual obligations)

1.Profitability: costs, margins, contribution, returns 2.Productivity: efficiency, effectiveness, usage,

consumption, labor, time losses

3.Product quality: 1st_{class, product innovation} 4.Clients service: satisfaction, service level 5.Human Resources development: H&S,

succession planning, training

6.Business Development & Growth: top line

growth, market share, new businesses 7.Business compliance: environment: (water,

discharges, noise), business rules (contractual obligations)

A set of management systems that… A set of management systems that…

By improving across 7 key business dimensions… By improving across 7 key business dimensions…

A world class management system is …

•Project

•Program

•System

(culture)

•A special activity with limited

objectives and fixed resources

and with a beginning and an end

•An efforts for achieving

pre-established goals, involving only

a subset of an organization

•A systematic (and consistent)

way of managing every aspect of

the business by focusing the

entire organization towards

continuously improving.

An Operating System •Six Sigma •Toyota produc-tion system "The g_oal" by E Go_ldratt •Theory of constraints High penetration

•40% of Fortune 100 companies have six sigma programs

•Toyota production system (TPS) has been adopted around the world (e.g., Ford production system, Alcoa production system)

Executive commitment

•Significant financial investments (e.g., dedicated staff, capital invested)

•Senior executives investing time and passion •Typically viewed as the “ticket to stay in the

game”

Solid funda-mentals

•Well proven problem solving tools used similarly by different programs •Prescriptive program management (e.g.,

Black Belts, Ohno's disciples)

Success stories

•Many examples of one-time cost reduction and cash flow improvement – and a few real corporate successes of sustained improvements

•Alcoa business system

World class operating systems are all over the industrial space

•Lean Manufacturing

•Bombardier Lean Sigma

•TQM

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4

Time Frames Cost Quality

Impact may be significant, but it requires sustained efforts over many

years EXAMPLES

Company Years Annual

Improvement Performance Units

Omron Toyota 7 16 7% 6% Defects/100 Defects/100 Sollac GE Lighting Alcoa 12 10 7 5% 8% 5% Cost/tonne Cost/unit Cost/tonne Pechiney Aerospace Porsche British Aerospace 7 6 6 10% 10% 10%

Order to delivery time frame Design to manufacture time frame Order to delivery time frame

5 Strategic link between World-class performance and world -class practices European Plants Competitiveness Study

European Plant Average Results The Model

Kobayashi was the first to create what we call roadmaps to CI

1. Cleaning and organizing

2. Rationalizing the

System/Management of Objectives

3. Improvement Team Activities

4. Reducing Inventory (Shortening Lead Times)

5. Quick Changeover Technology

6. Manufacturing Value Analysis (Methods Improvement)

7. Zero Monitor Manufacturing

8. Coupled Manufacturing

9. Maintaining Equipment

10. Time Control and Commitment

11. Quality Assurance System

12. Developing Your Suppliers

13. Eliminating Waste (Treasure Map)

14. Empowering Workers to Make

Improvements

15. Skill versatility and Cross-Training

16. Production Scheduling

17. Efficiency Control

18. Using Information Systems

19. Conserving Energy and Materials 20. Leading Technology and Site

Technology

20 Keys to Workplace Improvement

All this originates from the Toyota Production System

Two big contributors: •Taichi Ohno (VP-manufacturing) •Shigeo Shingo (consultant)

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8 Toyota Production System

•

Its overall competitiveness has remained high and stable in recent years. There’s a general

•

Toyota remains one of the most profitable companies in automotive industry.

•

Toyota made systematic profits over the last forty years (normally strong 5 per cent)

Up to now, it’s manufacturing

system is the most competitive

one, But beyond the visibility of

its production system, Toyota

has developed better than

others:

Evolutionary great

learning capabilities

9 Three Layers of Toyota’s Organizational Capabilities

1. Routinized manufacturing capabilities 1. Routinized manufacturing capabilities 2. Routinized learning capabilities 2. Routinized learning capabilities 3. Evolutionary learning capabilities 3. Evolutionary learning capabilities

•For example, if Toyota operates with a consistently lower number of defectives parts per million compared to its competitors it means that certain defect-preventing routines such as poka-yoke, jidoka, andon, 5S… are implemented more

thoroughly in its factories than others. This set of routines

constitutes Toyota’s routinized manufacturing capability. • Routines for problem identification.

•Reveal and help visualize problems. •Diffuse problem information. •Keep individuals conscious of problems. • Routines for problem-solving and improvement projects.

•Ability to search, stimulate, and evaluate alternatives. •Coordinate knowledge, skills.

•Diffuse such tools throughout an organization.

• Routines for solution retention and systematic standardization. •Formalize and institutionalize new solutions in standard

operating procedures.

• Systematic development of new layout, new manufacturing practices

Many companies have tried, but few really succeed at creating a self-nurturing operating systems and CI approaches, because…

•Executives are not committed to their heart; they do not walk the talk

1. Insufficient management leadership

•Focus on discrete projects (e.g.: “cut cost”) distracts leaders from thinking broadly about fundamentally improving the entire business system

2. Too Project-centric

•Expected impact becomes difficult to capture; goals are not tightly connected to business unit performance management systems

3. Fleeting financial impact

•Focus on general problem solving tools and approaches – lack of sufficient depth in subject-matter expertise (technical and functional)

6. Content neutral

•Prescriptive methodology can result in more attention paid to the steps and/or training rather than the answer

4. Overly process-oriented and rigid

•Transformation experts reporting to a central staff group rather than through the line resulting in lack of shop floor performance accountability

5. Interpreted as a technical exercise

So what makes a world class operating system work: First set the bar high and focus… 1.Performance Management 1.Performance Management Focus on what really matters

The right tools to solve the right problems

The right people in

the right jobs doing the right things The right skills and coaching 2.Tools & Methods 2.Tools & Methods

3.Capability building 3.Capability building 4.Mindsets and behaviors 4.Mindsets and behaviors

•

Metrics that cascade from the top to the front-line

•

Targeting Methods that are limits based and stretching, yet achievable

•

Action Tracking that creates transparency to the inputs of improvement

•

Performance dialogs that focus on problem solving and issue resolution

•

Linkages to HR Systems to assure individuals are accountable for delivery

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12 Second, develop world class ways for solving problems…

1.Performance Management 1.Performance Management Focus on what really matters

•

A world class problem solving approach

•

Pivotal Process Definitions codified in standard operating procedures

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Analytical Diagnostic and Improvement tools aligned by pivotal process

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Qualitative Assessors that articulate “what good looks like” by process/ function

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Subject Matter Expertise that can be deployed to solve specific issues

13 Third, make sure you support the people by building the right set of skills…

•

Change agents that can lead change within the line and across the organization

•

Functional Skills development methods that assure capability building

•

Best Practice Sharing methods that enable rapid deployment

Finally, walk the talk. lead the change by aligning mindsets and behaviors…

•

Talent Deployment to align “A” people against “A” opportunities/issues

•

Aligned HR Systems that motivate people to do the right things

•

Conviction building tools/

communications that highlight individuals’ roles within the big picture

•

Leadership actions that consistently demonstrate the desired behaviors

•

Aligned organizational structures to prevent barriers to the right decisions/actions

•Operating strategies

•Performance management systems •Stretch targets

•Continuous Improvement tools •Front line execution

•Problem solving teams •Audit and diagnostics •Centers of excellence •KPI and balanced score cards •Appraisal systems

•Succession planning •Kaizen / Blitz •… •…

An operating system: it’s not a project, it is not an initiative; it is a system followed by everybody from Corporate to the shop floor…

This includes…

•We already do many of these

things in different parts of the

organization.

•The operating system will enables

us to:

•put it all together in a common

framework to facilitate

communication

•Be Systematic to ensure we

do the right things everywhere

•Communicate our objectives

clearly to all employees

•Ensure alignment on the

management principles

•Address the areas of gap &

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16 It’s not a project, it is not an initiative; it is an Operating system followed by everybody from Corporate to the shop floor…

An integrated system of principles, operating practices, and elements that: •Drive the relentless

pursuit of perfect customer value creation •Create leading financial performance by focusing on relentless pursue of excellence •Develop world-class employees What it is…

•Just a shop floor improvement program •A set of Kaizen events •A menu of tools and

techniques

•Something that can be delegated

What it is not…

17 The Operating system is built on 5 fundamental elements…

2. Performance Management 4. “Problem Solving” tools and technical capacities 5.Continuous Change Mechanisms Focus on key priorities and stretch for results Skilled people driving constant improvement and change World class problem solving approach and tools Coaching, capability building, and knowledge sharing

The Brain The muscle

3. Talent Management

The spirit The Structure

1. Operating Strategy The Vision Where do we want to go and why Front line execution and performance

An operating strategy: defining a vision for where to go and why…

2. Performance Management 4. “Problem Solving” tools and technical capacities 5.Continuous Change Mechanisms

1. Understand where we stand today 2. Understand what our potential is

3. Understand how do we get there and close the gap

1. Operating Strategy The Vision Where do we want to go and why Front line execution and performance

3 fundamental questions to answer

An operating strategy supports and complements the business strategy

A Business strategy…

•

Focuses on answering the following 4 questions:

– What?: What products, what customers, what value proposition

– Where? What regions, what markets

– When?: Over what period of time, in what sequence – How?: What business model,

where in the value chain

•

Determine the source of competitive advantage on which the business is to be built

Multi-annual strategic and business plan reviewed and thoroughly communicated yearly through the strategic planning cycle

An Operating strategy (for each site)…

•

Feeds into and gets informed by the business strategy by focusing on:

– Current performance?: What is our performance (strengths and weaknesses) against key benchmarks

– Potential?: how good could our operations be (against benchmarks)?

– How?: What is the game plan to close the performance gap?

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20 To improve performance, we must address these six major losses, which are :

• Downtime losses (availability losses)

1. Breakdowns and equipment failures: losses due to unexpected failures and affecting equipment operation.

2. Changeover and adjustment set-ups: losses due to shutdowns for die changes and adjustments inherent to the machine operation.

• Speed losses (efficiency losses)

3. Idling and minor stoppages: losses due to idling and minor stops resulting from temporary problems.

4. Reduced speed (versus rated speed): losses due to discrepancies between the actual and nominal production speed, as specified at the time of equipment design. • Defects losses (quality losses)

5. Defects in process: losses due to reprocessing and defects.

6. Reduces yield (start-up losses): losses occurring between the very beginning of production and the moment it reaches full stability, i.e. the so-called start-up phase. OEE a strategic measure to focus on the six big losses

21 Management systems are part of a complete diagnostic - example

Key findings

•Performance management heavily focussed on business with limited attention to people and health dimensions

•Performance dialogue centered around explaining recent performance vs. budget, instead of root cause problem solving and action plans

•Sufficient capabilities in most sectors with specific concerns in converting and maintenance

•Limited lean capabilities to improve

– Standard operating procedures (e.g., different operators have different “magic”) – Process control (e.g., lack of

abnormality detection and root cause problem solving) Performance improvement Current Potential Mindsets and Behaviors Production System Management Infrastructure and Capabilities

The operating strategy has to set a compelling vision for operational improvement

1. Current performance: What is our performance (strengths and weaknesses) against key benchmarks?

3. How: What is the game plan to close the performance gap? Lead the Change

2. Potential: how good could our operations be (against benchmarks)?

Complete diagnostic of 3 areas:

•

Production systems

•

Management systems

•

Mindsets and behaviors

•

Create the burning platform for improvement agenda: set the gap

•

Align and mobilize the organization against a vision and action plan for closing the gap

•

Define the mandate and the collective aspirations

Evaluate current performance against:

•

Technical limits

•

Best in class

•

Best historical

Is that enough to close the competitive gap?

Operating strategy leading the change concept (including diagnostic)

•Creating a burning platform and a vision

•Mobilizing people, opinion leaders

•Adapting vision based on mobilization and

people

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24 Performance management: focus on priorities and make it happen…

1. Set stretch targets

2. Define priorities and accountabilities for results 3. Maintain tight monitoring on progress (performance review) 4. Integrate results into all management cycles (e.g.; performance

appraisal, strategy, etc.)

1. Operating Strategy The Vision Focus on key priorities and stretch for results Front line execution and performance 4 fundamental steps 25 The Performance Management cycle implements the operating strategy

4. Integrate into planning cycles 1. Set higher and higher targets 3. Control, monitor and adjust 2. Plan and implement Operating strategy

– Sets the context by defining the objectives:

•Operational diagnostic: –OEE

–Technical limits

•How to maintain well –Equipment reliability strategy –Organizational effectiveness •How to match to customer requirements: –CTC; CTQ; CTP – Aligns the entire

organization against common set of objectives – Sets the context by

defining the objectives:

•Operational diagnostic: –OEE

–Technical limits

•How to maintain well –Equipment reliability strategy –Organizational effectiveness •How to match to customer requirements: –CTC; CTQ; CTP – Aligns the entire

organization against common set of objectives

Performance Management: a rigorous follow-up 4 step cycle

4. Integrate into planning cycles 1. Set higher and higher targets 3. Control, monitor and adjust 2. Plan and implement

– Identify key performance indicators (KPI) in all levels of the organization – Establish stretch targets, taking into account the technical limits, best historical performance, internal/external benchmarks, etc . – Set goals right up to the

front line personnel – Qualitative roadmaps to

articulate “what good looks like” for key processes/ functions – Identify key performance

indicators (KPI) in all levels of the organization – Establish stretch targets, taking into account the technical limits, best historical performance, internal/external benchmarks, etc . – Set goals right up to the

front line personnel – Qualitative roadmaps to

articulate “what good looks like” for key processes/ functions

KPI: The Foundation of Good Performance Management •Focus attention. Set improvement priorities

– Facilitates management of what is important, avoid management by urgency (fire fighting)

– Facilitates identification of problems and action to be taken (we manage what we can measure)

– Allows management to have value added dialogues (problem solving based on good understanding of root causes) •Makes individuals accountable for specific parameters over

which they have direct control

•Establishes a clear and transparent link between value creation and every-day operating decisions/actions on the line •Sets precise stretch targets and facilitates benchmarking •Measures progress and anticipates down turns

KPIs are there to expose weaknesses and opportunities NOT to justify current performance

KPI: Key performance indicators

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28 Typical pitfalls in a KPI architecture

KPI used as a report procedure and not as a management tool 2

2

Not transparent to entire organization (right info, right format, right time, right people)

3 3

Oriented toward explaining the past, not planning the future 4

4

Insufficient stretch targets 1

1

Isolated exercise, not integrated into overall management processes. No systematic and rigorous (daily) performance management dialogue 5

5

Not cascaded creating inconsistencies between levels / areas of the organization

6 6

Improvements cannot be distinguished from simple statistical fluctuations

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Incomplete breakdown; KPI too general to conduce to action 8

8

Focus on limited number of variables 9

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KPIs not owned by key individuals 10

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29 Through technical limit benchmarking for each selected KPI determines

the stretch target. No “stretch”, no KPI! EXAMPLE

Throughput Time Technical limit Best day Actual avg. Gap Actual Best-in-class Stretch goal based on study of technical limits Throughput Deciles Best day Actual avg. Gap Stretch goal based on historical best performance 82 87 88 95 Average performance last 12 months

Establishing Technical Limitations

Same plant performance, 3 best months Any plant in the division performance, 3 best months Performance technical limits Efficiency % Options Options •

•Best operating months Best operating months to date

to date

•

•Composite of best Composite of best month’s performance

month’s performance

for each key

dimension dimension • •Engineering Engineering calculations calculations (specifications, (specifications, physical limits) physical limits) ILLUSTRATION Performance shortfall Performance shortfall used to set used to set improvement goals improvement goals

Reduction of variation: statistical diagnostic and six sigma

Six Sigma concept: Make the connection on Critical to Business and Critical to Customer

• What is critical???

–C.T.C. (Critical to Customer)

–C.T.Q. (Critical to Quality)

–C.T.P. (Critical to Process)

Up to control loops…

• Customer Focus…

–Reduction of variation is a systematic

process of improvement focus totally on

customer.

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32 Performance Management: a rigorous follow-up 4 step cycle

4. Integrate into planning cycles 1. Set higher and higher targets 3. Control, monitor and adjust 2. Plan and implement – Define improvement priorities and align organization around them

– Define detailed action plan for improvement initiatives

– Enforce unequivocal accountability for execution & results – Ensure same rigor is

applied at all levels of the organization – Define improvement

priorities and align organization around them

– Define detailed action plan for improvement initiatives

– Enforce unequivocal accountability for execution & results – Ensure same rigor is

applied at all levels of the organization

33 Performance Management: a rigorous follow-up 4 step cycle

4. Integrate into planning cycles 1. Set higher and higher targets 3. Control, monitor and adjust 2. Plan and implement – Systematic monitoring of

KPIs and progress at:

•Daily production meeting

•Weekly staff meeting

•Monthly operating meetings

•Yearly/quarterly reviews – Thorough follow up on

agreed action plans with timely corrective action – Transparency of results

and trends:

•Balanced score cards

•Plant dashboards

•Visual posting of KPIs – Systematic monitoring of

KPIs and progress at:

•Daily production meeting

•Weekly staff meeting

•Monthly operating meetings

•Yearly/quarterly reviews – Thorough follow up on

agreed action plans with timely corrective action – Transparency of results

and trends:

•Balanced score cards

•Plant dashboards

•Visual posting of KPIs

The review meetings should NOT focus on explaining the past, but on planning ahead and anticipating issues

“Looking Ahead”: Planning, setting targets and anticipating “Looking Ahead”: Planning, setting targets and anticipating

Key elements to be managed Key elements to be managed

These principles must be integrated at all levels of the organization •Line •Section •Plant •Division •Corporate “Result Monitoring”: performance dialogue “Result Monitoring”: performance dialogue •Set targets to be reached

•Define a plan (where are we going)

•Anticipate and resolve potential road blocks •Set targets to be

reached

•Define a plan (where are we going)

•Anticipate and resolve potential road blocks

•Measure and review KPIs to understand trends towards closing gap

•Integrate initiatives and review priorities

•Follow-up on action plans •Measure and review KPIs

to understand trends towards closing gap •Integrate initiatives and

review priorities •Follow-up on action plans

20% 20%

80% 80%

Performance Management: a rigorous follow-up cycle

4. Integrate into planning cycles 1. Set higher and higher targets 3. Control and adjust 2. Plan and implement

– Identify key performance indicators (KPI) – Establish higher and

higher targets, taking into account the technical limits, not merely internal/external

benchmarks

– Set goals right up to the front line personnel – Identify key performance

indicators (KPI) – Establish higher and

higher targets, taking into account the technical limits, not merely internal/external

benchmarks

– Set goals right up to the front line personnel

– Definition of priorities – Detailed action plan for

improvement initiatives – Unequivocal

accountability for results – Definition of priorities – Detailed action plan for

improvement initiatives – Unequivocal

accountability for results – HR: direct link between

performance, skills and incentives

– Establish financial goals based on technical limits – Integration with annual

planning process – HR: direct link between

performance, skills and incentives

– Establish financial goals based on technical limits – Integration with annual

planning process

– Daily monitoring of key performance indicators (KPI)

– Thorough action plan follow up

– Regular forums for review and transparency – Timely corrective action – Daily monitoring of key performance indicators (KPI)

– Thorough action plan follow up

– Regular forums for review and transparency – Timely corrective action

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36 Talent Management: putting the best people to work…

1. Assess key pivotal job 2. Review and appraisal 3. Fill the talent gap

4. Promote right mindsets and behaviors

1. Operating Strategy The Vision Skilled people driving constant improvement and change Front line execution and performance

The 4 core components

37 Talent management: 4 core components to enable the development of our people

•

Roles and responsibilities: Continuous performance improvement and change leadership explicitly included in the responsibilities of the key roles (plant managers, key supervisors, etc. )

•

Assess ability of pivotal roles to lead improvement and change along 5 dimensions:

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goal setting & comfort with stretch targets;

•

motivate, lead & coach front line;

•

Collaborate, share and bring down barriers

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Openness to new ideas and methods

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Rigorous problem solvers

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Understand change agents and opinion leaders that can lead change (or block it) within the line and influence across the organization

1.Assess pivotal jobs 1.Assess pivotal

jobs Define who makes things happen

Understand strengths and weaknesses

The right people in the right jobs doing the right things Build the right skills and and capabilities 2.Review & Appraisal 2.Review & Appraisal

3.Fill the talent gap 3.Fill the talent gap

4.Mindsets and behaviors 4.Mindsets and behaviors Top team Middle management Shop floor

•

Rigorous evaluation & appraisal systems (across all levels of the organization) that encompasses technical performance and change leadership dimensions

•

Segmentation: continuous assessment of high, average and low performers (with a standardized assessment tools)

•

Action plan: Identification of talent gaps (particularly within pivotal jobs) and development of gap-closing actions (by individual and by organization)

•

Performance contract and consequence management: Specify performance objectives (including KPIs) and link “contract” to reward/recognition processes

Talent management: 4 core components to enable the development of our people

• Talent deployment: Assign “A” people against “A” opportunities/issues

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Attracting skills: Thorough hiring for fit with change leadership desired

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Thorough succession planning that promotes desired leadership change

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Career development processes that continuously exposes high potential individuals to be stretched

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Comprehensive training program to reinforce desired skills in pivotal jobs

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40

•

Aligned HR Systems that motivate people to do the right things (soft and hard incentives)

•

Conviction building tools & communication strategies to ensure Operators understanding the need for change and committed to implementing the new operating system

•

Leadership actions that consistently demonstrate the desired behaviors; Top management team must “walk the talk”

•

Aligned organizational structures to prevent barriers to the right decisions/actions

•

Focus on cultural change to proactively attack limiting mindsets and paradigms that block the solution set

41 Problem solving capabilities: bring out the best of our people…

1. Rigorous problem solving approach 2. Team based involvement of front line

3. Best-in-class analysis and problem solving tool box 4. Best-in-class operations processes (maintenance, quality, etc.) 5. Net work of “on call” technical experts

1. Operating Strategy The Vision Front line execution and performance 5 components World class problem solving approach and tools

The rigorous 7 step problem-solving approach is at the heart of the Operating System

Standardized and

control Define problem and set goals

Analyze situation

Generate potential solutions Select and plan solution Implement solution Evaluate success 1 2 3 4 5 6 7

7 steps to Problem solving… 1. Problem solving approach 1. Problem solving approach 2. Team based front line execution 2. Team based front line execution 3. Problem solving tools 3. Problem solving tools 4. Operating processes 4. Operating processes 5. Technical expertise “on call” 5. Technical expertise “on call” Plan Do Check Act •Systematic process to be used across the organization for every improvement opportunity an eliminate all sources of waste •Our biggest challenge and weaknesses reside on steps 1,2 and 7

Team based front-line execution: fundamental to the Operating system

Fundamental concept to the Operating system: •Problems don’t get solved unless they are addressed with

full attention

•People solve problems thus need to dedicate a team full time to the resolution, and create a problem solving event (Kaizen, Blitz, etc.)

•The team brings relevant people together in an organized way and has the power to make things happen

•The team addresses the root-causes and do not look for palliative measures

•Ensure a standardized approach to solving the problems to allow for rigor and learning

•A Problem solving event (Kaizen, Blitz, etc.) requires 6 to 12 people involved 100% for 1 to 3 weeks

•The solution adopted becomes the new operating standard.

Fundamental concept to the Operating system: •Problems don’t get solved unless they are addressed with

full attention

•People solve problems thus need to dedicate a team full time to the resolution, and create a problem solving event (Kaizen, Blitz, etc.)

•The team brings relevant people together in an organized way and has the power to make things happen •The team addresses the root-causes and do not look for

palliative measures

•Ensure a standardized approach to solving the problems to allow for rigor and learning

•A Problem solving event (Kaizen, Blitz, etc.) requires 6 to 12 people involved 100% for 1 to 3 weeks

•The solution adopted becomes the new operating standard.

2. Team based front line execution 2. Team based front line execution 3. Problem solving tools 3. Problem solving tools 4. Operating processes 4. Operating processes 5. Technical expertise “on call” 5. Technical expertise “on call” 1. Problem Solving approach 1. Problem Solving approach

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44 Each operation has to have the capability for applying specific tools depending on the problem at hand

•OEE – Measure the overall effectiveness of the equipment •Six Sigma statistical analysis

•Ishikawa •PokeYoke

•SMED – Quick change over

•5S – Organize working environment (sort, clean, locate, identify, maintain)

•Clean and check – (5S applied to a machine) •Tack time cycles

•Kanban •Value mapping •Spaghetti diagram •…

Sample of lean and six-sigma tools

3. Problem solving tools 3. Problem solving tools 4. Operating processes 4. Operating processes 5. Technical expertise “on call” 5. Technical expertise “on call” 1. Problem Solving approach 1. Problem Solving approach 2. Team based front line execution 2. Team based front line execution 45 To sustain and maintain improvements several operating processes must support the Operating system

•World-Class maintenance system: ensures maximum equipment reliability at low cost and waste. Equipment reliability should be owned jointly by maintenance and production •Quality System: Intended to built quality assurance into the

process and eradicating root causes (ISO certification is one tool for implementing a quality system)

•Standard Operating Practices (SOP): Ensures consistent, safest, lowest cost and most efficient operating procedure. It stabilizes the operations and creates a baseline from where improvements can be achieved.

•Visual Management: Communication process between management and shop floor to ensure alignment on performance, improvement, and priorities •Health and Safety system: maintain the safest work

environment possible (OSHA 1800 certification is one tool being used in some of our operations)

•Environmental compliance system: maintain strict adherence to rules and requirements (several certifications types could be applied across our operations)

6 Operating processes to support it

4. Operating processes 4. Operating processes 5. Technical expertise “on call” 5. Technical expertise “on call” 1. Problem Solving approach 1. Problem Solving approach 2. Team based front line execution 2. Team based front line execution 3. Problem Solving tools 3. Problem Solving tools

Front-line has to be supported by access to a network of technical expertise

•External: network of functional expertise (consultants) available and shared across the network

•Internal: Centers of excellence on areas of common interest that enable best practice sharing across businesses and divisions

•Internal: skilled trades people and engineers who provide subject matter expertise (e.g., maintenance, chemistry, manufacturing systems) that can be leveraged for general problem-solving across any division and business unit Both internal and external formal network of technical experts 5. Technical expertise “on call” 5. Technical expertise “on call” 1. Problem Solving approach 1. Problem Solving approach 2. Team based front line execution 2. Team based front line execution 3. Problem Solving tools 3. Problem Solving tools 4. Operating processes 4. Operating processes

Continuous change mechanisms: build a sustaining system…

2. Performance Management

5.Continuous Change Mechanisms

1. Dedicated local coaches (Local CI team) and steering co. 2. Communication strategy and visual management 3. Knowledge sharing infrastructure

4. Centers of CI Excellence

The Brain

1. Operating Strategy The Vision Front line execution and performance 4 components Coaching, capability building, and knowledge sharing 4. “Problem Solving” tools and technical capacities The muscle

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48 The initiatives require dedicated local coaches

1. Dedicated local coaches 1. Dedicated local coaches 2. Communication strategy 2. Communication strategy 3. Knowledge sharing infrastructure 3. Knowledge sharing infrastructure 4. CI center of excellence 4. CI center of excellence

•“Black coaches”:specially trained dedicated “transformation resources” and coaches to facilitate: Facilitate, coordinate, coach, train, and provide the analytical horse power to the problem solving; operate as chief of staff on CI to the plant manager

– Typically 1% of the total work force – Experts in fact based problem solving and in

Kaizen methods

– Experts in a few lean or six sigma tools •“Green coaches”: line operators/supervisors

trained through involvement in kaizen events; Typically 35% of an organization will have some “green coaches” capabilities

•Accountability for improvement remains within the line operations. Each area of improvement is thus championed by line supervision

49 Messages, successes and learnings need to be constantly communicated

2. Communication strategy 2. Communication strategy 1. Dedicated local coaches 1. Dedicated local coaches 3. Knowledge sharing infrastructure 3. Knowledge sharing infrastructure 4. CI center of excellence 4. CI center of excellence

•CI is a central part of the strategic agenda •Visual management: KPIs, improvement and

performance displayed across organization •Public recognition of successes

•Commitment to CI communicated to customers and other stakeholders

•Implementation of “good will ideas” to motivate and build commitment

•…

Examples (not exhaustive)

Learning organization needs innovative ways for sharing knowledge

3. Knowledge sharing infrastructure 3. Knowledge sharing infrastructure 2. Communication strategy 2. Communication strategy 1. Dedicated local coaches 1. Dedicated local coaches 4. CI center of excellence 4. CI center of excellence

•“Black-coaches” sharing system

•Intranet libraries, expert directories, training materials •Codified and shared learnings from each Kaizen events •CI knowledge sharing events for all coaches •Conferences and access to outside experts •Visits to sites and other industries •…

Examples (not exhaustive)

Overall coordination across multiple sites requires and overarching infrastructure 4. CI center of excellence 4. CI center of excellence 2. Communication strategy 2. Communication strategy 3. Knowledge sharing infrastructure 3. Knowledge sharing infrastructure 1. Dedicated local coaches 1. Dedicated local coaches

•Team at the top mandated to strike the right balance between getting momentum in driving significant improvement and managing the cultural change •Team at the top to coordinate agenda •Network of CI coaches to support knowledge

sharing and coordination across all divisions/business unit

•Company-sponsored programs to train leading practitioners within the organization, adopting a mix of techniques including

•Learn by doing

•Shadowing/coaching

•Developmental assignments

•Selective technical and analytical classroom sessions

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52 The Operating system is built on 5 fundamental elements…

2. Performance Management 4. “Problem Solving” tools and technical capacities 5.Continuous Change Mechanisms Focus on key priorities and stretch for results Skilled people driving constant improvement and change World class problem solving approach and tools Coaching, capability building, and knowledge sharing

1. Operating Strategy The Vision Where do we want to go and why Front line execution and performance 53 Execution is king…

“ Only 5 percent of the

organizations in the West truly

excel. Their secret is not what they

do, but how they do it.”

H.J. Harrington

Improvement Trend Experience has shown…

• Best performing plants have the best results

• Average performing plants have average results

• Low performing plants have the worst results

The reverse of their potential

It’s a DNA thing…

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56 What Makes the Difference ?

The genetics of your plants

The

DNA

Factors

So how do we get started?

•Iterative process that will be continuously improved •Will not be linear: all elements of a CI program are “tackled” simultaneously and “improved by doing”; learn by doing •Pareto (80/20) is king BUT relentless pursue of improvement is not negotiable.

•Good enough is NOT good enough: stretch, stretch, stretch: willingness to accept trial and error process

•Everybody is involved: walk the talk, management leads by example; line operators solve the problems

•Every aspect of the organization will be touched: profitability, productivity, quality, customers, compliance, growth. The Operating system is a journey not a project

Key success factors for launching a CI implementation…

Strong leadership and vision Strong leadership and vision

•Rigorous management by objectives (stretch targets)

•Visibility and commitment (this is for real)

•“Walk the talk”

•Communicate message continuously

•Rigorous management by objectives (stretch targets) •Visibility and commitment (this is

for real) •“Walk the talk” •Communicate message continuously All of these elements need to be there to make it successful

Local talent with passion Local talent with passion

•Local “black belt” with conviction

•Local championship with clear mandate

•Full commitment; credibility within the organization •Local “black belt” with conviction •Local championship with clear

mandate

•Full commitment; credibility within the organization

Willingness to invest Willingness to invest •Create a mandate •Bring capabilities in

•Have fully dedicated working teams

•Train and coach •Create a mandate •Bring capabilities in •Have fully dedicated working

teams •Train and coach