Author: Adam Payne

Lean Accounting

Posted on by Adam Payne

(hopefully explained or at least aware)

I came across an article ‘Lean Sustainability Requires a Change in culture’, well no s*&t Sherlock! But I decided to read it anyway. In reading the article I became intrigued with one comment in particular “I firmly believe that if more companies would make this transition (too lean accounting), we would be losing less business to China and other offshore suppliers.”

Now I’m not much of a financial wiz (otherwise I’d be an accountant) but thought I would highlight some of the differences between traditional vs Lean accounting. I will emphasise that I believe lean accounting is a transition based on a company’s lean maturity and should be worked on with the financial team as you progress to a lean thinking enterprise, and based on that maturity the above comment I believe would be true.

Traditional Accounting vs Lean Accounting

Lean Accounting fundamentally changes the accounting, control, and measurement processes so they motivate/support the progress to a lean enterprise and subsequently drive improvement. It provides information that is suitable for control and decision-making and creates an understanding of customer value, growth, profitability, and cash flow. The main areas on how it does this are

  • lean-focused performance measurements
  • simple summary direct costing of the value streams
  • decision-making and reporting using a box score
  • financial reports that are timely and presented in “plain language” that everyone can understand
  • radical simplification and elimination of transactional control systems by eliminating the need for them
  • driving lean changes from a deep understanding of the value created for the customers
  • eliminating traditional budgeting through monthly sales, operations, and financial planning processes.
  • value-based pricing
  • correct understanding of the financial impact of lean change

For further information (as this can be a deep subject matter) here are some follow on articles and I have also included a youtube video which Lean Accounting explained by Jean Cunningham from the Lean Summit 2011.

‘Lean Sustainability Requires a Change in culture’
http://www.industryweek.com/blog/lean-sustainability-requires-change-culture?page=1

‘Lean Accounting Defined’
http://www.leanaccountingsummit.com/LeanAccountingDefined-Target.pdf

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Re-Thinking Being Lean?????

Posted on by Adam Payne

I’ve recently read articles on Lean Manufacturing and in particular how certain businesses have been re-thinking the implementation of Lean.

Now for a bit of background on the articles. All of the business Leaders that started the implementation had been replaced and within 6 months of them being replaced the new Leader had decided to drop the programme. Now most of the stakeholder’s state that their objective is to address the challenges to delivering high-value to the customer, mmmmmm I wonder? By agreeing to drop a programme of business improvement?

Yes, lean takes time, yes lean utilises the front-line workers, yes you have to manage it and believe in it, but Lean is a long term strategy, a set of principles on how you do business, your business DNA. I wonder sometimes with the drive for instant results in a short space of time, particularly from stakeholders, the impatience for money, dividends, investors ultimately see the Leader that introduced the programme removed. This leads me to believe that stakeholders/leaders are either, ignorant, arrogant, none the wiser or have their own interest at heart, on what long term strategy and Implementation actually and physically means. I have been told about the removal of 11 Operations Managers over a 18 month period due to perceived lack of results, you cannot be that wrong in your recruitment process (or perhaps you can but that’s a separate discussion), so leads me to believe it’s the level above that’s the issue.

Now don’t get me wrong, if your haemorrhaging money within operations due to scrap or process variation don’t go and implement a 5S programme. Instead stop the haemorrhaging by attacking the root causes for variation and scrap, get controllable and predictable outputs. 5S may be part of the implementation but it’s not the saviour.

I worked in a number of businesses in my career and still see the same issues regarding short term results oriented thinking that has cost millions (and yes I mean millions in some cases). When I actually know that had the Lean Initiative programme, Operational Excellence, etc. been executed and maintained when it started, those losses wouldn’t have appeared and would have been quite the opposite.

Cost cutting is often a major reason for ditching the latest programme, and Leaders think that through the force of their personality or financial acumen that they are going to be able to fix the business without the aid of every employee in the business, how foolish are they??????

Any Improvement Programme is not going to be easy, but the benefits are massive for everyone, it takes time but ‘time’ is not a reason not to try.

What did make me smile was one of the businesses new Leaders justified the termination of the programme due to that fact that the frontline workers were involved, but in involving them had potentially reduced turnover times by 6.5 mins which equated into £410000/year of increased revenue.

Lean Manufacturing, business Improvement, whatever you call it, is not a short term strategy, but that’s not a reason not to pursue it.

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Sales: Just who is undermining performance?

Posted on by Adam Payne

Sales – the good guys or good for nothing? I guess it depends on your perspective, I have certainly heard both views, and whilst in Sales been the target of those and worse comments too. Personally during my tenure in the function and since, whilst I have come across the odd “rogue trader” more interested in his/her expense account than the success of his/her company, almost without exception I have found sales people to be dedicated, motivated individuals, driven almost without exception to succeed. What I have also found time and time again is sales organisations and processes that were well and truly broken with the Sales people taking the blame for a systematic failure in a company’s processes.

A few months ago Adam and I completed an assignment for a UK company, where the problem definition was something along the lines of “The ONLY problem is that the sales team are hopeless, they never go and see their customers” and on first inspection we found that indeed if the Sales team were out more than 1 day per week, then that was the exception.

However, having completed a process map, taking a typical opportunity through enquiry to order and delivery it soon became clear why this perception held – in fact the Sales team it appeared had taken it on themselves to manage the whole process, not only estimating the jobs, but project managing them through engineering, progress chasing through manufacture, even buying and organising site installation. What was worse was that everyone else including the management had let them and had abdicated all responsibility themselves, more than happy to point the finger at the Sales team when things went wrong. It was an absolute miracle that Sales ever went to see a customer at all, let alone grow the business. To be fair having had the scenario explained to them the senior management took on board our findings and re-engineered the organisation from top to bottom, allowing the sales team to let go of the internal processes, confident that they would be supported whilst out facing the customer.

When considering your organisation, remember – Sales people are employed to sell, and that it does not matter how good your operation is or how clever your design, without orders your business will die. Orders are the output of a process. A process that transforms prospects into orders.

If the process is optimised, it will be efficient, effective and create value for your customers and your business. If not, it will destroy value.

Richard Shaw – Business Practitioner

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The Productivity Puzzle and Lean

Posted on by Adam Payne

I’ve never been one to shout about Lean, Six Sigma or Theory of Constraints, to individuals to solve a solution. I personally have though, applied the tools and techniques to resolve a situation or gain an opportunity I have faced. Granted, it’s not just about the application of tools and techniques, it’s equally important to focus on People, Culture and Managing Change within today’s organisations and society. Every single person has touched or been a part of a Lean process, within our everyday life from grocery shopping to our work we will have been in contact with lean in motion.

The interesting thing I have noticed recently are the articles beginning to appear regarding “is Lean at a crossroads?” and “How Lean is perceived today” particularly in the UK (but perhaps globally). An article by Morpheus Group stated “Businesses are taking a much more pragmatic approach, using a blend of tools….with very few businesses labeling their Corporate Programmes as Lean”.

It does seem that Lean and other Japanese terms associated with it are perceived a risk to alienating the workforce. I wonder why? Are we that uncomfortable with something that is not invented by us?? Are we hiding behind the terms as an excuse not to change??? (There is no doubting it is hard to implement and sustain, but that should never be an excuse). When I personally think about these questions it’s never been about the wording (don’t get me wrong I do cringe with some of them) but it’s about the application, execution/implementation that is key and the right behaviours that drive it so that we can benefit from it.

Businesses are placing a lot of importance on Strategic Cost Saving and Quality. This is absolutely fundamental in “Change” for any business. Strategy and Performance Management, Policy Deployment, Hoshin Kanri, whatever you choose to call it, is the back bone of your business, it is how you do business.

I believe Business Improvement is more important today than it ever has been with the globalisation of markets. What is it that gives us the competitive edge? In particular UK Productivity remains below pre-recession levels. I have been in discussion groups where an estimated 40% of productivity is lost through non value added activities, an estimated £3 Billion cost. Something Lean, Six Sigma, TOC can certainly impact.

This debate will carry on and involves so much from skills, impact on society, etc., etc.

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Manage Time as a Resource

Posted on by Adam Payne

If your managing time in all sectors of the business, from Sales, Product Development and Production it will result in shorter planning and development cycles, as well as less process time in manufacturing.

Whether you’re a manufacturer making computer components, tin cans, widgets or an individual working in a purchasing department producing orders, reports, or budgets you are still producing an output, an output that someone wants.

We all have our processes (inputs) and transform them into something someone wants (outputs).

Time is the key element to control within our processes, for this we use standard work.

The establishment of time based standardised processes is the greatest key to creating consistent performance. Only when the process is stable you can begin the creative process of improvement.

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Improving Performance – Engineering Company Case Study

Posted on by Adam Payne

Increased Delivery, Increased Sales

**No images or Business Name as Customer NDA in place**

Opportunity

This Private Equity owned business was under performing against budget. Particular attention was required within the operational areas with Productivity and On Time Delivery drifting.

The Managing Director required a system to: communicate the strategy, allocate resources, focus and align actions, and control business drift. He wanted to ensure that all key improvement activities had ownership, responsibility, accountability and the relevant training and practitioner support required to increase overall company performance.

Improvement

Working with the Managing Director & Executive Team the decision of implementing Strategy Deployment and A3 Problem Solving was agreed along with hands-on project execution support.

Training was given to all Management and Leaders in what Policy Deployment and A3 Problem Solving is, what benefits and how the process should be structured to enable execution of the business objectives. Key fundamentals were as follows:

  • Identify the few, long term breakthrough objectives that are critical to long term success of the company.
  • Link these objectives with specific action plans throughout the organisation.
  • Focus and align the company’s internal organisations to achieve these long-term objectives.
  • Turn the strategic plan into a year – over – year action plan.
  • Coaches and Mentors others

Workshops were held to ascertain the critical improvement activities to be focused on within the business. Training and Coaching was given to the owners of each A3 Plan on how to manage and communicate through the A3 process. Guidance and training to understand background, current state, problem definition, analysis, actions and follow up.

Management Control Rooms were introduced with regular performance reviews held with all owners and stakeholders present. Ongoing coaching and mentoring in Management Behaviour for the process along with business improvement training and our Lean Coaching Programme to ensure execution and sustainability. Operational Excellence and Process Optimisation workshops/projects were completed covering Sales, Purchasing & Logistics, Operations and Planning.

The company significantly impacted it’s financial position over a 9 month period,

  • Increasing Sales by 20%
  • Delivery by 33%
  • Efficiency by 28%.

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The 7 Wastes, they rob us blind!

Posted on by Adam Payne

Getting your teams SEEING & ELIMINATING WASTE is a grass root fundamental in business nowadays.

Sounds obvious really, but how many people came to work today to spend their time on waste? Some maybe! But not most. So what is waste, and how do you identify it?

Some waste is obvious. But other forms of waste are more difficult to spot or to solve. I’m sure in most organisations it’s sometimes very difficult to identify what is waste and what is not, but make no mistake the root of all unprofitable activity links back to them.

7 Wastes Infographic

Identifying and eliminating waste should not be a rare event conducted by process re-engineering every few years. It should be a regular process, built into regular iterations, determined as much as possible by your people, and tackled in small, timely steps.

Making improvements little-but-often in this way creates a culture of continuous improvement – a learning environment – which for some organisations could potentially give you the edge over competitors.

The 7 Wastes: (These 7 Wastes come to work every day, never have a day’ off sick or take a holiday, they don’t pick-up a salary, BUT they rob us blind! Meet the HIDDEN Employee TIM WOOD)

T – Transport: The conveyance or transportation of material or parts adds no value

I –  Inventory: Inventory is any quantities of parts or material held within the system which are not being worked on.

M – Motion: Any motion by operators or machines when carrying out cycles of work which does not add value, IS WASTE!

W – Waiting: occurs when either material or operators wait for machines to complete cycles of work.

O – Overproduction: occurs when product is manufactured in excess of customer demand or in advance of customer demand.

O – Over-Processing: Where resource or effort is applied to a product or process that adds cost but no value for the customer.

D – Defects: (including all rework): Any manufactured product which does not meet customer requirements after the normal process, IS WASTE!

7 Wastes within a process

For further information on how we can help you eliminate these wastes, call 0330 311 2820 or email info@tcmuklimited.co.uk

Many thanks for reading this. If you liked it then please share this post with your networks or better still leave your thoughts in the form of a comment. Constructive comments are always welcome and if you have questions on the subject matter you can connect with me on LinkedIn and send me a message.

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Leadership Standard Work

Posted on by Adam Payne

Now most of us know and understand Standard Work, and hopefully when I say standard work your thinking of Process Capacity Tables (PCT), Standard Work Combination Tables (SWC), Standard Work Layout (SWL) and Standard Operating Procedures (SOP) and NOT just standard operating procedures????.

As a refresher

  • PCT – illustrates the production capacity of each process involved in producing a part.
  • SWC – combines human movement and machines cycle times based on Takt time.
  • SWL – A cell which is able to meet changing Customer requirements, as identified by Takt Time, with any number of Team Members, whilst maintaining productivity, without the waste of waiting.
  • SOP – is the document that details the current best method of operation. It includes quality checks, safety checks and any other activities that are included in the standard operation.

Now standard work also applies to management! Known as Leadership Standard Work.

Not to be confused:

Standard Work = a tool used to provide consistency of outcome

Leadership Standard Work = provides a structure and routine

It follows these three keys to leadership

  • Go See – spend time on the frontlines, be it, manufacturing, service, health sector, finance, etc.
  • Ask Why – use the “Why technique daily”
  • Show Respect – Respect your people

Leadership standard work is about walking the frontlines, seeing the abnormal from normal conditions. What is the work that’s is being done? What is the process? Is it adhered to? Are the business results being achieved? What is the next improvement that has been identified?

Leadership Standard Work in the case of a Production Manager may involve

  • A daily plan
  • A workplace walk across all areas
  • A conversation with a person from each area
  • Checking that Senior Management walks are completed
  • Is the 5S to the agreed standard?
  • Are actions being closed out?
  • Etc.

As we go up the hierarchy the standard work may become weekly, monthly, quarterly, etc.
A Senior Manager or General Manager may do the following:

  • Weekly frontline walk to touch base with associates, supervisors in each area to understand how the plant is running.
  • Spend time in the problem solving meetings, asking why, coaching and mentoring
  • Checking all critical audits are complete?
  • Are standards being adhered to?
  • Etc.

Leadership Standard Work Audit

Frontline associates see things first and we want to let them know what to do and feel at ease in highlighting the abnormal from normal conditions.

Leadership Standard Work is based on walking the frontline, observing waste and abnormalities, asking questions and supporting the improvement process.

By embedding this practice, leaders can begin to create a culture that:

  • Solves problems quickly and permanently.
  • Drives continuous improvement.
  • Develops the next generation of leaders.
  • Make continual gains in performance.
  • Embeds the culture of team working.

My early appreciation and benefit of this practice was implementing it at Unipart early 2000’s. It was implemented throughout the structure, from Team Leader to Managing Director, an example of which is the image above, showing the leadership pyramid/timing and Senior Manager standard work. Due Diligence is key to this practice, not paying it lip service or tick in the box mentality.

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World Class Traits

Posted on by Adam Payne

Committed LEADERSHIP is essential to success

Maintaining a strong CUSTOMER FOCUS assures we’re fixing the right things and going in the right direction

Effective PROCESS MANAGEMENT accelerates improvement & helps us keep ahead of our competitors

Drive improvement goals through the enterprise using effective STRATEGY DEVELOPMENT & REVIEW

Careful attention to ORGANISATIONAL DEVELOPMENT builds important foundations for continued success

Carefully chosen METRICS help us monitor our rate of improvement & make course corrections when needed

Rigorous & Structured USE OF CI TOOLS is the engine that propels improvement

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One of the Least used Tools – Standardised Work

Posted on by Adam Payne

Standardised Work is one of the most powerful but least used tools within business, yet it is one of the foundations to Lean Manufacturing

From my experience “without standards we do not have continuous improvement only chaos”.

The declarations I have heard, “we don’t make cars”, “You see, we are different”, “We’re unique….this isn’t an assembly line!”

My response to such statements is “everyone works a process that process can either be destroying or creating value added for the customer, which would you rather it be. Whether you’re building cars or delivering life-saving patient care, it takes a sequence of highly coordinated tasks and processes to deliver the end result. When this sequence of tasks is standardised, you’re on your way to fundamentally improving and eliminating significant sources of waste.”

Standardised work is the simple understanding that every task that can be repeated requires a written instruction of the most efficient and effective way to complete it to the highest quality Standard. We then use the selected standard work process each time the task is performed ensuring that the same results are achieved, in the same amount of time, regardless of who completes the task.

Now, we must understand here that the first step is to document what the current best practice is, this may be not be delivering the outcome you require currently, but without first understanding, how will you control any changes and what improvements have had what effect? We can’t, it would be guess work!

Key Elements of Standard Work

  • TAKT
  • Process Capacity Table
  • Work Combination Table
  • Work Layout
  • Standard Operating Procedure

Standard Work Documents

Takt Time – “Takt” is a German word which refers to the pace or beat of a musical composition, the metronome. The calculation of Takt time gives us the rate of production for meeting customer demand

Work sequence – “The time for an employee to do a prescribed task and return to his original stance.” – Taiichi Ohno
Standard inventory – In manufacturing this refers to parts, but in other sectors it can refer to applications, data inputs or other resources necessary to perform the job.

Bear in mind the following

Involve employees in the process – they are the ones who determine the best practice for each task. This also helps ensure engagement and ultimately adherence to the standard work.

Focus on the details – it must be in-depth to be useful in reducing variation. No detail should be omitted. Even the little nuances need to be understood, these are improvements that can be engineered out. (I can remember a process I worked with where the Associate had to lean on one part for the other part to fit, a stack up of tolerances had occurred. This knack had to be written in the standard work until we could engineer it out, imagine the amount of lost time/production if others weren’t aware of this)

Use visuals – Images, photographs, diagrams and examples will help bring your standard work definition to life and increase the likelihood of consistent compliance. A picture is worth a 1000 words.

Make it accessible – The documentation must be accessible at the time and place that the work is to be performed.

Innovate – While you don’t want employees deviating from the standard work process, there must be a method to give consideration to changes when new conditions or new ideas warrant revision. A governance process will increase the likelihood that changes will be analysed and approved rather than being implemented ad-hoc.


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