Lean Means Business
Lean is more than waste elimination
By Neil Hettler
Owens Corning Commercial
and Industrial Insulation Business
Owens Corning Corp.
In the book Lean Thinking (Womack and Jones, Free Press, 2003), Art Byrne, former CEO and CFO of The Wiremold Co. (West Hartford, CT) says: "In previous jobs, my senior bosses were more interested in massive long-range 'strategic' planning efforts, which they believed should take precedence. To my way of thinking, this is exactly backwards. Introducing lean techniques in every business activity should be the core of any company's strategy. These provide both the opportunity and the resources to generate and sustain profitable growth. Profitable growth is what the strategic planners of the world are always seeking, but find hard to achieve because their company's operations can't deliver on their strategies."
It's interesting that the more we learn about lean at Owens Corning, the broader our definition of it becomes. When we first heard about lean several years ago, in the Commercial and Industrial Insulation Business, it was simply described as a technique for eliminating waste in manufacturing processes. Since then, we've found that this definition was much too narrow for two reasons: First, lean is not just an initiative for manufacturing. Lean techniques can be applied to any business process, including administrative ones. Second, lean is much more than a technique for eliminating waste. We're beginning to understand how introducing lean techniques into every business activity drives growth, fosters innovation, increases employee engagement, directs organizational alignment, improves safety, and more.
Today, instead of thinking of lean simply as one element within our overall business strategy, we're thinking about it much more broadly. Lean has become the foundation for our business strategy. As Art Byrne points out above, this thinking has helped to simplify our strategic planning process and, more importantly, lean has given us the principles to guide our strategy, and the tools and techniques to deliver on it.
What's exciting for the manufacturing team is that as we broaden our definition of lean, we're beginning to see manufacturing in a different light. Lean thinking and tools are universal to any process. Because the manufacturing team has a head start on the rest of the organization, the other business functions are looking to manufacturing to help them with lean. Manufacturing employees are being asked to participate on kaizen events throughout the business, and they're also playing a greater role on our strategy teams.
So how is lean manufacturing evolving into a business strategy?
One of the starting points of lean is the concept of continuous flow. Ideally, when a customer places an order, this action triggers a series of events that causes both material and information to flow nonstop through the process, until a final product is delivered to the customer. Anywhere material or information must stop and wait is considered waste. Raw materials sitting in storage waiting to be processed, finished goods sitting in inventory waiting to be shipped, or people waiting on decisions from others are all forms of waste.
While it's important for material to flow, it should only flow through process steps that add value for the customer. For example, converting a raw material into a finished product adds value. However, moving a finished product to the warehouse for storage, or waiting on information to make a product design decision, does not add value and is considered waste. These non-value-added steps must be shortened or eliminated. The goal or vision for any business process is to have continuous flow through a 100% value-added process.
Developing a value stream map is the first step in seeing the waste in a process. A value stream map is a visual representation of the value-added and non-value-added steps that move materials and information through the process. While a value stream map is an important tool for seeing and eliminating waste, we have found that it is also a valuable strategic tool.
- Because value added must be defined by the customer, a value stream map forces the team to view the process through the eyes of the customer. Thus the customer has the final say.
- It forces the team to agree on the current process, which can be much more difficult than it sounds, especially for administrative processes.
- The current value stream becomes a communication tool for aligning the organization around the call for action to improve the process.
- Finally, the current value stream map becomes the foundation for decision making.
Often people describe where they want to go without fully understanding where they are. Without this understanding, it's very difficult to prioritize the improvement opportunities. After the current value stream is mapped, an ideal value stream is mapped. The ideal state serves as true north or the long-term vision for a 100% value-added process. Next, a future state is mapped. The future state is the improved process state that the team believes it can realistically achieve within a given period of time, typically 6–12 months. The gap between the current and future value streams drives the improvement activities. A regular sequence of kaizen events is outlined. This approach ensures that the individual improvement events are aligned toward bringing the process closer to the future state and, ultimately, toward the ideal state.
It's important to appreciate that lean techniques parallel business planning. In fact, many of the lean techniques used to eliminate waste in manufacturing and administrative processes parallel the basic elements of strategic planning—customer focus, future-state vision, gap analysis, opportunity prioritization, organizational structure, etc.
One quote that I particularly like regarding strategy is: "Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that will enable an organization to achieve its objectives." (Fred David, Strategic Management). The obvious difference between strategic planning and lean planning is that strategic planning focuses on the higher levels of the organization, while lean has historically focused on the lower-level processes. This emphasis changes, however, when the organization decides to elevate their lean activities to the enterprise level.
One of the issues that the value stream map highlights is the question: "Where does a local process start and end?" When you map a local process, you quickly realize how much material and information flowing in and out of the process is also flowing through other company processes. For example, the information flowing into almost any manufacturing process must also flow through sales, marketing, customer service, purchasing, and the material-planning processes. Any flow disruption in these areas affects the local process. Therefore, all lean activities must be coordinated at the highest or enterprise level to ensure that flow is truly continuous when viewed by the customer. It's of no value to the customer if a manufacturing process can produce a product quickly, if the order entry process requires several weeks.
It's easy to see how starting with the simple concept of improving 'flow' on the manufacturing floor soon involves the entire organization, that is, the enterprise. The objective (and challenge) of applying lean principles at the enterprise level is to coordinate the individual lean activities so that the overall flow across the entire enterprise is improved, because in the end, that is what is important to the customer.
Rearranging business processes across the enterprise isn't easy, of course. Functional silos develop over time, and within them each function feels strong ownership over their resources and processes. We know, however, that if we are truly committed to driving out waste and serving our customers more efficiently, the same lean principles of flow and value added that apply to manufacturing must also apply to everyone else. No process is exempt—manufacturing, sourcing, logistics, order entry, accounting, forecasting, marketing, product development, human resources, everything.
Finally, the biggest change in our 'lean thinking' came when we made the connection between lean and growth. As Art Byrne remarks, ultimately strategic planning is about growth. Because we initially thought of lean as a cost-reduction initiative, we considered it to be separate from our growth initiatives. We have now come to understand that lean is ultimately about growth; in fact, it has to be about growth.
The connection between lean and growth are the kaizens. Kaizens are used to drive the waste out of our processes—both manufacturing and administrative. To have successful kaizens, it's critical to engage the employees who have the most knowledge of the processes, i.e., those who use them. The issue is that as the kaizens make the processes more efficient, they also free up people. We can't let people go because of kaizens, or we'll kill engagement and shut down the waste-elimination momentum. Instead, we are beginning to move people to our growth initiatives, which are typically starved for resources. So kaizens become both the driver for waste elimination, and the opportunity for growth.
As we continue to expand our definition of lean, it's energizing to see lean manufacturing principles being applied across the entire business. Yet the organizational challenges of improving flow and adding value across an entire enterprise remain daunting, to say the least. We aren't making wholesale changes to the organization, but we are making logical, stepwise changes as guided by our value stream maps. It hasn't been easy, but in the end, it's the right thing to do for our customers, and as lean expert George Koenigsaecker (President, Lean Investments LLC, Muscatine, IA) points out, there are no short cuts.
This article was first published in the January 2008 edition of Manufacturing Engineering magazine.