Lean Principles for Process Delivery

Lean Principles for Process Delivery Project Plan for Apply Lean Principles to Automotive Refurbishment and Service Lifecycle Management Processes Lean manufacturing's greatest benefits are from eliminating waste from the many processes that auto manufacturers, their supply chains, aftermarket and refurbishment partners rely on to anticipate, respond to, fulfill, and serve customers. The focus on making processes more lean and efficient is the catalyst of competitive advantage, as through greater process efficiency, there is a higher level of collaboration and learning through an organization over time (Likert, 2003).

As an integral component of the automotive supply chain, automotive refurbishment and service lifecycle management play critical roles related to lifetime customer value, quality management and compliance, the development of higher levels of collaboration across distribution channels and supply chains, all contributing to consistent profitable performance as a business (Hammant, Disney, Childerhouse, Naim, 1999).

For an automotive refurbishment or service lifecycle management -based business to attain its' long-term financial and growth objectives it's clear there needs to be a high level of sychronised with other members of the automotive supply chain to the process level. This has led to an increasingly higher level of adoption of Business Process Management (BPM) techniques for streamlining processes while crystallizing them down to their most elementary aspects, in effect defining the best practice of the given process over time, then automating it (Kim, Sohn, Roemer, Yassine, 2006).

Re-architecting processes first, then applying information technologies including BPM and Service-Oriented Architectures (SOA) to foster and support higher levels of collaboration across supply chain partners is becoming an evolving best practice as well (Bae, Seo, 2007) (Adamides, Karacapilidis, Pylarinou, Koumanakos, 2008). Creating platforms that enable high levels of collaboration and synchronizing of processes throughout a supply chain often across organizations and trading partners is leading to the development of learning organizations over and above merely ones that collaborate with one another (Likert, 2003).

Fostering the development of knowledge of the primary differentiator requires a significant concentration supply chain wide first on lean manufacturing core concepts, and second, on specific process areas that make the most impact on attaining higher levels of knowledge within an organization (Johnson, Sun, Johnson, 2007).

Intent of this Proposal The definition of the fundamentals of lean process flows taken from a manufacturing context, the definition of a project plan framework for ascertaining the extent to which dominant processes are lean or not within the organization, and defining a plan for the acceleration of growth of the organization are the three objectives of this proposal. The definition of the fundamentals of lean is followed by a suggested self-rating research instruments respondents within the organization can use to ascertain the level of maturity of profiled processes.

The self-rating scale or research instrument has been derived from research completed by the Massachusetts Institute of Technology (MIT) Lean Aerospace Initiative, which has applicability to lean process definition in the automotive industry as well (Bennett 2003).

AMR Research, a consultancy that specializes in supply chain research in the automotive, aerospace and defense, discrete manufacturing, high tech and retailing industries, has devised the concept of the Demand Drive Supply Network (DDSN) which is defined by O'Marah (2004), which includes a maturity model that designates the level of demand chain synchronization at both a process and information level (Barrett, 2007). The combining of these two concepts of DDSN and its respective maturity model form the foundation of the analysis of results from the self-administered framework presented in this paper.

In addressing how these analytical constructs lead to accelerating growth of an organization, the selection of process to profile and improve is critical to the accomplishment of that objective. For purposes of this discussion the quote-to-order process is profiled. Finally, recommendations are made as to how manufacturers can attain lean transformation based on the collective insights gained from working with manufacturing customers to attain their lean manufacturing objectives. In addition, AMR Research's Demand Driven Supply Chain (DDSN) Maturity Model applied to manufacturing lean production processes maturity.

Process-Centric Lean Best Practices Starts With Lean The five primary elements to consider when implementing lean manufacturing are manufacturing flow, organization, process control, metrics, and logistics (Mondragon, Lyons, Michaelides, Kehoe, 2006). These elements represent the variety of aspects needed to sustain a successful lean supplier enablement and manufacturing implementation program and are briefly defined here. Manufacturing flow by definition addresses physical changes and design standards. Organization identifies people's roles/functions, training in new ways of working, and communication.

Process control is directed at monitoring, controlling, stabilizing, and pursuing ways to improve the process. Metrics addresses visible results-based performance measures, targeted improvement, and team rewards/recognition. Logistics provide the definition for operating rules and mechanisms for planning and controlling the flow of material. Clearly there is a need for intensive coordination and synchronization of these activities to attain lean objectives within a supply chain, and more broadly, throughout t a manufacturing organizations' network of suppliers, resellers, partners and dealers (Harland, 1996).

In addition to the quote-to-order process, the forecasting process has been extensively analyzed by both industry practitioners and academicians as these two specific processes require high levels of supply chain collaboration (Jain, 2002). The heavy reliance on collaboration across the enterprise is critical for both these process areas of forecasting and quote-to-order to be profitably executed over time (Singh, Goodie, and Popplewell 2007).

Implicit in what this specific team of researchers found (Singh, Goodie, and Popplewell 2007) is the observation that the higher the level of integration of forecasting and quote-to-order processes across a given supply chain the higher the level of Return on Investment (ROI) attained across supply chains.

When automotive manufacturers are segmented as having lean manufacturing strategies in place that contribute to a DDSN model set of dynamics occurring, there is a correspondingly higher level of market valuation created over time as well (O'Marah, 2004), Attaining best practices in these and other process areas that are integral to lean manufacturing's supply and value chains begins with embracing a lean enterprise vision for the enterprise first.

In attaining this vision of a lean enterprise, manufacturers and their suppliers inevitably begin pursuing higher levels of supply chain visibility, greater levels of collaboration with customers, and increasingly greater levels of real-time integration of manufacturing flow, organization, process control, metrics and logistics throughout sourcing, pricing, manufacturing, and service systems. All of these advantages are combining to deliver higher product quality levels in the process.

A lean enterprise is one that aligns itself to the goal of being as responsive and as accurate as possible in all responses to customers and eliminating the many forms of waste, both for resources and time (Oliver, Delbridge, Jones, Lowe, 1994).In defining lean processes, the catalyst for changing processes centers on reducing the many forms of waste and concentrates on how to create a greater value by removing all barriers to accomplishing manufacturers' and suppliers' lean objectives.

There are seven types of waste lean manufacturing can assist in alleviating in making manufacturers more efficient and centered on better serving their customers, attaining their goals in the process: Waste of overproducing: Producing components that are neither intended for stock nor planned for sale immediately. Waste of waiting: Refers to the idle time between operations. Waste of transport: Moving material more than necessary. Waste of processing: Doing more to the product than necessary and the customer is willing to pay.

Waste of inventory: Excess of stock from raw materials to finished goods. Waste of motion: Any motion that is not necessary to the completion of an operation. Waste of defects and spoilage: Defective parts that are produced and need to be reworked. Overcoming the Barriers to Accomplishing Lean Process Improvement and Optimisation The greatest challenges in implementing a process-driven lean strategy is attacking those processes that cause one of the seven types of waste first, and second, creating a more synchronized supply chain, fulfillment, and service chain series of strategies.

When one considers the work completed by AMR Research, Gartner, and the research completed by MIT's Lean Aerospace Initiative (Bennett, 2003) in addition to MIT's Center for Transportation and Logistics it becomes clear that the same barriers to change are more process- than customer-centric and require a change in how manufacturing is perceived - not as a cost but as a means of better serving customers.

From the accumulated work of the sources mentioned, here are the major barriers to manufacturers being able to transform themselves into a lean enterprise: Need for greater levels of ownership at the CEO-Level to force change to existing processes. What is consistent across industry advisory firms is the fact that all three rank the lack of urgency and lack of support for lean initiatives at the C-level as the major reason why so many companies fail to become lean enterprises.

As the self-scoring survey in this paper will show, the lack of support and vision at the top of an organization actually encourages more siloed-based approaches to managing lean initiatives at the lower levels of the organization.

More of a focus on "What a company measures, it becomes." In those manufacturers who are attaining lean enterprise-level performance, the cultures of their companies have become incredibly focused on metrics, and in fact the organizations themselves have become so metrically driven that the culture itself embraces the concept of measuring performance and improvement (Nash, Poling 2007). Lean positioned for cost cutting vs. customer-driven change.

This is also a critical mistake many manufacturers make, and often becomes the main focus these companies continue to pursue, as opportunities to better integrate their strategies with customers, suppliers, buyers, and service organizations present themselves. Evolution of the Lean Enterprise Manufacturers have continually struggled to gain the advantages of lean manufacturing, starting first with manufacturing processes at the shop floor level and progressing to a vision of implementing an entire lean enterprise.

What's become essential in the pursuit of the lean enterprise are the creation of strategies for driving waste of all types (time, logistics, costs) out of the enterprise. Table 1, Characteristics of a Lean Production System, show the specific lean production processes and accompanying system change initiatives, an analysis based on the research completed by the MIT Lean Aerospace Initiative, which has applicability to the auto industry as well.

Characteristics of a Lean Production System, Lean Production Process System Change Initiative Focus Production line (tasks, activities, and cells) Single organization (departments, processes, suppliers, and customers) Practices Cellular manufacturing, quality circles, supplier relationship management, pull production, reengineering setups.

TQM, JIT, Six Sigma and, process reengineering Performance Measurement Systems Takt time, on time delivery, first time through safety performance production rate Visibility - real-time reporting and the use of analytics to track the entire value chains' performance Casual relationships (production tasks and activities) Use of single version of the truth and single information reporting Quality, delivery, process time, cost, flexibility, customer satisfaction Balanced set of strategic metrics (financial and non-financial) New methods of cost accounting (ABC, target costing) down communication Internal vs.

external focus (benchmarking and self-assessment) Process management and measures (value delivery) Source: (Bennett 2003) Table 2, Comparing Lean Production and Lean Enterprise Characteristics, illustrates the many differences in focus, practices, metrics, and performance measurement systems. The shift required in manufacturing companies to achieve this level of performance needs to start with the recommendations at the end and continually build upon insights gained from the survey contained within this paper.

Comparing Lean Production and Lean Enterprise Characteristics, Lean Production Process System Change Initiative The Lean Enterprise Focus Production line (tasks, activities, and cells) Single organization (departments, processes, suppliers, and customers) Extended enterprise (value streams and all stakeholders) Practices Cellular manufacturing, quality circles, supplier relationship management, pull production, reengineering setups TQM, JIT, Six Sigma and, process reengineering Seamless information flow, integrated product and process development, process capability and maturation, identify and optimize enterprise flow, maintain stability in changing environment, align and involve all stakeholders to achieve lean vision, relationship based on mutual trust and commitment across the extended enterprise, make decisions at the lowest levels, optimize capability and utilization of people, focus on external and internal environment, nurture a learning environment Metrics Takt time, on time delivery, first time through, safety performance, production rate Quality, delivery, process time, cost, flexibility, customer satisfaction Stakeholder value (effectiveness), overall efficiency, system availability, system level flexibility Performance Measurement System Visibility - real-time reporting Casual relationships (production tasks and activities) Use of single version of the truth and single information Balanced set of strategic metrics (financial and nonfinancial) New methods of cost accounting (ABC, target costing) -down communication Process management and measures (value delivery) Stakeholder value measures Uniform set of measures Casual relationships between measures across all levels Source: (Bennett 2003) Framework for Evaluating Lean Process Maturity Based on the collective work completed at the Massachusetts Institute of Technology (MIT) Center for Transportation and Logistics relating to manufacturers and the theoretical frameworks developed by the MIT Lean Aerospace Initiative the following benchmarking framework has been created.

The 18 life-cycle lean processes (Bennett 2003) measured in this benchmarking instrument include the following: Business Acquisition and Program Management Leverage lean capability for business growth Optimize the capability and utilization of assets Provide capability to manage risk, cost, schedule, and performance Resource and empower program development efforts Requirements Definition Establish a requirements definition process to optimize life-cycle value Utilize data from the extended enterprise to optimize future requirement definitions Develop Product and Process Incorporate customer value into design of products and processes Incorporate downstream stakeholder values into products and processes Integrate product and process development Supply Chain Management Define and develop supplier network Optimize network-wide performance Foster innovation and knowledge-sharing throughout the supplier network Produce Product Utilize production knowledge and capabilities competitive advantage Establish and maintain a lean production system Distribute and Service Product Align sales and marketing to production Distribute product in lean fashion Enhance value of delivered products and services to customers and the enterprise Provide post delivery service, support, and sustainability In creating a questionnaire and research instrument from these 18 factors, it's critical to take into account the maturity levels of each attribute as it relates to the lean performance of an entire organization.

It is not enough to simply look at a binary, either/or condition for each factor. It is rather the level of maturity on each of these 18 attributes that determines an organizations' potential for attaining best practices as a lean enterprise. Using a four-point scale applied to each of these factors yields a self-scoring questionnaire which is shown in the following table. Giving just one answer for each of the 18 factors, calculate a given process's lean enterprise performance with an organization of interest.

The development of aggregate scores by each specific area will define the level of process maturity as defined by their lean characteristics. After having scored an organization and its processes on its lean initiatives, use the following table to define where an organization is on the Lean Enterprise Maturity Model: Score Level in the Lean Enterprise Maturity Model Orchestrating - Where an organization has a very high level of cross-department and division collaboration and often has a corporate-wide edict that forces lean enterprise principles deep into the organization.

Collaborating - a series of process -- and it-based infrastructures exist to ensure cross-department and cross-divisional collaboration. Anticipating level - Marked with in-division collaboration only. Isolated approach to lean - Heavily influenced by silos The following graphical representation of the Lean Enterprise Maturity Model illustrates how each level of maturity varies by Process Maturity and Information Maturity.

This graphical concept of a maturity model was originally proposed by AMR Research in the definition of Demand Driven Supply Networks (DDSN) maturity levels, and has direct applicability to lean enterprises' levels of lean manufacturing maturity. Both process and information maturity is measured, progressing from being purely reactive from a process standpoint through creating processes through anticipating departmental requirements, through collaborating to orchestrating processes to attain level process best practices.

Recommendations for driving Lean Process Transformation In the studies referenced implementing lean manufacturing strategies for automotive refurbishment suppliers the following key recommendations emerge: Greater system-level integration with downstream stakeholder values and greater visibility into customer demands. Relating back to the discussion at the beginning of this paper how the highest performing manufacturers are able to eliminate several types of waste while concentrating on delivering exceptional value to their customers is a key success factor in attaining lean manufacturing strategies.

Using the 18 attribute lean manufacturing framework to evaluate an organization can serve as the catalyst for further diagnosing of processes' areas of strengths and weaknesses. Delivering greater process standardization and greater cross-functional communication eliminates wasted time, duplicated processes, and lost opportunities to better serve customers. In several of the case studies that MIT and others have cited as examples of best practices in lean enterprises, the senior management teams worked to tear down the silos between departments by actively encouraging and rewarding cross-department and cross-division collaboration.

The greater the level of integration between functions and processes, the greater the reduction of waste in over-processing, waiting, transport, processing, inventory carrying costs, in addition to defects & spoilage (Monroe 2006). Integrate and reward lean initiatives success and include them in both strategic planning and production systems planning. The automotive manufacturers and automotive refurbishment companies gaining the greatest competitive advantage through their efforts to become lean enterprises have started first with smaller projects and then progressed to enterprise-wide ones once the payoff has become clear.

Integration of environmental protection, compliance, health and safety systems corporate wide. Clearly the need for mitigating the significant costs of compliance as they relate to the use and disposal of chemicals and raw materials used in the production of complex products are many manufacturers' most critical concern, and this area of automotive manufacturing is gaining in importance as governance, risk and compliance (GRC) continues to gain in prominence as a strategic initiative within organizations.

The development of lean initiatives that include GRC components have increasingly been developed as a result of global compliance requirements as well. The intersection of GRC and lean process workflows has also contributed to exponential growth in Business Process Management (BPM) and Business Process Re-engineering (BPR) as well. Continually pursuing best practices through the use of BPM and BPR techniques also generates a more accumulated knowledge within the organization as well.

In short, this contributes to a much greater level of collaboration over the long-term, especially when manufacturers, suppliers, buyers and distribution channel partners are involved in the re-vamping of BPM-based workflows. Allow the customer to have a seat at the development table. MIT found that the highest performing lean enterprises re-define their product development processes to support the inclusion of customers in the actual development environment.

This has increased customer satisfaction, reduced the number of reworked orders, and also led to the development of cross-functional teams that attacked the processes that got in the way of allowing divisions to be more responsive to customers. Customer Facing Processes need to be Lean First In the context of this proposal, the quote-to-order process needs to be focused on initially as this process requires intensive integration of systems, processes, trading partners, suppliers and customers, all unified by the taking and fulfillment of a sales order.

Figure 1 and 2 illustrate the benefits of addressing customer-facing processes first, specifically with the objective of making them leaner in scope and execution. These two figures are a before-and-after analysis of the quote-to-order process, illustrating graphically and quantifying the benefits of streamlining one of the more common customer-facing processes. Taking the time loss, revenue and profit loss out of the quote-to-order process assures higher levels of customer satisfaction as well.

Figure 1: Finding Competitive Advantage Figure 2: Funding Competitive Advantage The quote-to-order process varies in its complexity and steps, yet figures 3 and 4 are fairly representative of the process within discrete manufacturing industries including spare parts and automotive aftermarket products. The function of Business Process Management (BPM) is to concentrate on the development of process workflow definition, as is shown in Figure 3. In conjunction with this approach to defining process workflows, organizations are increasingly relying on value stream mapping (Monroe, 2006).

Figure 3: Typical Quote-to-Order Process Source: Columbus (2003) As can be seen from Figure 3, there is an accumulated time of 2-5 days for Marketing to typically reply to a quote, and between 14-21 days for master scheduling and engineering to complete the more complex aspects of the a given quote. Taken together, this is well over three weeks to complete a quote for a custom part or subassembly component.

The timing as shown in Figure 3 is exacerbated by the difficulty of having supply chain systems to integrate with, the need for process integration at the distributor, dealer and reseller levels, and the need fro continually staying current with manufacturers on their specifications as well. Instead of re-defining the entire process for lean improvement, more successful organizations concentrate on streamlining needs assessment and pricing first as part of their broader quote-to-order process.

Concentrating on pricing especially yields a significant return on investment (ROI) for those auto manufacturers, auto refurbishing and service lifecycle management firms that seek to gain process-level competitive advantages over time. Figure 4, Streamlined Quote-to-Process Process illustrates the areas where organizations are relying on BPM, process re-engineering and the use of information technologies to attain lean efficiencies.

Figure 4: Streamlined Quote-to-Order Process Source: Columbus (2003) The development of streamlined quote-to-order systems also ensures a higher level of financial returns over time as well, with operations-based measures often being evident within the first six months of operations, and financial measures being reported within nine months to a year. The ability to ascertain just which financial performance levels were attributable to a streamline quote-to-order process is defined by the in both operational and financial performance measures over time.

What emerges often from pursuing best practices of a customer-facing series of processes is that there is a roadmap to process value that emerges. Figure 5, Roadmap to Process Value, defined through the collection of research results from MIT Lean Aerospace Initiative, AMR Research, and research compiled from the Gartner Group. Figure 5: Roadmap to Process Value Taking a look at the financial impact of streamlining this specific customer facing process, quote-to-order, also delivers significant increases in performance of shipping orders on time and accurately across industries as well.

From the research completed by Columbus (2003) one can see how the percentage of orders shipped on time significantly increases when the quote-to-order process is streamlined. Table 3 provides an analysis of quote-to-order strategy performance across multiple industries where this specific process had been streamlined and made more efficient.

Table 3: Long-Term Results of a Lean Quote-to-Order Strategy Company of orders shipped on time before Quote-to-Order system of orders shipped on time after Quote-to-Order system Elevator Mftr (Otis) Aerospace & Defense Mftr High Tech Distributor doing Assemble-to-Order (ATO) Electronic component Mftr Auto Parts Mftr PC and Server Mftr Source: Columbus (2003) Roadmap to Lean Best Practices Starts with Business Process Management (BPM) and Business Process Re-engineering (BPR) Of those companies accomplishing best practices in lean manufacturing, their collective core focus begins with quote-to-order and progresses through an additional six major process areas.

The following are six process areas where best practices-level performance is being attained by firms specifically looking to increase the quality of products and services they deliver, while also increasing the speed and flexibility they fulfill the demand for their product and services which is by definition the essence of accomplishing lean process improvement and optimization: Order-to-Cash fulfillment cycles that measure the quality, speed, and flexibility companies have in fulfilling demand for their products has been extensively researched by Columbus, (2003), and show that the quote-to-order process area specifically has direct impact on the speed and flexibility of both manufacturing and service companies.

What is unique about this best practice area is the combination of quality of orders, speed of fulfillment and flexibility required to fulfill demand, and fulfills the strategic payback of a manufacturer's investment in lean manufacturing by increasing the ROIC, reducing Days Sales Outstanding (DSOs) and reducing Accounts Receivables. Supply chain synchronization with sources of demand is another best practices area that encompasses many manufacturing processes of those companies looking to achieve higher levels of lean manufacturing performance.

The attainable ROI of aligning supply chain planning, execution and fulfillment with sources of demand is explored in research provided by Manufacturing Engineer (2005) and shows the resulting impact on financial performance of companies who adopt this best practice to increase their quality, speed and flexibility. Standardization of customer service processes leads directly to great responsiveness, higher customer satisfaction scores, and greater employee retention and further accomplishes the lean manufacturing vision by greatly reducing total costs (McKinsey & Company, 2005).

The ability of the world's best-run companies to accomplish this level of standardization has a direct influence on their ability to deliver quality service, efficiently and with greater flexibility. This best practice area has implications across all industries as it relates to better managing demand from a lean manufacturing perspective.

Redefining inventory strategies based on greater visibility and more efficient optimization of resources is yielding a 20-30% reduction in inventory carrying costs, according to research on this best practice done by Aberdeen Group (2006) in its report, Best Practices in International Logistics. The study concludes that greater visibility of inventory dynamics with analytics and better planning coordination with manufacturing, suppliers and buyers can yield major gains in operating profits.

Collapsing order cycle times through outsourcing is an emerging best practice companies who are in pursuit of lean manufacturing best practices are choosing to pursue. This is especially true of those organizations who have a logistical component to their business models are relying on, including Royal Phillips Electronics that outsourced their order management to UPS.