Almost everything I read or learned suggests that lean was never intended to be complicated. The simplest definition of lean I have read to date follows:
Focus on what matters and eliminate what doesn’t
This is not to suggest that lean is easy. In actual practice I find that some companies have sufficiently compounded the definition of lean to exclude all but a select team of employees.
I contend that lean is an all inclusive initiative based on the simple premise that we can always find a better way.
As suggested by our definition of lean above, the ability to discern what matters from what doesn’t is the most fundamental step to any lean initiative.
As I discussed in “Discover Toyota’s Best Practice“, improvements are seldom the result of a single action or countermeasure. Rather, in the context of lean, innovations are the culmination of numerous improvement initiatives over time.
I become increasingly concerned where a lean culture is compromised by infrastructure, policies, systems, and procedures that inherently frustrate improvement initiatives.
This reflects one of my qualms with six sigma where an implied hierarchy is created by virtue of the “belt” or level that a person has achieved. The approach is intentionally “exclusive” by virtue of education, experience, and / or proven expertise. As such, people are inherently disqualified from the process.
Quite simply, don’t create an environment that alienates your team to the extent that lean is beyond reach by design.
Getting people engaged and “on the same page” requires everyone to understand the language used to convey the message. Even the method of disseminating information can create confusion. Oral presentations can convey a completely different message than one delivered in writing.
The tone used in an oral presentation cannot be delivered in writing using the same words. Voice inflections, body language, and atmosphere all add to the message. How many times have you heard the expression, “When s/he spoke those words, you could almost hear a pin drop”. It is obviously not just the spoken words but how they are delivered that create an aura of suspense or awe.
How does this apply to lean? The answer is quite simple. Don’t assume that people understand – just because you told them either verbally or in writing. Lean is “hands-on” management. Go to the process and see what is actually happening (or not happening).
If a picture is worth a thousand words, how many words would it take to describe the experience of seeing the real process first hand? “Don’t just tell me – show me” are words that should be uttered most often by leadership, managers, or any lean practitioner.
The first step to implementing lean is going out to SEE what opportunities exist. Unlike computer programs that have explicit meanings, people are intelligent and capable of interpreting the real message behind the words. Computers do not have an intuitive sense.
The Language of Lean can be summed up in two words – QUICK ACTION. Successful lean organizations understand that ACTION is truly LOUDER than WORDS. See it, Solve it, Share it executed in real-time.
Contingency Planning for Lean Operations – Part III
“Deaths spark huge crib recall” was the main headline of today’s Toronto Star (24-Nov-09). This recall was the result of 4 infant deaths and affects up to 2.1 million units sold. Click here to access the full article. This announcement has made headlines throughout North America and is certain to be featured on all of the major network news stations.
Managing a major product recall is likely one of the more significant events where contingency plans are fully executed and developed. As tragic or unfortunate as the events may be, it is imperative for a company to manage the recall event in professional and responsible manner. While it may seem difficult to prepare for an event that has not yet occurred, learning to anticipate the sequence of events to recovery and to script are necessary steps to developing an effective contingency plan.
What are the elements of an effective contingency plan?
We will be covering the elements of an effective contingency plan over the next few posts. Before we get too far into the process, it is important to recognize that one of the critical skills required as part of the contingency planning process is the ability to perform an effective risk assessment.
It is not our intent to cover all aspects regarding risk assessments and analysis as this would require a book in itself.
A newly released book, The Failure of Risk Management – Why It’s Broken and How to Fix It, by Douglas W. Hubbard (copyright 2009) and published by John Wiley & Sons, Inc., provides extensive insight and resources to perform effective Risk Management Assessments and Analysis. The reasons why some risk management methods fail or are susceptible to failure are also covered in detail.
As exemplified in the opening article, there is no real means to measure the net effect or impact of a recall campaign of this magnitude. Elements such as Consumer Confidence, Brand Loyalty, Loss of Life, or Warranty are difficult to value in tangible terms.
Unfortunately, there are too many examples of crisis events where the knowledge was available to rectify or fix the situation before any tragic event occurred. As heard in many workplaces, “Why is that nothing is done until something bad happens?”
An effective contingency planning is not only designed to manage tragic or crisis events, it should also aid to identify potential failure modes that can be captured and addressed before a product is ever released for mass production or to market. Consider the following two scenarios:
Scenario 1: (Highly unlikely …)
Jill: What if the part fails?
Jack: We’ll recall it.
Jill: How will we do that?
Jack: We have an excellent recall management process
What if the dialogue took a different turn as follows:
Scenario 2: (More likely …)
Jill: What if the part fails?
Jack: What could possibly go wrong? It’s perfect.
Jill: Engineering said it barely passed the tests.
Jack: Well, maybe we should take another look at the design.
Jill: Great, you know we can’t risk a recall.
Developing a Contingency Plan – The Process
1. Corporate Responsibilities – Charter
If contingency planning ever concerns an individual person in the company directly, it is the Chief Executive Officer or the president who are personally at risk of significant legal ramifications and also the greatest level of exposure.
This past year Maple Leaf Foods experienced a major Listeria outbreak at one of their food processing facilities. Contaminated product reached the market place resulting in illness and loss of life. A major recall was initiated and the company immediately initiated corrective actions. During this crisis, the CEO took personal responsibility for public relations, communicating the strategy, and ultimately overseeing the recovery process.
The CEO or President should be leading the charge for the development of contingency plans and to assure their effectiveness. To this end, it is also imperative that the team responsible for formulating the plan includes a cross-section of people from across the company.
The CEO or President will also want to assure that everyone is trained to respond to events that pertain their specific areas of responsibility.
2. Contingency Planning – Form a Team
As we mentioned in our previous posts, contingency planning is an enterprise-wide process. The collective intelligence of the team is greater than that of any team member.
You should consider the skill sets that may be required to support the team. Although we are not suggesting that you need to be an expert in probability theory or statistics, someone having exposure to these types of assessment tools or an outside consultant may be worth the effort.
It is not possible for one committee to prepare contingency plans for every area in the company. When forming teams, how the skills and levels of expertise required to support the team in one area may be vastly different for another area. For example, Product Engineering and Operations will have different failure modes to contend with.
To ensure the appropriate resources are available, we recommend that executive management or a steering committee are assigned to oversee the contingency planning and development process.
Based on some of the scenarios cited in this post, it would stand to reason that most CEO’, Presidents, and / or owners are primary stake holders in the Contingency Planning process.
Lean operations are driven by effective planning and efficient execution of core activities to ensure optimal performance is achieved and sustained. The very nature of lean requires extreme attention to detail through all phases of planning and execution. Upstream operations simply cannot tolerate any disruptions in product supply or process flow without the risk of incurring significant downtime costs or other related losses.
Effective risk management methods, contingency plans, and loss prevention strategy are critical components of successful operations management in a lean operation. Risk management and preventing disruptions is the subject of contingency planning and requires the participation of all team members.
Successful contingency planning assures the establishment of an effective communication strategy and identification of core activities and actions required. Contingency plans may require alternative methods, processes, systems, sources, or services and must be verified, validated, and tested prior to implementation.
Understanding and assessing the potential risks to your operation is the basis for contingency planning with the objective to minimize or eliminate potential losses.
Inventory represents the most basic form of contingency planning. Safety stock or buffer inventories are typically used to minimize the effects of equipment downtime or disruptions in the supply chain.
The levels of inventory to maintain are dependent on a number factors including Lead Time, Value, Carrying Cost, Transit Time (Distance), Shelf Life, Minimum Order Quantities, Payment Terms, and Obsolescence.
Why is this relevant?
Material and Labour represent two key resources that may be influenced by external factors that are beyond the control of any company policy or practice. Internally controlled or managed resources such facilities, equipment, and tooling are less susceptible to unknown elements. For the purposes of this discussion, we will examine Labour in a little more detail.
The H1N1 virus, originally known as the Swine Flu, is the latest potential health pandemic since the outbreak of SARS only a few years ago. The government has been struggling to organize mass immunization clinics and to engage the media to aid in the cause. In the meantime, the potential impact of the H1N1 virus on your operation remains to be an unknown.
Experts have commented to the media that the lessons from the SARS outbreak have still not been learned. One would expect that past practices would have already been adopted into new best practices from our experiences with other similar events in our history.
Government agencies at all levels (Federal, Provincial, and local) have mismanaged the activities required to procure and distribute the vaccine, and failed to provide an effective communication and immunization strategy to ensure the risk to public health was minimized and the at the very least understood.
The lack of coordination and accountability for the success or failure of the communication strategy, procurement and distribution of the vaccine, and other related activities are strong indicators that the planning process did not consider the infrastructure requirements and relationships needed between levels of government.
The lack of an effective communication strategy introduced confusion and speculation in the media and the general public. Mass education only seemed to become more aggressive as incidents of severe H1N1 complications and related deaths were reported in the media.
If this really was a pandemic event, many operations today would (and may still) be adversely affected due to direct or indirect (supply chain) labour shortages. Do you have contingency plans in place to address this concern?
It could be argued that “if we are affected to this extent, then our customers will be as well.” This is not necessarily true unless your customers and / or suppliers are located in the same immediate area or region of your business.
People travel all the time, whether they are commuting to work from out-of-town or traveling to or arriving from a foreign country on business. The source of exposure is beyond your immediate control.
What other elements can directly impact labour? We will explore some of these in our next post. In the meantime, keep your hands washed and remember to cough into your sleeve.
Until Next Time – STAY Lean!
Unexpected and Appreciated – Uncommon Courtesy: This morning, a person cut into the drive through lane ahead of us – not realizing the gap in the line was there for thru traffic. Recognizing the error in drive through etiquette and to make amends, we were pleasantly surprised by the “free” coffee at the pick up window. Thank you ladies!
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A number of requests have been received recently that point to a lack of clarity in the definition of Overall Equipment Effectiveness (OEE). One of the questions we were recently asked is:
How do you calculate OEE for Overtime hours?
Overtime and OEE
Our first response is quite simple. OEE doesn’t care whether you are working overtime or straight time. The basic OEE definition pertains to equipment effectiveness. If the machine is scheduled to run production, the same basic calculations apply regardless of the day or hours worked.
If your machine is running two shifts and customer requirements increase to the point where you no longer have capacity to meet demand , two choices exist: either work overtime or add an additional shift to make up for the shortfall. In both cases, the production time would be scheduled.
If capacity should be available but simply isn’t because of extenuating circumstances such as poor quality (material or process) or equipment condition, the same rules still apply. Production is scheduled, therefore machines must run to meet customer demand. The difference in this case is not increased customer demand but rather the inability to produce parts due to extenuating equipment or process conditions.
While appropriate action should be taken to address the reason(s) for working overtime, the fact that you are working it should not change the method used to calculate OEE.
This question, like many others we receive, reinforce our recommendation to clearly state what is being measured and why. We also stated in previous posts that OEE is relative for your organization – a standard industry wide definition for OEE exists only by way of calculation. The elements and how they are to be considered for calculation purposes are subject to company policy.
We appreciate the feedback and look forward to hearing from our readers. To submit your questions, comments, or suggest a topic for a future post, send an e-mail to LeanExecution@gmail.com
We have received several topic requests that we will work on for the month of March, 2009. If you have a topic that you would like to see featured on our site, send an e-mail to LeanExecution@gmail.com.
OEE on the Shop Floor – Measurement: What should we be measuring to make OEE practical at the shop floor level. What factors are critical to the person or persons doing the work? We have presented the pros and cons of various systems that are used today. We would suggest that the number of solutions is as varied as the number of companies seeking them. A customized solution for your specific business operation is likely the best option. A tailored solution is not necessarily a costly one.
OEE Innovations – TRIZ: Ultimately the reason for measuring OEE is to make improvements in capacity utilization. TRIZ is a very valuable tool that can be used to bring new and innovative solutions to improving your OEE. Many companies are likely unaware of the TRIZ process as so much focus is placed on LEAN and Six Sigma. Combining these disciplines with TRIZ can yield a highly successful solution that may just be the next generation ideal.
Capacity Planning with OEE: By definition, it only makes sense to use OEE as an integral part of your capacity planning process. We will cover the details to do this effectively. Effective capacity planning naturally extends to improved resource management and effective production planning.
OEE, Value Streams, and COST: Although some managers may rise to the challenge and volunteer, many are either assigned or designated to be project champions. In many cases, unfortunately, the scope of the project is extremely limited or restricted and project managers simply become “metric managers”. Who is in charge of OEE? The answer is quite simple: EVERYONE. OEE is a multi-discipline metric and, like other sound lean strategies, requires seamless interaction among managers and departments.
OEE cannot and should not be managed as an independent metric. Having said that, don’t get caught in the trap of “stand alone” OEE reviews. While there may be a number of strategies for improving OEE, such as constrained capacity, we will present a model that explicitly ties operational costs to your processes. When OEE data is sensitised by cost data, a completely different strategy for improvement will emerge. If the ultimate goal is to improve your bottom line, then our Cost sensitisation model will bring the concept of OEE and your bottom line to a whole new level.
OEE and Lean Agility: Can OEE be a leading indicator of your ability to respond to change? Well we think so and happen to have a few ideas that will show you how and why.
Send us your questions or comments or simply suggest a topic for a future post or article.
In this post we will present a simple method to calculate a truly weighted OEE, including weighted factors Availability, Performance, and Quality.
The QUICK weighted OEE method:
Recalling our original definition of OEE, we are measuring how effectively our planned production time (net available time) is used to make a quality (saleable) product. The weighted OEE then is the total time required to make a quality product divided by the total net available time.
From our examples in the “Calculating OEE” post, the following table summarizes the time required to produce quality products ONLY for machines A, B, and C:
Machine A: 365 minutes
Machine B: 318.75 minutes
Machine C: 254.34 minutes
The total time to produce good quality (saleable) products is 938.09 minutes.
The total net available time for the three machines is 1365 minutes (3 * 455 minutes).
The total weighted OEE for the 3 machines = 938.09 / 1365 = 68.72%
Calculating the Weighted Factors:
A similar process to the one described above can be applied to the individual factors. It stands to reason that when the individual factors are multiplied together that we should get the same result. We will use this to check our answer.
Availability measures machine uptime efficiency. The definition applied to an individual process also applies to the total of all the machines. Availability is calculated using the formula:
Availability: Net Operating Time / Net Available Time
From our examples in the “Calculating OEE” post, the following table summarizes the Net Operating Times for machines A, B, and C:
Machine A: 423 minutes
Machine B: 437 minutes
Machine C: 433 minutes
The total Net Operating Time = 1293 minutes.
The total Net Available Time for the three machines is 1365 minutes (3 * 455 minutes).
The weighted AVAILABILITY for the 3 machines = 1293 / 1365 = 94.73%
Performance measures machine operating time efficiency when compared to the “ideal” cycle or operating time. The definition applied to an individual process also applies to the total of all the machines. Performance is calculated using the formula:
Performance: Ideal Operating Time / Net Operating Time
From our examples in the “Calculating OEE” post, the following table summarizes the Ideal Operating Times for machines A, B, and C:
Machine A: 373.33 minutes
Machine B: 337.50 minutes
Machine C: 267.17 minutes
The total Ideal Operating Time to produce ALL parts = 978 minutes.
The total Net Operating Time for the three machines is 1293 minutes (See Availability Calculations Above).
The weighted PERFORMANCE for the 3 machines = 978 / 1293 = 75.64%
Quality measures how efficiently the “ideal” operating time is used to produce quality (saleable) products. Again, the definition applied to an individual process also applies to the total of all the machines. Quality is calculated using the formula:
Quality: Ideal Operating Time to Make Quality Parts / Ideal Operating Time
From our examples in the “Calculating OEE” post, the following table summarizes the Ideal Operating Time to produce Quality Parts ONLY for machines A, B, and C:
Machine A: 365.00 minutes
Machine B: 318.75 minutes
Machine C: 254.34 minutes
The total Ideal Operating Time for Good Parts = 938.09 minutes.
The total Ideal Operating Time to produce ALL parts for the three machines is 978 minutes (See Performance Calculations Above).
The weighted Quality for the 3 machines = 938.09 / 978.0 = 95.92%
Weighted OEE cross check:
Let’s compare the results. From the calculations above, the results are summarized as follows:
Weighted Availability: 94.73%
Weighted Performance: 75.64%
Weighted Quality: 95.92%
Now, we multiply the individual weighted OEE factors together:
OEE = 94.73% * 75.64% * 95.92% = 68.73%
You will see the result is the same as the Quick check introduced at the start of this post.
In our next post we will show you how to calculate the weighted factors for each individual process and introduce yet another way to confirm the weighted OEE calculation.
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