FEATURE | FALL 2009 EFFECT

What We Can Learn From Lean

by Sara Aase

In 2003, E-Z-GO, a golf cart manufacturer in Augusta, Georgia, was a mess. “It was dark and dingy, the manufacturing line was completely disjointed, and there were materials stacked up everywhere,” says Westy Bowen, vice president of quality and Six Sigma. Most critically, E-Z-GO was hemorrhaging money. “We needed to figure out how to fix our business, because it was broken,” says Bowen.

Today the plant is immaculate. And E-Z-GO is not only profitable, says Bowen, “It’s now one of highest businesses in its parent company’s portfolio (Textron) in terms of return on investment capital.” Business operations also have improved by every measure. E-Z-GO moves inventory 30 percent faster and has reduced its manufacturing time per vehicle by more than 20 percent. Quality scores are over 98 percent, up from 50 percent in 2003. Customer satisfaction and loyalty have improved, and satisfaction scores for its 1,000 employees are the highest of any Textron-owned company.

E-Z-GO’s complete transformation has earned it the coveted Shingo Prize for operational excellence. The prize is named for Japanese industrial engineer Shigeo Shingo, who created and wrote about the Toyota Production System—since popularized as “lean manufacturing.”

“There’s no better business case for a lean transformation than when your company is experiencing a downturn,” says Bowen.

What is lean?

At its heart, lean is a systemic way of focusing on what your customers want and eliminating steps that don’t contribute to that value. The process of asking, “What are we doing, and why?” identifies areas that are wasting time and resources.

Lean is easy to visualize. Picture almost any airport today. You often stand in line to check in, stand in another line to go through security, and wait in a final line to board. It’s easy to imagine a better flow for this process that would result in a better customer outcome—less time spent in line and more on actual travel.

Lean applies this idea to companies of any size, including those with thousands of customers, employees, and suppliers, and empowers everyone to think, “What value does the customer draw from this process? If this process provides no value, how might we fix or eliminate it?” In other words, “How can I solve this problem?”

By empowering employees, companies are able to eliminate wasteful procedures. Across a large organization, those minutes add up to hours, weeks, and months, and small fixes that save a few dollars here and there, add up to millions.

How Is Lean Different From Six Sigma It’s easy to confuse lean with other quality improvement approaches, such as Six Sigma or Total Quality Management. Six Sigma and lean are not only two of the most popular methods businesses use, they are theories that can be deployed together. (Some companies, in fact, employ a hybrid version called Lean Sigma). More

Such a simple concept, however, is extraordinarily disruptive to traditional organizations, because it upends the hierarchy. Instead of complaining to management about a problem and waiting for its resolution, employees are empowered to fix it themselves. “You ask, ‘Why didn’t this engine move?’” says Doug Foster, a Textron Six Sigma Master Black Belt and leadership team member for Lycoming Engines in Williamsport, Pennsylvania. “They’ll say, ‘I’ve been bringing that up for six months now.’ With a lean approach, suddenly these processes not only assure that the employee’s voice is heard, but that they are the process owners who can fix it.”

A lean history

After World War II, a small Japanese auto company was on the verge of going under. It faced low and uncertain demand schedules as well as a crippling labor strike. To compete against the American Big Three, then in ascendancy, the company was forced to offer its workers unprecedented job guarantees. The company then leveraged that workforce to redesign its production processes to be as innovative and responsive to the customer as possible. That company, of course, was Toyota, which took the assembly line process pioneered by Ford and adapted it over decades into the lean system (often still called the Toyota Production System) to become the world’s largest car company.

“They restructured in a way to best utilize their people,” says Stephen Ruffa, author of Going Lean: How the Best Companies Apply Lean Manufacturing to Shatter Uncertainty, Drive Innovation, and Maximize Profits (2008, AMACOM). By contrast, says Bruce Hamilton, president of the Greater Boston Manufacturing Partnership, most American businesses have stayed firmly rooted in the tradition of efficiency espoused by Frederick Winslow Taylor, who in 1911 wrote:

Yet it will be shown that the science of handling pig iron is so great and amounts to so much that it is impossible for the man best suited to this type of work to understand the principles of this science, or even to work in accordance with these principles without the aid of a man much better educated than he is … the philosophy of the old management puts the entire responsibility on the workmen, while the philosophy of the new places a great part of it upon the management.

“Most businesses have a structure where very few people work on problem solving and creativity,” Hamilton says. “Most people are expected to come to work and not think.” Up until 1985, he says, U.S. companies could solve their problems by raising prices. But as the world demands faster production and innovation, over time, broken processes and work-arounds pile up until they leave companies like E-Z-GO struggling to continue.

Take an example, says Ruffa, where a company experiences a sudden spike in demand. Not having enough product is costly, he says. “So they say ‘Let’s put more on the shelf for next time.’” But then customer preference changes, and a new process must be developed to keep that old inventory on the shelf and switch to making a new product. “Generally after a crisis those extra steps aren’t taken away.” Extra steps cost companies millions, if not billions, of dollars in lag time.

Ruffa’s research shows that companies that adopt lean ways are better able to focus on the future and spend far less time putting out fires. This means they also weather crises better than traditional companies. “Because they have more stability, they stay out of the reactive mode and focus on new ways to create value,” he says. “The leaner the organization, the more precisely it’s run, which leads to quicker visibility when there is an issue, so it can be dealt with before it’s amplified.”

Transforming people and processes

If this business philosophy works so well, why aren’t more companies already lean? Most want to jump right to cutting out waste without transforming the people and processes around it. “Companies that have tried this and failed, forgot about the people,” says Alice Lee, special assistant to the president for business transformation at Beth Israel Deaconess Medical Center in Boston. “It’s really easy to be tempted to focus solely on cutting costs and making more revenue, but how will you sustain it?”

Five S’s Seiri—Sorting. Go through all tools and materials, and keep only essential items. Store or discard the rest. Seiton—Straighten or set in order. Arrange tools, equipment, and parts in a manner that promotes work flow. Tools and equipment should be kept where they will be used, and the process ordered for maximum efficiency. Every item should have a place and be labeled. Seiso—Sweeping, shining, or cleanliness. At the end of each shift, clean the work area and put everything in its place. Maintaining cleanliness should be part of the work—not an occasional activity initiated when things get too messy. Seiketsu—Standardizing. Standardize work practices to operate in a consistent fashion. Shitsuke—Sustaining. Once the previous 4 S’s have been established, they become the new way to operate. Maintain and review standards to protect against sliding back into old ways of operating.

What some manufacturing and health care companies have learned from lean

Getting an organization to think as one quickly opens people’s eyes to all the customer barriers their processes inadvertently create. One of the first lean steps is to pick one area, identify a problem, and observe the steps that happen there in a typical day.

For example, Deborah Porto, director of applied research for the industrial extension service of North Carolina State University, spent a day observing the check-in desk for mammogram appointments at a North Carolina hospital. “People were always late for their appointments,” she says. “When the patient came in, all they could see was the big Starbucks. The registration desk had a tiny little sign.” But that wasn’t the only step in the process causing delay. Once they found the desk, they had to go to a more private place across the hall to finish registration. After that, they were sent down the hall to mammography. Only there’s no sign that says “mammography,” so women were getting lost.

Brainstorm fixes

After listing the steps causing the problems, your team brainstorms all the different ways the issues might be fixed. This taps into your employees’ innate creativity and motivation to solve problems that directly affect them. For the lab, Lee says, “We asked, ‘Can we change the courier routes? What if they come eight times a day instead of three?’”

In the orthopedics wing of the hospital, patients waited for more than three hours for a 15-minute doctor’s appointment. “There were too many handoffs,” Lee says. “But it’s a very complex process, so the only way to solve it is to get together everyone involved in that chain of processes. Then they say, ‘Now I understand how what I do affects the person around the corner from me.’” A patient’s entire time in orthopedics today, from registration to leaving the hospital, is on average 53 minutes.

When the people who perform the work are asked to identify and solve problems, a light goes on, Hamilton says. “It’s important for every employee to understand that if they’re searching for something in a file, that’s not work. When you put them in an environment where [broken processes] can’t be fixed, it just becomes normal.”

Getting them to “see” what’s impeding process flow, on the other hand, is contagious. “When people are presented with opportunity to solve their own problems, they just take off,” Porto says.

Employees will always come up with ideas that management would never think of on its own, Hamilton says. “The companies that see this start to realize there’s almost nothing their employees can’t do.”

Streamline processes

Once you start to move people and processes together in ways to optimize efficiency, you can literally see the flow.

Take a typical hospital’s supply closet. Before Lee started introducing lean to Beth Israel Deaconess, none of the physicians, nurses, and support staff could locate their supplies quickly, because the closet was a jumbled mess.

“You’ve got soap next to a suture removal kit,” Lee says. “Nobody can find anything,” she says. “I say, ‘Picture a supermarket. All the cereals are in one aisle.’” Grouping supply items by function, i.e., tool kits, toiletry supplies, etc., “was a real crowd pleaser,” Lee says. “It’s critical to take something simple like this to get some quick wins for lean, develop some key players, and show that the system is possible in different settings.”

In manufacturing facilities, grouping products by family—and the people who work on them—instead of by machine means that they can be used with more flexibility, Ruffa says. This is especially true if employees understand their functions and are cross trained to work on multiple steps in the process. This grouping is often called a “cell.”

Once you fix a problem, lean philosophy provides a variety of tools to help ensure you standardize that process and continually monitor it for further improvement.

“We have a three-second rule [at E-Z-GO],” Westy says. “Anybody should be able to walk over to your cell and within three seconds be able to tell what’s going on.” Metric boards for each area also list the words, “quality,” “inventory,” “delivery,” “safety,” and “productivity,” with a green or red dot next to each. “So in three seconds you can tell if that cell is having a good or bad day.”

Sustaining continuous improvement

Ongoing training and education throughout an organization is critical to sustaining the changes a company has made.

Foster says that Lycoming Engine wants each of its 420 employees to practice problem solving, so they’ve been instructed to go through seven steps when they hit problems. The steps help employees identify defects that could be causing a problem and figure out how to improve the process to make sure the problem doesn’t come back.

“We want them to be problem solvers, not just product builders,” says Foster.

At E-Z-GO, all employees are required to pick at least two areas and figure out how to optimize processes.

For Lee, it has been easy to measure results as lean progresses through Beth Israel Deaconess in terms of reduced wait time, greater patient volume, and more revenue. It’s important to continually talk about your progress, goals, and results, she says. “We have such a great track record that now there’s a huge queue of people wanting to get on board. We’re doing a lot of training now so we can get people there much quicker.”

Getting lean right

Once a company starts to understand lean, they realize that it’s a philosophy, not a program with a discrete end. “It’s a never ending journey,” Ruffa says.

"It spreads," Porto says. “The second generation is getting your customers and suppliers to be lean, too.”

Porto and other experts highly recommend finding and working with reputable, experienced mentors who believe in lean at a systemic level—who talk in terms of understanding problems, processes, and improvement, and not just in identifying waste. Porto says some consultants come in and move 20 pieces of equipment and clean the building, but leave people without the ability to improve a process themselves.

Could anyone do lean?

On the one hand, yes. For example, a Toast Kaizen, a 30-minute video Hamilton made, shows how to identify and eliminate wasted steps and movement by taking viewers through the process of toasting bread. Broadly, Ruffa says, applying lean principles can help us “understand the need to recognize where change occurs and identify ways to meet it head on.”

On the other hand, he says, lean has principally been applied in manufacturing, service, and increasingly health care organizations, which have many parallels in their overarching missions and operations. “Organizations that are very idea-focused, that maybe come up with new inventions but don’t produce them need to be careful,” he says.

With the right leadership, most organizations can do lean.

“I love it because it’s so holistic, methodical, and scientific,” Lee says. “Instead of just trying to find the million-dollar problems, if you take everybody and get them working on those $1 and $5 ideas, that’s a lot of money. And now you’re transforming the culture.”