“[…] When starting an improvement effort, I usually ask about the minimum target the team is attempting to achieve. The answer is often something made up on the spot or a generalization, like as much as possible. Improvement efforts should generally be driven by the actual requirements of the business. For example, if a company determines that the time between a customer placing an order and receiving the product is too long, it should determine an improvement target based on what the business needs. If it currently takes 42 days and customers expect to receive the product in 22 days because of their needs or what competitors are offering, the minimum improvement needed is 20 days.[…]”
Sourced through Lessons in Lean
Michel Baudin‘s comments:
Gregg Stocker illustrates abstract principles with concrete examples, which makes his meaning clear and unambiguous. The above excerpt is meant to show the need for employees and managers to understand the consequences of local actions on the organization as a whole. As he points out in the rest of his post, it’s not always easy.
In Gregg’s examples, the need for improvement and project goals can all be expressed in quantitative terms, like “reducing an order fulfillment lead time from 42 to 20 days.” In the 2nd example, about the reduction in the time needed to change a filter in the oil and gas industry, he admits it is difficult to connect a project this deep inside the organization to externally visible results but insists that it must be done.
In this as in many other cases, a thorough analysis of the benefits of a project may require more time and effort than carrying out the project itself. Another example could be the mistake-proofing an assembly operation. More generally, quality improvement falls in this category. The only way most organizations know how to quantify it is in terms of cost-of-quality (COQ) reductions, which ignore the effect of quality problems on market share.
Where the company’s reputation for quality is treated as the crown jewels of the business, managers take on quality improvement projects that cannot be supported in terms of COQ. Other parts of Lean Manufacturing whose benefits are generally not practically quantifiable include 5S, yet it is the object of considerable implementation efforts.
In yet other cases, the analysis is simple: an external organization mandates the company to make certain changes, regardless of their impact on any performance metric. These may be imposed by government regulations or by customers who will only buy from suppliers who are “certified Lean,” or comply with ISO standards, or use a particular ERP system… The economic benefit is staying in business.
What a project in a section of a plant does for the business as a whole is, of course, a question that must be answered, even if it is in qualitative terms. The criterion I have been using for this is whether the proposed local changes move the plant as a whole towards takt-driven production, which others have called “True North.”
This is what I had written about it in this blog 5 years ago:
The takt time allows you to define an ideal state, that John Shook and Pascal Dennis call True North, but that I prefer to call takt-driven production. In this state, you perform all operations one-piece at a time with process times that exactly match the takt time, and with instant transfer to the next operation at every beat. Of course, it is never perfectly realized, even on an assembly line. Real lines can only be approximations of it. The point is that it gives us a direction.
All deviations from takt-driven production translate to Ohno’s waste categories, overproduction, waiting, excess inventory, etc. Since any local project that moves production in this direction eliminates waste, it can be undertaken with the confidence that it contributes to global improvement and is not sub-optimization.