This article is also available on our website: PROACTION – Generating Best Practices. It is an excerpt of a paper originally written by George Miller, Founder of PROACTION. It has been modified and updated by Paul Deis, PROACTION CEO.
INTRODUCTION
Objective:
• To help enable process improvement for better performance—do it better, cheaper, faster.
Would you like a simple, effective approach to process improvement? This is a generic method for almost any type of process and is intended as a guide of things to do, rather than an in-depth tutorial. Because it’s generic, it doesn’t contain discipline-specific technical advice. While it outlines a methodical approach, we also encourage creativity in concert with it, because the biggest breakthroughs happen when method and creativity find a way to co-exist.
This paper first defines key terms, then discusses how to improve inputs to the process, the process itself, and wraps up with some “lessons learned” advice. Although production and manufacturing terms are employed, nearly everything herein works for service businesses and office operations. It is currently fashionable to say that value is only added on the factory floor, but little would happen on its own without the intelligence value-added of such “non-value- added” activities as marketing, selling, planning, designing, contracting, buying, shipping, etc.
The “value-added” concept needs expansion beyond the narrow realm of production that it is now so myopically focused upon.
DEFINITIONS
Process
• A process is a collection of related activities that adds value to a product or service, that a customer would be willing to pay for. A process accomplishes specific objectives. Products consume processes, which consume activities, which consume resources, such as money, manpower, material, and machine. They may also require information, in the form of specifications, instructions and schedules.” – George Miller, PROACTION
• A collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.” – Hammer and Champy, in Reengineering the Corporation
Typical potential process improvement areas are:
• Speed
• Cost/Return on Investment/Assets
• Quality
• Flexibility
• Product Innovation/Improvement
• Compliance/Safety
And will help enhance:
• Profitability/asset return/shareholder value
• Customer service
• Market share
• Reputation
Select from the targeted improvement areas above to support your company/project strategies. The most critical areas should have “metrics” to track performance and possibly, targets.
Excellent processes have or utilize:
• Mission
• Objectives, Metrics
• Responsibility—who is in charge of process to see that it is right
• Resources, such as: – Material – Manpower – Energy – Equipment- machinery, tools, technology – Information- specs, direction, instructions, procedures, software, schedules
• Activities
• Cycle Time
• Inputs
• Outputs—Products, by-products, waste
• Defects (even excellent processes usually have)
• Policies/Procedures
• Tools/Technology
Do yours have these? Make sure their availability and quality are addressed in your process review.
VALUE-ADDED ACTIVITY (VAA)
Activity/cost that actually increases the value of a product or service in a customer’s eyes. Fabrication and assembly are examples of this category. The ideal process consists of only Value-Added Activities
NON-VALUE-ADDED ACTIVITY (NVAA)
Activity/cost that does not increase the value of a product or service in the customer’s eyes. Example: storage. Decide if the activity is needed at all, is it duplicated anywhere, can it be done better or differently? Can the timing, method, material, equipment, speed, training, technique, setup, specification be altered to improve the results? An activity may be all value-added, all non-value-added, or a mixture. Certain non-value-added activities may still be needed, such as a storage requirement due to a capacity imbalance or a wait for a required inspection. Customers may see value in some of these activities, if only to “Band-Aid” a weak process.
NON-VALUE-ADDED ASSET
Non-productive asset. Assets kept working are more productive, but only if the output is actually needed and soon. The classic asset misuse is “keeping machines or people busy” even though the results aren’t needed. This wastes investment by inflating inventory, tying up material, space, capital, manpower and equipment resources. It is often aggravated by misapplication of metrics. For example a production manager who is measured by raw unit production “efficiency” measures is likely to commit this “sin.” If assets cannot be kept productive under this rule, then divestiture, replacement or outsourcing should be considered, as feasible. New metrics may also be needed.
CYCLE TIME
The total elapsed time to produce one unit. This includes all delays including elapsed set-up, queue, move, inspection, rework and also the actual processing time. Typical processes have 60-95% idle time, while product is not actually being worked on. Therefore the greatest cycle time reduction opportunities are normally, but not always, in delay time. Lost time may be recovered by balancing operations, reducing: storage time, handling, waiting for approvals, queues, handoffs, inspection, etc. Shorter cycle times usually improve competitiveness by cutting costs and response time.
WORK TIME
Time required or spent actually working on the product.
TAKT TIME
Interval of time for each unit to be completed—the rate of production. A product may have a 2-hour cycle time, but have three 20-minute operations and one 30-minute operation. One unit comes off the line an average of every 30 minutes. Resources and work content should be allocated to adjust Takt Time to the desired rate of production.
DEFECT
Anything about the product which is legitimately not acceptable to the customer or internal authorities (normally, but not always, documented in specifications). Defects result in added cost, lost time or lost utility of the product to the customer, as well as delays in response time, wasted inventory and capacity.
PROCESS CAPABILITY
The ability of the process to meet the desired quality and speed at an acceptable cost.
METRIC
Important performance indicator to be measured. Examples: Inventory turns, cycle time. Metrics should be meaningful to the level of the people held accountable. For instance, “average plant level cycle time” is not meaningful to a team responsible for assembling a certain model computer disc drive. They need their own metric.
CELL
Production unit designed to make one product/service line or process.
Ideally, all resources needed to complete a product or process are contained in the cell. Cells may be arranged as component/assembly feeders to final assembly test cells. Functionally-oriented cells have resulted in improvements, but product or process cells have generally shown superior results.
WASTE
Any portion of an activity performed, resource assigned or utilized that is not absolutely essential to meeting the mission/objectives of a legitimate process.
LEAN MANUFACTURING
Manufacturing process with as much waste as possible eliminated. A Lean Manufacturing manifesto and body of knowledge has been created and is available through the Agility Forum. This is having a profound influence on current thinking.
INPUTS TO THE PROCESS
External to the Process
Don’t jump right into the detailed guts of the process. Start at the top, with the product or service to be provided. Make sure it is defined to meet customers’ expectations—technical specifications, service requirements, quality and pricing. First make sure you’re working on the right process, with the right objectives! The biggest, easiest improvements often occur right here, before even getting into the actual process in question.
“Frame the process”—Look at things external to the process first. Before you do anything, make sure you know what you need the process to do. There should be a clear, simple, strong overall mission statement. Examples: “Eyeglasses in one hour,” (Lenscrafters) or… “When it [your package] absolutely, positively has to be there overnight.” (FedEx). Don’t waste time improving the wrong process with the wrong mission or approach. As you break the process down into lower levels of detail, each piece may not satisfy the overall mission statement, but it should be clear what role it plays in doing that. Accomplish this by formulating simple objectives for each piece.
The mission statement potentially has enormous power to improve the process. For example, a while back, we were brainstorming the warehouse “process” with a client. The “owner’” of the process stated that her “mission” was to receive material, move it to inspection, store it, issue it to production on work order kits when requested, replace shortages and rejections, move finished goods to inspection and stores and “generate paperwork” (how’s that for a mission?). After much discussion, the new mission agreed upon was to ensure that material was safeguarded, provided to production as needed and then accounted for. This triggered a flood of changes, questioning the very existence of warehouses, inspection, work orders, kits, etc. The company ended up starting to certify key suppliers, using supplier-managed inventories, eliminating most work orders, using kanbans, pull systems, point of use storage and much smaller warehouses, inspection and overhead.
• Decide on scope of change, process boundaries. Are you reengineering the whole company, one process, several products, a department? Are you looking for a complete redesign or major improvements in the current approach or just incremental enhancements?
• Formulate objectives and metrics—Preferably quantifiable and measurable. More important ones will be assigned quantifiable metrics, such as cycle time minutes, or defects for significant attributes. Don’t set them and measure them unless they are important, because it takes valuable resources and time just to do that. Most metrics will fall into speed, cost and time categories. Others may relate to flexibility, innovation and compliance/safety. Still others may meet quality of life and even aesthetic objectives. Metrics themselves are non-value-added activities, to be used only when needed.
• Analyze process inputs and outputs—Study inputs and outputs to see if they are appropriate and what improvements could be made. Also decide if the cycle time is acceptable for competitive purposes, regardless of how easy or difficult it would be to improve it.
• Estimate Improvements—For principal metrics. Do this at the start and again after the internal process has been analyzed. For each one of the performance improvements, write up how you will accomplish it. When work actually starts on improvement planning, other ways will be probably also be found.
Now you’re ready to look at the internal process steps. . .
Internal to the Process
Analyze the overall process flow, preferably using pictorial charts and problem identification techniques. Repeatedly walk through the process physically with employees, customers, suppliers, consultants, objective bystanders and learn all you can about what is right and wrong. This seems to work better when one performs the external steps first. Look for continuity, search for gaps or redundancy, delays and defect generation. It helps to do a map of the area, superimposing activity, paper and material movement.
Finally, it is also helpful to prepare a summary of activities chart, showing: responsible person, cycle time consumed, delays, inspection, movement, wasted time, defect generation, process Takt time, value-added component, non-value-added, probable reduction and whether step is needed under current conditions, wait time, defects produced, resources consumed, applicable policies, procedures and instructions. The number and complexity of worksheets used is a function of the complexity of the process and the mindsets of those in charge. Space limitations don’t allow us to show you enough samples.
See if the broader, overall process, or even parts of this process are interfering with the portion you are working on. For example, in a recent project, a company discovered that its order picking effectiveness was being severely hampered by improper stock and record keeping practices that eroded inventory record accuracy. This prompted the company to properly redirect its energies on improving this critical upstream activity first. Redo Figure 6 when you are done, including the additional “how-to” write-ups.
Focus on eliminating defects, problems and constraints.
Rather than detail planning, followed by a “big bang” implementation of changes, it is desirable to test and incrementally implement new changes. In the case of radical process change, this is not always possible, although prototyping and parallel operation can help alleviate the risk and pain of major change.
• The performance of a process may often be improved without a change to the process itself, but just by better clarification, training, measurement or emphasis on it.
• Tips for organizing a process:
Determine WHAT is to be accomplished and WHY first, before determining HOW, WHEN, WHO and with WHAT, pretty much in that sequence. This can best done correctly by putting the process in perspective with the overall enterprise, business unit and workflow.
• Internal Process Improvement Checklist
Here is a list of improvement ideas to help out. Keep in mind that some of these are radical and may require planning and coordination. For example: don’t eliminate inspections of nuclear pressure vessels without some overarching quality strategy in place, along with customer and regulatory approvals!
• Identify or assign process “owners” and accountability for implementation of improvements and ongoing performance results.
• Compress time, do things faster and cheaper, by overlapping operations, eliminating hold points and inspections, scheduling better, eliminating capacity and defect bottlenecks.
• Eliminate non-essential activities.
• Eliminate non-value-added assets, such as excess inventory, space or unneeded equipment. Some say this is impractical, because the assets are already there and the money is spent, but they might be sold, scrapped, transferred, leased or converted, with some thought. For instance, a company had four factories, with much unneeded space. Employees were encouraged to consolidate layouts, move out unneeded assets, rope off unused spaces and place “FOR RENT” signs on them. Result from this and other actions: Plants were consolidated, one plant closed and employees transferred, some to better jobs, remaining plants saved from closure.
• Do activities in parallel or other optimized sequence to get high resource utilization while reducing cycle time.
• Reduce queue, move, setup, inspection, storage, wait/administrative time.
• Time-phase improvements to improve payback while reducing risk.
• Eliminate bottlenecks, which might be inadequate capacity, excessive setup time, bureaucratic check-in/out or approval procedures, etc.
• Reduce defects, through awareness programs, personnel screening, process training, set-up training, equipment tune-ups/maintenance, rebuilding/replacement, poke-a-yoke approaches, revised material specs, better screening, reworked tooling, redesigned processes.
• Reduce capacity constraints/bottlenecks.
• Reduce number of required approvals, sign-offs.
• Reduce steps, complexity, in general.
• Reduce number of hand-offs. Reduce number of organizations, people, facilities involved- Change organization and facilities to fit the desired process if feasible.
• Increase flexibility- avoid “hard wiring” the system, design it for change.
• Use standardized approaches, “packaged” solutions, where practical.
• Simplify design of product, process, tooling, equipment. Use the simplest product, process, equipment, tooling design that will get the job done effectively. Only automate/make significant investments when significantly higher productivity, quality or speed will result. Beware of expensive investments that cannot be recovered, or result in losses of money or flexibility when volume, mix or design changes. Keep it flexible!
• Try to modularize the new process design. Design process/business “objects” that are self contained in what they do, that can easily be linked to other activities or processes and redesigned without having to “rewire” other activities or processes. They ideally should be reusable and interchangeable elsewhere in the organization, system, maybe even in other organizations.
• Throw away functional organization charts and functional space layouts. Make the organization chart and layout fit the process, not vice versa. This make take significant time, planning and internal salesmanship.
• The amount of time and trouble to accomplish needed changes is almost inversely proportional to the support, strength and competence of the people responsible for approving and making the changes. Get the best and most adaptable people you can afford. You can’t afford weak people.
• Employ cheaper materials, or maybe even better, more expensive materials that reduce defects, improve quality, reduce overall costs.
• Reduce costs (most of the above reduce costs).
• Use OPM (Other People’s Money)- “leverage” their inventory, capital equipment, technology, organization, knowledge.
-Set up supplier partnerships/contracts.
• Outsource where practical, in-source where you are clearly better.
• Use consultants, where it makes sense.
• Utilize professional and trade associations contacts, services and body of knowledge, to learn better methods, find and train better people, locate helpful people and organizations.
• Use schools, colleges and universities, when they can deliver useful knowledge.
• Brainstorm, get outside opinions from almost anyone you can—employees, managers, mad scientists, poets, writers, freaks, even customers!
Selectively Employ:
• Policies/Procedures
• Checkpoints
• Controls
• Auditing, Checking
• Metrics
… because these are “non-value-added” activities that should only be used as needed.
LESSONS LEARNED
A. 80% of the improvement task is selling it and getting peoples’ support.
B. Organizations resist change, no matter what they say. Certain individuals may help or even lead, but many people will slow down, stop or even reverse improvements unless they are properly trained, motivated and led. Focus on education and change management more than technical improvements.
C. Talk to people first. Soften them up before the big push. People who are your friends are more likely to help you, simply because you are familiar and they like you. Find out what thy want/need and help them if possible.
D. Try to hire, transfer, or borrow like-minded people. It’s often easier than trying to convert them.
E. Simple systems usually work better than complex ones.
F. People are more accepting of change when you take the mystery out of it and show them what’s in it for them.
G. People are much more accepting of change when you can show it working somewhere else, preferable nearby and full-scale.
H. Teams and consensus are great, but strong leadership still has its uses.
I. Constant repetition and leadership by example are needed. Don’t think that you can simply state the mission, objectives, conduct a brief training session, then come back in a couple of months and reap rich rewards. This war will consist of multiple campaigns and many battles. There will be resistance, indifference, confusion, conflicting priorities/philosophies, even outright opposition, or worse yet, covert opposition. Persistence and determination are called for!
J. The process improvement methodology can be straightforward. There are other approaches besides this one. Some will yield better results, but may require much more skill and complexity. The methodology is only a framework. Technical expertise and creativity are also needed. Beware of either letting “industry experts” drive the solution down the same old roads and also letting those ignorant of industry lessons learned move into naive approaches.
K. Imagination and creativity are needed for best results. The folks who were determined to deliver packages overnight, provide a computer for “the rest of us”, sell books over the Internet, invent the Internet, provide eyeglasses in one hour, had real vision (no pun intended) and enriched life for many.
Process Improvement Examples
When this session is presented live, workshops/examples are offered to illustrate the points made herein. If you’re reading this, why don’t you try the ideas out on your own with an actual case, preferably a simple one to start with—one that people agree needs great improvement?
REFERENCES
Reengineering: 40 U$eful Hints,” George J. Miller, APICS XX International Conference Proceedings, APICS, Falls Church, VA
The Process Reengineering Workbook, Jerry L. Harbour, 1994, Quality Resources, NY, NY
Reengineering Your Business, Morris & Brandon, 1993, McGraw-Hill, NY
Reengineering the Corporation, Hammer & Champy, 1993, Harper-Collins Publishers, NY, NY
Business Process Improvement, James H. Harrington, 1991, McGraw-Hill, NY