Joint Ventures

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Joint Ventures

A joint venture is when two or more businesses or people pool their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared.

Reasons you might want to form a joint venture include business expansion, development of new products or moving into new markets, particularly overseas.

Your business may have strong potential for growth and you may have innovative ideas and products; however, a joint venture could give you.
1. More resources.
2. Greater capacity.
3. Increased technical expertise.
4. Access to established markets and distribution channels.

Entering into a joint venture is a major decision. This book gives an overview of the main ways you can set up a joint venture, the advantages and disadvantages of doing so, how to assess if you are ready to commit, what to look for in a joint venture partner and how to make it work.

A joint venture differs from a merger in the sense that there is no transfer of ownership in the deal.

This partnership can happen between goliaths in an industry. It can also occur between two small businesses that believe partnering will help them successfully fight their bigger competitors.

Companies with identical products and services can also join forces to penetrate markets they wouldn’t or couldn’t consider without investing tremendous resources. Furthermore, due to local regulations, some markets can only be penetrated via joint venturing with a local business.

In some cases, a large company can decide to form a joint venture with a smaller business in order to quickly acquire critical intellectual property, technology, or resources otherwise hard to obtain, even with plenty of cash at their disposal.

How does a joint venture work?

The process of partnering is a well-known, time-tested principle. The critical aspect of a joint venture does not lie in the process itself but in its execution. We all know what needs to be done specifically, it is necessary to join forces; however, it is easy to overlook the “hows” and “whats” in the excitement of the moment.

We will look at the “hows” in our review of the “Critical Factors of Success” later in this book. For the moment, let’s keep in mind that all mergers, large or small, need to be planned in detail and executed following a strict plan in order to keep all the chances of success on your side.

The “whats” should be covered in a legal agreement that will carefully list which party brings which assets (tangible and intangible) to the joint venture, as well as the objective of this strategic alliance. Although joint venture legal agreement templates can readily be found on the Internet, we suggest you seek the appropriate legal advice when entering such a business relationship.

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Lean in Unionized Environment

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Lean in Unionized Environment

One question I get asked a lot is whether Lean can work in a unionized environment. Fortunately, I have had the opportunity to work in a unionized environment. The engagement did not start out as an Lean engagement, but as the continuous improvement project wore on there were more and more opportunities to influence in more and more Lean methods. The engagement itself was to help set lead the implementation of a solution into an operational support area. Doesn’t sound very Lean right? But I thought it was a great opportunity to try to extend Lean practices into the realms of Application Management Services, otherwise known as Maintenance and Support.

The People

Without a doubt, the people I met and worked with were some of the most client-focused, motivated people I have ever met. In fact, everyone on the project team was incredibly focused on value to the customer. At every turn, there was mention by people of the impact that current issues were having on the end clients and co-workers. Were there a few people who were the stereotypical ‘Union-worker’? Sure. But in my experience the percentage of those type of people are pretty consistent across both unionized and non-unionized environments.

There were a few issues to used Lean that were perhaps more prevalent in a unionized environment though.

The Challenges

Roles – The primary challenge was that unions typically have a large component of their footprint being the formalization of roles and the responsibilities of each role. In addition, the corporation itself also further segmented these roles into functional departments. These functional departments, like Quality Assurance, were the only departments that was authorized to perform those tasks. An interesting thing happened on projects though. People from these different functional areas were assigned to the project and the project was then given the authority to use them in whatever way they saw fit. The projects were also co-located. So the projects were quite a bit more Lean compared to the rest of the organization. But you always had to be careful so make sure everyone was totally happy with how the team self-organized as one person could submit a union grievance if they did not like the work they were doing and if they thought it was outside their official role. Unfortunately when the project was over and it was transitioned to the Maintenance and Support areas, we were less successful in having the team self-organize and had to adopt more structured roles. It is an interesting note that the client knew that this structure was not as responsive and efficient, but they required the process to be aligned and use their current organizational structure.

Compensation – Compensation in a union environment is again a very formalized process and is based upon role and seniority. As we worked on the projects, it really did hamper the ability to recognize people even in informal ways. (like offering to buy someone a lunch) If you wanted to offer someone a perk, you had to offer everyone the same perk whether they were involved or not. This seems like a small thing but it ended up being a constant conundrum for the project.

Documentation – The documentation requirements were quite extensive for two reasons. One, they used documents as the transfer of knowledge between one department to another. Two, they evaluated people’s competencies and their readiness to be promoted to the next level based upon the deliverables they can produce. As you can imagine, this was a problem in trying to move toward more Lean methods. In addition, these documents frequently sat on the shelf for long periods of time after they were produced and became stale.

Hierarchy – Once we transitioned to Maintenance and Support, all departments had managers that assigned work. This was a traditional push system of work. The people were not empowered to pull work at all. Eventually this was a major issue as it really limited the ability to be Lean and focus on Value and Flow.

What did we do?

So you may be saying to yourself, this seems like a failure and Lean can’t work in a unionized environment. I would say that is incorrect.

One aspect that I thought we were very successful was implementing a Kan Ban board and limiting Work in Progress(WIP). The Kan Ban board was also extremely helpful in letting management see exactly what we were working on. Until we implemented the Kan Ban board, it was not uncommon for people to be juggling 20-30 items at once and not informing people of issues. As you can expect, the team also was very energized and focused by the use of the Kan Ban board combined with a Daily stand up to discuss the work they had planned for the day. These practices are still being used today in that area.

As far as the other issues discussed, although they were prevalent in the union environment, I have seen them exist to an equal or greater extent in other large corporations. These are not just union issues. I would propose that they are management issues.

Can Lean be implemented in a union environment? I would say yes, but there are challenges that need to be addressed. But just like anywhere else, you need the commitment from management that the client’s needs and value will drive the organization’s structure and not the other way around. The challenge with a union environments is you need this agreement from not only the company’s management, but also the union management.

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Lean Sustainable Supply Chain Management

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Lean Sustainable Supply Chain Manageent

Lean Sustainability Supply Chain Management. It’s More Than Just Being Green.

In today’s business environment, companies are being held accountable to a growing list of stakeholders who assess company performance against a variety of criteria, from financial and operational performance to labour practices and environmental issues. The pressure for greater transparency in all areas of performance is increasing; not only for consumer-facing companies, but for all business entities throughout the supply chain; including manufacturers who are several steps removed from the ultimate consumer.

To be effective, a supplier risk-assessment program must address sustainability issues in the broadest sense, assessing vendors’ financial and economic viability as well as social responsibility and environmental sustainability.

In many businesses, the procurement, internal audit and enterprise risk management functions provide focus on supplier risk concerns and offer language that helps describe risk. Yet industry research indicates there is still a significant lack of clarity in terms of how and what to measure in order to accurately assess risk in the supply chain.

For example, more than half of the businesses in a recent Compliance Week study expressed dissatisfaction with their current approach to supply chain risk assessment, even though they said managing supply chain risk was a top priority. The top challenges these companies cited were a lack of good data on vendors, poor visibility into the use of subcontractors, and limitations in their ability to compare vendor risks.

Such shortcomings become even more critical in today’s industrial environment, where lean production practices make manufacturers more vulnerable to short-term supply disruptions.

Beyond these fundamental supplier viability measures, the concerns of today’s broader range of stakeholders must also be addressed. These concerns are measured against social and environmental criteria such as reduced waste, lower carbon emissions, minimized environmental footprint, and a host of social issues, from fair labour practices to immigration and employment policies.

A Bi-level View of Supply Chain Sustainability

Corporate responsibility involves much more than just “being a good corporate citizen.” In the broadest sense, corporate responsibility encompasses a business’s financial and economic responsibility to its stakeholders including customers, suppliers and investors as well as doing business in a way that is socially and environmentally responsible.

Including sustainability in the supply chain involves much more than just “being green.” Broadly speaking, sustainability means managing performance in a way that supports the long-term viability of both the business and the wider community in which it exists.

These multiple facets of sustainability affect an organization on several levels, and their impact on a company’s financial performance is demonstrated over varying time frames. In this sense, any effort to improve supply chain viability must address at least two levels; economic and financial sustainability at a basic level, and social and environmental sustainability on a second level.

Economic Viability

The risk of supplier failure is always a concern for manufacturers, but it grows even more acute during periods of economic fluctuation. A recent CFO Magazine study determined that approximately one out of every seven midcap companies poses a potential credit risk. Moreover, the study found significant risk across nearly three dozen disparate industries.

The consequences of supplier failure can be devastating, causing a crippling effect on a company’s day-to-day operations and even threatening its ultimate survivability. In today’s lean manufacturing environment, where inventories are kept to a minimum and critical equipment and skilled labour are stretched thin, supplier failure very quickly leads to stalled production and lost revenue. Moreover, switching critical suppliers during a crisis following an unexpected failure is, at best, a costly and difficult response.

Unfortunately, traditional supplier risk management initiatives typically track and respond to after-the-fact performance and quality metrics, rather than focusing on forward-looking elements of disruption risk that could provide an early warning of the risk of supplier failure.

Environmental Sustainability and Social Responsibility

A comprehensive supply chain sustainability initiative must also address the second level of issues, ascertaining that suppliers’ business practices are sustainable from an environmental and social perspective. In recent years, many leading retail and consumer goods companies have taken high-profile steps in this area, assessing their suppliers’ performance against an array of metrics that fall under the general heading of “corporate responsibility.”

To cite one prominent example, Walmart several years ago broadened its annual report on “Ethical Sourcing” to encompass the wider topic of “Global Responsibility.” In addition to requiring vendors to demonstrate a commitment to sound business ethics, the retailer’s assessment tool also addresses such issues as energy consumption, greenhouse gas emissions, the sourcing of raw materials, reduced waste, more effective use of resources, and support for more vibrant workplaces and communities.

Moreover, even though many mid-tier manufacturers might not be directly measured by initiatives such as these, the effects of such assessments cascade throughout the supply chain. As a result, more and more manufacturers not only are required to assess their own performance, but also must make sure their suppliers do the same.

Accessing and Assessing Supplier Information

Addressing both aspects of supply chain sustainability; that is, both the immediate financial and economic factors and the longer term social and environmental issues can be especially challenging when some critical vendors are privately held rather than publicly traded. Most privately held companies are understandably protective of financial information, especially if they fear their disclosures could put them at a competitive disadvantage or weaken their negotiating position on pricing or other contract terms.

In the same way, your company’s public assessment of its corporate responsibility performance might be called into question if the only source of information is the self-reporting of suppliers whose records are sealed. As many businesses have discovered in recent years, the potential of a backlash against such perceived “greenwashing” poses its own type of reputational risk.

To be effective and to be credible the information that a supplier sustainability assessment gathers and presents should be timely, proactive and objective. Each of these attributes is essential.

Timely: In view of the speed with which supplier failure can affect lean operations, traditional, dated financial reports are inadequate. What is needed is a rapid deployment supplier rating process that will provide early visibility to key financial performance indicators. In the same way, the company must be made aware of changes in its suppliers’ social or environmental risk immediately.

Proactive: The financial indicators being tracked must be leading indicators of coming performance, rather than reactive indicators of past performance. A proactive approach identifies potential risks, such as a supplier’s anticipated cash flow or credit problems, in advance, while there is still time to address these risks before they affect delivery of critical materials.

Objective: Just as suppliers are reluctant to share confidential financial information, they might hesitate to report comprehensive raw data on environmental or social concerns. In both cases, an effective way to overcome this reticence is through the intervention of an objective third party that can assure confidentiality. A CPA firm, for example, can analyze suppliers’ proprietary raw data; financial and otherwise and then report results to the buyer in abstracted, risk rating form. Confidentiality is thus maintained, and suppliers can be more forthcoming in sharing critical information.

What You Can Do Now

Developing and implementing a supplier viability initiative is obviously a long-term undertaking requiring ongoing commitment, but following are four immediate steps an organization can take to get started.

The first step is to identify the subset of suppliers that are most critical to the company, and then identify those about which the company is lacking important information; both basic financial viability metrics and longer-term corporate responsibility indicators. This analysis must consider the strategic objectives of the organization and incorporate an understanding of the risks that could have the most impact on these objectives.

Next, develop a credible set of supplier financial viability metrics that reflect your company’s specific supplier risk profile. Ideally, this will encompass a diverse set of inputs including data generally not available as part of traditional supply chain management.

Concurrently, develop a comparable set of corporate responsibility metrics. Begin with widely recognized standards and best practices, and then adapt them to reflect the particular environmental and social issues most pertinent to your business.

Finally, develop and implement a program for timely and accurate reporting of all key metrics, employing third-party intermediaries as necessary to encourage supplier compliance and openness. Third-party support is often critical because of the hesitancy of private suppliers (especially troubled ones) to share their information directly with the customer.

In all instances, the risks being mitigated must be weighed against the costs of accessing and presenting such information. The goal is to strike a pragmatic balance that accurately assesses critical economic, social and environmental concerns.

In today’s business environment, where supplier failure can pose an immediate risk, and where customers and other stakeholders demand greater transparency, such a proactive program for accurately and credibly assessing supplier viability and sustainability can be critical to a manufacturer’s continued success.

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Sustainable Urban Supply Chain Management

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Supply Chain optimization is a topic of increasing interest today, whether the main intention is to maximize the efficiency of one’s global supply chain system or to pro-actively make it greener. There are many changes that can be made to improve the performance of a supply chain, ranging from where materials are purchased, the types of materials purchased, how those materials get to you, how your products are distributed, and many more. An additional question on the mind of some decision makers is. Can I minimize my environmental footprint and improve my profits at the same time?

Supply chains are critical links that connect an organization’s inputs to its outputs. Some challenges in the past included lowering costs, ensuring just-in-time delivery, and shrinking transportation times. However, the increasing environmental costs of these networks and growing consumer pressure for eco-friendly products has led many organizations to look at supply chain sustainability as a new measure of profitable logistics management. For many companies, the largest opportunity for improving sustainability performances such as reducing carbon emissions, water use, and toxic chemicals is in its global supply chain. For example, up to 60% of a manufacturing company’s carbon footprint is in its supply chain, for retailers, that figure is closer to 80%.

Companies must confront the reality that their supply chains can no longer be opaque. Stakeholders demand more accountability. If we add the financial benefits of energy and resource efficiencies to this mix, a sustainable supply chain makes long term business sense and creates a competitive advantage for companies worldwide.

“Going Green” is becoming a higher priority for companies large and small, as regulatory bodies and consumers around the world push for more readily-available information on corporate carbon footprints and companies’ plans to control / reduce their carbon emissions.

Many changes you make to your supply chain could either intentionally or unintentionally make it greener, so effectively reducing the carbon footprint of the product or material at the point that it arrives at your receiving bay. Under the right circumstances, if the reduced carbon footprint results from a conscious decision you make and involves a change from ‘the way things were’, then there might be an opportunity to capture some financial value from that decision in the form of Greenhouse Gas (GHG) emission credits, even when these emission reductions occur at a facility other than yours.

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Lean Government

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As Lean manufacturing and “Lean fill-in-the-blank” take root in mainstream business consciousness I am noticing more mention of “lean government” by politicians as well as press releases. I am afraid; to many people Lean government means something similar to the dreaded “lean and mean” or “lacking resources to pay for basic services”.

So what is a Lean government?

First let’s take an operational excellence approach to this question and outlined what we describe as 8 Workable Strategies for Creating Lean Government.
1. Synchronization to Customer Demands.
2. Understand Variations in Customer Demand.
3. Create Work Cells.
4. Eliminate Batching Work and Multi-Tasking.
5. Enforce First in, First out.
6. Implement Standardized Work and Load Leveling.
7. Do Today’s Work Today.
8. Make the Value Stream Visible.

While the above 8 workable strategies does a great job of explaining Lean transaction, it falls short of defining Lean government. Saying that processing information or serving customers one at a time in a flow synchronized to demand is Lean government would be like saying that having everyone working on an assembly line from call to cash in a manufacturing organization is the definition of a Lean enterprise. There’s simply more to it than that.

Perhaps if you do not have the type of government as we do in the U.S and Europe; with lawmakers who attempt spend tax payer money building bridges to nowhere. If you have a government that is free of these types of boondoggles then focusing on Lean transactions in the various ministries and offices may be a sufficient definition of Lean government.

But I am looking at the question of “What is Lean government?” from the perspective of the staggering basket of boondoggle that is the U.S. and European government. It’s a bigger target, so my definition of Lean government has to work harder. A Lean government is one that will:
1. Solve people’s problems based on facts, by using the scientific method.
2. Provide the highest quality of life to as many people as possible.
3. Do this at the lowest cost.
4. Do this as quickly as possible.
5. Do this in a way that is sustainable beyond your tenure in government.

Lean government is improving quality, cost, and delivery through kaizen.

Kaizen is about getting rid of waste, burden and variability in all of their forms. The U.S and European government are number one source of waste in the world. Why do I say this? The United States and Europe has the largest economy in the world. They have the largest tax base and collects the most taxes. They spends not only these taxes, but also what it can borrow from other governments! Much of the spending is waste. We are the champions of the world when it comes to government waste. It is shameful, but it is also a tremendous opportunity.

Lean government needs to address waste at both a strategic level (which pain should we relieve first?) and at a logistical level (how can we deliver the most relief as quickly and cost effectively as possible?). In our economy there are thousands of trained professionals who go to work every day to solve exactly these types of problems. Unfortunately, we don’t seem to have sufficient numbers of them at the top of government to make a significant difference.

Lean government is not about how civil servants or political leaders come to power. In the United States there is something fairly close to direct elections. In other countries there are monarchies. Neither system is inherently more or less wasteful. Common sense would suggest that a system of direct elections would do a better job of making sure that the customers’ voice (the will of the electorate) was reflected in policy and spending. Yet there have been benevolent dictatorships in history, as well as disastrous examples of popular rule.

Lean government is not about a balanced budget. Businesses also carry debt. Businesses take risks, shoulder debt and strike out in bold new directions from time to time. Governments are not too different in this way. Governments invest in infrastructure (build roads, airports), identify demographic trends (what the population will need in the future) and craft policy based on some combination of facts, faith and will of those being governed. The key is to do this with minimum waste and where there will be maximum effectiveness.

Lean government is not replacing the human capacity for making decisions with one strictly based on numbers. But a Lean government would certainly be more fact based than the faith-based Presidency enjoyed in the United States today. By their own admission facts come in a distant second to faith in today’s administration. I don’t know how to do kaizen without facts. I admire people who do.

In the absence of facts, I go with faith. In the presence of facts that do not agree with faith, I question the facts. But I generally regret it when I ignore the facts. It takes a kind of faith to rely on the facts that are presented to you when making decisions. A Lean government would learn from the factual results of these decisions, good or bad.

Economist Milton Friedman said “the business of business is to do business” or to make money in a sustainable way. The business of government is to redistribute wealth (tax and spend) for the maximum good of the maximum number of people in a sustainable way. A Lean government should do this as effectively as possible. That means doing it rapidly with low transaction costs while strategically avoiding boondoggles, also known fondly in U.S and Europe as pork.

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Lean Tools

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Lean Tools

Lean core idea is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources. “More for less”

Lean has a very extensive collection of tools and concepts. In this book we discussed the importance of these tools and our understanding of what they are and how they can help. This is an excellent way to get you started on your Lean Journey. We dedicated a chapter per tool; with a brief description and short explanation of how each tool can improve your business. If a tool captures your interest or resonates with you in some way; explore it further to decide if it is something to pursue now…or later. Many of these tools can be successfully used in isolation, which makes it much easier to get started. On the other hand, the benefits will compound as more tools are used, as they do support and reinforce each other.

A lean organization understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste. To accomplish this, lean thinking changes the focus of management from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers.

Eliminating waste along entire value streams, instead of at isolated points, creates processes that need less human effort, less space, less capital, and less time to make products and services at far less costs and with much fewer defects, compared with traditional business systems. Companies are able to respond to changing customer desires with high variety, high quality, low cost, and with very fast throughput times. Also, information management becomes much simpler and more accurate. A popular misconception is that lean is suited only for manufacturing. Not true. Lean applies in every business and every process. It is not a tactic or a cost reduction program, but a way of thinking and acting for an entire organization.

“Where do I start?” seems to be one of the most commonly asked, and most intensely discussed and debated, topic on the various discussion forums over the years. Yet a clear consensus hasn’t really emerged.

Normally I don’t wade into those discussions when the question is asked generically. The reason is that without specifics about the situation, it is really hard to answer. There isn’t a clear set of step-by-step directions that say “Start here” followed by (2), (3) and so on.

Here is how I look at it.

The theoretical end-game (which you likely never reach) is perfect one-piece-flow at takt time, with a perfectly safe work environment, producing 100% defect-free product, with no environmental impact, delivering it exactly when the customer needs it, without any wasted motion.

The practical end-game comes when the laws of physics and the limits of known technology become the limiting factors for further progress. (And even in that case, this is a usually a limit of human knowledge, which can be improved.)

The beginning is where ever you are!

There is no first step.
There is only the next step that moves you incrementally and tangibly toward perfection.

That next step is going to depend largely on what you are starting with.

The variation of starting points is what confounds the efforts to set down a formula. Any abstract attempt to answer the “Where do I start?” question must build in assumptions that answer the “Start from where?” question.

Here are a couple of examples.

If there is so much clutter and junk that people have to move things out of the way just to get work done, then absolutely, begin with the classic starting point – 5S. That can take anyone a long way as they learn to question why something is out of place, and come to realize that introducing new things into the workplace can will alter the way work is done. Best to do it on-purpose than randomly.

On the other hand, if the place is fairly neat, and most of the things are where they need to be, or close, and “looking for stuff” is not a huge impediment to the work, then I might be inclined to let workplace organization naturally evolve as part of the effort to establish some degree of stability.

If there is a hugely varying customer demand signal hitting the shop floor every day, calculating takt time is an exercise in frustration. If nobody believes it is possible to stabilize the demand, they aren’t much interested in hearing about takt. So the “first steps” might be to work on a leveling system so people have some solid ground to stand on.

It comes down to what is, right now, disrupting the effort to smooth out the work.

Maybe it’s quality and tons of rework. Then we have got to work on that. Or part shortages. Then at least contain the problem until a long-term solution can be put into place.

Sometimes it is leader’s knowledge. They don’t believe, or don’t understand, how improvement is possible. Countermeasure? Because “knowledge” is the next impediment to improvement, the “first step” becomes some kind of leader education, study mission, or other experience that is going to give them some confidence that they can do better (and it won’t be painful to get there).

If the organization has a lot of functional silos that are disrupting each other, it could be really beneficial to take a cross-functional team through a really deep exercise to understand how their system works and why it performs as it does. (this is a good time to use the current-state value stream map.)

How do you know?

Ah – and that is why people ask the question in the first place.
As much as I hate to say it, I think the answer is “from experience.” This is one place where it might be worth your while to bring in someone who has done this a few times and get an opinion.

But if they tell you where to start without first personally assessing where you are, I did question the quality of the answer. “There is no substitute for direct observation,” or, to use the Japanese jargon, genchi genbutsu. You can’t answer the question without first understanding the specific situation. At least I can’t, which is probably why I stay out of those debates!

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Lean Business

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Lean Business

Lean business principles lead to processes that minimize waste in delivering products or services to end users.

Lean Business Improvement focus on how you use your available resources in the most efficient way, without adding stress. Also providing effective methods and processes resulting in a calmer work pace since everyone knows what, when and how to do their job. To enable this it is important to have a company culture that sees every problem as an opportunity to become even better.

A lean organisation understands customer value and focuses its key processes to continuously increase it. The ultimate goal is to provide perfect value to the customer through a perfect value creation process that has zero waste.

To accomplish this, lean thinking changes the focus of management from optimising separate technologies, assets, and vertical departments to optimising the flow of products and services through entire value streams that flow horizontally across technologies, assets, and departments to customers.

Eliminating waste along the entire value streams, instead of at isolated points, creates processes that need less human effort, less space, less capital, and less time to make products and services at far less costs and with much fewer defects, compared with traditional business systems. Companies are able to respond to changing customer desires with high variety, high quality, low cost, and with very fast throughput times; information management also becomes much simpler and more accurate.

A popular misconception is that lean is suited only for manufacturing. Not true. Lean applies in every business and every process. It is not a tactic or a cost reduction program, but a way of thinking and acting for an entire organisation. Businesses in all industries and services; including healthcare and governments are using lean principles as the way they think and do.

From the standpoint of lean thinking, value begins and ends with the customer. Customers require a particular product or service from your business, and you must provide it in the amount necessary and on the customer’s schedule. Determining the product or service that provides value to the customer stands as the first task for the business.

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Lean Retailing

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Lean Retailing Cover

If time is money, then being lean is both. Thanks to mega retailers worldwide, lean principles have rapidly spread to a variety of different manufacturers, such as consumer foods, apparel and food/beverage.

Over the past few years, these retailers have dramatically changed how they do business in order to stay competitive in the marketplace. How products are ordered, how inventory is moved throughout distribution centers and barcodes vs. RFID technology for inventory management have all been taken into consideration in order to work as swiftly and efficiently as possible.

While lean thinking has been rapidly expanding amongst large manufacturers and retailers, there are still a lot of companies that have hardly implemented any lean concepts.

At the end of the day lean is about adding value for customers; but how can companies do that while also reaping in benefits for themselves?

Lean opportunities for retailers fall into three basic categories:

1. Retail Strategy
For lean concepts to be successfully applied within a retail or wholesale organization, departmental strategies need to be aligned with and support an overall lean company strategy in order to efficiently function as one lean, cohesive machine.

2. Merchandise Management
When it comes down to it, efficiently managing merchandise comes down to having the right product at the right price at the right time. To achieve this developing, securing, pricing support and communicating the retailer’s merchandise offering effectively is of the utmost importance. Failing to manage merchandise using lean principles causes waste, taking away value from both the customer and the enterprise.

3. Store and Distribution Operations
Store and distribution operations tend to be where companies have the biggest amount of waste. Depending on how many stores are involved, it can be one of the hardest areas to manage, making lean principles seem unattainable. But distribution is all about optimizing trade-offs between handling costs and warehousing costs, maximizing the warehouse while maintaining low costs and minimizing time.

It’s All About the Customer

In a retail environment, it’s crucial to consider store operations and process improvements from the customers’ point of view before making lean improvements. Remember, what’s good for the customer is good for your business; it’s just about finding the right solution.

Analyzing in-store logistics can be very beneficial to becoming a lean organization.

In addition to those crucial last customer-facing moments in the retail environment, such as e-commerce, adds an entirely new layer of challenges to becoming a lean organization.

Identifying where customers will see value across all channels and applying lean concepts to these areas is crucial in retail and wholesale environments in order to succeed in today’s competitive market.

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Lean Banking

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The principle of lean banking is all about identifying areas of waste and inefficiency within a banking Organisation, and applying proven methodologies to generate high quality solutions. The aim of this book is to help banks improve their customer experiences, get the most out of their staff and reduce monetary and other forms of waste wherever possible.

In response to the recent economy’s woes, banks have placed a growing premium on reducing costs and improving operational efficiencies and many banks have turned to lean programs as a useful tool. Most of these banks will find themselves disappointed, however, because few lean initiatives, in our experience, deliver the expected results. The near and longer-term impact on costs proves to be far less than expected, and any gains in efficiency prove to be either temporary or too limited in scope to make a real difference. There is no fundamental, lasting change in the way the bank conducts its operations and hence little impact on long-term performance.

The problem is not with lean itself, however. Indeed, we believe that lean has much to offer banks. The problem lies in the approach and implementation. Typically, banks go wrong in one of two ways. One, they apply lean too narrowly and from too limited a perspective. There is no cohesive, end-to-end view of the process itself or the alignment of all of its elements. Alternatively, the effort is driven solely from the top down and fails to engage and involve the key people who actually perform the critical tasks within the process. This leads to a lack of process ownership and accountability. The end result, in either case, is that the lean effort delivers only a fraction of its potential benefits.

In this book, we discuss what we consider to be the optimal means of deploying lean in the banking sector. Specifically, we advocate a holistic lean program that addresses underlying processes and employee behaviours and attitudes. We also recommend an incremental, pilot-based approach to adoption, one that allows banks to generate quick wins and establish a culture of continuous self-improvement. These elements, we believe, can mean the difference between an unsuccessful lean initiative and a truly transformational one.

Finance leaders are facing a hailstorm of accounting, regulatory, and management challenges, creating pressure to improve the efficiency of Finance and information quality. Externally, stakeholders and regulators demand more transparent and reliable information in less time.

Internally, business leaders require fast, accurate, and increasingly transparent information to support smart, informed business decisions. Meanwhile, overlapping and inconsistent data, manual reporting, disparate systems, and aging technology lead to poor information quality.

By reducing costs and releasing capacity, Lean can contribute significantly to the bottom line. Financial institutions leveraging Lean report results of 20-30% cost reduction within 12 to 18 months and maintain cost-efficiency ratios below the industry average. Unlike other process improvement methodologies, Lean does not require significant capital investment. Lean concepts and tools are relatively easy to learn and apply and often boiling down to common sense.

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5S Office Management

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5S Office Management

When was the last time you saw your desktop?

If your answer is, “Hmm…I don’t really remember,” do you realize how much time and energy you are wasting just looking for stuff? I am guessing that you already know you are wasting time. Or maybe you are so embarrassed by your messy office that you don’t even let clients see it. You end up meeting with clients in a conference room. You did like to get your office cleaned up, but you have no idea where to start.

Let me suggest a concept called; 5S. 5S is an organizational tool born out of the Toyota production system called Lean.

The basic idea behind 5S office management is that a messy office is full of waste. Not only the waste you can see, i.e. the mess; but the time wasted in looking for the right file, your phone, eye glasses. You get the idea. (Caveat: Lean tools like 5S are designed to work together to create a synergistic whole. Ideally, they should not be implemented individually, but rather as a part of an entire Lean organization. That being said, 5S is something you can implement today, with the understanding that your goal is to create a more effective and efficient office as a whole.)

One of the first tools everyone seems to jump to is 5S. Lets implement 5S to start our lean office journey, whether that is the right answer for them or not. On the manufacturing floor, 5S is more straight forward. Employees may not like it at first but 5S has an easier time getting accept on the manufacturing floor.

The flip side is in the office. 5S is very applicable in the office but harder to apply appropriately. I can’t count how many times I have heard, “You are not taking my pictures away from me.” or “It is stupid to label my phone and stapler. I know where they are and where they go.” Who am I to argue? I totally agree and would feel the same way.

When I stopped to think about it, people felt this way because of the improper understanding and/or execution of 5S in the office. Most likely someone came in and dictated how they were going to clean up their area and label everything and they would be graded on it.

That is not the intent of 5S. It is to quickly surface problems so they can be recognized and addressed.

So when and how does someone apply 5S to the office appropriately?

The first answer is when it is a shared space. If someone else will have to use the same area or desk to do the same or similar work, then this is a place that 5S can help. Just like the manufacturing floor someone can come in and spend too much time re-arranging the desk area for their work or spend too much time looking for something that is out of place. Unlike your own personal desk that no one else will use. If no one else will use it, then why label, because you know where everything is. Even “messy” people have a system so leave it be.

A company that I visited recently did a great job of applying 5S to the office. The work was processing layouts through a computer system. People had their own desk, but could have to share it with others. So if Mike left on vacation, Maureen would come to his desk to do that work, because no matter what the layouts had to be processed that day. So they standardized the colour of the folders for “To Be Done”, “In Process”, and “Completed”. They standardized what drawer the folder went into when completed and how the work area was laid out for the work. The work area was the computer and the things directly around it to get the job done. They also standardized where their visual signal for needing the next job was on the desk so no one had to search for it. The rest of the area was for Mike to personalize with his pictures, calendars, and what not. It did not interfere with the work that was needed to be done.

The group became more efficient and standardized without losing any personalization because of this, for 2 years this worked very well and there was ownership. The only reason it isn’t around now is because of new technology that eliminated that work. The challenge is to know when and how to use 5S, especially in the office.

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Reshoring is essentially the opposite of offshoring, it is a term used to describe the act of bringing back offshored manufacturing to a country.

A number of American and UK companies moved their manufacturing facilities to Asia in search of lower costs; Recent survey found that a little over a third (37%) of those with annual sales above $1 billion said they were planning or are seriously considering moving their production facilities away from China and back to America or UK.

When asked why they would be bringing manufacturing to the U.S. or UK, most companies said it was because of the increasing labour costs in China.

The International Labour Organisation revealed that real wages in Asia rose by 7.1-7.8% a year between 2000 and 2008.

In the beginning of 2011, for the most part, most people thought that this was just impossible, that there would be no reshoring to the U.S. or UK, that everything was going to China, manufacturing was leaving the country and will never come back and I think the striking thing is how much that’s changed in the last three years.

You went to China because it was just so cheap you couldn’t help it, But if you’ve got the engineers and people in the U.S. or UK, and the customer base in the U.S. or UK, you’d like to be close to the customer. It gives you a shorter supply chain.

Below are number of reasons why companies are reshoring, such as:
1. Improving the quality and consistency of inputs.
2. Enhancing the ability to respond to customer demands.
3. Reducing the Total Cost of Ownership.

There are reasons why a government would want to encourage reshoring, such as; bringing jobs back home, balancing budgets, helping recruits enter the workforce, and improving the country’s defence industrial base.

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Corporate Storytelling

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Cover Corporate Storytelling

Corporate storytelling
is how the most successful companies use marketing and communications to move their businesses ahead.

Corporate storytelling is about winning…

It’s about getting to the core of an organization’s value proposition, and developing narratives that simply and compellingly relate “the story” to customers, prospects, investors, media, employees and others in a way that motivates them to think or act favourably and it’s about developing focused, cost-effective programs that enable companies to reinforce the story (and differentiate themselves) through every communication they produce and action they take.

Corporate storytelling relies on facts, never fiction, and is grounded in meticulous competitive and market research.

If you are in the retail trade, this story is legendary.

About a dozen years ago, a guy walked into an Alaskan Nordstrom store and wanted to return two faulty tires. Although Nordstrom does not sell tires, the previous property owner did. Nevertheless, Nordstom provided a refund without question.

The Nordstrom story has been cited in hundreds of articles and told millions of times, helping build the store’s reputation for outstanding service to mythical proportions. Who cares what Nordstrom actually sells; you just want to go there and experience this level of service first-hand! This and other Nordstom service stories, spread by word of mouth, are examples of how a company can build its reputation through the telling of stories that exemplify its vision and core values.

As a public relations practitioner, there is no doubt in my mind that the most powerful tool a business has to sustain its success is creating an enduring and authentic reputation. This means a reputation for doing an outstanding job, for caring for people and the community, and for running a good business. While advertising can tell the marketplace about what your company does, your commitment to great service, your outstanding workplace environment, and how you give back to the community, building a reputation is truly where your actions speak louder than words; however, companies struggle with talking about their “good works” and successes because they don’t want to seem boastful.

So the question becomes how do you profile your company’s mission, vision, and core values in a way that is compelling and enduring? Perhaps more importantly, how do you get others to tell your story?

You start by capturing your company stories; from your employees, your customers, and even your suppliers and making them part of your regular communications. These are “legends” that exemplify your company’s core values, your organization’s essential and enduring guiding principles.

A company needs to reinforce its core values regularly and encourage employees to tell stories of how they have recently lived up to the company’s guiding principles through an internal interaction or working with a client or supplier. These stories can be retold again and again as examples of how your employees are actively living your company’s core values and they are even more powerful when your clients tell them.
What is the biggest stumbling block for businesses in creating their own stories?

Many companies struggle to describe what it is they do in simple language and few words, and core value statements are rarely written down. Remember the years of the elevator pitch? Being able to describe what you do in two or three simple sentences is critical to building your story. People, including your employees, clients, and suppliers, have to understand clearly what you do before they can provide you with “stories” of how you have done it well.

Spend some time with your team to discover how each of you describes your company and exactly what it does. Are your messages similar and consistent? Do they encapsulate exactly what you do? When you think you have come up with your core value statements about your company, “for instance” add a corporate story.

Your “for instance” stories are also invaluable when working with media, who need validation when profiling your business.

Here is another example. Go to Monk Office Supply’s website and you will see the simple tag line “The Helpful Office People.” Are they? Well, here’s my story. We recently leased more space so we could have a boardroom. A key customer was coming into town for a meeting and we needed a table right away. We knew we didn’t have time to shop around for a deal, and we ordered through Monk hoping it would come in time. A Monk salesperson called us back upon seeing the order and said she had a table in stock that was less expensive and the same size and quality, which she could get to us right away. I did say that was helpful and that story has been told to everyone who comes into our new boardroom and admires our new table.

Which brings me to another point. Your stories have to reflect the reality of how you and your employees conduct your business. They have to be authentic. While some question whether the Nordstrom tire story actually happened, no one questions Nordstrom’s legendary service ethic and, along with the tire story, there are hundreds of other Nordstorm outstanding service stories.

Granted, some are not as compelling as taking back merchandise you don’t even sell; however, they speak to how a customer is made to feel when shopping at Nordstroms, from receiving personal thank you cards, to hand-delivered items and phone calls when there is a sale on favourite items. These stories are believable and enduring because the commitment to service actually exists and they make this commitment come to life.

Can you create a positive story from a bad service experience?

Yes, because it is how you respond to client or employee concerns that builds the legend. One client of ours responded to a letter written by an upset guest by driving to the guest’s house, introducing himself as the owner, and asking how he could make it up to the disgruntled guest, including offering a complimentary stay. That story is now known within the organization and highlights to employees just how important responding to guest feedback is to the business. You can also bet the guest has told the story to his friends.

Ask your clients and suppliers for their stories on how you conduct business with them. If you get negative feedback, then your story will be how you helped to turn that relationship around. If you get positive stories, you can use them as endorsements for building your business and by asking them to put into words how you have demonstrated your core values to them, you will have helped clients to create their own stories about your company, which they most likely will tell to others and the building of your corporate legend will have begun.

So you don’t think I am naïve or overzealous about the topic, I am not suggesting storytelling should be used in every situation. For example, if you are trying to decide what your five-year strategy should be, what you need is a good strategist. Or if you are trying to decide how much money to pay to acquire your biggest competitor, what you need is a good financial advisor.

Once you have decided what your five-year strategy is going to be, and you need the 15,000 people that work at your company to line up behind it and deliver it, now you need a good story. Or once you have acquired your biggest competitor, and you need the 5,000 people that work there to stay, and not quit, now you need a good story. In short, storytelling isn’t always the right tool to help you manage things; but it’s exceptional at helping you lead people.

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TPM Simplified

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TPM Simplified

It’s time once again to make much of a simple concept; that two groups with different names, languages and cultures might put aside their old habits, pettiness and grudges, recognize the overwhelming alignment of their most critical self-interests, and join their complementary strengths to achieve unprecedented peace, harmony and productivity.

That’s the concept behind total productive maintenance (TPM), where maintenance and production personnel cooperate to define, standardize, allocate and perform the tasks needed to maximize overall equipment effectiveness (OEE), which keeps equipment producing quality product at maximum efficiency and minimum lifecycle cost.

TPM is simple, but not easy, at least, not in a traditional manufacturing environment. But the experts and plant professionals we spoke with made it clear that the results are worth the effort. TPM not only supports OEE, it also improves job satisfaction and in today’s competitive environment, it might make the difference between your facility’s death and life.

TPM requires a change in work habits, so like any culture change, it’s doomed and the alternative is even more disturbing. It is; Facilities that engage production and maintenance increase OEE by as much as 40%, but it takes about two years. At that point, plants without effective TPM are at a distinct competitive disadvantage with no quick means of correction.

TPM is simple, but not easy, at least, not in a traditional manufacturing environment.

Maximizing OEE means balancing productivity and reliability, getting the most from the machine with the least time lost for maintenance or breakdowns. Production operators and maintenance technicians must work in concert, not conflict; but in many facilities, there’s a long tradition of separation that works against cooperation. Experts say the hardest part of TPM is overcoming that tradition.

Do it by showing workers how TPM will relieve their anxieties and frustrations. On the floor, it’s about work environment, job security and their role in the organization. They want to make sure they have a job, and their kids have a job.

TPM is not operators doing maintenance.

Three years ago, I was sitting with a leadership team including the CFO, executive VPs, and production management. We talked about the need for transformation, and I told them they would rely on operators and maintainers to tell them how to operate the plant and determine their future. You should have seen their faces. Everybody forgets that you can’t change the culture just by saying you will put in autonomous maintenance; you actually have to put operators and maintenance in charge.

TPM is founded on total employee involvement, leveraging natural work teams of operators and maintenance. Management provides resources and a structure to encourage progress. Some people think executives will make the decision and the floor will do it. That doesn’t work. “For example, management says, ‘Tell the operator to clean the machine.’ Hey, it’s been in the job description for 50 years, but we have never enforced it. The operator says, ‘Hell no.’”

TPM key Objectives includes; achievement of zero defects, zero breakdown, zero accidents in all functional areas of the organization and the involvement of people from all levels of the organization; from different teams to reduce defects and self maintenance.

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Lean In Construction

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Lean In Construction

Lean Construction is a way to do more and more with less and less; less effort, less equipment, less time and less space whilst providing customers with exactly what they want.

A Lean system, process, and organisation is one that is waste free. Lean is not about size or number of people employed. A reduction in employees may cut costs, and eliminate the waste of those employees, but does not decrease the proportion of waste to value adding within the organisation or process. Most waste is through products waiting to be worked on by succeeding activities.

Construction is possibly the last frontier for lean. Although manufacturing’s productivity has improved during the last 40 years, the construction industry has experienced a slight decline. Even though the construction world has embraced high-tech tools, we still manage projects the same way we always have, and we are still getting the same poor results. Less than 30 percent of projects come in on time, on budget, and within specification. The answers to improving construction productivity are not in more software or technology.

Waste in construction

Defects: Everyone in construction understands this type of waste. It includes doing the wrong installation, defects in fabrication, and errors in punch lists. Not meeting the required code is waste. Rework in construction is rarely measured.

Overproduction of goods: This happens when we fabricate material too early or stockpile material in the warehouse or at the job site. Estimating and bidding jobs that are not won is a form of this waste. Printing more blueprints or making more copies of a report than needed is overproduction.

Transportation: This waste occurs when we move material around the shop, when we load it on the truck or trailer, when we haul it to the job site, when we unload it, and when we move the material from the lay-down or staging area to the installation point.

Waiting: Construction is full of this waste, including when a crew waits for instructions or materials at the job site, when a fabrication machine waits for material to be loaded, and even when payroll waits for the always-late timesheets.

Overprocessing: This waste includes over-engineering, requiring additional signatures on a requisition, multiple handling of timesheets, duplicate entries on forms, and getting double and triple estimates from suppliers.

Motion: This “treasure hunts” happen when material is stored away from the job or when workers look for tools, material, or information. This waste also occurs in the office or job site trailer, when looking for files, reports, reference books, drawings, contracts, or vendor catalogues.

Inventory: This includes uncut materials, work in process, and finished fabrications. Some contractors claim that they have no inventory because they job-cost all material. While this may work for accounting, if the material is not yet installed and isn’t being used by the customer, it’s waste. This waste includes spare parts, unused tools, consumables, forms and copies, employee stashes, and personal stockpiles. One could argue that the unfinished facility is inventory and is waste until operational.

Waste is everywhere in construction and has been for hundreds of years. This is not a statement of blame, just fact. It is so much a way of life that most construction managers don’t even see it. They accept waste as inevitable and unpreventable and add it into the cost of the job. Thus, the customer pays for it; However, some construction companies don’t accept waste as a necessary part of doing business. They attack it through the application of lean.
Lean has been used in many industries for years and is just beginning to show success in construction. Because almost everyone and everything is affected by the cost of construction projects, becoming lean should be of great benefit to the construction industry and its customers.

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Six Sigma Service

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Lulu Cover Six Sigma Service

Six Sigma is all about quality improvement; however, there are still many non-manufacturing companies that have come to the conclusion that Six Sigma will not work for them. This is because Six Sigma was originally developed for helping the manufacturing industry. Organizations such as health care systems, financial service providers and educational systems all doubt the usefulness of Six Sigma.

The most obvious reason why service companies keep away from Six Sigma is because they perceive it as a manufacturing tool. Service organizations feel that because their companies have a large amount of human work force, there are no measurable defects to be corrected; however, experts say this is not true. A recent survey has shown that service companies that have invested in Six Sigma are all saving millions of dollars for every project. Human resources makes up a large part of all service organizations. To conquer this problem, leaders of the industry can be trained in Six Sigma to balance their employment expertise with statistics-based analytical tools.

The fear of metrics is another obstacle that stands in the way of the service sector and Six Sigma. Most people feel that Six Sigma sounds too technical. The importance of metrics is to give an insight into the business working processes. Service based companies need to focus all their attention on developing Six Sigma projects that specialize in their business needs like customer and cash generation. Convincing the service sector about the merits of taking up Six Sigma has proven to be a big challenge. Most service companies still believe that Six Sigma can only benefit the manufacturing industry.

Six Sigma goes in to the details of improving customer service, generating business expansion and gaining knowledge about the service sectors business processes. Most service industries revolve around areas of finance, human resources and sales and marketing. Hence, Six Sigma delves deeply into the subject of soft skills.

Six Sigma can be applied to a company that provides housekeeping services. Firstly, the companies working processes would need to be understood. Using the DMIAC method or the define-measure-improve-analyze-control method, Six Sigma can definitely implement quality in any industry.

As the main aim of this methodology is to reduce defects, the first step would be detecting the particular defect. Secondly, data will be collected to observe how, why and how often these defects occur. Next, the Six Sigma team implements an outstanding employees method of working as the normal method for all employees. Finally, new employees are taught the correct techniques.

Six Sigma is useful in the field of sales and marketing as well. According to Six Sigma data, during sales, too much face time with a customer can prove to be counter-productive. Changing this process can result in an increase in the percentage of sales per product. Other industries that Six Sigma has assisted in the past are the financial service sector, insurance companies, management companies, educational institutions, high-tech companies, state agencies and many more.

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