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There is a reason why Heijunka is a block in the foundation of the Toyota House, or the Lean House as some call it. The short answer is stability in an operation. The rest of this article will explain Heijunka, then discuss what can go wrong without it. I’ll also share 4 Videos that further explain how to apply Heijunka and share several Heijunka Boards as example.

What is Heijunka?

The Toyota House, or the TPS House, is a great metaphor for the Toyota Production System. The TPS House is based on the idea that “A House Divided Cannot Stand”, Citing the great Abraham Lincoln, who is quoting from the Bible. This means that every part of the house has a role and has a specific purpose.

The foundation of the house is critical. A block in that foundation is Heijunka.

Heijunka is a Japanese term to describe “production leveling”. The distinction between “leveling demand” and “production leveling” is important because we cannot control demand. What we can control is the rate of workload – information, material, raw good, finished goods in fulfillment, or actual production – enters the operation.

Here’s an example:

Not Heijunka

Suppose you run an operation where you make small widgets (11 A), medium widgets (9 B), and large widgets (7 C). You follow a production schedule that looks like this:

Notice that the forecast requirements are met with 11 A widgets, 9 B Widgets, and 7 C widgets.

This is classic batch production. In this example, the company forecasts that their orders will mostly be A, then B, and then C will probably have the least number of orders, which is why there are much fewer C production hours.

The problem with this approach is the following:

• Suppose there’s a big spike in C widgets on Tuesday. This means the customer has to wait until Friday for the order to be fulfilled.
• Suppose the firm decides that the customer shouldn’t have to wait, then the production schedule is changed and an expedited order is created. This creates an overburden on the employee, overtime pay, and instability in the system.
• Suppose the expected demand for C falls, then we end up with more C widgets than the customer needed – overproduction.
• Suppose we find a defect in production for A widgets on hour 5. This means we’ve produced 4 hours of defective products.

Yes, Heijunka

In this example, the forecast requirements are again satisfied.

Notice how the production schedule of A, B, C is dispersed throughout the week. This approach creates a stable and predictable production schedule, less burden on the employee, fewer instances of overproduction, and the ability to fulfill demand during times of uncertain customer demand.

Why Heijunka is a Foundational Block in Lean

We’ve seen from the non-heijunka example above that there are several wastes that come from a non-level production environment. If what I say is true, then much of continuous improvement will be limited if there is no level production. In fact, in that environment most of the mental and physical energy is trying to figure out what is going on. Heijunka is a critical foundation of any application of Lean.

The Challenge of Heijunka

One challenge of Heijunka is in its application. Depending on the industry and business you are in, the application will generally need to adjust. But the principle remains the same – to level production, create stability and predictability.

But to implement Heijunka, we need to first learn a little bit about the Pacemaker Process.

Why Heijunka is a Block in the Foundation of the Toyota House is a post from: Lean Six Sigma Consulting

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When organizations first begin their Lean Journey, it’s often done through “events” either as small point Kaizen events or Kaizen events spanning several days. I’m a believer that Lean can begin from many different places, but this approach fundamentally doesn’t lead to the daily cultural changes we wish to see in organizations  in which we work.

Let me illustrate.

Suppose a department sets a goal to have 1 Kaizen event per month. That goal is honorable and is a good start. In actual practice and in all reality, what does that look like though?

What we end up with is a culture that relies on “events”, but following the event, it goes back to business as usual until the next event.

What Are We Really Teaching?

In this “event-driven” lean deployment approach, what we are really teaching is actually Business As Usual. Why? Because most days of the month are actually spent in Business as Usual than in the actual practice of lean.

This might be a fine place to start, but is not ultimately what will sustain long-term lean and respect for people behaviors.

So, what’s the countermeasure?

Well, there are three options:

1. Have more events throughout the month.
2. Same number of events, but do a better job in sustaining the behavioral changes post-event.
3. Or, get away from the notion of “event” and instead focus on daily practice of PDCA – which can even be described as many, many daily micro-events.

For the long-term success of lean at any organization, option 3 is the target place to be. The diagram above is a good way to judge how you’re organization is doing in its lean journey.

Manage For Daily Improvement

Option 3 above can be done in several ways. One way that I’ve applied it in supply chain, fulfillment, healthcare, software, and call centers is to have a daily practice that applies the concepts of Visual Management, managing to metrics, and applies PDCA in its daily work.

Lean Manager Series: Business as Usual is a post from: Lean Six Sigma Consulting

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Leave it to the Harvard Business Review ¹ to regurgitate an old debate on the relationship between continuous improvement and innovation. Here’s a great recipe for effective regurgitation that gets the media’s trousers all up in a wad:

1. Have a reasonable title that draws in the reader.
2. Then, zap them with a first paragraph oozing with a doomsday tone to get them scared, angry, or outright interested to read the rest of the article.
3. Go down the march of history and explain the debate, various points of views, but don’t dare be conclusive. Keep it open ended.
4. Then, close the article with questions, keeping the reader interested enough to comment on the article, write an article as a response, tweet the article to their followers, or just give the reader something to think about – as if the reader has nothing else better to occupy their minds and thoughts with.

Using this approach, Ron Ashkenas does a heck of a job. Except for one thing:

He’s Wrong.

What Tangled Webs We Weave

When one brings up an old debate, rehashes old stories of companies that failed, fell, or are otherwise now forgotten because they implemented some form of misguided Lean, Six Sigma, or, in general, Continuous Improvement, be sure to also highlight how those companies implemented continuous improvement.

The HOW matters.

For example, if a very dogmatic approach and a broadstroke was made to implement a very rigid version of Lean and to do it everywhere – then the fruits of such approach clearly will lead to a bad end.

But that’s not the fault of Lean of Continuous Improvement.

Lean Doesn’t Kill Innovation, People Kill Innovation

Using an old Gun Rights mantra of “guns don’t kill people; people kill people”, we can apply the same logic to the debate:

Lean doesn’t kill innovation – people kill innovation.

What do I mean?

Lean, as properly understood and applied with wisdom, is actually very flexible and very practical. There’s actually little or no dogma at all. Indeed, it’s all about “practice over theory”. But, when dogma enters the scene, that’s when bad things happen to good companies.

So, how can one wisely implement Lean Thinking, meet the goals of Lean, and yet support Innovation?

Be Wise.

Yes.

I even described this dogmatic approach in the continuous improvement world as Sith-like.

Okay, it’s not that easy, but seriously, be wise; focus on practical aspects, be pragmatic, and use your common sense.

Here’s a few examples of where this has been done to support innovation and to also do so in the spirit of Lean Thinking:

1. Ideo: Yup, Ideo is the Innovation 300 Pound Gorilla. And, when you look at their Innovation Process – it uses many, many tools and approaches straight from Toyota.
2. Clayton Christensen: Yes, the Innovation Guru and Juggernaut and pre-eminent author on Innovation. He quotes me in his new book “The Innovator’s DNA”, wherein he describes the 5-whys approach as central to innovation.

So, let’s put an end to this debate. Instead, let’s shine a light on all the Lean and Six Sigma dogmatist and their unwise approaches. Anything done to the extreme is really contrary to the spirit of lean. That’s what we need to address.

Lean and Innovation: Regurgitated Variations of an Old Debate is a post from: Lean Six Sigma Consulting

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Here’s an interesting video that shows Lego characters – lego minifigures explaining several principles in Lean Manufacturing. It’s amusing, but it might be also be instructive. It’s certainly innovative and novel.

The video explains the following lean principles:

1. Total Productivity Maintenance
2. 7 Wastes
3. 5S
4. Just in Time

And explains Quality, Productivity, and Visual Management.

It’s amusing to be sure. I’m not sure if it’s instructive, but give it a chance I suppose.

Oh, and if you are a Lego enthusiast, check out this Lego Factory Tour.

Lean Principles Explained By Lego Movie is a post from: Lean Six Sigma Consulting

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One uncommon approach in Lean is the framework of ECRS – Eliminate, Combine, Rearrange, and Simplify. This article explains how to apply the framework followed by a downloadable Work Analysis Template.

Fundamental to understanding any process and eventually generating practical ideas for improvement is to ask the 5W’s and 1H. So, here’s the definition of the 5W and 1H.

What are the 5W?

Put simply, the 5W’s are:

• Why?
• What?
• Where?
• When?
• Who?

For example:

• Who is responsible for this process?
• What is the purpose of this process?
• Why do you do that?
• When does x happen?

What is the 1H?

Of course, it is:

• How?

Such as “How is that done?”

These questions, while seemingly simple, are critical to better understanding the process and also the potential opportunities for improvement.

What is ECRS?

In generating practical ideas for improvement, a common and practical framework I’ve used in the past is called ECRS, which stands for the following:

• Eliminate
• Combine
• Rearrange
• Simplify

Eliminate

In this step, it’s important to identify the steps that can be quickly eliminated. Where possible, eliminate the details of work.

Combine

When work cannot be eliminated, then seek to combine them. In this step, the Combine phase addresses the Who, Where, and When.

Rearrange

Work can also be rearranged.

Simplify

And, a good rule of thumb regardless of the situation is to simplify anyway. Of course, we want to Eliminate first but, if not, then Combine, Rearrange, and Simplify will be helpful.

The template below shows the following:

1. Work Element
2. Safety, Distance, Dimension, Quality, Ease
3. Why, What, Where, When, Who, How
4. Improvement Ideas
5. Eliminate, Combine, Rearrange, and Simplify

Eliminate, Combine, Rearrange, Simplify: Work Analysis Sheet Template Download is a post from: Lean Six Sigma Consulting

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Most Lean Leaders manage through influence and not authority. This is especially true when just starting out. This can be challenging and learning how to effectively and sincerely influence an organization to learn to adopt the Lean worldview and also its practices requires that we demonstrate empathy in a genuine and sincere way.

In a recent article on FastCompany, empathy is described as “the most powerful leadership tool” ¹. I’d have to completely agree.

The article describes what each lean practitioner knows all too well:

• People don’t have to follow us.
• People don’t have to listen to us.
• People don’t have to believe in our ideas.

This is true because most Lean practitioners often start out with no authority, but only through influence. This means that literally nothing can be exerted onto people. But this also means that we have to exercise true leadership by bringing people together, to believe in a vision, to march toward the same direction – that is the essence of leadership.

And, empathy is a key ingredient in the process of influence.

Become The Other

To increase our influence, the author of The Zen Leader suggest that we need to “become the other.” What the author means is this:

To become the other person is to listen so deeply that our own mind chatter stops; to listen with every pore on our body until we can sense how the other’s mind works. To become the other person is to feel into her emotional state, see through her eyes, think like she thinks, and see how she views us, our proposition, and the situation at hand.

This is also a practical approach because once we understand the other person’s perspective,

influence becomes a matter of showing how our idea connects with those interests.

And the upshot of this approach can be incredibly powerful:

Extending this empathetic approach, person by person, group by group, through your world, you can see where your actions start to be informed by an ever larger context. Consequently, your ideas, actions, and direction will start to resonate within that larger context. You can start making big things happen, not by controlling, but by connecting; not by making war on them, but by becoming the people whose interests are served by those big things.

For Lean leaders, Genchi Genbutsu is an application of demonstrating empathy.

Practical Advice

As practical steps to take to become a more empathetic leader, the author suggest taking the following steps:

1. Deeply understand your own needs and interests: Go beneath the surface to unearth what you really want and why.
2. Become the other. See through their eyes, think with their mind; sense its patterns. Consider what is truly in their interests.
3. Go from there. Show how your idea is in their interests, either directly or through an exchange you offer.

Not only is this advice good for leaders in general, but it’s especially important for lean leadership and lean managers.

Below is a framework ² for empathy and how empathy can support Respect for People as well as be very strategic in your lean journey.

Lean Manager Series: Demonstrate Empathy is a post from: Lean Six Sigma Consulting

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Pete’s Note: We’re pleased to have Gary Netherton provide a guest post for us today. In this post, he shares a dialogue between operators around how to balance a line, which inevitably leads to an educational lesson on the Theory of Constraints, and methods for line balancing such as reducing cycle time, doubling, and moving work elements.

Enjoy his post and learn more about Gary after the article.

Ever have processes that need fixed but the team seems to have their own ideas about which processes need fixed first?  As a result, you end up “fixing” problems that seem to create problems elsewhere.  It seems that you end up right where you started.

“How did you manage to do that?”

It is actually pretty simple.  You don’t choose your best target for improvement.  Or, as Eliyahu Goldratt would say, you don’t identify and attack your constraint.

“How do you do that?”

Well, that is actually pretty simple, too . . .  if you take the time to do it correctly.  This often means more than walking the floor and looking for a buildup of inventory between operations (though that is a very good start).  One of the best ways to start is by mapping the process.  Some might suggest a value stream map while others may say a process flow diagram will suffice.  Either is a good option, but I recommend choosing the one that works for you.

After you have a picture of what your process looks like, pull out the old stopwatch.  Take about 10 cycle time measurements for each operation that you’ve identified on your flow diagram.  When you are done, average them out and create a Pareto diagram of the operations.

The first, tallest bar on your diagram is your constraint.

Complete a detailed review of that operation.  Look for opportunities to speed it up or pass off some of its activities to another operation (that’s called “line balancing” . . . an important part of eliminating constraints).  The idea is to either speed up that operation (if possible) or to “share” part of that operations activities with other operations.  In the end, the goal is for all of the operations to take about the same amount of time (except the last one . . . it should be your fastest).

But what if I can’t speed it up OR share with other operations?

Well, there is one more option, but this is a last resort.  In the event that an all-encompassing operation cannot be split up or sped up – like, for example, some kind of functional test – you might need to consider doubling that operation.

Doubling?

Yes, doubling the operation is the equivalent of putting a fork in the river.  Operation “C” can either feed station “D-1” or “D-2”, whichever is free.  By having two “D” stations, you essentially reduce the overall cycle time of that operation.  Then either of the “D” stations can feed the next operation.  Granted, this operation may be a bit capital-intensive, but it can pay for itself in increased productivity if done correctly.

Using the Theory of Constraints – the equivalent of a chain is as strong as its weakest link – the team can attack items in a sensible order.  And once that is complete, the cycle can start all over again (like PDCA).  Restudy, re-graph, and research the weakest link (slowest operation).  Attack that constraint and watch as the team starts to see improvements.

Gary Netherton is a multi-certified quality professional with project management experience in leading quality and manufacturing efforts from product and product launch to problem-solving using Six Sigma, PDCA, and other quality tools. His expertise is advanced product quality planning as well as data collection and analysis. He currently reside and work near the Seattle area of Washington.

The Weakest Link is a post from: Lean Six Sigma Consulting

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Continuing our series on Lean Management, another aspect that goes along with the skill of Lean Manager’s Ask Effective Questions during a Gemba Walk is that effective Lean Managers listen to words, but they also listen to feelings.

This post is not meant to be “touchy feely” – there’s a very pragmatic and practical reason why we should listen to feelings: Words and Body language and Feelings gives us greater insight into the operation and the opportunities for Kaizen in that operation. And, this goes to the fact that a lot of process problems almost always have to do with leadership and people problems. And, thankfully, Lean as a strategic approach to operations is a very good approach to solving those types of problems.

So, as you talk with the associates and operators in your daily Gemba Walk, take notes in what they have to say, but also watch and be perceptive of how they feel. Then, validate them, sympathize with them, then help them and their leadership engage in Kaizen to help them improve their operation.

Below are a list of feeling ¹ words to watch out for.

Lean Manager Series: Listen to Feelings is a post from: Lean Six Sigma Consulting

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Here to slap down more knowledge, making sure we pick up what puts down, The Most Interesting Lean Guy in the World has graced us with his presence.

He is interesting because, through many years of study and experience, he has amassed a treasure-trove of knowledge on Lean Manufacturing. And, because he is the most interesting Lean Guy, he is ready to impart that knowledge weekly here on Shmula.

After having shared his thoughts on One Piece Flow, he decided that there’s more to teach us.

Today’s version is the Value Stream Map Edition.

Most Interesting Lean Guy in The World: Value Stream Edition is a post from: Lean Six Sigma Consulting

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Creating a culture of excellence requires systems that are inclusive of all employees. Indeed, Respect for People must make its way into formal and informal systems within an organization. One formal way demonstrate the Respect for People principle is to have a formal and effective Employee Suggestion Program.

One critical item in that suggestion program is the actual creation of the suggestion form – the venue by which the employee will submit her idea for continuous improvement. And, you can also download a FREE Suggestion Program Template here.

Creating a channel by which employees can submit their ideas for improvement is a cultural enabler of continuous improvement. Put plainly, it’s a formal system that the organization can use to solicit ideas and listen to the thoughts and concerns of employees.

Making this form is both a science and art form. We must design the form to accomplish the following:

1. The format of the submission card must encourage critical thinking and reflection – not just a complaint.
2. The format of the submission card must be self-selective; that is, the submitter must put in some work, resulting in fewer submissions, but the submissions will likely be of higher quality.
3. The format must be easy to understand and quick to complete.

Here’s one example of an Employee Suggestion Program Card:

This 3×5 Index Card has the following sections:

1. Name
2. Submission Date
3. Safety, Quality, Productivity, and Costs (SQDC)
4. Describe the Problem
5. 5 Whys and Root Cause Analysis
6. Countermeasure (your idea for a solution here)

Notice that all of this is on a 3×5 card – and, yes, it is effectively a Mini A3 Problem Solving Form.

Also notice how much work the submitter has to go through to be able to place a card in the box? The thinking involved in completing a card is the manifestation of Respect for People. Why? – now we are moving from a complaint box to a Employee Thinking System. Encouraging employees to think in this simple but systematic way drives involvement and excellence.

How to Create an Employee Suggestion Card

Here are the steps:

1. Buy Avery 3×5 Blank Index Cards
2. Download the Microsoft Word Employee Suggestion Program Index Card Template

And that’s it.

Next in this Employee Suggestion Program series, we’ll look at the metrics necessary to measure and hold accountable the program.

Employee Suggestion Program: How to Create the Idea Submission Form is a post from: Lean Six Sigma Consulting

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As we move from isolated Lean “events” to Lean Management, producing Lean Managers becomes more and more critical. Part of managing a lean organization, however, requires that our lean managers know how to manage, coach, and teach. A critical part of teaching is knowing how to ask the effective questions.

Asking questions is a skill and, when done well, leads to effective leadership and good management of a business and people. But, the opposite is also true: when wrong questions are asked, then that leads to poor management and bad leadership.

Before going into examples of effective questions, below are ineffective ways to ask questions:

1. Positioning: “I know I’ve been working here for 2 months, but . . .”
2. Avoidance: Ignoring the obvious elephant in the room.
3. Posturing: “The VP listens to whatever I say. So, why . . .” – in other words, projecting an “I’m in charge” or “I’m better” image prior to asking the question.
4. Speaking in Jargon: In general, use clear and plain language. One litmus test I use is whether my Filipino Immigrant mother will understand what you are saying. If the answer is “No”, then let’s try to explain more clearly.
5. “No Question” Question: This is confusing. Making a statement, but using an intonation that makes it sound like a question. It’s another way of making a statement, but pretending it’s a question. For example, “When I managed this department, we always met our monthly metrics. It wasn’t even hard, right?”. If you notice, this is really a statement about how good this person managed the department, but it’s couched as a question.
6. Casual Question: All questions have context. So, there’s really no casual questions.

The above are common errors we fall into in asking questions. Knowing the above is good so that we are careful in how not to frame our questions.

So, how do we frame our questions? That’s a topic for our next article. Stay tuned.

Lean Manager Series: Asking the Wrong Questions Leads to Poor Management is a post from: Lean Six Sigma Consulting

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Few of us think of eating as a process, but it is. And, just like any process, there are wastes that can be categorized into the 7 Wastes.  For example, one could even commit Overproduction – in other words, eat more than is needed. The customer in this case is your stomach. Religious folks call this Gluttony. But, we’ll steer away from anything religious.

The point is this: if you’re eating more than your body needs, you’re overproducing and getting more calories than you need. The result? You’ll probably gain weight. Interestingly, Facebook knows all about this and has come up with an interesting way to mistake-proof the eating process ¹.

Facebook is growing and is in need of expanding their Headquarters. And, they’ve needed to look at their approach for providing free food to their employees, a perk that Facebook employees really love. But, how do they avoid the behavior that almost always comes with anything “free” attached to it, especially “free food”?

What do you see in the picture below? Or, more accurate, what don’t you see? Notice there is no tray — Facebook thinks you’ll eat too much unless you only carry a plate. In other words, this is a way to Poka-Yoke the waste of overeating.

What do you think? Do you think something as simple as not providing a tray will prevent the behavior of getting more food than you need?

Poka-Yoke for Overeating is a post from: Lean Six Sigma Consulting

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When you have 9 children with an age range of 14 years for the oldest and 2 as the youngest, the more they can do things on their own (self-sufficient) the better it is for mom and dad and, ultimately, for them. One goal we have as parents is for our kids to learn to stand strong on their own, which means we need to teach them life-skills now, not later.

One of those life-skills is learning how to brush their own teeth.

But, it’s actually not that easy. Learning to brush teeth is easy on its own, but when toothbrushes look the same, another unintended problem we have is this:

Whose toothbrush is it?

So, to solve this seemingly simple problem, I came up with a solution that my wife approves and the kids seem to appreciate.

See below. What do you think? Is it an effective use of Visual Management? How would you improve it?

Bathroom Visual Management: Whose Toothbrush is it? is a post from: Lean Six Sigma Consulting

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A CDC report released on last week reveals that the rate of Autism has increased 23% from 2006-2009, or 1 in 88 children has a diagnosis within the spectrum of Autism. Most are quick to point out that the increase could be due to an increased screening, not necessarily an increase in prevalence of Autism or related disorders. But, at closer inspection, there might be more to the story.

The chart below shows the rate of increase over the last several years ¹:

By most accounts, the rate of increase is staggering, which has led many to question what is truly going on? Is Autism really on the rise? Or, is there something else happening?

Below are the hypotheses presented so far:

• The prevalence of Autism has actually and in truth increased.
• The definition for what constitutes Autism is murky ²:

“To qualify for the diagnosis, it’s a little bit murky,” Carey said. “It’s a pretty wide spectrum, it goes from very severely disabled kids to kids who are unusual, awkward, have social difficulties.”

Carey said he’s skeptical the report demonstrates a real increase in the rate of autism spectrum disorders. He cites financial support from the government as one of several reasons why families might push for their child to receive an autism diagnosis.

“Any time a very rare condition goes to very common, especially in these young kids, I think you have to be wary about what’s going on,” Carey said.

• Because of broader awareness, there is now more testing and screening of Autism. In other words, the prevalence hasn’t increased, just our discovery of the disorder.
• The definition of what constitutes Autism, while murky, has also changed, leading to an increase (but it is artificial). In other words, the Check Sheet and the Operational Definition used has changed mid-way in the data collection.

The last point above is important. If the diagnostic criteria for Autism has changed, then that materially can lead to a possible increase in the rate of Autism. In other words, if the criteria which was once narrower but is now broader, then children under the former criteria might not be diagnosed as Autistic, but under the new definition might be diagnosed as Autistic:

There is no brain-imaging test for autism, let alone a blood test or other rigorously objective diagnostic. Instead, physicians determine whether someone fits the criteria laid out in the American Psychiatric Association’s Diagnostic and Statistical Manual, or DSM.

The manual has undergone significant changes over the years, including in the diagnostic criteria for autism. In its current version, someone must fit at least eight of 16 criteria, including symptoms involving social interaction, communication, and repetitive or restricted behaviors and interests.

The previous version was stricter, describing one diagnostic criterion as “a pervasive lack of responsiveness to other people.” In the current manual, that became “a lack of spontaneous seeking to share …. achievements with other people” and friendships that appear less sophisticated than the norm for a child’s age.

The earlier manual also required “gross deficits in language development” and “peculiar speech patterns” for a diagnosis, while the current one lists difficulty “sustain(ing) a conversation” or “lack of varied . . . social imitative play.”

Morton Ann Gernsbacher, a professor of psychology and autism researcher at the University of Wisconsin, Madison, and others have cited these changes to question the reality of the reported autism increase.

All of this points to Operational Definitions and how important it is to set clear definitions. Indeed, we’ve seen this before – when the diagnostic criteria was changed for Diabetes Type 2, we saw a significant increase in the rate of Diabetes. But, it turns out, according to many Epidemiological studies, that the increase in rate for that time period was mainly due to the change in the diagnostic criteria ³.

Rate of Autism Diagnosis: A Case of Operational Definitions and Check Sheet Data Collection is a post from: Lean Six Sigma Consulting

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Many of you are familiar with the popular commercial brand campaign of Dos Equis meme called the “The Most Interesting Man in the World”. So, for fun, I thought I’d do my own version that I’m calling “The Most Interesting Lean Guy in the World” and join Mark in the fun.

He is interesting because, through many years of study and experience, he has amassed a treasure-trove of knowledge on Lean Manufacturing. And, because he is the most interesting Lean Guy, he is ready to impart that knowledge weekly here on Shmula.

Today’s version is the Single Piece Flow Edition.

Enjoy.

Most Interesting Lean Guy in The World: Single Piece Flow Edition is a post from: Lean Six Sigma Consulting

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I was in a conversation the other day with a colleague where Design of Experiments (DOE) came up. During our discussion, we talked about the factors involved, controllable and uncontrollable variables, the number of levels or settings in the experiment, and the various responses for each trial. It was fun, until I realized quickly that we were definitely overthinking it.

Then, I quickly brought myself back from the clouds and remembered that, while it might be fun to conduct a DOE, it is likely that it would be overdoing and overthinking the problem. Most optimization problems can be answered much quicker, cheaper, and with much less effort than a traditional Taguchi Design of Experiments.

I find this analogous to the relationship between men and women – or, specifically, my relationship with my wife. On appearance, my wife seems very complicated, much akin to a sea of variables with different knobs, turns, settings, and levels. But, that’s just in appearance. In reality, there are just a few things I need to do to make her happy: listen to her, treat her well, be thoughtful, involve her in my life. You know. The basics.

Actually, sticking to the fundamentals probably solves most problems, eliminating the need to get fancy.

How have you been guilty of overthinking? Share your examples here.

Overthinking: Are You Guilty of Missing the Mark? is a post from: Lean Six Sigma Consulting

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Answering the question “What’s In It For Me” (also known by its acronym WIIFM, pronounced “WE-FEM”) is a common change management strategy. Often times the approach is to demonstrate how one method or another is important and how the application of that method will help the person you’re trying to persuade. Almost always, education is required and teaching must be done while you demonstrate the benefits. So, today, I’m going to attempt to persuade you to give Visual Management a shot.

What is Visual Management?

Visual Management defined is as follows:

• Visual Management provide real-time information on work place status by a combination of simple, effective visual information aids that allow employees to understand their influence on the organization overall performance hence allowing the employees to improve their performance.

How might you benefit from the application of Visual Management? Here are some ways:

1. Expose waste so that it can be eliminated and prevented from recurring making the workplace more efficient.
2. Make abnormalities in the 4Ms (Man, Machine, Material, Method) process inputs visible to everyone for prompt corrective action.
3. Enable trends in Quality, Safety, Delivery, Cost (QSDC) & abnormalities to be visible for timely preventive action to be taken.
4. Motivates everybody to improve by clarifying key performance targets.
5. Makes operation standards quicker and easier to understand by all employees so they can follow them.
6. Builds participation through shared information.
7. Creates flow in the value stream and allows pull to the voice of the customer.

In general, below are the 9 areas of Visual Management in business:

Interestingly, some of the most effective applications I’ve seen of Visual Management are not in business or operations; they are in the classroom.

Here’s one very simple but effective application of Visual Management to remove clutter in the classroom, but also to alert the teacher on the status of children’s birthday:

A simple birthday display board is incredibly helpful for a teacher and is simple, effective, and achieves the outcome for its design: to alert the teacher on which kids have a birthday that month.

What’s your experience on Visual Management? Have you seen or experienced effective displays of Visual Management in the workplace or outside of it?

Visual Management: What’s In It For Me? is a post from: Lean Six Sigma Consulting

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We’re pleased to have Gary Netherton share with us his thoughts on quality control and quality audits. He takes a common sense approach, which I advocate, and stears away from any dogma or rigid approach, which some organizations blindly follow.

Read more about Gary after you read his thoughts on Quality Checks.

“What’s the Frequency, Kenneth?”  No, I am not singing an old REM tune… I am talking about quality.  More specifically, I am talking about dimensional quality checks.  I have a print with several characteristics labeled as “critical.”  I need to know how often I should be checking these parts.

Sound familiar?  One thing that I’ve learned in my quality journey is the importance of understanding critical dimensions and manufacturing’s obligations to ensure their correctness.  I recently experienced a situation where a manufacturer of a component had a drawing from the design folks that listed 23 dimensions as critical.  He was asking me to talk to the design team about reducing the number of critical dimensions to a more manageable number.

Being familiar with the product, I told him that there were that many dimensions for a reason . . . that the final assembly was very complicated and the component that he was supplying was critical to the final assembly’s functionality.

“But my operators only have three to five minutes, maximum, to check dimensions!  How can they check that many dimensions every two hours in three to five minutes?”

And so began my journey into confirming and explaining the significance of those “critical” dimensions.

In general, a dimension is “critical” because – if it is “out-of-spec” – the final product will not work in the best case and could violate regulations (Federal, state, or other) or  injure someone in the worst case (including killing them).  In some industries, contractual obligations dictate the frequency of inspection or the type of inspection or SPC that the supplier will use.  In many cases, however, it is strictly up to the supplier to “protect the customer” – to ensure that everything that he ships to the customer meets specification.

So, how often should we check a critical dimension?  That is up to you.  If, shortly after product launch, you collect a lot of data (which we all should do at product launch) and determine that the a certain dimension is always within specification, perhaps you should check it at shift start and shift end.  If it is a dimension that tends to vary throughout the shift, perhaps you should check it every two hours.

Another consideration is production speed.  If you are only making 10 per shift, then a 100% inspection might not be out of the question.  If you are making 10 per minute, then a sensible sampling plan (SPC anyone?) should suffice.

At the end of the day, the onus is on you to ensure that the customer is protected… that is, the customer receives exactly what they are expecting.

Gary Netherton is a multi-certified quality professional with project management experience in leading quality and manufacturing efforts from product and product launch to problem-solving using Six Sigma, PDCA, and other quality tools. His expertise is advanced product quality planning as well as data collection and analysis. He currently reside and work near the Seattle area of Washington.

Frequent Quality Checks is a post from: Lean Six Sigma Consulting

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Every year about this time in the United States, people scramble to get their taxes done. I’m no exception. But thankfully, with the help of tax professionals and Turbotax, there is plenty of help to decode and understand the convoluted tax laws that we have to abide by.

In the course of doing my taxes, I’ve found Turbotax very helpful in walking me through the process of what I need to report and what I need to do. In the workflow of filing my federal taxes, Turbotax has a nice feature that they call the “Audit Risk” results. This temperature gauge is meant to show the risk level of a potential IRS Tax Audit. Below is an example of the Audit Risk Result:

Visual Control

We know that the principles of Visual Management are the following:

1. Make Problems Visible
2. Make Problems Obvious
3. There Must be a Standard
4. In a Glance

In general, we want to make “normal” and “abnormal” easily visible. But, we must also make our responses to the specific abnormality standardized.

Given the Audit Risk Report, it dawned on me that it was a simple but effective mode of visual control. In fact, it was a type of Andon to alert the tax preparer.

What is Andon?

Andon (Japanese for lantern) is a tool for visual management and refers to a system of signals used to indicate the operational status (at a glance) of a machine or work center. It can be used manually or automatically. It also one of the principle elements of the Jidoka, or smart automation or automation with a human touch.

General Uses of Andon

In general, Andon can be used for the following:

1. Alerts management and other workers to quality or process problem.
2. Gives the worker the ability to stop production when a defect is found, and immediately call for assistance.
3. Indicates where the alert was generated, and may also provide a description of the trouble whether shortage of material or maintenance call or supervisor call.

The Tax Audit Risk Thermometer is an example of a visual Andon, which accomplishes the task of

• alerting the tax preparer that there’s a problem and
• specifies the next steps of how to respond to the problem

This goes to show that the principles of lean can be found everywhere, if we but learn to look and see.

And, yes, even in tax software.

Taxes Online: Tax Audit Risk Visual Management is a post from: Lean Six Sigma Consulting

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There’s a story shared among lean practitioners that illustrates the dogmatic approach to lean manufacturing that, in part, has given lean the perception that it is detached from anything important to the organization. In other words, when a Lean Transformation doesn’t align to organizational purpose, it becomes a detached and misaligned effort. This leads to apathy, misunderstanding, and eventually, failure. The story that illustrates my point goes like this.

Heroic Act of Reducing Changeover Time

Supposedly, a few ex-Toyota folks were hired to do some consulting for a company. These ex-Toyota employees visited the facility to do a quick assessment and evaluate what exactly needed to be done and what the company expected of them. At the facility, they met with the companies’ internal lean office or Kaizen office personnel. During their Gemba walk, the internal Kaizen Office associates proudly took the Toyota visitors to a recent the team had facilitated.

A week previous, the Kaizen Office had wanted to implement SMED and found a great forum to apply Single Minute Exchange of Die. It turns out the facility had this massive machine where the changeover time was around 8 hours. After the Kaizen Office was done with it, they had reduced Changeover Time from 8 hours to 15 minutes.

Proudly and expectantly, the Kaizen Office associates waited to see the smiles and admiration from the ex-Toyota visitors. But instead of praise for the reduction in Changeover Time, the ex-Toyota visitors asked this question:

How often is this machine used?

Surprised at the question, the internal Kaizen Office associates answered reluctantly,

We’re not sure, but we believe about 1 or 2 times per month.

Then, the ex-Toyota associates responded:

Was this the best use of your time?

The Lesson

There are many lessons in this short anecdote:

1. The internal Kaizen Office associates began with the goal “how can we implement SMED?” That approach is very tool-focused and, that approach, leads to a very detached and disjointed application of Lean.
2. When the organizational purpose is poorly understood, it leads to spending time where it doesn’t count. This approach fundamentally means that we are either spending time in areas that are:
• High effort, but low impact
• Low effort, but low impact
3. While the application of an approach is, in itself, something to be celebrated, it also leads to a misguided approach in deploying and tranforming a company toward a lean culture.

It’s Your Turn

Is your application of Lean or Six Sigma similar to the story above? Are you spending time where it matters most to the company?

No Organizational Purpose: Lean for the Sake of Lean is a post from: Lean Six Sigma Consulting

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We’re pleased to have Cliff Lowe as a guest blogger today and for him to share his thoughts with us on what many of us take for granted: floor visual management and the importance of that type of communication design for lean manufacturing. Enjoy his article and read more about Cliff after the article.

My best customers are from companies that practice Lean Manufacturing. So I started to ask, what is it about Superior Mark floor tape that these Lean guys love so much? I had tested my tape thoroughly and knew that it was the most durable on the market. Was it the durability? Or was there something more?

I started to research Lean and learned enough to understand the reasons why Superior Mark made so much sense in a Lean Manufacturing environment. It came down to three core concepts: Muda, Kaizen, and Kanban.

Every industrial workplace is required by OSHA to clearly mark aisles and passageways to guarantee that pedestrians have a designated walkway to safely pass. Forklift drivers must also be keenly aware of where their driving lanes begin and end. There are various ways to “clearly mark”, but as we consider the most common method, painting, keep in mind muda, kaizen, and kanban.  Let’s take an in depth look at the entire life cycle of a painted line on an industrial floor.

Paint does not like to stick to concrete, and so in order to use paint to mark a line, the floor must usually be prepped by bead blasting or etching to rough up the surface so that the paint will have something to grab.

In order to paint a nice line, two lines of tape are typically applied to create a clean border for the paint. The section of the facility is shut down to allow the paint to dry completely, which is usually several hours. Then both lines of tape must be removed. The entire process could take a few days and require areas of production to be shut down.

In industrial facilities, floor markings almost always need to be maintained. Due to the abusive environment, we have to consider the cost of any repair or maintenance that will be involved. In order to maintain a painted line to keep it bright and visible, basically the whole process has to be repeated.

If there was an alternative aisle marking method to painting, which eliminated the expensive floor prep, the extra taping, the shut down time, then the process of painting would be considered “muda” in comparison. Waste can be found in almost any process. When it comes to floor marking, consider the waste that can be incurred not only in the initial installation, but in the long term maintenance of the floor marking.

Now, about Kaizen, or continuous improvement, which is a key tenet of Lean Initiatives. When a certain floor layout is designed in a Lean facility, it is designed with Kaizen in mind. Everyone is encouraged to always look for ways in which the layout can be improved. Hence the placement of objects inside the factory is never permanent. Marking the floor should ideally be done in a way that could be easily and quickly modified when a “Kaizen burst” or great idea arises that could improve efficiency. Painting lines does not allow for this flexibility, but using a removable floor tape does.

Finally, a well thought out floor marking design can create the equivalent of a giant Kanban board.  Sometimes it is difficult to clearly identify the WIP or Work In Progress Limits. The limits of the production capacity for an industrial facility have a limiting factor, and sometimes that limiting factor is space. Floor marking tape can visually organize the space to highlight the physical limitations. The best example of this I have seen from one of my customers was in an auto body shop. They had learned about creating a visual workplace, and had been applying Lean and 5S concepts to their garage, in an effort to make better use of their space. Once they installed clear delineating floor markings, they discovered that they actually had the space to work on twice as many cars as they previously could.

The method that a company selects to mark their industrial floors can have ripple effects on their overall operational efficiency. Choosing a method that is flexible (i.e. removable, and installs fast) yet very durable and long lasting, is the best bet for maximum operational efficiency.

About Cliff Lowe:

Cliff holds two patents in traffic marking materials and is the creator of Superior Mark aislemarking tape. He is the owner of InSite Solutions LLC and Stop Painting.com. When he is not busy perfecting the design of traffic marking materials, he enjoys spending time with his wife and three kids.

Floor Marking: Muda, Kaizen, or Kanban? is a post from: Lean Six Sigma Consulting

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Bypassing any expected change management effort or cultural transformation, nothing gets a group of employees moving than an executive order. That’s exactly what the Governor of the State of Washington did – has executed an executive order for government employees to apply Lean in their work.

I’m as surprised as you are. When I first read the executive order, I thought it was a joke, but it’s very real. On the one hand, I find it encouraging. On the other hand, the notion of an “executive order” feels a bit contrary to the spirit of lean. Either case, I find it as a positive event in the adoption of Lean in Government.

The Governor’s executive order has led to a Bill that is now up for a vote in the Washington State Legislature. The Bill is titled “Maximizing the use of Lean Strategies in State Government“.

What is more encouraging is that the Office of the Governor released a blog post, detailing the current successes of Lean so far in their application in government. In the words of Wendy Korthuis-Smith from the Office of the Governor:

Some positive examples include:

• Department of Social and Health Services reengineered its Community Service offices – moving more staff to the frontline to serve clients and consolidating 63 call centers into one statewide call center. Since then, DSHS saw a 99 percent reduction in wait times for community services – from 4 weeks to 5-45 minutes – and the number of dissatisfied customers dropped from 98 percent to less than one percent.
• DSHS increased its outreach to encourage more parents to use online resources to pay and obtain child support payments. As a result, more clients are shifting to online payments and distribution – saving the agency $600,000 and improving accuracy and efficiency.
• The Department of Corrections avoided spending $1.3 million in additional food costs by standardizing its menu at all 12 prisons across the state.

I find all of this as very positive. What do you think?

Below is the text of the Executive Order.

· · ·
EXECUTIVE ORDER 11-04
LEAN TRANSFORMATION

WHEREAS, our current economic climate with lower revenues and higher demand for services
requires state government to continue to streamline operational processes and prioritize limited
resources; and

WHEREAS, the citizens of Washington expect state government to deliver needed services with innovation, efficiency and integrity; and

WHEREAS, we must continue to transform government into a leaner, 21st century organization that is more effective and efficient, and put our state on a trajectory that ensures a strong financial foundation for years to come; and

WHEREAS, Washington, with a long-standing commitment of using tools to improve government performance, has already embraced the Lean philosophy with several agencies
reporting results which demonstrate it can reduce waste, eliminate delays, save money and provide high quality service to the public; and

WHEREAS, Washington has already established a strong performance management culture through Government Management, Accountability and Performance (GMAP), a management tool that relies on performance measures for a disciplined approach to decision making; and

WHEREAS, Lean builds on the GMAP program as a proven management approach used by a wide range of public and private organizations to increase customer satisfaction and employee morale, improve productivity, eliminate waste in processes and improve the quality of products
and services delivered; and

WHEREAS, government has partnered with Lean subject matter experts in the private sector to learn how to apply Lean methods and tools to eliminate waste, save time, standardize workflow, reduce backlogs and decrease process complexity; and

WHEREAS, Washington is already seen as a model for performance improvement practices that encourage innovative and responsible ways of providing goods and services; and

WHEREAS, it is necessary for state agencies to take additional steps to do more with the resources we have available.NOW, THEREFORE, I, Christine O. Gregoire, Governor of the state of Washington by virtue of the power vested in me by the state Constitution and statutes do hereby order and direct:

All executive cabinet agencies to begin implementing Lean by:

1. Learning about Lean principles, concepts and tools;
2. Completing a Lean project by August 31, 2012;
3. Deploying efforts to build capacity for Lean, while embedding Lean in the agency culture; and
4. Reporting Lean results and lessons learned to the Governor’s Office by August 31, 2012.

The Governor’s Accountability and Performance staff will work with internal and external
partners to:

1. Provide enterprise-wide guidance on initiating Lean implementation;
2. Provide resource options to assist agencies in Lean deployment;
3. Develop an enterprise roadmap for effective Lean implementation, including a
4. Lean learning path for leaders, practitioners, managers, supervisors and employees; and
5. Report progress and results of agency and interagency Lean implementation.
6. No later than October of each year, the Governor’s Accountability and Performance staff shall report to the Governor on progress made by state agencies in implementing the provisions of this order.

This executive order shall take effect immediately. Signed and sealed with the official seal of the state of Washington on this 15th day of December, 2011, at Olympia, Washington. By:

/s/

Christine O. Gregoire

Governor

BY THE GOVERNOR:

/s/
Secretary of State

Legislating The Toyota Production System: Making the Application of Lean the Law is a post from: Lean Six Sigma Consulting

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We, lean folks, sometimes develop a narrow worldview that lean is just for manufacturing. While we know that lean is being applied to many different industries, we are sometimes surprised to hear of companies applying lean, especially if they are unconventional companies we never expected to be adopting lean; such is the case with AOL.

We’ve all heard of AOL – America Online. “You’ve got Mail” has become a staple phrase in our lexicon. What people don’t realize is that AOL is also a company that has adopted lean and lean is a part of their continuing cultural transformation.

In fact, recently, CEO Tim Armstrong, in a letter to all AOL employees used the word “Kaizen” in his letter, encouraging all AOL employees to contribute to the mission of doing better in 2012.

I came across a case study on how AOL has implemented lean thinking that I think will be helpful. At the time of this case study, AOL had implemented a blended version of both Lean and Six Sigma and appears to have followed the DMAIC approach for the case study. Continue below to learn more about how lean was applied in the AOL Broadband Division.

AOL Broadband

Under the AOL Broadband division is a group called the Carphone Warehouse. Below is some history on this group:

• The Carphone Warehouse was set up in 1989 by Charles Dunstone. Today it is Europe’s leading mobile communications retailer, generating annual turnover of £4bn (year ending March 07), offering customers impartial and expert advice, the widest choice of the latest products and unbeatable service.
• The company operates across 10 markets and employs over 17,000 people.
• The vision and core values first introduced by Charles remains unchanged and the company continues to be driven by a total dedication to customer satisfaction:
• The Carphone Warehouse’s Product Truth: A product bought from The Carphone Warehouse will not only be the most appropriate for the customer’s needs, it will also benefit from a comprehensive range of products, services and after-sales care that cannot be found elsewhere.

As with most businesses, The Carphone Warehouse operates a customer service center. AOL Broadband claims that their Customer Service Center is unlike the traditional customer service center which they define as:

• Operators working from a script
• Non-expert operators (call screening)
• Incompetent or untrained operators incapable of processing customers’ requests effectively
• Overseas location, with language and accent problems
• Automated queuing systems—this sometimes results in excessively long hold times
• Complaints that departments of companies do not engage in
• Complaints that departments of companies do not engage in communication with one another
• Deceit over location of call centre (such as allocating overseas workers false English names)
• Requiring the caller to repeat the same information multiple times
• High staff turnover, low moral

Contact centers are traditionally Efficiency driven, with the following supporting metrics:

• Average Handle Time (AHT)
• Call volumes
• Queue times
• Agent & customer
• Abandoned Calls

To their credit, they realize the following realities:

• Competition is more intense
• A more balanced approach is required on service delivery & value creation with the strategic direction of the business
• Call centre performance is more important for delivering CRM
• The growth in off-shoring of contact centres is having positive & negative impacts
• Regulation is constraining and demanding a new response
• Cost improvements are required to ‘plug’ falling prices & margins
• Customer are more disloyal & demanding of consistency & service
• Staff retention is critical to a consistency of delivery

Because of the new realities of customer service, AOL Broadband decided to apply the concepts found in lean manufacturing and six sigma. Doing so meant having a dedicated process team that:

• Focusing on Customer touch points
• Lean thinking & methodologies
• Value Stream & process mapping
• Identification of process improvements from Customers
• The Pursuit of Excellence at AOL Broadband perspective
• Integrated knowledge management strategy
• Customer call listening
• Proactively supporting Waterford as a centre of excellence and sharing best practice.

And this team applies Lean methodologies that are focused on delivering maximum value and eliminating waste:

• Using the DMAIC approach
• Understand the drivers of contacts
• Creating value
• Analysing root cause
• Measuring end to end response & process capability
• Transforming culture & engaging staff
• Building change capability & agility

Given AOL Broadband’s new approach, they decided to look at Repeat Calls.

Customer Service Repeat Calls

Repeat Calls presents a significant opportunity for improvement for AOL. Some data supports this:

• The current level of repeat calls are costing the business €2.38 million over budget.
• This addition cost & call volume also affects service levels & the overall quality of service.

Define

Problem Statement

The initial problem statement is stated below:

Data Collection

Some initial data collection was taken, primarily from the call logs from the call center. Below is the data collection plan.

Measure

The initial data pointed to the following major areas of opportunity:

Apparently, for all repeat calls during the data collection period, 53% of the cause can be attributed to the customer service agent behavior.

Analyze

After the Pareto above was obtained, the next step for the AOL Broadband team was root cause analysis:

Following root cause analysis with the team, they organized their findings into a second level Pareto Chart below:

Once the root caused were identified and validated and quantified, the next step to address these primary call drivers was for the team to brainstorm practical solutions or countermeasures in the Improve Phase.

Improve

A number of insights were gleaned from these sessions.

• Current AHT targets were restricting first time fix rates
• Need for more skills & training for bottom performers.
• OSP Contracts were driving wrong behaviours.
• Culture of Tech Support lead to lack of ownership, lack of interest in resolution & AHT myopia.

To address the findings above, several improvements were made. One of those areas was in reporting. This new report included the following:

• New Stake Holders Report Created.
• Repeat Call Volumes & AHT.
• Call Driver Tracker Created to Capture Call Reasons.
• New Control Dashboard Created.

Before scaling changes to the entire enterprise, the AOL Broadband team decided to pilot the changes in a small scale at first. Their pilot test consisted of the following:

• A group of 24 Agents running 2 pilots schemes set up.
• 1 team using new operating procedures brought about by initiative.
• The second team being used as a control to benchmark against.
• Data Capture tools in place.
• Reporting set up on scheduled basis.
• Communication & Training was delivered to both teams.

Results from Pilot Test

Based on early results from Trial. The following Data shows significant business benefits. By Improving the time taken with each customer on the initial call, the team reduced repetition on subsequent calls. Through Improvements to the AOL Broadband Knowledge Base & the new operating procedures, the team forecasted a potential benefit of €2.1 Million per year and €600,000 to the end of the current financial year.

While the improvements to reporting might seem trivial, they were not, for the changes in reported added critical items that were not previously collected and reported on. The team made other changes in training and in also policy changes, involving human resources.

Conclusion

• Lean Must be led by the Top Managers
• Aligning contact strategy & delivery with the business goals
• A Lean approach will contribute to an improved Customer experience and retention rates
• Reduced resource costs
• Better Agent engagement & working environment
• Lean Green belt training is vital
• Cross functional team works well
• A more customer centric methodology based on adding value and reducing waste
• Release resources to focus on growing the value proposition
• Makes the contact centre a key strategic tool
• Lean thinking is applicable to all industries

Below is Tim Armstrong’s email to all AOL Employees:

AOLers –

I hope you all have a great New Year’s and are spending this time with family and friends. As we close 2011, I wanted to share some reflections on the year and look forward to some important themes for 2012. In 2011 we accomplished a great deal as a team and we set the company up for long-term growth in key segments of the Internet’s future. We are leaving the year a healthier and more disciplined company – and a company poised for continued improvements in 2012.

Looking Back – 2011:

During 2011, AOL touched over 250 million global consumers, millions of customers, tens of thousands of publishers, and a growing list of important partners. Our transformation has been substantial and we continued to invest in our bold strategy throughout the year. From a tangled set of brands, products, regions, and technology platforms two years ago, we now have a company that contains powerful brands, powerful products, and a simplified technology foundation that will allow us to scale in key markets.
In the last 24 months we have completed an impressive list of concrete items that form the foundation for our work in 2012:

• AOL grew OIBDA sequentially for the first time in 3 years in Q3 2011
• AOL grew total Advertising year-over-year for the 2nd consecutive quarter in Q3 2011
• AOL grew Global Display advertising year-over-year for the 3rd consecutive quarter in Q3 2011
• AOL grew Third Network Revenue year-over-year for the 2nd consecutive quarter, and sequentially for the 5th quarter in a row in Q3 2011
• Search revenue declines were the lowest in almost 2 years in Q3 2011
• We implemented the new search product in 2011 as part of our significant 5 year extension to our Google search partnership
• Subscription declines continued to moderate and the core subscription business is now leveraged into selling broader subscription services
• Video viewers, views, and revenue all grew at over 100% Y/Y during Q3
• Huffington Post expanded from 27 sections to over 50, opened two new countries, and increased video insertion rates to over 70%
• Patch expanded from 30 towns to over 850, added over 10 million unique consumers, and increased to over 5,000 new customers
• Mobile pageviews doubled during 2011 and mobile advertising was integrated into AOL’s core advertising system
• We launched major redesigns, partnerships, and new products across all of AOL’s endemic content brands, including Engadget, TechCrunch, Moviefone, MapQuest, the AOL Homepage, and AOL Mail
• AOL re-entered the International marketplace as we had planned to do after the successful International restructuring of 2010
• We announced major partnerships (Examples: The Sporting News, Move.com, Everyday Health, Cambio, Yahoo/MSN, Vivaki, Le Monde, El Pais, and a number of branded entertainment deals)
• We simplified over 30 advertising and content platforms to 5
• We restructured our advertising systems, sales structure, go-to-market strategy, and integrated video, local, and mobile into the core advertising business
• AOL Technology Operations fundamentally rebuilt AOL’s core serving, data-center, and platform infrastructure, and it launched the first “lights-out” data center in 2011
• We repurchased close to 10% of the company’s outstanding shares at attractive valuation levels during Q3 and Q4
• We restructured the company from 10,000 employees and contractors to approximately 5,000 employees, while recruiting approximately 2,500 new team members
• We exited approximately $250M of unprofitable revenue and sold non-core assets
• We removed over $500M in expenses
• Having begun 2010 with ~$100 million cash and acquired significant assets for the company since then, we are ending 2011 with ~$400 million in cash

The corporate groups, which work to support our business units, also had a series of important accomplishments during the year. We were able to streamline operations and costs throughout the company. AOL continues to get more and more nimble – we are doing more with less.

The technology infrastructure got many needed upgrades and new capacity built on cloud computing infrastructure. Our M&A team was able to do fantastic deals for the company, including the Huffington Post deal. Business Development was able to set up large partnerships with device, wireless, and important content partners. The finance team was successful in driving our rigorous company planning process and an improved forecasting system. The HR team consolidated the recruiting process, the review process, and the level of transparency we have on our team leaders and performance. Our legal team continues to counsel and guide us through our transformation and the re-entry into new markets. Our brand marketing continued to re-invent how AOL is perceived, as well as started the process of building a house of brands that have global appeal and consumers love.

We also learned a number of important lessons during the year. The first lesson was around maintaining and accelerating a culture of high expectations. “Beat the Internet” has been an important theme in the turn-around of AOL. In 2010, we had a very strong year of organically improving our experiences. In 2011, we spent needed time on integrations and transforming our brand portfolio. In 2012, we will be back to maniacal improvements of our consumer experiences and a host of important product launches.

In 2012, we must be a culture centered on the principle of Kaizen, the practice of constant improvement – and that applies to all of our products as well as all of our corporate services.

The second lesson is centered on a more ruthless consistency of only operating within our strategy and giving our teams the ability to work on important projects that will accelerate our transformation. With the Top Box priorities we launched in 2011, the company was able to move key growth initiatives and say no to the projects that were not important to the long-term success of AOL. In 2012, we need to be even more disciplined, and we have room for improvement on this front.

The third lesson is the need for a deeper injection of a consistent technology thread in our product development. We need a more technology-centered differentiation in all of our products. We have to avoid building products that are just incrementally getting better or trapped in the cycle of only building features for other platforms – we are not a feature company. We have to solve real human problems with our products and technology.

A lesson for 2012 will be the need to shift our talent culture from one where talent changes result from brand changes to one where talent is a corporate asset that we grow within our streamlined stable of brands. I would expect us to continue to be a very attractive place for the world’s best talent and a place that our current talent will see opportunities for growth and exciting challenges.

Ending 2011, we believe our stock price does not reflect what our team achieved during the year. In our opinion, the company remains undervalued, and we will eliminate the value gap by improving our operating results through the disciplined execution of our long-term strategy. Execution is the most important driver of our valuation growth, and we’re going to have another big year of improvements in 2012. We reinforced this view by executing the stock buy-back program.

Looking Forward – 2012:

We enter 2012 for the first time in many years with one agenda item – to create. The word “create” defines everything we are trying to accomplish as a 21st century digital media company. We are creating world-class experiences and delivering high-value content that is rooted in the innovative spirit that defines our industry and AOL.
There are some specific areas that we would like to see created and built during 2012. We want products to be created and built with a technology-centric model that is differentiated and leverages our investment in content and operational scale. We have great examples our of engineering teams’ game-changing products at AOL, but 2012 is the year we move from examples to an always-on technology process for products – including the internal tools we use as a company.
As part of the focus on technology and building, we have scheduled a weekly engineering meeting with the executives where our engineers will have an open platform to show product work and ideas. Alex Gounares and I have been planning the session, and we have made it part of our executive session every Monday. We expect the engineering teams and operations teams to press the company on innovating all areas of our business.

We will also be adding a deeper process around talent recruitment and talent management internally. Creating great Internet experiences for our customers starts with being a place where our people can thrive at work, where they know how their efforts contribute directly to the company’s important purpose in the world; where they can learn and grow in their careers; where they are paid for performance and have opportunities to build wealth; and where the environment supports high performance at a sustainable pace. I’ve been working closely with Chief People Officer, John Reid-Dodick, to review our people strategy to ensure we are competitive in these dimensions and that we are innovating to create opportunities for our people to learn and grow in ways that lead our industry.

We will also be going deeper into our purpose and mission as a company in 2012. We are building the first branded media and technology company of this century – a mission we started in 2009 and we must drive that mission forward in 2012. To create a more meaningful purpose behind our mission we must measurably improve consumers’ lives. We need to be the brands that people rely on to make themselves smarter, wiser, healthier, sexier, faster, funnier, more connected, more interesting – and more fulfilled. As much as the digital age has disrupted many aspects of life and work, the basic tenants of what people care about endure. Our purpose will move further into touching all aspects of human lives in more human ways – online and offline. The Internet has been built by discrete segments of people and there is a big opportunity to expand the design, content, and services to some of the most meaningful groups of consumers in the world.

We also want to continue to create a more profitable company in 2012. Growing healthy profits while we re-create a powerful Internet asset in AOL is our goal and it has to be the foundation of our mission and purpose. Being a very healthy company will allow us to provide more and more powerful services to our global audience.
As a reminder, here are the 2012 company goals we’re focused on:

• Unique Visitor Growth
• Revenue Growth
• Adjusted OIBDA
• Free Cash Flow
• Consumer Net Promoter Score
• Advertiser Net Promoter Score
• Employee Pulse Survey Index

In closing out 2011, I want to thank all of you for your effort and contribution, and for the passion you bring to work every day. We have a company that is poised for growth and the external world hasn’t seen or recognized our hard work yet – they will take note during 2012.

For 2012, let’s create. We’re set up and organized to have a great year. Our mandate is to create awesome products, sell those products, and have fun transforming one of the best brands in the world. Let’s go get it done – GO AOL – TA

Kaizen at AOL is a post from: Lean Six Sigma Consulting

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This article is a guest post from Noeradji Prabowo, a continuous improvement practitioner in Indonesia. In this article, he shares a simple and effective application of Kaizen and the Kaizen frame of mind to a common activity in business meetings: drinking coffee.

Learn more about Noeradji Prabowo after the article.

Beginning in November 2011, we held training at a motorcycle tire manufacturer; in the class room we’ve encountered an interesting idea of kaizen. For participants, we provided drinks: tea or coffee are provided in a stroller or a drink cart. The result is often dirty floor because water, tea, or coffee spills from the cart onto the floor.

To cope with spills on the floor, we decided to add place holders in the stroller or cart, thereby eliminating the non-value added work of mopping spilled water, tea, or coffee spills on the floor.

About Noeradji Prabowo

Noeradji Prabowo is a Senior Consultant at PQM Consultants – a Consulting Firm that specializes in helping clients in consulting and training to build continuous improvement culture by making “productivity and quality improvement through people” works.

He is a Consultant who specializes in area of Productivity and Quality Improvement. He has served as consultant for shop floor management teams from various industries, services and manufacture, national and multinational companies, by providing consulting and/or training to make improvement happen in their workplaces through strong genba-oriented processes.

Some of his experiences are helping client’s organizations in building “Sustainable Excellence” by creating visual and error-free workplace; Creating Disciplined People and Bright Factory through 5S implementation; creating reliable equipment by eliminating its losses through Total Productive Maintenance implementation; building quality culture through Total Quality Management; people development through Management Development Program, and creating a flow production process, pulled processes and reduce excessive inventory by implementing Operation Excellence program.

He began his career as a Field Coordinator at Schlumberger(oilfield and information Services Company). He then joined PT Cold Rolling Mill Indonesia (steel manufacturer) as counterpart of HAY Management, to set up Compensation System.

He obtained his degree in Physics (Padjadjaran University) and post graduate diploma in Production Management (Institute for Management Education and Development/IPPM).

Training he has attended among others: Program for Quality Management, Statistical Process Control, Shopfloor Management, On the Job Training Instructor, Total Productive Maintenance and ISO 9000, Understanding the ISO 14001 Specification, Implementing EMS, Strategic Thinking, Toyota Way. He has also attended Quality Management Training in Singapore, Osaka, Japan and Detroit, USA.

Kaizen in Everyday Life is a post from: Lean Six Sigma Consulting

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This post is sponsored by the University of San Francisco’s Supply Chain program. Learn more about the program and their focus on sustainability at the end of the post.

Don’t Let Suppliers Rack up Bogeys on Your Sustainability Scorecard

A sustainability scorecard is a system for companies to measure the sustainability of their different suppliers.  These scorecards typically measure recyclable materials, water and energy use, greenhouse gas emissions and various forms of waste for the complete supply chain.  Companies with high marks on their scorecard are demonstrating their commitment to supply chain management best practices to their stakeholders.

At this point a sustainability scorecard isn’t required of businesses, but more and more companies expect that as time goes by, more and more of their customers will be requesting information on the organization’s carbon footprint. Those that do collect data and analyze their supply chain will certainly see some benefits.

Who is Leading the Way?

Wal-Mart

Wal-Mart has implemented a broad, corporation-wide sustainability initiative called the Wal-Mart Packaging Scorecard.  This software tool grades the company’s packages on how environmentally friendly they are, and buyers can now use this online tool to help with their purchasing decisions for all the store’s products.

The environmental impact of the package is now as important as the product inside it, and through this initiative, Wal-Mart plans to reduce its supply chain packaging by five percent over the next two years. This type of scorecard is available to all buyers, and allows them to make informed decisions about their purchases.

Proctor and Gamble

This company is using a new scorecard that will help pinpoint the areas where increased effort is necessary to achieve long-term sustainability.  Proctor and Gamble’s ambitious vision contains several objectives that will help its sustainability score grow:

• To have all its plants powered by 100% renewable energy
• To use 100% recycled or renewable materials for all its packaging and products
• To have zero waste going to landfills from its factories and consumers
• To manufacture products please consumers while also maximizing conservation of resources

Proctor and Gamble’s scorecard is an excellent example of how a sustainable initiative can begin with the retailer then move down the supply chain.

IKEA

IKEA recently introduced its Sustainability Product Score Card, which helps the company stock its shelves with the greenest furniture products possible.  This method rates the individual products and not the suppliers; however, if the products themselves are sustainable, then the supply chain would tend to be more or less sustainable as well.

IKEA’s Score Card contains a list of product criteria, such as renewable energy during production, energy efficient production, recycled material and other more general requirements.  Unlike Wal-Mart, IKEA customers will not have access to the score card; instead the company will use it internally to measure its own progress and the sustainability of its products. Over the next several years, IKEA hope to be able to label its entire inventory of home furnishing products as 90% sustainable.

Why are Sustainability Scorecards Important?

Scorecards allow organizations to clearly define, measure and communicate their sustainable vision to the public.  They identify how their sustainable goals are an integral part of the organization’s larger mission, and provide a means to monitor sustainability in a formal, measurable and ongoing way.

A commitment to sustainability sends a clear message to your consumers that you care about your company’s impact on the environment. Supply chain analysis can lead to exciting new innovations, cost savings, reduced energy use and waste streams, better brand reputation and increased business opportunities for your company.

University Alliance submitted this article on behalf of The University of San Francisco’s online program. The University of San Francisco provides all the tools and resources necessary to gain a sustainable supply chain management certification online.

For further information please visit http://www.usanfranonline.com.

Supply Chain Sustainability and the Scorecard is a post from: Lean Six Sigma Consulting

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We’re pleased to have Derek Singleton present an article on Manufacturing Software and argue for how traditional ERP software can better support the principles of Lean Manufacturing. ERP and MRP have traditionally been at odds with the principles of lean. So, in his article, he also asks you, the reader, for advice on how else traditional ERP or MRP software can improve to better support the principles of Lean. Please chime in with your own thoughts.

Thanks to Derek and read more about him after the article.

Three Ways Manufacturing Software Can Adjust to Lean Principles

There’s a long-standing debate between manufacturing planning strategies. The debate is between proponents of material requirements planning software–better known as MRP software– and lean manufacturing advocates.

The crux of the dispute boils down to whether sophisticated software tools are needed to adequately plan production. Proponents of MRP software believe that today’s complex manufacturing challenges require formal planning tools to get an accurate picture of the production requirements. Lean advocates, on the other hand, argue that these planning tools actually get in the way of accurate planning because they’re too slow and transaction-intensive to pace to actual consumption, or adjust to demand fluctuations.

Three Components to Incorporate in Manufacturing Software

I see three main ways that manufacturing software can evolve to adapt to the demands of lean manufacturing. Each way focuses on bringing lean principles front and center of manufacturing software packages.

1. Make Value Stream Mapping a Core Software Component

One of the most important tools in lean manufacturing is create a value stream map to outline the flow of information and materials in the manufacturing plant. Modeling how information and materials flow through a shop floor will allow manufacturers to more easily identify production bottlenecks.

2. Monitor Cycle Times Intensely

The most important metric to know in manufacturing is how long it takes for materials to arrive on the dock and to leave in a completed product. In order to improve cycle times, these times need to be monitored and tracked. A subset of monitoring and tracking cycle times is keeping track of production status.

3. Locate Key Places to Add or Remove Inventory

While there’s ample functionality in manufacturing software for determining what to stock and how much to stock, there is little functionality to help manufacturers figure out where to stock. Functionality that can tell a manufacturer where to stock will help them figure identify the best places to protect against volatility, which will ultimately help avoid product shortages.

These are a few ways that I can see manufacturing software changing to adapt to the requirements of lean manufacturing. However, I’d like to hear your thoughts.

What needs to change in manufacturing software to adapt it to lean manufacturing principles?

About Derek Singleton

Derek is the ERP Market Analyst at Software Advice, which he joined after graduating from Occidental College with a degree in political science. He writes about various topics related to ERP software with particular interest in the manufacturing applications, such as manufacturing resource planning software. In his spare time he enjoys training in boxing and martial arts.

How Manufacturing Software Can Adjust to Lean Principles is a post from: Lean Six Sigma Consulting

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While waiting for my kids’ swimming lesson to start, the kids and I waited at the only available seat at our local recreational center, which was in the corner of the building next to the men’s bathroom. As we sat down, my 2 year old started playing with something attached to the wall. And, as I motioned to tell him to please stop hitting whatever he was hitting, the title on top of the object caught me by surprise: Employee Suggestion Box

Goal of an Employee Suggestion Program

I believe that the goal of a suggestion system or employee suggestion program is the following:

To engage the maximum number of people and consider the maximum number of ideas and implement the most impacting of those ideas in the fastest amount of time with the least amount of cost.

There are, of course, times where it’s appropriate to go through an experimentation process where the most impacting ideas might not be the ones enacted upon. In this case, the process of experimenting and learning for the team and company is just as valuable as the result.

From a practical perspective, managing a suggestion system really boils down to the following questions, which can be considered at the team and department level:

• How many incoming suggestions can we handle per week?
• At what response time can we handle those suggestions?
• Of those accepted, what % were implemented within 3 (enter your number here) days?
• Of those implemented, what were the benefits for the department and company?

In my next several posts, I’ll cover the topics that allow for an effective suggestion system within a company that meets the goals I set forth in this article:

To engage the maximum number of people and consider the maximum number of ideas and implement the most impacting of those ideas in the fastest amount of time with the least amount of cost.

Namely, I’ll cover:

1. Resources for a Suggestion Program
2. Roles and Responsibilities of Managers, Supervisors, and Team Leads
3. How to manage Idea Generation
4. Structure of Suggestion Card
5. Training in Problem Solving Fundamentals
6. Recognition and Reward of Employees
7. Alignment to Company Objectives

Suggestion Box: Employee Kaizen Ideas is a post from: Lean Six Sigma Consulting

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Signs and symbols without context has no meaning.

Context matters. But, rarely do we consciously think of it; in fact, we almost always assume without really realizing that the subject of which we are talking about is really relative to other parts of the story. We take it for granted.

For example, take the picture below, which says: “Do you have any suspicious moles?”

Without context, the sign doesn’t mean much. But, when the sign above is coupled with the image below of a primary physician’s office or a hospital room, then it takes on a different meaning:

Putting the two together, the sign inquires of the person reading it to consider any strange looking moles and to have those moles checked by a physician for any signs or symptoms of skin cancer.

Do you see what just happened? The sign by itself – without context – could be understood as strange, funny, and even weird. BUT, the sign coupled with the context of a physician’s office all of a sudden takes on some meaning.

What else in your life is like that? In the world of process improvement, can you think of situations where, by itself and without context, a tool such as Kanban, Process Map, or something else doesn’t have meaning unless there’s context attached to it?

What do you think?

Why Context is Important is a post from: Lean Six Sigma Consulting

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Toyota’s supply chain is a vast network of suppliers providing auto parts to the Toyota plant. If there’s any defects in the products as provided by its supply chain, then it will likely manifest itself in the finished good: a defective and potentially unsafe Toyota vehicle.

The Quality Advisory Panel addresses this concern and makes the following inconclusive advice:

Some commentators have suggested that Toyota’s recent quality and safety problems may be partially the result of inadequate oversight of its suppliers. For example, Toyota recalled over one million Corolla vehicles because of defects in the engine control module manufactured by one of Toyota’s suppliers.

Even though Toyota engineers reviewed the supplier’s proposed production process, there was a problem with that process resulting in some units developing electrical shorts that could not be found by inspection. Toyota has explained that it has already taken steps to strengthen its oversight of suppliers.

Although the Panel did not undertake a detailed review of Toyota’s supplier oversight in its first year, it looks forward to learning more about Toyota’s initiatives in this area and their implementation in the coming year. Of course, the Panel recognizes that mitigating the adverse effects of the earthquakes and tsunami on the company’s supply chain will remain Toyota’s focus for the foreseeable future.

Please read our series on the findings from the Toyota Quality Advisory Board:

1. Toyota North American Quality Advisory Panel Conclusions: The high-level summary of the findings from the quality advisory panel.
2. Balance Between Local and Global Management Control: How can Toyota best balance decision making between Toyota Motor Corporation in Japan and its regional operations in the North America and the world?
3. Responses to Problems Raised by Internal and External Sources: The panel found that problems raised by sources external to Toyota were not treated as seriously as those found within Toyota. The panel claims that this violates the tenets of the Toyota Production System.
4. Management Responsibility for Quality and Safety: Because Toyota treated Safety as a subset of Quality, the panel believes that this has led to the blurring of the lines and makes the question “Who is Responsible?” more difficult to answer; consequently, this has led to the old adage of “if everyone is responsible, then nobody is accountable”.
5. The Challenges of Integrating Electronics and Software: Has the integration of software led to safety problems?
6. Management of Supplier Product Quality: As Toyota becomes more and more decentralized, has Toyota maintained the rigorous supplier quality requirements it once had?

Greater oversight of the Toyota suppliers is wise. Toyota already has a very strong Toyota Supplier support, but that is primarily focused on the adoption by the supplier of the Toyota Production System. An added level of oversight ought to be on the safety side of things. That, in addition to the quality focus, will enable Toyota to get back on track and maintain its brand, known for quality and safety.

Toyota Supplier Quality: Quality Advisory Panel Opinion is a post from: Lean Six Sigma Consulting

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For the past several months, I’ve been reading and reviewing Yoshihito Wakamatsu’s book “The Toyota Mindset”, which outlines what he calls the The Ten Commandments of Taiichi Ohno. These are, what we now know as basic practices in lean manufacturing, but Wakamatsu explanation brings to light the HOW, and not just the current what of the practice.

Below are the review pages and the specific topic I have attempted to summarize. I have learned a great deal from Wakamatsu’s book. I hope that as you read my reviews below, you will learn as well and grow as a practitioner of continuous improvement.

To read my reviews of Wakamatsu’s book on Taiichi Ohno, please visit the links below.

• Taiichi Ohno on Standard Work
• Taiichi Ohno on Genchi Genbutsu
• Do Not Act Spoiled
• Learn from Previous Masters
• Wastes Hide, Disclose All Mistakes
• Truth and Understanding
• Innovation and Craftiness
• Teach Others to Think
• Intelligent Automation
• Taiichi Ohno on Leadership

Taiichi Ohno: The Toyota Mindset Book Review Summary is a post from: Lean Six Sigma Consulting