Lean Benchmarking and value chain optimisation

Business Growth Opportunities
through
Value Chain Optimisation
Presented by
Mark Knowlton MBA (KPS Ltd)
SUBCON 2012 NEC Birmingham Wednesday 13th June

www.LeanBenchmark.org

My Background
2012
Clients

2006 Lean Consulting

2003 Business Adviser, gained MBA

1998 Plant Manager, Manufacturing Director

1990 Engineering, Project Mgt. + Lean training Uni’ of Michigan

1979 Engineering Apprentice ,Draughtsman


Contact Details

Contact:
Mark Knowlton MBA
KPS Ltd

Tel 01843 292681
Mob 07880 721471
Email mark@knowlton.org.uk
Blog www.knowlton.org.uk
Twitter @MarkKnowlton


Lean & Business Growth
Lean/Cash flow 5 golden rules
The 8 Lean Competencies
Supply Chain Case Study
Benchmarking for Growth


Lean/Cash flow 5 Golden rules
The 8 Key Competencies
Your Next steps?

Growth vs. squeeze on profit
End Customer Price
Company Reductions
£
Asking Price Global
Market
Profit Price
Need for
Profit Continuous
Improvement

Manufacturing
Cost Value Chain Internal Cost
Cost Increases
+
Supplier Cost
Increases

Cost Plus Cost Down Time
(In the past) (Now)

Pressure to reduce Costs and “Do More with Less”

Improve or die
Improvement
1. Improve

2. Do nothing

3. Decline

= Your Company
Time
= Competitor

Do nothing = fall behind the competition as they improve ! 7

Business Growth
Defined as:
Generating significant positive cash flows for future
reinvestment.

There are only two ways to grow a business…
Increase turnover or Reduce costs
(or both)

So…how can ‘Lean’ be a driver for growth?

Lean…a driver for growth
A low cost approach to improvement that
allows companies to:

• Increase Capacity
• Remove Unnecessary Cost.
• Improve Customer Lead Times.
• Control Inventory.
• Optimise Workplace Layout & Space.
• Deliver Better Quality & Service.
• Empower Staff and Increase Morale 
• And…Improve cash flow!

9

Lean improves Cash Flow
How can Lean improve cash flow?
The production batch size affects everything:

Large batch sizes = higher WIP and Stock levels
More cash required.

Small batch sizes = less WIP and less stock
Less cash required.

…try the ‘Lego’ – lean simulation exercise

Lean – impact on Cash Flow
Five Golden Rules

Rule # 1 - Speed up the Order Fulfilment cycle

• From order receipt to cash in the bank
• Streamline (faster) sales order processing
• Map process, Identify and eliminate Waste


Five Golden Rules

Rule # 2 - Only make what you can sell

• Talk to your customers – what is their real demand?
• Make to Order
• Work towards zero stock (reduce gradually to
expose hidden issues)


Five Golden Rules

Rule # 3 - Only buy what you need

• Local supply where possible (JIT)
• Kanban replenishment system (demand driven)
• Smaller quantities, greater delivery frequency


Five Golden Rules

Rule # 4 - Reduce Work In Progress (WIP)

• Apply lean principles, reduce batch sizes, WIP and
create balance flow
• Don’t start production until you have all materials
• Work towards ‘single piece flow’


Five Golden Rules

Rule # 5 - Collect what you are owed

• Invoice immediately
• Identify and fix reasons for non payment
• Rigorous debt management process


Lean Principles – a quick reminder…

Lean is a business improvement
technique

focused on delivering Value to the
customer

17

Lean Principles
Best Quality + Lowest Cost + Shortest Lead Time
Best Safety + Highest Morale

Respect
Continuous
for
Improvement
People

Plan - Do – Check – Act

PDCA Cycle repeated to create continuous improvement
Performance

Plan
Do
Act
Check
“Continuous”
improvement

Time

Lean Principles

5. Pursue
Perfection

4. Pull System

3. Making Value flow

2. Map the Value Stream
1. Customer Value

Applying Lean Tools
Principles Tools & Techniques
1. Customer Value SIPOC, Enhance Value Add Activity. Quality
Improvement Tools, Root Cause Analysis.
2. Value Stream Value Stream Mapping, Process Mapping, 8
Wastes, Hand off Charts, Spaghetti Diagrams.
3. Flow Load Levelling, waste reduction, 5S Workplace
Organisation, Line Balancing, TPM, OEE,
SMED, SOP’s
4. Pull Takt, Kanban, Visual Management
5. Perfection Continuous Improvement, PDCA, 6-Sigma,
KPI’s , Knowledge Transfer

8 Wastes Overproduction

Waiting & Delays Movement of People Transport

Inventory Over Processing Skills!
Defects

The 8 WASTES
TRANSPORT
INVENTORY
MOVEMENT

WAITING AND DELAYS
OVERPRODUCTION
OVER PROCESSING
DEFECTS
SKILLS

Cash flow 5 Golden rules
The 8 Lean Competencies


8 Key Competencies
Lean is NOT just about tools and techniques!


8 Key Competencies
1. Lean Leadership
2. Customer Focus
3. Empowerment
4. Communication
5. Core Processes
6. Machines and Equipment
7. Support Processes
8. Supply Chain


1. Leadership
• Lean strategy & objectives linked to business plan
• Management visibility – “GEMBA” walks
• Recognise and celebrate success.

MAS –SE Best Practice winners 2010 (Williams Renault Oxford)


2. Customer Focus
• Quality – Be proactive ,fix the root cause
• Schedule completion - On Time In Full (OTIF)
• Industrial marketing - Factory is a “Showroom”


3. Empowerment
• Develop motivated, Self Directed teams
• Shop floor ownership of continuous improvement
• Allow staff to redesign their own processes


4. Communication
• Open – two way, encourage feedback
• Communications plan, daily - weekly - monthly
• Team display boards


5. Core Processes
• Begin with 5S – workplace disciplines
• Value Stream Mapping to identify savings
VALUE STREAM MAPPING

Step 1 Map the ‘Current State’
- Capture ideas
- Identify Quick wins
Step 2 Agree the ‘Future State’ vision
Step 3 Map the ‘Future State’ process
Step 4 Project Scoping
Step 5 Implementation


6. Machines and Equip’
• Maintenance Plan
• Daily Operator checks and Technician?
• SMED + TPM


7. Support Processes
• HR ,IT, Engineering’s role = support Manufacturing
• KPI’s Balanced Score Card Approach

Balanced Score Card example

8. Supply Chain
• Procurement Strategy, Portfolio Planning
• Develop appropriate supply solutions:
Kanban - Consignment - Vendor Managed – JIT
High

CRITICAL STRATEGIC

Contingency Planning Build Partnership

VALUE

TACTICAL LEVERAGE

Contract Out / Kanban Short term agreements

High
Low VOLUME


Cash flow 5 Golden rules
The 8 Key Competencies


Supply Chain Optimisation

Supply Chain
improvement in action
with
MAS South East
Facilitated by Mark Knowlton
(2011)

Background
Background

• Request from Kent Best Practice Club members
• Need to address supply chain issues
• “Win-Win” opportunity
• Impartial facilitator


Supply chain groups
Group 3 – Silent Gliss
Group 1 – MEP Paul Head – Silent Gliss
Steve Poulten – MEP Rob Moore - Spa Aluminium
Mark Foord -Abbey Precision Richard Godbolt - Spa Aluminium
Janine Jarrett -Abbey Precision Julie Shilling - Euromark
Jason Pither - Turner Tools Mark Durley – Euromark

Group 2 – Cummins
Jon Huxtable - Cummins
Group 4 – Johnston Sweepers
Siddharth Raote - Cummins Sarah Hester - Jonson sweepers
Emma Booth - Cummins Richard Cardwell Jonson sweepers
Chris Johnston - Stevens & Carlotti Phil Chapman - Kent Metal Developments
Ian Hobbs - Stevens & Carlotti Mark Edge ABT - Products
( John Gough - ABT Products
Mark Hignett - ABT Products
David Simmons Hydraquip
Alan Scott Hydraquip
Glen Baker Raker - Eng Services

Aims and Objectives

1. Lean Awareness training for Suppliers
2. Supplier issues identified
3. Map the Value Stream
4. Supply Chain issues identified.
5. Agree an improvement plan

Step 1
Lean Awareness training
for Suppliers

Step 2
Suppliers identify
their own (internal)
opportunities

Step 3
Together identify
Supply Chain
opportunities.

Supplier Perspective

Late payment Frequent deliveries
Our Suppliers Rapid deliveries
Long winded ordering process JIT Service
Poor quality drawings Kanban System
Customers chasing orders Our new equipment
Miss-picking Good Packing / labelling
Lack of order numbers Quality
Communication Long term relationship
Picking errors Repeat Orders
To many people involved Quality of service
Order process not measured Reliability
Partnership Online Ordering
Sales order process
Lack of Tooling investment

42

Customer Perspective

Reactive not proactive Good Quality
Some late suppliers Fast turnaround
Unreliable suppliers Reactive
Stock control / ordering Flexibility
Slow machines Knowledge and skills
Wasted movement of parts Internal improvements
Too much paperwork Lean Production
Communication Team work
Scheduling Low cost products
Shop floor Layout Factory layout
Equipment reliability investing in equipment
Need to delegate Good Reputation
SOP’s Technical Support

43

Key Issues Summary
Area Issue Impact
Lead time Request to change Duplicated work + waste
Quantity Changes Increase or decrease Cost impact / Storage space
Drawing accuracy Change control, Spec, clarity Cost / Lead time / errors
Systems / Process Incompatible Lost time / Duplication
Information Missing or incomplete Lost time
Payment Late or delayed ‘On Stop’ Delays/cash flow

44

Benefits and Feedback
“A good system to bring suppliers and customers together to improve future
prospects.”
Mark Edge, ABT Products.

“A great fresher – we now need to transfer to action both within our business and
between our business and our customer.”
Mark Hignett, ABT Products.

“Good interaction by the host companies and within the groups and subgroups.”
David Symons, Hyrdaquip.

Summary
Involve your customers & suppliers in a VSM
workshop

…what’s in it for them?

Health warning!
• Start internally first – control the direction.
• Need good customer / supplier relationships
• Group session or individual workshops?


Employee Benefits
Multi skilled team
Better sense of ownership
Higher Moral
Customer Benefits
Increased flexibility
Fewer defects and errors
Faster, high quality of service
Supply Chain benefits
Reduced cost of poor quality
Increased capacity
Increased throughput
www.LeanBenchmark.org Reduce Cost

Benchmarking

‘If you don’t know where you are going
…any road will lead you there’

Lewis Carol


Purpose of Benchmarking
To compare against a standard point of reference

A systematic process for identifying and
implementing best practice.

In practical terms…
It’s about learning from the experiences of others


Research data kindly provided by : Terry Schilling (Director) GBN

www.globalbenchmarking.org


Research Sample Group
450 Responses 44 countries Report published by GBN in 2010


Types of Benchmarking
INFORMAL - Comparing with Peers and Colleagues
Actively encouraging employees to learn from the experience and expertise of other
colleagues and organisations through comparing practices and processes e.g.
through best practice visits, conferences, best practice websites, networking

FORMAL
(a) Performance Benchmarking
Comparing performance levels of a process/activity with other organisations
(b) Best Practice Benchmarking
Following a structured process for comparing performance levels and learning why
better performers have higher levels of performance and adapting/implementing
those better practices


Benchmarking vs. other Tools
Most used out of the 20
improvement tools are
Mission and vision statements and
Customer surveys (77%). Closely
followed SWOT (72%) and then
Informal Benchmarking (68%)

Tools that are likely to
increase significantly in
popularity over the next three
years are:
• Performance Benchmarking,
• Informal Benchmarking
• SWOT Analysis
• Best Practice Benchmarking.


Benchmarking Trends

• 56% Use Benchmarking

• Performance
Benchmarking is the
most used tool


Benchmarking Trends
Growing interest in
China, the Middle east and
Africa


Business Benefits

1. Improved Performance
2. Improved processes
3. Learning from Others
4. Strategic issue addresses
5. New Products and Service
6. Encourage Cultural Shift
7. Business Excellence


Critical successes factors

1. Management
Support.
2. Reliable comparative
data.
3. Understanding own
processes.
4. Clear project
objectives.
5. Organisations
readiness to change


1. Management commitment is vital.
2. Requires a structured approach with clear objectives
3. Reliable comparative data / willing Partners essential
4. Business benefits both Qualitative (Culture shift) and
Quantitative (Measurable performance gain)
Benchmarking
…a business improvement tool that is growing in
popularity.


Current Users - sample


Comparative data
Manufacturing 178 (245)
Healthcare 28
Automotive 21
Furniture 16
Aerospace and defence 15
Finance / Professional services 11
Food and Horticulture 9
Construction products 8
Printing 3
Marine 2
Other 35

Total 295


Company Size mix

11% 9%

32% 48%

0 to 9

10 to 99

100 to 999

1000 to 9999


What is LeanBenchmark?

• An online tool comparing Lean performance
• Assessment, Analysis, Recommendations
• Personalised LeanBenchmark™ Report


Users comments
Responses from businesses
…cultural transformation

There were a number of benefits to our organisation; this gave us independent
feedback on the status of our lean implementation, it also allowed us to compare
and highlight strengths and weaknesses with others in the lean community and
analyse our current status.

The gap analysis offered useful suggestions for improvement projects. The
assessment also focused on cultural and organisational transformation rather than
just the individual uses of lean tools.

Philipp Schuell (Lean Specialist) Trumpf GmBH & SPI Lasers Ltd.

66

Users comments
…clear and understandable

If you are interested in making improvements within your business then I would
seriously recommend that you consider using this tool as a part of your continuous
improvement tool kit. It really helped to put my company’s Lean competencies into
perspective so that we could look into the future with clear goals ahead of us.
Overall I am very happy with the online Lean Benchmarking tool and with the
after service provided.

The questions are clear and understandable. The report generated after the
questionnaire is submitted is very in-depth. All of the information and help
provided is clear, down-to-earth and informative.

Keiven Smith (Project Engineer) Cobham Microwave Ltd

67

Users comments
…see where to focus next

The benchmarking process has been really valuable, it enabled us to consider how
well we are doing and where we need to focus next. It wasn’t just about seeing how
well our score compared to others (although obviously this was very interesting) the
recommendations within the report meant we could identify what we needed to do
next.

We have now started to build our lean road map with lean objectives linked directly
to the Genzyme businesses goals.

Lesley Coombes (Lean Transformation Manager) Genzyme Ltd

68

Step 1 - Register


Step 2 – self assessment


Step 3 View Results

71

Step 4 – Download your Report


and finally…
Applying Lean principles for growth:
• Remember the 5 golden rules to improve cash flow:
1. Speed up the order fulfilment cycle
2. Only make what you can sell
3. Only buy what you need
4. Reduce WIP
5. Collect what you are owed
• Value Stream Mapping – with Suppliers / Customers
• Benchmark performance against sector competitors
• Develop a growth plan, focus on 8 Lean Competencies


Thank you…Questions?
10 FREE LeanBenchmark™ Vouchers codes
available for today's delegates
(Normal online cost £99)
Contact:
Mark Knowlton MBA
KPS Ltd

Tel 01843 292681
Mob 07880 721471
Email mark@knowlton.org.uk
Blog www.knowlton.org.uk
Twitter @MarkKnowlton


Lean Benchmarking and value chain optimisation

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