"Improving Competitiveness Through Non-Value-Added Activity Analysis"

Jesse Barfield, Caroline Fisher, and Jerry Goolsby

Cost Management

July/August 2004, pp. 22-32

This article provides a very good overview of the topic of adding value in operations. Four subjects are explored:

1. Defining value—The most popular approach has been to view value as the ratio of benefit received to cost expended. Some people define benefit in terms of customer satisfaction, while others focus on benefit to the quality of the product/service. Definitions of cost also vary. Therefore the authors suggest that "It is absolutely necessary that an organization, prior to an assessment of value-adding activities, define the meaning of value, benefit, and cost that will be used."
2. Assessing value in activities—Identifying value-added and non-value-added activities is a key step. The authors define value-added activities as ones "that improves the output received in the perception of the customer." A non-value-added activity "does not improve the output for the customer and, in addition, consumes resources for which the customer cannot justify paying."
3. Minimizing non-value-added activities—Methods include:
   • Eliminating non-value-added activities
   • Reducing the scale of non-value-added activities
   • Streamlining the performance of the activities
   • Substituting a more efficient alternative activity
   • Outsourcing the activity
   • Minimizing the impact of the non-value-added activities
4. Implications for management—The authors suggest initiating a systematic process to identify non-value-added activities, training managers and workers in such tools as flowcharting and process mapping, and creating a culture that supports and encourages challenging the organization's assumptions.

Back to top of page

"How to Lead a Self-Managing Team"

Vanessa Druskat and Jane Wheeler

MIT Sloan Management Review

Summer 2004, pp. 65-71

The authors of this article studied 300 self-managing teams in a large manufacturing plant in the Midwest. The study focused on the external leaders of these teams. These leaders were the ones held responsible for the team's performance, and they also served as the link to higher levels in the organization.

Research has already shown that a key to the success of self-managing teams is the delegation of considerable decision-making authority and flexibility to the self-managed team. However, this study found that a number of leadership behaviors and activities could be identified as contributors to building the foundation for team empowerment. In all, the authors of this study identified four general functions and eleven behaviors that contribute to those four functions:

The first function is relating. "External leaders must continually move back and forth between the team and the broader organization to build relationships." Three behaviors that contribute to relating are:

• Being socially and politically aware—Superior external leaders showed an understanding of concerns and decision-making criteria of constituencies in various departments and the broader organization.
• Building team trust—Superior external leaders understood the importance of building bonds of trust with the team members. They demonstrated that they had were keenly interested in the success of the team, and that they could be relied upon to help work towards that success.
• Caring for team members—Superior leaders recognized that team members' personal problems were not merely impediments to getting the work done. They understood that these were opportunities to build relationships.

The second function is scouting. This refers to the proactive work needed to fully understand all aspects needed to make the team successful. The three behaviors that contribute to scouting are:

• Seeking information from managers, peers, and specialists—Superior external leaders were more likely to seek advice and technical information from others in the organization. This behavior proved useful both in influencing the team's decision making and in advocating effectively for the team.
• Diagnosing member behavior—External leaders are rarely physically present when critical events occur in the self-managed team. The superior leaders were more skilled at analyzing and making sense of second hand information from the team members.
• Investigating problems systematically—Superior leaders gathered more data and input, enabling them to make better-informed recommendations that would be acceptable to both external constituents and to the team members themselves.

The third function is persuading. The two behaviors that contribute to persuading are:

• Obtaining external support—Average leaders seek external support from the broader organization less frequently, and they are less successful in obtaining the support when they do seek it.
• Influencing the team—Superior leaders were more skillful in guiding their teams to decisions that were in the best interest of the organization.

The fourth function is empowering. The three behaviors that contribute to empowering are:

• Delegating authority—"average leaders tended to be more fearful about delegating authority, and they would often make decisions for the team and solve its problems covertly"
• Exercising flexibility regarding team decisions—"even when a team has to be reined in, superior leaders did so only after considering the proposal as open-mindedly as possible"
• Coaching—"superior leaders focused on strengthening a team's confidence, its ability to manage itself and its contributions from individual members. A common coaching behavior was for leaders to work with people who had just taken on roles of greater responsibility."

The authors sum up the results of their research by stating that superior leaders were able to develop strong relationships both within the team and with the rest of the organization. Average performers tended to do well with one or the other, but not with both.

Back to top of page

"'Lean' and the Toyota Production System"

Robert Hall

Target

Volume 20, Number 3, 2004, pp. 22-27

[Note: Target is only available through membership in the Association for Manufacturing Excellence (AME). They can be contacted at (847) 520-3282.]

This article provides an overview of how (according to the author) the original Toyota Production System, as practiced in Toyota locations, differs from "lean manufacturing" as practiced by other manufacturers. While not downgrading Lean as a very valuable approach, the author implies that Toyota has some special attributes that are very difficult for other organizations to capture or imitate.

The author contends that the main differences are:

• Lean Manufacturing usually starts with Value Stream Maps to better understand the overall picture of current processes, while Toyota emphasizes first what every process and sub-process should do to move towards the target of zero defects. Toyota tries to squeeze the waste out of sub-processes before attempting to link them closely.
• The Toyota Production System spotlights maximum visibility of waste, prompting more kaizen. Employees are socialized to be always looking for new ways to make improvements. Lean Manufacturing is usually less focused on this "never-ending" aspect
• Lean Manufacturing implementations are more likely to be "engineered" by staff, and to be planned in detailed ways. The author of the article says "A well-structured lean implementation may consider adoption of the tools to be a success, but allow people to remain underdeveloped in problem solving and detailed process problems to remain hidden." Toyota Production System creation is more organic, and does not focus on engineering cultural change or other aspects: "The premise is that workers have vast, untapped potential waiting to be tapped."
• The Toyota Production System emphasizes more worker development, as the basis for ongoing problem solving. Workers learn more primarily through direct experience. The Lean approach usually places more emphasis on formal training than Toyota does.
• The Toyota Production System converts managers to valued "coaches", rather than the approach sometimes used by Lean implementers who may wish to reduce the number of managers to reduce cost.
• The Toyota Production System places more emphasis on standardized work, including documentation, improvement process, layout, work sequence and work methods. Standardized work simultaneously combines holding the improvement and continuous improvement. This is an ongoing effort that takes time to mature. Lean implementers usually do not dedicate as much effort to this process.

Back to top of page

"The Building Blocks of Service Excellence"

Michael Schmidt and Steven Aschkenase

Supply Chain Management Review

July/August 2004, pp. 34-40

Over the last 15 years, Caterpillar has greatly improved its supply chain efficiency and responsiveness for service parts. They have done this without any negative impact on service quality. In the 1990's the company focused on "staving off competition and managing product support like a business."

Since the year 2000, Caterpillar has focused its service parts improvements on two initiatives-reintegrating its Cat Logistics business and developing a Six Sigma program across all parts of the corporation. Some of the Six Sigma results have included improved forecasting (adjusted for seasonal fluctuations), optimization of inventory levels for a complex mix of fast- and slow-moving parts, and adoption of the Lean approach for distribution (through accelerated receiving, speeding up the pick process, and kit-to-order).

Over the past four years, productivity for operations has increased by over 50%. Fulfillment errors have decreased by 64%. Annual warehousing costs for service parts have been reduced by $400 million. Total service parts inventory has been cut by 33%.

The author recommends seven areas that are generally good places to start to address aftermarket supply chain challenges:

1. Staff key positions with the right people
2. Cleanup your inventory data
3. Manage inventory with statistics, not rule of thumb
4. Apply lean methodology to distribution
5. Adhere to basic principles for supplier management
6. Focus your collaboration efforts
7. Establish a scalable and flexible IT infrastructure

Back to top of page

"Ten Steps to Lean Production; Steps 9 and 10: Pokayoke, Autonomation and Computer Integrated Manufacturing"

Steve Hunter

FDM

June 2004, pp. 20-23

The final article in this series focuses on pokayoke, autonomation, and computer integrated manufacturing.

Autonomation is defined in the article as "developing devices and processes, including devices in manufacturing processes, which automatically prevent that process from making defects or another form of waste—overproducing."

Pokayoke refers to any device that can check critical part dimensions and provide feedback so that the process can be immediately improved before any defects are made.

According to the author, computer integrated manufacturing allows information systems in the factory to "interpret data in more than the conventional data processing sense. Instead of merely performing repetitive calculations on the data, the system will understand the inherent relationships in the data."

Back to top of page

Four Stages of Manufacturing Improvement

John McNeil, GP Deltapoint

Medium sized manufacturing organizations face a unique set of challenges in striving for operational excellence. They are not large enough to afford staffs of Black Belts and MBAs. They are not small enough for the key managers to be part of the same family or college class. They must evolve their way to excellence. GP Deltapoint's successful clients have progressed through the stages below. Where do you stand?

1. Starting Out: What's Lean?

In the early stages, companies focus on waste elimination. Quick changeover (SMED), continuous flow, Five S and Total Productive Maintenance (TPM) are implemented, often with the help of Rapid Improvement or Kaizen workshops. Expect that each of your employees, both in the office and the plant, will have actively participated in five or more events over a two year period and for up to one in ten managers to be engaged full time in process improvement.

2. Stepping up the Pace: Core Change

As current processes become leaner, leading companies dig into product and process design to improve the internal value of product development, examining how to balance marketplace needs with improved manufacturing processes to provide a competitive edge.

Improved products flow from such tools as Design for Six Sigma (DFSS) and Production Preparation Process (3P) that codify and standardize development efforts.

3. Analytical Excellence: Fast Thinking

While Six Sigma can be implemented independently of Lean, the two are better as complements to each other. Six Sigma is one of a family of organized, multi-step problem-solving methods. Quality Improvement Story (QIS) emphasizes visual communication and team involvement for deviations from standard work. The DMAIC method from Six Sigma encourages the use of analytical tools such as Designed Experiments to solve more intractable process problems.

4. Standardizing success: Re-Humanizing

Analysts and leaders are essential in a drive for improvement. But the gains can only be held if the production workers own and in fact continue the development of the improvement effort. Standardization is key to success here: but not a rigid adherence to engineers' rules. What is needed is a continuously evolving agreement to work in the best way; teach everyone to follow the agreed methods; monitor themselves for variation and failures; and then change the standards, starting the cycle again.

Back to top of page