"Lean Manufacturing and the Environment"

Mitch Kidwell

Target (available at www.ame.org)

Sixth Issue 2006, pp. 13-18

The Environmental Protection Agency (EPA) has become very interested in the practices of lean manufacturing. In fact, "environmental waste" has now been added as the 8th Deadly Waste for manufacturers.

Lean manufacturing caught the eye of the EPA when case studies started to demonstrate that Lean Activities intended to increase production efficiency were also attaining very significant reductions in environmental waste. In 2003, the EPA won a Shingo Prize for a report documenting these case studies. The report can be downloaded at www.epa.gov/lean/leanreport.pdf (524KB PDF).

Members of the EPA began participating in actual AME-sponsored kaizen events held by manufacturers. The EPA has promoted the concept of "pollution prevention" for a number of years. Most pollution prevention strategies save money over dealing with environmental waste at the end of production. The EPA is now actively encouraging manufacturers to include Environmental Health & Safety (EHS) personnel in Lean activities. The perspectives of these individuals provide added insights into environmental cost savings that might not have been considered otherwise.

The EPA has also created a publication called "The Lean and Environment Toolkit". Much of the information provided involves traditional lean tools, but there are also additional aspects that more fully incorporate the environmental perspective. This toolkit can be downloaded at www.epa.gov/lean/toolkit/lean_environment_toolkit2.pdf (1.08MB PDF).

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"Understanding Customer Experience"

Christopher Meyer and Andre Schwager

Harvard Business Review

February 2007, pp. 117-126

The authors of this provide the following definition: "Customer experience is the internal and subjective response customers have to any direct or indirect contact with a company." Direct contact is most often initiated by the customer, and it occurs in the course of purchase, use, or service. Indirect contact refers to unplanned encounters with any sort of advertising, news reports, word-of-mouth or other references to the company, its products, or its services.

The article discusses three patterns of customer experience information:

• Past patterns—These assessments look at recent experiences that have already occurred. The intent is to improve transactional experiences, to track experience goals and trends, to assess the impact of new initiatives, and to identify emerging issues. Surveys or user forums are the most common data collection methods.
• Present patterns—These assessments have a broad scope, and may ask about perceptions of the company in relation to its competitors or new features the customer might desire. The intent is to keep a watch on the state of the current relationship, to look forward as well as backward, and to keep watch on more critical populations and issues. Direct contact, user forums, and focus groups are common approaches used.
• Potential patterns—These assessments try to check out receptivity to future plans or potential solutions to unique customer problems. Specific customers are sought out for their perspectives.

The authors state that customer experience includes every aspect of the company's offering, and especially the quality of customer care, advertising, packaging, ease of use, reliability, product features, and service features. Every function has a role to play in maximizing the customer experience: Marketing must capture, and circulate through the company, the tastes and standards of each important market segment. Service Operations must ensure that proper attention is given to every customer "touch point". Product Development should understand customer use and frustrations with use. Information Technology needs to organize and present customer data in a digestible way for employees. Human Resources should convey how Customer Experience Management should affect work and decisions.

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"Discovering Your Authentic Leadership"

B. George, P. Sims, A. McLean, and D. Mayer

Harvard Business Review

February 2007, pp. 129-138

The authors remind us that "Authentic leaders demonstrate a passion for their purpose, practice their values consistently, and lead with their hearts as well as their heads. They establish long-term, meaningful relationships and have the self-discipline to get results. They know who they are."

To further pursue this concept, 125 leaders were interviewed to see how they became and remained authentic leaders (They were chosen for the study based on their reputation for authenticity and effectiveness as leaders). The authors found no universal traits, styles, skills, or characteristics. What they did find was that the journey to authentic leadership begins with "understanding the story of your life." Most of these stories involved overcoming difficult experiences, and using these experiences to understand who they were at their core. They also discovered that being authentic made them more effective as leaders.

The most common themes from the interviews of how to become an authentic leader were:

• Learn from your life story
• Know your authentic self
• Practice your values and principles
• Balance your extrinsic and intrinsic motivations
• Build a support team
• Integrate your life by staying grounded
• Empower people to lead

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"Motivating Lean Behavior: The Role of Accounting"

Peter Brewer and Frances Kennedy

Cost Management

November/December 2006, pp. 22-29

This article contends that "lean accountants" can help build a culture of intrinsic motivational commitment in five ways:

• Enable process ownership
  • Use measures that can be understood by all employees
  • Use measures that show employees how their efforts drive overall success
  • Provide information when it is needed to make decisions
• Think sales growth first
  • Provide information to help answer questions about what the process constraints are and how to alleviate them
  • Treat employees as assets, and redeploy people as improvement efforts make them available
  • Use layoffs only as a last resort
• Adopt the enterprise lean view
  • Define value steams from the customer's point of view
  • Use value stream maps to streamline the information management side of the business
  • Satisfy financial reporting and SOX compliance with fewer resources to free up people for lean accounting
• Become a business partner
  • Seek to learn from those with process knowledge
  • Participate in kaizen events and readily recognize their success
  • Build shared commitments and goals with value stream and cell team members
• Adopt a long-term view
  • Proactively manage expectations regarding short-term hits to the income statement as inventory shrinks
  • Recognize nonfinancial performance improvements in value streams and cells as the drivers of future financial success
  • Participate in recognition events for nonfinancial improvements

This article also discusses six elements of the "lean measurement mindset":

• Lean measurement systems are strategy-driven
• Lean measurement systems capture the voice of the customer
• A lean measurement system tracks measures related to process excellence
• Lean measurement systems provide visibility
• Lean measures build shared commitment
• Lean measures motivate a continuous improvement culture

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"Manage a Living System, Not a Ledger"

H. Thomas Johnson

Manufacturing Engineering

December 2006, pp. 73-80

Johnson provides a totally different perspective on Lean and Accounting than Brewer and Kennedy's in the above article. Like other paradoxes in Lean (such as being more productive through One-Piece Flow), Johnson argues that Toyota looks at improving financial results in a totally different way than most companies do: "It's hard for Americans to understand that a business organization cannot improve its long-run financial results by working to improve its financial results. But the only way to ensure satisfactory and stable long-term financial results is to work on improving the system from which those results emerge."

Toyota relies less than other organizations on second-hand reports and data, and emphasizes continuous improvement and problem-solving instead. The work at Toyota has been carefully designed so that the current state of each process is clearly visible. The author calls this approach "Managing By Means". He compares Toyota to a Living System, and says that "satisfactory business results follow from nurturing the company's system—the "means"—not from manipulating and wrenching its processes to achieve predetermined financial results."

Trying to achieve short-term financial results only leads to employees building work-arounds that violate the necessary sound systems principles needed for true improvement and competitiveness.

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Lean Beans: Micro Measures That Work

John McNeil, GP
 

While recent quality reviews have been very unkind (see Car and Driver, Feb '07, or Autosite.com's review of the 2007 Camry), Toyota certainly is a juggernaut at making money, seemingly as an unintended byproduct of making cars. And their approach to doing so is systemic and comprehensive, as indicated by the Johnson and the Brewer articles. Is this Japanese magic or mojo, or something that any organization can emulate? In his well-regarded texts (The Toyota Way, and The Toyota Way Fieldbook), Jeffrey Liker points out that the superficial or readily replicable Toyota tools are not as important as an overall philosophy and culture of cost reduction, problem solving, customer focus, and people development. But to disregard the tools is foolish, including adapting measurement systems that drive success.

We hesitate to use the term lean accounting because accounting is so strongly tied to financial measures. And much of the success of the Toyota system can be traced to a much stronger tendency to measure time and deviations from standards than to measuring money. Toyota's measures also occur at a very local level: if localized teams do everything that they are tasked to do and execute every improvement that they have agreed to make, the "means" have been met and the money then results, as pointed out by Johnson. So a better term than lean accounting might be lean management or lean stewardship, but the problem remains for an organization with lean aspirations: what exactly should we measure?

Here are some clarifications and amplifications of Brewer's message. "Measures that can be understood by all employees, that show employees how their efforts drive overall success; and provide information when it is needed to make decisions" will all be local production measures related to the rate expected of work and the quality that is expected by immediate and final customers. They will be understandable because they will be the language in which supervisors should already converse directly with their employees. They will seldom be denominated in dollars. "Process constraints and how to alleviate them" are measured again in time, waste and quality terms. Sound easy? It isn't. Switching from money to time is as significant as the change from AM to FM radio (and the analogy stronger than you might think). But confronting the effort to do so will soon make one organization the largest auto manufacturer in the world. You, too, with a renewed focus on time and standards adherence, may just be ready to deploy your lean bean team.

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