Call it a revival of the Efficiency Movement in the United States, lean manufacturing models are re-emerging in business sectors worldwide, including Utah. The convictions behind using lean manufacturing models are not so different now than they were historically; all aspects of the economy, society and government are riddled with waste and inefficiency—everything would be better if experts not only identified problems, but fixed them.
Lean manufacturing is a practice that considers the expenditure of resources for any goal other than creating value for the company or customer to be wasteful, and a target for elimination.
According to global management consulting firm Accenture, more than half of all U.S. manufacturers have embarked on some kind of lean manufacturing initiative. “In Europe, I believe that figure is at least 50 percent and perhaps up to 70 percent, says Paul Olsen, public relations manager at the Manufacturing Extension Partnership of Utah. “In Utah, we would be similar to the U.S. number—50 percent, perhaps 60 percent. I would say the larger manufacturers would be at least in the 70 to 80 percent range.”
But today, lean processes are also practiced in businesses in the public and private sectors, in industries as diverse as insurance, software and retail. In particular, health care, government and education are hotbeds for debate concerning efficiency, effectiveness and costs. In these sectors, at least in Utah, lean principles may be coming to the rescue.
Creating a Competitive Workforce
Two years ago, former Utah Gov. Jon Huntsman launched the 21st Century Workforce Initiative to study and enhance how Utah’s workforce development system is preparing for an increasingly global market. He formed a Globally Competitive Workforce Steering Committee comprised of leaders and representatives in the public and private sector to lead the initiative. The methodology selected as the initiative’s analytical framework was Lean Six Sigma, a model that included rigorous tools and proven techniques to extract solutions and achieve results while minimizing resources and increasing accountability.
“The Governor was really on board with this,” says Kristen Cox, executive director of the Utah Department of Workforce Services (DWS), and a member of the committee Huntsman recruited to lead the effort.
During the summer of 2008, expert volunteers, nominated by the Steering Committee, used Lean Six Sigma as a tool for discussion during a series of intense working meetings called “SMART” (Stakeholder-focused, Measure and data-driven, Action-oriented, Responsive to customers, and Time-bounded) sessions. Highly qualified Lean Six Sigma experts facilitated the sessions, and helped participants identify problems and solutions to improve workforce development.
The participants represented educators and education leaders, professionals from large and small companies, labor leaders and government representatives who deal with workforce issues and economic development. “In an environment and process where they could look at the system, not just the parts, many insights surfaced and were discussed,” the Steering Committee said in its final report to Huntsman.
“It’s a tool to create a shared understanding in developing a plan,” explains Cox. “In this case, it was used looking at the whole system of education and workforce.”
Giving a Different Perspective
Session participants developed project plans to test recommended solutions using the Lean Six Sigma DMAIC model (Define, Measure, Analyze, Improve and Control). Then they presented their plans to the Steering Committee, who in turn, presented the plans to Huntsman.
“During these sessions, participants used data, a systemic view of workforce-related processes and their collective backgrounds and perspectives to assess the current systems and processes, and identify opportunities for improvement,” the report said. “There were many times during the summer when people who have made careers in the area being discussed saw things from a different perspective and over time concluded we can improve.”
Though Huntsman was appointed Ambassador to China only months after the report was finalized, Cox says the sessions were an overall success and led to change.
“It was a good report, the recommendations are solid and I think it will now be up to Governor Herbert and his education commission to review it and decide how to move forward.”
Cox also says the sessions created increased collaboration between the Utah Department of Higher Education and the Governor’s Office of Economic Development (GOED) to better leverage resources and funding. “We are taking some of the recommendations on how we identify occupations and demand and make decisions. So even though Governor Huntsman left, there are still pieces of [the report] that are impacting how we’re doing business.”
Through the sessions, Cox says, participants discovered how to better assess student competencies and improve teacher qualities, and how to better align curriculum with the demand of industry and employers. “The effort for higher education and workforce services to partner in forwarding economic development in Utah is a by-product of this 21st century initiative.”
Breaking the Bottlenecks
In the meantime, Cox says lean principles are actively creating value-added results at DWS.
“Government is a series of processes that are linked together to implement policies,” she says. “Government’s really great at creating policies and new programs, but not always at looking at the processes involved in implementing them. So we started using lean, six sigma and theory of constraints in our own internal processes.”
Cox says DWS uses Theory of Constraints for eligibility work. The $70 million division has since reduced its costs by $9 million and its staff by 10 percent. In the meantime, food stamp requests are up 47 percent and unemployment insurance claims are up 101 percent. “So to reduce costs and staff at a time when case loads are up is pretty significant.”
While Cox says part of the results can be attributed to reorganization, she adds, “The point is that process improvements ought to be part of every government organization: How do you process your forms, how do you move them through the system, how do make sure that you’re meeting your targets? [We need to be] wise stewards of tax payers’ dollars, that we are efficient in how we administer our programs and services.”
Cox says the department is also considering using the Theory of Constraints to identify where to target automation activities. “Where you automate and what you automate requires some kind of process improvement tools,” she says. “You don’t want to automate a process that’s not efficient and creates a bottleneck, so how do you prioritize your automation process?”
Having experience working with several lean methods, Cox says, “These tools are applicable across the board—in government, in nonprofits, in education—it’s just simply looking at processes, how their lining up with your outcome and how you really achieve your goals.”
Jane Wallace, PhD, RN, is a long-time quality control/improvement advocate. And as an implementation scientist at the Utah Prevention Epicenter, it's her job to understand the processes that occur between health care providers and patients.
The Epicenter is a participant of the federal CDC (Centers for Disease Control) program, which supports HAI (Health-care Acquired Infections) prevention strategies by funding extramural research through a network of academic centers. Essentially, Wallace is on health care’s frontlines, studying what's wrong and implementing quality improvements.
“If you experience the health-care system, it's far from providing in an ideal way, which is to be squarely focused on what the patient needs at all times,” says Wallace, mentioning that HAIs account for nearly as many deaths, about 90,000 per year, than all other medical infections combined. “It's a very serious problem that's facing us.”
Wallace heard about lean processes, particularly the Toyota Production System, through a network of people in her field. She knew it could be a promising solution to HAIs in Utah. “The Epicenter is interested in systems redesign. Its essence is focusing on what the patient needs and the things that get in the way of that.”
Last year Wallace and Jean Mayer, MD, hospital epidemiologist at the University of Utah Hospital, wrote a grant to investigate problems that interfere with effective infection prevention practices. The project illustrated how various items in the health-care environment, such as technology and tools, tasks, people and the organization, flow with HAI preventions and outcomes.
“If [you have] a systems issue, then the approach has to be a systems approach,” explains Wallace. “Lean processes are a systems approach to problem solving. If you implement them, it's not about tools and methods; it's about providing what the customer wants and removing barriers to that. In the health care system, that’s the patient.”
In Sept. 2009, Wallace, became the project's principal investigator at the Intermountain Burn Unit on the University of Utah Health Sciences medical campus. With Mayer and other investigators, she set out to define problems and goals, measure current processes, analyze problems, implement and evaluate desired processes, and control the new processes. In April, 2010, Wallace wrote of summary of findings and conclusions. New processes were in place without problems; others have been implemented, but require monitoring and feedback processes.
“The big message is we have scratched the surface—we have made good progress,” explains Wallace. “But most of those statuses show ‘needs further work, ongoing.’ And the important message there is that just because you implement a lean process doesn’t mean that it’s a sustainable activity. And that's what we're interested in: sustainability. We have demonstrated in a local environment that this process has been associated with some successful activities. But it is in my opinion far from sustainable
without continued effort, energy and support.”
No Better Time than Now
“Lean works wherever there is a flow of people and paperwork,” explains Dave Sorensen, center director of the Manufacturing Extension Partnership of Utah. It’s a way, he says, to create more output with the same resources, and increase capacity and activity. “Lean doesn’t let you drop to the bottom line.”
Inventor Thomas Edison lived during the Efficiency Movement of the late 1800s, early 1900s. He said then that waste is worse than loss. “The time is coming when every person who lays claim to ability will keep the question of waste before him constantly. The scope of thrift is limitless.”
In the midst of recession-driven losses and a slow rebounding economy, more business leaders in numerous sectors, industries and companies are indicating that there is no better time for an efficiency movement than now.
Tools of the Trade
Which Lean Method Can Work in Your Business?
*The Toyota Production System (TPS): The main objectives of the TPS are to eliminate inconsistencies and waste and drive up value. "TPS works in companies or any business that wants to improve and sustain their performance, growth and profitability,” says Dave Sorensen, center director, the Manufacturing Extension Partnership of Utah.
*Lean Accounting: The application of lean methods to a company's accounting, control and measurement processes can eliminate waste, free up capacity, speed up processes, eliminate errors and defects, and make the processes clear and understandable. Lean accounting does not require traditional management accounting methods such as standard costing, activity-based costing, variance reporting and cost-plus pricing. “For any businesses that has accounting processes,” says Sorensen.
*Demand Flow Technology (DFT): A strategy to define and deploy business processes in a flow, driven in response to customer demand. Companies who implement DFT are typically looking for an improvement in the response to customer demand. "Businesses such as manufacturers and distributors who want to change from 'schedule-push' to ‘customer-pull' can find DFT useful," says Sorensen.
*Theory of Constraints (TOC): TOC contends that any manageable system is limited in achieving its goal by constraints, and that there is always at least one constraint. The TOC process seeks to identify the constraint and restructure the rest of the organization around it. The underlying premise of TOC is that organizations can be measured and controlled by variations on three measures: throughput, operating expense and inventory.
"TOC is useful in services and products companies that encounter kinks in the flow of service delivery or production that cause disruption to customer delivery,” says Sorensen.
*Six Sigma: A set of practices designed to improve processes and eliminate defects, defined as any process output that does not meet customer specifications or that could lead to creating an output that does not meet customer specifications. “It works in all parts of a company,” says Wayne Stewart, CEO of Promontory Management Group, a Layton-based process improvement company. “It was created in the manufacturing world, but many of the best Six Sigma projects come from areas like finance, quality, HR, supply chain, distribution, marketing, sales and facilities.”
*Lean Dynamics: A business management practice that emphasizes the same primary outcome as lean production eliminating waste. But its focus is on conditions that cause wastes to accumulate in the first place, like fluctuating conditions that affect operational stability or predictability. Local lean experts say it can be applied in a wide range of service, medical and retail industries, and those that stand out during a crisis, such as the airlines. Its methods have been studied for aerospace and defense.
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Green and Lean’s Natural Fit
While lean can streamline businesses and save money, the techniques also have environmental benefits. Since lean is conducive to waste minimization and pollution prevention, it typically results in less material use, less scrap, reduced water and energy use, and decreased chemical use.
As a matter of fact, in recognizing lean's benefits to the environment, the
Environmental Protection Agency (EPA) developed a toolkit specifically for
lean operational managers, environmental practitioners and lean practitioners who work toward organizational efforts to identify and eliminate environmental wastes. The toolkit, available on the EPA’s website, www.epa.gov
, can introduce anyone to incorporating environmentally conscious practices into lean activities. “It may help align your environmental management system’s goals and objectives as a routine task of your lean initiatives and business decisions,” the website says.