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© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Applying LEAN to Medical Device;
Tools or Competitive Strategy
William Owad
SVP Operational Excellence
2© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Session Objectives
• The debate – tools vs management system
• A framework to consider
• A few comments / examples
• Closing thoughts
3© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Who Is This Guy
Early Career
Pharmacy / Health Care admin
$1.5B IDN
FQHC Turnaround
Corporate Quality
Cardinal Health
Pharma Supply Chain
Medical Supply Chain
Pharma Manufacturing
Med device Manufacturing
Retail Pharmacy
Specialty Pharmacy
Corporate Leadership
4© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Essential facts
• Leading provider of products and services across
the healthcare supply chain
• Extensive footprint across multiple channels
• Delivering products to ~60,000 customers daily
• More than 30,000 employees with direct operations
in 10 countries
• #1 on the Gartner Health Care Supply Chain Report – 3
consecutive years
Broadest view of the healthcare supply chain
5© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Alphabet Soup
Value Stream
5S TOC
taKt
GembaDMAIC
P-D-C-A
Operational Excellence
KanBan
LEAN
Kaizen
High Reliability
6© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
6
Transformational Improvement
• Combination of daily
improvement and Value
Stream alignment create
the capacity for
transformation change
• It’s not cost cutting; it’s
value creation heavy
emphasis on enabling
organic growth through
customer driven, customer
focused improvement
Transformational
improvement
Step change
improvement
Incremental
improvement
Time
Imp
rovem
en
t
7© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Time
INSTABILITY
(No sustainable
Improvement)
STABILITY
(Sustainable
Improvement)
OPERATING SYSTEM CHANGE
- Pull, Flow
- Standardization
- System learning & focus
Std Work
Problem Solving
Flow
Visual Controls / Transparency
Future Operating System
IMPROVEMENT FOREVER
•Get control of quality
•Get to schedule
Leadership for Excellence
Source: Lean Enterprise Institute
8© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
5 Paradigms
Focus both on results (what) and behaviors (how)
Behaviors flow from principles that govern
outcomes
Principles enable sustaining over the long term
Alignment to principles shapes how people behave
Methods and Tools are enablers to allow systems
to achieve improved results and behaviors
9© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Four Dimensions
Where are you
spending
your time?
Create ValueMeasure what Matters
VisionAs clear as Possible
ASAP 2 ?As Simple As Possible
ASAP 1 ?As Safe as Possible
10© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Guiding Principles
1. Respect Every Individual – it all starts and ends with People
2. Lead with Humility – to enable change and innovation
3. Seek Perfection – No problem is a big Problem
4. Embrace Scientific Thinking – seek to understand to be
understood
5. Focus on Process – Poor processes result in poor outputs
6. Quality at the Source – Stop and Fix
7. Flow and Pull Value – True measure of value transfer
8. Think Systematically- Understanding how things work together
9. Maintain Constancy of Purpose – Why does the organization exist
10.Create Value for the Customer – Only the customer can define
value
Ideal Results Require Ideal Behavior
Beliefs and Systems Drive Behavior
Principles Inform Ideal Behavior
11© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Authority by leaders of organizational units (vertical delegation)
with cross-function disputes referred to higher levels of authority
Managers measured on end-of-the period results for their span of
control, primarily Financial.
Planning and Direction is from Top Down
A good Plan produces the desired Results (justifying a
compliance/blame focus.)
Decisions made far from the point of value creation, by analyzing
data.
Problem solving and improvement conducted by staffs, often
through Programs.
Strong emphasis on the vertical flow of Authority, looking upward
toward the CEO
Traditional - Directing
12© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Leading in a very different way:
By setting the vision (more why than how)
Setting challenging expectations at the individual level
By cascading responsibility (Transparency)
Creating Empowerment
By letting others to take initiative (Performance)
Coaching and teaching
By making information available
Creating horizontal decision making
Lean - Coaching
13© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
What do we know about how people learn?
Through experience
Through mistakes
Through trail and error
How can we build structured opportunities for
people to learn the way they learn most naturally?
Rapid Improvement as a model for OPERATIONAL
LEARNING
A System for Operational Learning
14© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
PROCESS
IMPROVEMENT
Continuous,
real, practical
changes to
improve the way
the work is done
CAPABILITY
DEVELOPMENT
Sustainable
improvement
capability
in all people
at all levels
- Value-Driven Purpose -
“WHAT PROBLEM ARE WE TRYING TO SOLVE?”
Basic Thinking, Mindset, Assumptions
That drive this transformation
Responsible
Leadership
MANAGEMENT
SYSTEM
Lean Transformation Model
14
Source: Lean Enterprise Institute
15© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Transformation Questions - LEI
1. What is our purpose or what problem are we
trying to solve, what value to create?
2. How do we improve the actual work?
3. How do we develop the people?
4. What role must leadership take and how
does the management system support the
new way of working?
5. What basic thinking or assumptions underlie
this transformation?
16© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
LEI’s Overall Learning Points for Leaders
1) Leadership is demonstrated by understanding the facts,
not through reports
2) You must be a coach and a learner
3) Focus on and support improving the process and through this,
developing the people.
4) Challenge organizational assumptions
5) For problems to be solved continuously, the leader must:
a) Motivate to True North
b) Create culture for problems to be brought to the surface
17© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Three Keys to Change
Go See.
• Observe the work
Ask Why.
• Seek to Understand
Show Respect.
• Respect the people who do the work
18© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
4 Key Questions to Answer
How People Work?
Is the work specific and repeatable
How People Connect?
Communication should be clear and direct
How Processes Flow?
As simple and direct as possible
How to Improve?
Applied at the lowest level possible following scientific
methods
19© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Essential to Excellence
Foundational Capability:
Ensure continuous improvement
and operational excellence as
part of our go-to-market strategy
20© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Transformation Business Case
• Are we working on the “Quality” of the business or the business of quality
• “Quality” is a governance and strategic imperative
• An “Integrated” approach to Excellence is essential -it delivers what the customer values at minimum cost
• Aligning “Value Streams” will align the opportunities
• Remember the majority of work activities are deliveredat the local level
21© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Key Elements
• A system of daily improvement
– Visual controls
– Huddles
– Methods to support daily problem solving
• A method to escalate and support problems that cross
organizational boundaries
– Kaizen
• A method to align and improve key value streams
• A integrated management system
22© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Cardinal Health Deployment principles
Cultural objective
• Drive the business from the customers’ point of view
• Align projects and resources to key strategic drivers
• Drive continuous improvement methods broadly into all
areas of the business (the way we work)
• Embed common language / process thinking/skills /
methodology throughout Cardinal Health
• Require Lean Six Sigma as a leadership
development tool
• Achieve zealous leadership involvement and support
23© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Result: Culture Driven Transformation
Line ofSight
CustomerLoyalty
TeamworkMindset
Empower
Culture
Employees that are:InspiredEngaged
24© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
2005
•May 2005, full deployment launch
•12 Site Assessments
•June, Sponsor, BB, Kaizen
•December summit
2004
•Pre-launch - 2004
•Process improvement
•Quality and Operations
•Sizing the opportunity
•Evaluating the capability
•Drive cost out
20072006
•January – accelerate
•June –169 BB, 297 GB, 209 KL, 1,600 sponsors,
•Shift to “Value Stream”
•Pharma Lean
•Innovation awards
•Top Gun
•Medical lean
•MBB promotions
•June - 160 BB (net of 55 “PTS), 835 GB/ KL
2008
•Shift to “Value Creation”
• Supply chain lean
•Talent Review and requirements
•Top Gun
•June - 209 BB, 1,037 GB/KL
2009
•Top Gun
•MBB promotions
•June:- +65 promotions
•Full value stream view
•Lean office
•HVN Sponsor
2010
• Enterprise capability
•Perfect processes
•Value stream alignment
•+95 promotions
•1,025 improvement projects
20122011
• Lean Road Maps- full enterprise
•MBB Internal candidates
• Shingo Assessor workshops with HVN
•Lean Leader
•300+ promotions
• > 6,000 projects
• >100 customerengagements
Operational Excellence...a Journey
© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Closing Thoughts
26© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Vision – World class behaviors
• Achieve absolute customer preference built on execution
• Create a culture that relentlessly pursueswaste elimination, cycle time minimization, and customer loyalty
• Embed metrics that drive operational excellence goals and culture
• Achieve full productive utilization of resources and assets
• Drive zealous leadership participation
27© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Lesson #1 –It will take courage to be honest and
transparent regarding the “True” quality of your organization
28© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Lesson #2 –This is bigger than a “cost out”
program. EXCELLENCE is about
connecting the entire value chain to create value. (ie. GROWTH)
29© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Lesson #3 –Leaders must be willing to “Break Glass”
30© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Operational Excellence Changing how you think
• Everything I do affects the customer
• Continuous improvement mentality (we can do better)
• Question why
• Think in order of quality, delivery, cost throughout all
our work and processes
• Stop and fix mentality (see an issue, address it)
30
31© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Lesson #4 –You must create experiences that
create a “Chip Change” – Goodbye to “That’s the way we do it”
32© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Lesson #5 –Stay the Course, the immune response
will be strong! See and “connect” the value stream; it is vital.
© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Q & A
© Copyright 2011, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Thank You
William Owad, FACHE
SVP, Operational Excellence
7000 Cardinal Place
Dublin, Ohio 43017
614-757-2849