Operational Excellence Framework

For The Lean Enterprise

Created and Proven by Phil Williford

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Value CUSTOMERS

Traditional Operational Business Structure

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A traditional operational business structure is made up of individual business departments or “silos”, which are not aligned with the creation of value for the customers. Each department is focused on departmental objectives and goals instead of the creation of overall customer value.

Sales & Marketing

Customer Service

Value Stream #2

Value Stream #4

Value Stream #3 QA/RA

Value Creation

EXTERNAL CUSTOMERS

Lean Enterprise Operational Business Structure

The Lean Enterprise operational structure replaces the traditional “silo” structure with product Value Streams, where the focus is the elimination of waste and the creation of value for the customer. Support functions are aligned with the value streams in the creation of value and the value streams in turn are aligned with the customer facing functions which interact directly with external customers.

Value Stream #1

Value Stream #5

Value Stream #6

Distribution #7

HR

Finance

R&D / NPD

I.T.

Value Creation

Support Functions

Customer Facing Functions

Facilities

Receiving

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Elements of the Lean Enterprise Operational Excellence Framework

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Operational Excellence Framework

Operational Excellence Framework

Lean operational excellence is not achieved by superficial imitation or the isolated and random use of lean tools & techniques and systems, but instead requires an understanding of the underlying principles and how those systems are applied as a unified framework with a clear strategy to drive financial results.

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Lean Enterprise Visual Management System

Value Stream Daily Departmental

Boards

Visual Leadership Center Boards &

Support Boards

Visual Leadership Center Policy Deployment

Board

The Lean Enterprise Visual Management System is the primary Enterprise communication systems to manage operations on a daily basis. The system consists of individual Value Stream Boards and a Visual Leadership Center for a centralized daily operational debrief.

Lean Enterprise DMAIC Problem Solving

The Lean Enterprise Operational Excellence Framework focuses on employee knowledge creation through problem solving with the Lean DMAIC approach. Under the Lean Enterprise Operational Excellence Framework, employees are developed by teaching them to continuously solve problems with Lean DMAIC to improve their processes. Because the employees are directly involved in the problem solving activities, the employee themselves become agents of changes. The acceptance of changes introduced through problem solving activities is directly proportional to the level of employee participation and involvement. Once employees apply Lean DMAIC and begin to develop skills through “Learning by Doing”, continuous improvement becomes an integral employee activity that does not need to be pushed onto them.

Lean DMAIC is a structured problem solving approach that breaks problem solving into five phases. Define , Measure , Analyze, Implement and Control. Lean DMAIC directly involves employees in problems solving activities and encourages them to “Learn by Doing”.

Lean Enterprise Continuous Improvement System

Employees

Ideas & Creativity

Continuous Improvements activities are documented using the Standard A3 Report which captures all of the phases of the Lean DMAIC problem solving approach.

LEAN DMAIC

A3 Report

Lean Enterprise Visual Replenishment System

Two Bin System For Raw Materials and Subassemblies

KV (Kanban-Visual) Loop For Finished Goods

The Two Bin system for raw materials/subassemblies and the KV Loop for finished goods, allow for visual inventory management and visual production control which is directly tied to customer demand. Build what you need, when you needed.

Lean Enterprise Lean Standard Cost System

Std. Flat Labor Routing Value Stream Map Earned Hours @ Standard Labor and

Overhead Rates Plus

Materials @ Standard cost

Standard Product

Cost

In the Lean Enterprise Standard Cost System; products are organized by Value Streams and “Standard Work” is captured in Value Stream Maps, from which the corresponding Standard Flat Labor Routings are calculated. “Standard Work” results in “Standard Costing”, which forms the baseline for continuous improvement measurements. As the Standard Work is improved, the Standard Flat Labor Router is improved, which results in a reduction of manufacturing lead times, inventories and product costs. Improving standardized work is a never-ending process.

Standard Work

Lean Enterprise Operational Analytics

The Lean Enterprise Operational Analytics System, provides weekly, month to date, and year to date Value Stream operational reports with the necessary information to measure Value Stream performance against the Standard Gross Profit Margin that is expected from the Standard Work processes. If the standard processes are generating negative manufacturing variances, the Value Streams will engage in Continuous Improvement activities to resolve the cause of the manufacturing variances. Once the processes are capable of maintaining the Standard Gross Profit Margin, continuous improvements activities are focused on generating positive manufacturing variances to increase the Gross Profit Margin. The Value Stream Reports include, Labor Efficiency, Cost Center Spending, Price Purchase Variance, Material Usage, Scrap, Raw Material / Finished Goods Inventory , Shipping Revenue and Back Orders / Back Log.

Work Orders

Mfg. Variance Analysis

Labor Material Burden

@ Standard

@ STD Gross Profit Margin

If Variance = 0

If Variance = Negative

If Variance = Positive

Below STD Gross Profit Margin

Above STD Gross Profit Margin

Continuous Improvement

Lean Enterprise and The Role of ERP

ERP Database

ERP System

Lean Operational Reports

In the Lean Enterprise Operational Excellence Framework, the ERP system functions as the core database and transaction engine. Daily operational management is executed using the Visual Management and Visual Replenishment Systems. Manufacturing work orders, purchase orders, receiving transactions and shipping transactions are captured daily by the ERP System and data is stored in the ERP database.

Visual Management

Visual Replenishment

Mfg. Work Orders Inventory Mgmt.

ERP Transactions

About Phil and Lean Enterprise Operational Excellence

The Lean Enterprise Operational Excellence Framework is the result of Phil Williford’s 20+ years of combined experience in Lean Management within the Automotive and Medical Device industries; with the goal of creating a clearly defined path to a successful and sustainable implementation of an Enterprise Wide Lean Program.

The Lean Enterprise Operational Excellence Framework has been proven in both Domestic and International sites.

(North Carolina, Florida, Texas, California, Connecticut, Missouri, Puerto Rico, France, Germany and the Czech Republic)

• It was used as the foundation for the Medtronic Corporate Lean Sigma Platform. • Utah State University (School of Business) case study in the Shingo Prize modeling for Operational Excellence. • Including the awarding of both the Shingo Prize for Operational Excellence in 2003 and The Shingo Silver Medallion in 2010.