Design for Operational Excellence: A Breakthrough Strategy for Business Growth (BUSINESS BOOKS) - Hardcover

DUGGAN

Hardcover

ISBN 10: 0071768246 ISBN 13: 9780071768245

Publisher: McGraw Hill, 2011

Synopsis

"Design for Operational Excellence presents numerous examples that people who have been disappointed by purely technical approaches to operational challenges are bound to appreciate." Business Digest, March 2012

About this title

About the Author

Kevin J. Duggan is the author of Creating Mixed Model Value Streams and the lead author of The Office That Grows Your Business: Achieving Operational Excellence in Your Business Processes. A sought after international speaker on Operational Excellence, Duggan has appeared on CNN Headline News and Fox Business Network as the expert in Lean Manufacturing. He lives in North Kingstown, RI.

Excerpt. © Reprinted by permission. All rights reserved.

Design for Operational Excellence: A Breakthrough Strategy for Business Growth

By Kevin J. Duggan

The McGraw-Hill Companies, Inc.

Copyright © 2012 Kevin J. Duggan
All rights reserved.

ISBN: 978-0-07-176824-5

Contents

Foreword by Jeffrey K. Liker
Acknowledgments
Introduction: The Return on Your Investment
PART I: Destination: Creating Operational Excellence
Chapter 1: The Engine of the Business
Chapter 2: The Myth of Improvement
Chapter 3: The Leapfrog
Chapter 4: Defining Operational Excellence
Chapter 5: Creating the Road Map to Operational Excellence
PART II: Nine Tough Questions on Continuous Improvement
Chapter 6: Preparing People to Jump
Chapter 7: The First Question: Why Do We Do Continuous Improvement?
Chapter 8: The Second Question: What Is the Best Way to Improve?
Chapter 9: The Third Question: How Do We Know Where to Improve?
Chapter 10: The Fourth Question: Why Do We Strive to Create Flow?
Chapter 11: The Fifth Question: What Causes the Death of Flow?
Chapter 12: The Sixth Question: What Would the Shop Floor Look Like if We 
Did Everything Right?
Chapter 13: The Seventh Question: What Would the Office Look Like if We 
Did Everything Right?
Chapter 14: The Eighth Question: What Would the Supply Chain Look Like if 
We Did Everything Right?
Chapter 15: The Final Question: Where Will Our Continuous Improvement 
Journey Take Us?
PART III: The Eight Principles of Operational Excellence
Chapter 16: The New Operations "Engine Design" for Operational Excellence
Chapter 17: The First Principle: Design Lean Value Streams
Chapter 18: The Second Principle: Make Lean Value Streams Flow
Chapter 19: The Third Principle: Make Flow Visual
Chapter 20: The Fourth Principle: Create Standard Work for Flow
Chapter 21: The Fifth Principle: Make Abnormal Flow Visual
Chapter 22: The Sixth Principle: Create Standard Work for Abnormal Flow
Chapter 23: The Seventh Principle: Have Employees in the Flow Improve the 
Flow
Chapter 24: The Eighth Principle: Perform Offense Activities
PART IV: Extended Case Studies
Introduction to Case Studies
Chapter 25: Parker Hannifin Corporation
Chapter 26: IDEX Corporation
Chapter 27: Hypertherm
Conclusion: Our Blueprint for Growth
Notes
Index

Excerpt

CHAPTER 1

The Engine of the Business

In the early 1970s, there probably was a day in most people's lives when therewas an important event that they had to attend in the morning, let's say aninterview or a final exam. They were probably nervous about the event, havingstudied or prepared for it the entire night before. When they got up that day,they were apprehensive. Over and over again, they ran through the informationthey had studied and how they expected the events of the day to unfold. Theyleft their house promptly, walked out to their car, and got in. Suddenly, theywere no longer nervous about the obstacle that was ahead of them that day. Theapprehension, however, did not leave them. Instead, their focus had shifted andtheir worry intensified: they wondered whether their car was going to start toeven get them to the interview or exam.

The car had had trouble starting in the past, and they hoped that the enginewould not be finicky again today. They tensed up as they put the key in theignition, saying things like, "Come on, baby, you can do it," then turned thekey and perhaps said a silent prayer all in hopes that the engine would fire up(and continue to run). Once they turned the key, the ritual would begin bypumping the gas pedal or pulling a choke, and cranking the engine again andagain. Soon, the battery would drain of its power and they had to use their lastresort: push the car (hopefully downhill), jump in, shift into gear, then popthe clutch!

Hopefully, this ritual would get the car started, but there was no guarantee ofsuccess. The engine might rev up for a few seconds and then die. If the carfinally started and ran smoothly, the driver would breathe a long sigh of reliefand go on his way, his thoughts (and apprehension) returning to the event thatwas ahead of him.

Fast-forward to the present day. When you go out to a late-model-year car, doyou have any apprehension about whether it will start? Do you find yourselfnervous? Do you even give it a momentary thought? Would you ever even thinkabout pushing your car downhill, jumping in, and popping the clutch to get itstarted? Your answer to these questions is probably no. You simply turn a key orpress a button, and the engine magically starts the first time, every time. Youhave no worries that it won't start consistently every time. And that'sexactly how your operation should run: it should start every time.

When customers give us orders, we should not have to think about, worry, orwonder whether those orders will be finished on time, with perfect quality, anddelivered to the customer when the customer wants them. The order comes in fromthe customer (that's the start button), and the operational side of the businessprocesses the order with no interruptions and then delivers the product. Weshouldn't have to think about it or worry about it. Without flaw, the processshould take place when we get an order. Just as today's engine starts everytime, our operations should start every time, and like the modern engine, theyshould be smooth and seamless, without any managers pumping the gas pedal orpulling the choke, or management teams pushing the car to jump-start it.

While the concept of a smooth, seamless operation delivering product tocustomers without management intervention may seem implausible, as was theconcept of starting a car on the first try in the 1970s, it is entirelyattainable. Of course, we may think it was technological changes that allowtoday's engines to start every time. The advances in electronics andmicroprocessors played a big role in this, but technology is not the only reasonwhy the modern car engine starts consistently every time. The main reason thattoday's engines start every time is that someone at a car manufacturing company,perhaps in Sales or Marketing, decided that the company needed an engine thatwould start consistently in order to be competitive in the marketplace. Thischallenge was then given to the engineers. To be successful, the engineers couldnot simply keep tinkering with, adjusting, or continuously improving the engineas it was. They had to redesign the engine. In other words, the reason themodern-day engine starts the first time, every time, is that it was designedthat way. So why won't our operations start every time? They are notdesigned that way.

The Business in Motion

When an engineer designs something that is in motion, such as an aircraft, anengine, or an elevator, she considers both a static design with the object atrest and a dynamic design with the object in motion. For example, the staticdesign of an aircraft at rest is the size of the wings, fuselage, landing gear,windows, seats, and other such things. The dynamic design of an aircraft is thedesign for its performance in flight: the cruising speed, center of gravitychanges, slipstream effect, drag characteristics, and other related aspects.

When we use the words business operations, we are talking about thedynamic side of the business. Think of it as the business in motion, orthe day-to-day activities that a business must carry out in order to get itsproducts or services to the customer. Most companies spend quite a bit of timeand do a good job on the static design: the necessary building size, the rightequipment to meet production capacity, the physical layout of the factory andoffices, the number of shipping and receiving doors, the number of parkingspaces for employees, and so on. All of this is well planned and well laid out.

When they are considering the physical layout, more progressive companies haveeven thought about creating "flow," and have therefore designed their facilitiesto support flow. They have connected processes, created cells, moved heavymachinery, eliminated inventory storage locations, and streamlined their factorylayouts to provide products to customers in an efficient manner. Some companieshave even rearranged their offices to support flow. While theseinitiatives are good and are heading in the right direction, they are still justdealing with the physical layout. They involve where machines will be placed,how wide the aisles will be, where conference rooms will be located, and soforth. What they don't cover is the dynamic side of the business, meaning whatthey will do when the customer calls, or when things are in motion.

While the static design of business operations is typically carried out withgreat care, many questions in the dynamic design often go unanswered or evenunasked. For example, is your office layout designed to flow information toproduction when it needs it? Or, more important, does it flow information to thecustomers when they need it? In your office, how will everyone know what to workon next? When will information flow? How will we know whether the office is ontime? On the manufacturing floor, similar questions apply: Sales may know whatthe customer wants, but how will each operator know what to work on next? Howwill we know whether the operation is on time? How often will we know that it'son time? What will we do if there is a problem?

While the static side of the business is clearly planned and thought out, themore important business in motion side is left up to management.Managers are charged with making decisions to steer the course and keep thingsmoving in the right direction. Every day, they manage the operation and at thesame time try to continuously improve it.

Rarely do we step back and think about an actual dynamic design in ouroperations. If we do, we find that developing and implementing the improvementsin the operation that are needed in order to achieve the company's preset goalsare left up to individual managers. Yet the operations side can have a directimpact on the profitability and growth of the business. Just think about whathappens when Sales works for months to take clients away from a competitor, wefinally get an order, and Operations ships it three weeks late.

In most operations, quality, reliability, cost, delivery, profitability, andmany other aspects of performance depend on good management and leadership toprocure parts and produce products when the customer wants them, at or belowcost. We rely on people with strong management skills and a leader who can drivethe management team to work in concert to bring raw materials together, thenfabricate, assemble, ship, and deliver a high-quality product to the customer ontime. In fact, in most cases, how an operation is run is left up entirely to theleader in charge. If a leader leaves and a new one comes in, the new one may runthe operation in a completely different way. For example, one leader may focuson improving unreliable processes by implementing a Six Sigma program. When heleaves, whoever fills that position may drive an outsourcing program and moveproduction to suppliers who can produce good quality.

In most cases, the profitability and growth of the operation, along with itsability to contribute to shareholder value, depend primarily on the leader'sbackground, management experience, and leadership style. Therefore, the successof the design depends on our hiring the right person for the operation.Companies go so far in trying to find the right person with the exactcredentials they are seeking that they spend a great deal of money hiringexecutive recruiting firms. The cost of finding the right person is worth it, asit is imperative that this person not only be a perfect fit for the existingorganization but also have the right skill set to improve the company and growthe business.

In fact, operations are so dependent upon management for success that if anoperation is not successful in delivering product to customers over time,eventually the "right person" or even the entire management team gets revamped.The products we're delivering or the machines we produce them on are notaltered; we simply swap out the people in charge. We seek out a new leader ormanager, one whom we hope has more experience and more knowledge than theprevious one, to help us correct the underperformance by applying her skill set.We then rely on her to do her job and deliver product to the customer in orderto return profit and shareholder value. She must do this on her own, without anylaws of physics, without any design for the business in motion, without anydesign for the aircraft once it is in flight.

CHAPTER 2

The Myth of Improvement

Imagine that you are boarding an aircraft. You take your seat and relax as theother passengers get on board and the doors are shut. The plane begins to rolldown the runway and then takes off. While it is cruising, the captain comes outand gathers the flight crew in the galley. He holds a meeting with them and asksif there are any issues he should know about. After they tell him that all iswell, he informs them that they have to find ways to reduce the operational costof this flight. He asks the crew members for suggestions, and they brainstormanswers such as, "Move more people to the back of the plane for better balance,""Try 10 percent flaps for more lift at slower speeds," "Transfer fuel to the afttank to move our center of gravity, we may get more speed," "Trim the nose down;we should get better fuel economy that way," and "See if we can change ourroute." You soon realize that the captain and his team are using theirexperience and knowledge to improve the performance of the aircraft in flight.They are trying to reduce the cost of the operational side of the flight. Salesand Marketing got the people in their seats, but if they want the flight to showa profit (and perhaps keep themselves employed), everyone needs to make surethat the plane is flying and also improve the performance of the plane at thesame time.

As strange as it sounds, this same phenomenon happens every day in manyoperations. Like the aircraft, our business takes flight when we get a call fromthe customer, and activities are set in motion. As managers, we do what we mustto get the orders to the customer, but we also have to improve the overalloperation to keep it profitable with the same people delivering the product.

There is a significant difference between the two examples, however. In reallife, every captain goes to flight school. He learns how the plane has beendesigned, the engineering behind aircraft performance, and how that design canbe maximized in flight. Therefore, he does not need to assemble a team to lookfor trouble spots and try to improve them. Instead, he follows a checklist tosee that everything is done right and in the proper sequence to ensure safetyand maximize the performance of the aircraft. The optimization of the flight isbased on the design specifications of the aircraft. Back to our company: Do wehave a checklist to follow? Is it based on a design? Most likely, the answer isno, and without a design to follow or a checklist to use, improvement is left upto leadership and management.

The Never-Ending Journey Begins

Over the past few decades, just about every company has embarked on a journey ofcontinuous improvement. Led by management, companies are seeking to improvetheir operations and their business by creating a goal or vision toward which tolead people. These visions are usually motivational and inspirational. Theyexcite employees about business growth in the future. For example, statementssuch as "Be the global leader in precision measuring" or "Delight customers withsuperior performance and quality" tell the employees what the company isstriving for. They may say what is good for the company as well as theemployees. A good vision statement can fire up the troops to help move forwardand improve the performance of the operation.

Once the vision statement is sent out, the next step is to embed continuousimprovement into the operation to achieve the vision. In this step, we challengeteams to make the business operations more efficient. We provide them withimprovement tools, benchmark other companies, seek the knowledge used by thebest companies, shamelessly steal ideas from other industries, and perhaps evenhire consultants to help us. Armed with this knowledge, and perhaps with someoneto guide us along the way, we start teaching employees how to continuouslyimprove the operation. (See Figure 2.1) We challenge them to eliminatewaste, or the non-value-added activities, in order to make the operation moreefficient each day. The goal of this effort is to have an army of people whoimprove the operation each day, or to create a culture of continuousimprovement.

The improvements are done through many techniques, such as value stream mapping,kaizen (rapid improvement) events, and action workout events, where teammembers target an area of the operation in which to make an improvement. Theythen present the proposed improvement to management, management approves, andthe team implements the proposal. Once the improvement is implemented, it needsto be embedded into the standard work in order to sustain it. Then managementmonitors and measures the results to ensure that the results do not driftbackward. Each day, this process continues: find areas that need improvement,improve them, and then embed the improvements into standard work. If managementis successful, in the end, we will have an army of people that work for us whonot only do their own jobs but also make the operation more efficient by findingwaste in the organization and striving to eliminate it.

Seeing the Myth Of Improvement

The journey is under way. Management sets a vision and charges Operations withbecoming efficient. Operations seeks to create a culture of continuousimprovement, so it provides training and tools, creates teams, and selectstarget areas to improve. Improvements are made, the new process is documented instandard work, and management monitors and measures the results to ensure thatthey are sustained. The organization follows a process of improve, sustain,measure, and monitor, then repeats that cycle over and over again to create aculture of continuous improvement. The end result of this process, or the bestpossible outcome we can have using this process, is a "staircase of continuousimprovement." (See Figure 2.2.)

Improve, sustain, improve, sustain. As this process continues over time, thecycle repeats itself, and the operation progresses; teams make improvements inone area and then embed the changes into the standard work in order to sustainthem. But often, the pattern of improvement does not look like a staircase atall. In many cases, sometimes the operation moves forward, sometimes it slidesbackward, and sometimes the company regresses and possibly even abandons itsimprovement efforts altogether. (See Figure 2.3.)

(Continues...)

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Excerpted from Design for Operational Excellence: A Breakthrough Strategy for Business Growth by Kevin J. Duggan. Copyright © 2012 by Kevin J. Duggan. Excerpted by permission of The McGraw-Hill Companies, Inc..
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Edition details

• Publisher: McGraw Hill
• Publication date: 2011
• Language: English
• ISBN 10: 0071768246
• ISBN 13: 9780071768245
• Binding: Hardcover
• Number of pages: 320