Lean for Knowledge Work

Buried in Work?

If you’re a knowledge worker or managing knowledge workers, chances are you are buried in work. Do you ever feel this way? And that – daily – you’re sinking ever deeper?

Maybe You’re Buried in Unplanned Work!

The amount of unplanned work often exceeds planned work, and the result is:

  • Unsatisfying
  • Exhausting, and
  • Ultimately not sustainable

You’re caught on the ‘overcommitted and underperforming’ merry-go-round of endless firefighting.

Firefighting

Management literature widely uses the metaphor of fighting fires. It typically refers to the allocation of important resources toward solving unanticipated problems or “fires”.

  • When the point where work volume exceeds capacity is reached, people tend to shift into a firefighting mode.
  • They attack symptoms and provide quick fixes.

They do this rather than identify the actual root causes of their fires, and implementing lasting solutions that can create a fire-free zone.

Knowledge Work Is Invisible

There’s a reason people fall into fire-fighting. It’s because you can’t see knowledge work. It’s invisible. While in manufacturing and some service industries, co-workers and managers see widgets on an assembly line or customers in a queue, in knowledge work this flow is mostly invisible. And because it is, nobody knows when there is too much Work in Process (WIP).

  • This lack of understanding leads to workers taking on too much even when they are already overloaded.
  • Also, invisibility means no one has an idea what the knowledge worker’s capacity is.
  • That means the organization routinely over assigns

Bring in Fire Marshal Kanban

If you want to take back control of your process, employ Fire Marshal Kanban. Kanban is a mechanism that makes your workflow visual and restricts the number of tasks underway (WIP).

  • Your lead times will decrease.
  • It allows people to improve processes themselves, and to do so at their own speed.

While there is no shortage of management frameworks, tools, and methods, Kanban has proven to be the most effective method for managing knowledge work.

  • The Kanban concept comes from Lean manufacturing.
  • It is a signaling device that gives authorization and instructions for the production or withdrawal (conveyance) of items in a pull system.
  • The term is Japanese for “sign” or “signboard.”

Knowledge workers can effectively leverage Kanban to gain the same quality and efficiency improvements that manufacturers enjoy.

The Kanban Method

The Kanban method uses three core principles to create an emergent set of Lean behaviors in organizations.

  1. Visualize:

You have to understand what it takes to get an item from request to completion. The goal of Kanban is to make positive change in order to optimize the flow of work through the system. Only after understanding how the workflow currently functions can you aspire to improve it by making the correct adjustments. The most common way to visualize your workflow is to use “card walls” with cards and columns. Each column on the wall represents steps in your workflow.

Kanban Board

If you look around you will find that the physical board is not the only choice. There are plenty of electronic tools on the market.

Virtual Kanban Board

  • Both solutions have their advantages and both have their flaws. Physical Kanban boards have visibility and presence. They encourage face-to-face communication, enhance stand-up experiences, and they serve as a constant reminder of team goals and achievements.
  • Digital boards are accessible from anywhere, making remote collaboration a breeze. Digital boards are great for distributed teams and maintenance of charts, and they link directly to the associated tickets.
  1. Limit WIP

After visualizing WIP, the next step is to start balancing the amount of WIP against the available processing capability. It may even seem counterintuitive to those who believe that the more work you put into the system, the more you get out. While that is true up to a point, after that point the system becomes turbulent and firefighting starts.

Simply put, you can’t do more work than you can handle.

  1. Manage flow

The whole point of implementing the Kanban method is to create positive change. Before you can create that change, however, you have to know what to change. You figure that out by looking at how value is currently flowing through the system, analyzing problem areas in which value flow is stalled, and then defining, and finally implementing, changes.

You then repeat the cycle to see what effect your changes had on the system because you need to know if the changes you made had a positive or negative impact on the things you were attempting to improve.

You are never finished. It is a never-ending journey.

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The “10 Foot, 3-Second” Rule of Visual Management

Fujio ChoThe “10 Foot, 3-Second” axiom is a rule of thumb regarding visual controls.

The rule says that a person should be able to look at the visual board from 10 feet away, and should be able to discern normal from abnormal within 3 seconds, allowing the person to make a decision on what to do to return the workplace to normal conditions.

Hour by Hour BoardThis does not mean that a novice needs to be able to do it, but someone who is familiar with the visual controls should be able to interpret the situation quickly and in passing. That means that visuals need to be big, and they need to be followed.

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Build a Rock-Solid Business Case for Your Lean Six Sigma Project

Build a Rock-Solid Business Case for Your Lean Six Sigma Project

Before you begin any Lean Six Sigma project, you need to determine whether a business case exists for the goal you intend to achieve. Every project needs to be linked to a business benefit. There is a shared responsibility between Money-Business Casethe business leader and the Lean Six Sigma professional to communicate clearly with each other around the cost-benefit evaluation before resources are committed. The business literacy of the Lean Six Sigma professional – the ability to speak the language of business (revenue, operating margin, earnings, free cash flow, and return on equity) – is a key leverage point to introduce and sell a proposed improvement opportunity at the business tier of the organization. The business case is the heart of a project charter. The approval of the charter signals the activation of the Lean Six Sigma project. This is the first point where project responsibility and accountability are formally declared.

As the project moves forward, the business case can serve as a dynamic component of the decision-making process throughout the project management life cycle. In many cases, the financial numbers are validated prior to each phase’s milestone review (financial validation is a requirement of passage to the next phase).

Finally, when a project is complete, an additional validation must take place as Finance attempts to accumulate and report financial benefits of completed projects.

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Improve your Working Capital Management

Improvement Opportunities in Working Capital Management

working-capital

Working capital management plays an important role in the successful management of a company.

The goal of working capital management is to ensure that the company is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses.

Along with fixed assets such as plant and equipment, working capital (WC) is considered part of operating capital. Net working capital is calculated as current assets minus current liabilities.

Net Working Capital = Current Assets − Current Liabilities

                A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses.

Current assets and current liabilities include three accounts which are of special importance:

  • Accounts Receivable (current asset)
  • Inventory (current assets), and
  • Accounts Payable (current liability)

By definition, working capital management entails short-term decisions – generally, relating to the next one-year period – which are “reversible”. These decisions will be based on cash flows and/or profitability.

The best measure of cash flow is provided by the Cash Conversion Cycle – the net number of days from the outlay of cash for raw material to receiving payment from the customer. As a management tool, the Cash Conversion Cycle (CCC) measures how long a firm will be deprived of cash if it increases its investment in resources in order to expand customer sales. It is thus a measure of the liquidity risk entailed by growth. However, shortening the CCC creates its own risks: while a firm could even achieve a negative CCC by collecting from customers before paying suppliers, a policy of strict collections and lax payments is not always sustainable.ccc1

CCC = RCP + ICP – PDP

  • RCP – Receivable Conversion Period is the time between the sale of the final product on credit and cash receipts for the accounts receivable.
  • ICP – Inventory Conversion Period refers to the length of time between purchase of raw material, production of the goods or service, and the sale of the finished product.
  • PDP – Payable Deferral Period is the time between the purchase of raw material on credit and cash payments for the resulting accounts payable.

A positive CCC indicates the number of days a company must borrow or tie up capital while awaiting payment from a customer. A negative result indicates the number of days a company has received cash from sales before it must pay its suppliers.

As industry benchmarks, the lowest value of the CCC is found in the retail, with an average of 35 days, and the highest mean value of the CCC is found in the textile industry, with an average of 165 days.

A company’s CCC indicates its efficiency in managing working capital, and is of particular use in benchmarking versus competitors or comparable companies. Improving CCC is an excellent way to release cash from the balance sheet. Increased free cash flow can be applied to growing the business.

Identify Improvement Opportunities

When looking for improvement opportunities, compile the Cash Conversion Cycle for your company for each of the last five years. How has your CCC changed over the last years? Does it show a decreasing/increasing trend or high variation? Compare your CCC for the most recent year to the industry average.

Even if your company’s CCC shows stability over the years – with a value close to the industry average – it is worth investigating the behavior of its components:

  • Compute the Receivable Conversion Period (RCP) for each of the last five years. How has it changed over the years? Does it show a decreasing/increasing trend or high variation? Compare your RCP for the most recent year to the industry average.
  • Compute the Inventory Conversion period (ICP) for each of the last five years. How has it changed over the years? Does it show a decreasing/increasing trend or high variation? Compare your ICP for the most recent year to the industry average.
  • Compute the Payable Deferral Period (PDP) for each of the last five years. How has it changed over the years? Does it show a decreasing/increasing trend or high variation? Compare your PDP for the most recent year to the industry average.

At the end you can identify improvement opportunities and eventually start a Lean Six Sigma project with following objectives:

  • Reducing the RCP – speeding up collections
  • Reducing the ICP – processing the raw material as quickly as possible
  • Lengthening the PDP – slowing payments

A good example to follow is the Dell Inc. model with a negative Cash Conversion Cycle, which means that their sales are converted in hard cash BEFORE the sale.

Why use your own money when you can use someone else’s for free?

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Forecast Accuracy and the Bottom Line

demand-forecastingTo handle the increasing variety and complexity of managerial forecasting problems, many forecasting Demand Forecasting techniques have been developed over time. Each has its special use, and care must be taken to select the correct technique for a particular application. The manager as well as the forecaster has a role to play in technique selection; and the better they understand the range of forecasting possibilities, the more likely it is that a company’s forecasting efforts will bear fruit.

To have an idea on the impact of the forecast accuracy on the bottom line, take following rule of thumb: each 1% improvement in forecast accuracy translates to 0.5-1 % less inventory.

– Naive Forecasting: Estimating technique in which the last period’s actuals are used as this period’s forecast, without adjusting them or attempting to establish causal factors. It is used only for comparison with the forecasts generated by the better (sophisticated) techniques.

– Time Series Analysis: The cornerstone of traditional forecasting is based on the Fourier series time series mathematical analysis conceived by Joseph Fourier in 1822. Fourier statistical modeling uses a historical data series to create seasonal forecasts and set the course of forecasting for the next 125 years.

– Moving Average: Moving Average (MA) is a popular method for averaging the results of recent sales history to determine a projection for the short term. The MA forecast method lags behind trends. Forecast bias and systematic errors occur when the product sales history exhibits strong trend or seasonal patterns. This method works better for short range forecasts of mature products than for products that are in the growth or obsolescence stages of the life cycle.

– Exponential smoothing: In 1957, Holt-Winters took time series analysis to a new level with exponential smoothing. Inherent in the collection of data taken over time is some form of random variation. There exist methods for reducing of canceling the effect due to random variation. An often-used technique is “smoothing”. This technique, when properly applied, reveals more clearly the underlying trend, seasonal and cyclic components. It is a very popular scheme to produce a smoothed Time Series. The past observations are not weighted equally. Exponential Smoothing assigns exponentially decreasing weights as the observation get older. In other words, recent observations are given relatively more weight in forecasting than the older observations. First suggested by Charles C. Holt in 1957 it was meant to be used for non-seasonal time series showing no trend. He later offered a procedure (1958) that does handle trends. Winters (1965) generalized the method to include seasonality, hence the name “Holt-Winters Method”.

– Box–Jenkins method: Named after the statisticians George Box and Gwilym Jenkins, applies autoregressive moving average ARMA or ARIMA models to find the best fit of a time-series model to past values of a time series. The first step in developing a Box–Jenkins model is to determine if the time series is stationary and if there is any significant seasonality that needs to be modelled.

– Demand Sensing: Demand Sensing is a next generation forecasting method that leverages predictive analytics and near real-time information to create an accurate forecast of demand, based on the current realities of the supply chain. The typical performance of demand sensing systems reduces near-term forecast error by 30% or more compared to traditional time-series forecasting techniques.

Demand Sensing imports fresh daily demand data, immediately senses demand signal changes compared to a detailed statistical demand pattern, and evaluates the statistical significance of the change. It analyzes partial period actual demand to perform automatic short-term forecast adjustments using probabilistic pattern recognition and predictive analytics. Advanced statistical analytics identify and rapidly react to replenishment issues or sudden changes in customer demand.

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Tuckman’s Model for Kaizen Facilitators

tuckman-modelThe Kaizen event is a focused, short-term workshop that involves people from multiple functions and levels of the organization in working together to address a problem or improve a process focusing all resources towards a narrow and specific objective. These events may be a day-long affair or take as long as an entire week, depending on the level of improvement needed.

At the beginning of Lean implementation several companies are turning to a quicker, one day long, high speed problem solving approach, to shift paradigms and quickly demonstrate results. The intensity and urgency overcomes the resistance to a new paradigm. People have little time to think of reasons for delay. It forces solutions.

This approach however has its limitations.

First of all, the training part is necessarily short. There is insufficient time for deep learning of principles, tradeoffs, and lean methodology.

The team dynamic is totally different. The team members will go through Forming, Storming, Norming, Performing and Adjourning stages (Tuckman Model for team dynamics) but they can drop back to earlier stages, normally storming at anytime and multiple times. The challenge of facilitating a one day Kaizen is to get through the Forming and Storming stages as quickly as possible so that you can get to the Norming and Performing stages. Many Kaizen events fail due to the team getting stuck in the Storming stage.

If you understand the stages, you can plan your agenda and approach around these and use them to your advantage to have an effective Kaizen event.

The Forming stage is like the first day of school. No one knows anyone and everything is new. When a team first convenes, it’s all new and a little uncomfortable. Being the facilitator, start with some training where you are leading the presentation. This directs their attention to you. So instead of them versus the whole room, they only have to worry about relating to you, one person (single channel). They will warm up quicker, you can build trust – which you might need later – and they can converse with you directly. You can get the team “Formed” quickly by directing the attention towards you.

After the team is getting comfortable with each other you want to force them into the Storming stage. The Storming stage is basically a contest. At this point, people start to compete for their position in the group. This is good, you want this and you have to have this to get people fully engaged and reach a successful outcome. However, you want to do this in a controlled manner and do it quickly so that you can move on to the next stage. If you don’t plan for and manage this stage of the dynamic, you may lose control and never get anything accomplished. So how do you effectively force a ”fight” in a nice way? First, you need to change roles. During the training, your role was that of an instructor. Now you need to become the ”instigator” and mediator. Instigator is a little harsh, but I’m trying to highlight the shift in role. Second, it is time to shift the team’s attention from you to each other. During the Forming stage, they got to size each other up by watching how they interacted with you. Now it is time to interact with each other. The simplest way to force the interaction is through a simulation. A simulation will get the team interacting, talking and working together. You need to use a simulation that requires discussion and problem solving. Guide the simulation to keep it moving, but during the discussion and problem solving, LEAVE THE ROOM! Take a break and walk away. If you stay in the room, they will come to you for safety. If you walk away, they will be forced to interact with each other and establish their roles and positions in the group.

Now that you have the team storming, you need to pull them out of it. This is where you need to make sure your simulation is very robust. No matter what they come up with, they need to be successful. If they can come out the other end successful, you will have solidified the team and prepared them to get some real work done and move on to the next stage. Getting through the Storming stage is critical but that doesn’t mean you’re done. The first thing to remember is that just because you’ve made it through a stage, doesn’t mean you won’t slip back into one. This is common, just like any relationship you will have good and bad times. Understanding this will help you keep your focus and not ease up. If you turn your back for a moment the team may slip back into Storming and you are behind schedule. It is not a problem in a five days Kaizen event, but in case of a one day event it can lead to a failure to achieve planned results. Your schedule is tight…very tight.

Like the other phases you need to change your role again. In the first stage you were and instructor or director if you will, then you became an instigator or maybe a hard coach is more appropriate. Now you need to become a teacher. The team is now in the Norming stage. What does that mean? In the Norming stage, the team is starting to solidify. They finally have their team dynamics worked out. Everyone knows their role and place on the team, but not necessarily what to do. This is where you come in. The team is in a state of transition between unconscious incompetence and conscious incompetence. They need your guidance and they are willing to be taught. Give them some guidance but let them figure it out. If you take over and do it for them you will fall back into the director mode (Forming stage) and you focus their attention on you and not towards each other. If this happens, you can actually throw them back into the Storming stage.

We’re finally on to Performing! But how do you know? What is the sign? In moving from one phase to the next, it’s less of a binary switch and more of a subtle shifting over. In the Norming phase the team is working well together but relying on you as to how and what they should be doing. In the Performing phase the team is becoming self sufficient and self confident. Again your role and approach will change. You will now shift from being a teacher to a coach. Your role is to enhance the performance of what they know how to do. You will provide the tips, tricks and words of wisdom to help them become more effective and efficient. In this phase of the event, the team is at a point of conscious competence and there are several things going on to which you need to be aware. First, while the team, “gets it”, they haven’t developed yet the experience and routine to handle all situations they may encounter. You have to watch the team and help them work through the one offs, every Kaizen event has, that could get them discouraged and delayed.

There is an interesting effect going on during the transition from Norming to Performing. This has to do with the cultural change you are driving and the team you need to help foster the growth. Watch your team during the shift from Norming to Performing. This is where you will start to see the combination of those who get it and will lead it. It is kind of an unintentional interview process. If one of these folks is on the team, they will assume your role and start leading the team.

If your long-term goal is to grow a community of lean professionals, THIS IS WHERE YOU CAN FIND NEW RECRUITS.

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Comparison of Monte Carlo Simulation Tools

monte-carlo
monte-carlo-comparison
The Monte Carlo method is often used in Design for Six Sigma (DFSS) to analyze the sensitivity of a prototype system, and to predict yields and/or process capability. A product design should ideally have a small degree of sensitivity to process variation so its performance remains well within specification limits.

It’s important to know how to chose the right tool to have all the functionalities needed to run Monte carlo simulation.

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