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Chapter 1
Enterprise Lean Transformation Introduction
Lean Transformations: Creating & Maximizing Customer Value
So, what is a “transformation”? Generically, a transformation is thorough or dramatic change in the form or appearance of an item.
Therefore, an Enterprise Lean Transformation is the end-the-end transformation of a company’s order fulfillment process: i.e. a Lean Transformation of the order fulfillment process would maximize customer value while minimizing waste throughout the process and sub-processes (Figure 1.1).
Figure 1.1 A simple representation of a typical enterprise’s order fulfillment and support processes.
The objective of a holistic Enterprise Lean Transformation is the alignment of an enterprise’s focus (or purpose), processes, and resources across all value streams to maximize customer value while minimizing waste across the enterprise.
A transformation’s ultimate goal must be to maximize customer value;
so, how do we define value from the customers’ perspective. (Figure 1.2)
Figure 1.2 Creating value for the customer.
Creating and maximizing value for the customer means:
■ raising quality levels – zero defects, Six Sigma;
■ raising delivery and service levels – 100% on-time-in-full (OTIF), 100% supply reliability, transparent collaborating;
■ reducing costs: win–win cost reduction sharing, managing supply chain inventory and cost;
■ reducing response time – shortening process lead time, shortening overall order fulfillment times, shortening replenishment times.
However, we must continuously verify how our customer defines value (more definitive breakdown of the above four core values); we should always validate the Voice of Customer (value definition from the mouths of our customers and direct feedback on our performance). This will be my first reference to the “boots on the ground” approach; we need be talking directly with our customers as we need to be a presence for them.
So, the focus of the Lean Transformation should be to provide maximum value to the customer through perfect processes that consist of zero waste.
And how do we define “waste”? Waste is the utilization of any more than the minimum amount of resources required to deliver the desired value to the customer (internal or external). I’ll discuss “waste” in more detail later in this book.
A Lean Culture Transformation changes the focus from the optimization of segregated activities, technologies, assets, and vertically structured functional departments (i.e. departmental silos) to the optimization of the flow of products and/or services through value streams that flow horizontally to customers across activities, technologies, assets, and departments (Figure 1.3).
Figure 1.3 Focus on the processes and value stream … not the functions.
To transform your business, the focus should be on the processes, not the individual functions, as a value stream is no more than a series of related processes that deliver a product or a service. The best way to ensure that you deliver a quality product or service is to control the process, and the first step in the Lean Transformation is to identify and remove inefficiencies (a.k.a. waste) from the process (and organization). Eliminating waste throughout the value streams, instead of at isolated activities, creates processes that require fewer operators and assets and less space and time to make products, or that enable the delivery of services at far lower costs and with far fewer defects compared with traditional business thinking. Lean Transformed companies are more responsive to changing customer desires and are of higher quality, lower cost, and shorter throughput times. In addition, information management becomes simpler and more accurate.
In a business transformation initiative, it’s imperative that there’s clear accountability and ownership for all processes during the transformation. Through all phases of the transformation (planning, assessment and execution), you must engage upstream and downstream stakeholders to get a balanced perspective.
Change Readiness, i.e. Appetite for Change
One of the real challenges of any enterprise or business transformation is determining the organization’s appetite for change. Every organization has to decide if their goal is incremental changes, or if they are willing to seek breakthrough changes: i.e. changes that will modify their competitive landscape. Many organizations may settle for somewhere in between status-quo and radical-change, but aligning your organization’s goals with the organization’s appetite for change is critical to the success of your transformational journey. Every transformation must be a journey with a clearly defined end goal. And that goal must align with your enterprise’s appetite for change (status quo or breakthrough) (Figure 1.4).
Figure 1.4 What’s your appetite for change?.
Case-in-Point Example 1.1 Appetite for Change FAIL
I hope it’s not bad omen to start off my book with a failed case-in-point example, but I think it’s important to understand that if a company is not prepared to make and accept the necessary changes, then failure is imminent. During my consultancy days, I had a chance to visit a Southeast Asian semiconductor manufacturer and make a proposal to address a burning platform. The burning platform in this case story was excessive inventory at all levels: raw, WIP, and finished. I personally created the proposal knowing that I had addressed all of the concerns of the company’s CEO. After our consultancy firm was awarded the consultancy contract, I met often with the CEO, and he made it clear that the inventory issue was keeping him awake at night. My role on the project was Project Management Oversight and Subject Matter Expert (I was supporting multiple projects in multiple countries). As my team started the assessment, it became very apparent that the CEO’s staff didn’t share his perspective that the company’s inventory situation was an urgent burning platform. They strongly felt that the current inventory levels were required to satisfy customer requirements. So, there was a definitive disconnect between the CEO and his staff. The CEO was seeking monumental breakthrough changes, while most of his staff was OK with status quo or incremental changes at the most. I had a very seasoned Project Manager onsite and our team did a good job in their assessment; and under my guidance, we had a very good action plan to meet the CEO’s targets. But we never proceeded to implement any of the proposed changes; the company’s staff pushed back hard on all proposed changes. The CEO held me personally responsible for this failure, as he thought that I should have been able to convince his team of the benefits of the breakthrough changes. Unfortunately, I couldn’t even get his team to agree to a proof-of-concept pilot runs in order to validate the benefit of the proposed changes: the CEO’s team united to totally disrupt any and all proposals. They had zero appetite for change, even though the CEO was starving for it. And this CEO would never tell his staff that they must change; he had empowered them. The CEO passionately believed that my team was responsible for successfully selling the changes to his staff. As a side note, I was terribly handicapped on this project as the CEO’s staff spoke minimal English; as a typical “old” American, I spoke only one language. Anyway, the moral of the story is that if a team is resistant to change and doesn’t see the urgency in the need for it, then they will not change. This was one situation in ...
