How Lean Thinking fits with environmental issues and how Environmental Management is a Cost Saving, not a Cost Professor Tony Bendell Managing Director

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How Lean Thinking fits with environmental issues
and how Environmental Management is a Cost
Saving, not a CostProfessor Tony
BendellManaging Director Principal
ConsultantServices Ltd Charnwood House17
Caythorpe Road , LowdhamNottingham, NG14 7DZ
tel [phone] fax 44 (0)115
9663191e-mail tony_at_servicesltd.co.uk
www.servicesltd.co.uk
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Two Hot Topics

• Environmental Management
• Enormous legal ethical pressure to manage
  environmental impact of Operations
• Lean Operations
• Great current interest for operational
  efficiency, cost reductions and spreading limited
  resources more thinly

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Two Hot Topics but kept apart

• Both concerned with controlling waste and
  inefficient use of resources
• Both involve aspects of systems and processes,
  human behaviour and culture, standardisation and
  audit

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What is Waste?

• Waste and Emissions
• Utility Consumption
• Unnecessary use of Raw Materials
• Unnecessary Processing and Process Inefficiencies

Muda
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Carbon Reduction Imperative
Why Lean? Cost and Customer Focus Emphasis on
Process Efficiency
Why Environmental Management? Legal
Compliance Emphasis on Waste and Emissions
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Environmental Impact and Carbon Footprint of
Operations

• Utilities
• Raw Materials and bought-in services
• Waste and Emissions
• Processing/Activities

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Environmental Impact and Carbon Footprint of
Operations

• Utilities
• Raw Materials and bought-in services
• Waste and Emissions
• Processing/Activities
• Basic Cost
• The 7 Wastes eg. Unnecessary transport and
  storage
• Management and Support Processes
• Basic Cost
• The 7 Wastes

Utilities and Raw Materials bought-in services
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Correlating Process Inefficiency and Waste
Waste and Emissions
Low
High
Oil Refineries
(some) Pharmaceuticals
High
Internet-based Financial Services
Process Inefficiencies
Labour intensive Craft Workshop
Low
High
Low
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Correlating Process Inefficiency and Waste
Lean and Green Saving Money through Good
Environmental Management, 1 May09
Waste and Emissions
Low
High
Lean
Today
High
Environmental Management
Carbon Reduction Imperative
Process Inefficiencies
Low
High
Low
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What is the Lean Approach?

• Drive to reduce cost and improve customer
  satisfaction by improving process efficiency
• Focuses everything on Value to the customer (and
  possibly other stakeholders)
• Non Value Adding activities are minimised
• Value Adding activities are streamlined

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The Origins of Lean

• Manufacturing
• Automotive Industry
• TPS
• The war on waste
• Just-in-Time - a pull system
• Reduced inventory
• Supplier partnership
• Jidoka - identification of defects at source
• Operator empowerment
• autonomation

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Lean Principles

• Value
• The Value Stream
• Flow
• Pull
• The Pursuit of Perfection

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Value

• As perceived by the customer (and what he will
  pay for) and fully understood by the supplier
• Quality
• Key characteristics, quality spec.
• Cost
• Economies of scale, premiums
• Delivery
• JIT, specific delivery schedules
• Danger when organisational value overrides
  customer perceived value
• It is not uncommon for function or
• departmental priorities/needs to undermine
• the process
• In Public Sector processes, value also needs to
  reflect all stakeholders value perceptions.

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The Value Stream

• Identifying and defining the main flow of the
  value adding activities to achieve the customer
  or stakeholders perceived value of product or
  service.
• Recognition and identification of a process
• First opportunity to identify non-value adding
  activities MUDA
• A lean organisation will be mindful of
  maximising the ratio of added value to
  non- added value activities

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Value Added Analysis

• Real value added activities as perceived by the
  customer or stakeholders
• Improve efficiency
• Improve speed of reaction
• Business value added activities required to run
  the business
• Reduce to a minimum
• Non-value added activities do not add customer
  or stakeholder perceived value nor are required
  to run the business i.e. WASTE

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Typical Examples of Value andNon-Value Added
Activities

• Real Value Added
• Acknowledging a Customer Order
• Delivering a product
• Processing a Customer Order
• Providing after sales service

• Business Value Added
• Updating financial accounts
• Updating training records
• Issuing Purchase Orders
• Negotiating price

• Non-Value added
• Rework
• Authorisations and Approvals
• Checking and Inspection
• Internal transport

• Reviews and Audits
• Complaint Handling
• Processing Customer claims/credits
• In process storage

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Typical Examples of Value and Non-Value Added
Activities

• Real Value Added

Business Value Added

• Non-Value Added

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Waste - The Enemy of Competitiveness and Best
Value

• 7 Wastes originated by Taiichi Ohno of Toyota
• The Elimination of Waste leads to a leaner and
  fitter operation leading to improved
• Quality
• Cost
• Delivery
• Waste is when we are not Adding Value for the
  Customer
• Waste is "Public Enemy No. 1"

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The 7 Wastes Are

• OVER PRODUCTION making, or doing more than is
  required
• WAITING for something to happen!
• unnecessary TRANSPORT of materials or
  work-in-progress
• OVER PROCESSING due to poor design of services,
  products, equipment or processes
• INVENTORIES that are bigger than they need to be
  - just in case!
• unnecessary MOTION by people doing their work
• the creation of parts, products or services which
  have DEFECTS

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New Wastes

• The Waste of Talent
• Lack of people/skill development
• Failure to encourage and establish an environment
  of innovation and creativity
• Inefficient use of utilities
• Creating harmful emissions and products/bi
  products
• Packaging

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Waste of Overproduction

• Making or doing too much, too early,
  just-in-case
• Excessively long lead times
• Increases work-in-progress (work-not-in-progress)
• Cost issues dictate big batches because of
  lengthy set-ups
• Makes us feel safe
• Make what is required just-in-time
• Smooth the flow - Speed the flow
• Control the flow around the bottleneck
• Focus on set-up reduction

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Waste of Waiting

• Time is of the Essence
• Impatient Customers and Shorter Lead Times
• 70 to 80 of Lead Time is Queuing or Waiting
• Reduce the number of Jobs flowing through the
  process
• Keep the bottleneck working
• Move jobs to the next operation quickly
• Examine Waiting at Equipment?
• Machines
• People
• Competitive pressures dictate that we must find
  something else to do during cycle times

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Waste of Waiting

• Throughput Efficiency Work Content x 100
• Time
  in System

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Waste of Over Processing

• Using a "Hammer to Crack a Nut"
• Inappropriate machine for the job
• Is technology always the answer?
• Complicated Set-Ups

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Waste of Unnecessary Inventory

• Too much Inventory
• Hides the problems - quality issues
• Slows down the flow
• Occupies expensive space
• Ties up working capital
• Minimal Inventory
• Is the Goal (zero may not be achievable)
• Aids visibility - stock and job counting, quality
• Most applicable in a repetitive environment

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Process Flow

• Value must flow through the process
  continuously
• Traditional to batch processing
• Excuses for batching can be financial or
  operational e.g. full utilisation of capital
  equipment, reduced changeovers/set-ups

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Pull

• This is the action of the customer pulling the
  added value activities through the process to
  receive goods or service how and when needed

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The Pursuit of Perfection

• Effective transformation to lean is achieved
  when
• Value is specified and understood
• Added value to non-added value is maximised and
  waste is eliminated
• The value stream flow is smooth and continuous
• The value added activities are pulled in line
  with customer demand
• BUT

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The Pursuit of Perfection

• All of this could come to nought if
• The effort to sustain the transformation falters
• Practices not in place to develop a continuous
  improvement policy

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Lean and Green Saving Money through Good
Environmental Management, 1 May09
Value Stream Mapping (VSM)

• A simple tool for visualising the door-to-door
  service flows in your organisation
• Focuses lean efforts on improving the whole value
  chain (rather than optimising the parts) to
• Establish flow
• Eliminate waste
• Add value
• Captures material movements and information flows
  in one current state picture
• Provides step-by-step approach to creating an
  ideal future state (where non-value adding
  activities are minimised)

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Why is VSM Important?

• It helps you visualise more than a single
  operation (e.g. data entry, case evaluation etc.)
• It helps you see sources of waste
• It provides a powerful communication tool
• It bring lean concepts and tools to life
• It focuses improvement activities
• It shows the link between information flow and
  material and job flow

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Stages of VSM

• (1) SELECT A PRODUCT/SERVICE the selection of a
  product/service, or family of products/services
  which follow similar process routes
• (2) CURRENT STATE MAP drafting a current state
  map to reflect work flow, information flow and
  sequence of processes
• (3) FUTURE STATE MAP creation of a future state
  map. This is the teams vision of the ideal
  condition in which wasteful elements have been
  resolved
• ACTION PLAN development of an action plan. A
  detailed to do list which prioritises each
  action to realise the future state
• IMPLEMENT MONITOR PROGRESS ACCORDING TO THE
  PLAN
• CONTROL TO KEEP THE GAINS
• THINK ABOUT WHATS NEXT

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Mapping the Process
Current State Map

• Start with customer need e.g. quantity, order
  size, frequency, service level
• Map each service process using a box - a
  separate box indicates that processes are
  disconnected and job flow stops (e.g. jobs are
  moved in batches). Start at the customer end and
  work backwards using post-it notes.
• Collect process data for each box that is a
  measure within the process
• C/T (cycle time)
• C/O (changeover time)
• Batch size
• Number of operators
• Number of product or service variations
• Job size
• Working time (i.e. excluding breaks)
• Rework/Scrap rate
• Value added time
• Note the location and amount of inventory
• Map the supply process e.g. volume, batch size,
  frequency

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Typical Current State Value Stream Map for
Manufacturing
Operating Hours Shift Pattern Usage Rate
Delivery Window
Supplier Lead Time Batch size
Production Control
Daily/weekly/monthly
Deliveries per day/week/month Delivery batch size
Production Manager
Ship
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Current state map
An Example Current State Map (Automotive Seat
Manufacturing)
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District Council Current State Map (Waste
Collection)
Regulations Targets
Service agreement or contract parameters (e.g.
Regulatory)

• Citizens
• County Council
• Recycling Contractor

In-house or out sourced Supplier
Head of Service
deliver to waste amenities
allocation of Vehicles people from depot
collect on set route
re-batch at depot
store and deliver recyclables
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Future state map
Aims of Future State Map

• Get one process to provide only what the next
  process needs when it needs it
• Link all processes from the final customer back
  to initial input
• Avoid detours in the process
• Develop continuous flow wherever possible

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(3) Future state map
An Example Future State Map
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Implementation

• The 5 Stages are
• Creating a framework for the programme
• Identifying the value stream, analysing and
  standardising the process
• Streamlining the process to create flow of the
  value-creating steps
• Pulling the product or service according to
  customer demand
• Continually improving the process in the pursuit
  of perfection

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How Can Environmental Management be a Cost Saving?

• 7 Wastes
• Overproduction
• Waiting
• Transport
• Over Processing
• Inventories
• Motion
• Defects
• New Wastes
• Talent
• Packaging
• Utilities
• Emissions Products/By-Products

Cost ? ? ? ? ? ? ? ? ? ? ?
Environmental Impact Primary Secondary Primary Pri
mary Secondary Secondary Primary Primary/Secondar
y Primary Primary Primary
The Answer Managing the Environmental Impact of
the Process will help manage Cost of Process
Operations
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The 5 Lean Principles and the Effect on the
Environmental Impact
Effect on Process Cost
Effect on Environmental Impact

• Value
• The Value Stream
• Flow
• Pull
• The Pursuit of Perfection

• Dont waste money
• Minimises
• Minimises
• Minimises
• Minimises

• Minimises
• Minimises
• Minimises
• Minimises
• Minimises

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The Whole Life Model
Operating System (Operations Cost)
Building System (Capital)
Dispose of system (Disposal Cost)

• Cost/Value
• Environmental Impact

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PROCESSES AND ACTIVITIES
OUTCOMES
OUTPUTS
CAPITAL INFRASTRUCTURE
UTILITIES
RAW MATERIALS
OTHER INPUTS
WASTE EMISSIONS/DISPOSAL
MANAGEMENT
CONTROLS
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Example of Advantage of Value Stream Thinking
Internal Mail
Building 1
VAN
Building 2

• Reduce Environmental Impact (Environmental
  Management)
• - Bicycle
• Eliminate (Value Stream)

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Internal Mail
Lean and Green Saving Money through Good
Environmental Management, 1 May09
Environmental Impact
Low
High
Frequent Van Service
Old Van?
High
Pushbike/trolley
Electric Van
Cost
Low

• Capital
• Operations
• Disposal

High
Low
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Summary

• Environmental Management and Lean thinking are
  related
• The 7 Wastes ( New Wastes) and the Value
  Stream are useful tools that apply to
  Environmental Management as well as Lean Cost
  Minimisation
• Utilising the Lean approach, Environmental
  Management can be a Cost Saving rather that a
  Cost

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Using the Lean Approach for Environmental
Management

• Apollo Hardwoods
• Baxter Healthcare
• Bowing
• Columbia Paint and Coatings
• G.E.
• General Motors
• Goodrich
• Lockhead Martin
• Plymouth Tube
• Robins US Air force Base
• 3M