LEAN ENTERPRISE PRINCIPLES AND PRACTICES September 11, 2002 Prof. Deborah Nightingale Deborah Nightingale, MIT ? 2002 Objectives nullEnterprise perspective nullEnterprise value streams nullThree levels of enterprises nullStakeholders nullPrinciples of lean enterprises nullEnterprise value stream analysis Deborah Nightingale, MIT ? 2002 3 Deborah Nightingale, MIT ? 2002 Sometimes “less” adds up to “more.” ? less waste ? less design time ? less costs ? fewer organizational layers ? fewer suppliers ? more employee empowerment ? more flexibility and capability ? more productivity ? more quality ? more customer satisfaction ? more long-term competitive success … stressed minimizing waste. The emphasis was on Lean Production. The Early Lean Message 4 Deborah Nightingale, MIT ? 2002 The emphasis is on Value Added Activities Lean Production Lean Enterprise Extended Lean Enterprise Moving beyond lean “production” to an extended lean enterprise. The Evolving Lean Message Enterprise Definition "One or more persons or organizations that have related activities, unified operation or common control, and a common business purpose" -Blacks Law Dictionary, 1999 Deborah Nightingale, MIT ? 2002 Lean Enterprise Defined “A lean enterprise is an integrated entity which efficiently creates value for its multiple stakeholders by employing lean principles and practices.” -Lean Aerospace Initiative, MIT, 2001 Deborah Nightingale, MIT ? 2002 Integrated Enterprise Customer Product Development Supplier Network Product Support Finance, H/R, Legal, etc... Manufacturing Operations Deborah Nightingale, MIT ? 2002 Program Value Stream Value Deborah Nightingale, MIT ? 2002 Multi-Program Value Stream Value Value Value Value Value Value Value Deborah Nightingale, MIT ? 2002 10 Deborah Nightingale, MIT ? 2002 National and International Value Stream Value Value Value Value Value Value Value US Value Value Value Value Value Value Value Value Value INTERNATIONAL Identify Three Levels of Enterprises Program Multi-Program National or International F-22 Boeing, USAF, Lockheed Martin Primes, Suppliers, Government Deborah Nightingale, MIT ? 2002 Centralized Control Decentralized Execution Status at a Glance Metrics JSF Example of a Program Enterprise JSF Team LMM Aeroo NG ACSACS BAE SYSTEMS S JSFPOJSFPO Major Critica l Suppl ierss LMISS T r a i n i n g M i s s i o n S y s t e m s V e h i c l e S y s t e m s Ai r f r a me Sup port Rapid Decision Making Flexible Repositioning World Class Team Source: Lockheed Martin Aeronautics Co. “JSF - A Winning Environment”. Presentation at MIT. Mar. 6, 2002 Deborah Nightingale, MIT ? 2002 Boeing Example of a Multi-Program Enterprise Boeing Capital Corporation Commercial Airplanes Military Aircraft and Missile Systems Air Traffic Management Connexion By Boeing Space and Communi- cations Boeing World Headquarters Source: The Boeing Co. 2001 Annual Report Deborah Nightingale, MIT ? 2002 Customer Value “Value measures the worth of a product or service to a customer. It is a function of the product’s usefulness to the customer, its relative importance to the customer’s need, its availability relative to when it is needed, and how much the customer has to pay for it.” -Rebentisch, MIT, 2000 Deborah Nightingale, MIT ? 2002 -- Manufacturing Excellence null “...deliver what the customer wants, including design changes, when wanted, where wanted, at reasonable cost, with no quality glitches and no environmental degradation” (Dr. Robert Hall Association for Manufacturing Excellence) null 21st century ideal - meet any need or change instantly Deborah Nightingale, MIT ? 2002 Increased Emphasis on the Customer null Customer as consumer will play increasingly proactive role null “Prosumer” -- a customer who participates in own service or order fulfillment null Prosumers will change character of industry null Surviving enterprises will be different in form and practice Deborah Nightingale, MIT ? 2002 Stakeholder Defined Any group or individual who can affect or is affected by the achievements of the organization’s objective * Corporate Leadership Employees Multi- Program Enterprise Business Unit Customers/ End Users Shareholders UnionsSociety Partners Suppliers * Source: Freeman, Strategic Management: A Stakeholder Perspective, Pittman, 1984 Deborah Nightingale, MIT ? 2002 Lean Enterprise System null A Lean Enterprise Requires the Integration of null Processes null People / Organization null Information null Technology null Holistic View null Enterprise as a System Deborah Nightingale, MIT ? 2002 Lean Thinking Embraces the Entire Enterprise Value Stream, Focuses on Processes, Cuts Across all Functions & Covers all Phases of the Product Lifecycle null Enterprise perspective: Lean requires an enterprise perspective, encompassing the entire enterprise value stream (extended enterprise), for successful implementation null Process focus: Lean views the enterprise as a network of processes; optimizing each process does not optimize the entire set of enterprise processes null Functional integration: Lean cuts across & integrates all enterprise functions (product development, manufacturing, finance, human resources, customer support) null Lifecycle orientation: Lean spans from product development to production to operations & support to deliver best lifecycle value Deborah Nightingale, MIT ? 2002 Best Life Cycle Value “A product introduced at the right time and for the right price which delivers best value in mission effectiveness, performance, affordability, and sustainability, and comparatively retains these advantages over the useful life of the product.” - Murman et al, MIT, 2000 Deborah Nightingale, MIT ? 2002 Processes Must Be Integrated to Deliver Value Finance Procurement Suppliers Process Capabilities Budgets & Costs Marketing Product Concept/ Design Process Planning Prod. Control Mfg. Assy. Test Insp. Distrib. Support Customer Capacity Schedule Detail Designs Delivery Material Reqmts Schedule & Material Reqmts Forecasts Schedule Reqmts Costs & Process Capabilities Reliability/Maintainability Product Requirements Reqmts Deborah Nightingale, MIT ? 2002 Traditional vs. Core Process TRADITIONAL DESIGN MAT'L S FAB ASS'Y LOGISTICS Core Process Approach ORDER GENERATION TO FULFILLMENT PRODUCT DISTRIBUTION INTEGRATED PRODUCT - PROCESS DEFINITION CUSTOMER DEFINITION SUPPLY REALIZATION DISTRIB. CUSTOMER SERVICE Deborah Nightingale, MIT ? 2002 23 Deborah Nightingale, MIT ? 2002 Enterprise Process Architecture Life Cycle Processes ? Business Acquisition and Program Management ? Requirements Definition ? Product/Process Development ? Supply Chain Management ? Production ? Distribution and Support Enabling Infrastructure Processes ? inance ? Information Technology ? Human Resources ? Quality Assurance ? Facilities and Services ? Environment, Health, and Safety Enterprise Leadership Processes ? Strategic Planning ? Business Models ? Managing Business Growth ? Strategic Partnering ? Organizational Structure and Integration ? Transformation Management F What is the Vision of the Future Lean Industrial Base? A Future Manufacturing Base That Responds Quickly and Efficiently to Gov’t and Commercial Sector Needs Characteristics and Competencies of This Future Industrial Base null Workforce null Products null Organizations null Customer Deborah Nightingale, MIT ? 2002 Vision of the Future Lean Industrial Base: Workforce null Flexible organizations where workers are treated as the most valuable company resource null Multi-skilled, continuously trained, highly committed workforce null Easy access to industry knowledge, data, and lessons learned null Advanced, integrated information systems null Seamless access to information without regard to geographic distance or corporate boundaries null Revolution in manner in which individuals work individually and together Deborah Nightingale, MIT ? 2002 Vision of the Future Lean Industrial Base: Products null Dramatically reduced costs, cycle times, and improved quality in all aspects of product life cycle null Technical risk, producibility, and affordability will be considered early in R&D process null Quantum advances in key materials technologies including composites, metal alloys, and ceramics null Modular systems and low-cost upgrades to take advantage of technology advances null Extensive use of Commercial standardized components in military applications Deborah Nightingale, MIT ? 2002 Vision of the Future Lean Industrial Base: Organizations null Agile engineering and manufacturing systems null Seamlessly integrated flexible supply chains null Expansive use of partnerships to achieve product, technology, and service breakthroughs null Civil and military industrial bases will be more fully integrated null Globally competitive companies and leadership null Virtual Enterprises on a global basis Deborah Nightingale, MIT ? 2002 Vision of the Future Lean Industrial Base: Customer null Quick response to global queries for products with affordable, high-quality solutions null Products enter production with predictable and affordable costs, schedules, and funding null Global customers delighted by quality, price, and environmental friendliness Deborah Nightingale, MIT ? 2002 Lean Enterprises Principles null Create lean value by doing the job right and by doing the right job. null Deliver value only after identifying stakeholder value and constructing robust value propositions. null Fully realize lean value only by adopting an enterprise perspective. null Address the interdependencies across enterprise levels to increase lean value. null People, not just process, effectuate lean value. * Source: “Lean Enterprise Value” Deborah Nightingale, MIT ? 2002 Lean Enterprise Model (LEM) Lean Aerospace Initiative Deborah Nightingale, MIT ? 2002 What is the LEM? null A systematic framework for organizing and disseminating LAI research results null Comprised of lean enterprise principles, practices and metrics null Populated by data derived from surveys, case studies and other research activities I n n o v a t i v e T h i n k i n g A Major Product of the Lean Aerospace Initiative! Deborah Nightingale, MIT ? 2002 The LEM is a “Lean” Enterprise Tool null Assists in the self-assessment of leanness of consortium organizations and processes null By examination of existing practices null By comparison of quantitative performance null By assessment of rate of improvement null Serves as a guide for identifying leverage points for organizational change null Provides insights as to where lean efforts should be directed Supports Consortium Members in their Journey toward Lean Deborah Nightingale, MIT ? 2002 Lean Enterprise Model Practices and Benchmark Data LEM Supporting Practices(~300) Enabling Practices (~ 60) Metrics -Data - Barriers - Interactions Enterprise Level Metrics Meta-Principles/Enterprise Principles Overarching Practices Develop Relationships Based on Mutual Trust & Commitment Continuously Focus on the Customer Nurture a Learning Environment Ensure Process Capability and Maturation Assure Seamless Information Flow Optimize Capability & Utilization of People Identify & Optimize Enterprise Flow Implement Integrated Product & Process Development Maintain Challenge of Existing Processes Make Decisions at Lowest Possible Level Promote Lean Leadership at all Levels Maximize Stability in a Changing Environment Metrics - Barriers - Interactions Data Sheets (~225) Internet Links (~600) Deborah Nightingale, MIT ? 2002 LEM Overarching Practices Address People and Process People Practices null Promote lean leadership at all levels null Relationships based on mutual trust and commitment null Make decisions at lowest appropriate level null Optimize capability and utilization of people null Continuous focus on the customer null Nurture a learning environment Process Practices null Assure seamless information flow null Implement integrated product and process development (IPPD) null Ensure process capability and maturation null Maintain challenges of existing processes null Identify and optimize enterprise flow null Maintain stability in changing environment Deborah Nightingale, MIT ? 2002 LEM Principles Enterprises null Waste minimization null Responsiveness to change null Right thing at right place, and in right quantity null Effective relationships within the value stream null Continuous improvement null Quality from the beginning *Source: LAI Deborah Nightingale, MIT ? 2002 1 Deborah Nightingale, MIT ? 2002 OAP Interaction Matrix copyright by MIT , Lean Aerospace Initiative Where Should Enterprises Begin? Cost Percentage Influence Percentage Product/Process Design Material Labor Overhead 5 % 50 % 15 % 30 % 70 % 20 % 5 % 5 % Actual Life Cycle Cost From Ford Motor Company Information, reflecting leverage for improvements in life cycle costs. Source : Boothroyd and Dewhurst Deborah Nightingale, MIT ? 2002 Enterprise Value Stream Analysis Deborah Nightingale, MIT ? 2002