The Denver Health & Hospital Authority -- The Results Are In

Over on the Hospitals and Health Networks site, I read this great article about the Denver Health organization's incredible benefits resulting from its six-year Lean journey. Patricia A. Gabow, CEO of the Denver Health and Hospital Authority, believes the $135 million financial benefit since 2006 is a result of the adoption of Lean management techniques. In addition, in 2011, the hospital evidently saw "$46 million in financial benefits from Lean projects."

Other than the amazing benefits discussed in the article, I found this detail quite interesting: "There are 16 value streams and an organized method for picking improvement projects. Some are short term, others extend over multiple years, such as revenue cycle, the OR and community health. Each value stream has an executive sponsor and a steering committee that meets monthly. Gabow reviews metrics for all of the value streams and rapid-improvement events every month."

What do readers working in the healthcare industry think of this format for value stream maps? Are your maps used in the same fashion?

After winning the coveted Shingo Prize for Operational Excellence (the first healthcare organization to achieve this feat) , Denver Health now offers its own Lean Academy. Check out the video presented at the Shingo Award ceremony:

Lean and Agile Software Development: How Do We Make It Happen?

Recently, I had the chance to speak in person with Michael Levine, author of a new book published this past December titled A Tale of Two Transformations: Bringing Lean and Agile Software Development to Life. His book provides entertaining and thought-provoking guidance on making organizational change.

I asked Michael about one of the paradoxes of bringing Agile software development into organizations -- Although Agile preaches the centrality of the self-managed team, in practice many Agile migrations are imposed top-down by strong-willed executives. Can this really work? Here is his response:

Organizations vary dramatically from each other, and these variations must drive the approach to introducing Lean and Agile techniques effectively. An organization that is performing adequately and for which the risk of disruption is high must be addressed differently than an organization that is performing unacceptably and for which change is urgent.

That is why I draw out two approaches to change: Drive People, a top-down approach focused on processes and tools, and People Driven, an enabling approach focused on people, learning, and organizational design.

Ultimately agile success depends on becoming People Driven – aligning the skills and perspectives of the team members to the work at hand, with broad understanding and embrace of Lean and Agile principles. Some organizations can begin their Lean/Agile journey with a low-risk, gradual People Driven approach from the start; others do not have the capability or the time and need the kick-start of a Drive People approach. Both can work, so long as the end-game is a self-sustaining, continually improving People Driven culture.

What do you think of Michael's points? Do any readers who work in software development have any opinions or experiences to share in regard to Agile software development in a Lean organization?

The Visual Author

Happy New Year! I hope everyone had a healthy and happy holiday season.

CRC Press, the parent company of Productivity Press, recently established a YouTube channel that will feature many Productivity Press authors discussing performance-improvement topics as well as methodologies explored in their respective books. I've decided to feature a sample of some recent videos in this blog post.

Patrice Boutier speaks about his forthcoming book The Seven Kata: Toyota Kata, TWI, and Lean Training here:


Robert Hafey discusses Lean Safety: Transforming your Safety Culture with Lean Management here:



Larry Fast discusses The 12 Principles of Manufacturing Excellence: A Leader's Guide to Achieving and Sustaining Excellence here:
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Daniel Markovitz discusses A Factory of One: Applying Lean Principles to Banish Waste and Improve Your Personal Performance here:



Please let me know your thoughts on these videos as we plan to shoot more and suggestions are always welcome.

"Lean Versus MRP" or "Lean and MRP"?

I attend many Lean conferences throughout the year that focus on different areas of the supply chain. Presenters there often state how the concept of material requirements planning (MRP) is outdated and works as a detriment to Lean thinking. In addition, there have been many articles published that discuss the "Lean versus MRP" debate. I recently had an email conversation with Derek Singleton about this very topic. Derek is an enterprise resource planning (ERP) market analyst and writes for the Software Advice website. He has some interesting ideas about the use of software during the planning process, and I'd like to share his thoughts here:

Three Ways Manufacturing Software Can Adjust to Lean Principles

There’s a long-standing debate between manufacturing planning strategies. The debate is between proponents of material requirements planning software -- better known as MRP software -- and lean manufacturing advocates.

The crux of the dispute boils down to whether sophisticated software tools are needed to adequately plan production. Proponents of MRP software believe that today’s complex manufacturing challenges require formal planning tools to get an accurate picture of the production requirements. Lean advocates, on the other hand, argue that these planning tools actually get in the way of accurate planning because they’re too slow and transaction-intensive to pace to actual consumption, or adjust to demand fluctuations.

Three Components to Incorporate in Manufacturing Software

I see three main ways that manufacturing software can evolve to adapt to the demands of lean manufacturing. Each way focuses on bringing lean principles front and center of manufacturing software packages.

1. Make Value Stream Mapping a Core Software Component - One of the most important tools in lean manufacturing is create a value stream map to outline the flow of information and materials in the manufacturing plant. Modeling how information and materials flow through a shop floor will allow manufacturers to more easily identify production bottlenecks.

2. Monitor Cycle Times Intensely - The most important metric to know in manufacturing is how long it takes for materials to arrive on the dock and to leave in a completed product. In order to improve cycle times, these times need to be monitored and tracked. A subset of monitoring and tracking cycle times is keeping track of production status.

3. Locate Key Places to Add or Remove Inventory - While there’s ample functionality in manufacturing software for determining what to stock and how much to stock, there is little functionality to help manufacturers figure out where to stock. Functionality that can tell a manufacturer where to stock will help them figure identify the best places to protect against volatility, which will ultimately help avoid product shortages.

These are a few ways that I can see manufacturing software changing to adapt to the requirements of lean manufacturing. However, I’d like to hear your thoughts. What needs to change in manufacturing software to adapt it to lean manufacturing principles?

What do you think of Derek's ideas? What are your views on the role of MRP within a Lean initiative?

What are We Learning from Our Projects?

Recently, I had the chance to speak in person with Dr. Willis Thomas, author of a new book published in November 2011 titled The Basics of Project Evaluation and Lessons Learned. His book provides the framework to conduct lessons learned using the Project Management Body of Knowledge (PMBOK) as a standard.

When I asked Willis why he chose the PMBOK approach for lessons learned he replied:

Project managers trust and are comfortable with the PMBOK for five Process Groups (Initiation, Planning, Executing, Monitoring/Controlling and Closing) and nine Knowledge Areas (Communications, Cost, Human Resources, Integration, Procurement, Quality, Risk, Scope and Time). Many project managers run projects using these categories.

The approach I take is very simple; to overlay what has been done right, done wrong and could have been done differently using these 14 process group and knowledge area categories. This matrix, creates a 5x9 table of 45 categories, with three variables per category (right, wrong, differently), which results in potentially 135 elements for review.

This compartmentalizes the collection process for lessons learned so that it is situation-specific. The project team can then determine what lessons to review -- that is, what went right during project initiation regarding communications. Of course, each factor should allow for comments to detail characteristics of the lesson.

A primary goal for lessons learned should not only be to avoid making the same mistakes in projects (summative reflection), but to strategize for improvement (formative thinking). This approach can help project managers to be consistent in their approach to evaluating projects.

What do you think of Willis' advice? Have any of you used this process?

To Be, or Not to Be... A Project Manager

At the recent Association for Manufacturing Excellence (AME) conference in Dallas, I had the chance to talk with Adil Dalal, author of a new book called The 12 Pillars of Project Excellence: A Lean Approach to Improving Project Results. An important part of his book essentially provides the "5 Powers" needed to transform from a project manager to an advanced project leader. In addition, it provides groundbreaking techniques to achieve excellence in project leadership that can result in six sigma type results or failure-free projects.

I basically asked Adil what it means to be a project leader instead of a manager, and here is his response:

A project, by definition, is a "temporary" endeavor undertaken to create a "unique" product, service, or result. Thus, every project is like an expedition through the unknown terrain to reach the summit of success. When something "unique" is being created – how can we expect to manage it? Are we not required to lead the "unique" transformation effort? Today, most project managers fail because there is too much "management" and too little "leadership" during the journey. Only project managers who undergo a paradigm shift and transform themselves into project leaders by providing guidance and direction to their team can be truly successful in their expeditions every time. Attempting to manage a project is like trying to hang on to the tail of a wild tiger. The focus is always on countering the tiger’s every move to avoid the fatal jaws. Thus, a project manager is constantly in a reactive mode and there is no time for creativity. On the other hand, leading a project is like riding a tame tiger. Although there is a healthy level of anxiety and adventure, the focus is on guiding it in the right direction. Thus, a project leader is always proactive.

What do you think of Adil's ideas? What characteristics do you see lacking in most project managers? Does your organization have more project managers or project leaders?

Not Only Achieving the Excellence, But Sustaining It...

Some surveys conducted during the past 30 years continue to find that upwards of 80% of the companies that start down the road to manufacturing excellence, using techniques such as TQM, Agile Manufacturing, Theory of Constraints, Lean, Six Sigma, Lean Six Sigma and others, end up stalled within two to five years. All these journeys probably began very seriously with high hopes for continuous improvement (CI), but early results eroded and hopes of sustaining long-term results faded. Based on the short-term results, every company that has used the various tools has found that they work. The point most often missed, however, is that continuous improvement is not, nor will it ever be, solely about the tools.

I recently asked Larry Fast (author of a new book titled The 12 Principles of Manufacturing Excellence: A Leader's Guide to Achieving and Sustaining Excellence): What does it take for companies to learn how to sustain their CI journey? Here is his response:

My book devotes almost no time on the use of tools but rather to those critical “infrastructure” items that must be in place for an enterprise to sustain the improvements for the long term. For example, the principles of safety and good housekeeping (#1 & 2) focus on the trust and discipline necessary to change culture while helping the hourly associates develop both competence and confidence in their ability to work a new way.

The principles (# 3 &5) of using only authorized formal systems/standard work further develops the discipline necessary for culture change while each important work process is being re-engineered for standardization and capability. A strong preventive/predictive maintenance system (# 4) demonstrates leadership’s commitment to making sure the machine operators always have equipment that is in proper working condition so they can control their process and deliver great products. Principles #10 and 11 provide the standard work necessary to perpetuate the replenishment of the trained people necessary to effectively fulfill their roles every day. Absent the sustaining of comprehensive training and communications, skills disappear, performance deteriorates and the dream of CI dies.

The final point is that the culture changes very gradually – that is, not because of some feel-good initiatives, but rather because the leadership has sustained their commitment on the pathways to excellence. When management reestablishes its credibility, it is because they have collectively provided the focus and organizational alignment consistently, day after day, month after month, year after year such that the workforce develops trust in their leadership. Further, when management provides the context for their work, provides the proper tools, training, maintenance, systems, processes, communications, follows up with attention to detail on commitments that have been made, then the associates experience the change. In fact, they live the new way of working and thinking, and begin to willingly take ownership/accountability for their work without feeling "put upon."

The culture of Operator-Led Process Control is not the starting point. It is the vision of the culture that we seek. And it will evolve as the outcome from meticulous execution of the first eleven principles to a level of Stage 4 excellence. But make no mistake: The first day any member of leadership decides to stop doing the training, the preventative maintenance, or the communications, that’s the first day that the business starts going backwards from whence it came.

What do you think of Larry's points? Do you agree with his comments about management credibility?

Toyota Benchmarked... Yet Again

There's a great article worth checking out over on the CNNMoney / Fortune site. It's one thing to see software companies adapting Lean methodologies, but it's quite another to see them transform their culture, and Menlo Innovations seems to be doing the latter. Jeffrey Liker confirms: "Any piece you see in Menlo you'll see somewhere else. What you won't find [elsewhere] is all the pieces working together…."

The article covers four techniques that contribute to Menlo's success -- Assigning bite-sized pieces of work, Keeping projects in plain sight, Observing the customer in action, and Training workers to stay flexible -- but, it's this last area that I found quite insightful, and CEO Rich Sheridan's explanation of "towers of knowledge." Because all programmers at the company work in pairs, no one employee becomes the sole "owner" and facilitator of a particular project. This keeps programmers available to delve into other areas as well making all projects team efforts.

What do you think of Menlo Innovations' work atmosphere and business techniques? Will it become a benchmark for its own industry? Do you know of any other software developers that are building this type of culture?

"Made in the USA" -- Can it Happen Again?

During the past 20 years, US manufacturers have moved their production operations, at a massive rate, to foreign countries that offer cheaper labor costs.The migration of US manufacturing jobs to such locations as China have resulted in cheaper products, but the overall effect on the US economy has been hotly debated. Will manufacturing in the United States ever see a resurgence?

Tim Hutzel and Paul Piechota recently published a very interesting and timely book titled Keeping Your Business in the U.S.A.: Profit Globally While Operating Locally, and they feel that the current adage -- "The US can't compete with offshore labor costs" -- is a mere myth. Both have spent the past three years researching companies that have flourished while manufacturing their products in the US and their book documents just how these organizations achieved this goal.

I recently asked both authors why they believe the US can recover from the out flow of manufacturing, and here is their response:

A burning issue that is certainly in need of a remedy is the mass departure of manufacturing from the US to foreign countries. The results of this exodus are felt every day. As much as you would like to buy US-made products, this has become an impossible task. It is heartbreaking and disturbing that so many products, such as bicycles, clocks, garments, shoes, and computers are not produced domestically anymore.

Manufacturing can return to the US because many companies have been hurt by the rush to outsource. We have heard the tales of many business leaders regretting their outsourcing decisions -– the unplanned costs, poor quality, uncontrolled processes, long delivery times, graft, monstrous order quantities, inventory nightmares, lost and damaged products, oversight trips overseas, confrontations, half-truths, excessive order-to-remittance times, and added debt. In addition, there are social and national implications of outsourcing -– unemployment, increased government jobs, loss of skills, weakened national defense, loss of tax base, and unbridled national debt.

In our book, we clearly illustrate three manufacturing companies that have been able to resist the outsourcing trend and achieve overwhelming success while keeping jobs in the US. We have examined the successes, failures, lessons learned, and methods used by each company to achieve and sustain profitability.

What do you think the future holds for US manufacturing? Will labor costs in China only eventually rise? Will shipping and inventory costs associated with production in foreign countries eventually be important factors in cost?

The Supply Chain Executive?

I recently came across this great article written by Michael Koploy over on the Software Advice site. Koploy argues that technology companies must appoint more persons with strong supply chain backgrounds at the C-level (top-level executive) to operate at utmost efficiency. He believes that a talent crisis is, unfortunately, holding back this field from gaining increased exposure among executives.

Koploy notes Apple Inc.'s recent appointment of Tim Cook as new CEO of the company is groundbreaking because "a supply chain-minded executive is a rare sight" and believes "organizations need to take Apple’s lead and include supply chain-minded executives at the leadership table: to help organize, implement and manage strategies to improve the business’ value chain."

One of the most important points made in this article is essentially a statement that I've heard during many supply-chain presentations at various Lean conferences: Supply-chain experts must now "transition from a traditionally execution-based role to a strategic one."

Koploy's list of attributes for the ideal supply-chain executive candidate are:

1. Experience managing large, global supply chains.
2. A track record for being able to adhere to lean and just-in-time fundamentals.
3. Experienced enough with SCM software to know how to implement and leverage its benefits.
4. The ability to continually push both strategic and operational supply chain improvements.

What are your thoughts on Koploy's assertions? Should more companies follow Apple's example? How should the industry respond to the skills' shortfall?