Creating a sustainable competitive position through a world class operating system

To survive on the long run, we must embrace world class management systems: A A set set of of management management systems systems that… that…

Creating a sustainable competitive position through a world class operating system

Enable Enable us us to to Stay Stay ahead ahead of of competition competition and and continually continually generate generate superior superior results results Market share

Profits

Jean-Claude Savard Montreal, Quebec, Canada

By By improving improving across across 77 key key business business dimensions… dimensions…

1. Profitability: Profitability: costs, costs, margins, margins, contribution, contribution, returns returns 2. Productivity: Productivity: efficiency, efficiency, effectiveness, effectiveness, usage, usage, consumption, consumption, labor, labor, time time losses losses Product Product quality: quality: 11stst class, class, product product innovation innovation Clients service: satisfaction, Clients service: satisfaction, service service level level Human Human Resources Resources development: development: H&S, H&S, succession succession planning, planning, training training 6. Business Business Development Development & & Growth: Growth: top top line line growth, growth, market market share, share, new new businesses businesses 7. Business Business compliance: compliance: environment: environment: (water, (water, discharges, discharges, noise), noise), business business rules rules (contractual (contractual obligations) obligations)

3. 4. 5.

August 2008 [email protected]

1

A world class management system is …

•Project

•Program

World class operating systems are all over the industrial space

•Six Sigma

•A special activity with limited objectives and fixed resources and with a beginning and an end

High penetration

•Lean Manufacturing •Alcoa business system

•An efforts for achieving preestablished goals, involving only a subset of an organization

• 40% of Fortune 100 companies have six sigma programs

• Toyota production system (TPS) has been adopted around the world (e.g., Ford production system, Alcoa production system)

Solid fundamentals

•Toyota produc-

• Well proven problem solving tools used similarly by different programs

• Prescriptive program management (e.g., Black Belts, Ohno's disciples)

tion system

•System (culture)

•A systematic (and consistent) way of managing every aspect of the business by focusing the entire organization towards continuously improving.

"Th

An Operating System

EG

e go

al"

old by ratt

•Theory of constraints

• Significant financial investments (e.g., Executive dedicated staff, capital invested) commitment • Senior executives investing time and passion • Typically viewed as the “ticket to stay in the game”

•Bombardier Lean Sigma

•TQM •ACE 2

• Many examples of one-time cost reduction Success stories

and cash flow improvement – and a few real corporate successes of sustained improvements 3

1

Impact may be significant, but it requires sustained efforts over many years EXAMPLES

Quality

Company

Years

Annual Improvement Performance Units

Omron Toyota

7 16

7% 6%

Defects/100 Defects/100

Sollac GE Lighting Alcoa

12 10 7

5% 8% 5%

Cost/tonne Cost/unit Cost/tonne

7 6 6

10% 10% 10%

Strategic link between World-class performance and world -class practices European Plants Competitiveness Study

The Model

European Plant Average Results

Cost

Time Frames Pechiney Aerospace Porsche British Aerospace

Order to delivery time frame Design to manufacture time frame Order to delivery time frame

4

Kobayashi was the first to create what we call roadmaps to CI

5

All this originates from the Toyota Production System

20 Keys to Workplace Improvement

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

Cleaning and organizing Rationalizing the System/Management of Objectives Improvement Team Activities Reducing Inventory (Shortening Lead Times) Quick Changeover Technology Manufacturing Value Analysis (Methods Improvement) Zero Monitor Manufacturing Coupled Manufacturing Maintaining Equipment Time Control and Commitment Quality Assurance System Developing Your Suppliers Eliminating Waste (Treasure Map) Empowering Workers to Make Improvements Skill versatility and Cross-Training Production Scheduling Efficiency Control Using Information Systems Conserving Energy and Materials Leading Technology and Site Technology

Two big contributors: •Taichi Ohno (VPmanufacturing) •Shigeo Shingo (consultant)

6

7

2

Toyota Production System

•Its overall competitiveness has remained high and stable in recent years. There’s a general

•Toyota remains one of the most profitable companies in automotive industry.

Three Layers of Toyota’s Organizational Capabilities

Up to now, it’s manufacturing system is the most competitive one, But beyond the visibility of its production system, Toyota has developed better than others:

•For example, if Toyota operates with a consistently lower number of defectives parts per million compared to its competitors it means that certain defect-preventing routines such as poka-yoke, jidoka, andon, 5S… are implemented more thoroughly in its factories than others. This set of routines constitutes Toyota’s routinized manufacturing capability.

1. 1. Routinized Routinized manufacturing manufacturing capabilities capabilities

• 2. 2. Routinized Routinized learning learning capabilities capabilities

•

•Toyota made systematic profits over the last forty years (normally strong 5 per cent)

•

Evolutionary great learning capabilities 3. 3. Evolutionary Evolutionary learning learning capabilities capabilities

•

Routines for problem identification. • Reveal and help visualize problems. • Diffuse problem information. • Keep individuals conscious of problems. Routines for problem-solving and improvement projects. • Ability to search, stimulate, and evaluate alternatives. • Coordinate knowledge, skills. • Diffuse such tools throughout an organization. Routines for solution retention and systematic standardization. • Formalize and institutionalize new solutions in standard operating procedures. Systematic development of new layout, new manufacturing practices

8

So what makes a world class operating system work: First set the bar high and focus…

Many companies have tried, but few really succeed at creating a self-nurturing operating systems and CI approaches, because… 1. Insufficient management leadership 2. Too Projectcentric 3. Fleeting financial impact 4. Overly processoriented and rigid 5. Interpreted as a technical exercise

6. Content neutral

9

1. 1. Performance Performance

• Executives are not committed to their heart; they do not walk

Management Management

the talk

Focus on what really matters

• Focus on discrete projects (e.g.: “cut cost”) distracts leaders from thinking broadly about fundamentally improving the entire business system

2. 2. Tools Tools & & Methods Methods The right tools to solve the right problems

• Expected impact becomes difficult to capture; goals are not tightly connected to business unit performance management systems

• Metrics that cascade from the top to the frontline

• Targeting Methods that are limits based and stretching, yet achievable

• Action Tracking that creates transparency to the inputs of improvement

• Prescriptive methodology can result in more attention paid to the steps and/or training rather than the answer

3. 3. Capability Capability building building The right skills and coaching

• Transformation experts reporting to a central staff group rather than through the line resulting in lack of shop floor performance accountability

• Focus on general problem solving tools and approaches – lack of sufficient depth in subject-matter expertise (technical and functional) 10

• Performance dialogs that focus on problem solving and issue resolution

• Linkages to HR Systems to assure individuals are accountable for delivery 4. 4. Mindsets Mindsets and and behaviors behaviors The right people in the right jobs doing the right things 11

3

Second, develop world class ways for solving problems… Third, make sure you support the people by building the right set of skills… 1. 1. Performance Performance

1. 1. Performance Performance

Management Management Focus on what really matters

Management Management

• A world class problem solving approach

Focus on what really matters

• Pivotal Process Definitions codified in standard operating procedures

• Change agents that can lead change within

2. 2. Tools Tools & & Methods Methods The right tools to solve the right problems

2. 2. Tools Tools & & Methods Methods

• Analytical Diagnostic and Improvement

The right tools to solve the right problems

tools aligned by pivotal process

the line and across the organization

• Functional Skills development methods that assure capability building

• Qualitative Assessors that articulate “what 3. 3. Capability Capability building building The right skills and coaching

good looks like” by process/ function

3. 3. Capability Capability building building

• Best Practice Sharing methods that enable

The right skills and coaching

• Subject Matter Expertise that can be

rapid deployment

deployed to solve specific issues 4. 4. Mindsets Mindsets and and

4. 4. Mindsets Mindsets and and

behaviors behaviors The right people in the right jobs doing the right things

behaviors behaviors The right people in the right jobs doing the right things 12

Finally, walk the talk. lead the change by aligning mindsets and behaviors… 1. 1. Performance Performance

2. 2. Tools Tools & & Methods Methods The right tools to solve the right problems

• Talent Deployment to align “A” people against “A” opportunities/issues

• Aligned HR Systems that motivate people to do the right things

• Conviction building tools/ communications that highlight individuals’ roles within the big picture

3. 3. Capability Capability building building The right skills and coaching

• Leadership actions that consistently demonstrate the desired behaviors

• Aligned organizational structures to 4. 4. Mindsets Mindsets and and

An operating system: it’s not a project, it is not an initiative; it is a system followed by everybody from Corporate to the shop floor…

This includes…

Management Management Focus on what really matters

13

prevent barriers to the right decisions/actions

behaviors behaviors The right people in the right jobs doing the right things 14

•Operating strategies •Performance management systems •Stretch targets •Continuous Improvement tools •Front line execution •Problem solving teams •Audit and diagnostics •Centers of excellence •KPI and balanced score cards •Appraisal systems •Succession planning •Kaizen / Blitz •… •…

•We already do many of these things in different parts of the organization. •The operating system will enables us to: •put it all together in a common framework to facilitate communication •Be Systematic to ensure we do the right things everywhere •Communicate our objectives clearly to all employees •Ensure alignment on the management principles •Address the areas of gap & weakness 15

4

It’s not a project, it is not an initiative; it is an Operating system followed by everybody from Corporate to the shop floor… What it is…

The Operating system is built on 5 fundamental elements…

3. Talent Management

What it is not…

An integrated system of principles, operating practices, and elements that:

• Just a shop floor

1. Operating Strategy

improvement program

2. Performance Management

4. “Problem Solving” tools and technical capacities

5.Continuous Change Mechanisms

• A set of Kaizen events

• Drive the relentless

Front line execution and performance

• A menu of tools and

pursuit of perfect customer value creation

techniques

The Vision The Brain

The spirit

The muscle

The Structure

• Something that can be delegated

• Create leading financial performance by focusing on relentless pursue of excellence

Where do we want to go and why

• Develop world-class

Focus on key priorities and stretch for results

employees

Skilled people driving constant improvement and change

World class problem solving approach and tools

Coaching, capability building, and knowledge sharing

16

An operating strategy: defining a vision for where to go and why… 3. Talent Management 1. Operating Strategy

2. Performance Management

4. “Problem Solving” tools and technical capacities

An operating strategy supports and complements the business strategy

5.Continuous Change Mechanisms

A Business strategy…

Front line execution and performance The Vision The Brain

The spirit

The muscle

The Structure

3 fundamental questions to answer Where do we want to go and why

1. 2. 3.

17

An Operating strategy (for each site)…

•Focuses on answering the

•Feeds into and gets informed by the

following 4 questions: –What?: What products, what customers, what value proposition –Where? What regions, what markets –When?: Over what period of time, in what sequence –How?: What business model, where in the value chain • Determine the source of competitive advantage on which the business is to be built

business strategy by focusing on: – Current performance?: What is our performance (strengths and weaknesses) against key benchmarks –Potential?: how good could our operations be (against benchmarks)? –How?: What is the game plan to close the performance gap?

Multi-annual strategic and business plan reviewed and thoroughly communicated yearly through the strategic planning cycle

Understand where we stand today Understand what our potential is Understand how do we get there and close the gap

18

19

5

OEE a strategic measure to focus on the six big losses

Management systems are part of a complete diagnostic - example Key findings

To improve performance, we must address these six major losses, which are :

• Performance management

• Downtime losses (availability losses) 1. Breakdowns and equipment failures: losses due to unexpected failures and affecting equipment operation. 2. Changeover and adjustment set-ups: losses due to shutdowns for die changes and adjustments inherent to the machine operation.

Management Infrastructure and Capabilities

•

Production System

• Speed losses (efficiency losses)

•

3. Idling and minor stoppages: losses due to idling and minor stops resulting from temporary problems.

Mindsets and Behaviors

4. Reduced speed (versus rated speed): losses due to discrepancies between the actual and nominal production speed, as specified at the time of equipment design.

• Defects losses (quality losses) 5. Defects in process: losses due to reprocessing and defects.

Performance improvement

•

heavily focussed on business with limited attention to people and health dimensions Performance dialogue centered around explaining recent performance vs. budget, instead of root cause problem solving and action plans Sufficient capabilities in most sectors with specific concerns in converting and maintenance Limited lean capabilities to improve – Standard operating procedures (e.g., different operators have different “magic”) – Process control (e.g., lack of abnormality detection and root cause problem solving)

6. Reduces yield (start-up losses): losses occurring between the very beginning of production and the moment it reaches full stability, i.e. the so-called start-up phase. Current

Potential

20

The operating strategy has to set a compelling vision for operational improvement 1. Current performance: What is our performance (strengths and weaknesses) against key benchmarks?

2. Potential: how good could our operations be (against benchmarks)?

3. How: What is the game plan to close the performance gap? Lead the Change

21

Operating strategy leading the change concept (including diagnostic)

Complete diagnostic of 3 areas: •Production systems •Management systems •Mindsets and behaviors Evaluate current performance against:

•Creating a burning platform and a vision

•Technical limits •Best in class •Best historical

•Mobilizing people, opinion leaders •Adapting vision based on mobilization and people

Is that enough to close the competitive gap?

•Creating a system for support (steering co.)

•Create the burning platform for improvement agenda: set the gap

•Align and mobilize the organization against a vision and action plan for closing the gap •Define the mandate and the collective aspirations 22

6

The Performance Management cycle implements the operating strategy

Performance management: focus on priorities and make it happen… 3. Talent Management 2. Performance Management

1. Operating Strategy

4. “Problem Solving” tools and technical capacities

5.Continuous Change Mechanisms

Operating strategy Front line execution and performance

The Vision The Brain

Focus on key priorities and stretch for results

The spirit

The muscle

The Structure

4 fundamental steps

1. 2. 3. 4.

Set stretch targets Define priorities and accountabilities for results Maintain tight monitoring on progress (performance review) Integrate results into all management cycles (e.g.; performance appraisal, strategy, etc.)

–– Sets Sets the the context context by by defining defining the the objectives: objectives: •• Operational Operational diagnostic: diagnostic: –– OEE OEE –– Technical Technical limits limits •• How How to to maintain maintain well well –– Equipment Equipment reliability reliability strategy strategy –– Organizational Organizational effectiveness effectiveness •• How How to to match match to to customer customer requirements: requirements: –– CTC; CTC; CTQ; CTQ; CTP CTP –– Aligns Aligns the the entire entire organization organization against against common common set set of of objectives objectives

4. Integrate into planning cycles

3. Control, monitor and adjust

1. Set higher and higher targets

2. Plan and implement

24

Performance Management: a rigorous follow-up 4 step cycle

4. Integrate into planning cycles

3. Control, monitor and adjust

1. Set higher and higher targets

25

KPI: The Foundation of Good Performance Management • Focus attention. Set improvement priorities

–– Identify Identify key key performance performance indicators indicators (KPI) (KPI) in in all all levels of the levels of the organization organization –– Establish stretch targets, Establish stretch targets, taking taking into into account account the the technical technical limits, limits, best best historical historical performance, performance, internal/external internal/external benchmarks, benchmarks, etc etc .. –– Set Set goals goals right right up up to to the the front front line line personnel personnel –– Qualitative Qualitative roadmaps roadmaps to to articulate articulate “what “what good good looks like” for key looks like” for key processes/ processes/ functions functions

– Facilitates management of what is important, avoid management by urgency (fire fighting) – Facilitates identification of problems and action to be taken (we manage what we can measure) – Allows management to have value added dialogues (problem solving based on good understanding of root causes) KPI: Key performance indicators

• Makes individuals accountable for specific parameters over which they have direct control

• Establishes a clear and transparent link between value creation and every-day operating decisions/actions on the line

• Sets precise stretch targets and facilitates benchmarking • Measures progress and anticipates down turns

2. Plan and implement

KPIs are there to expose weaknesses and opportunities NOT to justify current performance 26

27

7

Typical pitfalls in a KPI architecture

Through technical limit benchmarking for each selected KPI determines the stretch target. No “stretch”, no KPI! EXAMPLE

Insufficient stretch targets

2

KPI used as a report procedure and not as a management tool Not transparent to entire organization (right info, right format, right time, right people)

3 4

Oriented toward explaining the past, not planning the future

5

Isolated exercise, not integrated into overall management processes. No systematic and rigorous (daily) performance management dialogue

6 7

Stretch goal based on historical best performance

Stretch goal based on study of technical limits

1

Technical limit

Best-in-class

Incomplete breakdown; KPI too general to conduce to action

9

Focus on limited number of variables

10

KPIs not owned by key individuals

Best day

Best day

Not cascaded creating inconsistencies between levels / areas of the organization Improvements cannot be distinguished from simple statistical fluctuations

8

Throughput

Throughput

Gap

Gap

Actual

Actual avg. Actual avg.

Time

Deciles

28

Establishing Technical Limitations

Reduction of variation: statistical diagnostic and six sigma

Efficiency %

ILLUSTRATION

The concept behind the six sigma diagnostic 95 87

88

Performance shortfall used to set improvement goals

• What is critical??? Six Sigma concept: Make the connection on Critical to Business and Critical to Customer

82

Options

• Best operating months •

• Average performance last 12 months

29

Same plant performance, 3 best months

Any plant in the division performance, 3 best months

Performance technical limits

to date Composite of best month’s performance for each key dimension Engineering calculations (specifications, physical limits)

30

–C.T.C. (Critical to Customer) –C.T.Q. (Critical to Quality) –C.T.P. (Critical to Process) Up to control loops…

• Customer Focus… –Reduction of variation is a systematic process of improvement focus totally on customer.

31

8

Performance Management: a rigorous follow-up 4 step cycle

4. Integrate into planning cycles

3. Control, monitor and adjust

1. Set higher and higher targets

2. Plan and implement

Performance Management: a rigorous follow-up 4 step cycle

–– Systematic Systematic monitoring monitoring of of KPIs KPIs and and progress progress at: at: •• Daily production meeting Daily production meeting •• Weekly Weekly staff staff meeting meeting •• Monthly Monthly operating operating meetings meetings •• Yearly/quarterly Yearly/quarterly reviews reviews –– Thorough Thorough follow follow up up on on agreed agreed action action plans plans with with timely timely corrective corrective action action –– Transparency Transparency of of results results and and trends: trends: •• Balanced Balanced score score cards cards •• Plant Plant dashboards dashboards •• Visual Visual posting posting of of KPIs KPIs

–– Define Define improvement improvement priorities priorities and and align align organization organization around around them them –– Define Define detailed detailed action action plan plan for for improvement improvement initiatives initiatives –– Enforce Enforce unequivocal unequivocal accountability accountability for for execution execution & & results results –– Ensure Ensure same same rigor rigor is is applied applied at at all all levels levels of of the the organization organization

4. Integrate into planning cycles

3. Control, monitor and adjust

1. Set higher and higher targets

2. Plan and implement

32

Performance Management: a rigorous follow-up cycle

The review meetings should NOT focus on explaining the past, but on planning ahead and anticipating issues

–– HR: HR: direct direct link link between between performance, performance, skills skills and and incentives incentives –– Establish Establish financial financial goals goals based based on on technical technical limits limits –– Integration Integration with with annual annual planning planning process process

Key Key elements elements to to be be managed managed 20% 20% “Result “Result Monitoring”: Monitoring”: performance performance dialogue dialogue

80% 80% “Looking “Looking Ahead”: Ahead”: Planning, Planning, setting setting targets and targets and anticipating anticipating

• Measure Measure and and review review KPIs KPIs to to understand understand trends trends towards towards closing closing gap gap • Integrate Integrate initiatives initiatives and and review priorities review priorities • Follow-up on action Follow-up on action plans plans

• Set Set targets targets to to be be reached reached • Define Define aa plan plan (where (where are are we we going) going) • Anticipate Anticipate and and resolve resolve potential potential road road blocks blocks

33

These principles must be integrated at all levels of the organization • Line • Section • Plant • Division • Corporate

34

4. Integrate into planning cycles

1. Set higher and higher targets

3. Control and adjust

–– Daily Daily monitoring monitoring of of key key performance performance indicators indicators (KPI) (KPI) –– Thorough Thorough action action plan plan follow follow up up –– Regular Regular forums forums for for review review and and transparency transparency –– Timely corrective action Timely corrective action

2. Plan and implement

–– Identify Identify key key performance performance indicators indicators (KPI) (KPI) –– Establish Establish higher higher and and higher higher targets, targets, taking taking into into account the technical account the technical limits, not merely limits, not merely internal/external internal/external benchmarks benchmarks –– Set Set goals goals right right up up to to the the front front line line personnel personnel

–– Definition Definition of of priorities priorities –– Detailed Detailed action action plan plan for for improvement improvement initiatives initiatives –– Unequivocal Unequivocal accountability accountability for for results results

35

9

Talent management: 4 core components to enable the development of our people

Talent Management: putting the best people to work… 3. Talent Management 1. Operating Strategy

2. Performance Management

4. “Problem Solving” tools and technical capacities

5.Continuous Change Mechanisms

1. 1. Assess Assess pivotal pivotal jobs jobs Define who makes things happen

Front line execution and performance The Vision The Brain

The spirit

The muscle

The Structure

Top team Middle management Shop floor

2. 2. Review Review & & Appraisal Appraisal

improvement and change along 5 dimensions: • goal setting & comfort with stretch targets; • motivate, lead & coach front line; • Collaborate, share and bring down barriers • Openness to new ideas and methods • Rigorous problem solvers

Build the right skills and and capabilities

The 4 core components

1. 2. 3. 4.

• Understand change agents and opinion

4. 4. Mindsets Mindsets and and

Assess key pivotal job Review and appraisal Fill the talent gap Promote right mindsets and behaviors

performance improvement and change leadership explicitly included in the responsibilities of the key roles (plant managers, key supervisors, etc. )

• Assess ability of pivotal roles to lead

Understand strengths and weaknesses

3. 3. Fill Fill the the talent talent gap gap

Skilled people driving constant improvement and change

• Roles and responsibilities: Continuous

leaders that can lead change (or block it) within the line and influence across the organization

behaviors behaviors The right people in the right jobs doing the right things 36

Talent management: 4 core components to enable the development of our people

• Rigorous evaluation & appraisal systems

1. 1. Assess Assess pivotal pivotal jobs jobs Define who makes things happen

2. 2. Review Review & & Appraisal Appraisal Understand strengths and weaknesses

Top team Middle management Shop floor

37

Talent management: 4 core components to enable the development of our people 1. 1. Assess Assess pivotal pivotal jobs jobs

(across all levels of the organization) that encompasses technical performance and change leadership dimensions

Define who makes things happen

Build the right skills and and capabilities

2. 2. Review Review & & Appraisal Appraisal

high, average and low performers (with a standardized assessment tools)

Understand strengths and weaknesses

behaviors behaviors The right people in the right jobs doing the right things

Shop floor

• Attracting skills: Thorough hiring for fit with change leadership desired

• Thorough succession planning that promotes desired leadership change

(particularly within pivotal jobs) and development of gap-closing actions (by individual and by organization)

3. 3. Fill Fill the the talent talent gap gap Build the right skills and and capabilities

• Performance contract and consequence 4. 4. Mindsets Mindsets and and

Middle management

• Talent deployment: Assign “A” people against “A” opportunities/issues

• Segmentation: continuous assessment of

• Action plan: Identification of talent gaps 3. 3. Fill Fill the the talent talent gap gap

Top team

management: Specify performance objectives (including KPIs) and link “contract” to reward/recognition processes

38

4. 4. Mindsets Mindsets and and behaviors behaviors The right people in the right jobs doing the right things

• Career development processes that continuously exposes high potential individuals to be stretched

• Comprehensive training program to reinforce desired skills in pivotal jobs

39

10

Talent management: 4 core components to enable the development of our people

Define who makes things happen

3. Talent Management

• Aligned HR Systems that motivate people to

1. 1. Assess Assess pivotal pivotal jobs jobs

Problem solving capabilities: bring out the best of our people…

do the right things (soft and hard incentives)

Top team Middle management

1. Operating Strategy

• Conviction building tools &

Shop floor

communication strategies to ensure Operators understanding the need for change and committed to implementing the new operating system

2. 2. Review Review & & Appraisal Appraisal Understand strengths and weaknesses

2. Performance Management

4. “Problem Solving” tools and technical capacities

5.Continuous Change Mechanisms

Front line execution and performance The Vision The Brain

The spirit

The muscle

The Structure

• Leadership actions that consistently demonstrate the desired behaviors; Top management team must “walk the talk”

3. 3. Fill Fill the the talent talent gap gap Build the right skills and and capabilities

• Aligned organizational structures to prevent barriers to the right decisions/actions World class problem solving approach and tools

• Focus on cultural change to proactively

4. 4. Mindsets Mindsets and and

attack limiting mindsets and paradigms that block the solution set

behaviors behaviors The right people in the right jobs doing the right things

5 components

1. 2. 3. 4. 5.

Rigorous problem solving approach Team based involvement of front line Best-in-class analysis and problem solving tool box Best-in-class operations processes (maintenance, quality, etc.) Net work of “on call” technical experts

40

The rigorous 7 step problem-solving approach is at the heart of the Operating System 1. 1. Problem Problem solving solving approach approach

41

Team based front-line execution: fundamental to the Operating system

7 steps to Problem solving…

1. 1. Problem Problem Solving Solving approach approach

1 7

2. 2. Team Team based based front front line line execution execution

Standardized and control

full full attention attention

Define problem and set goals

2

Act

Check

Plan

Analyze situation

6 Do

3

Implement solution

4. 4. Operating Operating processes processes

5

Generate potential solutions Select and plan solution

4

2. 2. Team Team based based front front line line execution execution

•Systematic

Evaluate success

3. 3. Problem Problem solving solving tools tools

Fundamental Fundamental concept concept to to the the Operating Operating system: system:

• Problems Problems don’t don’t get get solved solved unless unless they they are are addressed addressed with with

process to be used across the organization for every improvement opportunity an eliminate all sources of waste

3. 3. Problem Problem solving solving tools tools

• People People solve solve problems problems thus thus need need to to dedicate dedicate aa team team full full • • • •

•Our biggest challenge and weaknesses reside on steps 1,2 and 7

4. 4. Operating Operating processes processes

5. 5. Technical Technical expertise expertise “on “on call” call”

•

time time to to the the resolution, resolution, and and create create aa problem problem solving solving event event (Kaizen, (Kaizen, Blitz, Blitz, etc.) etc.) The The team team brings brings relevant relevant people people together together in in an an organized organized way way and and has has the the power power to to make make things things happen happen The team addresses the root-causes and do not The team addresses the root-causes and do not look look for for palliative palliative measures measures Ensure Ensure aa standardized standardized approach approach to to solving solving the the problems problems to to allow allow for for rigor rigor and and learning learning A A Problem Problem solving solving event event (Kaizen, (Kaizen, Blitz, Blitz, etc.) etc.) requires requires 66 to to 12 12 people people involved involved 100% 100% for for 11 to to 33 weeks weeks The solution adopted becomes the new operating standard. The solution adopted becomes the new operating standard.

5. 5. Technical Technical expertise expertise “on “on call” call” 42

43

11

Each operation has to have the capability for applying specific tools depending on the problem at hand 1. 1. Problem Problem Solving Solving approach approach 2. 2. Team Team based based front front line line execution execution

3. 3. Problem Problem solving solving tools tools

4. 4. Operating Operating processes processes

To sustain and maintain improvements several operating processes must support the Operating system 1. 1. Problem Problem Solving Solving approach approach

Sample of lean and six-sigma tools • OEE – Measure the overall effectiveness of the equipment • Six Sigma statistical analysis • Ishikawa • PokeYoke • SMED – Quick change over • 5S – Organize working environment (sort, clean, locate, identify, • • • • • •

6 Operating processes to support it • World-Class maintenance system: ensures maximum equipment reliability at low cost and waste. Equipment reliability should be owned jointly by maintenance and production

2. 2. Team Team based based front front line line execution execution

• Quality System: Intended to built quality assurance into the process and eradicating root causes (ISO certification is one tool for implementing a quality system)

• Standard Operating Practices (SOP): Ensures consistent,

maintain) Clean and check – (5S applied to a machine) Tack time cycles Kanban Value mapping Spaghetti diagram …

3. 3. Problem Problem Solving Solving tools tools

• 4. 4. Operating Operating processes processes

5. 5. Technical Technical expertise expertise “on “on call” call”

• •

5. 5. Technical Technical expertise expertise “on “on call” call”

safest, lowest cost and most efficient operating procedure. It stabilizes the operations and creates a baseline from where improvements can be achieved. Visual Management: Communication process between management and shop floor to ensure alignment on performance, improvement, and priorities Health and Safety system: maintain the safest work environment possible (OSHA 1800 certification is one tool being used in some of our operations) Environmental compliance system: maintain strict adherence to rules and requirements (several certifications types could be applied across our operations)

44

Front-line has to be supported by access to a network of technical expertise

Continuous change mechanisms: build a sustaining system… 3. Talent Management

1. 1. Problem Problem Solving Solving approach approach 2. 2. Team Team based based front front line line execution execution

3. 3. Problem Problem Solving Solving tools tools

45

1. Operating Strategy

Both internal and external formal network of technical experts

2. Performance Management

4. “Problem Solving” tools and technical capacities

5.Continuous Change Mechanisms

Front line execution and performance The Vision The Brain

The spirit

The muscle

The Structure

• External: network of functional expertise (consultants) available and shared across the network

• Internal: Centers of excellence on areas of common interest 4. 4. Operating Operating processes processes

5. 5. Technical Technical expertise expertise “on “on call” call”

that enable best practice sharing across businesses and divisions

• Internal: skilled trades people and engineers who provide

4 components Coaching, capability building, and knowledge sharing

subject matter expertise (e.g., maintenance, chemistry, manufacturing systems) that can be leveraged for general problem-solving across any division and business unit

46

1. 2. 3. 4.

Dedicated local coaches (Local CI team) and steering co. Communication strategy and visual management Knowledge sharing infrastructure Centers of CI Excellence 47

12

The initiatives require dedicated local coaches

1. 1. Dedicated Dedicated local local coaches coaches

2. 2. Communication Communication strategy strategy

3. 3. Knowledge Knowledge sharing sharing infrastructure infrastructure

4. 4. CI CI center center of of excellence excellence

Messages, successes and learnings need to be constantly communicated

• “Black coaches”:specially trained dedicated

Examples (not exhaustive) 1. 1. Dedicated Dedicated local local coaches coaches

“transformation resources” and coaches to facilitate: Facilitate, coordinate, coach, train, and provide the analytical horse power to the problem solving; operate as chief of staff on CI to the plant manager – Typically 1% of the total work force – Experts in fact based problem solving and in Kaizen methods – Experts in a few lean or six sigma tools • “Green coaches”: line operators/supervisors trained through involvement in kaizen events; Typically 35% of an organization will have some “green coaches” capabilities • Accountability for improvement remains within the line operations. Each area of improvement is thus championed by line supervision

• CI is a central part of the strategic agenda • Visual management: KPIs, improvement and performance displayed across organization

2. 2. Communication Communication strategy strategy

• Public recognition of successes • Commitment to CI communicated to customers and other stakeholders

• Implementation of “good will ideas” to motivate and build commitment

•… 3. 3. Knowledge Knowledge sharing sharing infrastructure infrastructure

4. 4. CI CI center center of of excellence excellence

48

49

Overall coordination across multiple sites requires and overarching infrastructure

Learning organization needs innovative ways for sharing knowledge

1. 1. Dedicated Dedicated local local coaches coaches

1. 1. Dedicated Dedicated local local coaches coaches Examples (not exhaustive)

2. 2. Communication Communication strategy strategy

3. 3. Knowledge Knowledge sharing sharing infrastructure infrastructure

•“Black-coaches” sharing system •Intranet libraries, expert directories, training materials •Codified and shared learnings from each Kaizen events •CI knowledge sharing events for all coaches •Conferences and access to outside experts •Visits to sites and other industries •…

2. 2. Communication Communication strategy strategy

3. 3. Knowledge Knowledge sharing sharing infrastructure infrastructure

4. 4. CI CI center center of of excellence excellence

• Team at the top mandated to strike the right balance between getting momentum in driving significant improvement and managing the cultural change • Team at the top to coordinate agenda • Network of CI coaches to support knowledge sharing and coordination across all divisions/business unit • Company-sponsored programs to train leading practitioners within the organization, adopting a mix of techniques including • Learn by doing • Shadowing/coaching • Developmental assignments • Selective technical and analytical classroom sessions

4. 4. CI CI center center of of excellence excellence

50

51

13

The Operating system is built on 5 fundamental elements…

3. Talent Management 1. Operating Strategy

2. Performance Management

4. “Problem Solving” tools and technical capacities

Execution is king…

5.Continuous Change Mechanisms

Front line execution and performance The Vision The Brain

The spirit

The muscle

The Structure

“ Only 5 percent of the organizations in the West truly excel. Their secret is not what they do, but how they do it.” H.J. Harrington

Where do we want to go and why

Focus on key priorities and stretch for results

Skilled people driving constant improvement and change

World class problem solving approach and tools

Coaching, capability building, and knowledge sharing

52

Improvement Trend

53

Experience has shown…

• Best performing plants have the best results • Average performing plants have average results • Low performing plants have the worst results

The reverse of their potential It’s a DNA thing…

54

55

14

What Makes the Difference ?

So how do we get started?

The Operating system is a journey not a project

The genetics of your plants

•Iterative process that will be continuously improved

The DNA Factors

•Will not be linear: all elements of a CI program are “tackled” simultaneously and “improved by doing”; learn by doing •Pareto (80/20) is king BUT relentless pursue of improvement is not negotiable.

•Good enough is NOT good enough: stretch, stretch, stretch: willingness to accept trial and error process

•Everybody is involved: walk the talk, management leads by example; line operators solve the problems

•Every aspect of the organization will be touched: profitability, productivity, quality, customers, compliance, growth.

56

Key success factors for launching a CI implementation…

• Rigorous Rigorous management management by by Strong Strong leadership leadership and and vision vision

objectives objectives (stretch (stretch targets) targets)

• Visibility Visibility and and commitment commitment (this (this is is for for real) real)

• “Walk “Walk the the talk” talk” • Communicate Communicate message message continuously continuously

Local Local talent talent with with passion passion

Willingness Willingness to to invest invest

• Local Local “black “black belt” belt” with with conviction conviction • Local Local championship championship with with clear clear mandate mandate • Full Full commitment; commitment; credibility credibility within within the the organization organization

All of these elements need to be there to make it successful

• Create Create aa mandate mandate • Bring Bring capabilities capabilities in in • Have Have fully fully dedicated dedicated working working teams teams

• Train Train and and coach coach 58

15