Implementing the Virtual Lean Enterprise Second Edition
Brian J. Carroll
Auerbach Publications
Taylor & Francis Group
Contents
When the ERP Project Manager Is the Lean Champion 3
The Organizational Consequences of Mass Production 8
The Origin of Lean Production 10
What Is Lean Production? 14
Why Aren’t More Firms Lean? 16
What Is Required to Become Lean? 18
Implementing Lean Cross-Functional Processes 21
Lean Quality Management 23
Lean Maintenance 24
Lean New Product Introduction 25
Lean Design and Engineering 26
Lean Accounting 27
What Is the Virtual Lean Enterprise? 33
Lean and ERP: Why Can’t We All Just Get Along? 35
The Failure of ERP Implementations 42
Lean and Six Sigma 44
Why Should Our Enterprise Be Lean? 45
The Three Levels of Lean Business Process Management 49
Lean Business Process Strategic Level: Lean Policy Deployment 50
Lean Business Process Organizational Level: Lean Process Innovation 53
Lean Business Process Activity Level: Lean Performance Implementation 62
What Is Lean Performance? 66
How Does Lean Performance Improve Processes? 68
Why Lean Performance Is the Best Lean Methodology 69
What Is Lean Commerce? 81
Lean Customer Relationship Management 88
Lean Production Smoothing 90
Lean Supply-Chain Management 100
Lean Performance China Strategy 103
Supporting a Lean Factory Flow 104
Toyota Production System and Lean Commerce 108
Implementing a Virtual Lean Enterprise 110
Lean Cultural Principles 113
Process-Oriented Thinking Means What Before How 115
Product Quality Results from Process Quality 115
Every Process Needs a Process Standard 116
The Process Owners and Operators Are the Process Experts 117
The Next Process Is Your Customer 119
Loyalty to People Enables Continuous Improvement 119
Process Data and Measurements Drive Process Continuous Improvement 122
Lean Cultural Principles Checklist 122
Process-Oriented Thinking Means What Before How 122
Product Quality Results from Process Quality 123
Every Process Needs a Process Standard 124
The Process Owners and Operators Are the Process Experts 125
The Next Process Is Your Customer 126
Loyalty to People Enables Continuous Improvement 126
Process Data and Measurements Drive Process Continuous Improvement 128
Lean Transformational Principles 129
Precisely Specify Value by Product or Family 129
Identify the Value Stream for Each Product 129
Make Value Flow Without Interruption 129
Let Customer Pull Value from the Process Owner 129
Pursue Perfection 129
Lean Transformational Principles Checklist 130
Precisely Specify Value by Product or Family 130
Identify the Value Stream for Each Product 130
Make Value Flow Without Interruption 131
Let the Customer Pull Value from the Process Owner 131
Pursue Perfection 131
Lean Diagnostic Tools 132
3 MUs 132
5 Ss 137
5 Ws-1 H 142
4 Ms 146
Lean Performance Practices 152
Management Policy Deployment 152
Lean Performance Teams 154
Visual Management 155
Lean Performance Analysis 155
Management in the Lean Performance Project 161
Advocate 162
Champion 162
Sponsor 162
Communicator 162
Motivator 163
Team Builder/Team Player 163
Educator/Developer 163
Change Agent 163
Facilitator/Coach/Catalyst 164
Mediator/Negotiator 164
Completing the Lean Performance Assessment 166
Lean Performance Assessment 167
Lean Enterprise Future State 167
In Our Future Lean Enterprise 171
Enterprise Lean Vision Elements (Add/Change to Fit Your Lean Enterprise) 172
Our Process Owners (Managers and Supervisors) 173
Company Readiness 173
Opportunity to Make Lean Applications 176
Company Capability to Become Lean 177
Lean Performance Project Constraints 180
Management Tasks 189
Organizing the Steering Committee 189
Confirming the Lean Vision 191
Identifying and Deploying Lean Business Policies 191
Identifying and Deploying Lean Project Strategies 192
Defining the Project Mission 195
Defining the Project Scope 196
Setting Up the Project Organization 197
Identifying and Deploying the Project Objectives 199
Conducting Steering Committee Meetings 203
Management Tasks 212
Organize the Software Evaluation and Selection Project Team 212
Project Team Tasks 213
Organize the Project Office and Conference/Education Room 213
Determine Key Lean Software Features Workshop Attendees 213
Review All Lean Strategy/Policy/Project Objectives LPA Masters 214
Conduct Process Area Workshops 214
The 9 Forms of Office MUDA Checklist 215
The 5 Ss in the Office Checklist 216
The Office 5 Ss Checklist 217
5 Ss in the Computer Room Checklist 219
Conduct Key Lean Software Features Workshops 220
Process Stream Key Lean Features Checklist 221
Prepare a Draft of the Key Lean Software Features Checklist223
Report Progress to Management Steering Committee223
Project Team Tasks229
Maintaining the Project Summary Bar Chart229
Maintaining Project Communications229
Maintaining the Project Plan 230
Maintaining an Open Issues Resolution Process 230
Maintaining the Project Organization235
Maintaining the Quality Assurance Process236
Reporting Progress to the Steering Committee239
Project Team Tasks241 Developing the Site Configuration 242
Identifying All Processes 244
Developing Site Teams254
Developing Lean Performance Team Training254
Reporting Progress to the Steering Committee265
What Follows Lean Performance Planning?265
Management Tasks273
Maintaining Lean Performance Teams273
Conducting Steering Committee Meetings274
Project Team Tasks275
Lean Performance Team Education275
Human Resource Team Tasks278
Finance Team Tasks 286
Engineering Team Tasks 288
Materials Team Tasks292
Operations Team Tasks294
Information Team Tasks296
Lean Commerce Team Tasks299
Completing Lean Performance Analysis 304
Challenging Processes Checklist320
Producing Work Instructions329
Project Team Tasks337
Installing Hardware and Software337
Initiating the System338
Setting Up System Security338
Creating Test and Training Environments339
Creating Production Databases339
Testing System Setup339
Managing the Data Conversion Process 339
Evaluating Additional Software Packages and Interfaces 340
Conducting Process-Oriented System Design 342
Summarizing Proposed Modifications 342
Completing Hardware and Communications Analysis 344
Preparing Detailed Design Specifications 344
Managing Outsourced Programming345
Defining Interface and Database Testing 346
Project Team Tasks347
Objectives of Testing347
Prototype and Pilot Testing 348
Establishing the Test Team 348
Test Team Kick-Off Meeting355
Process Test356
Stress Test 360
Process Workflow and Work Instruction Update361
Conducting the User Training Program362
What Follows Lean Performance Improvement?362
Management Tasks365
Maintaining Lean Performance Teams365
Implementing Lean Performance Management 368
Continuously Deploying Lean Policy and Strategy372
Auditing Lean Performance374
Project Team Tasks376
Completing the Implementation Readiness Assessments376
Verifying System Integration377
Counting Down to Implementation377
Implementing Improved Processes378
Providing Additional Training378
Providing Production Start-Up Support378
Project Team Tasks379
Defining and Initiating Lean Performance Measurements379
Continuously Improving Lean Performance385
Deploy Management Policy387
Deploy Information Process Technology388
Identify Processes and Teams388
Complete the Lean Performance Analysis388
Build New Information System Supports389
Complete Updated Process Standards389
Continuously Improve Lean Performance389
Index391
Preface to the Second Edition
The first edition of Lean Performance ERP Project Management was written by a veteran of ERP implementations in manufacturing environments that were working to “get lean” We hadn’t always called it “lean,” however We had called it J-I-T, Zero Inventory, Synchronous Manufacturing and Continuous Flow, and several other names MRP was often viewed as the enemy in these embryonic lean enterprises Empowered by a lean management team and the beginnings of lean cultures in several of these implementations, I managed or directed projects that were successful in employing Lean Performance ERP in what were becoming very lean enterprises I emerged from these experiences and wrote the first edition of this book I thought that everyone in manufacturing would embrace Lean Performance ERP and that those same manufacturers as well as service industries would readily embrace “lean in the office” I was wrong American manufacturers who had been struggling with MRP transitioned into struggling with lean, and later with lean and ERP/MRP The ERP/MRP proponents often reject lean as “simplistic—yesterday’s news” while lean advocates posit that ERP/MRP is the dinosaur In this second edition of Lean Performance ERP Project Management, I am adding the “why do it” of Lean Performance ERP/MRP implementation to the first edition’s “go do it” perspective I hope to convince the skeptics, on both sides of the issue, that lean and ERP/MRP are not only compatible but that they need each other I would ask the reader to suspend his or her disbelief about the relative merits of lean and ERP/MRP and consider the case that this book puts forth.
It is apparent that many lean implementations fail for the same two primary reasons many ERP/MRP implementations fail—lack of education on how to accomplish the desired outcome and lack of directed commitment to change As the global lean phenomenon accelerates, failure at lean is a doomsday scenario for American manufacturers ERP/MRP systems form the backbone of global commerce, so failure at ERP/MRP implementation is likewise a doomsday scenario I hope this second edition helps to educate on the desired outcome: lean and ERP It is up to the individual to accomplish the commitment to change I would like to explore for just a moment three additional themes that I believe make the publication of a second edition of this book desirable The first theme is the title of the book itself The title (actually subtitle) of this book has been returned to that which was originally submitted for publication in 2001 Readers of the first edition will notice that the original subtitle that has been reinstated is Implementing the Virtual Lean Enterprise There are three key reasons for this change:
1 The subtitle for the book as originally submitted was Implementing the Virtual Lean Enterprise The powers that be in the publisher’s office decided that no one would buy a book with that subtitle It was felt that that subtitle wouldnot be understood by potential buyers It was felt that “supply chain” was a term that had more currency at that time.
2 There are many good books on the market that are more suited to bear the subtitle Implementing the Virtual Supply Chain The book you are reading presents only a portion of supply-chain implementation, that being the technical ERP/MRP foundation There is plenty more to do to implement a supply chain, virtual or otherwise, and many books on the market do just that 3 This book refers to the Virtual Lean Enterprise repeatedly, and is in fact about the Virtual Lean Enterprise The Virtual Lean Enterprise is a real thing—it is the virtual connection and coexistence of linked producers in any lean enterprise: the automotive lean enterprise(s), the PC lean enterprise(s), etc.
The Virtual Lean Enterprise is especially vibrant in the shared intersection of virtual space where the producers of products and services common to multiple lean enterprises collect, process, and share data about supply and demand The second theme that makes this second edition desirable has to do with the necessity of lean transformation and implementation of the Virtual Lean Enterprise that is imperative upon the West as the Eastern manufacturing base increasingly dominates global business through the emergence of lean global supply chains increasingly interconnected through channel Virtual Lean Enterprise technologies.
The third theme is the fact of the new challenges facing the ERP implementer, especially in a lean environment—or an environment attempting lean transformation The typical project manager wants to be equipped with a current discussion of the latest events and theories on the topic and then see the “toolkit” with which to address them It is my hope I have provided project managers with a relevant discussion on the latest theories and topics in the ERP/MRP project area Here is a listing of the new evaluation and implementation tools included in the second edition that can provide implementation assistance:
1 “Foreword: A Message for Management” provides the project manager with an overview to give his or her lean sponsor and the other lean transformation steering committee members to read
2 A case in support of the ERP project manager to be the lean champion and to lead the lean transformation3
3 A refreshed discussion of history in the “Origin of Lean Production”10
4 A discussion of why lean cultural principles are required to become lean14
5 A discussion of lean accounting27
6 A definition of the Virtual Lean Enterprise33
7 A discussion of the conflicts between lean and ERP titled “Lean and ERP: Why Can’t We All Just Get Along?”35
8 A discussion of the failure of ERP implementations 42
9 A discussion of lean and Six Sigma 42
10 A refreshed discussion of current events in the transition to lean from mass in “Why Should Our Enterprise Be Lean?”45
11 A discussion of the three levels of lean business process management49
12 An update of the “lean commerce” section, including new developments such as e-kanban and Radio Frequency Identification
(RFID) A discussion of customer TAKT and operational TAKT is also included, as is a discussion of the lean commerce system implemented by Toyota North America in the years since the publication of the first edition81
13 A Lean Performance China strategy for ERP project managers dealing with China-based manufacturing103
14 A discussion of the differences between lean principles, lean tools, and lean practices110
15 An expanded discussion on the lean cultural principle “The Process Owners and Operators Are the Process Experts”113
16 An expanded discussion on the lean cultural principle “Loyalty to People Enables Continuous Improvement” 119
17 A new lean enterprise future state assessment to introduce the Lean Performance Project Assessment183
18 An evaluation and selecting software module that discusses a “process stream mapping” methodology to a lean ERP key features determination to select software 209
19 A human resource team and the tasks needed to address HR requirements in a lean transformation278
20 A management policy deployment loyalty GAP analysis human resource team task281
What Is Lean Performance?
Lean Performance is a project management methodology for lean implementation that starts with existing processes and develops process performance improvements and measurements. By developing process workflow standards of what work must be completed, and then utilizing the process workflow standards to determine how to do the work, Lean Performance produces process work instructions for training to ensure continued process quality.Lean Performance also manages multi site projects by identifying common processes and prioritizing assignments.The methodology develops process performance measurements and Continuous Lean Performance where information technology has already been implemented, or as the implementation methodology for new projects.
Lean Production is the philosophy and practice of eliminating all waste in all production processes continuously. Manufacturing workers may apply lean principles, tools, and practices successfully to continuously improve production processes, but usually information technologies do not readily enable continuous improvements in management decision processes, information/support processes, and linkages to physical processes. Methodologies for information technology installation such as reengineering and process or system innovation do not facilitate the use of Lean Thinking to readily enable continuous improvements in management decisionprocesses, information/support processes, and linkages to lean physical processes.
Until now, lean thinking has narrowly focused on physical processes. This limited approach has several serious shortcomings:
Process improvements driven by information technology are not always linked to management strategies and objectives.Management decision processes do not support lean physical processes. Physical process lean improvements are not supported by or linked to information systems. The Lean Performance methodology presented in this book suggests a solution.
Lean Performance uses lean principles, tools, and practices to improve and then continuously improve management decision processes, information/support processes, and their linkages to lean physical processes. The methodology trains and empowers the in-house experts, the process owners, operators, and customers, while employing the best of the process and system innovation and reengineering tools (from a lean perspective) to achieve system integration. Lean Performance develops or enhances a company culture of continuous improvement by recognizing the strength of the business (i.e., people and processes). Lean Performance integrates strategy, people, process, and information technology into a project management methodology that applies lean thinking to all processes by utilizing eight implementation and training modules.
Why Is Lean Performance Important?
Today’s manager is faced with the dilemma of managing emerging cross-functional and cross-enterprise business processes such as e-commerce and the new supply-chain management processes utilizing information technology in a business enterprise with an increasingly empowered team culture. All too often, traditional information system development based in methodologies such as reengineering and system or process innovation is woefully inadequate for use in an empowered team culture. Even in more traditional business environments, process analysis and system development projects run and performed by business or information technical “experts” often deliver miserable results, especially from a quality standpoint.
Delivered systems either do not work technically or do not fit the process as the user performs it today or could best perform it tomorrow. In contrast, great results have been obtained by harnessing the power of all enterprise team members through methodologies that employ lean philosophy and thinking, such as Total Quality Management (TQM), kaizen, and continuous improvement. The Lean Performance project management methodology presented here incorporates lean philosophy and thinking in a task structure that, when executed, implements lean management
decision processes, information/support processes and information linkages that support lean physical processes and provides the structure to improve physical processes.
The methodology performs best in the empowered team business environment, utilizing vendor-supplied, unmodified software packages for manufacturing such as enterprise resource planning (ERP), supply-chain management (SCM),
operations planning systems (OPS), advanced planning systems (APS), manufacturing execution systems (MES), and customer relationship management (CRM).
A successful business process improvement or redesign approach to implementation of these systems must consider input from the two hemispheres of management that are in conflict in a typical project:
1. Departmental, politically based management practices.
2. Emerging information-based management practices.
In many companies, established politically based management practices rely on an individual power-oriented management style that leverages power gained through controlling a “stovepipe” departmental structure and the flow of information (work) residing within that stovepipe. These structures depend on internal management alliances to manage the business through a process of negotiation, compromise, and accommodation. Emerging information-based management practices are fundamentally different in that the information that is held hostage in the
stovepipes of the old style organization is open in the empowered team workplace. In fact, opening up this information flow and designing work around it (workflow) is the real (and perhaps only) reason to consider information technology–enabled process improvement or redesign. With open information, old alliances are not necessary, and team-based decision making can take place. Departmental structures are no longer efficient and are replaced by product and process stream structures.
Obviously, these structural changes can be very threatening to old-line (stovepipe) managers, and they resist them. When the information technology specialist (MIS manager/CIO/system analyst) is introduced into the mix, numerous complications occur. The lack of a common language between power-style managers (who translate their information requirements into newer and better stovepipes) and technically adept information technology/data processing experts (who do not have the business process expertise of the people already performing the existing processes) le
ads to enough confusion to sink many business process improvement efforts. When the process owners/operators are not the process designers, nonvalueadded tasks will dominate a new stovepipe at the end of the project. This collision of dysfunctional styles is a fundamental impediment to success in the information age, much as office-based manufacturing engineers of the mass industrial age were an impediment to success in the factory, leading to their removal by the originators and practitioners of Lean Production. Lean Performance defeats the nonvalueadded
process constraints imposed on processes by well-intended, technologically adept but misguided individuals who presume they are “experts” in processes that they themselves do not perform.
Applying the Lean Performance methodology to a business process improvement or redesign project focuses the efforts on a common approach that uses common principles, tools, and practices. This approach promotes successful dialogue among the managers, information technology specialists, and emerging computer literate knowledge workers and team members, who in many cases are already in the workplace but generally not (yet) in a position of management. Lean Performance leverages the expertise of existing internal process owners, operators, and customers to design processes in terms of what needs to be done to produce value (product or service) for process customers immediately downstream. All methodology tasks are structured to “pull” process redesign/improvement activities from the point of view of the external customer so that optimum customer value is provided.
How Does Lean Performance Work?
Lean Performance identifies and deploys lean management business policies and strategies during software implementation, process improvement, and lean transformation projects by integrating lean thinking and process-oriented management at the management decision, information/support, and physical process levels through the use of an integrative project and management practice: the Lean Performance Analysis. The methodology then utilizes Business Process Reengineering practices to design the process architecture. Lean Performance employs lean
practices to develop Lean Performance teams of process owners and customers. These Lean Performance teams eliminate waste from existing management and information/support processes while developing value-added information linkages to support lean physical processes and improve physical processes. Additionally,
Lean Performance employs system innovation practices from a lean perspective to provide a project management work plan and toolkit to integrate the information system (ERP, MES, ASP, SCM, OPS, CRM), and to provide an ongoing continuous improvement tool after implementation.
Who Is Lean Performance For?
This book is geared toward the 21st-century business manager, a new manager who is developing in the lean workplace: one who manages with technology, not one who simply manages technology. I propose that there is a critical difference. These new managers will have used information technology for most of their careers and
will readily agree that most information technology projects fail or deliver poor results and require extensive after-project rework. These managers may already be chief executives or chief operating officers, engineering or operations or materials managers, or continuous improvement or lean coordinators. They have probably served as project managers at some point or now employ project management approaches to team management. Project managers who have been exposed to Lean Production are a ready audience for this book. These managers are or have been
successful employing lean methodologies in their current or previous assignments. Information technology (IT) professionals, on the other hand, may not see the relevance of the methodology. Many IT professionals may be all too familiar with the failures of previous projects and methodologies; however, seasoned IT professionals who are ready to try this more comprehensive approach will immediately hone in on the most obvious reason for IT management to support Lean Performance:
Lean Performance puts the responsibility for a successful implementation or transformation squarely on the shoulders of the process owners, operators, and customers. The typically non involved system user of the past cannot function successfully in a Lean Performance environment.
