OpEx in action

Almost every manufacturing operation has attempted to apply lean principles in order to enhance efficiencies, reduce costs, or improve quality. This process often involves management selecting a targeted area to improve, setting goals for the improvement, and forming a team to carry out the work. Once the changes are achieved, management selects another area, and repeats the process. This approach results in a never-ending journey of continuous improvement.

However, some companies have broken this cycle and realized significant gains in both operational and financial results in months, not years. The difference? Instead of an endless journey of continuous improvement fueled by management and teams running Kaizens, these companies designed their operations to achieve the destination of operational excellence (OE).
 

Operational excellence defined

OE is when each and every employee can see the flow of value to the customer and fix that flow before it breaks down. In OE, flow is not created to increase productivity or efficiency, but simply so every employee can see when it stops.

And that’s a fundamental difference. While lean teaches how to eliminate waste through value stream flow, OE teaches that value stream flow must be self-healing. In other words, each employee can see the flow becoming abnormal and know how to correct it before flow stops, preventing customers from getting their products or services. A key element in achieving OE is to design value stream flow by using guidelines that teach how to flow from the receiving deck to the shipping deck, through the supply chain, and in the office.

In the office, the destination of OE results in an overarching design specification that defines the performance and characteristics:

• How the office behaves when it receives a customer request
• How information will flow to provide the service
• How everyone will know what to work on next
• How long it will take to complete the request
• How everyone in the office will know if they’re on time
   

To accomplish this, an organization would apply the following guidelines:

1. Match production to demand (Takt or Takt capability)
2. Continuous flow
3. First-in, First-out (FIFO)
4. Workflow cycles
5. Integration events
6. Standard work
7. Single-point sequence initialization
8. Pitch
9. Changes in demand

By following these guidelines in the office, teams would no longer brainstorm solutions to problematic areas. Instead, they would learn how these guidelines work and how to apply them to the services they provide in the office.

The result? A designed flow that can achieve the destination of OE. And, this will result in much more than waste elimination but in top-line business growth as well. That’s because OE creates value stream flow that does not require management intervention when things start to go wrong: no meetings, no status updates, and no changing priorities. With management’s time freed from managing, it can focus on offense – activities that grow the business. This is a powerful concept, which only a few companies have realized. One of these companies is A-dec.

OpEx at A-dec

An Oregon-based manufacturer of dental equipment, A-dec was founded in 1964 by husband-and-wife team Ken and Joan Austin. Today, its 50-acre headquarters is home to approximately 1,000 employees who design, manufacture, and market the company’s equipment to dental professionals worldwide, supported by facilities in the United Kingdom and Australia.

A-dec embarked on a lean journey in 2000. Initially implemented in manufacturing, the company expanded the concepts and, in 2005, formed a special lean team focused exclusively on applying traditional lean concepts into its administrative processes. While this effort resulted in improvements, A-dec achieved another level of performance when it learned how to design lean value streams that created OE in the company’s office areas.

To start, A-dec sent 10 of its employees to a training program on achieving OE in the office, which was followed by book-based study. A-dec also understood that to be truly effective, it needed more people exposed to OE concepts, so it pulled in key people from customer service who would be included in the value stream flow as well as leaders from other administrative areas.

The customer service department consisted of 20 service representatives and five customer service specialists who were charged with processing high order volume – an average of 1,200 new orders per week – as well as 150 order changes. Due to the custom nature of the products, each order was complex, with as many as 100 line items.
 

Challenges in flow

The orders came in by fax, web, or phone and were sorted into three bins accordingly. Some were further organized into a secondary grouping by product or by date. A complicated system was in place for the sequence for completing orders. As a result, in the middle of order entry, a customer service specialist could find out he or she was missing information needed to complete the order entry. That employee would then have to stop work on the order and take it to a customer service representative, placing it in the representative’s inbox with a note asking for the missing information.

When able, the representative would call the customer for clarification/additional details – sometimes making multiple attempts to reach the customer or other sources to find the answers. As a result, it wasn’t uncommon for the order to sit waiting for information for as long as six days. Once the information was received, it went back into the inbox of a customer service specialist to wait for order entry.

While the customer service department published an order-entry processing time of 24 hours for orders placed online, it usually took three to five days to process them. Faxed orders typically had a five-day backlog. And change orders often had a week-plus wait. Only a hot order would be put to the front of the stack to ensure it was processed quickly, with those marked as “must go out today” processed the same day.

This system prompted many concerns that the trained employees hoped to address with lean concepts. The motivations for implementing lean in customer service included:

• Orders taking too long to get through their system
• Orders lacked the necessary information to make it through the system the first time
• A lack of visual indicators in the process
• The absence of a course of action when demand spiked
• Management intervention was needed to control action
• Defects were allowed into the system, creating disruptions in the flow
  
   

Designing for OpEx

The team responsible for applying lean to the system started by gathering data about the customer service processes, such as the number of orders at each stage.

Once the team had a grasp of the current state, it began its transformation by using the nine design guidelines to design its future state. Now, when orders arrive, they are immediately picked up by an evaluator, an employee who sorts them into a specific process family designed for flow. Once assigned, orders in each family are logged in, starting the processing clock. Each family of orders flows through a specific FIFO lane with folders indicating the timeframe when the orders arrive.

The flow that has been designed is also protected up front from interruptions. For example, for a more complex family, a customer service representative with a working knowledge of the orders reviews them for proper information before submitting the orders into flow. If the information is complete, it goes into another FIFO lane and flow begins. If information is missing, the service representative quickly contacts the customer. Following this method, a steady flow of processing occurs at the rate at which the customer needs the orders, or Takt time. Interruptions in this flow are minimal.

“This process has had a tremendous impact on our order entry,” says Gail Wilson, customer service specialist, “Before, we would struggle through some of the more complicated orders only to give them back for questions or call the customer and hold them at our desk. With the new process, they are screened and all questions are answered before they’re submitted to order entry. We are touching orders fewer times and they are entered quicker and with fewer errors.”

To help employees in the flow see if the orders are processed without issues, a visual system was put in place to monitor the status of order entry. Anyone can now tell the status of order flow by looking for a red/yellow/green light on the ceiling above the customer service specialist’s work cell. These colors are used to indicate Takt capability (or preset levels of value stream flow) modes. If the FIFO system is within normal designed limits (green zone), then the team works as normal.

However, if demand changes and the volume goes beyond the normal level (yellow), the team has a pre-authorized response to this condition, such as having a cross-trained person from another department enter some orders until the load returns to a green condition. This system means the flow is self-healing. Even on an unusually busy day, no decision making is required from management. Instead, the team responds on its own, freeing up managers to work on growing the business.

“The visuals that have been provided have enabled us to have better time management and overall efficiency,” says Dari Schwarz, customer service specialist.

The results

Today, A-dec’s Customer Service department operates very differently, and it shows.

• Average lead-time changed from 5 to 6 days to less than 2 hours.
• During the final week of the company’s annual price adjustment period (before new pricing takes effect) in 2013, customer service took in the equivalent of 3 weeks’ worth of domestic orders and processed them in 3-1/2 days vs. more than 7 business days.
• Customer satisfaction has soared, thanks to the improvements in order speed and accuracy.
• Little or no management is needed to ensure the seamless processing of customer orders.
   

A-dec has been on its lean journey for 14 years. Introducing the concepts of OE, along with other critical communication and problem-solving skills, has provided a destination for its improvement efforts – and a design to achieve it.

Institute for Operational Excellence
www.instituteopex.org

About the author: Kevin Duggan is founder and president of the Institute for Operational Excellence. He is an expert in applying advanced lean techniques to achieve Operational Excellence. Duggan can be reached at info@instituteopex.org or 401.667.0117.