Business Analysis Guidebook/LEAN

LEAN

Lean

Lean is a set of tools used by public, private and non-profit sectors to improve processes by removing waste and increasing efficiency. The core idea is to maximize customer value while minimizing waste and thereby creating more value for customers with fewer resources. The concepts have been successfully employed by manufacturing industries such as the Toyota Production System, but are equally applicable to all industries and services, including healthcare and government as they create a culture of continuous improvement.

The following is a five-step thought process for guiding the implementation of lean techniques:

Specify value from the standpoint of the end customer.
Identify all the steps in the value stream, eliminating wherever possible those steps that do not create value.
Make the value-creating steps occur in tight sequence so the product will flow smoothly toward the customer.
As flow is introduced, let customers pull value from the next upstream activity.
As value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in which perfect value is created with no waste.

The following chart lists eight office examples of wastes that add costs to the business, but no value to the customer.

Waste Category	Office Examples¹
Transportation – Movement of paperwork	Excessive email attachments, multiple hand-offs, multiple approvals
Inventory – Any form of batch processing	Filled in-boxes (electronic and paper), office supplies, sales literature, batch processing transactions and reports
Motion – Movement of people	Walking to/from copier, central filing, fax machine, other offices
Waiting	System downtime, system response time, approvals from others, information from customers
Overproduction – Producing more, sooner, or faster than is required by the next process	Printing paperwork out before it is really needed, purchasing items before they are needed, processing paperwork before the next person is ready for it
Over-processing	Re-entering data, extra copies, unnecessary or excessive reports, transactions, cost accounting, expediting , labor reporting, budget processes, travel expense reporting, month-end closing activities
Defects	Order entry errors, design errors and engineering change orders, invoice errors, employee turnover
Underutilized People – People’s abilities, not their time	Limited employee authority and responsibility for basic tasks, management command and control, inadequate business tools available

1 Keyte, Beau and Locher, Drew. The Complete Lean Enterprise Value Stream Mapping for Administrative and Office Processes, 2004

Six Sigma

While the lean methodology concentrates on creating more value with less work, the Six Sigma system strives to identify and eliminate defects in product development. Many organizations combine the systems, Lean/Six Sigma, to improve both the method of production and the quality of the product. The six sigma quality management system is used to measure the number of defects that occur during a process. The system then determines how far this number deviates from a desired result. Six sigma is a set of methodologies used to achieve extremely low failure rates in any process. The term six sigma derives from the mathematical use of sigma in statistics as a standard deviation. Six sigma is therefore six standard deviations which means less than 3.4 failures per million.

The main process for Six Sigma is DMAIC which stands for define, measure, analyze, improve, and control. Practitioners who have undergone extensive training in six sigma techniques and methodologies can be certified as six sigma green belts, black belts, and master black belts.

Lean for Government

In his book, Extreme Government Makeover Increasing Our Capacity to Do More Good, Ken Miller describes how government services have successfully applied lean concepts to improve services and cut non-value-added work. Rather than using the terms normally associated with lean, he makes an analogy to twisted water pipes impeding the flow of government services. He contends the pipes or processes employed by government are twisted because of excessive handoffs and reviews, backlogs, and other non-value-added work making the delivery of services slower than the demand from the public. His extreme government makeover techniques emulate the methods used on television to build a new house in a week without reducing the amount of value-added work or compromising quality. The steps, which are lean concepts and improvement techniques, include the following:

Expose and analyze the pipes (value stream mapping). Determine where bottlenecks and unnecessary twists and turns exist in the pipeline.
Poka Yoke the entry into the pipe. Wherever possible, “mistake-proof” process components, i.e., change the process to make it easier to comply. Check lists are often used to make improvements in government compliance.
Triage the flow. Most government pipes are one-size-fits-all that every customer must travel through. Create separate pipes: self-service, everyday service and intensive-care service. Creating separate processes for self-service frees resources for those who need more assistance and the delivery of more service overall.
Process simultaneously when possible. Government tends to have long, sequential processes. With simultaneous processing, work remains the same but the duration is shorter. Find ways to move down-stream activities up-stream, thus shortening the pipe.
Eliminate CYA by reducing handoffs. Defense mechanisms are built to avoid getting blamed for others’ mistakes which takes time and management that is not directly related to producing the service. Reducing handoffs straightens the pipe. Trust workers to handle more complex tasks. Should government workers be treated as unskilled, uneducated, and unworthy of trust or as knowledgeable, skillful, and trustworthy?
Cut batches. Batch processing holds one customer hostage to a larger group and creates a dam mechanism into the pipe. Batches are convenient for the service producer, not for the customer.
Break bottlenecks. Identified as an area that does not have the capacity to handle all the work feeding into it so work piles up. Productivity depends totally on the capacity of the pipe and the system is only as good as its weakest link. Find ways to divert all but the most necessary work from the bottleneck.
Eliminate backlog. Cross-train staff so they can step in to help during high-traffic times. There are three kinds of backlog: Historic (not growing) – work overtime to dig out; Seasonal – get ready for it; Ongoing and growing – fix the process.
Get off the crazy cycle. Once work falls behind, it is destined to get far behind, due to status requests inundating the workload and status tracking taking time away from delivering the service. In order to stop the cycle the process must be made more efficient.
Eliminate status requests. Fewer status requests frees more resources for providing services and creates greater capacity.

Value Stream Mapping

Value stream mapping (VSM) refers to the activity of developing a visual representation of the flow of processes, from start to finish, involved in delivering a desired outcome, service, or product (a “value stream”) that is valued by customers. In the context of government, a value stream could be the process of conducting an audit, completing a procurement, or hiring new agency staff. VSM can increase understanding of actual decision-making processes and identify sources of non-value-added time (e.g., documents waiting to be reviewed). The typical products of a 2-5 day VSM workshop are a map of the “current state” of targeted processes and a “future state” map of the desired process flow and an associated implementation plan for future process improvement activities.

ValueStreamMapParts

Image Source: WikiCommons Author: Daniel Penfield

For More Information

The following websites provide more information on Lean and Lean for Government:

www.lean.org - Lean Enterprise Institute, Inc. – a nonprofit education, publishing, research, and conference organization

www.leangovcenter.com/govweb.htm - LEAN Government Center Quality and Productivity Improvement Center – links to many city and state government lean initiatives