Lean principles & practices applied during an SAP roll-out (Part 1)

It has been quiet over the last year on my blog. Supporting the implementing of an SAP system has been keeping me really bussy at my pevious employer. Now, time has come to share some reflections. Three years ago, I was hired as a lean manager, a year before the company went life on SAP. Little did I expect that this event would offer so many opportunities for applying lean thinking and practices. This is what I'll be sharing with you in the next couple of articles.

In this first article, I will share how 1) "Process Thinking" was reflected in the roll-out approach, 2) how weekly whiteboards huddles made problems visible and engaged cross-process cooperation, and 3) how agile techniques helped us esp. in the testing phase.

The company subsidiary where I worked, was the second one to go live on the SAP system. Previous implementation experience had shown that major disconnects occured in the processes especially between departments. In an integrated ERP system, all processes are linked: a simple mistake in product master data can cause products not to be orderable from customers, not to purchaseable from vendors or not to be received in the warehouse. Hence, the way of looking at the organisation was enhanced from a solely departmental perspective to a process perspective as well. The additional conceptual layer, the process model, was put on top of the functional silo's. This layer introduced a new language -a new standard- e.g. Order to Cash covering the activities from creating a quotation and an order (sales), credit checking (finance), calculation of estimated delivery date, billing (finance) and collections (finance). This reflects the essence of the 2nd Lean Principle, that customer value is created by a value stream.

In theory this sounds logical and simple. In practice this had major consequences. The entire project organisation, for design and implementation of the SAP processes and solution, was organised in Process Teams e.g. Order to Cash, Procure to Pay, Receive to Ship. Supply chain folks were now teaming up not just with their own peers but also with the accounts payable folks and with the teams maintaining vendor master data. Process owners, supported by process leads, were assigned to own the design and functioning of the main end-to-end processes. In the design of an EPR functional solution, few decisions can be taken in isolation. [By the way, after dissolvement of the project organisation, the value stream specialist role remained.  It proved to be a challenge for these specialists, who always belonged to one functional organisation as well, to focus their efforts on the end-to-end proces they were responsible for. For example: a sales specialists was required to master the billing and credit processes as well.]

When replacing your existing processes and systems with an entirely new one, and the existing solutions in SAP are known to be incomplete, how do you keep overview of all issues and dependencies whilst preparing for a go-life. We introduced weekly boardwalks, where the process team leads were updating eachother on progress, were issues were raised to sponsors and dependencies between team and processes were managed.

PMO board

Project board - Order to Cash

Project board - Product Life Cycle

We experimented with some agile development practices, without having the true agile in place. Development was done in sprints, which allowed for better tracking of deliverables on time and useability. Burn down charts revealed that no development ever went according to plan. In some area's daily scrum meetings made problems visible between teams and had multi-disciplinary teams work together much better. During testing, simple visual management methods were used track the testing progress. Here are a couple of pictures.

Testing - Daily Production Board 

Example of testcases

Issues raised on today's tests.

Backlog of testscripts to be done

Scripts with defects

Data objects "in use" and hence reserved for ongoing tests. 

A visual plan with all milestones and activities was filling the wall.  Progress or delays were immediately visible with green and red dots. The visual plan helped us to "see, learn and act together as a team".

Visual Plan for SAP roll-out

Visual Plan detail - green = started / red = overdue / blank = not to be started yet.

 In the next articles, I will share e.g. how Lean principles were introduced in the "Training Approach", how "Standard Work" was introduced and how visual management techniques supported Incident Management.

Purpose of Kaizen Events

Kaizen Events are bursts of improvement activity, where typically employees from different departments participate in a one- or multiday workshop to solve a business problem.

In my experience, the purpose of these events is not limited to just solving a problem. By solving a problem together we also aim at building capabilities and trust.

What capabilities are we developping during Kaizen Events?

First, we develop process understanding; i.e. understand how my work relates to that of my colleagues and eventually to the customer.

Second, we train people in problem solving methods and lean practices such as A3, fishbone, process mapping, 5 why's.

Why and how do we develop trust and relationships during Kaizen Events?

Cooperation and trust between people (esp. from different departments) are at the foundation of continuous improvement. Without trust and teamwork, there can be no autonomous kaizen. In my experience, people who have solved a problem together during a Kaizen Event have build relationships. They have a betting understanding of eachother's work and concerns. Consequently, I find that whenever a new problem occurs, they'll contact eachother much easier.

Go See - understand the process at the gemba

Here are some tips that can help you work towards this purpose of Kaizen Events:

• Plan time to train employees in problem solving tools, before applying them
• Allow time for participants to share views and opinions. The benefit is in the dialogue, not in rushing to the solution.

Taking time to reflect with the team

It wasn't until reviewing this article, that I realised the summary of this article is the same as my slogan "Improving Performance, Growing Together": improve your process and business while developping people and fostering teamwork.

Lean appeals to mind, hands and heart

I just love lean! It appeals to my mind, my hands, and my heart. Somehow, since working from the lean source, I feel a more complete and balanced person.

Clearly, lean is a holistic management system, an integrated approach on how to run a company. But for today, I would like to zoom in on how lean is holistic in the way it engages people. My deep rooted belief and daily experience is that lean management appeals to the minds, hands, and hearts of people.

First, lean's preference for the scientific and socratic method appeals to our brain. Many of the traditional lean tools help in addressing business challenges from an analytical perspective, such as Value stream maps, SMED, KPI's, level scheduling, designing the ideal state value stream based on lean prinicples. The predominant lean school of thought in the West has been very much the analytical en technical one.

Secondly, lean has a strong preference for experiments and for incremental improvement action, especially in comparison with other improvement methodologies such as TQM or LSS. Lean emphasises the gemba where the action takes place. It's at the gemba that we learn by doing. A famous quote in this context is: "Learn with you hands, and see with your feet."

Thirdly, lean addresses the heart: respect for people is a core value of lean management. Lean is about developing and engaging people, about giving them a meaningful purpose (e.g., serving the customer, serving society, personal mastery), and about belonging and contributing to a team. It is also about giving people a sense of dignity and ownership, and about creating a physically and mentally safe workplace where people can develop to their full potential and experience a mental state of flow.

I'd love to hear if you have had similar experiences with lean practices addressing mind, hands, and heart.

Understanding complex problems with causal diagrams.

Some problems are just more complex than others. In some cases multiple causes and effects are re-enforcing or smoothing eachother. Typical tools such as 5why's or fishbone don't offer sufficient support to understand and visualise these problem. In my experience, this is when a causal diagram really helps out. A causal diagram is a graphical tool that enables the visualisation of causal relationships between multiple variables in a causal model.

Here is an example of a causal diagram I once made to understand challenges in a complex SAP development and roll-out program, where milestones were systematically not met. The white circles describe causes and effects, where the arrows indicate how one topic has a causal relationship to another. For example, running many projects in parallel causes competition for scarce resources.

Let's have a closer look at how this works using the above example, starting at the bottom right: running many interrelated projects in parallel is increasing the complexity and dependencies in each of the projects. This increased complexity made it hard to make a reliable overall plan. Furthermore, all these projects were competing for scarce resources. When an issue or delay in a high priority project pulled for more scarce resources than planned, other projects where these people originally were planned to work on, were delayed. As a quick fix, it was as a rule agreed that critical resources would only be allocated shortly in advance and for a short period of time; in other words to allow them to work on where the biggest fires were. Consequently, since nobody knew whether critical resources would be available as planned, the quality and relevance of (short term) planning of projects was getting poorer. Basically, people were thinking: "Why bother investing time in making a serious planning; I never get the people I need for my project anyway." As a result, there was no real commitment for any of the timelines of the projects that were on the table. Also, challenging project managers on not meeting their deadlines, systematically resulted in the answer: "I'm not getting a response or availability (from the critical resources)". Gradually, the local roll-out management stopped challenging their local project managers. So, the incentive for good planning and execution slowly diminished. All in all, this resulted in a self enforcing mechanism of constant project replanning, with deteriorating quality of planning, poor commited project managers and nobody who was really following up on realisation of plans.

It took me a while to understand what was really going on. Mapping the interdependencies in a causal diagram helped in analysing the problems and finally defining the countermeasures.

Lean Principles as Generic Target Condition

Today I was thinking about how Womack's five lean principles ( Customer Value, Value Stream, Flow, Pull, Perfection ) fit in the overall concept of the improvement Kata as described by Mike Rother. In summary, my conclusion is that the five lean principles set a generic target condition for any improvement activity in an organisation.

Before becoming a lean thinker, I was educated in the Six Sigma school of thought. What struck me when first learning about lean was that it gave me guiding principles on how to optimize processes. These principles are Customer Value, Value Stream, Flow, Pull and Perfection (1). In my experience until then, Six Sigma had no such thing, other then a CTQ tree which designs customer expectations and CPk's (process capability) which measure the extend of meeting these expectations.(2) Clearly I'm not a master black belt, but having mentored many six sigma projects, I found that depending on the team I worked with, solutions to the same problems could be radically different. (3)

Even without fully grasping the real meaning and potential of these lean principles, they provided a lot of guidance for designing solutions. Honestly, I experienced it as a relief! Come on ... the solution chosen to be implemented could not just be determined by who was in the team (or which voting system was used) ...

Then I learned about the Improvement Kata in Mike Rother's book. Any improvement activity should start not only with a (measurable) problem statement, but also with a target condition. A target condition describes not only the measurable process indicators ( or target outcome) but also the ideal process design to give guidance to the solutions that should be developed. As I understood the importance of the target condition, I suddenly realised why an ideal state VSM was so important ...

Now let's fit the Lean Principles and the Improvement Kata together. For any (point or system) Kaizen I engage in, I will use the improvement Kata approach and design an ideal state which represents my target condition. In designing the ideal state and target condition, I will always use the Lean Principles as generic guidelines.

Imagine that all improvement activity within your organisation is using this approach ... -isn't that what the principles are meant for?-. Basically the lean principles will function as a generic target condition for any improvement activity in an organisation.

The summary of my lean learning for today: The five lean principles set a generic target condition for any improvement activity in an organisation.


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(1) I'm using Womack's five principles, but I could as wel refer to the 14 Toyota Way principles.

(2) I agree that by having added lean tools to the Six Sigma portfolio (turning it into Lean Six Sigma), some of guiding principles are now included.


(3) Here is an example to illustrate this. In trying to reduce lead time of refunding customers for credit notes issued, a six sigma team decided to move processing of refunds to India. This solution allowed to use a lot of cheap labor for fast refund processing, in a process with more muda which was less flexible ( due to e.g. language and distance) and not capable of communicating with front line teams or customers. The CPk objectives ( 60% lead time reduction) and required cost reduction (!) were achieved. Now, imagine what the solution would have looked like if this team would have used lean principles in designing the future state ...

Learning the difference between goals and standards

From past experience, I know how difficult it is to set good goals. In this article I will share some of my experiences and learnings in setting goals for managing and improving processes on the gemba.

As a manager of a customer care back-office department, I set overall daily productivity goals just to challenge and push my team of agents for improvement. In fact, after an initial start-up fase, the team members set their own goals for the day and my role was to challenge these goals. We discussed actual performance compared to the goals on a daily basis during 15 minute stand-up whiteboard meetings. This PDCA approach was a good basis for discussing deviation from plan and identify issues and improvement actions. However, these goals were not based on anything really ... Honestly, I didn't know if these goals were realistic and achievable, but I just pushed for little baby improvement steps every day.

Then, I had a big insight whilst working as lean consultant for a central heating installation company. Based on an analysis of McKinsey, the suggestion was to improve productivity of individual installation mechanics to the performance of the 75th percentile. I was a bit shocked, as my thinking was "Why don't we just focus on getting the performance of the bottom half up to the performance of the median." I then realised that my approach, which really meant making the mean performance the goal for everyone, resulted in no incentive for improvement for half of the installation mechanics workforce ...

Yesterday, as I was reading through "The Lean Manager" of Michael Balle, my understanding of setting goals went yet another step further. Of course I realised that "Problems are defined as gaps between standards and actuals. And yes, "A standard is the best known performance". But what new was to me, was the true understanding that a (measurable) standard should be set "based on observation of actual work content over multiple cycles". Referring to the customer care back-office example, this would be e.g. the best observed performance in cycle time to complete the administrative steps for re-ordering and picking up incorrectly delivered products to customers. The significance of this is tremendous! First, everybody understands the goal is achievable. And second, everybody - not just the bottom half performers- in the team is challenged to improve.

Now, how realistic is it to expect people to maintain that "standard" performance in cycle time for one hour or one day straight? That's the whole point of Kaizen. We should ask ourselves: How can we reach our best cycle time every cycle? This doesn't mean that the improvement is just for individual customer care agents or mechanics to achieve. It's an objective for the entire team: agents, mechanics, supervisors and managers.

By definition we should never beat the standard. For, if it is possible to beat the standard, the standard does not represent the best known performance and we should change the standard. When we outperform the standard, we must have included waste in the definition of the standard. If we include waste in our standards, there is absolutely no incentive for the team to solve any of these problems.

Summary. A big difference between a goal and a standard is that standards are based on the best observed and measured performance. This turns a standard into a realistic and achievable goal. A standard should not include any waste and should never be outperformed, as it is intended to constantly engage everyone in improvement activities.

The Toyota Way - 14 principles in relation

Here's an interesting representation of the 14 principles from The Toyota Way and how they relate to each other.

Source:
http://www.agilecoach.net/wp-content/uploads/2009/05/toyota-way-handout.pdf