The Concept of Continuous Improvement
Continuous Improvement has been around for a lot longer than people realize. In fact, many businessmen were using what we consider "Continuous Improvement" today long before it was called Continuous Improvement.
"People can have the Model T in any color - so long as it's black."
Ford made production simple and visual. He converted Batch Production to Flow Production (sequenced processes) and implemented the concept of Standard Work, where employees worked the same way to achieve the same results - only then could you truly measure your efficiencies. This was truly revolutionary for its day. Ford spent his days as a true leader on the shop floor as opposed to hiding behind a desk hoping things would magically be perfect. Everyday Ford would ask his employees why certain items were not moving and why finished cars in the warehouse were not being shipped to customers. Through this, along with his employees, they developed strategies to keep everything moving along the entire process all the way to the customer depot. From this, Ford coined the following great term...
“If it’s not moving or not being shipped to the customer it’s not adding value.” Click to Tweet
Continuous Improvement Principles have evolved greatly from the days of Henry Ford. As we know it today, it derives from the Japanese car manufacturer Toyota – The Toyota Production System. The philosophy is simple - Ruthless elimination of the 8 Wastes. Sounds easy, yes? However, what is waste and how we do we eliminate it? Rest assured that those 2 questions come fully loaded!
Toyota have mastered these 2 questions!
Enter RESPECT for people!
Toyota’s approach is not to implement this as a ‘Tools & Technique’ exercise, but rather a mechanism for improving the culture of the company. They give their employees on the shop floor autonomy and accountability. What are the results? Innovate Problem-solving real-time, a culture on wanting to do things better, a culture of collaboration, a culture of continuous improvement and growth. The results of this speak from themselves - they are the largest car manufacturing company in the world!
We've seen Continuous Improvement being implemented across many sectors and many companies, and we've seen some great examples and some tough ones. Why are there tough ones? They have misunderstood the true value of Continuous Improvement and haven’t used it effectively.
Here are some examples of what Continuous Improvement should be and what Continuous Improvement should not be:
It is not a cost-cutting exercise.
It is a mechanism for providing exceptional value to your clients at the lowest possible cost which in turn leads your business to profitability and sustainable growth.
Continuous Improvement used solely as a cost-cutting exercise will lead to a company entering the cost cutting spiral - this in turn leads to the business shrinking.
It is not a mechanism to remove people from an operation.
It is a vehicle for increasing capacity within a business so that you can do more work with the same resources - not the same amount of work with less resources. It is a totally different strategy.
A lot of businesses generally don’t suffer from a lack of business (a lack of getting paid more like)! In a lot of cases, businesses actually turn down work. So, how would you like your business to be able to take on more work without having to take on any new resources? Spare resources should be redirected, retrained and developed so that they can add value in other aspects of the business.
It is not a set of tools which you tell people to use in a "like it or lump it" style approach.
It is a forum for opening up discussions with all of your employees and creating a sense of engagement and participation for all involved.
The people who know your processes like the back of their hands are the people on the front line: the operators, line leaders, the supervisors. Treat them with RESPECT, work with them, teach them, give them a voice and listen to them. When you engage these people and empower them, they begin to use both sides of their brain and that’s where your best process improvement ideas will come from. And guess what, if it’s their ideas, how transparent will the implementation process be? Picture that against a team of middle managers dictating what changes are going to be made next and how! It’s not a pretty sight!
temporary solution to a permanent problem.
It is a permanent mindset and should be embedded in all aspects of the business.
At the heart of Continuous Improvement is getting to the Root Cause of a problem and implementing what is called the "100 Year Fix" - that is, you should never see this problem again. Once you fix one problem, move onto the next. However, are you sure you are focusing on the right problems that are causing you the most headaches?
Yes, the 80 - 20 rule again! Conduct a Pareto Analysis on your problems so that you know you are targeting the biggest issues your business is having. THis ensures that you are maximizing your results and using your resources in the most effective manner.
So many businesses focus Continuous Improvement only in the manufacturing / operational process. Yes, you will make improvements. However, you will never realize the true potential it can offer. Waste is everywhere and in many cases more abundant in the support functions of the business.
It is not a process that has an end point.
It is a Continuous Improvement Process.
Therefore, there is no end point! Once you reach your initial goal, then you review and improve again. You are probably familiar with the process.
1. Understand the Current State - know where you are today
2. Create your Future State - decide where you want to be
3. Create a Plan to achieve - implement your Process Improvement initiatives
4. Achieve Future State - this is now your new Current State
5. Repeat Steps 1 -4
It is not a methodology that is just used for manufacturing companies.
It’s a philosophy that can be applied to any process in any company in any sector - the principles are always the same!
Speaking of Principles, James P. Womack, Daniel Roos, and Daniel T. Jones have popularized 5 Value Principles through their book, "Lean Thinking", back in the 1990s. While many have developed and tweaked these principles, they still hold strong today. They are as follows
1. Specify Value from your Client’s perspective
a. not from where you are standing or from what your perceptions of value are.
2. Integrate the Value Stream from your first supplier to your last customer
a. Continuous Improvement is not limited to the 4 walls of your building. It calls for seamless collaboration between all clients and suppliers. Why wouldn't anyone want to do this - we all want to achieve the same result?
3. Make the product Flow
a. as Henry Ford says, the product must flow fluidly until it reaches the client, it must not stop.
4. At the pull of the customer
a. only make what the customer wants, not what you think they want to build and stock.
5. In the pursuit of perfection
a. continually strive for perfection. Make this a core principle for your business. Never settle for the status quo, your company deserves more!
The 5 Value Principles
And, why should we follow them? Well firstly, they are designed to keep a business honest and focused in the right direction. They are Guiding Principles. However it is not just about the “What”, it’s also very much about the “How” and “Why”. The application of these principles is crucial for a business success. So, what are they?
1. Specify Value by Offering
So, what is Value? How do we define Value? When you think about it, it’s surprising sometimes how difficult a questions this is to answer. People tend to forget seeing Value from the customer’s perspective. Lots of companies have lost focus on what value they actually provide for their customers. Business is not static and in this day and age especially, getting and retaining business is not simply about picking up the phone to administer a sales order. Customers make you work for their money now and make you work hard – if you are not paying attention, they will go somewhere else.
Coming back to our earlier question, “What is Value”? Simply put, Value is only the actions / processes that the customer is willing to pay for, the assembly process for a product, a bank holding your money in an account etc. So, with that, any other processes in your business are technically not adding value, and with that costing your business money.
Many companies don’t know the answer to this question, “Why”? This is because they forget to ask their customer. They don’t engage with them, and they don’t understand their specific needs and wants. While we’re on the subject, how does your business process customer complaints?
In this first principle, there is a great opportunity to cement your relationship with your customers, understand their needs, and in some cases help them understand and develop their own. Be an extension of your customers business in support and service and proving YOUR value is a lot more than just delivering a product, at the right cost, right quality, right quantity and all at the right time. Business is about relationships, and the more intertwined they are, the more you will understand what value you need to be providing to your customer.
2. Integrate the Value Stream
What is your value stream, and what is Integration? A lot of companies have a narrow vision of what they believe Continuous Improvement can do for them. The stereotypical viewpoint is that Continuous Improvement can only work on the shop floor or operational aspects of the business. That’s the lowest form of Continuous Improvement. Other companies might know more and know that they can improve effectiveness and efficiencies in the support functions. However, both companies are still not realising the true potential of Continuous Improvement and will therefore only achieve pockets of improvement.
Continuous Improvement is not confined to your 4 walls. We’ve already discussed adding value to your customers.
However, are you not customers to your suppliers?
And, are they not customers to their suppliers and so on?
Are you all not a part of the same chain that wants the same thing?
Which is growing your business with your existing clients?
So, how can you help each other in ways that will result in a better service, reduced lead times and reduced costs and perhaps there are other things you can provide to your direct client that will make their jobs simpler?
In Continuous Improvement we don’t talk about a traditional Customer-Vendor relationship. We talk about Supply Partners that work together to achieve a shared vision / goal.
With that, the Value Stream starts with you first supplier and ends with your last customer. The integration of the Value Stream is creating the virtual extended enterprise where everyone works together to ensure they continually improve their services to each other, reduce costs, reduce lead times and improve quality as required.
3. Make the Offering Flow
Typically when you first Map your process, you will be surprised at how little flow there is! Why? Traditional methods call for large batching to be carried out before the batch can move onto the next stage. This keeps people busy, keeps efficiencies up and sounds like everyone should be happy. Unfortunately, that’s not the case. Batching hides so many issues, which we won’t get into here. However, in essence batching greatly increases your lead times to your customers and also the amount of work you have to do to get there. There is so much waste hidden before your process begins to flow. In fact, some would say there is 90%+ waste in the system! Developing and implementing strategies to continually improve your flow will lead to substantial savings and improved service to your customer. There is no “One Size Fits All” here – different companies have different issues and working methods, so understanding your specific bottlenecks and problems are the key to improving.
4. At the Pull of the Customer
This is about understanding the demand from your customers and delivering only what they want. However, there is another dimension to this which can cause huge problems for companies (when I say huge problems, sometimes they don’t realise they are problems at all and just accept the situation as part and parcel of the process without challenging them).
We talked previously about working in large batches, so what is the knock on effect of this? Here is an example. Say your customer orders 5,000 products from you but what if your production batch is 10,000 parts? What happens to the 5,000 they didn’t order? They go to stock and sit there. You’ve paid to have them produced, for all the raw materials, the labour and now you are going to pay for them to just sit there and add no value. So, while you’re only delivering what the client wants, it’s at a huge cost to the business. Do you think this is sustainable? What happens if all of a sudden your customer doesn’t want this product anymore and it becomes obsolete?
What if we can develop a system that flows in tangent with customer demands so that you are only producing at the pull of the customer? This is where flow really teaches you strategies to become really effective at what you do.
However, there is another set of criteria we need to consider here – Forecasting, and how do we deal with it? To protect themselves and their customers, companies traditionally build to a Finished goods stock that could amount to millions of $ worth of product sitting there, as you guessed it, doing nothing. We call this ‘Just in Case’ manufacturing.
Wouldn’t it be ideal to just build and place directly into a container that will be shipped out that evening? Most companies are too afraid to take on such bullish strategies. However, many companies have implemented these strategies successfully, and while not feasible for every style of business, the goal should be to get as close as possible to a system that reflects the principle itself! Some Sectors have no choice but to produce product like this – Dairy / Food / Agriculture and any industry that have tight Best Before Dates.
It might be worth learning a few things from these industries!
5. In Pursuit of Perfection
This principle is all about adopting the previous 4 principles, and once adopted successfully, how can you go back and make them more effective. How can you continually improve on these principles? Do you think this sounds difficult? In reality, it’s simpler than you would think. As you make improvements, other wastes always become more visible. Waste comes in many forms and under many layers and there will always be something to improve on. There is a reason why this principle states ‘In Pursuit of Perfection’ as you will never reach it. However Continuous Improvement is not a once-off process. It is continuous improvement, thus continually improving on what you are today.
How can you make tomorrow better than today?
This is the philosophy that Continuous Improvement holds with great respect and pride, and companies who can adopt these principles are the ones that will not just survive, they will thrive. Make Continuous Improvement part and parcel of everyone’s day to day work, thus developing a culture of Continuous Improvement.
In adopting these 5 Value Principles, you will actually be changing the mindset of people, changing the culture and motivating and empowering your team. This is what you want! The more your team are empowered and motivated, the higher your performance will be, and continuous improvement will become ‘Just the way things are done’.
Value V Non Value
In Continuous Improvement we talk about 3 different types of Value
- Value Added Activities
- Unnecessary Non Value Added Activities
- Support Activities / Necessary Non Value Added Activities
Without having to say much, they really speak for themselves and we have different strategies for them all. So lets have a look
1. Value Added Activities
So how do we know what is value added? In business we say is only that in which the customer is willing to pay for. Sounds simple yes? If only it was.
For the majority yes we can see what that value is, assembling parts on an assembly line, selling a new car to a client, a bank holding your money for you in an account. So yes we can see that.
However do you know that’s all they want?
Are you charging them the correct price for it?
Can you provide the service faster, better and cheaper?
So what’s value today may not be value tomorrow. There is a need in any business to constantly review and assess their service delivery for their clients OR you run the risk of losing clients where competition can steal your business before you know it’s gone. This happens through lack of engagement and not taking a HUGE interesting in constantly understanding what their needs are. Sometimes they may not always be able to answer that question and herein lies an opportunity to support and assist while at the same time cementing the relationship. This is where the 1st of the 5 Value Principles should be your Bible!
So, if we relate this back to the 80 – 20 Rule, this would be the 20% you need to be spending your time on. This should always be your priority. You need to meticulously understand what it is you do on a daily basis that provides value for your clients. There is no point in hitting and hoping here. Understanding ‘YOUR’ Vital Few will tell you where you need to be aligning your resources.
2. Unnecessary Non Value Added Activities
These are the things / processes your business needs to RUTHLESSLY REMOVE. The more time you are spending on these activities will lead to less time focussing on what you do need to be working on, the Value Added. Again, this may sound simple, however in reality it rarely is and in fact, not only is it not simple, this can be very well hidden and very difficult to eradicate. It takes constant and consistent efforts to understand and develop solutions to eradicate. The standard method of tackling these is to focus on removing the 8 Wastes & conduct Problem Solving. And they are the absolute correct things to focus on, however, like anything, it’s not just about the what, you need to pay special attention on the how and the why!
Enter The Human Element & Respect for people
There are 2 dimensions to delivering a successful Continuous Improvement project
Getting the staff to trust you and work with you
Then work on Continuous Improvement Improvements
Why would people want to help you? They have being working there for many years doing things a certain way. What’s in it for them? In fact some people can be very resistive in this process. They could feel betrayed by the business, stuck in a rut. So, why should they help you? To get the most effective, sustainable results through elimination of the 8 Wastes and effective Problem Solving you need to have a highly motivated team. If they are not currently motivated, a plan is required firstly to understand what motivates them and then to develop it.
Please note, that’s not to say you won’t achieve good results without this, or you need everyone on board (that rarely happens anyway), however to really achieve the full potential of a waste elimination program, that is sustainable, they need to be instrumental in this. In fact, they need to be driving it this process! This takes time, however a seed needs to be planted by you to grow this process.
Waste elimination is continuous and the more effective you work at it, the more time you will have to focus on Value adding Activities.
3. Support Activities / Necessary Non Value Added Activities
Some people call these the necessary evils, which is not reflective. While they are not adding value to the client, they ensure that the value service is feasible, carried out, in compliance and executed correctly e.g. regulatory, order processing, quality, logistics et.
They are absolutely necessary, so while you can’t eliminate them, great value is to be gained in optimising them, so you are ONLY putting the time into them that is absolutely necessary and no more!
So in short, what needs to be done is
Value Added Activities – Understand, Develop and Improve for your Client
Unnecessary Non Value Added – RUTHLESSLY ELIMINATE
Support Activities – Optmise as much as possible
The 8 Wastes that Block Continuous Improvement
Continuous Improvement is all about improving process effectiveness and efficiency. So how do you do this the correct manner?
Is it about cutting corners and taking shortcuts or even speeding the process up?
The answer is none of the above. Continuous Improvement is all about the RELENTLESS ELIMINATION OF WASTE. Therefore understanding what the 8 Wastes of Continuous Improvement are paramount to success.
However what is waste? How do we know something is waste? Waste is essentially Non Value Added activities. The key to an effective system is
- Discover the 8 wastes of Continuous Improvement
- Develop strategies to remove or mitigate the 8 wastes of Continuous Improvement as much as possible.
In order to assist in finding these wastes, they have been broken down into 8 different forms which are described below. There is also a table at the bottom of this post that summarises them should you wish to jump straight down to them.
You will notice I have also arranged them in a certain order to form the anagram ‘TIM WOODS’ to make it simple to remember.
This refers to the constant moving of product or information within a system. This can be a tricky one as you will have to move product or information around. And while the product is in transport, no value added activities can be carried out. However how can you reduce the amount of movement? Wouldn’t it be great if we could just do a ‘Beam me up Scotty’ and they’ve moved instantaneously!
Unfortunately that’s not going to happen anytime soon, so this is about being creative. How can you reduce the movement, can you make improvements to the layout that optimises transportation? Can you carry out some work on a client site? Can you reduce the amount of information exchange between departments?
This is probably the most deadly of all wastes. With excess inventory, there is a good chance you will have other forms of wastes as it leads to so many other issues, wasted money, defects, overproduction and taking the chance that your inventory could become obsolete.
So why do companies like to hold on to excess inventory?
A lot of companies take a ‘Just in Case’ approach, better to have too much than too little or ‘Just in Case’ something goes wrong.
Can anyone see the problem with that approach or attitude?
If you think about it, people who take the approach are actually accepting and expecting bad quality in the system, so when it happens they have a safety net. That may sound great for a short term get of trouble situation. However, this is a chronic issue, if you don’t fix a problem, you can be sure it will come up again and again. Would it not be a better choice to get to a root cause of a problem so it doesn’t happen again, thus not requiring you to over supply on inventory and thus only spending money on what you need?
A good example of how this can go wrong. You buy in bulk, you build in batch (no flow), you hold lot so finished goods in your warehouse, you ship some product out and all of a sudden there is a defective part in the market. What do you have to do? Recall everything, check all stock at every stage in the process and you may not need to, it could have been a once off.
The cost of all that, producing product you don’t need, then discover the excess you have produced could be faulty, so you have to inspect the product you shouldn’t have produced in the first place. The amount of cost, resource and time involved in this can be huge and this is something I have seen many times industry.
Another reason why companies tend to hold too much is that Purchasing also get discounts for buying in bulk and commission. While this maybe good for purchasing, this is not good for any other aspect of your business. The more inventory you have in your system will mean more money tied up, more potential quality issues, longer production times which in turn will lead to longer lead time to your customers and harder to satisfy changing requirement and also the possibility that your material may come obsolete in the mean time.
So what is motion or excess motion? Probably the best example to describe this is using a TV remote control. Which is more efficient, having a remote control so you can stay sitting on your couch or having to get up every time, walk over to the TV and switch it.
While there are opportunities here, it’s probably not considered of huge importance in terms of time savings, however in certain industries where quality is of huge importance e.g. medical device etc, making the process as simple as possible can only improve the quality standard. Many people dismiss this waste, however we suggest you don’t. While not a top priority, always consider improvements in quality as well as time.
So how is waiting a waste? Well simply put, when you are waiting around, you are not doing anything to add value and generally means the system isn’t balanced. Whether is someone on an assembly line waiting on the previous step or waiting on paperwork to come through before you can process an order, it’s still waiting and nothing can be done until you receive the work load.
When workload is balanced, the flow is smoother, people and processes work in harmony, however we are also not robots so getting the perfect balance is impossible. Therefore goal is to create a system that strives towards a rhythm that balances the pace with which work needs to be completed with the right type and quantity of resources.
There is lots of hidden waste, hidden by processes due to waiting and hence it’s a great area to focus on as once you reduce waiting, it can bring other issues to the surface which then can be seen more clearly and therefore removed. You will achieve great reductions in lead times and improvements on efficiencies.
As the title states, this waste is about producing products or services that are not needed at that time. As mentioned earlier having too much inventory can cause other wastes. This is definitely one of them. Put it this way, if you only have the correct amount of inventory, you can’t overproduce and have product sitting in a warehouse or develop features in a piece of software that nobody wants.
Overproduction can also be a symptom of utilising capacity when customer demand is low and we still produce at the same rate in our balanced system. So what should you do? For starter don’t produce. It would actually be cheaper to tell your staff not to come in than come in and produce products or services that a customer wants. Alternatively you could brainstorm other activities that staff could carry out that would benefit the business e.g. training catch or cross training, factory clean or set up a 5S Program, problem solving, standard work creation / update or even Kaizen Blitzs. The key is to take advantage of the spare capacity while you can and with that it’s also a great opportunity to give your staff something different to do, some variety and engage them and this will only lead to a better relationship with them.
This can be a tricky one to get your head around and a lot overprocessing can be hidden and subjective. A good question to ask is, can you do things better or should you be doing better things?
A good example of this is multiple inspection points along a process. If the process was designed so it could only be done the ‘right’ way, would this not be a better approach? Is the customer willing to pay for you to inspect? Or what about multiple sign offs. There are many examples of where you could have up to 9 signatories on a validation sheet. What happens if someone is on holidays or off site, or, one manager won’t sign off unless another has signed before them. Can you see the amount of extra and unnecessary work that has been created here?
The KISS Model absolutely applies here
This can be tricky enough to identify in a production environment, however it’s even more difficult in an office environment when dealing with transactional processes. This one takes some brainstorming and engagement from your team and will require problem solving activities.
Again this waste is self explanatory. When you produce sub standard services or processes what happens?
- At best you can rework to get it right which will cost extra resources and time
- In the middle, you will create scrap so you’ve essentially paid for it to be produced and you are also paying someone to tell you it has to be scrapped.
- At worst, the defective product / service is discovered by your customer in the field which will lead to a borage of different issues for you business from reputation to loss of business.
So what is the best thing to do? Develop a process that will get it right first time.
Many companies always feel they need to speed up their processes to meet customer demands. The primary focus is always on yield throughput. However this is a great example of a KPI driving the wrong behaviours. Quality should always be the main focus. If its not, conduct a study to asses the cost of scrap and rework and determine whether it would be have been more efficient to take a quality first approach. Your process may not achieve the same throughputs, however you will be producing less products so in effect you process will turn out to be quicker.
8. Skills & Human Capability
This 8 Waste is a more recent addition to the previous 7 (it was formally the 7 Wastes). However people have come to realise without using the people on your ground, getting the best out of them, you will never uncover all the previous 7 and won’t even get close. Those people know your processes inside and out and in many cases have been there for many years. They have all the knowledge you need so should you not ensure these people are always treated with respect? When you truly get this one right, the opportunities are endless. This is all about treating your staff as valuable assets and about turning your organisation hierarchy on it’s head.
With that, its quite simple to visualise the issues. Everyone is different and want different things. So how do you create a culture of change and continuous improvement?
There are many different answers to this and lots of material online about Change Management techniques. The key to getting this right is about building up a trustful and honest relationship with them, engaging them and making them feel empowered. Treat them with absolute respect. Will you get everyone on board? Probably not and that’s not the goal. The goal is to create a solid foundation based on trust. Being slowly working on pilot projects and demonstrate to them that you value their opinion and give them the responsibility of making small improvements.