A plan is a detailed method or process to achieve an end.
Changing the culture begins with a plan to do it. This is one difference from what Ohno did during his years driving waste elimination. He may have done so, but it doesn’t appear that he worked off an organized plan. Either way, today we can make plans knowing the history of Ohno’s actions at Toyota. Undertaking an overhaul of manufacturing can be seen as a daunting task. Where to start, what to do, and in what order are pertinent questions. Lean efforts have generally concentrated on numerous “kaizen events” in the belief that changing operations through these improvement exercises will, somehow, lead to a lean culture that adds to the bottom line. Some even determine which improvement projects to tackle based on some supposed dollar savings. Possibly sometime down the road this should be considered, but it is not a good idea in the beginning. Where’s the problem-solving? The focus is a cost figure, not problem-solving. This approach will change the culture alright, but not in a lean direction. The right plan leads to implementation of the right concepts and methods in the right order.
To improve operations through adoption of the Toyota Template, the plan must be directionally correct regarding the current condition. It overarches the scope of the change and addresses shortcomings. It’s been said that a goal without a plan is just a wish. Most companies have some sort of annual planning process; however, the template uses the Hoshin Kanri method. Hoshin Kanri simply means policy deployment. This method is unique in that it aligns goals with the company mission as well as with the annual objectives up, down, and across the organization at every level. This planning process is critical to organizational alignment.
The Hoshin plan acts as the rudder for the business. It keeps all areas moving in the same direction. It involves everyone from the executive suite to the floor level in all departments. The yearly planning should begin taking shape several months prior to the next fiscal year. The planning process to achieve alignment takes some time, and you need to be well prepared to begin implementation from the beginning. The yearly plan should align with your long-term strategy.
Alignment begins at the senior level. They’re responsible for the objectives of the enterprise. They should be looking 3 to 5 years ahead strategically in broad terms. Where do you want to be in the future? Narrow goals will become simply projects to complete, which stymies participation. Of course, these should follow the S.M.A.R.T. acronym (Specific, Measurable, Achievable, Realistic, and Time-targeted). Some examples might be to reduce overall costs by 20% or increase customer satisfaction by 25% over the time frame; whatever is suitable for your current condition.
After agreement on these broad objectives at the senior level, each one is broken down based on the time frame. For example, using the 20% reduction in overall costs over years, you could simply set the yearly goal at 5% per year. This shouldn’t be automatic, however. There could be circumstances that dictate that the goal is 8% for the first year and 3% for each of the next 4 years. Senior leaders should consider all relevant factors to determine achievable and realistic goals.
Each department level then determines their tactics to achieve their goals. These should be developed with the approval of upper-level management, so that there is agreement that the selected actions support the upper-level goals. This is called catchball, with the idea being that these actions are passed up and down the management hierarchy so that there is agreement on alignment. For example, each vice president might meet with each of their direct reports and agree on the tactics. Once the tactics are determined and agreed on, they should be reviewed at regular intervals to determine whether you’re making progress or not. During the review, decisions are made as to whether the progress is acceptable and any adjustments that need to be made.
The production floor is where the tactics become operational. Floor leaders must work out the details to support the tactics. This is where the rubber hits the road. Again, catchball is done between department heads and floor management to ensure that the operational part of the plan aligns with the department goals. All this planning can be illustrated using a tool called the X-Matrix. This visual shows how the plans are correlated, how they support the objectives, and the expected impacts.
There are several benefits of Hoshin Kanri planning. It focuses the organization on common goals, involves leaders in the planning and communication of the goals, and holds leaders responsible for their respective parts of the plan. It ensures that the company’s goals are being driven at all levels of the organization. It helps to dilute silo thinking and supports prioritization of resources in support of the goals. Hoshin Kanri is a systematic approach to planning.
Following the Toyota Template will dictate, in the beginning, what goals should be included. These will be critical goals of the planning process up front. Concepts such as problem-solving and waste recognition education, continuous flow, a pull system, standard work, and heijunka could be front and center in an initial Hoshin Kanri plan. The plan always starts from the current condition.
As with any plan, we must have ways to measure success. Key Productivity Indicators (KPIs) are used to measure progress toward goal attainment. KPIs should exist at every level of the management team. They’re tracked regularly at the appropriate intervals – daily, weekly, monthly, and so on – depending on the place where they’re used. Here are the rules for KPIs:
Must be in control of owner: For example, is man hours/unit under the control of the supervisor at the floor level, or is staffing determined further up the chain of command? Wrong or missing parts are a more appropriate measure. Or maybe non-production overtime hours? These are in the span of control of the floor supervisor.
Must drive desired behaviors: For example, overall equipment effectiveness at the floor level can drive poor decisions by making products not needed so as to meet the KPI. Downtime is a good measure: how many should be made vs. how many were made.
Must be actionable information that drives improvement: Can you clearly see the gap between the current condition and the goal? Measure the actual against the goal.
Must be aligned with the overall strategy: Does the KPI drive behaviors that support the corporate objectives? For example, the corporate goal may be to increase customer satisfaction. The plant may measure On-Time-Delivery (OTD) in support of the corporate goal to improve customer satisfaction. The plant departments may measure off-line repairs as a KPI to support OTD, while the work group may measure wrong/missing parts in support of reducing off-line repairs. The idea is that missing parts contribute to off-line repairs, which affect OTD, which in turn, affects customer satisfaction. Logically, when the process minimizes missing parts, the plant’s off-line repair KPI will improve, OTD increases, and customer satisfaction is higher. The KPIs are aligned up and down the organization, and wrong/missing parts are in the control of the supervisor.
Minimize the number of KPIs: Measure only those things that affect the goals. Don’t measure everything!
I’m not aware of any measure that’s accepted by everyone, but one KPI that is a good indication of relative leanness, or efficiency, is Inventory Turnover.
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This is a KPI that, when measured over time, can indicate progress in increasing efficiency. By turning inventory faster, it is possible to significantly reduce the amount of inventory on the floor. The money previously tied up in inventory is now cash in the bank and can be used for other things.
Another measure that is sometimes used is Days Inventory Outstanding (DIO). It’s just the opposite of Inventory Turnover. The math is:
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What it says is that for every dollar of goods sold, there is a dollar amount of inventory in the system. So, if the average sales revenue per day is $2 million and the average inventory is $50 million, then the DIO is 25. With this measure, the lower the DIO, the better off you are, because the daily sales figure is achieved with less inventory.
This focus on uniting everyone toward a common purpose and valuing the importance of each person’s role through Hoshin Kanri brings the organization together. It creates a common vision that is not only shared with everyone in the organization but requires the involvement of leadership at all levels in the formulation of plans at each respective level. A sense of teamwork evolves out of the input from all levels and areas of the organization in pursuit of common goals. This plan will align and unite the enterprise.
The Plan: The Hoshin plan is the method to align the organization.
Culture: The Hoshin plan lays the groundwork for culture change by valuing every leader’s input, supporting common goals, and instilling a sense of teamwork through the organization.