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Managing Risk While Going Lean
Copyright (c) 2006-2023 Ronald Crabtree
Case StudyMy company currently is assisting a large retailer with a major rollout of Lean practices in 20 distribution and repair facilities across the United States. A key element in this task is careful risk management and countermeasure assessment. Let"(tm)s examine some of the actual ideas and actions that are underway.
Before arriving at the regional distribution center (DC), we had previously defined risks and responsibilities. Our goals included:
Expending adequate resources at the facility level. Implementing Lean is decidedly a "no pain, no gain" deal. If a measured effort is not expended, it is impossible to get expected results. Providing incentives to facility directors to drive change. This includes changing job descriptions; performance appraisal criteria; and the bonus structure tied to results, for both expending effort and measuring quantifiable improvements. Training and developing managers and supervisors to adopt a team based, empowered culture, moving away from traditional command-and-control management styles. Answering the "what"(tm)s in it for me" question for the entire work force.
The facility directors and their management team also had several goals. First, they needed to communicate to the entire work force that the vision and action plan is a major risk, requiring care, guidance, training, and follow-up. They also had to require all facility staff members to participate in training and implementation.
It also was important to not show favorites; they could not allow any individuals or groups to opt out of full and unconditional support of the initiative. Lastly, they would need to change job descriptions, performance appraisal criteria, and the bonus structure so they would be in line with the implementation of Lean and other changes.
In a Lean implementation, the key requirement for success, for obvious reasons, is empowering the work force. The causes of failing to empower are not as well understood. In his book Leading Change, John Kotter warns against these oversights:
Failing to build an effective guiding coalition Not creating and conveying a sensible vision Ineffective communication and lack of planning and verification of effectiveness Inadequate and unproductive training Misunderstanding or not accepting the natural "grieving cycle" people go through before they can embrace change Not carefully answering for everyone "What"(tm)s in it for me?" Failing to create and celebrate quick wins, and thus losing sponsor support Not tying metrics and measures to financial performance Discouraging and undervaluing the challenging of old ideas.
Finally, the facility steering committee or guiding coalition has certain key roles:
Participating in identifying and resolving change barriers and risk issues in the facility Assisting with the development and deployment of the implementation plan in the facility Assisting in assessing project risks and developing a countermeasure plan of action, and continuing in this role for the duration of the project Developing and executing a comprehensive communications plan to support project progress and elevating any issues to facility directors and corporate project managers Assisting in assuring resources are provided in the facility for implementation, including hours of training and continuous process improvement activities as defined in the project plan Providing support for facilitators who will champion implementation teams to resolve issues and break roadblocks to project success.
DC-Level Risks
The DC"(tm)s guiding coalition team got together and held a brainstorming session. The team identified several risks and came up with proposed countermeasures to be pursued.
1. There is a risk in failing to answer effectively "Why are we implementing Lean?" The body of knowledge on Lean is slanted heavily toward manufacturing operations (for an in-depth examination of how Lean tools apply in distribution, see the cover story in the January 2005 APICS magazine). With this information, people in distribution more easily can understand how these ideas work in their environment.
There are many reasons to implement Lean, including improved customer satisfaction, reduced costs, and shortened lead times. If we look at this from a stakeholder perspective, here are the "whys":
For customers, there will be faster deliveries of benchmarked quality products and services at a fair market price For owners, there will be improvement in profitability and cash flow, as well as in positioning the business to be globally competitive Managers and supervisors can provide the basis for superior operational performance by making management and supervisory jobs easier through empowering the entire workforce For the work force, there will be heightened job security and safety, and they will have a say in how things will be done in the future.
2. There is a risk in allowing complacency and naysayers to hold sway. If anyone opts out of involvement in your initiative""and is allowed to get away with it""you may as well give up right now. Few things are more demotivating than realizing that the high level at which you are working is not expected from everyone. When this happens, people quickly realize it"(tm)s acceptable to just pay lip service to the whole change initiative.
The best solution for this problem is a strong commitment on the front end of the effort to establish team norms and actively change the structure that drives behaviors. This includes modifying position descriptions to mandate involvement in the implementation, in kaizen teams, in actively providing ideas.
3. There is a risk in not budgeting enough resources to enable the changes to happen. This risk is one of the most obvious, yet most often ignored, in a Lean implementation. The gurus promise quick wins and will launch kaizens to quickly make changes, so the temptation is to give training and continuous practice of Lean principles short shift by "kaizening your way to prosperity." I recommend the steering committee come up with a minimum level of effort required by all employees as part of the process. For example, at the major retailer"(tm)s DCs, we have committed to investing an average of 4 percent of this year"(tm)s working hours to training and involvement in implementing Lean and kaizen circles.
Out of 40-hours, 4 percent works out to a little more than 1.5 hours per week per employee. Trust me on this one: Taking this much time out will not reduce output or efficiency. Properly structured activities always generate two to five times the investment in improved results.
There is rarely enough effort expended in risk management at the onset of a Lean implementation. Err on the side of too much planning; you will be far better off in the long run.
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Ron Crabtree, CPIM, CIRM, is director-at-large for the Greater Detroit Chapter of APICS and president of MetaOps, Inc. He is an active speaker and instructs professional audiences on operational excellence techniques including Lean Six Sigma, change management and many others. He may be reached at (248) 568-6484, or at his website
http://www.metaops.com
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