© 2013 The Karen Martin Group, Inc.  Coach / Facilitator / Consultant / Trainer: Lead Lean transformations & develop people across all industries. Kaizen Events: Current Thinking & How To's

Kaizen Events: Current Thinking and How To’s Webinar July 25, 2013

© 2013 The Karen Martin Group, Inc.  Coach / Facilitator / Consultant / Trainer: Lead Lean transformations & develop people across all industries.  Teacher: University of California, San Diego  Author & Speaker: Karen Martin, President The Karen Martin Group, Inc. www.ksmartin.com 2 October 2013

Upcoming Webinars • Creating a Continuous Improvement Culture – Tuesday, August 13, 2013 – 11:00 am-12:15 pm PT – https://www2.gotomeeting.com/register/229489922 • Value Stream Mapping: Visualizing Work Flow and Aligning People for Organizational Transformation – Thursday, October 10, 2013 – 11:00 am-12:15 pm PT – https://www2.gotomeeting.com/register/151856458 3

Key Topics • When to use and when NOT to use a Kaizen Event • The FULL set of benefits Kaizen Events offer • 10 Key Success Factors • How to quantify & sell your results 4

5 Kaizen: Perhaps the most misunderstood & misused word in the novice improvement community

6 kai∙zen [kahy‐zen] Noun A business philosophy or system that is based on making small, positive changes on a regular basis. (dictionary.com) But…you don’t “do a kaizen”

7 kai∙zen [kahy‐zen] An adjective? Kaizen Event, Kaizen Blitz

8 Kaizen Event – Definition A two- to five-day focused improvement activity during which a sequestered, cross-functional team designs and implements improvements to a defined process or work area, generating rapid results and learned behavior. Karen Martin & Mike Osterling The Kaizen Event Planner

9 5-Day Kaizen: Typical Structure Day 1 & 2 (Plan) Day 3 & 4 (Do, Study) Day 5 (Study, Adjust) Kick‐off Analyze current state Perform root cause analysis Design future state Interim briefing Design & test improvements Obtain buy‐in Interim briefing Finalize improvements Train process workers & stakeholders Present results CELEBRATE!

Kaizen Event Benefits • Achieving rapid results through sound means energizes and helps form new habits. • Behavioral – Helps people grow more comfortable in challenging the status quo – Helps frontlines gain a “voice” in process design. – Helps build trust between execs and others; and between managers and staff… • Documented, measurable processes • Stronger working relationships • Develop problem-solving skills • New mindsets, behaviors & habits – Need fewer & fewer KEs as you progress with transformation • Clearer roles between leadership and frontlines • Energized & engaged workforce 10

The Outstanding Organization

IMPROVEMENT IS EVERYONE’S JOB

13 Who? Scope of Authority Means Leadership “What has to happen” Strategy Deployment, Value Stream Mapping Frontlines “How it will happen” Kaizen Events, Just-do-its, and Projects Improvement RolesStrategyTactics Middle Management

People who do the work are the experts! 14

When to Use Kaizen Events • When you want a focused improvement activity that yields rapid learning and results. • When you have achieved leadership understanding and obtained commitment that: – Kaizen Events will be tied to a larger improvement strategy or defined problem (value stream improvement plan, A3, strategy deployment). – You will work in parallel to development strong habits of daily kaizen organization-wide. 15

16 1. Increase sales 5%. 3. Achieve 10% profit. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec IT Mktg Ops HR Bob Fin PE Pario COM Direct CDs / AMs PD Rec PD Mgmt BMD SWS 2 3,500 units sold by 12/31/2013 through all channels (approx. $700K) X X X X X X X X X X X X Bob Dana 2 3 3 3 2 3 3 1 1 3 3 1 3 11 Develop & deliver training to top 50 Dealers X X X X X X Bob Rex/Tim 3 3 3 21 Revised course materials by 6/30/2013 X X X Bob Josh R? 2 3 3 2 2 5 Education: 1 school district spec'd/underperforming COM distributor (25) by 12/31 valued at min $35K each X X X X X X X X X X X X Howard Michael S 1 3 2 3 3 8 10 new dealers on board (net) ($500K per dealer this year) X X X X X X X X X X X X Howard Mike B 2 3 9 5 new distributors bringing $200K annual rev (& 5 terminated) X X X X X X X X X X X X Howard Howard 1 1 1 2 3 17 10 projects spec'd by 12/31; $300K rev by 12/31 X X X X X X X X X X Howard Dana 1 3 3 3 29 20 by year‐end X X X X X X X X X X X X Howard Mark H 2 3 3 3 32 TBD X X X Howard Howard 33 TBD X X X X X X X X X Howard Howard 10 Useful reporting and metrics are established and in place X X Jim Randall 3 1 1 1 1 1 1 30 TBD X X X X X Jim Josh 3 31 TBD X X X X X X Jim Josh 1 1 1 3 1 1 1 1 1 1 1 1 1 1 25 TBD Jim Shannon 3 3 1 1 1 1 1 26 System 7.0's in place X X X Jim Randall 3 2 1 2 1 15 100% accurate payroll; 100% management satisfaction at April mgmt. meeting X X X Josh Phyllis 1 3 20 Internet task list is simplified and streamlined for PDs then plan is rolled out to PDs X X X X Michael M Michael M 2 3 2 3 22 Design Calculator is updated successfully and rolled out X X X Neall Matt D 3 1 1 3 2 2 3 24 Competitive Analysis complete and distributed for use X X X Neall Dana 2 3 3 3 3 3 3 1 Design changed to solve delam issue long‐term X X X X X Susan David R 3 2 3 12 30 parts sourced in U.S.; completed plan for managing China‐sourced parts X X X X X X Susan Shannon 3 3 2 2 13 Warehouse laid out; kanban revised; Syspro implemented X X X Susan Shannon 3 14 Lay out complete; equipment installed X X X Susan David R 3 3 X = Planned 2013 Priorities 2013 Goals & Objectives 4. Improve morale (metric TBD). 2. Achieve 50% gross margin. Created: 01‐14‐13 Revised: Level of Effort/Involvement Required Priority Goal or Measurable Objective Exec Owner Plan review dates: Tactical Owner ● = Actual < Company Name > Contentremoved for confidentiality © 2013 The Karen Martin Group, Inc. Tie Improvement to Annual Strategy Deployment Plan ABC Company

Tie Kaizen Events to a Larger Purpose 17 Left side of an A3 report (PLAN) shows how a Kaizen Event is tied to a value stream map, which was created to understand the current state in solving a problem.

Tie Kaizen Events to a Larger Purpose 18 DO portion of the right side of an A3 report shows how a Kaizen Event will be used to design, test, revise, and implement one of the improvements needed to solve the problem that the A3 is exploring.

Customer Demand: 615 requistions per year Dept. Manager Approve in ERP PT=5 mins. C&A = 90% 1 0.5 days 5 mins. 0.75 days 5 mins. 1 days 20 mins. 10 days LT = 12.3 days PT = 30 mins. AR = 0.508% Supervisor Review Req. PT=5 mins. C&A = 95% 2 8 hrs. Originator Enter Req. in ERP PT=30 mins. C&A = 85% 31 File Maker ERP Vendor Websites 6 hrs. Standard Workfor review Additional IT access Requisition Checklist Cross Training Additional IT access External Supplier PT=20 mins. Supplies 4 hrs. Auto Notify Integrate Form File with File Maker Use budget in place of Quicken Dedicated Buyers Corp Purchasing Place Order PT=20 mins. C&A = 98% 6 Approval 1 2 3 4 5 PT = Process Time LT = Lead Time C&A = % Complete & Accurate AR = Activity Ratio (PT/LT x 100) RFPY = Rolled First Pass Yield RFPY = 71% 80 hrs. Purchasing Future State Value Stream Segment All but one Kaizen burst were accomplished in one Kaizen Event Project One Kaizen Event

20 Kaizen Event #1 Kaizen Event #3 Kaizen Event #2 Kaizen Event #4

21 10 Key Success Factors

Workforce Training 1 2 1 3 2 4 3 5 4 5 1 6 2 7 3 8 4 9 5 10 1 2 1 3 2 4 3 5 4 1 2 3 4 Date:Date: Date: Contact Information Signature: Signature: Name FacilitatorValue Stream Champion Name Dates Start & End Times Specific Conditions Value Stream Champion FacilitatorProcess Trigger Kaizen Event Charter Event Scope Leadership Schedule Last Step First Step Executive Sponsor Event Name Team Lead Interim Briefings Location Value Stream Event Drivers / Current State Issues Team Members Final Presentation Event Boundaries & Limitations Event Coordinator Function Event Goals and Objectives Potential Deliverables On-Call Support Function Contact Information Possible Obstacles Approvals Signature: Executive Sponsor Charter must be iterative, collaborative, and properly socialized

Charter: Proper Socialization • Post in work areas • Review and discuss with leadership and frontlines in those areas being affected • Review and discuss with team members • Do not merely email the charter!

Proper scoping is essential for creating focus and getting results 26

Define Scope: Narrow & Deep • Define fenceposts, conditions, and limitations. • Gives the team “freedom with boundaries.” • Charter communicates what the team does not have permission to do. 27

Proper Team – cross‐functional; people who do the work being improved

Scope First, Then Form the Kaizen Team • No more than 10 • Highly cross‐functional – Process workers (30‐50% of the team) – Upstream suppliers (internal) – Downstream customers (internal) – Subject matter experts – Outside eyes – External suppliers / contractors – External customers – Administrative support (if needed) – Union representatives (if relevant) – Maintenance / facilities representatives – Management (limited representation) 30

Kaizen Event facilitators wear multiple hats • Teacher • Coach • Motivator • Challenger • Provocateur • Obstacle eliminator • Mediator • Time keeper 32

33 Rules of Engagement • The team starts and ends the day together and breaks together; being on time is critical. • The team stays 100% committed and 100% focused. – No interruptions. – All wireless devices on silent mode or off. No vibration. – No email except for during breaks. • Keep an open mind and consider all ideas. Ask “why?,” “what if?,” “why not?” • Challenge everything; seek the wisdom of ten vs. the knowledge of one. • Rank has no privilege. • Finger-pointing has no place. • No silent objectors; don’t leave in silent disagreement; respectful disagreement is encouraged. • Use creativity before capital. • What’s said in the room stays in the room.

Begin with Measurable Objectives

37 Kaizen Events: Must help develop PDSA habits Event Prep The Event Event Follow‐up Event Follow‐up Within the Event: Micro PDSA Cycles

38 Detailed Steps 1. Define and break down the problem. 2. Grasp the current condition. 3. Set a target condition. 4. Conduct root cause & gap analysis. 5. Identify potential countermeasures. 6. Develop & test countermeasure(s) 7. Refine and finalize countermeasure(s). 8. Implement countermeasure(s). Study Evaluate Results 9. Measure process performance. 10. Refine, standardize, & stabilize the process. 11. Monitor process performance. 12. Reflect & share learning. Adjust Do Clarifying the PDSA Cycle Plan Develop Hypothesis Conduct Experiment Refine Standardize Stabilize Phase Continuous Improvement New Problem 50‐80% of the total time From The Outstanding Organization, Karen Martin (McGraw‐Hill, 2012)

Interim Briefings – Every Day or Two • Purpose – Build consensus. – Assure a well-designed and sustainable improvement. • Team’s role – Present findings & ideas. – Ask leadership for guidance (if needed). – Discuss relevant policies and concerns. • Leadership’s role – no veto power. – Assures team has considered all options and thought through all implications. – No veto power if team is within scope and boundaries. • Instead: “Have you considered this?” “How would we handle…?” “What if…?” 40

Process Management & Improvement KPI Target Result Actual Result Root Cause Corrective Action Taken New Result KPI-1 KPI-2 KPI-3 KPI-4 KPI-5 42 KPI Target Result Actual Result Root Cause Corrective Action Taken New Result Turnaround 4.0 hrs 6.2 hrs Errors on incoming orders Modified order form to reduce errors 3.8 hrs Output errors 2% 1% N/A N/A N/A

43 Establish Key Performance Indicators: 2‐5; Balanced; Visual Metric Description Owner FY12 Target Apr Total May Total Status Production Output Output in Units VS Mgr 75,000 81500 110300 Batch Deviations % Batches are Right the First time VS Mgr 80.0% 81.8% 80.5% Quoting Leadtime Days from receipt of RFQ until sent to customer Dave 5.4 6.6 6.9 Promise Date Accuracy % On time for Promise Date Dave 96.0% 85.0% 89.0% Engineering Release Time Days - receipt of PO until documentation released Vicky 4.7 5.6 4.7 Problem Resolution Number of calls to resolve customer issues Dave 2.1 2.4 2.3 Quality Quality Release Backlog # of lots waiting for release by quality engineers VS Mgr 80 99 77 ProductionCustomerService

Who’s Minding the Store?

46 Process Owner ≈ Process Doctor

Communicate process performance measurement plan. Sustainability Plan Executive Sponsor Value Stream Champion Facilitator Event Name Update training records to reflect who has been trained. Plan Who will deliver it and when? Who leads identification of training that need to be updated (ongoing and for new employees), when will training be in place? Event Dates "Go Live" Date Team Lead 30-Day Audit Date "Go Live" Location 60-Day Audit Date Post the Event Report, 30-Day List, Sustainability Plan. Update SOPs and other ISO or regulatory documents impacted by changes. Communicate and post 30-day and 60-day audit results. Communicate audit results to stakeholders and leadership team. Communication / Training Requirement Communicate to affected parties who were not advised during event. Provide training for those who missed initial training. Integrate new process into ongoing department training. Update Value Stream Map. Who communicates? How? To whom? Where posted? Who communicates? Via what medium? How is process performance going to be communicated to workers? Are additional visuals needed? Who owns this activity? Which value stream map(s) need to updated, who will do it and when? Who maintains training records? Who communicates? How? To whom? Who is accountable? Where posted? Who identifies relevant documentation? Who updates it? By when? You MUST Plan for Sustainability and Continuous Improvement Name Name Signature Signature Date Date Will there be rewards / recognition for sustaining improvements? What will corrective actions be if workers are not following new process? Who will enforce these rewards/consequences? Who monitors process performance on an ongoing basis? Who communicates the results? When, to whom, in what format? Who will lead audit & when? How will results be communicated? To whom? How will the process be adjusted, if needed? What's the plan for continuous improvement? Who will lead audit & when? How will results be communicated? To whom? How will the process be adjusted, if needed? What's the plan for continuous improvement? Who has ultimate responsibility for how process is performing? Which Kaizen team member(s) will observe the process? How will they communicate results? Who is responsible for adjusting the process, if needed? Who is responsible for finalizing process performance metrics and by when? Which team member(s) will observe the process? When? How will they communicate results? Who is responsible for adjusting the process, if needed? Process Owner Monitoring / Measurement Requirement Put in place key metrics to measure process performance; post performance. Plan Value Stream Champion Define corrective actions required if new process not being followed (rewards and consequences). Monitor process performance frequently; post results put continuous improvement plans in place. Identify process owner. Observe process one day after event is over. Talk with workers, assure they understand how process should be performed; see if there are problems. Observe process one week after event is over. Talk with workers, assure they understand how process should be performed; see if there are problems. Conduct 30-day audit. Conduct 60-day audit.

Metric Unit of Measure Before Measurement Projected After Measurement Projected Change 1 Lead Time Days 8.3 2.3 -72.3% 2 Process Time Min 55.0 25.0 -54.5% 3 Rolled First Pass Yield % 4.0 72.0 1700.0% 4 Handoffs Each 6.0 2.0 -66.7% 5 6 7 8 9 10 Michael Prichard Mary TownsendSean Michaels Sam Parks Event NameAllen Ward Sally McKinsey Facilitator Team Lead - Reduced equipment downtime due to waiting for parts; trickle-down effect re: stress on maintenance department and inter-departmental conflicts - Less frustration with the purchasing process - Reduced lost-time,and improved productivity, due to walking requisitions through the approval process - Should see less premium freight costs due to expediting of purchased parts and customer orders. Event Objectives Engineers and maintence given access to ERP and trained how to create requisitions Reduced lead time from time requistion is received until it is input from approx 11 days to 2 days. 1 Key Improvements Implemented Dianne O'Shea Ryan Austin Paul Dampier Kaizen Event Report Order Fulfillment Process 11/26 - 11/28/2008Event Dates Executive Sponsor Value Stream Champion 5 3 Team Members Before Photos, Graphs and/or Data ERP coding changed only department manager authorization is required if total spend is less than $5000 Department managers trained on approval process including need to engage IT group if purchasing application programs Dave Parks Sean Michaels After Photos, Graphs and/or DataCollateral Benefits 2 Reduce number of approvals form 5 to no more than 2 Measurable Results 4 Communicate results broadly!

50 Owner Owner's Manager Due Date 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 4 1 3 2 5 4 3 2 6 7 8 11 14 15 13 12 9 10 Value Stream Champion Facilitator Progress Event Dates Team Lead Action Item 1 Comments Kaizen Event 30-Day List Event NameExecutive Sponsor Spell-check Sheet 4 1 3 2 4 3 2 4 3 4 100% Complete Progress Key 0% Complete 25% Complete 50% Complete 75% Complete Finish what you started!

Do not turn to Kaizen Events as a methodology if… • They are not tied to a larger strategy. • They are the only means for making improvement. • Leadership isn’t ready to give proper authority to the frontlines. • The improvement to be made or problem to be solved is too complex for 5 days. • You’re merely designing the improvement or creating a plan. Kaizen Events are ACTION ORIENTED – you are actually making change. 51

Additional Resources http://www.scribd.com/doc/148612588/Kaizen‐Event‐Evaluation Kaizen Event Evaluation: www.vimeo.com/karenmartingroup www.youtube.com/karenmartingroup www.slideshare.net/karenmartingroup www.ksmartin.com/webinars Previous Kaizen Event Webinars:

© 2013 The Karen Martin Group, Inc. Karen Martin, President 7770 Regents Road #635 San Diego, CA 92122 858.677.6799 ksm@ksmartin.com Twitter: @karenmartinopex 53 For Further Questions Blog & newsletter: www.ksmartin.com/subscribe