by Steve Withers of Canada Post shown at the 1st Lean Service Summit on 23rd June 2004 run by the Lean Enterprise Academy

1. Process Excellence at
Canada Post Corporation
Lean Summit, June 2004
Steven Withers
Senior Advisor, Lean
Version 1.0

2. Page 2
Agenda
1. About Canada Post
2. Value
3. Value Streams
4. Flow
5. Pull
6. Perfection
7. Learning

3. Page 3
About Canada Post
• Canadian Crown Corporation
• Group of companies, CPC,
Purolator, Innovapost,
Progistix, ePost, Intelcom
Courier, CPIL
• Over 64,000 employees, 7th
largest employer in Canada
• Services 13 million domestic
addresses – growing at
170,000 per year
• 22 major plants
• 37 million pieces delivered
daily
• $6 B revenues annually
Section 1 – About Canada Post

4. Page 4
Impressive Results
• Exceeded annual profitability goals – 9
years of consecutive profit
• Returned dividends and income taxes to
Canadians each year
• Improved and stabilized on time
delivery
75 84
67 71
253
0
50
100
150
200
250
300
99/00 00/01 2001 2002 2003
Net Income $M
On Time Delivery
•3.2 million sq. ft. of space freed for
divestment or consolidation
•Dramatic plant inventory reductions
•Improved labor relations – no labor
disruptions since starting lean
•Improved visuals – line of sight and
less fire fighting
Section 1 – About Canada Post

5. Page 5
Historical Lean Perspective
1996 – Womack & Charlton talk about Postal
1996 – 1999 Learn through isolated experimentation
1999 – 2002 LEI internships
2000 – First supplier VSM experience with Air Canada
2001 – Plant reorganization – value streams
2001 – VSM used for future state planning
2002 – Deployment of “Process Excellence” advisors
2003 – Integration of lean and six sigma
2003 – New operations planning process based on policy deployment
2004 – Getting serious about administration, 1st focus order to cash
1996 2004
Section 1 – About Canada Post

6. Page 6
Unusual Characteristics
• Customers on each end of the value stream
− The paying customer is at the start - where the supplier
would be in manufacturing. If they are bad quality mail
suppliers you can’t fire them!
− The receiving customer often doesn’t know mail is coming,
and often doesn’t want it!
• Ultra short cycle business
− What comes in that night must be processed that night –
1000 inventory turns! (4X per night)
− No ability to use finished goods supermarkets, or level
production between days like Toyota
Section 1 – About Canada Post

7. Page 7
Plant Value Stream
Organization
Plant Director
Production Control
Tech Services
Operations Improvement Value Stream Leader
Parcel
Sort CUPW CUPW
APOC
(Sups)
Section 1 – About Canada Post

8. Page 8
Customer Value
• Perfect process performance
(e.g. on-time, no damage,
right address)
• Easy to do business with:
− Simple, accurate billing and
invoicing (order to cash value
stream)
− Superior customer service
• Supply chain visibility through
scanning information
• Price
• Hassle free borders
Section 2 – Value

9. Page 9
Value Streams
Letters - Publications and Admail – Parcels - International
Sorting large envelopes - Windsor
Section 3 – Value Streams

10. Page 10
Continuous Flow – Hamilton Plant
Reduced Annual
Operating Cost - $5.6 M
Freed floor space – 4678
sq meters or 46% of S/L
area
Reduction in Equipment
MLOCR – 7 to 6
LSM – 6 to 4
VES Desks – 44 to 14
Manual Cases – 255 to 60
Mail Handling Equipment –
reduced 33%
S / L C e l l s
B u s i n e s s U n i t # 3
S h i f t 1
J u l y 2 0 0 1
G e n C o n
M L O C R
1 2 3
M L O C R
1 2 4
C u l l s
R e j
C F C
S t a f f = 3 2
T / A
R e j
S o r t a t i o n
C a s e s
A E G
L S M
A
B
V E S
F
F
F
F
R T S
A E G
L S M
A
B
M a n u a l / M e c h
L V R
6
4
5
1
2
1
2
3
4
5 3
4
5
B R M
3
T o B R M
F r o m R T S
T o C F C
1
2
1
2
3
2
1
3
1
2
3
4
1
2
3
4
1
2
3
4
S u p e r v i s o r
S u p e r i n t e n d a n t
Section 4 - Flow

11. Page 11
Cells in Calgary
CFC
#3
CFC
#2
MLOCR 88
1 Ltr every
106 Seconds
1 Ltr every
106 Seconds
1 Ltr every
53 Seconds
Before:
-Throughput not achieving takt
-Poor flow
-Frequent stops/downtime
-Feeder idle time
After:
-Capable of achieving takt
-4000 pph throughput improvement
-Reduced stoppage/downtime
-Out of cycle work removed
Section 4 - Flow

12. Page 12
Kaikaku Results – Toronto
Toronto plant beforeToronto plant before Toronto plant afterToronto plant after
Travel Distance
Before After
% Reduction
Bag of Mail 806' 76' 91%
Culler to
OpticalReader 998' 12' 99%
Optical Reader
to Refeed 250' 17' 93%
Oversize Letter
to Mech Sort. 461' 307' 33%
Dispatch Cart to
Dock 537' 230' 57%
Before
(sq. ft.)
After
(sq. ft.)
%
Reduction
Mail Prep. 51,000 21,000 59%
Final Sort
to
Stations
83,000 20,000 76%
Priority
Courier
Facility
75,000 0 100%
Toronto
Exch'ng
Office
45,000 0 100%
Space
Section 4 - Flow

13. Page 13
Quebec – Flow Reduces
Inventory
Before After
Section 4 - Flow

14. Page 14
Flow in Administration
Payment Processing
• 1140’ traveled
• Pick-up/Put-down 49X
• 9 people involved
• 4 Elevator Rides
• <13 Minutes of work
• 2-3 minutes of VA activity
Section 4 - Flow

15. Page 15
Administrative Flow
Layout and material flow
Section 4 - Flow

16. Page 16
Load Leveling Administration Work
Basic sort station
number
Post dated file
Basic sort station
SIS Cards Post dated
calendar
Section 4 - Flow

17. Page 17
Building Standard Work Elements in
Administration
Making Customer Calls – Payment Processing
?

18. Page 18
Building Standard Work in Administration
Basic Payment Processing

19. Page 19
Pull
• Issue #1: Large volume mailing houses
− Scheduling
− Small batch issue: getting paid the right amount versus JIT
• Issue #2: Street box collection
− 900,000 access points
− End of day mailing habit versus our leveling dilemma
• Issue #3: Between plants
− Problem simplification: 5 biggest suppliers can make a difference
− The ‘grid’ is 22 x 22 or 484 critical links
• Issue #4: Between delivery depots and plants
− Creating supplier – customer standard work
− A single plant might supply over 100 delivery depots
• Issue #5: Administration
− Huge culture change required to make pull work
Section 5 - Pull

20. Page 20
Perfection
• Visual depot, and 5S depot approach
− 13 ‘prescribed’ kaizens
• Recognition that successive kaizens yield
additional benefits
• Integration of lean and six sigma
− Rath & Strong provides training and coaching
horsepower
− Future integration of six sigma and lean training
Section 6 - Perfection

21. Page 21
5S – Continually Seeking Perfection
Before After
Section 6 - Perfection

22. Page 22
Measures of Success
• Change from… old metrics:
− Utilization maximization (machines,
trucks)
− Point velocity (pph)
− Direct labor optimization
• To… new metrics:
− Lead time
− System cost
− Space
− New focus on process metrics
Section 6 - Perfection

23. Page 23
Process Excellence Strategy
and Training
Training
6 SigmaInfluence Skills
Change Management
Leadership
Lean
Lean Black Belt
•5 weeks in class
•2 value stream projects – defense
•Written case study
6 Sigma Black Belt
•5 weeks in class
•2 projects - defense
•Written case study
Section 6 - Perfection

24. Page 24
Reflections on what we’ve learned
• Constancy of purpose essential
• The right people in the right place
− From ‘directing’ to coaching
− Value stream management
• Nothing happens without clear responsibility for improvement
− Process Owner and Process Manager roles
− New metrics needed, focus on lead time
− The means as important as the results
• There are many roads that reach the same destination
− The same methods work in postal as in basic manufacturing, but they
need to be customized
− Six Sigma and Lean are not competing methods – they work together
Section 7 - Learning