Quantifying the Value of Lean Improvements

We are pleased to present this guest blog post by Adam Wellstead, PhD, Associate Professor of Public Policy, Social Sciences at Michigan Technological University and 2019-2020 Faculty Fellow.

Every year, the Office of Continuous Improvement (OCI) undertakes a number of wide-ranging projects to make processes throughout our campus more efficient and effective. Often the project outcomes go unnoticed by a majority of the Michigan Tech community, including the bean counters. This contrasts with the manufacturing sector where Lean tools are applied to the creation of a tangible product, and costs/savings are meticulously tracked. Michigan Tech is a highly complex multiple million dollar business (of higher education), and OCI projects have improved safety and reduced waste. However, the accrued financial benefits are largely invisible because the current cost to the university for most of its processes is not documented. This year, I was a Faculty Fellow working with the OCI and one of my projects was to account for these costs.

Other universities who employ Lean methods and tools also struggle to show the financial benefits. One possible approach to account for these invisible benefits of Lean in a system that does not closely track expenses is to apply counterfactual thinking. This approach has played an important role in the efforts of social scientists, particularly historians, to assess causal hypotheses. By making claims about events that did not actually occur, counterfactuals play a necessary and fundamental, if often implicit and underdeveloped, role in the efforts to assess the hypotheses about the causes of a phenomena.

A well-known example is, had George W. Bush not been elected, would the Iraq war have occurred? Counterfactual analysis makes causal claims about events that did not actually occur; that is, non-observations. Social scientists have developed well-established criteria for judging counterfactual arguments (Table 1). For example, we cannot make implausible counterfactual claims. Looking at the Bush-Iraq War case, had George Bush not been elected, it is implausible to claim that Iraq would have been become a fully democratic country.

Table 1Criteria Checklist for Judging Counterfactual Scenarios
CriteriaDescription
ClaritySpecify and circumscribe the independent and dependent variables (the hypothesized antecedent and consequent)
Logical consistencySpecify connecting principles that link the antecedent with the consequent and that are cotenable with each and with the antecedent
Historical consistency (minimal-rewrite rule)Specify antecedents that require altering as few “well-established” historical facts as possible
Theoretical consistencyArticulate connecting principles that are as consistent with “well-established” historical facts as possible
ProjectabilityTease out testable implications of the connecting principles and determine whether those hypotheses are consistent with additional real-world observations

In the more modest world of Lean processes, we also can make a counterfactual causal claim about a non-observation, namely, what would have happened had the Lean process not been undertaken and what would have been the costs accrued by not addressing waste and inefficiencies? One recent OCI project highlights this approach. Daniel Heights has 52 buildings, all utilizing 1 of 13 different water heater pumps for circulating hot water to residents. This made it very hard to manage and keep records of the inventory for each pump type, brand, horsepower and orientation. Due to the amount of differentiation between the pumps, the process for reordering/replacing each pump lacked standardization and had many errors.

In 2019 standardization of pumps was implemented and an inventory of the pumps was taken. Now the shelves only contain needed pumps and are organized into a set space. Processes to perform inventory audits and reorder pumps are in place. The number of different brands of pumps being used for the water heaters in Daniel Heights went from 13 to two. They are also only using two different sizes of pumps when they were using five before. Table 2 lists the benefits that the project participants identified as well as the estimated yearly excessive costs of $8,461 had no action been taken (the counterfactual). The estimated value was determined by a deliberative process, keeping the criteria for judging counterfactual scenarios in mind, involving at least three OCI facilitators.

Table 2Estimation of Excessive Costs Incurred by Michigan Tech
Area Improved from StandardizationExcessive Costs
Water Use/Efficiency$100
Storage Space$286
Time to Reorder$375
$ Tied up in Inventory$4500
Hrs. Recording Inventory$270
Staff Training for Pumps$330
Bulk Inventory$2600
Total $ Saved$8,461
Table 3Estimated Costs Incurred by Michigan Tech Over Five Years
YearNet Present Value
1$8,058.10
2$7,674.38
3$7,308.93
4$6,960.89
5$6,629.41
Total$36,631.70

This is an example of one fairly modest project. In the coming months, the OCI will implement this procedure for all of its projects being undertaken.

Michigan Tech will be a very different place this Fall, but one constant will be the continual need to root out waste and inefficiencies, and thereby reduce costs.


Covid-19 Can’t Stop Lean

One of the most quintessential aspects of continuous improvement is that there will always be something one can do to reduce waste and no virus can change that. While Michigan Tech’s classes moved online, so did our Office of Continuous Improvement. Our offices may have taken the form of our personal computer desks and nobody can tell if you are wearing pajama pants, but lean principles are still being applied as there are always problems that can be fixed and improved. Thanks to Zoom, kaizen events can continue and uphold our mission of providing a Lean culture to the university.


While some events have been put on hold for the time being, the Office of Continuous Improvement is still proud to be helping coordinate with almost two dozen kaizen events to bring out the best environment that Tech can be. If you have a problem that you think could be solved or an inefficiency to squash, the Office of Continuous Improvement would love to be a tool in your repertoire and assist you in accomplishing your summer goals!

A Kaizen event held via Zoom, with all the comforts of home!

Outside of Kaizen events, the Office of Continuous Improvement also has many tools that can be implemented to improve work, such as an assortment of visual tools and templates to help you maximize your efficiency and reduce waste at home, work, anywhere! With all the time being spent at quarantine, wouldn’t it be great to go through a 5S organization to achieve a tidy and clean home or work environment? We all have plenty of time to spend, let’s make the most of it!
If you would like more information regarding Lean and how it can help you with your job or education, please feel free to reach out to improvement@mtu.edu.


Dissecting a SIPOC diagram

An interesting and often overlooked continuous improvement tool the SIPOC diagram. SIPOC is an acronym for Suppliers, Inputs, Process, Outputs, Customers. The goal of this diagram is to aid the kaizen team in quick high-level identification. That is to:

  • Identify both the suppliers and customers.
  • Identify the scope of the project.
  • Identify the results that will satisfy stakeholders with regards to the problem.
  • Identify the proper metrics for verifying that the customer’s needs.
  • Identify who should participate in the kaizen team.

Completion of the SIPOC involves filling in the relevant data through the following steps:

  1. Process – List the process steps, keeping detail to a minimum by only outlining five to eight steps.  When describing the process steps, try to limit the description to two words. Have each description start with a verb (action) and end with a noun (subject).
  2. Output – Record what information, data, report, material, etc. comes out of this process, or is produced as a result of this process.
  3. Customers – Record who or what receives the outputs of the process.
  4. Inputs – Determine what data, supplies, systems, tools, etc. are required for the process, or who is needed to perform the various steps in the process.
  5. Suppliers – Determine who or what supplies inputs for the process. The supplier can include organizations, systems, databases, individuals, etc.

Typically a quick exercise, a SIPOC is often all that is needed to move forward with an improvement project. If more detail is needed, a SIPOC provides a foundation for detailed process maps such as Swim Lane Process Maps.


Welcome, Nathan!

Joining the Office of Continuous Improvement is a new student Process Improvement Coordinator (PIC), Nathan Weeden. Nathan is a second year student pursuing a degree in mechanical engineering. Please help us welcome Nathan as he gives some introductory information about himself:

Good day everyone,

My name is Nathan Weeden. I was born in Ann Arbor, Michigan, and for the majority of my life have lived in the moderately sized town of Saline, Michigan. That’s where I spent my time until moving to Houghton, MI to begin my studies at Michigan Tech. I’ve had quite an enjoyable time at the university, as it is a beautiful slice of the country, even if I find myself often bogged down with work. In my spare time I enjoy playing video games, hiking, target sports, and fishing, if the weather permits.

Currently I am undergoing training to become a full-fledged student PIC and am learning the meaning, importance, and applications of Lean thinking. The process has been engaging and I am looking forward to an enjoyable and fruitful experience here at the Office of Continuous Improvement.


Welcome, Sydney!

Hello,

My name is Sydney Dankert. I was born in Omaha, Nebraska and lived there for 11 months before moving to my hometown of Pewaukee, Wisconsin. I am currently in my second semester of my first year here at Michigan Tech pursuing a degree in Chemical Engineering. I am delighted at how my first year has progressed as I joined the Undergraduate Student Government, the American Institute of Chemical Engineers, and College Republicans here on campus. Along with these fun activities I’ve found time to make friends and experience campus from hockey games to trivia nights. 

I have just finished my training as a Student Process Improvement Coordinator, and I am learning the principles of Lean and the language of Continuous improvement. I have always had a passion for system improvement and I am looking forward to the professional experiences I will have here at both Michigan Tech, and at the Office of Continuous Improvement.


Greetings!

My name is Jon Sturm. I was born in Kalamazoo, MI and moved to a town called Kingsford in the U.P. at a young age. My dad’s side of the family has lived in Kingsford for four generations. I am pursuing a degree in chemical engineering at Michigan Tech. Even though the classes can give me more stress than I need at times, the people I have met here and the experiences I’ve had have been amazing. When I am not in class or at work, I enjoy hanging out with my friends, working out, and being outside (hiking, fly fishing, hunting, etc.)

Although my favorite subject is chemistry, I have thoroughly enjoyed learning about Lean facilitating and continuous improvement. I love how the principles are applicable to a seemingly endless list of real-life situations. I am excited to finish the Canvas training and have my duties around the office expand and develop.


The People Factor

We are pleased to present this guest blog post by Lisa Cunard

It is around 8:00 a.m. on a Saturday morning, not any old morning.  It is a morning that I have been looking forward to with anticipation all week because it is one of the precious days of the week that I get to sleep-in late.  Why I woke-up with Lean swirling in my brain followed-by a strong-desire to get out of bed, and put my thoughts on paper is something I cannot explain.  So let me share with you how I came to learn about Lean and what was swirling in my brain this morning.

I started my Lean training about three months ago, working towards my Level 1 Certification. My class is not scheduled to graduate until April, 3-months from now, so I have a lot more to learn.  My experience so far, Lean training is like a firehose of information being directed straight at you.  This is not a bad thing!  There is so much to learn, to contemplate and concepts to be explored.  

Where to start?  This is the question I’ve asked myself, as many of the Lean concepts taught in class made me think in ways I won’t normally think about a “process” or “people”.  One of the principles of LEAN that I have a natural resistance to is a “no-blame” environment, meaning when a mistake is made the “person” involved is not to blame, the “process” is to blame.  What? Right?  To further explain, I think Lean’s intent, is to design a “process” so it is difficult to accidentally do anything, but the right thing.  To me, that makes sense (sort of), but if you are like me—my mind keeps inadvertently going back to the question: How can the “process” really be to blame and not the “people”?

I set out to learn more, outside of class.  Our instructor encouraged us to visit a website dedicated to Lean, the GEMBA Academy gembacademy.com, which has over 1000 continuous improvement lessons.  The best thing about this website is they offer a large selection of Lean videos that are interesting.  On the website, I’ve watched two excellent videos, so far, “Lean from the Heart: by Karl Wadensten”, spiked my interest and was really helpful to me. I want to share with you some of what I learned about an organization’s successful Lean journey from watching this video.  It was filmed during an Iowa Lean Conference 2015, featuring Paul Akers and Karl Wadensten.  Karl spoke in great length about the “people” part of his organization’s Lean journey and that is where I’d like to start.

Karl shared, GALLUP poll results of a poll conducted in 2015 and it found that in a large number of organizations across the United States, organizations reported their employees were largely unfulfilled at work and divided as follows:

30% of employees – Engaged in their work
52% of employees – Not Engaged
18% of employees – Disengaged – Actively sabotaging and working against the company

I think the reason Karl shared this information was to illustrate that “cultivating a culture” in an organization is the first step in the Lean journey.  That resonated with me, I see it and feel it in the workplace and it speaks to the blaming of “people” that circles in my mind and how it all works into the Lean journey.  Another eye-opener was the Lean timeline of Karl’s company Lean transformation.  In 2000, his company began its Lean journey and they worked solely on “cultivating a culture” until 2005.  FIVE YEARS of working on the “people” part, of the culture!  The company didn’t start incorporating Lean-tools until the culture had changed until the “people’ had changed.  This was a light-bulb moment for me.

What is my point?  What pulled me out of bed at 8:00 a.m. on a Saturday morning?  I think it was the need to share with you what I’ve learned from my personal Lean journey (so far).  My natural inclination to blame people for failures in the workplace has been validated in a sense.  For Lean to work it has to begin with people who collectively create a culture that is based on Lean principles and if the people resist or refuse to adapt to an ever-changing Lean culture, they are to blame for refusing to try.  At the end of the day, the key to the success or failure of a Lean transformation is people. People at all levels of an organization matter a great deal to the success of creating Lean processes that exemplify continuous improvement.  This is what has been swirling in my mind, and I feel I have a greater sense of understanding and peace with how a workplace goes from mediocre performance to continuous improvement and excellence.  Now, I’m ready for my Saturday nap. : )


Sustaining Improvements

Most processes, especially those that involve people, will tend to slowly deteriorate over time. Perhaps after organizing a workspace to perfection, one might find that ten weeks after the reorder the whole workspace is back to where it started. A more solid example of this was seen in one of the improvement events done in conjunction with our office. The improvement event was a digital reorder of a Google Drive. Several years ago the drive started out as a relatively small drive, but over time expanded into over 9000 files, with most of these files being either unnecessary or duplicates. After combing through and removing these unnecessary files, the drive ended with approximately 2500 files that were decently well-ordered.

While the above drive is well organized now, without supervision it will likely slowly return to an unorganized state in the future. However, this slow degradation, as with other processes, can be stopped with periodic audits. The audits for the drive include general standards for organization along with more specific guidelines for naming conventions and handling images. The below standards are scheduled to be reviewed once every 6 months.

The Standards for the Drive

Most improvements, not just those focused on organization, can benefit from the use of audits over regular intervals. Altogether the inevitable decrease in the quality of a process can be slowed or stopped entirely by creating standards and enforcing those standards through periodic audits.


What is Lean to you?

Sometimes it can be hard to really grasp the concept of what Lean is and what it really means to use it, and it can be even harder to explain Lean to someone else. When I say I have an on-campus job many of my peers give the normal response of “where do you work?” and to that I reply with “The Office of Continuous Improvement.” While I get a couple responses to this like “Where is that at?” or “I didn’t know we had one of those,” the most common response I experience is “What do you do there?” When I first started working as a Student Process Improvement Coordinator I would just reply with “oh, I help do Lean for the school.” But after seeing the confused look on peoples’ faces I realized that they probably had no idea what I was talking about and I was going to have to start explaining what Lean was.  So, I started thinking about how to describe Lean in my own words with out using any Lean lingo.

To me, Lean is a complex concept that ultimately always puts the customer and people first. Lean is based on waste elimination, respect for people and customer value. In Lean practices, it is important to simplify and standardize everything, to stream line it. In the end Lean should be more of a culture or a way of life than a practice or set of rules. I feel as if Lean is hard to define. The more information I’m introduced to the more broad Lean is and the more it can include.

I’m sure many others have different definitions of Lean than mine but that is kind of the interesting aspect of it. Lean is such a broad topic that encompasses so many aspects of our day-to-day lives. It’s much more than the tools and terms–its a way of thinking and a culture, which is why it is so hard to describe and define. So, what is your definition of Lean and Continuous Improvement?


Side Effects

Almost invariably, when one acts they commit that act with a specific goal in mind. The reason why we move is to get from point A to point B, and the reason why we drink is to quench our thirst. In the office it is the same, we create checklists with the goal of ensuring full completion of tasks, and we flip off light switches to reduce the amount of electricity used. Acting with a purpose is quite important, but it is also important to consider the side effects of our actions and the side effects of our processes.Image result for light switch

Side effects can manifest themselves in many forms, both positive and negative. The positive side effect of turning off a light switch could be that natural light is easier on the eyes, while a negative effect could be a lack of vision in some areas. Though it must be noted side effects as with intentional results often interact with many other systems, and can change when other systems change as well.

It is also worth recognizing that the value of a side effect can be greater than the intended result itself, though comparing value is often a difficult task itself. To again use the light example, it is very likely that a lack of vision is far costlier than the small amount of money saved from turning off the light, or perhaps the area is well enough lit with natural light.

Branching side effects.

There are many Lean related tools that can assist in understanding the side effect of processes, even when this revelation is itself a side effect of the Lean tool. Mapping out a process in its entirety can lead to an understanding of many of the detailed side effects involved. Furthermore, a SIPOC (a tool designed to analyze the inputs and outputs of a process) can help one understand the big picture behind a process. Knowing the side effects of a process is an important part of continuous improvement as one cannot improve that which one does not know.

Overall, it is clear that processes and actions are not merely standalone, they often interact with others and produce side effects. These side effects come in all manner of forms, and recognition of these forms is significant for finding areas that need improvements.