FEATURE – Using data from a recent piece of research on logistics, the author discusses how Lean Thinking contributes to a more efficient and effective way of dealing with problems.
Words: Alvair Silveira Torres Júnior
A recent scientific research covering 38 logistics flows belonging to three different companies revealed that 40% of logistics workflows are wasteful. What is even more frightening is the fact that this waste was not identified by employees and managers at any time during the study. However, the lean philosophy has an explanation and solution for these problems.
WHY DON’T WE SEE WASTE?
It is very common for companies to closely keep track of their business results, but the same cannot be said about processes. If there is no standard for the process, but only for the result, so long as said result is achieved (even at the expense of unknown procedures) there is nothing to worry about. Indeed, only paying attention to the result without recognizing that as the process unfolds resources are consumed in wasteful ways is a common mistake. Luckily, it also hides a series of opportunities.
In the sample of processes examined, much of the waste was not seen by the teams and managers due to the absence of standards and standardized work. Those that were recognized by the teams were in all cases processes in which causes were being sought to explain unexpected effects.
The importance of having standards for work processes and results is highlighted in the lean approach to identifying and analyzing problems with the aim of improving performance. In his book Four Types of Problems, Art Smalley said that it is possible to classify problems into four categories, each of them requiring a unique type of answer.
The four types of problems according to Art Smalley
Type-1 and Type-2 problems are revealed by the standard, which therefore acts as a beacon for improvement. If we only have standards based on numerical indicators of aggregated results – numbers that we need to achieve at the end of the data gathering on a set of activities – we will not be able to pinpoint at which stage the work standard did not perform as expected until we have that aggregate measure. In this case, problems are only discovered at the end of the process, when they have already caused a lot of waste.
This is typically when the management team holds meetings to resolve these problems, seeking to find the causes behind the macro indicator not being reached. However, they have a very difficult time carrying out this investigation and truly finding the root cause of the problem, because there are no localized standards to highlight exactly where it is manifesting itself.
At this point, Lean Thinking reveals that at various stages in the logistics operation, we lack clearly defined and understood standards in each procedure performed by our human resources and systems. Such standards should constitute the standardized work in which each activity is explained (how to do it, when to do it, how long it should take to do it). Everyone must recognize that outside these pre-defined limits, there is a problem.
Type-3 and Type-4 problems are of a different nature and handling them requires a different approach. As these problems are created rather than caused, they do not refer to the fulfillment of a standard but to its elevation. Lean offers a number of management tools for this purpose, such as hoshin kanri, used to deploy the organizational strategy by turning it into actions that people across the company can carry out. In this process, one discovers which factors and actions will lead to the desired effect.
This discovery leads to an understanding of the factors that most influence business performance and pushes the boundaries of organizational knowledge, generating ever greater leaps in performance and results. Consider this hypothetical scenario:
An organization sees the need to improve a standard: increase e-commerce sales by 50%, achieve OTIF of 98%, and NPS above 8. However, this Type-3 problem (raising the target condition) needs to be preceded by an investigation into the causes the teams need to act on to bring about the new effect. In the logistical operation, this can mean finding which actions should be designed and worked on (causes) with new local standards to achieve the intended macro result. It also means articulating the new standards and where they should be implemented.
If expanding e-commerce by 50% means, in the analysis of the expected operational effect, to reduce the takt time of the logistics operation by 50%, this can lead to causal relationships that also point to the need to change standards in the supporting areas – like invoicing, billing, order tracking, etc. New standards need to be created to support the new standard in logistics.
Now, imagine that at a later stage the company needs to deliver goods to customers across a much bigger territory, with a superior level of service and in the same way that it has done for the customers it previously served in the area around the distribution center. Surely, a traditional approach of strategically located DCs will not be enough to handle the new reality, even if they become the most efficient DCs in the world.
Here, we encounter a limit to our ability to improve the current standard in order to achieve the desired effect. Therefore, it will be necessary to find another causal factor that can lead to the effect of increased speed in delivering to different parts of the territory. It will be necessary to seek a new network design, new relationships and new communication technologies. In other words, the company will need to innovate. Several alternatives will appear and, with the use of the scientific method, the company will need to search for the one that is most likely to produce the projected performance effect.
With this approach to identify and solve different types of problems, find their specific causes and the best countermeasures according to their nature, Lean Thinking can provide logistics operations and supply chains with great benefits that allow them to discover new opportunities for performance improvement.
While lean is inspired and guided by the scientific method, its application is supported by tools that don’t cause any difficulty or uncertainty (on the contrary, they are easily understood at all organizational levels), as evidenced by countless practical cases around the world.
Alvair Silveira Torres Júnior is Head of Supply Chain and Logistics at Lean Institute Brasil.