Lockheed martin production system. Lean Six Sigma: Combining proven methodologies to achieve strategic advantage. Preparation and Deployment

Ozhiganov Edward Nikolaevich, Doctor of Philosophy, Professor, Head of the Department of Foreign Economic Activity of the Institute of Applied Technical and Economic Research and Expertise, Peoples' Friendship University of Russia, Moscow, Russia

As technology constantly changes, corporations in the industry are looking for new ways to improve their products to gain a competitive advantage.

A corporation can be chosen as a “model” organization for comparing the performance of different classesLockheed Martin Corp. , diversifiedwhose production includes four main sectors: 1) aeronautics, 2) space systems, 3) technological systems and 4) electronic systems. Lockheed Martin is the owner of 50 joint ventures in equal shares with Boeing Co mpany, which are part of the United Space Launch Alliance ( United Launch Alliance). 84% of Lockheed Martin's revenues are provided by orders from various departments and organizations of the US government, the largest of which are the Department of Defense (64% of revenues) and NASA (20% of revenues).

The corporation's products and services have military, civilian and commercial applications, and it serves both domestic and foreign customers. SWOT analysis of activities Lockheed Martin lists its strengths as diversified production and business operations (Fig. 2).

Figure 2. SWOT - analysis of the corporation's activities Lockheed Martin

Source: Sell ​​Report – Lockheed Martin FIN 573

Key indicators of diversified production Lockheed Martin and competing US aerospace companies by sector are presented on table 1.

Table 1

Key indicators of competitiveness LockheedMartinCompared to Leading US Aerospace Companies by Sector

Company	Sector	Gross income	Total income	Market share
LOCKHEED MARTIN	Aeronautics	31.79 %	27.5 %	35.69 %
NORTHROP GRUMMAN	General aerospace activities	41.38 %	42.8 %	25.51 %
BOEING	Precision instruments & Mobile systems	16.88 %	15.3 %	36.45 %
LOCKHEED MARTIN	Space systems	17.46 %	17.77 %	11.94 %
RAYTHEON	Missile systems	27.9 %	26.14 %	10.52 %
BOEING	Network systems	9.16 %	7.74 %	12.05 %
LOCKHEED MARTIN	Technological systems	17.93 %	12.18 %	10.55 %
BOEING	Network systems	9.16 %	7.74 %	10.36 %
RAYTHEON	Intelligence and information systems	24.84 %	15.73 %	8.05 %
NORTHROP	Information Technology	26.97 %	21.4 %	8.71 %
LOCKHEED MARTIN	Electronic systems	32.82 %	42.55 %	12.56 %
BOEING	Network systems	9.16 %	7.74 %	6.74 %
NORTHROP GRUMMAN	Electronic systems	28.11 %	35.4 %	5.91 %
RAYTHEON		26.73 %	31.34 %	5.64 %
RAYTHEON	Network systems
NORTHROP GRUMMAN	Information Technology	26.97 %	21.4 %	5.67 %
LOCKHEED MARTIN	Systems integration
BOEING	Support systems	11.23 %	12.81 %	29.64 %
RAYTHEON	Integrated Defense Systems	26.73 %	31.34 %	20.23 %

Source: CSIMarket Inc.

The production diversification strategy is based on the identification and implementation of innovative approaches to such aspects of aerospace enterprise management as 1) organizational design, 2) project management, 3) cost management, 4) human capital management and 5) the use of accurate methods for measuring performance. For vertically integrated enterprises, implementing such approaches is challenging because in practice there is no single strategy that can optimize productivity and achieve competitive cost of production.

A comparative analysis and assessment of functional, matrix and system models of organizational design of multi-industry companies in modern economic science is carried out in the context of the processes of strategic management, competitiveness and innovation management in conditions of risk and instability. The general point is expressed by the rule of "fit", according to which, for a company's strategy to be feasible and successful, there must be a match between its organizational model and its environment.

Today's dynamic and competitive environment is characterized by the interplay of increasing complexity and interdependence and creates a constant demand for organizational structures that can accommodate new and more powerful coordination mechanisms. Modern organizations must be efficient, flexible, innovative, adaptable and responsive to change. They should focus on increasing existing resources and reducing costs as a complementary strategy to meet resource demands. Such organizational goals require significant systemic efforts and the implementation of numerous organizational interventions, differentiation and integration of activities and are recognized by foreign analysts as one of the most important priorities of organizational design.

Depending on the stage of development of the corporation - formation, development, stabilization or crisis situation - different approaches are required to build its organizational structure, while monitoring changes in the organizational structure at the stage of active growth and development of the corporation and in the process of transition from one stage is considered especially important to another,

The most effective organizational structure is determined by the corporation's global strategy, the characteristics of its activities in global markets compared to domestic operations, and the characteristics of the markets in which the corporation competes. Eg, Lockheed Martin Corp. is represented in international markets by 11 subsidiaries, including Lockheed Martin Global, Beontra, Lockheed Martin Australia, Lockheed Martin Canada and Lockheed Martin UK, in which it competes with 511 companies such as Thales, Airbus Group and etc.

Accordingly, a diversification strategy requires organizational structures that can provide both the business functions usual for foreign economic activity (finance, marketing, R&D, production, etc.) and the functions necessary to achieve success in the domestic market. The main categories or units of construction of their structures - the international department, the global product division, the global area and the matrix principle - can be used as the basis for their typology. Each of these types has its own strengths and weaknesses. In practice, certain properties of these four types can be used simultaneously, in fact forming a fifth - hybrid - type, since in large corporations, which must ensure some autonomy of their production units, leaving the development strategy, research, financial and investment policies and etc., it is necessary to combine centralized coordination and decentralized control.

There are two dimensions of organizational design - structural, which shows how companies are differentiated into specialized, autonomous units, and process, which shows the flow of information and resources, integrating and coordinating their activities into a single whole. As a result of focusing on the process dimension, traditional functional barriers disappear, and the activities of companies become more comprehensive, which allows saving time, resources, money, order fulfillment, etc.

Many attempts to implement matrix models fall short, but while a number of companies have failed despite their carefully designed strategies, many leaders in critical industry segments dominate global markets using this model (IBM, Toyota, General Dynamics, Lockheed Martin Corp., Boeing Company, etc.). It is obvious that any organizational innovations associated with a change in the organizational design model will be superimposed on the management, production and social relations that have developed over a relatively long period of time.

The diversification strategy should provide a flexible approach to estimating the costs and value of diversified products, which should draw on the aerospace enterprise's existing internal project management experience, relevant product specification and procurement market knowledge. This approach can be integrated into a general methodology that assimilates any relevant information and relevant knowledge.

Leading companies create value and gain competitive advantage through supply markets by focusing on four key areas: 1) innovation and growth; 2) optimization of value chains (supply chains); 3) advanced cost management methods; 4) risk management and continuity of supply. It is clear that the improved importance of supply chains has made procurement a strategic function and cost management and pricing a critical job for space companies.

It is clear that the increased importance of supply chains has made cost management and estimates a strategic function for aerospace companies, and the increased focus on cost management is critical to operational control and sustainable improvement of the function, providing a measurable basis against which related operations can be assessed.

According to NASA experts, cost estimates for the development and implementation of projects remain a mixture of experience (or intuition) and science (computer models, statistics, analysis). Directory NASA according to cost assessment, it divides all methods into parametric and analogue, while having an impressive list of regulatory documents and research papers on their application. Each of these methods has its own advantages and limitations.

The “traditional” planning process, used, for example, to evaluate long-term investment projects, implements methods for calculating indicators such as rate of return, net present value, profitability index, and others, where for each investment project the numerical value of a certain indicator is calculated. Other processes, for example, the purchase of materials and components, are calculated similarly.

The main disadvantages of these methods are as follows:

- comparing projects using only one numerical indicator unnecessarily simplifies the situation;

- the dynamics of each project over time is not clear, since development scenarios along the time axis are not determined, although noticeably different scenarios may have almost identical indicators;

- analysis of the sensitivity of factors to changes is difficult, since the volatility of each of the calculated indicators is not taken into account (it is known that even minor changes in some data or assumptions can lead to completely different calculated values ​​of the indicators and, accordingly, to different investment decisions);

- both negative and positive external factors and their changes (fluctuations in the value of natural resources, the impact of economic sanctions, geopolitical situation, etc.) cannot be included in these methods, although it is obvious that they must be taken into account.

In "traditional" approaches using regression methods, the analysis of cause-and-effect relationships between factors in comparative periods is not taken into account, both in planning and in determining how they affect various elements of the plan.

These shortcomings are filled by system dynamic modeling, which allows you to build scenarios, create models of competitive processes, identify strategies and levers for managing change, experiment with future scenarios, and on this basis formulate the best diversification strategies. In this case, it is possible to optimize models and analyze risks to find solutions for a number of variable values.

On Figure 3 A graphical diagram of the project management model is presented in the context of budget adjustments, changes in work schedules and expected project completion. The advantage of this model is the ability to identify and analyze changes caused by the systemic interdependencies of all model variables, and to draw qualitative conclusions about the best strategies under given conditions.

Figure 3.Project management

in conditions of significant changes in their implementation

The industrial revolution is bearing fruit: swords turn into guns, people switch from horses to cars, robots begin to work in factories, and we are gradually coming into the era of high-tech business. The development of the Internet of Things has made it possible to modernize many factories, add automation and deep production control. Ecology and efficiency, speed and millions of responsive sensors - these are the priorities of modern owners of large factories. We will tell you about them. Here are ten of the most advanced plants and factories in the world.

In 2015, Sheffield opened as “one of the most advanced factories in the world,” as project leaders described it. The Advanced Manufacturing Research Center has teamed up with Boeing to unveil Factory 2050: a transformable glass-walled factory at the center of the new advanced campus at Sheffield Business Park at the University of Sheffield. AMRC Executive Dean, Professor Keith Ridgway, said Factory 2050 would be the world's most advanced factory.

It will be home to the Integrated Manufacturing Group and will utilize advanced assembly and manufacturing technologies, advanced robots, flexible automation, next-generation human-machine interfaces, and new programming and training tools.

The main SpaceX factory, which also houses the company's offices, covers an area of ​​50,000 square meters. in a three-story building originally built by Northtop to assemble 747 fuselages. The plant now houses avionics, missile, capsule, and quality control areas, as well as a glass-walled control center that monitors and controls the Dragon capsule in flight. . Dragon is the first private spacecraft to orbit the Earth and return safe and sound. In one of the world's most advanced facilities, SpaceX tests various elements of its Falcon 9 rockets, Dragon capsules and Merlin engines.

SpaceX's headquarters, in the Los Angeles suburb of Hawthorne, where the company assembles its rockets, is located in a place with a high concentration of aerospace manufacturers: Boeing, Raytheon, NASA, Lockheed Martin, BAE Systems, Northrop Grumann, AECOM and others also operate here . Most notably, SpaceX uses vertical integration and builds virtually all rocket components and software at its Hawthorne facility.

Tesla

The Tesla plant is one of the most high-tech in the world. The Tesla factory in Fremont, California, has almost 500,000 sq. m. are dedicated to production and offices. Everywhere you look there are robots that synchronously process cars and produce about 100,000 cars a year. Tesla owner Elon Musk doesn’t particularly like to talk about what’s going on behind the closed doors of the factory, but as time goes on, the world is gradually learning about its insides.

Particularly surprising is the efficiency and sterile conditions in which Tesla operates. It is in these concentrated and high-tech conditions that an autopilot based on artificial intelligence is being developed, which will independently control the company's electric vehicles.

Siemens plant in Germany

Modeling, 3D printing, lightweight robots are just a few of the innovative technologies that are pushing the fourth industrial revolution - Industry 4.0. And they are already working at a plant that assembles Siemens electronics in Erlangen, Germany. One of the main reasons for the success of this plant is that people and machines work hand in hand.

Manfred Kirchberger, plant manager, says its efficiency is unique: “We produce industrial drives and controllers for production equipment. At our customer's factories, the numbers often exceed millions. It would be too expensive to produce all this equipment manually. In addition, customer requirements are changing faster than ever, so production lines must be flexible.”

Constant and rapid adaptation is only possible if the workforce is willing to embrace change coupled with modern technology.

United Launch Alliance

You don't need to be an engineer to understand how important rockets are to us. There are currently more than a thousand satellites operating around the Earth, providing us with navigation, communications, security and scientific research. United Launch Alliance, a joint venture between Boeing and Lockheed, builds rockets that launch satellites into orbit. And it does this efficiently and inexpensively, thanks to competent management of enterprise resources.

The Alliance supports program management, engineering, testing and mission control from its headquarters in Centennial, Colorado. Assembly, installation and production take place in Decatur and Harlingen. Obviously, to ensure high-quality and high-tech operation of assembly lines, ULA not only uses advanced technology, but also an ERP system.

Lockheed Martin plant at Plant 4 Air Force Base in Fort Worth

No list of the world's coolest factories would be complete without Plant 4. Dozens of next-gen fighters are scattered throughout the facility in various stages of assembly. The latest weapons and high-tech aerospace designs are reminiscent of World War II. The plant currently produces the F-35, the world's most advanced fighter jet. The plant is self-sufficient and carries out assembly and installation almost independently.

Boeing manufacturing facility in Everett, Washington

Everyone knows that Boeing produces the largest, most reliable and most famous passenger airliners in the world. Their assembly site is a labyrinth of moving parts and workers, in the center of which is erected the massive frame of one aircraft, the famous Boeing.

During World War II, B-17s were assembled at this plant. From 2005-2009, the Everett facility began the Future Factory Project to create a new, enjoyable work area in the main plant building. The goal was to encourage cooperation among people, improve the quality of employee work and overall production efficiency. Approximately 4,000 people moved into the 55,700 sq. m. of updated space in five office buildings. In fact, the Everett plant is the main representative of Boeing in our world.

Intel Fab32 Semiconductor Manufacturing Plant

100,000 sq. m. area and a thousand employees on one floor - this is the Intel Fab32 plant in Arizona and at the same time the headquarters of the technology giant. The main floor contains 17,000 sq. m of clean rooms in which tens of millions of energy-efficient processors are created.

The most distinctive feature of the plant is not striking. It is rated a "class 10 clean" indoor environment, which means there are ten or fewer particles 0.5 microns in size or smaller per cubic foot of air (approximately 28 liters). The thickness of a human hair is approximately 80 microns. For comparison, hospital operating rooms are allowed to have a cleanliness class of 10,000: the air in the Fab32 room is a thousand times cleaner than the air in the operating room. The air outside is class 3 million.

McLaren Technology Center in Waukeen, UK

In general, this plant itself is beautiful: it is located on the shore of a lake and resembles a long letter S. The height of the plant was deliberately limited to reduce the visual impact of this structure on the environment: a person passing by will see trees towering above the top of the building.

The McLaren Group has one goal: victory. And any Formula 1 fan knows that the McLaren team has not only held a fine share of checkered flags over the past four decades, but also benefited from their company's technological advances. Such a company simply must have a cool plant.

eBay

The last item on our list is not exactly a plant. And in general, the word “factory” itself has recently lost its ancient meaning - a noisy, oil-smelling facility where powerful, heavy, steel pieces are assembled. eBay is working in a slightly different area: trying to understand the buying and selling of the millions of items that flow through its networks every day. It's one of the largest online retailers in the world, and it needs a fast, efficient way to comb through 50 petabytes of data to separate the wheat from the chaff and highlight real market signals from the noise.

Successful analysis of tens of thousands of variables and millions of transactions every day requires the use of the latest equipment and the most high-tech approaches. While in the past eBay used Excel charts to categorize trends and then communicated them to teams via email, today there is no need for such complex chains: the ERP system does everything. Along with the development of the Internet of Things, the very existence of such objects has become possible.

Of course, there are many more amazing plants, factories and production facilities in our world. But it was impossible to fit them all into a list of ten, so if we undeservedly forgot someone, write in the comments.

The American aircraft manufacturing company Lockheed Martin, which has been developing developments to tame thermonuclear fusion for decades, recently published sensational information about its achievements in this field. According to information provided by scientists from Lockheed Martin, they are ready to create a compact version of a 100 MW thermonuclear reactor, an experimental image of which can be demonstrated to the world community within a year. In addition, in just 10 years, this thermonuclear reactor with dimensions of 2x3 meters should become a real, commercially successful project.

It is understood that with this kind of energy source, the world community will almost completely lose its current dependence on hydrocarbon fuels, which, against the backdrop of slowly but surely depleting oil reserves, seems a very bright and encouraging prospect. And given the compact size of the installation, it will not be difficult to equip cargo ships and trains, as well as airplanes, ground military and even civilian equipment with a Lockheed Martin thermonuclear reactor.

In addition to Lockheed Martin, research into thermonuclear fusion and work in the same direction is carried out within the framework of the international project International Thermonuclear Experimental Reactor (ITER). However, the results of their activities are still far from the successes announced by the representative of the aircraft manufacturing company, the veracity of the information about which is very much in doubt and causes a lot of controversy.

Thus, the head of the Russian ITER agency, Anatoly Krasilnikov, publicly stated that the scientific breakthrough announced by Lockheed Martin is in fact empty words and has nothing to do with reality. And the fact that the Americans are supposedly ready to begin creating a prototype reactor with the stated dimensions seems to Mr. Krasilnikov to be ordinary PR. In his opinion, modern science is not yet ready to design a fully functioning safe thermonuclear reactor of such a small size in the next few years.

As arguments, Krasilnikov noted that honored nuclear physicists from China, South Korea, India, the USA, Japan, Russia and the European Union are working on the international ITER project, but even the best minds of our time gathered together hope to receive only the first plasma from ITER, at best, by 2023. At the same time, there is no talk of any compactness of the prototype.

Implementation of the joint ITER project

Of course, the possibility of creating a small-sized installation in the future will become obvious, but not in the next few years, despite Lockheed Martin’s statement that it will show a real model within a year. And, of course, not under the condition that they work on a project of this level in isolation from the rest, as, according to them, American engineers were able to do, even in such a large company that has all the necessary resources. Therefore, Anatoly Krasilnikov is sure that Lockheed Martin’s promises to demonstrate a prototype will remain promises.

Leading engineers have been working on the creation of a thermonuclear reactor for decades, and this process is necessarily accompanied by the exchange of experience, and promising developments become an open property for other specialists. The breakthrough of scientists, the details of which no one knows, seems greatly exaggerated and pursues non-scientific goals.

Tokamak reactor - a toroidal installation for magnetic plasma confinement

In turn, President of the Kurchatov Institute Research Institute Evgeny Velikhov commented on this news as “Lockheed Martin’s fantasy.” Velikhov himself is not aware of any successes supported by real facts in the creation of a compact thermonuclear reactor by specialists from an American company. Actually, as noted above, no one in the world is informed about the invention except Lockheed Martin itself. And she only loudly announced her intentions, but did not disclose any technical details of the project. The reason for this is the banal absence of those very real achievements and truly revolutionary and sensational developments that are currently being discussed in the media.

Michael George Chapter from the book “Lean + Six Sigma in the Service Industry. How Lean Speed ​​and Six Sigma Quality Help Improve Business"
Publishing house "Mann, Ivanov and Ferber"

Rice. 2. Normal distribution The limits of the normal distribution are 6 a

The indicators used in the Six Sigma concept allow you to compare the distribution of actual results with a range of acceptable values ​​(customer requirements). A defect is any value that does not meet the customer's requirements. The greater the area under the distribution curve that falls within the range of customer requirements, the higher the sigma level. To compare different processes, the concept of “percentage” of defects (or “defects per million opportunities”) is used instead of the number of defects.

The Six Sigma level is a process that produces 3.4 defects per million opportunities, taking into account expected variances.

Here's one example: Any company that planned to build in Fort Wayne soon found out that doing business in this city was problematic, to put it mildly. Among other things, simply obtaining the necessary permits often took almost two months (an average of 51 days). A team of city staff conducted benchmarking and identified gaps that were preventing Fort Wayne from competing with other cities that had resolved a similar issue in less than a month.

The team tasked with improving the permitting process soon identified the most critical steps, eliminated unnecessary steps, and developed standardized procedures with clear guidelines. With the new process in place, 95% of permits were issued in less than 10 days. Many customers - businesses that were previously reluctant to build in Fort Wayne - immediately noticed this improvement.

The ABCs of Lean Manufacturing

Every discipline has its own language, and lean manufacturing is no exception. There are a number of terms that you will need to understand lean manufacturing and explore its capabilities (all of which you will encounter in this book).

Lead time and process speed

Lead time measures how long it takes to deliver a product or service from the time an order is received. A simple formula known as Little’s Law (named after the mathematician who proved it) helps to understand the factors influencing order fulfillment time:

This equation allows us to determine how long it will take to complete a unit of work (lead time) by knowing the amount of unfinished work (work in progress) and the amount of work we can complete per day, week, etc. (productivity).

Little's Law means much more than it might seem at first glance. Most of us have no idea about productivity, let alone the level of deviation. The very thought of having to track every step of the order fulfillment process - especially if the process takes several days or weeks - makes us despondent. (Think about the Fort Wayne permitting process and imagine what it's like to track a process that takes 51 days.) Given the values ​​of the two variables in this equation, we can determine the third. In other words, if you know your work in progress and productivity, you can determine the lead time. If you know the lead time and productivity, you can estimate the amount of work in process in the process.

Unfinished production

Sometimes those involved in the provision of services avoid the term “work in process”, since this term is traditionally associated with the production line. However, the concept itself is applicable to almost any process. If you feel the need to transform this lean manufacturing terminology to apply to your business, try thinking of work-in-process as “objects” in a process. These "objects" could be customer requests, receipts that need to be processed, phone calls that need to be answered, reports that need to be completed, etc. - any work that needs to be completed. The term "work in progress" is used almost everywhere in this book. When faced with it, think about your own work and how many unfinished tasks are lying on your desk, waiting in the wings on your computer or on your answering machine. All this is work in progress.

The goal of lean manufacturing is to ensure that you have enough resources and work gets done at the right pace according to the customer's needs. More importantly, through a standardized process, lean manufacturing allows you to quickly respond to customer signals, which means that it makes the process predictable, controllable and stable.
Jim Kaminsky, Assistant Vice President, Bank One

Delays/waiting times

Work in progress means there is work waiting to be done. In lean manufacturing parlance, this work is “queued”; and the time during which it is not attended to is called "waiting time." Queue time, regardless of length or reason, constitutes delay.

Value-adding and non-value-adding work

When you start tracking the flow of work, it becomes clear that some activities add value from the customer's perspective (and are called value-adding work for this reason). To test whether a given job adds value, ask yourself whether your client would be willing to pay for it if they knew it was included in the overall price of the product. If, in all likelihood, he refuses to pay for it or prefers to do business with a supplier who does not have such costs, this is non-value-added work.

Process efficiency

For any service delivery process, a very important indicator is the proportion of total cycle time that is spent on value-adding activities. This indicator simultaneously shows the share of losses and is called process cycle efficiency. It represents the ratio of value added time to total order lead time:

Process Efficiency = Customer Value Added Time / Total Order Lead Time.

If the process efficiency is below 10%, then the process is loaded with non-value-creating waste and can be improved.

Losses

As we just showed, waste includes everything that does not add value from the customer's point of view: time, cost, work. There is a certain amount of loss in all organizations, since there are weaknesses everywhere. These are the ones that should be eliminated during optimization. The volume of losses in any activity is proportional to the duration of delays in the progress of work. Lean teaches us to recognize and eliminate waste rather than mindlessly follow the beaten path. In lean manufacturing practice, there are seven types of waste.

Key Lessons from Lean Manufacturing

The above allows us to draw several seemingly very simple, but extremely important conclusions, indicating that with the help of lean manufacturing we can quickly achieve improvements. These are the conclusions that will be discussed in more detail below.

1. Most processes are not “lean” and have a process efficiency rate of less than 10%.
2. Reducing work in process (WIP) is paramount (unless you can't control WIP, you can't control lead times).
3. Every process should operate on a pull system rather than a push system to eliminate lead time variance.
4. About 20% of work causes 80% of all delays.
5. You can't improve what you can't see: you need to visualize the process based on data.

Lesson #1. Most processes are not "lean"

I think you won't be surprised to learn that in lean service processes, the bulk of the work—50% or more—is in non-value-adding activities. This can be visualized on a process map using colors or other techniques to visually distinguish value-adding work from non-value-adding work. So, fig. Figure 3 shows the initial portion of a basic block diagram compiled by the Lockheed Martin team. This team found that 83% of the work performed between a purchase order and product receipt did not add value (that is, wastage). These include correcting errors, requesting price quotes from wholesalers (although prices can be negotiated in advance), obtaining revised drawings, and other actions caused by delays in earlier stages of the process.

Can speed come at the expense of quality?

We've all been in situations where the pressure to "go faster" has created quality problems and slowed down processes as a result. Therefore, it is quite reasonable to be concerned: will a lean approach aimed at speeding up the process cause damage to quality? This doesn't happen. Why? Because the application of lean manufacturing reduces time by eliminating non-value-adding activities, eliminating queues, reducing the time between value-creating activities, etc. The most important stages of the process that provide value to the customer are generally left untouched by the lean manufacturing method. Applying Six Sigma tools to value-adding activities reduces defects, which in turn speeds up value-adding steps.

However, since these stages typically account for less than 10% of the total order lead time, increasing the speed of value-adding processes has little impact on the speed of the overall process. Impact only increases measurably when non-value-adding activities are eliminated.

Rice. 3. Simple flowchart (visually showing value-adding and non-value-adding activities)

The Lockheed Martin Supply Center team discovered that most of the work from the time a purchase order was placed to the materials received was waste (non-value added). Measures were taken to compensate for errors, omissions and delays at earlier stages of the process, as well as measures to reduce the huge variety of heterogeneous tasks (complexity). Detailed development of the value stream (representing 248 stages in the necessary detail) and subsequent reduction of complexity through standardization eliminated most of the waste. The results of these improvements allowed the company to cut supply costs in half.

Lesson #2. The primary task is to reduce work in progress

Let's go back to Little's Law again.

Lead time = Work in progress / Productivity.

This equality is not just a theoretical construct; it has many practical consequences. First of all, it shows that there are two ways to reduce lead time - either by reducing work in process or by increasing productivity. In any operation that does not involve direct customer contact—that is, where work in process consists of orders, emails, or reports rather than people—it is much easier to control work in process than to improve productivity. In fact, you can speed up any process - reduce time spent - simply by reducing work in progress and doing nothing to improve productivity.

This finding explains how lean manufacturing principles can quickly achieve positive results. It is only necessary to limit as much as possible the volume of work received for processing per unit of time. The following describes what to do if work in progress is “people” and the optimal way to maintain order lead time is to connect additional capacity to increase productivity.

Why should we prioritize work in progress? To reduce its volume, only intellectual capital is needed. Increasing productivity requires investment or an increase in the payroll, both of which negatively impact the return on capital invested and therefore shareholder value. Little's Law provides the mathematical basis that allows us to apply lean manufacturing methods to any process.

Lesson #3. "How do we reduce this damn work in progress?" (Creating a "pull" system)

Take a look around your workspace. Is your email inbox full of unread messages? Do you have a long list of emails that will take several days to review? Is your answering machine refusing to accept new messages? Is anyone waiting for the results of your work?

These are all different forms of work in progress, work that someone else - a colleague or a client - expects from you. As a convert to lean manufacturing, you know that to reduce cycle times and waste, you must reduce work in progress. You know that work in progress is like cars on a freeway: if there are more cars, the speed of traffic on a congested road will decrease! But how to do that?

Naturally, you cannot limit the amount of work-in-process in processes directly related to the customer, when the work-in-process is customers waiting for service or wanting to purchase a product (in such situations, there are other ways to maintain or reduce lead time).

For any job where you don't have a client in front of you, Little's Law provides the key to reducing work in progress. In lean service delivery processes, there is a stage that precedes the process as such, a stage at which the “accumulation” of input factors (work requests, orders, calls, etc.) occurs. Someone then controls the input of these “factors” into the process.

Consider the following example. Independent distributors needed quote information from the marketing department to determine construction cost estimates. They were unhappy that it took the marketing department two to three weeks to provide this information. The period that suited them was three days.

The task force spent several weeks collecting data that showed that marketing staff could process an average of 20 proposals per day. Distributors wanted a guaranteed 3-day turnaround; The data obtained indicated that process deviation required achieving the more stringent target of 2.4 days.

How much work in progress was allowed in this process? By using Little's Law and plugging in 20 (productivity) and 2.4 (lead time), the team found a maximum work in process of 48 proposals, the number of proposals "in progress" at any given time.

Lead time = 2.4 days = (WIP = 48 proposals) / (Productivity = 20 proposals/day).

To manage such a system, they created a stand to visually display information about the number of proposals being processed. The maximum allowable amount of work in progress was 48 applications, so until their number dropped to 47, the department employee could not begin processing new applications, as shown in Fig. 4.

The secret that makes this system work is in the lower left corner of Fig. 4, which shows a drive labeled “input”. (Depending on the nature of your work, this repository may be a physical receptacle or an electronic database.) Applications do not formally enter the process while they are in the raw material repository. The only signal for submitting work to the input of the process is the output of a unit of product from the process - this is the “pull” system. The guaranteed period for providing the service is about two and a half days, counted from the moment the application is received into the process. In other words, the pull system in the service industry means making deliberate decisions about when to put work into the process. However, how such decisions are made is very important: value must not be lost sight of. In this case, it is a question of which application is entered into the process when the processing of the other application is completed. Processing bids on a first-come, first-served basis is unlikely to be appropriate here, since some bids promise promising large-value orders, while others involve small orders, contain questionable quotes, or are likely to be rejected.

Rice. 4. Pull system for commercial offers for sale

The issue of processing order can be resolved by determining the priority of proposals depending on their prospects. Each application is characterized by the following three parameters, each of which is assessed using a three-point system:

• complexity of calculation;
• competitive advantage;
• gross profit in dollars.

The scores for each criterion for each proposal are multiplied. Proposals with the highest ratings are submitted for processing first, even if other applications have a longer wait time. (A new application with a rating of 9 is entered into the process faster than an application with a rating of 6 previously submitted). Using such a system, the marketing department staff, with the same number of employees, was able to ensure an increase in gross income by 70% and increase gross profit by 80%. (Of course, the company could increase productivity by increasing the size of its marketing department and incurring enormous costs.)

How to create your own pull system?

How to make such a system work for you? Below is an approximate sequence of actions.

1. Determine/validate the desired level of service. Ask the client what level of service is desired for him.
2. Determine how quickly your work team can complete work (based on data).
3. Use Little's Law to determine the maximum allowable amount of work in process.
4. Limit the amount of work in progress to the resulting maximum value.
5. Place all incoming work in the input hopper.
6. Develop a prioritization system for the order in which work is entered into the process from the drive.
7. Continue to make further process improvements that will allow you to increase the speed of work completion and achieve further reductions in lead times.

The positive impact of Lean Six Sigma on these types of situations is two-fold: First, in service delivery, decisions are made in a way that has never been the case before, based on data (demand variances, work-in-process, and productivity). Secondly, it uses tools of speed and quality, which are adopted by those who are willing to spend time and effort to get the job done.

Carefully! Don't treat your customer like inventory or raw materials!

The “pull” system described above works when documents, emails, phone calls, etc. are submitted as input. But in the face-to-face customer experience, you must maintain response times and service performance at an acceptable level so that no matter what happens. When the work-in-process is customers, you cannot create inventory from them, just as you cannot increase the waiting time for a service, and therefore the order fulfillment time. Little's Law says that the only option in this case is to increase productivity.

One of the challenges of direct-to-customer operations is high demand variance, with busy periods alternating with periods of slow business activity.

If the dynamics of this rotation are predictable, productivity can be increased by changing the number of service personnel accordingly: additional workers can be brought in during peak hours, as is done in call centers. If demand variances are unpredictable, you should apply queuing theory, which allows you to calculate how various factors, such as supply or demand variances, affect work in progress (and therefore lead time). For example, fig. Figure 3.11 from Lean Six Sigma: Combining Six Sigma Quality with Lean Speed, which is reproduced in Figure 3.11. Figure 5 shows that if you have a capacity slack of 20%, variation in demand has virtually no effect on customer wait time.

Rice. 5. The negative impact of deviation is greatest when operating at the performance limit.

Spare capacity can be provided by drawing in personnel from other departments who are trained in related skills, or by using a priority system (as in the “pull” system described above) in which more complex services are assigned to more experienced employees.

Lesson #4. Process efficiency allows you to quantify your capabilities

Typically, the efficiency of processes in the service sector is about 5% (Table 1), that is, 95% of working time is spent waiting. Terrible? Still would. It's not just a matter of delays. The old saying is true: the longer a job is left unfinished, the more it costs. In lean processes, value addition time accounts for more than 20% of total cycle time.

Table 1. Process efficiency

Don't be surprised if you find that your organization's process efficiency is below 5%. Don't be discouraged. Experience shows that by applying the basic tools of Lean Six Sigma, you will quickly begin to reap the benefits and be able to reduce costs by at least 20%.

Process efficiency can be visualized by separating value-added time from non-value-added time on a value creation time graph, as shown in Figure 1. 6. (This kind of visual representation helps get people excited and interested!)

Rice. 6. Time axis of value creation

The idea of ​​a value creation time map is quite simple. It is necessary to trace the process of processing any unit of production and classify the time spent into one of three categories: 1) value-added, 2) inevitable losses - they are an integral aspect of doing business (work for which the client does not want to pay, but which cannot be done without - accounting, compliance with legal and other regulations) and 3) delays/losses. Then draw a timeline and plot all three categories on it. In the Lockheed Martin procurement example, you can see that it takes four days from the time the supply center receives a requisition until the order is placed. The value-adding activity (shaded areas above the midline) shows that during those four days, the buyer spent 14 minutes processing the order. Most of the time that is depicted as empty space represents waiting time. Initially, this process had an efficiency of less than 1% (14 minutes out of 4 days, or 1920 minutes).

The time axis of value creation tracks the movement of a unit of output through a process and accounts for the time spent. Above the middle line is time that adds value from the customer's perspective; the rest is losses.

Lesson #5. 20% of work causes 80% of delays

The main goal of lean manufacturing - speed - can be achieved in one and only way: get rid of everything that slows down the process. Mapping your process and collecting data on cycle times, variances, and complexity will allow you to calculate latency at each individual process step. Experience shows that in any process with efficiency of 10% or less, 80% of the lead time is “eaten up” by less than 20% of the activities - another example of the Pareto effect in action! This 20% is called “hidden time waste,” which becomes apparent when creating value stream maps and can be represented as a value creation timeline (as in Figure 6).

Identifying hidden losses is one of the most important problems, since the priority in this case is determined by the duration of the delay. By correctly prioritizing your targets, you will have powerful leverage over your financial improvement efforts.

Lesson #6: You can't improve what you can't see.

If the opportunity to reduce costs and lead times in the service industry is so great, why not use Lean Six Sigma more often?

One of the obvious benefits of production is the ability to see and track the flow of work. You walk along a production line and see how a product is processed and how, moving from one workplace to another, raw materials or materials are transformed into the final product. This flow is always documented in the dispatch department, which records the value-adding work. In addition, you see tangible evidence of waste (products requiring rework, production waste, delays) in the form of piles of work in progress or defects.

In service delivery, much of the work remains invisible. With one keystroke, someone sends a report to another office down the hall or anywhere in the world. Someone presses a button on a phone and switches a customer from one department (such as customer service) to another (technical support).

In the service industry, it is more difficult to see more than just the flow (process). Almost as difficult is estimating the amount of work in progress. Yes, some of us can estimate its volume by looking at the pile of papers on the table or counting how many people are standing in line waiting to be served. But more often than not, “work” takes on less visible forms—for example, electronic reports or orders waiting to be processed, 20 emails to respond to, 10 clients hanging on the phone line.

But while it's difficult to make work flow visible in the service industry, understanding it and estimating work-in-process volume is a prerequisite for using lean manufacturing tools to increase speed and reduce waste. To “make the invisible visible,” you can use a variety of maps, including the value stream maps that you will see many times throughout this book (see Figure 7 for an example of such a map).

Rice. 7. Value stream map (process flow map)

In addition, Fig. 7 shows that many management processes are overly complex. For example, at one company, approval for a design change requires the signature of seven managers, and the approval form spends weeks traveling through seven incoming document trays. This service delivery process causes serious problems in the manufacturing process because it interferes with timely changes to drawings (and the products that are manufactured from those drawings). The long cycle of this decision-making process means that once quality problems are identified, rework will continue for a very long time, even after new drawings have been created that can be used to produce defect-free products.

When the company examined the processes for obtaining all seven signatures more closely, it became clear that five of the seven managers did not have the knowledge and qualifications relevant to the job. It was quite enough for these five managers to receive notification of the approval of a new document, which would not cause the slightest harm to the process. They were still sent a copy of the document because they would benefit from learning about the changes, but they were excluded from the decision-making process. Now the two remaining managers have time to study the form and resolve all issues in less than a week, after which the process can continue further.

Visual management

The abundance of visual management tools that lean manufacturing uses is due to the benefits of visually representing work in progress, costs, and employee competencies. These tools allow you to:

• identify and clearly present work priorities;
• visualize daily process performance indicators (“was the day successful or not?”);
• create favorable conditions for communication in the work area, as well as between management and staff;
• provide feedback to team members, supervisors and managers and enable all employees to contribute to continuous improvement.

Rice. 8. Tact board for registering orders

At its simplest level, visual management may involve posting process maps (showing how a process should be carried out) or a list of metrics on a notice board so that everyone in the work area can see how well or not the process is performing. Rice. Figure 8 shows a special type of visual management tool called a takt board (takt is the German word for metronome). Such boards are used to maintain the desired rhythm or pace of the process. The board reflects the desired indicators of the “rhythm of production” (taking into account client requirements and work-in-process volume limits) and indicators of the actual speed at which process participants work. The team that developed this board has determined the WIP limit and is using it to keep the number of tickets in the process at 48. Next we will talk about other visual management tools.

Examples of application of lean production tools in the service sector

Several years ago, Lockheed Martin's Systems Integration Division concentrated much of its procurement work at the Mid-Atlantic Region's Materials Acquisition Center (MAC-MAR). This center serves 14 regions with different addresses (“MAC-MAR clients”). Many of these regional sites were acquired during defense industry mergers in the 1990s and run a variety of legacy computer systems.

Each supplier of the center is responsible for the supply of a certain list of products. Suppliers connect to the computer system of the corresponding site, process purchase requirements and only then move on to work with another site. This connection and disconnection presented a problem. Because different sites used different computer systems, it took an average supplier 20 minutes to switch from one customer to another. In lean manufacturing language, this situation is called long changeover times. However, at that time - before the advent of the LM21 program - no one in the supply chain was trained in lean manufacturing, and therefore did not call or perceive this activity as changeover time and did not think about how this affects the process as a whole.

It wasn't just the long physical switching times from one computer system to another that hampered MAC-MAR's suppliers. There was also a “learning curve” that was also a problem: the lack of uniformity in systems meant that suppliers had to constantly switch from one instruction to another, trying to remember 14 different designations for one part, etc. d.

How would you act in such a situation? The suppliers worked like this: first they processed all requests from one site and only then moved on to the next. On average, it took them a full day to process one customer's requests before they could move on to the next area. If productivity was considered as the number of orders placed per hour, it was quite high, but if we take into account the priority of these orders, the suppliers placed orders incorrectly most of the time. And when there is an excess of work in process in the system, you can be sure that Little's Law will lead to a very long lead time.

Rice. Figure 9 shows how orders were processed before the process improvements. Having connected to one of the sites, suppliers tried to process all requests coming from there - both urgent ones and those that could wait.

Rice. 9. Fragment of the program interface that was used before

Due to non-standard computer systems, Lockheed Martin supply center employees were unable to work in multiple areas at the same time. It took them 20 minutes to switch to the next section. It is quite understandable that, having connected to one of the sites, they sought to immediately process all orders before moving on to the next client.

Features of the lean manufacturing philosophy

The lean process is characterized by:

• process efficiency more than 20%;
• a fixed limit on the volume of work in progress, allowing you to control the speed;
• using a “pull” system, in which new work enters processing only when the corresponding output work is transferred to the next operation;
• Using visual displays of information to manage and monitor a process (for example, showing the status of various products or services in a process or listing additional ideas for reducing lead times).

The problem was that this process completely ignored the timing required by other customers: an urgent order for section D had to wait until the supplier processed all the orders for sections A, B and C. As a result, the supplier took 14 or more days of so-called time turnover time for the client (customer turnover time) in order to go through the full cycle of processing applications from all clients. This led to long lead times, delays in billing for critical projects, and the need for overtime in production (Figure 10).

Rice. 10. Lack of flexibility in the procurement process

Because switching from one site to another was an extremely complex and time-consuming process for Lockheed Martin's buyers, the standard procedure was to process all orders from one site—urgent and non-urgent—before moving on to the next, as shown in Figure. 10. It is easy to calculate that when processing data from 14 sites, 14 days or more often passed before the supplier was ready to accept the next batch of orders from the site.

Moreover, the same product, such as an Intel Pentium processor, could be ordered 14 times under 14 different internal designations (each order could be 1/14 of the total quantity), increasing per-item costs and increasing overall time waiting and delivery times 14 times.

The value stream map showed that most of the delays in the procurement process as a whole were caused by the "changeover" problem, which represented the main hidden time loss. It was clear that if this problem was not solved, other improvements would be useless. These findings were confirmed by the “voice of the customer”: the most important point for customer sites was speeding up the execution of supply orders and reducing supply costs.

The MAC-MAR team mapped the process, determined the amount of work in progress at each stage, identified the longest delays, determined the complexity and realized that the solution to this problem had two components:

• a program should be developed that will be compatible with the computer systems of all areas and will be able to group orders according to types of products, displaying the consolidated data together (this will eliminate delays due to constant readjustment when connecting to different systems);
• The structure of the program should allow suppliers to sort orders by delivery time and type of product.

The result is shown in Fig. 11. Instead of information on one site, now only urgent orders from all sites are brought together here. By clicking on the appropriate product name, you can obtain information on purchase requests and view their history. Further changes included expanding the range of products that can be supplied under contracts, allowing buyers to place an order with a single keystroke (rather than having to reconfigure the system for individual orders), and many other improvements.

Rice. eleven. Interface view after transformations

At first glance, the information on the screen is almost no different from what was originally presented (Fig. 9). However, the ability to sort orders received from all sites in order of delivery priority means that it is now possible to combine information received from different sites using different programs.

Overcoming the challenges of dealing with different programs has increased the flexibility of the procurement process.

• Changeover time has been reduced from 20 minutes to almost zero.
• The batch size is now 1 order because the supplier does not have to switch from one site to another when placing orders.
• Cycle times that used to exceed 14 days are now less than 1 day (if the supplier starts at site A, he can process all rush orders and return to site A on the same day).
• Work in progress: Customers were accustomed to waiting in line for up to 14 days; the average wait was 7 days or 56 hours. Now the maximum wait time is 2 hours, and the average is 1 hour.
• Productivity has increased - instead of serving one customer in an 8-hour workday, orders from 14 customers are now processed every 2 hours (equivalent to 56 customers per day).

Who is comfortable with this kind of work - you or the client?

The MAC-MAR Working Group made other changes to the process (including expanding the list of pre-negotiated conditions). In general, all these changes made it possible to reduce supply prices by 50%, lead times decreased by 67% for consumer goods (from 6 to 2 months), thanks to on-time deliveries, enterprise productivity increased by almost 20%, and average unit costs for materials decreased by 6.4%. This example illustrates another key discovery of lean manufacturing: the speed of any process is proportional to its flexibility. Lockheed Martin's original process was very inflexible (customer turnaround time was 21 days); When the process of switching between clients was significantly simplified, suppliers were able to significantly speed up the process.

Changeover time and batch processing when providing services

Many people don’t realize that when providing services there is also changeover time. After all, if the transition from servicing one customer to servicing another takes you a certain period of time or you need time to achieve normal productivity, we are talking about changeover time. If you are postponing servicing a client (internal or external) because it is more convenient for you to continue with the work at hand, then it is more convenient to process in batches. Chapter 11 explains how to eliminate these sources of process delays.

Why can't Lean Manufacturing work without Six Sigma?

Lean manufacturing is highly effective at optimizing lead time and eliminating non-value-added costs, but there are still a number of serious issues that are not addressed by even the most advanced lean manufacturing literature. Six Sigma helps solve these problems and is why it is a necessary complement to lean manufacturing.

1. Lean does not prescribe the culture and infrastructure needed to produce sustainable results.

Much of the Lean literature does not address the infrastructure needed to successfully implement Lean projects and not only achieve speed but also maintain it. In fact, many companies that implement lean manufacturing are forced to develop a Six Sigma-like infrastructure, but instead of immediately adopting a traditional Six Sigma structure, they do so only under pressure. Companies that only apply Lean manufacturing are often unable to implement it throughout the organization and achieve sustainable results because they do not have a clear Six Sigma organizational infrastructure. Such an infrastructure ensures the involvement of senior management in the process, allows for training, strengthening the allocation of resources, etc. In its absence, the success of lean manufacturing depends only on personal initiative. I have seen successful lean manufacturing programs deteriorate when management changes. In this regard, Six Sigma is less vulnerable (though it is not completely immune to such problems): it assumes that the interests of shareholders must be protected first and foremost. Every Six Sigma book goes into detail about sustainable infrastructure, but no Lean book addresses this issue.

2. Lack of focus on critical features from a consumer perspective

Requiring the identification of process components that add value, lean manufacturing includes some elements of customer focus, but its approach is introspective. The value stream mapper makes a decision based on whether a given activity adds value or not. In contrast, Six Sigma determines when to include “voice of the customer” and “voice of supplier” in the improvement process. The most important indicator of this method is the characteristics critical to the client, the means for taking into account the “voice of the client” are provided at the “Definition” stage of the DMAIC cycle (Definition - Measurement - Analysis - Improvement - Control). In other words, Lean lacks the customer focus that permeates Six Sigma work.

In my experience, most people in the financial services industry have an interest in Six Sigma, but believe that lean methods are more appropriate in a manufacturing environment. However, after experiencing lean manufacturing firsthand, they change their attitude, seeing that these methods are faster and easier. Implementing Six Sigma tools requires a lot of effort.
Daryl Green, Senior Vice President, Bank One

3. Lean manufacturing does not recognize the impact of variances.

Lean manufacturing does not have the tools to reduce variances and provide statistical process control. Six Sigma considers the elimination of variance to be a key factor and offers a wide arsenal of tools for dealing with variance (from statistical process control to experimental design). As discussed above, 10% defects can increase lead time by 38% and increase work-in-process inventory by 53%. In other words, the speed and cost savings achieved through lean manufacturing can be negated by increased variance!

An increase in the percentage of defects is not the only source of deviations that lead to an increase in work in progress and lead time.

“Who needs lean manufacturing? I don’t have changeover time!”

Most service providers believe that there is no changeover time in their business. They associate it with dead zones during the transition from the production of one type of product to another in production. However, there is usually a learning curve involved in switching from one task to another before productivity reaches its peak, as we saw with Lockheed Martin's MAC-MAR supply center. This learning curve is shown in Fig. 12.

Rice. 12. Learning curve costs and performance

The employee remains committed to each task for 20 minutes, even though current customer demand requires that task to be completed within 5 minutes. This is similar to the situation at Lockheed Martin, where a procurement officer was tied to one customer all day and had 14 “tasks” assigned to him, corresponding to the number of sites (tasks A through N). In this case, the total order time increases fourfold. Using lean manufacturing methods can significantly reduce the learning curve.

The bottom line: Anything that reduces productivity levels will lead to longer lead times because people remain tied to similar tasks for longer than current customer demand dictates. Using lean manufacturing tools can significantly reduce lead times and minimize the impact of activity changes on productivity. One of the main sources of the learning curve is complexity, that is, the variety of tasks performed. The greater the number of different tasks, the less frequently they are repeated, the steeper the learning curve. Therefore, by reducing complexity, Lean Six Sigma addresses the learning curve problem.

Deviations in demand and time spent on operations to create products have a significant impact on order fulfillment time, while lean manufacturing does not imply a direct impact on these factors. This connection is illustrated in Fig. 13, which depicts the results of one of the stages of the above-described procurement process at Lockheed Martin.

Rice. 13. Impact of deviations on waiting time

Let's imagine that Bob spends an average of 16 minutes on a given task. However, due to variability in 68% of cases (one standard deviation), the total time could deviate from the average by 8 minutes, in which case the deviation factor would be 8/16 = 50%. Now suppose that Bob's employment has a similar deviation. As you can tell from the figure, if Bob is at 90% of his capacity, the job he is doing will wait in line for an average of 60 minutes, which explains about half of the time in line. If Bob encounters a particularly difficult problem, this time could increase to 100 minutes.

The deviation has a negligible impact on processes that operate with a large margin of throughput (left side of the graph). But most service organizations operate almost at capacity, and it is in this case that deviations have the maximum impact on the length of time a job (or consumer) waits “in line.” Processes that involve direct contact with the consumer are often subject to high demand variances because we cannot control the actions of the consumer who chooses the timing of contact at his own discretion. What is the conclusion? The higher the input deviations, the greater the capacity reserve should be provided. If the variances are small or we can control demand in some way (which is more likely in the case of internal processes), we can work with increased load without the risk of significant delays. When I first presented this analysis to Lockheed Martin, Manny Zulueta, vice president of Lockheed Martin's MAC-MAR supply center, said, “This confirms our observations!”

The impact of demand deviations on waiting times is greater the higher the percentage of existing capacity utilized by the process (as can be seen from the steep slope of the curve on the right). The more significant the deviations, the stronger the impact.

Lean Manufacturing also needs DMAIC

Most descriptions of lean manufacturing begin solving a problem at the Improve stage, bypassing the Define and Measure stages. Because the Define stage identifies the scope of the problem, and the Measure stage aims to quantify it and relate it to resources, people often bite into a portion of Lean that they cannot chew, or get lost in the shuffle. various improvements.

Why does Six Sigma need Lean Manufacturing?

There are certain gaps in Six Sigma, just like in Lean manufacturing methods. Let's take a look at what Six Sigma's shortcomings Lean Manufacturing helps fill.

The general idea is this: as the practice of many companies has shown, the use of Six Sigma can achieve a lot. But there is one difficulty. Whatever tool you choose, if it doesn't have a lean component, if you don't focus on increasing speed and reducing work-in-process, all your gains will eventually come to naught. The process will remain slow and labor-intensive, and the costs will be prohibitive. There are five reasons why Six Sigma needs Lean.

1. Identification of losses. Although process mapping is a Six Sigma tool, it does not collect the data (including changeover time, unit processing time, transportation, etc.) needed to quantify process steps and identify activities that do not add value and increase the costs of the service/product. Lean manufacturing has a powerful tool in its arsenal - a value stream map, which overcomes barriers between functional departments and allows you to identify waste and delays. Six Sigma rarely looks at different activities from a value-adding perspective and does little to eliminate non-value-adding activities. First of all, the Six Sigma protocol prescribes the elimination of deviations, and only if this is not possible, design according to the Six Sigma criterion (DFSS) is carried out. Lean manufacturing is based on the premise that process redesign (to eliminate non-value-adding activities) is necessary to some degree in all cases below 10%.

2. Increasing process speed and cycle time. Optimizing cycle time and responsiveness is often considered an outcome of Six Sigma. However, Six Sigma experts do not link quality and speed, either practically or theoretically, nor do they set a limit on the amount of work in process required in a pull system (this operation is needed to make lead time a controllable parameter with limited variance). The volume of work in progress is the most important factor in cycle time (according to Little's law). If you don't limit work in process to a maximum limit, cycle time reduction will remain a dream.

Losing a client

One of the most significant losses that lean manufacturing does not take into account is the loss of a customer. You are missing out on customer-related revenue, and the cost of acquiring a new customer is typically significantly higher than selling the same amount of services or products to an existing customer. In fact, all the losses that lean manufacturing explicitly identifies are internal to the process, not external. It can be proven that eliminating these internal losses significantly reduces the likelihood of losing an external customer because you deliver services quickly, without waste, and at minimal cost. However, you can waste a lot of time and effort on providing a service that the customer doesn't want, and so Six Sigma takes a more constructive approach to incorporating the "voice of the customer" and defines customer loss as a defect.

3. Speed ​​tools. Six Sigma tools rarely include lean manufacturing tools such as total plant maintenance (TPM), time-sharing, 5S, etc. These extremely effective speed tools have been developed and refined over decades of practical application. Of course, adapting them to the service industry requires some effort, but neglecting them will not achieve maximum process productivity.

4. Methods for obtaining quick results (kaizen process, DMAIC). Lean manufacturing has a kaizen method for rapid improvement. It represents short-term, intensive projects, when a group of people with relevant knowledge, over the course of four-five days, purposefully and systematically improves a selected process or type of activity. The effectiveness of such events is extremely high; the need to quickly achieve tangible results gives a powerful impetus to creative thinking. As you will learn in this book, kaizen plays a prominent role in service delivery, although the method often requires some modification. Having an operational improvement method in your arsenal provides a great catalyst for DMAIC projects. Lean's focus on action allows for faster results.

5. Six Sigma quality is achieved much more quickly after non-value-added steps are eliminated using lean manufacturing methods. The Six Sigma Research Institute has compiled a table (Figure 14) that examines the cumulative impact of defects on actual throughput. For example, consider an invoicing process that includes 20 transactions, each of which is performed at level 4a (99.379% yield). The total real throughput will be (0.99379) 20 = 88%, which is quite typical for service delivery processes. Such a low yield creates problems with accounts receivable and necessitates the need to “knock out” money and re-process.

Rice. 14. Real Bandwidth

This table clearly shows that it is very difficult to achieve high quality in processes with a large number of operations, and, conversely, low quality has a much stronger impact on a complex process. The most effective way to achieve Six Sigma quality levels is to simultaneously improve quality and apply lean manufacturing principles to eliminate non-value-adding process steps.

Using lean manufacturing tools allows you to quickly (in a few weeks at most) eliminate non-value-adding activities, most likely at least half of them (10). Thus, instead of 20 processing stages, invoices now go through only 10. It is clear that even without additional quality improvement measures, a process involving 10 stages has a much lower probability of errors than a process with 20 stages.

The actual throughput increases to (0.99379) 10 = 94%. Higher yield will increase the return on your improvement investment, and more importantly, the speed of the process will double, allowing you to not only deliver your services to the client faster, but also increase the rate of return on quality tools by doubling their effectiveness.

By combining Lean and Six Sigma, you can not only reduce the number of activities, but also improve the quality level of the remaining activities to, say, 5a, which will increase the actual throughput to (0.99976)10 = 99.8%.

A Challenging Challenge for Six Sigma Proponents

Sometimes the question arises: is it better to start with process optimization using Six Sigma (without eliminating non-value-adding steps) or to first eliminate non-value-adding steps using Lean methods and only then start optimizing the process using Six Sigma. Some Six Sigma proponents believe that lean manufacturing techniques (such as the pull system) should be applied once the process has become controlled and optimized. However, this point of view is easily challenged: “Would using lean manufacturing and a pull system, which allow you to control speed and reduce cycle time, harm the implementation of Six Sigma?” In fact, using both Lean and Six Sigma tools together will have the most beneficial impact on a company's culture. Projects should be selected based on their impact on increasing ROIC, not on whether a set of tools is required to solve the problem - one that offers Lean manufacturing or one that uses Six Sigma.

Merging Lean and Six Sigma to Improve Services

It is known that the Lean Six Sigma method is a powerful means of implementing the strategy of top management and a tactical tool that allows managers of independent departments to achieve annual and quarterly targets. If management stays away from the Lean Six Sigma program, the company will likely have to lose out to competitors where managers have added these techniques to their arsenal.

The merging of the basic principles of lean manufacturing and Six Sigma allows us to formulate five “laws” that determine the directions of improvement work. Below are the first four (we started numbering them from 0, since this law is the basis for the rest).

0. The law of the market. Issues critical to quality from the customer's perspective are the top priority for improvement, followed by return on invested capital (ROIC) and net present value (NPV). We call this law the Zero Law because it is the foundation for the others.

1. The law of flexibility. The speed of any process is proportional to the flexibility of that process (see Figure 10).

2. Law of focusing. 80% of delays in any process are accounted for by 20% of all activities.

3. Law of speed. The speed of any process is inversely proportional to the volume of work in progress (or the number of “objects” in the work). Little's Law states that the number of objects in a process increases due to long changeover times, rework times, demand and supply variances, time and complexity of the product offered.

4. Law of complexity and costs. Typically, the complexity of a service or product offering increases non-value-added work and work-in-process by a greater amount than does low quality (low sigma) or low speed (no lean).

History of success. New Lockheed Martin traditions

Lockheed Martin was formed by the merger of Lockheed and Martin-Marietta (one of a number of mergers) in 1995, so technically the company is about seven years old. But ask the people who work here and they'll tell you the company feels even younger, because as recently as two years ago most employees were closely tied to their former organizations, and Lockheed Martin was more of a diverse group of 18 corporations than unified education.

Two years ago, the LM21 - Operational Excellence program was born, based on the Lean Six Sigma method. According to Mike Joyce, vice president of LM21, this method became a consolidating beginning for the company, which helped employees learn to work together for a common goal. Below is how they managed to achieve this.

Business idea

Lockheed Martin's success is largely determined by inventions, major scientific and technological achievements and quality of execution. This explains why so much of the improvement work is in service delivery: development, procurement, design, lifecycle support, hiring, customer invoicing, legal, etc. Supply is also a service that comes first plan, since about 50-60% of the costs of each type of product come from procurement or subcontracting.

As Joyce says, “We would never have dreamed of equipping new fighter jets with 1975-style radars, but we still found it perfectly acceptable to have 1975 business processes in our supply chain. We not only need to develop a new radar, we must thoroughly work out the process of creating this radar.”

The government awarded Lockheed Martin a contract to do what the company defines as “software engineering”—developing custom software solutions to meet a customer's specific needs. The company says: “Scientific and technological achievements and innovative solutions are part of our daily work.” It’s no wonder that 50 thousand of Lockheed Martin’s 125 thousand employees are scientists and engineers.

The issue of tradition at Lockheed Martin was a very important factor. Lockheed Martin has incorporated former divisions from a variety of companies, including General Dynamics, GE, IBM, Goodyear, Westinghouse, Loral and Ford, each with its own legacy. Combining 18 different companies meant 18 different computer systems, 18 different part numbering systems, 18 different sourcing approaches, 18 different ways of writing specifications, hiring employees, paying bills.

Moreover, each company had its own background in the struggle to improve quality: quality circles, statistical process control (SPC), continuous flow manufacturing, Six Sigma, TQM, lean manufacturing. Therefore, Lockheed Martin's improvement strategies needed to enable people to take pride in and continue their company's traditions while also ensuring teamwork worked well.

Movement towards this goal began in 1998, when Lockheed Martin management realized that the new enterprise had enormous resources of quality and craftsmanship. They rolled out a program called LM21 - Best Practices to make their accumulated knowledge and experience available throughout the company.

Mike Joyce, vice president of the LM21 program (Lockheed Martin's operational excellence program), and Manny Zulueta, vice president of the Material Acquisition Center - Mid Atlantic Region (MAC-MAR) helped us become familiar with Lockheed Martin's application of Lean Six Sigma. ), James Isaac, Director of Supply Chain Excellence, Northern Material Acquisition Center, and Miles Burke, Certified Black Belt and Supply Chain Improvement Manager.

Lockheed Martin has 125,000 employees worldwide in four core areas: aeronautics, space systems, systems integration and services technologies.

While sharing best practices was a good start, it had its drawbacks:

• What is "best"? In the current business environment, the pace of change is accelerating. By focusing on best practices, you may lose sight of waste and opportunities to improve the enterprise as a whole;
• people can become complacent. Lockheed Martin strives to ensure that every employee feels a sense of urgency to continually improve and never feels like they have achieved perfection. “Best” is a transitory concept;
• the “best practices” system was too flexible. At first, factories and other departments decided for themselves which best practices they wanted to use. "But when Lockheed Martin makes something, it has to mean something in terms of quality standards," Joyce says. - We cannot allow our departments to refuse to improve quality by saying, for example, that they are interested in advanced business development methods. Quality and speed are a must for everyone.”

The LM21 program covered all departments of the enterprise, it applied to all types of work and was aimed at increasing productivity and efficiency.
Manny Zulueta, Vice President of Material Acquisition Center

So after two years, the LM21 program's priorities shifted from a focus on best practices to superior performance, with the primary goal of delivering lean processes with Six Sigma quality.

“This covers the entire Lockheed Martin operating system,” says Joyce, “everything we do from customer billing and purchasing to product development and hiring people.” The new LM21 approach is based on Lean Six Sigma principles: all work is scrutinized, value-adding activities and waste are identified, eliminated, and remaining activities are improved. More importantly, LM21 is not perceived as something external or external to the organization's activities. “It's a strategy that helps managers achieve ambitious annual goals and establish processes that enable sustainable results over the long term,” says Joyce. “It’s everyone’s job to do their job and improve the way they do it.”

Preparation and Deployment

Integral to Lockheed Martin's LM21 program deployment are critical Six Sigma infrastructure components. Among them:

1. Undoubted and clear support from senior management and its participation in the program

Lockheed Martin CEO Vance Coffman has been vocal about his support for the LM21.

2. Senior management is trained in Lean Six Sigma concepts and their application.

Coffman and his entire executive committee completed four and a half days of training (two and a half days of classroom training and two days of hands-on training to fine-tune the process). This course included:

• Lockheed Martin's 5 Principles of Excellence (see box);
• a half-day session on “defining value from the customer's perspective,” including a roundtable with customers who gave their opinions on whether Lockheed Martin is a good deal to do business with;
• study of value streams and process flows, including simulation modeling for systems development;
• practice of structured problem solving.

Lockheed Martin's Five Principles of Excellence

Mike Joyce says it was important for Lockheed Martin to define the principles of excellence early on because they were the criteria for choosing how to do the job. These principles include elements of both Lean Manufacturing and Six Sigma.

1. Understand what is valuable from the customer's point of view. The client values ​​you not only for what you give him, but also determines whether he is comfortable doing business with you. Everyone must understand what is valuable to their client. Getting this right is the first step because it allows you to classify any work as either value-add or waste. If you make a mistake in understanding the value, then all subsequent work will be a loss!
2. Understand what “value streams” are. The manager must thoroughly know in which departments of the organization the product or service is being created. There is no room for guesswork here: you must write it down, documenting each step, and be prepared to answer questions like: “When was the last time we saw this? Where are the data from these observations?
3. Deeply understand the work flow. Engineers often talk about the "top of the requirements pyramid" - the most important need that a product or service must satisfy, and it is this need that dominates everything else. When achieving excellence, the top of the pyramid of requirements is to design systems that optimize the flow of data and the flow of molecules. If you don't optimize flow, you won't achieve optimal efficiency.
4. Prioritize cycle time and “pull.” The goal is to reduce turnaround time to an absolute minimum so that you can respond instantly to changing customer needs.
5. Strive for perfection. For Lockheed Martin, this means Six Sigma quality at Lean speed.

Leadership training has two other important aspects:

• At first, many members of Vance Coffman's team were less than enthusiastic when they learned that they would have to block out four and a half days of training in their schedule. At one meeting, Mike Joyce asked them, “How many of you have been trained in this way of thinking?” Of the 20 people, only two raised their hands (one was familiar with Six Sigma, the other with Lean Manufacturing). Joyce then said that if this team was going to lead the company's implementation of Lean Six Sigma, they had to know what it was about. After completing the training course, management representatives unanimously stated that it was the best training in their entire career. As Joyce himself said: “We did not intend to make them black belts or radically change the process in two days. But we hoped to provide an impetus that would help them take action in the right direction and support the LM21 program";
• Lockheed Martin's senior leadership team was trained in Lean Six Sigma within their departments rather than in isolation. The question arose: “Why?” As Joyce responded: “Ultimately, the LM21 program needs to involve everyone in the company. So instead of training all of you together, I want you to train together with your staff in a work environment. Let everyone see that management intends to implement this program.”

3. Management at all levels have received basic training

When the senior management team completed the training, all Lockheed Martin employees who were included in the compensation system were required to take the basic course. In this organization, this applied to everyone who held a director or higher position. This five-day lean training was organized across departments and conducted in groups of 50 until all 5,000 managers had completed it. (The program has now expanded to include clients and supplier executives, who are taught ways to achieve results quickly.)

4. Implementation began with value stream mapping

From a strategic perspective, Lockheed Martin's starting point was to map the value stream at the program level because it is at this level that cross-functional flow optimization occurs (a program is a set of processes that is used to provide a specific customer with a product or service). A value stream map reflects the current state of affairs, that is, it shows what is happening in the workplace. Value stream maps provide an opportunity to evaluate operations based on the principles of excellence: are you creating value in the customer's mind? What are your omissions? What can you do to overcome them?

5. They continue to build stable infrastructure

All employees are involved in improvement projects and undergo just-in-time training. LM21 projects rely on an internal workforce that includes Black Belts, Green Belts, sponsors and what Lockheed Martin calls Subject Matter Experts (SMEs).

• The primary responsibility for identifying and selecting projects lies with line management (e.g., department managers), who often act as project sponsors. Usually they are the owners of the process, that is, they are responsible for maintaining and improving the process.
• Subject Matter Experts are a group of 20 experienced professionals who report directly to Mike Joyce. In this sense, they are similar to Six Sigma champions in other organizations, but at Lockheed Martin they play a much more important role. These 20 professionals come from various functional areas: business operations, cash management, supply chain management, production management, development, human resources, customer relations, logistics management, software management, etc. Their main focus is Understand everything related to LM21 in a short timeframe and facilitate the rollout of the program at each site and in each functional unit. Their job is to act as process catalysts across Lockheed Martin's 36 locations and ensure that work in those locations follows corporate methodology and meets established standards.
• Lockheed Martin has set a goal of training 1% of its employees to become certified Black Belts (certified means they have completed several weeks of training, completed a number of projects, and are mentoring Green Belts). helping the sponsor and administration of LM21).
• Anyone can take the 40-hour course to become a green belt. All that is required of a Green Belt is that after training, he must lead a team working on a project that will achieve cost savings. To date, 43 of the 160 employees of the systems integration group at the Material Acquisition Center have completed such training, 32 of them have certificates.

6. Their methods are a fusion of lean manufacturing and six sigma.

The LM curriculum and improvement methods are a combination of the basic tools and principles of Lean and Six Sigma, such as the DMAIC methodology, identifying the seven types of waste (a Lean manufacturing tool), process mapping, working on cycle time reduction, etc.

7. At the first opportunity, they took on suppliers.

“Like most manufacturers, we have always placed great emphasis on controlling incoming materials to ensure they meet our specifications and engineering documents,” said Manny Zulueta, vice president of Lockheed Martin's Material Acquisition Center. “Then we did five or six programs where we worked with major suppliers to implement Lean Six Sigma in their plants to make them better suppliers... And we got the materials coming in to be almost flawless. Now, when we receive material, we just need to make sure it arrived in the right quantity, do a quick check of its condition, and then we can send it to the warehouse.”

Supplier collaborations range from Lean Six Sigma training conducted by Lockheed Martin personnel to symposiums where suppliers can share experiences.

However, the possibilities for such cooperation are not unlimited. With thousands of suppliers, Lockheed Martin cannot do this type of work with everyone. “We identified a set of criteria that allow us to determine how important a particular supplier is for us, weighed the pros and cons, and assessed them using a system of quantitative indicators,” explains Dzulueta. - We took into account the following factors: how successfully suppliers fulfill our requirements, whether they have technologies that are important to us, to what extent their work affects the quality of products, etc. We compiled a list of approximately 200 main suppliers with whom we all want to work "

“The secret to collaborating with suppliers,” says Dzulueta, “is a close relationship with the management of the supplier company. Everything works out if we manage to attract the participation of senior management, because we believe that they must be involved in transforming processes. Typically, such work with the supplier takes several months. We cannot do this without the support of senior management. If the company president, CEO or general manager is not interested in it, it will most likely end in failure.”

Lean Six Sigma experience helps advance

James Isaac is an example of how the LM21 program is being used to develop leadership. He is currently Director of Supply Chain Excellence at MAC-MAR, a position he assumed in the spring of 2002. Prior to this, he worked for two years as a “subject matter expert.” “We received very thorough training,” says Isaac. “Along with this, we received personal training in management skills, participating in successful projects and improving productivity.”

Before Isaac was appointed to his current position, he was only tangentially involved in supply chain management. “Before I became a specialist, I worked with Lockheed Martin for 18 years as a systems engineer,” he says. - It was very interesting to look at the design from the point of view of a supplier. Now I look at what is happening with the developments that I was previously involved in myself with completely different eyes.”

results

Today, the LM21 program brings together more than 5,000 projects, more than 1,000 of which are carried out in the field of business operations (management, financial management, deal closure, procurement, etc.). The initial goal was to reduce costs by $3.7 billion over four years - in reality, the savings are closer to $4 billion. As Mike Joyce noted, in an organization the size of Lockheed Martin, it is difficult to argue that all this is a result of LM21, but The attention paid to excellence is undoubtedly one of the most important factors. Other business indicators are also improving: the company has a record number of orders; liabilities have decreased significantly compared to levels at the time of the merger; The annual cash flow is in the billions. These changes, many of them in the services sector, have allowed Lockheed Martin to create a next-generation cruise missile with the same capabilities as other products, but at half the cost and one-third the cycle time. All Lean indicators at the departmental and individual project levels have improved significantly. Handoffs have been significantly reduced in many processes, resulting in shorter cycle times and greater customer satisfaction.

Similar results are visible in the non-core manufacturing activities of Lockheed Martin. Comparable acceleration and cost savings were achieved by Naval Electronics and Surveillance Systems, a group that provides products and services to combat fleets around the world, including advanced shipborne electronic warfare systems coupled with communications systems. These results also impacted Lockheed Martin's ability to secure new orders. For example, the company was recently selected as one of the prime contractors for Deepwater, the most ambitious program of the US Maritime Border Protection ever.

Billions of dollars have been allocated for this program to rebuild the Navy's infrastructure, and Lockheed Martin will lead its implementation. As the company embarks on a 20-year program, the company is making extensive use of Lean Six Sigma tools to define customer value and identify critical customer requirements, leveraging Six Sigma design and developing close relationships with new suppliers. .

Grow your business

According to Mike Joyce, it is important that management does not equate “eliminating waste” with “firing people.”

“The goal of LM21 is not to fire people once we've eliminated waste, but to improve our operations and provide people with value-adding jobs without wasting their energy,” he says. “By eliminating waste, we can offer the client a better deal, which will allow us to grow our business.”

Like any company, Lockheed Martin acknowledges that it cannot guarantee lifetime employment for employees. But work under the LM21 program expands the company's ability to obtain new large contracts. Employees who participate in LM21 training and projects gain skills that enable them to better serve customers, increasing their chances of long-term employment with the company. “The client provides us with work,” says Joyce, “so the ultimate goal for everyone is stable employment.”

Difficult tasks

Imagine how hard it is to get 125,000 people to think and work differently, and you'll appreciate the work Lockheed Martin has done. The company has set itself the task of 60% of employees (about 70 thousand people) by 2004 either completing a week-long training course to obtain a “green belt” or taking part in a week-long project. Meanwhile, the company is actively engaged in compiling value stream maps for all implemented programs (their number is 2000). Among other tasks:

• increased demands on program managers.
  Until now, most program managers have been asked to do one thing - to provide the client with what is stipulated by the contract: “Here are the costs, and here is the work schedule. Ensure timely delivery." Now they are told that this is not enough: they must not only meet cost commitments and stay on schedule, but also be concerned with improving the way they operate the program they are responsible for. "It's like changing the rules in the middle of the game," says Mike Joyce. “We want to make sure they have the knowledge and tools to keep up with the increased demands.”
• synchronization of the work of all departments of the enterprise.
  Let's say Lockheed Martin focused solely on streamlining its manufacturing operations and made them the epitome of lean manufacturing: fast, efficient, just-in-time, without unnecessary investment in inventory. However, all this work will go down the drain if planning staff continue to process orders in batches, or if supply has not corrected shortages and suppliers have not provided the required quality or improved design. These types of problems can affect any organization that does not take a systematic approach to making sure the pieces of the puzzle fit together. Keeping track of all of these points helps companies avoid the classic state of constant failures that limit the ROI of Lean Six Sigma investments;
• Convincing people that they can't do without Lean Six Sigma.
  Your attempt to bring Six Sigma, and especially Lean Manufacturing, to the service industry will likely be met with one of two responses (and Lockheed Martin is well aware of both). First: “This doesn’t suit us... This has nothing to do with software. legal services. to (fill in yourself).” Second: “You see, we already tried this. We did this ten years ago. This is of no use." To these objections, Mike Joyce responds: “Okay, let's watch your process and find out what's really going on.” He invites people to go through the entire process that a document goes through, observe what happens, and collect data on the current state of affairs. People are invariably amazed by their discoveries. and begin to realize that they have plenty of opportunities to improve quality, speed and reduce costs!

These data are valid for a normal distribution. It should be taken into account that not every process is characterized by a normal distribution. More information about statistical process control: Wheeler D., Chambers D. Statistical process control. Business optimization using Shewhart control cards. M.: Alpina Business Books, Alpina Publishers, 2009. Approx. scientific ed.

Learn more about lean manufacturing terms: Illustrated glossary of lean manufacturing/Ed. C. Marchwinski, D. Szuka. - M.: Alpina Business Books, 2005. Note. scientific ed.

More about value stream maps: M. Rother, D. Shook. Learn to see business processes. Practice of constructing value stream maps. - M.: Alpina Business Books, 2005. Note. scientific ed.

It should be borne in mind that D. Womack and D. Jones, who “formalized” Japanese “lean manufacturing” for Americans in the early 1990s, start with value for the consumer as one of the central ideas of the entire concept of lean manufacturing. Note scientific ed.

Extremely popular among the Japanese (and, primarily, at Toyota), control charts - the main tool for reducing variability - arose long before the concept of Six Sigma. Accordingly, it is difficult to agree with the author that lean manufacturing (Toyota production system) does not have such tools. In general, no improvement in quality is possible without reducing variation. Note scientific ed.

Developed based on the works of James Womack, author of such books as The Machine that Changed the World and Lean Thinking (there is a Russian translation: D. Womack, D. Jones. Lean manufacturing: How to get rid of losses and achieve prosperity for your company. - M. : Alpina Business Books, 2005). Note scientific ed.

The Lockheed Martin Board of Directors decided to issue a booklet entitled “Setting the Standard,” a corporate code of ethics and conduct in business. It emphasizes that ethical behavior requires much more than compliance with laws and regulations. Each employee received this booklet along with the following letter:
“Lockheed Martin strives to be sensitive to the diverse social and cultural contexts in which we all operate, but also strives to set standards for ethical conduct for its operations around the world. The hallmark behavior of our members should be honesty, integrity, respect, trust, responsibility and civic duty. Honesty: truthfulness in all endeavors, honesty and frankness in relationships with each other and with customers, suppliers, shareholders, society. Integrity: say what you mean, do what you promise, stand up for what’s right. Respect: Treat each other with dignity and fairness, respect the demographic diversity of our workforce and the uniqueness of each employee. Trust: Develop confidence in each other through working in teams and open, respectful communication. Responsibility: Feel free to speak up about workplace issues, including violations of laws, regulations, and company policies; If in doubt, seek clarification and assistance. Civic duty: to comply with the laws of the countries in which we do business, to serve the benefit of the communities in which we live and work.
We understand how difficult it can be to perform job responsibilities within the above framework and offer numerous support resources...
We are proud of our employees and the leading role we play in advancing the world. Thank you for your contributions to developing and maintaining an ethical work environment... and for helping to set standards."7
In international companies, the issue of moral code is complicated by the need to respect human rights. In response to the “sweat-squeeze system” used in many textile factories, a New York NGO, together with a number of influential companies, developed a set of global labor standards (child labor, low wages, hazardous working conditions). The resulting document was called “Social Responsibility 8000”, or “SA 8000”. In essence, it is intended to play the same role as the ISO 9000 quality assessment system of the International Organization for Standardization. SA 8000 is the world's first auditable social standard. It has been implemented, for example, in factories that produce clothes for fashion designer Eileen Fisher (annual turnover exceeds $100 million). In the process of “social standardization” of her company, E. Fisher prepared suppliers for certification and even paid for an audit of their enterprises. Companies such as Avon and Toys "R" Us followed suit.
Ethical structures. Ethical structures include the various systems, positions and programs through which a company seeks to encourage ethical behavior among employees. A company's ethics committee is typically a group of senior managers who are charged with monitoring employees' compliance with ethical principles and making decisions when controversial situations arise. In addition, the committee is responsible for punishing those who violate ethical rules, which is important if the organization seeks to directly influence employee behavior. For example, Motorola's ethics committee has the power to interpret and amend the basic provisions of the moral code, communicate changes to its employees, and make decisions regarding employees who violate it. In addition, many companies, such as Sears, Northup Grumman, and Columbia/HCA Healthcare, have permanent departments dedicated to maintaining company morals and ethics. Such departments are headed by a commissioner, or director of ethics, one of the company's senior leaders who ensures compliance with legal and ethical standards in the organization. He defines communication standards, oversees ethics training, resolves problems and various difficult situations, and advises managers on the ethical aspects of decisions made. Just ten years ago, such a position did not exist in principle, but during this time there have been so many ethical and legal scandals in American companies that today few people doubt the need for an ethics director. There is even an Association of Chief Ethics Officers, whose members include representatives of more than 700 companies (in 1992 there were only 12). Employees can report questionable behavior, possible fraud, losses, unfair treatment by managers and various conflict situations using a free, confidential hotline. In addition, they have the opportunity to receive personal advice from representatives of the Association.
To ensure that there are fewer such situations, and that the provisions written in the moral code exist not only in words, but also in deeds, training programs on ethics are being conducted. All Boeing employees, for example, are required to devote at least one hour of such training per year, and senior managers - five hours. At Murray Publishing, employees participate in workplace ethics workshops on a weekly basis. At these seminars, they discuss possible solutions to certain ethical dilemmas and possible actions in the event of a conflict of interest.
However, even the strongest ethics support program does not protect employees from possible mistakes. Dow Coming, whose problem with imperfect silicone implants shook up the entire business community, was the first (mid-1970s) to develop what was considered an exemplary ethics program. The program included the creation of an ethics committee, courses for employees, periodic reviews and reports of managers to the committee. What was the mistake? The program took into account only the environment as a whole, and its individual elements, such as product safety, were regulated by standard methods. In the case of Dow Coming, we were talking about the US National Council of Medicine, where research work takes a very long time. Dow Coming's problems were a wake-up call for many other industries. Having a company with an impressive ethics program is not enough. It must be present in all daily operations, encouraging employees to make morally correct decisions in any situation.
Ethics and the new workplace
Today, many leading companies understand that the results of their activities are measured not only by financial indicators. Problems of ethics and the impact of social events on the company’s economic performance are of concern to both managers and scientists; There is a lively debate surrounding this topic. The most pressing question is whether “behaving diligently” will harm a firm's bottom line—after all, ethical programs cost money. Several studies have been devoted to this problem. The results obtained by scientists are mixed, but they confirm that there is a small but positive relationship between social responsibility and financial performance. For example, the Domini Social Index, developed in 1989, shows that such firms operate as efficiently or more efficiently than “irresponsible” organizations. An analysis of the results of a Walker Research study suggests that, given equal prices and quality, two thirds of consumers express a willingness to switch to products from an ethical or socially responsible company. Although the results of these studies have not yet been properly confirmed, they demonstrate that the company's allocation of funds to solve ethical problems and develop social responsibility does not have a negative impact on financial performance. Management at leading firms recognizes that honesty and trust are essential to maintaining a successful, profitable business. For example, the Davenport Works division of the world's largest aluminum producer, Alcoa, uses its own funds to attract students to clean up trash from the Mississippi coast. Student Chad Pregracke, named Environmentalist of the Year by the Illinois Wildlife Federation, removed 12 tons of trash from the river banks, including 92 metal barrels, 153 tires, 3 refrigerators, a stove and a television. By funding the program, Alcoa enhances its reputation as a socially responsible company. In the short term, socially beneficial activities may involve additional costs, but only they can establish a trusting relationship between the company and society, which, as we know, cannot be bought for any amount of money. Ultimately, good deeds benefit the company in one way or another.
In an era of rapid development of e-business, ethical issues sometimes fade into the background: managers and ordinary employees strive to earn the maximum possible money as quickly as possible. However, the most insightful leaders

know the results that good old-fashioned honesty brings. Managers of the newly created Silicon Valley company CenterBeam, Inc. have placed integrity at the core of their corporate culture, and employees now have many stories to tell about how their company keeps its word. In accordance with one of them, one of the applicants for a job in the company received a promise from the management of a worthy place. But soon after, the company received a resume from an even more promising candidate. In another fast-growing company, the first applicant, despite promises, would have been rejected, but not at CenterBeam. Once a promise is made, it must be kept. Fulfilling a preliminary promise to one of the company's suppliers cost her several thousand dollars, but the managers kept their word. Both cases ultimately benefited CenterBeam itself and strengthened its credibility among employees, suppliers, partners and customers. We will talk about the role of trust in the activities of Internet companies in the next chapter.
Changes in working conditions raise new ethical issues. Remote access, work in virtual teams, flexible schedules - all this creates conditions for employees to abuse the freedom provided to them. The success of new ways of organizing work will depend on mutual trust. From the point of view of managers, new technologies provide the opportunity to tighten control over personnel (tracking the time an employee logs into a local network, using a computer, searching for information on the Internet). An American Management Association survey on this topic found that about 74% of large US firms record the activities and communications of their employees in the workplace in some way, and this figure almost doubled between 1997 and 2000. It is common practice for most companies to notify employees that they are being monitored, but not all follow this rule. In addition, some managers ethically believe that such total control is not only ineffective in terms of money and time, but is also fundamentally wrong, since it is an invasion of the employee’s privacy.
We have raised some difficult issues regarding modern work ethics. The processes of globalization of companies' activities only complicate them. We are confident that management’s strong support for high standards of ethics and social responsibility will benefit both the companies themselves and society as a whole.
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There appears to be no clear right (or wrong) solution to the dilemma facing pharmaceutical companies. Protecting intellectual property rights (drug patents) is their legal right, as well as a responsibility to employees, shareholders and customers. Managers who take a utilitarian approach to ethics will say that protecting patents brings the greatest good to the greatest number of people because companies develop new drugs based on the decisions they record. But equity advocates might call this approach unfair to AIDS victims in the world's poor countries. It should be noted that many pharmaceutical companies, in response to negative media coverage, are reducing prices on drugs for AIDS patients from developing countries. Merck, for example, states that it does not knowingly make any profit from supplying these drugs to developing countries. The leadership of Doctors Without Borders welcomed the decision, but noted that for many AIDS patients, the prices for essential medications are still prohibitively high. Most members of the public would like to see pharmaceutical companies take additional responsibility to ensure that AIDS drugs are available to everyone who needs them.8
Questions Dr. Martin Luther King said: “As long as there are poor people in the world, I cannot be rich... As long as people are sick, I cannot be healthy... I can never become what I want until you become the way you want." Discuss this quote in the context of this chapter. Does it apply to corporations? The Greens defend the need to pass laws that would oblige oil companies to fully compensate for damage to the natural environment in the event of an oil spill, which would deal a serious blow to their financial well-being. Do you think the adoption of such a law will lead to increased social responsibility of corporations? Compare the advantages and disadvantages of utilitarian and moral-legal approaches to making ethically correct decisions. Which one do you think managers should adhere to? Why? Imagine yourself in a situation where you are asked to “inflate” your business expenses a little. What will influence your decision: your level of moral development or the cultural values ​​of the company you work for? Explain. Do you think it is socially acceptable for a company to engage in political activities or enter into alliances with other organizations to influence government? Discuss. In descending order of importance, the criteria for assessing a company's social responsibility are in the following order: economic, legal, ethical and assumed obligations. How do they all relate to resolving ethical dilemmas within companies? What ethical issues are on the rise right now? Name one company that solves problems from an ethical and socially responsible perspective and one that is unethical and irresponsible. Do you consider it ethical to collect personal information about website visitors without their knowledge? Control over the actions of workers on the Internet? Discuss. What do you think is more effective in developing sustainable ethical behavior in an organization: a code of ethics coupled with training programs or developed ethical leadership? Why? At Lincoln Electric, customers and employees are considered more important stakeholder groups than shareholders. Can management even divide interest groups into more and less important ones? Is it right to treat them as equals?