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visit MIT OpenCourseWare at ocw.mit.edu. EARLL MURMAN: OK, well, this
is literally, for most of you, the start of your lean
journey because we've seen the value of data, and
we know that, for many of you, this whole subject
matter is something you've hardly heard about. And that's perfect
because that's what this course is designed for. So welcome. So, at the end of
this module, we hope you'll be able to explain
the origins of Lean and Six Sigma, explain the lean 6S tool. You're going to learn
your first lean tool here. You're going to be able
to define what is lean, what's a lean enterprise,
and who are stakeholders of the lean enterprise. You'll recognize why
Lean Six Sigma principles are being implemented
in aerospace, health care, and other sectors. We're going to talk about
why these sectors are moving in this direction. And you'll be able to explain
that lean is a journey. It's not a state. You never are lean. You're always trying
to become lean. And we'll talk a
little bit about that. So this subject matter comes
out of the Japanese automotive industry. And, unlike aerospace
engineering and structures and controls and
aerodynamics where you can go to the laboratory
and see what's happening and do experiments and
things, in this field, you have to go to
where it's actually being practiced because
the body of knowledge comes from that field. So this all kind of came
to the surface in 1990 when MIT published a book
called The Machine That Changed the World. It was a study of the
Japanese, North American, and European automotive
manufacturing. And this is a plot given
then of production of cars. These are all the US
car manufacturers, and here's Japan. And what do you
see in that chart? What jumps out at you? What's the first thing you see? AUDIENCE: Japan is increasing
a lot faster than US and passes us in-- EARLL MURMAN: Yeah, close to-- AUDIENCE: --1980. EARLL MURMAN: It's
now kept going. AUDIENCE: Yeah. EARLL MURMAN: So
that's one thing. Japan has just steady growth. What's the next thing you see? AUDIENCE: It's
pretty consistent. EARLL MURMAN:
Inconsistent, right. This is the typical US thing. You kind of overproduce,
underproduce, overproduce. And the Japanese are
nice, smooth, and steady. There's a lot of data in The
Machine That Changed the World. And we're not going to
go through all this, but I want to make
a couple of points. First of all, the
data in this chart is product development
and manufacturing. Now, a big mistake a
lot of US companies made when they read
this book was that lean is a manufacturing paradigm. It's a manufacturing system. In fact, most of my friends,
when they talk to me say, oh, you're in lean
manufacturing. The Japanese never
saw it that way. They implement lean right back
in engineering and product development. So, in product
development, for instance, the average engineering hours
in a new car, 1.7 million for Japanese, 3.1 million
for US, almost twice the number of engineering
hours for the same car. Supplier share of engineering,
how many of the suppliers are actually doing
engineering compared to just supplying parts? 51% in Japan, 14% in US. So we're going to be
talking about that tomorrow in the engineering section. That's design. Here's production. Let's just get a
couple of numbers. Quality defects per 100
vehicles, 60 for Japanese, 82 for US. Training hours of new workers,
380 for Japan, 46 for US. That's probably not because the
Japanese need more training. It's probably because Japan
invests more in training. So this is what started
the whole lean activity around the world and in the US. Now, how does lean compare-- what are the
fundamental comparisons of lean with what
we already know? Well, we have here lean
thinking, mass production, and craft production as
sort of three paradigms. Let's just-- we're going
to spend a bit of time on this chart
because this is going to set your thoughts
for the whole course. So let's look at these
are different focus areas. So, in operations,
in a craft thing, a person is working
on a single item. In mass production, the idea
is you make a lot of them, and you put them in a queue. You make more, and you
put them in a queue. In lean thinking, it's all flow. Everything is flowing very
smoothly and synchronized. And we're going to
talk a lot about flow. What's the overall aim? In craft, it was the
mastery of the craft. In mass production,
it's reduced unit cost and increased efficiency. In lean, it's
eliminating all waste and only doing
value-added activities. You're going to be
hearing a lot about this. By the way, most of the things
that we talk about today, we're going to come back
and talk about tomorrow. And then we're going to
come back and talk about on Wednesday. So, if something
goes by you today and you go home and say I
don't think I really got it, that's good because
tomorrow you're going to get it again probably. So we're going to be talking
about all these things. Quality, in craft
production, it was just part of how they did things. It was integrated into
their whole system. In mass production, quality
was treated as a second step. We inspect, and we correct. In lean thinking, it's built-- the quality is built in at
every step of the whole activity from engineering right
through production. And one of the things that was
so hard for Westerners to grasp was most Westerners thought
I'll give you a quality output, but it's going to
cost you more money. And what the Japanese found was
I'll give you a quality output, and it costs less money. Quality-- and this is really
important in health care. This is really important
in health care. Focusing on quality
will drive down cost. It always has. Business strategy here
was customization. Here it's economies of
scale and automation. Here it's being flexible and
adaptable to the changing customer demands. And I think this is really the
heart of lean, this last one. In the craft, who
does the improvement? In the craft world, it was
the master-driven continuous improvement. In the mass production
world, it was the expert-driven
periodic improvement. We'd bring in the
consulting company. They'd tell us how to improve. Here it's the worker
does the improvement in a continuous way. The worker is a
continuous problem solver. So I spent a lot of
time on that chart because this really sets
up the whole course. And, when we wrote
a book on this, we struggled with
how we define lean. And here's the term
we came up with. Lean thinking is the
dynamic, knowledge-driven, customer-focused
process through which all people in an enterprise
continuously eliminate waste and create value. So you guys are actually little
enterprises for this course. You guys are going to be
airplane manufacturing enterprises. And you guys are
going to be clinics. And tomorrow, when we
do our LEGO simulations, you're going to be
applying these principles in your enterprises. OK, so what about
Lean and Six Sigma? They're very interrelated. They came from somewhat
different backgrounds. Six Sigma was
developed by Motorola in the 1980s when they decided
that the big problem they had was that all their processes
had too much variation. So, when they built
something, they weren't sure what the
output was going to be. And so they didn't have very
good what you might call yield. They had a lot of scrap
and not just in production, but in office processes
and everything. So Motorola focused on reducing
the variation of every process so that every process would
have a predictable output to deliver value
to their customers. It was very problem
focused, and the assumption is you've got a-- that a process isn't working. So you go, and you do a very
kind of quantitative analysis and fix that process and
get the variation down. Lean has the same end
objective of delivering value to the customer,
but its focus is to reduce waste, to get all
the waste out of the system. And we'll find out that
most of the thing-- most of the inefficiency
is not the people. It's the system in which the
people are working is wasteful. And it's focused on
keeping everything flowing. And so the assumption is that
waste removal will improve businesses and that many
small improvements are better than a big, giant step. So lean is very much a process
of starting where you are, taking whatever system
you have, making it a little bit better or a
lot better, and then making it a lot better and then
making it a lot better and just continually
trying to improve it. And that's why it's a journey. Now, what's happened over the
past 10, 15 years is that-- well, let me back up
and say, 15 years ago, there were people saying,
oh, I'm doing Six Sigma, or I'm doing lean. It was like there
were two camps. And, luckily, eventually
we got past that, and most organizations
now pick some portions of lean, some portions of Six
Sigma, and bring them together. We think of lean as sort
of optimizing flow and Six Sigma as reducing variation. And the body of knowledges
have come together into something that's generally
called Lean Six Sigma. There are books you can
buy called Lean Six Sigma. And what happens
is an enterprise will look at these principles. They will tailor their
own version of it. They will name it and brand it. And it becomes their operating
strategy or their improvement strategy. So Textron calls theirs
Textron Six Sigma. Virginia Mason Medical Center
calls it the Virginia Mason Production System. Some of you are
either going to work or have been working at Boeing. They call theirs Lean+ now. And I was talking with
Susan a little earlier. Dartmouth, which is a
real leader in this area, doesn't even call
it lean at all. And that doesn't matter. It's that the organization
understands their process improvement and identifies with
it and takes ownership of it and doesn't get hung
up on what the name is. So our course is going to
cover all the principles that underlie all these things. If you are going-- if you were in a company or
a hospital in which they're training, they would give
you specific training on their system because
you're working for them. But you're all going
to go somewhere else, different places. So what we give you are
the fundamentals that apply to any of those systems. Let's wind up the first
part of this module with a slide that shows
how important people are in implementing
continuous improvement. I often hear that there
are two jobs we all have. One job is the work we
do, and the other job is improving how we do our work. And we're going to emphasize
the importance of people in implementing lean thinking
throughout the whole course. And we'll even get ahead
of it in this exercise we're now going to do. That's the background. Now, let's get some
of these specifics. On the right-hand
side of your folder is an exercise that
looks like this. And take it out, and
don't open it up yet. Just put it in front of you. OK, this is called 6S. Now, there are two
versions of this out there. There are multiple versions. There's 5S and 6S. So 5S came from the Japanese. They were Japanese words,
which I don't remember, but they've been translated
into basically sort, straighten, scrub,
standardize, and sustain. And this is a way of improving
your work environment, very simple. And we'll talk a
little bit about it. Now, what happened when this
came to the Western world? The Western world said, ah,
safety, that starts with an S too. And safety is very important. So we'll make it 6S, and we'll
add safety onto the list. And, when we put--
this is the only place in the course where we've
actually taken something that we didn't
observe in the field. When we did this, we thought
that's kind of an afterthought just to put safety
at the end of a list. And safety is more
important than that. So either leave it off, or, if
you're going to integrate it, integrate it. And so we put it
as the second S. And we call it safe,
which is an action verb. This is probably the only place
you'll see this version of 6S, but that's OK. Don't worry about that. So what we're going
to do is we're going to do a little exercise. And this is your
workplace for right now. This is your work environment. And we're going to
try to improve it, applying the basic
principles of 6S. And we're going to do
it in 20-second rounds. You can think of
each 20-second round as maybe a work shift
or something like that. And you have a
bunch of supplies. And this is in the
medical context, but we could do it otherwise. You have some instruments, some
bandages, and some medications. And you're going to--
each of your work shifts, you're going to be asked to
fetch some of these supplies from your storeroom. And don't turn it over yet,
but the first page represents your current work environment. And then each next
slide will show you what you have to fetch
in your first work shift. And, when you fetch it,
so what you're going to do is just put an X through
whatever you fetch. Or, if you want to circle
it, you could do that too. I don't care. OK, so here's what
we're going to need to get on the first round. You're going to have
to find five syringes, five of these Band-Aids,
five scissors, and five of the medication II's. So don't do it yet,
but, when I say go, you're going to flip the page,
cross off five of each of these until I say stop. And that's the end of the shift. OK, any questions on
the mechanics of it? OK, so we'll do ready, set, go. Stop. [LAUGHTER] Shift is over. Time to go home. OK, so now count up the number
of items, total number of items you got. I don't need to know
items by category, just the total number of items. OK, super. OK, how many are kind
of around 8, 9, 10? OK, probably 10 is
roughly about the middle. We don't have to be too careful. So this is kind
of our workplace. Well, what do we see? OK, we didn't get the job done. And there's high
variability, OK? We have about-- let's see. We have about 25, 28
workers here in our plant. And we get quite a
variable outcome. This is the kind of thing Six
Sigma was worried about, high variability. OK, so that's where
we're starting. Now, our first S is to sort. And you probably saw,
in your workplace, there's a lot of
stuff there that you don't have to go collect. There's some old equipment
that's in your storeroom. There may be some medications
that have been there. When this first started,
a lot of these companies go into the storeroom,
and they find out that somebody in purchasing
got a good deal some time on some piece of some
equipment or supply. They got a volume discount. They bought 10
years worth of it. And, a year later, they
stopped using that stuff. And then another nine years
are still in the storeroom. That's waste, OK? So what we're going
to do is we're just going to go through and
clean up, get everything out of the workplace that
we're not looking for. And then we're
going to redo this. So it's the same thing, but
now we've gotten rid of all the clutter, but
we're going to get-- just so we take
the learning out, we're going to get now five
tape rolls, five Band-Aids, five tweezers, and
five medication III's. OK, ready, set, go. Stop. OK, now, we count them up again. And then we'll see
where we're at. OK, anybody get all 20? 19? 19, OK. OK, how many are around 15, 15? OK, that's good enough. OK. AUDIENCE: 25. EARLL MURMAN: 25? AUDIENCE: [INAUDIBLE] [LAUGHTER] EARLL MURMAN: So you've
made a-- you've made a-- we're going to talk a lot. AUDIENCE: [INAUDIBLE] EARLL MURMAN: So,
just a heads up, one of the things about
lean is you're trying to meet your customer's demand. And you exceeded
customer demand. OK, sometimes, the customer
won't pay you for it, but, this time,
it's probably OK. How many got-- look
at your medications. Did anybody get a medication
I or a medication II? AUDIENCE: Oh. AUDIENCE: Yeah,
that one is right. That one is right. AUDIENCE: I did. AUDIENCE: Oh, yeah. [INTERPOSING VOICES] EARLL MURMAN: Ah, OK. OK, so now we're going to safe. Getting the wrong
medications is a big problem. So that's an example
of why we set it up-- that's why we put safe here. So safe is just making
the workplace safe. If your workers get injured
or if the customers get injured or suppliers get
injured, that's pure waste. That's lost time that they can't
contribute to your enterprise. So safety is not good-- safety
is important for many reasons, but it's very much
a lean principle. You don't want anything that-- well, I've always said
accidents are waste. So we've gone in, and we've
made our workplace a little safe now. We've put sheaths
on our syringes. We've made the medications
different shapes. We've closed the scissors. And so we're going to do the
same thing, get 20 items. And ready, set, go. Stop. I think everybody has
got the mechanics down. OK, anybody get 10
or less than 10? 12? 11? 11? AUDIENCE: 12. EARLL MURMAN: 11, 11, 12. OK, we had a little bit
of improvement here. Anybody get all 20? 18? 19? 19, OK. OK, how about 16,
17, 18, 15, 14? OK, it's kind of hard to see. I think we're maybe a little
bit better than before, but about the same. So we've closed down the
variation a little bit. We didn't expect to get too
much improvement in productivity because all we did was we
made the environment safe. We didn't really do
any reorganization. OK, now we're going
to straighten. Now, that we've gotten
all the clutter out and we've made things
safe, now, let's get our workplace a little
bit better organized so it's not so helter-skelter. So we're going to
straighten things. So we've installed some
racks in our storeroom. Because management has seen this
great increase in productivity, they're going to ask for
more now on the shift. They want 25. They want 25 things found. OK, so you can see
the list up there. OK, ready, set, go. Stop. OK, anybody 15 or less? How many? AUDIENCE: 14. EARLL MURMAN: 14. AUDIENCE: 14. EARLL MURMAN: 14. OK, 14. OK. AUDIENCE: 15. EARLL MURMAN: Yeah, you
got 15, but she got 14. What did you? AUDIENCE: I got 15. EARLL MURMAN: 15, OK. Anybody get 25? 24? 23? 23, OK. And how many are 19, 20, 21? OK, that looks like we're
about in the middle here. OK, well, we see the increase
in productivity there. OK, now the next S is to
basically clean things up, to scrub. By the way, in
these charts, there are multiple translations
of the Japanese word. And we've given them all here. So, for scrub, it's
scrub, shine, or sweep you might find in a particular
5 or 6S incarnation. And that's pretty important. Of course, in a health
care environment, it's critical for
all sorts of reasons. But, in an aerospace environment
or a production environment, you can walk-- a lean
factory, you can walk into, and you can eat off the floor. I mean, we'll see. We're going to have a
video of New Balance shoe. And you'll see, when we
get into that factory, how clean it is and well lit. Everything is clean. It's just a way of thinking. So keeping your workplace tidy
and neat is just part of it. We can't find a good way
to do that exercise here. So we're going to skip this
S and move on to standardize. So now we want to
make it-- now, we've got everything straightened up. Now, we make it really
easy to find things. So we've got three clinics here. It'd be nice if each clinic had
its own way of storing things. OK, and we're going to
talk about that tomorrow in our simulation. Or we've got two
production facilities here. It'd be nice that, in the two
production facilities maybe of the same company, you'd have
the same way of storing things so you can go from
one to the other and not have to be trained. So we're now going to-- we've done a good job of that. We've standardized. This as an example. It's hard to see, but these
are a bunch of binders. And they just put
little tags on them so you can immediately see
which binder is missing because it's out of sequence. OK, well, now we're up to 30. OK, we want to get 30
items on this round. This is the last
shift of the week. You're going to have the
weekend off after this. Ready, set, go. Stop. OK, anybody get 30? AUDIENCE: I got 30. EARLL MURMAN: Look at that. Wow. Anybody get 25 or less? How many? AUDIENCE: 25. EARLL MURMAN: 25. OK, and how many got 30? Let's see your hands again. 29? I mean, it's like this. OK, well, let's
look at this chart. So we've gone from a system that
has high variability and low productivity to a system
that has high productivity and low variability. How many of you would-- how many of you found
this environment where you produced so much more
to be more stressful to work in than this environment? Nobody, right? That's what lean is about. OK, lean is about
doing simple things to improve your workplace. When I toured the Sikorsky plant
where they make the Black Hawk helicopter, the plant
manager said, Earll, lean is the focused application
of common sense. This is not complicated stuff. And lean is not about making
the worker work harder. Lean is about putting the
worker in an environment where they can be more
productive and happier. OK, so this is
what lean is about. Most organizations start
with 5S as their first thing. And let me just share-- just to underline it,
I'll share you an example. So I live in the small
town of 9,000 people. The whole county only
has 30,000 people. It's a rural community. Our hospital started
adopting lean. The very first
thing they did was they went into the hospital
laundry and applied 5S. The laundry was
so dysfunctional. They had high
turnover of employees. The linens and gowns
were not on the floors when they needed to be. The laundry bin, they didn't get
to the bottom of it each day, the dirty laundry. So, the next day, more
laundry was on top and so on. In one week, the women in the
laundry who operate the laundry took 5S with a
facilitator and a coach. They reorganized their laundry. And it went from
that to now they get all the laundry done every day. I've been in this laundry. The women are so happy. They just can't-- they
just want to tell you about their workplace. They've had no turnover
since they did this. And everybody in the hospital
is affected by the laundry. And they all knew
it was a success. So, if you want to
start in a hospital, start in the laundry with 5S. The last S is to sustain,
often the hardest part. I like the Virginia Mason
version of it, self-discipline. Sustainment should be-- the trap
as you do this one-week event like I mentioned in
the laundry, and then you drift back into old habits. So the hard part is
keeping this as a mindset. Sometimes, you have
to have a chart, but usually you should
just be able to do it. OK, so that's your
first lean experience. Let's now talk about why lean
is being applied in these areas. OK, we're going to look
at aerospace, health here. And we're to look also
at New Balance shoes just for three comparisons. So aerospace is a really
interesting industry. It's a flagship industry
of the United States. It's one of these
things that goes with the image of the country. It enables the movement
of people and goods. It enables communication. It's critical to
national security. And it's a source of
inspiration for many people for exploration. Now, why did aerospace
turn to adopting lean? Here's an industry where we
think we're the world's leader. And I pause because we may
not be, but we think we are. But why did we turn to lean? Well, here's why. This is a study that came
out of the Sloan School by Jim Utterback that shows
the natural progression of many different
industries plotted by the number of companies
in a particular industry. So this is the
typewriter industry. So it started in the late
1870s, and companies came in. They reached a peak
of about 80 companies. And then somewhere they
reached a peak around 1910. And then the number of
companies started declining. And, of course, there's probably
no typewriter companies now. What happens? Well, this phase, this is
where the product architecture and product characteristics
are not set. So many inventors come up
with new ways of doing things. Eventually, somehow,
the best design emerges. And that's where the
market consolidates around. And then, instead, there's
not really real opportunities for new companies. What happens is companies buy
up other companies that emerge. And, at this point,
it's very hard to change the
product architecture. This keyboard we all use
came out of this era. It's pretty well known that
there's more efficient keyboard layouts, but it's impossible
to change that now. It's impossible to change it
because it's the standard. OK, here's the automobile
industry, same kind of thing here. The main product architecture
was the enclosed steel body. Here's aerospace. Now, this is
representative aerospace. So it's probably-- it's just
some of the major companies, but, throughout the
1900s up to about 1960, we had a growth of the
number of companies. Then along came something
that looks like a 747, 707, and other things. And we sort of reached
the product architecture. And then we would have gone on
this decline just as companies. But we get to this point
here, and there's a plateau. We're in the Cold War. And the government,
for strategic reasons, wanted to keep a
big industrial base. So they invested in
that industrial base. When the Cold War was over,
the Secretary of Defense invited all the CEOs of the
major aerospace companies to dinner. It's called "The Last Supper." And he said, we don't
need this many companies. And so we're not going to have
as many, but it's up to you to sort it out. We'll let the
marketplace sort it out. So Boeing buys McDonnell
Douglas, so on, and so forth. And we have now consolidation
and fewer aerospace companies. Had we not had the Cold War, we
probably would have done this. But here's where aerospace--
here's where LAI started. We had an industry,
which was inefficient and couldn't survive
in the new world. And so they turned to lean. So we had a company with-- companies that have
mature products can't survive on a
business strategy that's designed for early growth. Here's one of the
things that happens. In an early phase,
when there's not-- when the competition
really hasn't developed, you can charge what you want. You can charge what you
want for a new device. And then you
subtract your costs, and you get whatever profit. Competition builds
up, or the government says we're not going to pay
as much for airplanes anymore. OK, the customer sets the price. The only way for you to make a
profit is to reduce your costs. So you have to become
more efficient. It's just the way it is,
or you don't survive. Here's an example of some of
the problems in the aerospace industry. Here are three programs-- the second block of
the GPS satellites, the Joint Strike
Fighter, Boeing 787. These are new airplanes, years
behind schedule, one, two, three, four, billion
dollars overrun, $12 billion beyond the development costs. The price per unit, they're
going to buy a lot of F-35's. The price has doubled,
and it's still in trouble. Other programs where their
costs and schedule is overrun is the F-22 and so on, the A340-- A380, so on. This is what's called
the burning platform. The paradigm here
is people adopt lean when the platform they're
staying on is burning. And, if they don't do something,
they're going to disappear. Now, there are so many
aerospace programs which are executed very well. And we've learned a lot
from studying those. So I don't want to say the
aerospace can't do anything, but there are a lot of problems
with the aerospace programs. Health care, there was a
book published in 2003 called Crossing the Quality Chasm. It was published by the
Institute of Medicine. And the paradigm here
was this is the health care we're delivering. This is the health care
we know how to deliver. And there's such a wide gap
in quality of health care that we have a big chasm
between what we're doing and what we should be doing. And they outlined what the
objectives of health care are and that these are not new aims. These are aims that have
been there for many years. And most people go
into health care because they want to do this. Probably, all of you guys
are going into health care because you don't want-- you probably didn't say
I picked health care because it's an inefficient
system that I can work in. You picked health
care because you want to help people and do things. So we need to do that. OK, but what are some signs? Well, I think we've all heard
about the cost of health care. There are different
metrics here. I don't think we have to
go through those in detail. There are quality issues. This is the one that
was staggering to me, the study done in 1999
that between about 50,000 and 100,000 people a
year in our country die from perfectly
preventable medical mistakes. OK, that's more people
than die on the highway. And, by the way, that number
still has not changed too much. It's gotten a little bit
better maybe, but not changed. Many people don't have
access to health care. This slide is a
little bit out of date because of the Affordable
Health Care Act. And 60% of the
doctors in the survey said they wouldn't recommend
going into health care to their children. Here we've got Bo is an
emergency doctor, emergency medicine doctor. Is 50% of your time
spent on paperwork? AUDIENCE: On waste
on a good day. EARLL MURMAN: On a good
day, 50% is wasted. And Susan is a nurse. Many studies have shown we
have a big shortage of nurses coming up here. OK, so we've got some problems,
as you all know about. So, basically, what
we say in health care is there's a value crisis. Value is defined
as what you deliver and divided by what you pay for. And roughly about
half the health care we know how to deliver to
the patient gets delivered. And the cost, this is of GDP. In 2007, we were spending 16%
of our gross domestic product on health care. In 2050, it's
supposed to be 37%. That's just unsustainable
and the same with Medicare. So we hope that
lean thinking can be one piece of a puzzle
of improving health care. It's a complicated--
it's a complicated field. And there's no simple
solution, but lean can help. OK, so those are
two industries as to why they're applying lean. Now, let's talk a
little bit about what is an enterprise
because, in this course, we very much focus on applying
lean across an enterprise, not just a manufacturing
or a clinic thing. So an enterprise
is broadly defined as one or more
organizations having related activities,
a unified operation, and a common business purpose. And so you might have, in
an engineering enterprise, customers, engineering
products, product development or engineering, manufacturing,
suppliers, finance, and so on and support. And enterprises can
be pretty complex. So it's hard to define the
boundaries in an enterprise. It's somewhat contextual. You might draw it around your
table here as an enterprise, but most enterprises
have partners that they have close
operating agreements with. And so we call the core
enterprise the organization plus its most closely related
partners that work with them. And then, beyond that, there's
an extended enterprise, which is all their suppliers and
actually their customers too. And also their community and
regulatory agencies and things like that all can
affect their enterprise. So a company like Boeing
has maybe 2,000 suppliers. And, by the way,
those 2,000 suppliers are suppliers to
Airbus and Embraer. And so this gets
very complicated. OK, so who are the
stakeholders of an enterprise? They're any group
or individual who can affect or is affected by
the organizational objective. So you have your employees,
partners, suppliers, unions, customers, shareholders. These are all stakeholders
who can affect or are affected by your enterprise. Jennifer, at Boston Medical
Center, do you have any-- I don't know how long you've
been at Boston Medical Center and whether you-- do any of these kind of
things resonate with you in terms of who your
stakeholders are there? What department? You're in radiology? AUDIENCE: Radiology. I've been there for five years. So hopefully I know
a little bit about-- EARLL MURMAN: So you have
some suppliers of CAT scans and all this kind of stuff? AUDIENCE: Oh, sure. Sure, I mean, I was actually
thinking about the broader sense in terms of how the
community health centers [INAUDIBLE]. So we, for instance,
serve the emergency room. We serve the inpatients. We serve our own
BMC outpatients. Then we also serve a very large
network of community health centers who send all
of their patients to us for imaging that
they can't provide. Then there's the technical
arena of all of the-- GE provides most
of our equipment, but we have different
suppliers for our MRIs and our CTs and our ultrasounds. Those are all
different corporations. And then they all have their
own technical support services. EARLL MURMAN: I think
you've made the point. AUDIENCE: Yeah. [LAUGHTER] EARLL MURMAN: So there
are a lot of stakeholders. And each of these stakeholders-- this is a very high-level
definition of value. We're going to come
in the next module to a much more specific
definition of value. This is a very high level, but
every one of these stakeholders expects some value
from the enterprise just like Jennifer
just outlined. And, in return, they're supposed
to contribute some value to that enterprise. So there's kind of a
value proposition here. A value is how
various stakeholders find worth, utility,
or a benefit or reward in exchange for
their respective contribution to the enterprise. So there's this kind
of value relationship going on here in an enterprise. And now what's a
lean enterprise? When we started
this work, we said this is a lean enterprise
course or a lean enterprise initiative. People said, well, what
is a lean enterprise? It turns out that's
a good question. And here's our definition. It's an enterprise of-- it's an integrated entity
that officially creates value for its
multiple stakeholders by employing the principles
and practices we're going to cover in this course. Now, these principles apply
across the entire enterprise. So, in an engineering
enterprise, you have generally what's
called the product lifecycle from the initial concept
of a product like this through the design,
definition, design, getting the supply chain
lined up, production, and distribution of support. That's what generates
money for the enterprise, selling this product. But it also has finance,
information technology, human resources, various support
functions which are needed, and the leadership processes. And the point is lean
applies to all these. It doesn't apply just
to manufacturing. It applies across
the whole enterprise. And we'll show you an
example of that in a minute. In health care, it's
very much the same. Instead of having the
product life cycle, you have the patient life cycle. So lean doesn't apply
just to treatment. It applies from
preventive monitoring through long-term
care management. We should really be
thinking-- in fact, there are people who feel that
the health care system should be reorganized along-- let's call them disease
pathways or something like that, instead of segmented
into imaging and so on. And again you have the
same supporting functions. And I'm really glad that a
couple of our students here in health care are
administrative fellows, looking into health
care administration. That's really important. OK, so does it work? Well, I told you how
LAI got started in 1992. And it took us 10 years
to respond to the general with a book we wrote. And we said-- after 10 years,
we said to the general-- by then, we'd been through
three or four generals. And we said, yes, lean does
apply to aerospace if we take it at the enterprise level. If it's applied to all the
functions of aerospace, not just to manufacturing. OK, here's a really good
example of the F-18 aircraft. This is a fighter
aircraft for the Navy. They were going through
an upgrade to the model E/F. It was an upgrade,
but it was actually a completely new aircraft. It was 25% bigger, but
it was sold to Congress as an upgrade, $5 billion
budget, 8 and 1/2 years to do the engineering
and design. The program performed
on schedule within cost, met all its technical
requirements, very unusual compared to those
burning platform programs I showed you. And, when we went in and
studied it and looked at what they'd done with
what the lean principles are, they were a lean enterprise. They didn't call themselves
a lean enterprise, but they had done this. And, in fact, we went and
gave them this briefing. And we said to them, we've
concluded your lean enterprise. And they said,
whoa, no, we're not. We have so much more to do. Don't tell us we're
a lean enterprise. That's the attitude you
want, wonderful program. Here's a completely
different area, electronics, Rockwell Collins. We're going to come back to
them on Thursday with a case study of Rockwell Collins,
but they applied lean thinking across their whole company
in the office environment, as well as in the factory,
and the great results. And we'll see data from them
on their operating performance tomorrow. Health care, many
examples in health care, Susan will give you a lot more
when she talks on Thursday, but just hear a few. There's a number
of books out now. ThedaCare in
Wisconsin, waiting time from when you first
call to when you get scheduled for orthopedic
surgery went from 14 weeks to 31 hours. Here's a hospital
in Pennsylvania where they reduced
the readmission rate for COPD patients. Children's Hospital in
Seattle reduced its capital expenditures by $180 million
by using lean improvements. And Susan mentioned
about architecture. That's becoming a big area for
saving in capital improvements. And here's a
hospital in Nebraska where it reduced the time it
took to turn around the lab results over a
six-year period by 72% by using the same people
and the same facilities. OK, here's the
New Balance story. We're going to see a
video on this shortly, but they're a shoe company. They're the only company that
manufactures athletic shoes in the United States. OK, it used to take them eight
days to make a pair of shoes. Now, it takes three hours. They're actually doing
the same amount of work. So here they were only-- of
the eight days, only 2/10 of a percent of the
time were they doing anything useful on the shoe. The number of items they have
to have in inventory went from-- well, inventory
turn is the number of times you turn
over the inventory. Here it took from 3.5 to 13. They can make a pair of shoes. They get a call saying
we need some more shoes. They can ship it in three days. Floor space reduced. Production went up and so on. Let's just talk about this. Kanban, Japanese word, who's
ever heard the word kanban? One, Catherine has heard kanban. Kind of a strange
word, isn't it? How many of you at home
keep a shopping list? OK, so tell me. How do you make your
shopping list, Whitney? AUDIENCE: Like in
terms of which ones? Well, now, I use an
app for everything. So I don't [INAUDIBLE]. On the weekends,
we'll kind of pick what things I'm going to do. And it forms a list for me. So I carry it around
with me everywhere. EARLL MURMAN: So how do you
make that list of things you-- well, let's say
grocery shopping, just to take an example. So grocery shopping, what
do you put on your list? AUDIENCE: I pick the recipes,
and it creates a list for me. EARLL MURMAN: OK, so
you pick what you need. AUDIENCE: Yeah. EARLL MURMAN: OK, anybody else? How do you do your
shopping list, Tony? AUDIENCE: I go to my fridge. And I look at what is
missing I go to my cupboard and see if there
are things that are missing that I need to replace. And I write down the list. EARLL MURMAN: So
he's got 5S working. He can look at his cupboard
and see he's missing something, right? OK, you have some kind of
standardized way of storing things in your cupboard. AUDIENCE: Yeah. EARLL MURMAN: OK, and you
spot what you're missing, and you put it on
your list again. Those are kanbans. OK, kanban is nothing more
than a queuing system, a visual system,
to indicate what material parts or
other information you need to keep going. In a factory environment,
typically, it's a card, a barcoded
card of some kind. And, at some station where
they're manufacturing something or, in a health
care environment, where they need some supplies,
they need more of that. And so they make
a little system. And then someone delivers it. OK, now, the
opposite is, instead of deciding what
recipes you have and what you're going to
buy, you go to the store, and you say, oh,
this is on special. I'm going to load up on
whatever, hamburger or toilet paper or ketchup. OK, what you're doing
is you're buying because you're getting
volume discount, but you may not need it. So a kanban system
is one where you only deliver what's needed to
whoever is doing the work. And there's some cue,
usually a visual cue. It can be a barcoded card. It could be a bin that's empty,
some space on the floor that I need a new delivery there. In an engineering environment
or a work office environment, it might be an empty inbox. Also, an interesting
kanban I saw, this was a factory at McDonnell
Douglas in East St. Louis. And they have supplies,
something coming from a company in California. They make a packaging container
that this product went into. And so the company
is in California. The factory is in
East St. Louis. And on the ceiling is
a camera looking down at the number of these
boxes that are there. And, when the
company in California sees they need more
boxes, they ship them. That's a kanban. So Toyota implemented kanban
in their production system. It took them 20 years. You wouldn't think it
would take that long. When they first
started doing it, they actually came
to the United States and saw the supermarkets. And, in the supermarket,
the potato chips, you buy potato chips, and
the shelf looks empty. So the potato chip
guy comes and sees you need more potato chips. That's where it came
from, supermarkets. So they introduced it. It took them 10 years after
they did the experiments to make it across the whole
company and another 10 years to make it across
their suppliers. OK, and they continued
to work on it. So now think a little bit
about whatever enterprise you might think about. Get out your colored cards here. Think about where you've
had some experiences. How long do you think it
would take to implement lean in some environment? You can think about your company
or your department at MIT. Think about lean thinking
in your department. Think about your parents'
work environment. Just pick some work environment,
knowing that all the we could teach you in three
days, how long do you think it might take to
implement lean in whatever work environment you're
thinking about? And then hold up
the colored card when you make up your mind. OK, I don't see any blues. I see a lot of yellows,
a lot of greens. That's good, some reds. OK, so it's going to
take a little while. Maybe it looks like,
I'd say, the bulk of the numbers I have
up here are five years. Susan, you work with a lot
of health care organizations. You said you've been
doing this for five years. What kind of-- how long are you
seeing that a typical health care organization-- SUSAN SHEEHY: Most
of the hospitals we've worked with take at
least five years if not more because you really
have to spread it throughout the organization. And it takes that long. You can't just teach five
people and say, OK, we're lean. So it's at least five
years if not more. And that's with
an all-out effort. EARLL MURMAN: At
least five years with an all-out effort,
not a half-hearted effort. OK, so this is a big
commitment for an organization to implement lean. OK, they're not going to see
quarterly bottom-line profit changes, which their
shareholders may be looking for. What are some questions that
this introductory module kind of brings up in your mind? Or do you have comments you'd
like to make or suggestions? Yeah, Jennifer. AUDIENCE: For the
6S activity, if you had asked me to sort that
stuff from the very beginning, I probably would have
ended up on the end page first with everything in-- if you just said
sort these things, it would have been
super subselected, which might just be my
own personality when somebody says sort. So I'm a little unclear what
the difference between sort, standard, straighten,
and standardize are in that respect. EARLL MURMAN: That's
a good question. You know, I think the sort
one is, first of all, just get rid of stuff that
shouldn't be there. And I have slides from a
lot of different examples of storerooms that had totally
obsolete equipment in them. And people were
spending lots of time looking for something
that was not all that obsolete equipment. So I think the sort
part is pretty quick. Now, the straighten
and standardize I think might be done as a single step. But I'm not going to-- I think you're fine. It's a good comment. But what's amazing
to me is how often an organization starts with 5S. I mean, you would
think, why isn't anybody doing it this way? SUSAN SHEEHY: It's because-- and we hear this
term all the time. It's the way we've
always done it. That's what we always hear. Because it's the
way we've always-- and workarounds
and do-overs have been built into the system. So nobody even recognizes
that they're doing it. It just becomes part
of the daily work. EARLL MURMAN: Do you
have a question, Monica? AUDIENCE: Yeah, I
was just wondering. You said that the average
time was five years. So I was just wondering, in our
culture of immediate response time and response to
crisis, how do you sustain an organization's interest-- EARLL MURMAN: That's a-- AUDIENCE: --for five years? EARLL MURMAN:
--really good question I'll answer what I can. And Bo and Sue and
others can pipe in. First of all, you have to
have this so-called burning platform. That is there's sort
of no other option. Either we do it, or
we go out of business. So it's very hard
for an organization that's doing extremely well
to adopt something like this. Secondly, it takes leadership. It has to be that the
organizational leadership says, this is important,
and we're going to have constancy of
purpose and sustain this. We're going to start this
and do it and stay with it. And then, third, it has
to align with the strategy of the organization. That is it has to be built into
what the organization is trying to do. It can't be something separate. We're trying to do
this, and, meanwhile, we're going to do lean. The two have to be together. And, frankly, many
organizations can't do it. SUSAN SHEEHY: I could
answer that too. It's also a series of
incremental changes. So, if something happens,
like a medication error that's disastrous, you
can certainly start with that. And, as you have
improvements, you celebrate those improvements
and distribute that information so that it's a
continuous improvement. And it can happen over time with
really good things happening along the way. But to roll it out to an entire
organization takes a long time. But we tell people we
have to start somewhere. And it's not like it's going to
alter your whole organization overnight. It's celebrating those
incremental things that you do, looking at your data,
looking at your outcomes, looking at your staff
turnover, and using that to build your lean program. So it takes time, but you can
celebrate things along the way. EARLL MURMAN: The biggest-- I think the biggest
barrier to this is if there's a change in
the leadership at the top, and the new person doesn't
really understand it. And then the whole
thing can crash. Bo? BO MADSEN: I think, as
well, it's important that you have a vision, that
your organization has a vision, and that everybody knows
what that vision is. And then the beginning
is the hardest, but, in reality, we all
want to do value-added work. We want to do the work that
we're actually employed to do. People, they enjoy that. When they can see with the
first steps that the waste that we're sucked into every
day, that that goes away and you're more
productive, that's nice. People, they enjoy that. EARLL MURMAN: Good, what
are some questions that come from the
engineering folks here? Yeah? AUDIENCE: So, at some point,
you pointed out a disparity between how many hours of
training both United States and Japanese companies,
exactly, give to their workers. And this might be
silly, but it seems that the people are what pretty
much makes the company run. So, if they're spending so much
time training their workers and getting so much
profit off of it, how are we not doing
the same thing? EARLL MURMAN: So
is the question-- is the question, does
the training detract from the productive [INAUDIBLE]. AUDIENCE: No, my question is,
why aren't we investing more into training our workers? EARLL MURMAN: Oh yeah, so that's
been a real change in the US companies as they've
adopted these is they've come to realize
the importance of training. And they do invest
a lot in training. A typical company that
I know of in the US will invest at least 40 hours
a week for every employee to be trained during the year. And training can be broad. It can be specific to
that particular job, but it could be much broader,
just communication skills or sometimes even just
awareness about their culture of the customers
in other countries. AUDIENCE: So do you think
that the difference is not in training hours anymore,
but in the workers themselves? EARLL MURMAN: I
really don't know. I'm not sure I can answer that. I can say that they
are investing more in training hours. Whether it's because the workers
are different, I don't know. Yeah. There may be a chicken
and egg situation there. One question here, and
then we'll come back. AUDIENCE: OK, so you mentioned
that a lean enterprise creates value to multiple stakeholders. EARLL MURMAN: Yeah. AUDIENCE: But what happens
if those values are not necessarily aligned? EARLL MURMAN: Aligned. Good question. AUDIENCE: I'm
thinking, sometimes, you have the shareholders. And they might be willing to
move the enterprise-- transform the enterprise in one direction. And you can have the employees. They don't want
change because they're comfortable in that situation. I don't know. EARLL MURMAN: No,
it's a great question. Is it Matthias? AUDIENCE: Yeah. EARLL MURMAN: Matthias
asked is the shareholders values are not always-- will normally not be
aligned completely. OK, so you have to
do the best you can. OK, I mean, you have
to find something. I mean, the ideal is if
you could find something where every stakeholder
gains something. Maybe they don't gain
everything they want, but they gain something. Something is better than before. OK, so let me take
the employee thing. I think one of the-- I think the question Monica
asked relates to that too. One of the things
that-- one of the things that successful organizations
do that implement lean is they make it known to their
employees that nobody is going to lose their
job because of increase in productivity. So it's very hard if you
go into an organization and say, Emily, I want
you to help improve us. And, by the way, we
probably won't need you when we're finished. Your heart is not
going to be in that. So instead, you
say, Emily, we want to have a better organization. And you're going
to be part of it. You may not be doing the same
thing you were doing before. We may have to train you
to do something else, or we may have to do something. But you're valuable to
us, and we want you here. And we want you to
help us improve. So Emily is going to come out. She'll probably be
happier when she's done because she's
probably not completely satisfied with her job. And they'll be more productive. And maybe they'll end
up outsourcing stuff, but they'll find a place for
Emily in the organization. So you want to make sure it's
as much of a win-win as you can. And that's the challenge. I mean, sometimes, it's hard. And, unfortunately,
the short-term focus of our financial
system is a barrier for some of these
long-term commitments. So it takes a lot of strong
leadership to overcome that. And I think Susan-- good. You want to show
incremental improvement. You want to try to get
better and better and better, not [INAUDIBLE]. SUSAN SHEEHY: But I also think
that the equation in health care traditionally has been that
employees were on the expense side of the equation. And so, when they needed to
cut costs, they cut positions. And what Toyota does
is their employees are on the value
side of the equation. And so they value
those employees. And that makes the difference
in the expense side as well. And I think that
makes a difference because Toyota expects their
employees to make suggestions. And they implement
their suggestions where, in health
care, we haven't done a good job at doing that. Employees were just employees. And now we're starting
to see that employees are the experts at what they do. And so we need to start
listening to them. And I have an example. I was doing work at a small
rural hospital in northern New England, a 50-bed hospital. And this class, I did
two classes of 16 people. And they were working on some
productivity kinds of issues. And they came up with
$3 million in savings from the delayed OR start times
and canceled imaging tests and all those kinds of things. And they really did a beautiful
job with their projects. And the last day at report
out, the CEO was there. He didn't hire us. It was a grant
through the state. So they did this report out and
talked about what they found. And, at the end, he said,
this really makes me look bad. And I said, excuse me. And he said, I should
have fixed these things. [INAUDIBLE] It was just-- it was the
old, traditional model of the hierarchy. I tell you what to
do, and you do it. If I tell you to cut
10% off your budget, you do it, not show me
how you can increase throughput and revenue. So we need to just change
our thinking in health care. And it's happening,
but very slowly. And valuing the employee
is the most important thing we need to do. And, unfortunately,
the term lean gives people the
absolute fear that we're going to cut positions. That's what they
immediately think when you say we're coming
in to do lean, that word. EARLL MURMAN: Do that,
and lean became the word. It's like the-- SUSAN SHEEHY: Exactly. EARLL MURMAN: It's
like the evolution of industry I showed you. We can't change the word now. It's just become part of it. SUSAN SHEEHY: It's
just what it is. EARLL MURMAN: It came actually
from a MIT graduate student in a research
seminar one day when they were talking
about the things they were learning about the
Japanese automotive industry. And they said, what are
we going to call this? And he said, well, let's call
it lean because we're doing more with less, and it stuck. But it unfortunately has
a negative sound to it, lean and mean and all
that kind of stuff. So we have time for
one more question. Did you have a question? AUDIENCE: Yeah, so I'm going
to play the skeptical a bit. How do you establish causation
between these methods and the outcome? How is it not just
an improvement in employee mentality? I want to have this company
that won't just sit back and-- EARLL MURMAN: That's a
really good question. How can we show that the
kind of results we showed here come from lean? Because there are a lot of
confounding factors going on. There's a changing
business environment. There may be other
things going on. And I guess, in a
scientific sense, it might be very
hard to do that. But, when you go and look at
organization after organization after organization that adopts
this and sees improvement, there's a correlation there
that adopting lean thinking and the way we teach it here-- one of the pitfalls in
adopting lean thinking is-- and let's take the 5S or 6S. A lot of people
think lean is a tool. Oh OK, now, I know how to do 5S. I can fix it. That's not what lean is. Lean is this change in culture
and the way of thinking that Susan mentioned. And that takes some time.
