Introduction to Operational Excellence @ CDTA

1. Introduction to Operational Excellence@ CDTA Mike Borzumate XONITEK Corporation Thursday, January 29, 2009

2. Why are we here today? The economy is tough. Resources are tight. How can we control costs and maintain service levels… • …without employing less people? • …without raising fares/funding sources? “Operational Excellence” could be the answer. Presented by XONITEK Corporation

3. The Continuous Improvement Equation Lean + Six Sigma + Leadership Development + Business Systems = Operational Excellence! Presented by XONITEK Corporation

4. Operational Excellence is… • The integration of four key disciplines: • Lean • Seeing the Entire Value Stream • Eliminating the Waste • Six Sigma • Minimizing the Process Variability • Improving the Service Quality Presented by XONITEK Corporation

5. Operational Excellence is… • The integration of four key disciplines: • Leadership Development • Management Effectiveness Training • Strengths-Based Management Techniques • Business Systems (ERP, CRM, BI) • Organizational Integration • Formal Company Wide Communication Presented by XONITEK Corporation

6. What Is Lean?

7. What Is Lean? A philosophy and set of tools for identifying and removing waste, leading to a smooth flow of profitable goods and services, always from the perspective of the customer. “Value” Presented by XONITEK Corporation

8. Who Is the Customer?

9. What is “Value” ? • Every business activity can be classified as one of: • Value Add • Activities for which the customer is willing to pay • Actions that “transform” the product or service • Non Value Add – Waste • Everything else! • Business Value Add (BVA) • Required by regulation, ethics, or strategy • Filing tax returns, producing annual reports, etc. If the feature or service were eliminated from the product, would the customer care? Presented by XONITEK Corporation

10. Putting Value into Perspective Value add in an organization can bemuch lower than shown in this chart. Value add is typically less than 5%; 95%+ is non value add cycle time. Presented by XONITEK Corporation

11. Types of Waste Muda (“unusefulness”) An activity that does not add value, from the perspective of the customer Presented by XONITEK Corporation

12. Types of Waste Mura (“unevenness”) Shifts in demand or delivery that lead to a service or support process being sped up or slowed down (unsteady) Presented by XONITEK Corporation

13. Types of Waste Muri (“unreasonableness”) A process, system, or facility designed beyond the physical capacities of employees / equipment Presented by XONITEK Corporation

14. Categorizing “Muda” Waste Waiting • Transition times for drivers or vehicles when changing routes / shifts • Waiting for job instructions / route schedules / equipment • Delays for approvals, signatures, e-mail replies… Presented by XONITEK Corporation

15. Categorizing “Muda” Waste Quality Deficiencies • Conditions that lead to Defects – service that is not delivered as promised • The effort required to identify defects (“inspection”) or fix them • Route schedules, signage, etc. that are incorrect or misleading Presented by XONITEK Corporation

16. Categorizing “Muda” Waste Conveyance / Transport • Movement of physical items around a facility • Movement of information from system to system and person to person • Poor facility or information system layout that adds unnecessary conveyance Presented by XONITEK Corporation

17. Categorizing “Muda” Waste Overprocessing • Doing more within a service than the customer finds valuable • Excess features • Excess supporting facilities (overdesigned “servicescape”) Presented by XONITEK Corporation

18. Customer Options: Potential Waste… Examples of waste in the automotive industry…. Think: What does the customer really want? Presented by XONITEK Corporation

19. Categorizing “Muda” Waste Wasted Skills / Creativity • Designing a service or facility in a way that minimizes the ability of an employee to creatively solve problems • “Busy work” • Assigning employees to tasks that should be automated Presented by XONITEK Corporation

20. Categorizing “Muda” Waste Overproduction / “Inventory” • Providing more frequency of service than needed • Providing vehicles or facilities that are too large (“batch size”) • Operating services at times with too low demand (“efficiencies”) Presented by XONITEK Corporation

21. Categorizing “Muda” Waste Motion • The movement of employees within the facility beyond what adds value • Search – finding materials and moving equipment so that production can happen • Obtaining the needed tools and equipment for a job Presented by XONITEK Corporation

22. Categorizing “Muda” Waste Hazards • Design of a service, facility, or schedule that puts an employee at physical or mental risk • Unreasonable job requirements • See also muri Presented by XONITEK Corporation

23. Why Does Lean Fail? The obstacles to success are… within your control. Commitment to the cultural change is essential. Presented by XONITEK Corporation

24. Five Steps to Becoming Lean… • Define the Value… as perceived by the customers. • Identify the Value Stream… follow the process flow beginning with the customer. • Flow the Product… remove the waste. • Pull… produce to customer demand. • Continuous Improvement… strive for perfection. The Initiative must be Management Driven… Presented by XONITEK Corporation

25. Core Skills for the Lean Practitioner… Problem Solving 5-S Kanban VSM Kaizen QCO Presented by XONITEK Corporation

26. Why I’m Here… I do not know how to operate a public transit organization. I know other things… • Process Modeling • Team Dynamics • Initiative Strategy Presented by XONITEK Corporation

27. What are we striving for? • Our Philosophy: To BECOME the Benchmark • It’s easier to lead than to follow • Which is more painful… • To continuously innovate & improve? • Or to be forced to change by your situation? Let us begin by adopting this new PHILOSOPHY… Presented by XONITEK Corporation

28. Our Definition of Business Failure • That moment in time when the momentum of the product or service can no longer overcome the inefficiencies of the organization. Presented by XONITEK Corporation

29. What Is Six Sigma?

30. What Is Six Sigma? A rigorous method for using observational data to make a process more reliable and predictable. Presented by XONITEK Corporation

31. Six Sigma vs. Lean Lean… • Removes waste/cost • Simplifies a process Six Sigma… • Makes the process stable • Encourages consistency and reliability Typically, make Lean-style improvements first. Presented by XONITEK Corporation

32. The Normal Curve Image source: Jeremy Kemp & PetterStrandmark Presented by XONITEK Corporation

33. Effects of Improving Process Variation Area under the curve: • +/-1 SD = 68.27 % or 317,300 ppm • +/-2 SD = 95.45 % or 45,500 ppm • +/-3 SD = 99.73 % or 2,700 ppm • +/-4 SD = 99.9937 % or 63 ppm • +/-5 SD = 99.999943 % or .57 ppm • +/-6 SD = 99.9999998 % or .002 ppm Presented by XONITEK Corporation

34. What is Leadership Development?

35. Leadership Is Essential Success in continuous improvement requires skilled leaders Command-and-control will not work A new approach to management is necessary Presented by XONITEK Corporation

36. Leadership Development Examples Strengths-Based Management Techniques • Look for fit and advancement along talent themes • Now, Discover Your Strengths Collaborative Decision Making • Encourage brainstorming and discussion toward consensus • Six Thinking Hats Presented by XONITEK Corporation

37. Example Strengths Profile Restorative Context Harmony Significance Arranger Presented by XONITEK Corporation

38. What Are Business Systems?

39. Business Systems : Technology The full suite of IT systems to enable communication • E-mail, voicemail, etc. • Accounting and financials • Customer support/feedback systems • Scheduling • … Presented by XONITEK Corporation

40. Other Business Systems Employee handbook Facility design Structured meetings “Culture” Presented by XONITEK Corporation

41. Discussion… What are our specific improvement goals?

42. Introduction to Operational Excellence@ CDTA *** Questions and Discussion ***