Enterprise Interactions and Waste
Professor Deborah Nightingale
October 17, 2005
Objectives
• Enterprise Interactions
• Process
• Stakeholder
• X- Matrix to assess alignment of •
•
•
•
Strategic Objectives
Metrics
Key Processes
Stakeholder Values
• Enterprise-level Wastes
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Enterprise Interactions
• Process Interactions
• What flows in interactions between
processes?
• Material
• Information
• Resources (people, $s, etc.)
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Interaction Performance Parameters
• Reactive vs. Proactive
• Stability
• Timeliness
• Accuracy
• Completeness
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Interaction Checklist Template
What flows in this interaction?
Information
Material
Resources
Blue dot for
crossorganization
handoff
Red, yellow,
or green dot
Goes from:_______________ to _______________
Note:_________________________________
Is this interaction Reactive
Rate each of the following as:
Stability
Timeliness
Accuracy
Completeness
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Lo
Proactive
Med
Hi
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Mapping Enterprise Interactions
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Interactions
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Supply Chain Management
System
Engineering
Determine
Req’s
SCM
Mfg.
Contracting
Depot
Maintenance
Buy
Repair
Budget
Req’s
Repair
Contracting
Planning
ESD.61J / 16.852J: Integrating the Lean Enterprise
Base
Support
Information
Tech
Contracting
Scheduling
Distribute
Assets
AF
Production
Bases
Dispose
Excess
AFMC
Other
ALC
MA
DRMO
Material
Support
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
Analysis
Problem
Tracking
Tech
Orders
Quality
Execution
Reporting
Page 8
Supply Chain Management
System
Engineering
Determine
Req’s
SCM
Mfg.
Contracting
Depot
Maintenance
Buy
Repair
Budget
Req’s
Repair
Contracting
Planning
ESD.61J / 16.852J: Integrating the Lean Enterprise
Base
Support
Information
Tech
Contracting
Scheduling
Distribute
Assets
AF
Production
Bases
Dispose
Excess
AFMC
Other
ALC
MA
DRMO
Material
Support
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
Analysis
Problem
Tracking
Tech
Orders
Quality
Execution
Reporting
Page 9
Supply Chain Management
System
Engineering
Contracting
Buy
Repair
SCM
Distribute
Assets
Dispose
Excess
Analysis
Problem
Tracking
Tech
Orders
Other
ALC
MA
Planning
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Production
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Process Interactions Analysis
Supply Chain Management
Supply Chain
Management (Overall)
Incoming Interactions
Incoming Interaction
•
• Analysis & Problem Tracking (46%) &
Determine Requirements (31%)
• Timeliness largest driver (54%) with
remaining split evenly Stability,
Accuracy, & Completeness
High
Medium
Low
Supply Chain
Management (Overall)
Outgoing Interactions
High
Medium
Low
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Most low assessed interactions
occur in sub-processes
Outgoing Interaction
•
Most low assessed interactions
occur in sub-processes
• Buy/Repair (75%)
• Dispose of Excess Assets (25%)
•
Stability largest driver (38%)
Timeliness (25%) & Accuracy
(25%)
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
Page 11
Objectives
• Enterprise Interactions
• Process
• Stakeholder
• X- Matrix to assess alignment of •
•
•
•
Strategic Objectives
Metrics
Key Processes
Stakeholder Values
• Enterprise-level Wastes
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
Page 12
X-MATRIX
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0 0 0
Strategic Objective
0
0
0
0
0
0
Metrics
Stakeholder
Values
Key Processes
0 0 0
Enterprise Process
0 0 0
Enterprise Process
0 0 0
Enterprise Process
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
Stakeholder Value
Strategic
Objectives
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X-Matrix Assessment Process
• The grids in each corner of the matrix
represent potential interaction between
the row and column they connect:
•
•
•
•
Strategic objectives
Enterprise metrics
Enterprise processes
Stakeholders values
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X-Matrix Completion Process
•
Start in the upper left quadrant and move around
the matrix in a counter-clockwise direction
•
The following questions will help fill in the matrix
with either, strong, weak, or no interaction.
1. Is this strategic objective measured by this
metric?
2. Does this metric measure performance of this
process?
3. Does this process contribute to delivering this
stakeholder value?
4. Is this stakeholder value represented by this
strategic objective?
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Metric Alignment with
Strategic Objectives
• Do the metrics currently employed align to
the strategic objectives?
• What is the relationship between the
metrics and the strategic objectives?
• Do the metrics accurately evaluate
enterprise performance and
achievement of strategic objectives?
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Metrics Alignment with Processes
• Do the enterprise metrics measure the
performance of the enterprise processes?
• What is the relationship between the
metrics and the processes?
• Do the metrics flow down through the
organization in a logical manner to
measure process performance?
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Process Alignment with
Stakeholder Values
• Do the enterprise processes deliver the stakeholder values for the enterprise?
• How well do the enterprise processes
deliver value to the stakeholders?
• Which processes deliver the most value? which deliver the least?
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Strategic Objectives Alignment with
Stakeholder Values
• Do the strategic objectives represent the
stakeholder values?
• Are the strategic objectives well
aligned with the stakeholder values?
• How many stakeholder perspectives
are represented by the strategic
objectives?
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X-Matrix
Achieve high performance on every
high importance stakeholder
Lead the industry on performance survey results
b
1
3
4
b
b
0
2
2
4
3
7
2
2
4
Eliminate the manpower shortfall
Reduce cycle time for every process
by 50%
b
b
b
b
b
b
b
b
b
y
y
b
y
b
b
y
b
b
y
b
y
y
b
y
b
y
b
y
y
b
b
b
y
b
b
b
b
b
y
b
b
y
b
b
b
b
b
b
b
y
y
b
b
b
b
Consistent application of rules( Union)
y
y
y
b
b
b
y
Implement plan
y
y
y
b
b
b
y
y
b
y
b
y
y
b
b
y
y
b
b
y
Monitor and report status
b
y
b
y
b
b
b
b
y
y
b
y
b
b
y
y
b
b
y
y
b
b
y
y
y
b
b
y
b
y
b
b
b
b
y
b
b
b
b
b
y
b
b
b
b
b
b
y
Budget
b
Buy/repair assets
y
Distribute assets
b
Dispose of excess assets
y
b
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y
y
Determine requirements
b
b
b
Disposition
Tech Orders/Libraries
Recognition (Employee)
y
b
y
y
b
y
y
(Leadership)
y
b
Key Processes
Resources to do job (Employee)
y
y
Stakeholder
Values
Metrics
Competent managers( Union)
b
b
Stable Requirements (Suppliers)
Percent on time delivery for all
products and services vs. schedule
b
Develop plan
Product availability
Percent on cost for all delivered
products and services vs. budget.
Determine requirements
y
Number of entries in high
importance/low performance
y
b
b
y
b
b
b
b
y
b
b
b
y
b
b
y
y
b
b
b
y
b
y
b
Deliver on time - every time
Deliver a quality product (material
and intellectual) the first time
Improve product availability by 20% by implementing PBL.
b
y
0
5
5
Deliver on cost - every time
Strategic
Objectives
b
b
0
5
5
b
y
y
b
2
4
6
y
b
y
b
b
y
Easy to do business with (Suppliers)
Number of deficiency and other error
reports
b
cycle time for each process vs. "prelean” baseline
Manpower requirement less authorized
Aggregate cost of delivered products
and services in then year dollars
Performance survey scores compared
to industry averages
b
1
3
4
b
b
y
1
7
8
Information; ad hoc requests
b
b
0
8
8
Information; performance measurement
b
7
2
9
y
b
y
b
y
y
y
y
b
y
b
y
Workload)
b
b
y
y
y
y
y
y
Plan
b
b
y
y
y
y
y
b
Schedule
b
b
y
y
y
y
y
b
Production
b
y
b
b
b
b
Material support
b
b
b
Quality
y
y
y
b
b
b
b
y
b
b
b
b
b
y
b
y
y
b
y
y
y
b
y
y
y
y
b
b
b
b
y
y
b
y
y
b
y
y
b
b
y
y
y
y
y
y
y
y
b
b
y
y
y
b
y
y
y
y
y
b
b
y
b
b
b
b
y
y
y
y
y
y
Page 20
y
y
y
y
y
y
y
y
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
y
Timely deliver of physical assets and
information
(End User)
b
7
2
9
b
Eliminate cost growth
b
0
5
5
Quality parts, systems, software
b
0
3
3
(End User)
0
1
1
Stable and reasonable prices
0
1
1
(Customer)
0
1
1
Proactive, frequent communications
0
1
1
(Customer)
0
1
1
Meet customer metrics/standards
0
1
1
(Leadership)
0
1
1
Sustainment performance
0
1
1
(Leadership)
0
1
1
b
b
y
b
y
Objectives
• Enterprise Interactions
• Process
• Stakeholder
• X- Matrix to assess alignment of •
•
•
•
Strategic Objectives
Metrics
Key Processes
Stakeholder Values
• Enterprise-level Wastes
ESD.61J / 16.852J: Integrating the Lean Enterprise
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
Page 21
Production Wastes
Waiting: Idle time in which no value is added
Transportation: Excessive movement of material, tools or parts
Over-processing: Effort expended which does not add customer value
Inventories: Accumulations of materials beyond JIT requirements
Unnecessary Motion: Any human movement that does not add value
Product Defects: Any item that does not meet specifications
Over Production: Producing more or sooner than required
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Information Wastes
Waiting: Idle time due to unavailable information
Transportation: Unnecessary movement of paper, people, or bits
Excess-processing: Processing information beyond requirements,
e.t., unneeded precision
Inventory: Information that is unused or is “work in progress”
Unnecessary Motion: Any local human movement necessitated by
poor Information System design
Defects: Any element of data, information or intelligence that is
erroneous
Over Production: Producing, duplicating and distributing more
information to more people than is needed
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Enterprise Level Wastes
• Waiting/Delays • Excessive Transportation
• Inappropriate Processing/Ineffectual Effort • Inventory
• Excessive Motion
• Defects/Rework
• Over Production
• Structural Inefficiencies
• Opportunity Costs
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Waiting/Delays
Idle time due to late decisions, cumbersome and excessive approvals, and unsynchronized enterprise processes
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Waiting/Delays
Idle time due to late decisions, cumbersome and excessive
approvals, and unsynchronized enterprise processes
Examples
Causes
In making decisions
Unnecessary levels/steps in decision structure and approval processes
Multiple handoffs
Information unavailable or inaccessible
Risk aversion mentality
Inflexible policies and procedures
Excessive rules and regulations
In administrative
processes
Undisciplined processes and practices
Variability in enterprise processes
Lack of standardization
Lack of common tools and systems
Errors in data
Linear, serial task sequencing
Batch and queue mentality in enterprise processes
Lack of flow—lack of level scheduling of administrative processes
Unsynchronized enterprise processes
Delays in information processing, dissemination and consequent actions
Ineffective, inefficient business systems
Lack of connectivity and interoperability
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Excessive Transportation
Unnecessary movement (including electronically) of administrative information and people; multiple approvals and handoffs
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Excessive Transportation
Unnecessary movement (including electronically) of administrative information and people; multiple approvals and handoffs
Examples
Causes
Movement of forms, reports,
other paperwork
Poor design of business
processes
Multiple handoffs
Unsynchronized enterprise
processes
Expediting administrative
paperwork
Poor design of business
processes
Dispersed facilities
Poor location decisions
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Inappropriate
Processing/Ineffectual Effort
Effort expended that does not increase value to
any of the enterprise’s stakeholders; can occur
within the workforce, within management ranks, or
across the entire enterprise
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Inappropriate
Processing/Ineffectual Effort (cont.)
Effort expended that does not increase value to any of the enterprise’s stakeholders; can occur within the workforce, within management ranks, or across the entire enterprise
Examples
Poor enterprise
performance
Causes
Inefficient, ineffective process interfaces
Physical, information and conceptual disconnects—lack of connectivity
and interoperability
Lack of standardized processes; lack of common tools, systems and
platforms
Bloated middle management
Outdated, counterproductive financial systems & performance measures
Enterprise managers not on the same page
Inflexible policies and procedures, excessive rules and regulations
Organizational rigidity, lack of responsiveness and adaptability
Unsynchronized enterprise processes
Wrong metrics
Poor strategy execution
Business systems are cumbersome and disconnected
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Inventory
Unnecessary levels of any enterprise resource: capacity, space, workforce, suppliers, information/data
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Inventory
Unnecessary levels of any enterprise resource: capacity, space, workforce, suppliers, information/data
Examples
Causes
Excessive capacity
Poor planning
Excessive space
Poor planning, redeployment of freedup resources
Excessive workforce
Poor planning, redeployment of freedup resources
Excessive technical staff
Poor staffing planning
Excessive suppliers
Lack of rationalized lean supply chain
network
ESD.61J / 16.852J: Integrating the Lean Enterprise
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Excessive Motion
Any human effort that does not increase stakeholder value.
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Excessive Motion
Any human effort that does not increase stakeholder value.
Examples
Causes
Redundant activities
Poor integration
Excessive and uncoordinated
initiatives
Chasing fads
Wasted effort
Excessive number of meetings,
status reporting
Unsynchronized enterprise
processes
ESD.61J / 16.852J: Integrating the Lean Enterprise
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Defects/Rework
Erroneous results from defective enterprise processes and decisions
ESD.61J / 16.852J: Integrating the Lean Enterprise
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Defects/Rework
Erroneous results from defective enterprise processes and decisions
Examples
Causes
Errors
Physical information and conceptual disconnects—lack of connectivity
Undetected errors in data entry and processing
Out-of-date policies and procedures—lack of configuration control
Variation in enterprise processes
Misinterpretation of data
Incorrect,
inappropriate
decisions
Optimizing within one function causes sub-optimal enterprise performance
Errors (defects) in enterprise processes
Unsynchronized enterprise processes
Misinterpretation of processes information
Confusion regarding roles and responsibilities
Lessons learned are not captured and archived
Decisions re-decided or changed later
Excessive metrics, inappropriate metrics
Poorly prepared and facilitated meetings
Multiple handoffs
ESD.61J / 16.852J: Integrating the Lean Enterprise
© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Overproduction
Any creation of enterprise outputs that does not increase stakeholder value
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Overproduction
Any creation of enterprise outputs that does not increase stakeholder value
Examples
Causes
Excessive dissemination “Push” mentality prevails
of data, reports
Outdated policies and procedures
Wrong metrics
Over-managing
Lack of appropriate delegation, employee empowerment
Command and control mentality prevails
Exuberant pursuit of
illogical initiatives
Too many “movements” (initiatives) being pushed, some at
cross purposes, leading to diffusion of commitment
Failure to stay grounded in fundamentals
Over-reliance on “solutions of the month”
Marketing campaign
Belief that “pushing” sales via incentives will result in
overall increase in sales volume, but usually results in short
term demand amplification and then sharp drop in demand
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Structural Inefficiencies
Waste resulting from inappropriate organizational structure, policies, business model structure, alignment, or strategies
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Structural Inefficiencies
Waste resulting from inappropriate organizational structure, policies, business model structure, alignment, or strategies
Examples
Causes
Organizational Redundant activities, overlapping command and control
structure
Failure to deploy critical resources horizontally along the value
stream
Bloated middle management
Unclear chain of command
Unsynchronized enterprise processes
Supplier
relations
Tendency to view suppliers in an adversarial way
Failure to create “win-win” relationships
Reluctance to share detailed operations data
Partner
relations
Lack of interconnectivity and interoperability
Reluctance to share detailed internal data
Customer
relations
Failure to focus on customer needs and values
Failure to anticipate how we can help our customers be successful
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Opportunity costs
Wastes resulting from lost opportunities, e.g., untapped talent in the workforce
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© Deborah Nightingale, 2005 Massachusetts Institute of Technology
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Opportunity costs
Wastes resulting from lost opportunities, e.g., untapped talent in the workforce
Examples
Causes
Customer
disconnects
Remoteness from customer
Failure to focus on what customer values
Untapped
talent in
workforce
Failure to capitalize on the whole person by helping each
employee grow to full potential; underutilization of people
Inappropriate reward/incentive systems
Failure to view
knowledge as
a corporate
asset
Managers unaware of potential of knowledge management
No tradition of capturing lessons learned, of growing
corporate knowledge base, lack of knowledge transfer
internally
Unmotivated
workforce
Workforce not empowered, people have no authority or
accountability
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Enterprise Monuments
• Centralized command and control structure
• Fragmented, multiple legacy information systems
• Highly bureaucratic and/or stagnant rules, regulations and
procedures
• Excess layers of management
• Highly concentrated, centralized headquarter facilities
• Excessive, bloated corporate staff functions
• Monolithic functional organizations (Silos): Purchasing, H.R.,
Finance, Engineering, etc.
• Facilities in disparate locations
• Strategic objectives not in alignment
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