Strategic Perspective to
Fleet’s Total Cost of
Ownership
Most Organizations
Struggle to Stay
Competitive
While a few seem to find ways to
become truly exceptional!
The DIFFERENCE?
• Becoming Principle Focused
– Correct Principles!
– Traditional wisdom is frequently based on:
• Incorrect or outdated principles
• Only one principle at a time
Becoming PRINCIPLES Driven
Example
• If it’s not broke, don’t fix it.
– Traditional ‘common sense,’ that doesn’t
make any sense at all
Shigeo Shingo
Shigeo Shingo
IF IT’S NOT BROKE, BREAK IT
CHALLENGING THE STATUS QUO – PRINCIPLE FOCUSED
Cost Management/Control
– How is it that so many organizations focused
on lower costs, never achieve greatness (or
real significant cost reduction, for that
matter)?
Cost Management/Control
• Narrow focus?
• Wrong focus?
What is the Correct Principle?
• Accelerate the FLOW of VALUE
• And its converse – Identify and Eliminate
Waste
Focus on Flow of Value
•
•
•
•
•
What is value?
What is waste?
What is flow?
Flowing Value – Principle based Focus!
Identify and Eliminate Waste –
– Everyone can contribute – every day
7 Wastes
1.
2.
3.
4.
5.
6.
7.
Over-Production
Inventory
Waiting
Defects
Motion
Transportation
Over-Processing
Economies of Flow
• Reduced Lead Time
–
–
–
–
Increased reliability and predictability of results
Reduces Flow Time
Matches supply to demand and sustains pricing levels
Improves responsiveness to demand and product
changes
– Reduces overall customer inventory
– Reduces customer time to market (or similar)
Economies of Flow
• Cost
– Quality
• Reduced costs of poor quality – inspection, rework, scrap,
etc.
– Quality must improve as flow velocity increases
– Less inventory makes defects more obvious
– Productivity
• Decreases work time that is non-value added
• Reduced overhead functions like:
– Purchasing
– Planning & Control
– All accounting for these
• Reduced inventory control points and complexity
• Decreases needless movement of product
Economies of Flow
• Cost (cont.)
– Lower capital investment
•
•
•
•
Less space
Smaller equipment & less complexity
Lower inventory costs
Significantly improved operational equipment availability
• Increased Value
– Less Feedback Delay speeds improvement rate
– Closer positioning improves communication and
feedback
– Complex systems improve rapidly
– Clear determination of value added and non-value
added
Necessary but NOT Sufficient
• The principle - Flowing Value - is
absolutely necessary
• There are other principles that are also
required to achieve greatness
• The other principles magnify the impact of
Flowing Value
WHAT ARE THE
PRINCIPLES OF
OPERATIONAL
EXCELLENCE?
10 Principles
•
•
•
•
Nurture humility and respect for the individual.
All value is created through processes.
Maintain constancy of purpose.
Seek perfection.
•
•
•
•
•
See complex systems holistically, dynamically, and as closed loops.
Seek to understand value from the customer’s point of view.
Value can only be created with demand.
Accelerate the flow of value.
Embrace Jidoka: Separate people from machines and Stop and Fix
• Ingrain scientific methods throughout the organization. (Everyone is
a scientist)
High Velocity Organizations
• Imbed all of the principles of ‘operational
excellence’
• Recognize the interdependence of the of
the principles
• Nurture a culture of total employee
involvement in rapid continuous
improvement
• Achieve incredible results consistently
Principles Apply Everywhere
MIDDLE MANAGERS:
Develop systems in accordance with
Business Systems
Product/Service Development
EVERYONE:
Supply
Operations
Customer Relations
Concepts derived from Hino's book, "Inside the Mind of Toyota"
Quietly engages in work
system improvement (kaizen)
Management
Administrative
Management
Information
Management
Management
Financial
Management
Cost
Management
Delivery
Management
Quality
Planning
paradigms and culture,
Management
Exerts leadership through principle based
Human Resource
top management's
Internal direction
Support Systems
ADDITIONAL TOPICS AS
TIME PERMITS
Mental Models
• Traditional Mental Models (Not based on
Principles)
– Standard Costing
– Managers/Engineers make all improvements
– Keep moving even if we are going in the
wrong direction
– Empowering workers is giving up control
– Cost control systems control costs
Application of the model — like real
transformation — is not a sequential, wellcadenced progression throughout a company.
II. The Shingo Prize Model
a. Levels of Transformation
T
LEADERS
PRINCIPLES
T
MANAGERS
P
SYSTEMS
S
EMPLOYEES
S
P
TOOLS
THE PERFECT SYSTEM…
can not be designed into its work from
the start…no brain trust could ever
figure out in advance all the little
things that could go wrong.
COMPLEXSYSTEMS