Getting Back on Offense

For many years, companies in the medical device industry have been making improvements to quality, efficiency, and productivity by embracing lean, Six Sigma, and other continuous improvement (CI) philosophies. While the efforts are positive and should continue, the medical device industry is a fast-changing one, with new technologies and innovations leading the way to increased market share. The challenge then becomes: How can the continuous improvement journey be leveraged not just to eliminate waste and improve quality and efficiency, but to support capturing market share and business growth? The answer lies in the attitude and approach to using continuous improvement tools to break the mold on traditional thinking.

The phrase, “If you build it, they may not come,” probably explains this issue best. Building a waste-free factory, a lean operation, or an operation based on a Six Sigma program does not guarantee increased market share and business growth. That’s because even though a company has an efficient factory, competitors may have the products and solutions customers want. Therein lies the end game: having a continuous improvement program that is specifically and strategically targeted to provide customers with the products and solutions they seek. It’s a big jump, and a bit of a leap in the continuous improvement world, but it is exactly what progressive manufacturing operations in the medical device industry have done to grow their businesses.

From CI to Self-Healing Flow
The shift starts with the goal of the CI program itself, which is traditionally a never-ending journey of continuous improvement. Instead, it should be a journey with a destination. That means rather than trying to improve each day, the objective is to move the operation from point A to point B. The key to accomplishing this is to establish what point B is, and understanding normal versus abnormal flow is essential in the process.

Flow specifically means the flow of information from the customer through the operation and back to the customer when the product or service is delivered, as well as the material flow, or how materials move through the supply chain and through the factory. Embedded in the concept of flow is quality. In other words, flow cannot exist without quality (in the office and on the shop floor). Therefore, quality defects are also flow interruptions. The overall operational concept is that all employees should understand the normal flow of products and services to the customer. Once that occurs, an operation establishes something monumentally more important—the ability to see abnormal flow.

If employees can see what abnormal flow is, they can be taught what to do to resume the flow when it breaks down. In fact, employees will even get to the point where they see abnormalities occur and address them before they impact the customer. And all this happens without management intervention.

Operational Excellence for Business Growth
How does self-healing, autonomous flow lead to market share and business growth? Think about how much time is spent by management dealing with abnormal flow conditions, how many status meetings are held to prevent them, how many emails are exchanged, how much effort is spent chasing information. All of this time and much more is freed up, and management can then focus on offense, or the activities that grow the business. This means talking with product development and integrating operations upfront at the top of the innovation funnel. It means operations spending time with sales and even visiting customers to discuss the development of products and services their operations can currently support or stretch to meet customers’ needs. It means that operations, sales, and marketing are acting as one in supporting the company’s brand and focusing on both existing customers and potential new customers.

This concept can be summed up into two words: Operational Excellence, which is defined as when “each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.” Operational Excellence is not about eliminating waste or increasing efficiency; it’s about leveraging operations for business growth. As the president of Micropump, an IDEX company, elegantly said, “You have to earn the right to innovate with your customers.” And Operational Excellence enables companies to do just that. By separating normal from abnormal flow and teaching employees how to correct flow without management intervention, organizations create a seamless delivery of high-quality products and services to the customer, the result of which is the ability to talk to the customer about how they use the products and services and what they will need in the future. If a company tries to have this conversation when on-time delivery is only 90 percent and quality is 92 percent, it won’t be an easy one.

Operational Excellence is more than a theory or concept. It is an achievable state with a roadmap, or process, to get there using lean tools and applying process control techniques such as Six Sigma, DMAIC, PDCA, and others to design the future state. The key word here is design, which means using guidelines (not brainstorming or kaizen) to develop a future state of process connections that establish normal flow.

Designing Flow for Operational Excellence
Let’s start with a process. A process is defined as the work that is completed between two points where inventory stops and accumulates. All the work that takes place between these two points is considered part of one process. For example, if one collection of accumulated parts is waiting to be processed in front of a workstation and another collection of accumulated parts that has already been processed is waiting after the workstation, then all the work performed at that workstation would be considered part of one process. Typically, the work done within the boundaries of a process is completed in one-piece flow, or “make one, move one” fashion. It’s okay if one part stops in between the activities being performed at a workstation; as long as the parts don’t accumulate within the workstation, then the activities that take place there are all considered part of the same process (Figure 1).

It is at the process level where improvement techniques like Six Sigma, DMAIC (define, measure, analyze, improve, and control), and others are applied. The goal of these process improvement techniques is to reduce or eliminate process variation as much as possible in the pursuit of quality. In fact, creating and maintaining process and quality control are so fundamental to the success of medical device manufacturers that they’re essentially the price of admission to conducting business.

The next level of flow is the value stream level (Figure 2). A value stream is defined as all activities, both value added and non-value added, required to bring a product from raw material to the customer.¹ Value streams are defined by product families for operations, which are groups of products that go through similar downstream processing steps or equipment. Think of a value stream as being the flow of a product family.

Value streams are extremely important in Operational Excellence, and how value stream mapping is applied separates companies that can achieve Operational Excellence from those on a never-ending journey of waste elimination. Typically, companies have been taught that value stream mapping involves five high-level steps:

1. Create a current state map to help visualize the manufacturing environment.
2. Form cross-functional teams to identify the waste evident on the current state map.
3. Brainstorm ideas and hold kaizens (rapid improvement events) to solicit ideas on how to improve the current state. Negotiate with various personnel and seek agreement.
4. Present to management on what can be done.
5. Form teams and attempt to implement the agreed-upon future state.

By contrast, in Operational Excellence, an organization maps the current state of a product family, then applies guidelines to design the future state. These guidelines handle true manufacturing realities like mixed model production and creating flow through shared resources on the shop floor. Guidelines are also used to design the flow of information in the offices.

In manufacturing, the first set of these guidelines (there are more detailed guidelines for mixed model and shared resources) are as follows:²

1. Takt—The rate of customer demand
2. Finished goods strategy—How the operation will know what to build next for each value stream
3. Continuous flow—A method of production that produces parts in a “make one, move one” fashion
4. FIFO—A method of production between disconnected processes that makes parts “first in, first out”
5. Pull—A method of production between disconnected processes where a fixed amount of inventory is held and consumed on an as-needed basis
6. Schedule only one point—The one process in the value stream to which the production schedule is issued, identified as where flow stops and pull begins. This is also referred to as the pacemaker process
7. Interval—How long it takes the pacemaker process to cycle through each part in a given product family
8. Pitch—The management timeframe, or how often completed parts are taken away from the pacemaker process

In the office, the guidelines used to create flow are different. They are:³

1. Takt capability—Since demand can be difficult to determine, multiple capabilities of what the office can produce within a given timeframe are set
2. Continuous flow—Creating part-time processing cells where work is completed in a “process one, move one” fashion (these can be live or done digitally through email)
3. FIFO—A “first in, first out” method of completing work that preserves the sequence and volume of work between processes
4. Workflow cycles—The preset times at which work flows through the office and the physical pathways on which it flows, which establish a guaranteed turnaround time for the completion of work
5. Integration events—These are used to move large quantities of information from one area of the company to another on a one-time basis (e.g., closing out the books for a fiscal quarter)
6. Standard work—Work is categorized into two types: the activity level, which describes the best method for performing each task, and the flow level, which describes how each process is connected to the next (e.g., timing, WIP, etc.)
7. Single-point initialization—The one process at which work is introduced into the flow from outside the value stream, which should be as far upstream as possible
8. Pitch—A preset timeframe that lets everyone know visually if the flow is on time
9. Changes in demand—A “Plan B” that can be enacted when demand shifts up or down, usually involving switching to a different takt capability

These nine guidelines enable a company to know if the office is on time and create a guaranteed turnaround time for the work produced by the office, meaning that if a customer request comes in by noon, it will be out by 4 p.m. the next day, guaranteed, without emails, phone calls, or meetings required to get it done.

OpEx for Offense
Following these sets of guidelines enables an organization to create a definition of normal flow. By definition, everything else is abnormal flow. By then creating visual flow that enables employees to distinguish normal from abnormal, meaning the employees see and fix abnormalities as they occur, managers no longer have to spend time fixing problems or preventing abnormal flow occurrences from negatively impacting customers. Leaders can then spend their time on offense, or the activities that grow the business.

In fact, once an organization achieves Operational Excellence, everyone will be able to work on offense. Floor-level employees will work on improving standard work to correct abnormal flow, minimizing future flow disruptions and their impact on customers. Supervisors will work on integrating new product lines into the operation and supporting new customer requirements. Managers and leadership will focus on growing the business, acquiring new customers, and breaking into new markets.

In all cases, very little time will be spent fixing flow problems because the flow will be self-healing, which opens up tremendous possibilities for the organization. Medical device manufacturers will no longer be limited to supplying parts to customers, but instead, can integrate them into their product development cycles and become solution providers, using the benefits of Operational Excellence to enter previously untapped markets and consolidate positions in existing ones.
Operational Excellence is achieved by following an eight-step process or roadmap to get there:⁴

1. Design lean value streams.
2. Make lean value streams flow.
3. Make flow visual.
4. Create standard work for flow.
5. Make abnormal flow visual.
6. Create standard work for abnormal flow.
7. Have employees in the flow improve the flow.
8. Perform offense activities.

IDEX Health & Sciences: Rhonert Park
This overarching roadmap or process is exactly what high-performance medical device companies are following to improve their market share and growth. And they do it rapidly, not on an endless journey. Take, for example, IDEX Health & Science (IH&S), which applied this thinking to improve its organization and business performance significantly while other medical manufacturers were struggling to survive.

Headquartered in Rohnert Park, Calif., IH&S consists of five manufacturing operations in the United States that produce advanced fluid-handling solutions for a wide range of analytical instrumentation and in-vitro diagnostic systems, including engineered diagnostic systems, precision valves, filters, tubes, and fluid transfer systems.⁵
IH&S applied Operational Excellence in the mid-2000s and experienced strong results in 2010, despite the recession. By formally educating the employees at Rohnert
Park in the principles and guidelines of flow and challenging them to create flow that could operate without management intervention, even when things went wrong, the team at Rohnert Park not only reduced lead time and inventory and increased quality and on-time delivery, it was also able to significantly reduce the amount of management intervention required in the day-to-day operation of the flow. In fact, during that period, the production supervisor spent only 30 minutes each day dealing with flow problems and the rest of the day working on offense, including continuously improving the company’s value streams and working with engineering personnel on the launch of new products.

By embedding the principles of Operational Excellence into its operation and following the formal guidelines for creating flow for manufacturing, mixed model pacemakers, shared resources, and the office, Rohnert Park witnessed exceptional results in a period that was terrible for U.S. manufacturing:

• New system and product sales increased by 50 percent from 2009 to 2010.
• Growth was three times that of the market average in 2010.
• Overall growth was 20 percent from 2010 to 2011.
• During this period, the general manager spent about 60-70 percent of his time on offense, and the operations leader was out visiting customers.

By applying the principles of Operational Excellence and creating robust, visual, self-healing flow, IDEX Health & Science and Rohnert Park positioned itself to work on offense at every level of the organization and grow the business, both during tough economic times and well into the future. 

References

1. Shook, John and Mike Rother. Learning to See. The Lean Enterprise Institute. Cambridge, MA. 2003.
2. Ibid. Many of these guidelines were first published in Learning to See.
3. Duggan, Kevin J. and Tim Healey. Operational Excellence in your Office: A Guide to Achieving Autonomous Value Stream Flow with Lean Techniques. Productivity Press. New York. 2016.
4. Duggan, Kevin J. Design for Operational Excellence: A Breakthrough Strategy for Business Growth. Mc-Graw-Hill. New York, 2011.
5. http://bit.ly/lean091601 (Accessed Aug. 2, 2016).

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Kevin J. Duggan is a renowned expert in applying advanced lean techniques to achieve Operational Excellence and the author of four books on the subject: “Design for Operational Excellence: A Breakthrough Strategy for Business Growth,” “Creating Mixed Model Value Streams,” “Operational Excellence in Your Office: A Guide to Achieving Autonomous Value Stream Flow with Lean Techniques,” and “Beyond the Lean Office: A Novel on Progressing from Lean Tools to Operational Excellence.” As the founder of the Institute for Operational Excellence, the leading educational center on Operational Excellence, and Duggan Associates, an international training and advisory firm, Kevin has assisted many major corporations worldwide, including FMC Technologies, Chromalloy, Aetna, SpaceX, Caterpillar, Pratt & Whitney, Singapore Airlines, Sikorsky, IDEX Corporation, and Parker Hannifin. A recognized expert on Operational Excellence, Kevin is a frequent keynote speaker, master of ceremonies, and panelist at international conferences, and has appeared on CNN and the Fox Business Network.