Seamless Delivery Earns the Right to Innovate

“You have to earn the right to innovate with your customers,” the president of a medical device company recently stated, and nowhere is that statement more true than in operations.

Previously, medical device organizations relied on continuous improvement, six sigma, and Lean to improve. But they were missing the target since, in this industry, there is a strong need for operations to focus on fueling innovation, customer solutions, and technical breakthroughs, all to increase market share. While these goals used to be simply sales and marketing initiatives, today, operations play a significant role in them as well. But traditional approaches will not yield the results companies want. Instead, there is a new way, and a new target.

With increasing regulations, pricing pressures from insurers, and competition in emerging economies, medical device manufacturers have to work to set themselves apart in a crowded healthcare market. One of the best ways to differentiate themselves is through on-time, seamless delivery that fuels product innovation and technological solutions for customers.

Beyond Product Development
Medical device manufacturers typically invest heavily in the product development process, with a high level of detail required at each step, at each work station, on how to technically manufacture the product so the end result works as specified. Even when operations are part of this process, the focus is on workstation design, tooling, quality, method sheets, and the environment (clean room level, hair nets, gloves, etc.), which is at the process level, or where the work is done.

However, there are a number of activities required to move the product from one process to the next once complete, and significantly more activities that move the product through the factory from the receiving deck to shipping deck and to the customer. These activities use scheduling, expedites, management oversight, supervisors, foremen, plant managers, meetings, and more, all to deliver the product to the customer efficiently and with continuously improved lead time, cost, quality, inventory, and other operational metrics. While this reliability on intervention may get some results in delivery performance, it is not a recipe that fuels innovation and business growth.

Rather, a foundation is needed in the operation that will ensure a seamless delivery without the need for management intervention and create a high-performance company even in the rapidly changing medical device industry. The key element to create this foundation? A customer delivery system.

Designing for Delivery
In the factory, there is a formal system at each station describing the work to be performed. Called standard work, it tells employees exactly how to perform the steps at their specific operation to build the product. By contrast, there is not an equally established step-by-step process for the operation to deliver the product to the customer. Instead, most companies use planning tools, delivery dates, and management intervention to move (or, most often, expedite) the product through the operation and out to the shipping deck. That is where a customer delivery system comes into play.

By delivering the product day in and day out seamlessly, without the need for management intervention or meetings, managers will now have the time to innovate with customers and develop advanced solutions to capture market share. When setting out to create a system, the key word is “design.” Rather than creating value stream maps then looking at opportunities to improve, or doing a gap analysis and then running kaizens, a successful customer delivery system is designed using principles and guidelines.

In high-performance companies, management does not set goals or objectives for improvement and assign teams to accomplish tasks. Instead, managers teach the design guidelines of the delivery system and challenges their teams to apply them in the operation from end to end, including the office and even out to the supply chain, then measure success based on how little intervention is needed to deliver the product day in and day out.

It All Starts with Product Families
Before applying the guidelines, the first step is to deeply understand the concept of product families since, if misunderstood, applying the rest of the guidelines can be very challenging. Product families, by definition, are a group of products that go through similar processes or equipment (roughly 80 percent or more) and have similar work content (roughly 30 percent or less). A value stream is then simply the flow—both material and information flow—of a single product family.

To determine product families, a tool called a product family matrix can be used. To create a matrix, an operation lists all the processes in the columns and all the products in the rows. An X is placed where a product and process intersect. Later, the X is replaced by the time in the process or the process time (not to be confused with cycle time).

After the matrix is completed, the key is how to determine the families, which can be challenging. Rather than looking at the entire matrix, it is important to only consider the downstream processes where equipment could be dedicated to make the decisions. Later, different guidelines are used to handle the upstream shared resources.

Once the product families are established, the next step is to design the flow for each product family or the flow of value stream using a series of guidelines.

Guidelines for Flow
Rather than attempting to create flow by brainstorming, kaizen, and objectives, medical device manufacturers can apply a series of guidelines in order, regardless of how complex the operation. A critical point is that each set of guidelines is applied to each product family, one at a time, since the application may be different for each value stream.

The first series of guidelines are the basic eight of end-to-end flow. Most of these were first published in the book “Learning to See” in 1998 by Mike Rother and John Shook. They are:

• Takt: Takt time means the rate of customer demand. It is used to synchronize the pace of production to the pace of sales. Because of the variety in medical device manufacturing, an operation often has to use a more detailed definition of takt called takt capability. Takt capability is used to support mixed-model production as it takes into account the combined mix and volume to really understand customer demand and the effect on the product family.
• Finished Goods Strategy: A strategy should be in place for the finished goods supermarket that essentially resolves how an operation is going to signal the pacemaker (the single point of schedule) every day to know what to build next for its respective value stream. And it is a system rather than management, a sales strategy, or an objective on how much or little inventory is needed.
• Continuous Flow: Continuous flow means “make one, move one” production, the value of which is that material and information flow are bound together to reduce interruptions and not, as typically thought, simply for efficiency.
• FIFO: This “first in, first out” method of production between disconnected processes controls the sequence of production, signaling, and the amount of inventory needed to balance processes. If an operation cannot do continuous flow, then FIFO is the next best thing. There are many different types of FIFO systems depending upon the application, so a good understanding of the various types can really help, especially when encountering shared resources. FIFO is also a method to eliminate scheduling, which is very powerful in reducing management intervention as well.
• Pull: Supermarket pull systems, or kanban systems, are used to connect processes if and only if an operation is unable to use continuous flow or FIFO. Supermarkets are good to signal suppliers and material within the operation. It is important to think, however, about using a variation on FIFO whenever possible as supermarkets break flow. In other words, in medical device manufacturing, a kanban system is the last technique that should be tried to use to move product through the value stream. One piece flow and FIFO should be the connection of choice.
• Schedule Only One Point: This principle means there should be only one process in the value stream to which the production schedule is issued, identified as where flow stops and pull begins (also referred to as the pacemaker process—not to be confused with a bottleneck). It greatly reduces management intervention and expedites since information travels with the product through FIFO or continuous flow from the pacemaker to the shipping deck. No schedules or expedites are needed.
• Interval: The interval is the time it takes to cycle through the mix of part numbers within a designated product family. To start, an operation defines the interval at the pacemaker, then progresses upstream to shared resources to ensure they can support the pacemaker.
• Pitch: Pitch refers to how often an operation releases and takes away work from the pacemaker. It is a measurement of how the value stream, or more specifically, the pacemaker, is performing to customer demand or the current takt time. Pitch is also used to let every employee in the value stream know if the delivery to the customer is on time. The attributes of a good pitch require that it should be physical, visual, anticipated, and binary.

Once a company implements a designed future state using these guidelines, each employee, either on the shop floor or in the office, should be able to answer the following five questions:

• Where do I get my work from?
• How will I know what to work on next?
• How long will it take me to do my work?
• Where will I send it when finished?
• When will I send it?

None of the answers to these questions should include the terms “supervisor,” “schedule,” “priority list” or “it depends” in them. Instead, the designed flow should provide a single binary answer.

These series of guidelines are only the beginning. Depending on the operation, there are 10 guidelines for developing a mixed-model pacemaker, six for designing flow through shared resources, and nine for creating flow in business processes or office operations (see sidebar). While these guidelines are essential to the design of flow, even more significant is what the application of these guidelines will yield for the business.

Normal vs. Abnormal Flow
While most companies have learned to value stream map, they view it as a process in which they create a current state map, look for opportunities, identify kaizens to eliminate waste, and create a future state map with these wastes eliminated. That is the way they were simply taught. In contrast, the design guidelines have a very deep purpose in developing a customer delivery system. These guidelines develop a system where material and information are bound together so information moves with the product. While that is a breakthrough in itself, there is a much deeper purpose as well.

The guidelines provide organizations a designed blueprint of how the operation will deliver the product to the customer in a normal manner—or “normal flow.” Establishing normal flow is a huge step in the right direction toward medical device manufacturers’ new targets because each employee can learn to see the way the designed customer delivery system should work, day in and day out, and be able to tell if everything is moving along as designed.

Conversely, an even deeper concept at the heart of high-performance operations is abnormal flow. By defining normal flow, an operation also defines abnormal flow. Establishing exactly what abnormal flow is allows companies to develop standard work so the operation knows what to do when flow breaks down, without the need for management intervention. To be successful, abnormal flow needs to be visible in the operation.

Visuals that Reflect Customer Delivery
It is common to put visuals throughout the factory to organize it and improve the appearance. But frankly, they often miss the point. In a high-performance operation, the purpose of visuals in a factory is simply to see the status of flow.

Essential to a customer delivery system is providing a way for every employee to tell if the designed flow is working (i.e., normal) and, therefore, the delivery of the product is on time. They do not need white boards that supervisors maintain or plasma displays showing lots of information; they can tell simply by looking with their eyes. The key is to make the designed flow so visual that workers—and even visitors—can tell if the operation is on time to customer demand with little or no reading and without asking any questions.

A color-coded system that reflects the design and is consistently used throughout the operation can be very valuable in this effort. Imagine lines taped on the floor for a FIFO lane in the colors green, yellow, and red. If inventory is in the green section of a FIFO lane, that is normal. The yellow section means “warning track or starting to become abnormal,” and a red section means “reaction is needed” (Figure 1). Each employee would know exactly what a problem is and when to react. Add standard work to this and they will also know what to do without seeking out a supervisor.

This common color scheme can be used anywhere in the operation, even in non-traditional places of flow such as the shipping department. For example, an organization can put down color-coded lines in shipping to indicate timing and ship frequency for products. As parts are produced throughout the day, they are loaded into the shipping area, and there would be a designed rate in which products would show up on the shipping deck. A quick walk by the shipping deck and a look at the tape on the floor and where product is placed along the tape would let each employee, and even a visitor, know if the operation is on time to customer demand.

By using a visual system that reflects the designed flow, it becomes possible to determine if the entire operation is on time without meetings, printouts, or reports (Figures 2 and 3). When it is not, employees can take action on their own from a menu of responses. In that way, the frontline employees, rather than management, can correct the flow according to pre-established standard work for abnormal flow. The result: an operation that is designed to run seamlessly and autonomously day in and day out delivering products to satisfied customers—earning the right to innovate with them in the process.

Changing the Target
In the medical device industry, the target for operations is to be efficient. Time is spent trying to be Lean, eliminate waste, reduce cost and inventory, and increase productivity to achieve this target. High-performance companies, however, have changed their targets. They strive to deliver seamlessly to customers without the need for management intervention in order for the operation to fuel innovation and customer solutions to increase market share and business growth. Their operations understand just how important it is to “earn the right to innovate with your customers.”  

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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. As the founder of the Institute for Operational Excellence—an educational center on Operational Excellence—and president of Duggan Associates—an international training and advisory firm—he has assisted many major corporations worldwide. A recognized expert on Operational Excellence, Duggan is a frequent speaker, master of ceremonies, and panelist at international conferences, and is regularly featured in industry publications.