Manufacturing’s Role in Lean Healthcare

One of the better presentations I heard recently about lean in healthcare focused on what may be an important trend in this area – manufacturers helping healthcare organizations get better.

            I previously wrote about the scary opportunity of lean healthcare, as described at the recent AME conference by Dr. John Toussaint of Thedacare. A workshop at the same conference featured the efforts of GM to help transform the University of Michigan academic health system.

            I’m sure some of you share the feeling I have of skepticism about whether GM is the best teacher of lean. (Can you say Toyota?) However, GM has learned a few things about lean from the battering it’s taken in the marketplace. And to her credit, Sheila Hainsworth of GM, a lean implementation manager and the conference presenter, admitted that when GM first started to learn about lean from its NUMMI joint venture with Toyota, “we didn’t drive lean into the culture of the organization.”

            In any case, the university undoubtedly is willing to take lessons from GM, regardless of the automaker’s credentials, because the company is a big customer. GM spent $5.3 billion on healthcare in 2005, and when that kind of customer talks, you listen.

            The university perspective was offered by Dr. John Billi, who holds several titles, including associate vice president for medical affairs. UM hospitals and health centers provide 817 beds plus 1.6 million outpatient visits, and employ 10,000. Meanwhile, the medical school has 1500 faculty physicians, 995 resident physicians and 690 medical students.

            GM has been providing training to the medical system, including classes at GM University in Pontiac, a visit to the Lansing Grand River auto plant, and plenty of GM materials, tools and templates. The automaker also coached initial learning projects and provided training for medical system coaches.

            The improvements so far include:

  • An increase in vascular lines placed within 12 hours (an important action for certain heart patients) from 35 percent to 71 percent, reducing by 46 percent the number of cases needing interventional radiology.
  • In surgical ear/nose/throat cases, an increase in the number of histories and physicals completed at pre-op visits from 75 percent to 99 percent.
  • A reduction in the time to schedule MedSport appointments in orthopedics from 23 days to two and a half minutes.

            There are plenty of other examples. The university’s effort (called the Michigan Quality System) is now in its second year and is involved in everything from developing lean leaders to mapping key value streams to broadening the initiative’s rollout.

            What I found most heartening is that Billi (and presumably others at the university) seemed to understand that lean is not a quick fix, and means never-ending continuous improvement.

            “We look at this as the marathon,” he said. “This is the long race.”



Warren Buffett Likes Lean

I don’t normally write about awards, particularly those given by one company to another, because they rarely have significance to anyone other than the people involved.

            However, a recent award announcement intrigues me. I’m hoping it may indirectly help the cause of lean production.

            NetJets, an operator of private business jets, has given what it describes as its first-ever Annual Performance Award to Cessna, a division of Textron. Why? Cessna, which maintains jets for NetJets, used what a news release describes as “Six Sigma lean improvement processes” to decrease maintenance down-time on the jets by 30 percent, or four days per jet operated. NetJets is Cessna’s largest customer.

            So why is this interesting? NetJets is owned by Berkshire Hathaway – which, as anyone who follows business knows, is essentially a holding company for the investments of Warren Buffett, the world’s second-richest man.

            Actually, I’m not sure if he’ll still be the second-richest man after he gives a huge chunk of his money to the foundation of his friend, Bill Gates, who is number one. However, that’s not the point.

            The point is, when Warren Buffett speaks, people listen. And if Warren Buffett is saying, in effect, that applying lean principles works, maybe the cause of lean will get some increased attention and a few more devotees.

            Now Buffett himself didn’t actually say anything about lean. In fact, he isn’t even mentioned in the Cessna news release, though Berkshire Hathaway is. The only person quoted in the release is Ron Chapman, senior vice president of customer service at Cessna (who issued a humble, obligatory thank-you).

            But clearly, one of Buffett’s companies is sending a signal that it likes lean suppliers. That’s a start. I look forward to hearing more.



Lean Healthcare: A Scary Opportunity

Healthcare, and how it can be improved with lean principles, is simultaneously a huge opportunity and an incredibly scary situation.

            I’ve written about this before (Standard Work Saves Lives). But it’s one thing when I say it. It’s something else when the head of a major healthcare organization makes this point.

            I’m referring to Dr. John Toussaint, CEO of ThedaCare, an operator of hospitals and other healthcare facilities. Toussaint was a keynote speaker at the AME conference in Dallas last week, and he delivered a clear, on-point address about what needs to be done.

            Application of lean to healthcare is an area of growing interest. (There were a few other healthcare-related sessions at the conference, some of which I’ll also be writing about in the near future.) The most encouraging thing about the speech was that Toussaint gets it – he understands what lean is all about, and is a champion for its application.

            “Healthcare is a black box as it relates to performance,” he said. “It’s about time for that to stop. It’s about time to make data-driven decisions.”

            He commented that hospitals have an excellent quality record when it comes to blood transfusions and anesthesia, but quickly noted the reason: “These are the only two things in America done exactly the same at every hospital.”

            He then noted efforts at a Thedacare hospital to improve care related to heart attacks. These efforts focused on making sure that certain simple procedures, which apply to almost all heart attack victims, are performed, and are done when they should be done. These include giving the patient an aspirin, giving the patient a beta blocker, making sure that insertion of an artery-opening catheter occurs within 90 minutes.

            Toussaint said his hospital lowered its defect rate in these areas by one-third. That’s the good news. The bad news is that they still operate at a rate of 66,000 defects per million opportunities – not very good by lean or Six Sigma standards.
            Even worse, the hospital’s performance puts it in the 95th percentile for all hospitals. Imagine going for treatment to a hospital in the 10th percentile.

            Beyond the quality issues are the financial issues. “It’s possible to take $1 trillion out of the healthcare system in America,” Toussaint declared.

            The biggest issue in achieving improvement, not surprisingly, is change management. “Our professionals are fearful they’re going to lose control,” he said.

            Toussaint is an early adopter. I hope that he represents the leading edge of a revolution about to take place in the healthcare industry. Our lives may depend on it.


A New, Enterprise Shingo Prize

A new branch of the Shingo Prize honoring a division or a whole company, not just a single plant, will be rolled out next year.

            That’s the word from Ross Robson, executive director of the Shingo Prize. He notes that the criteria for the prize (originally established in 1988) have always been heavily, though not exclusively, focused on manufacturing. The existing criteria will be maintained, but “we are in the process of developing enterprise-wide criteria,” Ross says, with more emphasis on lean in the office and administration, covering everything from research and development to marketing to customer service.

            I’m delighted to hear this news. I recently commented on the need for such a prize when I wrote about Best Plants, Lean Benchmarks and Role Models.

            The Shingo Prize organization is following the same path of many smart, growth-oriented companies, in that it is looking for ways to leverage its brand. Only last year, its board authorized a new public sector prize, with the first public sector conference just concluded. And plans set in motion three years ago have led to the first state-level prizes being awarded, with more likely to come.

            The Shingo Prizes are awarded based on implementation of lean principles, and Ross is an optimist about the spread of those principles.

            “My sense is that many companies still say they are doing quality or six sigma, but they are in fact really focusing on lean,” he says. “Lean has become the leading paradigm of companies and organizations in terms of doing manufacturing. That includes the front office as well as the shop floor.”

            And in the military services, “it is abundantly clear that the primary paradigm is lean,” he adds.

            However, he is quick to note that “there is still a lack of true, clear-cut focus on what really needs to be done to achieve the operational excellence that everybody theoretically desires. They think that if they do a few of the tools and a few of the mechanical things, that’s going to solve their problems and lead to success. It’s more clear today that lean is not a toolset. It is a combination of principles, techniques, and particularly a system, and it requires changing the culture. It’s a huge change in culture.”

            He also observes, “one of the key things we see is that almost every organization we talk to, they really have a fairly decent focus on value stream mapping. Once they do that, then they struggle mightily to truly implement the essence of what it takes to identify and eliminate all the waste, and to change the culture.”

            I believe this new Shingo Prize will be valuable in identifying the true lean leaders, but I suspect it may also generate some controversy. There may be debates over the criteria, and whether a company is truly lean – but that is the kind of healthy debate we need.

            Stay tuned.



The Low Rates of “True” Six Sigma Implementation

When it comes to Six Sigma, talk is cheap, according to the Aberdeen Group. In other words, lots of companies claim to be doing Six Sigma, but few really are.

            I previously wrote about Aberdeen’s reports on Low Rates of Lean Implementation and on Lean Supply Chain. Their latest report, called The Lean Six Sigma Benchmark Report, is based on a study of 418 companies.

            Aberdeen states that, while more than half of respondents in this and other surveys said they had implemented Six Sigma programs, “we found less than 16 percent of “Six Sigma” companies and less than 8 percent of all respondents are holding true” to a genuine Six Sigma program.

            The consulting firm defines a “true” Six Sigma company as one that:

  • Must have a formal Six Sigma program
  • Must have adopted DMAIC (Define, Measure, Analyze, Improve, Control) methodology
  • Must require black belts to produce results for certification. Simply demonstrating a body of knowledge was not sufficient without having completed business impact projects that generated real savings to the company (specifically, two projects, or one with a total impact of at least $500,000).
  • Must require business impact projects to be formally validated by finance

            Aberdeen further says industry “is missing out on billions of dollars in potential savings, sales and profits each year through ineffective application of Six Sigma tools and methodologies.”

            On average, the study said, the companies with “true” Six Sigma programs produced 40 percent more savings than those without such programs.

            Resistance to change (and failure to overcome it through proper training) are on the list of factors undermining Six Sigma programs. Other factors mentioned include using the wrong metrics (or not enough of the right ones) and not using technology effectively to gather and track the data needed for Six Sigma analysis.

            But when you boil it all down, it amounts to this: Continuous improvement, whether lean of Six Sigma, isn’t easy. It takes dedication, structure, constant monitoring and measurement, and champions at high levels. Improvement is not for wimps.

            Does your company have what it takes?



Lean Supply Chain – Few Do It Right

I previously wrote about a study by the Aberdeen Group, focusing on The Low Rates of Lean Implementation that the study confirmed in a wide range of manufacturers.

            Now Aberdeen has released a follow-up study, looking at efforts to extend lean into the supply chain. Guess what? Talk is cheap, but successful efforts are few and far between.

            (There’s also a third report, which I’ll write about in my next post.)

            The supply chain study looked at 308 enterprises in aerospace and defense, automotive, high-tech, industrial products and other industries. The survey covered a range of job titles and functional areas, and the companies were of varying sizes, though 43 percent had annual revenues of more than $1 billion. Seventy-nine percent of those responding were from the U.S., the rest from other parts of North America, the United Kingdom and the Asia-Pacific region.

            Ninety percent of the companies surveyed said they were committed to lean. But, the study said, “further analysis found that less than 10 percent of these companies can be considered Best in Class.”

            Aberdeen Group didn’t make clear the precise criteria that make a company best in class, though I suspect they include a variety of fairly standard financial metrics.

            For those best-in-class companies, life is sweet. The study said the lean implementations at more than 70 percent of these leaders met or exceeded performance expectations in areas such as customer service and supply chain flexibility. For example, the best in class performers are “able to quantify the value of lean and measure their efforts towards initial investment with ROI at 33 percent.”

            One of the more intriguing – though again, not surprising – comments in the study is a statement that “lean philosophy takes a back seat to lean business processes and lean enabling technologies. Enterprises are more likely to take a pragmatic view and turn to enabling technology in support of lean, streamlining benefits across the supply chain.”

            I suspect that’s part of what’s wrong with a lot of companies that fail to achieve the greatest benefits of lean, one of the prime examples being the U.S. automotive industry. They think lean is all about tools, and they fail to get that it’s a total-enterprise business strategy requiring an entirely different kind of culture.

            By the way, the study also said that technology solutions are a key part of what the best in class companies are doing, by enabling them to continuously measure, monitor and respond to key production and supply chain metrics in real time. The study was partially sponsored by technology company E2open, though Aberdeen claims that sponsors were solicited after the fact and had no substantive influence on the direction of the report.


Engineering Education: Lean Manufacturing’s Achilles Heel

A disturbing, but not surprising report on foreign college students enrolling – actually, NOT enrolling – in U.S. science and engineering programs should be of concern to every manufacturer.

            Prepared by Jane Wishneff, an author and attorney with the Manufacturers Alliance/MAPI, the new report notes that foreign student enrollment in U.S. college science and engineering (S&E) programs dropped by 2.4 percent in 2003, the first decline in 50 years. Foreign enrollment fell another 1.3 percent in 2004, and graduate school admissions of foreign students fell 18 percent in 2004, followed by a 3 percent increase in 2005.

            The reasons cited for the decline include stricter visa regulations since 9/11, foreign countries highlighting advantages of staying home (such as lower tuition rates and costs of living), and competition from countries such as Australia and England.

            But the real problem is the sad state of S&E education in the United States.

            “Unfortunately, the American educational system does not produce enough talent in the S&E fields to meet the need for high-skilled workers in the manufacturing sector,” Wishneff writes. In 2003, the report says, 55 percent of engineering doctorates awarded in the U.S. went to foreign-born students, while the figure for doctorates in mathematics, computer sciences and agricultural sciences was nearly 44 percent.

            Even worse, the report notes, is that fewer than half of the undergraduate students entering college with a science or engineering major completed a degree in either field throughout the 1990s, and very few students transfer in from other areas.

            Of course, the biggest impact is on manufacturing, which employed 59 percent of all full-time scientists and engineers performing industrial R&D in January 2001, and 56 percent at the beginning of 2004.

            Obviously, finding good people is not going to become easier for manufacturers anytime soon. And that has implications for the spread of lean throughout manufacturing – and other industries – because lean requires good people who understand engineering principles.

            Most efforts to improve the situation are focusing on businesses and schools (and occasionally government). All that is fine, but personally, I think we need to involve Hollywood. And that’s not a joke.

            There have been widespread reports of increased enrollment in college programs on forensic sciences, due in large part to the popularity of “CSI” and similar programs.

            We need a show that makes engineers the heroes. The “Star Trek” programs had noble chief engineers, but a program set 300 years in the future does little to spur interest in jobs available today.

            I’ll admit it may be difficult to create a program about manufacturing that is entertaining and popular, but I can’t believe it’s impossible. Aaron Sorkin, we could use your help.

            Short of a TV program (which I’ll admit isn’t likely anytime soon), we need a good PR campaign. And I’ll suggest a starting point.

            When I attended the annual conference of the Institute of Industrial Engineers in Orlando this past spring, one of the keynote speakers was Kathy Kilmer, director of industrial engineering at Walt Disney World. Her presentation included a slickly-produced video in which engineers at Disney talked about what they do. (Kilmer commented, “There are advantages to working for an entertainment company.”)

It may not have been produced for this purpose, but in my view, the video was the best recruiting film for engineering that I have ever seen. (OK, I haven’t seen any other engineering recruiting films – how many are there? – but you get my point.)

All this talk about television, Disney and PR may seem rather lighthearted, but the workforce situation is serious, and we need to think of new ways to address it.

Any other ideas?


The Real Problem With U.S. Automakers

A new report offers interesting figures about the gap between U.S. and Japanese automakers. However, the report only touches on the real reasons behind the gap.

            Prepared by the Harbour-Felax Group, a consulting firm, the report notes, as one example of the figures, that Toyota has a profit-per-vehicle advantage over competitors ranging from $1,570 (over Chrysler) to $2,985 (over GM). The advantage over Ford is $2,165.

            The usual suspects are lined up here: Steep discounts and incentives offered by the U.S. automakers, a need to use more common parts across vehicles, the higher costs in the U.S. brought about by a wide range of labor issues, from health insurance for retirees to excessive absenteeism to guaranteed jobs for those laid off.

            All of this is true, and there is value in what Harbour-Felax group has done, providing details and numbers that bring into focus areas to be addressed.

            But the real issue is the fact that the Japanese follow a lean strategy. Lean is an integral part of their corporate DNA. It is how they think.

            Consider two items in the report. It notes that “Kaizen, or continuous improvement, remains a driving force for the Japanese automakers. Toyota, for instance, wrung $1,000 per vehicle out of its cost of North American and worldwide production simply in the initial phase of an all-out effort to increase the number of standard commodity components across its vehicle lineup. Toyota, Japan’s No. 1 automaker, has set a goal of reducing major non-commodity component costs by 30 percent.”

            Another section of the report discusses flexibility: “Maximum assembly flexibility, where more than one platform can be built in one body shop and on one assembly line, requires common body architecture and common assembly standards. Detroit firms historically have organized product development around unique platforms, with little common focus.”

            These two statements are both absolutely true, but the real question is why? Why, for so long, have the Japanese been focused on continuously reducing costs and improving flexibility? It’s because they think that way, and their U.S. counterparts don’t.

            Perhaps the most telling section of the report is this one, labeled Investing for the Future:

            Toyota spent $21.4 billion in research and development and capital expenditures on its worldwide automotive operations in 2005. That’s 47 percent more than GM and 42 percent more than Ford. Toyota’s outlay represented 12.6 percent of automotive revenue, compared with 9.8 percent for Ford and 9.2 percent for GM.”

            We often hear how the Japanese are more focused on the long term. Those figures are the evidence.

            In a posting commenting on the Harbour-Felax report, fellow blogger Mark Graban says that Detroit needs more than lean; it needs to design exciting cars and earn back a quality reputation.

            I agree completely. I would suggest that until Detroit’s leaders genuinely become true believers in lean, they’re going to have difficulty doing that.

            By the way, the report also offers a pessimistic view of the outlook for U.S. automotive suppliers. It states, “Pressure on all suppliers is huge, and likely will grow, particularly for the smaller, privately-held suppliers that service the Tier One supplier group. The in-house restructuring we believe is necessary to restore the Detroit based automakers to full health could take years, while suppliers continue to offer the OEMs immediate opportunities for cost reductions through price cuts.”



Where Will We Find Lean Leaders?

            I’m not a CEO, or even a plant manager. But if I were, I’d sure be worried about finding good leaders for my company.

            I say that because, according to the recent Productivity Survey from TBM Consulting Group (which I also wrote about in my last post), that’s what manufacturing executives are worried about.

            The survey found that more than a third (34 percent) of the 2,288 executives surveyed in the U.S., the U.K., Germany, Mexico and Brazil identified “leadership qualities” as the greatest shortcoming in the workforce. Another 32 percent cited “innovative thinking” as the most significant area of weakness – and of course, innovative thinking should be one of the qualities of a good leader.

            In addition, 15 percent cited “lack of leadership” as the greatest barrier to productivity improvement, the second most-mentioned factor. The first was “resistance to change,” mentioned by 31 percent. (And how do you overcome resistance to change? Does the term “leadership” come to mind?)

            More than one-third also said that the shortage of skilled workers and “people” issues were most likely to “make them lose sleep at night.” Only 17 percent said their insomnia would come from rising energy costs. (The survey was conducted in the first half of this year.)

            “The study suggests that the dwindling supply of qualified workers continues to be a big hurdle for manufacturers in highly industrialized countries, and given the extreme challenges of today’s ‘flat earth’ economy, it’s now a major concern for the industry,” Mike Serena, managing director of TBM LeanSigma Institute, said in a news release. “The gap in leadership skills has global manufacturers wondering how to sustain growth.”

            It’s ironic, at least in the United States, that after eliminating literally millions of manufacturing jobs, we can’t find skilled leaders. Where did they all go? Or were the people who used to be in leadership positions never properly trained to begin with?

            The more pressing question is where tomorrow’s leaders will come from. The answer involves training, collaboration between industry and our schools and colleges, and outreach to attract more people into educational programs and jobs.

            To those of you who confront these issues on a daily basis, I ask, how bad is it? What are the challenges you face, and how are you coping with them? Your comments are always welcome.



Is Support for Lean Only Lip Service?

            TBM Consulting Group says its annual survey shows lean culture gaining ground, but I’m a bit skeptical as to what that really means.

            The company just released the results of its fourth annual multi-national “Productivity Survey,” conducted in the first half of 2006  in conjunction with The Manufacturer magazine. The survey polled 2,288 executives from mid-sized to large manufacturers in the U.S., the U.K., Germany, Mexico and Brazil.

            (This is the first of two postings I’m writing about the survey. The next will focus on what the survey says is a gap in leadership skills.)

            The manufacturers were asked to specify the productivity or quality improvement program currently being used. The results:


                                                U.S.     U.K.     Germany        Mexico            Brazil

Lean                                       78%    66%         20%                15%               52%

ISO Certification                      41%    58%         59%                25%               48%

Kaizen                                    63%    42%         26%                15%               71%


            I’m a bit confused by the differences between the programs. I always thought kaizen was part of lean. But hey, what do I know?

            The manufacturers were also asked to rank the top sources of improved productivity. The results:


                                                U.S.     U.K.     Germany        Mexico            Brazil

Continuous Process

  Improvement (lean)                   56%    35%         26%                21%            36%

Work Flow/Procedure

  Process Improvement              18%    19%         30%                25%               36%

Technology                                 6%      8%           4%                11%            13%


            Again, the clear differences between those first two categories elude me.

            The survey also said the vast majority of manufacturers in all five countries reported productivity improvements.

            Anand Sharma, CEO of TBM, said in a news release, “The data suggests that the Lean culture is gaining more mainstream acceptance worldwide as a driver of productivity… As more and more of these companies gain visibility for their growth, the lean architecture is increasingly being adopted in the major manufacturing countries of the world.”

Well, maybe so. But I suggest you take another look at the research from Aberdeen Group I previously described, regarding The Low Rates of Lean Implementation. According to that research, relatively few manufacturers (at least in the U.S.) have really been implementing lean for any extended period of time.

So what conclusion can be drawn here? The most optimistic interpretation is that more companies have only recently jumped on the lean bandwagon, and the best improvements in productivity are yet to come. A more cynical analysis would be that more companies are saying they are embracing lean, but aren’t really doing it.

What’s your take on this? Are you an optimist or a cynic? I look forward to your comments.