Flow Processing in Administrative Processes
GN ReSound’s success as a case study
Flowing the information to manufacture the product can be as important as
flowing the product itself
As the world of manufacturing becomes more and more productive, we see that gaining an advantage over the competition becomes more challenging every day. Just a decade ago, Flow Manufacturing was enough to gain that coveted edge over other market contenders. In many cases, the first businesses to truly implement and maintain the tools of Flow on the shop floor gained a great competitive advantage. We must bear in mind, however, that the vast majority of manufacturers were still building product in batches and pushing materials according to a schedule that usually relied heavily on a forecast. Today, bringing Flow to the manufacturing shop floor alone does not constitute a complete and dominating application of Flow principles. The manufacturer that intends to fully leverage Flow must extend its use into all the administrative processes of the enterprise.
The competitive advantage of Flow Manufacturing was gained by following a relatively simple path: Chain production processes together so as to cause materials to advance at a target flow rate through sequential increments of those processes. Different practitioners may take different paths or series of implementation steps, others claim to have "invented" Flow. The irony is that they all move in the same general direction by attempting to eliminate waste or "non-value-adding" work in the factory processes. Once the processes have been designed to advance materials at a target flow rate, we need to add the materials to the equation. Kanban has proved itself to be the best way to support a flow line with purchased, and in some cases manufactured, components.
The results of Flow Manufacturing speak for themselves. Volumes of success stories have been written. Flow Manufacturing has raised the performance bar. If you are not building your products in a flow today, your methods may well be considered outdated, putting your organization at a serious competitive disadvantage. So, how do you compete in a market where all the contenders flow their products? The focus must now expand toward "flowing" the entire supply chain. But before we go out running after the "B2B" consultants, let’s understand the entire supply chain, and the elements of it that are under our immediate control:
In order to satisfy a customer’s demand for our product, we have to do more than manufacture the product. After the product is ready for customer use, we have to reach the customer through the distribution channels. Before we can manufacture the product we have to know what the customer wants and have the materials available for the conversion process. Of the chain of events described above, the typical implementation of Flow Manufacturing addresses only the factory processes. The manufacturing lead-time of the Flow manufacturer is likely to be as short as it can be, barring any continuous improvement activities. Additionally, materials are likely to be available in Kanban containers, ready to be consumed by any product at any time.
The objective of our case study is to focus on a usually untapped source of benefit: the administrative processes leading to the manufacturing of product, depicted above as "Order Processing". Our case study will center on GN ReSound as a Flow Manufacturer of custom-made hearing devices. As we will see, at GN ReSound it was clear that the tools of Flow would provide them with valuable benefits in manufacturing. However, if the office processes ranging from Mail Opening to Order Entry were not optimized, the overall gains would not provide them with a real competitive advantage. Because GN ReSound chose to implement the tools of Flow, not only in manufacturing, but in the office as well, they refer to it in a broader sense as "Flow Processing"
Background information
GN ReSound is a manufacturer of premium hearing devices. GN ReSound offers a full line of products, from the traditional behind-the-ear (BTE) to custom-made in-the-ear (ITE) devices. Their focus on research and development has earned them the reputation for the highest sound processing quality. Unfortunately, they faltered in customer response time to market. Not long ago, their turn-around-time (same as manufacturing lead-time) was in the neighborhood of 11 days. This number may not mean much until you compare it with the industry standard of a three-day response time.
The products included in our Multi-Product Flow Processing line are:
New orders – A brand-new hearing aid is manufactured from a dispenser’s specifications and a mold of the end user’s ear.
Repair orders – An instrument is sent to the plant to be repaired after the warranty period has expired. The great majority of the cases do not require a new shell.
Remake orders – Customer returns the order within the warranty period for adjustments. The work is similar to a repair order, but most cases require a new shell.
Unlike many other manufacturers, GN ReSound has one key issue to contend with; a hearing device must conform to the unique anatomy of every customer’s ear. So in this business, the idea of building finished goods to a forecast is a completely foreign one. Products are built only to a specific customer order. The supply chain picture for GN ReSound is as follows:
An end user’s order is brought to the facility via courier. The mail arrives
every day, early in the morning. The incoming shipments are then opened and
orders are sorted out and the order requirements are processed. Once the orders
have been processed and entered into a computer system, there is a tangible
signal to communicate the manufacturing processes what to make and how to make
it. When products are completed they are packaged according to the courier’s
specifications and delivered back to a large number of dispenser’s offices
across the
Distribution – Inbound and Outbound Transportation
Let’s first approach the easiest part of the administrative processes we dealt with. Because of the build-to-order nature of GN ReSound’s business, there is no accumulation of product, and hence no delays, in the distribution side of the supply chain. Hearing devices are shipped, as they are finished. There is no finished goods inventory of custom-made hearing devices. As depicted above, orders arrive from and are returned to customers via airfreight couriers. The Courier companies are one of the American icons for outstanding customer service, speed and efficiency. It is no news that many companies in customer service-intensive industries have hired away executives from the ranks of FedEx and other courier companies. In other words, when it comes to speed, couriers are better off left alone. Having dealt with both ends, incoming orders and distribution, let’s move to the most common place where the tools of Flow are implemented.
Manufacturing
Before we discuss this section, think of a custom-made hearing instrument. You must have seen one in the past. Maybe one of your friends or relatives wears one of these incredibly useful and small devices. That’s right they are very small. If the size of a hearing aid suggests "not a lot of work content" to you, you are absolutely right. There is neither a lot of touch labor, nor a significant amount of machine time in one of these units. In general terms, any new hearing device can be built within 100 minutes from start to finish. It is then a reasonable expectation to see a response time through manufacturing that approximates those 100 minutes worth of work content.
Let’s begin by describing the two key pieces of a custom-made hearing instrument:
The shell – Made of hypoallergenic UV plastic material.
The face plate – Where all the live components are wired. The face plate also carries the battery receptacle.
A one-of-a-kind shell is made for an order from the customer’s ear mold. Then, the shell will be attached to a face plate. Once the face plate is attached to the shell (process usually known as "casing") the excess face plate is trimmed off, the instrument is buffed, and the product is then subject to a series of quality steps. After a program is downloaded into the instrument, each order is invoiced, packed and shipped.
A summary of the methodology the GN ReSound Flow Processing design team used for the design of their Multi-Product Flow Processing line is:
Product Definition – Identification and listing all the products to be built in the Multi-Product Flow Processing line.
Process Flow Definition (PFD) – Documenting the process relationships required to make a product.
Process Flow Mapping – A matrix, derived from the PFDs, that displays all the process/product relationships. It is one of the key tools in determining the existence of product families.
Standard Work Definition (SWD) – Documenting the work in a process, along with the Standard Time and quality criteria per work element. The summation of all Standard Times per work element is the Standard Time of the product in the process. In most cases a weighted average of all Standard Times will be determined for the calculation of resources.
Forecasted Volume – The desired line capacity. Usually the result of looking ahead 12 to 36 months, depending on the industry.
Takt time – The maximum flow rate the line is capable of achieving. Calculated by dividing the Number of Work Minutes available in the day by the Forecasted Volume. At the process level, Takt time establishes the process’s completion rate, as well as the maximum amount of work content per workstation in a process.
Resource calculation – Number of people, workstations, and machines required to support the line’s capacity. Calculated by dividing the Standard Time (weighted average) by Takt time.
Balancing – Ensuring that each resource in the line can perform work within the calculated flow rate. A series of tools is used for balancing workstations: Elimination of waste, Relocation of work, Addition of resources, or Addition of In-Process Kanbans (IPK).
Materials Kanban – Providing the designed processes with the materials required to build a family of products
Graphic Work Instructions – Visual aids that highlight the quality checks and work content per workstation. These are developed from the SWDs.
Once the above steps were completed, the team developed a conceptual floor layout. The next task was to contend with all the physical constraints of the building and manufacturing resources as the blueprint of the production floor was created.
The final design called for:
An enclosed area for the manufacturing of shells: The "Shell Lab" produces shells for all new and remake orders.
A series of parallel "mirrored" assembly lines: There were two main reasons for this choice:
Scalability - By establishing a "modular" design, overall volume could be increased by adding an extra line.
Takt time versus Work Content - The maximum flow rate of the overall line was such that would have made the casing work impossible to complete in increments of Takt time.
A common quality area – The different lines, capable of making all the products (new, remake, and repair) flow into one common quality area. These resources will perform a computerized functional test as well as a cosmetic review.
Common invoicing, packing, and shipping areas – Once the product has been cleared for shipment, it will be invoiced, then packed to the courier’s specifications, and shipped throughout the workday.
A conceptual view of the resulting line design was:
The benefits in the manufacturing area were:
Response time – Any product can be finished within 100 minutes of launching.
Quality – By dividing the work in sequential increments and implementing TQM techniques (Check-Do-Check) the number of defective instruments reaching the Quality process are in constant decline.
Flexibility – The overall capacity is scalable and every line is capable of processing all products i.e. new, remake and repair orders.
Productivity – Each line is designed to throttle its output according to the number of people that work at the line.
Shortage Elimination – The kanban methodology has buffered the line from shortages. It has also provided an "advanced signal" mechanism for materials replenishment.
At this stage, the manufacturing processes are flowing product according to the Multi-Product Flow Processing line design. A list of issues was identified for further quality and process improvements. A number of cross-functional Continuous Improvement teams assisted, and they still do, with the development and implementation of the improvement ideas. Once an order hits the manufacturing floor, at the Shell Lab or the Assembly lines, it will be completed and shipped within hours, never days.
Order Processing
Had the management team at GN ReSound chosen to stop at the factory, still would not have achieved their goal of two-day turn-around time. The reason was quite apparent; regardless of manufacturing’s ability to process products rapidly, the time from the moment the dispenser’s package containing the customer order arrived to the moment manufacturing knew about it was taking far longer than two days.
The tools of Flow Processing were chosen to streamline these administrative processes. Administrative processes are often not given the attention they deserve by Flow practitioners, potentially hindering the overall performance of the supply chain. The basic series of steps we described before were the same we used for the design of the administrative processes.
Let’s review the steps as we attempt to identify some unique attributes of administrative processes:
Product Definition – A "product" in an administrative environment does not necessarily reflect the product that will later be manufactured. We usually have to look for "types of transactions" as the output of administrative processes. A case in point at GN ReSound is the "return for credit" category. When a customer returns a device in exchange for their money, a transaction has to be processed, but manufacturing will never know about it, because they do not have to apply any work to it.
Process Flow Definition – There are no significant differences here. A process is still a series of sequential elements of work. We still need to identify how the administrative processes relate to each other, so we can later connect and balance them. In a batch environment, where quality is usually "inspected in" it is common to see many paths that "flow backwards" as in the example below.
The work occurring in the processes above is:
|
Process |
Batch Mode |
Flow Processing |
|
Order Staging |
Opens incoming shipments |
Open incoming shipment and perform all the quality checks necessary for the order to be entered. Also transfers rejects to Customer Service |
|
Order Entry |
For a stack of orders: Check all Enter all Print all travelers Scan all to manufacturing |
Enters the order in the computer system |
|
Scan and Label (New process) |
Included in Order Entry |
Takes on order at a time, prints the traveler, checks all data and scans to Manufacturing. |
|
Customer Service |
Calls customer for resolution of issues. Returns a batch to Order Entry |
Calls customer for resolution of issues. Returns one at a time to Order Entry. |
|
Invoicing |
Invoices a stack of orders |
Invoices one order at a time. Checks paperwork for accuracy. |
|
Shipping |
Packs and ships a stack of orders. Usually, runs out of time at the end of the day. |
Packs and stages one order at a time for shipping. Stream of work is consistent and even throughout the day. |
Let’s analyze one example: As the incoming shipments were opened in batch mode, all customer orders were dumped in tubs and taken to the Order Entry area. Once in the Order Entry department, a group of people reviewed each incoming order as they attempted to enter the order in the computer system. In many cases, there is missing data that prevented the order from being entered. The rejected order was then placed on a cart that once a day was brought to the Customer Service department where the issue will be resolved and the order returned to Order Entry. The majority of the times, the problem that caused the order to be rejected was a very simple one. However, since all rejects were processed in batches, the simple ones end up mixed with the difficult ones, thus stretching the turn-around time.
Process Flow Mapping – This step, as in manufacturing, will aid us in determining the families of "products" that could potentially flow down the same set of resources. The Process Flow Map had nearly every cell populated, indicating that, in our case, there was really only one family. So the team proceeded to design one line capable of processing al different types of orders through the same set of resources.
Standard Work Definition – The same principles used to describe the work in a process, the time standards and the quality criteria by work element we used for manufacturing apply to administrative processes. This may be a good time to remind you of what we teach in class: Remember the reasons why you are creating these documents (SWDs):
- To determine the Standard Times per product in a process for line design and planning
- As a training tool for the team members in the shop floor
- As the source for the creation of Graphic Work Instructions
None of these reasons should lead you in the direction of a Times-and-Motions study. Remember we are not chasing the extra second a human may take to do work. That is not where the money is!
While developing the SWDs, make sure that you begin to understand which work is breakable in sequential increments and which work the same person must complete once started.
Forecasted Volume – As we did for the manufacturing processes, we needed to determine the line’s capacity. In the case of administrative processes, the volume tends to be measured in "number of transactions"
Takt time – We calculated this maximum flow rate using the same calculation we used in manufacturing. As an improvement over past practices, the GN ReSound team decided that the incoming shipment had to be opened within three hours of arrival. The key reason behind this requirement was to identify incoming order issues that may lead to rejection as soon as possible. Then, the Takt time for the Order Staging process was based on a three-hour period, not an eight-hour workday. All the processes downstream from Order Staging had a Takt time based on an eight-hour workday. The dilemma this caused was that while incoming shipments were being opened, the Order Staging process operated at a faster pace than the rest of the line. This was easily solved through balancing techniques. The one we chose to apply to this case was the addition of In-Process Kanbans (IPK).
The number of IPKs was calculated as follows:
180 min/0.25 min/unit – 180 min/ 0.58 min/unit = 410 units
Calculation of Resources – The calculation of required resources is the same we used in manufacturing processes. The same rules on interpretation of results apply here. When reading the number resulting from the division of Standard Time and Takt, we must understand whether we are looking at People, Machines, Pieces, etc. In this administrative environment, we also had to contend with:
Employee Training: Not everybody knew how to process all orders. As the degree of complexity increased, only the most experienced people knew how to deal with more difficult orders. Training in a flow environment, manufacturing or office is always of key importance.
Equipment Flexibility: Not all computers could have all the necessary screens opened at the same time. A team was tasked with developing a "universal workstation" They successfully designed it within a week.
Sequential work: The work at the Order Entry process could not be broken down in increments of takt time. Hence Order Staging had to feed a distribution mechanism that would allow any person entering orders to take an order, process it and send it downstream. The distribution mechanism the team chose was a roller conveyor with plastic rollers to make it as quit as possible.
Quality: The division of the Order Staging process into sequential workstations was one of the key tools in the early detection of customer data issues. As problems were detected, they were immediately given to Customer Service team members. Orders were given to a Customer Service agent one at a time, as they were found, not in batches.
Balancing – The same principles we applied in the manufacturing environment are valid for administrative processes. We must ensure that every resource can perform their work content within the process’s Takt time. Some minor imbalances were addressed mostly by relocating work, adding resources, or adding IPKs.
Materials Kanban – There is very little, if any, material consumption in an administrative environment. Office supplies could be placed under kanban control with some minor gains.
The resulting Multi-Product Flow Processing line was:
Conclusions
The traditional understanding of a process as "people and machines making something" can lead you and your company down a path of sub-optimal performance. A process does not necessarily have a physical result. In some cases the result of a process is information. Take the time to look at the number of resources (people, computers, printers, etc.) dedicated to all the administrative processes within your company. Physically follow a particular document from beginning to end and ask yourself:
- Did I have to wait a lot?
- Was my document buried in a batch?
- Was my document processed in minutes, hours, or days? How does that total time compare to the actual work applied to the document?
- Did the document ever fall into a "black hole"?
- How many times did I go back to the same department/desk/place?
- Did the document flow smoothly or was it stop-and-go?
- How many documents are waiting for someone to work on them at any point in time?
- Did I see room for improvement, like I saw in manufacturing before Flow?
Do not let the misconception of "these flow concepts work only in the factory" mislead you. Nothing is farther from truth. The set of steps we discussed above is a proven path for flow-based process design. In many cases, we find that all the forward thinking that made manufacturing efficient and productive has not been applied to the rest of the organization.
By flowing the administrative processes leading to the manufacturing of their products, GN ReSound is operating today at 1.8 days of turn-around time. And that is just the beginning. Thanks to a visionary management team, continuous improvement and teamwork are becoming the new corporate culture. Great products built fast with great quality. That is GN ReSound’s Flow Processing Advantage.
The authors:
· Author: Gerard Leone
· Title: Vice President and Senior Consultant
· Company: Business Process Consulting Group
· Phone: 877-279-BPCG
· Email: gleone@bpcgflow.com
· Author: Paul DiFraia
·
Title: Vice President of Operations,
· Company: GN ReSound
· Phone: 650-780-7884
· Email: pdifraia@gnresound.com