LEAN RETURN ON INVESTMENT Jamar’s Lean Initiative

Cindy Luoma and Cindy Martins

Lean progression since 2008 Through each project, we used a variety of lean tools. We consider PDCA, 5S, visual controls and root cause analysis foundational tools. However we continually add tools as needed. Each project presents a unique degree of challenges. We see the value in Lean concepts and have blended Lean and Six Sigma as our model to capture ROI.

Introduction

2008

LEAN Adoption

• Business Case Presented

• Training of the first 25 employees begin

2009

LEAN Implementation

• Formed a leadership group: the guiding Coalition who’s mission is to provide leadership for the ongoing lean initiative

• First initiative: service vehicles

• Company wide visuals, education, and planned communications

2010

Embed Lean

• Continued company-wide visuals and communications

• Last class completes lean certification; 100 employees trained

• Expand concepts to satellite offices (MI/WI) and customer sites

• Real-time lean application in the field

2011

ROI Increases Customer Value

• Customer required we complete two lean projects as part of a 2-yr. contract

• Field onboarding process at large mining sites provides increased customer value and cost savings

2012

Refocus Lean for ROI and Strategic Growth

• Pared down large leadership committee

• Hired a process analyst / blended lean and Six Sigma as our model

• Leadership directs steering committee projects and helps set ROI goals

2013

What’s Not Working? • Beginning of Nip-It (Finance & Accting. process improvements) • Beginning of FOCUS (Tool and Equipment fulfillment)

2014

Re-scope Initiatives to Deliver Greater ROI and Sustainability

• Two large broad-based initiatives were a handful; hired an intern to assist

• Narrowed the focus to achieve greater ROI and sustainability success

FUTU

RE

Grow Lean

• New hires receive an ‘Intro to Lean’ training

• Introduce and apply more lean tools

• Train and support at least one lean leader in each area of our business

• Apply lean construction industry benchmarks

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Nip-It LEAN Initiative in the budget

Year One

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$500,000 reduction of cost, that can be seen in annual EBITA. . . HOW:

• Reducing cycle time (process start to completion)

• Reduction in required space for backup files, paper documentation, etc.

• A safe, clean work place

Initiative Goal:

By identifying & eliminating waste in all Finance & Accounting processes

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What’s not working in the

Finance & Accounting area?

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NARROW THE SCOPE…

What “MISSION CRITICAL

PROCESSES” are not working

in the Finance & Accounting area?

General Communication $50k of savings

Time Sheet Process $150k of savings

Payables & PO Process $250k of savings

WIP Process $50k of savings

Subcontractor Process $100k of savings Billing Rates

$125k of savings Incomplete Paperwork $50k of savings

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Payables & PO’s Processes Focus How did we know what processes to target?

METRICS: We measured almost everything!

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In addition to targeted process work… There was a “Ripple Affect”

Team members ran with “Just Do It” projects in addition to targeted payables and PO process work.

They attacked photo copy waste…

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SORT ALL PHOTO COPY SAVINGS

ANNUAL SAVINGS: $80,525.13

2013 SAVINGS: $35,349.98

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BEFORE & AFTER… IMPROVEMENT?

BEFORE: 27 reams of paper needed to print “landscape” format of monthly financial packets

AFTER: 18 reams of paper needed to print “portrait” format of same report!

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SORT SAVINGS

9 reams of paper a year x 500 sheet per ream ______________________________________

= 4500 sheet of paper x $3.28 (cost of photocopy labor + equipment) _____________________________

= $14,760 annual savings

Changing the format of the monthly Financial Packet

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BEFORE & AFTER… IMPROVEMENT?

BEFORE: Job Folders with paper documentation of vendor invoices and POs

AFTER: Job documentation now in SharePoint and searchable!

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SORT SAVINGS SWEEP STANDARDIZE SUSTAIN

15,000 sheets of paper X $3.27 (cost of photocopy labor + equipment)

= $49,050 annual cost

-15,000 sheets of paper X $1.27 (cost of scan labor + equipment)

= $19,050 _______________________________________

$49,050 - $19,050 = $30,000 annual savings

New Filing & Retrieval in SharePoint for Billing:

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and then there was… Payables & PO’s Processes Focused work….

Projects included in this work:

One payable check run per week vs. two

Vendor discounts maximized

PO training – company wide

Scheduled Subcontractor status review process

Email depositories (POs ,Payables, Time Sheets, etc.)

Eliminated re-handling of incoming invoices using “Pink Folders”

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Weekly Pink Folder Distribution…

BEFORE: Average weekly invoices to research prior to entry in WebApps

AFTER: A measurable reduction of average weekly invoices, in a neat traceable system

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SORT SAVINGS SWEEP STANDARDIZE SUSTAIN

Weekly review of invoices with PO errors…. SAVINGS of $ 21,003

Daily entry of vendor/material invoices (reduced cycle time)…. SAVINGS of $8,400

Elimination of multiple invoice sorts and re-handling… SAVINGS of $8,390

Monthly proactive vendor statement review … SAVINGS of $2,941

Pink Folder Program Savings:

Total Annual Savings of… $40,734

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How are RESULTS measured? Quantitative: Measurements / Metrics / Actual Number Data

Qualitative: Surveys / Interviews / Perception

Return on Investment (ROI) :

Sustained Operation Cost

Cost of Project

Cost of Project / - = ROI

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Validation of ROI

Qualitative Data:

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SORT STRAIGHTEN SWEEP Quantitative Results SUSTAIN

4064 additional work hours would be needed to accomplish the same amount of work in 365 days… OR two additional staff would have to be hired!

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Top 10… LESSONED LEARNED (out of 416) …

1. COMMUNICATION: Do it frequently & be specific

2. FOLLOW PROCESS RULES: Limit exceptions!

3. CRITICAL SUPPORT of Jamar: Demonstrated by cost savings captured through changing process vs. how jobs are run.

4. BE PROACTIVE: Take initiative!

5. EMBRACE CHANGE: Look for improvements in your everyday work AND be open to outsiders asking questions about the process.

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Top 10… LESSONED LEARNED (continued)…

6. ASK QUESTIONS: Ask WHY

7. DON’T ASSUME STAKEHOLDERS KNOW EVERYTHING: Training is ALWAYS beneficial – Educate ALL involved with the process.

8. LEAN IS AN ENVIRONMENT TO TAKE RISK: Push for continuous change!

9. “STANDARDIZING” IS VERY DIFFICULT DUE TO SO MANY DISCIPLINES, DEPTS. & LEADERS: Implementing our new LEAN processes in every department, while balancing and respecting different departments’ freedom & flexibility to work jobs differently is challenging and time consuming.

10. PROCESSES NEED TO CHANGE TO ADAPT TO OUR GROWTH AND CUSTOMER NEEDS: Many of the old, long standing processes don’t work for the volume we now have . Keep your eyes open for these situation in everything you do – company wide!