Access savings potentials in the indirect areas in a sustainable manner
To reduce the costs in the indirect areas and maintain the competitiveness of the internal structures, Nolte Möbel [Nolte Furniture] together with Staufen AG implemented a large-scale lean administration project. The result: efficiency increased by up to 50 %, processing times decreased by up to 70 % and quality increased by up to 65 %.
When Dr. Stefan Schwarzfischer became Managing Director for Technology and Administration at Nolte Möbel GmbH & Co. KG in 2007, he faced a difficult profit situation. Shortly thereafter, the Global Financial Crisis became imminent. In consequence, the decision was made to cut costs across the entire business. During this process, the focus was to be on sustainability. "We didn't have the objective to cut costs by a certain percentage as classic management theories stipulate", Mr Schwarzfischer explains. "Primarily this was about generating long-term effects through process and structure optimizations." In a first step, Nolte Möbel initiated targeted lean production measures in manufacturing. The second lever the company wanted to use was the overhead costs, comprising all indirect areas including the indirect components of manufacturing and assembly, maintenance and internal logistics, which are also categorised as overheads at Nolte Möbel. "This was where Staufen AG entered the playing field. Together with them, we developed a comprehensive lean administration project".
As in manufacturing, lean administration is based on the idea of focusing on creating value and avoiding waste. Waste is defined as anything not directly or indirectly serving the customer. During the process, internal areas are also considered "clients" if they depend on the work results of upstream processes to carry out their own work. Staufen AG's fundamental lean administration approach was also used in the Nolte Möbel project: analyze, differentiate, optimize.
Analyzing and differentiating
For two months, Staufen consultants rigorously analyzed Nolte Möbel's overheads. "In agreement with the shop council, we initially analyzed the cost structures", explains Andreas Mohren, Senior Manager and Partner at Staufen AG and manager for the project "Nolte Möbel". "Based on these findings, we analyzed each workplace, functional areas and process in great detail where appropriate". In consequence, for the first time it was possible to define who in the company spends how much time on what. The analytical tools used ranged from job analyses of individual workplaces to function and value stream assessments to interviews with executives. The consultants presented their findings in a comprehensive final report. While differentiating between processes that create value (indirectly) and waste, they also came up with measures to improve the analyzed processes in close collaboration with managers and employees. Furthermore, they highlighted savings potentials and developed schedules for the implementation. "In some departments, we had potentials of up to 50 %", Mr Mohren says. However, due to capacity and budget constraints, not all suggested measures and approaches could immediately be implemented. During a workshop with senior management and Staufen consultants in late 2009, all measures were checked and ranked according to their potential as well the required investments, capacities and time: All items falling below a certain threshold were postponed. Moreover, the workshop team linked the measure to the context of projects already underway in other areas at Nolte Möbel - the "Power" program came to life.
Implementation and internal resistance
In early 2010, the Power program and the lean administration measures were supposed to commence. However, the program only ran sluggishly to begin with. "Everything we had considered a great kick-off with senior management seemed to have been almost forgotten over the Christmas time", Mr Schwarzfischer surmises. "
2. Table of Contents
1 Initial situation, analysis of potential, project management
2 Role of management in the change process
3 Our seven success factors
4 Lessons learned
3. 1 Initial situation, analysis of potential, project management
4. Initial situation, analysis of potential, project management
Competitive cost structures and economic conditions require further optimisation of
fixed costs
Goal:
• Nolte Möbel aimed to reduce fixed costs by further optimising processes, thereby ensuring its cost structure
would remain competitive.
• The economic crisis meant that these efforts had to be forced.
• Before the introduction of Lean Office, a comprehensive package of measures was already developed, which
entailed capacity adjustments in direct areas or resulted in overhead cost reductions through sweeping
budget adjustments in indirect functions.
• The process of overhead optimisation that had been launched was to be continued as part of an additional
step involving Lean Office, with the aid of an external consulting agency.
• The aim was to define measures using the Lean Office approach which could be used to reduced the fixed
costs of the company sustainably and appropriately – i.e. from the perspective of added value.
• To achieve this, the costs of indirect and administrative functions were first documented and analysed
(types of costs, amount of each cost element, cost structure, etc.).
• Next, detailed analyses were performed to generate optimisation measures which were incorporated into a
rated and prioritised implementation roadmap.
• All activities were carried out in a way that involved management personnel and the staff to create
information transparency and the basis for the acceptance of the resulting activities.
5. Initial situation, analysis of potential, project management
Definition: lean administration
The term “lean administration” refers to the prevention of waste and the optimal synchronisation of
business processes in an organisational unit. This involves using “lean production” methods with the
goal of optimising the focus on value-added processes.
Typical methods:
• Cost/functional analysis • Value stream analysis
• Activity structure analysis • Interface analysis
• 5S method
3 levels of process streamlining
Analysis Differentiation Optimisation
• Surveying the cost structure and
drivers • Designing value-
• Activities analysis • Value-generating activities generating activities
• Obvious waste • Minimising Lean
• Documenting input, output and
cost of activities hidden waste Processes
• Hidden waste
• Documenting internal process • Eliminating
chains obvious waste
6. Initial situation, analysis of potential, project management
Analysis approach
Method Area Content Goal
Cost analysis: • Creating transparency
•Identifying cost types and their amounts • Eliminating redundant work
•Cost structure analysis • Eliminating unused services
Cost/functional Total range of analysis •Identifying cost drivers • Minimising cost drivers
analysis • Identifying areas of action
Functional analysis:
•Value creation factor for each function
•Activities with time apportionment
•Cost drivers for each function
• Analysis of key processes and their share of
waste
Process analysis Priority areas with the • Identification of redundant interfaces Integration, parallel
(value stream and interface • Interface analysis with respect to friction processing, synchronisation
greatest potential
losses and minimisation of activities
analysis)
• Identification of areas needing process
definition
Identification of:
•Opportunities for increasing efficiency at Optimisation of the
Analysis of individual workplace and at team level workspace layout and
Workspace analysis selected workspaces •Optimisation potential through effective time management
time- and self-management, DP and skills
training
7. Initial situation, analysis of potential, project management
Potential identified
Management Department Sales & Marketing Administration & Engineering
Personnel Material Personnel Material
Cost type Total
costs costs costs costs
Potential in numbers and
backed by actions:
< 6 months 5.0% 1.5% 5.6% 0.0% 12.2%
Implement-
6–12 months 11.0% 1.7% 20.5% 2.0% 35.2%
ation horizon
> 12 months 8.8% 0.0% 38.2% 5.9% 52.8%
Potential total in numbers and
24.8% 3.2% 64.1% 7.9% 100%
backed by actions:
27.9% 72.1% 100%
A feasibility of at least 50% is expected.
8. Initial situation, analysis of potential, project management
Project planning following a defined process flow
Project task Project flow Scheduling
Capacity planning
9. Initial situation, analysis of potential, project management
Project controlling
Project status report Implementation schedule
Project status report
10. Initial situation, analysis of potential, project management
Project controlling
• Monthly summary of status reports
Multi-project overview from sub-projects
• Visualisation of the entire project
FSC-PEFC certification
landscape for management
Investments
Standardisation Analysis of deadline compliance and
Domestic sales
Product development process achievement of goals
Order fulfilment process Key production figures => deviation management
Introduction of premiums
Maintenance • Basis for regular communication in
SCM (IT)
the steering committee/core team
Likelihood of achieving the target
Process planning
high
Business management
Company-internal logistics
Master efficiency
low
Discount and conditions system
poor good
Likelihood of complying with deadline
12. Role of management in the change process
• A lean office project cannot be implemented successfully without active support and
guidance from management because the will to change, particularly in area of
administration, is less pronounced than it is for lean production projects.
• Ongoing communication of project tasks and partial results.
• “You must set an example with, and demand, the lean office philosophy or the project
will fail!”
• Management must be a team player and not a power factor or administrator.
14. Our seven success factors
1. Creation of a uniform analysis methodology that is communicated ahead of time.
2. Prioritisation of projects according to savings potential, speed of implementation and
resource compatibility.
3. Overcoming insular thinking within departments by deploying neutral consultant.
4. Avoiding time windows that are too small – in practice, everything takes longer than
planned.
5. Training key staff in the lean philosophy.
6. Management providing reinforcement/support for project leaders – lean is a managerial
task.
7. Implementing routine communication protocols and motivating the employees.
16. Lessons learned
Positive Negative
• Proven successes and shared goal • Areas of potential are not always directly
orientation. measurable in the profit/loss statement.
• Change in the area of administration, despite • Change process was not implemented in all
initial resistance. areas to an equal degree.
• Better cooperation between departments and • In some areas, a data harmonisation
reduction of “rifts”. between departments must take place first.
• In some cases, there is too much project
documentation and therefore too much “idle
power”.
17. Lessons learned
Range and average of the improvements (as %)
0 20 40 60 80 100
Increase in efficiency
Reduction of lead times
Quality improvement
• Improvement of (internal) customer satisfaction
Other positive effects • Improvement of employee satisfaction
• Improvement of internal/external customer focus
• Creating room for strategic/value-generating activities
0 20 40 60 80 100
Range Average