Success Story 1 : Hoshin Kanri

We worked with a mid-size electronics manufacturing company to develop a Hoshin Kanri strategy as a way of improving financial performance. This involved addressing a huge financial challenge at one particular manufacturing site in India producing high-mix/low-volume industrial, medical, aerospace products.

• Align all initiatives and goals with the organization’s highest level strategy and goals the year, including improving customer satisfaction metrics, profitability, and cash flow
• Create ways for individual teams to stay aligned with this larger strategy at multiple levels.
• Set a True North goal of achieving 200 basis points improvement in profitability for site within three quarters.

• Teams tended to work in silos, with individual functional heads focusing on his/her metrics only versus looking at the system as a whole.
• This company had an active department dedicated solely to continuous improvement office, and its team members believed that they understood how to apply lean thinking to operations. However, improvement efforts took the shape of piecemeal projects; this company still struggled to look at end-to-end operations.

• Hoshin Kanri is a Japanese term that means “shiny compass.” It is a framework that leaders use to set the direction of a company and bring about managed change in the organization toward the company’s highest level strategic goals.
• To get started, we led our client’s department heads in an offsite session designed solely for the purpose of reflection (Hansei in Japanese) on the previous year. Using this information, we performed a SWOT analysis and identified those key areas of focus that we knew would help this client achieve the tall target of profitability.
• Next we conducted a training session on hoshin kanri followed by a team building event intended to raise empathy in functional leadership teams. We led breakout sessions to address for various cost issues, which we organized based on the value streams in question. Then we set out to define the Hoshin plans for each area.
• Working closely with the client, we charged one team with focusing only on reducing costs on the indirect labor front. We had the Planning, Purchasing, and Engineering value streams identify focus areas for cost improvements. We asked another team to focus on improving costs on the supply chain front, including materials, freight, and warehouse costs reduction.
• We broke down actions in individual “A3” plans into three categories: Just-do-it actions, Kaizen event projects (week-long rapid improvement events), longer-term Kaizen projects (eg: Warehouse Outsourcing to in-sourcing, vendor developments, etc.). A3 plans became the focus for the year, and the leadership team committed to reviewing these plans twice per month (with A3 owners checking on the status of all actions and making course corrections as needed).
• All future Kaizen events undertaken at the site were based on these A3 plans, hence there being no searching for projects just to meet some arbitrary corporate deliverable of undertaking a certain number of Kaizen events.

As a result of these breakout sessions and A3 strategy sessions, the client now had:

• individual Hoshin A3 plans
• a literal A3 sheet that articulated clearly the objectives for each area.
• information and analysis on the previous year’s performance.
• a clear analysis of gaps and root causes of problems.
• specific actions with timelines and owners to close those gaps/achieve targets.
• risk areas with a risk mitigation plan.

As a result of our overall approach, the client was able to show significant improvements in profitability within three quarters. We were also able to achieve the profitability target of 200 basis points within this three quarter timeframe.

Why were we able to execute effectively to the plan? Each function had clarity of purpose.

For this company’s leadership team, this change project inspired great confidence in their future planning activities. They felt empowered by the Hoshin and A3 process and appreciated the knowledge they gained from it. They also saw the practical applicability of Hoshin to their business.

Ultimately, all of this new problem solving energy resulted in this team continuing to use Hoshin as part of its daily work and highest level strategy work for the next five years.