Process Re-engineering in a Transactional Environment

© 2007 Textron Financial Corporation.

Process Re-engineering in a

Transactional Environment

WCBF’s Lean Six Sigma Summit - Chicago

© 2007 Textron Financial Corporation. 2

Martina Kuhlmeyer Work experience split between manufacturing and finance

Introduced to Lean in 1998

5 years at Textron Financial, 4 years with GE

Current Position: VP of Six Sigma

Heavy focus on Transactional Lean

Jonathan Wiederecht Work experience split between manufacturing and finance

Introduced to Lean in 1998

21 years at Textron, last 4 being with TFC

Current position: Master Black Belt

Heavy focus on Transactional Lean

Presenter Backgrounds


Textron Financial Corporation

Cessna

Cessna Industrial

E-Z-GO

Fluid & Power

Greenlee

Jacobsen

Kautex

FinanceBell

Bell Helicopter

Lycoming

Textron Systems

Textron Inc. at a Glance

NYSE: TXT 2006 Revenue: $11 Billion Fortune 500 Ranking: 190 2006 Ranking on Forbes Global 2000 Largest Public Companies: 731

© 2007 Textron Inc.


DistributionFinance

AviationFinance

GolfFinance

ResortFinance

Asset-BasedLending

Inventory financing programs

Network of 16,000+ manufacturers, distributors and

dealers

Expert provider of financing for new and used Cessna aircraft, Bell helicopters and general aviation aircraft

Financing middle market manufacturing, distribution, service industry sectors

Golf course mortgage and financing for E-Z-GO and Jacobsen

equipment

Timeshare, commercial resort, and hospitality financing

Diversified market leader in specialty niche commercial finance Also Provides financing programs for products manufactured and serviced by Textron Over $10 billion of managed receivables

Textron Finance Corporation (TFC)


Structured Finance

Equity capital for large ticket transactions


TFC Background

● Approximately 1,200 employees

● 11 Locations in USA, 1 Location in Canada

● Niche player with over $10B in managed receivables


1) Early Success• Removing Waste (6S, Visual Management, Standard Work)

• Improving Touch Time

• Improving Throughput

2) Implementing a Lean System in a Transactional Environment• Moving from Low Hanging Fruit to complex tools & concepts

• Training and Engaging all Employees

• Culture and Mindsets

TFC’s Implementation


6S in the Office1S - Sort

2S - Straighten

When in doubt, throw it out!

Decide and organize where to keep

necessary items.

Perform a thorough cleaning.3S - Shine

Incorporate cleaning procedures

into the daily work.

Management and leadership to

motivate and sustain.

4S - Standardize

5S - Sustain

Training needs to be Office examples for each step

Early Success-Removing Waste

6S - Safety Not just looking for safety hazards –

but more like Business Continuity

Plans


6S in the Office

Rarely will you not see this level of “output” from Sort



6S in the Office

Indicates when to reorder

Indicates what

belongs



6S in the OfficeAM/AE CUBE LAYOUT

Outside of Cube

Calculater Rolodex Phone

Pic's, etc.

Dealer Files -use rubber band to secureREPOFilesQT Draw/Constr/VUD

Office Chair

Trash

Can

Recycle

Computer

Desk Caddy

In Box

Secure Cords

FormsForms Rolling File Cabinet 1st drawer supplies 2nd and 3rd drawers personal items

WhiteBoard -Place name of dlr files you current have at your desk & QD Info

Chair

Chair

Tissue

Standards set for like titles – easily find files in each other office




Communication at a Glance

Visual Management


Communication at a Glance


Six Sigma Department 5S Audit - February 2008

0

2

4

6

8

10

12

14

16

18

20

Sort

Straighten

ShineStandardize

Sustain

Before 5S Prior Month Current Month

5S Rating 0 - Start 20 - Poor 40 - Fair 60 - Good 80 - Excellent100 - Outstanding

Visual Management


Standard Work Standardized high impact processes Access in one place (rev control) and virtual Created by Users of the Process Contains target times for completion of each step Tool is user friendly / interactive


Document Review/ Manufactuer Repurchase

Credit Line Status to Repossession

Repossession Acount Request

Send Voluntary Surrender Release

Default & Acceleration

Letter

Collateral Evaluation

Initial/Update MSAJoint Inspection

with ManufactuerNOPS & REP

LetterNPA Form

Replevin Required?

Auction- Public Transition to Recovery

Final Demand Letter

Recode SAUApply Suspense

Funds

Collect Repurchase from Mfg

Bid Private

Collect from Highest Bidder

Decision

Decision

*Complete within 24 hours *Complete within 24 hours *Complete within 24 hours *Complete within 24 hours

*Complete within 24 hours

*Complete within 24 hours


Interest Collections Eliminated unnecessary

steps in the process Standardized process Metrics Impacted

Touch Time Quality

Observation

Indiv

idu

al V

alu

e

NovSeptJulyMayMarJan/05NovSeptJulyMay/MarJan/04

400

300

200

100

0

_X=56.4

UCL=67.8LCL=44.9

Baseline Improved State1

LTD Delivery MeasurementInterest Collections

Time Spent - Cycle Time

Early Success – Improve Cycle Time / Touch Time

Reduced From 317 hours/month

to 56 hours/month

Observation

Ind

ivid

ua

l Valu

e

NovSeptJulyMayMarJan/05NovSeptJulyMayMarJan/04

100

99

98

97

96

_X=98.484

UCL=99.601

LCL=97.367

Baseline Improved State

LTD Quality MeasurementInterest CollectionsPercent CollectedQuality already

good at 98.1% - but improved to98.4% even with 82% reduction in

Touch Time.


Quick Draw Eliminated unnecessary steps in the

process Standardized the process Metrics Impacted

Cycle Time to Customer More deals per month

Early Success – Improve Throughput

Obser vation

Indiv

idual V

alue

9/289/148/198/197/135/164/204/13/11/3/05

75

50

25

0_X=3.3UCL=10.1

LCL=-3.4

Pilot Closed DMAI C Post WE

Obser vation

Mov

ing

Ran

ge

9/289/148/197/136/65/164/204/13/11/3/05

60

45

30

15

0

__MR=2.53UCL=8.27

LCL=0

Pilot Closed DMAI C Post WE

11

1

1

11

111

1

1

1

1

2005 Quick Draw Transactions - Total Cycle Time

Average Cycle time reduced from 15 days

to 3.3 days (later improvements reduced it

to 1.5 days)


Implementing A Lean System

Training and engaging all employees

Next Level Execution (Operating Metrics, Problem Solving, Level Loading)

Culture / Mindsets


Training and Engaging All Employees

Training Top Down

Sr. Managers first to become certified Green Belts Managers of managers next to become Green Belts TFC President and TXT President both certified as GB’s

early on in the deployment Bottoms Up

All employees receive general training Ongoing training each year for all employees as things

evolve

Implementing a Lean System


Change Management, Change Management, Change Management…

Tools such as 6S and Standard Work drive engagement

Training and Engaging All Employees


3© 2002 Textron Inc. Transformation Acceleration Process V3.0 [12/ 04]

I ndividual Dynamics of Change

Change Management = Manage Depth & Duration

“What? Why?”“Not again!”

“It won’t impact me…”“This too shall pass”

“Where do I fit?”“What do I do?” Energy picks up, resolve

to deal with change

DURATI ON

Energy Drain

Shock/Betrayal

DenialIdentity Crisis

Search for Solutions

The Change Curve

ENDING NEUTRAL ZONE NEW BEGI NNI NGS

DEP

TH

Productivity Drain


Next Level Execution

Operating Metrics Are The Key Activity based – not financial based

(ie # of payments process / per person / per day)

Clear Link to Financial Metrics (Lean Accounting) (ie payments processed links to profitability)

Easy to measure (Daily if possible) (can measure payments processed daily)

“Front line” can impact the metric




Company Wide Problem Solving 4 levels at TFC


1. BB Project2. GB Project3. A34. Just Do It

Level ofComplexity

Time toComplete



Level Loading Key Ingredients

Skills Matrix

Cross Training

Understanding Pitch / takt time of your processes

Key Enabler to Level Loading Heijunka



Heijunka Box



System of Heijunka Boxes



5 Minute Daily Meetings

Need Operating Metrics first (front line’s link to high level business objectives)

Basic problem solving at the front lines (Closed Loop System) Just Do It A-3 (employing 5 why’s)

Culture and Mindsets



Culture and Mindsets How do you build that Continuous Improvement Culture?

OngoingTraining

OperatingMetrics

Top Down/Bottom UpDeployment

Fin/BusObjectives

Daily 5Minute

meetings

Problem Solve

At all levels

ImplementImprovement

Ideas fromFront line

EarlySuccess

TFC’s Answer


Summary

For Early Success – Focus on what employees easily understand

● Eliminate Waste● Improve Cycle Times● Improve Throughput


● Proper Operating Metrics are key● Problem Solve at all levels of the organization● Continuous training● Top Down and Bottom Up Deployment● Change Management, change management, change management


Jonathan Wiederecht

[email protected]

Martina Kuhlmeyer

[email protected]

Questions?


APPENDIX


Textron’s VisionTo be the premier multi-industry company, recognized for our network

of powerful brands, world-class enterprise processes and talented people



Textron Financial Global Reach

North America Distribution Finance Asset Based Lending Cessna Finance Golf Finance Division Resort Finance Division

Central/South America and Caribbean Cessna Finance Golf Finance Division Resort Finance Division

Africa Cessna Finance

Asia/Pacific

Cessna Finance

Europe Cessna Finance Resort Finance Division


Textron Six Sigma “rolled out” in 2002 Uniform continuous improvement program across the enterprise

While titled Six Sigma, program includes Lean

Lean component garnered more attention starting late 2004

6 years into program & Textron CEO is committed more than ever

Program Background


No data entry required by employees to submit status (self documenting)

No computer systems to maintain

Visible to all team members what work is needed to be accomplished

Capacity issues immediately visible, work level loaded (self regulating)

Heijunka Box Benefits


Need to understand how long each process takes (range is fine) Work best when adequate volume flows through cell (one file per day

curtails its real benefit) Team members are willing to share their work and share other work Team members are willing to accept SLA and meet them

Heijunka Box Demands


Heijunka Box - Capacity

When volume exceeds capacity

based upon color folder system, flag is changed

to Red – triggering

pre-established personnel to come

support this process



TFC journey has lots of lessons learned, with 3 sticking out:

1. Need to Make it Transactional

2. Change Management, change management and then some more change management

3. Time & Rate

TFC’s Implementation


Being a manufacturing company, our initial training materials were focused as such

Transactional folks were essentially being asked to make the mental translation

The result: Some not capable Each translation may be different

Make it Transactional


Convert training into target audiences language. For example: Laptop = machining center

Documentation, including email = inventory

5S = show office files, messy desk

Make it Transactional

People looking for reasons not to adopt change – presenting examples & materials in manufacturing lingo

gives them that reason


Very simple – if folks aren’t ready to accept change, don’t waste your time 2002 – 95% focus on tools, 5% on change management (CM)

2007 – 20% focus on tools, 80% on CM

Change Management

“The soft stuff is really the hard stuff” – with soft referring to people side


If mindsets aren’t dialed in, you wouldn’t get the behavior you need to have change “stick”

Don’t underestimate resistance to change

Change Management

Burning platforms are needed, but you need more than burning platforms to get meaningful change to be

sustained


Lots & lots of examples of “huge impact events (home runs)” in literature, talks, etc.

Natural to “want some of this action”

But don’t be lured into unrealistic “time to impact”

Time & Rate

False expectations will lead to delusion and disappointment


Appreciate its incremental change

Requires a plan detailing digestible size change – strung together to make impact

Can’t implement all Lean tools at once – understand the progression

Time & Rate

Prepare for a journey


Training and Engaging All Employees Black Belt Certification (some key requirements)

Specified as either DMAIC or DFSS

5 weeks training (over 5 months)

Minimum of 2 projects closed with total $500K in savings

Mentor Green Belts to certification

Pass test



Training and Engaging All Employees Green Belt Certification (some key requirements)

Specified as DMAIC, DFSS, or LEAN

Complete 2 weeks training (about 7.5% of population each of the last 2 years)

Complete 2 projects, or 1 Cycle of Learning on a BB project plus one project of their own

Pass tools demonstration with an MBB



Heijunka Box*– WHAT IS IT? Heijunka Box, or leveling box, is a physical device used to manage the

scheduling The load is leveled with consideration for the most efficient use of people

and equipment. Kanban cards are placed in slots corresponding to the pitch increments in

which products are to be released and subsequently replenished.

Visual Management

Industry wide literature all shows/discusses manufacturing – need to convert “lingo”

*Source: Value Stream Management – Don Tapping, Tom Luyster, Tom Shuker



Excellent tool that self documents work status versus employees manually documenting work status

Simple system for scheduling work, leveling work load

Team sets rules

Visual feedback to team, manager

Immediately exposes capacity issues

Visual Management - Heijunka Box


Education

Process Re-engineering in a Transactional Environment