Szabolcs Molnár, president and founder of the Lean Enterprise Institute Hungary, introduces this LMJ special focusing on examples of lean transformation in the Eastern European nation.
As is probably the case in most Central and Eastern European countries, lean knowledge first came to Hungary 10 to 12 years ago, through the multinational companies. Their subsidiaries had to use lean, adopt the companies’ internal production systems and support this process, with lean specialists or even outside consultants having been sent to Hungary from the motherland.
The Hungarian employees were then trained. They learned lean through workshops and projects led by externals or even by traveling abroad to their mother company. Years later, when these experienced lean managers left their companies, they often started to work as consultants.
Today most affiliates of large multinational companies use lean methods. Hungary has also experienced the “tool age”: most of the following examples are rather about tools and methods than building a lean culture. Additionally, lean is mainly present in manufacturing environments. Office lean is more and more popular, but is still not widely used. Some banks have started to implement lean and there are only few examples for lean in healthcare. A limited number of SMEs know of lean, let alone use it. This is mainly due to resource issues – they don’t have a budget to hire a full time specialist or work with a consultant.
There are approximately 10-12 Hungarian lean firms offering both general and specific training and consulting. Many international consulting firms are also present here.
Up to last year only Lean Thinking, The Toyota Way and some editions of Productivity Press were published in Hungarian. There are twothree lean related conferences a year, mainly organised by consulting firms. In leading universities, lean is taught, but mainly in a course lasting one semester.
The Lean Enterprise Institute Hungary was founded in September 2011 with the purpose of filling the gap described above and spread lean knowledge in Hungary. The main mission of LEIH is to promote lean thinking and make it available in Hungarian, right from the original source, through books, publications, workshops and summits. In addition it works to make lean part of university education and provide the opportunity for young people to get real “gemba” experience.
With the aim to become the focal point of lean in Hungary and serve the needs of its customers (no matter if they are private people, firms or consultants), the Institute was founded by 16 individuals (well known company executives and lean experts) and four firms (Avis Budget Group BSC, Jabil Circuit, Raiffeisen Bank and TÜV Rheinland).
Any private person or company who agrees with our mission and would like to support our activities can become a member – we currently have about 70. During our first Lean Summit in April, we had John Shook as a keynote speaker and the Hungarian editions of the books Learning to See and Managing to Learn were presented.
AUTOMATIC FOR THE PEOPLE
Zoltan Kiss, operations director at NCR Corporation in Hungary, which builds automated teller machines (ATMs) and self-checkout (SCO) solutions, talks about the company’s lean journey, explaining how continuous improvement and collaboration with suppliers helped overcome fierce competition and great challenges in manufacturing.
NCR Hungary’s lean journey started in 2006, when the company decided to move from traditional manufacturing to a flow line environment as it opened factories around the world. I joined NCR in 2009 as the first Hungarian manager to direct operations here in Budapest, from which we supply the EMEA market, producing ATMs for the financial sector and SCOs for retail.
In 2008 we had production volumes very similar to those we have today, but produced by 60% of the people we had back then. When we make productivity gains, we redeploy people to other tasks, and as part of our lean journey, continuously attacking costs and lead times, we started to integrate vertically. In 2010 we began to produce SCO machines, which were previously outsourced. We have halved the lead times with this move and managed to better utilise our facility.
There is no such thing as a standard ATM or SCO machine – each machine is tailor made to fulfil customer requirements. There is huge variance on the line, but we managed to go down to zero changeovers. Training people for this variety is difficult – in normal assembly operations workers learn a 20-30 second task, at NCR their tasks take several minutes. By insourcing high level assemblies that were previously made outside and through vertical integration, we managed to reduce our lead time and remain cost competitive. This means that more units are manufactured by the same number of people. After all, we work in a very tough market.
We leaned out our processes and make them rely on a just-in-time supply chain. I trained our Hungarian suppliers in lean principles, and they were astonished to understand the impact they have on our operations. We have a special department working on nothing else but supplier development. We try to localise the supply chain, to create a smaller circle in Europe. For example for the self-checkout units produced here, we managed to cut the lead time by more than half of the outsourced model. We can now reach any point in Europe in 48 hours with special shipping arrangements whereas previously the machines were built in the United States, requiring long shipping times.
Customers regularly visit us to see what we do and to improve mutual understanding. Everywhere we go in the company, we copy and share best practice. There is a sense of healthy competition among plants and departments, which works as a big motivator. Lean has helped increase the plant’s output, allowing us to bring more products with multiple configurations and complexity.
For 10 consecutive quarters we have been exceeding expectations – we are getting better and better and our culture of continuous improvement is a great driver for growth.
Peter Villányi, managing director of Avis Budget Group Business Support Centre for the EMEA region, explains why the company is looking to adopt lean in its back office operations, and the steps it’s taking in order to prepare for the implementation.
We act as a back office shared service centre in the EMEA region for Avis Budget Group. When we started thinking about lean, it was because we wanted to become a centre of excellence, and we were under pressure in terms of quality and productivity improvement.
What could help us implement a bottom up approach? We did some benchmarking and realised that lean and six sigma are increasingly being used in back office environments, not only in production and front office. We didn’t jump right into any methodology, however: we first needed a robust cultural basis to build on. We needed awareness.
Secondly, we understood the necessity of building a framework for change, and in 2010 we started with TQM workshops and began identifying quality problems. Different islands of people in different processes started working together to tackle quality issues, and we then introduced continuous improvement to sustain their efforts.
Last October we measured improvement through quality KPIs and satisfaction surveys, and saw good progress. When the company operating Avis and Budget in Europe, the Middle East, Asia and Africa was bought by Avis Budget Group, which owns and operates the brands in the rest of the world and had a well structured improvement programme already in place, the lean six sigma programme gained even more momentum. We were the first in Avis Budget EMEA region to implement a process excellence programme, of which we are now in the early stages.
In Budapest we currently do financial services (accounting, purchase-to-pay, receivables) for Western European markets on behalf of the local centres, with UK, France, Germany, Italy and Spain being our biggest markets. The other part of our business is customer service (after rental complaint handling, customer data management, rates, location database).
Avis Budget faced significant challenges during the economic downturn as international travel went down: our objective was to become more flexible. Cost and processes became more important than ever before, and we started feeling the pressure of profit margins. Before the merge the European and American businesses had different ownership structures: we are now in a better position to meet the challenge of creating the highest quality and achieving the highest productivity globally while being flexible enough to respond to local nuances.
Embedding a culture based on customers and on continuous improvement in back office operations is a big achievement: tools are applied and processes are changing, with a direct link between the quality of our work and the trust management has in our centre.
A top down approach wasn’t going to work: we found a lot of initial resistance and realised we needed to be more patient. Until people saw the benefits of the new ways of working they would only perceive change as a way to throw extra work their way. The real challenge was the limitation in our own mindset.
Joining the Lean Enterprise Institute Hungary will give us the opportunity to benchmark against others and start working on developing an improvement culture. We don’t see ourselves as a lean company yet, but we are working to get there.
Martin Melkowitsch, COO of Raiffeisen Bank in Hungary, shares with LMJ the first steps the financial institution is taking with regards to its lean transformation, highlighting early wins and potential for future progress.
In 2008, Raiffeisen International, the predecessor of Raiffeisen Bank International, RB’s parent company, launched a lean pilot project in one of its subsidiary banks. The impressive productivity results and the great success with employees paved the way in 2009 for a wider project in more banks. Five of the group’s network banks were the early adopters that saw the beauty of lean and decided to go forward. Raiffeisen Bank in Hungary was one of them, starting with the transformation journey a year ago. Progress in Hungary has been substantial: we have already covered over 430 staff across the entire organisation and aim to transform the whole bank in the coming years.
The programme already started to improve the productivity of our staff and the efficiency of our processes. We will have a happier workforce which will lead to more satisfied customers. Employees already feel the difference: there is less waste and more value-added work in our daily activities, a different leadership style and the chance for every transformed team to shape their own objectives and future.
We ensure our people don’t see lean as a way to reduce our workforce, because it would poison the whole message. Resources which we can reduce due to process simplification get pulled in a lean practitioners’ group and get redeployed to teams starting with the lean transformation. This improves all aspects of the transformation for the new team, creating multi-skilling opportunities and allowing our people to share knowledge.
On a baseline of about 430 full-time equivalents, we identified 20% impact potential, of which almost half has already been achieved by focusing on process improvements, capacity management, management infrastructure and particular mindset and behaviour.
The operations department has probably been the most responsive to the transformation, but others are now engaging with the philosophy, too. In the central mid-office unit, a staffing model is being developed from scratch, while central loan administration is in the design phase, with an impact potential of about 15 FTE identified through workout back office team transformation, process and organisation redesign and error analysis in connection with E2E corporate lending processes.
We are looking to cover more than 1,500 FTE in 2012, with two of the main areas being the branch network and call centres. We encourage people to visit our “lean intranet” site, which explores the impact of lean and works as a platform to share learning material and to speak anonymously to leadership and lean teams. Outstanding employees are awarded, while underperformers are helped to catch up. The bank is currently testing a reward-based salary, which would entail pre-paying a portion of the bonus to high achievers, based on performance. Our sister bank in Slovakia has already implemented this.
Games and quizzes aim to make our people understand that lean changes our approach to clients. A product-sales philosophy is not working in financial services anymore. After all, we are selling money for money, and not smart phones. We are therefore moving from a productselling mindset to one based on the relationship with customers.
Lean came rather later to Hungary than elsewhere in Central Europe. It was essentially brought by foreign multinationals from Germany, Scandinavia, the USA and Japan. As elsewhere this spawned a lot of local lean consultants, working in manufacturing, clothing and banking. The next step with the formation of the Hungarian Lean Institute is to spread lean practices to locally owned enterprises and to universities. Although it does not have the dynamism or scale of inward investment Poland has, Hungary stands to benefit from the resourcing of products from China to lower wage locations within trucking distance of Western Europe. It will however have to move quickly to compete with lower cost locations further east. Lean will be essential in doing so.