The Esselte Group is one of the world’s premier manufacturers of office supply and organizational products, with sales of $1 billion per year in over 120 countries. Its products are sold in Europe under brand names including Esselte, Leitz and Rapid and in North America under the Pendaflex, Oxford, Xyron, Rapid and Ampad brands. Like most leading manufacturers, the company has been focused on lean principles on its shop floor for decades. But more recently, lean is taking hold in other parts of the company, including IT. ERP Executive talked with Mark Katz, senior VP and CIO for Esselte, who explained how lean concepts that work well on the shop floor can be applied to IT, including to SAP, to free up capacity and help IT do more with less.

Q: What is the idea behind the lean approach to IT?

A: In a nutshell it’s two things. No. 1 is the elimination of waste. By eliminating waste you create better flow, faster response times, more capacity to do more work and lower costs. No. 2, you’re ultimately able to deliver what your customer wants, when they want it, with a high degree of quality. For IT, this works best when it is focused on the delivery of basic services – a new PC, a password reset, resolving a user application problem such as setting up a new pricing condition in SAP for a customer.

My focus has been the elimination of waste to create capacity. In the past 4 to 5 years, IT organizations have seen their budgets shrink, almost universally. Because of market conditions and the way business is going, IT as a percentage of sales has to go down. A lot of CIOs deal with that with typical cost-cutting strategies: you squeeze your supplier for bigger discounts, eliminate projects, cut staff and cut services. But all four of those strategies will put you in a terrible position to respond when business gets better and you’re asked to do more. Your suppliers won’t be happy and won’t give you a good response. If you eliminate projects and services, you’re not providing what your customer wants and needs to grow the business – that’s when outsourcing looks like an option to them. If you eliminate a bunch of people as a math exercise, you have less capacity to react when the demand increases. If you’re running a truly lean operation, you can react to the need to squeeze your budget down by eliminating waste in the organization.

Q: Can you describe how lean concepts that work in manufacturing apply to IT?

A: Lean has 7 wastes: there’s over-production, over processing, motion, wait time, defects, transportation or unnecessary motion, and inventory. They all have correlates in IT. In IT, if you’ve got a month-end close process that breaks down every month and someone has to go in and fiddle with it, tweak this and that, that’s the same as a machine breaking in the middle of producing a product. Lean would say, for a machine you need to ‘see’ where the breakage is occurring and repair the root cause. Then we do TPM [Total Productive Maintenance] and Poke-a-Yoke mistake-proofing techniques to ensure the breakdown does not happen again. For IT, you want to look at that process, understand where the failures are and repair them. When you repair that root cause your month-end process runs without errors. Now you don’t have an employee waking up in middle of night killing himself for 16 hours, then going into the office the next day and creating a bunch more errors because he’s tired.

Q: What kinds of things have to change in an IT group to get to Lean?

A: It’s a concept of “learning to see,” which is the name of a book about lean thinking [by Mike Rother and John Shook]. You have to make things visual. The key tool in lean is the kaizen, a technique for bringing people together to watch the process – some who are familiar with it and some who aren’t. When we have a blockage or breakage, we don’t have someone go in on a screen and look at code, they print the code out. They diagram the flow, put it on a board. More than one developer looks at it, including a developer from another group, to bring a new perspective. So in the example of the month-end close, we’ll have someone diagram it on a board, then have other people look at it. Then in a test system we’ll run the process, look at what happens, and not just once but several times, because things change over time. Rarely when you have a problem does it happen the same way each time.

Looking for un-necessary motion or processes can simplify a process, remove the risk of errors then remove waste. Every CIO and architect will tell you they’ve seen situations where, in an interface between two systems, to get data from one place to another they’ll have a query which exports the data to a flat file, which is then sent to another destination where it’s read into a table. The table is finally processed by the destination system. Someone will look at that and say, “There are a lot of steps there. Why can’t you just tell us where that data is, and we’ll come pull it out?” The more steps you have in a production process that don’t add any value, the more likely you are to have errors. So it’s about reducing the steps from A to B, and that’s called flow – one-piece flow, in fact.

Q: How do you find the processes that contain waste?

A: We look at end user complaints. Most IT shops have some sort of issue tracking system, so you can begin to analyze where the bulk of your tickets are. Wherever your IT people are spending the most amount of time fixing internal problems, that’s where you want to focus. It’s a parallel to manufacturing. When you have a machine that’s not being productive and wasting a lot of raw materials, it becomes really clear where the problem is.

Q: How do IT people learn about lean IT?

A: They don’t learn from IT people. I learned at the knee of our heads of manufacturing and our lean office that focuses primarily in manufacturing. Many years ago, I was invited to a kaizen in a factory and spent time getting very dirty determining how to improve the productivity of a machine. I got very excited because I saw the parallels. If they’re doing lean on the shop floor of your company, that’s where IT people should spend their time. Go to as many kaizens as you possibly can. If there is no lean in the organization, you’ll probably need to bring in a practitioner of lean. There are many. The most famous is a company called Shingijutsu, which we’ve used on the past – the people who worked at Toyota. Failing that, there are probably no less than 150 titles on lean office on Amazon. There’s a great handbook, The Lean Office Pocket Guide.

Q: How do you get started with lean IT?

A: You start slow. When we started, we did a kaizen in the server room, to clean it up and put everything in its place. That’s called 5S. A lot server rooms are rats’ nests. When you clear them out, you solve a lot of the potential problems. You can also do that in a system, in terms of log files and the other detritus that comes from a system. Do you keep every log file forever and ever? In SAP, are you doing routine maintenance on the servers? That’s TPM. Is someone routinely going through with a checklist, making sure everything is running, like a mechanic does when you bring your car in for a tune-up? Why do they do that? Because you won’t want to break down on the highway.

Q: How would SAP change when brought under lean IT?

A: There’s a goal of a zero defect and down time environment. Easily said, hard to do, at least on the operating side. On the application side, it’s zero defects when you implement a change. If you manage to do that, the benefit is when something goes into production, it doesn’t have to be pulled back out and you don’t have to reverse transactions. A great goal would be to reduce by half the errors you have in daily operation and post-go live situations. That’ll take a while to get to, and lots of different actions. Then you reduce by half again, and reduce by half again. Then you begin to approximate the ultimate goal, although you’ll probably never quite get there, not if you want to be agile and quick.

Q: Any examples of how lean IT has improved SAP at Esselte?

A: We have a critical job that was written to interface to an external warehouse. The interface would frequently blow up. It’s a very old program, written in days when we had R/2 and it’s been technically updated to death. The business had learned over 10 years to exist with it, and IT learned to exist with it. It wasn’t until my head of SAP and I started to really pay attention to what some of the errors were that at least we came up with something that minimized the impact. As the result of a kaizen, the team came up with the idea of putting a little alert in the interface so that if data isn’t received within 5 minutes, it sends an SMS message to a number of people in the business and IT. It doesn’t resolve the issue – that would take a major rewrite which we plan for later this year – but this small change has reduced the time it takes for IT and the business to be notified and to do something about it. It’s a very small thing. But that is the essence of lean, many small changes that create continuous improvement.

Q: What is the benefit of lean for SAP administrators?

A: The value to an admin is maybe they don’t have to admin as much, maybe they can actually deliver business functionality. That’ll probably scare half of them but every CIO would wish they could deliver more value for the budget they have and this is a way to do it. Take people who are fixing problems off of fixing problems by fixing the root causes and then use these highly skilled resources for delivering application support, delivering value. Another value for the admins is they’re not waking up at 2 a.m.

Q: What about benefits for companies overall?

A: Any time an SAP system is not working, it presents a cost to the business. If you don’t follow the prescribed checklist for preventative maintenance on your systems, you’re going to have a failure and you may spend 10 hours repairing the failure, but the business could lose 10,000 times that cost. You can’t take orders, the supply chain stops, you can’t ship products. In manufacturing a key metric is productivity of the machine and the productivity relates to service level and service level relates to your ability to respond to demand. What’s the cost of one day’s lost business to a billion dollar company that operates every day of the year? Probably in the $3 million range if they’re 100% on SAP. The investment in lean is nothing compared to the loss of one day’s sales.

Q: To what extent do tools that help automate IT functions play a role in lean?

A: One thing you need to be careful of is if you have completely automated systems you can’t see anything, you don’t have any visual control. One hundred percent automation to me is just 100 percent obfuscation. But tools that can help document reality can help. Panaya was a great tool for us in that regard, and certainly sped things up and helped us to ‘see’ when we were upgrading from SAP ERP 4.7 to 6.0. With Panaya we understood what the most used and least used programs were, so we knew which we needed to focus on. Others we took off the remediation list.

Q: How would you summarize your results with lean thus far?

A: We tend to measure in terms of major failures and we’ve had none in terms of SAP. For the smaller things like batch errors we’ve seen a steady decline. We have not been able to measure how much more capacity my team has, although our total IT budget has gone down every year – every year – but the organization has done more every year, in terms of application delivery. We do more projects, more user requests, we’re delivering more value to the business. Across the board, we’re doing more with less. But there are miles to go. We’re in lean kindergarten. We’re hoping to get to first grade soon.

Editor’s note: Jon Reed contributed to this article.

ERP Executive is published by Panaya.