Deploying a Hoshin Kanri implementation pays off.

Emmanuel Obadinma, Alloy Casting Industries Ltd., New Hamburg, Ontario, Canada; Morteza Zohrabi and Farhad Samsami, Global Value Expanders (GVEX), North York, Ontario, Canada

(Click here to see the story as it appears in June's Modern Casting.)

Metalcasters are looking for ways to increase profitability through initiatives such as process improvement, lean manufacturing, Six Sigma and quality/project management.

Since the 1960s, many companies have used Hoshin Kanri planning, which focuses on achieving a “vital annual stretch goal,” an ambitious long-term target. Interest in Hoshin Kanri now appears to be growing worldwide. As more large U.S. businesses use it, it will extend to their supply chains. It is one of the most powerful planning tools available to organizations today, allowing for breakthrough innovations and continuous improvement.

This article explores the implementation of Hoshin Kanri at one metalcasting firm.

Management by Objectives

The Hoshin Kanri process fits under the umbrella management philosophy of Total Quality Management (TQM). It interplays with Plan, Do, Check or Study & Act (PDCA) and Management by Objectives processes in achieving a high level of satisfaction and outcome during planning and implementation (see Fig. 1).  

For one metalcaster, the first step was implementation of Management by Objectives as a culture of management. This was done to provide employees with the board’s vision and objectives, which were created using the Hoshin Kanri format. The relationship between Management by Objectives and Hoshin Kanri also was established as an annual objective. Before Hoshin Kanri, individual projects were not always linked to an annual objective.

Hoshin Kanri is synonymous with the PDCA planning cycle. By definition, Management by Objectives is a process of agreeing upon objectives within an organization so management and employees understand what they are and buy in to them. Management by objectives is a dynamic system that seeks to integrate the company’s need to clarify and achieve its profit and growth goals with management’s need to contribute and develop itself and the entire organizational team. It is a demanding and rewarding style of managing a business consistent with the PDCA cycle as well as the basic concepts of Hoshin Kanri.

The key to organizational learning is to discover problems and solve them. Most of the time, organizations spend resources solving the wrong problems, leading to serious losses. For a successful outcome, problem solving requires planning and coordination, including monitoring.

In the Hoshin Kanri process, the two kinds of planned organizational activities are breakthrough activities and business fundamentals. Organizations endeavor to identify these two activities to eliminate ambiguity during implementation. The bottom line is that all specific improvements or changes to be made by the organization should contribute directly to the business objectives. This ensures the Hoshin Kanri strategies are being carried out properly and progressively toward achieving individual strategic goals.

Setting and Attaining Goals

Hoshin Kanri strategic planning leads to the identification of a few “Vital Goals” from the Management by Objectives. In this case, Hoshin Kanri was introduced as an annual strategic planning tool that uses the objectives.

Strategic planning usually includes a consideration of strengths, weaknesses, opportunities and threats (SWOT analysis). Most of the time, the metalcaster’s business plan revolves around how to translate weaknesses into opportunities by developing an appropriate long-term business strategy. This company’s strategy involved a look at the following:

Capability Expansion: This means either machine capability expansion or market expansion—looking for ways to expand the business using the results of a SWOT analysis.

Acquisition Decision Making: A needed expansion was achieved by undertaking a study of other metalcasters and related industries, and deciding on making an acquisition. This important strategic decision must be analyzed properly before an investment is made.

Product Mix Change: A new product introduction targets a certain segment of the economy, or it can be in the form of a change to an existing product line. This initiative resulted from a decision to focus on core competencies.

Energy Savings Initiatives: Metalcasting is an energy intensive industry, and any effort to monitor and control energy use will yield financial rewards. Adopting green manufacturing initiatives will assist metalcasters in meeting and even exceeding various environmental regulations. Successful implementation of an environmental related business plan also comes with some tangible and intangible financial benefits. This was one of the topmost financial yielding initiatives.

Business, Process or Product Improvement Initiatives: Business, process or product improvement plans are practical at the tactical level where improvement projects were carried out in many areas of the company.

Raw Materials Sourcing Strategy: Most metalcasters practice raw materials sourcing strategy development, and when strategically planned, it can yield great benefit.

A Success Story

One company’s plan for a partner metalcasting facility had eight vital goals or strategies. The method and scope of deployment was determined after the implementation programs were accepted and approved. Cause-and-effect thinking and other tools were used while establishing implementation programs.

One of the vital goals was in the area of raw material sourcing. The cost of mined and processed nickel for a plant in Toronto, Canada, was the same from two sources, and both had ample quantities. One supplier delivered it by rail from Sudbury, Ontario; the other by rail from Thompson, Manitoba, Canada.

If energy prices were not expected to increase in the foreseeable future, then signing contracts with one or the other supplier would be based on cost alone. On the other hand, if the price of energy and consequently the cost of freight were expected to double, then one source of supply could be more attractive and less risky than the other. The partner foundry discovered an increase in energy pricing and was able to lock in pricing and supply terms that gave it a competitive advantage over its competitors. It established, deployed and implemented this strategy and achieved financial gains.

Definition and Prioritization of Vital Goals

To reduce ambiguity and misinterpretation during the planning phase of Hoshin Kanri, use a fact-based interlevel negotiation process known as “Catchball.”

Hoshin planning begins with senior management defining, identifying and prioritizing the strategic goals to be achieved, complete with deadlines. Once determined, these “challenges” are sent to the operational units, which break them down and determine what each unit and person must do to achieve the management objective. They then bounce the “ball” back to senior management, who “catches” it and determines whether the execution will be satisfactory. If not, the “ball” is bounced back to operations again, and they “catch” it and respond accordingly. As in the example, this process should take place under the monitoring of an experienced consultant.

An X-Matrix tool developed for the company described the main foundation of its vision upon which its strategies, tactics, processes and results rest. It is the ability to analyze and document the corresponding correlation between the strategies, tactics and processes that usually brings in the expected results. This correlation must be analyzed and understood fully to guarantee a strong or at least an important correlation but never weak correlation among the strategies, tactics, processes and results, or else the entire strategic planning project will fail. When correlations are found to be weak, measures are taken to reverse that, when possible. The measures may dictate changes in one of the other key areas such as a change to strategies, tactics or processes, to revamp initiatives and reverse the weak correlation. An X-Matrix helps corporations and others allocate individual responsibility to leaders of teams who are made to be accountable to the entire Hoshin Kanri team.

Team-based Implementation

Typically, a Hoshin Kanri project involves establishing an executing Hoshin Kanri team that is the backbone for ensuring the entire project’s success. Occasionally, a Hoshin team is assigned the duty of developing long-term, mid-term and annual strategies. The tactical team handles the tactics, the operational team handles all operational activities or projects, and the action team deals with the implementation of Kaikaku (radical change) and Kaizen (improvement) projects. Table 1 illustrates the example company’s implementation of Hoshin Kanri, with at least four teams having specific allocated duties.

Other tools available for use during the planning and implementation of Hoshin Kanri include strategy maps, market analysis, competitor analysis, value stream mapping and a host of others. The PDCA process improvement cycle enters repeatedly in the plan’s development, implementation and review.

Table 2 is a proven roadmap for the implementation of Hoshin Kanri that applies to all levels of leadership within an organization.

During the implementation of Hoshin Kanri, review certain key issues in the organization. Some of those in the example included:

• Review and update the organization’s purpose (vision and mission).
• Implement environmental analysis through SWOT and political, economic, social and technological (PEST) analyses.
• Devise strategic imperatives.
• Develop long and medium-term strategies.
• Plan the tactics (six to 18 months’ intervention) to support strategies.
• Set process improvement projects to support tactics (six to 12 months).
• Review the correlation between different levels of Hoshin plan (correlation analysis).
• Define owners for different levels of the plan.
• Set control items and prepare a control item list.
• Deploy the policy.
• Deploy the control items.
• Implement the policy plan.
• Check the results of implementation on a monthly basis.
• Analyze deviation of the plan.
• Communicate proactively with stakeholders and process owners.

Monitoring Progress Through Measurement and Review

Vigorous monitoring is required at each stage of a PDCA process improvement cycle for the attainment of the desired results. Corrections or revisions usually are implemented whenever any non-conformance is noted.

The review of the company’s plan progress must follow the PDCA cycle, and it applies to all levels of leadership within the organization.

After this company’s deployment of the Hoshin Kanri planning process, it checked the results of implementation on a monthly and yearly basis. Deviations from the plan were analyzed and the value of each strategy and certain performance measures were debated. Review tables were created and used to compare actual versus expected results and document any changes to the plan. Review tables make the plan a living document.

Abnormality tables also were created to document any occurrence outside the normal range of variation, and to facilitate root cause identification and the implementation of corrective actions.

The Bottom Line

The centerpiece of any business improvement effort is strategic planning. In the metalcasting industry,  seeing where the business is heading and developing strategic initiatives to address identified future needs will benefit all stakeholders. At the end of implementing a Hoshin Kanri planning process, a complete alignment of all the company’s strategies and initiatives will be achieved.

Undertaking Hoshin Kanri often requires the commitment of resources with a  focus on achieving larger organizational objectives. It is worthwhile to ensure the information gathered represents what the company wants to achieve, and that the information is updated as quickly as new data appears using the catchball process.

Training and coaching must be provided to individuals involved in the planning, execution and verification of results to ensure each participant in the strategic planning process understands his or her role. Hoshin Kanri can and should be fine tuned to suit an individual company’s needs. Its effectiveness as a strategic planning process can be seen at the end of the implementation in terms of improved revenue, usually achieved by involving all employees at every level of the organization.