Kaizen Binder

THE Gi KAIZEN METHOD

HOW YOU CAN TRANSFORM MORE
DONATIONS INTO SALEABLE MERCHANDISE

QUICKLY

AT NO EXPENSE

AND SIMULTANEOUSLY IMPROVE MORALE
AND SAFETY AMONG YOUR STAFF

By
John Miller, Chief Executive Officer
Vickie Volpano, Senior Vice President – Retail Operations
John Poole, Vice President – Commercial Services
Goodwill Industries of Southeastern Wisconsin and Metropolitan Chicago, Inc.

Over the past eight months, the process of turning donations into saleable merchandise in this
Goodwill has been transformed. We have completely changed our approach, and in doing so,
we have dramatically increased sales, found added work space in crowded quarters, improved
employee morale and enthusiasm, and improved safety conditions. Best of all, the new
approach did not cost hundreds of thousands of dollars in consultant fees, new equipment, or
remodeling. The biggest investment was time – setting aside a few days at each store to make
the transition.

We are so impressed with the success of this new approach that we want to share it with you.
This method works anywhere, in any type of business or occupation. It is particularly applicable
to Goodwill’s unique task of collecting and reselling donated goods to the retail public.

What is Gi Kaizen?

Loosely translated, the word, “kaizen” is Japanese for “continuous improvement.” The word,
“Gi” is Japanese for Goodwill.

The kaizen method was developed in Japan in recent years and first used in the automobile
manufacturing industry. It is catching on in America because it involves a simple, practical
approach to the goal of “process improvement.”
Its two major components are:

 Five S Workplace Organization (Sort, Straighten, Sweep, Standardize, and
Sustain)

 Cellular Production (Creating standardized, streamlined work cells that concentrate
on activities that add value to the job at hand and eliminate activities that do not)

Like many organizations, we have been committed to process improvement for several years.
However, previous consultants and exploration of other approaches resulted in suggestions that
would be far more costly, complicated, and difficult to maintain over the long term. We have
found the kaizen method to produce rapid, sustainable improvement in donated goods
processing.

How did we apply the Gi Kaizen approach to Goodwill stores?

Each of our 15 store/donation centers held two or more “Gi Kaizen events.”
A Gi Kaizen event takes three to four days. Each event gathered a team of 10 to 20 people.
About half of the team were store managers and employees; half were non-retail Goodwill staff,
who were able to offer an outside perspective. Selection of this type of cross-functional team is
important, and differs from traditional “best practices” or “benchmarking” team selection
processes.

 In the morning of Day 1, the team learns Gi Kaizen principles and applications of 5S
Workplace Organization and Cellular Production.

 During the afternoon of Day 1, the team begins the 5S Workplace Organization process by
Sorting, Straightening, and Sweeping.
Sorting is segregating and discarding all unnecessary items from the production
environment. “When in doubt, throw it out!” or “Sell It!” Straightening is arranging remaining
items and identifying their proper location. “A place for everything and everything in its
place.” Sweeping is cleaning the workplace of debris.

 On Day 2 ,the team maps and measures its current donation processing methods in terms
of both time and distance. This process identifies waste and allows the team to redesign
the process focusing on activities that add value to the operation, while eliminating actions
that waste time.

 On Day 3, the team continues the 5S Workplace Organization by Standardizing and
Sustaining the reorganization of the workplace that was accomplished the day before.
Standardizing means frequently revisiting the sorting, straightening, and sweeping to
generate new improvements. Sustaining is developing visual performance measurement
tools that will promote adherence. Additionally, the team maps and measures the new
standard work process for improvement in preparation for a team presentation.

 On Day 4, the team prepares, practices, and presents a team presentation outlining their
activities from the previous three days and communicating the measurable results of these
activities. Store and donations staff who did not participate in the process attend the
presentation, as do managers and leadership from throughout the Goodwill organization.
The presentation develops the team’s confidence in communicating the merits of the Gi
Kaizen process, and helps build an organization-wide culture of continuous improvement.

What were the results?

We now have less cluttered, cleaner, more rational workplaces at all of our stores, which has
resulted in improved morale, higher productivity and more efficient use of space. Year-to-date,
our 33-year-old Plant Store has produced 11% more sales than it did in the first seven months
of 1999. Transactions are only up 1.3%, but sales per transaction are up 9.5%.

Gi Kaizen has impacted both sales and margins. Through July 2000, Retail Operations
performance is improved over 1999 with revenues up $1.8 M and margins increased by
$936,000.

Donations employees report that they are able to work faster and no longer have to break away
from their tasks to move carts of clothing out of the way, etc. One employee, who uses a cane
due to a disability, commented that she is glad the floor is now clear of clutter.

Can these results really be sustained?

Yes.

Case in point: On Saturday, January 22, 2000, the back of our Plant Store was its usual
beehive of activity. About 20 store processing personnel, the store manager, and the assistant
manager were getting the store ready to open at 9 a.m. The back room was so crowded that in
many areas you needed to turn sideways to move around. We seemed to be flooded with
donations. Material handling equipment was stacked everywhere, and the adjacent dock area
was similarly crowded.

During the following week, the first Gi Kaizen event was held, focusing on the donation-to-rack
process. Afterward, management took a tour of the store’s back room. We were astounded by
the vast amounts of open space and the transformation of the processing effort. There was,
however, considerable skepticism that the changes were sustainable. We agreed that we would
all meet on February 29 to take the same tour. The next day, we met with Cora Stellpflug and
Judy Dykstra, the manager and assistant manager of our Plant Store. As we stood in the neatly
organized, clearly labeled, orderly, quiet processing area, looking at more open than occupied
space, Cora, who has worked for us for more than 15 years, and Judy who has more than 20
years of service, commented that “there seemed to have been a big slowdown in donations”
over the past week. In fact, they themselves had brought about the dramatic changes in the
workplace by streamlining operations.

Our initial skepticism proved to be unfounded. The positive changes in our Plant Store were
sustained. We have been through peaks in our donation cycle on Memorial Day and July 4, and
every time we visit that back room it still works.

There has been another Gi Kaizen event at this store, and there will be more in the future,
because this is about continuous, not just one-time improvement.

Gi Kaizen from three individual perspectives:

We would like to discuss Gi Kaizen from the perspectives of the executive charged with
process improvement, the executive responsible for the donated goods operation and the chief
executive. These perspectives are important because Gi Kaizen requires both
leadership and commitment. It creates changes in operations that cannot be imposed on
workers but which they can and will adopt for themselves if they see that the commitment of
management at all levels is sincere. In addition, management must provide the tools that
workers and supervisors require to improve their workplace and productivity. Finally,
management must lead by example.

A CEO’s perspective
By John L. Miller

Goodwill Industries of Southeastern Wisconsin and Metropolitan Chicago, Inc. has been
collecting and selling donated goods for 81 years. In the late 1980s, we shifted from central to
on-site processing and adopted the store/donation center model. But like most Goodwills that
went through this transition, our stores lacked the docks, back room space and other
characteristics of a true store/donation center. Typically, the processing centers (which
occupied about one-third of the space in each unit) were run as each individual manager saw fit.

The Gi Kaizen process has brought to light the difference between retailing and
manufacturing. Goodwills often seek out store managers and donated goods executives who
have considerable experience in retailing. These individuals generally come to Goodwill with a
blind spot. They assume that material in the back room of the store is saleable! This
assumption arises from the simple reality that in a department store, a chain discount store, or
any supermarket there is a back room with merchandise waiting to be displayed, all of which is
saleable. Some of it has to be ticketed, but decisions as to its salability have been made
elsewhere. This is not true in most contemporary Goodwill stores. An insight we gleaned from
our experiences with Gi Kaizen is that the preparation of materials for sale in our stores is a
manufacturing process and must be managed as such. The principles of Gi Kaizen are not
only useful, but in fact, critical to successful extraction of value from our donations.

In the past, our management has solicited proposals from consulting firms to lead a process
improvement effort in our donated goods system. The proposals we received were not
particularly compelling and very expensive, ranging up to $250,000 for a 9-month effort. Not
liking the alternatives we had seen, we made a decision in November 1999 to hire an individual,
John Poole, who had never worked in a retail setting in his life and who had no responsibility
other than to improve processes in the organization, beginning in the Retail Division.

No management effort we have made in Goodwill has ever produced as much positive
change as rapidly as this one. Based on our familiarity with other Goodwills, we believe these
principles can be applied immediately and at no cost to any Goodwill anywhere and will effect
an immediate improvement in operations. They will look better, be more organized, cleaner and
produce measurable financial improvement.

The best thing about Gi Kaizen is that it is free. It is a set of ideas, and hence transferable at
the speed of thought. We have already introduced these concepts to colleagues from Goodwill
Industries of Central Indiana, North Central Wisconsin, and Portland, Oregon, and have no
doubt that they can and should spread throughout all Goodwills.

Of course, this applies not just to the back rooms of our stores, but to all our processes. We
experimented with using the Gi Kaizen method in our Human Resources department. We
focused on one task: completion of a personnel file for each new employee that meets
regulatory compliance. Throughout my tenure, this process has taken about four weeks to
complete. When we analyzed the steps involved with a Gi Kaizen team, we found it actually
should require just three days. We have set a target of having the entire file for each new hire
completed in four days, and have made great progress toward that. We are now at seven days
on average, and declining.

A Retail Executive’s Perspective
By Vickie Volpano

“A place for everything and everything in its place.” - Mother
“Change is good!” – Mother Nature

As a 14-year Goodwill associate, allow me to share my perspective on how Gi Kaizen can
assist in our shared interest to have Goodwill Industries, and specifically our donated goods
programs, thrive.

It was mid-1986 when I came to Goodwill from a national retailer. Store sales have since grown
six times from $2.8M to over $17M this year and store presentation is greatly improved.
However, our donated goods production improvement efforts were neither complete nor
comprehensive. In retrospect, there was well-veiled opportunity in the deplorably low salvage
prices of 1998 and 1999. We have since gained some appreciation for lessons learned and for
opportunities that emerged (at least in part) from those difficult times. During this period of
intense “character building,” we were compelled to focus on the margins our store operations
were—or were not—generating.

Our donated goods operations simply were not as efficient as they could and needed to be. We

made progress, but never reached a level of proficiency in the production of donated goods that

translated to improved bottom-line performance—until now.

In the last eight months we have certainly not gained every insight needed to run a successful
donated goods program. But we have clearly benefited greatly from applying Gi Kaizen, 5-S
Workplace Organization, and Cellular Production principles in the workplace.

In addition to improving bottom line performance, Gi Kaizen improves operations in other

fundamental ways. First, Gi Kaizen is a true workforce development tool. Its

implementation is not a one-time shot through operations with “best practices” prescribed

and mandated by management. Rather, Gi Kaizen, 5-S Workplace Organization, and

Cellular Production are tools and philosophies. And in the true spirit of Goodwill and

workforce development, it is the participants and employees whom we serve and work

alongside with who discovered and implemented real solutions to the challenges of

operations.

Secondly, Gi Kaizen encourages creativity before capital. As mentioned earlier,

implementation does not take significant resources—it is essentially free. What is required

is a more precious commodity, the investment of time. As with any process improvement

initiative, Gi Kaizen does require a significant investment of people and the commitment of

management.

To remain relevant in an increasingly competitive donation and retail market, we must
ceaselessly improve our operations. To increase funds to support the mission and good work of
Goodwill, we must ceaselessly improve the productivity of our operations. And Gi Kaizen can
help.

The Process Improvement Executive’s Perspective
By John Poole

The Gi Kaizen event is conducted with an understanding of the following two axioms:

1. Bias for action.
2. Creativity before capital.

Having a sense of urgency drives change in an organization by identifying, addressing, and
taking immediate action at all levels to make improvements. Previously described dissatisfaction
with Retail Operations performance and the need to overcome the drop in salvage prices
provided the sense of urgency to motivate Goodwill to improve its donations processing
activities, so as to more quickly turn donated items into saleable merchandise. This provided
the “bias for action.”

Because the process of reselling donated items is inherently wasteful, we must look for
improvements using existing resources. A focus on waste reduction generates capacity and
may resolve any need for capital spending. In this case, we were able to improve use of space
in the areas of stores dedicated to donations processing, which eliminates the need for
expensive renovation or expansion. This illustrates “creativity before capital the future of Gi
Kaizen in Goodwill’s retail operations will be the integration of product and information
throughout the entire Value Delivery System, continuously improving quality, cost, and
response.



GI Kaizen

 What is Kaizen?

– Has its roots in Japanese automotive
– Is a big initial change, followed by smaller,

constant, incremental changes
– Kaizen focuses on One Piece Production versus

Big Batch or Big Lot Production

• Examples of One Piece Production:

– Burger King “Have it Your Way”
– Subway

• Examples of Big Batch / Big Lot Production:

– McDonalds
– Goodwills

– Gi means “Goodwill”

Kaizen Philosophy

 Focus on “Improvement” and the results will
happen

 Harness the intellectual capital and practical
expertise of the “Kaizen Team” to improve the
process

 Define standards
 Remember “Creativity before Capital”

Continuous Improvement

The reason a lot of organizations adopt the
latest “program-of-the-month” is because they
are unwilling to follow through on the basics.

“We won’tTypical Responses “It’s too
have radical a
enough to Change change!
hours for
our clients!” ”

“Are you “We “We tried “We
saying won’t that before don’t
that we’re be as
doing it flexible and it do
wrong didn’t thing
now?” ” work” s that
way
here”

What is Kaizen/Lean?

Lean is…. “Traditional” is...

• Continuous • Continuing the “way
Improvement we always have”

• About working • About working
smarter harder

• Job security and • About eliminating jobs
opportunity and opportunities

• About working • Putting productivity
safely and making before safety
safety a standard
• End-of-line
• Quality built into inspection
the process

Keys to Success…

 Leadership buy-in
 Follow through on maintenance system

– Work Instructions
– Cell layouts
– Audits

What Does Kaizen Affect

 Employee Turnover
 Production
 Revenue
 Expense Ratios
 Supply Costs

Before

After

Kaizen Video

Kaizen Resources

 Books
– “Gemba Kaizen, A commonsense, Low-cost
Approach to Management” by Masaaki Ima
– “ Kaizen, the Key to Japan’s Competitive
Success, Masaaki Imai

Kaizen Resources

 Internet
– Kaizen Institute – Introduction to Kaizen: A
concise definition of Kaizen. www.kaizen-
institute.com/kzn-htm
– Kaizen Institute – Insemination of Kaizen into
the Organization www.kaizen-
kaizen.com/kzn/a.htm
– Lean Enterprise Institute- www.lean.org

Gi Kaizen
Cellular Production
5s-Workplace Organization

What I’d like to learn at this
event:

1.

2.

3.

4.

Event Rules

1. All cell phones are turned off or placed on
pager mode.

2. There is no rank among team members. One
person, one vote.

3. Keep an open mind to change.
4. Change is good. More change is better.
5. Maintain a positive attitude.
6. Nobody blames anyone for anything.

Event Rules (cont.)

7. Respect each other.
8. There is no such thing as a dumb question.
9. Plans are good only if they can be

implemented. Plans succeed only if gains are
sustained.
10. There is no substitute for hard work.
11. Just do it!

What Is Cellular Production?

 A production approach that helps organizations
produce a variety of products for their customers
with as little waste as possible.

 Equipment and workstations are arranged in a
sequence that supports a smooth flow of product
through the process, with minimal transport or
delay.

Production Cell

 Consists of people and equipment or
workstations required for performing the steps
in a process, arranged in the processing
sequence.
– One-piece flow.
– High-variety of production.

One-Piece Flow

 The state that exists when products move
through a production process one unit at a time.
(Opposite of large-lot production)

One-Piece Flow vs. Large-
Lot Production

 Large-lot production  One-piece flow production
– Length of production – Reduces production
time delay
– Requires labor, – Reduces resources
energy and space to required for storage or
store and transport transport
product – Reduces product damage
– Increases the chance – Exposes problems
of product damage

Benefits of Cellular Production

 Cuts costly transport and delay from the
production process.

 Shortens production time.
 Saves space that can be used for other value-

adding purposes.
 Promotes continuous improvement by exposing

problems hidden in inventory.

Operating in a U-Shaped Cell

 In a production cell, the equipment and
workstations are arranged close together in the
sequence of the processing steps.

 The production cell is U-shaped to bring the
end point of the process close to the beginning
point, minimizing the distance the operator has
to travel to begin the next cycle.

Becoming Multi-Skilled
Operators

 The simple change of arranging equipment in a
process-flow means operators may need to
learn how to perform different operations or use
different equipment.

 Cross-training enables employees to perform
different operations within a process and lets
teams take full responsibility for their processes.

Kaizen

15 Minute Break

Working in Teams

 Cellular production combines several different
operations in sequence.The primary job of
people working together in the cell is to
maintain a smooth flow through all the
operations.

 A group of operations and people have more
creative potential and energy than any person
working on a problem alone.

Cellular Production
Exercise

 Multicolored balls

 Participants gather in a circle for a
demonstration of what cellular production is and
what the advantages of cellular production
are……Or……..

 Lego exercise

Gi Kaizen

15 minute Break

Area Maps

Purpose:

• Show the flow of people using arrows
• Document distance traveled by and

work sequence of each operator
• Document the workplace before making

improvements (before picture)
• Assist in problem identification
• Assist in making improvements

Department: Widgets Area Map

Operation: Gizmo attachment Date:01 / 01/ 2000

Material flow

1 W.S. Steps: Distance:
24 7
68 1. get widget 12’

2. bring to w.s. 12’

3. get gizmo 7’

35 4. attach to part 7’

5. get gizmo cover 6’

6. get rag/cleaner 6’

7. assemble/clean 6’

8. move 8’

9.

10.

Total: 64’

Observer: I.B. Watching

Understanding the Current

Conditions

 Determine Product Mix
– Calculate Product Type/Quantity(PQ) ratios

 Document Current Layout and Flow
– Overall square footage utilized
– Area Mapping
• # of people in the process
• Distance traveled by the people

Understanding the Current Conditions

Work Center Time

Complete a “before” area map in the department

Department: Area Map Date: / /

Operation:

Steps: Distance:
1.
2.
3.
4.
5.

What Is Waste?

Anything other than the minimum amount
of equipment, tools, product, space, and

worker’s time, which are “absolutely
essential” to add value to the product.

Any operation in the production process that
adds cost without adding value to the product.

Seven Deadly Wastes +1

u Over Production (Pre-Sort)
u Product/Equipment defects
u Excess inventory
u Excess process
u Transportation
u Excess motion
u Waiting/Delay
u Under-utilizing people

Typically in the Retail environment,
these wastes are evident….

Waste of Over Production (Pre-Sort)

What to Look For:

• Multiple category sorts (i.e. toys, books,
electrical, etc.)

• Excessive work in process (WIP)
• Production based on perceived need

Eliminate by:

• One piece flow
• Donor driven staffing

Waste of Product/Equipment Defects

What to Look For:

• Any scrap in the general area
• Defects created by improper handling
• Broken wheels, pallets etc.

Eliminate by:

• Training
• Standardized work
• Reduced handling
• Creating flow/defining aisle-ways

Waste of Excess Inventories

• Excessive storage of donated goods
• Excessive work in process (wip)

What to Look For:

• Excess bins or skids of donated goods
• Piles of unfinished product
• Dusty, dirty or rusty parts

Eliminate by:

• Smaller lot sizes
• Dispose of obsolete material
• Line balancing

Waste of Transportation

• Double or triple handling
• Moving donated goods or tools long distances

What to Look For:

• Excessive walking back and forth to get
tools, goods or information.

• Moving donated goods to a separate
holding or storage area

Eliminate by:

• Point of use storage
• Combining jobs

Waste of Excess Motion

• Excessive bending, lifting, stretching,
turning, or reaching.

• Movement that takes the operator away from
the value-added part of the job

What to Look For:

• Product or tools that are more than a few
inches away

• Walking back and forth
• Movement that does not add value to the

product

Eliminate By:

• Point of use storage for product and tools

Waste of Waiting

• Employee waiting for equipment, tools,
product, maintenance, supervisor, etc.

• Equipment waiting for maintenance,
operator, product, tooling, etc.

What to Look For:

• Doing “busy work” just to keep busy
• Waiting for fork-lifts

Eliminate by:

• Preventive maintenance
• Point of use storage
• Line balancing

A Process Improvement Tool

Analy sis PROCESS FLOW CHART FORM
Why ? Rev ision:

Question Each Detail Process/Job: Date:
What?
Where? Chart begins: Page: Of:
When?
Who? Chart ends: Charted by:
How?
TRANSFORM
TRANSPORT
STORE
ELIMINATE
COMBINE
SEQUENCE
PLACE
PERSON
IMPROVE
Possibilities / Changes

DETAILS OF PRESENT METHOD QUANTITY DISTANCE TIME NOTES
PROPOSED

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

WASTE

THERE ARE THREE ELEMENTS
IN THE PRODUCTION SYSTEM

Transform:transformation, change in quality, Store Transform
assembly (value-added), work 67% (add value)

Transport:change of location, moving, Transport 8%
transporting, walking 25%

Storage:waiting, only time passes without
processing, inspecting or handling

ONLY PROCESSING ADDS VALUE
in the eyes of the CUSTOMER