Hoshin Kanri Strategic Planning and Its 5 Support Systems

Hoshin kanri, or Hoshin planning, is an integral part of the House of Lean Production that encourages employees to be involved in company planning.

Every company needs clear goals and a well-thought-out plan to achieve them. Hoshin Kanri helps companies by identifying goals, figuring out the best ways to reach those goals, and supporting the actions required.

Let’s dive deeper into Hoshin Kanri, starting with what it is and the four phases of its application.

What is planning?

Planning is figuring out how to gain an advantage and achieve goals by making a strategy. It involves answering two critical questions: (1) Where are we going? and (2) How do we get there?

There are four types of planning commonly used in modern organizations:

1. Operational planning: This planning deals with managing the company’s day-to-day activities.
2. Financial planning: It focuses on deciding how to spend the budget.
3. Project planning: This type of planning outlines how to accomplish specific goals.
4. Strategic planning: This planning involves deciding where the company is heading and how it will reach its goals.

This chapter emphasizes strategic planning, focusing on goals and their methods. To create an effective plan, the company must grasp critical aspects, including its current position, the desired goals (vision), the plans to attain those goals, and potential problems and obstacles.

Here is a visualization of a company’s planning process as it progresses toward its goals:

Source: Dennis, P. (2017). Lean production simplified; Road Metaphor.

Why planning is essential?

Planning is essential for companies because it helps them create a shared vision of where they want to go and how to get there. In Lean manufacturing, planning works like a pull system, where the idea is so convincing that it pulls the company into the future.

Planning also helps improve the abilities of individuals and the company. It encourages new ideas and innovation and helps the organization learn and grow.

It’s essential to consider the company’s strengths and weaknesses and take action to prevent problems for an effective plan. Planning also helps keep the company motivated by setting new goals regularly and avoiding complacency.

Common issues with planning

Mintzberg’s influential work, “The Rise and Fall of Strategic Planning,” reveals some problems with traditional planning. These problems include:

• Unrealistic predictions or expectations because the planning process is inflexible and can’t adjust to changes.
• Goals without a clear link to company needs.
• Having too many goals results in a lack of focus.
• Putting the wrong target or objective.
• Goals that aren’t SMART (Simple, Measurable, Achievable, Reasonable, and Trackable).
• Not reviewing planned activities regularly.
• Treating planning as a one-time event instead of an ongoing process.
• Planning without enough information or data.
• Over-analyzing data.
• Insufficient communication between departments and within teams.
• The management team’s reluctance to consider strengths and weaknesses.

Planning problems often arise due to disconnections within departments (horizontal), between departments (vertical), and over time (temporal). These disconnections result in wasted knowledge and inefficiencies. The figure below displays nine symbols representing specific types of knowledge wastage.

Most companies have a lot of energy and talented people but still struggle to reach their goals. To overcome this challenge, companies can create a smooth knowledge flow, experience, and creativity within the organization.

By using Hoshin Kanri or Hoshin planning, companies can involve everyone in the company and effectively solve strategic problems.

What is Hoshin Kanri?

Hoshin Kanri is how a company manages its goals and ensures it goes in the right direction. “Hoshin” means direction or purpose, and “Kanri” means management or managing. In simple terms, Hoshin Kanri is the company’s way of setting and achieving goals while staying on track.

Hoshin Kanri, also known as Hoshin planning, is like the nervous system of Lean manufacturing. It helps businesses figure out what they must do in the short-term (one year) and long-term (three to five years) to succeed. It’s all about identifying those needs and helping employees develop their skills.

To make it happen, Hoshin Kanri brings together all the company’s resources and ensures everyone is working towards the same goals. It uses a cycle called PDCA (Plan, Do, Check, Action) to keep things on track and get the results they want.

The Hoshin Kanri method follows a simple 7-step process:

1. Company leaders create a clear vision.
2. The leadership team decides on the main goal or mission to give the company an edge. These big goals need everyone’s effort, not monthly or quarterly targets.
3. The leadership team and senior management break down the goals into yearly targets.
4. The plans are implemented throughout the organization, starting from the top and reaching every employee.
5. The organization puts annual goals into action.
6. Conduct monthly reviews to make sure plans are on track.
7. At the end of the year, there’s an annual review to check the final results.

Read more: Lean Manufacturing: Definition & 3 Benefits

Hoshin Kanri Focus

Hoshin Kanri focuses on essential issues for improvement, represented as big stones. It uses an operational plan to handle routine work like small stones. However, a common mistake in Hoshin Kanri is trying to do too much, draining energy and leading to no real achievements.

Source: Dennis, P. (2017). Lean production simplified; The road metaphor with problems targeted.

Alignment and flexibility

In Hoshin Kanri, companies need to align resources and promptly adapt to changes in the flexible business environment. This approach helps them stay on track and respond effectively to any shifts or challenges that come their way.

Hoshin Kanri system

Hoshin Kanri improves upon Management by Objectives (MBO), a concept introduced by Peter Drucker in his 1954 book “The Practice of Management.” It takes MBO’s strengths and fixes its weaknesses.

Hoshin Planning system includes improvements such as Plan-Do-Check-Act (PDCA), Nemawashi, Catchball, control department concept, and A3 thinking. Let’s take a look at each of these systems:

PDCA (Plan – Do – Check – Act)

The PDCA cycle is a crucial model in lean manufacturing for implementing changes. It provides a four-step method that helps teams improve processes and prevent repetitive mistakes. Here is a concise explanation of each PDCA step:

• Plan: Create a plan for the experiment and estimate the expected outcome.
• Do: Execute the plan and put it into action.
• Check: Validate the hypothesis and assess the results.
• Act: If the experiment is successful, standardize the results and begin the cycle again.

Hoshin Kanri incorporates multiple overlapping PDCA cycles, including:

• Macro (three to five years): Implemented by senior management.
• Annual: Practiced by operations managers.
• Micro (weekly, monthly, and biannual): Carried out by operational managers and their subordinates

PDCA requires a management system that shows everyone what’s going on and stops problems from happening. This system includes both formal and informal reviews.

Formal reviews should happen three times yearly: at the year’s beginning, middle, and end. The year-end review summarizes past events and assists in planning for the next year (which the management team presents in January).

Informal reviews involve the management team providing daily status reports, department heads reporting progress in weekly meetings, and conducting shop floor process reviews. These casual reviews are crucial in keeping everyone informed and detecting problems early.

Nemawashi

Nemawashi is a way to reach an agreement and create harmony. Before putting it into action, Nemawashi involves discussing the plan with all the customers who would be affected. It also includes making changes to the program based on their feedback.

Catchball

Catchball is the process of managers at different levels exchanging ideas and feedback during planning. It helps strategy and tactics to spread throughout the organization.

Catchball connects the officers’ vision with the day-to-day activities of the shop floor team members. Here’s how it works:

1. Company personnel create a vision and determine what actions to take. They share this vision with senior managers.
2. Senior managers understand and interpret the officers’ visions, turning them into plans. They ask, “What do you mean? Will this activity help us achieve our vision?”
3. Officers provide feedback and guidance to senior managers and keep exchanging ideas until they agree on a plan.
4. Once there’s a consensus, senior officers and managers say, “This plan will help our company achieve our vision.”
5. Senior managers then share the plan with middle managers, who break it down into specific tasks.
6. Middle managers pass on the tasks to their subordinates.

Control department concept

The control department is essential for solving the problems that many organizations face. Different groups must work together regarding important areas like productivity, quality, cost, and safety.

For instance, groups like Manufacturing, Purchasing, Production Control, Engineering, Maintenance, and Quality must collaborate to meet quality goals.

Regarding quality, the control department coordinates activities among these groups to achieve company objectives. Some of their tasks include:

• Leading the planning process for quality.
• Setting goals and ways to achieve them.
• Implementing plans to ensure success.
• Identifying and addressing problems.

A3 Thinking

A3 is a way of thinking based on PDCA, nemawashi, and catchball. A good A3 shows that you understand the situation well and know how to use Lean tools effectively.

An A3 report is a simple one-page document printed on 11″×17″ paper. Toyota started using A3 in the 1960s to summarize the Kaizen Circle Activity (KCA), and it has become Toyota’s most helpful communication tool.

There are four types of A3 documents:

1. Hoshin Kanri A3 summarizes the goals and plans of a department or company.
2. Troubleshooting A3 outlines problems and the solutions or workarounds for them.
3. Proposal A3 presents present new ideas or suggestions.
4. Current status A3 summarizes the current situation, issues, or concerns related to the goals or plans.

The main challenge in writing A3 lies in the varying report formats employed across different departments or sections. Another issue is the “better by the pound” syndrome.

Take a look at the image below. It shows the format of the Hoshin Kanri A3, which is essentially a storyboard following a standard and logical structure. You can adjust the layout to show the current situation or address any problems.

Source: Dennis, P. (2017). Lean production simplified; Hoshin Kanri A3.

The image below displays the current A3 status format for reporting hoshin progress.

Source: Dennis, P. (2017). Lean production simplified; Current status A3.

The 4 phases of Hoshin Kanri

Hoshin Kanri consists of four phases: Hoshin generation, Hoshin deployment, Hoshin implementation, and final evaluation. Let’s break down each stage and see what it involves.

1. Hoshin generation

The first step is called “hoshin generation,” where the company sets its annual and departmental goals. Senior management collaborates with subordinates to discuss processes and outcomes to achieve this.

Let’s examine how we can apply this first step in the quality department. The goal is to reduce the overall damage rate by 20% before the year ends. We will achieve this by:

• Working with our top suppliers to fix ten quality issues.
• Improving the three most essential processes in each department.
• Involving and empowering the team members on the shop floor.
• Refining and finalizing this statement through multiple rounds of discussions and feedback.

2. Hoshin deployment

In this phase, you must set specific goals and plans at different levels within and across departments. To accomplish this, teams should discuss and share ideas (nemawashi and catchball). At each station, the focus should be on converting hoshin goals and means into practical actions.

For example, the assembly department wants to reduce defect rates by 25%. To achieve this, they will:

• Create a team to focus on five essential quality issues. The team will include people from engineering, maintenance, and suppliers.
• Ensure that all departments carry out quality assurance activities.
• Boost the involvement of assembly team members by providing them with KCA training.

When you implement hoshin, you’ll get results like tree and affinity diagrams and the A3 strategic plan. These things are developed step by step through listening to everyone’s input.

In the first year of hoshin planning, each level typically takes around two weeks to reach an agreement and create a shared strategy in A3 format. However, as you move into the second year, the process becomes faster and can be completed more quickly.

3. Hoshin implementation

This phase is about putting the developed hoshin into action through management activities. It includes carrying out several PDCA cycles. Throughout the year, there should be formal and informal reviews to keep track of the current status and countermeasures.

4. Hoshin evaluation

In the year-end assessment of each hoshin kanri, we determine if we achieved the process and outcome objectives. We analyze what we learned and identify ways to strengthen our abilities. By answering these questions, we can evaluate whether Hoshin Kanri has been implemented effectively or requires improvement.

A learning organization is about improving our actions by gaining better knowledge and understanding. It means constantly learning and growing to make our efforts more effective.

Summary

Hoshin Kanri is an integral part of Lean manufacturing that involves everyone in the company working together to create strategic plans. It helps align resources and goals effectively.

The Hoshin planning system includes PDCA, catchball, nemawashi, the control department concept, and A3 thinking. Hoshin Kanri has four phases: development, deployment, implementation, and evaluation.

In the upcoming chapter, we will delve into Lean Culture.

References

Dennis, P. (2017). Lean production simplified: a plain-language guide to the world’s most powerful production system. Crc press.