Lean and Six Sigma are all the rage in business. Companies from all different sectors are attempting to implement the tools and systems of the Toyota Production System in various forms. Sensei’s and black belts are running around as internal and external consultants attempting to improve their internal and external value streams. While their efforts are to be commended, the practical output of their work is not having the impact that is promised. Basically, how we are currently implementing Lean and Sig Sigma in trying to transform the way our value streams should function isn’t working.
“With reduced lead times and faster cycle times, you will lower your inventory and have more cash available to be put to more productive use”
Effective and efficiency value streams are the hallmarks of a great business
For any business to be a market leader they must have the ability to have fast, effective and efficiency internal and external value streams. The four main reasons are:
• Reducing lead time to market: In the ever changing modern economy, the ability to respond to changes in customer preference is crucial to survival. The ability to identify and implement design requirements and changes provides organizations with a huge competitive edge.
• Reducing your order to payment cash cycle: For a business to be successful they must enough cash to take advantage of the market changes. With reduced lead times and faster cycle times, you will lower your inventory and have more cash available to be put to more productive use. This allows you to create new products and services without having to generate large amounts of capital.
• Efficient value streams have minimal variation and over burden: Efficient value streams have processes that repeat the same desired result/outcome with the least amount resources need. These efficient values streams eliminate excess variation and overburden in equipment, process and people. Efficient value streams have high quality processes with minimal variation.
Efficient and effective values stream also allow business to use all the data from their process and people to have the flexibility to respond to changes in the market. As well as the flexibility to respond to other external and internal factors that positively or negatively impact your ability to deliver your product or service.
If it is so simple, why doesn’t everyone do it? It is called sub optimization.
Most Lean Six Sigma transformation is really project or process based improvement base on get a onetime change. Examples of these onetime improvements are: reduce manufacturing costs by 25 percent , reducing scrap by 15 percent, or reducing supplier lead-time by 20 percent . These are great achievements and will help the business. Here are the reasons most Lean Six Sigma improvement project don’t deliver long term sustainable benefits to an organization:
• We tend to focus on internal (manufacturing) process optimization. It tends to be the part of the value stream that we have controls over, therefor the ability to implement improvement. Internal processes also tend to be more receptive to improvement efforts.
• We focus only on what we do; we don’t ask the question why we do it at all. We will focus on improving an internal process instead of figuring out if the process should be done at all.
• When we do look upstream, we focus on suppliers reducing material costs and delivering on-time. To reduce costs, we have suppliers ship us materials or products in larger quantities than we can consume in a day. We will pay less for a product, even if we don’t need that amount of product to get a better price.
• Project Based Improvements, run out of steam! The process, and the people doing it, can only handle so much “improvement” before fatigue sets in.
• Small improvement won’t save the business! It’s true that the aggregation of marginal gains can lead to great improvement. People easily get behind the idea of improving only 1 percent a day.
• Focus on cost savings, not transformation. There are times it is better to increase the activities or cost to a certain internal process so that we can reduce the overall lead time and increase the output.
So how do you optimize your complete value stream? One word…Transformation.
Over 25 years of trying to create operational excellence in organizations has taught me that the application of systems and tools of Lean and Six Sigma fails without transforming the way people work. All the systems and tools of Lean and Six Sigma need to be aligned with principles to drive long term sustained success. Long term sustainable transformation takes focus and dedication.
You will need to combine the best systems and tools to create a culture of continuous improvement such as A3 thinking, DMAIC/DMADV, Total Predictive Maintenance (TPM), Design of Experiments (DOE), Jidoka, Failure Mode and Effects Analysis (FMEA).
So how can you develop a transformation culture?
You must develop systems that are aligned with your principles; these systems will drive your principles throughout your organization. From these systems you derive tools that we can use to effect change. These tools enable the systems to provide you with leverage to achieve your desired results. (The visual model is based on the model developed by the Shingo Institute.)
How Transformation optimizes the complete Value Stream…
To allow value streams to continually transform we have developed our 8 step model:
During our Value Stream transformations, we start with understanding the complete system from Customer to Supplies in order to define the current state of our process/system. We then define a series of improvements (Projects, Events (3-5 days) or Blitzes (just do it) to get us to a future state which is 50 percent towards the ideal state. We strive to get to the future state in 6-12 months. After a couple of cycles, our value streams reduce that transformation cycle to 3-6 months. This is when you begin to approach world class performance.
The future state keeps everyone focused on the vision and doesn’t allow for sub-optimization of processes within the value stream. The focus is always on ensuring to increase customer value. We need to understand how we create value to our customers. We need understand the strategic needs of our customers. We must have a clear understanding of how materials, methods, people and machines work together so we can eliminate waste and create value.
Real world results
I managed a return and repair value stream for 7 years. During that time we followed this cycle through several iterations. This is what we accomplished:
• Lead Time Reduced: (from receipt to repair to return) 3-5 weeks to 7 hours–50 percent of all returns are processes and returned same day. Fastest return processing center in the world at the time.
• 300 percent increase in output per person.
These types of results take hard work and dedication to the transformation process based on principle. Remember the journey is to perfection, not just being best in class today.