Rath & Strong Blog

A Lean-Six Sigma Consulting for the Office – A Case Study

Article courtesy of Rath & Strong Management Consultants.
Combining Lean tools and the Six Sigma methodology through Lean Six Sigma Consulting has become popular during the last five years. However, most of these efforts were focused on manufacturing operations. The experience of a European life insurance provider highlights the lessons learned from transferring Lean from the shop floor to the office, as well as providing a deployment model that integrates Lean, Six Sigma through Lean Six Sigma Consulting and process management.

A First Attempt at Integrating Lean and Six Sigma

A leading life insurance company decided to implement a comprehensive process excellence program, using Lean and Six Sigma through Lean Six Sigma Consulting to achieve substantial cost savings. With aggressive cost reduction goals, the Lean aspect of the program was considered the more critical to demonstrate credibility. As the first Six Sigma project can take between six and nine months to complete, Lean efforts (through one-week bursts of activity called Kaizen) often take only weeks to deliver substantial improvements.
Having conducted some initial analysis, the team in charge of the overall effort decided to conduct a Lean pilot project to test the assumption of early wins. Using an experienced instructor who had used Lean extensively in manufacturing settings, a group of candidates was pulled together for one week of Lean training using traditional training modules.
While the training was well received, the Kaizen workshop revealed a number of issues:

• Many of the tools could not be applied.
• Changes could not be implemented within five days.
• Ideas generated by the team had to be vetted by the managers in charge of the process.
• Estimates of the potential cost savings were too high, causing management to lose interest.
• To achieve the targeted savings, the scope would have to be increased from a single process to the entire value stream.
• The Lean pilot area was not strategic and not aligned with the Six Sigma project selection effort.

Refining the Approach

The lessons of the early pilot program helped to refine the approach to deploying Lean in the office. The first intuitive step was to eliminate tools that could not be applied from the training program. Even more significant, a process management framework was added to the program as the organizing framework to identify potential projects and to sustain the improvements achieved. Finally, the Lean curriculum was integrated into the DMAIC framework to emphasize the message that the company was using a common problem-solving approach, with Lean tools focused on reducing cycle time and Six Sigma tools aimed at reducing defects.

Lean Six Sigma Training Programs

With so much pressure on costs these days, it’s not surprising that most companies are looking hard at the duration of their Lean Six Sigma training programs and asking if they could be shortened.  I think this is a worthwhile exercise, so long as it is entered into in the spirit of reducing non-value-adding training rather than setting some arbitrary target for how long the course should be. We have been offering courses of any length from one day to three weeks for many years, and the trick is, of course, to match the depth of training to the needs of the organization.  Here are some factors to consider when asking yourself if your courses are too long:

* Are you studying machine processes or people/computer processes?  In factories and laboratories where much of the improvement activity focuses on the equipment, techniques such as Gauge R&R, Process Capability, Setup Reduction, total Productive Maintenance and perhaps even Design of Experiments are invaluable for squeezing out another percentage of yields.  But in transactional businesses, they are usually an irrelevance.
* Are you dealing with high-volume repetitive processes?  Much of the Lean training can be simplified and reduced if you are not: Value Stream Mapping and the key questions that enable you to develop flow and pull systems, for example, can be covered with a light touch.
* What are you trying to achieve?  If the answer is mainly to remove errors (as is often the case in Financial Services or IT environments) then you are rarely going to need much statistical analysis to find these – it tends to be a job for process analysis, Pareto Charts, Run Charts and the like – which are quick and easy to teach. But if you are trying to improve your performance – increase Sales Force Effectiveness for example – then you may well need the dreaded statistics to be brought to bear to enable you to sort out what works best. Even relatively sophisticated techniques such as Multiple Regression can have a huge impact here – for example in figuring our which factors has the greatest effect on sales or customer satisfaction.

For most manufacturing applications, a 2-3 week course remains the norm because they usually need the more sophisticated options from my list above.  But if you’re looking at a people process without a high volume of repetitive tasks and your goal is to reduce errors, you’re in luck!  You may be able to deliver a perfectly respectable Green Belt course in 5 or 6 days, without the need for sophisticated software.  I’d still strongly advise you to run the course in two separate sessions though, to enable you to include status reports from each participant in the second week – these do wonders for people’s effort levels in the important early phases of the project.

I’ll just leave you with one note of caution: when people cut courses (Lean Six Sigma training ) too aggressively, the consequences take a while to emerge: projects taking too long, excessive coaching demand, Green Belts not confident enough to tackle follow-on projects and a general loss of confidence in the whole process.  By the time you discover your mistake, in other words, people will already be whispering that the program has ‘run its course’, and you run the risk that management support ebbs away.  That can set you back years.  So cut with care!

David Hampton

Vice President, Rath & Strong

Back to Basic Stability

There’s an old joke that involves someone asking for directions, only to be told “well you wouldn’t want to start from here”.

I’m sometimes reminded of it when people embark on their Lean Transformation journey. They get excited by the prospect of implementing a responsive system that does away with the need for short-term forecasting, dramatically reduces inventory and creates short, real-time feedback loops to reduce quality and other problems. And why not? It is a pretty appetizing prospect and there are a number of books that paint a very appetizing picture of the Lean approach.

The trouble is that you may not be starting from the place you would like to start from. And there are no magical short-cuts. If you want to implement a pull-based system, there are some pre-requisites that have to be taken care of, possibly even before you make your first Value Stream Map.

• You can’t operate with low inventories if your equipment is unreliable, or if you suffer from excessive rework - you’ll run out so frequently that you’ll use up your people’s patience and goodwill in no time.
• You can’t reduce your batch sizes if each new setup brings a host of bedding-in problems – twice the setups will mean twice the problems, at least in the short term.
• You can’t put a Kanban system in place if staff aren’t used to following standard work in a disciplined way – the system relies on close adherence to the disciplines that it demands.

The very books that paint a dramatic and exciting picture of Lean often neglect to mention these issues, perhaps because they assume that you will already be “ready”. But sometimes that’s not the case, and you have to start from a different place to the one you want to start from. Sometimes this is because (being blunt) the organization hasn’t been very sophisticated about managing their operations, and sometimes (also being blunt) because they are so sophisticated, they have lost sight of the basics. I’ve seen this latter case both in research and also in highly-sophisticated manufacturing operations.

The term that’s normally used for being “ready”is Basic Stability. It means that you can pretty much rely on your people and equipment to do what they are supposed to do, pretty much all the time. Basic Stability usually involves establishing (or re-establishing) standard work, implementing 5S and dealing with the main quality and equipment reliability problems. It might take six months; it might take two years. It shouldn’t become an excuse for putting off starting work on the more ambitious changes, and I’m not suggesting that everything has to be perfect, just that you have your operations running reasonably smoothly.  Soon enough you will get to the place that you wanted to start from in the first place, and you will have learned a great deal along the way.

Is DFSS The Appropriate Response?

by David Hampton, Rath & Strong Management Consultants.

Over the past week, I have been asked by three different clients whether they should use DFSS.  I wonder if these conversations mean that there’s a mini-surge in interest in DFSS; when you read what I said, you might well wonder if these conversations just show that you can ask the same consultant the same question three different times, and get three different answers.  We’ll see…

The first one is in manufacturing, and making good progress attacking waste.  Some of the work is going on in individual sites, and some of it is whole end-to-end Supply Chain transformations.  They are working hard to address their cost issues and at the same time are developing their internal capability, continuing to improve process robustness and establishing a culture of continuous improvement by engaging all employees in problem-solving activities.  My answer to the DFSS question was that they should leave it for a few years yet and concentrate on the ongoing success of their Lean/Six Sigma efforts – don’t assume that the battle is won just because everything is going well; launching a new initiative now runs the risk of creating a ‘novelty factor’ that distracts management and forces your talented CI professionals to choose between switching their focus from LSS to DFSS and feeling left out of the next big thing.

The second one is in Financial Services, and they too have a successful program based heavily on Green Belt projects.  They sometimes find that processes (which are mostly for internal customers I should add) are so badly broken that they need to be redesigned.  In this case my answer is to keep it simple and stick with the DMAIC approach.  Once you have completed Define-Measure-Analyze you are pretty much the world’s expert in your problem process.  Where it is for an internal customer, whose needs are well understood by now, and the general shape of the process is well understood too, it’s usually sufficient to take what you have learned during the project so far as the basis for the process redesign. It’s fast, simple and doesn’t require any new tools or training.

The final one was in logistics.  They too have a successful program, using a mixture of Rapid Improvement Events and DMAIC projects.  But their challenge is that they have to create new processes for new B2B customers on a regular basis, and in the past this has taken too long and led to unpredictable results.  So in this case I said ‘go for it!’.  The customer-focused methodology of DFSS will ensure that they designed processes with their customers’ needs designed in, the stronger project management aspects will help ensure they launch on time and the use of tools such as QFD, Pugh Matrix and Design FMEA will help them to expand their thinking in both the sexy area of creativity and the unsexy area of risk avoidance.

I don’t think there’s a single right answer to the question of whether DFSS is appropriate.  It’s easy to just pigeon-hole it as the methodology of choice for process design.  In truth, the best approach has a lot more to do with circumstances, culture and customers.

The People-side of Change

I was back at the iQPC conference in London last week… it was a well-attended event and the quality of presenters was high.

Of course, people were talking about finding faster ways to cut costs, as you would expect.  But what really struck me was the emphasis that was placed by many speakers on getting the people side of change right.  They are absolutely right, of course, and I was struck by this as my own presentation was on that point too (so much for standing out from the crowd). 

I posed the question “Is sustainability a luxury that we might have to do without when the pressure to act quickly becomes overwhelming?”  We all know stories of organisations that have cut costs too deeply or in the wrong place and lived to regret it, and I got to thinking about the recession of 1991 where the need to cut costs in a hurry was almost as pressing as it today.  Back then the methodology that came into vogue  was Business Process Re-engineering.   In hindsight, this does not seem to have achieved what it promised - the improvements were often short-lived because they relied too heavily on IT solutions and, most importantly, ignored the people side of change. 

So of course I was greatly reassured to hear so many people making it clear that they won’t be repeating the mistakes of the past. Let’s hope they walk the talk – do you?

3-Point Plan for Lean Cost Reductions

By David Hampton

There are plenty of examples of organisations that use rather crude methods to achieve their cost reduction but ignore the people-side of change.

–  Benchmarking is often seen as a quick route to cost savings: if our competitors have 20% fewer people in this department then we should cut staff by 20% and our people will figure out a way to cope.  But this makes some huge assumptions: there may be differences that affect the number of people that we or our competitors need?  And how do we know our competitors have got it right?  And typically, not enough is done to enable people to work more efficiently, or to help them make ongoing improvements in their processes.  And so the gains tend to be precarious.

-  You might be tempted to enforce tough targets in the belief, as with Benchmarking, that people will somehow find a way to improve their processes.  The upshot of this approach, however, is that people sometimes are forced to find ways to cheat the measurement system so that they hit their targets. This usually means that services get worse, not better.  

-  And then there’s always the good old-fashioned across-the-board headcount reduction.  But  people will be the secret to recovery when things turn up, and you will lose a lot of good ones that way – it’s a key role of leadership to look after scarce resources, ready for the better times.

So here’s a three-point plan for making swift cost reductions the right way. 

1. Base your cost-cutting on a proper assessment of your current state and what it is that customers really value.  This can be completed quite quickly – the version that Rath & Strong does is called Lean Profit Hunt, and it typically needs just 15 days.  It will show you where the real opportunities are so that you can go after waste selectively, protecting what’s important to the customer. You’ll get a vision of how the Future State operation would look and the sort of implementation plan that you’ll need to get you there.
2. The next part is the painful bit.  Management teams don’t have time to wait for natural attrition to do its job these days and so sadly it’s likely that some jobs will have to go.  But this is a much surer way of delivering the cuts than asking managers to follow through and make cost reductions after the Kaizen events. You might have to consolidate parts of a business. This shakes up all the givens, with people scrambling to find a chair and sit down before the music stops.  This also allows you to redefine work processes from scratch, staffing them up as needed.
3. Once that step is complete you can start to rebuild the team and get your employees to plan the new processes that will enable the company to return to health. Done this way round, the cuts stay, because they are already done, and the people that are left are freed of the cloud over their future so that they can use the Lean tools to help them get their jobs done in a tough environment.  And as they do this, they should work on simplifying and standardizing your processes, to reduce waste and make it easier to train people in the future, which helps sustainability.

You should plan to make ongoing improvements after the initial burst of activity that carries out the initial fix, and you’ll need some training and coaching support for that.  It not only helps you to sustain the improvements for the long term, it also helps you to keep engaging with your people and reinforce their value to the company.

We Fixed The Process – Now Why Won’t People Follow It?

By Mary Federico.

 We’ve heard it so many times: “We did a Lean Six Sigma project and now our process is in great shape. Or it would be if people would just follow it! For some reason that’s just not happening consistently – and we don’t know why.”

When faced with this kind of problem, organizations typically increase efforts in exactly the wrong places. They focus on training, documentation, goal-setting, monitoring results, establishing policies, sending e-mails, exhorting the troops, etc. These approaches are necessary to get people to try a behavior once or twice, and you certainly should do them. But they will not sustain behavior or ensure its consistency.

The specifics of each situation are different, of course. But a general rule to keep in mind is that people do things because of what they believe will happen as a result. What are the consequences (good/bad, real/imagined) to people for doing the process the new way?  And how do those compare with the consequences for doing it the old way? 

It’s a safe bet that if people are doing it the old way, it’s because there are better consequences for doing so. No matter what behavior you’re hoping for, you’re going to get the behavior you’re reinforcing. Your job is to figure out which behaviors are being reinforced, and to make the appropriate changes. And we don’t mean turning to threats or punishment. Those may get you short-term compliance but they will never get you the kind of commitment to change that you’re looking for. But if you create positive consequences that support the new way and not the old, you’ll see behavior change.

Obama-Biden and Lean Manufacturing??

How will the new administration address the failing manufacturing industry in the USA? The introduction of Lean Six and Lean Six Sigma may be an answer. The Obama-Biden policy for Manufacturing is set out as follows:

* Invest in our next generation innovators and job creators: Obama and Biden will create an Advanced Manufacturing Fund to identify and invest in the most compelling advanced manufacturing strategies.
* Double funding for the manufacturing extension partnership: The Manufacturing Extension Partnership (MEP) works with manufacturers across the country to improve efficiency, implement new technology and strengthen company growth. This highly-successful program has engaged in more than 350,000 projects across the country and in 2006 alone, helped create and protect over 50,000 jobs. But despite this success, funding for MEP has been slashed by the Bush administration. Barack Obama and Joe Biden will double funding for the MEP so its training centers can continue to bolster the competitiveness of U.S. manufacturers.
* Invest in a clean energy economy and create 5 million new green jobs:
* Create new job training programs for clean technologies:
* Boost the renewable energy sector and create new jobs:

While many of these initiatives revolve around Green & Clean, the Obama-Biden administration also highlights the importance of innovation, technology and efficiency in the US manufacturing sector. Clearly Lean Manufacturing can play an important role in the revitalization and sustainability of the US manufacturing sector. If combined with innovation, technology and advanced manufacturing strategy we can help create a competitive US manufacturing industry once again.

VA/NVA ANALYSIS – Perfect For Today’s Economy

Just about everyone knows that the economy is bad. Organizations are laying off employees by the tens of thousands, and realistically, most of the time this becomes just a numbers game. If we get rid of X number of people, it will impact the bottom line of the organization by Y amount.

Typically, this is not the case. Often organizations end up spending more or incurring additional waste as a result of staff reductions. Processes can become broken and often do not function properly because knowledgeable people have been let go, and the people that remain, do not know what to do. Confusion is rampant – with everyone wondering what needs to be done and how it will happen with fewer people. The word “reorganize” is everywhere; to the point where we are reorganizing so much, we never become organized.

This is where understanding the tools of Lean & Lean Six Sigma becomes invaluable. If companies want to reduce costs and waste in an organization, that is the heart of Lean and Lean Six Sigma.

One of the best tools that can be used is the Value Added/Non Value Added flow analysis. Upwards of 80% of most processes consist of non-value added activities. VA/NVA analysis looks at an entire process and looks at three key things for each activity:

• Is this activity something the customer is willing to pay for?

  • Storage, handling, extra steps, are all activities that add cost, time, and waste and the customer (external customer & internal business customer) do not want to pay for

• Is the activity done right the first time?

  • Rework, missing information, incorrect amounts, all add to waste internally

  • Call centers to answer questions, fix problems, not only add cost, but can cause customer frustration

• Does the activity add value or physically change the product or service?

  • There are many activities associated with processes that change absolutely nothing to the product or service – typically inspection is one of them, but approvals and other things of this nature also do not add to the product or service

To be a Value Added activity, all three of the above criteria must be met. Value added flow analysis looks at a complete end-to-end business process and analyzes each step of the process to see which steps are value added and which are not. This then leads to working to eliminate the non-value added work.

This is a much more practical and logical way to remove waste, than just removing people from the process.

Just reducing people only causes the organization to do the same work that is being done today – Value added and non-value added, but with less people. This is a perfect formula for failure.

What is necessary in today’s economic climate is leadership understanding that the short-term removal of people is not as successful as the disciplined short and long term use of the tools of Lean and Lean Six Sigma to improve processes and improve profitability.

Cutting Costs in an Economic Crisis

This has been a dramatic and unforgettable year, a demarcation.  Jeff Immelt, the CEO of General Electric, recently remarked:

“this economic crisis doesn’t represent a cycle. It represents a reset. It’s an emotional, social, economic reset.”

Now, as we survey the wreckage and try to understand how things can have gone so wrong, so fast, it’s time to get back to basics.  We need to get back to where Process Excellence, Lean and Lean Six Sigma thrive. As in every downturn, who succeeds and who fails is likely to be determined not by what costs are cut, but how they are cut and above all which ones are not cut.

Also, today time is of the essence so organizations need to drastically cut costs and do it rapidly. The danger is that, in their haste, organizations cut the wrong costs and damage their long term viability and competitiveness. The concepts and methodologies behind Lean and Lean Six Sigma hold true more than ever in this environment. Applying the concepts and methodologies of Lean and Lean Six Sigma across the value chain helps organizations align operations with the customer and market and offers them the flexibility to react quickly to sudden changes in demand. This in turn enables organizations to balance the workforce and reduce costs while still meeting customer’s needs.  In this economic climate, organizations, more than ever, need to focus on programs that balance the need to rapidly reduce costs while maintaining long term competitiveness.