Relevance of Lean Six Sigma for the 21st Century
By Dr. Shree Nanguneri and Mr. Dhananjay Joshi, Director Towers Vestas India
As originally published on October 20, 2010
Over decades since the 1960s, initiatives were introduced by Dr Deming, Dr Juran, and Dr Goldraat known in the industry as continuous improvement gurus. Some industries utilized the knowledge in initiatives of such gurus and succeeded sustainably, while others had a jump start and faded away into oblivion in a very short period of time.
Initiatives such as operational excellence, lean enterprise, six sigma, change management, and theory of constraints yet weathered the storm of increased customer demand for quality, and survived as a result of their unique value proposition for their customers. In several organizations, these initiatives became the flavor of the month or that of the ‘C’ levels such as CEO, CIO, CTO, CFO or COO.Organizations were then exposed to a combination of Lean Enterprise and Six Sigma known as Integrated Lean Six Sigma (ILSS) including the application of theory of constraints in order to institutionalize change for a sustainable period in time. In some cases, they succeeded very well, while in others they sizzled away due to a weak plan for sustainability. This article provides reasons for success or failure of such initiatives over the last decade and how, when done right, these can transform into the future for engineering exporting business owners in the Indian millennium.
Investment in such initiatives as customers become more sophisticated and get a better grip on exporters’ COGS (cost of goods sold), their expectations increase for product speed of delivery (which the industry terms as OTD – on-time delivery). When the customer focuses on speed, he clearly assumes that speed comes with a built-in quality, and any deviation from performance of the product or the service quality cannot be compromised. This means most initiatives will need to focus on process cycle time keeping in mind a built-in high quality product/service at a value that the customer is willing to pay for. In some industries, customers are willing to pay a premium, while in others they are seeking aggressive pricing options. In the area of ILSS, investments by Indian engineering exporters will increase as they can lead to multiple positive consequences such as:
- business enterprises in India exporting goods and services are interested in gaining, regaining, and maintaining customer loyalty abroad;
- such customers have a high demand for speed and are willing to pay but are seeking some unique value;
- in today’s world competition is stiff from our neighbor China, the only foreseeable threat. They have even penetrated into Indian-based products such as Ganesh moorthys (idols) in our own markets and homeland by successfully selling them to Indian consumers, just in time, during peak seasonal demands.
Benefits of ILSS
ILSS has shown to have provided a significantly higher benefit to business enterprises, especially when the lessons learned from previous deployments are sincerely applied with a fundamental change in approach in its implementation. To date, most initiatives of such types have been perceived as a career-based value addition to the employee (whom we designate generally as a Yellow Belt, Green Belt, Black Belt, or Master Black Belt) and primarily ignoring the customer’s benefit for the most part. Had the customer’s benefit been integrated into the forefront of such change initiatives, organizations executing and implementing the same would be bound to succeed. In this millennium, factors that Indian business enterprises need to control for sustainable success with ILSS are suggested here:
1 Three critical organizational components that have to involve and contribute are:
- Finance leadership → CFOs
- Information technology leadership → CIOs
- Human resources leadership → Senior HR official
2. Kickoff initiative as pilot project, learn from pilot and then deploy at a larger level.
3. Implement change at operational levels, not above it during initial stages of the deployment.
4. An external consultant rightly chosen for sustainable success would be highly essential.
5. Establish clear project charters, and approved process ownership prior to any kickoff.
6. Project demographics:
- Defined, based on the application of theory of constraints
- Goals in charters need to be directly linked to the KPIs of the project leaders
- Project KPIs need to be linked to either of the following:
- Preferably the EBITDA* of the external customer and/or
- To a budget reduction assuming the sales: capacity ratio is > 1.0
7. Kickoff the deployment at the lowest level (yellow belt) keeping it simple but effective.
8. Utilize home-grown XYZ belt resources to develop rather than hire from outside.
9. Primary focus of the deployment needs to be ‘one-time’ training and a lifetime of application.
10. XYZ belt’s role is that of an ‘enabler’ and not of a ‘stay in one area’ one.
11. Once project benefits are sustained, ILSS enablers disband, and redeploy wherever necessary.
12. With a sales: capacity ration running at 1.0, focus on the process benefits such as:
- Reduction in process cycle time
- Assess non-value add, dead-time, idle time and eliminate it
- Remember built-in quality measures are assumed when cycle-time is reduced
- Cycle-time linked directly to increase in:
- Organizational capacity
- Process capacity
- Business capacity
13. With a sales: capacity ratio < 1.0, never run the deployment outside of sales to begin with.
14. With a sales: capacity ratio ≈ 1.0 determine what will sustain it and then execute 1 through 12.
15. Utilize the modern tools of technology such as:
- Internet means to navigate deployment magnitude and direction checks
- Avoid running deployment on MS Excel spreadsheets
- Establish/validate clear understanding of tool/technique comprehension by XYZ belt
16. Integrate the supply chain into your plans of deployment and demonstrate potential of ILSS.
17. Start your screening and selection of suppliers based on their attitude toward ILSS.
- Enroll suppliers into ILSS and help them duplicate steps 1-15 as you did
- Delve at least to the second-tier level of your supply chain and beyond if necessary
18. Ensure XYZ belts are treated like customers by:
- Managing their career options via a senior executive council
- Total freedom in executing projects as enablers and not restricted
- Mix and match enablers regardless of subject matter expertise
- Encourage ‘data based-decision making’ across your people and culture.
ILSS methodology for EEPC INDIA members: The ILSS methodology for engineering exporters is applicable readily in the following areas:
- Operational excellence in manufacturing products in India prior to shipment.
- Transportation excellence and effectiveness during shipment.
- Product/service application excellence abroad during field performance.
The conceptual flow of the ILSS sequential problem solving methodology is illustrated as:
- Define the problem or opportunity for engineering exporters in any area as listed above.
- Measure the baseline performance in the area chosen for improvement.
- Analyze the root causes for defects and delays in the process area of interest.
- Improve the process by reducing the cycle time, and reducing/or eliminating defects.
- Control the process at the improved level of performance to exceed customer expectations.
Engineering exporters can also benefit from the application of ILSS in the following ways:
Maintain current customer base abroad without reducing pricing:
- Understand customer’s latest expectations and provide the same.
- Deliver products and services and delight them.
- Regain lost customers abroad by assuring old promises:
- Revisiting lost customers, and demonstrating capability to deliver.
- Re-evaluate broken promises if any and approach with a new age of commitment.
Gain new customers abroad by exceeding competition:
- Understand voice of such customers and provide value not easily available.
- Pursue and ask ‘what needs to be done to get them back,’ to which some of them will return.
Regardless of what we think, perceive, propose, and execute there is something called ‘pulse of your customers’ culture’ and as Indian exporters we need to be constantly touching, feeling, quantifying, while understanding, and translating back to the process to achieve the same. If Indian engineering exporters fail to cash this opportunity in 2010 and beyond, competitors are waiting to grab that market share overnight. Additionally, any strategy you have is likely to fail without an awareness of your customers’ culture. Devising a strategy without accounting for the cultural factor, would result in a fatalistic deployment. Organizations paying attention to the vital elements of an effective deployment will experience significant benefits over a sustainable period. Good luck!
- CEO Chief Executive Officer
- CIO Chief Information (or Innovation) Officer
- CTO Chief Technology Officer
- CFO Chief Financial Officer
- COO Chief Operating Officer
- EBITDA Earnings before Interests, Taxes, Depreciation, and Amortization
- ILSS Integrated Lean Six Sigma
- KPI Key Performance Index
- QSE Quality, Safety and Environment