Tuesday, July 26, 2011

Lean Six Sigma Revisited Part 2

This post is the second part of a two part series about revisiting lean manufacturing and six sigma in the 21st century. Before reading this post, I encourage you to read the post immediately below which is part one in the series. In this post I will discuss six sigma and my recommendations for management.


Six Sigma


Six Sigma™ as a brand is simply the repackaging of several statistical tools that have been developed over decades; the only difference being the sequence with which they are deployed. The marketing of six sigma over the past fifteen years has been phenomenal. Huge companies like GE and Motorola trumpeted their success with six sigma and the business world scrambled for it. Books were written by the truckload, consultants hired and people trained by the boatload and a huge revolution in improvement was started. At least that's the story that most people want to believe and most consultants and authors sell. There are several problems with this story; I'll highlight two big ones: the deployment and the results.




Six sigma is typically deployed in a company in the following way:


l        Hire a consultant to do training

l        Train people as follows:

n        Upper management - introduction only, maybe two hours.

n        Middle management - Champion training, maybe four hours.

n        Master Black Belts/Black Belts (MMBs/BBs) - full-blown 6+ weeks of training in all of the details of six sigma, including leading projects and mentoring other "belts".

n        Green Belts (GBs) - 2-4 weeks of training, not as involved as MBB/BB but still pretty deep.

n        White Belts/Yellow Belts - some exposure, maybe the same as introduction or Champion training but meant for the remainder of the workforce.

l        Define some projects (usually done in parallel with the training so that the trainees have a "real-world" application during their learning)

l        Track the projects

l        Complete the projects and start counting the money


This deployment plan leads to several problems; let's look at some of them.



BBs and MBBs are dedicated full-time to implementing six sigma and leading projects. GBs and Champions are expected to dedicate a certain amount of their existing work time for their projects. This is the first problem with the deployment of six sigma: GBs and Champions are expected to take time to work on six sigma but there is no subsequent increase in overall resources. The thinking is: "they can take 10% of their time and work on six sigma projects" but that translates into an additional half-day of work per week (or more). For someone who is already working in a downsized department this 10% more work can be a deal breaker. Something has to give and it's usually the six sigma project, especially if their manager is interested in something else.


Knowledge Gaps

And that's the second problem with the deployment: the Champions do not have the same level of knowledge about six sigma as their GBs (fours hours of training vs. four weeks of training). In the worst case, the manager is unaware of the importance of this activity (due to poor top-down communication) and doggedly assigns the GB to work on other things, like their "real" job. Who can effectively mentor GBs?


Unclear Direction

The BBs/MBBs can mentor GBs but their main work is leading multiple six sigma projects per year (usually in parallel). They are measured by the number of projects completed and the amount of cost savings that they "produce", not the number of GB hands that they hold. This means that they are more focused on doing their main job and less on mentoring other people.


What does all of this mean? Unlike lean manufacturing, where there may be only one dedicated person and no part-timers, almost everyone is expected to participate in six sigma. Lean likes to have "Kaizen events" where they recruit some people, do an activity and then let the people get back to work. Six sigma, on the other hand, must have a virtual army of specialists available for any and all projects all of the time. This thinking causes the biggest burden of implementation to fall on the GBs and their Champions, already adding to their workload. And when (if) the projects are completed, what are the actual results?


Results of Deployment


Most companies are able to actually complete several six sigma projects; especially if they've hired several top gun BBs/MBBs to support their deployment. They get all of the way through the DMAIC process, get approval from their Champion and close the project. What happens after that? It all falls apart. The "C" at the end of DMAIC stands for "Control". In this phase of six sigma, the improvements made during the project are documented, stabilized and handed over to the owners of the process. Out of all of the phases of six sigma, I think that this one is the weakest (followed closely by the Define phase). I think that it's the weakest because from my own experience, and the experience of other BBs, I know that many projects soon fail after being handed over to the process owners. This may be for several reasons but most of the time the owners don't really understand what the GB/BB did to their process and revert to old methods. This leads to the interesting phenomenon of multiple projects for the same problem. I don't know how many times I've heard "oh, we had a six sigma project on that last year" when discussing some significant manufacturing problem. What is so wrong with a philosophy/method/system that can allow so much effort to simply evaporate within a short time period? Obviously, measuring immediate cost savings or other metrics and then walking away is not the answer.


Recommendations and Conclusion


So what can management do to really make lasting improvement in their company? I have to admit that there are many valuable tools embedded in lean six sigma and the manager who wishes to ignore them in their entirety places his/her company at an extreme competitive disadvantage. It's not the tools themselves that are the problem; it's the mindset that tries to implement them. I think that companies that are truly successful with lean six sigma are simply successful companies in general. Their management had the correct mindset for improvement, lean six sigma just happened to be the vehicle that they used to implement their thinking. And that's the key: the mindset of the management. Is the direction to cut costs or, even worse, pretend to cut costs by playing with numbers? Or is the direction to be competitive in a global marketplace? And how do these lean six sigma tools help with that direction?


I believe that the core lean tools (pull, kanban, jidoka, poka-yoke, SMED, TPM, etc.) should be taught to all of the manufacturing engineers and manufacturing supervisors. The manufacturing engineers are responsible for planning and installing the manufacturing process. Their understanding of lean tools is crucial so that they can set up a production line using the best methods available, from the beginning. Why set up a line, run for a few years and then decide to do a kaizen event to streamline it? Just set it up that way in the first place. The supervisors face the daily challenges of pulling everything together, they have to manage and use the tools given to them from the engineers to create value for the company. Their understanding of lean tools, equal to the engineers, will guarantee that they will properly supervise the manufacturing operation. As for the existing lean group, make them a manufacturing engineer, manufacturing supervisor or manufacturing manager. Take the knowledge that they have and allow them to implement it every day, instead of when there is a kaizen event.


Six sigma also offers a lot of valuable tools that can aid in manufacturing. Like lean, the tools should be trained to a more general audience such as the quality engineers and manufacturing engineers. Don't bother with Define and Control; just teach the core tools in Measure, Analyze and Improve. Make a "six sigma project" out of one of your new product development activities. Just like lean, use the tools to analyze and improve the manufacturing process before it even exists. You have plenty of time and resources, that's what APQP is all about. And as for your existing BBs and MBBs: quality engineers and manufacturing engineers. Their deep knowledge of statistics and analysis will be invaluable in those roles.


In conclusion, you need to embed the core improvement tools of lean six sigma into your company; don't separate them into a special group with colorful job titles and ambiguous responsibilities. Dispense with internal marketing and exhortations for change. Change yourself and lead others by example. And let your competitors chase the end of the lean six sigma rainbow.

Thursday, July 21, 2011

Lean Six Sigma revisited, part 1


This is not your typical lean six sigma (LSS) blog. It’s not a rah-rah marketing message from some consultant trying to make a living. If you want that, there are thousands of other blogs you could read; this post is about revisiting LSS, its meaning, purpose and future. I detail my concerns of both lean and six sigma as deployed by many companies today and then I give my recommendations for improvement. 

This post is the first of two parts, in this part I will explain the reason why LSS doesn’t fit with an efficient company structure and also the foibles of lean manufacturing. In the second part I’ll discuss six sigma and my recommendations for management.

Line and Staff
Companies typically have some kind of “line and staff” organization. The “line” is the group primarily responsible for the operations of the company. In a manufacturing company this group would be the Manufacturing department and probably the Sales and Design departments. The “staff” group is responsible for supporting the line and includes Accounting, HR and IT. The staff group typically reports to someone at the top of the management team (e.g. the CFO). (In ISO 9001 process-speak: the line represents the Customer-Oriented Processes and the staff represents the Supporting Processes.) The line’s purpose, fundamentally, is to execute the strategies of the company with the support of the staff. These strategies often include goals and objectives measured in terms of months and years. In a relatively good company everyone knows the targets (e.g. sales growth, profit, customer complaints, etc.) and they do their best to meet the targets.

One way that a company tries to improve this situation is by adding a group responsible for “continuous improvement”. This continuous improvement group is usually your friendly neighborhood LSS team. So how does this group actually fit into the line and staff  structure of the company? Typically this group has a separate reporting structure from the rest of the company, an additional line reporting directly to the CEO. This is to show the “importance” of the group to the remainder of the company. This importance is also usually shown by spending a lot of money on outside consultants, doling out tremendous internal marketing (hats, banners, stickers, stuffed animals, etc.) and grand pronouncements of fundamental change in the organization. This activity may be further promoted with public announcements, customer presentations and large gatherings of people from various plants/locations/countries to promote the company’s good intentions. What is the goal of all of this hoopla? TO SAVE MONEY. LSS, when implemented in various ways, aims to save money. But do the management of these companies and the practitioners of these methods really understand their meaning? And do these methods really save money?

Lean Manufacturing

Lean is an adaptation of the production-side of Toyota’s management system, known as TPS. TPS is a part of their management system; it is not the entire system. That is a key factor to consider. Toyota is not successful because of TPS. Toyota is successful for a variety of factors, one of which is TPS. TPS at Toyota operates within an overall management system that is driven by a company culture. This company culture was developed over many years as a reaction to the absolute devastation of Japan during WWII and the Japanese national culture. I lived there for more than three years; Japanese culture is unique in the world. The combination of national culture, re-building from nothing and the support of American business consultants (outlined in The Puritan Gift) led to the success of Toyota and other Japanese companies. It is wrong to believe that TPS was the main factor in Toyota’s success. It was a part of it but certainly not the main part.

To try to recreate Toyota's success most companies, supported by well-paid consultants, do lean training and start marching down the road of continuous improvement. Their consultants may actually coordinate their projects or they may do it themselves. Either way, they fully believe that this is the path to cost savings. They’ve been told by their consultants (who are trying to make a living) and the authors of many books (who are also trying to make a living) that this is the way that it is done. This is the path that many, many companies have taken to more efficient operations and significant cost savings. Nobody tells them that TPS is only a part of the success of Japanese companies. Nobody tells them that these tools are backed, primarily, by a very different national culture from most other countries. Think about this. Have you ever visited a Japanese company’s manufacturing location in another country? I’ve visited several Japanese automotive OEM and Tier 1 companies in various countries; I even worked at one for a short time. What is one thing that is common for all of them, regardless of the country? There are Japanese people everywhere, mostly managers and engineers. Japanese companies know that the only way to implement their operations in a foreign country is to manage it as if it was in Japan. If lean manufacturing, or any other Japanese idea for management, was so easy to implement then why do Japanese companies run their foreign locations in this way? Because the CULTURE is the primary reason for their success and they know that. They pay an unbelievable amount of money to have Japanese people on the ground in their locations because they are not only transferring technology and knowledge to a foreign country, they are transferring their CULTURE. Lean was not developed in a vacuum and it cannot be deployed in a vacuum. Anyone who says otherwise is trying to sell you something.

So does lean, when implemented as in most companies, actually save money anyway? Let’s look at some common measures of a lean project’s success: reducing people, freeing up floor space and reducing inventory. Reducing people is an easy one, just rearrange the machines, add some additional work to a person or two and voila! Immediate “headcount reduction” and cost savings. Project closed, kaizen finished, happy ending. But, did you actually fire that person that you reduced? Probably not, you know that if you fire them that it will de-motivate the remaining workforce. So you found something else for them to do, maybe on that new line you are building…if you are building a new line. Otherwise, that person can do something else. But unless you can immediately put that person to work on some valuable activity, an activity where you would need to hire someone to do it, then you didn’t save any money by removing them from the production line.

How about freeing up floor space? That’s an interesting metric, “our project freed 2 sq meters of floor space” or something similar. This freed space is gleefully converted into currency/sq unit and fed into the cost savings measurement. The calculation is based on the building lease amount per sq unit or something similar and you have some nice tidy cost savings. But how are you actually saving any money? Empty space does not add any value to the company. Until you put something valuable into the space and use it, there is no benefit to the company at all. Did your Lease Company or bank agree to lower the monthly payment on the property by an equivalent amount? Freeing up space by itself saves absolutely no money.

Reducing inventory actually has some hard cost savings behind it. When I worked in LSS I would tell people to go out to the warehouse and see the piles of money sitting there. All inventory represents a cost to the company that has not been recovered from the customer by selling the product; just big piles of money, sitting in a warehouse. Anybody would want more of that money in the company coffers rather than having it sitting there doing nothing. The risk here is not directly financial but the indirect cost of reducing inventory too quickly. You are probably familiar with the analogy of the boat and the water. The water represents inventory and as long as it is high then the boat just sails along happily with no problems. However, as the water level/inventory level is reduced all sorts of rocky protrusions such as bad quality, machine downtime and inefficient process start to crop up and risk grounding our happy ship. Once the ship hits those rocks all of the savings from reducing inventory, and then some, is spent in expedites, scrap, rework and customer complaints. Reducing inventory levels is the LAST thing you want to do as an improvement activity. Fix all of your other problems first (including TS and customer audit findings) before you even think about lowering your inventory in any significant way; to do otherwise leads to a big risk for your company.


Companies typically implement lean without any understanding of its place in the success of the company that created it. They also track their progress using ambiguous or outright bogus cost-savings metrics. In this situation, the only people who come out ahead are the consultants and the authors. They promote and sell this mindset to managers who want to find an  easy way to fix their problems. But there are no easy ways to fix problems. The members of the line are responsible to find and fix the problems, not rely on some outside group (internal or external to the company). I'll discuss six sigma and my recommendations in my next post.

Sunday, July 17, 2011

Quality, Strategy, Execution

I enjoyed ASQ CEO Paul Borawski's interview with Tata's J.J Irani regarding how Tata has implemented quality throughout the company. I am very pleased to see someone at Dr. Irani's level promote a quality culture for this company. I already believe that companies that are serious about quality should have a CQO position at the top, to fully support improvement and customer satisfaction. If that's not possible then having someone at the top who is a strong spokesperson is the next best thing.

So how do we develop a quality culture at a company, in an overall fashion? Quality is about strategy and execution, just like every other important aspect of an organization. That's right, quality must be a strategy, a way to differentiate an organization from its competitors (speaking about for-profit organizations). That's the first step. If quality is not a strategy, discussed at the top of the company, then further discussions are almost pointless. It is a main strategy, but not the only strategy, various market-related and technology-related strategies are just as important (quality isn't everything in any organization). However, for quality, if you lose it, one of your competitors will pass you and they will beat you. Cost-cutting is not a way to grow a company, it is not a way to compete. Focusing on the "bottom line" is pointless if you do not focus on your "top line". Quality grows the top line through customer satisfaction. Quality also helps with the bottom line, but that is secondary to its main purpose of satisfying the customer. So, quality must be a STRATEGY.

The second question is that even if we have defined quality as a strategy, how do we implement it? The other key activity of business, EXECUTION, is just as important as strategy. Top management must communicate the strategy (all of it) to all layers of the company all of the time. The people at lower levels of the organization are responsible to implement it. But if they don't know what it is or how it relates to their job, how can they do that? Especially the "lowest" people in the company as they are often (surprisingly) the main interface to the customer. Think about it. If you work in a manufacturing company the people actually making the parts are probably at the "lowest" level of the organization but their activities directly impact your customer, every minute of every day. How important is it that those people fully understand and can implement the strategy of the company? It's the MOST IMPORTANT thing. The function of management, starting with the first-level supervisor up to the CEO, is to support THEM. Communicate the strategy and give them the tools to implement it, all the way down the org chart. That is the key to EXECUTION. Without that, you can start down a slippery slope and not even realize it, especially if you only focus on costs.

To close, quality must be a key strategy for an organization, one of the best examples is shown in a motto from Newport News shipyards: "We shall build good ships here. At a profit - if we can. At a loss - if we must. But always good ships." This is a clear statement of quality as a strategy. However, strategy is not enough, execution must be done with the proper mindset from management. Together, this overall culture of quality can lead to higher customer satisfaction and business success.