In the efforts to draw closer to customers, many manufacturers have lost focus on what should be a company’s primary success factor – profitable growth. In today’s competitive manufacturing environment, it takes more than quick fixes, outsourcing and downsizing for companies to consistently achieve their growth and profit objectives. While these options may yield temporary financial relief, they will not lead the way to long-term growth and profitability. For companies to grow and consistently exceed bottom line expectations, they need to get lean. And to get lean they should master eight basics of Lean Six Sigma.
Software as the Solution
During the last 30 years, companies were led to believe that computerized systems would provide the solution to all growth and profit challenges. Material requirements planning (MRP) and enterprise resource planning (ERP) system gurus assured organizations that if that implemented their software programs the bottom line would take care of itself. Well it did not happen. Like most perceived panaceas, each of these programs received a lot of hype, but, in general, contributed little toward helping companies identify and achieve their full growth and profit potential.
For a measure of their shortcomings, one needs only to spend some time in an MRP scheduled manufacturing facility – especially during the last weeks of the final financial quarter. In a typical company, converting the quarterly financial forecast into reality still requires overtime, internal/external expediting, last minute “on-the-run” product changes and even some “smoke and mirrors” from time to time. Results are scrap, rework and warranty costs that negatively impact profitability and quality, and shipment problems that deliver less than acceptable customer satisfaction. Companies have spent many thousands of dollars in pursuing MRP and ERP only to see growth and profits decline due to uncontrolled operating costs that produced non-competitive pricing.
So, after introducing such computer systems, why is it that many businesses are still struggling to sustain profitable growth and are not close to achieving their full growth and profit potential? The first reason is simple – the results achieved by any computer system are only as good as the people at the controls and the integrity of the data they provide. The second is more complex – most manufacturing managers facing major day-to-day problems and constraints adopt a totally reactive management style. Consequently, their time is consumed applying “Band-Aids” and/or finding ways to work around system and process problems. That leaves them little or no time to analyze and eliminate the root causes of ineffective systems and processes.
How to Get to Root Causes
How does one turn around such a classic cart-before-the-horse situation? What is required first is a company-wide, in-depth understanding of the fundamentals of Six Sigma and then a total commitment to the consistent and tenacious execution of eight basics of Lean Six Sigma.
Like renowned football coach Vince Lombardi, who achieved success by having his team focus on the mastery of football basics, manufacturing teams need to focus on the mastery of the Lean manufacturing basics. These basics require proactive planning and tenacious execution that demands leadership above and beyond just satisfying day-to-day accountabilities. Some managers cannot envision the benefits of mastering manufacturing basics. Others simply cannot find the time. Like practicing blocking and tackling in football, it is not exciting. And like most football heroes, managers prefer to run with the ball. But without the solid execution of Lean Six Sigma basics, companies will seldom achieve their full growth and profit potentials. Here are the eight basics of Lean Six Sigma which every manager should know and implement:
1. Information Integrity: It is not uncommon for front office management to become disenchanted with computerized systems results when time schedules and promised paybacks are not achieved. It is a given that acceptable systems results cannot be achieved when systems are driven by inaccurate data and untimely, uncontrolled documentation.
2. Performance Management: Measurement systems can be motivational or de-motivational. The individual goal-setting of the 1980s is a good example of de-motivational measurement – it tested one individual or group against the other and while satisfying some individual egos, it provided little contribution to overall company growth and profit. Today, the balanced scorecard is the choice of business winners.
3. Sequential Production: It takes more than systems sophistication for manufacturing companies to gain control of factory operations. To achieve on-time shipments at healthy profit margins, companies need to replace obsolete shop scheduling methodology with the simplicity of sequential production. Manufacturing leaders have replaced their shop order “launch and expedite” methodology with continuous production lines that are supported by real-time, visual material supply chains…sequential production. The assertion that sequential production only works in high production, widget-manufacturing environments is a myth.
4. Point-of-Use Logistics: Material handling and storage are two of manufacturing’s high cost, non-value-added activities. The elimination of the stock room, as it is known today, should be a strategic objective of all manufacturers. Moving production parts and components from the stockroom to their production point of use is truly a return to basics and a significant cost reducer.
5. Cycle Time Management: Long cycle times are symptoms of poor manufacturing performance and high non-value-added costs. Manufacturers need to focus on the continuous reduction of all cycle times. Achieving success requires a specific management style that focuses on root cause, proactive problem solving, rather than “fire-fighting.”
6. Production Linearity: Companies will never achieve their full profit potential if they produce more than 25 percent of their monthly shipment plan in the last week of the month or more than 33 percent of their quarterly shipment plan in the last month of the quarter. How linear does a production department produce to the company’s master schedule? As companies struggle to remain competitive, one of the strategies by which gains in speed, quality and costs can be achieved is to form teams of employees to pursue and achieve linear production.
7. Resource Planning: One of the major challenges in industry today is the timely right sizing of operations. Profit margins can be eroded by not taking timely downsizing actions, and market windows can be missed and customers lost by not upsizing the direct labor force in a timely manner. These actions demand timely, tough decisions that require accurate, well-timed and reliable resource information.
8. Customer Satisfaction: Customer satisfaction is in the eyes of – surprise! – the customer. Perceptions are what a company needs to address when it comes to improving customer satisfaction. It does no good to have the best products and services if the customer’s perception of “as received” quality and service is unsatisfactory. Companies need to plan and implement proactive projects that breakdown the communication barriers that create invalid customer perceptions.
Answer Is in Six Sigma Basics
While many business gurus may have identified one or more of these Six Sigma basics as important to the successful pursuit of business excellence, the fundamental importance of these basics seems to have been lost in the proliferation of buzz words and the mania of systems sophistication. It is time for companies to put a hold on sophisticated systems development that cause self-inflicted, day-to-day chaos. In its place, they should initiate an action learning program for gaining a company-wide understanding and acceptance of the importance of the basics of Six Sigma. Once buy-in and commitment have been achieved, aggressive planning and tenacious implementation must follow. In short, that is putting “horse in front of the cart.” And such a program will build a solid foundation for redefining and revitalizing a company’s pursuit of profitable growth.