Targeted Lean Six Sigma ®

Generating Rapid Payback From

A Long-Term Business Strategy
© 2009 R. Michael Donovan & Co., Inc. All rights reserved.

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 Targeted Lean Six Sigma ®
Generating Rapid Payback From
A Long-Term Business Strategy
© 2009 R. Michael Donovan & Co., Inc. All rights reserved.

Table Of Contents

Introduction 3
The Traditional Implementation Model 4
The New Model of Lean Six Sigma Implementation 5
The Targeted Lean Six Sigma Approach 6
Targeted Lean Six Sigma Specifics 8
Targeted Lean Six Sigma for Your Organization 9
About R. Michael Donovan & Co., Inc. 9

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Introduction

Is your business one of many finding it is not generating savings from Lean and Six Sigma at the
rate it could and should in these difficult economic times?

If you are perfectly satisfied with your results, feel free to skip the rest of this article. On the other
hand, if your organization needs more return from your Lean Manufacturing and/or Six Sigma ini-
tiative, try this quick quiz.

Is Lean Six Sigma:

A) A long-term business philosophy?

or
B) A way to quickly generate financial savings?

The good news is that the correct answer is ‘yes’ to both of the above.

The idea that Lean Six Sigma can simultaneously be a long-term strategy while spinning off a con-
tinuous stream of cost savings and cash generation is a significant departure from the usual ap-
proach requiring a broad roll-out with detailed education throughout the organization before seeing
a return.

In fact, our experience shows the opposite holds true. A succession of cost saving projects is a
great driver for full adoption of Lean Six Sigma. The key is to logically sequence initiatives so that
they address immediate opportunities but still complement a long-term strategy.

This approach offers new hope to businesses that are not satisfied with the rate of cost savings
and/or increased cash flow they have so far experienced – and are unwilling or unable to make
huge upfront investments in time and money.

At about this point “Lean purists” are pounding the table and insisting that real Lean Six Sigma re-
quires changing the culture at all levels and an organization-wide commitment to a new philosophy.
We are the first to agree that over the long-term they are correct. But our point is that even the
best of the best Lean companies started somewhere – so why not start by making money?

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The Traditional Implementation Model

Some Lean advocates teach that Lean Six Sigma requires a complete change in business prac-
tices – “a new way of life”. Achieving this means mastering a wide range of Lean and Six Sigma
tools along with the never-ending stream of acronyms and Japanese terms. In order to achieve
the full benefits of Lean Six Sigma at the highest levels, this is true.

However, reaching this level requires decades of effort. Toyota, the ultimate Lean organization
in the world, has been attributed as saying that its Lean efforts are “further behind then when we
started” – and they have been perfecting Lean technology for 60 years! While Toyota’s achieve-
ments show the inherent power of constantly attacking waste, this long-term approach can be
intimidating for companies that are starting Lean Six Sigma or, more commonly, those that are not
satisfied with the return on their efforts.

But very seldom does Lean take hold uniformly across an organization. It has to start somewhere.
In most cases that starting point is production. Indeed, Lean Manufacturing has a shop floor heri-
tage that goes all the way back to the early days of Henry Ford. If the initial implementations are
successful Lean methods begin to spread.

Our experience is consistent with this experience. Many organizations that are now finding great
success in administrative applications of Lean and Six Sigma “got religion” from their first tentative
steps in Lean Manufacturing. As improvements were made in the factory people began to ques-
tion why the same principles couldn’t be applied in the office. The inherent beauty of Lean and Six
Sigma is that the underlying concepts are universal. Obtaining the benefits throughout the organi-
zation only requires knowledge of the techniques, understanding of the specific opportunities and
creativity – along with a healthy dose of leadership.

The point is that Lean Six Sigma usually builds on success. As one Lean Six Sigma tool delivers
benefits it encourages people to try more. The old analogy of water (representing waste) covering
rocks (which represent problems) holds true. When the water level is lowered rocks invariably start
to emerge. The problems are not new but have never been fully recognized because other forms
of waste hide them from view.

As a result, the more waste that is eliminated the more problems are exposed. In the spirit of
Continuous Improvement this is a wonderful problem to have since there is no end to beneficial
improvement opportunities.

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What about the organizations where a strong executive mandates that the entire organization
adopt a Lean approach at one time? We find these situations are relatively uncommon, probably
as a result of the tremendous inertia that must be overcome to drive change across an entire
enterprise. Even in the rare causes where it is attempted the actual progress is not uniform.
Some areas show quick results while other areas struggle to apply Lean Six Sigma methods.

The New Model of Lean Six Sigma Implementation

Since Lean capabilities tend to start in manufacturing and then spread enterprise-wide over time
the next question becomes how to get started – or, if Lean Six Sigma efforts seem stalled, how to
reboot the efforts.

Reading too many Lean text books may create the mistaken belief that a very structured applica-
tion of all the Lean Six Sigma tools is required as a foundation. In our experience this can lead
to initial projects with lofty objectives but requiring too many distinct tools, techniques and team
members. Overly complicated and lethargic initiatives with unachievable goals are sometimes
known as “Solve World Hunger” projects. They generally lead to a massive up-front training ef-
fort and an overly complex structure. While the intentions are good the result is a painstakingly
slow return on investment and, in the worst cases, loss of the bias for action that marks success-
ful Lean Six Sigma initiatives.

Please don’t misunderstand – training and education have their place. It is virtually impossible to
start a Lean effort without the ability to recognize Non-Value Added activities. In addition, 5S and
Value Stream Mapping are almost always the best way to start an improvement effort. Further-
more, the ability to state customer demand as a Takt time is critical. All of these require up-front
training.

However, some organizations fall into the trap of requiring training on a full laundry list of top-
ics before getting started on any level of implementation. There are several problems with this
approach. First, most people learn most effectively when they can apply their new knowledge
immediately. The old adage of “use it or lose it” holds true. Second, training is a big invest-
ment. Our philosophy is to start generating an ROI on initial training as quickly as possible.
Finally, success breeds success. Demonstrating the application of the initial training on real
problems makes the organization more receptive to learning the next set of tools and techniques.
Then, your organization should launch into the solving of bigger, more complex problems yielding
greater and greater benefits.

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The Targeted Lean Six Sigma Approach

Our term for the preferred low risk, high yield approach to business improvement is Targeted Lean
Six Sigma®. As the name suggests, projects are targeted to the priorities of the business. How-
ever, and very importantly, the sequence of projects is also chosen to support a long-term strategic
plan.

The importance of the long-term strategic plan cannot be overstated. Without the long range view
an organization risks falling into the trap of “random acts of improvement” – small, localized proj-
ects that each address a pain point but don’t result in a significant, measurable financial impact for
the entire business. Another concern is that before effort is invested in improving some trouble-
some process the first question should be why the process is being done at all. It is very common
to find 60 – 90% of the steps and time taken for a process to be non-value added – BIG opportuni-
ties emerge.

As a result, the first step in Targeted Lean Six Sigma® is to develop a concise vision of the future.
We typically recommend a three year planning horizon as appropriate. Shorter plans make it
difficult to structure projects that link together while it becomes difficult to anticipate the business
conditions after three years. Of course there are exceptions that justify longer or shorter planning
horizons. For example, companies with extremely long product development or capital construc-
tion cycles have no choice but to be planning farther into the future.

The long-term plan does not have to be a painful, draw-out process. Our experience is that a
management staff can develop a suitable plan over several working sessions. In fact, complicated
and detailed plans seem to have more difficulties staying relevant than those that outline overall
direction. We find it is far more important that the long range plan be periodically reviewed and
updated.

With a long-term direction established, attention can turn to determining the targets for initial Lean
Six Sigma efforts. In most cases, the logical starting point is to attack the greatest financial oppor-
tunity. This may seem like common sense but, as the saying goes, “Common sense is not always
so common.”

Most businesses are accustomed to calculating the cost of production inputs. The most straight-
forward are easily measured items such as direct labor content, scrap cost, rework rate, and con-
sumables expense. These are ideal early projects since there can be no question that improve-
ment in these areas results in a real cost reduction.

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Other items such as floor space and manufacturing cycle times offer legitimate benefits but
harder to measure, at least in traditional financial terms. If the long-term plan calls out these
as important objectives we recommend a liberal view of costing for project justification only.
While improvements in these areas may not translate directly to the bottom line, they can have
a meaningful impact in the right circumstances.

For example, saving 2,000 square feet of space in an underutilized facility may not create
much savings. However, saving the same space in a crowded plant to avoid an expansion
could result in a huge payback. The principle of Targeted Lean suggests pursuing these hard
to quantify projects only when circumstances make them attractive.

A related situation arises from applying Lean Six Sigma to administrative or office opportuni-
ties. In many cases, eliminating some non-value added activity reduces the work load but not
to the extent that allows elimination of a full position. If headcount does not change there is
no savings in strict financial terms. Items that fall into this category could include paperwork
processing cycles, change control procedures, purchasing practices and so on.

Again, the decision on whether to pursue a project in these areas depends on the criteria for
Targeted Lean Six Sigma. If the project either generates a hard cost savings or meets an
objective of the long range plan it should be pursued. If it does not meet one or both of these
tests it can be deferred for another time.

There are several logical reasons for prioritizing based on the “Biggest Bang for the Buck” be-
sides the obvious financial return:

Available resources. In the best of economic times there is never enough man-
power, expense funding and capital budget to tackle every problem. In a down
economy it is truer than ever. The greater the financial benefit the more likely man-
agement is to allocate the required resources.

Build on success. The best way to spread Lean Six Sigma through the organiza-
tion is by example – and the best example is one that shows a financial benefit. A
successful implementation will generate the credibility and management support to
tackle larger projects next time.

Learn by doing. There are hundreds of books on how to become a great golfer.
Somehow it gets more complicated when you actually pick up a club. The same
holds true of Lean Six Sigma. Books and training classes are a starting point but
cannot replace the hands-on experience. After tackling a big opportunity don’t be
surprised or disappointed if further improvements are identified. The nature of
Lean Six Sigma is that the first cycle of improvement invariably uncovers

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 more waste that can become the basis of a second round of improvement.

Break the Inertia. High performing organizations tend to have a bias for action. (This
doesn’t mean it is acceptable to bypass change control, ignore safety concerns or reduce
inspection without eliminating the source of defects.) Successfully tackling a major cost
and/or cash consumption problem is a sure way to breathe new life into improvement
efforts.

Targeted Lean Six Sigma Specifics

The basis of Targeted Lean Six Sigma is linking specific Lean and Six Sigma technologies to imme-
diate cost savings opportunities. The tools are taught, applied and mastered in the sequence that
generates the greatest return. No longer is it necessary to train the entire organization in all Lean
Six Sigma subjects. Instead, after some basic exposure the principles, specific technologies are
targeted to solve the greatest cost improvement opportunities.

This may best be illustrated with some examples of the Lean tools that can be applied to specific
cost problems:

Excessive Raw Material and WIP Inventories: Internal Kanban, One Piece Flow, Pull Sys-
tems, Inventory Quality Ratio

Excessive Manufacturing Lead Time: One Piece Flow, Lot Size Reduction, Supplier Kan-
ban, Flattened Bills of Material, Lean Line Design, Applying Lean to office and administrative
tasks associated with order fulfillment

High Scrap, Rework or Product Defect Rates: Mistake Proofing (Poka Yoke), Six Sigma
applications, Design for Manufacturing, Visual Factory

Excessive Finished Goods Inventory: Reduce product lead times (see above), Kanban
replenishment of inventory, customer-driven inventory deployment strategies

Excessive Process Downtime: Total Productive Maintenance, OEE, Change Over Reduc-
tion (SMED)

Low Labor Productivity: Elimination of Non-Value Added activity, Lean Line Design, Mistake
Proofing (Poka Yoke)

As you can see, eventually all the Lean Six Sigma tools are utilized. However, they are
applied in the logical sequence that provides the most benefit.

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Targeted Lean Six Sigma for Your Organization

Is your business either just starting to utilize Lean Six Sigma or have your efforts failed to deliver
the financial benefits as quickly as needed? If so, consider how Targeted Lean Six Sigma® can
help your efforts to quickly become more effective.

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About R. Michael Donovan & Co., Inc.

R. Michael Donovan & Co., Inc. is an international management consulting and education firm that
provides manufacturers and distributors with business performance improvement services on a
focused, enterprise-wide, or entire supply chain basis.

For over thirty-five years, R. Michael Donovan & Co., Inc. has a consistent record of providing
manufacturing and distribution companies with highly competent, results-oriented professional as-
sistance to help management improve business performance.

We have developed specializations and refined methodologies for: Lean Manufacturing, Supply
Chain Management, Lean Office, Lean Design, Lean Sourcing, Lean Distribution and Six Sigma,
among others.

Our consultants work directly with your personnel to develop breakthrough improvements for your
specific Lean Supply Chain requirements - solutions which produce lasting, measurable results.
Because client problems vary, we never limit ourselves to one particular approach. We will help
you to develop and implement the Lean Thinking approach for an enterprise or supply chain solu-
tion best suited to your needs.

We encourage maximum participation from client company personnel to ensure effective knowl-
edge transfer and solution ownership to achieve sustained Lean Six Sigma success.

Clients always receive active direction and involvement only from senior level consultants who
focus on measurable results and the development of the client organization’s capabilities.

R.Michael Donovan & Co., Inc. offers several complimentary services to help you get started in-
cluding a Lean Assessment checklist and a copy of the book “Lean Supply Chain Management, An
Executive’s Guide to Performance Improvement.” Both of these, as well as information to learn
more about Targeted Lean Six Sigma® are available at www.rmdonovan.com or feel free to call us
at 508-788-1100 or email Mike Donovan at rmd@rmdonovan.com.