Posts Tagged ‘lean’

six sigmaIn our March 31, 2016 post we discussed how the tool set known as Six Sigma can help firms save a lot of money by enabling continuous improvement throughout their production (and other) processes.  We noted then that by utilizing Six Sigma’s tools to reengineer your business processes to the highest standard (of lowest defects) you can then let those processes drive your ERP implementation.  In other words, you let your business drive your ERP software, rather than the other way around.

Today we thought we’d enlist some added Six Sigma input from our friends at Panorama Consulting, whose President Eric Kimberling wrote a recent post describing a few key ways that Six Sigma can increase ERP benefits realization.  These include:

Six Sigma supports a broader business transformation beyond ERP software. Notes Kimberling, “The most successful ERP software initiatives are those that are managed more as business transformations rather than technology initiatives.”  By beginning an ERP implementation with clearly defined and well-designed business processes – a hallmark of Six Sigma initiatives – you allow your business to drive your ERP software implementation.

Six Sigma provides the performance measures required for any successful change initiative.  Here Panorama reminds us: “It’s widely known that if you don’t measure it, you won’t achieve it. Unfortunately, too many organizations neglect to define the specific performance measures and metrics that will be used to drive and manage business benefits moving forward.”

Six Sigma makes for a faster and cheaper ERP implementation.  While it may sound counterintuitive, the fact is “having clearly defined business processes up front avoids much of the ambiguity, inefficiency and ineffectiveness common in most ERP implementations.”

Six Sigma enables effective organizational change management.  Says Kimberling, “Not much helps enable organizational change management, training and employee communications as much as the tangible business processes and performance measures afforded by Six Sigma tools.  Well-engineered business processes, thorough process documentation and clear performance metrics all help drive adoption and accountability.”

The process improvements and the ‘leaning out’ that come as the direct benefits of Six Sigma (as defined and discussed in our earlier post here) are the very same thinking companies need to apply to early-stage ERP implementation.  Whether you hear that message from us, or Panorama, or anyone else, it’s a message worth careful consideration.



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Taiichi_OhnoTaiichi Ohno, father of the Toyota Production System, once said of the lean approach that “All we are doing is looking at the timeline from the moment the customer gives us an order to the point when we collect the cash.  And we are reducing the timeline by reducing the non-value added wastes.”

Legions of disciples since then have flocked to follow his precepts, often obscuring the lean concept by overcomplicating it.  So it is good to recall what Rajan Suri, the creator of the quick-response manufacturing philosophy writes (while referring specifically to “manufacturing critical path time” but of practical relevance to any lean initiative…) that “knowing the critical path helps focus lean initiatives and reveals the greatest opportunities for waste reduction and lead-time improvement.”

It actually all boils down to taking a step back, that is, taking a ‘macro’ view.

Lean teaches that compressing the timeline increases velocity… reduces inventory… and improves cash flow.  Compressed timelines simplify processes by eliminating the many wastes that accrue over time.  The quicker the cycle (or lead time), the fewer chances for waste, right?  Other benefits accrue to such time savings from “quicker put-away and retrieval, counting and recounting, moving, recording transactions” and so on, notes Joyce Warnacut in a recent article featured in APICS Magazine called “Zoom Out to Build Lean Up.”  She notes that compressing the timeline to delivery “adds value for the customer in the form of quicker responses and leads to market opportunities.”

Pretty obvious when you think about it, right?

Warnacut makes the case for taking the macro view, noting that “lead time should not be measured at the operation level, but the system, or macro, level.  This is because reducing lead time at one step while leaving work in process (WIP) in queue at the next step is futile.”  Lead time must be measured from the point at which resources are committed to the point at which customers receive the goods.  This is particularly true in manufacturing.

That means that, unlike traditional on-time delivery schemes that suggest making and holding inventory for better order fulfillment, “a true time-based measure built around when resources are committed to an order [means that] making ahead is not advantageous.  It actually increases response time because having people, material and machines allocated to something that is just going to sit on a shelf negatively affects both responsiveness and cash flow.”

The point is, take the macro view and recognize that lead time must be defined as the time to complete and ship an order “from scratch” beginning with order placement and on until receipt.  Focus tightly on compressing that time line and you will succeed in increasing velocity, reducing inventory and improving cash flow.  Just as Ohno had prescribed.

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pushvspullThere’s a long running debate about push versus pull planning in the manufacturing production environment, with push typically exemplified by MRP (material requirements planning) and lean exemplified by pull techniques.  A recent article in the Jul/Aug edition of APICS Magazine article (“New-Fashioned MRP”) by Dave Turbide, an APICS certified CFPIM boils it down as follows:

MRP is based on a forecast of expected demand.  A forecast is prepared… production and purchasing are scheduled to support demand, and work proceeds.  So, you’re pushing forward, to make your product.

In pull, nothing is made until there is demand.  Finished goods require a customer order.  Replacement materials and sub-assemblies are not bought until existing items have been used.  Lean emphasizes making and buying to demand, along with one-piece flow and physical replenishment triggers (kanban).

While some say that push is simply bad, and pull (lean) is good, both approaches, Turbide points out, have their advantages and disadvantages.  Push is recommended in fairly high-variety, complex manufacturing and MTO (make to order) situations.  Pull works best when demand is high for a “relatively” small range of products.  Many companies incorporate elements of both push and pull in their manufacturing environments.

Push is appropriate in conditions of long lead times and a lot of work-in-process inventory.  MRP can be difficult to use in these cases, generating multiple exception notices.  Required information can be difficult to maintain in these cases.  MRP is not demand driven, which is to say, parts and products are acquired to meet a forecast regardless of demand.  If – a big if – “the forecast is accurate and the demand actually occurs, then the company can be efficient and profitable.  But there is no guarantee…” and any differences between forecast and demand create either shortages or excesses in inventory.

Despite all this, MRP remains “the best tool for handling complexity and it has the flexibility required to deal with a wide product variety.  Smart business leaders thus are uniting lean manufacturing tools (kanban, flow production) with their MRP-driven organizations,” notes Turbide.

He goes on to note that some practitioners have taken to using Theory of Constraints to enhance throughput and reduce lead times, and using demand-driven MRP “as a way to pull material replenishment with an MRP-based system.”

As Turbide concludes… “MRP is not dead but traditional techniques are becoming irrelevant as markets shift and evolve.  MRP that incorporates the best of the old with the modern, demand-driven extensions is the tool we need today.”

You can learn lots more about APICS here.



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The Seven Wastes

Shideo ShingoAPICS fans will recall that Shigeo Shingo – the master of lean manufacturing and Toyota waste reduction – first coined the notion of the 7 wastes of manufacturing.  In a recent article, Donald Sheldon of DH Sheldon & Associates, who lectures at SUNY and was one of the original authors of the APICS Operations Management Body of Knowledge Framework suggests two more.  But first, the Seven.

Shingo was once observed eating a banana on stage at an APICS conference and being bothered by having to buy bananas by weight when he did not eat the skins, which he considered “waste” (or “muda” the Japanese term for waste).

That sort of thinking is what drove him while at Toyota years ago to define his seven areas, which we thought worth reprising for the thought and benefit of our many manufacturing clients today:

  • Overproduction of products and services, as in activities not supported by customer demand
  • Waiting for parts, or a machine to finish, or a support function, etc.
  • Excessive transportation or handling of goods
  • Stocking unneeded inventory
  • Motion by employees that is redundant or avoidable
  • Defects in products or services that result in scrap or rework
  • Processing and transactions that are unnecessary

In an article in the May/June 2015 of APICS Magazine Sheldon adds that the APICS community added an eighth area and he suggests a ninth courtesy of a student of his who was certifying for his green belt in a six sigma class:

  • Waste of human creativity, and
  • Environmental waste (for example, wasted or excessive use of energy).

We mention these today to give readers a chance to pause for a moment and consider these areas of waste within their own plants and organizations.

Identifying such areas in your operation and taking the necessary steps to remedy them is simply one more link in your chain of continuous improvement.

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lean six sigmaIn manufacturing two sets of concepts are often discussed (though less often implemented).  These are “lean” and “six sigma.”  Each when applied in its own right brings enhanced value to companies and their customers.  Both are often ignored in small business – often thought of as “too complex,” or “not for our small company.”  In fact, there are simple lessons from both which, when combined, can bring operational improvement to any firm – even non-manufacturers.

First, a couple basics.  Lean focuses on value.  Simply put: what’s important to the customer?  Its key principles involve the elimination of waste and accelerating the velocity of processes.  It traces its roots back to Toyota.  If value is defined as “what matters to the customer” then value-added simply means work your customer is willing pay for.  Everything else is waste, to be identified and eliminated in a process of continuous improvement.

A simple acronym helps remind us of the 8 key forms of waste: DOWNTIME:  Defects, Overproduction, Waiting, Non-Utilized Talent, Transportation, Inventory (too much or too little), Motion, and Excess Processing.  As you reduce or eliminate these, you become leaner.  Meanwhile, “accelerating the velocity of processes” does not mean working faster; it means speeding up the end-to-end process, or the entire “lead time.”  Think of this as the time lapse between ordering something online and when you receive it.  Compressing those lead times at each incremental step possible increases velocity and makes you leaner.

Meanwhile, six sigma is a well-defined system of striving for the near-perfect delivery or products or services.  Without getting into its technicalities – books have been written – the idea is that if you can get to six “standard deviations” (a mathematical concept relating to how far a given process deviates from being perfect) you will have arrived at better than 99.999% (“five nines”) reliability in your process.  (Since one of our staff is a Six Sigma Black Belt, I’m sure I’ll hear about it if I’ve misled anyone here…)

Like lean, six sigma also has an acronym to describe its framework.  That would be DMAIC: Define, Measure, Analyze, Improve, and Control.  As implied above, with six sigma, you identify the root causes before implementing solutions.

When you combine the two, as Peter J. Sherman, an APICS Certified Supply Chain Specialist (CSCP) at Riverwood Associates writes… “we get something powerful — a business improvement methodology that maximizes shareholder value by achieving the fastest rate of improvement in Cost, Quality and Customer Satisfaction. It focuses on reducing waste by streamlining operations and reducing defects (i.e., services not delivered on-time or within budget).”

While companies generally prefer to utilize some outside assistance in solving their own individual continuous improvement initiatives, isn’t it heartening to know that at the core of it all, the concepts are so beautifully simple and logical?  The challenge, as is so often the case, lies in having the discipline and technique to pursue a successful initiative.



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LeanCartoonRichard Schonberger is the author of over a dozen books on Lean, Six Sigma and process improvement.  In the most recent issue of APICS Magazine he casts an important reminder about what lean is really meant to be, and how often it’s confused.

As Schonberger points out, “… people tend to forget that lean is inherently strategic and a matter of –time-based competition [italics ours].”  Too often, he notes, a lean initiative will start as a major company initiative with full senior management involvement.  Then, as the initiative gains ground and moves into what he calls ‘operational silos’ lean often transforms from its roots in “time-based competition” into merely a means of waste elimination, or some internally-focused efficiency program.

And at that point, ‘internal efficiency’ takes precedence over the more critical customer-focused effectiveness that lies at the heart of lean.  As a result, it often becomes disconnected from other parts of the company such as finance, marketing and sales – too focused on efficient instead of effective.  The author aptly likens this to the grocery store that has plenty of folks stocking shelves but not enough at the cash registers.

Schonberger reminds businesses that a lean shift needs to take place that redefines and promotes lean as time-based competition.  “That term should populate company walls and documents,” he suggests.  All other lean terms should remain intact, but “be subordinate to the main themes of time and the customer.”  It requires a dedicated campaign.

The key is a launch that promotes the Whys and Hows of tapping into lean’s large potential for dramatic competitive advantage.  Each success, he says, “should show up quickly and convincingly – first as reduction of channel inventories(*)  and, before long, in winning more customer orders and retaining good customers longer.”

Finally, he notes wryly, success appears as a sign of trouble for one’s competitors.

(*) For more insight on the Hows of reducing channel inventory, you need to read the entire article (it’s not terribly long) on fast setups and changeover, delivering quick and flexible response, and perhaps most important of all, having a multi-skilled workforce.  The full article (Catching Lean’s Drift) can be found in this month’s APICS Magazine (Jan/Feb 2015).  Consult your local APICS chapter for more information.

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iTLSThe MRP realms embraced by the sometimes complementary sometimes competitive disciplines known as TOC (Theory of Constraints), Lean, and Six Sigma have been integrated into a “united” theory by an operations expert and author by the name of Reza Pirasteh.  This hybrid goes by the name of iTLS.  Pirasteh’s goal in uniting these three different schools of thought is to “help organizations deliver their best productive potential by optimizing process efficiency and profitability, as well as aligning products and services.”

While Pirasteh’s work and its implications are well beyond the scope of this humble blog, a few key aims of his methodology are worth sharing here today.  It also should be noted that much of iTLS is best applied to the large and/or global firm.  However, as we see so often in the world of MRP and ERP, the lessons of the large on a macro scale can often be applied to the small (i.e., SMB market) on the micro scale.  Besides, in a globally competitive environment, all manufacturers and distributors need to be aware of the tools available to them for continuous process improvement.

Thus, a rudimentary intro to iTLS today.

Within iTLS, each continuous improvement tool or technique plays a particular role in optimizing operations and profitability.  In a recent article in APICS Magazine entitled “A Continuous Process Improvement Case Study” (Mar/Apr 2014 issue), the authors detail which of these three separate disciplines is best applied when – and why.  The short version is excerpted from their article below.

(For the full article, check out the APICS Magazine website here.) 

  • The Theory of Constraints (developed in the main by Eli Goldratt) aims to focus on the global results, subordinating local resources to best exploit the constraints that limit production processes.
  • Lean tools and techniques are best suited for elimination of non-value-added activities, particularly within constraints.  When these constraints are sequentially eliminated, this favorably affects company profitability.
  • Six Sigma helps users understand the sources of variation and variability that cause a process to perform outside of its specifications.  Six sigma tools recognize the natural process variability and are able to account for it in order to create a robust process that does not violate customer specifications despite natural, random process variations.

Successful practitioners of iTLS include a pump manufacturer in Brazil, a mid-size family business nearly 50 years old with three plants.  Following the concepts of iTLS they took seven steps, over seven months.  In doing so they eliminated, coincidentally, seven deadly wastes, while reducing variation and increasing on-time delivery and trimming overall lead time from 7 days to just over 2, all while cutting their part rejection rate to 3.4 ppm.

The 7 steps:

  1. Identify the constraint
  2. Exploit the constraint
  3. Remove sources of waste
  4. Control process variability
  5. Control supporting activities
  6. Remove the constraint and stabilize
  7. Reevaluate system performance

In today’s competitive environment, one-size (or methodology) does not fit all.  But a united hybrid of best-of-breed philosophies can be a driver of productivity – and profits.

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