Qualtec's Business Performance Improvement Blog

Warehouses and distribution centers are more and more being thought of as very strategic aspects of the supply chain and can be a gold mine for process improvement efforts.  Think about it, the warehouse directly shapes the experience customers have with your company.  Are products they need in stock? Are they getting what they ordered, when and where they need it? Does their product arrive undamaged, with an accurate invoice and documentation?  The bottom line is that your warehouses and DCs are definitely on the critical path to your customer.

What about other business-centric issues?  Production losses, inefficient pick and pack methods, inefficient use of labor, poor warehouse layout, etc all drain time, resources, and money. Lean, and a well-executed CI program in general, can help you get control of ALL of these things to streamline the entire order fulfillment process, from order receipt to the time of shipping. You can reduce cost, reduce order cycle time, and optimize labor …. And that is a WIN no matter how you look at it.  We’ve worked with a number of warehousing and distribution operations and have seen first-hand the impact that Lean and CI can have.

this short Executive Brief that discusses the importance of CI for companies whose business success is a clear function of effective and efficient warehouse and distribution operations – namely 3PLs.  Relevant reading even if you’re not a 3PL, but have warehousing and distribution operations.

I would argue that it’s difficult to justify NOT using Lean or other basic process improvement approaches in warehousing and distribution operations, as long as you keep it pragmatic and practical:

• Leverage the personnel and talent you likely already have working in its supply chain operations. No “super skills” should be required.
• Do it in a way that your people can coordinate and manage with their “day job” responsibilities. Don’t set up recipe for failure by making it too burdensome
• Make sure eliminating waste and inefficiency is viewed as a major positive, a win-win across the board, not something people fear is going to cost them their job.

Contact me if you’d like to discuss how Lean and continuous improvement might be applied in your warehouses and distribution operations.

We have many discussions with organizations where Lean, Six Sigma, and other performance improvement efforts have outright failed, or maybe have just started to lose their impact.  In an earlier article, we talked about the importance of alignment and how important it is to have clear line of sight to the performance gaps that matter the most.  But, in some cases, scorecards and dashboards are there, with well-defined KPIs pointing to high-value targets, yet improvement efforts still yield less than desired results. Why?

Of course there can be many reasons, but lack of discipline around project definition, or project charters, is something we see consistently in these problem situations.  Poorly defined projects are without a doubt a recipe for disaster.  You may be focusing on exactly the right problem, but, if the project’s problem statement and objectives are not well-defined, your chances of success in making an impact fall dramatically. So what are the key elements of a good project definition and charter?  Here are 5 big things I think should be present in all improvement project charters / project definitions:

1. A clear Problem Statement that defines the business problem in specific and quantifiable terms.  Done well, it will answer the following questions clearly and concisely:
   • What is the primary metric, or needle, that I’m trying to move?
   • What is the primary metrics current, or baseline, value?
   • How did I measure the primary metric’s baseline value, and over what period?
   • From the business’ perspective, what is the target value for the primary metric?
   • What is the gap between current performance and needed performance levels for the primary metric?
   • What is the value (in $’s if at all possible) of closing that gap?
   • What areas of risk do I need to pay attention to as I try to move the primary metric? These will become your secondary metrics. For example, if you’re trying to reduce costs in some customer facing area of the business, you need to pay attention to such things as attrition rates, customer satisfaction scores, etc.

 

2. A clear Objective Statement for the project.  It is unlikely that a single project can close the entire gap for the business problem defined in #1.  It is more likely (and usually preferable) that a project focuses on a sub-process, or segment of the overall value stream, and it targeting only a portion of the overall gap.

 

3. A clear understanding of the Start and Stop points for the project.  Related to #2, be very clear on exactly which segment of the value stream (subprocess) the project will be restricted to.  This is about scope, and avoiding the ever-present scope creep.  It may need to be adjusted as the project progresses (and/or evolves), but make an effort to define start and stop points up front.

 

4. A clear definition of the Team that needs to be involved in the project.  Team members may be actively working on the project analysis, or they may just be subject matter experts that are called upon to gather information and feedback.  They may work in the process/sub-process being analyzed, or they may be customers of or suppliers to that process.  Take time to think through who really needs to be involved, and engage them early.

 

5. Explanations of how things like are computed and derived.  For the gap values in problem and objective statements, how were those values derived?  There will always be questions of value, and it’s better to have explanations right in the project definition. The same goes for primary metric baseline values?  How were derived?  Show the data that was used, identify any assumptions that were made, identify any anomalies in the data, etc.

Project definition (project chartering), done well, takes time and effort, but I can assure you that your project outcomes will suffer if shortcuts are taken here.  I do realize that there is a lot of ground covered with these 5 elements, and that there is a lot of detail and nuance in each.  In an upcoming post, I plan to present an example and walk through each of the elements in some detail.

a short presentation on project identification and definition ….

Feel free to contact me if you would like to discuss project chartering and project definition for your organization and its improvement efforts.

Over the past 20 years of experience, we’ve learned the key to sustaining performance improvement gains rests on process management.  This role is entrusted to a broad group of employees who are often the process owners and, when not the process owners, are still the most affected by large scale improvements.  Providing them the proper skills forms a critical component of a robust quality management system.

Some have dubbed this person and the required skills Yellow Belt but that term hasn’t done the role justice.  Yellow Belts are often thought of as data collectors or Black Belt assistants.  But a Yellow Belt’s ability to control and manage processes using metrics and data as well as solve problems using basic quality tools gives them far more impact.  Their power doesn’t come from their place in a tiered pecking order of Master Black Belt, Black Belt and Green Belt but in their numbers, demographics, foundational skills and role.

our executive brief that discusses how Yellow Belts play a crucial role in sustaining process improvement efforts

Yellow Belt training introduces the majority of individual contributors to the concepts of process improvement and management and their position in their organizations make a direct connection to improvement efforts.  Yellow Belt training can be fit to how people will be expected to operate.  If positioned to assist Black Belts, they have little need for project selection or analytical tools.  However, if Yellow Belts are expected to sustain gains long after Black Belts have left, a more complete set of tools is required.

Many organizations have active Operational Excellence programs that consistently execute projects through to implementation successfully.  But to make it stick, drive it wide and take care of low hanging fruit, they should look at process management which forms the core of Yellow Belt capability.  If you’d like to see the core concepts covered in Yellow Belt training, contact us or go to our website’s Yellow Belt webpage where you can download complimentary Yellow Belt training materials.

The last few years have witnessed big changes in the business climate, and continuous improvement (CI) efforts have certainly seen their share of change.   I talk with companies every day and, without a doubt, there has been a fundamental shift in thought on how to best make meaningful process improvement happen.

Prior to 2008, there was significant interest and buy-in for large-scale, top-down initiatives. There was a willingness to set aside large budgets and free up significant resources for the CI initiative.   Training increasingly large segments of the workforce was front and center.  Detailed, multi-year plans were put in place.   The CI initiative was heavily promoted, internally and externally, and employees were strongly urged to participate.

But, did those big initiatives deliver results?   Undoubtedly some did.  But, many more, when you really check the numbers, did not.  There are many distinct causes why they didn’t work, and I won’t try to dive into that here.    But, with the meltdown in the business climate, many leaders took a look in the rear view mirror and didn’t like what they saw …. big dollars and resources consumed with little evidence of concrete results.

Now, does this mean that CI and process improvement is useless and should be abandoned?  Of course not.  Businesses live and die today based on the strength and adaptiveness of their processes, as compared to their competitors.  Does it mean that the tools and methodologies used (Lean, Six Sigma, BPM, etc) are not good and should be replaced with something new?   I think not.  The tools and methodologies can certainly be improved and expanded (and are), but they are proven to work.

So what’s happened?  I believe that, for a lot of companies, there was too much focus on the initiative and not nearly enough focus on results. And based on conversations I have with business leaders every day, I think many have drawn the same conclusion.

So, when smart people see the error in their ways, it typically leads to change.  The change that I’ve seen happen for CI is a move back to the basics, and a focus on bottomline, business results.  It may return, but for now I see very little interest in big change initiatives whose results are measured over the very long term, if ever truly measured.  I see a much more tactical view of CI, focusing on solving specific business problems quickly,  as opposed to general quality improvement.  CI programs are more likely to be looked at from a bottom-up or grass-roots perspective.

Smart leaders are now letting the specific needs of their business drive what the CI program looks like, what methodologies and tools are applied, how results get measured, what technology platforms are deployed, etc.  To borrow from Lean, the business is pulling CI capability, as opposed to it being pushed into the business.  In the real world, what does this mean?

a short executive brief that provides a good overview of the basics of lean

Well, I can only give you my perspective from talking with leaders at companies of all sizes and in many different domains, but what I see is a clear move back to the basics of business and process improvement.  Basic quality and process tools as employed in Business Process Management (BPM), Lean, and basic quality tools (Yellow Belt) are getting a second look.

Why?  Because, for many businesses, the basics will help solve 95% of the real business problems, get results fast, and they can be introduced into the organization for a very low cost and very low risk.  The basics also build a solid foundation on which advanced capabilities like Six Sigma and DFSS can be effectively built and deployed to deliver even more dramatic business results, with much less risk.

So, what do you think?  Is this just a reaction to circumstances and will large-scale, top down change initiatives return.   OR,   is this the new normal for companies when it comes to business and process improvement? Feel free to  Contact me if you’d like to discuss.

With today's lean workforces, outsourcing important process improvement activities to a specialist partner may be the path to results ...

One trend I saw throughout 2010 (and 2009 for that matter) was a intense focus on doing more with less.  Business is picking up substantially for many companies, BUT the willingness to hire certainly has not.   Personally, I think this trend will continue unabated through 2011.  Companies are very lean and have realized very high levels of productivity (and profitability), and are simply unwilling to go back to the old ways of thinking (i.e. “bloated” workforces).  Outsource certain activities to specialist providers, and figure out how to do more with the same resource levels internally.  As I see it, that is the new norm.  And, one of the fundamental ways you do this is by improving processes.   

But, if the workforce is very lean, running at very high levels of utilization and productivity, how then do you find the bandwidth to do meaningful process improvement activities?  A difficult conundrum, without a doubt?  The old approach (if you consider 2-3 years old!) of setting up a formal top-down initiative (i.e. BPM, Six Sigma, Lean), training a large number of people in one or more problem solving methodologies, and then sending off your new process improvement army to fix stuff is simply not feasible for many organizations.  Even if they want to do this, their people are so busy that there is no bandwidth available, and any kind of a training centric approach like this would likely fail. And, hiring to build a dedicated process improvement organization is just not likely.  So, what is to be done? 

our Lean Primer Kit for an overview of Lean and how it can be leveraged to improve results

I would argue that the way to do it is to outsource process improvement activities to a partner that specializes in Process Improvement. This is a standard outsourcing value proposition where, instead of building up an internal CI organization, you establish a strong relationship with a specialist partner, and leverage their products/services on an on-demand, as-needed basis.  Fixed overhead now becomes variable cost.  Done well, it’s actually better in that ANY $’s expended on process improvement with your partner should yield a significant ROI.

Does working with this specialist partner mean that internal resources are completely isolated from process improvement activities?  No, of course it doesn’t.  But their involvement shifts to a subject matter expert role, rather than a process engineer.  Key stakeholders are involved every step of the way, from characterizing the current state of the process, to identifying problem root causes, to solution identification and prioritization, to management and control plans.  BUT, they are involved in a way that doesn’t drag them into the weeds and allows them to stay focused on their day job.   Process improvements get done in an efficient and cost effective way, and day to day business activities don’t suffer.   Not bad …     

Here at Qualtec, we are already seeing this type of shift happen with many of our clients and have adapted our business model and offerings to accommodate.  AND, we are seeing it work, very well.  So, if you have a real business driver for process improvements, but don’t and will not have internal resources to execute, think seriously about and outsourced approach to process improvement activities.  You may be pleasantly surprised with the results.

Feel free to contact me if you’d like to discuss.

Several years ago I wrote an article for iSixSigma entitled “Ask the Expert: Six Sigma and ROI” on the causes of falling ROI’s of Six Sigma programs. It was at a time when centralized Six Sigma programs were growing dramatically and possibly losing focus.

Recently iSixSigma republished the article on their website.  Let’s use the terms Performance Improvement or Operational Excellence, instead of Six Sigma, to reflect a broader view of improvement activities.  Then consider the focus on ROI is now driven by intense scrutiny of any corporate expenditure rather than declining returns on too much expenditure.  Add the two together and you realize the old ROI article is as applicable today as it was when written.

our short ROI and Six Sigma executive brief.

If you don’t have time to read the article, let me at least give you a short abstract from it which I believe was the most salient point. It is as follows:

As we all know, the birth of Lean (usually with the word “Manufacturing”)  is often considered to be the Toyota Production System. Lean for Service Operations is so new it is defined on Wikipedia as the application of lean manufacturing principles to service operations. Yet when you search using Google the term Lean Manufacturing yields just over 1.5 million results while Lean Services yields a surprising 16.3 million results! The derivative outpaces the original because of its natural application. It’s as if it were always meant to be.

This natural fit lies in the very nature of manufacturing, service operations and the strengths of lean. Lean was first easily discovered in manufacturing because waste and WIP are easily found. Like in the California gold rush, you could bend down and pick up the nuggets. Manufacturing’s physical nature provides an easy route by which to follow the flow of work. As you move along, you can see raw materials, intermediate stages of inventory and final finished goods. And also along the way, you can see bins of rework and scrap as well as WIP between stations. You physically see the work, the WIP and the waste. Certainly it took brilliance to design what to do with it but the problem was evident.

our whitepaper that discusses how Lean and/or Six Sigma in a services environment differs from a traditional manufacturing environment

Service operations, however, by their very nature aren’t so easily observed. Work flows are unseen. Information representing WIP are sent over networks. Customers waiting on phones can’t be seen. Time lost is erased with the stroke of a delete key. Service operations, like spirits on a Halloween night, can pass before our eyes without a trace. Enter Lean. Lean with its highly visual tools like value stream maps performs the supernatural. It gives earthly form to the phantom.

As the invisible becomes visible, we make a great discovery – so many service operations occur between functional areas such that they aren’t owned by anyone. We learn that not only is there waste, but there isn’t anyone even worried about it. Thus Lean, with its visual tools, not only provides visibility to work flow, waste and WIP but raises the question of process ownership.

With processes made visible and ownership addressed, the race for improvement forces the question of where to attack first. Very simply put, once non-value added activities are made obvious by the accumulation of waste & WIP, you look for the actions and processes that drive up said waste & WIP. Therefore, when looking for projects, look within or between the processes to which waste and WIP demonstrate the greatest sensitivity. Then heavily rank that projects that improve those processes. They will have the greatest impact on eliminating non-value added activities.

People talk about the amount of low hanging fruit in service operations. It’s important to understand why it is there. People in service operations aren’t fools willing to let waste and WIP drag them down. But they haven’t been able to see the problem and where it resides. With the visibility lean brings, that has changed. And consider us your Ghostbusters! If you would like to discuss the visual tools embodied in lean and how they can help your service operations, please feel free to contact me.

It was more than 15 years ago that our firm was first engaged to help a client implement Six Sigma. Along the way, Lean was integrated and the term of art became Lean Six Sigma.  Yet even today, we still begin many conversations with prospective clients who say “we want to do Six Sigma?”   We try to determine what Six Sigma means to them and why they want to do Six Sigma.  Definitions and motivations vary.  None are wrong.  They are individual to the person, the company and the situation. 

But to determine the appropriateness of their conclusion, we ask about the nature of their business challenges and the state of their management system.  And at the end of that portion of the conversation we invariably begin to wonder whether the prospective client can benefit greatly by first paving the way with Lean.  And that is really most apparent in Service Organizations where so much of the waste is invisible and Lean’s visual tools brings the waste to light before introducing Six Sigma. 

our latest whitepaper, which discusses how Lean Six Sigma is different in a services environment, as compared to a traditional manufacturing environment.

Lean can be of great benefit before introducing Six Sigma for the following reasons:

1. Lean makes the implementation of Six Sigma easier by eliminating non-value added activities.  Six Sigma, while robust, like any program that aims to drive change can be a challenge to implement.  You can make Six Sigma’s implementation simpler and more cost effective by first applying Lean.  This is for two reasons. First, you will enhance the effectiveness of the Six sigma tools by enhancing the rate at which information is fed into the Six Sigma problem solving exercises.  Secondly, you may discover after applying Lean, there is insufficient improvement available to merit a Six Sigma project.
2. Lean develops a culture of improvement which makes implementing Six Sigma easier.  Lean can be implemented more quickly and easily than Six Sigma.  We facilitate workshops that by the end of a week introduce improvements.  People come out energized and feeling they made an impact.  Managers see an ROI on the improvement investment.  The result is a willingness by all levels of the organization to increase their commitment.
3. Sometimes the problem isn’t going to be solved with Six Sigma tools…or at least not quickly.  When you prioritize problems, you try to separate them into buckets by their fundamental nature so as to gain some economies and structure to any allocation of resources.  Part of the reason is that Six Sigma efforts require more time and effort.  Failing optimize the problem to the applied tools, you may end up trying to apply Six Sigma to problems that can be easily addressed with a Lean exercise.  Even worse, you can work at reducing variation when all you need is to reduce your cycle time to capture the available gain.

We have written a great deal about both Lean and Six Sigma.  We don’t favor one methodology over the other nor do we see them as an “either or” decision.  In the long run, we encourage all our clients to gain proficiency and apply both Lean and Six Sigma.  However, to help our clients succeed in driving ROI and organizational change, we believe that there are advantages to Lean paving the way for Six Sigma, especially in companies just starting out as well as Service Organizations. 

Now there is always an exception to a rule such as when prioritized projects clearly require Six Sigma tools.  The business should always “pull” the improvement efforts as outlined in “Let Your Business Define Your Improvement Program”.  But in the case of launching or re-launching a general program, allowing Lean to pave the way for Six Sigma increases the ROI of the continuous improvement effort by using the simplest and most applicable tools first while increasing the effectiveness of subsequent Six Sigma activities. 

 If you wish to discuss these points, contact me.

When attempting performance improvement in a services organization, it is very important to distinguish between measuring the “correct thing” vs. “measuring the thing correctly”.  Since people drive the decisions in service organizations more than in manufacturing organizations where machines and software limit human variance, processes are less defined in service organizations.

With less defined processes, the service world’s KEY measurement issue is finding the correct things to measure that gives true feedback on past or future performance. This “what to measure” issue is quite different than the predominant issue in manufacturing, which is “how to measure more accurately.” In manufacturing, for example, gage studies are critical; the data usage is straightforward.  In service processes, however, the greater issue by far is determining a useful measure.  

 our latest whitepaper that discusses key differences for Lean Six Sigma in a Services environment

A general lack of consistent, cookie-cutter measurements for service businesses demands greater time and attention is focused on developing and understanding appropriate measurement systems in specific environments.  Managing a process becomes a matter of reading and interpreting a series of interrelated measurements rather than relying on a mystical “key measurement”.  No one measure will identify and eliminate all problems forever.  For the most part, businesses measure variables such as close rates, cycle time and on-time compliance, with little understanding of “value added” contributions to the final “product.”

Each service-related environment has its own unique set of problems, and each requires a carefully crafted, custom analysis that fit its top level customer and business data, its core and sub processes and its definition of critical to customer.  As such, the skills needed to do this well, such as process mapping and process design techniques rise in importance. 

So often when we talk to clients and prospective clients in service industries, they describe their requirements along the lines of “our folks don’t handle statistics well”, “we’d like more service examples” or “we need someone who understands our culture”.  To them, that is what Lean Six Sigma in Service environments mean.  All these things are true. But just as importantly, you need to understand your unique nature and adopt a different set of tools and techniques.  This discussion of the importance of process is just one.  In coming posts, we’ll discuss others.  If you want to talk about these Service Industry points, please feel free to contact me.

The dramatic changes of the Great Recession have left many starting over.  Continuous Improvement programs are being rebuilt, reconstituted and revitalized.  The people, knowledge and leadership are critical elements but an important lesson we learned over the last 15 years of helping our clients is that the success of a Continuous Improvement program is highly dependent on its infrastructure.   So whether you are staring over or just starting, very early in the deployment, you must implement the following:

1. Launch Planning; Establish the schedules and activity tracking/reporting techniques
2. Human Resource Guidelines; Establish competency models and participant selection, position and role descriptions, compensation, reporting relationships, career planning.
3. Communication Plan; Create an overall message for the implementation.  Provide clear reason why the adoption of the program makes business sense by explaining how it aligns to the Company’s strategic vision and each individual’s success.
4. Financial Guidelines and Responsibilities; Agree upon financial definitions, project forecasting requirements, methods of evaluation, realization tracking and reporting process. Agree how the financial arm of the organization will be involved.
5. Project Selection and Prioritization Guidelines; Recognize and define criteria, project type categorizations, problem statement and objective criteria, targeted savings values, approval process, completion requirements that collectively are to be used to rank and rate projects. 
6. Establish a Project Pipeline; Go beyond selection, ranking and rating criteria to outline how ideas for new projects will be gathered, converted to projects, ranked, rated and assigned.  A pipeline of worthwhile projects is imperative to maintaining a program’s momentum.
7. Project Tracking and Reporting; Organize report requirements, systems and initial reports.
8. Information Technology Support; Software installations, computer needs, Intranet development, databases for final reports.
9. Management Review; Ensure constant measurement, feedback, and reporting on key deployment metrics to all stakeholders to ensure deployment objectives are met.
10. Commence and Maintain Executive Training; Whether you want to think of it as part of infrastructure or as a separate item for organizations that are ready, upfront executive training is imperative.  You can’t allow the CI program to be something to which leaders aren’t aware, engaged and committed.  The training should go beyond “overview” training.  It should layout executive’s responsibilities and how they are to engage.  It should also explain what benefits the executives will accrue – what is in it for them.  Make sure the training emphasizes the benefits of aligning improvement activities to their business goals – the things that really matter to the business.

 our latest executive brief, 10 Essential Do’s and Don’ts for a Six Sigma Deployment

To date, we have discussed many things important to a CI initiative from good knowledge transfer methodology to project alignment.  But to attain real long term success, make sure you have a good infrastructure.  Think of it like the barrel of a gun.  It will ensure the program takes a straight line to its target.  If you would like to discuss how to build your infrastructure and ensure your program’s success, contact me.