Before
I get into how the UIC works, I want to talk about the current state of Lean,
Six Sigma and Lean-Sigma initiatives as it relates to sustainment. The Lean Enterprise Institute2
(LEI) conducts annual surveys on the subject of how well Lean implementations
are going. Considering the last three surveys (2004, 2005, and 2006), the
results do not paint a rosy picture. In fact, the LEI reported in 2004 that 36
percent of companies attempting to implement Lean were backsliding to their old
ways of working. In 2005, the percentage of companies reporting backsliding had
risen to almost 48 percent, while in 2006, the percentage was at 47 percent.
With nearly 50 percent of companies reporting backsliding, we are not looking
at a very healthy trend, especially when you consider the amount of money
invested in the initiative. Add to this what Jason Premo of the Institute of
Industrial Engineers3 reports: “A recent survey provided some
shocking results, stating that over 40 percent of Lean Manufacturing initiatives
have hit a plateau and are even backsliding, while only 5 percent of manufacturers
have truly achieved the results expected.”
And finally in 2010 research by McKinsey & Co. showed that 70% of
all changes in organizations fail!
In the case of Six Sigma
initiatives, the results have been more impressive, but not as impressive as
they could or should be. Celerant Consulting4 carried out a Six
Sigma survey in 2004, generating responses from managers across all business
sectors, and although the results of the survey were more positive than negative,
there were several problems that did surface The survey suggests that most
businesses new to Six Sigma often find that running effective projects has been
a significant challenge, with Six Sigma projects often quoted as taking four to
six months or even longer to complete. Poor
project selection is a key area where many businesses still continue to
struggle. Industry experience suggests that about 60 percent of businesses are
currently not identifying the projects that would most benefit their business.
OK, so if Lean, Six Sigma or
Lean-Sigma aren’t working well enough, then what do I recommend should replace
them. The fact is, we shouldn’t replace
them at all. They are vital to the
success of all improvement initiatives.
What is missing is the necessary focus
needed to maximize your return on your improvement investment.
What I’m about to explain is a methodology that has never failed
me. By focusing the Lean and Six Sigma
principles, tools, and techniques on the operation that is limiting throughput,
your profits will accelerate. And here,
in its most basic form, is how it works.
Figure
15 is a graphical representation of what I have named the Ultimate
Improvement Cycle. What you see are
three concentric circles representing three different cycles of
improvement. The inner or core cycle
represents the Theory of Constraints (TOC) process of on-going improvement6. TOC provides the necessary focus that is
missing from Lean and Six Sigma improvement initiatives. Based upon my experience and results, the key
to successful improvement initiatives is focusing your improvement efforts on
the right area, the system constraint.
Remember, the constraint dictates your throughput rate which ties
directly to bottom-line improvement.
Throughput in this context is revenue minus totally variable costs
(TVC). TVC’s includes things like the
cost of raw materials, sales commissions, shipping costs, etc…..anything that
varies with the sale of a single unit of product.
The
second circle represents the Six Sigma roadmap popularized by at least two
authors7,8. Here you will
recognize the now famous D-M-A-I-C roadmap associated with Six Sigma. The outer circle depicts the Lean improvement
cycle popularized by Womack, Jones9 and others. Both Six Sigma and Lean are absolutely
necessary for my methodology to work…..the only difference being where and when
to apply them.
Figure
25 summarizes the tools and actions needed to effectuate the
improvement in the constraint and a general idea of when to use them. Keep in mind that all processes are not the
same, so the type of tool or action required and the usage order could be
different depending upon the scenario.
This is clearly situation dependent.
I won’t go through each step in Figures 1 and 2 because they are
self-explanatory.
Figure
1
Figure
2
In my next posting we'll look at a case study using this integrated methodology and demonstrate how to use it to solve a real world problem.
Bob Sproull
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