Why YOU Need Lean Six Sigma – Part 3
Lean Six Sigma helps ensure that all business decisions, whether they involve buying a new core system or launching a new product, are based on data from the customer, market, process capability, and so on.
From the process improvement perspective, Lean Six Sigma ensures that the processes are being looked at holistically, considering their natural start and end points and understanding that mitigating the risk of re-engineering only a piece of the process and then harming other parts of the organization.
The four main goals and success metrics of Lean Six Sigma
Any meaningful initiative needs to have success metrics, and organizations need to continuously gauge the effectiveness of their Lean Six Sigma deployment – which brings me to the four main goals of a Lean Six Sigma deployment:
- Reduce operational costs and risk, thereby increasing efficiency unpredictability while reducing the cost associated with poor quality.
- Increase revenue and increase “leakage.”
- Improve customer service and deliver consistent customer service.
- Build a culture of continuous improvement.
Let me expand on these in more detail:
Reduce operational costs and risk.
Operational cost and risk are significant factors that contribute to lower profits or even losses.
While some risk cannot be eliminated and operational cost is ubiquitous, Lean Six Sigma can provide a road map that drastically reduces an organization’s exposure to risk while making the organization more efficient and delivering its products or services.
For example, a cost reduction project could focus on decreasing process cycle time. The result will be a streamlined process with fewer touchpoints, non-value-adding activities, less rework, and fewer failures, all of which will reduce cost.
Additional benefits may be consistently meeting service level agreements (SLAs) with customers, avoiding penalties, and recognizing revenue faster.
Another main focal area for Lean Six Sigma is projects to reduce costs associated with poor quality. For companies that used to ignore the importance of quality in their operations and products, it is essential to outline the impact this will have on their bottom line.
On average, US companies dedicate about 15 per cent of their sales to resolving quality matters. Some other more blatant tangible and intangible costs associated with providing products or services with poor quality need to be pointed out:
Inspection. Whenever you have to inspect a service or product, you perform a step that our customers want to avoid paying for. In the ideal Lean Six Sigma world, the product or service would only arrive at a certain point in a good or complete form.
The flow or process would be set up so that any potential errors would be captured and fixed at the process step where they occur.
Process waste. This includes any activity that has cost or time to the process but does not change the fit, form, or function of the delivered product or service. Examples of this are scanning, now distribution, and rechecking.
Rework. This means reworking something that has ostensibly already been done, and no customer would want to bear this cost.
Also, rework implies that the process has been set up in a way that allows incomplete or incorrect work to pass further along so that someone downstream must catch and correct it.
Complaints. If you can minimize the reasons for a customer complaint, you will reduce the cost to the organization. Complaints can affect your bottom line drastically in cases where the product or service has some critical faults.
Also, complaints can lead to the loss of repeat business from an existing client.
These refer to costs associated with failures in the quality realm that are hard to quantify. As an example here, losing customers has multiple effects on an organization. Having a lost customer would inform several other people of their experience, in addition to causing the company increased revenue.
Managing upset customers and handling complaints are also examples of intangible costs that should be reduced using Lean Six Sigma.
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