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Leveraging Lean Six Sigma

By Ron Crabtree CPIM, CIRM, MLSSBB
President, MetaOps Inc.

I had the pleasure to recently to attend an event featuring the president of a growing franchise company in Michigan — Bob Fish of Biggby Coffee. They started out with their first store in Lansing in 1995. They have been doubling in size every two years ever since. They have over 100 stores and look to keep doubling every two years in the future. They are ranked #255 in the top 500 franchise systems in the U.S. and expect to be much higher than that soon. Last I checked they are up to $38 million in sales — despite Michigan’s difficult circumstances.

He shared many incredible insights and a couple of takeaways we can all learn from. First, we must be absolutely clear about two things: who we are and where we are going. They are a great example of a company that has done a great job of creating a solid code of honor to shape everything they do. Of the seven keys he shared that led to their success, the first one really got my attention: simplicity through systems. What this means is nailing down precisely what our business processes are, then making sure they are teachable and provide the common thread for communications across the business.

One of my bold statements is that for most organizations, 30-70 percent of every dollar spent to run the businesses is wasted — not spent on things that truly add value. I have proven this is true in hundreds of organizations of all types, and now will help you understand the next key skill you need to adopt to find and eliminate forever the sources of waste and variation that eat way too much of your money.

Here I will share with you with yet another way of thinking about sources of waste and variation – examining business processes, and the fallacy of just focusing on people to find sources of waste and variation in our organization.

What’s a process?

It’s any series of discrete steps to do business. For example, getting a lead and closing the deal is a process. As is taking an order and making something to fill it. Fielding a customer complaint and developing that next product or service are processes too. Everything we do to generate value involves a process that can be documented.

Let’s shift gears

Conventional wisdom of the past has been that if we make sure our people busy that they must be productive. This thinking has served us well in the past, but will not be sufficient to help us root out and eliminate all the hidden wastes in our processes.

Try this: Look around in your organization and you will see that people are at least 95 percent busy – right? The trick is to have a way to take a more scientific look at what they are doing and determining if the activities being done add value. I want to offer a little challenge to get you thinking about my bold statement that 30-70 percent of everyone’s time is being wasted.

Before I teach you this little exercise, let me quickly review what “adding value” activities are. Does the activity change something? Is it something a customer is willing to pay for? Is it done right: specifically not a form of inspection or double checking?

Now in your next casual walk into an area of the organization where people are at work, take a snapshot view and note what is happening at that moment. Write down what each person in the area is doing at that second. Wait awhile and take another snapshot, writing down what each person is doing. Repeat this process until you have 15 to 20 sample observations.

Now here is your little test:

Analyze how many of the things you wrote down qualified as truly value-add based on my three-point criteria. Divide the number of “value adding” activities you saw by the total. Here is my bet: At least 50 percent of what you wrote down is not adding value. If you disagree or are confused, let me know. I’d love to learn more about your situation.

So what’s the deal? Are our people lazy or stupid? Of course not, in fact they are probably at least 95 percent busy trying to do a good job. The problem is this: the process is the culprit. People can only do as good a job as the inherent business process allows. It’s our job to come to grips with this fact and take steps to improve our processes.

Simple value-add mapping can help

Process flow mapping that examines each step of our processes and judges the degree of value-add for each step is a scientific approach to understanding and improving a process.

Here is a simple approach you can use that is fast and easy to identify opportunities in a process. Be prepared to write down each step in the process you want to focus on and do the following tasks. To keep this simple, let’s look at processing a new order for services.

First, we must “be” the thing being worked on — the information or request. Carefully write down each step, using the “hand-offs” to help segregate one activity from another. Note how long on average this takes. Let’s look at a New Order Process example:

1. Take the order and fill out the order form – 5 minutes.
2. Order waits for sales manager review – half day.
3. Order is reviewed and released to design – 5 minutes.
4. Order waits its turn to be worked on in design – 1 day.
5. Design completes the design and sends it to the sales manger to review – 30 minutes of work.
6. Order waits for the sales manager to review it – half day.
7. Sales manager approves the order and sends it to the warehouse to be picked and shipped – 10 minutes.
8. Order waits be picked and shipped – 1 day.
9. Order is picked and packed – 30 minutes.
10. Order waits until the invoice and shipping paperwork are complete – half day.
11. Order gets shipped with paperwork – 5 minutes.Now let’s add up what we have. First the total time in days for this process is about five days. During this time about one hour and 25 minutes of real work is accomplished. One great question at this point is if it only takes about 85 minutes to do the real work, why does it take five days to complete? Another way to think of it is if we divide that 85 minutes of actual work time by the 40 hours it takes — which suggests our ‘thing’ is 96 percent idle — not being worked on — while it is being processed.

This is a key point – by focusing on our “thing” and not the people, we begin to see the process itself is not too good — 96 percent idle is not a good thing if doing things faster for our customers is important.

Now, here is next thing you need to do: judge which of these steps — from the perspective of our thing, the order — actually add value? Let’s examine these steps against the value-add test: first, does the step physically change anything? Second, is our customer willing to pay for it? And third, is the step done right, or is it actually a form of inspection or “fix it” time? To be truly a value add step we must be able to say “Yes” to all three of these criteria.

Now, let’s look at those steps and time. Of the 11 steps, only four at least partially qualify as value add – they are #1 - take the order, #5 - design the order, #9 picking/packing the order, and #11 - shipping the order. None of the other steps add value. What does this mean? First, only four of the 11 steps really add value. These four steps account for just 60 minutes of real work time and suggest that the order would ship the same day as received. All the other steps only add cost and time.

Hmmmm.

Changing this process to get rid of the non-value-add steps will reduce the cycle from five days to just one and take 25 fewer minutes in “work time” — about a 30 percent improvement in productivity. This is accomplished because we eliminate the need for the extra steps that added cost without adding value. If we do things right the first time we eliminate a lot of wasted time and money.

What would it mean to your company if improved productivity 30 percent across the board? I’ll let you answer that one…

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• ron crabtree