How to Organize for Lean/Six Sigma

How to Organize for Lean/Six Sigma

To enable the maximum potential of lean/Six Sigma efforts, focus on more than the factory floor.

Mention lean or Six Sigma and a listener traditionally thinks of waste reduction, optimization and continuous improvement initiatives involving only the production process.

But that was yesterday. Today the practice of lean/Six Sigma solutions is no longer restricted to the production floor, says Jake Stiles, president and COO, Stiles & Associates. He explains that when his executive recruiting firm originated in the early 1990s, the clients were primarily looking to fill staff positions that would oversee lean/Six Sigma initiatives on the production floor.

"Today's corporations are looking for lean/Six Sigma experts that can help deliver the potential of the technology to every functional area, even finance and maintenance," says Stiles. "Lean/Six Sigma has progressed to become the common tool set across all corporate functions," adds Dennis McRae, client partner, Celerant Consulting Inc.

Applying lean/Six Sigma to some functional areas can synergistically optimize and accelerate the entire corporate mission -- including the application of lean/Six Sigma to the other functional areas.

"For example, consider the potential benefits of applying the lean/Six Sigma approach to product development," says John Gilligan, president, Boothroyd Dewhurst Inc. By first optimizing the product with the company's Design For Manufacture and Assembly (DFMA) software, the subsequent lean/Six Sigma initiatives can proceed from a more refined level, he notes.

"Today's corporations are looking for lean/Six Sigma experts that can help deliver the potential of the technology to every functional area, even finance and maintenance."

-- Jake Stiles, president and COO, Stiles & Associates

"The net result -- of product simplification preceding the lean/Six Sigma procedures -- could also simplify a wide variety of other manufacturing steps," Gilligan adds. For example if the simplified product design results in cutting part count, the implications include reduced assembly time, potentially fewer suppliers and reduced production floor space requirements.

At Hypertherm Inc., a manufacturer of plasma cutting systems, the DFMA software enabled a first pass part count reduction as high as 50%, says Mike Shipulski, Hypertherm's director of engineering. About 500 parts were eliminated from the product, a main power supply sub-assembly that originally contained about 1,000 parts. Shipulski says the resulting reduction in assembly floor space requirements made it possible to satisfy a growing market demand within the existing building. "We didn't have to add floor space."

Gilligan says past applications of the DFMA software reveal that most of the material and labor savings are in the 50% to 70% range, with floor space reductions typically in the 15% to 20% range. Shipulski says Hypertherm's part count reduction efforts range from 47% to 63% in first pass efforts. Subsequent efforts achieve less, but parts and labor can still be reduced, says Shipulski.

"Ultimately you have to change the technology to get to the next level," Shipulski says. "With DFMA, we're able to take out waste even before it gets into the manufacturing process. It enables us to introduce a low waste design into a manufacturing system and from there the lean thinkers in manufacturing can take the waste out even further."

"We've found that the lean lever in design is far more powerful than the lean lever in manufacturing," he continues. "For example, [applying lean to] manufacturing can't take out half of the labor. Traditional lean methods would be hard pressed to achieve more than a 30% reduction in production floor labor requirements. While DFMA can help bring about changes in the production process, traditional lean methods can't introduce as big an improvement."

Shipulski also points out that the supply base can be reduced when DFMA reduces part count by 50% -- a characteristic that conventional lean doesn't permit.

Shipulski admits that DFMA does require design engineers to have an expanded role in understanding how designs are translated into process requirements for the production floor. "DFMA demands that design engineers understand, at some level, how the various aspects of the design consume resources and what features create labor time and cost."

The approach is a demonstration that labor cost can be designed out of a product instead of pursuing what people think is lower labor cost in another country, Shipulski explains. "The DFMA-based alternative lowers labor cost without exposure to rapidly rising transportation costs from offshore suppliers." More importantly, he adds, DFMA-empowered lean provides the advantage of speed. Since shipping is not involved, the approach makes possible faster reaction to a changing demand.

Starting Out

Since pursuing the lean/Six Sigma journey is more a matter of commitment than compliance, Rob Pierson was impressed to observe the committed dedication of his CEO at a recent kaizen event at his new employer. Pierson says it was the first time in his lean/Six Sigma career that he experienced a CEO on a weeklong kaizen.

"That kind of commitment, coming from the top, signals a company that will become a lean/Six Sigma leader," Pierson says. "Our CEO is driving it into the DNA of our business culture to continuously eliminate waste and drive cycle time reduction. Our vision is to achieve and maintain that goal."

Pierson's new employer, Graf-Tech International Ltd., is a $1.3 billion producer of carbon and graphite products. Spun off from Union Carbide in the late 1990s, the organization is now embarking on a lean/Six Sigma journey with Pierson's leadership as global director of enterprise excellence. Pierson, a Six Sigma Black Belt, joined the company earlier this year. With 10 plants and 2,600 employees, about 80% of the company's output is electrodes for electric arc furnaces. Other industrial activity includes refractory brick and engineered solutions using graphite.

Pierson says lean/Six Sigma is being pursued as a competitive differentiator to build on GrafTech's products and services offerings. "The strategy is to leverage the company's financial strengths and become stronger operationally throughout the entire value stream." That strategy targets more than the plant floor, explains Pierson. "We'll be involving lean/Six Sigma from the supplier through manufacturing, through to the customer." That includes activities on the shop floor as well as the front office. As an example, Pierson notes that the company just completed its first accounts receivable kaizen event to improve that process. Another recent kaizen event focused on the transportation module.

"Our lean/Six Sigma activities involve more than the plant floor where we're moving equipment, creating flow and getting rid of plant floor waste. We're working inside and outside the organization's boundaries to improve the company." For example, with the front office, the metrics of accomplishment include such things as days of sales outstanding in collections and dollars past due. Having just done the kaizen, Pierson anticipates that collections will be cut by 75% and sales outstanding by 50% or more.

Typically, says Pierson, the results will be a 25% reduction in lead time, inventory turns of 24 or greater and a 25% to 50% profit improvement compared to industry standards. Pierson describes a committed learning process that's under way where employees undergo training and the short term use of consultants (TBM Consulting Group) helping to sharpen the focus of lean/Six Sigma methods and goals. "They're teaching us how to fish,'" says Pierson.

One measure of what awaits Graf-Tech's efforts is provided by TBM's benchmarks of lean/Six Sigma leaders. TBM says they enjoy the following:

  • Customer service levels of 95% to 99%;
  • Customer retention of 90% or more;
  • Lead times of one-quarter to one-half the industry average;
  • Productivity/throughput improvement: 15-plus % per year;
  • Sales growth: three to five times the industry average;
  • Earnings growth: two to four times the industry average.

Lessons Learned

When describing his GrafTech vision, Pierson is careful to reference the mission as the combined pursuit of both lean and Six Sigma. "It's not two competing camps -- just one army." He sees the either/or strategy in decline.

"Traditionally companies would either roll out lean or Six Sigma, but not both," explains Pierson. "The lean folks would focus on waste reduction, typically on the plant floor, via kaizen and continuous improvement. Those selecting Six Sigma, on the other hand, usually employed Black Belts or Green Belts to work on longer-term projects using an approach called DMAIC (Define, Measure, Analyze, Improve and Control)." The focus of Six Sigma organizations, he notes, is typically centered on variation reduction projects.

"Now when a continuous improvement team determines that flow of material is being interrupted by a significant scrap problem at the furnace, they don't say, Well, that will require using those Six Sigma tools -- we'll just leave it alone.' What they now say is, Hey, let's do a kaizen using Six Sigma to quickly solve the scrap problem then continue on with our flow project.'"

Pierson emphasizes that combining lean and Six Sigma simply increases the size of your toolbox. Adds Celerant Consulting's McRae, "Consider lean as the foundation for accelerating behavior change -- the elimination of non-value-added behavior. Then with the new attitudes established towards waste elimination and cycle time reduction, it makes sense to use Six Sigma to resolve part variability."

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