Driving Incremental Value Through Lean Six Sigma

Aug. 30, 2006
GE has learned that Six Sigma and Lean share a single over-arching goal: to create incremental value based on end customer requirements.

Imagine if the local weather person was right every day -- for 2,739 years straight. What if the cable company offered a lifetime of free services if your technician didn't arrive within 0.000034 seconds of their scheduled arrival? Of course, we'd all love the lottery ticket that pays out 99.9999% of the time.

In the manufacturing world, this level of near-perfection consistency is a quality mandate required to compete effectively in today's marketplace. Now an industry standard, Six Sigma has galvanized the concept that if a process lies within six standard deviations of the mean, production quality is all but guaranteed (3.4 DPMO). However, quality alone is no longer enough.The ability to eliminate process waste in the supply chain while delivering Six Sigma levels of quality will win the new end game.

GE, an early adopter of Six Sigma, has been working to combine Six Sigma's core principles with that of Lean, a methodology focused on waste reduction (as opposed to defect reduction). GE's hybrid approach to Lean Six Sigma is in part based on the venerable Toyota Production System (TPS), which seeks to compress the timeline from order receipt to payment received by removing waste. GE's Lean Six Sigma mode is guided by four key principles:

  1. Define what the customer perceives as value in the product or service.
  2. Map the value stream of all steps (value and non-value added).
  3. Establish the flow of products, services and related knowledge from supplier to customer.
  4. Continuously improve the process to perfection.

Thanks to the sheer diversity of GE (six key businesses -- Infrastructure, Industrial, Commercial Finance, NBC Universal, Healthcare and Consumer Finance), we learned that Six Sigma and Lean share a single over-arching goal regardless of industry: to create incremental value based on end customer requirements. Through our internal experience, we found that the combination of defect reduction and waste elimination into a single methodology created a more comprehensive approach, one not limited to GE's manufacturing quarters.

While Toyota and Dell quickly come to mind as industry leaders in floor efficiency, companies like Wal-Mart and Microsoft are applying these principles to streamline distribution chains and software engineering. A clear differentiator for GE's manufacturing business, we've begun to make great strides in applying Lean Six Sigma to our Commercial Finance organization. Just as a manufacturing or distribution process will rely on key notes from supply to delivery, a financial services organization relies heavily on key touch points to fund a loan transaction, from proposal through commitment to closing.

During a two-week Lean Six Sigma Workout held recently for Commercial Finance's lending business, our teams identified nearly a dozen immediate actions projected to reduce our total cycle time by 45%. With speed of execution a key customer requirement, this is a major win for the business.

As we continue to gain deeper levels of expertise from the internal application of Lean Six Sigma, GE is also working to share its knowledge with our customers. When Jeff Immelt became CEO in September, 2001 he initiated a program that we call At the Customer, For the Customers (ACFC). Delivered at no cost, the program is an effort to share with customers what GE has learned through 114 years of doing business across diverse operational segments. In return, our efforts to deliver incremental value for our customers helps deepen the relationship to facilitate future business opportunities, creating a win-win.

A large portion of our knowledge sharing through ACFC is driven by our expertise in Lean Six Sigma.Typically, an assignment begins with an overview followed by discussions with executives and managers. Why do they perceive to be the problems? Is overtime pay excessive? Are delivery dates chronically missed? Is unit production cost too high? Are lead times flat or increasing compared to competitors? The engagement can take the form of introductory sessions and corporate management training to joint working sessions on-site with our customers.

For Cequent Trailer Products, a Commercial Finance customer and maker of commercial grade jacks headquartered in Wisconsin, the teams thoroughly mapped their value stream as part of a Lean Six Sigma workout. From order entry to shipment, the teams walked up and down the production lines, measuring time intervals, gauging value-added inputs and non-value-added waste. Likewise, we spent days analyzing material and information flow looking for ways to reduce waste without losing knowledge to increase efficiencies. As a result, Cequent manufacturing lead times were reduced by three weeks, saving approximately $1 million in excess inventory. Together, we also simplified the company's materials by creating families of products that share common components rather than unique parts.

The combination of Lean and Six Sigma is proving to be a powerful answer to a familiar question -- amidst growing competition and a constant pursuit of efficiency, how can we get better at what we do to help our customers win? For GE, that means pursuing perfection in our own processes while sharing what we've learned with customers through the ACFC program. Akin to Six Sigma, it's a hybrid approach to continuous improvement that we believe is absolutely critical to creating meaningful long-term value.

Howard Mikytuck, is an Access GE Leader, Master Black Belt and Dan Moscone is a Master Black Belt at GE Commercial Finance.GE Commercial Finance Corporate Lending (gelending.com) is one of North Americas largest providers of asset-based, cash flow, structured finance and other complimentary solutions for mid-size and large companies seeking $10 million and more.

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