Create Efficiencies and Decrease Waste

Create Efficiencies and Decrease Waste

More businesses to use Lean Six Sigma in service processes
By Dustin Hostetler, senior financial analyst, Wooster office

2 May, 2007

For years, manufacturing companies have applied Lean Six Sigma methods to improve quality and efficiency in production. Lean Six Sigma, the method of choice for increasing productivity and decreasing waste, is responsible for significant gains in these companies by reducing variation and eliminating waste in production activities.

But did you know these same concepts can be applied to the service and transactional functions of a business as well?

Healthcare and banking industries are leading the way in applying Lean Six Sigma to their transaction- and service-oriented processes. Many other sectors, as well as the service functions within manufacturing businesses, will soon begin to explore the opportunities Lean Six Sigma presents to their business, if they haven’t already.

Service processes are ripe with waste and non-value added work that breeds inefficiency.
They present a slam-dunk opportunity to analyze and improve results. Most service functions have far too much WIP (work-in-process), like orders waiting to be processed, reports waiting to be run, e-mails waiting to be looked at, etc. This time spent in limbo is considered waste for two reasons: the service can’t be delivered while the work is waiting to be completed, and most of the time the wait is for non-value added activities like reviewing and waiting for approval.

According to the new Lean Sigma mantra, “a process is a process … is a process.” Any process, from manufacturing widgets to completing business transactions, can be broken down into steps and optimized with a methodology by defining the opportunity, measuring performance, analyzing the causes, improving performance and controlling the causes.

The goal is to re-work the process to eliminate as much waste as possible by reducing variation, complexity, duplicate steps, non-value added work and waiting time. The elimination of work “loops” is key.

Also, the 80-20 rule normally applies – meaning 20 percent of the process steps can impact up to 80 percent of the cycle time. Focus on that 20 percent and watch the cycle time of your service process drop!

The great part about Lean Six Sigma is that it applies to businesses of all sizes, and in both production environments and office/administrative environments. GE, Motorola and Caterpillar have all had tremendous success implementing Six Sigma; however, small and mid-sized companies are realizing incredible benefits in implementation as well. It revolves around one of the key quotes that drives Lean Six Sigma thinking: “Today’s optimal solution is tomorrow’s marginal solution and is the following day’s obsolete solution.” What’s optimal today may be obsolete tomorrow, and we need to maintain the mindset of continuous improvement in order to be successful.

No longer in today’s competitive business environment can business owners and executives get away with the thinking, “We’ve always done it this way, so we’re not going to change.”

The question a business executive has to ponder is this: “If my competition is implementing Lean Six Sigma principles in their business processes, can I afford not to?” If the answer to that question is no, you should investigate the benefits of Lean Six Sigma.