Lean Practices Shine On & Off The Production Line – Rea CPA

Lean Practices Shine On & Off The Production Line

Using Lean Six Sigma To Create Efficiencies and Decrease Waste

Editors Note: Even though the economy continues to flourish, many business owners have started to prepare for the downswing by applying cost-saving measures and lean initiatives. We decided to update this article, which was originally published in 2007, because it continues to provide great insight into the greater application opportunities of Lean Six Sigma. Enjoy!

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 continue to lead 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 and they present a slam-dunk opportunity to analyze and improve results.

Listen to episode 122, “Plain, But Effective: The Businesses Of East Central Ohio,” on Rea’s award-winning podcast, unsuitable on Rea Radio, featuring Kyle Stemple.

Got Too Much WIP?

Most service functions have far too much WIP (work-in-process), including 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.

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.

In today’s competitive business environment can business owners and executives can no longer get away with thinking they don’t have to change because they’ve always done something a certain way. Instead, owners and other leaders in the organization must begin to ask: “If my competition is implementing Lean Six Sigma principles into 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.

Rea has a team of Lean Six Sigma Green Belts on staff. Reach out to us today to find out how your company can become more efficient.

By Kyle Stemple, CPA, CGMA, CEPA (East Central Ohio Regional President)

Looking for more tips to help you prepare for the next recession? Check out these resources:

Are You Prepared For The Next Economic Recession?

Too Big Or Too Wasteful?

From Good To Great

Rea & Associates’ manufacturing services team specializes in helping companies like yours find long-term success and profitability. Find out how we can help you.