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lean six sigma

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MARK O. GEORGE Cut Costs, Reduce Waste, and Lower Your Overhead Foreword by Michael L. George The Lean Six Sigma Doing More with Less GUIDE TO The Lean Six Sigma Guide to Doing More with Less The Lean Six Sigma Guide to Doing More with Less Cut Costs, Reduce Waste, and Lower Your Overhead MARK O. GEORGE John Wiley & Sons, Inc. Copyright # 2010 by Accenture. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750 8400, fax (978) 646 8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748 6011, fax (201) 748 6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762 2974, outside the United States at (317) 572 3993 or fax (317) 572 4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging in Publication Data: George, Mark O., 1960 The lean six sigma guide to doing more with less : cut costs, reduce waste, and lower your overhead / Mark O. George. p. cm. Includes bibliographical references and Index. ISBN: 978 0 470 53957 6 (cloth) 1. Cost control. 2. Six sigma (Quality control standards). 3. Production control. 4. Industrial management. I. Title. HD47.3.G47 2010 658.4 0 013 dc22 2009052170 Printed in the United States of America. 10987654321 Contents Foreword xi Preface xv Acknowledgments xxi Chapter 1 Why Use Lean Six Sigma to Reduce Cost? 1 Transactional Example: Lean Six Sigma Transforming Our Government 6 The Alloy of High Performance: Why Choose Lean Six Sigma to Reduce Cost? 6 Lean Six Sigma versus Traditional Cost-Cutting Tactics 9 Emerging Stronger Than Ever 14 Spotlight #1 How to Use This Book 17 Overview of Part I: Process Cost Reduction—a Focus on the Tools of Waste Elimination 18 Overview of Part II: Enterprise Cost Reduction—a Focus on Value, Speed, Agility and Competitive Advantage 19 Overview of Part III: Accelerating Deployment Returns—Getting More, Faster, from a Lean Six Sigma Deployment 20 Part I Process Cost Reduction: A Focus on Waste Elimination Introduction to Part 1 23 v Chapter 2 Find Cost Reduction Opportunities in Waste 25 The Seven Common Faces of Waste: TIMWOOD 27 Using the Full LSS Toolkit to Drive Cost Reduction 37 Spotlight #2 Special Tips for Nonmanufacturing Processes 39 Key Success Factors in Reducing Costs in Services and Retail 40 Spotlight #3 Design a Successful Lean Six Sigma Project or Pilot 45 Which Methodology Is Right for Your Project? 45 Identifying the Players and Their Roles 47 Chapter 3 Use the Voice of the Customer to Identify Cost-Cutting Opportunities 51 Customer Types and Their Needs 52 Collecting Data on Customer Needs 53 Getting Specific about Customer Needs 57 Avoiding Misinterpretations 60 Conclusion 64 Chapter 4 Make Processes Transparent to Expose Waste 65 How to Define the Boundaries through SIPOC Diagrams 67 Using Value Stream Maps to Achieve Transparency 69 Conclusion 82 Chapter 5 Measure Process Efficiency: Finding the Levers of Waste Reduction 83 Process Cycle Efficiency (PCE): The Key Metric of Process Time and Process Cost 84 Little’s Law: Understanding the Levers for Improving Process Speed 88 The WIP Cap Method: How Limiting WIP Can Increase Process Speed and Reduce Costs 90 Using PCE and Little’s Law to Drive Cost Reduction 95 vi Contents Chapter 6 Improve Your Analysis Skills: How Understanding Variation, Root Causes, and Factor Relationships Can Help You Cut Costs While Improving Quality 97 Analysis Skill #1: Learning to ‘‘Read’’ Variation 98 Analysis Skill #2: Digging Out Root Causes 107 Analysis Skill #3: Establishing relationships between factors 109 Conclusion 114 Chapter 7 Make Rapid Improvements through Kaizens 117 Quick Overview: The Kaizen Approach 119 When Should You Use Kaizens in Cost Reduction Projects 120 Seven Keys to Kaizen Success 124 Conclusion 129 Part II Raising the Stakes: Reducing Costs at an Enterprise Level Chapter 8 Think Transformation, Not Just Improvement 133 Attain a Proper Understanding of the Extent of the Opportunity 135 Consciously Choose a Path to Capture the Opportunity 138 Plan for a Transformation Journey 144 Leadership Challenges in Leading a Transformation 151 Conclusion 152 Spotlight #4 Transformation at Owens-Illinois 155 Chapter 9 Unlock the Secrets to Speed and Flexibility 159 Alignment and Analytics 160 A Model of Speed and Agility 162 Economic Order Quantity (EOQ)—The First 100 Years 165 Augmenting EOQ with Lean Analytics 167 The Equations in Action 173 Conclusion 176 Contents vii Chapter 10 Reduce the Cost of Complexity 177 The Hidden Cost of Added Offerings on Processes 179 Assessing Complexity in Your Business: A Holistic View 182 Highlights of the Complexity Analysis Process 183 Complexity Reduction as the Gateway to Transformation 195 Conclusion 196 Chapter 11 Look Outside Your Four Walls to Lower Costs Inside 197 What Is an Extended Enterprise? 199 Working on the Supplier End of the Extended Enterprise 204 What to Do When You’re the Supplier: Extending Your Enterprise Downstream 208 Conclusion 211 Part III Speeding Up Deployment Returns: Strategies for Getting More, Faster, from a Lean Six Sigma Deployment Chapter 12 Create a Pipeline of Cost Improvement Projects: The Secret to Protecting the Heart of Your Business 215 Developing Rigor in Project Identification and Selection 217 From First-Time to All the Time: Shifting from a One-Time Event to an Ongoing System of Pipeline Management 226 Conclusion: Maintaining a Dynamic Pipeline 230 Spotlight #5 Link Projects to Value Drivers 233 Option 1: Value Driver Trees 233 Option 2: Financial Analysis Decision Tree 237 Option 3: Economic Profit 237 Option 4: EP Sensitivity Analyses 239 Value Driver Example 243 Chapter 13 Smooth the Path through Change 247 Change Readiness Assessments 248 Leading versus Managing the Change 250 viii Contents [...]... Approach to Le a n Six S igm a How do you avoid knee-jerk reactions and, instead, act like a high-performing organization? What’s needed is a holistic approach that focuses on applying Lean Six Sigma at multiple levels and in multiple ways across your organization Describing that holistic approach to using Lean Six Sigma to reduce costs is the purpose of this book ‘‘Holistic’’ Lean Six Sigma addresses... made possible by the powerful combination of Lean speed and Six Sigma quality The true power of the merger of Lean and Six Sigma as a single solution is in its unsurpassed ability to expose the wastes and complexities that are hidden in underlying processes Cost-cutting measures can then be sequenced for cascading returns at the organizational level Lean Six Sigma is the synthesizing agent of business... cost cutting Lean Six Sigma projects (continued) 12 W h y U se L e an S ix S i gma to Re du ce C os t ? Table 1.2 (continued) Traditional Action Common Pitfalls/Risks Alternative Lean Six Sigma Approach including the demoralization and slowing of the remaining workforce, the ensuing flight of brain power, and the inability to ramp up for future demand If excess capacity does exist, Lean Six Sigma can help... their Lean Six Sigma initiatives have been cost-neutral in less than one year, that they’ve reduced costs upwards of 20 percent and have improved ROIC and Economic Profit by as much as 10 percent or more by year two of the deployment The media abounds with examples of companies large and small that have made similar gains In the past decade, continuous improvement, including Lean, Six Sigma, and Lean Six. .. Six Sigma, has reached unprecedented levels of acceptance In fact, about 50 percent of Fortune 500 companies and over 80 percent of Fortune 100 companies (according to AVR Associates, Ltd, 2009), as well as government entities such as the U.S Navy, U.S Army, and multiple federal and state agencies have active Lean Six Sigma or similar programs The relevance of Operational Excellence and Lean Six Sigma. .. pioneered the introduction of what are now known as Lean methods in the United States Years later, in 2002, my company, George Group Consulting, led another wave of innovation: fully integrating Lean with Six Sigma so that companies could simultaneously improve cost, speed, and quality while tying all process improvement projects to shareholder value Lean Six Sigma has subsequently become one of the most... the reader comprehend the approach for Lean Six Sigma to manage costs, along with the pitfalls, lessons learned, and ways to mitigate risk—it is truly a how-to guide For those who have toiled away mapping processes, gathering data, and applying tools only to see business outcomes left relatively unchanged, Mark helps readers understand how a holistic Lean Six Sigma approach can enable annual cost reductions... improved ROIC and Economic Profit by as much as 10 percent or more The Lean Six Sigma Guide to Doing More with Less is a valuable reference tool for anyone seeking to reduce cost and improve business performance—no matter what degree of impact you seek, what amount of commitment you’re willing to make, or how mature your Lean Six Sigma program is Michael L George Former CEO and Founder of George Group... fundamental issues these methodologies are intended to improve All of the concerns listed here speak directly to the objectives of Lean Six Sigma, yet many executives don’t perceive the business impact While many companies have claimed hundreds of millions in economic benefit from Lean Six Sigma, just as many others have failed to see the results Is the methodology not universally applicable, or is it being poorly... and needs to rapidly reverse these trends, this book is for you Throughout this text you will learn how dozens of companies have deployed Lean Six Sigma to successfully improve costs and gain a sustainable competitive advantage Even if you already have a Lean Six Sigma program or other form of continuous process improvement initiative, you will learn how to extract greater returns—migrating from traditional . The Lean Six Sigma Doing More with Less GUIDE TO The Lean Six Sigma Guide to Doing More with Less The Lean Six Sigma Guide. Use Lean Six Sigma to Reduce Cost? 1 Transactional Example: Lean Six Sigma Transforming Our Government 6 The Alloy of High Performance: Why Choose Lean Six

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