Due to its focus on ensuring any kind of business operation is effective and efficient, the tools and techniques used in Six Sigma can give individuals who aspire to be leaders a highly effective method that they can use to make better decisions. Six Sigma methodologies themselves have received widespread acclaim for their effective application in process improvement across a range of corporate sectors, but when they are paired with skilled leaders, some truly amazing results can be seen.

Among the key leadership traits that are required of Six Sigma professionals, there are five qualities which stand out above the others. Leaders who are looking to move into the management of Six Sigma projects need to sharpen and develop the traits below to gain a competitive edge.

1. Customer Advocacy

A Six Sigma leader should be able to easily communicate to the rest of the team and help them understand that the customers (both external and internal) are the recipients of the process results, and that they are always the ultimate judge of the quality of a product or service. Understanding the needs of the customer is the first step in process improvement. For this reason, a Six Sigma leader will always be able to show how the elimination of variation in processes is key to overall business improvement.

2. Passion and Leadership

A Six Sigma leader needs to have initiative, a positive personality and be self-motivated. This is because there will be times when they have to be the cheerleader who picks up the team, helping them to move forward in a productive manner. Passion also gives the leader the strength they need to persevere when a project is not going their way.

They also need to have demonstrable experience as an agent of change and challenger of the status quo in some capacity in the past, regardless of their position. Changing an organization’s established processes and revamping how it is run is something that could upset employees. However, leaders who are change agents find ways of accomplishing changes while, at the same time, they amass support for change.

3. Effective Communication

Six Sigma leaders are effective communicators, an essential trait considering the various roles they are expected to take on: coaches, trainers and mentors. They need to talk to (and be clearly understood) by various audiences ranging from top management to employees on the shop floor. Understanding the audience’s needs and then being able to tailor a message to speak to the audience members’ concerns is the true hallmark of an effective communicator. Once the Six Sigma leader attains these qualities, they can easily create presentations that express the process improvement project in a way that will make the audience supportive of the effort.

4. Business Savvy

Unlike the quality managers who directed corporate processes in the past, Six Sigma professionals are expected to be business leaders. Because of this, it is necessary for them to have knowledge of business as well as the ability to illustrate the link between a Six Sigma implementation and the business’s overriding goals. They should understand and be able to explain how a project makes the company stronger, both financially and competitively.

5. Technical Aptitude and Project Management Ability

Implementation of Six Sigma is done a project at a time. Therefore, it is vital that a leader does not forget that they are responsible for the entire project, from scoping, establishing requirements and resources to organizing the timeline and analyzing variance perspectives. It is not necessary for a Six Sigma leader to be a graduate of engineering or statistics, but there are cases where the qualifications prove to be useful.

Conclusion

Although technical knowledge is clearly essential if one is to be an effective Six Sigma leader, there are certain “soft skills” and leadership traits that are required as well in order to complement business theory. Six Sigma professionals who aspire to be leaders would do well to develop these traits by seeking mentors and coaches as well as through continuous professional development.

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The concept of the ‘seven deadly wastes’ is one of the cornerstones of the lean methodology, and forms a part of a vital toolkit which every professional should be familiar with. If you are able to identify the impact that the seven wastes have on your workplace, then you can start to take the initial steps toward working more efficiently and productively.

Unfortunately one of the hangovers from lean’s inception in the manufacturing industry is that a large number of lean tools are focused on wastes within factories, making it challenging to adapt to non-manufacturing settings. This article seeks to change this viewpoint, so that education professionals can take a fresh look at how the methodology applies to them and their institutions.

1. Defects / Rework

In the same way that there are defective products in manufacturing, defects in education can take the form of systems that fail to transmit information as required, resulting in loss of time, communication and human energy. Examples include inability of institutions to complete admissions due to missing or incorrect student information, or failure to inform staff of new or recently changed policies in good time, leading to non-compliance.

2. Overproduction

More often than not, this is an issue that tends to slip under the radar in service industries like education. However, overproduction is a unique category of waste in the sense that it inevitably gives rise to other forms of waste if it is not checked. Examples of overproduction include having all the students in an institution enrolling concurrently, resulting in long queues, delays and errors, or expecting all members of faculty to adhere to standard teaching, research and service workload expectations, whether the extra work is required from everyone or not.

3. Waiting

This is idle time within a process before moving to the next step, and is generally caused by shortages in inventory or poor balancing of work across shifts and among employees. Some examples of this type of waste are: waiting for students to submit assignments or attend lectures, awaiting approval for critical decisions or waiting for people so that a meeting can begin.

4. Overprocessing

This is the performance of activities which provide no value to the service from the point of view of the students. It is manipulation of the service offered by an educational institution and its staff to levels beyond what students expect and are willing to pay for. For instance, it makes little sense and adds no value for handouts or notes to be packaged in envelopes that students will immediately discard.

5. Transportation

This involves the unnecessary movement of people or materials from one point to another. While some types of movement may be necessary for the provision of a service, they may not necessarily be of concern to the customer. Examples include faculty having to carry coursework home to grade it, or students ferrying assignments home on removable media and then back to class again every day.

6. Inventory

Inventory waste occurs when more supplies are ordered than are actually necessary, resulting in a glut, or when improper tracking of inventory causes shortages of essential supplies. For instance, a school library that has a limited number of a highly in-demand book will mean that students will struggle to complete their assignments. Another form of inventory waste is printing of new prospectuses every year and discarding those from the previous year, despite both having similar information.

7. Underutilized Employees

Having staff with good ideas is an invaluable resource, so the worst thing that leaders in educational institutions can do is to ignore them completely. The people actually working with the customers and processes directly are in a good position to identify areas where things go wrong and can suggest solutions.

Conclusion

Many people still think of lean and business improvement as they relate to manufacturing, especially since the concepts were first introduced by companies like General Electric, Motorola and Toyota. However, businesses and organizations in the service sector, including in education, are starting to consider how process improvement can transform how much value they offer to the customer.

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Walters & Wolf are a premier commercial cladding manufacturer. They have established the industry reputation of being able to produce products of every cast and color, to precise and exacting specifications. They draw and engineer all systems in-house, both shop and fabrication drawings for project submittals and shop fabrication and field installation. Their quality and customer satisfaction could not be reached without engraining a firm core of Lean manufacturing in their culture and everything they do.

Take a few moments and learn from Walters & Wolf!

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Since 1906, the name Rolls Royce has been recognized as quality and luxury in transportation. Throughout its legendary history, discerning people from around the globe have chosen Rolls Royce vehicles for their transportation. They are understood to be the finest example of luxury and comfort in motor vehicles. Take a few minutes and immerse yourself in the luxury of Rolls Royce.

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Big data is all around us, and as more and more is being said on the subject, it seems like some people are significantly behind the times with regards to their adoption of this technology. Which is a shame, because incorporating big data is easily one of the best things that can be done to boost the performance of a project of any scale, and organizations that have adopted these methodologies typically see significant improvements in their operations over a very short period of time.

• AI-Driven Decisions

Big data and AI go hand in hand, and those who are aware of the huge potential benefits in that field should already know what to expect from integrating an AI-powered project into their own workflow. Of course, it’s not as easy as setting a few things up and calling it a day, as working with AI properly can actually be quite complicated and requires the assistance of specialists who know their field. But as long as you can provide access to such specialists, you should be able to see some significant improvements in the way your company is able to make decisions for its future on a regular basis.

Sometimes those decisions might not even make much sense in the immediate term, but that’s just because the AI can account for factors that are far out into the future and beyond your current control. The way this works can sometimes actually be a bit scary, admittedly.

• Detect Problems Before They’ve Materialized

Which brings us to the next point – with the help of big data, and the right kinds of systems for analyzing it, you can figure out if something is about to go bad with your business long before it’s even happened. That’s a huge benefit to the operations of most companies out there, and it’s something that takes relatively little effort to put in place and get started with. After all, the main requirement for you is that you’ll have to gather a lot of business operations data and organize it appropriately. The rest comes down to having the right kinds of systems to analyze that data.

Make sure that you can trust your systems. It’s not rare for a small spike in the data set to confuse some less advanced systems and lead them to decisions they really should not be making, and this can sometimes have a huge impact on your business, even if it’s just a one-time incident. Sanitizing your data sets properly and ensuring that they remain consistent over time is one of the most critical factors you’ll want to consider.

• Be Ready for the Future

Leveraging big data in your business is also going to make you more prepared for the future. A huge revolution in how we collect and process data is coming, and it’s not too far away at this point. Those who’re already using the right kind of technology and know what areas are worth following are going to come out on top and benefit much more than their peers – and relying on big data is definitely a factor that’s going to make a huge difference in the very near future.

Of course, it will also matter exactly how that data is utilized in the first place, but as long as you’re following appropriate practices, you should be able to see great results. Make sure to join the community as well, as there is no shortage of people out there who are also experimenting with big data in their own projects and companies, and you can gain a lot from exchanging some experience with other entrepreneurs in the field. After all, that’s how we can expect to make the biggest advances, as they will hardly happen through the efforts of one organization alone.

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There are various steps you could take to improve your procurement process. It may involve minor adjustments with the aim of enhancing part of the system. Other strategies may involve an overhaul of the entire process. This article outlines instances where the Six Sigma methodologies can be applied to procurement processes, thereby adding value to the business:

Smooths the Adoption of New Technologies

The adoption of new technology is critical to an organization. It can determine the capacity of the organization to deliver goods and services efficiently and how effectively costs can be minimized. Six Sigma offers a framework that facilitates the smooth adoption of application software, IT infrastructure, and digital systems.

One of the applications you should consider adopting is the contract management system. It helps to manage obligations, and both parties benefit from this convenient setup. It assists entrepreneurs to determine which contract can be reused when moving from one vendor to the next.

Increases Employee Capability and Skills

Training and development is another critical factor that can determine the direction of the enterprise. Part of the Six Sigma philosophy is to train and help members of staff develop the confidence that will enable them to initiate and successfully complete tasks. Procurement managers can incorporate Six Sigma methodologies to train staff and ensure smooth implementation of policies.

Incorporating Six Sigma is not only beneficial to the staff but also to the organization’s efficiency and the bottom line. Additionally, it promotes goodwill between the business and suppliers, leads to higher rates of customer satisfaction, and accelerates growth while cutting costs.

Helps to Maintain Good Relationships with Suppliers

The aim of the procurement manager is to ensure that the suppliers are content with the organization’s policies and processes. You could ask for bids from new suppliers when the need arises, but that process often proves to be costly and time-consuming.

If you take the example of the supplier base of businesses that have been implementing the Lean Six Sigma methodologies for the last two to three decades, you’ll realize that these businesses have a different perspective towards supplier relationship. These organizations are not in the habit of changing vendors frequently.

Sending requests for bids every time you need something from the vendors is time-consuming. It involves analyzing each application that answers your request, getting information about their position in the industry, as well as identifying the best negotiation tactics for the shortlisted suppliers.

Reduces Expenses

The most desirable quality of a procurement officer is the ability to procure the items the company needs while at the same time reducing the associated cost. The key question then is, how do we achieve this? It requires careful considerations before making purchases. The process is not always as simple as it sounds. Some inexperienced procurement staff may opt to create purchase orders for every single application. This is one of the problem areas that may incur unnecessary costs. The Six Sigma methodologies are often applied to these processes to research, identify, purchase and administer the items and orders that are relevant to your company.

Encourages Analytical and Negotiation Skills

Procurement managers have to handle a myriad of tasks in between the planning and execution stages of the projects they oversee. While this could mean experienced managers have well developed analytical skills, it is also important to ensure that the analytical skills are applied in more than one area of the process. A good understanding of quantitative data related to these processes is important to acquire. It fulfills an integral part of the Six Sigma methodology (i.e. the Analyze step of DMAIC) which requires a thorough analysis of each of the processes.

A procurement manager who follows the Six Sigma principles needs to understand that negotiating with vendors is an intricate process. The challenge is to strike a balance between getting good contract terms for the organization while ensuring that the organization and the suppliers uphold their business relationship.

Conclusion

Streamlining your procurement process increases the company’s profitability and maximizes efficiency. While the adoption of the Six Sigma tools and techniques may seem like an intimidating undertaking, it could prove beneficial to your organization in many positive ways.

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Six Sigma is a set of techniques and tools used for process improvement that was developed by Motorola and promoted by General Electric. These set of tools and techniques have a wide range of applications beyond manufacturing. The application of the Six Sigma methodologies in sourcing and procurement processes can lead to exceptional results in terms of business process improvement.

Six Sigma can be applied to a wide range of procurement projects, in spite of the level of process quality goals that have been set. The application of these set of tools requires that the process in question be clearly defined in order to be addressed within a reasonable period of time. It also requires that the process should produce significant returns to warrant the diversion of organizational resources into the task of process improvement.

The following are some of the instances where Six Sigma has been applied to achieve better procurement processes:

Reduction of Cycle Time

Lengthy procurement cycles can have an adverse impact on the budget. Also, long cycles tend to erode the commitment of the managers to the project. Using reliable data, a clear definition of the process, amongst other techniques, you can cut down procurement cycle time.

Six Sigma can be applied to the most fundamental aspects of your procurement process, be it invoice receipt and approval, drafting contracts, or sourcing process cycle times. Six Sigma seeks to minimize errors and perfect processes, while at the same time eliminating processes that do not adhere to the “CTQ” (Critical To Quality) benchmark.

Transaction Quality

Besides perfecting processes and identifying those that are not Critical To Quality, other projects that should be considered are:

• First-Pass Invoice Rates: Six Sigma methodologies can enhance the purchase order, invoice and receipt details to minimize data errors.
• Electronic Orders and Deliveries: Six Sigma enhances the process and allows you to make the most of electronic systems with minimal errors.
• Coding and Classification Codes: Requisitions need to be correctly matched with their corresponding classification codes.
• Spend with Line Item Visibility: Get more value from your SRM (Supplier Relationship Management) system by using visibility and analysis tools more effectively.

Six Sigma is a discipline and it may not be the standard to use to gauge some of these processes. However, getting over 90% results for these processes would mean that you are operating within world-class standards.

Adoption of Technology

From time to time, organizations find that they need to deploy new technology to gauge procurement performance and tweak it further. Six Sigma has been found to be an enabler in the adoption of new applications, IT infrastructure, and digital systems needed in these organizations.

One way the deployment and adoption of new technology can be enhanced is by tracking metrics such as the adoption rates of users, vendors, and external contacts. Some of the processes that can be tracked include:

• Tracking the Supplier Management Tools for User Adoption Rate: Supply management tools used in procurement such as AMD can achieve a 100% adoption rate compared to other organizational wide systems that are not tailored for specific end users.
• Tracking Percentage of Enabled Suppliers: Six Sigma proposes the use of the Pareto Principle. Focus on the suppliers contributing 80% of the spend, more than those contributing 20%.
• Tracking Indirect RFQs through E-Sourcing: Find out the total percentage of indirect RFQs. An 85% score is impressive, but an exceptional score for direct RFQs would be around 50%.

An ERP (Enterprise Resource Planning) software is the basic setup for the system required to generate transactional data. However, other applications may be integrated if the quality of the transactional data is found to be unreliable.

Compliance

We must acknowledge the fact that every process exists to generate a desired output. The output of these processes must adhere not only to customer’s expectations, but also to local codes and government regulations. The acknowledgement of this fact will help businesses avoid legal risks and costs associated with non-compliance.

Six Sigma based processes may need to be initiated to track some of the following issues:

• Data and information on contracts drafted, vendors on-boarded, issuance of purchase orders and receipt of invoices
• Renewals of expiring contracts, certificates and accounts
• Costs incurred through engagement with unwanted or blacklisted vendors
• Monitor Call For Bids by tracking uncompetitive bids or ignore bids from a list of vendors

Conclusion

Looking at the big picture, it is clear that the tools and techniques outlined by Six Sigma and the strategic sourcing process have the same objective; enhance, improve and adopt a more cost-effective approach to business. These methodologies improve processes by ensuring decisions are derived from reliable metrics.

Six Sigma is often associated with the improvement of the supply chain and manufacturing processes, but the methodology can be applied to a wide range of applications. By following the five phases DMAIC (Define, Measure, Analyze, Improve, Control), you will not only transform the critical business processes, but you’ll also provide clients with a reliable service and be in a better position to adhere to standards and regulations.

The post 3 Tips for Incorporating Six Sigma into Your Sourcing Process appeared first on Shmula.

Take a step back in time with a vintage Honda factory tour! Since 1959, Honda has been setting records. They are the largest manufacturers of motorcycles and internal combustion engines in the world. In 2001, they became the second largest Japanese auto manufacturer. Honda also manufactures garden equipment, marine engines, personal watercraft, power generators, and other products. Since its inception, Honda has applied the principles of Lean manufacturing, and this timeless video will take you back and show you how they do it.

Take some time and enjoy a flashback in Lean manufacturing!

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Boeing builds the venerable 737 workhorse at a rate of one every nine days! That is a monumental feat of Lean manufacturing. The Boeing 737 is the workhorse of many airlines across the globe, flying short and medium range flights. It was originally designed in 1964 and took its first flight in 1967. In 1968, Lufthansa airlines put the Boeing 737 into service across their service areas. Since its inception, the aircraft has been through numerous upgrades and modernization changes that continue to make it an in-demand aircraft among airlines. As of 2006, there were an average of 1,250 Boeing 737s airborne at any given time, with two either departing or landing somewhere every five seconds. 

Watch this video and see how they do it!

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Every organization needs to meet the standards and customer expectations on quality, and this is particularly true of telecommunication companies. The competitive nature of a business is such that if the company fails to meet these expectations, often it will have an impact on sales and the company’s reputation. It is not enough for businesses to merely churn out products and services to address market demand, they must also ensure every point of the supply chain meets and exceeds set standards.

Quality can be compromised at many different points in the supply chain. This may include errors during assembly of components or mistakes on the product label. To maintain high quality throughout the supply chain, several methods have been proposed. The Six Sigma methodologies can be applied to uphold quality and reduce unnecessary costs.

What is Six Sigma?

This is a methodology that involves the use of statistical analysis to address shortcomings in different organizational environments from the services sector to manufacturing. Using these analytical tools, organizations are in a better position to pinpoint bottlenecks and eliminate supply chain inefficiencies and human errors.

Six Sigma is said to have evolved through the manufacturing industry after it was invented by Motorola and promoted by other companies such as General Electric. Motorola wanted to develop a methodology that coordinated a series of procedures, according to the Environmental Protection Agency.

The values, procedures, and techniques proposed by Six Sigma are captured in the acronym DMAIC (Define, Measure, Analyze, Improve, Control). This simply means that you need to define your objectives, then collect accurate information, use the information to make an objective analysis, work on improving the procedures, and ensure control is done by monitoring the processes and making the necessary modifications.

How Does Six Sigma Help In Telecom Manufacturing Operations?

Even though Six Sigma evolved through the manufacturing field, it has many applications, especially in the telecom sector. In this industry, it can be instrumental in identifying issues on time. For example, you may find that minimizing lead time could multiply the number of finished products you produce. Having identified the issues, you can use the data to improve your supply chain management program.

Which Top Telecom Manufacturers Have Successfully Utilized Six Sigma?

General Electric is the most well-known company that has implemented these strategies to improve its operations. According to the company, within the first five years of applying Six Sigma principles, they had saved over $10 billion. General Electric mainly uses these techniques to improve the company’s customer service experience. The company also finds these techniques fruitful in developing efficient and predictable systems that can ensure customers get consistent value and that the company meets its standards. This way, General Electric has been able to cut costs to the tune of billions, while providing customers with the highest level of experience.

What Are the Other Benefits of Six Sigma?

The Six Sigma principles can also help your organization use fewer resources, cut down on waste and make positive environmental improvements. The U.S. Environmental Protection Agency has stated that you can reduce the risk of defective products, which means that industrial waste is minimized. Defective products need to be repaired and replaced. Fewer defective products also mean that people will not be exposed to risks and accidents as a result of the defects.

Why Proper Implementation of Six Sigma Is Essential

There is no doubt that Six Sigma can go a long way in improving various aspects of your organization. If not properly executed, it could end up being an obstacle. One weakness of the methodology is that it is primarily data-driven, and may ignore how your employees feel. However, understanding these weaknesses can make it easier to prevent obstacles. One way to do this is to have a wide consultation with staff to keep tabs of the working conditions. The same should be done when evaluating customer experiences.

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In its most general sense, process improvement is an analysis of a series of set actions, especially in business, that is aimed at both improving quality and decreasing costs. The theory and practice of process improvement have increasingly been applied in various industries and corporate sectors for over two centuries.

During this period, there have been many prominent process improvement gurus, both in the industry and within the academic sphere, but a few stand out as key names in the movement to achieve efficiency, quality, waste reduction, customer satisfaction and elimination of variance.

Although most of them have passed on, their memory continues to live on in the revolutionary and innovative methods and concepts that are now so pervasive within the business environment today. We look at these individuals, how their work relates to each other and how their ideas continue to contribute to process improvement.

The Pioneers

The quality revolution kicked off in the late 18^th and early 19^th centuries, with Eli Whitney among the movement’s leaders. Eli came up with the idea of manufacturing using interchangeable parts. He believed that assembly of identical parts to create one finished product sped up the process and allowed for uniform quality of finished products during mass production. This method of assembly also lowered costs, since the interchangeable parts could be put together even by unskilled workers.

As experts began to look closer at different work processes to see where more efficiency and cost savings were to be gained, one of the greatest husband-wife teams in science and engineering history stepped up to the plate. In the early 1900s, Frank and Lillian Gilbreth collaborated to develop the study of motion as a technique for use in both engineering and management. Until his death in 1924, Frank Gilbreth examined the relationship between people and human effort. His observation that people did the same jobs in different ways led him to try and find the most efficient of these ways that would require the least effort.

Development and Improvement of Specialized Manufacturing Processes

If there is one name that encompasses the global view of American business success in the 20^th century, it would have to be Henry Ford. His manufacturing processes were so efficient and effective in reducing waste that even Toyota, the Japanese automotive giant, studied them. Besides encouraging his employees to build better cars, he also drove them to remedy any operational deficiencies that they found.

For instance, he introduced the moving car assembly line in 1913 and ensured that the necessary parts were readily available at each stage to ensure that there was no need for the line to stop or slow down to allow a worker to sift through a pile of parts to find the one that was needed.

With the American manufacturing sector growing quickly in the early 1900s as evidenced by the success of companies like Ford’s, and as products and markets became segmented and complex, organizations needed to develop ever more specialized business functions. As the new functions brought new capabilities and ways to work, it became necessary to find new ways to improve them.

Frederick Winslow Taylor established himself as a major player in the effort to improve engineering processes during this period. Specifically, Taylor focused on the standardization of work, the study of processes, systematic training and the employee-management structure of manufacturing organizations.

Improvement of Quality Assurance and the Birth of Statistical Quality Control

In the 1920s during his time working at Bell Labs, Walter Shewart devised the concept of statistical process control, allowing for improved planning and implementation of mass production processes. During this period, Shewart also developed PDCA – Planning (what needs to change); Doing (making and testing the change); Checking (seeing whether the desired outcome has been achieved) and Acting (making changes a permanent part of the manufacturing process).

Yet another pioneer in the field of statistical quality control was Harold F. Dodge. He also worked at the Quality Assurance Department of Bell Labs alongside Harry Romig, where the pair was also responsible for the development of sampling plans. Dodge and Romig designed standardized schemes for use in sampling and published tables which related risks to sample sizes.

Scientific Analysis of Processes and Quality

Process improvement has proven most effective when carried out with data and metrics behind the identification of any areas of waste, poor quality or inefficiency. Eugene Grant became well known for his work in the field of engineering economics after publishing a book on the subject in 1930. He also taught at Montana State University in the 1920s and at Stanford University’s School of Engineering in 1930 on how to improve processes through problem-solving and decision making at the operational level.

Another process improvement guru responsible for important and enduring contributions to statistical quality control and the related sciences was George E.P. Box. However, he initially got into the field of statistics by happenstance rather than design. As a chemistry student carrying out scientific experiments during World War II, he needed the help of a statistician to help him make sense of the varied results he obtained. As there was no statistician available, he worked on his master’s degree in statistics, later taking up a job at Imperial Chemical Industries (ICI). In addition to research experimentation, he also helped ICI to improve its chemical and mechanical processes.

Putting People First

In contrast to Frederick Winslow Taylor, Peter Drucker decided to take an approach that was much more sympathetic to employees, whom he termed as “knowledge workers.” This was a stark contrast to Taylor’s highly structured and often inflammatory treatment of the common worker. By focusing on decentralization and simplification, Drucker pioneered the concept that we recognize today as outsourcing.

The key influences on business process improvement in the 1940s and 1950s were W. Edwards Deming and Joseph Juran, who made enormous contributions to the idea of Total Quality Management (TQM), which places the human aspect at the forefront of quality management. Deming and Juran were also responsible for many of the statistical quality control methods in use for the improvement of manufacturing processes.

Japanese Manufacturing Efficiency Comes to the Fore at Toyota

Much of the process improvement methodologies and tools that have become so popular today were developed in the period between 1950 and 1080, when Japan quickly emerged as the leader in manufacturing efficiency and quality. In 1950, engineer and statistician Genichi Taguchi joined the Nippon Telegraph and Telephone Corporation’s Electrical Communications Laboratory (ECL), at a time when the ECL was embroiled in a heated rivalry with America’s Bell Labs for the development of telephone switching systems. Taguchi also consulted widely with Toyota and other top manufacturers in Japan. His ideas on the loss function, experimental design and the reduction of variation have had a huge influence on fields beyond manufacturing and process engineering.

At the end of the Second World War, productivity at Toyota was way lower than the mighty American car industry based out of Detroit. The president of Toyota declared that his company must catch up with the Americans in three years and tasked Taiichi Ohno as part of the team to achieve this vision. He quickly deduced that the only reasons why the company was unable to match Detroit’s motor industry were waste and inefficiency. The strategy and methodologies that he and his team developed from the mid-1940s to the mid-1970s formed the basis of the famous Toyota Production System (TPS).

Another notable name in the practice of process improvement to have had an impact at Toyota during this period was Shigeo Shingo. A leading consultant on the improvement of manufacturing operations, he was greatly influenced by the work of Fredrick Taylor. In 1955, he joined Toyota and quickly developed the SMED system and error proofing. It is said that he managed to cut down the set-up time of a press from four hours to only three minutes. Throughout his life, he traveled around the world giving memorable talks on process improvement and carrying out remarkable projects as a consultant.

Japanese Efficiency Meets Quality Management

Kaoru Ishikawa is widely considered to be the “Father of Japanese Quality.” He not only invented the cause and effect diagram (Fishbone diagram), but was also responsible for the development of the Company Wide Quality Control (CWQC) method. In order to reduce workplace conflict, he also devised the “next operation as the client” concept. His belief was that management should not only be satisfied with offering the customer a quality product, but should also offer service to the customer after they had purchased the product.

During the late 1970s and into the early 1980s, Noriaki Kano, a consultant and professor of quality management, set up the foundation for a radically new approach to customer satisfaction. He challenged the belief that to achieve customer satisfaction, it was necessary to improve all attributes of a product or service. Kano instead stated that only certain attributes need to be improved. The Kano model for customer satisfaction puts customer preferences in five quality categories.

America and Europe’s Soul Searching

With Japan’s eminence in manufacturing based largely on its automotive industry, it came as little surprise that the US would try to find out how America’s car makers performed in comparison. James P. Womack and Daniel Jones carried out a study on American car manufacturing efficiency titled “The Future of the Automobile.” It indicated a 3:1 productivity ratio in favor of the Japanese, in contrast to Taiichi Ohno’s estimate in the 1950s which showed that Detroit’s worker productivity was nine times higher than that of Japan’s car manufacturers’. Womack’s book, “The Machine That Changed the World” used the study’s findings to conclude that Lean manufacturing in Japan produced higher quality products by using half the resources required by American car makers.

The GPRI model was initially mooted by Richard Beckhard in 1972. An acronym for Goals, Roles, Processes and Interpersonal Relationships, it represents the critical and interrelated aspects required for effective teamwork. The model, which started out in social science but has since been adapted for the change acceleration process (CAP) toolkit for Six Sigma, helps team leaders to ensure efficiency, quality and productivity.

As the 1970s drew to a close, it was apparent that North America and Western Europe were losing out to Japan’s more efficient manufacturers who produced reliable, affordable and high-quality goods at a fraction of the cost. Armand Feigenbaum, a process improvement consultant, estimated that as much as 40% of the capacity of manufacturing plants that do not follow lean principles is wasted.

Finally, a Way Back for the West?

By the time Philip Crosby’s book “Quality Is Free” hit the market, the US manufacturing industry was slogging through a recession and struggling with foreign competition. Crosby provided a 14-step blueprint for the improvement of quality, and introduced the manufacturing world to the “zero defect” concept, which many considered to be a sure recipe for success.

Eliyahu M. Goldratt, an Israeli businessman, took an unorthodox approach to publish his theory of constraints by having it as the central theme of a novel called “The Goal.” His theory states that the weakest link in a business process – a constraint – needs to be identified since it keeps the rest of the process from successfully achieving its goals. When constraints have been identified, they can be fixed or eliminated.

One of the most celebrated methodologies in use by process improvement professionals in the world today is Six Sigma. The name of this framework was coined by an engineer at Motorola known as Bill Smith. In the early 1980s, under the chairmanship of Bob Galvin, engineers at Motorola felt that traditional measures of quality, which measured defects in terms of thousands of opportunities, were not granular enough. They instead measured defects that occurred per million opportunities, created a culture that supported it and gave it the now iconic name. Because of the incredible bottom-line results that Bill Smith’s methodology achieved for Motorola, it has been adopted by tens of thousands of organizations from across the globe.

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Since 2006, Great American Cutlery has built the reputation for making the finest quality traditional pocket knives in the US. Located in historic Titusville, PA, the brand focuses on a hands-on process which yields the most beautiful and high quality pocket knives on the market. Their products exceed expectations from customers by producing a product that first became a mainstay in the late 19th century.

Check out the unique insights to the process that is Great American Cutlery!

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Jaguar has set the standard for luxury and speed in fine motorcars since 1922. The company was founded as the Swallow Sidecar Company, making sidecars for motorcycles, before building auto bodies. Over the years, Jaguar quickly became the name known for quality, luxury and speed. Through several decades of growth, the brand developed through several ownership changes, incorporating new innovations in vehicle development. After World War II, the mantra for Jaguar became ‘Grace, Space and Pace’ and provided the highest value for the money. Now, let’s go back to 1961 and explore the glory of Jaguar motors.

Check out this amazing video!

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The main aim of any Lean Six Sigma project is the elimination of defects and variation in processes. The outcome of this effort is improved business efficiency and better quality of products or services delivered. This outcome can only be achieved when business processes have been streamlined and wasted resources and effort have been eliminated.

However, it is easy to lose sight of the fact that choosing a Lean Six Sigma project and maintaining it is essential to overall success. Many organizations can easily identify opportunities for process improvement, but find it difficult to isolate priorities and package them into meaningful and sustainable projects. In order to succeed, the project selection strategy should be organized and well-defined.

Establish a Project Selection Committee

The first step is to put together a team that will be involved in identifying project opportunities and prioritizing them. Known as a Lean Six Sigma project selection steering committee, this group should include managers who have sufficient training as Lean Six Sigma Champions so that they may bring in their expertise and experience when trying to determine the manageability and viability of the projects to be considered.

Pareto Priority Index

The committee may then carry out a cost-benefit analysis of each opportunity in order to determine the benefit that the organization stands to gain by implementing the project. Also known as the Pareto priority index (PPI), this analysis considers the following:

• Savings: Calculated by the accounting department and enumerated as a dollar amount, it is a reflection of savings arising from higher sales, lower labor costs, lower carrying costs and a reduction in materials and maintenance costs.
• Probability of success: This percentage is an indication of how likely a project is to achieve the stated goals.
• Cost: Yet another dollar amount that is determined by the company’s accounting department, it is the price of implementing the project.
• Completion time: This represents the amount of time that the project team needs to completely implement the Lean Six Sigma project.

When the factors above are aggregated, the result is a PPI index number. This number helps the committee to quickly compare several potential projects. Those that offer higher dollar savings while also having a higher probability of success have a higher PPI compared to those with higher costs and long completion times.

Prioritization Matrix

Although the cost-benefit analysis involved in coming up with the Pareto prioritization index number comes with the advantage of being based on quantitative and objective factors which can be used to compare potential projects, it lacks customer input. Since the ultimate goal is to provide effective solutions to the customer’s problem, it is necessary to balance the PPI with a prioritization matrix which will capture the needs of the customer.

To get this information, the project selection steering committee relies on interviews, focus groups and customer surveys to get the voice of the customer (VOC). All of the recommendations made by the customers with regard to a potential project are then put in a matrix which helps the team compare them to all the other potential projects. Each project is then rated, and the one offering the greatest benefit to the organization is selected.

Conclusion

Choosing the right Lean Six Sigma project can have a dramatic and positive effect on the performance of your business.

If project selection is carried out haphazardly, the result may be that a project is selected which lacks complete buy-in from the business. It may also experience resistance from employees or encounter roadblocks from management, and will eventually leave the team feeling ineffective. This is a situation where nobody wins, particularly the organization’s quality manager, who may need to engage these disillusioned people when another need arises.

If a process is selected on the basis of rigorous cost-benefit analysis that is combined with a prioritization matrix, the project will provide tangible benefits to both the consumer and the company.

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Even though Lean principles are widely applied in manufacturing, the same principles can be beneficial to sourcing. Just like in manufacturing, the strategies assist in minimizing waste, reducing time lost, and ensuring processes are implemented correctly after the first execution.

Many businesses consider lean sourcing to involve mainly taking advantage of suppliers as often as possible, so that resources can be used more efficiently especially in the core areas of focus. However, there is a need to ensure that the right cord is struck between providing value-added services and the cost of goods and services without spending too much in terms of time or money.

Focus On Adding Value Instead of Reducing Costs

Like with most business processes, it is important to always try to accomplish more with less. That means you need to carry outsourcing with a few people. It is important to consider, what are the staff members doing? Is their strategy centered mainly on handling transactions or are they paying attention to strategic activities? Just as lean best practices are applied in inventory reduction in the manufacturing industry, it can be used intelligently to reduce headcount.

The focus needs to be on the workflow. You need to analyze it and review underlying assumptions. When sourcing, it is important to always consider how the approach will add value to the customer and bring new possibilities into the open.

The principles of lean sourcing and supply management can be used to:

• Enhance the sourcing processes and associated workflows to cut down the time taken and eliminate waste
• Reduce the costs associated with doing business while increasing the value of goods and services
• Shift the focus to the workflows and processes that are value-adding to the organization
• Shift the focus to strategic sourcing rather than focusing only on transaction processes
• Improve the relationship with suppliers and make these relationships more effective

Lean Enhances the Total Value of Sourcing

Organizations need to acknowledge that lean principles are not meant for manufacturing workflows only. This misconception comes from the fact that lean principles have been popularized by the manufacturing sector, but there are many advantages in supply sourcing and in establishing a supply base.

Lean principles, therefore, apply to all industries and even to businesses in the services sector. Even though the methodologies have yielded good results for manufacturers, they have the potential of helping businesses boost their operational and financial standing.

Some of the issues that need to be considered include: how to improve the total value of sourcing and how particular activities help in the achievement of this goal. The bottom line in the application of lean principles is to focus on adding value while eliminating waste and unnecessary costs.

Lean Principles Improve the Efficiency and Effectiveness of Sourcing

The main principles of Lean accounting – identifying value, mapping the value stream, pull, flow, and perfection,  – can be highly advantageous to sourcing. There are many tools proposed by the methodology that can be applied to sourcing such as: mapping the value stream, Kaizen 5s, standard work, etc. These principles can also be applied to the adoption of supply chain systems such as strategic sourcing and spend analysis applications. Using these principles to perform supply base rationalization leads to high performing suppliers. Failure to rationalize the supply base leads to more transactions and an increase in waste when it comes to the process of sourcing. The incorporation of supplier performance management with lean principles helps to reduce costs and provide more value by ensuring that the supply base is more efficient in meeting its goals. This is a more cost-effective sourcing approach for organizations.

Conclusion

Lean sourcing gives organizations the capacity to discern between sourcing tasks that lead to waste and those that can add value to the processes. This way, organizations are in a better position to pinpoint wasteful activities and eliminate them. It boosts the company’s bottom line by increasing cash flow and profitability. Organizations should, however, stay focused on leadership, staff, overall company’s strategy, as well as the culture rather than focusing only on the tools.

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Muda means waste and refers to a wide range of non-value-adding activities; eliminating waste is the key to efficiency. When you look at the Toyota Production System (TPS), eliminating Muda waste is one of the main principles of the Just-in-Time system. Some things that are considered waste are unnecessary financing costs, storage costs and worthless stock of old items. Toyota divides Muda into seven categories:

1. Transportation – increases risk of product being damaged, lost or delayed.
2. Inventory – Outlay of capital that doesn’t immediately produce income.
3. Motion – Damage inflicted through the production process.
4. Waiting – Product sitting idle.
5. Over-processing – Doing more work than is necessary.
6. Over-production – Making more product than is required by the customer.
7. Defects – Replacing faulty parts or products.

Processes consumes resources and naturally, waste can occur. The more resources that are used, the more opportunity exists for waste. The tools of Lean manufacturing and the TPS help focus on the elimination of Muda waste and create a heightened awareness. Understanding exactly what waste exists and where it is exists is crucial to any Lean manufacturing process. Even though products differ between manufacturing organizations, lean practitioners understand that the types of wastes are very similar.

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Muda is all about waste and Lean manufacturing is about eliminating Muda. It is any activity that adds no real value to the product or service being created or delivered. The diligent attention to the elimination of waste in how work is performed is a fundamental tenet of Lean manufacturing, the operational excellence strategy that was developed over many years and is widely used in business today.

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HP focuses on an innovative approach to product design based on the Six Sigma approach. The company calls this “The HP Method.” The company believes that there are several advantages to be gained by having a “process focus.” In addition, there is also a focus on design.

When Motorola introduced the Six Sigma approach, HP was one of the first companies to adopt the strategy along with Honeywell, GE, and Boeing, amongst others.

Preparing for the Future

According to Carly Fiorina, all business processes in the future will be digital, mobile, and virtual. It is with this guiding principle that the company has been approaching development.

HP’s “Process Focus,” it might be mentioned, is one of the hallmarks of the Six Sigma approach. The latter uses a data-driven and fact-based management strategy for maximal efficiency.

HP envisions a future where business processes will increasingly embrace new technologies. It is important, therefore, to modify management strategies continuously. This is because they must depend on the “process” which undergoes a continuous change in the modern world as new technologies emerge and evolve.

HP Business Processes

The company has measured and defined processes and best practices across the enterprise. HP uses open standard operations reference models to partner effectively and easily. 

The company believes in making decisions rapidly and responding quickly to the changing needs of the market. It is essential to do away with ill-defined processes as well as flows inconsistent across company segments.

It is also important to effectively measure the results of changes for a successful business growth. All of these strategies are in alignment with the core ideals and goals of the Six Sigma strategy, which emphasizes metrics and the need for measuring outcomes.

Business Process Redesign

Business process redesign entails working out strategies to improve the existing business processes. A reduction in costs and an increase in productivity are the end goals. HP recommends beginning by thinking about the aims and outcomes you wish to achieve. It is also important to be realistic about the possible shortcomings.

• Setting Clear Goals: It is important to set specific objectives. Goals can be actioned only after they have been established along with the outcomes. Ensure all projects are working towards achieving the same outcome.
• Identify all Business Processes and Prioritize: It is essential to maintain a clear and up-to-date list of all business processes. Businesses need to have a thorough understanding of everything they are working with in order to make improvements and changes.
• Integrate all Activities: Develop one workflow and integrate all new activities into it. Consider consolidating and streamlining all business activities. Count your freelancers too as in-house assets.
• Routinely Capture Data: It is of critical importance to capture data on a routine basis. Several options for data capture are available to businesses today.
• Capture Information At The Source: When a process is ongoing, consider changing it to incorporate data capture instead of creating a new process for the purpose. This will help save time and energy. It is also important to give more autonomy to clients in their current roles. This results in high morale and productivity boosts.
• Empowering Employees to Control Processes: Empower people to make decisions regarding the processes they perform. Remove unnecessary steps in process chains and prefer single approval systems wherever possible.

A successful business process redesign project is concise, clear, and controlled. Such projects leverage the expertise of people from all areas of the business to develop such processes that are realistic.

Conclusion

HP uses “The HP Method” which is an innovative approach to product design. The company maintains a strong focus on business processes. It attaches significance to the measurability of the results of the changes for long-term success.

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Healthcare facilities are adopting Electronic Health Records (EHR) more rapidly than ever. EHRs allow healthcare facilities to improve quality and boost efficiency through the application of data mining on large pools of data.

In the 90s, organizations applied data mining for credit scoring and the detection of fraud. More healthcare providers are starting to realize the potential that lies in using data mining and predictive analysis in their organization.

Benefits of Data Mining in Healthcare

There are several areas in the healthcare industry that data mining has proven to be useful. Some of these areas include improving customer relations, development of predictive medicine, identifying fraud and neglect, overall healthcare management, as well as accurately determining the accuracy of certain elements within the system.

The main goal of data mining in the different industries where it is applied is to capture the patterns that are useful and meaningful by evaluating large data sets. Once these patterns are captured, they are used to predict trends in the industry and how to take advantage of these trends.

Data mining has proven useful, specifically in the healthcare sector particularly in the reduction of costs through the enhancement of efficiencies, enhancing care for the patient, and by saving more patients lives.

What Are the Applications of Data Mining?

In many industries, data mining has played a big role in enhancing the customer’s experience, improving safety and the convenience of using the products or services. Data mining is very useful in the healthcare industry in the development of medication, enhancement of customer experience and customer relationships, detecting and eliminating fraud within the system, and determining the viability of treatment options.

Here is a closer look at two of the applications as applied in the healthcare industry:

• Determining Viability of Treatments: Data mining is used here to make a comparison on the symptoms, causes and factors that can determine the best treatment option for a given condition or illness. This can be done by comparing patients under different treatment protocols and working out which treatment option is the most effective and less costly. Additionally, this process can be carried out on an ongoing basis with the aim of standardizing treatment protocols for certain diseases. The advantage of using data mining, in this case, is that the treatment procedures take less time and conditions are easier to execute.
• Detecting and Eliminating Fraud: By using data mining, healthcare providers are in a better position to pinpoint unusual patterns of behavior from clinics, labs, and other medical practitioners making various claims. Data mining can help identify cases of false medical claims, unsuitable referrals, as well as detect prescription and insurance fraud. One real-life example of data mining used for this application is the Texas Medicaid Fraud and Abuse Detection System. In 1998 the system was able to recover $2.2 million in funds lost through fraud and also produced a list of 1,400 suspects who should be investigated.

The Effects of Data Mining on Privacy

While data mining can be useful to the healthcare industry, the privacy concerns must be acknowledged. Patients may not be comfortable with their data being used for data mining processes. Many patients may feel the process could fail to protect their data and it could fall in the wrong hands. Many experts believe the benefits outweigh the risks.

To solve the issue of privacy concerns, it has also been proposed that patients should be allowed to decide if their information can be shared for data mining purposes. Those who opt to share information can enjoy the benefits of a tax break, which will encourage more people to participate.

Data Mining in the Future

The application of data mining in improving aspects of the healthcare industry has largely been facilitated by the transition from paper records and files to Electronic Health Records. Practitioners in the healthcare industry can dispense information across different sectors of healthcare. This has enabled the players in the healthcare sector to eliminate mistakes, develop more comprehensive documentation of processes and procedures, and enhance the level of patient care.

According to a report by McKinsey Global Institute, data mining is expected to help in cutting costs further. The report states that if big data is applied with the aim of enhancing quality and efficiency, its value could rise to about $300 billion annually.

Conclusion

Data mining is set to play a very important role in minimizing costs in healthcare, the development of best practices and treatment options, determining and enhancing efficiency, detecting false medical and insurance claims, and to ultimately raise the level of patient care.

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Six Sigma is a methodology whose origins can be traced to manufacturing and uses metrics to determine the quality of the processes. What is its objective? To fine-tune processes to perfection. This is done by identifying faults and reducing deviations within the system. Six Sigma has been found to boost the motivation of staff, quality and overall efficiency.

Applying Six Sigma to procurement processes involves the use of analytical tools provided by the methodology, and using these tools to improve human resources for higher productivity. Six Sigma provides techniques that are efficient in discerning errors in the organization’s procurement processes.

Application of Continuous Improvement in Procurement

With Six Sigma’s continuous improvement process, you can tackle any type of procurement processes within your organization. As you begin the process, you need to remember that the first step in Six Sigma’s DMAIC is Define. The first step demands that the targeted process be clearly outlined and that it should be determined whether the process can be completed within a reasonable time frame and produce a significant return on the process invested in it. The following are some of the procurement processes where Six Sigma has been successfully executed:

Reduction of Cycle Time

Six Sigma seeks to reduce waste by using quality metrics to identify errors. Using CTQs as a benchmark, those procedures that are Critical To Quality are given a higher priority. These techniques can be applied to many different processes including invoice approval, contract development, supplier on-boarding, requisition to order, amongst others.

Transaction Quality

Besides determining purchase orders that do not require corrections, other projects to be considered are:

• First-pass invoice match rates
• Requisitions that are correctly coded and classified
• Electronic orders
• Line item visibility spend

While Six Sigma is a methodology and not a standard that is not most ideal to use here, attaining more than a 90% score across these measures is a sure sign of high performance.

Adoption of Technology

Six Sigma may also be used to track the key variables that indicate adoption after implementing a new system. The methodology suggests that both the adoption rates of internal users and vendors be tracked as the part of the best practices that will guarantee an ROI for the technology investments made by the organization. Some examples include:

• Six Sigma can be used to track the percentage of internal users adopting new tools. It is important to note that adoption rates for applications that are tailored specifically for procurement yield higher adoption rates than enterprise-wide applications. In enterprise-wide applications users will often use other methods of completing the transaction as long as these methods are available to them.
• The percentage of vendors with electronic transaction systems. Here the 80-20 rule should be applied. Focus on the 20% of the suppliers responsible for 80% of the spend and prioritize them over the 80% responsible for 20% of the spend.
• The fraction of indirect RfQs that are from e-sourcing. A score of 85% for indirect RfQs is excellent while for direct a good score is about 50% and over.

Compliance

The application of Six Sigma comes from the recognition that every process has a designed output. Therefore Six Sigma can be used to pinpoint those errors that may result in non-compliance. This is important for profitability and as well as reducing the regulatory risks associated with the process. Some areas that could be tracked include:

• Contracts created, purchase orders issued, invoices paid, and suppliers on-boarded, without following the right procedures
• Pinpointing suppliers who are not ideal for the business or those that have been blacklisted in the past
• Identify RFQs that do not meet standards such as competitive bidding or includes a broader list of suppliers
• Identify vendor certificate and contracts that are about to expire, are expired, or in the process of auto renewal

Conclusion

Six Sigma can be of great benefit to an organization looking to enhance its human resources. Staff can be released from processes that contribute to waste and errors, as they focus on core tasks that are of more value to the organization.

As a tool for continuous improvement, Six Sigma encourages a paradigm shift in the way the organization handles and implements procurement processes. A leaner chain is created as the variations that lead to wastage, whether with processes, equipment and human resources, are eliminated. This learner chain yields better results for both internal and external clients.

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