Just the phrase "Six Sigma" or "lean manufacturing" or "lean distribution" can make many people's eyes roll. Mention "black belts," "jidoka" or the "gemba" and they will stifle a yawn or let out a derisive laugh. Such are the reactions of those who've experienced all of the pitfalls and none of the rewards associated with these strategies for operational improvement.
Lean is all about reducing waste by making processes more visible and making material flow. Six Sigma is about reducing process variability and the defects those processes create. Six Sigma follows a disciplined, data-driven methodology to reduce defects — here's where the eyes tend to roll — below 3.4 defects per million opportunities. Out of "do or die" necessity, more manufacturers than warehousers or distributors have applied these techniques to reduce inventory, improve productivity and save floorspace.
"People fail with Six Sigma for two reasons," says Satya S. Chakravorty, director of consulting services for the Facility Group, Smyrna, Ga. (www.facilitygroup.com). "First, they don't do enough analysis on the value from the customer's point of view. They need to see how they're adding value. Second, the focus needs to be on the revenue, not on the cost. People don't understand value streaming so they end up looking at cost."
In business cutting costs often means cutting headcount, and when that connection is made by the heads on the chopping block, any lean or Six Sigma program is bound to meet stiff, self-protecting opposition. That's a major trap, and why some organizations make a pledge not to layoff any people as a result of process improvements.
This article will identify five more of the traps associated with implementing lean and Six Sigma programs. For help, we've asked some lean experts with a combination of academic and field experience, to weigh in with their advice.
Trap #1. It All Starts with Hardware
The temptation for material handling managers hoping to fix problems with flow and disorganization is to concentrate on getting the right racks or material handling equipment. The biggest waste in distribution comes from doing this before managers really understand how much inventory they're carrying.
The way around: Identify product flows, streamline them, and simplify processes. Only then should managers contact material handling equipment vendors for their take on what new equipment might or might not be needed.
"The problem comes when companies look for good solutions from the outside and they don't take enough time to develop their own problem-solving skills. By exercising those skills, you will save on rack and material handling systems," says Satya S. Chakravorty, The Facility Group.
"We are not investing significantly in technological tools to be successful [with lean] but instead are focusing on what we, as employees, can do to eliminate waste and improve our operations," adds Lon McAllister, V.P. of Manufacturing for the Jervis B. Webb Company (Farmington Hills, Mich., www.jerviswebb.com). "Consultants can help guide the way. We are also using lean as a tool for best practices in ERP. Due to lean we reorganized our warehousing and manufacturing operations to increase overall efficiency by more than 20%."
Trap #2. A Few Hours of Training Is All Employees Need
If management doesn't allocate enough resources or personal attention to a lean or Six Sigma program from the beginning, it will never get off the ground. Inadequate training, or even too much training and not enough application of the tools and techniques, is a sure ticket to failure. Eventually, through training and application of knowledge, and steady progress, a successful culture of continuous improvement becomes organic, which then must be carried forward by succeeding generations of management.
To ensure steady progress find a dedicated internal or external expert to champion and guide the organization's process improvement efforts. If improvements reduce labor requirements, take advantage of normal attrition and reassign the freed-up people elsewhere to further drive improvements.
"The best way to get support from the people out on the floor is to allow some number of them to stay with the process and continue to generate results by doing more lean events," says Bruce Tompkins, principal, Tompkins Associates (Raleigh, N.C., www.tompkinsinc.com). Tompkins is referring to three- or five-day projects where a cross-functional team of employees tackles a specific problem area. "Start out with an [event] pace you can handle—maybe once a month or every couple weeks. Spend the first day getting trained and understanding the scope of what you'll do. The next couple days, make process improvements, experiment with the tools of lean and Six Sigma. On Friday, report the results and celebrate successes. Eventually you'll build a schedule of events that over a period of time will result in real improvement across whole areas of an operation."
Trap #3. Reduce Inventory in the Factory, But Not the Supply Chain
If a manufacturing operation has a separate materials and parts warehouse, as inventory levels are reduced in the factory, there's a temptation to stock up in the warehouse. Move as much inventory out of the factory, out of the warehouse and out of the supply chain, as practical.
"You need to treat warehousing and the plant as one," says Kevin Prouty, senior director manufacturing solutions, with Motorola (Holtsville, N.Y., www.motorola.com/symbol.). "Get a handle on the tempo of your manufacturing facility. As you improve the process of manufacturing, the goal should be to reduce warehousing. By moving inventory out of the plant and putting it in a warehouse, the warehouse becomes an operation by itself. I'm a big believer that you shouldn't use warehouses unless you have to. That said, I don't think we'll ever get to the point where anyone's supply chain is predictable enough not to need warehouses or inventory. But you can reduce both."
Trap #4. Housekeeping Is for Sissies
If there's chaos in the warehouse or distribution center, that's a clear cry for improvement. For many organizations the process of cleaning up the workplace, getting rid of what's no longer needed, and identifying specific storage locations for everything else, is the starting point for lean.
There is a productivity advantage to having an organized workplace, in keeping with the philosophy of kaizen, which is generally translated from Japanese as "continuous improvement." It all starts with the five Ss: Sort, Set in order, Shine, Standardize and Sustain. Applying these concepts helps simplify the work environment while reducing waste and non-value-adding activity and improving quality, efficiency and safety.
"If you've set up your 5S program properly, you should be able to find a place on the floor where you can stand and just by looking you can tell if things are normal and going as planned," says Tompkins. "People shouldn't want [consultants] to work on a 5S program for them, they should venture off on it themselves, then call a consultant in once they can see a little better and determine the things they can do to improve their processes and apply the lean tools."
Trap #5. Put Outside Consultants in Charge
If managers decide to hire outside consultants, they should start by training the executive team in core ideas and concepts. A company's leaders have to be fully on board for lean or Six Sigma to have a lasting impact.
Consultants can bring the managers together to talk about the issues and help make sure a program stays on track. But engineers and supervisors should train the operators.
"The statistical sophistication [consultants bring] is only 5%," says Chakravorty. "The other 95% of the time you're teaching people how to solve problems and you want that to be initiated by your people. That should not be very expensive."
Keep Score on Lean
One manufacturer of industrial equipment contacted for this article uses scorecards to identify opportunities to improve its processes. The company starts with a control chart listing expected work performance for various functions. In picking, for example, if the charted performance is difficult for an operator to achieve, he might indicate that a particular item is hard to pick and might be better slotted in another area. The control charts are used to uncover problems that can be corrected.
"The computer can tell you how many lines were picked, but it won't tell you about the issues affecting that process," says this manufacturer's shop floor manager. "We also do value stream mapping to show where there are redundancies. We may look at eliminating some handoffs to improve a customer order's velocity. Before, it would take a long time for us to get back to a customer with a quote."
This manufacturer also conducts regular process improvement events. Managers have created product modules and determined who in its plant and distribution center has to do what at each handoff. Today it takes a day to get something to a customer that once took a week.
The Leaning of a Grocery Chain
Sotetsu Rosen's 250 suppliers ship product packed in aisle-ready cases and returnable containers directly to the DC. The facility handles approximately 6,400 SKUs, including processed foods, confectionery, liquor, daily necessities and clothes. Some of this product goes into buffers to accommodate surprises in the shipping schedule.
The DC does small-lot delivery twice per day, 365 days a year. A variety of material handling technologies make this possible, including a mini load (case) and unit load (pallet) AS/RS (automated storage/retrieval system) and high-capacity automatic sorters, all supplied by Daifuku America Corp. (www.daifukuamerica.com). The equipment helped Ryoshoku increase distribution efficiency by reducing delivery lead time and by reducing the workload at stores.
In an assessment of store-level material handling, Ryoshoku managers found that 63% of a store's processing hours can be affected by what happens in the DC. For example, the Aikawa distribution center has eliminated inspection in the stores. Every delivery that comes in is as close to 100% accurate as possible. That keeps the back storage rooms at the stores tiny. Receiving and sorting bulk products once consumed 25% of the stores' labor hours. Now all of that work is done in the DC.
As a net result of the lean approach and enabling technology, inventory in the DC has been reduced 20% with an error rate of one in 100,000 transactions.
There's more than one tool for building a lean operation. Where managers start depends on company priorities and the capabilities of supply chain partners.