Operational excellence through lean & six sigma

Business Transformation through
Operational Excellence

Harsh Upadhyay

engineerharsh@yahoo.co.in


Operational Excellence is a philosophy of leadership, teamwork and
problem solving resulting in continuous improvement throughout the
organization by focusing on the needs of the customer, empowering
employees, and optimizing existing activities in the process.

Strategic weapons for operation excellence’s are (but not limited to…)
• Lean
• Six Sigma
• Lean Six Sigma

Reference: http://en.wikipedia.org/wiki/Operational_excellence

Strategic Weapon For Operational Excellence

What is Lean?
Lean is a set of principles whose fundamental goal is to eliminate waste and
maximizing flow.

What is Six Sigma?
Six Sigma is about meeting customer requirements and stakeholder
expectations, and improving quality by measuring and eliminating defects.

What is Lean Six Sigma?
Lean Six Sigma is a combination of Lean methods and Six Sigma approach
which do more than simply improving processes by innovating business areas
including operations, products, services and business models. It enables
break through innovation thus destroying obstacles by creating an
organizational climate in which innovation is instinctive.


Continuous Improvement- The Key to Excellence in Execution
Improvement-

Continuous improvement can be achieved by operational excellence
methodologies like Lean, Six Sigma, Lean Six Sigma. It focuses on process
improvement and behavioural improvement of people and organization

Lean focuses on reducing non-value Six Sigma focuses on reducing process
add time variation

Source: Continuous Improvement (The key to excellence in business processes) -Accenture

Challenges With Implementation of Operational Methodologies

Unsupportive culture and climate in the organization

Lack of clarity in linking strategy to execution

Limited focus on process excellence

Little engagement or no engagement of top management

Inadequate or insufficient metrics which are not aligned with customer value

Lack of Employees engagement towards continuous improvement culture

Treating continuous improvement as a project/program instead of a journey


Strategies For Implementation of Operational Excellence

Leaders in organization must lead operational excellence initiatives

Operation excellence initiatives must be driven on organization’s top burning
issues which are highly critical for customer and stakeholders

Focus on values
Customer value and shareholder value are not created by the same
activities. As a rule, customers do not care what it costs to deliver a
product as long as that cost is not passed along however shareholders care
a lot about the costs for which that product is delivered
For getting higher impact, the continuous improvement initiatives should
maintain the balance between these values

The organization should adopt issue-based or value-driven approach to
issue- value-
problem-
problem-solving and process improvement


Strategies For Implementation of Operational Excellence

Organization capability enhancement through training and on-job coaching
on-
enabling continuous improvement initiatives to become self-sustained
self-

Promotion and retention of associates with deep operational excellence
expertise is critical

Top caliber high performers should be identified as “change agents” who can
drive operational excellence initiatives in the organization

Technology must be agile and responsive enough to support an organization’s
operational excellence agenda

Measurement of continuous improvement initiatives through PDCA or RCA in
pre-defined and timely manner
pre-


Develop “T” People

People who have broad experience in operational excellence
People with deep skill in operational excellence
Equal effort between “Going Wide” and “Going Deep”

Spread Operational Excellence Across the Organization

Develop Depth of
Capability within the
Organization


Final Thoughts

“Every day, little up”
“Some days, big up”

“Until you take the first step, it will not be possible
to see the next step”

Case Studies


Operational Excellence Deployment in Caterpillar

Business Case
The Caterpillar's growth was limited due to four years of flat revenues and
extreme competition

Operation Excellence Methodology
Lean Six Sigma

Goal of Lean Six Sigma Deployment
Determined to regain its industry leadership position and continuous growth
by customer-driven innovation and continuous improvements
customer-

Scope of Deployment
27 separate business units and over 72,000 employees in six continents with
multiple spoken languages


Operational Excellence Deployment in Caterpillar

Action taken
The CEO along with the strategic planning committee analyzed the
customer requirements, market conditions and Caterpillar's capabilities
and determined the vision of 2020 for the organization with 3 five years
plans across all business units to achieve the vision. Through the rigor
and disciplined enforced during the initiative, the entire company was
aligned behind the same and specific objectives
Trained 4200 employees in Lean Six Sigma who drove 1100 projects and
served as mentors to the rest of organization

Result
Record profits and company achieve its 2010 goal


Operational Excellence Deployment in PASCO

Business Case
The PASCO's growth was impacted due to low cost competition and its limited
regional foot prints

Lean Six Sigma

Becoming a value added steel maker rather than a low cost steel maker
by driving Six Sigma culture to change all employee’s way of thinking,
current working style and mind-sets
mind-



Actions taken
Trained employees in Lean Six Sigma
Collected customer requirements and recommendations by sending their
engineers to key customers which helped PASCO to understand the
several product areas where customers were looking for more innovative
solutions
Focused on high potential market (Shipping and Automotive industries)
where the company wanted to concentrate their R&D which led to major
product innovation. For example, the company invented steel that
remains rust-free in salt water, creating significant opportunities in
rust-
shipping and floating dock constructions
Using Lean Six Sigma to drive interactions with global automakers, POSCO
developed 21 varieties of high-grade steel designed to meet special
high-
industry needs, such as coated steel where the paint adheres easily



Action taken cont.
For maintaining the customer demand, PASCO increased global presence
and with the help of Lean Six Sigma, it reduced finished steel inventories
and cut lead time by 50%.
In addition to growth and profitability, the Lean Six Sigma approach helped
POSCO to restore and protect Korea’s natural environment by approaching
an iron-making process that eliminates the sintering and coking processes,
iron-
which, in turn, reduces environmental pollutants

Result
POSCO has produced over US$ 1 billion in financial gains to date, including
strong savings and record sales volumes
Company has transformed itself from a regional, low-cost producer to a
low-
global, value-added provider of high-quality steel. POSCO is now the third
value- high-
largest steelmaker worldwide with “world’s most competitive steel firm”
for three consecutive years.

Operational Excellence Deployment in ScotishPower

Business Case
ScotishPower was losing its market share because of high customer attrition
rate

Lean Six Sigma

Improve its customer service and sales operations thoroughly, to regain
a market-leading position
market-


Operational Excellence Deployment in ScotishPower

Action taken
Established Business Transformation Department and trained hundreds of
employees in Lean Six Sigma
Launched 130 Lean Six Sigma Projects
Designed the new process that approach to those clients who moved to
different home and canceled their ScottishPower services
Applied Lean Six Sigma to burning issues. For example, targeted marketing
campaign that boosted use of direct debit payments by 14 percent, a
simplified sign-up process for business customers that led to a 20 percent
sign-
increase in acquisition, and new meter reading processes with lower costs
and higher accuracy

Result
Customers base increased from 3.2 million to 5.1 million in just four years
Realized US$ 170 million in additional revenue and cost savings


Operational Excellence Deployment in UNS Healthcare

Business Case
UNS Healthcare is an 800-bed public hospital and trauma center, whose
800-
capacity was stretched to the limit. They needed more space but adding a new
bed costs a million dollars and takes several years. The length of patient stay is
a critical measure of effectiveness and efficiency. A shorter stay means that
beds turn over more quickly and hospitals can treat more patients without
investing additional capital.

Lean

Goal of Lean Deployment
Reduce the length of stay by 10% without affecting the quality of care



Action taken
Pilot program kicked-off in the orthopedics, medical oncology, pulmonary
kicked-
and infectious disease areas
Determined the care plan and target discharge date of each patient at the
time of admission into hospital.
Smooth communication between hospital and patients about target date
of discharge and steps involved in the process
Written care plan and a whiteboard in every room with daily goals to help
keep the patient focused on his or her discharge date

Result
Freeing up three to four hospital beds each day.
Patient satisfaction scores went up by 10% over historic averages.
Implemented the pilot program actions into the entire hospital, effectively
raised capacity by about 80 beds and add $ 35 million to the bottom line



Other Action with Lean initiatives were
Top-
Top-down review of day-to-day administrative procedures
day-to-
Reduced the waiting time of care performed by taking appointment in
advance with proper load-balancing
load-
Improvement in patient hand-offs- review of how many times patients are
hand-offs-
handed off during their hospital stay. When hospitals adopted lean
methods, they said “they tend to stop passing patients between care
professionals”. Instead, they developed care teams of dedicated
professionals who handled patients. “This reduces handoffs, it reduces
medical errors, it reduces length of stay, and it improves patient
satisfaction greatly.” More handoffs lead to more medical errors. And
more medical errors lead to longer lengths of stay


Operational Excellence in Financial Services

Lean implementation in financial services is same as Lean implementation in
manufacturing. Finance is just a different kind of factory. It is a processing
factory, and there’s a lot of waste. Becoming lean involves eliminating the
seven type waste in a process i.e. overproduction, waiting, over processing,
poor transportation/logistics, inventory control, rework, and unneeded
movement
Impact of lean initiatives in financial services look like:
An international commercial bank discovered the potential for 30% more
efficiency in processing customer transactions – while improving customer
satisfaction through more differentiated service
A lean audit of one North American asset manager uncovered ways to
make product pricing 12%-20% more efficient by carefully identifying and
12%-
eliminating non-value added activities
non-
Analysts using a lean approach in one investment bank reportedly gained
20%-
20%-30% in analyst productivity and a 60% reduction in cycle time by
redefining credit processes


Customized Continuous
Improvement Approach
- By Leading Consulting Firms


Adopting a Lean Mindset—A.T.KEARNEY
Mindset—

Lean mindset is the advocate of persistently pursuing the continuous
improvement in cost, quality and service

4 principle of Lean Mindset are:
1. Define Value for which customer is willing to pay
Define customer
Understand customer needs
Define customer values in term of quality, schedule and cost to fulfill
customer needs
2. Remove Non-value added activities and process
Non-
Value stream Map (Pre & Post)
Apply 5s and visual control system
Implement Flow
Implement pull system


Adopting a Lean Mindset—A.T.KEARNEY
Mindset—

3. Process improvement ownership must be aligned with process owner and
process team

4. Strive for perfection (continuous improvement) through idea generation
programs, innovation programs etc to make the process even more efficient
and effective.


Customer Focus Through BeLean™ - By Capgemini

BeLean™ Methodology
BeLean™ focuses on process or operation re-engineering and operational
re-
excellence by focusing on process, people and organization through
implementation of Lean and Behavioural Change Management

Its approach is the 3 Lean Principle:
1. Lean must bring about behavioural change
2. Lean must be tackled holistically, focusing on people and organization as well
as processes
3. Deployment must be progressive – it must happen level by level

Adopting these three principles makes Lean a means to achieving
sustainable results – whether financial, operational, cultural or all of these.


Customer Focus Through BeLean™ - By Capgemini

Deploying Progressively
Sustainable results are a consequence of behavioural change, which does
not happen overnight. Therefore it is clear that a progressive approach to
deployment taking one level at a time - will build a stronger result

Level-1 (Taking control)
Quick wins to create momentum
and build a foundation of basic
capability from which to
progress

Level-2 (Creating excellence)
Delivering transformational
results, embedding the Lean
culture into the new business
How to implement Lean successfully and deliver results that last-Capgemini

3 Phase Customer Improvement Approach- By Accenture
Approach-

The objective of 3 Phase continuous improvement approach is to sustain
Behavioral changes throughout the organization
These 3 phases are:

1. Business Evaluation – Focus on identify opportunities by capturing the
customer’s voice and shareholder’s voice

2. Develop Transformation Roadmap- Determine the long term vision by top
Roadmap-
management, identification of manager who drive the implementation and
implement the quick wins through Lean, Six Sigma or Lean Six Sigma.

3. Execute and build capability- Transfer the business improvement skills through
capability-
training and on-job coaching enabling the CI program to become self-sustained
on- self-


Thank You


Operational excellence through lean & six sigma

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