Lean Six Sigma Simplified Lean Six Sigma Simplified
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- 1. The Journal of Profits Through Process Innovation Lean Six Sigma Simplified Process Innovation Guru Jay Arthur Reveals the Secrets of Lean and Six Sigma_________________________________Developing a Lean Six Sigma MindsetDeveloping a Lean Six Sigma Mindset_________________________________ What is Lean? What is Lean? _________________________________What is Six Sigma? What is Six Sigma? _________________________________ The Power Laws of Speed The Power Laws of Speed _________________________________The Power Laws of QualityThe Power Laws of Quality________________________________ Page 1
2. The Journal of Profits through Process Innovation0 Lean Six Sigma A Personal Message from Jay Arthur Dear Business Leader, Have you ever sat down to figure out how much money painful. Still is. Studies have shown that downsizingyou're losing because of misses, mistakes, errors,will cost you 25% of all employee productivity. So omissions, defects and delay? If downsizing better save more than 25% or you'll have a your business is like 99% of all net loss. businesses, you're blowing 25- 40% of your profit margin to dealLet me ask you this question: If you had 25% more with, remedy, resolve and mitigate staff, what new and interesting customer serving projects these kinds of problems. Now,would you undertake? What new products or services maybe your people are perfect andwould you create? What possibilities would you never make mistakes, maybe yourembrace? Thats the power of Lean Six Sigma: more processes are so mistake-proof profit from streamlining your existing processes which that nothing ever goes wrong, butwill free up resources to do things you just don't have be honest: Isnt there some leveltime to do.Jay Arthur of daily crisis management thatIn the phone company, I worked with teams that found youways to save tens of millions of dollars. Since I left thewish didn't exist? Arent there too many complaints, toophone company in 1996, Ive helped other companiesmuch rework, too much waste, too much fire fighting and find ways to simplify, streamline, and optimize theirtoo much heroism by employees on a daily basis? processes to add $25,000, $250,000 or more to theFifteen years ago, I was working in what Henry Miller bottom line. The methods and tools are simple, but onlyonce called the Cosmodemonic Telephone and one company in 50 will take the time to learn and applyTelegraph Company. Like most monopolies, we could be them. Most people would rather rely on gut feel, commoninefficient and ineffective as long as we didn't irritate too sense, and trial and error to find and fix the problems inmany customers or regulators because we could raise their business. But here's what I've learned: at someour rates to extract our government specified rate of level of speed, quality and profitability these inherentreturn. Around that time, Total Quality Managementproblem solving tools stop working. That's when you(TQM) was all the rage and I got involved because need a new and improved toolkit to jump to new levels ofcompetition from other phone and cable companies wasperformance and profitability.on the rise. One way or another, we were going to haveIf youre open to it, this magazine is packed with insightsto start to squeeze our costs to maintain our margins.and resources to accelerate your productivity and boostDownsizing is one way to get results. It forced managersyour bottom line.to stop doing all kinds of useless things, but it was prettyJay Arthur Page 2 3. Lean Six Sigma SimplifiedInside this Issue Developing a Lean Six Sigma Mindset ___ 4What is Lean? _______________________ 8What is Six Sigma? ___________________ 9The Power Laws of Speed ____________ 10The Power Laws of Quality ___________ 11 KnowWare International Inc.dba Lifestar 2244 S Olive St. Denver, CO 80224 888-468-1537 firstname.lastname@example.org MMVI KnowWare Page 3 4. The Journal of Profits through Process InnovationAre You Overlooking the Biggest Profit-Making Opportunity in Your Business? Im willing to bet that your business can be a lot moreThese errors arent your fault and theyre not the fault of profitable than it is now. Ive worked with businesses your people. Its your systems and processes that are at ranging in size from an independent muffler shop tofaultthey let people make mistakes that could be hospitals to Fortune 50 companies. Ive helped them save prevented. anywhere from $25,000 to $25 million that could be added to the bottom line. The process is simple, but almost everyEvery Process Produces business overlooks this opportunity to bank more cash andTwo Unwanted Side Effects boost the bottom line.Every process produces defects and delays. The defects Every Business Has have to be fixed or scrapped. Big leak #1: Fixingmistakes that shouldnt have been made in the first Two Sources of Cash Flow place that consume time and money that could be better Cash is the lifeblood of your business. Businesses are spent serving customers and boosting the bottom line. only as healthy as their cash flow. Every business has two Big leak #2: The delays that cost you time and money sources of cash flow:that dampen your productivity and profitability. 1. External customers give you money for your products Even a small reduction in defects and delay in yourand services. The traditional wisdom says that you need mission-critical processes can give you a sustainableto sell more to more customers to increase your cashcompetitive advantage. Customers arent stupid. Theyflow. can tell a finely tuned supplier from a clumsy one. Once 2. Internal processes are another source of cash because you have a head start, your competitors will always bemistakes, errors, defects and delays make yourplaying catch up.business leak cash like a rusty bucket. Why are internalSecret #1: Work ON Your Business, Not IN Itprocesses a source of cash? Because when you plugthe leaks, you get to keep all that money!In the 1970s, I owned a Mustang. I loved to drive in mycar and I liked to work on my car, but I couldnt both Id like you to consider that most businesses spend all of work on my car and drive in it at the same time. As you their time and money focused on trying to fill the cashknow, if you dont periodically change the oil, tune the bucket with new customers and virtually no money engine, fix the brakes, and change the tires your car will plugging the leaks caused by internal processes. Almostmost likely breakdown. And it will most likely break down every company will spend a small fortune trying to gain aat the least opportune moment. While most business Mindset slight edge in marketing and sales that will allow them to owners will take time out of their hectic schedule to have get or keep a customer. The only problem is that thistheir cars serviced, most never think to do the same for elusive edge is constantly in peril from competitors and the their businesses. fickle perceptions of customers. You can never fully control this aspect of your cash flow. Do you feel like your business is controlling you, not theother way around? Can you leave your business or You do, however, have complete control of the processesdepartment in the capable hands of your employees or and technology inside the gates of your business. Everydoes it demand too much of your attention? Is your process leaks money. Even if you only make one mistake business an asset that any sane business person would in every 100 orders, bills, purchase orders, products or want to buy or franchise, or is it too chaotic? services, that one percent error rate can add up to 6-12-18 percent across your business.In the 1990s, Michael Gerber captivated the attention ofbusiness owners with a book called the E-Myth. He The Juran Institute has found that the cumulative cost ofargued that most people spend all of their time working in mistakes, rework, and scrap will add up to 25-40% of yourtheir business, but most never work on their business, total expenses. Dont believe its that much? Spend a daycreating and improving the processes and systems that tracking every mistake, glitch, and customer complaint inminimize mistakes and maximize output. If you want a your business. Then calculate the cost of finding and fixing reliable, dependable business that consistently produces each one. How much time does it take? What does it cost? predictable results, you will need proven methods and If you and your employees werent fixing the mistakes, tools to make it happen. what could you be doing instead? Multiply this by the number of days in the week, month, or year. Ouch! Page 4 5. Lean Six Sigma SimplifiedSecret #2: Become Process-Orientedof these two methods to solve the more mysterious and complex problems begins to fall off. Eventually, they stop Its easy to be seduced by the excitement of crisis working all together. This early-success and later-failure management and firefighting. It becomes a way of life in syndrome affects all problem-solving methods. Its often most businesses. When daily heroics are required to shown as an S-curve. avoid missing commitments and preventing defective products from escaping into the hands of customers, Throughout time, people have routinely found ways to companies come to rely on heros.solve seemingly unsolvable problems. Edison invented the light bulb. The Wright brothers figured out how to fly. But Develop a This is another mistake. People- to do this, they invariably had to invent new ways to solve oriented businesses believe that Plug thequality and productivity are a function problems that exceeded the grasp of the old methods.Leaks of their people, not their processes. People-oriented businesses have to Fortunately, the methods and tools for creating and improving your processes and systems have already been Mindset!pay a premium for the best people.developed and proven in every industry. I have found that When these people leave, they take their highly refined a few key tools used in the right order are all you need to mental processes with them. start making immediate breakthrough improvements in speed, quality, productivity and profitability. Process-oriented businesses, on the other hand, rely on mistake-proof processes to ensure that products and Double Your Profits services are delivered on time and error-free. Process- oriented businesses have procedures for everything from If youre like most businesses, reducing costs by 20% cleaning restrooms (e.g., McDonalds) to maintaining Navywould more than double your profits. To make this easy, fighter jets. When you have good processes, theres lessIve created a complete tool belt for working on your need for overtime and you can hire the lowest skill-level business. Its all here: methods, tools, technology, and necessary for the job. Labor costs are cheaper becausetraining to handle everything you need to plug the holes in you arent bidding for a small group of the best people.your cash flow and start saving 20-35% of your expenses. Best of all, you can go on vacation, secure in theDont Have The Time? knowledge that your business will run itself. The urgencies of any business can consume all of your Secret #3: Implement a Proven time. Fortunately, given the right gauges on the dashboard Improvement Systemof your business, its easy to diagnose where to focus your improvement efforts even while you are still working Most managers and business owners think they should in your business. Thats why we created the QI Macros be able to find and fix all of the problems in theirsoftware to simplify your initial foray into measurement business, and they can up to a point, but then they hit a and improvement. wall. This isnt your fault. Research has shown that one set of problem solving methods (e.g., common sense andToo Busy Bailing to Plug the Leaks? trial-and-error) will work for a certain class of problems, Every business has to improve the key aspects of but not another. Then you need a new set of methods and performance every year just to keep even with the tools to solve the next class of problem. Consider competition. The only question is whether youre going to antibiotics: they fight bacterial infections, but not viruses rely on the declining effectiveness of common sense and like the common cold. The same is true in business. trial-and-error or are you going to upgrade your ability to When people first start a business, processes are created solve the stubborn, seemingly unsolvable problems in your by accident in an ad hoc way. Problems with the business? If you arent going to employ the proven processes are fixed using common sense and trial-and- strategies of Lean Six Sigma, what are you going to do error as the business grows. But at some point, the ability instead? Calculate Your Benefits Your Business Reduce Costs Increase Sales 1. Annual Gross Revenue$____________ $10,000,000 $20,000,000 2. Annual Expenses $____________ $ 9,000,000 $18,000,000 3. Current Net Profit (#1-#2)$____________ $ 1,000,000 $ 2,000,000 4. Reduce Expenses by 10%$____________ $ 900,000 5. New Net Profit (#3+#4)$____________ $ 1,900,000 Which is easier? To increase sales by 100% or cut your costs by 10%? Page 5 6. The Journal of Profits through Process InnovationPlug the Leaks Every business succeeds or fails through a combination ofpeople, process and technology. The Plug the LeaksSystem shows you how to make dramatic performance improvements that will improve operational efficiency and boost the bottom line. Four Steps to Productivity and Profit Learn How To Maximize Your Profit UsingFREE! This Four-Step Million Dollar Improvement Strategy 1. Lean Six Sigma Lessons On Line 1. Develop Laser Improvement FocusYou get seven emailListen to the Voice of the Customerlessons on how to startIdentify the Critical to Customer Indicators making improvements!Develop a Balanced Scorecard of2. The QI Macros for Excel Performance 30-Day Evaluation 2. Double Your Speed by Eliminating Your Download the lessons andSpeed Bumps software for FREE right 3. Double Your Quality Using the 4-50 Rule now.4. Monitor and Sustain the Improvement www.qimacros.com/freestuff.htmlPage 6 7. Lean Six Sigma Simplified in Your Cash Flow Turn Your Cash Cow into a Golden Goose Every Business Has Two Core Process Problems: Defects and DelayI believe that your teaching4% of any business causes 50% of thematerials are the best format andwaste, rework and lost profit. Laser focusmost simplistic on the market. I amin a position to share your materialsyour improvement efforts. with the continuous improvementteams at my Ford location (Oakville25-40% of profits are wasted fixing defects.assembly plant).Learn to use the 4-50 rule and tools to Wallace Tait, Ford of Canada eliminate unnecessary mistakes and errors.As a certified Six Sigma Black Beltwith more than $30,000 of SixYour people are busy, but your product is Sigma training under my belt I feel Iam qualified to state categoricallyidle 95% of...