A CASE STUDY ON HOW TO PRODUCE SUBSTANTIAL AND LASTING PROCESS IMPROVEMENTS
By Tom Sanderson
Now more than ever, companies – regardless of industry – are looking for ways to improve customer service while also cutting costs and growing the top line. This often requires a major shift in thinking – from the top down. One of the best ways to drive organizational change is to identify and communicate a “burning platform” reason for change that gains buy-in from all employees. For my company that moment came in 2005 – we were losing money, not growing and customer satisfaction was low.
As a third party logistics (3PL) provider, we serve as an extension of our customers’ businesses and focus on process improvement both within our own company and within our customers’ organizations.
After recognizing the need for a formal process improvement methodology and set of tools, we implemented Lean Six Sigma (LSS) which has produced substantial and lasting results – both internally and for our customers.
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What is Lean Six Sigma?
LSS is the combination of two powerful approaches to continuous improvement. Lean focuses on reducing waste by eliminating non value-add activities. It seeks to eliminate the “Re”s – rework, returns, rejects, etc. Six Sigma’s focus is improving process consistency and minimizing variation. The focus is on measures critical to quality in the eye of the customer. These approaches go hand in hand. Lean speed enables Six Sigma quality while Six Sigma quality enables Lean speed.
Why Lean Six Sigma?
Many businesses today focus on three areas: people, process, and technology excellence. But, they often don’t live out process excellence. LSS provides a methodology and set of tools that can make the promise of process excellence a reality. This approach helps companies make better decisions, eliminate waste, and increase service and process reliability.
How to Implement Lean Six Sigma?
Initiating change in any organization can seem like a daunting and expensive task. But if done properly, LSS pays for itself. Here are some critical steps for implementing a successful LSS program:
- Finding a Partner to Guide Your Approach: In order to establish a solid foundation for the program, we needed help getting it off the ground. We selected George Group (since acquired by Accenture) because of the company’s thought leadership in LSS for service organizations and its location in Dallas, near our headquarters. We also chose TMAC, a business outreach program of the University of Texas Arlington, for training and certification. TMAC was a good fit because the program licensed George Group material and focused on companies our size – about 500 employees at that time.
- Selecting a LSS Deployment Champion: When selecting our LSS Deployment Champion, I initially wanted to go outside and get an expert. However, TMAC recommended we choose someone from inside the company who had the respect and trust of our organization. TMAC can teach LSS; the leader had to already have the trust of the organization.
- Structuring the Program: LSS projects are led by black belts and green belts. We dedicated one percent of our total staff as black belts to start the program. Our black belts receive four weeks of training from TMAC, serve a 12-24 month full-time tour of duty in LSS, and then rotate back into the organization in leadership roles. We also hired a master black belt from a competitor to help the initial team learn the tools and methodology – this can be a big help. Our green belts are trained and certified internally, keep their day jobs, and work on larger black belt directed projects or lead their own smaller projects.
For black belt selection, pick the BBs, not the AAs. That is, select the “best and brightest,” not the “average and available.” The key qualities we look for in a black belt are the ability to overcome obstacles, logical thought process, positive attitude, respect of and for others, eagerness to learn, knowledge of the organization and good communication skills.
The LSS deployment champion reports directly to me and we conduct formal project gate reviews that include the executive team and other key stakeholders. Insist that no project ever celebrate a birthday (i.e., take longer than one year).
Selecting the Right Type of Projects: Selecting the right type of projects is critical to LSS success. Larger projects are broken into five phases: Define-Measure-Analyze-Improve-Control (DMAIC). Smaller projects are referred to as kaizen events (Japanese for improvement) or even faster “quick wins.” We looked for processes inside the order-to-cash cycle, since that is where the real money is. We also looked for projects with high economic value and low effort required. But remember, LSS is not a panacea for all that ails a company. Without a willingness to commit resources to solve the problem the right way, don’t use LSS. LSS focuses on process improvement, not generalized problems such as employee turnover. Although implementing LSS may reduce turnover by fixing broken processes that frustrate employees.
It’s also important to work on projects internal to the company first and not practice on the customers. As our skills improved, so did the role of LSS in projects for our customers, which improved customer satisfaction. We have also evolved to uncover more quick win and kaizen projects that build enthusiasm and morale and just plain solve problems and save money.
Making LSS Part of the Culture: From the beginning, I have stressed the importance of integrating LSS into our company’s culture. That means every employee knows to speak up when they see or experience broken processes. It also means having all of our operations leaders comfortable with LSS methods and tools. When one of my customer service managers gets up in the middle of a meeting, walks to the whiteboard and says, “Let’s do a quick fishbone diagram for this problem,” then I know LSS is part of our culture.
To summarize, the keys to success are executive engagement, a strong deployment champion reporting to CEO, profit and loss owners who are held accountable for results, devoting a critical mass of resources, selecting future leaders as black belts, a solid project selection process and tracking results. Don’t tell me you can’t afford LSS; LSS done properly pays for itself. We save millions of dollars a year for our shareholders and for our customers. Today, our revenue is growing at a double digit annual rate, our profits are strong, and our customer satisfaction is much higher. Success has many fathers, so I can’t give all the credit to LSS, but it is certainly a strong contributor to our performance.
Tom Sanderson is the CEO of Transplace, a leading Dallas-based transportation management services and logistics technology company. Transplace manages all or a significant percentage of freight transportation – whether rail, truck, ocean or air – for manufacturers and retailers. www.transplace.com