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3 Tips on Measuring Your Business Process Performance

If you want to improve a part of your business, you would measure the current situation, take counter-measures to improve it and measure again to see if you made significant improvements. Right?

When I start a business process improvement project (Lean or Six Sigma) we start with the team defining the metric: what are we going to measure to see improved performance?

Here are 3 tips to help you choose your metric:

1. Frequency

Choose a metric that you can measure with high frequency, at least on a weekly base or
even daily. This will give you the possibility to react quickly when taking counter-measures. This way you can improve the process faster.

I had once a project on reducing employee illness rate. Because the reporting system generated data only on the monthly base, our team chose sick time per day (in hours) because this data was available daily.

If we would have stick to the monthly data, we had needed to wait at least 5-8 month to collect data on the improved performance.

2. Accuracy

You want accurate data otherwise you have no clue whether the data showing improvements is due to your team effort or it is only better by chance.

There are some statistical tests within Six Sigma that you can take to investigate the accuracy of your measurement system. The approach should not only apply to measurements by instruments (weight, density, length, dimensions, etc.) but also in any other situations.

In most cases, you can take a more straight-forward approach by checking out the following:

  • How many people collect data? The less is better.
  • How data is collected? Automated reporting preferred above manually.
  • Is there a written procedure on data collection? If yes, it is easier to train others and observe if procedure is followed.

3.    Output instead of input

Recently I had a project on improving the efficiency of purchasing activities of the Material department. The perceived problem was that they spent too much time on operational activities (placing purchase orders, following up shipments, reminding suppliers about due dates, checking invoices) instead of tactical and strategic activities (like selecting preferred suppliers, contracting, simplifying purchasing and invoicing activities).

We decided to measure how working time was spent concerning the purchasing activities of the people. They found it difficult to measure, often forgot to register, made many ‘guesstimates’. As a result, our baseline data showed the opposite situation than what was expected: limited time spent on operational activities. The metric was not the right one and the data not accurate.

Instead of measuring input (time spent on activities) we could better measure output, like number of invoices, number of suppliers or lead-time of purchasing transactions. These are output parameters that should drop significantly when purchasing is better organised.

Measuring the right parameter on the right way, with the right frequency helps you improve your business performance. Get your Black Belt in business process excellence.

Beat the average.

Yours,

Peter

What does “Value added” mean when improving your process?

Value added is an often-used term in many situations. In Finance and Economics it is used to refer to the profit: sales minus total costs. We also use it when talking about our products or services: they should add value for our customers.

But how do you decide what adds value for our customers – both internal and external – when trying to shorten our lead-times?

Everything that we do in our work adds value OR does not add value for our customers. And, as always, there is a “grey area” in between, so-called business value added activities.

Value added activities are those that the customer would want to pay for. For the rest, he/she won’t.

So if you spend your time searching for data, looking for documents, asking your colleague to answer your email because she forgot, getting internal approvals, filling your monthly travel expense forms, correcting some faulty data in your system, meetings, etc. are examples of activities your customer would not want to pay a penny for if you present them on your invoice. They are not adding value for the customer.

The reality is that you let them pay for all those activities anyway, but you do not itemise them on the invoice.

We let our customer pay for our inefficiencies. What can you do about it?

Option 1: do nothing.

You keep your inefficiencies, and keep therefore your costs high, so you have to charge your customers higher prices in order to create your own financial value added (profit). When your customer has not much choice, she will still do business with you.

At the end of the day, your margins are smaller, you charge your customer higher prices, and you need a higher sales volume to compensate for the smaller margin.

Option 2: reduce inefficiencies

If your aim is to provide value to your customers, it is a logical step to reduce and eliminate inefficiencies in every part of your business. You can learn how to do it in a practical, structured and measurable way at www.LeanSixSigmaBelts.com/black-belt.

This effort reduces your costs, increases your margins and you become more competitive on the marketplace.

Reducing inefficiencies (wastes) creates free capacity that was formerly occupied. As a result, you increase the capacity of your business: you can do more, serve more customers, deliver more products and services with the same resources.

This should be always our duty, in good times and in bad times. Don’t you think?

Beat the average.

Yours,

Peter

The 4 Biggest Mistakes I Made as a Manager

I made many more than 4 but let’s start with these ones…

Imagine that you could solve very difficult business problems at your work. Problems that are not even being noticed anymore because there were so many attempts to get them out of the way without success.

Problems that are often discussed but nobody could solve.

Problems that are now “part of the business” meaning: everybody has learnt to live with them.

They became a part of your company costs structure.

Imagine if you would be the only person who could solve it. Kind of a hero…

Once I wanted to become such a ‘genius’. Since my study of Chemical Engineering I was always triggered by process PERFORMANCE. I was interested in process optimising a lot.

I ended up working in Finance at the world’s largest oil and gas company.

There, again, I was fascinated with predicting financial performance of the company and their customers.

Later when I was a Finance Manager at other companies, my object was to improve the business processes and therefore create efficiency and reduce costs.

The problem was I had no clue how to start…While figuring out, I have made these 4 mistakes among others:

#1 Push info instead of Pull

I made a bunch of reports, analysed operating results, pieces produced, production-lead-times, on-time-delivery rates etc. and tried to push my colleagues in the operation to streamline how they worked. I did not ask them what information they needed. I thought I can figure it out myself. As a result I have “buried” them with lots of data and they did not know what to use and I did not know what information I should stop producing.

#2 Thinking for someone else = not respecting

I interviewed operators and supervisors and designed their new processes behind my desk. I thought because of my title, being their manager, I ought to set up their new process. The fact is I did not know enough about the day-to-day operation, knew nothing about the details because I was hardly ever on the shop floor. Actually, by creating a new process, I took over their responsibility not giving them the credit and respect for their position.

#3 Emphasis on end-control

Because I did not know at that time that controlling only the end result creates many possibilities on the way for mistakes to happen, I put up all sorts of control procedures to avoid mistakes and force people to do a better job. As a consequence operators were not putting enough effort in ensuring right quality during production steps so mistakes were carried through the process and cumulated until it was too late or too expensive to correct it.

#4 Re-designing without involvement

When redesigning a process, I did it on my own instead of involving those being part of the process and letting them come up with new ideas and solutions. Because the participants were not initially involved in the redesign, they were eager to proof to me that my solutions to improving the process were not the right one.

Avoid these mistakes and learn how to become an expert Black Belt in process improvement at LeanSixSigmaBelts.com

You get one-on-one coaching to make sure you 10X your ROI.

“Beat the average.”

Yours,

Peter

Lean Management, Six Sigma, Lean Six Sigma and my approach – what are the differences?

Lean Management, Six Sigma, Lean Six Sigma and my approach – what are the differences?

Recently, during one of my webinars I got this question: What are the differences between LEAN (Lean management, Lean Manufacturing), Six Sigma, Lean Six Sigma and HerkuLess® – the way I apply Lean Six Sigma?

First about the similarities

Before I go into explaining the differences, let’s talk about the relation between these methods.

They have all one major purpose: to change YOU.

Yes, you! To change how you think, how you work, how you work with others, how you detect problems, how you solve problems, how you set goals and how you achieve them, how you try out new approaches and fail and what you do then.

Changing you and your colleagues on a big scale – like company-wide – causes the company culture to change. To achieve this transformation, there are several factors which play an important role; such as leadership commitment and involvement, focus, communication, tool- or culture-focused implementation, short-term vs long-term orientation in decision-making, just to name a few.

Where is the method left from this list? The choice of the method plays a secondary role to the above-mentioned factors. So why bother?

Because company culture does not change if YOU do not change. Change begins with you. And that is my personal mission to inspire and to help you make that change.

LEAN, Six Sigma, Lean Six Sigma, HerkuLess® and many other methods are providing lots of help, structure, tools, insights to help you make the change. So let’s start with these methods.

The Differences

This short analysis is giving you only the most obvious differences and it is not a comprehensive analysis. The definitions I describe are my own words, the way I explain it during my training and webinars are based on my own experiences.

By giving you this short comparison I hope you will be able to decide what to apply in your situation.

LEAN

Definition: A method to remove waste (non-value-added steps and activities) from all processes, to concentrate on what the customer values. The non-value-added steps are steps that when you remove them, the customer would not even notice it.

Example: Think about overproduction, overprocessing, waiting time, defects, movements, transportation, etc. At the end it comes down to reducing process lead times, saving time and, of course, money.

Pro’s: easy tools to use with lots of visualisation. Achieve quick wins because solution is obvious: “in your face”.

Cons: use of data is not always encouraged, solving complex problems with many factors and their interactions is not easy with LEAN tools.

Conclusion: a great way to improve any business.

Six Sigma

Definition: Much less known compared to LEAN but it is a method to improve the quality of the process output by reducing variation, therefore enabling you to better match customer’s expectations and moving the average to the desired direction.

Example: scrap rate (products outside specification divided by total produced) may vary by day, by shift, by product group, by supplier, etc. This gives unpredictability of the output, eg. “are we going to produce enough good items to fulfil the order?”

Pros: Strong data-driven and structured approach going through the same phases with every project (called DMAIC: Define, Measure, Analyse, Improve and Control). Able to solve complex problems proving mathematical correlations between factors and their interactions.

Cons: Heavily loaded with statistics, therefore creating distance between practitioners (Black Belts and Green Belts) and project team members (Yellow Belts) and the work floor. Projects tend to have longer lead times compared to LEAN. Often combined with hierarchy among practitioners (including Master Black Belt and Deployment Manager) and lengthy training periods (I had 5 weeks of full-time Black Belt training), which requires significant investments only big companies can afford.

Conclusion: great tools and excellent project structure. It is worth the investment.

Lean Six Sigma

Definition: it combines the best of both worlds by being able to reduce both lead times (LEAN) and improving quality (Six Sigma).


Example: scrap rate needs to be controlled and reduced (Six Sigma) and by doing so, we reduce the time we need to produce the required amount (LEAN). We do not have to “re-process” or produce in excess and store, because we are able to do it right first time.

Pros: Powerful combination of both concepts because business challenges almost always deal with both elements: Lead-time is affected by quality and vice versa (see our scrap rate example). It can deliver quick results with a LEAN approach, but can also solve complex issues when more data-driven tools are needed.

Cons: It still requires a lot of knowledge of tools and statistics. After my 5 weeks of full-time training I had no idea where to start with my project. I did not know for sure whether I needed to use SIPOC, a Value-stream-map or just a flow chart. I also had difficulties with explaining statistics and Design-of-experiment results to my team from the shop-floor. The duration of projects due to this “search in the toolbox” did not match the magnitude of the project results either.

Conclusion: I think you know by now that I would rather use Lean Six Sigma to be able to identify and solve both time and quality related challenges.

My approach using Lean Six Sigma

Definition: I use only 20% of the most effective tools and techniques from Lean Six Sigma solving 80% of your problems and challenges.

I have selected no more than 10 tools from the 100+ of the Lean Six Sigma arsenal (so actually it is not 80/20 but 90/10 rule) that are effective and powerful, yet easy to use by anybody in the company.

Example: I choose to draw the current process on a white-board together with the project team, discussing the bottle-neck and the risks at each step instead of using SIPOC or VSM. Let the team together decide where the biggest problem is and explain it why. Using data for the baseline will still visualise the performance and show improvement later in the project.

Other example: I do not spend time on calculating DPMO (defects per million opportunities) and Sigma-level because by calculating % of defects (= number of off-spec items/total produced) I will get the same information and people are more familiar with % then Sigma-levels or Z-scores.

Pros: I use the structure of Six Sigma DMAIC, so you always know where you are in your project and what to do next. The tools at each phase are easy to use, enabling your whole team to fully understand them and support the work. Whether it is a lead-time issue or a quality problem, you solve both with the same tools, following the same steps in the project. You can easily see the progress on the project and compare it with other projects.

I use HerkuLess® to run Lean Six Sigma projects.

Cons: more focus on low-hanging fruits, the quick wins instead of on big, radical changes. In HerkuLess® you have run charts with control limits and spec limits, Pareto-analysis, Scatter plots and regression analysis, but you may need to upload your other Minitab statistics (ANOVA, DOE results, MSA, etc).

Conclusion: If you want faster project execution with standardised documentation of the project, hand-picked tools that are easy to use so that you can spend more time on the HUMAN part of the business challenge instead of the tool/technical side, then why don’t you give HerkuLess® a try?

Tagged

how to attack your biggest challenges

 

 

Is this you?

 

A real-life situation: you have made mistakes in the time sheets on which your invoicing is based. Your customer complains about the incorrectness, therefore you have to change your invoice, and anticipate $2 million reduction of your sales revenue. This does not happen only once, but year after year.

 

Is this bad? What would you say?

 

Sure it is.

 

If you were in charge of the time sheets, what would you do?

 

To improve this process, this is what is happening now as we speak:

 

  1. Screening the administrative capacity of the secretaries appointed to record the activities on the time sheets
  2. Additional training for the secretaries
  3. Updating of the system to improve data quality and consistency
  4. Installing system add-on, highlighting data inconsistency on a daily basis

 

 

This might work… sooner or later it will probably help, but do you have enough time?

 

My concerns are…

  • Are these actions tackling the root cause of the problem?
  • Are these actions defined by those having the most knowledge and experience of the problem with time sheet registration? This to increase the likelihood of success also for the long run.
  • Do you have a base line and a measurement system for the KPI (indicator) showing improvements as you carry out these actions? Or do you only have the yearly check, living in the past?

 

The biggest problems I see in businesses, especially in Dutch Healthcare companies:

 

  1. Problems are not addressed by the right people – a manager tries to solve it because “he supposed to have the answers”, without consulting the workforce
  2. Problems do not get the proper attention – the issue may costs millions, but it gets as much attention and focus as selecting this year’s Christmas card
  3. Lack of time is used as an excuse for almost everything – look, guys at Apple or Google have the same 24 hours per day…
  4. There is no structured approach to attack such a problem – no method is being followed from start to finish
  5. There is no real analysis of the root causes to identify the right solution – someone has an idea, a wild guess or past experience and based on that actions are defined

 

This lack of structured problem solving is costing you millions and millions. You and your employees know it and do not like it. What can you do?

 

If you want to stop wasting money, stop wasting time and frustrations and start building and improving your business, start with HerkuLess® now. You get our dedicated support to stop your losses.