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Want more from Lean Six Sigma?

By Klaus Neuhaus & Peter Guarraia

To help fund innovation and roll out a promising new product line, a multibillion-dollar consumer products manufacturer we’ll call ConsumerCo urgently needed to increase capacity at two of its plants and reduce overall operating costs. ConsumerCo turned to Lean Six Sigma, a widely popular performance-improvement approach that aims to create leaner operations while boosting product quality to within six sigma tolerances (or no more than 3.4 defects per million). Leading companies such as General Electric, Dell and Xerox have been satisfied with their Lean Six Sigma results.

Yet many other firms have trained and deployed Lean Six Sigma black belts only to see little value accrue from their efforts. In a recent Bain & Co. survey of 184 companies, 80 percent say their Lean Six Sigma efforts are failing to drive the anticipated value.

While Lean Six Sigma can be excellent at remedying obvious maladies such as manufacturing or call-center bottlenecks, it is less adept at uncovering hidden sources of pain. To wring the most value out of Lean Six Sigma, smart companies take a diagnostic X-ray of their business first to identify where process changes will yield the greatest payoff.

X-ray Vision

Performed by a small advance team of black belts, the diagnostic X-ray consists of three steps:

1. Value stream mapping. The first move taken by the X-ray team is to map the operation’s processes and the costs associated with them. The goal is to understand what activities a company performs and where inefficiencies might exist.

ConsumerCo’s X-ray team began its work by mapping its production processes, with the goal of a comprehensive perspective on what the company was trying to achieve in each manufacturing step—and what activities were actually being performed. That way, it was possible to see both performance gaps and waste, and then start to break down the reasons—equipment not operating at full speed or not running due to breakdowns, changeover time or lack of raw materials. The plant finance group helped the diagnostic team allocate costs to each major process step.

With the Value Stream maps in hand, the team could see where the biggest expenses lay—and where improved performance would deliver the greatest cost savings.

2. Benchmarking. The aim of this phase is to establish valid benchmarks, both external and internal, for each process to identify appropriate performance-improvement targets.

In comparing its labor and asset productivity with that of its lowest-cost US competitor, ConsumerCo discovered that it needed to make considerable gains to become competitive. The diagnostic team drew on its members’ previous experiences outside the company to assess the extent to which some processes were underperforming.

In addition to gauging its performance against these external benchmarks, the company looked inside its own walls for relevant internal benchmarks. For instance, the team compared the cost of producing a package at the two facilities it hoped to improve against the cost of producing a similar product at its other plants.

3. Prioritizing. In this final phase of the X-ray, the team decides which problems to pursue in which order. ConsumerCo’s X-ray team identified 45 possible performance-improvement initiatives in its six-week scan of the business and then ranked them according to their potential for providing the greatest increase in output at the lowest cost in the shortest timeframe. Initiatives that tackled problems shared across processes received a higher rank. In the end, the team whittled down the list to just six that would have the most impact.

Putting the X-ray to work

ConsumerCo created six Lean Six Sigma teams from a mix of plant staff and black belts and charged each with implementing a specific initiative. The teams had clear goals and metrics to guide them in pursuing the potential gains identified by the X-ray.

Team members made detailed observations of their assigned process steps in order to validate the X-ray findings—for example, that packaging-line downtime was driven by three specific factors: changeovers from one product mix to another, bottlenecks created by maintenance problems and line speed driven by product mix. They set about creating workable solutions that would meet performance targets.

The teams were directed to test out these solutions as early as possible and then progressively refine them until they could be rolled out to all shifts and to other lines with similar equipment.

Valuable surprises

The beauty of the up-front X-ray is its ability to expose hard-to-see problems. Sometimes, what it turns up is surprising. For instance, ConsumerCo started off believing that its most urgent priority was reducing machine changeovers on one production line. But instead, reducing unscheduled downtime would prove a far more valuable effort.

The company achieved success—more than it had envisioned. By reducing unit costs by 15 percent and improving the efficiency of its existing operations, ConsumerCo freed up much-needed capital and capacity. The company was then able to pour these resources into innovative new products that reinforced its competitive strength.

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Klaus Neuhaus is a partner at Bain & Co.’s Dusseldorf office. Peter Guarraia is a partner at Bain’s Los Angeles office.