operational excellence through lean & six sigma
TRANSCRIPT
Business Transformation through Operational Excellence
Business Transformation through Operational Excellence
Harsh UpadhyayHarsh Upadhyay
Operational ExcellenceOperational Excellence
�� Operational ExcellenceOperational Excellence is a philosophy of leadership, teamwork and is a philosophy of leadership, teamwork and
problem solving resulting in continuous improvement throughout the problem solving resulting in continuous improvement throughout the
organization by focusing on the needs of the customer, empowering organization by focusing on the needs of the customer, empowering
employees, and optimizing existing activities in the process.employees, and optimizing existing activities in the process.
�� Strategic weapons for operation excellence’s are (but not limited to…)Strategic weapons for operation excellence’s are (but not limited to…)
•• LeanLean
•• LeanLean
•• Six SigmaSix Sigma
•• Lean Six Sigma Lean Six Sigma
Reference: http://en.wikipedia.org/wiki/Operational_excellence
Strategic Weapon For Operational ExcellenceStrategic Weapon For Operational Excellence
�� What is Lean?What is Lean?
Lean is a set of principles whose fundamental goal is to eliminate waste and Lean is a set of principles whose fundamental goal is to eliminate waste and
maximizing flow.maximizing flow.
�� What is Six Sigma?What is Six Sigma?
Six Sigma is about meeting customer requirements and stakeholder Six Sigma is about meeting customer requirements and stakeholder
expectations, and improving quality by measuring and eliminating defects.expectations, and improving quality by measuring and eliminating defects.
expectations, and improving quality by measuring and eliminating defects.expectations, and improving quality by measuring and eliminating defects.
�� What is Lean Six Sigma?What is Lean Six Sigma?
Lean Six Sigma is a combination of Lean methods and Six Sigma approach Lean Six Sigma is a combination of Lean methods and Six Sigma approach
which do more than simply improving processes by innovating business areas which do more than simply improving processes by innovating business areas
including operations, products, services and business models. It enables including operations, products, services and business models. It enables
break through innovation thus destroying obstacles by creating an break through innovation thus destroying obstacles by creating an
organizational climate in which innovation is instinctive.organizational climate in which innovation is instinctive.
Continuous ImprovementContinuous Improvement-- The Key to Excellence in ExecutionThe Key to Excellence in Execution
�� Continuous improvement can be achieved by operational excellence Continuous improvement can be achieved by operational excellence
methodologies like Lean, Six Sigma, Lean Six Sigma. It focuses on process methodologies like Lean, Six Sigma, Lean Six Sigma. It focuses on process
improvement and improvement and behaviouralbehavioural improvement of people and organizationimprovement of people and organization
Lean focuses on reducing non-value
add time
Six Sigma focuses on reducing process
variation
Source: Continuous Improvement (The key to excellence in business processes) -Accenture
Challenges With Implementation of Operational Methodologies Challenges With Implementation of Operational Methodologies
�� Unsupportive culture and climate in the organizationUnsupportive culture and climate in the organization
�� Lack of clarity in linking strategy to executionLack of clarity in linking strategy to execution
�� Limited focus on process excellenceLimited focus on process excellence
Little engagement or no engagement of top managementLittle engagement or no engagement of top management
�� Little engagement or no engagement of top managementLittle engagement or no engagement of top management
�� Inadequate or insufficient metrics which are not aligned with customer valueInadequate or insufficient metrics which are not aligned with customer value
�� Lack of Employees engagement towards continuous improvement cultureLack of Employees engagement towards continuous improvement culture
�� Treating continuous improvement as a project/program instead of a journey Treating continuous improvement as a project/program instead of a journey
Strategies For Implementation of Operational ExcellenceStrategies For Implementation of Operational Excellence
�� Leaders in organization must lead operational excellence initiativesLeaders in organization must lead operational excellence initiatives
�� Operation excellence initiatives must be driven on organization’s top burning Operation excellence initiatives must be driven on organization’s top burning
issues which are highly critical for customer and stakeholdersissues which are highly critical for customer and stakeholders
�� Focus on values Focus on values
�� Customer value and shareholder value are not created by the same Customer value and shareholder value are not created by the same
�� Customer value and shareholder value are not created by the same 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 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 product as long as that cost is not passed along however shareholders care
a lot about the costs for which that product is delivered a lot about the costs for which that product is delivered
�� For getting higher impact, the continuous improvement initiatives should For getting higher impact, the continuous improvement initiatives should
maintain the balance between these valuesmaintain the balance between these values
�� The organization should adopt issueThe organization should adopt issue--based or valuebased or value--driven approach to driven approach to
problemproblem--solving and process improvementsolving and process improvement
Strategies For Implementation of Operational ExcellenceStrategies For Implementation of Operational Excellence
�� Organization capability enhancement through training and onOrganization capability enhancement through training and on--job coaching job coaching
enabling continuous improvement initiatives to become selfenabling continuous improvement initiatives to become self--sustainedsustained
�� Promotion and retention of associates with deep operational excellence Promotion and retention of associates with deep operational excellence
expertise is criticalexpertise is critical
�� Top caliber high performers should be identified as “change agents” who can Top caliber high performers should be identified as “change agents” who can
�� Top caliber high performers should be identified as “change agents” who can Top caliber high performers should be identified as “change agents” who can
drive operational excellence initiatives in the organizationdrive operational excellence initiatives in the organization
�� Technology must be agile and responsive enough to support an organization’s Technology must be agile and responsive enough to support an organization’s
operational excellence agendaoperational excellence agenda
�� Measurement of continuous improvement initiatives through PDCA or RCA in Measurement of continuous improvement initiatives through PDCA or RCA in
prepre--defined and timely mannerdefined and timely manner
Develop “T” PeopleDevelop “T” People
�� People who have broad experience in operational excellencePeople who have broad experience in operational excellence
�� People with deep skill in operational excellencePeople with deep skill in operational excellence
�� Equal effort between “Going Wide” and “Going Deep”Equal effort between “Going Wide” and “Going Deep”
Spread Operational Excellence Across the Organization
Develop Depth of
Capability within the
Organization
“Some days, big up”
“Every day, little up”
Final ThoughtsFinal Thoughts
“Until you take the first step, it will not be possible “Until you take the first step, it will not be possible
to see the next step”to see the next step”
Operational Excellence Case Studies
Operational Excellence Case Studies
Case StudiesCase Studies
Operational Excellence Deployment in CaterpillarOperational Excellence Deployment in Caterpillar
�� Business Case Business Case
The Caterpillar's growth was limited due to four years of flat revenues and The Caterpillar's growth was limited due to four years of flat revenues and
extreme competitionextreme competition
�� Operation Excellence MethodologyOperation Excellence Methodology
Lean Six SigmaLean Six Sigma
�� Goal of Lean Six Sigma DeploymentGoal of Lean Six Sigma Deployment
DeterminedDetermined toto regainregain itsits industryindustry leadershipleadership positionposition andand continuouscontinuous growthgrowth
byby customercustomer--drivendriven innovationinnovation andand continuouscontinuous improvementsimprovements
�� Scope of DeploymentScope of Deployment
27 separate business units and over 72,000 employees in six continents with 27 separate business units and over 72,000 employees in six continents with
multiple spoken languagesmultiple spoken languages
Operational Excellence Deployment in CaterpillarOperational Excellence Deployment in Caterpillar
�� Action takenAction taken
�� The CEO along with the strategic planning committee analyzed the The CEO along with the strategic planning committee analyzed the
customer requirements, market conditions and Caterpillar's capabilities customer requirements, market conditions and Caterpillar's capabilities
and determined the vision of 2020 for the organization with 3 five years 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 plans across all business units to achieve the vision. Through the rigor
and disciplined enforced during the initiative, the entire company was and disciplined enforced during the initiative, the entire company was
aligned behind the same and specific objectivesaligned behind the same and specific objectives
�� Trained 4200 employees in Lean Six Sigma who drove 1100 projects and Trained 4200 employees in Lean Six Sigma who drove 1100 projects and
served as mentors to the rest of organizationserved as mentors to the rest of organization
�� ResultResult
Record profits and company achieve its 2010 goalRecord profits and company achieve its 2010 goal
Operational Excellence Deployment in PASCOOperational Excellence Deployment in PASCO
�� Business Case Business Case
The PASCO's growth was impacted due to low cost competition and its limited The PASCO's growth was impacted due to low cost competition and its limited
regional foot printsregional foot prints
�� Operation Excellence MethodologyOperation Excellence Methodology
Lean Six SigmaLean Six Sigma
�� Goal of Lean Six Sigma DeploymentGoal of Lean Six Sigma Deployment
BecomingBecoming aa valuevalue addedadded steelsteel makermaker ratherrather thanthan aa lowlow costcost steelsteel makermaker
byby drivingdriving SixSix SigmaSigma cultureculture toto changechange allall employee’semployee’s wayway ofof thinking,thinking,
currentcurrent workingworking stylestyle andand mindmind--setssets
�� Actions takenActions taken
�� Trained employees in Lean Six SigmaTrained employees in Lean Six Sigma
�� Collected customer requirements and recommendations by sending their Collected customer requirements and recommendations by sending their
engineers to key customers which helped PASCO to understand the engineers to key customers which helped PASCO to understand the
several product areas where customers were looking for more innovative several product areas where customers were looking for more innovative
solutionssolutions
�� Focused on high potential market (Shipping and Automotive industries) Focused on high potential market (Shipping and Automotive industries)
Operational Excellence Deployment in PASCOOperational Excellence Deployment in PASCO
�� Focused on high potential market (Shipping and Automotive industries) Focused on high potential market (Shipping and Automotive industries)
where the company wanted to concentrate their R&D which led to major where the company wanted to concentrate their R&D which led to major
product innovation. For example, the company invented steel that product innovation. For example, the company invented steel that
remains rustremains rust--free in salt water, creating significant opportunities in free in salt water, creating significant opportunities in
shipping and floating dock constructionsshipping and floating dock constructions
�� Using Lean Six Sigma to drive interactions with global automakers, POSCO Using Lean Six Sigma to drive interactions with global automakers, POSCO
developed 21 varieties of highdeveloped 21 varieties of high--grade steel designed to meet special grade steel designed to meet special
industry needs, such as coated steel where the paint adheres easilyindustry needs, such as coated steel where the paint adheres easily
�� Action taken cont.Action taken cont.
�� For maintaining the customer demand, PASCO increased global presence For maintaining the customer demand, PASCO increased global presence
and with the help of Lean Six Sigma, it reduced finished steel inventories and with the help of Lean Six Sigma, it reduced finished steel inventories
and cut lead time by 50%.and cut lead time by 50%.
�� In addition to growth and profitability, the Lean Six Sigma approach helped In addition to growth and profitability, the Lean Six Sigma approach helped
POSCO to restore and protect Korea’s natural environment by approaching POSCO to restore and protect Korea’s natural environment by approaching
an ironan iron--making process that eliminates the sintering and coking processes, making process that eliminates the sintering and coking processes,
Operational Excellence Deployment in PASCOOperational Excellence Deployment in PASCO
which, in turn, reduces environmental pollutantswhich, in turn, reduces environmental pollutants
�� ResultResult
�� POSCO has produced over US$ 1 billion in financial gains to date, including POSCO has produced over US$ 1 billion in financial gains to date, including
strong savings and record sales volumesstrong savings and record sales volumes
�� Company has transformed itself from a regional, lowCompany has transformed itself from a regional, low--cost producer to a cost producer to a
global, valueglobal, value--added provider of highadded provider of high--quality steel. POSCO is now the third quality steel. POSCO is now the third
largest steelmaker worldwide with “world’s most competitive steel firm” largest steelmaker worldwide with “world’s most competitive steel firm”
for three consecutive years.for three consecutive years.
Operational Excellence Deployment in ScotishPowerOperational Excellence Deployment in ScotishPower
�� Business Case Business Case
ScotishPower was losing its market share because of high customer attrition ScotishPower was losing its market share because of high customer attrition
raterate
�� Operation Excellence MethodologyOperation Excellence Methodology
Lean Six SigmaLean Six Sigma
�� Goal of Lean Six Sigma DeploymentGoal of Lean Six Sigma Deployment
ImproveImprove itsits customercustomer serviceservice andand salessales operationsoperations thoroughly,thoroughly, toto regainregain
aa marketmarket--leadingleading positionposition
Operational Excellence Deployment in ScotishPowerOperational Excellence Deployment in ScotishPower
�� Action takenAction taken
�� Established Business Transformation Department and trained hundreds of Established Business Transformation Department and trained hundreds of
employees in Lean Six Sigmaemployees in Lean Six Sigma
�� Launched 130 Lean Six Sigma ProjectsLaunched 130 Lean Six Sigma Projects
�� Designed the new process that approach to those clients who moved to Designed the new process that approach to those clients who moved to
different home and canceled their ScottishPower servicesdifferent home and canceled their ScottishPower services
�� Applied Lean Six Sigma to burning issues. For example, targeted marketing Applied Lean Six Sigma to burning issues. For example, targeted marketing
�� Applied Lean Six Sigma to burning issues. For example, targeted marketing Applied Lean Six Sigma to burning issues. For example, targeted marketing
campaign that boosted use of direct debit payments by 14 percent, a campaign that boosted use of direct debit payments by 14 percent, a
simplified signsimplified sign--up process for business customers that led to a 20 percent up process for business customers that led to a 20 percent
increase in acquisition, and new meter reading processes with lower costs increase in acquisition, and new meter reading processes with lower costs
and higher accuracyand higher accuracy
�� ResultResult
�� Customers base increased from 3.2 million to 5.1 million in just four yearsCustomers base increased from 3.2 million to 5.1 million in just four years
�� Realized US$ 170 million in additional revenue and cost savingsRealized US$ 170 million in additional revenue and cost savings
Operational Excellence Deployment in UNS HealthcareOperational Excellence Deployment in UNS Healthcare
�� Business Case Business Case
UNS Healthcare is an 800UNS Healthcare is an 800--bed public hospital and trauma center, whose bed public hospital and trauma center, whose
capacity was stretched to the limit. They needed more space but adding a new 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 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 a critical measure of effectiveness and efficiency. A shorter stay means that
beds turn over more quickly and hospitals can treat more patients without beds turn over more quickly and hospitals can treat more patients without
investing additional capital.investing additional capital.
�� Operation Excellence MethodologyOperation Excellence Methodology
Lean Lean
�� Goal of Lean DeploymentGoal of Lean Deployment
Reduce the length of stay by 10% without affecting the quality of careReduce the length of stay by 10% without affecting the quality of care
Operational Excellence Deployment in UNS HealthcareOperational Excellence Deployment in UNS Healthcare
�� Action takenAction taken
�� Pilot program kickedPilot program kicked--off in the orthopedics, medical oncology, pulmonary off in the orthopedics, medical oncology, pulmonary
and infectious disease areasand infectious disease areas
�� Determined the care plan and target discharge date of each patient at the Determined the care plan and target discharge date of each patient at the
time of admission into hospital.time of admission into hospital.
�� Smooth communication between hospital and patients about target date Smooth communication between hospital and patients about target date
of discharge and steps involved in the processof discharge and steps involved in the process
of discharge and steps involved in the processof discharge and steps involved in the process
�� Written care plan and a whiteboard in every room with daily goals to help Written care plan and a whiteboard in every room with daily goals to help
keep the patient focused on his or her discharge datekeep the patient focused on his or her discharge date
�� ResultResult
�� Freeing up three to four hospital beds each day.Freeing up three to four hospital beds each day.
�� Patient satisfaction scores went up by 10% over historic averages.Patient satisfaction scores went up by 10% over historic averages.
�� Implemented the pilot program actions into the entire hospital, effectively Implemented the pilot program actions into the entire hospital, effectively
raised capacity by about 80 beds and add $ 35 million to the bottom lineraised capacity by about 80 beds and add $ 35 million to the bottom line
Operational Excellence Deployment in UNS HealthcareOperational Excellence Deployment in UNS Healthcare
�� Other Action with Lean initiatives wereOther Action with Lean initiatives were
�� TopTop--down review of daydown review of day--toto--day administrative proceduresday administrative procedures
�� Reduced the waiting time of care performed by taking appointment in Reduced the waiting time of care performed by taking appointment in
advance with proper loadadvance with proper load--balancingbalancing
�� Improvement in patient handImprovement in patient hand--offsoffs-- review of how many times patients are review of how many times patients are
handed off during their hospital stay. When hospitals adopted lean handed off during their hospital stay. When hospitals adopted lean
methods, they said “they tend to stop passing patients between care methods, they said “they tend to stop passing patients between care
methods, they said “they tend to stop passing patients between care methods, they said “they tend to stop passing patients between care
professionals”. Instead, they developed care teams of dedicated professionals”. Instead, they developed care teams of dedicated
professionals who handled patients. “This reduces handoffs, it reduces professionals who handled patients. “This reduces handoffs, it reduces
medical errors, it reduces length of stay, and it improves patient medical errors, it reduces length of stay, and it improves patient
satisfaction greatly.” More handoffs lead to more medical errors. And satisfaction greatly.” More handoffs lead to more medical errors. And
more medical errors lead to longer lengths of staymore medical errors lead to longer lengths of stay
Operational Excellence in Financial ServicesOperational Excellence in Financial Services
�� Lean implementation in financial services is same as Lean implementation in Lean implementation in financial services is same as Lean implementation in
manufacturing. Finance is just a different kind of factory. It is a processing 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 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, seven type waste in a process i.e. overproduction, waiting, over processing,
poor transportation/logistics, inventory control, rework, and unneeded poor transportation/logistics, inventory control, rework, and unneeded
movementmovement
�� Impact of lean initiatives in financial services look like:Impact of lean initiatives in financial services look like:
�� An international commercial bank discovered the potential for 30% more An international commercial bank discovered the potential for 30% more
efficiency in processing customer transactions efficiency in processing customer transactions –– while improving customer while improving customer
satisfaction through more differentiated servicesatisfaction through more differentiated service
�� A lean audit of one North American asset manager uncovered ways to A lean audit of one North American asset manager uncovered ways to
make product pricing 12%make product pricing 12%--20% more efficient by carefully identifying and 20% more efficient by carefully identifying and
eliminating noneliminating non--value added activitiesvalue added activities
�� Analysts using a lean approach in one investment bank reportedly gained 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 30% in analyst productivity and a 60% reduction in cycle time by
redefining credit processesredefining credit processes
Customized Continuous Improvement Approach Customized Continuous Improvement Approach
Improvement Approach - By Leading Consulting Firms
Improvement Approach - By Leading Consulting Firms
Adopting a Lean MindsetAdopting a Lean Mindset——A.T.KEARNEYA.T.KEARNEY
�� Lean mindset is the advocate of persistently pursuing the continuous Lean mindset is the advocate of persistently pursuing the continuous
improvement in cost, quality and serviceimprovement in cost, quality and service
�� 4 principle of Lean Mindset are:4 principle of Lean Mindset are:
1.1. Define Value for which customer is willing to pay Define Value for which customer is willing to pay
�� Define customerDefine customer
�� Understand customer needsUnderstand customer needs
�� Understand customer needsUnderstand customer needs
�� Define customer values in term of quality, schedule and cost to fulfill Define customer values in term of quality, schedule and cost to fulfill
customer needscustomer needs
2.2. Remove NonRemove Non--value added activities and processvalue added activities and process
�� Value stream Map (Pre & Post)Value stream Map (Pre & Post)
�� Apply 5s and visual control systemApply 5s and visual control system
�� Implement Flow Implement Flow
�� Implement pull systemImplement pull system
Adopting a Lean MindsetAdopting a Lean Mindset——A.T.KEARNEYA.T.KEARNEY
3.3. Process improvement ownership must be aligned with process owner and Process improvement ownership must be aligned with process owner and
process teamprocess team
4.4. Strive for perfection (continuous improvement) through idea generation Strive for perfection (continuous improvement) through idea generation
programs, innovation programs etc to make the process even more efficient programs, innovation programs etc to make the process even more efficient
and effective.and effective.
Customer Focus Through Customer Focus Through BeLean™ BeLean™ -- By CapgeminiBy Capgemini
BeLean™ MethodologyBeLean™ Methodology
BeLean™ focuses on process or operation reBeLean™ focuses on process or operation re--engineering and operationalengineering and operational
excellence by focusing on process, people and organization throughexcellence by focusing on process, people and organization through
implementation of Lean and Behavioural Change Managementimplementation of Lean and Behavioural Change Management
Its approach is the 3 Lean Principle:Its approach is the 3 Lean Principle:
1. Lean must bring about behavioural change1. Lean must bring about behavioural change
1. Lean must bring about behavioural change1. Lean must bring about behavioural change
2.2. Lean must be tackled holistically, focusing on people and organization as well Lean must be tackled holistically, focusing on people and organization as well
as processesas processes
3. Deployment must be progressive 3. Deployment must be progressive –– it must happen level by levelit must happen level by level
Adopting these three principles makes Lean a means to achieving Adopting these three principles makes Lean a means to achieving
sustainable results sustainable results –– whether financial, operational, cultural or all of these.whether financial, operational, cultural or all of these.
Customer Focus Through Customer Focus Through BeLean™ BeLean™ -- By CapgeminiBy Capgemini
Deploying ProgressivelyDeploying Progressively
Sustainable results are a consequence of behavioural change, which doesSustainable results are a consequence of behavioural change, which does
not happen overnight. Therefore it is clear that a progressive approach to not happen overnight. Therefore it is clear that a progressive approach to
deployment taking one level at a time deployment taking one level at a time -- will build a stronger resultwill build a stronger result
Level-1 (Taking control)
Quick wins to create momentum
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 Approach3 Phase Customer Improvement Approach-- By AccentureBy Accenture
The objective of 3 Phase continuous improvement approach is to sustainThe objective of 3 Phase continuous improvement approach is to sustain
Behavioral changes throughout the organizationBehavioral changes throughout the organization
These 3 phases are:These 3 phases are:
1.1. Business Evaluation Business Evaluation –– Focus on identify opportunities by capturing the Focus on identify opportunities by capturing the
customer’s voice and shareholder’s voicecustomer’s voice and shareholder’s voice
2.2. Develop Transformation RoadmapDevelop Transformation Roadmap-- Determine the long term vision by top Determine the long term vision by top
management, identification of manager who drive the implementation and management, identification of manager who drive the implementation and
implement the quick wins through Lean, Six Sigma or Lean Six Sigma.implement the quick wins through Lean, Six Sigma or Lean Six Sigma.
3.3. Execute and build capabilityExecute and build capability-- Transfer the business improvement skills through Transfer the business improvement skills through
training and ontraining and on--job coaching enabling the CI program to become selfjob coaching enabling the CI program to become self--sustainedsustained
