In the March LSS newsletter, Alberto Yáñez-Moreno, Ph.D discussed the financial results our students have reported from their certification projects. He reported a median financial impact of $100,000 USD for Green Belts (GB) and $149,000 USD for Black Belts (BB). These results are based on over 400 projects reviewed by TMAC’s Master Black Belts over the past 15 years. [March Blog]
In the April LSS newsletter, Alberto performed a more in-depth analysis by segmenting projects based on (a) type of industry, (b) type of project (Kaizen vs. full DMAIC), and (c) size of the company. These results were also broken down further by the main approach used (Six Sigma vs. Lean vs. Kaizen). [April Blog]
The financial impact of a LSS project is what definitely gets the most attention but where are these numbers coming from? What are the non-financial results from the LSS projects? And what tools and methods were used to achieve these results?
The following table includes information on six different projects submitted by TMAC GBs or BBs. Each example is from a different industry, using different approaches and generating diverse impact. The table also contains a very brief description of the project situation and the solution.
|Industry||Type of Project||Situation||Solution||Impact|
|Green Belt, full DMAIC||In a city government, the Asphalt Repairs process was inconsistent, had excessive travel times, high costs, excessive internal data processing and employees were underutilized.||
– The team mapped the current process and collected data on locations of potholes, repair supply materials, and repair equipment
– The team decided to change the location of supplies from a centralized spot to multiple pick up sites; In addition, multiple raw material suppliers were chosen and city zones redrawn.
– A standardized measuring method was implemented to track only relevant data
– Standardized work was established to fix potholes by creating SOP’s and providing proper training for all crews
– Addressed program concerns identified by the work crews.
Hard/soft savings (employee satisfaction)
– Weekly pothole repairs increased by 40% (from 200 per week to 280 per week)
– Production rate increased by 24%
– Reduction of 50% in employee data management work hours
– Total cost saving estimated to be $560,000 USD / year.
|Discrete Manufacturing – Jewelry
|Green Belt, Full DMAIC||The scrap rate from the Advanced Manufacturing process was estimated to be 8%. This is much higher than the average overall scrap rate (about 2.0 – 3.0%). Scope was restricted to chain tags only.||– Team prepared a detailed process map
– A Quick Win was used to eliminate an unnecessary step affecting lettering on product, the cause of 50% of rejects.
– Another Quick Win was to modify tooling to eliminate the gate removal process.
– Implemented clean trays for handling parts to avoid debris accumulation.
– Scrap rate reduced from an average of 8% to an average of < 2%.
– Estimated financial impact of $62,000 / yr
|Black Belt, Full DMAIC||The process of inpatient behavioral health admissions was inefficient, with a total of 158 (26%) denials due to utilization and access issues over 6 months. Denials resulted in failure to capture $1,217,248 USD ($202,874 / month).||
– A fishbone diagram and other basic LSS tools were used to identify root causes which included: inconsistent process and training, lack of night and weekend staff coverage, too many handoffs, etc.
– Solution ideas included creation of a uniform process, enhancing training for providers and monitoring each patient with a commercial payer.
– Average monthly volume of inpatient denials was reduced from 26% to 19%
– Estimated revenue increase of $314,672 over a period of six months.
– Opportunity to replicate these efforts in other areas.
|Continuous Manufacturing – Food & Beverage
|Kaizen||Changeover time was taking an average of 6.3 hours with almost one changeover per day. Additionally, no standard method for performing setups existed, resulting in inconsistency between shifts.||
– Team mapped the setup process and documented 116 steps – only one was external!
– After applying SMED/4-step Rapid Setup, the team developed a new, standard setup procedure that reduced the number of steps and moved about half the steps to external activities
– Steps reduced from 116 to 87
– Setup time reduced from 6.3 hours to 3.4 hours (46% faster)
– With additional capacity the yearly sales increase was estimated at $137,216 USD.
|Transactional process||Kaizen||The Accounts Payable manager was convinced the process had a lot of waste, with an average lead time of 4.7 days. In addition, the backlog of unprocessed invoices had grown to 160.||
– The AP Process was documented using a Value Stream Map
– The team used the Current State VSM to identify waste then created a Future State Map with a list of improvements.
– The team reduced the non-value added steps, improved the layout, identified new performance metrics, and improved communications, resulting in significant benefits.
– Invoice backlog reduced from 160 to 80
– Process lead time reduced from 4.7 days to 1 hr.
– Number of steps went from 97 to 25.
|Continuous Manufacturing – Food & Beverage
|Black Belt, Full DMAIC||In a period of 6 months, 137,131 cases of glass bottles were scrapped for out of specification lean dimensions. This represented 3.2 million bottles at a cost of lost sales equated to $292,089 USD.||– As part of the Analyze Phase, the team used statistical tools to determine possible factors affecting the dimensions of the bottles including correlation, regression and ANOVA.
– With this information they were able to try different machine configurations to improve the bottle attributes which led to significant reduction in scrap.
– The overall lean scrap cases reduced from 137,131 to 57,507 which represents 58.1% improvement.
– Likewise the cost of lost sales dropped by 54.3%.
As you can see, some tools are very commonly used (e.g., process maps) while others are very specific to the problem (e.g., SMED). Regardless of the tools used, the DMAIC process provides a structured approach. Measuring results is extremely important, and the expectation is to have benefits for the organization whether they can be easily quantified into dollars or not.
While many organizations set financial targets for their LSS projects, some projects do not generate financial impact or are hard to quantify. Examples of such projects include those involving safety or regulatory requirements. To be clear of our policy at TMAC, we do not require a financial target for certification.
What tools and methods have you used in applying LSS at your company? And how did you quantify financial impact? Please share your experience with us!