Improve operating margins by as much as 20%, ROIC by as much as 10%, and reduce the costs of goods sold by as much as
Table of Contents
Foreword xi
Preface xv
Acknowledgments xxi
Chapter 1 Why Use Lean Six Sigma to Reduce Cost? 1
Transactional Example: Lean Six Sigma Transforming Our Government 6
The Alloy of High Performance: Why Choose Lean Six Sigma to Reduce Cost? 6
Lean Six Sigma versus Traditional Cost-Cutting Tactics 9
Emerging Stronger Than Ever 14
Spotlight #1 How to Use This Book 17
Overview of Part I: Process Cost Reduction—a Focus on the Tools of Waste Elimination 18
Overview of Part II: Enterprise Cost Reduction—a Focus on Value, Speed, Agility and Competitive Advantage 19
Overview of Part III: Accelerating Deployment Returns—Getting More, Faster, from a Lean Six Sigma Deployment 20
Part I Process Cost Reduction: A Focus on Waste Elimination Introduction to Part 1 23
Chapter 2 Find Cost Reduction Opportunities in Waste 25
The Seven Common Faces of Waste: TIMWOOD 27
Using the Full LSS Toolkit to Drive Cost Reduction 37
Spotlight #2 Special Tips for Nonmanufacturing Processes 39
Key Success Factors in Reducing Costs in Services and Retail 40
Spotlight #3 Design a Successful Lean Six Sigma Project or Pilot 45
Which Methodology is Right for Your Project? 45
Identifying the Players and Their Roles 47
Chapter 3 Use the Voice of the Customer to Identify Cost-Cutting Opportunities 51
Customer Types and Their Needs 52
Collecting Data on Customer Needs 53
Getting Specific about Customer Needs 57
Avoiding Misinterpretations 60
Conclusion 64
Chapter 4 Make Processes Transparent to Expose Waste 65
How to Define the Boundaries through SIPOC Diagrams 67
Using Value Stream Maps to Achieve Transparency 69
Conclusion 82
Chapter 5 Measure Process Efficiency: Finding the Levers of Waste Reduction 83
Process Cycle Efficiency (PCE): The Key Metric of Process Time and Process Cost 84
Little’s Law: Understanding the Levers for Improving Process Speed 88
The WIP Cap Method: How Limiting WIP Can Increase Process Speed and Reduce Costs 90
Using PCE and Little’s Law to Drive Cost Reduction 95
Chapter 6 Improve Your Analysis Skills: How Understanding Variation, Root Causes, and Factor Relationships Can Help You Cut Costs While Improving Quality 97
Analysis Skill #1: Learning to ‘‘Read’’ Variation 98
Analysis Skill #2: Digging Out Root Causes 107
Analysis Skill #3: Establishing relationships between factors 109
Conclusion 114
Chapter 7 Make Rapid Improvements through Kaizens 117
Quick Overview: The Kaizen Approach 119
When Should You Use Kaizens in Cost Reduction Projects 120
Seven Keys to Kaizen Success 124
Conclusion 129
Part II Raising the Stakes: Reducing Costs at an Enterprise Level
Chapter 8 Think Transformation, Not Just Improvement 133
Attain a Proper Understanding of the Extent of the Opportunity 135
Consciously Choose a Path to Capture the Opportunity 138
Plan for a Transformation Journey 144
Leadership Challenges in Leading a Transformation 151
Conclusion 152
Spotlight #4 Transformation at Owens-Illinois 155
Chapter 9 Unlock the Secrets to Speed and Flexibility 159
Alignment and Analytics 160
A Model of Speed and Agility 162
Economic Order Quantity (EOQ)—The First 100 Years 165
Augmenting EOQ with Lean Analytics 167
The Equations in Action 173
Conclusion 176
Chapter 10 Reduce the Cost of Complexity 177
The Hidden Cost of Added Offerings on Processes 179
Assessing Complexity in Your Business: A Holistic View 182
Highlights of the Complexity Analysis Process 183
Complexity Reduction as the Gateway to Transformation 195
Conclusion 196
Chapter 11 Look Outside Your Four Walls to Lower Costs Inside 197
What is an Extended Enterprise? 199
Working on the Supplier End of the Extended Enterprise 204
What to Do When You’re the Supplier: Extending Your Enterprise Downstream 208
Conclusion 211
Part III Speeding Up Deployment Returns: Strategies for Getting More, Faster, from a Lean Six Sigma Deployment
Chapter 12 Create a Pipeline of Cost Improvement Projects: The Secret to Protecting the Heart of Your Business 215
Developing Rigor in Project Identification and Selection 217
From First-Time to All the Time: Shifting from a One-Time Event to an Ongoing System of Pipeline Management 226
Conclusion: Maintaining a Dynamic Pipeline 230
Spotlight #5 Link Projects to Value Drivers 233
Option 1: Value Driver Trees 233
Option 2: Financial Analysis Decision Tree 237
Option 3: Economic Profit 237
Option 4: EP Sensitivity Analyses 239
Value Driver Example 243
Chapter 13 Smooth the Path through Change 247
Change Readiness Assessments 248
Leading versus Managing the Change 250
Upgrading Your Communication Plan 253
Process Ownership and Cost Accountability 259
Conclusion: Restoring Faith, Hope, and Belief 260
Chapter 14 Establishing a Center of Excellence 261
What is a CoE and What Does It Do? 263
Focus #1: Performance Management 265
Focus #2: Replication: Copy and Paste Your Cost Savings 270
How Can a CoE Fit into an Organization? 273
Weaving the CoE into Strategic Planning 277
Conclusion 279
Chapter 15 Gaining New Perspectives on Deployment Cost and Speed Opportunities 281
Looking for Focus and Flexibility in Deployment 282
Focusing Deployments on Business Issues 283
Flexibility in Building Skills 286
Conclusion 297
Chapter 16 Reenergizing a Legacy Program 299
Why Deployments Lose Steam 300
Building a Steam Engine: Performance Management 306
Process Ownership: The Partner of Performance Management 307
How to Reenergize a Deployment 311
Conclusion 318
Index 319
