Lean Six Sigma News Update

Lockheed Martin Missiles/Fire Control, Camden Operations: IW Best Plants Profile 2006

NK Khoo Managing Consultant — Thu, 21 Sep 2006 18:11:00 +0000

Lockheed Martin Missiles/Fire Control, Camden Operations: IW Best Plants Profile 2006
Where Lean Is On Target: Lockheed Martin's Camden operations, which produces complex weapons systems for the military, is itself a lean and mean machine.

Sunday, October 01, 2006
By John S. McClenahen

Lockheed Martin Missiles/Fire Control, Camden, Ark.

Employees: 432, non-union

Total square footage: 1.5 million

Primary product: Military rockets, missiles and rocket launchers

Start-up: 1978

Achievements: ISO 9001; ISO 14001; National Environmental Performance Track Award; 10-time winner of Employee Involvement Association's Performance Excellence Award.

Normally, Lockheed Martin Corp.'s Missiles and Fire Control Operations in Camden, Ark., doesn't keep any finished goods inventory. The rockets, missiles and launch systems made at the 1.5-million- square-foot facility among southern Arkansas' pines become the property of its customers upon completion and formal acceptance.

However, the absence of finished-goods inventory is not the only surprise -- or even the major surprise -- among the facility's 532,679 square feet of manufacturing area. That distinction, which is a great source of pride to management and production people alike, is that Lockheed Martin's Camden Operations excels at lean manufacturing in the building of such complex systems as the Patriot advanced-capability interceptor missile for the U.S. Army.

For example, tools, parts and fixtures are shadowboxed so that workers can tell at a glance whether anything is missing. Materials are organized in convenient-to-use assembly kits -- again a glance is all that's needed to determine if something is missing. Also at work is 6S, Lockheed Martin's variation of 5S, which adds safety to sort, straighten, shine, systemize and sustain.

Among other achievements, implementing lean techniques has reduced production lead times for Patriot missile and launcher components by about six months, from 18 months down to approximately 12 months.

Six Sigma, a quality improvement program, is combined with lean manufacturing at Lockheed Martin's Camden Operations to improve production processes and reduce costs. Among Camden's 432 employees are half a dozen Six Sigma Black Belts, whose in-depth Lean Six Sigma knowledge allows them, among other things, to facilitate efforts that identify and remove production steps and processes that don't create value for customers.

http://www.industryweek.com/media/NewsItems/12671lockheed.jpg
Launcher final integration cells feature lean flow.

Camden also has 121 Six Sigma Green Belts trained in the basic tools of Lean Six Sigma. The Green Belts help implement and sustain Camden's process improvement initiatives. By the facility's calculations, 91 Lean Six Sigma activities have saved more than $23 million since 2001.

Lean Six Sigma and other process improvement efforts are designed to provide the best value to the customer, emphasizes Norman Anderson, general manager of the Camden Operations. They also belie the notion that a defense industry plant can't be a lean and mean manufacturing machine. Yes, specialized components, contract technical requirements and mandated product testing somewhat limit process improvement activities, acknowledges Anderson. But he speaks of a "moral and patriotic desire to improve product quality and reliability." Process improvement, he asserts, is "a life and death matter."

Strategic planning, which links the facility's goals and objectives to Lockheed Martin corporate objectives, an aggressive Lean Six Sigma program, state-of-the-art technology, and manufacturing flexibility and agility help set Camden Operations apart from other manufacturing plants that practice continuous improvement, says Anderson. But the "bottom line" at Camden is the facility's "patriotic and proud employee culture."

Web Exclusive Best Practices

Bring In The Animals

An easy-to-implement lean manufacturing technique is to color code tools, fixtures and machines. Match the color of the tool or of the fixture to the color of the machine and neither should end up in the wrong place.

But what if some of your employees have trouble distinguishing between colors? Bring in the animals.

At least that's what Lockheed Martin successfully did at its Critical Machining Center at its Camden, Ark., operations. Lockheed Martin builds military missiles, rockets and launchers at the facility, and the Critical Machining Center is where tooling, fixtures and machines come together to produce complex components. There's no room for error, specifically installing the wrong tooling or fixture on a precision machine.

To meet the needs of several skilled employees whose vision made it difficult to distinguish between colors, each machining center and corresponding piece of tooling now bears a unique and large animal picture to precisely identify the specific piece of tooling that can be used on a specific machine. This animal coding system also allows for an at-a-glance check of stored tooling that is available for use.

©2006 IndustryWeek. All Rights Reserved.

General Cable de Latinoamerica S.A. de C.V.: IW Best Plants Profile 2006

NK Khoo Managing Consultant — Thu, 21 Sep 2006 18:06:00 +0000

Flexibility Equals Opportunity: General Cable de Latinoamerica finds winning combination in Six Sigma and Lean.

Sunday, October 01, 2006
By Jill Jusko

General Cable de Latinoamerica S.A. de C.V. Tetla, Tlaxcala, Mexico

Employees: 301, union

Total square footage: 1,152,707

Primary products: Telecommunications exchange cable and service wire

Start-up: 1981

Achievements: Named Best Plant of the Year in North America (an internal award among General Cable Corp. facilities) in 2001, 2004 and 2005; improved productivity (annual sales per employee) by 103% in past three years

Root cause: volcano. Not a likely source of problems in most manufacturing plants certainly, but plausible at General Cable de Latinoamerica S.A. de C.V. The telecommunications wire and cable manufacturer is located in Tetla, Tlaxcala, a high-altitude region of Mexico landscaped with volcanoes.

In fact, Hector Arronte Vicario, quality assurance manager, determined during the course of a project to earn his Six Sigma black belt certification that corrosion of certain aluminum doors could be traced to two water sources -- one being the local water supply, which contains sulphur from nearby volcanoes. The sulphur, Arronte discovered, reacted with copper dust at the plant and provoked the corrosion. Given that the doors cost $28,000 each, Arronte says, finding and resolving the problem offers an obvious opportunity for savings.

Today, Six Sigma and lean manufacturing provide the foundation of General Cable Tetla's drive for manufacturing excellence. Five employees are certified Six Sigma black belts and 26 are green belts. And while some manufacturing literature suggests that lean and process industries aren't an easy fit, the Tetla plant says that lean, in combination with a strong focus on process variation reduction, has helped it achieve performances that include a first-pass yield of 99.97% across all finished products.

Where is lean at work? All over, but examples include comprehensive deployment of visual management systems, as well as a pull system on the shop floor in the service wire product group. (Service wire connects a communications network to a subscriber's location. Its basic configuration is an insulated copper conductor.) Customer orders there are translated into color-coded kanban cards that identify product type, quantity and package configuration for a value stream.

Martin Luna moves a reel to a kanban rack in preparation for the next process.
To control the production sequence, heijunka (or leveling) boards have been developed to schedule and maintain balanced production progress. The leveling boards, which contain multiple kanban card slots for each day of the week, are placed at the bottleneck process. Upstream from the bottleneck process, kanban signals trigger machine operators to start and stop the preceding process.

And rather than warehousing finished goods, product in this area is loaded directly onto trucks for customer delivery.

"Over the last several years we have been walking and living the lean culture," Arronte says.

Indeed, the lean focus extends beyond the factory floor. For instance, nearly 85% of the plant's incoming purchased materials no longer require incoming inspection, freeing up resources for other activities. And about three-quarters of key suppliers provide just-in-time delivery, reducing raw material inventory.

General Cable Tetla has grown increasingly flexible as a result of its continuous improvement efforts. For instance, a production schedule that previously was revised monthly now gets updated weekly. The plant also swiftly reacted to an opportunity for additional business that doubled production in three months.

Web Exclusive Best Practices

Benchmarking Is Family Affair

Like other manufacturing facilities that comprise General Cable Corp., the manufacturing plant in Tetla, Tlaxcala, Mexico, benefits from a strong corporate focus on cross-plant benchmarking. Indeed, General Cable de Latinoamerica explains that all General Cable plants are assessed annually about their performance against the 12 manufacturing principles by which General Cable operates. (Those 12 principles are safety, housekeeping (5s), use of formal systems, preventive and predictive maintenance, product quality, process capability, work order delivery, visual factory, productivity, communications, training of associates and operator led process control.) Specific metrics are assigned to each principle.

The assessments, formally called Manufacturing Excellent Audits (MEA), are performed in a cross-plant fashion. For example, General Cable Tetla plant manager Luis Rosete Gonzalez was slated to join his plant's finance manager in a trip to General Cable's manufacturing facility in Moose Jaw, Saskatchewan, Canada (a 2005 IW Best Plants winner), in late September to perform an MEA of that facility. Similarly, the Tetla plant was audited in mid-September by another General Cable Corp. plant. The audit took two full days and included three auditors.

Plants receive multiple benefits from these audits, explains Rosete, including the most basic -- sharing best practices and learning. "We learn about other processes and other work cultures and take the best," he says. Additionally, the audits foster better communications between plants, which speeds problem-solving of common issues across facilities. Further, the metrics that comprise the audits grow more challenging each year, Rosete explains, which motives continuous improvement.

©2006 IndustryWeek. All Rights Reserved.

Mercury Marine celebrates 1,000th Lean Six Sigma project

NK Khoo Managing Consultant — Thu, 21 Sep 2006 17:51:00 +0000

Employees at Mercury Marine in late August completed their 1,000th project using the company's Lean Six Sigma continuous improvement process, which has helped the company improve product quality, enhance customer service and lower costs.

Since 2003, thousands of Mercury employees around the world have helped improve the company's business processes through the implementation of Lean Six Sigma. The improvement methods are based on lean processes, which improve speed and eliminate waste, and Six Sigma methods, which reduce process variation. The company has focused on improving processes in everything from product design to manufacturing, including planning, sales, distribution and service.

"I am most proud that Lean Six Sigma has become a way of doing business for Mercury Marine, providing the foundation for the continuous improvement which will drive our customer satisfaction," said Mercury President Patrick C. Mackey. "We know it's working because our OptiMax and MerCruiser customers ranked us highest in customer satisfaction in this year's J.D. Power surveys."

Since Mackey launched the cultural transformation of Mercury three years ago, nearly 700 management and production employees have been formally trained in Lean Six Sigma methods, with dozens more attending training every quarter. The company has also worked with its suppliers and customers to create a lean supply chain to ensure the highest-quality products are manufactured and available for consumers.

Driving Incremental Value Through Lean Six Sigma

NK Khoo Managing Consultant — Tue, 12 Sep 2006 08:08:00 +0000

GE has learned that Six Sigma and Lean share a single over-arching goal: to create incremental value based on end customer requirements.

By Howard Mikytuck, Access GE Leader, Master Black Belt, and Dan Moscone, Master Black Belt, GE Commercial Finance
Sept. 6, 2006 -- Imagine if the local weather person was right every day -- for 2,739 years straight. What if the cable company offered a lifetime of free services if your technician didn't arrive within 0.000034 seconds of their scheduled arrival? Of course, we'd all love the lottery ticket that pays out 99.9999% of the time.

In the manufacturing world, this level of near-perfection consistency is a quality mandate required to compete effectively in today's marketplace. Now an industry standard, Six Sigma has galvanized the concept that if a process lies within six standard deviations of the mean, production quality is all but guaranteed (3.4 DPMO). However, quality alone is no longer enough.The ability to eliminate process waste in the supply chain while delivering Six Sigma levels of quality will win the new end game.

GE, an early adopter of Six Sigma, has been working to combine Six Sigma's core principles with that of Lean, a methodology focused on waste reduction (as opposed to defect reduction). GE's hybrid approach to Lean Six Sigma is in part based on the venerable Toyota Production System (TPS), which seeks to compress the timeline from order receipt to payment received by removing waste. GE's Lean Six Sigma mode is guided by four key principles:

Define what the customer perceives as value in the product or service.

Map the value stream of all steps (value and non-value added).

Establish the flow of products, services and related knowledge from supplier to customer.

Continuously improve the process to perfection.

Thanks to the sheer diversity of GE (six key businesses -- Infrastructure, Industrial, Commercial Finance, NBC Universal, Healthcare and Consumer Finance), we learned that Six Sigma and Lean share a single over-arching goal regardless of industry: to create incremental value based on end customer requirements. Through our internal experience, we found that the combination of defect reduction and waste elimination into a single methodology created a more comprehensive approach, one not limited to GE's manufacturing quarters.

While Toyota and Dell quickly come to mind as industry leaders in floor efficiency, companies like Wal-Mart and Microsoft are applying these principles to streamline distribution chains and software engineering. A clear differentiator for GE's manufacturing business, we've begun to make great strides in applying Lean Six Sigma to our Commercial Finance organization. Just as a manufacturing or distribution process will rely on key notes from supply to delivery, a financial services organization relies heavily on key touch points to fund a loan transaction, from proposal through commitment to closing.

During a two-week Lean Six Sigma Workout held recently for Commercial Finance's lending business, our teams identified nearly a dozen immediate actions projected to reduce our total cycle time by 45%. With speed of execution a key customer requirement, this is a major win for the business.

As we continue to gain deeper levels of expertise from the internal application of Lean Six Sigma, GE is also working to share its knowledge with our customers. When Jeff Immelt became CEO in September, 2001 he initiated a program that we call At the Customer, For the Customers (ACFC). Delivered at no cost, the program is an effort to share with customers what GE has learned through 114 years of doing business across diverse operational segments. In return, our efforts to deliver incremental value for our customers helps deepen the relationship to facilitate future business opportunities, creating a win-win.

A large portion of our knowledge sharing through ACFC is driven by our expertise in Lean Six Sigma.Typically, an assignment begins with an overview followed by discussions with executives and managers. Why do they perceive to be the problems? Is overtime pay excessive? Are delivery dates chronically missed? Is unit production cost too high? Are lead times flat or increasing compared to competitors? The engagement can take the form of introductory sessions and corporate management training to joint working sessions on-site with our customers.

For Cequent Trailer Products, a Commercial Finance customer and maker of commercial grade jacks headquartered in Wisconsin, the teams thoroughly mapped their value stream as part of a Lean Six Sigma workout. From order entry to shipment, the teams walked up and down the production lines, measuring time intervals, gauging value-added inputs and non-value-added waste. Likewise, we spent days analyzing material and information flow looking for ways to reduce waste without losing knowledge to increase efficiencies. As a result, Cequent manufacturing lead times were reduced by three weeks, saving approximately $1 million in excess inventory. Together, we also simplified the company's materials by creating families of products that share common components rather than unique parts.

The combination of Lean and Six Sigma is proving to be a powerful answer to a familiar question -- amidst growing competition and a constant pursuit of efficiency, how can we get better at what we do to help our customers win? For GE, that means pursuing perfection in our own processes while sharing what we've learned with customers through the ACFC program. Akin to Six Sigma, it's a hybrid approach to continuous improvement that we believe is absolutely critical to creating meaningful long-term value.

Howard Mikytuck, is an Access GE Leader, Master Black Belt and Dan Moscone is a Master Black Belt at GE Commercial Finance. GE Commercial Finance Corporate Lending (gelending.com) is one of North America’s largest providers of asset-based, cash flow, structured finance and other complimentary solutions for mid-size and large companies seeking $10 million and more.

USA. Lean Six Sigma helps Mercury marine improve quality

NK Khoo Managing Consultant — Sat, 02 Sep 2006 15:23:00 +0000

Wednesday, 30 August 2006
Company news:

Employees at Mercury Marine last week completed their 1,000th project using the company's Lean Six Sigma continuous improvement process, which has helped the company improve product quality, enhance customer service and lower costs.

Since 2003, thousands of Mercury employees around the world have helped improve the company's business processes through the implementation of Lean Six Sigma. The improvement methods are based on Lean processes, which improve speed and eliminate waste, and Six Sigma methods, which reduce process variation. The company has focused on improving processes in everything from product design to manufacturing, including planning, sales, distribution and service.

"I am most proud that Lean Six Sigma has become a way of doing business for Mercury Marine, providing the foundation for the continuous improvement which will drive our customer satisfaction," Mercury President Patrick C.

Mackey told employees Friday. "We know it's working because our OptiMax and MerCruiser customers ranked us highest in customer satisfaction in this year's J.D. Power surveys."

Since Mr. Mackey launched the cultural transformation of Mercury three years ago, nearly 700 management and production employees have been formally trained in Lean Six Sigma methods, with dozens more attending training every quarter. The company has also worked with its suppliers and customers to create a lean supply chain to ensure the highest quality products are manufactured and available for consumers.

Last Updated ( Wednesday, 30 August 2006 )

COMACC: how to operate 'better, faster, cheaper'

NK Khoo Managing Consultant — Tue, 01 Aug 2006 05:27:00 +0000

Blackanthem Military News, LANGLEY AIR FORCE BASE, Va., July 24, 2006

I know what you're thinking. "Here it comes again - a new fad." And I've been in the Air Force long enough to have seen my share too. Lean, Six Sigma, Action Workout, Re-engineering, and Quality Air Force - we just never seemed to get them right across the Air Force. Either we improved in a scatter-shot pattern at the local level, or descended into a full-time program of education with no output, or couldn't get the policy level of the Air Force interested in kicking over the hurdles that really were holding up progress. But each time, within each effort, there were seeds of success: money saved, process time saved, quality improved. But we never got those seeds to sprout so we could harvest across our Air Force. AFSO21 is an approach to finally do it right - not a bunch of training, not a bunch of AFSO21 offices to stand up and drain manpower from an already stressed force.

The point of all this is that it is time for us to do some hard reviewing of our organizations and the processes within them. Soon we are going to be about 40,000 full-time equivalents smaller across the active, Guard, Reserve, and civilian force. That means we have to stop doing things that don't really add value to our force anymore - even if we do them very well. And we need to start looking at all of our processes to understand where the value-added steps are, and where is the waste and delay that can be carved out. Last December I asked everyone for some suggestions on where we start. I got 428 ideas - 122 on improvements and 304 that challenged the rules that impeded smart operations. The tenet is this: If today we started doing whatever it is we are doing - would we do it at all, and if so, would we do it the same way? If we started with a clean sheet of paper, what is the better, faster, cheaper way to do what needs to be done? So you have to start with your process and that really has to start with your customer. Who is demanding your product or service and why are you producing it in the first place? Once you get past that, then you take whatever it is that you make, improve, provide, and map out how you actually do that from the moment you start until you finish.

To look at it another way, I spend a lot of time talking with many of you when I visit your units. Most of the time I shake your hand and ask you, "How are you doing?" I haven't had anyone yet answer anything but an enthusiastic, "Great!" What would you do if I followed that up with one more question, "How do you know?" I'd be impressed if you said, "Well, here is what I am tasked to do, here is who I do it for, and here is how I know how fast I do it, how good the quality is, and how costly it is. And, I watch these metrics to compare how well I am doing against how well I should be doing - and they tell me I'm doing great!"

Some of you have done some great work already - mapping out the routine things you do, cutting out extraneous steps, reflowing your work, and making sure that each step that remains adds value, or if it doesn't add value per se, is it still required for safety, or legal safeguards, or other policy rules - and challenging the rules if they don't make sense for today's world. One unit found out they could save 5,000 hours per year by just changing where the entry point was on their parking ramp. That means 5,000 hours more spent on their jets. Another unit has succeeded in reordering how inspections are done so they only open jets up twice instead of four times to get things done, and that gets us 15 days more flying on each of their jets. There are countless examples out there of innovative thinking. So I encourage you all to get that big roll of wrapping paper, a basket-full of yellow-stickies, get your process buddies together and start sticking the steps on the paper. I think you'll be amazed at what you find out. Here are some things to consider as you do it: if the customer knew you were doing all the things you do to their product, would they want to pay for all of those things (a good judgment of value-added)? If not, why are you doing them? If the product is waiting for something or someone, why? If one of the steps is "inspecting," see how many times the inspector finds something. Can you design that fault out? Or, if the fault doesn't rise to the level of "fatal," can we accept the consequences, and skip "wasting time" looking for it? And by the way, it helps to have a couple of folks on your team who know nothing about the process. They can ask those embarrassing, "Why do you do that, and why do you put that there?" questions that you're too close to the process to see.

Remember, the output is mission accomplishment. "Faster, better, cheaper" is the filter for our measures of merit. If we can accomplish the mission faster, maybe we can reduce our shift time, or maybe we will have more capability available without more equipment. If we can do it better, maybe it will last longer and we will save on repair or rework time. If we can do it cheaper, maybe we can take that money and fix something that takes money to fix. In any case, we're looking for ways to do the right things in the right way.

My challenge is to take all of your good ideas and institutionalize them across Air Combat Command. My vision is that if you are doing this better than anyone in the Air Force, why, in this plug and play force, isn't everyone using your process and why isn't it the standard? Part of my job is to insure that we don't have a dozen units re-inventing the same wheel but coming up with different rims and tires. Our intent is to take shiny new efficient processes, institutionalize them across the command, and move on to other processes. That will also include all of those IG "Best Seen To Dates," and "Benchmark Programs" to jump-start improved process work. I'm the project officer on this, and Maj. Gen. Kenneth DeCuir, the ACC Vice commander, is our champion. We're in the midst of standing up analytical experts in ACC/A-9 to be able to help you set up your first few reviews if you need help, or show you how you can use data to ensure your process is in control and staying fixed. Plug in with them as you have questions. To get started though, I need you to pull out the paper, the stickies, and your ideas on how to put our processes together faster, cheaper, and better - and make them last. Keep asking, "What if?" and keep your ideas coming.

By Gen. Ronald E. Keys
Air Combat Command commander

The Emerging Talent Crisis ... Six Sigma and Lean to the Rescue

NK Khoo Managing Consultant — Sun, 23 Jul 2006 18:54:00 +0000

MYSTIC, Conn., July 18 /PRNewswire/ -- "Talent Wars" and "Brain Drain"
are not the latest must-see horror movies due out this summer -- rather,
they are emerging crises that could play out to frightening results for
businesses in the coming decade. According to The Avery Point Group, a
leading national executive search firm, U.S. business leaders might want to
sit up and take notice.

As 77 million U.S. Baby Boomers begin to retire over the next decade,
there are only 46 million Gen-X'ers available to backfill the Boomers'
retiring ranks. Even with a modest two percent economic growth rate over
the next 15 years, demand for critical talent could increase by as much as
a third, creating a "war" for critical talent. For some companies the
crisis may be even more immediate. One recent study of the nation's 500
largest companies reported that they expect to lose half of their senior
management over the next five years. Additional studies suggest that up to
85 percent of major companies surveyed have no formal program or process in
place to deal with this impending crisis.

In the past few years companies have been so transfixed on downsizing
to contain costs that they have largely neglected this looming threat to
their competitiveness. "There is no doubt that over the next decade or so,
demand for talent will ebb and flow with the economy, and there is no
denying the demographic shift that will take place in the coming decade,"
says Tim Noble, managing principal of The Avery Point Group. "Too many
companies continue to drive their human resource processes blindly,
assuming the road ahead has not changed. These companies will be in for a
rude awakening when they are unable to achieve even the most modest of
business goals due to drastic staffing and talent shortfalls."

A less visible but no less dangerous problem is the loss of knowledge,
or "brain drain," resulting from senior workers departing the organization
without passing on their expertise to others. This lack of knowledge
management will place many companies in a position to repeat prior mistakes
and expose businesses to additional financial and operational risks. Worse
yet, if no action is taken, some organizations could be headed for a point
of no return with the complete loss of process knowledge in a few years.

Companies that rely solely on a strategy of outsourcing as a potential
solution may be in for a shock as well, as existing sources of talent from
offshore labor pools, such as India, Mexico and China, dry up as these
countries recognize their own needs and provide incentives to retain talent
in order to support their own local economic business objectives.

Given this looming demographic shift, the time for corporate leaders to
act is now; however, companies must resist the urge to rush ahead without a
well-balanced and deliberate approach to managing and leveraging their
human capital. Part of the solution may lie with such tools as Six Sigma
and Lean. With their focus on process discipline, variation reduction and
waste elimination, these tools are well-suited to help companies address
this impending crisis.

Six Sigma has long been utilized by organizations to transform
manufacturing and transactional processes from art to science by defining
and validating key process variables to gain process control and eliminate
variation. A key part of this methodology is the capture, transfer and
validation of knowledge from process owners, thus making Six Sigma an
essential part of any action plan to deal with the dangers of
organizational "brain drain." "Companies need to not only view Six Sigma as
a tool to drive productivity and service, but also as an essential
methodology for critical knowledge management within their organizations,"
says Noble. "Six Sigma has a built-in tool set that lends itself very
nicely to capturing and validating critical process knowledge that may
otherwise be lost when key talent departs an organization."

The Lean tool kit can also play an important role in aiding
organizations as they deal with this imminent crisis. Lean has a built-in
methodology with such tools as "value-stream-mapping" and "standardized
work" that can help organizations identify and eliminate non-value-added
processes that waste human capital. "Lean, with its focus on waste
elimination, is ideal for helping organizations to free up human capital
for redeployment," says Noble. "However, Lean will need to move beyond its
stereotype as a tool set for only manufacturing and be accepted and applied
to transactional processes in order to be an effective tool to mitigate the
effects of this impending crisis."

Six Sigma and Lean are only part of the potential solution, providing a
proven set of tools that can be part of a broader business talent
management strategy. Business leaders will first need to recognize that the
short-term solutions of the past will not work and accept that the
landscape for talent management will dramatically change, requiring a more
balanced and comprehensive solution in order to remain competitive in the
coming decades.

Lean Six Sigma eases fiscal constraint challenges

NK Khoo Managing Consultant — Sun, 23 Jul 2006 18:50:00 +0000

By Beth Reece

WASHINGTON (Army News Service, July 20, 2006) – As commanders throughout the Army look for ways to cut operating costs, business practices of Lean Six Sigma are reducing expenses and improving productivity throughout manufacturing, contracting, administrative services and even recruiting.

“People will say: we’re in the army; we’re not a business,” said Col. Mike Petrash, deputy commander for the 96th Regional Readiness Command in Utah. “I would counter that and say every time we do a transaction, every time we promote a Soldier, pay a Soldier, supply a Soldier or move that Soldier from point A to point B, that is a business transaction.”

Lean Six Sigma is a combination of two business-improvement systems, Lean and Six Sigma. Lean refers to the reduction of waste, or the elimination of unnecessary steps to increase speed and productivity. Six Sigma is the reduction of variance to improve system performance. Together, they free up resources and help ensure quality equipment and services are quickly provided to Soldiers.

Strides made through LSS practices may best be seen on manufacturing and repair floors such as at Red River Army Depot, Texas.

“We’re getting tremendous payback because of Lean Six Sigma .We saved, last year alone, $30 million on our Humvee line,” said Col. Douglas J. Evans, depot commander. “It’s not only in dollars but also in the number of vehicles that we can get to the Soldiers who need them.”

The facility can now turn out 32 mission-ready Humvees a day, compared to 3 a week in 2004.

LSS is also reforming administrative services and human resources.

“When our team took a look at awards processing, we found that on average it was taking 90 days from when we got a request for an award in to when the award was published. By taking a look at our process and reducing our cycle time, we’ve been able to reduce that to 21 days,” said Col. Lori M. Dupuis, chief of staff for the 96th Regional Readiness Command in Utah.

In charge of nearly 6,500 Soldiers in 65 units throughout six states, the 96th RRC has used Lean Six Sigma to also reduce the deployment preparation time for a battle-rostered unit from 30 days down to just three.

“Using the Lean Six Sigma approach, we went directly from defining the process to improving it,” said Petrash.

At the U.S. Army Recruiting Command, Lean Six Sigma has improved the LEADS system, through which recruiters receive prospective recruits and direct them through the enlistment process.

Of 32 steps taken to recruit new enlistees, subject matter experts from the Recruiting and Accessions Command determined that only 11 were value added. And by reducing the steps by 66 percent, USAREC officials also decreased by 40 percent the time it takes to get applicants through the process.

“We had the immediate return on the investment, which was to cut time and put people in the schools quicker. We were able to eliminate a lot of waste,” said Chief Warrant Officer 4 Jack Bailey, chief of USAREC’s Special Missions Recruiting Division.

“But it’s the intangibles, the impact it had on the Soldier in the field that was more customer centric. The benefit was so much more than what we realized inside our four walls. It was just a huge success story,” Bailey said.

Where Lean Six Sigma has been implemented, it’s been successful, said Mike Kirby, deputy undersecretary of the Army for business transformation.

“This is all in a backdrop of severe fiscal-year constraints, so we have to do business differently,” said Kirby.

“Lean Six Sigma is a lot different from the programs we tried to implement before. It gives give you a set of tools that even the most inexperienced person can use,” said George E. Kunkle III, process optimization manager at Corpus Christi Army Depot, Texas. “Initial response to Lean Six Sigma may be resistance, but it only takes one event for people to see right away that this is the right direction.”

At Kunke’s depot, employees decreased the time it took to rebuild the UH-60 Blackhawk from 256 days to an average of 70.

“Lean was the vehicle that we needed,” said Clarence L. Dean, chief of UH-60 Blackhawk Assembly Branch #2. “It helped us to really sit down and think about how we do our job.”

During fiscal 2005, the Army Material Command saw $110 million in savings and cost avoidance by implementing Lean Six Sigma practices. By removing waste and better controlling output, for example, Letterkenny Army Depot, Pa., reduced costs by $11.9 million in Patriot air defense missile system recapitalization. And Pine Bluff Arsenal, Ark., reduced repair cycle time by 90 percent and increased its production of M-40 protective masks by 50 percent.

“We are turning things around faster for the warfighter,” said Gen. Benjamin Griffin, commanding general of Army Material Command. “This is showing significant savings and improvement wherever it has been implemented.”

But using Lean Six Sigma principles to redefine principles and improve speed, quality and cost requires the collaboration of both management and employees.

“The workers have to be enfranchised, because they understand the processes. We have to solicit their input on how to make their processes more lean and more efficient,” said Kirby.

Marc Higgs, process improvement specialist at Red River Army Depot, used his experience and knowledge to influence how Lean Six Sigma practices would create improvements at the depot.

“Lean Six Sigma is good for the Soldier, it’s good for the employee, it’s good for Red River Army Depot, it’s good for the Army,” he said.

Lean and Mean

NK Khoo Managing Consultant — Fri, 07 Jul 2006 22:29:00 +0000

In a dramatic experiment, the army is remaking itself using theories perfected by business. Can Lean Six Sigma build a better, faster force?
By SALLY B. DONNELLY

Colonel Douglas Evans sits in his modest office at Red River Army Depot, tracking the dozens of war-battered humvees from Iraq that arrive every week to be repaired. Spread across 36,000 acres in Texarkana, Texas, the World War II--era Red River facility is one of the Army's oldest and most important maintenance and storage bases. But Evans, a 24-year Army vet with combat tours in the Balkans and Iraq, says what soldiers need to understand these days is not only bombs and bullets but also diapers.

Changing babies, Evans tells everyone at Red River, is the best model for thinking about how the facility can best help the Army. The faster you can fix a beat-up humvee, the sooner you can get it back into the fight. "You have to be organized," says Evans, who has an M.B.A. from Babson College. "You can't put the baby one place, the wipes another, the baby powder still another. If you fail to streamline the process, you might never get that clean diaper on. It's all about eliminating the 'waste' in the process." He smiles at his play on words.

Evans is the tip of the spear on what may be the most ambitious business effort in the 231-year history of the U.S. Army: an attempt to adopt a management theory, Lean Six Sigma, across the entire service. More comprehensive than the attempt in the 1960s by Defense Secretary Robert McNamara to introduce the highly quantitative "system analysis" to the Pentagon, this is an enormous experiment: the Army has an annual budget of $160 billion, with 1.1 million men and women in uniform, and it employs an additional 230,000 civilians. "This is the largest deployment of management science since the beginning of the discipline," says Mike Kirby, who holds the newly created position of deputy under secretary of the Army for business transformation.

Why shake up the Army now, in the midst of a difficult war? The U.S. defense budget has increased some 40% since 2001, to almost half a trillion dollars, but military experts expect the funding to slow. Secretary of the Army Francis Harvey, who signed the order last March to implement the effort, says the need for it is obvious: "We need to free up resources so we can apply them to the operating side of the Army. We need to equip our soldiers better and faster." Optimistic projections claim the Army could be saving billions of dollars each year in a decade.

The two concepts of Lean and Six Sigma have been around the private sector for decades, and some parts of the Army have been using them since 2002. Lean is an outgrowth of the Toyota production system, developed in the 1930s, which focuses on increasing efficiency and reducing cycle time by eliminating waste. Six Sigma was first used on a wide scale by Motorola in the 1980s as an approach to improving quality through statistical measurements and benchmarking, Evans explains. Six Sigma entered the U.S. business lexicon in a big way in the 1990s when CEO Jack Welch embraced it at General Electric.

Today on the bookshelves of nearly every Army office in the Pentagon, alongside military-history tomes, sits a stack of business books that try to decipher what Lean Six Sigma means. Harvey, the spiritual godfather of the Army's transformation, tries to cut through the jargon. "We used to call it 'quality and productivity improvement' or 'total quality management,'" says Harvey, who worked for Westinghouse for nearly three decades. "The bottom line is, you take the extra steps out of the system, and improvement should be ongoing and forever."

While Lean and Six Sigma have traditionally been applied to manufacturing, the Army is using them in administrative offices as well. Last year for the first time, Harvey began requiring precise monthly figures on how many employees the service had. Then he gave commanders the responsibility of scrutinizing every new hire. Largely through attrition, the Army recorded a mere 2.6% increase in civilian employees in 2005. And Harvey did his part: his office now has 30% fewer than when he took the job in 2004.

His officers are doing the same. General Ben Griffin, the head of Army MatÃ©riel Command--the service's central procurement organization for equipment--has dramatically cut the number of meetings, reports and briefings. He installed seven senior officers around the world, in part to track progress on Lean Six Sigma, and gets Army-wide operational updates every week by videoconference rather than in-person meetings. Griffin says his command alone saved $110 million last year, and military sources expect that to be doubled this year.

But it is on shop floors like Red River's where the changes are starting to show the most impressive results. Worn-out humvees used to be brought into a poorly lit, dirty and disorganized loading bay; now the vehicles move through a bright, gleaming shop floor--with American flags draped from the ceiling--in an assembly-line method, complete with a horn that blares every 23 min. to signal a move to a new station. Workers called waterspiders (named for the bugs that flit across the top of ponds) scurry back and forth to fetch tools and equipment for higher-skilled mechanics, who stay close to the humvees. Evans tracks the slightest delays. When an employee missed work for a family emergency last December and slowed the entire line, Evans realized that he had not cross-trained enough workers to fill in. Now he has at least one backup for every critical spot. Red River is also stocking more parts and requiring better quality from suppliers. The changes are paying off: the facility can turn out 32 mission-ready humvees a day, compared with three a week in 2004; the Lean process has lowered the cost of repair for one vehicle from $89,000 to $48,000.

And employees are part of the equation. At Red River, for example, broken vehicle hub gears used to be carted off to an area where several mechanics worked on them at three different tables. Workers came up with the idea of building one long table with an oval track on it that could slide the parts smoothly and quickly to each of the mechanics, whose tools were within easy reach. Evans is also taking some employees on site visits to efficient private-sector plants, like the British company BAE Systems' facility in York, Pa., where Bradley Fighting Vehicles are built. John Moore, a Bradley repair manager who has worked at Red River for 30 years, says he was skeptical of the new management regime at first. "I thought it was just going to put me out of a job," Moore says. "But I've turned around 180 degrees--I can see what an efficient shop can do."

Other Army facilities have seen similar results. Arkansas' Pine Bluff Arsenal reduced repair recycle time 90% and increased its production rate 50% on M-40 protective gas masks. Letterkenny Army Depot in Pennsylvania has saved $11.9 million in the cost of building the Patriot air-defense missile system.

In many cases, the Army is turning to the private sector for help. The service lets 200,000 contracts each year, and some companies, like Honeywell, Northrop Grumman and BAE Systems, work hand in hand with Army staff on the factory floor. At Red River, for example, BAE spent thousands of dollars for new equipment and physical improvements to the plant. The company has also posted an on-site representative at Red River to oversee repair work on transmissions for BAE's Bradley. Working together, the BAE--Red River team increased output from 1.5 to 4 units per shift. In many Army facilities, the physical work, or "touch labor," is done by military staff, "but the crucial technical support is private industry," says Griffin of the Army MatÃ©riel Command. There are more than 300 such partnerships throughout the Army, and Griffin says they accounted for $225 million in cost savings last year alone.

But two large questions loom over the Army's efforts: Is Lean Six Sigma just a management fad? And can a system designed to maximize profits and market share work in an enterprise whose goal is national security? Says an analyst who studies government procurement: "How is the Army going to judge success? Cutting people or saving money is useful, but the challenge will be making sure all the changes are not only relevant to the soldier in the field but that there aren't negative impacts for war fighting." Some outside experts have also raised doubts about the Army's ability to systematically track processes in minute detail as Six Sigma requires.

Even advocates of the Army effort recognize the challenge. Employees at all levels must adopt a new work ethic, learn new systems and often work harder, with no immediate rewards. At Red River, Evans asked his 300 supervisors to volunteer for intensive Lean Six Sigma training but felt that not enough embraced it, so last month he required attendance. "Ninety-nine percent of my folks are onboard, but a few have said they will retire rather than adopt the concept of Lean Six Sigma," Evans says.

Of course, what works in a humvee repair shop may not translate to an air-conditioned cubicle. "While cost savings are easier to achieve and see in a production facility, how do we measure success in the legal department?" asks Ron Davis, a civilian executive at the Army MatÃ©riel Command. "We can't use 'cases lost.' But we could look at speeding up how long it takes to produce a paper. Or how we might be able to get a recruit into the system faster."

For Evans, the Army's efforts are much more than a business-school exercise. "This is not only an economic transformation but a huge cultural change," he says. In the corner of every office at Red River, and on all the shop floors, stands a black cutout figure of a soldier with a helmet and rifle at the ready as a constant reminder of who the customer is and that the smallest errors can have the most serious consequences on the battlefield. A sign affixed to the front of the silhouette soldier says, WE BUILD IT AS IF OUR LIVES DEPEND ON IT. THEIRS DO!

Lean, mean, Six Sigma machines

NK Khoo Managing Consultant — Mon, 05 Jun 2006 21:26:00 +0000

Electronics companies have used Lean Six to trim down, but can it help them pump up?

By Tam Harbert -- Electronic Business, 6/1/2006

In the depths of the dot-com bust of 2001, the high-tech industry went on a diet—cutting costs, downsizing, scaling back. There were many different types of diets, but some electronics companies embraced a particular approach called Lean Six Sigma as their salvation.

Lean Six is much more than a diet, proponents say. Rather, it is a prescription for regaining business health and transforming a company, a way to cut waste from its operations and of increasing productivity and improving quality.

ELECTRONIC BUSINESS interviewed four electronics companies in various phases of deploying Lean Six: Celestica, ON Semiconductor, Solectron and Xerox. Without exception, each company is healthier now than it was five years ago. Three of them have turned profitable, and the fourth—Celestica—is close to turning the corner (see table, page 41). The question is how much credit for their progress goes to Lean Six. Most of the companies claim that their improved business results are a direct result of Lean Six, and they are looking to increase those results by applying Lean Six beyond their manufacturing divisions and even beyond their companies to customers and suppliers. And the evidence appears to strongly support the claim.

A merging of trends
Lean Six is a blend of two methodologies. In general, the lean approach focuses on eliminating all types of waste, including overproduction, waiting time, transportation, processing, inventory, motion and scrap. Originally developed by Toyota in the 1980s, lean improves quality and reduces production time and cost. Six Sigma—pioneered by Motorola in the 1980s—is a set of tools that use statistical analysis to identify and eliminate defects. General Electric was one of the first companies to blend the two approaches and is credited for popularizing the mix.

With their own jargon and complex frameworks, each methodology alone is hard to understand (see "Lean Six Sigma lingo," page 40). Put them together and add each company's own unique recipe, and identifying the exact ingredients is next to impossible. However, a typical implementation begins with mapping the value stream, which means listing how each process or operation is performed, step by step. Once the value stream is mapped, each step is evaluated. If it adds value—meaning that it's something the customer would pay for—it's kept. If it does not add value, the goal is to eliminate it.

Perhaps because they consider it such a competitive advantage, most companies won't say exactly how much they've spent or saved, making any return-on-investment calculations difficult. Xerox uses an internal measure called "economic profit," which is project value minus cost, says Bob Shea, communications manager for corporate Lean Six Sigma. Those internal figures (which Xerox doesn't release) are then rolled into the company's overall financial numbers.

"We don't try to separate out the monetary gain we get with Lean Six, because it's incorporated into the management process," says Arthur C. Fornari, vice president and corporate deployment officer for Xerox Lean Six Sigma.

Nevertheless, Lean Six projects have contributed hundreds of millions of dollars in cost savings, cost avoidance and revenue to Xerox, says Shea.

Solectron also declines to cite numbers, other than to point to its bottom line as proof of Lean Six's benefits.

"Three years ago, we had 16 quarters of losses, but we now have nine quarters of gain behind us," says Marc Onetto, Solectron's executive vice president, worldwide operations. "There are many other factors, but Lean Six Sigma is a big contributor."

Arthur C. Fornari, vice president and corporate deployment officer, Xerox Lean Six Sigma

Typically a company can get a tenfold return on investment within two years after implementing Lean Six, says Bill Kastle, a senior vice president at George Group, a Lean Six consulting firm that counts ON Semiconductor, Solectron and Xerox among its clients.

Savings fall into the three categories to which Xerox refers. Type 1 is hard dollar savings, which are directly measurable. Type 2 is cost-avoidance savings—expenses the company did not incur, because of fewer process steps and/or increased productivity. Type 3, the most difficult to measure, is growth in revenue that results from process improvement such as shorter lead times.

Manufacturing and beyond
The most obvious and usually the first application of Lean Six is manufacturing, where workers are comfortable using metrics and results are easily measured. "We recommend that companies initially target their Lean Six projects at Type 1 savings," says Kastle. "No one will debate those savings, and you'll gain the confidence of the organization."

One easy-to-understand manufacturing application of Lean reduces the number of steps workers must take to accomplish a particular task. The Lean Six team follows a worker, tracing the exact steps the worker walks, which often results in a "spaghetti chart," says Onetto. Working from there, the team and factory workers start rearranging things such as bins of components to straighten out the spaghetti, creating a more efficient path for workers.

Although companies tend to shield overall ROI figures, most of them can easily point to specific, dramatic improvements in manufacturing operations. For example, Celestica cites a string of improvements at its Monterrey, Mexico, plant. Over the course of 18 months, workers reduced equipment setup time by 85 percent, shortened time between receiving an order and shipping it by 71 percent, reduced floor space used by 34 percent, reduced consumables by 25 percent, reduced scrap by 66 percent and reduced the investment in surface-mount technology (SMT) lines by 49 percent.

Lean Six experts tend to eat, sleep and breathe this type of approach. Dave Cooper, vice president of supply chain solutions at Solectron, has rearranged all his clothes at home to improve his system for getting dressed, he notes.

"I can get dressed within fewer than eight feet," he boasts.

The staff at Solectron's Guadalahara, Mexico, plant also applied Lean Six to wardrobes, specifically to the process of providing uniforms and electrostatic shoes to factory workers. By limiting the number of available sizes to four, they reduced the time it takes to assign them to workers by 70 percent.

"We had something like 25 sizes of shoes," says Onetto. "We could have employed a dwarf and a giant."

Indeed, Lean Six can be contagious in many respects. Some companies are finding that Lean Six is spreading organically from manufacturing operations to other areas of the company.

"People start seeing the results and want to apply it to their own processes," says Robert Hemmant, global lean architect at Celestica, which adopted Lean Six in 2001. "We see that as we improve manufacturing, a lot of other processes will need to change; otherwise, they'll limit the rate of improvement." The company has Lean Six projects in human resources, finance and purchasing, he says.

ON Semiconductor is using Lean Six on a more limited scale but nevertheless is experimenting in areas besides manufacturing. About a year ago, the company started training 24 people to be Lean Six "black belts" —12 in manufacturing and 12 in other areas of the company, says John Mallon, director of supply chain management at ON Semiconductor. Among the nonmanufacturing projects is one involving forecasting.

By applying Lean Six, ON Semiconductor is identifying places in its communications process where information gets lost, Mallon says. The company is still debating the merits of using Lean Six throughout the corporation. "We want to deploy some projects and see what results we get," says Mallon.

Companies that apply the discipline across the entire corporation stand to net the greatest benefits from Lean Six, contends Kastle. "If a company wants to do this in just one area, it is going to leave some 70 percent of the savings on the table," he says.

Achieving maximum benefit is the hope at Xerox, which has applied Lean Six across the entire company all at once, says Fornari. Starting in early 2003, Fornari was charged with incorporating Lean Six into every function in the company. He appointed 33 Lean Six Sigma "champions," each responsible for deployment in their respective areas. The company now has about 633 black belts and master black belts, 3,500 green belts (an intermediate level) and 30,000 yellow belts (a basic level) out of 55,200 employees.

Revenue stalled
And yet Xerox has not been able to parlay this commitment into growth in its revenue, which has remained stuck at $15.7 billion for the last three years. Likewise for the other Lean Six proponents: They may have cut enough waste from their operations to reduce their costs, but they aren't seeing revenue growth yet.

The next step for Xerox is to leverage Lean Six as a platform for services. The company is beginning to show customers how to apply Lean Six to improve their business operations.

One example is how Xerox helped the Monroe County, New York, sheriff's office improve its accident-report-filing system. Xerox studied the path of those accident reports and designed an electronic system in which an officer would scan a driver's license and registration, after which report forms would be automatically populated with the data.

In the case of the sheriff's office, Xerox did not charge for its consulting services, but it is charging customers today. "The great thing is that you're cleaning your own company's processes and you can do it for your customers, too," says Fornari.

Such techniques come directly out of the playbook of Lean Six pioneer GE, says Kastle. Working directly with a customer at its own facility gives a company an ideal way to see customer problems firsthand and then design a solution to sell to it, he notes.

Indeed, Solectron is following this path with its Supply Chain Solutions (SCS) group, which works with customers to improve their operational model through Lean Six Sigma, according to Cooper. (This isn't surprising, because Onetto and at least one other Lean Six executive at Solectron—Ravi S. Ramanan, vice president of functional excellence, hail from GE Medical Systems.) In one case, SCS helped a customer reduce order delivery time from 12 to six weeks, Cooper says, with a target of further reducing it to two weeks.

"Supply Chain Solutions is not a profit center, but it certainly is garnering more business for Solectron," says Cooper. "We're helping customers change the way they compete in the marketplace. When their business goes up, our revenues go up."

That's the goal, anyway. Solectron's 2005 revenue fell by $1 billion, but sales for the first half of 2006 were running about 2 percent higher than in 2005.Do you have a "lean" story to share? Send your comments to feedback@eb.reedbusiness.com.

Tam Harbert is a freelance journalist specializing in technology and business.

Lean Six Sigma lingo
Six Sigma: A means of progressively improving operational performance through process and design optimization. The term specifically refers to a quality standard equivalent to 3.4 defects per million opportunities

Master black belts: Black belts who consistently deliver high performance. They lead complex projects and deliver internal training and mentoring.

Black belts: Team members who have implemented at least one project and have demonstrated mastery of Six Sigma methods and tools.

Green belts: Team members trained in basic Six Sigma techniques who support black belt projects or run their own.

Yellow belts: Team members with basic Six Sigma training.

DMAIC: Abbreviation for a framework for improving processes. The steps are define, measure, analyze, improve and control.

DMEDI: Abbreviation for a framework for creating and optimizing new processes. The steps are define, measure, explore, develop and implement.

Jidoka: A quality control process that involves stopping the manufacturing line when a defect or abnormality is detected.

Kaizen: Japanese for continuous improvement.

Kanban: Used in a "pull" system of manufacturing precisely driven by demand, as opposed to the traditional "push" manufacturing philosophy, in which inventories can pile up. A Kanban is a bin or container that can hold only the amount needed by the customer.

Field Report: Lean Manufacturing and Six Sigma at Raytheon IAD

NK Khoo Managing Consultant — Sun, 21 May 2006 11:15:00 +0000

By Ralph Rio, ARC Advisory Group

The Council of Supply Chain Management Professionals organized a plant tour of the Raytheon Integrated Air Defense (IAD) center in Andover, Massachusetts. This site has 4,000 employees, including 1,500 union members, and is a prime contractor for the military - characteristics that one would not normally assume are those of a leader in Lean Manufacturing and who is a recent Northeast Gold Shingo prize winner. They started with Six Sigma in 1999 and added Lean in 2003.

Excellent timing gave their Lean Manufacturing program a strong start. Three key constituencies came together at the same time. One, their prime customer, the US Navy, was ramping-up their requirements and wanted Raytheon to adopt a Lean program to improve production. Two, Raytheon had a few new members of senior management that where Lean Manufacturing advocates. Three, enlightened Union leadership approached management offering their help to keep the jobs local. Kind of like a perfect storm, but in a good way.

The Raytheon Lean Manufacturing program has, at its core, a focus on cultural change while connecting with the people who do the work with respect and integrity. The mind set transitioned from "entitlement" (not my job), to "activity" (look busy), and then to "results" (achieve the objective). Measurements in the form of dashboards are displayed in common areas. Several include large LCD monitors that are automatically updated every 15 minutes.

Raytheon's approach to the program had four distinct phases, 1) set a vision, 2) establish commitment from the executive team, 3) plan a change management process, and 4) develop people's skills. In terms of Lean Manufacturing methodologies, they have a best practice template where they are applied in a sequence steps. The typical sequence is training, quality tools, PokaYoke, 6S, Visuals, VSM (Value Stream Mapping), Cells, SMED (set-up reduction), pull (Kanban), and TPM (Total Productive Maintenance). Team members for a cell meet for 15 minutes at the start of each shift to identify issues and share best practices.

The adoption of Lean also affected their information systems. With Lean, they identified a need to facilitate cross-functional teaming. Previously, many of the software applications were independent silos of information. Now, they have connected the appropriate applications for information integration.

The tour included three major manufacturing lines within Raytheon's facility. They were electronic printed circuit board assembly (surface mount devices), metal fabrication (CNC machining and welding), and mechanical assembly. Each had its own application for managing work-in-process (WIP). The circuit board assembly area had a nice electronic Kanban application using barcodes for data entry.

During the tour, a few results where mentioned. Overall, there has been a 44 percent reduction in inventory. They where able to increase production 50 percent within the same floor space; meeting the requirements of their key customer, the Navy. And, the Union is happy with the improvements, because outsourcing was prevented and their jobs stayed local.

Leading through change and lean times

NK Khoo Managing Consultant — Fri, 12 May 2006 20:21:00 +0000

May 12, 2006 by Col. Sheri Andino
11th Mission Support Group commander

We live in a world today in which change is constant and accelerating. Change certainly exists in the 11th Wing with the maturation of the Air Force District of Washington, the evolution of joint basing on the Anacostia peninsula and the fast-paced and wide-ranging force-shaping cuts affecting our personnel on a daily basis. We are challenged to lead and embrace this change while continuing to provide the world-class customer support we are known for. How do we accomplish this seemingly daunting task?

Change is never easy, but it presents opportunities. Each of us must become a better resource manager in today's increasingly tight fiscal and personnel environment. Secretary of the Air Force Michael W. Wynne and Air Force Chief of Staff General T. Michael Moseley said, "We must fundamentally change the culture of our Air Force so that all Airmen understand their individual role in improving their daily processes and eliminating things that don't add value to the mission." This is the core of an Air Force-unique process-improvement program called "Smart Operations 21." The essence of this program of self-improvement is based on "Lean and Six Sigma" business process improvement tools.

The Lean concept includes two predominate process attributes:

* Do it right the first time.

* Stop doing non mission-critical tasks.

We make a process lean by changing it to eliminate steps that add no value to the end product or by combining steps to save time. For instance, moving tools and supplies closer to the work area reduces the number of footsteps required by workers to complete the job. Lean is all about getting the right things to the right place at the right time the first time while minimizing waste and being open to change. Lean is about less -- less waste, fewer organizational layers, and also about more -- more teamwork and worker empowerment, more flexibility and capability, more productivity and more customer satisfaction.

Six Sigma, or 6S, deals with quality control. It enables us to maximize our processes to deliver the highest-quality product or customer service. The Six Sigma process improvement tool includes:

* Sort through items and keep only what's needed.

* Straighten and keep things orderly.

* Shine and keep things clean; this makes it easy to see if something is wrong.

* Standardize or develop systems and procedures to maintain and monitor the first three "S's."

* Sustain or maintain your new standard.

* Safe workplace design.

The 11th Mission Support Group is integrating Lean and Six Sigma process improvement tools to continue to deliver the highest-quality customer support with fewer resources available.

The 11th Communications Squadron has worked aggressively to bring the new Project, Workflow, Requirements, and Resource Management System (or PWRR) onboard. The system provides a standardized, secure solution for communications and information-requirements processing. PWRR (pronounced "Power") is a Web-enabled, database-driven application that provides real-time processing, tracking, auditing, reporting and management of customer requirements. In the past, customers physically submitted a signed AF Form 3215 to the communications squadron in person, by fax or via mail to request support for their communications requirements. PWRR changed all that. Requirements are now submitted by the customer directly into the system for paperless processing and management. Customers now have the capability to check on the status of their requirements online, and the system enables much smoother workflow within the communications squadron (reducing processing time and meeting customers' needs faster).

The 11th Civil Engineer Squadron has led the way in examining their processes in light of increased Aerospace Expeditionary Force deployments and tighter fiscal constraints. For example, the purchase of any parts or materials called for the operations fight commander or deputy to personally sign "approval" on the material request form. This was cumbersome in emergencies or when individuals were not at their desks. In order to streamline the process, CE delegated the approval of parts and material purchases to the element chief level (one level above shop foreman).

They placed a $5K weekly budget on paper for the heavy repair and infrastructure element chiefs to fund all their emergency and urgent requirements. At the end of the week, if the element chiefs did not need to purchase emergency or urgent requirements, they can fund routine work requirements. As a result, parts were purchased quicker, since a level of paper handling was removed. This had a secondary benefit of getting the element chiefs involved in resources and requirements, not simply "available shop labor."

The 11th Security Forces Squadron is embracing change through process improvements to progress to the next level of force protection. Process application and improvement is "front and center" to accomplishment, accountability and execution of the mission. They began by flowing out the process. First, you grant yourself no more than 12 steps. Step one is the process purpose, step 12 is the desired process outcome.

Each step of the process may be independent or may be a process all its own, integrated into the process at hand. Each step should be the desired outcome of that step. A process need not take twelve steps but it can have no more than that. Determination of the process must be accomplished in 15 minutes or less. Application of this method is designed purposefully to prevent a practitioner from "getting into the weeds" during process identification. Once the "high points" of a process are identified, other process-improvement techniques can be applied.

Our 11th Mission Support Squadron Family Support Center offers seminars and classes to groups or individuals that are helpful in equipping us to lead change. Courses include: Time Management, Organizational Change Management, and "Who Moved My Cheese -- The Change Program." In concert with Lean and Six Sigma process-improvement tools, these courses enable us to discover how to deal with change positively and constructively so that we can experience more success and less stress in our careers and in our lives.

We cannot continue to do business as usual in today's environment of fewer resources and higher operations tempo and still provide the highest-quality product. We must take a look at our processes and eliminate any unnecessary steps. We must continually ask ourselves why we are doing things the way we are and work smarter, not harder. Every individual is important and empowered to lead change.

Leading change, through lean process improvements, provides opportunities to improve morale as we reduce the strain on our Airmen. Our core values -- integrity, service, excellence -- provide the foundation for standardizing and streamlining our processes and systems. We achieve the desired results of highest quality, lowest cost and shortest lead time for our customers; deployment predictability, job security, a safe work place, and involvement and satisfaction for our Airmen; and combat capability, flexibility, efficiency and sustainability for our Air Force. With a commitment to leading change at all levels, we will continue to fly, to fight and to win whenever and wherever we are called.

Remaking a champion

NK Khoo Managing Consultant — Tue, 02 May 2006 13:59:00 +0000

Bolaji Ojo
My-ESM

More than a few people concluded Mike Cannon either liked living dangerously or had a secret formula for success when he accepted the top job at embattled EMS provider Solectron Corp. in January 2003.

Certainly, the turbulent terrain of the EMS sector would be familiar territory for Cannon, who was then leaving the hardscrabble disk drive industry for Solectron. Some observers surmised at the time that Cannon, now 53, simply couldn't pass up the challenge of helping one of the premier contractors to electronics OEMs regain its footing after its savaging by the record downturn barely two years earlier.

Three years later, there are clear signs of positive change at Solectron, though a definitive verdict is probably years away. A new team of hands-on managers is in place; six of Solectron's top 10 executives joined in the last three years, and none has been there for more than seven years. Revenue is slowly rising.

And in a radical departure from the recent, wanton past, when the company would gobble up any OEM fare placed before it, Solectron has adopted a more discriminatory product and customer strategy. Today, Solectron aims to provide value-added manufacturing in sometimes low-volume but higher-margin areas such as automotive electronics, medical, networking and industrial equipment.

"At one time, we took any business that walked in the door," said Craig London, Solectron's executive vice president of marketing, strategy, services and corporate development. "If the rabbit was running, we shot at it. It didn't matter whether the rabbit had two legs, one leg or three ears. And a lot of the time it turned out to be a skunk."

That revenue-centered growth focus has been replaced by a discriminatory product selection plan built around providing extra design and supply chain services to customers.

"We are going after markets that honor and respect value," London said. "They demand an awful lot — system integration, quality and a very efficient supply chain."

Solectron executives said the company is also winning critical OEM endorsements with a revamped supply chain and manufacturing system that is proactive and responsive to customer requirements. At the core of that strategy is the Solectron Production System (SPS), a Lean and six-sigma combination patterned after the famed Toyota Production System pioneered by the Japanese automotive company.

For farsighted OEMs, Solectron has a team of experts ready to dissect the customer's operations, identify bottlenecks and suggest actions aimed at boosting design, manufacturing and other supply chain efficiencies. Solectron wants to ensure it can help customers anticipate problems, offer solutions and improve the efficiency of their operations, according to Marc Onetto, executive vice president of operations.

"We had to adapt," Onetto said. "Today, we have a suite of offerings that allow us to redesign the [customer's] supply chain — not just what we do [for them] but also the way we plan demand and manage flexibility for our customers."

Report card
Recent improvements notwithstanding, Solectron has its work cut out for it convincing the investment community that its recovery won't flame out with the next downturn.

In this regard, the company is struggling under the weight of its own recent history. Cannon and his team must dig out from so much slush — underused facilities, excess inventory, exposure to low-margin products — that it will probably take the company more than a few years to regain its balance, some analysts contend.

"We remain on the sidelines with Solectron," Kevin Kessel, an analyst at Bear Stearns & Co. Inc. (New York), wrote in a report issued March 24 after the company reported its fiscal-second-quarter results. "We believe Solectron is in the process of a slow return to growth."

There's a case to be made for embracing the new Solectron, according to one take on its history. Starting in the mid-1990s, the company expanded beyond its pc board-manufacturing base by acquiring OEM assets and taking on contracts for computing, telecom and wireless devices. By the end of its fiscal year ended Aug. 31, 2001, Solectron was the world's No. 1 EMS provider, with revenue of $18.7 billion.

That growth, however, came at a heavy price. Solectron's manufacturing presence across the globe more than doubled during those years, but many of the plants were unprofitable sites sold by lumbering OEMs that were themselves in the throes of redefining their relevancy in a market confronting the rise of low-cost rivals based in Asia. Solectron ended up with a serious case of indigestion that culminated in a huge inventory write-off in fiscal 2002 and a $3.3 billion restructuring and impairment charge. That same year, the company posted a $3.5 billion net loss.

The situation deteriorated further as the industry downturn clipped customers' wings. Solectron's revenue fell sharply, to less than $10 billion in fiscal 2003.

While the sales numbers have recovered somewhat, they have not reached the record fiscal 2001 level. Company executives said they expect continued improvements in the quarters ahead, anchored by a vastly expanded operation that looks beyond Solectron's manufacturing activities into value-added design and supply chain services.

A new set of services
In many ways, Solectron is no longer a traditional contract manufacturer. If yesterday's EMS provider focused largely on building systems and providing pc-board services to OEMs, today's leaders distinguish themselves on the basis of their value-added propositions.

It's there that Solectron is quietly distinguishing itself and winning accolades from customers. In manufacturing, for instance, Solectron has overhauled its services and now offers customers a complete supply chain suite of support activities (see page 52). Crucial changes have also occurred in the company's manufacturing operation, where a unit headed by Lean manufacturing and six-sigma veterans drawn from GE and Toyota Motor Corp. is constructing a proactive and customer-sensitive design and production system that they believe will alter the role of EMS providers in the electronics sector.

"Our customers are saying to us, 'We can't tolerate a 16-week lead time anymore,' " London said. "What we are doing is going to these customers and saying, 'Let us take over your parts management, let us take over your logistics, let us take over your repair depot. We'll do it for you, and we'll do it faster and cheaper.' That's getting a lot of traction."

The rigorous Lean manufacturing system upon which Solectron is building its ability to offer complete services described by London and Onetto is now being rolled out globally at the company's plants. In line with Toyota's approach, all players in Solectron's manufacturing operations are being trained and encouraged to offer suggestions for ensuring the optimization of the process.

"Lean is not just the job of the people at the Milpitas [headquarters]," said Ravi Ramanan, vice president of functional excellence at Solectron. "The energy of our people has to be unleashed."

Solectron has held training seminars for executives and other employees over the last couple of years, and it actively encourages customers to embrace the principles of Lean. Additionally, the company offers customers what Ramanan described as value-stream mapping, a procedure whereby Solectron helps an OEM review its operation to identify areas that require improvements.

Are you certified?
For component suppliers, the willingness to support Solectron's strategy could prove decisive in future contract negotiations. Recognizing the dependent nature of the electronics-manufacturing system, Solectron executives say they know overhauling their own operation and making it Lean-compliant won't be successful if they don't involve component suppliers.

"The first thing you need to do is to change yourself," Ramanan said. "Our next step is to work closely with customers and suppliers."

Ramanan said that Solectron envisions a time when it could approach OEMs with a "Solectron Certified Supply Chain" system that would include a list of component suppliers that have joined the Lean parade. A supplier that is not Solectron-certified could be locked out of certain contracts under this scenario.

Solectron might be on to something. Some OEMs would want nothing less than a system where the contractor is paid to handle thorny issues such as ensuring suppliers are compliant with regulations like the European Union's RoHS and WEEE directives. Other manufacturers want their EMS providers to handle the entire production process satisfactorily and act as an extension of the OEM's facility.

One such executive is Stephen Schwartz, chairman, president and chief executive of Asyst Technologies Inc., a supplier of fab automation equipment and services to the semiconductor and flat-panel display markets (see story on page 46). Solectron has worked with Asyst during the past two years to reorganize its supply chain, slashing costs and helping improve key operational metrics. Today, Asyst relies primarily on Solectron for all of its manufacturing activities.

"What impressed us most about Solectron was their willingness to adapt to the business model that was necessary for us," Schwartz said.

To Solectron executive, a statement like this proves the company is on the right track. "We will win only as long as our customers say we are different and continue to give us more business," Ramanan said. "Certainly, we cannot win accolades from every corner. But some of the key ones are telling us we are making a huge difference."

Army efficiency explained in LSS 101

NK Khoo Managing Consultant — Tue, 25 Apr 2006 08:25:00 +0000

By Beth E. Musselman
Army Materiel Command

Lean Six Sigma is the new buzz phrase in the Army. You probably hear it referenced every day in meetings, briefings and general conversation. But do you know what LSS is? Do you know the principles and concepts behind it? Do you know how it is changing the Army? Do you know how it will affect you in the near future?

Although LSS is new to the Army, the philosophies behind it have been around for some time. To understand the evolving concept of LSS, it’s best to know how it began.

Lean
The origins of the Lean philosophy are usually traced back to Toyota in the 1950s. However, arguments can be made that other individuals, including Henry Ford, played significant roles in its development. In its simplest form, Lean aims to identify and eliminate waste in order to increase speed and flow. To ‘lean’ a process is to identify and layout each step required from start to finish, identify the critical steps, and deleting those not required or nonessential.

Although it is an improvement tool, Lean is not without its problems. Cause and effect analysis is imperative in determining what steps are essential in producing the best product and what steps produce a substandard product.

In its pure form, Lean does not use cause and effect analysis as needed; rather it is more concentrated on speed, flow and elimination of waste.

Six Sigma
Its roots in the civilian world, most experts agree that the Six Sigma concept began at Motorola in the 1970s as an approach to improve quality and effectiveness through statistical control. Six Sigma can be defined as precision followed by accuracy, leading to data-driven decisions.

In layman terms, Six Sigma is designed to identify and eliminate variance (making the system more precise), moving it closer to its target (making the system more accurate), and then basing future decisions on the resulting data (data-driven decisions). In its mathematical terms, Six Sigma is achieved when a process produces less than 3.4 defects per million opportunities. Six Sigma is the highest level of Sigma. However, Six Sigma pure also has its downside. Six Sigma continues to make a process more precise and more accurate until it is close to perfection. Since decisions are data driven rather than speed driven, time is often not factored in and therefore lost.

Lean Six Sigma
According to Rod Tozzi, HQAMC Lean Six Sigma senior master black belt, the first signs of a merger between Lean and Six Sigma were in the mid 1990s when several books combined the two philosophies; although, the joined concepts were not yet referred to as Lean Six Sigma.

Today, most major corporations utilize LSS rather than the individual philosophies. As a hybrid, LSS is able to go a step further than the preceding philosophies could. Unlike Lean or Six Sigma, LSS accepts a measure of risk and asks how to mitigate that risk. Through analysis of the process, LSS is able to track every step of the process and determine when and where it goes askew before it is complete and results in an unacceptable product.

“One of the key tenants of Lean Six Sigma is to reinforce success and abandon failure,” Tozzi said. According to Tozzi, accepting that measured risk of failure allows losses to be cut and resources moved to a more efficient use.

Another benefit of LSS is the ability to determine the appropriate balance between quality and cost. For example, the high cost associated with high quality in aircraft maintenance is necessary. Airlines recognize the important of precision and accuracy in this process and spend the required time and money. On the other hand, airline companies do not spend the time and money to guarantee that same level of precision in their baggage handling process. It would be a waste of resources to perfect the baggage handling process to such a precise target.

Lean Six Sigma and the Army
Six Sigma first made its Army debut with Army Materiel Command. Then commanding general, Gen. Johnny Wilson sent the first HQAMC team to Six Sigma training in 1998. Lean was officially stood up in 2002 by then AMC commanding general, Gen. Paul Kern in response to the need to better support our warfighters serving in the Global War on Terrorism. Kern subsequently directed a transition to LSS in late 2003. LSS allows AMC to increase the number of vehicles and systems repaired, improve delivery times, and reduce repair cycles - while decreasing costs. Now in its third year of full implementation, LSS achieved $110 million in savings in 2005.

“We are turning things around faster for the warfighter,” said Gen. Benjamin Griffin, AMC commanding general. “This is showing significant savings and improvement wherever it has been implemented.”

LSS can best be seen in AMC’s depots, arsenals, and ammunition plants. The concept has provided for significant reductions in wasted time and funds.

Corpus Christi Army Depot, Texas, used LSS to reevaluate the T700 engine, used in the Blackhawk helicopter, product line. Once implemented, LSS reduced the overhaul cycle time from over 300 hours to a mere 81 hours, reduced production time from 261 days to 100, and increased efficiency by 83 percent. But perhaps most impressive was the reduction in time between replacement, from 300 hours to over 1400 - tripling the lifespan of the T700 engine.

Anniston Army Depot, Ala., utilized LSS to reduce repair cycle times in the M992 Field Artillery Ammunition Supply Vehicle, M88 Recovery Vehicle, and Abrams Tank by 20 percent, 37 percent and 10 percent respectively. In addition, they increased the production capacity of the M-2 .50-Caliber Machine Gun from 50 to 1,000 per month. In 2005, these efforts saved over $7.6 million for their customers.

At Pine Bluff Arsenal, Ark., employees working on the M45 CB Mask Program had an unorganized work environment and were producing more defects than desired. By applying LSS techniques, PBA was able to reduce lead time from 30 hours per mask to 30 minutes, a 98 percent improvement. Quality also improved by an impressive 90 percent. These advances lead to a 25 percent increase in production, 100 units per day are now being produced versus the 80 before LSS.

In July 2005, Gen. Peter Schoomaker, U.S. Army chief of staff, sent a letter to each Army command requesting an assessment be made of processes that would benefit from business transformation. More than 230 processes were nominated.

In March, Secretary of the Army Francis J. Harvey issued a deployment order requiring LSS be implemented Armywide. LSS business transformation principles are expected to free up resources for the operational Army and ensure quicker delivery times to Soldiers in the field.

At a Pentagon press briefing Harvey said, “It’s essentially to take the work out of a process and to apply it both to a factory-type operation or repair, and also to a headquarters operation, like the Department of Army.”

Once again, AMC is on the forefront of LSS implementation at the headquarters level:
AMC’s Research, Development and Engineering Command, Md., applied LSS to identify the root cause of a high level of material waste during the production of the M734A1 multi-option fuse used in mortars. RDECOM identified the problem resulting in $50,000 per month in savings, while reducing the risk of potential systems failure in the field.

The U.S. Army Security Assistance Command, Va., has shown LSS is not just for manufacturing. Since 2004, USASAC has used LSS to improve the processes involved in foreign military sales. The results reduced lead times by 25 percent, improved the quality of the processes, and cut administration costs by $3.2 million.

Lean Six Sigma and You
With the LSS philosophy spreading throughout the Army, it is sure to become the standard. With that in mind, here’s how one can be on the forefront of Army transformation:

Attend an LSS familiarization course
This three- to four-hour class offers newcomers the basics of LSS. Teaching methods and principles, the familiarization course is recommended for everyone.

Become certified
Processes and procedures altered through LSS were done so through certification projects. Personnel interested in making a change are encouraged to become LSS certified. Currently, LSS training and certification is being held at the headquarters levels, although that is likely to change as it spreads through the Army, says George Terrell, HQAMC master black belt candidate.

According to Terrell, LSS has three levels of certification:

The first level is green belt certification. This one week training course is an in-depth familiarization with LSS tools and methods. It goes into more detail than the familiarization course, but doesn’t require the statistical knowledge of the more advanced certifications. Master black belts instruct the course.

Once green belt certified, students may choose to advance to the black belt course. Requiring approximately six weeks of commitment, this program of instruction is much more intensive. Students work with their supervisor to select a process that can be more efficient, and develop recommendations based on the application of LSS tools and techniques. These projects result in the impressive improvements and cost savings attributed to the LSS program. HQAMC currently employs six black belts.

At this point, students have dedicated between five and eight months to training and are now ready to move on to the highest level of certification, master black belt. As a master black belt candidate, trainees are required to mentor at least two black belt students as they are working on their projects. The main role of a master black belt is to train, educate, mentor others in the program, and deploy LSS throughout the organization.

This exclusive level of expertise will require at least one more year of training and teaching and includes courses in ethics, creative problem solving, deployment planning and instructor certification. To complete the program, master black belt candidates must instruct green and black belt courses.

At this time, Tozzi is the only HQAMC master black belt, and four candidates are in training. Throughout AMC subordinate commands, seven students are currently pursuing their certification.

“Headquarters AMC has trained almost 200 people since it began its green belt, black belt, and master black belt programs in Lean Six Sigma in November 2004,” said Ron Davis, AMC deputy chief of staff for Industrial Operations.

According to Terrell, LSS certification is an invaluable tool. “If you become certified, even at the green belt level, you possess tools and can apply techniques that no one else has.”

With the implementation of Lean Six Sigma, the way the Army does business is soon to change. LSS not only provides monetary savings and waste reduction, most importantly it provides Soldiers a better product quicker. For further information about training opportunities near you, contact your local Lean Six Sigma office or visit www.amc.army.mil/lean.

Compliance and Beyond

NK Khoo Managing Consultant — Mon, 10 Apr 2006 02:17:00 +0000

2006-04-03 12:00:00.0 CDT

Establishing an Effective ERM Strategy

By Charles Brett

Today’s business conditions are driving a new focus on management of all types of records throughout the enterprise. As government mandates require companies to capture and manage increasing amounts of both hardcopy and digital documents, business leaders are tasked to be more proactive than ever about putting Enterprise Records Management (ERM) strategies in place.

Research shows that the markets for both e-mail archiving and ERM applications are expected to grow more than 35 percent annually in response to Sarbanes-Oxley regulations alone. Companies that have not considered the impact this will have on the way they do business should bear in mind that implementing a successful ERM strategy will solve a variety of paper and electronic document management challenges, beyond those posed by government regulations.

As much as organizations would like to eliminate paper, a document strategy that ignores the complementary relationship of paper and digital information will be ineffective. In a study conducted by Xerox Corporation and research firm IDC, fewer than 40 percent of organizations surveyed have digitized their document-dependant business process. As technology and services to manage records mature, the process and strategy for enterprise-level records management requires preparation, planning and an approach that includes integration of both paper and electronic documents into the daily workflow.

Currently, there are no out-of-the-box ERM solutions for handling different types of information. As a result, many companies do not address the simultaneous multi-media nature of documents, and treat electronic documents—Web, e-mail, and fax output from enterprise applications like ERP and CRM—separately from paper. In other instances, organizations focus only on the paper document production process and ignore the need for electronic document integration. To reap the benefits of an ERM system, linking document strategies with investments in ERP, CRM, document management, and other software is vital to bringing structure to unstructured information. The program must include all media defined as a record. A "record" is a legally binding document that if improperly managed may create a major risk or exposure to the organization (i.e., invoices, contracts, customer statements, etc.) This includes paper, electronic records (including e-mail and instant messaging in some cases) and all other media, such as microfilm and backup tapes.

Successful ERM strategies also require the consideration of all aspects of business culture, process and technology. While the technology is essential, it accounts for only about one-third of what is required to implement and maintain a records management program. It is important to remember that records support the way people conduct business and serve customers—not the other way around.

The Challenge of Corporate Governance
The increased interest in corporate governance offers additional obstacles for organizations with large volumes of records. Regulations like Sarbanes-Oxley require companies to be able to provide traceable, auditable proof that corporate records, which contain the supporting documentation for the reported financials, are being managed and maintained accurately. Yet most CIOs and IT managers are focused on other priorities such as cutting costs, growing revenue, increasing customer satisfaction and worker productivity—not on how documents are managed within their organization. However, severe consequences can result if the proper attention is not paid to government regulations. Staying current on regulatory changes and new requirements is crucial to avoiding these penalties.

The growing focus on corporate litigation poses yet another challenge, and is becoming an integral part of corporate records management strategies in order to minimize corporate risk. Amid numerous controls on e-mail management, paper documents still remain a constant challenge for large enterprises. While digital records can be easily indexed and tracked once entered into a system, paper documents require a large amount of physical space, are difficult to index and retrieve, and possess limited chain of custody if the company faces litigation.

For companies facing litigation, the symptoms of losing control over records can be pervasive and expensive. American corporations lose millions of dollars annually due to the spiraling costs of managing multiple litigation vendors and the sheer volume of handling digital documents. Dangers of an ineffective document management process can include a greater risk of court sanctions for missing deadlines and personal exposure to corporate officers and counsel for criminal and civil penalties. Litigation continues to become an ever-more critical element of business.

Companies that actively prepare before litigation commences are much more likely to avoid court sanctions and manage court-imposed deadlines. Equally important, proactive information management such as ERM allows a company to focus on its core business, mitigates risk, and invariably drives down the costs of their overall legal services.

Where to Start
When implementing a records management program, organizers should take a macro view and follow records from creation to final distribution, looking for better management opportunities. The benefit of taking this broad approach is to uncover opportunities for the enterprise that otherwise would remain hidden.

An important part of this broad approach is to consider the large amount of physical space that paper documents require, as well as the difficulty of indexing and retrieving them. Being able to transfer physical documents to digital can cut down on both internal and external storage costs. Many organizations store content much longer than necessary, costing significant dollars and posing potential legal risk. Electronic records control is frequently passed on to the IT department where management of electronic data files is often based on transaction volume and storage requirements. A typical solution for retention of electronic files is to automatically delete email after 60-days or to delete electronic records after a period of inactivity. Both of these solutions circumvent established hard copy records management controls and place the credibility of the records management program at risk. An ERM program complete with a structured plan for approved destruction of records, and archival transfer of records having permanent value, will prevent critical documents from being deleted automatically and will allow companies to ensure that their records are in order.

To accomplish this, an ERM management team should be established to create a strategy that involves objectives from key departments including IT, legal and human resources along with upper management. By not relying solely on IT to organize the ERM effort, the whole organization can ensure its objectives are met and tasks are not duplicated. Engaging subject matter experts from each department along with strategic advisors who understand the applicable technologies and regulations will help build a strong, knowledgeable ERM team.

In order to prevent a gap in information management, organizations should examine legal, business and other sources to identify record-keeping requirements for evidence information and determine where improvement is needed. At this time redundancies should be eliminated by examining existing backup and disaster recovery and storage systems in use and integrating them into the new ERM system. While backup systems are NOT records management systems, and should not be used as such, it is essential to integrate them with the new ERM system.

A Measurable Approach
For the daunting task of gaining control of paper- and electronic-based information, the most efficient solutions use a Lean Six Sigma approach.

A combination of Henry Ford’s Lean Flow manufacturing process of the early 1900’s and Motorola Corp.’s Six Sigma process from the 1980’s, Lean Six Sigma is the application of lean techniques to increase speed and reduce waste and process complexity. The method also seeks to improve quality and focus on the voice of the customer. Lean Six Sigma means doing it right the first time, implementing changes that generate value, while acting quickly and efficiently.

The Lean Six Sigma ideals of improving quality and reducing waste can be attached to virtually any process. Some ERM solution providers like Xerox Global Services employ Lean Six Sigma to help customers obtain vast improvements in how they produce, store and distribute both paper and electronic documents and records. Document-related Lean Six Sigma follows a work process that can benefit from quality and waste reduction.

Best Practices
Topping this list is the need for organizations to initiate an ERM program by implementing an internal assessment, to determine what electronic and paper documents a company is retaining. This assessment should employ methodology such as Lean Six Sigma that uses special information-gathering techniques to capture the very essence of an enterprise’s work processes. The result will provide a clear road map for rest of the ERM process.

Next ERM initiators must prepare the organization for change by explaining to employees what regulations and potential risks the company faces without an ERM system, and train them on their role in the implementation of the process. Too often money is spent on enterprise-wide solutions without considering the impact it will have on employees’ daily work routines. To ensure new standards are deployed most effectively, consider work habits and cultural norms that will be affected and educate employees on how the implementation will integrate with current work processes.

After assessment and awareness phases have been established, attention should be turned to compliance and regulatory issues. Daily work within any organization requires the capture of information that is both structured (forms, invoices) and unstructured (staff notes, e-mail). As these institutions compile the appropriate information for Sarbanes-Oxley, the U.S. Patriot Act, even HIPAA and Basel II, incorporating various document types into the workflow is key to minimizing time and labor costs and achieving ROI. Upon ensuring the ERM plan covers all such compliance concerns, companies should engage their IT departments in order to map out a fully integrated plan throughout the enterprise.

The next step is vendor selection. As the majority of enterprise records content is in both physical and electronic formats, the selection of a single vendor offering integrated solutions is highly recommended. During this phase, it is imperative a company work with its own IT department to ensure optimal performance and compatibility. Even when internal resources are limited, records management software and Web-based document repositories exist to help workers easily and accurately manage documents such as patient records, customer invoices, e-mails and other scanned images as legally-binding records. For instance, organizations have implemented Xerox DocuShare records management to effectively manage organizational records with affordable maintenance and deployment costs.

Once a plan has been outlined, the initial pilot implementation should focus on business areas that are most exposed, subject to immediate compliance mandates, or seeking to minimize risks associated with current ERM practices. Overlap in documentation retention will arise at this step, since much corporate content is created, accessed, managed and reused across many parts of the organization.

The final step on the best practices list involves enterprise-wide implementation, where collaboration between multiple departments within the organization is necessary. Organizations should also address other existing enterprise content applications, such as imaging, document management, ERP, etc. Any revisions to the plan at this point should involve input from the ERM management team.

Since developing a clear road map for records management requires a comprehensive assessment of the organization. Service providers and vendors can serve as a valuable resource in developing a program that complies with all regulatory requirements, meets the organization’s business needs and provides overall accountability.

Ultimately, companies must remember to be flexible. The right ERM system will take shape based upon each company’s specific needs. Whether on-site or hosted, electronic and/or physical storage, the solutions will vary depending on industry requirements and overall business goals. Once the plan has been set in place companies must remember to write, circulate and enforce user policies and procedures in order to gain employee acceptance and buy-in. This may be through an employee manual, handbook, or even advanced online learning and certification programs. E-mail usage guidelines, if not already part of an employee handbook, must also be developed.

Ancillary Benefits and Future Preparedness Once implemented, successful ERM programs can not only make a company compliant with Sarbanes-Oxley and other government regulations, but can help them improve productivity and protect their assess with a comprehensive implementation and strategy for future document management needs.

Implementing an ERM solution has a number of important business benefits. The first being the creation of a knowledge management environment within the enterprise that will capture, preserve and share critical business information throughout the organization. Employees will be able to retrieve records faster, more securely and with greater flexibility regardless of their location, medium or system type. Reliability and authenticity of the records can also be enhanced through access permission.

A permanent record of document decisions and actions will be kept as long as required to support research and program needs. This control will also guarantee that any records that the public has rights or entitlement to will be available for as long as the law requires, and can assist in making sure the public has easy access to any such records.

A reliable method for the preservation of company documents will safeguard the company against accidental or unauthorized disposal, or undocumented alteration of records. Should an organization face an audit or litigation and discovery demands, a successfully implemented ERM program will allow a company to not waste time and resources searching for necessary records and will prevent costly fines associated with the inability to produce court-ordered documents on time.

Return on Investment
Although maintaining compliance and meeting regulations are seen as the cost of doing business, implementing sound records management policies, procedures and technologies at the strategic and infrastructure level can demonstrate a return on investment. Reducing response costs and access, creating a single point of entry for all corporate records, minimizing data and records stored in multiple systems, and overall business process improvements are possible when companies implement a successful ERM program.

Along with return on investment, results such as avoidance of duplication across data stores, reduced response costs, and better integration with broader content and compliance initiatives also offer paybacks when implementing ERM systems and technologies.

Predictable discovery production with consistent results, enhanced data culling, search and review, and better collaboration with internal and outside counsel are additional benefits to be gained for this type of effort if properly coordinated and viewed within a larger records and content scenario.

In summary, the complexity of enterprise records management is only going to increase and gain in necessity in the years to come. Tools and procurement process are maturing, though not necessarily in a straight line. Overall, it is imperative to develop a comprehensive approach to records management that balances the requirements of culture, process and technology.