Four routes to SME improvement

/Four routes to SME improvement

 

John Wellwood Managing DirectorLean Six Sigma, continuous improvement, process excellence – call it what you want, it has long been considered the reserve of big businesses with big problems and complicated processes. And this assumption is partially correct. Lean Six Sigma did start as a way to introduce efficiency and remove waste in global organisations such as Motorola and GE.

However, many of the principles of Lean Six Sigma are just as valuable for SMEs, particularly in the current climate. All companies – big and small – are currently coming under pressure to deliver more to their customers in terms of service, quality and delivery. However, they have less money to invest, are often working at capacity and are facing pressures from administration, legislation and competitors around the world.

SMEs often have fewer resources, staff with a narrower skill set, a lack of time and money to invest in change and an absence of data. This pressure on small and medium businesses can lead to a culture of fire-fighting, inconsistent customer service and a lot of time wasted on doing things twice, rework and mistakes.

Lean Six Sigma – which can alleviate these pressures – can be seen as time consuming, complicated and difficult to use, further exacerbating the pressure on firms. But this is not the case. Because SMEs are flexible and adaptable, once the training starts it can be very easy to get things moving – and improving.

For example, Lean Six Sigma helped a medium-sized electrical component manufacturer we worked with reduce inspection time and increase quality, saving the company £225,000. The methodology helped a small food manufacturer identify the amount of food being wasted on the production line, and implement changes which saved £75,000. When implemented correctly, Lean Six Sigma can have immediate effects and tangibly improve process efficiency, customer service, quality and – crucially – cash flow.

Process efficiency

Improving internal processes can have a huge impact on business overheads. Streamlining a process saves not only the time and resources on that one assignment, but has a ripple effect throughout the business as time is freed up to spend on more profitable tasks. This was certainly the case for a legal firm we worked with.

The company wanted to use Lean Six Sigma to help them reduce their use of an outsourced legal teams because of the high costs incurred. The company was aware that internal time and resources could be better utilised, but did not know where to start to improve efficiency.

Lean Six Sigma tools provided them with the data they needed to identify where most time was being wasted; helping them to implement a targeted solution that reduced the time it took internal teams to complete cases. Freeing up the capacity required to bring cases back in-house saved the company £250,000 annually.

In all businesses inefficiency can build up and, over time, employees either become blind to the problems, or become overwhelmed by the task and don’t know where to start to fix it. Lean Six Sigma gives companies an accurate picture of how a process works, from start to finish, highlighting problem areas.

Businesses may know that they could be doing things better, but Lean Six Sigma provides them with the data and roadmap they need to be confident in the changes they’re making.

Customer service

We recently worked with a box manufacturing company that was experiencing bottlenecks, holding up the amount they could produce each month and keeping customers waiting. Using Lean Six Sigma, we helped them identify that the overall efficiency of their machines was only 65 per cent.

Lean Six Sigma helped them identify what was causing the bottlenecks, they saw machine efficiency increase to 87 per cent. This led directly to an increase in monthly output of £500,000 – saving the company money and increasing sales capacity.

These kinds of process improvements are vital in a challenging but growing economy. The company saw significant savings and improved customer delivery by making changes to internal processes. In a climate where organisations are coming under pressure to deliver more in a shorter time with the same resources, process improvement such as this can give companies a clear edge over their competitors.

Quality

Small and medium sized businesses must focus on providing a quality product and service in a timely manner. Anything which consumes capacity and has to be re-worked or thrown away has a large impact on SMEs. It is essential to get it right first time to avoid wasting money and disappointing customers.

Recently we worked with a manufacturing company who had a bottleneck on a CNC machine but over 25 per cent of what it produced had to be scrapped or reworked. A team followed the Lean Six sigma approach and reduced this to just five per cent. Customer service and revenue improved as a direct result.

In another example, a communications company we worked with had a customer service measure which showed only 87 per cent of customers were satisfied with their product. Lean Six Sigma enabled them to establish the root causes of the dissatisfaction and eliminate them.

Cash flow

Good cash flow is one of the most important aspects of any successful business, and is the number one cause of business failure. Key to preventing a cash flow crisis is having the data accessible to predict a potential problem in advance.

Despite this, few SMEs regularly collect data about how their business operates and where they can improve cash flow. One of the pillars of Lean Six Sigma is speaking with data. Armed with the necessary information, businesses are better placed to identify where they have potential issues and then run improvement projects to rectify the situation.

Over the last couple of years we have helped a great many companies to improve their cash flow. We aided a legal company to improve the invoicing process so that invoices when out efficiently and on time, vastly reducing their overdraft. We helped a financial services company to decrease the costs of some of their key suppliers, reducing the amount of money leaving the company. Then there was a consultancy firm that were able to reduce spending on marketing while increasing exposure.

Lean Six Sigma can help companies to improve in all sorts of areas from quality to cash flow, and from delivery performance to compliance. It is as relevant for SMEs as it is for the large corporations, indeed our experience shows it is actually easier to implement and obtain the benefits in an SME.

SMEs can just get on with it. They don’t have the same politics, the same inertia and the same lack of knowledge of what is actually happening in the business, so once a decision is made the roll-out is rapid. The result is that they obtain the benefits quicker, change the culture of their business and transform their company. Lean Six Sigma is a catalyst for change and companies who can harness the power of their people will win the battle of profitability and customer service.

If you’d like our advice on how to introduce Lean Six Sigma into your organisation, call us on 0800 066 3749 or visit our bespoke Business Solutions page.

By | 2017-02-22T16:40:38+00:00 February 25th, 2014|Lean Six Sigma|0 Comments

About the Author:

As Managing Director of 100% Effective, John is an authority on how effective Lean Six Sigma is. He draws on his 20 years experience as a consultant and Master Black Belt to give you practical insights into how Lean Six Sigma can help you and your business.

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