This article was originally published in the Colorado Springs Business Journal on May 18, 2018.
Continuous improvement key for small businesses
Continuous improvement methods are common in large businesses. Large businesses can afford teams of consultants or full-time employees that specialize in continuous improvement methodologies such as Lean Manufacturing or Six Sigma. Continuous improvement does not, however, need to be limited to large businesses. There are methods that small business owners can implement on their own to improve their bottom line. One method that the small business owner can implement is waste identification and elimination.
What is Waste?
The idea of waste identification and elimination was formalized by Taiichi Ohno, father of the Toyota Production System, as a method to identify items or processes that negatively impact profitability. The method was first applied to the manufacturing industry, but with some minor modification, it can be equally applied to the services industry.
Identifying waste should be done from the perspective of the customer, the employee, and the owners. Any activity that does not add value to the final product or service is waste. If the customer is not willing to pay for the activity then it is waste that is reducing the value the process adds to each of the stakeholders. The original Japanese word for this is “Muda” meaning “futility; uselessness, or wastefulness.”
Wastes can be classified into 8 distinct categories: Waiting, Over-Production, Re-Work, Motion, Processing, Inventory, Intellect, and Transportation. An easy way to remember these is with the acronym WORMPIIT.
Definition: any time that a product or service is not actively being worked on
Manufacturing example: The time materials are waiting to be loaded into a machine
Services example: The time that a customer is waiting in line
Definition: making more of a product or service than is required by the customer
Manufacturing example: making products before they are needed (often in large batches)
Services example: over-staffing for customer demand
Definition: producing defective products or services that must be corrected or thrown out
Manufacturing example: making items that fail to meet specifications
Services example: data entry errors or typographical errors
Definition: people moving unnecessarily
Manufacturing example: people walking repeatedly from one machine to another
Services example: people walking to a printer and back to their workstation repeatedly
Definition: doing more than is required by the customer
Manufacturing example: adding features to a product that the customer does not want or need
Services example: adding extra features to a computer program
Definition: products or services that cannot yet be used to generate revenue
Manufacturing example: producing a stockpile of parts that will not be immediately consumed
Services example: pre-printing forms
Definition: underutilized skills and knowledge
Manufacturing example: failing to incorporate line-workers in the quality inspection process.
Services example: failing to utilize feedback from customer service employees in marketing and operations.
Definition: moving products or people from one location to another
Manufacturing example: moving materials around the factory floor
Services example: moving people to a work site
Dealing with wastes should be a part of the company’s culture. This should include everyone in the company from the CEO to the janitor. Each employee should be trained to identify wastes and have a standard method to escalate the observation so that it can be addressed and eliminated.
Once the waste is identified the next step is to identify the root cause. This is not always obvious. A great tool for identifying the root cause is known as a “5 Why” analysis. In the simplest terms, 5 Whys is asking “why” repeatedly to get from the symptom or waste to the root cause. It is important to note that the number of times the questions are asked is arbitrary. Do not get trapped into asking “why” a set number of times. Additionally, caution should be used when asking “why,” which can be interpreted as accusatory and may elicit an emotional response. This is especially true in the services industry where symptoms are observed as human behavior. To overcome this limitation it may be better to frame the question with “how” or “what” rather than “why.”
After identifying the root cause of the problem, it is time to invoke a solution. Some solutions are simple and may require a minor change in process. Others can be more complex, requiring a major change to process or an innovative solution.
Opportunities to eliminate one category of waste should be explored with careful consideration for all the other forms of waste. It is easy to mistake waste elimination when waste is merely shifted from one form to another. For instance, you may eliminate the waste of overproduction by letting go of staff, but you should consider whether the cost of intellectual waste is greater than the benefit. Ask yourself if that same staff could have been utilized in a different way. Another example of shifting waste would be to eliminate the waste of transportation by increasing inventory.
It is imperative to think in terms of all stakeholders when solving a problem. The customer, employee and owner perspectives should be considered. The best solutions will improve the customer experience, improve the employee experience, and improve profitability.
Attila Dobai is a Lean Six Sigma Master Black Belt and project management professional with more than 14 years of continuous improvement experience in the services industry. He started Dobai.com, lives in Palmer Lake and can be reached at email@example.com.