Just as the processes and activities of companies must be continually improved to preserve and improve their competitive advantages, the systems, methods and tools used for such improvement must also be improved for the purposes of continuing to be useful to the purposes of the company.
Preserving and enriching the philosophy of continuous improvement typical of the Kaizen system, instruments and tools aimed at complementing it and increasing its capabilities to improve the levels of quality, cost and cycle times come to join.
Six Sigma represents both a measurement, an objective and a management system. As a measuring instrument it is useful to measure and monitor the improvements achieved through the application of Kaizen. As an objective it represents the values that the company's processes must achieve to make it a "world-class company". And finally, as a management system, it tends to complement Kaizen in the urgent need to improve customer and consumer satisfaction by delivering high added value.
The EVA (Economic Added Value) comes to contribute a critical factor to the continuous improvement system, which is represented by a calculation method designed to more accurately measure the wealth obtained, thereby helping to facilitate the payment of incentives managers and employees for the contribution they make to the improvement and proper functioning of the company.
It is precisely to avoid short-term practices that in the long term harm the company a very important point of contact with Kaizen, since the latter gives great importance to the improvement in the time of the processes over the search for results in the immediate term.
Kaizen as a systematic waste disposal
Failure-free and error-free products or services must be generated not only for external customers, but also for internal ones. And much more, these products and services must be generated according to the specifications "the first time", that is, without the need for reprocessing and adjustments.
Thus, when a secretary produces a document and prints it, with typing, spelling or grammatical errors observed by her supervisor, the document must be corrected and reprinted. We have lost inspection time, lost paper, reprocessed time by the employee, generating lower levels of productivity and higher costs and document dispatch times.
If this type of common errors in the administration work is multiplied by all the work carried out during the year by all the sectors and areas of a company, we have an impressive level of waste due to lack of quality and self-control. This represents an example of not achieving benefits or goods “the first time”. Let us think in the construction works how many adjustments and readjustments are necessary to achieve the desired objective.
How many times are reprocesses and adjustments necessary in an openings factory until the components coincide and mesh with each other. All these hours of rework and reprocessing imply higher costs of labor, material, and lack of compliance within the deadlines set for the client.
When an entrepreneur and manager has a clear understanding of both such waste, as well as the costs incurred, and the problems that are generated with customers and consumers, they become aware of this and adopt a clear attitude of continuous improvement aimed at avoiding not only the repetition of the previous errors, but even more to prevent them by means of a preventive and proactive attitude.
However, a large majority of entrepreneurs continue to make the same mistakes. Thus, these entrepreneurs and managers are the ones who make it possible for their employees and processes to “stumble not twice, but multiple times on the same stone,” something clearly inconceivable for a rationally managed company, much less in these times in which competitiveness levels make it necessary to reduce costs and constantly improve quality.
The companies of these entrepreneurs have enormous potential for improvement. A serious consequence of not seeing the problems of waste and waste in the company, leads them to the incessant search to increase sales to generate more profits, this being hampered by the lack of quality in products and services, added to their levels of costs.
The improvement in the levels of quality and internal productivity allows the company to increase its profits with much less investment, but as quality also improves while reducing its costs, the feasibility of competing in the market is increased, achieving greater share thereof. Continuous improvement in the levels of quality, productivity, costs and customer satisfaction is the fundamental question for a company not only to be able to succeed but at least to survive.
In the hunt for waste and waste, the fundamental objective must be to eliminate all those activities and processes that do not generate added value for the client, in addition to making each and every one of the current processes more effective and efficient.
It is in this work of detection, prevention and elimination of waste where the application of the measurement of “defects per million opportunities” (DPMO) becomes important. Getting to establish a world-class company means reaching a level of 6 sigma or what is equal, 3.4 DPMO. These defects per million opportunities are not only valid for failures of a material nature, but also for levels of satisfaction, meeting deadlines, among many others.
The other tool closely related to waste, quality and defects per million opportunities, is represented by the poor quality cost system, and the waste information system (SID), since they will allow monitoring permanent levels of waste and inefficiencies.
Among the seven fundamental wastes or wastes that every company must pursue in order to eliminate them are:
- Excess internal transport Excess movements or unnecessary movements Overproduction Excess inventories Production failures and reprocessing / adjustments Waiting times Failures in process designs
The main way to deal with these problems is to implement:
- Total Productive Maintenance (TPM) Total Quality Management (TQM) Quick Tool Change (SMED) Layout or reorganization of the plant Alliance with main suppliers
To implement the aforementioned methodologies, six fundamental systems for Kaizen are put into play, which are:
1. Just in Time Production System
2. TQM
3. TPM
4. Small Group Activity
5. Suggestion System
6. Deployment of Policies
As tools or instruments destined to support the aforementioned systems and contribute to the development, improvement and strengthening of processes, we have:
- Statistical Process Control (SPC) Management Tools (the seven classic and the seven new) TaguchiPoka-Yoke - Baka-Yoke Loss FunctionThe 5 "S" The 3 "K" (dirty - dangerous - stressful) The 3 "M ”(Waste - irregularity - stress at work) Standardization Deming Continuous Improvement Cycle Rapid Learning Organization Job System Design Operations Research Bottleneck Analysis Quality Function Display (QFD) Force Fields Mind Maps
Driven by an overcoming vision, Kaizen must be continually updated, without losing or moving away from its philosophical essence, to adapt to new needs and changes in the environment.
Six Sigma a step towards perfection
Although perfection as such is an ideal, reaching a very low level of just 3.4 DPMO at the manufacturing level is undoubtedly something transcendent for any company. The objective is clear, it is about reaching a level cataloged as “six sigma”, the way to carry out the measurement is also clear, it is Kaizen as a philosophy and system that allows this level of quality to become a reality, since it is It is very difficult to achieve absolute quality in products and services, without first perfecting the processes and the human beings that give them life.
It is impossible to achieve perfection in products and services without first perfecting the system that generates them. Achieving better systems implies better workers, better managers, better work methods and a constant concern for the education and training of all who make up the company.
It is necessary to demystify certain and certain questions to get to the essence, avoiding staying in symbolisms and formats that are not important. It is not in the colors of belts that the quality and competitive advantages of a company rest, but in its creative and innovative capabilities. The essence and philosophy on which Six Sigma rests is more linked to Crosby's ideas and to the fundamental needs of overcoming certain management aberrations held as paradigms, than to commercial issues out of context.
It is in the need to shape theoretically and practically a management style what we should see in the development and implementation of the Six Sigma system and philosophy. After the urgent need for a minimum of failures and a maximum of productivity that results in concrete the lowest unit cost, it is the supreme objective that companies that aspire to operate in high technology have, such as Motorola or Intel, but This is also valid for any company that, being high-tech or not, intends to compete actively in the world market.
Achieving these great objectives is only feasible through participatory management of high-performance personnel, something with which Kaizen is fully and absolutely identified. It is impossible to improve the generation of assets without improving the people behind the processes, but it is clearly impossible to improve the attitudes and skills of the staff without changing the policies and strategies regarding its management.
Today's companies, if they want to survive, must work for their customers more than for themselves. There are six reasons, each of which alone justifies the adoption of total quality as a management project.
- First reason: it is the arrival of a globalized economy. The irruption of new competitors in the world economic game makes non-competitive companies expire, and forces all those who want to survive to support their activity from now on on a meticulous, attentive and permanent surveillance of the market to always better adjust the quality. The second reason on which the inevitable character of total quality is based is the sudden inversion in the industrialized countries of the relation of forces between a less growing demand and a multiple supply, since the mid-1990s. 1970s, due to the explosion of Japan and the new industrialized countries.Behold, consumers and clients in the face of multiple offers become more demanding and always demand better quality at always lower prices. The third reason is that we have changed. In the West, a lower commitment of workers towards the company has been observed. A change of attitude is necessary if we want to keep jobs in the face of cultures with a much more committed and disciplined workforce. The fourth reason is given by the inability of the Taylor company to reduce non-quality costs. Fractioned into large self-centered functions, generator of the phantom company, more concerned with "doing more" than "doing better", in controlling and correcting rather than preventing, this company, overburdened with useless costs and resources devoted to "making nothing",It quickly loses ground in economic competition and is sentenced to death in the short term. Total quality constitutes its only lifeline. Fifth reason: it also alludes to the Taylorian organization and the waste of intelligence that it has been able to tolerate in the company, while the relationship between supply and demand was the opposite of that of today.. From now on, all these fallow intelligences can no longer be left in a stalemate at all levels and, particularly, at the levels of execution, that of the workers and employees. The battle of quality is too difficult for all this intelligence to be kept out of combat, and the sixth reason is that since there is a process of total quality and that certain economies have adopted it,all those that have not done so have seen a chasm open up in their competitiveness. And what is true for economies is also true for the company. For this it is necessary to take into account that the cost of non-quality in western economies is in the order of 20% of its turnover, while in the Japanese economy it is 12%. Failure to narrow this gap quickly, and given the economic growth of countries such as China, Thailand, Malaysia and other countries in Southeast Asia, they are predicting inevitable defeats.while in the Japanese economy it is at 12%. Failure to narrow this gap quickly, and given the economic growth of countries such as China, Thailand, Malaysia and other countries in Southeast Asia, they are predicting inevitable defeats.while in the Japanese economy it is at 12%. Failure to rapidly reduce this gap and in the face of economic growth in countries such as China, Thailand, Malaysia and other countries in Southeast Asia, foretold inevitable defeats.
The seven metamorphoses
The new philosophical stone of total quality allows the company to always satisfy the customer better and always cheaper. It is shown that quality does not cost more expensive; on the contrary, it pays because it allows selling. What is expensive is non-quality, that is, failure, useless costs, delays; All this is the product of a bad organization that is billed as a fine to the customer and that surprises, dislikes and finally leads him to other providers, because from now on they have the dilemma of choosing.
In this process aimed at achieving zero defect (Six Sigma implies 3.4 defects per million opportunities), companies focus on seven changes or metamorphoses.
- The first metamorphosis implies that the company is more interested in its market than in itself, in its clients than in its machines, in its purposes than in its means, and that its leaders replace the logic of the engineer or the accountant, focused on an excessive confidence in the ability of his technique, due to the logic of the commercial entrepreneur, who recognizes the uselessness of a superb product that has not been sold. The second metamorphosis is the establishment of customer-supplier relationships within the company itself. business; Each department, each service, each function, each worker must strive to better specify what they want from their source and to better respond to the demands of their consumer. The atomized organization gives way to an organization by flows.The walls that defended the functional territories fall down to give rise to a development of integral processes in which all take part in a harmonious way. The third metamorphosis consists of ceasing to "produce more" to move on to "produce better from the start". The infernal rhythms do nothing but produce products of mediocre quality and bitter, tired and less and less competent employees. Total quality pursues self-control and collective actions, producing well the first time, fixing the defect at the time it occurs.The fourth metamorphosis involves replacing the mechanistic model of an organization that assigns each individual an instrumental position of performer, by a biological model where the responsible teams take on missions, collectively uniting their talent to do so.The pyramid company is replaced by the multicellular company. The fifth metamorphosis involves moving from an isolated and intransigent company in front of its suppliers and subcontractors, to one involved in deep relationships of trust. The sixth metamorphosis involves the replacement of control by prevention. An increase in prevention costs results in a decrease in the total cost of quality by significantly reducing costs for internal and external failures, and decreasing evaluation needs. The seventh metamorphosis involves the elimination of all waste and waste, not only those related to the production process, but also those related to administrative-bureaucratic activities.The fifth metamorphosis involves moving from an isolated and intransigent company to its suppliers and subcontractors, into one involved in deep relationships of trust. The sixth metamorphosis involves the replacement of control by prevention. An increase in prevention costs results in a decrease in the total cost of quality by significantly reducing costs for internal and external failures, and decreasing evaluation needs. The seventh metamorphosis involves the elimination of all waste and waste, not only those related to the production process, but also those related to administrative-bureaucratic activities.The fifth metamorphosis involves moving from an isolated and intransigent company to its suppliers and subcontractors, into one involved in deep relationships of trust. The sixth metamorphosis involves the replacement of control by prevention. An increase in prevention costs results in a decrease in the total cost of quality by significantly reducing costs for internal and external failures, and decreasing evaluation needs. The seventh metamorphosis involves the elimination of all waste and waste, not only those related to the production process, but also those related to administrative-bureaucratic activities.An increase in prevention costs results in a decrease in the total cost of quality by significantly reducing costs for internal and external failures, and decreasing evaluation needs. The seventh metamorphosis involves the elimination of all waste and waste, not only those related to the production process, but also those related to administrative-bureaucratic activities.An increase in prevention costs results in a decrease in the total cost of quality by significantly reducing costs for internal and external failures, and decreasing evaluation needs. The seventh metamorphosis involves the elimination of all waste and waste, not only those related to the production process, but also those related to administrative-bureaucratic activities.
Achieving these changes allows us to reach the “Seven Zeros”: zero defects, zero stocks, zero breakdowns, zero deadlines, zero papers, zero accidents and zero contamination.
The Six Principles of Six Sigma
- Principle 1: Genuine Customer Focus
The main focus is to prioritize the customer. Six Sigma improvements are evaluated by increasing levels of customer satisfaction and value creation.
- Principle 2: Data and Factual Management
The Six Sigma process begins by establishing which are the key measures to measure, then moving on to data collection for further analysis. In this way, problems can be defined, analyzed and resolved in a more effective and permanent way, attacking the root or fundamental causes that originate them, and not their symptoms.
- Principle 3: Processes are where the action is
Six Sigma concentrates on the processes, so mastering these will achieve important competitive advantages for the company.
- Principle 4: Proactive management
This means adopting habits like setting ambitious goals and reviewing them frequently, setting clear priorities, focusing on problem prevention, and questioning why things are done the way they are done.
- Principle 5: Collaboration without barriers
Particular attention should be paid to breaking down the barriers that prevent teamwork between members of the organization. Thus achieving better communication and a better flow in the work.
- Principle 6: Seek perfection
The companies that apply Six Sigma have the goal of achieving an increasingly perfect quality, being willing to accept and handle occasional setbacks.
What is EVA?
The EVA is the result of subtracting from the ordinary benefits of the company or business unit, before interest and after taxes, the product of multiplying the book value of the asset by the average cost of the liability. Another way to calculate it is by multiplying the book value of the asset by the difference between the return on the asset and the average cost of the liability.
By focusing attention on the profits that remain after deducting the cost of all capital, the EVA reveals the true performance of a company by providing its executives with new and more valuable financial information that they can apply in making their business decisions, from the acquisition or disposal of assets to market planning, project budgeting and product creation.
While linking employee compensation to constant improvement based on EVA can lead to amazing results, much more so if we combine EVA with the Kaizen continuous improvement system.
Strategies to increase EVA
There are five ways to generate greater added economic value consisting of:
1. Improve the efficiency of current assets. It is about increasing the return on assets without investing more, achieving this by increasing sales prices, or reducing costs, or both measures simultaneously, with another possibility being an increase in asset turnover.. This clearly shows the wide repercussions of applying Kaizen and / or Just in Time as a way to reduce costs, increase asset turnover through a systematic reduction in inventories, and the possibility of achieving an increase in prices thanks to a substantial improvement in the levels of quality and customer service.
2. Reduce the tax burden through tax planning and making decisions that maximize tax breaks and deductions.
3. Increasing investments in assets that yield above the cost of the liability.
4. By reducing assets, in order to reduce the amount on which the financing cost is applied. Both Kaizen and Just in Time contribute by reducing inventories (both inputs and products in process and finished), the reduced need for physical spaces and monetary assets, to the reduction of business assets. Also the reduction of the total cycle of the process is an advantage granted by the Kaizen in reducing the credits granted.
5. Reduce the average cost of the liability so that the deduction made to BAIDI (Earnings before Interest and after Taxes) is less. The application of Kaizen by generating a lower need for funds, in addition to achieving an increase in flow via lower expenses (due to the systematic elimination of waste) and higher income (via a considerable increase in the quality of products and services, attention to customers and higher levels of satisfaction) results in greater financial solvency, and consequently a better credit rating and a lower cost of capital.
Applying a strategy that allows an adequate combination of the ways to increase the EVA, significant increases can be achieved for the benefit of both the shareholders or owners, as well as the managers and employees of the company.
8. Conclusions
We can appreciate from the aforementioned, the synergies generated by the fact of complementing and combining Kaizen, EVA and Six Sigma. Continuous improvement systems must improve themselves, and one way to do this is by adding new systems that increase their potential and allow companies to implement it solid competitive advantages.
Only continuous process improvement supported firmly in better human resource management can lead to a sustainable increase in economic added value, while generating fault-free products and services. It is this high-flying quality that not only reduces costs, but also offers customers and consumers ever greater added value.
Kaizen is the base of support on which an optimum quality of Six Sigma level can be achieved, as well as generating an increase in profitability for the shareholders and owners of the company.
Without a continuous improvement process, a company does not have a great future in today's markets. This continuous improvement requires awareness, decision and discipline to become a reality and give the desired results.
Continuous improvement and the search for six sigma are not a minor issue, they are a fundamental strategic objective for the continuity and success of the company. The greater the strategic advantage achieved, the greater the growth of economic added value in the medium and long term. In today's business there is no room for error. Mistakes are paid dearly, and it is very difficult and costly to recover from them. Only responsible, innovative, creative and competitive management will allow the company to obtain positive results in a sustainable way.
9. Bibliography
Knowledge Management - Karl Sveiby - Management 2000 - 1999
Best practices - Hiebeler, Kelly and Ketelman - Management 2000 - 1998
Skills Engineering - Guy Le Boterf - Management 2000 - 2000
In Search of Courage - G. Bennett Stewart III - Management 2000 - 1999
Six Sigma. Towards a new paradigm in management - Mauricio Lefcovich
Kaizen. Detection, prevention and elimination of waste - Mauricio Lefcovich
EVA: A new way of obtaining results and managing them - Mauricio Lefcovich
Kaizen - Mauricio Lefcovich
Kaizen Strategy - Mauricio Lefcovich
Kaizen Finance - Mauricio Lefcovich
Kaizen Cost System - Mauricio Lefcovich
Costs reduction. Critical Analysis - Mauricio Lefcovich
Achieving success through Kaizen - Mauricio Lefcovich
