Continuous improvement key for small businesses

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Continuous improvement methods are common in large businesses. Large businesses can afford teams of consultants or full-time employees who 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.”

Identifying waste

Waste can be classified into eight distinct categories: Waiting, Over-Production, Re-Work, Motion, Processing, Inventory, Intellect and Transportation. An easy way to remember these is with the acronym WORMPIIT.

Waiting

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

Over-Production

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

Re-Work

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

Motion

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 work station repeatedly

Processing

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

Inventory

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

Intellect

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

Transportation

Definition: moving products or people from one location to another

Manufacturing example: moving materials around the factory floor

Services example: moving people to a worksite

Eliminating waste

Dealing with waste 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 waste and have a standard method to escalate the observation so that it can be addressed and eliminated.

Once 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 Whys” analysis. In the simplest terms, 5 Whys is asking “why” repeatedly to get from the symptom of 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 of 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 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 attila@dobai.com.