Why fewer choices can provide higher profits

How many variations of products or services does your company offer?  A few?  A dozen?  A hundred? More?  Are all of these products really required to meet customer demand?  Does it make sense to provide all these choices to your customers?

choiceMany companies have embarked on a journey of product proliferation.  In an effort to capture more market share, we have seen an explosion of customization and niche marketing.  A trip to your local grocery or large retail store confirms this. For example, 352 distinct types of toothpaste were sold in 2010. There are entire aisles dedicated to cereal, dog food, and toilet paper. Have these companies enjoyed increased profits by offering all these new products?  Not necessarily…

In this post, we will briefly discuss the implications of having too many products (choices) on both (1) revenue and (2) costs.

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Control Plans are not very sexy, but are necessary!

It’s human nature to feel good about effecting positive change.  Perhaps you have removed some unnecessary steps from a process and now it is easier to perform a task.  Or you have modified the way that work was being done and now there is less rework.  Maybe your team has agreed on a more effective way to communicate and share information among various working groups.  It could be that you identified some “critical X’s” to control and now there is less variation in the process.  In any case, making small improvements that have a large effect can produce a great deal of satisfaction.  After all, this is why we invested time and effort – to become better at whatever we do.  It’s time to celebrate!

Unfortunately, improvements can be temporary.  After the team disbands, the process can revert back to the previous condition or people drift back to the old way of doing things.  Without something to prevent this regression, it is only a matter of time before any improvements (and the associated benefits) are in the rear view mirror. In the Lean Six Sigma world, the tool that is most often used to maintain the gains is a Control Plan.  It is the centerpiece of the “C” step in the DMAIC methodology.  A control plan should be used whenever you want to keep hard-won improvements in place.

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Think Quick! Can you work faster AND safer?

 “You can observe a lot just by watching”

Yogi Berra

faster and saferOne of the foundational Lean tools is QCO (quick changeover), which is also sometimes referred to as SMED (single minute exchange of die).  SMED includes a set of techniques that make it possible to perform equipment set-up and changeover operations in less than 10 minutes.  Not every changeover can be completed in this amount of time.  However, any operation would benefit from using this Lean tool if there is a requirement for:

  • a change in “lot” types
  • a process or set-up change

For this discussion, I will use the term QCO as being interchangeable with SMED. Most of the time, the opportunity for implementing QCO in a process is driven by the need for greater flexibility, quicker delivery, better quality, or higher productivity.  These are indeed significant benefits that are realized –  because this approach identifies and removes some of the eight sources of waste.  But there is an equally significant benefit to assessing a process and implementing QCO: the resulting process changes often make setups simpler & easier – and therefore faster and safer. The following case studies demonstrate how using QCO principles can lead to work which is not only completed in less time, but is also safer. Continue reading

Ask 3 questions to challenge the status quo

Regardless of the approach that is used for continuous improvement, at some point in the process the team will engage in a discussion to identify potential solutions.  The most common methods include silent brainstorming or a round-robin format, collecting the ideas from all team members for consideration by the team.  Often, this can be very productive.  A sufficient number of ideas is obtained and the team reaches consensus on which ones to implement.

However, one limitation of these conventional brainstorming techniques is that the ideas are generated within our existing paradigms.  In other words, every one thinks about potential solutions in the context of how we currently do things.  As a result, the improvements that are made tend to be incremental in nature.status quo

But what if we are seeking significantly higher levels of performance?  Will the ideas that the team implements be sufficient to get us there?  Or what if we have already made several improvements to the process, but the performance level is still not where we need it to be?

The team may need to leverage an alternative way of thinking to generate new and different solutions.  The Creative Challenge E/R/A approach is designed to question the current solutions.  It allows us to investigate the current way that work gets done – and surfaces alternative solutions that could be even better than the existing ones.

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Fail often! Encourage continuous improvement with trial and error

 “Success is stumbling from failure to failure with no loss of enthusiasm.”  – Winston Churchill

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Greg was always naturally curious.

As a boy, he would tinker in his father’s workshop, often taking things apart just to see how they worked (much to the annoyance of Dad).  He would take various things from the shop and piece them together, hoping to make something new – something that was his.  In science class, students were paired up to make model rockets.  failEveryone was given the same materials and a solid rocket engine.  On “launch” day, the model rockets were ignited on the football field.  All the rockets hurtled skyward for several hundred feet before the fuel was exhausted and they floated back to earth.  Except for one.  Greg and his lab partner’s rocket whistled out of sight – never to be seen again.  When quizzed about what he did, Greg just shrugged his shoulders and said, “I just changed a few things that I thought could make it go higher.  I guess it worked.”

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Eight sources of waste – Lean efforts to reduce the “waste of processing” can drive cost productivity

One of the primary tenets of Lean is the concept of value added activities. These can be defined as actions which transform raw materials and information into products and services which the customer is willing to pay for.  Anything that does not add value can be considered “waste”.  These are activities which consume time, space, or other resources, but don’t contribute to making value.

Classic Sources of Waste

Lean practitioners are familiar with the eight sources of waste.  They form the basis for lean thinking and are often used to offer a framework for removing waste (and cost) from any process.  A graphic depicting these eight sources of waste and a brief definition of each one is shown below.

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