Like many other organisations, you may be considering how you can reduce operating costs within your business. At this turbulent time of economic uncertainty, many organisations are finding that their costs to deliver services are increasing which is putting significant pressure on budgets. This is for a variety of reasons ranging from increasing energy prices, to increasing supply chain costs to increasing employee pay.
For some, this can result in difficult decisions such as redundancies or restrictions on purchasing, or a reduction in performance as a result of trying to meet budgets. Applying Lean Six Sigma within your organisation is a great approach to reducing operating costs through efficiency – so if you find yourself wondering what other options there are out there to reduce your costs without making drastic cuts, this article is for you!
What is Lean Six Sigma and how is it relevant to reducing operating costs?
When organisations first think of different ways to reduce operating costs, rarely is Lean Six Sigma at the top of the list – and this is a huge missed opportunity! You might be wondering – what really is Lean Six Sigma and how can it benefit your business? Lean and Six Sigma are two different methodologies that go hand-in-hand. Lean means creating more value for customers with fewer resources and so the focus is on reducing waste. Six Sigma on the other hand focuses on reducing process variation and improving process controls. The combined disciplines provide customers with the best possible quality, cost, delivery, and a newer attribute, nimbleness.
Lean Six Sigma reduces operating costs by reducing variation, waste, and process cycle time, while promoting the use of work standardisation and flow. It applies anywhere variation and waste exists – which is everywhere! In addition to this, it drives Customer Satisfaction, meaning that you can deliver more for less.
So where can you start on your journey of becoming a more Lean organisation?
Reduce Waste to reduce your operating costs
Every organisation has processes and every process has waste which is one of the main opportunities to reduce your operating costs. Waste is defined as any action that does not add value to the Customer – it is essentially any step that does not directly benefit the Customer and the Customer does not want to pay for.
There are different types of waste within processes which are often referred to by the acronym TIMWOODS.
Examples of common wastes include:
- Creating reports that aren’t used
- Waiting for a response
- Poor scheduling resulting in additional travel time
- Re-entering data into multiple systems
- Unused inventory of office supplies
- Walking to a different area to collect tools or cleaning products
- Errors causing re-work
- Management roles carrying out highly administrative tasks
If you experience any of these wastes within your business, it could be time to review your processes in detail to identify and remove the waste. By doing this you will spend less time on non-value adding tasks and can focus on value-adding or revenue generating activities to help reduce your operating costs.
Establish your baseline and monitor progress against reducing your operating costs
To understand just how much you can reduce your operating costs by, you need data. Lean Six Sigma is a data-based methodology and it’s important to spend time understanding current performance levels so that you can understand where you biggest challenges are and determine the impact that improvements have made. To measure the baseline of a process you can time how long it takes from start to end, and work out how much of the time is considered as “waste”. The overall objective is to implement changes to processes that reduce the amount of waste and reduce the overall process cycle time.
Once you have set your baseline for current performance, you can then set specific goals for cost reduction and measure this over time to monitor and measure progress towards your goals. For any processes that happen within systems, (for example purchasing systems or workflow systems) it’s highly likely that you can export timings, costs or other data from within the system, meaning you can automate reporting of performance levels – this is yet another example of being more Lean! Data insight is hugely valuable at this stage as you will be able to see the tangible benefits that have arisen out of applying Lean Six Sigma improvements within your organisation.
Engage your Employees within the process to sustainably reduce operating costs
There’s no point trying to reduce your operating costs without bringing your people on board. People are at the heart of every organisation, and it is extremely important to bring them on the journey! By engaging employees in the process, you will empower employees to feedback on changes and reflect on their own opportunities for improvement. It also ensures that as changes are implemented, there is a much higher rate of adoption, which ensures that the benefits are realised.
In our experience, a key enabler to successfully embed Lean into your organisation is to focus on the culture and increase the collective team’s understanding of Lean Six Sigma. First and foremost, one of the best ways to engage your employees in the process is to provide some foundational Lean Six Sigma training – Yellow Belt is most suitable for this and equips the team with problem solving, process mapping and waste identification skills. Once your team has developed an understanding of Lean Six Sigma and can understand how it can be applied within their organisation, it will become significantly easier to engage them in the process of cost reduction; they will understand the methodology, and will be eager to put their new skills into practice. Whether they are contributing to a workshop to review a process or carrying out a review themselves, the team will be equipped with the tools and skills to analyse the way they work and implement improvements to become a more Lean organisation.
Top tips for how you can engrain Lean into your culture in addition to Yellow Belt training:
- Provide Sponsor-level Lean Six Sigma training to business Leaders who should actively encourage application across the organisation
- Implement a feedback scheme whereby employees can make recommendations and suggestions on how to improve as a team/business: this can include identifying and delivering their own projects, or feeding back the areas that they feel need improvement
- Identify Lean Champions within your business who can actively drive forward Business Improvement as part of their role
- Use the language of Lean in your daily routine: ensure that efficiency and value stay high on the agenda by providing a consistent message day to day
- Ensure there is reward and recognition for employees who take a lead in embedding a Lean culture.
The proof is in the pudding! How have other organisations used Lean Six Sigma to reduce their operating costs?
Not yet sold on how Lean can help your organisation? Hear about the benefits that some of our clients have seen following the adoption of Lean processes and principles.
We have supported a number of organisations in the journey to becoming more Lean through delivery of improvement projects and through upskilling employees through our practical, experience-based training programmes.
We worked with a London-based NHS Trust to transform their service delivery. Through reviewing and re-designing their Operational processes, we were able to identify approximately £300k of efficiency savings through unnecessary waste in their processes and implemented a new model which provided improved assurance regarding their Operational processes.
We carried out a 5-day process review with a Pharmaceuticals training company in which we took the employees on the journey of change through workshop facilitation and coaching, which resulted in a 27% reduction in process cycle time and improved cash flow and efficiency, which was the equivalent of saving over £200k per annum. The time saving was re-invested into the business by repurposing roles to facilitate additional sales.
One of our clients invested in improving their Lean culture to improve their Operational Excellence and efficiency. We designed, established and delivered a Lean Deployment Programme starting a Sponsor level and working our way through the organisation. As a result of the training, coaching, and sponsorship from the client Executive team, we were able to demonstrate a payback of £30k efficiency savings within the first 3 months of the programme by empowering employees to identify and reduce waste within their Operating processes.
If you are looking for a sustainable way to reduce your Operating costs without making cuts, focus on efficiency! Adopt Lean Six Sigma principles to identify and reduce waste within your processes, measure your baseline and the impact of improvements, and don’t forget to take your teams on the journey of change so that changes are successfully adopted and sustained!
For support to deliver Lean solutions within your business or to discuss our training options further, get in touch here!