The objective of Lean Six Sigma is not reducing headcount, it is – among other things – increasing the opportunity for growth. And one of those growth opportunities can be found in General Electric’s “At the Customer, For the Customer” idea.
A misconception within some companies is that the primary purpose of Lean Six Sigma is to reduce operational costs by reducing headcount. Unfortunately, this is not only untrue, it negatively impacts the ability of companies to benefit from the improvement initiative.
Obviously, creating or fostering such a notion, only builds negative morale and perceptions about the methodology. And the negative perception results in limited acceptance, support and adoption of Lean Six Sigma. This seems ironic, since one of the core tenets of Lean Six Sigma is that quality should not suffer to reduce operational steps and costs, and the fact that human interaction is essential to the quality of almost any product or service.
In reality, an effectively run enterprise-wide Lean Six Sigma program works in conjunction with those in sales or client management to sell the capacity that successful projects create. The additional capacity obviously can be devoted to delivering new products and services. Such actions manifest themselves in the redeployment of surplus workforce capacity, empowering the business to grow with little or no cost.
An Environment for Using ACFC
A successful Lean Six Sigma program allows other options for growth. One such option is the “At the Customer, For the Customer” (ACFC) program in which a company lends Six Sigma Black Belt resources to its strategic customers. ACFC originated at General Electric and has since produced successful results at other companies such as 3M, Siemens and Xerox.
Unlike traditional Six Sigma projects that focus on an organization’s internal processes, ACFC projects focus primarily from inside the customer environment. Some companies such as GE and Xerox have deployed account-based Green Belts and Black Belts. These practitioners are assigned full-time to specific strategic customer accounts and focus on improving performance and increasing value at the customer by utilizing Lean and Six Sigma tools using abbreviated DMAIC/Kaizen roadmaps. The projects are limited to 45-day cycles and target existing business volume retention, additional volume growth and increased revenue with benefits reaching both the supplier and the customer. ACFC can function as an effective tool to move an organization from a delivery vendor to a business partner.
This concept has spawned a new application of Lean Six Sigma known as Lean Six Sigma for Growth. This approach utilizes existing Lean Six Sigma and Design for Six Sigma roadmaps such as DMAIC (Define, Measure, Analyze, Improve, Control), and DMEDI (Define, Measure, Explore, Develop, Implement). The Lean Six Sigma for Growth approach begins with discovering business and revenue growth opportunities. Once these opportunities are identified they are ranked to prioritize the selection of projects. The discovery process serves as a funnel to identify project opportunities and convert them into service opportunities. It is vital that the discovery step is conducted systematically as it augments the effort to identify opportunities and select appropriate projects.
ACFC for Growth Case Study
The following example presents an ACFC Lean Six Sigma project where a growth opportunity was converted into a service opportunity to deliver high initial benefits to the customer and long-term annualized revenue growth to the supplier.
The Business Problem: A vendor acquired a $1 million document management tool to better facilitate the development, tracking and storage of operational forms for a major customer. Working with the new tool, the customer’s cost and cycle time results of $25,000 and 25 days were exceeding its requirement of $2,500 and two days. As a result, the customer ceased ordering from the vendor and threatened to pull out of the entire relationship. If the customer pulled out, the vendor would incur significant legal costs as well as revenue and productivity losses.
Project Initiation: The project targeted a 90 percent reduction in repetitive development time and costs. The vendor met with the customer to propose a reduction in the current production cycle to achieve two days and $2,000 in exchange for a minimum number of orders. The customer agreed to the proposal.
Project Results: One of the vendor’s Lean Six Sigma Black Belts worked directly with the customer to launch the cycle time reduction project. The project team, led by the vendor Black Belt and including participation from both organizations, exceeded the 90 percent cycle time reduction objective. As a result, the customer recognized $600,000 in savings and the vendor secured more than $160,000 in revenue from the customer for new orders while avoiding $21,000 in termination costs. Peripheral benefits were gained as the vendor now has a low cost, high speed delivery system and a process to replicate with other customer accounts.
Faced with a business problem such as this, companies typically react by reducing headcount to reduce costs. Use of Lean Six Sigma within an ACFC process improvement environment provides a non-traditional approach to achieving results while enhancing the vendor-customer relationship.
Conclusion: Value in ACFC Partnership
All companies are faced with the traditional challenge of managing costs and increasing revenues. Lean Six Sigma assists in this effort while simultaneously increasing quality. The benefits of deploying Lean Six Sigma and ACFC together are numerous. Sharing Six Sigma resources across the vendor-customer relationship allows a more thorough analysis of both organizations and provides the opportunity to view business issues from a global perspective. In addition, business needs are more readily identified and solutions are implemented with a greater degree of impact. Placing the vendor Black Belt within the customer environment provides greater opportunities to enhance the vendor-customer relationship, offering the potential for additional vendor business growth. By improving or creating processes to deliver desired results, Lean Six Sigma and ACFC provide companies with solid tools for growth.
About the Author: Steven H. Jones is a senior process engineer with Siemens Business Service and a certified Lean Six Sigma Black Belt. He started his career with the 3M Corporation, an early adopter of the Lean Six Sigma methodology, in 1988 and has worked in quality improvement of telecommunications and information technology arenas since 1993. He also has provided quality improvement and process engineering services domestically and internationally to clients such as BP Canada, Convergys, Intercontinental Hotels and Microsoft. He can be reached at [email protected].
