Reasons for Lean Six Sigma

Lean Six Sigma allows for the improvement in speed and performance of a process coupled with the reduction of waste and defects. If you ever find your current processes with high rework, client turnover, product recalls/crashes, and a plethora of errors it might be time to change your process design. As you will read below, I have noted a few benefits and reasons for Lean Six Sigma.

  • Lean Six Sigma projects cut costs and expenses by eliminating waste (a result of inefficient or non-value added process steps).
  • Whilst, the reduction of expenses helps companies yield higher revenues and profits. Improvements in quality and delivery also have the potential to increase sales and profit.
  • When waste is eliminated, processes flow seamlessly and delivery times improve.
  • As a process flows more quickly, the amount of inventory needed to keep the process moving is reduced and cash is freed up for investment elsewhere.
  • By improving quality in each process, customer satisfaction is increased.
  • Lean Six Sigma allows employees to work in valued added processes which in turn increases overall internal satisfaction and morale.
  • The cost savings of implementing Lean Six Sigma, compared to the time and resources spent working on a project without Lean Six Sigma is typically 10 to 20 times the investment.

 

Notable Bookkeeping is a certified Lean Six Sigma company. Contact us today to learn more about our process improvement/Lean Sig Sigma services! We work with all industries and all company sizes.

 

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Preventing Process Failure with FMEA (Failure Modes & Effects Analysis)

FMEA (Failure Modes & Effects Analysis) is a Lean Six Sigma technique for identifying both the ways that a product, part, process or service can fail and the effects of those failures.Once these failure modes are identified, they are rated by the severity of their effects and failure probability. This is critical to the design of any system, process, service or product.

FMEA-Round-1
Sample FMEA GRID

There are 3 types of FMEA’s; system, process and design. However in this post I will only touch upon the Process FMEA. Process FMEA’s identify the different ways that a process could fail and the effects of those failures. They are often used to identify and rank process improvement opportunities. For the lower risk failure modes preventative plans are put in place to ensure minimal impact to productivity, costs, and delivery.

For example, say a Health Tech Startup, creates an app for patient on-boarding with a plethora of functionalities that they consider to be in the “cool factor”. However, this overload of features could overwhelm the user and miss the value curve completely.  With an FMEA analysis they would be able to identify the most critical features, risks, and problems with the product before they take it to market, in turn, significantly reducing rework, product, and process costs.

Contact us now to learn more about how to minimize rework costs and identify problems in processes, systems or products before they are used or put into production.

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Reduce A/P and A/R Errors with Standardized Work

Per my previous article, “Taking a Visual Management Approach to Accounts Payable”, I touched upon a Lean Six Sigma technique, called, Standardized Work.

“Standardized work is often referred as standard operating procedures to refer to the activities that must happen in order to complete a process. Essentially, everyone doing the job does it exactly the same way.” There should be no difference as to how your Sr. Accounts Payable Manager enters and processes bills versus your Junior Accounts Payable Coordinator. There would also be no difference between the 10th time they did the work or the 7,000th time they performed the work.

These standards and process procedures should include visual checklists, setup procedures, an integrated preventative plan, or other process steps. They should be written in terms of expected behavior or actions, and must be auditable.

Why do visual process controls make sense? It is known that people gain 80% of their information from their vision, 18% from their hearing and 2% from other senses. By implementing visual standard operating procedures for Accounts Receivable and Accounts Payable you aid in the reduction of transaction errors and process cycle time; and improve overall productivity, and client and vendor relations.

Critical departmental information, such as, KPI metrics (cost of A/P and A/R invoice, current process cycle time, on time delivery rate, et cetera) compared with industry and competitor data should also be visual as this will prompt your team to look for opportunities to improve.

A Visual Management Approach to Accounts Payable

Purchase order approval audit trails and visual bill entry controls can be an effective way to reduce the time it takes to resolve Accounts Payable errors and keep your vendors happy.

Visual management allows for standardized visual controls that are visible to all Accounts Payable (and also accounting team) on how approvals should be obtained for a purchase order, how to document these approvals, and how to enter bills into the accounting software. Visual controls are effective because the accounting team will see them everyday and there should be a constant review of them and essentially they should all be processing Accounts Payable the same way.

Visual controls are like visual checklists for your Accounts Payable team. These controls should be placed in high traffic areas where your accounts payable team will see them. A copy should be placed by each members desk as well and update them of course accordingly to business changes.

For recurring fixed bills, automation is a given. For example, lets say company HBN gets billed from Microsoft $17.95 for a productivity application every month a recurring transaction can be created in Quickbooks that will automatically create the bill every month. This significantly reduces manual entries and overall cycle time.

To reduce manual entries of non-fixed expenses you can create templates in Quickbooks (or other accounting software) in which they can be duplicated and make the changes needed per your company’s data entry controls and new bill specifications (purchase order, invoice #, et cetera).

Critical KPI metrics that your company should be tracking and analyzing in regards to Accounts Payable are the following:

  • Total Cost of an AP invoice
  • Overall time to complete the AP process
  • Overall time to resolve an AP error
  • Percentage of manually entered invoices
  • Number of full-time employees that perform the AP process, per 1 million (billion) in revenue
  • Percentage cost to perform the AP process as a percentage of total process cost

You should periodically compare these metrics with industry and competitor data to see where you stand and where you need to improve.

In conclusion, standardized visual controls for Accounts Payable is a great way to ensure the AP process is done the same way by all AP personnel.

The Customers that HATE you bring in the most valuable insights

 When utilizing the Voice of the Customer to glean insights don’t just target the customers that love you. When you take the time to really listen to the customers that hate you and turn their pains into solutions that is when you actually drive growth for your company.

Why target customers that hate you, you may ask? They have valuable insights on how your product or service can improve and can inspire you to create solutions that are currently not offered in the industry (first to market opportunities).

cust-service1Companies that are customer focused stay on top of customer pains and actually listen to them. They take more meetings with customers and work to turn client requirements into products, services or solutions.

The questions are:

Why do you hate us and what can we do to change that?

What are we doing wrong?

What are your pains?

When you acquire the answers to these questions then you can brainstorm ideas for products, services or solutions that will solve these pains. As a customer focused company you can’t be afraid to ask the hard questions. By turning customers who hate you into customers that love you will not only increase your client base and revenue but also make your competitors run for their money.

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