In February this year, automotive supplier EMCON Technologies was awarded the Best Lean Six Sigma Start-up Program at the iSixSigma Live! Conference held in Miami. EMCON Technologies, which was bought by car parts maker Faurecia SA in 2010, makes exhaust (emissions control) systems. The selection criteria for this award required a 5X minimum return on investment just to enter the competition and given the economic climate in 2008-9, this requirement was especially challenging for automotive suppliers. As a result, the award was a particularly meaningful achievement for EMCON Technologies.
EMCON’s success was a result of disciplined and focused attention to process excellence in an initiative called EMCON Process Excellence, or EPEx. This initiative, initiated in June of 2008, was built on a seamless combination of Lean and Six Sigma tools applied throughout EMCON’s value chain. EMCON, a $4 billion company with operations on 5 continents, immediately trained 135 mid- to upper-level managers from its locations around the world as champions of change in this new initiative. 18 Black Belts and 20 Green Belts were trained and certified in August 2009 after completion of multiple projects. The participants in these classes came from around the world, enabling the cross-pollination of best practices from diverse processes and cultures. As part of their certification these Black Belts and Green Belts delivered over $7 million in financially verifiable, direct annual contribution to Net Income.
Encouraged by the success of the first waves of Belts, EPEx redoubled its efforts in 2009, training over 117 more Green Belts and 17 Black Belts from around the globe. In total, the deployment delivered over $11.6 million in annual impact in 2009 through the elimination of defects and waste in both production and administrative processes throughout the company. Again, this must be put in the perspective of an environment where production volumes dropped by over 50% with hourly census cut by over 40% in some facilities and salary census reduced by approximately 20%. This commitment to continuous improvement reflected a culture with the courage and dedication to remain focused on process excellence as many other companies dissolved or significantly curtailed their own continuous improvement efforts due to adverse economic conditions.
Global culture change initiatives such as this which rely on the proper use of rigorous analytical tools for process improvement can be very painful and difficult to manage successfully. EMCON Technologies recognized this in their initial planning stages and chose to partner with consulting firm CS International Inc. to design and deploy the EPEx initiative. CS International, with a history of designing and consulting several successful deployments over the last 15 years dating back to AlliedSignal and GE, had helped its clients win two similar awards over the last five years. This achievement became the third award won by clients of Texas-headquartered CS International with the previous two awards won by Lonmin Plc, a platinum mining company operating in South Africa. Lonmin was recognized in two consecutive years as the Best Achievement of Six Sigma in a Manufacturing Environment.
This history of award-winning deployments is a direct outcome of CS International’s approach which has been developed and refined across industries and cultures around the globe. Founded in 2004 by Mike Carnell, President and CEO, CS International is a team of consultants who have been involved in deployments of Lean Six Sigma – in 19 countries across 6 continents – since its inception at Motorola. Over the years, CS International has observed the successes and failures in Lean Six Sigma deployments and the firm is able to utilize this experience to help its clients maximize their chances of success with new business excellence deployments or reviving underperforming programs. These deployments have ranged from small segments of companies to complete companywide deployments, such as the EMCON Technologies Lean Six Sigma deployment. Each deployment is designed to deliver on specific expectations of the client, such as the Lonmin deployment that targeted R 200,000,000 and 20 percent of projects addressing safety issues. Says Carnell: “The size and location of the organization are important factors, but the key to success is in understanding what the client wants to accomplish.”
Indeed, CS International says that its business model was created on the foundation of listening to customers’ needs and not providing predetermined solutions. CS International deployments are individually constructed based on each customer’s unique requirements. Then, by leveraging their consultants’ experience across multiple industries, the firm designs a Business Improvement Plan suited to customers’ specific needs. “Every organization is unique and faces specific issues related to their particular industry, culture, and environment. For this reason, CS International does not sell commodity-type deployments or services. When initiating a relationship with new clients, CSI listens. We are careful to establish a clear understanding of our clients’ challenges and objectives first,” says Rob Tripp who led the EMCON deployment for CSI.
According to CS International, what follows is a deployment design – developed in close collaboration with clients – that blends the rigor and analysis of traditionally successful deployments with a relentless focus on delivering financial benefits. EMCON Technologies saved USD 6 million in 6 months after implementing CS International’s program. Similarly, General Electric, another CS International client, saw savings of USD 400 million after two years. Navistar saw USD 95 million after one year and GenCorp USD 15 million after two years. And these results do not vanish as soon as the consultants leave. CS International’s deployments are unique in that the firm focuses on ensuring that its clients are self-sufficient, with no need for the presence of consultants to sustain the program. Jointly, CS International and its clients design and implement the management system necessary to sustain an initiative. “Many companies need an outside perspective in order to realize their strategic goals. CS International deploys trained professionals who assist organizations in the short term to create long-lasting results. Our vision is to facilitate significant improvements that will self-sustain. CS International brings the knowledge and experience needed to enable you to develop these critical skill sets for an effective and sustainable change management effort. Through development of internal expertise a company builds the necessary skill sets to deploy an initiative that is suited to both its industry and indigenous culture” says Carnell
Automotive Industries spoke to Mike Carnell, President, and Rob Tripp, Managing Partner of CS International Inc.
AI: To what do you attribute the success of your clients in winning the Lean Six Sigma Deployment Excellence Awards?
(CARNELL:) In each case, our clients matched our own commitment to building honest and productive communication channels. Lonmin won 2 awards for the best deployment in consecutive years, and EMCON Technologies received its award for best start-up deployment. In both situations, we were fortunate in that the clients were willing to listen to our own ideas based on many years of experience and, I think, our deployment strategies were able to reflect their own experience with their management systems and indigenous cultures at various operating locations. This could not have happened without strong, effective communication. Sure these deployments had strong executive support and leadership but that is basically a prerequisite for a successful deployment so their competition had that too. The result of that strong communication was a deployment strategy (and the execution that followed) which focused on discipline, integrity, and the financial results that followed. That is what differentiated both Lonmin and EMCON from their peers. They did not emasculate the rigor of the training content in order to make it more palatable to those unwilling to tackle challenges. They did not dilute or diminish the project support in order to minimize their investment. In both cases – though in different ways – they practiced an effective management system for selection of “Belts”, selection and tracking of projects, and, perhaps most importantly, they both instituted a disciplined approach to tracking, reporting and communicating project benefits.
The Lonmin approach to the management system was almost a textbook case of how to deploy effectively. As part of their annual audit of Lonmin’s operations and financials, Ernst & Young noted that Lonmin had the “best deployment we have ever seen”. Lonmin had an effective steering committee composed of senior managers and a strong deployment leader. They truly selected “the best of the best” to be Black Belts and Master Black Belts with the intent of repatriating these individuals into senior management positions. And, as I mentioned before, they developed a benefits capture protocol or documentation of standards and rules for consistent calculations of project savings which was the roadmap for the finance staff dedicated to tracking financial results of the individual projects and the deployment. This system enabled Lonmin to flex their strategy with changing business conditions. For example, when the price of Platinum was low, the strategic emphasis for projects needed to be on cost reductions; when the price rebounded, the emphasis changed to bottleneck reduction and anything that could increase throughput. This ability to flex and manage the deployment was instrumental in helping Lonmin move from number 3 to number 1 in terms of productivity in its industry.
EMCON was different in that the deployment was strongly championed and Managed by Paul Schultz, Chief Supply Chain and Operational Effectiveness Officer, who reported directly to the CEO. Paul had experience leading Six Sigma deployments in several other organizations like Tenneco, Ingersol Rand, and AlliedSignal. Furthermore, EMCON (formerly known as Arvin industries) had a long, rich history as a t-1 supplier which of course means exposure to the concepts and philosophies of continuous improvement, particularly Lean. Unfortunately, recent ownership and management changes at EMCON had suppressed the formerly vibrant Lean culture that once existed. This situation meant that Paul had to drive a continuous improvement effort that seamlessly integrated Lean and Six Sigma without alienating the people with earlier practical experience in Lean. This problem was largely avoided by carefully linking the Lean Six Sigma project benefits with strategic and AOP objectives, along with frequent reporting of deployment financial results. Projects focused on scrap, rework, and offal so the linkage to income, cash flow, and working capital was clear and this became especially important after the industry crash in 2008-09. One other important element that we introduced with Paul was the deployment of the Lean Six Sigma tools in the supply base. Suppliers were trained as Green Belts with projects required for certification. These projects eliminated waste and bottlenecks throughout the supply base resulting in significant raw material cost reductions as suppliers shared their benefits with EMCON.
While we can talk all day about how these award-winning deployments were different – different industries, different cultures, etc. in the end it is really the core similarities that are important here. In both cases these companies were singly focused on driving and measuring financial results. Cultural change was a by-product of that focus. Commitment to a disciplined, rigorous application of Lean Six Sigma through effective training and capable project support was necessary to achieve project results in both clients. And finally, all this resulted from the positive cooperation and communication that we developed with both clients.
AI: What makes EMCON Technologies winning the award so important to other companies in the automotive industry?
(TRIPP:) The award itself is not so important as the success that EMCON achieved in order to win the award. And this success was important for several reasons.
First of all, it demonstrates that there is room for the successful application of Lean Six Sigma in an industry where continuous improvement is generally considered to be mature. In particular, the Lean Six Sigma tools showed over and over how Lean, as it is practiced in many companies, can be naïve as it often ignores quantitative analytical methods in an effort to make improvements faster. Furthermore, the integrity of the data it does use is practically never validated. The analytical tools in Lean Six Sigma, especially as they relate to Measurement System Analysis, Capability Studies, and DOE, can be a powerful addition to the qualitative approaches that typically characterize Lean today. As EMCON demonstrated, the seamless combination of Lean and Six Sigma is both possible and effective as a continuous improvement philosophy.
Second, it shows that managing the deployment in a way that links financial benefits to AOP objectives is an excellent strategy to engage the commitment of leaders at all levels of management. Together, success and integrity breed loyalty so making the effort to meticulously track and report financial benefits helps to drive a cultural focus on results.
Third, and finally, the integration of Lean Six Sigma with Supply Chain Management is a powerful tool to manage all of the costs of goods sold on the P& L. Using the Lean Six Sigma tools combined with other strategies to reduce the costs of raw materials is a perfect companion to the standard Lean Six Sigma focus on manufacturing and business processes. In fact, we at CS International believe this approach is so powerful that we are forming a strategic partnership with Paul Schultz to attack the entire cost of goods sold via a strategic combination of Lean Six Sigma and Supply Chain Management in any manufacturing enterprise. It is an exciting opportunity for the automotive industry to apply Lean Six Sigma in a much broader context than before.
AI: What kind of automotive industry experience does CS International have?
(CARNELL:) In the last 15 years we have worked with several automotive companies including, Navistar, Libby Owens Ford, Magna International, United Technologies, AlliedSignal, Gen Corp, and of course EMCON. We have worked with OEMs, suppliers, and even at the commodity producers, so our experience is quite vertically integrated. Across this supply chain we have deployed Lean Six Sigma and Design for Six Sigma in multiple functions including manufacturing, design, and business support process like IT, Finance, Human Resources, and Sales. Prior to entering the consulting business our people came from companies such as Motorola, Borg Warner, and Allied Signal. Our experience is not limited to consulting with companies that serve the automotive market but we have a great deal of experiencing them as our customers as well.
AI: What goes into implementing high-impact improvement with Six Sigma and Lean Enterprise?
(TRIPP:) At CS International, our approach is unique in that we begin by facilitating a Design Team with our clients. This is a joint design and planning session facilitated by CSI to establish the plans and details for the execution of a Six Sigma deployment within our client. This step is critical to the success and sustainability of the initiative as it initiates the change management process. When the deployment plan is the result of a cooperative effort between CSI and leaders from our client, it becomes our client’s deployment rather than the consultant’s deployment. The details for organizing and planning a successful deployment are resolved by the Design Team, allowing members of the team and management to answer questions and communicate plans with confidence. The Design Team creates a comprehensive plan for managing the entire deployment that is supported by the Leadership Team. This plan will prescribe the mix of Belts (Green vs. Black), projects (Kaizen vs. DMAIC), and the content of the training. In addition, this plan will detail how projects will be selected, managed, measured, and closed throughout the lifecycle of the projects. And to support this, the deployment plan will document how people are to be selected for Lean Six Sigma participation and how they will be repatriated into the organization.
So to put it bluntly, the full scope of everything that goes into implementing high-impact improvement with Lean Six Sigma can’t be covered completely in the time we have together but I can tell you that it involves disciplined planning and execution that builds on a foundation of 5 pillars: rigorous training, capable project support, credible financial benefits tracking, assiduous career planning and development, and effective project lifecycle management.
Doing this effectively requires a commitment on the part of a company’s leadership team to carefully and continuously demonstrate the link between Lean Six Sigma activities and the company’s strategic or AOP objectives. Not all decisions made to support Lean Six Sigma are going to be popular so is it imperative that the leadership team remains committed to the Lean Six Sigma deployment plan in order to maximize the chances for success.
AI: How different or difficult is it for automotive companies to implement these programs?
(TRIPP:) It is no more difficult for automotive companies to do this than it is for any other company. In fact, automotive companies may have some advantage since they are familiar with continuous improvement, they have some measurement systems, and they typically have fairly high volumes of units of production to study and from which to learn. But of course this doesn’t make it easy, because in spite of these superficial advantages, automotive companies are not quick to embrace positive changes and they are reluctant to adopt ideas that aren’t their own. Cultural challenges such as these are often the most difficult to overcome and doing so – again – requires communication and commitment from the leadership team. This commitment can be especially difficult in times like we have seen over the last 2 years. Of course it was commitment to the Lean Six Sigma strategy that helped EMCON weather that storm, but many companies lack EMCON’s ability to stay focused on a longer-term objective amid competing priorities. Doing this effectively requires a commitment on the part of a company’s leadership team to carefully and continuously demonstrate the link between Lean Six Sigma activities and the company’s strategic or AOP objectives.
And you asked if it is “different” for automotive companies. My reply to that is generally, no, but some details may make it a little different for automotive companies. They experience the same trials, resistance, and challenges that other companies see in other industries. Yes, automotive quality systems are generally more mature. Yes, they tend to have more familiarity with continuous improvement methods like Lean. Yes, they tend to have more of a process-oriented culture. And these traits could be a source of advantage in implementing Lean Six Sigma if they don’t create a culture of complacency. Complacency and arrogance are the greatest challenges for many automotive companies to overcome. It sounds cliché but pride is a vice that blinds you to your true potential because it reduces the motivation to learn and change and improve. But this is no different than most companies in other industries.
AI: What advice do you have for automotive companies who are yet to implement such programs? What are some of the benefits they will gain by implementing a high-impact improvement with Six Sigma and Lean Enterprise?
(CARNELL:) Number one, above all else, focus on driving financial benefit. If your program can’t demonstrate its value to the organization, it can’t justify its existence. It’s that simple. Don’t do it to impress customers. Don’t do it to change your culture. Do it for financial benefit and impressed customers and culture change will follow.
This means you need to plan the deployment, link it to AOP objectives, meticulously track benefits, and manage your project portfolio, among other things. If you decide to hire an external consultant, make sure that you trust that consultant’s integrity and sense of fiduciary responsibility. Furthermore, make sure you can communicate effectively with that consultant and that the consultant shares your vision to relentlessly drive results.
The benefits of a successful deployment are significant. Many people have quoted numbers in the tens or hundreds of millions or more. Clearly all this is dependent on the size of your organization. So I think the real prize to keep your eye on is at least a 5:1 return on investment which is typical for most deployments. And that is generally achieved in the first year; keep in mind that improvements to ongoing operating processes last for the lifetime of that process. And as I said, if you focus on the financial returns, the “soft” returns will follow. For example, the Lean Six Sigma deployment at EMCON was instrumental in helping them land 3 new programs because the customers are looking for that culture in their suppliers. And when the capability and drive to constantly eliminate waste becomes part of your cultural identity, you will marvel as the pace of improvement accelerates and migrates into the design, support, and administrative functions.
And finally, one surprising benefit which we observed at EMCON was the improvement in cost and quality of purchased components and raw material. This was most pronounced in “developing” countries in South America, Eastern Europe, and Asia. In fact, the benefit was so impressive that we expect a strong future market for the combination of Lean Six Sigma with Supply Chain Management strategies as a means to manage the cost and quality of the supply base, particularly as it relates to off-shore suppliers. To that end, we will soon be launching a new partnership with Paul Schultz called Working Capital Partners International Inc. Paul was instrumental at leading successful deployments which combined Lean Six Sigma and Supply Chain Management to drive significant impact on raw and purchased components as well as internal processes at EMCON, Tenneco, and Ingersol Rand. We are excited to work with Paul and to significantly expand the influence of Lean Six Sigma on the entire value chain.