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This article: Philips brings Lean and Six Sigma in balance
Source: Business-improvement.eu
Lean Six Sigma: Value adding, perfect organization
Simply Philips brings Lean and Six Sigma in balance
Which method is most important to improve business processes within Philips, Lean or Six Sigma? Until recently, this was not very clear. The business-sectors Consumer Life Style, Healthcare en Lighting each had their own improvement program. The same was true for universal and sector-crossing functional areas like 'Innovation' en 'Supply'. To make it even more complicated, there were also local initiatives, for example in one specific factory.

Slowly but surely, all these puzzle pieces now fall into place! The Simply Philips program, originally developed within the Supply-organization, will become the umbrella for all supply chain innovation activities within Philips, read:it will span the complete chain from product development until production and delivery. Simply Philips originally was based on the Toyota Production System, and seen in that light it is a Lean-program. However, the existing Black Belt and Green Belt organization, including training in the fundamental principles of Lean Six Sigma, will now merge with Simply Philips. That way, one universal and group-wide improvement organization will be created.

Therefore, Simply Philips cannot be equated with Lean or Six Sigma. Even the term Lean Six Sigma does not cover the feel, since Lean Six Sigma as a rule is Six Sigma on a strategic level, with Lean-tools added on the operational level. Simply Philips is different. Philips is one of the first companies which chooses for a completely balanced application of Lean and Six Sigma. For bigger and complex projects, the focus will be somewhat more on Six Sigma. For smaller improvement initiatives, like Kaizen on the shopfloor, Lean might be more appropriate.

Article 1 (may '09):  How Six Sigma evolved to Lean Six Sigma
Lean Six Sigma boosts value creation within Philips Consumer Lifestyle
By Dr Jaap van Ede, editor-in-chief of business-improvement.eu. The first article (see below), published in the Dutch specialist journal Business Process Magazine in may '09, decribes how Six Sigma within Philips evolved to Lean Six Sigma.
The second article, based on an interview in june 2010, shows how Lean Six Sigma, complemented with other improvement initiatives, merged into Simply Philips which essentially is Lean + Six Sigma in balance. Below it, you will find a link to a very recent interview of march 2012.

The Philips division Consumer Lifestyle (CL) used to apply only Six Sigma, but in 2008 Lean-tools were added. The result is a Lean Six Sigma program, which helps to create both value adding and perfect business processes. The aim of all improvement efforts remains to respond to consumer insights, but the focus broadened from cost reduction to value creation.

For each functional area within CL, like for example ‘Innovation’ of ‘Supply’, one Master Black Belt acts as contact person. The execution of the improvement projects is done by Black Belts, which rotate between the functional areas, to increase their knowledge of business processes. Talented Black Belts (high potentials) also carry out projects within the other Philips divisions, Healthcare and Lighting. Project management software is used to unlock and share information about current and historical Black Belt projects. This combination of job rotation and project management software helps to proliferate best practices company-wide.

The way large companies improve their business processes by carrying out projects, always is more or less the same:

  1. Define: Which qualities are important (add value) in the view of the customer, these are Critical-To-Quality values or CTQ’s.
  2. Measure: How well does the current business process perform: how much value is added and which wasteful activities can be indentified.
  3. Analyze: Which CTQ’s are below their target value and why, what is the root cause of wasteful activities like to much stock, waiting times etcetera. What are the bottlenecks in the process?
  4. Improve
  5. Control: Secure the new and improved process as new standard, to prevent a return to the old situation.

Above, Six Sigma jargon is used to define the steps, but other improvement methods use a similar project cycle. The main difference between the methods is their primary focus. For example, whereas Lean has logistic improvement as line of approach, Total Productivity Maintenance (TPM) focuses on improving the productivity.

Six Sigma concentrates on improving the quality of business processes. In that case the five project steps mentioned above (Define-Measure-Analyze-Improve-Control) are known as the DMAIC-cycle. Six Sigma project leaders are called Black Belts (BB’s). Besides that there are Master Black Belts (MBB’s), these are people who supervise the work of a group of BB’s.

Overview of the Simply Philips program
Overview of the Simply Philips program

Until recently, Philips was neither more nor less then a Six Sigma organization. Lean manufacturing-tools were hardly used, and Black Belts carried out their improvement projects according to a variant of DMAIC, called MEDIC. This acronym stands for the project phases ‘Map’, ‘Explore’, ‘Define’, ‘Implement’ and ‘Control’.

MEDIC was coordinated by a department on corporate level, but In 2008 it was decided to disband this department. Since then, the three business sectors of Philips - Philips Lighting, Philips Healthcare and Philips Consumer Lifestyle - became responsible for their own business improvement programs.

This cleared the way for Philips Consumer Lifestyle, to transform MEDIC into a broader and more tailored improvement program, based on Lean Six Sigma.

Lean Six Sigma

Lean Six Sigma combines two process improvement methods. Theoretically this will result in processes which are not only efficient from a logistic viewpoint (Lean), but also deliver products or services of good and standardized quality (Six Sigma).

Lean manufacturing reduces waste in time and resources, which results in increasingly efficient (logistic) processes. Only process steps which add value for customers are considered to be useful. A process flow diagram (Value Stream Map) is used to identify which processes add value, and which don’t. Seven kinds of wastage such as inventory, manufacturing errors and unnecessary movements are reduced as much as possible. The result is a 'lean' process, which can then be brought to perfection by applying Six Sigma.

Six Sigma reduces variation in processes. Statistical tools are used to identify and eliminate root causes of problems. The goal is to maximize the likelihood that products or services will meet customer expectations. The term Six Sigma literally refers to a (often utopian) chance of 99,9997 % that a product of process meets the quality expectations of the customer.

Lean Six Sigma connects Lean and Six Sigma via the DMAIC project-cycle. DMAIC is a concept borrowed from Six Sigma, the acronym stands for the project phases Define (what is important in the eyes of the customer), Measure, Analyze (why is quality sometimes below standard), Improve and Control (prevent a return to the old process). By repeating the DMAIC-cycle, the process concerned becomes increasingly efficient (Lean) and perfect (Six Sigma).

Above, Lean is applied before Six Sigma, but the other way around is of course also possible. Six Sigma is then used first, to make a process more stable. After that, it is sometimes more easy to make this process 'leaner'. Take for example reducing intermediary stock in a supply chain. A prerequisite to do this, is having (production) links in the chain with predictable behavior.
In both cases (first Lean, then Six Sigma or the other way around) the result will be an organization which is both Lean and perfect.

Black Belts (BB’s) are (Lean) Six Sigma project leaders, these are people who carry out improvement projects according to the DMAIC-cycle.

Master Black Belts (MBB’s) act one level higher in the organization. They coordinate and support the work of groups of Black Belts.

> more about Six Sigma
> more about Lean (manufacturing)
> more about Lean Six Sigma

Philips CL
In their office in the Breitner Center in Amsterdam I meet Sanchay Roy, since may 2008 head of business improvement of Philips CL, and Nico Schutte, business improvement director.

'I can imagine that our position descriptions make you think that I have the same job as Sanchay', says Schutte. 'The difference is that he is division-wide responsible for the improvement program, whereas I concentrate on local initiatives, for example within factories or sales organizations. Besides that I am Master Black Belt for the functional area human resources. In the latter role I report to Sanchay.’

Lean example Philips factory: stock reduction
Typical example of stock reduction in a factory, after applying Lean-tools like Value Stream Mapping and 5S. Lean-aspects become increasingly important in the improvement projects of Philips. In this article Lean-tools are added to Six Sigma, in the sequel you will notice that Lean management is superadded.

Renewed focus
Sanchay Roy en Nico Schutte tell me about the transformation of MEDIC into Lean Six Sigma.

To manage that process, Roy could make good use of his 14 years of experience with (Lean) Six Sigma within the former General Electric Plastics (now part of SABIC). ‘My goal was to give the improvement program a renewed focus', explains Roy. 'You are the first person outside Philips who I tell about the changes that were carried out by me and my team.'

Philips Consumer Lifestyle (CL) had the advantage that this is a new division or ‘sector’, as they say within Philips. Philips CL was formed by a merger of Philips Consumer Electronics and Philips Domestic Appliances.

Because Philips CL is a new division, it is relatively easy to carry out changes. 'Therefore, we are now somewhat ahead concerning the transformation of MEDIC to Lean Six Sigma, in comparison with the other two Philips-sectors', Roy continuous. 'Second, we were the first to implement project management software, to unlock information about improvement projects worldwide. And third, we are pioneering with projects that are carried out by more than one Black Belt.’

During his last years within GE Plastics, Roy was already transforming the Six Sigma program there to Lean Six Sigma. 'With Lean-tools such as Value Stream Mapping you can eliminate steps in business processes that waste materials and/or time', Roy explains. 'After that, only steps remain that are really needed. By applying Six Sigma these steps can then be made more robust, that means: less sensible to environmental circumstances. The result will be a lean process of which the outcome nearly always is good.'

Philips CL was rather unfamiliar with Lean. ‘Adding Lean-tools therefore was one of the first changes I made. In the mean time, I replaced the MEDIC-terminology by standard Six Sigma-jargon, because that is a world standard. Since then, improvement projects are carried out according to a DMAIC-cycle, which includes the possibility to apply Lean-tools. We call this the Lean DMAIC cycle.’

Sanchay Roy (Philips CL)
Sanchay Roy: ''Improvement projects now go through a DMAIC-cycle, in which also Lean-tools are applied. We call this Lean DMAIC

Blue Sky Growth Projects
A more subtle but no less important change was that the focus of the improvement projects broadened from cost reduction to value creation. 'The fact is, that is our driver for growth. Connected with that, is that we now carry out projects that improve all of our three main processes, which are innovation, sales and marketing, and order to delivery. In the past, we focused mainly on the last process.'

A good example of this more holistic approach, combined with the new focus on value creation, is that Black Belts recently started to carry out Blue Sky Growth projects. ‘Using Lean and Six Sigma tools, these Belts investigate if making a new product matches with Philips CL. When such a Black Belt concludes that a certain product is not a good idea, then this is also a result. So, a Blue Sky Growth project can also be succesful if it doesn't bring in any money.'

In the past, a Black Belt carried out two projects per year, with the aim to save 100.000 to 500.000 euro. ‘Nowadays, improvement projects often are even bigger and more ambitious, with a possible business impact up to 10 million euro.’

New is also that complex DMAIC-projects, of which Blue Sky Growth is a nice example, can be multi black belt projects. ‘In that case, two or three Belts are working as a team. This makes it possible for them to optimize bigger parts of a business process in one go. In addition, the team members can make use of each others strong points.'

Matrix organization
Philips Consumer Lifestyle is a matrix organization. On the X-axis are business units like ‘television’, ‘home appliances’ and ‘audio & video’. These business units determine what should be produced.

On the Y-axis there are business processes which determine how things are done. Within Philips the latter more universal activities are called functional areas. Examples are ‘Technology & Development’, ‘Supply’ en ‘Finance’.   Sanchay Roy leads a team of five Master Black Belts. Each MBB is responsible for the management of all improvement projects within one or more functional areas on the Y-axis.

‘As I told you, I am not only director improvement, but also a MBB’, says Schutte. ‘In that role I am the contact person for all improvement projects in the functional area Human Resources. At the moment I coordinate the work of two Black Belts.’

The task of a Black Belt (BB) comes down to mapping a process, which performs below standard, in detail. ‘In other words, you make problems and root causes visible. That is already half of the solution. In ideal cases the people on the job floor then find a solution themselves.'

A current BB-project, carried out under supervision of Schutte, is the optimization of training. ‘Saving money on that is of course simple, but then you loose also the advantages. Therefore we investigate how we can measure the effect of education.'
‘An example is our Black Belt course’, adds Roy. ‘All our high potentials receive that training, because we find it important that future managers acquire fact based decision skills. If the training turns out all right, you would expect that the high potentials concerned would achieve better results then the group that did not recieve the training yet.'

Nico Schutte (Philips CL)
Nico Schutte: "Black Belts make problems visible and search for root causes. In ideal cases the shop floor finds solutions spontaneously"

At the moment there are 85 Black Belts active within Philips CL. The scope and the progress of all their projects is shared division-wide by way of project management software. ‘That makes it easier for me to monitor the projects I supervise’, says Schutte. ’But I can also retrieve information about other projects, worldwide. For the same reason, we made the system accessible to everybody who carries out improvement projects. These are not only BB's, but also people we call business improvement managers. They execute smaller and local improvement projects.'

The project management software is not only a reporting tool, but also functions as a knowledge database. 'That way, we prevent that the wheel is re-invented.'

The system encloses templates, used by BB’s to lay down information about their DMAIC-projects. ‘Those templates were designed on the basis of knowledge within Philips, my personal contribution, and input from consultancy organization BMG International', explains Roy.

Every project description starts with at least the main goals on one page. Besides that, there are among others file tabs for the Key Performance Indicators and the expected and realized savings. For the business improvement managers, a simplified template was developed.

The knowledge database, and the fact that BB's rotate between functional areas, both contribute to a division-wide allignment of Lean Six Sigma. ‘As MBB I am the fixed contact person for all HR improvement projects', says Schutte. 'However, those projects are done by varying persons. Black Belts that want to reach the top, should meet the 2x2x2 rule. This means that they must carry out improvement projects in at least two countries, within two functional areas en within two of the three business sectors of Philips. Therefore, it is possible that I supervise work of BB's from Philips Lighting or Healthcare.’

The rotation of BB’s between functional areas and business sectors not only contributes to their personal development, it also helps to spread knowledge and best practises within Philips.

Improvement competitions

Sharing knowledge is also stimulated by business improvement competitions. Schutte: ‘These competitions serve to promote process improvement, but are also a kind of reward for persons who were involved in projects.’

The final of the yearly competition of  Philips CL is always in january, when about 60 teams present their results in the passenger terminal for cruise ships in Amsterdam. 'Teams from CL worldwide then present themselves. They also visit each others stands.'

Every stall is visited twice by a three-headed jury. 'Such a jury gives direct feedback concerning the strong points and the weak points of a team. The average rating determines which team wins the first price, which is presented to them at the end of the day.'

Consumer Insights
Philips is a premium brand: products should offer extra value compared with products of competitors. 'Take for example our slogan “sense en simplicity”, explains Nico Schutte. ‘With that we state that we make products that both make your life easier, and that are simple to operate.'

Obtaining “Consumer insights”, to tailor the products to the needs of the customers, is very important. As a measure for customer satisfaction, Philips uses the Net Promotor Score or NPS. This is defined as the ratio between the number of customers which would advise family and friends to buy the same product or service, and the number of customers that would not recommend to do so.

Many Lean Six Sigma projects within Philips aim to raise a NPS-number. Other common drivers for improvement projects are cost reduction, productivity improvement, and realizing top line growth.

Design for Lean Six Sigma
The new Lean Six Sigma program as discussed so far, does not include product development. To optimize R&D processes, there are other methods in use within Philips CL. The former division Consumer Electronics (CE) for example has acquired a lot of experience with applying Design For Six Sigma (DfSS). ‘The product life cycle within CE is very short', explains Roy. 'Their Technology & Development department therefore has developed their own program for new product creation.’

DfSS uses a variant of the DMAIC-cyclus, called DMADV. Going through a DMADV-cycle delivers (1) a new product that has the characteristics that the customers wish and (2) a matching production method to make products of constant quality. If also a production process is designed which is lean from the start, this design method is called Design for Lean Six Sigma (DfLSS).
The R&D department of the factory of Philips in Drachten in the North of the Netherlands, where among others shavers are produced, applies a DfLSS resembling method, which they call Lean Product Innovation. The central idea is to develop form the start a complete value chain for the production of new shavers, which even includes decisions to outsource productions tasks or not. That way, it is prevented that waste is ingrained in the product design.

The question arises why local initiatives like Lean Product Innovation do not merge into the new division-wide Lean Six Sigma program. There are a lot of similarities between such programs, so the result would be only one (Design for) Lean Six Sigma program! ‘An appropriate remark', Roy reacts. However, merging our improvement programs will be a process of natural evolution. We will not force things.'
[ Note: As you will see in the second article merging the different programs was already in an advanced state in june 2010 ]

Cross organisational exchange
The other business-sectors, Philips Lighting and Philips Healthcare, have also adopted Lean Six Sigma. Roy: ‘Sometimes they emphasize other things, but there are no more differences then needed. The cross organisational black belt exchange helps to allign the programs. In addition, the course material for the Black Belt training is identical within whole Philips'.

The project management system could well become an extra tool to share knowledge between sectors. 'However, it is not known yet if Healthcare and Lighting will decide to use our system. If they do, I would welcome that.'

Lean Six Sigma is a means to an end. 'It is never a strategy in itself, but only a tool to realize goals', concludes Roy.

Article 2 (june 2010):  Lean Six Sigma and Lean Supply merge into Simply Philips
Simply Philips pursues optimal balance in applying Lean and Six Sigma
By Dr Jaap van Ede, editor-in-chief of business-improvement.eu, june 2010
This article shows how Lean Six Sigma, complemented with other improvement initiatives, merges into Simply Philips. A preceding article shows how Six Sigma within Philips evolved to Lean Six Sigma.
Below this article you will find a link to a more recent interview about Simply Philips and innovation, of march 2012.

Besides the Lean Six Sigma program of Philips Consumer Lifestyle, as discussed in the previous article, until recently there was a separate Lean-program for the supply chain, known as Simply Philips. To make it even more complicated, there were also local improvement initiatives regarding R&D, like Design for Six Sigma en Lean Product Innovation. For an outsider it was hard to tell all those programs apart!

However, slowly but surely, all these puzzle pieces now fall into place. Under the umbrella Simply Philips all initiatives and best practises regarding Lean and Six Sigma will be geared to one another.

The renewed and coordinating Simply Philips program will also apply to the other two business sectors of Philips, Healthcare and Lighting. So, Simply Philips will cover all improvement initiatives for whole Philips within the functional areas 'Supply’ and 'Innovation'. In plain words: all improvement initiatives within the chain from product development to fulfillment will be done by applying the Simply Philips approach.

The name Simply Philips originally was used only for the Lean-program of Philips Consumer Lifestyle (CL) to optimize the supply chain. That program, based on the principles of the Toyota Production System, was launched two years ago by Chief Supply Officer Lee Bennett. Consultancy organization Gemba Research guides the roll-out.

One of the goals of Simply Philips, which explains the name, is gearing production more directly and thus more simply to sales. For that purpose point-of-sale signals will be passed on, in upstream direction, in the supply chain. The idea is to create a pull-system, which is typical for Lean manufacturing.

Recently the R&D process became also part of Simply Philips, with the goal to develop not simply new products, but complete value chains which are intrinsically lean from the start. In some factories this lead to a real Lean revival, with focus on Leadership, working in teams, standardized work and visual management.

Example of the result of applying Lean-principles within Philips (1)
Example of the result of applying Lean-principles within Philips (1)

Simply Philips laid the emphasis on continuous, stepwise improvement (Kaizen) and involving everyone. Until recently there was a separate Lean Six Sigma program with Black Belts for big and complex improvement projects, as discussed in the preceding article.

However, there was a big overlap between Simply Philips and Lean Six Sigma. 'Therefore it was recently decided to integrate all improvement programs within whole Philips for the functional areas Innovation and Supply’, says Master Black Belt  Nico Schutte. ‘Note however, that this does not mean that there was no communication about the allignment before that. For example Sanchay Roy, my boss and head of the Six Sigma program, was already reporting to Lee Bennett.’

Balanced mix
The idea behind bringing the Lean Six Sigma program under the flag of Simply Philips, is striving for a balanced mix of applying Lean and Six Sigma in the complete chain from product development to fulfillment.

Schutte: ‘Simply Philips will now become the umbrella program for the complete Innovation and Supply organization, including Philips Healthcare en Lighting. This encompasses product development, procurement, the factories and logistics, be it that the main part of our distribution is outsourced.'

Best Practises
Best improvement practises of whole Philips will merge into Simply Philips. ‘One example is the end-to-end optimization of logistic networks. Philips Lighting is very experienced in that field'

A second example is the Hoshin-planning of Philips Healthcare. Hoshin translates strategic targets to Key Performance Indicators lower in the organization. After that, everybody everywhere knows how to contribute to realizing the strategic goals in their daily work.
The Hoshin process could not only lead to the start-up of new Black Belt projects, but makes it also possible that existing projects will reinforce each other. That way, Black Belt projects will contribute more directly to realizing the top-level management targets.

What remains is that Black Belt projects should contribute strongly to the improvement of the bottom-line results. ‘Black Belts should of course create more value then their own salary. Actually they should even recover the costs of the complete Lean Six Sigma educational organization, be it in the form of savings or in the form of creating extra turnover', Schutte explains.
In practice recovering the costs of the Lean Six Sigma program however is no big deal. 'We find it much more important that we have a limited amount of high potentials. Therefore, you want to put in these people where they create most value for Philips.'

Kaizen Bursts
Hoskin Kanri is locally supplemented with Value Stream Mapping, resulting in so-called Kaizen-bursts of many small improvement actions. ‘When a certain problem turns out to be big and complex, also on this level the services of a Black Belt can be called on.’

From now on, all new Black Belts within Philips will recieve for 80% the same base training, in which all best practises will come up. In addition, the training will contain more Lean-components then previously, and extra attention will be given to change management, including the importance of having self-insight. 'The base training can be supplemented later with modules tailored to the needs of specific business sectors or functional areas, and with theory needed for special projects.'

The Black Belt program for high potentials, these are managers with the potential to fulfill important management positions within Philips, remains unique for Philips Consumer Lifestyle. 'We think that by executing improvement projects, high potentials can not only demonstrate that they are good managers, but they can also prove that they are good and flexible process improvers, employable in multiple business areas', Schutte explains.

Example of the result of applying Lean-principles within Philips (2)
Example of the result of applying Lean-principles within Philips (2)

Replication projects
The deepening of the Lean Six Sigma program within Philips CL, as discussed in the previous article, still continuous. ‘I just started with the organization of the improvement competition of 2011. New is, that the improvement teams of the last competition can propagate their results, by way of live presentations and elevator pitches on our intranet. This helps to transfer knowledge and gives the teams the chance to sell their projects. There is no better reward imaginable then that your project is rolled-out within whole Philips. We aim to save about 40 million euro's with so-called replication projects.’

Read also: 
The Lean transformation of Philips Lighting

Read also: Interview with Michael Unverwerth, head of the Simply Philips improvement program.

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