Lean Six Sigma - The Absa Story Six Sigma - The Absa Story ... all forms of waste in our supply chain and to develop optimal and mutually beneficial processes. It ... not just optimizing

Lean Six Sigma - The Absa Story

Ravin PitamberSix Sigma Master Black Belt & Lean Coach

Ravin Pitamber MBB 1

Lean Supply Chain – Banking on the Lean process

Ever wondered where and how the deposit slips get to the bank? The cash to the ATM? Cash from

the bank? Or even what happens to cheques that are deposited each day at every branch?

Consider what happens when your branch runs out of withdrawal slips, or paper at the ATM.

Consider further what happens if your local ATM runs out of cash. Now think of all 8000 or so Absa

ATM’s in SA; is it not a wonder that Absa targets a 97.5% uptime on ATMs?

Each item we utilize every day, has to be ordered, and the supplier paid. Every document we print

touches the work of some or all the individuals that contribute to the SUPPLY CHAIN – the Value

Stream.

For items that we require in our business, in all facets of Absa, we need to act prudently in ensuring

that each commodity or item we utilize has the best value proposition i.e. it should be correctly priced,

be fit for purpose, be delivered to the right place at the right time, and it should add value to the

customer.


Lean Six Sigma - applied

Lean Supply Chain approaches process optimization vigorously, the aim being to analyse Value

streams from end to end, reducing waste every step of the way and ensuring that we never lose focus

of the customer.

Whether it be the Branches or other points of presence where our clients ‘do banking’ with us; the

millions of cheques Absa processes monthly; the computer on your desk; or the even the shear

numbers of temporary staff for the myriad of different positions in Absa, our SCM Lean team has

been working frantically behind the scenes to make a difference at the Bank.

We’ve been partnering with Business Units, our colleagues in Sourcing, and our suppliers to remove

all forms of waste in our supply chain and to develop optimal and mutually beneficial processes. It

took conscientious work of multiple facets of Absa and our supply base to develop win-win solutions

that managed to unlock millions.

Using business basics, removing the 7-Wastes in the form of Transport, Inventory, Motion, Waiting,

Overproducing, Over-processing, and Defects (the acronym TIMWOOD), the Team has unlocked

significant Business value.


How did it all Start?

Traditional procurement engagements focus heavily on price reductions and

diminishing profit margins for incumbent suppliers.

Absa recognised that the long term sustainability of the intended symbiotic

relationship is questionable, particularly in the current global economic

landscape, and that mutual success is dependent largely upon it’s suppliers

and associated supply chains.


The Absa Lean Six Sigma initiative

In conjunction with a leading global consultancy house, Absa embarked on

a programme to introduce Lean Six Sigma as a tool to drive effectiveness

and efficiency in it’s end-to-end supply chain and supplier processes

Absa then acquired requisite skills to complement the development of

internal capability.

Ravin Pitamber MBB

Some Basic steps….

5


What’s in it for me?

The success of this initiative is reliant on collaboration between Absa and it’s

suppliers.

Value is shared on an equitable basis agreed with suppliers, dependent on the

type of value and where it lies in the Value Stream

Suppliers receive a technical skill-set to unlock value within their business.

Transfer of knowledge to the supplier aids in developing internal capability to

drive further efficiencies with 2nd and 3rd tier suppliers

Suppliers leverage these process improvements with other clients to whom

they provide similar goods and services, further enhancing competitiveness.


How do we do it?

Work with key stakeholders and suppliers to finalise and document

The approach

Resourcing

Costs

Value sharing model.

The change team consists of

Master Black Belt (Programme Leadership)

Absa Lean Coach and/or Value Stream Manager

Employees from both Absa and the Supplier, with hands-on experience of the

requisite end-to-end processes


How Do We Select Our Projects?

Debt collection

Cash recycling smart safes (Retail clients)

Automated electronic clearance system

Electronic imaging logistics impact ananlysis

SBV

ATM Procurement and installationMounties

Telkom Line installation and termination

Cash recycling cash boxes (ATM)

ATM cheque scanning

Waste paper

AVAF

IBM - RBA (Africa)

50

100

150

200

250

300

350

400

450

500

550

2 4 6 8 10 12 14 16 18 20Ease of Implementation

Prio

ritiy

Rat

ing

Best opportunity Good Opportunity

DON'T DO!Low Focus

EasyDifficult

Low

High


Integrating Six Sigma & Lean

Six Sigma is most closely associated with reducing product and process variation – decreasing defects and improving quality.

Lean is a methodology that is used to accelerate the velocity and reduce the cost of any process (in any function) by removing waste.

We need both Lean (speed) and Six Sigma (quality) principles and tools to meet customer needs, drive

continuous improvement, and achieve the best competitive position.

LeanLean processes tell us……“Don’t do a process that does not add Value for the CUSTOMER!

Six SigmaSix Sigma processes advise…“Once we identify value added processes let’s absolutely minimize the variability and get them in control”


A Simple Framework

Supplier

SS IIInput

PPProcess

OOOutput

CCCustomer

Value Stream

Lean is about efficiency and effectiveness with optimized cost and minimal waste. Being customer-focused, it is about flexibility and readiness for future challenges

Waste is essentially inefficiencies or a misalignment between processes that results in the loss of value (“leaks ”) throughout the end-to-end supply chain


Outputs to the Lean initiative

Each Lean improvement program produced the following outputs:

A current state that highlighted performance issues such as duplication, key performance indicators such as

end-to-end lead time, and first time quality and processing times

A future state which shows the future state design and expected performance indicators aligned to customer

requirements

Future state components , which are the actions or mini-projects required to realise the future state design

An implementation plan with timelines and allocated responsibilities.

The expected benefits of the future state design in terms of operational performance, resources and financial

outputs.

A typical Lean initiative takes between 6~8 weeks to reach the “pilot” or “testing” stage, and depends mostly on the

agreed scope.

Where the FSC’s indicate unacceptable process variation, the team applied the Six Sigma toolkit to unravel and

optimize in order to bring the variation in control.


Understanding the Current StateIdentify customer & customer purpose

Confirm customer and identify key needs and any information available on how well these needs are met at the

moment

Understand type & frequency of demand

We must know the type and variety of demand hitting the Value Stream and how much is failure and opposed to

value demand before improving the system

Assess environmental conditions & constraints

Environmental conditions & constraints can often have significant negative impact on overall performance

Understand the benefits flow

We need to know how the benefit flows through the Value Stream. We will develop a value tree to show the areas

of benefit we can measure

Process walk-through

Conduct physical interviews with the process owner of each individual process step in the value chain. Record

metrics, such as processing time, in process lead time, waiting time, % complete and accurate, rework rate,

demand rate and variations for each process step.

Mapping the Current State

Mapping the physical flow of material and information as a product/service makes its way through the value stream. A value stream includes all the actions (both value added and non-value added) currently required to produce the product/service through the main flows essential to every product/service.


Current State Map Illustration

Policy Holder

Demand: 10 per dayLead Time: 10 days

FTQ: 60%

P/T = 14 mins

L/T = 0

%C&A = 70%

% Avail = 80%

P/T = 3 mins

L/T = 0

%C&A = 90%

% Avail = 100%

P/T = 8 mins

L/T = 0

%C&A = 100%

% Avail = 100%

P/T = 4 mins

L/T = 0

%C&A = 100%

% Avail = 100%

1 day 3 day 3 days

IN IN IN

Send Check

- Print Check 2 min per check- Put check into envelop 1 min per check- Mail 1 min per check

FinSys 2

ReworkType:Additional IPLTAdditional PT

%

CHAssess loss

- Find loss item value 5 min- Estimate replacement value 3 min

FinSys 1


%

CHVerify cover

- Check cover 2 min per loss item- Assign claims handler 1 min per claim

FinSys 1


%

CSRReceive notification

- Answer call 1 min per call- Do DPA check 3 min per call- Register loss 10 min per claim

FinSys 1


%

CSR

L/T = 7 days 29 mins

P/T = 29 mins14 mins

1 day

3 mins

3 days

8 mins

3 days

4 mins

Complete the map with any other data such issues, notes Customer Call

weekly


Identify Waste

◦ It is important to consider waste in the context of the value that the process provides to the customer

◦ Waste is really a symptom rather than a root cause of the problem

◦ Waste points to problems within the system

◦ We need to find and address causes of waste to improve flow

◦ In non-manufacturing processes, waste is often most prevalent in the information flow

◦ A rule of thumb is to expect that ca40% of what we do adds no valueTransport

Types of

WasteDefects

Over Production

OverprocessingWaiting

Motion

Inventory

W OOD

TIM

Unevenness

Unreasonable-ness

More Useful Thinking

� Waste is “tangible”� Identify many small opportunities � Leads to large overall change� Continuous improvement


Design the Future StateThe underlying principle of designing the future state is to make work (value) flow to the customer as fast &

smoothly (value stream) as possible, as productively (pull) as possible and in as constant, predictable, and

stable a way as possible (perfection). Taking a value stream perspective means working on the end to end

process, not just individual processes, and improving the whole, not just optimizing the parts

The future state:

• Breaks system into manageable, but related “loops” for implementation

• Depicts the target end state of the redesigned system

• Assists in quantifying improvement potential

• Forces end-to-end thinking

Policy Holder

Demand: 10 per dayLead Time: 10 days

FTQ: 60%

P/T = 17 mins

L/T = 0

%C&A = 70%

% Avail = 80%

L/T = 1 day 26 mins

P/T = 26 mins

Receive notification & Verify Cover

- Answer call

- Do DPA check

- Verify cover

FinSys 2

Rework Type:Additional IPLTAdditional PT

%

CSR

17 mins

1 day

9 mins

Customer Call

P/T = 9 mins

L/T = 0

%C&A = 70%

% Avail = 80%

Assess loss & cash settle thru BACS

- Find loss item value- Estimate replacement value - Make payment thru BACS

FinSys 1

Rework

%

CH

- FIFO -

Balance the

workload

Balance the

workload

Merge valuation

& payment

Merge valuation

& payment

Merge Notification

& Verification

Merge Notification

& Verification

Put FIFO in place

Put FIFO in place

BACS paymentBACS

payment

Other key design principles:

- Dedicated case manager per claim in claims handling area

- All required information is captured at the notification step


Prioritising Future State Components

Stop doing things that impair system performance

Eliminate other ‘environmental factors’ that impair system performance

Eliminate NVA steps first that don’t require new IT efforts

Simplify steps that require minimal IT effort (e.g. minimise transactions entering

and within the Value Stream)

Implement flow (e.g. change office layouts, takt time, Visual Displays, 15 min

team meetings, etc)

Implement load and activity balancing

Implement IT solutions (e.g. e-business)


Project Objectives (impact of implementation on what?):-P/T-L/T-PLT-Customer Retention

Quick Future State Component Impact Chart

� create effort vs. impact matrix� list the objectives that determine the

impact evaluation (i.e. P/T, L/T, customer retention)

� break down all implementation elements to the smallest unit that can be implemented (and major steps to get there) > avoid clustering of elements that are not absolutely dependent on each other!!

� rate each implementation element on impact and effort

� determine interdependencies� determine order of implementation of

the elements (beginning with high impact and lowest effort to get things moving! A then B, parallel A then B)

Effort required

Impactof Result

high

low medium high

Low

Medium1

A

visual filing system

�

�

2

C

optimized maildistribution

�

�

3

B

mail sorting andprioritizing by

work prep team

�

�

4

A

optimized infomaterial for customers

�

�

5

B

clarify continuation by phone contact

�

�

implementation of B dependent on A

implementation of B dependent on A


Process payment

Depiction of an actual Marketing Department initiative at Absa

Media & Advertising Procure-to-Pay process optimization

day 1 day 66lead time (LT)

day 1 day 9lead time

Small

Small to mediumLarge

Before Lean project

After Lean project

Adds value to the customerNo value; needs to be done

No value; no need to be done

Where the gains come from

The bottom line: Significant cost reduction due to time-value of money

Shortest possible payment

cycleService delivery to payment

reduced to 9 days


Value Stream Review: Points of Presence Distribution (February 2009)

Key Milestones – Assess & Implementation Phase:1. Workshop 1 – Kick-off 29 May ’082. Workshop 2.1 - Current State Interviewing 3rd ~ 13th June ‘083. Stage 1 Benefits discussion 3~13 June ‘084. Workshop 2.2 - Current State Mapping 17/18 June ‘085. Workshop 3 - Future State Design 25/26 June ’086. Stage 2 & 3 Benefits Discussion Current7. Workshop 4 - Future State Components 10 July ‘088. Stage 4 Benefits Discussion 15 Aug ‘089. Workshop D - Implementation Kick-off 14~31 July ‘0810. Preparation & Planning for Test Cell 1 Aug ’08 ~11. Test Cell 30 Oct ‘0812. Implementation 30 Mar ‘09

Milestone RAG Overall RAG

Value Stream objectives:Design an efficient and integrated process for roll-out of Points of Presence- to meet/exceed the customers needs- to drive out inefficiencies due to duplication- to have a consolidated view of ABSA's market disposition

Key Steerco decisions required:

LEAN

SUPPLIERSVS007

Benefits description:• Process Time improvement

of c77%• Process step reduction of

c35%

May2008

Jun Jul Aug Sept Oct Nov Dec

VS RAG

Operational Benefits:• Optimal use of available funding• Elimination of duplicated costs• Elimination of rework costs• Increased capacity• Shorter decision-making process• Shorter delivery lead-time• Resource optimization• Increased budget adherence• Reduction in P2P spend• Improved negotiations

•Implementation Costing:• < R0.5m

G

Overall RAG Comments:•Overall implementation activities on track.•Expected benefits start accruing on 01 September 2008. Business case template implementation could add further financial benefit.

Benefits

Scope

Team

VS Sponsor: Pravesh MahadeoVS Owner: Sonja van VlietMaster Black Belt: Ravin Pitamber

VS Owner Sign-off:

Actual

Benefits Target Benefits Realised

Mobilisation

3 Stage 1 Benefits

1 W12 W2.1

4 W2.2

5 W3

6 Stage 3 Benefits

8 Stage 4 Benefits

7 W4

9 WD

10

11 Test Cell

12 Implementation

2009

Preparation & Planning for Test Cell

Assess

Jan Feb AprilMarch

11 Test Cell60

65

70

75

80

85

90

95

55


Value Stream Review: AVAF

Key Milestones – Assess & Implementation Phase:1. Workshop 1 – Kick-off 03 Mar 092. Workshop 2.1 - Current State Interviewing 04-10 Mar 093. Workshop 2.2 - Current State Mapping 04-10 Mar 094. Workshop 3 - Future State Design 11 – 19 Mar 095. Workshop 4 - Future State Components 23 Mar 096. Stage 4 Benefits Discussion 24 Mar 097. Workshop D - Implementation Kick-off 31 Mar 098. Preparation & Planning for Test Cell 01 Apr 099. Test Cell 29 May ‘0910. Implementation 31 Aug ‘09

Milestone RAG Overall RAG

Value Stream objectives:Correctly specify value for the business, by identifying all theactions required to simplify and improve the process of making assets available for sale ,and supply chains between Absa and approved vendors, from asset intake up to sale. To drive out inefficiencies due to duplication

Key Steerco decisions required:SMD auctions versus in-house

auctions

LEAN

SUPPLIERSVS009

Benefits description:• Process improvement c 73% • Cost savings c 9%

Mar2009

Apr May Jun Jul Aug

60

65

70

75

80

85

90

95

55

Sep Oct

VS RAG

Operational Benefits:• Elimination of duplicated of work• Reduced cycle time• Resource optimization• Reduction• end to end cost optimization by managing;

•Interest on asset•Depreciation on asset•Storage of vehicles

•Implementation Costing:• < R 30 K

G

Overall RAG Comments:•Overall implementation activities on track.•Current and Future state mapping completed – Stakeholder report out’s (four) complete. Benefits analysis complete, Sponsor to sign off

Benefits

Scope

Team

VS Sponsor: Mike ManyikeVS Owner: Jakkie DrezelVS Manager: Cynthia MolefeMaster Black Belt: Ravin Pitamber

VS Owner Sign-off:

Actual

Benefits Target Benefits Realised

Mobilisation

1 W1

2 W2.14 W2.2

5 W3

8Stage 4 Benefits

7 W4

9 WD

10

11 Test Cell

12 Implementation

Preparation & Planning for Test Cell

Assess

Nov Dec AprilMarch

Ravin Pitamber MBB

Some take-away…

21

The Deployment path…

Making Change stick…

Ravin Pitamber MBB

Step 1: Create Urgency

For change to happen, it helps if the whole company really wants it. develop a sense of

urgency around the need for change. This may help you spark the initial motivation to get

things moving. This isn't simply a matter of showing people poor sales statistics or talking

about increased competition. Open an honest and convincing dialogue about what's

happening in the marketplace and with your competition. If many people start talking

about the change you propose, the urgency can build and feed on itself.

What you can do:

•Identify potential threats, and develop scenarios showing what could happen in the future.

•Examine opportunities that should be, or could be, exploited.•Start honest discussions, and give dynamic and convincing reasons to get people talking and thinking.

•Request support from customers, outside stakeholders and industry people to strengthen your argument.

Step 2: Form a Powerful Coalition

Convince people that change is necessary. This often takes strong leadership and

visible support from key people within your organization. Managing change isn't

enough - you have to lead it. You can find effective change leaders throughout your

organization - they don't necessarily follow the traditional company hierarchy. To lead

change, you need to bring together a coalition, or team, of influential people whose

power comes from a variety of sources, including job title, status, expertise, and

political importance. Once formed, your "change coalition" needs to work as a team,

continuing to build urgency and momentum around the need for change.

What you can do:

•Identify the true leaders in your organization.•Ask for an emotional commitment from these key people.•Work on team building within your change coalition.•Check your team for weak areas, and ensure that you have a good mix of people from different departments and different levels within your company.

Step 3: Create a Vision for Change

When you first start thinking about change, there will probably be many great ideas and

solutions floating around. Link these concepts to an overall vision that people can grasp

easily and remember. A clear vision can help everyone understand why you're asking

them to do something. When people see for themselves what you're trying to achieve,

then the directives they're given tend to make more sense.

What you can do:

•Determine the values that are central to the change.•Develop a short summary (one or two sentences) that captures what you "see" as the future of your organization.

•Create a strategy to execute that vision.•Ensure that your change coalition can describe the vision in five minutes or less.•Practice your "vision speech" often.

Step 4: Communicate the Vision

What you do with your vision after you create it will determine your success. Your

message will probably have strong competition from other day-to-day communications

within the company, so you need to communicate it frequently and powerfully, and embed

it within everything that you do. Don't just call special meetings to communicate your

vision. Instead, talk about it every chance you get. Use the vision daily to make decisions

and solve problems. When you keep it fresh on everyone's minds, they'll remember it and

respond to it. It's also important to "walk the talk." What you do is far more important -

and believable - than what you say. Demonstrate the kind of behaviour that you want from

others.

What you can do:

•Talk often about your change vision.•Openly and honestly address peoples' concerns and anxieties.•Apply your vision to all aspects of operations - from training to performance reviews. Tie everything back to the vision.

•Lead by example.

Ravin Pitamber MBB

Step 5: Remove Obstacles

If you follow these steps and reach this point in the change process, you've been talking

about your vision and building buy-in from all levels of the organization. Hopefully, your

staff wants to get busy and achieve the benefits that you've been promoting. But is

anyone resisting the change? And are there processes or structures that are getting in its

way? Put in place the structure for change, and continually check for barriers to it.

Removing obstacles can empower the people you need to execute your vision, and it can

help the change move forward.

What you can do:

•Identify, or hire, change leaders whose main roles are to deliver the change.•Look at your organizational structure, job descriptions, and performance and compensation systems to ensure they're in line with your vision.

•Recognize and reward people for making change happen.•Identify people who are resisting the change, and help them see what's needed.•Take action to quickly remove barriers (human or otherwise).

Step 6: Create Short-term Wins

Nothing motivates more than success. Give your company a taste of victory early in the change process. Within a short time frame (this could be a month or a year, depending on the type of change), you'll want to have results that your staff can see. Without this, critics and negative thinkers might hurt your progress. Create short-term targets - not just one long-term goal. You want each smaller target to be achievable, with little room for failure. Your change team may have to work very hard to come up with these targets, but each "win" that you produce can further motivate the entire staff.

What you can do:•Look for sure-fire projects that you can implement without help from any strong critics of the change.•Don't choose early targets that are expensive. You want to be able to justify the investment in each project.•Thoroughly analyse the potential pros and cons of your targets. If you don't succeed with an early goal, it can hurt your entire change initiative.•Reward the people who help you meet the targets.

Step 7: Build on the Change

Kotter argues that many change projects fail because victory is declared too early. Real

change runs deep. Quick wins are only the beginning of what needs to be done to

achieve long-term change. Launching one new product using a new system is great. But

if you can launch 10 products, that means the new system is working. To reach that 10th

success, you need to keep looking for improvements. Each success provides an

opportunity to build on what went right and identify what you can improve.

What you can do:

•After every win, analyse what went right and what needs improving.•Set goals to continue building on the momentum you've achieved.•Learn about kaizen, the idea of continuous improvement.•Keep ideas fresh by bringing in new change agents and leaders for your change coalition.

Step 8: Anchor the Changes in Corporate Culture

Finally, to make any change stick, it should become part of the core of your organization. Your corporate culture often determines what gets done, so the values behind your vision must show in day-to-day work. Make continuous efforts to ensure that the change is seen in every aspect of your organization. This will help give that change a solid place in your organization's culture. It's also important that your company's leaders continue to support the change. This includes existing staff and new leaders who are brought in. If you lose the support of these people, you might end up back where you started.

What you can do:•Talk about progress every chance you get. Tell success stories about the change process, and repeat other stories that you hear.•Include the change ideals and values when hiring and training new staff.•Publicly recognize key members of your original change coalition, and make sure the rest of the staff - new and old - remembers their contributions.•Create plans to replace key leaders of change as they move on. This will help ensure that their legacy is not lost or forgotten.

Ravin Pitamber MBB

Acknowledgements

24

1. Chris Rabie – Lean Coach & Value Stream Manager

2. Cynthia Molefe – Six Sigma Master Black Belt, Lean Coach, and Value Stream

Manager

3. Alan Hargroves

1. The Heart of Change – John P Kotter & Dan S Cohen

2. iSixSigma – www.isixsigma.com

3. Absa Lean Six Sigma project repository

References

Documents

Lean Six Sigma - The Absa Story Six Sigma - The Absa Story ... all forms of waste in our supply chain and to develop optimal and mutually beneficial processes. It ... not just optimizing