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Working Capital Meets Lean Six Sigma

Working capital is influenced by a complex system consisting of external and internal factors as well as strategic decisions. External drivers are composed of economy, cost of capital, regulations and market position. Strategic decisions include geographies of customers and suppliers, customer mix and vertical integration. Tactical factors are policies, processes and metrics, systems and tools and also the degree of execution of the former. Whilst external drivers and strategic considerations cannot be subject of short-term changes to gain cash advantage, tactical factors definitely are. Lean Six Sigma helps to analyse the drivers and their impact on the working capital situation. Working Capital meets Lean Six Sigma.


Gemba? I was There

When Uwe asked me whether I would like to go to Gemba in order to help understand the client’s process we have been studying, I looked it up on Google. To my surprise, Gemba is not a secluded, unknown part of Singapore. Gemba (现场) is a Japanese word that means “the real place”. Japanese detectives use Gemba to point to the crime scene. In our process excellence context, Gemba stands for the place where the “real value for customers is created”. I was wondering about the need for this. After all, we had received detailed information about both, flow and timing for all processes directly from project teams.

Eight Workable Strategies for Creating Lean Government

Lean Government. Even to the seasoned Lean practitioner, the idea of a Lean government sounds far-fetched. Governments are traditionally seen as the epitome of bureaucracy, and the guardians of red tape, incomprehensible forms and endless queues. But there are workable Lean strategies for governments seeking to reduce waste and become more efficient. Eight are outlined here.

Perhaps considering the eight ideas can spur government change agents to study Lean literature for potential improvement applications and in the longer run, start a Lean revolution in governments.


The idealised goal of Lean is “one-piece flow,” also known as continuous flow. One-piece flow is achieved when all waste is eliminated from the value stream and all that remains is value-added work from the perspective of customers. In manufacturing, one-piece flow is an ideal and will always be an ideal because of fluctuations in customer demands plus the customer requirements for ever shorter delivery time forces the manufacturer to create partially completed or completed inventories. This type of manufacturing strategy actually creates waste because there is a need for storage and management of storage.

The interesting thing about Lean Government is this that one-piece flow operation is almost achievable here because there is really no requirement for in-process inventories. There is really no such thing as a partially finished job that is not the result of a customer order within government processes.

What would one-piece flow feel like in a typical government value stream? Consider a typical government value stream. It has only four value-added processing steps from the customer’s perspective.

Adding up all the value added processing time, it should take no more than three hours to obtain a reply. Lean government is a possibility.

Most governments and their value streams are not lean. Recall personal experiences trying to obtain a government grant, applying for an international passport, getting a drivers license or applying for a business permit. The typical experience is that is not that it took just three hours. More likely, it took more than a week. Nonetheless, it is possible to make government value streams lean. Here are eight ways:

No. 1 – Synchronisation to Customer Demands

Most government value streams are not designed and synchronised to customer demands. In Lean manufacturing, the concept of Takt time, or beat time, is well understood but within most governments, this concept is unheard of. Takt time is a concept that is used to design work and it measures the pace of customer demand. It is the “available time for production” divided by the “customer demand.” The resulting number tells how fast each process step must operate to obtain one-piece flow.


Here is a government example: Suppose 30 citizens apply for a particular government permit in one working day and each working day consists of seven working hours. The Takt time of this permit application process is 420 (7 x 60) minutes divided by 30 applications, which is equal to 14 minutes. This means that for these 30 applications to be processed, every 14 minutes, one permit must be processed to satisfy the customer demand.

The first permit will take the sum of all processing times to complete. Suppose there are 10 processing steps,  synchronised to Takt at 14 minutes each; then the first permit will take 140 minutes to be completed. If one-piece flow is achieved, the next permit in the queue will leave the line exactly 14 minutes after the first permit and so on. To complete all 30 permits, it will actually take 140 minutes plus 406 (29 x 14) minutes, assuming one-piece flow operations.

To achieve this, the cycle time for each processing step must be 14 minutes or less to meet the demand. If any processing step takes more than 14 minutes, it becomes a bottleneck and work will get stuck at that point. However, if one process step takes two hours (120 minutes), it takes about 9 (120 / 14) staff to cope with the workload assuming these staff members work 100% on only this process – which is very idealistic. In reality, it takes rather 12 to 15 staff to complete this task assuming these staff members are only partially available for this process.

Government value streams are rarely designed around Takt time because the concept does not exist within most governments. One of the prerequisites for Lean Government itself does not exist. Most public sector administrators reject the idea that such a concept translates into their environment. As a result, workforce allocations in government value streams are rarely rationalised around Takt time, resulting in over capacity in some parts of the stream and under capacity in other parts.

The main waste that this produces is work-in-process inventory (WIP) and the most visible manifestation of this is the ever-full in-tray. WIP kills one-piece flow because it disables a processing step from producing to Takt. But WIP build up is inevitable in any government value stream that is not synchronised to Takt. This is the main reason why a three-hour job needs more than a week for processing.

No. 2 – Understand Variations in Customer Demand

Synchronisation to Takt generally requires two things – reducing the processing time of the step and establishing the correct staffing level. Suppose it takes 120 minutes to complete the application process at the government counter. To achieve one-piece flow at a Takt time of 14 minutes (as in the previous example) would require the manning of at least nine counters (120 divided by 14 minutes). This assumes that one customer arrives into the stream every 14 minutes. Reducing the processing time to 90 minutes would allow the manning level to be reduced to seven counters (90 divided by 14 minutes, data analytics).

BalancingOf course, customers do not normally arrive at specific intervals. Most value streams experience significant variation in customer demand throughout the course of any typical workday. When the counter process is not synchronised to fluctuating customer demand, the familiar queue builds up. The typical government response to this problem is to build waiting areas and queue ticketing systems. This wastes not only expensive floor space (which taxpayers pay for) but more importantly it wastes the time of the citizens (customers). In some of the government value streams, this queuing can take up to hours.

This happens because fluctuations in customer demands typically are not monitored and also because government processes generally ask for more information than necessary at this first step, hence lengthening the processing time unnecessarily. If fluctuations in customer demands were monitored, the manning levels can be adjusted to match the requirements. This requires a workforce that is not only multi-skilled but also flexible – which brings up the next problem.

No. 3 – Create Work Cells

Most government value streams are organised around separate departments and functions. For example, to obtain a government approval for a permit, an application form probably has to flow through no less than three separate departments and/or functions prior to approval. The main reason is that people performing a particular type of function are normally grouped together in the same place.

Because of this, in most government setups, there is a type of internal post office system (registry process) that handles this movement of work from one part of the organisation to another. From a Lean perspective, this creates waste of transportation and waiting. In some government processes studied, this registry process makes at most three to four collections and deliveries a workday. Collected WIP is sorted according to destination and delivered at the next allocated time slot. This causes two problems – a waste of time managing the movement of WIP between processes and, more severely, the creation of a natural batch of work that kills the one-piece flow capability of the receiving processing step.

5_5 (2)The solution to this kind of problem is deceptively simple. Why not create a work cell where all the necessary value-adding processing steps and personnel are located together? This cuts out the need for the registry process, which should take out 50 percent of the total processing time and allow for smoother work flow because batching is no longer required. Implementing this kind of solution has proven to be remarkably difficult, largely because of the mindset that says jobs of the same function should be clustered together.

A key feature of Lean work cells is the training of multi-skilled and flexible workers. In a Lean work cell, the goal is to have all workers trained to a level where everyone can perform the job at every workstation. Since everyone can do every job, processes are never left half finished because the right person to do a particular job is not around.

No. 4 – Eliminate Batching Work and Multi-Tasking

Because work within most governments is organised around functions and not around processes, most government officials are required to multi-task. Most government officials, at all levels, participate in more than one value stream. They also have a whole host of other types of work that takes them away from the main value-creating work streams (normally meetings and more meetings). To compensate for this, most government personnel batch their work – often waiting for a minimum number of work items to build-up before working on them.

good workerThis strategy increases their personal efficiency. Obviously it is more efficient to process a batch of similar type of work within a compressed time slot than to process them as they arrive. This is because batching eliminates the need for several set-ups. (It is a common perception that administrative work requires no set-up time. Anyone who has done administrative work knows that this is not true. Every time a particular type of work is to be performed, the processing officer needs at least the time to adjust their mind to that new type of work.)

However, the whole batching problem and the time it takes can easily be eliminated if work is organised around work cells. But, as noted, work cells are not easy to create in governments. A Lean Government would most likely have those.

No. 5 – Enforce First in, First out

In manufacturing, “first in, first out” (FIFO) is the normal rule applied to the processing order of work. If a company does not adhere to FIFO, much variation is added into the total distribution of processing time. For instance, in a last-in-first-out system, the jobs that come in last are processed quickly while the jobs that come in first take much longer to process.

passing waterNormally, in manufacturing value streams, there are FIFO lanes that prevent the FIFO rule from being violated. In government processes, jobs are often delivered into an in-tray. The in-tray creates a natural last-in-first-out effect leading to large overall processing time fluctuations. Large overall processing time fluctuations make the overall process less capable of meeting customer requirements as a whole.

The solution is once again the creation of Lean work cells, where work is pulled from one processing step to the next rather than pushed. If work is always pulled (that is, work is only ordered from the previous processing step when the operator is free), the FIFO rule will always be adhered to. Once again, the move from a push culture towards a pull culture is difficult for most governments. The normal government manager’s mindset is to load people with more work than they can do so as to ensure that they are always occupied.

No. 6 – Implement Standardised Work and Load Levelling

Related to first-in-first-out issue is the lack of understanding and application of standardised work within government value streams. Even in highly repeatable work, it is fairly common to find different government workers performing similar tasks using slightly different methods and hence taking slightly different time. Because work is not standardised, there is no basis for evaluation and improvement. Often, the “best” workers are loaded with more work because they work faster and more efficiently than other workers.
4_7Overall and over time, this encourages government workers to slow their pace. They learn that additional work will be pushed to them once they complete a certain amount of their current workload. Hence, production is paced according what is deemed reasonable by the supervisor and not paced according to customer demands.

No. 7 – Do Today’s Work Today

Most government officials do not believe that work that arrives today can be finished today. They are correct to believe so because the way the work streams are currently set up do not allow work that arrives today to be complete on the same day. Over time, this cultivates a mindset that says, “We can always do it tomorrow.”

Sit UpWhat many governments may not realise is that customer demands remain largely constant from day to day. That is, the number of people applying for a particular permit each day tends to average out. If about 300 apply on Monday, a similar number are like to apply on Tuesday. If the government agency only managed to process 100 out of the 300 applications on Monday, there will be about 500 applications waiting to be processed on Tuesday (200 from previous day). This gives good opportunities for Lean Government.

The accumulation of WIP has the effect of lengthening the expected flow time of the job. When the WIP is only 300, one can reasonably expect the permit to be processed within three days. However, by the end of the month, with WIP levels at 5,900, one can only expect their permit to be processed after 59 days. And the problem continues to grow.

The only way to stop this is to design value streams that can complete what comes in by the same day.

No. 8 – Make the Value Stream Visible

Last but certainly not least, the easiest way toward Lean Governments is to teach government officials value stream mapping. Unlike manufacturing, there is no visible line in government. In fact, most people working in government do not even know they are part of a larger value stream. They think largely in terms of their job and their function.

Discrete DataMaking the value stream visible through value stream mapping exposes non-valued steps, time wasted by transportation and WIP, excessive process variation caused by non-standard work processes and production rules, waste caused by rework, waste caused by excessive checking and more.

When a value stream map is created for their operations, many government officials are surprised by how much time and money is wasted. They are also surprised by how easy it is, once the value stream is visualised, to produce Lean Government value streams.

Lean Six Sigma Deployment Q+A

Here are some typical Questions and our Answers regarding the Lean Six Sigma deployment in an organisation. If you have more questions, please feel free to add them as a comment and we will try to answer.

Q: Where does Lean Six Sigma come from?

Lean Six Sigma is not a “slim version” of Six Sigma. It is rather a combination of two powerful methodologies. Lean has been developed mainly by Toyota over the last 40+ years. Six Sigma is a result of Motorola’s work to improve the quality of their TV production line from 1985 to 1988.

Q: What is the difference between Lean and Six Sigma?

Lean focuses on reduction of waste with the main idea of getting rid of non-value-added steps in any kind of process. Six Sigma focuses on reducing the variation in processes that are really needed. Only combined can these two methodologies with their powerful tool sets achieve the best impact.

Q: Which company can apply Lean Six Sigma?

It is hard to answer this question because there is rarely an organisation that has no room for improvement. The wide application of this powerful approach speaks for itself. There is always use for an application of modern methods to close performance gaps. Whether these gaps and the environment need a customised approach and not the full suite of tools is something that needs to be decided case by case.

Q: How do we start a Lean Six Sigma deployment?

One of the most important tasks for the senior management is to explain why your organisation needs this. It is additional work for many people and they may not like the idea without understanding the need for a Lean Six Sigma deployment. Create a shared need!

Then, you should look for some projects that will definitely help the organisation and that will definitely succeed. Run these as pilots, use them to gain more buy-in and develop some belts on the way.

Before you start, make sure you do an excellent job in defining these projects.

Q: Who will be involved?

The senior management has the important job of explaining the “burning platform” at the outset, overseeing selection of projects and belts at the beginning, keeping the people involved motivated and guided along the way as well as challenging and monitoring results. If senior management is not committed, do not start a Lean Six Sigma deployment!

Sponsors are members of the management team who want to have their process “fixed”, have gaps closed and performance improved. They are usually attached to one or a few projects as the management representative. They usually do not sit in team meeting but join at important junctures.

Lean Six Sigma Deployments need Green Belts or Black Belts

Green Belts or Black Belts are the Project Leaders for Lean Six Sigma Projects

Black Belts and Green Belts are the project leaders. They have full responsibility for leading the team, application of tools, communicating with the sponsor, addressing issues and delivering results.

Team members are part of the project team in order to make sure that the team as sufficient knowledge and experience with the whole process to be improved.

Master Black Belts are internal or external coaches who are usually necessary in the first phase of deployment when belts and sponsors are inexperienced with the new approach.

Q: How much time do Lean Six Sigma teams spend on their project?

This is hard to say. A rule of thumb is: over a period of 4 to 6 month they should spend some hours to half a day, i.e. up to 10% on the project related work. During some periods, they will probably need more time due to voice of the customer collection or due to data gathering. Sometimes it is definitely less.

Q: Do we need to give the people involved some training?

Definitely yes. Black Belts and Green Belts will need to handle a multitude of new tasks involving new tools. They certainly need to be trained otherwise they can not perform the task. Green Belts usually receive up to 12 days of training – spread over a period of about 2 to 3 months. Black Belts are Green Belts with project experience and additional training of another up to 10 days.

Some sponsors think they do not need. Wrong. Over the course of the project they will recognise that their teams speak a language they do not understand. They then ask for training. Two to four days is a good start.

Even the teams deserve some basic introduction. A day could be a good start and a nice support for the work of the Green Belt.

Q: Who should be a Black or Green Belt?

For both of them, similar criteria apply: They are from lower to middle management levels, belong to your talent pool and are planned for a significant promotion mid-term. They have some leadership competencies like ability to drive change cross-functional, coaching skills, communication skills, ability to prioritise to the benefit of the company, project management skills and a great enthusiasm. And, they need some basic analytical skills enabling them to learn and run powerful analysis tools.

Q: What is a “good Lean Six Sigma project”?

The “perfect project” addresses a significant business issue, can show improvements in 4 to 6 months, has a committed sponsor, improves a process that cycles often, i.e. at least daily with data readily available, and needs to be tackled with or without Lean Six Sigma. Here are some hints:

  • A good project is starting with a “pain” that is measurable. Something like “Customers complain about the turn-around-time between submitting an application for a loan and receiving the decision.”
  • A good project has an objective, which is often only put in place after getting some data about the problem. A SMART objective would look like “Reduce the turn-around-time for small consumer loans from currently 92% above 2 days to 90% below one day until end of August.”
  • A good project has a sponsor who wants this problem fixed, a Black or Green Belt who has a stake in it and a team who is able to cover the process from beginning to end.

However, I have not seen many “perfect projects”.  🙂

Q: How do we “find” these projects?

There are plenty of sources highlighting process issues. These are customer complaints or feedback, employee complaints or suggestions, process issues seen in your KPI or dashboard system, your balanced scorecard or even your financials. Even things that do not look like process issues such as “Large Accounts Receivables” stem from some kind of process upstream. Even “lack of knowledge” of some frontline officers shows that either the recruitment process or the training and development process or the appraisal process hide some gaps.

If someone tells me that his company has no Lean Six Sigma project candidates, I would either conclude that he is not very serious about his business or he can not see the flow of his business in the process perspective.

Q: Are there other approaches apart from Lean Six Sigma focussing on process excellence?

Yes, definitely. There are other approaches that can complement or substitute LSS. Lean Six Sigma focuses on mainly common cause variation, i.e. variation that is immanent of the process. It is rather weak when it comes to fire-fighting. Unfortunately, we need fire-fighting sometimes. Kepner Tregoe or PSDM is the better choice for this. I do not really like to recommend something like TQM. I have never seen one clear definition of what it comprises. LSS is very structured, very rigid, very driven and therefore it will certainly deliver results.

Q: Why should someone be interested in participating as a Green Belt if this is that much additional burden?

This depends on your positioning. If you can make and communicate it as part of a staff development programme that only selected people can attend, people will queue in front of your door. When Jack Welch announced in 1997 that you can only get a promotion to a certain level at GE when you are able to show a Green Belt, thousands of managers started joining the programme.

On the other hand, many high-level leaders in companies like GE have been developed out of the pool of successful Black Belts or Master Black Belts.

Q: Is Lean Six Sigma similar to ISO 9000 or any of the Quality Awards like MBQA, EQA, SQC/SQA etc?

No, it is not. It is rather complementing them. The above mentioned frameworks show requirements an organisation has to fulfill if they want to achieve high customer satisfaction, process efficiency and staff motivation. These frameworks say, WHAT needs to be done. Lean Six Sigma has tools to fulfill the requirements. It answers many HOW questions by showing the way. For example, ISO9000 requires the organisation to make sure that representative measurements are collected in a repeatable and reproducible manner. LSS has Gage R&R to fill this gap with a very powerful approach.

Q: Is there any Innovation in LSS solutions?

Actually, this depends. LSS does offer creativity techniques to come up with more creative solutions if needed. It is a matter of how the project is scoped, how the team is led by sponsor and belt as well as how the tools are being trained. We will certainly work with Creative Problem Solving (CPS, Buffalo) tools when it comes to solutioning.

Q: What can go wrong during a Lean Six Sigma Deployment?

There are some drivers for success of a Lean Six Sigma deployment: As usual, firstly, the senior management must believe in it. Otherwise, it will most likely fail. Secondly, it is key to involve the right people. Selecting the HiPos sends the signal that this is important to the management. Thirdly, recognition and rewards should be part of the plan. This could involve even considering promotion for those who make it – consistently. Lastly, selecting the right projects that help solving company issues is a major driver for success. There are some more that only become important when the aforementioned are in place.

Red Tape? – Not Here

Everyone, undoubtedly, has had the unenviable honour of experiencing ‘bureaucratic government processes.’ Be it applying for your first ID or passport, to initially obtaining a driving license and the inevitable dealings with the tax man. Judging by the time it takes and the “milestones” or number of departments one has to go through when dealing with German government bodies, the processes behind ID, passport or driving license must be highly complex and are usually being done by constantly overworked people. The Red Tape is often unbelievable.

Read Tape - Not HereSome time ago, I had to go to the Singapore Immigration and Customs Authority to receive my PR stamp in my German passport. The process was quite fast and the service very nice. I was about to leave the building when I saw a signboard which ‘advertised’ – “Get your Access Card now”. Since it seems to be a fashion to have a card for almost everything I stopped at the signboard and read the fine print. My conclusion was: “If you travel a lot you can make your life easier with an Access Card”. I turned around to ask a friendly officer for the Access Card counter.

Arriving at the second floor, I approached the counter. “Good afternoon, Sir. How can I help you?” After I had explained my interest in the card the lady behind the counter asked me with a smile: “Do you have your passport?” “Yes” “A passport photograph?” “Sure” “Some money?” “No problem” “Your thumb?” “Yes” “Then we can proceed.”

Being accustomed to typical government processes I imagined receiving my application form and being asked to fill it in, then submitting it and coming back a few weeks later to pick up my Access Card. I was under no illusion that this process would take less than a month.

The first surprise: this nice lady at the counter did not ask me to fill in an application form. She did it for me! I cannot recall any encounter with a German government clerk who would have done this. After signing my application form she asked me to take a seat.

About 15 minutes later, she called me back to the counter – presenting my plastic Access Card with chip and my photograph on top: “Sir, this is your Access Card. Please try at the simulator over there whether it works.” I tried. It worked – of course.

I could not believe what I had just experienced. Between not knowing that an Access Card exists until holding my personal card in my hands – with programmed chip embedded and photograph printed in plastic – pass less than 30 minutes in Singapore. No Red Tape. Impossible! Unbelievable!

This is what I call Process Excellence for Customer Satisfaction, or better: Customer Delight. I would not even expect this kind of performance from a private company, let alone a government agency. Thank you, ICA!


Only outstanding products or services are able to get customers noticing your company, talking about it and recommending it to their business partners and friends. Delivering what customers request is not enough. Customers would not ask for an Access Card delivered within 30 minutes because – for most of them – this is beyond their wildest dreams as it was for me. This kind of solution needs a creative mindset and an innovative organisation.
Keep in mind: Impossible is nothing.

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BPR Case Study: Preparation for ERP Purchase & Implementation

An Australian construction equipment rental & leasing firm had decided to implement an Enterprise Resource Planning system in 12 months. During this 12 month period there was an expectation that all front-end services including Sales, Customer Service, Receivables, Payables, would be re-designed to achieve streamlining and simplification prior to ERP implementation.

Operations spanned 18 cities across Australia with many more small ‘re-sellers’ located in the Australian interior or ‘outback’ as it is locally known. Compounding a normal organisational and operational setup was the fact that this firm grew a substantial portion of its business through the acquisition route thus effectively incorporating myriad systems and practices. There were 5 Receivables systems, 4 Payables systems and a decentralized customer service database (more than 200 input platforms) which needed to be tied together to make the ERP implementation work.
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SMED Case Study: Steel Tools Manufacturer

After a Lean programme for inventory was instituted the production facility struggled with getting a good product mix out to the finished goods inventory due to relatively long change-over times for cutting dies. Steel tool (final product) cutting dies need to be replaced after every 4 Kanban batch runs of 225 pieces each.

This frequent changeover, occurring once every hour of work is necessary to maintain and re-sharpen the cutting die’s cutting edges. Current changeover time for the cutting die was approximately 60 minutes and included the use of a single 10 ton forklift though the die weight was 5 tons. Nearly 50% of a working day was ‘wasted’ on changeovers not including the impact of the ‘inability’ to achieve a high vol-ume of product mix for agility to meet with product demand requirements of a Lean pro-gramme.
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HR Optimisation and Re-Engineering

Today, organisations must change their priorities from a traditional focus on planning and control to emphasising speed, innovation, flexibility, quality, service and cost. The HR team has to demonstrate their commitment to meet these key business drivers.

A major problem confronting HR managers today is to increase line management and employee productivity, provide higher more value-adding levels of HR service and internal customer responsiveness and at the same time reduce costs. What is needed is an HR team that is customer-focused and market-driven in its external relations with customer and process-focused and team-oriented in its internal operations.

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