Why Are Companies Unable To Acheive Profitable Growth?

Let's discuss some previous technological developments in the past years in the field of Six Sigma and understand how the companies reacted towards those. During the past three decades the software companies developed MRP (material resource planning) and ERP (enterprise resource planning) and the experts argued that it would provide all the solution to growth and profit challenges.

Unfortunately, however, companies faced a lot of shortcomings of this software. The companies had anticipated the conversion of forecasts of quarterly financial data into reality. But the much-anticipated conversion required overtime, last minute product changes, lots of scrap work, rework, and a whole lot of unnecessary costs. These things negatively influenced profitability and quality and increased the shipment problems.

So then the big question is that when companies are spending thousands of dollars on this so-called software, why are they still struggling to sustain profitable growth? Why are they still juggling with the uncontrolled operating costs and non-competitive prices? There are two reasons behind it: one, any result derived by computer is just only as good as the result achieved by the people at controls and integrity of the data. And the second one is that most of the manufacturing or operational managers while facing day-to day problems and constraints dissipate their time in applying quick-fix Band-Aids for the problems instead of finding out the root cause of ineffective processes and systems.

Now, we know that it is the root causes that hinder the profitability and growth of an organization and that eliminating them will give a long term financial relief. The obvious question that will cross everybody's mind is that how to get to the root causes. Well, the solution is now the companies should aim at a company-wide in-depth understanding of the fundamentals of Six Sigma and a total commitment to a persistent and undeviating application of the eight basics of Lean Six Sigma.

Eight Basics of Six Sigma

This may sound tedious at first, but until and unless a business acquaints itself with the eight basics of Lean Six Sigma, then realizing full growth and profit potential will be impossible. Now let's talk about the eight basics of Lean Six Sigma in detail:

Integrity Of The Information: Often front line staff becomes disenchanted with computerized system results when there is a disorientation in time schedules or delay in receiving promised paycheck. As a result, the desired results are not achieved because inaccurate data and untimely documentation now run the system.

Evaluating Performance Management: If the measurement systems are de-motivational, such as testing an individual's performance against others and rewarding them, they accordingly tend to create a general dissatisfaction which then leads to lesser contributions towards the company growth.

Sequential Production Methodology: Manufacturing leaders of today who are owners of all sizes of organizations are now replacing their old "launch and expedite" technique with continuous production lines that are supported by top quality visual material supply chain or sequential production for a more profitable venture.

Point-of-use Logistics Procedure: The two highest costs and non-value-manufacturing activities are material handling and storing. Eliminating the stockroom is a good idea, so that moving the parts and the components from the stockroom to their production point will be a big time cost-reducer.

Management of Cycle Time: Extended cycle times are an indication of poor manufacturing processes and high non-value added costs. For continuous growth and profit, managers need to adopt a specific time-cycle reducing management style.

Linearity in Production: Often, companies lose their competitive edge because of non-linearity or uniformity of production in a month or a quarter. For a better competitive approach, companies will have to devise a more linear production strategy by which the company will gain speed, quality and costs can be achieved.

Proper Resource Planning: Today everyone is gunning for right sizing operations and the resources required. Ignoring right sizing of resources can erode profit margins, make the company lose a new market window. It can also make you lose your customers if you don't upsize the labor force in timely manner.

Customer Satisfaction: Companies need to create a perception in front of its customers to improve customer satisfaction. Companies should now try to plan and implement such projects that breakdown the communication barriers that are creating wrong customer perceptions.

The conclusion is that if companies want profitable growth, then they need to initiate an action learning program that will make everybody understand the basics of Six Sigma. Once the basics are clear, the company can then go ahead with aggressive planning and tenacious implementation.

About the Author

Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.