Savings Yield of Process Improvement over Product Improvement

[k3nny]

Hi Cove.

During my travels in quality, I have seen product and process improvements - some small, some more significant. However, I remembered reading that a process improvement yields more significant improvements than a product improvement as a general guideline.

Maybe it was Lean vs. Six Sigma article- not sure.

I'm looking for a credible article/resource tied to Wharton, Princeton, Harvard that provides guidelines for the expected improvements from one focus over another. I understand that there are exceptions to every rule. But, basic guidelines to drive a direction.

Ultimately, I am building a business case to develop/improve the systems and products within the company - and need credible, recognizable resources that can be used to drive home this need to a more discriminating audience.

Your assistance is invaluable. Thank you.

[Stijloor]

In Reply to Parent Post by k3nny

Hi Cove.

During my travels in quality, I have seen product and process improvements - some small, some more significant. However, I remembered reading that a process improvement yields more significant improvements than a product improvement as a general guideline.

Maybe it was Lean vs. Six Sigma article- not sure.

I'm looking for a credible article/resource tied to Wharton, Princeton, Harvard that provides guidelines for the expected improvements from one focus over another. I understand that there are exceptions to every rule. But, basic guidelines to drive a direction.

Ultimately, I am building a business case to develop/improve the systems and products within the company - and need credible, recognizable resources that can be used to drive home this need to a more discriminating audience.

Your assistance is invaluable. Thank you.

Hello k3nny,

Very interesting question.

I did a search for you on the Harvard Business Review site.
I searched: Process Improvement vs Product Improvement.

Here are the results: http://harvardbusinessonline.hbsp.ha...search&x=8&y=9

You may want to dig further. I am very curious about what other Covers come up with.

Stijloor.

[Jim Wynne]

In Reply to Parent Post by k3nny

...I remembered reading that a process improvement yields more significant improvements than a product improvement as a general guideline.

I'm not sure why anyone would want pit process improvement and product improvement against one another. They're different categories that can and should proceed concurrently and perhaps independently of one another. A highly efficient process that produces an outmoded product should result in product improvement, and an inefficient process that produces a desirable product should result in process improvement. Can you give a real-world example of the dilemma you're interested in?

[k3nny]

In Reply to Parent Post by Jim Wynne

I'm not sure why anyone would want pit process improvement and product improvement against one another. They're different categories that can and should proceed concurrently and perhaps independently of one another. A highly efficient process that produces an outmoded product should result in product improvement, and an inefficient process that produces a desirable product should result in process improvement. Can you give a real-world example of the dilemma you're interested in?

Sure Jim.

Maybe the easiest approach is to provide you some examples. Here it goes:

a. We have a very inefficient PCN/ECN system (not unlike others)
b. We have a product with greater than .2% returns; defects greater than 1%

I agree with your statement "why would you pit one improvement against another". I also agree with your statement of "a highly efficient process..."

However, in reviewing the scope of a projects. Project B is a local improvement project with potential improvements for quick gains (reduction in scrap per se / lower unit cost). The cost savings are concrete and easily defendable with accounting measures.

Project A, as I mentioned has a global impact (every component, product, specifications will benefit from this change.

My thoughts are that the project A will ultimately generate a significantly greater improvement.

We do build products here. However, I have found that its not the manufacture of the products that is inefficient its the supporting systems such as Sales yielding incorrect forecast, supply chain retaining abnormally large reserves (just in case), planning scheduling without component verification etc.

Any project we choose for a product that could make it more efficient is typically blessed as a project(here). However, systemic areas that I mentioned before that can have a huge impact are not classified in the same list. (harder to measure??)

We have limited resources, as everyone does. However, I want to help us be smart about which projects we choose to master - and the process improvement initiatives are not selected. My (and I hate to use this) gut feel is that a process improvement with global implications can have a 3:1 improvement while a local product improvement is maybe 1.3:1.

Does this make more sense? It comes down to our process systems that could be in any business (think any input - actions performed - output).

[Jim Wynne]

In Reply to Parent Post by k3nny

a. We have a very inefficient PCN/ECN system (not unlike others)
b. We have a product with greater than .2% returns; defects greater than 1%

I think I understand. It seems, though, that both of the examples above are process problems, and not product problems, per se. When you talk about improving a product, it's normally construed to mean that the design of the product must be changed. If you're talking about defective product on the other hand, you have a process improvement issue. So--are you asking about process improvements that result in reduced levels of defects as opposed to process improvements that address efficiency issues, and have little or no impact on the product itself?

[Pudge 72]

In the context that we are talking about here, I would definately agree that your opportunity for widespread improvement will come as a result of process improvement as the process' span over multiple lines of product. There are times when you can incorporate product improvement over multiple "families" of parts, but that is the exception not the norm.

The way I try and work it is to give my Green Belts product improvement projects via our Cost of Goods Sold meetings and give the Black Belts the Process Improvement work. Process Improvements will as a norm involve a bit more management across managment boundries than will a product improvement - products generally involve more engineering and mechanical technique personel to produce true improvement and eliminate variation from a lower level, while the process improvements are more often than not a lot of clerical reorganizing from a system perspective and political jockeying - something that my Green Belts are not ready for yet. They are both using the same set of tools, but they are dealing with completely different groups and using different interaction skills to achieve their ultimate results and project closure. This is something that is really not taught in any Six Sigma course, and from a "pure" perspective should probably not exist,but, unfortunately, company cultures more often than not dictate who can achieve what. Also, don't forget - incorporate Lean techniques while reducing variation and you have process excellence whether you are dealing with a true process or a product.

[k3nny]

In Reply to Parent Post by Pudge 72

In the context that we are talking about here, I would definately agree that your opportunity for widespread improvement will come as a result of process improvement as the process' span over multiple lines of product. There are times when you can incorporate product improvement over multiple "families" of parts, but that is the exception not the norm.

The way I try and work it is to give my Green Belts product improvement projects via our Cost of Goods Sold meetings and give the Black Belts the Process Improvement work. Process Improvements will as a norm involve a bit more management across managment boundries than will a product improvement - products generally involve more engineering and mechanical technique personel to produce true improvement and eliminate variation from a lower level, while the process improvements are more often than not a lot of clerical reorganizing from a system perspective and political jockeying - something that my Green Belts are not ready for yet. They are both using the same set of tools, but they are dealing with completely different groups and using different interaction skills to achieve their ultimate results and project closure. This is something that is really not taught in any Six Sigma course, and from a "pure" perspective should probably not exist,but, unfortunately, company cultures more often than not dictate who can achieve what. Also, don't forget - incorporate Lean techniques while reducing variation and you have process excellence whether you are dealing with a true process or a product.

Pudge_72 - I think you are closer to where I am headed. I am interested in generating a list of improvement projects. To my benefit, I have a skilled Lean (TPS) trained Production Manager. The improvement are almost incremental (true kaizen). However, the systems that provide him input especially change control in any form seem to need what you refer to as a Black Belt project. How have you gone about generating a master list of projects? and under what premise of importance?

[Pudge 72]

If you do not already have one set up, I highly recommend a monthly financial group that meets to discuss profit margin and potential opporutnity for improvement. This is what I refer to as COGS - Cost of Goods Sold. This group flags product lines that are not performing up to profit margin strictly on financials - this eliminates the emotion of project selection from a product perspective.
For Process Improvement, utilize Internal Audits and systems that have been noted or flagged as barriers in the manufacturing / production proces. We have found that typically, a process that is defunct enough to have generated an NCR generally has been worthy of Black Belt scrubbing and subsequent cost savings across the board - enough to justify it as a Six Sigma worthy project.

Does that help?