Why the Philippines Needs Lean Six Sigma & Process Excellence

Despite 2014 proving to be an incredibly demanding year of rebuilding in the wake of Typhoon Yolanda, the Philippines has rebounded thanks to decisive government measures combined with a collective spirit of national cooperation.

This has resulted in the International Monetary Fund raising its growth projections for the Philippines for 2015 and 2016 by 6.6% and 6.4% respectively thanks to higher levels of public spending, growing national consumption and the robust performance of services supported of the IT-BPO industry.

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The Philippines’ economy now stands at a critical crossroads as it seeks not just to drive economic growth, but to secure its position of providing competitive business services ahead of its regional neighbors. Recent levels of growth have been attributed to the country’s relatively cheap labor combined with its high levels of proficiency with English. However, as is already being seen in Manila and Cebu, gradually costs are rising and businesses are increasingly looking for the next low cost locations, whether they be tier two locations within the Philippines or abroad.

Furthermore, the Philippines lacks a number of advantages enjoyed by its Asia-Pacific counterparts; such as the huge labor pool of China and India or the high concentration of technically skilled workers as in Japan or Taiwan. Another factor is that many of these countries, particularly China, has a rapidly increasing pool of English speakers amongst its gen Y workforce, meaning that the Philippines’ high level of English proficiency may not remain its trump card forever. With these factors combined, it is has become increasingly apparent that relying on the provision of low cost services, or English language proficiency, as a competitive advantage alone is not a sustainable long-term strategy for the Philippines.

Instead, companies based in the Philippines need to look inward and focus on generating higher levels of specialization and efficiency through initiatives like Lean Six Sigma (LSS) and Process Excellence (PEX) in order to secure a sustainable market share internationally and encourage competition domestically.

OPPORTUNITIES AFFORDED BY LEAN SIX SIGMA & PROCESS EXCELLENCE

The core principles of LSS encourage collaborative team efforts in order to find, highlight and eliminate wasteful processes and performance factors in the workplace. From under-utilized talent, redundant processes and overproduction, LSS is designed to remove these harmful and wasteful elements in order to enhance a business’ efficiency as much as possible.

Where LSS reduces waste, PEX creates a framework for continuous process and business performance improvement. It sets viable standards, which help a company deliver measurable performance in every element of its operation. Together, the two practices complement each other in a variety of ways:

1. PROCESS ENFORCEMENT AND BUSINESS OWNERSHIP:

   The integration of LSS and PEX can speed up the real-time execution of processes even when a team is geographically dispersed. An effective collaboration can identify wasteful elements of any given business process while at the same time optimizing its delivery in a continuous sense.

2. BETTER APPROACH TO PROBLEM SOLVING:

   Independently, LSS and PEX strategies can often only resolve narrow and highly specific issues, whereas both initiatives working together can eradicate wasteful processes whilst simultaneously building a well-defined set of steps that can be applied to the "big picture" of the company’s operation, so to sustain business improvements.

3. HIGHER RETURNS:

   Companies employing LSS or PEX are widely recognized for generating increased profit when compared to those who utilize neither.

KEY CHALLENGES PHILIPPINES BUSINESSES NEED TO OVERCOME IN LSS/PEX ADOPTION

HIGHER PRIORITIES:

For most Philippines businesses, even those of sufficient size and scale, LSS/PEX adoption is far removed from the top of their current priorities. Many are racing to expand the range and value of services they can offer to international customers in order to seize upon the rapid market growth that is currently being experienced, particularly in the IT-BPO sector.

PROJECT DURATION:

Depending on the size of the projects LSS/PEX is applied to, these methodologies may not necessarily be quick wins. Eliminating waste and replacing them with more productive business processes does require long-term commitment, which can lead back to a lack of support/buy in from management should they feel like the implementation is dragging.

LACK OF MANAGEMENT BUY-IN:

Without the support and understanding of senior management, any LSS and/or PEX initiative is destined to fail or at best achieve marginal results. If a company functions adequately, its management team could be inclined to view such processes as an unnecessary cost rather than a benefit, leading to a lack of endorsement and support for their implementation. Overcoming this kind of skepticism can be achieved by:

• Improving awareness of LSS/PEX benefits - Speak to management in their own language and minimize LSS/PEX technical jargon.

• Careful selection of team members and initial projects to demonstrate solid ROI.

• Sharing success stories company-wide.

DIFFICULTY IN ESTIMATING ROI:

Even with solid support from management who have a firm grasp of the benefits of LSS/PEX, companies implementing either initiative can experience inherent difficulties regarding the accurate assessment of their potential ROI due to:

• Estimations based on virtual assumptions.

• Lack of approval of actuals from financial teams.

• Financial accounting principles not followed from outset/Lack of understanding of accounting methods.

• No testing on smaller scale to generate proof of concept that can be applied to the business as a whole.

LACK OF SUPPORTING INFRASTRUCTURE:

Not every organization has the structural capacity to effectively support LSS/PEX implementation projects from inception. Missing infrastructure elements which are critical to the success of the project include:

• Lack of LSS skill sets (black belts, master black belts).

• Lack of management personnel from LSS/PEX background.

• Lack of training capacity in house/cost of consultancy.

PUSHING LSS/PEX FORWARD IN THE PHILIPPINES

While it is clear that there are a number of significant challenges in demonstrating the value of LSS/PEX principles to businesses in the Philippines, it is equally apparent that they understand the growing need to reduce wastefulness and raise productivity in order to remain competitive in the international business community. Therefore, despite the fact that many Filipino companies are either undergoing the early stages of LSS/PEX adoption or are not considering it at all, with the right implementation team, support infrastructure, awareness and demonstration of ROI, creating a sustainable and cost-effective change is both an achievable and necessary goal.

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