EricArno Hiller
Eric Hiller

Eric Hiller Leverages Lean Six Sigma to Discuss Seeing the Forest, not the Trees by Using Lean Six Sigma to Enhance Procurement

Eric Hiller and Hiller Associates are optimizing clients’ procurement functions leveraging process transformation techniques, including those from Lean Six Sigma, operational improvement, design-to-value, value analysis, and engineer (VAVE), and should-costing. All of these techniques to Lean concepts to some extent, such as the removal of waste, delays, defects, and over-processing by reducing process variation and distinguishing between common cause and special cause variation. These Lean concepts are general principles, but in order to bring more analytical rigor, Eric Hiller suggests adding aspects of Six Sigma. These include gathering data on metrics and setting KPIs to be controlled and add quantitative rigor to measure progress and success.

Ignoring the tactical focuses of Lean, such as waste and a lack of written procedures, can certainly cause mistakes and defects in supplier selection, supplier questionnaires, supplier audits and compliance efforts with ISO standards. The tactical tools to remedy this can include supplier scorecards, receiving inspections, etc. These tools play a vital role in procurement, but only if designed and executed correctly. However, a bigger problem in these transformation efforts is getting buried in mounds of new data without having a good visualization to distill the meaning from the data and a governance process to efficiently encourage leadership to take action on the results.

Eric Hiller and Hiller Associates review the status of all these elements of success (tools in place, data gathering, analytical visualization, and governance) with clients to optimize their supply chain and implement new systems that deliver better results. In addition to the operations of the supply chain, Eric Hiller states, “It is important to understand initial sourcing strategies in reviews of product development, such as make versus buy decisions and spend analytics, for physical products and enterprise software solutions.” The total cost of acquisition in procurement is critical. The scope of initial engagement with Hiller Associates will determine how much of each technique is used and how deeply.

  Eric Hiller leads clients through the prioritization of opportunities using a theory of constraints mindset. That is, what are the greatest bottlenecks that are holding back the process, and what problems, if solved, would generate the most immediate impact. Statistics are leveraged in the context of quality management to help identify opportunities for improvement within the supply chain.

Quality management systems and corrective actions are important for improving procurement, and as with most transformational projects, the need for support extends beyond the safe boundaries of one departmental function, such as procurement or supply chain. Eric Hiller encourages his clients to carefully assemble a team of participants and supporters across every department that is a stakeholder, typically including engineering, accounting, cost management, and manufacturing at the receiving plants. Executive sponsorship and active governance during the project are critical to success. Not only must senior leaders who have access to the resources, be directly involved in scoping the project.  They can also break road-blocks and give authorization as the project proceeds. Given the global and integrated nature of supply chains, quality in procurement is more complex and important than ever before. It takes a concerted and expert approach to remain competitive. However, another executive aspect that Eric Hiller says is critical for success, is to ensure that management acts on recommendations.

Often management will sit on the results, not knowing what to do. Eric Hiller states, “One of my favorite techniques to break the management inertia is to present multiple project charters which bundle multiple recommendations into each project in an efficient way. Each chapter is presented in only one or two slides and has all the high-level metrics that leadership needs to make a decision, including timing, cost, resources needed, expected ROI, and benefits.” Hiller notes, “Giving multiple options often makes the decision a lot easier and more comfortable for the executives.”

Eric Hiller is the Managing Partner of Hiller Associates, a well-known consulting firm specializing in operational process improvement, software product management, product cost management, and design-to-value analysis. He is a former McKinsey & Company engagement manager and operations subject matter expert. He also co-founded two high-technology companies – and aPriori.

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