Reigniting operational excellence at Pepsi
September 9, 2022 | Brought to you by Opex Canada
As world events and other challenges overshadow business operations, it can be too easy to overlook the importance of the basics. A tweak to an operational process seems insignificant compared to production line shutdowns and lack of vital components.
But, according to Les Cyfko, Director M&W, Operations, Engineering and Continuous Improvement at PepsiCo, the pandemic has exposed the direct correlation between continuous improvement and overall company performance and results.
“Lean Six Sigma, by virtue of simple tools like process mapping, identifying pain points and non-value added activities can help you discover potential solutions,” he explains. “That is of paramount importance to being able to unlock some of the issues that have appeared in the macroeconomic climate as well as mitigating some of the potential future risks that might come our way.”
In this interview, Cyfko, who was instrumental in setting up Pepsi’s Lean Six Sigma program a decade ago, discusses the impact of the past few years, reflects on a decade of Lean Six Sigma at Pepsi, and reveals why he’ll be focusing on reigniting the Lean Six Sigma program at the global beverage maker in the year ahead.
Diana Davis, IX Network: What does your operational excellence program look like at Pepsi?
Les Cyfko, Pespi Co: The continuous improvement program at Pepsi is really based on two planks. The first is lean Six Sigma, which is end-to-end across the business.
With our Lean Six Sigma program we’re looking to reduce the seven forms of waste, which we call TIMWOOD. That stands for Transportation, Inventory, Motion, Waiting, Overproduction, Overprocessing and Defects.
These wastes are the target of Lean; we generally apply Six Sigma to Design of Experiments such as finding the right center lining or to more complex business supply chain related business problems.
The second plan for our continuous improvement program is TPM – Total Productive Maintenance. This is geared for our plants and manufacturing facilities to reduce downtime, increase uptime and ensure the long-term viability of our equipment.
Much of our equipment costs millions to replace; it’s also very disruptive if we have to take an asset offline. If we can extend the lifetime of our machines and assets, that helps ensure an uninterrupted supply chain.
Diana Davis, IX Network: How are you structured? Do you have a centralized team that runs the operational excellence program or is it embedded within the business units themselves?
Les Cyfko, Pepsi Co: There’s not a simple answer to that. We have a sector team, which is run out of New York. The team oversees our Lean Six Sigma and Total Productive Maintenance programs across Pepsi Beverages, North America.
That said, it’s a very loose management. We are driven by the philosophy “nationally great, locally even better.”
Within Canada we’re free to explore bigger, better, faster, stronger ways to apply Lean Six Sigma and TPM to find out what works best for our division locally.
Diana Davis, IX Network: What role do you see a continuous improvement mindset and traditional process improvement tools like lean and Six Sigma playing to help companies respond to the disruption we’ve seen in the past few years?
Les Cyfko, Pepsi Co: I think they’ve played a very important role.
First, we had a pandemic which gave employees an opportunity to work remotely and, in many cases, to rethink their life. As a result, people have been examining their relationship with work, which has resulted in what some are calling the “great resignation,” which has impacted all businesses. Effectively, we’re seeing different manifestations of change in people’s habits and how they think of their life.
The second disruption is inflation. Without a doubt, commodities are increasing in price rapidly. It’s an unprecedented pace of inflation.
The third disruption is that global tensions have increased to a level that we haven’t seen in decades. The war in Ukraine has divided up what was a global economy into something potentially different where we may see separate economies emerging in different geopolitical regions.
These disruptions hit home to PepsiCo because we have hundreds of thousands of employees. We’ve felt the impact across the board of employees changing their careers and perspectives on what they want to do with their future. Turnover has increased as a result.
One of the first principles of a continuous improvement is standardization but it’s difficult to standardize when your team is changing players continuously. Lean Six Sigma and TPM play a vital role in maintaining standardization in a particularly volatile environment such as this.
Then, let’s turn to inflation. For many companies Lean Six Sigma and TPM are applied to offset inflationary pressures. If inflation is increasing at two or three percent per year, normally companies look to harvest a 3-5% annual productivity improvement.
This is the case in the automotive industry, for instance. Often, it’s written into contracts that price will reduce – or at least not increase – within the automotive supply chain. Your margins are only developed through continuous improvement by lowering your costs to offset the inflationary pressures.
But because inflation so high now – it’s well beyond 5% – how else does one get the productivity that’s required to maintain margins? That’s where continuous improvement comes in and it’s becoming much more important through that lens.
Finally, global tensions have made a significant impact on the supply chain. Pepsi food and beverage sources ingredients from all over the world. So even if the even if the sourcing doesn’t change the means of transportation might because certain routes may no longer be friendly or viable. That has meant that the cost of transportation and logistics has increased dramatically.
Another challenge is that there are far fewer truck drivers than is necessary for the number of truck loads required on a daily basis across North America. Even just being able to find transportation to maintain a steady supply chain is under immense threat.
Lean Six Sigma, by virtue of simple tools like process mapping, identifying pain points and non value added activities can help you know what potential solutions there might be. That is of paramount importance to being able to unlock some of the issues that have appeared in the macroeconomic climate as well as mitigating some of the potential future risks that might come our way.
Diana Davis, IX Network: It sounds like Lean and Six Sigma are good problem solving tools. They give you a way of thinking and approaching problems?
Les Cyfko, PepsiCo: Sometimes people try to rethink Six Sigma and rethink TPM. Many companies relabel these process improvement methodologies with different names or use the latest buzzwords when it comes to process improvement.
But the fact remains, these methods are like the scientific method. The method was valid 50 years ago when insulin was discovered and the same methodologies apply today as we’re trying to find the cure for cancer.
At the end of the day, these methodologies are tried and true. I think we should spend less time trying to invent new names for these processes and stick to the tools that work and have been tested over time.
Diana Davis, IX Network: It’s been a decade since you started building PepsiCo’s Lean Six Sigma program. How has the way that you approach process improvement changed since you started back in 2012?
Les Cykfo, PepsiCo: When I started in 2012, there was a lack of lack of skill but there was interest. People were curious and there was a desire for something that could unlock a lot of productivity.
At the time, Pepsi had just acquired a bottling group. All the bottlers had essentially been independent up to that point. The company was looking to achieve many hundreds of thousands of dollars of savings across North America.
We needed Lean Six Sigma to achieve this. But we had very little skill on how to use these tools. My main focus at that point was training everybody from the top down. We ensured that leadership understood how to pick the projects, what Six Sigma could do and what it couldn’t, how to get the right project scope and how to be a good sponsor.
We also trained for depth in the organization to be able to lead Lean Six Sigma projects in parallel to rolling out TPM in the plants. We set up the proper steering teams in the facilities and coached the plants on the pillars of TPM, best practices, and how to prioritize.
Fast forward to today where we have a lot of skill but the will isn’t as great. I think the reason for this is two-fold.
First, because of the current macroeconomic pressures and the disruption in our supply chain and on our business, people are focused on these challenges. There’s definitely a sense of competing priorities.
The second is that there is a complacency that has settled into the organization. We’ve done all the heavy lifting of building our Lean Six Sigma and TPM programs. We have a lot of people trained.
I think it’s quite common at this stage to have an autopilot that sets in. People believe that Six Sigma will continue to roll on its momentum.
But that certainly isn’t the case.
For example, from a project management perspective, it’s common for groups to take their foot off the pedal when they pass phase one. I see that as well with Lean Six Sigma. It’s hard to get some groups energized because they always looking for something new.
Once Lean Six Sigma is no longer headline news it becomes harder to sell the newspapers, so to speak. People are always looking for something new to make themselves or their teams look like they’re doing something innovative.
Diana Davis, IX Network: What have been your big learnings to deal with that challenge?
Les Cyfko, PepsiCo: I should add that part of the challenge has been the pandemic. I haven’t been able to be too hands on; through the pandemic, things were allowed to slide a bit as we focused on running the business in a challenging environment.
But we’ve found that there is a correlation between the lack of intensity of applying continuous improvement and overall performance and results. That makes it easier for me to point to the correlation and make that point that without a focus on Six Sigma and TPM our lines are not performing as they should and our throughput is diminished.
By pointing out these correlations it makes it easier to reignite the field – our system, our people, and our teams – around Lean, Six Sigma and TPM, it’s a bit like a new beginning.
Diana Davis, IX Network: We spoke a little bit about all the new names and rebranding that process improvement tends to go by. The word ‘transformation’ is bandied about a lot now. Do you think there’s something new going on or is this just a new way of packaging something companies have always done?
Les Cyfko, PepsiCo: I think that’s a very interesting question. I’m not going to pretend I have all the answers but from my experience I would say that without a doubt there is a dynamic tension between the rote continuous improvement tools and digital technology.
The continuous improvement tools are very basic tools that have stood the test of time and I think will always stand on their own merits. But as those tools are applied to a more transformational perspective, you introduce digital technology.
Both require data. We have the means to acquire data like never before. Data can give you a competitive advantage if you have good data and you know how to use that data.
So I think there’s a dynamic tension between the principles of continuous improvement and the advances that technology enables.
Artificial intelligence and machine learning, for instance, helps in the plants by machines talking to each other in real time. That allows the machines to automatically adjust speeds, balance the lines based on certain situations in order to maximize throughput, and free up people’s time to be able to do more continuous improvement.
If you look at back-office work like accounting, a lot of artificial intelligence bots now do a lot of the data entry and processing work that otherwise would have taken a lot more time. I think that frees up people to do more of the value added continuous improvement work. So I think they play off each other.
Diana Davis, IX Network: What’s your focus at Pepsi in the year ahead?
Les Cyfko, PepsiCo: It’s back to basics for us. Over the pandemic we were essentially scrambling just to keep the business going. Now with turnover being what it is, I think we’ve lost a lot of sense of how to run the basic processes that have that have been honed over years.
We’re ramping up training across the board. That’s the biggest focus today. We are also rebooting and renewing our Lean Six Sigma and TPM efforts to counteract the malaise that has set in over the last few years.
Diana Davis, IX Network: Finally, what are you hoping to get out of our Operational Excellence Canada event?
Les Cyfko, PepsiCo: I always get a lot out of your events. I go in with a sense of what I’m looking to get out of it but I also try to keep an open mind so that I can absorb the vast array of information. I think it’s important to balance between having expectations and just soaking in all the learning and experience.
There hasn’t been one single OpEx event that that you’ve delivered that has not resulted in an immense amount of learning for me. I refer back to the notes I take at the events periodically. There are some great learnings that I have been able to apply in my work and in the business.
In short, I’m looking for more thought-provoking golden nuggets of information based on interactions with others and the many great speakers that you have at these events.
Interested in Learning More about this Topic?
Hear from Les Cyfko and over 30 other world class transformation thought leaders at the Pan Pacific Hotel in Toronto October 17-20, 2022 at Operational Excellence Week Canada 2022.
Exciting new opportunities are emerging to accelerate digital transformation, operationalize sustainability, improve supply chain agility and boost productivity – making it easier and quicker than ever for companies to capture this value. Find out how at Operational Excellence Week Canada 2022.