Optimizing Internationalization: The Importance of Lean Six Sigma in International Business

Companies seeking to enter the North American Free Trade Agreement market They must understand that operational excellence is a fundamental pillar for their competitiveness and sustainability in the long term, since the United States market It's a highly demanding and highly competitive market. Due to its economic power, everyone wants to sell their products there, so competition is fierce.

Operational excellence refers to an organization's ability to optimize its processes, reduce costs, increase productivity, and eliminate waste through continuous improvement practices. This approach is based on methodologies such as Lean Six Sigma, which focus on identifying and eliminating non-value-adding activities, as well as improving efficiency and quality in all areas of the company. Its basis is the concept of Kaizen Philosophy, a Japanese word composed of two Japanese characters meaning "good" and "change," Kaizen currently refers to a system of continuous improvement in which small but constant improvements accumulate large, long-term benefits. In my opinion, a well-implemented continuous improvement system ensures that everyone working in an organization is constantly thinking about how they can do their jobs better and how they can eliminate and reduce non-value-added activities (waste) in their daily work.

When companies don't prioritize operational excellence, they face a series of challenges that can hinder their ability to compete in the international marketplace. These include slow, costly, and inflexible processes, as well as a greater propensity for waste and errors. The main impact of these inefficiencies is reflected in the business cycle time, which, the longer it is, the more expensive and inefficient it is. Time is money, after all. In my experience, there are more business opportunities that exist in the international market I believe that in my nearly 30 years of professional experience, I've seen more successful businesses miss out on opportunities than organizations that have the capacity to take advantage of them. Below, we'll analyze how these obstacles affect the competitiveness of companies seeking to expand beyond their national market:

 

1. Inefficient processes: Inefficient processes can slow down production, increase costs, and affect the quality of products or services. This can lead to longer delivery times and a reduced ability to meet international market demands in a timely manner. I once introduced a leather supplier to a major manufacturer, who, interested, requested sample development so they could be considered as a supplier for their next leather goods collection. This supplier took eight months to develop and ship these samples. Needless to say, when the client received them, they wanted nothing more to do with a supplier who takes so long to fulfill such a commitment, which very likely reflects the problems they will face when it comes to manufacturing a formal order for the material. The business opportunity was lost.

 

2. High Costs: A lack of operational efficiency can result in high costs at all stages of the value chain, from raw material procurement to product distribution. These additional costs can make products less competitive in the international market, where consumers seek high-quality options at competitive prices. I witnessed a shoe manufacturer who wanted to enter the Canadian market, where we found an interesting opportunity to introduce a footwear line with a major department store chain. Among several problems, all related to its inefficiency, it was unable to offer a competitive price because its processes had many hidden costs, mainly derived from waste and activities that did not add value to its processes. The price difference was minimal, however, the manufacturer could no longer do more, and the business opportunity was lost, something that would not have happened if it had had efficient and highly productive processes.

 

3. Low Flexibility: Companies with rigid and inflexible processes may struggle to adapt to market changes or respond quickly to customer needs. In a constantly evolving international environment, the ability to adapt and be flexible is essential to remain competitive. Examples of this were clearly evident during the pandemic. I witnessed many companies that were unable to adapt to all the changes this historic event brought and therefore disappeared. I witnessed many others that swiftly identified opportunities and, by adapting, achieved exponential growth. An organization can only achieve this when it has agile and flexible processes, free from bureaucracy, unnecessary activities, and waste. Today, it's not the big ones that eat up the small; it's the fast ones that eat up the slow ones. In an environment as dynamic and ever-changing as the one we live in today, time is money, and the agility to adapt to change is essential for success.

 

4. Waste and Non-Value Added Activities: Waste and non-value-added activities are common in companies that lack a systematic approach to continuous improvement. These include wasted time, waiting, unnecessary movement of people and materials, excessive inventory, quality defects, and redundant processes, all of which can negatively affect the company's profitability and competitiveness. Many of these wastes are unseen, and because they are unseen, they are unmeasured. And because they are unseen and unmeasured, managers think they don't exist. However, they do exist, and they make processes more expensive and inefficient, and it is the end customer who ends up paying for these inefficiencies. Or, if the end customer has other options, this results in them buying from the competition. An example is quality inspections, which are non-value-added activities but are necessary. I've seen operations where there are five quality inspections during the manufacturing process, and at the end of it, 5% of the production is rejected and has to be repaired, generating rework costs that directly impact the final price. The cost impact of this inefficiency is very negative for the company's competitiveness, which is reflected in the loss of business opportunities.

 

For companies seeking to internationalize, operational excellence is a key factor that can make the difference between success and failure. Those that implement operational efficiency and continuous improvement programs are better positioned to take advantage of the business opportunities offered by the international market. By optimizing their processes, reducing costs, and increasing productivity, these companies can improve their competitiveness, offer high-quality products and services at competitive prices, and meet customer demands anywhere in the world. Not only can they dominate their domestic market, but they can also access a wide variety of market niches, which can allow them to achieve more aggressive, diversified, and sustainable growth.

 

In short, operational excellence is imperative for companies seeking to internationalize. Those that invest in optimizing their processes are better equipped to compete in an increasingly competitive global environment and take advantage of the business opportunities presented on the international stage. Ultimately, operational excellence not only improves a company's competitiveness but also drives its long-term growth and success in the global marketplace.

 

Miguel puga 

Expert in internationalization and lean six sigma with more than 25 years of experience. 

Area Director of Gedeth for North America and CEO of Intercambi