Note: This is the first installment of a two part series on Lean Six Sigma.
Two Disciplines with Common Goals Combine to Improve Operations and Profitability
More than ever before companies are under pressure to improve operational efficiency and bottom line profitability. It does not matter if your business is manufacturing, service or knowledge based; all are under the same pressures. Increasingly companies are turning to Lean Six Sigma as a strategic tool to achieve measurable improvements at the bottom line, reflecting the results of changes made throughout the value chain, including internal processes, suppliers and most importantly customers. As a facility management professional you have likely been challenged to keep pace and may have wondered if and how these principles can be applied to your organization. Rest assured that they can be, and that your staff and internal customers are up for the challenge. As with any Continuous Improvement (CI) program strong leadership and commitment from the top is a requirement. Your understanding, sponsorship, and support will help launch and sustain the effort.
What is Lean?
The term “Lean” was first used in reference to quality improvement systems when it was applied to the Toyota Production System (TPS) in the nineteen eighties. Reduced to its basic premise, the system seeks to improve process efficiency and quality by increasing speed and eliminating waste. Students of TPS will be familiar with the concepts and methodologies of Kaizen, the never ending effort to discover and eliminate all forms of waste in a process. While originally developed during Japan’s post-WWII recovery to improve manufacturing quality and efficiency it is now routinely applied to all forms of work processes.
It is a gross mistake, however, to think of Lean as a one-time project or improvement effort. It is about establishing a new culture that pervades the organization and becomes a part of its very DNA. It does not happen overnight, but it can (and should) happen more quickly than you might think. This rapid adoption occurs best where strong leadership and commitment are obvious to all, setting an expectation. Including Lean participation and results as a part of performance management signals to every worker at every level just how important it is. Lean should be viewed as a journey. One that can begin with early results to be sure, but those first positive outcomes should not lead to a declaration of victory and the sure to follow loss of interest.
Remember that the two prime points of focus in Lean are increasing speed and eliminating waste to improve overall quality and value. To achieve this Lean practitioners take a customer view of every process and outcome, looking to improve customer value in terms defined by the customer. Value stream mapping will identify areas for rapid waste elimination opportunities while flow management will optimize the sequence of process steps. Allowing customers to control the pace of production through pull management systems that deliver products and services based on actual consumption need prevents the waste of over production and the transportation and storage activities associated with it.
Lean’s attention to eliminating waste evaluates all areas of value provision. Defects such as bad product or service quality and missed deadlines cause rework and increased resource utilization. Over producing consumes materials and adds time cost as well as transportation and storage. And lest you be thinking to yourself, “I see how that applies in a manufacturing environment but what effect does it have for my service organization?” think about the costs associated with your service quality shortfalls, the cost of bad information that leads to bad decisions, or the hidden costs of over-provisioning to provide contingencies that may never be required.
Lean’s three basic components; Quality, Just-In-Time, and Stable Operations often require a different way of thinking about the work of the enterprise. Where most are focused along functional lines Lean requires a re-focusing to improve efficiencies throughout the value stream.
What is Six Sigma?
Six Sigma is essentially a statistical regime that improves process effectiveness by reducing process variability and improving process yield. It is a collection of various statistical and analysis tools which are used to discover process defects, and a set of methodologies for curing them. The term “Six Sigma” represents 3.4 defects per one million opportunities. Compare that to the average manufacturing quality level of three sigma, or 67,000 defects per million, and think about the human, material and opportunity costs associated with the difference between the two. Not in manufacturing? Then think about your service processes and the cost of your defects when applied to your corporation’s cost of producing its products or services. Customers pay that cost and they know who provides the best quality at the best price. Customers know where the value is.
Interestingly, the Six Sigma “movement,” if one can call it that, began in the eighties when Motorola took on the challenge of reducing product defects as a way of improving market position at about the time Toyota was inventing its Lean processes. Like Lean, Six Sigma is best thought of as a philosophy and culture that is customer focused, in which the customer defines product or service specifications and the provider meets those needs with optimized efficiency.
The goals of Six Sigma are much the same as those of Lean but it approaches these from a statistical perspective. Decreasing process complexity, reducing cycle time, and minimizing defects all contribute to increased customer satisfaction and all can be measured, mapped, analyzed and improved.
All quality improvement programs include improving financial performance as a goal. Six Sigma, however, uniquely equips an organization owing to its statistical nature and allegiance to empirical data and the scientific method of investigation. Pre-project scoping analyses of financial benefits allow management to prioritize projects based on expected beneficial outcomes. Continuing financial analysis during project evolution keeps the team focused on delivering bottom line results by fine tuning the project. This also provides management a view into the project’s progress as it evolves, thereby improving and speeding intelligence on “ground level” operational developments. At the same time it informs management the financial analyses educates the team members and allows them to recognize other opportunities for improvement.
Next week: Combining Lean and Six Sigma, and a shared services implementation case study.