Thursday, April 28, 2011

The Chicken or the Egg: Six Sigma and Lean - By Joseph A. De Feo

Companies debating the relative merits of these practices should instead learn to combine both.......

How many times have you heard, “Lean is in and Six Sigma is out” from a colleague? The funny thing about this is that I used to hear the same thing 23 years ago. Only then it was, “Lean is in, and quality improvement teams are out.” Little has changed since then.

 Everyone is looking for a simple answer to cost reduction and quality improvement. My biggest concern, and it should be yours, is that both are needed, not one or the other. It is not about which came first, or which is better or even easier. It is about what problem your organization is facing today. Do you have customer dissatisfaction, product or service complaints, defects, high cost of failure? Or are you trying to improve speed and throughput, and reduce cost of waste? These are the questions one needs to ask before arguing about whether to use lean or Six Sigma.

Organizations have a number of methods available to deal with process and performance problems. Six Sigma and lean have become two of the most widely recognized and effective methods for creating breakthrough improvement. Both have evolved from the basis of prior methods, such as Joseph M. Juran’s universal sequence for breakthrough quality improvement, Walter A. Shewhart’s and W. Edwards Deming’s plan-do-check-act (PDCA) cycle, and Toyota’s specialized focus on driving out waste. Lean and Six Sigma both take different approaches in the quest for greater effectiveness, efficiency, and cost reduction.

Six Sigma: improvement by putting customers first – Focus on Defect Reduction:

The quality improvement methods on which many Six Sigma projects are based—define, measure, analyze, improve, control (DMAIC) and define, measure, analyze, design, verify (DMADV)—focus on identifying and meeting the needs of customers first, and the organization or business second. In this way, revenues increase and costs decrease, improving results.

Lean, by contrast, is the process of optimizing organizational systems by eliminating or reducing the “waste” within them. Anything that does not offer value is considered waste. Lean methods and tools can provide significant improvements in organizational efficiency. During the past decade, lean has experienced a rebirth in manufacturing-based industries, as well as service- and health care-based organizations. Lean is not a replacement for Six Sigma or vice versa. It focuses on different problems. It is typically an internally focused means of cost reduction. It is badly needed but should work in concert with a systematic Six Sigma practice.

More than just a formal program or discipline, Six Sigma has become an operating philosophy that can be shared beneficially by everyone: customers, shareholders, employees, and suppliers. Fundamentally, it is also a customer-focused methodology that drives out customer dissatisfaction, raises levels of quality, and improves the financial and time performance of organizations to breakthrough levels.

The term “Six Sigma” means to attain a target for quality that is close to perfection, to achieve 3.4 defects, errors, or mistakes, whether that involves the design and production of a product or a customer-oriented service process.

Many large organizations have experienced great success employing Six Sigma and lean Six Sigma methods. Today, many organizations combine lean and Six Sigma as their improvement methods of choice. These methods help both traditional manufacturers of goods, as well as producers of services and information, to improve their bottom lines and increase customer satisfaction.

Lean: improvement by waste reduction:

Lean in particular is based on creating a “pull system” to produce faster, rather than the traditional “push systems” used by most organizations. One of the main goals is to always pull from the customer demand, not push to the customer.

Lean methods and tools have made their way into most industries. A method that was used in manufacturing to reduce waste is now used to improve cycle time, flow, and velocity, improve workplace department performance, and reduce waste in hospitals, insurance companies, and financial services. Value-stream mapping is another important lean tool. It maps and documents all the tasks (material and information flow) and the metrics associated with them (cycle time, costs) within a process, including inherent waste. This provides the guidance to select the right problems and solve them as process improvement projects. There is a standardized approach and set of tools, such as rapid improvement events or kaizen (a Japanese word for “improvement”), to attack embedded wastes and increase the velocity of a process. Improving velocity exposes the problems—or waste—so that they can be eliminated, thereby making the processes faster, better, and cheaper.

6S (actually called 5S, but we add one more S for safety) is an abbreviation for “sort, set in order, shine, standardize, sustain, and safety.” It’s a lean tool for achieving a highly effective workplace that is clean, well-organized, and standardized to enable all employees to perform to the best of their ability. The benefits of an efficient workplace include prevention of defects, prevention of accidents, and elimination of time wasted searching for tools, documentation, and other elements to produce goods or services.

One key component of being lean is the need to create “value” as seen from the eyes of the customers. The operational definition of value is the benefit the customer gains from using the product or service. Value is created by the customer. Providing value to the customer is why the producer exists. Lean starts with defining value in terms of products or services and customer benefits provided at the right time at an appropriate price. Anything that does not provide value to the customer can be considered waste.

Lean Six Sigma: the chicken-or-egg phenomenon

In the Six Sigma methodology, the two primary methods are DMAIC to improve processes and products, and DMADV to help ensure that products and processes function well starting with the voice of the customer through to the delivery of goods.
The DMAIC steps are:
  • Define the problem as clearly as one can (for DMADV, define the design goals).
  • Measure the current level of performance and the voice of the customer.
  • Analyze collected data to determine the causes of the problem or the failures of existing designs.
  • Improve by selecting the right solutions to solve the problem or create new designs.
  • Control to hold the gains, for both the improved process or newly designed goods/services.

Organizations worldwide are continuously under pressure to control costs, maintain high levels of safety and quality, and meet growing customer expectations. This improvement process has been adopted by many large organizations, like Samsung Electronics, GE, and smaller organizations like Molex (electronics), A. Schulman (plastics), J. R. Simplot (food processing), and Highmark (insurance) to name a few.

“Lean Six Sigma” is quite simply the integration of lean and Six Sigma methodologies. Lean’s focus on efficiency, and Six Sigma’s  focus on effectiveness can lead to faster results than either method applied independently of the other.