Lean Six Sigma 101 part one: an overview

"The significant problems we face cannot be solved at the same level of thinking we were at when we created them." Albert Einstein

Need for Lean Six Sigma

Virtually all companies grow from wobbly start-ups into cash cows using trial-and error and common sense. Current methods of conducting the business developed in an ad-hoc fashion, reacting to problems without much forethought. The bad news about this ad-hoc, trial and error method of adaptation is that most companies stop improving when they reach 1%, 2%, or 3% error levels in marketing, sales, ordering, and billing.

Not all businesses need Lean Six Sigma! LSS is like a scope on a rifle; unless you're on a solid ground and have a clear vision of a far target in stable environment, the scope wouldn't help you!

Two Factories

Every company, service or manufacturing, has two factories:

1. A factory that creates and delivers your product or service. In a printing company, this might be the press-room. In a hospital, this would be the emergency room, surgical rooms, and nursing units. In an automotive manufacturer, this would be the assembly line.
2. A hidden factory that creates all the mistakes and delays that occur in the main factory.

Every business has two sources of cash flow:

1. External customers give you money for your products and services.
2. Internal processes that leak cash like a rusty bucket. When you plug the leaks in your cash flow, you get to keep all that money. Every process leaks cash; delays, defects, and variation.

Lean Thinking

"All we are doing is looking at a time line from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes." Taiichi Ohno, the architect of the Toyota Production System

You first need to understand the customer and their perception of value. You have to know how the value stream operates and enable it to flow, perhaps by removing waste and non-value-added activities.

Lean thinking also means looking for ways of smoothing and leveling the way the work flows through the process and, where possible, working at the customer’s pace. In other words, it’s a pull rather than a push process. And, of course, in the pursuit of perfection, you’re always looking to improve things through the concept of continuous improvement.

Wastes

Almost all of the physical sources of waste within production processes fall into the acronym D.O.W.N.T.I.M.E:

• Defective Production; Defects can incur cost through tangible outcomes such as scrap, retooling, re-purposing, or reworking. Intangible costs include decreased brand perception and loss of market share.
• Over-processing; waste events are the result of poor communication, ineffective or inefficient production controls, or other errors that cause a part to be processed past the customer’s specs.
• Waiting; Time spent waiting is non-value-added and therefore considered a waste event. Waste through waiting is tied to many aspects of production including evenness of workflow, facility layout, and process management.
• Under-utilized Employee Talent; The cost associated with this type of waste is best described as an opportunity cost, since the exact nature of the “price” is nearly impossible to calculate.
• Transportation; This doesn’t only include transportation from one facility to another or orientation within a warehouse but also encompasses movement from one workstation to the next and non-process-oriented movement on the factory floor.
• Inventory; Whether they consist of raw materials, work in progress, or finished goods, large inventories can contribute significantly to an operation’s expense profile. Lean practitioners often use Just-In-Time (JIT) inventory control measures coupled with stable and even work flows to reduce on-hand inventory.
• Motion; Wear and tear on facilities, machines, and other assets is the result of production cycles and other motion. Repetitive strain injuries, or the equivalent of wear and tear on a workforce, are also caused through motions in a process. While wear and tear is inevitable, unnecessary motion can reduce efficiency, cause bottlenecks, and shorten the lives of production machines.
• Excessive Production; Excessive production increases the chances of defective production or can cause defects to go undetected within the quality control system. Additionally, the excessive finished goods must be stored or liquidated, both options resulting in financial costs.

Lean Core Concepts

1. The Continual Elimination of Waste
2. Goals with a Broad View (strategy and planning)
3. Simplicity (simple in means simple out)
4. Continuous Improvement (perpetual enhancement builds innovation)
5. Visibility (Waste can only be eliminated if it can be identified)
6. Flexibility (less friction in regard to changing customer needs)

Six Sigma

Six Sigma is a quality improvement oriented process management system. It uses statistical tools and empirical techniques to reduce the number of defects within a process. Developed by the multinational telecommunications company Motorola in 1986, it has evolved into a process focused business strategy and manufacturing tool that promises highly sought after results.

Like many quality improvement strategies, the exact practical implementation of Six Sigma varies from industry to industry and product to product, but the entire program is shaped around several guiding precepts. Many of these defining principles are evident in traditional quality improvement programs as well, and the program of Six Sigma methodologies is also derived from this venerated framework.

While Six Sigma was introduced as a manufacturing process improvement tool, it is applicable to nearly all quantifiable business processes. The most notable of these non-manufacturing quantifiable processes are the fields of billing and call center or support center efficiency control.

Six Sigma Core Concepts.

1. Continuous efforts to achieve stable and predictable process results are of vital importance to business success.
2. Manufacturing and business processes have characteristics that can be measured, analyzed, improved, and controlled.
3. Achieving sustaining quality improvement requires commitment from the entire organization, particularly from top level management.

Six Sigma, once a precise, narrowly defined term. has grown over time to represent a number of concepts:

• Six Sigma is a problem-solving methodology. In fact, it’s the most effective problem-solving methodology available for improving business and organizational performance.
• Six Sigma performance is the statistical term for a process that produces fewer than 3.4 defects (or errors) per million opportunities for defects.
• A Six Sigma improvement is when the key outcomes of a business or work process are improved dramatically, often by 70 percent or more.
• A Six Sigma deployment is the prescriptive roll-out of the Six Sigma methodology across an organization, with assigned practices, roles, and procedures according to generally accepted standards.
• A Six Sigma organization uses Six Sigma methods and tools to improve performance: Continuously lower costs, grow revenue, improve customer satisfaction, increase capacity and capability, reduce complexity, lower cycle time, and minimize defects and errors.

Six Sigma numerically

In the world of Six Sigma manufacturing, the type of variation most often addressed is the defect rate, measured as the defects per million opportunities (DPMO). Defects incur costs, and costs affect profits.

A common aim of the Six Sigma program is to achieve what is known as “Six Sigma quality,” a term that refers to processes that produce a defect rate less than or equal to 3.4 DPMO.

To put that in perspective, that same defect rate expressed as a percentage means that defects will occur .00034% of the time. However, this proportion does not necessarily represent the number of defects that a process can allow under the Six Sigma approach!

Linking Lean with Six Sigma

Six Sigma thinking is very similar to Lean thinking. Six Sigma also focuses on the customer. A key principle of Six Sigma is understanding customer requirements and trying to meet them. If you don’t understand those requirements, how can you expect to provide the customer with value?

Again, as with Lean thinking, to understand your processes you need to understand how the work gets done. Data comes into play more so with Six Sigma thinking than with Lean thinking. If you’re to manage by fact, you need to have the right measures in place and the data presented in the most appropriate way.

An appreciation and understanding of the variation in your process results enables you to more effectively interpret your data and helps you know when, and when not, to take action.

Six Sigma thinking also means equipping the people in the process so that they’re fully involved and engaged in the drive for improvement.

From Ford to Toyota

We need to adopt thinking that focuses on improving value for the customer by improving and smoothing the process flow and eliminating waste. Since the establishment of Henry Ford’s first production line, lean thinking has evolved over many years and in the hands of many people and organisations, but much of the development has been led by Toyota through the creation of the Toyota Production System. Toyota was able to build on Ford’s production ideas to move from "high volume, low variety" to "high variety, low volume".

Six Sigma thinking complements the lean approach through a systematic and robust approach to improvement that is based on management by fact. In particular, it looks to get the right data, in order to understand and reduce the variation in performance being experienced in the organisation’s products, services and processes.

Principles of LSS

Similarity and synergy exist between Lean thinking and Six Sigma and combining the two approaches creates a "magnificent seven" of Lean Six Sigma key principles:

1. Focus on the customer.
2. Identify and understand how the work gets done – the value stream.
3. Manage, improve and smooth the process flow.
4. Remove non-value-adding steps and waste.
5. Manage by fact and reduce variation.
6. Involve and equip the people in the process.
7. Undertake improvement activity in a systematic way.

Lean focuses on the process while Six Sigma focuses on the output.

The goal for Lean is to remove waste, and improve flow, while the goal for Six Sigma is remove variation and increase performance

Lean Six Sigma Frameworks

Lean Six Sigma provides two frameworks for improvement. The action you take in improving or designing your processes needs to be undertaken in a systematic way. DMAIC provides the framework to improve existing processes and DMADV covers the design of new products, services and processes.

DMAIC

The DMAIC cycle is a systematic approach to solving problems and improving existing processes. DMAIC stands for Define, Measure, Analyse, Improve and Control.

DMADV

DMADV stands for Define, Measure, Analyse, Design and Verify, and is a framework for designing new products, services or processes. You can also use DMADV when an existing process is so badly broken that it’s beyond repair.

DMAIC vs. DMADV

It’s possible to start a project using the DMAIC method only to find yourself changing to DMADV at some point.

To be continued...

This is just an overview. I'll talk more about tools of Lean and the frameworks in details in other articles

To wrap up this article, I have to mention the golden rule, in my opinion, which is

ALL MODELS ARE WRONG, BUT SOME MODELS ARE USEFUL.

Never fall in love with any style or idea or a concept of management. Every model has its own advantages, limitations, and assumptions with which it can be useful. Choose wisely and keep learning.

PEACE