Deciphering Lean Six Sigma
Much has been written about Lean, Six Sigma and the combined Lean Six Sigma. Yet there is still confusion about their core purpose and viability at the workplace. This article goes over the basics.
Objectives of Lean
Twenty years after the Second World War, Toyota implemented lean production, a business system that eventually spread throughout the world and proved superior to the mass production business system pioneered in the United States and Europe by General Motors and Ford. Lean production is often associated with manufacturing environments; however, it is relevant to every organization that wants to create value for its customers. So what is Lean and what is its relationship with Six Sigma?
The lean methodology builds upon the understanding that in every organization there is waste, or muda in Japanese. The waste is everything that comes up during a process that does not have value in the eyes of the customer in terms of time, effort, material, capital and energy; it must be removed to achieve a more efficient process flow and demand pull. Waste removal boosts productivity, lowers costs and improves product and service quality. There are up to nine recognized elements of muda in any organization:
Overproduction - one of the main contributors to and triggers of overall waste, refers to producing excessive, unnecessary WIP or finished goods
Overprocessing - performing tasks and using materials that do not add value
Waiting - the cost of nonproductive time - unused, idle resources
Motion - unnecessary movement of people and equipment
Inventory - cost of keeping raw materials that are not immediately needed or transactions that are not processed on time
Transportation - unnecessary, not value adding movement of materials or goods
Correction - the waste associated with fixing errors and defects
Skills - the waste of skill due to resource used wrongly
Lack of safety - the cost associated with fixing issues due to insufficient safety
Waste can be identified by means of a tool called Value Stream Mapping (also called lean process mapping), where flowcharts document every step in a given process.
As a start, removing waste at the workplace of any environment is done using the 5S lean framework - sort, straighten, shine, standardize and sustain. When we are organized and can easily and quickly find what we need without going through a pile of other documents first, we are more productive and happy. Upon a successful 5S implementation, one would expect substantial reductions of the space needed for operations. Ensuring a tidy, organized and waste-free workspace is necessary before building highly reliable processes for business impact. Which leads us to the next concept…
What is Six Sigma?
Six Sigma is the concept of measuring the number of defects in a process, with the end goal being to achieve zero defects or deliver nearly perfect products and services. It is a statistic that measures the performance of processes. Quantitatively, it is defined as the level of 3.4 defects per million operations. The original Six Sigma idea sprang from Motorola in 1984 and was later further developed and applied throughout global businesses as a philosophy, strategy and a way to manage processes and business functions.
Six Sigma is based on the so called DMAIC methodology for problem solving - Define, Measure, Analyze, Improve and Control. The goal of these consecutive phases is to find a solution to a specific problem via use of tools and statistical methods that identify which variables x cause statistically significant changes in the variable y. Once a proper solution has been found, control mechanisms are put in place to sustain high operational performance that is linked to a specific business KPI. There are numerous tools and techniques one can apply within a Six Sigma environment depending on the point of time, type of issue and the individual context.
Six Sigma deals with process capability and aims to reduce and, if possible, eliminate variation in a process. Variation (also dispersion or spread) has different measures such as range, variance, interquartile range and standard deviation. The higher the dispersion in a process, the higher the possibility for having a defect, or for crossing the acceptable boundaries. Numerically, Six Sigma is linked to the square root of the variance, or the standard deviation, which is denoted as sigma (σ). In a normal curve, Six Sigma represents the data that is located within six standard deviations from the mean (99.9999998% of the data fall within +/- 6σ from the mean). For comparison purposes, three standard deviations from the mean correspond to 99.73% of all data and one standard deviation to 68.27%.
Six Sigma measures process capabilities, in reference to the normal curve of the actual process relative to the boundaries set by customer requirements. This is key to understanding the concept of Six Sigma. When the upper and lower limits of the customer requirements are at or outside the six sigma boundaries of the normal curve of the process, then we can relax - it means that we have 3.4 or fewer defects per million operations, that the probability for a defect is extremely low and that our customers will very likely be happy with the products and services we provide.
The majority of businesses are not at the Six Sigma level and getting there is not easy. Some studies have positioned the industry average of Six Sigma preparedness at the 4-sigma level, or 99.4% yield. The ease of achieving a Six Sigma level depends on the preparedness of the organization and in some cases the costs do not justify the gains. In other cases, it is mission critical to have Six Sigma implemented. For example, there are processes where not having a Six Sigma performance can be the difference between life and death (e.g. surgical operations), while some other industries may be able to get away with less than perfect products in the short term and risk some lost sales and profit erosion. A company is unlikely to benefit much by applying Six Sigma’s multiple tools and methods when it is still at the 2-sigma or 3-sigma level.
It can be difficult to sustain a Six Sigma environment due to the complexity of analyses and solutions that such perfection calls for. In low sigma readiness environments, which struggle to become on a par with competition, companies are typically better off applying basic problem solving and standardizing rather than using complex statistical analyses. In other words, applying the complete Six Sigma palette of tools is recommended for organizations that have already progressed significantly in terms of process knowledge and optimization.
In what situations do we use Lean vs Six Sigma?
Lean and Six Sigma can be used separately or in combination. Lean does not call for rigorous statistical analyses and typically targets situations where the issue is visible or easy to identify, and where a more obvious solution can be applied to fix the issue in question. Six Sigma, on the other hand, ensures statistically capable processes and can (but not always) require heavy use of statistical analyses. Six Sigma projects also tend to be longer in duration.
We use Lean to remove waste and improve process flow, and we use Six Sigma to reduce variation in a process that is necessary or seen as generating value to the customer. Lean is used to remove unnecessary steps and clear out the way for complex analyses. A business should deploy Six Sigma after the obvious waste has been removed and a more efficient process flow has been achieved. For example, if an administrative process flow includes an unnecessary step, such as an approval of one and the same document by two different managers when a single approval would be just as effective, this step must be removed before applying Six Sigma tools.
Variation is considered the main cause of waste so Lean and Six Sigma are closely interrelated, but variation is not waste as it refers to activities that the process actually needs. For example, when the number of defects in a batch is high due to common cause variation, this leads to wasteful activities consuming capacity and resources with no value to the customer, such as rework, retesting, scrapping, etc.
While Lean is more linked to process efficiency, the goal of Six Sigma is to achieve process effectiveness. In other words, Lean improves overall process flow or focuses on doing things right, while Six Sigma helps to pick the right things to focus on.
Most problems do not need the application of complex statistical analyses and can be resolved by using simple math, process knowledge and basic Lean or Six Sigma steps and tools. This takes away the anxiety and unwillingness of company employees to learn to run statistical programs on large datasets. Alternatively, organizations may deploy external consultants to deal with internal challenges that would benefit from a Lean Six Sigma approach. Consultants can help the management with:
projects selection for Lean Six Sigma pilots
Lean Six Sigma tools to internalize and in what functional context
KPIs to choose in LSS projects in line with strategic goals
data structuring and running more complex statistical analyses
planning and implementation of Lean Six Sigma projects and programs throughout the business
The benefits of combining Lean with Six Sigma have naturally led to a unified Lean Six Sigma approach in organizations aiming to achieve the highest levels of quality, efficiency and effectiveness. So at which stage of Lean Six Sigma is your organization?