Lean Six Sigma - George 3av3e

Lean Six Sigma Combining Six Sigma Quality with Lean Speed

by Michael L. George McGraw-Hill © 2002 300 pages

Focus Leadership & Management

Take-Aways • Adding Lean to the Six Sigma approach creates unprecendented value.

Strategy Sales & Marketing Finance Human Resources

• Lean management focuses on eliminating elements from the production process that don’t add value for the customer. • Lean doesn’t speed up processes; rather, it cuts downtime between processes.

IT, Production & Logistics Career Development Small Business Economics & Politics Industries

• Six Sigma aims “to achieve lasting business leadership“ by focusing on quality. • Six Sigma depends on an effective infrastructure of teams and leaders. • Top management must fully commit to Lean Six Sigma to make it succeed.

Intercultural Management Concepts & Trends

• Prepare your Lean Six Sigma initiative well to get it smoothly off the ground. • Involve your entire company to ensure that the initiative lasts. • Use the “DMAIC” approach to structure your improvement projects: “Define” goals, “measure” the problem, “analyze” the information, “improve” the process and “control” the outcome. • Apply Lean Six Sigma principles to the earliest stages of product development.

Rating (10 is best) Overall

Applicability

9

9

Innovation 10

Style 7

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Relevance What You Will Learn In this Abstract, you will learn: 1) Why combining the efficiencies of Lean production with the cost control and quality tools of Six Sigma creates value and 2) How to implement Lean Six Sigma at your company. Recommendation Six Sigma devotees may dispute the need to add anything to Six Sigma, but a shot of Lean thinking provides a production boost. Consultant Michael L. George contends that Six Sigma reduces product quality variation but does nothing to improve delivery time. That may not be strictly true. However, the author’s analysis and presentation of the Lean Six Sigma approach is lucid and straightforward. The explanation of Six Sigma alone is much clearer than some other texts on the subject and even some Six Sigma veterans may appreciate the refresher. George provides some compelling examples of companies that have successfully used the Lean Six Sigma approach. getAbstract recommends this book primarily to leaders and managers of firms that rely on factories and other production units. However, the author also supplies practical information that will be relevant to service providers and to every company that cares about customer service and efficient production.

Abstract

“Sometimes we regard our customers like the man who has one foot in the fire and the other in a block of ice: on average, he should be comfortable.”

Why Combine Lean and Six Sigma General Electric CEO Jack Welch famously described Six Sigma as “the most important initiative GE has ever undertaken.” Yet, Welch itted that Six Sigma alone was not enough to achieve the performance improvements the company needed. In his 1998 annual report, he said that GE had managed to “move the mean” and achieve great improvements. However, it had not managed to eliminate variances. An improvement of average delivery times, for example, means little to customers. A customer does not experience the average. He or she may experience a very satisfying faster-than-expected delivery or a very frustrating later-than-acceptable delivery. Six Sigma focuses on defects, but says nothing about time. When Jack Welch recognized the insufficiency of Six Sigma, he added a new measure he called “span.” This term refers to the variation in delivery based on the customer’s requested delivery date.

“The fundamental thesis of Six Sigma is that variation is evil.”

In December 2000, a survey in Industry Week magazine showed that Jack Welch was not the only manager struggling with the difficulty of reducing delivery time to a predictable, reliable standard. The survey found that more than half of the firms that responded failed to achieve the world-class objective of meeting delivery deadlines 98% of the time, and a whopping three-quarters hadn’t been able to cut their lead times by 20% during the five years prior to the survey. Lean is all about speed. Six Sigma is all about quality. Together, they make a winning combination. Lean Six Sigma addresses both the activities that affect the customer’s perception of quality, and those that cause delays, while simultaneously keeping costs under control. Lean Six Sigma

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“The Lean Six Sigma culture leaves nothing to chance.”

“Rapid improvement requires both Lean and Six Sigma.”

“Eighty percent of the delay in any process is caused by 20% of the activities.”

“It does no good to have your leaders nod their heads in an executive committee meeting, but then bouth Lean Six Sigma to their own troops.”

The Essence of Six Sigma Six Sigma aims to “achieve lasting business leadership and top performance applied to benefit the business and its customers, associates and shareholders.” It provides a measure to assess quality and sets a goal of near-perfection. Six Sigma requires a quality-driven culture marked by: • “Customer centricity” – This entails translating customer input into measurable aspects of the production process, identifying elements that are “critical to quality” (CTQs) and defining failures to deliver CTQs as defects that must be solved. • “Financial performance” – Total Quality Management (TQM), a system that predates Six Sigma, also focused on quality. It exhorted believers to pursue quality indiscriminately with the fervor of a revival preacher. It was a moral commitment. In contrast, Six Sigma is all about financial results. Its leaders must add between a quarter of a million and one million dollars to the bottom line each year. • “Management engagement” – Engagement means more than lip service. Managers, even the most senior ones, must take an active role in Six Sigma and must keep its projects in line with the organizational strategy. • “Resource commitment” – Companies must commit between 1% and 3% of their workforce to Six Sigma. “Champions” and “Black Belts” are full-time Six Sigma professionals, chosen precisely because they are the company’s future leaders. The other staff will also have to contribute to Six Sigma projects. • “Execution infrastructure” – Six Sigma Champions start by focusing on the financial performance goals that the CEO sets. They translate these goals into operational , turn the details over to highly trained Six Sigma Black Belts and pursue the achievement of these goals as leaders of organized teams. The Six Sigma approach mobilizes every level of the corporation to deliver process improvement results.

The Essence of Lean Lean is a “process philosophy” that aims to “eliminate wasted time, effort and material,” to “provide customers with make-to-order products” and to “reduce costs while improving quality.” Lean doesn’t just mean speeding up the production line. In fact, haste often does make waste. If you need an hour to do a process correctly, then take an hour and do it right. But most factories have variable delays between steps in the process. Maybe a machine breaks or a parts delivery is late, or maybe a scheduling bottleneck or emergency run causes an unexpected interruption in production. Lean wrings wasted time out of production processes by reducing the time spent waiting. Lean relies on a metric called “process cycle efficiency.” This metric is the ratio of “valueadded time” to “total lead time.” Value-added time is the time you spend on a product that actually increases the perceived value for the customer. Total lead time refers to the overall production time. The more nonvalue-adding time in your production process, the lower this ratio is – and the more room you have for shortening the variable delays. Lean management reduces inventory, thus saving working capital. It reduces handling, which saves labor expense. It cuts storage costs and space requirements, and reduces lead time, thus helping sales and building revenue. When you watch out for “time traps” in your processes, heed these laws: Lean Six Sigma

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“The very first actions associated with Lean Six Sigma implementation – getting CEO engagement and deployment planning – are focused at the highest level of the company.”

“Time and again, at company after company, experience shows that being able to deal effectively with the human element of improvement is a more critical determinant of team success than the rational, analytical processes and tools.”

“Actual stock market data shows that only companies with differentiated products and services can sustain ‘above market’ profit margins.”

“Once you can deliver a product quickly, Design for Lean Six Sigma is the next logical step to drive down product costs and improve design quality.”

• “The Law of the Market” – Prioritize CTQ elements. • “The Law of Flexibility” – Keep your processes adaptable by minimizing your batch sizes. • “The Law of Focus” – Note that “80% of the delay in any process is caused by 20% of the activities.” • “The Law of Velocity” – Velocity moves inversely to work in process (WIP) and variations in supply and demand.

Lean + Six Sigma Separately, Lean and Six Sigma are powerful. By merging them, you may cut 80% from lead times and 20% from costs, and create a 99% improvement in delivery times. How do you bring about this combination effectively? Follow these steps: 1. “Initiatiation” – Involve the CEO, create the vision and train the top level. 2. “Selection of projects and resources” – Dedicate the best people, inculcate a mindset that does not allow product variations, and train Black Belts in team leadership and Six Sigma techniques. 3. “Implementation, sustainability, evolution” – Saturate the organization with Lean Six Sigma. No matter what your improvement project is, the “DMAIC” formula can help you structure the path from “project idea to an active project.” The acronym stands for: • “Define” – Spot an improvement opportunity and outline the project goals. • “Measure” – Find data that helps you measure the problem and track the progress of the project. • “Analyze” – Spend time understanding the data you have compiled and detecting connections between them. • “Improve” – Implement your solutions. • “Control” – Make sure your improvements will last. Each step includes a series of “tollgates,” which are meetings where managers, Black Belts and Champions carry out these actions: • • • • • • •

Hear presentations from the team. Question the team. Determine whether the project is on track. Assess the competence of the team. Counsel the team. Plan to run political and organizational interference to help the team. Check progress against schedules.

Putting It All Together Caterpillar is one of the leading practitioners of Lean Six Sigma. The company has a four-phase approach to deploying Lean Six Sigma in the organization and making it a standard approach in the company. The phases are: Lean Six Sigma

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• “Comply” – Top executives agree to invest in and drive Six Sigma. • “Commit” – Build true belief, aided by publicizing successes. • “Embed” – Make Lean Six Sigma a defining part of everything that happens in the organization. • “Encode” – Make Six Sigma part of the company’s DNA. “Any company that can reduce the costs of holding raw materials will gain a competitive advantage in its industry, from a viewpoint both of lower cost structures and of increased manufacturing flexibility.”

Building momentum at the beginning of the institutionalization process is crucial. Select high-profile projects and allow top people to dedicate all their time to the initiative. Keep up momentum, for example, by communicating Lean Six Sigma’s benefits and success stories. Finally, expand the scope across the organization. And keep in mind that institutionalization won’t happen overnight. Lean Six Sigma can help improve processes not only in one workstation but in your whole company and even across the entire supply chain. A long lead time, in and of itself, makes it more likely that variation will occur. It creates extra expense. Several Lean Six Sigma principles help reduce lead times and variation, including: • • • •

“A Lean process is one in which the value-added time in the process is more than 25% of the total lead time of that process.”

Capping the permissible amount of work in process (WIP). Keeping WIP flowing smoothly. Correlating material in the line to form units or production batches. Using a “pull system,” a set of procedures that collectively ensure that material will enter the line only when the line is ready to receive it. Readiness is a function of the WIP caps, flows and batch sizes.

Companies reap the greatest gains from Lean Six Sigma when they use this approach from the beginning, by starting to implement it at the initial product design phase. One heavy-equipment company redesigned a machine using Lean Six Sigma and managed to cut lead time by two-thirds (11 months instead of 36 months), recapture market share without sacrificing margins. They successfully boosted customer satisfaction while cutting costs.

Conclusion Both Lean and Six Sigma take a strongly quantitative approach to reducing inefficiency, waste, defects and variability in important processes. Lean attempts to make lead times and delivery times more predictable by reducing the delays that occur between production activities in a manufacturing process (or service delivery activities in a service process). Six Sigma targets variations in defect rates and ensures reliable, consistent, predictable service and delivery performance. The combination of Lean and Six Sigma promises astounding improvements in customer satisfaction, revenues, cost reduction and other important performance dimensions.

About the Author Michael L. George is founder and CEO of The George Group, the biggest Lean Six Sigma consultancy in the United States. Lean Six Sigma

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