Basics
Similarity
• Both Lean and Six Sigma (SS) help reduce process complexity.
• Both are data driven and measurable and have a framework for effective problem solving
• Both need to be supported by people (from top to bottom) and culture
• Both reinforce each other such that return on invested capital ( goods and people) is faster compared to what is achieved if anyone is implemented
Dissimilarity
• SS recognizes the variation in process that hinders consistent quality outcomes
• Lean centers on identifying and eliminating waste (non value adding) activities and improve the flow speed
• SS is prescriptive in its approach whereas Lean is more inrospective not mandating where the voices of the customer must be included.
There is a preconceived notion that both SS and Lean are only for manufacturing, however that is far from real. In service applications, costs that add no value to the customer are higher than in manufacturing in terms of percentage and absolute dollar value. Because, manufacturing used both these methodologies were widely, the terminology like WIP, workstation turnover, pull systems etc appear to have no meaning for people from services industry.
Why services are replete with waste:
Service processes are slow. Slow processes are usually expensive and prone to poor quality. A service process is usually slow due to wait and queuing. Lack of information, multiple decision loops, and red tape are common waste generators.
Lean Six Sigma (LSS) is about getting rapid results, which track to the bottom line in support of strategic objectives. It allows organization to leverage cost, quality and speed rather than making a tradeoff between them.
Core elements of SS
A powerful SS concept is that the outcomes of a process are a result of the inputs to the process. Y = f(X1, X2, X3,,, Xn). A deeper meaning to this equation is that the LSS team must discover the various Xs that will actually alter the outcome Y. A promise of SS is that one full time Master Black Belt will be able to generate $500,000 worth of increased operating profit per year. To facilitate a SS project, basic requirements include the involvement of senior management, essential workforce training, resource allocation, and reduction of the variations in the CTQ (Critical to Quality) requirements of the customer.
A handful of terms
Lead-time = Amount of WIP/Average completion rate (Little’s Law). WIP can be emails, calls, orders etc. Reducing WIP cost mostly intellectual capital whereas it takes investment capital to alter the completion rate (Usually used when the work involves a direct customer handling. Customers are not the same as Things-in-Process and often show unpredictable patterns in demand).
Delay (Q time) = Time for which a task sits waiting to be worked upon
Value add / non-value add = any work that the customer will pay for is value add. Anything else is non-value add (waste). Long set up times are also non-value adds.
Process efficiency = Value add time/Total lead time
Core elements of Lean
Most processes are “fat.” One mechanism of controlling lead-time is to reduce WIP. Every process should operate on pull to eliminate variation in lead-time. Each organization needs to create its own pull system. Pareto’s principle of 80/20 is valid. Only work that is visible (data based) can be improved. In services, it is difficult to draw out the process and even more difficult to judge the amount of WIP. A good example of such an activity is the set up time or bring lock in period in moving from one task to the other.
High velocity of an object through a process does not reduce quality because the speed comes by reducing wasteful activities and not the key steps. A lean service process typically is one whose value added time is at least 20% of cycle time.
Why do they need each other
It is important to note that speed and cost gains from lean can instantly be erased by an increase in variation leading to WIP and lead times.Conversely any process (even the near perfect ones) will eventually become slow, cumbersome and coslty if it is not continuously tuned for reducing waste.
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