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Enterprise Integration & IT Strategy Blog

Lean and Six Sigma

Ashu Bhatia, Director of Delivery  :  08 June 2009 / 11:45 AM  :  0

Recently I was on the panel of a CXO discussion around how to optimize costs and increases business productivity, when someone from the audience asked about Lean Six Sigma and its relevance, especially in today’s economy.

They asked is it Six Sigma that has been more effective or have Lean principles helped more? And how exactly do they differ? That set of dialog encouraged me to write this post. There is always debate about Lean and Six Sigma being so close that practitioners love to dichotomize in their thinking.

So what is Six Sigma?

• A Metric? - Less than 3.4 defects per million opportunities of product produced/ service rendered
• A Vision? - Six Sigma is an overall strategy to accelerate improvements in processes, products, and services
• A Value? - Strive for continuous improvement in all activities
• A philosophy? - A proven “pursuit of perfection” business initiative that creates breakthroughs in profitability, quality, and productivity

Six Sigma practitioners follow these tenets as a business philosophy:

• If something cannot be measured, we really do not know much about it.
• If we don't know much about it, we cannot control it.
• If we cannot control it, we are at the mercy of chance.

Six Sigma started in the manufacturing industry with emphasis on management of efficient processes, efficient management of people, dedication to measurement systems, etc – mostly Operational Excellence. But it became apparent that business success was more than the absence of negatives (defects, delays, cost overruns). Six Sigma then began to encompass positives like customer loyalty and delighters in new products. From operational excellence, Six Sigma has moved towards Customer Intimacy and Product Leadership value disciplines through its DFSS / DMADV tools. There is always debate that Six Sigma does not go that well with a Innovation focus. But all said and done the tools offered are used everywhere in different flavors and different terms:

• SIPOC - A top level process mapping tool to document a process in the context of suppliers who provide inputs which are transformed into outputs for the customer.
• Cause & Effect Matrix - A process of identifying problems, finding their causes, and creating the best solutions to keep them from happening again (fishbone diagram).
• Failure Mode & Effects Analysis (FMEA) - A tool used to identify ways the process can fail, estimate the risk of the failure, identify causes of failure, prioritize actions to reduce failure risks, develop control plans to prevent failures
• VOC - The “Voice of the Customer”; the customer specifications/ requirements that dictate acceptable and unacceptable outcomes and drive actions.
• VOP  - The “Voice of the Process ”; the company's processes doing what they need to produce products/ services.
• CTQ - “Critical to Quality”; characteristics that significantly influence one or more of the customer requirements.

Of course, recently Six Sigma has begun to be used in the IT industry as Six Sigma for Software.

And what is Lean?

Lean is a philosophy that shortens the time line between the customer order and the shipment by eliminating waste (non-value-adding activities). This philosophy is based on the following principles:

• Value – what the customer buys
• Value stream – how value is delivered
• Flow – putting value added steps in sequence. The “flow” or “value-stream” perspective represents a shift from vertical to horizontal thinking. Flow is enabled when materials and processes are standardized across the supply chain to reduce complexity.
• Pull – triggering flow from the customer needs. E.g. have only projects in IT that the pipeline can take i.e. Demand Management.
• Perfection – continuous improvement

Value Added

• Any activity that increases the market form or function of the product or service.  (These are things the customer is willing to pay for.) For .e.g in the Airline industry – actual flying time or in the Healthcare industry – diagnosis/treatment.

Non-Value Added = Waste

• Any activity that does not add market form or function or is not necessary.  (These activities should be eliminated, simplified, reduced or integrated.). For e.g. in the airline industry – lining up to check –in or in the Healthcare industry – sitting in the waiting room waiting for an appointment. There are specific categories of waste that Lean targets:
   
1. Excess (or early) production - Overproduction
2. Inventory - documents, forms, supplies
3. Waiting  - e.g. delay in obtaining an appointment or test results
4. Transportation (to/from processes)/ Motion – for example leaving exam rooms for equipment, chart forms
5. Extra Processing like inspection
6. Defects
7. Underutilized people / resources

The way I look at it is the Lean is the management philosophy and Six Sigma is a great set of tools that help you chart your path. You have got to use the Six Sigma to first reduce variation and then deploy Lean management to take your processes to a newer level altogether.

Posted in Enterprise Integration & IT Strategy on 08 June 2009
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Tagged: Business Architecture   Project Methodology   

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