Lean six sigma has its roots in the two most effective quality improvement techniques for todays business world. Six sigma can be taken as a business strategy and a science aiming at the reduction of costs associated with manufacturing and service operations of the organization resulting in long term significant improvements in performance ultimately increasing customer satisfaction through a combination of statistical and business methodologies (Thomas et al., 2009). The concept of lean has been described by Naslund (2008) as a pull system that promotes all the prerequisites of world class manufacturing for products and meeting the demand with lower levels of inventory. The idea is the reduction of holding cost as the materials arrive only when needed and all the production carried out has its basis on the demand forecasted. Evidence based information clarifies that the companies employing either of the two approaches reach a level where they experience diminishing returns (Arnheiter and Maleyeff, 2005). To attain the best of both worlds, the attention of academics and practitioners has been drawn to the implementation of the combination of both approaches.
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This essay has a twofold purpose. The first is to review the work done by people who have studied the effectiveness of the combination of lean and six sigma approaches and have presented them in the form of papers. In the findings section, the effectiveness has been supported by the examples from real life organizations where lean six sigma has been successfully applied not only in manufacturing but in service organizations too. The same includes two cases where the approach didn't work. The second is the discussion that presents the lessons that are learned as to how far is this combination receiving attention and consideration and the factors contributing to the success. Information from the cases is discussed in terms of advantages and disadvantages experienced as an outcome of implementing the combined approach in both the sectors that can serve as the basis to measure the overall benefits achieved. The conclusion highlights the main themes of the essay and few recommendations for those interested in conducting a study on this topic.
The organizations currently implementing either of the techniques can be benefited if they adopt the combined approach as described by Arnheiter and Maleyeff (2005) that a company that has longer manufacturing lead times and does not deliver on due dates cannot achieve greater customer satisfaction no matter the quality of products conforms to six sigma. In order to be competitive the company needs to be good at the quality of both, the product and service. Adoption of lean management system by a six sigma organization will help it in getting rid of all kinds of wastes, such as reducing setup times and mapping the value streams. Similarly a lean organization can gain advantages of six sigma practices by making decisions based on scientific studies and by promoting methods to reduce variations in the production quality. The two approaches complement each other and thus can work for the sustainable competitive advantage of the organization as has been found out by Moxham (2008) saying that "Both lean and six sigma take a process view and converge in their focus on variation, flow and the customer". Lawson (2007) has emphasized the significant benefits can be attained from the integrated implementation of the two methodologies by presenting the view that the combined approach can be taken as strategic and tactical as it is an organizational philosophy of removing waste at all levels and reducing the defect rate of production to increase quality moreover it encourages the organization to determine, on a continuous basis, the rooms for improvement. The same author has presented the beliefs of Bill Carrier and Bill Trudell who consider the adoption of lean six sigma tools and operating philosophies, the need of the hour, for any company to become successful in the international arena. Moreover, the objective of employing the combined approach has been explained by Garg (2007), distribution manager at Honeywell, holder of a green belt in six sigma and trained in expert techniques of lean, according to him it is the establishment of an effective delivery system not only in terms of product and service but also in terms of employee performance where he works on processes like engineering, administration and manufacturing, to add value for the customer (CIPS publication, 2007). Lean Six Sigma builds on the extensive knowledge, tools, techniques and methods developed over years for the improvement of operations. It has enabled the organizations to experience innovations that have
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ultimately brought significant improvement and quality in their performance throughout the enterprise. (Byrne et al., 2007)
Not only is this combination being considered in terms of its effectiveness but work has also been done on what to do to implement it as is described in "what is lean six sigma" (George et al. 2004, cited in Navy enterprise) that to achieve the success, four key elements must be considered which include, delighting the customer, improving process by reducing defects, using teamwork to solve problems and making decisions based on data and facts. Similarly George (2002) suggests that the companies that are striving to achieve the benefits from both, lean and six sigma strategies need to design and employ a standard operational framework (cited in Thomas et al. 2008). Expanding the scope of lean six sigma and clarifying the misconception that it only works for manufacturing sector, Peterka (2005) has presented his findings that in developed countries with service based economies, the top management of all the giant organizations is showing deep concerns and interests to achieve the significant and long lasting benefits by adopting and implementing the six sigma quality and lean efficiency in a combination called lean six sigma.
Dr. Inozu (2009) has presented that the adoption of lean six sigma by companies is a better way to do business as the economic crises deepens as organizations will focus on how to make the best use of scarce resources, improve performance and reduce waste. He added on by mentioning that this approach is now applied in all industries throughout the world that include federal agencies, state and city governments as well as small size companies. The applicability of the approach to the small and medium sized enterprise has been proved by the study conducted by Thomas, Barton and Chiamaka (2009) described in the following case:
3.1) Example of Lean Six Sigma (LSS) in Manufacturing
Company A is a manufacturer and service provider of specialist seating systems for industries including automotive and aerospace. It has a position of a market leader in research and development and this owes to its uninterrupted attention to quality, cost, delivery and achieving high levels of customer satisfaction. The increasing pressure from the competitors required the company to become more responsive and this raised the need to ensure decline in quality problems that were caused by errors in the system and to increase productivity and performance of the machine to the highest level. The management decided to identify and sort out customer concerns in the initial stages to prevent the suffering of relationships and this brought the concept of lean and six sigma into picture. This approach provided with a structured means to solve issues that were considered critical to quality. The methodology adopted for the implementation was DMAIC where in the define phase the team identified that the firmness value of the seat was seriously low and was the main problem found out by Pareto analysis. In the measure phase, ten chairs were drawn randomly from the production line and were examined that confirmed the problem was real as six out of ten did not come up to the specifications. Brainstorming was conducted to analyze the problem at hand and the team came up with a number of factors that could influence the firmness and after filtering, only the main factors were taken into consideration for further study. In the improvement phase, the interaction between the factors was studied by the use of design of experiment to figure out the correct operational factor setting. The control was done by setting up a statistical process control chart and five forms were taken as samples out of the production line ensuring that all forms passed the firmness test. For lean implementation, the first step was to clean and standardize the working methods so 5S system was adopted. All the non value adding activities were identified by the value stream mapping (VSM) which gave the idea to design ways to reduce waste and improve flow without the system's reconfiguration. The setting of factors done by six sigma adoption actually reduced the set up and start up time and made savings in energy consumption up to 12%. The success achieved by the LSS implementation has encouraged the company to extend to all the plants as it experienced a number of benefits including a reduction in cost of rejects to £36,000 (previously was £69,000), equipment downtime reduced from 5% to 2%. An overall attainment for the product was 99% for the product.
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Following is the figure of the integrated LSS model of company A.
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Source: (Thomas et al, 2009)
3.2) Examples of Lean Six Sigma (LSS) in Services
Peter Peterka (2005) states that the initial application and the success of six sigma and lean can be traced back to the manufacturing organizations but the effectiveness of the two approaches is the same if applied to service organizations. His findings can be supported by the effort made in presenting case studies where service industries have attained benefits. Curtis, An and Gettys (2008) have presented the success of implementation of LSS principles in retail stores.
3.2(a) Case 1
A large global retailer in North America was facing stagnant sales in its office chairs although the sales were on the increase in other regions for the same product. Once a chair was sold, its replacement process from the 40 stores was showing 75% failure. Customers could not find the assembled chairs as they were not displayed and therefore did not make a purchase decision resulting in loss of sales. The management decided to implement LSS and came up with a cross-functional team to work on the project successfully. The team made use of DMAIC methodology and figured out that missing display of chairs on daily basis was 15%. The complexity of assembling a chair which required 45 steps also rose as an issue to be considered. The team got to a number of root causes including the inefficient inventory management, complex store formats, missing consistent assembly process and lack of signage affecting recovery processes. A pilot testing was conducted to implement the optimal solution resulting after the brainstorming that included chair assembly training with the use of standardized assemble tools, efficient inventory management processes and simplifying store format. There was a considerable reduction in missing chair displays and improvement in recovery standards. The process generated more than $ 3 million from the sales of chairs from this retail store and an estimate benefit of $ 14 million upon the implementation of the same throughout the chain to other regions.
3.2(b) Case 2
The planned promotions and advertisements boost sales and this translates into the amount of product inventory distributed to the concerned stores. A large retailer operated a number of stores in urban areas where the sales volume was high but the stores did not have much space to hold a large amount of inventory. The products somehow stored into the constrained spaces gave rise to a number of issues including the problems with handling of products, management of inventory, improper use of labor, upset management and dissatisfied customers. To deal with this problem, an LSS approach was adopted to improve inventory flow in a sample of 45 constrained space stores. The statistics of the stores gave the results that the average holding was 10.5 weeks and every week they received 5 shipments. The cross-functional team of experts came up with a number of inputs critical to the inventory supply including increasing lead time of order cycle, the stores with a minimum inventory, promotion plans and displays for items that were stored in bulk quantities. The solutions put forward by the team were the identification of three combinations of implementing changes in system for the item order cycle and lead time. A group of six stores was considered for testing each approach. The management of inventory turned out to be effective with all the three approaches. Some other measures were also taken that included the shipment reduction to one per week, replenishment of mostly promoted items closer to sales and sending inactive products to constrained stores. The overall reduction in inventory achieved was by 8,800 units per store and average holding to 7 weeks indicating a £3.3 million inventory reduction.
Of all the case studies read in understanding the efficiency of LSS, there are few points common to all including the emphasis of solving the problems in cross-functional teams, starting right from the initial stage of the process so that quality is ensured at all levels till the process ends, making continuous improvement a part of the organization's routine activities, training to employees that not only helps LSS implementation but also adds to the employee's better performance for the rest of his work life. The potential advantages for pharmaceutical and biotech industries have been mentioned by six sigma training assistant (2008) that by adopting the scientific and statistical tools of LSS can automatically reduce the chance of occurrence errors caused by human and process. Alongwith the operational and financial benefits, there are intangible advantages gained by LSS as explained by Goyal (2002) stating that improvement stories when presented to the customers can build the company reputation as a leading quality supplier which ultimately increases the volume of business. A very important lesson for organizations is to understand the way of bringing about changes in the organization as Naslund (2008) has highlighted that the functional approach to change can actually result in improvement at the cost of performance of the rest of the organization and it will be difficult for the company to manage fragmented processes.
Where many organizations have been benefited from LSS, there are evidences where it did not work as expected and is proved by the scenario posted by an employee of Ford Motor Corp (2006) as he explains that the implementation of LSS has brought in corruption in the organization since the middle managers overstate the results to show a success to top management although the return is less than the cost of implementation. He states that the diversion of employees from their assigned tasks to training for LSS actually left parts of the business unperformed. Another idea is evident from the case published on the website of a company, Poppendicke.LLC (2008) that the companies while adding lean to six sigma, should re-think as the processes are sometimes slow although the point of adding lean is to speed up the flow so there should be a clear understanding of the hand-in-hand relationship of speed and quality otherwise it will not result as desired. Replicating the idea will not work, the methodologies adopted need to be customized according to the nature of operations.
The combined implementation of lean and six sigma has proved to be the road map for all the organizations striving for achieving the highest quality in products and services, higher levels of customer satisfaction, streamlining the flow of inventory and implementing standard procedures for clean working conditions. The academics have provided with a lot of evidence based information on the emerging approach of LSS and have been supported by the practitioners where they have presented the case studies of its successful implementation starting from manufacturing sector and extending to the services. The popular methodology used by many organizations to start with LSS implementation has been DMAIC. This owes to its systematic approach in tackling the issues at hand from defining the problem all the way to controlling and preventing failures from reoccurring.
From the information at hand, the increasing concerns of the organizations to implement the new approach proves its success and by the time, knowledge of does and don'ts of LSS from the success and failure stories of the applicability in both, the manufacturing and service organizations will provide a guidance for the future practitioners. The long lasting promising outcomes are an encouragement for firms that the approach is worth adopting.