![]()
Chapter 1
An Overview of Lean Six Sigma*
Jiju Antony, Roger Hoerl and Ronald Snee
1.1 Introduction
This chapter is an overview of Lean Six Sigma (LSS) as a powerful Operational Excellence (OPEX) methodology adopted by many Fortune 500 organisations around the world. OPEX has become an important strategy for many organisations today across the globe, despite of their nature and size. This includes manufacturers, financial service organisations, healthcare services, public sector organisations and most recently third sector organisations. Development of an effective OPEX strategy is a key factor for long-term success of modern organisations. Over the last decade, LSS has become one of the most popular and proven OPEX methodologies organisations ever witnessed in the past.
The concept of Lean Thinking (LT) developed from Toyota Production System (TPS) involves determining the value of any process by distinguishing value-added activities or steps from non–value-added activities or steps and eliminating waste so that every step adds value to the process. Lean focuses on efficiency, aiming to produce products and services at the lowest cost and as fast as possible (Antony, 2011). The commitment to LT must start at the top management level and should be cascaded down to various levels across the organisation to improve flow and efficiency of processes.
Six Sigma was developed at Motorola by an engineer Bill Smith in the mid-1980's. Six Sigma is a business improvement approach that seeks to find and eliminate causes of defects or mistakes in business processes by focussing on process outputs that are critical in the eyes of customers. Six Sigma principles can be used to shift the process average, help create robust products and processes and reduce excessive variation in processes which lead to poor quality (Shah, Chandrasekaran, & Linderman, 2008). The statistically based problem-solving methodology of Six Sigma delivers data to drive solutions, delivering dramatic bottom-line results (Snee & Hoerl, 2007).
The term Lean Six Sigma was first introduced into literature around 2000, and LSS teaching was established in 2003 as part of the evolution of Six Sigma (Timans, Antony, Ahaus, & Solingen, 2012). Since that time, there has been a noticeable increase in LSS popularity and deployment in the industrial world, especially in large organisations in the West such as Motorola, Honeywell, General Electric and many others (Laureani & Antony, 2012; Timans et al., 2012) and in some small and medium-sized enterprises (Timans, Ahaus, Solingen, Kumar, & Antony, 2014). LSS has been defined by Snee (2010) as ‘a business strategy and methodology that increases process performance resulting in enhanced customer satisfaction and improved bottom line results’.
This chapter addresses three aspects of LSS: the yesterday, then the today and finally the tomorrow. The yesterday aspects of LSS will be presenting the background to LSS, history of LSS and also the rationale behind the integration of Lean and Six Sigma. The today aspects will be looking into a number of themes including, LSS for public sector, LSS and innovation and standards for LSS certification. The tomorrow aspects will be looking into the future trends of LSS, the importance of developing a holistic approach of OPEX in organisations, the synergy between Big Data and LSS for problem-solving, sustainability of LSS and the use of LSS for dealing with human variation.
1.2 Lean Six Sigma Yesterday – The History of Lean Six Sigma
1.2.1 The Launch of Six Sigma
Within this context, Motorola was facing extreme pressures from overseas competition, particularly Japan. While it is impossible to set a definitive date for the beginning of Six Sigma, around 1987 Bill Smith and others began improvement projects that in many ways looked similar to TQM projects. Eventually, Mikel Harry and others helped Smith formulate this approach into an overall business initiative aimed at protecting Motorola's pager business. They named the initiative ‘Six Sigma’ based on the desire to reduce variation to the extent that specification limits for key process metrics were six standard deviations away from target.
Importantly, Six Sigma provided an overall ‘roadmap’ within Motorola, or problem-solving process, known as MAIC, which stood for measure, analyse, improve, control. MAIC effectively linked and integrated the individual tools. Therefore, employees could be trained in this one approach that was generic enough to be applied to a wide variety of problems, eliminating the need to reinvent the wheel with each new project. In addition, Six Sigma received clear management support, including supporting infrastructure, such as line items in budgets, resources, project selection systems, and so on.
Motorola achieved tangible results, and other organisations began to take notice. Honeywell and AlliedSignal, other organisations in similar markets to Motorola, launched Six Sigma initiatives around 1990. These also met with success. However, it was when GE CEO Jack Welch loudly proclaimed that GE was jumping into the Six Sigma game in late 1995 that the initiative moved off the back pages of the business section to the front page of the newspaper. Welch told Wall Street analysts that Six Sigma would be the biggest initiative ever launched by GE, and that it would be his personal number one priority for the next 5 years (Welch, 2001). Even before results started to pour in, GE stock began to rise sharply, and many other companies started looking more closely at Six Sigma.
GE also played a very significant role in the development of Six Sigma as a methodology. After some projects stalled because there was a lack of clarity on the specific problem being addressed, and on the overall objectives, GE decided to add a ‘Define’ step at the beginning of the MAIC process and created the process we now know as DMAIC (Hoerl, 2001). The Define step became critical – a make or break step that often determined long-term success of the project. The need for careful problem definition is well-understood among those researching problem-solving in general.
Based in part on GE Capital's success, other financial institutions began Six Sigma initiatives. One of the most successful has been by Bank of America, which was publishing savings in the billions of dollars annually. Similarly, Commonwealth Health Corporation launched the first major Six Sigma deployment in healthcare in the late 1990s and produced millions of dollars of savings in the radiology department alone within a year (Snee & Hoerl, 2005).
In the late 1990s and early 2000s, a large number of organisations, in diverse industries, launched Six Sigma initiatives, including DuPont, Dow Chemical, 3M, Ford and American Express, to name just a few. The US military began major investments in Six Sigma at this time as well. Overseas, companies in Europe and Asia began to implement Six Sigma to varying degrees, particularly Korean companies such as Samsung.
1.2.2 A Brief History of Lean
Lean has had somewhat of a tangential development history to Six Sigma. Much of what we call Lean Enterprise today is based on the TPS (Womack, Jones, & Roos, 2007). Of course, the TPS has roots that go back to Henry Ford's development of the assembly line and Frederick Taylor's work. This approach to manufacturing cars, which emphasised removal of all types of waste, including non–value-added human motion, began taking shape at Toyota in the 1930s and has progressed ever since. Krafcik (1988) is generally credited with the first use of the term ‘Lean manufacturing’.
In our view, there is some confusion between Lean and the TPS, in that some authors use the term Lean to refer to any business practice utilised by Toyota, while others use Lean to refer to a specific set of principles and tools (George, 2002). For clarity, we will refer to Lean Enterprise as the set of principles and accompanying tools outlined in George (2002), MacInnes (2002) and other sources that see Lean as based on TPS, but having a unique identity from Toyota.
While Six Sigma focused on collecting data in order to apply statistical methods to solve baffling problems, Lean was generally applied in a more knowledge-based approach, by applying time-tested principles, such as reducing inventories, pull versus push production systems, line of sight, continuous versus batch processing, cell manufacturing and so on, to reduce waste and enhance productivity. That is, while knowledge and data were needed by both methodologies, one can be reasonably accurate in generalising that Six Sigma was more data oriented and Lean was more oriented on applying proven principles based on knowledge and experience. All processes have waste, and sound principles can be applied outside of manufacturing to reduce waste and improve productivity. For example, the principle of line of sight – being able to physically see the production line – can be applied to financial transactions, in that those working in the financial process should have process transparency, in order to be able to ‘see’ the process in operation, at least electronically. Workflow-based IT systems are one example of providing line of sight to financial systems.
1.2.3 The Marriage of Six Sigma and Lean
Because both Six Sigma and Lean had produced tremendous results, but had limitations, some type of integration of the two was appealing and made intuitive sense. Books and seminars on the topic of LSS began to appear in the early 2000s, such as George (2002). As noted previously, Lean is not well suited to resolving complex problems that require intensive data analysis and advanced statistical methods.
Conversely, those implementing Six Sigma found that not every problem needed several months of data collection to resolve. Do we really need to collect data for 3 months in order to repave a parking lot that has potholes? Quality professionals found that Lean principles could be broadly and effectively applied with minimal data collection and achieve immediate benefits. Then, for more complex problems requiring intense data analysis, Six Sigma could be utilised. In our view, the key questions to ask when considering a Six Sigma versus Lean approach are
- Is the solution known or unknown?
- Is the root cause of the problem believed to be in a value-adding step in the process, or in the linkages between value-adding steps?
We have found that in many Lean applications, what must be done is known; we just need a method and tools to implement the known solution. This is because Lean is primarily a set of known principles, as opposed to data analysis techniques. The second question points to the fact that the principles of Lean are focused on the flow of information and material through the process. Therefore, if the root cause of the problem is a flow issue – in the linkages between value-adding steps – Lean is likely to work well. Conversely, if the root cause of the problem is in a value-adding step, Six Sigma is more likely to succeed for such problems. Fig. 1.1, from Snee and Hoerl (2007), illustrates this point.
Fig. 1.1. Process View of Lean Six Sigma.
The key point is that organisations need to avoid having ‘favorite’ methods that they apply to all problems, even if the method is not suited for that particular problem. Integrating Six Sigma and Lean into a broader approach called LSS has enabled many organisations, including GE and many of those mentioned previously, to solve more problems quicker and enhance the bottom line faster. It can be considered state of the art in improvement at the time of this writing.
1.2.4 Lean Six Sigma Today – The Current State of Lean Six Sigma
This section presents the today aspects of LSS which includes LSS for the public sector, the link between LSS and Innovation, standards for LSS certification and the current burning issues around the certification process.
1.2.4.1 Lean Six Sigma for Public Sector Organisations
Although Lean has been widely used by many public sector organisations in Europe, the use of Six Sigma and LSS are in their early stages. The challenge for many public sector organisations today is to reduce spending, while retaining or even improving the efficiency and effectiveness of service delivery. Using LT, we need to reduce waste and maximise the value-added activities for customers, and by using Six Sigma, we need to deliver consistent services by reducing process variation. Some of the benefits of utilising LSS in public sector organisations include
- Costs associated with fire-fighting and misdirected problem-solving efforts with no structured or disciplined methodology could be significantly reduced
- Increased understanding of the VOC (Voice of the Customer) and the associated CTQs (critical-to-quality characteristics, e.g., teaching quality of a professor in a university sector) which will have the greatest impact on customer satisfaction
- Reduced number of non–value-added operations through systematic elimination, leading to faster delivery of service, faster lead time, faster cycle time to process critical performance characteristics to customers and stakeholders, etc.
- Transformation of organisational culture from being reactive to proactive thinking/mindset
- Many managers lack statistical knowledge and the ability to apply statistics to problem-solving. LSS provides a fundamental framework for managers to use practical and proven applied statistical tools and techniques for problem-solving in public s...
