Lean vs Six Sigma

I am assuming you have an MBA, are getting one or are thinking you may like to have one. You don't need one but it does make you feel slightly more justified when you speak or write about business topics. It's a generalist, not a specialist degree after all. Anyway, during my MBA studies I was taught about Toyota's lean manufacturing principles, as well as GE's love affair with Six-Sigma. In essence Toyota cuts out waste by eliminating duplication of effort and designing both the production line and the product to have the minimal number of parts, bottlenecks or possible problem areas. It minimises assembly times (fewer parts doing multiple jobs) and thus saves time and money whilst boosting production. It builds what the customer actually wants and nothing more. It's also based on incremental improvement from the shop floor as well as above (or below or sideways, whatever) and it's complementary with just-in-time assembly. You buy just enough parts to make just enough cars to meet immediate demand and avoid having bins, rows or yards full of parts or completed products. Makes sense, doesn't it?

Unless you want to save the planet, of course. What happens is that the production is refined to the nth degree but the product - although reliable and long-lived - is almost irrepairable in a traditional sense. What were once multiple, low-cost serviceable parts become 'modules' of high cost replaceable parts. You remember cars you could fix for a few dollars? Well complete cars are cheaper and better today but when you break a bit - like a gearbox - you are more than likely required to buy an entire gearbox to fix it! OK, that's an extreme - but increasingly that's where it leads. It suits the car makers - they make more stuff, cheaper, and sell more. But it's more energy used overall, more otherwise healthy parts rendered useless an dmelted down (at an energy cost). It's all about faster life-cycles, mass consumption and saving waste at the factory, and less about maximising serviceability, product life-times and re-use. So it has a downside.

And Six-Sigma. well again it's about minimising factory or production waste, in both effort and materials, and getting the greatest consistency of quality possible. Just imagine if you make no errors in production - or just 1 in a million - and your competitor makes 10 such faults in a million - what an advantage you have! You have less cost soaked up in in stopping production, replacing parts or re-making faulty product. And fewer returns.

So Six Sigma and Lean are both process improvement methodologies that focus on reducing waste associated with production processes. Six Sigma is particularly about eliminating defects in any process. The fundamental objective of the Six Sigma methodology is the implementation of a measurement-based strategy (can't manage what you can't measure!) that focuses on process improvement and variation reduction. Build with tight tolerances and don't go outside. GE has used it to great effect.

However Lean is more about speed and efficiency in the process. Lean is a systematic approach to identifying and eliminating waste, where waste is defined as anything that does not add value to the client (anything they don't think they want, or that doesn't register as useful. That 6th cupholder may be going too far, for example, in a 5 seater car). So whereas Six Sigma eliminates defects it does not address the question of optimising process flow. By adding Lean as well each approach can work in concert to result in dramatic improvement within an organization. They make a powerful combo.

So what are the Lean principles?

• Value: Keep asking what the customers value and want
• Value Stream: Map the flow of work and look for ways to speed it up by reducing waste and the amount of work in progress
• Flow: Do work so that it flows smoothly and without interruption; mistake-proof the process, and solve problems at their source to achieve higher quality and productivity
• Flexible Pull: Produce only what the customer requests, when they need it
• Continuous Improvement: Define, measure, analyze, improve, and control production.
  

By applying these principles organizations have used the Lean process approach to shorten delivery cycle times, increase quality and the value of their services, improving their competitiveness. As I say, however, they is a potential drawback for the world's energy and resource reserves. Whilst savings are made at the factory there may be no such savings in the overall scheme of things - until we start to value our environment a bit more! Do the math yourself and come back to me!