Out of the Crisis, W. Edwards Deming, 1982

Chapters 1-2, 6-9, 11 and 16 provide a good introduction to the science of variability and quality.  The author’s unique personality makes this a memorable work, even though some content is repeated and some of the author’s personal views must be ignored or discounted.

 

The Goal, Eli Goldratt and Jeff Cox, 1984

This 300 page novel illustrates how a sequence of variable events operates and how it can be managed effectively.

 

The Toyota Way, Jeffrey K. Liker, 2004

Chapters 1-4, 7-20 describe the power, principles and components of the Toyota Way.

 

The Six Sigma Way, Peter S. Pande, Robert P. Neuman and Roland R. Cavanaugh, 2000

Chapters 1-5 provide an executive overview of Six Sigma and why a firm might invest in this approach to operations excellence.  Chapters 6-11 outline a common approach to staffing and organization.  Chapters 12-18 provide a high level overview of the major tools and processes used in Six Sigma.

 

The Six Sigma Handbook, Thomas Pyzdek and Paul Keller, 3^rd ed., 2010

Chapters 1-4 outline the management of a Six Sigma organization and projects.  Chapters 5-12 provide a comprehensive explanation of Six Sigma tools and techniques.  A modest amount of technical statistics is included.  Often used as a textbook for Six Sigma black belt courses.

 

Lean Six Sigma Pocket Toolbox, George, Rowlands, Price and Maxey, 2005

Quick reference guide to 100 commonly used tools.  Best used by individuals with lean six sigma training and experience or significant statistics background.

Lean Six Sigma (LSS) is a term which describes a complementary set of tools and insights used to improve business processes.  It is based upon the statistical understanding of variation and the sequence of steps in a process.  It provides a comprehensive approach to setting business goals, improving processes and delivering results.  It builds upon the modern quality movement and the Japanese manufacturing emphasis on process flows.  It includes ISO 9000 standards for quality assurance within an overall management system.  It takes a long-term view of processes, investing in measurements, staff skills, feedback systems and the pursuit of near perfect goals reflecting customer needs.  The insights and tools originated in manufacturing firms, but are successfully applied to many business processes, functions and industries.

A mature Lean Six Sigma (LSS) implementation commonly has six distinct components: a comprehensive quality management system, operations measures and goals integrated into an overall planning and control system, a supplier management program, a supply chain management system which integrates suppliers, internal processes and customer processes, process improvement projects and a product development process.

The comprehensive quality management system is designed to meet the ISO 9000 standards.  At all levels and functions, processes are defined, measured and improved.  The “Plan, Do, Check, Act” improvement cycle is used.  “Say what you do, do what you say, be able to tell the difference” forms the basis for decentralized continuous improvement.  Quality control, quality assurance and quality cost programs are implemented.  Senior and functional managers understand and support the role of quality, measurement and improvement.  Front-line employees learn quality concepts and tools and begin to apply them effectively.

Standalone quality management systems have a history of becoming technical functional silos or disappearing due to lack of support.  Successful LSS initiatives proactively define company level operations measures to meet perceived customer needs.  These measures are integrated into some version of a balanced scorecard that includes financial, customer, operations and asset measures.  Operations measures cover the customer goals of quality, speed, flexibility, value, information and personal service (QSFVIP).  The limitations of purely financial measurement systems are overcome.  Process improvement projects are prioritized together with other capital investments and strategic initiatives.

Organizations soon discover that they are constrained by the limitations of their suppliers and undertake supplier management programs.  They translate their customer goals into supplier goals.  Formal supplier qualification, scorecard and preferred supplier programs are implemented.  Supplier management coordination is centralized.  Individual supplier goals and improvement programs are defined.  Overall company goals and improvement programs are defined.  The quality supplier management program is enhanced.  Organizations adopt the supplier perspective as a complement to the product and financial perspective.  The supplier base is consolidated.  Supplier assets and risks become strategic management factors.

Purchasing, sourcing, freight, distribution and customer service functions are aligned, combined and upgraded within a formal supply chain management process.  Internal processes are revised to more directly and effectively meet core and exceptional customer needs for products and services.  Organization level delivery goals are defined for product availability, on-time shipping and recovery.  Future goals are defined and investments are made to reach these goals.  Internal capacity and cycle times are elevated in importance.  Customer requirements are translated into supplier requirements.  Lead-time, capacity, on-time shipping and minimum order quantity improvements are requested of suppliers.  Forecasting and MRP systems are modified to deliver what they can.  Investments are made in creating “just-in-time” supply systems.

Process improvement projects are formalized.  Quality, industrial engineering, purchasing, accounting, IT and project management professionals learn Lean Six Sigma skills and work with functional staff to define process improvement opportunities.  Projects are divided into continuous process improvement, Kaizen quick-fixes and total process re-engineering projects.  Typically, physical processes are addressed first, followed by transaction and support processes. 

Finally, product development is formalized as a well-defined and consistent process.  Standard development stages, approval gates and documents are defined.   Cross-functional teams, roles and participation are emphasized.  Business justifications support business requirements which are translated into technical requirements.  The clear project scope allows for a project task plan and timeline to be defined.  Templates, forms and guidelines are used to systematize the collection, review and sharing of key information.   The statistical principles of variability and queuing theory are used to effectively manage various functional resources in the portfolio of active development projects.

In summary, Lean Six Sigma takes a probability and statistics approach to managing and improving repetitive tasks and sequences of events.   It does not diminish the importance or value of the individual tasks which are often the province of functional experts.  It does not discount the importance of staff management, but highlights the limits of motivational approaches.  It does not ignore the need to handle exceptions or the value of exceeding customer expectations, but emphasizes the value of consistently meeting negotiated customer requirements.   It does not dispute the need to set and achieve short-term financial goals, but focuses on long-term improvements to meet escalating customer expectations.  It does not challenge the value of improving individual operations steps, but notes that only final product delivery earns customer value.

 Lean Six Sigma directly challenges the common sense view that the whole is the sum of the parts.  It emphasizes processes that span suppliers, all internal functions and customers.  The process view (including quality and customer perspectives) often differs from the functional, financial or product views.  Effective managers learn to integrate these perspectives to make superior business decisions.

A Lean Six Sigma (LSS) approach to operations management delivers many benefits:

1. A comprehensive operations management system, processes and staff aligned with organizational priorities through a balanced scorecard.
2. Engaged staff who understand what actions deliver customer satisfaction and increase long-term profits.
3. An improved root cause oriented decision-making process that includes all functional perspectives.
4. A system which naturally identifies potential process improvement projects.
5. Improved supplier loyalty and willingness to invest in customer success.
6. Satisfied customers, sales growth, pricing power and a more effective sales force.
7. Less fire fighting.  Exceptions are managed effectively with less negative impact.
8. Increased ROI from the existing ISO 9000 infrastructure.
9. Finished goods defects below 1%.  Defect rates cut in half.
10. Total cost of quality cut in half, especially scrap, waste and rework.
11. Individual process quality levels are measured so that risks are understood and managed.
12. Customer expectations are made explicit, holding operations accountable for delivery and limiting the power of individual staff or customers to lobby for exceptional (unprofitable) results.
13. Delivery cycle times are reduced by 33-80%, with clear understanding of process capabilities to avoid overpromising.
14. Consistent on-time delivery improves from 98% to near 100%.
15. In-stock product availability increases from 95-97% to 99%.
16. Peak period delivery capacity doubles.
17. Real conversion cost per unit improves by 2-3% per year.
18. Product costing better reflects the real cost of low volume products.
19. Buying and selling transaction costs are reduced by 50%.
20. Risks are reduced through process definition, staff engagement, cross-training and supplier experience.
21. A constructive culture is built which engages staff in continuous improvement towards near perfection goals in quality, delivery time, capacity, cost, product variety, transaction costs, risk management and customer engagement.

The operations best practices collectively termed Lean Six Sigma (LSS) fill several textbooks and form the basis for a professional certification.  They were developed by academics and industry practitioners across 80 years.  Looking back, the key results proceed logically from just two statistical insights!  First, repeated activities have variable results which can be described by a probability distribution.  The variability is inherent in the process and will continue until the process is fundamentally changed.  Second, the completion of a sequence of steps with variable time results can be described by a probability distribution derived from queuing theory.   Variability of the individual steps will accumulate, leading to bottlenecks and longer completion times than might be expected.

There are two core ideas.  Activities have variable results.  Sequences of activities have variable results with significant delays.  Both insights rely upon probability theory, which is based upon the repeated trials of random events.  Probability theory looks at the outcomes of the whole process.  It predicts average results and the dispersal of results.  As such, it describes the forest rather than the trees.  It predicts patterns of outcomes, not single events.  It treats variability and central tendency as equally important.

Six Sigma promotes the pursuit of near perfect quality.  The impact of variability on defects and quality is described in the work of Dr. Deming and Dr. Juran.  Lean is shorthand for Lean Manufacturing, which emphasizes the flow of product through a sequence of steps.  The impact of variability upon a sequence of dependent events is described in the works of Shigeo Shingo (Toyota Production System) and Dr. Goldratt.  In the last 30 years these breakthrough ideas have been applied, refined and extended by many others. 

The insights below are briefly summarized together with their major practical implications.  This approach allows the reader to quickly gain a sense of the range of topics addressed and their potential impact.  The power of these two statistical insights in the hands of an experienced operations team will hopefully become apparent. 

Quality, total quality management, zero defects, process re-engineering and ISO 9000 programs each played a role in developing the content of Lean Six Sigma.  These programs had mixed degrees of success due to their innovative nature, misunderstandings by businesses and practitioners, change management hurdles and conflict with the dominant short-term financial paradigm.  Lean Six Sigma has built upon their successes and modified the tools and applications to better fit within the real business environment.  Organizations which have reached a critical mass of Lean Six Sigma skills, processes and skilled staff have gained momentum, leveraging this effective approach to operations excellence.

1. Process steps can universally be modeled as inputs, processing and outputs.  Processing has inherent variability.  This variability applies equally to machine and human processing.  Variability is everywhere and can be described by simple statistics.  Defects are inherent in all variable processing steps.
2. Since variability is inherent in every process step, the responsibility for variable outputs lies primarily with the managers and engineers who designed the system.  Staff members are responsible for working within their capacity.  Supervisors are responsible for selecting, motivating and disciplining staff.  Process design is the largest driver of output and defects!
3. Process results can be measured in a simple fashion and graphed versus time.  Controlled processes can be determined statistically and the range of normal variability defined.  Outlier events can be distinguished from inherent process variability.  Outlier events should each be investigated.  Non-outliers should be ignored.  Reaction to random variability only increases variability and reduces average results!
4. Line employees can measure results, understand variability, determine and reduce sources of process variability.  Together with management they can analyze results and greatly improve processes.  Employee training and engagement is critical.
5. Since defects arise from variability, zero variability should be the goal of each process step.  Continuous improvement through many small steps is used to eliminate variability (close to zero).  Failsafe processes and radical simplification are highly valued.  Process step operators are best positioned to self-inspect the results of their work and prevent any defects from moving downstream.  Production lines should stop when a process step is broken.  Final inspection is the least cost-effective defect reduction program.
6. Supplier quality is critical.
7. Although Dr. Deming preached against the tolerance of any level of variability or defects, the controlled process measurement systems lead to self-correcting and self-improving systems.  A goal is set, like zero defects.  The result of the process is measured.  The set of defects is examined, grouped and rank ordered.  Solutions to reduce the leading cause are identified, implemented and confirmed to cause improvement.  The cycle is repeated.  This patient, incremental process can achieve heroic results with enough repetitions.  The conflict with the financial paradigm’s law of diminishing marginal returns is apparent.
8. Once released from the short-term assumptions of the financial paradigm, engineers found that progress towards perfection was possible with defect rates cut in half repeatedly.  One defect per hundred dropped to 1/200, 1/400, 1/800, 1/1,600, 1/3,200, etc.  As with the half-life of a radioactive material, there is no end.  The limit is zero, which is approached but never reached.
9. More importantly, practitioners found that all metrics can be defined in terms of defect rates and addressed the same way.  Zero variability, cycle time, capacity limits, set-up time, work-in-process inventory, response time, travel distance, non-value added steps, unique parts, unique events, etc. can all be pursued this way.  In practical terms this may be the single most important idea.  Cumulative progress through simple actions towards perfection is valuable.
10. This experience lead engineers to challenge and reject accounting orthodoxy.  Local optimums are not global optimums.  Fully allocated cost is a misleading fiction.  Efficiency and utilization ratios matter in the long-run but not in the short-run.  Eliminating waste is always a good step.  Staff and engineers can use this simple rule to guide improvement steps.  Budgets and financial measures provide disincentives for progress.  Financial measures are misunderstood by staff (and engineers).  In the long-run, enabling staff and engineers to make processes better may generate the greatest total value.  In practice, engineers and cost accountants have made peace, coordinating their standards and measurements and ensuring that budget variance explanations are made within the context of overall results.
11. The cost of quality is often underestimated by a factor of 2-5.  Accounting for all prevention, detection and mitigation costs confirms this range.  Initial defect prevention, identification and correction is highly valued.
12. The cost of customer dissatisfaction from defective products is “unknown and unknowable”.   The same value applies to out of stock products.  Businesses rarely apply infinite value to customer dissatisfaction, but the point is well taken and a non-zero estimate is used.
13. Freed from the mysteries of standard cost accounting, diminishing marginal returns, efficiencies and utilization measures, operations staff sought to make customer demands more certain.  They discovered that all customer demands fit within a framework of quality (product and process), speed, flexibility (capacity and exceptions), value (price, features and benefits), information (transaction cost, risk management) and personal relations.  Operations staff soon discovered that customer demands are unlimited.  Customers want zero defects, perfect tracking and assurance, immediate delivery as needed (not as ordered), infinite capacity, payment to use the product, total customization, zero transaction cost, fully buffered risk and family level intimacy!!  Operations staff members have used this insight to guide their long-term improvement efforts and to negotiate service level agreements with the sales staff to limit the demands for a given year and avoid the need for exception processing beyond this greatest common denominator!
14. The operations approach to measurements fits well within the balanced scorecard framework of complementary financial, customer, operations and asset measures.
15. ISO 9000 evolved to define a set of standards which ensure the effectiveness of a comprehensive quality management system.  ISO 9000 is built upon the simple self-improving system of “say what you do, do what you say and be able to tell the difference”.  As such, ISO 9000 leaders and auditors place heavy emphasis on the ability of the system to be audited for the existence of well-defined processes, the consistent measurement of results,  the review of variances and development of corrective actions and improvements.  This overlapping superstructure has sometimes been opposed by staff, operating managers, engineers and senior management who do not see the systematic value in being able to assess and prove compliance.  Wise internal ISO 9000 leaders have reduced the administrative burden and simplified processes to deliver “good enough” assurances of process compliance.

 

1. Shingo, Toyota and Goldratt looked deeply at the apparently simple idea that a process is composed of a sequence of dependent events.  One step cannot be completed until the prior step is complete.  The first result is that variation (delays) accumulates.  Randomly shorter and longer times do not naturally offset each other.  Later steps pay for the delays of earlier steps.  Waves of delayed product sweep through the system, interspersed with periods of no product.  More steps, options and variability combine to make average total process cycle time several multiples of the theoretical average time!
2. As with Dr. Deming’s focus on the “willing worker” who is unfairly expected to pay attention and work harder to avoid variability and defects, Shingo and Goldratt note that harder working and more responsive employees can play only a very small role in offsetting this accumulated variability.  These results are not based upon Theory X or Theory Y assumptions about the nature of employees.   They rely solely upon the science of variation.  The process is the 90% answer!
3. Both statistical insights indicate that management should focus on the process rather than individual events or behavior.  The whole is more than the sum of the parts.  The forest is more than the sum of the trees.  Improved efficiency in one step might not help total output at all.  Improved cycle time at one step might not lead to shorter overall completion time.  Labor efficiency or utilization may not help short-term results.  Short-term machine utilization is irrelevant.  Releasing work may delay the whole process.  A perfectly balanced production line is inherently inefficient.  No forecast is accurate enough to optimize production scheduling.
4. The scientific management, factory automation and IT approaches to optimizing a single step are called into question.   Single step improvements may not benefit end results.  If they require large processing batches, they probably hinder overall results!  The flow of product from step to step, across functional borders, may be the most important opportunity for improvement.  These improvements can be made locally with little or no capital investment!
5. Simple, visual measures and signals can best guide the flow of parts and product from station to station.  Complex planning and control systems to track product and forecast completion are costly and ineffective!
6. The probability of a final defect rises to certainty as error rates exceed 1% and the number of steps exceeds 50.  A two percent defect rate across 30 steps has a 46% total defect rate!  Individual process error rates must be reduced.  The number of steps must be reduced.  Processes must be combined into fewer steps.  Modular product design is indicated.
7. Work-in-process (WIP) inventory can be used to buffer variability between work steps.  It is less effective at buffering than is generally presumed.  In practical terms, WIP serves to hide the variability of individual process steps.  Hence there is no pressure for improvement.  The counterintuitive approach is to reduce inventory by 20% and monitor the process step variability to see if product can flow through.  If not, invest in steps to reduce the variability.  If so, reduce the inventory by 20% again.  Repeat!  Zero WIP is the goal.  In practical terms, one hour or one load or one container of WIP is common.
8. Large batches inherently increase the lumpiness of flow between workstations, increase total production time and result in inefficiencies due to delays.  As with WIP, the recommended approach is to reduce batch sizes until “unit of one” processing is achieved.  In practical terms this can be one container, one pallet, one shift or one unit.
9. Smaller batch sizes also play a role in reducing lead-times to recover from out of stock conditions.  They play a role in maximizing required production during a capacity constrained situation.  As such, effective organizations systematically invest in ways to reduce batch sizes for individual production steps and finished goods orders.
10. The fixed costs of an operation usually determine the minimum order quantity.  In manufacturing this is driven by the set-up times.  Manufacturers have found that set-up times can be reduced by 80-95% or more!  The historic role of large batches and volume discounts is greatly diminished.
11. The accumulation of process step variability indicates that downstream capacity must be significantly greater than beginning capacity.
12. Systems to control the release of product at the beginning of a production process or between any two adjacent steps can improve the overall capacity of the system by reducing the investment of time and materials in product that is not immediately required!
13. Due to set-up costs, unique parts and learning curve effects, high volume products are typically costed too high while low volume products are costed too low.  Efforts to reduce set-up, training and purchasing fixed costs reduce these differences.
14. Although world-class operators reduce lot sizes, WIP, lead-times, defects and step variability to surprising levels, few have been able to design a wide variety of products and process flows with true “unit of one” processing, zero WIP, 0.1% defects and one hour cycle times for random orders.  Hence, many operators develop focused factories to continuously produce small batches of related A volume products, classic assembly lines with cellular manufacturing designs, travel distances and shared work teams for B volume products and flexible low automation job shops for C volume products.  Customers cooperate to keep focused factories at 100% capacity.  They pre-notify parts requests for B volume products.  They accept longer lead-times and higher costs for C volume products that cannot flow within the focused factory or cellular manufacturing lines.
15. The production of finished goods for safety stock when there is demand for finished goods not in stock is inherently counterproductive.  Current demand product should be the first priority at all times.
16. Since finished goods demand cannot be adequately forecast, organizations should invest in reducing their total production time so that they can produce to order with a very short cycle time.  This approach is called a pull, just-in-time or build to order system in contrast with a push system that builds stock to meet forecast demand.  Production cycle time, even when multiple factories are involved, should be reduced from weeks to days to hours.
17. Since raw materials cannot be stocked for all possible finished goods demand patterns, suppliers should also reduce their cycle times to hours so that all components have an infinite effective supply!
18. In practice, manufacturers maintain finished goods buffers for immediate sale.  They reduce production cycle times to days.  They hold inventory buffers between plants even if they are able to minimize them within a factory.  Manufacturers hold a few days or weeks of component supplies.  They partner with suppliers and trade-off other factors to achieve historic usage quantity (2x) parts supply cycle times of less than one week.
19. Firms have also learned that improvement efforts must be differentiated among continuous process improvement steps done locally with minimum capital investment, Kaizen events that quickly change a contiguous set of steps with minimum capital investment, IT resources or adjacent impact and process re-engineering which requires time, capital, IT and other functional resources. 
20. Firms have developed a number of process evaluation methods to identify improvement opportunities.  Process results are benchmarked against world-class results in related and unrelated industries.  As noted in step 9, processes are compared against the ideal of zero cycle time, travel distance, non-value added activities, etc. 

 

 

The so-called quality revolution became a business operations revolution.  Like the probability based revolutions in quantum physics, chemistry, mathematics, ecology, evolution, meteorology, marketing research, target marketing, network communications, game theory, portfolio theory and options valuation, the discipline of operations management has been revolutionized as well.  Variability is inherent in process steps.  Variability is magnified across steps in a process.  Customers have infinite and infinitely variable demands.  The sales team lobbies for customers.  Product managers seek infinite product variety.  Finance requires predictable short-term financial results.  Suppliers want predictable demands.  Operations managers have embraced the Lean Six Sigma program and actively invested in training, staffing and projects to create the assets needed to anticipate, meet and manage these inherently competing demands. 

 

The net benefits of a comprehensive Lean Six Sigma program are substantial.  The staffing and project implementation costs are modest and well-defined.  The benefits, steps and risks are documented in this series of Lean Six Sigma articles. 

 

The received wisdom in strategic planning indicates that firms should pursue operations excellence, product innovation or customer intimacy.  The Lean Six Sigma approach directly delivers operations excellence, supports systematic product innovation and meets current levels of customer needs.  World-class firms in a wide variety of industries have proven the value of this business strategy.

A Lean Six Sigma (LSS) approach to operations excellence is inherently challenging.  The core ideas (the impacts of statistical variation and sequential events) are abstract and subtle.  They are not emphasized in secondary education or easily acquired through experience.  Implementation requires some training in theory and significant experience applying the ideas.  Lean Six Sigma applies to all functions and processes, including those which prize creativity and exceptions, rather than structure and consistency.  LSS provides a new language, shifts power and seeks a cultural change that values process owners, operators and change agents.

Hence, a successful Lean Six Sigma transformation takes time, often 3-5 years.  Progress is cumulative, with cycles of learning and application progressing from an initial core team to project teams and functions.   Jim Collins’ flywheel analogy is appropriate.  Consistent, constructive progress generates momentum, a shared language and understanding, demonstration projects, senior management confidence, measurement and feedback systems, continuous improvement from process operators and expanded functional coverage.

While most organizational change efforts require a comprehensive top-down plan and senior management direction, Lean Six Sigma often starts with a single function, plant or process and senior management tolerance.  A defect rate is too high.  A large customer’s demands cannot be met.  The sales team needs ISO 9000 certification to sell products.  A new factory or distribution center is required.  Some management appreciation of the potential benefits is required to allow the initial investment.  LSS expansion best advances through proof of its effectiveness one project or process at a time.  The break-through improvements convince staff and management skeptics of the potential value.

Although every company takes its own path, a common progression is outlined below:

1. A perceived operations need exists.  An experienced staff member sells management on a new quality system, factory layout or transaction process.  LSS tools are used to produce a significantly more effective system than existed before.
2. A senior manager reads an article, attends a conference, networks or meets with a customer.  Support grows for staff training and application of these tools.  
3. More projects are undertaken.  Select training is begun.  Process mapping and improvements begin in earnest.  Senior managers monitor results.
4. Value from the initial projects is recognized.  A consensus forms that the firm ought to leverage these tools through a centralized quality or project office.  Permanent staffing is added. 
5. Front-line quality control staff members expand their impact as process measurement and improvement agents.  Improved technical skills and software are acquired.  Quality assumes a higher profile.
6. A single, comprehensive quality management system is proposed.  The organization learns more about quality, process flows and quality assurance.  A central staff is created to manage the project and function.
7. Functional and project staff members are trained in ISO 9000 standards, process mapping and quality basics.
8. All processes are mapped.  Process improvements are implemented.
9. Larger process improvement projects are proposed in more areas and resources are allocated.
10. The importance of process flow and the critical role of cycle time are recognized, leading to the use of lean techniques, including pull scheduling, JIT flows, inventory reduction and set-up time reduction.
11. Standardized training is developed for project leads, project members, executives and functional staff.  The training covers processes, quality, statistics and tools.
12. Supplier management becomes an area of emphasis, through quality or procurement.  Supplier scorecards are used to measure and improve performance.
13. Formalized customer goals are defined and prioritized.  Measurement systems are created to monitor overall operations progress at meeting the goals.
14. Operations and financial measures are reconciled and combined in some form of balanced scorecard.  The quality management system is integrated with the financial management system.
15. An official Lean Six Sigma program with formalized roles and training for project managers and black belts is adopted.
16. The combination of operations, financial and strategic planning results in a prioritized portfolio of process improvement projects.
17. The product development process is standardized in some type of stage-gate approach.
18. Continuous process improvement becomes routine.
19. Business units, factories and processes begin to experience near zero defect rates, daily or hourly cycle times, 3X process flexibility, annual cost reductions, minimal WIP inventories, smaller batches, immaterial set-up times/costs, free transactions, instant information sharing and faster product introductions.

Lean Six Sigma makes audacious promises about its ability to improve organizational effectiveness.    The implementation process is messy, but the required techniques, tools and steps are well-known.  Organizations that make the commitment to get the flywheel spinning will be rewarded by a self-controlled and self-improving system that requires minimal maintenance while delivering increasingly valuable benefits.

Organizations often find that the benefits of implementing a Lean Six Sigma (LSS) program with their suppliers are the same order of magnitude as their own implementation.  Organizational progress is inherently limited by the capabilities of key suppliers.  Suppliers can consider these new insights and tools, implement them quickly and amortize the implementation costs across all of their customers. 

1. Defect levels decline each year without customer cost or involvement.
2. Total cost of quality declines through reduced returns, inspection, scrap and rework.
3. Process quality assurance improves.  Risk of catastrophic failure drops.  Diagnosis of potential epidemic failure is quicker and more certain.
4. Supplier lead-time reduction decreases average customer inventory carrying costs.
5. Supplier lead-time improvement reduces customer recovery time from high demand events and provides increased capability to pursue sales opportunities.
6. Increased supplier capacity to support regular, one-time and peak demands.
7. Increased supplier capacity reduces customer reliance on safety stock to buffer demand.
8. Process improvement projects reduce supplier costs which eventually translate into lower supplier prices.
9. Supplier cost reduction improves their long-run viability as a supplier, avoiding potential change costs.
10. Reduced production line changeover costs deliver smaller lots, which supports product lines with diverse features and benefits.
11. Effective supplier partners reduce new product time to market.
12. Integrated supply chain partners minimize transaction costs and errors.
13. Integrated supply chain partners react to final customer demand changes quickly.
14. Preferred suppliers manage their supplier base, reducing costs, improving capacity and lead times while reducing risks.
15. Qualified suppliers allow the organization to source from 1-2 suppliers and reduce the risk of an end-run to the organization’s customers.
16. A supplier scorecard sets clear expectations of improved performance.
17. Qualified and preferred supplier programs provide benefits that motivate supplier investments.
18. The total supplier perspective allows clear trade-offs between high and low value attributes.
19. Responsive suppliers reduce the chance of long-term product shortages.
20. Organizations can learn from supplier breakthroughs.

Lean Six Sigma (LSS) is the name given to the set of best practices for achieving operations excellence.

Six Sigma refers to six standard deviations away from the mean of an observed outcome.  Six Sigma became a term denoting a process where the defect rate is beyond six standard deviations, roughly one defect in every 300,000 events.  The impression is one of near perfect quality, which is achieved by repeatedly decreasing the error rate.  The pursuit of near perfection is justified by the importance of the defect (life threatening), the potential long-run savings, the competitive product advantage or the technical knowledge gained from pursuing this challenge.

As such, Six Sigma refers to the passionate pursuit of quality excellence, incorporating all of the insights and achievements of modern quality.

Lean is short for Lean Manufacturing, a term coined to describe the Japanese/Toyota manufacturing system which emphasizes process flow and cycle time, characterized by the pursuit of zero work in process inventory, zero set-up time, unit of one production, just in time supply and minimum production cycle time.  Lean manufacturing practitioners have found that the pursuit of near zero cycle times, much like the pursuit of near zero defects, results in breakthrough process improvements that produce competitive advantages.

Taken together, Lean Six Sigma combines all of these insights and techniques into a comprehensive body of knowledge that can be used to systematically define operations goals in support of customer needs and routinely make significant progress toward achieving the goals.

Six Sigma and Lean Six Sigma have benefited from the progress made by earlier ISO 9000 and Total Quality Management initiatives.  The vocabulary and concepts overlap.  The change management pinch points are known.  The business context and rationale is well-defined.  The inconsistencies and positive relationships with financial planning and control systems are known.  Project management is a better developed supporting discipline.  True believers in the new religion better understand the limits of the new approaches and the enduring value of the older operations approaches.

Lean Six Sigma has becoming increasingly professionalized, with quality, engineering, IT, accounting, project management and purchasing professionals competing to add Six Sigma black belt credentials to their resumes.   This provides a standard approach to training and mastery of a core body of knowledge.  It provides organizations with assurance that certified professionals are ready to deliver value.

Lean Six Sigma is a terrible brand name.  To the uninitiated it sounds like a dieting sorority.  The words clash.  However, the term seems to be settling in for the long-term.  The abbreviated “Six Sigma” is incomplete and equally bare of intuitive meaning.  It may prevail in the long-term simply because it is shorter, assuming a new meaning like Kleenex, Xerox or Clorox.  The functionally accurate term “process engineering” triggers images of complex chemical engineering, pipes and boilers.   It also echoes the discredited term “re-engineering” which became synonymous with drastic cost reduction.  “Operations excellence” describes the end of LSS, but is too much of a booster term which points away from the process focus.  TQM and ISO 9000 were too narrowly focused and the terms were often discredited by emphasizing the quality assurance proof necessary for an audit rather than the improvements driven by projects.  The Toyota Production System overlaps with LSS by 90%, but didn’t gain traction as a name even when it was clearly the best operations approach available in the 1970’s and 1980’s.  “Operations management” is an accurate name but it is too bland.

Lean Six Sigma is here to stay.  Organizations which adopt these techniques and implement projects find success.  They repeat the processes with even greater success.  A beautiful process by any other name is still a beautiful process.

With 40 years of hard-earned experience and wisdom, Lean Six Sigma (LSS) initiatives should have a high success rate.  Wise practitioners will avoid seven pitfalls.

Don’t fail to take the content seriously.  Lean Six Sigma ideas, tools and practices can be learned by nearly anyone.  But, they are not simple or obvious.  Students need context and history to make sense of this new approach.  Instructors need the deep knowledge recommended by doctors Deming and Goldratt.  Students need experience applying the tools.  Learners need coaching when they first use the tools.  They need to be familiar with the main set of concepts, tools and goals.  No single concept or shortcut approach is adequate.

Don’t overreach.  A steady pace and cumulative progress is ideal.  Match project size and complexity to skills and experience.  Start with single function projects.  Keep the project portfolio manageable.  Under promise and over perform.  Assess risks.  Support new project managers.  Try Kaizen blitz projects after a team is skilled.  Pursue major process re-engineering projects only with adequate resources.

Don’t be too technical or idealistic.  Functional managers and staff advance in their careers by being practical and delivering specific results.  They are looking for practical answers to their specific problems.  The theory of variation through dependent events doesn’t even sound like it might help.  Limit the technical statistics to what is required.  Accept that systematic solutions must incorporate existing exceptions and customer promises.  Explain solutions that fight with common sense or ask for patience to observe the results.  Use business judgment to limit the overuse of quality control, assurance and proof.  Extreme positions destroy credibility.  Take it easy with the pursuit of zero.  Zero defects, zero inventory, zero non-value added, zero travel distance and zero set-up time are ideal goals, not current expectations.

Don’t be a zealot of the new religion.  Managers did just fine before the quality revolution and the newly enlightened state.  They are proud of their knowledge, skills and achievements.  Don’t proclaim that “inventory is evil”.  Downplay Dr. Deming’s emphasis on the “unknown and unknowable”.  Don’t repeat the Shakespeare joke, “first, let’s kill all of the cost accountants”.  Don’t argue that “everything is a process”.  These are valid and important insights, but an overbearing approach will backfire.

Don’t create a new functional silo.  Quality, supply chain management, industrial engineering and project management are important functions that contribute to operations excellence.  No one of them is most important.  Six Sigma black belts have a role to play, but not the most important one on most projects.  Limit the professional jargon.  Avoid kingdom building.  Build cross-functional teams and experiences.

Don’t ignore the forces that oppose change.  All change is opposed by someone.  Use change management tools to identify opponents and work to move them swiftly to the new reality.  Carefully hide any attitude that indicates that the new way is the right way and the old way was wrong or inferior.  Operations improvements come about by leveraging the existing knowledge to address new challenges.  The Lean Six Sigma tools facilitate this progress.  They are not the goal.

 

Don’t ignore the realities of power.  Many Lean Six Sigma practitioners take a scientific, naïve view that all staff members work hard to make the world better and the company succeed.  Unfortunately, many employees first look out for number one.   Build teams and find allies.  Define political interests and align projects to support them.   Start with the interests of senior management.  What hot buttons and board room pressures matter most?  What interests do functional managers have?  Even while promoting the process world view, support their positions.  Is finance losing power due to the new measures?  Work with them to build new measures that support their existing roles.  Look at the measurement and reward system.  What does it encourage?  Don’t fight the reward system.  Leverage it.  Work to modify it if necessary.  Be sensitive to becoming a perceived threat to others’ power.  Investigate and resolve concerns.

Lean Six Sigma attempts to broaden the organization’s perspective to consider real customer needs and the major processes and partners which meet those needs.  Practitioners need to adopt this same broad, wide-open approach to their work.  The content needs to be adequate and mastered.  Projects must match resources.  Staff must be respected and supported where they are.  Change and politics must be managed as an integral component of success.