I got side-tracked from my
postings on the TLS series because of Atlanta’s significant winter weather
event and how “forecasting” played a role in a rather inadequate response to it
by local and state government officials.
So in today’s posting I will now discuss the other two components of
TLS, Lean and Six Sigma.
Lean
Much has been written
about Lean over the past several years, but its basic philosophy is centered on
a whole-systems approach that focuses on the existence and removal of
non-value-added (NVA) activities within a process or system. These NVA
activities are characterized as waste in the Lean vernacular. As an
improvement initiative, Lean teaches you to recognize that waste is present
within every process and that we should take extreme actions to either
eliminate it or significantly reduce it.
The entire premise for
doing this action is to facilitate a flow of value through the entire process.
If this is true, then it begs the question—What is value? There have been many
attempts to define value, but the best definition is based on the customer
value and not the producer value. In
its simplest terms, value, is whatever the customer feels good about paying
for. Customers know what they want, when they want it and how much it is
reasonable to pay for it—so in the long run, value clarifies itself.
Lean has become recognized
as one of the most effective business improvement strategies used in the world
today, but if this is so, then why are so many Lean implementations failing at
such an alarming rate? In this case, failure implies the inability to not only
achieve, but also sustain, the needed effort.
Six Sigma
Like Lean, much has been written
about Six-Sigma methods and the now infamous acronym DMAIC. Whereas Lean is
attempting to remove non-value-added and wasteful activities, Six Sigma is attempting
to remove unnecessary and unwanted variation. Six Sigma uses the road map Define,
Measure, Analyze, Improve and Control (DMAIC) to seek out sources of
variation, and through various statistically based tools and techniques,
attempts to limit (control) variation to the lowest possible level. The
professed power of Six Sigma lies in the disciplined structure and use of the
tools and techniques.
However, this supposed power sometimes ends up being a detriment
to some companies because in many instances they will experience enormous
information overload, coupled with a failure to launch the information into
viable solutions. In essence, these companies are suffering from analysis
paralysis. Like Lean, many Six Sigma initiatives have failed to deliver true
quantifiable bottom line improvements and, therefore, have been abandoned. Six
Sigma can be difficult to employ. It is heavily dependent on mathematics
(statistics) and formula derivatives that quite frankly most people do not
enjoy or involve themselves with. At
times is seems as if you need to call Merlin the magician just to get started.
There is also popular hybrid of
Lean and Six Sigma known as Lean-Sigma which, as the name suggests, is a merger
of the two initiatives. The primary assumption of Lean-Sigma is that
eliminating or reducing waste and variation in the system will lead to major
cost reductions. It seems to make perfect sense that if each initiative
delivers its own separate improvement, then combining output from both of them
should optimize the process and result in a double-dip reduction in cost. However,
in the final analysis, the primary functions of Lean and Six Sigma are aimed at
cost savings. Saving money is indeed a strategy, but it’s just not an effective
strategy for making money. The overall issue is not with either one of these
methodologies, but rather the belief that the way to increase profitability is
through cost reduction. Cost reductions have implied mathematical limits, and
once those limits are encountered, the improvement effort stops or slows down
significantly. Consider this—have you ever heard of a company that has actually
saved themselves into prosperity? If cost reduction is not the answer, then
what is the best route to profitability?
In my next posting we'll dive deeper into this integrated methodology and discuss why these three improvement methods work so well together.
Bob Sproull
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