INTEGRATION OF LEAN AND SIX SIGMA METHODOLOGIES

Prof. Tushar N. DesaiDr.R. L. Shrivastava

AbstractThe last two decades have witnessed an increased pressure from customers and competitors for greater value from their purchase whether based on quality, faster delivery, or lower cost (or combination of these) in both manufacturing and service sectors. The intense competition in the current marketplace has forced industrial firms to reexamine their methods of carrying out manufacturing activities. This has encouraged many industries to adopt advanced quality management philosophies such as Lean manufacturing (for improving speed to respond to customer needs and overall cost), Six Sigma (as a process improvement and problem solving approach), as part of management strategy to increase the market share and maximize profit.Lean and Six Sigma practitioners are integrating these two strategies into a more powerful and integrated approach that is ‘Lean Six Sigma’ or ‘Lean Sigma’, addressing many of the weaknesses and retaining strengths of each strategy. Lean Six Sigma methodology integrates the waste and non-value added elimination tools and techniques from Lean manufacturing with the variability reduction tools and techniques from Six Sigma, to generate savings to the bottom-line of an organization. This paper makes some critical examinations relating to comparison of Lean Management with Six Sigma, provides comprehensive set of tools, techniques and principles of the integrated approach; and a direction for integrating them into the planning, design and implementation framework to enhance their effectiveness and operational performance. The paper also purposes a Lean Six Sigma (Lean Sigma) framework which provides a synergistic approach to integrating the concepts and tools of Lean enterprise within Six Sigma Define, Measure, Analyze, Improve and Control (DMAIC) methodology to improve the bottom-line results of the organization and enhance customer satisfaction. The disciplined, structured and systematic methodology of Six Sigma combined with the speed and agility of lean will provide greater solutions in the search for operations and business excellence. Key words: Lean Management, Six Sigma, Lean Sigma, Business Performance

INTRODUCTIONThe last two decades has witnessed an increased pressure from customers and competitors for greater value from their purchase whether based on quality, faster delivery, or lower cost (or combination of both) in both manufacturing and service sector (Basu 2001, George 2002). All the large companies across globe have achieved dramatic results by implementing either Lean or Six Sigma methodologies.The core thrust of Lean production is that it works synergistically to create finished products at the pace of customer demand with little or no waste. Lean strategy brings

a set of proven tools and techniques to reduce lead times, inventories, set up times, equipment downtime, scrap, rework and other wastes of the hidden factory. The statistically based problem solving methodology of Six Sigma delivers data to drive solutions, delivering dramatic bottom-line results. Companies across the spectrum have found the most effective way to eliminate the flaws that lead to rework and scrap, and create one unified idea of continuous improvement, is the integration of Lean Manufacturing and Six Sigma (Smith 2003). The integration of the two systems can achieve much better

results than either system can achieve alone. While, Lean strategies play an important role in eliminating waste and non-value added activities across the organization, Six Sigma, through the use of statistical tools and techniques, takes an organization to an improved level of process performance and capability.

LEAN MANUFACTURING Womack et al. (1990) coined the term ‘lean production’ in their book “The Machine that changed the World”. He define ‘lean production’ as : is “lean” because it uses less of everything compared with mass production-half the human effort in the factory, half the manufacturing space, half investment in tools, half the engineering hours to develop a new product in a half time. Also it requires keeping for less than half the needed inventory on site, results in many fewer defects and produces a greater and ever growing variety of products.” Lean production (also known as ‘Lean Manufacturing’ or ‘lean’) refers to a manufacturing paradigm based on the fundamental goal of continuously minimizing waste to maximize flow. Lean management is a systematic approach to identifying and eliminating waste through continuous improvement, flowing the product at the pull of the customer in pursuit of perfection (NIST, 2000). Non-value adding activities generates various kinds of waste (muda). Taichi Ohno (1988), the father of Toyota Production System, defined Muda as any human activity, which absorbs resources but creates no value. Performing a wasteful activity adds no value but incurs cost. This insight creates a vision of eliminating waste both within the firm and across the value chain (Womack and Jones, 1996). Lean operations focuses on the elimination of waste throughout all aspects of a business, while maximizing quality and flexibility and

thereby reducing the environmental degradation also. Eliminating these wastes improves labor, material, capital and energy productivity.

SIX SIGMASix Sigma is a methodology that provides businesses with tools to improve the capability of their processes by decreasing variation, which leads to a reduction in defects, improve quality of products and services, shorten the product development cycle, and an improvement in profitability and growth. Six Sigma is a disciplined, data-driven approach and a business performance improvement strategy that aims to reduce the number of mistakes/defects to as low as 3.4 occasions per million opportunities. It is as good as zero. Higher the sigma level, lower is the Defects per million opportunities (DPMO). Six Sigma is a strategic initiative to boost profitability, increase market share and improve customer satisfaction through statistical tools that can lead to breakthrough quantum gains in quality; Mike Harry (2000). Six Sigma fundamentally focuses on reduction in variability. This technique is a simple common sense concept for those who understand statistical principles of targeting the mean to the required nominal value and controlling variance around the mean. But it is much more than just a statistical approach to problem solving. It is a company-wide initiative to improve both top line and bottom line through sustained customer satisfaction (Seth and Rastogi, 2004). Six Sigma practitioners apply the rigorous DMAIC and Design for Six Sigma (DFSS) methodologies to analyze processes and to make improvements in product and service quality and profitability. DMAIC methodology follows the phases as define, measure, analyze, improve and control.

NEED OF INTEGRATION OF LEAN AND SIX SIGMA APPROACHESResearchers and practitioners of quality management are trying to integrate lean and Six Sigma as an integrated methodology, which is more effective in enhancing customer satisfaction, improving operational and business performance, and generating substantial financial savings (as compared to lean and Six Sigma implemented alone). Both Six Sigma and Lean concepts are effective in enhancing customer satisfaction as by concentrating on control and reduction of variation and waste and hence defects, costs are reduced and customer satisfaction is simultaneously increased (Bendell, T. 2006).The team Lean Sigma has recently been used to describe a management system that combines the two systems viz. lean management and Six Sigma (Sheridan, 2000).Two currently “hot” process improvement approaches are Six Sigma and lean enterprise theory (Bendell, T.,2006). The researchers have been trying to establish the linkages between Six Sigma and other manufacturing strategies like lean manufacturing (Park, 2003).

Advantages of systematic integration of Lean and Six Sigma approachesLean methodology is more appropriate for dealing with problems of chronic waste. Six Sigma initiative perform well if the objective is a variation reduction. Integration of these methodologies under the title of “Lean Six Sigma” or “Lean Sigma” brings following benefits to a company:-• Lean streamlines process and eliminates

waste (idle time, machine downtime, in-process inventory), reduces overall complexity, and helps to eliminate non-value added activities of the process. Six Sigma solves complex cross functional problems by finding root causes of the problem and reduce / eliminate

undesirable variations in the processes. The integration of two methodologies eliminates the limitations of individual methodology.

• Lean creates a foundation that allows the tools and techniques of Six Sigma to yield greater benefits, faster.

• Reduction of manufacturing lead times by lean methodology enhances competitiveness by achieving faster deliveries, and delivering defect- free products by implementation of Six Sigma methodology enhances bottom-line results of the organization.

• A company will gain from reduced manufacturing lead times and by replenishing their stocks more often which increases the company’s revenues and inventory turnover rate by lean tools. A company will also improve its profit simultaneously by defects reduction and process improvement by Six Sigma techniques.

• Streamlining product flow and changes in the basic operating systems by maximizing the value-added content of all operations and by removal of wasteful activities by application of lean management. Optimization of measurable quality and delivery metrics by making use of data driven and statistical quality control methods in all decision making by Six Sigma quality management drive.

• Lean production delivers products at lower cost, shortest lead time by continuously eliminating muda (waste). Application of Six Sigma methodology effectively reduces variation in processes and achieves management’s desired goals by delivering defect free products.

• Implementation of Lean Sigma framework help in

(i) Reducing machine downtime which increases overall equipment effectiveness (OEE); (ii)Establishing a

standard housekeeping procedure which helps to reduce number of accidents at work place, which in turn reduces the amount of compensation the management needs to pay to injured employees; (iii)Rectifying the customer complaints;(iv)Reducing work-in-process (WIP) inventories which enhances savings per year;(v)Reducing machine set-up time; (vi)Striving for Six Sigma capability level; (vii)Becoming faster and more responsive to customers; (viii)Operating at lower costs of poor quality (COPQ);( )Achieving greater flexibility throughout the business;()Improvement in key performance metrics such as Defect per unit (DPU), process capability index (Cp), mean and standard deviation of the product, first time yield (FTY), OEE.

• Improvement in key performance metrics leads to improvement in monetary terms per year for the company after implementation of the Lean Sigma strategy.

• Monetary improvement motivates the management for horizontal deployment of the Lean Sigma approach in other areas of the organization such as service-related processes, transactional processes, logistics, etc. This deployment strategy improves the overall organizational performance.

• New model of Lean Six Sigma (or Lean Sigma) is more effective as it possesses the characteristic features of lean management and Six Sigma strategies both such as customer focus, leadership, involvement of people, waste identification and elimination, identification of value stream (value stream mapping), just-in-time delivery and scheduling, realistic work standards, multiskilled workforce, process management approach, continual

improvement, preventive maintenance, cross-trained workers, factual approach to decision making, Lean Sigma organization, Lean Sigma deployment, design quality management, benchmarking, workforce management, Lean Sigma quality communication, Lean Sigma work culture, mutually beneficial supplier relationships.

Lean Six Sigma synergy work towards meeting customers’ needs by delivering product without defects. The techniques and tools of Lean manufacturing emphasize eliminating unneeded activity, to reduce lead time and lower total costs .Six Sigma techniques and tools focus on reducing variation in processes and products, thereby eliminating rework, which allows faster delivery time and lower total costs, that helps organizations deliver product more quickly, at a competitive price.

Differences between Lean and Six SigmaThere are some differences between Lean and Six Sigma as noted below:-• Generally speaking, a Lean approach attacks variation differently than a Six Sigma system does. Lean tackles the most common form of process noise by aligning the organization in such a way that it can begin working as a coherent whole instead of as separate units. Setup time, routing of processes and machine maintenance are important measures in Lean. However, Six Sigma focuses on defective rates and costs of poor quality due to part variation and process variation based on measured data. • The data-driven nature of Six Sigma problem-solving lends itself well to lean standardization and the physical rearrangement of the factory. Lean provides a solid foundation for Six Sigma problem-solving where the system is measured by deviation from and improvements to the standard.

• While Lean emphasizes standardization and productivity, Six Sigma can be more effective at tackling process noise and cost of poor quality. Lean and Six Sigma, working together, represent a methodology that fight against process variation. Six Sigma methodologies use problem-solving techniques to determine how systems and processes operate and how to reduce variation in processes. In a system that combines the two philosophies, Lean creates the standard and Six Sigma investigates and resolves any variation from the standard. Table 1 exhibits comparison of Lean with Six Sigma.

LEAN SIX SIGMA DEFINED“Lean Six Sigma is a methodology that maximizes share holder value by achieving the fastest rate of improvement in customer satisfaction, cost, quality, process speed and invested capital.” Lean helps to reduce the waste, but cannot reduce variation alone. Six Sigma can help to reduce variation, but alone does not reduce waste or cycle time. Table 2 presents some of the fundamental differences between the two methods.

Table 2: Differences between Six Sigma and Lean Production Methodologies

Issues / Problems / Objectives

Six Sigma

Lean Production

Focuses on customer value stream

X Y

Focuses on good house keeping

X Y

Attacks waste due to waiting, over processing, motion, over production.

X Y

Focuses on reducing variation and achieve uniform process outputs

Y X

Focuses heavily on Y X

the application of statistical tools and techniques Employs a structured, rigorous and well planned problem solving methodology

Y X

Focuses on creating a visual workplace

X Y

Attacks work – in – process inventory

X Y

Creates standard work sheets

X Y

Focuses on control planning and monitoring

Y X

LEAN SIGMA SYNERGYTable 3 presents the synergies of Six Sigma and lean production. Six Sigma does not directly address process speed and hence there is lack of improvement in lead time in concerns applying Six Sigma method alone above. These concerns also generally achieve modest improvement in work in process (WIP) and finished goods inventory. In a similar manner, those concerns that are engaged in lean methodology alone show limited improvements across the organization, due to the absence of a Six Sigma cultural infrastructure.

Table 3: Synergies of Lean Production Strategy and Six Sigma Business Strategy

Lean Production Strategy

Six Sigma Business Strategy

Optimal value flow is achieved through elimination of waste and non-value added activities

Provides the structured methodology for eliminating process variation

Collect product and production data

Data collection

Cycle time reduction, value stream mapping,

Seven basic tools of quality, modern

Single Minute Exchange of Die (SMED), TPM, Jidoka, Pull production, U-cell layout ,Kaizen, Source inspection, multi-skilled workforce.

management tools of quality.

Create standard work combination sheets

Process stability and control planning

A holistic methodology “Lean Six Sigma”Each of the two approaches has distinct strengths and limitations relative to each other. If Six Sigma initiative is implemented properly then it should perform well as an approach if the objective is really a variation reduction. Six Sigma initiative is not the best solution for dealing with problems of chronic waste, for which lean methodology is more appropriate. In contrast, lean as a methodology focuses on removal of waste, and it is not primarily designed for addressing variation problems. A holistic model and methodology which integrates Lean and Six Sigma approaches should thus retain this at its heart. The companies practicing either lean management or Six Sigma alone might not derive the maximum benefits. Arnheither, E. and Maleyeff, J. (2005) contend that lean organizations should make more use of data in decision-making and use methodologies that promote a more scientific approach to quality. They further contend that Six Sigma organizations should include training in lean management methods and eliminate all forms of waste. Six Sigma quality initiative put emphasis on optimizing measurable quality and delivery metrics, but it ignores changes in the basic operating systems to remove wasteful activities. Lean management put emphasis on streamlining product flow, but it does so without making much use of data and statistical quality control methods.

A lean Six Sigma organization would incorporate the strengths of both lean management and Six Sigma. A lean Six Sigma organization would incorporate the following principles of lean management:

• It would incorporate the methods that seek to maximize the value-added content of all operations. • It would incorporate a management decision-making process that makes every decision giving due consideration to customer impact.

A lean Six Sigma organization would incorporate the following principles of Six Sigma: • It would make use of data-driven

methodologies and statistical methods in all decision making, so that changes are based on scientific studies.

• It would employ tools and techniques that minimize the variation of quality characteristics.

LEAN SIX SIGMA ORGANIZATIONHarry and Schroeder (2000) contend that both these methodologies have been impacted by lack of support from the middle management in many companies, and steps to be taken to mitigate this risk. Hence the authors propose that Lean Six Sigma strategy needs an organizational infrastructure to be deployed. This will have Lean Masters, Lean Experts, Six Sigma Master Black Belts, Black Belts, Green Belts and an organization structure to keep focus on deployment of the process improvement projects.

TOOLS AND TECHNIQUES OF LEAN SIX SIGMA

The companies using the integrated approach begin to first apply the basic lean tools and techniques stated in Table 1,3 and figure 1 . After implementing these tools and techniques of Lean, some wastes are eliminated from the system and there is

faster response to customer demand (by reducing lead-times), increase in availability of machines, greater throughput, reduction in scrap/rework, reduction in cycle times, improvement in worker productivity. Now, the tools and techniques of Six Sigma are used to offer powerful solutions to chronic problems. Lean is used to create a foundation that allows the tools of Six Sigma to get more benefits, faster. Lean strategy brings a set of proven tools and techniques to reduce lead times, inventories, set up times, equipment down time, scrap, rework and other wastes of the hidden factory. The statistically based problem solving methodology of Six Sigma delivers data to drive solutions, delivering dramatic bottom-lined results.

FRAMEWORK FOR LEAN SIX SIGMA PROGRAMSFigure 1 exhibits a model or framework road map to implement Lean Six Sigma programs in the organization. In the proposed framework, Lean tools are used within the Six Sigma DMAIC problem-solving methodology to reduce the defects, eliminate wastes, reduce the variations in the processes, enhance the bottom line results and enhance customer satisfaction.

Figure 1: Model to Implement Lean Six Sigma Programs

CONCLUSION Six Sigma and Lean production are not an alternative for each other but they are complimentary to each other. There are potential synergies between the two concepts, lean and Six Sigma. The application of Six Sigma principles combined with the speed and agility of lean strategy will produce solutions in the never ending quest for better, faster, economical business processes. This paper addressed a concept development on integration method for Lean and Six Sigma . A framework is developed for understanding the differences in depth for mitigating some of the conflicting implementations of the two methods. Methodologies developed for using the synergies of the two methods makes a company successful in its quality and productivity implementation initiatives. Systematic implementation of the proposed integrated framework of Lean and Six Sigma provides an impetus for bringing a cultural change in the company, provides the company with a performance benchmark on which the company can base future performance enhancement programmes and improves operational and business performance. Lean Six Sigma merges two powerful process improvement methodologies. Each methodology has unique tools that can be combined to monitor, analyze and improve processes. Lean manufacturing and Six Sigma do not work well enough alone to cover the sources of problems in a process. But the integration of Lean and Six Sigma viz. ‘Lean Six Sigma’ or ‘Lean Sigma’ provides a complete toolset for process improvement. ‘A Lean Six Sigma Organization’ would capitalize on the strengths of both lean management and Six Sigma and overcomes weaknesses of the individual approaches. Integration of lean production and Six Sigma quality recommend clear roadmaps to follow for

companies which guide and assist them on their quality journey to world-class quality.

SCOPE FOR FUTURE RESEARCH There is a need to articulate critical success factors (CSFs) and performance

measurement factors of lean Six Sigma strategy and develop a ‘Lean Six Sigma’ or ‘lean Sigma Implementation (Performance) Model’ for the manufacturing and service sectors.

Table 1: A Review and Comparison of Six Sigma and Lean Methodologies

Sr. No.

Concepts Lean Six Sigma

1 Origin The quality evolution in Japan and Toyota

The quality evolution in Japan and Motorola

2 Theory /Focus Lean management places focus on removal of waste.

Six Sigma strategy places clear focus on achieving measurable and quantifiable financial returns to the bottom line of an organization, focus on strategic goals and applies them to cost, schedule, profit and other key business metrics.

3 Approach Project management Project management4 Process view Improve flow in processes Reduce variation in processes5 Nature Technique Technique 6 Level Individual as well as group Group 7 Methodologies

(Tools)Single Minute Exchange of Die , Total Productive Maintenance (TPM), Jidoka, Pull production, source inspection, Kaizen, Value stream mapping, motivational and team building exercises.

DMAIC (Define, Measure, Analyze, Improve and control) and DMADV (Define, Measure, Analyze, Design and Verify) with advanced statistical and analytical tools, motivational and team building exercises.

8 Motivational factor

Recognition among group Recognition among group

9 Motivation Intrinsic as well as extrinsic Intrinsic as well as extrinsic, driven by tangible benefit for a major stakeholder group (customers, shareholders and employees)

10 Supervision issues Requires continuous monitoring, supervision, guidance and evaluation

Requires continuous monitoring, supervision, guidance and evaluation

11 Tools Analytical tools Advanced statistical and analytical tools12 Flow of

communication Top to bottom Top to bottom, bottom to top, horizontal

13 Who can participate

Staff Staff

14 Implementation Group, with the help of Group, with the help of management

responsibility management15 Time frame for

implementation Long time Long time, usually 3-4 years

16 Evaluation criteria Wastes reduction, quality improvements are primary. Encouragement for participation is secondary.

Customers’ satisfaction, costs reduction, quality improvement, top and bottom line improvement and encouragement for participation are primary.

17 Who does it? Cross functional team identified by management

Cross functional team identified by management

18 Involvement Senior and middle management, workmen

Senior and middle management, workmen

19 Membership Appointed and decided by senior management

Appointed and decided by senior management

20 Dependence on management function

Dependent Dependent

21 Working Held during working hours Held during working hours22 Management

involvement Direct Direct, delegation of authority and

responsibility 23 Expertise required Conceptual and practical Conceptual and practical 24 Constitution Constituted by management Constituted by management 25 Problems Given by management Given by management 26 Time-frame Decided by management Decided by management, specific duration

is assigned27 Nature of group Heterogeneous Heterogeneous (members from different

departments and different levels but specialists may be there from outside or consultant)

28 Team type Cross functional problem solving

Cross functional problem solving

29 Objective / Primary effects

Reduce waste, Lead Time Save money-monetary benefit through customer satisfaction

30 Secondary effects Reduces inventory, increases productivity and customer satisfaction

Achieves business goals and improves financial performance

31 Impact on employees

Improves worker productivity and motivation

It brings cultural and perceptional changes in the organization. The employees start seeing all problems with a quantitative approach, rather than with qualitative and biased opinions.

32 Cost Expenses are on training in techniques for waste identification and reduction, SMED, TPM, Jidoka, Poka Yoke.

Expenses are on exhaustive training in statistical techniques, soft wares. Cost varies across industries, size and even from one unit to another

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AUTHORSProf.Tushar N. Desai Six Sigma Green Belt & Associate Professor, S.V. National Institute of Technology, Surat- 395 007.E-mail: tushardesaisvnit@gmail.comDr. R. L. Shrivastava Six Sigma Master Black Belt & Professor, YCCE, Nagpur.E-mail: rlshrivastava@yahoo.com

ACKNOWLEDGEMENTAuthors would like to thank the reviewers for their creative suggestions, which helped to formulate this paper in a better shape.