Six Sigma has applications in high technology, high transaction, or expensive error environments. But what if you are in a mature industry, a service business, or an organization that handles few transactions? Perhaps Lean Thinking (waste reduction) or the Theory of Constraints (throughput improvement) would work better. So what is lean process improvement?
First, what is Lean Thinking anyway? As the name implies, it is a mindset — a way of viewing the world. Lean is about focus, removing waste, and increasing customer value. Lean is about smooth process flows, doing only those activities that add customer value and eliminating activities that don’t.
Adding value is another way of saying “generating revenue”. If it doesn’t generate revenue then it must add cost, not value. Sounds easy, doesn’t it? After all, this is what we do every day…or is it? Let’s see…
There are five basic steps in assessing lean operations:
For example, let’s take a look at the most fundamental cycle within a lean manufacturing operation, the order-to-delivery cycle. The top level activities, in sequence, are:
The activities that don’t add value include order entry, backlog, inventory, and shipping delays.
In a lean operation, we could have the customer enter their own orders; products made on demand, so we would have no backlog or inventory, and then product could be shipped overnight for minimal shipping delay (or downloaded in the case of software).
Companies with very short order-to-delivery cycles (and not using inventory as a buffer) are lean operations. Lean operations have a strong cash cycle. In general, the shorter the cycle, the leaner the operation. Do you know any companies like this?
Here at Bizmanualz, we carry very little inventory. Customers enter their own orders via the web, we make product on demand, and we ship it. Our order-to-delivery cycle is very short: Orders go out the same day if they’re received before 3:00 pm, US Central time — otherwise, by the end of the next business day.
Another important tool used in lean thinking is the 5S system of organization. The idea is that a messy workplace, desk, or manufacturing cell makes it hard to find things, easier to get distracted, and can introduce accidents or mistakes. The “5S” stands for:
Note the visual nature of Lean. Lean Thinking is very visual, picturesque, even Zen-like. It is definitely a state of mind. Clean, clear, and focused at the task at hand and nothing else. It does not require a lot of mathematical analysis, unlike Six Sigma.
Six Sigma is problem-focused, with a view that process variation is waste. Lean Thinking, on the other hand, is focused on process flow and views any activity that does not add value as waste. Six sigma uses statistics to understand variation. Lean uses visuals: process mapping, flowcharting, value stream mapping, and visual dashboards to understand the process flow.
View of Waste
Variation is waste
Non-value add is waste
Process flow focused
Taiichi Ohno is credited with creating the Toyota Production System (TPS), which is one of the better known implementations of Lean Thinking anywhere in the world. The concepts of lean were born out of the severe resource constraints in postwar Japan, which leads us to the Theory of Constraints.
Lean Thinking is ideal for mature (energy), slow growth (automotive), low transaction industries (small business) or an organization where mathematical tools are not common. Lean begins to use systems thinking and considers all of the process interactions.
But lean is still a reductionist approach focused on eliminating waste (cutting costs). What is needed is to balance the resources released through Lean or Six Sigma improvement programs with an increase in throughput and need for resources. Otherwise you enter a cost cutting, job losing cycle and your lean process improvement program will grind to a halt.
If you’re in a mature, slow growth, low transaction, or non-math business, Lean Thinking will work really well for your organization. So what’s left? The desired end result is lean process improvement. The Theory of Constraints (throughput improvement) takes the concepts of Lean Thinking to another level of systems thinking.