Lean, Six Sigma, Lean Six Sigma: How to Choose the Right Tool for You
March 03, 2014
Lean, Six Sigma, Lean Six Sigma — you hear these terms tossed around as though they are inter-changeable. Are they the same, though? Mike Stimson, a Manager of our Business Advisory Services, and Bill Caplan, one of our Business Growth Consultants, weighed in to clarify and define how these powerful solutions bring their own definitive virtues to process improvement in businesses of any type and size.
How do Lean and Six Sigma compare?
Mike Stimson: Lean and Six Sigma are both improvement techniques, but they are designed to do two different things. Six Sigma is generally used to reduce defects or process variation, while Lean is intended to reduce waste.
It’s important to note that while all defects are a form of waste, not all waste comes from defects. Generally speaking, companies stand to gain more from Lean than Six Sigma, because while there is always waste to be taken out of a given process, not all of that waste comes from defects.
As the Six Sigma name implies, it’s very statistically oriented—it uses statistics and measurements to improve processes. Lean, on the other hand, is a more processes-based, practical application of principles.
Lean principles teach us there are eight types of waste, which can be simple to remember using the “DOWNTIME” acronym:
Non-utilized resources (primarily people)
Transportation (moving things around more than you need to)
Motion (moving around your station more than you need to)
You’ll see that the “defects” are just one part of the equation. Six Sigma is effective for that part of it, but it’s really not applicable to the others.
Bill Caplan: All true. If I’m drawing a Value Stream Map for a client, I describe the two in terms of value-added, and non-value-added processes. The Six Sigma philosophy is about reducing variation in business processes, about improving value-added parts of the equation. The toolsets you draw on to do focus on the elimination of variation in the processes themselves.
Lean, on the other hand, focuses on the non-value-added activities associated with your processes. The elements in the DOWNTIME acronym are symptoms of some other problem associated with your business system. Lean is about using the right tool to address the problem that causes the symptom. For example, if you have too much inventory, that’s a form of waste, and Lean will focus on eliminating it. The most important thing to remember, though, is that you have to fix the reason the waste got there in the first place. Otherwise, it will just reoccur.
When do you need Six Sigma?
Bill: The starting point for Six Sigma is usually a desire to drive out variation in your business processes, to stabilize them. Lean should ideally start with a stable process; we don’t want to improve something that isn’t stable to begin with—that would just accelerate waste creation.
What circumstances make Lean the best process improvement approach?
Mike: If you experience a lot of waste (as defined by the DOWNTIME acronym), or have cash flow problems, for instance, Lean is the tool to focus on. Lean is going to help you reduce excess inventory, shorten the time between order placement and receipt of payment receipt, and cut costs.
Lean helps open up capacity. If you have orders but aren’t able to fill them, or you have poor on-time delivery performance, or your lead times are too long and shortening lead times could be a competitive advantage, Lean will help.
Think of it this way: if your total lead time for a given process is 100 hours, chances are that only about five hours of that span (if that) is actually being used to add value to a product—turning the product into something. The rest is waste of some sort. It can be amazing to actually study a process and see how little time it takes to convert raw materials into product. Lean teaches you to take out as many of those non-value-added steps as possible—that shortens lead time and improves cash flow.
What are the typical benefits of Six Sigma?
Mike: Reduced defects, fewer errors, improved physical product quality…Six Sigma can be used to improve the process steps that actually add value.
What are the typical benefits of Lean?
Mike: Lean projects typically deliver shortened lead times, reduced waste, lowered inventory costs, and improved process flow. They also get people more involved in the process improvement, so there’s a greater sense of employee ownership.
Bill: You might also divide the benefits of Lean into categories like “improved customer satisfaction” (shorter lead time, better customer response times, improved quality) and “operational effectiveness” (improved costs, better flexibility, overall operational effectiveness).
What kinds of companies stand to benefit from Six Sigma?
Mike: Any company with a high rate of quality issues is a candidate, but also those that perform high volumes of a given operation—a lot of measurements, for instance, even large numbers of transactions. It’s not just manufacturing; if you’re processing information (banks, insurance companies, front office operations, for instance) those can all benefit from Six Sigma. Typically, higher volumes of transactions or processes are ripe for reducing the variation.
Bill: The point about non-manufacturing companies is very important. Insurance companies, banks, …they need to make sure they don’t make errors. If you make millions of transactions a day, even 1% is a huge number of errors. That’s why those businesses want to go to the Six Sigma level. Businesses that require high levels of precision are also good Six Sigma candidates. It’s most applicable in environments with continuous processing.
Who benefits most from Lean?
Bill: Lean tools really fit all types of working environments today—low volume/high mix, high volume/low mix, make to order, make to stock…they can all benefit from applying Lean philosophy. The philosophy is about value stream optimization.
Mike: Any company that has a problem with lead time, cash flow, those who are capacity constrained, they can all benefit from Lean process improvement.
Where should you start with Lean or Six Sigma?
Contact us! We’ll sit down, learn about the business issues at hand, and see whether Lean or Six Sigma are what your business needs.
Six Sigma is generally used to reduce defects or process variation, while Lean is intended to reduce waste. While all defects are a form of waste, not all waste comes from defects. Generally speaking, companies stand to gain more from Lean than Six Sigma, because while there is always waste to be taken out of a given process, not all of that waste comes from defects.
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