Lean & Six Sigma: What’s The Difference??

WHY:           Lean primarily focuses on how we create value for the customer, rather than on the production or other processes. Waste is anything we do that the customer does not value. Six Sigma primarily focuses on the processes that create the customer value. Six Sigma has rigorous, usually statistical, methods to identify poor processes, and to create robust, repeatable, and perfect processes.

HOW:           Lean companies systematically work on increasing customer value and eliminating waste. There is waste everywhere in the company. Administrative, financial, & managerial processes are 100% waste. Sales and marketing contain huge amounts of waste. The factory process also has huge waste but also has a huge amount of value-add. Six Sigma seeks to eliminate variability in the processes. Six Sigma identifies poor processes and there are standard methods for identifying, analyzing, changing, measuring, and validating the improvements.

TOOLS:           Six Sigma has a clear set of tools that can be used very successfully by trained engineers to make much improved processes. Lean does not really have “tools”. Lean methods change according to the circumstances and the customers needs. But over the last 20 years a certain number of methods deriving from Toyota Motors have become popular and are largely standard within US and Western manufacturing. Lean tools do not make for a lean organization; there must be a passion for continuous improvement that increases customer value week in and week out.

WHO:            Owing to the complexity of the methods and statistics, Six Sigma projects are generally run by production engineers and other “professional” people. Six Sigma projects usually run over several months and create significant, measurable change.
Lean improvement is primarily done by the people working in the company’s processes, and the benefit comes from a large number of small improvements. The people are trained on-the-job by engineers or lean specialists. This leads to genuine continuous improvement driven by the workforce, rather than a series of projects driven by the managers and engineers.The “pursuit of perfection” becomes ingrained in the company’s culture.

THINKING:            Six Sigma can be applied in any kind of industrial organization. Six Sigma is not dependent on the company’s Lean ambitions. Six Sigma does not change any fundamental thinking within a company; it can be used frequently or occasionally.
Lean is not a series a tasks and methods; it is a radically different way of managing the company. Lean thinking is largely the opposite of 20th century management practice. A company can not achieve success by “applying some lean tools”. Companies are only successful will Lean if their leaders passionately embrace strategic business change.

COMING SOON: very personal piece on “Where Lean Accounting Came From–and Why

Posted in Economics of Lean, Healthcare, Industry, Lean Management System, Lean Manufacturing, Strategy | Leave a comment

Why Measuring Efficiency is Anti-Lean

The measurement of people’s efficiency has a long history in manufacturing industries. The design and production engineers calculate the time required to manufacture a product or batch of products. Each time the product is made, the “actual time” is measured and recorded. The efficiency of the production people (or the process) is calculated by dividing the standard time by the actual time.

If the actual time is faster than standard, the efficiency will be greater than 100%. When the actual time is longer than standard, the efficiency is less than 100%.

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The purpose of measuring efficiency is to monitor if the people and the process are running at the right speed so that the right number of units are made according to the production schedule, and the need’s of the customers. When the efficiency measurement is significantly less than 100% an investigation is made so that the shortfall can be caught up, and the reasons for the problem identified.

Traditional approaches to manufacturing finds these measurements very helpful. The measurements were designed to support the “scientific management” developed by Frederick Taylor (and others) in the 1920’s when modern industrial methods were first standardized. These clever and innovative engineers and entrepreneurs based their methods on a few key paradigms.

  • One was that the operations people in a manufacturing plant have “separation of duties”. The people should not make the whole product but each have specialized skills. The products pass through several work stations from fabrication to finished products.
  • A second paradigm is that the plant must maximize the use of the operators time. Operators are an expensive resource and we need to make sure that every minute is used productively.
  • A third is that making large batches of products optimizes the production time and productivity.

The outcome of these assumptions is that the factory makes products all the time, builds finished goods inventory, serves the customers effectively by having available product, and minimizing the product costs. The underlying philosophy of manufacturing management is that we need maximize the “economies of scale” and produce as many products as possible, and to harness the production operators 100% of the time.

None of this thinking works in a lean organization. “Overproduction” is one of the famous Seven Wastes articulated by Shigeo Shingo.

  1. Lean companies do not want their people working all the time making the products. The people need time to work on improvements in their work areas. These improvements are not the large “kaizen events”; they are “continuous improvements”. Hundreds of small improvements initiated by the people in the cells or other work areas. These many small improvements lead to huge benefit as the small improvements add up to significant change, and the people making the changes are the people with the most knowledge.
  2. If the company emphasizes production efficiency, then the people will work to create maximum efficiency. One way to achieve this is to shortcut the standardized work required to make the product, or other tasks the people are doing. This may lead to short-term “efficiency” but violating standard work compromises quality and consistency.
  3. Making larger batches increases the efficiency measurement of production but violates single-piece-flow which is fundamental to lean manufacturing.
  4. Another way to increase efficiency is to change the sequence of products being made so as to minimize such things as change-over or materials handling. In many cases the production sequence is important to providing the right products to the customers, and leads to shortages or delayed delivery of all the products the customer needs today.
  5. A more important issue is that process problems are overlooked and hidden when the people are driven by efficiency. Lean companies identify problems immediately by stopping the process and solving (or at least fixing) the problem so that it will not happen again. This is an important aspect of continuous improvement.

If Efficiency is Anti-Lean then What Do We Measure?

A common way to measure the production process in a lean organization is to use the Day-By-The-Hour chart.

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The production quantities for each hour are shown in the Schedule column. The quantities completed are shown in the Actual column and the problems are recorded in the right hand column. This visual board is posted in the work area and kept up-to-date each hour. The board controls the production quantities, initiates problem solving, and ensures that the right products are made at the right time and in the right sequence.

Different versions of the Day-By-The-Hour chart are used in office, warehouse, design, and other processes to create control of the work processes.

bmaskell@maskell.com

Posted in Cautionary Tales, Continuous Improvement, Industry, Lean Accounting, Management Accounting, Performance Measures, Process Control, Team Work, Uncategorized | Tagged , , , , , , , | 10 Comments

Work by Seeing It. Make it Visual.

unnamedLean organizations of all kinds make strong use of visual management. Visual management means that – as far as possible – people’s work is scheduled, organized, and controlled by themselves, and the information they need can be easily seen on schedule boards, visual work instructions, and simple progress boards.. Their work is not “hidden” inside computer systems or desk drawers.
There is a simple reason why lean companies focus on visual work methods. Humans are visual creatures, and we work much more successfully when the work is visually controlled. The other great advantage of visual management is that it saves a great deal of time. When work schedules and organizations are visually controlled, there is no need for supervisors and managers to spend time assigning work and scheduling on-the-fly.

This is the 8th article of our series showing how to develop a truly Lean Management System. Control your processes using VISUAL MANAGEMENT.unnamed-1 

 

 

 

 

 

 

 

 

What Does Visual Management Look Like?

The most obvious aspect of visual management is the widespread use of operations boards. In many lean companies there are operations boards at each cell and work station, and there is a visual board for each value stream. Similar boards are used in new product development, sales and marketing, the office processes, and executive meetings.
VS Board for BlodThe boards are used to show what work needs to be done today or this hour. They are used to report the status of the work, who does the work, the issues and problems that arise, the action needed to ensure the quantity and quality, and to report completion of the work. Visual management is best when the work-teams control and schedule their own activities, based on the current needs of the customers and the company.

Visual work boards are often placed immediately where the work is done. Employees and managers can immediately see the schedule and the progress. This eliminates a lot of wasted time asking what to do next, how to resolve a problem, searching for information. Well organized, visual processes improve productivity, costs, quality, on-time completion, customer service, inventory levels, and machine reliability.

Visual Control of Materials. (What, Where, When, How Many)
This goes back to the adage of “a place for everything, and everything in it’s place”. Lean companies have carefully organized production areas that clearly show where the materials should be, how many items, and the sequence of use. Many simple methods are used to achieve this. Squares drawn on the floor show how many are needed and when the items need replenishment. Colored lines painted on racking show the maximum and minimum number of boxes required. Liquids or powders stored on weighing scales so the amount available and amount needed can be controlled.

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This kind of visual management makes it is easy to replenish materials, to identify shortages, and ensure everything is available before starting a production job. Replenishment is often done using visual kanbans. If, for example, we need 5 pallets of an item in stock, then each pallet has a kanban card attached. When a pallet is used, the kanban card replenishes it from the supplier.

These method largely eliminate the traditional stock counting at year-end or quarter. The materials are under control constantly, and we are not required to “stock count”.

Making this Right
Clear and visually available standard work diagrams enable everybody to know how to make the products, or other tasks, and do it right every time. Similarly, specifications, diagrams, drawings, photographs, and videos are used to visually show the correct process. There are often comparison diagrams showing common errors and mistake-proofing (poke yoke). Clear and standardized inspection and verification processes are also shown visually in the work centers.

Who Does It and When Is It Done

Visual management is used to ensure that the right people with the right skills are assigned to appropriate tasks. It is common to have assignment boards that show who isimagesworking on which tasks or projects, and when they will be available. This is complemented with visual boards showing each persons’ certification for the company’s tasks with various levels of complexity, and where they are currently working so they can be easily found. This visual information makes it easy to assign people to new tasks. This is particularly important for companies that work as “job shops” and have a wide variety of products and processes, and widely different products and services.

Visual Management for Senior Leaders
One of the most successful visual management methods adopted by lean organizations is the “Obeya room”. The Japanese word just means “a large room” but it has been adopted by many companies. The purpose of the Obeya room is to visually organize and monitor the company’s strategic plans.

Visual Management in the Offices, Design Departments, Sales/Marketing, and Administration
As with all aspects of lean management, these visual methods work in the same way throughout the company. Visual methods to control, report, and expedite product designs imagesare achieved in similar ways to production processes, although the work often takes longer, is more diverse, and people work in parallel across multiple projects. This kind of work lends itself to visual management. I cringe every time I see people pulling up Microsoft Project software and thinking they have visual management. Apart from the fact that anyone over 40 years of age can not read the tiny type, these project management apps should be replaced with clear, hand-written (or post-it’s) in visual control boards.

Sales and Marketing has similar issues to that of product development because they often they need to communicate across the long distances. This makes a computer based planning and control system a necessity. But it is again important to create a system that is simple and visual so that people can effectively use the information.

Administrative tasks are a given for visual management. Much of the administrative processes are highly standardized but irregularly used. These include recruitment, month-end financial close, customer relations, etc.. In these situations standardized visual management is a must to ensure the quality and consistency of the process.

Homo Sapiens are visual creatures. To achieve fast, effective, and consistent results we must use visual thinking and methods. Simplistically said, the fewer computer transactions, the lower the waste, the better the process, and more engaged the people. This is a recipe for success and improvement.

VIDEO: Visual Management at Steffes Corporation. 

Why Visual Management

bmaskell@maskell.com

Posted in Lean Accounting, Lean Management System, Lean Management System Series, Uncategorized, Value Streams | Tagged , , , , , , , | Leave a comment