Lean Six Sigma: Leaning by Degrees

Tags: 3PL, Supply Chain Management, Lean

 

Lean Six Sigma enablers and practitioners are using continuous improvement methodologies to squeeze cost and inefficiency out of the supply chain.

Mere mention of Lean Six Sigma rouses a litany of names from manufacturing’s hallowed past— Ford, Deming, Ohno, Bossidy, and Welch among the notables. Or, it summons any number of Scott Adams’ more contemporary Dilbert cartoons.

Take, for example, Jan. 19, 2007: Pointy-haired boss approaches Carol, the snarky, MBA-toting office receptionist, and asks her to schedule a staff meeting.

“What’s the topic?” she asks dryly.

“I plan to fuse Six Sigma with Lean methods to eliminate the gap between our strategies and our objectives,” proudly gushes Pointy-haired boss.

Carol begins typing, pauses, then curtly replies: “I’ll just say ‘waste of time.’”

Lean Six Sigma is the corporate catchword that business strategists and satirists alike are buzzing about. It’s popular to the point that it has become mainstream outside the enterprise, yet obscure enough to be easily lampooned by those not in the know.

Lean Six Sigma’s odd coupling of Greek symbology and Japanese terminology, shadowy allusions to the martial arts, and abundance of fun acronyms— DMAIC, 4M+I, BIG Ys, CANDO, Tim Wood, SMART, and R&R— guarantee lay biases won’t change any time soon. But the ways businesses embrace and defuse Lean and Six Sigma are changing, and to great degrees— beyond black belt certifications and supply chain MBAs.

Where there is waste there is need for lean process; and where there is dysfunction within logistics functions, Six Sigma probes deep to expose problems and prescribe solutions. More telling, businesses spanning all industries are turning to continuous improvement methodologies to streamline their supply chains, manage variation, eliminate costly defects, and optimize existing resources.

Lean to the Core

When LeanCor, a Florence, Ky.-based 3PL, began operations in 2005, its first customer was Maytag, the iconic commercial appliance company since swallowed by Whirlpool Corporation.

“Because the Lean movement began in repetitive manufacturing, that’s where we saw our initial customer base,” says Erika Roberts, director of corporate development for LeanCor. “Our customers recognized they needed to branch out into the extended value stream and begin working with suppliers and collaborating with customers in order to match product flow to the assembly line.”

It was this repetitive manufacturing pedigree that gave LeanCor traction to grow. And it has. The 3PL offers customers a three-tiered approach to implementing Lean Six Sigma: training, consulting, and non-asset-based operational capabilities that include materials and facility management, logistics process engineering, and transportation management.

LeanCor’s rapid rise over the past few years reflects Lean Six Sigma’s growing acceptance. Companies are increasingly receptive to the merits of continuous improvement because they sense its potential.

“Many companies have issues with service or fill rates, yet their inventory levels remain high. Inherently, they know there is waste in the system. There’s a platform to increase service, and reduce costs, inventories, and waste in order to stay competitive and profitable,” offers Roger Pearce, director of Lean deployment, LeanCor.

The 3PL’s services address these tentative progressions by coupling Lean theory with operational reality. “We are able to go beyond what the book says. We understand the fires that need to be fought every day and the issues that arise when relationships and emotions come into play,” Roberts says.

Part of the value that LeanCor brings to the market is derivative of its broadening exposure to a wide variety of industries through training and consulting. Working with different customers brings more best practices and knowledge to the table. It’s why Lean Six Sigma continues to expand beyond manufacturing.

Tim Noble, managing principal at Alpharetta, Ga.-based The Avery Point Group, knows this well as a Lean Six Sigma job recruiter. He sees new twists in how industries apply Lean and/or Six Sigma from their initial outreach for new talent.

“In the late 1990s, companies took Six Sigma out of the manufacturing function and put it into financial services and insurance,” he says. “The same progression is now occurring with Lean in healthcare and retail. Companies that have legacy Six Sigma programs outside manufacturing are embracing Lean in the same way they took to Six Sigma five or six years ago.”

Continuous Improvement, Copy That

But Lean Six Sigma’s pedigree is in manufacturing and that’s where companies have made great strides investing resources in continuous improvement initiatives.

Xerox’s first fling with Lean Six Sigma began in 2002. The Norwalk, Conn.-headquartered document management company was emerging from its own financial doldrums when then-CEO Anne Mulcahy began exploring ways to steer the enterprise through this turbulence.

“Our partner, GE Capital Services, which was handling a lot of our administrative processes, was heavy into Lean Six Sigma. Through this partnership, Mulcahy saw an opportunity,” recalls Doug Burgess, senior vice president global customer integration and material productivity for Xerox. “She wanted to use this as a platform to exponentially improve our performance.”

Xerox engaged the George Group, a Lean Six Sigma consultant and integrator (now part of Accenture) in September 2002 to investigate an enterprise-wide deployment. In November, Mulcahy and the senior leadership team went through three days of training. By 2003, Xerox had fully launched Lean Six Sigma across its entire enterprise.

With seven years under its corporate black belt, the company has now created an organizational structure underpinned by continuous improvement.

“Some companies only apply Lean Six Sigma in supply chain. Xerox elected to deploy it across finance, marketing, sales, engineering, manufacturing, and supply chain— all operational areas— to ensure we had a common language and approach to solve cross-value chain projects,” Burgess explains. “Because we are functionally organized, we wanted to make sure everyone had the skills and capabilities to support this.”

Xerox orchestrates its Lean Six Sigma strategy through a hub-and-spoke model. A small, centralized group at the corporate level is responsible for governance, strategy, training, and development.

“The decentralized pieces are the functional organizations that have deployment managers reporting to operational heads. They have green belts, black belts, and master black belts supporting projects within their areas,” he adds.

Currently, Xerox has about 1,300 Six Sigma black belts and nearly 7,000 green belts— of which 4,000 are fully certified. The company trains employees in both Lean and Six Sigma skill sets. When Xerox first began investigating a continuous improvement platform, it conducted its own market research and entertained discussions with consultants to determine the best balance.

“Some were into Lean, others Six Sigma, many embraced both. But we didn’t see Lean and Six Sigma as 1 + 1 = 2. It wasn’t a matter of addition. We saw exponential opportunities to focus on process improvement,” Burgess notes.

Gravitating Toward Lean

How companies couple Lean and Six Sigma principles depends on countless internal and external factors. It’s what makes continuous improvement programs liquid and adaptable. There are always allowances for process change, which is necessary as businesses seek to mitigate supply and demand variations.

The Avery Point Group conducts a yearly survey of the job market, taking a snapshot of corporate postings to find out where continuous improvement strategies are leaning from a hiring perspective.

“In 2005, when we began our annual study, Six Sigma job postings outstripped Lean by more than 50 percent,” reports Noble. “Over the past several years, Lean has picked up steam. The tipping point happened in 2008 when it began reaching parity with Six Sigma.”

In 2010, the recruiter’s review of 3,500 job postings found that demand for Lean talent exceeded Six Sigma by almost 35 percent, significantly widening its lead over 2009 results, which showed an 11-percent edge for Lean.

The reasons for this shift are manifold. “From an economic standpoint, companies recognize Lean’s focus on waste elimination, operational flexibility, business process flow, and throughput,” explains Noble. “Lean is the foundation to build upon. Six Sigma is better targeted at more complex problems that focus on variation— problems that require heavy use of statistics. A lot of companies are coming around to this view.”

Another consideration is that Six Sigma has been ingrained in the business culture since the mid 1990s. “That talent exists and is pervasive in the market. When you see job postings for one or the other it’s because companies know they don’t have that in their toolkit or in their talent stable. They’re looking to augment what they already have,” he says.

Emerging and growing supply chain management complexities also favor continuous improvement methodologies that eliminate clutter— excess inventory and redundant processes— then drill down and optimize specific logistics functions. Strategically, businesses are looking at how they can apply Lean and Six Sigma, to varying degrees and with greater or lesser emphasis, to meet their needs.

The Power of 6…and Lean

“Companies deploy Lean and Six Sigma depending on the area they’re targeting,” says Burgess. “In some cases, a process or sub-process is buried in a functional organization. So they need subject matter experts and Lean Six Sigma resources to process map the situation and understand where waste and variation exist. It might depend on reducing one or the other, or both.”

From Noble’s perspective, businesses are prioritizing Lean, then applying Six Sigma. “We’re seeing a shift where companies understand they need to lean out operations first, understand the value stream and where waste is, move toward that future state, and put in place work standards to stabilize the process,” he says. “Once they’ve done that to a certain extent, and begin dealing with more variation issues, Six Sigma’s powerful use of statistics presents real value.”

Xerox’s emphasis on Lean and Six Sigma depends on the project. “We use the DMAIC (Define Measure Analyze Improve Control) methodology, so we first define what the problem is,” says Burgess. “When you get into the measurements, you look for a baseline through SIPOCs (Suppliers Inputs Process Outputs Customers) and other tools. As you work through these steps, it becomes clearer what you need to do to reach a project charter. That may require Lean principles or Six Sigma.”

Many companies today realize they have a lot of basic waste in the supply chain that doesn’t require the rigors of Six Sigma tools and problem-solving models with DMAIC motions.

“There was a time when Six Sigma was more prevalent and every company wanted to focus on it. Then philosophies began to merge and companies embraced both sides— which aren’t too different. They are equally centered around continuous improvement,” says Pearce.

“LeanCor encourages companies to embrace both— 95 percent of supply chain problems can be solved with Lean tools and Lean thinking. But there’s still five percent that requires Six Sigma and DMAIC methodology,” he adds.

Noble agrees, specifically pointing to the fact that Lean and Six Sigma are complementary. “They aren’t at odds,” he says. “Part of the maturing process involves recognizing these tools can be applied where appropriate. That’s an important point in any Lean and Six Sigma discussion.”

Expanding Value

Lean Six Sigma’s growing acceptance is a consequence of recessionary trends— pressures to reduce costs— and its strategic advantage. Companies across all industries are taking note.

“Many different verticals are recognizing that there is waste in any process. We have seen pick-up in the retail sector, which in the past wasn’t focused on this type of solution. The principles apply outside manufacturing,” says Pearce.

LeanCor’s growing roster of both Fortune 500 and privately owned small business clients is testament to this unfolding net of captive practitioners. Continuous improvement initiatives have a ripple impact, gradually reaching farther upstream and downstream in the supply chain. Companies are demanding Lean best practices from their partners and, in turn, are looking for help training, teaching, and engaging suppliers as well as customers, creating an extended connection throughout the value stream.

“3PLs contact us because their customers demand Lean and they need to know what that means,” Pearce adds. As more logistics service providers latch on to the idea, largely through their customers but also because they see the positive influence on their own businesses, the continuous improvement thread will weave its way through the supply chain.

As any black belt will attest, Lean Six Sigma’s value proposition ultimately comes down to granular-level details. But its real impact is manifest in big numbers.

“Our return on investment with Lean Six Sigma over the past seven and a half years is more than 300 percent. Last year it was 433 percent,” says Burgess. “This includes all the investments and resources that have been applied to our Lean Six Sigma program.”

So maybe Pointy-haired boss was onto something in 2007, much to Carol’s chagrin, and in defiance of mainstream bias. The gap between those pondering and executing Lean Six Sigma is shrinking— and for good reason. It isn’t a “waste of time.” Companies are eliminating waste and inefficiency in real time, and in no time.