You are on page 1of 17

IMPLEMENTING LEAN SIX SIGMA:

ADVANTAGES AND DISADVANTAGES

Working Paper Series

2010

RICARDO ROJAS MONTERO


e-mail: rrmmex@netscape.net

1
Copyright statement

Copyright in text of this dissertation rests with the author. Copies (by any process) either in full, or
of extracts, may be made only in accordance with instructions given by the author. Details may be
obtained from the Programme Administrators. This page must form part of any such copies made.
Further copies (by any process) of copies made in accordance with such instructions may not be
made without the permission (in writing) of the author.

The ownership of any intellectual property rights which may be described in this document is
vested in the Author, subject to any prior agreement to the contrary, and may not be made available
for use by third parties without the written permission of the Author, which will prescribe the terms
and conditions of any such agreement.

About the Author

Ricardo Rojas is a Management Consultant who has experience in Strategy, Supply Chain and
Public Policy through more than 20 consulting projects at national and international level. His
professional objective has been to help organisations to design its business strategy to maximise
value in a cost effective manner and implement such strategy in their operations and supply chain.
Ricardo studied a Bachelor Degree in Political Sciences and a Master of Business Administration
(MBA) at ITAM followed by a Master in Operations and Supply Chain Management at Manchester
Business School.

Contact details:

Ricardo Rojas Montero


e-mail: rrmmex@netscape.net

2
Implementing Lean Six Sigma:
Advantages and Disadvantages.

Abstract.

This essay examines the advantages and disadvantages of implement Lean and Six Sigma
to improvement in manufacturing and service operations. The level of Quality Management
adoption and the correct use of the Improvement Approaches are hypothesized to be the
factors that determines the result of implementing Lean Six Sigma. Literature review on
implementing Lean and Six Sigma shows that low level of Quality Management adoption
has a negative impact on the success of Lean Six Sigma. The implication for managers are:
first, they have to understand the scope and limits of quality approaches; second, before any
LSS programme, companies must to apply quality assessment in order to be prepared to
implement Lean, Six Sigma or both. The value of this essay is in providing an explanation
about the success and fail of companies in its way to LSS.

3
Introduction.

Lean Six Sigma (LSS) has gained important attention in the academic and business field
due to its financial impact and levels of customer satisfaction (Smith 2003; Arnheiter and
Maleyeff 2005; Cheng 2008; Proudlove, Moxham et al. 2008; Shah, Chandrasekaran et al.
2008). Companies which have adopted Lean or Six Sigma have reported increase financial
performance in short term (Thomas, Barton et al. 2009), cost reduction (Anchanga 2006),
improvement in customer satisfaction and cost saving (Sharma 2003). On the other hand,
not all the companies that implement a Continuous Improvement programme have been
able to capture its entire economical benefits (Cusumano 1994; Bossert 2003; Sharma
2003).

According to the literature review, some of the explanations for unsuccessful results are:
• Flavour of the Month. Companies adopt new procedures to resolve old problems
when the actual tools don’t work (Näslud 2008).
• Misunderstand of Lean and Six Sigma relationship. The effectiveness of Lean
and Six Sigma is undermined due to firms misunderstand or its principles and risk
related to its implementation (Bossert 2003; Lee-Mortimer 2006).
• Immature firm readiness to apply Lean Six Sigma. Companies have to identify
and understand its level of Quality Management Adoption in order to achieve a
properly implementation (Sharma 2003; Lee-Mortimer 2006).
• Deficient stock of knowledge and monetary resources. Because of its statistical
and parallel organization nature, LSS demands specific skills to implement LSS
tools and techniques and economic resources to hire external consultants (Thomas
and Web 2003; Lee-Mortimer 2006; Thomas, Barton et al. 2009).
• Unclear link between strategy and LSS projects. Undermined or localized impact
and unsustainable improvements is the result of develop LSS initiatives that don’t
support the business strategy (Proudlove, Moxham et al. 2008).

4
• Lack of key process structure into the organisation. LSS projects are expected to
be successful when process are well defined and a relatively stable performance
(Lee-Mortimer 2006; Proudlove, Moxham et al. 2008).

Lean Six Sigma refers to a hybrid methodology that associates Six Sigma and Lean
approaches in order to increase its improvement effectiveness (Sheridan 2000; Arnheiter
and Maleyeff 2005; Proudlove, Moxham et al. 2008). In service sector, George (2003)
defines LSS as a methodology that increase investment value by improving process speed,
customer satisfaction and decrease cost. According to Pande and Holpp (2002), Six Sigma
is a breakthrough business improvement initiative in which products or services will be
delivered almost without defects. Six sigma is based on customer satisfaction and use
DMAIC (Define-Measure-Analyze-Improve-Control) as a main problem solving
methodology (Näslud 2008; Proudlove, Moxham et al. 2008). In contrast, Lean is a
systematic approach to eliminate not adding value activities (Andersson, Eriksson et al.
2006) through a smoothly flow of products and avoiding inventory at lowest possible cost
(Slack, Chambers et al. 2006).

This essay attempt to identify the advantages and disadvantages of combine Lean and Six
Sigma to improvement. The level of Quality Management adoption and the correct
application of Lean and Six Sigma are hypothesized the factors that explain the successful
implement this combined approach.

5
Improvement approaches

Lean improvement approach. Concept, strength and limits.

Lean is a considered as an improvement approach that use a set of tools and techniques to
identify and eliminate waste in business processes, involvement of everyone in the business
and the adoption of continuous improvement philosophy (Shah and Ward 2003; Arnheiter
and Maleyeff 2005; Slack, Chambers et al. 2006; Dale, Wiele et al. 2007). Lean
management has its origin on the Toyota Production System (Andersson, Eriksson et al.
2006) and can be considered as a continuous more than a breakthrough approach.

According to Dale (2007), the key components of lean concept are:


• Value: Customer value through providing the right product/service, right price, at
the right moment.
• Value stream: the set of add value actions involved from product/service concept to
delivery.
• Flow: Smooth flow of materials, information and people.
• Pull: Focus on produce exactly the volume demanded.
• Perfection: continuously improving the capacity utilization and elimination of
waste.

Lean is a useful approach to operational, administrative and strategic improvement. Its


correct application has to consider that the main strengths of Lean are in reducing work-in-
process, increasing inventory turns, increasing capacity, reducing Cycle-time and
Improving customer satisfaction (Andersson, Eriksson et al. 2006).

6
On the other hand, before to implement any Lean initiative, managers have to understand
some disadvantages of this approach, according to the literature review its limits are:

• Lean principles do not always apply when customer demand is unstable and
unpredictable(Andersson, Eriksson et al. 2006; Slack, Chambers et al. 2006).
• JIT deliveries cause congestion in the supply chain, leading to delays, pollution,
shortage or workers (Cusumano, 1994).
• One characteristic of Lean manufacturing is the use of “small scale simple process
technology”, which requires use small machines rather than a single machine
(Slack, Chambers et al. 2006). For Small and Medium Enterprise, in the short term,
requires sacrifice financial resources.

Six Sigma. Concept, strength and limits.

Six Sigma is continuous and breakthrough improvement approach that employ parallel
organization in order to reduce cost, variability defects into the business process and
increase customer satisfaction (Andersson, Eriksson et al. 2006; Slack, Chambers et al.
2006; Näslud 2008). Although Six Sigma has its origins in TQM, it is more structured and
precise, achieves financial results in the short term and create dramatic process changes
(Revere, Black et al. 2004; Andersson, Eriksson et al. 2006; Dale, Wiele et al. 2007).

Before implementation of a Six Sigma programme organisations must to consider the next
Critical Successful Factors (Andersson, Eriksson et al. 2006; Dale, Wiele et al. 2007).
1. Management involvement. Manager commitment and identify the responsibility of
each organisational area.
2. Training. Requires trained managers in Statistical Tools and use of DMAIC
methodology.
3. Organization. A medium level of Quality Management.
4. Understanding of customer needs
5. Six sigma program should begin from strategy, that means a top down approach.

7
The main benefit of Six Sigma is its positive financial impact due to cost saving, risk
reduction in process variation (Slack, Chambers et al. 2006); a common tool set, problem-
solving approach, and project linked with business objectives (Ingle and Roe 2001).

However, Six Sigma has different downwards one of the main is its inflexible process for
improvement and problem solving. The parallel organisation that characterize SS into the
organizations motives attitudes of elitism and unique language making difficult to transfer
knowledge and skills into the host organisation (Ingle and Roe 2001).

Lean Six Sigma. Concept, strength and limits.

As we discussed Lean and Six Sigma are two different approaches. Lean is focus on
increase product flow and eliminates waste (non value added activities), while Six Sigma is
based on reduce variability. But more than be contradictory approaches, Lean and Six
Sigma helps companies to fast deliver of products and services without defects at minimal
cost (George et al. 2004). That is, Lean manufacturing has focused on process flow and
waste while Six Sigma is on variation and design.

The main strengths of Lean Six Sigma are in its combined approach. Specifically, Six
Sigma complements Lean (George 2003) in three different ways. First, Six Sigma could
provide cultural infrastructure and senior management commitment that sometime Lean
initiatives are unable to generate. Second, Six Sigma takes the customer as a core of its
activity something that is not the main objective in Lean approach. Third, Lean tools and
techniques are unable to reduce variation.

On the other hand, Lean complement Six Sigma (George 2003) in four areas. First,
identifying non value added activities. Second, improving responsiveness and speed in the
processes. Third, Lean has a group of robust tools focus on increase speed and rapid

8
response to improvement. Fourth, Six Sigma benefit could be improved if Lean eliminates
non value added activities. Finally, Arnheiter (2005) argue that firm which have
implemented only Six Sigma or Lean practices might exhibit diminishing productivity
returns and implementation of LSS helps to boost the company productivity.

Companies that implement LSS trends to apply a set of tools that are common to both
approaches: 5 why, Cause and effect, Pareto, Creativity tools, histograms, Process Charting,
Scatter diagram, and Poka Yoke (Krumar, Antony et al. 2006; Lee-Mortimer 2006).
However, it is important to mention that one of the main weaknesses of LSS is the high
skills required in order to implement its tools and techniques. As Carreira and Trudell
(2006) said: “having a Black Belt is not absolutely necessary, but having someone with
certain skills is”

Implementing Lean Six Sigma

The capacity of companies to create, learn and maintain their continuous improvement
capabilities is the base for the implementation of more sophisticated approaches like Lean
Six Sigma. In this sense, the Implementation orientation allows us to understand how
Continuous Improvement programmes uses its capabilities in order to apply new tools and
techniques (Shah, Chandrasekaran et al. 2008).

Dale (1994) and Dale, Wiele et al. (2007) describe the Continuous improvement process as
a cycle of improve, maintain and assess (Fig 1). Under this point of view, successful
implementations of Lean Six Sigma have to be based on existing Quality Management
systems, like Lean, Six Sigma or TQM.

9
Taylor and Wright (2003) found that there are some necessary factors for TQM success.
These factors are:
• Time of adoption of TQM.
• Understanding of the purpose of TQM
• Understanding of the relationship between ISO9000 and TQM.
• TQM treated as a key strategic planning process.
• Senior management involvement
• Firms motivating their employees to become Involvement in TQM.

Figure Sustaining a Continuous Improvement Programme.


Source: Author based on Dale 1994; 2007.

Some authors describe Six Sigma as an advanced version of TQM (Arnheiter and Maleyeff
2005; Näslud 2008). According to Cheng (2008) in order to implement Six Sigma via TQM
some tools and techniques have to be implemented and stable. But most important is the
impact of the technical skills, Cheng (2008) establishes that without mature TQM technical
Skills it is impossible to implement the Six Sigma.

Shah et al. (2008) is one of the first studies in focus on identify the existence of a Lean Six
Sigma implementation pattern. This author, based on absorptive capacity theory, argues that
efforts to implement a Six Sigma programme will be more successful in firms that have

10
implemented other quality management programme. Analysing a sample of 2511 firms,
they detect six practices that have the highest impact on Six Sigma implementation:
o Process capability measurement
o Statistical Process Control
o Continuous improvement
o Error proofing
o Quality management
o JIT/Pull system

Finally Arnheiter and Maleyeff (2005) explore the routes to implement LSS in Lean and
Six Sigma corporations: According to them, Lean firm could implement Six Sigma
throughout:
1. Applying more data in decision making, as well as, the DMAIC approach in order
to use a more scientific approach to problem solving.
2. Gathering data and using Statistical Process Control, in order to keep under control
the production process.

In the case of Six Sigma firms implementing Lean:


1. Produce to order company, they have to implement lean will result in faster
deliveries and increase in dependability, i.e. percentage of deliveries “on-time, in
full”.
2. Produce to stock enterprise, lean practices could improve the firm profitability by
decreasing lead times and replenishing inventory more frequently.

Business Case 1: National Health Service in UK (Proudlove, Moxham et al. 2008)

In 2004 the NHS Modernisation Agency (MA) established a Six Sigma Green Belt project
in order to test the viability of Six Sigma in NHS. Six Sigma was seen as a solution to the
lack of measurement and more scientific problem solving methodology used in the NHS to

11
improve the quality of services. Four projects were selected and evaluated throughout
observation and interviews with GB.

As we described, the factors affecting Lean Six Sigma success in NHS are related with the
level of Quality Management adoption and the low capabilities developed before
implementation. Some of the factors are:
• Flavour of the Month. Quick solution to old problems.
• Unclear link between business strategy in the NHS
• Lack of well-designed processes.
• Lack of structure project support on the organisation.
• Difficult to stick with the rigour of the approach, many NHS project jump straight
to DO or improvement

Main Lessons
• Any process improvement program must to support the global strategy of the
company and it is required to identify the level of Quality Management adoption
before any implementation.
• Strategic framework is required in order to avoid localized impact of Lean
implementation.
• Identification of processes is a key prerequisite to eliminate waste, identify value,
implement and sustain improvement.
• Team working is a key element in Green Belt projects.
• Required internal employee skills to develop and implement LSS.

Business Case 2: Small engineering company (Thomas, Barton et al. 2009)

In 1990, a small company leader in seating systems for automotive and aerospace industries
experienced the need to become lean and responsive to client due to increase in competition
from low cost countries. The use of external consultant was unfruitful so to create in house
expertise was option for implementation. In order to diversify its product portfolio, the

12
company decided to sell product into the high value market, this strategy demanded highest
standards of quality and more responsiveness to customers.

Enable factors:
• Historic awareness to quality and investment in infrastructure to assure total
customer satisfaction.
• Ability of the organisation to continually innovate.

Factors affecting Lean Six Sigma success.


• Lack of intellectual and financial capacity as primary issue to poor system
implementation.
• Low application of statistical methods in SME and Management do not have
sufficient knowledge to obtain the full potential of using statistical tools.
• Insufficient statistical data limit the effectiveness of some tools and techniques (e.g.
problem solving benchmarking, continuous improvement)
• Complexity of implementation
• The cost to machinery reconfiguration to implement Lean approach.

Main Lessons
• Develop in house expertise for future process systems development, creating
internal capabilities and saving cost.
• Develop advanced statistical techniques and to become “technical” in the approach
to problem solving implementing Six Sigma.
• The lean approach developed a culture towards continuous improvement and
elimination of non value added activities before Six Sigma implementation.
• TPM approach within the lean strategy allowed the company to develop more
advanced maintenance analysis techniques and fewer breakdowns.

13
Business Case 3: Stanford Hospital and Clinics (George 2003)

Stanford Hospital was applying the basic elements of Lean Six Sigma mid-1980s, the first
approach to LSS was throughout Total Quality Management. In 1990s, the clinics needed
more profitability in order to sustain its operations. Healthcare organisations cannot fully
control their fixed costs. The first failed quality implementation was in mid-1980, after that
they implement Operation Improvement initiative, in late 1980s.

Enable factors:
• Ten year implementing quality systems.
• Development of Operation Improvement fosters the quality culture into the
organization.
• OI build the first basement to tools and techniques
• Link between improvement program and business strategy.
• Develop internal capabilities throughout training employees.
• First, TQM implementation; following by Lean and finally LSS

Factors affecting Lean Six Sigma success.


Lack of entire service vision.

Main Lessons
• Use of cross departmental team in order to understand and analyse the entire
process.
• Developed of Numerical skills to identify critical process indicators.
• Implementation throughout flexible methods according to teams needs and styles.

14
Conclusions

In this essay we investigate the advantages and disadvantages of implement Lean Six
Sigma. After an extensive literature and case review, the applicability of LSS is valid in
services and manufacturing sectors. We found out, that the main factors that explain the
successful implementation of LSS is the level of Quality Management adoption (i.e.
developed quality capabilities into the company) and the correct understanding of the
scope, limits and use of quality approaches. The main implications of this research are:
1. In order to obtain the whole benefits of any Quality program, the firm has to
identify its level of quality capabilities. Every improvement approach has different
tools, techniques, critical success factors, objectives and limitations, managers have
to understand these elements and identify its applicability into their companies.
2. Literature review shows some possible routes forward a successful implementation
of Lean Six Sigma. There are some factors that have highest impact to implement
quality approaches. But there is not a unique route.
3. One important implication to managers is the strategic impact of Quality
Management. Implementing a quality program increase the company capabilities,
under limit resources, managers have to take trade off decisions at selecting the
approach and its components.
4. Finally, the human factor is still one of the most important determinants of Success.
As we see in the Small company case, training employees not only help to develop
internal capabilities, but have a positive financial impact.

15
References

Anchanga, P. (2006). "Critical success factor for lean implementation within SMEs." Journal of
Manufacturing Technology Management 17(4): 11.
Andersson, R., H. Eriksson, et al. (2006). "Similarities and differences between TQM, Six Sigma
and Lean." The TQM Magazine 18(3): 14.
Arnheiter, E. and J. Maleyeff (2005). "The integration of lean management andf Six Sigma." The
TQM Magazine 17(1): 13.
Bossert, J. (2003). "Lean and Six Sigma-synergy made in heaven." Quality Progress 36(7): 31.
Carreira, B. and B. Trudell (2006). Lean Six Sigma that works a powerful action plan for
dramatically improving quality, increasing speed, and reducing waste. New York, American
Management Association.
Cusumano, M. (1994). "The Limits of "Lean"." Sloan Management Review 35(4): 5.
Cheng, J.-L. (2008). "Implementing Six Sigma via TQM improvement: an empirical study in
Taiwan." The TQM Journal 20(3): 13.
Dale, B. G. (1994). "A Framework for the Introduction of a Process of Quality Improvement in
Retail Organizations." International Journal of Retail & Distribution Management 22(8): 7.
Dale, B. G., T. Wiele, et al. (2007). Managing quality. Oxford, Blackwell Publishing.
George, M. L. (2003). Lean Six Sigma for Services. London, McGraw-Hill.
Ingle, S. and W. Roe (2001). "Six Sigma black belt implementation." The TQM Magazine 13(4): 7.
Krumar, M., J. Antony, et al. (2006). "Implementign the Lean Sigma framework in a Indian SME: a
case study." Production Planning and Control 17(4): 16.
Lee-Mortimer, A. (2006). "Six Sigma: a vital improvement approach applied to the right problem,
in the right enviroment." Assembly Automation 26(1): 7.
Näslud, D. (2008). "Lean, Six Sigma and Lean Sigma: fads or real process improvement methods?"
Business Process Management Journal 14(3): 18.
Pande, P. S. and L. Holpp (2002). What Is Six Sigma? New York, McGraw-Hill.
Proudlove, N., C. Moxham, et al. (2008). "Lessons for Lean in Healthcare from Using Six Sigma in
the NHS." Public money & management 28(1): 7.
Revere, L., K. Black, et al. (2004). "Integrating Six Sigma and CQI for improving patient care." The
TQM Magazine 16(2): 8.

16
Shah, R., A. Chandrasekaran, et al. (2008). "In pursuit of implementation patterns: the context of
Lean and Six Sigma." International Journal of Production Research 46(23): 20.
Shah, R. and P. Ward (2003). "Lean manufacturing: context, practice bundles, and performance."
Journal of Operation Management 21: 20.
Sharma, U. (2003). "Implementing Lean principles with the Six Sigma advantage: How a battery
company realized significant improvements." Journal of Organizational Excellence 22(3):
9.
Sheridan, J. H. (2000). "Lean Sigma synergy." Industry Week 249(17): 2.
Slack, N., S. Chambers, et al. (2006). Operations and process management. Principles and practice
for strategic impact. Harlow, FT Printice Hall / Pearson Education.
Smith, B. (2003). "Lean and Six Sigma-A One-Two Punch." Quality Progress 36(4): 4.
Taylor, W. A. and G. H. Wright (2003). "A longitudinal study of TQM implementation: factors
influencing success and failure." The International Journal of Management Science 31: 14.
Thomas, A., R. Barton, et al. (2009). "Applying lean six sigma in a small engineering company - a
model for change." Journal of Manufacturing Technology Management 20(1): 16.
Thomas, A. J. and D. Web (2003). "Quality systems implementation in Welsh small to medium-
sized entrerprises: a global comparison and a model for change." Journal of Engineering
Manufacture 217(4): 6.

17