An Analysis Of Service Operations

Over the last decade, we saw an exponential growth in Lean and Six Sigma approaches. Recently the combination of Lean with Six Sigma as an improvement approach has captured the attentions of academia and industry. Lean Six Sigma was widely used in manufacturing sectors but can also be used in administration and service areas (Snee and Hoerl, 2004). Companies adopting Lean or Six Sigma have reported an increase in financial performance within a 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 economic benefits (Cusumano 1994; Sharma 2003). The objective of this essay is to demonstrate the power of Lean Six Sigma in the manufacturing and service sectors of business. Two case studies relating to both the business areas are discussed along with the significant benefits and drawbacks to its use in such areas.

Review of literature

As the name suggests, lean Six Sigma is an integration of lean and Six Sigma philosophies, principles and tools (Sheridan, 2000). Lean Six Sigma makes use of the knowledge, methods and tools resulting from decades of operational improvement research and implementation. Goal of Lean Six Sigma is growth and effectiveness and not just cost-cutting efficiency. According to Bendell (2006), the adoption of lean Six Sigma as a process improvement is yet to be fully established in particular area of academic research. Full potential of lean Six Sigma have not been realised (Smith, 2003).This failure is due to the lack of commitment from management (Cusumano, 1994).

Lean focuses on reducing cost through process optimization and also on waste elimination in existing processes. Six Sigma is all about stakeholder expectations and meeting customer requirements. It also improves quality by measuring and eliminating defects. Both these approaches are implemented in isolation (Smith, 2003),leading to conflict of interest and draining of resources due to the creation of lean and six sigma subcultures that is emerged within the organization (Bendell, 2006). According to George (2003), Lean and Six Sigma help companies to deliver products and services at a faster pace without defects at minimum cost. Lean manufacturing focus on process flow and waste while Six Sigma focuses on variation and design.

The below figure shows the DMAIC framework on which the Six Sigma projects are built. The five phases of DMAIC are Define, Measure, Analyze, Improve, Control. To improve the process speed and efficiency within the project, Lean Methods are used within the DMAIC framework to augment Six Sigma tools.

Source: IBM Global Business Services analysis.

Six Sigma complements Lean in three different ways (George 2003) by

Providing senior management commitment and cultural infrastructure that cannot be generated by Lean initiatives.

Having customer at the center of its activity and this is not seen in Lean approach.

Reduce variation that cannot be achieved by lean tools and techniques.

Lean complements Six Sigma in Four different ways (George 2003) by

Non-value added activities are identified.

Eliminating the non-value added activities improves and benefits Six Sigma.

Process responsiveness and speed is improved.

Speed and rapid response is increased with lean tools.

Arnheiter and Maleyeff (2005) outlines the benefits when lean and Six Sigma are integrated. Companies use a set of tools that are common to both approaches ie tools like 5 why, Scatter diagram, Histograms, Pareto, Cause and Effect and Poka Yoke (Kumar et al., 2006).

Table I shows the key lean implementation steps with the Six Sigma tools that can be used to complete each task.

Source: (Pepper and Spedding, 2009).

In an organization Six Sigma is implemented only by few specific individuals, whereas lean is used by everyone to identify and eliminate non-value adding activities(Higgins, 2005). Employees have true ownership of the process even at higher-level process analysis stage due to the integration of lean Six Sigma. According to Harrison(2006),Neither lean nor Six Sigma is very effective when implemented in isolation because of their forced needs within the organization. Smith (2003) says that this will result in the creation of two subcultures competing for the same resources. End objective of both the approach is to achieve quality throughout the process. According to Arnheiter and Maleyeff (2005), continuous improvement of process is difficult if the approach is implemented alone. Organizations find it effective if implemented alone but after the initial improvement there is no improvement in the process. In order to avoid this lean approach should combine the use of targeted data to make decisions and also to approach quality in a more scientific way within the system. On the other hand, it is necessary that the Six Sigma adopts a wider system approach, by considering the effects of waste on the system as a whole.

These approaches are considered to be ineffective by many people and they feel that the blending of these approaches leads to ineffectiveness and led to some criticism in the literature. Bendell (2006) who has vast experience as both practitioner and as an academician argues that lean Six Sigma for becoming “ill-defined philosophies”, thus becoming a less effective tool. Bendell feels that it would be beneficial if there is a single approach combining the effectiveness of both the lean and Six Sigma approaches. This emphasizes the fact that consultants have provided a number of consultancy models for lean Six Sigma which is available on the World Wide Web. Methodologies used by these consultants are without any logical explanation and theoretical support or explanation for choosing the techniques.

Taking a practitioner view, Spector and West (2006) says that when practitioners adopt lean and Six Sigma involve in many projects that yields insufficient results due to the time required to complete them. According to Mika(2006) both the approaches are not compatible with one another because lean is open to workers and encourages teamwork whereas six sigma is not available to the “average worker on the floor”. The use of lean tools and techniques identifies important areas that can be leveraged by Six Sigma techniques and also to arrange the information flow to run the system by providing continuous feedback (Pepper and Spedding, 2009).

In few literatures, the main concerns when building a new and a complete framework for lean six sigma is that it focuses on process and strategy and that it should strike a balance between complexity and sustainability and finally structured around the type of problem that’s encountered and by recognizing the advantages of both these approaches.

Findings

Lean Six Sigma approach in Healthcare related to service operation and small engineering company of manufacturing sector case is discussed below.

Lean Six Sigma in Healthcare(de Koning et al., 2006)

Like any other service operation, Healthcare needs to remain cost efficient, competitive and up-to-date. This can be achieved by using Lean Six Sigma in Healthcare sectors. George (2003) describes innovative work on Lean Six Sigma at Stanford Hospital and Clinics. Let us take the case where lean Six Sigma is used by Red Cross Hospital in Netherlands. Worldwide the cost of medical care is increasing at an alarming speed. Unnecessary operational inefficiency leads to increase expenditure in healthcare. In order to improve quality wastefulness has to be measured. Medical service delivery process has led to operational inefficiency.

First quality improvement techniques were initiated followed by six Sigma, lean and then lean Six Sigma. In 2002 the Hospital started using Six Sigma and found that this methodology provided solutions to many of the below mentioned problems identified by top management.

At times absence of important business case.

Absence of Project-tracking system.

Failed method for project management and control.

Many incomplete projects.

Lean Six Sigma projects in healthcare include both the medical as well as the administrative problems. Quality improvement is not only to address defects like medication errors but can be widened to various fields of application. The kind of problems tackled in healthcare are

shortening the length of stay in chronic obstructive pulmonary disease patients

Errors related to invoices received from temporary agencies are reduced.

Revision of payment terms.

Number of patients needing intravenous antibiotics is reduced.

Intravenous medication’s preparation time is shortened.

The Red Cross Hospital involvement shows the vital elements of the Lean Six Sigma approach. These are:

Organizational infrastructure of Six Sigma applied.

Quality improvement deployment focused on each project.

Training employees leading to evolving organizational ability for innovation .

Selection of projects had a strategic focus.

A serious budget cut was imposed on the Red Cross Hospital. This demanded a strict focus on cost reductions while keeping quality on focus. The clinic needs profitability to sustain its operations as the fixed costs cannot control the operations.

Lean Six Sigma in a small engineering company (Thomas, 2009)

To enhance manufacturing operations, companies use Lean Six Sigma. small engineering company (Thomas, Barton et al. 2009) is a leader in seating systems for automotive and aerospace industries. Manufactured products are supplied to worldwide markets increasing the competition from low cost countries and the need to be responsive to customers led the company to adopt lean. The company preferred to create in-house expertise to process systems development as consultants were ineffective. When the company moved into the high-value markets its profit increased by manufacturing less products, higher quality and the delivery requirements were tight. This lead to the need to use lean Six Sigma to respond effectively to the unpredictable customer demands. The company had the potential to innovate continuously along with the awareness in infrastructure quality and investment.

This approach provided the company with a simple structure but an effective one which resulted in the manufacturing operations and product capabilities improvements.

Discussion

Based on the literature review, the advantages and disadvantages for the above mentioned case studies using Lean Six Sigma is discussed below.

Advantages/benefits when introducing lean six sigma

Improved Quality

When concentrating on the product development and production, the number of defects in the manufactured products is reduced as the problems are identified in the manufacturing process. This results in waste elimination, improving efficiency and increased customer loyalty towards the product.

Reduced waste

Wastes are eliminated in order to protect the product and the reputation of the organization.

Improvement of cash flow

Products are made to order thus reducing the inventory and increasing the available cash.

Safer working environment

Workers and customer safety is considered when using lean Six Sigma within an organization, thus reducing accidents.

Customer Expectations

Organizations use lean Six Sigma in order to satisfy and to meet the customer demands.

Changes a company’s culture

Manufacturing processes are viewed from different perspectives. Employees at various levels in the process make decisions by relying on data than giving importance to gut feelings.

The implementation of lean Six Sigma can be done on a trial and error ie by introducing it within a department before implementing it across the whole organization.

Having in-house expertise to process systems development saves cost.

The company developed advanced maintenance techniques with fewer breakdowns by using TPM.

Products are delivered at the right time.

Cycle time is reduced.

Complexity in hiring personnel resulting in reduced rework and major cost savings.

Starting times of the operation theatre was reduced resulting in further improvement of the process.

Maintenance resulted in fewer complained and increase in revenue.

Disadvantages/drawbacks when introducing lean Six Sigma

Lack of vision affects the LSS implementation.

Implement the LSS tools and techniques solely depend on the experts having high skills.

Only LSS tools and techniques are used to solve all the problems.

Cannot be implemented when timeline expectation is short.

Cannot be used when the business is beyond repair.

Requires full commitment from top management.

Minimum amount of resources is at least required.

The effectiveness of few tools and techniques were limited due to the inadequate statistical data.

Conclusion

It is obvious that the lean thinking and scientific improvement standard of Six Sigma have led to success across industries. When fused together both the approaches become a powerful tool. Lean Six Sigma can be used in all sectors within any industry and does not only relate to manufacturing sector. In this essay we discussed the advantages and disadvantages in using Lean Six Sigma approach. Innovations are necessary in the service delivery process. We also discussed that operational improvement was the main motive for organizations using Lean Six Sigma leading to performance improvements, cost reduction and customer satisfaction. Literature review also highlighted the possible ways of using both the approach. For a company to have employees trained is an added benefit. Using Lean Six Sigma companies should focus on doing better things than just to do things better.