Why six-sigma, just-in-time and lean manufacturing are dangerous!
Six sigma is a great idea: make sure that your product or service is as close to perfect as possible with almost zero (3.4 in a million) faults. So is just-in-time (JIT) and lean manufacturing. All involve tight control on business processes and require businesses to focus on efficiency. You can’t have a JIT manufacturing process without being highly efficient in controlling all aspects of your supply chain.
The problem is that when circumstances change it can be difficult to adapt the processes quickly enough. When the change is disruptive then it’s likely to lead to business failure. Casey Haksins and Peter Sims describe this in a Harvard Business Review blog post: The Most Efficient Die Early.
The authors correctly point out that business must also expect the unexpected and plan to absorb it and cope with it. The problem is that pursuing greater and greater efficiency goes against this need for flexibility to change. Instead there needs to be a balance. Look for efficiency but not at the cost of losing flexibility. Success requires both.
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The term Six Sigma originated from terminology associated with manufacturing, specifically terms associated with statistical modeling of manufacturing processes . The maturity of a manufacturing process can be described by a sigma rating indicating its yield or the percentage of defect-free products it creates. A six sigma process is one in which 99.99966% of the products manufactured are statistically expected to be free of defects (3.4 defects per million), although, as discussed below , this defect level corresponds to only a 4.5 sigma level. Motorola set a goal of “six sigma” for all of its manufacturing operations, and this goal became a byword for the management and engineering practices used to achieve it.
The concept of six-sigma is actually a statistical concept – linked to the normal (gaussian) curve and standard deviations.
Statistically, 68.27% of values lie within 1 standard deviation of the mean (1-sigma) i.e. 31.7% are outside this value.
About 95.45% of the values lie within 2 standard deviations of the mean. In a lot of scientific work, a result is viewed as being statistically significant if it outside the expected result or the mean by more than 1.96σ which corresponds to 1/20th or 5%. In a manufacturing sense, this would be a defect rate of 5% which would be too high in most cases. Sometimes a lower error / defect rating is needed. A 3σ error represents 2.7 errors in 1000 (99.73% are good).
Less than 99.994% error / defect rate would be 4-sigma (i.e. 6 errors in 100,000 – roughly 1/16,000).
5-sigma represents an error/defect rate of 1 error in 1.7 million while 6 sigma represents an error of 1 in 500 million. Particle physics uses a 5-sigma level for a declaration of discovery – and was used in the discovery of the Higgs Boson.
“We observe in our data clear signs of a new particle, at the level of 5 sigma, in the mass region around 126 GeV. The outstanding performance of the LHC and ATLAS and the huge efforts of many people have brought us to this exciting stage,” said ATLAS experiment spokesperson Fabiola Gianotti, “but a little more time is needed to prepare these results for publication.”
http://press.web.cern.ch/press-releases/2012/07/cern-experiments-observe-particle-consistent-long-sought-higgs-boson
The reason that six-sigma is the preferred target is that even if you can achieve such a low error level, things tend to drift – by about 1.5 sigma either side of a control point, over time. This occurs because of random variations. In manufacturing terms, it could be that the machines function very slightly differently on a warm day to a cold day, or are marginally different on a Monday after a weekend of non-operation to a Friday, when they’ve been running for 5 days. This drift increases the error level which is why manufacturing chose the “six sigma” level. (4.4 sigma would be an error of 1/100,000 so you get something between the two i.e. the quoted 3.4 defects per million).
The principles of Lean manufacturing are applicable to any business process. This article reviews some of the common problems seen in transactional projects and outlines an example where simple graphical methods are used to interpret cycle time data. Identifying and characterizing the non-Lean processes facilitates the application of 5S, brainstorming and other improvement tools with realistic goals for improvement.
The negative reviews here don’t get it– this is not a typical Six Sigma book for the typical Six Sigma crowd. Heaven knows there are plenty of thoses already. This book is an attempt to apply Lean/Six Sigma discipline and tools to the general topic of marketing processes– in a framework that is more familiar to marketers than Black Belts.”What a great concept! Too long has Lean/Six Sigma been the private domain of manufacturing engineers and “TQM geeks!” not only are these tools adaptable for use in business management and operations in general, but should prove particularly valuable in the arena of Sales and Marketing, where the “voodoo” math of Creativity X Impressions=Results is about as sophisticated as Madison Avenue is willing to accept. Direct mail and interactive marketing at least bring metrics into the picture, but still fall way short of implementing fundamental principles such as root cause analysis, DMAIC, hypothesis testing and other concepts that could have meaningful application in scientific market analysis and ROI analysis for business development, campaign evaluation, budget allocation, etc.There are VERY few books of this kind to take a serious look at applying the Lean Six Sigma methodology and toolset to the often “touchy feelie” discipline of marketing where all too often subjective impact and literary/artistic cleverness are held in higher regard than accountability.The book is superb as far as it goes, which is a detailed, comprehensive treatment of the topic, but I think the authors should consider a companion to this book more in the style and vernacular of best-selling popular business books suited for novice practitioners– a “Seven Habits” or even “Idiot’s Guide” type of book.It may not be a typical Six Sigma reference book, but it Should become a required text or even the topic of a whole course in every MBA program.
I’m not sure which book you are referring too as you don’t mention it in your comment.
However applying six-sigma in its classical form to any strategic discipline would be a recipe for failure. Marketing and strategy demand flexibility and adaptability. They need to have the ability to change quickly and so processes that fix routines are dangerous. This is the point about my post.
Nevertheless some aspects may be suitable for a six-sigma treatment. I discussed this looking at competitive intelligence processes in an article written for SCIP’s Competitive Intelligence magazine, several years ago. I’ve included this as part of the FAQs on Competitive Intelligence at http://www.marketing-intelligence.co.uk/help/Q&A/question27.htm
Six Sigma is a quality management methodology that provides businesses with the tools to improve the capability of their business processes. This increase in performance and decrease in process variation lead to defect reduction and improvement in profits, employee morale and quality of product. It is a quality measure and improvement program that was pioneered by Mikel Harry and Motorola. It focuses on the control of a process until the point of six sigma (standard deviations) from a centerline, or 3.4 defects per million items. It includes identifying factors which are critical for the quality as determined by the customer. It reduces process variation and improvement capabilities, increases stability and designs systems to support the six sigma goal.
I’m fully aware of the benefits of Six Sigma. The problem with this (and many other similar approaches over the years) is that if management see it as the solution to their problems then they are likely to fail. It is an operational tool aimed at improving efficiency – and that’s it. Nothing wrong in having a strategy to improve efficiency as long as you remember that things change and what works today may not work tomorrow. That’s the danger when you make a god (or idol) out of any business process. As things change, so must business practices. The key to business survival is more than just reducing variation / increasing performance. It’s flexibility. Of course you need quality but as demand alters, so must you. You need to adapt to changing situations and six-sigma processes CAN (but don’t have to) make this much harder.
The secret of success is to focus on the customer so that you achieve customer delight. That may require a process to reduce errors to below six-sigma levels. It may not. As customer expectations change so must yours. The emphasis should always be on delighting the customer – more than reducing operational errors. If that’s what is needed, then do it. If not, don’t waste time and money on something not needed. Spend it on what is.
Separately, Lean Production and Six Sigma have changed the face of the manufacturing business. Together, they become an unprecedented tool for improving product and process quality, production efficiency, and across-the-board profitability. Lean Six Sigma introduces you to today’s most dynamic program for streamlining the performance of both your production department and your back office, and providing you with the cost reduction and quality improvements you need to stay one step ahead of your competitors.
I agree that both Lean Production and Six Sigma have changed manufacturing and made it become much more efficient and effective. They are both fantastic ways for improving profitability as long as companies don’t make them the be-all-and-end-all of strategy. The problem with any method such as this is that it can remove flexibility and ability to change. If it remains an operational tool only then it’s fine. Move it to strategy and fail to adapt to change makes it fatal.
The principles of Lean manufacturing are applicable to any business process. This article reviews some of the common problems seen in transactional projects and outlines an example where simple graphical methods are used to interpret cycle time data. Identifying and characterizing the non-Lean processes facilitates the application of 5S, brainstorming and other improvement tools with realistic goals for improvement.
It’s nearly impossible to find educated people on this subject, but you seem like you know what you’re talking
about! Thanks
Separately, Lean Production and Six Sigma have changed the face of the manufacturing business. Together, they become an unprecedented tool for improving product and process quality, production efficiency, and across-the-board profitability. Lean Six Sigma introduces you to today’s most dynamic program for streamlining the performance of both your production department and your back office, and providing you with the cost reduction and quality improvements you need to stay one step ahead of your competitors.
Six Sigma is a formalized process for removing variation and improving quality in processes. Originally used in manufacturing environments, Six Sigma has come to be used in a variety of industries and disciplines, including marketing. It is a quantitative process used to focus on eliminating defects and improving quality to the six sigma level of performance which, mathematically, is expressed as 99.99999 percent error-free. A worth goal, but one that is understandably challenging to achieve.
Six Sigma is a disciplined process that helps a business to focus on developing and delivering greater efficiency and near-perfect products and services. The ultimate aim of Six Sigma is a high level of customer satisfaction and retention.
Separately, Lean Production and Six Sigma have changed the face of the manufacturing business. Together, they become an unprecedented tool for improving product and process quality, production efficiency, and across-the-board profitability. Lean Six Sigma introduces you to today’s most dynamic program for streamlining the performance of both your production department and your back office, and providing you with the cost reduction and quality improvements you need to stay one step ahead of your competitors.
just in time (JIT) – Just In Time, commonly abbreviated to JIT, describes operational or production methods based on minimising stock levels, the aim of which is to reduce capital employed in stock, which also has knock-on benefits to reducing storage space, decreasing dependence on logistics, easier supply chain management, and better overall quality. Just In Time is actually a capability arising from improvements within a business operation, rather than a cause of improvement itself. Introducing Just In Time methods without improving efficiency and reliability necessary to support it is not viable. Since Just In Time methods entail reducing stock levels to absolute minimum or even zero, JIT allows no room for error. Timing and predictibility are cruicial. JIT requires total commitment to quality and efficiency or the supply chain and related operations break down, the costs and implications of which can easily exceed any savings from JIT stock reductions. The term and methodology were developed by the Japanese during their post-war industrial revival (second half of the 1900s) as a logical progression from ‘materials requirements planning’ (MRP). The Japanese original terminology is ‘kanban’, and is important within ‘lean production’ methodology. The aim of kanban is actually zero inventory. JIT features in highly efficient manufacturing corporations, and has more recently been significantly enabled by computerization, especially to analyse and manage timings rather than stock levels. Noted authors to have covered the subject include Edwards Deming, Taiichi Ohno, and Yasuhiro Monden. The acronyms page contains a more amusing definition of JIT .
I’ve approved most of the above comments on Lean Manufacturing, JIT and Six Sigma – even though they are all propagandist in tone.
They are preaching and explaining the concepts as if I’m not familiar with what they are or their origins (Deming, et al). What’s interesting is that they ignore the points about the need for flexibility – especially when technology is changing so fast.
In fact, there are many companies that follow these techniques and do many times worse than competitors that don’t – but instead emphasise flexibility. As an example of this, a 2005 article from the Fast Company newsletter illustrates this naming how Toyota doesn’t follow this and how companies such as Xerox that use six sigma have fallen behind competitors.
http://www.fastcompany.com/53830/six-sigma-stigma
The same is true for JIT and Lean Manufacturing. All are fads – and when they become the driving force behind a company’s business processes, the company risks its future for a present-day fad that ties it down in way that is bad for business.
This is not to say that they do not have a place. They just aren’t the be-all-and-end-all that their acolytes and advocates believe and push, like heroin, to the unwary.