Six-Sigma: Divergence from Manufacturing Operations
Waste and lack of productivity is a serious problem for most operations management and production systems. Decreasing waste both in time and materials is essential for remaining competitive and profitable. In the last 50 years, there has been a trend in operations and production management to utilize the lean management philosophy. Often referred to as Six Sigma, this management system is considered to be a model of operations management. Although originally designed for auto manufacturing and developed from the Toyota Production System (TPS), lean management concepts are often applied to a variety of operations management systems in different industries and production systems. The problem with this approach is that Six Sigma is not a perfect fit for many companies and in many instances this system fails.
The following report discusses the problem of implementing lean management within production systems. This report shows that lean management systems are not effective as they move further from manufacturing systems. Analysis of lean management systems shows that in many instances it is unwise to implement a one-size-fits-all approach such as Six Sigma. This report recommends performing a needs assessment of a production system in order to implement or design a more specific lean management system.
The eagerness of many industries to improve operations management systems led to the adopting of six sigma which studies have shown that “nearly 60% of all corporate Six Sigma initiatives fail to yield the desire results” (Chakravorty, 2010).
An examination of this problem reveals that the problem rests more in the fact that lean management systems were implemented in companies that diverged from manufacturing environments. As well, many of these companies altered the Six Sigma approach or TPM approach radically from its original form in order to fit a particular work environment. An examination of the lean management/Six Sigma system shows that the choice of system for a company may need to be more specifically designed rather than trying to use a one-size-fits-all approach.
Understanding Lean Management
In order to understand why lean management systems can fail, one must understand their specialized nature. The TPS was designed with key concepts in mind such as reducing waste and smoothing the work process. There are numerous and specific tools applied to this management system with the following only being a few of many: “value mapping, Five S, Kanban (pull systems), poka-yoke (error-proofing), total productive maintenance, elimination of time batching, mixed model processing, order clustering, single point scheduling, redesigning working cells, multi-process handling and control charts (for checking mura), etc…” (Holweg, 2007).
The TPS system is a combination of quality, materials, and operations management systems built around eliminating waste. Within TPS, a Total Quality Management system exists for operations and material management (OMM) which has revolutionized manufacturing by decreasing waste and improving the quality of products. This system not only allows Toyota to reduce cost but it allows it to increase its competitive advantage by being able to meet the demands of new markets and products without the excessive cost of retooling production lines. For example, as the popularity and demand for new hybrids rise, the cost of production will decrease as supply chains are maximized. Utilizing TQM Toyota’s processes allow for the rapid increase of demand without overloading supply chains. This success is built on the use of another aspect of the TPS which is known as Just In Time (JIT).
JIT creates an environment in which the supply and demand (customer orders) are synchronized with supply chains and manufacturing (Ohno, 1998). As the demand for cars increases, the TPS increases in efficiency and cost effectiveness (Ohno, 1998). This results from the continuous improvement process through which workers are capable of detecting and solving problems. This process requires a stable production system that has constant volume and product mix (Ohno, 1998). When these factors are optimized the TQM system provides production smoothing which in turn allows workers the ability to concentrate on reducing waste and improving the production through quality assurance (Ohno, 1998). Toyota’s use of TQM provides a strategic advantage in growing markets because of its ability to problem solve during production. This production ability is perhaps the most important concept in the value chain as it allows for continuous improvement and consistent quality of the product.
Essentially, the TPS is designed with manufacturing, materials management, and quality of production in mind. The design of TPS is based on concepts which are specialized for manufacturing. The original lean manufacturing model which is used in the TPS is designed exclusively for the purpose of manufacturing. This narrow focus in purpose means that lean management must be altered in order to be applicable to new industries.
One of the major issues that seems to recur with companies implementing lean management strategies is that more often than not the companies do not follow the management theory or methodology. This is a tremendous problem throughout the field of operations management in which many companies do not research their operations effectively (Flynna, Sakakibarab, Schroederb, Batesb, & Flynna, 1990). Most organizations relied on qualitative rather than quantitative data (Flynna, Sakakibarab, Schroederb, Batesb, & Flynna, 1990). The reason for this lack of diversity in research was due mainly to cost and problems with data interpretation (Flynna, Sakakibarab, Schroederb, Batesb, & Flynna, 1990). In part, this research issue was the result that most management tends to make decisions based on the belief that their particular operation can be benefited by a management technique utilized in another company or industry (Flynna, Sakakibarab, Schroederb, Batesb, & Flynna, 1990). This belief is problematic because it overlooks the nature of the technique being implemented. In simplest terms, applying a manufacturing focused management system to a nonmanufacturing company may result in less than desirable outcomes.
Non-empirical research methods in operation management lead to bad decision making and insufficient solutions. These problems resulted from biased data which only looked at certain processes or practices (Chakravorty, 2010). As a result, management systems and practices were implemented which were too focused on specific operational areas such as increasing quality or reducing waste. For example, Coca Cola has had tremendous success with Six Sigma.
Coca Cola employs a popular and proven quality management system known as Lean Six Sigma (Coca Cola, 2010). Under the lean six sigma theory there are seven forms of waste that include: defects, overproduction, transportation, waiting (time loss), inventory, motion, and over-processing) and provision of goods and services at a rate of 3.4 defects per million opportunities (George, Rowlands, & Kastle, 2003). The lean six sigma management approach is designed for large scale manufacturing operations (George, Rowlands, & Kastle, 2003). This system is specifically geared for operations in manufacturing such as Coca Cola in which there are multiple processes that operate in a distinguishable order for manufacturing (George, Rowlands, & Kastle, 2003). For example, bottling is one process in the production of Coca Cola and labeling would be another process. Within these processes, Six Sigma can be employed to lower waste or defects and thus increase quality. An example of this management process at work could be seen in the removal of a specific type of label paper that might be causing jams in the machinery.
In contrast to the success that Coke was able to achieve, other companies have met with dismal outcomes when implementing lean management. When Aetna implemented Six Sigma in an effort to improve quality and reduce issues such as errors the system failed (Barry, Murcko, & Burbaker, 2002). Barry, Murcko, and Brubaker (2002), describe Six Sigma as, “a management method that addresses error prevention, problem solving, problem detection, and managed change. They indicate that Six Sigma focuses any other philosophy on getting the output right, starting right now and that it would be an excellent complement to any other philosophy.”
This approach to Six Sigma can be seen in Aetna, as it has created a common theme of not just quality improvement but also the idea of shared responsibility. Each area and department within the company is a stakeholder in quality management. For Aetna, the process of TQM/Six Sigma is a four-part process:
1. collaborate with physicians and all hospital departments to collect accurate data as required by regulatory agencies.
2. to tabulate and distribute the data to the appropriate departments as reports which measure and reflect the care given in selected areas of physician performance.
3. maintain yearly reports and statistics which reflect the maintenance of quality care given, indicate area which need improvement and to perform follow up studies which measure improvement following the implementation of change.
4. to provide Medical Staff Services with specific information upon request to be utilized during the re-credentialing process.
This process is intended to control the services that Aetna provides through continuous improvement of systems through evaluation (Barry, Murcko, & Burbaker, 2002). This TQM philosophy should lead to continual improvement and foster a sense of ownership and pride from the employees, which gives employees a reason for improvement as they feel invested in the company’s processes (Barry, Murcko, & Burbaker, 2002).
While this system appears to be rational it is a large divergence from the original TPS model. The real measure of lean management systems is not from profit from sales but rather from the profit generated from lowering cost and improving efficiency (Chakravorty, 2010). Aetna has not decreased cost but instead increased costs (Porter & Teisberg, 2006). The implementation of Six Sigma failed to reduce costs or generate profits.
A pattern can be seen when one examines companies that have implemented lean management systems. Depending on the type of company and industry would seem to impact the success of the implementation. As companies move further from manufacturing industries, lean management systems become less and less effective.
While TPS appears to be a solution for reducing costs and increasing quality and efficiency in operations, this solution may be limited to specific operations. As an operation moves further from manufacturing the lean management systems become less effective. This means that companies must perform comparative studies when choosing or designing a lean management system. For example, although a food packaging facility is similar to a product manufacturing facility it is not the same due to the nature of the product. Food conveyors and cooking systems cannot be shut down while a problem is dealt with such as waste. This simple example shows how quickly the lean management system can begin diverging from its core competency.
The lean management system is useful in a broad scope and in theory. The better method of utilizing a lean management system is to study the product and operations systems in order to perform a needs assessment. This assessment would provide operations managers with the limits and boundaries of the operation and show how to best design a lean system. This is a more sensible and practical means for decreasing waste in a specific production environment rather than implementing a one-size-fits-all system and constantly tweaking and making adjustments for system differences.
Barry, R., Murcko, A., & Burbaker, C. (2002). The Six Sigman Book for Healthcare Improving Healthcare by Reducing Errors. Chicago: Health Administration Press.
Chakravorty, S. S. (2010, January 25). Where Process-Improvement Projects Go Wrong Six Sigma and other programs typically show early progress. And then things return to the way they were. Retrieved from The Wall Street Journal: http://online.wsj.com/news/articles/SB10001424052748703298004574457471313938130
Coca Cola. (2010). Corporate Social Responsibility Report. Retrieved from Coca Cola: http://assets.coca-colacompany.com/94/87/ca2e65a741d9b872c379d40087b5/Coca-ColaIcecekSR.pdf
Flynna, B., Sakakibarab, S., Schroederb, B., Batesb, K., & Flynna, J. (1990). Empirical research methods in operations management. Journal of Operations Management, 9 (2), 250–284.
George, M. L., Rowlands, D., & Kastle, B. (2003). What is Lean Six Sigma? New Jersy: McGraw-Hill Education.
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Ohno, T. (1998). Toyota Production System: Beyond Large-Scale Production. New York: Productivity Press.
Porter, M. E., & Teisberg, E. O. (2006). Redefining Health Care: Creating Value-Based Competition on Results. Boston, Mass: Harvard Business Review Press.