Six sigma

Lean Six Sigma

Michael L. George

This booklet contains a preview of Section I of Lean Six Sigma. It is printed with permission from McGraw-Hill. The full version of the book will be published in Spring 2002.

Preface
In 1996, General Electric CEO Jack Welch praised Six Sigma as “the most important initiative GE has ever undertaken.” Yet despite widespread success with Six Sigma, twoyears later Welch articulated one shortfall: “We have tended to use all our energy and Six Sigma science to move the mean [delivery time] to… 12 days. The problem is, as has been said, ‘the mean never happens,’ and the customer is still seeing variances in when the deliveries actually occur—a heroic 4-day delivery time on one order, with an awful 20-day delay on another, and no real consistency…variation is evil.” Welch’s statement was prompted by a growing awareness that time is nearly as important an improvement metric as is quality—and that reducing process lead times and variation in the amount of time it takes to complete a process has just as much potential for improving a company’s performance as does reducing variation in quality. Sometimes we regard our customers are like the manwho has one foot in the fire and the other in a block of ice: On average, he should be comfortable! But obviously the range of temperatures is intolerable— just as unpredictable delivery time is to our customers. Most of the methods and tools associated with Six Sigma do not focus on time; they are concerned with identifying and eliminating defects. Any savings in time that result from Six Sigmaprojects are often a byproduct of defect reduction and of the general problem solving methodology. That’s why in GE’s 2000 Annual Report (dated February 2001), Jack Welch announced a additional goal for GE: reducing the variation in lead-time (which he refers to as “span”): “Today we have a Company doing its very best to fix its face on customers by focusing Six Sigma on their needs. Key to thisfocus is a concept called ‘span,’ which is a measurement of operational reliability for meeting a customer request. It is

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Preface

the time window around the Customer Requested Delivery Date in which delivery will happen.” Welch positioned the focus on span as an addition to not a replacement for Six Sigma. Quickly and reliably reducing process lead time—which also reduces overhead costand inventory—is the province of an entirely different set of principles and validated tools known as Lean methods. Use of Lean tools turbocharges the rate of reduction of lead time and manufacturing overhead and quality cost. Welch has thus provided yet another key insight to improve corporate performance (and we wish him well in his post-GE endeavors): “The generation that is going off thestage has deserved well of mankind for the struggles it has made.”1 How are companies other than GE faring with continuous improvement initiatives? Data on the impact of continuous improvement programs like Six Sigma in service industries is not well defined by financial improvement. However, the December 2000 issue of Industry Week included a survey of manufacturing companies that scored themselvesagainst World Class performance metrics. Over half the firms had not achieved 98% on-time delivery, and three-quarters had not been able to reduce manufacturing lead time by even 20% over the last five years. Scrap and rework costs exceeded 1% of sales for 77% of the respondents. These rates of improvement, even by self-evaluation, are quite slow—which is surprising since subjectiveself-evaluations could be expected to err on the favorable side! While such surveys are provocative, anyone dedicated to improvement knows that we need to look at objective data. Since my interest is rooted in driving “hard” financial results from improvements in process quality and lead times, I looked into ways that I could get data on World Class metrics from a company’s financial statements. Internal...