Operations Management Ii: Academic Group 36
Operations Management Ii: Academic Group 36
Operations Management Ii: Academic Group 36
OPERATIONS
MANAGEMENT II
End Term Paper
CONTENTS
1 Abstract 01
2 Introduction 01
7 Recommendations 14
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SIX SIGMA, LEAN AND LEAN SIX SIGMA
Abstract
The purpose of this paper is to study the scope of business improvement methodologies like Six
Sigma, Lean Thinking and Lean Six Sigma (LSS), to understand and contrast these methodologies
in terms of their objectives and the tools utilized in each of them. The research reported in this
term paper summarizes three academic journal papers – first on Six Sigma, Lean and Lean Six
Sigma (LSS), second on LSS implementation in the Manufacturing Industry (Refinery) in respect
of Industrial Safety and third on LSS implementation in the Service Industry (Healthcare).
Although LSS has been extremely successful in the past couple of decades, organizations still
struggle when it comes to its implementation and this paper analyses this implementation in detail.
The paper is concluded with overall learnings from this exercise.
Introduction
In this world susceptible to constant change in the internal and external environment of the
organizations, in most cases driven by factors like cut-throat competition, evolving consumer
needs and economic instability of many major economies, running operations at the minimum
possible cost with highest levels of reliability is becoming more and more important. The phrase
Continuous Improvement is mostly associated with the Total Quality Movement wherein models
like Six Sigma and approaches like Lean Manufacturing form foundations of lean systems. For
many decades the number of continuous improvement models has been proliferating based on the
concepts of wastage reduction and quality improvement and a lot of research has been done on the
appropriateness and the limitations of implementing these for solving business problems. Some of
these methods include: Total Quality Management (TQM), Lean Manufacturing, Six Sigma etc.
However, in some cases these standalone methodologies are unable to solve the business problems
under consideration and thus hybrids models like Lean Six Sigma (LSS) are adopted to overcome
their deficiencies (Bhuiyan and Baghel, 2005).
Lean, Six Sigma and Lean Six Sigma: an Analysis based on Operations Strategy
Six Sigma concepts are widely used across the manufacturing and service sectors as the Gold
standard of precision and accuracy. Lean manufacturing/enterprise is widely used for increasing
cost-competitiveness by eliminating waste. The combination of these two yields an effective
technique that increases productivity and maximizes profitability. In this paper, Six Sigma, Lean
concepts, the combined application of these tools in various industries with a few illustrated
examples are given. The learnings from the introduction and implementation is also given.
Operations Strategy:
Hayes and Wheelwright (1985) determined that in a competitive environment companies need a
performance edge in their production system and that there are certain specific characteristics
which can set them apart from the herd. They classified these characteristics into four stages of
operational effectiveness wherein the first stage production has only a small contribution in the
success of the organization, while in the fourth stage production becomes the source of the
competitive edge of the organization. For aligning the competitive operations strategy of the
organization with the business strategy, it becomes pertinent to identify the competitive priorities
for different products and families of products. The below table summarizes these competitive
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priorities (also known as performance dimensions) according to the research done by various
authors over the years –
Leong, Snyder and
Wheelwright (1978) Slack (1991) Garvin (1993)
Ward (1990)
Based on this doctrine, two broad approaches are employed while formulating the Six Sigma
methodology -
DMAIC & DMADV, which is also known as DFSS - Design For Six Sigma)
Although DMAIC is used for projects aimed at improving existing processes while DMADV is
used for projects aimed at creating new product or process designs.
Application of Six Sigma can drastically reduce the operating cost for companies. A famous
example is of General Electric where a saving of USD 2 Billion in 1999 is attributed to six sigma
(Kwak and Anbari, 2006)
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Lean Manufacturing:
The origins of Lean manufacturing can be traced back to the crisis in Japan in the wake of World
War II. With soaring unemployment rates and widespread destruction of post-war, the productivity
in Japan was very low when compared to America, and thus a systematic process to banish all
waste was formulated. Lean production or lean manufacturing is a concept which aims to reduce
the wastage in the production by identifying and eliminating processes or steps that do not add
value. Lean concepts are largely derived from the Toyota Production System (TPS). Lean uses
various tools to achieve the objective which includes value stream mapping (VSM), Kaizen, 5S,
Kanban (pull systems), poka- Figure 1: DMAIC vs DMADV yoke (error-proofing), control
charts etc. Overburden and unevenness are the two aspects of
a system which are targeted to achieve the elimination of wastage. The original wastes from TPS
include:
Lean differs from TPS primarily in the implementation phase. Lean manufacturing is an
amalgamation of various thoughts like understanding waste, understanding the value chain,
process mapping, pull production and Continuous Improvement (seeking perfection). One of the
important tool used in the beginning of lean application is the Value Stream Mapping (VSM),
although lean is based on a much wider set of tools which include Single-Minute Exchange of Die
(SMED), the 5S Methodology among others. Singh, Garg and Sharma (2010) showed that it is
possible to reduce WIP inventory by almost 89%, finished goods stock by 17.85% and processing
time by almost 13% by application of VSM tool of Lean in an effort to identify various points for
improvement in the processes.
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Lean Six Sigma (L6σ or LSS):
Lean Six Sigma is a synergistic managerial concept that relies on collaborative team efforts to
improve the performance by minimizing the variability and eliminating wastage. This is achieved
by combining six sigma and lean concepts. Both sets of tools are used simultaneously administered
by a team of trained professionals who form a definite hierarchy to look after the processes. The
training for Lean Six Sigma is provided through the belt-based training system which is also the
standard for Six Sigma. The belt personnel are designated as white belts, yellow belts, green belts,
black belts and master black belts according to their level of proficiency.
The differentiating aspects of Lean and Six Sigma are listed below:
Advanced Value stream mapping, cycle time Failure Mode and Effects Analysis
tools reduction, Kanban, Kaizen, 5S, Line (FMEA), Root cause analysis,
balancing Benchmarking
Some Six Sigma tools Some Common tools Some lean tools
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LEAN SIX SIGMA IN MANUFACTURING
Applications of Lean Six Sigma Methodologies for Improvement in Industrial Safety
Industrial safety is of utmost importance as accidents cause human/material loss and result in huge
losses and legal implications. For the welfare of the workers and sustained productivity, safety of
the plant should be ensured with stringent control measures. Safety Management is an
organizational function which ensures that all safety risks have been identified, assessed and
satisfactorily mitigated. As an example, industrial safety in a petroleum refinery is discussed here.
The approach is common to many hazardous industries of scale.
Likewise, all facets in a particular department and consequently the whole refinery is covered
under this framework, where objective and desired output is clearly given out. These processes are
monitored for desired outcomes.
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SWOT reveals potential weak links in the system:
Sort, set in order, shine, standardize and sustain- These are the headings under which checklist
items are classified and scores are given based on the satisfactory level of the item to be checked.
Suppose if the audit scores of plant area is 3.5 out of 6, say and the score of maintenance shop is
4 out of 6, then more emphasize should be placed on plant area to improve safety.
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The Analyze Phase
Failure Mode and Effect Analysis (FMEA), Root Cause Analysis (RCA) and 5 why’s are
commonly used frameworks to statistically analyze the reasons for occurrences especially of
accidents. After the find, the anomaly is rectified.
The rating of severity, occurrence and detection are given as per the benchmarking of the
frontrunner. One case from the paper can be taken as example.
1. zero effort, no evidence, not started Applications of Lean Six Sigma Methodologies for
Improvement in Industrial Safety
2. activity started with minimal effort but not sustainable
3. widespread activity with more opportunity for improvement
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4. minimum acceptable level sustained for a month
5. all encompassing activity and sustained for over a month
6. best in class and sustained for at least six months
A sample 5-S Audit done after improvement phase for the Furnace Section of the plant is shown
here. Similar audits were done for all the six sections of the industry. Their Audit score is given
below:
Learnings:
Thus, by combining the methodologies of lean and six sigma, accidents occurring can be reduced
in industries. Systematic application of these frameworks are easy for the personnel to conduct gap
analysis to find the gaps and plug it. Control phase ensures that the sigma level never degrades and
with time the plant can aim for zero accidents and injuries. Worker and management support is
imperative for this to be achieved.
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LEAN SIX SIGMA IN SERVICES
Lean Six Sigma, as a business improvement methodology is rooted in the manufacturing industry,
where it is evolved in the past few decades, and has been adopted in all parts of the world.
According to the World Economic Outlook Database (published in 2011 by International
Monetary Fund), the distribution of PPP (Purchase Power Parity) GDP in 2015 in key worldwide
economies reflected a decline in the industrial sector, and a corresponding upward movement in
the service sector, across various industry sectors.
PPP GDP 2015 Agriculture Industry Service
European Union 1.5% 24.5% 70.7%
United States 1.1% 20% 78.9%
China 8.8% 40.9% 50.2%
India 17.5% 29.6% 52.9%
In the light of evidence regarding increasing importance of the service sector in major world
economies, the objective of this section of the term paper is discuss how the methodology of Lean
Six Sigma for business improvement is applicable to the service industry as well, and support the
argument with examples.
The service industry has its own special characteristics, which can act as challenges and make it
harder to apply Lean Six Sigma concepts and tools as discussed thus far. These characteristics can
be summarized in the following areas (Kotler, 1997; Regan, 1963; Zeithmal, Parasur and Berry,
1985) – Intangibility, Perishability, Inseparability and Variability
Owing to these inherent differences between products and services, it has been difficult for the
companies in the service industry, such as financial services companies, healthcare providers,
hospitality organizations, public services, education institutions, airline companies, and many
more to adopt the Lean Six Sigma methodology.
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Application of Lean Six Sigma methodology in the registration process of a Hospital
This paper has presented the step-by-step application of the LSS approach to reduce the cycle time
of a patient’s registration process in a hospital. The reduced cycle time in turn resulted in drastic
reduction of the waiting time of patients in the system, the length of the queue and the percentage
utilization of the assigned staff.
The methodology followed by the authors was – as a part of the research, one author who holds a
Black Belt in Six Sigma worked in a Hospital that had never implemented LSS earlier. After
formulating the research problem and conducting the literature survey, the authors collected data
according to the detailed data collection plan with the help of the OP-HID (Out Patient – Health
Information Department) of the Hospital. The Data collected was used to establish baseline
performance and testing of hypothesis, followed by detailed analysis using Control Charts (X-bar
Chart), Capability Analysis and Value Stream Mapping. Now we will summarize the
implementation process using the DMAIC framework of LSS.
The Define Phase
The objective of the define phase is to finalize the goal of the project by formulating the business
problem at hand, identifying the scope of the project and process to be improved. A project charter
was prepared to formulate the business problem with the aim of reducing the cycle time of the
patient registration process from 3 minutes to less than two minutes. For agreement on the scope
of the project, a SIPOC (Supplier-Input-Process-Output-Customer) process definition was
developed. Finally, for the improvement of the process, it was mapped using a process flow chart.
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The Analyze Phase
Identifying the influencing factors and causes that determine the CTQ’s behaviour is the main
objective of this phase. A Value Stream Mapping (VSM) was prepared of the current state to
visualize and understand the flow of materials, manpower and information. From the current-state
VSM, it was deduced that the process consists of 94 seconds (52.2 percent) of Non-Value Add
(NVA) activity. For identification of the NVA activities that could be eliminated and the potential
causes for process variation, the team conducted a brain storming session with the Hospital staff.
The result of the brain storming session helped in performing the Root-Cause Analysis with output
resulting in the form of a Fishbone Diagram (or Cause and Effect Diagram).
0 0%
Doctor Problem Patient Patient Other
Name Address Age
To validate all the causes thus identified, various data was gathered and appropriate analyses were
prepared. For potential causes such as lack of experience, lack of training, lack of printer with high
configurations, insufficient printers etc. statistical analyses were used for validation whereas
causes like non-availability of currency, incomplete information, error in entering patient
information etc. were validated by observing the process (i.e. by performing GEMBA). As an
example, we will look at how Pareto Analysis was used to study the cause “incomplete information
from patients” from which it was evident that more than 80% of the problem was associated with
identifying the patient’s disease and the doctor to diagnose that disease. A table was used to
summarize and record the causes based on the Fishbone diagram, the type of analysis planned for
each cause and the result of the same.
The Improve Phase
The objective of this phase is to deal with the design and implementation of the solutions involved
in the process, with an effort to improve the performance of the CTQ. It involves intervention by
the project team to determine how significantly reduce the defect levels of the process by
generating and implementing solutions.
For example, for quicker cash transactions cash drawers were recommended and the team
performed two sample t-test to check the statistical significance of the solution in reducing the
cycle time. In house training programs were conducted for all the staff in spelling skills, quick
typing skills and other activities. Also, a specialized training was given to the staff so that they
could better recommend a particular doctor for specific patients’ symptoms. Submitting ID proof
was made mandatory for registration, which reduced mistake made while entering patient
information. Similarly, the doctor’s availability was displayed at appropriate and convenient
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locations to ease the registration process. A future state Value Stream Mapping (VSM) was
prepared using the improved process steps after the implementation of the solutions. A detailed
risk analysis was also carried out to conclude whether the implemented solutions had any negative
impacts. After a bit more data gathering, a graphical representation of the results comparing the
cycle time before and after the project was formulated and a two sample t-test was used to verify
the statistical significance of the results (found significant at 5% level).
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CTQ Average (sec) SD (sec) DPMO Sigma Level
Percentage
SI. No. KPI Before After
Reduction
Six Sigma and Lean both are proven methodologies aimed at productivity improvement and profit
maximization and this has been superbly demonstrated by the superior performance of Motorola,
General Electric and Toyota, the companies that are responsible for the popularity of these
techniques. Lean Six Sigma combines the tools and techniques of both to provide a wholesome
package of refined process targeting zero waste and variability. LSS implementation results in
greater efficiency, cost reduction, reduced delivery times, improved quality of product/service,
customer satisfaction, employee satisfaction, reduced variation and financial benefits including
increased profits. Both manufacturing sector and service sector can benefit from the deployment
of LSS techniques.
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Recommendations:
References:
Everton Drohomeretski, Sergio E. Gouvea da Costa, Edson Pinheiro de Limaa, Paula Andrea da
Rosa GarbuioaLean. (2013). Six Sigma and Lean Six Sigma: an analysis based on operations
strategy. International Journal of Production Research, 2014, Vol. 52, No. 3, 804–824.
P. R. Gajbhiye, A. C Waghmare, R. H. Parikh. (2016). Applications of Lean Six Sigma
Methodologies for Improvement in Industrial Safety. International Journal for Innovative
Research in Science & Technology, Volume 3, Issue 06, November 2016.
Shreeranga Bhat, E.V. Gijo, N.A. Jnanesh. (2014). Application of Lean Six Sigma
methodology in the registration process of a hospital. International Journal of Productivity
and Performance Management, Vol.63 Issue: 5.
Atanas J.P., Rodrigues C.C., Simmons, R.J. (2016). Lean Six Sigma Applications in Oil and Gas
Industry: Case Studies. International Journal of Scientific and Research Publications, Volume 6,
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Jiju Antony. (2011). Six Sigma vs Lean. International Journal of Productivity and Performance
Management.
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