Many business owners may have heard of and implemented lean production principles — a method for eliminating waste — or Six Sigma, a data-driven approach to eliminating defects, but practitioners haven’t combined Six Sigma with lean until recently.
Companies such as GE, Coca-Cola and IBM — even the U.S. military — use Lean Six Sigma not only as a way to focus on efficiency and growth but also to serve as the foundation for innovation.
Before the merger of Lean and Six Sigma, companies did one or the other. Six Sigma uses the DMAIC (define, measure, analyze, improve and control) method to reduce defects. Lean, derived mostly from the Toyota Production System, focuses on cycle time reduction by eliminating non-value-added steps.
However, while most people think of lean and Six Sigma as ways to improve processes, they are both really complementary.
Lean Six Sigma principles can be applied to any business, whether it’s a manufacturing company or a service industry, and will force you to look at every process in your organization through a different lens. Implementing these principles can help your business in a variety of ways, including:
- Cost reduction: Lean Six Sigma can help employees manage their time effectively, resulting in a more efficient business and more productive employees. It also aids in analyzing and finding solutions for long cycle times.
By helping you gain a new perspective on business operations, such as customer activities and product processes, you can eliminate unnecessary steps and significantly decrease costs, leading to greater profits. In fact, research has shown companies can save as much as 5 percent of net revenue from a healthy Lean Six Sigma program.
- Increased customer satisfaction: Customers who don’t return to a business do so because of dissatisfaction with the service and poor employee attitude. However, most companies don’t know they have a dissatisfied customer until that customers takes their business elsewhere.
Lean Six Sigma focuses on improving the customer experience and better serving their needs through the supply chain and all areas of customer activity. This leads to repeat business, positive word of mouth and better sales.
- Improved earnings: Lean Six Sigma stresses the importance of efficiency and clarity of goals between management and employees. This increases productivity, decreases errors and streamlines processes for a better bottom line.
- Employee motivation: Organizations that are willing to fully engage with employees have consistently demonstrated increases in productivity. By empowering employees to be a part of the solution and to take ownership of their work, company leaders can create a climate that encourages engagement and success.
- Strategic planning: Beyond a company’s business plan and mission statement, Lean Six Sigma can help focus on areas of improvement. For example, if your business strategy is to compete on cost, Lean Six Sigma can be used to improve processes, increase yields and successfully manage the supply chain.
Whatever your strategy happens to be, Lean Six Sigma can help make your company the best at what it does.
This post was first seen on the AME Target Online Weekly newsletter. To learn more about this post please visit AME at www.ame.org. To learn more about the concepts of LEAN and its application to business, please feel free to contact the LEAN Accountants at www.leanaccountants.com.