What Is Lean Six Sigma and Could Your Company Benefit?

Improving business processes is key to boosting efficiency and profitability. One way to turbocharge the improvement process is to implement the principles of Lean Six Sigma. This is a management approach that combines the process improvement methods of Six Sigma with the philosophy and methodology of "Lean."

The Lean method was developed by Toyota in the 1940s as the company sought new ways to streamline automobile manufacturing. Motorola developed Six Sigma in the 1980s to help identify and reduce product defects. The strategy was inspired by the Japanese business philosophy known as Kaizen, which essentially means "continuous improvement." The term Lean Six Sigma was first introduced in the 2002 book by Michael L. George, "Lean Six Sigma: Combining Six Sigma Quality with Lean Speed."

Eliminating Waste and Defects

Lean Six Sigma can be applied to any industry or job function, not just manufacturing. The approach is designed to eliminate waste and defects, as well as to ensure that companies meet efficiency and quality standards in their operations.

To that end, Lean Six Sigma tools are intended to help businesses both identify and eliminate eight types of waste referred to collectively as DOWNTIME. That acronym refers to: defects, overproduction, waiting, nonutilized talent, transportation, inventory, motion and excess processing. To identify and eliminate DOWNTIME, your business needs to:

1. ‍Define the problem from both the company's and customers' perspectives. Identify the biggest areas of waste and inefficiency in your business. Then assess your customers' quality expectations.‍
2. Measure actual performance data. Evaluate how current processes contribute to waste and inefficiency in operations. Performance measurement techniques can help you accurately determine this.‍
3. Analyze the data gathered. What's the full scope of problems in your operations and their root causes? This analysis will help you design and implement effective solutions.‍
4. Improve your business processes. Does a proposed solution solve the actual problem you've identified? Once implemented, you'll need to test your solution and gather performance data to help support it.‍
5. Control what you can. Create a plan to sustain improvements, maintain gains, prevent problem recurrence and deal with any variations that may arise.

It's important to keep in mind that, according to Lean Six Sigma principles, any use of resources that doesn't create value for customers is wasteful and should be eliminated.

Realizing the Benefits

Your company could reap several benefits by putting the principles of Lean Six Sigma into practice, including:

• Improved customer loyalty attributable to more positive shopping experiences,
• Higher profitability because of more efficient process flows and less waste,
• Lower costs thanks to defect prevention rather than detection,
• Increased flexibility and nimbleness due to standardized processes, and
• Greater capacity because of shorter lead times.

In addition, you can improve staff morale by helping employees develop new skill sets. This can increase employee satisfaction and reduce turnover. (See "Use Lean Six Sigma Belts to Motivate Employees," below.)

Operating Lean

If your interest is piqued, discuss the potential benefits of Lean Six Sigma for your company with your leadership team. Keep in mind that, by engaging employees in the process, you can tap into their talents, creativity and knowledge to make your business as lean and profitable as possible. For help quantifying costs and estimating potential dollars saved, contact your CPA.