Implementing lean operations in manufacturing and service industries

¶ … Lean Operations

The theory of constraints, which was created by Elivahu M. Goldratt, is a particular body of knowledge that addresses effective management of various organizations as systems (McMullen, 1998). These organizations are mainly business-related, but other organizations can be addressed in this way as well. Although Goldratt started this body of knowledge, there have been many others that have also helped to contribute to it in various ways (McMullen, 1998; Cusumano, 1998; Ortiz, 2008). This theory has to be addressed and briefly explained before a discussion of lean operations is undertaken in order to be sure that the concepts are understood and to show why lean operations are so important for companies today.

There are thinking processes that are involved in the buy-in process, and these thinking processes are generic tools that are used to help those that are involved in the buy-in process to get through it in the easiest and most common-sense way possible (Rachna & Ward, 2003). These processes are also very useful when it comes to any other type of interaction between human beings (Rachna & Ward, 2003). There are five steps that are utilized in this buy-in process, and these are: gaining an agreement on what the problem is; gaining an agreement on what direction should be taken for a solution; gaining agreement that the solution that is proposed actually does solve the problem being addressed; agreeing to work to overcome any of the potential negative issues that could be seen from using the solution discussed; and making an agreement that any obstacles that are found when implementing this solution will be overcome (McMullen, 1998).

The theory of constraints is designed for different organizations, and therefore must be adjusted slightly based on the type of business that is being addressed. The theory of constraints became part of the basis for total quality management, and total quality management eventually worked its way into six-sigma, or lean six-sigma, which was created by Bill Smith of Motorola during the mid-1980s (Gupta, 2003). Originally, the definition of this was that it was a metric that was used for improving quality and measuring defects, and also a methodology that was used in order to reduce the level of defects below 3.4 defects taking place for every one million defect opportunities (Rachna & Ward, 2007). In other words, less than 3.4 products, on average, could be defective for every one million produced if everything was working properly for the company (Gupta, 2003).

While six-sigma is a trademark and a registered service of Motorola, which has saved the company approximately $17 billion up to this point, other companies have also adopted the six-sigma approach and basically just called it lean manufacturing. General Electric, for example, stated that they used the six-sigma approach and determined that it had saved them $300 million in the first year that it was implemented (Gupta, 2003).

The CEO of General Electric and the CEO of Allied Signal were both vital in helping with the popularity of the six-sigma approach. There are other important organizations that have also stated that they have benefited from the six-sigma approach, and these include: Cummins, Microsoft, Quest Diagnostics, Siemens, Merrill Lynch, 3M, Lear, SKF, Seagate Technology, Raytheon, Caterpillar, and Ford Motor Company (Gupta, 2003).

Originally, the six-sigma approach was basically designed for control of defects, but it has since grown beyond that (Slack, 2007). Now the definition of six-sigma is closer to a methodology that is used in order to manage the variations in processes that cause the defects and are generally defined as the unacceptable deviations that are seen from the target (the mean), and to work toward a systematic management of the variation until those defects are eliminated from the product (Slack, 2007). The objective of the lean manufacturing approach is then to deliver reliability, performance, and value to the customer or the end user on world-class level (Slack, 2007).

There are many areas of business where lean manufacturing is being used today, and these include insurance, banking, healthcare, telecommunications, software, and marketing (Slack, 2007; Ortiz, 2008). There are also two key methodologies that are involved with lean manufacturing (Slack, 2007). These are DMAIC and DMADV. DMAIC is used in the improvement of an existing process in an existing business, and DMADV is used to create either new process designs or product designs in way that results in mature, predictable, and defect-free performance for the company (Gupta, 2003). Both of these methodologies will be addressed here more fully.

The basic DMAIC methodology consists of five specific phases. These are: define, measure, analyze, improve, and control (Gupta, 2003). In other words, it is important to: define what the goals are when it comes to process improvement and how these are consistent with both enterprise strategy and customer demands; measure - using a baseline - the current processes so that they can be used for comparison in the future; analyze the relationship between the factors based on causality; improve and optimize the process based on the analysis that was created; and control the process capability, the transition that was seen in production, and the process that takes place in the future (Gupta, 2003; Slack, 2007). It is also important to ensure that the changes that have been made are then continuously monitored so that and variances that are seen in the future can be quickly corrected before they are allowed to results in any kind of defects (Gupta, 2003).

On the other hand, the DMADV methodology also has five phases, but some are slightly different from those seen in the other methodology. These five phases are: define, measure, analyze, design, and verify (Gupta, 2003). The define step is the same as the one seen in the previous methodology, where it is important to define the goals that are seen when it comes to design activity as they relate to the enterprise strategy and the customer demand (Slack, 2007). From there, it is important to measure the production process capabilities, the product capabilities, the risk assessment, and other issues (Gupta, 2003).

Once this has been completed, one must analyze the alternatives for design and create and evaluate different designs until one is chosen (Ortiz, 2008). From there, the design that was chosen will be developed in detail, optimized, and verified, which may require that some simulations be run. The last step is to verify the design that was chosen, address some pilot runs, implement the process that was agreed upon, and then hand the process over to the owners of the company (Gupta, 2003).

The lean manufacturing approach, however, cannot just be implemented without a great deal of effort being put into it (Ortiz, 2008). There are five key roles that must be addressed for a lean manufacturing approach using six sigma to be successful in its implementation. These are: executive leadership, champions, master black belts, black belts, and green belts (Gupta, 2003). An explanation of what each of these mean and why they are important is necessary here, in order to understand the seriousness of what must be worked through to implement six sigma and lean manufacturing.

The first key role, executive leadership, includes not only the CEO but other top management as well (Womack & Jones, 1996). These individuals are the ones responsible for the actual set-up of the vision that they will use for the lean manufacturing implementation (Gupta, 2003). These individuals also empower others that have specific roles so that they have the resources and the freedom to explore many new ideas and make improvements. The second key role is that of the champions, and they are charged with the duty of actually implementing the lean manufacturing approach throughout the organization and ensuring that it is integrated (Gupta, 2003).

The next level, master black belts, are identified and selected by the champions, and they are in-house experts to coach others on lean manufacturing (Gupta, 2003). All of their time is spent on this, and they help assist the champions and guide the black belts and the green belts. In addition to working with statistics, they also spend time to ensure that the lean manufacturing approach is integrated across all departments and functions. The black belts operate under these individuals to make sure that the lean manufacturing approach is applied to certain specific projects (Gupta, 2003). They also devote all of their time to lean manufacturing and the generally focus most of their attention on the project execution. The last level, the green belts, are standard employees that work on lean manufacturing in addition to the rest of their duties (Gupta, 2003). They work under the guidance of the black belts and they help to support them so that overall results can be achieved. There are specific training programs that are utilized to ensure that these people are able to perform properly in these roles (Gupta, 2003).

Overall, much of what is used in lean manufacturing is not all that new, but the old tools are used together, and a far greater effort is put into them than what has been seen in the past. Some also wonder where the six sigma term that is used so often in lean manufacturing came from. The sigma is a Greek letter which is used to represent the standard deviation of a targeted population (Gupta, 2003). The six sigma term therefore comes from the idea that, if one has six standard deviations that come between the mean result of any process and the nearest limit for specification, than one will create virtually no items that actually exceed those specifications (Gupta, 2003). This idea is the main basis for what is called the process capability study, which is generally used by quality professionals, and the six sigma term has roots within that particular tool.

In summary, all management theories are very important when it comes to what is appropriate for businesses (Achanga, et al., 2006). The theory of constraints is discussed first because it is the theory that goes back the farthest, and because it is originally thought to be what created the rest of the issues that were discussed within this paper. The theory of constraints was actually the first tool that was widely used when it came to business management and quality satisfaction (Achanga, et al., 2006; Hines, Holweg, & Rich, 2004). Until that point in time, not all businesses were that concerned about the quality that they had, and even those that were concerned were not necessarily that good at being able to ensure this quality (Holweg, 2007). They did not know what they should be doing to make sure that the products that they made met the standards of quality that their customers wanted.

Some of these problems with quality came from the fact that parts and finished goods often sat around in warehouses, and this could cause these items to become damaged or not to work properly (Holweg, 2007). Even if the quality seemed to be fine when the business had made the product, the quality may have been poor when the customer finally received the product, and so the company received a reputation for having poor quality, which was unfortunate for the company that was working hard to have good quality control and provide good products (Holweg, 2007).

Because of these problems with quality, just-in-time inventory became very important, since this stopped the needed components from sitting around, and also stopped the finished goods from sitting around (Holweg, 2007). Both of these areas were important to the companies that kept having problems with quality based on the fact that their raw materials and their finished products had to sit for so long before they could be used or delivered to stores. Just-in-time planning avoided all of this and therefore became a significant part of the business life of many of the companies that used it (Emiliani, 2000).

In some ways, however, just-in-time was not really enough. It helped to improve quality and customer satisfaction, and it also helped to increase profits, but not to the extent that some companies wanted, and there were other companies that still had problems with quality control in other areas (Emiliani, 2000). Because of this, the idea of total quality management came about. This idea was created in Japan, but it was also worked on in the United States, and through a combination of work in the U.S. And migration of ideas to the U.S., total quality management was adopted by many businesses (Emiliani, 2000).