Six Sigma Lean v/s Theory of Constraints

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How To Compare Six Sigma, Lean and the Theory of Constraints  A fram fram ew ork for cho choo osing sin g wha w hatt ’s best best for for yo y ou r orga organ n iza iz at ion ion  by Dave Nave

W

ITHIN THE AMERICAN business

comm comm un ity a multitude of process process improvement champions are

vying for leadership attention. attention. Each champion advocates the

adop tion of his or her improve-

ment method ology in your organization. Almost Almost all

Six Sigma Six Sigma claims that focusing on reduction of  variation will solve process and business problems. By using a set of statistical tools to understand the fluctuation of a process, management can begin to predict the expected outcome of that process. If the

plead that if you ad op t their sp ecifi ecificc tools or follow follow

outcome is not satisfactory, associated tools can be

a specific way of thinking, all your business prob-

used to further understand the elements influenc-

lems w ill be solved.

ing that process.

After After listening listening to m ultiple cham cham pions ad vocate

Through a rigid and structured investigation

their special methodology, how do you choose

methodology, the process elements are more com-

wh at will be best best for for you r situation? What m ethod-

pletely pletely u nd erstood. The The assum ption is the outcome

ology fits fits the culture of you r organization ?

of the entire process will be improved by reducing

M a n y p r o ce ce s s i m p r o v e m e n t m e t h o d o l o g ie ie s app ear to confli conflict ct with each other or at least dow n-

the variation of multiple elements. Six Sigma includes five steps: define, measure,

play the contribution of other m e t h o d o l o g ie ie s . Th Th i s m o n t a g e o f  

I m p r ov o v e m e n t P ro r o g ra ra m s

TA BLE 1

tools and philosophies creates the illusion of conflicting strategies. In this article, I will discuss the basics of the three improvement method ologies ologies and and present a model

Progra m

Si x Si gma

Le a n think i ng

The ory of c onstra i nts

Theory

Reduc e var iation

Remove w aste

M a nage c onst r aint s

Application guidelines

to help you u nderstand their conconcepts and effects and similarities and differences. Table 1 describes the essence of each each m ethod ology. ology.

Focus

1. 2. 3. 4. 5.

Define. M ea easur e. Analyze. Impr ove. Contr ol. Pr oblem foc used

Q U A L I T Y

1. 2. 3. 4. 5.

I d e n t i f y va l u e . Id Identify value str eam. Flow . Pull. Per fec tion. Flow fo foc used

P R O G R E S S

1. 2. 3. 4. 5.

I dent if y c onstr ai nt. Ex Exploit c on onstr aint. Subor dinate pr oc esses. Elevate c onstr aint. Repeat c yc le. Systems c onstr aints

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HOW TO COMPARE SIX SIGMA, LEAN AND THE THEORY OF CONSTRAINTS

analyze, improve and control (comm (comm only know n as DMAIC): DMAIC): • Define. Practitioners begin by defining the process. They ask  w h o t h e cu cu s t o m e r s a r e a n d wh at their p roblems roblems are. They They identify the key characteristics important to the customer along with the processes that support those key characteristics. They then identify existi n g o u t p u t c on on d i t i o n s a lo lo n g with th e p rocess rocess elements. elements. • Measure. Next the focus is on m e a s u r i n g t h e p r o c e s s . K ey ey characteristics are categorized, measurement systems systems are v erified fied an d d ata are collec collected. ted. • Analyze. Once data are colcollected, it is analyzed. The intent is to convert the raw data into information that provides insights into the process. These insights include identifying fying the fundam ental and m ost imp imp ortant causes causes of the defects defects or prob lems. • Improve. The fourth fourth step is to imp rove the p rocess. rocess. Solutions to the problem are developed, and changes are made to the process. Results of process changes are seen in the measurements. In this step, the company can judge whether the changes are beneficial, or if another set of changes is necessary. • Control. If the process is performing at a desired and predictable level, it is put under control. This last step is the sustaining portion of the Six Sigma methodology. The process is monitored to assure no unexpected changes occur. Focusi Focusing ng on the p rimary area of variation variation red uction uction produces other secondary effects, too. Quality is improved. Process investigation produces the re-evaluation of the value added status of many elements. Some elements are modified, while others are discontinued. Elements Elements are refined refined an d improved . Mistakes Mistakes and opp ortunities for for mistakes are redu redu ced. ced. Some elements discovered during the Six Sigma investigation constrain the flow of products or services through the system. Flow is defined as the time from the input of raw material to the output of a salable item. Improvement of a process that was restricting flow results in red uced v ariation, ariation, better quality and improvement in the volume of the process output. Thus the organization has less money tied up in in-process inventory. The time from paying for input material to seeing a profit is reduced, and the organi-

zation zation can respond to customer n eeds m ore quickly. quickly. Six Sigma Sigma is foun ded on t w o m a i n a s s u m p t io io n s . First, people in an organiz a t io io n u n d e r s t a n d a n d a p p r e ccii a t e t h e f a ct ct t h a t numbers can represent features and characteristics of a process. They appreciate that a deeper und erstanding erstanding of data and data analysis can be used to produce improvements, and graphical representations of data can provide new and different perspectives of the process. Analytical types, such as engineers and scientists, generally respect this approach. Another assumption is that through the reduction of variation of all the processes, the overall performan ce of the organization will be imp roved . But w hile it is is hard to argue against improvem ent, the economic economic reality of business is we want the most improvement for the least investment. Improving all of an organization’s tion’s individ ua l processes could actually hav e a detrimental effect on the company’s ability to satisfy the customer’s needs and provide prod uct and services services at the right time at the lowest cost. The realized savings to the system might be less than the cost of all the improvements. So , a n o r g a n i z a t i o n t h a t i m p r o v e s t h i n g s ju ju s t because because it can can m ay be improving the w rong things for the bu siness. siness.

STheix i xassumption S ig i gis themoutcome a of the entire process will be improved by reducing the

variation of multiple elements.

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Lean thinking Lean thinking is sometimes called lean manufacturing, the Toyota production system or other names. L e a n f o cu cu s e s o n t h e r e m o v a l o f w a s t e , w h i ch ch i s defined defined as anything not n ecessary ecessary to produ ce the prod uct or service service.. One common measure is touch time—the amount of time the product is actually being worked on, or touched, by the worker. Frequently, lean’s focus is manifested manifested in an em ph asis asis on flow. flow. There are five five essential steps in lean: 1. Identify Identify w hich hich features features create create value. 2. Identify the sequ ence of activi activities ties call called ed the valu e stream. 3. Make the activities flow. flow.

4. Let Let the custom custom er pu ll prod uct or service service throu gh the process. 5. Perfect Perfect the process. Identify Identify value. The determination of which features create value in the product is made from the internal and external customer standpoints. Value is expressed in terms of how the specifi specificc produ ct meets the customer’s needs, at a specific price, at a specific time. Specific products or services are evaluated on which features add value. The value determination can be from the perspective of the ultimate customer or a subsequent process. process. Identify the value stream. Once value is identified, activities activities that contribu te value are iden tified. tified. The entire sequ ence of activities activities is is called called the v alue stream . Then a d etermination etermination is m ade as to wh ether activiti activities es that d o not contribute value to the prod uct or service service are necessary. Necessary operations are defined as being a prerequisite to other value added activities or being an essential part of the business. An example of  a nonvalue added but necessary process is payroll. After all, people need to be paid. Finally the impact necessary, nonvalue added activities have on the process is is redu ced ced to a minimu m. All other nonvalue added activities are transitioned out of the process. Improve flow. Once value add ed activi activitie tiess and necessary nonvalue activities are identified, improvement effort effortss are d irect irected ed toward making the activities flow. Flow is the uninterrupted movement of  product or service through the system to the customer. Major inhibitors of flow are work in queu e, batch batch processing processing and transportation. These buffers buffers slow the time from p roduct or service initiation to delivery. Buffers also tie up money that can be u sed elsewhere in the organization and cover up the effects of system restraints and other w asted activiti activities. es. Allow customer pull. After waste is removed and flow established, efforts turn to letting the customer customer p ull produ ct or service through the process. The company mu st make the process responsive to providing the product or service only when the customer needs it— not before, not after. Work toward perfection. This effort effort is the repeated an d con-

stant attempt to remove nonvalue activity, improve flow flow and satisf satisfy y customer d elivery elivery needs. While lean lean focuses focuses on rem oving waste and improving flow, it too has some secondary effects. Quality is improved. The product spends less time in process, redu cing cing the chances of dam age or obsolescence. obsolescence. Simp lific lification ation of p rocesses results in red uction of va riation. As the company looks at all the activities in the value stream, the system constraint is removed, and performance is is improved . The lean methodology also makes some assumptions: • People value value the visual effe effect ct of of flow flow.. • Waste is is the m ain restrict restriction ion to profitabil profitability ity.. • Many small small imp imp rovements rovements in in rapid success succession ion are are more b eneficial eneficial than a nalytical stud y. • Process Process interact interaction ion effe effect ctss will be resolve resolved d through value stream refinement. refinement. People in operations ap preciate preciate this app roach. roach. Lean involves many people in the value stream. Transitioning to flow thinking causes vast changes in how people perceive their roles in the organization and their relationshi relationships ps to the p rodu ct. ct.

Theory of constraints constraint s (TOC (TOC) TOC focuses on system improvement. A system is defined as a series of interdep interdep end ent p rocesses. rocesses. An analogy for a system is the chain: a group of interdependent links working together toward the overall goal. The constraint is a weak link. The performance of the entire chain is limited by the strength of the weakest link. In In manufacturing processes, TOC concentrates on the process that slows the speed of product through the system. TOC consists of five steps: 1. Identify Identify th e constraint. constraint. 2. Exploit the constra constra int. 3. Subord inate other processes processes to the constraint. 4. Elevate Elevate the constraint. constraint. 5. Repeat the cycle. cycle. Identify . The constraint is i d e n t i fi fi ed ed t h r o u g h v a r i o u s methods. The amount of work  in queue ahead of a process opera tion is a classic classic ind ind icator. icator. Another example is where products are processed in batches.

LLean e focuses a non the

removal of waste, which is defined as anything

not necessary to produce the product or service.

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HOW TO COMPARE SIX SIGMA, LEAN AND THE THEORY OF CONSTRAINTS

Exploit. O n c e t h e c o n s t r a i n t i s i d e n t i f ie ie d , t h e p r o c es e s s i s im i m p r o v e d o r o t h e r w i se se s u p p o r t e d t o achieve its utmost capacity without major expensive up grades or changes. In other word s, the constraint constraint is exploited. Subordinate. Subordinate . When the constraining process is working at maximum capacity, the speeds of other subordinate processes are paced to the speed or capacity of the constra int. Some Some processes w ill sacrifi sacrifice ce individ ual productivity for the benefit of the entire system. Su b o r d i n a t e p r o c e s s e s a r e usu ally ally found ahead of the cons t r a in in t i n t h e v a l u e s t r e a m . Processes Processes after the constraint are not a major concern—they are probably already already p rodu cing cing u n d e r c a p a ci ci t y b e ca ca u s e t h e y have to wait on the constraining process. Elevate. If the output of the overall system is not satisfactory, further improvement is required. The company m a y n o w c on on t e m p l a t e m a j or or changes to the constraint. C h a n g e s c a n i n v o l v e ca ca p i t a l improvemen t, reorganizatio reorganization n or other major expenditures of  time or money. This is called elevating the constraint or taking w hatever a ction ction is necessary to elimina elimina te it. Repeat. Once the first constraint is broken, another part of the system or process chain becomes the new constraint. Now is the time to repeat the cycle of  improvement. The performance of the entire system is re-evaluated by searching for the new constraint process, exploit exploiting ing the process, subord inating and elevating. By focusing on constraints, this methodology produces positive effects on the flow time of the product or service through the system. Reduction of waste in the constraint constraint increases increases throughpu t and improves throughput time. When the constraint is improved, variation variation is redu ced, ced, and quality is imp imp roved. Constraint focus does not require intimate knowledge of data analysis or that a large number of people un derstand the elements elements of the system. system. Und erstanding by a few people with the power to change things is all that is necessary. The effort can be localized with minimu m involvemen t of the workforce. T O C o v e r c o m e s o n e c r i t i ci ci s m o f m o s t p r o c e s s

improvement programs: that many programs use a mass, one size fits all approach to improvement. With the mass ap proach, a comp comp any hop es that by refining refining and improving each process individually and independently to maximum output, the entire system output will improve. TOC methodology operates on several assum assum ptions: • A s in in t h e ca ca s e o f l ea ea n , t h e organization places a value o n t h e s p e e d a t w h i ch ch i t s prod uct or service travels t h r o u g h t h e s y s t e m . Sp Sp e e d and volume are the main determinants of success. • Current Current proces processe sess are ess essenent i a l to to p r o d u c e t h e d e s i r e d output. • The product product or servi servicce design design is stable. Value added workers do not need to have an in-depth understanding of this improvement methodology. Suggestions by the w orkforce orkforce are not considered vital for successful implementation of the theory of  constraints. Organizations Organizations with hierarchical hierarchical structure structure an d cencentralized knowledge value this approach.

TO C

The performance of the

entire chain is limited by the strength of the weakest link.

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Comparing the three methods There are some commonalities and general criticisms of all improvement models. In addition, all process process improvem ent theories and method ologies ologies make a few of the same assu mp tions. The main points of each each metho do logy are summ arized in Table Table 2. 2. Improvement m ethodologies ethodologies begin begin by taking taking th e prod uct or service service configuration configuration at face face value an d improving the processes or system. They assume the following: • The design design of produ ct or service service is essential essentially ly corcorrect. • The design of the produ ct or service service is the most ecoeconomical. • Customer needs needs are sati satisf sfie ied d w ith ith that design. design. • The current produ ct configuration configuration fulfi fulfill llss the fun fun ctional requirements requirements of the m arket and customer. customer. • The management management struc structure ture supports supports and nourishes nourishes change. These These assumptions may not be valid valid and require require exploration.

After extensive refinem refinem ent of th e existing processes processes or systems, many improvement method ologies ologies begin begin to look at the p r o d u c t o r s e r v i ce ce d e s i g n . H o w e v e r , each each views the d esign esign th rough its theory and tools. tools. Quality function deployment and value management are two techniques techniques used to help connect the product or serv i c e d e s i g n t o c u s t o m e r n e e d s . Bo Bo t h bring m arketing, finance, finance, operations, design, customer and suppliers together to systematically explore how the product performs the function the customer needs. An interesting part of this investigation is that cost can be associated with function. When marketing and custom ers know the cost of specifi specificc features, features, they m ake informed informed choice choicess about the configu configu ration of the prod uct or services.

Major Maj or obstacles to improvement

TA BLE 2

Comparison of Improvement Programs

P ro g ra m

S i x S i g ma

Le a n thi nk i ng

The ory of c onstra i nts

Theory

Reduc e var iat i on

Remove w ast e

M anage c onst r ai nt s

Application guidelines

Focus Assumptions

1. 2. 3. 4. 5.

Def ine. Me M e as ur e . Anal yze. I m p r o ve . Cont r ol.

1. 2. 3. 4. 5.

Pr obl em f oc used A pr o bl e m e xi s t s. Fi gur es and number s a r e va l u e d . System output improves if variation in all pr oc oc es esses is is r ed educ ed ed.

I de n t i f y v a l ue . Id Identi f y val ue st r eam. Flow . Pul l . Per f ec t i on.

1. 2. 3. 4. 5.

I de n t i f y c o ns t r a i n t . Ex Expl oi t c onst r ai nt . Subor di nat e pr oc esses. Elevat e c onst r ai nt. Repeat c yc le.

Fl ow f oc used

Syst em c onst r ai nts

W ast e r emoval w ilill i mpr ove busi ness p e r f o r m an c e . Many small improvements are better than syst em ems an anal ys ysi s.s.

Emphasi s on speed and vol ume. Uses exi st ing syst ems. Process interdependence.

Primary effect

Uni for m pr oc ess output

Reduc ed f low t i me

Fast t hr oughput

Secondary effects

Less w aste. Fast t hr oughput . Less i nvent or y. Fluctua luctuatio tion— n— perfo performa rmance nce measur es es fo for ma manager s. s. Impr oved qu qual i t y.

Less var i ati on. Uni f or m out put . Less i nventor y. New accoun accountin tingg syst system em.. Flow — per fo for m maanc e measur e fo for ma manager s. Improved quality.

Less i nventor y/ w ast e. Thr oughput c ost a c c o u n t i ng . Throu Through ghpu put— t— perfo performa rmance nce measur em ement sy syst em em. I mpr oved qu quali t y.

There are major obstacles to the Syst em i nt er ac tition St at i st i c al or system M in ini mal w or or ker i nput . Criticisms improvement m ethodologies: ethodologies: not co co n s i d e r e d . anal ysis no not va valued. Data an anal ysis no not va valued. • They address address manage management ment theo theory ry as a Processes improved independently. second second ary or tertiary tertiary issue. • They don ’t add ress policie policies, s, either either forformal or informal. informal. • They don’t don’t address how managers are are measure measured d Beneath a theory of management is a system of  and rew arded for process process improvements. organizational values. Is the purpose of the organiza• They They don’t don’t address the the general general theory of of managetion solely to increase the wealth of the stockholders? ment u sed by the organization. organization. Or is the existence of the organization to benefit soci• They don’t don’t add ress ress the organizati organization’ on’ss values. values. ety, ety, the nation or some other group ? Do not get caught In any organization many activities are driven by in the trap of thinking thinking an organization’ organization’ss only pu rpose policies whose purpose has been lost in time. All is to make money. Money, or profit, is the result of  change programs challenge the existing ways of doing good management toward satisfying a societal need. things. This necessitates asking what purpose a specifAlso, consider that some organizations are created not ic policy serves and whether that purpose is still valid to make a p rofit. rofit. in today’s environm environm ent. The issues of theory of management and organizaOne technique for assessing an organization’s mantional ethics and values are beyond the scope of this a g e m e n t t h e o r y i s t o s ea e a r c h fo fo r t h e u n d e r l y i n g article but have been raised to point to other areas assumptions supporting each policy. A challenge of  needing consideration consideration w hen looking at p rocess rocess or sysassump tions provides a starting starting p oint for for determining tem improvement programs. wh ether the current p olicy olicy is is still still supp orting someChampions of each of these methods say they can thing of value tod ay. ay. overcome overcome th ese draw backs because because imp lementation lementation of  The management theories of W. Edwards Deming their particular particular m ethodology and focus focus on their tools, tools, may help organizations organizations challenge challenge current m anagemethods and theories will allow an improved theory ment practice practicess and assump tions—not tions—not by suggesting of management an d bu siness siness strategy to emerge. emerge. incremental improvements but by pointing to a new How to choose way of managing. Through this line of study, leaders achieve a greater understanding of the way they can To help work through the apparent conflicts of difinfluence the social and economic well-being of their ferent ferent improvement p rograms, use a mod el that that idenorganization. tifies tifies a hierarchy of cause an d effec effectt relationship s. Q U A L I T Y

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First, identify the primary theory. What is the core emphasis of the program or methodology? This core emp hasis is is usu ally ally a few w ords or a short p hrase: Six Sigma’s is variation reduction, lean’s is waste reduction and TOC’s TOC’s is constrain constrain t redu ction. ction. Then identify the relationship between the primary theory and the primary focus focus of the tools tools and methodology. ology. This This relationship relationship indicates how th e prim ary theory m anifests anifests itself itself in tan gible results—wh results—wh at I call the pr imary effect effect.. This This is an if/ if/ then typ e of relationship relationship : • For Six Sigma: “If we focus on reducing variation, then w e will have m ore uniform process outp outp ut.” • For lean: “If we focus on waste removal, then flow time will imp imp rove.” • For TOC: “If we focus focus on constraints, constraints, then throu ghpu t volume w ill ill imp imp rove.” rove.” The next to last level of the model in Table 2 (p. 77) identifies secondary effects. Secondary effects can be d e s c r ib i b e d b y u s i n g a n if if / t h e o r y a n d p r i m a r y effe effect ct// results type statement. While While the p rimary theory to primary effect relationship is usually one-to-one, the second ary effects effects are several-to-many, includin g: • For Six Sigma, focus on reducing variation and achieving uniform process results in less waste, less through pu t time and less less inventory. inventory. • For lean thinking, focus on waste and flow time results in less variation, uniform output and less inventory. • For TOC, f o cu cu s o n c o n s t r a i n t s a n d i n c r e a s ed ed through pu t results in in less inventory and a d iffe ifferent rent accounting accounting system. Each improvement methodology appears to be driving toward common tools and concepts. However, d ifferent ifferent method ologies begin begin th e jour jour ney from d ifferifferent perspectives. At the secondary effects level of the model, the results from each methodology start to look similar. Many of the secondary effects of one methodology look similar to the primary effect or focus of another methodology. Extending Extending the fund amental ph ilosophy ilosophy th rough each methodology’s primary, secondary and tertiary effects, you might conclude each method strives to achieve similar results. Even along the journey, each methodology incorporates the primary effe effects cts of other improvement programs. Can we infer that after extensive time and effort effort implementing a single methodology, methodology, the end result will be similar similar no matter w hich path w e take? Where does that leave us? As a manager, how do you select an improvement methodology or program to overcome your o bstacles? bstacles? Selection of a process improvement methodology is dep end ent on the culture of your organ ization. ization. If If many popu lar lar programs app ear to end end up in the same same place place addressing the same issues after a number of years of  7 8

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use, the main issue left to explore is the speed at which a method will be acce accepted pted into an organization: • If your organization organization values analytic analytical al stud ies and the relationships of d ata, charts charts and analysis, Six Sigma is a perfect perfect progr am for you to star t with. • If your organizati organization on values visual visual change change and right now time, then lean thinking might be the way to go . • I f y o u r o r g a n iz iz a t io io n v a l u e s a s y st st e m s a p p r o a ch ch where total participation is not desired and if it values the separation between worker and management, then TOC might be a good w ay to start. More and more organizations are trying to determine what improvement method will work best and fit best with their culture. When you are working through the apparent conflicting claims of performance improvement programs, my advice is to concentrate on the primary and secondary effects of their philosophies. Once the values of a specific improvement program are identifie identified, d, the comp arison of those values with the values of the organization can make the m ethod of selecti selection on easier, if not obviou s. Never stop learning. Each improvement methodology contributes valuable concepts, ideas ideas and techtechniqu es to your organization. Your Your challenge challenge is to use wh atever strengths strengths th e method ology possesses possesses to help your organ ization ization imp rove. BIBLIOGRAPHY D e m i n g , W. W . E d w a r d s , The New Economics for Industry, Government, Education , second edition (Cambridge, MA:

Massachu setts In stitute of Technology, Technology, 1994 1994). ). Dettmer, William H., Goldratt’s Theory of Constraints: A Systems  Approach  Approach to Contin uous Improvement  Improvement  (Milwauk ee: ASQ ASQ

Qu ality Press , 1997). 1997). Process of On going G o l d r a t t , E l i y a h u M . , The Goal: A Process  Improvement , second edition (Great Barrington, MA: North

River Press, 1994). Goldratt, Eliyahu Eliyahu M.,   It’s Not Luck  (Great Barrington, MA: Nor th River Press, 1994). 1994). Womack, James P., and Daniel T. Jones,   Lean Thinking: Banish Waste and Create Wealth in Your Corporation (New York:

Simon & Schuster, 1996).

DAVE NAVE

works on assignment to Boeing Commercial

 A irplanes for Comforce Technical Technical Services. H e holds a m aster’s aster’s degree in management systems from the Deming Scholars Program at Fordham University in New York. Nave is a member  of ASQ.

QP

© 2002 American Society for Quality. Quality. Reprinted with permission.