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Lean vs. Six Sigma vs. ERP – live together or live apart?

September 2, 2009

In my 20 years of implementing continuous improvement projects all over the globe for 50 companies, I frequently get asked by client personnel to explain which is better, Lean or Six Sigma?  My answer is simply: “That’s the wrong question”.  Both are excellent and if utilized appropriately will improve an organization’s quality, through put and customer service.  Both require leadership to be passionate about improvement and must “walk the talk”.  Both require skilled implementation experts to guide the process along a fairly long path to completion.  Both focus on the customer as the driving force for improvement.

However, there are some differentiating factors between the two programs.  The first is the ease of training the talent level personnel to get involved in the changes.  Typically a person with no statistical expertise what so ever can be taught how to remove waste from a process within a single day of training by a skilled lean Sensei.  This is not the case with Six Sigma.  Generally a candidate must be trained in some fairly sophisticated statistical concepts (scatter plots, regression, correlation and ANOVA) before starting down the continuous improvement journey.

The second differentiating factor between the two processes is the main focus areas of interest.  Lean’s focuses are on Taiichi Ohno’s People and Quantity Wastes – Processing, Waiting, Motion, Over Processing, Excess Inventory and Transportation.  Six Sigma is primarily focused on the seventh waste – Quality. This is not to say that Lean doesn’t focus on quality or that Six Sigma only concentrates on quality.  In fact both processes try to remove all 7 of the Ohno Wastes but their starting points typically are as stated.

Another difference is that Lean is a process that can be done immediately, Six Sigma requires much study, analysis and data.  The best example is a very fast and extremely effective improvement activity called a Kaizen Event.  A Kaizen event is a team based, focused, heavily facilitated, one week “mini project” that removes waste and generally improves productivity, reduces errors and improves customer satisfaction by removing non value added activities. The team is composed of talent level personnel who work in the work cell.  They are trained, find barriers, remove them, install the improvement process and celebrate the success in 5 days.  A Six Sigma project is generally much longer than a week (sometimes months) but does go through a similar problem solving process (the DMAIC; or Define, Measurement, Analysis, Improvement and Control).

Another topic which frequently surfaces when we talk about the power of Lean relates to the installation of an ERP system in an organization.  The typical response is:  “we don’t need a lean focus because our ERP system uses standard templates of best practices”.  This is the wrong answer.  The templates for SAP, Oracle and others are generally not lean.  They are structured, organized and SOX compliant, but not Lean.  In no large measure this is due to ERP systems and their templates being transaction/data/planning/scheduling driven while Lean focuses on continuous cost reduction and process improvement with the minimum number of transactions and processes.  Thus, it is best to remove the non value added activities and then insert the IT systems supporting the Lean operation.  Given how hard it is to alter an ERP system once it is installed, the case for a pre-ERP Lean initiative is quite strong.  Are ERP and Lean mutually incompatible?  Just the opposite – a well implemented Lean ERP infrastructure is a major competitive advantage, but it does have to be sequenced properly.

The question has to come up – if Lean is relatively simple and can be performed with your own staffs, how effective is it?  Based on my own results in over 50 engagements, worldwide, I have seen cases where the combined revenue increase and Administrative cost takeout totaled $48M annually, and in just one more example, I managed a team of client employees who, post training, conducted over 60 Kaizen events that realized a combined $100+ millions in savings and reduced average cycle times by 30%.

In conclusion, whenever I speak to experienced Black Belts who first leaned Six Sigma and then Lean, they usually say it is best to identify and get the “quick hits” using the Lean processes, then, focus on optimizing the improved processes by applying Six Sigma processes.  I think this is excellent advice.

Gill Park, PhD is a Partner of Return on Efficiency, LLC, who’s website is www.growroe.com and is one of their senior turnaround leaders/CROs, Program and Interim Executives with over 25 years experience reshaping companies and Operating areas through his Lean Administration process.  A former Deputy Commissioner of NY City, Gill has extensive experience in achieving significant cost reductions and non-value add activity/cost takeout within strong unionized workforces in both the public and private sectors.  Dr. Park leads RoE’s Lean Administration practice and can be reached at gill.park@growroe.com.

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One Comment
  1. Lean and six sigma which is better is a frequent asked question. When people ask me this question, i will ask them pen and ruler which is better before i answer the question.

    Both of them used to “optimize” the process but focus on different way. Six sigma basically is optimizing the process by reduce the defect possibility but lean is more on the effectiveness

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