Lean and Six Sigma are two ways in which a business can maximize the value created for its owners or shareholders. Lean is about continuously cutting down wastage in the production processes. Wastage is defined as anything that doesn’t result in creation of value for customers. Value is anything that the customer will be ready to pay for. By cutting down wastage continuously, Lean makes the processes more efficient.This in turn lowers the cost of production and operations. Lower costs translate into higher profits for the owners and shareholders of the business.
Six Sigma is about continuously improving the processes so that defect-free high quality products can come out. A Six Sigma process is one that churns out defect-free products 99.9997 percent of the times. This means that in a production run of 1 million output units, only 3.4 units turn out to be defective. The defect-free products due to Six Sigma mean higher customer satisfaction. Higher customer satisfaction usually translates into higher sales. Higher sales mean higher revenues. Also because the products are defect-free the cost of replacing defective products comes down. Both these factors – higher revenue and lower costs- translate into more profits for the owners of the business.
In spite of these benefits many small and midsized businesses do not implement Lean philosophy and Six Sigma. One major reason for this is lack of awareness about Lean Manufacturing and Six Sigma among the owners and management of such businesses.
Another reason lies in cynicism of business owners and managers. They tend to dismiss Lean and Six Sigma as fanciful fads that are not worth the time and expenditure required. Obviously these people are driven by prejudices and gut feeling and not by available data about the benefits accrued to companies from these two philosophies.
Some businesses suffer from the fallacy that implementation of Lean and Six Sigma is very costly and hence they are suitable for large organizations only. The truth is that these two philosophies are as beneficial for small businesses as they are for large ones. Another common fallacy is that these two philosophies are applicable only to manufacturing organizations. Actually they have been applied successfully by many service organizations to deliver high quality, error-free customer service at lowest possible costs. The core of Lean and Six Sigma is process oriented approach. This approach is equally applicable to manufacturing and service organizations.
Some business owners and managers are simply too conservative and are driven by fear of the unknown. But if you own a business and you are too conservative then nothing is more suitable for you than Lean and Six Sigma. Don’t be afraid. Go and try it. You may soon be laughing all the way to banks.