Although Lean Six Sigma is something usually associated with larger corporations, especially those with big manufacturing plants and lots of working parts, the principles can be just as effectively used in even the smallest of businesses. For a small company trying to compete with local and international businesses, using these principles can mean the difference between success and failure in trying times. Here we take a look at how Lean Six Sigma works, and how you can use the tools and insights it provides to make your business run more smoothly, eliminate waste, reduce costs and boost profits.
What are Lean and Six Sigma?
Essentially, the Lean methodology focuses on eliminating waste – whether that’s in the form of wasted time, money or resources. Six Sigma focuses on eliminating defects or inconsistencies in the product or service you supply, ultimately improving customer satisfaction. Lean Six Sigma combines principles from both methodologies, complementing each other and creating something more powerful than the sum of its parts.
How these principles can help small businesses
While Six Sigma might follow parts down a production line and along a conveyor belt, in a small service-oriented business it might be used to track the flow of information, communication between departments and external suppliers, and back to the customer. Whether it’s one machine holding up the production line or one overburdened department that’s creating a bottleneck, the approach is basically the same. It’s all about using data to identify problems and come up with a workable solution.
And where Lean principles might be used to reduce material waste in a factory, they could be used to reduce time waste in a small office. If you use a shared database or CMS software to capture the information of new and prospective clients, but that capturing is being done by already busy salespeople while the receptionist sits idle waiting for calls to come in, there’s a solution right in front of you. It might not have occurred to you, however, until you had an accurate picture of where the bottleneck was in the first place. Lean can also be applied to the everyday behind the scenes costs that you rarely take time to consider, like making an effort to reduce your monthly municipal bills, arranging a shuttle for your workers from the nearest bus station to help everyone get to their stations on time, or ordering the materials you need in bulk to save on production costs.
Some starting points:
Most small businesses won’t have the resources to send staff on formal Lean Six Sigma training, but that doesn’t mean you can’t apply the basics and see some massive improvements. If you manage to streamline just one or two of your most wasteful processes, you’ll find you’ve suddenly opened up time and money to improve others too.
Identify and analyze your value chain
Start by reminding yourself of what it is your customer actually wants – what you’re in the business of doing better than anyone else. This is the end goal. Now work backwards and identify all the steps along the way to providing that product or service and put it down on paper or digitally. Once you can visualize the value stream, possible improvements often start to become apparent straight away.
The next step is timing and scrutinizing all those steps. Why does one step go quickly and another one fall behind? Are there steps that could be eliminated entirely, or diverted to an underutilized employee or department? Could you get two steps done in one?
What is your 20%?
The 80/20 rule is common to most businesses – that on average, 80% of the revenue or value you create comes from 20% of your most crucial activities. Identifying where those profitable 20% of activities lie is a useful precursor to implementing a Lean Six Sigma overhaul. Once you’ve got this information, you can use Six Sigma principles to improve efficiencies and customer service in your most profitable 20% of activities; and use Lean principles to focus on cutting costs and time waste within the other 80% of activities as a starting point.
Both these systems are not do-it-and-forget-about-it activities but need to be revisited frequently for them to be most effective. When you implement a large-scale change that affects your value chain, draw up a new one and make sure you measure your results. If you can state categorically that using Lean Six Sigma helped you deliver your service to customers 33.4% faster than before, for example, you’ll find it’s a lot easier to stay motivated and keep making other improvements.