LEAN SIX SIGMA for SMALL and MEDIUM SIZED ENTERPRISES “ it constitutes a valuable addition to the Lean Six Sigma literature that is often focused on the needs of large multinational corporations Lean Six Sigma is not only for large corporations and this book proves it an excellent reference text for running continuous improvements in small and medium organizations.” —Alessandro Laureani, Master Black Belt, Google, Republic of Ireland Antony • Vinodh • Gijo INDUSTRIAL & MANUFACTURING ENGINEERING / QUALITY CONTROL & RELIABILITY LEAN SIX SIGMA for SMALL and MEDIUM SIZED ENTERPRISES A Practical Guide Lean Six Sigma for Small and Medium Sized Enterprises: A Practical Guide provides a medium-sized enterprises (SMEs) It includes six real-world case studies that demonstrate how LSS tools have been successfully integrated into LSS methodology Simplifying the terminology and methodology of LSS, this book makes the implementation process accessible • Supplies a general introduction to continuous improvement initiatives in SMEs • Identifies the key phases in the introduction and development of LSS initiatives within an SME • Details the most powerful LSS tools and techniques that can be used in an SME environment • Provides tips on how to make the project selection process more successful This book covers the fundamental challenges and common pitfalls that can be avoided with successful introduction and deployment of LSS in the context of SMEs Systematically guiding you through the application of the Six Sigma methodology for problem solving, the book devotes separate chapters to the most appropriate tools and techniques that can be useful in each stage of the methodology Keeping the required math and statistics to a minimum, this practical guide will help you to LEAN SIX SIGMA for SMALL and MEDIUM SIZED ENTERPRISES roadmap for the successful implementation and deployment of Lean Six Sigma (LSS) in small and deploy LSS as your prime methodology for achieving and sustaining world-class efficiency and effectiveness of critical business processes K24217 6000 Broken Sound Parkway, NW Suite 300, Boca Raton, FL 33487 711 Third Avenue New York, NY 10017 Park Square, Milton Park Abingdon, Oxon OX14 4RN, UK ISBN: 978-1-4822-6008-3 90000 78 482 260083 w w w c rc p r e s s c o m Jiju Antony • S Vinodh • E V Gijo LEAN SIX SIGMA for SMALL and MEDIUM SIZED ENTERPRISES A Practical Guide LEAN SIX SIGMA for SMALL and MEDIUM SIZED ENTERPRISES A Practical Guide Jiju Antony • S Vinodh • E V Gijo Boca Raton London New York CRC Press is an imprint of the Taylor & Francis Group, an informa business CRC Press Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2016 by Taylor & Francis Group, LLC CRC Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S Government works Version Date: 20151124 International Standard Book Number-13: 978-1-4822-6009-0 (eBook - PDF) This book contains information obtained from authentic and highly regarded sources Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the consequences of their use The authors and publishers have attempted to trace the copyright holders of all material reproduced in this publication and apologize to copyright holders if permission to publish in this form has not been obtained If any copyright material has not been acknowledged please write and let us know so we may rectify in any future reprint Except as permitted under U.S Copyright Law, no part of this book may be reprinted, reproduced, transmitted, or utilized in any form by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying, microfilming, and recording, or in any information storage or retrieval system, without written permission from the publishers For permission to photocopy or use material electronically from this work, please access www.copyright com (http://www.copyright.com/) or contact the Copyright Clearance Center, Inc (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400 CCC is a not-for-profit organization that provides licenses and registration for a variety of users For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the CRC Press Web site at http://www.crcpress.com Dedication This book is dedicated to Frenie, Evelyn, Janane, Gaurav, Jayasree, Vaishnav, Vismaya and our parents Contents Preface xvii Acknowledgements .xxi Authors xxiii Chapter Introduction to small and medium sized enterprises (SMEs) 1.1 Introduction 1.2 Definition of SMEs 1.3 SMEs’ contribution to world economy 1.4 Characteristics of SMEs 1.4.1 Low start-up costs 1.4.2 Portability 1.4.3 Leadership 1.4.4 Management structure 1.4.5 Planning 1.4.6 Systems and procedures 1.4.7 Human resources 1.4.8 Market and customer focus 1.4.9 Operational improvement 1.4.10 Innovation 1.4.11 Networking 1.4.12 Revenue and profitability 1.4.13 Ownership and taxes 1.4.14 Locations 1.5 SMEs versus larger firms 1.5.1 Innovation 1.5.2 Attitude towards risk 1.5.3 Decision-making 1.5.4 Resource allocation 1.5.5 Understanding and management of business models 1.6 Summary References 10 vii viii Contents Chapter Continuous improvement initiatives in SMEs 15 2.1 What is continuous improvement? 15 2.2 Continuous improvement practices in small and medium sized enterprises (SMEs) 16 2.3 Critical success factors in the implementation of CI practices in SMEs 18 2.4 Leadership for CI 19 2.5 Sustainability of CI initiatives 20 2.6 Summary 21 References 21 Chapter Lean Six Sigma 23 3.1 What is Lean production system? 23 3.2 Key principles of Lean production system 24 3.3 Benefits of Lean production system 26 3.4 What is Six Sigma? 27 3.5 Some common myths of Six Sigma 28 3.5.1 Six Sigma is another management fad 28 3.5.2 Six Sigma is all about statistics 28 3.5.3 Six Sigma works only in manufacturing settings 29 3.5.4 Six Sigma works only in large organisations 29 3.5.5 Six Sigma is the same as Total Quality Management 30 3.6 An overview of Six Sigma methodology 30 3.7 Benefits of Six Sigma 31 3.8 Some pros and cons of Lean and Six Sigma 31 3.8.1 Some pros of Lean 31 3.8.2 Some cons of Lean 32 3.8.3 Some pros of Six Sigma 32 3.8.4 Some cons of Six Sigma 33 3.9 Why Lean Six Sigma? 34 3.10 Benefits of Lean Six Sigma 35 3.11 Challenges in the implementation of Lean Six Sigma 36 3.12 Summary 37 References 37 Chapter Lean Six Sigma road map for SMEs 41 4.1 Readiness factors for the successful introduction of LSS 41 4.1.1 RF1: Senior management commitment and involvement 41 4.1.2 RF2: Visionary leadership and culture inculcation 42 4.1.3 RF3: Customer focus 42 4.1.4 RF4: Selecting the right people 43 4.1.5 RF5: Linkage of LSS deployment to organisation’s business strategies 44 Contents ix 4.1.6 RF6: Competence to develop effective framework 44 4.1.7 RF7: Appropriate selection and usage of LSS metrics 44 4.1.8 RF8: Education and training 45 4.2 Lean Six Sigma implementation infrastructure 46 4.3 A road map for implementing Lean Six Sigma 47 4.3.1 Conceptualisation 47 4.3.2 Initialisation 49 4.3.3 Implementation 49 4.3.4 Sustenance 50 4.4 Managerial implications 51 4.5 Summary 51 References 52 Chapter Lean and Six Sigma metrics 53 5.1 Introduction 53 5.2 Introduction to common metrics of Lean 53 5.2.1 Value������������������������������������������������������������������������������������������ 53 5.2.2 Customer value 54 5.2.3 Creating value 54 5.2.4 Flow������������������������������������������������������������������������������������������� 55 5.2.5 Value stream 55 5.2.6 Value flow��������������������������������������������������������������������������������� 55 5.2.7 Waste����������������������������������������������������������������������������������������� 55 5.2.8 Value-added activity 57 5.2.9 Non-value-added activity 58 5.2.10 First-time quality 58 5.2.11 Computation of first-time quality 59 5.2.12 Cycle time��������������������������������������������������������������������������������� 59 5.2.13 Takt time����������������������������������������������������������������������������������� 59 5.2.14 Lead time���������������������������������������������������������������������������������� 59 5.2.15 Changeover time 60 5.2.16 Worked examples 60 5.2.16.1 Example 60 5.2.16.2 Example 60 5.2.16.3 Example 61 5.3 Introduction to common metrics of Six Sigma 61 5.3.1 Defects per million opportunities 62 5.3.1.1 Example 62 5.3.2 Sigma quality level 62 5.3.3 Rolled throughput yield 63 5.3.4 Cost of poor quality 63 5.3.4.1 Example 64 5.3.4.2 Example 65