Lean Six Sigma in the Service Industry
University of Strathclyde
The business improvement methodology known as Lean Six Sigma is rooted in the manufacturing industry, where it developed over the past few decades, reaching widespread adoption worldwide. However, according to the World Economic Outlook Database, published in April 2011, by the International Monetary Fund (IMF, 2011), the distribution of PPP (Purchase Power Parity) GDP, in 2010, among various industry sectors in the main worldwide economies, reflected a decline in the industrial sector, with the service sector now representing three-quarters of the US economy and more than half of the European economies.
PPP GDP 2010
Table 1. PPP GDP Sector Comparison 2010.
In light of the increasing importance of the service sector, the objective of this chapter is to discuss whether the business improvement methodology known as Lean Six Sigma is applicable to the service industry as well, and illustrate some case study applications.
2. What is Lean Six Sigma?
Lean Six Sigma is a business improvement methodology that aims to maximize shareholders’ value by improving quality, speed, customer satisfaction, and costs. It achieves this by merging tools and principles from both Lean and Six Sigma. It has been widely adopted widely in manufacturing and service industries, and its success in some famous organizations (e.g. GE and Motorola) has created a copycat phenomenon, with many organizations across the world willing to replicate the success.
Advanced Topics in Applied Operations Management
Lean and Six Sigma have followed independent paths since the 1980s, when the terms were first hard-coded and defined. The first applications of Lean were recorded in the Michigan plants of Ford in 1913, and were then developed to perfection in Japan (within the Toyota Production System), while Six Sigma saw the light in the United States (within the Motorola Research Centre).
Lean is a process-improvement methodology, used to deliver products and services better, faster, and at a lower cost. Womack and Jones (1996) defined it as: … a way to specify value, line up value-creating actions in the best sequence, conduct those activities without interruption whenever someone requests them, and perform them more and more effectively. In short, lean thinking is lean because it provides a way to do more and more with less and less—less human effort, less human equipment, less time, and less space—while coming closer and closer to providing customers with exactly what they want. (Womack and Jones, 1996:p.)
Six Sigma is a data-driven process improvement methodology used to achieve stable and predictable process results, reducing process variation and defects. Snee (1999) defined it as: ‘a business strategy that seeks to identify and eliminate causes of errors or defects or failures in business processes by focusing on outputs that are critical to customers’. While both Lean and Six Sigma have been used for many years, they were not integrated until the late 1990s and early 2000s (George, 2002; George, 2003). Today, Lean Six Sigma is recognized as: ‘a business strategy and methodology that increases process performance resulting in enhanced customer satisfaction and improved bottom line results’ (Snee, 2010). Lean Six Sigma uses tools from both toolboxes, in order to get the best from the two methodologies, increasing speed while also increasing accuracy. The benefits of Lean Six Sigma in the industrial world (both in manufacturing and services) have been highlighted extensively in the literature and include the following: 1.
Ensuring services/products conform to what the customer...