As Lean Six Sigma is considered an outside - in approach (with customer opportunity identification being the first step), there are several ways of using the approach.

Generally the interpretation is - we should use Six Sigma for setting up processes (designing process/ improving processes). This means the strategy must be in place and we use Six Sigma for execution.

My question to everyone here is - Where should Six Sigma be placed?

• Can we use it for strategy building for certain business goals?
  
• Should we use it only when we have clear objectives for a process design or process improvement?
  

Six sigma is supportive tool to execute your business strategy/ goal.  

 

Hi VK,

I believe Six Sigma is an absolutely flexible subject which can be easily adopted and placed in any given situation.

For eg: In my process, if I need to understand why one of my teams is not able to perform as per KRAs listed and what do I do to identify the issues and resolve it, I can easily apply six sigma.

Your question on:

Can we use it for strategy building for certain business goals? - My answer is absolutely 'Yes'. Every organisation has a portfolio of services to offer. The CEO / MD identifies the value maximizing / cash cows in his portfolio, and accordingly aligns program managers to direct six sigma projects to maximize profits while minimizing costs. This in turn facilitates long term strategy planning.

Should we use it only when we have clear objectives for a process design or process improvement? - My answer is again 'Yes'. This only makes the task of the functional head easier when you clearly know the objectives at hand to be achieved.

Given the above two scenarios six sigma has been able to prove it's tremendous application success in the last decade and I am sure it would do wonders for the forthcoming generations.

Regards,

Tina

I agree with Tina and Manian. Let me provide an example of Six Sigma usage in strategy building.

In a recent assignment, a client was trying to devise a product mix that provides for minimum ROI required for survival. This particular company had been producing large number of variants of a single product. The management, had historically been of the view, that a complete range of variants is a must for all leading players.

During this DMADV project following were considered in a simulation model.

1. Dealer, Distributor opinions and a sample survey of the consumers was used as inputs for segregating variants as

• Expected by all - categorised as must
  
• Expected by majority - categorised as good to have
  
• Expected by small segments - avoidable
  
• Utilization of common, standard raw material for certain variants provided cost benefits due to lesser overall inventory. This was factored in the model.
  
• Activity based costing and product linked costing techniques were utilized to create projected costs for alternative solutions.
  
• Various product mix options were considered including solutions that had a limited number of standard stock items (and remaining to be produced only on confirmed orders with a committed lead time).
  

2. The recent and cyclical trends in consumer patterns were used to create demand forecasts.

Monte Carlo simulation showed higher possibilities of realising business goals with a particular new strategy. The simulation provided an optimum solution which was not hypothesized earlier. Verification with mathematical and accounting calculations showed this optimum solution was really better than others.

This finally led to a decision of trial that required discontinuation of certain variants of the product. This particular selected solution showed reduction in inventory levels, higher levels of standardisation for chosen product variants and increased value for marketing intermediaries/consumers due to better availability and competitive pricing of all listed products.

The solution was piloted in one of the units and marketed in a specific region. The results were highly encouraging. This led to nation-wide revision in product mix strategy and significant business benefits.

With additional revenue and profitability, the company invested in some more Lean Six Sigma DMADV assignments and found ways of adding variants using late point differentiation techniques and set-up reduction techniques without disturbing inventory levels or unjustified processing costs.

In this manner the company was able to address the pressing need of survival initially and that of growth later (with Six Sigma projects used for strategy building.)