Lean, 6-Sigma and Optimization

Introduction

There was a point in the past when, to many, the idea of “optimization” used to summon images of Greek letters juxtaposed in odd arrangements kept in black boxes that spewed out inscrutable results.  In some places, optimization was thought of as a subject best left to impractical theorists, sequestered in small cubicles deep in the bowels of the building to which few paths led and from which there were no paths out.   From that perspective, optimization was something that had to be reserved for special cases of complex decisions that had little relevance for day-to-day operations.

That perception was never reality, and today, growing numbers of business managers now understand that optimization, and those who leverage it intelligently, are not just valuable assets, but absolutely necessary to achieving and sustaining a more valuable enterprise.  Global competition mandates that managers not “settle” in their decisions, but that they constantly make higher quality decisions in less time.  Optimization helps decision-makers do just that.  The exponential increases in computing power along with advances in software, both tools and applications, have enabled the use of optimization in an ever widening array of business decisions.

Lean

The application of Lean principles is done to drive out waste through a reduction of lead times, lot sizes, and activity that does not increase the value of the whole.  Lean principles have been encapsulated by the five S’s, taken from the transliteration of five Japanese words, which, in turn, have been translated into English counterparts.  The Japanese set is as follows with English translation in parentheses.

  • Seiri (Sort) – sorting, i.e., proper arrangement of all items, storage, equipment, tools, inventory and traffic
  • Seiton (Set in order) – orderliness
  • Seiso – (Shine) cleanliness
  • Seiketsu – (Standardize) standardization, and
  • Shitsuke – (Sustain) self-discipline

The reduction of lead times and lot sizes in manufacturing has focused on reducing setup time and the frequent use of physical and visible signals for replenishment.  At times, the decision processes can be neglected in favor of execution processes, but that puts the proverbial “cart before the horse”.

Six Sigma

Six Sigma pursues reduced variability in processes.  In manufacturing, this relates most directly to the controlling a production process so that defective lots or batches do not result.  It has been encapsulated with the acronym of DMAIC:

  • Design
  • Measure
  • Analyze
  • Improve
  • Control

There has been a natural interest in the convergence of Lean and Six Sigma so that fixed constraints like lead time and lot size can be continuously attacked and reduced while, at the same time, identifying the root causes of variability and reducing or eliminating them.

There are obvious limitations to both efforts, of course.  Physics and economics of reducing lot size and lead time place limitations on Lean efforts and Six Sigma is limited by physics and market realities (the marketplace is never static).

Until it is possible to economically produce a lot size of one with a lead time of zero and infinite capacity, manufacturers will need to optimize tradeoffs.

Decision Points and Optimization

In many cases, the key levers for eliminating waste and variability in any process are the decision points.  When decisions are made that consider all the constraints, multiple objectives, and dependencies with other decisions, significant amounts of wasted time and effort are eliminated, thereby reducing the variability inherent in a process where the tradeoffs among conflicting goals and limitations are not optimized.

Intuition or incomplete, inadequate analysis will only result in decisions that are permeated with additional cost, time and risk.  Optimization not only delivers a better starting point, it gives decision-makers insight about the inputs that are most critical to a given decision.  Put another way, a planner or decision-maker needs to know the inputs (e.g. resource constraints, demand, cost, etc.) in which  a small change will change the plan and the inputs for which a change will have little impact.

Consider a few of the areas where organizations face these decision points.

Optimization

.

The diagram below explains how optimization enables faster, better decisions that reduce waste and variability.

how opti works.

Of course, most people are not operations research professionals, so they need to see the results of optimization in easy-to-understand terms that are visual and sensible.   Some examples include the following:

Custom Views

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Conclusion

Lean and Six Sigma are very helpful approaches to improving business processes by eliminating waste and variability.  Optimization is a powerful tool that can and should be used within that context of that business process improvement to drive much better decisions which are the key leverage points in any business process.

A final thought to ponder over the weekend comes from Steve Sashihara in his book The Optimization Edge:  “Good optimization automates decision making; great optimization changes how things are done.”

Have a wonderful weekend!

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About Arnold Mark Wells
Industry, software, and consulting background. I help companies do the things about which I write. If you think it might make sense to explore one of these topics for your organization, I would be delighted to hear from you. I am employed by Opalytics.

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