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This article: World Class Operations & Method Selection
Source: Business-improvement.eu
WorldClass: Value adding, smooth & perfect organization

For more articles about World Class Operations (using mixed methods), use the drop down menu in the top left corner. This is the introductory article, about method selection.


Lean, TOC, QRM, Six Sigma, TPM, RCM, WCM … Which method adds most value?
Selecting and/or combining improvement methods
By Dr Jaap van Ede, editor-in-chief business-improvement.eu.
The first version was published in the Dutch specialist journal PT Industrial Management. Since then, the article was regularly updated.


Each company struggles with the same question:  How can I provide – at the lowest possible costs and with an acceptable delivery time – products or services that add maximum value for my customers ?

There are many different methods which address this problem:  (links refer to chapters on this site):
Lean (the value adding organization),  Six Sigma (the perfect organization),  TOC (the unlimited organization),  TPM (the smooth organization),   RCM (the reliable organization) and QRM (the cellular organization). In addition, combinations of these methods exist, like Lean Six Sigma (value adding ánd perfect organization) and World Class (value adding ánd perfect ánd smooth organization).

Which kind of companies use which approach, which method should yóu choose, what are the bottlenecks, do you have to choose anyway, and why are there so many methods to choose from? This site-section, 'WorldClass', is about those subjects!

This website has a separate section for each different process improvement method, Lean, TOC, QRM, Six Sigma, TPM and combinations thereof. For each method, (dis)advantages are discussed, and a lot business cases are given. Particularly these case studies help you to learn from other companies. In addition, these demonstrate which tools yields good results in a specific situation.

But, are there also other ways to choose an improvement method that fits your organization? And do you have to choose, or is it also allowed to combine the best bits? That’s what this article is about!

Acquiring knowledge
The first question is: How do you start a process improvement project? By simply taking one’s chance with a consultant specialized in one specific method? When you are not acquainted with terms like Lean and Six Sigma, then I think you could better wait a while.

It is far better to acquire knowledge first about all methods, regarding possibilities and limitations. One way to do that, is to study the information on this site. Besides that, it is perhaps a good idea to take a course about a method which seems attractive. If you do that, it is important that there is room to discuss your own business problems.

Another idea is to simply experiment with some improvement methods. The fact is that this is the way how methods like Lean manufacturing and the Theory of Constraints were invented. There is nothing wrong with trial-and-error on the shop floor. On the contrary,
that is necessary anyhow to adapt methods like Lean and Six Sigma to each new business application.

When you have a rough idea in what direction you want to head, it could be time to search for a consultant which matches your business. In that stage it might be helpful that all articles on this website belong to a particular section, as shown in the upper right of each article (this page belongs e.g. to the section WorldClass). In the margin(s) you will see banners of consultants that advertise in the section the article belongs to.
In addition there are buttons above each bannerlist, like "Consultancy World Class" on this page. Use these to get descriptions of the services the consultants are offering.

Theoretically, process improvement methods can be applied without any help, since the principles often are rather straightforward. However, beware that implementing a lasting culture of continuous improvement is not easy, a lot of change management is needed.  A good consultant knows not only which tools are best to apply in your specific situation, but also knows how to get commitment from everybody on your shop floor!

Fundamental choice
There are consultants which plea for a fundamental choice between, say,  Lean, Six Sigma of TPM, under the motto "either go for it or not". Indeed it is true that when you are in a sailing boat, it generally makes more sense to hoist a spinnaker, then to start rowing. But, when the wind drops, what do you do then? Isn’t it better to change tactics in that case?

To hold onto one process improvement method under all circumstances, therefore resembles a physicist who forces himself to choose between Newton and Einstein. That is not a good idea, because these ideas complement each other.

This applies also to improvement methods, since these all help to achieve one common goal: to produce and deliver products as efficient as possible, under the boundary condition that these fit the expectations of the customers.

This leads to the next question: Why are there so many different tools, why isn’t there an all-embracing process management method?

Line of approach
Part of the answer is the different line of approach of each method. In time, different business disciplines have developed their own process improvement policy.

  1. Lean, TOC and QRM were invented by logistic managers, and by scientists in the field of operations management.
    Background information about these methods is grey in this article.

  2. Six Sigma was thought up by quality managers.
    Background information about this method is blue in this article.

  3. TPM and RCM were invented by maintenance managers.
    Background information about these methods is green in this article.

The box below gives an overview.

Process improvement methods and their lines of approach


Logistic management perspective

1.  Lean manufacturing (LM)
Lean aims to maximise the value which streams towards your customers. It considers only processes which add value to products or services as useful. Seven kinds of waste are reduced as much as possible: overproduction, inventory, manufacturing errors, manufacturing disruptions, waiting times, transport and movements, like searching for materials. One of the ways to achieve this, is to let materials flow through your company in as steady a stream as possible (flow manufacturing), with a minimum of intermediate stock, and at a rate dictated by customer demand (pull). A process flow diagram (value stream mapping) is used to identify which processes add value to the products or services provided by your company, and which don’t.

Origin: Japan (Toyota). Later also the US (Massachusetts Institute of Technology)


2.  Theory of Contraints (TOC)
TOC concentrates on reducing the throughput time. By optimally exploiting bottlenecks or constraints, and to subordinate all other processes to these bottlenecks, the efficiency of the supply chain as a whole is improved. 

Origin: Israel/US (consultant and management guru Dr Eli Goldratt)


3. Quick Response Manufacturing (QRM)
QRM focuses on gaining time during the process from buying raw materials until the delivery of the finished products. This will result in shorter lead and delivery times. To increase the throughput on the shop floor, work-in-progress should be reduced. This means smaller batch sizes, and therefore possible investments in extra people and/or machines. Those investments are however more then dan compensated for by savings in other departments, like warehouses.

Origin: US (prof. Rajan Suri)

Quality management perspective

4.  Six Sigma (6S)

Six Sigma reduces variation in production and business processes. The goal is to maximize the likelihood that your products or services will meet customer expectations. The term Six Sigma refers to an error probability of only 0.00034%. 

Origin: US (Motorola, later also General Electrics)

Maintenance management perspective

5.
Total Productive Maintenance (TPM)
TPM concentrates on productivity improvement, primarily by way of maximizing the availability of equipment.  To do that, small multidisciplinary teams improve step-by-step the Overall Equipment Effectiveness (OEE) of ‘their’ machines or production lines. The OEE is defined as the multiplier from, among others, the machine availability, the relative machine performance and the fraction correctly manufactured products.

Origin: Japan (automotive supplier Nippondenso). Further developed by the Japan Institute for Plant Maintenance.


6. Reliability Centered Maintenance (RCM)
RCM concentrates on the prevention of those machine failures, which have the most harmful consequences. To do that, per failure event the consequential loss is determined, during a so-called Failure Mode and Effect Analysis or FMEA. These losses can be financial (the production process stops), but can also include harm to humans and/or to the environment.
Finally, for each machine part the best maintenance plan is determined, which is the plan which prevents the most harmful failure-related events.

Origin: US (Boeing)    


Broadened
In the beginning, all the improvement methods mentioned above where only used within the business discipline from which they originated.

However, the applicably of most methods (with as sole exception RCM) broadened later to all business processes, and even to supply chains.

This can be clarified, by giving a few examples.

Initially, TOC was primarily used to optimize production lines.  Later, the application spontaneously expanded to the whole supply chain. So, also suppliers, business partners and even the marketing approach became part of the analysis.

Six Sigma broadened itself in a similar way. First this was a method to improve product quality, but nowadays Six Sigma is also used to optimize the quality of for example administrative processes.

As final example TPM. Originally this method concentrated on the improvement of machine availability. However, later “availability” was redefined as “being able to produce”. From that moment on, securing the supply of materials also became part of TPM-projects.

As a consequence of this broadening process the overlap between the different methods became bigger and bigger. Today, all methods can therefore be used, at least theoretically, to improve any business process! Even the end result will be more or less the same, independent of which line of approach was originally taken. In general, you always end up with a reduction in inventory, and/or faster throughput times and/or products (or services) of better quality.

It is logical that people give preference to improvement methods which fit in with their own business discipline or nature. For example, persons with a mathematical attitude often will have affinity for Six Sigma, which relies heavily on statistical analyses. Popular among engineers is the TOC, since this theory was developed by a physicist.

As discussed earlier, the development of the improvement methods started from different lines of approach.  So, these methods implicitely make a different assumption about what is the biggest problem in an organization. According to Lean this is to much waste, TOC says it’s a bottleneck in a supply chain or even a mental blockade, and Six Sigma states that varying product quality is the biggest issue. TPM sees the (un)availability of machines as most important, and RCM starts with the assumption that the biggest problem is the consequential loss of machine failures.

Similarities
Much bigger then these differences are the similarities between the different improvement methods:

  1. Every methods improves business processes step-by-step, via a cyclic process which starts with measuring, followed by analyzing and improving. Next, the improvements are secured, this is sometimes called the Control-phase. The idea is to prevent a relapse to the old and inferior method of work. Finally a new improvement cycle starts, see the table cyclic improvement methods and their primary effect.
    There are different names for this improvement cycle, such as Deming-cycle (plan-do-check-act or PDCA) and DMAIC (Define, Measure, Analyze, Improve, Control). For small and quick improvements, implemented by self-managing teams, also the Japanese term Kaizen is popular.

  2. Local optimization is forbidden, if this stands in the way of improving the amount of value added during the complete process which begins with purchasing raw materials, and which ends with the delivery of your finished products. This way of thinking is called process-orientation.

  3. Improvement projects are carried out by multidisciplinary teams. That way, interdepartmental cooperation and process-oriented thinking is stimulated (see also point 2). Project teams often ‘own’ the process that they improve.

  4. Focus on empowerment: Employees are stimulated to come up with – and implement - improvements themselves. Employees should learn to see the difference between wastage and adding value.

  5. The three logistic improvement methods, Lean, TOC en QRM, share the idea that improving throughput is the Holy Grail, see the box logistic improvement methods stimulate flow.
Cyclical process improvement methods and their primary effect
LOGISTICS QUALITY PRODUCTIVITY
Lean  TOC QRM Six Sigma TPM RCM
Reduce waste, increase added value Increase throughput, by exploiting and elevating constraints
in supply chains
Reduce the lead time in the entire route from buying raw materials until the delivery of (made-to-order) products
Reduce the variation
in the quality of products, processes or services
Improve productivity, primarily by way of maximizing the availability of equipment. Prevent those machine failures, which have the most harmful consequences
1. Identify – per product or product family – what the customer values 1. Identify the bottleneck or constraint, that is currently limiting the goal of the organization the most 1. Use Value Stream Mapping to detect waiting times in the entire process from order to delivery 1. Define:
During this first step of the DMAIC-cycle, the company’s mission is evaluated. Who are the customers, what do they want, and how will their expectations be met
1. Define which machines and/or production lines play a crucial role in making the products.
Form multi-disciplinary teams which become responsible for those machines.
1. Locate the most critical parts in the production process, split these up into (as small as possible) maintainable units
2. Use, among others, Value Stream Mapping (VSM) to indicate which processes add value and which don’t. Eliminate eight types of loss.
2. Exploit this bottleneck. Don’t spill any capacity by unnecessary disturbances or lack of supply of materials.
2. Investigate which 'hidden profits' (like less material handling) will be generated if those waiting times are reduced. 2. Measure: 
Per critical-to-quality aspect it is measured if and when customers expectations are met. If not, this is called a 'defect'

2. Organize and clean the workspace, to make visual controlled and efficient production possible (5S). Measure the Overall Equipment Effectiveness (OEE) per machine. 2. Define, per maintainable unit, what the desired function is
3. Ensure that products flow smoothly through the company. Stoppages lead to intermediate stockpiling and thus to waste!
3. Subordinate all other processes to the operation of the bottleneck. The production schedule of the bottleneck should be the drum which gives the rhythm that all other processes should follow 3. Reorganize from functional to cellular, e.g. by forming multidisciplinary work cells. Each of those cells is staffed with three to ten persons, and each cell performs a group of similar tasks 3. Analyze:
Frequently occurring defects and their root causes are identified. In addition, possible improvement solutions are identified.
3. Analyze which improvements can raise the OEE. Detected "hidden losses" should be prevented in the future. 3. Per maintainable unit and per failure event the consequential loss is determined. This is done by a so-called Failure Mode and Effect Analysis (FMEA)
4. Make the production demand-driven. Producing an item that no one has ordered is also a form of waste. 4. Elevate the constraint, for example by investing in an extra machine. 4. Reduce work-in-progress, make the orders and semi- finished products flow from workcell to workcell. One method to control this is the POLCA-system, which is a variant of Kanban. 4. Improve:
The process owner selects the best improvement suggestions and these are implemented.
4. Implement improvements like autonomous, preventive and/or predictive maintenance 4. For each machine part the best maintenance plan is determined, which is the plan which prevents the most harmful failure-related events.
5. Constantly strive for perfection.
Therefore: always return to step 1

5. Return to 1.

Remark: The new bottleneck doesn't necessarely have to be a machine, but could also be the way in which your products are distributed !

5. Return to 1. 5. Control:
Is the result as expected?
If so, protective measures like measurement of KPI's are introduced to prevent a return to the former (worse) state.

Return to
step 1 or 2

5. Control: Is the result as expected?
If so, prevent a return to the former (worse) state, by adapting the new situation as standard.

Return to
step 1 or 2

5. Measure which machine-failures do occur inspite of all counter measures, and determine the consequential loss per event.



Return to
step 1 or 2

All improvement methods share a cyclical approach. Step-by-step improvement is made via a 4 or 5 step process: Plan, Do, Check, Act  or  Define, Measure, Analyze, Improve, Control  © Business-improvement.eu, 2009-2014

Systematic approach
Especially Six Sigma and RCM bring along a very systematic, nearly bureaucratic approach. The advantage of that is however, that improvement opportunities are not likely to be overseen, and that the improvement process is structured. There is however also a drawback, namely the risk of getting a tunnel vision. If that happens, the improvement method can become a purpose in itself.

To prevent this, it is important to keep checking if investments are balanced by benefits. It should for example be checked if an improvement such as faster delivery, is appreciated by your customers. It is also important to think “out-of-the-box” on a regular basis. For example, sometimes it turns out that not the production process, but the product itself is the bottleneck. If the product is redesigned, it might become easier to produce and/or assemble it. 

Same end result
As mentioned before, different improvement methods focus initially on different (assumed) problems within organizations. Does that also mean that it is possible to chose the wrong method?

Theoretically speaking, the answer is “no”, although a clumsy start is possible because another method would have delivered results much faster. A Black Belt in for example Six Sigma can however, in principle, say that “his method” is suited to improve all organizations and all business processes.

This can be explained by the fact that the primary goal of one improvement method is the secondary goal of the other, and vice versa. That is also the reason why the end result will be, in general, the same: a reduction in inventory, faster throughput times, and products of better quality.

Some examples illustrate that.. The primary goal of Six Sigma is quality improvement. However, that includes also on time delivery. To achieve that, the supply chain should be streamlined. This means that also TOC, Lean or QRM tools have to be used.
The other way around, when you start with Lean to improve a supply chain, you will soon find out that defect products are just another form of waste. So, this leads to the application of Six Sigma. One final example: to achieve just-in-time production, one of the starting points of Lean, the machine availability must be sufficient (stable) first. So, this will lead to the application of TPM- or Six Sigma-like tools.

Debates
On the internet there are fierce debates about which improvement method is best, especially if these methods originated from the same line of approach. The logistic methods Lean, TOC and QRM for example have a lot in common, since these methods all focus on reduction of inventory, just-in-time production, increasing flow, and improving supply chains. However, there are subtle distinctions. Lean concentrates on removing wasteful steps to increase the flowrate with which value is created. TOC and QRM both concentrate on increasing the throughput, respectively by finding and maximally exploitung bottlenecks, and by reducing waiting times in the supply chain.
 
Two other methods which have a lot in common are TPM en RCM. These both improve the availability of machines. In TPM, the failure-and-effect-analysis is done less thoroughly, but for the rest TPM is a much broader approach then RCM. With TPM, also the way a machine is operated is for example part of the optimization process.

RCM is in fact the only improvement method which has not crossed the line of the discipline in which it was originally developed, industrial maintenance. Interestingly, broadening of RCM is theoretically possible. One could for example use FMEA to investigate what consequences a certain kind of failure has for a customer which uses the product. FMEA is also used as a tool within Lean- and Six Sigma-projects.

In debates about the usefulness of improvement methods which are further apart, interestingly there is a stronger tendency towards consensus. For example, some consultants combine Lean and Six Sigma into a new method, which they call Lean Six Sigma. In this approach, Lean is used to improve the flow and to remove unnecessary (production) steps, and Six Sigma is used to improve the quality of the remaining production steps.

Clumsy start
As mentioned before, the end result is more or less independent from which improvement method was applied originally.

Nevertheless it is possible to make a clumsy start. Because the methods have a different line of approach, that brings along a different assumption of  what problem is the biggest problem. If this is wastage in a production or supply chain, then Lean, TOC or QRM will render results most quickly. However, if the biggest issue is variation in quality, then Six Sigma is probably more effective.

So it seems reasonable to select a method, on the basis of what should be improved first. If quality improvement is the primary goal, then Six Sigma should be chosen. If the throughput is to low, Lean, TOC, or QRM could be selected.  Finally, if most of your problems seem to be related to the availability of the machinery, then TPM or RCM should be applied, at least in the beginning.

Some methods are more suited to a certain business organization then others. Besides that, the applicability is dependent on the type of production process, see the box “differences in applicability” below

Differences in applicability

Logistic management perspective

The value adding organization
Lean manufacturing
is perfectly suited for flow-driven manufacturing, especially if there are many consecutive steps, because then there are a lot of potential sources of waste to eliminate. Typical examples you will find in the automotive, metal and electronics sectors. However, consecutive processing steps are also found in places like hospitals and even in offices.
Examples: Scania, Eaton, Sara Lee, Omron
Consultancy: List consultancy and support Lean

The unlimited organization
If production capacity or throughput is limited most by logistic problems, then the Theory of Constraints (TOC) might bring relieve.  Look around in your organization: Do you see huge amounts of intermediate stock? The TOC provides the tools to get rid of it.
Initially, the TOC was primarily used to optimize production lines, in case several consecutive steps are needed to make the products.  Later, it turned out that the TOC works even better if the whole supply chain, thus suppliers and business partners included, becomes part of the analysis.  
Examples: Fleetguard Filters (India), St Antonius Hospital (Holland), Tomplast (Slovenia)
Consultancy: List consultancy and support TOC

The cellular organization
When capacity is limited most by logistic problems related to high mix/low volume production, customer-specific production, and/or a highly volatile demand, Quick Response Manufacturing (QRM) becomes an interesting option.  To reduce the lead times the business-organization is reformed from functional to process-oriented. One way to do that is to form multidisciplinary work cells, which each perform a group of similar tasks. The workload and the exchange of materials between the work cells is controlled with for example the POLCA-system.
Examples:  Interfocos (Holland), John Deere (VS), Harley-Davidson, JoyGlobal
Consultancy: List consultancy and support QRM

Quality management perspective
The perfect organization

Six Sigma is often applied when there are products which should meet high quality specifications, which should lie between certain boundaries. These type of products are commonly found in the (semi)processing industry, and in the high tech sector as well.
However, Six Sigma is also used when the quality of administrative processes is important, for example within banks, insurance companies and hospitals. Generally speaking, Six Sigma can be applied when certain characteristics can be made measurable, which are critical to quality (in the eyes of the customer)
Examples: SABIC Innovative Plastics, ABN AMRO (Holland), University Hospital Groningen (Holland), Shell, Philips
Consultancy: List consultancy and support Six Sigma

Maintenance management perspective

The smooth organization / factory
Total Productive Maintenance (TPM) becomes a suitable method, if there is complex (and/or expensive) machinery of which the capacity seems to be insufficient, or if the maintenance costs are racing up.
Examples: Unilever, Heineken, ProfExtru (Holland), Outokumpu (Finland)
Consultancy: List consultancy and support TPM

The reliable factory
When possible machine failures bring along serious safety issues, or when such failures entail high costs, then Reliability Centered Maintenance (RCM) becomes useful (or even inevitable!). RCM is among others applied in the aviation and military industry, within nuclear power stations, by railway companies, and also in the (petro)chemical industry.
Examples: Stork, Nyrstar (Holland)


Steppingstone approach

Finally, one question remains to be answered: Should I improve with one method, or should I immediately apply more then one method?

Using only one method has the advantage of a strong focus. That way, low hanging fruit can be harvested quickly. After that, other improvement methods can be added.

Lean Manufacturing for example is suitable for this “stepping stone” approach. First, Value Stream Mapping is applied, to indentify the biggest problems. Next, these problems are solved with a method which seems best at that moment. In this approach, TOC, QRM, Six Sigma, TPM and RCM are considered as a toolbox, which is subordinated to Lean.

Of course it is also possible to use another method as stepping stone. When for example TOC is chosen as leading method, this has the advantage of an immediate focus on the biggest constraint, which fits well with the development of a business-strategy.

When Six Sigma is chosen as stepping stone, that has the advantage that a lot of attention is given to the wishes of your customers, and it helpes you to built an organisation for improvement with Black and Green Belts as professionals.

The stepping stone approach is advisable, if your company has not much experience with business improvement methods.

This is different for multinationals, because these generally have many years of experience with step-by-step improvement. Notice however, that as a rule also these multinationals started by applying only one improvement method. For example, Unilever started with TPM, Philips with Six Sigma, and Scania with Lean. Later, these companies added the other improvement methods, under the umbrella of the originally chosen method (which remained leading). As a result, multinationals now generally apply a mixture of logistic, quality and productivity oriented improvement methods, e.g. Lean+Six Sigma+TPM. This combined approach is often called World Class Manufacturing of WCM, a term popular for already thirty years to describe several mixed continuous improvement approaches.

WCM as defined today improves business processes from all three perspectives: logistics, quality and productivity. Therefore it is tempting to start immediately with WCM. However, because of the risk of a lack of focus this is not advisable. There is however one exception, namely Lean Six Sigma. This is sometimes successfully used as starting method. It should be noticed however, that generally one of the approaches in Lean Six Sigma is leading, and commonly this is Six Sigma.

Not puristic
A choice for one of the methods does not have to be puristic. After all, a complete and perfect implementation of one method is not the goal. It is only the result that counts: more value added for your customers!

Therefore it is advisable not to become fixated on one of the improvement methods. As discussed already in the stepstone approach, it is often smart to use tools from other methods when appropriate. The manner how such a tool is used then often will not deserve the beauty prize, but why should you want that? It should however be noted that to use a certain improvement-tool it is important that you, and the consultant involved, know the background of the matching improvement method.

No standard approach
Flexibility and remaining to “think-out-of-the-box” are also important for another reason: there is no standard approach to implement an improvement method.

As a rule, it is necessary to develop your own method and production system by trail and error. Whatever method you use, you can’t simply copy the production and improvement system from one company to another. Beware: this also includes the famous Toyota Production System! This system was developed by trial and error within Toyota, so this perfectly suits that car manufacturer alone.

Logistic improvement methods stimulate flow

The logistic improvement methods, Lean manufacturing, The Theory of Constraints (TOC) and Quick Response Manufacturing (QRM) are based on the same ideas, which were first formulated and applied by Henry Ford:
  1. Improving flow should be the primary objective to improve production and/or distribution.
  2. A control system should be in place to balance the flow and to reduce work-in-progress, by exposing rate-limiting steps (so that these can be improved)
Lean, TOC and QRM are different in the manner how the flow should be balanced and how "focused improvement" should be achieved. Which way is best also depends on the product mix your company makes. For example, do you produce large amounts of the same article, or small amounts specified by customers and made to order?
> more about this subject


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