Page 32 - Lean six sigma demystified

Chapter 1 What iS Lean Six Sigm a ? 11

to small manufacturing shops that are doing well, meeting the needs of
companies like Toyota and Honda who continue to manufacture in the
United States.
Ninety-nine percent of manufacturing companies are small businesses. In
these companies, only 20 percent of the employees are actually engaged in
manufacturing; the other 80 percent work in backroom service functions like
purchasing, payroll, accounts receivable, accounts payable, and so on. They will
continue to need quality improvement and control to succeed in a global mar-
ketplace. But hardly a week goes by that some service company manager
doesn’t call to ask whether Six Sigma applies to service businesses. The answer
is Of course! Every business, regardless of size, suffers from three profit-eating
problems that can be solved with Six Sigma methods and tools: delay, defects, and
deviation.
Although manufacturing businesses had to embrace quality to survive, ser-
vice businesses have yet to realize that they will need to embrace quality. The same
is true of information technology professionals (which is where I see our econ-
omy headed over the long term).
We’re facing the end of manufacturing, and the explosion of services and
information technologies (IT) will be the core of our economy. We can fight the
change or lead it. It’s up to us.

Manufacturing and Service

At an abstract level there’s no real difference between a service process and a
manufacturing one. They both encounter unnecessary delays, defects, deviation,
and costs. One may produce purchase orders instead of computers, bills instead
of brake liners, but they all take time, cost money, create defects, cause rework,
and create waste.
In an IT department, we might focus on downtime or transaction delays. We
might focus on manual rework of order errors or the costs of fixing billing
errors. Even a great manufacturing company can suffer tremendously from IT
problems.
In a hospital, we might focus on medication errors. We might focus on varia-
tion in admission, diagnosis, treatment, or discharge delays. We might focus on
the costs of medical errors that result in longer hospital stays.
In a hospital, the clinical side is only one element. Defects and delays in
issuing bills and insurance claims can cost millions of dollars. This is true in
any company, from a family-owned restaurant to a Fortune 500 company.
Incorrect bills, missing charges, incorrect purchase orders, overpayment,