Maximizing Profitability Part 5

In my last entry I explained the basic concept of the TOC Process of On-Going Improvement (POOGI) using the five focusing steps. In Part 5 I want to talk about how to best combine Lean, Six Sigma and TOC to achieve breakthrough profits. The major difference between Lean, Six Sigma and TOC improvement initiatives is simply a matter of focus and leverage. While Lean and Six Sigma implement improvements and measure reductions in inventory (I) and operating expense (OE) as well as increases in throughput (TP), TOC focuses up front on TP and looks for ways to achieve higher and higher levels. The only way to increase TP is to focus on the operation that is limiting it, the constraint. We then use Lean to reduce waste and Six Sigma to reduce variation, but we do so only in the constraint. Let’s look at all three improvement initiatives as if they were stand-alone.

In the figure below we see the classic Lean improvement cycle. You begin by defining value throughout the entire value chain. You then make value flow without interruption, pull to customer demand and then relentlessly pursue perfection. There is no question that a Lean implementation will result in an improved process, but will it result in significant and rapid bottom line improvement?

Now let’s look at the Six Sigma improvement cycle in the figure below. In Step 1 you define problems and customer requirements and set goals. In Step 2, you measure/collect data to validate and further refine problems. Steps 3, 4, and 5 complete the now classic DMAIC cycle of improvement. There is no question that Six Sigma creates a much better process, but how long does a typical Six Sigma project take to complete and have you impacted the bottom line significantly and quickly?

Finally, let’s look at the TOC improvement cycle that I presented in my last blog posting. The figure below lists the five steps, Identify, Exploit, Subordinate, and Elevate. The cyclic arrow indicates that at the completion of the elevate step, you should return to step 1. In my opinion, the TOC cycle of improvement requires the use of improvement tools and techniques that exist within both Lean and Six Sigma.  But having said that, both Lean and Six Sigma need the focusing power of TOC to be successful.  The three of them form a symbiosis of sorts in order to be effective.

So, if you were to combine the best of all three improvement initiatives into a single improvement process, what might this amalgamation look like? Logic would tell you that you would have an improvement process that reduces waste (i.e. through Lean) and variation (i.e. through Six Sigma), but the improvement effort would be focused (i.e. through TOC) on the operation that is constraining throughput. So think about what this improvement methodology might look like and in my next posting I’ll show you my version of this integration and then we’ll begin discussing how it works.