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The pursuit of perfection in the med lad industry.

Senior executives of several medical and wet laboratory companies got together recently to share notes about how to use Lean Six Sigma to improve laboratory processes and maximize efficiency.

The get-together of the MedLab Advisory Council--a laboratories peer group that I organize--included individuals from CBLPath, ATMI and ACMI, among the best companies in the business.

Why Does It Work?

We asked Robert Brooks, of Value Innovations Partners, to talk to us about the topic. According to Brooks, the seeds for Six Sigma were planted at the end of the 1970's when Motorola's communications sales manager, Art Sundry, declared during a meeting, "Our quality stinks!"

The company had found itself unable to compete with Japanese companies partly because of an outdated American definition of quality.

Motorola executives soon turned their attention toward quality improvement and, in 1986, launched its Six Sigma Quality program, a highly successful method of improving products and services.

It was just a couple of years later that Motorola became the first large company to win the United States' Malcolm Baldrige National Quality Award. In the course of two decades, Motorola saved a reported $17 billion using the Six Sigma methodology.

Today, corporations in many industries have used the methodology, including Microsoft, Caterpillar, Merrill Lynch, 3M and Quest Diagnostics. General Electric--one of the early adopters of Six Sigma--saved over $300 million just in its first year.

How Does It Work?

Sigma is a statistical term that measures how far a given process deviates from perfection. Six Sigma is the mathematical formula that signifies a ratio of 3.4 defects per million parts. From a standard yield of 1,300 incorrect surgical operations per million per week, for example, the Six Sigma yield would be a vast improvement at just one incorrect surgical operation in 20 years. It's not clear that Six Sigma quality has ever actually been achieved by a large manufacturing entity on a consistent basis. Motorola reports averaging 30 defects per million--about five and a half Sigma.

Six Sigma is organized around five basic tenets: customer focus, process perspective, continuous improvement, empowerment, and database decision-making. Six Sigma adherents use the acronym DMAIC (Define, Measure, Analyze, Improve and Control) to explain their approach--a systematic and logical approach to improving processes.

Basically, Six Sigma operates on the principal that if you can measure the quantity of defects that result from a given process, you can then systematically determine how to eliminate the defects. Reduced defects mean lower product costs, near-perfect products and services and valuable customer loyalty.

Lean Production

While Six Sigma focuses on reducing product defects, Lean production techniques focus on reducing project cycle time, and on eliminating inefficiency in project cycles. Lean production originated in the automotive industry. Taiichi Ohno and Shigeo Shingo of Toyota devised the system to improve the process of the manufacturing of automobiles. Back then it was called the Toyota Production System. During the 1980's, manufacturing plants across the United States and Europe adopted the methodology. Toyota, Dell Computers, Harley-Davidson and Boeing Aircraft have all utilized Lean.

Lean's focus on improving efficiency by doing away with waste is one of the most effective ways to increase the profitability of any business. Lean identifies seven wastes including over-production, waiting time, transportation, processing, inventory, motion and scrap. According to Brooks, 50 percent or more of all workers' time in the typical hospital, for example, is devoted to non-value-added activities. Almost immediately, Lean improves productivity by a reported 40 percent, and can reduce some space needs by 50 percent.

Putting It Together

Lean Six Sigma combines the two methodologies to improve the quality (Six Sigma) and efficiency (Lean) of production and service offerings, and to reduce operation costs. According to George Group, a global leader in creating Lean Six Sigma operations for service and product companies including Xerox, Caterpillar, Eli Lilly, Alcan, Best Buy, Washington Mutual, GEICO and BMW, Lean Six Sigma is especially useful for service industries because so much of their money is tied up in operations. In fact, the George Group's analysis reveals that a whopping 30-80 percent of the costs in a service business are pure waste.

Eliminating waste obviously reduce costs. It also allows businesses to become more efficient and much more responsive to its customers' needs. This in the end improves the bottom line.

One MedLab Council member--a medical equipment manufacturer--recently began experimenting with Lean by installing a Kanban board for an assembly line where employees select inventoried components to build parts of a product. The Kanban board, a low-tech visual display of inventory and work in progress, has dramatically improved the process.

On the assembly line, employees now know what their next assignment is without waiting for direction from a supervisor. Additionally, everyone on the line knows the status of all jobs, and as a result, inventory and waiting times have been reduced. With the increased information available to them, employees can be more proactive.

The results so far have included greater staff satisfaction, reduced inventory, a shorter production cycle and lower costs. Results like this can benefit every business.
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Title Annotation:Commercial Sales & Leasing
Author:Manley, Marisa
Publication:Real Estate Weekly
Geographic Code:1USA
Date:May 3, 2006
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