ADAPTING LEAN SIX SIGMA
Lean Six Sigma is a process improvement practice most commonly used in large scale manufacturing and health care industries to improve performance and efficiency. The goal of Lean Six Sigma is to improve efficiency, consistency, and focus on value added elements. Over the years, Lean Six Sigma has evolved from being primarily a manufacturing practice to serving more service based industries such as healthcare and government. However, Lean Six Sigma has yet to be implemented in the non profit sector. This technical report outlines the importance of identifying the unique characteristics of the organization you wish to improve and then adapting lean six sigma techniques accordingly. This report will specifically look at the challenges faced by a non profit organization, GRID Alternatives, and evaluate how Lean Six Sigma techniques can be adapted to improve their warehouse procedures and conditions. ADAPTING LEAN SIX SIGMA FOR A NON PROFIT ORGANIZATION 5 What is Lean Six Sigma? Lean Six Sigma is a methodology that focuses on continuous process improvement. Lean Six Sigma is a combination of Lean Manufacturing and Six Sigma. Lean Manufacturing focuses on people involvement, the business philosophy, doing the right thing, creating a more predictable process, and most importantly reducing waste. The eight types of waste in Lean are defects, overproduction, waiting, neglecting resources, transportation, inventory, motion, and extra processing. The goal is to develop "eyes for waste" so that you can recognize and eliminate the unnecessary or non value added steps in a process. Six Sigma focuses on applied statistics, tools to improve business processes, creating a more capable process, and reducing process variation. Six Sigma really focuses on the numbers, the statistical definition of Six Sigma is striving for a process to be 99.9 percent capable and producing only 3.4 defects per million opportunities (DPMO) Six Sigma is about reducing the number of defects and errors while simultaneously lowering costs, saving time, and improving customer satisfaction. Lean Manufacturing and Six Sigma together are much more powerful. Lean Six Sigma is defined as a "well structured theory based methodology that improves performance, develops effective leadership, customer satisfaction and bottom line results" (Zhang) Lean Six Sigma is very project based and strives for continuous improvement. Lean Six Sigma originally came from manufacturing industries and has now found its way to services. "Lean Six Sigma: A Literature Review" mentions that in addition to manufacturing Lean Six Sigma has also become very common in healthcare, since defects and ADAPTING LEAN SIX SIGMA FOR A NON PROFIT ORGANIZATION 6 errors are even less tolerable in this industry. Lean Six Sigma is not only in healthcare and manufacturing but is also seen in government, the military, and financial services. Literature reveals that Lean Six Sigma is beneficial for different industries with little modifications per industry requirement. In addition, it has been stated that Lean Six Sigma is "equally beneficial for manufacturing or services concerns in large or small scale organizations" (Zhang) These finding come to show how applicable Lean Six Sigma can be in different organizations whether it's based on type of industry or size of the organization. However, it is still suggested to continue research for implementing Lean Six Sigma where financial capability is a hurdle (Zhang) which brings our attention to a specific industry that needs more Lean Six Sigma implementation research: the nonprofit sector. Nonprofit Case Studies Currently, there are very few literary works that examine the implementation of Lean Six Sigma in the nonprofit sector. There is a case study by Chen Yang Cheng and Pu Yuan Chang from Tunghai University in Taichung, Taiwan that examined how to implement Lean Six Sigma in a non profit organization that provided wheelchairs, walkers, and various assistive devices for people with disabilities. Their work is titled "Implementation of the Lean Six Sigma Framework in Non profit Organisations: A Case Study." Cheng and Chang mention that prior to their case study, which took place in 2012, the Lean Six Sigma process had not yet been applied to non profit organizations. Their case study demonstrates that they were able to improve efficiency by reducing transfer and delay times, and raising process cycle efficiency by 27% and 28% (Cheng, Chang) However, at the end of their case study, they emphasizes the importance of recognizing the unique characteristics of the non profit organization you wish to improve stating that it can "provide a reference to improve the ADAPTING LEAN SIX SIGMA FOR A NON PROFIT ORGANIZATION 7 efficiency of non profit organizations' services." This case study reveals the importance of recognizing the culture and structure of the organization you plan to work with because it can reveal certain queues that may help improve different processes' within the organization. Another relevant literary source is "The Role of Process Improvement in the Nonprofit Organization" by Vikki C. Lassiter, a master student from the University of Pennsylvania. This thesis case study is different from Cheng and Chang's because it focuses on the application of the process improvement concepts in general and then applies those specific principles to nonprofit organizations. Process improvement in general is different from Lean Six Sigma because as Lassiter states Lean Six Sigma methods and tools are "somewhat limiting, since they tend to examine only individual processes rather than integrating these processes into an examination of the complete system at work within an organization." Lassiter looks at process improvement in non profit organizations as a whole and assesses the understanding of process improvement culture in an organization as well as overall organizational growth. These literary works support the purpose of this technical report demonstrating that there is a need for more Lean Six Sigma case studies in the nonprofit sector. This report also recognizes the importance of paying close attention to the unique characteristics of the nonprofit organization services' and processes because they provide queues and references for not only improving process performance and efficiency but also help in creating a culture of understanding process improvement in the organization. This report is a documentation of the implementation of Lean Six Sigma process improvement tools at GRID Alternatives' Warehouse, and the results and recommendations for adapting Lean Six Sigma for their specific needs. However, first it is important to ADAPTING LEAN SIX SIGMA FOR A NON PROFIT ORGANIZATION 8 understand the type of organization that GRID Alternatives, what makes it unique and some challenges this organization faces. What is a Nonprofit? A non profit is an organization that has no owner, stockholder or trustee that shares in the profits or losses of the organization. Nonprofits exist not to make revenue but to promote a mission that generally enhances community welfare (Lassiter) GRID Alternatives is a nonprofit solar organization that provide solar electric systems for low income families. The GRID Alternatives' mission is to "make renewable energy technology and training available to underserved communities" (GRID Alternatives) The GRID Alternatives goal is not to make money but to provide a service for low income families. By installing solar, GRID Alternatives is not only reducing our carbon footprint, but is also providing families with energy savings and up to 10 volunteers per install with free solar job training (Non profit group) Common Nonprofit Challenges Nonprofit organizations are faced with a variety of challenges on a day to day basis. Some of these challenges include a rapidly growing demand for their services, pressures to incorporate a fee for the services being provided, competition from for profit organizations, and many more that require a consistent evaluation of ongoing organization effectiveness (Lassiter) GRID Alternatives for instance constantly faces all of these challenges. With the changing economy more and more homeowners are meeting the low income requirements and people are seeking job training opportunities. Therefore there is an increasing in demand for GRID Alternatives services. ADAPTING LEAN SIX SIGMA FOR A NON PROFIT ORGANIZATION 9 In addition, to the growing demand for their services, GRID Alternatives also faces the pressure of charging a service fee. According to Energy Informative, solar electric systems are not cheap and states that "a residential electric systems cost upwards of thirty thousand dollars" (Non profit group) In order to help finance the expenses of these solar electric systems GRID Alternatives has made an effort to partner with Third Party Owners (TPOs) to help cover the expenses. GRID Alternatives has also recently incorporated a homeowner contribution fee to help the program continue its efforts. Homeowners are asked to contribute two cents per kilowatt of energy their electric system generates every month. On average a homeowners pay about eight dollars a month to help the program continue its mission to providing energy savings and job training for underserved communities (Non profit group) Lastly, GRID Alternatives is also facing more and more competition from for profit solar providers. Today, there are numerous solar company providers that sell and rent residential solar electric systems to homeowners, some of these companies include Solar City, Sun Run, Vivent Solar, and REC Solar. These companies are competitors to GRID Alternatives because they are selling or renting solar to homeowners who may have qualified for their services. To make matters worse, because they are for profit companies they have more money to spend on marketing and advertising. Therefore, GRID Alternatives struggle