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Lean Six Sigma and Service vs Manufacturing

When I first started working with TQM in the phone company, many people said it wouldn't work because TQM works for manufacturing, not services. I've heard many people say the same thing about Six Sigma. Nothing could be further from the truth. This is just a convenient way for crafty employees to dodge learning the improvement strategies.

What are Services?
According to Peter Pande, et. al., the answer is:
Sales, finance, marketing, procurement, customer support, logistics, IT, or HR in any organization, from a steel company to a bank to a retail store. A few of the other words used to describe these activities include: transactional, commercial, nontechnical, support, and administration. These business functions have tried to hide from TQM and Six Sigma and many have been successful at flying under the "radar."

What is Manufacturing?
Those activities relating to the development and production of tangible products. Other terms used to describe these are "plant floor," "production," "a fab," and sometimes "engineering" and "product development." Driven by the marketplace, most manufacturing functions have had to embrace improvement methodologies and SPC just to survive.

I have found that, at an abstract level, there's no real difference between a service process and a manufacturing one. They both encounter delays, defects, 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. When we focus on finding the few key measures of defects, delay, and cost that are hampering profits and productivity, breakthrough improvements are easy.

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 billing errors. Even a great manufacturing company with IT problems can suffer tremendously from the service side of the business.

In a hospital, we might focus on medication errors. We might focus on admission, diagnosis, treatment, or discharge delays. We might focus on the costs of medical errors that result in longer hospital stays.

Every aspect of your business follows a process; it may be a highly refined process or an error-prone, ad hoc one. Regardless of whether it's service or manufacturing, there are always defects in the process steps, delays between steps, and increased costs involved in reworking or scrapping some work product.

So, if you're a good manufacturing company, but need to improve your ordering, fulfilling and billing, use Six Sigma to simplify and streamline your "service" components. If you're a good service company, find some key defects, delays, or costs in which to make breakthrough improvements that will differentiate you from all your competitors.