What it means
Lean focuses on speed and flow, asking which steps add value and which are waste. Six Sigma focuses on quality, using statistics to cut defects until a process is almost always right.
Combining the two means a process becomes both faster and more accurate, which is why the method is popular in finance, where late and wrong figures are both costly. Most projects follow the DMAIC cycle, which stands for define, measure, analyse, improve and control.
The team defines the problem and the customer need in writing, measures current performance with real data, analyses the root causes, tests and implements improvements, and puts controls in place so the gains last. Each step has tools, such as process maps, cause-and-effect diagrams and control charts.
People trained in the method hold coloured belts that show their level. A yellow or green belt may work on projects part-time, a black belt leads larger projects full-time and a master black belt coaches others.
Many companies require a project to show a measurable financial saving, which keeps the effort tied to business results. A central measure is defects per million opportunities, or DPMO, which allows different processes to be compared on the same scale.
A sigma level translates that rate into a single number, and a process at six sigma has only a handful of defects per million opportunities. Few business processes need to reach that level, so the target depends on the cost of an error.
In finance teams, typical projects include shortening the month-end close, reducing invoice errors, speeding up collections and cutting the number of manual journal corrections. A nuance is that the statistical tools suit processes with large volumes of repeatable work and are less useful for one-off decisions.
Managers should also remember that the method can feel heavy for small problems, where a quick fix may be enough. A good sponsor therefore asks whether the likely saving justifies the time before approving a project.
Used where they fit, they give an objective record of what changed and what it was worth.
In practice
Real-world examples.
Example
A bank's loan operations team finds that 8% of applications need to be reworked because of missing documents, which delays lending income and frustrates customers. A Lean Six Sigma project introduces a checklist at the first step. Rework falls to 2%, and processing time drops by two days.
Example
A manufacturer of medical devices tracks defects per million parts and traces most of them to one machine setting. The team standardises the setting, trains the operators and adds a monitoring chart so that any drift is spotted early. Scrap costs fall by $180,000 a year.
Example
A shared services centre aims to close the monthly books in 5 days rather than 9. It maps each step, removes duplicate reconciliations and automates routine journals. The finance director reports faster results to the board and more time for analysis.
Formula
Calculation
DPMO = defects / (units x opportunities per unit) x 1,000,000
An accounts payable team processes 2,000 invoices in a month, and each invoice has 5 opportunities for error, such as wrong amount, wrong supplier, missing approval, wrong coding and wrong date. The team finds 50 defects. DPMO = 50 / (2,000 x 5) x 1,000,000 = 50 / 10,000 x 1,000,000 = 5,000. The process yield is 100% - (5,000 / 1,000,000 x 100%) = 99.5%, which corresponds to a sigma level of roughly 4 on the standard conversion table.Case study
Seen in the real world.
Summit Billing Solutions is an illustrative, fictional company whose customers complained about invoice errors. The finance director launched a Lean Six Sigma project, and the team measured 120 errors in 4,000 invoices, each with 6 opportunities for error, giving 5,000 defects per million opportunities.
Analysis showed that two causes, outdated customer addresses and manual rate entry, accounted for most errors. The team cleaned the customer data and linked the rate table directly to the billing system, which cut errors to 24 per 4,000 invoices, or 1,000 DPMO. Disputed invoices fell and the finance team saved an illustrative $90,000 a year in rework and credit notes.
Watch out
Common mistakes.
- Using the tools on a problem that has not been measured, when the method depends on facts and data rather than opinion.
- Declaring success when the improvement is made, without control measures to stop the process from slipping back.
- Treating belts and certificates as the goal, when the real goal is a measurable improvement in cost, quality or speed.
Questions
People also ask.
What does DMAIC stand for?
It stands for define, measure, analyse, improve and control, the five stages that most Lean Six Sigma projects follow.
How does Lean Six Sigma differ from Six Sigma on its own?
Six Sigma concentrates on reducing errors and variation, while Lean Six Sigma adds the removal of waste and delay to get faster flow as well.
Can small companies use it?
Yes, because the core steps can be applied to a single process with simple tools, without a large team or expensive software.
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