# Design for Lean Six Sigma Application in a Family Run Multi-generational Micro Enterprise – A Case Study

John O’shanahan, Olivia Mcdermott, John Noonan

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John O’shanahan, Olivia Mcdermott, John Noonan. Design for Lean Six Sigma Application in a Family Run Multi-generational Micro Enterprise – A Case Study. 8th European Lean Educator Conference (ELEC), Nov 2022, Galway, Ireland. pp.318-328, 10.1007/978-3-031-25741-4_27. hal-04735687

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# Design for Lean Six Sigma application in a Family run Multi-generational Micro Enterprise – A Case Study

John O'Shanahan¹*, Olivia McDermott², and John Noonan³

¹ Lean BPI, Ireland

² University of Galway, Ireland

³ University of Limerick, Ireland

*johnoshanahan@leanbpi.ie

**Abstract.** Existing research emphasises limited success rates for Lean implementation in Small and Medium Sized Organisations. The objective of this research was to test and validate the applicability of Design for Lean Six Sigma methodology in a case study within a micro enterprise. The DFLSS model of Define-Measure-Explore-Develop and Implement was utilised to redesign a new order entry process within the case study organisation. The results confirmed that utilising Define for Lean Six Sigma and the voice of the customer enabled a new order entry design that improved productivity, reduced nonvalue add steps and reduced order turnaround times while increasing revenue. The study demonstrates the applicability of Lean to smaller organisations and the effective application of the Define for Lean Six Sigma methodology.

**Keywords:** ME, DMEDI, Critical Success Factors, Lean implementation; Design for Lean Six Sigma, Micro enterprises

## 1 Introduction

Small and Medium Enterprises (SMEs) which includes micro enterprises (ME's), which are family-run, are a vital sector of the Irish economy. They contribute significantly to Ireland's employment and Gross domestic product (GDP), making up over 90% of indigenous companies [1]. These businesses face various challenges, with many failures in the second generation (Groysberg and Bell, 2014). Stakeholders of family businesses must collaborate and exploit all available resources to maximise opportunities for multi-generational success. For enterprises to survive, they need to constantly adapt and improve to serve the needs of their customers and maintain competitiveness. Lean philosophy supports business improvement efforts by continuously identifying waste in processes and removing the identified waste from the system [2]. Since 2015, the Irish Local Enterprise Offices (LEOs), as part of their suite of business supports, have been running a successful Lean for Micro programme [3]. Microenterprises, businesses employing less than 10 people and with a turnover of fewer than two million euros [4], can benefit from the programme by adopting Lean business principles in their organisations to become more competitive [3]. Delivery of these programmes is through accredited consultants. They help form a network of small, often specialised businesses and promote economic growth. SME suppliers need to provide high-quality products or services at competitive prices to survive. Adopting a Lean philosophy is beneficial to achieving this goal [5]. While the literature on Lean implementation in larger organisations has been extensive, the literature on Lean implementation in ME's has not been as thorough [6]. Despite Lean's reputation for vastly improving company operations, for the most part, only large companies have successfully implemented Lean and are reaping the benefits [7]. Lean adoption challenges in small businesses are unique and different from those faced by large corporations, according to research [8]. Due to many critical factors affecting Lean implementation, MEs lag behind large organisations in Lean implementation [9].

The objective of this research was to test the use of Lean methodology within a case study approach regarding the successful adoption of Lean practices within a ME. The case study was conducted through a LEO Lean for Micro consulting assignment. While engaged in Lean implementation, the researcher evaluated the use of Lean methods to achieve business results.

## 2. Literature Review

### 2.1 SME & Micro Enterprises in context
While Lean is an established methodology for improving business performance, it is not a foregone conclusion that every Micro Business embarking on a Lean programme will succeed in its implementation and realise improved business performance [9].

SMEs are defined as companies with a maximum of 250 employees and an annual turnover of fewer than 50 million euros. SMEs are further broken down into small enterprises (less than 50 staff members and under ten million Euro turnover) and Micro-enterprises (less than 10 staff and under two million Euro turnover)[10].

Although these companies individually employ small numbers of workers, they collectively contribute to employment numbers and GDP. However, although the contribution Micro-enterprises make to economies worldwide, from a research perspective, the Micro Business sector is often overlooked[1].

The principle of Lean management is to eliminate waste to improve further the efficiency and quality of the business [11]. Lean production manufactures a wide range of products at lower costs and better quality with less input than traditional mass production. In their bestselling book, 'Lean Thinking' Womack and Jones define the five Lean principles (Value, Value Stream, Flow, Pull and Perfection) and suggest strategies for their implementation [12]. Organisations in many sectors have witnessed the positive impact that Lean can have on operational, financial, social, and environmental performance[13].

Micro-enterprises account for 91.8% of European enterprises, small-enterprises account for 6.9%, medium enterprises (employing 50 to 249 people) account for 1.1%, and large enterprises (employing 250 or more people) make up the remaining 0.2%. There were an estimated 22.6 million small and medium-sized enterprises (SMEs) in the European Union in 2021, most of which were micro-sized firms [14]. The Micro-business sector is crucial to future productivity and employment growth[5]. However, we know little about these firms because they are often excluded from national and international surveys[15].

Within the E.U., 60% of all businesses are family businesses, their role in the E.U. economy is significant, no matter how big or small they are [14]. Family-owned businesses, where a family supplies a significant proportion of the enterprise's senior management and effectively controls the business' [16], account for a high percentage of employment, revenues, and GDP in many countries. Previous research suggests that 30% of family businesses survive past the first generation and that many small businesses fail shortly after the second generation takes control of the business [17]. This is a problem for business owners, their employees, society, and economies. In family-owned MEs, the owners can initiate change and ensure that the decisions are implemented to achieve the desired results; ownership gives them the power and freedom to explore and renew the business (Dolz et al., 2019). Nelson et al. [5] found that MEs have a high proportion of owner-managers and thus can influence Lean adoption more expediently and successfully in their businesses. Therefore, MEs' importance to the business infrastructure is greater than may be obvious at first glance [18].

## 2.2 Lean implementation

Readiness factors are defined as 'essential ingredients which will increase the probability of success of any CI initiative before an organisation invests its resources heavily on the initiative' [19]. Nelson et al. [5] highlighted that in Lean deployment in M.E. is that resource issues such as time for training and time to implement Lean changes were cited as a challenge initially by the M.E.s; it was found that the changes once made and at a steady pace aided consensus, teamwork and engagement.

Different methodologies can be selected for Lean implementation. For example, lean has been incorporated with Six Sigma's DMAIC approach to reduce waste and variation by following the DMAIC problem-solving methodology to improve existing processes[20].

Design for Lean Six Sigma(DFSS) is a data-driven quality strategy for designing or re-designing a product or service from the ground up[21]. DFSS is an approach that improves quality by re-designing the product or service using the customer's voice or customer requirements[22]. Table 1 is adapted from the literature related to DFLSS structured methodologies. DFLSS can be utilised to ensure design quality and predictability during the early design phases of a process, and the approach employs a structured integrated product development methodology and a comprehensive set of robust tools to drive product quality, innovation, faster time to market, and lower product costs[23]. An example of different DFLSS methodologies is shown in Table 1.
<table><caption>Table 1 DFLSS Methodologies described in the literature</caption><tr><td>DMAIC</td><td>Define, Measure, Analyse, Improve and Control</td><td></td></tr><tr><td>DMADV</td><td>Define, Measure, Analyse, Design, and Verify</td><td>[20, 21, 22, 23, 24]</td></tr><tr><td>DMADOV</td><td>Design, Measure, Analyse, Design, Optimise, and Verify</td><td>[23, 25, 26, 26-28]</td></tr><tr><td>DMCDOV</td><td>Define, Measure, Characterise, Design, Optimise, and Verify</td><td></td></tr><tr><td>DCOV</td><td>Define, Characterise, Optimise, and Verify</td><td></td></tr><tr><td>DCCDI</td><td>Define, Customer, Concept, Design, and Implement</td><td></td></tr><tr><td>DMEDI</td><td>Define, Measure, Explore, Develop, and Implement</td><td></td></tr><tr><td>DMADIC</td><td>Define, Measure, Analyse, Design, Implement, and Control</td><td></td></tr><tr><td>IDOV</td><td>Identify, Design, Optimise, and Verify</td><td></td></tr><tr><td>RCI</td><td>Define and Develop Requirements, Define and Develop Concepts, and Define and Develop Improvements</td><td></td></tr></table>

### 3. Methodology

A case study approach was used and within that a DFLSS methodology. As part of the DFSS methodology, the DMEDI approach was utilised. DMEDI is "a creative approach to designing new robust processes, products and services [29]. Thus the difference between DMAIC and DMEDI is that DMAIC examines processes already in place, and DMEDI helps put a new process in place [30].

The case study methodology was applied because it enables more insight into the phenomenon under investigation [31]. In addition, the case study approach allows for the answer to the "how" and "why" questions as well as the recognition of contextual circumstances [32].

The Case study company, JFH Jewels is an online jewelry wholesaler based in Ireland. The business was in existence as a family run business for over 30 years. They had recently acquired a pearl jewellery manufacturing business as part of their growth strategy. Unfortunately, the acquired business had inefficient legacy systems. The Managing Director of JFH Jewels recognised the need to upgrade these inefficient processes and approached the Local Enterprise Office (LEO) for support. The LEO recommendation for JFH Jewels was to enrol in the Lean for Micro Programme, run by the LEO with support from Enterprise Ireland. Data for the Case Study was collected from interviews, existing company documentation, direct observation, participant observation, and physical artifacts.

Following the formation of the project team, an initial workshop was conducted, and the order entry process within the case study organisation was selected for improvement. The order workflow process was deemed fragmented and inefficient; it was agreed to develop a new order workflow process. The development of a stock management system was also included in the project scope, as there was no existing stock control system. DMEDI was selected as a creative approach to designing new robust processes[22].
## 4. Results

Utilising DMEDI methodology as outlined in Table 2, various Lean Six Sigma tools or techniques were utilised to re-design the case study organisation's order entry process. First, the order entry process was defined and mapped, and data was collected around its current performance. Next, a Critical to Quality (CTQ) tree was utilised to establish internal and external customer needs. Subsequently, Quality Function Deployment (QFD) was utilised to design a new and improved process to meet the order entry process VOC and eliminate NVA waste from the process.

<table><caption>Table 2- Overview of DMEDI Methodology – Tools/Techniques</caption><thead><tr><th>DMEDI</th><th>Phase Deliverable</th><th>Tools / Technique</th><th>Application of Tools / Technique</th></tr></thead><tbody><tr><td rowspan="2">Define</td><td rowspan="2">Define the purpose, structure, goals, and value. Identify benefits/challenges/risks.</td><td>SIPOC</td><td>Agree project team and activities; scope confirmed to cover from materials to finished orders dispatch.</td></tr><tr><td>Project Charter</td><td>The Main goals were to implement lean systems in the order entry, production operations, stock control and invoicing processes.</td></tr><tr><td rowspan="2">Measure</td><td rowspan="2">Understand Internal and External customer requirements</td><td>Critical To Quality (CTQ) Tree</td><td>Identify the needs of the internal customers (admin, operations and reps) and external customers (clients); these needs were translated into measurable process requirements. For example time to process an order in the field</td></tr><tr><td>Voice of the Customer (VOC) and Quality Function Deployment (QFD)</td><td>Design factors such as ease of use, speed of use, reliability, simplicity and scalability were identified with these tools</td></tr><tr><td rowspan="3">Explore</td><td rowspan="3">Explore a conceptual design of the new sales order workflow</td><td>Brastorming / Affinity Diagram</td><td>At this stage, alternative solutions such as Microsoft forms, Jot forms, google sheets, web databases and custom systems were discussed.</td></tr><tr><td>Kaizen event</td><td>An outcome of the Kaizen event was to agree on the best coding system for finished products and raw materials stocks</td></tr><tr><td>Pugh Matrix</td><td>The Mobile app solution for order entry was selected using the Pugh Matrix.</td></tr><tr><td rowspan="2">Develop</td><td rowspan="2">Develop a comprehensive plan on how to organise and implement the new sales order workflow</td><td>Develop User Story</td><td>The user story explained the order entry process, how ops processed the order, how the system handled automatic raw material stock control and how the invoices were generated</td></tr><tr><td>FMEA Analysis</td><td>The FMEA was important to consider the impact of failure before rolling out the process; the main concerns were around the technology's robustness.</td></tr></tbody></table>
<table><tr><td></td><td>Prototyping</td><td>Built a working prototype in google sheets to demonstrate flow and provide users with an opportunity to identify changes needed</td></tr><tr><td rowspan="3">Implement</td><td rowspan="3">Implement the new process, validate the design, and establish control</td><td>Pilot</td><td>The pilots were run in phases, starting with sales, then ops and finishing with the finance side</td></tr><tr><td>Control Plan</td><td>All data recorded with zero tolerance for discrepancies, the system was designed to be 100% effective</td></tr><tr><td>Post Implementation</td><td>Ongoing review of the workflow performance identified improvement opportunities; for example, the customer selection process was revised 3 times based on the post-implementation review process</td></tr></table>

JFH halted production activities temporarily so that workers could absorb the new learnings implemented. During the implementation, the M.D. and office manager enrolled on a management development programme, which involved financial outlay and management time. New manufacturing equipment was invested in, and a barcode printer was required to integrate with the newly designed Sales rep app; this was purchased and allowed JFH jewels to take full advantage of the sales rep app. The new stock management system reduced inventory waste. The ordering app was integrated into the accounting software to cut out data entry steps and provide more detailed data for business development.

As a result of the newly designed and implemented order entry process, there was a reduction in order lead time from 48 hours to 9.5 hours, a reduction in order processing time from 20 to 10 mins, a productivity improvement of 9.1 orders per hour inputted from a previous 7 orders per hour (Figure 1). Staff numbers increased in the business from 3 to 5 full-time members as there was less non-value add work to be carried out and thus more opportunities to deploy staff into value add roles and increase sales. The invoice process time went from 3 minutes to 10 seconds. Revenue increased by 70% due to the new, more efficient processes.

<figure><img src="image_3.png" /><figcaption>Figure 1: KPI performance before versus after the new Lean process design</figcaption></figure>
**5. Discussion**

Leadership and management, finance, organisational culture, and skills and expertise are the essential Critical Success factors for SMEs to adopt lean manufacturing. This study had a strong leadership ethos and committed management support from the outset. This is because implementing an idea within any organisation is founded on leadership and management commitment [33].

Financial Capacity was found to be a critical success factor in the DFLSS Lean implementation within the case study organisation as it involves acquiring new skills, investing in modern technologies and engaging with business advisers to help with the change process. The JFH jewels business invested in a training programme with the Local Enterprise Office, followed by work on the Lean implementation project. Funds were made available to develop technical solutions and to provide staff training.
Achanga et al. [33] were one of the few studies explicitly identifying the need for financial capability in SMEs as a critical success factor. Although other studies have discussed how Large enterprises (L.E.) can have better success with Lean deployment due to larger financial resources, people resources, training resources and allocation of employees to work on projects, all of which costs money in terms of labour costs [8, 34, 35].

Lean manufacturing implementation in MEs can be problematic. Typically, MEs employ staff with low skill levels and do not promote continuous learning and skill development [33]. The research found JFH employees to be engaged in the Lean implementation process. This was demonstrated by the interest in the initial workshops and their engagement with project deliverables. The employees acquired new skills in workplace organisation, brainstorming, and visual management. They became skilled in using the technical tools employed in the Lean implementation, Dropbox, Evernote, Google Suite and Snagit, and in understanding how to operate the new Lean management system. A consistent vision and alignment of the Lean program with strategy is an explicit prerequisite for a Lean enterprise [36]. As part of their strategy, JFH management identified an opportunity to differentiate from competitors by being strategic and offering a 2-day lead time on hand-made jewellery; the employees embraced learning new skills and techniques to achieve this service level and provide JFH with a competitive advantage.

Utilising the DFLSS methodology, the M.D. communicated the company strategy and vision to the team members. By outlining the reason for the change and design of the new order entry process, the employees were made aware of the positive impact of Lean implementation and were more likely to support the change process. Lean's success depends on those who implement everyday practices[19]. The DFLSS methodology promoted employee collaboration on improvement plans and supported their input to new design layouts. In addition, the methodology aided employee involvement in continuous improvement, goal setting, problem-solving, and other daily management issues.

The researchers observed that the employees contributed suggestions for improvements which were taken on board and implemented. For example, the employees suggested an improved bar code printing system, which reduced rework in the process and freed employees to work on other tasks. The structured methodology aided employee involvement [37, 38]. The DFLSS methodology enabled the design of a new process with integration of the voice of the customer, both internal and external, as well as the designing of suitable KPIs to measure the design effectiveness. This experience of the case study organisation demonstrated how DFLSS could eliminate waste and improve value add processes while integrating the VOC [23].

**6. Conclusion**

This research met the research objectives to demonstrate how DFLSS methods can be utilised to implement Lean processes within a family-run ME. Thus the novelty of this research is that it demonstrates that Lean and DFLSS methods can be adopted by any organisation pursuing the design and implementation of an operational improvement. This research fulfils a gap in practical DFLSS case study applications in the ME arena. A limitation is that the research only applied to one organisation. Future research opportunities would be to carry out a longitudinal study on this case study organisation as well as to other similar-sized organisations undergoing Lean implementation.
This research can be leveraged by ME-type organisations considering Lean deployment and by
Enterprise Ireland's LEOs to demonstrate the importance of the Lean for Micro program.

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