Lean and Six Sigma Create Valuable Synergies for RFID Adopters

By Kurt Hozak

Here's how to achieve the greatest return from your company's RFID investment, and facilitate continuous improvement.

Those who use and study RFID frequently stress the importance of utilizing the technology to enable value-adding process changes (for example, see Managerial Guidance for Applying RFID in the Tourism Industry), but some businesses find it difficult to identify opportunities for improvement. One way overcome that problem is to apply lean and Six Sigma principles to reap greater benefits from RFID on an ongoing basis.

The lean implementation at the GM-Toyota New United Motor Manufacturing Inc. (NUMMI) automotive plant in Fremont, Calif.—which operated from 1984 until closing in 2010—illustrates many of the process-improvement principles that are relevant for getting the most out of RFID investments. Paul Adler, a professor at the University of Southern California, described NUMMI's history and key characteristics in the articles Time-and-Motion Regained and Flexibility Versus Efficiency? A Case Study of Model Changeovers in the Toyota Production System.

General Motors originally operated the plant using a non-lean approach. "Over the years," Adler wrote, "GM-Fremont came to be what one manager called 'the worst plant in the world.' Productivity was among the lowest of any GM plant," and "quality was abysmal." GM initially closed the plant in 1982, but when Toyota wanted to learn about making cars in the United States and GM wanted to learn about Toyota's production system (considered by many to be the epitome of lean manufacturing), they formed the NUMMI joint venture and reopened the plant in 1984, using a lean approach. By 1986, productivity and quality were higher than at any other GM facility.

Adler identified trust and training as the critical contextual factors behind the success of NUMMI's lean efforts. Mutual trust between management and assembly workers was vital, because instead of relying primarily on methods engineers to drive continuous improvement, NUMMI asked the assembly workers to take much greater responsibility.

To aid in creating that trust, Adler noted, "NUMMI's culture placed a high premium on consistency—on 'walking the talk.'" As an example of this, the plant's policies, such as not laying off workers except under existentially dire circumstances, helped to reduce employees' fears that their suggestions might be used against them. When the plant's capacity utilization dropped to approximately 60 percent in 1988, NUMMI followed through on its commitment and did not lay off any workers. Participation in the employee suggestion program more than tripled between 1986 and 1991—perhaps, in part, because management demonstrated that it could be trusted not to indirectly punish workers for their ideas that helped to increase plant efficiency (and thus contributed to the reduced utilization).

Ninety-two percent of NUMMI employees participated in the suggestion program in 1991, with more than 80 percent of the 10,000 suggestions made that year being implemented. Other companies have copied many of NUMMI's specific lean practices, but have not achieved the same high level of success. This may be because they lack NUMMI's culture of trust that generated such high levels of employee enthusiasm for continuous improvement efforts.

Mutual trust and internal support are as necessary for taking full advantage of RFID as they were to the success of NUMMI's lean implementation. Without good communication reinforced by corresponding deeds, employees may believe that their ideas about how to use RFID will be ignored, or may fear that the technology will be utilized in ways that will make their jobs less enjoyable. In either case, a lack of trust may cause them to actively or passively perform in ways that could limit gains from RFID, or even lead to outright failure.

In the article 'Sketch' the User Experience to Ensure an RFID Project's Success, the leader of an acclaimed project to protect workers from being hit by trains observed that a system could be perfectly designed, but "if track workers tossed the tags in the toilet because they didn't want to be monitored, it would all be for nothing." Although continuous RFID tracking can offer unprecedented insights about processes, employee resistance or a lack of engagement can subvert such a system and make companies less competitive.

In response to a question posed at the RFID Journal LIVE! 2012 conference about how to increase enthusiasm for RFID, one speaker in the health-care track stressed the need to show employees that the collected data can be used to make their jobs better. The data might show that workers are not taking enough breaks, and that additional employees need to be hired so that the existing staff is not overworked.

In another example of how RFID can benefit workers, the Alta ski resort installed RFID technology in 2007 that ultimately allowed staff members to focus on the more fulfilling role of helping guests rather than being "the bad guys" checking tickets and looking for fraud (see Alta Opts for RFID Lift Tickets). Workers will be more motivated to trust their employer, and thus support RFID, if they can see that the continuous improvement process is not just an endless grind to perform tasks at an ever-faster pace for that employer's sole benefit.

Just as NUMMI benefited from having the entire organization identifying process improvements on an ongoing basis, companies that have more staff members creatively considering ways in which to apply RFID and take advantage of its data are more likely to be successful than those relying on fewer staff members offering input. This is especially true as RFID moves from use in isolated projects to applications in widespread infrastructure that can more easily provide system-spanning data for lean and Six Sigma tools. As was the case at NUMMI, trust, training and empowerment are necessary to achieve effective company-wide participation.

While additional data can lead to more and better insights, the "fire hose" of data that can be collected from RFID systems may cause operations and IT analysts to experience information overload, and they may lack the context to fully take advantage of it. A key tenet of the lean philosophy is that frontline workers are in the best position to see where processes might be improved. Such workers can provide valuable perspectives regarding where to locate the needles that drive process improvements in the haystack of RFID data, or which processes might benefit from applying the technology. Companies with an organization-wide process-improvement culture will see greater opportunities for applying RFID, simply because there are more people actively engaged who personally understand current process shortcomings and the practical realities described by collected data.

Adler noted that "...worker empowerment degenerates into abandonment if work teams fail to get the right tools, training in their use, and support in their implementation," and that committed management leadership was required to make the necessary investment possible. Although most assembly workers at the NUMMI plant had only a high-school education, training helped them to produce world-class vehicles. Employees today can benefit not only from training in how to use RFID applications, but also in continuous improvement principles and techniques.

For example, thinking about RFID in a lean context may help employees see additional opportunities while experimenting with the technology (see RFID Research Supports Real-World Experimentation for related discussion). In an article titled RFID Opportunity Analysis for Leaner Manufacturing, Alexandra Brintrup and her colleagues described how simple lean diagramming tools can help to identify processes that can be improved by using RFID.

Six Sigma especially relies on numbers-driven decision making to improve processes, so as with lean concepts, synergies are created when trained employees apply it together with RFID. Continuous data collection enables businesses using quantitative lean and Six Sigma tools to respond more quickly to changing operations conditions. Because RFID can collect data that would be more difficult or time-consuming to obtain via other means, employees can focus more on analyzing the data and creatively applying insights. It is important that the RFID applications and collected data be easy to use, so that employees will not be inhibited from performing the analysis necessary for many of the process improvements (see Lessons Learned from ERP Can Help Drive RFID Adoption for a related discussion about ease-of-use).

Decoding the DNA of the Toyota Production System, Lean Thinking and Fixing Health Care from the Inside, Today are some of the best and most influential writings on fundamental principles behind lean practices. The insights from these works can help companies go beyond being just ostensibly lean and wondering why they do not experience greater benefits. The essence of lean is not about mindlessly and halfheartedly applying a checklist of techniques previously identified as best practices, but about creatively and massively applying lean principles on an ongoing basis to add value for customers. To become truly lean and achieve the results to show it, companies must go beyond best practices to continually innovate, based on their unique and changing circumstances.

Sustained competitive advantage will not come from implementing a particular lean technique (just-in-time production, for instance) or a single RFID application. Good ideas about lean techniques and using RFID will inevitably be copied (and perhaps improved at a lower cost) by the competition, thus reducing differentiation over the long term, if the originator does not keep improving. Companies need to continuously improve, because that is what their competition is doing—and it is what their customers expect. They can achieve such innovation by cultivating a culture based on mutual trust, as well as by training and empowering employees to take advantage of synergies between lean, Six Sigma and RFID.

Kurt Hozak is an assistant professor of operations management at Coastal Carolina University's E. Craig Wall Sr. College of Business Administration, and an operations and technology management consultant.