International Journal of Production Economics 186 (2017) 8188

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Int. J. Production Economics

journal homepage: www.elsevier.com/locate/ijpe

Bi-objective project portfolio selection in Lean Six Sigma MARK

a b, a
Vyacheslav Kalashnikov , Francisco Benita , Francisco Lpez-Ramos , Alberto Hernndez-
Lunaa
a
School of Engineering and Sciences, Tecnolgico de Monterrey, Campus Monterrey, Eugenio Garza Sada Av. 2501 Sur, 64848 Monterrey, Mexico
b
SUTD-MIT International Design Centre, Singapore University of Technology and Design, 8 Somapah Road, Singapore 487372, Singapore

A R T I C L E I N F O A BS T RAC T

Keywords: There are many aspects of a successful implementation of Lean Six Sigma techniques. Typically, decision-
Lean Six Sigma makers have to consider multiple conicting objectives, and in many cases, they lack a formal approach for
Project portfolio selection selecting projects. To meet the organization's requirements, some studies have proposed the use of multi-
Bi-objective optimization objective combinatorial optimization techniques. However, such formulations are notoriously dicult and
Mixed-Integer Quadratically-Constrained
complex to solve in reasonable computational time. In contrast to previous works, the present study proposes a
Programming
Pareto-optimal solutions
novel integrated methodology to formulate and solve the Lean Six Sigma project portfolio as a 01 Bi-objective
Quadratic Programming Problem. The model considers interdependent project eects (quadratic objectives)
and is subject to resource limitations and constraints regarding mutually exclusive projects and mandatory
projects. The approach permits tackling the problem as a Mixed-Integer Quadratically-Constrained
Programming Problem and thus to use the branch-and-bound algorithms implemented by the standard
optimization solvers such as CPLEX or Gurobi. Numerical examples are provided to verify the eciency and
added value of the methodology.

1. Introduction an organization should have an ongoing portfolio of LSS projects. This

The survival of organizations depends on their ability to adjust to
new competitive conditions imposed by the changing business envir-
onment. There is a need to invest in continual improvement with a
focus on reducing waste and product variation from manufacturing,
service or design process. Lean Six Sigma (LSS) is a project-driven
method devised for improving customer requirements understanding,
business systems, productivity and nancial performance (Kwak and
Anbari, 2006).
For many organizations, the question is not whether or not to
implement LSS, but how to implement a successful LSS process
improvement project. Research on implementation of LSS shows that
the success or failure of a deployment in an organization hinges on
selecting the right project that can be completed from four to six
months and will deliver quantiable business benets (Breyfogle et al.,
2001; Kwak and Anbari, 2006; Pande et al., 2000). Doing the right
project portfolio selection is more than simply individual project
selection. The decision process is characterized by data uncertainty,
dynamic opportunities, multiple goals, strategic considerations and
interdependence among projects. Recently, Lean Six Sigma project
portfolio selection (LSSPPS) has received increasing attention. Ideally,
requires strategic planning, budgeting, shorter-term management to
keep the pipeline full, and fulllment of strategic goals.
In current practice, organizations use subjective or unstructured
techniques (simple approaches) for the selection of projects. On the
other hand, multi-objective optimization based on more scientic
rationale (complex approaches) are harder to understand for the
decision-makers, namely Champions or Master Black Belts. In this
context, the key questions for any organization are: What Six Sigma
projects should be working on? and; Does the selected projects justify
the deployment of a Six Sigma team? These are important research
questions to address because they involve the most important and
dicult part in a LSS deployment (Pande et al., 2001).
In this paper, a simple but eective mathematical tool for LSSPPS is
developed. Although the proposed model falls within the complex
approach classication, we try breaking it down into manageable pieces
not only by its systematic implementation but also by maintaining its
theoretical insights. To this end, a 01 Bi-objective Quadratic
Programming (01 BOQP) problem is proposed, assuming that the
organization is interested in two particular objectives: (1) maximiza-
tion of the benet and, (2) minimization of the diculty of implement-
ing the projects. Since the problem is highly non-convex, it is

Corresponding author.
E-mail addresses: kalash@itesm.mx (V. Kalashnikov), francisco_benita@sutd.edu.sg (F. Benita), francisco.lopez.r@itesm.mx (F. Lpez-Ramos),
alberto.hernandez@itesm.mx (A. Hernndez-Luna).

http://dx.doi.org/10.1016/j.ijpe.2017.01.015
Received 13 July 2016; Received in revised form 10 December 2016; Accepted 23 January 2017
Available online 26 January 2017
0925-5273/ 2017 Elsevier B.V. All rights reserved.
V. Kalashnikov et al.
approximated by means of a Mixed-Integer Quadratically-Constrained
Programming (MIQCP) problem. The proposed MIQCP formulation
allows using branch-and-bound algorithms implemented in standard
optimization solvers such as CPLEX or Gurobi.
The remainder of this article is organized as follows. In Section 2,
related works on LSSPPS are discussed. In Section 3, the 01 BOQP
problem is formulated, whereas Section 4 states the solution approach
together with the numerical experiments. Finally, Section 5 provides
the summary and the concluding remarks throwing light on the scope
for further research.
2. Literature review
The LSS method utilizes a well-disciplined approach. Its unique
features include the following: (1) Sequencing and linkage of improve-
ment-tools into an overall approach (Dene-Measure-Analyze-
Improve-Control, known as DMAIC); (2) Integration of human and
process elements using a belt-based organization (Champion, Black
Belt, and Green Belt); (3) Focus on bottom-line results and on
sustaining of gains over time (Breyfogle et al., 2001).
Project selection is the process of evaluating individual projects as
well as choosing a subset of them to be implemented so that the
objectives of the organization will be achieved. LSS projects dier from
typical R&D project in various aspects. The focus is more on applica-
tion and orientation towards results and shorter time of project
execution. This type of projects also necessitates a more deterministic
nature of the outcome as well as the participation of the entire
stakeholder (Padhy and Sahu, 2011). Clearly, there is a need for a
reliable way to make eective and consistent business decisions to
ensure that resources are used eciently.
Several methods have been applied to priority assessment and
selection of LSS projects. The literature classies project selection
methods into two groups: simple approaches and complex approaches.
The simple approaches are widely used in practice and may be found in
commercial software, whereas the complex approaches are based on a
more scientic rationale (Kumar et al., 2007; Tkk and Lycsa, 2010).
In the following subsections, a base for an understanding of LSSPPS is
stated. The reader is referred to Mawby (2007) for a comprehensive
survey of the dierent methodologies for LSSPPS.
2.1. Simple approaches
Simple approaches are based on Multiple Criteria Decision Making
methods (MCDMs), where several objectives are combined by a
weighting scheme assignment or by a self-weighting generated using
the Pareto principle. Larson (2003) mentions that the Pareto Analysis
is an essential tool for prioritizing projects in LSS as the technique
allows comparing the frequency of occurrence of a group of measured
eects in a process. In that study, it is also discussed that business
leaders should focus on the critical aspects of the process rather than
trying to devote valuable resources to every issue. The study nally
suggests the use of tools to address the projects with the greatest
impact on customer satisfaction, protability, the cost and the return
rate, to mention only a few.
Another class of MCDMs methods for LSSPPS are matrix-based
techniques such as the Ranking Matrix, the Selection Matrix or the
Assessment Matrix. The authors of Adams et al. (2003) propose a
Project Ranking Matrix where the team members assign relative
importance weights to each criterion on a xed scale. Then, for each
project, the potential contribution in each criteria area is ranked. At the
end, a matrix for a number of projects is obtained by multiplying the
importance of each criterion by the impact of the project on that
criterion and then summing up all the products for each project. The
paper Kelly (2002) comes up with a Project Selection Matrix where
priority numbers and scores are rst assigned to selection matrices and
then compared with the nal scores of various project ideas. The
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International Journal of Production Economics 186 (2017) 8188
decision matrix is based on criteria established by the business leaders,
with each criterion assigned a weight relative to the overall objective.
The priority number is assigned being based on the impact of the
project on the organization. Similarly, Breyfogle et al. (2001) use a
Project Assessment Matrix (PAM) to allow business leaders to assess
the suitability of a potential project. By using the PAM, one can
compare and analyze multiple projects to determine opportunities for
development strategies.
Finally, Pyzdek (2003) uses the Quality Function Deployment
(QFD), a known priority ordering tool for selecting the most appro-
priate LSS project alternative. The QFD has been widely accepted in
both practical and academic environments due to its ease of use for
helping guide project management. The authors of Shanmugaraja and
Nataraj (2012) extend this methodology under the name Quality
Function Deployment-Measure-Analyze-Improve-Control.
2.2. Complex approaches
Complex approaches comprise a variety of techniques such as the
Analytic Hierarchy Process, Options Pricing, Fuzzy Logic, and
Mathematical Programming methods. The Analytic Hierarchy Process
(AHP) is also based on multiple criteria decision-making methods. This
technique decomposes the overall problem into smaller problems
according to a given importance hierarchy. Pyzdek (2003) states that
the AHP has proven to be extremely valuable in LSS prioritization
decision when involving both tangible and intangible considerations.
The reason is that AHP can be used to select those projects that are
more closely aligned with the four perspectives of the scored balance:
nancial, customer, operational and human resources, approaching,
therefore, the organizational strategy.
Among the Options Pricing techniques, the Real Options
Framework (ROF) is the most useful method. The ROF gives to
decision makers alternatives for investment, growth, or abandoning a
contingent project upon arrival of new information. In Tkk and Lycsa
(2010) and Padhy and Sahu (2011), it is designed a Six Sigma project
evaluation model following a two-stage process. In the rst stage, the
LSS project investment is evaluated by the ROF, whereas the second
stage involves a portfolio optimization via mathematical programming
techniques in which several LSS projects are simultaneously considered
for funding. All authors agree that ROF presents an attractive alter-
native to the existing evaluation methods as the ROF explicitly
accounts for the value of future exibility in the decision making. In
fact, option values of the project not only provide its real value but also
increase the exibility in that decision making.
LSS implementation decision may deal with constraints related to
the organization internal policies, as well as externally imposed system
requirements. In such situations, a high degree of fuzziness is
encountered in the data, and fuzzy set theory provides a framework
for handling the uncertainties of this type. According to Yang and
Hsieh (2009), the most important challenge is that simple approaches
cannot take into consideration the inner dependencies and relation-
ships among criteria, so the validity of these models where such inner
dependencies do exist is questionable. Another challenge is that simple
approaches need predetermined weights of criteria. Thus, with the
intention to attack the diculty the authors propose a fuzzy multiple
criteria decision-making method for the criteria evaluation and project
selection in LSS. The authors mention that the imprecision may arise
from a variety of reasons, such as unquantiable information, incom-
plete information, unobtainable information, or partial ignorance. A
similar study was conducted by Saghaei and Didehkhani (2011) for
deriving the overall project utility. The authors design an adaptive
neuro-fuzzy inference system, capable of considering interrelations
among dierent criteria. Then, by applying a fuzzy weighted additive
goal programming model, the optimal portfolio of projects is obtained.
The last class of models that lie in the complex approach are based
on Mathematical Programming techniques. The next section shows the
V. Kalashnikov et al. International Journal of Production Economics 186 (2017) 8188

Table 1
Features considered in the literature.

Solution Objective Objective Resource Interaction

approach type function limitations between projects

Kumar et al. (2007) LP Single-objective Costs Human & material No

Kumar et al. (2008) MLIP Single-objective Profit Material No
Hu et al. (2008) GP Multi-objective Benefits/costs Human & material Yes
Tkk and Lycsa (2010) DSP Single-objective Profit Material No
Padhy and Sahu (2011) 01 ILP Single-objective Profit Material No
Saghaei and Didehkhani (2011) FGP Multi-criteria Customer satisfaction/profit Material No
Wang et al. (2014) ANP Multi-criteria Profit/quality/cycle time Human & material Yes
This work MIQCP Multi-objective Benefits/difficulty Human & material Yes

Note: Linear programming (LP); Mixed-integer linear program (MILP); Goal programming (GP); Fuzzy goal programming (FGP); Dynamic stochastic programming (DSP); 0-1 Integer
linear programming (0-1 ILP); Analytic network process (ANP); Mixed-integer quadratically-constrained program (MIQCP).

Table 2 multi-objective optimization the obtaining of the Pareto front is not

Symbols for variables and parameters used throughout this work. guaranteed in a strict theoretical sense. For example, the work of Hu
et al. (2008) does not distinguish between ecient Pareto optimal
Sets and indices
solutions and weakly ecient Pareto optimal solutions. Our contribu-
N Number of potential projects. tion guarantees to compute the weak Pareto front. Last but not least, it
5 Set of potential projects competing for financial support; is also remarkable that the inclusion of human and material constraints
5 = {1, 2, , N}. is not a common practice. Most of the studies simplify the decision
:MX Set of mutually exclusive projects; :MX 5 5 .
space such that all the constraints involve only monetary values.
:MP Set of mandatory projects; :MP 5 .

Parameters 3. Problem statement

i Difficulty of the individual implementation of project
i; i 5 . The problem under study consists of selecting a subset of projects
ij Difficulty of implementing projects i and j together;
from a given project portfolio. When doing this selection, two opposite
i, j 5 .
i Benefit of the individual implementation of project i; i 5 .
objectives are sought-after: 1) Maximizing the benets resulting from
ij Benefit of implementing projects i and j together; i, j 5 . the selected projects; and 2) Minimizing the diculties of implement-
bi Total miscellaneous costs of project i; i 5 . ing the selected projects.
B Total available budget for miscellaneous costs. Together with these objectives, as it was reported in Kumar et al.
hi Total number of human resources devoted to developing (2007), Hu et al. (2008), Padhy and Sahu (2011), among others, it is
project i; i 5 .
also needed to evaluate certain requirements related to time, resources,
H Total available number of human resources.
oi Operator time required by project i; i 5 . costs, and performances. For the time aspect, starting and ending times
O Total available operational time. of the projects, as well as the times for their activities must be
ai Analyst time required by project i; i 5 . determined so that the due dates of the projects are met. Resources
A Total available analyst time. related to labor and equipment are required for the projects, as well as
Decision variables
their assignment to activities. Project costs should be tracked because
xi Binary variable with value 1 when project i is selected, 0 all the projects have a limited budget. These costs are evaluated
otherwise. according to the consumed resources. Finally, performance should be
tested according to the grade of satisfaction of the customer's require-
ments.
details of previous related literature and highlights our contribution. To state the model formulation, some notation is rst introduced in
Table 2, and then, the objective functions and constraints are sepa-
2.3. Contributions to the literature rately stated in two subsections.

This optimization model determines an optimal LSSPPS consider- 3.1. Objectives

ing organization objectives, constraints related to resource limitations,
and interdependencies among projects. The relevant methodologies The rst objective is the maximization of the organization's prot,
devised for selecting LSS projects are shown in the following Table 1. which is represented as follows:
From the table, one can see that not many works deal with
optimization techniques due to their computational complexity. f1 (x1, x 2 , , xN ) = ixi + ij xixj max,
x
i5 i5 j5 :j>i (1)
Among these techniques, only one work uses a 01 Integer Linear
Programming problem, a special case of integer programming pro- where the rst term is the total benet derived from each implemented
blems with non-polynomial time solution. The LSSPPS also becomes project individually. The second term is an additional benet arising
much more complicated to solve when multiple project characteristics from implementing projects i and j together.
coexist (e.g., Hu et al., 2008; Saghaei and Didehkhani, 2011; Wang The second objective entails the minimization of the total diculty
et al., 2014). In a multi-objective optimization problem, the purpose is of implementing the selected projects, and is set as follows:
to optimize several conicting objectives simultaneously while still
meeting some constraints. It is also appreciable that few studies have f2 (x1, x 2 , , xN ) = xi i + ij xixj min,
x
i5 i5 j5 :j>i (2)
been focused on the interaction between projects. This aspect is also
dicult to consider in an optimization model as non-linearities arise where the rst term symbolizes the total diculty steaming from
when considering relationships between projects, so the solution implementing each project individually. The second term represents an
approaches become even more complex in terms of computational additional diculty when projects i and j are implemented simulta-
time. Another important aspect is that in previous studies dealing with neously.

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V. Kalashnikov et al. International Journal of Production Economics 186 (2017) 8188

3.2. Constraints 4. Solution method and implementation

Budget constraint. This constraint limits the budget to be assigned 4.1. Solution method
to the projects:
In this section, problem (01 BOQP) is reformulated as an MIQCP
bixi B. problem, which can be treated by standard optimization solvers. Let be
i 5 (3) x(x1, x 2 , , xN ) and dene the set

X {x {0, 1}N x satisfies (3) (8)}.

Human resource constraint. Each organization has some limitations
In the following, various denitions of eciency are introduced.
on its available human resources. LSS projects are typically led by
Black Belts, thus the number of projects that an organization can
Denition 1. (Eciency)
implement are limited by the number of Black Belts at the
organization:
A point x is said to be feasible to problem (0-1 BOQP) if there exists
an x X .
hixi H .
i 5 (4) A point x* feasible to (0-1 BOQP) is said to be an ecient (or globally
non-dominated, or non-inferior) Pareto optimal if and only if there
does not exist a feasible point x* such that:
Operational time constraint. This constraint ensures that the total
fk (x) fk (x*) k {1, 2},
working time of operational employees required to complete the
selected projects on time does not exceed the maximum available and, for at least one k 0 {1, 2}, fk (x) < fk (x*) is valid.

o 0
operational time: A point x* feasible to (0-1 BOQP) is said to be weakly ecient (or
local) Pareto optimal of (0-1 BOQP) if and only if there does not
oixi O. exist a feasible point x* such that:
i 5 (5)
fk (x) < fk (x*) k {1, 2}.

Analyst time constraint. This constraint is similar to (5) but with

respect to the total working time of analyst required to complete the The set of all ecient points x* of (0-1 BOQP) is called the Pareto set
selected projects on-time: and its image under f the Pareto front. The weak Pareto set and
weak Pareto front are dened in a similar manner.
aixi A. It is easy to see that every ecient Pareto optimal solution is weakly
i 5 (6)
ecient Pareto optimal. This work focuses on weakly ecient solutions
of (0-1 BOQP) as this problem is highly non-convex. A common
This constraint is particularly relevant during the analysis phase,
approach to solving a multi-objective optimization problem is to
where the team needs to collect and analyze the data to understand
reformulate it as a single-objective optimization program by means
the key variables that aect the project goals.
Mutually exclusive project constraints. Mutually exclusive projects
of a set of parameters. Such reformulation is referred to as parameter-
based scalarization. Therefore, the scalarized problem can be solved
are such that the acceptance of one project excludes the other from
using single-objective optimization techniques and the associated
consideration. Constraint (7) ensures that only one of the two
software. Since the objective function (1) is non-convex, the
projects can be implemented (or both not implemented) for the
Pascoletti-Serani method Pasccoletti and Serani (1984) is employed.
condition to hold:
This is a commonly used technique for generating points of the Pareto
xi + xj 1, (i , j ) :MX . (7) front. Let the set of positive weights be dened as follows:


2

W w 2 wk > 0, k {1, 2}, wk = 1.
Mandatory project constraints. Some projects are mandatory to be
k =1


implemented due to internal and external restrictions. Its corre-
sponding constraints are as follows: The parameter-based scalarization is a powerful technique in multi-
objective optimization, which replaces a vector optimization problem
xj = 1, j :MP . (8) by a family of scalar optimization problems. In particular, the
scalarization proposed by Pascoletti and Serani is a geometrical
scalarization scheme where the vector-valued objective function of a
problem under consideration is integrated into the constraint system.
The model can be summarized as follows: The objective of Pascoletti-Serani's auxiliary problem is just a real
number expressing the magnitude of a possible movement along a
f (x1, x 2 , , xN )
f (x1, x 2 , , xN ) = 1 vmin vector taken from the relative interior of the ordering cone (Huong and
f2 (x1, x 2 , , xN ) x (0-1 BOQP) Yen, 2014). Moreover, this scalarization method allows fullling the
two essential requirements: (i) The possibility of nding all vector
subject to (3) (8), xi {0, 1}, i 5, optimal among the scalar optimal obtained by varying the parameters
and; (ii) The well-behaviour dependence of optimal on the parameters.
where vmin stands for vector minimization. Recall that in vector In short, for the decision-maker (Champion or Master Black Belt) it is
optimization the concept of minimal value and, thus, of a minimizing important to have in hand all possible alternatives of the problem, but
sequence are not uniquely determined. In the next section, some in general the quality of information depends on the approximation
notions of the appropriate minimizing sequence are introduced. Note obtained by varying the weights w W . To tackle this problem as well
that f : {0, 1}N 2 is a vector-valued function. Moreover, 0-1 BOQP as to address both previously mentioned requirements, Pascoletti-
is a 0-1 integer program, which is well known to be NP-complete Serani scalarization has been proven to be a useful method.
combinatorial optimization problem. In order to continue with the analysis, we need to introduce the

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V. Kalashnikov et al. International Journal of Production Economics 186 (2017) 8188

Fig. 1. Scheme of solution.

concept of ideal vector. A vector minimizing each of the objective vector for any other objective function with quadratic costs.

functions is said to be an ideal vector. In general, the ideal vector Problems (Pk ) and (Pk ) are equivalent if and only if these problems
corresponds to a non-existent solution due to the conicting nature of possess the same set of solutions in the original variable space, and
the objectives, and if an ideal vector is feasible for problem (0-1 BOQP), their corresponding objective functions values coincide. This lineariza-
then it is an ecient Pareto optimal of (0-1 BOQP). Hence, it is usual to tion allows the use of commercial software for solving linear mixed
consider a reference vector called the utopia vector. integer programming problems, such as CPLEX or XPRESS-MP.
Our approach consists of transforming the 0-1 BOQPP into an
Denition 2. (Utopia vector) The utopia vector u 2 associated with MIQCP. In Eichfelder (2008), it is established that every solution of
problem (0-1 BOQP) is dened as uk f k* k , where k > 0 , for all problem (MIQCP) is a weak ecient point that can be used for
k {1, 2}, and f k* is the optimal value of the optimization problem generating an approximation of the Pareto front. Problem (MIQCP)
fk (x) min is a subclass of non-convex Mixed Integer Quadratic Programming
x X (Pk)
(MIQP) problems that can be easily transformed into a convex MIQP.
If x* is an optimal solution of problem (Pk ), then In particular, problem (MIQCP) possesses a linear objective, and both
f k* fk (x*), k {1, 2}. quadratic binary and linear binary constraints. Therefore, the branch-
For a given w W , the scalarization is conducted as follows: and-bound algorithm implemented in standard optimization solvers,
such as CPLEX or Gurobi, can be used to nd weak ecient points of
min
(, x) X (MIQCP) problem (0-1 BOQP). The reader is referred to Bliek et al. (2014) for a
recent and detailed description on how the computational complexity
subject to wk [fk (x) uk ] , k {1, 2} of an MIQCP can be tackled by the implementation within CPLEX.
where is a new variable and u is a utopia vector associated with
problem (0-1 BOQP). 4.2. Implementation
When one tries to solve (Pk ), one particular diculty arises owing to
its nonlinear objective function's terms xixj . However, as (Pk ) is a 0-1 Typically the Master Black Belt (or Black Belt) is in charge of
quadratic programming problem, an equivalent linear reformulation selecting the most impacting projects. Fig. 1 illustrates the solution
can be used. While doing this, it is denoted by yij = xixj and dened approach for assisting the Master Black Belt throughout the process.
1 N (N 1) The process begins with the extraction from a database of information
y(y12 , y13, , y1N , y23, y24 , , y2N , , yN 1N ) and Y {y {0, 1}2
}. In that requires model (0-1 BOQP) related to input parameters contained in
order to be consistent with the previous notation, the following Table 2. These parameters must be set together with dierent departments
auxiliary matrices k N N , k {1, 2} with elements in the organization. Additional parameters, such as the project benets i
k
ij , i , j 5 : i < j are introduced to represent the parameters asso- and ij, should be given by the Finance & Accounting Department,
ciated with the objective cost functionals (1) and (2): whereas the project diculty parameters i and ij should be provided by
1 12 13 1N 1 12 13 1N the strategic business unit. As for constraint parameters, the costs bi and
budget B should be also given by the Finance & Accounting Department.
0 2 23 2N 0 2 23 2N
=
1
, =
2
. The rest of parameters related to human resources, operational time

requirements and analyst time, can be obtained from the Planning and
0 0 0 N 0 0 0 N
H.R. Departments. At the next step, the Master Belt together with the
Here, the rst and the second matrix diagonals comprise the individual Champion choose the positive weights wk W , k {1, 2}, representing
benets and diculties of implementing each project, respectively. the subjective preference information of benets and diculty. The
Note that the negative sign on the matrix 1 is needed when it is question arising at this step is how the Master Black Belt and Champion
formulated the maximization of benets as a standard minimization can more properly express the trade-o between objectives. A suitable
problem. Using the matrix formulation, the following program for each practice for such task is the use of simple approaches techniques stated in
objective k {1, 2} is obtained: Section 2. For instance, matrix-based methods such as Ranking Matrix
(Adams et al., 2003), Selection Matrix (Kelly, 2002) or the Assessment
ikxi + ijkyij min
Matrix (Breyfogle et al., 2001) may be useful at this stage. In the next step
(x, y) X Y
i5 (i, j ) 5 5 : j > i
and by following Denition 2, the utopia vector can be easily obtained by
yij xi , i, j 5 : j > i,
solving the two single-objective problems (P1 ) and (P2 ). At the third step, the
subject to yij xj , i, j 5 : j > i, decision-maker possesses all the necessary information for tackling pro-
yij xi + xj 1, i , j 5 : j > i . blem (Pk ). The problem is implemented in an AMPL script that uses a text
(P k)
le to provide the model parameters and calls CPLEX optimizer to solve it.

Note that in problem (P2 ), the objective function (2) minimizes the The default branch-and-bound algorithm of that solver transforms problem
total diculty of the project portfolio selection. Since all the objective (MIQCP) into a convex MIQCP. Finally, the script gives back the weakly

parameters are nonnegative, to nd the optimal solution for (P2 ), it is ecient solutions according to Denition 1.
only necessary to choose all mandatory projects, i.e., all the projects An illustrative example where the model (0-1 BOQP) is applied to

contained in the set :MP . Therefore, only problem (P1 ) needs to be an LSSPPS, is presented. The practitioner experience on the selection

computed. The linearized formulation (Pk ) allows nding the ideal and implementation of LSS projects has been used to generate

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V. Kalashnikov et al. International Journal of Production Economics 186 (2017) 8188

Table 3
Resources input data+optimal selection of projects.

# Project b h o a Status

1 91 1 85 80 Rejected
2 96 3 95 50 Rejected
3 56 3 85 25 Accepted
4 96 2 90 40 Accepted
5 82 3 105 30 Accepted
6 54 1 180 35 Accepted
7 64 2 120 40 Rejected
8 77 3 90 35 Accepted
9 98 3 105 35 Rejected
10 99 3 190 40 Rejected
Available 406.5 12 572.5 205

Note: :MX {1, 4}, :MP{3}, 1 = 0.3 and 2 = 0.7.

Fig. 2. Average totals of the number of selected projects for dierent sizes of project
portfolios. Note. Dark gray: w1=0.3, gray: w1=0.5 and light gray: w1=0.7.
plausible and reasonable values for project-specic data. The number
of potential problems to be selected has been set to N=10, thus keeping
the instance size small enough for a clear understanding. The left half the average totals of the number of selected projects for
of Table 3 gives the resources consumed per each project regarding N {10, 20, 30} using w1 {0.3, 0.5, 0.7}, and w2 {0.7, 0.5, 0.3}. The
implementation costs (b ), human resources (h ), operational times (o), horizontal black lines in each bar represent the number of projects that
and analyst time (a), as well as the totals availability of each resource in are always selected, no matter which combination of weights w1 and w2
the last row (e.g., values of parameters B, H , O and A). On the other has been used. The graph shows that the number of projects to be
hand, matrices k k {1, 2} provide the functionals for the two implemented for the same N does not depend on the choice of values
objectives. Finally, projects 1 and 4 has been set as mutually exclusive for vector w, i.e., one always needs to implement 5, 9 and 14 projects
and project 3 as mandatory. for N {10, 20, 30}, respectively. On the other hand, the number of
commonly selected projects decreases as N increases. It is observed
182 3 85 94 68 76 75 39 66 17
0 192 27 4 that for N=30, only 8 out of 14 are in common.
9 83 70 32 95 3
Another important aspect is the eciency on the use of resources.
0 0 168 80 18 49 45 65 71 76
The following Fig. 3 shows another bar graph where resource bars are
0 0 0 192 12 50 96 34 59 22
0 328 96 55 14 15 26 grouped by N. In each group, the capital letters B, H, O, A denote the
1 = 0 0 0
0 0 0 0 0 216 19 25 62 47 available budget, human resources, operational time and analyst time,

0 0 0 0 0 0 192 76 38 57 respectively. Moreover, the amount of gray color with which each bar is
0 0 0 0 0 0 0 308 1 34 lled denotes the average percentage of use for its corresponding
0 0 0 0 0 0 0 0 95 75 resource. Complementary, the amount of white color indicates the
0 0 0 0 0 0 0 0 0 297
average percentage of the unused resource. These averages were
10 computed using a set of instances with w1 {0.1, 0.2, , 0.9}, and
5 0 4 4 5 0 2 1 4
0 2 1 1 0 0 5 3 3 0 w2 {0.9, 0.8, , 0.1} for each N. The graph shows that the use of
resources increases as N does. However, under all tested settings, the
0 0 8 3 2 0 1 0 1 1
0 0 0 6 2 2 2 5 2 0 average use of all resources is higher, i.e., more than an 85% of each
0 . resource is used on average.
2 = 0 0 0 0 8 0 5 5 3
0 0 0 0 0 6 3 4 3 2 Next Fig. 4 represents the resulting weak Pareto-fronts from the
0 0 0 0 0 0 4 3 4 0
weakly ecient Pareto points computed for the sizes of project
0 0 0 0 0 0 0 8 4 4 portfolios with N=10 (Fig. 4a), N=20 (Fig. 4b), and N=30 (Fig. 4c).
0 0 0 0 0 0 0 0 8 3
0 On each graph, the x-axis shows the values of the benet objective (f1),
0 0 0 0 0 0 0 0 10
whereas the y-axis depicts the values of the diculty objective (f2).

The utopia vector is rst computed by solving problem (Pk ) for Attached to each point, there is a 2-component vector (w1, w2 ) denoting
k {1, 2}, separately, and the values of f1* = 1,737 and f2* = 8 are the values of weights related to each objective (i.e., w1 for the benet,
obtained. Note again that the optimal solution for the diculty and w2 for the diculty). Some vectors are not displayed because the
objective is to select the mandatory project 3 with the diculty degree weakly ecient Pareto-points did not change for the associated
of 8. Following the solution scheme in Fig. 1, the weight values of w1 combinations of weights. For example, in Fig. 4c, it is omitted the
and w2 are manually set to 0.3 and 0.7, respectively, giving thus more weight combinations for (0.7,0.3), (0.8,0.2) and (0.9,0.1). This nding
importance to the objective related to the diculty. To establish the is particularly interesting because it provides insights to the organiza-
utopia vector u, the optimal values of f1* and f2* together with the tion on which combination of weights should be explored with the
adjusted constants 1 = 2 = 1 106 are used. Finally, problem intention of obtaining dierent pareto solutions. Fig. 4a shows another
(MIQCP) is solved, and its weakly Pareto optimal solution is reported example of this occurrence. It that case, it might be interesting to run
in the last column on the right had side of Table 3. This column the model assigning to w1 values comprised between 0.2 and 0.3, and
indicates that the organization should implement projects 3, 4, 5, 6, to w2 values ranging from 0.8 to 0.7.
and 8. As explained in Section 3, these projects have been selected With the intention to fully construct the weak Pareto-front, we
according to their potential benets and diculties of implementation computed 99 pareto-points for the project portfolio size of N=30. To
shown in matrices k k {1, 2}, as well as the number of consumed this end, the values of w1 and w2 were varied from 0.01/0.99 to
resources reported in columns b to a of the Table 3. 0.99/0.01, respectively, with a step size of 0.01. Fig. 4d shows the
In order to analyze the performance of the solution approach, a set resulting weak Pareto-front. In 4d, the weight combinations are not
of experiments with dierent sizes of project portfolios (N) and weight shown as points are very close to each other. Computational time is not
settings (w1, w2 ) were conducted. Fig. 2 represents a bar graph showing reported as all problem instances of Fig. 4ac were solved quite fast,

86
V. Kalashnikov et al. International Journal of Production Economics 186 (2017) 8188

Fig. 3. Average use of available resources for dierent sizes of project portfolios.

from tens of seconds to a few minutes. Nevertheless, the computation
of all weak Pareto-points of Fig. 4d took a few hours.
5. Concluding remarks
The appropriate selection of the project portfolio is a key aspect for
a successful accomplishment of the Lean Six Sigma methodology. A
wrong project selection may gravely aect the total eciency and
productivity of the organization. This work proposes a novel methodol-
ogy to assess this important problem, having the following implications
in both theoretical and managerial aspects.
5.1. Theoretical implications
This work contributes relevant aspects to the literature by incorporating
relationships among projects and a reliable method to compute the weak
Pareto-front. The latter is crucial in order to guarantee the optimality of
each solution in a weakly ecient Pareto sense; whereas, the former aspect
is important when considering conicting objectives such as the benet and
the diculty of implementing couples of projects with mutually inclusive
features. These relationships are modelled with quadratic costs in the bi-
objective function and with linear dependencies in the constraints set. After
an appropriate reformulation, the approach allows using standard solvers.

Fig. 4. Weak Pareto-fronts for the dierent sizes of project portfolios (N).

87
V. Kalashnikov et al.
The weak Pareto-front is obtained by implementing the parameter-
based scalarization of Pasccoletti and Serani (1984) to the reformu-
lated problem as Mixed-Integer Quadratically-Constrained
Programming. For this type of problem, it is possible to obtain weakly
ecient pareto-optimal solutions in an ecient way. Some previous
works (e.g., Hu et al., 2008) dealing with multiple objectives do not
guarantee to distinguish between ecient and weakly ecient solu-
tions.
The formulated model also incorporates constraints related to the
limitation of both human and material resources, and thus, allowing its
application to the real world. As a future work, it would be interesting
to compare the solutions provided by this methodology with the ones
obtained by other solution methods such as the goal programming
approach proposed in Hu et al. (2008); the -constraint method, which
generates the Pareto front and; meta-heuristics.
5.2. Managerial implications
The proposed approach is exible, computationally ecient, easy-
to-use, and non-solver dependent. It is exible because it allows easily
incorporating more objectives such as the minimization of total costs,
the minimization of total risk, the maximization of social benet, and
so on. As for constraints, it is possible to include a minimum gain, a
minimum risk depending on the project scope, the choice of a new
process, the lack of support for the projects, diversity constraints, or
institution-specic constraints, just to mention a few of them.
It is computationally ecient as for real-sized problems, the
computational time for each weakly ecient Pareto-optimal solution
ranges from tens of seconds to a few minutes. This is because the size of
the reformulated problem is quite small, i.e., it has a linear objective
function, four linear constraints (leaving apart the mutually exclusive
project requirements), two quadratic binary constraints, and the
number of decision variables is N+1 (with N binary variables but
typically N 30 ); so the problem can eciently be solved.
It is easy-to-use as Champions or Black Belts have enough training
to obtain reliable matrices related to benets and diculties of
implementing projects. Moreover, they can weight both objectives,
evaluating dierent trade-os and, thus, obtaining the weak Pareto-
optimal front. Furthermore, the input data is easily coded in a text le
that can be manually created or automatically generated from any
standard commercial software such as Excel.
Finally, the approach is non-solver dependent, i.e., it is coded in
AMPL language, a platform for standard optimization that allows to set
a wide variety of commercial and non-commercial solvers such as
CPLEX or Gurobi, among others. It is also possible to evaluate the
performances of dierent solvers and decide which is the most
convenient for eciency purposes.
88
International Journal of Production Economics 186 (2017) 8188
Acknowledgements
The authors would like to express their profound gratitude to the
anonymous referees, whose valuable comments and recommendations
helped them to improve the paper's quality. This work was nancially
supported by the CONACYT grant No. CB-2013-01-221676 (Mexico).
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