or society workshop: practical process improvement using lean and 6 sigma

© 2011 Copyright ISC Ltd.

Practical Process Improvement using Lean and Six Sigma

A 1-day workshop for the OR Society

Facilitated by Ian J Seath

1


What you will learn…

How Lean and 6-Sigma differ, yet are complementary approaches for process improvement

How to set-up and define a process improvement project How to use appropriate tools to map, measure and

analyse business processes How to design a Lean, value-adding process How to engage key stakeholders and staff to ensure

effective management of process change

2

An introduction to the tools and techniques for defining, measuring, analysing and improving business processes using methods from the Lean and 6-Sigma toolkits.

Is that an “active banana” or an “inactive banana” on your desk?

© 2011 Copyright ISC Ltd.3

What is a Process?

Processes take INPUTS, do WORK to them, and produce OUTPUTS for CUSTOMERS

They exist to achieve performance OUTCOMES (for the benefit of customers or stakeholders)

© 2011 Copyright ISC Ltd. 4

ProcessInput Output

Focus of improvement


Efficient Effective

CapableFlexible & Agile

More CapacityFaster

Cheaper

Better

HappierCustomers

Less Waste

More Responsive

More Reliable

In two sentences…

Lean: Driving out waste by using TIME as a competitive

weapon

Six Sigma: Driving out waste by reducing VARIATION


7

Who’s using Lean and Six Sigma?


Recent examples of ‘service’ or ‘back office’ programmes have delivered significant benefits including:

Centrica

Utility Call Centre

Considerable real benefits in call handling

Home Office

Claim process capacity increased by 130%

ING

Foreign Exchange Processing

Increased straight- through processing from

70% to 95%

O2

Value Stream Programme

25% reduction in time spent on non-value-

adding activity in store

Probation

Drug Testing Programme

Capacity increased to 110% of target

Bolton Hospital

Pathology Lab

Sample testing time reduced from 24 to 2

hours

Evolution of Lean Thinking


Lean Concepts

Toyota ProductionSystem

Lean Thinking“Lean Enterprise”

8

1991

ELAPSED TIME =59 hrs

V.A. TIME= 7 hrs

V.A.RATIO= 4%

Lean: Time as a competitive advantage

4 hrs 24 hrs

ENQUIRIES RECEIVED

1.5 hrs 4 hrs 4 hrs 24 hrs 1 hr

ALLOCATION&

PLANNING WRITTENACK

CUSTOMERS

ACTION

SIGN OFF

SIGNOFF

SIGNOFF

MEMO

SORTINGANALYSIS RESPONSE AGREEMENT

16 hrs

16 hrs

.5 hr8 hrs

8hrs

20M_169 © 2011 Copyright ISC Ltd.

Evolution of Six Sigma


Statistics Holistic

1980s

2011

StatisticalMeasurement Process

Control

ProblemSolvingToolkit People

Skills

BlackBeltApproach

ProjectBased(DMAIC)

EncompassingExistingTechniquesSupport

Structure

2000

ZeroDefects

Six Sigma provides a common basis for comparison


Which of these processes is performing best?

Accounts receivable 35 days sales outstanding (DSO)

Call answering 10 rings on average

Customer service 89% satisfied, or very satisfied

Invoicing 99% accuracy

Checkout queue 3 minutes on average

6 Sigma: Customers feel the Variance, not the Mean


On average our rope is2 cm thick !

That’s good to know!

Supplier

Customer

Lean and Six Sigma


Lean Evolved from the Toyota

Production System Focus on identifying and

delivering customer value Managing horizontal value

streams (& systems thinking) Aligning capacity to demand

and creating “flow” Engaging front-line staff in

daily improvement Using visual management to

track performance Managers “go and see”

Six Sigma “TQM on steroids” A statistically-based approach

to process improvement Requires support from “Black

Belts” for implementation Achieves improvement through

project activity, chosen by management; often based on ROI potential

An evolution from “Zero Defects” thinking of the 1990s

Aiming for fewer than 3.4 ppm defects

Tools/TechniquesSix Sigma SIPOC Voice of the Customer House of Quality (QFD) Process Mapping Design of Experiments Statistical Process Control Taguchi Sampling & Data Collection Statistical Analysis Failure Modes Effect Analysis DPMO/Sigma/CPK


Lean The Seven Wastes 5 S Poka Yoke Value Stream Mapping Kaizen Standardised Work Visual Management Flow: Push & Pull Just-in-time Takt time Value Add Ratio

Improvement approach


Six Sigma: Define Measure Analyse Improve Control

Lean: Current State VSM VAR Waste/Flow Future State VSM

Where are we now?Understand

current performance

Reduce waste

Implement improvement

Improve continuously

Process Improvement (DMAIC)


Define

Measure

Analyse

Improve

Control

• Agree the problem/opportunity for the Process Improvement Project• Identify the process customers and what they want• Define the “As Is” process map

• Agree what data is needed to quantify the performance of the process• Identify how the data will be collected• Collect the data

• Analyse the performance of the process using the data• Assess the process using qualitative information• Identify the root causes of the performance of the process

• Identify, select and test possible “To Be” process improvement ideas• Develop plans to implement the selected improvements• Implement the new process

• Assess the performance of the new process• Ensure the required performance can be sustained• Review the project and apply learning for the future

DMAIC is rarely linear


Define

Measure

Analyse

Improve Control

Stage 1: Define

Purpose: To translate a perceived

problem or opportunity into a do-able project

To ensure the customer’s needs are identified at the start of the project

To establish a high-level understanding of the process

Outputs: Completed Project Proposal SIPOC Process Definition Process Map (‘As Is') Analysis of Customer

Requirements


Process Definition (SIPOC)


Process Name

Suppliers Customers

Inputs Outputs

What triggers the process?

What does the processproduce?

Who supplies the

inputs?

Who receives the

outputs?

Process Definition (expanded SIPOC)


Process Name

Suppliers CustomersBoundaries

Start-point: End-point:

Include: Exclude:

Inputs Outputs

Purpose:________________________________

Owner:______________________

Case study – part 1


Sequence Map


DefineProblem

DefineProcess

Opportunity/need forimprovement Convene/

BriefTeam

DraftHigh-level

Map

Walk-throughProcess

Sign-offMap

IdentifyProblem

Areas

IdentifyCustomer

Requirements

ProblemList

Swim-lane Map


IdentifyRequirements

Need forBusinesstravel

CompleteBooking

Form

ApproveTravel

InvestigateOptions

AdviseTraveller

SelectPreferred

Option

BookTickets

CollectTickets

ProvideTickets &Itinerary

Tickets &Itinerary

Employee Line Manager Travel Office Travel Agent

ELAPSED TIME =14w 2d

V.A. TIME= 16.6

hrsV.A.RATIO =

3%

Lean: Value Stream Map

5 btc/ 8 hrs2 shifts5 variants3 machinesc/o = n/a

1 btc/ 2 hrs2 shifts25 variants8 machinesc/o = n/aFOM = ABC ?

1 btc/ 12 hrs3 shifts100 variants30 machinesc/o = n/aFOM = ABC?+ 12 hr cure

1 btc/ hr2 shifts400 variants15 machinesc/o = 1 hr w/eFOM = 25/wk75 ca / btc .5 wks 2.5wks

400 products40,000 ca./ month4 week leadtime50% service level !

MRPII +MANUAL SYSTEMS

manualintervention

1.6 hrs . 5 wks 2 hrs 2.5wks 12 hrs

SUPPLIERS

PURCHASEORDERS

PLANNING

FIRMORDERS

ROLLING FORECASTS

CUSTOMERS

SHIPMENT

workorder

workorder

workorder

workorder

MIXING FORMING FINISHING PACKING

4 wks

4 wks 6 wks

6 wks

1 hr1wk

1 wk

24 © 2011 Copyright ISC Ltd.

The Voice of the Customer

Processes exist to meet the requirements of customers (recipients of the outputs) and to achieve specific outcomes

“Customers aren’t interested in your organisation’s structure; what they see, and feel the effects of, are your processes.”

Key questions:

Who are the Customers? What do they want? What is most important to them? How happy are they with what they’re getting? How do they measure your performance? What improvements would they like to see?


Stage 2: Measure

Purpose: To identify key data that will

enable process performance to be quantified

To develop methods of measurement

To gather data to quantify process performance

Outputs: Facts; i.e. quantified process

performance data


Three types of Process Measure Internal Measures

Time, Volume, Cost Output Measures

Quality, Delivery, Success Satisfaction Measures

Perception

The measures you need will depend on: Desired process outcomes

(Process Definition) Customer requirements Known problems Known improvement priorities

You may need a larger set of measurements to help diagnose problems in a process than you would need to manage it on a day-to-day basis


Source: Total Customer Service: Davidow & Uttal

Time

Pe

rfo

rma

nce

Checksheet example: “Reasons for Delayed Court Reports”


CAUSE JAN FEB MAR APR TOTAL

Unclear supporting information

47

CPS papers not available

6

Staff absenteeism 18

National policy 3

Not informed of crime date

6

Computer problems 5

Other 2

Total 25 20 23 19 87

IIII IIII I IIII IIII II IIII IIII IIII IIII IIII

II II I I

IIII IIII IIII II II

II I

IIIIII

IIII I

I I

Concentration Diagram


Application Form Ref. No. Auth Code

Dept. Salary Grade Address X XXXXX

XXXX

X

XXXX

This shows fieldswhich havemissing information,incorrect details,invalid data etc. andquantifies thoseproblems.

“Traveller” Time Log example for Expenses Claims processProcess Step Date/Time arrived Processing Time Date/Time sent

1. Receive & Log Form

2. Validate information

3. Calculate Vat amount

4. Authorise Claim

5. Set up Bank payment

6. Notify claimant

7. Update Ledgers

8. File receipts and Form

31© 2011 Copyright

ISC Ltd.

Collecting “Soft” Data

Face-to-face Interviews Focus Groups Exit Polls

Verbal Telephone Interviews

Process Mapping Sequence and

Swim-lane Maps Process Walk-through

Written Questionnaires Report/Score Cards

Analysis of existing data Complaints Market Research Market Intelligence

(e.g. field staff)


Stage 3: Analyse

Purpose: To assess and understand

process performance data To evaluate, qualitatively, the

performance of the process To identify root causes of

process performance

Outputs: Identification of waste Agreed root causes of process

performance


Waste Waste is anything that does not add value to

your product or service Eliminating waste gives you more resource to

meet your customers’ requirements Waste will always be present, so there is always

something that you can do to improve your performance

Identifying all the waste in your processes forces you to compare your operation against perfection.....…and this is not a comfortable experience!


The Seven Wastes


Waste ExamplesPeople Waiting Waiting for “stuff to arrive”, Waiting for people to make a decision

Over-production

Producing extra copies “just in case”; Sending two people, when one would be enough

Rework & Failures

Correcting errors in reports, databases, plans, documents , Dealing with complaints, Paying compensation claims, Operating a Helpdesk

People Moving Travelling to and from meetings, incidents, interviews

Over-processing

Doing any steps that are unnecessary; Checking the quality of somebody else’s work; Keying the same information into multiple databases; Gathering the same information from a client/victim/suspect on different Forms

Inventory Cupboards full of stationery in every office; Stores of obsolete brochures, forms, posters; Piles of files on desks (work in progress)

Transport of materials

Moving files around between locations; Moving files to and from archives

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Value Add

Real Value Add Those activities which a

customer would expect you to do for them in producing the output

Ask “Could we invoice the customer for having done this activity?”

Business Value Add Those activities which you

have to do in order to… Stay legal Be compliant Manage the organisation

Challenge: “Would we get locked up, shut down, or fined, if we didn’t do this activity?


• Every activity in a process either adds value or cost.• Value Add is determined firstly from the Customer’s perspective.• There may also be Business Value Adding activities.• Everything else is Waste.

Data Handling Tools


Apr

-05

May Jun

Jul

Aug

Sep Oct

Nov

Dec Jan

Feb

Mar

Apr

-06

May Jun

Jul

Aug

Sep Oct

Nov

Dec Jan

Feb

Mar

Apr

-07

May Jun

Jul

Aug

Sep Oct

Nov

Dec Jan

Feb

Mar

Apr

-08

May Jun

Jul

Aug

Sep Oct

Nov

0

10

20

30

40

50

60

70

80Monthly Caseload

UCL LCL Process Avg

x

New Procedure

Pareto Analysis The Pareto Principle suggests that a small number of

causes (the vital few) will typically account for a large proportion of effects. The remaining causes (the trivial many) only account for a small part of the problem.


20%

80%

CausesEffects

This is also known as the 80:20 rule

20%

80%

Pareto Diagram: Reasons for Delayed Court Reports


0

10

20

30

40

50

60

70

80

90

A B C D E F GCauses

Fre

qu

ency

0

25

50

75

100

Cu

mu

lati

ve %

Lat

e

Cost Cycle-time Analysis


Do A

Input

Do B Approve C Do D

Do EDo F

Do G

Do I

Do H

Output

XXXXXX YYYYYY ZZZZZZ AAAAAA

Processing Timeand Cost

Delay Time

Cost/Cycle-Time Analysis Example


Activity Times (hours) Costs ($/transaction)

Process Cycle Total People Other Total

1. Log incoming mail 0.01 0.10 0.11 0.10 0.10

2. Allocate to staff member 0.05 3.00 3.05 0.50 0.50

3. Check details provided 0.25 1.00 1.25 2.50 2.50

4. Investigate complaint 2.00 24.00 26.0 20.00 25.00 45.00

5. Write draft response 0.50 8.00 8.50 5.00 5.00

6. Approve response 0.15 2.00 2.15 3.00 3.00

7. Copy response letter 0.15 8.00 8.15 1.50 0.50 2.00

8. Post letter to customer 0.05 0.01 0.06 0.50 0.30 0.80

9. File supporting documents 0.25 10.00 10.25 2.50 2.50

10. Log off complaint 0.10 0.10 1.00 1.00

3.51 56.11 59.62 36.60 25.80 62.40

N.B. In this example, Cycle-time is the gap between the completion of one activity and the startof the next activity. It has no cost associated with it.

A one-sigma process


1 17 33 49 65 81 97 113 129 145 161 177 193 209 225 241 257 273 289 305 321 337 353 369 385

The customer requirement lies only one standard deviationaway from the mean of the distribution

This is a picture of a normallydistributed process with a

mean value of 100

This area represents defectsor errors.

Customer requirement (max. 160)Distribution Mean

1s

Could be: ‘time to process an offender in custody’ ‘errors in CRB checks’ ‘cycle-time from receiving case files to delivery of service’ ‘database errors – addresses, personal details, etc.’

A four-sigma process


1 17 33 49 65 81 97 113 129 145 161 177 193 209 225 241 257 273 289 305 321 337 353 369 385

The customer requirement lies four standard deviationsaway from the mean of the distribution

4s

Many organisations’ processesrun at a 3 sigma or 4 sigma

performance level.95%....99% levels

A “Six Sigma” approach is all abouttrying to reduce the variability inprocesses such that errors and

defects are reduced.The process has beenimproved (‘tightened’)

A six-sigma process is “world class”


1 17 33 49 65 81 97 113 129 145 161 177 193 209 225 241 257 273 289 305 321 337 353 369 385

The customer requirement lies six standard deviationsaway from the mean of the distribution

Virtually defect free.

The process distributionis very ‘tight” relative tocustomer requirements.

6s

Sigma and error levels


Yield (Error Rate) DPMO Sigma

30.9% (69.1%) 690,000 1

69.2% (30.8%) 308,000 2

93.3% (6.7%) 66,800 3

99.4% (0.6%) 6,210 4

99.98% (0.02%) 320 5

99.9997% (0.0003%) 3.4 6

Stage 4: Improve

Purpose: To identify, select and test

potential improvements to meet the project and customer requirements

To plan implementation of improvements

To implement an improved process design

Outputs: An improved process, in place

and operating


The Principles of a Good Process


Good processes are based on the idea that you only do what you need to do to meet the customer’s requirement

Any activity should start and finish as late as possible This increases the relevance of what is done, reduces cycle times,

etc, but makes the system very reliant on getting things right first time Throughput time for any individual item (piece of paper,

information or item) processed is very short i.e. if we clock any individual or document through a process, it takes

the minimum possible time to go through all the stages There a minimum of work in progress, and therefore little

queuing between stages (this means no paper on desks, no big queues in e-mail Inboxes, or queues of items at any stage) The different stages are designed to be balanced in their work input

and output

The Principles of a Good Process People are multi-skilled and able to operate various parts

of the process depending on demand People see it as normal that their roles may change from day to

day Systems are designed with job flexibility in mind

Almost no transport between stages, movement reduced to a minimum

Systems are error-proofed to ensure quality People are involved in identifying and preventing errors rather than

finding better ways to check for them Teams own the process and are responsible for improving

all aspects of its performance All wastes are identified and reduced to a minimum


Designing a “To Be” Process

Agree the required levels of performance Define the inputs and outputs Draw a high-level “Sequence To Be” map with maximum

Real VA activities Drill-down to provide additional detail Challenge all Business VA activities to minimise these Carry out a “desk-top walk-through” to confirm the

process will produce the outputs Finally, decide what people and other resources (e.g. IT)

will be needed to operate the process


Design Options

Removing Non-VA Triage and Simplification Automation/Technology Parallel vs. Sequence Multi-skilling Adding/removing Features/Functionality


Develop an Action Plan

Actions toimplementsolutions

Actions toensuresuccess &reducerisks

ActionPlanforchange

WHAT WHEN WHO

Form TeamCommunicateTrainRun PilotAssess PilotPlan Roll-outGet Approval

ACDFACDGACDFDG


Stage 5: Control

Purpose: To ensure the performance of

the re-designed process can be sustained and continuously improved

Outputs: Project Completion Report Updated Process Definition

Template Process Measurement Plan


Appoint a Process Owner

A single, named individual who is responsible for managing and improving the performance of the process to meet customer needs and achieve business outcomes

In the Control phase this will involve... Ensuring measurement systems are in place to quantify and report

performance Regularly reviewing the process in light of customer and business needs,

and identifying further improvements needed (maybe including external Benchmarking)

Addressing areas of under-performance and ensuring corrective actions are taken

Maintaining the skills and capabilities of those who have to manage, operate and improve the process


Control Charts

2SD

1SD

3SD

3SD

2SD

1SD

Upper ControlLimit

Lower ControlLimit

Control charts allow us to see if what is happening to a process is outside what we would normally expect to see.


Continuous Improvement


SetPerformance

Targets

IdentifyImprovements

ImplementChanges

Measure ProcessPerformance

Review Performancevs. Targets

Benchmarkvs. Leaders

Celebrate

Success

Project Completion Report

What did you set out to achieve? What did you achieve? How did you achieve it?

What worked well? What didn’t?

What learning can be transferred elsewhere? Have you celebrated your success?


Ensuring Success: Force Field Analysis What are all the things that will help us

implement successfully?

Include actions in your Plan to build on these

What are all the things that might hinder successful implementation?

Include actions in your Plan to minimise, or eliminate, these


Ian J Seath, DirectorImprovement Skills Consulting Ltd.

www.improvement-skills.co.uk

[email protected]

M: 07850 728506

@ianjseath


http://www.improvement-skills.co.uk/

mailto:[email protected]

or society workshop: practical process improvement using lean and 6 sigma

Business

customer requirement

project completion

process definition

process improvement

include actions

moving files

standard deviations

business