Barriers of Adopting Statistics by Firms Adopting Lean Methodology 46 th Annual Meeting of Decision...

Barriers of Adopting Statistics by Firms Adopting Lean Methodology

46th Annual Meeting of Decision Sciences Institute Seattle, WA.

Discussion Points

• My Background• Lean Six Sigma Methodology• The Problem• Define• Measure• Analyze• Improve• Control

My Background

• Bachelor’s & Masters in Business Administration from India (1996)

• Worked in GlaxoWellcome India in its export department & started own consultancy firm (2000)

• Ph.D. in Supply Chain & Logistics from University of Maryland, College Park

• Worked in University of Kentucky, Lexington; Indian Institute of Management Indore; Qatar University, Doha and Central Washington University, WA.

My Background

• The Lean Six Sigma / Operational Excellence bug at KY thanks to Toyota, Georgetown.

• Faculty advisor and as an independent consultant for supply chain, inventory management, and lean and six sigma management projects: ThyssenKrupp (4), Fastenal (2), Procurement & Contracts (CWU) (8), Pexco (5), Center for Advanced Manufacturing of Puget Sound (8), Hopunion (1), Wildcat Shoppe (1), Genie Industries (3), C H Robinson (1), Liberty Bottleworks (1), Lexmark (8), Humana (4), United Technologies (4), Valvoline (4), Brown-Forman (4), O’Charley’s Restaurants (4), Ryder Systems (3), Tempur-Pedic (3), Alltech (2), Brunswick Boat Group (1), Kyocera (1), and Vascor (3), LeanCor (1), Kaba Mas (1), Lexington Fayette Urban County Government (1), Papa Johns (1), Ryder (3), Sylvania (1), ACS (1), Central Bank (1), Hitachi Automotive Products (1), and Scientech Technologies Pvt. Ltd. (2) among others.

Lean Six Sigma Methodology

• The objective of every organization is to increase revenue / profitability / customer service levels and reduce costs. Lean Six Sigma is an effective methodology (way of life) to reduce costs.

• Benefits of both Lean (eliminate wastes) and Six Sigma (reduce defects).

Lean / Six Sigma

• Focus on improving processes to achieve positive business results– Reduction in costs– Increase in quality– Improvements in customer satisfaction

• A process is a collection of interacting components that transform inputs into outputs.

Six Sigma Philosophy

• Cause – Effect relationship Y = f(X)s• Variations exist in nature– Common cause (random) variation– Special cause (assignable) variation

• Eliminate Special cause variation• Eliminate defects through use of statistics rather than

through inspection• Doing business that focuses on continuous improvement

of processes (Repetitive processes)

The Need for Lean

“When capable people with good intentions meet bad processes, bad processes win 9 times out of 10.” - General Jim Mattis (CWU ‘72)

• “We get brilliant results from average people managing brilliant systems. Our competitors get average results from brilliant people working around broken systems” – Fujio Cho, Chairman Toyota Motors

• T – Transportation• I – Inventory• M – Motion• W – Waiting• O – Over-production• O – Over-processing• D – Defects• T – Talent (under-utilized)

The 7+1 Wastes

The ProblemLe

an: D

oing

the

Righ

t Thi

ngs

6 Si

gma:

Doi

ng T

hing

s Rig

ht

Lean Six Sigma Fusion

Lean Six Sigma

Focus Improve system efficiency - improving work flow - stability of processes

Improve process effectiveness- Reduction of variation

Goal Eliminate Waste Reduce Defects

Emphasis Value to customer Quality to customer

Tools VSM, 5S, Kaizen, Flow & Pull, Takt Time, Kanban, 8 wastes, Value Add analysis

FMEA, Statistics, DPMO, Pareto, DOE, CTQ

Common Tools

Cause & effect diagrams, visual controls, standardized work, process mapping

Define

Purpose & Deliverables (Y)• Articulate the business problem (current state)• Articulate the business opportunity (future state)• Determine scope of the problem– What is in scope– What is definitely out of scope

• Build the team• Prepare data collection plan

Define: Concepts & Techniques

• Voice of Customer (VOC) & CTQ – 6 Sigma• Project Charter - Tie• A3 Thinking - Lean• Team roles & responsibilities - Tie• SIPOC - 6 Sigma

Customer Perception

Measure

Purpose & Deliverables (Y)• Identify available data and its accuracy• Identify critical measures of inputs and

outputs• Execute data collection plan• Describe the process with data and facts

Measure: Concepts & Techniques

• Genchi Genbutsu (Observe the practice) - Lean• Process Maps – Tie but….• Calculate Yield Throughput – 6 Sigma• Categorize activities as value added / non-value

added / business value added - Lean• Value Stream Maps - Lean• Compute Takt time - Lean but…….

Measure: Concepts & Techniques

• Compute Descriptive Statistics - 6 Sigma but….• Appropriate Control Charts (Control limits) - 6

Sigma – Process capability (specification limits) - None– Run charts - None

• Validity of the measurement system– Gage R&R - 6 Sigma

Analyze

Purpose & Deliverables (X)• Find out the root causes• Establish causal relationship

Y = f(X)s

Analyze: Concepts & Techniques

• Lean strives towards stability of the processes.• Do not confuse stability with capability.• Customers normally feel the instability of the

internal processes

Analyze: Concepts & Techniques

• 5 “Why” Analysis - Lean• Pareto Analysis - Tie • Fishbone Diagram - Tie • Cause & Effect Matrix - Tie • Failure Mode and Effects Analysis (FMEA) -

Lean• Hypothesis testing - 6 Sigma• Regression - 6 Sigma

Improve

Purpose & Deliverables (X)• Move the “causes” or Xs in the

favorable direction• Establish guidelines, policies, counter

measures on the Xs

Improve: Concepts & Techniques

“Stop production so that production never has to stop.”- Lean Proverb

SPC is based on the fact that defects will happen. Therefore we have powerful statistical tools to measure the defects.

Lean goal – To detect mistakes and prevent defects. There is a big difference between mistake and defect. People will make mistakes, however a mistake becomes a defect when it is passed on to the next step (internal / external customer) in the process.

Improve: Concepts & Techniques

• Jidoka (Autonomation) - Tie •Poka Yoke - Lean•Brainstorm - Tie •Visual management - Lean•5S (Sort, Set, Shine, Standardize, Sustain with Safety) - Lean•Design of Experiment (DOE) - 6 Sigma

Control

Purpose & Deliverables (Y)• Make Standards visible and simple• Train and teach new standards• Institute & monitor discipline of process• Measure and verify outcomes• Plan Do Check Act implementation• Transfer ownership to process owners

Improve: Concepts & Techniques

•Control charts with process capability and run chart - 6 Sigma•Measure & Monitor the Xs - Tie •Dashboard of future metrics - Tie •Documentation - 6 Sigma but……•Audit - None

Way Forward

• Call it “Operational Excellence”• Have the operators practice the Lean

techniques while the managers need to be more data driven

• Introduce descriptive statistics to the operators

• Firms will be more “Lean” or “Six Sigma” oriented based on their culture – Hire the right people.

Thank You