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A 1-day workshop for the OR Society: Practical Process Improvement Using Lean and Six Sigma.
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© 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
© 2011 Copyright ISC Ltd.
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
© 2011 Copyright ISC Ltd. 5
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
© 2011 Copyright ISC Ltd.6
7
Who’s using Lean and Six Sigma?
© 2011 Copyright ISC Ltd.
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
© 2011 Copyright ISC Ltd.
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
© 2011 Copyright ISC Ltd.10
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
© 2011 Copyright ISC Ltd.11
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
© 2011 Copyright ISC Ltd.12
On average our rope is2 cm thick !
That’s good to know!
Supplier
Customer
Lean and Six Sigma
© 2011 Copyright ISC Ltd.13
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
© 2011 Copyright ISC Ltd.14
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
© 2011 Copyright ISC Ltd.15
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)
© 2011 Copyright ISC Ltd. 16
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
© 2011 Copyright ISC Ltd.17
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
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Process Definition (SIPOC)
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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)
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Process Name
Suppliers CustomersBoundaries
Start-point: End-point:
Include: Exclude:
Inputs Outputs
Purpose:________________________________
Owner:______________________
Case study – part 1
© 2011 Copyright ISC Ltd.21
Sequence Map
© 2011 Copyright ISC Ltd. 22
DefineProblem
DefineProcess
Opportunity/need forimprovement Convene/
BriefTeam
DraftHigh-level
Map
Walk-throughProcess
Sign-offMap
IdentifyProblem
Areas
IdentifyCustomer
Requirements
ProblemList
Swim-lane Map
© 2011 Copyright ISC Ltd. 23
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.
Case study – part 2
© 2011 Copyright ISC Ltd.25
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?
© 2011 Copyright ISC Ltd. 26
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
© 2011 Copyright ISC Ltd. 27
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
© 2011 Copyright ISC Ltd. 28
Source: Total Customer Service: Davidow & Uttal
Time
Pe
rfo
rma
nce
Checksheet example: “Reasons for Delayed Court Reports”
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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
© 2011 Copyright ISC Ltd. 30
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)
32 © 2011 Copyright ISC Ltd.
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
© 2011 Copyright ISC Ltd. 33
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!
© 2011 Copyright ISC Ltd.34
The Seven Wastes
© 2011 Copyright ISC Ltd.
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
35
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?
© 2011 Copyright ISC Ltd. 36
• 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
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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.
© 2011 Copyright ISC Ltd. 38
20%
80%
CausesEffects
This is also known as the 80:20 rule
20%
80%
Pareto Diagram: Reasons for Delayed Court Reports
© 2011 Copyright ISC Ltd. 39
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
© 2011 Copyright ISC Ltd. 40
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
© 2011 Copyright ISC Ltd. 41
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.
Case study – part 3
© 2011 Copyright ISC Ltd.42
A one-sigma process
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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
© 2011 Copyright ISC Ltd.44
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”
© 2011 Copyright ISC Ltd.45
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
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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
© 2011 Copyright ISC Ltd. 47
The Principles of a Good Process
© 2011 Copyright ISC Ltd. 48
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
© 2011 Copyright ISC Ltd. 49
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
© 2011 Copyright ISC Ltd. 50
Design Options
Removing Non-VA Triage and Simplification Automation/Technology Parallel vs. Sequence Multi-skilling Adding/removing Features/Functionality
© 2011 Copyright ISC Ltd. 51
Case study – part 4
© 2011 Copyright ISC Ltd.52
Develop an Action Plan
Actions toimplementsolutions
Actions toensuresuccess &reducerisks
ActionPlanforchange
WHAT WHEN WHO
Form TeamCommunicateTrainRun PilotAssess PilotPlan Roll-outGet Approval
ACDFACDGACDFDG
53 © 2011 Copyright ISC Ltd.
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
© 2011 Copyright ISC Ltd. 54
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
© 2011 Copyright ISC Ltd. 55
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.
56 © 2011 Copyright ISC Ltd.
Continuous Improvement
© 2011 Copyright ISC Ltd. 57
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?
© 2011 Copyright ISC Ltd. 58
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
© 2011 Copyright ISC Ltd. 59
Ian J Seath, DirectorImprovement Skills Consulting Ltd.
www.improvement-skills.co.uk
M: 07850 728506
@ianjseath
© 2011 Copyright ISC Ltd.60