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corporate trainer: professional investor
good is not enough…..excellence is the goal
Introduction to lean six sigma
Saturday, 28th november 2015
cep for the institute of cost accountants of india –
pune chapter
CMA manohar v dansingani, CSCA
Views expressed are personal, without prejudice &
without recourse. e&oe.
CSCA
CMA manohar v dansingani, CSCA
CMA manohar v dansingani, CSCA
National Merit Scholar, Rank Holder in Professional Exams
Visiting Faculty at The Institute of Cost Accountants of India (best faculty award)
IBS Business School
Gokhale Institute of Politics & Economics
National Academy of Defence Financial Management
CPE Trainer for NISM (National Institute of Securities Markets)
CPE Trainer for BSE Institute
Train the Trainers, Faculty Development, CEP & Management
Development Modules.
Conducted Customized Sessions for:
ICAI
IBS
GIPE
NADFM
MCCIA
Associate Member: ICAI-CMA
Certified Six Sigma Black Belt Professional
Associate Member: ACFE
ISCEA Certified Instructor
CPE Trainer: NISM
Global Mentor: SCNext
Certified Supply Chain Analyst
CMA manohar v dansingani, CSCA
*
*The Tragedy is Not That
*We Aim too High & Fail,
*But that we Aim Too Low
*& Succeed !!
CMA manohar v dansingani, CSCA
*Good news
*Bad news
CMA manohar v dansingani, CSCA
*
*I hope to learn from all of you….Thank You
*2 * sessions of 60 minutes each
*Break for 5 minutes
*Request your active participation
*This will be a brief overview of Lean Six Sigma
*TIME MANAGER: PLEASE INFORM ME AFTER 45 MINUTES IN EACH SESSION
CMA manohar v dansingani, CSCA
*
*“We don’t know what we don’t know.
*We can’t act on what we don’t know.
*We won’t know until we search.
*We won’t search for what we don’t question.
*We don’t question what we don’t measure.
*Hence, we just don’t know.”
CMA manohar v dansingani, CSCA
*
*Not a formal training session
*Brief introduction & understanding
*Shall keep it simple & practical
*Relevance in normal profession or business
*Dispel the fear which the terms invoke
*LEAN & SIX SIGMA ARE A POWERFUL
COMBINATION & THAT’S HOW WE SHALL
DISCUSS THEM
CMA manohar v dansingani, CSCA
*
*Sigma is the Greek letter which denotes
Standard Deviation
This is the lower-case alphabet
The upper-case sigma below, is used to signify
summation
*
*The Customer
*The Process
*The Employee
*
*Customers are the center of any company’s universe: they define quality. They expect performance, reliability, competitive prices, on-time delivery, service, clear and correct transaction processing and more. Our customers’ satisfaction is priority number 1. If we don't keep them happy, someone else will.
*
*Outside-In Thinking
*By understanding the
transaction lifecycle from the
customer's needs and
processes, we can discover
what they are seeing and
feeling. With this knowledge,
we can identify areas where
we can add significant value
or improvement from their
perspective
CMA manohar v dansingani, CSCA
*Two Volunteers please
CMA manohar v dansingani, CSCA
*
*Suggestions for 100% accuracy at all times
*(almost)
CMA manohar v dansingani, CSCA
*
LS
L
USL
Customer Target
Defect
s
Defect
s
Prevent Defects by
Reducing Variation
LS
L
USL
Customer Target
Defect
s
Prevent Defects by
Centering Process LS
L
USL
Customer Target
Meet Customer
Requirements Lean eliminates waste, adds
value & hence reduces (cost) or
improves (value) the average
Six Sigma reduces variation
or defects which the customer
faces & improves profits CMA manohar v dansingani, CSCA
1930 1950 1900
Ford
Assembly
Line
Guinness
Brewery
Shewhart
Introduces
SPC
Gilbreth, Inc.
•Management
Theory
•Industrial
Engineering
Deming
•14 Points
•7 Deadly Diseases
Toyota Production
System
*
CMA manohar v dansingani, CSCA
Frank Gilbreth 1st proposed
the position of “caddy” to a
surgeon
& standardized
techniques for army recruits
to reassemble/disassemble
their weapons even in total
darkness
1990 2000 1980
Motorola
Introduces Six
Sigma
Just – in–
Time
SPC
Lean Mfg.
TQM
AlliedSIgnal
GE Adapt LSS to
Business
Processes
*
CMA manohar v dansingani, CSCA
CMA manohar v dansingani, CSCA
A Vision and Philosophical commitment to
our consumers to offer the highest quality,
lowest cost products
A Metric that demonstrates quality levels at
99.9997% performance for products and
processs
A Benchmark of our product and process
capability for comparison to ‘best in class’
A practical application of statistical Tools and
Methods to help us measure, analyze,
improve, and control our process
Six Sigma
*Six Sigma as a Philosophy
Internal &
External
Failure
Costs
Prevention &
Appraisal
Costs
Old Belief
4 Co
sts
Internal &
External
Failure Costs
Prevention &
Appraisal
Costs
New Belief Co
sts
4
5
6
Quality
Quality
Old Belief
High Quality = High Cost
New Belief
High Quality = Low Cost
is a measure of how much
variation exists in a process
CMA manohar v dansingani, CSCA
* Focus: The End
User *Customer: Internal or
External
*Consumer: The End User
the “Voice of the Consumer” (Consumer Cue)
must be translated into
the “Voice of the Engineer” (Technical Requirement)
Quality Function Deployment
CMA manohar v dansingani, CSCA
*
Critical to Quality (CTQ): Attributes most important to the customer
Defect: Failing to deliver what the customer wants
Process Capability: What your process can deliver
Variation: What the customer sees and feels
Stable Operations: Ensuring consistent, predictable processes to improve what the customer sees and feels
Design for Six Sigma: Designing to meet customer needs and process capability
CMA manohar v dansingani, CSCA
WHAT’S IN IT FOR YOU?
Customers don't judge us on averages, they feel the variance in each transaction, each product we ship.
Six Sigma focuses first on reducing process variation and then on improving the process capability.
Customers value consistent, predictable business processes that deliver world-class levels of quality.
CMA manohar v dansingani, CSCA
Assume Daily
Entries Errors % error Reliability 20 entries per client
Your assistant 20 1 0.05 0.95 1 error in accounts of every client
Checked by every day
another assistant 20 1 0.05 0.95
But now, we are concerned about the joint probability of both of them making a mistake in the same
entry or, 0.05*0.05
Entries Errors % error Reliability
or one error every 400 1 0.0025 0.9975
400 Entries
As if by magic, this system of unbiased, independent cross-check ensures that there is only
ONE ERROR EVERY 20 CLIENTS, per day
CMA manohar v dansingani, CSCA
WOW! THAT IS SOUND BUSINESS SENSE. SHALL WE PROCEED?
CMA manohar v dansingani, CSCA
*Carl Friedrich Gauss (1777-1855) introduced the concept of the normal curve.
* In the 1920’s Walter Shewhart showed that three sigma from the mean is the point where a process requires correction. One of W. Edwards Deming's teachers, he preached the importance of adapting management processes to create profitable situations for both businesses and consumers, promoting the utilization of his own creation -- the SPC control chart.
William Gosset discovered the t-distribution while working
for the Guinness brewing company. Because his employer
prevented employees from publishing papers, Gosset
published his research under the pseudonym Student.
That’s why his distribution is often called Student’s t-
distribution. (t-distribution, used when sample size is small &
the population standard deviation is unknown)
CMA manohar v dansingani, CSCA
* Create and communicate to all employees a statement of the aims and purposes of the
company.
* Adapt to the new philosophy of the day; industries and economics are always changing.
* Build quality into a product throughout production.
* End the practice of awarding business on the basis of price tag alone; instead, try a long-
term relationship based on established loyalty and trust.
* Work to constantly improve quality and productivity.
* Institute on-the-job training.
* Teach and institute leadership to improve all job functions.
* Drive out fear; create trust.
* Strive to reduce intradepartmental conflicts.
* Eliminate exhortations for the work force; instead, focus on the system and morale.
* (a) Eliminate work standard quotas for production. Substitute leadership methods for
improvement.
(b) Eliminate MBO. Avoid numerical goals. Alternatively, learn the capabilities of processes,
and how to improve them.
* Remove barriers that rob people of pride of workmanship
* Educate with self-improvement programs.
* Include everyone in the company to accomplish the transformation.
Dr. W. Edwards Deming
CMA manohar v dansingani, CSCA
*
* In the early and mid-1980s with Chairman Bob Galvin at the helm, Motorola developed this standard & designed its methodology.
* Bill Smith (a Motorola engineer) was a co-founder & he coined the term “Six Sigma”
* Dr. Mikel Harry was the other co-founder & he said,
* “Six Sigma shifts the focus from the business of quality to the quality of business”
* (“Six Sigma” is a federally registered trademark of Motorola).
CMA manohar v dansingani, CSCA
*
*G E, under the leadership of
*Jack Welch
*Promoted it aggressively & spread awareness
CMA manohar v dansingani, CSCA
*Six Sigma helped Motorola realize powerful
bottom-line results in their organization – in
fact, they documented more than $16 Billion in
savings
*
CMA manohar v dansingani, CSCA
*
*Six Sigma can be seen as: a vision; a
philosophy; a symbol; a metric; a goal; a
methodology.”
CMA manohar v dansingani, CSCA
P d c a Plan Do Check act
Continuous improvement
Popularized by Dr. Edward Deming,
known as “Deming Cycle”, but he always
called It the “Shewhart Cycle”
Later on, Deming modified it to
“PLAN, DO, STUDY, ACT”
CMA manohar v dansingani, CSCA
DMAIC
33
Phases of Six Sigma are:
*Define specific goals to achieve outcomes,
consistent with customers demand and business strategy
* Measure the existing process & output
*Analyze problems ,cause and effects must be
considered
*Improve process on bases of measurements
and analysis, aim is to eliminate defects
*Control process to minimize defects
DMAIC
CMA manohar v dansingani, CSCA
DMAIC Define
Measure
Analyze
Improve
Control
•Define the project goals and customer (internal and
external) deliverables
•Measure the process to determine current
performance
•Analyze and determine the root cause(s) of the
defects
•Improve the process by eliminating defects
•Control future process performance
When to Use DMAIC
The DMAIC methodology, instead of the DMADV methodology, should be
used when a product or process is in existence at your company but is not
meeting customer specification or is not performing adequately.
CMA manohar v dansingani, CSCA
DMADV Define
Measure
Analyze
Design
Verify
•Define the project goals and customer (internal
and external) deliverables
•Measure and determine customer needs and
specifications
•Analyze the process options to meet the customer
needs
•Design (detailed) the process to meet the
customer needs
•Verify the design performance and ability to meet
customer needs
When to Use DMADV
The DMADV methodology, instead of the DMAIC methodology, should be
used when:
•A product or process is not in existence at your company and one needs
to be developed
•The existing product or process exists and has been optimized
(using either DMAIC or not) and still does not meet the level of customer
specification or Six Sigma level
CMA manohar v dansingani, CSCA
*
*The problem
*Restaurant….complaints from customers
*Discuss
*Feedback not points 1 to 5 for satisfaction
*But: rated on most dissatisfying, in descending
order
CMA manohar v dansingani, CSCA
*
*The problem
* Restaurant….complaints from customers
* Food
* Ambience
* Service
* Billing
* Music
* Tableware
* Waiting for table
* Dessert Trolley
* Parking
CMA manohar v dansingani, CSCA *
*Restaurant….complaints from customers
*Parking 170 22.67% 22.67%
*Waiting for table 140 18.67% 41.33%
*Music 95 12.67% 54.00%
*Billing 80 10.67% 64.67%
*Ambience 75 10.00% 74.67%
*Service 70 9.33% 84.00%
*Food 50 6.67% 90.67%
*Tableware 40 5.33% 96.00%
*Dessert Trolley 30 4.00% 100.00%
750 1
CMA manohar v dansingani, CSCA
0
20
40
60
80
100
120
140
160
180
Number of complaints
Number of complaints
CMA manohar v dansingani, CSCA
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Percentage (ParetoChart)
Percentage (ParetoChart)
What do you observe?
CMA manohar v dansingani, CSCA
S SUPPLIER I INPUT P PROCESS O OUTPUT C CUSTOMER
Useful to Define the problem
CMA manohar v dansingani, CSCA
BREAK
CMA manohar v dansingani, CSCA
WELCOME BACK
CMA manohar v dansingani, CSCA
*
TOO HOT, TOO COLD, QUANTITY, TASTE…..
*What do you say as customers?
*What have you observed?
*(also, fuse wire, pressure cooker…)
CMA manohar v dansingani, CSCA
*
*Audit Report errors
*A) Society/Association
*B) Capital items/Revenue items
*C) Interest waived not shown nor any note
*D) Deficit shown under Surplus with negative
sign
CMA manohar v dansingani, CSCA
According to the SEC, a complete failure of internal controls over Satyam’s
invoice management system, books of account, and financial reporting
enabled the company’s then-senior managers to intentionally overstate
revenue, income, earnings per share, cash, and interest-bearing deposits from
2003 through September 2008 by over $1 billion, or more than half of the
company’s total assets
2015 Fraud Examiners Manual (International) (1.211 & 1.212) ACFE
CMA manohar v dansingani, CSCA
2015 Fraud Examiners Manual (International) (1.211 & 1.212) ACFE
In confirming Satyam’s cash balance, the auditors relied on management
to send confirmation requests to the company’s banks and to return
purported confirmation responses from the banks to the auditors. This
was in direct conflict with standard audit procedures, which require that
1) cash balances be independently confirmed with the financial
Institutions in which the accounts are held, and
2) the auditors retain control over the confirmation documents to reduce
the risk of tampering. Had this basic procedure been performed in
accordance with standards, it is likely that the auditors would have
caught the fraud themselves.
Emphasis, highlighting, added by me
CMA manohar v dansingani, CSCA
CMA manohar v dansingani, CSCA
Calculator 200 components
Each one 99.75% reliable
Every 400 components 1 faulty component
How reliable
is the calculator 60.62%
Every 400 calculators 242 defective
calculators
CMA manohar v dansingani, CSCA
*
“If there are processes that generate a lot of
negative customer feedback, whether that
customer is internal or external, the
components of Six Sigma should be considered
as a means to study and rectify the problem.”
CMA manohar v dansingani, CSCA
*
*7QC tools
Check Sheets (collect data to make improvements)
Pareto Charts( define problem and frequency)
Cause and effect diagram (Identify possible causes to solve problem)
Histogram (Bar charts of accumulated data to evaluate distribution of data)
Scatter diagram (plots many data points and pattern between two variables)
Flow Chart (Identify unwanted steps)
Control charts (Control limits around mean value)
CMA manohar v dansingani, CSCA Ishikawa Diagram
CMA manohar v dansingani, CSCA
5 WHYS
WHY
WHY
WHY
WHY
WHY
CMA manohar v dansingani, CSCA
*
*TQM great….but did not show resultant profits
*Six sigma project will only be initiated if it can
*Deliver higher profits (ROI)
*
*PROBLEM?
* Identify Potential Causes (X’s)
* Investigate Significance of X’s
*Collect data on x’s
*Graphical/Quantitative analysis
* Identify Significant Causes to focus on (y=f(X))
*Evaluate the impact of x’s on y
*Here you identify the critical factors of a “good” output and the root causes of defects or “bad” output.
*
*Generate Potential Solutions
*Select & Test Solution
*Develop Implementation Plan
*
*Create Control & Monitoring Plan
*Mistake proof the process
*Determine the x’s to control and methods
*Determine Y’s to monitor
*Implement Full Scale Solution
*Revise/develop process
* Implement and evaluate solution
*Finalize Transition
*Develop transition plan
*Handoff process to owner
CMA manohar v dansingani, CSCA
* http://www.motorolasolutions.com/en_us/services/learning.html
http://www.ge.com/en/company/companyinfo/quality/whatis.htm
http://www.iassc.org/
https://goleansixsigma.com/
http://www.leanproduction.com/lean-glossary.html
CMA manohar v dansingani, CSCA
*
*Taiichi Ohno – Toyota Production System.
*1940s-1950s company was on verge of bankruptcy
*Dynamics of industry were changing – moving from mass production to more flexible, shorter, varied batch runs (people wanted more colors, different features, more models, etc).
*Ohno was inspired by 3 observations on a trip to America
*Henry Ford’s assembly line inspired the principle of flow (keep products moving because no value is added while it is sitting still)
*The Indy 500 – Rapid Changeover
*The American Grocery Store – led to the Pull system – material use signals when and how stock needs to be replenished
https://www.youtube.com/watch?v=5LyfX
ZaDq_k
Amazing tyre change
CMA manohar v dansingani, CSCA
*
CMA manohar v dansingani, CSCA *
CMA manohar v dansingani, CSCA
CMA manohar v dansingani, CSCA
*
*Standardized Work (difference between
standardized & identical)
*JIT
*Level loading
*Kaizen
*Respect
*Employee training & empowerment
*(the list is not comprehensive)
CMA manohar v dansingani, CSCA *
*Kaizen (Continuous Improvement)
*5S – this methodology reduces waste through improved workplace organization and visual management
*seiri, seiton, seiso, seiketsu, and shitsuke *Sort, Set in order, Shine, Standardize and Sustain
*Kanban – a Japanese term that can be translated as “signal,” “card,” or “sign.”
*Most often a physical signal (paper card of plastic bin), that indicates when it is time to order more, from whom, and in what quantity.
CMA manohar v dansingani, CSCA
*
*5 s
CMA manohar v dansingani, CSCA
*
*Lean is used for shorter, less complex
problems….often time driven
*Focus on Eliminating waste & adding value
*Six Sigma…bigger, more analytical
approach..often quality driven
*Focus on reducing variance & delivering
improved profits (primarily thru savings)
Lean vs. Six Sigma 67 .PPT
*
LEAN = Improvement principles focused on
dramatically improving process speed and eliminating
the eight deadly wastes.
Improve
Process-
Pull
Control
Process
Analyze
Process-
Flow
Measure
Value
Define
Value
SIX SIGMA = Breakthrough Process, Design, or
Improvement Teams focused on eliminating chronic
problems and reducing variation in processes.
Improve Control Analyze Measure
Define
*
Voice of Customer
Voice of Process
The Voice of the Process is
independent of the Voice of the
Customer
Sigma
Capability
Defects per
Million
Opportunitie
s
% Yield
2 308,537 69.15%
3 66,807 93.32%
4 6,210 99.38%
5 233 99.98%
6 3.4 99.99966%
Lean Value Stream Management starts with defining
value in terms of products and process capabilities to
provide the customer with what they need at the right
time and at an appropriate price.
Value
added
Non-value
added/waste
CMA manohar v dansingani, CSCA
Poka Yoke
Error proofing or mistake proofing
Adopted by Dr. Shigeo Shingo as part of the TPS
In 1960
Target is zero defects
Originally, called “baka-yoke”…but this means “Fool-
Proofing”, so name changed later
e.g. Plug sockets, petrol pump nozzle,
CMA manohar v dansingani, CSCA
*Spaghetti chart
CMA manohar v dansingani, CSCA * Go to GEMBA
Deming example
CMA manohar v dansingani, CSCA
Takt German Taktzeit Beat or Cycle Time
Net Operating Time OT Customer Requirements CR
CUSTOMER REQUIREMENTS 50 every 8 hours
minutes One Shift of 8 hours 480
Break 30 Start up meeting 10 Lunch 30 End clear up 10 Machine set up 15
CMA manohar v dansingani, CSCA
*minutes
One Shift of 8 hours 480 Break 30 Start up meeting 10 Lunch 30 End clear up 10 Machine set up 15
95
Net Operating Time (NOT) 385 minutes/shift
Customer Requirements 50 units/shift
takt time 7.7
7.7 units per minute to meet customer requirements
CMA manohar v dansingani, CSCA
A3 THINKING
CMA manohar v dansingani, CSCA
Lean Six Sigma can only be successful….
if there is very
Strong leadership support
77
The Impact of Added Inspection
1,000,000 ppm
3.4 ppm
6 ppm
If the likelihood of detecting the defect is 70% and we have
10 consecutive inspectors with this level of capability, we
would expect about 6 escaping defects out of every
1,000,000 defects produced.
You can save your self by producing quality not by Inspection You can save your self by producing quality not by Inspection
CMA manohar v dansingani, CSCA
*Video of TPS & discuss
https://www.youtube.com/watch?v=kce2
L23yLcw
CMA manohar v dansingani, CSCA
*
Critical to Quality: Attributes most important to the
customer
Defect: Failing to deliver what the customer
wants
Process
Capability: What your process can deliver
Variation: What the customer sees and feels
Stable
Operations:
Ensuring consistent, predictable
processes to improve what the
customer sees and feels
Design for Six
Sigma:
Designing to meet customer needs
and process capability
Key Concepts of Six Sigma
At its core, Six Sigma revolves around a few key concepts.
http://www.ge.com/en/company/companyinfo/quality/whatis.htm
CMA manohar v dansingani, CSCA *
*
Control
Process
Improve
Process - Pull
Analyze
Process - Flow
Measure
Value
Define
Value
CMA manohar v dansingani, CSCA
*aristotle
* we are what we *Repeatedly do; *Excellence, then, is not an act but a habit
CMA manohar v dansingani, CSCA
THANK YOU
FOR YOUR PATIENCE,
TIME & ATTENTION
HAVE A NICE DAY
Questions ?
Views expressed are personal, without prejudice &
without recourse. e&oe.