The Need to Integrate TOC, Lean, Six Sigma and Management by Processes

Eduardo C. MouraSeptember 2010

A Webinar by:

Eduardo C. Moura: Founder and President ofQualiplus Consulting (www.qualiplus.com.br).Graduated as Electronics Engineer in 1978, USP(Sao Paulo University-Brazil). Since 1984 hasbeen an active instructor, consultant and authoron quality and business excellence.From 1986 till 2003 accumulated the ASQ certifications for CQE,CRE, CQA and CQM. Quality Specialist by the UNICAMP(University of Campinas, Brazil) in 1992. Certified Taguchi Expert by the ASI (American Supplier Institute), 1999. Author of severaltechnical papers and books published in Brazil and in the USA, including Volume 15 of the ASQ “How-To Series”, How to Determine Sample Size and Estimate Failure Rate in Life Testing”, Quality Press, 1993. Certified Thinking Process Practitioner by the TOCICO (The Theory of Constraints International Certification Organization), 2010.

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30 years TQM/Six Sigma; 16 yr BMTP; 10 yr TOC; 9 yr Lean (studying, teaching and implementing)Preaching integration of those 4 methodologies since 2003, 7 yrs ago.Article submitted to a US Quality magazine 4 yrs ago; rejected: “Nobody ever wrote about that...”

✤ Article written in 2004, revised by Dr. Alan Barnard (Goldratt Research) late 2009.

✤ Available from Qualiplus or TOCICO.

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The goal...

✤ To clarify about the need and benefits of integrating:✤ TOC (The Theory of Constraints)✤ Lean Production/ Lean Office✤ Six Sigma✤ Business Management through Processes (BMTP)

Prereqs...

✤ You have some previous knowledge about TOC, Lean and Six Sigma.✤ BMTP will be explained in a little more detail...

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✤ That is a methodology developed by Eduardo Moura as of 1994, based on the concept of “Cross-Functional Management” by Kaoru Ishikawa, plus the contributions of H. James Harrington and the use of the “7 New QC Tools” [Mizuno, Ref. 3].

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Ishikawa

Harrington

Mizuno

E. Moura

I didn’t dare to place my

photo among such

celebrities...

Origin of BMTP

Some more details about BMTP✤ BMTP implementation

steps:✤ 1) Identify and

structure the needsfrom every businessstakeholder.✤ Customers✤ Employees✤ Owners/investors✤ Suppliers✤ Community✤ Government

7Customer satisfaction parameters (partial)

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✤ 2) Identify all business processes by grouping together related, cyclical business activities.

Desenvolvimento e avaliação de fornecedores

Reunir fornecedores para avaliação de desempenho

Analisar desvios nas entregas de insumos (quantidade + prazo)

Negociar requisitos da Reckitt com fornecedores

Desenvolver fornecedores com qualidade assegurada

Controlar as entregas por fornecedor

Avaliar performance dos fornecedores

Aprovar fornecedores de serviços de beneficiamento

Comparar diferentes fontes de suprimento

“intercompany”

Desclassificar fornecedores sem qualidade

Preparar documentação técnica p/ produção em

terceiros

Monitorar desempenho dos CDA’s

Visitar fornecedores de insumos produtivos

Buscar especificações técnicas de materiais

Auditar processos de fornecedores

Distribuição

Armazenamento

Armazenar produtos acabados no C.D.’s

Endereçar os produtos p/ armazenagem

Analisar custos de armazenagem

Desenvolver formas alternativas de

armazenagem de insumos/produtos

Eliminar estoques obsoletos

Expedição

Separar produtos p/ expedição

Despachar produtos acabados para clientes

Identificar problemas nas entregas de produtos

Acompanhar as entregas dos produtos

Carregar veículos para embarque

Enviar produtos para os CDA’s

Cyclical business activities Processes

Macroprocesses

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✤ 3) Identify improvements and innovations needed to realign business processes (value-creation, support and management) to the satisfaction of stakeholders’ needs.

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✤ 4) Create the business macroflow (a systemic model of the business system viewed as a process chain)

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✤ 5) Design and implement the integrated standardization of the business macroflow

Business Macroflow

Macroprocess flow and interfaces

Process flow and interfaces

Let’s recognize...

✤ No individual improvement methodology has the definite cure for all organizational diseases.

✤ A solution is needed that combines the best contributions from each of them.

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Why those 4 methodologies?

✤ Real improvement cannot be achieved without starting from a systemic point of view.

✤ Most organizational improvements require a precisely orchestrated intervention in the chain of work processes.

✤ Nowadays TOC, Lean, Six Sigma and BMTP all consider:✤ a business-wide perspective, and✤ orient improvement actions to business processes.

✤ And each of those methodologies have unique contributions that no other have:

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Unique contribution of TOC

✤ Goal: “to increase organizationalprosperity by focusing on thebusiness system’s constraint”.

✤ Do organizations need that?✤ No other approach does that with such a “laser-

precision” focus and effectiveness.✤ That’s why TOC should serve as the guiding

methodology for Lean, Six Sigma and BMTP implementations.

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Unique contribution of Lean

✤ Goal: “To reduce time-to-cash by focusing on waste elimination in the process flow.”

✤ Do organizationsneed that?

✤ Lean contributes withpowerful concepts andproven tools for visualcontrol, quick feedbackand constantimprovement of thevalue-creation chain.

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A Value Stream Map

Unique contribution of Six Sigma

✤ Goal: “to increase customer satisfaction by focusing on the variability reduction of key product/process parameters.”

✤ Do organizationsneed that?

✤ No other methodology inherits so much of the core values, concepts and tools developed along 80 years of the worldwide Total Quality movement.

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Unique contribution of BMTP

✤ Goal: “to increase all stakeholders satisfaction by focusing on the integrated standardization of the business processes flow”.

✤ BMTP identifies a major policy constraint: the “Management by Departments” paradigm✤ that sub-optimizes the entire

business system...

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MANAGEMENT BY DEPARTMENTS PARADIGM

AMBIGUOUS INTERFACES BETWEEN AREAS (UNCLEAR,

MISMATCHED AUTHORITIES AND RESPONSIBILITIES)

DEFICIENT COMMUNICATION/ INFORMATION FLOW

LOTS OF REWORK AND FIREFIGHTING

INCREASED COSTPOOR QUALITY

SLOW RESPONSES

UNSATISFIED CUSTOMERSLOW COMPETITIVITY

✤ That root cause has shown up in more than 50 CRTs the author has built in several different companies along the past 10 years!

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✤ The high levels of rework and firefighting (typically 70%!) immediately drive managers into the “focusing dilemma”:

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✤ So far, the “Management by Departments” paradigm (a root cause of the focusing dilemma) has been taken for granted by TOC, Lean and Six Sigma!

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✤ By establishing a new business structure and management model, BMTP is a win-win solution to the managerial focusing conflict.✤ different groups of people will be effecitively focused on both

sides of the conflict...

Current gaps in each methodology(my point of view; no offense intended...)

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GAP

TOCTends to be “top management” only.Takes process variation as a given.Tends to be (too) “money-focused”; lacks attention to values and mission.

Lean Tends to be “internally focused” on company’s value streams.Does not consider market constraints.

Six Sigma

Tends to be too “statistics-oriented”.Typically, focuses mostly cost reduction.

BMTPAlthough it builds an integrated process structure, it does not provide the “filling” for each specific process, in terms of applicable improvement tools.

Integration trends

✤ Lean Six Sigma (Rubrich 2001; George 2002) is a standard approach nowadays.

✤ Quite recently, the integration of TOC+Lean+Six Sigma is gaining voice: “The Ultimate Improvement Cycle” (Sproull 2009); “Velocity (AGI 2010).

✤ E. Moura (2002, 2006) introduced (humbly...) the 360º Excellence model (E360), integrating TOC, Lean, Six Sigma and BMTP.

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TOC

LEAN

TOCTOC

SS

BMTP

TP: prioritize projects

CCPM: better project mang’t

CCPM: better project mang’t

TA: better eval. financial impact

CCPM: prioritize projects

CRT: problem analysisCloud: innovative solutions

TA: better financ. indic./decisions

CCPM: better project mang’t

TOC Sol. incorp. into processes

Main syenergistic interactions

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LEAN

TOC

TOCTOC

SS

BMTP

Lean tools: more visual control

Wider people involvement

Lean tools: more stable processes

Waste elim.: better Q, faster L/T

Visual process standardization

Kaizen team maintain standard.

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SS

TOC

TOCTOC

LEAN

BMTP

Balances customer focus x T

Stat. tools: better data analysis

Less variab.: more stable flow

GBs/BBs: high impact proj.

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BMTP

TOC

TOCTOC

LEAN

SS

Integr. chain: better exploit/subord.

Overall integrated chain: flow

Kaizen efforts are incorp. to proc.

Leadership is standardized

Systematic projects id./drive

Breaks silo mentality

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But watch out!

✤ All such integration of methods and tools is just know-how...✤ And know-how is not sufficient for sustainable, long-term

organizational improvement✤ As a matter some 70% of the organizational improvement

initiatives fail because of the narrow-minded, “tool-oriented” approach...

✤ Two other elements are necessary:✤ know-what: what key business aspects should we drive know-

how to, in order to improve overall performance?✤ know-why: why improve? (core values)

Know-How

Know-What

Know-Why

The 360º Excellence Model

“Successful know-how application requires precise know-what identification and know-why realization.”

Opportunities Definition

A simplified implementation roadmap

Define Organizational Ideology

Identify High-impact themes VOC Study

Improvement ProjectsBMP Lean Six

SigmaTOC Other

Results Analysis

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References

✤ [1] E. C. Moura, A. Barnard (2006, 2010): “The Need to Integrate TOC, Lean, Six Sigma and Process Management”, Qualiplus Consulting.

✤ [2] Strategos website: http://www.strategosinc.com/just_in_time.htm✤ [3] Shigueru Mizuno, editor (1988): “Management for Quality

Improvement - The Seven New QC Tools”, Productivity Press.✤ [4] L. Rubrich, M. Watson, A. Larson (2001): Blending Lean and Six Sigma

Workbooks, WCM Associates.✤ [5] M. L. George (2002): “Lean Six Sigma - Combining Six Sigma Quality

with Lean Speed”.✤ [6] E. C. Moura (2002): “Business Management by Processes - An

Executive Briefing”, Qualiplus Consulting.✤ [7] E. C. Moura (2006): “Integrated Business Process Standardization -

Training Manual”, Qualiplus Consulting.