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What Management Accountants might want to know about Lean Six Sigma

Lou Gorga

Six Sigma Solutions, Inc. 6sigmasolutions@optonline.net (973) 359-0416

Agenda

Introductions and Focus Lean Six Sigma (and Change Management) Overview Key Tools and Technique Summary Value Proposition Questions/Discussion

Drivers

What do you believe is necessary to manage


your business? How do you measure success? What do you look at?

Our motto:
If you cant Measure it You cant Manage it. Some Tools used to measure and change.
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Tools

Reengineering PDCA Best Practices Change Management Initiatives Lean processing Six Sigma Initiatives Lean Six Sigma Initiatives Etc. Focus on improving processes
through measurement and evaluation
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Lean Six Sigma Drivers


What comes to mind when you hear Lean Six
Sigma? What think of when you hear Change Management? Is anyone here a Six Sigma Black/Green Belt or higher? Lean Six Sigma Drivers
Voice of the Customer (VOC) Critical to Quality (CTQ)

Data

Reduce Variation

Processes For Improvement

Lean Six Sigma provides a process based approach to improvement. It can be used to improve any business process.

What is Lean Six Sigma? Comprehensive Process tool for:


Achieving Sustaining and Maximizing business success.

Six Sigma is uniquely driven by:


Understanding customer needs Disciplined use of facts and data Statistical evaluation of issues Attention to managing, improving and reinventing business process.
Where did it originate and how is it different?
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History of Change
Fords Assembly Line GE Western - Hawthorne (20s -30s) PDCA cycle originally conceived - Shewart (Western PDCA Made famous by his assistant - Demming Ohno / Toyodas - Toyota Processing System (TPS)
was already taking shape (40s-50s) Harry / Shroeder start the Six Sigma process initiative at Motorola (80s) Womacks The Machine That Changed the World Described Lean a.k.a. TPS (90s)
(The Demming Wheel) - became CQI model (40-50s) Electric -30s -40s)

What might be next?

Drivers: Business and/or Improvement

Customer Specifications

Board

Customer
Customer Need Senior Management

Bottom Line

All Customers and We NEED to listen to their Voices (VOC)

Lean Six Sigma

Customer focused Data Driven Accurate Creates a Common Language Reduces waste Reduces variation Improves contribution
Distinguishes between

the feel and the real

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Example
Roller Bearing Manufacturing
Diameter is a CTQ (Critical To Quality Parameter)

Nominal diameter = 2.5mm Minimum Spec Maximum Spec = 2.25mm = 2.75mm


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Example (Cont.)
Lower Specification Limit Upper Specification Limit

Nominal Diameter

Customer is expecting 2.5 mm


But will allow No More Than some variation within the Spec 2.75 mm range.
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2.5 mm
No Less Than

2.25 mm

Example (Cont.)

Manufactured Roller Bearing Diameter Actual Micrometer Measurements

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Example (Cont.)
Manufactured Roller Bearing Diameter
Variation ending up as a defect
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Example (Cont.) Lets Look at Some Basic Statistics


Mean diameter = 2.50 mm Standard Deviation = 0.125 mm

On Average its OK
Its a Variation issue
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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process Capability

2s
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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process Capability

3s
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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process Capability

4s
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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process Capability

5s
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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process Capability

6s
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How do Others Perform?


IRS Tax Advice (phone in)

1,000,000

Defects per Million

100,000 10,000

1% of Hospitalized Patients Injured by Negligence

Doctor Prescription Writing

1,000
100 1

Average Company

Airline Baggage Handling

Deaths caused by anesthesia during surgery

Best-in-Class 2 3 4 5 6

Domestic Airline Fatality Rate

Sigma Scale of Measure

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Understanding Six Sigma


Sigma DPMO STATISTICALLY
Six Sigma refers to a process that produces only 3.4 defects per million opportunities.
Business Strategy 2 3 4 5 308,537 66,807 6,210 233 Most US Businesses

3.4

Goal

An overall strategy that encompasses your organizations quality philosophy. It sets the vision for achieving Six Sigma levels in key processes. A set of statistical tools and a disciplined methodology used by specially trained individuals to improve processes by reducing variation and defects.
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Tools And Tactics

Six Sigma Method


DMAIC: To improve any existing product or process

Define

Measure

Analyze

Improve

Control

Who are the customers and what are their priorities?

What are the most important causes of the defects?

How can we maintain the improvements?

How is the process performing and how is it measured?

How do we remove the causes of the defects?


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The Language Of Six Sigma


CTQ (Critical To Quality) Big Y

Y
X DPMO

Measurable Y (part of Big Y)


Input that affects Y Defects Per Million Opportunities

Defect
Variation

Failing to deliver what the customer expects


The enemy of predictable output and customer satisfaction
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Customer Needs vs. Customer CTQs


Customer needs are the data collected from customers
that gives information about what they need or want from your process. Customer needs are often high level, vague, and non-specific I need a quick response! I need accurate information!

CTQs are customer needs translated into critical process


requirements that are specific and measurable. A fully developed CTQ has three elements: Y metric, target, specification/tolerance limits

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Getting to the CTQs


Translating a customer need into a fully developed CTQ

Example:

Time from inquiry to resolution (Y metric)

Quick Response

CTQ

5 minutes or less
(Target)

Not greater than 60 minutes


(specification / tolerance limit)
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Measure Overview
What is the Measure phase? The Measure phase defines the defects, establishes improvement goals, determines that the system of measuring defects is repeatable and reproducible and gathers data about the process. Why is the Measure phase important? The Measure phase ensures that you specifically define the defects you are going to measure and that your measurement system is accurate before you begin to actually measure the process.

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Alternatives to Measuring

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Specifications

Mean Time Between Failures

% Defects
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Analyze Phase
Purpose: Identify the key sources of variation (vital Xs) by analyzing data and the process Steps: Define Performance Objectives Identify Variation Sources Graphical Tools Hypothesis Testing Regression Analysis

Primary Goal: Determine the vital few Xs

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Analyze
Define Performance Objectives
State the improvement goal in statistical terms

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Analyze: Graphical Tools


Find potential Xs using data analysis techniques on the data collected in Measure.
Examples of some of the data analysis tools are shown here:
Boxplot of Sales in Dollars vs Shift
35000 30000 25000

Pareto Chart of Shift Summary


14 12 10 100 80 60 40 20 0

Sales in Dollars

20000 15000 10000 5000 0 AM Shift PM

Count

8 6 4 2 0 Shift Summary Count Percent Cum % PM 10 71.4 71.4 AM

4 28.6 100.0

Wait Time = 1.371 + 1.029 Customers In Line 20


S R-Sq R-Sq(adj) 1.22070 93.9% 93.4%

Fitted Line Plot

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Wait Time

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6 8 10 Customers In Line

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14

16

Percent

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Improve Phase

Purpose:
To confirm that the proposed solution(s) will meet or exceed the quality improvement goals of the project To identify the resources required for successful full-scale implementation of that solution
Screen potential causes Discover variable relationships Process improvement techniques
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Steps:

Improve General Approach


Select improvement strategy Critical Elements: Process Improvement Standard Operating Procedures Best Practices Brainstorming Mistake Proofing Cost / Benefit Analysis Plan for Pilot Run Pilot Collect & Analyze Data

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Piloting the Solution


Plan and Prepare Pilot Execute Pilot Analyze Pilot Document and Transition

Pilot: small scale, localized, high level of control, high level of scrutiny

Scale-up: gradual, highly monitored

Full-scale implementation: everyday hospital environment, monitoring plan

Pilot solution on a small scale or for a specific period of time in a real business environment. Verifies that process meets CTQs

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Change is never easy but not always bad.

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Improvement Drive

You must Change to improve by

definition Change is hard and expensive Change requires a collaborative plan


THIS

APPROACH IS NOT ROCKET SCIENCE BUT NOT ALWAYS USED.

Quality (Q)

Effectiveness (E)
Acceptance (A)
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Implementation Needs
Get Senior Management engaged Set the tone for change Get the organization involved

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Importance of Cost Benefit

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Control Phase
Purpose: Ensures that the solution is sustained Share the lessons learned in the improvement project Steps: Determine process capability Implement process control Goal: A solution that is fully implemented Statistically confirmed process improvement Sustained Improvement supported with a control plan to ensure continuity
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Statistical Process Control


A key control and monitoring tool. Control charts are used to distinguish between common and special cause variation and use that understanding to control and improve processes.

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Transition
Process owner should understand the project, track key measurements and lead the effort to close any open transition items. Recognize and celebrate the contributions that made the teams achievements possible.

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What Does Lean Six Sigma Deliver?

Improved problem solving skills More focused project management Common Business Language
Defect Customer Consistent Business metrics

Improved performance more consistent


deliverables Improved contribution

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Potential Focus Areas

Marketing Sales Call Centers Strategic Sourcing/Purchasing Operations Distribution Logistics Finance Billing Etc.
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Sustaining Improvements
Post-project metrics defining the success of the
project If you dont: It will cease to be important You will Not sustain the gains Metrics can/should be the new processes capability

Common Language Measurable and Sustainable Improvement


Measurable and Sustainable Improvement ONLY If You Keep Measuring

Dashboards

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Level of Improvement

Sustainability

Fiscal Performance Accumulating Contribution

Where can you go from here?

These tools allow you to build what you want: It is about:


Better trained work force Focused attention to objectives/goals Measuring Recognizing Accountability Achievement

What does the future hold?

Training and certification programs available

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Thank You
Questions?

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