Chapter 10
Lean Systems and
Six-Sigma Quality
Copyright 2011 John Wiley & Sons, Inc.
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Lecture Outline
• What is Lean?
• Lean Production
• Respect for People
• Total Quality Management (TQM)
• Statistical Quality Control (SQC)
• Six-Sigma Quality
• Lean Six-Sigma Supply Chain
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What is Lean?
Lean is a management approach for
creating value for the end customer
through the most efficient utilization
resources possible
• Standard in many industries
• Often results in:
– large cost reductions
– improved quality
– increased customer service
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Lean Six Sigma
Combines the approaches of Lean and Six Sigma
• Six Sigma
– methodology to identify and eliminate causes of
quality problems
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Tenets of Lean
There are six tenets of the Lean Philosophy:
1. Elimination of Waste
– eliminate all non-value adding activities
2. A Broad View
– decisions made for the success of the
entire supply chain
– all supply chain members responsible for
adding value
3. Simplicity
– the simpler the solution the better
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Tenets of Lean Continued
4. Continuous Improvement
– emphasis on quality and continuous
improvement
– called kaizen
5. Visibility
– visible problems are identified and solved
6. Flexibility
– easily switch from one product type to
another, using flexible workers that
perform many different tasks
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Elements of Lean
Lean is composed of three elements that
work in unison:
• Lean Production
• Total Quality Management (TQM)
• Respect for People
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Elements of Lean
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Lean Production
Coordinated system for producing the
exact products desired, delivered in right
quantities to where needed Just-in-Time
• The Pull System
• Visual Signals
• Small Lot Production
• Uniform Plant Loading
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The Pull System
• Traditional approach
– supply chains work as “push” systems
– inventory carried to cover up problems
• Pull approach
– each stage in supply chain requests
quantities needed from the previous stage
– no excess inventory generated
– reduced inventory exposes problems
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Visual Signals
Communication between workstations
• Kanban
– “signal” or “card” in Japanese
– contains information passed between stations
– authorizes production
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Visual Signals
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Small Lot Production
The amount of products produced at any
one time is small
– reduces inventory and excess processing
– increases flexibility
– shortens manufacturing lead time
– responds to customer demands more
quickly
– setup time must be low
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Uniform Plant Loading
• Problem
– demand changes are magnified throughout
the supply chain
– contributes to inefficiency and waste
• Uniform Plant Loading
– production schedule is frozen for the month
– also called “leveling”
– helps suppliers better plan own production
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Respect for People
Respect for all people must exist for an
organization to be its best
– flatter hierarchy than traditional organizations
– ordinary workers given great responsibility
– supply chain members work together in cross
functional teams
• Look at Role of:
– workers, management, and suppliers
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Role of Workers
Workers have the ability to perform many
different tasks and are actively engaged in
pursuing company goals
• Worker Duties
– improve production process
– monitor quality
– correct quality problems
• Work in Teams
– quality circles
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Role of Management
Create the cultural change in the
organization needed for Lean to succeed
– provide atmosphere of cooperation
– Empower workers to take action based on
their ideas
– develop incentive system for lean behaviors
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Role of Suppliers
Lean builds long-term supplier relationships
– companies partner with suppliers
– improve process quality
– information sharing
– goal to have single-source suppliers
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Total Quality Management (TQM)
TQM is an integrated organizational effort
designed to improve quality at every level
Look at:
• Quality Gurus
• Voice of the Customer
• Costs of Quality
• Quality Tools
• ISO 9000
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Quality Gurus
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Voice of the Customer
Quality is defined as meeting or exceeding
customer expectations
• Determine customer wants:
– focus groups
– market surveys
– customer interviews
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Costs of Quality
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Quality Tools
Lean requires workers to identify and
correct quality problems
• Seven Tools of Quality Control:
–
–
–
–
–
–
–
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Cause and Effect Diagrams
Flowcharts
Checklists
Control Charts
Scatter Diagrams
Pareto Analysis
Histograms
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Cause and Effect Diagrams
Identify causes of a quality problem
– sometimes called “fishbone diagrams”
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Flowchart
Diagrams the sequence of steps in an
operation or process
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Checklist
Lists common defects and number of
occurrences of the defects
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Control Chart
Determines whether a process is operating
within expectations
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Scatter Diagram
Graph that visually shows how two
variables are related to one another
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Pareto Analysis
Based on the premise that a small number of
causes create the majority of problems
– identifies problems based on degree of importance
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Histogram
Chart that shows the frequency distribution of
observed values of a variable
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ISO 9000
“Family” of standards for quality management
– increased international trade developed a need
– published by International Organization for
Standards (ISO) in 1987
– concerns measuring and documenting the
quality process
– ISO provides a certification process
• ISO 14000
– standards for environmental management
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Statistical Quality Control (SQC)
SQC is the use of statistical tools to measure
product and process quality
Three categories:
• Descriptive Statistics
– describe quality characteristics
• Statistical Process Control (SPC)
– a random sample of output is used to
determine if characteristics are acceptable
• Acceptance Sampling
– sample determines if whole batch is acceptable
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Sources of Variation
All processes have variation
• Assignable Variation
– caused by factors that can be clearly
identified and managed
• Common Variation
– inherent in the process
– also called random variation
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Process Capability
Process Capability evaluates the variation of
the process relative to product specifications
• Product Specifications
– ranges of acceptable quality characteristics
– also called tolerances
• Process Variation
– all processes have natural variation
– defects are produced when variation exceeds
product specifications
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Process Variation Equal to
Specification Range
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Process Variation Exceeds
Specification Range
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Process Variation Narrower than
Specification Range
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Process Capability Index
product specification range USL  LSL
Cp 

process var iation range
6
where: USL = upper specification limit
LSL = lower specification limit
• Cp Values:
– Cp = 1: process is minimally capable
– Cp ≤ 1: process is not capable of producing
products within specification
– Cp ≥ 1: process exceeds minimum capability
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Cp Example
Given a process with three separate machines
that are used to fill jars with pasta sauce.
– specification range is between 30 and 34 ounces
– process mean, μ, is 31 ounces
Machine
A
B
C
σ
0.6
0.7
1.2
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Calculate the Cp for
each machine to
determine capabilities
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Cp Example Continued
USL  LSL
Cp 
6
34  30
 1.11
• A: Cp 
6(0.6)
34  30
• B: Cp 
 0.95
6(0.7)
Machine A has a
Cp > 1, however
the process mean
is not centered
34  30
• C: Cp 
 0.55
6(1.2)
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Cpk Example
Cpk addresses the lack of centering of the
process over the specification range
Cpk
 USL     LSL 
 min
,

3 
 3
• Machine A:
Cpk
 34  31 31  30 

 min
,
 3(0.6) 3(0.6) 
Cpk = min (1.66, 0.55) = 0.55
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Process Control Charts
Graph that shows whether a sample of data
falls within the common range of variation
1. sample process output
2. plot result on the control chart
3. use to determine if process is in control
• can monitor:
– variables
• characteristics that can be measured
– attributes
• characteristics that can be counted
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Process Control Charts
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Control Charts for Attributes
A p-chart monitors the proportion of defective
items in a sample
• centerline: average value of p across all samples, p
• UCL = p + z sp
• LCL = p – z sp
where: z = standard normal variable
p = sample proportion defective
sp = p(1  p ) = standard deviation of
n
avg. proportion defective
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P-Chart Example
Given the following five samples of data
tracking incorrect procedures in a hospital
Sample
# of Incorrect
Procedures
# Inspected
Fraction
Defective
1
0
10
0.1
2
1
10
0.1
3
2
10
0.2
4
1
10
0.2
5
1
10
0.1
Total
5
50
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P-Chart Example Continued
p = 5/10 = 0.10
sp 
p(1  p )
0.10(1  0.10)

 0.095
n
10
UCL = p + z sp = 0.10 + 3(0.095) = 0.385
LCL = p + z sp = 0.10 - 3(0.095) = 0.185
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What is Six Sigma?
Six Sigma is a quality management process
that uses measurement to reduce process
variation and eliminate defects
– no more than 3.4 parts per million defective
– sigma stands for # standard deviations of the
process
– originated at Motorola in 1970s
– “zero defects”
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Six Sigma Methodology
Two Aspects:
• Use of technical tools
– statistical quality control
– seven tools of quality
• People involvement
– all employees responsible for rooting out
quality problems
– all employees trained to use technical tools
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Six Sigma Five-Step Plan
Define:
– define the quality problem of the process
Measure:
– measure the current performance of the process
Analyze:
– analyze to root out cause of quality problem
Improve:
– improve process by eliminating root causes
Control:
– control process to ensure continued improvement
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Lean Six Sigma Supply Chain
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Developing a Lean Six Sigma Supply
Chain
Steps:
1. Jointly Define Value
2. Conduct Supply Chain Capability Analysis
3. Develop Key Financial & Operational Metrics
4. Identify & Implement System Improvements
– Value Stream Mapping (VSM)
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Impact on Supply Chain Activities
• Suppliers
– lower costs due to efficient systems
– shorter lead times
– lower safety stock
• Operations
– proper cycle time calculation ensures production
according to customer demand
– uniform work flow
– pull production
• Logistics
– optimization models to select routes
– warehouse design changes reduce waste
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Review
1. Lean management approach concerns the
most efficient use of resources possible. The
most important tenet is eliminating waste.
2. Lean consists of 3 elements: Lean Production,
Total Quality Management, Respect for people.
3. Lean relies on visual signals to pull products
through the system.
4. Jidoka is the authority of every worker to stop
the production process.
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Review Continued
5. The “seven tools of quality control” include causeand-effect diagrams, flowcharts, checklists,
control charts, scatter diagrams, Pareto analysis,
and histograms.
6. ISO 9000 standards address quality
management. ISO 14000 standards address
environmental management.
7. SQC measures and identifies quality problems in
both the product and process. 3 categories:
descriptive statistics, SPC, acceptance sampling.
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Review Continued
8. All processes have variation. Assignable
variation can be identified and managed.
Common variation is inherent in the process.
9. Process capability evaluates the processes
ability to meet product specifications.
10.Process control charts ensure that the
process is “in a state of control.”
11.Six Sigma uses measurement to reduce
process variation and eliminate defects.
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