Chapter 10
Lean Systems and
Six-Sigma Quality
10-1
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
10-2
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
10-3
Lean Six Sigma
Combines the approaches of Lean and Six Sigma
• Six Sigma
– methodology to identify and eliminate causes of
quality problems
10-4
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
10-5
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
10-6
Elements of Lean
Lean is composed of three elements that
work in unison:
•Lean Production
•Total Quality Management (TQM)
•Respect for People
10-7
Elements of Lean
10-8
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
10-9
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
10-10
Visual Signals
Communication between workstations
• Kanban
– “signal” or “card” in Japanese
– contains information passed between stations
– authorizes production
10-11
Visual Signals
10-12
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
10-13
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
10-14
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
10-15
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
10-16
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
10-17
Role of Suppliers
Lean builds long-term supplier relationships
– companies partner with suppliers
– improve process quality
– information sharing
– goal to have single-source suppliers
10-18
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
10-19
Quality Gurus
10-20
Voice of the Customer
Quality is defined as meeting or exceeding
customer expectations
• Determine customer wants:
– focus groups
– market surveys
– customer interviews
10-21
Costs of Quality
10-22
Quality Tools
Lean requires workers to identify and
correct quality problems
• Seven Tools of Quality Control:
–
–
–
–
–
–
–
Cause and Effect Diagrams
Flowcharts
Checklists
Control Charts
Scatter Diagrams
Pareto Analysis
Histograms
10-23
Cause and Effect Diagrams
Identify causes of a quality problem
– sometimes called “fishbone diagrams”
10-24
Flowchart
Diagrams the sequence of steps in an
operation or process
10-25
Checklist
Lists common defects and number of
occurrences of the defects
10-26
Control Chart
Determines whether a process is operating
within expectations
10-27
Scatter Diagram
Graph that visually shows how two
variables are related to one another
10-28
Pareto Analysis
Based on the premise that a small number of
causes create the majority of problems
– identifies problems based on degree of importance
10-29
Histogram
Chart that shows the frequency distribution of
observed values of a variable
10-30
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
10-31
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
10-32
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
10-33
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
10-34
Process Variation Equal to
Specification Range
10-35
Process Variation Exceeds
Specification Range
10-36
Process Variation Narrower than
Specification Range
10-37
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
10-38
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
Calculate the Cp for
each machine to
determine capabilities
10-39
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)
10-40
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
10-41
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
10-42
Process Control Charts
10-43
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
10-44
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
10-45
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
10-46