What Management Accountants might
want to know about Lean Six Sigma
Lou Gorga
Six Sigma Solutions, Inc.
6sigmasolutions@optonline.net
(973) 359-0416
1
Agenda
• Introductions and Focus
• Lean Six Sigma (and Change Management) Overview
• Key Tools and Technique Summary
• Value Proposition
• Questions/Discussion
2
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 can’t Manage it.
Some Tools used to measure
and change….
3
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
4
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
5
Processes For Improvement
Lean Six Sigma provides a process
based approach to improvement.
It can be used to improve any
business process.
6
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?
7
History of Change
• Ford’s Assembly Line
• GE Western - Hawthorne –’(20s -’30s)
• PDCA cycle originally conceived - Shewart (Western
Electric -’30s -’40s)
• PDCA Made famous by his assistant - Demming
(The “Demming Wheel”) - became CQI model (40-50s)
• Ohno / Toyoda’s - Toyota Processing System (TPS)
•
•
was already taking shape (’40s-’50s)
Harry / Shroeder start the Six Sigma process
initiative at Motorola (80s)
Womack’s “The Machine That Changed the World”
Described Lean a.k.a. TPS (’90s)
What might be next?
8
Drivers: Business and/or Improvement
Customer
Specifications
Board
Customer
Need
Senior
Management
Bottom
Line
Customer
All Customers and
We NEED to listen to
their
Voices (VOC)
9
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”
10
Example
Roller Bearing Manufacturing
Diameter is a CTQ
(Critical To Quality Parameter)
Nominal diameter = 2.5mm
Minimum Spec
= 2.25mm
Maximum Spec
= 2.75mm
11
Example (Cont.)
Lower
Specification
Limit
Upper
Specification
Limit
Nominal
Diameter
2.5 mm
No Less Than
2.25 mm
Customer is
expecting 2.5 mm
But will allow
No More Than some variation
within the Spec
2.75 mm
range.
12
Example (Cont.)
Manufactured Roller
Bearing Diameter
Actual Micrometer
Measurements
13
Example (Cont.)
Manufactured
Roller Bearing
Diameter
Variation
ending up as a
defect
14
Example (Cont.)
Let’s Look at Some
Basic Statistics
Mean diameter = 2.50 mm
Standard Deviation = 0.125 mm
On Average
it’s OK
It’s a Variation
issue
15
Example (Cont.)
Reducing Variation
is Clearly the Key to
Improving Process
Capability
2s
16
Example (Cont.)
Reducing Variation
is Clearly the Key to
Improving Process
Capability
3s
17
Example (Cont.)
Reducing Variation
is Clearly the Key to
Improving Process
Capability
4s
18
Example (Cont.)
Reducing Variation
is Clearly the Key to
Improving Process
Capability
5s
19
Example (Cont.)
Reducing Variation
is Clearly the Key to
Improving Process
Capability
6s
20
How do Others Perform?
IRS Tax Advice
(phone in)
Defects per Million
1,000,000
1% of Hospitalized Patients Injured by
Negligence
100,000
Doctor Prescription Writing
10,000
Airline Baggage Handling
Average
Company
1,000
Deaths caused by
anesthesia during surgery
100
Domestic Airline
Fatality Rate
Best-in-Class
1
2
3
4
5
Sigma Scale of Measure
6
7
21
Understanding Six Sigma
Sigma DPMO
STATISTICALLY
Six Sigma refers to a
process that produces
only 3.4 defects per
million opportunities.
2
308,537
3
66,807
4
6,210
5
233
6
3.4
Most US
Businesses
Goal
Business
Strategy
An overall strategy that encompasses your
organization’s quality philosophy. It sets the
vision for achieving Six Sigma levels in key
processes.
Tools And
Tactics
A set of statistical tools and a disciplined
methodology used by specially trained individuals
to improve processes by reducing variation and
defects.
22
Six Sigma Method
DMAIC: To improve any existing product or process
Define
Who are the
customers and
what are their
priorities?
Measure
Analyze
Improve
What are the
most important
causes of the
defects?
How is the process
performing and
how is it
measured?
Control
How can we
maintain the
improvements?
How do we
remove the
causes of the
defects?
23
The Language Of Six Sigma
CTQ (Critical To Quality)
Big “Y”
Y
Measurable Y (part of Big Y)
X
Input that affects Y
DPMO
Defects Per Million
Opportunities
Defect
Failing to deliver what the
customer expects
Variation
The enemy of predictable
output and customer
satisfaction
24
Customer Needs vs. Customer CTQ’s
• 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!”
• CTQ’s 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
25
Getting to the CTQ’s
Translating a customer need into a fully developed CTQ
Time from inquiry to
resolution (Y metric)
Example:
Quick Response
CTQ
5 minutes or less
(Target)
Not greater than 60
minutes
(specification / tolerance limit)
26
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.
27
Alternatives to Measuring…
28
Specifications
• Mean Time Between
Failures
• % Defects
29
Analyze Phase
Purpose:
Identify the key sources of variation (vital X’s) 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 X’s
30
Analyze
Define Performance Objectives
State the improvement goal in statistical terms
31
Analyze: Graphical Tools
Find potential X’s 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
Pareto Chart of Shift Summary
14
25000
10
20000
8
100
80
60
6
15000
40
Percent
12
Count
30000
4
10000
20
2
5000
0
Shift Summary
Count
Percent
Cum %
0
AM
PM
Shift
PM
10
71.4
71.4
AM
0
4
28.6
100.0
Fitted Line Plot
Wait Time = 1.371 + 1.029 Customers In Line
20
S
R-Sq
R-Sq(adj)
1.22070
93.9%
93.4%
15
Wait Time
Sales in Dollars
35000
10
5
0
2
4
6
8
10
Customers In Line
12
14
16
32
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
• Steps:
• Screen potential causes
• Discover variable relationships
• Process improvement techniques
33
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
34
Piloting the Solution
Plan and
Prepare Pilot
Pilot: small scale,
localized, high level of
control, high level of
scrutiny
Execute Pilot
Scale-up: gradual,
highly monitored
Analyze Pilot
Document and
Transition
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 CTQ’s
35
Change is never easy
but not always bad….
36
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)
37
Implementation Needs
Get Senior
Management engaged
Set the tone for
change
Get the organization
involved
38
Importance of Cost Benefit
39
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
40
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.
41
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 team’s achievements
possible.
42
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
43
Potential Focus Areas
• Marketing Sales
• Call Centers
• Strategic Sourcing/Purchasing
• Operations
• Distribution
• Logistics
• Finance
• Billing
• Etc.
44
Sustaining Improvements
• Post-project metrics defining the success of the
•
•
project
If you don’t:
• It will cease to be important
• You will Not sustain the gains
Metrics can/should be the new processes capability
“Dashboards”
• Common Language
• Measurable and Sustainable Improvement
Measurable and Sustainable
Improvement
ONLY If You Keep Measuring
45
Level of Improvement
Sustainability
Fiscal Performance
Accumulating Contribution
Where can you go from here?
• These tools allow you to build what you want:
• Better trained work force
• Focused attention to objectives/goals
• It is about:
•
•
•
•
Measuring
Recognizing
Accountability
Achievement
What does the future hold?
Training and
certification
programs
available
50
Thank You
Questions?
51