OR Society workshop: Practical process improvement using Lean and 6 Sigma

Practical Process Improvement
using Lean and Six Sigma

A 1-day workshop for the OR Society
Facilitated by Ian J Seath

1 © 2011 Copyright ISC Ltd.

What you will learn…

 How Lean and 6-Sigma differ, yet are complementary
approaches for process improvement
 How to set-up and define a process improvement project
 How to use appropriate tools to map, measure and
analyse business processes
 How to design a Lean, value-adding process
 How to engage key stakeholders and staff to ensure
effective management of process change

An introduction to the tools and techniques for defining, measuring,
analysing and improving business processes using methods from the
Lean and 6-Sigma toolkits.

Is that an “active banana” or an
“inactive banana” on your desk?


What is a Process?

 Processes take INPUTS, do WORK to them, and produce OUTPUTS for
CUSTOMERS

Input Process Output

 They exist to achieve performance OUTCOMES (for the benefit of
customers or stakeholders)


Focus of improvement
Cheaper Happier
Customers

Efficient Effective
Less Waste Better

More More Reliable
Responsive Flexible
Capable
& Agile
Faster More Capacity


In two sentences…

 Lean:
 Driving out waste by using TIME as a competitive
weapon

 Six Sigma:
 Driving out waste by reducing VARIATION


Who’s using Lean and Six Sigma?
Recent examples of ‘service’ or ‘back office’ programmes have
delivered significant benefits including: Probation
Centrica Drug Testing
Utility Call Centre Programme
Home Office Capacity increased to
Considerable real
benefits in call handling Claim process capacity 110% of target
increased by 130% O2
ING Value Stream
Programme
Foreign Exchange
Bolton Hospital Processing 25% reduction in time
spent on non-value-
Pathology Lab Increased straight- adding activity in store
through processing from
Sample testing time 70% to 95%
reduced from 24 to 2
hours

Evolution of Lean Thinking

1991
Lean Thinking
“Lean Enterprise”

Lean Concepts

Toyota Production
System


Lean: Time as a competitive advantage

ALLOCATION
& CUSTOMERS
PLANNING WRITTEN
ACK ENQUIRIES
RECEIVED

MEMO SIGN SIGN SIGN
OFF OFF OFF

SORTING
ANALYSIS RESPONSE AGREEMENT
ACTION

4 hrs 24 hrs 8hrs 16 hrs
1.5 hrs 4 hrs 4 hrs 24 hrs 1 hr 8 hrs .5 hr 16 hrs

ELAPSED TIME = 59 hrs
V.A. TIME = 7 hrs
V.A.RATIO = 4%

20M_16

Evolution of Six Sigma

Encompassing
Existing
Support Techniques
Problem Structure
Solving
Statistical Toolkit People
Process Project
Measurement Skills
Control Zero Based
Defects Black (DMAIC)
1980s Belt
Approach

2000
2011

Statistics Holistic


Six Sigma provides a common basis
for comparison
 Which of these processes is performing best?

 Accounts receivable
 35 days sales outstanding (DSO)
 Call answering
 10 rings on average
 Customer service
 89% satisfied, or very satisfied
 Invoicing
 99% accuracy
 Checkout queue
 3 minutes on average


6 Sigma: Customers feel the Variance,
not the Mean
On average
Supplier our rope is
2 cm thick !

That‟s good
Customer
to know!


Lean and Six Sigma
Lean Six Sigma
 Evolved from the Toyota  “TQM on steroids”
Production System  A statistically-based approach
 Focus on identifying and to process improvement
delivering customer value  Requires support from “Black
 Managing horizontal value Belts” for implementation
streams (& systems thinking)  Achieves improvement through
 Aligning capacity to demand project activity, chosen by
and creating “flow” management; often based on
 Engaging front-line staff in ROI potential
daily improvement  An evolution from “Zero
 Using visual management to Defects” thinking of the 1990s
track performance  Aiming for fewer than 3.4 ppm
 Managers “go and see” defects


Tools/Techniques
Six Sigma Lean
 SIPOC  The Seven Wastes
 Voice of the Customer  5S
 House of Quality (QFD)  Poka Yoke
 Process Mapping  Value Stream Mapping
 Design of Experiments  Kaizen
 Statistical Process Control  Standardised Work
 Taguchi  Visual Management
 Sampling & Data Collection  Flow: Push & Pull
 Statistical Analysis  Just-in-time
 Failure Modes Effect Analysis  Takt time
 DPMO/Sigma/CPK  Value Add Ratio


Improvement approach
Six Sigma: Define Measure Analyse Improve Control

Understand
Reduce Implement Improve
Where are we now? current
waste improvement continuously
performance

Lean: Current State VSM VAR Waste/Flow Future State VSM


Process Improvement (DMAIC)
• Agree the problem/opportunity for the Process Improvement Project
Define • Identify the process customers and what they want
• Define the “As Is” process map

• Agree what data is needed to quantify the performance of the process
Measure • Identify how the data will be collected
• Collect the data

• Analyse the performance of the process using the data
Analyse • Assess the process using qualitative information
• Identify the root causes of the performance of the process

• Identify, select and test possible “To Be” process improvement ideas
Improve • Develop plans to implement the selected improvements
• Implement the new process

• Assess the performance of the new process
Control • Ensure the required performance can be sustained
• Review the project and apply learning for the future


DMAIC is rarely linear

Measure

Define Improve Control

Analyse


Stage 1: Define
 Purpose:  Outputs:
 To translate a perceived  Completed Project Proposal

problem or opportunity into a  SIPOC Process Definition
do-able project  Process Map („As Is')
 To ensure the customer‟s
 Analysis of Customer
needs are identified at the start Requirements
of the project
 To establish a high-level
understanding of the process


Process Definition (SIPOC)
Inputs Outputs

Process Name What does
What triggers
the process
the process?
produce?

Suppliers Customers

Who Who
supplies the receives the
inputs? outputs?


Process Definition (expanded SIPOC)
Purpose:________________________________
Inputs Outputs

Process Name

Owner:______________________

Suppliers Boundaries Customers

Start-point: End-point:

Include: Exclude:


Case study – part 1


Sequence Map
Opportunity/
need for
improvement Convene/
Define Define
Brief
Problem Process
Team

Draft
Walk-through Sign-off
High-level
Process Map
Map

Identify Identify Problem
Customer Problem List
Requirements Areas


Swim-lane Map
Need for Employee Line Manager Travel Office Travel Agent
Business
travel
Identify
Requirements

Complete
Approve Investigate
Booking
Travel Options
Form

Select
Advise
Preferred
Traveller
Option

Provide
Book
Tickets &
Tickets
Itinerary
Tickets &
Itinerary
Collect
Tickets


Lean: Value Stream Map
PLANNING
ROLLING FORECASTS
MRPII +
MANUAL CUSTOMERS
PURCHASE FIRM
SYSTEMS 400 products
ORDERS ORDERS 40,000 ca./ month
4 week leadtime
50% service level !
SUPPLIERS

work work manual work work
order order intervention order order

MIXING FORMING FINISHING PACKING

5 btc/ 8 hrs 1 btc/ 2 hrs 1 btc/ 12 hrs 1 btc/ hr
2 shifts 2 shifts 3 shifts 2 shifts
5 variants 25 variants 100 variants 400 variants SHIPMENT
3 8 machines 30 machines 15 machines
machines c/o = n/a c/o = n/a c/o = 1 hr
c/o = n/a FOM = ABC FOM = ABC? w/e
? + 12 hr cure FOM = 25/wk
4 wks .5 wks 2.5wks 1 wk 75 ca / btc 6 wks
4 wks 1.6 hrs . 5 wks 2 hrs 2.5wks 12 1wk 1 hr 6 wks
hrs
ELAPSED TIME = 14w 2d
V.A. TIME = 16.6 hrs
V.A.RATIO = 3%


The Voice of the Customer

 Processes exist to meet the requirements of customers (recipients
of the outputs) and to achieve specific outcomes
 “Customers aren‟t interested in your organisation‟s structure; what
they see, and feel the effects of, are your processes.”

 Key questions:

 Who are the Customers?
 What do they want?
 What is most important to them?
 How happy are they with what they‟re getting?
 How do they measure your performance?
 What improvements would they like to see?


Stage 2: Measure
 To identify key data that will  Facts; i.e. quantified process

enable process performance to performance data
be quantified
 To develop methods of
measurement
 To gather data to quantify

process performance


Three types of Process Measure
 Internal Measures  The measures you need will
 Time, Volume, Cost depend on:
 Output Measures  Desired process outcomes

 Quality, Delivery, Success
(Process Definition)
 Customer requirements
 Satisfaction Measures
 Known problems
 Perception
 Known improvement priorities

 You may need a larger set of
Performance

measurements to help diagnose
problems in a process than you
would need to manage it on a day-
to-day basis
Time

Source: Total Customer Service: Davidow & Uttal


Checksheet example:
“Reasons for Delayed Court Reports”
CAUSE JAN FEB MAR APR TOTAL
Unclear supporting
IIII IIII I IIII IIII II IIII IIII IIII IIII IIII 47
information
CPS papers not II II I I 6
available
Staff absenteeism IIII IIII IIII II II 18

National policy II I 3
Not informed of
III II I 6
crime date
Computer problems IIII I 5

Other I I 2

Total 25 20 23 19 87


Concentration Diagram

Application Form
Ref. No. Auth Code XXXX
Dept. Salary Grade Address
X XXXXX X This shows fields
XXXX which have
missing information,
incorrect details,
invalid data etc. and
quantifies those
problems.


“Traveller” Time Log example for
Expenses Claims process
Process Step Date/Time arrived Processing Time Date/Time sent

1. Receive & Log
Form
2. Validate
information
3. Calculate Vat
amount
4. Authorise Claim

5. Set up Bank
payment
6. Notify claimant

7. Update Ledgers

8. File receipts and
Form

© 2011 Copyright
ISC Ltd. 31

Collecting “Soft” Data
 Face-to-face  Written
 Interviews  Questionnaires
 Focus Groups  Report/Score Cards
 Exit Polls  Analysis of existing
 Verbal data
 Telephone Interviews  Complaints
 Process Mapping  Market Research
 Sequence and Swim-  Market Intelligence
lane Maps (e.g. field staff)
 Process Walk-through


Stage 3: Analyse
 To assess and understand  Identification of waste

process performance data  Agreed root causes of process
 To evaluate, qualitatively, the performance
performance of the process
 To identify root causes of

process performance


Waste
 Waste is anything that does not add value to
your product or service
 Eliminating waste gives you more resource to
meet your customers‟ requirements
 Waste will always be present, so there is always
something that you can do to improve your
performance
 Identifying all the waste in your processes forces you to
compare your operation against perfection.....…and this is not a
comfortable experience!


The Seven Wastes
Waste Examples
People Waiting Waiting for “stuff to arrive”, Waiting for people to make a decision

Over- Producing extra copies “just in case”; Sending two people, when
production one would be enough
Rework & Correcting errors in reports, databases, plans, documents , Dealing
Failures with complaints, Paying compensation claims, Operating a
Helpdesk
People Moving Travelling to and from meetings, incidents, interviews

Over- Doing any steps that are unnecessary; Checking the quality of
processing somebody else‟s work; Keying the same information into multiple
databases; Gathering the same information from a
client/victim/suspect on different Forms
Inventory Cupboards full of stationery in every office; Stores of obsolete
brochures, forms, posters; Piles of files on desks (work in progress)

Transport of Moving files around between locations; Moving files to and from
materials archives


Value Add
• Every activity in a process either adds value or cost.
• Value Add is determined firstly from the Customer‟s perspective.
• There may also be Business Value Adding activities.
• Everything else is Waste.

 Real Value Add  Business Value Add
 Those activities which a  Those activities which you

customer would expect you have to do in order to…
to do for them in producing  Stay legal
the output  Be compliant
 Ask “Could we invoice the  Manage the organisation
customer for having done this  Challenge: “Would we get
activity?” locked up, shut down, or
fined, if we didn‟t do this
activity?


x

37
10
20
30
40
50
60
70
80

0
Apr-05
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan New Procedure
Feb
Mar
Apr-06
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec

UCL
Jan
Feb
Mar
Apr-07

LCL
May
Data Handling Tools

Jun
Jul
Aug
Monthly Caseload

© 2011 Copyright ISC Ltd.
Sep
Oct
Nov
Process Avg Dec
Jan
Feb
Mar
Apr-08
May
Jun
Jul
Aug
Sep
Oct
Nov

Pareto Analysis
 The Pareto Principle suggests that a small number of
causes (the vital few) will typically account for a large
proportion of effects. The remaining causes (the trivial
many) only account for a small part of the problem.
20%

This is also known
as the 80:20 rule
80% 80%

20%
Effects Causes


Pareto Diagram: Reasons for Delayed
Court Reports
90 100
80

Cumulative % Late
70 75
60
Frequency

50
50
40
30
20 25
10
0 0
A B C D E F G
Causes


Cost Cycle-time Analysis
XXXXXX YYYYYY ZZZZZZ AAAAAA
Input
Do A Processing Time
and Cost

Delay Time

Do B Approve C Do D

Do F Do E

Do G Do H

Output
Do I


Cost/Cycle-Time Analysis Example
Activity Times (hours) Costs ($/transaction)
Process Cycle Total People Other Total

1. Log incoming mail 0.01 0.10 0.11 0.10 0.10
2. Allocate to staff member 0.05 3.00 3.05 0.50 0.50
3. Check details provided 0.25 1.00 1.25 2.50 2.50
4. Investigate complaint 2.00 24.00 26.0 20.00 25.00 45.00
5. Write draft response 0.50 8.00 8.50 5.00 5.00
6. Approve response 0.15 2.00 2.15 3.00 3.00
7. Copy response letter 0.15 8.00 8.15 1.50 0.50 2.00
8. Post letter to customer 0.05 0.01 0.06 0.50 0.30 0.80
9. File supporting documents 0.25 10.00 10.25 2.50 2.50
10. Log off complaint 0.10 0.10 1.00 1.00

3.51 56.11 59.62 36.60 25.80 62.40

N.B. In this example, Cycle-time is the gap between the completion of one activity and the start
of the next activity. It has no cost associated with it.


A one-sigma process
1
Customer requirement (max. 160)
Distribution Mean
This is a picture of a normally
distributed process with a
mean value of 100

This area represents defects
or errors.

1 17 33 49 65 81 97 113 129 145 161 177 193 209 225 241 257 273 289 305 321 337 353 369 385

The customer requirement lies only one standard deviation
away from the mean of the distribution
Could be: „time to process an offender in custody‟
„errors in CRB checks‟
„cycle-time from receiving case files to delivery of service‟
„database errors – addresses, personal details, etc.‟

A four-sigma process
4 A “Six Sigma” approach is all about
trying to reduce the variability in
processes such that errors and
The process has been defects are reduced.
improved („tightened‟)
Many organisations‟ processes
run at a 3 sigma or 4 sigma
performance level.
95%....99% levels

1 17 33 49 65 81 97 113 129 145 161 177 193 209 225 241 257 273 289 305 321 337 353 369 385

The customer requirement lies four standard deviations


A six-sigma process is “world class”
6

The process distribution
is very „tight” relative to
customer requirements.

Virtually defect free.

1 17 33 49 65 81 97 113 129 145 161 177 193 209 225 241 257 273 289 305 321 337 353 369 385

The customer requirement lies six standard deviations


Sigma and error levels
Yield (Error Rate) DPMO Sigma

30.9% (69.1%) 690,000 1

69.2% (30.8%) 308,000 2

93.3% (6.7%) 66,800 3

99.4% (0.6%) 6,210 4

99.98% (0.02%) 320 5

99.9997% (0.0003%) 3.4 6


Stage 4: Improve
 To identify, select and test  An improved process, in place

potential improvements to and operating
meet the project and customer
requirements
 To plan implementation of
improvements
 To implement an improved
process design


The Principles of a Good Process
 Good processes are based on the idea that you only do
what you need to do to meet the customer‟s requirement
 Any activity should start and finish as late as possible
 This increases the relevance of what is done, reduces cycle times,
etc, but makes the system very reliant on getting things right first time
 Throughput time for any individual item (piece of paper,
information or item) processed is very short
 i.e. if we clock any individual or document through a process, it takes
the minimum possible time to go through all the stages
 There a minimum of work in progress, and therefore little
queuing between stages (this means no paper on desks, no
big queues in e-mail Inboxes, or queues of items at any
stage)
 The different stages are designed to be balanced in their work input
and output

The Principles of a Good Process
 People are multi-skilled and able to operate various parts
of the process depending on demand
 People see it as normal that their roles may change from day to
day
 Systems are designed with job flexibility in mind
 Almost no transport between stages, movement reduced
to a minimum
 Systems are error-proofed to ensure quality
 People are involved in identifying and preventing errors rather than
finding better ways to check for them
 Teams own the process and are responsible for improving
all aspects of its performance
 All wastes are identified and reduced to a minimum

Designing a “To Be” Process

 Agree the required levels of performance
 Define the inputs and outputs
 Draw a high-level “Sequence To Be” map with maximum
Real VA activities
 Drill-down to provide additional detail
 Challenge all Business VA activities to minimise these
 Carry out a “desk-top walk-through” to confirm the
process will produce the outputs
 Finally, decide what people and other resources (e.g. IT)
will be needed to operate the process


Design Options

 Removing Non-VA
 Triage and Simplification
 Automation/Technology
 Parallel vs. Sequence
 Multi-skilling
 Adding/removing Features/Functionality


Develop an Action Plan

Actions to
implement WHAT WHEN WHO
solutions
Action Form Team AC
Plan Communicate DF
Train AC
for DG
Run Pilot
Actions to change Assess Pilot AC
ensure Plan Roll-out DF
success & Get Approval DG
reduce
risks


Stage 5: Control
 To ensure the performance of  Project Completion Report

the re-designed process can  Updated Process Definition
be sustained and continuously Template
improved  Process Measurement Plan


Appoint a Process Owner

 A single, named individual who is responsible for managing and
improving the performance of the process to meet customer needs
and achieve business outcomes

 In the Control phase this will involve...
 Ensuring measurement systems are in place to quantify and report
performance
 Regularly reviewing the process in light of customer and business
needs, and identifying further improvements needed (maybe including
external Benchmarking)
 Addressing areas of under-performance and ensuring corrective actions
are taken
 Maintaining the skills and capabilities of those who have to manage,
operate and improve the process


Control Charts
Control charts allow us to see if what is
happening to a process is outside what we
would normally expect to see.

Upper Control
Limit

Lower Control
Limit


Continuous Improvement

Benchmark
Celebrate vs. Leaders
Success
Set
Performance
Targets

Review Performance Identify
vs. Targets Improvements

Measure Process Implement
Performance Changes


Project Completion Report

 What did you set out to achieve?
 What did you achieve?
 How did you achieve it?
 What worked well?
 What didn‟t?
 What learning can be transferred elsewhere?
 Have you celebrated your success?


Ensuring Success: Force Field Analysis
 What are all the things that will help us  What are all the things that might hinder
implement successfully? successful implementation?

Include actions in your Plan to build on Include actions in your Plan to minimise,
these or eliminate, these


Ian J Seath, Director
Improvement Skills Consulting Ltd.

www.improvement-skills.co.uk
ian.seath@improvement-skills.co.uk
M: 07850 728506
@ianjseath


OR Society workshop: Practical process improvement using Lean and 6 Sigma

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OR Society workshop: Practical process improvement using Lean and 6 Sigma