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Chapter 9

Process Improvement and Six Sigma

Breakthrough

…the accomplishment of any improvement that takes an organization to unprecedented levels of performance.

Breakthrough attacks chronic losses or, in Deming’s terminology, common causes of variation.

Process improvement methodologies and tools provide the foundation for breakthrough as well as modern Six Sigma approaches.

Quality Profile: Iredell-Statesville Schools

Classrooms focus on five key questions:

1. “What do students need to know?”

2. “How will they learn it?”

3. “How will we know they have learned it?”

4. “What will we do if they have not learned it?”

and

5. “What will we do if they already know it?”

Plan, Do, Study, Act (PDSA) cycle is used to identify and implement improvements.

PDSA is also used throughout the school district in operational and support areas

Quality Profile: Caterpillar Financial Services Corp. U.S.

CFSC maintains a constant focus on process improvement.

Tools such as Six Sigma, help CFSC prioritize and manage projects, design products, and improve processes.

Ninety-seven percent of employees are trained in Six Sigma procedures for designing new processes and for improving existing ones.

Investments in technology along with a continuing focus on excellence and process improvements are helping CFSC achieve its corporate vision.

Process Improvement Methodologies

Redefining and analyzing the problem: Collect and organize information, analyze the data and underlying assumptions, and reexamine the problem for new perspectives, with the goal of achieving a workable problem definition.

Generating ideas: “Brainstorm” to develop potential solutions.

Evaluating and selecting ideas: Determine whether the ideas have merit and will achieve the problem solver’s goal.

Implementing ideas: Sell the solution and gain acceptance by those who must use them.

Evolution of the Deming Cycle

Walter Shewhart: specification, production, and inspection for mass production.

These steps correspond to the scientific method of hypothesizing, carrying out an experiment, and testing the hypothesis.

“Deming Wheel”

1. Design the product with appropriate tests.

2. Make the product and test in the production line and in the laboratory.

3. Sell the product.

4. Test the product in service and through market research.

Japanese Implementation: Plan-Do-Check-Act

Plan (1 of 2)

Define the process: its start, end, and what it does.

Describe the process: list the key tasks performed and sequence of steps, people involved, equipment used, environmental conditions, work methods, and materials used.

Describe the players: external and internal customers and suppliers, and process operators.

Define customer expectations: what the customer wants, when, and where, for both external and internal customers.

Determine what historical data are available on process performance, or what data need to be collected to better understand the process.

Plan (2 of 2)

Describe the perceived problems associated with the process; for instance, failure to meet customer expectations, excessive variation, long cycle times, and so on.

Identify the primary causes of the problems and their impacts on process performance.

Develop potential changes or solutions to the process, and evaluate how these changes or solutions will address the primary causes.

Select the most promising solution(s).

Conduct a pilot study or experiment to test the impact of the potential solution(s).

Identify measures to understand how any changes or solutions are successful in addressing the perceived problems.

Study

Examine the results of the pilot study or experiment.

Determine whether process performance has improved.

Identify further experimentation that may be necessary.

Act

Select the best change or solution.

Develop an implementation plan: what needs to be done, who should be involved, and when the plan should be accomplished.

Standardize the solution, for example, by writing new standard operating procedures.

Establish a process to monitor and control process performance.

Creative Problem Solving

Creativity is seeing things in new or novel ways.

Creative Problem Solving Process

Understanding the “Mess”– identify symptoms

Finding Facts – gather data; operational definitions

Identifying Specific Problems – find the root cause

Generating Ideas – brainstorming

Developing Solutions – evaluate ideas and proposals

Implementing Solutions – make the solution work

Custom Improvement Methodologies

FADE: focus, analyze, develop, and execute.

DRIVE—Define the problem, Recognize the cause, Identify the solution, Verify the actions, and Evaluate the results. (Park Place Lexus)

Some organizations embed the Deming cycle within a broader framework.

DMAIC Methodology

Define

Measure

Analyze

Improve

Control

Six Sigma

…a business improvement approach that seeks to find and eliminate causes of defects and errors in manufacturing and service processes by focusing on outputs that are critical to customers and a clear financial return for the organization.

The term six sigma is based on a statistical measure that equates to 3.4 or fewer errors or defects per million opportunities (dpmo).

Evolution of Six Sigma

Motorola (mid-1980s)

Improve product and services quality ten times by 1989, and at least one hundred fold by 1991. Achieve six-sigma capability by 1992. With a deep sense of urgency, spread dedication to quality to every facet of the corporation, and achieve a culture of continual improvement to assure total customer satisfaction. There is only one ultimate goal: zero defects—in everything we do.

General Electric (mid-1990s)

Rapid growth and interests in subsequent years.

Principles of Six Sigma (1 of 2)

1. Think in terms of key business processes and customer requirements with a clear focus on overall strategic objectives.

2. Focus on corporate sponsors responsible for championing projects, support team activities, help to overcome resistance to change, and obtain resources.

3. Emphasize such quantifiable measures as dpmo that can be applied to all parts of an organization: manufacturing, engineering, administrative, software, and so on.

Principles of Six Sigma (2 of 2)

4. Ensure that appropriate metrics are identified early in the process and that they focus on business results, thereby providing incentives and accountability.

5. Provide extensive training followed by project team deployment to improve profitability, reduce non-value-added activities, and achieve cycle time reduction.

6. Create highly qualified process improvement experts (“Green Belts,” “Black Belts,” and “Master Black Belts”) who can apply improvement tools and lead teams.

7. Set stretch objectives for improvement.

Differences Between Six Sigma and TQM

TQM is based largely on worker empowerment and teams; Six Sigma is owned by business leader champions.

TQM activities generally occur within a function, process, or individual workplace; Six Sigma projects are truly cross-functional.

TQM training is generally limited to simple improvement tools and concepts; Six Sigma focuses on a more rigorous and advanced set of statistical methods and DMAIC methodology.

TQM is focused on improvement with little financial accountability; Six Sigma requires a verifiable return on investment and focus on the bottom line.

A k-sigma quality level satisfies the equation:

k × process standard deviation = tolerance range/2

Here, k × σ = 12σ/2; thus, k = 6

Calculating DPMO Using Excel

Excel function:

=(1 – NORM.DIST(sigma level, 1.5, 1, TRUE)*1000000 (9.2)

Calculating Sigma Level Using Excel

Excel function:

= NORM.S.INV(1 - dpmo/1000000) + 1.5 (9.3)

Types of Quality Problems

Conformance problems are defined by unsatisfactory performance by a well-specified system.

Efficiency problems result from unsatisfactory performance from the standpoint of stakeholders other than customers.

Unstructured performance problems result from unsatisfactory performance by a poorly specified system.

Product design problems involve designing new products that better satisfy user needs—the expectations of customers that matter most to them.

Process design problems involve designing new processes or substantially revising existing processes.

Six Sigma

Lean tools

Creative thinking

Special tools (Ch. 7)

Combined approaches

Project Management and Organization

Projects are the vehicles that are used to organize and to implement Six Sigma.

The Project Management Body of Knowledge (PMBOK), developed by the Project Management Institute, defines 69 tools that every project manager should master.

Achieving professional certification in project management can significantly assist Six Sigma efforts.

Six Sigma Teams

Champions: Senior-level managers who promote and lead the deployment of Six Sigma in a significant area of the business.

Master Black Belts: Full-time Six Sigma experts who are responsible for Six Sigma strategy, training, mentoring, deployment, and results.

Black Belts: Fully-trained Six Sigma experts with extensive technical training who perform much of the technical analysis required in Six Sigma projects, usually on a full-time basis.

Green Belts: Functional employees who are trained in introductory Six Sigma tools and methodology and work on projects on a part-time basis, assisting Black Belts while developing their own knowledge and expertise.

Team Members: Individuals from various functional areas who support specific projects.

Factors in Six Sigma Project Selection

Financial return, as measured by costs associated with quality and process performance, and impacts on revenues and market share

Impacts on customers and organizational effectiveness

Probability of success

Impact on employees

Fit to strategy and competitive advantage

Return on Quality (ROQ)

…balancing quality costs against expected revenue gains

Principles

Quality is an investment

Quality efforts must be made financially accountable.

It is possible to spend too much on quality.

Not all quality expenditures are equally valid.

Toyota A3 Report

1. Theme, which succinctly states the problem being addressed.

2. Background, which contains a description of all pertinent information needed to understand the scope of the problem.

3. Current condition, which deals with developing an understanding of the process using a value-stream map.

4. Cause analysis, which focuses on determining the cause of the problem.

5. Target condition, which specifies possible improvement ideas that could solve the problem.

6. Implementation plan, which identifies the steps that need to be accomplished in order to achieve the improvements.

7. Follow-up, which lists activities that will need to be completed after implementation along with the results of the implementation.

Define

Describe the problem in operational terms

Drill down to a specific problem statement (project scoping)

Apply Pareto analysis

Identify the process

Use a SIPOC diagram

Develop a project charter to include

A simple project definition, the project objective, the project team and sponsor, the customers and CTQs on which the project focuses, existing measures and performance benchmarks, expected benefits and financial justification, a project timeline, and the resources needed.

Pareto Analysis

A Pareto distribution is one in which the characteristics observed are ordered from largest frequency to smallest.

A Pareto diagram is a graphical description of a Pareto distribution.

Measure

Focus on understanding process performance and collecting the data necessary for analysis.

Key data collection questions

What questions are we trying to answer?

What type of data will we need to answer the question?

Where can we find the data?

Who can provide the data?

How can we collect the data with minimum effort and with minimum chance of error?

Operational definitions – clarify performance measures

Y = f(X)

Six Sigma uses the notion of a function in mathematics to portray the relationship between process performance and customer value

Y is the set of CTQs and X represents the set of critical input variables that influence Y.

Check Sheets

…special types of data collection forms in which the results may be interpreted on the form directly without additional processing

Analyze

Analyzing a problem starts with a fundamental understanding of the process

typically accomplished through detailed process mapping, expanding on the SIPOC diagram that is developed in the Define phase.

Value stream map - highlights value-added versus non-value-added activities, and include times that activities take.

Value stream maps are an important tool in lean thinking

Why Defects, Errors, or Excessive Variation Occur (1 of 2)

A lack of knowledge about how a process works, which is particularly critical if different people perform the process. Such lack of knowledge results in inconsistency and increased variation in outputs.

A lack of knowledge about how a process should work, including understanding customer expectations and the goal of the process

A lack of control of materials and equipment used in a process

Inadvertent errors in performing work

Why Defects, Errors, or Excessive Variation Occur (2 of 2)

Waste and complexity, which manifest themselves in many ways, such as unnecessary steps in a process and excess inventories

Hasty design and production of parts and assemblies; poor design specifications; inadequate testing of incoming materials and prototypes

•Failure to understand the capability of a process to meet specifications

Lack of training

Poor instrument calibration and testing

Inadequate environmental characteristics such as light, temperature, and noise

Root Cause Analysis

Root cause -“that condition (or interrelated set of conditions) having allowed or caused a defect to occur, which once corrected properly, permanently prevents recurrence of the defect in the same, or subsequent, product or service generated by the process.”

Root cause analysis is an approach using statistical, quantitative, or qualitative tools to identify and understand the root cause.

“5 Why” technique - forces one to redefine a problem statement as a chain of causes and effects to identify the source of the symptoms by asking why, ideally five times.

Cause-and-effect diagram is a simple graphical method for presenting a chain of causes and effects and for sorting out causes and organizing relationships between variables.

Scatter diagram - the graphical component of regression analysis.

Improve

Generate ideas for removing or resolving the problem and improve the performance measures and CTQs.

Brainstorming – a group problem-solving procedure for generating a large number of ideas through combination and enhancement of existing ideas.

Checklists to spawn new ideas.

Evaluation and selection

Scoring models to assess possible solutions against important criteria such as cost, time, quality improvement potential, resources required, effects on supervisors and workers, and barriers to implementation such as resistance to change or organizational culture.

Control

Maintain the improvements, which includes putting tools in place to ensure that the key variables remain within the maximum acceptable ranges under the modified process.

establishing the new standards and procedures,

training the workforce, and

instituting controls to make sure that improvements do not die over time using checklists, status reviews, or control charts.

Lean Tools

Lean production refers to approaches that originated at the Ford Motor Company in the early 1900s, but which were refined and modernized by the Toyota Motor Corporation later in the century.

Lean approaches focus on the elimination of waste in all forms, including defects requiring rework, unnecessary processing steps, unnecessary movement of materials or people, waiting time, excess inventory, and overproduction.

Tools of Lean Production

The 5S’s: seiri (sort), seiton (set in order), seiso (shine), seiketsu (standardize), and shitsuke (sustain).

Visual controls.

Efficient layout and standardized work.

Pull production.

Single minute exchange of dies (SMED).

Total productive maintenance.

Source inspection.

Continuous improvement.

Lean Six Sigma

…an integrated improvement approach to improve goods and services and operations efficiency by reducing defects variation, and waste.

Lean production addresses visible problems in processes, for example, inventory, material flow, and safety.

Six Sigma is more concerned with less visible problems, for example, variation in performance.

Lean Six Sigma Metrics in Services

Accuracy

Cycle time

Cost

Customer satisfaction