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A Lean Six Sigma Transformation
at a Financial Service Provider
1
Ronald J.M.M. Does
June 2013
Lean Six Sigma Transformation · 2
A Lean Six Sigma Transformation at a
Financial Service Provider
Ronald J.M.M. Does
Professor of Industrial Statistics, Faculty of Economics and Business
Managing Director at the Institute for Business and Industrial
Statistics
Director at the Institute of Executive Programmes, Amsterdam
Business School
Lean Six Sigma Transformation · 3
- Economies of scale
- Standardisation
- Managing large organisations.
1900–1980: Mass fabrication
- Quality and manufacturing virtuosity as strategic weapon.
- Flexibility, service level, reliability, lean
→ cheap, dependable processes.
“Operational excellence”
1970–2000: Total Quality Management
Lean Six Sigma Transformation · 4
Industry
General Electric Plastics
DAF Trucks, LG.Philips,
Philips, Tata, NXP, ASML,
BOSCH, VDL, Sensata
Perlos, Desso, NedTrain
Food
Douwe Egberts (Sara Lee)
United Biscuits (Verkade)
Noviant
Friesland Foods
Services
ABN AMRO en ING Bank
Achmea, Ziggo,
Getronics, TNT Post, TenneT,
Wolters Kluwer, AEGON
Heijmans, ZwitserLeven
Healthcare
Rode Kruis -, Jessa -, Lange
Land -, Canisius Wilhelmina -,
Beatrix -, Deventer-, Martini Hospital
Erasmus MC, UMC Groningen
RdGG, WFG, AMC, UMCU
1990– : Six Sigma, Lean Operations, Lean Six Sigma
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Company
Operating routines:
Production processes
Service delivery
Healthcare processes
Administrative processes
- Structure change - Technological innovations - Cut-throat competition - Price erosion - Higher expectations
I O C P
I O C P
I O C P
I O C P S
S
S
S
Design
Planning & Control
Improvement
Operations management
Lean Six Sigma Transformation · 6
Designing a process: “If you can’t describe what you
are doing as a process, you don’t know what you are doing”
Task
Task
Task
Task
Task
Resources
What tasks to do, and in what order? Which tasks to combine in a process step? Which resources do which tasks? Physical layout of the process, and the transport
routes, and the WIP queues.
Task
Task
Task
Task
Task
Process step
WIP queue
(“Work in Process”)
Route
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Input Output Client Process Waste Waste Waste Waste
7 56
121110
8 4
21
9 3
7 56
121110
8 4
21
9 3
€
Operations management is about ensuring
effective and efficient processes.
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The 5 Key Performance Measures Cost
Personnel costs, materials, facilities
Quality (design quality)
Functionality, courteousness, attractive looks, durability.
Speed
Throughput time, waiting times, …
Dependability (delivery quality)
On-time processing, no out-of-stock, cancellations, service
interruptions, defects & mistakes, punctuality, …
Flexibility (ability to adjust to variability in demand)
Volume-flexibility (fluctuations in volume of demand)
Delivery-flexibility (flexibility in changing agreed delivery times)
Mix-flexibility (ability to offer a wide range of products)
Product-flexibility (ability of allow customization and introduce new
products)
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How to develop an Operations Strategy?
Operations strategy should determine:
- Which performance indicators should the operations focus on?
(determine strategic position)
- Which dimensions may be compromized in order to excel
where it counts?
- How do we envisage that we excel in them?
Strategy formation is an ill-structured task; there is no step-plan or
algorithm. But there are some analysis models and concepts to
help you structure your thoughts
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Various improvement methodologies
Short-cycle improvement roadmaps, typically applied by workfloor
personnel in short (one week) projects:
Kaizen, Blitz Kaizen
PDCA-project (Plan Do Check Act)
8D (Eight Disciplines problem solving)
Roadmaps for breakthrough improvement, typically applied by line
management or specialists
DMAIC (Six Sigma)
Integrated combination of DMAIC and best practices from Lean
thinking movement: “Lean Six Sigma”
Roadmaps for (re-)design of processes, typically applied by
specialists
BPR (Business Process Reengineering)
DfSS (Design for Six Sigma)
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- Pilot projects
- Learning by doing
- Ad hoc initiatives
- Support in organisation
- Project selection
- Capable people
- More projects and support
- Program
- Project selection with focus
2. More visible
- Set up program
- Projects with high benefits
- Clear vision
- Create capacity
- Increase in scale
- LSS standards known throughout company
- Consistent application
- Make results visible
- Maintain enthusiasm
- LSS integrated throughout company
- Part of strategy and decision- making
- Involve all company divisions
- Integrate LSS in organisation structure, culture, and procedures
- LSS training in MD program
- LSS integrated in organisation structure, culture, and procedures
- Second nature
- Permanent financial impact
- Keep LSS new and interesting
- Continue applying LSS, even after changes such as growth and acquisitions
3. Way of working
4. Integrated
5. Operational excellence
Results
Enable
rs
1. Project based
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How to organize improvement efforts?
Important to distinguish between (Process) Control and (Process)
Improvement activities:
Process control: reactive, fire-fighting, dealing with sporadic problems,
“mopping with the tap running”
Process improvement: breakthrough, dealing with chronic problems
once-and-for-all, “find and close the tap”
Improvement and control activities should be organized differently:
Control: continuous activity, executed by the workfloor and automated
inspection and monitoring systems
Improvement: organized as projects (clear begin and end point),
executed by teams of line personnel, line managers or specialists
Improvement should be consciously organized:
The pressure of day-to-day problems is such, that the whole
organization can be occupied by them. Unless improvement projects are
organized and initiated consciously, they typically won’t happen. The
organization risks getting lost in mopping with the tap running.
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Yellow belts
Senior business management
Black belt
Green belt
Orange belt
Champion
Black belt
Green belt
Orange belt
Champion
Black belt
Green belt
Orange belt
Champion
Master black belts
Programme managers
Programme management
Project management and execution
Team members
Lean Six Sigma’s Belt hierarchy
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Programme: an integrated and coordinated collection of projects,
courses and other initiatives aimed at achieving a strategic goal.
Programme director
Member of the business’s senior management
Accountable for and formal leader of the improvement programme
Strategic direction and focal points of the improvement programme
Programme managers
Day-to-day management of the programme’s activities
Project monitoring and control
Adjustment of the programme’s course
Benefits management
Planning: courses, events, etc.
Master blackbelts
Specialists on Lean Six Sigma methods and techniques
Give training to blackbelts and greenbelts
Review whether projects meet Lean Six Sigma’s methodological
standards
Programme management
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Various improvement methodologies
Short-cycle improvement roadmaps, typically applied by workfloor
personnel in short (one week) projects (Orange Belts and Yellow
Belts)
Kaizen, Blitz Kaizen
PDCA-project (Plan Do Check Act)
8D (Eight Disciplines problem solving)
Roadmaps for breakthrough improvement, typically applied by line
management or specialists (Green Belts or Black Belts)
DMAIC (Six Sigma)
Integrated combination of DMAIC and best practices from Lean
thinking movement: “Lean Six Sigma”
Roadmaps for (re-) design of processes, typically applied by
specialists (Black Belts)
BPR (Business Process Reengineering)
DfLSS (Design for Lean Six Sigma)
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Just-do-it
Who will do
and when?
Problem solving
Why has this
happened?
Lean/Kaizen event
How do we
tackle this?
Lean Six Sigma
What is the
solution?
Known Unknown
Low
H
igh
Solution
Com
ple
xity
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Project selection and definition
The project’s objectives and deliverables are chosen. A rough
assessment of the project’s potential benefits should demonstrate that
the project addresses a Big Fish, and not a trivial issue.
The project leader (black or greenbelt) and team members are
selected, as well as the project review board.
Terms and conditions are negotiated: how much time can the project
leader and team members spend? What is their budget? What is in
scope and what is not? What side conditions are assumed? What
contingencies and complications are foseseeable?
Timelines: deadlines for milestones and toll-gates?
Deliverables, terms and conditions are laid down in a project charter,
signed by the project leader and the project review board.
Project life-cycles: 1. Selection and charter
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The project leader and team members execute the project, making
analyses and design improvement actions.
The project’s progress is reviewed on a number of occasions
(milestones, toll-gates) defined in advance.
Typical points for discussion:
Is there enough progress? Is the project still on track?
Is the project’s direction still acceptable for the champion and user?
Do the project leader and team members encounter problems? Time
issues? Commitment of the workfloor or line management?
If it seems that there is not much sense of urgency for a project’s
aims, or if the project seems to get stuck for lack of time, drastic
actions are needed: either cancel the project, or insist that obstacles
are removed instantly.
Project life-cycles: 2. Project execution
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Jan Bert Claudia Dorine Erik Fred
Signed Project charter Nog formeel akkoord geven.
SIPOC
Benefit analysis Berekening erbij
Organisation (time, review board)
Stakeholder analysis
CTQ flowdown Kosten door boetes uit CTQ-flowdown verwijderdKlanttevredenheid / wachttijd - spoor uit de CTQ-flowdown halen.
Operational definitions Let op: BT wordt gemeten per proces/poging; 1 dossier kan bestaan uit meerdere pogingen, dus de totale BT per dossier is de som van de BT's per poging.
Measurement plan Gaan doen: meetplan finaliseren Metingen = DILO plus travel sheet
Validity of the measurements validiteit onderbouwen Geef oplossingen voor validiteitsissues
Precision: Gauge R&R or kappa
Measurements started DILO gedaan om uit te vinden welke taken in totaal de meeste tijd kosten (Pareto); nu travel-sheet-metingen aan het doen voor de taken 'expiraties' en 'afmeldingen'.
Process behaviour in time Gaan doen: meetresultaten analyseren Gaan doen: travel-sheet-metingen geanalyseren
Process capability analysis 1 slide per CTQ, met gemiddelde en doelstelling.Pareto gemaakt, nu voor activiteiten afzonderlijk
Value stream map herbewerkingen en verspilling in VSMVSM voor activiteiten afzonderlijk
Updated project objectives and benefits
Brainstorm session / group meetings Gaan doen: procesmatrix gaan vullen met FMEA en Gemba.Gaan doen: FMEA, BOB/WOW, Gemba, en daarmee verstoringen en inefficienties in procesmatrix zetten.Bezig met: brainstorming/FMEA; procesmatrix; gemba; autopsies.BOB vs WOW n.a.v. histogram / lognormale verdeling. Gaan doen: FMEA + Gemba
Expert interviews FMEA gaan doen.
BOB vs WOW / autopsies Laatste update: 17/5 Project gestopt, want het is niet realistisch dat Fred hier meer tijd voor krijgt.
FMEA 17/5/2010: Project gestopt vanwege gebrek aan voortgang. Nagenoeg geen voortgang in afgelopen 5 weken.
Process inefficiencies identified in value stream map Project heeft op de afdeling onvoldoende prioriteit, en GB daardoor te weinig tijd.Laatste update 17/5 Harde afspraak: voor 28/6 substantiele voortgang (2 dagen per week), anders project stoppen.Laatste update: 17/5
Process matrix completed GB aangespoord om serieus na te denken of er wel voldoende tijd en prioriteit voor dit project zijn.NB. Besparingspotentieel is beperkt (ongeveer 0.4 FTE).Sinds 1 maart te weinig voortgang. Hierover serieus spreken met Wim om te komen tot een realistisch plan.
Project life-cycle: 2. Project execution
“Toll-gate reviews” for the D, M, A, I and C stages:
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The last review assesses whether the project has achieved its
objectives.
If the champion and other members of the project review board
accept the project’s results, the project leader and team members
are discharged. This is the formal end point of the project.
If there are pending actions, responsibility for these actions is
transferred to the project champion.
Programme management will track whether the anticipated benefits
of the project will actually be realized and cashed.
Project life-cycles: 3. Discharge
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Project life-cycle: 3. Discharge
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Measure
Analyze
Improve
Control
5. Establish the effect of influence factors 6. Design improvement actions
7. Improve process control 8. Close the project
3. Diagnose the current process 4. Identify potential influence factors
1. Define the CTQs 2. Validate the measurement procedures
Define
Lean Six Sigma’s DMAIC method provides a roadmap for projects.
It helps project leaders to structure their activities by breaking down the
tasks of an improvement project into a sequence of steps and deliverables.
It helps project owners to review and manage the progress of a project by
defining toll-gates on which the project leader can be reviewed.
Lean Six Sigma’s DMAIC structure
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DMAIC’s main principles
Measure
Analyze
Improve
Control
5. Establish the effect of influence factors 6. Design improvement actions
7. Improve process control 8. Close the project
3. Diagnose the current process 4. Identify potential influence factors
1. Define the CTQs 2. Validate the measurement procedures
Define
Some of the main principles of DMAIC and similar approaches:
Project objectives are translated into measurable and quantitative
metrics
“You cannot improve what you cannot measure”
Attempts at improvement should be preceded by a data-based
diagnosis
“Focus on the Big Fish”
Remedies are based on established cause-and-effect relations
“Find the X”, “Five times ‘Why?’”
The effectiveness of proposed interventions must be demonstrated
(evidence-based intervention)
“In God we trust, all others must bring data”
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Measure 1. Define the CTQs 2. Validate the measurement procedures
Define
DMAIC: Define & Measure
DEFINE stage: definition of the project:
Goals (On what dimensions should the process be improved?)
Deliverables (Analysis only? Implementation of recommendations?
Benefit realization?)
Organizational structure
MEASURE stage: operational definition of the project’s objectives
Translation of objectives into measurable characteristics (CTQs:
Critical To Quality characteristics)
Establishment of a measurement plan
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Problems
€ $ Financial
perspective
Process overhaul
Voice of the patient
ClientClient
Lead timeLead time
BankBank
MistakesMistakes
Queue times
Queue times
InternalreloopsInternalreloops
Externalreloops
Externalreloops
Oper. costsOper. costs
Processingtimes
Processingtimes
FteFte
Strategy
1. Project identification
2. Project proposals
3. Project selection
Project definition
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1. Decreasing operational cost by improving
operational efficiency
2. Decreasing operational cost by using a cheaper
channel
3. Improving revenue by increasing customer
satisfaction
4. Improving revenue by servicing more customers
5. Decreasing operational losses
6. Improving business decision making
7. Increasing customer satisfaction and improving
processing efficiency
Overview of templates – Financial services
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Revenue
Through-put time
Strategic focal
point
External iterations
Project
objective Service quality
Constituents
Perceived quality
Net waiting time Net processing time
Additional processing time due to rework
Operational cost
Personnel cost
Work Volume
Productive hours
Total processing time
Additional waiting time due to rework
CTQ
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Analyze 3. Diagnose the current process 4. Identify potential influence factors
DMAIC: Analyze
ANALYZE stage: Data-based diagnosis of the current situation
What are the extent and nature of the problem?
Single out the “vital few” problems from the “trivial many” problems
(“focus on the big fish”, “80/20 rule”)
What are the causes and influence factors of the problem?
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DMAIC: Improve
IMPROVE stage: Evidence-based intervention to improve the
process
Find evidence for the effectiveness of the proposed intervention
(experiments, trials, historical data, theoretical / expert knowledge)
Design the future state process
Improve 5. Establish the effect of influence factors 6. Design improvement actions
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DMAIC: Control
CONTROL stage: Transfer of improvements to line and process
management
Integrate findings in the process’s control plan, and add or improve
process controls
Transfer responsibilities for sustained improved performance to line
management and the workfloor
Control 7. Improve process control 8. Close the project
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Senior management
Line management, process owners
Workfloor employees
Automatic process controls
Juran’s control pyramid
- Organize process control - Improvement projects to
tackle chronic problems
Co-ordinate improvement projects
Respond to sporadic problems
Handle predictable every-day problems
Many organizations struggle with the balance between fire fighting and improvement. Juran suggested a model for organizing both fire fighting and improvement.
Juran’s control pyramid
Lean Six Sigma Transformation · 32
Process improvement
Process control
Execution
Facilitate Execution
Coordinate
Provide
input
The idea is, that by empowering the workfloor to do fire fighting efficiently, line management can focus on improvement projects.
Senior management
Line management, process owners
Workfloor employees
Automatic process controls
Juran’s control pyramid
Lean Six Sigma Transformation · 33
0
50
100
150
200
250
2007 2008 2009 2010 2011 2012
Master Black Belts
Black Belts
Green Belts
Orange Belts
Yellow Belts
Lean Six Sigma Transformation · 34
This presentation is based on the book:
J. de Mast, R.J.M.M. Does, H. de Koning and J. Lokkerbol (2012), “Lean Six Sigma for Services and Healthcare”, Beaumont, Alphen a/d Rijn, the Netherlands.
And the articles:
J. de Mast, B.P.H. Kemper, A. Wiltjer and R.J.M.M. Does (2013), “Deploying
Operational Excellence at a Financial Service Provider”, Quality Engineering
25(3), to appear.
J. Lokkerbol, R.J.M.M. Does, J. de Mast & M. Schoonhoven (2012),
“Improving Processes in Financial Service Organizations: Where to Begin?”,
International Journal of Quality and Reliability Management 29(9), pp. 981-
999.
Lean Six Sigma Transformation · 35
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