Lou GorgaSix Sigma Solutions, Inc.

6sigmasolutions@optonline.net(973) 359-0416

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What Management Accountants might want to know about Lean Six

Sigma

Agenda• Introductions and Focus

• Lean Six Sigma (and Change Management)

Overview

• Key Tools and Technique Summary

• Value Proposition

• Questions/Discussion

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Drivers • What do you believe is necessary to

manage your business?

• How do you measure success?

• What do you look at?

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Our motto:Our motto:

If you cant Measure it…If you cant Measure it…

You can’t Manage it.You can’t Manage it.

Our motto:Our motto:

If you cant Measure it…If you cant Measure it…

You can’t Manage it.You can’t Manage it.

Some Tools used to measure and change….

Some Tools used to measure and change….

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

Focus on improving processes through measurement and

evaluation4

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?

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Lean Six Sigma DriversLean Six Sigma Drivers

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Processes For Improvement

Lean Six Sigma provides a process based approach to

improvement. It can be used to improve any business process.

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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?Where did it originate and how is it different?

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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

CustomerBottom

Line

All Customers andAll Customers and

We We NEEDNEED to listen to to listen to theirtheir

Voices (VOC)Voices (VOC)

Drivers: Business and/or Improvement

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Lean Six Sigma• Customer focused

• Data Driven

• Accurate

• Creates a “Common Language”

• Reduces waste

• Reduces variation

• Improves contributionDistinguishes

between “the feel and the

real”

Distinguishes between

“the feel and the real”

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Example

Roller Bearing Manufacturing

Diameter is a CTQ

(Critical To Quality Parameter)

Nominal diameter = 2.5mm

Minimum Spec = 2.25mm

Maximum Spec = 2.75mm

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Example (Cont.)

Nominal

Diameter

2.5 mm

No Less Than

2.25 mm

No More Than

2.75 mm

Lower Specification

Limit

Upper Specification

Limit

Customer is expecting 2.5 mm

But will allow some variation within the Spec range.

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Example (Cont.)

Manufactured Roller Bearing Diameter

Actual Micrometer Measurements

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Example (Cont.)

Manufactured Roller Bearing

Diameter

Variation ending up as a

defect

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Example (Cont.)

Let’s Look at Some Basic Statistics

Mean diameter = 2.50 mm

Standard Deviation = 0.125 mm

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On Average it’s OK

It’s a Variation

issue

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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process

Capability

216

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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process

Capability

317

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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process

Capability

418

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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process

Capability

519

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Example (Cont.)

Reducing Variation is Clearly the Key to Improving Process

Capability

620

How do Others Perform?

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Defe

cts

per

Million

1,000,000

100,000

10,000

1,000

100

1 2

IRS Tax Advice(phone in)

Doctor Prescription Writing

Airline Baggage Handling

Deaths caused by anesthesia during surgery

Domestic Airline Fatality Rate

Average Company

Best-in-Class

3 4 5 6 7

Sigma Scale of Measure

1% of Hospitalized Patients Injured by Negligence

Understanding Six Sigma

STATISTICALLY

Six Sigma refers to a process that produces only 3.4 defects per million opportunities.

STATISTICALLY

Six Sigma refers to a process that produces only 3.4 defects per million opportunities.

Sigma DPMO

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.

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Six Sigma Method

Define Measure Analyze Improve Control

Who are the customers and what are their priorities?

How is the process performing and how is it measured?

What are the most important causes of the defects?

How do we remove the causes of the defects?

How can we maintain the improvements?

DMAIC: To improve any existing product or process

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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

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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

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Getting to the CTQ’sTranslating a customer need into a fully developed CTQ

Quick Response

Time from inquiry to resolution (Y metric)

5 minutes or less (Target)

Not greater than 60 minutes

(specification / tolerance limit)

CTQ

Example:

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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.

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Alternatives to Measuring…

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Specifications

• Mean Time Between Failures • % Defects

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Analyze PhasePurpose:

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

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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:

Shift

Sale

s in

Dolla

rs

PMAM

35000

30000

25000

20000

15000

10000

5000

0

Boxplot of Sales in Dollars vs Shift

Count

Perc

ent

Shift SummaryCount 10 4

Percent 71.4 28.6Cum % 71.4 100.0

AMPM

14

12

10

8

6

4

2

0

100

80

60

40

20

0

Pareto Chart of Shift Summary

Customers In Line

Wait T

ime

1614121086420

20

15

10

5

S 1.22070R-Sq 93.9%R-Sq(adj) 93.4%

Fitted Line PlotWait Time = 1.371 + 1.029 Customers In Line

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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

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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

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Piloting the Solution

Plan and Prepare Pilot

Plan and Prepare Pilot Execute PilotExecute Pilot Analyze PilotAnalyze Pilot Document and

TransitionDocument and

Transition

Pilot: small scale, localized, high level of control, high level of scrutiny

Scale-up: gradual, highly monitored

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….

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• You must Change to improve by definition

• Change is hard and expensive

• Change requires a collaborative plan

Improvement Drive

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Implementation Needs

Importance of Cost Benefit

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Control PhasePurpose:• 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

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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.

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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.

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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

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Potential Focus Areas• Marketing Sales

• Call Centers

• Strategic Sourcing/Purchasing

• Operations

• Distribution

• Logistics

• Finance

• Billing

• Etc.

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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 ImprovementMeasurable and Sustainable Measurable and Sustainable

Improvement Improvement

ONLYONLY If You Keep Measuring If You Keep Measuring45

Level of Improvement

Sustainability

Fiscal PerformanceAccumulating 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?

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Training and certification programs available

Thank You

Questions?

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