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


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A 1-day workshop for the OR Society: Practical Process Improvement Using Lean and Six Sigma.

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

  1. 1. Practical Process Improvement using Lean and Six Sigma A 1-day workshop for the OR Society Facilitated by Ian J Seath1 © 2011 Copyright ISC Ltd.
  2. 2. 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.2 © 2011 Copyright ISC Ltd.
  3. 3. Is that an “active banana” or an“inactive banana” on your desk?3 © 2011 Copyright ISC Ltd.
  4. 4. 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)4 © 2011 Copyright ISC Ltd.
  5. 5. Focus of improvement Cheaper Happier Customers Efficient Effective Less Waste Better More More Reliable Responsive Flexible Capable & Agile Faster More Capacity5 © 2011 Copyright ISC Ltd.
  6. 6. In two sentences… Lean:  Driving out waste by using TIME as a competitive weapon Six Sigma:  Driving out waste by reducing VARIATION6 © 2011 Copyright ISC Ltd.
  7. 7. Who’s using Lean and Six Sigma?Recent examples of ‘service’ or ‘back office’ programmes havedelivered significant benefits including: Probation Centrica Drug Testing Utility Call Centre Programme Home Office Capacity increased to Considerable realbenefits 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 fromSample testing time 70% to 95%reduced from 24 to 2 hours 7 © 2011 Copyright ISC Ltd.
  8. 8. Evolution of Lean Thinking 1991 Lean Thinking “Lean Enterprise” Lean Concepts Toyota Production System8 © 2011 Copyright ISC Ltd.
  9. 9. 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%9 © 2011 Copyright ISC Ltd. 20M_16
  10. 10. 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 Holistic10 © 2011 Copyright ISC Ltd.
  11. 11. Six Sigma provides a common basisfor 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 average11 © 2011 Copyright ISC Ltd.
  12. 12. 6 Sigma: Customers feel the Variance,not the Mean On average Supplier our rope is 2 cm thick ! That‟s good Customer to know!12 © 2011 Copyright ISC Ltd.
  13. 13. Lean and Six SigmaLean 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” defects13 © 2011 Copyright ISC Ltd.
  14. 14. Tools/TechniquesSix 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 Ratio14 © 2011 Copyright ISC Ltd.
  15. 15. Improvement approachSix Sigma: Define Measure Analyse Improve Control Understand Reduce Implement ImproveWhere are we now? current waste improvement continuously performanceLean: Current State VSM VAR Waste/Flow Future State VSM 15 © 2011 Copyright ISC Ltd.
  16. 16. 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 processMeasure • 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 future16 © 2011 Copyright ISC Ltd.
  17. 17. DMAIC is rarely linear Measure Define Improve Control Analyse17 © 2011 Copyright ISC Ltd.
  18. 18. 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 process18 © 2011 Copyright ISC Ltd.
  19. 19. 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?19 © 2011 Copyright ISC Ltd.
  20. 20. Process Definition (expanded SIPOC) Purpose:________________________________ Inputs Outputs Process Name Owner:______________________ Suppliers Boundaries Customers Start-point: End-point: Include: Exclude:20 © 2011 Copyright ISC Ltd.
  21. 21. Case study – part 121 © 2011 Copyright ISC Ltd.
  22. 22. Sequence MapOpportunity/need forimprovement Convene/ Define Define Brief Problem Process Team Draft Walk-through Sign-off High-level Process Map Map Identify Identify Problem Customer Problem List Requirements Areas22 © 2011 Copyright ISC Ltd.
  23. 23. 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 Tickets23 © 2011 Copyright ISC Ltd.
  24. 24. 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%24 © 2011 Copyright ISC Ltd.
  25. 25. Case study – part 225 © 2011 Copyright ISC Ltd.
  26. 26. 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?26 © 2011 Copyright ISC Ltd.
  27. 27. Stage 2: Measure Purpose:  Outputs:  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 performance27 © 2011 Copyright ISC Ltd.
  28. 28. 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 & Uttal28 © 2011 Copyright ISC Ltd.
  29. 29. 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 8729 © 2011 Copyright ISC Ltd.
  30. 30. 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.30 © 2011 Copyright ISC Ltd.
  31. 31. “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
  32. 32. 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-through32 © 2011 Copyright ISC Ltd.
  33. 33. Stage 3: Analyse Purpose:  Outputs:  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 performance33 © 2011 Copyright ISC Ltd.
  34. 34. 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!34 © 2011 Copyright ISC Ltd.
  35. 35. 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 archives35 © 2011 Copyright ISC Ltd.
  36. 36. 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? 36 © 2011 Copyright ISC Ltd.
  37. 37. 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
  38. 38. 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 Causes38 © 2011 Copyright ISC Ltd.
  39. 39. Pareto Diagram: Reasons for DelayedCourt 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 Causes39 © 2011 Copyright ISC Ltd.
  40. 40. 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 I40 © 2011 Copyright ISC Ltd.
  41. 41. 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 62.40N.B. In this example, Cycle-time is the gap between the completion of one activity and the startof the next activity. It has no cost associated with it. 41 © 2011 Copyright ISC Ltd.
  42. 42. Case study – part 342 © 2011 Copyright ISC Ltd.
  43. 43. 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 distributionCould be: „time to process an offender in custody‟ „errors in CRB checks‟ „cycle-time from receiving case files to delivery of service‟ 43 © 2011 Copyright ISC Ltd. „database errors – addresses, personal details, etc.‟
  44. 44. A four-sigma process 4 A “Six Sigma” approach is all about trying to reduce the variability in processes such that errors andThe 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 away from the mean of the distribution 44 © 2011 Copyright ISC Ltd.
  45. 45. A six-sigma process is “world class” 6The process distributionis very „tight” relative tocustomer 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 away from the mean of the distribution 45 © 2011 Copyright ISC Ltd.
  46. 46. 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%) 3.4 646 © 2011 Copyright ISC Ltd.
  47. 47. Stage 4: Improve Purpose:  Outputs:  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 design47 © 2011 Copyright ISC Ltd.
  48. 48. 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 48 © 2011 Copyright ISC Ltd.
  49. 49. 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 49 © 2011 Copyright ISC Ltd.
  50. 50. 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 process50 © 2011 Copyright ISC Ltd.
  51. 51. Design Options Removing Non-VA Triage and Simplification Automation/Technology Parallel vs. Sequence Multi-skilling Adding/removing Features/Functionality51 © 2011 Copyright ISC Ltd.
  52. 52. Case study – part 452 © 2011 Copyright ISC Ltd.
  53. 53. Develop an Action PlanActions toimplement WHAT WHEN WHOsolutions Action Form Team AC Plan Communicate DF Train AC for DG Run PilotActions to change Assess Pilot ACensure Plan Roll-out DFsuccess & Get Approval DGreducerisks53 © 2011 Copyright ISC Ltd.
  54. 54. Stage 5: Control Purpose:  Outputs:  To ensure the performance of  Project Completion Report the re-designed process can  Updated Process Definition be sustained and continuously Template improved  Process Measurement Plan54 © 2011 Copyright ISC Ltd.
  55. 55. 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 process55 © 2011 Copyright ISC Ltd.
  56. 56. 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 Limit56 © 2011 Copyright ISC Ltd.
  57. 57. Continuous Improvement Benchmark Celebrate vs. Leaders Success Set Performance Targets Review Performance Identify vs. Targets Improvements Measure Process Implement Performance Changes57 © 2011 Copyright ISC Ltd.
  58. 58. 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?58 © 2011 Copyright ISC Ltd.
  59. 59. 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 59 © 2011 Copyright ISC Ltd.
  60. 60. Ian J Seath, Director Improvement Skills Consulting Ltd. www.improvement-skills.co.uk ian.seath@improvement-skills.co.uk M: 07850 728506 @ianjseath60 © 2011 Copyright ISC Ltd.