Error-Proofing in Office & Service Environments

Error-Proofing Transactional, Service, Creative, and Analytical Processes August 12, 2010 Company LOGO

Your Instructor  Early career as a scientist; migrated to quality & operations design in the mid-80’s.  Launched Karen Martin & Associates in 1993.  Specialize in Lean transformations in nonmanufacturing environments.  Co-author of The Kaizen Event Planner; co-developer of Metrics-Based Process Mapping: An Excel-Based Solution.  Instructor in University of California, San Diego’s Lean Enterprise program. © 2010 Karen Martin & Associates Karen Martin, Principal Karen Martin & Associates 2

You will learn… Common causes for errors. The key metric (%C&A) for measuring quality in office/service settings (review). Error-proofing prioritization. Root cause analysis tools. Countermeasures for improving quality. How to translate quality improvement into productivity gains. © 2010 Karen Martin & Associates 3

Building a Lean Enterprise Jidoka

Eight Wastes (Muda) Overproduction Motion (people) Inventory Transportation (material/data) Waiting Underutilized Over-Processing people Errors ( Defects Rework) © 2010 Karen Martin & Associates 5

Building a Lean Enterprise Process Stabilization Tools

Building a Lean Enterprise Poka Yoke; Error-Proofing

Potential Impact of Poor Quality Customer    Death or injury Slow delivery Lost market share Financial    Excessive expenses Missed performance bonuses Cash flow Legal / Regulatory   Staff      © 2010 Karen Martin & Associates Non-compliance Litigation Interpersonal & interdepartmental tension Stress & frustration Turnover / absenteeism Poor morale Inability to attract talent 8

Cost of Poor Quality (COPQ) Labor (Process Time)    To fix To inspect/audit/monitor/approve Turnover due to frustration & stress Extended lead times  Cash flow Material costs (sometimes)   Scrap Rework Quantify COPQ to establish your current state baseline from which to measure improvement Storage costs (sometimes) Litigation / regulatory fines © 2010 Karen Martin & Associates 9

1-10-100 Quality Rule The 1-10-100 rule states that as work moves through a process, the cost of correcting an error increases by a factor of 10. Order entry example Activity Prevention Order entered correctly Inspection Error detected by billing dept Failure Error detected by customer Big Failure Cost of customers telling others © 2010 Karen Martin & Associates Cost $1 $ 10 $ 100 ??? 10

Error-Proofing Recognizes that every human will make errors. Methodology that is used to strive toward zero defects by either preventing or automatically detecting defects. Help people do the right thing; prevent them from doing the wrong thing.  Key Toyota principle – Respect for people. Errors become defects that require rework. © 2010 Karen Martin & Associates 11

Levels of Error-Proofing 1. Prevention   Make it impossible to make the error. Make it difficult to make the error. 2. Detection  Make it obvious the error has occurred. 3. No Impact  Make it a “no impact” error. © 2010 Karen Martin & Associates 12

Error-Proofing Tenets Common tendency (non-Lean mindset) is to blame people   “If they’d just be more careful…” “They’re being lazy…” Errors are not the result of careless or inattentive employees. Warning or “be careful” signs are not robust solutions (and may be insulting) Errors are evidence of a process design or environmental problem, not a people problem.  Lean mindset: “We (the organization) have failed you.” © 2010 Karen Martin & Associates 13

Quality: People aren’t the problem. The problem is generally rooted in: • Process design • Technology capabilities • Environmental conditions 14

State of Quality in Office & Service Environments Office & service quality rarely measured. If measured, typically “end state” quality. “In process” quality is a far more revealing analytical tool, in terms of:     Determining how robust your process is Identifying waste Rebuilding interpersonal and interdepartmental relationships Capturing productivity gains © 2010 Karen Martin & Associates 18

Key Lean Metric: Quality %Complete and Accurate (%C&A)  % time downstream customer can perform task without having to “CAC” the incoming work:  Correct information or material that was supplied  Add information that should have been supplied  Clarify information that should or could have been clear   This output metric is measured by the immediate downstream customer and all subsequent downstream customers. If workers further downstream deem the output from a particular step to be less than 100%, multiply their assessment of quality with the previous assessments. © 2010 Karen Martin & Associates 21

Measuring Step-Specific Quality Customer %C&A = 50% Step 1 Step 2 Step 3 Step 4 %C&A = 70% %C&A = 85% %C&A = 25% %C&A = 80% Rolled First Pass Yield = 6% (.50 x .70 x .85 x .25 x .80) x 100 © 2010 Karen Martin & Associates 23

Two Ways to Measure Value Stream Mapping   Holistic, macro view of process Strategic planning tool Metrics-Based Process Mapping   Micro view of process Tactical design tool © 2010 Karen Martin & Associates 24

Mapping Post-it Conventions Step # Activity (Verb / Noun) Function that performs the task # Staff (if relevant) Barriers to flow (if relevant) PT (process time) % Complete & Accurate LT (Lead time)

Current State Value Stream Map Service Delivery – Call to Cash Source Refrigeration & HVAC, Inc. Current State Value Stream Map Serv ice Deliv ery Created February 11, 2009 CONFIDENTIAL Customer Great Plains Verisae (Customer) Special Order Part Excel Spreadsheet (Customer) Supplier Tech Upload time card Close call in Verisae Process Time Cards Tech Account Manager (West) Payroll Admin PT = 0 mins. %C&A = 70% Batch: 1x/day PT = 1 mins. %C&A = 90% Batch: 1x/day Complete Call in GP Pick up Part at Parts Store Review Service Call Data ?% Tech 40% Receive customer call Select & Dispatch Tech Call Center Dispatcher & Service Manager 5 m. 120 m. PT = 2 mins. %C&A = 60% 0.0833 hours PT = 5 mins. %C&A = 60% Tech PT = 90 mins. %C&A = 90% PT = 0 mins. 640 m. 240 m. PT = 5 mins. %C&A = 80% PT = 120 mins. %C&A = 40% 2 hours 75 minutes Dispatcher Tech 120 m. 1.25 hours 90 minutes Make Repair; Call to raise the NTE Get Part from Truck 75 m. 1.5 hours 5 minutes ?% Tech 90 m. 2 hours 2 minutes Assess Problem PT = 75 mins. %C&A = 95% 5 minutes PT = 15 mins. %C&A = 85% Batch: 1x/day Billing Admin 6 days PT = 25 mins. %C&A = 75% Posting Admin 240 mins. PT = 3 mins. %C&A = 98% Batch: 1x/day 640 m. Account Manager 3 minutes Enter Invoices into Verisae & Excel; Mail Invoices Billing Admin 120 m. PT = 10 mins. %C&A = 85% Batch: 3-5x per wk 10.7 hours 4 hours 25 minutes Review Invoices; Close in Verisae (Pac) Review & Post Invoices Review Open Ticket Report 48 hours 10 minutes A/P Admin PT = 10 mins. %C&A = 90% Batch: 1x/day PT = 10 mins. %C&A = 50% Batch: 2x/day 10.7 hours 4 hours 120 minutes Service Manager Process A/P Receive Cash; Post Payment Collections 60 days PT = 4 mins. %C&A = 95% Batch: 1x/week 480 hours 2 hours 10 minutes 4 minutes Lead Time = 572 hours Process Time = 349 minutes Acronym Key %C&A %Complete and Accurate AR Activity Ratio FTE Full Time Equivalent LT Lead Time PT Process Time RFPY Rolled First Pass Yield Lead Time to invoice = 86.2 hrs Process Time =5.9 hrs. NOTE: Business hours Activity Ratio = 6.8% RFPY = 1.1% Lead time to cash = ? days RFPY = 1.1%

Summary Quality Metric Rolled First Pass Yield (RFPY)     The percentage of occurrences where work passes through the process “clean,” with no “hiccups,” no rework (CAC) required. RFPY = %C&A x %C&A x %C&A… Common finding = 0-15% Multiply ALL %C&A’s, even if parallel processes (concurrent activities). © 2010 Karen Martin & Associates 27

Service Delivery Value Stream Call to Cash Metric Lead Time (LT) Process Time (PT) Current State 86.2 hours 5.9 hours % Activity 6.8% Rolled First Pass Yield (RFPY) 1.1% # Handoffs © 2010 Karen Martin & Associates 10 Projected Future State Projected % Improvement

Future State Value Stream Map Service Delivery – Call to Cash Future State Value Stream Map Source Refrigeration & HVAC, Inc. Service Delivery T&M Target example, refrigeration component repair, non-peak season (35 w ork orders per day) Created February 13, 2009 CONFIDENTIAL Create Source preferred T & C's Explore flat rate pricing Customer %C&A = 99% Establish parameters for time & parts by service type EDI Interf ace Create EDI Interface w/ Customers Create Tech performance report Create EDI Interface w/ Verisae Supplier Great Plains No EDI Special Order Part Improve Tech Training; Create Sub-levels Improve Tech Onboarding Tech Create Tech Support Center Implement GPS Contact Tech Support As Needed Install kanban on trucks ? Centralize Dispatch 10% Assess Problem Dispatcher 120 mins. PT = 7 mins. %C&A = 85% 2 hrs. Make Repair; Complete call on handheld Tech PT = 75 mins. %C&A = 90% PT = 0 mins. ` 24 hrs. PT = 120 mins. %C&A = 75% 2 hrs. 1.25 hrs. Create stnd work for invoicing PT = 5 mins. %C&A = 99% 1x daily Billing Admin Compare invoice register to invoices and mail invoices 4 hrs. PT = 25 mins. %C&A = 95% 24 hrs. 2 hrs. Create Customer Billing Teams Review W.O., payroll, AP & invoice; post immediately Tech 2 hrs. 1.25 hrs. 1.25 hrs. Create invoice exception report Get Part from Truck 75 mins. 1.25 hrs. 0.117 hrs. ? Enter data into Verisae and Excel from Daily Report Billing Admin Standardize Truck Inventory PT = 75 mins. %C&A = 95% Tech 75 mins. Separate labor & payroll Pick up Part at Parts Store Tech Tech Create W.O. Dispatch Tech Excel Spreadsheet (Customer) Verisae (Customer) Billing Admin Receive Cash; Post Payment Collections 60 days PT = 5 mins. %C&A = 99% 1x daily 4 hrs. 0.417 hrs. 480 hrs. 0.0833 hrs. Lead Time = 520 hrs. Process Time = 5.12 hrs. Acronym Key %C&A %Complete and Accurate AR Activity Ratio FTE Full Time Equivalent LT Lead Time PT Process Time RFPY Rolled First Pass Yield Lead Time to invoice = 34.5 hrs NOTE: Business hours Process Time = 5.1 hrs. Activity Ratio = 14.8% RFPY = 45.4% Lead time to cash = 67 days

Service Delivery Value Stream Call to Invoice Segment Projected Improvement Current State Projected Future State (10 months) Projected % Improvement 86.2 hours 34.5 hours 60.0% 5.9 hours 5.1 hours 13.6% % Activity 6.8% 14.8% 45.9% Rolled First Pass Yield (RFPY) 1.1% 45.4% 3,990% 10 5 50% Metric Lead Time (LT) Process Time (PT) # Handoffs Freed Capacity = © 2010 Karen Martin & Associates 0.8 hrs/service call x 75,000 calls/yr 1,875 hrs/year = 32 FTEs

What do you do with freed capacity?  Absorb additional work without increasing staff  Reduce paid overtime  Better work/life balance  Slow down & think  Innovate – create new revenue streams  Conduct ongoing continuous improvement activities  Do a better job with fewer errors and higher safety  Get to know your customers; build stronger supplier relationships  Mentor staff to create career growth opportunities  Provide additional workforce development; cross-training  Do the things you haven’t been able to get to; get caught up  Collaborate with other areas  Reduce payroll through natural attrition © 2010 Karen Martin & Associates 31

Reasons for Errors  Lack of effective training  Non-standardized work  Excessive complexity  Time delays between input and output (holding info in one’s head too long)  Multi-tasking  Rushing  Poor knowledge re: internal customer requirements © 2010 Karen Martin & Associates  Hardware / software issues  Similarities  Environmental   Interruptions/ distractions Noise, odor, lighting  Ambiguous information    Unclear instruction Poor handwriting Blurry images (technologyrelated 32

Root Cause Analysis (RCA) RCA is necessary to:     Avoid jumping to conclusions. Avoid creating “band-aid” fixes (addressing only the symptoms). Select proper countermeasures. Design and implement lasting solutions that truly eliminate the problem. © 2010 Karen Martin & Associates 34

Root Cause Analysis: 4 Key Tools Cause-and-Effect Diagram 5 Why’s People Material / Info Lack of experience Budgets Submitted Late Forecast in other system Manual vs. PC System avail. Quality issue requiring rework Staffing/absenteeism Order entry error Changing customer requirements w/ no adjustment to expected delivery Equipment failure Tally ||||| || ||||| ||| ||||| ||||| ||||| ||||| ||| | No standard work Email vs. FedEx Check Sheets Quantify Occurrences Material shortage Changing schedule Input rec’d late No sense of import Machine Reason No stnd spread sheet Time availability Why? Why? Why? Why? Why? Method No milestones $ vs. units Measurement Weather delays Dispersed sales force Environment

Root Cause Analysis Tools Simple problems   Five Why’s Problem Analysis Tree More complex problems    Brainstorm causes (fishbone) Tally frequency of most likely causes (check sheet) Identify relevant few (Pareto analysis) for countermeasure development © 2010 Karen Martin & Associates If necessary 36

Five Why’s Example Problem: Report is taking too much of an employee’s time; team questions whether the report is needed 1. Why is the error report being prepared?  My supervisor told me to. 2. Supervisor – Why are you asking for this report?  One of the standard reports to be prepared per my predecessor – I have yet to determine its usage. 3. Predecessor – Why did you initiate this report?  Report was required in the past because personnel in order entry were making data input errors. 4. Data entry – Why were orders being input with errors?  Orders received via fax were blurry and hard to read. 5. Data entry - Why were the fax orders hard to read?  Fax machine was old and of low quality. It was replaced 10 months ago and errors no longer are occurring.

Problem Analysis Tree Problem: Documents are not being translated well and on time In physical transit Lost docs* No tracking In cyberspace Large batches In in-basket Confusing formats In out-basket Poor original Late or poorly translated documents Translator doesn’t understand original Translation problems** Translator understands original, but still poor translation Faxed / poor resolution Random vocabulary Translator skills Selection Lack of training Wrong technical vocabulary Training No standard Poor editing Poorly expressed * Lost and found = 40%; lost & never found = 5%; stuck in system = 55% ** Rework on over 50% of documents Unclear expectations Uneven workload

Cause-and-Effect Diagram (aka Fishbone, Ishikawa) Brainstorming tool used to identify all possible causes for an undesirable effect in 6 categories:      People (“Man”) Material/Information - Inputs used in the process Method - Procedures, work instructions, processes Machine - Equipment, computers, tools, supplies Measurement - Techniques used for assessing the quality/quantity of work, including inspection  Environment (“Mother Nature”) - External & internal Use other categories if appropriate © 2010 Karen Martin & Associates 39

Cause-and-Effect Diagram (continued) Decreases the likelihood that something is being overlooked Shows us the possible causes, but not how much each contributes, if at all, to the problem Does not provide solutions / countermeasures © 2010 Karen Martin & Associates 40

Call back cause-and-effect diagram.igx Cause and Effect Diagram – Call Backs Method Material People Tech ambition Wrong tech sent Bad part Tech training No criteria for calling for help Wrong part Not reaching out for help No help available Rushing Substitute part Call Backs Inherent problem in case Repeat failure Machine Poor data Lack of defined metrics Measurement Unplanned conditions Equipment variety Environment Circled items indicate likely highest volume root causes

Cause-and-Effect Diagram Medication Administration Errors

Check Sheets  Help collect and record process data in an organized way (how often are certain events occurring?)  Provides factual data to help analyze process (transition from subjective to objective)  Detects patterns  Includes “likely candidates” from Cause-and-Effect Diagram (the relevant few)  Basis for Pareto Analysis  NOTE: Make it easy & collect data for limited period of time only © 2010 Karen Martin & Associates 43

Root Cause Analysis: Late Shipments Check Sheets Quantify Occurrences Reason Material shortage Quality issue requiring rework Staffing/absenteeism Order entry error Changing customer requirements w/ no adjustment to expected delivery Equipment failure © 2010 Karen Martin & Associates Tally ||||| || ||||| ||| ||||| ||||| ||||| ||||| ||| | 44

Pareto Analysis Named after Wilfredo Pareto (18th century Italian economist/statistician) who discovered the 80-20 principle.  20% of the people held 80% of the wealth Focuses our attention on the VITAL FEW issues that have the greatest impact to avoid spending energy on the TRIVIAL MANY. A type of bar graph that displays information/data in order of significance. A visual aid for defining & prioritizing problems. © 2010 Karen Martin & Associates 45

Pareto Chart Credit Application Delays 3500 100% 97% 100% 94% 3000 86% 77% 80% 2493 2500 Occurrences 90% 2909 70% 60% 2000 50% 1500 41% 40% 30% 1000 627 20% 561 500 242 180 0 10% 0% No Signature Insufficient BankNo prior address Info Current Customer Reason for Delay No Credit History Other

Error-Proofing Process Design Priorities Goals:    First, avoid making the error. (Lean priority) Second, avoid passing errors to downstream internal customer. Third, avoid passing errors to external customer. (Traditional priority) Typical non-Lean solution – Inspection! © 2010 Karen Martin & Associates 47

Priorities for Designing ErrorProofing into the Process 1. Make it impossible to make the error. 2. Make it harder to make the error. 3. Make it obvious the error has occurred. 4. Make the system robust so it tolerates the error. © 2010 Karen Martin & Associates 48

Error Proofing Priorities Goals: Make it impossible to make the error.  Make it harder to make the error.  Make it obvious the error has occurred.  Make the system robust so it tolerates the error.  © 2010 Karen Martin & Associates 49

Impossible to make the error – mechanical/physical solutions typically needed.

Error-Proofing (Poka Yoke) Data Entry

Error Proofing Priorities Goals: Make it impossible to make the error.  Make it harder to make the error.  Make it obvious the error has occurred.  Make the system robust so it tolerates the error.  52

Error Proofing Priorities Goals: Make it impossible to make the error.  Make it harder to make the error.  Make it obvious the error has occurred.   Sight – spell check, grammar check  Sound – beeps at the checkout stand  Smell – additive to natural gas  Touch – ?  Make the system robust so it tolerates the error. © 2010 Karen Martin & Associates 54

Make It Obvious That an Error Has Occurred 55

Error Proofing Priorities Goals: Make it impossible to make the error.  Make it harder to make the error.  Make it obvious the error has occurred.  Make the system robust so it tolerates the error.  © 2010 Karen Martin & Associates 56

Mistake Proofing Goals:    First, avoid making errors. Second, avoid passing errors to downstream internal customer. Third, avoid passing errors to external customer. Design robust processes with:   No errors No “impact errors” if errors occur at all We have a tendency to be less diligent when we know a downstream inspection will occur. 58

Establishing a Quality Culture Remove all obstacles to an employee’s success      Adequate time for quality work Pressure-free Effective training Robust processes Automation Make problems visible Stop “the line” / fix problems immediately Honesty is honored; Blame-free Improvement-oriented Inspection is a last resort, not the first solution. © 2010 Karen Martin & Associates 59

Types of Inspection Self-inspection (point of origin inspection) – most desirable Downstream inspection – less desirable (we’re less diligent) 3rd party inspection before it reaches an external customer – adds excess cost 3rd party inspection after the fact – NO! © 2010 Karen Martin & Associates 60

Ways to Error-Proof Data Entry Environment       Information enhancement Audible or visual warnings Physical workspace Reduce noise, smells, interruptions Adequate breaks Rethink production standards Technology  Process  Simplify! (Why multiple fixes for the same problem?) People     © 2010 Karen Martin & Associates Correct data to begin with Effective training! Grouping data / cadence Reading aloud Time for self-inspection 61

Ways to Error-Proof Data Entry (continued) Process-related  Standardized work  Proper sequencing (logical order of work)  Job aids & visual reminders  Checklists  Verbalize information  Repeat orders  Measurement & feedback © 2010 Karen Martin & Associates System-related  Software  Drop-down menus instead of free text field  Required fields  Pop-up warnings  Programming / macros  Hardware  Dual monitors  Ergonomic considerations 62

Error-Proofing  Help people do the right thing; prevent them from doing the wrong thing (e.g. automation, physical restrictions, warnings)  Create easy standard work tools (e.g. checklists)  Provide adequate training & retraining   Visual work instructions See one, do one, teach one  Send work back upstream for completion and/or correction and follow-up with add’l training  Have customer requirements discussions with upstream suppliers 63

Quality-at-the-Source Make problems visual The work stops immediately when an error is detected! Cross-trained workers are better at detecting errors DO NOT RELY ON INSPECTION!!! 64

Reasons for Errors Lack of training Lack of standardization Overly complicated processes Time delays between input and output Multi-tasking Interruptions Rushing Ambiguous information    Unclear instruction Poor handwriting Blurry images (technology-related) 65

Ambiguous Information 66

Review: Elements of Quality-atthe-Source Standardize work. Make problems visual. The work stops immediately when an error is detected! Cross-trained workers are better at detecting errors. Eliminate or minimize reliance on inspection. © 2010 Karen Martin & Associates 68

You will learn… Common causes for errors. The key metric (%C&A) for measuring quality in office/service settings (review). Error-proofing prioritization. Root cause analysis tools. Countermeasures for improving quality. How to translate quality improvement into productivity gains. © 2010 Karen Martin & Associates 70

Resources Chapter 11 Chapter 8 71

For Further Questions Karen Martin, Principal 7770 Regents Road #635 San Diego, CA 92122 858.677.6799 ksm@ksmartin.com Subscribe to monthly newsletter: www.ksmartin.com/subscribe © 2010 Karen Martin & Associates 72

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