Lean, Six Sigma and ToC DMAIC Process Improvement Optimise -GB

Knowledge base Lean: is centred around creating more value with less work by removing waste and increasing efficiencies in business processes. Six Sigma: seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) to achieve cost reduction or profit increase and customer satisfaction Optimise -GB

Knowledge base Theory of Constraints (TOC ) is an overall management philosophy introduced by Dr. Eliyahu M. Goldratt and is geared to help organisations achieve their objectives. Any manageable system is limited by a small number of constraints. Optimise -GB

Six Sigma Process Improvement methodology Optimise -GB

Six Sigma Define What do the customers want from the project? What are the issues you wish to address? What are the Critical To Quality aspects of the project? What is the reason for change? By failing to prepare you are preparing to fail – Benjamin Franklin Optimise -GB D M A I C

Six Sigma Stakeholder Identification! Optimise -GB D M A I C

Six Sigma Stakeholder Analysis – who are the key players? Optimise -GB D M A I C

Six Sigma What do you do and how? Use SIPOC (Process) map Supplier - Who starts the activity in the process Input - What is used in the process: documents, reports, orders Process – What is done with the inputs Output – What are the outputs from the process, forms Customer – Who receives the output Optimise -GB D M A I C Supplier Input Process Output Customer

Six Sigma SIPOC (Process) map – Example: Customer Orders Optimise -GB D M A I C Supplier Input Process Output Customer Customer Need for goods Give order Order Operations Operations Order Take goods from shelf Obtained goods Finance Finance Obtained Goods Produce and print invoice Invoice Operations Operations Goods and Invoice Box goods / invoice Boxed Goods Customer

Six Sigma Obtain data relating to the process Optimise -GB D M A I C Process Give order Take goods from shelf Produce and print invoice Box goods / invoice

Six Sigma High level Problem statement Optimise -GB D M A I C Poor quality with goods Invoice entered incorrectly Invoice authorised in error Invoices lost in the post Invoice paid twice Process Give order Take goods from shelf Produce and print invoice Box goods / invoice

Six Sigma Critical to Quality (use SMART) Error Rate less than 2% Reduce cash collection days by 15 days Operational costs less than £5 per transaction Optimise -GB D M A I C Process Give order Take goods from shelf Produce and print invoice Box goods / invoice

Six Sigma Define the requirements Weighting: M = Must have failing this then the solution is rejected 3 = Very important to strategy, customer requirement, legal 2 = Would have significant benefit to the company 1 = Would be good to have but not imperative Optimise -GB D M A I C Quality Aspects / Objectives Weighting* Examples: Improve speed of debt collection by 15 days M Remove manual intervention of generating letters 3 Reduce costs of sending letters 1

Six Sigma 2. Identify protect team 1. Identify objectives / targets for project / Business case 3. Agree project scope and direction 4. Create a high level project timetable Optimise -GB D M A I C Project Charter (Project document) Or PID

Six Sigma Produce an A2/3 project charter to describe what the project is about and what it is to deliver (ex1) Optimise -GB D M A I C

Six Sigma Produce an A2/3 project charter to describe what the project is about and what it is to deliver (ex2) Optimise -GB D M A I C

Six Sigma Measure Confirm Objectives Document current process Measure the performance of your process in terms of time, cost and quality (defects) and set new targets to be achieved Optimise -GB D M A I C

Six Sigma SIPOC (Process) map - Convert into a Swim Lane process map Optimise -GB D M A I C Supplier Input Process Output Customer Customer Need for goods Give order Order Operations Operations Order Take goods from shelf Obtained goods Finance Finance Obtained Goods Produce and print invoice Invoice Operations Operations Goods and Invoice Box goods / invoice Boxed Goods Customer

Six Sigma SIPOC (Process) map - Convert into a Swim Lane process map You may wish to add more process boxes for each department or add decision boxes for variable outcomes with diamonds. We will continue with the simple process map as an example Optimise -GB D M A I C Customer Operations Finance Give order to sales desk Take goods from shelf Produce / print invoice Box goods / Invoice

Six Sigma SIPOC (Process) map – Measures Optimise -GB D M A I C Types of measures Time of completing an activity Time waiting between activities Labour cost of activity Distribution costs % of errors / re-work Number of people in the process Cost of 3 rd party Storage costs

Six Sigma Process Time 10 Min 30 Min 10 Min 15 Min Waiting Time 0 Mins 5 Days 2 Days Distribution method N/A Post Post Cost of process £10.00 £0.00 £15.00 £0.00 £5.00 £0.00 £2.50 % Defects 5% 0% 5% 1% 0% 0% 4% Optimise -GB D M A I C Customer Operations Finance Give order to sales desk Take goods from shelf Produce / print invoice Box goods / Invoice

Six Sigma Using the data from the swim lane Process Time = 45 Minutes Waiting Time = 10,080 Minutes(8 hours in a day @7 days) Cost of process = £32.50 % Defects = 23% rework required You will need to verify the above data with sampling techniques of your choosing – Once more data has been identified then statistics can be used to verify consistency. Interviews should be used to obtain qualitative information Optimise -GB D M A I C

Six Sigma Spaghetti Diagram – Flow diagram (describes the motion of activity) Customer Operations Credit Control Phone in order Deliver goods and invoice Pay invoice Requests an invoice to be raised Optimise -GB D M A I C

Six Sigma Spaghetti Diagram – Also used to describe movement of people in a factory or office (Motion is waste) Post Room Credit Control Desks Central Printer Collect copy of order from operations Collect invoice from printer Take invoice to post room Stationery Room Get stamps and envelopes Optimise -GB D M A I C

Six Sigma Key things to measure are : - Distance travelled - Cost of travel - Time of travel (return) - Number of trips made Optimise -GB D M A I C

Six Sigma Theory of Constraints (ToC) The Theory of Constraints aims to identify and eliminate constraints so that bottle necks do not appear by following 5 steps: 1 – Identify the constraint 2 – Exploit the constraint to maximise production benefit 3 – Subordinate everything else – eliminate non value added work 4 – Elevate the constraint by increasing resources to handle more work 5 – Start again from point 1 to review all other constraints Optimise -GB D M A I C

Six Sigma Process time: 10 Min 30 Min 10 Min 15 Min Batch Units B/F 10 25 10 50 Process along (6) (2) (6) (4) Prev Process - 6 2 6 Batch Units C/F 4 29 6 52 You can see which processes are becoming bottle necks and where action is required Optimise -GB D M A I C

Six Sigma Statistics to see if there is consistency Optimise -GB D M A I C Trial # Time to collect cash 1 12 Days 2 15 Days 3 28 Days 4 15 Days 5 22 Days 6 9 Days 7 10 Days 8 12 Days 9 15 Days 10 18 Days

Six Sigma Statistics to see if there is consistency Optimise -GB D M A I C

Six Sigma Statistics to see if there is consistency Mean (Average) = 15.6 Days Median (Middle number) = 15 Days Standard deviation = 5.8 If the standard deviation is > 2 then there is a large variation and little correlation in the data. Identifying abnormal data and removing it will ensure that a better sample may be taken. Optimise -GB D M A I C

Six Sigma Statistics to see if there is consistency A large standard deviation could be the result of different gauges – for example: - Different people being measured - Variations in complexity with invoice - Customers paying invoices differently - Different payment terms It is important to understand these variations and produce sample data based on categories rather than the entire sample Optimise -GB D M A I C

Six Sigma Remove abnormal data Optimise -GB D M A I C

Six Sigma Statistics to see if there is consistency Mean (Average) = 14.5 Days Median (Middle number) = 15 Days Standard deviation = 2.26 The standard deviation is still greater than 2 but this at least provides a better sample. Therefore the average (baseline) of 14.5 can be assumed for larger samples. Optimise -GB D M A I C

Six Sigma Staff availability: 6.5 working hours per day (8 hours less 1 hour lunch less 30 minutes for breaks) Meetings none customer focused Idle time due to no work Availability time Operating time 390 Mins (60 Mins) (30 Mins) 300 Mins 77% Availability Optimise -GB D M A I C

Six Sigma Staff Performance efficiency: Total Process time from order to cash As above one month later Efficiency Operating time 15 Days 18 Days 80% Optimise -GB D M A I C

Six Sigma Not Right First Time = Quality measurement of defects % Defects 5% 0% 5% 1% 0% 0% 4% In a sample of 100 sales invoices the number of defects would be 15. Therefore the NRFT is 15%. Quality = 85% Optimise -GB D M A I C Customer Operations Finance Order goods Take goods from shelf Produce and print invoice Box goods and invoice

Six Sigma Therefore the Overall Efficiency is: OEE % = Availability X Performance X Quality X 100 OEE % = 77% X 80% X 85% X 100 OEE % = 52.4% (World Class is 85%) This means that 47.6% of work is lost through inefficiency Optimise -GB D M A I C

Six Sigma Remove or minimise non-value added work Optimise -GB Value Added Non-value Added Value enabled D M A I C Process Take order Take goods from shelf Produce and print invoice Box goods / invoice

Six Sigma Prioritisation of focus: Process time If your focus is on process time, a Pareto chart will help to prioritise your improvement focus. In this case Taking goods from Shelves” and Boxing goods and invoice” seems to take the longest time. Optimise -GB D M A I C Process Time Take goods from shelf 30 Package goods and invoice 15 Take order 10 Produce Invoice 10

Six Sigma Prioritisation of focus: Quality If your focus is on quality a Pareto chart will help to prioritise your improvement focus. In this case “Taking goods from shelves” and “Taking orders” has the larges defects. Optimise -GB D M A I C Process Defects Take goods from shelf 5% Take order 5% Package goods and invoice 4% Produce Invoice 1%

Six Sigma Analyse Pinpoint and verify causes of process inefficiencies and identify value added and non-value added activities Determine process capability and speed Look beneath the surface; let not the several quality of a thing nor its worth escape thee – Marcus Aurelius Antoninus Optimise -GB D M A I C

Six Sigma Prioritisation of focus: Quality If your focus is on quality a Pareto chart will help to prioritise your improvement focus. In this case Taking goods from shelves and taking orders has the larges defects. Optimise -GB Process Defects Take goods from shelf 5% Take order 5% Package goods and invoice 4% Produce Invoice 1% D M A I C

Six Sigma From the Pareto chart the area of focus for quality would be “Take Orders” and Take goods from shelf” as these have 5% defects You will now need to understand why!! Optimise -GB D M A I C Process Give order Take goods from shelf Produce and print invoice Box goods / invoice

Six Sigma Use Cause and Effect Trees to get the root cause of the problem Optimise -GB D M A I C Take goods from shelf Writing on form mis-read Writing of poor quality Person was in a rush Writing was smudged Felt tips are used Too much workload Person is carless Paper is greasy No pens in the office No other supplies Lack of training

Six Sigma Use Cause and Effect Trees to get the root cause of the problem Optimise -GB D M A I C Take order from customer Wrong order taken Could not hear customer Phone telephone systems Customer quotes wrong code Code obsolete Poor telephone reception Customer spoke too quietly Used old catalogue Product obsolete

Six Sigma Use Relationship models to understand interaction of problems The problems with the most outbound issues are targets for improvement Optimise -GB D M A I C Customer spoke too quietly Product obsolete Too much workload No pens in the office No other supplies Lack of training Poor telephone reception

Six Sigma Measure costs, time for Process Waste Optimise -GB Waste category Office examples 1. Overproducing Printing / working on paperwork before it is needed 2. Inventory Filed in boxes, office supplies, batch processing 3. Waiting System downtime, managers approval, information from others 4. Extra processing Re-entering data, extra copies, excessive reports, budget process, scanning 5. Correction Data entry, design, invoice errors 6. Excess motion Walking to and from printers, other offices, filing 7. Transportation Excessive email attachments, multiple hand offs, approvals, postal services, internal post 8. Under utilised people Limited employee authority, excessive management control D M A I C

Six Sigma List all root causes and wastes – Issues with High risk defect / waste levels are targets for improvement Optimise -GB Risk / defect / waste Impact Impact M / M / L Probability H / M / L Risk / Defect / Waste Level Poor quality of goods from the supplier Cannot sell goods, use less quality products H M M Lack of training in customer service and procurement Quality of staff output decreased H H H No pens in the office Writing smudged and wrong orders picked H M H D M A I C

Six Sigma Improve To address the process inefficiencies of risks, defects and waste. Identify and evaluate mitigating solutions. Develop project implementation plan People never improve unless they look to some standard or example higher and better then themselves – Tryon Edwards Optimise -GB D M A I C

5 S Six Sigma Sort out the work area.... Optimise -GB D M A I C

5 S Six Sigma Sort out the work area.... - Review equipment, files, stationery, storage, posters, shelves - Red tag items not used often (Keep spare tags at the ready) - Remove red tag when item is used - Remove items that have red tags still in place after 3 months - Have things next to you, where you need it - Label cupboards (use easy to read writing, colour) - Use shadow boards to show where specific items go - Throw out rubbish Optimise -GB D M A I C

5 S Six Sigma Sort out the work area.... - Arrange items for easy access, everything has a place - Place items so that you do not have to search for them Optimise -GB D M A I C

5 S Six Sigma Sort out the work area.... - Daily checks done - Clean surfaces down each day - Clean desk policy - All equipment checked for suitability, efficiency and effectiveness Optimise -GB D M A I C

5 S Six Sigma Sort out the work area.... - Do jobs in the same way where possible by all users - Keep and adhere to all rules - Speed of access to systems and equipment remains high Optimise -GB D M A I C

5 S Six Sigma Sort out the work area.... - Keep high standards - Use suggestion box, management meetings to improve system further - Track measures via photos, checklists, visual workplace - Focus on the customer - Remove 7 wastes Optimise -GB D M A I C

5 S Six Sigma Sort out the work area.... Optimise -GB D M A I C

Improve - Select one process issue at a time ...then Identify the solutions Solution 1 Use post it notes and put the solutions on a blank wall Solution 2 Solution 3 Solution 4 Solution 5 Solution 6 Solution 7 Solution 8 Solution 9 Solution 10 Solution 11 Solution 12 Solution 13 Solution 14 Solution 15 Solution 16 Solution 17 Solution 18 Six Sigma Optimise- GB D M A I C

Improve - Select one process issue at a time ...Group the solutions to identify duplications Group the post it notes in an affinity diagram to identify common themes Six Sigma Theme 3 Solution 12 Solution 18 Theme 2 Theme 1 Optimise- GB Solution 1 Solution 2 Solution 3 Solution 4 Solution 5 Solution 7 Solution 8 Solution 9 Solution 10 Solution 11 Solution 13 Solution 14 Solution 15 Solution 16 Solution 17 D M A I C

Improve - Select one process issue at a time ... Generate additional ideas Six Sigma Optimise- GB D M A I C

Improve – Agree weighting for objectives to evaluate solutions Six Sigma Count the objectives on the matrix to determine the weighting Optimise- GB D M A I C

Improve - Evaluate solutions against the objectives & criteria Identify solutions that must pass a certain requirement. If the solution does not meet this requirement then it will not be selected even though it may have a high weighted score, which must be 5 for high importance, 2 for nice to have. If the solution meets the criteria then give the solution the weighted score or 1 if it does not meet the requirement. Multiply the scores to identify the best solution Six Sigma Optimise- GB Solutions Must Have Objective 2 Weighting 5 Objective 2 Weighting 2 Objective 2 Weighting 2 Solution 1 Pass 5 1 2 10 Solution 2 Fail N/A N/A N/A N/A Solution 3 Pass 1 2 2 4 D M A I C

Improve – Evaluate solution Six Sigma Optimise- GB D M A I C Easy to Implement Big Impact Hard to implement Small Impact Solution 1 Solution 3 Solution 6 Solution 7 Solution 8 Solution 9 Solution 2 Implement Now Possible Kill Implement Later

Improve – Evaluate solution De Bono’s 6 thinking hats Six Sigma Optimise- GB D M A I C

Improve – Evaluate solution De Bono’s 6 thinking hats Six Sigma Optimise- GB D M A I C

Current state process map Six Sigma Optimise -GB D M A I C Customer Operations Finance Order goods Take goods from shelf Produce and print invoice Box goods and invoice

Future state process map Six Sigma Solution: Operations produce invoice and pack goods Benefit: No waiting time, reduces headcount from Finance Solution: Customers place orders through internet (discounts as incentives) Benefit: Orders are no longer hand written thus mistakes reduced Optimise -GB D M A I C Customer Operations Order goods on internet Take goods from shelf Produce and print invoice Box goods and invoice

Six Sigma Improve - Now formulate a project plan to identify what activities are required to deliver the solutions. Agree millstones for review Optimise -GB D M A I C Project Plan What Who When How

Six Sigma Control Project manage business process improvement activities Ensure control reports, policy documents, training manuals and schedules are in place to ensure control Optimise -GB D M A I C

Control – Use mistake proofing to prevent previous errors recurring Six Sigma Optimise -GB D M A I C Use colour and clear help guides for users Use system interfaces to prevent manual working Use drop down lists instead of free text fields Use colourful pictures to show the expected end result Process Take order Take goods from shelf Produce and print invoice Box goods / invoice

Control – Use exception report to act on out of control work Six Sigma Unacceptable time to input invoice – managers to immediately address issue System to send email upon work falling outside tolerance levels Optimise -GB D M A I C

Control – Use visuals to set and monitor daily targets Invoices to process Six Sigma Optimise -GB D M A I C Time Target Actual Difference Reason 0900 – 1000 1000 – 1100 1100 – 1200 1200 – 1300 1300 – 1400 1400 – 1500 1500 – 1600 1600 – 1700 Total

Control – Use visuals to set and monitor weekly targets Invoices to process Six Sigma Optimise -GB D M A I C Time Target Actual Difference Reason Week 1 Week 2 Week 3 Week 4 Total Month

Control – Training manuals: Each process maps should be accompanied by the following documents Six Sigma Process map of who does what Procedure of how to carry out activity clearly numbered with screen shots What is expected, policies behind work, rules and regulations that apply Examples of what the finished output should look like: example being forms Check list for the activities to confirm completion and sign as authorisation Optimise -GB D M A I C Process map How to guide Policy info Specimen Checklist

Control – staff training: Steps to training Six Sigma Optimise -GB D M A I C

Control – staff training: Ensure that every user involved in the business process has been given training. Use tests to ensure understanding and ensure employees sign to acknowledge that training has been given Do not allow access to systems or allow person to work in process if they do not have thorough understanding Six Sigma Optimise -GB D M A I C