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How Do You Measure Up
- 1. How Do You Measure Up? Measurement for Business Success NAPBA National Conference 9/11/2008
- 3. Why do you need to measure? “ You can’t manage what you can’t measure” - Dr. Edward Deming, attributed
- 5. “ Lean gets rid of clutter. Six Sigma gets rid of variation, and variation is evil.” Jack Welch, CEO of GE Voice of the Customer CTQ Tatk time Sigma level Anderson-Darling result FMEA COPQ
- 17. How good is good enough?
- 22. Questions? Jeffrey C. Cox LSSGB Lean Six Sigma Facilitator Eflexgroup.com [email_address] 608-354-7429
Editor's Notes
- Why do you need to measure? Well, the quotation so often attributed to Dr. Edward Deming, says, “You can’t manage what you can’t measure.” There is dispute about whether he actually said this, but the message is indisputable.
- Here are five quick questions about the performance of your company. To how many do you know the answer? Last week, the eflexgroup call center answered _______ calls, with an average time to answer of _____________ seconds, and abandoned call percentage of _________. As you measure performance, most likely you will find out that there are areas in which you need to improve performance. Figuring out what you actually need to improve and how to make that improvement are why we are here today. At eflexgroup, we have brought together a combination of complimentary methodologies: Project Management, The Theory of Constraints, and Lean Six Sigma. Show of hands: Did anybody know the answer to all five of these? 4? 3?
- When you get started in Lean Six Sigma it is easy to get bogged down in terms, to think that the tools and techniques are what it is all about. They are not the core of Lean Six Sigma. Jack Welch, CEO of GE when they launched Lean Six Sigma said it this way: “Lean gets rid of clutter. Six Sigma gets rid of variation and variation is evil.” Another way to think of it is that lean looks at the time involved in a process and Six Sigma looks at the quality of what is produced.
- The history of Six Sigma is rooted in manufacturing. There have been many quality initiatives over the last several decades, but they have largely come and gone in a sort of “flavor of the month” manner. They include TQM, Quality Circles, ISO 9000 and others. Motorola was the place where the term Six Sigma was coined for the methodology. It came out of their search for a better picture of their quality problems. Measuring defects in thousands of opportunities was not a clear enough picture. As they developed the methodology and deployed it, they did it in the manufacturing areas only. They have since realized the mistake. Bob Galvin said that “the lack of Six Sigma emphasis in the non-manufacturing areas was a mistake that cost Motorola at least $5 Billion over a four year period.” Toyota added the Lean component to Lean Six Sigma. They learned lessons from US auto-makers in the late 40s and 50s and changed a very class-conscious system to learn from their workers how to produce automobiles more efficiently. Six Sigma needs to have Lean added to it because Lean lacks a customer focus and it does not recognize the effect of variation.
- So for eflexgroup, what is Lean Six Sigma? What can it be to you and your company? If you use this framework, if you are willing to continuously re-examine your processes and to change, you position yourselves to outgrow and outperform your competitors. “ What matters today is not a company’s competitive advantage at a point in time, but it’s evolutionary advantage over time.” Gary Hamel – London Business Institue, in WSJ 4/26/2006.
- Six sigma makes use of many statistical tools. In fact even understanding the name Six Sigma requires a rudimentary understanding of a couple concepts: Normal distribution, Mean, and Standard Deviation. Basically we expect the values measured to be clustered around the Mean (what most of us refer to as the average). Once we’ve found the mean, we look to see how much things vary from the mean. Without all the technical definitions, this is referred to as the Standard Deviation. It is represented by the greek symbol Sigma. If we have Normal Distribution we know then that 99.7% of all the data will be within plus or minus 3 standard deviations. 3 sigmas less than the mean + 3 sigmas greater than the mean = 6 sigmas.
- At the heart of a Six Sigma project is the DMAIC structure. It is important to remember that this is not a straight, linear progression. In fact, they overlap. The measure stage often requires the Define stage to be revisited. One of the best ways to lose the benefit from a project is to skip the Control phase, or to minimize it. It is important to evaluate the data that is compiled and to review a project after sufficient time has elapsed.
- One of the key measurements we look at in a L6 σ project is Cycle Time. - Easy example is how long does it take for a claim to be processed from the time of submission to payment or denial is generated? Seems a no-brainer that if the cycle time is less: 1. Each cycle costs less. 2. More cycles can be completed in the same time. 3. So more productivity.
- This is the process map for a real mail order print music company. You should know that the owner intentionally rejected using the software’s ability to track inventory and to tell customers at the time of order whether or not the music was out of stock or not. The Fill Order step is totally manual. The last copy of every piece was in the retail store. If there is no copy on the shelf in the warehouse the person filling the order has to walk downstairs to the retail store to see if there is a copy there. If not, they return the fill slip to the manager labeled as a back order.
- Call Center receives another call saying “My card is on hold and I received a check for a claim that I already paid with my debit card.” Participant needs to either send in repayment of the check or send in another claim to offset the original. Check must be processed by Jamie Error must be tracked and processor notified/instructed. Participant must be notified that situation is resolved. Average cost to EFG: $35 per error. Do some quick math: 30 errors/year = $1000 300 errors/year = $10,000 How many groups do we have to sell to pay for that?
- You can see that the drop in defects per million opportunities drops radically as the sigma level increases. We push for as high a Sigma level as possible, for example, in claims accuracy. It is important to understand, however, that because almost all of our processes currently involve humans exercising judgment, there is a limit to how high this can be. For human processes like ours, between 3 and 4 sigma is the highest range that can reasonably be expected.
- OK. Time for a real life exercise of Six Sigma statistics and definitions.
- The thing to remember about the improvement here – a reduction from 1 million pieces per day to 2 – 3 thousand pieces of mail per day is that this is improving on a process scoring 99% to start with.
- Now let’s take a look at a few other real life examples that might benefit from performing at a Six Sigma level. Do you want to have surgery in a 3 sigma surgery hospital or land in a 3 sigma plane?
- Boiled down, the Theory of Constraints involves finding the bottlenecks or constraints in your process, and finding ways to open them as necessary. A constraint is anything in a system that prevents it from reaching its objective. Think about your own company. Imagine over growing to 5 times the number of participants over the next 2 years. To answer your phones right now you have to need 7 agents on the phone full time. If you change nothing, you will need 35 agents to answer those calls. Finding constraints in your system may allow you to reduce the number of agents you need on the phone.
- At eflexgroup we have found that we need to slow down if we want to make rapid progress. We use the tools of project management – project charters, scope documents, Gantt charts – to help us keep projects on track and focused. They help us to avoid spending time on items that, in the end, are not part of the project.
- You may be interested in getting formal training in Lean Six Sigma. If you are, start out with looking at www.isixsigma.com or google on International Society of Six Sigma Professionals. You can make small changes. Spend 10 seconds a day thinking about how to improve how to do your job.