01 introduction to lean 6 sigma

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01 Introduction to lean 6 sigma 1

Introduction to Lean Six Sigma



Objectives

>  Understand what is lean six sigma >  Understand what does a 6 sigma performance mean >  Learn what is the DMAIC framework >  Understand what are the opportunities to achieve the goal of 6 sigma



What is Lean 6 sigma?

1st) Lean 6 Sigma is a management methodology and its goal is to improve dramatically the speed and the quality of all your processes, services and products. It is:

>  The combination of Lean with Six Sigma >  A problem solving method which is Customer centric >  It allows decision making based on data, measurements & statistics >  A pragmatic & disciplined approach (no solution before measurement

of problem and its root cause analysis plus control of implemented solution over time)

>  Business oriented, providing high returns >  Focused on reducing variability, defects and non value added tasks >  A philosophy, a common language and a goal to reach

2nd) A performance level: an indication of how well a process is performing



Lean Six Sigma

Lean Six Sigma is the integration of Lean and Six Sigma

  Increase speed of processes

  Eliminate the Wastes

  Improve quality

  Reduce defects and variation

An operational excellence methodology centered on Customers

A pragmatic, disciplined and results oriented approach

Lean Six Sigma

Resulting into



Lean origins

1900-1940 1945-1990 1996 2002-Present

“Mass production of inexpensive cars using

the assembly line”

“Toyota Production

System”

“Lean Thinking Five

Principles”

“Lean and Six Sigma

Integration”

Womack & Jones Michael George



Toyota Quality House

JIDOKA: Hilighting/

Visualization of problems

Quality must be built in during the manufacturing

process!

JIT: Just In Time

Productivity Improvement

Making only "what is needed, when t is needed,

and in the amount needed!"

Superior Quality Reduce Costs & Delays

Improve Safety & Morale

+

Heijunka (Sequence plan) Standard Work Kaizen Operational Stability

The Toyota Quality House was developed by Taiichi Ohno and Eiji Toyoda to make it easy to explain Toyota's continuous improvement system to employees and suppliers. The aim of TPS is to eliminate all muri, mura,

muda (overburden, unevenness, waste) from the operations.



Lean five principles

Specify Value… from the customer’s point of view Identify Value Stream… map process & see wastes Flow… move one piece at a time continuously Pull… let the customer pull your product Perfection… always improve the process

From Lean Thinking by James P. Womack and Daniel T. Jones, Free Press



Lean tools Lean designates a set of tools which has been first used in Manufacturing in the 60’s (coming mainly from the Toyota Production System) and now used in the service industry (business transactional processes). The Lean tools allow the optimization of production and transactional processes: >  7 forms of wastes (Mudas) >  5 S (Clean, order and optimize the workplace) >  Kaizen event (Change to become good) >  Jidoka (Highlighting/Visualization of problems) >  Value Stream Mapping (Process value & Time analysis) >  Just in Time, Pulling systems & Kanban refurbishing systems >  Quick Changeover or SMED (Single Minute of Exchange of Dices - Setup time

optimization) >  TPM (Total Productive Maintenance) >  Process Standardization: alignment of the production with the demand (Takt time

synchronization, Heijunka (sequence plan), Standard Work)



Six Sigma origins

1989- 1990- 1994- 1995-Present

“Premise of Six Sigma”

“Adopters of 6 sigma”

“1st Six Sigma Consulting company”

“Six Sigma expanded to non manufacturing

functions + DFSS”



Assumption: •  Normal distribution

“If I can place six times my sigma value (standard deviation) between my process mean and a

specification limit then I am operating at six sigma”

6 sigma performance measurement

Characteristic

frequency

0

defects

3

10

1 2

50

σ

µ

Histogram

Specification limit

>  Sigma is a Greek letter which represents the standard deviation in statistics.

>  Performing at six sigma means that our process produces only 3.4 defects per million of operations long term!!

6*σ

Six Sigma



6 sigma scale ZST value

1.5 σ

2 σ

3 σ

3.82 σ

4 σ

5 σ

6 σ

Defects* per million of opportunities (dpmo)

500000

308537

66807

10000

6210

233

3.4

% defects

50.0000%

30.8537%

6.6807%

1.0000%

0.6210%

0.0233%

0.00034% *observed with long term data. With ZST=ZLT+1.5

σ , defects

ZLT value

0 σ

0.5 σ

1.5 σ

2.32 σ

2.5 σ

3.5 σ

4.5 σ



Six Sigma in terms of performance

Performance Commercial flights KPIs



What does 6 σ mean in financial services Performance (simulation)

  14 billions of transactions per day*

  4 billions checks per year*

  4 billions credit card transactions per year*

  2 billions financial transactions per year*

A 19649 defect reduction factor between 3 σ and 6 σ !

at 6σ at 3σ (6,68% defects)

  47600 defects   13600 defects

  13600 defects

  6800 defects

  935 Millions defects   ~267 Millions defects

  ~267 Millions defects

  ~134 Millions defects

Processes

*EDS data **VISA data

Services traditional performance

  19.789 billions credit & debit card transactions per year**

  67283 defects   1.322 billion defects



Who is applying Lean Six Sigma? >  ALLIANZ >  AIRBUS >  AXA >  BANK OF AMERICA >  CLARIANT >  DEUTSCHE TELEKOM >  DHL >  GENERAL ELECTRIC >  HSBC >  SIEMENS AG >  ….. >  95%+ of Fortune 100 companies GE advertised that by applying Lean Six Sigma/simplification to its core processes it will deliver 8% organic growth… GE Nov. 05 Immelt update



Lean 6 sigma financial impact Cost of poor quality

(in % Sales) 40%

35%

30%

20%

15%

10%

5%

DPMO 3.4 233 6210 66807 308537 500000 Sigma 6 5 4 3 2 1

Budget : •  I sell 10 $ every unit •  Operational margin = 25% (2.50 $) •  every defect costs me 24 $! •  at 2,67 σ (12,08% defects) I lost 40 cents for every unit I sold!!



Lean Six Sigma benefits

>  Revenue growth through: –  increased customer satisfaction –  introduction of quality products & services

>  Margin increase through: –  less non quality costs (reduction of defects, wastes and manual

rework)

–  more productivity and capacity (reduced cycle times)



Optimization Potentials with one project

>  Cycle times: reduction of 30%-70% >  Defects: reduction of 70% >  Costs: reduction of 30%-50% >  Capacity: increased by 20% >  Productivity: increased by 20%-25% >  ROI of 3 to 4 >  4 months projects. Typical projects brings 300 to 400 K€ of benefits



Lean Six Sigma for which project?

Initial situation: I have an issue/project:

>  I know the solution:

>  I do not know the solution:

>  It is an existing process or an existing product:

>  It is a new process or a new product to design:

“JUST DO IT”

DMAIC

DFSS (DMADV)

Method Timing

Immediate

4 to 6 months

6 months

KAIZEN 1 week

OTHERS 1+ year

Lean Six Sigma focus



How to get the benefits of Lean 6 Sigma?

Select, train & coach people

Select key processes

Select Lean 6 Sigma projects

Complete Lean 6 Sigma projects€€

Market /Customer

expectations Company strategy

CTQs*

Cycle time

*CTQ Critical To Quality

Customer eyes

Quality

Cost

Processes

Voice of Customer

Continuous Improvement Loop

Risk



Customer impact

“mean moved from 3 days to 2.2 days. We are improving!”

Traditional view Lean 6 sigma view “mean moved from 3 days to 2.2 days and standard deviation from 0.5 to 1. With a spec of 4 days maximum, we have more issues.”

“We are improving our internal process from 7% of defects to 6.5%. Our customers will be happier!”

“We measured end to end and found out that our customer process did not yet improve.”

Not sure

Not sure certain

certain



Who is doing what in Lean Six Sigma? Top Management

Champion

Sponsor

Stakeholders

Finance

Master Black Belt/Expert

Black Belt/Project Leader

Green Belt/Team member

Engage/promote Lean 6 sigma

Select processes, projects & people. Make plan. Change Agent

Has a business issue. Pays the costs of the project and gets the benefits

Represent the functional teams which will be impacted by pthe project

Validate the business case

Is a Lean Six Sigma expert. Train and coach Black Belts and Green Belts

Delivers Lean 6 Sigma projects. Full time project leader.

Contributes/leads Lean 6 Sigma projects



Lean 6 sigma example

Lets take an example: >  The cycle time of a distribution company, from customer order to

customer delivery should not exceed 3 days (our contractual terms & conditions)

>  The Customers complain. >  The competitors are better than us. They never exceed 3 days >  The Management says “we are loosing money” >  The team in place says “we dispatch in average the same day we receive

the order and we always use a 24 hours delivery carrier”



What says Lean 6 sigma

>  If there is an output, there is a process! >  If there is a process there is a performance variation >  If there is variation there is a probability of defect (missing our customer specifications or our contractual obligations!) >  The customer feels always the output process variation. This is how he perceives your quality! >  A 6 sigma process produces only 3.4 defects per million of operations >  A process operating at 3 sigma produces 66807 defects per million of opportunities >  A 3 sigma process cost you up to 20 % of your sales revenue >  A 6 sigma process cost you less than 1% of your sales revenue



The 5 phases of a Lean 6 Sigma project (DMAIC framework)

• Define

• Measure

• Analyze

• Improve

• Control

Define your business problem

Measure your process (Y) performance

Find the root causes (X’s) of the problem

Improve, implement new solution

Deliver Y performance over time

Close project



The 5 phases of a Lean 6 Sigma project

• Define

• Measure

• Analyze

• Improve

• Control

Define Y

Y AS IS Process performance

Find the root causes (As Is Y=f(X’s))

Y To Be Process

Y To Be Process performance over time

Close project


01 Introduction to lean 6 sigma

Define Define your business problem, your objective and your project plan 1.  Deliver a Project Charter with:

–  Problem, Objective, Scope, Business Case, Risks identified –  Process Map, Indicator, Project plan, Resources

Improve

M

A

I

C

D

Measure Measure your process performance (Y) and its defects 2.  Define your CTQ(s) 3.  Analyze the measurement system (Gage R&R) 4.  Measure the current process performance and capability

Find 20% of root causes (Xs) which create 80% of the issues

5.  AS IS process analysis (VSM, Cause and Effect analysis, FMEA, …) 6.  Data analysis (graphical analysis, statistical analysis) 7.  Main root causes analysis synthesis

Design & implement solution(s) which fix the main root causes of issues 8.  Design and develop solutions 9.  Implement the solutions (Pilot and/or Deployment) 10.  Control that the performance is better

Control that the performance is stable over time (stable solution) 11.  Establish a Statistical Process Control 12.  Close project, Verify financial gains

Analyze

Control

The 12 steps of a Lean 6 Sigma project



process felt by the customer

Customer Input Order

Output Unit delivery

Definition Specification Performance limit Targets/goal

CTQ* Lead time 3 days 99% < 3 days

Procurement Collect Order &

Forward to delivery dept

Ship to Customer & Bill Customer

Lead time is the measurement

*Critical To Quality

Problem statement: we miss our contractual obligations of delivering in less than 3 days Process in which we have a business problem:

Define

?



Measure

Measure your problem and your defects Lead time distribution

Time from order to delivery

in days

nb of occurences

0

defects

Contractual/Customer Specification

Limit

3 days

10

1 day 2 days

50

Histogram

Observed probability of defects=12.03%

26/216

Variation

Trend



Measure conclusion I observed a probability of defect of 12.03%! My performance is 2.67 σST*. We have a problem! 6 sigma goal is to reach 0.00034% of probability of defect!

ZST value*

2 σ

3 σ

4 σ

5 σ

6 σ

Defects per million of opportunities

308537

66807

6210

233

3.4

% defects

30.8537%

6.6807%

0.6210%

0.0233%

0.00034%

12.03% 2.67 σ

* For long term data with ZST=ZLT+1.5



Analyze Analysis – finding the root causes (Xs)!

>  Pareto chart of the 26 defects

Miss 3 pm carrier for

outside Paris region

20 77%

Incomplete shipping address

4 15%

Other

2 8%

>  2 causes represent 92% of my defects



Improve

2 actions taken: >  Speed cycle by processing “Outside Paris region” orders first & organize an earlier transfer to shipping department by removing some non value added tasks (unnecessary sign offs) >  Change address format and control it at order time (avoid quality issues)

Time from order to delivery

in days

nb of occurences

0 defects

Contractual/Customer Specification

Limit

3 days

10

1 day 2 days

50

Histogram

Short term data Observed probability

of defects=0% Expected performance: 6 σ

I can place 6 σ between µ and the spec. limit and the

distribution is normal!

σ

µ

6xσ

New Cycle time from order to delivery distribution

KAIZEN



Control 2003 Delivery time performance

P99 = percentile 99%



Take orders offline (laptop)

Submit order to Manufacturing

Sales Repr.

Update orders on Intranet

Synchronize orders by email connection

Coordinator

orders

eBook

Production orders

Nb of Manual Human Interactions* Before

4

6

After

1

1

Web

Ord

er B

ook

proj

ect

* averages

st dev 1.6 st dev 1

What could Lean 6 Sigma do for you?

520 K$ of saving

TOTAL 10 2



% of time spent by 8 persons doing financial manual entries before and after FPA project implementation

27% reduction of time spent by 8 financial analysts …gives 1.75 Full Time Employee proven benefit!

>  140 K$ saving

> Overtime reduced

>  Interim reduced

> More time for analysis (added value task)

Base Costs What could Lean 6 sigma do for you?

Before After

100%

50%



Summary

>  Lean six sigma is a problem solving methodology that speaks with data, which takes into account only the customer point of view & experience and which propose solutions only after analysis, not before

>  Six sigma performance is equivalent to 3.4 defects per million of operations

>  There is a direct link between our current level of performance and the margins we are making

>  Lean and Six Sigma have been integrated into Lean Six Sigma to achieve one goal: reduce variation, wastes and non value activities in our processes

>  DMAIC is the framework to solve a problem and to complete a lean six sigma project



www.equable.fr email: [email protected]

Six Sigma is a federally registered trademark of Motorola, Inc. Lean Six Sigma is a registered trademark of George Group Consulting, L.P..

01 introduction to lean 6 sigma

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