combining lean and six sigma to create radical change and increased value

Six Sigma in Service and Transactional Environments

Combining Lean and Six SigmaCombining Lean and Six SigmaTo Create Radical Change To Create Radical Change

And Increased ValueAnd Increased Value

BPM

LeanSix Sigma


Agenda

• Combined approached to Continuous Improvement– Linking Lean and Six Sigma– Tying to Critical Business Drivers

• Examples of Execution– HR– Banking Administration

• The Role of Change Management


How Do You Start Improving?

• How do you measure success within your business?– Are the measures understood and quantified?

• Is there something you don’t like?– Waste– Variation

• Is there a need or an opportunity to improve?

• What is the driver for change?

• Is there a silent driver? What is out there that you have not discovered?


Co

ntin

uo

us Im

pro

vemen

t Fo

cus

Bu

sin

ess

and

Cu

sto

mer

Fo

cuse

d N

eed

sLinking Business Performance Drivers

Financial P&L

$$$

OperationalExcellence

MarketPosition

CustomerSatisfaction

People Key Projects

$$$ $$$$$$ $$$ $$$

Business Commitments

Measuring Vision

BUSINESSOBJECTIVES

Y’s

Y = Function of X1, X2

“PLANNING THE

BUSINESS”

“RUNNING THE

BUSINESS”

“IndividualLine of Site”

Corporate Metrics – The Big Y’s • Customer• Financial• Market Position

Key Process Indicators (KPIs)

Business Indicators:Process X’s

Receive Deal

DataEntry Verify

UpdateSystem

FollowUp

FundDeal


Continuous Improvement Planning

BPM

LeanSix Sigma

Global Systems DesignDigitizationDesign for Six Sigma

LeanStable Operations

Productivity

SPANOn-time Delivery

“How Will You Get There”Enterprise Wide Alignment to Key Drivers

•Value Stream Mapping•Linkage System•Project Management•Web Portal•Global Super Users

•Kaizen•Set-up Reduction•Standard Work•Five S•LMA and Flow

•Design for Manufacturability•Speed of Transfer•Customer Integration – QFD•Commercialization•Product Development

•RTY•Global Capacity•Variation Reduction•Process Stability

•RFQ•Delivery Performance•Supply Chain Management


Creating Harmony in Your ProcessesCreating Harmony in Your Processes

• Lean and Six Sigma

• Within and Between

• Value Added vs Non-Value Added

• Speed and Accuracy

• Internal and External

• Growth and Productivity

• Profitability and Customer Satisfaction


Powerful Combination - f(d+a+s+c)=Y

Six Sigma Plus• JIT• Waste Elimination• Continuous Flow• Value Stream Linkage

Six Sigma • Variation Reduction• Process Control• Performance Optimization

Direction + Accuracy + Speed + Control = $$$

Activity Based Management• Activity/Process/Product Valuation• Cost Management • Macro Project Prioritization

Performance Management• Project Management• Optimize Results• Accountability

The Ultimate Transfer Function


Dual Approach Targets Business Wide Issues


Y=f(X) & S =f(X)

• Maps• Measurement

Systems• Capability Analysis

• Histogram• Control Chart

• Fishbone Diagram• Cause and Effect

Matrix

• Failure Modes and Effects Analysis

• Multi-Vari Studies• Design of

Experiments (DOE)

• DOE/Evolutionary Operations

Analyze

Measure

Improve

Prioritizing Improvement

Define• Charter the Project• Capture Customer

Requirements - QFD

Control• Control Plan• Statistical Process

Control Charts

• Value Stream Map• Business

Assessment

• Identify NVA• Create Flow• Standard Work• Load bar• PAA

•5S•Seven Wastes•Data Collection•Performance Measures•Business Takt

• 5S, Setup Reduction, mistake-proofing, TPM

• Visual Controls• Standard Work• Link to Pull

Comprehensive ModelSix

SigmaLean

DF

SS

/Co

mm

erc

ializ

atio

n/N

PI

Pro

duct

ion

Pre

par

atio

n P

roce

ss


JUST IN TIME• What is needed.• In the amount

needed.• At the moment

needed.• Utilizing the

minimum: Material, Space, Equipment, and Labor

Autonomation

• High quality,

reliable, and

efficient processes

• Separation of

People and

Machines - Jidoka

• Detection and

Correction

IntegratedIntegratedBusinessBusinessSystemSystem

Standard WorkVariation

People

VisualControls

Information

• Poke Yoke• DFSS/M

Engineering

Continuous Flow

Material

• 3P• TPM

Machine

Takt TimeProduction

One-pieceFlow

Pull System

Flows Methods

5S Foundation

Expanded Lean Model

D

M

A

I

C

D

M

A

D

V

Seamless Integration of All Continuous Improvement Tools


99% NVA 1%VA

Typical non-value to value-added ratio:

Comprehensive BPM Create Better Results

• Traditional approach ties to improve the 1% of Value Added activities

• Focus on the whole process, not just the value added piece.

• Connects process with customer value.• Attacking flow, waste, and variation together.


Toyota 30.4 hrs/carFord 34.8 hrs/carGM 45.6 hrs/carChrysler 44.2 hrs/car

Data from USA Today - 2000

Savings

Toyota’s Efficiency in Dollars

If US automakers could match Toyota’s labor hoursper car they could save this amount of money per year.

…………….$2.1 billion…………….$4.9 billion……..……...$2.7 billion

Why Combine Lean and Six SigmaWhy Combine Lean and Six Sigma


Creating a Faster Rate of ImprovementCreating a Faster Rate of Improvement

Lean

Enterprise

Kaikaku - LMA

Kaikaku - 3P

Kaikaku - 3P

Kaizen

Kaizen

Kaizen

Impr

ovem

ent

Time

Kaikaku - Revolutionary Change Kaizen - Evolutionary ChangeLMA - Lean Manufacturing Analysis3P - Production Preparation Process

Kaizen Only

Balancing Frame Breaking Change and Steady Progress


Practical ExamplesPractical Examples


HR StaffingHR Staffing

• Visible Problem – Cycle time and variation is staffing new and replacement positions

• Root Problem – Retention, growth of NVA positions,

• Course of Action– Define and Measure Performance– Analyze date and decide on a course of action– Implement a solution and monitor


Point Roberts, WA

Livingston, MT

Seattle, WAAction

Mortgage

OregonKlamath

Addition to Staff

Title Upgrad

ReplacementFTE >95%

Addition to Staff

Boise, ID

ReplacementFTE <95%

HQ - WallSpokane, WA

HR Employment

Asst

4th Floor Front Desk

Judy(Exec Asst)

HR Director

Jerry Lyon COO President

Mailroom Cindy(Regional

Asst)

Regional MgrMarty

Regional MgrMalcolm

IP CenterSpokane, WA

Regional MgrK Brown

Action HQSpokane, WA

Hiring Requisition Form Travel Flow Diagram

As-Is Process (Paper Form)March 31, 2005

Material Flow Diagram – Follow the FormMaterial Flow Diagram – Follow the Form


Hiring ManagersHREmployment

Specialist

Sterling SavingsBank; Action;

Harbor; Intervest

1200 Jobs/2005Average = 24/Week

Employment

Throughput Time

Processing Time

HR Staffing Value Stream Map

5 min.

1-3 days

??

1

Complete Requisition

1

1st LevelApproval

1

2nd LevelApproval

1

3rd LevelApproval

1

HR Director Approval

1

PresidentApproval

1

COOApproval

1

Prepare Posting/Ads

Post Job 1

Receive Resumes/

Application

1

ScreenApplicants

1

InterviewCandidates

1

ReferenceCheck

1

Extend Offer

Addition?

1

ApplicantTracking

? 9 21

47

11 2 6 23 I

Background Check

I17

27

10

1

AdditionalRecruiting

HR Intranet

Job Opening

Advertising

Newspaper/Monster.com

Weekly Update

Sterling Internet

Staffing Budget Plan (Annually)

Personnel ChangeDaily/Weekly

Expense Variance Review

Monthly

E-mail to Marketing/DI

Every 2 weeks

Weekly e-mail to TMP

Approved Requisition

Employment Activity Report (EAR)

Applicants

Incoming ResumesApplications

1

Complete Paperwork/

Send HR

Background /Credit Report

Interview ResultFinalist Name

Offer Profile

New Hires Start Work

1-7 days 1-3 days

1 day 1 day 1 day

2 min. 2 min. 2 min.

2 min. 2 min . 2 min.

120 – 180 mins

1-7 days 7-14 days

5 min. 1 min .

7-30 days 7-30 days

60 mins 180 mins 20 mins 30 mins

1-3 days

20 mins

1-7 days 1-3 days

1

CloseRequisition

and File

30 mins 20 mins

28 days 9 hrs 17 mins -117 day 9 hrs 17 mins

1-10 days

9 hrs 17 mins

How Does This Create ValueHow Does This Create Value


HR– Staffing Process ImprovementHR– Staffing Process Improvement

Before After % ChangeRequisition Travel 1- 600 miles 0 ↓ 100% Staffing Lead Time 29 - 118 days 18 – 72 days ↓ 40 %Processing Time 9 hrs 6 hrs ↓ 35 %Backlog* 348 * 280* ↓ 20 %*# of System 5 1 ↓ 80%# of Paper Forms 6 1 ↓ 80%Cost/Time to Hire Not Monitored System Enabled

Key Assumptions:– Implement On-line requisition with build-in approval work flow– Continuous posting to eliminate job announcement delays– On-line candidate database to maintain prospects information– Immediate routing of completed application to hiring managers to speed up

candidate interview and selection process– On-line assessment and application to pre-screen applicants– Free up 1 FTE equivalent time currently working on manual tasks

* YE 2005 Projection. Actual backlog as of September 15 equaled to 132.


Back Office AdministrationBack Office Administration

• Statement Generation and Mailing

• Check Clearing

• Account Resolution

• Fee Income


IPC Event Summary – 2005

•8 C.I. events completed YTD 20055 of 6 IPC managers have lead at least 1 C.I. eventAll levels of staff involved in eventsCross departmental involvement in each event

•Typical event results50%-70% reduction in people travel50%-78% reduction in product travel5%-48% reduction in space10%-50% reduction in Lead Time when targeted10%-50% productivity increase when targeted

•Other resultsEliminated expansion need – Savings of lease 14.3% of budgetEliminated certified mail and other postage exceptions requirement for - $375,000/yrElimination of physical equipment (Inserters, PCs) $55,000Elimination of Premium Federal Reserve deadline fees -- $125,000Staff reduction of 10% through normal attrition

Series of Parallel Improvement ActivitiesSeries of Parallel Improvement Activities


18%28:2034:40Product Cycle Time (min)

Lead time for EOM cycle reduced from 6-7 days to 1.5 days = 78% reduction; Headcount reduced 67%

OtherProductivity/Lead Time

% ChangeAfterBefore

14%9.5 hours11 hoursProduct Lead Time Cycle 25

12%43 tasks49 tasksNon-Value Added Tasks

105 S Level

48%1165 Sq. Ft.2187 Sq. Ft.Space

78%121 Ft566 FtProduct Travelfor One Product

66%6.81 Miles20.3 MilesPeople TravelEnd of Month Generation

EOM Statement Results – March 2005


% ChangeAfterBefore

Subset of the EOM processOtherOperational

16%37:30:0044:30:00 hrsProduct Cycle Time (hrs)

36%3.5 days5.5 daysProduct Lead Time (hrs)

EOM cycle


1.71.45 S Level


49%150 Ft.292 Ft.Product TravelMonday Work

63%460 Ft.1240 Ft.People TravelMonday Work

Within the Month Statement Generation – June 2005


% ChangeAfterBefore

Savings of $125K based on Fed Fund Premiums aloneOther$ Savings

18%00:42:001:29:12Product Cycle Time (hrs)

14%1:04:301:47:34Product Lead Time (hrs)

1 capture


1.7205 S Level


73%.59 Miles2.17 MilesProduct TravelMonday Work

68%1.38 Miles4.42 MilesPeople TravelMonday Work

Check In-clearing – May 2005


% ChangeAfterBefore

Reduced equipment and property lease by $135KOtherSpace




To be achieved with layout completion

2.01.365 S Level


63%1233 Ft.3993 Ft.Product Travel

78%2029 Ft.9019 Ft.People Travel

Check Dispute Resolution – July 2005


% ChangeAfterBefore

Major source of new product incomeOther




1.481.25 S Level


53%578 Ft.1225 Ft.Product Travel

53%763 Ft.1578 Ft.People Travel

Lockbox – July 2005


Fee IncomeFee Income

• Problem – Long-term decline in fee incomes

• Course of Action– Define the problem– Measure current performance– Analyze the data– Improve current performance level– Control the process


Long-Term TrendLong-Term Trend

C2

Ind

ivid

ua

l V

alu

e

Mar 2005Feb 2005Jan 2005Dec 2004Nov 2004Oct 2004Sep 2004Aug 2004Jul 2004Jun 2004May 2004Apr 2004Mar 2004

1400000

1200000

1000000

_X=1173474

UC L=1440203

LC L=906745

C2

Mo

vin

g R

an

ge

Mar 2005Feb 2005Jan 2005Dec 2004Nov 2004Oct 2004Sep 2004Aug 2004Jul 2004Jun 2004May 2004Apr 2004Mar 2004

300000

200000

100000

0

__MR=100290

UC L=327677

LC L=0

Net Monthly NSF Income Initial Corrective Action

Process Controls Not Aligned to Business Needs

Recognition of Problem


Significant Shift in PerformanceSignificant Shift in Performance

• Discovers sources of variation

• Dissect to causes• Implement solutions• Build controls• Monitor• Major Learning Point –

Organizational Behavior is the key to fee income

Month

Inco

me

in $

10

00

s o

f D

olla

rs9/1/

2005

8/1/

2005

7/1/

2005

6/1/20

05

5/1/20

05

4/1/20

05

3/1/

2005

2/1/

2005

1/1/20

05

12/1

/200

4

11/1

/200

4

10/1/2

004

9/1/

2004

8/1/

2004

7/1/

2004

1700

1600

1500

1400

1300

1200

1100

1000

900

_X=1202.8

UCL=1485.7

LCL=919.8

1

1

Total Monthly NSF Income


Daily Average Performance (by Month)Daily Average Performance (by Month)

Month

Do

llars

9/1/

2005

8/1/20

05

7/1/20

05

6/1/20

05

5/1/20

05

4/1/20

05

3/1/20

05

2/1/20

05

1/1/

2005

12/1

/200

4

11/1

/200

4

10/1

/200

4

9/1/

2004

8/1/

2004

7/1/

2004

80000

75000

70000

65000

60000

55000

50000

_X=56469

UCL=65375

LCL=47563

1

1

1

Daily Average Income

•Decline

•Stabilize

•Improve

•Transform


Combined Attack on Flow and VariationCombined Attack on Flow and Variation

• Currently locking in control plan

• Looking for next incremental increase

Month

10

00

's o

f D

olla

rs9/

1/20

05

8/1/20

05

7/1/

2005

6/1/

2005

5/1/20

05

4/1/20

05

3/1/20

05

2/1/20

05

1/1/20

05

12/1

/200

4

11/1

/200

4

10/1

/200

4

9/1/

2004

8/1/

2004

7/1/

2004

1800

1600

1400

1200

1000

_X=1653

UCL=1834

LCL=1472

1 2 3

Significant Shift

One-way ANOVA: C3 versus C1

Source DF SS MS F P

C1 2 1788642578 894321289 3.68 0.031

Error 62 15086315237 243327665

Total 64 16874957815

S = 15599 R-Sq = 10.60% R-Sq(adj) = 7.72%


Lessons LearnedLessons Learned

• Culture Change is Critical• Focus on the Value Stream, Not A “Shotgun” Approach• Support systems critical for information flow• Effectively Communicate Case for Change• Standard Work is the key to sustaining improvements• Leadership Is Crucial and Mandatory

– We don’t have time to lose money!!– Whose business is this, anyway?– There is no THEY! – There is NO decision that we can’t influence!– What have we done today to contribute to a better tomorrow?– Leadership starts with you.

Setting the Tone Breads Success

combining lean and six sigma to create radical change and increased value

Documents