lean six sigma yellow belt advanced program - hmg.com.au yellow belt mz2019.pdf · dynamic view vs...

Lean Six Sigma Yellow Belt Advanced Program

Ver. 2019.1

iii

Program Schedule

Day 1

1. Introduction to Lean Thinking and Six Sigma

Morning Break

2. Foundation Concepts

2.1. Process Thinking

• Process Thinking Case Study

• Process Thinking vs Functional Thinking

• Process Mapping

• SIPOC

Lunch Break

2.2. The Cost of Quality Concept and the Cost of Poor Quality

2.3. Process Complexity

Afternoon Break

3. Customers, Customer Experience and Customer Satisfaction

3.1 The Perceptions-Expectations Model

3.2. The RATER Framework

Day 2

4. Improvement Strategies andVariation

4.1 The Dice Game

4.2. Sources of Variation

4.3. Approaches to Improvement

Morning Break

5. Team Based Problem Solving and Process Improvement

5.1. The DMAIC Process & Process Story Board

5.2. The DMAIC Process – Integrative Case Study

5.3 Tools introduced:

• Problem Definition

• Project Charter

• Customer Requirements

• Fishbone Diagram

• Check Sheet

• Pareto Chart

• Potential Solutions Matrix

Lunch Break

5.4. Root Cause Analysis (RCA) Methodologies and 5 Whys

iv

6. Process Change/The DMADV Process

6.1. DMADV, BPR, Process Redesign and Kaikaku

6.2. DMADV Application Case Study

6.3. Tools and Techniques

• Process Deployment Chart/Zig-Zag Analysis

• Value Added/Non-Value Added Analysis

• Double Fishbone

6.4. Process/People/Technology Redesign Principles

Afternoon Break

7. Process Flow and Work Management

7.1. Dynamic View vs Static View of Processes

7.2. The Water-Bucket Method

7.3. Little’s Law

7.4. Flow Measures and Decision Making

7.5. Process Balancing

7.6. Dealing with common dynamic effects

8. Implementation Issues and Conclusion

v

Detailed Table of Contents Pge

Introduction to Lean Six Sigma 1

The Box Simulation 3

3 Operational Strategies 6

The Evolution of Management Thinking 8

Three Paradigm Shifts 9

Lean Six Sigma core concepts 10

The Lean Wastes 11

Operational Infrastructure and Capability 12

Business Improvement 13

Improving Organisations/Improving Operations 14

Process Thinking 15

HTLC Case Study 17

Functional vs Process Thinking 22

The Cost – Service Trade off 24

Increasing Service while Decreasing Costs 24

Process Thinking and Process Management 25

Identifying Processes 26

Process Mapping Symbols 29

Process Mapping Hints and Tips 30

The SIPOC Model 31

SIPOC Diagram:HTLC 33

Cost of Quality 35 Conventional View of Cost Drivers 37

Cost of Quality Categories 38

The Cost of Quality View of Cost Structure 40

Changes in the Cost Structure 42

Using the Cost of Quality 43

Improvement: COQ Reduction 44

Improvement: Process Change 45

Validating the New Process 45

Linking COQ to Improvement Strategy 46

COQ: A more useful way of looking at cost structure 49

Complexity 51

Identifying Complexity 53

Two View of Work Time 54

Improving Processes by Reducing Complexity 57

Complexity and Flexibility 59

Alternate approach to complexity 61

Process Thinking – Review of Concepts 62

vi

Pge

Customers and Customer Satisfaction 63 How Customers See Quality 65

How Customers Form Expectations 66

Dimensions of Quality 66

Managing the Customer Experience 67

The RATER Framework 68

Delivering on the Service Standards 70

Who are our customers? 70

Rater Template 71

Impact of Customer Satisfaction on Loyalty 75

Understanding Customer Defection 75

Managing Customer Perceptions of Quality 76

Process Measurement and Variation 77 Y = f(x) 79

A Generic Performance Measurement Template 80

The Role of Complexity in Determining Measures 80

Leading Indicators and Drivers 81

From Measures to Metrics 82

Processes deployed through the organizational structure 83

Performance Measures and Organisational Structure 83

Introduction to Variation and Flow Concepts 84

The Dice Game 85

Lessons from the Dice Game 89

Some Sources of Variation 90

Understanding Variation 91

Common vs Special Causes 91

The Path to Continuous Improvement 92

The DMAIC Process – an Overview 95

Types of Problem Solving 98

The DMAIC Process 99

The DMIAC Process Story Board 100

DMAIC Process Case Study: South Eastern Food Packagers 103

Problem/Opportunity Theme Statement 130

Lean Six Sigma Project Charter 131

Structured Problem Statements 132

Customer Requirements Statement 133

The Anatomy of a Check Sheet 136

The Pareto Principle/Pareto Chart 137

Fishbone Diagram 139

Potential Solutions Matrix 142

Improve:Implement and Check 143

High level validation of improvements 145

Future Plans 146

Analysing for Root Causes - Revisited 147

Analysing for Root Causes 150

5 Why’s Applied to SEFP 152

vii

Pge

Process Change: The DMADV Process at Work 155 Process Change/Reengineering 157

The DMADV Process 158

The DMADV Process Storyboard 159

The Process Redesign Framework 161

Deciding if Process Redesign is the best approach 162

Joan’s Story Case Study 163

Measures: HTLC Current Process 167

Process Deployment chart 168

Reengineering/Redesign Opportunities 169

Reengineering Enablers 170

Process Redesign Methodology Toolkit 171

Value Added/Non-Value Added Analysis 172

The Double Fishbone 174

Quick wins 177

Process Challenge Templates 177

Process Flow Management 181 The Structural View of Processes 183

The Flow View of Processes 186

WIP, Lead Time and Service Level (Little’s Law) 189

Key Work Management System Relationships 191

Case Study: Smith’s Auto-Service Centre 193

A more comprehensive view of an organization 197

Key Lean Work Flow Principles 198

Prioritisation, Scheduling and Customer “Pull” 199

Work Leveling and “One Piece” Flow 199

What do we measure? 200

What influences productivity? 200

Urgent Work – The Crisis Management Trap 201

Telephone Calls and Shrinking Capacity 202

Rework and Shrinking Capacity 203

Implementation Issues 205 Succeeding at Operational Excellence 208

Lean Six Sigma Support Structure 209

Templates 213

viii

Additional Reading and References

Some useful reference books and materials:

Books

Six Sigma and Lean Specific:

• Pyzdek, Thomas (2003) The Six Sigma Handbook, McGraw Hill

• Gygi, Graig., DeCarlo, Neil., and William, Bruce (2005) Six Sigma for Dummies,

Wiley Publishing Inc.

• Gygi, Graig., DeCarlo, Neil., and William, Bruce (2005) Six Sigma for Dummies

Workbook, Wiley Publishing Inc.

• Liker, Jeffrey K. and Meier, David (2005) The Toyota Way, McGraw-Hill

• Liker, Jeffrey K. and Meier, David (2006) The Toyota Way Field Book, McGraw-

Hill

• Liker, Jeffrey K. and Franz, James K., (2011) The Toyota Way to Continuous

Improvement, McGraw-Hill

• DeCarlo, Neil (2007) A Complete Idiot’s Guide to Lean Six Sigma, Penguin Group

• George, Michael L., Rowlands, David., Prices, Max and Maxey, John (2005) The

Lean Six Sigma Pocket Tool Book, McGraw Hill

• Womack, James P., Jones, Daniel T. and Roos, Daniel (2007) The Machine That

Changed the World (2007 reprint of 1990 book), Free Press.

• Womack, James P. and Jones, Daniel T. (2003) Lean Thinking, Simon and

Schuster.

• Womack, James P. and Jones, Daniel T. (2005) Lean Consumption, Simon and

Schuster.

• Sayer, Natalie J. and Williams, Bruce (2007) Lean for Dummies, Wiley Publishing.

• Evans, James R. and Lindsay, William M. (2008) Managing for Quality and

Performance Excellence, Thomson Publishing.

• Breyfogle III, Forrest W., Implementing Six Sigma, John Wiley & Sons, Inc.

• Pande, Peter S., Neuman, Robert P. and Cavanaugh, Roland R. , The Six Sigma Way

• Pande, Peter S., Neuman, Robert P. and Cavanaugh, Roland R. , The Six Sigma Way

Team Fieldbook

• Gitlow, Howard S., Levine, David. And Popvich, Edward A. (2006) Design for Six

Sigma for Green Belts and Champions, Prentice Hall.

Statistics Specific

• Levine, David M., (2006) Statistics for Six Sigma Green Belts with Minitab and

JMP, Prentice Hall. Comes bundled with:

• Berenson, Mark L., Levine, David M., and Krehbeil, Timothy C. (2006) Basic

Business Statistics, Concepts and Application, Prentice Hall.

ix

Business Improvement and Team Work

• Pfeffer, Jeffrey and Sutton, Robert I. (2006) Hard Facts, Dangerous Half-Truths and

Total Nonsense, Harvard Business School Press.

• Harrington, J (1991) Business Process Improvement, McGraw Hill.

• Joiner, Brian (1996), The Team Handbook, 2nd

Edition, Straus Printing Company

• Scholtes, Peter R., The Leader’s Handbook.

• Goldratt, Eliyahu M. and Cox, Jeff. The Goal, Gower.

• Weisbord, Marvin. Productive Workplaces

• Evans, James R. and Lindsay, William M. (2008), Managing for Quality and

Performance Excellence, Thomson South-Western, 7th Edition

• Brown, Tim (2009), Change by Design, Harper Collins.

For Small Business

• Gerber, Michael E., (1995), The E-Myth Revisited, Harper Business. (Read this

first).

• Gerber, Michael E., (2005), E-Myth Mastery, Harper Business

Thinking and General Interest

• Meadows, Donella H. (2008), Thinking in Systems, Chelsea Green Publishing

• Senge, Peter M., (2006), The Fifth Discipline, Random House

• Gladwell, Malcolm (2000), The Tipping Point, Back Bay Books

• Gladwell, Malcolm (2005), Blink, Back Bay Books

• Gladwell, Malcolm (2008), Outliers, Allen Lane

• Taleb, Nicholas Nassim (2004), Fooled by Randomness, Penguin Books.

• Taleb, Nicholas Nassim (2007), The Black Swan, Penguin Books.

• Ferris, Timothy, (2007) The 4-Hour Work Week, Crown Publishers

.

Magazines:

• Quality Progress Magazine, published by ASQ (American Society for Quality)

• iSixSigma Magazine, published by iSixSigma

• Harvard Business Review (occasionally)

Web Sites

www.iSixSigma.com

Lean Advancedment Initiative (lean.mit.edu)

Lean Enterprise Institute (www.lean.org)

American Society for Quality (asq.org)

Henley Management Group Pty Ltd (www.hmg.com.au)

x

Personal Profile for Mr Max Zornada

Mr. Max Zornada B.E. (Mech), Hons. M.B.A.

Max is a Management Educator and Consultant with extensive

experience teaching MBA, Executive Education and Management

Development Seminars and as a hands-on practitioner, consulting to

major corporations on a range of Operational and Strategic issues,

throughout Australia, the US, Middle East, UK, Western Europe

and Asia, with a focus on achieving Business and Operational Excellence.

Max Zornada is an Adjunct Lecturer in the University of Adelaide,

Business where he currently teaches Operations Management and

Business Performance Improvement in the MBA Program. He has also taught Statistical and

Quantitative Analysis, Project Management, Quality Management, Managing Innovation and

Technology and e-Business.

He is a graduate of the University Innovation Fellows Program at the Stanford University

d.School and qualified to teach the d.School Design Thinking program.

He delivers various Executive Education Programs including the “Yellow Belt Advanced”

module in the Professional Management Program , the Lean Six Sigma Yellow Belt

Advanced Program, Green Belt and Black Belt Public Programs.

He has been a presenter in Australian Graduate School of Management’s (AGSM), University

of New South Wales, Executive MBA and Southern Cross University, College of

Management MBA Programs. Max was a Visiting Professor in the MBA program at

Consorzio MIP in the Politecnico di Milano in Milan.

Max is also the Director of the Australian based Management Consulting and Education firm

Henley Management Group. In this capacity he has presented many in-house Executive

Programs for major corporations on topics such as Six Sigma, Business Improvement, Lean

Thinking, The Balanced Scorecard, Project Management, and Maintenance Management,

both throughout Australia and internationally in Asia, the US, UK, Italy and the Middle East.

Prior to founding HMG, Max spent several years with the London based international

management and technology consultancy PA Consulting Group, after holding various

managerial and professional engineering positions in the chemicals processing and

petrochemicals industry with Adelaide and Wallaroo Fertilisers, ICI and Santos.

From his base in Adelaide, South Australia Max maintains an active local, Australian and

International consulting and Management Education practice, with a focus on capital

intensive (petrochemical, energy and chemicals) businesses, and back-office operations in

financial services and services organisations. In recent years, a major focus of his consulting

activity has been Lean Six Sigma and Process Improvement implementation in industries

spanning Financial Services, Business Process Outsourcing, Aerospace, Mining, IT and

Energy.

Contact Details

Max Zornada may be contacted at:

The University of Adelaide,

Business School Level 12, 10 Pultney Street,

Adelaide, 5005,

South Australia.

Tel: +61 8 83035525 Fax: +61 8 8223 4782.

Email: [email protected]

Henley Management Group Pty Ltd

Mob: +61 (0)412 500 844

Email: [email protected]

Introduction to Lean Six Sigma

1

The Box Simulation

3


© Max Zornada Slide 1

Lean Six Sigma: Yellow Belt Advanced

An Introduction to Lean Six Sigma



The Box Simulation

5




The Box Simulation - Results

Max =

Min =

Ave. =

Max =

Min =

Ave. =

Max =

Min =

Ave. =



3 Operational Strategies

ObjectivePerformance

MeasureResultsstrategyGoalMission

Strategy

Execution/Operations

_____ ____________ _____

_____ ____________ _____

_____ ____________ _____

6




Structure

Teamwork + Structure

Teamwork



Processes = Structure• Explicit Processes & Procedures

• IT Systems

• Organisation Structure

– Relative location of functional expertise with the

organisation;

– Relative location of authority – authorisation structure;

• Implicit processes – individual competence, “I know how

to do that”;

• Culture and norms – “the way we do things around here”.

7




People, Teamwork and Processes

People and

Teamwork

+

Customer

Organisation’s

Productive

Outputs

Value

or ?

Processes



The Evolution of Management Thinking

1910, Scientific Management,

Frederick Taylor1914+, Ford, Mass Production

1932, Statistical Process Control,

Walter Shewhart

1950’s/60’s, Toyota

Production System 1950’s/60’s, TQC

Deming, Juran

1980’s TQM

1990, Lean,

James Womack

2000 + Lean &

Six Sigma

Improvem

entThe

Man

agem

ent S

yste

m

1920’s, Alfred Sloan, General

Motors “The Multi-divisional

Corporation”

Mid-1990’s, Six

Sigma

8





Frederick Taylor

1990, Six

Sigma

1990, Lean

Thinking,

1920’s, Alfred Sloan, “The

Multi-divisional Corporation”

Managing Individual

Workers. Focus of

efficiency and control in

what individuals workers do.

Managing Organisational

Units (Divisions,

Departments, Work Groups)

Focus on efficiency and

control of organisational units.

Managing Processes Focus on

efficiency and control of

organisational and operational

processes.

Management Focus Management Practices Process thinking/management;

Team based (collaborative) decision

making, problem solving and

improvement;

Process Scorecards;

Cross-process collaboration.

Budgeting & Budgetary control;

Hierarchical organisational structure

(usually by function);

Leadership;

Effective management decision making

and problem solving.

Time & motion studies;

Standardised procedures;

Standard times & costs;

Financial incentives;

Supervisory control.

Three paradigm shifts




Frederick Taylor

1990, Six

Sigma

1990, Lean

Thinking,

1920’s, Alfred Sloan, “The

Multi-divisional Corporation”

Managing Individual

Workers. Focus of

efficiency and control in

what individuals workers do.

Managing Organisational

Units (Divisions,

Departments, Work Groups)

Focus on efficiency and

control of organisational units.

Managing Processes Focus on

efficiency and control of

organisational and operational

processes.

Management Focus Management Practices

Three paradigm shifts

Process Effectiveness/

Enterprise Effectiveness

Organisational Effectiveness

Individual Effectiveness

Process thinking/management;

Team based (collaborative) decision

making, problem solving and

improvement;

Process Scorecards;

Cross-process collaboration.

Budgeting & Budgetary control;

Hierarchical organisational structure

(usually by function);

Leadership;

Effective management decision making

and problem solving.

Time & motion studies;

Standardised procedures;

Standard times & costs;

Financial incentives;

Supervisory control.

9




Lean Six Sigma is based on an interrelated and

reinforcing group of core concepts …..

L6σ

Process View

of Organisation

Measurement &

Management of

Variation

Customer

Focus

DMAIC

Improvement

Methodology

Statistical Tools

and Techniques

Supporting

Infrastructure

Financial Results

Driven



Relating Sigma to Defect Levels

Six Sigma 3.4 99.9997%

Five Sigma 233 99.977%

Four Sigma 6,210 99.4%

Three Sigma 66,810 93%

Two Sigma 308,500 69%

One Sigma 691,500 31%

DPMO (Defects Per

Million Opportunities) Error Free Rate

10




Lean means eliminating waste

“All we are doing is looking at the time line from the moment

the customer gives us an order to the point when we collect

the cash, and we are reducing that time line by removing the

non-value added wastes”

Taiichi Ohno, 1988 quoted in

Liker, Jeffrey K and Meier, David,

The Toyota Way Fieldbook, 2006



The “Lean” approach to management strives to systematically minimise

waste - called muda - in the value stream.

• Ohno (1988) identified 7 types of muda:

– The Waste of Defects/Rework;

– The Waste of Over-production – producing more than you need;

– The Waste of Inventory. Having more materials, parts or information than you need or alternately, not having enough when you need it;

– The Waste of Processing. Effort that adds no value to the service or product;

– The Waste of Motion. Any extra movement of people that does not add value;

– The Waste of Transport. Unnecessary movement of information or goods;

– The Waste of Waiting. When no action is underway, no value is added – no action = waste;

• Womack and Jones (1996) added:

– Waste of Design. Designing good and services that do not meet customer needs;

– Waste of Intellect/Human Potential. Not utilising the knowledge and talent of all of your people.

• Added since by others:

– Waste of Energy. Usually relates to waste of power, but can relate to human energy;

– Waste of Space. Storage space, excessively spacious layouts;

– Health, Safety and Environmental Waste – losses due to ill-health, safety issues, environmental incidents.

11




Operational Infrastructure and Capability

Processes

People

Technology

Operational Capability



Operational Excellence and Capability ...

• Leaders at all levels must have a strong understanding of their

current operational capabilities (determined by their

operational infrastructure – People, Processes and

Technology), how to improve and build new ones.

• In the short-term:-

– The existing organisation and its ability to improve

constrain strategy by defining what is and is not doable;

• In the medium-to-long-term:-

– Strategy can determine what capabilities need to be built

and/or improved.

12




Business Improvement

The (only) 3 Paths

Problem Solving Process Change Dynamic Balancing of

Process FlowsIdentify and Solve the

problems which stop

the process from

working as intended.

Change the Process,

implement a new

process design.

Maintain “balanced”

flows through out the

process to maximise

performance.

?



Improving Organisations / Improving Operations

Problem Solving Process Change Balance and Flow

Underlying Assumption

Business or work process assumed to be

sound

Problems impacting of process impede its

ability to consistently function as

intended


Business or work process not assumed

to be sound

Process operates as intended but fails

to meet customer requirements


No particular assumption made about

business or work process soundness - work

with you’ve got.

Once you load a process with work you

create workflows and associated dynamic

effects which are independent of process

design and structure.

Lean

Kaizen/Root Cause Analysis Kaikaku/Value Stream Mapping Heijunka, Process Leveling

Six SigmaDMAIC DFSS/DMADV

Team Based Problem Solving Business Process Reengineering Process Flow Management

Generic

13




The Giants on whose shoulders we stand onW. Edwards Deming – The Theoretician

Quality is customer defined;

Reducing variation improves quality and reduces costs;

There are two types of variation, common cause and special cause variation, it is important to be able

to tell the difference;

We need statistical tools and techniques to understand and reduce variation and to solve problems.

Joseph Juran – The Strategist

Quality is conformance to specification and fitness for use;

Improvement can only be progressed project-by-project;

Improvement and improvement planning must be integrated into overall company strategic planning,

resourcing and budgeting processes.

The Cost-of-Quality provides an objective measure of improvement.

Philip Crosby – The Salesman

Quality is conformance to specification;

Zero Defects is the aim and Quality is Free – the cost of improving quality is less than the cost

of living with the impact of poor quality.

The Cost-of-Quality provides an objective measure of improvement.

Taiichi Ohno – The Philosopher The Toyota Production System – “Lean”

Waste – Flow - Time

Continuous Improvement culture – improvement is EVERYBODY’S

responsibility

Lean Philosophy

14

Process Thinking

15

Process Thinking

Case Study

Hi-Tech Leasing Corporation

17


Case Study OMHTLC/1.1∗

Hi-Tech Leasing

Corporation (A)

John Briggs is the General Manager of Hi-Tech Leasing Corporation

(HTLC), an organisation that leases scientific equipment, ranging from

simple personal computers to high-tech laboratory and field test equipment.

One of his sales representatives, Jane, who had been with the company

almost six months, had recently complained to him about how long it was

taking to fill the various orders for leased equipment. Despite the fact that

the company's promotional material stated that all orders would be delivered

within 7 to 10 days, Jane had highlighted the fact that several recent orders

from major customers had taken over 21 days before the equipment was

finally delivered and installed.

John wondered whether or not there was some thing wrong with the basic

process, or if it was just Jane's lack of familiarity with the "system" that had

caused these delays.

John decided to take a look at the "system" and considered the various steps

that were gone through when an order for equipment lease was filled. He

identified the steps in the process as follows:

1. A customer decides to lease some equipment supplied by HTLC,

telephones a Sales Representative, and tells them what they require over

the telephone. This is then confirmed by fax.

2. If the Sales Representative is not available to take the call, the customer

will call back later as most products require some discussion with a Sales

Rep. before an order can be placed.

3. The Sales Rep. receives the fax, checks it and passes it on to a Sales

Clerk who types up an official order.

4. The order is then passed on to a Data Entry Clerk who types the order

details onto the computer system.

∗

This case was prepared by Max Zornada. Copyright © Henley Management Group Pty Ltd, 2010

18


5. The order is then sent to the Credit department who check the customer's

credit with their banker. HTLC keep a record of each of their customers'

bankers on their computer system. The Credit Officer telephones the

bank and contacts the customer’s banker with the details.

6. If the banker's response is positive, the order is approved. If not, the

customer is notified and the order refused.

7. The order then goes to the Warehousing Manager who sources the

required equipment from the stock on hand. The Warehousing Manager

allocates the order to one of the stock pickers who picks the item from the

shelf and delivers it to Shipping with the Order.

8. Shipping Department, arrange the first available transport and notify the

Sales Rep. assigned to the order of the details.

9. Upon receiving notification from Shipping, the Sales Rep. notifies the

Service Department to schedule a service technician to do the installation

on the same day the equipment is due to be received by the client.

Although service technicians were kept very busy, there was usually

enough of a lead time before the equipment was due to be shipped, to

allow for a technician to be allocated to the order when required.

If a service technician was not, Shipping was notified and the dispatch

date deferred to the first date a technician was available.

10. The equipment was checked, loaded onto a truck and despatched to the

customer. The copy of the order was then sent to Accounts for invoice

preparation.

11. The technician would arrive at the customer's premises in time to

supervise the unloading operation and then go about installing and

commissioning the equipment.

This process had been in place virtually unchanged since the company

was founded almost ten years ago, and John's perceptions as the General

Manager were that there was not any great problem with it.

19


Hi-Tech Leasing Corporation Organisational Structure

General

Manager

Marketing

Manager

Sales

Supv.

Sales Rep.

Sales

Support

Supv.

Sales

Clerk

Admin

Services

Manager

Data

Proc'g

Supv.

Data

Procs.

Accounting

& Finance

Manager

Credit

Supv.

Credit

Officers

Accounts

Manager

Product

Manager

Product

Sourcing

Manager

Maint.

Supv.

W/house Manager

Shipping &

Transport

Manager

Transport

Off 'rs

Delivery

Drivers

Service and

Installation

Manager

Service

Supv.

Service

Techs

New

Installation

Supv.

Installation

TechsCustomer

Stock Picker

20

Process Thinking


Lean Six Sigma: Yellow Belt AdvancedLean Six Sigma: Yellow Belt Advanced

Process Thinking

Understanding Business and Work Processes



Process Thinking

Hi- Tech Leasing Corporation

Case Study

21

Process Thinking



Hi-Tech Leasing Organisational Structure

General

Manager

Sales

Supv.

Sales

Support

Supv.

Data

Proc'g

Supv.

Accounts

Manager

Product

Sourcing

Manager

Maint.

Supv.

W/house

Manager

Transport

Off'rs

Delivery

Drivers

Service

Supv.

New

Installation

Supv.

Credit

Supv.

Sales

Rep.

Sales

Clerk

Data

Procs.

Credit

Officers

Service

Techs

Installation

TechsCustomerStock

Picker

Admin

Services

Manager

Accounting

& Finance

Manager

Product

Manager

Shipping &

Transport

Manager

Service and

Installation

Manager

Marketing

Manager



Functional “Thinking”

Executive Management

Sales &

MarketingOperations

Finance &

Admin

Strategic Plans

Budgets

Objectives

Work Done

Resources

Performance

22

Process Thinking



Process “Thinking”


Sales &

MarketingOperations

Finance &

Admin

Customer

Resources Resources Resources

Performance



A Process: A Formal Definition

InputsBusiness or

Work ProcessCustomer

• A Process is any activity or group of activities that takes an input, adds value to it,

and provides an output to an internal or external customer. Processes use an

organisation's resources to provide definitive results.

• A Process is the largest unit referring to the flow of work through an organisation

beginning with external suppliers and ending with external customers.

• A Business Process consists of a group of logically related tasks that use the

resources of the organisation to provide defined results in support of the

organisation's objectives.

Output

or Work

Product

23

Process Thinking



The Cost - Service Trade-offThe Legacy of Functional Thinking

Costs Resources Service

Increase Service

Reduce Costs Vary Resources



Increase Service while Reducing CostsThe Power of Process Thinking

Costs Resources Service

Increase Service

Reduce Costs

Leverage

Resources

24

Process Thinking



Process “Thinking” & Process ManagementHorizontal Management Processes


Processes

Value creation

Delivery/Service

Quality

Customer satisfaction

Efficiency

Waste Reduction

Speed

Improvement

Organisational Functional Groupings



Processes deployed through the organisational structure

Responsibility for

major end-to-end

processes

Responsibility for

major sub-processes

Responsibility for

work processes/ sub-

processes

WorkgroupWorkgroup Workgroup Workgroup Workgroup

Senior Manager

ManagerManager

25

Process Thinking



Identifying Processes

• Ask the following questions:

– What are we doing for a customer?

– What is the first step in the chain of events that lead to

meeting the customer need ?

– What are all the steps in between including the

decisions and choices that need to be made?

– What order or sequence do the steps flow in from start

to finish ?



Identifying the Customer and what it is we do for

them ……

Customer

Outcome

Satisfaction

26

Process Thinking



Identifying what it is that tells us we have to do this for them

… the “triggering event” which kicks off an operation of the

process.

Triggering or

Initiating Event

Customer

Outcome

Satisfaction



Identify all of the tasks, operations, activities, judgements, decisions,

inspections and checks which must be done along the way in order to

deliver the required outcome to the customer.

Customer

Outcome

SatisfactionTask or activity required to progress the process

Decision, judgement, inspection, check point or choice.

Yes/No, OK/Not OK outcome.

Triggering or

Initiating Event

27

Process Thinking



Link them all up to to show the order in which the

process flows.

Customer

Outcome


Decision, judgement, inspection or check point.


Triggering or

Initiating Event



This is a process map!

Customer

Outcome


Decision, judgement, inspection or check point.


Triggering or

Initiating Event

28

Process Thinking



Process Mapping SymbolsSymbol Name Brief Definition

Operation or

process step

Decision Point

Document

Generated

Continuation

Point

Input/Output

Block

Flow lines

Depending on the level of detail being developed, can be

used to denote anything from a simple task, major activity or

a whole sub-processes.

Used to indicate the process is continued elsewhere on the

flow diagram or on another sheet.

Point at which a form or report is generated by the

process.

Point where a decision must be made before any

further action can be taken.

Optionally used to describe an input or output from a

processing block.

Use to connect all blocks to display the sequence in

which operations are performed.

Termination

pointUsed to indicate the start and end of a process.



Sample Process Map: Taking a Customer Order

A diamond shape

represents a

decision point

Continues onto the

Cook’s part of the

process.

1

1

Start

Change order

Yes

No

An extended oval shape is used to

indicate the start or finish of a process.

A numbered circle represents a continuation point.

Cook's part of process continued page 2.1

A rectangle represents a processing step

A line with an arrowhead

indicates flow and direction

of the process

1

Greet customer

Take customer's order

Repeat order to

customer

Customer

confirms

Confirm order on

terminal

Verbally announce

to kitchen

Note:

Some computer based

flow charting packages

use

to indicate a continuation

point on another page, and

to indicate a continuation

point on the same page.

29

Process Thinking



Sort and

determine loan

type

Calculate

Credit Score

Credit

Score

Required?

Data Entry

Yes

No

Assess Credit

Credit OK?

Prepare Instruction

Documents

No

Yes

Advise

Lending

Consultant

Receive Loan

Application

Start

Prepare loan

documentation

No

Yes

Cancel

ApplicationConfirmed &

Agreed?

Confirm with

customer and /or

agent

Underwriting

preliminaries

Property

Valuation

Legal check and

review

NoLegals OK?

Make required

changes to loan

docs.

Yes

Wait until

settlement date

Complete

Settlement

activities

Settlement date

passed?

Release &

Transfer funds

Post-settlement

finalisation

Finish

Re-book

Settlement date

Update loan

documentation

Yes

No

A more complex process map



Process Mapping Hints and Tips

• Focus on understanding the “tasks” and “decision points” - don’t just re-

map the organisation chart;

• Map what happens, not what should be happening or what you think

should happen;

• Flush out at least all the decision points;

• There may be no one person who knows how the whole process operates

– draw on other’s input, put together an appropriate team;

• Verify the process map – do an actual “process walk through” What is

the actual process? Is there more than one process at work?

• Don’t start solving problems – don’t make changes until the process as

is, is thoroughly understood. This is tampering.

30

Process Thinking



Process Definition WorksheetObjective : To specifically define the scope of the process being studied

Process Name:

The Process Starts with:

The Process Ends with:

The Process includes:

The Process excludes:

Connecting Process:



The SIPOC ModelSuppliers - Inputs - Process - Outputs - Customers

Suppliers CustomerBusiness

or Work

Process

Inputs Outputs

Supplier 1

Supplier 2

Supplier 3

Input 1

Input 2

Input 3

Process Step 1

Process Step 2

Process Step 3

Process Step 4

Process Step ...

...............

Output 1

Output 2

Output 3

Customer 1

Customer 2

Customer 3

RequirementsRequirements

MeasuresMeasuresMeasures

31

Process Thinking



SIPOC Diagram WorksheetSuppliers Inputs

Requirements

Process Outputs Customers

Requirements

Providers of the required resources to the process

Resources required by the process

High level description of activities in the process.

Deliverables from the process

Anyone who receives a deliverable from the process.



SIPOC Diagram: HTLCSuppliers Inputs

Requirements


Requirements

Order taking

Credit check

Stock picking

Delivery

Installation

Billing

Customer Equipment lease

order

Equipment

purchase order

An official purchase order

Clear Equipment

Specification

Customer company identity

details

Bank Details

An official HTLC

order

Customer bank

details

An official HTLC order

Clear Equip’t Specification

Delivery date and time

Agreed price/lease payments

Customer Business Id.

Customer Bank Details

Credit Department

Warehouse Dept.

Transport coordinator

Technician Scheduler

Invoicing Team

Sales Rep Official Order Customer Bank contact details

Customer Id

Credit approved

orderCustomer meets HTLC

credit criteriaSales Dept., Warehouse

Dept., Transport Dept.

Technicians

Sales Rep

Credit OfficerCredit approved

Official Order

Credit approved Official

Order

Clear equipment specification

Required by date

Equipment issued

from Warehouse

Equipment issued from

Warehouse IFOT to meet

delivery promise

Correct equipment picked

Placed on loading dock x

days before delivery.

Transport Dept.

Sales Rep

Credit Officer

Warehouse

Credit approved

Official Order

Equipment on

loading dock

Credit approved Official Order

All required equipment on

loading dock x days before

delivery date.

Required delivery date

Equipment

delivered to

customer site

Equipment delivered IFOT to

meet delivery promise.

Correct equipment delivered

In working order

Delivered to correct address

Customer

Technicians

Sales Rep

Credit Officer

Transport Dept.

Credit approved

Official Order

Equipment at

customer premises


All required equipment on site

Promised installation date

Equipment

installed

Equipment installed and

commissioned

Correct equipment installed

Equipment fully functional

Completed installation order

Customer

Invoicing Team

Technicians Completed

installation order


Installation date

Installation report

Invoicing schedule

InvoicingCorrect invoices, amount

and issued as per schedule

Invoice paid on time

Customer

Finance Team

32



SIPOC Diagram: HTLCSuppliers Inputs

Requirements


Requirements

Order taking

Credit check

Stock picking

Delivery

Installation

Billing

Customer Equipment lease

order

Equipment

purchase order

An official purchase order

Clear Equipment

Specification

Customer company identity

details

Bank Details

An official HTLC

order

Customer bank

details

An official HTLC order

Clear Equip’t Specification

Delivery date and time

Agreed price/lease payments

Customer Business Id.

Customer Bank Details

Credit Department

Warehouse Dept.

Transport coordinator

Technician Scheduler

Invoicing Team

Sales Rep Official Order Customer Bank contact details

Customer Id

Credit approved

orderCustomer meets HTLC

credit criteria

Sales Dept., Warehouse

Dept., Transport Dept.

Technicians

Sales Rep

Credit OfficerCredit approved

Official Order

Credit approved Official

Order

Clear equipment specification

Required by date

Equipment issued

from Warehouse

Equipment issued from

Warehouse IFOT to meet

delivery promise

Correct equipment picked

Placed on loading dock x

days before delivery.

Transport Dept.

Sales Rep

Credit Officer

Warehouse

Credit approved

Official Order

Equipment on

loading dock


All required equipment on

loading dock x days before

delivery date.

Required delivery date

Equipment

delivered to

customer site

Equipment delivered IFOT to

meet delivery promise.

Correct equipment delivered

In working order

Delivered to correct address

Customer

Technicians

Sales Rep

Credit Officer

Transport Dept.

Credit approved

Official Order

Equipment at

customer premises


All required equipment on site

Promised installation date

Equipment

installed

Equipment installed and

commissioned

Correct equipment installed

Equipment fully functional


Customer

Invoicing Team

Technicians Completed

installation order


Installation date

Installation report

Invoicing schedule

InvoicingCorrect invoices, amount

and issued as per schedule

Invoice paid on time

Customer

Finance Team

33



34

Deconstructing Cost Structure

The Cost of Quality

35

Financial Services Group

Case Study - Part (A)

Financial Services Group (FSG) are a global financial

services organisation, providing back office processing and

customer support services on an outsource basis to leading

investment and funds management companies.

Their key sources of competitive advantage are low

processing costs per transaction and high levels of customer service and support.

The business consists of 3 "functional" silos - Corporate, Operations and Customer

Support reporting through to an overall CEO.

The current cost structure (annualised) is illustrated in Table 1 below.

Corporate

Policy/Procedures Group $450,000 20%

Training and Development $450,000 20%Finance & Accounting $562,500 25%

General Admin $787,500 35%Total Corporate $2,250,000 15%

Operations

Document Receipt $1,950,000 20%Processing Team $4,875,000 50%

Communications Team $2,925,000 30%Total Operations $9,750,000 65%

Customer Support

Customer Support $2,400,000 80%

Problem Resolution Team $600,000 20%Total Customer Support $3,000,000 20%

Total Costs $15,000,000

Challenge

FSG's Revenues for the next year are effectively fixed and determined by existing

contracts. Therefore, increasing profit through revenue increases is not an option.

The remaining option is to reduce costs.

Examine the cost structure above and identify any opportunities to improve

profitability through cost reduction.

Note: It is essential that operating capacity and service levels be maintained. FSG's

revenues are performance based and rely on achievement of contractually specified

service levels.

How easy (or difficult) is it to identify opportunities that meet the above objectives?

36

The Cost of Quality



The Cost of Quality

and the Cost of Poor Quality

"Defects and errors are not free. Someone

makes them and gets paid for making them.

Even more people are paid to repair and

recover from the consequences."



Conventional View of Cost Drivers and their

Relationship

Output/

OutcomesActivity Cost

ResourcesRevenue

37

The Cost of Quality



Cost of Quality View – “Not All Activities Are Equal!”

Output/


ResourcesRevenue

Core

Prevention

Appraisal

Failure

Cost of Quality

Categories

“Core Activity” is the core value

adding activity that is the purpose

of the organisation.



Cost of Quality Categories

• Prevention

– Activities and costs incurred before work is done (core task performed), to ensure things get done right first time.

– Note: Prevention activities must occur before any work is commenced or done. Activities performed after work has commenced cannot be prevention!

• Appraisal

– Activities and costs incurred after work has commenced and when work is finished, associated with checking to ensure things have been done correctly.

• Failure

– Activities and costs caused by things not being done right the first time. ie. correcting problems once they have occurred.

38

The Cost of Quality



Failure Costs(usually referred to as COPQ)

• Internal Failure

– Failures which happen and are corrected internally within the

organisation, these add to internal costs but the customer does

not see it. eg. scrap, rework.

• External Failure

– Failures which happen during and after delivery of the product

or service to the customer, impacting on the customer and the

customer's perception of the product, service and organisation.



COQ - Some Examples

Prevention

• Training

• Procedure Development

• Policy Development

• Standards and Specifications

• Planning

• Improvement Teams

• Preventive Maintenance

• Quality Assurance Activities

• Recruitment

• Templates and Tools

Appraisal

• Inspection

• Audits and checks

• Process control

• Quality Control Activities

• Testing

• Performance measuring

• Customer surveys

• % of Supervision

• % of Management

• Part of the cost of the IT and Reporting infrastructure.

39

The Cost of Quality



COQ Examples - Failure

Internal Failure

• Cost of Correction and Rework

• Cost of Rejects and Scrap

• Downtime

• Reinspection

• Inventory buffers/excess

inventory

• System and procedure failures

• Isolating causes and corrective

action

External Failure

• Customer complaints

• Warranty costs

• Customer compensation costs

• Product liability

• Lost market share

• Delivery delays

• Unplanned field services

• Invoice errors/adjustment



Cost of Quality View – Protect the Core!

Output/


ResourcesRevenue

Core

Prevention

Appraisal

Failure

Only the level of Core activity

“drives” output and revenue

All categories of activity Core +

COQ drive costs!

40

The Cost of Quality



COQ - How Significant is it ?• Industry Surveys suggest that:

– Approximately 25-30% of labour and assets in a manufacturing firms;

– Range between 20% and 30% of revenue;

– In service businesses COQ usually greater than 50%.

• Examples from the presenter’s consulting case file:

Type of Business

Bank

Funds/ Wealth

Management

Financial Service

Transaction Processing

COQ as % of Total Cost

60%

Prev’n as % of COQ

Appraisal as % of COQ

Failure as % of COQ

56%

49%

45%

27%

26%

33%

34%

39%

22%

39%

35%

Plastics Products

Manufacturing25% 43% 16% 41%



The Cost of Quality view of cost structure?

Failure

Appraisal

Prevention

Cost of Quality Components

Cost of Performing Core Tasks(not to scale)

Core

41

The Cost of Quality



Cost of Quality Objectives

• Reduce time spent on Failure and eventually Appraisal by

increasing time spent on Prevention;

• Reduce total COQ overall, to enable more resources to be

spent on core activities, satisfying customers, internal and

external;

• Add prevention activities that lead to reductions in Failure and

Appraisal Cost that are greater than the cost of the prevention

activity that was added.



Changes in the Cost Structure

Prevention

Appraisal

Failure

To

tal

Co

st o

f D

oin

g B

usi

nes

s B

efo

re

To

tal

Co

sts

of

Do

ing

Bu

sin

ess

Aft

er

Failure

Appraisal

Prevention

Core Core

42

The Cost of Quality



Using Cost of Quality• The COQ measures the performance of an organisation in terms of

the efficiency and effectiveness of its business and work processes, systems and practices.

• Using COQ

– To identify and prioritise opportunities/problem areas;

– To assess COQ profiles:

– As an objective performance measure for progress in overall quality improvement - the “Ultimate” measure of improvement;

• If COQ didn’t reduce whatever you did, didn’t work!

– To determine which is the most appropriate improvement strategy to be used – problem solving (PS) or process change (BPR).

• If Failure=High use PS if Failure=Low use BPR.



Improvement: COQ Reduction

Customer

Core

Failure

Appraisal

Prevention Prevention

Appraisal

Failure

To

tal

Co

st -

Bef

ore

Improvement

To

tal

Co

st -

Aft

er

“Economic” level of

quality - Juran

43

The Cost of Quality



Improvement: COQ Reduction

Customer

Core

Failure

Appraisal

Prevention

Prevention

Appraisal

To

tal

Co

st -

Bef

ore

Improvement

To

tal

Co

st -

Aft

er

Maximum level of quality

i.e. failure = zero



Improvement: COQ Reduction - 2

Customer

Core

Failure

Appraisal


Appraisal

Failure

To

tal

Co

st -

Bef

ore

To

tal

Co

st -

Aft

er

Ben

chm

ark

44

The Cost of Quality



Improvement: Process Change“Reengineering”

Core

Failure

Appraisal


Appraisal

Failure

To

tal

Co

st -

Bef

ore

To

tal

Co

st -

Aft

er

Ben

chm

ark

Core

Prevention

Appraisal

Failure



Validating the new processIs the new process design better than the old process?

�Core cost should be less than old process;

�Cost of Prevention should not be more than for old process –

ideally, will be less;

�Cost of Appraisal should not be more than for old process –

ideally, will be less;

�Cost of Failure should not be more than for the old process –

ideally will be less.

45

The Cost of Quality



Linking COQ to Improvement Strategy

Yes

No

Yes

No

No

Yes

COQ

High?

Failure Cost

High?

Cost of

Core Task

High

Poor process

– “non-

robust”

Inefficient

process

Challenge

assumptions

about costs

Lots of

problems

impacting on

process

Improvement

achieved through

Problem Solving

based methodology

Improvement

achieved through

Process Change

methodology

46



Cost of Quality Categorisation

Answering the telephone to a customer who is querying their bill.

Co-worker checking their colleagues work before completion

Carrying out a quality audit.

Reworking something that was done incorrectly.

Staff training on new procedures.

Proof reading a report before distribution.

Developing instruction manuals and procedures.

Processing an invoice for payment correctly.

Spending half the morning pacifying an irate customer.

Reprinting promotional material because the some information was stated incorrectly.

Collecting data required for the weekly management report.

Time spent in an improvement team working on an improvement project.

For each of the following activities identify whether the costs incurred should be allocated to: Core Task

(C ) Prevention (P) Appraisal (A) Internal Failure (FI) External Failure (FE)

47

The Cost of Quality



COQ: A more useful way of looking at cost and

cost structure

Cost of

Core Task

See cost as being

Like this

Not like this

Cost

Failure

Appraisal

Prevention



Cutting costs while improving service outcomes?

Reduce costs and

cost structure by

cutting

Like this

Not like this

Cost of

Core Task

Cost

Failure

Appraisal

Prevention

48

The Cost of Quality



Consider what happens when we cut costs like

this ...

Cost

Cost of

Core

Task

Failure

Appraisal

Prevention

We have cut our capability to

perform the core task

We have cut the “insurance”

elements we build into our processes

to ensure we get it right first time

and to detect when we didn’t get it

right first time.

What would you expect will happen?

In the Short Term?

In the Medium to Long Term?



Conclusion of COQ Module

49

Financial Services Group

Case Study - Part (B)

Review the Financial Services Group (FSG) cost structure given below, analysed in terms of cost of quality.

Identify any opportunities to improve profitability through cost reduction, without compromising operating capability or

service levels. Are there any specific areas you would focus on as a matter of priority? How large a reduction in cost

structure could potentially be possible?

Corporate Total Cost Core Prevention Appraisal Failure Total COQ

Policy/Procedures Group $450,000 $90,000 $270,000 $45,000 $45,000 $360,000

Training and Development $450,000 $405,000 $45,000 $450,000Finance & Accounting $562,500 $225,000 $56,250 $168,750 $112,500 $337,500

General Admin $787,500 $315,000 $39,375 $196,875 $236,250 $472,500

Total Corporate $2,250,000 $630,000 $770,625 $455,625 $393,750 $1,620,00028% 34% 20% 18% 72%

Operations

Document Receipt $1,950,000 $1,560,000 $390,000 $390,000Processing Team $4,875,000 $2,925,000 $1,462,500 $487,500 $1,950,000

Communications Team $2,925,000 $1,170,000 $1,404,000 $351,000 $1,755,000

Total Operations $9,750,000 $5,655,000 $0 $2,866,500 $1,228,500 $4,095,00058% 0% 29% 13% 42%

Customer Support

Customer Support $2,400,000 $1,680,000 $240,000 $480,000 $720,000Problem Resolution Team $600,000 $600,000 $600,000

Total Customer Support $3,000,000 $1,680,000 $0 $240,000 $1,080,000 $1,320,00056% 0% 8% 36% 44%

Total Costs $15,000,000 $7,965,000 $770,625 $3,562,125 $2,702,250 $7,035,000

53% 5% 24% 18% 47%

50

50

50

Complexity

51

Complexity



Process Complexity



Complexity

• Concept first put forward by the Hewlett-Packard Company;

• Complexity is defined as being those extra process steps that

are required to deal with external errors (errors generated by

factors outside the process) and to recover from internal errors

(errors generated by the process).

• Classified all work into two categories:

– Real Work

– Complexity

53

Complexity



Identifying Complexity

To identify complexity, ask the question:

"If the process were running perfectly, would this activity

be performed ?"

YES = Real Work

NO = Complexity



Two Views of Work Time

Time Unavailable

for Work

Time Available

for Real Work

Time Unavailable

for Work

Complexity -

Internal Errors

Complexity -

External ErrorsTime Available

for Real Work

Conventional View

Complexity View

54

Complexity



Indicators of High Complexity

• Lots of work-in-progress materials. Many shelves and interim storage facilities to hold

materials.

• Many people walking from place to place, standing in line waiting for something,

standing idle.

• Work areas that are in disarray. Dusty boxes on floors, bookcases full of dusty binders,

desks and walls covered in little scraps of paper serving as reminder notes.

• People who can give only brief and vague explanations of what they are working on

and why it is important.

• Humorous signs taped to the walls that say things like "You want it when ? Ha ! Ha !"

or " A clean desk is a sign of a sick mind"

• In office areas, piles of processed and unprocessed documents, stored in the work area.

• Supervisors and managers pacing around the area trying to find out what's going on,

ascertain who made a critical mistake and expediting late orders.



Indicators of Low Complexity

• Small amount of work-in-progress. Few shelves and temporary storage areas to hold work.

• Few people walking around. Most people working at a steady, relaxed pace. No one waiting in line at copy machines, office supplies stores etc.

• Work areas that are neat. Everything in a department has a place and a use. People using time management systems instead of scraps of paper. Desk tops containing only what the person is working on at the time.

• People on shop floor or office areas can give complete descriptions of what they do, why they do it, who their customers are, and what's important to those customers.

• The most common item displayed on department walls are monthly performance graphs, daily control charts, pareto charts of problems.

• In office areas all documents are received, processed and filed. In-baskets are clean.

• Supervisors and managers who are relaxed, walking around the area talking with employees, asking them what they are working on, and looking for ways to make their employees' jobs easier and more satisfying.

55

Complexity



A Simple Retail Purchasing ProcessThe “Official” Process

Select goods

from shelfRead price tag

Enter data in register

Announce TotalOffer to Pay

Make change

Wrap GoodsLeave

Customer Clerk



The Real ProcessComplexity caused by Errors!

No

Yes

No

Yes

No

Yes

No

Yes

?

Etc., Etc. ...

Customer Clerk Supervisor Store person

Pick Goods from shelf

Is

Price Tag OK ?

Look up Printed list

Explain Difference

Accept ?

Exit Angry !

Goods

Damaged ?

Discuss with supervisor

Inquire if available from storeroom

Discuss situation

Bring to ClerkFetch and

Notify SupervisorApologise to Customer

Explain to Customer Available ?

Wrap etc.

56

Complexity



Improving Processes by Reducing Complexity

No

Yes

No

Yes

No

Yes

No

Yes

?

Etc., Etc. ...



Is

Price Tag OK ?

Look up Printed list

Explain Difference

Accept ?

Exit Angry !

Goods

Damaged ?



Discuss situation




Wrap etc.

Can the process be changed

to eliminate a decision point.

I.e. make what was

previously a decision point a

straight through.




Yes

No

Yes

No

?

Etc., Etc. ...



Exit Angry !

Goods

Damaged ?



Discuss situation




Wrap etc.

If cannot be removed, measure the

complexity to determine what

causes it and the degree of impact

it has on the process. Then ……..

57

Complexity




1. Complexity due to ONE thing, same thing every time.

RW Solution: Apply Root Cause Analysis to eliminate the cause

of complexity.

RW

2. Complexity due to a number of different things.

Solution: Rank each cause by degree of impact and then

apply Root Cause Analysis to eliminate the cause of each

one in turn or until impact has been reduced to an

insignificant level.

AB C

D E

RW

3. Root Causes of complexity cannot be resolved

Solution: Identify strategies to measure, quantify, control,

constrain or fix complexity at a known and predictable

level.

C E B A D



A “generic” process mapAnother way to think about process structures

Customer

Real Work

Stream

Complexity Stream

Complexity Stream

58

Complexity



Is there a good complexity?

Complexity and Flexibility



Consider a Process Established to Deliver a

Product or a Service “A”

Customer

59

Complexity



We now need to deliver a second product/service “B”

Option 1: Set up a separate process for B Option 2: Make the A process “flexible”

enough to handle both A and B

Process for A Process for B

Customer CustomerCustomer



The Flexible “A” Process

Customer

Real Work

Stream

(A)

Complexity Stream (to cater for B)

Complexity Stream (to cater for B)

60

Complexity



Which option is best?

Option 1:

• Benefit:

– Most “efficient” and

“effective” way to produce

products A and B.

• Cost:

– Cost of establishing,

resourcing and operating the

second process.

Option 2:

• Benefit:

– Save on the costs of building and operating the second process;

• Cost:

– The cost of the inefficiencies due to complexity induced on the process by the second product.

>

<

?



Alternate approach to complexity

• Use information technology to deal with complexity;

• Build decision rules into systems;

• Work done by people not impacted by complexity;

• If IT solution not feasible, provide clear rules/ policies for

dealing with complexity. Eg. If this … do this ……

61

Complexity



Process Thinking - Review of Concepts

• Function Thinking (Vertical) vs. Process Thinking (Horizontal)

• Organisation control vs Value creation and improvement issues;

• Process Mapping tool;

• The Cost Structure and the Cost of Quality (Core, Prevention, Appraisal, Failure)

• Problem Solving vs Process Change

• Complexity vs Real Work

• Identifying opportunities for improvement by focussing on complexity



In Summary

Anything that can be process mapped can

be improved!

There is no activity in the known Universe

that cannot be process mapped!

62

Customer Experience, Satisfaction and

Loyalty

63

Customer Satisfaction



Managing Customer Experience,

Satisfaction and Loyalty



How Customers See QualityPerceived Quality (Experience) = Perceptions - Expectations

Expectations Perceptions

Customer

Content Process

What the customer gets, the actual

service or product. The "technical

dimension“ or output.

How they get it, the process by which

the service or product is delivered. The

service or “experience”.

Perceived Quality

Parasuraman, Zeithaml and Berry (1988)

65




How Customers form ExpectationsControllable Expectation Creators

Un-controllable Expectation Creators

Past

Experience

External Communications

Marketing Strategies

Quality

Dimensions

Process &

Content

CompetitorsWord of

Mouth

Personal Needs

and Preferences

Expectations



Dimensions of Quality

Content

• Performance;

• Features;

• Reliability;

• Conformance;

• Durability;

• Serviceability;

• Aesthetics.

Process

Tangibles;

Reliability;

Responsiveness;

Competence;

Courtesy;

Credibility/Trustworthiness;

Security;

Access;

Communication;

Understanding the Customer.

66




Managing Customer Experience

Percep

-tions

Expect

-ations

Quality

Customer

Internal ProcessesCustomer

interface

Service

Delivery

Perception

Dissatisfaction

Delighted

Satisfied



Drivers of Satisfaction and Loyalty for Medical Clinics

• Accuracy of the Diagnosis

• Cost of the visit

• Friendliness of reception staff

67




Focus on the Process

• Customers often assume content;

• Provided the content is in the right “ball park”

– Customers often cannot tell the difference between

good and bad content;

• Most of what they judge is process;

• Process is important!



The RATER FrameworkA framework for understanding customer experience

Reliability Ability to perform the promised service, dependably and

accurately;

Assurance Knowledge and courtesy of employees and their ability to inspire

trust and confidence i.e. do they look like they know what they are

doing;

Tangibles Physical facilities, appearance of personnel etc. The tangible

evidence the customer can see, hear, touch etc.;

Empathy Providing personal understanding and customer support. Being on

the “customer’s side”;

Responsiveness Willingness to help and provide prompt service. Being flexible to

cater for customer specific needs.

Parasuraman, Zeithaml and Berry (1988)

The RATER framework consolidates the dimensions of customer process quality or “experience” into 5 key themes.

68




The RATER Framework

• The RATER framework provides us with a tool for understanding and specifying the “customer experience”dimension of the customer requirements;

• Used for determining what we need to establish service standards for and what these standards should be in managing interactions with customers;

• Can be used for designing the “operational infrastructure”required to deliver customer service to the required service standards.

– That is:- Processes, People and Technology



Example: The Room Service ProcessGuest Calls Room Service, Service Cycle.

Quality Dimension Customer Requirements/ Quality Service Standards

Responsiveness

Assurance

Tangibles

Empathy

Phone operator has thorough knowledge of menu and prices

There is a menu in the room giving full description of

what is available. Specific delivery time stated

Effort to comply with any special requests. Prompt

service.

Reliability Phone answered within five rings, 24 hours a day

Customer name used. Prescribed guest treatment

procedure carried out with sincerity. Order taken in a

courteous manner.

69




Delivering on the Service StandardsTranslating Service Standards into Customer Experience

Quality Service Standards

Reliability

Assurance

Tangible

Empathy

Responsiveness

People – Skills, Roles,

Responsibilities.

Process – Processes,

Policies, Consistency.

Technology – Systems

and Tools.

Customer

Experience

Customer

Satisfaction



Who are our customers ?

External

CustomerSupplier

Internal Customers

External Customers

Those outside the organisation who use, buy or are affected by our work.Internal Customers

Those within the organisation, who will be affected by our work. The next

person in the process, those who may need to add to, respond to or adapt

to our work.

… anyone who comes into contact with our work

RSHK

70



Managing Perceptions of Quality

Service : .

Responsiveness

Assurance

Tangibles

Empathy

Reliability

Think of a customer contact point associated with a service you currently provide

to a customer(s).What experience will result in a satisfied customer?


71



72



Using RATER to Design Service ProcessesWhat supporting operational infrastructure/capability will need to be provided to

consistently deliver the desired customer experience?

Responsiveness

Assurance

Tangibles

Empathy

Reliability

Quality DimensionSupporting Operational Infrastructure/Capability

People Process Technology

73



74




Impact of Customer Satisfaction on Loyalty

Typical results from loyalty studies, using a 5 point customer satisfaction rating to correlate satisfaction levels to

loyalty. Key loyalty testing questions “would you repurchase” and “would you recommend”.

Rating CategoryWould

Repurchase

Would

Recommend

Completely Satisfied 90% 96%

Somewhat Satisfied 56% 71%

Neither Satisfied Nor Dissatisfied 12% 19%

Somewhat Dissatisfied 3% 0%

Very Dissatisfied 7% 7%



Understanding Customer Defection

• Dissatisfaction with existing provider;

• Expectation that another provider will satisfy them more;

• Changing life circumstances and changing needs.

75




Managing Customer Experience

• Identify the elements of customer expectations you can control;

• Set expectation levels high enough to attract business, but accurately enough to reflect the reality of what is likely to be delivered 99.9% of the time (under-promise and over-deliver);

• Identify the elements of customer expectations you can’t control. Monitor and respond to changes;

• Identify areas where expectations are low and importance to the customer is high. Focus on improving/addressing these;

– Strategic gaps in the market that provide viable footholds.

• Customer expectations will increase with time - so should your ability to meet them. Plan for it!;

• Surprise is one way to exceed customer expectations. Promise what to expect, deliver more, sometimes surprise customers.

– e.g. “going the extra mile when it matters.

76

Process Measurement and Variation

77







Y = f(x)

The fundamental equation that drives Six Sigma

Output (Y) is a function of the Inputs and the Process

Examples of Y

Output

Outcomes

Effect

Symptom

A Dependent Variable

A Key Performance

Indicator

Examples of x’s - x1, x2, x3 …. xn

Inputs to the process

Leading indicators/Drivers

Problems and their causes

“Noise” factors

Complexity

Independent Variables

Control and “levers”

79




Process Measurement: Y = f(x)

A draft “generic” template for process measurement

Customer Outcomes

Measures

•Delivery

•Quality

•Value

Internal Process

Outcomes Measures

•Time

•Cost

•Quality/Waste

Supplier Outcomes

Measures (Inputs)

•Delivery

•Quality

•Value

Process

Input Measures

Customer

Usually

the Y’s

Potential x’s found here

Leading Indicators

•Process specific issues

•Key Complexity Issues

•External to process issues

Some Y’s

also here.

Based on work by Richard Lynch and Kelvin Cross (1991)

For any process, the most appropriate measures

will be found in the following generic categories

CTP’s: Critical to the Process

CTQ’s: Critical

to the

Customer,

Market



The Role of Complexity in determining measures

• Examining Complexity can help identify:

– Diagnostic measures:

• Measures that allow you to identify and quantify what is going wrong:-

– i.e.the x’s that are having a negative impact on process performance;

– “Drivers”:

• The key cause-and-effect relationships by which process performance can be

controlled or “driven”;

– i.e. the x’s that can be manipulated to give the desired Y

– Leading Indicators:

• Leading indicators, advance warning or predictors Y.

– i.e. the x’s that allow us to predict what Y will be some time later.

80




Example: Leading Indicators and DriversHTLC Order Fulfillment Process

Customer

Stock availability

Measure: Orders in

Backlog Status

% of Orders Delivered on Time

97%

Time

Time

% of Orders on Purchasing Backlog

5 %

12 %

Outcomes Measure: Delivery Performance

% of orders in

backlog status

increases

(i.e. not able to fill

from current stock)

Lead time before

delivery

performance is

impacted

Delivery

Performance

deteriorates



Shortcut method for diagnostics and leading

indicators (x’s)

• What are all of the things that could stop the process

(internally)?

• What external factors could stop the process from meeting its

customer and process outcomes?

• Can you measure these?

81




Example: HTLC – From Measures to Metrics

What does Delivery

mean for this process

Generic Measure

Delivered and installed on the

date promised.

Number/% order delivered and

installed on time.

What does Quality

mean for this processCorrect equipment delivered

Complete order delivered

Equipment works

#/% incorrect deliveries#/% not delivered in full 1st time#/% service calls to repair new equip.#/% of returns for faulty equip

What does Value mean

for this processPricing meets customer

expectation

Customer satisfied with value

proposition

#/% of orders lost due to price.

Customer satisfaction

Measure Specific Metric

Similarly for Cost, Time

and Waste

Specify the

“generic measure”

What does the “generic measure”represent in specific terms for this

process.

What are some specific metrics –

things we can measure, count, collect data on, to quantify the measure?



A Scalable Concept

External

Customer E

xte

r na

l S

upp

l ie r

s

But the specific measures developed will be different in each case, but

relevant to the sub-process selected.

Internal CustomerInternal Supplier

Workgroup A

SubprocessWorkgroup B

Sub-process

Customer

ProcessLeading

Indicators

SupplierCustomer

ProcessLeading

Indicators

Supplier

82






Senior Manager

ManagerManager

Responsibility for

major end-to-end

processes

Responsibility for

major sub-processes

Responsibility for


processes



Performance Measures and Organisation Structure

Warehouse Manager

Senior Manager

Logistics &

Service Manager

KPI Report


PI’s (Things that effect CSAT) Delivery Performance Quality of Installation

Quality of Product Order Accuracy

Senior Manager’s Y’s

Senior

Manager’s

x’s

Potential Causal Relationship

KPI Report

Delivery Performance

PI’s (Things that effect Delivery)

L&S Manager’s Y’s

Out of Stock Backlog Transport Availability

Credit Backlog Technician Availability

L & S

Manager’s

x’sPotential Causal Relationship

KPI Report

Out of Stock Backlog

PI’s (Things that effect Out of Stock)

Warehouse Manager’s Y’s

Order on Backorder

Orders for New Items

Warehouse

Manager’s

x’s

ActionsRevise and increase

level of stock holding

for an existing item if

necessary.

Add new item that is

not currently stocked

to stock holdings

Potential Causal Relationships

83




Performance Measures and Organisation Structure

Warehouse Manager

Senior Manager

Logistics &

Service Manager

KPI Report


PI’s (Things that effect CSAT) Delivery Performance Quality of Installation

Quality of Product Order Accuracy

Senior Manager’s Y’s

Senior

Manager’s

x’s

Potential Causal Relationship

KPI Report

Delivery Performance

PI’s (Things that effect Delivery)

L&S Manager’s Y’s

Out of Stock Backlog Transport Availability

Credit Backlog Technician Availability

L & S

Manager’s

x’sPotential Causal Relationship

KPI Report

Out of Stock Backlog

PI’s (Things that effect Out of Stock)

Warehouse Manager’s Y’s

Order on Backorder

Orders for New Items

Warehouse

Manager’s

x’s

ActionsRevise and increase

level of stock holding

for an existing item if

necessary.

Add new item that is

not currently stocked

to stock holdings

Potential Causal Relationships

WHY?WHY?

WHY?WHY?

WHY?WHY?



Introduction to Variation and Flow Concepts

84




The Dice Game

A simulation of the

effect of variation on

the output of a multi-

stage process



85




86

The Dice Game

Cycle Round 1 Round 2 Round 3 Round 4

1

2

3

4

5

6

7

8

9

10 Total Average Work in

Progress

Customer

Service

87




The Dice Game

Customer Requirement

= 35 units in 10 deliveries

= 3.5/delivery average

Organisation “functional”

structure

Process

Average capacity = 3.5

Min = 1

Max = 6

Min = 2

Max = 7

Ave = 4.5+30%

Min = 3

Max = 4

Ave = 3.5



Lessons from the Dice Game

• Difference between theoretical/installed capability and actual delivered capacity;

• Effectiveness of improvement strategies:

– Apply more resources (+30%)

– De-bottlenecking the problem function(s);

– Reducing variation.

• Process driven behaviours vs people issues;

• Process fix vs people fix;

• Systemic interactions - WIP/rework/capacity.

89




Systemic interactions – a self-reinforcing system

Work in

progress

Pressure on

people

Errors and

failures

Rework

Capacity to

do work



Some Sources of Variation

• Failures causing Rework and

Waste;

• Mistakes and Errors;

• Complexity;

• Poor in-process quality;

• Variation in inputs;

• Attempting to manage the

organisation through the functional

hierarchy vs across processes:-

– Lack of functional coordination across

processes;

– Mismatch between resourcing and

workloads and demand;

– Resource rigidity i.e. inability to move

resources across a process;

– Inappropriate response to “events”

– Etc., etc., …..

• “Lumpy”/unbalanced flows through

the process;

Problems Management

90




Understanding Variation

Dr. W.A. Shewhart, 1920's, found:

• All processes display variation;

• Some display controlled variation;

• Some display uncontrolled variation.



Common vs Special Causes

Dr. W. Edwards Deming called this:

• Variation due to common causes. Due to the random

interaction of the many variables in the system or process.

These were purely random and are built in to the system.

People working in the system have no control over these.

They are effectively "prisoners" of the process.

• Variation due to special or assignable causes. Not a natural

part of the system. These could be traced to a specific event,

person, machine or localised condition.

91




Sources of Variation• Common Causes:

– Variation caused by the random interaction of all of the

variables that are built in to or are a “normal” part of the

process. This represents “business as usual” performance for the

process;

– Adjusting the process increases this type of variation.

• Special Cause:

– Non-random variation. May exhibit a pattern;

– Due to something happening that is not a normal for the process

- a problem, event, a specific cause that can be found and

explained;

– Adjusting the process decreases this type of variation.



The Path to Continuous Improvement

• The path to continuous improvement, is to:

– Train and empower employees to identify and remove

special causes from work processes (problem solving);

– Train management in variation principles and

reengineer/change processes to reduce variation from

common causes (process change);

• Alternately: - Management empowers teams to work on

changing the processes to remove common causes.

92




Understanding & Managing VariationStatistical Process Control

There is a whole “Body of Knowledge”, Tools and

Techniques derived from Shewharts work called

Statistical Process Control (SPC).

SPC provides tools and techniques for

measuring, understanding and managing

variation in processes.

SPC is outside the scope of the Yellow Belt

program.



93




94

The DMAIC Process

Team Based Problem Solving

95

The DMAIC Process



The Team Based Problem Solving

The DMAIC Process

6σ

D

MA

I

C



Problem Solving

"If the only tool you have is a hammer, you tend to

see every problem as a nail"

Abraham Maslow (1908-1970)

The DMAIC Team Based Problem Solving Process uses

a suite of tools, applied within a structured framework

to support the problem solving process using teams.

97

The DMAIC Process



Key Problem Solving Tools

• Process Mapping (flow charts);

• Brainstorming;

• Fishbone Diagram;

• Check Sheet;

• Pareto Chart;

• Potential Solutions Matrix.



Types of Problem Solving

• Issues driven problem solving, where the focus is on solving a specific, clearly identifiable and obvious problem (or symptom). This is usually the case during the first few years of implementing a team based problem solving process where many long standing problems have been flushed out into the open;

• Process Improvement driven problem solving, where the process improvement process provides the impetus to analyse the way things are done and seek out problems to be solved.

The DMAIC Process



The PDCA Process

The Plan-Do-Check(Study)-Act Cycle

Plan

DoCheck

Act

Plan a change aimed at

improvement.

Implement the change.Check the result. Did it

work?

Institutionalise the change

or abandon and start again.



The Six Sigma Approach

DMAIC

Define

Measure

Analyse

Improve

Control

6σ

Define the problem

or opportunity.

Measure the current

performance and

capability

Analyse to identify

root causes.

Improve by implementing

potential solutions.

Control by standardising

solution and monitoring

performance.

99

The DMAIC Process



DMAIC Process Storyboard

Cause and Effect DiagramRun chart or

control chartProcess Map

Objective: Identify and implement the measures required to establish

baseline performance and quantify the opportunity.Objective: Define the Problem/Opportunity, Business

Case, Customers & Customer Requirements, and Process.Objective: To allocate a project worth

doing to a capable team.

Output: Project selected, team selected,

project allocated to team.

Develop Business Case

Develop Project Charter

Understand Customer Requirements

Understand the Process.

PRE-DMAIC DEFINE MEASURE

ANALYSE

Output: A quantified picture of the current process performance

(current state) and problem impact.

Key Steps:- Key Steps:-

IMPROVE - I : Generate Potential Solutions

Output: Business Case, Project Charter, Work Plan, Problem

Definition, Measurable Customer Requirements, Process Map

Team charter

Objective: Identify and verify the root cause(s) of the problem.

Objective: Implement the preferred solution. Confirm that the

problem and its root cause(s) have been reduced or eliminated.

Implement preferred solution

Verify effectiveness

Apply comparative methods if

necessary.

Objective: Prevent the problem and its root

cause from recurring.

Standardise the solution

(standards & procedures)

Develop and Implement

PMCS

Document project

Analyse Data

Analyse Process

Determine Potential Root Causes

Form & Test Hypothesis

Verify Root Causes

Key Steps:-

Objective: Determine possible solutions that will address the identified root cause(s) of

the problem.

Generate potential solutions

Assess potential solutions

Select preferred solution

Test/Pilot preferred solution

Develop implementation plan

Before

After

Key steps:-

Flowchart Standard

procedure

Output: Solution embedded and “routinised” in

relevant process, procedures and standards.

Key steps:-

Objectives: Review team effectiveness, plan to

address remaining issues and institutionalise the

learning.

Output: Recommendations for future projects &

improvements to team processes. Project

documentation and learnings “pack”

IMPROVE - II: Implement and Check

Review remaining project

opportunities

Review other applications

Review learnings

C D

MA

I 6σ

CONTROL - Standardise FUTURE PLANS

Output: Root cause(s) identified & verified

Cause and Effect Diagram

(Fishbone)Checksheet

Pareto Chart

Output: Preferred solution or countermeasures

Key Steps:-

Output: Confirmation the best solution to eliminate the problem & its

root cause(s) has been implemented.

Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

Identify opportunities

Select project

Select team

Allocate to team

Key Steps:-Determine what to Measure

Understand the Measures

Understand Variation

Assess Current Process

Performance

Pareto Chart



The Process Improvement FrameworkDefine

Measure

Control

Analyse

Improve

Analyse

Improve

Yes

No

Understand the Process

Understand Customer Requirement

Measure performance

Assess capability of process

Monitor & evaluate

Can process meet

customer need ?

Is there a problem ?

100

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart

101



102

Case Study South Eastern Food Packagers

103

South Eastern Food Packagers

104


Case Study South Eastern Food Packagers

Case Q05041/1.4

Background

South Eastern Food Packagers (SEFP)* are a division of a large food processing and distribution organisation. They operate a processed food packaging and palletising facility in the South Eastern Region.

“Bulk Packs” of packaged food products such as dried fruits, nuts etc. are received from other divisions or external suppliers. SEFP pack these into boxes or bags which are then palletised for distribution to customers. Their main customers are supermarket chains and food wholesalers.

SEFP packs and ships product to a schedule compiled from customer orders reflecting their required-by dates. If these dates are not met there is the risk of stockouts in their customers’ supply chains. The products packed by SEFP have varying shelf-lives and they are required to ship products such that at least two thirds of the time until the use-by date is available to

their customers.

Costs competitiveness is also critical, most of the products packaged by SEPF are low value products and so the packaging and distribution component can be significant.

Problems with the Cardboard Box Packing Process

A major part of SEFP’s operations was the cardboard box packing process. The growth in overall volumes and range of products packed had led to a gradual increase in packaging

costs.

SEFP recovered such increases by way of an annual contract price review with all customers. Although customers usually complained about any price increases, the incremental annual increases had always been accepted by customers as one of the realities of business.

As the end of the current budget year loomed, SEFP’s management were reviewing their costs to determine pricing for the forthcoming year. This internal price setting process was

disrupted by the receipt of a “formal” letter from one of their key customers specifying a target price, which if not met would lead to non-renewal of their contract.

* This case was prepared by Max Zornada as the basis for class discussion rather than to illustrate either

effective or ineffective handling of an administrative situation. Copyright © Henley Management Group Pty

Ltd, 2011

The objective of the case is to provide participants with a feel of what it is like to be a member of a Six

Sigma team, using the DMAIC process to solve an operational problem and to give team members some

exposure and practice at using key problem solving/improvement tools and techniques.

105


A second major customer had also advised SEFP through their Account Manager, that they would not be accepting further price increases this year, and unless a 10% price reduction could be delivered by next year’s price review, they would also not renew their contract and bring their packaging back inhouse.

Together, these two customers represented more than 50% of SEFP’s business. SEFP management suspected that at their current pricing levels, they would be unable to attract new customers to replace these if they were lost.

The cost of packaging had clearly become a customer priority.

In the short-term, SEFP would need to price to meet their customer’s requirements. However, given their current costs, this would not be sustainable in the long-term. The pricing structure offered to their customers would need to be supported by real internal reduction in box packaging costs, through improvements to the process.

Competitor benchmarking and customer feedback suggested that if a target Packaging Cost or $2.75 per box could be achieved, SEFP would meet both customers’ price objectives and

their own profit objectives.

Unfortunately, the actual cost of packaging currently stood at $3.09/box. (See Table 1, below).

A preliminary review of SEFP's Operational Statistics (See Table 1) reinforced the belief that waste reduction offered a major opportunity for improvement. Management believed that the cost of waste could be halved in the short to medium term, and reduced even more in the longer term.

Description Amount

Boxes packed/shipped per day 8,626

Cost of Contents $22.00

Distribution Costs $2.43

Packaging Costs $3.09

Delivered cost per box $27.52

Labour Costs $2,344,000

Operations Materials $1,200,000

Maintenance Materials $672,000

Energy and Utilities $400,000

Other Costs $100,000

Waste $1,629,835

General and Administration $150,000

Total Cost $6,495,835

Table 1: SEFP Operational Statistics (Note: Facility Operates 244 days/year)

106


Note: SEFP’s revenue is generated only by their packaging service. The only cost they incur which must be recovered in their pricing is the Packaging Costs. The cost of distribution and contents are paid for by their customers.

Managing costs in the Box Packaging area had always been problematic. It is believed that a significant part of the cost is due to the high levels of waste recorded against the business. Even though the cost of cardboard boxes and associated consumable items were less than $0.70 per box, the contents of the box averaged $22. Where the box and its contents were lost as waste, the entire cost of the box and contents were recorded against SEPF.

SEFP management define the high level problem as “the cost of box packaging operations”, with an objective defined to reduce the cost of waste by the amount required to meet the target cost of $2.75 per box.

A problem/opportunity theme statement was developed for this project, shown in Exhibit 1.

Exhibit 1: Problem/Opportunity Theme Statement for the Problem

What is the area of concern? What first brought this problem or opportunity to the

attention of your business?

Summary problem statement (summarise the above in a concise statement).

Project Title: Box Packaging Operations Cost Reduction

Cost of Box Packaging operations are too high. Current costs are above target and not

competitive for the customer.

The Cost of Box Packaging is $3.09/box vs target of $2.75. This difference is currently

being absorbed internally as customer will not accept.

Cost of Box Packaging operations are too high at $3.09/box vs target of $2.75 and not

sustainable in the long term.

What will happen if the business does not address this problem?

True costs of box packaging will continued to be absorbed internally and lead to

continued low profit margins. Risk of making losses is problems gets worse or if there is

pressure to reduce costs from customers.

What impact has this problem already had? What evidence is there that it is a problem

worthy of attention?

107


The Improvement Team

An improvement team was formed to look at ways of reducing the cost of waste.

The team members included:

• The Packaging Area Manager (Team Leader)

• A Senior Marketing Officer, who is usually responsible for dealing with customers who return boxes and arranging credits to their accounts;

• The Quality Control Officer

• Two packaging line Operators;

• The packaging line Supervisor;

• A member of the Operational Excellence Support team to mentor and coach the team.

The Define Stage

The Business Case and Project Charter

At their first meeting, the team reviewed the initial problem theme statement and the operational data. They developed a formal Project Charter for the project, which included formalising the problem statement, problem objective and business case statement for the project.

They confirmed that the cost of waste was a significant and actionable cost – currently

standing at 25% of total costs. A 44% reduction on this initial baseline would allow them to achieve the target $2.75 per box.

The Project Charter for this project is shown in Exhibit 2.

108


Exhibit 2: Project Charter

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cess

Gre

en B

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Pro

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Ow

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109


Customer Requirements

The next steps were to understand and “codify” the Customer Requirements.

Price had already been identified as a key priority at the outset. However, team members interviewed several key customers to collect more information about their requirements and satisfaction with SEFP’s box packaging operations.

Customers reinforced SEFP’s concerns about the cost of packaging and confirmed the presence of other competitors in the market place. Feedback from interviews led the team to

form the opinion that if SEFP were to pass on the full costs of packaging operations to their customers, many would be so dissatisfied that they would defect to competitors or bring it inhouse.

Other priorities raised by customers included the importance of delivering product in line with order specifications and to schedule. This included, delivering the right amount of the right products, at the specified times. Getting the amounts right was emphasised as an important issue, failure to do so could lead to stock shortages and missed sales. Customers

indicated that they were happy with the quality of product and timings of deliveries.

The team used the information collected from customers as well as their own judgement to

develop a Customer Requirements Statement for SEFP’s Box Packaging process and

identify the Critical-to-Quality (CTQ) for this project. This is shown in Exhibit 3.

Exhibit 3: Customer Requirements Statement. Critical-to-Quality Issue for this project confirmed as cost competitiveness.

What is this customer’s major complaint? What issue would they want us to work on?


1. Cost competitiveness

Contract Box Packaging Customers

2. Schedule compliance

2.1. On-time delivery/right day/right time.

2.2. Right product delivered

2.3. Product quality to specification

2.4. Right amount/ amount as per manifest.

Ranking SchemeImportance to customer: 1 = Nice to Have, 2 = Important, 3 = Critical, Must HaveCustomer Satisfaction: 1 = Very Satisfied, 2 = OK. Could be better, 3 = Unhappy, Must be improved

* Price has been raised a specific priority by key customers. We are absorbing difference between market price and actual costs. If customer were charged actual cost we would lose the business.In addition to price, getting the delivery amount right is a Critical-to-Quality (CTQ) issue for the customer.

3 3* 9*

2 1 2

2 1 2

3 2 6

$2.75

97%

95%

99%

99% 3 3 9

Outputs: Customer:

Measure Importance to Customer


Boxed product delivered to buyers according to customer manifest.

(Importance x

Satisfaction)

Target

Processing cost $/Box

Returns: wrong product %

Returns: off-spec product %

PriorityRating

% On time

Order shortfall %

110


Understanding the Process

The next stage was to understand the process that was at the core of the improvement opportunity.

The team members spent a week familiarising themselves with the way the cardboard packing processes worked. A write up of the key steps in the process is given in Exhibit 4.a.

A schematic representation of the overall supply chain is given in Exhibit 4.b.

A copy of the process map is shown in Exhibit 4.c.

Question

From the map of the process, what data would you collect in order to assess the overall

performance of the process and quantify the extent of any problems? i.e. diagnostic

measures?

111


Exhibit 4.a. The Cardboard Box Packaging Process

The process started with the receipt of a customer order. The scheduler consolidated all orders received to produce a daily schedule. This determined the contents and configuration of product "bulk packs" required at the Filling Stations. There were three filling stations, which provided greater flexibility in the range of products that could be packed at the same time - this also simplified scheduling and bulk pack replenishment.

On the shop-floor, bulk packs were loaded onto the Filler Stations and cardboard “flats” pre-cut and pre-printed with the appropriate branding and artwork was loaded into the Flat-Feeder all as specified on the schedule. The Flat-Feeder automatically fed “flats” into the Box Folding Machine as required. The Box Folder folded the bottom and sides, leaving the top open. Occasionally, a box became jammed and was damaged before it was fully folded. In such cases, the operator manually stopped and cleared the machine, then restarted the process.

The formed box moved along to the Filler Stations, where the contents - small pre-wrapped packs, dropped down a chute into the box. The chute was weight activated, ensuring the contents of each box met the box weight specifications. Depending on requirements, a box might be completely filled by one filler or move along receiving partial loads from the different fillers to make up a "variety box".

The box moved to the automatic Weighing station. Under-weight boxes triggered an alarm and were manually removed from the line. (Both the contents and the box were recycled back into the process). Overweight boxes had product manually removed from them by the operator until the correct weight was reached. The box next moved to the Lid Seal & Close station, where the top of the box was closed and sealed.

Boxes moved out from Lid Seal & Close along a short conveyor and into a chute which aligned the box’s orientation as it went into the Print station, where two inkjet printers printed the bar code and date stamp on the box.

Boxes then moved to the Palletising station where they were automatically stacked, palletised and shrink wrapped. The pallets were then moved either into a temporary storage area to await loading onto outgoing trucks or loaded directly onto trucks. Most pallets were dispatched within a few hours of palletising. All of the steps up to truck loading were linked by short conveyor belt runs.

The company’s trucks delivered the pallets to the various customer warehouses, where they were unloaded by customer warehouse staff. Customer staff received and checked pallets. If the load was incorrect it was placed back onto the truck and returned.

If the load verified OK, the pallet was unpacked (de-palletised) and the receipt of the individual boxes recorded. Boxes not conforming to the customer’s specification, damaged or which could otherwise not be received were rejected and sent back to SEFP on the next truck.

Received boxes were placed into the warehouse until required, where they would be issued to retail.

When a box of product was issued, customer staff opened it and checked the contents. If the contents were OK, the box was taken and the contents placed in the Supermarket/Store, if not OK, the box was returned to SEFP for refund.

112


Exhibit 4.b. Schematic Diagram of overall Supply Chain for SEFP Cardboard Box Packaging

Exhibit 4.c. Process Map of SEFP Cardboard Box Packaging Process

Box flats

Flat feeder Box folder

Filler Stations

1 2 3

WeighingStation

Lid Seal

& Close

PrintStation

Palletising

TruckLoading &

Dispatch

Transport tocustomers

Receive palletsDe-palletise &receive boxes

Place inWarehouse

stock

Issue to

retail asrequired

Unpack& place

on shelf

Product Bulk Packs

Retail

Bulk Pack

Replenishment

Customerplaces order

Scheduling

Schedule

Start

Load flat into Flat Feeder

Box Folding

Box Jam?

Box Filling

Underweight?

Overweight?

Lid sealing and close

Customer Receive Pallets

Remove Excess

Remove & Recycle

Stop and Clear

Restart the ProcessPallet OK?

Unpack & receive boxes

Boxes OK?

Place in Warehouse

Unpack Box when required

Contents OK?

Place on shelf for sale

End

Return to SEFP

Return to SEFP

Return to SEFP

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

Printing Bar Code & Date

Palletise

Truck Loading and Dispatch

Receive Customer Order

Consolidate & Schedule Orders

Load/configure bulk packs

113


The Measure Stage

Getting Focussed

The team collected data on the amount and cost of waste for the box packaging process generated from various sources as well as waste due to customer returns, including the reason for the return.

The cost of waste data by source is shown in the Pareto Chart given in Figure 1 below.

Figure 1. Cost of waste showing % by source

It was apparent from this analysis, that the major contribution to waste came from boxes returned by customers. This represented some 66% of the total reported cost of waste.

In fact, the improvement team found that there were two full-time people employed in roles associated with receiving returned boxes, accounting for them in the system, unpacking and where possible reprocessing the contents.

Although problems were experienced with only a small number of boxes overall, the impact was significant.

Boxes could in theory be sent back on trucks making subsequent deliveries. Because most of the foods packed by SEFP had a limited shelf life, almost all were unfit for repacking

once returned.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Customer returned boxes

Boxes damages in

dispatch

Boxes damaged in

storage

Past due date Boxes damaged in

process

Flats scrapped

66%

13%10% 8%

3%0.37%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Customer returned boxes

Boxes damages in

dispatch

Boxes damaged in

storage

Past due date Boxes damaged in

process

Flats scrapped

66%

13%10% 8%

3%0.37%

114


The Analyse Stage

Drilling Down to the Details

The team conducted a specific data collection exercise to determine the causes of box returns. A representative sample of boxes returned during a typical shift was logged. Information about the specific defect and value of contents were recorded for each box.

A log of the data collected is given in Exhibit 5.

Exercises:

Assume your are one of the members of the improvement team.

1. Use the check sheet developed by the team, given in Exhibit 6 to analyse the data. Use

the categories suggested plus any others that may be necessary to describe the data.

2. Calculate the number of occurrences and the costs of each category of defect.

3. Draw a Pareto Chart for the number of occurrences of each category of defect identified.

4. Draw a Pareto Chart for the costs associated with each category of defect identified.

5. Using the information developed above which problem offers the greatest potential for

improvement and should be investigated further.

You may use the sheets given in Exhibits 7.a. and 7.b. to draw your Pareto Charts.

115


Exhibit 5: Box Returns Problem Log

1 Box underweight 44 Box physically damaged 2 Date stamp illegible 45 Box underweight 3 Bar code in wrong place 46 Date stamp illegible 4 Incorrect coding of contents 47 Bar code in wrong place 5 Box not sealed 48 Incorrect coding of contents 6 Box physically damaged 49 Box not sealed 7 Box empty 50 Box physically damaged 8 Box underweight 51 Box underweight 9 Date stamp illegible 52 Box underweight

10 Bar code in wrong place 53 Date stamp illegible 11 Incorrect coding of contents 54 Bar code in wrong place 12 Box not sealed 55 Incorrect coding of contents 13 Box empty 56 Box not sealed 14 Box underweight 57 Box underweight 15 Date stamp illegible 58 Date stamp illegible 16 Bar code in wrong place 59 Bar code in wrong place 17 Incorrect coding of contents 60 Incorrect coding of contents 18 Box not sealed 61 Box not sealed 19 Box physically damaged 62 Box underweight 20 Box underweight 63 Box underweight 21 Date stamp illegible 64 Date stamp illegible 22 Bar code in wrong place 65 Bar code in wrong place 23 Incorrect coding of contents 66 Incorrect coding of contents 24 Box not sealed 67 Box not sealed 25 Box physically damaged 68 Box underweight 26 Box underweight 69 Box underweight 27 Date stamp illegible 70 Date stamp illegible 28 Bar code in wrong place 71 Bar code in wrong place 29 Incorrect coding of contents 72 Incorrect coding of contents 30 Box not sealed 73 Box not sealed 31 Box physically damaged 74 Box underweight 32 Box underweight 75 Date stamp illegible 33 Box underweight 76 Bar code in wrong place 34 Date stamp illegible 77 Incorrect coding of contents 35 Bar code in wrong place 78 Box underweight 36 Incorrect coding of contents 79 Date stamp illegible 37 Box not sealed 80 Bar code in wrong place 38 Box physically damaged 81 Incorrect coding of contents 39 Box underweight 82 Box underweight 40 Date stamp illegible 83 Date stamp illegible 41 Bar code in wrong place 84 Bar code in wrong place 42 Incorrect coding of contents 85 Box underweight 43 Box not sealed 86 Box underweight

116


Exhibit 5: Box Returns Problem Log (Page 2)

87 Date stamp illegible 120 Box underweight 88 Bar code in wrong place 121 Date stamp illegible 89 Box underweight 122 Box underweight 90 Box underweight 123 Date stamp illegible 91 Date stamp illegible 124 Box underweight 92 Bar code in wrong place 125 Box underweight 93 Box underweight 126 Date stamp illegible 94 Date stamp illegible 127 Box underweight 95 Bar code in wrong place 128 Date stamp illegible 96 Box underweight 129 Box underweight 97 Date stamp illegible 130 Date stamp illegible 98 Bar code in wrong place 131 Box underweight 99 Box underweight 132 Date stamp illegible

100 Date stamp illegible 133 Box underweight 101 Bar code in wrong place 134 Date stamp illegible 102 Box underweight 135 Box underweight 103 Date stamp illegible 136 Date stamp illegible 104 Bar code in wrong place 137 Box underweight 105 Box underweight 138 Date stamp illegible 106 Box underweight 139 Box underweight 107 Date stamp illegible 140 Date stamp illegible 108 Bar code in wrong place 141 Box underweight 109 Box underweight 142 Date stamp illegible 110 Box underweight 143 Box underweight 111 Box underweight 112 Date stamp illegible 113 Bar code in wrong place 114 Box underweight 115 Date stamp illegible 116 Bar code in wrong place 117 Box underweight 118 Date stamp illegible 119 Bar code in wrong place

Approximate Cost/Box

1 Box underweight $2.50 2 Date stamp illegible $12.50 3 Bar code in wrong place $22.50 4 Incorrect coding of contents $22.50 5 Box not sealed $22.50 6 Box physically damaged $22.50 7 Box empty $2.50

117


Exhibit 6: Check Sheet for Analysing Box Return Data

Reason Code Tally Frequency $ Value

1 Incorrect coding of contents

2 Date Stamp Illegible

3 Box not sealed

4 Box Underweight

5 Box physical damage

6 Bar Code in wrong place

7 Box Empty

Total

118


Exhibit 7.a. Pareto Chart for Number of Boxes by Cause

119


Exhibit 7.b. Pareto Chart for Cost

120


Further Investigation

The team selected the “Bar Code in Wrong Place” cause to investigate further. This had been identified as the “Pareto” cause of the cost of box returns.

However, it was not an actionable cause and therefore not a root cause. The cause of the bar code being in the wrong place would require further investigation before corrective action could be taken.

The problem was formally redefined as “Bar Code in Wrong Place”

The team decided to use a fishbone diagram to brainstorm the likely causes of the bar code being in the wrong place.

Exercise:

From your own experience and the information given in the role sheet you

have been asked to read, use the space below to record some of the things

you think could be possible causes that could contribute to the bar code

being in the wrong place.

121


Role Sheet A: The Operator’s Perspective You are a Box Packaging Line Operator and member of the Box Packaging Operations, Improvement Team which has been asked to look at reducing waste. Analysis of the causes of this problem has revealed that “bar code in wrong place” is one of the Pareto causes of boxes returned as defective, which in turn accounts for the majority of waste in this area.

You have been asked to contribute to a brainstorming session to identify the causes of “bar code in wrong place”. From your experience working in this area, you have noted that often the box is not in the right position relative to the print heads - the bar code and date code print heads, when they fire. The boxes move through rapidly and the whole print operation happens very quickly.

Often the boxes slip on the rubber conveyor belt as they approach the print station. The mechanical trigger lever, which sets the timing of the print heads relative to when each box trips it often sticks. While the box passing by usually pushes it over and still triggers the printer, the force required to “unstick” the lever often causes the box to slip a bit and the timing of the printer ends up being just a little ahead of the box. When the print heads fire, they get the printing in the wrong place or miss the box altogether.

The same problem with timing happened when the box approached the printer sitting slightly askew on the belt. The leading edge triggered the printer earlier than required. Even though the box straightened as it entered the printer station the bar code and date ended up being printed well ahead of where required on the box or missed the box completely. Several years ago you had suggested to your supervisor to move the chute which straightens the boxes ahead of the trigger lever, but nothing had been done about it. That supervisor had since left and the matter had not been taken further.

You often did your best to keep the lever loose by wiggling it with your fingers, but the boxes moved through too fast to do much good. Maybe the maintenance people should oil it more often or something.

122


Role Sheet B: The Supervisor’s Perspective You are a Supervisor on the Box Packaging Line and member of the Box Packaging Operations, Improvement Team which has been asked to look at reducing waste. Analysis of the causes of this problem has revealed that “bar code in wrong place” is one of the Pareto causes of boxes returned as defective, which in turn accounts for the majority of waste in this area.

You have been asked to contribute to a brainstorming session to identify the causes of “bar code in wrong place”. From your experience working in this area, you have noted that the operators often play with the lever which sets the timing for the print heads. They do this when the box is no where near in position. When the print heads fire they get the bar code and the date all over the boxes in different

places, depending on when the operator triggered the lever. You have warned the operators about doing this on many occasions, but it just didn’t seem to sink in. After all, most of these operators weren’t hired for their brains. If only they would stop playing with the lever, the bar code would always print in the same place. Maybe if the operators were told not to touch the print trigger lever during their initial orientation training on the line, you wouldn’t have to waste so much of your time telling

them. The design of the machine could also be improved, surely the lever could have been put somewhere else where no-one can touch it or even use a light beam to set the timing. The other thing you weren’t sure about was maintenance. They never seemed to be doing their preventive maintenance routines on time. You were sure that some of the problems were often due to faults in the print heads such as clogged jets, lack of ink to the heads or even the heads coming loose from the frame due to all the vibration.

Even when maintenance did come to look at the heads or investigate any problems, they never seemed to get it right or tell anyone anything.

123


Role Sheet C: The Manager’s Perspective You are the Box Packaging Area Manager and member of the Box Packaging Operations, Improvement Team which has been asked to look at reducing waste. Analysis of the causes of this problem has revealed that “bar code in wrong place” is one of the Pareto causes of boxes returned as defective, which in turn accounts for the majority of waste in this area.

You have been asked to contribute to a brainstorming session to identify the causes of “bar code in wrong place”. From your experience working in this area, you have wondered about how the print station was being operated by the operators. Replacing the ink feedbottle, aligning the print heads to the boxes, setting up the ink flow rate to the heads and keeping the heads clean, were all standard operating tasks, yet each operator had their own way of doing it.

You were sure that sometimes the printing smudged because there was too much ink going to the heads, in other cases the heads were aligned incorrectly for the size of box being packed. You were disappointed that the supervisor had not yet written a standard procedure for doing this. The boxes themselves could also be a problem, slight differences in their sizes, which came about due to lack of consistency in the size of the “flats”, could cause boxes to get caught up in the print station and sit incorrectly when being printed. Some of the boxes

using the shinier cardboard also tended to slip on the belts more often than the others.

124


Exhibit 8. Fishbone Diagram Proforma

People Procedures

Equipment/Systems

Materials/Environment

Bar codewrong place

125


Collecting Even More Data

When the fishbone analysis had been completed, the team used the multivoting technique to identify the most likely of the causes and a check sheet was developed for these.

Given that most of these causes were not readily noticeable on a day-to-day basis, the two packaging operators on the team agreed to keep a detailed check on these causes during a full day’s production shift.

The packaging line supervisor, also a team member consolidated the results and developed

the Pareto Chart given in Exhibit 9.

Question:

Which cause would you select to address further?

What would be your next step?

Exhibit 9. Pareto Chart of Causes of Bar Code Wrong Place

10

20

30

40

5044

27

15

9

5 2

1 2 3 4 5 6

Cause Codes1. Trip lever sticking

2. Box askew on belt

3. Operator accidental

lever trip

4. Box misfeed

5. Print head loose6. Other

126


This Page Intentionally Left Blank

127


The Improve Stage The team members brainstormed ideas to address the problem of synchronising the printer with the box's actual position and developed a potential solutions matrix to rank the ideas. The idea finally selected for implementation was to replace the mechanical lever with a light beam triggered print head located at the print head (just ahead of it) and triggered by the leading edge of the box after it had been straightened by the feed chute.

This modification to the unit cost just over $ 2,000 to implement, including the labour cost of the maintenance technician who did the installation.

Implementing the Preferred Solution and Checking that it Worked! Data on customer returns continued to be reported. At the recommendation of the team it was now reported by each of the categories they had identified during their analysis, rather than just an aggregate figure, as had been the past practice.

After 3 months, the team concluded:

• Only a single batch of 25 boxes had been returned for the “bar code in wrong place” cause. Further investigation revealed that this had been due to a temporary fault with the customer’s equipment and not due to the bar code actually being in the wrong place;

• An added bonus had been reduction in “Date stamp illegible” to less than 25% its former level. The date stamp, printed by a separate printer at the same print station was found to be affected by the same problem that caused the “bar code in wrong place”. When the timing was upset for the print station by the box being askew or slipping, the date often ended up being printed over sections of the box “artwork” which made it illegible or it missed the box completely.

The Control Stage The light beam print trigger was adopted as a standard for print station design within the company. Performance measures on box returns were left in place as a Key Performance Indicator (KPI) for the Cardboard Box Operations group and monitored weekly.

128

The DMAIC Process




Team Based Problem Solving

Case Study

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart

129

The DMAIC Process



Problem/Opportunity Theme Statement




































The “positive” – the

benefit we are chasing.

The “logic” – why it

makes sense – more than

just some ones opinion that

it is a good idea.

The “pain” – the

consequences of not doing

it – usually terrible/

unimaginable!

The whole story in

a neat tidy package

130

The DMAIC Process

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart



Process

Green Belt

Process Owner

Start Date

Project Title

Objective

Problem/Opportunity

Definition

Business Case

Team Members

Customer Benefit

Schedule

What is the Problem to be solved or the

opportunity this project will exploit.

Project Scope

Improvement target, impact on Sigma,

COQ/COPQ and Customer Satisfaction

What improvement in business

performance is expected. $ impact and by

when.

Who are the team members and key experts

to be consulted.

Which part of the process will be

investigated

Who are the final customers. What

benefits will they see and what are their

most critical requirements.

What are key milestone dates for

completion of each stage.

Jane Verde

John Briggs

1-April

Box Packaging Expected Financial Impact

Telephone Number

Organization/Function

Target Completion Date

The objective of this project is to reduce the cost of waste to 50% of the

current level, from 25% of total cost to 14% of total cost.

634-5789

Box Packaging Operations

1- October

$815,000

Jane Verde (Team Leader), Paul Black, Rachel Cintura, Roland

Thompson, Sdravo Krysevic, Malcom DiTesta, Giovanni Nero (Black Belt)

Box packaging from order receipt through to the placement of product

by customers on retail store/supermarket shelves.

20-April

This project will reduce the cost of waste from a baseline of $1,630,000 to

$815,000 and deliver a net annualised benefit of $815,000 p.a.. This will

translate into a packaging cost of $2.70/box. $0.05 below target.

The packaging customers for whom we package and deliver product to.

Benefits: competitive costs and more accurate schedule compliance.

1-June

1-August

1-September

15-September

1-October

Define completion

Measure completion

Analyse completion

Improve completion

Control completion

Project Completion

Cost of Waste Reduction in Box Packaging OperationsImprovement Project Charter

During the past financial year, the cost per box for the box packaging

process was $3.09. This gap of $0.34 from a target of $2.75 represents a

$815,000 of annualised cost impact.

131

The DMAIC Process



Business Case, Problem Statement and Project Objective

Problem/Opportunity Identification

Alignment with Strategic Priorities

Problem Statement

Project Objective

Project Initiation

Business Case

Does this problem/opportunity

align with the strategic priorities

of the organisation?

Formal statement

defining the problem or

opportunity

Project initiated to address the

problem or opportunity.

Realistically, what would

we hope to achieve with

this one project?If we achieve our objective,

what will be the benefit to the

business.

Is it worth doing?



The format of a structured problem statement

• Timeframe during which it was observed;

• The metric with which the impact of the problem was

measured;

• The process it relates to;

• The current performance or baseline;

• The target performance;

• The gap;

• The impact of the gap.

132

The DMAIC Process



Example: SEFP’s Customer Requirements Statement



1. Cost competitiveness

Contract Box Packaging Customers

2. Schedule compliance

2.1. On-time delivery/right day/right time.

2.2. Right product delivered

2.3. Product quality to specification

2.4. Right amount/ amount as per manifest.

Ranking Scheme

Importance to customer: 1 = Nice to Have, 2 = Important, 3 = Critical, Must Have

Customer Satisfaction: 1 = Very Satisfied, 2 = OK. Could be better, 3 = Unhappy, Must be improved

* Price has been raised a specific priority by key customers. We are absorbing difference between market price and actual costs. If customer were charged actual cost we would lose the business.In addition to price, getting the delivery amount right is a Critical-to-Quality (CTQ) issue for the customer.

3 3* 9*

2 1 2

2 1 2

3 2 6

$2.75

97%

95%

99%

99% 3 3 9

Outputs: Customer:

Measure Importance to

Customer

Customer

Satisfaction

Boxed product delivered to buyers according to customer manifest.

(Importance x

Satisfaction)

Target

Processing cost $/Box

Returns: wrong product %

Returns: off-spec product %

PriorityRating

% On time

Order shortfall %



SEFP’s Box Packing & Fulfilment Process - Process MapStart

Load flats into Flat Feeder

Box Folding

Box Jam?

Box Filling

Underweight?

Overweight?



Remove Excess

Remove & Recycle

Stop and Clear



Boxes OK?

Place in Warehouse


Contents OK?


End

Return to SEFP

Return to SEFP

Return to SEFP

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No


Palletise





133

The DMAIC Process



SEFP’s Box Packing & Fulfilment Process - Process MapStart

Load flats into Flat Feeder

Box Folding

Box Jam?

Box Filling

Underweight?

Overweight?



Remove Excess

Remove & Recycle

Stop and Clear



Boxes OK?

Place in Warehouse


Contents OK?


End

Return to SEFP

Return to SEFP

Return to SEFP

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No


Palletise





















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart

134

The DMAIC Process



SEFP: Cost of Waste Analysis

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

Customer

returned

boxes

Boxes

damages in

dispatch

Boxes

damaged in

storage

Past due date Boxes

damaged in

process

Flats scrapped

66%

13%10% 8%

3%0.37%

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart

135

The DMAIC Process



The Anatomy of a Check SheetExample: Lost Time Injury Data for a Security Firm

Category Tally Frequency

Total

Allergy

Broken limb

Back/Neck

Concussion

Contusion

Heart Attack

Sprains

Other

1

2

3

4

5

6

7

8

8

12

6

14

7

1

23

3

78

The categories in

which the data occurs

Progressive “Tally” count of each

occurrence, collected from raw data or directly from the fieldNote: = 1, = 5

Numerical frequency

count or summary of the “tally” or

occurrences in each category

Overall Total



The Pareto Principle(Also know as the 80/20 Rule):

“A few causes account for most of the effect”

Causes Effect

20% of the causes

account for 80% of

the effect!

Critical

Few

Trivial

Many

136

20% of the causes account for 80% of the

effect

Causes Effect

Vital Few

Trivial Many

The Pareto Principle

The Pareto Principle is named after an Italian economist

Vilfredo Pareto (1848-1923) who studied the distribution of

wealth in Europe in the late 19th and early 20th centuries.

In a particular study he concluded that 80% of property in Italy

was held be 20% of the population. Thus the Pareto Principle

or 80/20 rule was born.

Pareto's Principle states that: "A few causes account for the bulk

of the effect"

This is illustrated in the diagram at left.

During the 20th century Dr. Joseph Juran

was able to show that this was a much more

general principle as a result of his studies

into business activities.

For example:

• 80% of a company's waste are as a result of

20% of the causes; waste are as a result of

20% of the causes

• The bulk of a company's business comes from relatively few customers;

• 80% of your phone calls come from 20% of your friends and colleagues.

Pareto's Principle provides managers will a tool to save work, by helping prioritise issues, so

that efforts can be focussed where they will do the most good.

• In any situation where there are a number of factors, separate the critical few from the

trivial many.

• Don't give equal weight to all factors. Find the critical few and give them VIP treatment.

• When gathering the information needed to solve a problem, note that most of the answers

will come from a small amount of information (providing it is the right information on the

right key points).

• The right information is a question of quality rather than quantity.

• Sheer volume of data rarely provides its own information automatically.

Identify your Key Results Areas is an example of the Pareto Principle at work:

"The critical few areas in which excellence will have an extraordinary effect on results or

where poor performance would significantly damage the operation".

137

The DMAIC Process



Pareto AnalysisExample: Anatomy of a Pareto Chart

Critical few towards the Y-Axis

Trivial many trail away from Y-axis



Fishbone DiagramPeople Procedures

Equipment/Systems Materials/Environment

Bar code in wrong place

139

The DMAIC Process



Fishbone Analysis Technique Tips

• Be specific – no generalisations;

• No Blame Statements;

• Focus on causes not solutions/actions;

– If you find yourself thinking of solutions or actions, ask “if this

action was implemented, what problem cause does it fix?”

• During the early part of the process, the fishbone diagram is used to

structure the output of the brainstorming contributions;

• When ideas start to “dry up” use the fishbone structure and “clusters” to

stimulate further brainstorming.



Example: Fishbone Diagram(Cause and Effect Analysis)

People Procedures


Late order delivery

Item not in stock

Out of Stock

Item

orde

red

not a

stoc

ked

item

Credit check takes too long

No procedure for guaranteeing tech and transport

Truck breakdowns

Too many truck out for

maintenance

Computer system down

Stock damaged

Order entered incorrectly

Not enough trucks

Incorrect it

em picked

No communication with Sales

No communication with

techs Unrealistic delivery data quoted

No communication with

warehouse

Brainstorm possible causes and show as

feeding into the most appropriate spine.

When items come up related to ones already on the

diagram. Show as feeding into the appropriate item Problem of focus

placed at the head of the fish

140

The DMAIC Process



Assessing the Cause & Effect Analysis and preparing

to collect dataPeople Procedures


Late order delivery

Item not in stock

Out of Stock

Item

orde

red

not a

stoc

ked

item

Credit check takes too long

No procedure for guaranteeing tech and transport

Truck breakdowns

Too many truck out

for maintenance

Computer system down

Stock damaged

Order entered incorrectly

Not enough trucks

Incorrect it

em

picked

No communication with Sales

No communication

with techsUnrealistic delivery data quoted

No communication

with warehouse


1

2

3

4

5

6

7

8

Data Collection Instrument:

Check Sheet

Check out each potential cause and

eliminate ones that can be verified

as not happening

Possibly use List Reduction or

Multivoting.



SEPF Pareto Chart of Bar Code Wrong Place Causes

10

20

Fre

qu

ency/

Nu

mb

er o

f O

ccu

rren

ces

30

40

5044

27

15

9

5 2

1 2 3 4 5 6

Cause Codes

1. Trip lever sticking

2. Box askew on belt

3. Operator accidental

lever trip

4. Box misfeed

5. Print head loose

6. Other

141

The DMAIC Process

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart



Potential Solutions Matrix

Potential SolutionsCost Ranking

Ease of Implementation

% of problem it fixes

Overall Ranking

Scale: 0 = None, 1 = Low, 3 = Moderate, 9 = Strong

142

The DMAIC Process




Potential SolutionsCost Ranking

Ease of

Implementation

% of problem

it fixes

Overall Ranking

Oil itReview/change maintenance routineReplace with a new one

Replace with light beam

9

9

7

5

9

9

7

5

1

1

3

9

81

81

147

225


















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart

143

The DMAIC Process



Improve: Implement and Check

• Implement preferred solution;

• Verify effectiveness by checking current performance against

original baselines;

• Apply statistical comparative methods if necessary.

Before Pareto Chart After Pareto Chart

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart

144

The DMAIC Process



Control

• Standardise the solution by making it part of the standard

procedure for the process;

• Provide training in the changed process;

• Update the performance measurement scorecard for the

process;

• Implement controls for the process;

• Document the project.



High level validation of improvements

Costs

Cost of waste

Box Returns

Bar Code Wrong Place

Trigger lever sticking

Light beam printer trigger

Root Cause

Solution

Improvement

implemented

here

Consistent flow

through of results

bottom-to-top

145

The DMAIC Process

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart



Future Plans

• Review the previous non-pareto causes to see which ones

have upgraded themselves and assess whether these are worth

going after;

• Review any obvious opportunities to apply the solution in

other areas;

• Communicate the solution to other parts of the organisation

where it may also apply;

• Review and document lessons learnt and institutionalise the

learning.

146

The DMAIC Process

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart



Analysing for Root Causes - Revisited

147

The DMAIC Process



Causes and Root CausesT

he

Pro

ble

m S

olv

ing P

roce

ss

Not Actionable

Not Actionable

Not Actionable

Actionable

Cause

Cause

Cause

Root Cause

Observed Problem -

Symptom



South Eastern Food ProcessorsHigh level objective:

Reduce costs of box packaging process

Cost of waste

Box Returns

Boxes Underweight Bar Code Wrong Place



Root Cause

Solution

148

The DMAIC Process



South Eastern Food ProcessorsHigh level objective:


Cost of waste

Box Returns




Root Cause

Solution



South Eastern Food Processors

High level objective:


Cost of waste

Box Returns




Root Cause

Solution

Level 1

Level 2

Level 3

Level 4

Level 5

149

The DMAIC Process



No

Yes

Analysing for Root Causes

• Brainstorm possible causes. Fishbone

Diagram (Cause and Effect Analysis).

• Collect Data. Outcomes of Fishbone used

to design Check sheet or other appropriate

data gathering proforma.

• Analyse Data using Pareto chart,

determine most likely cause.

• If cause not actionable, redefine problem

to determine causes of this cause.

Is cause

actionable?

Define the problem



Flushing out root causes vs reacting to symptoms

Apply problem solving process

YES

YES

NO

NO

Problem Solved

Observed symptom - "The Problem"

Is cause actionable ?Not a root cause

Does action(s) fix

problem ?

Cause found

Not the right cause

150

The DMAIC Process



The Root Cause Analysis ProcessDefine/ Redefine the

Problem

Brainstorm

Possible Causes

Select Pareto Cause

as the Problem of

Focus

Collect Data on

Possible CausesIs the Pareto Cause

Actionable?

Apply Pareto

Analysis to the

Data Collected

Root Cause

Analysis

Root Cause

Found

Actionability Test

Yes

No

















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard

procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart

151

The DMAIC Process



5 Why’s Applied to SEFPCosts of box packaging process too high

Cost of waste

Box Returns

Bar Code Wrong Place



Root Cause

Solution

Why?

Why?

Why?

Why?



A manufacturing process “5 Why’s”ExampleUsing 5-Why’s to guide investigation

Situation: Welding Robot stopped working abruptly

Initial Proposal: Replace Blow Fuse

Problem: Breakdown of Welding Robot

Why? Fuse melted due to over loading

Why? Bearing lubrication was inadequate

Why? Oil pump did not draw enough oil

Why? Metal shavings were sucked into pump

Why? There was no filter on pump intake

Countermeasure: Install Oil Filter

Effect: Breakdown frequency decreased dramatically

Root cause !

Reference: Toyota Motor Manufacturing USA, Inc Case Study (1992) Harvard Business School Publishing

152

The DMAIC Process



An office process “5 Why’s” ExampleUsing 5-Why’s to draw on local knowledge and SME’s

Situation: Employee complaints about errors in pays

Initial Proposal: Replace temp staff with permanent staff in payroll to reduce turnover

Problem: Errors in payroll

Define the error: Mistakes at special pay data entry

Why? Some entries were omitted

Why? Temps didn’t know that they were necessary

Why? Permanent staff failed to mention requirement

Why? No explicit guidelines existed

Countermeasure:

1. Establish process flow chart

2. Standardise work procedure

3. Improve upon explicit standard

Root cause !

Effect:

1. Errors decreased by 80% in 8 months

2. Payroll staff reduced by 65%

3. Payroll staff overtime reduced by 85%

Reference: Toyota Motor Manufacturing USA, Inc Case Study (1992) Harvard Business School Publishing



5 Why Analysis of Bhopal Disaster

Uncontrolled release of

MIC gas

High risk plant design

requires high level of

operational disciplineMIC tank overpressure

due to exothermic reaction

with water.

Operators did not respond

to warning signs. Pressure

gauge and blocked nozzles.

Vent Gas Scrubber off-

line for maintenance

Refrigeration system

switched off by

management

Water leaked in

through leaky

Relief Valve

VGS maintenance

scheduled at same time

as pipe washing

Lack of compliance to

standard procedures

Lack of discipline by

operators – did not follow

up on blocked nozzles

Spade blind not fitted to

isolate water system from

MIC system

Maintenance did not

repair faulty relief valve

Pressure gauge in

control room assumed

to be faulty

Water backed up during

cleaning due to blocked

nozzles

Lack of compliance to

standard proceduresLack of discipline by

maintenance attending

to repairs

Why?

Why?

Why?

Why?Why?

Why?

Why? Why?

Why?

Why?

Why?

Why?Why?

Why?

Why?

Why?

Why?

Why?

153

The DMAIC Process



Seek problem causes that are solvable

• Seek to find causes that are in direct control of the problem

solver;

• Do not find fault with people, suppliers or customers,

– “5 why’s” not “5 who’s”

– “Root cause” not “root blame”

• Do not accept causes as “the way it is”

• Do not pursue “dead ends”.

154

The DMADV Process

Process Change/Reengineering

155

Process Change/DMADV

© Max Zornada



© Max Zornada



• Improvement achieved through radical change to the process;

• Change to the process is significant enough that supporting

changes are also required to organisation structure and

technology supporting the process;

• Other names for this type of change:

– Core process redesign;

– Business Process Reengineering;

– Design for Six Sigma;

– Kaikaku.

157


© Max Zornada


The Lean Six Sigma Approach to Process

Redesign - DMADV

Define

Measure

Analyse

Design

Validate

6σ

Define customer requirements

and goals for the process,

product or service.

Measure and match

performance to customer

requirements.

Analyze and assess the

design for the process,

product or service.

Design and implement the array

of new processes required for the

new process, product or service.

Validate results and

maintain performance.

158

© Max Zornada


Process

Objective: Establish current/baseline performance or process and

quantify customer requirement.

Objective: Define Opportunity/Gap, Customer Requirements,

and Process.Objective: Select process for Design/

Redesign and project team.

Output: Process and Team selected

TEAM FORMATION DEFINE MEASURE

ANALYSE

Output: A quantified picture of customer requirements reconciled to

current process performance.


Output: Project Charter, Customer Requirements, Process Map,

Project plan

Project charter

Objective: Generate Insight and Vision for New Process Options

Objective: Develop detailed design and test/control plan Objective: Implement New Process

Key Steps:-

Key steps:-

Output: New process fully implemented.

Key steps:-



learning.




DESIGN

C D

MA

I 6σ

VALIDATE FUTURE PLANS

Output: Design Options for New Process

Output: Preferred design ready for full implementation

Key Steps:-

•Select Process for Design/Redesign

•Project Charter and Business Case

•Understand the Process

•Understand Customer Requirements

•Develop project plan

•Implement new process design

•Implemented PMCS

•Manage the change

•Plan continuous improvement

•Select preferred design option

•Detailed Socio-technical design

•Simulation and Piloting

•Pilot evaluation

•Implementation Planning

•Analysis

•Generate Insights

•Visioning

•Generation of Options

METHODOLOGY

Process

•Quantify customer requirements & CTQ’s

•Measure Current Process Performance

•Understand Variation

•Assess Process Capability

Process

Process PLAN

TRANSFORM

ANALYZE

COLLECT

Process Analysis/

Redesign PrinciplesValue Stream

AnalysisBenchmarking Quality Function

Deployment

Existing process redesign New Process Design

•Post implementation review

•Prepare project documentation pack

Process PMCS

DMADV Process Storyboard

159

© Max Zornada


160


© Max Zornada


Process








ANALYSE





Project plan

Project charter



Key Steps:-

Key steps:-


Key steps:-



learning.




DESIGN

C D

MA

I 6σ




Key Steps:-







•Implemented PMCS






•Pilot evaluation


•Analysis


•Visioning


METHODOLOGY

Process





Process

Process PLAN

TRANSFORM

ANALYZE

COLLECT

Process Analysis/ Redesign Principles

Value Stream Analysis

Benchmarking Quality Function Deployment




Process PMCS


© Max Zornada


The Process Redesign Framework Define

Measure

Analyse

Design

Verify

No or Uncertain

Yes

?

Understand the Process

Understand the Customer

Monitor performance

Assess capability of core process

Significant Redesign

potential?

Core Process Redesign Process Improvement

Ongoing Business Process Management

Implement Changes

Select a Process

161


© Max Zornada


Deciding if Process Redesign is the best approach

• Cost of Quality High but Failure Low – poor process;

• Cost of Core Task High – inefficient process;

• Complexity Endemic;

• Excessive variation is normal for the process;

– Significant source of variation is common cause

variation.

© Max Zornada



Joan’s Story

162

Joan's Story Hi-Tech Leasing Corporation

163

Hi-Tech Leasing Corporation - Joan's Story

Case Study Hi-Tech Leasing Corporation

Joan's Story

Joan is an Account Manager with Hi-Tech Leasing Corporation, an organisation that leases

high-tech laboratory and field test equipment.

She has just finished expediting an order for a major customer, one of the company's key

accounts, who was irate at a late delivery.

Joan sat back at her desk, reflecting on what happened.

Here is Joan's story.

Joan is frustrated! While this order was unique because it had to be filled quickly, Joan says it

is a good example of the way the Sales Department has to fill every order. This is how this

order was processed.

Joan received the customer's frantic call. Telling him the obstacles she would have to

overcome, Joan promised to try to fill his order. When she hung up, she realised that she

would not be able to take any more orders that day, following this order through the channels.

To the company that obviously meant less revenue - and for Joan, who was on a commission,

a smaller paycheque.

The customer faxed a purchase order that Joan gave to the Sales Support Clerk, who then

typed up an official company order. "I had to plead with her to put it on top of her in-tray, so

that she would get it done first thing" Joan explained. Otherwise the person would have put it

to the bottom of the stack. After that, Joan had to give the official order to the Data

Processing Clerk to enter the data onto the computer system, otherwise it too would have

gone to the bottom of the stack. After the information was on the computer it was sent to the

credit department. Joan had to prompt one of the Credit Officers to immediately check on the

customer's credit, otherwise it too would have been stuck at the bottom of the pile. Having to

plead her case at every step was bad enough, but the uncooperative attitude of some of the

people with whom she dealt doubled the frustration. "It's almost like they feel that they're

doing the customer a favour," said Joan.

Joan had to trade favours with the people in the Product Department to get the piece of

equipment for the customer. The Products Department clearly let Joan know that they were

doing her a favour.

Joan had to notify Dispatch that a special order was going out. She had to verify with the

department that the equipment could be delivered to the location the customer specified.

164

Hi-Tech Leasing Corporation - Joan's Story

She then had to schedule a service technician to set up the equipment once it arrived at the

customer's location. Given her past experience with the Service Department, Joan knew that

if she did not take care of the scheduling personally, it would not happen. She feels that

people in the company resent getting special customer requests.

Joan had to keep the customer informed of her progress and alert him immediately if the

company was not able to fill the order. "There are eight people who could screw up my order,

so I had to baby-sit it. I couldn't just pass it over and forget about it," she says. "On top of

that, I had to make sure I wasn't making anybody mad. If I ticked anybody off, I was dead.

None of the eight departments I had to work with would ever fill my orders again."

Finally the equipment was rounded up, checked and ready to go, but Joan hadn't heard from

the Credit Department. When she asked, the person told her the bank wasn't returning phone

calls.

Joan called the customer and the customer called the bank. Later, Joan discovered that the

customer's regular banker was on holidays. The bank had not offered that information to the

Credit Department and the Credit Department had not asked.

By 5:00pm everything was ready to go. Joan faxed the customer his shipping number and

other pertinent information.

"Although this was a rush order, I was able to fill it, but I had to fight all the way. That's the

way it always is around here. Things have to change. They keep telling us they are working

on it, but we don't see any changes. In fact, things appear to be getting worse - and tomorrow I

start work owing eight more favours."

165

Customer calls acc't mgr

Available ?

Is order urgent ?

Is there alternate

supplier?

Call others

Place order

verbally

Send faxed

order

Receive,

check, pass to

clerk

Type up

official

order

Pass to

order

entry clerk

Input

order

Is clerk busy ? Is order urgent ? Can you get

priority?

Is clerk busy ? Is order urgent ?Can you get

priority?

Is order urgent ?

Send to

credit

In internal

mail

Take to

Credit

Is credit busy ? Is order urgent ?Can you get

priority?

Examine

order, id

bank

Call

banker

Check

creditWait Is banker avail ?

OK ?

Advise

customerEnd

Send/Take

order to

Tehnical

Is Supv. busy? Is order urgent ?

Is equip avail?

Deliver to

despatch

Can you get

priority?

Feedback to

customer

Is despatch Supv.

busy ?Is order urgent ?

Can you get

priority?

Is technician avail?

Advise

customer

Schedule

technician

Deliver

equipment

Send

order to

acc'ts

Install &

commission

Is transport avail?Arrange third

party

End

Continued

on another

sheet

Y Y Y

Y

Y

Y Y

Y

Y

Y

N N N

N NN

N NN

N

N

YY Y

Y Y Y

YY

N

N N

NN

Y

Y

Y

N

N Y

Y

Y

YN

NN

Joan's view of the order fulfillment process !

A Work Activity

A Decision

Point

A Delay

A Transport

Potential to create a

dissatisfied customer

Legend

Customer calls acc't mgr

Available ?

Is order urgent ?

Is there alternate

supplier?

Call others

Place order

verbally

Send faxed

order

Receive,

check, pass to

clerk

Type up

official

order

Pass to

order

entry clerk

Input

order


priority?


priority?

Is order urgent ?

Send to

credit

In internal

mail

Take to

Credit


priority?

Examine

order, id

bank

Call

banker

Check


OK ?

Advise

customerEnd

Send/Take

order to

Tehnical


Is equip avail?

Deliver to

despatch

Can you get

priority?

Feedback to

customer

Is despatch Supv.


Can you get

priority?


Advise

customer

Schedule

technician

Deliver

equipment

Send

order to

acc'ts

Install &

commission


party

End

Continued

on another

sheet

Y Y Y

Y

Y

Y Y

Y

Y

Y

N N N

N NN

N NN

N

N

YY Y

Y Y Y

YY

N

N N

NN

Y

Y

Y

N

N Y

Y

Y

YN

NN


A Work Activity

A Decision

Point

A Delay

A Transport



Legend

166


© Max Zornada


Customer calls acc't

mgr

Available ?

Is order urgent ?

Is there alternate

supplier?

Call others

Place order

verbally

Send faxed

order

Receive,

check, pass to

clerk

Type up

official

order

Pass to

order

entry clerk

Input

order


priority?


priority?

Is order urgent ?

Send to

credit

In internal

mail

Take to

Credit


priority?

Examine

order, id

bank

Call

banker

Check


OK ?

Advise

customerEnd

Send/Take

order to

Tehnical


Is equip avail?

Deliver to

despatch

Can you get

priority?

Feedback to

customer

Is despatch Supv.


Can you get

priority?


Advise

customer

Schedule

technician

Deliver

equipment

Send

order to

acc'ts

Install &

commission


party

End

Continued

on another

sheet

Y Y Y

Y

Y

Y Y

Y

Y

Y

N N N

N NN

N NN

N

N

YY Y

Y Y Y

YY

N

N N

NN

Y

Y

Y

N

N Y

Y

Y

YN

NN


A Work Activity

A Decision

Point

A Delay

A Transport



Legend

© Max Zornada


Measure: HTLC Current Process

• Time to fill an order (range)

• Average

• Amount of Value Adding Work

• Value adding work/Cycle Time

• Decision Points

• Opportunities to Dissatisfy the Customer

• Physical transport of documents

• Delays and Waits

• Responsibility hand-offs

• No. of people involved

• No. of departments involved

3.5-7 days.

4.5 days

4 hours

11%

21

10

5

15

13

8

6

Design

Measures

Performance

Measures

167


© Max Zornada


Process Deployment Chart - Joan’s View

Customer Sales Credit Dispatch ServiceClerk Data Proc. Technical Bank

© Max Zornada


HTLC’s Reengineered Process

No

Yes

Customer Sales Rep Technical Dispatch Service

Online Check of:

Fax Order

Electronic Link ?

Type into Computer

Make Order

On-line Check

Feedback to

Customer

Source Equipment Deliver Install

End

OK ?

� Equipment Availability

� Transport Availability

� Technician Availability

� Best available time

� No need for credit check - key

account

Start

Negotiate changes

Authorise

168


© Max Zornada


Validate: Before and After Benchmarks

• Amount of Value Adding Work

• Time to fill an order (range)

• Average

• Value adding work/Cycle Time

• Decision Points

• Opportunities to Dissatisfy the Customer

• Physical transport of documents

• Delays and Waits

• Responsibility hand-offs

• No. of people involved

• No. of departments involved

4 hours

3.5-7 days.

4.5 days

11%

21

10

5

15

13

8

6

3 hrs 10 min.

6-9 hours

7 hours

45%

1

2

1

1

3

4

4

Before After

© Max Zornada


Process Change/Reengineering Improvement

Opportunities

• Opportunities for process improvement through process change

will arise in the following general areas:

– Changes to the structural design of the process (process

redesign);

– Use of technology to improve process performance

characteristics;

– Use of different organisational forms (management and

organisational structures) to support the process;

– Standardisation and Management of existing process to

eliminate or manage variation and complexity.

169


© Max Zornada


What Goes Wrong When Organisations

Reengineer

• Focusing on the technology rather than the process;

• Automation and computerisation of existing process without

addressing fundamental process design issues, i.e. a manual mess

becomes a computerised mess;

• Reengineering is done in the absence of a knowledge of key

process & variation management principles;

• Processes didn't need changing, they just needed to be process

managed;

• No consideration is given to how the process will be managed after

the change - old structure doesn’t fit.

© Max Zornada


3- Key Reengineering Enablers

Process Design

Technology

Organisation &

Job Design

170


© Max Zornada


Process Redesign

Methodology Tool Kit

© Max Zornada


Process analysis and design tools/techniques

Process Deployment ChartDouble Fishbone

Process Mapping

Complexity Analysis

Value Added/Non-Value Added

AnalysisCustom

er

Value

Added

Operati

onal

Value

Added

Non-

Value

Added

Activity

171


© Max Zornada


Value-Added and Non-Value Added Analysis

• Process steps can be categorised as being value added or non-value

added;

• Value-added steps are steps considered essential to the process;

• Value-added process steps pass the following three tests:

– Is the step related to doing it right the first time ?

– Does the step get you one step closer to delivering the product or

service to the customer ?

– Would the customer be willing to pay for the step ?

• In Cost-of-Quality terms – Core and Prevention are considered value

added, Appraisal and Failure are non-value added.

© Max Zornada


Categorising VA/NVA Activities

Value-Added Activities (Customer Value Added)

• The customer recognises the value. Must want it/be willing to pay for it;

• Transforms the product or service in some way towards customer expectations;

• Is done “right first time”.

Non Value-Added but Needed Activities (Operational Value Added)

• Activities that create no value but which cannot be eliminated based on current state of technology or thinking;

• Activities required for regulatory and legal compliance, or which the customer mandates;

• Necessary activities due to non-robustness of process, risk management

Non Value-Added Activities

• Activities that consume resources but create no value in the eyes of the customer;

• Pure waste.

Complete Red-Yellow-Green Dot AnalysisGreen

Yellow

Red

172


© Max Zornada


“Rough Cut” Value Added/Non-Value Added Analysis

Customer

Value Added

Operational

Value Added

Non- Value

AddedActivity

© Max Zornada


The Double Fishbone

Organisation

and Roles

Process

Structure

Technology Customer Interface

Process

Structure

Organisation

and Roles

TechnologyCustomer Interface

New Process Vision

Process to be

Redesigned

Existing Process Analysis

173


© Max Zornada


1. Brainstorm problems with existing process

Organisation

and Roles

Process

Structure

Process

Structure

Organisation and

Roles

New Process Vision

Process to be

Redesigned


Problems

Technology Customer Interface TechnologyCustomer Interface

© Max Zornada


2. Identify responses to existing problems

Organisation

and Roles

Process

Structure

Process

Structure

Organisation and

Roles

New Process Vision

Process to be

Redesigned


Problems

Responses

Investigate

further


174


© Max Zornada


3. Brainstorm how the process might be if he started with a

clean sheet of paper

Organisation

and Roles

Process

Structure

Process

Structure

Organisation and

Roles

New Process Vision

Process to be

Redesigned


Problems

Responses

Investigate

further


The “perfect” process,

design features.

© Max Zornada


4. What actions would be required to implement this process?

Organisation

and Roles

Process

Structure

Process

Structure

Organisation and

Roles

New Process Vision

Process to be

Redesigned


Problems

Responses

Investigate

further


The “perfect” process,

design features.

Actions

Investigate

further

175


© Max Zornada


Consolidate actionsShort term actions - Medium term investigate further - Long Term actions

Weeks

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Project Start-up

Team training & briefing

Define input requirements

Trial with manual input

Develop interfaces

Trial run thru’ interfacesProduce draft reports

Business review meeting

Handover of system

Debrief

2

2

1

11

1

11

1

1

2

22

Tasks Peo

ple

Set up computer system

Source input requirements

Develop documentation

Weeks

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Project Start-up




Develop interfaces



Handover of system

Debrief

2

2

1

11

1

11

11

2

22

Tasks Peo

ple




Weeks

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

Project Start-up




Develop interfaces



Handover of system

Debrief

2

21

1

1

1

1

1

11

2

22

Tasks Peo

ple




Short term actions and investigations can be

progressed bottom-up through problem

solving/quality improvement teams.

Longer term actions and investigations

typically driven top down using a task

force approach,

Medium term actions and investigations

typically progressed using a mix of top

down and bottom up approaches.

© Max Zornada


Quick Wins

• Sometimes, process mapping may flush out some easy and obvious improvement opportunities - “quick wins,” or “low hanging fruit” as they are often called. Teams should prepared to identify and action such opportunities;

• A Quick Wins must be pre-qualified before implementation. It should be:

�Easy to Implement - Will not take much time or cost to implement;

�Within the team’s control or ability to easily influence;

�The case for implementation is obvious and compelling

�Easily reversible ie. the change or improvement can be backed out if necessary.

176


© Max Zornada


Generating Improvement Opportunities

21

Present

Reason

Alternatives

Selection

Improvement

Concerning Purpose Place Sequence Person Means

What is done ?

done ?

Can it be

Should it be

Eliminate Combine or Change Simplify

done ? done in the it ? done ?

done there ?

could it be

Where should

done then ? done by that done that

could it be could it be could it be

When should it Who should it How should it

Method

Means of

Questions Aspects Examined

Why is it

eliminated ?

eliminated ?

Where is it When is it

sequence ?

Who does How is it

Why is it

Where else

done ?

it be done ?

Why is it Why is it

person ?

Why is it

way ?

When else

done ?

Who else

done by ?

How else

done ?

be done ? be done by ? be done ?

© Max Zornada


The 5W2H Questions Who What Where

Why

� Who does it ?

� Who is doing it ?

� Who should be doing it ?

� Who else can do it ?

� Who else should do it ?

� What to do ?

� What is being done ?

� What should be done ?


� What else should be done ?


� Where to do it ?

� Where is it done ?

� Where should it be done ?

� Where else can it be done ?

� Where else should it be done ?

� Why does he/she do it ?

� Why do it ?

� Why do it there ?

� Why do it then ?

� Why do it that way ?

How much?

� How much does it cost

now ?

� What will the cost be

after the improvement ?

When

� When to do it ?

� When is it done ?

� When should it be

done ?

� What other time can it

be done ?

� What other time

should it be done ?

How

� How to do it ?

� How is it done ?

� How should it be done ?

� Can this method be

used in other areas ?

� Is there any other way

to do it ?

177

© Max Zornada



1

Present

Reason

Alternatives

Selection

Improvement


What is done ?

done ?

Can it be

Should it be



done there ?

could it be

Where should




Method

Means of


Why is it

eliminated ?

eliminated ?


sequence ?

Who does How is it

Why is it

Where else

done ?

it be done ?

Why is it Why is it

person ?

Why is it

way ?

When else

done ?

Who else

done by ?

How else

done ?


179

© Max Zornada



Why

� Who does it ?





� What to do ?












� Why do it ?




How much?


now ?



When

� When to do it ?



done ?


be done ?

� What other time

should it be done ?

How

� How to do it ?






to do it ?

180

Process Flow Management

Heijunka

181

Process & Flow Management



Process and Flow Management

Levelling Process Flows



We are all familiar with this view of processesA “Structural” or Process Map View or Processes

Process structures are described by

using Process Maps or

Flowcharts;

e.g: Part of an Order

Fulfillment Process

carried out by Account

Manager

Process provides detail of steps to

be followed;

Process provides detail of logic

flow and decisions to be made.

Send to Account

Mgr.

Is Account Mgr

in ?

Type up official

order

Send to Data

Processing

Is Order OK?

Call Account

Manager

Provide

Additional Info

Provide

Additional Info

Return to Data

Proc

Yes

No

No

Yes

183




An example of a Work ProcessMake one hamburger

Standard time to

make a burger

= 40 sec.

Pick up and cut roll

Place condiments on roll

Check that meat is

cooked. If not, wait.

Place meat in roll and close

Wrap and place in tray



What about …...Customers in

Customers served

Work Load

Queues

Waiting time

184




Key Management Issues• How many people do we need to handle demand (volume) - chefs,

serving at the counter etc.?

• How long do we tell customers that they will need to wait until they get

their meal (e.g. 6 minutes service standard) and how do we ensure we

meet these standard consistently;

• How do we ensure each customer’s food is hot when they get it, even

when they place a complex or special order e.g. burger, fries, drink, hot

dessert all ready at the same time all at the right temperature.

Process Maps (Process Structure View of Processes) do not

help with these decision areas.



New Standard

time to make a

burger

= 20 sec.

Pre-cut rolls

Place condiments on roll

Automatic Hot Plate

Place meat in roll and close

Wrap and place in tray

“Process Improvement”Make one hamburger

185




The 20-second Burger process

• How many people do we need to handle demand (volume) - chefs,

serving at the counter etc.?

• How long do we tell customers that they will need to wait until they get

their meal (e.g. 6 minutes service standard) and how do we ensure we

meet these standard consistently;

• How do we ensure each customer’s food is hot when they get it, even

when they place a complex or special order e.g. burger, fries, drink, hot

dessert all ready at the same time all at the right temperature.

Still have the same problems, you just get different answers for the 20

second process than you do for the 40 second process



Water

Flowing

Out

Water

Flowing

In

Water

Level

The Flow View of ProcessesThe Water Tank Analogy

Hole in pipe at

the bottom of

the tank.

186




Workflow Process Management Model

Work

Flowing

Out

Work

Flowing

In

Work In

Progress

(WIP)

Resources

Capacity

Productivity



Ave.

Work Out

100/day

Ave.

Work In

100/day

Work In

Progress

(WIP)

Claims Processing Example

What Service Level can be promised ... ?

500

187




Ave.

Work Out

100/day

Ave.

Work In

100/day

WIP

What about .....

300



Ave.

Work Out

100/day

Ave.

Work In

100/day

WIP

WIP, Lead Time & Service Level ..

200

188




Ave.

Work Out

100/day

Ave.

Work In

100/day

WIP

WIP, Lead Time & Service Level ..

500

300200

5 days

3 days2 days

Little’s Law: Lead Time =Water Level

Hole Sizeor

Capacity

WIP



Ave.

Work Out

100/day

Ave.

Work In

100/day

WIP

What happens if level is 50 ?

50

189




WIP

Consider the following situation - 1

What we

promise the

customer

3 days

2 days



WIP

Consider situation - 2

5 days

What we

promise the

customer

3 days

How would it feel working in this team?

What are some of the effects and impacts due to this situation?

190




Key Work Management System Relationships

Work In Progress

Capacity

Resources

Lead Time

Service level

Utilisation

Productivity



Smith's Auto-Service Centre

Managing Work Flows Case Study

191




192

Managing Work Flows

Case Study


193

Smith's Auto Service Centre

Smith's Auto-Service Centre - Part II

After a shakey start, Bob Smith's "Auto-Service Centre" had become a

well established business.

During the past year they had slowly grown and now employed 8

mechanics fulltime. In light of some of the planning problems they had

earlier on, Bob Smith decided they would concentrate on mechanical work

only.

Bob prided himself on being able to offer a superior and more responsive

service than many of the larger dealer workshops around town.

With any customer who booked their car in advance - Bob generally

offered a same-day service (1 day service level). That is, cars received first

thing in the morning would be available that night, unless something

unforeseen was found, or it was previously known when taking the

booking that the job would take more than one day.

With corporate customers, Bob promised a next day service (i.e. a 2 day

service level) so that cars delivered today, would be available tomorrow.

During the past few weeks however, there had been several complaints

from customers about cars not being ready on time.

As a result of these complaints, Bob decided to examine the current

situation more closely. He looked at some data on how the shop was

operating and this is what he found:

• Each mechanic worked 8 hours per day (excluding breaks). Therefore,

with a workforce of 8 mechanics, there were 64 available working

hours in each day;

• The number of cars being booked in each day - from all sources, was

averaging 48 cars per day;

• The number of cars being completed per day was also averaging 48;

• There were currently 145 cars in the workshop either being worked on

or waiting to be worked on.

194


Questions

What is your assessment of the current situation. Discuss:

1. Do you think Bob can meet his service levels i.e. how realistic are they?

2. What should Bob do to improve the situation?

Notes

195



Worksheet

WIP

Work out

Work in

Mechanic

Hours

Mechanic

Hours/Car

Service level

196






Senior Manager

ManagerManager

Responsibility for

major end-to-end

processes

Responsibility for

major sub-processes

Responsibility for


processes



A More Comprehensive View of an OrganisationReconciling Dynamic Flows and Static Structures


Senior Manager

ManagerManager

197




Process Maps or Work Procedures:Define the work steps required to get something out of the bucket and move

it on to the next step ….

WorkgroupWork

Group 1Workgroup Workgroup Workgroup

Process Map for the whole “end-to-end” process

Process map for the

part of the overall

process performed by

Work Group 1



Key Lean Work Flow Principles

• Customer pull – prioritises and paces the process;

• “One-piece” flow – work is done one “piece” at a time;

• Heijunka – level the work load. Only release an amount of work

equivalent to the capacity during the “control” time period;

• Problems should have nowhere to hide – problems hide in work-in-

progress;

• Types of problems:

– Capacity (not enough or too many resources);

– Capability (I cannot do/do not know how to do this work);

– Quality (there is something wrong with this work);

198




Prioritisation, Scheduling and Customer “Pull”

Voice of the

Customer (VOC)

Schedule

Work sequence “pulled” to meet

customer requirement



Work Leveling and “One Piece” flow

Voice of the

Customer (VOC)

Schedule

Work in

Team capacity

Work scheduled

199




What do we Measure ? What can we Control?

Quantity Flowing In (Work In);

Quantity Flowing Out (Work Done);

Level in the “bucket” (WIP);

Size of the hole (Capacity);

Amount of resources deployed (Level of

resources working - FTE);

Rate at which resources are converted into

capacity (or completed work) -

(Productivity)

Level in the “bucket” (WIP);

Size of the hole (Capacity);

Amount of resources deployed (Level of

resources working - FTE);

Indirectly:

Rate at which resources are

converted into capacity (or

completed work) - (Productivity)

What can we Control What can we Measure



Process Measurement Template Updated with Flow Measures

Customer Outcomes

Measures

•Delivery

•Quality

•Value

•Lead Time/Service Level

•Work Done (Quantity

flowing out).

Internal Process Outcomes

Measures

•Time

•Cost

•Quality/Waste

•Capacity

•Resources (FTE)

•Capacity/Resources Ratio

Supplier Measures

(Inputs)

•Delivery

•Quality

•Value

•Supplier Service Level

•Work In (Quantity

flowing in)

Process

Leading Indicators

•Process specific issues

•Key Complexity Issues

•External to process issues

•Work-In-Progress

200




What influences Productivity?

Level of WIPI.e. level in the

bucket

Scheduling

Efficiency

Individual

competence &

motivation

Failure,

Complexity &

Rework levels (variation)

Process Structure

& Work Methods

IT systems,

functionality &

tools provided.

Management need to be able to

tell the difference between the

influence of each factor, on

overall productivity as each

requires a different response.

Productivity



Some interesting process dynamic effects

201




Ave. Work

Out

100/day

Ave. Work

In

100/day

System Dynamic No.1Urgent Work - The Crisis Management Trap

WIP = 500

Urgent work or

transactions

processed in less

than 5 days



Ave. Work

Out

100/day

Ave. Work

In

100/day

WIP = 500

System Dynamic No.1Urgent Work - The Crisis Management Trap

Urgent work or

transactions

processed in less

than 5 days

Any work pushed through

in less time than the system

average automatically

generates work that will

take longer than average.

Issue: Which ones are the ones that are going to take longer?

How can you know before it is too late?

202




Ave. Work In

100/day

System Dynamic No.2Telephone Calls and shrinking capacity

e.g. a Call Centre

500

Reduces capacity

to process real

work

High WIP leads to

customer phone calls

Which increases

WIP

Time spent dealing

with phones calls



Ave. Work In

100/day

System Dynamic No.2Telephone Calls and shrinking capacity

e.g. a Call Centre

500

Reduces capacity

to process real

work

High WIP leads to

customer phone calls

Which increases

WIP

Time spent dealing

with phones calls

Issue: How do you ensure you manage the customer calls

while maintaining processing capacity in the system.

203




System Dynamic No.3Rework and shrinking capacity

500

Resources spent on rework

reduces capacity to process

real work

High level of WIP

creates pressure on

workers – work faster

Leads to more errors and

more rework

Which

increases WIP



System Dynamic No.3Rework and shrinking capacity

500

Resources spent on rework

reduces capacity to process

real work

High level of WIP

creates pressure on

workers – work faster

Leads to more errors and

more rework

Sources of Error and Strategies

Carelessness: take the pressure off

by reducing WIP – will eliminate

pressure induced errors/rework;

Systemic/Process based: fix the

process to eliminate root-causes of

errors/rework.

Which

increases WIP

204




The reality of work in many organisations

All three dynamics present and at

work at the same time.



205




206

Implementation Issues and Conclusion

207

Implementation Issues






Succeeding at Operational ExcellenceCritical Success Factors …..

• Leadership;

• Link to Strategy;

• Build a culture that values Excellence;

• Provide education and training;

• Establish supporting “infrastructure”;

• Identify and action “enabling” projects;

• Manage change.

209




Governance Structure

Steering Committee

Project Portfolio

Priorities Capacity

Select projects

Do projects

Measure Results

Resource

Balancing

Lean Six

Sigma teams

Business Strategy &

Strategic Priorities Strategic initiatives

COQ

Employee suggestions

Benchmarking

Agree Issues and

Opportunities

Sources of

Projects



Managing Change

Need to change all 3 in order to have changed.

Can start at any point provided you go around all the

bases.

Change the

Systems &

Structures

Change the

Behaviours

Change the

Attitudes

210




You do not have to do this.

Survival is not compulsory.

W. Edwards Deming.

(1900-1994)



211




212

Templates

213

© Max Zornada


Process Definition WorksheetObjective : To specifically define the scope of the process being studied

Process Name:

The Process Starts with:

The Process Ends with:

The Process includes:

The Process excludes:

Connecting Process:

215

© Max Zornada


SIPOC Diagram WorksheetSuppliers Inputs

Requirements


Requirements

Providers of the

required resources to

the process

Resources required

by the processHigh level description of activities in the

process.

Deliverables from

the process

Anyone who receives a deliverable from

the process.

216

© Max Zornada


Managing Perceptions of Quality

Service : .

Responsiveness

Assurance

Tangibles

Empathy

Reliability

Think of a customer contact point associated with a service you currently provide

to a customer(s).What experience will result in a satisfied customer?


217

© Max Zornada


Using RATER to Design Service ProcessesWhat supporting operational infrastructure/capability will need to be provided to

consistently deliver the desired customer experience?

Responsiveness

Assurance

Tangibles

Empathy

Reliability

Quality DimensionSupporting Operational Infrastructure/Capability

People Process Technology

218

© Max Zornada
















ANALYSE







Team charter







necessary.






PMCS

Document project

Analyse Data

Analyse Process



Verify Root Causes

Key Steps:-


the problem.






Before

After

Key steps:-

Flowchart Standard procedure



Key steps:-



learning.






opportunities


Review learnings

C D

MA

I 6σ





Pareto Chart


Key Steps:-



Potential Solutions

Key Steps:-

Action Plan

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6


Select project

Select team

Allocate to team





Performance

Pareto Chart

219

© Max Zornada


DMAIC Process StoryboardPRE-DMAIC DEFINE MEASURE

ANALYSE IMPROVE - I : Generate Potential Solutions

IMPROVE - II: Implement and Check CONTROL - Standardise FUTURE PLANS

220

© Max Zornada


Process

Green Belt

Process Owner

Start Date

Project Title

Objective

Problem/Opportunity

Definition

Business Case

Team Members

Customer Benefit

Schedule

What is the Problem to be solved or the

opportunity this project will exploit.

Project Scope

Improvement target, impact on Sigma,

COQ/COPQ and Customer Satisfaction

What improvement in business

performance is expected. $ impact and by

when.

Who are the team members and key experts

to be consulted.

Which part of the process will be

investigated

Who are the final customers. What

benefits will they see and what are their

most critical requirements.

What are key milestone dates for

completion of each stage.

Expected Financial Impact

Telephone Number

Organization/Function

Target Completion Date

Define completion

Measure completion

Analyse completion

Improve completion

Control completion

Project Completion

Improvement Project Charter

222

© Max Zornada


Customer Requirements Statement



Ranking Scheme

Importance to customer: 1 = Nice to Have, 2 = Important, 3 = Critical, Must Have

Customer Satisfaction: 1 = Very Satisfied, 2 = OK. Could be better, 3 = Unhappy, Must be improved

Outputs: Customer:

Measure Importance to Customer


(Importance x

Satisfaction)

Target PriorityRating

223

© Max Zornada



Potential Solutions Cost

RankingEase of

Implementation

% of problem

it fixes

Overall

Ranking


226

© Max Zornada


Process








ANALYSE





Project plan

Project charter



Key Steps:-

Key steps:-


Key steps:-



learning.




DESIGN

C D

MA

I 6σ




Key Steps:-







•Implemented PMCS






•Pilot evaluation


•Analysis


•Visioning


METHODOLOGY

Process





Process

Process PLAN

TRANSFORM

ANALYZE

COLLECT

Process Analysis/



Deployment




Process PMCS


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ANALYSE

DESIGN VALIDATE FUTURE PLANS

METHODOLOGY

Process PLAN

TRANSFORM

ANALYZE

COLLECT

Process Analysis/



Deployment



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“Rough Cut” Value Added/Non-Value Added Analysis

Customer

Value Added

Operational

Value Added

Non- Value

AddedActivity

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The Double Fishbone

Organisation

and Roles

Process

Structure

Technology Customer Interface

Process

Structure

Organisation

and Roles

TechnologyCustomer Interface

New Process Vision

Process to be

Redesigned


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21

Present

Reason

Alternatives

Selection

Improvement


What is done ?

done ?

Can it be

Should it be



done there ?

could it be

Where should




Method

Means of


Why is it

eliminated ?

eliminated ?


sequence ?

Who does How is it

Why is it

Where else

done ?

it be done ?

Why is it Why is it

person ?

Why is it

way ?

When else

done ?

Who else

done by ?

How else

done ?


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Why

� Who does it ?





� What to do ?












� Why do it ?




How much?


now ?



When

� When to do it ?



done ?


be done ?

� What other time

should it be done ?

How

� How to do it ?






to do it ?

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