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Chapter 2: Six Sigma
Lean SixSigmabringstogethertwobusinessimprovement methodologies: Lean and Six
Sigma. It unites the emphasis on cutting waste from Lean, with a focus on reducing
variation from Six Sigma. It is not entirely clear when or where this combination arose,
although some identify the source as Michael L Georges’ 2002 book entitled “Lean Six
Sigma: Combining SixSigma with Lean Speed”. Since its publication, the fusion of these
concepts has evolved to become one of the world’s foremost businessimprovement
techniques.
What is Six Sigma?
Sigma, from the Greek letter (σ), is used by statisticians to measure the variability in any
process; so the performance of an organisation can be assessed by the sigma level of its
business processes. Traditionally, companies have accepted three or four sigma
performance levels as the norm, even though these processes create between 6,200 and
67,000 defects for every million opportunities. Adhering to the SixSigma standard
generates only 3.4 defects per million opportunities.
Companies operating at three or four sigma performance typically spend between 25 and
40% of their revenues fixing problems. (Cost of poor quality later is covered later.) Those
functioning at the SixSigma level typically spend less than 5%.
The term SixSigma process comes from the notion that if there are six standard deviations
between the process mean and the nearest specification limit, as shown in the graph
below, practically no items will fail to meet specifications. Should there be a Four Sigma
process, many items will fall outside the specification.
Six Sigma is used to ensure a product or service is as good as it can. Measuring the Six
Sigma level of a process is a key part of this process. It can be linked to customer
assessments to develop a baseline from which improvements can be implemented and
measured. If the level of variation in the product or service can be reduced, this will cut
costs for both the company and the customer, as performance moves towards the
optimisation point.
Six Sigma is applied in a number of phases that follow the DMAIC structure. This acronym
stands for Define, Measure, Analyse, Improve and Control. In each of the phases, a number
of tools are used to assess quality. All SixSigma projects follow the DMAIC path.
1. Define the goals of the improvement activity
2. Measure the existing processes and systems
3. Analyse the system and measures to understand how the process works
4. Improve the process
5. Control the new process
One of the central concepts of SixSigma is that the output of any process or service is
directly related to the input. This is represented by the following equation, where Y is
output and X is input:
Y = f(X)
Six Sigma tools and techniques are used to understand what the inputs are and how they
influence the output. The organisation can then focus on those inputs that have the
biggest impact to reduce the variability and defects in the outputs.
As well as reducing variations and defects, the aim of SixSigma is to ensure processes
meet customers’ requirements. The chart below summarises this:
Six Sigma definitions:
• A management-driven, scientific methodology for product and process
improvement that creates breakthroughs in financial performance and customer
satisfaction. (Source: Motorola.)
• A methodology that provides businesses with the tools to improve the capability of
their business processes. This increase in performance and decrease in process
variation lead to defect reduction and improvement in profits, employee morale
and quality of product. (Source: ASQ.)
History of Six Sigma
Six Sigma is the name for a collection of tools and techniques that have their origins in a
wide range of improvement and statistical analysis methodologies. In many ways, Total
Quality Management (TQM) was seen as the forerunner to the SixSigma approach. The
TQM approach was developed by many notable business thinkers, including Deming,
Ishikawa, Crosby and Juran. At the core of TQM was the principle that everyone in the
organisation should be focused on improving processes, products and services to raise the
level of customer satisfaction.
The father of SixSigma is Bill Smith, who developed it while working for Motorola. In
1986, he brought together a number of concepts, tools and approaches into the SixSigma
methodology. The drive to improve the quality of products and services at Motorola had
started many years earlier.
During the early 1970s, Motorola produced televisions under the brand name of Quasar.
However its products were consistently being beaten by Japanese companies in terms of
cost, quality and price. In 1974, it finally admitted defeat and sold the factory to
Matsushita, a Japanese producer of televisions under the Panasonic brand.
Matsushita immediately went to work on improving the quality of the product made in the
factory by reducing variations and defects. In a short time, they were producing
televisions with one twentieth the number of errors produced when Motorola ran the
factory; despite using the same workforce, technology and designs. This supported
increasing sales and revenue, and reducing costs. This was a massive wake-up call for
Motorola; why could the Japanese management make such a massive difference when
using fundamentally the same inputs. When the then President and Chief Executive Bob
Galvin asked in a meeting: “What's wrong with our company?”, many staff at the meeting
gave a number of politically correct but predictable answers. Until Art Sundry, a sales
manager, famously stood up and shouted: “I'll tell you what's wrong with this company
our quality stinks!"
Bob Galvin did not accept this assertion at face value. He went to end users and customers
to ask them about their experience of his company. He found that the market had moved
on; competitors were making similar products that were more reliable and of a better
quality at a lower cost. He realised radical change rather than slow step-by-step evolution
was required.
Motorola set out a path for improving many aspects of its business, including the quality of
its products. This culminated in the development of the SixSigma approach by Bill Smith,
which was presented to, then championed by Bob Galvin. He gave Bill Smith the mandate
to make the SixSigma approach to quality the core of Motorola’s new culture.
During the 1990s SixSigma became more widely known and used. In the mid-1990s,
General Electric (GE) and Allied Signal developed SixSigma programmes. GE saved $12
billion over five years and Allied Signal has recorded over $800 million in savings since
1995.
Chapter 3: Lean
What is Lean?
A Lean organisation understands customer value and directs its key processes on
continuously increasing it. The goal is to provide perfect value to the customer through a
zero-waste creation process.
To accomplish this, lean thinking changes the focus of management from optimising
separate technologies, assets, and vertical departments to optimising the flow of products
and services through the value stream.
Eliminating waste along entire value streams, instead of at isolated points, creates
processes that require less human effort, space, capital, and time to make products and
services, at less cost and with fewer defects compared with traditional business systems.
As a consequence, companies are able to respond to changing customer desires with high
variety, high quality, low cost, and fast throughput times. Also, information management
becomes much simpler and more accurate.
Lean manufacturing is underpinned by the five following principles:
1. Determine what is value for the customer
2. Identify the key steps along the process chain
3. Make the process flow smoothly
4. Drive the process by the customer ‘pulling’ value
5. Strive to continually remove waste
Lean definitions:
• A methodology that improves operations and the supply chain with an emphasis on
reducing wasteful activities.
• A practice that considers the expenditure of resources for anything other than
creating value for the customer to be wasteful.
History of Lean
Lean has its roots in the Toyota Motor Corporation’s production methods. In response to
the external challenges that were putting the future of the company in the balance, it
developed a new way of making vehicles that would eventually see the company become
the world’s biggest car manufacturer.
The car industry is a good example to show the development of the Lean approach. When
cars first started to be produced in the 1900s, they were a bespoke product. Designed and
built individually by small groups of craftsmen, they were the preserve of the few that
could afford their relatively high cost.
As the twentieth century progressed, mass-production techniques were introduced into car
manufacture. Frederick Taylor was one of the first to apply science to engineering
processes, developing a radical new system based around the separation of planning and
production, where production was broken down into short repetitive tasks that required
few skills. This approach was outlined in his ground-breaking 1915 book, ‘The Principles of
Scientific Management’.
Henry Ford pioneered the development of mass-production for the 1908 Model T. By
standardising and reducing the number of parts in its engines, the manufacturing process
could be vastly speeded up. Parts were delivered to the production site and a moving
assembly line installed.
However, mass-production techniques also had some downsides. Workers complained
about the monotony and associated working conditions, and there was little sense of a
shared purpose between workers and the company. Quality was negatively impacted, with
much checking and rework undertaken at the end of the production process.
In 1950, Eiji Toyoda, whose family owned the Toyota car company, visited Ford’s Rouge
plant in Detroit. His company was in poor health and in danger of closing. Following the
end of the Second World War, a number of national initiatives meant demand for vehicles
had collapsed. In order for the company to survive, Toyota agreed a rescue package with
the trade unions, whereby a quarter of the workforce was made redundant, the remaining
employees received a guarantee of employment, and pay was graded according to
seniority, experience and company profits. One of the impacts of this change was that the
workforce was now a fixed and not a variable cost; so the company had to get the most
from its employees.
On his return to Japan, Eiji Toyoda worked with production engineer Taiichi Ohno to
develop a new production model for their company. They decided that mass production
was not the best way forward as it contained a lot of waste or ‘muda’, and so developed
the Toyota Production System. This was designed to reduce waste using the following
approaches:
• A ‘pull’ system is used for the production process. Products move through the
process in a consistent way, avoiding bottle-necks. Process steps are standardised
and supported by visual management. Where errors occur they are fixed there and
then.
• A continuous improvement culture is embedded throughout the process and the
wider organisation.
• People and teamwork are emphasised, with the organisation continually investing
in its workforce to improve and deliver benefits.
• A long-term approach is taken over short-term quick wins.
Ohno was critical of the Ford approach to production. He felt that many of the specialist
workers (foremen, specialist repairmen) added any value to the process; only assembly-
line workers did this. He also thought that those on the assembly line could do many of
the jobs performed by these specialists and do them better.
The initiatives that Ohno put in place with the Toyota Production System included:
• Grouping workers into teams with a team leader (not foreman) involved with
production. Teams are given sets of assembly steps and told to work together in
the best way to get the job done.
• Giving housekeeping tasks to the teams, such as repairs and checks.
• Setting time aside for teams to suggest ways of improving the process.
• Empowering workers to stop production to fix errors – eliminating reworking at the
end of the line.
Ohno also identified seven wastes that could occur within any process:
1. Over-production: processing too soon or too much than required
2. Defects: errors, mistakes or rework
3. Over-inventory: holding more inventory (material or information) than required
4. Over-processing: processing more than required
5. Over-transportation: moving items more than required
6. Waiting: employees and customers waiting
7. Motion: movement of people that does not add value
Deliverables of Lean Six Sigma
Lean SixSigma is a fusion of the two approaches; the Lean element reduces waste, while
the SixSigma element focuses on the customer, and looks to reduce defects and
variability in the process.
When examining current practices, it uses the Lean tool of value stream mapping to
analyse the process and the DMAIC framework to structure the review.
[Does this need a little more work? A bullet point list of the ‘deliverable’s – outcomes,
results benefits of Lean Six Sigma?]
Chapter 4: Selecting and Managing Lean SixSigma Projects
The process for selecting a Lean SixSigmaimprovement project will vary for each
organisation. For those organisations where Lean SixSigma is firmly embedded and has the
backing of senior management, existing tools and techniques (used to measure processes)
will identify when a project is required to reduce variations or defects in a process and
illustrate the benefits of delivering the project.
The aim of the project should be to reduce the costs to the business and customers, and
move the process closer to the optimisation point. Projects should be selected that will
help move the business closer to this point. In order to fully embed the principles and
benefits of Lean Six Sigma, it should be aligned with the implementation of a continuous
improvement culture throughout the organisation. Key data linked to improving products
and services, such as customer assessments, should be collected and analysed on an
ongoing basis.
However, in other organisations Lean SixSigma may yet not be embedded or may never
be. Therefore, there may be a variety of reasons why a particular Lean SixSigma project
is selected. It could be because a senior manager feels the service could be improved and
made more efficient. Or there may have been a specific incident or error that points
towards the process needing to be reviewed and improved. In some cases, the motives for
selection of a project may be as much political as business based.
Organisations will choose Lean SixSigmaimprovement project in different ways. The most
effective way is to select projects based on objective assessments to ensure they deliver
real change and improvement for the organisation. Outlined below is a project selection
matrix showing the key elements that may be measured to indicate where a Lean Six
Sigma project should focus.
From this data, service area C would be the area to pick as the Lean SixSigma project. It
has the lowest assessment from its customers, the second highest budget and sales falling
by 23%.
There is no particular timescale for a Lean SixSigma review. Some books and guides say
that a Lean SixSigma review should take from three to six months. However, as each
organisation will undertake its reviews in a different way, it is not possible to define the
length. In many organisations, where the concepts of measuring and reducing customer
and business costs to reach the optimisation point are ingrained in the organisation and
are ongoing. Where this approach is not present the standard three to six month timeline
may be used as a guide.
Project Charter
The project charter is a key element of any Lean SixSigma project. In many cases, it will
be the starting point or prompt for a project to be initiated. Although it is completed at
the outset of the project, it will be constantly reviewed and if required, updated as the
project progresses.
The project charter is the key link between two key players in the project; the project
manager and the project sponsor. The project manager is responsible for the delivery of
the project. Typically, in a SixSigma environment they will be a Black Belt or a Green Belt
that is being coached and mentored by a Black Belt. The project sponsor has the authority
to authorise the project in the organisation. They may be a managing director or service
head and provide the project manager with the mandate to undertake the project.
The project charter is owned by the project sponsor. The role of the project charter is to
provide the project manager with the authorisation to progress with the project. It
outlines the scope, aims, resources and timelines of the project. These elements are
agreed with the project sponsor and any amendments to them should be agreed and
signed off by the sponsor.
For every project, a project management plan should also be developed by the project
manager. This is more detailed than the one included in the project charter but is
developed from the information included in it, such as resources and scope. It will be
managed by the project manager and the sponsor will only get involved in the plan, if it
deviates from the terms set out in the project charter.
Elements of the Project Charter
There is no one definitive project charter template. Project charters have evolved and
changed to meet the needs of different organisations. However, below are some key
elements of a project charter required for all Lean SixSigma projects:
Project Title:
Outlines what the project is going to do.
Project Team:
This should state all those people who will be involved in the delivery of the project. The
key roles where people are to be identified are:
• Project Sponsor
• Project Leader
• Team Members
Stakeholders:
All other people or roles that have a stake in the project should also be identified. This
may include the SixSigma champion or Black Belt.
Business Case:
This is an essential component of any project charter; it is the reason for the project
being undertaken. Without a sound business case the project should not proceed. The
business case explains the problem or issue that exists and why the project is being
undertaken. It clearly describes the purpose and justification for the project.
Scope:
This outlines the extent of the project and includes, such as services, departments and
locations. It may also show which processes are included and specifically excluded. It will
offer guidance to everyone involved in the project on what is covered in the review.
Problem Statement:
In a SixSigma organisation, the ongoing measurement of outputs through tools such as
control charts and capability analysis will highlight when and where defects or variation
are occurring. The problem statement is a short sentence outlining the problem that the
review is looking to resolve or improve. It should explain what the problem is, how often it
occurs and the impact.
The statement should be ‘SMART’ – specific, measurable, achievable, relevant and time-
bound – and should be tested against these criteria.
Key advice for a typical problem statement includes:
• Keep it short
• Put a value on the problem
• Make it accessible – do not use jargon
• Refer to the scope of the project
Problem statement example 1:
From 20.10.2012 to 03.11.2012, 7% of all outputs from the chocolate-packing machine
were oversized compared with the upper control limit of 3%. This resulted in an extra
cost to the business of £14,750 and a corresponding reduction in profit.
In many Lean SixSigma reviews, the exact figures surrounding the problem statement will
not be available. Data such as the defect level and associated cost may not be derived
until the measure and analyse stage.
It may be the case that a Lean SixSigma review has been instigated to improve the service
by reducing both the business and costumer costs. Therefore the problem statement may
quote a level of inefficiency or costs in the process that the review is tasked with
reducing. Again, this figure may not be identifiable until the measure stage has been
completed. An example of how such as problem statement may look is outlined below.
Problem statement example 2:
It is estimated that up to X% of time and resources in X department comprises
process waste and cost X organisation £X during the 2012/13 financial year.
Goal Statement:
The goal statement outlines the impact from undertaking the project. It is a response to
the problem statement and will outline how the problem will be resolved.
As with the problem statement, it should be short and SMART. The key elements required
for the problem statement should also be present in the goal statement.
Sometimes it may be difficult at the define stage to be specific about some of the
measures represented in the goal statement. In this case, an ‘X’ can be placed where the
measurable will be and completed when this data is available.
Goal statement example 1:
By 01.12.2012, the percentage of all outputs from the chocolate-packing machine
that are oversized will be no greater than 3%, resulting in a saving of £25,000 for the
remainder of the financial year.
As outlined above with the problem statement, the Lean SixSigma review may not have
derived from a specific problem but have been initiated to improve the service in general.
An example for this scenario is shown below.
Goal statement example 2:
Reduce the amount of process waste in X department by 10% during 2011, saving X
organisation £X in efficiencies and cash savings.
Cost of Poor Quality Summary:
The Cost of Poor Quality (COPQ) refers to those costs to the organisation that are derived
because there is poor quality in the way it operates. For example, there may be some
parts or roles in a production process that exist only because there is poor quality within
the process, so the defective outcomes need to be identified and rectified.
The problem statement will include the main cost of poor quality but there will be others.
Although this will be at the start of the project, all COPQs that currently exist in the
process should be identified. This information may be collected from ‘walking the process’
and speaking with staff involved in it.
There are four different types of cost of poor quality:
1. Internal Failure costs: these costs occur before the product or service reaches the
customer and so the cost is borne within the organisation.
2. External Failure costs: costs associated with defects being detected after the product
or service has reached the customer.
3. Appraisal costs: such costs are incurred in the process of ensuring that outputs from
the process meet quality requirements. This includes any systems, procedures or staff
required to check outputs.
4. Prevention costs: costs that are incurred in order to keep defects and appraisal costs
to a minimum. It includes systems or procedures that prevent error.
As the organisation moves through the DMAIC stages, the COPQs identified will highlight
the benefits of reducing variations and defects. These benefits will include both hard and
soft benefits. Hard benefits are those that can be measured financially, such as no longer
employing a person to check outputs. The soft benefits are non-financial, and include
outcomes such as improved customer satisfaction and reputation.
Key Customers:
Key customers of the organisation, process or service should be noted here. Further
analysis of these customers will be undertaken in the voice of the customer section.
Outline Project Plan:
The key milestone dates for the project are listed here. They should be developed with
the help and assistance of some key stakeholders, especially the project sponsor. It is
important that the dates for the milestones are realistic and achievable.
A template project charter is outlined below:
Project Charter
Project Title
Project Team Stakeholders
[...]... Project Sponsor Project Leader Team Member(s) Name Role Six Sigma Black Belt Business Case Scope Problem Statement Goal Statement COPQ summary Name Key Customers Outline Project Plan Plan Actual Notes Start of Project End of Define End of Measure End of Analyse End of Improve End of Control Critical Success Factors At the outset of the Lean SixSigma project, the key factors for success should be determined... SixSigma Project Tracking As the Lean SixSigma project advances, it is important that its evolution is tracked to enable the project manager to have visibility on progress as it moves through the DMAIC stages In many projects, the first step in tracking a project will be development of a plan or schedule that shows the tasks, start and end dates, and interdependencies with other tasks For Lean Six. .. those for the customer increase Business costs could include reduced sales or less repeat business Costs for the customer could be making a complaint or enduring multiple contacts Lean SixSigma tools help deliver on customer requirements, which in turn decreases unnecessary costs resulting in improved profitability Understanding customer requirements is the foundation of any improvement project – it is... organisation, for different service areas or products, a benchmark for a set period in time can be obtained Customer feedback data can then be used with the Lean Six sigma tools to deliver improvements that reduce costs for the customer and the business The impact of these changes can be measured against the original baseline Gaining feedback from customers should become part of the DNA of the organisation... factors With many Lean Six Sigma projects, it is difficult to accurately identify all the tasks and activities through to the end of the project At the outset, it is possible, with some degree of accuracy, to plan the define and most of the measure stages However, as the variations and defects from the measure and analyse stages have not yet been revealed, and the solutions and improvements from the... during the course of the project This makes it hard to track the progress of individual tasks Therefore, it may be more useful to set some broad milestones for each DMAIC stage at the start of the Lean Six Sigma review and track progress against these Chapter 5: Voice of the Customer Excellent customer service is getting to know customers so well that their requirements can be anticipated or exceeded... or is r tte be Must have Dissatisfied Present Absent Feature of the product of service Once the voice of the customer has been analysed, a list of improvement actions can be developed that will influence the overall customer rating There will be a list of improvements that will be critical to the customer (CTC) and these will help inform the These enable the level of customer service to be increased... stages In many projects, the first step in tracking a project will be development of a plan or schedule that shows the tasks, start and end dates, and interdependencies with other tasks For Lean Six Sigma projects, the tasks may also be grouped into the DMAIC stages This plan should also link with the key milestone dates identified on the project charter As the project progresses and each successive . Chapter 2: Six Sigma
Lean Six Sigma brings together two business improvement methodologies: Lean and Six
Sigma. It unites the emphasis. value
Deliverables of Lean Six Sigma
Lean Six Sigma is a fusion of the two approaches; the Lean element reduces waste, while
the Six Sigma element focuses