A Lean Six Sigma Transformation at a Financial Service ... · PDF fileLean Six Sigma...

A Lean Six Sigma Transformation

at a Financial Service Provider

1

Ronald J.M.M. Does

June 2013

Lean Six Sigma Transformation · 2

A Lean Six Sigma Transformation at a

Financial Service Provider

Ronald J.M.M. Does

Professor of Industrial Statistics, Faculty of Economics and Business

Managing Director at the Institute for Business and Industrial

Statistics

Director at the Institute of Executive Programmes, Amsterdam

Business School


- Economies of scale

- Standardisation

- Managing large organisations.

1900–1980: Mass fabrication

- Quality and manufacturing virtuosity as strategic weapon.

- Flexibility, service level, reliability, lean

→ cheap, dependable processes.

“Operational excellence”

1970–2000: Total Quality Management


Industry

General Electric Plastics

DAF Trucks, LG.Philips,

Philips, Tata, NXP, ASML,

BOSCH, VDL, Sensata

Perlos, Desso, NedTrain

Food

Douwe Egberts (Sara Lee)

United Biscuits (Verkade)

Noviant

Friesland Foods

Services

ABN AMRO en ING Bank

Achmea, Ziggo,

Getronics, TNT Post, TenneT,

Wolters Kluwer, AEGON

Heijmans, ZwitserLeven

Healthcare

Rode Kruis -, Jessa -, Lange

Land -, Canisius Wilhelmina -,

Beatrix -, Deventer-, Martini Hospital

Erasmus MC, UMC Groningen

RdGG, WFG, AMC, UMCU

1990– : Six Sigma, Lean Operations, Lean Six Sigma


Company

Operating routines:

Production processes

Service delivery

Healthcare processes

Administrative processes

- Structure change - Technological innovations - Cut-throat competition - Price erosion - Higher expectations

I O C P

I O C P

I O C P

I O C P S

S

S

S

Design

Planning & Control

Improvement

Operations management


Designing a process: “If you can’t describe what you

are doing as a process, you don’t know what you are doing”

Task

Task

Task

Task

Task

Resources

What tasks to do, and in what order? Which tasks to combine in a process step? Which resources do which tasks? Physical layout of the process, and the transport

routes, and the WIP queues.

Task

Task

Task

Task

Task

Process step

WIP queue

(“Work in Process”)

Route


Input Output Client Process Waste Waste Waste Waste

7 56

121110

8 4

21

9 3

7 56

121110

8 4

21

9 3

€

Operations management is about ensuring

effective and efficient processes.


The 5 Key Performance Measures Cost

Personnel costs, materials, facilities

Quality (design quality)

Functionality, courteousness, attractive looks, durability.

Speed

Throughput time, waiting times, …

Dependability (delivery quality)

On-time processing, no out-of-stock, cancellations, service

interruptions, defects & mistakes, punctuality, …

Flexibility (ability to adjust to variability in demand)

Volume-flexibility (fluctuations in volume of demand)

Delivery-flexibility (flexibility in changing agreed delivery times)

Mix-flexibility (ability to offer a wide range of products)

Product-flexibility (ability of allow customization and introduce new

products)


How to develop an Operations Strategy?

Operations strategy should determine:

- Which performance indicators should the operations focus on?

(determine strategic position)

- Which dimensions may be compromized in order to excel

where it counts?

- How do we envisage that we excel in them?

Strategy formation is an ill-structured task; there is no step-plan or

algorithm. But there are some analysis models and concepts to

help you structure your thoughts


Various improvement methodologies

Short-cycle improvement roadmaps, typically applied by workfloor

personnel in short (one week) projects:

Kaizen, Blitz Kaizen

PDCA-project (Plan Do Check Act)

8D (Eight Disciplines problem solving)

Roadmaps for breakthrough improvement, typically applied by line

management or specialists

DMAIC (Six Sigma)

Integrated combination of DMAIC and best practices from Lean

thinking movement: “Lean Six Sigma”

Roadmaps for (re-)design of processes, typically applied by

specialists

BPR (Business Process Reengineering)

DfSS (Design for Six Sigma)


- Pilot projects

- Learning by doing

- Ad hoc initiatives

- Support in organisation

- Project selection

- Capable people

- More projects and support

- Program

- Project selection with focus

2. More visible

- Set up program

- Projects with high benefits

- Clear vision

- Create capacity

- Increase in scale

- LSS standards known throughout company

- Consistent application

- Make results visible

- Maintain enthusiasm

- LSS integrated throughout company

- Part of strategy and decision- making

- Involve all company divisions

- Integrate LSS in organisation structure, culture, and procedures

- LSS training in MD program

- LSS integrated in organisation structure, culture, and procedures

- Second nature

- Permanent financial impact

- Keep LSS new and interesting

- Continue applying LSS, even after changes such as growth and acquisitions

3. Way of working

4. Integrated

5. Operational excellence

Results

Enable

rs

1. Project based


How to organize improvement efforts?

Important to distinguish between (Process) Control and (Process)

Improvement activities:

Process control: reactive, fire-fighting, dealing with sporadic problems,

“mopping with the tap running”

Process improvement: breakthrough, dealing with chronic problems

once-and-for-all, “find and close the tap”

Improvement and control activities should be organized differently:

Control: continuous activity, executed by the workfloor and automated

inspection and monitoring systems

Improvement: organized as projects (clear begin and end point),

executed by teams of line personnel, line managers or specialists

Improvement should be consciously organized:

The pressure of day-to-day problems is such, that the whole

organization can be occupied by them. Unless improvement projects are

organized and initiated consciously, they typically won’t happen. The

organization risks getting lost in mopping with the tap running.


Yellow belts

Senior business management

Black belt

Green belt

Orange belt

Champion

Black belt

Green belt

Orange belt

Champion

Black belt

Green belt

Orange belt

Champion

Master black belts

Programme managers

Programme management

Project management and execution

Team members

Lean Six Sigma’s Belt hierarchy


Programme: an integrated and coordinated collection of projects,

courses and other initiatives aimed at achieving a strategic goal.

Programme director

Member of the business’s senior management

Accountable for and formal leader of the improvement programme

Strategic direction and focal points of the improvement programme

Programme managers

Day-to-day management of the programme’s activities

Project monitoring and control

Adjustment of the programme’s course

Benefits management

Planning: courses, events, etc.

Master blackbelts

Specialists on Lean Six Sigma methods and techniques

Give training to blackbelts and greenbelts

Review whether projects meet Lean Six Sigma’s methodological

standards

Programme management


Various improvement methodologies

Short-cycle improvement roadmaps, typically applied by workfloor

personnel in short (one week) projects (Orange Belts and Yellow

Belts)

Kaizen, Blitz Kaizen

PDCA-project (Plan Do Check Act)

8D (Eight Disciplines problem solving)

Roadmaps for breakthrough improvement, typically applied by line

management or specialists (Green Belts or Black Belts)

DMAIC (Six Sigma)

Integrated combination of DMAIC and best practices from Lean

thinking movement: “Lean Six Sigma”

Roadmaps for (re-) design of processes, typically applied by

specialists (Black Belts)

BPR (Business Process Reengineering)

DfLSS (Design for Lean Six Sigma)


Just-do-it

Who will do

and when?

Problem solving

Why has this

happened?

Lean/Kaizen event

How do we

tackle this?

Lean Six Sigma

What is the

solution?

Known Unknown

Low

H

igh

Solution

Com

ple

xity


Project selection and definition

The project’s objectives and deliverables are chosen. A rough

assessment of the project’s potential benefits should demonstrate that

the project addresses a Big Fish, and not a trivial issue.

The project leader (black or greenbelt) and team members are

selected, as well as the project review board.

Terms and conditions are negotiated: how much time can the project

leader and team members spend? What is their budget? What is in

scope and what is not? What side conditions are assumed? What

contingencies and complications are foseseeable?

Timelines: deadlines for milestones and toll-gates?

Deliverables, terms and conditions are laid down in a project charter,

signed by the project leader and the project review board.

Project life-cycles: 1. Selection and charter


The project leader and team members execute the project, making

analyses and design improvement actions.

The project’s progress is reviewed on a number of occasions

(milestones, toll-gates) defined in advance.

Typical points for discussion:

Is there enough progress? Is the project still on track?

Is the project’s direction still acceptable for the champion and user?

Do the project leader and team members encounter problems? Time

issues? Commitment of the workfloor or line management?

If it seems that there is not much sense of urgency for a project’s

aims, or if the project seems to get stuck for lack of time, drastic

actions are needed: either cancel the project, or insist that obstacles

are removed instantly.

Project life-cycles: 2. Project execution


Jan Bert Claudia Dorine Erik Fred

Signed Project charter Nog formeel akkoord geven.

SIPOC

Benefit analysis Berekening erbij

Organisation (time, review board)

Stakeholder analysis

CTQ flowdown Kosten door boetes uit CTQ-flowdown verwijderdKlanttevredenheid / wachttijd - spoor uit de CTQ-flowdown halen.

Operational definitions Let op: BT wordt gemeten per proces/poging; 1 dossier kan bestaan uit meerdere pogingen, dus de totale BT per dossier is de som van de BT's per poging.

Measurement plan Gaan doen: meetplan finaliseren Metingen = DILO plus travel sheet

Validity of the measurements validiteit onderbouwen Geef oplossingen voor validiteitsissues

Precision: Gauge R&R or kappa

Measurements started DILO gedaan om uit te vinden welke taken in totaal de meeste tijd kosten (Pareto); nu travel-sheet-metingen aan het doen voor de taken 'expiraties' en 'afmeldingen'.

Process behaviour in time Gaan doen: meetresultaten analyseren Gaan doen: travel-sheet-metingen geanalyseren

Process capability analysis 1 slide per CTQ, met gemiddelde en doelstelling.Pareto gemaakt, nu voor activiteiten afzonderlijk

Value stream map herbewerkingen en verspilling in VSMVSM voor activiteiten afzonderlijk

Updated project objectives and benefits

Brainstorm session / group meetings Gaan doen: procesmatrix gaan vullen met FMEA en Gemba.Gaan doen: FMEA, BOB/WOW, Gemba, en daarmee verstoringen en inefficienties in procesmatrix zetten.Bezig met: brainstorming/FMEA; procesmatrix; gemba; autopsies.BOB vs WOW n.a.v. histogram / lognormale verdeling. Gaan doen: FMEA + Gemba

Expert interviews FMEA gaan doen.

BOB vs WOW / autopsies Laatste update: 17/5 Project gestopt, want het is niet realistisch dat Fred hier meer tijd voor krijgt.

FMEA 17/5/2010: Project gestopt vanwege gebrek aan voortgang. Nagenoeg geen voortgang in afgelopen 5 weken.

Process inefficiencies identified in value stream map Project heeft op de afdeling onvoldoende prioriteit, en GB daardoor te weinig tijd.Laatste update 17/5 Harde afspraak: voor 28/6 substantiele voortgang (2 dagen per week), anders project stoppen.Laatste update: 17/5

Process matrix completed GB aangespoord om serieus na te denken of er wel voldoende tijd en prioriteit voor dit project zijn.NB. Besparingspotentieel is beperkt (ongeveer 0.4 FTE).Sinds 1 maart te weinig voortgang. Hierover serieus spreken met Wim om te komen tot een realistisch plan.

Project life-cycle: 2. Project execution

“Toll-gate reviews” for the D, M, A, I and C stages:


The last review assesses whether the project has achieved its

objectives.

If the champion and other members of the project review board

accept the project’s results, the project leader and team members

are discharged. This is the formal end point of the project.

If there are pending actions, responsibility for these actions is

transferred to the project champion.

Programme management will track whether the anticipated benefits

of the project will actually be realized and cashed.

Project life-cycles: 3. Discharge


Project life-cycle: 3. Discharge


Measure

Analyze

Improve

Control

5. Establish the effect of influence factors 6. Design improvement actions

7. Improve process control 8. Close the project

3. Diagnose the current process 4. Identify potential influence factors

1. Define the CTQs 2. Validate the measurement procedures

Define

Lean Six Sigma’s DMAIC method provides a roadmap for projects.

It helps project leaders to structure their activities by breaking down the

tasks of an improvement project into a sequence of steps and deliverables.

It helps project owners to review and manage the progress of a project by

defining toll-gates on which the project leader can be reviewed.

Lean Six Sigma’s DMAIC structure


DMAIC’s main principles

Measure

Analyze

Improve

Control

5. Establish the effect of influence factors 6. Design improvement actions

7. Improve process control 8. Close the project

3. Diagnose the current process 4. Identify potential influence factors

1. Define the CTQs 2. Validate the measurement procedures

Define

Some of the main principles of DMAIC and similar approaches:

Project objectives are translated into measurable and quantitative

metrics

“You cannot improve what you cannot measure”

Attempts at improvement should be preceded by a data-based

diagnosis

“Focus on the Big Fish”

Remedies are based on established cause-and-effect relations

“Find the X”, “Five times ‘Why?’”

The effectiveness of proposed interventions must be demonstrated

(evidence-based intervention)

“In God we trust, all others must bring data”


Measure 1. Define the CTQs 2. Validate the measurement procedures

Define

DMAIC: Define & Measure

DEFINE stage: definition of the project:

Goals (On what dimensions should the process be improved?)

Deliverables (Analysis only? Implementation of recommendations?

Benefit realization?)

Organizational structure

MEASURE stage: operational definition of the project’s objectives

Translation of objectives into measurable characteristics (CTQs:

Critical To Quality characteristics)

Establishment of a measurement plan


Problems

€ $ Financial

perspective

Process overhaul

Voice of the patient

ClientClient

Lead timeLead time

BankBank

MistakesMistakes

Queue times

Queue times

InternalreloopsInternalreloops

Externalreloops

Externalreloops

Oper. costsOper. costs

Processingtimes

Processingtimes

FteFte

Strategy

1. Project identification

2. Project proposals

3. Project selection

Project definition


1. Decreasing operational cost by improving

operational efficiency

2. Decreasing operational cost by using a cheaper

channel

3. Improving revenue by increasing customer

satisfaction

4. Improving revenue by servicing more customers

5. Decreasing operational losses

6. Improving business decision making

7. Increasing customer satisfaction and improving

processing efficiency

Overview of templates – Financial services


Revenue

Through-put time

Strategic focal

point

External iterations

Project

objective Service quality

Constituents

Perceived quality

Net waiting time Net processing time

Additional processing time due to rework

Operational cost

Personnel cost

Work Volume

Productive hours

Total processing time

Additional waiting time due to rework

CTQ


Analyze 3. Diagnose the current process 4. Identify potential influence factors

DMAIC: Analyze

ANALYZE stage: Data-based diagnosis of the current situation

What are the extent and nature of the problem?

Single out the “vital few” problems from the “trivial many” problems

(“focus on the big fish”, “80/20 rule”)

What are the causes and influence factors of the problem?


DMAIC: Improve

IMPROVE stage: Evidence-based intervention to improve the

process

Find evidence for the effectiveness of the proposed intervention

(experiments, trials, historical data, theoretical / expert knowledge)

Design the future state process

Improve 5. Establish the effect of influence factors 6. Design improvement actions


DMAIC: Control

CONTROL stage: Transfer of improvements to line and process

management

Integrate findings in the process’s control plan, and add or improve

process controls

Transfer responsibilities for sustained improved performance to line

management and the workfloor

Control 7. Improve process control 8. Close the project


Senior management

Line management, process owners

Workfloor employees

Automatic process controls

Juran’s control pyramid

- Organize process control - Improvement projects to

tackle chronic problems

Co-ordinate improvement projects

Respond to sporadic problems

Handle predictable every-day problems

Many organizations struggle with the balance between fire fighting and improvement. Juran suggested a model for organizing both fire fighting and improvement.



Process improvement

Process control

Execution

Facilitate Execution

Coordinate

Provide

input

The idea is, that by empowering the workfloor to do fire fighting efficiently, line management can focus on improvement projects.

Senior management

Line management, process owners

Workfloor employees

Automatic process controls



0

50

100

150

200

250

2007 2008 2009 2010 2011 2012

Master Black Belts

Black Belts

Green Belts

Orange Belts

Yellow Belts


This presentation is based on the book:

J. de Mast, R.J.M.M. Does, H. de Koning and J. Lokkerbol (2012), “Lean Six Sigma for Services and Healthcare”, Beaumont, Alphen a/d Rijn, the Netherlands.

And the articles:

J. de Mast, B.P.H. Kemper, A. Wiltjer and R.J.M.M. Does (2013), “Deploying

Operational Excellence at a Financial Service Provider”, Quality Engineering

25(3), to appear.

J. Lokkerbol, R.J.M.M. Does, J. de Mast & M. Schoonhoven (2012),

“Improving Processes in Financial Service Organizations: Where to Begin?”,

International Journal of Quality and Reliability Management 29(9), pp. 981-

999.


Copyright statement

This material is the intellectual property of the University of

Amsterdam.

This material is provided to you for personal use only. Sharing,

posting or selling is strictly forbidden.

© University of Amsterdam, 2013.

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