Review of Baseline Philosophies XONITEK Consulting Group Int’l Friday, August 13, 2010.

Review of Baseline Philosophies

XONITEK Consulting Group Int’lFriday, August 13, 2010

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You may have heard these terms: Continuous Improvement Lean Manufacturing Six Sigma Kaizen Statistical Process Control

All are methods of Deliberate Leadership The concept of taking control over what you do on a daily basis,

rather than letting outside forces determine your fate

Operational Excellence

Presented by XONITEK Consulting Group Int’l

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Lean

+ Six Sigma

+ Leadership Development

+ Business Systems

= Operational Excellence!

The Continuous Improvement Equation


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Operational Excellence is…

The integration of four key disciplines:

Lean Seeing the Entire Value Stream Eliminating the Waste

Six Sigma Minimizing the Process Variability Improving the Service Quality


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Operational Excellence is…

The integration of four key disciplines:

Leadership Development Management Effectiveness Training Strengths-Based Management Techniques

Business Systems (ERP, CRM, BI) Organizational Integration Formal Company Wide Communication


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Waste From the perspective of the customer, which activities are valuable? The rest is wasteful. Reducing the waste leads to lower costs and a happier customer.

Flow There are points in any process that are bottlenecks. If you could simplify or speed up a bottleneck, you could do more overall. The removal of bottlenecks leads to a smooth flow of value to the

customer.

Key Concepts


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Stability If there is variability in how a process is completed, it is unpredictable. Unpredictable processes lead to overprocessing – doing more work to

correct problems to make sure the end result is what you want. Stable processes are easier to flow.

Pull Predicting the future is nearly impossible. If you guess wrong, the customer won’t want what you offer. Rather than guess, let actual customer demand pull what you do.

Key Concepts


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…put out a fire (or prevent one) Failure Mode and Effects Analysis Ishikawa Diagrams

…do some part of my job more quickly / easily Quick Changeover 5-S

…figure out if I’m doing a good job or not Statistical Process Control Value Stream Mapping

There Are Tools to…


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…design a new service Quality Function Deployment Voice of the Customer

…solve a difficult problem (or brainstorm ideas) Six Thinking Hats Five Why’s

There Are Tools to…


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There are limitless possibilities for using these tools to make improvements.

How do you know which improvements are most important?

Tying It All Together: Strategy Deployment


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The most important tool in Deliberate Leadership: alignment

Start by determining the annual strategy of the business What is most important to achieve this year? What (few) specific, measurable targets represent those goals?

Next, translate those high level targets into measurements that can be tracked and improved at lower levels

Then, develop a handful of projects in each work area that improve those metrics in a way that supports the high level objectives

What Is Strategy Deployment?


To Maintain Strategy Deployment: High-Level View

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Identify True NorthEstablish TargetsAdjust IncentivesCreate Visibility PlanSelect MetricsDevelop Mother StrategiesChoose Deployment Leaders

Cascade the StrategyCreate Baby A3s (functional, departmental…)Execute Kaizen and/or DMAIC Projects

Progress Review Meetings (weekly, monthly)“Connected Checking” – reviews that cascade upward

Are results as expected?If “yes” – StandardizeIf “no” – Use problem solving techniques to find better solutions

Plan Do Check Adjust

The Yearly Cycle

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Strategy Deployment Planning Example


Profitability DeliveryCustomer

SatisfactionEmployee

Satisfaction

Current metrics:Cost Management (meeting budget)

Needed metrics:Cost reduction ($ /unit)New product launches (throughput, lead time, engineering orders, utilization rates)

Current metrics:Build to scheduleEfficiencyInventory daysMachine availability

Needed metrics:Total lead timeTotal logistics costIn-plant part-outs

Current metrics:Cost of qualitySix-month in serviceScrap

Needed metrics:First time throughDefects per unit

Current metrics:Accident rateAbsenteeismTurnover

Needed metrics:Suggestion program data

Hoshin:Speed – Cost – Innovation

Targets:Revenue = $252 million

EBIT = 5%Cash-flow increase = $10 million

No layoffs

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You always know what’s important to work on.

You don’t waste your time trying to improve what doesn’t matter.

What you improve is always important to the organization.

The A3 Reporting methodology minimizes the paperwork involved.

Discourages micromanaging – agreement up front on what needs to be done.

Benefits of Strategy Deployment


What Is Lean?

What Is Lean?

A philosophy and set of tools for identifying and removing waste, leading to a smooth

flow of profitable goods and services, always from the perspective of the

customer.

“Value”

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What is “Value” ?

Every business activity can be classified as one of: Value Add

Activities for which the customer is willing to pay Actions that “transform” the product or service

Non Value Add – Waste Everything else! Business Value Add (BVA)

Required by regulation, ethics, or strategy Filing tax returns, producing annual reports, etc.

If the feature or service were eliminated from the product, would the customer care?


Types of Waste

Muda (“unusefulness”)

An activity within a process that does not add value, from the perspective of the

customer


Types of Waste

Mura (“unevenness”)

Shifts in demand or delivery that lead to a service or support process being sped up

or slowed down (unsteady)


Types of Waste

Muri (“unreasonableness”)

A process, system, or facility designed beyond the physical capacities of

employees / equipment


Categorizing “Muda” Waste

Waiting Transition times for drivers or vehicles when changing

routes / shifts Waiting for job instructions / route schedules /

equipment IT downtime, system delays, sluggishness Delays for approvals, signatures, e-mail replies…

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Quality Deficiencies Conditions that lead to Defects – service that is not

delivered as promised The effort required to identify defects (“inspection”) or

fix them Route schedules, signage, etc. that are incorrect or

misleading Rework – correcting collateral, payroll, grant

documentation



Conveyance / Transport Movement of physical items around a facility Movement of information from system to system and

person to person Poor facility or information system layout that adds

unnecessary conveyance



Overprocessing Doing more within a service than the customer finds

valuable Excess features Excess supporting facilities (overdesigned

“servicescape”) Poorly aligned reporting capabilities E-mail chains with excess CC or forwarding



Customer Options: Potential Waste…

Examples of waste in the automotive industry….

Think: What does the customer really want?


Wasted Skills / Creativity Designing a service or facility in a way that minimizes

the ability of an employee to creatively solve problems “Busy work” Assigning employees to tasks that should be

automated Overly automated tasks that lead to employees

seeking override authority


What is Inventory? A finished item for a customer

A complete toaster

An engine assembly

An unfinished item that has had some work done to it (Work in Process / WIP)

The plastic enclosure of the toaster

A piston assembly for the engine

Raw materials

Plastic panel sheets

Steel ingots


A cost variance reportA seat on a bus while it conducts a route

The changes made to a data set to clean it for reportingThe cleaning of the bus to make it ready for its run

A data tableThe dirty bus

Why Is Inventory Bad?

Inventory hides mistakes Defects are not revealed until materials are taken from WIP Unneeded finished goods rot in the warehouse

It’s expensive You paid for all the materials and labor, but can’t get paid from

the customer You’re also paying for the floor space, material handling,

administrative costs… $$$



Overproduction / “Inventory” Providing more frequency of service than needed Providing vehicles or facilities that are too large

(“batch size”) Operating services at times with too low demand

(“efficiencies”) Any point in a process that involves batching – e-mail

inbox, report queues



Motion The movement of employees within the facility

beyond what adds value Search – finding materials and moving equipment so

that production can happen Obtaining the needed tools and equipment for a job Centralized office equipment that requires walking Movement to meeting locations



Hazards Design of a service, facility, or schedule that puts an

employee at physical or mental risk Unreasonable job requirements See also muri


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Putting Value into Perspective

Wastes vs. Value Add

Inspection, 24%

Transport, 21%

Overprocessing, 15%

Motion, 14%

Search, 10%

Setup, 6%

Value-Add, 11%

Inspection

Transport

Overprocessing

Motion

Value-Add

Search

Setup

Value add in an organization can be much lower than

shown in this chart.

Value add is typically less than 5%;95%+ is non value add cycle time.


Key Concept: Flow

Presented by XONITEK Consulting Group Int’l 33

Speed Flexibility

Cost= &

Key Concept: Flow

If an average process is 98% waste… Removing waste will make it much faster Thus the requirement to amortize setup time slackens

Shorter setups mean greater flexibility Greater flexibility leads to reduced lead times and

“order sizes” for the customer


Where to start?

Theory of Constraints: Bottleneck There is a single point in any process operating at

100% capacity Making improvements anywhere else will not improve

overall flow Thus, start at the bottleneck


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Why Does Lean Fail?

Biggest Obstacles to Lean, CategorizedLean Enterprise Institute 2005 Study

History of Lean failure, 3%

Lack of tool knowledge, 14%

Financial concerns, 15%

Management resistance, 30%

Front line resistance, 37%

Other, 1%The obstacles to success are…

within your control.

Commitment to the cultural change is essential.


What Is Six Sigma?

What Is Six Sigma?

A rigorous method for using observational data to make a process more reliable and

predictable.


Six Sigma vs. Lean

Lean… Removes waste/cost Simplifies a process

Six Sigma… Makes the process stable Encourages consistency and reliability

Typically, make Lean-style improvements first.


Effects of Improving Process Variation

Acceptable performance against standard: +/-1 SD = 68.27 % or 317,300 ppm +/-2 SD = 95.45 % or 45,500 ppm +/-3 SD = 99.73 % or 2,700 ppm +/-4 SD = 99.9937 % or 63 ppm +/-5 SD = 99.999943 % or .57 ppm +/-6 SD = 99.9999998 % or .002 ppm


Effects of Improving Process Variation

“3-sigma” performance may seem great; 99.73% of attempts are successful…

However, consider that there are approximately 20 million surgeries in the USA each year –

“3-sigma” performance against fatality = 54,000 deaths

“6-sigma” performance against fatality = 0.04 deaths


Key Measure: Process Capability

Can the process operate reliably within its specification limits?

Long term vs. short term


Types of Variation

Common Cause The usual variation present in a process on a day-to-

day basis Typical variations in how often a database is accessed Common passenger variations on a particular route Usual variations in a route run-time due to traffic

Use the Six Sigma toolkit to gradually improve

Common Cause Variation


Types of Variation

Special Cause Something unusual, typically caused by an outside

force on the process Huge weather disruption clogs call center State government furlough day USA in the World Cup

Create contingency plans (or fundamental changes)

for Special Cause Variation


*** Questions and Discussion ***

Review of Baseline Philosophies

Review of Baseline Philosophies XONITEK Consulting Group Int’l Friday, August 13, 2010.

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