Lou Gorga Six Sigma Solutions, Inc. 6sigmasolutions@optonline (973) 359-0416

1. Lou Gorga Six Sigma Solutions, Inc. 6sigmasolutions@optonline.net (973) 359-0416 What Management Accountants might want to know about Lean Six Sigma

2. Agenda • Introductions and Focus • Lean Six Sigma (and Change Management) Overview • Key Tools and Technique Summary • Value Proposition • Questions/Discussion

3. Drivers • What do you believe is necessary to manage your business? • How do you measure success? • What do you look at? Our motto: If you cant Measure it… You can’t Manage it. Some Tools used to measure and change….

4. Tools • Reengineering • PDCA • Best Practices • Change Management Initiatives • Lean processing • Six Sigma Initiatives • Lean Six Sigma Initiatives • Etc. Focus on improving processes through measurement and evaluation

5. Lean Six Sigma Drivers • What comes to mind when you hear “Lean Six Sigma”? • What think of when you hear “Change Management”? • Is anyone here a Six Sigma Black/Green Belt or higher? Lean Six Sigma Drivers

6. Processes For Improvement Lean Six Sigma provides a process based approach to improvement. It can be used to improve any business process. 6

7. What is Lean Six Sigma? • Comprehensive Process tool for: • Achieving • Sustaining and • Maximizing business success. • Six Sigma is uniquely driven by: • Understanding customer needs • Disciplined use of facts and data • Statistical evaluation of “issues” • Attention to managing, improving and reinventing business process. Where did it originate and how is it different?

8. History of Change • Ford’s Assembly Line • GE Western - Hawthorne –’(20s -’30s) • PDCA cycle originally conceived - Shewart (Western Electric -’30s -’40s) • PDCA Made famous by his assistant - Demming(The “Demming Wheel”) - became CQI model(40-50s) • Ohno / Toyoda’s - Toyota Processing System (TPS) was already taking shape (’40s-’50s) • Harry / Shroeder start the Six Sigma process initiative at Motorola(80s) • Womack’s “The Machine That Changed the World” Described Lean a.k.a. TPS(’90s) What might be next?

9. Drivers: Business and/or Improvement Bottom Line Customer All Customers and We needto listen to their Voices (VOC)

10. Lean Six Sigma • Customer focused • Data Driven • Accurate • Creates a “Common Language” • Reduces waste • Reduces variation • Improves contribution Distinguishes between “the feel and the real”

11. Example Roller Bearing Manufacturing Diameter is a CTQ (Critical To Quality Parameter) Nominal diameter = 2.5mm Minimum Spec = 2.25mm Maximum Spec = 2.75mm 11

12. Lower Specification Limit Upper Specification Limit Nominal Diameter 2.5mm Customer is expecting 2.5 mm But will allow some variation within the Spec range. No Less Than 2.25mm No More Than 2.75mm Example (Cont.) 12

13. Manufactured Roller Bearing Diameter Actual Micrometer Measurements Example (Cont.) 13

14. Manufactured Roller Bearing Diameter Variation ending up as a defect Example (Cont.) 14

15. Example (Cont.) Let’s Look at Some Basic Statistics Mean diameter = 2.50 mm Standard Deviation = 0.125 mm On Average it’s OK It’s a Variation issue 15

16. Example (Cont.) Reducing Variation is Clearly the Key to Improving Process Capability 2s 16

17. Example (Cont.) Reducing Variation is Clearly the Key to Improving Process Capability 3s 17

18. Example (Cont.) Reducing Variation is Clearly the Key to Improving Process Capability 4s 18

19. Example (Cont.) Reducing Variation is Clearly the Key to Improving Process Capability 5s 19

20. Example (Cont.) Reducing Variation is Clearly the Key to Improving Process Capability 6s 20

21. How do Others Perform? IRS Tax Advice (phone in) 1,000,000 100,000 10,000 1,000 100 1 1% of Hospitalized Patients Injured by Negligence Doctor Prescription Writing Defects per Million Airline Baggage Handling Average Company Deaths caused by anesthesia during surgery Domestic Airline Fatality Rate Best-in-Class 2 3 4 5 6 7 Sigma Scale of Measure

22. Sigma DPMO 2 308,537 3 66,807 4 6,210 5 233 6 3.4 STATISTICALLY Six Sigma refers to a process that produces only 3.4 defects per million opportunities. Most US Businesses Goal Understanding Six Sigma

23. DMAIC: To improve any existing product or process Define Measure Analyze Improve Control Who are the customers and what are their priorities? What are the most important causes of the defects? How can we maintain the improvements? How is the process performing and how is it measured? How do we remove the causes of the defects? Six Sigma Method

24. The Language Of Six Sigma

25. Customer Needs vs. Customer CTQ’s • Customer needs are the data collected from customers that gives information about what they need or want from your process. Customer needs are often high level, vague, and non-specific “I need a quick response!” “I need accurate information!” • CTQ’s are customer needs translated into critical process requirements that are specific and measurable. A fully developed CTQ has three elements: Y metric, target, specification/tolerance limits

26. Getting to the CTQ’s Translating a customer need into a fully developed CTQ Time from inquiry to resolution (Y metric) Example: Quick Response 5 minutes or less (Target) CTQ Not greater than 60 minutes (specification / tolerance limit)

27. Measure Overview What is the Measure phase? The Measure phase defines the defects, establishes improvement goals, determines that the system of measuring defects is repeatable and reproducible and gathers data about the process. Why is the Measure phase important? The Measure phase ensures that you specifically define the defects you are going to measure and that your measurement system is accurate before you begin to actually measure the process.

28. Alternatives to Measuring…

29. Mean Time Between Failures • % Defects Specifications

30. Analyze Phase Purpose: Identify the key sources of variation (vital X’s) by analyzing data and the process • Steps: • Define Performance Objectives • Identify Variation Sources • Graphical Tools • Hypothesis Testing • Regression Analysis Primary Goal: Determine the vital few X’s

31. Analyze Define Performance Objectives State the improvement goal in statistical terms

32. Analyze: Graphical Tools Find potential X’s using data analysis techniques on the data collected in Measure. Examples of some of the data analysis tools are shown here:

33. Improve Phase • Purpose: • To confirm that the proposed solution(s) will meet or exceed the quality improvement goals of the project • To identify the resources required for successful full-scale implementation of that solution • Steps: • Screen potential causes • Discover variable relationships • Process improvement techniques

34. Improve General Approach • Select improvement strategy • Critical Elements: • Process Improvement • Standard Operating Procedures • Best Practices • Brainstorming • Mistake Proofing • Cost / Benefit Analysis • Plan for Pilot • Run Pilot • Collect & Analyze Data

35. Piloting the Solution Plan and Prepare Pilot Execute Pilot Analyze Pilot Document and Transition Pilot: small scale, localized, high level of control, high level of scrutiny Scale-up: gradual, highly monitored Full-scale implementation: everyday hospital environment, monitoring plan Pilot solution on a small scale or for a specific period of time in a real business environment. Verifies that process meets CTQ’s

36. Change is never easy but not always bad….

37. Improvement Drive • You must Change to improve by definition • Change is hard and expensive • Change requires a collaborative plan This approach is not rocket science but not always used.

38. Implementation Needs

39. Importance of Cost Benefit

40. Control Phase • Purpose: • Ensures that the solution is sustained • Share the lessons learned in the improvement project • Steps: • Determine process capability • Implement process control • Goal: • A solution that is fully implemented • Statistically confirmed process improvement • Sustained Improvement supported with a control plan to ensure continuity

41. Statistical Process Control A key control and monitoring tool. Control charts are used to distinguish between common and special cause variation and use that understanding to control and improve processes.

42. Transition Process owner should understand the project, track key measurements and lead the effort to close any open transition items. Recognize and celebrate the contributions that made the team’s achievements possible.

43. What Does Lean Six Sigma Deliver? • Improved problem solving skills • More focused project management • Common Business Language • Defect • Customer • Consistent Business metrics • Improved performance – more consistent deliverables • Improved contribution

44. Potential Focus Areas • Marketing Sales • Call Centers • Strategic Sourcing/Purchasing • Operations • Distribution • Logistics • Finance • Billing • Etc.

45. Sustaining Improvements • Post-project metrics defining the success of the project • If you don’t: • It will cease to be important • You will Not sustain the gains • Metrics can/should be the new processes capability “Dashboards” • Common Language • Measurable and Sustainable Improvement Measurable and Sustainable Improvement ONLYIf You Keep Measuring

46. Level of Improvement

47. Sustainability

48. Fiscal PerformanceAccumulating Contribution

49. Where can you go from here? • These tools allow you to build what you want: • Better trained work force • Focused attention to objectives/goals • It is about: • Measuring • Recognizing • Accountability • Achievement

50. What does the future hold? Training and certification programs available