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Transforming your business operations with

the Lean Six Sigma toolkit


Entrepreneurial Roundtable  University of Chicago Booth School of Business

John A. “Jack” Kahler


December 21, 2009
How do I serve my customers?

What value does my work create?

All of us are in operations.


Kano diagrams plot customer
expectations against satisfaction
High Satisfaction

Delighted
Expectations Not Met Customers

Expectations Met
Basic
Expectations

Low Satisfaction

Page 3
Kano diagrams plot customer
expectations against satisfaction
• Weston Chicago found
that guests were lonely
away from home.
Introduced successful
evening social program.
• Starwood changed its
complimentary massage
because guests wanted
massage to last longer.
Paid massage revenues
hit an all-time high, 30%
over the previous year

Page 4
Do you hear the Voice of the Customer?

• Where to listen: • What to do with the info:


– Point-of-use observation – Identify unmet needs
– User comment sites – Identify Critical-To-Quality
– Interviews & surveys requirements
– Customer complaints – Convert VOC to
– Sales reporting measurable attributes
– Lost sales or customers
• What to listen for:
– Likes & Dislikes
– Apologies & Forgiveness
– Wish List
Page 5
Value links to both Customer
Service and Business Metrics
• Core Product or Service Attributes
Service • Experience Enhancers

• Does everything we do produce the


Quality intended result?

• Did we provide our products or services


Delivery in the shortest amount of time?

• Do we provide our products or services


Cost at the least possible cost?

• Can we efficiently adapt to meet our


Flexibility customers’ broad needs?

Page 6
Would you pay for these experiences?

• Waiting at the doctors office


• The drive-through kid forgetting
your French fries
• The clerk searching for your file
• Making 3 copies of your
mortgage application
• Repeating your account number
to a customer service rep
• Calling your Primary Care
Physician for a specialist referral
If you’re a customer of these industries, you already do!
Page 7
The benefits of improvement

• Increase customer satisfaction


• Increase available resources
• Increase cash flow
• Decrease inventory
• Decreased lead times
• Improve the bottom line

Page 8
How does business measure value?

Before After % Improvement


Sales $1,000 $1,000
Variable Costs 600 540 10%
Operating Margin 400 460 15%
Fixed Costs 300 300
Net Profit (Loss) $100 $160 60%

Page 9
Improvement in Layers
Lean attacks waste
• Improve efficiency across the entire value chain
• Align production with demand
• Reduce defects, costs and inventory
• Increase quality and flexibility
• Improve delivery, quality and safety

Six Sigma reduces variation


• Rigorous analysis of individual activities
• Broadly define quality, but closely define
metrics
• Reveals root causes and effects
• Formal hypothesis testing
• Ongoing data monitoring

Page 10
The first challenge is seeing waste

Making more
Over-Production than you can sell
People, Products,
Transportation Information
Walking, Bending,
Motion Turning
Storing parts or
Inventory material
Not doing It right
Defects the first time
Information,
Waiting parts, “your turn”
Under-utilizing
Skills people & ideas
Performing more
Over-Processing steps than needed
Un-utilized
Capacity capabilities

Page 11
S I P O C outlines key process elements

Suppliers Inputs Process Outputs Customers

• Consulting • Airline receipts • Complete T&E rep’t • Invoices • Clients


Manager • E-mail to Acct’ing
• Food receipts • Expense • Consultants
• Consultants • Sort by client Reimburse-
• Mileage • Sum and Balance
• Management
• Contractors ments
• Other receipts • Match receipts to • IRS
• Payroll Expenses • Summary
• Hours reports
Processing • Review expenses
Company • Billing Codes • Save to PDF • Payroll
• Descriptive • Enter data to A/P Adjustments
notes • Prepare and • Quarterly
• T&E transmit Invoices tax reports
Spreadsheet • File T&E's
• Report totals
• A/P Trial
• Expense policy Balance
• Enter expenses into
and thresholds payroll run
• Process payroll
Page 12
Value Stream Maps show the proportion
of value-added and waste in cycle time

Page 13
Spaghetti Diagrams diagram
movement in a workcell
• As-Is Process
– Operator travels 3,215 feet
Eject Stamping Press Steel – Cycle time 98 minutes
Decoiler

Tool Grinder
Tool and Die
Kanban Grinder
Bench

Inspection
Scrap
Table

Page 14
Spaghetti Diagrams diagram
movement in a workcell
• Improvements
– Improved workcell layout
Steel
– Point-of-Use toolboard
Eject Stamping Press
Decoiler – Improved machine controls
Toolboard – Improved inspection equipment
and lighting
– Visual Production Board &
Tool Inspection instructions, signal for supplies
Scrap Kanban Table Grinder and part removal
– KANBAN for perishable tools

• To-Be Process
– Operator travels 375 feet
– Cycle time 14.9 minutes

Page 15
Cellular Operations
• Arrange workstations and equipment to create a
smooth flow with minimal transportation
• Benefits
– Flexibility
– Speed
– Teamwork
– Real-time coordination
– Small batches
– High-quality of work

Page 16
Improve performance at workstations
and in work areas using 5-S

 Sort
 Set In Order
 Shine
 Standardize
 Sustain

Page 17
“Poka-Yoke” means mistake-proofing

• Lock-in/Lock-out
• Use unusual physical
attributes
• Make information
stand out
• Use Dispensers
• Use Checklists
• Kit only what’s needed
• Counting and ordering
Page 18
SMED/Rapid Changeover
• Eliminate total wasted
time or useless
operations
• Convert Internal into
External operations
• Simplify fittings and time
consuming fasteners
• Work in teams
• Reduce or eliminate
adjustments and test
runs.

Page 19
One Piece Flow matches effort to
demand and reveals problems

14 Days

1 Day

Page 20
Use “Kanban” signals to match
production with customer demand
• Pull system –the actual
use of a resource or
input dictates when to
restock or replenished
• Kanban –a visual card
or sign which is used as
signaling system to
trigger action

Page 21
Just In Time
• JIT -produce only what is required, in the
correct quantity and at the correct time
• Benefits
– Improve return on investment
– Reduce inventory (raw material, components, WIP,
finished goods)
– Reduce carrying cost
– Increase efficiency

Page 22
Visual Management

• Visual management allows you to quickly


grasp the current situation in real time
– What to work on next
– Queue size
– Current pace
– Current quality

Page 23
Why the best golfer changes his swing

• Be first to “raise the bar”


• Observe and learn about your business
• Solve the problems that emerge
• What’s left were deeper problems

Page 24
So who is the better golfer?

Page 25
The Six Sigma DMAIC Methodology
Define Measure Analyze Improve Control
• DPO • Blueprints • Multivariate • Designed • Control
• Cost of Poor • Process Analysis Experiments Plan
Quality Sheets • SPC & - Full Factorial • Operator
• Surveys • Metrics Charting - Fractional Illustrations
• Basic Stats - Comparison • Operator
• Warranty • Flow
Charts - Hypothesis • Measurement Instructions
• Pareto Charts
- Basic DoE System • Error Proofing
• Flow Charts • Linkage
• Check Sheets Analysis
• SIPOC Matrices • Automated
• Histograms • Capability Control
• VOC • FMEAs
• Scatter • Statistical • QMS
• Kano Model • Measurement
Diagrams Tolerance
System • Variation
• CTQ Trees of Process
Analysis • Regression Monitoring
• Project Charter
• Capability
Analysis

Page 26
Is 99% good enough?

99% Good (3.8 Sigma) 99.99966% Good (6 Sigma)


20,000 lost articles of mail per hour 7 lost per hour

Unsafe drinking water for 15 minutes / day 1 unsafe minute every 7 months

5,000 incorrect surgical procedures / week 1.7 incorrect operations per week

2 short or long landings per day 1 short or long landing every 5 years

200,000 wrong drug prescriptions per year 68 wrong prescriptions each year

No electricity for almost 7 hours per month 1 hour without power every 34 years
Lean Six Sigma Breakthrough Management Group with Neil DeCarlo

Don’t forget, we all pay for poor quality!


Page 27
But… where do I begin?

© 2009 Avocus Group LLC. All Rights Reserved.


Begin by… Seeing… Doing… Knowing

Begin by
• Ask Customers what they
Doing • Learn what you don’t
know
really want
• Nothing succeeds like
• Observe your business in • Stop and attack waste success
person
• Experiment with basics • Always be better, but
• See Value and Waste never be perfect
• DO try this at home!
• Work as a team
Begin by Begin by
Seeing Knowing

Page 29
Raise the bar… and begin again

Begin by Doing • Learn what you don’t know


• Ask Customers what they • Nothing succeeds like
really want success
• Observe your business in • Stop and attack waste • Always be better, but never
person • Experiment with basics be perfect
• See Value and Waste • DO try this at home!
• Work as a team
Begin by Begin by
Seeing Knowing

Begin by Doing • Learn what you don’t know


• Ask Customers what they • Nothing succeeds like
really want success
• Observe your business in • Stop and attack waste • Always be better, but never
person • Experiment with basics be perfect
• See Value and Waste • DO try this at home!
• Work as a team
Begin by Begin by
Seeing Knowing

Page 30
Free and cheap resources
Free Cheap
• Six Sigma Material offers good basic • Open Source Six Sigma has a broad array of
instruction and free templates www.six- resources for training and implementation.
sigma-material.com
www.opensourcesixsigma.com
• www.isixsigma.com has articles, case
studies and products geared to the lean six • Getting Things DONE, The Art of Stress-
sigma practitioner Free Productivity, by David Allen.
• Several excellent blogs offer instruction, • There’s also an Outlook Add-In at
tips, case studies and tools for the Lean Six https://gtdsupport.netcentrics.com
Sigma community. Here are a few of our • The Lean Six Sigma Pocket Toolbook by
favorites: George, Rowlands et al 2005 McGraw-Hill
– www.gembapantarei.com
– Improve with Me (passthebuck.wordpress.com)
• The Goal, by Eliyahu Goldratt & Jeff Cox
– www.productivitycafe.com 1984 North River Press
– www.leanblog.org • Lean Thinking by James Womack & Daniel
– www.evolvingexcellence.com Jones 2003 Free Press
– www.worthsolutions.com/leanblog/ • The Six Sigma Handbook by Thomas
Pyzdek 2003 McGraw-Hill

Page 31
Thank you and good luck!

1755 South Naperville Road, Suite 100


Wheaton, IL 60189

AVOCUS GROUP LLC Jack Kahler (630) 510-3212 Direct


jkahler@avocusgroup.com

Visit our website at www.avocusgroup.com

© 2009 Avocus Group LLC. All Rights Reserved. Page 32


Thank you!

“The secret of getting ahead is getting started.

“The secret of getting started is breaking your


complex overwhelming tasks into manageable
tasks, and then starting the first one.”
- Mark Twain

© 2009 Avocus Group LLC. All Rights Reserved.


Thank you!

“The most dangerous kind of waste is the waste


we do not recognize.”
- Shigeo Shingo

© 2009 Avocus Group LLC. All Rights Reserved.


Who is Avocus Group LLC?

• Results-driven business improvement utilizing


Lean Six Sigma and Activity-Based Costing

• Lean Six Sigma certification training, mentoring,


execution and program management

• Chicago-Based, founded in 2000

© 2009 Avocus Group LLC. All Rights Reserved. Page 35


Thank you!

“There is nothing so useless as doing efficiently


that which should not be done at all.”
- Peter F. Drucker

© 2009 Avocus Group LLC. All Rights Reserved.


Thank you!

“Continuous improvement is not about the things


you do well - that's work.

“Continuous improvement is about removing the


things that get in the way of your work.

“The headaches, the things that slow you down,


that’s what continuous improvement is all about.”
- Bruce Hamilton

© 2009 Avocus Group LLC. All Rights Reserved.


Our Clients include leading Fortune
1000 and middle-market firms
S O S O T
O S

S O T O T
S O T

O T
T O T

S O T
S O
O T

S O
T
O T

O T
S O S Strategy
O Operations
© 2009 Avocus Group LLC. All Rights Reserved. T IT Services
Page 38
Thank you!

“If you need a new process and don't install it,


you pay for it without getting it.”
- Ken Stork

© 2009 Avocus Group LLC. All Rights Reserved.


Thank you!

“There are many experts on how things have


been done up to now. If you think something
could use a little improvement, you are the
expert.”
- Robert Brault

© 2009 Avocus Group LLC. All Rights Reserved.


About Jack Kahler

• Jack Kahler is founder and president of Avocus Group LLC with over
twenty years’ supply chain and operations management experience
in a wide variety of industries.
• Jack has directed numerous performance improvement initiatives
for Fortune 1000 and emerging firms utilizing lean and six sigma
methodologies.
• Prior to Avocus Group, Jack was National Supply Chain Practice
Director with Braun Consulting in Chicago. Jack was also a senior
manager in Ernst & Young’s Performance Improvement consulting
practice, and manager with Price Waterhouse in Chicago.
• He has written several papers and is a frequent lecturer on
operations management and lean methods.
• Jack also serves on the School District 41 Board of Education in Glen
Ellyn, Illinois.

© 2009 Avocus Group LLC. All Rights Reserved.


Thank you!

“Time waste differs from material waste in that


there can be no salvage. The easiest of all
wastes and the hardest to correct is the waste
of time, because wasted time does not litter
the floor like wasted material.”
- Henry Ford

© 2009 Avocus Group LLC. All Rights Reserved.


Thank you!

“The first rule of any technology used in a business is that


automation applied to an efficient operation will
magnify the efficiency.

“The second is that automation applied to an inefficient


operation will magnify the inefficiency.”

- Bill Gates

© 2009 Avocus Group LLC. All Rights Reserved.