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Lean Six Sigma

Applications to Transactional
& Service Process
Environments
WHAT IS VARIATION?
Obtaining different results when the same thing is done
repeatedly

WHAT IS WASTE?
ANYTHING not done right the first time

ANYTHING that introduces delay into a process

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Objectives
Understand the market and workplace forces driving the
need for Lean Six Sigma in the Transactional environment

Key Lean Six Sigma Tenets

Key differences between Manufacturing and


Transactional/Service Environments

Case Study Transactional Environment (Quoting)

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Traditional Performance Paradigm

In the past, companies


believed a gain in one
performance area Shorter Improved
Cycle Process
required a trade off in Times Quality
one or more of the other
dimensions.

For example, to decrease


cycle time firms hired
more people, which
Lower
drove up costs, while Costs
process quality suffered
to get tasks completed.

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New Performance Paradigm
The new paradigm says a
performance gain in one area
requires or will result in
Shorter Improved
performance gains in the Cycle Process
other dimensions. Times Quality

For example, achieving a


sustainable decrease in cycle
times require that rework,
errors, and other
inefficiencies be eliminated in
the process, resulting in
Lower
higher quality and lower Costs
costs.

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The Lean Six Sigma Strategy
To implement the new paradigm,
Lean Six Sigma
companies turned to two major
process improvement strategies
Lean and Six Sigma. Shorter Improved
Cycle Process
Lean focuses on reduced lead Times Quality
time and reduced costs.

Six Sigma focuses on improved


quality and reduced costs.

Lean Six Sigma combines the


benefits and power of both Lower
strategies. Costs

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Lean Production History
Concept pioneered by Toyota

Adopted by other Japanese manufacturers

Discovered much later by Western manufacturers

Known by many names:


Toyota Production System
Just-In-Time
Lean production

Originally focused on reducing waste in manufacturing

Now huge gains are being achieved by applying Lean to


transactional and service environments

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Lean Focuses on Eliminating the Seven Deadly
Wastes (TIM T. WOOD)
Waste in Transportation

Waste of Inventory (Excess Stock on Hand)

Waste of Movement (Excess Worker Motion)

Waste of Talent (Employee knowledge, talents)

Waste of Waiting (Idle Time)

Waste of Overproduction (Currently Unneeded Stock)

Waste of Over Processing (Misused Capacity)

Waste of Defective Products

The Seven Deadly Wastes are inherent in EVERY process


Lean provides the methodology, tools, and techniques to
reduce and eliminate them!
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Six Sigma History

Motorola was the first advocate in the 80s; gathered


momentum in late 80s/early 90s

Six Sigma involves use of statistical tools and structured


problem-solving approach to attack high payback
projects

Project implementers called Black Belts and Change


Agents

Also being applied very successfully in transactional &


service environments

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Six Sigma Terminology
Sigma () = Standard Deviation
Key measure of variability
Emphasizes the need to control both the average and variability of a
process

Six Sigma Quality


Sigma Quality Level (SQL): measure used to indicate how often
defects are likely to occur
Realization that 99% Yield is not good enough, examples:
Unsafe drinking water almost 15 minutes each day
2 short or long landings at most major airports each day
No electricity for almost 7 hours per month

Six Sigma Quality = 3.4 Defects per Million Opportunities (DPMOs)

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Lean Six Sigma Framework
Define: Clearly define the problem that needs to be solved

Measure: Map the process & gather data


Processes may be mapped already; if not map them
Data may be available; if not, get it; or utilize information / tribal knowledge to estimate

Analyze: Brainstorm or use Statistical methods to find root cause


Use Cause & Effect Diagram or 5-Why
Statistical methods: Hypothesis testing

Improve: Develop potential solutions that address root causes


Rank order solutions (if more than 1)
Test & Validate Solutions

Control: Put a plan in place to hold the gains


Error-Proofing: Make mistakes impossible OR
Make mistakes so obvious, they can be corrected immediately
Implementation plan: Assign accountabilities and responsibilities

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How do YOU define (in Payroll):
The CUSTOMER

Waste?

Poor Quality? Exercise!


Capacity?

Costs?

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Why Do These Problems Require
Both Lean and Six Sigma?
Inconsistent processes/quality negatively affects customers & business

In a value stream, material spends 95% of its time waiting

Poor quality increases cycle times


10% rework/scrap can increase cycles time by 40% & reduces capacity

Slow cycle times reduce the rate of quality improvement

Capacity problems are masked by slow cycle times

Lean tools accelerate cycle time reduction

and Six Sigma brings a process under control

Lean Six Sigma optimizes capacity, reduces lead time,


and eliminates variability in all processes

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Six Sigma and Lean
Contributions
Six Sigma is the Unifying Framework
Six Sigma provides the over-riding methodology
(DMAIC and DFLSS)
Six Sigma provides the improvement infrastructure
Six Sigma provides the burning platform for improvement

Lean provides:
Key measure and analyze tools to visualize problems and
pin-point where to improve
Powerful improvement tools to turbo-charge improvement
efforts by reducing waste and increasing process speed

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Lean Six Sigma Employs the Evolved
Deployment Model for Success
Train Black Belts and Green Belts in
Lean Six Sigma DMAIC and Team
Train Business Leaders to use a Leadership
rigorous Value Based Project
Selection process Implement a Projects in Process
Focus management system and stage
Analyze each business to gating
understand relative opportunity
of process improvement vs. Train Project Sponsors to ensure
Strategy accountability and long-term results
offering complexity reduction Execution
Integration
Leverage experts to support
reduction of offering complexity

Building
Infrastructure
Quality of Commitment
Thinking

Rapidly deploy the best people as Black Belts in a critical mass


Create an effective organization of improvement resources in line organizations
Implement a rigorous process for measurement and tracking of project financial results
Integrate Lean Six Sigma into the daily management practices of the business
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Lean and Six Sigma Are Essential
for the Success of the Company
Lean Six Sigma
Speed + Waste Reduction + Quality + Cost +
Implicit Infrastructure Explicit Infrastructure
Goal Reduce waste and increase Goal Improve performance on
process speed Customer Critical Requirements

Focus Bias for action/ Implementing Focus Use DMAIC with Total Quality
Toyota tools Management tools to eliminate variation

Method Kaizen events, Value Stream Method Management engagement,


Mapping 1% dedicated as Champions and Black
Belts

Lean Speed Enables Six Sigma Quality Enables


Six Sigma Quality Lean Speed
(Faster Cycles of (Fewer Defects Means
Experimentation/learning) Less Time Spent on Rework)

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Lean Six Sigma Must Be Applied to
All Processes, Not Just Manufacturing
Customer Facing Processes
Pricing/Quotations
Order Management
Customer Service
Accounts Receivable

Internal Business Processes


Engineering Change Notice Cycle
Production Scheduling Cycle

All can and should be attacked using Lean Six Sigma


quality and time tools

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Manufacturing vs
Transactional
Environments
Key Differences between Manufacturing and
Transactional Environments
Transactional/Service Environments Less Tangible
Often electronic-based

Processes often:
Decision / approval-based
Interdependent (non linear) & Cross-Functional

Quality, defects, waste, etc are relatively invisible (not


measured) or not evident until experienced by customer

Because of this, we need to think more broadly about the


Lean Six Sigma discipline and apply the right tools for the
problems at hand

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Case Study:
Improving Quoting
Process