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Process

Improvement
Monitoring and changing
business processes.

Process Management
A business
process is a series of
steps that are followed in order to
carry out some task in
a business.

R&D

Product
Design

Customer
Manufacturing Marketing Distribution Service

Business functions making up the value chain

Traditional Push
Manufacturing Company

Forecast Sales

Make Sales from


Finished Goods
Inventory

Order components

Store
FG Inventory

Store RM
Inventory

Produce goods (WIP)


in Anticipation of Sales

Traditional Push
Manufacturing Company
Traditional push
manufacturing
Raw
materials

Large
inventories
Work in
process

Materials
Materials waiting
waiting
to
to be
be processed.
processed.

Finished
goods
Completed
Completed products
products
awaiting
awaiting sale.
sale.

Partially
Partially completed
completed products
products
requiring
requiring more
more work
work before
before
they
they are
are ready
ready for
for sale.
sale.

Lean Production
The
The five
five step
step process
process results
results in
in aa pull
pull manufacturing
manufacturing system
system
that
that reduces
reduces inventories,
inventories, decreases
decreases defects,
defects, reduces
reduces
wasted
wasted effort,
effort, and
and shortens
shortens customer
customer response
response times.
times.

Customer Places
an Order

Create Production
Order

Generate Component
Requirements

Lean Production is often called Just-In-Time (JIT) production.

Goods Delivered
when needed

Production Begins
as Parts Arrive

Components
are Ordered

Lean Production
Because lean thinking only allows production in
response to customer orders, the number of units
produced tends to equal the number of units sold.

The lean approach also results in fewer defects,


less wasted effort, and quicker customer response
times than traditional production methods.

Theory of Constraints
A constraint (also called a bottleneck) is anything that prevents
you from getting more of what you want.
The Theory of Constraints (TOC) is based on the observation
that effectively managing the constraint is the key to success.

The constraint in a system is determined


by the step that has the smallest capacity.

Theory of Constraints Only actions


2. Allow the
weakest link to
set the tempo.

that
strengthen the
weakest link in
the chain
improve the
process.

3. Focus on
improving
the weakest
link.

1. Identify the
weakest link.

4. Recognize that
the weakest link
is stronger.

Six Sigma
AA process
process improvement
improvement method
method relying
relying on
on customer
customer
feedback
feedback and
and fact-based
fact-based data
data gathering
gathering and
and analysis
analysis
techniques
techniques to
to drive
drive process
process improvement.
improvement.
Refers
Refers to
to aa process
process that
that generates
generates no
no more
more
than
than 3.4
3.4 defects
defects per
per million
million opportunities.
opportunities.

Six Sigma
The Six Sigma DMAIC Framework
Stage
Goals
Define
Establish the scope and purpose of the project.
Diagram the flow of the current process.
Establish the customer's requirements for the
process.
Measure Gather baseline performance data related to
the existing process.
Narrow the scope of the project to the most
important problems.
Analyze Identify the root cause(s) of the problems
identified in the Measure stage.
Improve Develop, evaluate, and implement solutions
to the problems.
Control Ensure that problems remain fixed.
Seek to improve the new methods over time.

Exhibit
1-8

Measurement Skills
A good manager
complements an
understanding of
strategy, risks, and
business processes with
data-driven analysis.
The key to effective analysis is to understand that
the question you are addressing defines what you
measure and how you analyze the data.

Measurement Skills
What
What net
net income
income should
should my
my company
company report
report
to
to its
its stockholders?
stockholders?
Measure
Measure and
and report
report historical
historical data
data that
that
complies
complies with
with applicable
applicable rules.
rules.
How
How will
will my
my company
company serve
serve its
its customers?
customers?
Measure
Measure and
and analyze
analyze mostly
mostly non-financial,
non-financial,
process-oriented
process-oriented data.
data.
Will
Will my
my company
company need
need to
to borrow
borrow money?
money?
Measure
Measure and
and analyze
analyze estimated
estimated future
future cash
cash
flows.
flows.