Professional Documents
Culture Documents
Introduction to Chapters 13
Part 1 of the book deals with some of the fundamentals of quality. The per-
ception of quality varies significantly depending on the type of industry,
economy and culture. However it is undeniable that in todays global econ-
omy quality forms an integral part of the business, and the differences in its
perception from the points of view of both the suppliers and customers are
gradually converging. The following topics are examined in this section:
Introduction
The methodology of implementing a quality management and improvement
programme can be varied. The programme is likely to have a different name
or label, such as TQM (Total Quality Management), Six Sigma, Lean Sigma,
BPR (Business Process Re-engineering) or Operational Excellence. Regardless
of the methodology or name of the continuous improvement programmes,
each organisation and programme team will certainly need to use a selection or
tools and techniques in their implementation process. Most of these tools and
techniques are simple to understand and can be used by a large population of
the company. However, there are also some techniques which are more com-
plex. These advanced techniques are used by specialists for specific problem
solving applications. It is vital that the tools and techniques are selected for the
appropriate team and applied correctly to the appropriate process. Therefore
the fundamental requirements for achieving repeatable and reliable results by
these tools and techniques is a clear understanding, both of the tools and tech-
niques themselves and the process by which they could be applied.
The objective of this chapter is to introduce to the reader the following
areas:
has a defined role and a technique may comprise the application of several
such tools.
Dale and McQuater (1998) have suggested the following definition of tools
and techniques.
A technique, on the other hand, has a wider application than a tool. There
is also a need for a greater intellectual thought process and more skill,
knowledge, understanding and training in order to use them effectively.
A technique may even be viewed as a collection of tools. For example,
Statistical Process Control employs a variety of the tools, such as graphs,
charts, histograms and capability studies, as well as other statistical methods,
all of which are necessary for the effective deployment of a technique. The
use of a technique may cause the necessity for a tool to be identified.
Examples of techniques are:
What is quality?
If you were to ask quality experts to define quality, it is likely that you would
receive many different answers, although you would elicit a set of common or
comparable themes, such as Fitness for purpose, Right first time, What the
Quality and operational excellence 5
Aesthetics are sensory characteristics such as a look, sound, taste and smell.
Perceived quality is based upon customer opinion.
The above dimensions of quality are not mutually exclusive, although they
relate primarily to the quality of the product. Neither they are exhaustive.
Service quality is perhaps even more difficult to define than product quality. A
set of service quality dimensions (see Table 1.2) that is widely cited has been
compiled by Parasuraman et al. (1984).
Tangibles are the physical appearance of the service facility and people.
Service reliability deals with the ability of the service provider to perform
dependably.
Responsiveness is the willingness of the service provider to be prompt in
delivering the service.
Assurance relates to the ability of the service provider to inspire trust and
confidence.
Empathy refers to the ability of the service provider to demonstrate care and
individual attention to the customer.
Availability is the ability to provide service at the right time and place.
Professionalism encompasses the impartial and ethical characteristics of the
service provider.
Timeliness refers to the delivery of service within the agreed lead time.
Completeness addresses the delivery of the order in full.
Pleasantness simply means the good manners and politeness of the service
provider.
Product Specifications
quality
Project
quality
Sustainable
Conformity culture
Process Organisation
quality quality
company can work towards a common objective. The product quality should
contain defined attributes of both numeric specifications and perceived dimen-
sions. The process quality, whether it relates to manufacturing or service
operations, should also contain some defined criteria of acceptable service
level so that the conformity of the output can be validated against these cri-
teria. Perhaps the most important determinant of how we perceive sustainable
quality is the functional and holistic role we fulfil within the organisation. It is
only when an organisation begins to change its approach to a holistic culture
emphasising a single set of numbers based on transparent measurement with
senior management commitment that the organisation quality germinates. We
have compiled (see Table 1.4) a set of key organisation quality dimensions.
Hierarchy of quality
Our hierarchy of quality approximately follows the evolution of quality man-
agement from simple inspection to full quality management system as shown
in Figure 1.2.
Quality and operational excellence 9
Total quality management has been defined in ISO 8402, 1995, as the
Management approach of an organisation, centred on quality, based on the
participation of all its members and aiming at long-term success through
customer satisfaction, and benefits to all members of the organisation and
society. The holistic view of TQM supports the idea that quality is the respon-
sibility of all employees and not just quality managers. TQM encompasses
10 Implementing Six Sigma and Lean
all three dimensions of quality as shown in Figure 1.1, with particular empha-
sis on organisational quality.
Cost of quality
One frequently asked question about quality management is, Can you quan-
tify the benefits? The answer to this question is yes we can, albeit approxi-
mately. The benefits are quantified in terms of not having the right quality
or the cost of poor quality. As shown in Figure 1.3, cost of quality is derived
Total cost of
quality
Control Failure
cost cost
Figure 1.3 Cost of quality. ( Ron Basu; Also Wilds model for cost of
quality. Text book, 6th edition, p. 650).
from the non-value added activities or wastes in the process and is made up
of costs associated with
Prevention
Appraisal
External failure
Internal failure
The emphasis will be on prevention rather than detection, thus the cost of
supervision and inspection will go down. Prevention will go up because of
training and action-orientated efforts. But the real benefits will be gained by a
significant reduction in failures both internal (e.g. scrap, rework, downtime)
and external (handling of complaints, servicing cost, loss of goodwill). The
total cost of quality will reduce over time as shown in Figure 1.4 (see also
Basu and Wright (1997, pp. 116117)).
The concept of the law of diminished returns argues that there is a point
at which investment in quality improvement will become uneconomical.
Therefore the ethic of continuous improvement should aim at the appropriate
or optimum level of quality and then sustain it.
Quality and operational excellence 11
Total cost
Cost
Prevention cost
Appraisal cost
Failure cost
Time
It has been two and a half years since the above statement was made.
During this time the Six Sigma revolution has created a huge impact in the
field of Operational Excellence, yet conflicting views are still prevalent.
Let us evaluate the arguments for both sides. On a positive note, the success
of Six Sigma in General Electric (GE) under the leadership of Jack Welch is
undisputed. In the GE company report of 2000 their CEO was unstinting in
his phrase: Six Sigma has galvanised our company with an intensity the likes
of which I have never seen in my 40 years of GE. Even financial analysts
and investment bankers compliment the success of Six Sigma in GE. An ana-
lyst at Morgan Stanley Dean Witter recently estimated that GEs gross annual
benefit from Six Sigma could reach 5% of sales and that share value might
increase by between 10% and 15%.
However the situation is more complex than such predictions would suggest.
In spite of the demonstrated benefits of many improvement techniques such
as TQM, BPR and Six Sigma, most attempts by companies to use them have
ended in failure (Easton and Jarrell, 1998). Sterman et al. (1999) conclude that
companies have found it extremely difficult to sustain even initially successful
process improvement initiatives. Yet more puzzling is the fact that successful
improvement programmes have sometimes led to declining business perform-
ance causing lay offs and low employee morale. Motorola, the originator of
Six Sigma, announced in 1998 that its second quarter profit was almost non-
existent and that consequently it was cutting 15 000 of its 150 000 jobs!
12 Implementing Six Sigma and Lean
To counter heavyweight enthusiasts like Jack Welch (GE) and Larry Bossidy
(Allied Signal) there are sharp critics of Six Sigma. Six Sigma may sound
new, but critics say that it is really Statistical Process Control in new clothing.
Others dismiss it as another transitory management fad that will soon pass.
It is evident that like any good product Six Sigma should also have a
finite life cycle. In addition, Business Managers can be forgiven if they are
often confused by the grey areas of distinction between quality initiatives
such as TQM, Six Sigma and Lean Sigma.
Against this background, let us examine the evolution of total quality
improvement processes (or in a broader sense Operational Excellence) from
Ad hoc Improvement to TQM to Six Sigma to Lean Sigma. Building on the
success factors of these processes the key question is: How do we sustain the
results? The author has named this sustainable process as FIT SIGMA (see
Basu and Wright, 2003).
What is FIT SIGMA? Firstly, take the key ingredient of quality, then add
accuracy in the order of 3.4 defects in 1 000 000. Now implement this across
your business with an intensive education and training programme. The result
is Six Sigma. Now lets look at Lean Enterprise, an updated version of classi-
cal Industrial Engineering. It focuses on delivered value from a customers
perspective and strives to eliminate all non-value added activities (waste) for
each product or service along a value chain. The integration of the complemen-
tary approaches of Six Sigma and Lean Enterprise is known as Lean Sigma.
FIT SIGMA is the next wave. If Lean Sigma provides agility and efficiency,
then FIT SIGMA allows a sustainable fitness. In addition the control of vari-
ation from the mean (small Sigma ) in the Six Sigma process is transformed
to company-wide integration (capital Sigma ) in the FIT SIGMA process.
Furthermore, the philosophy of FIT SIGMA should ensure that it is indeed fit
for the organisation.
The road map to FIT SIGMA (see Figure 1.5) contains three waves and
the entry point of each organisation will vary:
First Wave: As Is to TQM
Second Wave: TQM to Lean Sigma
Third Wave: Lean Sigma to FIT SIGMA
1
Frederick W. Taylor a late 19th century American is remembered as the father of
scientific management. His philosophy was that management, by scientific means, should
find the best method of doing a job (method and equipment). Once the best method was
found workers were trained and offered incentives to increase productivity. Supervisors
were employed to maintain the best method. Workers were not expected to make
suggestions; their job was to do what they were told while management did the thinking.
First wave Second wave Third wave
Customer SPC
focus tools
Value Shift from
management Senior variation ()
management to
Six Sigma Deployment
Management review integration()
tools plan
accounting (S&OP)
Total Sustainable
AS Ad hoc
IS
quality Six Sigma Lean Sigma Fit competitive
improvement
management fitness
Lean
Top Company Manufacturing
Lean
management wide manufacturing
commitment culture
that is credited with the formal initiation of the first wave of Operational
Excellence. This Industrial Engineering approach was sharpened by
Operational Research and complemented by operational tools such as
Management Accounting.
During the years following the Second World War, the first wave saw
through the rapid growth of industrialisation, but in the short term the focus
seemed to be upon both increasing volume and reducing the cost. In gen-
eral, improvement processes were ad hoc, factory centric and conducive to
pockets of excellence. Then in the 1970s the holistic approach of TQM ini-
tiated the second wave of Operational Excellence. The traditional factors of
QC and QA are aimed at achieving an agreed and consistent level of qual-
ity. However TQM goes far beyond mere conformity to standard. TQM is a
company-wide programme and requires a culture in which every member of
the organisation believes that not a single day should go by within the organi-
sation without in some way improving the quality of its goods and services.
Six Sigma began back in 1985 when Bill Smith, an engineer at Motorola,
came up with the idea of inserting hard nosed statistics into the blurred philos-
ophy of quality. In statistical terms, Sigma () is a measure of variation from
the mean and the greater the value of Sigma the fewer the defects. Most com-
panies produce result at best around four Sigma or more than 6000 defects. By
contrast at the Six Sigma level, the expectation is only 3.4 defects per million
as companies move towards this higher level of performance.
Although invented in Motorola, Six Sigma has been experimented with by
Allied Signal and perfected at GE. Following the recent merger of these two
companies, GE is truly the home of Six Sigma. During the last 5 years, Six
Sigma has taken the quantum leap into Operational Excellence in many blue
chip companies including DuPont, Ratheon, Ivensys, Marconi, Bombardier
Shorts, Seagate Technology and GlaxoSmithKline.
The key success factors differentiating Six Sigma from TQM are:
The emphasis on statistical science and measurement.
A rigorous and structured training deployment plan (Champion, Master
Black Belt, Black Belt and Green Belt).
A project focused approach with a single set of problem solving techniques
such as DMAIC (Define, Measure, Analyse, Improve, Control).
Reinforcement of Juran tenets (Top Management Leadership, Continuous
Education and Annual Savings Plan).
Following their recent application in companies like GlaxoSmithKline,
Ratheon, Ivensys and Seagate, the Six Sigma programmes have moved to the
Lean Sigma philosophy, which integrates Six Sigma with the complementary
approach of Lean Enterprise. Lean focuses the companys resources and its sup-
pliers on the delivered value from the customers perspective. Lean Enterprise
begins with Lean production, the concept of waste reduction developed from
industrial engineering principles and refined by Toyota. It expands upon these
principles to engage all support partners and customers along the value stream.
Common goals to both Six Sigma and Lean Sigma are the elimination waste
and improvement of process capability. The industrial engineering tools of Lean
Enterprise complement the science of the statistical processes of Six Sigma. It
is the integration on these tools in Lean Sigma that provides an Operational
Excellence methodology that addresses the entire value delivery system.
Operational Excellence
In agreement with the waves of quality management, we have developed a
road map towards Operational Excellence and we note a convergence between
the two. Operational Excellence (OE) is a broader programme of improving
and sustaining business performance in which quality management is embed-
ded. OE is synonymous with Business Excellence and it also encompasses
other focused excellence programmes such as Manufacturing Excellence,
Service Excellence, Marketing Excellence and Supply Chain Excellence. For
most companies to be the very best in their industry and stay there is a long
journey which will need a long-term improvement plan of, say, 510 years.
Figure 1.6 helps us ascertain the steps towards achieving Operational
Excellence.