What Management Accountants

might want to know about Lean Six

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

Agenda

Introductions and Focus

Lean Six Sigma (and Change Management)
Overview
Key Tools and Technique Summary
Value Proposition
Questions/Discussion

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 cant Manage it.
Some Tools used to
measure and change.
3

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

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

Processes For Improvement

Lean Six Sigma provides a

process based approach to
improvement. It can be used to
improve any business process.

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
Where did
did it
it originate
originate
and
and how
how is
is it
it different?
different?

History of Change

Fords Assembly Line

GE Western - Hawthorne (20s -30s)
PDCA cycle originally conceived - Shewart

PDCA Made famous by his assistant - Demming

(Western Electric -30s -40s)

(The Demming Wheel) - became CQI model (40-50s)

Ohno / Toyodas - Toyota Processing System (TPS)

was already taking shape (40s-50s)
Harry / Shroeder start the Six Sigma process
initiative at Motorola (80s)
Womacks The Machine That Changed the
What
might
World Described Lean
a.k.a.
TPS (90s)be

next?

Drivers: Business and/or

Improvement

Customer

All Customers and

We NEED to listen to
their
Voices (VOC)

Bottom
Line

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

10

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

Example (Cont.)
Lower
Specification
Limit

Upper
Specification
Limit

Nominal
Diameter

2.5 mm
No Less Than

2.25 mm

Customer is
expecting 2.5
mm

No More Than But will allow

some variation
2.75 mm
within the Spec
range.
12

Example (Cont.)

Manufactured Roller
Bearing Diameter
Actual Micrometer
Measurements

13

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

Example (Cont.)
Lets Look at Some
Basic Statistics
Mean diameter = 2.50 mm
Standard Deviation = 0.125 mm

On Average
its OK
Its a
Variation
issue

15

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

2
16

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

3
17

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

4
18

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

5
19

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

6
20

How do Others Perform?

Defects per Million

IRS Tax Advice

(phone in)

1,000,00
0

1% of Hospitalized Patients Injured by

Negligence

100,000
Doctor Prescription Writing

10,000

Airline Baggage
Handling
Deaths caused by
anesthesia during
surgery

Average
Company

1,000
100
1

Best-inClass
5

Sigma Scale of
Measure

Domestic Airline
Fatality Rate

21

Understanding Six Sigma

STATISTICALLY
STATISTICALLY
Six
SixSigma
Sigmarefers
refersto
toaa
process
processthat
thatproduces
produces
only
only3.4
3.4defects
defectsper
per
million
millionopportunities.
opportunities.
Business
Strategy

Sigma

DPMO

308,537

66,807

6,210

233

3.4

Most US
Businesses

Goal

An overall strategy that encompasses your

organizations quality philosophy. It sets the
vision for achieving Six Sigma levels in key
processes.

Tools And Tactics A set of statistical tools and a disciplined

methodology used by specially trained
individuals to improve processes by reducing
variation and defects.
22

Six Sigma Method

DMAIC: To improve any existing product or process
Define

Who are the

customers and
what are their
priorities?

Measure

Analyze

Improve

What are the

most important
causes of the
defects?
How is the process
performing and
how is it
measured?

Control

How can we
maintain the
improvements?

How do we
remove the
causes of the
defects?
23

The Language Of Six Sigma

CTQ (Critical To Quality)

Big Y

Measurable Y (part of Big Y)

Input that affects Y

DPMO

Defects Per Million

Opportunities

Defect

Failing to deliver what the

customer expects

Variation

The enemy of predictable

output and customer
satisfaction
24

Customer Needs vs. Customer CTQs

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!

CTQs 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

25

Getting to the CTQs

Translating a customer need into a fully developed CTQ
Time from inquiry to
resolution (Y metric)

Example:

Quick Response

CTQ

5 minutes or less
(Target)

Not greater than 60

minutes
(specification / tolerance limit)
26

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.

27

Alternatives to Measuring

28

Specifications

Mean Time Between

Failures

% Defects
29

Analyze Phase
Purpose:
Identify the key sources of variation (vital Xs) 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

Xs

30

Analyze
Define Performance Objectives
State the improvement goal in statistical terms

31

Analyze: Graphical Tools

Find potential Xs using data analysis techniques on the data collected in
Measure.
Examples of some of the data analysis tools are shown here:
Boxplot of Sales in Dollars vs Shift

Pareto Chart of Shift Summary

14

25000

10

20000

100
80

60

8
6

15000

40

Percent

12

Count

30000

10000

20

5000

0
Shift Summary
Count
Percent
Cum %

0
AM

PM
Shift

PM
10
71.4
71.4

AM
4
28.6
100.0

Fitted Line Plot

Wait Time = 1.371 + 1.029 Customers In Line
20

S
R-Sq
R-Sq(adj)

1.22070
93.9%
93.4%

15
Wait Time

Sales in Dollars

35000

10

6
8
10
Customers In Line

12

14

16

32

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
33

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

34

Piloting the Solution

Plan
Planand
and
Prepare
PreparePilot
Pilot

Pilot: small scale,

localized, high level of
control, high level of
scrutiny

Execute
ExecutePilot
Pilot

Scale-up: gradual,
highly monitored

Analyze
AnalyzePilot
Pilot

Document
Documentand
and
Transition
Transition

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 CTQs

35

Change is never easy

but not always bad.

36

Improvement Drive

You must Change to improve by

definition
Change is hard and expensive
Change requires a collaborative plan

37

Implementation Needs

38

Importance of Cost Benefit

39

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
40

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.

41

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 teams achievements
possible.

42

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

43

Potential Focus Areas

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

Sustaining Improvements

Post-project metrics defining the success of the

project
If you dont:
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
ONLY If You Keep Measuring

45

Level of Improvement

Sustainability

Fiscal Performance
Accumulating Contribution

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

What does the future hold?

Training and
certification
programs
available

50

Thank You
Questions?

51