Leading Lean Six Sigma

Transforming Operations with
the Lean Six Sigma Toolkit
Leading Lean Six Sigma

Agenda
• Objectives & Introductions
• The process improvement toolkit
• What is Lean Six Sigma?
• Two paths to better business
• What can you expect to accomplish?
• Q & A
Descartes EVOLUTION 2009 User Conference
© 2009 Avocus Group LLC. All Rights Reserved.
Page 2

Session Objectives
• Do we really need to explain why?
• Lean Six Sigma in an improvement framework
• The Lean Six Sigma purpose and process
• Two paths to implementing Lean Six Sigma
• What you should expect from a LSS program
Page 3

Who is Avocus Group LLC?
• Simply stated, we provide the best value in
terms of experience, cost and results
• Results-driven business improvement
• Lean Six Sigma certification training, mentoring,
execution and program management
• We are change agents, delivering tangible
benefits to our clients
• Chicago-Based, founded in 2000
• Global client base, global solution delivery
Page 4

Our Clients include leading Fortune
1000 and middle-market firms
Page 5 T
O
S
IT Services
Operations
Strategy
TO
TO
TOS
TOS
T
OS
TO
TOS
TO
O S
TO
OS
S TO
T
OS
TO
S O

Small savings create big profits
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 6

Our Operations Improvement Toolkit
Page 7
Leadership
and
Execution
Activity-
Based
Costing
Lean
Six Sigma
Theory of
Constraints

Lean and Six Sigma have
complimentary goals and approaches
Lean
• Efficient operation of the
entire value chain
• Eliminate Waste
• Align production with
demand
• Reduce inventory
• Increase flexibility
• Improve process safety
and efficiency
Six Sigma
• Rigorous analysis of
individual activities
• Eliminate Variability
• Broadly define quality, but
closely define metrics
• Statistical analysis of root
causes and effects
• Formal hypothesis testing
• Ongoing data monitoring
Page 8

Lean focuses on standardization,
improvement and sustainability
Stability
Process
Improvement
Cultural
Change
Page 9

• 5S To improve and maintain cleanliness
and orderliness
• 7W Eliminate wastes in a structured way
• Standardized Work Instructions for work
operations
• Increase safety and ergonomics in
working places
• Visual Management Use standard
approaches in ground markings, info-
boards, clothes
• Key Performance Indicators Provide
performance indicators and targets to all
levels
Lean strives to make processes
repeatable, simple and safe
Stability
Process
Improvement
Cultural
Change
Page 10

• Value Stream Mapping to identify
improvement opportunities
• Set-Up Reduction to minimize
changeover time and increase flexibility
• Productive Maintenance increasing
equipment efficiency and availability
• Quality improvements with a goal of Zero
defects as the quality standard
• Zero Inventory and Pull Production
Produce what is needed, when it’s
needed and nothing else
Process
Improvement
Cultural
Change
Stability
Page 11

• Continuous Improvement Sustain
improvements with continuous search for
new internal and external opportunities
• Continuous development Involves
developing and training employees in
improvement techniques and required
behaviors
• Ongoing Management Focus Supporting
team work and responsibility assumption
at all levels
• Work Teams Delegate work to teams and
reduce non-value-added oversight
• Leader Development Promote leadership
and coaching capabilities and encourage
initiative
Cultural
Change
Stability
Process
Improvement
Page 12

5-S and 7 W's are at the core of Lean
Implement 5-S
• Sort
• Systemize
• Sweep & Clean
• Standardize
• Self-Discipline
Eliminate 7 Wastes
• Overproduction
• Inventory
• Transportation
• Over-processing
• Idle Time
• Operator Movements
• Poor Quality
Page 13

What is a Value Stream Map?
Page 14

Six Sigma
• Overall objective is to reduce process variation
• Detailed analytical, data-driven methodology for
eliminating waste and defects from discrete
activities
• Based on established statistical process control
techniques, data analysis methods and systematic
thinking
• Ultimately strives for 3.4 defects per million
events
Page 15

So who is the better golfer?
Page 16

Graphical View of Six Sigma
Page 17
USL = 6σLSL = - 6σ Target +3σ
Measured Process
Customer Requirements (USL, LSL) defined at ±
Six Sigma from the measured Process Mean

How do Sigma Levels relate to
real-world defect rates?
Page 18
1,000,000
100,000
10,000
1,000
10
1
0.1 1 2 3 4 5 6 7
IRS Tax Advice
Bogie Golf
Baggage HandlingBurglary Case Closure
Tech Center Wait Time
Order Processing
Airline FatalityFlight Delays
Sigma Level

The Six Sigma DMAIC Methodology
Page 19
Define
•DPO
•Cost of Poor
Quality
•Surveys
•Warranty
•Pareto Charts
•Flow Charts
•SIPOC
•VOC
•Kano Model
•CTQ Trees
•Project Charter
Measure
•Blueprints
•Process
Sheets
•Metrics
•Flow
Charts
•Linkage
Matrices
•FMEAs
•Measurement
System
Analysis
•Capability
Analysis
Analyze
•Multivariate
Analysis
•SPC &
Charting
•Basic Stats
- Hypothesis
- Basic DoE
•Check Sheets
•Histograms
•Scatter
Diagrams
•Regression
Improve
•Designed
Experiments
- Full Factorial
- Fractional
- Comparison
•Measurement
System
Analysis
•Capability
•Statistical
Tolerance
of Process
Control
•Control
Plan
•Operator
Illustrations
•Operator
Instructions
•Error Proofing
•Automated
Control
•QMS
•Variation
Monitoring

Your best implementation path
depends on where you are
“The High Road”
“The Low Road”
• Top-Down Approach
• Executive Sponsorship
• Big-Picture Authority
• Appropriate Budget
• Bottom-Up Approach
• Usually Mid-Level Sponsor
• Process or Functional
Authority
• Minimal Budget
Page 20

Implement
Projects
Implement
Projects
The "High Road" Implementation
Process Overview
Page 21
Build
Project
Portfolio
Plan & Staff
Projects
Implement
Projects
Implement
Quick Hit
Projects
Transition to
Process
Owners
Monitor &
Control

Process Overview
Page 22
BuildProjectPortfolio Select Program
Champion
Confirm Strategy &
Goals
Conduct ABC Analysis
Conduct TOC Analysis
Identify Opportunities
Analyze Benefits and
Returns
Select Projects
Form PMO
Plan&StaffProjects
Identify Project
Champions
Create Project Plans
Determine Staff
Requirements
Select Staff for Belt
Assignments
Conduct Belt training
Conduct Manager
Training

Process Overview
Page 23
ImplementProjects Implement Metrics
Rapid Improvement
Workshops
Visual Management
Standard Work for
Operators &
Managers
DMAIC / Reduce
Variation
Assess Management
Capability
IdentifyQuickHitProjects
Kaizen Blitz
5S
7W
Supplier Improvement
Visual Management
Implement Standard
Work
Assess Management
Capability

Process Overview
Page 24
TransitiontoProcessOwners
Confirm Standard
Work for Managers
in place
Complete manager
assessments
Transition staff
where needed
Conduct additional
training
Coach and shadow Monitor&Control
Implement Balanced
Scorecard
Establish
management by
exception
Control chart reviews
Stress the system –
schedule goal
increases
Confirm correlation
to financial results

The "Low Road" Implementation
Process Overview
Page 25
Implement
Projects
Implement
Projects
Identify
Opportunities
Plan Projects
Implement
Quick Hit
Projects
Monitor &
Control
Communicate
Results

Each approach has
benefits and challenges
Page 26
Challenges Benefits
High-Road
• Visibility to pilot projects
• Lower-level buy-in
• High visibility from the start
• Executive exposure
• Focus on results
• Company-wide opportunities
• Program funding
• Broad authority to direct support
• Access to the best talent
• Scale opportunities
Low-Road
• Managerial support for projects
• Limited funds
• Narrow opportunity set
• Upper-level buy-in
• Diversion of resources
• Communicating wins
• Selling the program
• Low exposure
• Autonomy
• Close proximity to pilot projects
• You know your team
• Low-Hanging Fruit
• Direct Accountability for results
• Personal satisfaction

A basic 5-S initiative saves a $1 billion
retailer over $1 million annually
Page 27
25%
Improvement
Target
15% due to
Admin Error
2% Shrink
Total Retail
Turnover
$1 Billion
$30 Million
$4.5 Million $1.1 Million
Theft &
FraudProfit &
Other Costs

A "small" project will save one retail
distributor over $1 million
Page 28

High-Tech Company: $500,000 annual
savings per Black Belt
Page 29
Each Black Belt
completes two $250k
projects per year
Up to 90 people will
have Black Belt by end
of year 1
Expected annual savings
between $15 million and
$45 million

Let's look at the economics
Costs Benefits
LSS Green Belt • 1 Week Certification Training
• About $2,000 training cost
$75,000/yr savings per Green Belt:
• Complete one $50,000 project for
certification
• Approx. 2-3 projects per year
• Est. $25,000 per project
LSS Black Belt • 4 Weeks Certification Training
• About $5,000 training cost
$300,000/yr savings per Black Belt:
• Complete one $50,000 project for
certification
• Approx. 2-3 projects per year
• Est. $150,000 per project
• Mentor and lead Green Belts on
additional projects
Page 30

Some final thoughts
• Lean Six Sigma is a bottom-up process. At
every stage, request as little as possible from
above.
• Start with small wins, not big programs
• Don’t hand this off to the Junior Varsity. It
takes leaders to drive change.
• It also takes leaders to sustain change.
Evaluate managers as you fix your processes.
• Remember, nothing succeeds like success.
Page 31

Thank you and good luck on your
Lean Six Sigma Journey!
Great Lakes Office West Chicago, Illinois
West Coast Office Lafayette, California
Jack Kahler (630) 621-4659 Direct
jkahler@avocusgroup.com
Visit our website at www.avocusgroup.com
AVOCUS GROUP LLC
Page 32

Leading Lean Six Sigma

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