Statistical Definition

Statistical Six Sigma Definition

What does it mean to be "Six Sigma"? Six Sigma at many organizations simply means a measure of quality that strives for near perfection. But the statistical implications of a Six Sigma program go well beyond the qualitative eradication of customer-perceptible defects. It's a methodology that is well rooted in mathematics and statistics.

The objective of Six Sigma Quality is to reduce process output variation so that on a long term basis, which is the customer's aggregate experience with our process over time, this will result in no more than 3.4 defect Parts Per Million (PPM) opportunities (or 3.4 Defects Per Million Opportunities – DPMO). For a process with only one specification limit (Upper or Lower), this results in six process standard deviations between the mean of the process and the customer's specification limit (hence, 6 Sigma). For a process with two specification limits (Upper and Lower), this translates to slightly more than six process standard deviations between the mean and each specification limit such that the total defect rate corresponds to equivalent of six process standard deviations.

Many processes are prone to being influenced by special and/or assignable causes that impact the overall performance of the process relative to the customer's specification. That is, the overall performance of our process as the customer views it might be 3.4 DPMO (corresponding to Long Term performance of 4.5 Sigma). However, our process could indeed be capable of producing a near perfect output (Short Term capability – also known as process entitlement – of 6 Sigma). The difference between the "best" a process can be, measured by Short Term process capability, and the customer's aggregate experience (Long Term capability) is known as Shift depicted as Z_shift or s_shift. For a "typical" process, the value of shift is 1.5; therefore, when one hears about "6 Sigma," inherent in that statement is that the short term capability of the process is 6, the long term capability is 4.5 (3.4 DPMO – what the customer sees) with an assumed shift of 1.5. Typically, when reference is given using DPMO, it denotes the Long Term capability of the process, which is the customer's experience. The role of the Six Sigma professional is to quantify the process performance (Short Term and Long Term capability) and based on the true process entitlement and process shift, establish the right strategy to reach the established performance objective

As the process sigma value increases from zero to six, the variation of the process around the mean value decreases. With a high enough value of process sigma, the process approaches zero variation and is known as 'zero defects.'

Statistical Take Away
Decrease your process variation (remember variance is the square of your process standard deviation) in order to increase your process sigma. The end result is greater customer satisfaction and lower costs.

Article -what is six sigman

Six Sigma - What is Six Sigma?

Six Sigma at many organizations simply means a measure of quality that strives for near perfection. Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving towards six standard deviations between the mean and the nearest specification limit) in any process -- from manufacturing to transactional and from product to service.

The statistical representation of Six Sigma describes quantitatively how a process is performing. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity of chances for a defect. Process sigma can easily be calculated using a Six Sigma calculator.

The fundamental objective of the Six Sigma methodology is the implementation of a measurement-based strategy that focuses on process improvement and variation reduction through the application of Six Sigma improvement projects. This is accomplished through the use of two Six Sigma sub-methodologies: DMAIC and DMADV. The Six Sigma DMAIC process (define, measure, analyze, improve, control) is an improvement system for existing processes falling below specification and looking for incremental improvement. The Six Sigma DMADV process (define, measure, analyze, design, verify) is an improvement system used to develop new processes or products at Six Sigma quality levels. It can also be employed if a current process requires more than just incremental improvement. Both Six Sigma processes are executed by Six Sigma Green Belts and Six Sigma Black Belts, and are overseen by Six Sigma Master Black Belts.

According to the Six Sigma Academy, Black Belts save companies approximately $230,000 per project and can complete four to 6 projects per year. General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits on the order of $10 billion during the first five years of implementation. GE first began Six Sigma in 1995 after Motorola and Allied Signal blazed the Six Sigma trail. Since then, thousands of companies around the world have discovered the far reaching benefits of Six Sigma.

What is Six Sigma

Six Sigma

The goal of Six Sigma is to increase profits by eliminating variability, defects and waste that undermine customer loyalty.

Six Sigma can be understood/perceived at three levels:

1. Metric: 3.4 Defects Per Million Opportunities. DPMO allows you to take complexity of product/process into account. Rule of thumb is to consider at least three opportunities for a physical part/component - one for form, one for fit and one for function, in absence of better considerations. Also you want to be Six Sigma in the Critical to Quality characteristics and not the whole unit/characteristics.
2. Methodology: DMAIC/DFSS structured problem solving roadmap and tools.
3. Philosophy: Reduce variation in your business and take customer-focused, data driven decisions.

Six Sigma is a methodology that provides businesses with the tools to improve the capability of their business processes. This increase in performance and decrease in process variation leads to defect reduction and vast improvement in profits, employee morale and quality of product.

Here's an article with more detail on defining Six Sigma: What is Six Sigma?

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Six Sigma is a rigorous and a systematic methodology that utilizes information (management by facts) and statistical analysis to measure and improve a company's operational performance, practices and systems by identifying and preventing 'defects' in manufacturing and service-related processes in order to anticipate and exceed expectations of all stakeholders to accomplish effectiveness.

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Posted By: Craig Tonner
Modified By: pradeep patra
Last Modified: Sep. 3, 2003

Value Stream Mapping to Identify Improvement Projects

By Thomas Bertels

With many companies integrating Lean and Six Sigma methodologies into a single improvement tool kit, value stream mapping has emerged as a preferred tool to identify process improvement opportunities. A number of valuable points can be made about applying value stream thinking to project selection across a range of industries and processes both in the United States and in Europe. They include:

Understand the Overall Goal

The power of value stream thinking lies in looking at an entire business process. With the typical Lean or Six Sigma project focusing on fixing a specific issue in a narrowly defined process, it is critical to have an overall perspective for selecting what projects to tackle. Even more important, value stream mapping not only includes defining the current state, but also includes defining the future state and the gaps between the two.

With a clear picture of how the entire process should operate in the future, it is relatively easy to identify the projects that will close the gap. For discrete manufacturing processes, the ideal of continuous flow often drives the design of the future state. For process manufacturing and administrative processes, the characteristics of the future state are often less well-defined and require a strategic perspective. For example, using value stream mapping for mapping core human resources (HR) processes forces the business leadership team to decide on the future service delivery model – to what extent should the business adopt a self-service approach, what tasks will be performed by HR specialists versus local generalists, etc.

When developing the future state, it is crucial to define the overarching goal for the process that will guide the design. For a staffing process, the goal might be filling a position in less than two months. For a pharmaceutical filling operation, the goal might be to achieve a higher number of fills. A clearly defined business goal for the process provides the perspective that drives the design.

Understand the Real Constraints

When developing the future state, it is critical to understand the real process constraints of the current state and to evaluate to what extent these constraints will remain in the future state. For example, developing the future state for pharmaceuticals manufacturing needs to consider the time required to validate new equipment. A typical future state map describes the state of the process 12 or 18 months from now. If it takes 30 months to get a new piece of equipment in place and validated, the current equipment becomes a constraint for the future state map. Some constraints are real, others are only imagined. For example, headcount should never be a constraint.

Focus on Projects That Help Achieve the Goal

When analyzing the gap between the current and future states, one should focus only on those projects that will help achieve the overall goal. In many instances, the improvement plan is filled with projects that have no clear link to the overall objective. Most companies have only limited resources at their disposal; therefore the available resources should be concentrated on those projects that really need to be done.

Define the Options

In almost every instance, there are several different paths to achieve the future state and meet the overall process goal. For example, when focusing on capacity increase at a bottleneck machine, this goal could be accomplished by reducing process cycle time, unplanned downtime, changeover times or process yield. Defining the alternative "project packages" is helpful to understand the trade-offs and make smart resource allocation decisions.

Integrate Existing Initiatives into the Plan

Initiatives and projects already under way or planned for the foreseeable future need to be integrated into the overall plan to the extent that they impact the future state. However, one needs to be careful and review whether the deliverables for these initiatives are realistic.

For example, a company which was mapping its manufacturing process identified two projects that were expected to yield a substantial reduction in process time. However, when the team reviewed these projects it became obvious that the impact expectations were very unrealistic. When putting together an inventory of these current or planned projects or initiatives, the team should ask itself: Are the objectives for these projects clearly defined? Are these initiatives on track to deliver the expected results? What is the risk of these projects failing? Especially when it comes to technology projects, reviewing the track record of similar projects in the company can help to understand whether the team should count on successful completion or not.

Be Creative and Adapt the Approach to the Situation

Value stream mapping typically focuses on a product family. However, in many instances the concept of product family is limiting. In many process industries, the equipment is not dedicated to a certain product or family, and processing paths can vary from run to run. Similar issues arise in many service processes – for example, when customers can choose between various channels (internet, phone, e-mail, etc). Focusing narrowly on a product family does not really provide much insight into the improvement opportunities available. In such cases, the value stream perspective can be enhanced by combining the mapping with other tools such as bottleneck analysis.

Value stream mapping is a powerful tool that helps to identify the vital few Lean and Six Sigma projects that will yield the highest value to the process in question.

About the Author

Thomas Bertels is a partner of Valeocon Management Consulting, and serves as the global firm's regional director for the Americas. He has worked with clients such as TRW, Siemens, Vanguard and Johnson & Johnson, and also served as the editor of and main contributor to a Six Sigma leadership handbook. Mr. Bertels started his career at ABB (Asea Brown Boveri), one of the early adopters of Six Sigma. Fluent in German and English, he is based in New York, N.Y., USA, and can be reached at thomas.bertels@valeocon.com.

Learning to Recognize Process Waste in Financial Services

By Bill Kastle

One of the biggest challenges for Six Sigma practitioners in financial services is developing the ability to recognize waste.

Imagine an "overnight pack" entering Bank One's wholesale lockbox process for processing remittance payments. By the time it has been through every step, up and down the elevators, back and forth between departments, it would have traveled one-and-a-half miles. Hard to believe? The lockbox staff also thought so, at first. But as they traced the physical flow of the value stream, everyone was floored. "Well, I guess maybe it could travel that far!"

What is even more astonishing is how much that distance could be shortened. Bank One's team came up with a workspace design that required just 386 walking steps to complete the entire process – an 80 percent reduction in transportation.

Most departments or companies that provide financial services are in the same position as Bank One. They accept things like traipsing up and down hallways as simply part of "how work is done around here." But success with Six Sigma means developing new eyes, then critically and regularly re-examining what is being done and how it is being done. The goal is to identify the steps in processes that are value-added in the eyes of customers. That is, steps which customers would value and be willing to pay for if they knew about them. Everything else is waste. A company will never be able to recoup the time, resources and dollars spent on waste.

To help Six Sigma practitioners in financial services begin developing a "waste-sensing" ability, here are seven types of process waste that someone is doing right now somewhere in virtually every company:

Waste No. 1: Over-Processing

Adding more value to a service or product than customers want or will pay for - The basic theme of over-processing is doing more work than is absolutely necessary to satisfy or delight customers. There are two elements to over-processing:

1. Not knowing what customers want. For example, including return envelopes for loan payments is seen as value-added by customers who pay by check, but waste by customers who pay through automatic transfer.
2. Redundancy. Consider a process that involves a number of approval steps or handoffs. Would customers think that each of those steps is adding value? Rather than requiring five managers to sign off on a decision, why not develop a process and guidelines so one manager can make the call?

Waste No. 2: Transportation

Unnecessary movement of materials, products or information - Too much physical back-and-forth movement is one of the problems that plagued Bank One's original lockbox process. Excess transportation is important because every move from one activity to another adds time to a process – and world-class organizations are passionate about reducing time.

Yet in many service processes, it is not uncommon for paperwork to loop back several times…waiting in queues in a virtual or actual in-box every time it goes through again. Transportation in service processes almost always manifests itself as materials constantly being collected or delivered, or the actual or virtual chasing of information ("Who has that expense figure? Marcy? Okay, I'll ask Marcy…. Marcy says Hector has it…"). At one end of the spectrum, eliminating excess transportation can involve combining steps to eliminate loops. Cutting the hand-offs in half generally cuts the queue time in half. At the other end is the option to rearrange the workspace to match the flow of the process.

Waste No. 3: Motion

Needless movement of people - While "transportation" refers to the movement of the work, "motion" involves movement of workers. Both are much harder to see in service environments than in manufacturing. Motion may show up as people constantly switching between different computer domains or drives, or simply having to perform too many keystrokes to accomplish a computerized task. Solutions can involve everything from rearranging people's desks, to purchasing ergonomic furniture and equipment, to using software that performs tasks offline so information is waiting for the staff rather than vice versa.

Waste No. 4: Inventory

Any work-in-process that is in excess of what is required to produce for the customer - The evils of inventory were first recognized in manufacturing because that is where the inventory itself is most visible. It is hard to ignore a room full of half-completed assemblies – a very visible reminder of thousands of dollars the company could be putting to better use.

Inventory in service areas is just as big a problem, but more insidious because it is not as readily apparent. Look for physical piles of forms (in in-boxes, for example), a list of pending requests in a computerized email program, callers on hold, people standing in line at a branch, and the like. This excess inventory is often the result of overproduction. (See Waste No. 7) The goal, from a Lean standpoint, is to have on hand only what is needed immediately or in the short-term. (To find solutions to inventory problems, read up on Lean practices such as pull systems and triaging.)

Waste No. 5: Waiting

Any delay between when one process step/activity ends and the next step/activity begins - One of the biggest evils in today's marketplace is to make customers wait for delivery of a product or service – because chances are a competitor will be able to get it to them quicker. Anything in a process that makes a work item wait to be processed should be eliminated. Because so much of the work in a service process is invisible to the naked eye, process-mapping techniques (flow charting, value-stream mapping) are essential for identifying delays in a process.

Waste No. 6: Defects

Any aspect of the service that does not conform to customer needs - Producing work that customers are not going to pay for – or that makes them seek out other companies to do business with – is one of the more obvious forms of waste. Six Sigma practices have long been structured around minimizing the possibility of producing defects. In services, that translates to preventing the possibility of missing information, thus improving the chance of making deadlines.

One clue to studying defects is to recognize that their impact is usually felt far downstream from where they occurred. A customer service staff, for example, is likely to receive the complaint calls from customers upset about something that happened in an entirely different part of the process. The defect has to be traced back to where it happened – where the incorrect information was put into the computer system, for example – in order to find a solution that will last.

Waste No. 7: Overproduction

Production of service outputs or products beyond what is needed for immediate use - In one of Lockheed Martin's procurement centers, buyers purchased items for 14 or more different facilities. The way the computer system was initially set up, it was incredibly cumbersome for the buyers to switch from one facility to another. So they naturally processed all the requests from one center before moving on to the next, even if there were urgent or priority requests in queue from other facilities. As a result, non-priority requests from one center would be processed before priority requests from another facility. This batch processing and delivering a service before it is needed by the customer is a type of overproduction common in services. The solution to overproduction is to examine the process and see why the staff does not work in a way that reflects actual customer needs, then make changes accordingly. (At Lockheed Martin, the solution was to change the computer system so buyers could see priority requests from all facilities simultaneously.)

The better Six Sigma practitioners in financial services are at recognizing these forms of waste, the more effective improvement efforts will be.

About the Author: Bill Kastle is a vice president at George Group and has helped guide Lean Six Sigma initiatives at major corporations. He is co-author of the book What Is Lean Six Sigma? (McGraw-Hill, 2003). He has conducted executive training at Fortune 500 companies such as Alcan, Geico, Xerox, ITT Industries and DuPont-Merck. For more than 15 years, he has helped teams at all levels apply Lean and Six Sigma tools to respond to their customer needs. Mr. Kastle can be reached at bkastle@georgegroup.com.

Value Stream or Detailed Process Mapping

More Value: Value Stream or Detailed Process Mapping?

By J. DeLayne Stroud

Imagine a company starting a journey of change without factoring in where it is starting (baseline), and where it wants to go (making changes). No successful company or Six Sigma practitioner would begin such a journey without that information and a map.

When a novice Black Belt began his Six Sigma journey, he asked his first Master Black Belt mentor which process mapping tool provided more value – detailed process or value stream? He was surprised at the mentor's answer, "It depends." Now, having used both mapping tools, he understands why. Project goals, resource availability and deadlines are some contributing factors in deciding which tool fits best. Project experience also helps determine which one to leverage.

For those who are just starting their Six Sigma journey and are wondering which process map to use, it is important to first understand the differences between the two.

In general terms, value stream mapping identifies waste within and between processes, while detailed process mapping identifies both the big Y (from the voice of the customer) and the y's (process outputs), and identifies and classifies x's (process inputs).

Value stream mapping takes a high-level look at a company's flow of goods or services from customer to customer. It usually contains seven to 10 steps. Practitioners can drill down to find the true bottleneck in a company's processes. Key metrics captured are cycle times, defect rates, wait times, headcount, inventory levels, changeover times, etc.

In comparison, detailed process mapping provides a more detailed look with a much deeper dive into a process. One captures the inputs and outputs of every step in a process and classifies each as critical, noise, standard operating procedure or controllable. The key to using this tool is controlling inputs and monitoring outputs. Detailed process mapping also helps document decision points within a process.

What Are Value Streams?

While most people are familiar with the concepts of detailed and high-level process maps, many need clarification on value stream maps. Value stream mapping helps companies avoid randomly making improvements by allowing them to identify and prioritize areas of improvement up front as well as to set measurable goals for improvement activities. This is accomplished through three stages:

• Create a current state map showing how the company serves its customers today.
• Create a future-state map showing the reduction of waste and the effects of the changes.
• Develop and implement a plan to reach the future state.

According to the iSixSigma dictionary, "A value stream is all the steps (both value-added and non-value-added) in a process that the customer is willing to pay for in order to bring a product or service through the main flows essential to producing that product or service." One of the key elements of value stream mapping is that it can provide a baseline of defined processes.

The critical phrase in this definition is, "the customer is willing to pay for." If a company's customer walked through its process, how would that customer react? Every process the customers sees involves work that adds value in their eyes. Unfortunately, every process the customers sees also involves work for which they are not willing to pay – waste. While no one can eliminate all waste, using value stream mapping to identify waste helps determine a plan for eliminating it.

However, before a company can identify its value stream, it needs to determine:

• The value in the process that the customer is willing to pay for.
• The steps required to deliver the product or service to the customer.
• What is significant in each.

There are steps that create value and those that do not. Some non-value-added steps, perhaps because of regulations, policies and current technologies, cannot be eliminated, or at least cannot be eliminated immediately. However, a Six Sigma project team will most likely find many non-value-added steps, or "low-hanging fruit," that can be eliminated immediately, benefiting a company's bottom line.

Three Steps in Understanding the Value Stream

Before a current-state value stream map can be created, a project team must identify and understand the value stream. Following is a three-step method for identifying value streams:

1. Create a list of products and group them in families. Some companies offer varied products and services. For example, an investment company offers different investment opportunities, such as mutual funds, 401Ks, stocks, etc. A finance company offers different types of loans, including first mortgages, home equity, car loans and small business loans. It is relatively easy to group products into families by constructing a simple table, like the one below. The goal is not only to identify all product families, but also to identify what process steps each product utilizes. This will be a living, breathing table, so a project team should be prepared to make further revisions as it dives deeper into its analyses.

Table: Grouping Products or Services Into Families
Product/Service	Process Step 1	Process Step 2	Process Step 3	Process Steps 4, 5, 6...
A		x	x
B	x	x
C	x	x	x
D, E, F...

2. Determine which product or service is considered primary. While a product/service may utilize different processes, a company needs to concentrate on one process at a time, focusing on processes critical to company goals. In many instances, a company's improvement plans may be filled with process improvement projects with no clear link to its overall goals or vision. With limited resources available, efforts need to be concentrated only on those projects that really need to be done. Selecting which product family to analyze will depend on the individual business situation. Examples of products/services to analyze include those that:

• Stem from company goals/vision.
• Utilize the most process steps.
• Are known to have high defect rates.
• Represent the voice of the customer and offer the highest customer rate of return.
• Are high volume in dollars and/or units.

3. Document the steps of the process – initial walk-through. Use a SIPOC diagram (suppliers, inputs, process, output, customers) to document the process steps. Begin with the customers and work backward. A project team will gain more insight by working in reverse order. During the walk-through, think about the customer. How does the customer receive the product or service? What triggers the product or service to be delivered to the customer? What are the inputs? From where are these inputs supplied? Once the walk-through is completed, there should be enough initial data to understand the value stream, and begin creating a current-state value stream map with a more detailed depiction of the value stream.

'Which Process Map Should I Use?'

Why not take advantage of both models by using detailed process mapping and adding value stream mapping data into it. While each type of map is used to identify different variables, there is more value in combining components of value stream with detailed process mapping. Detailed process mapping has all the process components the value stream map does, and it can be broken down in much greater detail. Due to the time involved in constructing detailed process maps, one could include detailed process mapping after value stream mapping has located the bottleneck.

Value stream mapping requires both current- and future-state process maps. However, future-state maps are often less well-defined in services or administrative organizations. These organizations typically require a strategic perspective, like what the new service delivery model looks like. Value stream mapping typically focuses on a single product family, but choosing only one product family may not be appropriate in a service organization – especially if the customer can choose between different channels. For example, in banking, the customer may choose channels such as online, email or telephone banking. Focusing on a single product family may not provide the insight needed to identify all available improvement opportunities. In such cases, the value stream mapping methodology can be combined with other tools such as a bottleneck analysis.

Bottom line, value stream mapping is a powerful tool that helps identify the vital few Lean and Six Sigma projects that will yield the most value to the process tagged for improvement. And its approach of current- and future-state maps allows Six Sigma practitioners to know where they are starting from, where they are going and how they will get there. When a company reaches tomorrow, it will be much more rewarding if it knows the route it followed.

About the Author: J. DeLayne Stroud is a Six Sigma Black Belt project manager with DeLeeuw Associates, a division of Conversion Services International. He retired from Bank of America in 2005 with more than 20 years of experience as an executive in project and change management in the banking industry. He has led multiple Design for Six Sigma and Lean initiatives. During his career, Mr. Stroud was a senior project manager in some of the largest mergers and change initiatives in the history of the financial services industry, including former banks such as General Bancshares, Boatmen's Bank, Centerre Bank, Barnett Bank and BankAmerica. He can be reached at jstroud@deleeuwinc.com.

VSM

Value Stream Map Without All the Data Still Offers Gains

By Craig Ladner

A complete value stream map (VSM) is like a flowchart on steroids. There is the usual action boxes with arrows showing the flow of work, but a lot of other information, too – material and information flow, operating parameters, process and lead times, inventory, a timeline depicting value-added time relative to overall lead time, and so on.

A value stream map can look daunting, especially for anyone who has not worked much with flowcharts and does not have all the needed data. But as one major national bank discovered, there is still a lot to be gained from starting a value stream map, even if there is not enough data to do the perfect map the first time through.

The Challenge: Slash Cycle Time on Mailings

The bank in question mails thousands of credit card offers each month. The process was on a 65-day cycle, meaning if the mailing was in early February, the process would have to be started in December. Bank management wanted to cut that time in half, and go even shorter if possible. Here is why:

• The bank's credit card offers had a 1- to 2-percent acceptance rate.
• The average balance transferred to the cards (in the targeted demographic segment) was about $1,000.
• The lowest interest rate the bank charged was 12 percent (and some cards went as high as 21 percent).

Given these factors, for every 100,000 offers mailed, the bank could expect to gain minimally $1,000,000 in credit card loans (1,000 acceptances multiplied by $1,000 transfers). That equals about $10,000 in interest per month. This nationwide bank often mailed out many hundreds of thousands of offers. Doubling the number of mailings in a year could well mean a million dollars or more in additional interest charges.

Another minor factor was that addresses tend to get outdated quickly. So the faster the bank could process offers to the lists it purchased, the fewer bad addresses they would have to deal with.

The Procedure: Determine Value and Time

The bank had never studied, mapped or measured this process before, so doing a complete value stream map was out of the question. But just doing some preliminary analysis was well worth the effort.

One of the most important elements of a value stream map is quantifying times. A fully developed VSM has time data for each step – how long it takes a work item to make it through one step, how long it waits in queue before moving to the next step, etc. Initially, the bank had no data at all on actual time needed to complete various steps in the process, and it determined that gathering detailed data would be impossible since there were no mechanisms for tracking time per step.

But with a minimal effort, a consultant working on the project with them was able to divide the process into four phases and get reliable estimates for the length of those phases. The "prototype VSM" is shown in Figure 1.

Figure 1: Basic Value Stream Map

With this basic information in place, the bank could then examine the work that happens in each step and ask three key questions:

• Does this work add value?
• What determines how long this step takes?
• Is there any way to do it faster? (Or, can some work currently done manually be automated? Or, can some work in this step be combined with work from another step?)

What Was Discovered: Big Delays, Lots of Waste

The bank's analysis of the VSM was that the pace of the process was determined in large part by an outdated mailing schedule that spelled out exactly what would be happening on each day of a two-month cycle. Unfortunately, it was built around artificial timelines, not actual process capability. So, for example, if a mailing list was ready to be merged on Day 20, but the schedule said that merging was to occur on Day 25, the list would sit around in the databank for five days.

Cumulatively, delays caused by this artificially determined mailing schedule accounted for almost half of the two-month processing time. Simply moving to a system in which triggers alerted one step that work from a previous step was ready to go saved almost 30 days in the cycle time.

The analysis also exposed a lot of work that was not value added from a customer's perspective. For example, the bank obtained mailing lists from a number of sources, which would arrive in a variety of electronic formats. The lists were formatted into a common software for processing. However, before the data processors moved the lists into the common software, they would convert each original list to a format they were most comfortable manipulating, then move it into the common software.

A third main contributor to delays was the "large-batch" mentality built into the original system. The people who generated the offer letters through a mail merge process liked to work in monthly batches as large as 1.5 million letters. The system was capable of handling about 300,000 records per day. So if a particular list had only 50,000 or 100,000 names, they would wait until more lists came in and do the entire month at one time. Running 1.5 million records in one batch caused numerous delays downstream.

The Result: Cycle Time Down by 60 Percent

Four months after the project began, lead time for this mass mailing process was down from 65 days to 27 days. A year later, it reached 12 days.

The lesson is that an organization should not let the complexity of some value stream maps prevent it from taking the first steps in doing a value and time analysis. As the bank learned, there was so much waste in its original process that broad measures of time and a little probing into what was truly value added allowed it to quickly cut lead time by more than 60 percent. If a company has never looked at how time is spent in a particular process or done a value-added analysis, the odds are very good that the same kind of benefits are out there waiting to be reaped.

About the Author: Craig Ladner is a Lean expert and senior consultant with George Group. He has more than 20 years of experience generating productivity improvements through the application of Lean methods in a number of industries, and has worked extensively at senior levels to develop and deploy customer-focused operational strategies. Mr. Ladner has an MBA from Houston Baptist University. He can be reached at cladner@georgegroup.com.

Value Stream Mapping

Value Stream Mapping on a Budget (Using a Spreadsheet)

By Gary Burger and F. Lee Campbell IV

Value stream analysis is one of the easiest methods to analyze a process and identify areas that can be improved. Even someone inexperienced can find the low hanging fruit. But what do you do when you want to conduct a value stream analysis and the boss tells you that he is not going to buy you dedicated software and pay to train you because then he would have to do the same for every Belt in the organization and he cannot afford it?

The answer is simple if you have any background in using a spreadsheet. While you cannot perform some of the additional functions that can be achieved by the software packages created just for this purpose, you will be able to develop a value stream map (VSM) that will achieve what you are trying to accomplish.

The process requires three worksheets but all are fairly simple and once the templates are set up, you can record future VSMs with little setup work. The first worksheet indicates the actual steps in the process. Start with the current process and use two boxes per step. The top box indicates who performs the step and uses color coding. The box also is numbered to indicate what step is being performed. The box below indicates what is actually being performed. Below the current state, repeat the identical steps to follow the future state.

This has two advantages over the specialized software. First, it shows the current state and the future state next to each other for quick comparison. Even the unsophisticated used can determine easily how many steps have been eliminated. Second, this system forces a linear view. Often VSMs are created from flow charts which show several steps in parallel and a great number of steps vertically. A good VSM is totally horizontal. This method forces steps to be considered in linear way. While you are free to add another row to show two process streams, you will be discouraged from having multiple process streams unless you truly go through the mental thought process to create them.

First Worksheet – Steps in Process

The next worksheet is where data is entered. You can set up the data in any of several formats. One way is to actually have two worksheets side-by-side, one for current state and one for future state. This method is easier to work with since you enter the data for one and then for the other independently. The other method is to enter the process step on each line and continue the data out with all calculations. There seems to be an advantage in creating two smaller worksheets but formatting is all a matter of preference.

Table 1: Second Worksheet – Enter the Data
Current State
Step	Task	Cycle Time		Touch Time		People
		Min.	Max.	Min.	Max.	Min.	Max.
1	Problem Discovered	16	32	8	8	5	10
2	Field Investigates Problem	24	40	2	12	2	3
3	Modification Required Decision Point	1	16	1	2	2	4
4	Assign Number and Prepare Modification File	1	4	1	1	1	1
5	Define Statement of Work	16	40	4	16	2	3
6	Project Manager Enters into Project Tracking System	1	4	1	1	1	1
7	Modification Review Board	40	80	8	16	6	6
8	Design Support for Change Order	0	160	0	80	5	10
9	Allocate Funding	8	40	2	4	5	7
10	Funding Project	8	40	2	4	5	7
11	Notify Change Customer	8	16	1	1	3	3
12	Prepare Necessary Documents	0	80	0	24	0	5
13	Funds Available	1	8	.25	1	2	3
14	Funds Request	0	16	0	8	4	4
15	Funds Approved	0	0	0	0	0	0
16	Budget Amended and Approved	8	40	1	2	2	2
17	Request for Proposals	8	16	1	4	2	2
18	Receive Contractor Proposals	80	360	1	1	2	2
19	Prepare Pre-Negotiation Objectives	0	40	0	8	1	1
20	Legal Review of Changes Greater Than $100,000	24	40	1	2	2	4
(Variables Limited to Formatting Constraints)
Future State
Step	Task	Cycle Time		Touch Time		People
		Min.	Max.	Min.	Max.	Min.	Max.
1	Problem Discovered	16	32	8	8	5	10
2	Field Investigates Problem	24	40	2	12	2	3
3	Modification Required Decision Point	1	16	1	2	2	4
11	Notify Change Customer	8	16	1	1	3	3
5	Define Statement of Work	16	40	4	16	2	3
4	Assign Number and Prepare Modification File	1	4	1	1	1	1
6	Project Manager Enters into Project Tracking System	1	4	1	1	1	1
8	Design Support for Change Order	0	160	0	80	5	10
12	Prepare Necessary Documents	0	80	0	24	0	5
13	Funds Available	1	8	.25	1	2	3
14	Funds Request	0	16	0	8	4	4
15	Funds Approved (Preliminary)	0	0	0	0	0	0
17	Request for Proposals	8	16	1	4	2	2
18	Receive Contractor Proposals	80	360	1	1	2	2
19	Prepare Pre-Negotiation Objectives	0	40	0	8	1	1
22	Negotiate with Contractor	8	24	4	16	2	2
23	Reach Settlement (Bilateral)	8	40	4	8	2	2

Finally you will need to create a summary worksheet. Again this can be placed this on a separate worksheet or at the top or bottom of the data sheet. Wherever this section is placed, it should be easy to find because this where you perform your analysis. As is obvious, you can have as many variables as you desire. Adding variables is as easy as adding "min." and "max." columns for the current and future states. You can track further by time period or any other factor you think necessary.

Table 2: Third Worksheet – the Summary
	Current State	Future State	Improvement
Steps	25	17	32%
Cycle Time	76/338	60/212	21-37%
Touch Time	18/34	15/24	16-29%
Touch Time/Cycle Time	16.8%	27-47%
Number of People	65/82	40-52	36-38%
Approvals	44-46	29-31	32-34%
Rework	365%	185%	49%

About the Authors: Gary Burger is the internal review officer for the Los Angeles District of the U.S. Army Corps of Engineers. He is an ASQ/Department of the Navy certified Lean Six Sigma Black Belt. He also instructs for the NAVSEA Lean Six Sigma College in Port Hueneme, California, U.S.A. He can be reached at gary.b.burger@usace.army.mil. F. Lee Campbell IV has been the Lean Six Sigma implementation program manager for the U.S. Army Corps of Engineers since inception. The program now comprises 27 Belts in various stages of development and 74 projects. He is a graduate of the U.S. Military Academy and has an MBA from Georgetown University. He came be reached at lee.f.campbell@hq02.usace.army.mil.

Kaizen and Problem Solving

Fast and Intense: Kaizen Approach to Problem-Solving

By Mark Price and Tim Williams

Perhaps it was impatience with how long traditional projects take. Often it was an awareness of how hard it is for people to concentrate on improvement when they keep thinking about getting their work done. To some extent it was a matter of their innate respect for the people who do the work. For all these reasons, years ago the Japanese inventors of the Lean improvement systems came up with a different improvement model they called Kaizen.

Kaizens (or blitzes, as they are sometimes called) are improvement events where people work only on improvement for a few days, up to a full week. In a traditional Kaizen project, the people from a particular work area come together with a few experts for four or five days straight and complete most or all of a DMAIC cycle on a narrowly targeted high-priority issue. ("We need to process loan applications faster.") The model has been so successful that this basic approach has been adapted to other uses such as service design sessions.

Example of a Bank's Use of Kaizen

A major national bank started using the five-day Kaizen approach whenever it wanted to attack process speed and efficiency problems. The bank's Kaizen events all share four characteristics:

• The purpose is to take a cross-functional view of the process or work area.
• Participants are people who are directly involved in, and usually responsible for, various parts of the process. The team is cross-functional.
• Participants are pulled off their jobs for several days at a time.
• The project is well-defined going in because there is not time to redefine the purpose or scope.

A Typical Kaizen Schedule

Here is a sample agenda which the bank uses for the five days:

Day 1 is an afternoon spent training participants on topics that cover basic concepts related to the goals of the project. This could include teaching relevant Lean or Six Sigma concepts and reviewing relevant data.

Day 2 is spent looking at the process with new eyes. Participants do a "unit walk," a tour of operations affected by the problem or situation being studied where they simulate being a work item flowing through the process. The group visits each portion of the process, where, because there is cross-functional representation, they have the opportunity to hear insights from someone who works in that area. The group creates a value stream map (a picture of the "as-is" situation) that captures the basic process steps, such as cycle times, number of steps, rework loops, queuing delays, work in progress (WIP) and transportation time.

Day 3 is designed around clarifying problems and brainstorming solutions. The team re-organizes the value stream (on paper) or creates a "should" map that depicts how the process would need to function to solve the identified problems. The outcome includes developing action plans for implementing solutions or trial simulations for the next day.

Day 4 is used to test the solutions, conducting a simulation within the operations if possible. The group quantifies the improvement if the proposed changes are implemented, using estimates of reductions in travel time, queuing time, work in process, number of steps, number of forms, and so on.

Day 5 is when participants prepare and present their findings to the sponsor in a formal report-out session.

Making It Work and the Results

The bank makes this model work by having its internal consultants (equivalent to Master Black Belts) partner with the manager/sponsor to pick problems that are extremely high priority, not only for that work area but also for the business as whole. This makes it much easier to justify taking people off their regular jobs. Also, the goal of the event is a little more modest than a traditional Kaizen. Instead of having solutions up and running full-bore after five days, teams are expected only to get through the simulation and piloting of solution ideas. The internal consultant will then assist the team with full-scale implementation.

In the many Kaizens this bank has run, it has achieved results such as:

• Cycle-time improvements have ranged from 30 percent faster to nearly 95 percent faster, measured sometimes in minutes and other times in days. One administrative process went from 20 minutes to 12 minutes, and a complaint resolution process dropped from 30 days to 8 days.
• Fiscal indicators have all been positive. One high-level project has allowed the bank to start charging for a service that previously was offered free to customers. New revenues are expected to total between $6 million to $9 million per year. Other projects have led to cost reductions or loss avoidance in the hundreds of thousands of dollars.

An Alternative Kaizen Format

While consecutive days of intense work is the ideal, some companies have found it impossible to pull an entire work group, or even a subset of a work group, off the job for the better part of a week.

One company worked around this issue by using the following structure:

• The team was brought together for a brief meeting where the problem was explained and people brainstormed what they would need to know and understand in order to find solutions.
• The team leader, a Black Belt, and one team member then worked offline during a period of several weeks to gather data and refine the problem definition.
• The team was brought together for a day to rapidly analyze the problem and come up with complete action plans – not just ideas – for improvement.
• Since the changes likely would affect the everyday work of the team members, they and others were involved in making the changes real-time on the job, and establishing a control plan.

This alternative Kaizen structure works well in this company because:

• The company is still relying on the knowledge of the people who actually do the work.
• It is data-based decision making.
• The company starts with a narrowly defined problem or opportunity statement – often the participants may be examining how they can implement a Lean principle to their process, such as "How can we make information flow better?"
• The company takes steps to verify that the target is likely to bring important, measurable results. Random or "drive by" Kaizens, chosen with little forethought, may, at best, lead to local improvements, but will not contribute to significant value stream gains.

Conclusion: Concentrating on Creativity

Kaizen events are a powerful improvement tool because people are isolated from their day-to-day responsibilities and allowed to concentrate all their creativity and time on problem-solving and improvement. Companies which use Kaizens have found they generate energy among those who work in the area being improved, and produce immediate gains in productivity and quality.

About the Authors: Mark Price is a vice president with George Group and has led Lean Six Sigma deployments for Global 500 clients in service and product companies. He has been working with corporate teams to design and implement successful performance improvement programs for the last 16 years. He can be reached at mprice@georgegroup.com. Tim Williams is a Master Black Belt at George Group. He is experienced in applying Lean Six Sigma to the financial services industry to drive bottom-line results. He has assisted organizations in scorecard development, business review practices, and process improvement strategies. Mr. Williams has been a speaker at conferences for the Banking Administrative Institute and the Institute of Business Forecasting. He also contributed to the book Lean Six Sigma for Service by Michael George. He can be reached at twilliams@georgegroup.com.

Value Stream Mapping

New from iSixSigma Dominating Markets with Value E-book Lean Value Stream Mapping Quick Reference Guide Lean Principles Quick Reference Guide

Value stream mapping is a paper and pencil tool that helps you to see and understand the flow of material and information as a product or service makes its way through the value stream. Value stream mapping is typically used in Lean, it differs from the process mapping of Six Sigma in four ways:

1) It gathers and displays a far broader range of information than a typical process map.
2) It tends to be at a higher level (5-10 boxes) than many process maps.
3) It tends to be used at a broader level, i.e. from receiving of raw material to delivery of finished goods.
4) It tends to be used to identify where to focus future projects, subprojects, and/or kaizen events.

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A value stream map (AKA end-to-end system map) takes into account not only the activity of the product, but the management and information systems that support the basic process. This is especially helpful when working to reduce cycle time, because you gain insight into the decision making flow in addition to the process flow. It is actually a Lean tool.

The basic idea is to first map your process, then above it map the information flow that enables the process to occur.

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Posted By: Ron
Modified By:
Last Modified: Jul. 31, 2003

Kaizen Event

New from iSixSigma Kaizen Workshop E-book Defect Prevention Reference Guide Preventative Maintenance Log Worksheet

Any action whose output is intended to be an improvement to an existing process.

Kaizen Events are commonly refered to as a tool that:

1) Gathers operators, managers, and owners of a process in one place
2) Maps the existing process (using a deployment flowchart, in most cases)
3) Improves on the existing process
4) Solicits buy-in from all parties related to the process

Kaizen Events are an extremely efficient way to quickly improve a process with a low Sigma score. Kaizen Events are also useful for convincing organizations new to Six Sigma of the methodology's value.

The true intent of a Kaizen Event is to hold small events attended by the owners and operators of a process to make improvements to that process which are within the scope of the process participants.

Keep it Simple

Keep it Simple: Choose the Best Tools for Kaizen Events

By Robert Tripp

Kaizen events are deceptively simple. The tools used are often considered to be less rigorous than the more analytical tools that are the hallmark of Six Sigma. But in practice, Kaizen events can be challenging to facilitate effectively because participants are pulled from their regular roles, requiring the events to be short and focused, and facilitators to be efficient in their selection and execution of problem solving tools.

Facilitators trained in the Six Sigma methodology may be tempted to use more rigorous analytical tools. A non-statistical tool, the value stream map, is the focus during Kaizens, however, and when selecting other tools to accompany the map, Belts must be mindful not to introduce anything overly complicated.

Focus on the Value Stream Map

Standard tools and approaches in Kaizen can vary, but the backbone of most Kaizen events is the value stream map. Beyond that, the specific tools applied in any given event will depend on a variety of factors. Selecting the right tools for a given situation is challenging and using the tools effectively can be even harder. Furthermore, the tools that are most useful for complementing the value stream map in Kaizen events are other non-statistical tools, such as selection matrices, fishbone diagrams and brainstorming.

Recently I observed a Kaizen team immediately jump into a failure mode and effects analysis (FMEA) following the creation of a well-documented current state value stream map. Any positive momentum that had accumulated during the value stream work was immediately squelched as the team slogged through an excessively detailed and painful FMEA. While the FMEA can be an effective tool for documentation or detailed process analysis, forcing a team to meticulously examine how they do work, it can also be mercilessly laborious, and in the context of a Kaizen event it must be applied selectively. In this case, the team attempted to document a detailed FMEA for the entire value stream and to make matters worse, the FMEA was improperly facilitated, yielding misleading risk priority number (RPN) scores.

The Role of the Facilitator

Examples such as the use of the FMEA are common in Kaizen events because facilitators often fail to prudently select the best tools and techniques for their situation. The irony is that the tools are simple to understand; the way they are manipulated and applied requires a special skill in the context of Kaizen. The good news is that while there is some mystery in the successful application of Kaizen tools, there are several ways to improve the chances of success.

The first step is to plan and prepare for the event, taking into consideration the participants and desired outcome for the effort. While not every Kaizen event will require takt time analysis and redefinition of standard work combinations, every event should produce a list of immediate and future improvement actions with dates and responsibilities assigned. In the course of planning, ensure that the proper scope and objectives are consistent with the complexity of the process being studied and the time allotted for the event. Traditional Kaizen events, which aim for inventory, waste and cycle time reductions in five days or less, are best applied to operational processes where no more than three different functions play important roles in the value stream.

As in any project management endeavor, the advice of the day for Kaizen event planning is “don’t bite off more than you can chew.” Events that focus on larger, multi-disciplinary or cross-functional organizations should be limited in their objectives to thorough value stream documentation, management system implementation and waste elimination at a high level. One major outcome of such events – in addition to fundamental improvements – is often a detailed plan for more focused Kaizen events in the future. This is consistent with the philosophy that processes should be “Kaizened” periodically, not addressed once and then ignored.

Establishing Basic Disciplines

In addition to scope, complexity and time allowed, Kaizen event objectives should also take into account the maturity of the organization or process to be improved. Navigating the path to Lean requires basic disciplines to be established in the following order:

1. Workplace organization (5S)
2. Visual workplace (signals to work and visible performance data)
3. Standardized work (process control)

Establishing these fundamentals can require considerable time, but they are important contributors to the efficacy and the permanence of continuous improvement efforts like Kaizen. In many cases it is appropriate for a single five-day Kaizen event to focus purely on establishing 5S standards and methods.

Ensuring Useful Results

For certain team-based tools, Black Belts and Green Belts should not let their facilitation be encumbered by the exact approach that they learned in their DMAIC coursework. For any Kaizen event it is important that the right tools be applied in creative ways to ensure that the team’s time is used most effectively and that the tools produce useful results. This is the part that can make Kaizen event facilitation particularly challenging, but the challenges can be transformed into opportunities with a little preparation and practice.

About the Author: Robert Tripp is a frequent contributor to iSixSigma.com and an associate with Six Sigma Advantage. He was part of the "original DNA" of AlliedSignal's groundbreaking Six Sigma program. He has trained, coached and certified hundreds of business professionals, managers, engineers and senior leaders in Six Sigma. He can be reached at r.b.tripp@att.net.

DMAIC

http://www.isixsigma.com/me/dmaic/

IDOV

Design for Six Sigma - IDOV Methodology

By Dr. David Woodford

Design for Six Sigma (DFSS) can be accomplished using any one of many methodologies. IDOV is one popular methodology for designing products and services to meet six sigma standards.

IDOV is a four-phase process that consists of Identify, Design, Optimize and Verify. These four phases parallel the four phases of the traditional Six Sigma improvement methodology, MAIC - Measure, Analyze, Improve and Control. The similarities can be seen below.

Identify Phase
The Identify phase begins the process with a formal tie of design to Voice of the Customer. This phase involves developing a team and team charter, gathering VOC, performing competitive analysis, and developing CTQs.

Crucial Steps:

Identify customer and product requirements

Establish the business case

Identify technical requirements (CTQ variables and specification limits)

Roles and responsibilities

Milestones

Key Tools:

QFD (Quality Function Deployment)

FMEA (Failure Means and Effects Analysis)

SIPOC (Supplier, Input, Product, Output, Customer product map)

IPDS (Integrated Product Delivery System)

Target Costing

Benchmarking

Design Phase
The Design phase emphasizes CTQs and consists of identifying functional requirements, developing alternative concepts, evaluating alternatives and selecting a best-fit concept, deploying CTQs and predicting sigma capability.

Crucial Steps:

Formulate concept design

Identify potential risks using FMEA

For each technical requirement, identify design parameters (CTQs) using engineering analysis such as simulation

Raw materials and procurement plan

Manufacturing plan

Use DOE (design of experiments) and other analysis tools to determine CTQs and their influence on the technical requirements (transfer functions)

Key Tools:

Smart simple design

Risk assessment

FMEA

Engineering analysis

Materials selection software

Simulation

DOE (Design of Experiments)

Systems engineering

Analysis tools

Optimize Phase
The Optimize phase requires use of process capability information and a statistical approach to tolerancing. Developing detailed design elements, predicting performance, and optimizing design, take place within this phase.

Crucial Steps:

Assess process capabilities to achieve critical design parameters and meet CTQ limits

Optimize design to minimize sensitivity of CTQs to process parameters

Design for robust performance and reliability

Error proofing

Establish statistical tolerancing

Optimize sigma and cost

Commission and startup

Key Tools:

Manufacturing database and flowback tools

Design for manufacturability

Process capability models

Robust design

Monte Carlo Methods

Tolerancing

Six Sigma tools

Validate Phase
The Validate phase consists of testing and validating the design. As increased testing using formal tools occurs, feedback of requirements should be shared with manufacturing and sourcing, and future manufacturing and design improvements should be noted.

Crucial Steps:

Prototype test and validation

Assess performance, failure modes, reliability, and risks

Design iteration

Final phase review

Key Tools:

Accelerated testing

Reliability engineering

FMEA

Disciplined New Product Introduction (NPI)