6σ & Kaizen

KAIZEN

KAIZEN-The Concept Kaizen….means improvement Kaizen Philosophy Ongoing improvement Involves everyone Both Managers & Workers Kaizen Philosophy Our way of life need to be constantly improved Working life, social life, home life Kaizen embodies Productivity Improvement Total Quality Culture QC Circles Zero Defects …..etc.

KAIZEN-The Concept Masaki Imai

KAIZEN-The Concept

KAIZEN-The Concept KAIZEN INNOVATION

KAIZEN-The Concept Process Oriented Approach People Oriented Approach Leads to Improved Results Focus on the process improvement without loosing sight of the expected results. People Oriented Approach Focus on …. Discipline Time Management Skill Development Participation and Involvement Morale Communication

KAIZEN-The Practice Management Group Individual Tools Involves Target Seven QC Tools New Seven Tools Professional Skills Common Sense Involves Managers and Professionals QC Circles Everyone Target Systems and Process Group Work area Individual work area Implementation Cost Small investment Mostly inexpensive Inexpensive Results New System and Facility improvement Improved work procedures On the spot improvement

KAIZEN-The Practice Just In Time- Management Oriented Kaizen Exact number of required units brought to each successive stage of production at the appropriate time The advantage of JIT Shortened Lead Time Reduced time spent on non-process work Reduced inventory Better balance between processes Problem clarification

KAIZEN-The Practice Group Oriented Kaizen- SMALL GROUP ACTIVTIES Informal, voluntary small groups, organized within the company Carry out specific improvement activities Many forms:- QC circles, Suggestion Groups, Workers group……… QC Circles…the most famous Emphasis on problem solving in the work area Advantages of QCC Sense of teamwork Improved communication Improved morale Acquire new skills Labor-Management relationship improved

KAIZEN-The Practice Individual Oriented Kaizen- SUGGESTION SYSTEM Individual provides suggestion on how to improve his work area. Helps the individual to be Kaizen conscious. Also helps in…. Workers to speak out. Opportunity for management to help workers. An valuable opportunity for two way communication Suggestions normally covers:- Savings in energy, material and other resources Improvement in working environment Improvements in machines, processes, jigs and tools Improvements in customer services

KAIZEN- Implementation Seven Conditions for Successful Implementation of Kaizen Strategy Top management commitment Top management commitment Setting up an organization dedicated to promote Kaizen Appointing the best available personnel to manage the Kaizen process Conducting training and education Establishing a step-by-step process for Kaizen introduction.

KAIZEN & INNOVATION

Figure 2.2 Ideal pattern from innovation Time Figure 2.3 Actual pattern from innovation Time

INNOVATION plus KAIZEN New Standard KAIZEN INNOVATION New Standard KAIZEN INNOVATION

KAIZEN and INNOVATION KAIZEN INNOVATION 1. Effect 2. Pace Long-term and business as usual Short term and dramtic 2. Pace Small Steps Big Steps 3. Time frame Continuous and Incremental Intermittent and non-incremental 4. Change Gradual and constant Abrupt and volatile 5. Involvement Every-one Selected champions 6. Approach Collective group efforts, systems approach Individual ideas and efforts 7. Mode Maintenance and Improvement Scrap and Rebuild 8. Effort Orientation People Technology 9. Practical Requirements Little investment but great efforts to maintain Large investment but little effort to maintain 10. Advantage Works well in slow growth economy Better suited in fast growth economy

Another comparison of Innovation and KAIZEN Creativity Individualism Specialist-oriented Attention to great leaps Technology-oriented Information: closed, proprietary Functional (specialist) orientation Seek new technology Line + staff Limited feedback Adaptability Teamwork (systems approach) Generalist-oriented Attention to details people-oriented Information: open, shared Cross-functional orientation Build on existing technology Cross-functional organization Comprehensive feedback

6 Sigma

About Six Sigma Six Sigma Was Developed at Motorola in the 1980’s As a Method to Improve Process Quality. It Was First Used to Improve Manufacturing Process Capability and Then Migrated to Business Processes Capability Companies That Have Deployed Six Sigma: Bank of America, Motorola, GE, IBM, Kodak and Many More The Basic Premise Is, All Processes Have Variation. Variation Is the Enemy.

Six Sigma Philosophy Know What’s Important to the Customer (CTQ) ? Know What’s Important to the Customer (CTQ) Reduce Defects (DPMO) Center Around Target (Mean) Reduce Variation (Standard Deviation) GE Company Proprietary November 1998

SIX SIGMA-Definitions Business Definition A break through strategy to significantly improve customer satisfaction and shareholder value by reducing variability in every aspect of business. Technical Definition A statistical term signifying 3.4 defects per million opportunities.

SIX SIGMA DEFINATIONS If your yield is… Your DPMO is…. Your Sigma is… 30.9% 690 000 1σ 69.2% 308 000 2σ 93.3% 66 800 3σ 99.4% 6 210 4σ 99.98% 320 5σ 99.9997% 3.4 6σ

SIX SIGMA-Definitions In brief, Six Sigma is a process control method to improve the quality of products or services in a continuous manner. This method uses six standard deviations of a normal distribution as the limits of customers’ acceptance of the system’s products. This method is applicable to manufacturing as well as service industries. With six sigmas, only 3.4 defects per million are allowed, or an acceptable level of 99.9997% is required

Six Sigma Performance With 99 % Quality With Six Sigma Quality For every 300000 letters delivered 3,000 misdeliveries 1 misdelivery For every week of TV broadcasting per channel 1.68 hours of dead air 1.8 seconds of dead air Out of every 500,000 computer restarts 4100 crashes Less than 2 crashes Source: The Six Sigma Way by Peter Pande and Others

Who is Implementing Six Sigma At least 25% of the fortune 200 claim to have a serious six sigma program - Michael Hammer. Financial - Bank of America, GE Capital, Electronics - Allied Signal, Samsung, Sony Chemicals - Dupont, Dow Chemicals Manufacturing - GE Plastics, Johnson and Johnson, Motorola, Nokia, Microsoft, Ford. Airline - Singapore, Lufthansa, Bombardier And hundreds of others in Americas, Europe, Sub Continent.

Six Sigma Results Company Annual Savings General Electric $2.0+ billion JP Morgan Chase *$1.5 billion (*since inception in 1998) Motorola $ 16 billion (*since inception in 1980s) Johnson & Johnson $500 million Honeywell $600 million Six Sigma Savings as % of revenue vary from 1.2 to 4.5 % For $ 30 million/yr sales – Savings potential $ 360,000 to $ 1.35 million. Investment: salary of in house experts, training, process redesign.

Key Concepts of Six Sigma At its core, Six Sigma revolves around a few key concepts. Critical to Quality: Attributes most important to the customer Defect: Failing to deliver what the customer wants Process Capability: What your process can deliver Variation: What the customer sees and feels Stable Operations: Ensuring consistent, predictable processes to improve what the customer sees and feels Design for Six Sigma: Designing to meet customer needs and process capability

Dissecting Process Capability Premise of 6 Sources of variation can be: Identified Quantified Eliminated or Controlled Unstable Parts & Materials Inadequate Design Margin Inadequate Process Capability LSL USL Defects Acceptable Defects Process Capability

“Common sense” doesn’t mean “commonly done” or when done, done well. Six Sigma Methodology Define Define the problem and customer requirements. Measure defect rates and document the process in its current incarnation. Analyze process data and determine the capability of the process. Improve the process and remove defect causes. Control process performance and ensure that defects do not recur. Control Measure Improve Analyze “Common sense” doesn’t mean “commonly done” or when done, done well.

Six Sigma Methodology Control Define Measure Analyze Improve Establish standards to maintain process; Design the controls, implement and monitor. Evaluate financial impact of the project Identify, evaluate and select projects for improvement Set goals Form teams. Collect data on size of the selected problem, identify key customer requirements, Determine key product and process characteristic. Analyze data, establish and confirm the “ vital few “ determinants of the performance. Validate hypothesis Improvement strategy Develop ideas to remove root causes Design and carry out experiments, Optimize the process. Final solutions Project Phases

Six Sigma – Case Study Service Organisation Background M/s Alpha Inc. manages out bound cargo from a distribution centre to different stores. Deliveries made on trucks - owned and hired. Customers dissatisfied at delivery schedules. Leadership decision to deploy Six Sigma; Team of 1 Black Belt and 3 Green Belts formed Sponsor of the project – Distribution Manager

Define - Critical to Quality (CTQ) Focus on customers generating annual revenue of USD 400,000/-. Customer needs Improved delivery performance Level 1 CTQ Timely delivery Level 2 CTQ On time delivery to schedule Level 3 CTQ Delivery within +/- 1 hour of scheduled delivery time Current process sigma level - 2.43 or 175889 DPMO

Define - Goal Statement Reduce number of delayed deliveries by 50 % by 31st December Y 2002 to better meet customer requirement of timely delivery defined as within +/- 1 hour of scheduled delivery.

Define - Performance Standards Output unit A scheduled delivery of freight Output characteristic Timely delivery Project Y measure Process starts when an order is received Ends when goods are received & signed for at customers desk. Process measurement – Deviation from scheduled delivery time in minutes. Specification limits LSL = -60 minutes USL= +60 minutes Target Scheduled time or zero minutes deviation Defect Delivery earlier or later than 1 hour. No. of defect opportunities per unit 1 opportunity for a defect per scheduled delivery of freight.

Detailed process maps drawn Define - SIPOC Diagram Supplier Stores Manager Input Stores Order Process Steps (high level) Receive order Plan delivery Dispatch Driver with goods Deliver goods to stores Receive delivery Output Received freight with Documents Customer Store Manager Detailed process maps drawn

Measure and Analyze Driver and Distance identified as key factors influencing delivery performance. Driver selected for focus. Potential root causes as to why Driver influenced the time: Size of the vehicle Type of engine Type of tyres Fuel capacity

Improve Experiments designed and conducted using truck type and tyre size. Findings: Larger tyres took longer time at certain routes where area was cramped and time lost in maneuvering. High incidence of tyre failures since tight turns led to stress on tyres thus increasing number of flat tyres. Team modified planning of dispatch process by routing smaller trucks at more restrictive areas.

Control Test implementation. Process sigma level up from 2.43 or 175889 DPMO to 3.94 or 7353 DPMO. Performance still fell short of best in class 4.32 or 2400 DPMO. Improvement led to significant customer satisfaction. Process continually monitored and data on new cycle times, tyre failure collected as per defined methods and frequency, analysed and monitored. Customer satisfaction measured and monitored.

Key Lessons Learnt Define Measure Difficulty in identifying the right project and defining the scope; Difficulty in applying statistical parameters to Voice of the Customers; Trouble with setting the right goals; Measure Inefficient data gathering; Lack of measures; Lack of speed in execution;

Key Lessons Learnt Analyse Challenge of identifying best practices Overuse of statistical tools/ under use of practical knowledge Challenge of developing hypotheses Improve Challenge of developing ideas to remove root causes Difficulty of implementing solutions Control Lack of follow up by Managers/ Process Owners Lack of continuous Voice of the Customer feedback Failure to institutionalize continuous improvement.

Key Lessons Learnt “ Define “ ranked most important step but gets the lowest resource allocation Project scoping and its definition is critical to its success/ failure; “Measure” is considered most difficult step and also gets the highest resources Source: Greenwich Associates Study Y 2002

What Makes Six Sigma Different? Versatile Breakthrough improvements Financial results focus Process focus Structured & disciplined problem solving methodology using scientific tools and techniques Customer centered Involvement of leadership is mandatory. Training is mandatory; Action learning (25% class room, 75 % application) Creating a dedicated organisation for problem solving (85/50 Rule).

Benefits of Six Sigma Generates sustained success Sets performance goal for everyone Enhances value for customers; Accelerates rate of improvement; Promotes learning across boundaries; Executes strategic change

6 Sigma vs Kaizen

Six Sigma & Kaizen- The Difference Quality Improvement YES Continuous Improvement Approach Improve Existing System Human Based Statistical Method Improvement Framework-DMAIC Implementation Simpler and Low cost Difficult and High Cost RELIES UPON GROUP DYNAMICS FIXED PLAN OF IMPLEMENTATION

Kaizen Six Sigma Japanese Origin Western Origin Culture Methodology (or Culture) Kaizen Umbrella Road Maps Continuous Improvement Immediate Perfection Mistakes as Possibility for Improvement Reducing Variation and Defects Long-term Results Short-term Results Possible Every Possible Improvement Prioritising Projects Providing Quality Ensuring Profitability Participation of Every Single Employee Creation of Project Teams

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