COIT 20252 BPM Week 9: Business Process Improvement Methodologies - Lean and Six Sigma.

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COIT 20252 BPM Week 9: Business Process Improvement Methodologies - Lean and Six Sigma

Objectives Differentiate between Lean & Six Sigma On completion of this module you should be able to: Differentiate between Lean & Six Sigma Identify the phases in a Six Sigma Improvement Project Identify the pillars and approaches of Lean Distinguish between flow Kaizen and process Kaizen Identify types of waste (wasteful activities) Develop a value stream map Develop a communication process management A3 page. Understand and identify phases of a process redesign project © Ritesh Chugh

Process Flow Problems Both Lean and Six Sigma are methods for process change. Lean is a name for a subset of the ideas derived from the Toyota Production System (TPS). It focusses on reducing time of activities and process waste. Six Sigma is a movement that aims to make all employees aware of the value of process improvement and provides the organizational structure to support a continuous improvement effort. Its main emphasis is on reducing the number of errors in a process. © Ritesh Chugh

Six Sigma (History) Six Sigma approach was created at Motorola in the late 1980s. Focus on measuring quality at each step of a process. Considered to be a systematic approach to process improvement. In 1995, Jack Welch, the chief executive officer of GE, decided to use Six Sigma at GE. Six Sigma originated as a set of statistical techniques that managers could use to measure process performance. By using the techniques, a manager could then make changes in the process to see if it improved the process. Once the process was as efficient as they could get it, managers then used the statistical techniques to maintain the process. © Ritesh Chugh

Six Sigma (Contd..) Three types of process change efforts: Process management - developing an overview of the company’s processes, linking it with corporate strategy, and using it to prioritize process interventions. Process improvement - a set of techniques used to incrementally improve and maintain process quality. Process redesign - major changes in a process. © Ritesh Chugh

The Six Sigma Concept Six Sigma is a name derived from concepts associated with a standard bell-shaped curve. Almost anything varies if you measure with enough precision. If the items being measured vary in a continuous manner, one finds that variation frequently follows the pattern described by the bell-shaped curve: 68.26% of the variation falls within two standard deviations. In statistics, the Greek letter sigma ( σ ) is used to denote one standard deviation; 99.73% of all deviations fall within six standard deviations. © Ritesh Chugh

The Six Sigma Concept (Contd..) Three sigmas to the right of the mean. Imagine that we subdivided the 0.13% of the curve out on the right and inserted three more sigmas. We would have six sigmas to the right of the mean. We would cover 99.99966% of the deviation and only exclude 3.4 instances in a million. Harmon, 2014, Pg. 297 © Ritesh Chugh

The Six Sigma Concept – Key Message Six Sigma projects rely on formulas and tables to determine sigmas. Start be defining a defect, and then create a process that is so consistent that only 3.4 defects will occur in the course of one million instances of the process. Sounds like a rigorous goal? © Ritesh Chugh

The Six Sigma Concept – A restaurant example Deliver all meals as close to 15 min as possible. Allow some variation however deliver under 30 mins. The restaurant wanted to achieve Six Sigma and ensure that all meals, except 3.4 of a million, would be delivered in 30 min or less. -The goal of most Six Sigma projects is to reduce the deviation from the mean. -This will require efficient processes. Harmon, 2014, Pg. 298 © Ritesh Chugh

The Six Sigma Approach To Process Improvement Begin by helping a management team develop a process architecture. If an architecture already exists, then identify projects that will benefit most from a process improvement effort. Process improvement projects based on the Six Sigma method are usually short and typically range from 1 to 6 months. Most Six Sigma projects focus on a subprocess or subsubprocess. Many focus on what would be regarded as a single activity. Six Sigma always stresses that measures at any level should be tied back to higher level processes and eventually to strategic goals. © Ritesh Chugh

Six Sigma Teams Six Sigma projects chosen by steering committee or process sponsor or team sponsor or champion. Six Sigma jargon: Black Belt – A leader who has knowledge of Six Sigma projects. Green Belt - If the leader is a manager who has full-time responsibilities elsewhere and is slightly less qualified. Master black belt - an internal or external consultant who is a specialist in Six Sigma, and especially skilled in the use of the statistical tools that Six Sigma depends on. © Ritesh Chugh

Phases in a Six Sigma Improvement Project Most Six Sigma projects are organized around a process improvement approach that is referred to as the DMAIC process. Harmon, 2014, Pg. 301 © Ritesh Chugh

1. Define Develop/give a draft charter, specifying process to be improved, who will do what, when and the expected results. Identify SIPOC(Supplier, Input, Process, Output, and Customer.) Harmon, 2014, Pg. 303 © Ritesh Chugh

1. Define (Contd..) List potential requirements on a chart called a CTQ (Critical-To-Quality) tree. Pareto Analysis - 80 percent of problems may be caused by as few as 20 percent of causes. Harmon, 2014, Pg. 304 © Ritesh Chugh

2. Measure Develop measures that tell you how well each key requirement is being satisfied. Three measurement principles: Measure only what is important to the customer. Only measure process outputs that you can improve. Do not measure an output for which you have no history of customer dissatisfaction. © Ritesh Chugh

2. Measure (Contd..) Focus on determining how to measure process effectiveness and efficiency. Measure: Inputs Processes Outputs Distinguish between output measures (features of the product or service you deliver) and service measures (refers to more subjective things having to do with how the customer expects to be treated). © Ritesh Chugh

Cause-effect diagram (refer to week 7) can be developed. 3. Analyse Analyze what might be causing the problem. Consider how each activity adds value to the entire process. A systematic analysis process: Begin with a comprehensive look for possible causes. Examine the possible causes in more detail, gather data as appropriate, and apply statistical tools. Come back to the 80/20 rule. Cause-effect diagram (refer to week 7) can be developed. © Ritesh Chugh

4. Improve Think of ways to improve the process. Changes are evaluated and some are put into force. Additional data are gathered to see if the changes result in a more consistent process. © Ritesh Chugh

5. Control Maintain the gains and, sometimes, in new initiatives, to improve the process further. Constantly sample and evaluate output. Determine a reasonable compromise between excessive measurement and enough measurement to ensure that processes remain efficient and effective. © Ritesh Chugh

Two key principles (pillars) Lean Derived from the process improvement approach developed at Toyota. Lean also referred to as the TPS or the Toyota Way(a comprehensive approach to managing and improving Toyota’s corporate efforts). Two key principles (pillars) Five basic approaches Harmon, 2014, Pg. 316 © Ritesh Chugh

The Toyota Way Challenge refers to the Toyota philosophy, or to long-term thinking. Kaizen refers to the Toyota improvement method. Respect and Teamwork both refer to interactions between managers and employees, and interactions of teams. Genchi Genbutsu refers to going and seeing it for yourself on the ground. © Ritesh Chugh

Flow Kaizen Focuses on improving the flow of the high-level value stream. Flow Kaizen is the concern of senior management. The chief tool of the Flow Kaizen practitioner is a high-level diagramming technique called value-stream mapping. © Ritesh Chugh

A value-stream map The map provides a view of an entire value chain. Begin at the upper right, with the customer(distribution) in this figure. This value-stream map shows a complete product cycle, from order to delivery. The bold boxes indicate the 8 subprocesses. The bold boxes and the wide arrows track the flow of actual product. The thin arrows and boxes track the flow of information. The bold clear arrows indicate that the item is “pulled” by the upstream subprocess. The bold, striped arrow indicates that the item is “pushed.” © Ritesh Chugh Harmon, 2014, Pg. 317

Process Kaizen After the overall value stream is running smoothly, Lean team begin to drill down and look at specific processes. Looking for the elimination of waste. Process Kaizen is the responsibility of the line workers. Define activities as either value-adding or non–value-adding activities. Eliminate non–value-adding activities. © Ritesh Chugh

Types of waste (wasteful activities) Overproduction Waiting Transport Extra Processing Inventory Motion Defects Identify and streamline a process so that all work is done in the most efficient manner possible. © Ritesh Chugh

Management, Teams, and A3 Pages Employees are organized into teams that will take responsibility for their own work. Learn from others. Encourage and reward teamwork. Mentor employees rather than “control” them. A3 Page (Communication process management tool) layout Title (Process to be improved) Background (How big and how important is the problem?) Current Conditions (How much? How many? How long?) Goals/Targets (What would a solution look like?) Analysis Proposed Countermeasures (What should we do?) Plan (How should we go about the solution?) Follow-up (How should we follow up to ensure the solution works?) © Ritesh Chugh

Sample A3 worksheet © Ritesh Chugh Harmon, 2014, Pg. 321

BPTrends Process Redesign Methodology Harmon, 2014, Pg. 328 © Ritesh Chugh

Overview of Process Redesign Harmon, 2014, Pg. 328 © Ritesh Chugh

Five phases of a process redesign project Outcome Understanding the project Detailed project plan Analyze business process Documents and models describing the existing process, a draft plan for the redesign of the existing process, and the support of all key senior managers. Redesign business process New process documentation and proposed management structure Implement redesigned process Infrastructure and resource materials Roll out the redesigned process A new process © Ritesh Chugh

In summary Six Sigma focused on improving the quality and consistency of process outputs, whereas Lean focused on improving the flow of activities and reducing the cost of a process by reducing several forms of waste. Both can be used to improve a process that is already worked in a satisfactory manner, as part of a continuous improvement effort. A blend of Lean and Six Sigma has emerged – Lean Six Sigma! Adopt a process redesign methodology. © Ritesh Chugh

Lecture Content Source Harmon, P 2014, Business process change: a business process management guide for managers and process professionals, 3rd edn, Morgan Kaufmann-Elsevier, Waltham, MA. (Chapters 12 & 13) © Ritesh Chugh

Next Week Business Process Software Tools & BPM Suites- Chapters 15(Software Tools for Business Process Analysis and Design) & 16 (Business Process Management Suites)