1. Lean Systems and Six-Sigma Quality
Chapter 10
Lean Systems and
Six-Sigma Quality

2. Lecture Outline What is Lean? Lean Production Respect for People
Total Quality Management (TQM)
Statistical Quality Control (SQC)
Six-Sigma Quality
Lean Six-Sigma Supply Chain
Copyright 2011 John Wiley & Sons, Inc.

3. What is Lean?
Lean is a management approach for creating value for the end customer through the most efficient utilization resources possible
Standard in many industries
Often results in:
large cost reductions
improved quality
increased customer service
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4. Lean Six Sigma Combines the approaches of Lean and Six Sigma Six Sigma
methodology to identify and eliminate causes of quality problems
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5. Tenets of Lean There are six tenets of the Lean Philosophy:
Elimination of Waste
eliminate all non-value adding activities
A Broad View
decisions made for the success of the entire supply chain
all supply chain members responsible for adding value
Simplicity
the simpler the solution the better
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6. Tenets of Lean Continued
Continuous Improvement
emphasis on quality and continuous improvement
called kaizen
Visibility
visible problems are identified and solved
Flexibility
easily switch from one product type to another, using flexible workers that perform many different tasks
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7. Elements of Lean
Lean is composed of three elements that work in unison:
Lean Production
Total Quality Management (TQM)
Respect for People
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8. Elements of Lean
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9. Lean Production
Coordinated system for producing the exact products desired, delivered in right quantities to where needed Just-in-Time
The Pull System
Visual Signals
Small Lot Production
Uniform Plant Loading
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10. The Pull System Traditional approach Pull approach
supply chains work as “push” systems
inventory carried to cover up problems
Pull approach
each stage in supply chain requests quantities needed from the previous stage
no excess inventory generated
reduced inventory exposes problems
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11. Visual Signals Communication between workstations Kanban
“signal” or “card” in Japanese
contains information passed between stations
authorizes production
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12. Visual Signals
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13. Small Lot Production
The amount of products produced at any one time is small
reduces inventory and excess processing
increases flexibility
shortens manufacturing lead time
responds to customer demands more quickly
setup time must be low
Copyright 2011 John Wiley & Sons, Inc.

14. Uniform Plant Loading Problem Uniform Plant Loading
demand changes are magnified throughout the supply chain
contributes to inefficiency and waste
Uniform Plant Loading
production schedule is frozen for the month
also called “leveling”
helps suppliers better plan own production
Copyright 2011 John Wiley & Sons, Inc.

15. Respect for People
Respect for all people must exist for an organization to be its best
flatter hierarchy than traditional organizations
ordinary workers given great responsibility
supply chain members work together in cross functional teams
Look at Role of:
workers, management, and suppliers
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16. Role of Workers
Workers have the ability to perform many different tasks and are actively engaged in pursuing company goals
Worker Duties
improve production process
monitor quality
correct quality problems
Work in Teams
quality circles
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17. Role of Management
Create the cultural change in the organization needed for Lean to succeed
provide atmosphere of cooperation
Empower workers to take action based on their ideas
develop incentive system for lean behaviors
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18. Role of Suppliers Lean builds long-term supplier relationships
companies partner with suppliers
improve process quality
information sharing
goal to have single-source suppliers
Copyright 2011 John Wiley & Sons, Inc.

19. Total Quality Management (TQM)
TQM is an integrated organizational effort designed to improve quality at every level
Look at:
Quality Gurus
Voice of the Customer
Costs of Quality
Quality Tools
ISO 9000
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20. Quality Gurus
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21. Voice of the Customer
Quality is defined as meeting or exceeding customer expectations
Determine customer wants:
focus groups
market surveys
customer interviews
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22. Costs of Quality
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23. Quality Tools
Lean requires workers to identify and correct quality problems
Seven Tools of Quality Control:
Cause and Effect Diagrams
Flowcharts
Checklists
Control Charts
Scatter Diagrams
Pareto Analysis
Histograms
Copyright 2011 John Wiley & Sons, Inc.

24. Cause and Effect Diagrams
Identify causes of a quality problem
sometimes called “fishbone diagrams”
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25. Flowchart Diagrams the sequence of steps in an operation or process
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26. Checklist
Lists common defects and number of occurrences of the defects
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27. Control Chart
Determines whether a process is operating within expectations
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28. Scatter Diagram
Graph that visually shows how two variables are related to one another
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29. Pareto Analysis
Based on the premise that a small number of causes create the majority of problems
identifies problems based on degree of importance
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30. Histogram
Chart that shows the frequency distribution of observed values of a variable
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31. ISO 9000 “Family” of standards for quality management ISO 14000
increased international trade developed a need
published by International Organization for Standards (ISO) in 1987
concerns measuring and documenting the quality process
ISO provides a certification process
ISO 14000
standards for environmental management
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32. Statistical Quality Control (SQC)
SQC is the use of statistical tools to measure product and process quality
Three categories:
Descriptive Statistics
describe quality characteristics
Statistical Process Control (SPC)
a random sample of output is used to determine if characteristics are acceptable
Acceptance Sampling
sample determines if whole batch is acceptable
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33. Sources of Variation All processes have variation Assignable Variation
caused by factors that can be clearly identified and managed
Common Variation
inherent in the process
also called random variation
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34. Process Capability
Process Capability evaluates the variation of the process relative to product specifications
Product Specifications
ranges of acceptable quality characteristics
also called tolerances
Process Variation
all processes have natural variation
defects are produced when variation exceeds product specifications
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35. Process Variation Equal to Specification Range
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36. Process Variation Exceeds Specification Range
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37. Process Variation Narrower than Specification Range
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38. Process Capability Index
where: USL = upper specification limit
LSL = lower specification limit
Cp Values:
Cp = 1: process is minimally capable
Cp ≤ 1: process is not capable of producing
products within specification
Cp ≥ 1: process exceeds minimum capability
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39. Cp Example
Given a process with three separate machines that are used to fill jars with pasta sauce.
specification range is between 30 and 34 ounces
process mean, μ, is 31 ounces
Machine σ A
0.6 B
0.7 C
1.2
Calculate the Cp for each machine to determine capabilities
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40. Cp Example Continued A: B: C:
Machine A has a Cp > 1, however the process mean is not centered
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41. Cpk Example
Cpk addresses the lack of centering of the process over the specification range
Machine A:
Cpk = min (1.66, 0.55) = 0.55
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42. Process Control Charts
Graph that shows whether a sample of data falls within the common range of variation
sample process output
plot result on the control chart
use to determine if process is in control
can monitor:
variables
characteristics that can be measured
attributes
characteristics that can be counted
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43. Process Control Charts
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44. Control Charts for Attributes
A p-chart monitors the proportion of defective items in a sample
centerline: average value of p across all samples, p
UCL = p + z sp
LCL = p – z sp
where: z = standard normal variable
p = sample proportion defective
sp = = standard deviation of
avg. proportion defective
Copyright 2011 John Wiley & Sons, Inc.

45. # of Incorrect Procedures
P-Chart Example
Given the following five samples of data tracking incorrect procedures in a hospital
Sample
# of Incorrect Procedures
# Inspected
Fraction Defective 1 10
0.1 2 3
0.2 4 5
Total 50
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46. P-Chart Example Continued
UCL = p + z sp = (0.095) = 0.385
LCL = p + z sp = (0.095) = 0.185
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47. What is Six Sigma?
Six Sigma is a quality management process that uses measurement to reduce process variation and eliminate defects
no more than 3.4 parts per million defective
sigma stands for # standard deviations of the process
originated at Motorola in 1970s
“zero defects”
Copyright 2011 John Wiley & Sons, Inc.

48. Six Sigma Methodology Two Aspects: Use of technical tools
statistical quality control
seven tools of quality
People involvement
all employees responsible for rooting out quality problems
all employees trained to use technical tools
Copyright 2011 John Wiley & Sons, Inc.

49. Six Sigma Five-Step Plan
Define:
define the quality problem of the process
Measure:
measure the current performance of the process
Analyze:
analyze to root out cause of quality problem
Improve:
improve process by eliminating root causes
Control:
control process to ensure continued improvement
Copyright 2011 John Wiley & Sons, Inc.

50. Lean Six Sigma Supply Chain
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51. Developing a Lean Six Sigma Supply Chain
Steps:
Jointly Define Value
Conduct Supply Chain Capability Analysis
Develop Key Financial & Operational Metrics
Identify & Implement System Improvements
Value Stream Mapping (VSM)
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52. Impact on Supply Chain Activities
Suppliers
lower costs due to efficient systems
shorter lead times
lower safety stock
Operations
proper cycle time calculation ensures production according to customer demand
uniform work flow
pull production
Logistics
optimization models to select routes
warehouse design changes reduce waste
Copyright 2011 John Wiley & Sons, Inc.

53. Review
Lean management approach concerns the most efficient use of resources possible. The most important tenet is eliminating waste.
Lean consists of 3 elements: Lean Production, Total Quality Management, Respect for people.
Lean relies on visual signals to pull products through the system.
Jidoka is the authority of every worker to stop the production process.
Copyright 2011 John Wiley & Sons, Inc.

54. Review Continued
The “seven tools of quality control” include cause- and-effect diagrams, flowcharts, checklists, control charts, scatter diagrams, Pareto analysis, and histograms.
ISO 9000 standards address quality management. ISO standards address environmental management.
SQC measures and identifies quality problems in both the product and process. 3 categories: descriptive statistics, SPC, acceptance sampling.
Copyright 2011 John Wiley & Sons, Inc.

55. Review Continued
All processes have variation. Assignable variation can be identified and managed. Common variation is inherent in the process.
Process capability evaluates the processes ability to meet product specifications.
Process control charts ensure that the process is “in a state of control.”
Six Sigma uses measurement to reduce process variation and eliminate defects.
Copyright 2011 John Wiley & Sons, Inc.

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