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What is Lean Six Sigma?
By Mike George Dave Rowlands Bill Kastle
McGraw-HillCopyright © 2010 The McGraw-Hill Companies
All right reserved.
Chapter OneThe Four Keys to Lean Six Sigma
Bank One is a national company with branch offices in many states. Each month, its National Enterprise Operations staff handles more than 200,000 requests from customers who want to get copies of old checks. Data from early in 2000 showed that on a monthly basis, anywhere from 10% to 25% of these requests were not filled to the customer's satisfaction. Often the copies were late, or unreadable, or the original couldn't even be found.
And it wasn't just the customers who were unhappy. How would you like to be one of the service staff having to handle all the complaint calls they got?
Time after time, the bank had tried to solve the problem, but with no lasting results. Then, when the company embarked on a new initiative based on Lean Six Sigma methods, management decided that the check retrieval process was one of the first things they should tackle.
This time around, the approach to solving the problem was very different. For one thing, people representing each part of the check retrieval process were brought together. The team included frontline staff who received the requests, people responsible for locating the filed original or microfiche copy, as well as some who mailed the photocopies. (In the past, it's the people who received the requests who took most of the blame for problems.) Secondly, the team also got a lot of support from coworkers who had a lot of experience in making improvements.
Thirdly, the team didn't just rely on their opinions about what the problem was. They used a problem-solving method that required them to
1) Use their creativity to think about the problem in new ways.
2) Collect data to see if what they thought was happening was true. In some cases, their theories turned out to be right. But they also discovered a number of issues they hadn't even thought about before, such as problems with vendors who processed the microfiche film. The data also helped them identify which issues caused the most problems.
3) Develop solutions that they could show would solve the issues they had confirmed with data.
The team ended up making changes in nearly every step of the process. For example, the clerks who took the requests from customers got better training, including how to fill out the request forms correctly and completely. The staff who processed the microfiche film started operating under new procedures for maintaining equipment. As a result, service failures are now just a third of what they used to be (about a 66% reduction from the peak) ... and service staff are happy that they have far fewer angry customers calling!
This case study highlights the foundations of Lean Six Sigma, as shown in Figure 1.1 (next page). Above all, the team was working on a problem that was important to their company and its customers. In addition ...
Their goal was to delight customers—delivering higher quality service in less time.
To achieve that goal they had to improve their processes. To do that, they had to eliminate defects (anything that was unacceptable to a customer) and focus on how the work flowed through the process.
The people who work in the different process areas used teamwork, sharing ideas with each other so they could solve the problem.
All their decisions were based on data.
It took all of the elements, working together, to create real solutions. Any of the elements alone isn't enough. You need to combine the creativity of people working on the process with data and with an understanding of customers and processes. The next four chapters of this book walk through each of these elements in more detail and show how they apply to your own job.
Chapter TwoKey #1: Delight Your Customers with Speed and Quality
It used to be that a company would decide what features to include in its products or service based solely on what their engineers or marketing staff said they should be doing. And people were taught that the only opinion that really mattered was the boss's.
Nowadays, those old-fashioned notions have been replaced by a new attitude that only customers can define quality. The logic seems obvious when you stop to think about it. Customers are the people who will decide whether to spend their money on your company's services or products. They'll be comparing your offerings against everything else in the marketplace and determining which ones best fit their needs. (That's why Lean Six Sigma projects always start by trying to figure out what it is your customers will be focusing on as they compare you to your competitors.)
In the hotel business, for example, "quality" to some customers will mean a five-star hotel. To others, it will mean a lower-priced motel that's clean and close to a highway. In the auto business, quality can mean anything from a Lexus to a small wagon that gets good mileage. In manufacturing, it might mean having goods delivered in small batches twice a week, or meeting very narrow specifications. It all depends on what the customer wants. The companies who will do best in the marketplace are those who take the time to see everything through their customers' eyes and deliver what they want.
It's not just these external customers—people outside your company—whose opinions matter, either. You have internal customers, too. Those are the people inside your company to whom you hand off your work. Have you ever asked these internal customers what they want from you? What is most important to them in the information or service or product you provide?
In Six Sigma, you'll hear the term Voice of the Customer or "VOC" all the time. It's used to indicate that the opinions and needs of customers are being represented in decisions about products and services. There is a mix of VOC techniques that help companies live up to the ideal of meeting or exceeding customer needs. Some are simple, like tracking complaint calls that come in. Others are more complex, such as setting up focus groups or visiting customer sites.
Whatever methods you use, the biggest obstacle is developing the awareness that any decision about a service or product should start with customers.
The goal: eliminate defects
Since Lean Six Sigma starts with customers, its goal is clear—to eliminate anything that doesn't meet their needs. In Lean Six Sigma terms, things that don't meet customer needs are called defects. So if you promise a 3-day turnaround time and it takes you 3.5 days, that's a defect. If you're entering a purchase order and enter the wrong product code, that's a defect. If you're producing lamps and the wiring is frayed, that's a defect.
One of the challenges you'll face as you begin to use Lean Six Sigma is defining and measuring defects. For example, suppose you find out your customers want courteous service. How would you determine whether or not they got it? The thing to keep in mind is what aspects of your product or service are most important to your customers. Then find ways to determine whether or not you've met those needs. If you don't, your process is probably producing defects.
What's also important in Lean Six Sigma is checking on the consistency in your products, services, and processes. How likely is it that customers will consistently get something they're happy with? If you deliver what they want one day, but not the next day, they may take their business elsewhere.
The links between quality, speed, and low cost
Most of us can identify with "customers needs" because all of us are customers, too. We want the same thing our company's customers want: quality, speed, and low cost. When we order a product or service, we want it delivered as quickly as possible and on time (speed), with no errors (high quality), and at the lowest possible price (low cost).
What few people realize before they begin studying Lean Six Sigma is that we can't really achieve any of these goals without doing all of them at the same time. Why?
1) A process that makes a lot of errors cannot keep up its speed. So high quality makes it possible to attain fast speed.
2) A process that works slowly is prone to errors (low quality). To some people, that sounds like it doesn't make sense: don't people make fewer mistakes if they work slowly? The key here is that we're looking at overall process speed, not how quickly an individual person or machine works.
Imagine following some item in your process from beginning to end. How much time is it actually worked on? How much time does it spend sitting around waiting to be worked on? In the vast majority of cases, "work" spends most of its time waiting. This waiting time is easy to see in manufacturing plants where material is stacked to the ceiling. If you're in service areas, you have inventory, too—it's just harder to see! How many e-mails or voicemails or work requests do you have in your computer or on your desk waiting to be worked on?
Bad things happen to work that sits around waiting. In manufacturing, materials can become outdated or damaged. In services, information can get outdated.
The lesson? You have to do the things that create process speed (meaning "eliminate delays") if you want to achieve the highest levels of quality.
3) Low quality and slow speed are what make processes—and services and products—expensive. For example, if you have "inventory" of any kind—products or materials or requests for information or customer orders—that has to sit around before it's worked on, that means there is unfinished work that your company has spent money creating but can't yet bill to the customer. So the only way to consistently offer the lowest price—and still make a profit!—is to improve quality and speed.
It's because of these links that Lean Six Sigma offers advantages over other improvement methods. Traditionally, the methods we now call "Six Sigma" focused more on quality than speed. The methods known as "Lean" are better at improving process flow and speed than on improving quality. Combining the two is what makes Lean Six Sigma such a powerful improvement tool.
A mini-case study
To see how the concept of customers and defects apply in business, let's look at a story inspired by a real company:
Meet the folks at Sigma Oil Change
The managers at Sigma Oil Change are concerned about stiff competition from both other "quick lube" franchises and from automotive garages that want to recapture the oil-change business they've lost.
They began their work correctly by listening to the Voice of the Customer—finding out what their customers want. One thing they realized early on was that they actually have two different types of customers: (1) individual consumers bringing in family cars, and (2) fleet operators regularly bringing in cars owned and operated by companies. Determining whether these different customers had different needs was one of their initial goals.
A survey of both types of Sigma Oil Change customers exposed what Lean Six Sigma calls Critical to Quality (CTQ) requirements. These are the features of a product or service that are MOST important to your customers, the ones you should pay close attention to. Any defects associated with CTQ requirements can be fatal to a business. In this case, the CTQs for both groups included ...
In addition, the fleet customers wanted Sigma Oil Change to produce monthly reports on services for all their vehicles.
On the one hand, nothing on this list was particularly surprising. But having a confirmed list of specific customer needs gave the team a focus for their improvement efforts. (And in many cases, you will find some surprises on such lists.) Within a few months, the company made progress on being able to consistently deliver what their customers wanted, which led to an increase in repeat business—and increased profits in a competitive market.
What it means to focus on customers
Developing a focus on customers means a lot more than just doing a survey now and then. It means developing an awareness that customer needs should shape most of the work we do every day.
Mark Saloman works for the Neighborhood Code Enforcement Department in Fort Wayne, Indiana. Early in one improvement project, an expert who was coaching the team asked Mark the following question: "Who are you really working for? Who is your customer?"
Mark thought about it for a while, and said, "I think it's the Citizen's Review Board. That's who I report to."
"Okay," said the expert, "the Citizen's Review Board. Let's pursue that. If they're your customer, what do they do?"
"Well, they review my code enforcement write-ups about which people are violating the code," said Mark.
"So to satisfy your customer, all you have to do is go write up a bunch of reports and send them to the review board?" asked the expert. "That's all you need to do to meet your goals?"
"Well, no," Mark answered.
The expert then asked, "What's the goal of code enforcement?"
"To improve the neighborhood," said Mark.
"So who is really your customer?"
"I guess it's the people in the neighborhood," Mark said.
Mark's original answer is similar to what most people would say—that it was "their boss" that they needed to be concerned about. Being concerned about what your manager wants is a fact of life in business. But in Lean Six Sigma organizations, what the manager wants is to make customers happy. He or she therefore takes on the role of encouraging a customer focus among employees. Mark, for example, made some changes in his procedures once he realized who his customers were. He started making direct contact with citizens, attending neighborhood association meetings, and so on. This not only helped him focus on projects of importance to Fort Wayne residents, but led to greater understanding and cooperation from his constituents.
Having a true customer focus is not something you do only during an improvement project. We should all make a conscious effort to check what we're doing against what our customers want. We need to know what it will take to delight these customers—what they would define as "quality" work, how quickly they want our products or services delivered, what they would see as a "defect," and so on.
Chapter ThreeKey #2: Improve Your Processes
Once you understand your customers, the next step is figuring out a way to get better at delivering what they want. The answer lies in improving the processes your company uses to generate the services and products you sell.
Dr. W. Edwards Deming, an American statistician who led the quality movement in Japan (and later in America), spent much of his time trying to convince people that most quality problems are "in the process, not the person." For most of his 60+ year career, he promoted his 85/15 rule, based on his experience that 85% of problems were built into the way work was done (and hence under the control of management). Only 15% of the problems, he said, were really the fault of individual employees.
Most frontline employees had no trouble accepting Dr. Deming's assertions. After all, they were the people who paid the price for a lack of training, poor equipment, little communication, and unrealistic goals. In short, they worked under conditions that guaranteed poor quality. It was often managers who resisted Dr. Deming, because they were trained to find "who to blame" when something went wrong.
In the last few years of his life, Dr. Deming admitted his 85/15 ratio was probably wrong. More than likely, he said, it's 96% of problems that are built into the work system. Individual employees, he concluded, could only control perhaps 4%!
Why does it matter if most problems are "in the system"? Because it means that if you want to improve quality, you have to change the way work is done. That's why Lean Six Sigma focuses on process improvement. In fact, the purpose of most improvement efforts is to use data to find out what's wrong in the system that allows the problems to happen in the first place. Removing these problems will allow your company to provide better products and services to customers.
Excerpted from What is Lean Six Sigma? by Mike George Dave Rowlands Bill Kastle Copyright © 2010 by The McGraw-Hill Companies. Excerpted by permission of McGraw-Hill. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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