Lean Six Sigma Demystified

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CONTENTS

CHAPTER 1

Preface

What Is Lean Six Sigma?

Primitive Tools and Archaic Methods

Top 10 Ways You Know You Need Lean Six Sigma

Find Your Fix-it Factory

Double Your Profi ts

The End of Common Sense

It’s Not Your Fault!

Innovation, Customer Intimacy, and

Operational Effectiveness

Manufacturing versus Service

The Death of Manufacturing

Small versus Large Businesses

Bypassing the BS

Why Lean Six Sigma?

Plug the Leaks in Your Cash Flow

Every Business Has Two Improvement Focuses

The Universal Improvement Method

Improve

Lean Six Sigma DeMYSTiFiED

Quiz

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CHAPTER 2

Lean Six Sigma Demystifi ed

Lean DeMYSTiFieD

You Already Understand Lean

The Power Laws of Speed

Economies of Speed

The Toyota Production System

The Lean Process

Core Ideas of Lean

The Lean Mindset

Lean versus Mass Production

The Seven Speed Bumps of Lean

The Five S’s

Value Stream

Double Your Speed!

Pull versus Push

Redesign for One-Piece Flow

Production Floor Problem Solving

Get the Right Size Machines

Mistake Proofi ng with Color

Piloting Lean

Six Sigma and Lean

Lean Decision Making

Lean Hospitals

Lean Software

Lean Call Centers

The Religion of Reuse

Conclusions

Do More With Less

Lean for Doctor’s Offi ce

The Biggest Barrier to Lean Six Sigma

Quiz

Exercises

CHAPTER 3

Excel Power Tools for Lean Six Sigma

Setting Up Your Data in Excel

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Contents

CHAPTER 4

QI Macros Introduction

Fill in the Blanks Templates

Put Your Whole QI Story in One Workbook

Convert Tables of Data from One Size to Another

Using the ANOVA and Other Analysis Tools

Power Tools for Lean Six Sigma

Analyzing Customer Service Data Hidden in

Trouble Reporting Systems

Analyzing Text with Excel

Troubleshooting Problems

Technical Support

Chartjunk

Quiz

Exercises

Reducing Defects with Six Sigma

Six Sigma’s Problem Solving Process

Getting to Lean Six Sigma

Problem Solving

A Lean Six Sigma Case Study—Reducing

Computer Downtime

THE 4-50 RULE

Six Sigma Tar Pits

Lean Six Sigma Mindset

Mistakes, Defects, and Errors

Measurement Simplicity

Invisible Low Hanging Fruit

Core Score

Customer Supplier Relationships

The High Cost of Bad Data

Measuring Innovation

Accidents Don’t Just Happen

Using the QI Macros to Analyze Your Data

Quiz

Exercises

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CHAPTER 5

CHAPTER 6

CHAPTER 7

Lean Six Sigma Demystifi ed

Transactional Six Sigma

Transactional Six Sigma

Software Bugs and Six Sigma

The Dirty 30 Process for Six Sigma Software

Service Order Case Study

Common Problems

Dirty Thirty Process Review

Insights

Conclusion

Quiz

Exercises

Reducing Variation with Six Sigma

What Is Variation?

Causes of Variation

Distributions

Histograms and Capability

Conclusion

Quiz

Exercises

Sustaining Improvement

Process Flowchart

Control Charts for Sustaining the Improvement

Stability and Capability

The Hole in Krispy Kreme

Choosing a Control Chart

Stability Analysis

Understanding Standard Deviation

and Control Charts

Quiz

Exercises

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CHAPTER 8

Laser-Focused Process Innovation

Focusing the Improvement Effort

Voice of the Customer

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Contents

CHAPTER 9

Speak Your Customer’s Language

Critical to Quality Indicators

Balanced Scorecard

Quiz

Exercises

Making Lean Six Sigma Successful

Making Lean Six Sigma Successful

Formal Network versus Informal Network

Don’t Confuse the Means with the Ends

Linear versus Circular Causes

Bell-Shaped Mindset

Take the Low Road

There Has to Be a Better Way

Set BHAGs

Use SWAT Teams

Right Size Your Lean Six Sigma Team

Are You a Lean Six Sigma Salmon?

Spring Forward—Fall Back

Make It Sticky!

Risk Free Way to Implement Lean Six Sigma

Defending Your Data

Can Lean Six Sigma Kill Your Company?

Confl icting Goals

Honor Your Progress

The Hard Work Is Soft

Six Sigma Roles

Success with Lean Six Sigma

Quiz

CHAPTER 10

Measurement System Analysis

Measurement Systems Analysis

Conducting a Gage R&R Study

What to Look For

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Lean Six Sigma Demystifi ed

CHAPTER 11

CHAPTER 12

Mistakes People Make

Challenges You Will Face

Bias and Linearity

Linearity Study

Destructive Testing

Conducting a Gage R&R Study

Attribute Gage R&R

Conclusion

Quiz

Exercises

Design for Lean Six Sigma

Design Six Sigma Quality into Your Business

Quality Function Deployment

Failure Modes and Effects Analysis

Design of Experiments

TRIZ

Quiz

Exercises

Statistical Tools for Lean Six Sigma

Hypothesis Testing

Determining Sample Sizes

Regression Analysis

Conclusion

Quiz

Exercises

Final Exam

Answers to Quiz and Exam Questions

Bibliography

Glossary

Index

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PREFACE

Whenever I say the words Lean Six Sigma, people’s eyes automatically glaze over

as visions of complex statistical formulas dance in their heads. If you feel this way,

you’re not alone. I have found that many people have a phobia of anything

resembling math or technology. Sometimes both. Well, let me set your fears to

rest.

First, Lean Six Sigma is a mindset for solving specific business problems. It

contains some essential methods and tools that you can learn and apply without

ever having to do a single calculation. Lean Six Sigma involves simple insights

about how to look at your business that will transform how you simplify and stream-

line it for maximum productivity and profitability. In other words, once you learn

how to look at your business through these filters of Lean Six Sigma perception,

you’ll never be stumped for ways to become better, faster, cheaper, more produc-

tive, and more profitable.

Second, you can apply the methods and tools of Lean without any technology

other than Post-it® notes and a flip chart. And aggressive applications of Lean can

take you a long way toward the kinds of speed and quality that your customers

demand.

Third, once you learn how to use what I call the 4-50 rule of Six Sigma, you’ll

always be able to laser focus your improvement efforts for maximum benefit with

minimum effort. This book will cover the bare-bones, essential methods and tools

you need to know to start making breakthrough improvements. Lean Six Sigma is

first a mindset for problem solving and then a set of methods and tools to support

that mindset.

Now for the bad news: most businesses, while profitable, are barely three sigma

in performance. This means that every step in your process has a 1 to 3 to 6% error

rate. Add these up across any business and you get a 6 to 12 to 18% error rate that

devours 25 to 40% of your total expenses and slashes profit margins. Using Lean

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Lean Six Sigma Demystifi ed

Six Sigma you can cut these “costs of poor quality” to 5% or less while doubling

productivity and profitability, and tripling growth.

To get to four or five sigma levels of performance, you’re going to want to learn

how to use the essential tools of Lean Six Sigma. You’ll want to learn how to use a

few key statistical and graphical tools to improve your business, and more

importantly sustain the improvement. A handful of tools will take you from three to

five sigma in as little as 24 months. To go from five to six sigma will require more

advanced tools discussed in the latter part of this book—Design for Lean Six

Sigma.

QI Macros Lean Six Sigma SPC Software

Here’s the good news about Six Sigma: yes, there is some complex statistical stuff,

but it’s all handled by simple software that you can download for free for 90 days.

“Oh no!” you think, software, computers, technology. Arrggh! Again, let me put

your mind at rest. The QI Macros Lean Six Sigma software is an add-in for Micro-

soft Excel that is so easy to use that most people say they can learn it in about

5 minutes. Forget all the fancy formulas. The QI Macros will do that for you. Just

focus on what the graphs are telling you about how to improve the business. Since

most business data is already kept in Excel or easily exported to Excel, you can get

started using the tools right away. Without software, Six Sigma becomes too labori-

ous for even the smartest employee, so you will need some software to facilitate the

process. You can download your 90-day trial from http://www.qimacros.com/

demystified.html. Here you will also find links to download the data for the exer-

cises throughout the book.

Focus on Results

While most Six Sigma books spend a lot of time trying to turn you into a statistician,

I think it’s a waste of time. What’s more important is learning how to use the

methods and tools to reduce defects, delay, rework, waste, and lost profits. If you

want to learn all of the statistical formulas, buy Juran’s Quality Control Handbook.

Everything you ever wanted to know about statistics and quality is between the

covers of the handbook, but beware: too much information can be confusing and

you won’t know where to begin. This is one of the principles of Lean—too much

inventory is a bad thing, even knowledge.

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xv

BELTS

Unfortunately, Six Sigma has fallen into the trap of measuring the number of “belts”

trained as a measure of success. It doesn’t matter how many Green or Black Belts

you have in an organization if they can’t find and fix the causes of long lead times,

errors, mistakes, scrap, waste, and lost profit. I don’t care if you ever become a

Green or Black Belt. I want you to become a money belt: someone who can find

ways to make dramatic improvements in speed and quality that translate into cost

savings or more sales because of improved performance.

Sadly, every employee wants to be certified as a Green or Black Belt because it

looks good on their resume, but they just want to go to class and get a certificate at

the end. Training is just the beginning. Improvement projects are where the rubber

hits the road. Can you find and fix the causes of delay and defects?

Unfortunately, people lose 90% of what they’ve learned in less than three days if

they don’t apply it. What does that mean? It means that if you spend five days in a

Green Belt class, you’ve forgotten most of what you learned on Monday by

Thursday. And after a weekend, you’ve lost most of what you learned during the

whole week. Fortunately, I’ve found some ways to change the learning process to

integrate learning with project experience that will enable you to learn and apply

Lean Six Sigma more quickly and effectively. I’ll discuss those methods in the

implementation part of this book.

One of the real problems I see with the extensive education requirements of most

Six Sigma belt programs is the volume of information. The American Society for

Quality put together a “body of knowledge” for a Black Belt that you can download

from http://www.asq.org/certification/docs/sixsigma_bok.pdf. Most of this infor-

mation is overkill. I recently saw a debate between H. James Harrington and Peter

Pande (two Six Sigma gurus) at the Quality Expo in Detroit. The one thing they

could agree on was that most Black Belts would never use even a fraction of what

is taught in these classes. Maybe you’ve noticed this in other situations—a handful

of tools do most of the work. Go into any hardware store and you’ll see hundreds

of tools, but at home most of your needs will be met by a hammer, pliers, a saw, and

a screwdriver. The same is true of Lean Six Sigma—a handful of tools will solve

90% of the problems. So, in this book, I’ll focus on the key methods and tools first

and the less frequently used tools second.

If you still want to be certified as a Green Belt after reading this book, all you

have to do is apply the methods and tools as you work your way through the

book to a real project in your business. (You can find case study requirements at

Certification

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Lean Six Sigma Demystifi ed

www.qimacros.com/casestudy.html.) When you submit the project, we’ll evaluate

the project, your application of the methods and tools, coach you to improve their

use, and certify you (additional fee required). Black Belt certification requires

two projects, a Green Belt level project and a more advanced project using tools

of Design for Lean Six Sigma.

Culture and Implementation

The mindset, methods, and tools of Lean Six Sigma are actually simple and easy to

learn. Getting your corporate culture to adopt these methods, tools, and mindsets is

the real challenge. If your employees are like most employees, you’ve experienced

too many panaceas and programs of the month. It’s hard to keep Lean Six Sigma

from ending up in the junkyard of failed culture changes.

Most Lean Six Sigma books and programs dive into the top-down, endless

training required to make Lean Six Sigma fly. I call this wall-to-wall, floor-to-

ceiling Lean Six Sigma. Unfortunately, research has shown that at least half the

time this method fails. But there are better ways to implement Lean Six Sigma.

So I’m going to encourage you to aim straight for results. No one can argue with

success. Start small, get successful immediately and the change will pick up

momentum. If you struggle a little bit at the start, which is normal, you won’t

trigger what I call the corporate immune system, which will attempt to kill Lean Six

Sigma before it even gets started. We’ll look at these implementation strategies

later in the book.

Structure

From a high level, the book will cover:

1. Lean for reducing delay and non–value-added activities. Lean thinking can

be applied to any business process, service or manufacturing, without the

need for any exotic tools.

2. Essential Six Sigma for reducing defects and variation. The application

of the 4-50 rule and a handful of tools will solve 90% of problems with

mistakes, errors, and defects that cause excessive rework, waste, and lost

profi t.

3. Transactional Six Sigma for reducing errors in information systems.

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xvii

4. Implementation—The human factor

5. Robust Six Sigma for designing Six Sigma into products and services.

Each chapter will cover the what, why, and how of each improvement strategy:

(cid:129) Lean Six Sigma Jargon, while Lean Six Sigma borrows from its

predecessors like Total Quality Management, it has its own jargon. I’ll

illuminate and defi ne the jargon as we go and link it back to its origins

wherever possible.

(cid:129) Methods for solving problems

(cid:129) Tools for defi ning, measuring, analyzing, improving, and sustaining the

problem and its solution.

(cid:129) Case studies to show the methods and tools in action.

(cid:129) A quiz to review your knowledge.

(cid:129) Exercises to apply the knowledge you’ve learned.

Lean Six Sigma is a Journey

Lean Six Sigma is a journey, not a destination. The good news is that you can start

today; the bad news is that you’re never finished. There will always be better, faster,

and cheaper ways to perform any process. There will always be customers demand-

ing that next level of perfection.

The good news is that if you’re the first one in your industry to embrace Lean Six

Sigma, you get a decided first mover advantage. The bad news is that if you’re a

slow follower like the American automotive industry, you’ll always be playing

catch up. Japanese cars still have fewer defects per car than American cars.

Customers expect ever-higher levels of quality. If you can’t deliver, they’ll find

someone who can. The typical lifespan of any business is 30 years. Will your

company still be around on its 30th or even 100th birthday? Or will it suffer from

rigidity of the way we’ve always done things here? It’s up to you. Lean Six Sigma

can help, but you’ve got to be willing to look at what’s not working and focus on

your weaknesses, not your strengths. It’s sometimes painful, but always rewarding.

It’s the breakfast of champions. Are you ready to take the first step?

JAY ARTHUR

The KnowWare® Man

www.qimacros.com

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Demystifi ed

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www.EngineeringEbooksPdf.comCHAPTER 1

What Is Lean

Six Sigma?

I have spent 21 years working in various parts of the Bell System—one of the best

cash cows of the last century. In the 1990s I led improvement teams that, in a matter

of months, saved $20 million in postage expense and $16 million in adjustment

costs. Other teams reduced computer downtime by 74% in just six months. Since

then, I’ve helped other companies find ways to save $25,000 to $25 million per

project or more. And you can too, using the power of Lean Six Sigma.

Has your business grown into a cash cow? Are you comfortable with your cur-

rent level of productivity and profitability? Or do you still have a nagging feeling

that they could be much higher? Well they can be and here’s why:

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Lean Six Sigma Demystifi ed

Primitive Tools and Archaic Methods

Virtually all companies grow from wobbly start-ups into cash cows using trial-and-

error and common sense. Current methods of conducting the business developed in

an ad hoc fashion, reacting to problems without much forethought. The bad news

about this ad hoc, trial and error method of adaptation is that most companies stop

improving when they reach 1%, 2%, or 3% error levels in marketing, sales, order-

ing, and billing.

At least once a week I hear from some poor employee who’s been told to inves-

tigate Lean Six Sigma. They lament that it’s their job to find and fix problems in the

business. The business is already successful. Earnings are already up for the year.

Why would they need Six Sigma to do what they already think they’re doing

well?

I call this the foolishness of the five senses. Just because your five senses let you

detect problems and patterns at one level, you think that they’ll work at even more

subtle levels of detection. They won’t. As patterns and problems become less fre-

quent and more subtle, they become less and less detectable.

For your five senses to detect all of the varying levels of problems in your busi-

ness you would need:

(cid:129) The awareness of a world champion poker player to detect all of the

opposing player’s “tells”

(cid:129) Eagle eyes

(cid:129) Bat radar

(cid:129) Dolphin sonar

(cid:129) Dog ears

(cid:129) Shark smell

(cid:129) Surgical feel

(cid:129) Gourmet taste

Here’s my point: Your normal sensory apparatus isn’t up to the task of finding

and fixing the more subtle problems that affect your job, department or business.

Like a doctor using an EKG or MRI, you need the right kind of tools to help you

detect patterns you cannot detect with the naked eye.

Sure, every once in a while a problem will happen frequently enough with suf-

ficient unpleasantness to trigger some action. You’ll feel good about that, but you’ll

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3

have missed the huge opportunities that lie just below the surface of your detection

capabilities.

That’s why you need line graphs, pareto charts, histograms and control charts: to

help you detect hidden patterns and problems.

Line graphs are like an EKG; they show the pulse of your business processes

over time.

Pareto Charts are like an MRI; they help you slice the problem into clearly

observable patterns.

Control charts and histograms have the added benefi t of showing expected

variation that allows you to predict your performance.

Just because you can’t see, hear, feel, smell, or taste a problem doesn’t mean that

there isn’t one. It just means that your sensory system isn’t precise enough to detect

the problem.

Did you know that there are dogs that can smell cancer? They don’t need any

fancy equipment because they’ve got a nose that’s 10,000 to 100,000 times better

than ours.

Humans, however, have the ability to create tools to extend the five senses. The

tools of quality can give you an eagle’s eyes and a dog’s ears, if you let them.

The primitive methods and tools that took you to sustainable profitability will

take you no further. To turn your cash cow into a golden goose you will need the

common science in Lean Six Sigma to make breakthrough improvements. Here’s

what you can accomplish with Lean Six Sigma:

1. Double your speed without working any harder. Most companies have

extensive delays built into their processes. Eliminate the delays and you

can run circles around your competition.

2. Double your quality by reducing defects and variation by 50% or more.

Lean alone has been shown to reduce defects by 50%. Add Six Sigma and

you’ve got a recipe for world class performance.

3. Cut costs and boost profits because every dollar you used to spend fixing

problems can now be refocused on growing the business or passed right

through to the bottom line. Instead of wasting 25% to 40% of every dollar

you spend fixing things that shouldn’t be broken, most of that money can

fall through to the bottom line boosting margins through the roof.

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Lean Six Sigma Demystifi ed

Top 10 Ways You Know

You Need Lean Six Sigma

10. Customers still complain about your products and services.

9. Employees complain about the roadblocks to serving customers.

8. Blaming customers.

7. Blaming employees.

6. Customers return products for refunds.

5. Warranty costs climb.

4. Customers switch to your competitors.

3. Sales flat-line or fall.

2. Margins thin.

1. Growth stagnates or shrinks.

Find Your Fix-it Factory

Every company, service or manufacturing, has two “factories:”

1. A “Good” factory that creates and delivers your product or service. In a

printing company, this might be the pressroom. In a hospital, this would be

the emergency room, surgical rooms, and nursing units. In an automotive

manufacturer, this would be the assembly line.

2. A hidden “Fix-it” factory that cleans up all the mistakes and delays that

occur in the main factory. If your company is a typical company (and

virtually all non-Lean Six Sigma companies are), then the Fix-it factory is

costing you $25 to $40 of every $100 you spend.

Your Expenses

$1 million

$10 million

$100 million

$1 billion

Potential Savings

$250,000–$400,000

$2.5–$4 million

$25–$40 million

$250–$400 million

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5

Double Your Profi ts

If you’re like most businesses, reducing defects, delays, and costs by 20% would

more than double your profits.

Calculate Your Benefits

Your Business

1. Gross Revenue

2. Annual Expenses

3. Current Net Profit (#1 – #2)

4. Reduce Costs by 10%

5. New Net Profit (#3 + #4)

Reduce Costs

$__________

$__________

$__________

$__________

$__________

Example

$10 million

$9 million

$1 million

$900,000

$1,900,000

Just think what saving a fraction of that waste could do for your productivity and

profitability!

The urgencies of any business can consume all of your time. Fortunately, given

the right gauges on your operation’s dashboard, it’s easy to diagnose where to focus

your improvement efforts even while you are still working in your business.

The End of Common Sense

When I worked in a phone company, managers used to say that process improve-

ment is “just common sense,” but what I’ve learned is that common sense will only

get you to a 1 to 3% error rate. Hospitals get to a 1% error rate on things like infec-

tion rates and medication errors, but that’s where they reach the edges of human

perception, the end of common sense.

Doctors routinely use diagnostic tools like EKGs, x-rays, and MRIs to detect

possible problems in the body. Shouldn’t you use a more advanced set of tools to

diagnose problems in the corporate body?

When you reach the end of what you can do with one problem-solving technol-

ogy (e.g., common sense), you need to look to the next level: systematic problem

solving and the tools of Lean Six Sigma.

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Lean Six Sigma Demystifi ed

It’s Not Your Fault!

You know there are still unsolved problems in your business, but it’s not your fault.

In The Structure of Scientific Revolutions, Thomas Kuhn found that humans are

natural problem solvers. He discovered a pattern to our ongoing ability to solve

problems: an S-shaped curve. When confronted with a new type of problem, new

methods are tried and the most successful one is rapidly adopted. But over time, the

method’s ability to solve that class of problems levels off.

At this point, almost everyone is fully vested in the old paradigm and a fringe

group is exploring ways to “jump the curve” to the next paradigm of solution. The

success of the old method often blinds people to the value of a new method (e.g.,

digital vs. mainspring watch, cell phone vs. wired phone). I find the same thing

holds true when working with managers and business owners. The instinctive meth-

ods of...