You might have asked yourself how well your operation performs relative to ‘best-in-class’:

Get "From Chaos to Control"
as Paperback | Kindle | Pdf

Processes rule the world, and whether we like [...]]]> Get better Results from your Process!
Learn how to standardize Processes.
Create effective Work Procedures.
Go from "From Chaos to Control".

Get "From Chaos to Control"
as Paperback | Kindle | Pdf

Processes rule the world, and whether we like it or not, processes control a big part of our lives. We might even say that our entire life is one big process consisting of many smaller processes. It means that the results we achieve are largely dependent on the processes we follow, that “we get what we do.” The more we are aware of these processes, the better we can steer and influence the result, and the more control we gain control over our destiny, and that’s our starting point: Control the process to control the result.Keep in mind that every result depends not only on things we can influence but also on things out of our control, such as changes in the environment we operate in. This is because of the following fun-damental relationship:

Result = Process + Environmental Factors

This means that external forces are always present, and these factors impact the overall result. No matter how perfect our process is, environmental factors come into play. We must recognize this and account for it. Another implication is evident when we consider the extreme situation in which no formal process exists. In this case, the equation becomes:

Result = Environmental Factors

This relationship indicates the result would depend entirely on external forces and thus the outcome would tend to be highly random. Outcomes governed by this relationship could be disastrous for most business scenarios. In practice, businesses usually have some process associated with each task, and the process can be informal (verbal instructions) or more formal (written instructions). In any case, it is insightful to consider the extremes. In the above equations, “Environmental Factors” refers to those things we have little or no control over, and “Process” relates to those elements we control with our formal procedures. The equal sign is not meant to be taken literally; rather, it implies there is a direct relationship between the components of the equation. Note that this book focuses on what we can influence, and that is the process itself, not so much the environmental factors. Note also that following the steps will not guarantee your success, but doing so will significantly increase your chances of success, where “success” refers to getting what you expect. We learn now how to create and implement policies and procedures that specify the best way to think, plan, and work. Graphically, we can visualize this concept as follows:

Set Procedure > Control Process > Get Results

“If you can’t describe what you are doing as a process, you don’t know what you’re doing.” – William Edwards Deming, American statistician, professor, author, lecturer, and consultant, 1900–1993

In the following chapters, we will discuss how to standardize work processes and create highly effective, professional procedures. This is achieved by using work standards. The exercises at the end of this book will allow you to test your understanding and apply your knowledge of these topics. Ultimately, you will create your own work standard. The primary role of a work standard is to guide users through every step of a process, specifying exactly what to do and how to do it. Properly constructed work standards make work processes reliable and ensure predictable results. In effect, work standards are used to train people and manage their output in a consistent fashion; the decision-making and physical labor are delegated to those closest to the actual work. Thus, work standards free managers from operational tasks, allowing them to focus on strategic tasks that will grow the business rather than sustain it. As a result, processes run faster and smoother with shorter cycles. They produce less waste and fewer mistakes, resulting in a much higher quality (sigma level). When work standards are implemented into the workflow, processes are guaranteed to become leaner while delivering more value to the customer at a lower cost to the provider.

The Process House

The “Process House” is a simplistic model used in manufacturing and services to organize processes around a value-chain. You can think of this concept as follows: core processes build the value-chain, while support-processes enable the value-chain.

Core Processes

• SCM – Supply Chain Management (sourcing and logistics)
• PLM – Product Lifecycle Management (engineering, research, technology)
• MFG – Manufacturing (product, operations, delivery)
• CRM – Customer Relationship Management (commercial, sales, marketing, service)

Support Processes

• HR – Human Resources (people)
• FC – Finance and Controlling (money)
• IT – Information Technology (reports)
• QM – Quality Management (excellence)

Since most companies today are organized by functions—for example Sales and Marketing, Engineering, Manufacturing, Logistics, Finance, Quality etc—the Process House model can be adapted to any business.

For example, let us consider a typical service company. For this type of business, you would need (1) a commercial process to promote and sell the service, (2) a technical process to develop service features, (3) a sourcing process to purchase hardware, software, and assistance from third parties, and (4) a service delivery process, which is equivalent to the production process in a manufacturing business.

Are you ready to get better results with less work?

Get the book to read more about:

• Process Hierarchy
• Process House
• Core and Support Processes
• Measuring Process Quality
• Six Sigma Model
• Capability Maturity Model
• Hard Rules of Process Management
• Lean Strategies for Lean Processes
• Benefits of Standardization
• Overcoming the Barriers to Standardization
• 5 Steps to build a Standard Operating Procedure
• Procedure Model SIPOC+MOTIV
• Procedure Template and Exercise
• Procedure Sample for Warehouse
• Procedure Sample for Administration
• Procedure Sample for Parents
• Frequently Asked Questions (FAQ)

What readers say about "Chaos to Control"

Review on Amazon.com:

"With a corporate background, I had always heard about 6-Sigma and quality control. I knew that big companies spent a lot of money on this type of thing because they have entire departments dedicated to quality control. With just that experience, I still did not fully understand what is at stake until I worked as a consultant for medium-size and smaller companies. I then realized how business processes can make or break a business–in particular, the efficiency or inefficiency of those processes. If you do not optimize your critical business processes, you can cause your business to fail. I'm still not an expert on it, but after reading this book, I did learn enough to make some significant changes myself. I didn't need a dedicated department of professional, high-paid workers to implement quality control and streamline my business processes. You can save a tremendous amount of money by simply following the steps outlined in this book.

The book is concise and to the point. The author first provides a good summary of Processes, Standard Operating Procedures, and Work Standards. Very easy reading. It then shows you how to build a Standard Operating Procedure, step-by-step, and how to document it and keep history on how the process changes. Several easy-to-follow examples are then included. They illustrate exactly how to put this theory to work in the real world and how simple it is. The author also outlines that this technique can be applied to ANY process in a business, and goes so far as to show how the technique can be applied on the home front as well. This just underscores how easy it is.

After I finished reading it (in a single day), I was able to start streamlining my processes. In particular, we have a big directory of files we use in our daily operations. It has always been a big mess since all the names are complicated because everyone uses their own naming rules, but I used the process outlined in this book to clean it up and put a standard operating procedure in place that will keep the directory clean and the names are standardized. Now we no longer have to take the extra time, and we eliminated the errors it created for our customers. We also addressed privacy issues once and for all. Now everything has a name that makes sense and everyone knows what it means. If someone needs to be trained on it, we have a simple description that explains it all.

This book should be carried in the briefcase of every consultant. The information is practical, detailed, and very valuable. I highly recommend it."

Download VALUE Pack

DownloadD Book/pdf-Version + Template + Exercise + Samples

Download FREE Pack

FREE Pack = Template + Sample

"From Chaos to Control" is available on Amazon.com as hadcopy [Paperback] and ebook [Kindle].

(1) Precisely specify value by specific product, (2) Identify the value stream for each product, (3) Make value flow without interruptions, (4) Let the customer pull value from the producer, (5) Pursue perfection.

Value Stream Focus

Rather than focusing on individual machines, processes, or departments, Lean focuses on optimizing entire [...]]]> Going Lean in 5 Steps

(1) Precisely specify value by specific product, (2) Identify the value stream for each product, (3) Make value flow without interruptions, (4) Let the customer pull value from the producer, (5) Pursue perfection.

Value Stream Focus

Rather than focusing on individual machines, processes, or departments, Lean focuses on optimizing entire value-streams end-to-end. Common value-streams are: RawMaterials-to-FinishedGoods, Order-to-Delivery, Design-to-Launch, and Concept-to-Cash.

About Waste

Any human activity which absorbs resources but creates no value for the end customer is considered waste or 'Muda':

• Mistakes which require rectification
• Production of items no one want so that goods pile up
• Any kind of inventory, raw, semi or finished goods
• Processing steps which aren’t actually needed or making excessively precise
• Movement of employees, bending, stretching, reaching
• Transport of from one place to another without any purpose
• Waiting because an upstream activity has not been delivered (part, information, approval)
• Goods/services which don’t meet the needs of the customer.

Root Cause of Waste

Products and services are consumed steadily in small amounts (but often bought in batches), yet all machinery to create the product or service and get it to the customer is large, difficult to change-over and designed to operate efficiently at high speed and large batches.

First Step to reduce Waste

Stop looking at aggregated activities and isolated machines, start looking at all the specific actions required to produce specific products/services to see how they interact with each other, then start to challenge those action which do not actually create value for the customer.

• Muda Type-1: adds no value but is required by current system > consider redesign
• Muda Type-2: adds no value, a redundant step or feature > eliminate immediately

The critical 3 Management Tasks

Three specific management tasks are required to bring a product or service effectively to the customer through an established value-chain:

1. Problem-Solving task from concept through detailed engineering to launch
2. Information-Management task from order-taking through detailed scheduling to delivery
3. Physical Transformation task from raw-material to finish product in the hands of a customer

Lean Enterprise

• Current thinking promotes outsourcing, where the firm is doing less, the actual need is for a voluntary alliance of all the interested parties to oversee the disintegrated value stream, an alliance which examines every value-creating step and lasts as long as the product/service lasts.
• New thinking, Lean Enterprise, focuses on firm-to-firm relations, some simple principles for regulating behavior between firms, and transparency regarding all the steps taken along the value stream so each participant can verify that the other firms are behaving in accord with the agreed principles.

Traditional Thinking, Barriers to Lean

• SALES COMMISSIONS – destroy quality consciousness and load-leveling (Heijunka)
• THE TRAP – most producers want to make what they are already making because most customers only ask for some variants of what they are already getting. This means starting at the wrong place leading to the wrong destination. When thinking about value, they fall back on simple formulas – cutting cost and increasing product variety through customization and added features that no-one asked for – instead analyzing what is really needed.
• REENGINEERING – allows to produce such bad results even faster. Reengineering in most cases means: making an ineffective process more efficient but not satisfying the key element: delivering exactly what the customer wants and needs.
• TARGET-COST – traditional firms set target selling prices based on what they believe the market will bear. The work backwards to determine acceptable costs to ensure an adequate profit margin. Lean firms define the target cost as the waste-free cost of the product/service once unnecessary steps are removed and value is made to flow. Because such target cost is typically far below competitor’s costs – the lean enterprise can reduces prices to increase volume and profits or add features or capabilities to increase value and margin. Asking whether a specific activity really creates any value for the customer is key to meet the aggressive cost target.
• BENCHMARKING – traditionally, companies perform external benchmarking, comparing their performance with competitors’ in terms of factor costs, scale and culture. External benchmarking is often used to justify status-quo “We are not that bad”, “Our competitors do the same”, “We are already 2% better than industry-average”. Lean means comparing performance to perfection – the “pure” product/service without any content of waste/muda.
• MEASUREMENT – activities that can’t be measured can’t be properly managed; activities to create, order and produce a specific product/service which can’t be precisely identified analyzed and linked together cannot be challenged, improved or eliminated and perfected.
• COMPETENCE – the problem is not the competence of the managers operating the system in accord with the agreed logic – the problem is the logic itself.

Flow – The endless Conveyor Belt

• TRADITIONAL THINKING – most people believe that work should be organized in functions and departments where activities are grouped together by type and be produced efficiently in large batches and overseen more easily. Departments and specialized machines are installed to produce large batches in high speed – driven by cost-accountants trying to keep expensive assets fully utilized to recover a large investment – extreme inventory in WIP and stock is the result.
• REENGINEERING – processes are optimize on a local level, so that people can handle more of the same tasks. Value does not flow. Result is the collapse of morale among the surviving employees.
• CHOICES – a producer can (1) run stable schedules with little inventory when orders are completely uniform, predictable and stable – such as demand for a qualified subscription-drug/medicine. (2) maintain large inventories at every stage to deal with instable supply and shifts in demand while customers must accept stock-outs or buy from competitors.
• PROCESS – two options: (1) Manage by value-stream of a specific product, not by function. (2) Eliminate organizational barriers to make value flow. (3) Right-size and optimize location of people, machines and tools. (4) Apply Lean technique to eliminate waste from optimized structure, process, system.
• TRADITIONAL R&D – in the industry, a typical development cycle is one year from concept to full-scale production. Most of the time the concept, drawing, orders and data are waiting for review, feedback and decision. Marketing identify the need, product-engineers develop the concept to serve the need, the design-engineering creates the detailed drawings, prototype department builds the pilots for testing by the testing department, production-engineering builds the tools and fixtures to mass-produced the approved design and manufacturing arranges the line create the product to be delivered to inventory where it waits to be sold to a customer.  It moves from department to department waiting in queue to be worked on – with frequent backflow for rework, correction and adjustment. During ramp-up, pilot-runs wait for a time-slot in between production-runs. Once the decision is made to launch, the product/service again has to wait for production to build the fixtures and tooling, the software engineers to write the test-program, the packing-material to be customized, and the marketing campaign be planned and rolled out. A traditional solution is to put a strong program management system with experience project-managers in place – to make an ineffective process faster. The main problem is the lack of ownership as no-one is really responsible for the end-results of the development. The disconnect between product-success though its life-cycle from the design-effort, engineers focused on developing-in costly features, pushing what is technically feasible while ignoring actual customer-needs – failing to return a profit.
• LEAN R&D – dedicated product-teams include members with all the skills needed to develop the target specification, design, development, purchasing, planning in one room in a short period of time using a proved team decision-making methodology – Quality Function Deployment (QFD). QFD permits development teams to standardize work so that a team follows the same approach every time – which allows to measure throughput and continuously improve the design methodology itself. QFS-teams specify value and then eliminate rework and backflows, so that the design never stops moving forward until its’ fully in production and running there at the expected high yield. Development-times and effort (time and man-power) typically reduce by half, while hit-rate (first-time success) improve dramatically. Example: traditional hit-rate of 50% in high-tech is considered acceptable while a lean firm can achieve over 90% – this means almost doubling the number of successful product-introduction or halving the amount of resources needed. The human-behavior aspect: keeping dedicated product-teams do not require narrow-skilled specialists; instead, trained professionals have much broader skills than they have ever imagined/admitted/allowed to use. A small team of mediocre people typically achieves better results than a departmentalize structure of highly trained specialists.
• PERSONAL SERVICES – such as health-care or travel are prime-examples for non-Lean. as treatments are provided through a series of specialized functions, disconnected processes and lots of waiting for the next specialist (doctor, driver, agent etc). The customer is integral part of an inefficient process, not just the consumer of the end-product. Do the following: line-up all the essential steps needed to get a job done into a steady continuous flow, which no wasted motions, no interruptions, no batches, and no queues and working together in-line with all the tools, documents, approvals to facilitate the flow. Flow principles can be applied to any human activity to reduce the amount of effort, space, time, investment, inventories needed to design and provide a given product/service can typically cut in half (each one) very quickly and again by half within a few years by continuous waste-reduction through Kaikaku and Kaizen activities.
• TECHNIQUE – once value is defined and the value-stream is identified, focus-ignore-rethink: (1) FOCUS on the object – a specific order, design, product, service, treatment, transaction – and never let it out of sight. (2) INGNORE all limitations, such as traditional boundaries from assets, skills, functions, locations – removing all impediments to continuous flow of the specific product/service family. (3)  RETHINK specific work practices and tools to eliminate backflows, scrap and stoppages so that the design, order, and production can proceed continuously.
• MANAGEMENT – in traditional thinking good management means avoiding variances between plan and actual in a complex system. In Lean, good management means eliminating the system and only performing activities triggered by the pull of the customer.

Example for Order-to-Delivery Process

• TRADITIONAL PROCESS – (1) obtain order from customer by Sales, (2) check credit-history by Accounting, (3) validate requirements to match capability by Engineering, (4) determine shipment-date based on capacity and current loading by Planning/Production, (5) confirming the schedule by Operations after considering the complex system of batch, queue, rework, resources and inventory, (6) communicating the shipment-date back to the customer by Sales, (7) checking the status of the order by the Customer calling Sales, (8) tracking the order by Sales calling Production., (8) moving the order on top of every queue by an Expeditor – on the expense of every other order on the line to prevent the loss of an order or customer. Result: all other orders in queue are being delayed, overtime and schedule changes to catch-up until the next expedite hits – usually the same or next day.
• LEAN PROCESS – Sales, Engineering, Scheduling and Production are fully integrated – represented as core-members of .the product-team – always keeping capabilities and capacity in mind when planning in mind so that orders progress without stoppage. The advantage: the teams sees opportunities to run different products simultaneously (ideally: mixed model production) to balance load and productivity – no scheduling-system (MRP) is able to work as efficient as many factors are not considered in the optimization-algorithms driving the schedule. Products are built to order instead to inventory – just a few hours ahead between raw-material and shipment-dock. Because the production-system’s capability and capacity are clearly known, orders can be reviewed, accepted and confirmed very quickly, produced to Takt-time at the actual rate of demand and delivered on time without any expediting.

Takt – Sync with Demand

• ASSUMPTION – aggregate order-volume may increase or decrease over time – but the actual rate of consumption varies only very little. This means, the Takt-time is nearly constant.
• VISUAL MANAGEMENT – displays demand (Takt-time) and actual cycle-time (supply) – so everyone can see where fulfillment stands – anytime – and take the appropriate actions. Everyone talks the same language and has the same goal: Do to meet TAKT..
• ORDER-TAKING: linking Sales to Production prevents from the two pitfalls of  traditional selling system: (1) BONUS to motivate sales personnel to take any order without knowing capabilities and actual status of the production system and (2) PROMOTIONS – creating surges in demand. Both traditional approaches lead to disruptions, urgencies, overtime, inventory and delays regular orders – total waste!.

Lean Manufacturing Principles

• TRADITIONAL – common approach of designing a manufacturing and service/transaction layout is (1) identify activities by type, (2) group task in families, (3) create specialized department for each family, (4) design/arrange/automate each department to maximum speed, (5) manage to run each department at maximum rate (units per hour). Result: because run-rates of each department are different, bottlenecks appear and inventories are building everywhere – consuming money and management-resources to track and correct.
• MODER MRP SYSTEMS – such as SAP and Oracle just help to track the problem but DO NOT solve the problem. Errors accumulate and trigger replenishment-order just because someone forgot an entry.
• JUST-IN-TIME – the concept of Just-in-Time is based on a supermarket-approach where items re replenished only when taken away by a customer – ordered when the shelf is (almost) empty to be refilled in time, just before all items as being consumed. To work properly, JIT requires change-over times to be very short (to switch quickly between two different products) and downstream processes are load-leveled preventing spikes in demand upstream – smoothen out perturbations unrelated to actual customer demand. Smoothening demand prevents bottlenecks from appearing and make buffer-stocks in from of every machine/department unnecessary.
• CELLS – production steps are arranged in sequence, within a single cell and the product or transaction moves from one step to another without wait and inventory in between. How to create a cell: (1) create product areas by product-family, (2) arrange people and machines in the sequence of tasks to be performed in a continuous flow instead of batch and queue, (3) locate product manager, buyer, engineer and scheduler in the same room next to the cell/production. Shop-floor and office merge so that all people involved in the value-stream have the same view of status and problems. Locating support-staff right next to production-workers allows people to constantly talk to each other, solve upcoming problem on the spot (here and now) – preventing capacity-constraints from bottlenecks, reproduction of errors, expedites and missed due dates. Co-locating people from the same value-chain is essential to success in lean and flow.
• TRADITIONAL – the competitive advantage of traditional mass-production factory is/was massive machine, highly automated, specialized and inflexible equipment, producing parts at maximum speed, managed by cost-accounting methods, running the equipment hard to recover the large investment, no matter if parts are actually needed or not – so WIP and large inventory is growing. Because batch-sizes are large, a defect is reproduced many times before caught in a separate inspection-station downstream – costly rework, delays and scrap is the consequence. Safety-stock must be very large to compensate for delays from failures, rework and lengthy changeover.
• LEAN – very simple, highly flexible, semi-automated or even manual equipment, designed to quick change-over – switching immediately to a different product-type when demand changes. People are trained on multiple machines, processes are highly capable and produce minimal variations. In case of defects, the problem is caught in-station and corrected immediately without re-producing the error – safety-stocks can be reduced to a minimum, when response time to solve problems is fast. Right-sizing equipment requires in most cases no additional investment – often, large equipment can be sold to free cash while converting the factory to Lean.
• TPM – Total Productive Maintenance, developed by Toyota, is a structured program to achieve up-time of equipment to 100%, preventing capacity-loss from break-downs and avoidable variability from unreliable machines,
• POKA YOKE – an error-proofing technique that makes a product, process, machine or system fail-proof so that no defect can be moved to the next step. Also called key-lock system. Example: safety-switch to prevent overheating, pass-through gauge, overflow-drain, asymmetrical parts that can be assembled in just one way.
• LOCATION – outsourcing is often viewed as a quick and easy way to reduce cost. However, disconnecting design (US, EU) from manufacturing (China) and centralizing functions in “Focus-Factories” and “Support-Centers” while outsourcing sub-assemblies and key components erode technical capabilities and competitive edge in the long-term. Lean does exactly the opposite – bring all key expertise together in one place, make processes and people highly capable and flexible, produce to demand near to the actual consumer and reduce cost by preventing defects, delays and inventories. By disconnecting Engineering from Production – visibility is lost and correcting problems is extremely difficult, time-consuming and costly. Once a product is released to production it still takes typically 2+ months between order and delivery to account for time-consuming logistics and sea freight. As forecasts never match changing demand, excess inventory and stock-outs are the logical consequence – hurting the bottom-line.
• CHAOS – traditionally operating companies often fear lean where customers are able to pull instantly value from raw-materials into reality and lead-times largely disappear. In this case, the world’s industrial economy, the most striking feature is the relative stagnation and predictability of most product markets – even though product technology, end-use demand is inherently quite stable and predictable because driven by replacement. The volatility and perceived chaos in these industrial activities is self-introduced, the inevitable consequence of long lead times and large inventories in the traditional world of batch-and-queue process overlaid with a relatively falt demand and promotional activities (p88).

Going for Perfection

Dreaming about perfection shows what is possible and helps us to achieve more than we would otherwise. Converting a classic batch-&-queue production system to continuous flow with effective pull by the customer will double labor productivity all the way through the system (direct, managerial, technical, from raw-materials to delivered product) while cutting production throughput times by 90% and reducing inventories in the system by 90%. Errors reaching the customer, injuries and scrap within the production process are typically cut in half. Time-to-market for new products will be halved and a wider variety of products, within product-families can be offered at very modes additional cost. Capital investments required will be modest to negative if facilities and equipment can be freed-up and sold. The pursuit of perfection is an ongoing, never-ending process, not just one step to fix something. The radical path to perfection is a total value stream Kaikaku(radical redesign) involving all firms from start to finish.

Any activity adds either value or waste. A step is considered valuable when customers are willing to pay for it, all other steps are considered waste. Eliminating waste is the most effective way to increase profitability in manufacturing, administration, government, and service. This article introduces the concept of waste and simple strategies [...]]]> Less Waste, more Lean

Any activity adds either value or waste. A step is considered valuable when customers are willing to pay for it, all other steps are considered waste. Eliminating waste is the most effective way to increase profitability in manufacturing, administration, government, and service. This article introduces the concept of waste and simple strategies to reduce waste, improving operating efficiency for provider and value-add for the customer..

1. Waste: Over-Production

• Producing an item before it is needed, also called “Just-in-Case” (JIC)
• JIC disrupts flow, increases inventory, reduces flexibility, capacity and quality
• Producing an item only when needed at exact amount is called “Just-in-Time” (JIT)
• JIT requires accurate scheduling and flexible equipment to adjust to demand
• Changing from JIC to JIT through application of flow, takt, pull, and leveling

2. Waste: Wait & Queue

• Occurs when goods are not moving or wait in process for the next step
• In traditional "batch & queue” manufacturing, 90-99% WIP is waiting
• Causes are poor loading, inconsistent flow, large batches, and long distances
• Wait is reduced by standardizing processes, reducing variability, leveling load

3. Waste: Internal Transport

• Movements take time, reduce visibility, and decrease quality from handling
• Find ways to move items without interruptions, pick-up, put down, movement
• First steps: map flow, relayout flow to move processes closer and connect them

4. Waste: Over-Processing

• Caused by using inappropriate methods, machines or tools
• Using sophisticated machines when a simple tool would suffice is waste
• Inflexible, highly automated machines require long change-over times
• Expensive machines promote heavy loading to recover large investments
• Heavy loading beyond demand causes overproduction and excess inventory
• Steps to improve: combine steps, build small and flexible cells, reduce lot size
• Consolidate and combine processes, performed within one step or work-center

5. Waste: Inventory

• Inventory from Work-in-Progress (WIP) is a result of overproduction and wait
• Departmentalized organization, each organizational layer adds buffer inventory
• Inventory consumes space, ties money, increases lead-time, hides problems
• Changing from JIC to JIT through application of flow, takt, pull, and leveling

6. Waste: Motion

• Bad ergonomics cause excess motion: reaching, walking, lifting, bending
• Solution: redesign job to improve speed and reduce motion
• Rearrange process and layout so that all tools/equipment is reachable
• Implement tools, fixtures, aids to eliminate excess motion

7. Waste: Defects

• Defects cause rework, repair, replacement, backflow, warranty cost
• Defects consume resources for inspection, correction, scrap
• Defects cause opportunity-loss, capacity and resources used to fix problems
• Defects cost 5% of Sales for 6-Sigma and 40% of Sales for 1-Sigma process
• First step: reduce process variability, add controls and add error-proofing

8. Waste: unused Potential of People

• Waste of people dimensions: “Do what you’re told”
• Caused by hierarchical organization with order top-down
• Impact is that ideas and learning is suppressed
• System is bureaucratic, strict hierarchy, many levels
• Process with excessive manuals and procedures
• People are disengaged, poor communication, wait for decision
• Engage and develop people, define process, align targets
• Improving capabilities allows delegating decision-making to lower level

Reducing Waste increases Efficiency

Traditionally configured business operate at very high waste levels. In developed countries; 97% of all activities in manufacturing and 99% in administration and service do not add value from the customer's perspective. In developing countries, the waste percentage is even higher, 99.9% and above is rather common than an exception. It means that in the time between order and delivery, only a few minutes are spent to add value; while the product or paper is in queue for hours, days, or even weeks, waiting for a decision, handling, or further processing. 

If a business is successful at 97-99.9% waste, how much better would it operate with less waste? Imagine the impact when reducing waste:

• Productivity: consuming fewer resources while maintaining output (cost savings)
• Capacity: producing more with same labor, material, equipment (throughput gain)
• Flexibility: quicker setups and smaller batches at shorter cycles (more variety)
• Quality: processing to standard at lower variability and defect rate (first pass)
• Speed: reducing cycles for shorter time to market (competitiveness, share gain)

Six Sigma is used by virtually all industries to improve quality and overall results. It is a structured and disciplined approach of reducing variability in products and processes, based on principles from business, statistics, and engineering. The ultimate goal of Six Sigma is achieving 'Perfect Quality' below 3.4 defects per million opportunities. Results are more reliable [...]]]> Pursuit of Perfection

Six Sigma is used by virtually all industries to improve quality and overall results. It is a structured and disciplined approach of reducing variability in products and processes, based on principles from business, statistics, and engineering. The ultimate goal of Six Sigma is achieving 'Perfect Quality' below 3.4 defects per million opportunities. Results are more reliable products (higher MTBF) and more stable and predictable processes (higher Cp, Cpk). Six Sigma methodology is applicable to manufacturing and service, but also government and infrastructure. Leading organization makes 'Quality' a central element of corporate plan and strategy.

Reducing Variability is Key

Six Sigma stands for six standard deviations from process average, represented by the Greek letter 'Sigma'. It means that the typical variation of a product or process is six times smaller than the tolerance limit. Less variability leads to higher capability, profitability, employee-motivation, and customer satisfaction. Six Sigma is being trained and implemented by Green-Belts and Black-Belts. Green Belts are quality specialists, improving product reliability and process capability. Black Belts are quality executives, leading corporate-wide Six Sigma initiatives and coaching Green Belts.

Benefits from less Variability

• Direct benefits: lower operating cost, controlled processes, predictable results
• Indirect benefits: trust from stable and reliable output, creates a competitive edge

Defects are Expensive!

• Non-confirming output must be corrected or scrapped, market-potential is lost
• Cost of rectification and lost potential make up 'Cost of Poor Quality' (COPQ)
• COPQ includes costs for inspection, rework, overhead, lost future orders
• Defects cost 5% of Sales at 6 Sigma and 20% of Sales at 3 Sigma level
• YIELD is the process pass-rate with 'single touch' from start to finish
• DPMO Defects Per Million Opportunities is the defect-rate for each step

The table below shows quality versus yield, defect level, and cost impact. Long-term effects have been accounted for, assuming +1.5…-1.5 Sigma drift around the mean to reflect a real operating environment.

Short-term versus Long-term Quality

Short-term variability (quality right after adjustment) is significantly higher than long-term as variability increases over time. Per empirical rule, the quality level can be translated into yield: 1 Sigma = 68%, 2 Sigma = 95%, 3 Sigma = 99.7%.

Six Sigma Techniques

Virtually all businesses can benefit from Six Sigma by using two proven techniques:

• DMAIC – Design-Measure-Analyze-Improve-Control – improvement-process
• DFSS – Design for Six Sigma – reliable and high-yield products and services

Six Sigma Process (DMAIC)

Six Sigma emphasizes the structured, scientific experimentation and uses statistical tools in a systematic project-oriented manner through the DMAIC-improvement-cycle:

1. DEFINE opportunities for improvement
2. MEASURE baseline performance
3. ANALYZE causes of non-conformance
4. IMPROVE by eliminating root-causes
5. CONTROL by locking improvements

Six Sigma Design (DFSS)

Design for Six Sigma (DFSS) creates reliable products with very little variability at near perfect quality. Instead of correcting deviations, DFSS focuses to building-in quality, to 'get it right the first time'. Design for Six Sigma improves margin and creates a competitive advantage in the long run:

• Short-term: savings are directly proportional to the reduction in scrap and rework
• Long-term: higher market potential from reliable product and stable deliveries

Operating at high Sigma level allows repositioning the product or serve to a segment where customer are willing to pay a premium for quality, and where the firm is less likely to be attacked from competitors.

Limits – where Process Management does not work

Correctly applied, process management (like Six Sigma, TQM, ISO9000) improves quality and efficiency but is not effective everywhere. Process management focuses on continuous improvement (Kaizen) which limits innovation by restricting thinking on what exists already. Especially in areas that are exploratory and where radical thinking (Kaikaku) is necessary to find new ways and break through traditional layers and thinking.

Guidelines for successful Process Management

• Apply where processes are data-driven – do not apply to creative processes
• Some variations do not cause problems – avoid 'Quality Overkill'
• Avoid where processes 'touch the customer' – focus on relationships, not data
• Lower Sigma level may be acceptable – consider benefit versus cost

Six Sigma Example – filling Bottles at 3 and 6 Sigma Quality

A wine-bottling company wants to improve the accuracy of their filling process. The target is 1000ml with 6ml tolerance to each side (plus/minus). The following calculation shows the impact of reducing variability from 3 to 6 sigma.

We assume the process is normal, stable, and repeatable (no strike, no power-outage). Short-term performance shows variability right after the machine was adjusted. Long-term performance considers drift over time, the process-average shifts around the mean, caused by people (sickness, mistakes), materials (aging), machines (breakdowns), environment (power outages). The typical value for long-term drift is a 1.5 sigma shift (difference between newly adjusted and long-term).

• Requirements and Specifications
  Filling bottles to target: T = 1000ml
  Acceptable tolerance: dT = ± 6ml
  Lower Specification Limit LSL = 994ml
  Upper Specification Limit USL = 1006ml
• 3 Sigma Process short-term
  Machine just calibrated, average on target
  Process is centered, no shift: μ = 0
  Process variation: μ–3σ…μ+3σ = 6σ
  Typical variation: (1006–994)/6 = 2ml
  Defectives: 2,700ppm = 1 of 370 fail
• 3 Sigma Process long-term
  Shift due to operator, material, temp etc.
  Average deviates from target by ±1.5σ
  Total process-shift μ = 3σ
  Defectives: 66,807ppm = 1 of 15 fail
• 6 Sigma Process short-term
  Machine just calibrated, average on target
  Process is centered, no shift: μ = 0
  Process variation: μ–6σ…μ+6σ = 12σ
  Typical variation: (1006–994)/12 = 1ml
  Defectives: 0.1ppm = 1 of 10,000,000 fail
• 6 Sigma Process long-term
  Shift due to aging, operator, material, temp etc.
  Average deviates from target by ±1.5σ
  Defectives: 3.4ppm = 1 of 294,000 fail

Conclusion: the 6 Sigma process produces 794 times less defects compared to 3 Sigma. Defects from non-conformance are costly due to (a) higher expenses from rework and scrap and (b) lower margin from selling a lower quality product at a discount.

Cost of Quality

The Economical Quality Level (EQL) is the point where quality-cost (for reaching and maintaining a high level of quality) divided by the 'Cost of Poor Quality' (COPQ) reaches a maximum.

Cost Of Poor Quality

COPQ includes expenses for identifying the defect, rework, repair, replacement, communicating to customer, spending additional time and money to smoothen the situation, additional administrative expenses, lost image and market-potential etc. Putting it into perspective:

• If all orders would have been fulfilled perfectly, how much MORE money could you have made?
• How much money did you actually spend on rectifying problems and handling emergencies?

Six Sigma Project Basics

1. ANALYSIS – what is the situation and condition?
   Reviewing current performance and environment
2. TREND – what is going to happen?
   Projecting the future based on baseline and trend
3. REASON – what can be done?
   Translating findings into one compelling reason to act
4. PLAN – how to make it happen?
   Planning implementation, resources, tasks, expectations

Six Sigma Project Phases

1. DEFINE – Outline and Charter
   Tasks: understand how things work and framing the project
   Deliverables: current-state-map and project-charter
2. MEASURE – Baseline, Trend, Impact, Benchmarks
   Tasks: measuring performance against target
   Deliverables: metrics, logs, charts
3. ANALYZE – Root-Causes
   Tasks: analyzing deviations and identifying root-causes
   Deliverable: Failure Mode and Effect Analysis (FMEA)
4. IMPROVE – Eliminating Causes
   Tasks: implementing improvements and coaching people
   Deliverable: rollout and skill development plan
5. CONTROL – sustaining improvements
   Tasks: standardize processes, transfer knowledge
   Deliverable: results are validated, processes are stable

Impact from Six Sigma Rollout

A successful implementation leads to higher capability short-term and improved competitiveness long-term. Resources occupied with fire-fighting and rework can now be reassigned to advance and grow the business:

• Increasing RANGE by adding more products or services
• Increasing VALUE by adding features or lowering cost
• Increasing QUALITY by serving the premium segment

Lean is a customer-driven approach to eradicate operational business problems. It is a perspective, a culture, way of thinking, leading and operating, not just a set of efficiency tools. Lean focuses on what customers need and willing to pay for, not on what the company likes to do.

Lean reduces inefficiencies that drain [...]]]> Speed and Efficiency

Lean is a customer-driven approach to eradicate operational business problems. It is a perspective, a culture, way of thinking, leading and operating, not just a set of efficiency tools. Lean focuses on what customers need and willing to pay for, not on what the company likes to do.

Lean reduces inefficiencies that drain money from the system, caused by waste, strain, and variability. Lean pursues value-driven speed and efficiency; lowering cost is a favorable side-effect but never the focus of Lean.

Leaks drain Money from System

A business makes money by converting lower grade inputs into more valuable outputs. Each business systems has leaks, draining value from the system in form of (1) Waste Muda, (2) Variability Mura, (3) Strain Muri.

Fewer Inputs and shorter Cycles

Lean aligns people, processes and systems to make value flow at the pace of demand; meeting customers' expectations while reducing resource consumption and cycle-times to a minimum.

• Reducing inputs to deliver precisely what customers want (not more or different!)
• Reducing leaks by using resources more effectively with focus on value generation
• Reducing cycle times to increase speed while reducing inventory

Traditional versus Lean

Traditional companies work like in a planned economy, where a forecast and master schedule drives production. Problem is that a plan is never accurate, causing shortages, stock-outages, downtimes, changeovers and excess inventory – reduce capacity and profitability. Lean works the opposite way, like in a free economy where demand controls supply and allocation of resources.

• Traditional manufacturing means ‘Push to Plan’ per schedule (MRP, MPS)
• Lean-manufacturing means ‘Pull to Demand’ per takt on time (JIT)

The 3 Steps to Start

1. Talking to customers to understand what they truly value and what's not absoutely required
2. Aligning all value-creating activities, connecting them in a chain, manage chain and not item
3. Applying Lean principles to individual processes comes last, improving speed and efficiency

The 4 Techniques of Lean

• FLOW: arrange parts to make material/data move without interruption
• TAKT: synchronize all activities to the pace of balanced demand
• PULL: replenish only what is consumed – pull control supply and inventory
• LEVELING: balance workload to minimize strain and idling resources

The 5 Steps to Lean

1. Precisely define customer value for each specific product and service
2. Identify the value stream from order to delivery for each product and service
3. Make value flow, remove all obstacles from material and information streams
4. Pull the value-generation upstream at the pace of customer-demand
5. Build-in quality, and strive for excellence and never-ending improvement

Going Lean with external Support

Naturally, companies become like ‘inflated onions’, adding layers of management and inefficiencies over time. This phenomena is noticeable when overhead is growing faster than sales. The causes for those inefficiencies are deeply embedded into an organization’s structure and culture (corporate DNA) and is well protected and defended from internal change.

An outsider can effectively challenge incorrect assumptions, self-destructive methods and behaviors. Such change-agents are able to introduce change without hurting anyone’s feelings. Without external stimulation and assistance, organizations typically apply “spot-fixes” that too often do not deliver the desired results or worst case, even add administrative load.

Supporting the Journey – how we can help

We are experts in transforming traditionally operating companies into lean enterprises. We are skilled in diagnostics, design, rollout planning, and hands-on implementation management. We lead the clients from the current state into a leaner future state, delivering significant savings short-term and improved competitiveness in the long run. We provide:

• Design and implementation of Lean operational systems and infrastructure
• Skill-transfer in Lean Six Sigma and cutting-edge management techniques
• Interim management assistance to implement until results are achieved

Impact on Scorecard

• Quality – stable and reliable output to customer takt and requirements
• Flexibility – able to adapt quicker to changing customer-demand and -taste
• Productivity – much higher utilization of labor, time, machines and space
• Satisfaction – delivering value on demand, specified by customers

Key Success Factors

1. Lean is the result of planned action and persistent follow-up
2. Action is based on thorough understanding and system-thinking
3. Lean is a mindset which works in concert process and tools
4. Standardization is the precondition of any improvement
5. All activities must be measurable and related to a set target
6. Lean is day-to-day work with full dedication and no excuses
7. Ownership cannot be delegated – it is your job, just do it!
8. Basic principle of Lean is respect of people and facing reality
9. Lean means firm decision without procrastination and no way back!

Lean Principles

• LEAN is the most effective way to satisfy customer-demand at lowest cost
• LEAN creates FLOW in the order-to-cash cycle – over entire value-chain
• FLOW happens when barriers (Waste, Muda) are eliminated from the system
• WASTE is a product, feature, step, activity that a customer is not willing to pay for
• Lean PULLS VALUE through the system, while increasing speed and lowering cost
• VALUE is a product, feature, feeling or activity that triggers a ‘buy’ decision
• PULL means configuring and controlling resources solely by customer DEMAND
• All systems contain waste – cutting waste/leaks creates a competitive advantage
• Lean ENTERPRISE is the end-result of applying Lean in all areas of the business
• Lean TOOLS are tactical and operational, only effective with long-term philosophy

The Lean Machine

When reconfiguring or designing a new plant, we assist in the design of cellular manufacturing and mixed-model assembly lines. Higher flexibility allows running multiple products on one single line or cell. Products are grouped around processes, not around model, type or customer. Standard-work, setup-reduction (single-minute exchange of dies, SMED) and flex-tool designs reduce change-over times so that a large variety of products can be made by the same people on the same line or cell. Redesigning workflow reduces batch-sizes towards one-piece-flow, implementing pull and controls reduce inventories – moving towards JIT and significantly reduced lead-times. In total, flexibility improves so that people and machines can quickly respond to changing demand, mix and customer taste.

Heart of the Machine

Mixed-model flow-cell is the key to high productivity in any build-to-order environment. The future belongs to companies that are organized to run any product at any given time – exactly to customer-demand. Mixed-model flow eliminates MRP-driven forecasting and individual planning of each single activity, part and work-center – never accurate as the plan lags behind changes in demand. Lean Manufacturing drives all labor, materials and schedules according the pull of the customer – building products to order in a one-piece/container flow method on mix model lines or cells.

Lower Cost is Side-Effect

Lean application allows for significant reduction in cost, inventory, labor-content, delays, defects, and lead-times. Case from an electronics assembly plant:

• 50% less inventory
• 50% shorter lead times
• 75% shorter setup times
• 15% higher capacity
• 25% higher operating margin

A traditional batch-&-queue manufacturer can expect 25-50% cost-savings from a combination of Lean-Transformation, mixed-model layout, revamped supply-chain, and modified DNA/culture focusing on problem-solving and performance excellence (first time right). Impact in service processes is even higher; up to 50-80% improvement can be expected.

Lean Application Examples

• Plant configuration, cleanroom-design and workstation-layout
• Production cost-reduction program – material, labor, overhead
• Design of mixed-model assembly line and manufacturing cells
• Efficiency and capacity-improvement reconfiguring layout and flow
• Easing labor-shortages through standardization and manning systems
• Make versus buy models – considering long-term total cost
• Advising on alliances and joint ventures with partners overseas (China, Mexico)
• Yield and capacity improvement for existing equipment
• Overall equipment effectiveness (OEE) improvement
• Advising on maintenance strategies to increase up-time and reliability (TPM)
• Alignment of processes to rationalize and revamp the supply chain
• Supply optimization through supplier selection and supplier management
• Quality management systems

Read more about our Lean Transformation Program (LTP).

Visit us on Facebook | Linkedin | Xing and see more about
Teams | Tools | Techniques | Trainings | Transformations

The service sector is at the beginning of major transformation period. Savings potential is an estimated 50-75% compared to traditional processing, accomplished through shorter cycles, continuous flow, and faster decisions. Maintaining competitiveness requires continuously improving productivity, “doing more and more with less and less”. Proven methods from manufacturing provide effective solutions [...]]]> Lean in Non-Manufacturing

The service sector is at the beginning of major transformation period. Savings potential is an estimated 50-75% compared to traditional processing, accomplished through shorter cycles, continuous flow, and faster decisions. Maintaining competitiveness requires continuously improving productivity, “doing more and more with less and less”. Proven methods from manufacturing provide effective solutions for the service sector. Eliminating non-value adding steps and service features, while reducing response times of internal decisions and external requests dramatically improves efficiency levels.

Current Trend

Lean transformation starts by aligning value-creating activities, taking the waste out of the sales-to-service process and making value flow through the system without interruption, improving transactional speed by up to 400% while freeing up resources to further improve the value chain. In manufacturing, a customer receives the end-product of a process whereas in service the customer becomes part of the process itself. Even more consideration must be spent on adapting processes to the need of people. Globalization and commodization push production more and more offshore, with little more than R&D and personal service remaining in developed countries, such as the EU and US. Traditional manufacturing companies move into services to secure profits and fuel further growth. Example: GE banking, IBM consulting, P&W turbine-service. Today, the service sector represents a tremendous opportunity for Lean-application to reduce operational expenses, time for development, transaction, approval, and delivery. Lean techniques applied to service processes increases flexibility; allowing to adapt more quickly to changing customer tastes and demand. .

Lean Service Examples

Lean has been successfully applied to non-manufacturing sectors:

• Banking
• Farming
• Hospitals
• Education
• Accounting
• Call Centers
• Government
• Life-Sciences
• Administration
• Sales & Marketing
• Insurance & Healthcare
• Transportation & Logistic
• Research & Development

The Technical Aspect is just 20%

Lean Transformation includes the development and generation of the service itself, its delivery and management throughout the entire life cycle. Particular focus is given to the transactional process, operating system, skills and behaviors to sustain the gains. A Lean service process keep activities and information lowing rapidly through the system without interruption and backflow.

The Human Behavior Aspect is 80%

Running the businesses in a traditional manner for years, many managers lack the knowledge, skills and expertise to lead the transformation themselves. Lean requires the entire organization to change, not just the operational system, breaking down top-level goals into measurable tasks that employees at every level must clearly understand, accept, and meet. Lean also means tracking current performance against a target and taking relentless action on any deviation with root-causes analysis and corrective action.

Transition to Lean

Persistence and commitment is a prerequisite to overcome initial skepticism and barriers of traditional thinking. Once concepts and impact are proven, productivity and morale are rising. Transitioning towards a performance-culture, managers often must change themselves. Key success factors are:

1. Being absolutely clear on what is expected
2. Resolving problems quickly – decide and move
3. Defining ownership and holding people accountable

Lean Service must be measurable

Measuring waste and variability in manufacturing is easier than in service because more obvious and visible. Naturally, service-tasks depend on the behaviors and preferences of customer, provider and environment – which makes it more difficult to standardize, measure and track. Steps to make service performance measurable:

1. Identify cost-drivers and modify metrics to just measure those parameters
2. Apply cost-tree analysis to identify value-leaks, costs without adding value
3. Implement a system to track cost, quality, delivery, and customer satisfaction

100% Service Improvement

Traditionally operating service-businesses represent a vast opportunity for improvement. Lean transformations target to reduce cycle time and defect-levels by 50%. Examples from actual cases:

• Reducing approval-time for an insurance application from 25 to 4 days
• Reducing processing cost for a new order from USD 700 to USD 125
• Reducing time to review a trademark application from 30-40 days to 5 days
• Reducing design-to-launch time for a new LED lamp from 120 to 45 days
• Reducing time to distribute incoming mail from 2 days to 4 hours
• Reducing time for a health check from 2.5 hours to 30 minutes
• Reducing time for an oil-change from 2 hours to 9 minutes

Read how you can benefit from our Lean Transformation Program (LTP).