Lean Six Sigma Overview

Lean Six Sigma Overview

April 2, 2015

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Presented By:

Mike Sibley, CPA, CFE, LSS Black Belt Katie V. Davis, CPA, Certified LSS

• Introduction to Lean Six Sigma • Simulation • 5 Principles of Lean • 9 Categories of Waste • Lean Practices in Action • Success Stories

Agenda

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

What is the Goal?

• Increased throughput and

capacity

• Better quality from the start • Less management time in

“the mud”

– Allows time for high level activities and identifying value-adding solutions • Increased customer service and

satisfaction!

• Decreased costs

Benefits of Implementation

• Reduced turnaround time • Improved employee morale • Decreased overtime

• Better inventory management • Improved communication

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Caterpillar:

• In 2000, Caterpillar had 4 years of stagnant revenue growth.

• Caterpillar manufacturing facilities cut lead times by more than 50%.

• Revenues grew by 80% from 2001 to 2005.

“It is always about control. 6 Sigma forces you to have the processes and the people accountable to make sure the results are enduring.”

– Dave Burritt, VP, CFO, Caterpillar

Benefits of Implementation

Numina Warehouse Technologies:

• The Company’s Lean Distribution Process provides faster shipping

• Productivity increased by 30%-50%

• Operating expenses reduced while customer satisfaction and retention increased

• Reduced shipping errors (greater than 99.9% accuracy)

• Velocity!

• Efficiency

• Capacity

• Value

“Moving fast is not the same as going somewhere.”

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• Quality!

• Consistency

• Capacity

• Value

“There’s never time to do a job right, but always

time to do it over.”

What is Six Sigma?

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

What Lean Six Sigma Is

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Powerful Model for Process

Improvement

• Begin with the End in Mind

• Organize project scope and develop project charter.

• Determine the “Current State” process

• Opinion of the experts

• Put the process under the microscope and beat it up!

• Collect data to confirm/deny opinions

• Manipulate process to improve

• Create desired “Future State”

• Develop procedures and controls

• Sustain the gains

Define

Measure

Analyze

Improve

Control

TOPS Model Lean Companies Use:

• Team-OrientedProblemSolving

“No one knows the work like the people doing the work.” – Henry Ford

Cross-Functional Team

Champion

Team Leader

Facilitators

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• Management

understanding

& commitment

is essential!

“Any fool can criticize, condemn and complain –

and most fools do.” - Dale Carnegie

Securing Buy-In

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

1. Customers define value 2. Identify the value stream –

what is value added and what is “waste”?

3. Make the process flow 4. Implement “pull” to the

process

5. Continuous Improvement

5 Principles of Lean

Internal Customer:

person in the process • Any downstream process

External Customer:

• The end customer who is paying for the service • Outside compliance

agencies and readers of data

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

D O W N T I M E + A

9 Categories of Waste in Processes

efects

verproduction aiting

ot utilizing people’s talent ransporting

nventory otion

xcess Processing ttitude

Examples

Creates

Tools/Solutions

• Errors • Not following procedures and quality guidelines • Re-work • Lost opportunity • Poor Service • Non-compliance • Bottlenecks • Creates frustration/ stress • Pareto Charts • Proper Feedback • Develop Consistency • Quick Checks • Poke Yoke • Training

Defects

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Examples

Creates

Tools/Solutions

• Significant time on tasks that do not take precedence

• Prioritizing the wrong projects • WIP • Lost capacity • Bottlenecks • Strained employees • Triage

• “Managing the front Door”

Overproduction

Examples

Creates

Tools/Solutions

• Non-value added time • Productive output is not being performed

• Increased costs • Lost capacity • Bottlenecks • “Learning Curve”

• Analyze process steps • Level-loading work responsibilities • Cross-training

Waiting

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Examples

Creates

Tools/Solutions

• Higher skilled people performing lower skilled work

• Not maximizing staff strengths

• Failing to cultivate staff ideas for improvement

• Job dissatisfaction • Employee turnover • Increased costs • Limited value to customers • Bottlenecks

• Understanding the VOC and your people

• Staff A-B-C matrix • Training & Development

• Creating team culture

Not Utilizing People’s Talents

Examples

Creates

Tools/Solutions

• Poor office design - not accounting for work teams and flow

• Not properly leveraging technology (e.g.

electronic documents)

• Longer cycle time • Increased costs • Lost capacity

• Value stream maps • Creating work cells/ teams for high volume service areas

• Properly leveraged technology

• Spaghetti Diagram

Transporting

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Examples

Creates

Tools/Solutions

• Filled inboxes

• Backlog in email inbox • WIP • Supply storage • Stress • Low throughput • Poor service • Bottlenecks • 5S and Visual Management • Triage workflow • Performance goals

Inventory

Examples

Creates

Tools/Solutions

• “Search parties” in the office

• Forms/Supplies centrally located • Trips to printer/copiers

• Longer cycle time • Increased costs • Chaos

• Evaluating workflow • Properly set up work centers

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Examples

Creates

Tools/Solutions

• Performing more work than necessary

• Over-documentation • Creating “works of art”

• Non-value added project time • Increased costs • Lost capacity • Bottlenecks

• Understanding the VOC • Use 80-20 rule for getting work done • Training/Development

Excess Processing

Examples

Creates

Tools/Solutions

• Whether you think you can or can’t, you’re right

• Not respecting needs of the customers • Redundant discussions • Inaction to pressing issues • Inefficient, low quality work • Performance metrics that promote the right behaviors

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

 Variation in process cycle times to customers  Waiting for customer information to filter in  Variation in processes between employees  Numerous and repeatable mistakes

 Complex filing structure or inconsistent filing system  Excessive management time in the minute details – not

enough time spent for high-level activities  Working ever harder, not smarter

“Develop success from failures.” – Dale Carnegie

Symptoms of Inefficiency

Where Do You Start?

What inputs are required to enable this process? List the inputs

from the suppliers which

are needed by the process.

What are the requirements for the input to be acceptable to the process? PROCESS Top level description of the activity. OUTPUTS Resources required by the process Numerical requirements on inputs Requirements:

What inputs are required to enable this process? List the inputs

from the suppliers which

are needed by the process.

What are the requirements for the Input to be acceptable to the process? CUSTOMERS Stakeholders who place the requirements Who is the customer of each output? List all of the customers, both internal and external, who receive the outputs. SUPPLIERS

Where Do You Start?

Meet new client

Requirements Requirements:

Understand client’s needs in new car Present options to client, test drive Co-agreement on options, price &

delivery Complete credit check & financing New Car Option Packages Wash / Fuel Credit Check Forms Financing Forms Options Guide

Car has low mileage to qualify as new Option packages are installed and functional Car is clean and full tank of gas

Forms are current and acceptable by credit check

agency Finance forms are current and apply to correct finance agency Options guide is clear to the customer and sales person

Car Manufacturer Detail Shop Service Garage Bank of Credit Union Credit Agency New Client Account Dealer Sales Paperwork State Paperwork Financing Paperwork Service Contract Client Rapid transactions, no excess waiting (max 1 hour)

All options available and installed same day Car clean and fueled

Paperwork correct Best financing terms All manuals and service

contract available and

Car Buyer Dealership Service Department US DMV Bank or Credit Union

Value Stream Map

• Problem: The stone on the Jefferson Memorial is deteriorating. • Cause: Frequent

washing of the stone

• The rest of the story ...

Cause & Effect

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• Managing the front door • Setting consistent

expectations and expecting consistent performance • Bust the bottlenecks • Level loading

• Implement “pull” and reduce WIP

• Utilizing lead time goals to help with project management

Lean Practices in Action

• Everything that is done prior to starting the job. • Being proactive can go a long way toward dictating

how effective the job will be.

• The more hours that can be moved out of higher capacity periods and into time periods of less constraint will alleviate bottlenecks.

• Purposeful planning with clients up-front to set

expectations in order to meet stated deadlines.

• Preventing confusion and communication loops.

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• Document expectations and responsibilities at each level in the process.

• If used properly, each team member will be working towards the “Gold Standard” and will know exactly what to expect in their work product.

• This includes technical and non-technical items. • Consider including metrics that help outline the

success of each stage of the process.

Quick Checks - Summary

• Quick Checks help build consistency into the process at the various levels. • Quick Checks help build quality into

the process at all levels.

• Avoid the “hot potato syndrome”

and get personnel at all levels to focus on providing only quality work to the next step.

• Set the expectations and watch personnel strive to meet it. Too often we just fail to set expectations.

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• Eliminate non-value add activities • Level-load work responsibilities • Develop consistent work

practices

• Quality control before the bottleneck

• Minimize re-work and loops • Avoid batch processing • Triage

• Add resources

Ways to Bust the Bottlenecks

• 3R’s – Right people, right roles, right

time.

• Without this you will most likely end up with bottlenecks because you will have higher level people performing way too much lower level work (and possibly vice versa).

• It is important to shift workload to the level and expertise it’s most practically done at.

• Match capabilities to the job.

Level Loading

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• “Red Zone Principle”

at starting work but stall in finishing work (when we get into the red zone we kick field goals instead of getting touchdowns).

Pull & WIP Reduction

• While “managing the front door”, expectations

are extremely effective in helping employees manage work load.

• Without setting these expectations, work tends to drag out. We begin to lose discipline. We think we still have plenty of time available until the deadline and it is easier to pick something else up.

• Setting time goals gives us an internal deadline to strive for – since it is human nature to procrastinate to a deadline.

– It builds discipline.

Lead Time Goals

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• Time goals help with project management because they break up our steps and

processes into bite sized chunks.

– Each step has to hit their target for the project to be completed on time. • Effectively managing each project means we

should be seeing more completed projects with less chaos.

– To make this happen each step needs to hit their time goal target.

Time Goals Help With Project

Management

• Quickly respond to external and internal customer

phone calls and emails, even if it is to set

expectations for a later date.

• Start off each day tackling the most complex task or

task you are dreading (try doing this before you even

open email). You are the most efficient first thing; get that done and watch your productivity that day soar! • Utilize the “3 Minute Rule” to answer emails. When

you are checking emails, if you can take care of the question/issue in 3 minutes or less, do it. If not, file it away and schedule a time to come back to it.

Individual Project Management

Techniques

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Case Study #1 – City Municipality

Contract Change Order Process

• Problem Statement:

– Change orders go through up to 10 approvals – Change orders go through a manual approval

process, then a redundant electronic approval process

– Certain personnel involved are not adding value

– Insignificant change orders are approved

• Focus Areas:

– Minimize time to approve change orders – Eliminate manual paperwork and process

change order exclusively in the HTE system – Eliminate redundant approvals

• The quarterly capital purchases report to

the Commission includes all change order

activity

• Change in threshold requires City Commission approval

– Reduced approvals from 11 to 3

• Eliminated the process of walking the

change order form throughout city hall for

manual approvals and move to purely electronic approval

• Overall goal to complete the approval of

change orders within one week

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Case Study #2 – City Municipality

HR Performance Review Process

• Problem Statement:

– Average past due 84 days – Manual process of tracking when

evaluations are due

– Lengthy performance review paperwork – Performance reviews inconsistent in ratings

• Focus Areas:

– Reduce turnaround time

– Utilize current software to notify and track

outstanding performance reviews

– Eliminate use of spreadsheets and manual

data entry

– Revise performance review document – To be approved by HR Board

• Employee evaluations

moved to an automated online tracking system the organization already owned • Reduced the evaluation

from 10 pages to 2 pages

• Goal: Reduce turnaround time to 30 days

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• Problem Statement: The process of moving students in and out of on-campus residence halls is a bottleneck, due to constrained time frames and inefficient procedures.

• Focus Areas:

1. Find proactive methods for communicating the

procedures and expectations to students in

advance of move in and move out periods.

2. Leveraging technology to more efficiently and

more accurately track issuance of keys to students during move in/receipt of keys from students during move out.

3. Training of university staff and student resident

advisors involved, with built in accountability

for following the updated SOP’s.

Case Study #3 – University

On-Campus Residence Halls

• Implementation of a real-time computer system

to track changes of student profiles.

• More ownership taken by university staff responsible for checking in/out student residents.

• Elimination of paper key cards by utilizing electronic signature capability of swiping student ID cards on laptops or tablets present during move in and move out.

• Improved security over key access and improved tracking of keys issued.

• Decreased frustration by students, parents, and staff due to improved communications and reduced uncertainty.

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

• Problem Statement: The residence hall maintenance work order process is not well defined, which leads to inefficiency, staff frustration, and customer dissatisfaction.

• Focus Areas:

1. Develop SOP’s for proper management,

storage, and safeguarding of inventory. 2. Leverage technology to gather detailed

information on service requests.

3. Training of maintenance staff on use of

technology and management of inventory, and training of university staff on student management by directing them to follow updated protocol.

Case Study #4 - University

Maintenance Work Order Process

• Implementation of an electronic work order

tracking system that is user friendly to students

and captures all data required by maintenance.

• Real-time communication of work order status

changes to maintenance supervisors to monitor service requests for all areas they supervise.

• Improved communication to students on status

of work orders.

• SOP’s incorporate expectations for quality and

accountability of inventory management and

safeguarding.

• Decreased frustration by everyone involved due

to forward flow/reduced work loops.

Case Study #4 - Results

Success Stories

Aluminum Trailer Company

Steve Brenneman, Founder of Aluminum Trailer Company

“If you think about ‘green’ in the right way, it doesn’t have to cost extra; it may take a little more care and a little more thought, but you will find that it saves costs and saves money.”

Implemented lean principles in 2009, following the economic downturn and a resulting drop in sales.

Decreased warehouse space from 105,000 square feet to 50,000 square feet. Reduced sales cycle time from seven weeks to three weeks. In 2010, began applying green principles. Lighting upgrades, making recycling easier for line workers, and provided adequate bins for recycling.

Goals were met, as was a 50% decrease in paper use in the office.

Success Stories

Canyon Creek Cabinet Company | Columbia Paint & Coatings

Canyon Creek Cabinet Company: Implemented lean principles in May 2006 Canyon Creak realized $1.19 million per year in cost savings through November 2007 Increased production from 900 cabinets per day to 1,000 cabinets per day.

Allowed for 70% additional production

Columbia Paint & Coatings:

Implemented lean principles in October 2006 Cost savings expected to total $210,000 per year Decreased total lead time for non-stock Reduced the

quality control

Providing Tax, Auditing, Accounting & Controllership, Consulting, and Wealth Management Services Since 1964.

Remember the Goal?

Katie V. Davis, CPA

Certified LSS Senior Manager Office: 352.378.1331 EXT. 2202 [email protected] http://www.linkedin.com/in/

Contact Information

Mike Sibley, CPA, CFE

LSS Black Belt Partner Office: 386.257.4100 EXT. 4440 Mobile: 386.212.8198 [email protected] http://www.linkedin.com/in/ mikesibleydaytonabeachcpa www.jmco.com