Lean Six Sigma - Yellow belt program

Module 3

prepared for

3-4 October 2008 zumtobel lighting division ZDL Curtici – lean 6 sigma
Agenda

Day 1 Day 2

Introduction - objectives, expectations Recap day 1

Recap module 2 Systematic Problem Solving

TPM (Total Productive Maintenance) 7 QC Tools

DMAIC approach
Definitions, principles and types of losses
Lunch break Lunch break

Overall Equipment Effectiveness (OEE)

Turnaround – business simulation

Simulation debrief Closing session and feedback

Wrap up

2
Learning Objectives

Î Understand Total Productive Maintenance

Î TPM Principles and major pillars
Î Overall Equipment Effectiveness (OEE)
and types of losses
Î Systematic Problem Solving, DMAIC
approach, tools
Î Turnaround – business simulation (part3)

3
 TPM

Total Productive Maintenance

3-4 October 2008 zumtobel lighting division ZDL Curtici – lean 6 sigma
1. TPM definition (1)
Î A company-wide team-based effort to build
quality into equipment and to improve overall
equipment effectiveness
Î Total
y all employees are involved
y it aims to eliminate all accidents, defects and
breakdowns
Î Productive
y actions are performed while production goes on
y troubles for production are minimized
Î Maintenance
y keep in good condition
y repair, clean, lubricate 5
1. TPM definition (2)

Î TPM combines the traditionally American

practice of preventive maintenance with
Total Quality Control and Total Employee
Involvement, to create a culture where
operators develop ownership of their
equipment, and become full partners with
Maintenance, Engineering and
Management to assure equipment
operates properly everyday.

6
TPM Goal

Î Zero Breakdowns,
Î Zero Accidents,
Î Zero Defects.

7
2. Origins of TPM

Î Dr. Deming introduced statistical analysis and

used the resulting data to control quality during
manufacturing (TQM)
Î Some general concepts of TQM did not work well
in the maintenance environment
Î The need to go further than preventive
maintenance was quickly recognized by those
companies who were committed to TQM
Î Maintenance became an integral part of TQM in
the early 90’s

8
3. TPM principles

Î Increase Overall Equipment Effectiveness

(OEE)
Î Improve existing planned maintenance
systems
Î The operator is the best condition monitor
Î Provide training to upgrade operations
and maintenance skills
Î Involve everyone and utilize cross-
functional teamwork

9
 Autonomous Maintenance

Planned Maintenance

Equipment and process improvement

Early management of new equipment

4. Eight major pillars of TPM

Education and training

Process quality management

Safety and environmental management

TPM in the office

10
4. Eight major pillars of TPM
4.1. Autonomous Maintenance (1)

Î Train the operators to close the gap

between them and the maintenance
staff, making it easier for both to work
as one team
Î Change the equipment so the operator
can identify any abnormal conditions
and measure deterioration before it
affects the process or leads to a failure

11
4. Eight major pillars of TPM
4.1. Autonomous Maintenance (2)

7 steps are implemented to progressively increase operators

knowledge, participation and responsibility for their
equipment

1. Perform initial cleaning and inspection

2. Countermeasures for the causes and effects of dirt and dust
3. Establish cleaning and lubrication standards
4. Conduct general inspection training
5. Carry out equipment inspection checks
6. Workplace management and control
7. Continuous improvement

12
4. Eight major pillars of TPM
4.2. Equipment and process improvement

Î Objective: maximize efficiency by eliminating

waste and manufacturing losses
Î Manufacturing losses are categorized into 13
big losses:
y Equipment losses (6)
y Manpower losses (4)
y Material losses (3)

13
4. Eight major pillars of TPM
4.2. Equipment and process improvement
4.2.1. Equipment losses

Equipment failure / breakdowns

Downtime
loss
Set-up / adjustments

Minor stopping / idling

Speed loss
Reduced speed

Process errors
Quality loss
Rework / scrap

14
4. Eight major pillars of TPM
4.2. Equipment and process improvement
4.2.2. Manpower and material losses

Cleaning and checking

Waiting materials
Manpower
losses
Waiting instructions

Waiting quality confirmation

Material yield
Material
Energy losses
losses
Consumable material losses

15
4. Eight major pillars of TPM
4.2. Equipment and process improvement
4.2.3 Overall Equipment Effectiveness (OEE)

Î OEE figures are determined by combining the

availability and performance of your
equipment with the quality of parts made
Î OEE measures the efficiency of the machine
during its planned loading time. Planned
downtime does not effect the OEE figure.

16
4. Eight major pillars of TPM
4.2. Equipment and process improvement
4.2.3 Overall Equipment Effectiveness (OEE)

Overall Equipment Effectiveness = Availability x Performance x Quality Yield

Availability Downtime loss

Performance Speed loss

Quality Yield Quality loss

17
4. Eight major pillars of TPM
4.2. Equipment and process improvement
4.2.3 Overall Equipment Effectiveness (OEE)

Overall Equipment Effectiveness = Availability x Performance x Quality Yield

Availability = time available for production - downtime

time available for production

Performance = ideal cycle time x number of parts produced

operating time

Quality Yield = total number of parts produced - defect number

total number of parts produced

18
4. Eight major pillars of TPM
4.3. Planned maintenance

Î Objective: establish Preventative and Predictive

Maintenance systems for equipment and tooling
Î Natural life cycle of individual machine elements
must be achieved
• Correct operation
• Correct set-up
• Cleaning
• Lubrication
• Retightening
• Feedback and repair of minor defects
• Quality spare parts
19
4. Eight major pillars of TPM
4.4. Early Management of new equipment

Î Objective: establish systems to shorten

y new product or equipment development
y start-up, commissioning and stabilization
time for quality and efficiency
Î New equipment needs to be:
y easy to operate
y easy to clean
y easy to maintain and reliable
y have quick set-up times
y operate at the lowest life cycle cost
20
4. Eight major pillars of TPM
4.5. Process Quality Management

Î Definition: a process for controlling the

condition of equipment components that
affect variability in product quality
Î Objective: to set and maintain conditions to
accomplish zero defects
Î Quality rate has a direct correlation with
y material conditions
y equipment precision
y production methods
y process parameters
21
4. Eight major pillars of TPM
4.6. TPM in administrative and support departments

Î Administrative and support departments can

be seen as process plants whose principal
tasks are to collect, process, and distribute
information
Î Process analysis should be applied to
streamline information flow

22
4. Eight major pillars of TPM
4.7. Education and training

Î TPM is a continuous learning process.

Î 2 major components
y soft skills training: how to work as
teams, diversity training and
communication skills
y technical training: upgrading
problem-solving and equipment-
related skills
23
4. Eight major pillars of TPM
4.8. Safety and environmental management

Î Assuring safety and preventing adverse

environmental impacts are important priorities
in any TPM effort

24
5. TPM implementation
3 requirements for fundamental improvement

Î Increasing motivation: changing peoples

attitudes
Î Increasing competency and peoples skills
Î Improving the work environment, so that it
supports the establishment of a program for
implementing TPM

25
 5. TPM Implementation
12 steps

Announcement to introduce TPM

Introductory education campaign for the workforce
Preparation TPM Promotion (special committees)
Establish basic TPM policies and goals
Preparation and Formulation of a master plan

Kick-off Invite customers, affiliated companies and subcontractors

Develop an equipment management program
Develop a planned maintenance program
Implementation Develop an autonomous maintenance program
Increase skills of production and maintenance personnel
Develop early equipment management program

Stabilization Perfect TPM implementation and raise TPM levels

26
5. TPM Implementation
5.1. Announce top management’s decision to introduce TPM

Î State TPM objectives in a company

newsletter
Î Place articles on TPM in the company
newspaper

27
5. TPM Implementation
5.2. Introductory education campaign

Î Seminars for managers

Î Slide presentations for all employees

28
5. TPM Implementation
5.3. TPM Promotion

Î Special committees at every level to

promote TPM
Î Newsletters
Î Articles
Î Videos
Î Posters

29
5. TPM Implementation
5.4. Establish basic TPM policies and goals

Î Analyze existing conditions

Î Set goals
Î Predict results

30
5. TPM Implementation
5.5. Preparation and Formulation of a master plan

Î A master plan lays out your goals, what

you will do to achieve them and when you
will achieve them
Î Detailed plans for each pillar have to be
prepared

31
5. TPM Implementation
5.6. TPM kick-off

Î The main kick-off to TPM should take the

form of a formal presentation with all the
employees attending
Î This opportunity can be used to gain the
full support of the employees
Î Invite external customers, affiliated and
subcontracting companies

32
5. TPM Implementation
5.7. Develop an equipment management program (1)

Î The tools of Total Quality Management

and Continuous Improvement are applied
to the management and improvement of
equipment
Î Form project teams
Î Select model equipment
y identify equipment problems
y analyze equipment problems
y develop solutions and proposals for
improvement
33
5. TPM Implementation
5.7. Develop an equipment management program (2)

Î Typical membership of a team

y five to seven operators
y a maintenance person
y a technical expert
Î Tools
y Pareto
y Cause & effect
y Root cause
y Methods Analysis

34
5. TPM Implementation
5.8. Develop a planned maintenance program

Î Set up plans and schedules to carry out

work on equipment before it breaks down,
in order to extend the life of the equipment
Î Include periodic and predictive
maintenance
Î Include management of spare parts and
tools

35
5. TPM Implementation
5.8. Develop a autonomous maintenance program

Î A handing-over of maintenance tasks from

specialized maintenance personnel to
production operators
Î Promote the seven steps
Î Tasks to hand over
y cleaning
y lubricating
y inspecting
y set-up and adjustment

36
5. TPM Implementation
5.10. Increase skills of production and maintenance personnel

Î The training sessions must be planned

shortly after the kick-off presentation.
Î 2 major components
y soft skills training
y technical training
Î Train leaders together
Î Have leaders share information with group
members

37
5. TPM Implementation
5.11. Develop early equipment management program(1)

Î The principle of designing for

maintenance prevention can be applied to
new products, and to new and existing
machines.
Î New products must be designed so that
they can be easily produced on new or
existing machines
Î New machines must be designed for
easier operations, changeover and
maintenance

38
5. TPM Implementation
5.11. Develop early equipment management program(2)

Î Existing machines:
y analyze historical records for
• trends of types of failures
• frequency of component failures
• root causes of failures
y determine how to eliminate the problem
and reduce maintenance through an
equipment design change or by changing
the process

39
5. TPM Implementation
5.12. Perfect TPM implementation and raise TPM levels

Î Evaluate for the PM Award: The Japanese

Institute for Productive Maintenance runs
the annual PM Excellence Award. They
provide a checklist for companies
applying for the award.
Î Set higher goals

40
6. TPM Benefits

Î Increased equipment productivity

Î Reduced equipment downtime
Î Increased plant capacity
Î Lower maintenance and production costs
Î Approaching zero equipment-caused
defects
Î Enhanced job satisfaction
Î Increased Return On Investment

41
 Systematic Problem Solving

3-4 October 2008 zumtobel lighting division ZDL Curtici – lean 6 sigma
Intro
Abstract:
Î Successful total quality management (TQM) is dependent
on first class problem solving. Numerous techniques have
been created to help the TQM practitioner along the
problem solving journey. However, it can be very difficult to
decide which of these techniques should or could be used
at any point in the journey and in particular to see how the
different approaches are related to each other. As a result,
most people use only a small number of these techniques
and tend to cling to their own limited toolbox. Three of the
strongest groups of tools are “the seven simple tools of
TQM”, “the four thinking models of Kepner-Tregoe” and
“root cause analysis”. This presentation argues that all
three are complementary to each other and provides a flow
chart to help navigate between them. This is particularly
relevant for programmes aimed at implementing total
productive manufacturing/maintenance (TPM).

43
Î Don't confuse decision-making with
problem-solving
y The outcome of one may be sub-optimal
for the other!
Î Decision making seeks to choose between
known alternatives
Î Problem solving tries to find entirely new
options
y The following approach has similarities to
"brain-storming", but is more methodical

44
What is a "problem"?
Î A problem is a question raised for inquiry,
consideration, or solution
Î An intricate unsettled issue which is a
source of perplexity, distress, or vexation
y And that may be difficult to understand or
accept
Webster's US dictionary
Î Problem solving answers the general
question
y "How do I make this thing work?"
45
• Problem = situation where there is deviation
from what is expected and
what actually is.
• Problem-solving = finding a way to attain what is
expected or desired from what actually is.
• Problem-solving method = specific way of
proceeding in the determination of the
solution(s) to a problem.
• A key perspective is that one should be
systematic and follow some method when
trying to solve a problem.

46
Problem Solving?

Î “Problem solving, the isolation and

analysis of a problem and the
development of a permanent solution, is
an integral part of the quality-improvement
process”.
y Not hit or miss, but objective and
systematic
y Not directed at symptoms, but rather at root
causes

47
Problem Solving Process

Symptom
Recognition

Fact
Finding

Problem
Identification Follow Up
Idea
Generation

Solution
Development

Plan
Implementation
48
All Managers Need Problem Solving
Skills

Î 80% of problems are external to QC

organizations
Î Quality problems transcend individual
functions
Î Companies need multi-discipline problem
solving approach
Î Management involvement and
commitment is crucial

Source: Feigenbaum, Total Quality Control, 1991, p. 151.

49
Problem Solving Skills for Managers

Î Understand and utilize a systematic

problem solving process
Î Ask the right questions
Î Present information clearly and
unambiguously
Î Make judgments based on information

PDSA Cycle Seven QC Tools

50
10 Problem Solving Steps

Recognize
Problem

ACT PLAN

STUDY DO

51
Gap
Gap Analysis
Analysis

Internal or
External
Supplier

Internal or
Input Process A Output External
Customer

Quality Requirements
Characteristics and
Expectations

Are there any gaps?

52
10 Problem Solving Steps
Continuous Recognize
improvement Problem
Ensure Form quality
performance improvement
ACT teams
Define
Problem
Evaluate Analyze
STUDY PLAN
Solution Problem
Determine
Possible
DO
Causes
Identify
Implement Possible
Solution Solutions
53
Florida Power & Light’s 7 step model

1. Identify a problem area

2. Identify the problem’s component parts
3. Search data for root causes
4. Identify and select countermeasures
5. Confirm the problem responds to the correction
6. Assure non-recurrence
7. Decide what will be done with future problems -
evaluate team effectiveness

54
FPL’s PDCA cycle
Involve the right people
Execute cycle again
Gather all available data
Improvement standardized
Understand customers needs
Improvement becomes
Thoroughly study
current best approach
the process
Improvement ACT PLAN Capable of meeting
projects identified needs?
Develop plan
Understand differences Train people
Analyze and STUDY DO
display data Implement the
Review problems/errors improvement
What was learned?
Collect appropriate data
What is still not working?

55
Xerox Problem Solving Process

56
Process Analysis Method

UNDERSTAND

SELECT

ANALYZE

ADOPT PLAN

CHECK DO

57
Why do we need the 7 QC tools?

Î TQM is data driven: data are impersonal;

opinions are not.
Î Experience is gained quickest by
collecting and analyzing data.
Î The 7 QC tools provide common methods
of analysis to help problem solving teams
operate effectively.

58
PDSA and QC Tools

Brainstorming
Pareto analysis

ACT PLAN Why-Why diagram

Run charts
Cause and effect
Control charts STUDY DO diagram
Histograms Scatter diagrams
Check sheets Control charts
Scatter diagrams Check sheets
Pareto charts Run charts

59
Quality Control Tools

• Pareto chart
• Histogram
• Process flow diagram
• Check sheet
• Scatter diagram
• Control chart
ƒ Run chart
• Cause and effect diagram

60
Pareto Principle

Î Vilfredo Pareto (1848-1923) Italian

economist
y 20% of the population has 80% of the
wealth
Î Juran used the term “vital few, trivial
many”. He noted that 20% of the quality
problems caused 80% of the dollar loss.

7 Quality Tools
61
Pareto chart

30
28
% Complaints

25

20
16
15
12 12
10
6
5 4 3
0
Loose Stitching Button Material
Threads flaws problems flaws

7 Quality Tools
62
 Chart
Pareto

Percent from each cause

10
20
30
40
50
60
70

0
Po
or
W D
ro es
ng ig
di n
(64)

m
De ens
fe io
ct n
(13)

ive s
M pa
ac rts
hi
ne
(10)

ca
O l
pe ibra
ra tio
to
(6)

r e ns
De rro
fe rs
ct
(3)

ive
m
Causes of poor quality

Su at
rfa er
ce ia
ls
(2)

ab
ra
sio
ns
(2)

63
 Frequency

0
5
10
15
20
25
Histogram

1.
9
2.
9
3.
9
4.
9
5.
9
6.
9
7.
9
8.
9
9.
9
Category 10
.9
11
.9
12
.9
13
.9
14
.9
15
.9
M
or
e
7 Quality Tools
64
Histogram

40
35
30
25
20
15
10
5
0 1 2 6 13 10 16 19 17 12 16 20 17 13 5 6 2 1

65
Flowcharts

Î Flowcharts
y Graphical description of how work is done.
y Used to describe processes that are to be
improved.

7 Quality Tools
66
Flow Diagrams

" Draw a flowchart for whatever you do.

Until you do, you do not know what you
are doing, you just have a job.”

-- Dr. W. Edwards Deming.

67
Flowchart
Flowchart

Activity

Yes
Decision

No

7 Quality Tools
68
Flowchart

69
Flow Diagrams

70
Flow Diagrams

71
Process Chart Symbols

Operations
Inspection

Transportation

Delay

Storage

72
Process Chart
Date: 9-30-00 Location: Graves Mountain
Analyst: TLR Process: Apple Sauce

Distance
Operation
Transport

Storage
Description

Inspect

(feet)
(min)
Time
Delay
Step

of
process

1 Unload apples from truck 20

2 Move to inspection station 100 ft
3 Weigh, inspect, sort 30
4 Move to storage 50 ft
5 Wait until needed 360
6 Move to peeler 20 ft
7 Apples peeled and cored 15
8 Soak in water until needed 20
9 Place in conveyor 5
10 Move to mixing area 20 ft
11 Weigh, inspect, sort 30
Page 1 0f 3 Total 480 190 ft

73
74
Check
Check Sheet
Sheet

Shifts

√√√ √√√√ √ √√√

Defect Type

√√ √√√

√√√√ √√√

√√ √

7 Quality Tools
75
Check Sheet

COMPONENTS REPLACED BY LAB

TIME PERIOD: 22 Feb to 27 Feb 1998
REPAIR TECHNICIAN: Bob

TV SET MODEL 1013

Integrated Circuits ||||
Capacitors |||| |||| |||| |||| |||| ||
Resistors ||
Transformers ||||
Commands
CRT |

76
Cause-and-Effect Diagrams

Î Show the relationships between a problem

and its possible causes.
Î Developed by Kaoru Ishikawa (1953)
Î Also known as …
y Fishbone diagrams
y Ishikawa diagrams

7 Quality Tools
77
Cause-and-Effect Diagrams

Materials Procedures

Quality
Problem

People Equipment

78
Fishbone Diagram
Measurement Human Machines

Faulty testing equipment Poor supervision Out of adjustment

Incorrect specifications Lack of concentration Tooling problems

Improper methods Inadequate training Old / worn

Quality
Inaccurate Problem
temperature Poor process
control Defective from vendor
design
Ineffective quality
Not to specifications management
Dust and
Dirt Material- Deficiencies
handling problems in product
design
Environment Materials Process

79
Cause and effect diagrams

Î Advantages
y making the diagram is educational in itself
y diagram demonstrates knowledge of
problem solving team
y diagram results in active searches for
causes
y diagram is a guide for data collection

80
Cause and effect diagrams

To construct the skeleton, remember:

Î For manufacturing - the 4 M’s
9man, method, machine, material
Î For service applications
9equipment, policies, procedures, people

81
Scatter Diagram

82
Run Charts

Î Run Charts (time series plot)

y Examine the behavior of a variable over
time.
y Basis for Control Charts

83
Control Chart
27

24
UCL = 23.35
21
Number of defects

18 c = 12.67

15

12

6
LCL = 1.99
3

2 4 6 8 10 12 14 16
Sample number 84
Control Charts

85
Quality Improvement: Problem Solving
“Stem and leaf” displays

Data
Integrated Circuit Response Time (ps)

4.6 4.0 3.7 4.1 4.1 5.6 4.5 6.0 6.0 3.4
3.4 4.6 3.7 4.2 4.6 4.7 4.1 3.7 3.4 3.3
3.7 4.1 4.5 4.6 4.4 4.8 4.3 4.4 5.1 3.9

86
“Stem and leaf” displays

Integrated Circuit Response Time (ps)

3 7 4 4 7 7 4 3 7 9

4 6 0 1 5 6 2 6 7 1 1 5 6 4 8 3 4

5 6 1

6 0 0

87
Dot diagrams

Integrated Circuit Response Time (ps)

3 4 5 6
Plant A

Plant B

88
Brainstorming

Î Purpose - generate a
list of
y problems
y opportunities
y ideas
Î Success requires
y no criticism
y no arguing
y no negativism
y no evaluation

89
Brainstorming

90
Brainstorming

Unite the 9 dots with FOUR straight lines.

91
Brainstorming

Unite the 9 dots with FOUR straight lines.

92
Problems for
“Why-Why” discussion

Î What are the root Î Construct a “Why-

causes? why” diagram
y 737’s not being y List problem
delivered on time statement
y Utility outages too y Ask why 5 times;
frequent record responses
y Fast food outlet
profits falling

93
 Problem Solving
DMAIC approach

3-4 October 2008 zumtobel lighting division ZDL Curtici – lean 6 sigma
What Is a Project Charter?
ÎDefines the problem background and its affect on the
broader business
ÎDescribes why the problem is strategically important
to the business
ÎDescribes the specific opportunity and goals of the
project
ÎPuts a value on the opportunity
y Net of the potential effort it will take to implement
y Also describes non-financial benefits
ÎIt does NOT solve the problem
ÎIt is a living document, until the project is launched
y Minimal changes can made beyond after the launch, but any
change to the scope has the risk of not having the proper
project team members involved or even a potential ‘false start’ 95
 Life Cycle of a Charter
Project
Birth Initial Charter Creation DMAIC
Complete
Scoping
Simple PDF Template Revised 10-24-00 Simple PDF Template Revised 10-24-00 Simple PDF Template Revised 10-24-00
Project Name Project Name Project Name
page 1 of 2 page 1 of 2 page 1 of 2

Problem Statement Problem Statement Problem Statement

Benefit Benefit Benefit

Approach Approach Approach

- include the 4 basic elements : What, Where, When, Extent - include the 4 basic elements : What, Where, When, Extent - include the 4 basic elements : What, Where, When, Extent
- make quantifiable whenever possible
Ca lculations - make quantifiable whenever possible
Ca lculations - make quantifiable whenever possible
Ca lculations

Scope Statement Scope Statement Scope Statement

Scope In Net Be nefit Scope In Net Be nefit Scope In Net Be nefit

& &
Assumptions Assumptions Assumptions

Scope Out Scope Out Scope Out

Effort Effort Effort

Pe ople Required Pe ople Required Pe ople Required
Key Measures Proposed Key Measures Proposed Key Measures Proposed
Measure Name I/P/O Exists Baseline % of Time
Notes Duration Tota l FTE Measure Name I/P/O Exists Baseline % of Time
Notes Duration Tota l FTE Measure Name I/P/O Exists Baseline % of Time
Notes Duration Tota l FTE
1 Tea m Membe r Role on Proje ct (in weeks) Weeks 1 Tea m Membe r Role on Proje ct (in weeks) Weeks 1 Tea m Membe r Role on Proje ct (in weeks) Weeks
1 - 1 - 1 -
2 2 2
2 - 2 - 2 -
3 3 - 3 3 - 3 3 -
4 4 - 4 4 - 4 4 -
5 - 5 - 5 -
5 5 5
6 - 6 - 6 -
6 7 - 6 7 - 6 7 -
7 8 - 7 8 - 7 8 -
8 9 - 8 9 - 8 9 -
10 - 10 - 10 -
9 9 9
- - -
10 10 10
Project Duration week s Project Duration week s Project Duration week s
One Time Costs One Time Costs One Time Costs

Risks Risks Risks

• An Idea is • Idea could be • Data collected to • Data Collected • Added to completed

Generated a project support a project • Analysis Done projects database
• Initial Pareto • Solutions Generated
analysis completed

• Complete ‘Shallow-Dive’ • Complete ‘Deep-Dive’ • It’s a set of ideas and an • It’s a cleaned-up
• It’s the initial ideas
• It’s a couple sentences • It’s 1-2 pages implementation plan set of files & data
developed during a
Diagnostic, or other • 1 hour • 4-8 hours • 3-5 months of effort • 2 days of clean-up

• Value unknown • “Ballpark” value • Value established (+/-) • Value, costs, timing • Value is Fixed
estimated are refined during • Metrics monitored
Define & Measure & value captured
phases
Screening Prioritization 96
What’s Needed on a Charter?
Problem Statement
„ The problem statement should contain the What, Where, When and Extent of the issue.
Describe the “pain.”
„ The opportunity should be related to a key business issue and have strategic relevance.

Goal Statement
„ Quantitatively describe the key objectives of the project, in terms of a metric and a target.

Financial Benefits
„ Describe the financial benefits, net of implementation and potential capital costs.
„ Generally described in terms of Economic Profit (EP)
„ State key assumptions.

Planned Resources
„ Insure the team is adequately staffed with the sufficient skill sets to solve the problem.
„ Insure time commitments are clearly identified.

Project Scope
„ The boundaries of the project.

Risk and Accelerators

„ What key risks to projects success exist.
„ What could be done to accelerate the completion of the project or the benefits.

Project Plan
„ High level estimate of the project timeline
„ Generally, hard dates should be placed only on key milestones, such as Gate Reviews

97
Project Charter Example
CHARTER FORM
General Information

Project Name: Implement Sales and Operations Planning Process Project Goals:
Project Definition: Implement SOP to provide better visibility into capacity planning for all areas, provide Improve On-Time Delivery (79% to 84% - Industrial,
improved production scheduling, and also drive specific shop orders and purchase part 72% to 81% - Airborne, 80% to 85% - Valves)
releases for select strategic purchases. 1
Start Date: Improve Order Fulfillment Time (34 days to 29 days -
Industrial, 48 days to 40 days - Airborne, 62 days to
End Date: 2 52 days - Valves)
Site Location: Improve Inventory Turns (3.7 to 4.3 - Switches, 2.4 to
Valencia, C Process Type: Planning 3 3.7 - Valves)
Value Center: Aerospace Process Owner: Bob Lacy 4 Improved Direct Labor Productivity (65% to 66.5%)
nagement Company: Improve Revenue (5% increase - Industrial, 5%
increase - Airborne, 1.5% increase - Airborne, 1%
SPG Champion: Brian Jordan 5 increase -Valves)
BlackBelt:
% of time required: 100% Risk Projection: Medium

Planned Benefits

Assumptions: Projected Financial Benefits

1 A reasonably accurate forecast can be generated. $0.700 Revenue Enhancement ($MM)
2 The effort to roll-out the project beyond the pilot will be minimal, in order to achieve full
benefits (see support slides).
3 Benefits are being calculated for Switches only (Industrial and Airborne) $0.500 Operating Profit ($MM)
4 Only 50% of expected labor and a minimal burden is needed to support increased volume
due to better labor and machine utilization (better throughput, increased capacity).
5 $0.000 Capital Expenditure ($MM)
Other Benefits:
1 Improved Communication and teamwork $0.470 EVA ($MM)
2 Provide a tool for planning and achieving strategic business goals.
3 Provide visibility for planning long-term capacity planning. (Facilities, Capital Equipment, Other ($MM)
Labor, etc.)
4
5

Planned Resource Requirements

Team Memb kills Requir Start Date End Date % of time required Capital Investment ($0.0MM)
1 General MaExecutive sponsorship 5%
2 Master SchDevelop capacity planning tools & estimates 25%
3 Demand MDevelop forecasting tools & forecasts 25%
4 Sales & M Project overview 10%
5 Operations Project overview 10%
6 Order MgmDevelop policies & procedures 10%
7
8
0.85 Total Equivalent Resources Required
98
Project Charter Example (Cont.)
Project Background

Project Background: An SOP process doesn't currently exist. An attempt at implementing some form of this process had been undertaken in the past, but didn't realiz
potential (and was eliminated) due to inaccurate and too detailed Planning BOM's and lack of a formal pr

Scope In: Switches Out: All other products

Measurement of Success:
Project Output: Implemented and functioning S&OP process (pilot). On-time order delivery, shipment $ vs. Plan

High Level Approach:

Step 1 Establish products to be included in S&OP (pilot phase)
Step 2 Determine Product Families for forecasting and planning
Step 3 Develop or correct Planning BOM's
Step 4 Identify and enable SOP tools (tracking mechanisms for forecast, production, orders, etc. and capacity planning)
Step 5 Determine and document decision making guidelines
Step 6 Establish time fences
Step 7 Define generic units
Step 8 Define stocking strategy
Step 9 Establish SOP meeting format and strategy between Sales/Operations
Step 10 Implement test case and expand to other products

Risks and Accelerations

Risks to Benefits: Acceleration factors:

1 Inadequate top management commitment 1 Leverage best practices already in place at EV Conoflo
Gattis has made 1 trip)
2 Inadequate project planning between sales 2 Read book "Orhestrating Success: Improve Control of t
3 Poor team synergy (non-cooperative 3
4 Inadequate definition of product families, 4
5 Inaccurate product forecasts 5
Risks to Schedule:
1 Inadequate top management commitment
2 Inadequate project planning between sales
& operations
3 Improper education of all parties involved
4
5

99
Who Develops the Charter?

ÎDeployment Managers will start the process of filling

out the Charter, with assistance from:
y Project Sponsor and/or Process Owner
• Detailed process knowledge
• Find / analyze data
• Contribute resources
• Help with estimation
• Buy-in
y Controller / Finance
• Validate financial estimates
• Buy-in
y Black Belt
• Maintains and Updates
100
Problem Statement

Î The problem statement describes the “why” of

undertaking the improvement initiative. The problem
statement should address the following questions:
y What is wrong or not working?
y When and where do the problems occur?
y How extensive is the problem?
y What is the impact “pain” on our customers?
y What is the impact “pain” on our business?
y What is the impact “pain” on our employees?
y Does it make strategic sense to address this
problem?

101
Elements of a Problem Statement

AA Problem
Problem Statement
Statement contains
contains information
information that
that gives
gives specificity
specificity to
to the
the issue.
issue.
After
After reviewing
reviewing the
the data,
data, describe
describe the
the problem
problem in
in the
the terms
terms below.
below.

ÎWhat is occurring/happening?
y Example: Services are delivered late to our customers
ÎWhen did the problem start?
y Example: The problem has developed over the last six
months
ÎWhere is the occurrence?
y Example: Our West Coast customers are primarily affected
(roughly 75% of the total)
ÎExtent of the problem
y Example: 30 orders worth $790,000 in July
102
Building a Problem Statement

A Problem Statement:
ÎContains information that gives specificity to the issue
ÎDescribes the “pain” caused by the problem
ÎIdentifies the issues
What When Where Extent
Late Services Last Six Months To West Coast • 30 orders worth
$790,000 in July
Warranty Issues Last Year Plant XYZ • Warranty costs
equals 4% of
revenue
• 3x higher than
other plants

103
Problem Statement Example 1

Bad Problem Statement:

The Service Delivery process needs to be improved. Facility
XYZ has received numerous customer complaints. XYZ
associates also confirm there is a problem. Improving the
process will increase Customer Satisfaction scores and
Economic Profit.
Good Problem Statement:
The XYZ Facility performed $5.6 million of services in July.
Data collected from customers for the last 6 months indicates
that an average of 56% of West Coast customers experienced
problems but only 9% of others customers experienced
problems. During the month of July, facility XYZ delivered 30
services that were late in the West Coast region. These
services were worth $790,000.
104
Problem Statement Example 2

Bad Problem Statement:

Our customers are angry with us and late in paying
their bill.

Good Problem Statement:

In the last 6-months (when), 20% of our repeat
customers – not first timers – are late (over 60 days)
paying our invoices (what). The current rate of late
payments is up from 10% in 1990 and represents
30% of our outstanding receivables (magnitude). This
negatively affects our operating cash flow (impact or
consequence).
105
Goal Statement

Î A goal statement quantitatively describes the

desired outcome from the project. It includes:
y A metrics or metrics
y Specific targets for those metrics
Î It answers the questions:
y What are our improvement objectives and targets?
y What specific parameters will be measured?
y What are our tangible result deliverables?
Î It also may contain some qualitative objectives, but
these must be secondary to the quantitative
objectives.

106
 Goal Statement Example

Bad Goal Statement:

Install a Peregrine tracking system to improve visibility and
reduce late lease equipment returns.

Good Goal Statement:

Improve on-time return of Unix leased equipment to 98% by
July 31, 2002.

107
Financial Benefits

Includes:
ÎProjected Financial Benefits
y One-Time Benefits (example: sale of equipment made
surplus by the project)
y On-Going Benefits (example: decrease in labor)
ÎFinancial Benefit Assumptions
ÎOther Qualitative Benefits (additional benefits that
are difficult to quantify)
ÎCan also include Expected Expenses:
y One-Time Expenses (example: capital expenditure)
y On-Going Expenses (example: increase in labor)
108
Types of Financial Benefits

ÎRevenue Growth
y Volume/Price/Mix Improvement
y Asset Utilization Enhancement
y Product/Service Generation
ÎCost Reductions
y Purchase Items and Services
y Waste Elimination
y Labor Reduction
• Salary
• Hourly
y Productivity Improvements
ÎWorking Capital Reduction 109
Incremental Financial Analysis
Objective
ÎIsolate the results of an action from the background
activity (the things which would have happened if the
action was not taken).
Practice
ÎEstablish the baseline performance.
y Choose a representative data set.
y Adjust it for any one-time events.
ÎEstablish what will change and the effect(s) that
change will have, relative to the baseline case.
ÎEstimate the financial benefit(s) associated with each
change.
y There’s more than one way to “skin a cat.” 110
Estimation Approaches

Î Bottom-Up
y Identify all individual elements of the total benefit
y Estimate each component’s contribution
y Sum up the pieces
Î Top-Down
y Start with the whole pie
y Exclude items out of scope or not likely to happen
y See how much is left
Î Subjective/Conditional
y When all else fails, gather many views and average
the estimates
111
Bottom-Up Estimates
ÎCreate a statement that summarizes the change and
where/how the financial impact will occur
y Must correspond to the baseline situation
y Can be a “hypothesis statement”
ÎLay out a “Chain of Causality” that describes how
the benefits will be realized
y IF <this action> THEN <this result>
(there may be several steps in a given chain)
y Explicitly list any assumptions
ÎEstimate the financial benefit of each “Chain of
Causality”
y Show your work (formulas, calculations)
ÎCheck for double counted and missing elements
112
Examples:
“Chain of Causality”

Revenue Increase
ÎDecreasing delivery lead times will increase sales.
y Facts:
• Average service delivery lead time is 9 business days
• Sales reps say we lose 4-6 orders each month because we
cannot meet customer requirements of 3 business days
• Order sizes average $10,000 each (YTD numbers)
• Contribution margins on our services average 18% (YTD
numbers)

y Calculation:
• 5 orders/month X $10,000 X 18% margin = $9,000 /
month
What assumptions have been made?
113
Examples:
“Chain of Causality”

Cost Reduction
ÎImproving uptime on the Main Server will reduce
working capital.
y Facts:
• Main Server has a 63% uptime record (YTD)
• Similar servers average > 75% uptime in other facilities
• Average queue waiting for processing is $540,000 (YTD),
80% of which is dependent on Main Server (estimated)

y Calculation:
• ($540,000 X 80%) X 50% reduction = $216,000

What assumptions have been made?

114
Top-Down Estimates
ÎEstablish the total size of the
opportunity/problem within the scope of the
project.
ÎEstimate how much of that can be “solved” by
a successful Lean Six Sigma project.
ÎEstimate the financial impact of the solution.
ÎExample:
y Late service delivery at facility XYZ averages
$450,000 per month
y 40% of this is “engineered” into the process
• $450,000 x 60% addressable x 50% reduction = $135,000
/ month 115
Convergence and Confidence

Î Confidence
y What are the assumptions behind the estimates?
y How comfortable are we with the assumed values? How does this
impact the result?
y How good is the “hard data” we based our calculations on?
y Is the “Chain of Causality” believable?
Î Convergence
y Do we have any independent estimates?
• They must not share any underlying assumptions to be
“independent.”
y How closely do they match?

116
Elements of a Scope Statement

A Scope Statement defines the boundaries of the project.

ÎScope-In
y Areas that will be addressed
y Consider applying the 80/20 rule to narrow the scope addressed
y Example: The project will address services to customers in the
West Coast region from facility XYZ.
ÎScope-Out
y Specific areas that will not be addressed
• Aspects of the problem
• Areas of the business/physical locations
• Related issues that can be addressed later
y Example: The project will not address other customers/regions.
The project will not address suppliers or the sales process.
117
Scoping Guidelines

Î Duration of Project should be 3-5 months.

Î Dependencies on “outside” resources
should be identified (i.e., central IT support,
suppliers, etc.) and mitigation plans
developed.
Î Projects must be complex enough to justify
applying the DMAIC process, a Black Belt,
and the other personnel.
Î Project scope must encompass the location
of the root cause of the problem.

118
 Planned Resources,
Risk and Accelerations,
and Project Plan

3-4 October 2008 zumtobel lighting division ZDL Curtici – lean 6 sigma
Planned Resources (Team Resources)
ÎObjective:
y Insure the team is adequately staffed with sufficient skill sets to
solve the problem.
y Insure time commitments are clearly identified.
ÎDecisions to be made:
y Resource Requirements
• How many team members ?
y Project Duration
• The longer the project the more stress it places on the organization.
Also affects resource constraints and risk.
y Areas of Expertise Needed
• The should have representation from each department affected by the
potential change
y Percent of time required
• Core team members generally need to commit up to 25% of their time
• Extended team members may need to commit up to 10% of their time

120
Risk and Accelerations
ÎCategories of Risk
y Risk to Schedule
• Factors that could cause slippage of the schedule (ex. IT resources
will be critical during the implementation of the solutions)
y Risk to Benefits
• Factors that could negatively impact achievement of planned
benefits (ex. The new process will require a highly skilled resource
with is in high demand)
• Important: Assumptions on which the financial benefits are
calculated are a separate issue, and are located in the Financial
benefits section (ex. The revenue growth assumption assumes that
the broader service category growth continues at 10%)
ÎAccelerations
y Factors that could enable the early completion of the project
(ex. Leverage best practices obtained from previous
implementation of similar process in another department) 121
Project Plan

Î The Project Plan includes a high-level

estimate of the project timeline.
Î Initial schedule dates should only be placed
on key milestones, such as Gate Reviews,
unless more detailed knowledge of the
project workplan is already known.
Î More detailed planning should commence as
the project progresses and knowledge of
approach becomes clearer.
Î Key Milestones become the ‘building blocks’
from which the detailed plan is created.
122
 S.M.A.R.T.
Project Charter Evaluation

ÎOnce you receive the

Specific
project charter, you • Does it address a real business
problem?
should evaluate the
charter to ensure its Measurable
• Are we able to measure the problem,
establish a baseline, and set targets
effectiveness. for improvement?

ÎA methodology for Attainable

• Is the goal achievable? Is the project
evaluation is called completion date realistic?

“SMART.” Relevant
• Does it relate to a business objective?
ÎThis acronym is a
checklist to ensure that Time Bound
• Have we set a date for completion?

the charter is effective

and thorough. 123
Takeaways

ÎThe creation of a Charter is an iterative process, beginning

with a idea, which is further refined through additional work
ÎThe Deployment Manager, in conjunction with the Project
Sponsor/Process Owner, creates the Charter.
ÎThe key elements of the project charter include:
y Problem statement
y Goal Statement
y Financial Benefits
y Planned Resources (Project Team)
y Project Scope
y Risk and Accelerations
y Project Plan

124
 Improvement Process Road Map

Define Measure Analyze Improve Control

Activities
• Identify Problem • Identify Key Input, Process and • Propose Critical X’s • Develop Potential Solutions • Develop SOP’s, Training Plan
• Complete Charter Output Metrics • Prioritize Critical X’s • Develop Evaluation Criteria & & Process Control System
• Develop SIPOC Map • Develop Operational Definitions • Conduct Root Cause Select Best Solutions • Implement Process
• Map Business Process • Develop Data Collection Plan Analysis on Critical X’s • Evaluate Solution for Risk Changes and Controls
• Map Value Stream • Validate Measurement System • Validate Critical X’s • Optimize Solution • Monitor & Stabilize Process
• Gather Voice of the • Collect Baseline Data • Estimate the Impact of • Develop ‘To-Be’ Process Map(s) • Transition Project to Process
Customer & Voice of the • Determine Process Each X on Y and High-Level Implementation Owner
Business Performance/Capability • Quantify the Opportunity Plan • Identify Project Replication
• Develop CCR’s & CBR’s • Validate Business Opportunity • Prioritize Root Causes • Develop Pilot Plan & Pilot Solution Opportunities
• Finalize Project Focus • Calculate Financial Benefits

Tools
• Pareto Charts • SIPOC Map • Pareto Charts • Brainstorming • Control Charts
• Project Selection Tools • Operational Definitions • C&E Matrix • Benchmarking • Standard Operating
• PIP Management Process • Data Collection Plan • C&E/Fishbone Diagrams • Process Improvement Procedures (SOP’s)
• Value Stream Map • Statistical Sampling • Brainstorming Techniques • Training Plan
• Various Financial Analysis • Measurement System Analysis • Detailed ‘As-Is’ Process Maps • Line Balancing • Communication Plan
• Charter Form (MSA), Gage R&R • Basic Statistical Tools • Process Flow Improvement • Implementation Plan
• Stakeholder Analysis • Constraint Identification • SupplyChainAccelerator • Replenishment Pull • Visual Process Control
• Communication Plan • Setup Reduction Analysis • Purchasing and Sales Strategy • Process Control Plans
• SIPOC Map • Generic Pull • Non Value-Added Analysis • Poka-Yoke • Project Commissioning
• High-Level Process Map • Kaizen • Hypothesis Testing • FMEA • Project Replication
• Non-Value Added Analysis • TPM • FMEA • Solution Selection Matrix • Plan-Do-Check-Act Cycle
• VOC and Kano Analysis • Control Charts • Box Plots • ‘To-Be’ Process Maps
• RACI and Quad Charts • Process Capability, Cp & Cpk • Interaction Plots • Piloting and Simulation
• Simple & Multiple Regression
• ANOVA
125
 Dashboards
and Metrics

3-4 October 2008 zumtobel lighting division ZDL Curtici – lean 6 sigma
Learning Objectives

Î Understand the importance of measures as a

basis for analysis and improvement, as well
as in helping processes to become
consistent and stable
Î Develop strategies for leveraging measures
to assist and sustain the improvement
process
Î Understand how measures drive behavior

127
What’s in It for Me?

Î Understanding measures
y Will allow you to ask more effective questions about
historical data, use it better where possible and avoid
using it where it is not appropriate
y Will assist you in setting up new measures that
balance effectiveness, risk and cost
y Will help you to understand the linkages between
different measures at different levels of the
organization and their effect on organizational
behavior

128
Thought Provoking Quotations –
Why Measure?

Î “Perfection of means and confusion of goals

seem to characterize our age.” – Albert Einstein

Î “Our task now is not to fix the blame for the past,
but to fix the course for the future.” – John F.
Kennedy

Î “I often say that when you can measure what you

are speaking about, and express it in numbers,
you know something about it; but when you
cannot express it in numbers, your knowledge is
of a meager and unsatisfactory kind…” – Lord
Kelvin
129
The Measurement Problem

Î Organizations by nature have many

y Elements and functions,
y Diverse activities, and
y Varied resources.
Î There are a variety of opportunities for
y Inefficiency,
y Ineffectiveness,
y Redundancy (overlaps), and
y Gaps in operations.

130
Maximizing Results Via Metrics

To maximize the effectiveness of the organization’s

efforts,
it is necessary to have:
y Clear, high-level goals,
y The means to make those goals meaningful to
persons throughout the organization, and
y A system to review and modify goals at all levels as
the
situation evolves...
y The basis for this system is the metric.

Show
Show me me how
how aa person
person or
or organization
organization is
is measured,
measured,
and
and I’ll
I’ll tell
tell you
you how
how the
the person/organization
person/organization is
is behaving.
behaving.
131
 Dashboards

3-4 October 2008 zumtobel lighting division ZDL Curtici – lean 6 sigma
Dashboards Definition

What do you think of when you hear the word

“dashboard”?

133
 Dashboard – Example
Order Managm em ent Cycle Tim e
On-Time Delivery
45

66% 40
65%
35
64%
63%
OTD (%)

30

62%
25
61% OM Cycle Time
OM CT Goal
60% 20

59% 15 Owner:
58% J. Stubbs
57% 10

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 5

OTD Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Overhead Labor Productivity Unbilled Accounts DSO

(Applications Closed / Payroll
Hours) $170.00 52
$165.00 50

DSO (000s)
65% 48
OLP (%)

60% $160.00
55% 46
50% $155.00
45% 44
$150.00 42
ct
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$145.00

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Labor Productivity
$140.00
Labor Prod Goal
Jan Feb Mar Apr May Jun DSO
Linear (Labor Productivity)

20.5 Gross Revenue

Rolled Throughput Yield
20 5
100%

Millions of Dollars
RTY (%)

19.5 4
50%
19 3 Revenue
0%
2 Revenue Goal
18.5
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S eg
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Noc t
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Jan Feb Mar

0
Rework Costs RTY RTY Goal
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Rework Costs Goal
Dashboard Example

Î What are some observations you have

when you look at the design of the
dashboard example on the previous page?
y
y
y
y
y
y
y
135
Dashboards Definition

ΓDashboards” are a compilation of standardized

performance measures. These measurements are designed
to:
y Facilitate achieving objectives
y Provide feedback
y Enable learning
ÎDashboard measurements should accomplish each of the
above at all levels of the company.
ÎThey should be clearly defined, simple to produce, and
easily understood by users.
ÎDashboards are the tactical tool used by lean
implementations to measure and track project performance.

136
Management of Goals:
Dashboards

Î Dashboards – used to measure and track performance to

meet business goals.
Î Determine key performance indicators in four areas which
cover the past, present and future of the firm:
y Financial – share price, sales, profits, return on
investment.
y External – customer satisfaction, warranty returns,
repeat orders, market share.
y Internal – business process performance, productivity/
efficiency, rework rates, cycle times, employee turnover.
y Learning and growth – staff training, suggestions
made and implemented, percentage of work hours
working in teams.
137
Dashboards Should...

Î Focus the organization and create energy around

increasing return on investment and economic profit
Î Be well integrated, ensuring that every level of the
organization has metrics that support the goals and
strategies of the entire enterprise
Î Drive accountability for achieving goals throughout
the organization
Î Be clearly defined, simple to produce, and easily
understood by users
y “Is my business/division/department/cell performing
well or performing poorly” - at a quick glance!

138
Key Dashboard Design Principles
ÎCost Effective – Many metrics look good on paper,
but are difficult or expensive to implement.
y Evaluate the labor and systems cost required to implement
a metric before selecting it - a metric that is cumbersome
to generate will not last long
• For example, pulling data from the business system into a
database, parsing using queries and uploading to excel - versus
using manual markups on a white board.
y If a metric is difficult to implement, there are usually ways
to simplify the it (and therefore its implementation) - seek
to SIMPLIFY!
ÎDifficult to Manipulate – A metric should be difficult to
manipulate, “game”, or “cook.”
• For example, using actual and standard hours to measure
productivity. Productivity could be improved by simply
increasing the standard hours required to complete an
operation.
139
Key Dashboard Design Principles
ÎConstructive – One purpose of metrics is to drive behavior.
y If a metric doesn’t drive any behavior, it is likely a poor choice - and the
behavior must be constructive.
y Needs to create: (1) focus (2) energy (3) action
ÎComprehensible – Straightforward and easy to understand.
y If not, they are not good for communication or as a vehicle for influencing
behavior.
ÎVisually Consistent – Easy to read at a glance
y Help the audience quickly assess whether performance is getting better
or worse, and where performance stands with respect to the target.
• For example all trend lines should be positive up or all positive down
ÎFrequency of Measurement should be:
y Balanced between the desire for action/learning cycles and level of
effort/ cost
y Typically based on how often the parameter changes, using the shortest
practical interval
y Highest frequency at the lowest level (where the key drivers are)
140
 Project Dashboard – Example

Loans-R-Us Refinancing Project – Key Metrics

On-Time Close Order Management Cycle Time Overhead Labor Productivity (OLP)
(Promise Date vs Close Date) (1st Contact to Close) (Applications Closed/Payroll Hours)

100% 50 65%

OM CT (days)
80% 40
OTC (%)

60%

OLP (%)
60% 30
40% 55%
20
20% 50%
10
0% 0 45%
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Owner: Owner: Owner:
J Crew OTC OTC Goal Linear (OTC) G Gap OMCT OMCT Goal Linear (OMCT) J Crew OLP OLP Goal Linear (OLP)

Unbilled Contracts Rolled Throughput Yield Rework Costs (RWC)

(Apps under contract but not closed) (Appl,Proc,Appr,Close) (due to Non-Client Errors)

$200 25
100%
UBC (000's)

RWC (000's)
$150 80% 20
RTY %)

60% 15
$100
40% 10
$50 5
20%
$- 0% 0

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Owner: Owner: Owner:

G Gap UBC UBC Goal Linear (UBC) A Fitch RTY RTY Goal Linear (RTY) A Fitch RWC RWC Goal Linear (RWC)

141
Dashboard Implementations
ÎKeep it simple, understandable and get it installed
quickly!
y Momentum and energy will be lost the longer it takes to
install a dashboard – don’t “polish the cannonball!”
ÎEstablish clear accountability for individual metrics
y Each metric should have a clear owner and clear timeline
for updates
ÎAnswer the key questions:
y If I excel on this metric will I gain advantage over the
competition?
y If I do not do well on this metric, will something really bad
happen?
ÎCommunicate the metrics to the organization
y It should be very clear who owns the metric, how it is
calculated, and how to impact it 142
Linked Dashboards
ÎBefore you start building dashboards, it is important to
understand the concept of “linked dashboards.”
ÎDashboards can be built at many levels of any organization:
y Enterprise level
y Corporate level
y Site level
y Department level
y Process level
ÎEach measure should be “linked” to a higher and/or lower level
dashboard
ÎRelationship of Measures – clear linkages:
y Enterprise – Summary or result required for success
y Corporate – Focused on key drivers not measured at the site level
y Site – Value drivers that, when executed with excellence, yield the
above enterprise results
y Department/Process – Drive improvements in site results

143
 Linked Dashboards – High Level
Overview

Enterprise Level Product

Development
Corporate
Transportation

Site Level

Plant B Plant A Site/Process Measures

Plant C Plant D Plant E Plant F

Process (Labor, Material, Overhead)

Level
(Order Mgmt,
etc.)

Process/Department Measures
(Cycle Time, Productivity, Rework)
Department
Level
(Order Entry, Scheduling, etc.)

144
 Metrics

3-4 October 2008 zumtobel lighting division ZDL Curtici – lean 6 sigma
Dashboard Metrics (Measurements)

ÎCharacteristics of a good measurement:

y Objective / quantifiable
y Non-conflicting & relevant
y Achievable & verifiable
y Monitored frequently / timely
y Visible
ÎMetrics can be leading or lagging – i.e., they can tell you about
your performance before or after the fact.
y Leading metrics are preferable, since they can stimulate corrective action
before it is too late.
y For example, statistical process control, especially using cusum charts, will
give a warning prior to a process going out of control.
• For example, the weather temperature in Florida orange groves and
concentrate inventory are leading measures, the lagging measure might be
orange juice concentrate prices.
y Unfortunately, it is often difficult to find good leading metrics. Often the most
accurate and easily implemented metrics are lagging metrics. 146
Metrics Considerations
ÎMetrics should ALWAYS include:
y Baseline
y Goal line
y Primary data
y Legend (for multiple data sets)
y Units
ÎIf possible, the following should also be included on the metric:
y Equation for calculated data:
• Example: (productivity = mortgage applications processed/hours paid)]
y Explanation of non-common data or data definition:
• Example: (hurricane Isidore causing a surge of mortgage defaults)
y Bulleted explanations of any non-conforming data points
• Example: (kaizen event improvement)
y Trend lines for measured data

147
Example Metrics

ÎWork-In-Process

ÎExit Rate

ÎProcess Cycle Time (PCT)

ÎFirst Pass Yield (FPY)

ÎRolled Throughput Yield (RTY)

ÎCustomer returns

ÎProductivity

ÎDay Sales Outstanding (DSO) 148

 Standard Metrics:
Work-In-Process (WIP)

ÎProduct that has started a process but Work-In-Process

has not yet completed

ÎCan be paper, parts, product, people,

WIP
information!
Transactional (Process) Cycle Time

Raw Finished
Material Goods
Order Take Order Entry Credit Check Shop Orders
Order
Order Order
Order Order
Order
Order
Order 5 5 each:
each: Order 5 each:
Order 5each:
each: Order
Order 5 each:
5each:
each:
5each: A, B, C 5each: A, B, C
5 5each: A,
A,B,B,CB,
CC 5 5each: A,
A,B,B,CB,
CC
A,A, B, C A,A, B, C
A, B, C A, B, C

Transactional (Process) WIP

149
Standard Metrics:
Exit Rate

ÎThe number of “things” that are Exits

completed through a process in a

given amount of time

Exits
(“things”/time)
ÎCan be based on equivalent units
(standard hours, for instance) to
aggregate.

Starts
Process Exits

150
Standard Metrics:
Process Cycle Time (PCT)

The time from release of a product Process Cycle Time

into a process until it’s completion

PCT
is called Process Cycle Time.
Î Single largest driver of results
Î Cycle time represents summary for entire
process
y Weighted average actual
y Approximation: PCT = WIP / exit rate
y May need to be smoothed

151
Standard Metrics:
First Pass Yield (FPY)

ÎPercent of “things” that pass a First Pass Yield

given process step THE FIRST

FPY
TIME (without internal rework)
ÎCommonly used after inspection,
which can be misleading.
ÎMajor productivity driver (labor and
material)
ÎProduct of key yield measurement
points throughout process
ÎMix can impact measurement
ÎTrue measurement should capture
rework 152
Standard Metrics:
Rolled Throughput Yield (RTY)

Î RTY is the TRUE yield of a process that Rolled Throughput Yield

takes into account rework (the hidden

office).

FPY
Î Simply the multiplication of the
individual first pass yields of each
process step.
Î For example, if a process has 4 steps
and each step has a first time yield of
90%, the RTY would be:
y RTY = .90 X .90 X .90 X .90 = .66 or
66%

153
Standard Metrics:
Rolled Throughput Yield

Order Entry Rolled Throughput Yield

(Order Take * Entry * Credit Check * Schedule * Confirm)
100%
90% Kaizen Event
RTY (%)

80%
70%
60%
50%
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Owner: Randy Johnson
RTY Goal Linear (RTY)

154
Standard Metrics:
Customer Returns

Î Measures quality Customer Returns (Field Defects)

Customer Returns
from customers
perspective
Î Measured in either
dollars or units
Î World Class typically
measures as PPM

155
Standard Metrics:
Productivity

ÎProductivity measured as an index Labor Productivity

OF

ÎFor Transactional:

Productivity Index
DL

y Aggregate: (SG&A) / Revenue$ (COGS-Mt’l)/(Labor$)

y Typically: IDL = “Things” Processed / Hrs

Paid
y Suggest equivalent units (hrs per report,
etc.)
ÎIntent is to avoid productivity swings due
to mix (margin or product variations)
ÎEquivalent units/person (or
EqUnits/payroll)
ÎMay need to be smoothed

156
Standard Metrics:
Day Sales Outstanding (DSO)

Î Measure of the cash outstanding to Day Sales Outstanding

the business, also the (extent of)

credit extended to customers

DSO
Î Day Sales Outstanding typically
equal to accounts receivables
divided by sales per day
Î DSO = Accts Rec.. $ / (Sales $ / day)
Î Period oriented (one year, one
quarter) etc.

157
Standard Operational Metrics:
On-Time Performance (OTP)

Î OTP represents, by line item Shipments & On-Time Performance

On-Time Performance
or by order, the % on-time

Shipments (COGS)
from what was completed and
delivered to the customer
y Due date is typically the
promise date (may be different
than the customer request
date)
y May need to be smoothed
y Also known as On-Time
Delivery (OTD)
158
Takeaways

Î The measures used in any process have to be

aligned with those of other impacted processes and
the overall organization – as well as reinforce the
behavior sought.
Î Use the many dashboard design principles as just
that
Î Leading measures are preferred to Lagging
measures, and Closely Lagging measures to Distant
Lagging ones.
Î Correctly identified and appropriately monitored
measures will enable consistent production and
help in finding and isolating irregularities as they
occur.
159
Closing session

Î Did we reach our objectives?

Î What did you learnt?
Î What is still to learn?
Î How do you intend to do it?
Î What help do you need?

160