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14. The Fundamentals of Six Sigma - Pareto Analysis Rule

The Fundamentals of Six Sigma Pareto Analysis the 80 20 Rule Parrito diagrams are very specialised forms of column graphs. They are used to prioritise problems or opportunities so that the major problems or opportunities can be identified. Parrito diagrams can help Six Sigma teams get a clear picture of where the greatest contribution can be made. History. There is a very interesting story behind the name of the Parrito Diagrams. The word parrito is derived from vilfredo. He was born in Paris after his family had fled from Genoa, Italy, in search of more political freedom. Parito, an economist, made extensive studies about the unequal distribution of wealth and formulated mathematical models to quantify this male distribution. He also wrote a political book on nationalism, which helped lead to fascism in Italy. Dr. Joseph M. Duran, a world-renowned leader in the quality field, was preparing the quality control handbook in the late Nineteenforty s.He needed a short name to apply to the phenomenon of the vital few and the trivial many. He depicted some cumulative curves in this manuscript and put a caption under them. Paredo's principle of unequal distribution. The text makes it clear that Paredo only applied this principle in his studies of income and wealth. Dr. Duran applied this principle as a universal. Thus the diagram could be named a Duran diagram. To complicate matters more, the cumulative curve diagram itself was first used by Mo Lawrence in 19 Four.Briefly stated, the principle suggests that in most situations, a few problem categories, approximately 20%, will present the most opportunity for improvement. Approximately 80% of pureedo diagrams are used to analyse a problem from a new perspective. Focus attention on problems in priority order. Compare data changes during different time periods to provide a basis for the construction of a cumulative line. The fundamentals of six basics of Six Sigma. What is a unit? an item being processed? What is a defect? failure to meet a customer requirement or a performance standard. What is an opportunity? Any product or service characteristics that are measured to a standard What is defective? a unit that has a defect. What are the defects per million opportunities? The number of defects that would arise given a million opportunities DPU, DPO, and DPMO. Defects per unit (DPU DPU equals D dividedby u d equals total number of defects. U equals the total number of units. Defects per opportunity (DPO The total number of defects is equal to DPO divided by U-X-O-D. U equals the total number of units. Oh, that means more opportunities for defects per unit. Defects per million opportunities (or DPMO DPMO equals 1 million times DPO equals 1 million times D divided by U-X-O yield. Different types of fulfilment can impact the quality level we measure in our processes. Yield can be understood as follows classical yield, classic yield, or YC minus units passed divided by units tested in the first pass yield.First-time yield, or y Ft minus units passed divided by units input, for first-time rolled-throughput yield rollthroughput yield YTP minus yield one time yields two times yield three times Performance measures are yield divided by cycle time, which equals one divided by throughput rate. Effective Business Process Management, or BPM, requires an integrated system of metrics in order to achieve the desired Six Sigma business improvements. The system of metrics should provide monitoring and control of each metric at each level of the business, as well as identify the linkages needed to discover the key relationships of Kpibs to Kpovs across the entire system. It should facilitate the collection of data and the building of summary information from detailed parameters—that is, temperatures, voltages, or dimensions—at the process level to customer and manager parameters—that is, DPMOS yields and throughputs at the operations level—to market and financial indicators, that is, profit, growth, and market share at the business level. A closer look at each level reveals the kind of measures and sampling strategies required for an effective Six Sigma process. Business Level Metrics Business-level metrics are typically financial or external and operational or internal, and they are summarised for shareholders and management. Kaplan and Norton introduced the balance scorecard for business level management metrics in the following areas: financial customer perception, internal business processes, and operations company learning and growth. Employee satisfaction is sometimes added as a fifth category. The true purpose of these metrics, when he refers to them as "satellite metrics," is to be the highest level measures in business process management. Business or executive level metrics comprise summaries of detailed operations and financial results reported monthly, quarterly, or annually. Traditional end-of-period cut-off reports are not sufficient for Six Sigma projects. Other standard reporting practices, such as comparing year-to-date totals to the same period last year, are also inadequate. It is important to remember that these metrics are part of a complete system and should be treated with the same statistical process, monitoring, and control techniques as operations data. Operation-level metrics from Six Sigma provide new metrics for managing complex operations. Business effectiveness measures track how well products meet customer needs or the needs of an external audience. We can call them 30-foot metrics, indicating that they should have a longer-term perspective and reflect the total variation that the customer sees. Operational efficiency measures relate to the cost and time required to produce the products. They provide key linkages between detailed process measures and summary business results and help identify important relationships and root causes. The employees and teams who can see the impact of their efforts on the overall business outcome learn and make improvements more effectively and efficiently. Six Sigma project financial measures will be described in more detail later in this section. Process Metrics Detailed process level metrics include data from production, people, and machinery. This is the information that operators and supervisors need to run normal operations. This information is also the subject of much of the measure, analyze, improve, and control phases (or ma) of Six Sigma once the improvement project has been selected and defined. Measurement system considerations and recommendations for effective process performance Metrics for the modern enterprise include the vital versus the trivial. Many large organisations may have hundreds or even thousands of metrics, but no individual should have to focus on more than a few. Overall business-level metrics should be less than 20. Metrics should focus on the past, present, and future. Past history provides context for decisions and builds organisational wisdom. The present data provides realtime process control. Future predictions provide the basis forestimates, improvement plans, and strategies. Metrics should be linked in a systematic way Metrics should be linked in a systematic way to meet the needs of shareholders, customers, and employees. Have Multiple Metrics. The key to an effective system is to have multiple metrics, not just one important one. Success is about balance, not a mindless focus on quality, shareholder value, profit, or any other individual measure. Metrics linked to shareholder needs Metrics should be linked to shareholder needs at the business level. Metrics linked to customer needs Metrics should be linked to customer needs on the operations level. Metrics linked to employee needs Metrics should be linked to employee needs on the process level. Metrics must be consistent. Metrics should be consistent for all levels of the organization. Combination of Multiple Metrics Multiple measures can be combined or aggregated into overall indices of performance at higher levels. Evolving Metrics Metrics should evolve as strategy and situations evolve. Research-Based Metrics Metrics must have targets or goals based on research. Six Sigma improvement methods help establish improved goals. Summary The Fundamentals of Six Sigma In this session, you learned about the following What is the definition of a process? What are "critical to quality characteristics," or "Ctqs"?What is the cost of poor quality, or COPQ? What is the Paradoanalysis or the 80/20 rule, which are basic Six Sigma metrics?

15. Selecting Lean Six Sigma Projects - Introduction to Building a Business Case

Define phase: selecting Lean Six Sigma projects Selecting Lean Six Sigma Projects: Overview and Objectives By the end of this phase, you will learn how to build a business case and project charter. How do we develop project metrics? How do we perform financial evaluations and capture your benefits? Selecting Lean Six Sigma Projects and Building a Business Case and Project Charter A critical element in the establishment of an improvement team is the development and acceptance of a charter. A charter is a written document that defines the team's mission, scope of operation, objectives, time frames, and consequences. Charters can be developed by top management and presented to teams, or teams can create their own charters and present them to top management. Either way, top management's endorsement of a team's charter is a critical factor in giving the team the direction and support it needs to succeed. The charter begins with a purpose statement. This is a one or two-line statement explaining why the team is being formed. The purpose statement should align with and support the organization's vision and mission statements. The charter should also identify the objectives the team is expected to achieve. Objectives should always be stated in measurable terms. The charter should also define the operating scope. This is an opportunity to identify the organisational or operational boundaries within which the team is expected and permitted to operate. Defining boundaries is crucial to avoid energy-draining and time-delaying turf wars. Teams need to know what top management expects of them. The team has the authority, permission, and blessing from the necessary levels of management to operate, conduct research, consider, and implement any changes needed to achieve the expected project results. A charter provides the following advantages eliminates any confusion and defines the subject boundaries identifies areas that should not be addressed identifies the deliverable product provides a basis for team goal setting authorises the team to collect relevant data; provides access to necessary resources approves time for team members to address problems in selecting Lean Six Sigma Projects Building a Business Case and Project Charter A team project charter should contain the following key points: business case or financial impact. The business case is a short summary of the strategic reasons for the project. Problem Statement A problem statement will detail the issue that the team wants to improve. Project Scope or Boundaries The project scope refers to the boundaries of the project. Goal Statement: The goal statement will be created and agreed to by the team and team champion. Team members Descriptions of various Six Sigma roles are included in the description. Milestones deliverables or end products of the project. A set of milestones is used to keep a project on track and help bring a project to completion. Resources Required A calculation of resource requirements is done at the start of the project. Identifying the above details in written form will provide a constant and consistent target for the team. We will be covering each of the above points in detail in the next slides. Business Case The business case is a short summary of the strategic reasons for the project. A business case's general rationale would normally include quality and cost for product delivery with a financial justification. There are four basic activities design of a new product Redesign of an existing product; design of a new process Redesign of an existingprocess A common problem for many projects is the lack of a company impact measurement. For example, if the existing quality defect rate is 5000 defects per million opportunities, the possible justification is a reduction to 250 defects per million opportunities with a cost savings of $1 million. Another example would be a reduction of product cycle time from six weeks to five days for an additional 100 units of production, resulting in an additional $1 million in revenues. A project improvement team should follow typical financial department justification guidelines. The advantages and disadvantages of a project should be researched. Other individuals or departments should be involved if necessary to examine the key costs and resources for a successful project. Projects that do not show a significant financial impact for the company should be stopped or eliminated as soon as possible. Problem Statement A problem statement will detail the issue that the team wants to improve. The problem statement should be crafted to be as descriptive as possible. That is, how long has the problem existed? What measurable item is affected? What is the business impact and what is the performance gap? The problem statement should be neutral to avoid jumping to conclusions. A sample problem statement might be that the ABC Company in 2007 experienced a 25% drop in sales with a 40% drop in net profits. The problem statement should include a reference to a baseline measure for guidance. A baseline measure is the level of performance of the particular metric at the initial start of a project. The collection of good data and process performance measurements will provide a picture of the areas in the company that are in greatest need of improvement. In addition, the measurement system will provide a foundation for other teams to use to pursue other projects. If the baseline measures differ from the assumptions of the team or company, more clarification may be necessary. The project scope refers to the boundaries of the project. It is an attempt to outline the range of the team's activities in the area of product development. The team may decide to limit itself to the launching of a new product at a single manufacturing site. Issues or problems regarding market research, prototype development, or financial investments would be outside the scope of team activities. Each team works very hard in its first meetings to clarify the project's scope. The team champion, the team leader, and the team will all be involved in this process. We will also look at the diagram given. It shows two main types of scoping—the longitudinal scope and the lateral scope. Longitudinal scope refers to a clear articulation of the start and end of the process. It describes the length of the process. For example, let's say we have to work on reducing the average handle time of a call or transaction for a given call center. The longitudinal scope will be referred to as "start," the time when the call centre agent receives the call, and the time when the call is closed. Similarly, the lateral scope refers to the width of the process. For example, the average handle time reduction project for the call centre is only applicable for Pittsburgh, Virginia, and New York locations in the United States and is not applicable in any other location across the country. Goal Statement The goal statement will be created and agreed to by the team and team champion. Hopefully, the goals will be achievable within a 120- to 160-day period. A typical rule of thumb for six-sigma goals is a requirement of a 50% reduction in some initial metric or an improvement of 50%. For example, reduce the collectibles from 120 days to 60 days. Reduce the scrap from 5% to two 5%.Another example of a possible goal is to reduce the average handle time from 17 minutes to less than six minutes in the next three months. Milestones and deliverables A set of stages or milestones is used in any well-managed project to keep the project on track and help bring it to completion. Initial team projects should be at least 120 days long. Only half of the project would be allocated to the define and measure stages. Assigning teams to an initial project with a length of more than 160 days will lower the anticipated success rate for the sample milestones described in the diagram. The defined phase gets over by January 10, the measure phase gets over by January 30, the analysed phase gets over by March 15, and the improve and control phases each take a month to complete. Please note that milestones could vary from project to project. This is just a sample example. Resources Required The resources required for a project must be detailed. Typical resources required for a project could include qualified people, individuals who are subject matter experts, and help in ensuring the right feedback and work is done for the project. Machine Time Machine time is required for certain projects. We need to ensure that machine time is captured appropriately and is used in the project. There are several pieces of equipment used in the project for measurement, execution, and other purposes. This equipment should be captured and articulated in the project. Charter Phones and Faxes Phones and faxes are also required and need to be articulated as per their usage in the project. Machinery: There are several machines that are required during the course of the project. We need to ensure that these machines are captured and their uses articulated in the course of the project. Computer Equipment Computer equipment is an essential component of any project. We need to articulate the software and different possible usages of applications in the project charter, lab or office space, and utilities. We should also list out the usage of different labs, office spaces, and utilities during the course of the projects. The Six Sigma defined phase should provide the following information for the team champion, team leader, and team members: Importance of the Project How important is the project? What if it is not done now? Goals of the Project What are the critical goals and objectives that the project will achieve? Knowledge of the team champion, leader, and members: is the project team comprised of subject matter experts? scope of the project in terms of time and budget resources What is in scope, and what is out of scope? The key process involved What are the different key processes involved in the project? Current baseline Metrics Where are we in terms of the current performance of the project? Customer Requirements What is the customer wanting out of the project? Charter Negotiation The project charter can be created and presented to the team by upper management. However, the project team might be closer to the actual facts and might propose a different mode of attack than envisioned by management. Hence, charter negotiation may be required. Consider the following examples objectives, the final customer, product, or internal process may require a substantial redesign that was not envisioned. Scope the boundaries of the project—it could require expansion. The project may be sufficiently large to require dividing into more manageable pieces. This could require two or three projects in succession by a single team or additional project teams working on a portion of the original project. Boundaries, the project team may discover that additional areas such as engineering, maintenance, finishing, etc. should be included in the solution. Resources for excessive projects are rarely provided. Generally, an oversight of some key resource component is encountered. These needed resources can be internal or external to a company. Management may be called upon to prioritise certain fixed resources outside of the team's control. Project Transition The transition of a project to normal company controls may necessitate either a time extension or additional monitoring on the part of another group. This may or may not require more time. Team Involvement Project Closure of the improvement team could discover that related processes or products need the same type of effort as that which was undertaken for the initial project. In some cases, the project closure date might be moved up because of such diverse events as unexpected success or shifts in customer preference. Obviously, both the project team and upper management are interested in success, not failure. There should be a willingness on the part of both parties to negotiate a number of project details. Generally, it is best to handle charter negotiations at the start of a project. However, all pertinent information may not be apparent at this point. Charter negotiations can be required at any point during the project. Project Management and Benefits The successful black belt candidate should have the ability to manage projects and reach closure, a persistent drive towards meaningful bottom line results, and timely completion of projects. Many businesses have deployed project managers to ensure that complex production processes move through the proper functional elements and make the proper transitions in a timely and cost-effective manner. This form of matrix management has proven very effective in improving the on-time delivery of good products. Six Sigma has adopted similar project management roles for Six Sigma black belts. They serve as project managers for business improvement projects to ensure timely completion and achievement of the improvement objectives. The black belt takes direct responsibility for completing the improvement project, working full-time and coordinating the part-time efforts of cross-functional team members to achieve the desired results. The project management roles and responsibilities of SixSigma Black Belts include the following Lead the cross-functional team and possess excellent interpersonal and meeting facilitationskills Develop and manage a detailed project plan, schedule, and lead team meetings sustain team motivation and stability communicate the benefits of the project to all associated stakeholders Track and report milestones and tasks interface between financial and information management. The following definitions are also presented for consideration: project management is concerned with doing things right; maximising business benefits is concerned with doing the right things. Case and project charter projects need charters, plans, and boundaries. A project may be selected from a broad range of areas, including improved process capabilities, customer complaint reduction, reduction of internal defects, and supplier-related improvements Lean manufacturing principles improved workflows Administrative or service improvements Cycle time reductions Market share growth The actual project should be consistent with company strategies for survival and/or growth. The project will be rather specific. Examples include reducing scrap costs in the finishing department for closure defects by 20% by May 2002 and improving market share for lefthanded widgets by 10% for the 2002 fiscal year. One manufacturer of low-volume, high-value products reported improvements in on-time delivery from less than 25% to 100% when project management was deployed to facilitate the complex production process. Six Sigma efforts show similar results when the blackbelt serves as a full-time improvement project manager, coordinating the efforts of part-time team members and keeping Six Sigma projects on schedule.

16. Selecting Lean Six Sigma Projects - Building a Business Case

Project Plan Elements A project is a series of activities and tasks with a specified objective, starting and ending dates, and necessary resources. Resources consumed by the project include time, money, people, and equipment. Project management includes project planning and implementation to achieve the specified goals and objectives at the desired performance or technology level within the time and cost constraints while utilising the allocated resources. The stages of project management are planning, deciding what to do, scheduling, and deciding when to do it Controlling and ensuring that the desired results are obtained Key project management elements include identifying schedule time limits Allocation of functional responsibilities establishing continuous reporting methods; selecting applicable tradeoff methodologies Measuring accomplishments againstplans Identifying problems early and applying corrective action to problems knowing when objectives will be met or exceeded and improving capabilities for futureprojects work Breakdown Structure The Work Breakdown Structure Or WBS. is a detailed plan that expands the projector's statement of work into a detailed listing of activities required to complete the project. The project team leader is usually responsible for completion of the work breakdown structure, including the assignment of responsibilities for each task to individuals or team groups. Each project task is subdivided into smaller activities, and then elements, until each element is assigned to a single identifiable individual or group. Another way to say this is that you take a long journey one step at a time. Each activity is assigned a duration along with the interrelationships between activities. If one activity must be completed before another can begin, this is called a predecessor event. After the material, equipment, and personnel needs are established for each activity, the project network can be scheduled. The schedule is a balance between time constraints, resource constraints, and costs. If the time constraints are fixed, such as a set deadline, then the resource constraints must be flexible to accommodate variations in the project. Time delays during the project require offsetting increases in resources and costs to maintain a set deadline. One example of a time-constrained project is the construction and delivery of a new product. These projects have fixed completion dates, often with penalties for each day they are late. The contract is often based on the fact that the company plans to meet the deadline date and is willing to risk the losses if the project is late. Time-constraint projects are assumed to have unlimited resources. In a practical sense, this means that resources must be acquired until they reach a level that will ensure on-time project completion. Most projects have relatively fixed levels of resources, including manpower and equipment. In resource-constrained projects, the objective is to meet the project duration requirements without exceeding the resource limits. If these resources are shared within an organisation, resource scheduling and coordination between projects become vital for those resources. With time conflicts, it may become necessary to schedule planned parallel activities as sequential tasks, using existing slack time and possibly delaying the project completion date. Project Documentation The initial project documentation is the project proposal. The proposal is usually in response to meeting an improvement objective. The proposal should include the objectives, project plan, and budget. Approval of the project is management's indication of support for the project objectives and commitment to provide funding and resources during implementation of the project. Status reports are the vehicle for communicating with management or the customer on the progress and health of the project. Project Review The project review is a formal and documented critique conducted by a committee of qualified company personnel. The project review extends over all phases of development from inception to completion. The review process is established by a management policy or a customer specification, or both. A project review considers all of the important factors in the creation of a mature product design. Some of the fundamental review topics include the adequacy of personnel, time, equipment, and money. The project's effectiveness is determined by internal and external information, the effectiveness and reliability of corrective actions, and the true quality level of the delivered product and/or service. The outcomes of project reviews will be archived alongside other project documentation for future reference. Measurement of Project Activity During the planning stage of project management, the monitoring and measuring requirements should be defined. In most cases, upper management requires scheduled briefing sessions during the project. These sessions range in depth from an overview of the project milestones to comprehensive reports. During the planning stage of project management, the monitoring and measuring requirements should be defined. In most cases, upper management requires scheduled briefing sessions during the project. These sessions range in depth from an overview of the project milestones to comprehensive reports. The project monitoring plan should address the following areas What is being monitored? The purpose of the monitoring timing or frequency ofreporting method of reporting that is written reports. Verbal summaries or forms used procedure forindicating a need for assistance criteria forreporting of unusual events or urgent informationthe channel for feedback that is. The feedback loop defines the methods for monitoring and adjusting the process, as well as who and how the information issents assignment of feedback loop responsibilities and actions to be taken when performance differs from requirements. If results are different than desired, planning for feedback is analogous to designing an automatic control system. The success or failure of a project is measured in the following dimensions: the specified goals and objectives are achieved within the time deadlines and within or below cost constraints utilising the allocated resources. Well-executed project plans meet all of the above criteria. As project complexity, project duration, or innovative technology increase, the more likely the project will not meet the desired time target. Crash programmes to return a project to the desired time schedule are done at the expense of higher costs and resource usage. It is possible for a project to be considered a success even when it is late, overbudget, or does not meet the stated objectives. An example of this type of success is when the project accomplishes a significant feat. Nearly every project encounters unanticipated events or problems,but this is not an acceptable excuse forfailure to meet the performance standards. The skillful project leader will manage the resources to resolve the issues and maintain the project schedule and budgets. Performance is measured on results, not effort. The project timeline is the most visible yardstick for measuring project activities. The unit of measurement is time in minutes, hours, days, weeks, months, or years, which is readily understood by all participants on a project. The overall project has definite starting and ending dates, both planned and achieved. From a quality viewpoint, both early and late projects have the opportunity for poor quality compared to the project's schedule. For projects ahead of schedule, the sceptical question is asked: what corners were cut for projects behind schedule? An appropriate question is what is not being done properly in an effort to regain lost time. Methods for planning, monitoring, and controlling projects range from manual techniques such as using plain paper, graph paper, grease boards, and coloured magnetic markers to computer software. Advantages of manual project management methods include ease of use, low cost, and their best use for monitoring schedules and timing of events. A hands-on feel for the status of the project, easily customised for the specific project needs, and minimal training requirements Advantages of computer or automated project management methods includeable to model what if scenarios able to showthe impact of alternate options can present information ina variety of formats and details. Schedules are automatically calculated. Variances from plans are known almost in real time. Project status reports are easier to generate. People at different locations can input data and share the same information. Projects can be easily summarized. Some data collection activities can be automated. Whichever method is used by the project team, keep in mind that the method is only a tool to organise and summarise the data, and the completion of the project is the objective, not the status boards or bar charts. Milestones Reporting milestones are significant points in the project that are planned to be completed at specific points in time. Intermediate milestones serve the dual purpose of refocusing priorities on long-term goals while also providing status updates. Milestones typically occur at points where they act as a gate for a go-or-nogo decision to continue the project. The project team leader would be expected to make a presentation to management at each major milestone outlining the status of the project relative to the milestone, any potential roadblocks for the completion of the project, and plans for dealing with the roadblocks would be presented.The date and time for the milestone and the milestone activity are set annually in the project planning phase. Once set and approved, the milestones are not normally subject to change or negotiation. If the project is late on meeting a milestone, this fact will reach the attention of upper management quite quickly. Project Report The final report is the report card on project performance for completion of objectives, comparison of actual benefits and costs with budgets, and measures of major activity. Completion dates versus milestones The next step in project closure is the post-mortem analysis. An analysis of what went well and what went wrong is used as a learning tool for future projects. The intent is to avoid making the same mistakes and to benefit from effective processes. Document Archiving The final project stage is document archiving. This includes test data, traceability of materials, key process variables, and reports generated during the project. The documents must be complete and organized. Storage requirements include protection from damage, including fire, water, and other deterioration security of access and retrievability within a reasonable period, for example, three days adequate markings and indication of storage location consideration of duplicate copies at different sites use of a medium with a life longer than the record retention period Project planning tools include developing and analysing the project timeline, determining required resources, and estimating costs. Common techniques for evaluating project timelines include PERT charts, Gantt charts, and the critical path method, or CPM. The work breakdown structure, or WBS, helps identify detailed activities for the plan and enables estimation of project costs. Network Planning Rules Common applications of network planning include the programme evaluation and review technique, the critical path method (CPM), and Gantt charts. The following network rules are widely followed: Before an activity may begin, all activities preceding it must be completed. Arrows imply logical precedents. Only the length and compass direction of the arrows have any meaning. Any two events must be directly connected by only one activity. Event numbers must be unique. The network must start at a single event and end at a single event. programme evaluation and review technique, or PERT. The programme evaluation and review technique, as well as the individual requirements, are all unique. Project tasks must be sequenced in the network to allow determination of the critical path. Time estimates must be made for each activity in the network and stated as three values, optimistic, most likely, and pessimistic. Elapsed Times: The critical path and slacktimes for the project are calculated. The critical path is the sequence of tasks that requires the greatest amount of time. The slack time, or S, for an event is the latest date an event can occur or can be finished without extending the project, or TL minus the earliest date an event can occur, te. For events on a critical path, TL equals Te and S equals O. Advantages of using PERT include the planning required to identify the task information for the network and the critical path. Analysis can identify interrelationships between tasks and problem areas. The probability of achieving the project deadlines can be determined, and therefore, improved changes in the project can be evaluated to determine their effects. A large amount of project data can be organised and presented in a diagram for use in decisionmaking. Pert can be used on unique, nonrepetitive projects. One of the disadvantages of using PERS is that it increases implementation problems. The complexity of Pert increases implementation problems. More data is required as network inputs. Critical Path Method, or CPM The Critical Path Method (CPM) is very similar to PERT except that PERT is event-oriented, while CPM is activity oriented.Unique features of CPM include the emphasis on activities. The time and cost factors for each activity are considered. Only activities on the critical path are contemplated. Activities with the lowest crash cost per increment of time savings are selected first. As an activity crashes, it is possible for a new critical path to develop. For each activity, there is a normal cost and time required for completion. To crash an activity, the duration is reduced while costs increase. "Crash" in this sense means to apply more resources to complete the activity in a shorter time. The incremental cost per time saved to crash each activity on the critical path is calculated to complete the project in a shorter period. The activity with the lowest incremental costper time saved is crashed first. The critical path is recalculated. If more project duration reduction is required, the next least expensive activity is cancelled. This process is repeated until the project can be completed within the time requirements. Gantt charts or bar charts named after Henry Gantt display activities or events as a function of time or cost. Each activity is shown as a horizontal bar with ends positioned at the starting and ending dates for the activity. Advantages of Gantt charts include the fact that they are easy to understand. Each bar represents a single activity, or T. It is simple to change the chart. The chart can be constructed with minimal data. The programme task progress versus date is displayed. Disadvantages of Gantt charts include theydo not show interdependencies of activities. The effects of an early or late start of an activity are not shown. There is no means to indicate the variation in expected time to complete an activity. The details of an activity are not indicated. There is little predictive value to this presentation of data. The bar charts indicate only an ambiguous description of how the project as a system reacts to change. The network relationship between activities, which is indicated in PERT and CPM charts, is not shown in the Gantt chart.

17. Selecting Lean Six Sigma Projects - Building a Business Case and Project Charter

Project measures. It should be noted that key project measurements are also difficult to determine until the project selection and charter processes are complete. A careful selection of project measures ensures the overall success of the Six Sigma project. Since most Six Sigma projects deal with time and money issues, most project measures will also be about time and money or will be closely related to them. Project measures provide the data and information needed to analyze, evaluate, and improve the business process as well as manage and evaluate the impact of the Six Sigma project. Project measures for both cost and revenue factors must be included. After a detailed list of project activities has been created along with the resource requirements and activity durations, the project budget is determined during the project. Actual costs are collected and used as inputs to the revised estimated project costs. The team leader or project manager compares the revised estimated costs with the budgeted costs to monitor progress. The project budget must be reasonable, attainable, and based on estimates of the tasks to be accomplished. Revenue factors included in the budget and analyses are income from additional sales generated as a result of improved product cost, quality, features, and availability to the customer, reduced losses for scrap customer returns, and warranty claims. cost of poor quality, or COPQ—low throughput and poor time to market Cost factors included in the budget are manpower and labour costs, materials and equipment costs, rentals, leases, etc. Subcontracted work or fees, overhead or consulting charges, reserve or contingency funds Business level measures will likely be identified and provided by the executive steering committee as part of the project selection process. Detailed operations and process-level measures should be chosen to support the business-level measures used. The timing of the revenues and costs must also be identified. A project can have a predicted net profit but fail because funds were not available in the time frame needed. Large corporations manage cash flows on a daily basis. The precision and detail of the project planning phase will have a major impact on the accuracy of the budget. The costs associated with each project task are estimated on the basis of quotes, historical information, standard rates, or similar activities previously performed. These costs are summarised to give the cost estimates for the project. The budget becomes the measurement standard for project costs. Some organisations use a budget that, once approved, is fixed for the duration of the project. Another method is to update the budget to adjust for deviations from the plan. Project Charter Measured estimates of project revenues and costs are described by four types of measurement: budget forecast, actual, and variants of the approved written plan of the total costs and cash inflows expressed in dollar amounts for the project. The plan includes timing of the revenue and costs and a benefit-cost analysis forecast of the predicted total revenues and costs, adjusted to include actual information at the point the project is completed. Actual revenues and costs that have occurred and for which the amounts are known instead of estimated variants are the difference between the budgeted and actual revenues and costs. A positive variance denotes a favourable deviation, and a negative variance denotes an unfavourable deviation. During project implementation, the actual cash flows are documented by the accounting department and the information is provided to the team leader or project manager so that adjustments and decisions can be made. A favourable cost variance may be due to good execution or may be the result of incomplete work or material shortages. Project Charter Project Decision Analysis In addition to a benefit-cost analysis for a project, a decision to proceed must also include an evaluation of the risks associated with the project. To manage project risks, one should first identify and assess all potential risk areas. Risk areas include business risks, technology changes, competitor actions, material shortages, health and safety issues, and environmental issues. Insurable risks include property damage, indirect consequential loss, legal liability, and personnel injury. After the risk areas are identified, each is assigned a probability of occurrence and the consequence of the risk. The project risk factor is then the sum of the products of the probability of occurrence and the consequence of risk. The project risk factor equals the sum of the probability of occurrence times the consequence of Risk factors for several projects can be compared if alternative projects are being considered. Projects with lower risk factors are chosen in preference to projects with higher risk factors. Project Charter Risk Factors: When there is a portfolio of project opportunities and limited resources, as in the real world, management must make decisions to approve, postpone, or reject project proposals. These decisions are based on the project benefit-cost analysis and the evaluation of the risks. The decision maker may also make project approval decisions based on the track record of the project team leader and on intuition or gut feel for the nonfinancial benefits of the project and the likelihood of success. Regardless of the methods used for evaluating the projects, Roa, ROI, NPV, IRR, payback period, risk factor, etc. Each project will be compared against the other projects in the portfolio and against the criteria amounts established by the organisation for that measure. For example, the organisation may require a minimum ROI of 8% or a minimum NPV of $10,000 for the project to be considered. Typically, the project with the highest financial benefit, shortest payback period, or lowest risk factor is chosen for implementation first. Selecting Lean Six Sigma Projects developing project metrics, key project measurements are also difficult to determine until the project selection and charter processes are complete. A careful selection of project measures ensures the overall success of the Six Sigma project. Since most Six Sigma projects deal with time and money issues, most project measures will also be about time and money or will be closely related to them. Project measures provide the data and information needed to analyze, evaluate, and improve the business process as well as manage and evaluate the impact of the six sigma project. Project measures for both cost and revenue factors must be included after a detailed list of project activities has been created along with resource requirements and activity durations. The project budget is determined during the project. Actual costs are collected and used as inputs to the revised estimated project costs. The team leader or project manager compares the revised estimated costs with the budgeted costs to monitor progress. The project budget must be reasonable, attainable, and based on estimates of the tasks to be accomplished. Revenue factors included in the budget and analyses are income from additional sales generated as a result of improved product cost, quality, features, and availability to the customer; reduced losses for scrap customer returns and warranty claims; the cost of poor quality, or cop Q; low throughput; and poor time to market. Cost factors included in the budget are manpower and labour costs, materials and equipment costs, rentals, leases, etc. Subcontracted work or fees, overhead or consulting charges, reserve or contingency funds Business level measures will likely be identified and provided by the executive steering committee as part of the project selection process. Detailed operations and process-level measures should be chosen to support the business-level measures used. Project Charter: Project Measures Estimates of project revenues and costs are described by four types of measurement: budget forecast, actual, and variance from the approved written plan of the total costs and cash inflows expressed in dollar amounts for the project. The plan includes the timing of the revenue and costs and a benefit-cost analysis forecast of the predicted total revenues and costs, adjusting to include actual information at the point the project is completed, actual revenues and costs that have occurred and for which the amounts are known instead of estimated variants. the difference between the budgeted and actual revenues and costs. A positive variance denotes a favourable deviation, and a negative variance denotes an unfavourable deviation. During project implementation, the actual cash flows are documented by the accounting department and the information is provided to the team leader or project manager so that adjustments and decisions can be made. A favourable cost of variance may be due to good execution or may be the result of incomplete work or material shortages. Project Decision Analysis In addition to a benefit-cost analysis for a project, a decision-making process must also include an evaluation of the risks associated with the project. To manage project risks, one should first identify and assess all potential risk areas. Risk areas include business risks, technology changes, competitor actions, material shortages, health and safety issues, and environmental issues. Insurable risks include property damage, indirect consequential loss, legal liability, and personnel injury. After the risk areas are identified, each is assigned a probability of occurrence and the consequence of the risk. The project risk factor is then the sum of the products of the probability of occurrence and the consequence of risk. The project risk factor equals the sum of the probability of occurrence times the consequence of the risk. Risk factors for several projects can be compared if alternative projects are being considered. Projects with lower risk factors are chosen in preference to projects with higher risk factors. Selecting Lean Six Sigma projects: financial evaluation and benefits capture Six Sigma is about making money. It is about profitability. Although improved quality and efficiency are immediate byproducts, the financial benefits of Six Sigma products are the measurements that create a link between philosophy and action. Financial benefits and associated risks are the factors used to evaluate, prioritize, select, and track all Six Sigma projects. Cost-benefit analysis A project's cost-benefit analysis is a comparison to determine if the project will be or was worthwhile. The analysis is normally performed prior to implementation of project plans and is based on time-weighted estimates of costs and predicted values of benefits. The cost-benefit analysis is used as a management tool to determine if approval should be given for the project. Go ahead. The actual data is analysed from an accounting perspective after the project is completed to quantify the financial impact of the project. The sequence for performing a cost-benefit analysis is to identify the project benefits and express the benefits in dollar amounts, timing, and duration. Identify the project cost factors including materials, labor, and resources. Estimate the cost factors in terms of dollar amounts and expenditure periods. Calculate the net project gain or loss Decide if the project should be implemented prior to starting or if it would be beneficial after completion. If the project is not beneficial using this analysis, but it is management's desire to implement the project, what changes in benefits and costs are possible to improve the cost-benefit calculation? Return on Assets Return on assets is equal to net income divided by total assets, where the net income for a project is the expected earnings and total assets are the value of the assets applied to the project. Additionally, a calculation of the return on investments is widely used. Return on investment is equal to net income divided by investments, where net income is the expected earnings for a project and investment is the value of the investment in the project. Net present value The net present value is equal to the summation of t, which is equal to zero to N CFT divided by one plus r to the power of t. where t is the time period and r is the period cost of capital for the organization. If an annual interest rate is used, it is also denoted as I, and CF is the cash flow for the time period t. Note that CF cash flow in period zero is also denoted as the initial investment payback period method. The payback period is the length of time necessary for the net cash benefits or inflows to equal the net costs or outflows. The payback method generally ignores the time value of money. Although the calculations can be done taking this into account, the main advantage of the payback method is the simplicity of the calculation. It is also useful for comparing projects on the basis of a quick return on investment. A disadvantage is that cash benefits and costs beyond the payback period are not included in the calculations. Organizations using the payback period method will set cutoff criteria such as one, one, five, or two years maximum for approval of projects. Uncertainty in the future status and effects of projects or rapidly changing markets and technology tend to reduce the maximum payback period accepted for project approval. If the calculated payback period is less than the organization's maximum payback period, then the project will be approved. Thus, payback period is equal to initial and incrementalinvestment divided by annual or monthly cash flow. Summary Selecting Lean Six Sigma Projects In this session, you learned about the following How do we build a business case and project charter? How do we develop project metrics? How do we perform financial evaluation and capture benefits?

18. Lean Enterprise - Overview and Objectives

Define the Phase Lean Enterprise Section Overview andObjectives By the end of this phase, you will learn what lean is, what its history is, and how lean and Six Sigma work together. What are the seven elements of waste? Define Phase Lean Enterprise understanding Lean Lean considers customer inputs and conducts a war on waste. In layman's language, lean is the elimination of waste. The cornerstones of a lean strategy are tools such as Value Stream Mapping, or VSM. Value stream mapping identifies value-added, nonvalue-added, and essential nonvalue-added activities. Non-value-added activities are eliminated during the process. Workplace Organization Five S five S isa structured way of workplace organization. Five S helps keep the workplace spick and span and thus helps in error-free production. Total Productive Maintenance (TPM) or "total productive maintenance" helps ensure the proactive maintenance of the plant and machinery. Kanban or pole systems Kanban is nothing but signalling cards. Kanban systems help with using cards for raw material replenishment. Kaizen Kaizen is a small improvement in a process that helps improve the process or the function. Assume that two different processes are using the same equipment. In this case, when process one is complete, the equipment should take the least time to set up for the next process. Teamwork Teamwork is the common and most important way of establishing and executing a project. Error Proofing error proofing is alsoknown as mistake proofing or poke. It helps prevent inadvertent errors from occurring. Problem Solving problem solving is a toolcommonly used to solve minor problems withthe help of process experts. Cellular Manufacturing Cellular Manufacturing ensures that production is done in cells and that it is neatly tied for speed and agility. One-piece flow: one-piece flow is primarily used to avoid significant wait times in any given process. One-piece flow helps remove unnecessary bottlenecks caused by waiting within the process. Understanding Lean The lean enterprise examines the entire production system, as depicted in the diagram. The complete production system starts with a supply chain and concurrently requires raw materials. These get processed and followed. This is assembly. Post-assembly, the products move to sales outlets and then, finally, to the customer. A true lean system is dependent on the demand of its customers and the reliability of its suppliers. A lean manufacturing system cannot reach its full potential without taking into consideration the complete system in its planning. As shown in the diagram, the most fundamental form of lean techniques necessitates the systematic identification and elimination of waste. Some of the concepts used for lean techniques are continuous flow and customer pull. The benefits of lean production systems include lower production costs and fewer staff or personnel. quicker product delivery and shorter cycle time higher quality, higher profitability, and greater system flexibility. The benefits that can be achieved by constantly eliminating waste are inevitable. Generally, the five areas that drive a lean producer are cost, quality, delivery, safety, and morale. Mass production was first recognised in the 20th century. Similarly, lean production is now being recognised in the 21st century. Japanese terms are used in defining lean principles to convey broad concepts such as poke, jiroka, and kanban. However, once they are properly explained, these terms can be more than just small mistake proofing steps, polka-dot automations with human interventions, judoka, and those little cards that help control product moves, kanban. If these terms are not used effectively, it may have a negative effect on different cultures across the globe. Hence, one should carefully choose the training methods and terms for conveying Lean tools and methods. Lean Techniques and Service Manufacturing and Production Sector Waste can be identified in the manufacturing and production industry sectors, and lean techniques are applicable in these sectors. The service sector uses lean techniques applicable in a service-oriented industry or office environment. Every system contains waste. Whether a product is being produced, a material is being processed, or a service is being provided, we will always find elements that could be termed as waste. The techniques for analysing systems, identifying and reducing waste, and focusing on the customer are applicable in any system and in any industry. Depending on various factors such as industry, internal culture, and internal business considerations, the lean implementation will be different. Lean tools and techniques and their usage are highly dependent on whether a company is a discrete manufacturer, a continuous producer, or a provider of a service. Lean Glossary In order to introduce process flowmetrics, the following definitions are useful and on-board. A visual control device in a production area is typically a lit overhead display giving the current status of the production system and alerting employees to emerging problems. Continuous flow manufacturing a process whereby material moves one piece at a time at a rate determined by the needs of the customer in a smooth and uninterrupted sequence without WIP, which is work in progress. Cycle time: the time required to complete one cycle of an operation. Inventory tracks the number of times inventory is consumed in a given period just in time.Or JIT, a system for producing and delivering the right items at the right time in the right amounts, is approximated when upstream activities occur minutes or seconds before downstream activities. So single-piece flow is possible. The smoothing or balancing of the workload in all stages of a process is referred to as level loading. a Japanese term meaning any activity that consumes resources but creates no value. non-value-added activity: any activity that does not add value to the product or service. Perfection is the complete elimination of chaos so that all activities along a value stream create value. Point-of-use inventory is inventory that is delivered directly to the location where it will be consumed. Use a mistake proofing device or procedure to prevent or detect an error that has a negative impact on the product and wastes correction time. Process Flow A diagram of the flow or sequence of events in a process shows a system of cascading production and delivery instructions from downstream to upstream activities in which nothing is produced by the upstream supplier until the downstream customer indicates a need. This is the opposite of "push queue," which is the time a product spends awaiting the next processing step. single-minute die or smed exchange a series of techniques for rapid changeovers of production machinery. The long-term objective is zero setup time to optimise continuous flow. Ten minutes is a common initial objective. Single-piece flow a situation in which one complete product proceeds through various operations like design, ordertaking, and production without interruptions, backflows, or scrap. This contrasts with batch and queue arrangements. A work cell visual control that depicts all work activities It provides assistance in the cross-training of team members. The "small lot" principle effectively reduces lot size until the optimum of one piece is realized. Standard Work a precise description of each work activity. Specifying cycle time, tag time, the work sequence of specific tasks, and the minimum inventory of parts needed to conduct the activity Take the available production time divided by the rate of customer demand. For example, if customers want 480 widgets per day and the factory operates 960 minutes per day, the TAC time is two minutes. Value Stream: The specific activities required to design and provide a specific product from concept to launch, from order to delivery. Visual Control The placement in plain view of all the tools, parts, production activities, and indicators of production system performance is such that the status of the system can be understood easily and quickly. All overproduction ahead of demand should be discarded while waiting for the next processing step. Unnecessary transport of materials, excessive inventories, unnecessary movements by employees, and production of defective parts The arrangement of different types of machines or business processes performing different operations in a tight sequence, typically in a U or L shape to allow single-pieceflow and flexible deployment of human effort. Work Center One process station in a working solean Thinking WMC introduced the term "lean production" to the Western world in 1990 with the publication of The Machine That Changed the World. The book describes the basis of lean production or lean manufacturing as practised by the best companies in the world. In 1996, Wilmack wrote, "Lean: Banish Waste and Create Wealth in Your Corporation." This book describes the concepts of converting an ASQ production plan into a lean organization. Lomac in 1996 offered five guiding principles that specify value by product. Identify the value stream for each product or value. Make value flow Let the customer pull value from the producer. Pursue perfection.

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