c

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Qultn n Pmcncr:
An Applicationof Six Sigmato
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Qumrn KARLEECompany
andLos ReduceMedicalErrors
AlamosNational
Bank Qumnn Pmcrtcg:Ford'sDriveto Six Sigma
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Sx Srcrraanr Spnvrcesarvp Svan OncaNrzarroNs The PIVOTlnitiativeat MidwestBank,
Sx Slcuaawo LSANPnooucrroN Part2
LSANSx Srcveanvo Senvrcrs

)i* Stg-" has evolved from a simple quality metric to an overall strategy to accel-
erate improvements and achieve unprecedentedperformancelevelp by focusing on
characteristicsthat are critical to customersand idintifying and elimina'ting causfs ol
errors or defectsin processes.'The Six Sigma approach aims to reduce defeit ler-e,=;:
gdy few parts'per million for an organizdtion's key products and processes.
"
Accomplishing such a d.aunting task requires the effective implementation of statis-
tical principles and various tools for diagnosing quality problems and facilitating
improvement.
- In chapters 3 through 9 we introduced six sigma as a quality management
framework, discussedsome of the basic principles of six sigmais they relatelo cus-
tomers, leadership and strategc planning, human resourcis, process managemen!
and measurement, and addressed,somekey issues for succeisful implemeirtation.
Beginning with this chapte4 we focus on the technical, rather than the managerial,
issuesassociatedwith Six S_rgma, and present a wide variety of tools and techriiques
for improving products and processes.In this chapter we iniegrate the philosophy of
-Si*
Six Sigma introduced in earlier chapters by discussing thJunderpinnings'of
sigma and its methodology. In the remaining chapters br tne book, we deicribe in
detail the key tools for quality improvemmt that support six sigma efforts.

479
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 Principlesof Six Sigma
Pnonus
Qunun
AND
Colrpnlv
|(ARLEE Blttx
LosAultosNmonnt
KARLEE Company is a contractmanufacturer of
precision sheetmetal and machined components
ior the telecommunicationS,semiconductor,and
medical equipment industries. It provides a fuIl
range of manufacturing services from initial
component design to assembled, integrated
products. Located in Garland, Texas,KARLEE's
550 team members have met or exceededsales
growth goals every year since 1994,while con'
tinuing to improve customer satisfaction and
operational performance. Serving four major
customers, KARLEE's customer focus is exem-
plified by constant, scheduled communications.
Each primary customer is assigr:teda three-
peffion customer service team to provide
ongoing and proactive support. KARLEE.lead-
ership and team members actively support
the community. Activities include tutoring at a
Iocal elementary school, coaching a high school
team for a national robotics competition, and
adopting needy families in the Garland commu-
nity. To improve the work environment and pro-
duction processes,KARLEE usesmanufacturing
cells, consisting of state-of-the-art computer
numerical control equipment, machining cen-
ters, and robotic loading systemsas well as con-
cepts,such as lean manufacturing principles and
statistical process control, which often are not
used by smaller companies.Continued mastery
of these techniques has helped the comparty to
improve efficiency and productivity and, as a
result, benefit customers by reducing delivery
times and controlling costs. In 2000, KARLEE
went from lead-time assembliesof two to three
weeks to quick turn assembliesof one to two
days. Theseincreasedtums remained consistent
in the presenceof salesgrowth of 49 percent for'
theseproducts.
481"
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l0RL[Efoanxr
llrroxrLSrrr
l-osAunos
Los Alamos National Bank (LANB) is an inde-
pendent community bank that provides a full
range of financial servicesto the consumer,com-
mercial,'and govemment markets in northern
and central New Medco. LANB has 767
employees and locations in Los Alamos, White
Roik, and Santa Fe, and is the primary financial
institution for 66 percent of Los Alamos County
residents. It is the largest Guaranteed Rural
Housing lending institution in New Mexico and
the leading originator of Famrie Mae loans in
northem New Mexico. Becauseof streamlined
procedures,LANB appro\reshome equity loans
in two days or fewer while its competitors take
from one to six weeks.The Cerro Grande fires of
May 2000 truly tested the culture that LANB had
built. It was a catastrophethat forced the evacua-
tion of Los Alamos, bumed nearly 50,000acres
and destroyedmore than 280 homes. Overnight,
bank employeesmoved their entire operation to
the SantaFe branch and provided unintermpted
service to their customers. Not surprisinglT
LANB has a high level of customerloyalty. One-
third of bank customers have five or more
banking relationships with the bank, an industry
benchmark at more than five times the national
average. In one recent survey, 80 percent of the
bank's customerssaid they wete "very satisfied"
with the service they received. Returns on key
financial indicators exceedlocal competitors and
the national average. Employee satisfaction
results have been well above those of banks its
size in five of eight key indicators, and have
exceededthe norm forbanks of its sizein six of 12
dimensions important to its mission and cultuie.
Source.'MalcolmBaldrige National Ouality Award Winners' Pro'
fiies. U.S. Department of Commerce, National Institute of Stan-
dards and Technology.
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484 Part 3 Six Sigma and the TechnicalSystem

At Motorola, six sigma became part of the common language of all employees. To
them, it means near perfection, even if they do not understand the statistical details.
(some tell their coworkers, "Have a 6-sigma weekendl") since stating its goal,
Motorola has made greai strides in meeting this goal, achieving 6-sigma capabilityin
many Processesand 4- or S-sigma levels in most others. Even in those departments
that have reached the goal, Motorola employees continue their improvement efforts
in order to reach the ultimate goal of zero defects.
In addition to a focus on defects, Six Sigma seeks tojmp_rove all
ligr.ts1Thus, ogg1-lgf n5grcs: include vana
t-qggglpg!_Selecting the appropriate metric depends on the scopeand ves of
the project, making Six Sigma a universal apprc'lach for improvement in all aspects of
a business.

PROJECT SELECTION FOR SD( SIGMA

One of the requirementsfor achieving Gfee4 Belt status (seeChapter 6) is to success-
f ul!:o-ngl-e!igu::t9-ix-Sigma-proje*A-bfiGn--eaningtulbusinessproblem
fH-atpositively impactscustomersor businessperformance.Often GreenBeliprojects
address small problems within a department or work function. As employees
deveiop their skiils, become Black Belts, and start applying Six sigma on a l.outine
basis,they begin fo addresslarger and moie complex issuei, such is problemsasso-
ciated with key value-creationor cross-functionalprocesses,such as supply chains.
According to Kepner and Tregoe,a p.-roblgmis a deviation between wh4ljhsuld
be happening and what actualt/ it itupp""i"g rhui-iii*po.@
sbmeone think ihe aS"]1qorr-rughf to=6E*c.og
Research uffi more-ihln' i,Oittl--["t-
"IgSggd-J-
lished casesdescribingquality problem sc
activities suggeststhat virtually every ins
ofquality problem-solving falls into one c
categories:
7. Conformance problemsare defined by unsatisfactoryperformanceby a well-.
specifiedsystem.users are not happy rvith systemoutputs, such as quality or
customerservicelevels.The systemhasworked before,but for somereasonit is
not performing accepiably.The causesof deviations musf be identified, and the
systemrestoredto its intended mode of functioning.
2. Unstructuredperformance problemsresult from unsafisfactory performance by a
poorly specifiedsystem.That is, the task is nonstandardized and not fully spec-
ified by proceduresand requirements.An example would be poor sales.No one
right way of selling a product means the problem cannot be cured by enforcing
standards that do not exist. Unstructured problems require more creative
approachesto solving them.
3. Efficiencyproblemsresult from unsatisfactory performance from the standpoint
of stakeholdersother than customers.typicil examples are cost and produc-
tivity issues. Even though the quality of*r" outpuis may be acceptiblb, the
system'sperformance does not achieve internal orgarrizational goals. Identifi-
cation of solutions often involves sh'eamlining processes.
4. Productdesignproblemsinvolve designing new products that better satisfy user
needs-the expectationsof customers that matter most to them. In Six Sigma,
thosevital characteristicsare called "critical to quality" (CTe) issuesas we dis-
cussedin Chapter4.

I rl:
i,,ti
se!,.__
Chapterf0 PrinciPlesof Six Sigma 485

5. Processdesignproblemsinvolve designing new processesor substantiallyrevising

existing processes.The challengehere is determining Processrequirements/gen-
eratingnew processaltematives,and linking theseprocessesto customerneeds.
Techniquesdiscussedin Chapter 7, such as benchmarking and reengineering,
are useful tools for processdesign.
One of the more dfficult challengesin Six Sigmais the selectionof the most appro-
priate problems to attack.In the words of R
man4gement" Ackoff, a noted authority t
tfi;*t.r'* *temal conditions that ptodnc
"f :..'-._
dgfects,a rash of customer complaints, or lo
quality- and performance-related messes. Sr
Six Sigmaprojects.
Lynch lnd colleaguespoint out fwo ways to generate projects:JoEr<lqylr and-
bottom-up.sTop-down proiectsgenerally are tied to businessstrategyan-{a1ga[ggd
;F5;ffiiilfi"*a;. itr"ir *ui"Or-Weakness is that they are often too UrJaa in scope
IJTE completed in a timely manner. In addition, top managersmay underestimate
the cost and overestimatethe capabilities of the team or teamsto which the project is
assigned.In a*bottom-upapproach-Black Bglt: (orI4-BE) +99+" !h" p,T?igqftjba-tal:
well-suitedto the capabilitiesof teams. Howevet a major drawbackot thts aPProach
is*ffitffiprojbtts auy; iiotbttiitdcldely to strategic concernsof top management,
thus receiving little support and low recognition from the top. Perhapstigsggy
to ensuresuccessis for executive champioll, Who undefstand the i4pac! of p-1gjects
pelspective, to work clos.eJywith.Jhg technical.experts in cho_osing_
ffiggegic
tfr lmftibi urriptoyaAt urat nt w_ tnJilp3bili tiel .olsix-Sg ma tqgmq.
i tru-'n
ASii Sigmaprojeci might spin an eiitire division'oi be asnarrow as a singlepro-
driction operation. Factorsthat should be considered when seleclggll:.lgT3fr-o-
iects include the fo
. Financial return, as measuredby costsassociatedwith quality and processper-
formance, and impacts on re\ienalesand market share
o ImPactson customersand organizational effectiveness
. Probabilityof success
. Impact on employees
. Fit to strategy and competitive advantage
As we noted severaltimes in earlier chapters,$ix Sigmaprojectsare driven by expected
financial letums. Reducing costsassociatedwith poor qualiry such as scrap,rework,
excessivecycle fimes, delays,and lost customersoften provide an_obvious justification
for pursuing a project.A Cost of Quality process(discussedin Chapter 8) often facili-
tates identifying opportunities and measuring results.
One of ifru piifunr experienced.in organizations new to Six Sigma is a lack-of
ability of seniorhan"g"rc to estimatewhat the resourcesthey allocate(or fail to allo-
cate)io Six Sigrna projects will "buy" in the way of bottom-line returns' Thus, it
becomesimpoitanito te able to differentiate between, and to estimate fairly accu-
rately, the differences in resources requited to bring a $250,000project versus a
$50d00project to a successfulconclusion.Six Sigma projectsshould lead to improved
customer sitisfaction and organiza.tionalperformance. Such improvements can lead
directly to higher sales or market share, thus providing financial justification for
selectinga project.
projEctschosenshould have a high likelihood of success. Considerablerisk comes
in choosingproblems that canbestbe compared with "solving world hunger'" At the
486 Part3 Six Sigma and the TechnicalSystem

outset of a Six sigma initiative, it is beneficial to pick the "low-hangrng fruit,,-pro-

jects that are easy to accomplish,or even can be completed by a single individuil in
order to show early successes.This visible successhelps to build momentum and
support for future projects.Studies show that many projects are significantly over-
budget, behind schedule,or do not result in desired outcomes.erhls, good project
m€rnagement,as we discussedin Chapter Z, is essential.
Six Sigma projects should fit within the capabilities of the people and teams that
ue.Egtlei4ilg"gdted as Green or Black
o"ut-
ship skills, as pointed out in ChabTeT*6. Slf-
ite ana impioTt-6ai;Vam 6nvirorilrdnt,
b and personal self-esteem.Many projects
adth inadequate work processesor to pro-
vide increased value to customers; these types of projects are certainly imporiant
candidatesfor selection.
Finally, six sigma projects should sr pFort the prg44lu4!ig_Lq_."il.ig.*.g$
_.ggleL
{ye.lFategy-In Chapter 5 we stressedthe importance of creatingictioi i;ians ifratTreip-
an organizationachieveits chosenstrategies.At GE, for example,businessgoals work
their way down the organization, helping employees to distinguish betwein projects
that will not have asignificant effect on businessperformance and those that db.'o
of course,most oqg4nizationsprobably have more opportunides for six sigma
pfojects than available resourcesto do them. In many cases,project selectionis o-ften
political in nature. Senior executiveswho champion Six Siglna projects might exer-
cise political influente to get their pet projects recognized and lccepted. However,
a more objective viewpoint is more effective. Prioritizing and selecting pro-
luki.t$
jects using some rational criteria can contribute to greater effectiveness.fro;ect
steering comrnitteesthat include at least a portion of the organization's senior lead-
ership often guide thesedecisions.This group can act as a filier for the voices of both
the extemal and internal customersin evaluating and prioritizi4g projects.
Simple scoring models may be used to evaluate and prioritizL poiential projects.
An example of a project selectionmatrix is shown in Figure 10.2.The top box shows
the customer importance ratings on a set of key CTQs using the scaleat the bottom
left. The numbers in the main table arebasedon the scaleon ihe bottom right, and are
determined by the steering committee. By multiplying these rankings,by the cus-
!9mer importance ratings, we cEInarrive at a total score in the right-hind column
(Projectranking metric). The higher the number, the more the project affectscustomer
I issues' This process takes the guesswork and opinions out of the project selection
processand focuseson the important issuesto the customer and the organization.

SD( SIGMA PROBLEM SOLVING

Problem solving is the activity associatedwith changing the state of what is actually
happening to what shouid be happening. Many years ago, Juran defined break-
through as the accomplishmenf of any improvement that takes an organization to
unprecedented levels of performance. Breakthrough attacks chronic losses o1, in
Deming's terminology, corunon causesof variation. The objectivesof Six Sigma pro-
jects often focus on breakthrough improvements that add value to the organiruio.
anditseus-tomersthrosghsysf,e-fla,f idEppffi na.stoTio@.!:bEl,r__qg!*
qi-tit ina'u"iin"* p"^Jor-rtce improvement depends on the
.=Fft-&Gltfl-
to-identify and solve problems; this ability is fundarirental to-the Six Sigma
"91Tq,
philosophy. M*y nonquantitatively intlined managers(which may include ZSoi SO
Chapter10 Principlesof Six Sigma 487

Figure10.2Exampleof a ProjectSelectionMatrix

o o
o
E
o o
@ ! U)

o o) '15 ct)
o q)
o) 0) o_
o o
U)
U' (5
lssues
Customer J o
Customerimportance n 5 7 10 J ?

e
Project
Projectrankingba*d on ranking
Project correlationto customerissues metric

Orderfill orocess
flowootimization 8 .t 5 0 146
Replenishmentcycle
timereductionproject X 5 0 0 0 115
Customerservice
feedbackreporting J H t l 5 171
Deliveryvendor
certification 0 10 6 0 0 0 106
lT upgrade
processintegratjon 1
5 U 8 J 194

Customer Relationship
to Project to
Relationship
importafice customerimoortance rank customerissue
0 Notimportant 0 No correlation
important
Slightly o Verylittlecorrelation
lmportant Somecorrelation
8 Veryimportant I Highcorrelation
10 Critical 10 Completecorrelation

'Three Stepsto ProiectSelection,"^SixSigma Forum Magazine2, no.1(November

Source;Wif fiam Michael Kelly,
2002lr,29-32.@2002,American Society for Quality. Reprintedwith permission.

percent of the population) have difficulty in grasping the conceptof_asystematic{ac!-

6ased, often statistical, problem-solving approach. Yet, using such an approach is
vital to effectively identifying sourcesof problems, understanding their causes,and
developing improvement solutions.
"spiaking the same language" builds confidence and assuresthat solutions are
developed objectively, rather than by intuition. Leaders in the quality revolution-
188 Part3 Six Sigma and the TechnicalSystem

Deming, Juran, and Crosby (see Chapter 3)-

proposed specific methodologies'for improve- A structured problan-solaing
ment in the early days of the quality revolution. processproaidesall employeeswith
a commonlanguageand n set of
Although each methodology is distinctive in its
tools to comminicate with each
own right, they sharemany corrunon themes:ll other, particularly as membersaf
'1.. cross-functionnl t?affis. '
Redefiningandanalyzingtheproblem;Collect
I : : , ' ' . . " ' r i '
and organize informatiory analyzethe data
and underlying assumptions,and reexaminethe problem for new perspectives,
with the goal of achieving a workable problem definition.
2. Generatingideas:"Brainstorm" to develop potential solutions.
F.aaluating
and selectingidens:Determine whether the ideas have merit and will
achievethe problem solver's goal.
4. Implementingideas:Sell the solution and gain acceptanceby those who must use
them.
Thesethemesare reflectedin the principal problem solving methodology used by Six
Sigma,PMAG"dqfi 49llggll3lglIzg,i{r:rplgve,andco.ntrol-whichwediscuss
next. (We will discussseveral other types of quality problem solving methodologies
in Chapter13.)

The DMAIC Methodology

One of the first things that d Green Belt in training learns are the five steps in the
DMAIC methodology. ,

1. Define After a Six Sigma project is selected,the first step is to clearly define the
problem. This activitv is significantly different from project selection.Project selec-
tion generally responds to symptoms of a problem and usually results in a rather
vague problem statement.One must describethe p_roble-Uigop.gladqnal terms that
facilitatefqrther. analysis-For example,a firm might have a history of poor reliability
of electric motors it manufactures,resulting in a Six Sigma project to improve motor
reliabiliqv. A .p3-u_Iry1y*:investigation of w4r-rgnty--4ld_fie1d*servjee_*p2*dg!e*
might suggest that the source of most problems was brush wear, and more specifi-
cally, suggesta problem ud-th--b::rs_hhardness-variabjlity--fhus,
the problem might be
defined as "reduce the variability of brush hardness." This processof _4-ffllng_dow:r
sometimes called p-:gfSgt_,*S1l_*S
!.9--e.IUre,spe-cilk-p1qp!-g3*sje!-e-ms..n!5
A good problem statement should also identify customers and the CTQs that
have the most impact on product or serviceperformancq;describethe current level of
performanceor the nature of errors or customer complaints, idenfify the relevant per-
formance metrics, benchmark best perform;rnce standards, calculate the cost/
reyenue implications of the project, and quantify the expectedlevel of performance
from a successfulSix Sigma effort. The Define phase should also addresssuch project
managementissues*Jf._b1! will need to be.dole- by*ly,ho-g;*ilailwhe3*

2. Measure This phaseof the DMAIC processfocuseson how to measurethe internal

Processesthat impact CTQs. It requires an gL4_erllel4frgof.thecausal relaLiBn.E!.p_g*
betweerrprocessBeq,formance and customer.v_4-lqe=These conceptswere discussedin
Chaptei--lL Ho*evei, once'tfiey'iie'iffiiiiitood, procedures ior gathering facts-
collecting good data, observation,and careful listening-must be defined and imple-
mented. Data from existing production processesand practicesoften provide impor-
tant information, as does feedback from supervisors, workers, customers, and field
C h a p t e r1 0 P r i n c i P l eos f S i x S i g m a
489

Serviceemployees. Many of the technical issuesof measurement that must be con-

sidered in a Six Sigma project are discussedin Chapter 11.
One must first ask somebasic
Pqtq Sqlle!-ti-9-l-shouldnotbe performed blindly.
questions:
r\Atrhatquestions are we trying to answer?
.\vVhattype of data will we need to answer the question?
.Where calnwe find the data?
.Who can provide the da'ta?
oHow can we collect the data with minimum effort and with minimum chanceof
error?
for
The first step in any data collection effort is to develop ope;Sllonal_{"_e_fu!!r:n9
all performang-q4gu*t s that will be used. For example, rn'hatdoes it mean to have
,GiifrffieTelivery"? Does it mean within one day of the promised time? One week?
One hour? Wt uf it an error? Is it wrong information on an invoice, a typographical
mistake, or either? Clearly, any data are meaninglessunlessthey are well defined and
understood without ambiguitY.
TheI-qrarI4g_qi-!u1-q,suggeq-!s-1[Ilp_g_tg*!sp.r,-iideralio-npls-r"4ekjglkggs\
1. Formulate good questions that relate to the specifig inJormation needs of the
project.
Z. i-lse appropriate data analysis tools and be certain the necessarydata are being
collected.
3. Define comprehensivedata collection points so that job flows suffer minimum
interruption.
4. Selectin unbiased collector,who has the easiedtand most immediate accessto
the relevant facts.
5. Understand the environment and make sure that data collectors have the
proper experience.
6. Design simple data collectionforms.
7. Prcpare instructions for collecting the data.
8. Tesl the data collection forms and the instructions and make sure they are filled
out properly.
9. Train the data collectors as to the purpose of the study, what the data will be
used fot how to fill out the forms, and the importance of remaining unbiased-
10. Audit the data collection processand validate the results'"
Theseguidelines can greatly improve the processof uncorreringrelevant factsneces-
sary !o identify and solve problems.

3. Analyze A major flaw in many problem-solving approachesis a lack of emphasis

on rigoious analysis.Too often, we want to jump to a solution without fullY.under-
stanJing the natrr-re-ofthegroUfen.bfl-aj.denUIyr4g-the*souree..of-theprob.lem**Ihe
Analyze phase of DMAIC focusesonwhy defects,eriors, or excessivevariation occur,
which often result from one or more of the following:
r A lack of knowledge about how a processworks, which is particularly critical if
different people perform the process.Such lack of knowledge results in incon-
sistency and increasedvariation in outputs.
. A lack of knowledge about how a process should work, including under-
standing customer expectationsand the goal of the process'
. A lack of control of materials and equipment used in a process'
490 Part 3 Six Sigma and the TechnicalSystem

r Inadvertent errors in performing work.

o Waste and complexity, which manifest themselves in many ways, such as
unnecessarystepsin a processand excessinventories.
. Hasty design and production of parts and assemblies;poor design specifica-
tions; inadequatetesting of incoming materials and prototypes.
o Failure to understand the capability of a processto meet specifications.
o Lack of training.
o Poor instrument calibration and testing.
. Inadequateenvironmental characteristicssuch as light, temperature, and noise.
Finding the answersrequires identifying the key variables that are most likely to
createerrors and excessivevariation-th-e;
causeas "49!_co-ndition(gt interrela_tedse
{e!-qt to occur whiph,gnpe 9.o1rggtg_4p-_!9
"tliaTdFctlntiii{seae,-orssb'-e.e-ueti;iff!
As with a medical analogy,eliminating syn
temporary relief; eliminating root causesprovides long-term relief.
One useful approach for identifying the root cause is the "5 ltft,y_Jgg$$Lq_
This approach forces one to redefine a problem statement a"'itluit-bf,ii.tiuJ.ra
effectsto identify the source of the symptoms by asking why, "r ideally five times. In a
classicexample at Toyota, a machine failed becausea fuse blew. Replacing the fuse
would have been the obvious solution; however, this action would have only
addressedthe symptom of the real problem. \a/hy did the fuse blow? Becausethe
bearing did not have adequatelubrication. Why? Becausethe lubrication pump was
not working properly. Why? Becausethe pump axle was worn. Why? Becausesludge
seepedinto the pump ade, which was the root cause.Toyota attached a strainer to
the lubricating pump to eliminate the sludge, thus correcting the problem of the l
machine failure. I
After potential variables are identified, experimentsare conducted to verify them. 1
Theseexperiments generally consist of formuiating some hypothesis to investigate,
collecting data, analyzing the data, and reaching a reasonableand statistically sup-
portable conclusion.Statisticaithinking and analysis (Chapter 11)plays a critical role l
in this phase.It is one of the reasonswhy statistics is an important part of Six Sigma I
training (and one that engineering and many businesscurricula often ignore). Other
experimentsmight employ computer simulation techniques.

4. Improve Once the root causeof a problem is understood, the analyst or team needs
to generate ideas for removing or resolving the problem *a_l5p;g:p'_!kp*"t&=
r4gJre-rneasures-Ar:4.CTQs- This idea-gathering phase ip_9,_Eg!{y-gl9-atiye-as{ylryL
becausemany solutions are not obvious. One of the difficulties in this iask is the nat-
ural instinct to prejudge ideas before thoroughly evaluating them. Most people have
a natural fear of proposing a "srlly" idea or lookingfoolish. However, such ideas may
actually form thL bisis fo"ra cEaEGffiJ_usirful JoluUon. Effective problem solvers r
must leam to defer judgmenTEffi-d6VElbpthe ability tci'generatea large number of t
ideas at this stageof the process,whether practical or not. I
A number of processesand tools to facilitate idea generation can be used. One of c
the most popular is brainstorming. Brainstorming, a useful group problem-solving
procedure for generating ideas, was proposed by Alex Osborn "for the sole purpose
of producing checklists of ideas" that can be used in developing a solution to a
problem.lsWith brainstorming, no criticism is permitted, and people are encouraged
to generate a large number of ideas through combination and enhancement of
 Chapter10 Principlesof Six Sigma 491

existing ideas. WiId ideas are encouraged and frequently trigger other good ideas
from somewhereelse.
Checklistsare often used as a guide for generatingideas.Osborn proposed about
Z}*bdame-L1!41_questionsb ased on the f ollow in g principles :
o Put to other uses?
. Adapt?
. Modify?
. Magnrfy?
. Minify?
o Substitute?
o Rearrange?
. Reverse?
o Combine?
By consciously seeking ideas based on this list, one can generatemany unusual and
often useful ideas.
After a set of ideas have been proposed, it is necessaryto evaluatethem and select
the most promisinq. fh1g21g:grl includes confirmingthat the proposed solution will
*pJgqydy unpact the.key processvariabtqs and_the..CjQS,and {.entifylng !h9 ma1-
imum acceptableranges of ttqqsg_v41rabiee.
**?rriblem
solutionJ often entail technical or organizational changes.Often some
sort of decision or scoring model is used to assesspossible solutions against impor-
tant criteria such as cost, time, quality improvement potential, resourcesrequired,
effectson supervisors and workers, and barriers to implementation such asresistance
lo_change or organizational culture. fo*-i+ple..ment4.q-qlgtio_4 gffe,cllvely,resp91-si_-
IUryq-*.-b_"e.-ssignedJo*-p_gtg.9_Lq*{tg:9up1qhowillf ollowthroughonwhatmust
be done, where it will be done, when it wiil be done, and how it will be done. Project
managementtechniquesare helpful in implementation planning.

5. Control The Control phase focuseson how to maintain the improvements, which
includes putting tools in pla."_e jlqg1f$6.{lflg-T6}'fa-f]ables'ieqrain-wittrin ttre
+rygn-ace-ePJablglqr-Igeq-rg1{91t-he-a19{ified-p-19c.ess-"These improvements miSht
include establishing the new standards and procedures,training the workforce, and 1i ,,
instituting controls to make sure that improvements do not die over time. Controh i!
might be as simple as using checklistsor periodic statusreviews-toensurethat proper
P-Igggqglgsare followed, or qmploying statisticalprocesscontrol'"cTaits(iee Chapter
14) to monitor thd perfonnance of key measures.
The following example shows how DMAIC was used at American Express to {b@
.-v
-.American
improve the number of customers who received renewal cards." (In this example, ./ Exoress
data have been masked to protect confidentiality.)
DeJineand Measure: On average tn 1999, American Express received 1,000
returned renewal cards eachmonth. Of theserenewals,65 percent are due to the fact
that the card members changed their addressesand did not tell the company. The
U.S. Post Office calls theseforwardable addfesses.Amex does not currently notify a
card mer-':er when they receive a returned plastic card.
Analyze: Analysis of the data noted slgnificant differences in the causes of
returned plastics between product types. optima, the revolving card product, had
the highest incidence of defects,but was not significantly different frbm other card
types in the percentageof defects,Renewalshad by far the highest defect rate among
the three areasof replacement,renewal, and new accounts.After additional testing,
492 Part 3 Six Sigma and the TechnicalSystem

returns with forwardable addresseswere overwhelmingly the largestpercentageand

quantity of retums.
Improae:An experimental pilot study was run on all renewal files issued, com-
paring records against the National Change of Address database.As a result, they
were able to reduce the dpmo rate by 44.5 percent, from 13,500to 6,036defectsper
million opportunities. Thii action enabled over 1,200card members who would not
have automatically received their credit cards to receive them, increasing revenue
and customer satisfaction,
Control:Amex began tracking the proportion of retums over time as a means of
monitoring the new processto ensurethat it remains in control.

Tools and Techniques

Two of the unique features of DMAIC are its emphagil-ql-eql-t9$_9_Iggqgjrements*and
the.use-ofs_ta!!-q!94*t-o,-ql*s.95rd
methodologies. This approach requires an understanding
and commitrneni io stitisucir tlfrnfcing-afra"flre
use ti problem-'solvingapproachesat I
level that may be foreign to managersand other employeesin many organizations.
The tools used in DMAIC have been around for a long time. For example,Deming
long advocated using statisticsto understand and reduce variatiory and Juran pro-
moted the use of many simple tools for quality problem solving and improvement.
Thomas Pyzdek-,a noted quality consultant, statesthat more than 400 tools are now
available in the "TQM Toolbox."" However, most organizationsrarely go beyond the
basic improvement tools and fail to recognize the benefiis from more sophisticated
statistical tools such as design of experiments. Six Sigma recognized the power of
advancedstatisticalmethods and took them beyond the realm of engineering:Lr addi-
tion, a unique featureabout 9ja SigmqilJhe.intggratign of thesg!oo|s-4rg_|f,e.DMAI!--
methodology
-- into managementsystemsacrossthe organization.l8
Thes€-tools are integrated into standard Six Sigma curricula, which typically
involve a blend of technical topics and project manhgement and leadership topics.
Figure 10.3shows a typical Six Sigma Black Belt training curriculuni at General Elec-
tric. The topics coveredmay be categorizedinto sevengeneral groups:"
o Elemmtarystatisticaltools@asicstatistics,statisticalthinking, hypothesis testing,
correlatiorysimple regression)
' .
AdzJanced statisticalfools(design of experiments, analysis of variance, multiple
regression)
. Product designand reliability (quality function deployment, failure mode, and
effectsanalysis)
o Measuremmt(processcapability,measurenent systemsanalysis)
. . Processcontrol(control plans, statisticalprocesscontrol)
. Processimproaement (processimprovement planning, processmapping, mistake
proofing)
. Implementationand teamusork(organizational effectiveness,team assessment,
facilitation tools, team development)
Most of thesetopics are addressedin other chapters of this book. It can be seenthat
Six Sigmahas greatly expanded the requisite knowledge for true performancebreak-
throughs.
l
Design for Six Sigrna I
I
We introduced issuesassociatedwith product design in Chapter 7 and emphasized t
the importance of integrating design with sourcing and production. Design for Six
 Chapter10 Principlesof Six Sigma 493

Figure10.3Six-SigmaBlackBeltTraining

Week I Week 2 Week 3 Week 4

o Overview . Statisticalthinkinga Designof . Controlplans
. Processimprove- . Hypothesis experiments . Statistical
testing process
mentplanning . Analysisof control
o Correlation
o Process
mapping variance r Mistake-proofing
. Simpleregression
r Multipleregression
r'Quality
function . T€amdevelopment
r Teamassessment r
deployment Facilitation
tools
r Failuremodeand
effectsanalysis
t Organizational
effectiveness
^^^^^^+^
gvr lvgPLD

o Basicstatistics
r Processcapability
r Measurement
systemsanalysis
Source;RogerW. Hoerl, "Six Sigma and the Future of the Ouality Profession,"Auality Progress,June 1998,35-48.
@ 1998.Arnerican Society for Ouality. Reprintedtvith permission.

Signa (DFSS) pg*feleti,y_ely-Ieie$ +pplo.4ch!_o-p.19,{9qf devqlgpment that focllses on

delk!4g tle_right product at !h9 !ght=.Ji4e an{ { -theright cost. DFSSis a complex
systemse_ngineering analysis methodology that is enhancedwith statisticalmethods
to enhancetraditional design processes.Its focus is to optimize CTQs for Six Sigma
product a4d system performance by balancing cos! schedule, and quality; recog-
rizing that Six Sigma margins are not always the optimal design margins.20 Somefea-
lures of DFSSinclude the following:
. A high{evel architectural view of the design
r Use,of CTQs with well-defined technical requirements
. Application of statistical modeling and simulation approaches
o Predicting defects,avoiding defects,and performanceprediction using analysis
methods
r Examining the full range of product performance using variation analysis of
subsystemsand components
DFSSuses many tools including multivariable optimization, design of experiments,
statistical analysis techniques,probabilistic sirhulation techniques,and failure mode
and effectsanalysis,manlr of which are discussedin subsequentchapters.
One of the early applications of DFSSwas at GE's Medical SystemsDivision. The
Lt*rtqpeed"Cpr4pglej To_mogr4plry(CT)$ygegwas the Q*Cg_f_ry4uct to be com-
pletely designed *a dgfglQp.g{::ng P-E.S$. Lightspeed allows doctors to capture
multiple irnages of a patient's anatomy simultaneously at a speed six times faster
than traditional scanners.As a result, productivity doubled while the ima$es had
much higher quality. Jack Welch announced that all GE products designed aft'erthat
494 Part 3 Six Sigma and the TechnicalSystem

time would be designed using the DFSSapproach.'rWe will develop the concept of
Design for Six Sigma in more detail in Chapter 12.

Tearn Processesand Project Management

We introduced teams in Chapter 6. Teamsare vital to Six Sigma projectsbecauseof
the interdisciplinary nature of such projects.Six Sigma teamsrely on severaldifferent
types of professionals(roles),including Champions, Master Black Belts, Black Belts,
and Green Belts that we described in Chapter 6. An effective Six Sigma process an(
deploys this leadership structure throughout the organization. As noted earlier, abl
team-relatedtopics, including organizational effectiveness,team assessrnent, facilita- sio
tion tools, and team development, are part of standard Six Sigma training. Team ide
leaders and team members must inderstand their role-s_.1_1 pfoj9c1 ma4agdliEi-d- ln(
:
organizational leaders (refer back to Table6.2). fen
-
More than any other type of organizational s'tructure,the team structure depends
on cooperation, communication, and clarity. Eckes estimatesthat 60 percent of fail- nor
u{gs--of.Si}-qig.!g3j-9qqq are due to failures in the "mechanics" of team-oF;r-afron; as Tht
top_o*o-.1p19j9ctse_Jec.d,9J.r_o_{_ig}p._Lop.g-r.
gg9,_oJ-t_SqlL"
He cites contributing fac- Six
.opposed
;tors such as lack of application of meeting skills, improper use of agendas,failure to
,ideterminemegting roles and responsibilities, lack of settirrg and keeping ground
llrules,and lack of appropriate facilitative behaviors. Electronic commtrnications,vir-
itual teams,and motivation were discussedearlier, but they must also be used effec-
tively if teams are to be successful.
Projectsare the vehicles that are used to organize team efforts and to implement
the DMAIC process.Although projects are set up as temporary orgarization struc-
tures, their flexibiiity allows cross-functionalteams to complete significant work in
minimirm time, if well managed. One of the challengesof implementing Six Sigma
projects is to coordinate them with normal work activities. Someslack time, as well
as physical and financial resoutces,must be allocated to project teams in order for nor
them to achieve their objectives. Team members and project leaders cannot be tho
expectedto carry a full load of routine work and still participate fully and effectively €"-.
on Six Sigma project teams. ano
Projects fail for a variety of reasons,including not adhering to schedules,poor *!i
planning, and "scope creep" when the nature of the project gradually losesits focus
--gss
and becomesunwieldy, mismatching of skills, and insufficient knowledge transfer.E -leg
Being able tg manage a large portfolio of projects, as would be found in Six Sigma
environments, is vital to organizational success.The project m€rnagementbody of staS
knowledge defines 69 tools that a project manager must master,but few have done creE
so.Achieving professionalcertification in project managementcan significantly assist Ont
Six Sigma efforts. ofc
war
Pro
SD( SIGMA IN SERVICES AND SMALL ORGANIZAIIONS fere
othr
BecauseSix Sigma was developed in the manufacturing sector, and most publicity
I*t
has revolved around such companies asl4otoro14.4_q4GE, many people in the ser-
niqr
vice sectorthink that Six Sigma doesnot apply to their organizations.Nothing canbe
further from the truth.24These characteristicsare present in all business processes;
mal
thus, Six Sigma can easily be applied to a wide variety of transactional,administra.
site,
tive, and service areas.In fact, it is generally agreed that 50 percent or more of the "
icar
total savings opportunity in an organization lies outside of manufacturing. Withrt'.l* ,rda
the-servicegeqlgt Six Sigma is beginning to be called transactional_SixS!g!!g.,*
Chapter10 Principlesof Six Sigma 495

..,: However, while Six Sigma applies equally

,, : well in serviceareas,it is true that serviceshave
some unique characteristics relative to manu-
facturing processes. We discussed these briefly
,r",: in Chapter 1. First, the culture is usually lesssci-
, entific and service employeestypically do not
,,. ttrink in terms of processes/measurements,and
data.The_p_rocesses areoftqn invlsible, complex,
--:. not
and well
_- defingd or well documented. ted. Also.
Also, the Work'tvbicillv
work'typically reouiresconsider-
requires
.
iJCtiitomer interaction,underwriting or approval deci-
"bff"-mi*"*""tio",i".t
sions, or manual report generation. These differences make opportunities difficult to
identify, and projects difficult to define. Finalty, sirnilar service activities are often done
in different ways. If you have three people doing the samejob, perhaps in three dif-
ferent locations, it is unlikely that they will do the job in the sameway,
Because€gryl_c,g-plqc-e-s-9qs .are largely people-driven, measurementsare often
nonexistent or ili-defined, becausemany believe that defects cannot be measured.
Therefore,one mustcreate measurementsystemsbeforecollectingany data.Applying
Six Sigma to services requires examination of fgglkq)a g-tqas-ures 9t the pertgqlance,
o Accuracy,as measuredby correctfinancial figures, completenessof information,
or freedom from data errors
. Cycletime, whichis a measureof how long it takesto do something,such as pay
. an invoice
. Cost,that is, the internal cost of processactivities (in many cases,cost is largely
determined by the accuracy and/ or cycle time of the process;the longer it takes,
and the more mistakes that have to be fixed, the higher the cost)
. Customersatisfaction,which is typically the primary measureof success
Fortunately, important similarities can be shown between manufacturing and
nonmanufacturing processes.First, both types of Processeshave "hidden factories,"
those places where the defective "ptoduct" is sent to be reworked or scrapped
corrected, or discarded in lolq.glufactu.Iing telms). Find the hidden factory
f_e_v_1ged,
and you also find opportunities to improve the process.Performing manual account
reconciliation in accounting, revising b1g{_gqtsrepeatgdlY urrtil m}i,ffefient -frill
_ilcSep_t-ttnem,and making repeat salescalls io customersbecauseatl the information
are all examplesof the hidden factory.
*--Consider the customei was not available
requ-ested by
how a janitorial bervicb company might ir"-bUatC. In the Deirne .
stage, a key question would be to define what a defect represents.One might first
'create
a flowchart of the cleaning process,specifying what activities are performed.
One example of a defect might be leaving streakson windows becauseit is a source i
of customer dissatisfaction, a CTQ. ln the Measure stage,not only would the firm i
want to collect data on the frequency of defects,but also information about what ,
products and tools employeesuse. The Analyze stagemight include evaluating dif- '
ferencesamong employees to determine why some.aPPearbetter at cleaning th* :
others. Developing a standard operating procedure might be the focus of the 'i
lmprove stage.-Finally, Control might entail teaching employees the correct tech-
nique and measuring improvement over trme.
In one application at CNH Capital, Six Sigmatools were applied to decreaseasset
management cycle time in posting repossessionsto a bid list and remarketing Web
site.6Cycle time was reduced 75 percent,from 40 days to 10 days, resulting in signif-
icant ongoing dollar savings. A facility managementcompany had a high level of
"days salesoutstanding." lnitially, they tried to fix this issueby reducing the term of
496 Part3 Six Sigma and the TechnicalSystem

days in its billing cycle, which, however, upset customers. Using Six Sigma, they
found that a large percentageof accountswith high days salesoutstanding received
v
Pr
invoices having numerous errors. After understanding the source of the errors and
making processchanges,the invoice processimproved and days salesoutstanding in
was reduced.At DuPont,a Six Sigmaprojectwas applied to improve cycle time for rr
an emp_loyee's application for long-term disability benefits.'.SbmL S(
cii-I afipticationr of Six Sigma incluae tne following:,' "*urnple;o{Tiflgff:
-' at
' o"i".;;#";Ae'ani ,rariution of days outstanding of accountsreceivable. o:
. Close the books faster.
. Improve the accuracyand speedof the audit process.
. Reducevariation in cashflow.
' Improve the accuracy of journal entries (most businesseshave a 3-4 percent
error rate).
r Improve accuracyand cycle time of standard financial reports.
Theseare but a few of the many potential applications of Six Sigma in serviceorgani- F
zations. t
Small organizationsare often confused and intimidated by the size, costs, and r
,*_--"ryr'--_'i
extensrve tecnrucal ffaukaining they $eein iarge organizafionsthat implement "formal" Six a

Sigmaprocesses.For this reason,they often don't even try to adopt theseapproaches.

smallLll organizarions Eueare gg$IL]ge*!f*S$!v^but
gggelly_leg*l.):1gsqqlty,^but not always effectively so. Their t
:essesof
processes tenoperategryliglevelssltso_to-ths_ee_
often operateat jl8gle"andtLeJ*g.I.e-ggls=yg.c..
aware 1q--o!!9.=Spanyr and Wurtzel provide some sage advice to small oigafrtatibns
thinking about adopting Six Sigma or lean production:B
. Obtain managementcommitment.
. Identify key processesand goals.
. Prioritize the improvement projects.
r Be systematic.
a Don't worry about haining Black and Green Belts.
a use just-in-time practicesto learn the six sigma tools necessaryto successfully
carry out specificprojects.
Communicate successesand reward and recognizeperformers.
Small companiesoften need to bring in consultants for training or improvement ini-
hiativesin the early stagesof learning. Thesetypes of initiatives can help to develop
in-house expertiseand put them on the right'track.

SD( SIGMAAND LEAN PRODUCTION

Lean production refers to approaches initially
developed by the Toyota Motor Corporation
that focus on the elimination of waste in all
forms, including defects requiring rework,
unnecessary processing steps, unnecessary
movement of materials or people, waiting time,
excessinventory, and overproduction. A simple
way of defining ifre_lge$bg_ntrore dgng g!!h
J"stitt sryekql,g$!,{r-t$-. e$ -e.ll'l-eti-ne. retrieving parts, installing thern,
glgg-y4lrJ-e-,addedactiyi.H_qs*
throughout the
A Toyota assemblyplant .fairly
hums: Eaery moaement has q
purpose, and there is no sl"ack.
Tour a typical auto plant, and you
see stacks of haffinisheiL..:parfs,
assemblylines haltedfo,r'idjust.
ment, workers standing idle. At
Toyotathe warkerslooklike dartaers
in a choreographedproduction:
checkingthe quality, and doing it
all in immaculalesurroundings.T
C h a p t e r1 0 P r i n c i p l e os f S i x S i g m a 497

and bSttg1-hry?n resources.As one article about Toyota observed,to seethe Toyota
production systemin action is to "behold a thing of beauty."
Lean producfion is facilitated by a focus on measurement and continuous
improvement, cross-trained workers, n";if-f"=n-aTrtieaiingtt automated'iqrnp- l{
li
---.A*ar:*.
ffit,*ffiicientmachine layout, rapid setup and changeover, just-in-time delivery and
scheduling, realistic work standards, worker empowerment to perform inspections
and take corrective action, supplier partnerships, and preventive maintenance. Some
of the heryiftS-laimed by proponents of lean production include the following:
o At least60 percentreduction in cycletimes
r 40 percent improvement in spaceutilization
r 25 percent greaterthroughput
. 50 percent reduction in work-in-process and finished goods inventories
. 50 percent improvement in quality
. 20 percent improvements in working capital and worker productivity
However, as one industry expert observed,it takes "an incredible amount of detailed
planrring, discipline, hard work, and painstaking attention to detail." Surveys have
noted that midsized and large companiesare likely to be familiar with lean principles
and have systems in place; however, few small manufacturing shops have much
famitiarity with the principles. Thus, cgnsiderableopportunity exists for this impor-
tant economicsector.
Someof the key tools used in lean production include:
. The 5S's. The 5S's are derived from japanese terms: seiri (sort), seiton (set in
order), selso(shine), seiketsu(standardize), and shitsuke(sustain).They define a
systeqjqugg*plq*g!g?ru-Zsli;9n-4nd_q!an{a1{iz..gti--o_1r$glgef erstoensuring
tliat eachitem in a workplace is in its proper place or identified as unnecessary
and removed. Set in order meq4-q-tqa11angg--maLgfialp*414. Sguipment so that
they are easy to-TilEln? gf.ingefers to a clean work area Niot only is this
"se.
fordfett"but Asa-;'6;f areais .f"uffiiili"'ifr.e problemssuch
iffipoiTent
as oil leaks can be identified before they causeproblems. Standardizemeans to
formalize procedures and practices to createionsistencffiffiTildiffTfiffall
steps are performed correctly.Finally, sustain means to keep the processgoing
through training, communication, and organizational structures.
. Visual controls.Visual controls are indicators for tools, parts, and production
activities that are placed in plain sight of all workers so that everyone can
understand the status of the system at a glance.Thus, if a machine goesdown,
or a part is defective or delayed, immediate action can be taken.
. Efrcientlayoutand standardized work.The layout of equipment and processesis
designed according to the best operational sequence,by physically linking and
. arranging machines and process steps most efficiently, often in a cellular
arrangement. Standardizing the individual tasks by clearly specifying the
proper method reduceswasted human movement and energy'
. PuIl production.In this system (also described as kanbanor just-in-time),
upstream suppliers do not produce until the downstream customer signals a
need for parts.
Surgte r*t,rtrr-te etcckcttge of dies (SN{1ED\. S\[ED teters to tapid cttangeovet o(
tooling and fixtures-in machine shops so that multiple products in smaller
batchei can be run on the sameequipment. Reducing setup time adds value to
the operation and facilitates smoother production flow.
Totalproductiaemaintenance.Totalproductive maintenanceis designedto ensure
that equipment is operational and available when needed.
498 Part 3 Six Sigma and the TechnicalSystem

Sourceinspection.Inspectionand control by processoperatorsguaranteesthat

F
product passedon to the next production stageconforms to specifications. €
ContinuousimproaementContinuous improvement provides the link to Six r
Sigma.In order to make lean production work, one must get to the root causes t
of problems and permanently remove them. Teamwork is an integral part of c
continuous improvement in lean environments. Many techniquesthat we dis- t
cussin subsequentchaptersare used. t
One exampleof the application of lean conceptsis found at SunsetManufacturing,
Inc., of Tualatin,Oregon,a 35-persoryfamily-owned machine shop." Becauseof com- r
petitive pressuresand a businessdowntum, Sunsetbeganto look for ways to simplify S

operationsand cut costs.They establisheda lean steeringcommitteeto coordinateand t

drive the process.The comrnitteechartereda kaizen team to reducesefup time on ver- t
tical milling machinesby 50 percent.The team used SMED and the 5S'sapproach as t
their basic tools. Severalactionswere takery including (1) standardizing parts across S
milling machines, (2) reorganizing the tool room, (3) incorporating the SMED L

approach in machine setups, and (a) and implementing what was termed "dance €
cards," which gave operators the specific steps required for the SMED of various
machinesand products. The results were impressive. Tool preparation time dropped
from an averageof 30 minutes to lessthan 10 minutes, isolation and idenffication of
worn tools was improved, improved safety and appearancein the tool room due to
SS'sapplication was apparent,machine setup time was reduced from an averageof
216 minutes to 36 minutes (an 86 percent improvement). Estimated savings were
$33,000per yea\ with an implementation cost of lessthan half of that amount. The net
impact was to allow smaller lots to be run , a75 percentreduction in setup scrap,emer-
genceof a moie competitive organizahon,and a morale boost for team members.
Six Sigma is a useful and complementary approach to lean production. For
example, a cycle time reduction project might involve aspects of both. Lean tools
might be applied to streamline an order entry process.This application leiids to the
discovery that significant rework occurs becausEof incorrect addresses,customer
numbers, or shipping chargesand results in high'variation of processing time. Six t
Sigma tools might then be used to drill down to the root causeof the problems and (
identify a solution. Becauseof these similarities, many indusry haining programs t
and consultantshave begun to focus.on "Lean Six Sigma," drawing upon the best (
practices of both approaches.Both are driven by customer requirements, focus on (
real dollar savings,have the ability to make significant financial impacts on the orga- t
nization, and can be used in nonmanufacturing environments.
However, some differencesclearly exist between lean production and Six Sigma.
First, they attack different types of problems.Lean production addressesvisible prob- 1
lems in processes,for example,inventory material flow, and safety.Six Sigmais more 1
concernedwith lessvisible problems,for example,variation in performance.Another t

differenceis that lean tools are more intuitive and easierto apply by anybody in the (
workplace, while many Six Sigma tools require advanced training and expertise of
Black Belt or Master Black Belt specialists,or consultant equivalents.For example,the I

concept of the SS'sis easier to grasp than statistical methods. Thus, organizations
might be well advised to start with basic lean principles and evolve toward more (
sophisticatedSix Sigma approaches.

LEAN SD( SIGMAAND SERVICESz

Lean production can easily be applied to n'onmanufacturing environments. Pure
service firms such as banks, hospitals, and restaurants have benefited from lean
, Chapter10 Principlesof Six Sigma 499

principles. hr these contexts, Iean production is often called lean enterprise. For
example, banks require quick response and efficiency to operate on low margins,
making many of their processes,such as check sorting and mortgage approval, nat-
ural candidates for lean enterprise solutions.33Handling of paper checksand credit
card slips, for instance,involves a physical processnot unlike an assemblyline. The
"
f.astera bank moves checksthrough its system, the sooner it can collect its funds and
the better its retums on investedcapital.
One North American financial institution applied lean enterprise principles to check
processingoperations. They followed one check as it made its way through the bank's
systems,documenting the time spent in actual processing and in waiting, rework, and
handling. They found that almost half of the bank's processingcapacity was consumed
" by nonprocessingactivities such as fixing jams and setting up machines.Further inves-
tigation revealed wide variations in productivity between individual operators on a
single shift. When the work practices of the least and most productive operators were
compared, it became evident that although all were engaged in the same task, differ-
encesin the way they performed it were creating huge swings in productivity.
. To adopt a lean manufacturing approach, the bank first matched the flow of
incoming checks to processingcapacity.At the end of each businessday, the check
processing operation was swarnped with more checks than it could handle; this
bottleneck created the false impression that capacity was constrained. The bank
applied just-in-time principles to the processing of incoming checksand spread the
checkflow evenly through the day. A secondbottleneck occurred at the beginning of
the day; standard practice dictated that all checkspresented for morning processing
were sorted three times. This processprevented the processingoperation from han-
dling the morning checkvolume in time to meet the accountposting deadline. How-
ever,many of the chegksdid not need to be completed by the morning deadline, and
once the sorting of theselow-priority items was shifted to later in the day when vol-
umes were lower, capacity increasedby 122percent.
By uncovering and freeing up "phantom" capacity that had previously been
taken up by waiting time, maintenance, and rework, they could increase actual
capacity by more than 25 percent without investing in additional equipment. The
bank was able to both sell its services to other banks at an attractive price and to
expand capacity during the most time-sensitive period of the day, when its services
could be priced at a premium. In all, these one-off improvements resulted in a more
than doubling of the margin contributed by the operation.
A medical laboratory had been improving cycle time from test sarnirls receipt to
shipment for several years and had achieved a 30 percent reduciion, primarily by
using new technology.However, doctors were still asking for faster responses.Using
performance benchmarkin& the lab quality coordinator found some examples of
manufacturing plants that had reduced cycle time by as much as90 percentwith little
capital investment. The coordinator discovered that these improvements were not
achieved simply by making each step work faster, but also by identifying and
reducing waste that existed between the processsteps,such as movement, waiting,
and inventory. By learning about lean production techniquesand changing the flow
of test samplesin the lab, the organization was able to reduce cycle time by another
20 percent within sevenmonths.y
Six Sigma is even being successfullyimplemented in local government settings.
Consider the caseof the city of Ft. Walme,Indiana. Beforehe was electedmayor of the
city, Graham Richard had founded a qualify leaming network in 1991.Thanks to ihe
TQM Network, more than 40 small and medium-sized companies,nonprofit organi-
zations, and local government.now provide Six Sigma training to their employees.
s00 . part 3 Six Sigma and the TechnicalSystem

When he took office in January 2000,1

Fort Wapre into membership in the Nortt

Fne or using services offered by the city.,,