Testimonials

Top 5 ways to identify Lean Six Sigma project opportunities by Mike Titchen

How should an organisation go about identifying Lean Six Sigma project opportunities for their Black, Green and Yellow Belts?

The Top 5 Project identification methods are listed below:

• Value Stream Mapping
• CTS (Critical to success) Flow Down
• Cost of Quality
• Customer Journey
• Rolled Throughput Yield

Each will be explained in turn:

Value Stream Mapping is the preferred method. It is a classic Lean tool used to identify opportunities for improvement. It is a specialised form of process map which shows material and information flows, together with inventories and lead times. It is particularly useful for identifying blockages by highlighting where the inventory (and hence long wait time) lies within the process. It is usual to record other key pieces of information related to key process steps such as scrap rates, up times, yields and change-over times, and these can also reveal problems and issues to be tackled by improvement projects.

It is common to map the current process (current state map) and then to produce a vision for the future (future state map) which includes the Lean and Six Sigma projects necessary to move from the current to the future state.

Value Stream Mapping can be carried out at any level within a business. At business unit or product group level (level 1)) it is likely to uncover possible Black Belt projects, at departmental level (Level 2) Green Belt projects, and at line or office level (Level 3) Yellow Belt projects.

This exercise can be carried out in 3 or 4 days (with good preparation) and the Belts being taught should be familiar with this technique, although they might need supporting for the first one or two they do.

Value Stream Mapping can also be easily adapted to work in the transactional world of the service industry.

CTS (Critical to Success) Flow Down is the second of the Top 5 methods. This method draws upon existing metrics and indicators within an organisation to uncover project opportunities. It is a form of gap analysis because its aim is to uncover where significant gaps exist between desired and actual performance, and to highlight where standard investment projects or action plans are not expected to 'fill the gap'. It is particularly powerful when some way into the strategic planning cycle where gaps are beginning to concern executives.

There are three main 'Criticals' to consider: Critical to Cost (CTC), Critical to Quality (CTQ) and Critical to Delivery (CTD), and these are obviously linked to the classic customer requirements of competitive pricing, freedom from defects and prompt/accurate deliveries.

The CTC aspect is typically linked to the scrutiny of budgets and variances, and makes use of the Pareto principle. If an organization finds where the major spends or discrepancies are, project opportunities should be revealed when digging down to uncover the causes.

The CTQ and CTD aspects follow a similar path but utilise quality and delivery metrics. Classic quality metrics relate to scrap or rework Paretos, final test rejects, customer complaints or warranty issues. Typical delivery metrics relate to lead time, fill rate or OTD metrics.

The 'Cost of Quality' method, the third option, attempts to put a financial metric to all aspects of quality, and in this way enables an organisation to properly prioritise it.

When an organisational executive is made aware of the fact that attaining necessary quality levels for the customer typically costs up to 25% of sales, he is likely to take an interest.

The 'Cost of Quality' total is usually made up of four broad areas:

1. The cost of internal failure (scrap and rework discovered and within the organisation)
2. The cost of external failure (customer complaints, warranty and litigation)
3. The cost of inspection (test equipment and QC personnel)
4. The cost of prevention (risk management, audits, QA personnel and improvement activities)

The top two can be considered to be the costs of poor quality (and the cost of lost good-will and lost business can be added here as well), and the bottom two the costs of good quality.

Obtaining an exact figure for the COQ can be a daunting affair but reaching a reasonable estimate is not too difficult with the right team. It is common for the cost of good quality to be less than the cost of poor quality (one tenth to one fourth of the total cost according to Juran's Quality Control Handbook, Fourth Edition) and so the key to improvement is to focus projects on reducing the cost overall by concentrating more on the prevention side.

'Customer Journey' is the fourth of the Top 5 methods. This one is particularly powerful for customer facing service organisations as it is based on the results of a specialised form of focus group activity, carried out with customers. In it the focus group is asked to map out the journey typical customers take as they interact with an organisation.

The moderator then maps this on the wall and asks the focus group to describe what is important about each step. The participants are then asked to rate the organisation against the competition (or expectations) for each aspect. The ones scoring badly against the competition or expectations are opportunities for improvement and hence Lean Six Sigma Projects. It is probably easiest to explain this method by means of an example:

Participants are carrying out a Customer Journey exercise for an insurance group. The journey probably falls into several steps, a few of which are illustrated below:

The customer needs to find out what policy and provider to go with

They then need to start the policy and set up the Direct Debits

They need to make a claim ...... etc etc

For the first bullet aspects such as brand and product awareness, website quality, price competitiveness, knowledge and helpfulness of call centre staff (etc.) will probably emerge and one or two of these may be scored low. It is sometimes useful for the moderator to get the focus group to label each of the aspects as 'attractor points', 'voting points' and 'moments of truth', as this will further help the organisation align projects with strategic objectives.

The concept of a 'Rolled Throughput Yield', the fifth selected method, is one that is linked to the 'Right First Time' principle, as it is the probability of any entity (or value object as it is sometimes termed) flowing through the entire process without the need to rework or remake. It is calculated by multiplying the right first time proportions for each process step. It is very powerful at pointing an organisation towards the processes step which is producing the highest amount of defects. It is also useful as it forces the organisation to work on that step, as any work on any other step is likely to have little effect on the overall RTY.

An example could consider a company seeking to increase its sales by finding our where to focus its Lean Six Sigma resource to best effect.

To do this the company breaks down their sales process into four main steps:

1. Web hits
2. Enquires
3. Quotes
4. Orders

For each step the 'Right First Time' proportion needs to be estimated. They would do this by counting the number of first time successes and dividing it by the number of opportunities. These throughput yields are then multiplied to provide the Rolled Throughput Yield. The step with the poorest 'Right First Time' yield is the place to start.

The Top 5 ways of identifying Lean Six Sigma project opportunities in this article have been explained so that organisations can use at least one of these methods, having found it interesting enough to try. There are other methods, of course, and experience will ensure that the method most appropriate in the circumstance can be recognised in the future.

As mentioned in this article's opening statement, it is the job of leadership to ensure that the right projects are selected for its Belts, and it is usually the job of the Lean Six Sigma Champion to ensure that the correct projects are worked on.

He or she will still need to ensure that project opportunities are passed through the Prioritisation, Selection and Launch stages, but having the right process in place to identify opportunities should help improve the effectiveness of the overall process.

To find out more about project selection, click here to contact us