INNOVATIVE QUALITY TQM – LEAN MANAGEMENT – SIX SIGMA Day 1 Developed by Olga Trofymova, PhD

2. INNOVATIVE QUALITYTQM – LEAN MANAGEMENT – SIX SIGMA Day 1Developed byOlga Trofymova, PhD

3. Olga Trofymova • Director of the Quality Centre, Kharkov, Ukraine. • Trainer and consultant for SME with 10-years experience. • Associated professor at National Aerospace University. • STE and trainer at 11 International projects (TACIS, World Bank, DFID, TEMPUS, SWISSContact). The main expertise is training and consultancy providing for trainers, consultants and SME. • Partner and trainer of WIFI Austria; designer, organiser and trainer of training programs on Quality management and Lean production for SME in Austria, Germany, Russia and Ukraine together with WIFI, ACVR, Magna Styer, Quality Austria, Moody International. • Lead Auditor of IntertekMoody International Certification Body according to ISO 9001 requirements. Project manager on quality improvement for SME.

4. Training rules • You will be expected to share your experiences and ideas with the class as a whole. We will learn from each other. • The only «bad» question is an unasked question. • Don’t feel uncomfortable asking questions - it’s how to learn. • We certainly intend to ask you questions. We will frequently ask you to read or work on a hypothetical business situation. These we call «cases». We will expect you to share your thoughts and ideas on the cases with the class. • We may want you to discuss openly in the class issues with you • We have experienced at your enterprises and/or clients. If this • represents a problem, please, let us know.

5. Training program. Day 1 • Lean management as a movement • History of Lean Management • Toyota Production System (TPS) • Principles of Lean • The Goals of Lean Enterprise • Value Stream Mapping (Current State) • Lean Metrics • Value-add analysis • Time value maps • Value-add chart • Future State Value Stream Mapping

6. Training program. Day 2 • Reducing Lead Time and Non-Value-Add Cost • Just-In-Time • One-Piece Flow • Generic Pull System • Replenishment Pull Systems • Two-Bin Replenishment System • Kanban • Quick Changeover (SMED) • Total Productive Maintenance (TPM) • Error Proofing (Poka-Yoke) • Heijunka - Production Leveling

7. Training program. Day 3 • Work cell optimization • 5S • Standard Operations • Visual Management • Car Assembling Game

8. Training program. Day 4 • What is Six Sigma • Six Sigma Tools • Histogram • Control Charts • Process Sigma • Process Capability • y = f (x) Formula • DMAIC • Six Sigma Storyboards • FMEA • Lean Six Sigma for services

10. History of Lean Management Source: http://www.strategosinc.com/lean_manufacturing_history.htm

11. What is Lean? • Lean manufacturing, lean enterprise, or lean production, often simply, "Lean," is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the customer who consumes a product or service, "value" is defined as any action or process that a customer would be willing to pay for. • Essentially, lean is centered on preserving value with less work. Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS) (hence the term Toyotism is also prevalent) and identified as "Lean" only in the 1990s.

12. Toyota Production System (TPS) • A production system which is steeped in the philosophy of "the complete elimination of all waste" imbuing all aspects of production in pursuit of the most efficient methods. • This production control system has been established based on many years of continuous improvements, with the objective of "making the vehicles ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly as possible." • The system is a major precursor of the more generic "Lean manufacturing." Taiichi Ohno. Shigeo Shingo and Eiji Toyoda developed the system between 1948 and 1975.

13. Toyota House „Quality must be built in during the manufacturing process!“ (Toyoda Sakichi)

14. TPS Concept. Jidoka – highlighting/visualization of problems • Quality must be built in during the manufacturing process! • If equipment malfunction or a defective part is discovered, the affected machine automatically stops, and operators cease production and correct the problem. • For the Just-in-Time system to function, all of the parts that are made and supplied must meet predetermined quality standards. This is achieved through jidoka.

15. TPS Concept. Jidoka – highlighting/visualization of problems • Jidoka means that a machine safely stops when the normal processing is completed. It also means that, should a quality / equipment problem arise, the machine detects the problem on its own and stops, preventing defective products from being produced. As a result, only products satisfying quality standards will be passed on to the following processes on the production line. • Since a machine automatically stops when processing is completed or when a problem arises and is communicated via the "andon" (problem display board), operators can confidently continue performing work at another machine, as well as easily identify the problem's cause to prevent its recurrence. This means that each operator can be in charge of many machines, resulting in higher productivity, while continuous improvements lead to greater processing capacity.

16. TPS Concept. Just-in-Time – Productivity improvement • Making only "what is needed, when it is needed, and in the amount needed!” • Producing quality products efficiently through the complete elimination of waste, inconsistencies, and unreasonable requirements on the production line. • In order to deliver a vehicle ordered by a customer as quickly as possible, the vehicle is efficiently built within the shortest possible period of time by adhering to the following 4 steps:

17. TPS Concept. Just-in-Time – Productivity improvement • When a vehicle order is received, a production instruction must be issued to the beginning of the vehicle production line as soon as possible • The assembly line must be stocked with required number of all needed parts so that any type of ordered vehicle can be assembled • The assembly line must replace the parts used by retrieving the same number of parts from the parts-producing process (the preceding process) • The preceding process must be stocked with small numbers of all types of parts and produce only the numbers of parts that were retrieved by an operator from the next process

18. TPS Goals • The main objectives of the TPS are to design out overburden (muri) and inconsistency (mura), and to eliminate waste (muda). The most significant effects on process value delivery are achieved by designing a process capable of delivering the required results smoothly; by designing out "mura" (inconsistency). It is also crucial to ensure that the process is as flexible as necessary without stress or "muri" (overburden) since this generates "muda" (waste). Finally the tactical improvements of waste reduction or the elimination of muda are very valuable.

19. Principles of Lean • Specify value from the standpoint of the end customer by product family • Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create value • Make the value-creating steps occur in tight sequence so the product will flow smoothly toward the customer • As flow is introduced, let customers pull value from the next upstream activity • As value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in which perfect value is created with no waste.

20. Principles of Lean

21. The Goals of the Lean Enterprise • Goal #1. Improve quality. • Goal #2. Eliminate waste. • Goal #3. Reduce lead time. • Goal #4. Reduce total costs. • Why are these goals important? • Implementing lean tools and techniques will enable your company to meet its customers' demand for a quality product or service at the time they need it and for a price they are willing to pay. • Lean production methods create business and manufacturing processes that are agile and efficient. • Lean practices will help your company manage its total costs and provide a fair ROI to its stakeholders.

22. Lean Goal #1. Improve quality • Quality is the ability of your products or services to conform to your customers' wants and needs (also known as expectations and requirements). Product and service quality is the primary way a company stays competitive in the marketplace. • Quality improvement begins with an understanding of your customers' expectations and requirements. Once you know what your customers want and need, you can then design processes that will enable you to provide quality products or services that will meet their expectations and requirements. In a lean enterprise, quality decisions are made every day by all employees.

23. Lean Goal #1. Improve quality. How to do it • Begin your quality-improvement activities by understanding your customers' expectations and requirements. Tools such as quality function deployment are helpful ways to better understand what your customers want and need. • Review the characteristics of your service or product design to see if they meet your customers' wants and needs. • Review your processes and process metrics to see if they are capable of producing products or services that satisfy your customers. • Identify areas where errors can create defects in your products or services. • Conduct problem-solving activities to identify the root cause(s) of errors. • Apply error-proofing techniques to a process to prevent defects from occurring. You might need to change either your product/service or your production/business process to do this. • Establish performance metrics to evaluate your solution's effectiveness.

24. Lean Goal #2. Eliminate Waste • Waste is any activity that takes up time, resources, or space but does not add value to a product or service. An activity adds value when it transforms or shapes raw material or information to meet your customers' requirements. Some activities, such as moving materials during product production, are necessary but do not add value. A lean organization's primary goal is to deliver quality products and services the first time and every time. As a lean enterprise, you accomplish this by eliminating all activities that are waste and then targeting areas that are necessary but do not add value. • To eliminate waste, begin by imagining a perfect operation in which the following conditions exist: • Products or services are produced only to fill a customer order - not to be added to inventory. • There is immediate response to customer needs. • There are zero product defects and inventory. • Delivery to the customer is instantaneous.

25. Types of Waste • Overproduction • Waiting • Transport • Extra Processing • Inventory • Motion • Defects • Underutilization of employees

26. Types of Waste. Overproduction • The worst type of waste, overproduction occurs when operations continue after they should have stopped. The results of overproduction are • 1) products being produced in excess quantities and • 2) products being made before your customers need them.

27. Types of Waste. Waiting • Also known as queuing, this term refers to the periods of inactivity in a downstream process that occur because an upstream activity does not deliver on time. Idle downstream resources are then often used in activities that either don't add value or, worse, result in overproduction.

28. Types of Waste. Transport • This is the unnecessary movement of materials, such as work-in-progress (WIP) materials being transported from one operation to another. Ideally, transport should be minimized for two reasons: • it adds time to the process during which no value-added activity is being performed, and • goods can be damaged during transport.

29. Types of Waste. Extra processing • This term refers to extra operations, such as rework, reprocessing, handling, and storage, that occur because of defects, overproduction, and too much or too little inventory. Another example of extra processing is when an inside salesperson must obtain customer information that should have been obtained by the outside salesperson handling the account. It is more efficient to complete a process correctly the first time instead of making time to do it over again to correct errors.

30. Types of Waste. Inventory • This refers to any excess inventory that is not directly required for your current customer orders. It includes excess raw materials, WIP, and finished goods. Keeping an inventory requires a company to find space to store it until the company finds customers to buy it. Excess inventory also includes marketing materials that are not mailed and repair parts that are never used.

31. Types of Waste. Motion • This term refers to the extra steps taken by employees and equipment to accommodate inefficient process layout, defects (see the section below), reprocessing, overproduction, and too little or too much inventory. Like transport, motion takes time and adds no value to your product or service. An example is an equipment operator's having to walk back and forth to retrieve materials that are not stored in the immediate work area.

32. Types of Waste. Defects • These are products or aspects of your service that do not conform to specification or to your customers' expectations, thus causing customer dissatisfaction. Defects have hidden costs, incurred by product returns, dispute resolution, and lost sales. Defects can occur in administrative processes when incorrect information is listed on a form.

33. Types of Waste. Underutilization of human resource • Every worker, even the people do the most routine job in the organization will have something to contribute to the organization than their muscle power. Therefore not making the full use of the human resource is a waste. Wasting this without using to fight against wastes is the biggest loss for the organization. • Most of times the human talents are deteriorated because they are not identified by the decision makers. Decision makers do not have the mind set of managing human resource productively. Also most of the organization do not have a proper system to use the talents of the people. They also do not have a good motivation and rewarding system for the talents.

34. Lean Goal #2. Eliminate Waste. How to do it • Begin your team-based waste-reduction activities by identifying a product or operation that is inefficient. • Identify associated processes that perform poorly or need performance improvement. If appropriate, select the operation in your organization with the lowest production output as a starting point for your waste-reduction activities. • Begin by creating a value stream map for the operation you are reviewing. • Review the value stream map to identify the location, magnitude, and frequency of the seven types of waste associated with this operation. • Establish metrics for identifying the magnitude and frequency of waste associated with this operation. • Begin your problem-solving efforts by using lean principles to reduce or eliminate the waste. • Periodically review the metrics you have identified to continue eliminating waste associated with this operation. • Repeat this process with other inefficient operations in your organization.

35. Lean Goal #3. Reduce Lead Time • Lead time is the total time it takes to complete a series of tasks within a process. Some examples are the period between the receipt of a sales order and the time the customer's payment is received, the time it takes to transform raw materials into finished goods, and the time it takes to introduce new products after they are first designed. By reducing lead time, a lean enterprise can quickly respond to changes in customer demand while improving its return on investment, or ROI. • Reducing lead time, the time needed to complete an activity from start to finish, is one of the most effective ways to reduce waste and lower total costs.

36. Lead Time components • Cycle time. This is the time it takes to complete the tasks required for a single work process, such as producing a part or completing a sales order. • Batch delay. This is the time a service operation or product unit waits while other operations or units in the lot, or batch, are completed or processed. Examples are the period of time the first machined part in a batch must wait until the last part in the batch is machined, or the time the first sales order of the day must wait until all the sales orders for that day are completed and entered into the system. • Process delay. This is the time that batches must wait after one operation ends until the next one begins. Examples are the time a machined part is stored until it is used by the next operation, or the time a sales order waits until it is approved by the office manager.

37. Lead Time solutions. Product design • Product rationalization. This involves simplifying your product line or range of services by reducing the number of features or variations in your products or services to align more directly with your customers' wants and needs.

38. Lead Time solutions. Manufacturing • Process simulations. These enable you to model your work processes to reveal waste and test the effects of proposed changes. • Delayed product configuration. This means waiting until the end of your production cycle to configure or customize individual products. • One-piece, or continuous, flow of products and information. This enables you to eliminate both batch and process delays. • Technology (i.e., hardware and software) solutions. These enable you to reduce cycle time and eliminate errors. • Quick changeover. This involves making product/service batch sizes as small as possible, enabling you to build to customer order. • Work process standardization. This means identifying wasteful process steps and then standardizing "best practices" to eliminate them.

39. Lead Time solutions. Supply • Demand/supply-chain analysis. This reveals wasteful logistical practices both upstream and downstream in your demand/supply-chain. It often reveals excess inventories being held by your customers, your organization, and/or your suppliers due to long manufacturing lead times that result in overproduction. Freight analysis sometimes reveals that overproduction occurs in an effort to obtain freight discounts. However, these discounts do not necessarily offset the costs of carrying excess inventory.

40. Lean Goal #3. Reduce Lead Time. How to do it • Begin your team-based lead-time-reduction activities by creating a value stream map for the business process you are targeting. • Calculate the time required for the value-added steps of the process. • Review the value stream map to identify where you can reduce lead time. Brainstorm ways to make the total lead time equal the time required for the value added steps that you calculated in step 2. • Determine what constraints exist in the process and develop a plan to either eliminate them or manage them more efficiently. • Establish metrics to identify the location, duration, and frequency of lead times within the process. • Once you have established a plan for improving the process, measure the improvement. • Repeat this process for other inefficient operations in your organization.

41. Lean Goal #4. Reduce Total Costs • For cost management to be successful, everyone in your organization must contribute to the effort. When you implement a process to reduce total costs, your goal is to spend money wisely to produce your company's products or services. • To minimize the cost of its operations, a lean enterprise must produce only to customer demand. It's a mistake to maximize the use of your production equipment only to create overproduction, which increases your company's storage needs and inventory costs. • Before you can identify opportunities to reduce costs, your team should have some understanding of the way that your company tracks and allocates costs and then uses this information to make business decisions.

42. Cost-Reduction Methods • Target Pricing. This involves considering your costs, customers, and competition when determining how much to charge for your new product or service. The rise and fall of production volumes impact both the variable and fixed costs of the product - and ultimately how profitable it will be for your company. • Target Costing. This involves determining the cost at which a future product or service must be produced so that it can generate the desired profits. Target costing is broken down into three main components, which enables designers to break down cost factors by product or service, components, and internal and external operations. • Value Engineering. This is a systematic examination of product cost factors, taking into account the target quality and reliability standards, as well as the price. Value engineering studies assign cost factors by taking into account what the product or service does to meet customer wants and needs. These studies also estimate the relative value of each function over the product's or service's life cycle.

43. Cost-Reduction Methods • Activity-based costing (ABC). ABC systems allocate direct and indirect (i.e, support) expenses - first to activities and processes, and then to products, services, and customers. For example, your company might want to know what percentage of its engineering and procurement costs should be allocated to product families to determine product-contribution margin. In addition, you can do indirect cost allocations for each customer account, which enables you to do a customer-profitability analysis. • Kaizen (i.e., continuous improvement) costing. This focuses on cost-reduction activities (particularly waste reduction and lead-time reduction) in the production process of your company's existing products or services. • Cost maintenance. This monitors how well your company's operations adhere to cost standards set by the engineering, operations, finance, or accounting departments after they conduct target costing and kaizen-costing activities.

44. Lean Goal #4. Reduce Total Costs. How to do it • 
1. Decide whether your cost-improvement efforts will begin with new or existing product lines. • 
2. If new products or services are the focus of your improvement efforts, techniques to consider using are target pricing, target costing, and value engineering. • 
3. If existing products or services are your focus, begin by reviewing your company's high-cost products and processes. Apply ABC, Kaizen costing, and cost maintenance to assist your cost-improvement initiatives.

45. Value Stream Mapping

46. Value stream maps • A value stream can be defined as all the steps – both value added and non value added – required to take a product or service from its raw materials state into the waiting arms of a happy customer. • Purpose • To capture all key flows (of work, information, materials) in a process and important process metrics. It helps employees understand how the separate parts of their company’s value stream combine to create products or services. • Why use a value stream map • More complicated to construct than other flowcharts, but much more useful for identifying and quantifying waste (especially in time and costs)

47. What is a value stream? • The term Value stream refers to all the activities your company must do to design, order, produce, and deliver its products or services to customers. A value stream has three main parts: • The flow of materials, from receipt from suppliers to delivery to customers • The transformation of raw materials into finished goods • The flow of information that supports and directs both the flow of materials and the transformation of raw materials into finished goods

48. Why Value Stream Mapping? • To set strategy before diving into tactics. The future state VSM is a macro level blueprint for change; road map • Enables us to SEE the process • Promotes systems thinking/seeing the whole. Helps us avoid sub-optimizing

49. Four Steps to Value Stream Mapping • Define and pick the product or product family • Create the “Current State” Value Stream Mapping (CSVSM) • Create the “Future State” Value Stream Mapping (FSVSM) • Develop an Action plan to make the FSVSM the CSVSM

50. Let’s create a Current State Value Stream “Whenever there is a product for a customer, there is a value stream. The challenge lies in seeing it.” -Learning to See, Lean Enterprise Institute