Transactional Six Sigma and Lean Servicing: Leveraging Manufacturing Concepts to Achieve World-Class Service

272 Pages·2002·4.91 MB·English

by  Betsi Harris Ehrlich

Transactional
SIX
SIGMA
and LEAN
SERVICING
™
Leveraging
Manufacturing Concepts
to Achieve
World-Class Service
BETSI HARRIS EHRLICH
ST. LUCIE PRESS
A CRC Press Company
Boca Raton London New York Washington, D.C.
© 2002 by CRC Press LLC
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Library of Congress Cataloging-in-Publication Data
Ehrlich, Betsi Harris
Transactional Six Sigma and Lean Servicing : leveraging manufacturing concepts to
achieve world class service / Betsi Harris Ehrlich.
p. cm.
Includes bibliographical references and index.
ISBN 1-57444-325-9
1. Service industries—Management. 2. Total quality management. I. Title.
HD9980.5 .E35 2002
658.4′013—dc21 2002018976
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Dedication
To my loving parents, Paul and Dixie Plummer
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Preface
During the early part of World War II, the statistical methods used by statisticians for
years were successfully applied to the control of quality in production. [These methods
were] pioneered by Dr. Shewhart of the Bell Telephone Laboratories. … About 10
years ago the technique was successfully applied to office operations. … To many
individuals, the comparison between production operations and office operations is
difficult. It is easy to understand the sampling of parts off the production line to
determine the number of defective parts. However, when converting units of production
and number of defective parts to office applications, the analogy becomes somewhat
hazy. It has been argued that the two are not the same.
Systems and Procedures: A Handbook for Business and Industry, 1959
The more things change, the more they stay the same. Nowhere is that truer than in
quality management. When I started in this field more than 20 years ago, Quality
Circles — under the umbrella of “participative management” — was the latest
management rage, courtesy of Dr. Joseph M. Juran. Working as an industrial engineer
at a large bank, I received the mandate from our division head, who most likely read
the latest edition of Fortune touting this breakthrough strategy of the world’s top
corporations. Consultants were hired, plans made, and expectations raised.
This cycle repeated itself, in one form or another, for the 20-plus years since
and continues to this day. The latest breakthrough, of course, is Six Sigma.
The average life of a breakthrough strategy along the lines of Quality Circles,
Total Quality Management (TQM), and Reengineering is approximately 10 years after
popularization, with interest peaking at about the 7th or 8th year. Bill Smith at Motorola
started the Six Sigma effort in the 1980s; however, it was not until the early 1990s
that Larry Bossidy at Allied Signal and later Jack Welch at General Electric (GE)
popularized it as a breakthrough business strategy. This being 2002, I debated whether
I should write a book on an “outdated” concept when perhaps I should be researching
the next breakthrough strategy revolutionizing the world’s top corporations.
My answer is yes, no, and maybe, interpreted statistically as maybe. Yes, Six
Sigma will no doubt be among the postmortems of the next generation. No, I am
not wasting effort in being among those who document and add to the Six Sigma
knowledge bank. And finally, as a professional in the field, perhaps I should be
researching the breakthrough strategy that will take American companies to the next
level of global competitiveness.
THE CONTINUOUS JOURNEY
In the spirit of the profession, the study of quality management is a continuous journey
of improvement, much like the processes we continually strive to improve. Who can
argue that each new breakthrough strategy does not improve upon the previous one?
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Our journey begins with the ancients debating whether the planets revolved
around the sun or the other way around. Tycho Brahe had the unusual idea to solve
the debate by taking measurements that were accurate enough to determine the
motions of each.* Previous debates centered on philosophical arguments. Brahe’s
radical idea to study a problem by measurement and experimentation, rather than
opinion, began the journey toward the scientific method.
The journey continues through the age of enlightenment with the likes of Pascal,
Gauss, and Poisson, among others, developing and refining probability and error
theory. Galton’s studies of hereditary traits in the late 19th century led to the
development of correlation and regression, establishing the basis of modern statis-
tical methods that were further developed by Pearson, Fisher, Gosset, and Spearman.
From modern statistics came the industrial quality control techniques of
Shewhart, Dodge, and Romig. After World War II, when American industry shunned
him, Deming took his statistical methods of continuous improvement to Japan, giving
them the tools to easily surpass the United States in the quality wars. Juran, Ohno,
and Taguchi were significant contributors to the quality movement during the post-
WWII years, developing many of the basic quality tools used today.
Once Americans realized the inequities in manufacturing quality with Japan, we
quickly turned around our factories by applying Japanese quality techniques, Amer-
ican style, enabling the United States to achieve one of the highest standards of
living in the world.
From Deming and Juran came the idea that those closest to the process are in
the best position to improve it. Quality Circles was the first widespread adaptation
of this concept, followed by TQM, Continuous Process Improvement (CPI), and
Business Process Reengineering (BPR). Each new strategy was a variant of the
previous, recognizing their weaknesses and striving to improve.
Six Sigma builds upon many of the successful elements of past breakthrough
strategies and incorporates unique methods of its own. Most prominent of these are
the rigorous quality targets (six sigma equals 3.4 defects per million opportunities)
and an emphasis on measurements and statistical methods.
Just as our profession urges a “better, faster, and cheaper” product — what I
refer to as the velocity of improvement — Six Sigma will no doubt yield to a better,
faster, cheaper breakthrough strategy. If it does not, our future generation of quality
management professionals will have failed.
That said, I firmly believe that all significant quality improvement strategies for
the past 40 years are variants of Deming’s original Plan–Do–Check–Act continuous
improvement strategy. They all use the scientific method to find and fix problems
on a continual basis, usually within a team environment. The tools and techniques
may have become more sophisticated along the way, but the basic approach remains
the same.
* Feynman, Richard P., Six Easy Pieces: Essentials of Physics Explained by Its Most Brilliant Teacher,
Persus Books, Reading, MA, 1995, p. 90.
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TRANSACTIONAL SIX SIGMA AND LEAN SERVICING
Service industries have traditionally lagged manufacturing in adoption of quality
management strategies, and Six Sigma is no exception. Its genesis was when Motor-
ola engineer Bill Smith recognized that field failures of a product were correlated
to the amount of rework needed during the manufacturing process. From this came
the goal of driving out nonconformities through achieving a six sigma level of
defects. It was not until a decade later that Six Sigma was widely applied to service
processes at GE.
Having the unique advantage of applying practically all of the latest strategies
in servicing environments over the last 20 years, in addition to keeping up with
leading-edge manufacturing quality methods, I am impressed with what I believe is
the next generation of breakthrough strategy: Lean Manufacturing, and more spe-
cifically Lean Servicing, which is applying lean concepts to transactional and
service processes.
Lean Manufacturing evolved from the Toyota Production System (TPS), devel-
oped during the post-WWII years, incorporating concepts borrowed from Henry
Ford’s Highland Park and River Rouge Model T factories. Ford named his mass
production system “flow manufacturing,” a central concept of Lean Manufacturing.
Ford’s simple key concepts of a conveyor line to move work to the worker, special-
ization of labor to separate work into simple repetitive tasks, and an integrated supply
chain to bring materials to the assembly line share many traits with lean. Ford’s mistake
was to arrange his fabrication machinery into separate workstations, which translated
into batch production, queues, inventory, and ultimately a “push” scheduling system.
Taiichi Ohno of the Toyota Motor Company blended Ford’s concepts of flow
manufacturing with his own unique ideas, such as elimination of all forms of waste,
including time, materials, and space; jidoka (built-in quality); gemba (action on the
production line); and “pull” scheduling, meaning that the product is built to actual
demand rather than forecasts. Continually improved since inception, TPS is synon-
ymous with Lean Production and has made Toyota one of the most profitable
companies in the world.
I have applied the concepts of Lean Production in transactional environments
to achieve significant improvements in a system I have coined Lean Servicing.
The concepts of built-in quality, continuous flow, and small-batch production, along
with eliminating all forms of waste are especially adaptable to transactional pro-
cesses, such as an insurance claim moving through the authorization process.
INTENT AND STRUCTURE OF THE BOOK
This book is intended for those new to Six Sigma and Lean Production concepts,
as well as the more experienced quality professional. Its primary purpose is to serve
as a practical guide and reference for practitioners implementing Six Sigma in a
transactional environment.
Case studies are included to help the reader understand how Six Sigma and Lean
Servicing are successfully applied in familiar situations. Liberal use of examples,
graphics, and tables also assist in explaining these often difficult concepts.
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Specially dedicated “technical zones” can be skipped with no interruption in the
main text. These may be of interest to the more technical and experienced reader as
well as serve as a reference for all readers when applying a particular tool or
technique.
Chapters 1 through 5 describe the foundation for successful implementation of
any broad company initiative, covering project and change management in addition
to working within teams. A history of quality management is provided to assist the
reader in gaining a deeper understanding of the long journey that has preceded where
we are today.
Chapters 6 through 10 describe the Define, Measure, Analyze, Improve, and
Control (DMAIC) process, the cornerstone of Six Sigma. Design for Six Sigma
(DFSS) is covered in Chapter 11. The tools and techniques are described, along with
examples and lessons learned from the trenches.
Chapter 12 is an introduction to Lean Servicing and how it can be utilized to
achieve the next level of service excellence and ensure increasing velocity in our
never-ending journey of continuous improvement.
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Acknowledgments
Many individuals have assisted in creating this book. Most of all I want to
acknowledge my family: my husband Carl and sons Adam and Andrew. Their
assistance, understanding, and patience are greatly appreciated. Much appreciation
goes to Rebecca Fay for her assistance and inspiration in seeing this through. I wish
to acknowledge Tricia Nichols and Carrie Roediger for keeping my spirits up when
I needed it most. I would like to acknowledge the staff and volunteers of the American
Society of Quality, especially Jim McClinn and Ronald Atkins, for providing the
opportunity to be involved with the Six Sigma Black Belt certification process,
leading to a greater appreciation of the Six Sigma improvement approach. A special
word of appreciation goes to Forrest Breyfolge, III, and his staff at Smarter Solutions,
Inc., who provided my Black Belt training. Forrest’s guidance and enthusiasm for
Six Sigma opened my eyes to its many possibilities. And finally, thanks to Drew
Gierman, Erika Dery, and Amy Rodriguez at CRC/St. Lucie Press for their assistance
and patience throughout the publishing process.
Betsi Harris Ehrlich
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Author
Betsi Harris Ehrlich has more than 20 years experience as a professional
industrial engineer, primarily in financial services and health care. She graduated
with highest honors from the Georgia Institute of Technology with an industrial
engineering degree concentrating in the healthcare industry and holds a Masters of
Business Administration with a specialty in finance from the University of Connect-
icut. Ehrlich has spent the majority of her professional career as a technical specialist
and leader in quality and process improvement and has gained a unique perspective
on the evolution of the quality management field from first-hand experience. In
addition to being a practitioner, Ehrlich has experience as an adjunct professor,
developing curriculum and teaching graduate and undergraduate classes in statistical
process control and quality management. Ehrlich is certified as a Six Sigma Black
Belt by the American Society for Quality (ASQ) and is recognized by ASQ as a
subject matter expert in the field of Six Sigma, having participated in the develop-
ment and piloting of the Black Belt certification exam offered by the society. She
has authored numerous technical publications and newspaper columns on a variety
of topics, including quality management. Ehrlich is listed in Marquis’s Who’s Who
in America and Who’s Who in the World, the American Biographical Institute’s 2000
Notable American Women, and the International Biographical Centre’s World Who’s
Who of Women and has received many honors relating to her professional career.
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Introduction
Time keeps on slipping, slipping, slipping into the future. … I want to fly like an eagle,
to the sea, fly like an eagle … let my spirit carry me. … I want to fly right into the
future. …
“Fly Like an Eagle,” The Steve Miller Band, 1976
The corporate model we have spent the past century developing and improving will
almost surely disappear with this generation. Vast changes in socioeconomic and
political forces guarantee the demise of the modern corporation — the monolithic
structures we have all despised at some point, usually after spending too much time
and mental energy desperately trying to solve a rather simple issue with an under-
trained, underpaid, and misrepresented “customer service representative.”
Employment growth for the past 20 years has been in mid- and small-size
companies, with the big corporations’ growth rates steadily decreasing. Although it
has always been the case that small upstarts displace entrenched industry leaders
(the average life of a corporation is only 30 years),1 the trend has accelerated in
recent years. In addition to the accelerating shift in power between upstarts and
veterans, the methods by which market leadership is attained are very different than
in past years. Industrial-era management from the mass-production days will surely
be a page in the history books by mid-century. The internet and its proliferation of
dot-com successes and failures are the tip of the iceberg compared to the unorthodox
business climate that lies ahead.2
Innovation, flexibility, and rapid change — are they the keywords or the
buzzwords for 21st century business? Probably a little of both. Companies likely to
succeed are those that transcend the latest breakthrough management strategy. Look-
ing beyond marketing campaign copy, these companies share traits of innovation
and flexibility (buzzwords) as well as strong leadership, solid operational perfor-
mance, and plain old-fashioned luck (keywords).3
This book is about solid operational performance — specifically, how to achieve
it. It involves a multidisciplinary approach, combining Six Sigma quality and lean
production methods to achieve lasting profitability.
Japanese carmakers, specifically the Toyota Motor Company, long ago realized
the simple fact that product quality is the result of process quality. It is astonishing
that after years of evidence to this fact, most companies still do not understand this
concept. Although many are quick to tout their latest breakthrough management
strategy to produce high-quality products at a competitive price while empowering
their employees to offer their stakeholders the value supply chain through gap
analysis of vertical markets, and so forth and so on, translating theory into action
and subsequent results is difficult at best.
© 2002 by CRC Press LLC