Monday, March 29, 2010

Lean Tool of the Month-SMED

SMED or Single Minute Exchange of Dies is a manufacturing based term for the lean idea of minimizing down time of a process. In a traditional manufacturing process a die is a part of the machinery that helps to mold a part. Changing a die requires the machine to stop producing parts, some amount of time and resources devoted to changing the die, then a restart period where the process is dialed in to make the next good parts. The idea is to minimize this down time because its non-value added.

Just because the description I just gave is manufacturing based, does not mean that those of you in an office should stop reading here. Read on, because SMED applies to almost every process, regardless of the "product" that is produced. It does not matter if that process is transactional, front office, or back office, SMED applies to many of them.

Lets start with a visual example of SMED. Click this link for a video of SMED in a non-manufacturing environment.

So, from what we've already discussed and seen the generalized goal of SMED is to reduce Non-Value Added Time (NVA) associated with changing over from one value added activity to the next value added activity. If we consider this general goal, we can find many opportunities to SMED our office and transactional processes. An example might help illustrate. Suppose we have a process for completing a sales forecast. The Value-Add of the process is the end result, the forecast, and all of the steps associated with actually moving that forecast towards completion. Some of those steps might be; 1. Sales force enters known demand changes from their customers, 2. Sales force changes are consolidated to a global forecast, 3. Business leaders adjust forecast for general market conditions. There are many more steps than these but these are good examples of VA steps that move the forecast towards completion. Typical NVA steps in this process might be; 1. Adminstrator corrects file errors before releasing for revision, 2. Review meetings for updates and adjustments, and 3. Publication of forecast to ERP to start demand planning. Looking at our NVA step examples, we could apply SMED to a couple of these to reduce them or move them "off" the system. Correcting errors is definitely a NVA activity, but if errors are present it is a necessary activity to ensure a "good" forecast results. Maybe we could establish an "offline" process of file review that goes on outside of the forecasting process and ensures that when the process kicks off each month, the files are error free and can proceed immediately to the sales input step. This first step of SMED is called converting internal setups to external setups. Using this strategy we take process steps that were conducted during the execution of the process and move them outside of the process. The second step of the SMED process would be to reduce internal setups that remain to a minimum. That idea might drive us to reduce the review meeting activity to a minimum required to move the consolidated forecast towards completion.

While the example used above may not speak to you in your particular office or transactional situation, if you take it in as an example of how SMED can be applied outside of the manufacturing machinery paradigm to reduce or eliminate NVA time from any process.

Monday, March 22, 2010

Six Sigma Tool of the Month-Defect vs Defective

What is a defect? What is a defective? Whats the diference? Why do I care? Last month I discussed capability analysis as the Six Sigma Tool of the Month. Get a refresher on that here. One of the ways that we can measure capability is a statistic called DPMO or Defects Per Million Opportunities. DPMO is a measure of how many times (out of a million) your process would produce good "product" vs bad "product". But that measurement begs the question, What is a defect? So that brings us to today's post.

A defect is a characteristic of the "product" that does not meet the customer's requirements (Specifications). in a DPMO calculation, each one would count as one. Does a defect make a unit of product defective? lets say we are producing a complex product, with multiple quality characteristics, say a new automobile or a monthly sales forecast for 20 products. Does one defect make the car or the sales forecast defective? In other words does a defect affect our decision about the purchase or retention of the product as a whole. If there is a blemish in the paint on the car, should the car go to the junkyard? If one product in our sales forecast is misrepresented by 10% does that mean the whole sales forecast is no good and should be scrapped? Probably not. That's the difference between a defect and a defective. A defective is a unit of product that can not be considered good due to a preponderance of failing quality characteristics (Defects) - OR - a failing quality characteristic that is so vital to the functional purpose of the product that its failing inhibits the primary function of the product. In our new car and sales forecast examples if the car had a paint blemish, a burnt out headlight, a wobbly wheel, a staticy radio, and cracked windshield and tear in the seat. We'd return that car and demand a new one, or not buy it in the first place. In our sales forecast, if one product was off by 10%, and another off by 12% and another off by 23% and so on, eventually we would not believe the forecast at all. Its defective. Again, using our two case examples, if the car was missing the engine or the forecast for a major product was off by 50% or more, that alone would make the forecast defective.

So why care about the difference between a defect and a defective. Its all about the pain the customer is feeling. remember, we measure process capability in terms of the deliverable(s) the customer cares about (specifications). Our reaction to measuring a missing engine in our automobile product as a defect might be different than if we take the customers' perspective that the product is unuseable without the engine (defective).

Monday, March 15, 2010

Quality Methods Take Business by Storm; Whats Next?

Quality Circles, Total Quality Management, ISO 9001, QS9000, Baldrige, Six Sigma, Lean. All of these methods have at one time had lots of attention in the press and in the Quality profession. Looking back on these methods and their moment in the sun, I have one (maybe more than one) observation. All of these methods are valuable and have had major impact through disciplined application in a number of different companies but the one thing that strikes me is that all of these methods have been touted as a savior for all of our quality woes.
Quality Circles were the thing in the 70's and 80's as America struggled to catch up with quality advances made in Japan under the tutelage of Dr. Deming. ISO 9001 took off in Europe and Asia first but steadily gained momentum in the US in the 90's as more and more international companies started to make it a condition of business. The 80's and 90's saw the excitement about possible benefits of achieving the Malcolm Baldrige National Quality Award. Much was made of stock indexes based on the Baldrige winners beating the S&P 500 by significant margins. Many of us lived through the PR assault for Six Sigma created by Jack Welch at GE and others. Dramatic claims were made about savings achieved using six sigma, attracting lots of media attention. Lean has been slowly but surely gaining adherent over the years as Toyota continues to perfect the method and tools that has led to the elimination of millions of dollars in waste around the world
I think this is an interesting parallel to what we have seen here in the US in the last 30 years when we think about the stock market. Many of these companies have been doing things well for years and they just happen to do it using lean, or six sigma, or ISO 9001, or Baldrige, or Quality Circles. People start to hear good things about this companu or that and what they are doing with Baldrige and how their stock price is up compared to everyone else and suddenly, everyone starts to thign that the secret to success is the quality method du jour. Then of course everyone wants to learn about the method and pretty soon, just like preppies in the 80's, everybody is doing that sexy new quality method and looking for the big payoff. Some find it, others don't. Which is just additional proof that its really not the method as much as the culture of the organization attempting to employ it.

Back to that interesting parrallel I mentioned before. I have been a working adult through the last two recessions (2008-Present, and 2001-2002) While I was not a working adult during the recessions in 1979-81, or 1987, I do remember them well and I think there is an interesting difference between these era's that relates to our attitude about quality. The recessions of 1979-81, and 1987 were what I would call "normal" recessions. Normal in that they were caused by normal economic factors such as inflation, failure to compensate for changes in economic conditions, oil shortages, conflict, etc....The recessions of 2001-02 and the present one are different from the others in that they have been primarily caused by irrational speculation coupled with poor business discipline. Not since the Great Depression has speculation caused so much upset in the world. Seems the old saying is true, those that dont learn from history are doomed to repeat it.

OK, so what does all this have to do with Baldrige, Lean and Six Sigma? They are parrallels for our experience in the markets, sexy methods that were going to come in like white knights and save us boatloads of money. Baldrige winners were supposed to outperform the S&P 500 by significant percentages, ISO 9001 was going to keep American companies in business, and of course, Six Sigma saved the day at GE, Allied Signal and others in the 90's. None of this is false information, all of these things happened. So why is it that every company is not going for Baldrige, or applying Six Sigma or Lean? Why are none of these the silver bullet once claimed? Basically, it comes down to what really matters and what we should be focused on: Quality Fundamentals. Quality Fundamentals or those things that help a company delight customers, drive continuous improvement, and enable excellence. Whether you call it ISO 9001, Baldrige, Six Sigma, or Lean, those are the things that matter most.

Monday, March 8, 2010

ISO Stuff: Customer Focus

In this series I will talk about sections of the ISO 9001 standard that I have seen organizations struggle with.

This week's topic. Customer Focus.

Customer Focus is one of those "Mom & Apple Pie" requirements in the ISO 9001 standard. The requirement states "Top management shall ensure that customer requirements are determined and are met with the aim of enhancing customer satisfaction." It was added to the 2000 revision of the standard to increase the emphasis placed on meeting customer needs and improving customer satisfaction. While these have always been interpreted as requirements, they were not previously explicitly stated. There's little action mandated directly by this requirement, but Customer Focus is connected directly to two other clauses of the standard that do require specific action. Customer related processes, which describes our obligations around understanding customer product and service requirements, whether explicitly stated, implied, or assumed; and Monitoring & Measurement of Customer Satisfaction, which, as the title gives away, requires that we determine a method of measuring customer satisfaction with our products and/or services. Take these three requirements together and what we have is a system that says that we must figure out what customers want, whether they tell us directly or not, meet those needs, measure how satisfied they are with our efforts and that Top Management needs to care about all of that and use the information to spread the voice of the customer throughout the company.

Ok, so how do we show that we meet this requirement? This set of requirements mean that we need to get closer to our customers, ask the right questions, listen intently to what they tell us, and what they don't tell us. Bring back that information and spread it around. Communicate it often and widely. The Voice of the Customer (VOC) needs to inform how we produce products and deliver services, how we design new products and services. We need to establish measurements that tell us how we are doing and how satisfied our customers are with our efforts. Probably the easiest and most straightforward way to measure this is some measurement of customer complaints although extrapolating inferences from customer complaints to all customers is fraught with difficulty. First is the fact that most customers who experience an issue don't complain. Those that do complain fit a demographic group that you may not want to assume all customers are in. Measuring complaints is a good first step but a better way would be to measure customer satisfaction. There are a number of ways to do this from home made surveys to passive collection of supplier scorecards that customers may provide. The easiest way to show that we are addressing this requirement is to show improving satisfaction, and evidence of incorporation of information derived from customer feedback into products or services.

Monday, March 1, 2010

Measure What Matters

I was recently reading an update on the 2009 Baldrige National Quality Award recipients and in the right margin an article title caught my eye. Get the article here. The article was about a North Carolina school district that received the award in 2008 but the subject of the article was really about developing meaningful measurements. The author discusses how this is a key concept in the baldrige criteria and I pondered that for a minute......Really, that's a key concept of business. Every business, regardless of their intentions towards national quality awards, or not, should measure what matters most to their business. In last weeks' post I discussed a business situation in which the measurement did not drive action. Go here for a refresher. This is a key component of measuring what matters, does it draw in resources? Perhaps a better question might be, should it draw in resources? Should a measurement cause a leader to make a decision to dedicate some resources to its improvement? If it matters, the answer would be: Yes. So obviously the decisions about what to measure are very important. The first question should be; Does this matter to our customers? If the answer is yes, then it matters to you too. It should be measured and improved if not meeting needs. The second question should be; if this measurement does not meet the need, are we committed to improving it? If the answer to the first question is yes, then this one should be an easy yes. Sometimes its not though, hence my story from last week.

So how do we determine what to measure? What matters most? The short answer is: Get to know your customer. What matters most to them about the product or service you provide? Go ask them. Conduct surveys, solicit feedback, analyze complaints, talk to ex-customers about why they are ex-customers, and potential customers about their needs and expectations.

Lets be honest. Sometimes its hard to achieve a balanced perspective on whats important. Every business is concerned about costs, and quality, and customer satisfaction, and employee satisfaction to some degree. But how do you balance these sometimes competing concerns to make sure that cost does not outweigh quality or customer satisfaction does not drain the company cofers. Enter the Balanced Scorecard.

The balanced scorecard approach suggests that we view the organization from four different perspectives, establish objectives, measures, targets, and initiatives for each perspective. The four perspectives are: Financial, Customer, Learning & Growth, and Internal Business Processes. These four areas surround the central theme of the business; the vision and strategy. As you can see from the model above, each area interacts with the areas adjacent to it, so improvement in learning and growth has a positive impact on internal business process performance and customer satsifaction. The better we are at our internal business processes, the better we are able to meet our customers needs and improve our financial situation.

Of course, the balanced scorecard is only one approach to measuring what matters. There really is not right or wrong way to do it, just do it. Determining what matters most to the success of the business, developing measures, monitoring performance, and committing resources to improve when necessary are really the keys to success no matter what format you chose.