McKinseySixSigmaLean.ppt

McKinsey---Six Sigma& LeanGE has become the "poster child" of the Six Sigma movement 1987 889092949596989901 2002Cumulative Fortune 500 program launchesEstimatesEra 1 (1987) QualityEra 2 (1994) Financial performanceEra 3 (1996) Performance Improvement Umbrella Era 4 (2000) Strategic issuesWhy did GE adopt Six Sigma?•Intense pressure on margins and no room for price increases – premium on productivity•Mediocre quality and disappointed customers•Billions of dollars lost in cost of poor quality•Reenergize GE's productivity machine•Engine for cultural transformationEvolution of Six SigmaGEGESource: McKinsey1030602MVA_he_ZZT_786Delivery example"Six Sigma" has its roots in statistical process controlBeforeAverage delivery time: 45 minutes55 minutes(Commitment to customer)Before: 2 (i.e., 30.85% delivered outside target times)After: 6 (i.e., only 0.0003% delivered outside target times)35 minutesSource: McKinseyCritical-to-quality metric: on-time delivery•7 articles lost per hour•1.7 incorrect operations per week•1 short or long landing every 5 years•68 wrong prescriptions per year99.99966% Good (6 Sigma)99% Good (3.8 Sigma)Other process capability examples•20,000 lost articles of mail per hour•5,000 incorrect surgical operations per week•2 short or long landings at most major airports each day•200,000 wrong drug prescriptions each yearAfter•20,000 lost articles of mail per hour•5,000 incorrect surgical operations per week•2 short or long landings at most major airports each day•200,000 wrong drug prescriptions each year2030602MVA_he_ZZT_786The Six Sigma program has three key elements•Brainstorming•Affinity diagrams•Multi-voting•Hypothesis testing•Pareto charts•Fishbone•Process mapping•Root cause problem solvingMaster Black Belts(full time)•Support key line executives•Responsible for project selection, training/coaching of Black Belts and reporting progressBlack Belts(full time)•Lead improvement projects through DMAIC cycle•Receive 4 weeks of up-front trainingGreen belts(part time)•Provide Black Belts with support to get projects done•Receive less intensive trainingStatistically-focused problem solving toolsDedicated and certified resources3.Focuses on reduction in variation of key metrics2.Drives measurement and data-driven analysis of metrics that are critical to customers1.Creates standardized, disciplined problem solving approach used across companyAll Six Sigma improvement efforts optimize processes by reducing variation•Define the problem•Measure the problemDefineMeasureAnalyzeImproveControl •Analyze and identify the gap•Identify and implement solutions•Track and review progressD DMMA AI IC CPrescriptive Problem Solving Process – "DMAIC"•Design of experiment•Voice of the customer•Quality function deployment•ANOVA•Etc.3030602MVA_he_ZZT_786Improvement infrastructure GE's Six Sigma success is based on a thoughtful understanding of the drivers of large-scale change1243Set aspirationsArchitect programImplement changeBuild momentumEffective, well-orchestrated launch•Train top leaders and set aspirations•Architect program and begin massive communication drive •Select and deploy high-potential resources•Execute high profile projects and make teams heroes•Relentlessly communicate successes and changes to comeGE used several core elements of successful transformation programsOrganizational enablers•Leadership Intense involvement of top and line leadership•Program designRobust roadmap and processes•Performance management Goals baked into budgets at all levels •Dedicated resourcesBest resources with clear career paths•Talent/skill development Multi-level training •Program supportRuthless project manage-ment•Problem solving Disciplined use of DMAIC and tools199619961996 - 971997Source: McKinsey4030602MVA_he_ZZT_786Six Sigma projects follow a disciplined approach to root-cause problem solving Clearly definethe problem, the goal, and the processBaseline and further refine the problem Analyze to identify the "vital few" root causes Select solu-tions; test on pilot; imple-ment full scale Control the process to sustain gains Define Measure Analyze Improve Control •What is the problem?•Goal?•Customers?•Process to improve?•What is the ex-tent of the pro-blem?–Efficiency–Effectiveness•What data do we need to get to the root causes?•Range of options•Solutions•Best pragmatic solutions •Full range of solutions•The select few•The "optimal and pragmatic solu-tion"•Small scale pilot•Full scale implementation•Tactical level–Process standardization–Process through-put•Strategic level–Disciplined use of business pro-cess manage-ment by steering committeeKey elementsDeliver-ables•Clarity on what is "in scope" and what is "out of scope"•In-depth under-standing of how big the problem is and data to get to the bottom of it•Data driven rigorous con-clusions on the vital root causes for the problem•Fully imple-mented solu-tion based on lessons from pilot•Stable process•System to keep it stable•Fully integrated into business goals•Executives fully involved Source: McKinseyDMAIC 5030602MVA_he_ZZT_786Six Sigma has had high impact on service businesses Problem definition•Reduce accounts receivables tobest-practice levels in 24 weeks Organizational enablers and improvement infrastructure•CFO sponsor with division heads present at project launch•CFO and division heads attend key status reviews•Black Belt coach and guide but led by finance manager•Project tracked by Six Sigma staff and through steering committee meetingsProblem solving methodologyand tools•DMAIC•Tools used on project – brain-storming, fishbone, pareto, histo-grams, scatter plots, check sheets, control charts is-is not, force field analysis, simple FMEA, poke-yokeResults•Reduced AR by 90% for annual benefits exceeding USD 4 millionSample tools used Fishbone – defective invoice ManMeasure-mentMachine MethodMaterialEnvironmentDefective invoiceTraining Metrics No check against POPareto RecommendationsControl chartPOT&CDeli-veryOther•Improve invoice quality by following actions–Mandatory check of PO against invoice–5-day training of personnel by experienced gurus with best practices–One invoice per PO with itemized list of all items•Implement segment based control system for customers. •Set target goal into annual MBO to ensure accountability •Set guidelines for action, red, yellow, green flags for escalating actions •Observe strict $$ penalties for late payment •Monitore control chart of key metrics Days(USD delin-quency days) = USD invoice x days lateUpper control limitUpper spec. limitLower spec. limitLower control limit Special causesSource: McKinseyPROJECT – REDUCE DELINQUENT ACCOUNTS RECEIVABLES 6030602MVA_he_ZZT_786Green beltBlack beltExecutive sponsor/division manager•Part-time-position leading Six Sigma. Continues fulfilling current job responsibilities •Trained in Six Sigma tools, provides functional/ divisional knowledge and expertise•Mentored by a black belt •Communicates Six Sigma methodology to others in the organization•Full-time dedication to Six Sigma; Leads projects and shares responsibility for deliverables•Applies "right" Six Sigma methodology and tools to ensure quality of process •Escalate issues to management•Trains and coaches team members•Proposes Six Sigma improvement projects and responsible for deliverables•Resolves issues •Promotes Six Sigma strategy and methodology•Understands Six Sigma strategy, discipline and toolsSix Sigma roles Source: McKinsey7Although the impact from Six Sigma has been significant for GE ...Percent of salesSix Sigma net financial impact*USD mGE total revenuesUSD bn-20550760 1,490 2,0007990100112130•Single performance improvement theme•Customer perspective •Common language•Fact based problem solving•Enhanced capabilities•Powerful engine for cultural change•Facilitated success of other initiatives Hard dollar benefits for GESoft benefits for GESource: McKinsey8030602MVA_he_ZZT_786Weaknesses•Project-centric•Quick wins remove focus on strategic moves•Content neutral process prescriptive •Needs strong organizational element to succeed •Disconnects possible between quality and savings... Six Sigma is not a panacea for all ills – it has its own set of strengths and weaknesses Source: McKinseyLean can complement Six Sigma to overcome many of its major weaknesses Strengths•Common language•Customer focus•Bottom-line results•Real line management involvement•Fact-based problem solving methodology•Comprehensive set of tools•Builds new generation of leaders•Takes capability of organization to next level•Strong infrastructure helps other initiatives9030602MVA_he_ZZT_786More over, few companies are able to use Six Sigma effectively due to a small number of root causes Source: McKinsey•Lack of real involvement by top and line management – Six Sigma is a program run by a staff organization•Rewards and incentives are not aligned with Six Sigma program – no breakdown and assignment of targets for line management with accountability tied to incentives•Staffing Six Sigma with deadwood instead of top talent•Ineffective project selection system•Ineffective project management with no drop dead dates for projects•No effective system for best practice replication•Rapid training of large numbers of people – who have no projects to work on•Process measures, such as number of people trained, number of projects launched only assess progress and not results•Lack of understanding of the difficulties inherent in change managementTypical root causes for ineffective Six Sigma implementation10030602MVA_he_ZZT_786Six Sigma space and our capabilities Source: McKinseyClient needsOur capabilities •Considering Six Sigma and need an objective assessment of pros and cons•Six Sigma is not delivering expected results and need a rapid assessment and recommendations to fix it•Need help in accelerating existing and under-performing Six Sigma initiative•Need deep subject matter expertise and prescriptive solutions to move to the next level of performance •Six Sigma Executive Awareness Training – objective view of Six Sigma for executives•Six Sigma Diagnostic – 3 - 5 day Six Sigma diagnostic of Six Sigma companies •Six Sigma Acceleration – for comatose programs by building an effective transformation engine to complement their problem solving and tools already in place•Infusion of deep prescriptive functional knowledge into companies with robust Six Sigma programs –Lean Six Sigma–Pricing–Sourcing–Supply chain management11030602MVA_he_ZZT_786Lean Six Sigma integration12Many companies wish to build on their Six Sigma programs•The company has launched a company wide Six Sigma program in response to external pressures several years ago•A sizeable investment and efforts have been put into resource infrastructure building, and training•After showing early returns, the rate of improvement has begun to slow•There is interest in further content addition specifically around embracing lean manufacturing•Management acceptance and commitment to continuing the Six Sigma program remains high•The company would like to continue improvements by seamlessly integrating Lean into the Six Sigma program13030602MVA_he_ZZT_786Despite some common elements lean and Six Sigma have significant differencesWhat is ...... an integrated operating system of principles, practices, tools and techniques... a structured improvement methodology using a standard approach and statistical toolsDriving principleReduce wasteSynchronize flowsManage variabilityReduce variationOperational KPIs cascaded to front lineProject metricsPerformancemanagement•Lean experts•Team leaders•Natural teamsInfrastructure &involvement•Black belts, MBBs, GBs•Six Sigma project support•Ad hoc teamsPrescriptive solutions•One piece flow•Pull System•SMED•Standardized workPrescriptive processes•DMAIC•DMADV/DFSSStatistical approaches•DOE•Gauge R&RProblemsolvingSystematic value stream mapping Current state and future stateDriven by key issues and problems in current processesProject selection•Root cause analysis•Process mapping•Basic analytic toolsLeanSix Sigma14Synergies Synergies between Lean between Lean and Six Sigmaand Six SigmaSix Sigma Shortfalls• Project centric• Elitist• Rigid process• KPI disconnect• No prescriptive solutionsHowever Lean and Six Sigma can be highly complementary15030602MVA_he_ZZT_786Synergies Synergies between Lean between Lean and Six Sigmaand Six SigmaLean Positives•Holistic and systems oriented•Front line involvement•Standard practices•KPI deployed to all levels•End state driven project selection•Prescriptive solutionsSix Sigma Shortfalls• Project centric• Elitist• Rigid process• KPI disconnect• No prescriptive solutionsHowever Lean and Six Sigma can be highly complementary16030602MVA_he_ZZT_786Lean Shortfalls•Difficult to understand•Difficult to scale•Rigor can suffer•Weak tie to bottom line•Top management understanding superficialHowever Lean and Six Sigma can be highly complementarySynergies Synergies between Lean between Lean and Six Sigmaand Six SigmaLean Positives•Holistic and systems oriented•Front line involvement•Standard practices•KPI deployed to all levels•End state driven project selection•Prescriptive solutionsSix Sigma Shortfalls• Project centric• Elitist• Rigid process• KPI disconnect• No prescriptive solutions17030602MVA_he_ZZT_786Synergies Synergies between Lean between Lean and Six Sigmaand Six SigmaSix Sigma Shortfalls• Project centric• Elitist• Rigid process• KPI disconnect• No prescriptive solutionsHowever Lean and Six Sigma can be highly complementarySix Sigma Positives•Common language•Scalable infrastructure•Fact based rigor•Bottom line oriented•Top management relates to it easilyLean Positives•Holistic and systems oriented•Front line involvement•Standard practices•KPI deployed to all levels•End state driven project selection•Prescriptive solutionsLean Shortfalls•Difficult to understand•Difficult to scale•Rigor can suffer•Weak tie to bottom line•Top management understanding superficial18030602MVA_he_ZZT_786The typical integration approaches are too narrow•Do not understand fundamental differences between Lean and Six Sigma: view Lean as toolkit vs. total system approach •Do not incorporate Lean's systemic value stream mapping and end state view in project selection process•Do not take advantage of Lean prescriptive solutions to avoid reinventing the wheel•Do not ensure front line involvement •Do not provide required breadth and depth in capability building: front line, top management, practitioners•Do not alter performance management system to cascade KPIs to front line19030602MVA_he_ZZT_786Also, they do not address the typical implementation issuesLean pitfallsSix Sigma pitfallsLacks visionTop managementLacks involvementResourcesInadequate critical massElite resource modelProject selectionNot driven by end stateNot connected to line management's real prioritiesPerformance managementKPIs not defined or cascadedProject metrics disconnected from CTQsMiddle management support and ownershipWeakWeakDeploymentTool centricProject centric20030602MVA_he_ZZT_786We recommend a five building block approach to integration•Assess whether current Six Sigma program provides a robust enough platform for integration•Drive project selection from a systemic end state value stream view•Delineate best problem solving approach for each class of problem•Trigger demand by defining KPI cascade•Match and pace capability building to proposed roles & action plans and augment with Lean experts•Enhance by Lean KPI's cascade and real time dialogue down to front lines•Plan the multi-year journey on a timelineProgram readinessProgram readinessProject selection and Project selection and solution methodology solution methodology decision roadmapdecision roadmapOrganizational Organizational acceptance and acceptance and capability buildingcapability buildingPerformance Performance managementmanagementImplementation plansImplementation plans1234521030602MVA_he_ZZT_786Integration of Lean and Six SigmaKnowledge Session C22We recommend a five building block approach to integration•Assess whether current Six Sigma program provides a robust enough platform for integration•Drive project selection from a systemic end state value stream view•Delineate best problem solving approach for each class of problem•Trigger demand by defining KPI cascade•Match and pace capability building to proposed roles & action plans and augment with Lean experts•Enhance by Lean KPI's cascade and real time dialogue down to front line•Plan the multi-year journey on a timelineProgram readinessProgram readinessProject selection and Project selection and solution methodology solution methodology decision roadmapdecision roadmapOrganizational Organizational capability buildingcapability buildingPerformance Performance managementmanagementImplementation plansImplementation plans1234523030602MVA_he_ZZT_786The diagnostic will focus on three critical elementsElements•Financial•Operational•Culture–Capability building & training–Common operating language–Performance ethic •Organization•Core foundations •Program leadership & actions•Change agents/talent management•Rewards and incentives•Proven improvement approaches and analytical tools•Communication system•SME/program additions•Performance manage-ment and tracking systemKey questionsWhat are the concrete results achieved so far?How have the culture, mindset, and behaviors of the organization been changed by Six Sigma?How robust and well-designed is the initiative architecture?Concrete resultsSoft benefitsProgram architecture and implementation24030602MVA_he_ZZT_786The diagnostic will establish one of three paths going forwardMake significant improvements to Six Sigma pro-gram and hold off on adding LeanAdd Lean to existing robust Six Sigma program Make improve-ments to Six Sigma program and add LeanSix Sigma program is in trouble and needs a major overhaul to deliver meaningful resultsOverhaul of the program should begin immediately with close oversight from the topAdding Lean will not be effective at this pointSix Sigma is running well and delivering resultsThe infrastructure is healthy and the timing is right to successfully take on a new initiativeLean can quickly realize substantial benefits by applying prescriptive solutions to existing high yield opportunitiesSix Sigma is performing but not at its full potentialThe program can be tuned up to best in class without a major overhaulAddition of Lean can realize high potential opportunities through prescriptive solutions25030602MVA_he_ZZT_786Program readiness – key questions1. Does the overall approach and framework makes sense?2. Could this tool be used for clientele development?26Value stream mapping should be a key element in project selectionCompany XValue stream 1Value stream 2Value stream 9. . .Importance of value stream to businessManufacturing strategyOperations assessmentBrainstorming ideasComprehensive list of improve-ment ideas for each value stream27030602MVA_he_ZZT_786Lean basictoolsLean systemdesignSix SigmaDMAICJust do itFor each problem the optimal solutions methodologyshould be selectedExamplesRationaleWhere root causes are very clear and can be addressed by time-tested Lean prescriptive solutions•Change-over reduction•Overall equipment efficiency•Standardized workWhere the problem and solutions are systematic and involve redesign of multiple steps, complex processes, or flows•Plant layout redesign•Scheduling systems•Material and infor-mation flow changesWhere root causes are unclear and likely to require significant data-driven ana-lysis and unique solutions in a cross-functional effort•Cycle time variation•Scrap and rework•Process fluctuationsWhere the problem requires no further analysis and can be addressed by sound, well-defined practices•Job instruction•Visual management•Key metrics display and tracking28030602MVA_he_ZZT_786Project selection and solution methodology decision roadmap – key questions1. Is the proposed project selection methodology comprehensive and how important should value stream mapping be?2. Is a solution decision roadmap necessary?3. Is the proposed roadmap practical and relevant to your client situations?29There are six basic imperatives in adding lean capabilityCreate a sequenced deliveryUse multiple trainingdelivery methodsMatch capabilityto rolesCreate a Lean expert roleDefine operation KPI'sand cascadeProvide the context for lean capability building and to ensure that capability building is mirrored specifically to match improvement needsEnsure sustained expertise to support implementation in projects that require specific lean skills and system design expertiseTailor the capability building for different levels to the role they will play in lean integrationAvoid overwhelming the organization and program; derive maximum benefit from action learningSequence delivery of projects, training, and capability building in concert with projects for maximum impact and effectivenessUse a rapid seed and cascade approach in rollout Speed implementation across the organization to take advantage of the existing Six Sigma infrastructure30030602MVA_he_ZZT_786Create a sequenced delivery to match the order of project rolloutTypical action sequenceKey knowledge pointsCreate Lean awareness•Basic concepts•Overall approachDesign CS/FS,select projects•Value stream mapping•System design Sustain improvements•Performance management and improvement goals•Overall maintenanceDeploy Lean tools•Takt time•Line balanceStandardized workImplement just-do-it basic elements•Waste reduction•5S•Visual controls•Production tracking•OEE•RCA & problem solvingStability•SMED•PM•Flow•LoopsPull•Kanban•Level•Basic flow or material & informationFlow•Cell layout•Material location31030602MVA_he_ZZT_786Organizational capability building – key questions1. Are the proposed six imperatives in adding lean capability appropriate?2. Any thoughts on how we can develop deep lean experts at clients?3. Will the sequenced delivery work well?32Good performance management systems can be enhanced by Six Sigma and LeanBasicPerformanceManagementSix SigmaRefinementsSpecific Lean Enhancements•Before adding more advanced practices basic elements of performance man-agement must be mastered•Six Sigma is not a substitute for an effective perfor-mance management systemKey messages•CTQ cascade•Timely reviews•Disciplined execution•Visible accountability•Value stream perspective•Cascade to front line •Balanced metrics•Performance dialogue 33030602MVA_he_ZZT_786But not if the foundation is not strongDiagnostic conclusionsImplications•Strong core foundation in per-formance management with enhancements in place from Six Sigma•Weak performance management system and Six Sigma serving as de-facto project centric performance management system•Implement Lean to further enhance performance man-agement system and realize added value•Fix core foundation of per-formance management system and hold off on further addition34030602MVA_he_ZZT_786Performance management – key questions1. How can we overcome the fact that often Six Sigma becomes the default performance management system?2. Do you agree with the thought that lean enhancements should not be added if the foundation is weak?35McKinsey can get involved in multiple activities in the journey•Develop a tailored approach for the client building upon the five step process outlined here•Conduct the program readiness diagnostic•Develop the overall program architecture and roll out plan•Design the appropriate KPI cascade to deliver results•Assist in initial value stream mapping to aid in project selection and prioritization•Develop the capability building plan and materials to conduct initial training•Provide lean expertise as necessary•Participate in roll out as mutually agreed36030602MVA_he_ZZT_786McKinsey involvement – key questions1. Do you see this topic and the overall approach as being relevant to your clients?2. Where can McKinsey add greatest value in this journey?37。