1. Lean Systems and Six Sigma Quality
Chapter 10
Lean Systems and Six Sigma Quality

2. Objectives
After reading the chapter and reviewing the materials presented the students will be able to:
Explain the benefits of Lean and Six Sigma
Describe elements of the Lean philosophy
Identify Lean production
Explain Total Quality Management

3. What is Lean?
Lean is a management approach for creating value for the end customer through the most efficient utilization of resources possible.
Its implementation often results in large cost reductions, improved quality, and increased customer service.
1. Elimination of Waste: Waste is anything that does not add value to the system. This includes excess material, equipment, time, energy, space, or human activity that does not contribute to the value of the product or service being produced.
2. A Broad View: All tasks and processes should be driven by one goal – to serve the customer.
3. Simplicity: Lean emphasizes simple solutions to problems.
4. Continuous improvement: The premise is that an organization is never perfect and can always improve in some way.
5. Visibility: A clean environment creates order and improves performance.
6. Flexibility: Flexibility means adapting to changes in the environment.

4. Elements of Lean
Three elements: Lean production, Total Quality Management (TQM) and Respect for People.
Lean production focuses on the operation and delivery system – just in time (JIT) and pull production.
Total quality management serves to eliminate waste, such as defects, scrap, and rework.
Lean considers people the most important resource and their involvement central to the lean philosophy.

5. The Pull System
Traditional organizations and supply chains work as push systems where goods are produced based on a forecast and then stored in anticipation of demand.
Lean production is based on the pull system. If products are not requested, they are not produced, and no excess inventory is generated.
Lean views inventory as a cost that provides no value and should be eliminated.

6. Visual Signals
For the pull system to work, there must be communication between the work centers in a production facility, and between supply chain partners.
A kanban card typically contains information such as product name, part number, and the quantity that needs to be produced.

7. Small Lot Production
Producing in small lots is the primary way of eliminating inventory and excess processing while increasing flexibility.
It also shortens the manufacturing lead time, and the actual time it takes to produce a product.
Small lot production gives a company flexibility to allow it to respond to customer demands more quickly.
To produce only the quantities needed the setup time must be low so it is easy to switch from producing one type of product to another.

8. Respect for People
According to lean, respect for all people, including labor, management, and suppliers must exist for an organization to be its best.
Lean organizations have a hierarchy that is generally flatter compared to that of traditional organizations.
Great responsibility and autonomy is given to ordinary workers, and their input is highly valued.
Lean relies on cross functional worker skills, which is the ability of workers to perform many different tasks on many different machines.
Jidoka is the authority of every worker to stop the production process and fix problems as they occur rather than pushing them down the line.
Quality circles are groups of about 5 to 12 employees who come together to solve quality problems.

9. Role of Management & Suppliers
Lean relies on production workers to independently solve production problems.
Workers must feel secure in their jobs and know that they will not be reprimanded or lose their jobs for being proactive.
Lean emphasizes building long term supplier relationships.
Having few suppliers makes it easier to develop stable and repetitive delivery schedules and eliminate paperwork.
The manufacturer shares demand information and the supplier shares cost information and cost cutting efforts. Both parties help each other and together reap the benefits.

10. Total Quality Management (TQM)
Total quality means meeting and exceeding customer expectations.
Seven tools of quality control:
1. Cause and effect diagrams (fishbone diagrams): are used to identify causes of a particular quality problem. The cause may be a machine, worker, etc. The problem with workers could be related to lack of training, poor supervision, or fatigue.
2. Flowcharts: are schematic diagrams of a sequence of steps involved in a operation or process. They provide a visual tool of where a problem can arise.
3. Checklists: are lists of common defects and the number of each defect observed.
4. Control charts: are charts used to determine whether a process is operating within expectations.
5. Scatter diagrams: are useful in detecting a relationship between two variables.
6. Pareto analysis: tells us that there are a small number of causes that create the majority of quality problems.
7. Histograms: are charts that show the frequency distribution of observed values of a variable.

11. ISO 9000
The International Organization for Standards (ISO) have created universal standards for quality.
ISO 9000 consists of a family of standards that address various aspects of the quality management process.
To receive ISO certification, a company must provide extensive documentation of their quality process.
ISO standards adress environmental management.
They document what a company is doing to minimize harmful effects on the environment caused by its activities and to achieve continual improvement of its environmental performance.

12. Statistical Quality Control (SQC)
Statistical Quality Control (SQC) is the use of statistical tools to measure a product process quality.
1. Descriptive statistics are statistical tools used to describe quality characteristics. They include the mean, standard deviation, and the range.
2. Statistical process control (SPC) involves inspecting a random sample of the output and deciding whether the process is producing products that fall within the acceptable range.
3. Acceptance sampling is the process of randomly sampling a batch of goods and deciding whether to accept the entire batch based on the results.

13. Sources of Variation
Variation that is caused by factors that can be clearly identified and managed is called assignable variation.
Variation that is inherent in the process itself is called common or random variation.
Causes of assignable variation can be precisely identified and eliminated.
Examples of this type of variation are poor supplier quality, poor worker performance, or a misaligned machine.

14. Process Capability
Process capability is the evaluation of a process as to its ability to meet certain quality standards.
Strict quality standards are useless if the system is not capable of producing products that meet those standards.
Product specifications, also called tolerances, are set ranges of acceptable quality characteristics.
Process capability Cp = product specification range/ process variation range = (USL – LSL)/ 6σ
Where USL = upper specification limit; LSL = lower specification limit; and 6σ is the process variation range.
We use 6σ because 99.74% of the products fall within +- 3 standard deviations.

15. Process Control Charts
A process control chart is a graph that shows whether a sample of data falls within the common or normal range of variations.
The chart has upper and lower limits that separate common form assignable range of variation.
Control charts are one of the most commonly used tools in statistical process control and can be used to track the performance of any characteristic of a product, such as the weight of a cereal box, or the volume in a bottle of water.
Control charts for variables are used to monitor characteristics that can be measured and have continuous values such as height, weight, or volume.
Control charts for attributes are used to monitor characteristics that have discrete values, and can be counted.

16. Six Sigma Quality
Six sigma is a quality management process that uses rigorous measurement to reduce process variation and eliminate defects.
Six sigma defines quality as no more than 3.4 parts per million defective (ppm).
The idea behind Six Sigma is to systematically identify and eliminate defects and get as close to zero defects a possible.

17. Six Sigma Methodology
Black belts and master black belts are individuals who have extensive training in the use of technical tools and are responsible for carrying out the implementation of Six Sigma.
Green belts are individuals who have sufficient training in technical tools to serve on teams or on small individual projects.
The Six Sigma approach is organized around a five step plan known as DMIAC:
Define: Define the quality problem of the process.
Measure: Measure the current performance of the process.
Analyze: Analyze the process to identify the root cause of the quality problem.
Improve: Improve the process by eliminating the root cause of the problem.
Control: Control the process to ensure the improvements continue.

18. The Lean Six Sigma Supply Chain
A Lean Six Sigma supply chain is a cross functional team effort comprising individuals across different supply chain processes.
It requires teamwork among sales, distribution and logistics, operations, finance, and product development.
This enables supply chains to provide better customer service, lower inventory, reduce customer lead times, and stabilize production schedules.

19. Developing a Lean Six Sigma Supply Chain
1. Jointly Define Value: The cross functional team jointly defines value as perceived by the final customer.
2. Conduct Supply Chain Capability Analysis: The supply chain is analyzed for capacity bottlenecks and system constraints.
3. Develop Key Financial and Operational metrics: Metrics such as lead time, demand and service levels, cash flow, profitability, inventory investment and inventory turns are important.
4. Identify and Implement System Improvements: Value stream mapping (VSM) is a flowcharting tool that is used to illustrate product and information flows through various processing steps. It is a valuable tool in identifying all value adding and non value adding processes.

20. Impact on Supply Chain Activities
1. Suppliers: To respond quickly to demand, suppliers often locate their facilities close to their customers.
2. Operations: Effective inventory utilization is a critical aspect of the Lean Six Sigma supply chain.
3. Logistics: As logistics is often outsourced to third party logistics(3PL) providers, it is important to integrate the service provider into the supply chain planning process.

21. Summary
Lean is a management approach for creating value for the end customer through the most efficient utilization of resources possible.
Traditional organizations and supply chains work as push systems where goods are produced based on a forecast and then stored in anticipation of demand.
Lean production is based on the pull system. If products are not requested, they are not produced, and no excess inventory is generated.
A kanban card typically contains information such as product name, part number, and the quantity that needs to be produced.
Lean relies on cross functional worker skills, which is the ability of workers to perform many different tasks on many different machines.
Quality circles are groups of about 5 to 12 employees who come together to solve quality problems.
Cause and effect diagrams (fishbone diagrams): are used to identify causes of a particular quality problem.
Scatter diagrams: are useful in detecting a relationship between two variables.
Pareto analysis: tells us that there are a small number of causes that create the majority of quality problems.
The International Organization for Standards (ISO) have created universal standards for quality. ISO 9000 consists of a family of standards that address various aspects of the quality management process.
A process control chart is a graph that shows whether a sample of data falls within the common or normal range of variations.
Six sigma is a quality management process that uses rigorous measurement to reduce process variation and eliminate defects. Six sigma defines quality as no more than 3.4 parts per million defective (ppm).
The Six Sigma approach is organized around a five step plan known as DMIAC: Define: Define the quality problem of the process. Measure: Measure the current performance of the process. Analyze: Analyze the process to identify the root cause of the quality problem. Improve: Improve the process by eliminating the root cause of the problem. Control: Control the process to ensure the improvements continue.
Value stream mapping (VSM) is a flowcharting tool that is used to illustrate product and information flows through various processing steps. It is a valuable tool in identifying all value adding and non value adding processes.

22. Home Work 1. What is a pull system?
2. What are cause and effect diagrams used for?
3. What does a Pareto analysis tell us?
4. What is ISO 9000?
5. What is Six Sigma?