Archive for March, 2008

Monday, March 24th, 2008

Quality Guru Asks: What Methods are You and Your Company Using? What Measurable Results have you obtained, or not obtained? Share your thoughts with us!

Six Sigma, TQM, Lean?

With all the emphasis today on quality, and studies showing that quality is very important to the leaders of American business, why are so many organizations struggling to achieve and sustain quality systems? The answer is that managers have been inundated for 20 years with a parade of quality initiatives that have promised miraculous results in reducing costs and increasing profits. Consultants have peddled the promise of quality circles, self-directed teams, ISO 9001, theory of constraints (TOC), lean manufacturing, and Six Sigma to the point of near hysteria.

Each new system promises greater rewards. All of these systems have succeeded somewhere. Most have failed and died from neglect. My contention is that many managers do not have the time, knowledge, or resources for in-depth analysis of methods for process improvements. Competition has increased while pricing pressures from low cost countries have decreased profit margins. These lower profits make it extremely important that any money spent be able to show a return on the investment. A wrong decision on where to invest capital can be fatal to a company’s long-term health.

Any half-hearted implementation will probably fail, and every failure makes the next attempt even less likely to succeed. Let’s see if we can simplify the decision making.

What’s a manager to do? Here’s my list of questions to be answered by anyone looking to invest time and money in a quality-improvement system.

• Can the method be introduced to all types of business models?
• Will the method give a good return on investment?
• Is the method affordable?
• Is the method easily understood and assimilated into the company’s culture?

Let’s do a quick review of the heavy hitters in the quality arena.

Six Sigma

Six Sigma methodology involves two essential assumptions. The first is that people understand the ability of numbers to characterize a process. The second assumption is that reducing variation in a process— the cornerstone of Six Sigma—is always good. The goal of a business is to improve at the least possible cost, so the potential exists for savings to be less than the costs of the improvements. In addition, one process can be improved at the expense of another, causing the overall performance of a business to degrade.

Strengths of Six Sigma

• Projects have defined accounts to track money saved.
• Six Sigma can be used in either manufacturing or service industries.
• Because Six Sigma is driven by improvement in profitability, upper management is more likely to support it.
• Six Sigma isn’t viewed as a quality system, but a business system.
• Wall Street has become enamored of Six Sigma because of results reported by large companies. If Wall Street loves Six Sigma, business leaders have more freedom to invest capital without fear of failure.
• Six Sigma projects are intended to prevent defects before they can be created.
Weaknesses of Six Sigma
• Training costs are high. GE invested over $200 million dollars in the first year. Training a Black Belt can cost more than $40,000.
• The belt system can create a division between the “chosen ones” and everyone else.
• Turnover among trained Black Belts is high. Once trained, a Black Belt is valuable to other organizations. It may often be cheaper to hire a Black Belt than to train one.
• The cost savings reported are viewed skeptically by many, and predicted savings may not be tracked closely. Motorola reported in 1996 that it had savings of $16 billion from Six Sigma. From 1998 to 2003, Motorola gained no market share or improved stock value (Schniederman, Arthur M. (2004 March). Question: When is Six Sigma not Six Sigma, Answer: When it’s the Six Sigma Metric, posted on www.schneiderman.com). Where did the savings go? Schneiderman contends estimates don’t recognize that many costs are fixed or semi-fixed and don’t go away but show up elsewhere in the organization.
• The statistics involved are difficult for many employees to understand, and even experts cannot agree on the correct interpretation of the statistics. Try to figure out the argument about the 1.5 sigma shift and I guarantee your head will hurt!

Even if cost savings are accurately computed, eventually the big projects are completed and a cadre of highly trained specialists have fewer and smaller projects to work on, which may not justify full-time Black Belts.

Total Quality Management

Taguchi embraced the ideas of Deming and added to them. Kanbans, quality circles, just-in-time manufacturing and other concepts were combined to create the total quality control (TQC) system of continuous improvement that contributed to the rapid improvement of quality and productivity in the Japanese economy. The TQC concepts were Americanized to become TQM.
Strengths of TQM

• TQM organizations are typically flatter and Leaner than non-TQM companies
• TQM has worked in Japan, and benchmarking and training opportunities abound.
• TQM organizations are more customer-oriented than non-TQM companies.
• TQM stresses employee participation.
• TQM is adaptable to manufacturing or service industries.
Weaknesses of TQM
• TQM projects tend to focus on optimizing processes, rather than the whole system.
• TQM does not focus on bottom-line results to the extent other systems, like Six Sigma, do. Companies increasingly need to tie any investment to bottom-line improvement.
• Managers can be resistant to give up power. In a TQM organization, delegation is necessary for the system to succeed.
• Organizations may be hesitant to commit to the training necessary for employees to understand TQM concepts. Training can be viewed simply as a cost, not as an investment.
• TQM relies heavily on the team concept. Teams fail in organizations because of insufficient training and competing interests.
• Goals must be carefully established and communicated so everyone is working toward a common outcome, not individual achievement.

TQM typically seeks to optimize each process without considering the effect on the other processes in a system.

For example, if a team improves the efficiency of a piece of machining equipment by 20 percent, is that a good thing? Maybe. Improving a single piece of equipment may produce no savings at all. If the output of that equipment is waiting at the next process, inventory and waiting time have increased, and costs have actually risen. The entire process must be viewed as a whole. Many executives believe they “did quality” in the 1980s and it didn’t work. So TQM has fallen out of favor, and other initiatives, such as lean manufacturing and Six Sigma, have become more popular.

So far, neither TQM nor Six Sigma can answer our four questions with a yes. What about lean?

Lean
Lean is the reduction of waste. How do the types of waste factor into lost profitability? All waste can be classified as nonvalue-added. Nonvalue-added refers to some function or task the customer is not willing to pay for. Any overproduction uses labor, utilities, and space that might be used more profitably in other areas. Production that can’t be sold builds up inventory, and defective product is scrapped or reworked, causing lost productivity. Waiting time can never be recovered. Wasted motion is one of the most overlooked types of waste. Needless walking, turning, bending, and lifting are all nonvalue-added. Transportation waste is also often overlooked. A company that doesn’t use all its employees’ talents and ideas wastes possibly good ideas for improvement.

Extra inventory may have to be stored until it can be used. At some point in the process, the inventory has to be moved again when the next process is ready for it. To be successful in the global economy, where some countries such as China and Mexico have much lower labor rates, companies must do everything possible to cut costs and improve quality. Lean emphasizes teamwork, producing according to demand, smaller batches, quick setups, and cellular production.

Lean is the only methodology with which all four questions can be answered yes. Waste is present in all business models, whether they are service or manufacturing. Initial and ongoing training costs are low, and the concepts are easily understood. Many improvements can be made with little or no capital expenditures. Lean can be implemented on a small or grand scale. Departments from accounting to shipping can utilize lean techniques. The size of the business isn’t an issue, lean works just as well in a small business as a large one.

Six Sigma has too many negatives to be the first choice of a business as a methodology for continual improvement. Even proponents of Six Sigma admit that it’s not a good tool for small businesses. Because of the training cost and people resources required, a small company likely won’t have enough cost-reduction opportunities available to justify the investment. According to Got Six Sigma on the Brain, in the November 2004 Quality Digest, more than 66 percent of the companies using Six Sigma have more than 500 employees. In addition, the article points out that after three or four years companies abandon Six Sigma because the major cost savings have been realized. The math required in Six Sigma makes it difficult for everyone to understand the concepts. The tools of Six Sigma can be valuable for reducing variation in processes. The training to use these tools is readily available at local community colleges, on internet sites, and through other sources at much less cost than through the belt hierarchy.

Lean techniques should be investigated by any business interested in improving profitability and competitiveness. The principles translate to almost any business model. Results can be gained quickly and don’t require large expenditures at the beginning of the process. Many resources are available to gain the knowledge necessary to implement the methodology.

No one knows where the next quality guru will come from, but one thing is certain—the next “silver bullet” is just around the corner.

Article Written by Allen Huffman

Quality Objectives are Business Objectives

Saturday, March 1st, 2008
Performance Improvement Solutions for Your Business Needs March 2008
In this issue

  • Quality Objectives are Business Objectives
  • Clarification of Intent for ISO 14001:2004
  • Small Business Diaster Guide
  • FMEA – Quality Improvement Tool
  • Training Courses
  • Greetings!

    Welcome to Sustaining Edge Solutions E- Newsletter

    Our newsletters provide guidance on operational and quality systems ISO 9001, AS9100, ISO/TS 16949, TL 9000, ISO 13485, ISO 14001, and others. This includes process improvement methods Six Sigma, Lean Enterprise, and other topics of interest to our readers.

    If you have any questions about the articles appearing in this issue, or you want to suggest topics for future issues, please let us know.

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    Quality Objectives are Business Objectives
    tool

    Are you having a difficult time identifying quality objectives for your organization? Think about your business.

    According to ISO 9000:2005, 3.2.5, a quality objective is something sought or aimed for, related to quality. ISO 9001:2000, 5.4.1, states your quality objectives must be measurable and consistent with the quality policy.

    Clause 5.3 of ISO 9001:2000 says your quality policy is a framework for establishing quality objectives. It also says that the policy must include a commitment to 1) comply with requirements and 2) continually improve the effectiveness of the quality management system. Using the quality policy as a framework, you would have a quality objective to measure the degree to which requirements are being met, as well as, a quality objective that measures the results of the quality management system.

    If your quality policy identifies other important areas, for example, product reliability, you would be expected to have another measurable target for product reliability. ISO 9001:2000, clause 8.2.1, says a required performance measure is for customer satisfaction.

    Remember, goals are conditions to be achieved in the future. They should be defined consistent with your vision and mission. Goals are established to guide your decisions and actions. They don’t change as much as objectives. Your objectives must involve measurable results to achieve your goals.

    Objectives are focused on critical issues and milestones. They describe the activities and targets to achieve your goals. They even identify the dates for completing the activities. They are measurable in terms of being achieved, or not. For example, a general goal might be to reduce waste. The related, specific objective might be to reduce rework from 10% to 5% by the end of 2008.

    Depending on your industry, you might consider quality objectives such as:

    • Scrap Rate = Product Rejects / Products Produced
    • Return Rate = Products Returned / Products Shipped
    • Complaint Rate = Received Complaints /Total Customers
    • Customer Satisfaction Index = (Questions x Ratings) /Surveys Returned
    • On-time Delivery = Deliveries by Due Date / Deliveries Scheduled
    • Design Stability = Change Requests / Product Releases
    • Service Quality = Defective Transactions / Total Transactions
    • Requirements Traceability = Traceable to Design / Total Requirements

    Some of these metrics would be expressed over a period of time, e.g., complaints per customer per year. And, some values may be multiplied by 100 to give a percentage. Also, the objectives don’t have to be variable measures. You could include installation of a new MRP System by the end of 2008 as an objective.

    Be careful how you set these objectives and how you communicate them. You might find people actually manipulating processes to achieve the desired results, especially if the numbers are used to evaluate employee performance. When handled poorly, performance targets can result in internal competition and a lack of cooperation. In fact, a specific process objective can be optimized at the expense of overall system performance.

    If a target is perceived as arbitrary, and set beyond the capability of the process, it may lead to employee frustration, reduced morale, and even lower performance. Individuals must feel they have some control over the outcome for an objective to actually promote improvement. The objectives should help monitor and control the processes, not the people.

    Have a Business / Strategic Plan? These objectives should be based on comprehensive strategic planning. You should define measures to help identify needed process improvements and to grow your business.

    Clarification of Intent for ISO 14001:2004
    Interview

    The U.S. Technical Advisory Group (TAG) to ISO/TC 207 has issued two new Clarifications of Intent for ISO 14001:2004:

    Question: Is it a onconformance if an organization establishes Objectives, Targets, and Programs but, at the time of the audit, none relate to an identified significant aspect?

    Answer: No. Clause 4.3.3 requires that significant environmental aspects be taken into account when establishing and reviewing objectives and targets, but it does not explicitly require that there be an objective and target related to a significant aspect at all times. It is the intent of the standard that the organization be able to demonstrate that it has taken significant aspects into account in setting objectives. Over time, however, given the required commitment to continual improvement, it would be expected that there would be one or more objectives related to one or more significant aspects to demonstrate conformance to ISO 14001.

    Question: Under the third paragraph, second sentence of 4.3.3, how strong is the wording for “shall take into account”?

    Answer: No. Clause 4.3.3 requires that significant environmental aspects be taken into account when establishing and reviewing objectives and targets, but it does not explicitly require that there be an objective and target related to a significant aspect at all times. It is the intent of the standard that the organization be able to demonstrate that it has taken significant aspects into account in setting objectives. Over time, however, given the required commitment to continual improvement, it would be expected that there would be one or more objectives related to one or more significant aspects to demonstrate conformance to ISO 14001.

    To see all the clarifications of intent for ISO 14001:2004, go to the ASQ Standards Group web site.

    Small Business Diaster Guide

    The Small Business Administration (www.sba.gov) and Nationwide Mutual Insurance Company have teamed up to launch a disaster planning guide for small business owners.

    The 10-page brochure provides information that business owners need to develop an effective plan to protect customers and employees in the event of a disaster. The guide provides key disaster preparedness strategies to help small businesses identify potential hazards, create plans to remain in operation if the office is unusable, and understand the limitations of their insurance coverage.

    Understanding this, the SBA and Nationwide created this guide to help business owners get their arms around the disaster planning process, and convince them to mitigate their risk. An electronic version, PDF of the guide is available at this SB A Web Page.

    FMEA – Quality Improvement Tool

    Have you heard about FMEA, but remain unsure of its use as a quality tool? Well, FMEA is the acronym for Failure Modes and Effects Analysis.

    Failure Modes are the ways in which something might fail. The failures are actual or potential errors or defects, especially those affecting the customer. Effects Analysis refers to studying the consequences or effects of those failures.

    Failures are prioritized according to the seriousness of their consequences, the frequency of their occurrence, and likelihood of their detection. The purpose of FMEA is to take actions to eliminate or reduce failures, starting with the higher priority ones.

    FMEA is used during design to prevent failures. Later, it is used for control before and during operation of the process. Ideally, FMEA begins during the earliest conceptual stages of design and continues throughout the life of the product or service. It is a step- by-step approach for identifying all possible failures in a design, a manufacturing or assembly process, or a product or service.

    To see detailed information and an FMEA example from The Quality Toolbox, go to this ASQ web page.

    Training Courses
    training

    To see the course description, schedule, and on-line registration click on the course title below. Courses are awarded Continuing Education Units.

    Understanding & Implementing ISO9001:2000
    ISO 9001:2000 Process Based Internal Auditor
    Documenting Your Quality Management System

    Understanding & Implementing AS9100B:2004
    AS9100B: 2004 Process Based Internal Auditor
    Documenting Your Quality Management System

    Understanding and Implementing ISO/TS16949:2002
    ISO/TS16949:2002 Process Based Internal Auditor
    Documenting Your Quality Management System

    Understanding and Implementing ISO14001:2004
    ISO14001:2004 Process Based Internal Auditor

    The Five Pillars of a Lean Workplace Organization
    Continuous Process Improvement
    Lean Six Sigma

    All courses can be delivered at your company. Don’t see a course, location, or date that fits your needs?

    Contact Us

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