Process Improvement

From a customer’s perspective, the experience of process variation (any fluctuation in the quality of a product or service they receive) can be a very negative one.

Process Improvement

Think about the last time you were held up at the slowest checkout in the supermarket, or received a haircut that you didn’t ask for. You can probably list a number of experiences when you received a product or service you were unhappy with. Did you return to the same business again? Reverse the situation and remember how you felt when you were given the perfect haircut or got served quickly at the supermarket.

As a business operator, having processes in which errors occasionally occur may seem ok. Many organisations believe that handling errors is just a cost of doing business, but consider how many errors you may have hiding in your organisation’s processes and the impact it may have on your productivity, customer satisfaction and overall profitability.

Process improvement – Six Sigma

Six Sigma is a comprehensive and flexible strategic management system that you can use in your process improvement strategy to achieve, support and maximise your business profits. Its methodology is driven by understanding customer needs and uses accurate data, facts and statistical analysis to improve and redesign organisational processes.

The Six Sigma business improvement methodology focuses on:

  • Understanding and managing customer requirements
  • Aligning key business processes to achieve those requirements
  • Analysing rigorous data to minimise variation in those processes
  • Driving rapid and sustainable improvement to business processes

The word ‘sigma’ is a statistical term, used to measure ‘standard deviation’ or how far a given process deviates from perfection. The purpose of Six Sigma is to measure the number of ‘defects’ you have in your process. With this measurement you can figure out how to eliminate these defects and get as close to ‘zero defects’ as possible. To achieve Six Sigma Quality, a process must produce no more than 3.4 defects per million opportunities (DPMO) or a yield of 99.999999% zero defects.

Process Improvement

The Sigma Level Process Capability chart above shows the different Sigma Levels. The current Sigma Level for average industries is four Sigma or 6210 DPMO, however there are many areas of operation where being at the four Sigma level is not good enough. Examples include the processing of credit card payments or any situation where human safety is at risk.
If you are only working to a three or four Sigma quality level, you could very well be losing up to 25% of your total revenue on processes that deliver too many defects. These defects not only take time and effort to repair, but can lose you customers.
The real outcome is to both lower cost and improve customer service. General Electric, one of the most successful companies to implement Six Sigma, estimated savings of $10 billion during the first five years of implementation.

Six Sigma uses the DMAIC methodology as a schematic basis to achieve this goal. Within this process improvement framework, it is the responsibility of the project team to identify the process, define the defect and work out the corresponding measurements.
  • Define - Define the process to undergo improvement
  • Measure - Measure output variation in terms of DPMO
  • Analyse - Analyse the results of the measuring process
  • Improve - Improve the results of the measuring process
  • Control - Maintain the improvements and measurement system

Process Improvement – The Seven Wastes

Processes either add value, or waste to the production of a product or service.
Waste elimination is one of the most effective ways to increase profitability in a business. To eliminate waste, it is important to fully understand exactly what waste is and in which processes it can be found. Toyota, after spending many years working to remove waste has identified the following seven wastes as the most prominent ones.

1. Overproduction – Producing more than is needed or producing it before it is required. A result of producing ‘Just in Case’ rather than ‘Just in Time’.

2. Waiting – This occurs when time is not being used efficiently. Much of a product’s or service’s lead time is tied up in waiting for the next operation. This is usually caused by poor material flow, long production runs, or long distances between work centres. It’s not unusual for a product or service to spend 99% of its time waiting. This spare time can be better used by improving processes.

3. Transporting – Any transportation costs between processes are ultimately passed on to the customer, so are a clear source of non-valued cost. In addition to this, every transport event is an opportunity for damage or loss to occur and quality to deteriorate.

4. Inappropriate Processing – Can be explained by using the analogy ‘using a sledge hammer to crack a nut’. Are you using the right tool or process for the job? Are you using expensive equipment when simpler tools would suffice? Are you using the right person for the job?

5. Unnecessary Inventory – Is Work in Progress (WIP) and is a direct result of overproduction and waiting. Reducing WIP allows the other problems to surface. The analogy often used is that of a ship sailing along on a sea of WIP which hides rocks below the water level. By lowering the water level of the WIP slowly, it allows any problems to be addressed as they surface. If this isn’t done, it is a possibility that the ship will run aground.

6. Unnecessary Motions – Related to ergonomics, these are seen in all instances of bending, stretching and reaching. There are also legal OH&S issues to be considered.

7. Defects – Defects cost money. Internal defects found before sale will incur the costs of scrap, rework or delays and external defects which have been delivered to customers will incur the costs from warranty claims, onsite repairs and the potential loss of customers. As a rule of thumb, the cost of a defect increases tenfold for each production or supply chain step.

For examples of waste in the manufacturing, service and wholesale and retail sectors please contact us.

Contact your local business coach for a free 60 minute consultation on your business process improvement.