3/28/2025

MBA 793
Operational Effectiveness
Class #3 – Lean Six Sigma

Tonight

 OM in the News
House of Lean
 Review of last week

 Case Review – Frumerji

 Lecture – Lean 6-Sigma

 A3 Presentation

Case Review

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What Do We Know…

Group of Exercise

o In your Groups – Develop an A#

o Describe the Situation, the current condition
Aces Jacks
o What is the problem
8’s

Kings o What
10’s should the title of the A3 be
o7’s What is the desired outcome
Queens o 9’sIs there a bottleneck
6’s

o What countermeasures might be put in place

o What can be improved

Recommendations

Opportunities For
Opportunities for
Frumherji…
Frumherji...

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Lean
An Introduction to Lean principles,
methodology, tools and terminology

2025

A Lean organization, theoretically, should have the following characteristics:

1. See every problem and mistake as an opportunity to streamline processes
2. Value the customer experience above all else, and
3. Promote a culture of problem solving and open communication between teams at all levels, whereby
employees feel valued and invested.

What is Lean?

A Customer-centric methodology used to continuously improve any

process through the elimination of waste in everything you do; it is based
on the ideas of “Continuous Incremental Improvement” and “Respect for
People.”

- Time-tested set of tools and an organizational desire,

- Reduces waste and defects within systems and processes,

- Engages your staff and associates

- Improves productivity, quality, staff morale, and customer service

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Lean ….

 Is based on the Toyota Production System

 Is the Identification and Elimination of WASTE in the Process
 Got its name from MIT and James Womack’s research team
 Is process simplification, and the relentless removal of waste from all
processes
 Improves Safety, Quality, Delivery, Cost, Morale, (SQDCM)
 Increases process capacity
 Reduces defects
 Results in a stable, reliable, repeatable, predictable process

THE CUSTOMER TELLS YOU WHAT THEY VALUE

The customer defines value or value-added with the following three

conditions:
 It must transform the product or service.
Value-Add
 The customer must be willing to “pay” for it. Activities (VA)
 It must be done correctly the first time.

If you don’t meet all three of these criteria, then you have
Non-value-added (NVA) activities or waste.

Value Add vs NVA

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The Seven Wastes

Why Lean Six Sigma

A Data-driven approach to remove waste and reduce variation

Increase Reduce Cost of Improve Strengthen the

Efficiency Poor Quality Customer Organization
Service

Why Lean

Applied to any process where we find ourselves….

o Chasing information in order to complete a task.
o Jumping through multiple decision loops.
o Constantly interrupted when trying to complete a task.
o Engaged in expediting (of reports, purchases, materials, etc.).
o Performing work in batches or maybe unreasonable time fences
o Several ways to do the same thing.
o Anyone in any business who has a problem to solve

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 Half the hours of human effort in the factory

 Half the defects in the finished product

Benefits of
“Lean”  One-third the hours of engineering effort

 Half the factory space for the same output

 A tenth or less of in-process inventories

Dr. Deming

“If you can’t describe what you are

doing as a process, you don’t know
what you’re doing.”

“A bad process will

W. Edwards Deming beat a good person
every time”

What is Process Improvement?

Working on the Process versus

Working in the Process

How much time do we spending working

on the Process versus in the process

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Lean & Six-Sigma

Six-Sigma is analysis of the work being done, in each step

1 2 3 4

6σ 6σ 6σ 6σ
Lean Lean Lean

Lean is analysis of activities between processes

Lean Principles 1
Identify
Value

5 2
Continuous Map the
Improvement Value Stream

4 3
Establish Pull Create Flow

How Lean Works

 Engages the people who work in the process to improve the

process
 Designed to bring measurable and sustainable improvements
 Characterizes activities as VA or NVA from the customer’s
perspective
 Focus on eliminating the NVA

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Lean

Business as Usual
Customer Delivery of
Waste
Order Prod/Svc

Time

Savings
Lean Process
Customer Delivery of
Waste
Order Prod/Svc

Time = SHORTER!

Quality Processes Yield Quality Results

Traditional = People doing whatever they can to get results

Inconsistent Inconsistent
Process Results

TIME

Consistent Desired
Process Results

Lean = People using standard process to get results

Standardization

 To standardize a method is to choose out of the many

methods the best one, and use it

 Today’s standardization, instead of being a barricade against

improvement, is the necessary foundation on which
tomorrow’s improvement will be based

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What is Six-Sigma

A management methodology
• Customer focused
• Data driven decisions
• Breakthrough performance
gains
• Validated bottom line results 3.4 DPMO

What is Six-Sigma – f (x)

“Correct”
(In-Specification)
X1

X2
Customer’s
X3
Process Y Needs &
(VOP) Expectations
(VOC)
Xn

Process Output
Process Input Variables Critical To Satisfaction
Variables (POV) (CTS)
(PIV)
Quality Cost Delivery

Manage the INPUTS and good OUTPUTS will

follow that satisfy the customers

Why Six Sigma? How Good Is This?

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Why DMAIC

 DMAIC is a methodology for root cause analysis

 DMAIC should be used when:
o There is a problem and the root cause is unknown
o The stakes are high and we need to be absolutely sure
the solution fixes the problem
o A problem exists, solutions have been tried, but the root
cause is still unknown
 DMAIC should not be used when there are some problems
where the root cause and solution are already known

Methodology

Define the Assure that

problem and the Analyze the process. improvements
objectives Define factors of influence will sustain.

D M A I C
Define Measure Analyze Improve Control

What do we need to improve? Identify and implement

Can we measure this? improvements.

What Makes a Good Lean 6-Sigma Project

 There is no known solution

 The root cause is not known
 The problem is complex and needs statistical analysis
 The problem is part of a process
 The process is repeatable
 A defect can be defined
 Data is available, or can be captured/determined

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Lean Transformation

Transformation
• Do the cultural things first …
• Lean tools without knowledge
doesn’t work
Mass Lean • Knowledge without behavior is not
Culture sustainable
• You must engage the workforce for
them to exercise control

The Challenge

 Get Everyone Working at the Right Level!

1. What do you want them to do?
2. Do they know what you want them to do?
3. How do you communicate that to them?
4. Do they understand their role/job?
5. Do they have the tools/resources to do the job?

Theory of Constraints (TOC)

The Big Idea

Every process has a constraint (bottleneck) and
focusing improvement efforts on that constraint is
the fastest and most effective path to improved
profitability.

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Systems as Chains
Assume a system to be a chain with a goal of transmitting force from A to B.

System Level Measurement

Dimension Example
Throughput:
• Money (for-profit org’s)
Rate at which an entire system generates
• Delivery of a product or service to
money through sales of a product or
the customer
service
• Raw materials
Inventory:
• Unfinished goods
All of the money a system invests in the
• Purchased parts
products or services it intends to sell
• Investment in equip/facilities
• Direct Labor
Operating Expense:
• Utilities
All of the money a system spends in
• Consumable supplies
turning inventory into throughput
• Depreciation of assts

TIOC

System

$ $ $

Throughput Inventory Operating Expense

Money coming IN Money tied up inside Money going out

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TIOC

I O
T E

Throughput Inventory Operating Expense

Money coming IN Money tied up inside Money going out

Elements of TOC

 Identify the bottleneck

o Buffer the bottleneck
o QC before the bottleneck
 Exploit the bottleneck
o Identify alternative paths
 Subordinate everything else to the bottleneck
 Elevate the system’s constraint
 Reanalyze and target new bottleneck

Goal is throughput, which is measure in revenue

Key Points – The Goal

T-I-OE Priorities
1. Throughput is the most important

2. Inventory is the second most important (money tied up)

3. Operations expense (Not vice versa)

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The Goal – Key Actions

1. Add capacity to the bottlenecks to increase productivity for the whole plant

2. Changing the hours of lunch for the workers so the machines keep working at all times
3. Breaking the materials in half, and then in half again to pass it quicker through the bottlenecks

4. Not to look at efficiency in machinery, and accounting control but measuring improvement in sales
5. Focusing on minimizing inventory and keep it low as it is money tied up in them
6. Changing order with red tags (now demand tags) and green tags (future tags) where work was
prioritized from order of arrival to not get back orders or get behind
7. Bringing old equipment out to the factory to add capacity to the bottlenecks to minimize inventory
and increase output.

One Simple Rule

Keep the bottlenecks working 100% of the time, and non

bottlenecks to work around the bottlenecks, even if they
are not doing anything that is are very productive.

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