Which Continuous Process Improvement Method Should I Choose?

Which Continuous Process Improvement Method Should I Choose? Dr. Reza (Russ) Pirasteh, PMP, MBB, CLM Vice President Operations Excellence Stephen Gould Corporation June 27, 2012 rmpirasteh@stephengould.com www.itls-iso.com 2012 -ISO All rights reserved 1

Objectives Demonstrate the synergetic power of, and when used in logical steps, for continuous process improvement (CPI) Introduce integrated Toc,, (itls) methodology Overview of, Six sigma and Theory Of Constraints () as applied in integrated Toc,, (itls) methodology Overview of comparative analysis of, and itls contributions Overview of the need for itls application, study and history Brief example of typical itls results Overview of itls implementation steps 2012 -ISO All rights reserved 2

Questions Manufacturing companies can produce at least 25% more, why don't they? 25% more projects can be completed in an organization, why aren't they? Despite having 25% more finished goods inventory than needed, why do companies continually lose sales because products are not available to consumers? Bob Fox 2012 -ISO All rights reserved 3

Why? 80% of improvement initiatives fail 70% of company employees do not know the company strategies 73% of strategies are not owned by employees 81% of employees do not feel committed to the organization 92% of employees feel that they are working harder than the year before Over 50% of the work is waste, (Non-Value- Added or Fake Work) Source: Fake Work Gaylan Nielson, 2012 CPI symposium 2012 -ISO All rights reserved 4

Why? Lack of focus on what is the value to end users and consequences Too much Waste and non-value-added activities Too many Errors & lack of consistency in processes, procedures, policies Competing on the edge of chaos Typical rage of waste (COPQ as % of Sales): Manufacturing: 20-30% Services: 30-40% Software: 40-65% 2011 -ISO All rights reserved 5

Alternatives? In past 30 years great management philosophies have been introduced to continuously improve processes and achieve operations excellence by shifting paradigms and challenging the existing assumptions. Over 95% of CPI initiatives are: Theory Of Constraints 2011 -ISO All rights reserved 6

- 7 Muda Toyota Production System (TPS) Focusing on reduction of the seven wastes 1. Overproduction 2. Waiting - People, Parts Overproduction 3. Too Much Inventory 4. Unnecessary Motion Motion 7 1 2 Waiting 5. Unnecessary Transporting 6. Over Processing 7. Producing Defects or Rework Rework 6 Intellect 5 4 3 Transportation Motion Rework Overproduction 1 7 2 Intellect 6 3 Waiting Transportation 5 4 2011 -ISO All rights reserved 7

Key lean operation principles include: 1. Value / Hidden Factories / Non-Value Added 2. value-stream (eliminate waste) 3. Flow 4. Pull 5. Perfection Overproduction Motion 1 Waiting 7 2 Intellect Rework 6 3 Transportation 5 4 Source: Thinking Womack and Jones 2011 -ISO All rights reserved 8

TPS - Enormous amount of effective tools: Employee involvement & Respect for people Work life culture change 5-S and Visual Communication Management Value Stream Mapping Process Fail Safe and Error Reduction Pull Systems, Kanban, Buffer Management Kaizen SMED WCE (measurement system for NVA) Takt setting.more Motion Rework 6 7 Overproduction 1 Intellect 5 4 2 3 Waiting Transportation 2011 -ISO All rights reserved 9

Pioneered by Bill Smith at Motorola in 1986 Originally defined as a metric for measuring defects and improving quality Defect levels below 3.4 (DPMO) 7 Sigma 5 6 3 4 233 6,210 3.4.02 DPMO (Defects Per Million Opportunities) 66,810 2011 -ISO All rights reserved 10

Aimed to manage process variations that cause defects Unacceptable deviation from the mean or target To systematically work towards managing variation to eliminate those defects Spec Limit Spec Limit Distribution

Theory Of Constraints Originated and authored by Dr. Eliyahu M. Goldratt Also referred to as "Constraint Management Focus on Throughput Throughput is what is being sold Rate of revenue generation (Throughput) is limited by at least one constraint Only by increasing capability at the Constraint overall throughput will be increased Focus when dealing with change: Why Change? What to Change? What to Change To? How to cause the change? 2011 -ISO All rights reserved 12

itls Story A Research to Explore How to optimize profits using CPI? There had been little consensus among CPI methodologies Many opinions and guesses Effectiveness: Compare and contrast methodologies Evaluate and statistically quantify the impact Deployment Deploy CPI methodology that yields higher profits Systematic deployment globally 2011 -ISO All rights reserved 14

itls Brief History 1985 Learn and apply TQM 1996 - Begin to experiment with various combinations of CPI tools 1998 - Developed TLS CPI model (no consensus) 2003 - Documented for the first time in the world: Quantified effects of, and TLS 2005 Summarized & documented the designed experiments 2006 Publicized experiment findings APICS 2006 The First CPI Symposium Weber University Introduced itls Scott Jensen 2006 itls-trio model at the Weber University s CPI symposium Decided on writing a book to ensure integrity of itls and possibly bringing the CPI disciplines together for universal betterment 2007- Introduced itls-trio model at -ICO (Goldratt - Los Vegas) Others published books based on my research Created the origin of change in models 2010 August Profitability with No Boundaries available Took us 3- years to publish the book we needed to be sure Results of implementations fully supported the model 2011 -ISO All rights reserved 15

itls Story Research Case and had been practiced in for several years Both approaches had shown that they were able to prompt operations personnel to work on a series of projects that resulted in cost savings and process improvements itls: an alternative using synergetic approach 2011 -ISO All rights reserved 16

Experiment Objectives Hypothesized approach to measure and validate effectiveness of: Integrated,, (itls) Analyze results for statistical significance Criteria: Aggregate contribution to verifiable financial savings Validate savings US operations were studied 2011 -ISO All rights reserved 17

Experiment & Approach Methodology was assigned due to the local preference, experience with a particular methodology and expertise Data gathered (Time-years): 2.5 Participating plants: 21 11 4 6 TLS Team leaders trained: 211 Projects completed by all methods: 105 Each site chose their projects and coached with local experts Plant size, population, financial standing were mixed 2011 -ISO All rights reserved 18

Comparing With Individual 95% confidence intervals for Mean Based on Pooled Standard Deviations Ho : 1 2 Level N Mean StDev ---+---------+---------+---------+------ (Log) 8 4.8380 0.6575 (----------------*---------------) µ 1 (Log) 19 4.8673 0.5030 (----------*---------) µ ---+---------+---------+---------+------ 2 4.50 4.75 5.00 5.25 P-Value: 0.622 No Significant difference 2011 -ISO All rights reserved 19

Comparing With & Individual 95% confidence intervals for Mean Based on Pooled Standard Deviations Ho : 1 2 3 Individual 95% CIs For Mean Based on Pooled StDev Level N Mean StDev +---------+---------+---------+--------- (Log) 8 4.8380 0.6575 (-------------*------------) µ 1 (Log) 19 4.8673 0.5030 (--------*-------) µ 2 TLS (Log) 74 5.3469 0.4445 (---*---) µ 3 +---------+---------+---------+--------- 4.50 4.75 5.00 5.25 P-Value: 0.000: Highly Significant difference 2011 itlstm-iso All rights reserved 20

Experiment Results Plants using itls were able to return 12-24X financial benefits compared with the plants that used only one method Teams using itls were able to complete more projects Return per trained employee was 10-12X higher 2011 -ISO All rights reserved 21

Units Experiment Results itls showed 4 X greater financial benefit (project-toproject comparison) 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 Per Project Financial Return itls Methodology Plants that used itls produced 89% of the savings 28% of the plants produced 89% of the benefits 2011 -ISO All rights reserved 22

Examples of Results Achieved 5% bottom-line profitability improvement Gold mining - BR Improve throughput by 4X (L3) $3.8 mil in cost savings in 18 months - Alcon Labs process ind $18 mil reduction in inventories - Telecom 24 inventory turns from 7 per year Improved supply chain OTD performance from 45% to 99.8% - SGC Reduced DPM to < 393 from 37,000 in 4 months Achieved supply chain performance with Cpk of 1.67 in 6 months from ~0.8 $185 mil in cost reductions in 24 months Telecom Fulfillment cycle time reduction from 11 days to <5 globally 40% increase in revenue transactional & sales 90% reduction in plating process rework - Appliances 2012 -ISO All rights reserved 23

Some itls users Stephen Gould Corporation New Beginning Sanmina-SCI Alcon Brazil in Colombia, that I have advised during the past 3 years: Senco Colombiana: bathroom appliances Eurocerámica: Tiles Salamanca: Catering services Arroz Caribe: Rice mill L3 Communications Sanmina-SCI Northrop-Grumman Huntsman Cancer Institute Dyplast Products NavAir PECO Knight Industries Eli Lilly AzulK, Columbia Votorantim 2011 -ISO All rights reserved 24

Step 2 Identify Which Factor To Control Y = ƒ (1x 1, 10x Undesirable Response 10x 2, 2x 3... Which activities (factors) have the most impact on your response? 3... ) Process Outputs = Suppliers Process Inputs Business Process X s are activities or factors within the process 2011 -ISO All rights reserved 33

Step 3 Eliminate The Sources Of Waste Supplier E-Mails Acknowledgement of release to blanket PO. Purchasing Dept Supplier Operator E-Mails Order Trigger?Trigger Board Point of use. Material is shipped Information Material Inventory KanBan / Pull System for Raw Materials Receiver closes release Card information: Raw Material Code Card Quantity Batch Size Number of Cards 1. Purchasing issues blanket P.O. (Purchase Order) for material 2. Warehouse Associate will E-Mail appropriate supplier and Purchsing dept. a release for set quantity of material 3. Supplier E-Mails acknowledgement of release back to Purchasing and Warehouse. (Compliance) 4. Supplier ships material within timeframe specified on P.O. 5. Receiving Transaction closes this release upon receipt of material. 2011 -ISO All rights reserved 36

Step 5 Control Supporting Activities A: 120/D Takt: 85/D B: 100/D C: 100/D D: 110/D S 1 A B C D S n Identify direct feeders to the constraint Control feeder performance and variability SPC: Control Charts Fail safe 2011 -ISO All rights reserved

Step 7 Reevaluate system go after the next constraint Safeguard gains and embed control Re-mapped the process and analyzed for constraint shifts detection Go to step 1 of the TLS process and follow the cycle 2011 -ISO All rights reserved 44

About: Reza (Russ) M. Pirasteh Co-Author of Profitability With No Boundaries: Optimizing,, and, Dr. Pirasteh is currently the Vice President of Operations Excellence at Stephen Gould Corp and CEO of the itls- ISO Group. He conducted scientific studies on the efficacy of CPI approaches, which was later published in a groundbreaking article, The Continuous Improvement Trio. He has held executive, staff and line positions with 25 years of solid experience in implementation of continuous improvement systems in manufacturing, services and transactional environments. He has earned Ph.D. in Engineering, MBA in Industrial Management, BS in Industrial Engineering, Project Management Professional (PMP), Certified Master Black Belt, and Certified Master. He has formulated itls CPI methodology to fill the gaps among CPI methodologies he has experienced. Dr. Pirasteh has published numerous publications and provided lectures for Weber University, OSU, UTA, APICS, Industry Week and IIE organizations. He is a member of APICS, ASQ, IIE and PMI. Dr. Pirasteh is the recipient of the Fox Award for outstanding innovation and creation of itls system. To contact Dr. Pirasteh: rmpirasteh@stephengould.com info@itls-iso.com WWW.iTLS-ISO.com 2011 itlstm-iso All rights reserved 46