Archive for the ‘Process Improvement’ Category

Building Valuable Process Maps Takes Skill and Time

Monday, August 10th, 2009

Reproduced from http://www.isixsigma.com/library/content/c090810a.asp

Practitioners who think process mapping can be completed in a two-hour session with a group of subject matter experts, a white board and some sticky notes are likely to end up with a nice piece of paper with a bunch of squares and diamonds. This is because process mapping is not for wimps. Creating a process map that tells a full, data-based story requires a decent amount of time and effort by those individuals involved in the process.

Gathering Information

A great process map should show, with certainty, where improvements can be made, where cycle time delays exist and where smooth handoffs are not taking place. Creating a process, or value stream, map should be the first act a company performs when seeking to make process improvements. If they start more advanced process improvement methodologies without completing a value stream map first, organizations may make a slower start on their road to improvement. Of course, practitioners should not avoid these advanced methodologies. But they will benefit from beginning with a process map, which can make an immediate impact – immediate in the sense of less than three months.

Again, process mapping is not an easy undertaking. It is the perfect combination of business acumen and art. It takes special talent to interview individuals and get them to explain exactly what they do in their job every day, as well as share their pains and express their wants. In fact, it takes the ability to connect with many different types of people and personalities, the know-how to ask questions that will effectively prompt the interviewee and the listening skills to understand what a person is saying – without judgment or prejudice.

A skilled practitioner may ask some of the following questions during an interview to capture process owners’ pains and wants:

  • What parts of the process do you seek to eliminate, and why?
  • Where do you spend most of your time, and why?
  • Where in the process do you repeat work? How often, and why?
  • What does your manager think happens in the process? What really happens?
  • When pressed for time, what steps in the process do you skip or work around?

But what about the data-based story component? Well, to perform a true value stream mapping exercise, data must be collected in conjunction and concurrently with the interviews. Questions to collect this data may include:

  • Where do cycle time delays exist?
  • Where do handoffs take place?
  • Do people actually hand something off, or is it submitted to a system with the assumption that it is handed off?
  • What data points are put into systems? What data points are taken out?
  • What pains does the process cause? What do people want or desire from the process?

Gathering data is the real power of performing process mapping. The master plot, the final map with all the details, is great for showing people the process, but the juicy stuff is in the data that is collected.

One of the practitioner’s challenges is to identify exactly how many handoffs there are in the process, and how many inputs go into a system but never get taken out. However, the absolute biggest benefit comes from taking steps out of the process. Once changes have been made, practitioners can calculate a return on investment and assign value to each step in the process.

Five Key Tips

The following are some tips and tricks for process mapping any process in an organization:

  • Scope the process: Clearly define a start and stop in the process.
  • Identify metrics of importance: To give the effort value, practitioners should determine what they want to eliminate from the process – process steps that generate cycle time, steps where individuals seek approvals, steps where individuals perform manual effort and so on. These will become the steps to color code as action items.
  • Select a map collection method: Process mapping can be performed using sticky notes, a spreadsheet or technical drawing software program, or paper and pen. Practitioners should select the method that works best for them and their organization.
  • Validate the process maps: After completing a first round of interviews, practitioners should have someone within the organization who is familiar with the process read the maps. This person should check for clarity, content and continuity. The practitioner can review the feedback with the original interviewee for confirmation.
  • Minimal interviewees at one time: Practitioners should not attempt to create process maps with large groups. It is best to interview one or two people at a time, therefore reducing social conversation and the desire to correct the process during the mapping session.

About the Author: Joy Taylor is a Master Black Belt and the president of Taygan Consulting Inc. She has worked with clients such as NRG Energy Inc., Merck & Co and Avid Technologies Inc. Taylor started her career at GE Americom Comunications, a GE Capital Business. She is based in Yardley, Pa., USA, and can be reached at joy@tayganconsulting.com.

Posted in Business Process Management (BPM), Process Improvement | 3 Comments »

Six Sigma Aids in IT Employee Resource Planning

Thursday, May 7th, 2009

By Celia B. Banks, Ph.D. 

Reproduced from http://software.isixsigma.com/library/content/c090506b.asp  

Effective resource planning is an important part of any process improvement program. Formalizing processes and developing measurement systems helps to determine the value of internal projects from a human capital perspective. A measurement system for effective resource planning in implementing project goals may be particularly helpful for information technology (IT) divisions of companies.Developing a Measurement System 

A first step in defining the measurement system must be establishing formalized processes for resource planning. Practitioners should gather and analyze the business requirements within the process to determine deficiency input points. This can be done using process flow diagrams of both current, or “as is,” and modified, or “to be,” processes.

Next, practitioners should determine critical-to-quality (CTQ) requirements for project task deliverables. Metrics for evaluating resource planning processes consider these CTQs. Once CTQ characteristics are identified, the cost of poor quality (COPQ) can be determined. A project skills matrix and a failure mode and effects analysis (FMEA) for resource planning can be used to capture data for measurement. Then practitioners can identify the defects per million opportunities (DPMO), a number that can be converted to a sigma level. The sigma level will focus on measuring and eliminating defects in core resource planning processes.  

Six Sigma can be used to define process capability in order to identify metrics for evaluating the outcome of CTQ requirements.

Identifying CTQ Variables

In evaluating project resourcing planning, the earned value management model can be used in defining CTQ variables. In order to evaluate performance, practitioners can use a general variance model, in which the actual resource cost is compared to the standard budget for a given project, to examine the cost of a resource in terms of hourly amount, hours utilized and scheduling. When actual utilization in terms of cost and scheduling exceeds the standard budget, it is deemed unfavorable.

Within the variance model framework, a resource manager should construct a CTQ FMEA template that is applicable to staffing requirements outlined in the Define phase. The CTQ specifications should be stated, and measures devised. Variables can be associated with defect opportunities (Table 1).

Table 1: Example of CTQ Requirements
Requirement Variable Defect Threshold
Set up server hardware Resource skill Hardware malfunctions due to incorrect setup four times
Install and configure Oracle on server Resource skill in specialty area Incorrect settings in system global area four times
Post go-live application support Resource training relevant to skill Incorrectly diagnose problem as user training issue when in actuality it is an application bug three times

The conversion of actual defects in task delivery to DPMO will derive a sigma value denoting either organizational excellence, satisfactory performance or unfavorable results. Practitioners can compare sigma values at the start and end of the project to determine improvement gains. A sample of a CTQ measurement is illustrated in Table 2.

Table 2: Sample CTQ Measurement
Define Measure Analyze Improve Control
CTQ: The customer will tolerate up to four hardware malfunctions due to incorrect setup Defects: Hardware malfunctions four times
Units: 196 (47 file servers x 4 setup errors)
Opportunities: 1 per file server
DPMO: 85,100
Process sigma: 2.81		 Two system engineer resources, A and B, are assigned to task: Resource A sets up 23 file servers over a period extending beyond the planned 10 workdays (13 workdays actual). Resource B sets up the remaining 24 file servers under the planned 10 workdays (9 workdays actual). Six file servers that Resource A sets up experience malfunctions due to incorrect setup. Resource A caused a cost and schedule variance and failed to meet CTQ requirements six times.
Defects: Hardware malfunctions six times
Units: 138 (23 file servers x 6 setup errors)
Opportunities: 1 per file server
DPMO: 260,900
Process sigma: 2.14		 Identify opportunities for Resource A to improve server set up ability through training or journeying.

 

Quantifying COPQ in Resource Planning Processes

There are many causes that affect COPQ: demand constraints, labor cost to fix problems, cost of lost opportunity, underutilization, loss of sale or revenue, and lower service level to customers. Table 3 describes these causes from a resource planning perspective.

Table 3: Poor Quality Causes in Resource Planning
Poor Quality Cause Description
1 Underutilization of resources is also termed spoilage in Six Sigma. It occurs when there is inconsistence or inefficient processes.
2 Reworking a deliverable due to wrong resources skill applied involves the labor to repqir the defect.
3 Additional resources includes any burden of consumption of resources in order to accommodate an unforseen step in project deliverables.
4 Lost opportunity is the loss in business of a failure. Included are the loss of margin and the capital to be invested for regaining lost revenue to offset the cumulative revenue loss.
5 Lost revenue due to poor quality considers the loss of new business due to defective quality in a deliverable.
6 Poor customer satisfaction is the sum total of all COPQ. Cost is compounded by losses customers suffer due to defective quality in a deliverable.

The calculation of COPQ uses weighted risk for potential failures. It considers an estimation of four components:

  1. Probability of occurrence for each failure
  2. Potential severity of each failure
  3. Current detection provisions
  4. Resolution cost of a single failure
Table 4: Sample COPQ Measurement
Goal: Reduce Customer Dissatisfaction Incidents Due to Resource Related Project Failures by 75
No. Potential Resource Deficiency Risk Priority Number Effort Hours to Resolve Average Cost Per Hour Average Cost to Resolve RPN x ACR
1 Right skilled but underutilized in project task 30 10 $90.00 $900.00 $27,000.00
2 Wrong skill to repair defect 27 40 $48.00 $1,920.00 $51,840.00
3 Added resource due to scope creep 27 56 $240.00 $13,440.00 $362,880.00
4 Loss of business opportunity due to downtime (daily revenue = $10,000) 18 40 $416.67 $16,666.80 $300,002.40
5 Lost revenue due to resource incorrectly working project task 21 10 $4,166.70 $41,667.00 $875,007.00
  Total: 123       $1,616,729.40
Formula 1: Weighted average cost to resolve = (RPN x ACR)/RPN = 1,616,729.40/123 = $13,144.14
Formula 2: COPQ (annualized) = Weigted average cost to resolve x annual reduction in resource related project failures
13,144.14 x 75 = $985,810.50

The connection of COPQ to DPMO means that poor quality costs are proportional to sigma levels. The yield should be compared to the cost of quality in the finished project deliverable. The sigma level correlation to DPMO and cost of quality is stated as percentage of revenue (Table 5).

Table 5: Sigma Level, Value, DPMO and Cost of Quality Percentage
Sigma Level Range Value Yield DPMO Cost of Quality Percentage
2 Unfavorable – 298,000 More than 40%
3 Satisfactory 93.3% 66,870 25%-40%
4 Satisfactory 99.8% 6,210 15%-25%
5 Organization excellence 99.977% 233 5%-15%
6 Organization excellence 99.99966% 3.4 Less than 1%

 

Control System Benefits

A performance measurement system enables management to plan and make decisions. The approach identified here provides a control system that aligns practical standards against ideal, or perfect, conditions. Standardization provides performance baselines for control efforts in budgeting and planning of resource allocation. From here, practitioners can devise a simple formula that compares actual costs in resource allocation against the baselines. Variances should be noted to determine the extent of favorable and unfavorable outcomes. The data used to derive costs can be maintained in the project management application for creating reports and scorecards.

About the Author: Celia B. Banks, Ph.D., is a certified Black Belt. As a management consultant, she defines project management office (PMO) processes and standards for governance in information technology and aligns best practices with Six Sigma metrics. She can be reached at celia@cyberneteks.com.

 

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Lean Services: Doing Transactions Right the First Time

Tuesday, April 21st, 2009

The source of this article is http://www.isixsigma.com/library/content/c090406a.asp 

Written by Sharad Sharma

In a service organization, the most efficient method for cutting waste is to attack anything and everything that is not done right the first time. This concept, known as first time right, involves making sure that all activities are carried out in the right manner the first time and every time. Examples include a customer not needing to repeat their order at a take out restaurant and a bank executive handing the customer the correct form the first time. Completing all services right the first time is not easy, but doing so can be an effective way for businesses to begin their Lean journey.

Tracking First Time Right Encounters

The first step to completing service processes right the first time is to measure the current level of performance. Practitioners can begin by measuring the number of transactions that meet this goal and comparing this to the total number of transactions. Any process that receives input from another internal process should be measured. With this data, practitioners can approach the problem in a logical manner and find the reasons for poor performance. Sheer measurement of first time right processes usually helps earn the required buy-in and attention from the stakeholders.

Measuring the first time right performance of service personnel might be a change for many organizations. For example, bank managers may be used to judging their staff by the time it takes them to resolve a customer query. However, staff may not always provide complete information to customers, which can result in repeat complaints. Thus, it is essential to link an employee’s performance or output with the transactions that are completed correctly the first time.

Improving Performance

At the transaction level, organizations need to ensure that processes are well understood by the people performing them. Many transactions are not first time right simply because there are no clear guidelines and the staff has not been properly trained. A documented process will go a long way in ensuring this. For example, creating a standard operating procedure for filling out a loan application form will reduce the number of cases rejected at the next step in the loan process.

Simple techniques such as checklists and highlighted boxes for signatures help to ensure things are done right the first time. In a restaurant, for instance, all default silverware can be kept in stands or bins so that the waiter simply has to pick up one from each bin to ensure that all the tools are served correctly. Or, if a fast food restaurant distributes an order form while the customer is in line, the customer can check the items required and hand the form to the billing clerk, thus avoiding any error in ordering and reducing billing time.

Cutting Out Waste

First time right also helps address the seven wastes of Lean. By religiously following this spirit of making things right the first time, each of the forms of waste can be reduced, as explained here:

1. Defects – The simplest and most direct waste addressed by first time right. Any service rendered to a customer that is not first time right – wrong delivery, data entry or diagnosis in a hospital – is a defect. Services do not have the luxury of rework; any defect remains a defect. However hard an organization tries, customers will not be completely satisfied after a bad service experience. The same is not true in manufacturing, where the customer may not even be aware of rework if it happens prior to product delivery. For example, the wrong order served in a restaurant will leave a bad taste with the customer even after the mistake is corrected; however, the rework on a car engine has no impact on the customer as long as the final product meets the specifications.

2. Overproduction – Services have a tendency to overproduce to make up for transactions that do not go first time right. Any rework is overproduction, and takes up effort that should be going into a fresh transaction. For example, a package misdelivered results in an extra pick up and delivery to the correct destination.

3. Processing – In services industries, a lot of processing takes place to prevent defects from reaching the customer. For example, in a bank, employees may check an account-opening form at multiple points during the process before generating the new account number. Inspection is a pure non-value-adding activity. Hence, inspection needs to be performed only when absolutely necessary and should not be used as a filtering process to hide the inefficiency of the input. If a customer address is not captured accurately on a majority of applications, it is better to devote time and effort on correctly capturing the information the first time rather than deploying someone to check and rectify all the applications.

4. Waiting – Any difference between the processing turnaround time and customer demand results in customer waiting time. In many cases, the processing turnaround time increases due to rework for activities that have not happened correctly the first time. For any kind of rework, there is waiting involved – usually on the part of the customer. Any hotel room not made up properly results in customer waiting, and a loan application not completed properly will delay the disbursement to the customer.

5. Inventory – The traditional manufacturing concept of inventory does not exist in services; services cannot be stored for future delivery. A hotel room left vacant for a night is lost business forever – it can never be recovered. However, in certain situations, services do maintain an inventory in the form of capacity. Call centers can reduce the staff on board if they ensure first time resolution of the customer’s complaint so that the customer does not need to call again for the same reason. If sufficient focus and effort is applied to improving billing accuracy, organizations need not use part of its capacity for making corrections.

6. Motion and 7. Transportation – Services incur motion and transportation in the form of various handoffs that take place at stages of service delivery. Any rework results in more of these handoffs. For example, a loan that has been rejected due to incorrect income calculations goes thorough multiple handoffs and approvals before it is corrected. This could be avoided if the calculations were done correctly the first time.

About the Author: Sharad Sharma is employed with Reliance Money Ltd. in New Delhi, India. He is an engineering graduate with a master’s in business administration from the National Institute of Industrial Engineering, Mumbai. He has extensive experience in deploying quality initiatives across the manufacturing, business process outsourcing and financial services sectors. He can be reached at sharad.sharma1@yahoo.com

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