9. Process Management

What is a process? SIPOC is a six sigma tool. The acronym stands for Suppliers, inputs, process, outputs, customers. A SIPOC is completed most easily by starting from the right ("Customers") and working towards the left. Process approach: the application of a system of processes within an organization, together with the identification and interactions of these processes, and their management. The ISO 9001 process approach emphasizes the importance of: Understanding and meeting requirements;, The need to consider processes in terms of added value;, Obtaining results of process performance and effectiveness, and, Continual improvement of processes based on objective measurement.

Managing activities and related resources as a process means: Systematically defining the activities necessary to obtain a desired result;, Establishing clear responsibility and accountability for managing key activities;, Analyzing and measuring the capability of key activities;, Identifying the interfaces of key activities within and between the functions of the organization;, Focusing on the factors such as resources, methods, and materials that will improve key activities of the organization;, Evaluating risks, consequences and impacts.

Business Processes: Acquiring customer and market knowledge;, Strategic planning;, Research and development;, Purchasing;, Developing new products and services;, Fulfilling customer orders;, Managing information;, Measuring and analyzing the performance;, Training the employees, etc.

Three categories: Value-creation processes (core processes) / Support processes / Management processes.

1. Value-Creation Processes Are those most important to running the business and maintaining or achieving a sustainable competitive advantage: Design processes, which involve all activities that are performed to incorporate customer requirements, new technology, and past learning into the functional specifications of a product. // Production/ delivery processes, which create or deliver the actual product.

2. Support Processes Are those that are most important to an organization’s value-creation processes, employees, and daily operations. -> accounting/ finance, human resources, management information systems, ordering, stocking, research and development, technology acquisition, supply chain management, sales and marketing, project management, etc.

3. Management Processes Planning, Organizing, Coordinating, Leading, Controlling/ Evaluation, Staffing, Motivating, Improving

Value Chain: The string of activities that moves a product from the raw material stage, through manufacturing and distribution, and ultimately to the end user. By studying a product or service’s value chain, an organization can identify ways to create additional value and assess whether it has the means to do so. Value chain analysis is also helpful in identifying opportunities for new businesses and in understanding how business models emerge.

a) Primary Value Chain Activities: Inbound Logistics: The receiving and warehousing of raw materials. Distribution to manufacturing / Operations: The processes of transforming inputs into finished products or services / Outbound Logistics: The warehousing and distribution of finished goods / Marketing and Sales: The identification of customer needs / The generation of sales. / Service: The support of customers after the products and services are sold to them.

b) Support Value Chain Activities: Procurement: Purchasing inputs such as materials, supplies, and equipment / Technology Development: Technologies to support value-creating activities / Human Resource Management (HRM): Employee recruiting, Hiring, Training, Development, Compensation / Firm Infrastructure: Organizational structure, Control systems, Company culture.

Value-added perspective on quality: A value-added activity can be pinpointed by asking, “Would this activity matter to the customer?”. In other words, a value-added activity will have economic value to the customer.

Three categories are used to describe types of value that a process step may have:

Value added to customers served: steps that directly impact the satisfaction of the customers served

Value added to operations: steps that support the ability to deliver services to the customers served

Non-value-added: steps that could be eliminated or changed without harming service levels or the organization

a) Value-added to customers served: In order to assess whether the steps in the process have value to the customers served, ask: Is this step required by the customers served by the process? Are those served willing to pay for this activity? An activity can be described as adding value for the customers served only if: the customers served recognize the value; the activity specifically impacts the service requirements of those served; the step is necessary to meet the timelines and expectations of those served.

b) Value-added to operations: In order to assess whether the steps in the process add operational value, ask:

Could this activity be eliminated if some preceding activity were done differently? Is there a risk if this activity is eliminated? Could any existing technology eliminate this activity? Could this activity be eliminated without impacting the quality of our product or service? Does this activity fulfill an external regulatory requirement? An activity adds operational value if it is not a customer value-added activity and is required to: sustain the ability to perform value-added activities for the customers served; meet contractual, legal, or other regulatory criteria; meet health, safety, environmental, or personnel development criteria.

c) Non Value-added: In order to assess whether the steps in the process are non-value-added, ask: Does this activity add value for the customers served or operations? An activity is ‘non-value-add’ if it does NOT add value for either the customers served or for operations.

Process Steps: Request account to be opened, Gather information, Qualify request against legal compliance, Authorize request, Request review, Send incomplete requests to account rep, Obtain account information, Complete memo, Request set up, Account manager review, Account manager approval, Risk manager review, Risk manager approval, Notify account manager, Request authorization key, Data entry to system, Data formatted to open account, Distribute to various departments, Account open, Student receives notification.

10. Managing the Economics of Quality

ISO 10014:2006 Quality management -- Guidelines for realizing financial and economic benefits: provides guidelines for realizing financial and economic benefits from the application of the ISO 9000 quality management principles; complements ISO 9004 for performance improvements. It provides examples of achievable benefits and identifies management methods and tools that are available to assist with the achievement of those benefits. Quality management influences the economic performance of an organization both in the short and long term. The short- and long-term economic goals should be formulated and regularly reviewed in quality planning.

cost of conformity - cost to fulfill all of the stated and implied needs of customers in the absence of failure of the existing process

cost of nonconformity - cost incurred due to failure of the existing process

Methodology for managing the economics of quality: Identify or review the organization’s processes: identify, monitor and report the costs / identify, monitor and report the level of customer satisfaction / Review and identify opportunities to improve processes and customer satisfaction; cost/ benefit analysis to determine if action is required and if the proposed improvement action is justified, taking into account the short- and long-term benefits. If the action is approved, plan and implement the improvement and monitor the results to give feedback to the process. Repeat this methodology for continuous improvement.

Cost/benefit analysis: ensure that the proposed improvement action is clearly defined, planned and costed in line with the organization’s primary purpose // predict the impact on customer satisfaction by increasing the factors causing delight and satisfaction, and reducing the factors causing dissatisfaction // estimate the increase in revenue due to repeat orders and new business as a result of improved customer satisfaction // identify the less tangible benefits to the customers and other stakeholders // estimate the changes in the costs of conformity and nonconformity, both internal and external to the process;, collate the total financial impact of the proposed improvement action // compare the total benefits with the investment for the improvement action and decide whether to proceed or not.

Cost Monitoring: Costs could include direct and indirect labour, materials, equipment, overheads, etc. // Cost data can be actual, allocated or estimated. // Cost data can be extracted from the existing financial control system, complemented by operational data collection. // Costs that cannot be readily associated with specific cost elements should be estimated.

PAF Model: "Prevention, Appraisal and Failure": The “cost of quality” isn’t the price of creating a quality product or service. It’s the cost of NOT creating a quality product or service. Costs of poor quality (COPQ) – are those costs associated with providing poor quality products and services or those incurred as a result of poor quality. Prevention costs; Appraisal costs; Internal failure costs; External failure costs.

1. Prevention Costs: The costs of all activities specifically designed to prevent poor quality in products or services, The investments made to keep nonconforming products from occurring and reaching the customer, Quality planning costs: salaries of individuals associated with quality planning and problem-solving teams, the development of new procedures, new equipment design, and reliability studies;, Process control costs: costs spent on analyzing production processes and implementing process control plans;, Information systems costs: costs for developing data requirements and measurements;, Training and general management costs: internal and external training programs, clerical staff expenses.

2. Appraisal Costs: The costs associated with measuring, evaluating or auditing products or services to assure conformance to quality standards and performance requirements, The costs associated with efforts to ensure conformance to requirements, generally through measurement and analysis of data to detect non-conformance, Test and inspection costs: costs associated with incoming materials, work-in-process, and finished goods, including equipment costs and salaries;, Instrument maintenance costs: costs due to calibration and repair of measuring instruments;, Process measurement and control costs: the time spent by workers to gather and analyze quality measurements.

3. Internal Failure Costs: The costs resulting from products or services not conforming to requirements or customer /user needs, The costs occurring prior to delivery or shipment of the product, or the furnishing of a service, to the customer, Scrap and rework costs: material, labour, and overhead rework costs;, Costs of corrective action: time spent determining the causes of failure and correcting production problems;, Downgrading costs: revenue lost when selling a product at a lower price because it does not meet specifications;, Process failure: unplanned machine downtime or unplanned equipment repair.

4. External Failure Costs: The costs resulting from products or services not conforming to requirements or customer /user needs, The costs occurring after delivery or shipment of the product -- and during or after furnishing of a service -- to the customer, Costs due to customer complaints and returns: rework on returned items, cancelled orders, and freight premiums;, Product recall costs and warranty claims: cost of repair or replacement as well as associated administrative costs;, Product liability costs: costs resulted from legal actions and settlements.

11.Organization Performance Measurement

Importance of Performance Measurement: Osborne and Gaebler: If you don’t measure results, you can’t tell success from failure. If you can’t see success, you can’t reward it; and if you can’t reward success, you are probably rewarding failure. If you can’t recognize failure, you can’t correct it.

Balanced Scorecard: A tool for business performance measurement, Kaplan and Norton’s model – four perspectives: Financial / Internal / Customer Innovation / Learning.

1. FINANCIAL METRICS: COSTS: cash flow; direct and indirect labor costs; direct and indirect material costs; facility and operational costs; production systems; information systems; inventory-carrying costs; total cost of ownership… REVENUE: sales; earnings before taxes and interest; return on assets; return on investment; warranty costs; product profitability…

2.a CUSTOMER METRICS Customer satisfaction and dissatisfaction;, Customer retention;, Gains and losses of customers;, Customer awards;, Customer ratings;, Suggestions rates;, Customer complaints;, Warranty claims, etc. // 2.b HR METRICS Employee well-being: safety, absenteeism, grievances;, Employee satisfaction: turnover;, Employee motivation;, Employee training and development: extent of training, training effectiveness;, Work system performance, and effectiveness: measures of improvement in job effectiveness, employee productivity, suggestion rates.

BEHAVIORAL METRICS Category – COMMITMENT: adherence to policies and procedures; participation levels in improvement activities; availability and dedication of HR department; efforts to train employees as needed;

Category – COMMUNICATION: customer/ employee surveys regarding quantity and quality of company communications efforts; elimination of service or production errors caused by ineffective communications; error-reporting accuracy and timelines; formal recognition of employees’ communication efforts;

Category – COOPERATION: shared financial risks and rewards; effective efforts toward reporting and resolving problems; joint recognition activities; formal recognition of employees’ cooperation efforts;

3. OPERATIONS METRICS: Productivity, Cycle time, Distribution channels, Product quality levels, Operations costs CORE PROCESS METRICS: Results-focused; Productivity-focused. General core process metrics: New product launches; New product extensions; Product failures; Design-cycle time; Time to market; Product life-cycle profitability;

Core Process Metrics – Results - RESULTS METRICS: Health and safety (HS); First-time-through quality (FTT); Rolled-throughput yield (RTY); On-time delivery (OTD); Dock-to-dock (DTD); Order-fulfillment lead time (OFLT).

Core Process Metrics – Productivity - PRODUCTIVITY METRICS: Inventory turnover rate (ITO); Build to schedule (BTS); Overall equipment effectiveness (OEE); Value-added to non-value-added ratio (VA/NVA).

HEALTH AND SAFETY (HS) METRICS Measure the impact of the production processes on employees’ health and safety: days lost due to accidents; absenteeism; employee turnover.

FIRST-TIME-THROUGH QUALITY (FTT) METRIC: Measures the percentage of units that go through the production process without being scrapped, rerun, retested, returned by the downstream operation, or diverted into an off-line repair area. FTT measures how well you create units of product. unit = finished product, component, or sales order.

FTT = [units entering process – (scrap + reruns + retests + repaired off-line + returns)]/ units entering process.

ROLLED-THROUGHPUT YIELD (RTY) METRIC Measures the probability that a process will be completed without a defect occurring. RTY measures how well you create quality. opportunity = a part, product, or service characteristic that is critical to customer-quality expectations or requirements; you measure, test, or inspect it RTY = 1 – DPO // DPO (defect per opportunity) = probability of a defect occurring in any one product, service characteristic, or process step // DPO = DPU/ opportunities per unit // DPU = number of defects per unit/ total number of units

ON-TIME DELIVERY (OTD) METRIC Measures the percentage of units the company produces that meet customer’s deadline OTD = line items received on time by customer/ total line items received.

DOCK-TO-DOCK (DTD) METRIC Measures how long it takes raw materials or sub-components coming into the plant to be turned into finished products. control part = a significant component of the final product that travels through all the major manufacturing processes for that product // end-of-line rate = the average number of jobs per hour for a particular product end-of-line rate = manufactured units (per week) / production hours (per week)

DTD = total number of control parts/ end-of-line rate

ORDER FULFILLMENT LEAD TIME (OFLT) METRIC Measures the average time that elapses between the company’s receipt of an order from a customer and when the company sends an invoice to the customer for the finished product or service. OFLT is a measure of the company’s operating cash flow (the time from receipt of the sales order to the time of receipt of payment).

OFLT = SO + PS + M + S + I

SO (sales order) = the time from when an order is received until the time it is entered into the production-scheduling system // PS (production scheduling) = the time from when an order enters the production-scheduling system until the time actual production begins // M (manufacturing) = the time from when manufacturing order starts under the order is released to the shipment department // S (shipping) = the time from when an order is received in the shipping department until it leaves the dock // I (invoice) = the time from when accounting is notified of a shipment going out until it sends the invoice to the customer

INVENTORY TURNOVER RATE (ITO) Measures how fast the company sells the products produced (how efficient the marketing efforts are). A low ITO rate indicates excess inventory or poor sales. A high ITO rate indicates high efficiency: reduces the risk of inventory loss and keep the return on assets highly competitive.

ITO = goods sold/ year-end inventory (taken from the company’s balance sheet).

BUILD TO SCHEDULE (BTS) METRIC Measures the percentage of units scheduled for production on a given day that are actually produced on the correct day, in the correct mix, and in a correct sequence. BTS alerts the company to potential overproduction situations.

BTS = volume performance x mix performance x sequence performance

Volume performance = actual number of units produced/ scheduled number of units Mix performance = actual number of units built to mix/ actual units produced or units scheduled to be produced Sequence performance = actual number of units built to schedule/ actual number of units built to mix

number of units built to mix = number of units built that are included in the daily production schedule

number of units built to schedule = number of units built on a given day in a scheduled order

OVERALL EQUIPMENT EFFECTIVENESS (OEE) METRIC Measures the availability, performance efficiency, and the quality rate of the equipment

OEE = equipment availability x performance efficiency x quality

Equipment availability = operating time/ net available time

operating time = net available time – all downtime (breakdowns, setup time, and maintenance)

Performance efficiency = total parts run x ideal cycle time / operating time

total parts run = total number of parts produced (regardless of quality)

ideal cycle time = the normal expected cycle time for the equipment

Quality = [total parts run – total defects]/ total parts run

VALUE-ADDED TO NON-VALUE-ADDED RATIO (VA/NVA) METRIC Compares the amount of time in the work process spent on value-added activities to the amount of time spent on non-value-added activities.

VA/NVA = total value-added activities time/ total OFTL

VA = SO + PS + M + S + I // OFTL = SO + PS + M + S + I

4. SOCIETY METRICS: Environmental and regulatory compliance; Community service; Ethics audit results; Market innovation; Skills developed.

12. The Tools of Quality Management

The need for the tools of quality: Improving the system. The business must balance the needs of the basic functional areas: Marketing, Accounting, Human Resources, Operations, Engineering, Strategy.

Ishikawa’s basic seven tools of quality: Process maps, Check sheets, Histograms, Scatter plots, Control charts, Cause and effect diagrams, Pareto analysis.

Process Map: Visually depicts the sequence of events to build a product or produce an outcome. It comprises a stream of activities that transforms a well defined input or set of inputs into a pre-defined set of outputs.

Flowchart: Start and end symbols: represented as ovals or rounded rectangles, usually containing the word "Start" or "End", or another phrase signaling the start or end of a process, such as "submit enquiry" or "receive product". Arrows: showing what's called "flow of control" in computer science. An arrow coming from one symbol and ending at another symbol represents that control passes to the symbol the arrow points to. Processing steps: Represented as rectangles. Examples: "Add 1 to X"; "replace identified part"; "save changes" or similar. Input/Output: Represented as a parallelogram. Examples: Get X from the user; display X. Conditional or decision: represented as a diamond (rhombus). These typically contain a Yes/No question or True/False test. This symbol is unique in that it has two arrows coming out of it, usually from the bottom point and right point, one corresponding to Yes or True, and one corresponding to No or False. The arrows should always be labeled. More than two arrows can be used, but this is normally a clear indicator that a complex decision is being taken, in which case it may need to be broken-down further, or replaced with the "pre-defined process" symbol.

SIPOC diagrams are very easy to complete. Here are the steps you should follow: Create an area that will allow the team to post additions to the SIPOC diagram. This could be a transparency (to be projected by an overhead) made of the provided template, flip charts with headings (S-I-P-O-C) written on each, or headings written on post-it notes posted to a wall. Begin with the Process. Map it in four to five high level steps. Identify the Outputs of this Process. Identify the Customers that will receive the Outputs of this Process. Identify the Inputs required for the Process to function properly. Identify the Suppliers of the Inputs that are required by the Process. Optional: Identify the preliminary requirements of the Customers. This will be verified during a later step of the Six Sigma measurement phase.

Check Sheet: A structured, prepared form for collecting and analyzing data.

Histogram: Representation of a frequency distribution by means of rectangles whose widths represent class intervals and whose areas are proportional to the corresponding frequencies. A bar chart.

Scatter Plots: Show the relationship between two variables by displaying data points on a two dimensional graph. Is useful when there is a large number of data points.

Control Chart: Is used to study how a process changes over time. A control chart always has a central line for the average, an upper line for the upper control limit and a lower line for the lower control limit. These lines are determined from historical data. By comparing current data to these lines, you can draw conclusions about whether the process variation is consistent (in control) or is unpredictable (out of control, affected by special causes of variation).

Out-of-control signals: Obvious consistent or persistent patterns that suggest something unusual about your data and your process. A single point outside the control limits. Two out of three successive points are on the same side of the centerline and farther than 2 σ from it. Four out of five successive points are on the same side of the centerline and farther than 1 σ from it. A run of eight in a row are on the same side of the centerline.

Cause and Effect Diagram: Helps to visually display the many potential causes for a specific problem or effect. It is particularly useful for situations in which little quantitative data is available for analysis.

Pareto Diagram: 20% of sources are causing 80% of the problems (80/20 Rule). Is used to graphically summarize and display the relative importance of the differences between groups of data. The first few contributing causes to a problem usually account for the majority of the result. It answers: What are the largest issues facing our team or business? What 20% of sources are causing 80% of the problems (80/20 Rule)? Where should we focus our efforts to achieve the greatest improvements?

New tools for improvement: The Affinity Diagram, Interrelationship Digraph, Tree Diagram, Prioritization Grid, Matrix Diagram, Process Decision Program Chart.

Affinity Diagram: Organizes a large number of ideas into their natural relationships. Used: After a brainstorming exercise, When analyzing verbal data, such as survey results. Then we organize ideas in categories. Ex. Proposed performance measures: Product Quality, Maintenance, Manufacturing Cost, Safety and Environmental, Volume

Interrelationship Digraph: Identify, analyze and classify the cause and effect relationships that exist among all critical issues so that key drivers or outcomes can become the heart of an effective solution. Is used to show cause-and-effect relationships between identified factors surrounding an issue.Is there a cause/influence relationship? If yes, which direction of cause/influence is stronger? Identify visually both the key drivers (the greatest number of outgoing arrows) and the key outcomes (the greatest number of incoming arrows). Typical methods are double boxes or bold boxes.

Tree Diagram: Identify the steps needed to address the given problem. It is used to break down broad categories into finer and finer levels of detail. Move step by step from generalities to specifics. Fundamental goals are broken down in strategic objectives. Lag indicators are long-term and results-oriented. Lead indicators are short-term and process-oriented.

Prioritization Grid: Is used to make decisions based on multiple criteria. It involves assigning percentages and weights to each criterion and ranking them.

Matrix Diagram: Identify correlations between variables. The vertical (up) arrow is a driving cause and the horizontal (side) arrow is an effect. We may have added symbols indicating the strength of the relationships. The "total" column is the sum of all of the "relationship strengths" in each row. This shows that you are working on those items that have the strongest effect on the greatest number of issues.

Process Decision Program Chart: Identifies what might go wrong in a plan under development. By using PDPC, a company either revises the plan to avoid the problems or can be ready with the best response when a problem occurs. // Obtain or develop a tree diagram of the proposed plan. This should be a high-level diagram showing the objective, a second level of main activities and a third level of broadly defined tasks to accomplish the main activities. For each task on the third level, brainstorm what could go wrong. Review all the potential problems and eliminate any that are improbable or whose consequences would be insignificant. Show the problems as a fourth level linked to the tasks. For each potential problem, brainstorm possible countermeasures. These might be actions or changes to the plan that would prevent the problem, or actions that would remedy it once it occurred. Show the countermeasures as a fifth level, outlined in clouds or jagged lines. Decide how practical each countermeasure is. Use criteria such as cost, time required, ease of implementation and effectiveness. Mark impractical countermeasures with an X and practical ones with an O.

Tools of Quality Management – Case Examples PDPC: Sample problem– Central Theme (Level 0)

The problem: What will make the next generation of organizations competitive? // The tool: Process Decision Program Chart // Level 0: Central theme

PDPC: Level 1 – Initiatives Establish measurement systems that improve processes and outcomes. Monitor the costs of non-quality. Scan the environment for new trends and needs.

PDPC: Level 2 – Topics Create customer focused measures to improve problem solving. Develop core process focused measures to improve downtimes. Develop behavioral measures to enhance cooperation

PDPC: Level 3 – Big Ideas Do real-time surveys to track customer priorities.

PDPC: Level 4 – Supporting Ideas Use industry survey databases. Create a database from website comments and questions. Use Pareto Charts, Affinity Diagram to analyse the information from the database.

The problem: How can we foster team creativity so that better solutions can be developed?

Create environment to support innovative team-centered problem solving

Train on appropriate skills to enable team members to work effectively

Pick the right team to get rich input of ideas

Ca in viata

Neputinta

Ce poti sa faci cand simti ca nu mai esti cine ai fost? Cel mai rau te apasa tristetea faptului ca nu te-ai pastrat intreg. Iradiezi o neputinta pe care ai vrea sa o ascunzi, dar oricat incerci nu poti. Dormi prea mult, pentru a uita. Daca ai putea te-ai gandi la asta, dar nu poti gandi ca ai putut gandi vreodata asa ceva. Ceilalti te privesc cu mila, te menajeaza. Decizi sa lupti si sa te faci bine. Asta e azi, dar maine pare atat de departe! Uneori esti epuizat, alteori mai vesel. Uneori vorbesti, alteori refuzi sa o faci. Peste toate acestea pluteste insa avionul care scrie pe cerul mintii: ma refac incet, dar sigur. Nu iti ascunde lacrimile din coltul ochilor! Lasa-le sa spele toata rusinea si resentimentele! Cand vei fi liber si intreg din nou, vei iubi rabdarea care te-a adus aici. Iarta nepasarea sau mirarea sau condescendenta celorlalti. Accepta ceea ce esti. Eu te iubesc! Noi te iubim! Pentru ceea ce esti, asa cum esti acum!

Meditatie

Spital, miros fetid de analgezic
Si lagarul detentiei vietii
Care oricum se scurge.

O incercare disperata
De a iesi din umbra
Mortii.

De ce ne concentram ultimul avant pe vorbe
Spuse de oameni pe care nu ii stim?
Oare viata de dupa viata
Nu va fi mai buna?

Sperante mor cu noi, in noi-
Se duc in praful abisal
Al panzelor de paianjen ratacite la colt.

Deasupra tuturor e valul
Care acopera sufletul
Cu un cearceaf alb.

Spital,gradina paradisiaca
Cu flori avide de suflete,
De ce nu iti asumi esecul?