Operational Excellence
Summary
Lean Six Sigma for Services and Healthcare
Mast, Does, Koning, Lokkerbol
Operational Excellence...............................................................................................................1
Chapter 1: The business and economic background of LSS........................................................2
Chapter 2: organizational structure for LSS................................................................................3
Organization LSS:.....................................................................................................................3
Chapter 3: Six Sigma Method......................................................................................................5
Chapter 4: Lean methodology.....................................................................................................7
Chapter 5: Deployment strategy.................................................................................................7
Chapter 6: LSS in a historical perspective...................................................................................8
Chapter 7: Define........................................................................................................................9
Chapter 8: Measure..................................................................................................................10
Chapter 9: Analyse....................................................................................................................11
Chapter 10: Improve.................................................................................................................13
Chapter 11: Control...................................................................................................................16
Chapter 12: Elementary statistics for LSS.................................................................................18
1
,Chapter 1: The business and economic background of
LSS
LSS is not a business strategy, it’s a framework for organizing improvement activities.
- Focus on processes: all work that is done routinely.
o Process: number of operations that turn input into output.
- Costs of poor quality: costs an organization makes because things are not done right,
cost the organization a lot of money.
- Hidden factory: quality and efficiency issues often invisible on flowcharts and process
descriptions.
Companies implementing LSS choose to minimize the hidden factory by investing substantial
resources in improvement projects.
Recurring problems make for good LSS projects as LSS brings understanding of the root
causes of the problem and provides a definitive optimal solution.
- LSS projects optimize processes, eliminate waste, and provide a quantitative basis for
staffing/line balancing.
- Besides internal problems, LSS projects tackle problems that are perceived as
problematic by customers.
- LSS provides a management structure and methodology that turn systematic
improvements of routine operations into a routine operation itself.
Direct benefits of LSS consists of benefits derived from customer satisfaction and cost
advantages.
o Cost advantage: efficiency improvement, unnecessary cost avoidance, lower
inventory.
o Improved quality, more reliable deliveries, better marketing/sales processes.
LSS should be integrated in a strategy. In that way, tactical gains can be converted in
strategic advantages.
Price erosion: when companies achieve the same improvement in their operations,
principles of competition and market ensure that prices decrease by the same amount as
costs, leaving industry with the same profit margins, and feeding spilling over gains to
customers.
Competitive convergence: when companies start copying each other’s moves and best
practices, so they end up looking more alike – destructive for participating companies.
Competitive strategy: to avoid this convergence - effective methodology for
delivering the improvements that the business strategy dictates as essential.
LSS should not be started as a substitute for a good strategy, but to complement. If LSS
projects are not related to strategy, they will result in tactical wins (projects that achieve
objectives) but have no strategic effect on the company. With a proper strategic focus there
is unification, integration and mutual reinforcement, and thus a potential for performance.
Continuous improvement, flexibility and the ability to adapt to new circumstances
and opportunities have become crucial competencies in a highly dynamic and quickly
evolving economy.
Organizational structures and facilities are needed to carry out improvements
effectively.
2
, LSS projects must be fully in line with the organization’s strategic focal points.
LSS represents a competence that organizations can develop and once mastered, can be a
vital resource of performance and competitiveness. It requires commitment.
Values of LSS:
- Continuous innovation and improvement > efficient process that runs like clockwork.
- Focus on the customer.
- Data-driven decisions.
- Focus on the vital issues that determine performance, requiring determined
leadership.
Traditional notion of competitive strategy is based on Porter, where strategies are necessary
to deal with trade-offs. Competitive positions can be obtained by cost leadership, product
differentiation and focus (on niches). However, in today’s turbulent world competition is
becoming more global and innovations increase faster, thus resilience, flexibility and
innovativeness have become important complements to the traditional strategic goals based
on position.
Besides skills in data-based management, LSS companies develop a culture that
stimulates and enables company-wide continuous improvement.
Chapter 2: organizational structure for LSS
Juran on leadership for Quality – distinction:
- Quality planning: consists of the determination of what customers want and the
development of the products and processes, required to comply with these needs.
- Quality control: consist of on-line and real time monitoring of production or service
delivery, the detection of irregularities, and the reaction to those irregularities.
Reactive in nature and deals particularly with sporadic problems.
- Quality improvement: organized and systematic pursued improvement to increase
quality and efficiency to unprecedented levels (breakthroughs). Dealing with chronic
problems, tackling them ones and for all.
o Off-line affair dealing with chronic problems and project-by-project nature.
o Searching for improvements systematically, like LSS’s DMAIC.
Organization LSS:
Program management: (manage whole LSS initiative), consisting of MBB, program
manager(s) and program director.
- Program director: (part of senior management) ultimately accountable, map
strategic direction.
- Master BB: experienced BB and act as LSS experts. They deliver training and support
projects.
- Program managers: day-to-day administration of LSS and plan and resource
management, involving training and meetings, controlling budget, etc. Responsible
for project selection, monitoring and control.
Project management and execution: Champion (project owner), BB & GB (project leaders).
- BB or GB: typically selected from middle management, trained in becoming effective
project leaders and work full-time on the project.
3
Summary
Lean Six Sigma for Services and Healthcare
Mast, Does, Koning, Lokkerbol
Operational Excellence...............................................................................................................1
Chapter 1: The business and economic background of LSS........................................................2
Chapter 2: organizational structure for LSS................................................................................3
Organization LSS:.....................................................................................................................3
Chapter 3: Six Sigma Method......................................................................................................5
Chapter 4: Lean methodology.....................................................................................................7
Chapter 5: Deployment strategy.................................................................................................7
Chapter 6: LSS in a historical perspective...................................................................................8
Chapter 7: Define........................................................................................................................9
Chapter 8: Measure..................................................................................................................10
Chapter 9: Analyse....................................................................................................................11
Chapter 10: Improve.................................................................................................................13
Chapter 11: Control...................................................................................................................16
Chapter 12: Elementary statistics for LSS.................................................................................18
1
,Chapter 1: The business and economic background of
LSS
LSS is not a business strategy, it’s a framework for organizing improvement activities.
- Focus on processes: all work that is done routinely.
o Process: number of operations that turn input into output.
- Costs of poor quality: costs an organization makes because things are not done right,
cost the organization a lot of money.
- Hidden factory: quality and efficiency issues often invisible on flowcharts and process
descriptions.
Companies implementing LSS choose to minimize the hidden factory by investing substantial
resources in improvement projects.
Recurring problems make for good LSS projects as LSS brings understanding of the root
causes of the problem and provides a definitive optimal solution.
- LSS projects optimize processes, eliminate waste, and provide a quantitative basis for
staffing/line balancing.
- Besides internal problems, LSS projects tackle problems that are perceived as
problematic by customers.
- LSS provides a management structure and methodology that turn systematic
improvements of routine operations into a routine operation itself.
Direct benefits of LSS consists of benefits derived from customer satisfaction and cost
advantages.
o Cost advantage: efficiency improvement, unnecessary cost avoidance, lower
inventory.
o Improved quality, more reliable deliveries, better marketing/sales processes.
LSS should be integrated in a strategy. In that way, tactical gains can be converted in
strategic advantages.
Price erosion: when companies achieve the same improvement in their operations,
principles of competition and market ensure that prices decrease by the same amount as
costs, leaving industry with the same profit margins, and feeding spilling over gains to
customers.
Competitive convergence: when companies start copying each other’s moves and best
practices, so they end up looking more alike – destructive for participating companies.
Competitive strategy: to avoid this convergence - effective methodology for
delivering the improvements that the business strategy dictates as essential.
LSS should not be started as a substitute for a good strategy, but to complement. If LSS
projects are not related to strategy, they will result in tactical wins (projects that achieve
objectives) but have no strategic effect on the company. With a proper strategic focus there
is unification, integration and mutual reinforcement, and thus a potential for performance.
Continuous improvement, flexibility and the ability to adapt to new circumstances
and opportunities have become crucial competencies in a highly dynamic and quickly
evolving economy.
Organizational structures and facilities are needed to carry out improvements
effectively.
2
, LSS projects must be fully in line with the organization’s strategic focal points.
LSS represents a competence that organizations can develop and once mastered, can be a
vital resource of performance and competitiveness. It requires commitment.
Values of LSS:
- Continuous innovation and improvement > efficient process that runs like clockwork.
- Focus on the customer.
- Data-driven decisions.
- Focus on the vital issues that determine performance, requiring determined
leadership.
Traditional notion of competitive strategy is based on Porter, where strategies are necessary
to deal with trade-offs. Competitive positions can be obtained by cost leadership, product
differentiation and focus (on niches). However, in today’s turbulent world competition is
becoming more global and innovations increase faster, thus resilience, flexibility and
innovativeness have become important complements to the traditional strategic goals based
on position.
Besides skills in data-based management, LSS companies develop a culture that
stimulates and enables company-wide continuous improvement.
Chapter 2: organizational structure for LSS
Juran on leadership for Quality – distinction:
- Quality planning: consists of the determination of what customers want and the
development of the products and processes, required to comply with these needs.
- Quality control: consist of on-line and real time monitoring of production or service
delivery, the detection of irregularities, and the reaction to those irregularities.
Reactive in nature and deals particularly with sporadic problems.
- Quality improvement: organized and systematic pursued improvement to increase
quality and efficiency to unprecedented levels (breakthroughs). Dealing with chronic
problems, tackling them ones and for all.
o Off-line affair dealing with chronic problems and project-by-project nature.
o Searching for improvements systematically, like LSS’s DMAIC.
Organization LSS:
Program management: (manage whole LSS initiative), consisting of MBB, program
manager(s) and program director.
- Program director: (part of senior management) ultimately accountable, map
strategic direction.
- Master BB: experienced BB and act as LSS experts. They deliver training and support
projects.
- Program managers: day-to-day administration of LSS and plan and resource
management, involving training and meetings, controlling budget, etc. Responsible
for project selection, monitoring and control.
Project management and execution: Champion (project owner), BB & GB (project leaders).
- BB or GB: typically selected from middle management, trained in becoming effective
project leaders and work full-time on the project.
3
