LeanSigma in the Office - iise.org · Lean is focused on reducing waste through increasing speed,...

17th AnnualSociety for Health Systems

Management Engineering ForumFebruary 12-13, 2005

Dallas, Texas

All materials contained herein are the sole property of Value Innovation Partners, Ltd. and unauthorizeduse is strictly prohibited without the expressed written consent of Value Innovation Partners, Ltd.

LeanSigma in the OfficeValue Innovation Partners, Ltd.Patrick Lucansky41966 N US Hwy. 45Antioch, IL [email protected]

© Copyright 2004 All rights reserved VIPGroup

The Agenda• What is LeanSigma

• Lean• Six Sigma• Lean Sigma

• Designing LeanSigma for the Office• Strategy• Methodology• Deployment

• Case Studies• Issues• Methods• Results

• Questions and Answers


Evolution of Lean and Six Sigma

Mid 1800’s: Interchangeable partsLate 1800’s: Pork disassembly lines – Chicago1913: Moving assembly line at FordPre-WW2: Toyoda invents “Jidoka” on loomsPost-WW2: Toyota Develops a Production System For High-Variety, Low Volume.1980’s: MIT Study of Toyota1996: James Womack Documents General Applications of TPS and For Any Organization and Calls It “Lean Thinking”.

TQC

Employee Involvement

Waste Elimination

Supplier Development

Business Process Reengineering

Cost Management (ABC)

TQM

Lean Enter-prise

World Class Mfg

BPMBPM

JITJIT

Lean

Sigma

Six Sigma

LeanLean

6 σ6 σ

TQC

Employee Involvement

Waste Elimination

Supplier Development

Business Process Reengineering

Cost Management (ABC)

TQM

Lean Enter-prise

Lean Enter-prise

World Class Mfg

World Class Mfg

BPMBPM

JITJIT

Lean

Sigma

Lean

Sigma

Six Sigma

LeanLean

6 σ6 σ

1970’s 1990’s1980’s 2000’s


What is Lean EnterpriseA Group of individuals, functions, and sometimes legally separate but operationally synchronized organizations. The value stream defines the Lean Enterprise. The objectives of the Lean Enterprise are to:

• correctly identify and specify “value to the ultimate customer / consumer” in all its products and services

• analyze and focus the value stream so that it does everything form product development and production to sales and service in a way that activities that do not create value are removed and actions that do create value proceed in a continuous flow as pulled by the customer.

Lean is focused on reducing waste through increasing speed, reducing process inventory and decreasing process cycle timesLean is focused on reducing waste through increasing speed,

reducing process inventory and decreasing process cycle times


Six Sigma - The Short Story• Pioneered by Motorola in 1980s

• Discovered that products with high first-pass yield (the amount of product that made it through defect-free) seldom failed in use

• Won Baldrige Award in 1988• Some key players in Six Sigma history

• Mikel Harry - one of the original Motorola architectswho later founded Six Sigma Academy

• Jack Welch, CEO General Electric• Larry Bossidy, CEO Allied Signal

• Philosophy: Promote excellence in all business processes -- improve productivity, profits, and customer satisfaction

• Methodology: A 5-phase process for continuous improving quality by reducing inherent variability

• Statistic: Numerically describes amount of variation in a process • Benchmark: Normalized measure to compare performance of many

processes and process types • Goal: 6 Sigma performance -- a process which produces less than 3.4

defects per million opportunities (DPMO).• A tool reduce or eliminate variation

What is Six Sigma (6σ)?


What is Six Sigma…the TheoryA 3σ process because 3 standard deviations fit

between target and specTarget Customer

Specification

1σ

2σ

3σ

3σ

6.6% Defects

Before

Reduced VariationReduced VariationTarget Customer

Specification

After2σ

6σ

6σNo Defects!1σ

3σ4σ

5σ


What is Lean Sigma

Lean = Balanced Flows Through WasteElimination

6s =ReducedVariation

Process Process Step 1 Step 1




6s =ReducedVariation






Lean Sigma “DMAIC” ApproachLean Sigma& Process

Improvement

Tim

e

Step 1 Step 2 Step 3 Step 4

Cap

abili

ty

Capability / Variability / $COPQBalance / Time / $Inventory

D efineVoice Of the CustomerValue Stream MappingProduct Family MatrixMuda Matrix

Cycle Time Measurement5S, Quick Hits, OTD, LTSequence Of EventsSpaghetti Diagram

Quality BasicsMinitab, Basic Graphical AnalysisZ Calc, Capability metricsMeasurement Systems Analysis

Takt Time DeterminationMixed Model Line Balance Cause& Effect, FMEA

Statistical Hypothesis Testing

Heijunka, Kanban, PullOMS, Visual Management Flexing, Daily Rate Planning

Design Of Experiments, TolerancePoka- YokeSPC, Control Plan

M easure

A nalyze

I mproveC ontrol

Select projects within the process

Understand current state and potential factorsConfirm Vital Few factorsOptimize,ImplementSustain

Lean/ Supply Chain Six Sigma

Improving Capabilities…Enhances Process Balance

Customer Focused Quality

Improving Balance…Enhances Process Capabilities

Typical Process

Reduced VariationBalanced Steps

Tim

e

Step 1 Step 2 Step 3 Step 4

Improved Process

Phases Deliverables

Vendor Managed Inventory

9


What is difference between the two methods?

Lean Six Sigma• Attacks waste through

smoothing flow and reducing cycle time and NVA”

• Anyone in the organization can participate

• Does not require a format to make change happen

• Investment in Lean is low to moderate

• Many resources and books available

• Leadership can come from anywhere within the organization

• Attacks variation through statistical tools

• Requires a higher level of education, thus may exclude some

• Uses the DMAIC methodology to make change happen

• Investment in Six Sigma is moderate to high

• Books are limited in scope and tend to be technical

• Leadership is through a rigid structure of green and black belts with Masters and a Sensei

Note: none of these differences are obstacles to success, just areas to be addressed prior to implementation to ensure a smooth flow.

Note: none of these differences are obstacles to success, just areas to be addressed prior to implementation to ensure a smooth flow.


Lean Sigma Exceptions?Lean Sigma Does NOT apply to functions on the Exception List

Lean Sigma Applies Exception List -- Lean Sigma Does Not Apply in these Functions

SalesManufacturingEngineeringTechnical SupportFinanceAdministrationEmergency RoomsResearchHuman ResourcesFood Services, …


Is it Lean, Six Sigma or Lean Sigma?QUESTIONS

• Which should we do first?• What are the prerequisites of each?• Can I do them concurrently?• Which will deliver the biggest bang for

the buck?

Six Sigma -- 6σ:Six Sigma, a vehicle for

strategic change…an organizational approach to performance excellence. Six Sigma creates transformational change throughout the organization, processes, culture and customers. Six Sigma creates transactional change by applying tools and methodologies targeted at reducing variation and drastically improving processes.

Six Sigma (6σ): 99.99966% accuracy – 3.4 defects per million

ToolsTools:Design for ManufacturabilityDesign for Six Sigma, 6ơ TolerancingProduct Scorecard

ToolsTools::Process characterization (mapping, MSA, etc…)Process optimization (DOE, etc…)

Tools:Tools:Seven basic tools (paretos, fishbones, etc…)

Tools:Tools:Common senseTribal knowledge

6σ

5σ

4σ

3σ

1-2σ

What tool(s) should we focus our efforts on?

Where is your organization? What kind of tools should you be using?

ToolsTools:Design for ManufacturabilityDesign for Six Sigma, 6ơ TolerancingProduct Scorecard

ToolsTools::Process characterization (mapping, MSA, etc…)Process optimization (DOE, etc…)

Tools:Tools:Seven basic tools (paretos, fishbones, etc…)

Tools:Tools:Common senseTribal knowledge

6σ

5σ

4σ

3σ

1-2σ

6σ

5σ

4σ

3σ

1-2σ

What tool(s) should we focus our efforts on?

Where is your organization? What kind of tools should you be using?

6 Sigmatactics

Leantactics


Potential Benefits

Lean Sigma Potential ResultsLean Sigma Potential Results

• Productivity +20% per year• Lead Time Reduced to a Few Days (75%)• Manufacturing Space Cut in Half• Reduce Overhead and Quality Cost 20% /yr• Inventory Turns +25% Per Year• Little or No Capital Investment• Cycle times at 3 to 4 times “one piece touch time”


Where are Businesses Today?Most business processes are around 3σ

• 99% results in:• 20,000 lost articles of

mail per hour• 5,000 incorrect

surgical operations per week

• 200,000 wrong prescription drugs each year

• Even at 99.9% quality (= 4.6 sigma)

• 20,000 wrong drug prescriptions per year

• Two short or long landings at O’Hare airport each day

• 99% results in:• 20,000 lost articles of

mail per hour• 5,000 incorrect

surgical operations per week

• 200,000 wrong prescription drugs each year

• Even at 99.9% quality (= 4.6 sigma)

• 20,000 wrong drug prescriptions per year

• Two short or long landings at O’Hare airport each day

Process Sigma

DPMO

0

1

10

100

1000

10000

100000

1000000

0 1 2 3 4 5 6 7

IRS answ

ers 21

% of call

s

Ontime f

light a

rriva

ls (al

l carr

iers)

Mishan

dled bag

gage (

all ca

rriers

)

Overnight d

elive

ry of 1

st Clas

s Mail

Correct

legal

advic

e from IR

S

Wire tra

nsfers

Restau

rant bills

Payroll p

rocess

ing

Domestic

airlin

e fata

lity ra

te

(0.43

ppm)


Healthcare Facts• The IOM report noted at least 99,000 deaths

are caused by errors each year. In reality the figure is probably higher.

• 2002 estimated cost of care $1.76 trillion.• Shortage in the available, trained staff.• Regulations and compliance is becoming

more stringent. • Administrative costs account for as much as

40% of the Total cost of Healthcare.• $483 Billion was spent by the Federal

Government in 2004 on Medicare and Medicaid.


Principles of a LeanSigma Office• Positive, clear communications.• Ensure “no-blame” culture.• Work through cross functional teams.• Staff involvement at every stage.• Process maps on display for comments.• Remove non-value added steps, hand-off`s, rework loops.• Agree design principles with All. • Fix the root cause not the symptom.• Ensure solution supports departmental interfaces.• Incorporate Continuous Improvement


LeanSigma is Achieved Through:

Simplifying……………………...Processes

Integrating…………....…Across Organizations

Automating………. Utilizing IT functionality and connectivity


WASTE or “MUDA”. . . Any resource-consuming activity

that delivers NO value to the customer


Lean Sigma Means…Identifying and Eliminating the 7 Wastes

PEOPLE

TYPESOF

WASTE

Processing

Motion

Waiting

Defects

Making TooMuch

MovingThings

Inventory

QUALITY

QUANTITY

TAIICHI OHNO, ARCHITECT OF THE TOYOTA PRODUCTION SYSTEM


Waste In The OfficeTHE PROCESS

Handle

COUNT

File

SORT

Track

Retrieve

Record

HIDE . . . . . . FIND

INSPECT

Excess Paperwork

Multiple forms

DamageMovement

INPUT OUTPUT

. . . NONE OF THESE ADD VALUE !. . . NONE OF THESE ADD VALUE !


The analysis and redesign requires a clear understanding of:

Value Added, Non Value Added, and Sustaining ActivitiesThe value related attribute of an activitycan only be assessed in the context of the process, never in isolation–Considering other activities upstream and downstream

Value Added activities are those absolutelynecessary to deliver the customer’s requirements–These are colored green on the flowcharts–They are later re-designed into the new process

Non Value Added activities are those that are not necessary to deliver the customer’s requirements and can be eliminated in the re-design–These are colored red on the flowcharts

Sustaining activities are those that are not necessary to deliver the customer’s requirements but are either: –absolutely necessary to sustain the business or:–cannot be eliminated due to known severe constraints (often external)

–These are colored blue on the flowcharts–They are later re-designed into the new process

Sustaining activities are targeted for gradual elimination during the Continuous Improvement process

NVAVA SNVA

VA NVA

Sustaining Activities


How to Determine VA / NVA / SNVA?

Necessaryto Produce

Output?

Adds Valueto Customer?

Non-ValueAddedSustainingCustomer

Value Added

YesYes

No

NoYes

ActivityActivity

No

Review & ApprovalReworkFilingCopyingReconciliation

Agree SpecificationsManufacturing

VA SNVA NVA

Contributesto Business

Effectiveness?

PayrollTestingDevelopment ActivityBack-up Data BaseChangeoversRegulatory


Value Added Assessment of a RN’s TimeNon Value Added Time

• Rework• Correcting• Clarifying• Searching• Waiting

• Enforcing Rules• Duplication of Effort

Administrative Time• Compliance & Quality requirements

Patient Value Added Time• Providing Care• Listening• Assisting

33%

43%

24%

• Queuing

The opportunity is to eliminate the NVA, reduce the effect of the SNVA, optimize the VA time providing patients with more quality time for care. Healthcare facilities further

benefit from the increase in patient safety, patients/nursing, and cost reduction.

The opportunity is to eliminate the NVA, reduce the effect of the SNVA, optimize the VA time providing patients with more quality time for care. Healthcare facilities further

benefit from the increase in patient safety, patients/nursing, and cost reduction.

Adapted from John W. Kenagy, 2002

• VA) = Value Added Activities• (NVA) = Non-Value Added Activities• (SNVA) Sustaining Non-Value Added Activities


TRADITIONAL APPROACHFocus on Value AddedResources through . . .

• Time Study• Work Study• Outsourcing• Utilization• Automation

Approaches to Process Excellence

11%

72%17%

Most organizations struggle with complex dysfunctional systems, which have a top-down focus and often demonstrate a perceived value for profits over the patient care. Most organizations struggle with complex dysfunctional systems, which have a top-

down focus and often demonstrate a perceived value for profits over the patient care.

Source VIPGroup database, 2004

Process Excellence ApproachFocus on the 89%Non-Value AddedResources Through . . .

• Total Quality Control

• Total Waste Elimination

• Enforced Problem Solving

• Information Technology as an enabler

• Process Focus (Value Stream)Challenge is to Reduce the Need

for Imposed Quality Requirements

• Total Staff Involvement• Staff Reductions

Accept Imposed Quality Requirements


Lead Time Analysis ... Office Processes

TYPICALLY . . . 75% PLUS OF LEAD TIMES ARE NON-VALUE ADDED

NON-VALUE ADD

- Corrections

- Filing

- Retrieving

- Recording

- Reconciliation

- Sorting

- Copying

- Etc

- Counting

- Tracking

VALUE ADD- Purpose25%

75%

$BIN

- Stocking/restocking


Non-Value Added Activities in Healthcare

• Waiting• Patient traveling around • Terrible outcomes• Unnecessary procedures• Too many patients waiting• Empty beds• Hunting for supplies, staff• Process inefficiencies

• Queuing• Moving Materials around• Product defects• Over Production• Too much inventory• Excess Capacity• Too much motion• Process inefficiencies

A side by side comparison to Manufacturing

Healthcare Manufacturing

According to Taiichi Ohno (Architect of the TPS) there are 7 wastes which manifests in three formats, people, quality and quantity. Clearly, people are not wasteful, it is what we asked them to do that is non-value added. It is said there is an 8th waste … lost creativity

According to Taiichi Ohno (Architect of the TPS) there are 7 wastes which manifests in three formats, people, quality and quantity. Clearly, people are not wasteful, it is what we asked them to do that is non-value added. It is said there is an 8th waste … lost creativity


Basically, we’ve taken a simple process . . .

InboundData

Customer

Management

Employees

RECEIVE PROCESSSEND to

Next ProcessStep


. . . & Complicated it!

OperationsPurchasing Finance& Admin

Sales &Marketing

Design &Develop Quality Customer

Service

Inbounddata

CustomerDelivery

FUNCTIONAL MEASURES

• Efficiencies• Finance Related

• Utilization• Variances

DEPARTMENTAL BARRIERS

SYSTEMS BARRIERS• Bureaucracy• Delays

• Island of Autonomy• Aligned to Functions


Important Concepts About Processes….Lean Sigma uses the VSM (Value Stream Map)format of process flowcharts.

A B C DxS1xS2 xA1 xB1

xB2

xC1 xD1xA2 xC2 xD2

CustomerSupplier Customer

SIPOC =SIPOC =S = SuppliersI = InputsP = ProcessesO = OutputsC = Customers

S = SuppliersI = InputsP = ProcessesO = OutputsC = Customers

X1 X2 + X3… Y

• What is your Y?• What are the possible x’s?• How does it flow?

• What is your Y?• What are the possible x’s?• How does it flow?


VSM the Process “E2E”…Depicting the process as it is done today

C/T= 45 secC/O= 2 Hrs

3 Shifts150 Operators

3% RejectWIP= 45 DOS

C/T= 30 secC/O= 30 min

3 Shifts15 Operators

8% RejectWIP=10 DOS

ReceiveMaterial Inspect Manufacturing

Produce

ReturnTo

Vendor

TestAccept Accept Accept

Scrap4%

Scrap10%

Rework ReworkRetest

Yes

No

Retest= 8%

Rework= 25%

No

Pack& Ship

C/T= 10 min1 Shift

5 Operators95 orders/day

DOSFG= 55

DOSR= 77

No

Yes Yes

No

C/T= 45 min1 Shift

5 Inspectors95 receipts/day

15% Reject

Rework=13%

4 Days 8 Days 45 Days 5 Days 3 Days 1 Day

4 Days 12 Days 57Days 62 Days 65 Days 66 Days

CustomerPlanning & Scheduling

OrdersMaterial

RawInventory

FGInventory

8 Handoffs7 Steps Critical Path

17 Steps if all Loops Executed4 Rework/Retest Loops66 Days Critical Path

Value Add

Non-Value Add

Sustaining Non-Value Add

1

6

1


x\x\

BUSYNESSQALITY IS OUR


Everyone must have… …ownership of quality

End

Self

Source

Towards Lean ‘Inspection’

Successive

Type of ‘inspection’


The Quality DilemmaYou are now inspectors of the office process of creating invoices. Count the number of basketball passes the team in the white shirts make. Each pass is a poor quality invoice.

VideoHow many

bad invoiceswere caught?

How many bad invoiceswere caught?

Did you see the Defect?

Did you see the Defect?

copyright (© 2003, Daniel J. Simons, President, VisCog Productions, Inc.)


Strategy Deployment requires a disciplined approach and a robust management system

• Structured Management• Communications Program• Voice of the Customer (VOC)• Lean System for Managing• Deployment Strategy• Culture Change• Reward and Recognition• Metrics

Office waste is harder to recognize!


Use a disciplined methodology to achieve consistency and sustainability

A clear, structured, step by step process

Define top level

processroad map

Detailedprocessmap(s)

Identify wastefulactivities

DefineLean

Sigma Principles

DesignNew

Process

Develop Implementapproach

Obtain Management

approvalImplement

Quantitative&

Qualitativeanalysis

Voice of theCustomer

• External/regulatory requirements

• Internal requirements - global

• Internal requirements - local

• Future requirements

EvaluateBenefits/

GapAnalysis

YouAreHere

Obtain Regulatory

Approval if required


Communication Programs are a key ingredient to any change process• Distribute communication through a variety of

media and communications channels• Publications

• Newsletters, magazines• Memos, bulletins, handbooks, manuals

• Formal presentations• Meetings, conferences• Training

• Video, film, audio, computer• In-person informal socializing• Email• Voice Mail• One-on-one meetings• Town Hall meetings

Communicate !Communicate !

Communicate !Communicate !


Voice of Customer is a necessary first stepin DMAIC along with Value Stream Mapping

Value Stream Map

Quality Function Deployment

• What do they need?

• When do they need it?

• How do you know if they received it?

• What will they want?

• What do they want it to do?

Control

Improve

Analyze

Measure

Define


Possible Approaches to Deployment

AutonomyBusiness independence

and self-deploymentPros: Local owners, some

zealots, low stressCons: No focus, minimal

bottom line impact. No common language or talent pool. Wasted efforts, re-inventing of the wheel. Incorrect applications.

MandateCorporate edict,

deployment focusPros: Quick to the bottom

line, full participationCons: No real ownership or

sustainability. Many “weak” projects and implementations. Used for a ”ticket punch” not for its power.

Process FocusValue stream process

map, data driven methodology selection

Pros: Customer focused, consistent across the business, can be applied anywhere, has bottom line impact, relies upon lean and proper six sigma

Con: A bit more bureaucratic for lean and upfront homework before projects


Deployment Strategy must be easy to follow, consistent and repeatable

Structured approach to Lean performance . . minimizing the time to Realize Sustainable BenefitsRealize Sustainable Benefits

DRAMATIC SHORT TERM

GAINS

CONTINUOUS LONG TERM

GAINS

Mobilization Implementation

Stabilization

Continuous Improvement

Time

Performance

Benefit

1 2

34

Sustainable Benefits•Pick Pilot & Implement•Stabilize Process•Rollout to Other Areas•Measure Results•Adjust Process As Needed / Determined By Metrics

A structured process provides your team(s) with formal training along with responsibility and ownership, thereby ensuring program success and continuation.

A structured process provides your team(s) with formal training along with responsibility and ownership, thereby ensuring program success and continuation.


Critical Success Factors

• Voice of Customer• Compliance• Measures• Senior Management Commitment • Middle Management• Skill Matrix• Culture Change


LeanSigma Performance Measurements. . . Apply to all the Supply Chain & Business Processes

Lead Time

Effectiveness

PERFORMANCE MEASUREMENTS

Flexibility

Cost

CustomerService

OUTPUT

CustomerService

INPUT

Quality(No. of Defects)

(On-time Delivery)

100%

100%100%

NVAVA

Quality

0%

• What is the right thing to measure?• Set the Target Goals to strive for• Make measures visible.

• What is the right thing to measure?• Set the Target Goals to strive for• Make measures visible.


Senior Management and Team Structure

• Senior Management efforts across the Company including:• Communication Strategy • Reward and Recognition systems• Goal Alignment• Project over-site management• Prioritization• Process Alignment• Collaborative environment• Scorecard/Dashboard• Roles & Responsibilities

Keep all informed through a “LeanSigma Project” Folder on a shared drive

• Give Strategic Direction• Agree Recommendations• Resolve Issues• Remove obstacles• Support & coach

Steering Team

QA/QC/Mfg Expertise

• Cross-functional ‘users’• Full Time Team• Make Recommendations

• Cross-functional ‘experts’• Milestone Delivery

• Give Tactical Direction• Agree Recommendations• Resolve Issues• Support & coach• Implement Recommendations

Pilot Project Team

Ad hocProject Groups


Experts Role in Facilitating LeanSigma

ExpertsCo

mpa

ny

Cul

ture

Ow

ners

hip

Time

Training & FacilitationLean & Supply Chain ToolsLeanSigma ExpertiseProject Management

AuditingMonitoringGuidance

Driving ForceSustainability

Internal ExpertsImplementation Ownership

NeedDesire

TransferPoint


Lean Healthcare in Action $20 Million Emergency Room Management Group

Pareto Analysis of Injuries Treated

0%

20%

40%

60%

80%

100%

Percent

Inju

ry T

ype

Series1 28% 49% 68% 84% 91% 95% 98% 100%Knee Elbow Head Foot Back Pelvic Internal Face

Key Benefits•Labor and Over-time reduced 5%•Maintained compliance and quality•$250k annual operating expense reduction

Key Benefits•Labor and Over-time reduced 5%•Maintained compliance and quality•$250k annual operating expense reduction

The demand analysis allow the treatment centers to reset stocking levels of treatment carts in line with the demand. Local activities (skate boarding contests) accounted for the increase number of knee, elbow and head trauma treated. Drs and Nurses spent less time hunting for the right materials and implements.

80% of all injurieswere knee, elbow, head and foot


Lean Healthcare through……“Value Stream Mapping”

$350 Million Hospital Group

• The issue : could only get 2 knee operations per day accomplished.• Perceived constraints: Drs blamed the nursing staff, Nursing staff blamed Administration and

Administration blamed the Drs. and Nurses. • Actual constraint found through VSM: Sterilizer could only process 2 cycles per day.

Current State Map Key Benefits•89% of process steps were NVA and removed reducing the process time by 65%.•New process freed up the sterilizer thereby allowing for an additional 2-4 surgeries per day to be done.•Current sterilizer was not capable of more than 3 cycles per day. However, a new unit would allow for up to 10 cycles/day. The Hospital purchased a new unit and was able to perform 4-8 more surgeries per day. The new unit was paid for within 3 months. •Cost per procedure was reduced 8%.

Key Benefits•89% of process steps were NVA and removed reducing the process time by 65%.•New process freed up the sterilizer thereby allowing for an additional 2-4 surgeries per day to be done.•Current sterilizer was not capable of more than 3 cycles per day. However, a new unit would allow for up to 10 cycles/day. The Hospital purchased a new unit and was able to perform 4-8 more surgeries per day. The new unit was paid for within 3 months. •Cost per procedure was reduced 8%. Sterilization Process

Document

Type ofPayment

Flow ofInformation

Flow of Money

PPO

Preferred Provider Organization

3rd PartyBilling

Service

Outside Care Provider

“A”


“Z”

Hospital

Billing Process at

Hospital

Indicates Several Inside

Providers

Indicatesseveral outside

providers

PolicyOwner

PatientBillingInfo

RemittanceAdvice

EmployerOf

PolicyHolder

ExplanationOf

Benefits

PatientBillingInfo.

RemittanceAdvice

Insurance Carrier

“A”

InsuranceCarrier

“Z”

...

...

Patient Payment

Patient Payment

Claims Payment

Claims Payment

Care Provider

“A”

Care Provider

“Z”

...

Claims& Fee

Summary

Co-payDeductible

Balance DueOr Direct Bill

Co-payDeductible


Claims& FeePayment

Document

Type ofPayment

Flow ofInformation

Flow of Money

Document

Type ofPaymentType ofPayment

Flow ofInformation

Flow of Money

PPO


3rd PartyBilling

Service


“A”


“Z”

Hospital

Billing Process at

Hospital


Providers


providers

PolicyOwner

PatientBillingInfo

RemittanceAdvice

EmployerOf

PolicyHolder

ExplanationOf

Benefits

PatientBillingInfo.

RemittanceAdvice

Insurance Carrier

“A”

InsuranceCarrier

“Z”

...

...

Patient Payment

Patient Payment

Claims Payment

Claims Payment

Care Provider

“A”

Care Provider

“Z”

...

Claims& Fee

Summary

Co-payDeductible


Co-payDeductible


PPO


3rd PartyBilling

Service


“A”


“Z”

Hospital

Billing Process at

Hospital


Providers


providers

PolicyOwner

PatientBillingInfo

RemittanceAdvice

EmployerOf

PolicyHolder

ExplanationOf

Benefits

PatientBillingInfo.

RemittanceAdvice

Insurance Carrier

“A”

InsuranceCarrier

“Z”

...

Insurance Carrier

“A”

InsuranceCarrier

“Z”

...

...

Patient PaymentPatient Payment

Patient PaymentPatient Payment

Claims PaymentClaims Payment

Claims Payment

Claims Payment

Care Provider

“A”

Care Provider

“Z”

...

Claims& Fee

Summary

Co-payDeductible


Co-payDeductible


Claims& FeePayment


Lean Procurement Utilizing LeanSigma$1.2 B Medical Device Operation(a division of J & J)

Supplier performance improved to better than 98% while reducing their inventory hold by 50%

91

31SNVA

60NVA

11SNVA

Defect: Process and tolerance variabilityDMAIC Project:50

27SNVA

17NVA

Lean out the Supply Network, reduce Supplier parts variability and install a pull replenishment model$34M

$31M6 VA 6 VA

5 SNVA 21

2 10

ReworkLoops

RMSSteps

PFGSSteps

Handoffs Raw MaterialInventory

Procurement lead-time was reduced from 4-5 weeks down to 1 day


Lean Procurement Model for Success

MfgPlants Distribution

Supplier• focus on small batch

and short LT• plan using Kanban

board

• High flexibility to match demand

Supplier Planner• replenishes

to stock

Buyer Planner• co-located • manages customer (Mfr)

demand• sequence plan to simple

capacity model

• plans custom orders• RBS, KB, MRP

MTO

FG Stores

FinishedGoods

Visible measures

PKB

Planned Raw Stock Store

RawSupplier 2

MKB

Customer

RawSupplier 1

MKB

PKB

PKB

MKB

PKB

MKB

Item A

Item C

KANBAN CONTROL BOARDKANBAN CONTROL BOARD

URGENT

Item D

Item B

LESS URGENT

Green Yellow Red

$$$

$$$

Scheduling Wheels

Rate BasedScheduled

1000 5000 10000

Item aItem bItem c

SPCDOE DFMA DMAICSIPOC

LeanSigma Principles

BUILD A STRONG, SUSTAINABLE STRUCTURE


LeanSigma Distribution ExampleJapan Distribution Center for a $40B Medical Device Company

Defect: Process and compliance variabilityDMAIC Project: Lean out the Distribution Center

InOut

Unpacking (Outer carton)

LibraryMJ

Storage Obsolete Demo. Hold

Domesticprocured

MJStorage

VJOperationStorage

NTStoragePacking material

ＭＪ Storage

ＭＪ StoragePacking

Packing material

ＶＪ

Hart Valve operationINC

Office

OfficeRepair

Experiment

CheckReceiving Material & labelstorage

Telemetry check

Hard product

Labeling Assembly Appearance checkQA check

Receiving registration

Decision for release

MJ NT・VJ

Shipping

Import product receiveReturn product receive

　　　　Return operationDecision for release Rework　

1F

2F

3F

4F

6F

MJStoragePacking material

ＭＪ Stock MJ Stock


ＶＪ


Customer Service

OfficeRepair

Experiment

Receiving Unpacking FG

MJ

Shipping



1F

2F

3F

4F

6F

Pick Label Pack and ShipStaging

MJStorage

Office Space for Kawasaki

MJStoragePacking material



ＶＪ


Customer Service

OfficeRepair

Experiment

Receiving Unpacking FG

MJ

Shipping



1F

2F

3F

4F

6F

Pick Label Pack and ShipStaging

MJStorage

Office Space for Kawasaki

After (4Q ‘ 04)

2 days lead time, 3 floors, 18 FTEs$1M savings, + office space

Before

13 days lead time, 5 floors38 FTEs


ClientLogo

Client Location

Example 2- Pharmacovigilance… As-is Map

Process Steps

QC Steps

Reg Steps

S&DS Steps

Total Steps

Error Loops, F/U's & Cosuspect

Total Steps

Report Type

Process structure

US-CT 47 11 29 0 87 17 104 15 day IND ParallelNon US-CT 35 11 22 0 68 9 77 15 day IND ParallelNon US-Spont 32 13 21 19 85 45 130 15 day NDA ParallelUS-Spont 79 12 21 19 131 35 166 Spont Sequentia

477


Example 2a – Pharmacovigilance…As-is Flow Diagram

• 4560 cases times .5 miles/case = 2780 miles traveled/year.

• The distances result in increases in:

• lead times• batching• process

delays

MD MD

MD

MDAdmin Temp

Admin

Admin

MD

MDTemp

Temp

Regulatory

Data Mgt

Corp

FilesFDA

2nd Floor

1st Floor

Garden Level

The current layout leads to a case travelling about 1/2 mile from case receipt to submissionThe current layout leads to a case travelling about 1/2 mile from case receipt to submission


Example 2b – Pharmacovigilance…Redesigned Process Map

Actual redesigned process

Process Steps

QC Steps

Reg Steps

S&DS Steps

Total Steps

Error Loops, F/U's & Cosuspect

Total Steps NVA VA SNVA

All 17 0 0 0 17 0 17 0 8 9

Client


Serious Case Path Sequence1. Receive case by fax and sent

to hub-bin2. Initial Triage of case and

place in appropriate hub-bin3. Assessment and data entry4. Submission and printing of

required documents5. File Pending awaiting further

action6. File Archive awaiting further

action7. Offsite storage

DSS

DSC

Archive FilesArchive Files

Hub-Bin

Faxes FU’s

1

3

4

6

5

Off-sitestorage7

Distance traveled reduced by 96%

Approx. 100 ft/case2

Example 2c – Pharmacovigilance… Redesigned Flow Diagram


Lean Office in Action $4.8 B Pharmaceutical/Biotech/Chemical Operation

• Case travel distance was reduced by 96% from 1/2 mile to 100ft.

• All NVA steps were removed (400+)

• Global compliance improved from 30% to better than 97% pa

• Case processing time was reduced from 21 days to 11

• Internally generated documents were reduced from 32 to 1

• Improved productivity by 105% with existing staff

• Reduced process steps from 477 to 17

Source:Client Process Mapsincludes rework loops

Number of process steps and hand-offs

NVA78%

VA3%

SNVA19%

104

15

0

20

40

60

80

100

120

140

160

180

Old Process

10

25

RedesignedProcess

SNVA55%

VA45%

Before

76%After

Steps

Handoffs


… support processes constrain production with many rework loops, long leadtimes, excessive waste and handoffs.

Equipment Commissioning VANumber of Steps

Equipment Validation VANumber of Steps 0

3NVA12

SNVA0

14NVA

6SNVA

SNVA

33.6%NVA

66.4%

AS-IS Process Analysis

Equipment Validation As-Is process of a $6B PharmaActual touch time for the work is approx. 30 days

Total Lead-time for Equipment Validation is approx. 116 days

55

22410226

20

3550

0

20

40

60

80

100

120

140

Writ

e IQ

/OQ

Peer

Rev

iew

Valid

atio

nAp

prov

al L

oop

Exec

ute

IQ

Dev

iatio

nLo

op

QA

Appr

oval

Loop

Fix

Erro

r(s)

Loop

Exec

ute

OQ

Dev

iatio

nLo

op

QA

Appr

oval

Loop

Fix

Erro

r(s)

Loop

Writ

e Fi

nal

Rep

ort

Peer

Rev

iew

Aver

age

Lead

-tim

e (d

ays)


22510

2210

0102030405060708090

100110120130140

Writ

e C

PP

QA

Appr

oval

Loop

Fix

Erro

r(s)

Loop

Exec

ute

CPP

Writ

e Fi

nal

Rep

ort

QA

Appr

oval

Loop

Fix

Erro

r(s)

Loop

Aver

age

Lead

-tim

e (d

ays Interim Process Analysis

Integrated Process VANumber of Steps 5Blue Sky Process SNVA VANumber of Steps 0

NVA SNVA4

NVA0 3

0

Minimize the number of steps to be performed to reduce levels of waste, handoffs, leadtime and cost

Equipment Validation process of a $6B Pharmaceutical Lead-time redesigned to approx. 33 days

Critical Steps

NVA to meet conformance

Current lead-time 116 days

Lead-time with Process Redesign 33 days

SNVA

87.9%

NVA

12.1%


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