Six Sigma and Lean vs. PMBOK

1. Six Sigma and Lean vs. PMBOK Lean’s Ascension At Six Sigma’s Expense

2. Presentation Overview • Introduction (5 minutes) • Agenda proposal: • Six Sigma vs. Lean High Level Intro (5 minutes) • Why Lean is now far more popular than Six Sigma • Six Sigma Overview (25 Minutes) • Toolkit as employed at Supervalu • Six Sigma vs. PMBOK • Similarities / differences vs. PMP methodology • Some reasons why Six Sigma failed at Supervalu in 2009 (despite attempts to incorporate more Lean) • Lean Toolkit (15 minutes) • Implication of Lean’s ascendancy for a PM • Conclusion / Group Discussion (10 minutes)

3. Six Sigma vs. Lean High Level • Six Sigma • Analytical methodology that focuses on waste, defects and variation • More typically oriented toward solution of problems at root cause and prevention of their recurrence • Much in common with PMBOK: • Identify and communicate with stakeholders; sound plan; regular reviews; manage schedule, cost and resources, etc. • Lean • Targets reducing eight wastes of Lean • Highly responsive to customer demand while producing top quality in most efficient and economical manner possible • Simpler, stresses flexibility; more pragmatic during downturn • Sigma Lean • Often combined because they complement each other so well • Lean first to understand and achieve improved process flow • If problem not solved, use Six Sigma to reduce process variation.

4. Lean Now Far More Popular • Search firm Avery Point Group’s annual Six Sigma vs. Lean survey: • 2005 – Six Sigma more popular based on three indices: • More books published about Six Sigma the past five years • Six Sigma search inquiries outnumber Lean 2 to 1 • Six Sigma 50% more prevalent in job postings • 2009 – Lean now more dominant: • Lean demand exceeded Six Sigma by 35% in 3,500 job postings • Economic downturn causing companies to turn to Lean as the core foundation for their continuous improvement • Certifications still not as required for Lean, but that is slowly changing as it becomes more mature

5. Six Sigma Overview • Begun at Motorola in 1986, popularized by GE • Incorporates martial arts terminology • Green Belt, Black Belt (BB), Master Black Belt (MBB) • Utilizes common DMAIC 5 Phase methodology: Design, Measure, Analyze, Improve, and Control • Structured, data-based problem-solving process: • Specific activities in a specific sequence • Gathering data in nearly every phase for decision-making • Making sure solutions decided upon really will eliminate the cause of the problem

6. Six Sigma History at Supervalu • 2002 - Albertsons CEO hired from GE (Six Sigma proponent) • 2004 – hired Six Sigma Academy (now rebranded SSA) to roll out deployment in 10 geographies ramping to 80 BBs • One of first Retail deployments; historically Manufacturing • Talent management aspect: each BB hired for two years, given six weeks of training over six months and then “repatriated” back to business with skills to share • 2006 – after acquiring Albertsons, Supervalu decided to retain Six Sigma and roll it out to its legacy areas, too • Persuaded by proof from over 500 completed projects resulting in avg. annual savings of $250K • 2008 – dept headquarters moved from Boise to Minneapolis • 2009 – eliminated despite a year of “Leaning out” program

7. Six Sigma at SVU in 2007 • Geographical deployment example: SoCal had 18 BBs, 3 MBBs, Deployment Leader, Financial Analyst, Project Development Manager and Data analyst • Each project assigned sponsor and 6-8 person team • Projects focusing on “Shrink” most common • Rigorous phase gate quality checks by MBB and Corporate • Eventually 10 person data querying organization in India; Access necessary for BB with some queries exceeding a million rows • Used Minitab for statistics and Sigma Flow for Six Sigma tools • Financial Analyst reported up through Finance and Finance committee audits to vet benefit claiming methodology • Incentive and competition among BBs to achieve certification and MBB promotion; individual stats widely reported

8. DMAIC – Define Phase • Define the defect • Identify the "Y" or metrics • Validate data which the charter was based on • Refine the problem statement • Create a team • Create a high level process map • Supervalu deployment: • Winning over and retaining attention of sponsor and team key • 7 required deliverables loaded on shared database: Updated charter, SIPOC, CT Tree, Fishbone, Stakeholder Analysis, Baseline Data Request, PPT summary deck

9. DMAIC – Measure Phase • Map the process as is • Validate the measurement system • Create and execute the data collection process • Establish the process's baseline • Define and graph process’s variation • Identify X's • Supervalu: • 6 deliverables loaded – Baseline Performance Chart, Measurement System Analysis (MSA) on Y, Performance Objective, etc. • Methodology purity stressed: I spent hours buying $80 worth of items and then returning them just so I could demonstrate statistical proof that data flowed accurately

10. DMAIC – Analyze Phase • Analyze the data and the Process • Identify and define Critical X's or Root Causes and possible solutions • Statistical tools potentially employed: Hypothesis testing, Regression, Anova, DOE, 1 and 2 Sample T Tests, etc. • Supervalu: • 10 deliverables loaded – Cause and Effect Matrix (C&E), Failure Mode Effects Analysis (FMEA), PPT summary deck for phase gate approval, Process Map (contain inputs and outputs variables), Translator, Screened Potential Causes, etc. • Statistically significant critical factor or project stopped • Once so desperate for critical factor I visited 15 Boise stores and then 22 stores in SLC over two days to count backroom cases

11. DMAIC – Improve Phase • Review possible solutions • Select the best solution and pilot if possible • Collect performance statistics • Create an implementation plan • Map the new to 'be process‘ • Supervalu: • 6 deliverables loaded – Improvements, Rollout Plan and Cost, “To Be” Process Map, another MSA this time on X’s, etc.

12. DMAIC – Control Phase • Create and implement control plan • Create and implement reaction plan • Establish Standard Operating Procedures • Transfer ownership (usually to Sponsor) • Supervalu • 10 deliverables loaded – Control Plan, Reaction Plan, Improved Process Metrics, Final Process Capability, Statistical Proof of Improved Performance, Final Project Stats, Leveraging Opportunities, Summary deck, Executive Summary slide, Sponsor, Owner, and VP signatures, etc. • Statistically significant data points thrilling

13. Six Sigma compared to PMBOK • PMBOK Initiating Process very similar to Define in Six Sigma – • preparation of charter and assignment of a project manager • PMBOK Planning Process: • PMBOK Integration and Scope Planning - both toolsets help reveal unstated Voice of Customer (VOC) requirements • PMBOK Time and Cost Management: both utilize prioritization and feature selection tools • Promotes fact-based dialogue between team and customer • Helps reduce political decisions about schedules and budgets • PMBOK Quality Management – both emphasize predicting and managing process capability • Manages economic consequences of escaped defects • PMBOK Risk Management - Six Sigma employs tools such as Monte Carlo simulation that are PMBOK-endorsed

14. Six Sigma compared to PMBOK • PMBOK Execution Process - Six Sigma can complement product project execution primarily in risk management and in optimization through application of tools such as Design of Experiments (DOE) • PMBOK Monitoring and Controlling Process - Six Sigma complements Controlling in two primary ways: • Solves problems at root cause to ideally prevent problems from reoccurring • In the final step of the DMAIC improvement process (Control), controls and responses to special cause variation are institutionalized so that reaction to control issues is both rapid and sound • PMBOK Closing Process – Lessons learned, Formal handover / closeout • PMBOK Areas Six Sigma doesn’t address: • Procurement management • Professional responsibility

15. Demise of Six Sigma at SVU • Started experiencing diminishing returns 2007/2008; increasingly unpopular with stakeholders in a downturn • BB’s incentivized to quickly complete project vs. achieve lasting solutions • Last year deployment tried to shift more towards Lean: • Fewer process steps, deliverables, and phase gate reviews • Functionally aligned Black Belts • Shorter cycle time • Only do one MSA during whole tenure • Too late, new CEO shut program down in August 2009 • All 120 people given notice but most secured transfers

16. Lean Manufacturing Overview • Often shortened to Lean; term first coined in 1988 • Comes from Japanese manufacturing industry, especially Toyota • Refers to production processes • Goal is to avoid waste, i.e. void expenses which the final customers do not need • Implies the following stages: • Identify value • Identify value stream • Flow, pull and perfection

17. Lean’s 8 Types of Waste • Defects • Overproduction • Transportation • Waiting • Inventory • Motion • Human Capital • Processing

18. Lean Tools • 5S + 1 – Sort, Straighten, Scrub, Standardize, Sustain (+Safety) • Create and maintain organized and high performance workplace • Setup Time Reduction - creates smaller batch sizes which lowers required inventories • TAKT Time – rate at which a customer pulls the product or service • Total production time per period divided by the total production requirements per period • Material Replenishment Systems • Based on Customer Demand and Lead Time; planning essential • Types of MRS’s: • Pond draining – inventory is pushed and collected at various points to ensure product does not run out at any point • Bottleneck optimization – inventory built up to compensate • Push systems – inventory is pushed in batches to next step • Pull systems - inventory only supplied to next step when needed

19. Lean Tools Continued • Total Productive Maintenance (TPM) • Proactive approach to breakdowns: prevention, prediction… • Overall Equipment Effectiveness • Availability: (Schedule Time – Down Time) / Schedule Time • Performance: (Standard Time x Output) / Operating Time • Quality: (Total units – Defective Units) / Total Units • Visual Management • System that enables a novice to immediately recognize standards and information as well as any deviations from standards • Visual display vs. visual control

20. Lean Tools Continued • Mistake Proofing (Poka Yoke) • Strategy for preventing errors in processes • Ideal process is mistake proofed at three stages: • Input – process won’t accept a bad part • Process- won’t make any bad parts • Output – process won’t pass on any bad parts • Kaizen • Japanese for continuous, incremental improvement • Method for accelerating the pace of process improvement • Intensive project where employees pulled off regular job for a few days. • Implementation is immediate

21. Possible Discussion Topics • Lean and Six Sigma aid for a PM • Change of leadership impacts • Thoroughness in adhering to methodology vs. frustrating stakeholders by taking up too much of their time • Flexibility becoming more important • Fine line between too much focus on non-value add activities and letting quality slip