Too often, practitioners use only one of these approaches, where a combination of disciplines/tools would yield greater benefits.

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1 VE, LEAN, AND SIX SIGMA OPPORTUNITIES FOR LEVERAGE Charles L. Cell U.S. Army Field Support Command Rock Island Arsenal Rock Island, Illinois 61299, USA 309/ ABSTRACT BIOGRAPHY Mr. Cell is the Value Engieering Program Manager for the U.S. Army Field Support Command. He has a Bachelor of Arts from Franklin and Marshall College, and a Master of Public Administration from the State University of New York. He has experience in the Federal government in the fields of personnel, organization management, force management, commercial activities, and the application of Lean, Six Sigma, and Value Engineering methods. Mr. Cell has lead over 30 VE Workshops at a variety of Army organizations, and is the recipient of numerous awards for his work in the Value Engineering and productivity field. He has also consulted privately in Value Engineering, most recently with the Israeli Ministry of Defense in VE, Six Sigma, and Lean have respective strengths and weaknesses. When applied in a planned and focused manner, the respective strengths and weaknesses of these disciplines are complimentary. For projects of any scope, large or small, careful and judicious application of a combination of these three disciplines in will yield synergy, and correspondingly beneficial results, beyond what application of only one or two disciplines would otherwise yield. This paper explores the nature of the three approaches, the basis for collaborative synergy, and proposes a model for integration. INTRODUCTION VE, Lean, and Six Sigma are great disciplines. Too often, practitioners use only one of these approaches, where a combination of disciplines/tools would yield greater benefits. Too often practitioners of one of these disciplines view other disciplines as competitive methods, not complimentary methods that will, in fact, greatly aid and facilitate use of the others methods. The methods can compliment each other on an ad hoc basis, but they work better as part of a cohesive model. BACKGROUND 1

2 Value Engineering The Army (my organization) began using Value Engineering almost 50 years ago. During that time, the Army VE community has witnessed alternate methods for increasing value, efficiency, and effectiveness come and go. As those other methods came and went, the Army VE program continued to generate millions of dollars in savings, year after year. Why? What gave VE such lasting power, and yeild such steady and outstanding results, year after year? Three reasons: 1. The VE methodology works. VE has, at its core, function analysis, which leverages creativity. The function analysis and creating by function is supplimented and extended with a variety of complimentary tools, all of which are blended into a deceptively simple but amazingly effective analytic process called the VE Job Plan. VE simply works. Use of VE will reduce cost and increase performance of items, systems, processes, faclities. VE leverages creativity, and few other methods do this. VE is flexible it can be used on simple problems, or on complex problems. It can be applied to a range of issues. It is relatively easy to learn, and application improves with experience. Any methodology with these attributes will last. 2. Any systematic, reasonable, analytic process will improve operations. Yes, VE works, but so do other methods. One of the secrets known to productivity professionals is that in equal situations, most methologies will yield good results if used by a capable and motivated study team. This is not to say all analytic processes designed to improve productivity will work equally well in all situations. Chances of Success Pick VE, Lean, or Six Sigma Solve Problem Alone Delegate Problem Solving Assign to a Give Team a Provide Team Method Expert Facilitator Problem Solving Method/Strategy Assign Correct Method Variables: Capability and motivation of individuals, complexity of problem. 2

3 If challenged to solve a quality problem, a good VE facilitator can use VE methods improve product quality. He may use some of the same tools a Six Sigma analyst would use, but the core of his approach would be function analysis, and chances are excellent the VE team would produce results that increased quality, reduced cost, and increased overall value. Nonetheless, all things being equal, Six Sigma would likely have been a better choice of methodology to use in addressing a quality problem. Six Sigma is not very adept at developing creative solutions, but it is excellent in identifying the souces of process variation. A good VE study team, systematically examining a situation will also likely, eventually, identify the souce of variation, but Six Sigma methods are specifically intended to accomplish this. In a case like this, can VE do the job? Probably. Can Six Sigma do it better? Probably. The reverse is true. Few methodologies surpass VE in design. After all, facilitating creating by function is one of the main deliverables of a function analysis effort. Can you use Six Sigma in design? These is an entire module in Six Sigma called Design for Six Sigma. When you investigate, you quickly discover the design tools are relatively weak compared to the creative design leverage offered by VE. Nonetheless, you can use Six Sigma for design and be better off than if you used no systematic approach. Bottom line: VE has lasted 50 years in the Army because it has some unique attributes that make it effective in a broad range of applications works (reason 1, above), but also because of the simple reason that any reasonably effective analyitic method will improve operations if given half a chance, and VE has had more than half a chance, as spoken to in reason 3, below. 3. VE has lasted 50 years in the Army because the Army VE Program structure is effective, and provides both the focus and the administrative mechanisms that greatly facilitate an ongoing effort to increase value. No method will yeild results unless it is used. With VE s early success, Army managers developed, and continue to refine, a program management stucture that compliments and leverages successful application of VE. The Army VE program structure provides for lines of communication that today extend from the installation Value Engineering Manager all the way to Congress, with every level inbetween assigned specific tasks, roles, and responsibilities Major Subordinant Commands, Major Commands, Department of Army, Department of Defense, Office of Management and Budget all have specific and set roles to play in manageing and fosteringve. Large and complex organizations present a daunting challenge to those working to implement a transformative initiative. Size and complexity make change hard. As someone once said, changing a large organization is like trying to teach an elephant to dance it is a challenge. On the other hand, consider another saying once the elephant learns something, an elephant never forgets. It follows that once a large organization has a functioning program, and the program is exercised on a regular basis, then the obstacle of organization/bureaucratic inertia can, if dedicated people work at it over time, be transformed into organization momentum that can help sustain a program as it encounters periodic and inevitable (given a 50 year history) ups and downs. 3

4 LEAN AND SIX SIGMA In contrast, Lean and Six Sigma are late-comers to Army productivity. Interestingly, both methods have pedigrees older than VE. VE is the new kid on the block in terms of history. Most Six Sigma tools were developed and initially applied in the 1930s and 40 s. Dr. Walter Shewhart pioneered thus use of statistical quality control techniques in industry, and Dr. Edward Deming developed and applied statistical and sampling quality methods at the U.S. Department of Agriculture and industry. Dr. Walter Shewart Dr. W. Edwards Deming Six Sigma tools were revived in the 1980 s by a group at Motorola. (In the 1990 s Motorola also found that use of Six Sigma was not a be all to end all methods, and would not innoculate the company from hard times). Six Sigma was made more popular by Jack Welch, Chairman of General Electric, who showcased Six Sigma as a method he used to install analytic discipline in GE. Since that time, a large number of consulting firms extensively promote the use of Six Sigma. History of Lean methods is not as succinct. Lean is not an analytic process in the sense that VE and Six Sigma provide analytic tools. Rather, Lean is a collection of principles and practices (and attitudes), the application of which, over time, will reduce waste. Many credit first use of the core principles and practices to Henry Ford in the period, most notably at his Rouge River operation. Inexplicably, Ford later abandoned this strategy in favor of a process village model, and production suffered. Meanwhile, Toyota, under the leadership of Taiichi Ohno, continued to refine and develop Lean principles and practices they learned from Ford. With oil shocks and quality revolution of the 1970 s, there was a reckoning. 1 Japanese visitors reportedly saw Ford s Rouge River plant in operation and took it from there, applying the principles and practices of the Rouge River operation to their operations, and expanding and refining what they saw. They applied, refined, and expanded Ford s operating methods and principles relentlessly, eliminating wasted relentlessly, improving quality and increasing value relentlessly, and continue their relentless focus today. Continued and focused application of Lean principles and practices is an inherent part of the Lean organziation culture the central component of that model. 4

5 Taiichi Ohno, from Toyota, is generally regarded as the father of the Toyota Production System, now widely described as Lean production. Taiichi Ohno An example of the nature of the principles and practices encompassed by Lean are the Seven Types of Waste developed by Ohno. Type of Waste Definition Examples Waiting Time spent waiting on items required to Late delivery of information complete a task (i.e., information, material, supplies) Early delivery of information. This is a problem because it creates a push situation. Unnecessary Any motion that does not add value to Data sent to wrong person Motion a product or service Duplicated efforts Rework Processing Effort and time spent processing Multiple, unnecessary interactions information or material that is not Too much customization adding value No reuse Inventory Material or information that is waiting Too much information for processing Complicated retrieval of product or information Outdated / obsolete information Lack of controls Moving Items Transporting information or material by Communications failure mail, cart, conveyor, or foot travel Network down time Ease of retrieval Presentation in wrong format Misdirected material or information Making Too Much Producing more information or product Information over dissemination than the ultimate customer requires Creation of unnecessary data and information Pushing, not pulling data. Creates prioritization issues. Fixing Defects source: LEAN THINKING, Womack and Jones, Time spent repairing or reworking material or information Lean - Seven Types of Waste Inaccurate data Incorrect information delivered Inspection and review An interesting aside - Japanese products have the highest quality ratings in the world, particularly in the auto industry, yet Japanese companies have no Six Sigma programs or use Green/Black Belt 5

6 rankings. The Japanese use Lean and VE. How they achieve world class value, quality, effectiveness, and efficiency, with no Six Sigma Black Belts, is a topic for another paper. One last point on Lean - a core principle of Lean is the establishment of value. As one informed observer 2 put it: Value creation is a central concept in lean thinking, to build robust, adaptive, flexible and responsive enterprises. Value creation also differs from the traditional view of lean concentrating on delivering value economic utility, worth or satisfaction to the customer. In fact, value delivery may well miss the mark if it is not preceded by two essential, prerequisite, steps: value identification, which involves identifying the stakeholders and their value needs or requirments, and value proposition, which defines the terms under which value exchanges among the stakeholders can take place such that the enterprise, shareholders, the workforce, suppliers, customer and other stakeholders will contribute their efforts or resources in return for the benefits they can expect to derive from their engagement. In reality, of course, value indentification, value proposition and value delivery phases of the value creation process are closely coupled and highly interactive, rather than being sequential. (Emphasis in the original). In exploring the core concept of Lean, the author uses the word value 12 times in a paragraph of 146 words, which equals 8.2%. The author states the central concept of Lean is value creation, and value creation encompasses value identification, value proposition, and value delivery. Creating value is at the core of Lean. Creating value is at the core of Value Engineering. Lean and VE use different approaches to accomplish the same objective. Assuming we accept the idea that no one approach is superior in every respect to other approaches, it should not take much imagination to conclude that there may be concepts, approaches, and tools in each approach that could help the other. OUR EXPERIENCE Army leaders, like leaders in any forward-looking organization, are continuously looking for mechanisms and initiatives to help keep the Army current, efficient, effective, and moving forward. In keeping with this, in addtion to VE, some organizations in the Army are working to use Lean and Six Sigma to improve their operations. Success is mixed, but where Lean and Six Sigma have been successful, those organizations show significant results. As one might expect in an organziation as diverse as the Army, we have the full spectrum of results in applying VE, Lean, and Six Sigma. Some organizations don t use any of these approaches; others try and have mixed results with one, two or three of the methods. As the Value Engineering Program Manager in a large Army organization, it is the policy of my office to actively support Lean and Six Sigma initiatives, promote the use of Lean and Six Sigma 6

7 methods, participate in Lean and Six Sigma events, and actively work to integrate the three approaches. In our experience, organizations are at one of four Levels of use of productivity and transformation methods: Level 1 No systematic use of any productivity or transformation method (the Nothin Doin level). Level 2 Regular use of one method (the When all you have is a hammer, everything looks like a nail level). Level 3 Regular but independent use of more than one method (the cast-iron stove-pipe level). Level 4 Integrated, systematic, and synergistic use of more than one method (the trained mechanics with full toolboxes level). Too many organizations are at Level 1. Many organizations can see the benefits of productivity and transformation tools, and are struggling to attain Level 2. In our view, organizations with a future are at least operating at level 2, and in turn some of those are building on their growth and improvement momentum and evolving to level 3. Few organizations are at level 4. In the not too distant future, level 4 will be mandatory for long-term survival. Our model provides a xroadmap to get to Level 4, and there is a significant place for VE in this model. Simply put, project teams can use VE methods to efficiently and effectively address and accomplish vital projects that Lean and Six Sigma can t touch because it is beyond the methodological reach of either of those methods. Specifically, while Lean and Six Sigma often prove effective at guiding a team toward areas that require change (Lean will identify areas that are wasteful, and Six Sigma will identify causes of process variation), neither approach provides a team with a rigorous analytic and creative process to develop the best value solution. VE does. Put another way, in order to reduce waste (Lean) or reduce process variation (Six Sigma), a team will have to develop alternatives to current processes/designs. This requires some level of creativity, and the core methodology of VE, creating by function, can turbocharge a creative effort. In short, Six Sigma can identify souces of process variation, and Lean can identify waste. Neither method provides rigorous avenues for creatively developing corrective actions. VE not only provides an effective and proven process for developin creative alternatives, it helps create and identify the best value alternatives. 7

8 The table below provides a summary of VE, Lean, and/or Six Sigma attributes, with an assessment of where a method provides leverage ( ); where an approach claims leverage, but the claim may be weak (*);c and where a method neither claims nor provides leverage (blank). Many proponents of the three methods will find elements on this chart incendiary, and given the chart provides no qualifying information, it is clearly not intended to be authoritative or definitive. It is, however, a reasonable account of the relative strengths and weakness of the three approaches, and the intent is to simply illustrate something all proponents should agree on no one method can do everything better than other approaches. Attribute VE Lean 6σ 1. Effectively Reduces Cost and Increases Value 2. Customer Focus 3. Workforce Participation 4. Visual Analytic Tools 5. Strong in Process/Product Design 6. Effective Enterprise Transformation 7. Rigorous Creativity Tools 8. Rigorous Analytic Tools 9. Low-Cost Entry 10. Optional Tactical Use 11. Rigorous Risk Management 12. Systematic Enterprise Approach 13. Extensive Quantitative Analysis 14. Establish/maintain Process Controls 15. Continuously Revisit Same Area Given that, why sell an effort short by failing to use tools offered by other approaches? VE, LEAN AND SIX SIGMA SYNERGY VE, Lean, and Six Sigma are methods developed independently in time, with the intent to address different problems. The original application of VE by Lawrence Miles was to identifying suitable substitute materials during WWII, to reduce adverse impacts of shortages of some raw materials. They found that substitute materials often worked better, at lower cost. Henry Ford developed Lean to improve production line flow. Dr. Shewart developed his early statistical methods to help meaningfully differentiate between errors stemming from acceptable random variation and errors generated by an identifiable and unacceptable source. As such, they were not developed with the intention they be compatable. To manage them so they are compatable takes knowledge and insight. To manage them so they are complimentary takes experience, skill, judgement, and some determination. It s not easy getting an organization to use 8

9 one approach with any degree of effectiveness getting an organization to use three methods in concert takes a bit of doing. Synergy between Lean and Six Sigma is increasingly recognized. Both approaches are most commonly used in production areas, whereas VE is most commonly used in design. Increasingly, Lean, Six Sigma, and VE are used outside their traditional areas, and opportunities for synergy are increasing. INTEGRATING LEAN, VE, AND SIX SIGMA VE, Lean, and Six Sigma can work effectively, independent of the other methods, but they work better together, particularly in a process where a team can take advantage of respective strengths and avoid respective weaknesses. Our ideal integrated process is: 1. Select process/item improvement opportunity. Tie to larger organization, mission/goals, problem areas, high cost areas. 2. Conduct enterprise level Value Stream Analysis. Include customers and other organizations. a. Document current state. b. Develop future state. c. Create Future State Achievement Plan to include: i. Do it actions and fixes that require little coordination. ii. Actions targeting use of VE, Lean, Six Sigma, or other methods. iii. Actions requiring policy changes, information system changes, and similar activities. iv. Possible additional upstream and downstream Continuous Improvement/Value Stream Map events. Selecting the process/item can be done opportunistically (tactically), or, preferably, as part of a larger strategy. Six Sigma provides some particularly excellent tools for this ( voice of the customer ) but clearly all three approaches emphasize the importance of the customer. A Value Stream Analysis (a Lean tool) is a powerful tool for SEEING waste, and providing the basis for moving forward eliminating waste, and identifying areas requiring improvement. As the first major step in a serious and encompassing improvement process, a good value stream map will include customers who will establish the business case, i.e., they will tell you what they want they will give you the criteria to establish when you are effective. They will also definitively tell you where there is waste in your product/processes. Suppliers also have a role in building a Value Stream Map. A group of 20 or more is not uncommon. The MIT/Lean Aeorspace intitiative, in cooperation with the U.S. Air Force, will construct Value Stream Maps using groups of 40-60, encompassing the entire value stream for a complex system. A Value Stream Map identifies, among other things: 9

10 Customer requirments Process waste Areas generating poor quality Processes lacking interorganizational coordination Labor cost Material cost Inventory cost Maintenance cost Typically a VSM is developed in a session lasting 2-5 days (not counting preparation time), attended by representatives from all organizations involved in the product flow. Both Six Sigma and VE methods include creating/using process flow charts and comparable tools, but neither discipline offers a mechanism quite like a Value Stream Map. Deliverables from a VSM event include a detailed description of the current process. For each step in a value stream, the map will detail flow time, touch time, number of people involved, average work in process, changeover time, yield, and other relevant information. The VSM will identify areas in the value stream with quality problems, highest levels of waste, and identification of the areas offering the greatest potential for improvement in effectiveness and efficiency. The synergy enters the process at Step 2.c.ii. After identifying areas of waste and high cost in the value stream, staff experienced in the three approaches can assign followup actions as appropriate to VE, Lean, or Six Sigma teams/events, and the synergy doesn t stop there. For example, a good VE team will use individual Six Sigma tools as required/appropriate. Conversely, a good Six Sigma team will conduct a Value Engineering function analysis before deciding on a recommended solution intended to eliminate process variation. Keep in mind these actions take place within the context of and are preceeded by a Lean Value Stream Map. CONCLUSION I work in a Lean organization, where we use VE for breadth and Six Sigma for depth. This statement was made by an individual from an organization that is a leader in the balanced application of VE, Lean, Six Sigma, and other tools, and is a good summary of how to approach the three methods. That concept works for that organization. With focus, patience, and determination, other organizations will evolve use of VE, Lean, Six Sigma, and other approaches and arrive at comparable models for synergistic, integrated, collaborative use of techinques, and work toward becoming a Level 4 organization. Organizations will arrive at Level 4 operating practices at different times. Asking when they will arrive is a question that has meaning. Asking if they will arrive at Level 4 is a moot question organizations will become Level 4, or they will cease to exist. 10

11 1 James P. Womack, 1997, Foreward to: Becoming Lean, edited by Jeffrey Liker. Portland, Oregon: Productivity Press. 2 Kirk Bozdogan, 2003, A Comparative Review of Lean Thinking, Six Sigma and Related Enterprise Change Models, Massachusettes Institute of Technology, Lean Aerospace Initiative. 11