The purpose of using control charts is to regularly monitor a process so that significant process changes may be detected. These process changes may be a shift in the process average (X-bar) or a change in the amount of variation in the process. The variation observed when the process is operating normally is called “common cause” variation. When a process change occurs, then “special cause” variation occurs.

With the use of control charts, snapshots of the process average and variation are captured throughout a time frame. By first establishing the variation that we expect from the process (via control limits) when it is stable (in control), we are able to detect subsequent process changes. When specific signals are observed on the control charts, we conclude that the process is unstable (a change occurred, the process is out of control) because the probability of observing those signals if the process had not changed is very small.

The financial services sector has been a laggard in adopting lean tools and practices, perhaps because of their manufacturing origins. But those attitudes are slowly changing. As more banks discover the benefits of lean operations—such as lower costs, fewer errors, faster cycle times and far greater efficiency—wide-scale adoption by the industry is just a matter of time. But old habits often die hard, and slowly.

This article, part of a special report from Knowledge@Wharton and The Boston Consulting Group (BCG) on applying lean concepts to service industries, explores why the industry is dragging its feet, and shows what banks can achieve when they go lean.

Quality and IT executives alike face increasing pressure to implement technological solutions that allow the highest level of holistic control and oversight concerning the quality of their operations. This pressure is compounded by the current economic climate in which companies face constant demand to drive cost out of operations by eliminating redundant technology and supporting infrastructure. It’s imperative that the most effective decisions are made when reviewing alternate solution approaches to ensure that both quality and economic efficiencies are realized to the greatest extent possible.

A topic with which industry professionals have wrestled for a number of years is the extent to which they should repurpose existing software applications to manage quality systems processes. Central to this discussion is the question of how—or if—an organization’s enterprise resource planning (ERP) should be extended for use in the quality systems area.

The customization conundrum

Several trends have been prevalent in recent years that are changing the course of ERP deployments, due to lessons learned and the overwhelming pressures of economic uncertainty.

The 5 Whys is a well-known root cause analysis technique that originated at Toyota and has been adopted by many other organizations that have implemented lean manufacturing principles. Unlike more sophisticated problem-solving techniques, the 5 Whys doesn’t involve data segmentation, hypothesis testing, regression, or other advanced statistical tools; and in many cases can be completed without a data collection plan. By repeatedly asking the question “Why?” at least five times, you can successively peel away the layers of symptoms, which can lead to identifying the root cause of a problem.

Right now there are potential customers for your business trying to decide whether or not to choose you. Unfortunately, most of them can’t see much difference between you and your competition. You’ve all got good quality products or services. You all seem to have competent, helpful people. It all pretty much just looks the same. That leaves one factor to drive the decision: price.

Welcome to the commodity trap. It’s a place in which lowest price almost always wins, because customers don’t see any other difference. It’s not a place where most companies want to compete. To escape the commodity trap, you have to answer the toughest question in business: “Why should I choose you?”

From banking services and insurance products, to fast food restaurants and medical clinics, today’s buyers just don’t see much difference in their purchasing choices. Unless you want to compete on price, you have to clearly differentiate from your competition. You have to have a tiebreaker. You have to give potential customers a reason to say, “OK, that’s the difference. That makes my decision.” The good news is that you probably have one or more tiebreakers right now; you just haven’t developed them as such.

Just as many industry sectors have been experiencing this year, the machine tools industry has seen a slow period in consumption and distribution of manufacturing technology.

Manufacturing technology consumption data is relevant because it provides a reliable economic indicator of how manufacturing companies are investing in equipment to increase capacity and improve productivity. In other words, the machine tool industry is the foundation for the entire manufacturing industry.

And as the heart of fabricated parts manufacturing, machine tools are the bedrock on which machined-parts quality stands.

Not surprisingly, given the current economy, it has also been one of the hardest hit sectors within manufacturing. Orders for manufacturing technology were down 66 percent for the first 10 months of 2009, according to a statement by the Association for Manufacturing Technology (AMT). 

Quality Digest Daily asked Pat McGibbon, AMT’s vice president of strategic information and research, about this reality and what manufacturers across the country should expect in 2010.

The Six Sigma journey of many organizations has morphed into “lean Six Sigma” during the past couple of years.

While the fusion of two methodologies has yielded benefits, it has also spawned a number of urban legends on the context and relevance of combining the two methodologies.

What follows are just some of the common misconceptions surrounding this fusion.

Urban legend No. 1: Lean Six Sigma is a trimmed down version of Six Sigma.

Many practitioners may laugh at that statement, but it is not uncommon to find staff in many organizations (including some who are responsible for driving operational excellence) who assume that lean Six Sigma is a simplified version of Six Sigma: perhaps a Six Sigma Lite. 

This misconception is easy to clear up with the right communication which explains that lean Six Sigma is a hybrid created by integrating some of the best practices from lean with the method developed by W. Edwards Deming—define, measure, analyze, improve, and control (DMAIC)—used to reduce defects by finding the root causes of defects, eliminating them, and sustaining that improvement level. DMAIC has become one of the two key methods on which Six Sigma projects are based.  

Story update 11/23/2010: A paragraph was added to the end of this case study to reflect the current state of the company's quality initiatives.

Acme Technology Services (not their real name) is a privately-held provider of technology-enabled business solutions. Acme’s retail software division provides software that enables merchants to better manage their supply chain from the suppliers through to the customers. ARS provides customization, sometimes extensive, to satisfy individual company needs. Due to a large sales team, the client list had steadily grown.

The software support structure has many nice features, including a web-based ticket capture system. Customers complete a data-capture screen for incidents and requests-for-service. Tickets are automatically routed to the support team queue via e-mail and are dispersed by a queue coordinator. ARS has some bright, resourceful individuals who extract and report on operations data.

Over time, sales began to slow and become increasingly difficult. The software development cycle time slowed down while customer complaints increased. Profitability continued to fall. There was also a growing trouble-ticket backlog.

You just finished your audit, and your registrar has handed you a brand-new certificate. Now, what do you do to make sure everyone knows about it? Most likely you’ll send an e-mail out to the entire company, prepare a press release, post an announcement on your web site, and so on. But sometimes, these announcements don’t talk about certification in a technically correct manner. When you use the right terminology in each and every marketing piece, it brings added credibility to you and to every other certified organization.

It’s not “ISO certification”

The term “ISO certification” is commonly used to describe management systems certification. But it never has been, and never will be, a correct term. There are several reasons why:

• The International Organization for Standardization (ISO) is a global, nongovernmental standards-writing body. ISO writes standards, but is not in the business of auditing to them. The term “ISO certification” could be misread to imply that ISO provided your management system’s certification, when in fact that job is done by a registrar—a third party organization that audits your ISO 9001 system to verify that you meet its requirements.

We all have one hiding over there in the groan zone. It’s the unfinished project that lives in a strange sort of limbo. As Nassim Nicholas Taleb reminds us in The Black Swan (Random House, 2007), the longer a project goes unfinished, there is an exponential increase in the time to finish the project. Sound familiar?

So, you see them lurking there getting dusty and forlorn, what should you do about them? How can you move these projects from limbo to liberation (aka completion)?

Here’s my project liberation check list:

Look at all your unfinished projects. Which ones are still relevant? What’s important, and what no longer matters?

What can be recycled? Those projects that have expired or no longer matter can still be useful. Look at them, and see if any of the project assets can be reused somewhere else. For example, were there any lessons learned that you can reapply? Why did these projects stall; what put them on the back burner; and could you have prevented it? Also, go through your documentation, and pull out any golden nuggets such as charts or research or any data you can build on.