<<…>>

JIT (Just-in-Time)

March 30, 2011

By Terry White

The best approach in explaining what JIT (Just-in-Time) is to provide some historical, economic and religious background; and what contributed to the emergence of JIT.

What is JIT?

“Just-in-Time is a production strategy which minimizes inventory with emphasis on reducing waste.”1 Execution includes using the right materials, the exact amount at the precise time and location.

Principles include:1

· Continuous improvement [Kaizen] will identify problems immediately and thrive for innovation.

· Respect for people will add value to your people and partners.

Background

History tells us during the Industrial Revolution (i.e., late 1700’s to early 1900’s), Monarchies were overwhelmed by capitalism; and eventually Socialism as capitalists worked their employees relentlessly in order to make money.
In 1891, Pope Leo XIII published Rerum Novarum, in which the Pope “commented critically on those whose economic policies had created slums and repressive economic and social pressure. The encyclical criticized both socialist and capitalist excesses and offered in their place classic Roman Catholic Christian guidance that Leo believed would lead to an improved social system. The "Rerum" was hailed worldwide by both Roman Catholics and non-Roman Catholics.”9

What are interesting are the significant events that contributed to JIT and what it has contributed towards.

In 1910 Henry Ford’s Manufacturing Strategy produced the Ford Production System which was noted for its Assembly Lines and Flow Lines. In the 1920’s, labor unions produced challenges; and annual changes to models did not fit the Ford Production System. Ford opposed war, but eventually his plants retooled for war production. What was significant is that in 1940, Ford’s Willow Run facility in San Diego produced B24 Bombers at an amazing one an hour (i.e., 18 a day) and by the end of the war had built 8,800. Some researchers say that Willow Run was the epitome of the Ford Production System which later was transformed by Toyota into Just in Time and Lean manufacturing.1

Toyota Motor Company began to incorporate the principals of the Ford Production System along with the Statistical Quality Control practices (e.g. Total Quality Management) of Ishikawa, Edward Deming and Joseph Duran.1

What eventually inspired the founders was their visit to Piggly Wiggly and observed the automatic drink dispenser. When a customer wants a drink, he gets one and another replaces it. However, on a subsequent visit to a Piggly Wiggly, the delegation was inspired by how the supermarket only reordered and restocked goods once they had been bought by customers. Toyota applied the lesson from Piggly Wiggly by reducing the amount of inventory they would hold only to a level that its employees would need for a small period of time, and then subsequently reorder. This would become the precursor of the Just-in-Time inventory system or sometimes referred to as the “Toyota Production System”.2

Major differences between Just-in-Time and the Ford Production System included the role of inventory, the importance of employees, product variety, quality circles, kanban cards and a “socio-technical system”3. As Toyota continued to perfect Just in Time from 1949 to 19751, other Japanese and American companies started to study and incorporate it.

Throughout the late 1900’s a new buzzword, “Lean Manufacturing”6, emerged. Lean meant manufacturing without waste. Lean Manufacturing would be the set of techniques that would identify and eliminate waste (e.g., Pull Scheduling, Six Sigma, TQM).

Benefits include:1

· Reduced setup time and operating costs.

· Higher quality.

· The flow of goods from warehouse to shelves improves.

“Kanban”4 is a scheduling system, which similarities to Scrum are:5

1. Lean and Agile

2. Use pull scheduling – Production determined by the “pull” from the demand. Movement only occurs when the work station needing materials requests it.

3. Focus on delivering releasable software early and often

4. Based on self organizing teams

5. Require breaking the work into pieces

6. Release plan is continually optimized.

· Employees with multiple skills are used more efficiently.

· Increased emphasis on supplier relationships.

On February 1, 1997 a fire destroyed “Aisin Seiki Co.’s Factory, which supplied brake fluid proportioning ("P") valves to Toyota’s 20 automobile plants. Toyota was producing 14,000 cars a day; and experts estimated that it would be weeks to recover. By the following Thursday, 36 suppliers, aided by more than 150 other subcontractors, had nearly 50 separate lines producing small batches of the brake valve. Toyota deployed 800 Engineers to assist in the recovery. This could have only occurred had it not been for the excellent ongoing supplier relationships that existed.”7,8

Problem that Toyota encountered during initial implementation

Line stopping (i.e., production line had to be slowed or stopped) was frequent (i.e., almost hourly during the first week) whenever there was a process or parts quality problem which surfaced on the production line. By the end of the first month, the rate had fallen to a few line stops per day. After six months, line stops had so little economic effect that Toyota installed an overhead pull-line, similar to a bus bell-pull, that let any worker on the line order a line stop for a process or quality problem. Even with this, line stops fell to a few per week.1

Conclusion

I was fascinated by the history and the events which contributed to Just-in-Time; but more importantly how all this contributed to “Lean Manufacturing”6 and some of the tools that are available that help eliminate waste (e.g., “Value Stream Mapping and Process Mapping)”6.

References

1. Just-in-time (business). Available at

http://en.wikipedia.org/wiki/Just-in-time_(business)

2. Toyota Production System. Available at

http://en.wikipedia.org/wiki/Toyota_Production_System

3. Socio-Technical Systems. Available at

http://en.wikipedia.org/wiki/Socio-technical_systems

4. Kanban. Available at

http://en.wikipedia.org/wiki/Kanban

5. Kniberg, Henrik (June 29, 2009). "Kanban vs Scrum: A practical guide". Available at

http://www.crisp.se/henrik.kniberg/kanban-vs-scrum.pdf

6. Lean Manufacturing. Available at

http://www.strategosinc.com/just_in_time.htm

7. 1997 Aisin Fire. Available at

http://en.wikipedia.org/wiki/1997_Aisin_fire

8. How Toyota Recovered From A Major Fire in Less Than a Week". Mirror of Wall Street Journal article. 1997-05-08. Available at

http://www.rbbi.com/company/toyota/fire.htm. Retrieved 2006-06-19.

9. A Brief History of Pope Leo XIII. Available at

http://www.greeleynet.com/~maxalla/OKHSSub/LeoXIII.html

Blog.docx

Advertisements

Corporate Governance

March 30, 2011

Corporate Governance

April 1, 2011

By Erica Brown

Have you ever wonder who is keeping large companies and organizations in check. Who is "Big Brother" to the entities that govern your life? The answer is Corporate Governance. In recent years, corporate governance has received increased attention because of high-profile scandals involving abuse of corporate power and, in some cases, alleged criminal activity by corporate officers. Well this will lead you to ask “What is corporate governance?” Corporate governance is a term that refers broadly to the rules, processes, or laws by which businesses are operated, regulated, and controlled. The term can refer to internal factors defined by the officers, stockholders or constitution of a corporation, as well as to external forces such as consumer groups, clients, and government regulations. (1)

Parties to corporate governance

The most influential parties involved in corporate governance include government agencies and authorities, stock exchanges, management(including the board of directors and its chair, the Chief Executive Officer or the equivalent, other executives and line management, shareholders and auditors). Other influential stakeholders may include lenders, suppliers, employees, creditors, customers and the community at large. (2)

Styles corporate governance

There is no one specific style of corporate governance that fits every company. According to TE Research, however, there are four broad corporate governance styles. These four different styles of governance are suited to companies in various stages of their development, from the early stage of a new business to the final stage of a mature cash cow. (3)

The Controlled Board

  • A controlled board is a board of directors that is under the control of the company’s management. This can be achieved either directly, by having the management serve on the board, or indirectly, by placing management allies on the board of directors. The controlled board is best suited to upstart companies in the early stages of development because the environment for a new company is highly dynamic. In order to quickly change to market demands, a company needs to have management that can make strategic decisions on the fly.

The Trusted Board

  • The trusted board is a style of corporate governance that puts mechanisms in place to increase shareholders’ trust of the board. These mechanisms can include annual elections to the board of directors or restrictions on the ability of the board to use a poison pill to ward off takeover bids. This style of corporate governance is best suited to companies in the financing stage of their development. This is due to the simple fact that investors are more willing to commit capital to companies whose boards they can trust to make decisions in shareholders’ best interests.

The Sovereign Board

  • The sovereign board is a style of corporate governance in which the board is free from the influence of either the management or shareholders. An independent board of directors is able to make decisions in the long-term best interest of the company. Companies with independent boards of directors have, on average, a higher return on equity and profit margin. This increase in profitability makes this style of governance best suited to companies in the production phase of development, where they will begin to turn profits.

The Influenced Board

  • The influenced board is a moderate style of governance in which the board of directors is influenced (but not controlled) by management but in which there is little influence from shareholders. Companies with an influenced board yield the highest dividends to shareholders because shareholders, while well-intentioned, do not always have the long-term interest of the firm in mind. The influenced board is the style of corporate governance most important aspect of the business is continuing to yield high dividends for as long as possible.

Conclusion

Corporate Governance is rules, processes, or laws by which businesses are operated, regulated, and controlled. This is in place to safeguard the stockholders and stakeholders within companies. The key players involved in creating the corporate governance include government agencies and authorities, stock exchanges, management, lenders, suppliers, employees, creditors, customers and the community at large. There is not one style that fits all companies. A company can decide on their style by
the setup of their corporation. I’m personally glad corporate governances are in place to cover the companies that impact my life.

References

(1) Tech Target- Corporate Compliance -Definition http://searchfinancialsecurity.techtarget.com/definition/corporate-governance

(2) Wikipedia- Parties to Corporate Compliance

http://en.wikipedia.org/wiki/Corporate_governance

(3) Ehow- Styles of Corporate Governance

http://www.ehow.com/list_6719787_styles-corporate-governance.html

What is Kaizen?
“Kaizen” is a Japanese word that literally means “good change” and refers to a philosophy of continuous improvement of business processes. Kaizen was first implemented by Japanese businesses following World War II, most notably by Toyota in the Toyota Production System, a precursor of the Lean Manufacturing movement. Kaizen provides a culture of continuous improvement through innovation and evolution driven by people at all levels of an organization.

Why should I care?

  1. How many of us work for a perfect organization? Likely none of us do. Most organizations could benefit from improvement in one or more areas, and many desperately need improvements on all fronts. Kaizen is a method for bringing about these improvements.
  2. The pace of change in the economic environment is incredibly fast. A company’s business processes will likely need to change to keep up. Kaizen drives small changes on a continuous (daily) basis that will help companies match the pace of the business environment.
  3. Kaizen facilitates gradual change which is less costly, less disruptive, more humane, and more likely to succeed than immediate large changes driven by command-and-control methods.
  4. A kaizen culture can help a software organization achieve CMMI Level 5 – Optimizing, which stresses continuous refinement of quality and performance. (Anderson, 2010)

How does an organization develop Kaizen?
First, recognize the Kaizen is brought about through a cultural change. The social norms of an organization will need to be adjusted to create an environment in which continuous improvement is facilitated, encouraged, and celebrated. The following key features characterize a kaizen culture:

  1. A kaizen culture requires transparency. The workings of the organization, both strategic and tactical, must be visible both to management as well as the workers. This transparency is achieved through high-bandwidth information channels. Agile frameworks like Kanban and Scrum use “information radiators” such as kanban boards and burndown charts to make work visible.
  2. A kaizen culture requires feedback. All members of the organization use the information radiators to reflect upon the performance of the team and system. People must feel safe that raising an issue will not incur punishment. The organization must help people feel heard by acting on issues raised.
  3. A kaizen culture requires experimentation. The organization should encourage the use of the Scientific Method to facilitate improvement. The “guess, test, revise” approach should be adopted with a focus on team/system performance rather than individual performance. Recognize that every change may not succeed in bringing about improvements. Failures in this regard should not incur punishment.
  4. A kaizen culture requires empowered employees. Within certain limits, employees should be able to self-organize and decide how to go about doing the work. Those doing the work are the most informed and conscious of the details of the work. If management has practiced transparency, those doing the work will also be well aware of strategic goals.
  5. A kaizen culture requires trust and respect among members of the organization. Everyone’s input must be valued, and people must not be maligned for having conflicting opinions.
  6. A kaizen culture requires slack. An organization running at 100% (or more) capacity has no time to devote to reflection and adaptation. Change requires effort and time. Without this capital, an organization is locked into the status quo if not slipping into decline. Slack is an investment, not a cost.
  7. For an organization performing knowledge work, a kaizen culture requires a focus on effectiveness rather than efficiency. This is a very subtle distinction, but has a profound effect on the culture of an organization. “Efficiency” or “productivity” is measured in work done per time spent. This is a meaningless measure in knowledge work. On the other hand, “effectiveness” measures whether or not we are solving the problem at hand. Efficiency focuses on cramming more work into less time. Effectiveness focuses on doing the right things at the right time.

Author: John Pruitt http://blog.jgpruitt.com

Bibliography
Anderson, D. J. (2010). Kanban, Successful Evolutionary Change for your Technology Business. Sequim, WA: Blue Hole Press.

Demarco, T. (2002). Slack: Getting Past Burnout, Busywork, and the Myth of Total Efficiency. Broadway.

Wikipedia contributors. (2011, 03 26). Continuous improvement process. Retrieved 03 30, 2011, from Wikipedia, The Free Encyclopedia: http://en.wikipedia.org/w/index.php?title=Continuous_improvement_process&oldid=420842531

Wikipedia contributors. (2011, 03 29). Kaizen. Retrieved 03 30, 2011, from Wikipedia, The Free Encyclopedia: http://en.wikipedia.org/w/index.php?title=Kaizen&oldid=421303547

Wikipedia contributors. (2011, 03 30). Toyota Production System. Retrieved 03 31, 2011, from Wikipedia, The Free Encyclopedia: http://en.wikipedia.org/w/index.php?title=Toyota_Production_System&oldid=421417667

Change Management

March 30, 2011

By Alfredo Guzman

Change Management is a structured approach to shifting/transitioning individuals, teams, and organizations from a current state to a desired future state. It is an organizational process aimed at empowering employees to accept and embrace changes in their current business environment. In project management, change management refers to a project management process where changes to a project are formally introduced and approved. (1)

Today, the concept takes different meanings. The reason behind it is because change management is the application of several ideas from the engineering, business and psychology fields.

I wanted to cover a brief history to show how change management has becoming an essential process of any organizational changes (ex.: mission, structure, operations and/or technical changes) positioning the people as part of the equation.

History

To understand change management as we know it today, two converging fields need to be considered: an engineer’s approach to improving business performance and a psychologist’s approach to managing the people-side of change.

First, students of business improvement have been learning and practicing how to make changes to the operations of a business as a mechanical system since Frederick Taylor’s work in the late nineteenth century. From this perspective, a business is like a clock where each of the mechanical pieces can be changed or altered to produce a predictable and desirable solution. Historically companies embracing this mechanical approach to business improvement typically did not embrace change management concepts until their projects encountered resistance or faced serious problems during implementation. The other side of the story begins with psychologists. Concerned with how humans react to their environment, the field of psychology has often focused on how an individual thinks and behaves in a particular situation. (2)

The net result of this evolution is that two schools of thought have emerged contrasting both approaches in terms of focus (processes vs. people), business practice, measures of success (Business performance vs. Job Satisfaction) and perspective on change.

Eight steps to successful change

American John P Kotter is a Harvard Business School professor and author of organizational change management introduced his eight-step change process in his 1995 book, “Leading Change”. Each stage acknowledges a key principle identified by Kotter relating to people’s response and approach to change, in which people see, feel and then change.

Kotter’s eight step change model can be summarized as: (3)

1. Create Urgency. Inspire people to move, make objectives real and relevant.

2. Build the Guiding Team. Get the right people in place with the right emotional commitment, and the right mix of skills and levels.

3. Get the Vision Right: get the team to establish a simple vision and strategy focus on emotional and creative aspects necessary to drive service and efficiency.

4. Communicate the Vision. Involve as many people as possible, communicate the essentials, simply, and to appeal and respond to people’s needs. De-clutter communications – make technology work for you rather than against.

5. Remove Obstacles. Enable constructive feedback and lots of support from leaders – reward and recognize progress and achievements.

6. Create Short-term Wins. Set aims that are easy to achieve. Manageable numbers of initiatives. Finish current stages before starting new ones.

7. Build on the Change. Encourage determination and persistence – ongoing change – encourage ongoing progress reporting – highlight achieved and future milestones.

8. Make Change Stick. Reinforce the value of successful change via recruitment, promotion, and new change leaders.

Conclusion

Change management entails thoughtful planning and sensitive implementation, and above all, consultation with, and involvement of, the people affected by the changes. (4)

Today, a business have to continually look at its performance, strategy and processes to understand what changes need to be made. However, an organization must also understand the implications of a new business change on its employees given their culture, values and capacity for change. At the end, it is the front line employees that will perform the new day-to-day activities and make the new processes and systems come to life.

References:

(1) Wikipedia. Available at: http://en.wikipedia.org/wiki/Change_management

(2) Change Management Learning Center. Available at: http://www.change-management.com/tutorial-definition-history.htm

(3) MindTools. Available at: http://www.mindtools.com/pages/article/newPPM_82.htm

(4) Finnish National Education. Available at: http://www.oph.fi/english/sources_of_information/projects/wbl-toi/continuous_improvement/change_process

by Eddy Robinson

EE615 April 1, 2011

Capability Maturity Model, CMM, this part seems simple enough. It’s a model describing your corporations level of maturity. But maturity in what respect? Business, technology, age? And what does integration have to do with it? Perhaps we should start with where the CMM came from.

CMM

The Capability Maturity Model was first developed by the Software Engineering Institute (SEI) at Carnegie Mellon University as a method for government assessment of software contractors. Watts Humphreys, a Fellow at the SEI, published "Managing the Software Process" in 1989 and described the CMM including five maturity levels with five Key Process Areas (KPA) in each level. (i)

The maturity level described the contractors ability to reliably and sustainably produce required outcomes. These levels are 1) initial, 2) managed, 3) defined, 4) quantitatively managed, and 5) optimizing.

Development of the CMM quickly spread across different industries creating many reference models of matured practices in specific disciplines like Systems Engineering CMM, Software CMM, Software Acquisition CMM, and People CMM, each with differing KPA’s. This led to an alphabet soup with specific guidelines that were difficult to integrate.

SW-CMM – Software CMM

EPIC – Enterprise Process Improvement Collaboration

SE-CMM – Systems Engineering CMM

INCOSE – International Council on Systems Engineering

SECAM – Systems Engineering Capability Assessment Model

EIA/IS – Electronic Industries Alliance Interim Standard

IPD-CMM – Integrated Product Development Capability Maturity Model

Evolution not Revolution

CMMI is the successor of the CMM and evolved as a more matured set of guidelines. It was built combining the best components of individual disciplines of CMM (Software CMM, People CMM, etc) and can be applied to product manufacturing, people management, software development, etc. The aim was to improve the usability of maturity models by integrating many different models into one framework. (ii)

CMMI

CMMI is a process improvement approach, based on CMM, that helps organizations improve performance. According to the SEI, CMMI helps "integrate traditionally separate organizational functions, set process improvement goals and priorities, provide guidance for quality processes, and provide a point of reference for appraising current processes."(iii)

There are currently three "constellations", or areas of interest: CMMI-DEV, CMMI-SVC, CMMI-ACQ. And there are five maturity levels which are rated based on the capability level of core process areas. The process areas change slightly depending on which constellation you are working in, development, service, or acquisition.

Maturity Levels

1 – Initial Process is unpredictable, poorly controlled and reactive

2 – Managed Process characterized for projects and is often reactive

3 – Defined Process characterized for the organization and is proactive

4 – Quantitatively Managed Process measured and controlled

5 – Optimizing Focus on continuous process improvement

Capability Levels (CL)

0 – Incomplete Either not performed or partially performed

1 – Performed Baby step, you are doing something but can’t prove it’s working

2 – Managed Planned, performed, monitored, and controlled

3 – Defined Managed process tailored to guidelines contributing work products, measures, and other process improvement information to the organizational process assets

4 – Quantitatively Managed Defined process that is controlled using statistical and other quantitative techniques

5 – Optimizing Quantitatively managed process that is continuously improved

There are 22 core processes defined for CMMI-DEV. Whenever the following seven processes; CM, MA, PMC, PP, PPQA, REQM, and SAM, reach CL5, the organization is considered CMMI level 2. Whenever 11 more of them; DAR, IPM, OPD, OPF, OT, PI, RD, RSKM, TS, VAL, and VER reach CL5, then the organization is considered CMMI level 3. Two more, OPP and QPM take you to CMMI level 4. And finally two more, CAR, and OPM, and your organization reaches CMMI level 5. CMMI-SVC has 24 core processes defined and CMMI-ACQ has 22.

So what does all this mean? Maturity levels refer to a whole organizations level of competence whereas Capability level refers to the competence level of a given process. Organizations execute many processes every day and the CMMI gives management a way of ranking the capability of core processes and entire organizations while laying out a roadmap for which processes to improve first.

Conclusion

In EE615 we have been learning about Business Process Modeling and re engineering. CMMI can be used as a guide to process improvement across a project, division, or an entire organization. (iv) As applied to business processes think about it this way; how can you chart a path to where you want to go if you don’t know where you currently are? CMMI gives you the tools to find out where you currently are and in the discovery process, lays out the road map for how to move to the next step.

(i) Wikipedia – http://en.wikipedia.org/wiki/Capability_Maturity_Model

(ii) Tutorials Point – http://www.tutorialspoint.com/cmmi/index.htm

(iii) Wikipedia – http://en.wikipedia.org/wiki/Capability_Maturity_Model_Integration

(iv) SEI at Carnegie Mellon – http://www.sei.cmu.edu/

An increasing number of hospitals are adopting a Six Sigma process as a way to increase patient satisfaction and reduce errors by improving processes. Statistics compiled by the US Bureau of Labor Statistics show that health care costs have increased five to six times faster than much of the rest of the economy during the past 5 years.

Six Sigma is a program of quality that is grounded in statistical analysis of gathered data. The objective of the program is to improve quality by reducing variation in the output from organizational processes. In other words, the goal is to reduce variation and eliminate errors in every process. This consistency will lead to greater customer satisfaction. If a desired outcome is not delivered, known as a “defect,” it is necessary to discover the root cause and eliminate it from the process.

Although the Six Sigma Methodology may have been developed for a manufacturing organization, it can be used in a healthcare organization in order to give the same added benefits. The healthcare industry is a service organization facing challenges everyday. Quality improvement methods are more difficult to implement in a healthcare industry. The comprehensive approach offered by Six Sigma allows for the methodologies to be successfully implemented with positive results.

The DMAIC process is an important part of Six Sigma, standing for:

· Define

· Measure

· Analyze

· Improve

· Control

Each phase of the DMAIC process involves detailed plans that help to guide managers through the execution of the quality improvement project.

If implemented correctly, the Six Sigma process should:

· Increase revenue

· Improve patient satisfaction

· Reduce the number of new-hired staff

· Decrease operating costs at health care facilities

The speed of processes and procedures also should improve with initiation of a Six Sigma program.

The basic steps of a Six Sigma program

1. Identify what is critical to the quality (CTQ) of products or services to the customers.

2. Apply intensive analysis to the processes, products, and services to determine whether the customers are provided with these CTQs.

3. Uncover what variations are occurring in the current processes and whether your operations are stable (ie, is the same care provided no matter what time of day or night). A defect is created each time a process does not deliver acceptable results. Find out what defects are occurring, how often, and how much they cost.

4. Choose focus areas based on translation of company strategy into operational goals.

5. Translate the problem into quantifiable terms using CTQ characteristics.

6. Identify possible causal relationships between inputs and the CTQs.

7. Suggest solutions to the problem.

8. Draft a charter, which includes a cost/benefit analysis.

9. Design and implement process changes or adjustments to improve performance of CTQs.

10. Review implementation and results of process improvement regularly.

11. Quantify and then continually build upon improvements throughout the control phase.

Opportunities for the Six Sigma process in health care facilities

The following are some examples of how to use the Six Sigma process in health care facilities:

· Patient admission

· Accuracy of surgical procedures

· Reducing patient length of stay

· Outpatient scheduling

· Efficiency of the emergency department

Roles of Six Sigma team members

Different team members have different responsibilities:

· Champion—facilitates projects and breaks down barriers, carefully monitors projects and specified completion dates (4 hours of training)

· Master black belt (an expert)—coaches and supports black and green belts

· Black belt—leads strategic and high-impact process improvement projects, helps to coach green belts (160 hours of training)

· Green belt—leads process improvement projects within own areas (48 hours of training)

· Management team—commits to improving products and services, oversees recruitment of participants, assists in deciding upon focus areas, assists in implementing process improvements (1 hour of training)

· Hospital staff (1 hour of training)

An ongoing program

Six Sigma is not a temporary fix or a short-term program. Rather, it is a permanent change to the systems of the health care facility.

The perceived downsides of Six Sigma in health care

Six Sigma is a very complex system, and the use of it for solving simple problems sometimes is viewed as overkill. The danger of suboptimizing a process without considering the whole value is another concern. Sigma Six offers few standard solutions.

References

American Society for Quality. Lean Six Sigma in healthcare. Available at: http://www.asq.org/healthcaresixsigma/. Accessed May 10, 2010.

Implementing Six Sigma Certification in Healthcare. Available at: http://www.sixsigmaonline.org/six-sigma-training-certification-information/articles/implementing-six-sigma-certification-in-healthcare-environments.html. Accessed May 10, 2010.

Six Sigma Health Care. What is Six Sigma? Available at: http://www.sixsigmahealthcare.com/Pages/SixSigma.asp. Accessed May 10, 2010.

TLP, Inc. Six Sigma health care. Available at: http://www.sixsigmahealthcare.com/. Accessed May 10, 2010.

An increasing number of hospitals are adopting a Six Sigma process as a way to increase patient satisfaction and reduce errors by improving processes. Statistics compiled by the US Bureau of Labor Statistics show that health care costs have increased five to six times faster than much of the rest of the economy during the past 5 years.

Six Sigma is a program of quality that is grounded in statistical analysis of gathered data. The objective of the program is to improve quality by reducing variation in the output from organizational processes. In other words, the goal is to reduce variation and eliminate errors in every process. This consistency will lead to greater customer satisfaction. If a desired outcome is not delivered, known as a “defect,” it is necessary to discover the root cause and eliminate it from the process.

Although the Six Sigma Methodology may have been developed for a manufacturing organization, it can be used in a healthcare organization in order to give the same added benefits. The healthcare industry is a service organization facing challenges everyday. Quality improvement methods are more difficult to implement in a healthcare industry. The comprehensive approach offered by Six Sigma allows for the methodologies to be successfully implemented with positive results.

The DMAIC process is an important part of Six Sigma, standing for:

· Define

· Measure

· Analyze

· Improve

· Control

Each phase of the DMAIC process involves detailed plans that help to guide managers through the execution of the quality improvement project.

If implemented correctly, the Six Sigma process should:

· Increase revenue

· Improve patient satisfaction

· Reduce the number of new-hired staff

· Decrease operating costs at health care facilities

The speed of processes and procedures also should improve with initiation of a Six Sigma program.

The basic steps of a Six Sigma program

1. Identify what is critical to the quality (CTQ) of products or services to the customers.

2. Apply intensive analysis to the processes, products, and services to determine whether the customers are provided with these CTQs.

3. Uncover what variations are occurring in the current processes and whether your operations are stable (ie, is the same care provided no matter what time of day or night). A defect is created each time a process does not deliver acceptable results. Find out what defects are occurring, how often, and how much they cost.

4. Choose focus areas based on translation of company strategy into operational goals.

5. Translate the problem into quantifiable terms using CTQ characteristics.

6. Identify possible causal relationships between inputs and the CTQs.

7. Suggest solutions to the problem.

8. Draft a charter, which includes a cost/benefit analysis.

9. Design and implement process changes or adjustments to improve performance of CTQs.

10. Review implementation and results of process improvement regularly.

11. Quantify and then continually build upon improvements throughout the control phase.

Opportunities for the Six Sigma process in health care facilities

The following are some examples of how to use the Six Sigma process in health care facilities:

· Patient admission

· Accuracy of surgical procedures

· Reducing patient length of stay

· Outpatient scheduling

· Efficiency of the emergency department

Roles of Six Sigma team members

Different team members have different responsibilities:

· Champion—facilitates projects and breaks down barriers, carefully monitors projects and specified completion dates (4 hours of training)

· Master black belt (an expert)—coaches and supports black and green belts

· Black belt—leads strategic and high-impact process improvement projects, helps to coach green belts (160 hours of training)

· Green belt—leads process improvement projects within own areas (48 hours of training)

· Management team—commits to improving products and services, oversees recruitment of participants, assists in deciding upon focus areas, assists in implementing process improvements (1 hour of training)

· Hospital staff (1 hour of training)

An ongoing program

Six Sigma is not a temporary fix or a short-term program. Rather, it is a permanent change to the systems of the health care facility.

The perceived downsides of Six Sigma in health care

Six Sigma is a very complex system, and the use of it for solving simple problems sometimes is viewed as overkill. The danger of suboptimizing a process without considering the whole value is another concern. Sigma Six offers few standard solutions.

References

American Society for Quality. Lean Six Sigma in healthcare. Available at: http://www.asq.org/healthcaresixsigma/. Accessed May 10, 2010.

Implementing Six Sigma Certification in Healthcare. Available at: http://www.sixsigmaonline.org/six-sigma-training-certification-information/articles/implementing-six-sigma-certification-in-healthcare-environments.html. Accessed May 10, 2010.

Six Sigma Health Care. What is Six Sigma? Available at: http://www.sixsigmahealthcare.com/Pages/SixSigma.asp. Accessed May 10, 2010.

TLP, Inc. Six Sigma health care. Available at: http://www.sixsigmahealthcare.com/. Accessed May 10, 2010.

Object Management Group (OMG) is an international, open membership and not for profit computer industry consortium (1). This group develops a set of standards and relationships where any type of organizations can join this group and have a way to be able to have a set of specifications yet it does not provide the information for implementation. The OMG standards are used for any type of industries such as manufacturing, transportation, space, health care and information technology. Another way I see the OMG is similar to the Project Management Office (PMO), where they are a centralized organization that set up the standards and rules within the group. However what’s different between the two is that once the PMO makes their decisions within the group, they implement the project while OMG does not, only set standards.

The Object Management Group was originally founded in 1989 by eleven companies (including Hewlett-Packard, IBM, Sun Microsystems, Apple Computer, American Airlines and Data General) and the international headquarters is located in Needham, Massachusetts; OMG’s initial focus was to create a heterogeneous distributed object standard (2). Today, over 800 companies from both the computer industry and software-using companies from other industries are members of OMG. (2) The OMG has gone through many changes since it was founded and always changing to use as a better source of business process. In June of 2005, the Business Process Management Initiative (BPMI.org) and the Object Management Group™ (OMG™) announced the merger of their Business Process Management (BPM) activities to provide thought leadership and industry standards for this vital and growing industry. The combined group has named itself the Business Modeling & Integration (BMI) Domain Task Force (DTF) (4). In 2007 the Business Motivation Model (BMM) was adopted as a standard by the OMG. The BMM is a metamodel that provides a vocabulary for corporate governance and strategic planning and is particularly relevant to business undertaking governance, regulatory compliance, business transformation and strategic activities (2). Before anything can be accepted as a standard, there has to be a majority of companies to agree to a new standard otherwise the standard will not be accepted by anyone. A good example of a standard specification that is accepted by the OMG is the Unified Modeling Language (UML). UML is OMG’s most used-modeling specification. UML allows users to model the business process, application structure, application behavior, data structure, and architecture (3).

Model Driven Architecture

OMG evolved towards modeling standards by creating the standard for Unified Modeling Language (UML) followed by related standards for

* Meta-Object Facility (MOF),

* XML Metadata Interchange (XMI) and

* MOF Query/Views/Transformation (QVT).

These together provide the foundation for Model Driven Architecture (MDA), and related set of standards, building upon the success of UML and MOF.

Systems Modeling Language (SysML), a modeling language based on UML for use in Systems Engineering, has been standardized in collaboration with INCOSE.

Significant progress has also been made in bringing the world of UML modeling and the Semantic Web together through the adoption of the Ontology Definition Metamodel which relates UML models in a standard way with RDF and Web Ontology Language (OWL) models.

Semantics of Business Vocabulary and Business Rules (SBVR) is a landmark for the OMG, the first OMG specification to incorporate the formal use of natural language in modeling and the first to provide explicitly a model of formal logic. Based on a fusion of linguistics, logic, and computer science, and two years in preparation, SBVR provides a way to capture specifications in natural language and represent them in formal logic so they can be machine-processed. SBVR is an integral part of MDA (2).

OMG also provides a number of professional certifications as well. They are OCRES – OMG Certified Real-time and Embedded Systems Specialist, OCUP – OMG Certified UML Professional, OCEB – OMG Certified Expert in Business Process Management (BPM) and OCSMP – OMG Certified Systems Modeling Professional (2). One of the examples is the OMG Certified Systems Modeling Professional sponsored by IBM, Lockheed Martin, No Magic, Inc. and Sparx Systems out of Australia. The program awards the OMG Certified Systems Modeling Professional certification at four levels. The first level, OCSMP Model User, covers a wide range of essential MBSE and SysML knowledge and skills and so enhances the résumé of those who contribute to a model-based systems engineering project. Building on this foundation, since all lower levels will be prerequisites for the levels above, are three levels targeted at model builders and advanced model users.

These levels, termed OCSMP Model Builder – Fundamental, Intermediate, and Advanced, cover advanced topics with an emphasis on the interconnectedness among the different model viewpoints that gives MBSE its advantage over conventional engineering methods. (5).

References

1. http://www.omg.org/gettingstarted/gettingstartedindex.htm

2. http://en.wikipedia.org/wiki/Object_Management_Group

3. Minoli, Daniel. Enterprise Architecture A to Z: Frameworks, Business Processing, SOA, and Infrastructure Technology. Taylor and Francis Group, LLC. 2008

4. http://www.bpmi.org/

5. http://www.omg.org/ocsmp/

How do you know if a business deal or investment is worth your time and most importantly your money? The answer to this question can be answered by calculating and understanding the meaning behind expecting a “return on investment”. Return on Investment (ROI) (also referred to as Rate of Return (ROR)) (3) gives you the percentage of gain you have received or expect to realize on a given investment.

ROI can be defined as the following: “ A measure of a corporation’s profitability, equal to a fiscal year’s income divided by common stock and preferred stock equity plus long-term debt “(1). For those of us that are not bankers or accountants a simpler definition would be: The percentage of money that has or will be made on a given investment.

The website Investopedia states the return on investment formula as:

ROI=(Gain from Investment – Cost of Investment)/Cost of Investment (2)

In the above calculation, if the number generated is positive you made money. For example if the above calculation gave you a solution of .25, you would state that you made a 25% return on your investment.

In the last few decades, ROI has become a central financial metric for asset purchase decisions (computer systems, factory machines, or service vehicles, for example), approval and funding decisions for projects and programs of all kinds (such as marketing programs, recruiting programs, and training programs), and more traditional investment decisions (such as the management of stock portfolios or the use of venture capital) (4).

The wonderful thing about ROI is the ability to calculate accurate percentages on expected profits from different investments. Let’s look at a fictional example:

Rob has recently filed his taxes and expects to get an even $1000.00 back. Being a wise individual, Rob decides to let his money work for him. Rob talks with Jill about two different investment opportunities.

Investment A: The first investment requires Rob to invest $500 upfront and another $500 in 6 months. This investment is expected to give Rob $92.50 per month.

Investment B: The second investment requires Rob to initially invest $900 upfront, leaving Rob $100 left over. This investment is expected to give Rob $85 per month.

Rob is quickly able to work these calculations and determine which investment is right for him. After performing the calculations Rob is able to see that Investment B is the better investment giving him a 13.33% return on his investment while investment A only gives him a return of 11%.

The above example illustrates the power behind using ROI as a financial tool. It is easy to see that with different initial investment amounts which investment is the better choice.

A very important thing to note about ROI calculations is that the formula can and will be modified by the individual giving the statistic. Always make sure you understand how they reached this number because depending on what values are used you can receive different results. This goes double if time is involved within the calculation.

A word to the wise; ROI calculations are not guarantees unless the calculation is done after the investment has matured. Be very cautious about performing a single calculation when doing your comparisons. Make sure, as an investor or business owner that you calculate your ROI at different investment and return amounts to guard against investments not living up the potential they promise.

As you can see calculating the Return on Investment for individuals and businesses can prove to be a very profitable and wise decision. Given the ability to compare opportunities and measure different investments side by side allows you to make the most informed and educated investment decision. Just remember that little phrase your grandparents said to you when you where younger, “If it is too good to be true, it probably is”.

References

1) Investorwords – Return on Investment (http://www.investorwords.com/4250/Return_on_Investment.html)

2) Investopedia – Return on Investment – ROI (http://www.investopedia.com/terms/r/returnoninvestment.asp)

3) Wikipedia – Rate of return (http://en.wikipedia.org/wiki/Return_on_Investment)

4) Solution Matrix – Return on Investment: What is ROI analysis? (http://www.solutionmatrix.com/return-on-investment.html)

According to Michael Hammer and James Champy, “…reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in …cost, quality, service, and speed.” Reengineering processes incur costs in its goal to achieve these improvements. In today’s competitive environment, you most focus on maximizing the value generated from cost expenditures. You have to prove that your project’s worth. It’s no secret: when a customer is spending money, they always want to make sure their getting exactly what they paying for. As your organization considers spending large amounts of money on replacing or maintaining their IT systems, they expect to gain money from increased productivity, and/or reduced maintenance or energy costs. Considering this new reality, you most show the value IT expenditures will provide the organization. How do you show the value of a future expenditure? Present management with the actual cost of the purchase by using financial tools like Payback analysis, Total cost of ownership, or Return on Investment.

The payback method is a great way of analyzing multiple projects. It simply shows you how long it will take to earn your initial investment back. As a general rule the shorter the payback period the better. Payback analysis is simple to learn and great for small projects. However, it does have its faults. It does not account for it does not account for the time value of money, risk, financing or other important considerations, such as the opportunity cost. Even with these limitations it is still a good tool to use in determining the value of a project.

Total cost of ownership, TCO is more complex than Payback analysis and takes more effort to complete for large projects. However, the TCO provides the total cost of an IT expenditure; everything from hardware, software, outside services, and all internal costs. TCO is calculated by adding all of the costs associated with a given purchase over its expected life time. It is not uncommon that a project with a low initial cost may be become too expensive when all costs are considered. Good TCO analysis brings out the hidden or non-obvious ownership costs that might otherwise be overlooked in making purchase decisions or planning budgets.

Return on Investment ROI is the performance measurement used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the return of an investment is divided by the cost of the investment. At one time, ROI was the most common analyzing tool, however it status to both TCO and Payback Analysis.

An ROI calculation quantifies both the costs and the expected benefits of a specific project over a specific timeframe. TCO includes just total costs of the project. While Payback only shows the amount of time you will get your initial investment back. The question is which tool is better for analyzing you project. There is no, “one size fits all” solution. All three of these options are valuable tools when analyzing your project.

By: Brandon Johnson

Works Cited

Business Reengineering, Information Systems Planning and Acquisition, http://www.umsl.edu/~joshik/msis480/chapt13.htm

Business process reengineering, http://en.wikipedia.org/w/index.php?title=Business_process_reengineering&oldid=411743998

Return On Investment, http://www.investopedia.com/terms/r/returnoninvestment.asp

Getting a Grip on TCO and ROI, http://itmanagement.earthweb.com/columns/bizalign/article.php/3076031/Getting-a-Grip-on-TCO-and-ROI.htm

Rate of return, http://en.wikipedia.org/w/index.php?title=Rate_of_return&oldid=410674458