Project Metrics

Quick reference

• 00:04 Hi, this is Ray Sheen.
• 00:05 There's one other fundamental element of Lean Six Sigma that I would like to
• 00:09 discuss, and that is the measurements that are used.
• 00:12 These are used throughout all phases of a Lean Six Sigma project.
• 00:17 I'll start with the Lean Six Sigma project metrics.
• 00:20 These are similar to many of the more commonly found metrics in business
• 00:24 improvement projects.
• 00:26 One project will not use all of these metrics,
• 00:29 rather the stakeholders will decide which subset of these to use on a project.
• 00:34 So I've listed here a number of categories of typical project metrics.
• 00:39 Most projects will only have a few of these categories.
• 00:42 But depending upon the business case behind your project,
• 00:45 it could be almost any combination.
• 00:48 Let me quickly highlight one or two in each of the categories.
• 00:51 Performance normally means process performance tied to quality or yield.
• 00:57 Quality is the actual quality statistic for the product or
• 01:00 item that is produced in the process.
• 01:02 So defects, rework, returns, and process capability are typical measures.
• 01:08 Schedule is usually process cycle time,
• 01:10 although some organizations are pretty strict about project completion schedule,
• 01:15 especially if capital equipment must be procured.
• 01:18 Cost is normally product cost or
• 01:20 one of the categories of cost of quality, such as scrap costs.
• 01:25 Sometimes, the project is focusing on things happening right at the point
• 01:30 of customer interface, so
• 01:31 customer interactions such as retention or complaints are measured.
• 01:36 Material is normally measured in financial terms.
• 01:40 Although, occasionally, inventory term measurements are used.
• 01:44 When I say labor, I'm not talking about labor costs of project work,
• 01:49 but rather labor issues, such as overtime or grievances.
• 01:53 All the previous measures are a form of operational measures.
• 01:56 But in this category of operations, I'm talking about the management of
• 02:01 the operations, not necessarily the management of the process.
• 02:05 So items like safety and audit findings are often used in this category.
• 02:10 Finally, if the process includes elements of inter-facility logistics,
• 02:15 the logistics cost or cycle time may be measured.
• 02:18 The next measurement to discuss is the Bg Y measurement and
• 02:23 how it is refined and defined to identify other project measures.
• 02:28 A structured approach is used to translate the Big Y into the other measures.
• 02:33 The Big Y was the goal or objective that is found in the project charter or
• 02:37 business case.
• 02:38 It is the business level impact of the project.
• 02:42 Many times the Big Y already has a targeted performance element and
• 02:46 does not need further refinement.
• 02:49 However, sometimes we need to go through a process to get actionable measures.
• 02:54 When this is the case, we start with the Level 1 measures, which are often
• 02:59 a corporate or organizational measure, for instance, total customer complaints.
• 03:04 The Level 2 measure breaks that down to business unit or product category, for
• 03:09 example, complaints about customer service.
• 03:12 Then we further refine that measure to count for
• 03:14 each of the applicable functions and their contribution to the measurement.
• 03:19 Continuing with our example, one element of the service complaints could be based
• 03:23 on hold times with the customer call center.
• 03:26 Now, within this function, the process can be reviewed and
• 03:29 the functional measure applied to that process.
• 03:33 For instance, it could be hold times for
• 03:35 customers calling the inbound customer service call center.
• 03:39 Finally, specific actions or activities in the process can be isolated for
• 03:43 their contribution to the measurement.
• 03:45 Using our example, we could investigate the call routing routine and
• 03:50 whether it is prioritizing calls so that there is a minimum hold time.
• 03:55 Once the refining and defining are done, the Pareto principle can be
• 03:59 used to decide which of the measurements will be the focus for the project.
• 04:04 Next, we will look at the Six Sigma process measures.
• 04:07 These are the key measurements for understanding variation in the process.
• 04:13 First is process Sigma.
• 04:15 This is a metric that represents how much variation is in the process data.
• 04:20 The higher the process sigma value, the lower the process variation.
• 04:24 It is a measure of process capability and
• 04:27 indicates the likelihood of first pass yield.
• 04:30 Defects are any attribute in the product or
• 04:33 process that does not measure up to the expected standard.
• 04:36 This is not to be confused with defective, this is for a product or
• 04:41 process that has one or more defects.
• 04:44 So defects are at the attribute level,
• 04:47 defectives are at the full product or process unit level.
• 04:51 Opportunity refers back to the attribute level, and it is an attribute or
• 04:55 characteristic that is inspected or tested,
• 04:58 therefore, it creates an opportunity to pass or fail.
• 05:01 Finally, a unit is a completed product or process cycle.
• 05:05 It represents the full deliverable.
• 05:08 Now, we can combine some of these measures to create ratios.
• 05:12 A measure that is frequently used is DPU, which stands for defects per unit.
• 05:17 This is the average number of defects that are observed in a typical unit or
• 05:21 item that goes through the process.
• 05:24 This measurement implies that a unit or an item could have no defects,
• 05:28 one defect, or many defects.
• 05:30 It gives us a sense of the ability of the process to produce defect-free results.
• 05:36 Next is DPO, which stands for defects per opportunity.
• 05:41 This is the average number of defects that occur based on the measurement
• 05:44 opportunities.
• 05:45 It's usually a very tiny number, so we modify it to make it more usable.
• 05:51 The modification is DPMO, which means defects per million opportunities.
• 05:56 This is the number of things that actually went wrong in a production run divided by
• 06:01 the total number of things that could have gone wrong in that run, and
• 06:04 then normalizing it to 1 million opportunities.
• 06:07 DPMO lets us know how often something goes wrong, whereas DPU gives us a sense
• 06:13 of how likely we are to make any given unit correctly on the first try.
• 06:19 Finally, PPM stands for parts per million.
• 06:21 Because it's working with parts, it uses the defective measure, and like DPMO,
• 06:27 it multiplies the ratio of defective parts over total parts by 1 million.
• 06:32 Well, those were some Six Sigma measurements.
• 06:35 Now, let's look at Lean measurements.
• 06:37 The first one I want to discuss is cycle time.
• 06:40 This is the average amount of time that it takes an item to go
• 06:44 all the way from step one to step last through the process.
• 06:48 It includes nights, weekends, and
• 06:51 any time that is spent waiting at a process step to be worked on.
• 06:55 It is the time that the customer experiences waiting for
• 06:59 something to get done.
• 07:00 The second is value-added time,
• 07:03 we will discuss this in more detail in later lessons.
• 07:07 But the quick version is that it is the time spent in the process when
• 07:11 process resources are actually working on the item to add
• 07:15 characteristics that the customer values.
• 07:19 It's not uncommon for this to be a tiny fraction of the total process cycle time.
• 07:24 FTY stands for First Time Yield, and it represents the number of
• 07:29 occurrences within a process step that completes its work on an item in
• 07:34 a defect-free manner when the item is first processed in that process step.
• 07:40 An additional quality measure that is frequently used is RTY,
• 07:44 which stands for Roll Throughput Yield.
• 07:47 This is the probability that a given unit will go through every process step
• 07:51 error-free on its first try.
• 07:53 It is the product of multiplying together all the FTY, or
• 07:57 First Time Yield values from every step.
• 08:00 There's an old saying that you get what you measure, and that's why it's
• 08:04 important for us to understand our Lean Six Sigma measurements,
• 08:09 then we can take actions to deliver on them.

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