May 2004 e-Newsletter

As auditors, we see a variety of quality tools used within a quality management system. Since many of these tools are named after a person, use a Japanese word, or refer to an acronym or abbreviation, some auditors may not immediately recognize them. A brief description is provided below for some of the common tools.

Shewhart Cycle: Walter Shewhart defined the Plan-Do-Check-Act (PDCA) cycle as a helpful tool for process improvement. The Shewhart cycle is often called the Deming cycle since W. Edwards Deming proposed it for process improvement in Japan (although he gave credit to Shewhart). Deming used Plan-Do-Study-Act (PDSA) instead of PDCA.

Ishikawa Diagram: Kaoru Ishikawa developed a Cause and Effect diagram for determining the potential causes of an undesirable event. The diagram is often called a Fishbone diagram since the slanted lines representing the potential causes resemble the bones of a fish. The potential causes are grouped as Machine, Method, Material, Manpower, Measurement, and Environment. The diagram may also be referred to as a "4M" diagram (when only using Machine, Method, Material, and Manpower) or "5M & E" when all the cause categories are considered.

The purpose of the diagram is to arrive at a few key sources that contribute most significantly to the problem being examined. These sources are then targeted for improvement. The diagram also illustrates the relationships among the wide variety of possible contributors to the effect.

Pareto Principle: When Joseph Juran was looking for a short name to apply to the phenomenon of the "vital few" and "trivial many", he referred to it as Pareto's principle of unequal distribution. Vilfredo Pareto was an economist that applied the principle to income and wealth. Juran expanded it to a universal rule that, in most cases, a few problem categories (about 20%) will present the most opportunities for improvement (about 80%).

As a result, the Pareto Principle is also called the "80/20 Rule", meaning that in anything a few (20 percent) are vital and many (80 percent) are trivial. A Pareto Chart is a column graph that prioritizes problems so the major ones can be identified.

Likert Scales: Renis Likert devised a measurement method, called Likert Scales, used in attitude surveys. They allowed answers ranging from "strongly disagree" to "strongly agree." A Likert scale measures the extent to which a respondent agrees or disagrees with a statement.

Customer satisfaction surveys use rating scales and the most common scale for agreement is 1=strongly disagree, 2=disagree, 3=undecided, 4=agree, and 5=strongly agree. Other survey statements may relate to frequency (1=never, 2=seldom, 3=sometimes, 4=often, 5=always), importance (1=unimportant, 2=of little importance, 3=moderately important, 4=important, 5=very important), and quality (1=very poor, 2=poor, 3=average, 4=good, 5=very good).

Kanban: Kanban is the Japanese word meaning Kan = card, Ban = signal, or "signboard". It is a key tool in a Just-In-Time system and provides a visual sign to "pull" more work from one process to the next. It maintains an orderly and efficient flow of materials throughout the entire manufacturing process. It is usually a printed card with specific information such as part name, description, quantity, location, supplier, delivery, etc.

Every part and assembly that moves through the production sequence has an accompanying kanban. "Production instruction" kanban circulate inside each process. "Withdrawal" kanban circulate between processes. Processes use a "withdrawal" kanban to "buy" parts from the preceding process to replace the parts they used. And, the processes each array the parts they have made for the following process to withdraw when necessary.

Kaizen: Kaizen is a Japanese word meaning continuous improvement. It is taken from Kai = change and Zen = good. A Kaizen strategy involves everyone in an organization working together to make improvements. It is a culture of sustained continuous improvement focusing on eliminating waste in all systems and processes of an organization. Involved leaders guide people to continuously improve their ability to meet expectations of high quality, low cost, and on-time delivery.

Kaizen, Lean, and Six Sigma are all improvement tools. The logic of Kaizen is that breakthroughs result not from massive reorganizations or large-scale investment projects, but from the cumulative effects of successive incremental improvements. Although an oversimplification, Kaizen may focus on tactical, quick fixes; Lean on eliminating non-value-added activities and shortening cycle times; Six Sigma on reducing process variation and improving process capability.

Hoshin Kanri: Hoshin Kanri is a systems approach to the management of change in critical business processes using a step-by-step planning, implementation, and review process. The word Hoshin can be broken into two parts: Ho = direction and Shin = needle. So, the word Hoshin translates into direction needle or compass. The word Kanri can also be broken into two parts: Kan = control or channeling and Ri = reason or logic. Therefore, Hoshin Kanri refers to the management and control of an organization's compass or focus. The most popular English translation of Hoshin Kanri is Policy Deployment or Management by Objectives.

5S: 5S is a methodology for organizing, cleaning, developing, and sustaining a productive work environment. The five Japanese "S" words for organizing the workplace are Seiko (proper arrangement), Seiton (orderliness), Seiketso (personal cleanliness), Seiso (cleanup), and Shitsuke (personal discipline). 5S deals with issues such as: Space crowded with parts and tools; Unneeded items stacked between workers; Excess inventory on the floor; Excess items and machines making it difficult to improve process flow; Dirty and cluttered equipment; and Equipment and tools difficult to find.

Pokayoke: Shigeo Shingo has been credited with creating and formalizing the zero quality control approach that relies heavily on "pokayoke", the Japanese word for mistake-proofing. Shingo stated, "The causes of defects lie in worker errors, and defects are the results of neglecting those errors. It follows that mistakes will not turn into defects if worker errors are discovered and eliminated beforehand." In its simplest form, a pokayoke (pronounced POH-kah YOH-kay) is a device or piece of equipment that provides mistake-proofing. It does not allow a part to proceed unless the error is removed. Pokayoke also relieves people of the need for constant vigilance, as it automatically stops any part that may have slipped through, even if the person is tired. For more information, see the separate article on Pokayoke in this newsletter.

In an article in 6L, a new journal for six sigma and lean manufacturing professionals, Jim Womack states, "Unless you have defined from the customer's perspective what specific value is required, it is premature to begin thinking about building or improving processes to deliver it." Womack defines a perfect process as one that is:

1. Valuable
2. Capable
3. Available
4. Adequate
5. Flexible

The perfect process is valuable because it creates and adds value for customers. Start by drawing a Value-Stream Map to visualize the process. Then remove the non-value-adding steps. Don't begin by asking if a process step is valuable. First, see if the step is even needed. In other words, would the customer miss it? If the answer is "no", don't try to fix it, just eliminate it.

A capable process performs the same way with the same result every time. Improving the capability of a process is the starting place of Six Sigma. An available process can be performed every time it needs to be performed and in the standard cycle time. Availability depends on equipment reliability and uptime, therefore, it is the starting place for Total Productive Maintenance.

An adequate process has enough capacity to perform every time when it needs to be performed, without waiting. This is the concern of Theory of Constraints, Right-sized Tooling, and Lean Manufacturing System Design. A flexible process can change over quickly from one member of a product family to another one. Perfect processes have very low setup and changeover times. These flexible processes allow small amounts of parts for different products to be made frequently, resulting in high throughput and low inventory. This is the concern of the Toyota Production System.

In addition to being valuable, capable, available, adequate, and flexible, a perfect process also has its steps linked and coordinated by:

1. Continuous flow,
2. Customer pull, and
3. Leveled production.

Continuous flow is the quickest way to get materials from point A to point B, while allowing customers to pull products out of the value stream to prevent the waste of overproduction. Leveling the volume and mix of product flow through the process permits a steady consumption of resources and minimizes the work-in-process inventories associated with batch-and-queue production.

Womack says a perfect process is waste-free. Every step is completely valuable, perfectly capable, perfectly available, exactly adequate, and highly flexible. And, every step is connected by continuous flow, noiseless pull, and maximal leveling.

Note: Jim Womack is President of Lean Enterprise Institute <www.lean.org>. The 6L journal is published monthly by QSU Publishing <www.qsuonline>.

Move over Pokemon, Pokayoke is here. This one’s not for kids - it’s got companies all worked up over "go" - "no go" gauges, alarms, and red flags. They’re not playing games. Pokayoke is serious business because it saves costs, reduces human error, and makes life on the shopfloor easier and more efficient.

Like Pokemon, pokayoke is of Japanese origin. In its simplest form, a pokayoke is a device or piece of equipment that does "mistake proofing". It does not allow a part to proceed on the assembly line or production line unless the error is removed. Pokayoke also relieves humans of the need for constant vigilance, because it automatically stops any part that may have slipped through, even if the human is tired.

While it’s been around for a few years, Pokayoke has begun to take center stage because the results of these programs are enough to make any cost-conscious CEO sit up and take notice. In M&M’s Mumbai plant, a cross-functional team was formed to implement pokayoke in critical manufacturing functions. M&M reduced its scrap in manufacturing at the plant level by 80%, in rework by 98%, and rework in assembly by 85%.

Most quality management programs are essentially based on the processes used in production and work habits of workers and managers. Pokayoke, though, helps in a hundred little ways by automating the "vigilance" function. Instead of rejecting a faulty part, a pokayoke blows the whistle - literally - as soon as the part moves into the next stage of production. In effect, you catch the "error" before it becomes a part of the finished product.

Tata Motors has introduced more than 4,000 Pokayokes at their Pune facility. A spokesperson stated, "Apart from the reduction in tool breakages, accidents, and rejections, we are more assured of reliability of the process and this increases our confidence in manufacturing consistently good quality products.” It can take simple forms like a "go" - "no go" gauge, which allows parts of only conforming dimensions to be passed, rejecting others. There can be alignment devices that do not allow a vehicle to roll off the line unless the tires are correctly aligned.

A narrow view of pokayoke devices can be as limit switches, that ensure no damage to material at the end of a steel plate, for example. There are also cutouts that break a circuit, much like a fuse or guide pins or laser beams that, if broken, or not aligned, won’t allow a machine to operate. Even office equipment has pokayoke devices - the humble photocopy machine won’t start unless the paper tray is shut or refilled. The pokayoke devices are linked to alarm lights and even visual controls like red flags to halt operation.

Pokayoke, say practitioners, is one element which has contributed significantly to four Indian companies - Mahindra and Mahindra, Rane Brakes, Brakes India, and Sona Koyo - winning the Deming awards last year. The Deming Award, for manufacturing companies, is the holy grail where quality management is concerned. Deming, the American-turned-Japanese quality guru, himself advocated the need to remove constant vigilance in maintenance work from shop floors.

The Sarbanes-Oxley Act (SOX), or the Public Company Accounting Reform and Investor Protection Act, was enacted in 2002 to protect the American public's interests. SOX is being relied on to spot incidents of fraud, lack of internal controls, and suspicious business practices.

SOX was enacted in July 2002 and is the most important U.S. legislation to affect corporate governance, financial disclosure, and public accounting since the 1930s. Since it addresses corporate fraud, SOX helps to bolster the public’s confidence in the economy and in investing. SOX does this by monitoring the monitors, i.e., the financial auditors and company executives, as well as, statements of assets and revenues.

Section 302 of the act, requiring CEOs and chief financial officers to certify financial results, is already in effect. Now Section 404 calls for management to evaluate all the processes involved in producing a financial report. This will affect companies with fiscal years ending on or after June 15, 2004.

Under SOX, a publicly traded company is governed by the Securities and Exchange Commission (SEC) rules. It is subject to ongoing inspections over a period of one to three years. Inspectors will look for violations such as inaccurate accounting or evidence of personal loans extended to company executives. Companies must keep a seven-year record of all accounts for audit purposes. Their annual reports must include an internal control report stating that management takes responsibility for what is reported.

Failure to comply with SOX requirements is serious. If accounts are found to be inaccurate, for example, the CEO and CFO must forfeit their bonuses and other compensations. It could also result in a prison term or fines of up to $25 million, depending on the degree of negligence detected.

Even non-publicly traded companies are expected, over time, to abide by the spirit, intent, and letter of the law because the standardization and integration required by SOX can help any company improve its business processes.

The Sarbanes-Oxley Act is forcing organizations to rethink basic business procedures that they've come to take for granted. But for some companies, the smarter ones, SOX is about more than just compliance. These firms are asking, "How do we comply and improve our business capabilities at the same time?" To avoid being "socked" by SOX, go to IBM's Forward View magazine at <http://www-1.ibm.com/businesscenter/us/enewsletter/> for more information.

Since SOX calls for monitoring the monitors, then your internal quality audit program could have a role to play. Consider expanding the scope of your internal audits to include financial processes and use SOX as one of the audit criteria.

Review the documentation before the audit
Defer the review until onsite if not detrimental
Review in a preliminary site visit, if held
Include the relevant documents and records
Determine its conformity with audit criteria
Report any documentation concerns
Decide to continue audit or suspend it

3. Prepare for Audit Activities

Prepare the audit plan as the basis for agreement
Use it to schedule and coordinate the audit
Keep plan flexible to permit changes during the audit
Assign the work to the audit team members
Prepare the work documents: checklists, and forms
Confirm the audit arrangements and logistics

4. Execute the Audit Activities

Conduct the opening meeting
Establish the roles of guides and observers
Interview the people performing the work
Collect and verify sampled information
Communicate well and often during the audit
Prepare and agree on the audit conclusions
Conduct the closing meeting

5. Report the Audit Results

Prepare the audit report (audit team leader)
Review and approve it per the audit procedure
Issue the report within the agreed timeframe
Distribute the report to client-designated recipients
Maintain it as a complete, correct, clear, and concise record

6. Complete the Audit

The audit is considered "complete" when:

all activities in the audit plan are carried out
an approved audit report has been distributed
documents are kept or destroyed per agreement

If findings are reported, the audit is not considered "closed" until after the followup audit.

7. Conduct Audit Follow-Up

Conclusions may require actions by the auditee
Corrective actions must be taken in agreed timeframe
Such actions are not considered part of the audit
Auditee notifies the audit client when action is complete
Followup audit verifies the effectiveness of corrective action
Verification can be part of subsequent audit

These activities are covered in more detail in ISO 19011:2002 and in our Internal Auditor and Lead Auditor courses.

To enroll in these public classes, go to Class Schedule at our web site, or call us at 800-404-7585. The classes taught by Larry Whittington are shown in gold.

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Whittington & Associates provides training, consulting and auditing services for quality systems based on ISO 9001, ISO/TS16949, TL9000, AS9100, ISO 13485, as well as, ISO 27001, ISO 20000, ISO 22000, and ISO 14001.