Six Sigma Awareness Training

Six Sigma Awareness Training

Course Objectives The objectives of this workshop are: To explain the purpose of Six Sigma and the Six Sigma approach. To discuss Six Sigma implementation. To discuss the process for setting up projects and deploying project teams.

Course Contents • Six Sigma Overviews • The DMAIC Process Steps and Tools • Six Sigma Implementation • Collective Decision Making • Define: Set Up Projects and Deploy Teams

Section 1 Six Sigma Overview

Six Sigma: What & Why Effective Approach + Proper Deployment

RESULTS

Six Sigma Approach — Key Components Problem Solving Process Define—Measure—Analyze—Improve—Control

Improvement Tools Comprehensive and Integrated Set of Effective Improvement Tools

Quality Principles A Set of Sound Underlying Concepts

Results-Examples Allied Signal • Turn around from weak financial position in late 80’s. • US$3.2B cost savings during 1996 and 1997.

General Electric • Achieve 40% increase in operating margin. • Develop a better leadership for today’s more competitive world.

Fort Wayne City • Saved or avoided the need to spend nearly $3 million. • Has made numerous changes that have meant better service for city residents.

Evolution of Quality Practices DFSS, Lean Six Sigma 2000’s

1980’s 1960’s

1930’s

Six Sigma Lean Manufacturing Business Process Reengineering ISO9000 Total Quality Management Just In Time (JIT)

TQC (Total Quality Control) SQC (Statistical Quality Control) Testing and Inspection

The Origin of Six Sigma 1979 “ The Real Problem At Motorola Is That Our Quality Stinks ! ” Art Sundry (Formerly Motorola’s Senior Executive)

1981

“ Tenfold Improvement Over A Five Year Period ” Robert Galvin (Formerly Motorola’s President)

1980’s • Bill Smith discovered the correlation between market failures rate and manufacturing defects rate. • At Government Electronics Group, under the leadership of Mikel Harry, experiments with problem solving through statistical analysis showed dramatic results. • Mikel Harry began to formulate a methodology for applying statistical tools for problem solving. His work culminated in a paper titled “The Strategic Vision for Accelerating Six Sigma Within Motorola.”

1990 • Robert Galvin asked Mikel Harry to start up and lead Motorola’s Six Sigma Research Institute. • The mission was to develop Six Sigma implementation strategies, deployment guidelines, and advanced statistical tools that would work in a variety of companies and industries.

Adoption of Six Sigma

General Electric AlliedSignal Motorola 1987

1992

1995

- Seagate - Caterpillar - 3M - Dupont - Citibank - Bank One - Fort Wayne City - Sony - Toshiba - Shimano - Matsushita 2000

Adaptation of Six Sigma: Purpose and Approach • 1987

Motorola

- Defect reduction - Manufacturing processes

• 1992

AlliedSignal

- Operational excellence - Include non-manufacturing processes

• 1995

General Electric

- Financial results - Design for Six Sigma (DFSS) - Leadership development

• 2000

Sony

- Management Quality

Six Sigma As Improvement Management System Mindset

Business Goals

Skill Set

Define

Champions

Performance Measures Dashboard

Black Belts

Process Improvement (projects)

& Green Belts Bottom Line Improvement

Data Measure

+ Analysis

M-A-I-C

Tools

Financial Benefit

Performance Measure Examples

Motorola • Sigma Capability / Defect Per Million Opportunities (DPMO) AlliedSignal Laminate System • • •

Capacity Utilization Cost of Poor Quality (COPQ) Reduction Process Yield

General Electric Aircraft Engine Services • • • •

Project Financial Benefits Order To Remittance Inventory Turns Span / On Time Delivery

Drill Down Process To Identify Projects Business Goal

Business Objective Deployment Approach:

Objective

CTQ 1

A Objective

B Role & Responsibility: Executive Team

CTQ 2

Sub – CTQ 1

Project 1

Sub – CTQ 2

Project 2

Sub – CTQ 3

Project 3

Sub – CTQ 4

Project 4

Champion Black Belts Green Belts

Example : CTQ Tree Increase Sales

Sales Orders Production Output

Sales Lead Time On Time Delivery Order Fulfillment Customer Complaints Process Yield Down Time

New Products

Profitability

Manage Cost

Material Cost

Process Efficiency Time to Market Market Success Rate Design Changes Material Price Material Usage Rate

Failure Cost

Improve Working Capital

Utility Cost Account Receivable Inventory

Lot Reject Rate WIP Rejects Material Rejects Electricity Water Gas

Teamwork Coming Together Is A Beginning Keeping Together Is Progress Working Together Is Success Henry Ford

Six Sigma Benefits GE Capital’s railcar-leasing business achieved 62% reduction in turnaround time at its repair shops. Customer who once found themselves able to talk with a GE Capital Mortgage associate only 76% of the time now have a 99% chance of success on the first try. GE Plastics added 300 million pounds of new capacity through rigorous Six Sigma process work. Citibank’s Regional Cash Product Management Unit in Asia Pacific improved the defect rate of its fund transfer process to 4.95 sigma level.

Six Sigma As Problem Solving Process • Identify Performance Measures • Create Projects

MEASURE

• Establish Data Collection Plan • Understand Current Performance

ANALYZE

• Brainstorm Possible Causes • Verify Root Causes

IMPROVE

• Identify Improvement Solutions • Validate Effectiveness

CONTROL

• Establish Control System • Share Lessons Learned

Responsibility

Champion

Green Belt

DEFINE

Key Tasks

Black Belt

Phases

The DMAIC Toolkit Define        

 Process Map Brainstorming  Dashboard  CTQ Drill  Down Cause & Effect analysis Pareto diagram  Selection Matrix Project Charter   

Measure Analyze Improve Data Collection plan Histogram Distribution Measurement System Analysis Descriptive Statistics Run charts Control Charts Process Capability

          

Pareto diagram  Brainstorming Nominal group   technique Scatter plot  Box plot Stratification  FMEA Process C&E  matrix Interval Estimate  Hypothesis Test Process mapping and analysis

Creativity Techniques Selection matrix Design Of Experiments Force field analysis Potential risks assessments Stakeholder analysis Process Capability

Control     

Control plan Documentation system Control charts On the job training Story board

A] Soft Tools (Team Problem Solving) — Brainstorming — Affinity Diagram — Nominal Group Technique — Decision Matrix — Effectiveness / Practicality Matrix — Quality Function Deployment — Failure Mode and Effect Analysis — Force Field Analysis

B] Hard Tools (Quantitative Data Analysis) — Graphical Tools — Process Capability Study — Measurement System Analysis — Hypothesis Testing — Design Of Experiments — Control Charts

C] Work Process Redesign — Process Mapping — Non-value Add Analysis — 7 Principles of Process Redesign — Technology Enabler — Process Streamlining — “ Should Be ” Process Map Input

Process

Output

D] LEAN — Value Stream Mapping — Seven Major Wastes — Flow-based Processing — Kan ban System — Set-up Reduction — Mistake Proofing — Visual Management — Take Time — Total Productive Maintenance

Six Sigma Key Features • • • • • •

Top down approach Goals Alignment Logical and systematic process Consistency Rigorous problem solving method Effective Data driven and fact based decision Scientific Question conventions Breakthrough Results Financial benefits oriented Bottom Line Focus

What is “Sigma”?  Sigma (Greek letter Ơ) is a symbol for statistical unit of measurement called standard deviation that measure the variability of data from the mean.  In Six Sigma program, Sigma is an index for measuring the capability of process to produce “defect free” products or services. A “defect” is any mistake that results in customer dissatisfaction.

 The higher the sigma level, the less likely a process will produce defects. As sigma increases, costs go down, cycle time goes down, and customer satisfaction goes up.

Process Variation Input

• • • •

Process

Output

All businesses are a system of interconnected processes. Variations exist in all processes. Variations in processes result in process outputs variability. Understanding and reducing process variability is the key to improving the capability of a process to produce “defect free” products or services.

Process Output Variability Cycle time for taking X-ray at a hospital

0

10

20

30

40

50

60 (minutes)

Process Variability &Process Capability Process Output Variability

Customer Requirements

Customer Requirements

Defects • Less variability means less defects will be produced. • Less defects means better capability in meeting customer requirements.

Process Capability:Sigma Process Sigma

Defect Per Million

Percent Good

2

308,538

69.2%

3

66,807

93.3%

Noncompetitive Companies Average Companies

4

6,210

99.4%

5

233

99.98%

6

3.4

99.9997%

Competitiveness

World Class Companies

Is Three Sigma Performance Acceptable? Example: GE Plastics before Six Sigma implementation • 95% compounded product first pass yield =>3 million pounds of rework week. • 90% on-time delivery… =>1 missed shipment every 30 minutes. • 98% billing accuracy…. => 1 billing error every 3 hours. • 98% capacity utilization… => 20 million pounds of lost opportunity. • 95% meetings star on time(5%with a 10-minute delay) => 1,000 work-hours lost each day.

Variability and Cost of Poor Quality (COPQ) The Costs of Not Doing Things Right the First Time

Activity 1

Activity 2

Activity 3

Re-do

Re-do

Re-do

Re-check

Re-check

Re-check

Re-Scheduling Service Recovery Corrective Actions Additional Handling Ad-hoc Meetings

Lost Customer Goodwill

COPQ of an Average organization Direct Loss 4 – 8% Of Sales

• Re-do • Re-check

Indirect Loss

20 – 25% Of Sales Opportunity For Increasing Profit Margin

• Expediting Costs • Ad-hoc meetings • Service Recovery • Corrective Actions • Lost Customer Goodwill • Longer Cycle Time

Process Variability and COPQ

COPQ (% of Sales)

Correlation between an organization’s COPQ and variability of its key processes 40 30 20 10

2

(308538dpmo)

3

(66807dpmo)

4

(6210dpmo)

5

(233dpmo)

6

(3.4dpmo)

Sigma Level

Why Six Sigma? Q: Is the goal of Six Sigma to achieve six sigma level of quality? Contrary to what some believe, the goal of Six Sigma is not to achieve six sigma levels of quality. Six Sigma is about improving profitability, although improved quality and efficiency are immediate by-product of Six Sigma . “Six Sigma”, Mikel Harry and Richard Schroeder

Six Sigma and Other Improvement Approaches High Hanging Fruits (~ 6 Sigma)

Bulk of Fruits (~ 5 Sigma)  Low Hanging Fruits   (~ 4 Sigma)  Ground Fruits (~ 3 Sigma)

Design for Six Sigma (DFSS)  Six Sigma Approach (DMAIC) 

QCC & 7 Basic Tools  Common Sense & Intuition

What Is Six Sigma - Summary A management approach aiming at improving processes to achieve excellent performance level. It provides a comprehensive methodology and tools on how to effectively achieve sustainable breakthrough improvements. Through Six Sigma management: - makes known the intention to achieve excellence, - provides the enabling skills and knowledge, - creates the supporting infrastructures and mindset, and makes breakthrough improvement possible.

Section 2 The DMAIC Process Steps and Tools

The DMAIC Process Steps (1) Phase DEFINE

MEASURE

Step 1

Task Identify Focus Areas / Key Performance Measures

2

Set Up Project and Deploy Team

3

Define Key Process Output Variable

4

Develop Data Collection Plan

5

Determine Process Current Performance

The DMAIC Process Steps (2) Phase

Step 6

ANALYZE

7

Shortlist Major Suspected Causes

8

Verify Root Causes

9

Identify and Evaluate Possible Improvement Solutions

10

Confirm Improvement Solutions

11

Standardize Improvement Plan

12

Close The Project

IMPROVE

CONTROL

Task Brainstorm All Possible Causes

Step 1: Identify Focus Areas / Key Performance Measures Purpose: Focus limited resources on important areas. • This usually entails a working session participated by the management team (the champions) where they examine the various possible areas that impact the business results and then, using a structured collective decision making process, decide the critical areas to focus the improvement efforts. • Examples of focus areas include line reject rate, on-time shipment, capacity utilization, inventory turns, response time and warranty costs / customer complaints.

A tool that is commonly used for this purpose is the Tree Diagram Increase Sales

Sales Orders Production Output

Sales Lead Time On Time Delivery Order Fulfillment Customer Complaints Process Yield Down Time

New Products

Profitability

Manage Cost

Material Cost

Process Efficiency Time to Market Market Success Rate Design Changes Material Price Material Usage Rate

Failure Cost

Improve Working Capital

Utility Cost Account Receivable Inventory

Lot Reject Rate WIP Rejects Material Rejects Electricity Water Gas

Alternatively, the SIPOC diagram is used. SIPOC is more suitable for non-profit organization or supporting departments.

SIPOC Diagram [ Supplier — Inputs — Process — Outputs — Customers ]

Inputs Suppliers

Process

Outputs Customers

Step 2: Set Up Project and Deploy Team Purpose: To clarify the issue faced within the focus area and deploy suitable team to tackle the issue. • Here, the champion (usually with the help of his / her people) defines the problem statement, decide the improvement goal, and select the project team members. • This helps to make sure that due thoughts are given to make sure that the project is a valid one. • The project should be scoped at she process level where specific actions can be taken to realize the improvement in business results. • The outcome of this step is an approved project charter.

Project Selection Process-Overview Project Ideas Sources

Performance Gap

Voice of Customer

Competitive Pressure

Project Ideas Sources

Project Ideas Sources

Project Ideas Sources

Project Charters

Cost Reduction Initiative Issues of Concern

Project Charter • Project charter is a document created at the outset of a project to assign the project to the team. • It is an important tool for building committed project team. • A Team Charter should specify the followings: - Project title. - The process involved. - The business case and problem statement. - The goal statement. - Estimated financial benefits. - Name of Champion. - Team leader and members. - Project time line.

The 4 ‘Rights’ of Successful Project • Right project • Right team composition • Right team process

Right Result

Notes on forming a team : •

There should be a management member (champion) appointed as the project sponsor.

•

Team members are to be selected based on the problem statement and the process to be improved.

•

Team members must have good working knowledge on the process to be improved.

•

Rule of thumb for the number of people in a team is 5 to 7 persons.

•

The team leader should be trained on: - Problem solving process steps - Team facilitation skills - Process improvement tools

Step 3 : Define Key Process Output Variable Purpose : Define a measure for key process output variable. Input

Process

Output

Why is it necessary to measure the process output? • To quantify the current performance level. • To objectively evaluate the gap. • To aid in the analysis of key input factors. • To verify the effectiveness of the improvement solutions..

Examples of Key Process Output Variables: • • • • • • •

Proportion defective / Proportion resubmission Defect per unit / Error per unit / Callback per unit Process capability ratio (Cpk, Ppk) Cycle time / Turn around time / Service response time / Queue time On time delivery / Span Proportion of value adding activities Availability of personnel / material / facility

Step 4: Develop Data Collection Plan Purpose : To make sure the data accurately describes the process output variation. Components of Data Collection Plan: - Definition of data to be collected (from step 3) - Measurement method - Sampling timeframe - Sample size - Sampling method - Recording sheet

Measurement System Analysis When instrument or visual inspectors are involved to collect the data, make sure the measurement system is OK.

Important aspects of a measurement system: • • • •

Accuracy Precision Linearity Stability

Calibration System Gage Repeatability and Reproducibility Study Regression Analysis Control Charts

Step 5: Determine Process Current Performance Purpose: Determine objectively how well the process is performing now. • Gather process output data according to data collection plan. • Translate the raw data into useful process information: - Use histogram to show the variation in process output variable - Estimate the process average and process variation using descriptive statistics - Evaluate current process capability - Evaluate process stability using a run chart or a control chart

Case Study 1 : Invoicing process Problem Statement : About 30% of payments are received later than 60 days after invoices were issued. Goal Statement : To reduce the percentage of late payments to less than 5%. Financial Benefit : Successful completion of this project will result in an estimated financial benefit of US$50,000.

Data Collection Plan Critical To Quality: Payment received on time Measure: Cycle time from date of invoice issued to date of payment received (days) Specification: Not more than 60 days Process output unit: An invoice Data source: Account department Data collection method: Pre-exist data Sample frame: Three months period from January to March Sampling method: Random sampling Number of samples: 60

And Then…

Minitab A powerful data-analyzing software which can help us have a good knowledge of current performance

Step 6: Brainstorm All Possible Causes Purpose: List all possible factors causing the process performance gap. • • • •

Team leader to facilitate the brainstorming process. Leverage collective experiences of the team members. Search thoroughly, do not leave out any possible cause. Depending on the situation, choose the most suitable tool for this purpose. ( Cause and Effect diagram, Process FMEA, Process Mapping, Process C&E Matrix )

Identify possible causes using brainstorming and organize the information using cause and effect diagram Customer Related

Invoice Related

Customer Payment Policy

Money Amount In Invoice

Customer Location

Errors In Invoice

Customer Financial Position

Don’t Match P.O.

Customer Acct Payable Process

Need for Currency Exchange Payment Method Frequency of Invoicing

Invoicing Method

Wrong Address Wrong Amount

Product Quality Problem No Follow Up On Past Dues Relationship With Customers Customer Type

Others

Why are Customers Late in Paying Invoices?

Step 7: Shortlist Major Suspected Causes Purpose: Identify key suspects. •

Use structured discussion and team’s collective knowledge to narrow the possible causes down to a few most probable causes.

•

Team leader to facilitate this narrowing process. It is important for the team to gain a common understanding on the possible causes before starting the narrowing process.

•

Choose the most suitable tool for this purpose. ( Multi-voting, nominal group technique, selection matrix )

Step 8: Verify Root Causes Purpose: Confirm the key suspects are actually root causes. • • •

Make sure the key suspect are actually root causes. Discuss and decide how to confirm the key suspects. The methods commonly used for this purpose are: - Historical data analysis. - Design of Experiments. - Process observation and tracking.

Step 9: Identify and Evaluate Improvement Solutions Purpose: Identify various possible solutions and evaluate their strengths and weaknesses. • With the root causes identified, brainstorm all possible improvement solution. The first solution is usually not the best solution. • Without any constraints, generate a list of possible solutions. Choose the most suitable creativity techniques for this purpose. • Evaluate and select the best improvement solution.

Challenging conventional thinking / assumptions: Do not think

Think

- It can’t be done. - It will not work. - They’ll never buy it. - We’ve always done it this way. - We’ve never try this before.

- How to get it done. - Try and make it works. - We can convince them. - Let’s see if there is a better way. - If we don’t try, we don’t know.

Examples of tools for idea generation, evaluation and selection: • • • • •

Creative thinking techniques Brainstorming Effectiveness — Practicality Matrix Lateral Field Analysis Selection Matrix

Use Effectiveness – Practicality Matrix to evaluate each idea Effectiveness G

C D

F

A Practicality B E

Using Force Field Analysis to evaluate in detail the idea of giving rebate if customers pay on time for those invoices with high dollar values.

Driving Forces + • Increased cash flow of about $ xx. • Contribute $ xx to financial benefits.

- Restraining Forces • An estimated $ xx will be incurred as rebates. • An estimated xx hrs of administrative efforts. • An estimated total costs of $ xx will be incurred by the company

Step 10 : Confirm Improvement Solutions Purpose: Make sure solutions are effective before standardization. • Decide and develop an action plan to check solution effectiveness • Collect initial data to make sure the solutions are effective: - Check data distribution,compute the descriptive statistics, calculate new process capability. • Perform Potential risk assessment and stakeholder analysis to anticipate and address possible problems when implementing the solutions.

Implementation Action Plan Improvement Action

Responsible Person

Completion Date

Error proof the invoicing process.

Irene

18May

Make arrangements with customer to use payment method other than cheque.

Peter

30May

Develop and implement a rebate scheme

Adeline

30May

Step 11 : Standardize Improvement Plan Purpose: Incorporate improvement solutions into process control system. • Transfer the solutions from the team to the process owners. • Revise process control system / documents ( control plan, procedure, work instruction, etc. ) • Train / brief staff on the revised process control system. • Implement a continual monitoring system.

Step 12 : Close the project • Get Champion’s approval to close the project. • Project can be closed when: - The project phases have been completed. - Project documentations have been completed. - Improvement plan documented. • Share the lessons learned and knowledge gained with other related processes / areas.

Case Study 2: Orders Fulfillment Define Problem Statement The time taken from the moment production is completed to delivery is 2 days. Some urgent orders require products to be delivered in 1 day. Goal Statement : To reduce the turn-around-time time to 1 day. The process : Orders fulfillment process

Measure Map Current Process • Make the process visible by creating the process maps. • Common process mapping methods: - Linear flowchart - Cross functional map - Relationship map • Validate the maps created by walking-through the process and collect the necessary data.

Analyze Examine Current Process •

Look for flaws in current process.

•

Examples of process flaws: - Waiting - Duplication - Nom-value adding activities - Unnecessary check / approval - Errors - Re-do

Analysis Summary A] Waiting - Visual inspection does not start until laboratory tests have been completed. - Store supervisor waits for the test certificates before he can prepare the shipments. B] Duplications - Packers record product names,lot numbers and quantities and send these information to store.Store supervisor key in the same information into the finished goods inventory system. C] Non-value Adding Activities - Unnecessary movements involved in sending information or documents around.

Improve Identify Improvement Solutions A] Reduce waiting - Laboratory tests and visual inspections to be performed concurrently. - Store supervisor prints test certificates from computerized workflow system. B] Reduce non-value adding activities & duplications - Packers key in product information into finished goods inventory system. - Reduce document movements by installing a computerized workflow systems. - Empower QA technicians to decide lots acceptance based on the specification.

Transaction Project Examples Sales and Marketing •

Motorola employed Six Sigma methodology to improve its prospect success rate. The company tracked prospects and monitored marketing activities received (emails, website, etc.). By keeping a database of activities for each prospect, Motorola calculated the types of marking efforts generating the best customer responses.

•

3M’s Marine and Recreational Vehicle business applied Six Sigma within the sales organization to accelerate the conversion of sales. Managers and directors rank the sales representatives in 25 areas including product knowledge and combine this data with each sales rep’s conversion of accounts and growth in market share. Through data analysis, the company determines about 10 attributes that most impacted the conversion of sales and design a training program based on these attributes.

•

A business unit in Johnson & Johnson employed Six Sigma to resolve a distribution channel problem and create an improved data management system for sales reporting process. Prior to redesign the process, the company estimated that sales reps spent approximately 15% of their time on reporting activities, diverting their attention from selling. After completing the project, the company cut the time spent by sales reps on reporting activities in half. Source: Corporate Executive Board •

A home appliance company was facing a high number of “no-fault found” problem. This occurs when a repair technician is send to look into a fault reported by a customer and found out that it is not a real fault.After collecting the data to understand the problem, an effective solution was found. The solution is to get the receptionists to filter out the “non-fault” problems. Thos involves training the receptionists to clarify the type of faults reported by the customers and be able to explain to customers on how to operate the appliance correctly over the phone.

Banking and Finance • Copeland Companies,which are distributors and record keepers of finance service products, use Cross Functional Mapping and Process Redesign methods to improve the accuracy and timeliness of statements (28 days to 15 days). • Global Equipment Finance,which provides global financing and leasing services, improved all steps’ cycle times from a customer places an order to product delivery. The group also reduced the credit decision cycle by 67 percent, from3 days to 1 day. • Private Bank – Western Hemisphere, which served wealthy individuals reduced internal call backs by 80%,external call backs by 85% and credit process time by 50% Source : baldrigeplus.com

Finance, Purchasing and Logistics •

A company in OEM business faced problems in paying its suppliers on time. Delays in payment result in the suppliers holding back shipments causing the company to re-schedule production, suffer line down and miss delivery dates to its customers. • A cross functional team consisting members from logistics, account, finance, production planning and purchasing was form to solve the problem. The champion was the finance director. • The team created the cross functional process map, identified and verified key issues in the process that result in delays. These issues include (1) incomplete / delay in purchasing and shipping documents, (2) information that do not tally, (3) disconnects in the process flow. • The team identified and recommended the countermeasures needed to overcome these issues. With strong backing from the champion,the team implemented the countermeasures and achieved the project goal.

Human Resource •

A business unit in Johnson and Johnson identified sales force turnover as a significant threat to sales productivity. Therefore it used Six Sigma method to track and analyze the rate and demographics of turnover in the current budget year compared to both the current year estimates, previous years’ turnover and data from other Johnson and Johnson companies to determine factors causing sales rep to leave the company. Source: Corporate Executive Board

•

A large MNC with multiple manufacturing sites was having problem with high level of medical leaves consumed by its employees. It was believed that a high proportion of the medical leaves taken was not really necessary. This issue results in lost labor hours and higher medical expenses. From the data collected, it was found that a certain group of employees has a significantly higher count of medical leaves taken. Based on this information, some solutions (such as incentive-scheme and company approved clinics) was tried out. When the solutions were found to be effective,they were standardized by revising the medical leave policy.

•

An MNC set stretch goals on project financial benefits company wide and this includes the Human Resources dept. A team in HR examined the expenses in HR and Administration and discovered that one of the vital few high expense items was traveling expenses. Most of the traveling expenses incurred was air fares. There are about 50 engineers in the company who travel frequently to the company headquarter in the USA. The engineers traveled in business class. The team proposed giving an option to the engineers:While they can still travel in business class, alternatively they can opt for traveling in the economy class and receive an additional travel allowance of US$500. The team performed stakeholder analysis and potential risks assessment before they proposed this idea to the management. The idea was implemented and many engineers chose the second options resulting a saving of about US$50,000 annually.

Public Service •

A government authority reviews and approves applications from the businesses. A high proportion of applications were suspended and the applicants need to resubmit the application. A suspended application means the time spent to review the application is a waste (cost of not going things right the first time), Some applications went through as high as 5 resubmissions before they are approved. A team was formed to measure the problem, analyze the reasons for suspensions and recommend countermeasures. As a result, the number of suspensions per application reduced significantly and the labor cost saving was about $35,000 annually.

•

A hospital form a team to improve the patients discharge process. Many patients called back the hospital to clarify information on medication, follow-up appointment, etc. Each time a patient called,the nurses need to spent a substantial amount of time to retrieve the file, review the files and answer the enquiries. If the patient discharge process is done right the first time,the patients should not need to call back. Using Six Sigma methodology, the team reduced the number of call backs.

Section 3 Six Sigma Implementation

The Six Sigma Leap

Most Companies

• A vision that excellence performance is possible and is essential to success. • New paradigms, outlook, mindset. • New skills, tools and data.

2 Sigma

3 Sigma

4 Sigma

5 Sigma

6 Sigma

Culture Change

Six Sigma Implementation Stages Executive Briefing & Initial Assessment Alignment

CTQs & Project Selection Improvement Priority

Black Belts & Green Belts Training Improvement Skills Development

The Six Sigma Implementation Roadmap 10. Cont. With Next Projects 9. 1st. Wave Projects Completed 8. Black Belts & Green Belts Trained 7. Projects Identified ( 1st. Wave ) 6. Performance Measures (CTQ) Identified 5. Champions Trained 4. Deployment Plan Developed 3. Six Sigma Deployment Committee Formed 2. Six Sigma’s Objective Ascertained 1. Executive Briefing

Six Sigma Roles - Overview Senior Executives

Set direction and provide resources

Deployment Committee

Plan and lead organization-wide implementation

Champions

Set up projects and deploy teams

Master Black Belts and Black Belts Black Belts, Green Belts And Project Teams

Coach and support team leaders Execute projects

Typical GE Six Sigma Organization Structure Managing Director Finance Rep.

Division Manager (Champion)

Division Manager (Champion)

Black Belt – Full Time Engineer ( Green Belt )

Engineer ( Green Belt )

Six Sigma Dept. Master Black Belt Division Manager (Champion)

Division Manager (Champion)

Black Belt – Full Time Officer ( Green Belt )

Officer ( Green Belt )

Senior Executives’ Role • Understand what Six sigma is and how Six Sigma helps accomplish business objectives. • Give directive for Six Sigma implementation. • Provide the necessary resources. • Be seen as an advocate and supporter. • Follow – up on: - results - effectiveness of the approach - extent of deployment

AlliedSignal Our Vision We will be one of the world’s premier companies, distinctive and successful in everything we do. Our Commitment We will become a Total Quality Company by continuously improving all our work processes to satisfy our internal and external customers.

Iomega How did we decide on Six Sigma? We recognize the need for a change in the way we pursue operational excellence.

Why change the way we do it now? • • • •

To deal with a world of declining product prices. To compete successfully with the best companies in the world. To establish standard language and approaches across functions and across businesses. To develop the next generation of leaders.

To Increase Our Rate of Quality and Productivity Improvement Faster than Our Competitors!

General Electric … quality at GE will be taken to world-leading levels, providing us with yet another competitive differentiator. Our openness to learning……as well as the generosity of Motorola and others in sharing their techniques with us, will bring GE to a whole new level of quality in a fraction of the time it would have taken to climb the learning curve on our own. GE’s 1996 Annual Report

Guideline Principle for Leading Change VISION PASSION ACTION

Guiding Principle for New Work Habit • Want To Do. - appreciate the purpose - understand ‘what is in it for me’ • What To Do. - approach framework / model - role and responsibility • How To Do. - process - tools

Six Sigma Deployment Committee •

Tasked by Senior Executives to implement Six Sigma in the organization.

•

Responsibilities: - promoting - planning - coordinating - controlling

- monitoring - evaluating - reporting - recommending

Master Black Belts Role • Lead Six Sigma implementation committee. • Adviser to senior executives team and champions. • Instructor of Six Sigma training courses. • Coach for Black Belts and Green Belts. Profile • Business / technical degree, management experience. • Respected member of management. • Master of Six Sigma principles and practices.

Champions’ Role • Lead the implementation of Six Sigma in their areas. • Determine and track key performance measures (CTQs). • Select and prepare Black Belt and Green Belt candidates. • Identify, set up and support projects. - Ensure the projects are properly set up. - Follow up on the projects’ progress. - Help teams to remove barriers.

~95%

Basic Level

Intermediate Level

Green Belt

~50%

Black Belt

~75%

Yellow Belt

Opportunity To Apply ( Cumulative )

Six Sigma Skill Levels and “Belts”

Advanced Level

Efforts Needed To Acquire The Tools

Black Belts Role Serve as an expert who has in-depth knowledge of Sis Sigma methodology and tools. • Lead Six Sigma projects. • Coach green belts on their projects. • Trainers of certain Six Sigma tools. Profile • University education, 5 years working experience. • Respected by peer and management. • Good interpersonal and analytical skills.

Green Belts Role • Serve as a trained personnel who is able to lead Six Sigma projects. • Participate effectively in Black Belt’s project as team member. Profile • Higher education level. • 3 years working experience. • Respected by peer.

Typical Training Duration Executive

1 Day

Champion

2-3 Days

Green Belt

8-10 Days (spread over 2 months period)

Black Belt

16-20 Days (spread over 4 months period)

Training Approach Explain Practise

Describe / explain the techniques. Practise the techniques in class exercises.

Apply

Apply the techniques in actual work environment through project.

Review

Review the effectiveness of applications.

Finance Representative Role • Provides financial data for financial benefits calculation. • Provides guidelines for calculating financial benefits. • Verify actual financial benefits.

Human Resource Role Review and suggest appropriate incentive system for Six Sigma : • Career advancement opportunity • Recognition of efforts and contributions • Monetary reward for achievements

Policies / Guidelines • • • • • •

Personnel Selection. Project Selection. Financial Benefits Calculation. Project Tracking System. Black Belt Certification. Incentive Scheme.

Projects Tracking System Information to be tracked: • Total number of projects. • The numbers of completed projects and on-going projects. • The status of each on-going project. • Targeted financial benefits and actual financial benefits to date.

Projects Review Objectives: 2. Ensure projects proceed as plan. 3. Present the findings of each phase. 4. Make sure the vigor of Six Sigma approach is maintained. 6. Discuss the barriers faced. 7. Check correct applications of tools.

Six Sigma Critical Success Factors • The link of Six Sigma to business strategy is clear. • Recognize and manage Six Sigma as a change initiative. • Understand that Six Sigma is a management approach, not just a problem solving tool. • Identifying the right focus areas for Improvement. • Selection of key personnel. • Diligent and disciplined use methodology, fact and data.

Section 4 Collective Decision Making

Why Make Decision Collectively? •

A good decision has two basic components: quality and commitment.

•

A quality decision takes into account all of the facts and viewpoints, and makes good use of that information.

•

When decision is made4 on a collective basis, it pulls together the skills, knowledge, experience, and opinions of several people. This produces a decision that is usually better than the decisions made by individuals.

•

Knowing how to make collective decision effectively is an important skill to an organization.

Benefits of Collective Decision Making • • • • •

Fresh and diverse ideas. Minimize misunderstandings and biases. Increased learning and personal growth. Better ownership. Increased understanding of the big picture – better buy-in. • Better decision – quality and commitment.

Collective Decision Making Process • Collective decision making is a process where a group of people bring up, share, and discuss different ideas and viewpoints, and to select and agree on the best ideas. • Effective collective decision making process is not something that will happen by nature. • There are a set of tools that are developed to make the process more effective. Knowing these tools and the ability to apply them effectively is an important skill.

Collective Decision Making – General Steps • Define and clarify topic / objective. • Surface / generate ideas by stimulating discussion, using open questions, and brainstorming creatively. • Record all inputs on charts in full view. • Get everyone to understand each other’s ideas by reviewing inputs on the chart. • Group, combine, map or evaluate all inputs. • Make consensus decision by summarizing, eliminating, narrowing, or win-win negotiation to arrive at an agreement / consensus.

Collective Decision Making - Tools Less Complex : - Brainstorming - Multi-voting - Nominal Group Technique - Selection Matrix (or Decision Matrix) - Cause and Effective Diagram More Complex : - Quality Function Deployment (QFD) - Failure Modes & Effects Analysis (FMEA)

Collective Decision Making - Notes • The chance of everyone having exactly the same idea or viewpoint about an issue are very slim. •

Letting the most powerful person make the decision or by mean of majority rules are not effective approaches.

•

Good decisions require the team to pool information, consider different viewpoints and arrive at an agreement or consensus.

Consensus (1) A better decision will be made if… •

People with good knowledge and experience on the subject matter participate in the process.

•

Everyone’s opinions and thoughts are sought, clarified and considered.

•

There is a structured process that enables the team to listen to each other and discuss their ideas.

•

Consensus and buy-in from all participants are ensured.

Consensus (2) Is: • A search for the best decision through the exploration of everyone’s viewpoints. • Everyone has had an opportunity to be heard. • A decision that reflects the collective thinking of a team and that all the team members understand fully, can live with, and will actively support, and believe is workable. Is Not: • A unanimous decision. • Having everyone completely satisfied with the outcome. • Necessarily everyone’s first choice.

Collective Decision Making Process - Tips • Have enough time, do not speed up the process. • Balance power. • Listen carefully. Check for understanding. • Be open to different ideas, but avoid playing ‘nice guy’ to avoid disagreement. • Encourage differences of opinions. Have someone plays devil advocate role.

Brainstorming • A tool for creating a wide range of options in an environment free of criticism. • Brainstorming if useful when you want to generate a large numbers of ideas about - Issues to tackle. - Possible causes of a problem. - Corrective measures to take.

Brainstorming Ground Rules • Active participation by all. • No criticism, suspend judgment. • Ideas build on ideas. • Record all ideas. • Set a time limit.

Brainstorming Steps • • • • • • • •

Review the rules. Set a time limit. Assign a time keeper and idea recorder. State the topic. Collect ideas. Record ideas. Clarify each idea (after all ideas are recorded). Eliminate duplications.

Brainstorming Methods A. Freewheeling - Share ideas simultaneously. - List all ideas as they are”shouted out”. B. Round-Robin - Everyone takes a turn offering an idea. - Anyone can pass on any turn. - Continue until there are no more ideas. - All ideas listed as they are offered.

Multi-voting • A tool for short listing key ideas. • To reduce a long list of items to a manageable number of items. • Identifying the most popular or highest priority items to a group a people. • Also called the Delphi Technique.

Multi-voting - Steps 1. Work from a large list. 2. Assign a letter to each item. 3. Vote individually. 4. Tally the votes. 5. Repeat where necessary.

Multi-voting - Rule of Thumb • Number of votes allowed = half the number of items • Number of members 5 or fewer 6 to 15 more than 15

Eliminate items with 2 or fewer votes 3 or fewer votes 4 or fewer votes

Exercise Use brain storming and multi-voting to decide what are the key reasons for ineffective meeting

Nominal Group Technique • A weighted ranking method that enables a team to generate and prioritize a large number of options • A mechanism that  Gives everyone an equal voice.  Neutralizes the domination of the loudest person.  However, it will interactions between team members during ideas generation.

Nominal Group Technique-Steps 1. 2. 3. 4. 5. 6. 7. 8. 9.

Introduce and clarify subject. Generate ideas individually (each idea on one post-it note). Collect ideas. Read each idea out loud. Clarify if needed. Combine similar ideas. Assign a letter to each idea. Rank the ideas independently. Add the ranking. Prioritize items according to scores.

Selection Matrix • A method for relating a set of ideas or options with specific selection criteria. • Used when the team needs to achieve a consensus on the best idea or option.

Selection Matrix-Steps • • • • • • •

List the ideas or options to be evaluated. Decide the criteria for selecting the best idea or option. Create a table to relate the ideas / options with selection criteria. Determine the rating scale for the selection criteria. For each idea / option, all members individually decides the score for each criteria. Sum up the total score for each idea or option. Identify the best option based on total score.

Cause and Effect Diagram • A tool that helps identify, sort, organize and display possible causes of a specific problem or quality characteristic. • It graphically illustrates the relationship between a given outcome and all the factors that influence the outcome. • Also called an ‘Ishikawa diagram’ or a ‘fishbone diagram’.

Cause & Effect Diagram-Steps 1. Identify and clarify the effect to be analyzed. • Quality characteristic • Problem

2. Identify the main causes contributing to the effect. • 5 M’s (man, machine, method, material, mother nature)

3. For each main cause, identify other specific factors. 4. Identify increasingly more detailed levels of causes. 5. Analyze the diagram to identify causes that warrant investigation.

Example Software

Users Lack of training

Faulty installation

Misuse

Faulty media

Use wrong software

Faulty design

Faulty component Component failure Power fluctuation

Corrosion Mechanical shock Humidity Temperature

Hardware

Environment

Machine Down Time

Section 5 Define: Set Up Projects and Deploy Teams

Project Selection Process-Overview Project Ideas Sources

Performance Gap

Voice of Customer

Competitive Pressure

Project Ideas Sources

Project Ideas Sources

Project Ideas Sources

Project Charters

Cost Reduction Initiative Issues of Concern

CTQ Drill Down — A General Framework •

Clarify Business Goals and identify key performance drivers that impact the business goal.

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Define measures for key performance drivers.

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Implement the process for collecting data and reporting the measures.

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Identify gaps between goals and current baselines -prioritize focus areas for improvement.

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Brainstorm the causes that drive the measures.

1. Discuss the relationship between the causes (X’s) and the effect (Y) to identify vital few factors that drive the measures. For the vital few causes, identify project ideas that will move the effect (Y) to the desired level. 3. Apply project Assessment Matrix to prioritize the project ideas. 5. Scope the project and create Project Charter.

CTQ Drill Down-Example Step 1: Clarify Business Goals and identify key performance drivers that impact the business goal. Examples of performance driver: 1. Capacity Utilization 2. Inventory Turns 3. Cost of Poor Quality

Example : CTQ Tree Increase Sales

Sales Orders Production Output

Sales Lead Time On Time Delivery Order Fulfillment Customer Complaints Process Yield Down Time

New Products

Profitability

Manage Cost

Material Cost

Process Efficiency Time to Market Market Success Rate Design Changes Material Price Material Usage Rate

Failure Cost

Improve Working Capital

Utility Cost Account Receivable Inventory

Lot Reject Rate WIP Rejects Material Rejects Electricity Water Gas

Step 2: Define Measures for Key Performance Drivers. Examples:

Performance Driver Inventory Order Fulfillment Lead Time

Measure Inventory Turns: Monthly sales amount ( $ ) over inventory holding costs for that month.

Fulfillment Rate: Number of ordered items delivered on time over total number of ordered items ( % ).

Cycle Time: Time interval from order received to product / service delivery (days).

Criteria of Good Measures • Direct Relate directly to the characteristic being assessed. • Exact Can be observed or measured. • Detail but concise Clear, understandable, and unambiguous.

Step 3: Implement the Process for Collecting Data and Reporting the Measures.

• Determine data source. • Create recording sheet / form. • Decide reporting format. • Develop a procedure for collecting, reporting and review the information.

Example on a Procedure for Collecting and Reporting Data: Responsibility Operator Clerk

Procedure Outline

— Collect Data Daily — Record Sheets — Submit by 2nd day of month — Collate Data — Update charts — Submit by 4th day of month

— Monthly meeting to review charts and previous actions Manager and officers — 5th day of month

Clerk

Record

— Post charts and actions plan on dashboard

— Run Charts

— Meeting Minutes — Actions Plan — Department Dashboard

Common Graphical Tools for Reporting Data: • Pie Chart

• Histogram

• Bar Chart

• Pareto Diagram

• Run Chart

• Control Chart

Common Mistakes in Reporting Data: •

Data are reported in tables rather that graphs.

•

Only the most recent data are reported.

•

No comparative data are presented.

Example on Data Reporting Format: RTY Inc Logistics Div

Measure: Inventory Turns Owner: Bruce McDonald 2003 Goal

’00

’01

’02

J

F

M

A

M

J

J ……

Characteristics of a Good Feedback System: • Important and meaningful information • Accurate information • Timely feedback • Easy to understand • Accessible

Step 4: Identify Gaps Between Goals and Current Baselines — Prioritize Focus Areas for Improvement. 2003 Goal

J

F M A

M

J

J

A S

O

N D

Step 5: Brainstorm the Causes that Drive the Measures. Fill the Cause and Effect Diagram with data ( if available ). Purchasing Safety Stock Policy

Others Central Warehouse

Stock Count Accuracy (80%)

Material Storage

Stock Replenish Policy

Housekeeping

Inventory Turn Forecast Accuracy (70%) Inventory Control System

System

Quality (5% lot reject rate)

Lead Time (30 days) On – Time (95%) Shipment Quantity

Supplies

Step 6: Discuss the relationship between the causes (X’s) and the effect (Y) to identify vital few factors that drive the measures. For the vital few causes. identify project ideas that will move the effect (Y) to the desired level. Purchasing

Safety Stock Policy

Others

Central Warehouse Stock Count Accuracy (80%)

Material Storage

Stock Replenish Policy

Housekeeping Inventory Turn

Forecast Accuracy (70%) Inventory Control System System

Quality (5% lot reject rate)

Lead Time (30 days) On – Time (95%) Shipment Quantity Supplies

Step 7: Apply Project Assessment Matrix to the Prioritize Project Ideas.

Examples of Selection Criteria: • Magnitude of impact • Probability of success • Estimated duration • Effort Required • Estimated cost

The 3 Conditions for a Six Sigma Project • A gap exists between current and the desired performance. • The cause of the problem is not clearly understood. • The solution is not apparent. Is it a problem to be solved or an action to be taken?

Step 8: Scope the Project and Create Project Charter. Project Title Problem Statement

Business Case

Goal Statement

Process

Team Leader Members

Time Line

Financial Benefit (estimate)

Champion Name

Sign Date

The 4 ‘Rights’ of Successful Project • Right project • Right team composition • Right team process

Right Result

Right Project • Well selected - Address important business issue. • Well scoped - Focus on specific problem or process. • Well defined - Comprehensive and clear instruction, not a vague idea.

Project Charter • Project Charter is a document created at the outset of a project to formally assign the project to the team. • It is an important tool for giving clear instruction and getting commitment from the project team. • A Project Charter provides the following information: - Project title. - The process to be improved. - The business case. - The problem statement and goal statement. - Estimated financial benefits. - Name of Champion, team leader and members. - Project time line.

Project Title • A brief description of the project. • An idea on what the project is about Examples: • SB687 Mis-registration Reduction • Order Fulfillment Process Cycle Time Reduction • Loan Application Process Error Reduction

Process • The name of the particular process to be improved. • Can be described using a high level process block diagram. Examples: • • • •

Sales orders handling Multi-layer circuit board lamination Funds transfer transactions Pick and place process

Business Case • A broad statement on the business issue pertaining to the project. • Provides the rationale on why the project should be a business priority. Examples: • Competitor’s better quality product has reduced our market share. • Lower product prices have reduced profit margin, therefore the need to reduce costs. • Faster response time will generate more sales.

Problem / Opportunity Statement • A description on the symptom of the issue faced. • More specific and focused than business case. • Contains quantitative figure. Examples: • Sales for product A has fallen by 20% since last year. • The mis-registration defect rate has increased to 7% since last month. • The turn-around-time of competitor A is 5 days faster than ours.

Goal Statement • A description on what is to be achieved. Examples: • • • •

To reduce the orders confirmation cycle time 2 days. To reduce the mis-registration defect rate from 5% to 1%. To increase the inventory turns by 50%. To improve the forecast accuracy to 90%.

The ‘Right’ Team Composition • Right Members. - Those familiar with the problem, issue, work process. - Those who are affected by related changes. • Right Team Size - 5 to 7 members seem to function most effectively. • Role of Team Leader - Clarify with champion/management on project objective. - Schedule and conduct team meetings. - Get the necessary resources (time, training, equipment, materials, people) .

Responsibility of Team Members • Carry out team assignments (collect data, prepare presentation materials, etc.). • Participate actively in team discussions and decision making. • Share ideas and knowledge. • Implement improvement actions.

Team Effectiveness • A group of individuals is not a team. • An effective team if characterized by members who are: - Committed to team goal. - Collective responsibility to project success. - Collaborate and support each other. •

Team facilitation skill is necessary to create teamwork.

Project Set-up Guideline • Is the project aligned with the business goal? • Is there a specific problem to be addressed or multiple problems? • Is there a pre-determined solution? • Is the project focused on specific area / process? • Are the benefits of the project identified? • Are the right persons in the team. • Is the number of team members too many / few? • Are the team members trained? • Can the project be completed in 4 - 6 months.

Financial Benefits • • • • • • • •

Better quality Lower cost Consistent delivery Shorter lead time More capacity Reduced floor space Improved cash flow Higher flexibility

The Purpose of Financial Benefit • To quantify projects benefits financially. • To help prioritize improvement projects. • To evaluate the returns on investment from the Six Sigma program and improvement solutions.

Financial Benefit Reporting Define

A] Project Start Up: Rough estimate based on project goal.

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Measure B] Project Reviews: Revised estimated figure based on new data where necessary. Analyze Improve -------------------------------------------------------------

Control C] Project Closure: Confirm estimated figure based on actual improvement achieved.

Saving Items - Examples • Cost Reduction - Direct Savings - Material saving - Reduced concession / warranty - Direct labor savings - Reduced scraps and reworks - Expedited freight cost reduction

•

Cost Avoidance - Investment avoidance as a result of increased productivity / capacity - Expense avoidance as a result of preventative measures

•

Incremental Revenue - Increased sales volumes - Contribution margin enhancement

• Cost Reduction - Indirect Savings - Time savings for indirect • employees - Reduced administrative effort

Working Capital Reduction - Inventory reduction - Receivables reduction

Financial Benefit Guidelines • Guidelines are necessary for: - Calculating the financial benefits in certain conditions - Classify if a savings item has a direct impact to the profit (hard saving) or has an indirect impact (soft saving). • Financial benefit guidelines should be determined by the finance department.

Thank You !!!