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An introduction to Six Sigma as a means of productivity improvement.
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Six Sigma InitiativeSix Sigma Initiative
Driver for Business Excellence
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AgendaAgenda Revenue & Cost & Profit
Hard & Soft Saving What is Six Sigma?
Background Basic Definitions
Strategic PerspectiveStatistic Perspective
Deployment StructureChampionBlack BeltGreen BeltOthers
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AgendaAgenda Tools for Six Sigma Six Sigma for Small & Medium
Enterprise (SME) and Large Enterprise in Thailand
Six Sigma & Other InitiativesStrategic ManagementBalanced Score CardFinancial RatiosBenchmarkingLean MeasuresQCC/Kaizen
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Revenue & Cost & Revenue & Cost & ProfitProfit
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Ideal SituationIdeal Situation
Year 1 Year 3Year 2 Year 4
Profit
Cost
Revenue
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Actual SituationActual Situation
Year 1 Year 3Year 2 Year 4
Profit
Cost
Revenue
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Worse SituationWorse Situation
Year 1 Year 3Year 2 Year 4
Profit
Cost
Revenue
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Strategy for Worse Strategy for Worse SituationSituation
Long Term Strategy: New Customers/Market (Local/Global) New Products/Services Etc.
Short Term Strategy: Cost Saving Improve Productivity Etc.
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Hard SavingHard Saving These savings must go to the bottom
line to increase profit Reduce Headcount –
Remove from payrollReplace someone, in another area,
that would have been hired anyway; More pieces –
Need the extra pieces Extra pieces can reduce overtime or
manpower;
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Soft SavingSoft Saving Any savings that are not Hard
savings Transfer Headcount –
A person’s time was saved on that process so that he/she could spend more time on another process
There is no reduction to payroll.
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Six SigmaSix SigmaStrategic Tool for
Cost ReductionProcess ImprovementCustomer Satisfaction
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BackgroundBackground
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Start at MotorolaStart at Motorola In 1980s, Six Sigma began at
Motorola As a statistical measures of process
performance “Six Sigma Quality Program” Target to achieve six sigma level in five
years.
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Adopted by OthersAdopted by Others In 1990s, Six Sigma approach was
broadened by General Electric (GE) and AlliedSignal
Then.. DuPont Dow Chemical 3M Ford American Express Companies in Europe and Pacific Rim
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Six Sigma at GESix Sigma at GE In 1997, the GE annual report states
that Six Sigma delivered more than $300 million
to its operating income This number increased to $750 million in
1998 Today, GE has
~ 3,900 Full-Time Black Belts and Master Black Belts
~ 60,000 Green Belts
$1 = 43 Baht $750 million = 32,250,000,000 Baht
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Six Sigma TodaySix Sigma Today Six Sigma is viewed as
A business strategy and methodology for Improving process performanceIncrease customer satisfactionImprove bottom line
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Why Six Sigma?Why Six Sigma?
Increasing PROFIT by Reducing COST
The Bottom Line Focus
Gets the attention and support of senior executives and financial controllers.
Makes Six Sigma different from other improvement approaches.
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Basic DefinitionsBasic Definitions
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Strategic PerspectiveStrategic Perspective Definition : It is a Process Improvement
Initiative It is Customer focused It is data driven - decisions are based
on facts Involves the use of statistical tools It must have a bottom-line impact Paying back all the training.
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Six Sigma ProcessSix Sigma Process
Define - Measure - Analysis - Improve - Control
D-M-A-I-C
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A Process for Improving A Process for Improving Other Processes.Other Processes.
Inp
ut
Product/ Business/ Support Process
Inte
rnal/
Ext
ern
al
Su
pp
liers
Ou
tpu
t
Inte
rnal/
Ext
ern
al
Cust
om
ers
Defects Measures/Indicators
Feedback/Information/Specification
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Statistic PerspectiveStatistic Perspective What is Sigma ?
The Greek letter A statistical unit of measurement Used to define the standard deviation of
a population Measures the variability or spread of
the data
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How good is my process?How good is my process? Sigma Level (n):
The number before “” indicates how much of the data falls within the customers’ requirements
The higher the process sigma, the more of the process outputs meet customers’ requirements (the fewer the defects).
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Defects Per Million UnitsDefects Per Million Unitsn (Sigma Level) & Defect Rate
PPM = (Defect) Part Per Million
Sigma Level% of Output that meet
Customer’s Requirement
Defect (PPM)
6 99.99966% 3.4 PPM
4 99.379% 6,210 PPM
2 69.146% 308,538 PPM
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Goal of Six Sigma Goal of Six Sigma MethodologyMethodologySix Sigma methodology focuses on shifting process
output average from A to B and reducing process output variation from B to C to achieve Six Sigma Level.
A B
C
Customer Requirement Zone Acceptable Output
Defect Zone Unacceptable Output
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Core ValuesCore Values The core values of Six Sigma
methodology is that.. if you look at your organization as an
integration of business processes and can measure the defects in those
processes, you can systematically figure out ways
to eliminate them to achieve zero-defect performance level and bottom-line profitability.
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How does the Six Sigma How does the Six Sigma Process work?Process work?
Work on Issues that will Transfer Money to the Bottom Line
Focus on Specific Area or Process Top-Down Work in 4-6 Month Time Segments Program/Project must be Sustainable in
the Future Changes will Effect Everyone in the
Organization
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Examples of Six Sigma Examples of Six Sigma ProjectsProjects
In manufacturing organization: Reducing inserts/tools costs in
machining process: Using t-Test or DOE to find the optimal
combination of feed, speed, coolant concentration, and coolant flow rate to reduce tools/inserts consumption.
In a service organization: Reducing overtime payment in
accounting month-end-closing process.Reducing lead-time of the contract
review process: more responsive to clients and reduce costs.
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Other benefits from Other benefits from deploying Six Sigma..deploying Six Sigma..
Improve capacity and output Improve overall customer satisfaction Increase productivity and efficiency Reduce total defects and cycle time Decrease work-in-process Improve process flow ROI for Black Belt training
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Deployment StructureDeployment Structure
c.
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Senior Management TeamSenior Management Team Strategy & Infrastructure Building
Set short and longer-term direction for Six Sigma implementation (now)
Identify Six Sigma objectives during Strategic Planning process (yearly)
Resource planning (yearly) Review Six Sigma results (monthly) Communication and Recognition
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ChampionChampion Priority & Deployment
Provide Project Management. Select projects that support business
strategy and achieving performance objectives.
Manage for results. Champion improvement projects. Communicate business needs. Review and mentor Black Belts. Reward success.
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Black BeltBlack Belt Deliver Improvement Results (Big
Projects) Full time Lead & Train Teams Responsible for the Six Sigma process of
Improving key processes that affect customer satisfaction and bottom line profitability
Utilizing the 6 Sigma tools (advanced tools)
Help Green Belts to analyze complex data Report results back to the Champions.
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Black Belt/Employee RatioBlack Belt/Employee Ratio In general, the minimum numbers
of Black Belt in your organization is:
1 Black Belt : 100 Employees
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Saving from Black Belt Saving from Black Belt ProjectsProjects
In USA$125,000 to $250,000
per year/Project
$1 = 43 baht 5,375,000 – 10,750,000 baht
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Green BeltGreen Belt Deliver Improvement Results (Small
Projects) Part-time Lead Teams Responsible for the Six Sigma process
of Improving key processes that affect
customer satisfaction and bottom line profitability
Utilizing the 6 Sigma tools (basic tools) Report results back to the Champions.
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Saving from Green Belt Saving from Green Belt ProjectsProjects
In USA$50,000 - $75,000per year/Project
$1 = 43 Baht 2,150,000 – 3,225,000 Baht
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OthersOthers Support Teams Master Black Belts Other Belts
Yellow Grey White
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Deployment StructureDeployment Structure
Senior Management
TeamChampions
SupportTeams
MasterBlack Belts
SupportTeams
Black Belts
Green Belts
IT
HR
Finance
CEO
Process Owners
Senior Management
TeamChampions
SupportTeams
MasterBlack Belts
SupportTeams
Black Belts
Green Belts
IT
HR
Finance
CEO
Process Owners
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Tools for Six SigmaTools for Six Sigma
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Examples of Key ToolsExamples of Key Tools Process Mapping & Value Analysis Failure Mode & Effect Analysis Pareto Analysis Measurement Systems Analysis Statistical Process Control t-Test, z-Test, Data Comparison Design of Experiment (DOE) Financial Analysis Risk Analysis Etc.
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Six SigmaSix Sigmafor
Small & Medium Enterprise (SME)
and Large Enterprise
in Thailand
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Large EnterpriseLarge EnterpriseCountry Manager
Plant A Manager Financial ControllerMkt Develop MgrPlant B Manager
Production Mgr Engineer Mgr
Line 1 Sup Line 2 Sup Maintenance
Quality Mgr
Product Eng
Process Eng
SQE
CQE
Production Mgr Engineer Mgr Quality Mgr
Sup 1
Sup 2
Sup 3
Product
Process
SQE
CQE
Accounting MKT
Sales
Senior Management Team
MasterBlack Belts
Champions
SupportTeams
SupportTeams
Black Belts
Green Belts
IT
HR
Finance
CEO
Process Owners
Champions
SupportTeams
SupportTeams
Black Belts
Green Belts
Champions
SupportTeamsBlack Belts
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SMESMEOwner
General Manager
Production Mgr Store Mgr.
Line Sup Maintenance
Accounting Mgr
Officer Officer
Officer
BusinessOwners
Account
Champion
Green BeltTeam
Black Belt
Process Owners
Green BeltTeam
Process Owners
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Six Sigma & Other Six Sigma & Other InitiativesInitiatives
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Six Sigma and Strategic Six Sigma and Strategic ManagementManagement
TriView National Bank’s Strategic Planning Process (2001 Baldrige Program’s Case study)
1 2
3
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TQ
M S
trate
gic
T
QM
Str
ate
gic
P
lan
nin
gP
lan
nin
gT
QM
Str
ate
gic
Pla
nn
ing
at
Sole
ctro
n –
Bald
rig
e W
inn
er
1
2
3
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Six Sigma and Balanced Six Sigma and Balanced Score CardScore Card
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Six Sigma Score CardSix Sigma Score Card
Reduce CostCustomer Satisfaction
Improve Process
Customer:Customer SatisfactionOn-Time DeliveryProduct Quality
Financial:Cost Saving (Hard)
Inventory LevelScrap Cost
Learning:Training Hrs/Person
Employee InvolvementImprovement Ideas/Person
Internal Process:Defect LevelSigma LevelCycle Time
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Six Sigma and Financial Six Sigma and Financial RatiosRatios
A standard of comparisons of items on the company's financial statements rather than a direct reading of the financial figures.
Why do you need the Financial Ratios? Information Sharing Benchmarking Comparison Data
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Examples of Financial Examples of Financial RatiosRatios
Sales Growth Definition: Percentage increase (or decrease)
in sales between two time periods. Formula: ( Current Year's sales - Last Year's
sales )Last Year's sales
Net Profit Margin Definition: Shows how much profit comes from
every dollar of sales. Formula: Net Profit/Total Sales
Inventory Turnover Definition: Number of times that you turn over
(or sell) inventory during the year. Formula: Cost of Goods Sold/Average
Inventory
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Six Sigma and Six Sigma and BenchmarkingBenchmarking
Benchmarking process and data are key requirements in Baldrige Program (Thailand Quality Award Program.)
They are very important inputs for the Strategic & Business Planning Process. How can you plan and set objectives
without the comparison/benchmark data? How can you ensure that the Six Sigma
objectives that you set are:Achievable within specific time-frame?Reasonable – not too easy?
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Six Sigma and Lean Six Sigma and Lean MeasuresMeasures
Lean Manufacturing focuses on: Waste Reduction Process Cycle-Time Reduction Line Balancing & WIP Material Flow/Kanban Single Minute Exchange of Dies
Lean Measures Evaluate/Monitor Entire Key Production
Processes. Foundation for Six Sigma
Project SelectionMeasure/Analyze Phases
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Six Sigma and QCC/Kaizen Six Sigma and QCC/Kaizen Quality Control Circle & Kaizen Teams
Continuous Improvement Activities Part of JIT/Lean Employee Involvement Use Basic Analytical Tools (7QC Tools) Bottom-Up PDCA
Support Six Sigma Support Teams for Green Belts/Black Belts Pre-requisite Program for Green
Belts/Black Belts
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R&A’s Business Excellence R&A’s Business Excellence ModelModel
Business Excellence
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What Training Do You What Training Do You Need?Need?
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Align Six Sigma Training Plan Align Six Sigma Training Plan with Organization Strategywith Organization Strategy
Black Belt Training
Strategic Objectives
Executive Overview
Project Selection
Champion Training
Official Project Charter
Champion/ Black Belt
Green Belt Training
Official Project Charter
Champion/ Green Belt
Organizational/Strategic Level
Operational/ Deployment Level
The 1st Wave of TrainingThe 1st Wave of Training
1
2
3
4
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Payback Period CalculationPayback Period Calculation
Payback Period of Black Belt Training Investment
-500,000
0
500,000
1,000,000
1,500,000
2,000,000
Q0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Quarter
Cash
Flow
(Bah
t)
7th Project Saving6th Project Saving5th Project Saving4th Project Saving3rd Project Saving2nd Project Saving1st Project SavingBB's SalaryBB Training CostCumulative Cash Flow
Assumption: Monthly Hard Saving = 25,000 Baht/Month/Project
Payback Point
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R&A’s Training PackageR&A’s Training Package Objectives:
Develop Six Sigma OrganizationNot Individual Black Belt
Development Use Strategic Planning Process to Drive
and Maintain Six Sigma Process.Focus on Senior Management and
Champion Program Develop Six Sigma Infrastructure Project Selection, Management, and Review
Long-Term Strategic Partnership with Clients
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Questions?Questions?
Thank You