Aqm Programme Six Sigma

Six Sigma

99.99966% Good (6 Sigma)

• 20,000 lost articles of mail per

hour

• Unsafe drinking water for

almost 15 minutes each day

• 5,000 incorrect surgical

operations per week

• Two short or long landings at most major airports each day

• 200,000 wrong drug prescriptions each year

• No electricity for almost seven hours each month

• Seven articles lost per hour

• One unsafe minute every seven

months

• 1.7 incorrect operations per week

• One short or long landing every five years

• 68 wrong prescriptions per year

• One hour without electricity every 34 years

99% Good (3.8 Sigma)

Six Sigma -- Practical Meaning

World Class Performance

Less than 2 crashes4100 crashesOut of every 500,000 computer restarts

1.8 seconds of dead air1.68 hours of dead air For every week of TV broadcasting per channel

1 misdelivery3,000 misdeliveriesFor every 300000 letters delivered

With Six Sigma

Quality

With 99 % Quality

Source: The Six Sigma Way by Peter Pande and Others

Cost of Poorly Performing Processes

σσσσ level DPMO CP3

2 308,537 Not Applicable

3 66,807 25%-40% of sales

4 6,210 15%-25% of sales

5 233 5%-15% of sales

6 3.4 < 1% of sales

Each sigma shift provides a 10% net income improvement

Cost of Poorly Performing Processes (CP3)

Sigma (σ) is a measure of “perfection” relating to process

performance capability … the “bigger the better.”

A process operating at a “Six Sigma” level produces only

3.4 defects per million opportunities (DPMO) for a defect.

Without dedication of significant and appropriate attention to

a process, most processes in leading U.S. companies operate

at a level between 3 and 4 sigma.

Why is Six Sigma Important?

• Based on teachings of Dr. Walter Shewhart, Dr. W. E. Deming & Dr. J. Juran.

• Process Control;

• Plan Do Check Act;

• Common and Special Causes;

• Improvement can be done project by project

• Statistical tools

• Hawthorne Plant Experiences

• Developed by Bill Smith at Motorola in 1980s

What is Six Sigma ?

Six Sigma

� Is a management methodology

• Customer focused

• Data driven decisions

• Breakthrough performance gains

• Validated bottom line results

JURAN SAID…

�“All quality improvement occurs on a project-by-project basis and in no other way.”

Who is Implementing Six Sigma

� At least 25% of the fortune 200 claim to have a serious six sigma program - Michael Hammer.

� Financial - Bank of America, GE Capital, Electronics - Allied Signal, Samsung, Sony

� Chemicals - Dupont, Dow Chemicals� Manufacturing - GE Plastics, Johnson and Johnson,

Motorola, Nokia, Microsoft, Ford.� Airline - Singapore, Lufthansa, Bombardier� And hundreds of others in Americas, Europe, Sub

Continent.

Six Sigma Results

Annual SavingsCompany

*$1.5 billion (*since inception in

1998)

JP Morgan Chase

$600 millionHoneywell

$500 millionJohnson & Johnson

$ 16 billion (*since inception in 1980s)Motorola

$2.0+ billionGeneral Electric

Six Sigma Savings as % of revenue vary from 1.2 to 4.5 %

For $ 30 million/yr sales – Savings potential $ 360,000 to $ 1.35 million.

Investment: salary of in house experts, training, process redesign.

Customer Focused

Our Performance Compared to Competitors

Importance to Customers

We’re Better They’re Better

High

Moderate-to-’Low’

• Price• Complaints

• OTD• Quality

• Training

• Complete

• Shared Goals

Data Driven Decisions

• Y• Dependent• Output• Effect• Symptom• Monitor• Response

• X1 . . . XN

• Independent

• Input-Process

• Cause

• Problem

• Control

• Factor

To get results, what should we focus on - Y or X ?

f (X)f (X)Y=Y=

Six Sigma Methodology

� Define

� Measure

� Analyze

� Improve

� Control

Six Sigma Project Methodology

ControlControlDefineDefine MeasureMeasure AnalyzeAnalyze ImproveImprove

�Establish Establish Establish Establish standards to standards to standards to standards to maintain maintain maintain maintain process;process;process;process;

�Design the Design the Design the Design the controls, controls, controls, controls, implement and implement and implement and implement and monitor. monitor. monitor. monitor.

�Evaluate Evaluate Evaluate Evaluate financial financial financial financial impact of the impact of the impact of the impact of the projectprojectprojectproject

� Identify, Identify, Identify, Identify, evaluate and evaluate and evaluate and evaluate and select projects select projects select projects select projects for for for for improvementimprovementimprovementimprovement

�Set goalsSet goalsSet goalsSet goals�Form teams. Form teams. Form teams. Form teams.

�Collect data Collect data Collect data Collect data on size of the on size of the on size of the on size of the selected selected selected selected problem,problem,problem,problem,

� identify key identify key identify key identify key customer customer customer customer requirements,requirements,requirements,requirements,

�Determine key Determine key Determine key Determine key product and product and product and product and process process process process characteristiccharacteristiccharacteristiccharacteristic.

�Analyze data, Analyze data, Analyze data, Analyze data, establish and establish and establish and establish and confirm the confirm the confirm the confirm the ““““vital few vital few vital few vital few ““““determinants determinants determinants determinants of the of the of the of the performance.performance.performance.performance.

�Validate Validate Validate Validate hypothesishypothesishypothesishypothesis

� Improvement Improvement Improvement Improvement strategystrategystrategystrategy

�Develop ideas Develop ideas Develop ideas Develop ideas to remove root to remove root to remove root to remove root causescausescausescauses

�Design and Design and Design and Design and carry out carry out carry out carry out experiments,experiments,experiments,experiments,

�Optimize the Optimize the Optimize the Optimize the process. process. process. process.

�Final solutionsFinal solutionsFinal solutionsFinal solutions

Project Phases

The Normal Curve and Capability

LSL USL

Poor Process Capability

Very High Probability of Defects

LSL USL

Excellent Process

Capability

Very Low Probability of Defects

Very High Probability of Defects

Very Low Probability of Defects

Low SigmaLow SigmaHigh SigmaHigh Sigma

Units of Measure

Performance

Limit Probability

of a DefectArea of Yield

Process Capability Indices

where LSL and USL are the lower and upper specification limits, respectively.

σσσσ

−−−−====

6

LSLUSLCp

K-sigma

σσ

==2

LSL-USL

Range Halfk

The Sigma Scale

3.40.00034%99.9997%6

2330.023%99.977%5

6,2100.62%99.38%4

66,8076.7%93.3%3

308,53830.9%69.1%2

691,46269.1%30.9%1

DPMO% Bad% GoodSigma

68 times3.46 σσσσσσσσ

27 times2305 σσσσσσσσ

11 times6,2104 σσσσσσσσ



690,0001 σσσσσσσσ

Rate of Improvement

Defects Per Million Opportunities

Sigma Level

Process Capability Ratio

Off-Center Process

� Cp does not take into account where the process mean is locatedrelative to the specifications.

� A process capability ratio that does take into account centering is Cpk

defined as

Cpk = min(Cpu, Cpl)

σ

µ

σ

µ

3

3

LSLC

USLC

pl

pu

−=

−=

Bank of America – SS Experience

� Goals� # 1 in Customer Satisfaction

� Worlds’ most admired company

� Worlds’ largest bank

� Strategy - “ Develop business process excellence by applying voice of the customer to identify and engineer critical few business processes using Six Sigma

� Created Quality & Productivity DivisionSource: Best Practices Report


� Wanted results in 1 year;

� Hired more than 225 MBB & BBs from GE, Motorola, Allied Signal for rapid deployment

� Developed 2 week Green Belt training programs

� Introduced computer simulation of processes

� Trained 3767 Green Belts, certified 1230 - Minimum value target per GB project – $ 250K

� Trained 305 Black Belts, certified 61 - Minimum value target per BB project – $ 1 million

� Trained 43 MBB,

� 1017 in DFSS

� 80 % of Executive Team trained in GB and 50 % Certified


Results of first 2 years:

� Reduced ATM withdrawal losses by 29.7 %

� Reduced counterfeit losses in nationwide cash vaults by 54%

� Customer delight up 20%;

� Added 2.3 million customer households

� 1.3 million fewer customer households experienced problems

� Stock value up 52%

� Y 2002 – BOA named Best Bank in US & Euro money's Worlds Most Improved Bank

Six Sigma – Case Study

Service Organisation

Background

� M/s Alpha Inc. manages out bound cargo from a distribution centre to different stores.

� Deliveries made on trucks - owned and hired.

� Customers dissatisfied at delivery schedules.

� Leadership decision to deploy Six Sigma;

� Team of 1 Black Belt and 3 Green Belts formed

� Sponsor of the project – Distribution Manager

Define - Critical to Quality (CTQ)

� Focus on customers generating annual revenue of USD 400,000/-.

Level 3 CTQ

Level 2 CTQ

Level 1 CTQ

Customer needs

Current process sigma level - 2.43 or 175889 DPMO

Delivery within +/- 1 hour of scheduled delivery time

On time delivery to schedule

Timely delivery

Improved delivery performance

Define - Goal Statement

� Reduce number of delayed deliveries by 50 % by 31st December Y 2002 to better meet customer requirement of timely delivery defined as within +/- 1 hour of scheduled delivery.

Define - Performance Standards

1 opportunity for a defect per scheduled delivery of freight.

No. of defect opportunities per unit

Delivery earlier or later than 1 hour.Defect

Scheduled time or zero minutes deviationTarget

LSL = -60 minutes

USL= +60 minutes

Specification limits

Process starts when an order is received

Ends when goods are received & signed for at customers desk.

Process measurement – Deviation from scheduled delivery time in minutes.

Project Y measure

Timely deliveryOutput characteristic

A scheduled delivery of freightOutput unit

Define - SIPOC Diagram

Store ManagerCustomer

Received freight with DocumentsOutput

Receive order

Plan delivery

Dispatch Driver with goods

Deliver goods to stores

Receive delivery

Process Steps (high level)

Stores OrderInput

Stores ManagerSupplier

Measure and Analyze

� Driver and Distance identified as key factors influencing delivery performance.

� Driver selected for focus.

� Potential root causes as to why Driver influenced the time:

� Size of the vehicle

� Type of engine

� Type of tyres

� Fuel capacity

� Experiments designed and conducted using truck type and tyre size.

� Findings:� Larger tyres took longer time at certain routes

where area was cramped and time lost in maneuvering.

� High incidence of tyre failures since tight turns led to stress on tyres thus increasing number of flat tyres.

� Team modified planning of dispatch process by routing smaller trucks at more restrictive areas.

Improve

� Test implementation.� Process sigma level up from 2.43 or 175889 DPMO to 3.94

or 7353 DPMO. � Performance still fell short of best in class 4.32 or 2400

DPMO. � Improvement led to significant customer satisfaction. � Process continually monitored and data on new cycle times,

tyre failure collected as per defined methods and frequency, analysed and monitored.

� Customer satisfaction measured and monitored.

Control

Some Common Challenges in

Implementation� Define

� Difficulty in identifying the right project and defining the scope;

� Difficulty in applying statistical parameters to Voice of the Customers;

� Trouble with setting the right goals;

� Measure

� Inefficient data gathering;

� Lack of measures;

� Lack of speed in execution;

Some Common Challenges in

Implementation

� Analyse

� Challenge of identifying best practices� Overuse of statistical tools/ under use of practical

knowledge� Challenge of developing hypotheses

� Improve

� Challenge of developing ideas to remove root causes� Difficulty of implementing solutions

� Control

� Lack of follow up by Managers/ Process Owners� Lack of continuous Voice of the Customer feedback� Failure to institutionalize continuous improvement.

Points to remember…

� “ Define “ ranked most important step but often gets the lowest resource allocation

� Project scoping and its definition is critical to its success/ failure;

� “Measure” is considered most difficult step and also gets the highest resources

Source: Greenwich Associates Study Y 2002

Benefits of Six Sigma

� Generates sustained success

� Sets performance goal for everyone

� Enhances value for customers;

� Accelerates rate of improvement;

� Promotes learning across boundaries;

� Executes strategic change

Which Business Function Needs It?

As long as there is a process that produces an output, whether it isa manufactured product, data, an invoice, etc…, we can apply the

Six Sigma Breakthrough Strategy. For these processes to performto a customer standard they require correct inputs!!!

6 Sigma

Methods

MFG.

DESIGNSERVICE

PURCH.

MAINT.

ADMIN.

QA

Marketing

Master

Black Belt

Black Belts

Green Belts

Team Members

Quality Fundamentals/ Kaizen Now

Ch

am

pio

ns

Mentor, trainer, and coach of Black Belts and others in the organization.

Leader of teams implementing the six sigma methodology on projects.

Delivers successful focused projects using the six sigma methodology and tools.

Participates on and supports the project teams, typically in the context of his or her existing responsibilities.

Responsible for supporting the Deployment

Strategy within Line of Business/Customer

Segment or Golden Thread

Deployment

Champions

Education

Six Sigma & Leadership

� Six Sigma only works when Leadership is

passionate about excellence and is willing

to change.

� Leadership in Six Sigma context

� Challenge the process

� Inspire a shared vision

� Enable others to act

� Model the way

� Encourage the heart

� Six Sigma is can be a catalyst for leaders to accomplish change

Role of Champions

� Promote awareness and execution of Six Sigma within lines of business and/or functions

� Identify potential Six Sigma projects to be executed by Black Belts and Green Belts

� Identify, select, and support Black Belt and Green Belt candidates

� Participate in six sigma workshop trainings

Role of Black Belts

� Use Six Sigma methodologies and advanced tools (to execute business improvement projects

� Are dedicated full-time (100%) to Six Sigma

� Serve as Six Sigma knowledge leaders within Business Unit(s)

� Undergoes periodic training on advanced methods of data analysis

Role of Green Belts

� Use Six Sigma DMAIC methodology and basic tools to execute improvements within their existing job function(s)

� May lead smaller improvement projects within Business Unit(s)

� Bring knowledge of Six Sigma concepts & tools to their respective job function(s)

� Undergoes periodic training in statistical methods for quality improvement

� Subject Matter Experts� Provide specific process knowledge to Six Sigma

teams

� Ad hoc members of Six Sigma project teams

� Financial Controllers� Ensure validity and reliability of financial figures used

by Six Sigma project teams

� Assist in development of financial components of initial business case and final cost-benefit analysis

Other Roles

�Thank You