Six Sigma – A Strategy for Achieving World Class Performance

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Share concepts and application of Six Sigma with a case study;

Deployment of Six Sigma as a strategy to achieve World Class Performance;

Integration of Six Sigma with EFQM framework; Lessons Learnt

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With 99 % Quality

With Six Sigma

QualityFor every 300000 letters delivered

3,000 misdeliveries 1 misdelivery

For every week of TV broadcasting per channel

1.68 hours of dead air 1.8 seconds of dead air

Out of every 500,000 computer restarts

4100 crashes Less than 2 crashes

3Source: The Six Sigma Way by Peter Pande and Others

• 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

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• Degree of variation;• Level of performance in terms of defects;• Statistical measurement of process capability;• Benchmark for comparison;• Process improvement methodology;• It is a Goal;• Strategy for change;• A commitment to customers to achieve an acceptable level of performance

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Sigma is a letter

in the Greek Alphabet

• Business Definition A break through strategy to significantly improve

customer satisfaction and shareholder value by reducing variability in every aspect of business.

• Technical Definition A statistical term signifying 3.4 defects per million

opportunities.

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Sigma Level

Defects Per Million Opportunities

Rate of Improvement

1 690,000

2 308,000 2 times

3 66,800 5 times

4 6,210 11 times

5 230 27 times

6 3.4 68 times

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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

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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

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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

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• Revenue• Capital Utilization• Return on Assets• Profits

• Quote Time• Defect Rate• Waste• On Time Delivery• Inventory;• Machine Utilization

Strategically: Used by Leadership as a vehicle to develop sustainable culture of Customer, Quality, Value and Continuous improvement.

Operationally: By Quality Managers to reduce cycle times, costs, errors, rework, inventory, equipment downtime.

Deployment across all types of processes and industries - worldwide

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Six Sigma & EFQM/ DQA Framework

Results

Innovation and Learning

Encouraging & enabling people

To participate inImprovement

Personallyactively Involved in improvement

Recognizing Individual &Team effort

Identifying & designing

processes to deliverstrategy

Developing Team skills

Aligning Individual &Organization

Goals

Recognizing People

Establishing Process

managementSystem to be

used

ImplementingProcess Measures

Improving processes

to satisfy andGenerate valueFor customers

Delivery, Value,

reliability

Repurchasesatisfaction

Response Time to

customers

Time to Market

SatisfactionInvolvement Recognition

CompetencyProductivity

Utility consumptionTimeliness Inventory

Process cycle timeProcess costsDefect ratesProductivity

Cash flowMaintenance costReturn on assets

Gross marginsNet profit

SalesMarket Share

Leadership

Policy & Strategy

People

Processes

PeopleResults

Society Results

PartnershipsResources

Key PerfResults

Customer Results

Enablers

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.

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Company Annual Savings

General Electric $2.0+ billion

JP Morgan Chase *$1.5 billion (*since inception in

1998)

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

Johnson & Johnson $500 million

Honeywell $600 million

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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.

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ControlControlDefineDefine MeasureMeasure AnalyzeAnalyze ImproveImprove

Establish standards to maintain process;

Design the controls, implement and monitor.

Evaluate financial impact of the project

Identify, evaluate and select projects for improvement

Set goalsForm

teams.

Collect data on size of the selected problem,

identify key customer requirements,

Determine key product and process characteristic.

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

Validate hypothesis

Improvement strategy

Develop ideas to remove root causes

Design and carry out experiments,

Optimize the process.

Final solutions

Project Phases

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

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Customer needs

Improved delivery performance

Level 1 CTQ Timely delivery

Level 2 CTQ On time delivery to schedule

Level 3 CTQ Delivery within +/- 1 hour of scheduled delivery time

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

Current process sigma level - 2.43 or 175889 DPMO

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.

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Output unit A scheduled delivery of freight

Output characteristic

Timely delivery

Project Y measure 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.

Specification limits LSL = -60 minutes

USL= +60 minutes

Target Scheduled time or zero minutes deviation

Defect Delivery earlier or later than 1 hour.

No. of defect opportunities per unit

1 opportunity for a defect per scheduled delivery of freight.

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Supplier Stores Manager

Input Stores Order

Process Steps (high level)

Receive order

Plan delivery

Dispatch Driver with goods

Deliver goods to stores

Receive delivery

Output Received freight with Documents

Customer Store Manager

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• Detailed process maps drawn

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

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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.

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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.

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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;

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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.

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“ Define “ ranked most important step but 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

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Versatile Breakthrough improvements Financial results focus Process focus Structured & disciplined problem solving

methodology using scientific tools and techniques

Customer centered Involvement of leadership is mandatory. Training is mandatory; Action learning (25% class room, 75 %

application) Creating a dedicated organisation for problem

solving (85/50 Rule).

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Generates sustained success Sets performance goal for everyone Enhances value for customers; Accelerates rate of improvement; Promotes learning across boundaries; Executes strategic change

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Thank you

Q & A

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