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Background of Six Sigma Concept

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19History of Six Sigma . . . Credit for coming out with the term "Six Sigma" goes to a Motorola engineer named Bill Smith. (Incidentally, "Six Sigma" is a federally registered trademark of Motorola).

In the early and mid-1980s, Motorola wanted to set new statistical quality control standards to reduce defects in their manufacturing processes using defects per million opportunities. They soon discovered that it had wider applicability.

$8 Billion through 2001

Average of $600MM/year since 1995

$3 Billion in savings since 1995

$1.5 Billion in 1999; since 1987

$2.5 Billion in 2004

$1.9 Billion through 2002

¥130 Billion in 2000/2001

Since then, hundreds of companies around the world have adopted Six Sigma as a way of doing business including Honeywell, GE (1995) and financial services companies such as Citicorp, American Express (1998), JP Morgan Chase ( mid 1998), Bank One (2000), Merrill Lynch (2001), BOA (2001), HSBC, etc.

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20What is Six Sigma ?Six Sigma is a comprehensive and flexible improvement methodology for achieving, sustaining and maximizing business success. It is uniquely driven by close understanding of customer needs, disciplined used of facts, data and statistical analysis, and diligent attention to managing, improving and reinventing business processes.

“It is now the Way We Work — in everything we do and in every product we design” - GE

The real benefit of Six Sigma is the culture change to becoming a customer-focused, fact-based, data-driven organization.

It provides businesses with the tools to improve the capability of their business processes. Improved Processes = Increased Performance + Decrease Variation

It leads to defect reduction and vast improvement in profits, employee morale and quality of product.

If no one puts defects in, then no one has to find them or fix them. Hence everyone can focus on meeting the customer needs instead of fixing customer complaints.

S I G M A3

21More simply . . .

Six Sigma has evolved over the last two decades and so has its definition. Six Sigma has literal, conceptual, and practical definitions. Six Sigma can be viewed at three different levels:

σ As a Metric

σ As a Management system

σ As a Methodology

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22Six Sigma as a MetricStatistically

σ "Sigma" is often used as a scale for levels of "goodness" or quality. Using this scale, the sigma capability indicates how well a process is performing i.e to produce defect-free work.

σ The higher the sigma capability, the better. To achieve Six Sigma quality, a process must produce no more than 3.4 defects per million opportunities (DPMO). .

σ An "opportunity" is defined as a chance for non-conformance, or not meeting the required client specifications.

Comparing Six Sigma performances –is 99% good enough ?

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23Six Sigma as Six Sigma as a Management Disciplinea Management Discipline

Six Sigma is a basic management discipline -- and a mindset:

FOCUS on clients and their requirements

Uncover FACTS about profitability, shareholder value and employee

satisfaction

Track progress through powerful METRICS

Work ACROSS organisational boundaries

Get it right the FIRST time

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24Six Sigma Methodology Overview - DMAIC

Client-driven, consistent,

metrics focused, results oriented

Define the customer opportunity

Measure thecurrent performance

Improve processDelivery to the customer

Problem Statement:Goal:Business Case:Scope:Cost Benefit Projection:Milestones:

Problem

D B F A C E Other

UCL

LCL

Analyze thecurrent processes

Control and maintain the gains

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Why use Six Sigma to improve our customer experience ?

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26Focus on Customer View

Customer View of our process

Initial Contact

A/C Opening & Fulfillment

Servicing Contact

Relationship Building

End of Relationship

RM RM / Call Center Marketing / Ops

t1 t2 t3

Quality requires us to look at our business from the customer’s perspective, not ours. i.e we must look at our processes from the outside-in. By understanding the transaction lifecycle from the customer’s needs and processes – “the Client Experience”, we can discover what they are seeing and feeling.With this knowledge, we can identify areas where we can add significant value or improvement from their perspective.

Customer does not see or care what we do.But feels the impact when we do it wrong.

How customer measure us

How we measure ourselves

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27Process Variation Affects Our Client

Our Customers feel the Variance, Not the MeanOften, our customers are impacted by our variation / inconsistency in the service quality we provided.

However, our inside-out view of the business is based on average or mean-based measures of our recent past / historical measurements. Customers don't judge us on averages, they feel the variance in each transaction, each product we deliver.

Six Sigma focuses first on reducing process variation and then on improving the process capability.

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30Six Sigma Benefits The Customer

The following benefits may be achieved from the successful implementation of project leveraging six sigma tools and approach:

Improved Customer LoyaltyGreater knowledge of Customer PreferencesImproved Customer RelationsGreater ability to capture the true voice of customers right first timeImproved Market Position relative to CompetitorsLong-term Competitive AdvantageReduced Cost of Poor QualityIncreased Reputation of your organization

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31Six Sigma links CE to EEClient LevelA methodology we use to improve existing processes and build new ones that strengthen client relationships.

8 Six Sigma raises performance by bringing clients into vivid focus8 Measurement helps us see what clients really care about8 Clients get happier as we start ‘getting it right’

Employee LevelGives employees the tools to measure quality consistently, regardless of what kind of work they do.

8 As you improve your work environment, you get happier too!8 Using Six Sigma tools, employees manage by facts, rather than by

assumptions

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326 Sigma in a nutshellTypical Goals

Improve customer satisfactionDramatically lower costsShorten time to marketReduce defects, scrap and re-workSimplify operationsImprove competitive position

The PrinciplesFocus on the customer Continuous process improvementCompany wide implementationBusiness strategy integrationDecision making using statistical analysis

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Methodologies & Tools

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35How do we achieve results ?

Essentially, the Six Sigma project methodology / approach that can be applied to help you deliver your projects is:

The DMAIC method –for improvement to existing processes that require significant incremental improvement: Define-Measure-Analyze-Improve-Control.

Occasionally, we may have a process that is non-existent ( such as new processes) or a process that is so broken that we will need to add a DESIGN step in the methodology in order to have quantum level improvements and toensure we can fulfill our customer needs and expectations.

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37DMAIC

Develop a Problem Statement. Define CTQ criteria from client’s point of view.

Measure clients’ requirements (“VOC”) and the current process performance (in terms of cycle time, sigma or other useful metrics)

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38DMAIC Roadmap

30. Prepare Process Control Plan

31. Implement Solution

32. Validate Improved Performance

32. Standardize and Document new process

33. Develop Feedback Mechanisms

34. Transition to process owners

23. Develop Improvement Solutions

24. Select best solution

25. Cost & Benefit Analysis

26. Perform Risk Analysis

27. Pilot Solution

28. Determine Improvement Plan

29. Prepare change management strategy

15. Document all causes that impact the Main Problem

16. Determine Critical Root Causes

17. Collect Additional Data

18. Determine Failure Modes

19. Assess Risk

7. Select Key Measures/ Performance Metrics

8. Collect Performance Data

9. Identify Potential Sources of Variation

10. Developed Detailed Process Map

11. Validate Measurement System

12. Perform Graphical Analyses

13. Check Process Stability

14. Determine Current Process Capability

1. Select Project

2. Write Problem Statement

3. Develop Charter

4. Develop Project Plan

5. Determine Customer Requirements (CTQs)

6. Obtain Approval to Proceed

Define Measure Analyze Improve Control

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39Detailed Project Selection Criteria

Achieving breakthroughs requires prioritization of opportunities. There are many more opportunities than there is time and resources to work on them.When selecting a process, we are trying to prioritize exactly which problem to solve. If the problem is clear we move on to define the problem.In selecting a project, consider these issues:

a. Financial and strategic benefitsb. Improved customer satisfaction or CE scorec. Compatible with current goals and objectivesd. Translatable to other areas of the businesse. Probability of successf. Level of effort, amount of resources needed to complete

project

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