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9/12/2017
1
Adding Value Through Six Sigma ConceptsA Systematic Approach to Process Improvement
Presenter
William T. Bostick CPA, CGMADirector, Office of Internal Audits
Xavier University of Louisiana
Today’s Agenda
Session ObjectivesWho is Xavier University of Louisiana
Six Sigma and the Role of 3MThe Six Sigma Process and it’s Methodology
Project Successes and Challenges
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Session Objectives
• Explain Six Sigma concepts, processes, approach and tools;
• Explore a process to identify the root causes of process variation based on available data;
• To apply “value” through tangible and measurable outcomes.
The Primary session objectives are to accomplish the following:
Who is Xavier University of Louisiana
• Only Historically Black‐Catholic University in the United States;
• Founded by Saint Katherine Drexel in 1925 (She was canonized as a Saint in 2000);
• Current enrollment is approximately 3,000+ students;
• First in the number of African American Graduates who go on to complete Medical School; #1 in awarding African Americans baccalaureate degrees in Physics and the Physical Sciences;
• One of only two Schools of Pharmacy in the State of Louisiana; Approximately 25% of African American Pharmacists are Xavier Graduates;
• Wall Street Journal OpEd piece ranks Xavier #6 in the nation for social mobility measured by the % of students from the bottom 5th of income distribution who ended up in the top 3/5ths in income following graduation.
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The 3M Company and It’s Role • Xavier University of Louisiana was one of seven 3M Partner schools in a talent development program in Sales and Customer Relationship Management called – “Frontline Initiative”.
• 3M sponsored a small conference for their partner schools. The goal was to incorporate Six Sigma and other concepts into the sales and marketing curriculum so that students were better prepared to understand customer requirements and improve the image of sales as a career.
• As a part of the preparation for the conference 3M provided to the partner schools copies of the book The Six Sigma Way, by Peter S. Pande, Robert P. Neuman, and Roland R. Cavanagh.
Chance Encounter (Can I Tag Along?) • A copy of The Six Sigma Way was provided to my office.
• After reading the book, the practical applications of the concepts were obvious. I asked of the possibly to participate in the Conference.
• The conference was a 2 ½ Day Six‐Sigma Training – Combination of Champion and Green Belt ‐ and the rest is history.
• Xavier presented initial project results to senior managers of 3M involved with the partner schools. They were excited.
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Adding Value• 1)…Designed to Add Value and Improve Operations…
• Specific Consulting Projects focused on Business Processes.• Creative, Collaborative and Innovative method of Problem solving that involves University Staff at all levels.
• 2)…Systematic , Disciplined Approach to Improve…
• These projects are a systematic approach to process improvement.
• Utilizes a common language, data, and specific techniques to drive improvements and achieve Breakthrough Results.
Business Impacts of Process VariationPrevention Costs
– Education and training– Quality planning– Performing pilot runs– Student (Customer) interface– Controlling processes
Appraisal Costs– Independent audits– External Consultants– Accreditation– External Monitoring
Internal Failure– Policy Noncompliance – Noncompliance w/ Laws & Regs– Rework– Retest / Re-inspection – Unplanned downtime– Trouble shooting– Product/Process changes
External Failures– Reputational issues– Maintaining customer service – Incurring penalties/Questioned costs – Decline in enrollment
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The Six Sigma Process and It’s Methodology
Six Sigma Is … A Measurement … (NERD ALERT!!!)
SIGMA Defects/Errors Per Million Opportunities YIELD %/EFFICIENCY RATE
1 691,500 30.85%
2 308,500 69.15%
3 66,800 93.32%
4 6,200 99.38%
5 230 99.977%
6 3.4 99.99966%
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Six Sigma Overview…
• Initiating the right projects – linked to business goals• Facilitated Process Involving the right people• Using specific methods (or roadmaps) and tools
• Getting the right results based on 3primary objectives• Revenue Growth• Productivity / Cost• Cash / Working Capital
A systematic problem solving method tied to customer needs
The Methodology• DMAIC ‐ Define, Measure, Analyze, Improve, Control
• Process thinking• Everything is part of a process
• Variation exists in all processes and excess variation causes errors or defects. (PAIN!)
• The Key: Sources of variation can be identified, quantified and reduced or controlled
• Fact and data‐based decisions• Idea and Data Management tools• Statistical tools
• The work is to Identify and Focus on the Critical few variables
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FEELING THE PAIN!!!
FEELING THE PAIN• Each process will be analyzed for its performance to key metrics
• What does PAIN at the process level look like:• Roll Through Yield (RTY)
• Cost Of Poor Quality (COPQ)
• Capacity Productivity (C‐P)
• Cycle time
• Document/Customer Returns
• Servicing Students
66% is not 90%
... why not?
Process1 2 3
90%Yield
90%Yield
90%Yield =
FPY 81 % 73 %
90%Yield
4
66 %
>90%Yield
Final Inspection
Final Yield ignores the hidden factory.
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Project Highlights• Grants Receivable – Cash Project – If we decrease grants receivable turnaround from 75 days to 64 days we will generate $2.3 million in Cash Flow (Results ‐58 days $2.7 Million in Cash Flow)
• Student Departmental Hires ‐ If processing time for DHP is reduced from 32 days to 10 business days, XU saves $25K in processing costs and eliminate verification noncompliance. (6 Days)
• Improve University Time and Attendance System
Grants Receivable Turnover
-$1,000,000
-$500,000
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
1 2 3 4
Fiscal Year
Cash F
low
0
20
40
60
80
100
120
140
160
Turn
aro
und T
ime
Fiscal Year
Cash Flow
Turn in Days
Results of Grants Receivable ProjectA) Decreased the turnaround time for receiving grant funds from 143 days in 2001 to 58 days as of January 2004.
B) Increased cash flow by a total of $6.3 million over the same three year time span.
C) Identified immediate process improvements (Just Do’s)
D) Identified measures to continually monitor process.E) Individuals who touched the process at different levelsdiscovered how their actions affects business processes.
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‐10
0
10
20
30
40
50
60
70
80
‐20 ‐10 0 10 20 30 40 50 60
Policy Time
Sample PAF's
Policy Timeframe
PROCESS CAPABILITY
Six Sigma – Analysis of Student Departmental Hires Process Capability
0
10
20
30
40
50
60
70
80
90
100
‐20 ‐10 0 10 20 30 40 50
Policy Time
EPAF Time
PROCESS CAPABILITYPolicy Timeframe
Six Sigma – Student Departmental Hires Process Capability - EPAF
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Timing of EPAF Application
18 EPAF's
55 EPAF's
47 EPAF's
60 EPAF's
8 EPAF's
0
20
40
60
80
100
120
140
160
180
200
1
EPAFs Applied 30 Days or Greater
EPAF Applied Within Two to Four Weeks
EPAF Applied Within Two Weeks
EPAF Applied Within One Week
EPAF Applied Before or on Effective Start Date
Number of EPAF’S
Timing of EPAF Processing
EPAF Creates Job and Employee Record and Updates Status Changes
Eligible Employee Records Time Worked Through T/S
Eligible Employees Paid For Time Recorded
EPAF’s Created Prior to Payroll but After Employee is Working
EPAF’s are currently processed to payan employee, not to complete theestablishment of the employee’s eligibility or status change prior tothe employee actually working.
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DMAIC – The Problem Solving DisciplineDefine: Stating a problem in measurable and actionable terms
• Problem Statement – What’s the Process, Definition, Scope, Customers, Problems, Impact of Problems, Is it Measurable, Measurement Targets
• Project Charter – Definition, Business Case, Project Objective, Benefit, Schedule, Support Required, Team
• Defining Entitlement – Process Performance to Date, TheoreticalPerformance and the established Goal to be achieved.
• Stakeholder Analysis is an assessment of process stakeholders, their level of support, is it needed, and Influence Strategies to achieve support.
Pursuing Entitlement
Baseline EntitlementTraditional Goal Setting
Closing theGap
PerformanceGoal
Six Sigma Difference
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DMAIC – The Problem Solving DisciplineMeasure: measuring the variation of the problem’s performance data
• Process Maps‐ Hi, Lo ‐ documents key inputs and outputs
• Cause and Effects Matrix ‐ prioritizes key inputs for action
• Measure System Analysis ‐ evaluates accuracy and precision of measurement systems
• Initial Capability ‐ establishes initial process performance to customer specifications
Purpose of the Process Map• Document and build a common perspective about the process
• Highlights potential vulnerabilities and defects
• Identify the universe of variables that are relevant to the project
• Funnels detailed inputs to address the most important in FMEA
• Controlled Outputs or the End of a Process are a Function of the Inputs
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• This is a simplified matrix to emphasize the importance of understanding customer requirements
• Relates the Key Inputs (X’s) to the Key Outputs (Y’s) using the Process Map as the primary information source
• Key Outputs are scored for their importance to the customer (1‐10)
• Key Inputs are scored based on their relationship to key outputs (Correlational Scores 1,3,9 )
Cause and Effects Matrix
Measurement System Analysis & Initial Capability (WHERE IS the PAIN?)• Data collection and data analysis are an integral part of Six Sigma.
• Having data is a critical starting point for Project solving and decisions regarding process redesign and/or improvement.
• Three important Questions are: What should we measure?
• Is data available?
• Is data valid and free of errors?
• Data collection can be difficult, but it is absolutely necessary.
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563$2,079,112.56
177$145,293.26
Number of Employees Amount of Payroll
Payroll ApprovalMonthly Payroll Bi‐Weekly Payroll
98% or $2,037,530 of exempt payroll costs 98% or $2,037,530 of exempt payroll costs
11% or $15,982 of Bi‐Weekly 11% or $15,982 of Bi‐Weekly
98% or $2,037,530 of exempt payroll costs were not approved.
98% or $2,037,530 of exempt payroll costs were not approved.
11% or $15,982 of Bi‐Weekly payroll costs were not approved.
11% or $15,982 of Bi‐Weekly payroll costs were not approved.
Analysis of Payroll Cost Approval
Reissue0%
Adjustments12%
Manual1%
Redistributions43%
Voids44%
Analysis of Payroll Adjustments-Monthly
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DMAIC – The Problem Solving DisciplineAnalyze: finding the sources of variation to the performance data
• FMEA – Failure Mode and Effects Analysis
• Documents effects of Process Inputs (Xs) on Process Outputs (Ys)when key inputs (Xs) go wrong
• Documents potential causes of Xs (Inputs) going wrong
• The output of the FMEA is a Risk Priority Number (RPN)
• The RPN is determined by the severity of a potential error, how often it occurs and how well internal controls can detect the potential issue.
FMEA Overview
P ro c e s s S te p / In p u t
P o te n t ia l F a i lu r e M o d e P o te n t ia l F a i lu re E f fe c tsSEV
P o te n t ia l C a u s e sOCC
C u rre n t C o n tro lsDET
RPN
A c tio n s R e c o m m e n d e d
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
0 0 0 0
What is the Input
What can go wrong with the Input?
What can be done?
What is the Effect on the
Outputs?
What are the Causes?
How can these be found or prevented?
How Bad?
How Often?
How well?
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Definition of RPN Terms• Severity (of Effect) ‐ importance of effect on customer or process requirements – should relate to project outputs (Y’s)
• 1= None to Very minor; 10=Very Severe
• Occurrence (of Cause) ‐ frequency with which a given cause occurs and creates the failure mode. (Can sometimes refer to the frequency of a failure mode)
• 1=Not Likely to Occur; 10=Very Likely to Occur
• Detection (capability of Current Controls) ‐ ability of current control scheme to detect or prevent:
• the causes before creating failure mode• the failure modes before causing effect• 1=Likely to Detect; 10=Not Likely at all to Detect
DMAIC – The Problem Solving DisciplineImprove: eliminating or enhancing the highest drivers of the performance data variation
• Design of Experiments (DOE), or Tests of process tweaks/changes
• Improvements based on results, process changes, controls and benchmarking data.
• Improving specific tasks create a Responsible, Accountable, Consulted, Informed (RACI) Matrix.
• “As Is” and “Should Be” for improvements
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DMAIC – The Problem Solving DisciplineControl: establishing controls to manage the gains of the problem solution
• Develop a Control Plan utilizing the results from the Six Sigma DMAIC methodology
• From the documentation understand how the Critical inputs (X’s) impact the Project outputs (Y’s) and implement or adhere to the controls that reduce variance.
• Develop reaction Plan for out of control X (Human Element)
• Clarify ownership of Inputs (X’s) and Outputs Y’s. Show the linkage between control plans and the Discuss control methods.
Control Plans• Consulting report provides important elements from project information
• Including:• Measurement Information; Updated Detailed Process Map
• Update Procedures, Etc.
• The Goal is to Sustain the Gains!
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Description Baseline Goal (70%) Entitlement
The Difference in Active
Employees between the Banner
and KRONOS Systems.
There is an average difference of
119 employees between the two
systems.
Eliminated in going to one
system. The difference will
be ‐0‐
There should be a ‐0‐ employee
difference between systems.
Percentage of Employee Timesheet
Approvals
89% of Bi‐Weekly Timesheets
Approved; 2% of Monthly
Timesheets approved.
A goal of 97% of Bi‐Weekly
Timesheets Approved; and
80% of Monthly Timesheets. 100% Approval Rate
Adjustments to Payroll Approximately 1,230 adjustments A goal of 370 adjustments. ‐0‐ Adjustments to Payroll
Compliance with the Federal E‐
Verification Process 75% Compliance Rate A goal of a 95% Compliance
Rate.
100% Compliance Rate
Difference in Vacation Balances
Between System and Final Audit of
Terminated Employees
54.5% of terminated Employees
that were audited had a variance
of greater than eight (8) hours.
15% Variance of Greater
than Eight Hours.
There should be a ‐0‐ difference
system and final audited balance.
EPAF’s Applied Prior to the
Effective Date of Hire
10% of EPAF’s are applied prior to
the effective hire date.
75% of EPAF’s applied prior
to effective start date.
100% of EPAF’s should be applied
prior to effective start date.
Control Plan
Beware Of Project Pitfalls• Timing
– Projects should be done in about 4 to 6 months
– There are exceptions, be prepared to defend them
• Measurable Output (Y)
– If the Y can’t be measured, the project can’t get done
• Need a statement of “from ____ and to ____”
– General statements of reducing defects by X% don’t provide the detail necessary to understand the problem.
– State where the metric is today and where you want it to move to.
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Beware Of Project Pitfalls• Boiling the ocean projects / Too many metrics
– Projects won’t get done in 4 to 6 months
– Could be working on too many issues
• Solutions known
– DMAIC philosophy still applies
• Micro-focused
– Savings won’t be significant
– Project may not get appropriate level of support
When the Process Owner Gets It!Knowledge Transfer Occurs - Comments from a prize Pupil
• “There is a newfound respect for the works of this Unit…”• “I have learned more about analyzing my own process flows.”• “My experience was completely positive”. • “Our changes were not subtle, they were bold…”• “I love the fact that the Auditors promoted team‐like efforts to assist with implementing the changes.”
• “I'd like to see the Office of Internal Audits develop a Six Sigma Team as part of a permanent staple of the University…”
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Six Sigma in Summary • Setting clear expectations for breakthrough in process performance
• Achieving excellence through process characterization, optimization, and control
• Creating a single approach to driving performance breakthroughs • Same roadmap and tools• Same language• Driving improvements from fact
This is just the beginning
QUESTIONS ???
William T. Bostick, CPA, CGMADirector, Office of Internal Audits
Xavier University of Louisianao: (504) 520-5243f: (504) 520-7945a: 1 Drexel Drive, Box 150
New Orleans, LA 70125w: www.xula.edu/internal-audite: [email protected]
CONTACT INFORMATION
