Six Sigma

(A Strategy for Achieving World Class

Performance)

Purpose of Presentation
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
2

World Class Performance

With 99 %
Quality

With Six Sigma

Quality

For 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

Source: The Six Sigma Way by

3 Peter Pande and Others

What is Six Sigma ?

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?

Sigma is a letter
in the Greek
Alphabet

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

Six Sigma Definitions

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.
6

Sigma Defects Per Million

Level Opportunities
690,000
1

Rate of
Improvement

308,000

2 times

66,800

5 times

6,210

11 times

230

27 times

3.4

68 times
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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 Division
Source: Best Practices Report
8

Bank of America SS Experience

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
9

Bank of America SS Experience

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
10

High Level Business Metrics

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

Operating Level Metrics

Revenue
Capital Utilization
Return on Assets
Profits

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
11

Six Sigma & EFQM/ DQA Framework

Enablers
Personally
actively
Involved in
improvement

People

Developing
Team skills

Encouraging
& enabling people
To participate in
Improvement

Results
Recognizing
People

Aligning
Individual &
Organization
Goals

Identifying &
designing
processes to deliver
strategy

Establishing
Process
management
System to be
used

Implementing
Process
Measures

Leadership

Partnerships
Resources

Competency
Productivity

Satisfaction
Involvement

Recognition

Improving
processes
to satisfy and
Generate value
For customers

Key Perf
Results
Gross margins
Net profit
Sales
Market Share

Customer Results
Delivery,
Value,
reliability

Response
Time to
customers

Repurchase
satisfaction

Policy & Strategy

Recognizing
Individual &
Team effort

People
Results

Process cycle time

Process costs
Defect rates
Productivity

Time to
Market
Cash flow
Maintenance cost
Return on assets

Society
Results

Processes

Innovation and Learning

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Utility
consumption
Timeliness
Inventory

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.
13

Six Sigma Results

Company
General Electric
JP Morgan Chase

Annual Savings
$2.0+ billion
*$1.5 billion (*since inception in
1998)

Motorola
$ 16 billion (*since inception in 1980s)
Johnson & Johnson $500 million
Honeywell
$600 million
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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Six Sigma Project Methodology

Project Phases
Define
Define

Measure
Measure

Analyze
Analyze

Improve
Improve

Control
Control

Collect
Analyze
Improveme Establish
Identify,
data on
data,
nt strategy
evaluate
standards
Develop
size of the
establish
and select
to maintain
selected
and
ideas to
projects for
process;
problem,
confirm the remove
improveme
Design the

identify
vital few
root causes
nt
controls,
Design and
Set goals
key

implement
Form
customer
determinan carry out
and
requiremen ts of the
experiment
teams.
monitor.
ts,
performanc s,
Evaluate
Determine

e.
Optimize
financial
Validate
key
the
impact of
product
hypothesis
process.
the project
Final
and
process
solutions
characteris
tic.
15

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

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Define - Critical to Quality (CTQ)

Focus

on customers generating annual

revenue of USD 400,000/-.

Customer
needs
Level 1 CTQ
Level 2 CTQ

Improved delivery
performance
Timely delivery
On time delivery to schedule

Level 3 CTQ

Delivery within +/- 1 hour of

scheduled delivery time

Current process sigma level - 2.43 or 175889 DPMO

17

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.

18

Define - Performance Standards

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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Define - SIPOC Diagram

Supplier

Stores Manager

Input
Process Steps

Stores Order

(high level)

Output

Receive order
Plan delivery
Dispatch Driver with goods
Deliver goods to stores
Receive delivery
Received freight with
Documents
Store Manager

Customer
Detailed process maps drawn

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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
21

Improve
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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Control
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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Key Lessons Learnt

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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Key Lessons Learnt

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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Key Lessons Learnt

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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What Makes Six Sigma Different?

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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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

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Thank you
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