Six Sigma in Project Management

1st Middle East Six Sigma Forum Six Sigma – A Strategy for Achieving World Class Performance 7th to 9th December, Dubai

Sunil Thawani Manager – Business Process Improvement Union National Bank, Abu Dhabi Sthawani@unb.com 1

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 Peter Pande and Others 3

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

4

 Sigma is a letter in the Greek Alphabet

What Is Six Sigma?

• 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

5

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

2

308,000

2 times

3

66,800

5 times

4

6,210

11 times

5

230

27 times

6

3.4

68 times 7

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

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

• 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

Results Recognizing People

Aligning Developing Individual & Team skills Organization Goals

Encouraging & enabling people To participate in Improvement

Identifying & designing processes to deliver strategy

Establishing Process management System to be used

Implementing Process Measures

Improving processes to satisfy and Generate value For customers

Partnerships Resources Leadership

Competency Productivity

Satisfaction Involvement

Recognition

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

Utility consumption Timeliness Inventory

12

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.

14

Six Sigma Project Methodology

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

16

Define - Critical to Quality (CTQ) ď Ź

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 ď Ź

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.

19

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

20

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.

22

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.

23

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; 24

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.

25

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

26

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).

27

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 

28

Thank you Q&A

29