six sigma - an executive overview (mercer)

Larry T. Mercer, Ed.D., FACHESix Sigma Black Belt

Virginia HIMMSOct 4, 2006

Six Sigma

An Executive Overview

2

Agenda

• Background

• Voice of the Customer

• Project Team Roles

• Variation

• Key Concepts

• DMAIC

• Project Definition Phase

3

Why Six Sigma?

• Study by the Institute of Medicine titled,

To Err is Human: Building a Safer Health System

– 98,0000 people die each year as a result of preventable medical error in hospitals

• The estimated annual cost of preventable inpatient adverse drug events is $2 billion

4

What Is Six Sigma?

• Sigma () is:– The 18th letter of the Greek alphabet

– The symbol for standard deviation

– A measure of variation

• Six Sigma is also a:– Vision

– Philosophy

– Management System

– Problem Solving Methodology

5

Six Sigma Goals

• Improve Patient Safety

• Improve Operating Efficiencies

• Improve Patient Care

• Improve Financial Performance

6

Six Sigma – Where Did It Come From?

• 1984: Motorola Engineer Bill Smith originates the concept of six sigma.

• 1988: Motorola wins prestigious Malcolm Baldrige National Quality Award.

• 1998: American Society for Quality rolls out its six sigma training program.

7

Benefits Realized From Implementing Six Sigma

Company Industry Benefits

Diversified products

$5 Billion by 2000 (Since 1996)

Technology$1.16 Billion in 2000/2001

Technology$85 Million early 2000

Technology $1.5 Billion in 1999

Financial Services $2.5 Billion in 1999

Financial Services

$1.45 Billion since 1998

Diversed Manufacturer

Average of $600 M/year since 1995

Company Industry Benefits

Automotive$475 Million in 2001

Chemicals $700 Million

Chemicals$1.5 Billion (EBIT) by 2003

Products£110 Million in 2000

Mining and Metals $34 Million in 2000

Energy and Utilities

$3 Billion since 1995

Products $40 Million in 2001

GeneralElectric

*Source IBM

8

Imagine If… You could select one of your

biggest problems . . . ?

Assign one of your best people to work on it . . . ?

Provide that person with all the tools, resources, and management support needed to fix it . . . ?

And guarantee them uninterrupted time and focus to work on it . . . ?

9

Practical Solution

ControlControl

Statistical Solution

ImproveImprove

The Six Sigma DMAIC Process

Practical Problem

MeasureMeasure

Statistical Problem

AnalyzeAnalyze

Remember: the goal is the practical solution.

10

Why We Do Six Sigma

Intangible---Difficult or Impossible to Measure

• Re-inspection

• Lost or missing information

• Lost customer satisfaction

• Re-design of software

• Modifying service processes to correct deficiencies

• Redundant operations

Tangible---Measurable

•Inspection

•Warranty

• Rework

• Rejects

• Scrap

11

CUSTOMER FOCUS

• Voice of the Customer

• CT’s (Critical To …)– CTQ – Critical to Quality - GOOD

– CTD – Critical to Delivery - FAST

– CTP – Critical to Price - CHEAP

There are 3 key areas to Customer Focus.

12

Supplier Perspective(Theatre)

Management) Good

Popcorn No Sticky

Floors Clean

Restrooms Short Lines

Good, funny, entertaining movies

Customer Perspective(Movie Goers)

. . . So why do such differencesin perspective exist ?

Critical to Satisfaction Critical to Satisfaction Characteristics for Movie GoersCharacteristics for Movie Goers

Ticket Sales

Concession Sales

Labor/Work Force Costs

Profit Reports

Other...

13

Understanding Variation (Six Sigma)

LSL USL

Anything outside the specification limits

represents quality losses

Goalpost Mentality

Traditional Philosophy

LSL USL

Any deviation from

the target causes

customer lossesVariation is Evil!

Taguchi Philosophy

14

Variation

USLLSL

T

A standard deviation (s) is a measure of the amount of spread or dispersion about the

mean ().

Mean (m)Standard Deviation (s)Lower Specification Limit (LSL)Upper Specification Limit (USL)Process Target (T)

A three-sigma (3s) process

15

Basic Statistics and

Normal Distribution Probabilities

68%

95%

99.7%

Areas under the curve are probabilities.

16

Six Sigma. . . An Aggressive Goal

Sigma is a statistical unit of measure that reflects process capability. The sigma scale of measure is perfectly correlated to such characteristics as defects-per-unit, parts-per million defective, and the probability of a failure/error.

2 308,5373 66,8074 6,2105 2336 3.4

- Level(short-term)

- Level(short-term)

Defects per Million Opp.(long-term)

Defects per Million Opp.(long-term)

17

Can You Relate?

99.99966% Good (6 Sigma)

5,000 incorrect surgical operations per week

200,000 wrong drug prescriptions each year

1.7 incorrect surgical operations per week

68 wrong prescriptions per year

99% Good (2.8 Sigma)

18

Common Questions• What is so different about Six Sigma from Initiatives of

the past?– It builds an infrastructure with lines of accountability

throughout the organization

– It stresses breakthrough improvement

– Emphasis is placed on producing better, faster, and lower cost services than the competition

– Emphasis on measurable results

19

Roles

• The roles inside a Six Sigma organization:

–Executive

–Financial Representative

–Champions

–Process Owners

–Black Belts

–Green Belts

–Team Members

20

Typical Interaction During Phases

Analyze ControlMeasure ImproveRecognize Define Realization

Execs/Finance/ Champions/

Process Owners

BBs / GBs / Team Members

Process Owners / Finance/

Champions

Properly managing interaction of these circles can make or break the success of Six Sigma.

21

Executives & Deployment Leaders• Role

– Own the vision, direction, and results

• Responsibilities

– Determine the scope of deployment

– Identify financial, project, and training related goals

– Identify strategic priorities to which Champions will align projects

– Drive the use of 6 as standard problem solving methodology

• Training: 1 to 2 days

• Pitfalls: Without visible support, Six Sigma struggles

22

Six Sigma Core Team• Who are they?

– Multidisciplinary team of 10 or so leaders from key supporting functions of the organization including:

– Nursing

– Finance

– Human Resources

– Information Technology

– Training

• Responsibilities– Take the executive vision and make it a reality

– Create supporting infrastructure which enables long term success

• Training– 1-5 day

23

Six Sigma Champions• Who are they?

– Typically a Director

– Organizations can identify “hands-on” or “executive” Champions

• Role

– Own the financial results of projects

• Responsibilities

– Defines the projects

– Selects Black Belts

– Removes roadblocks to project success

– Report project activity to executive team

24

Six Sigma Champions - continued

• Training

– 1-3 days focused on high level understanding

of Six Sigma, the hows of project recognition

and definition

25

Process Owners

• Role– Owner of the solution delivered by Six Sigma team

– Could be Director, Manager

• Responsible– Implementation of the team solution

– Assist with culture change at departmental level

– Assist Champion with potential project identification

– Co-leads realization phase with Finance Rep

– Provides resources to serve as team members on projects

26

Team Members• Role

– Extend the reach of Six Sigma into the department

• Responsibilities– Assist Black Belts with data collection and tool application

– Provide invaluable process expertise to Six Sigma team

– Assist Process Owner with the long-term implementation of solution

• Training: 1-3 days

27

Team Members continued

• Training– Trained by Black Belts during team meetings

– 4 to 8 days

• Pitfalls– Teams that are too small or too large may prevent

project success

– Recognition of team member contribution is critical throughout the life of the project

– Black belt must seek out and get buy-in from Team Members

28

Green Belts

• Role– Carry the language of Six Sigma deeper into the

organization

– Accelerate number of employees positively affected by Six Sigma

• Responsibility– Become departmental advocate

– Part-time implementers of smaller scope projects with direct impact to daily non-Six Sigma duties

– Assist BB with team activities and tool application to project area

• Training: 5 -15 days

29

Black Belts

• Role– Practitioner of DMAIC Methodology

• Responsibilities– Ideally full-time facilitator / leader of Six Sigma project

team

– Team should discover and recommend project solution

– Executes 4 to 6 projects / year

• Training– 4 to 5 weeks of DMAIC training

– Personal and professional development for later leadership roles

30

Black Belts continued

• Pitfalls– The likely success of Six Sigma projects dramatically

decreases without the implementation of full-time Black Belts

– If BBs are not selected from amongst the best within an organization, it sends the wrong message

31

Master Black Belt

• Role– Varies from organization to organization

– Should make Champions life easier in mature deployment

• Typical Responsibilities– Instructor and / or mentor of Black Belts and / or Green Belts

– Training material developer

– Deployment assistant to core team and Champions

– Keeper of project backlog list

– Driver of project closure process

– Leader of larger scoped projects

• Training– Certified BB + additional course work and requirements

32

Typical Time Commitments During 1st Project Phases

Green Belt or Black BeltGreen Belt or Black Belt

Six Sigma Exec & Leader

Recognize

Define

Mea

sure

Analyze

Impro

ve

Control

Realiz

e

Lead

Review

Support

Finance Rep

Process Owner

ChampionChampion

Month 0 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6

Now, lets look at the interactions.

33

Project Selection Essentials

• Executives, Management, and Champions trained in

project selection

• Manageable number of projects to be launched

• Projects scoped properly

• Focus on both efficiencies and customer benefit

Project Scope -- “Common Mistakes”

• Most common: Scope too broad:– “Solving world hunger.”

– Symptoms: Many outputs, vague goals, poorly defined problem

– Solution: Divide problem into several, measurable projects

• Other mistakes:– Too easy. Problem is known. Solution: fix it!

– Policy issues do not make good BB projects

– Long term development project -- capital intensive

– Process or product re-design

35

Using S.M.A.R.T. For Project Objectives

SSpecific

MMeasurable

AAggressive yet Achievable

RRelevant

TTime-bound

36

Money Matters!

• Whenever possible, the financial benefits of a Six Sigma project should be calculated and tracked

• The typical financial Six Sigma project goal is > $175k in hard dollar savings

37

Reviewing Project Definition1. What is the Problem? 2. Who is the Customer?

3. Where is the problem taking place?

4. When is the problem occurring?

5. How Much? 6. How do you know this?

7. Define the Unit of Measure and the Defect.

8. What is the primary metric?

9. Baseline 10. Entitlement

11. Financial Impact 12. Strategic Link

As project Champions, you need these answers!

38

The DMAIC Process

Optimize & Refine

Solutions

Control X’s

& Monitor Y’s

Close & Hand-Off

Project

Control

Refine the Project

Process Maps &

Simplification

C&E for Variable

Reduction

Process Capability

MeasureFailure Modes

& Effects Analysis

ID Variation: Graphical Analysis

Plan for DOE

AnalyzeDesign &

Exec1ute An Experiment

Define Y=f(x)

RecommendedChanges

Improve

MeasurementCapability

ID Variation: Statistical Analysis

Data Collection Systems

39

Measure Phase Deliverables1) Refine the Project

– Confirm project scope and objectives with data & forecast

– Establish the key project metrics and track using Metrics.xls

2) Process Maps– Process flow diagram

– Detail process map (inputs / output detail documented)

3) Simplify the Process (lean techniques)

4) C&E Analysis for Variable Reduction– Fishbone

– C&E Matrix

5) Measurement and Process Capability– Measurement Systems Analysis

– Short-term and Long-term Sigma Level

6) Develop Data Collection System

7) Complete Phase Summary– Conclusions, Issues, & Next Steps

Refine the Project

Process Maps &

Simplification

C&E for Variable

Reduction

Process Capability

Measure

MeasurementCapability

Data Collection Systems

40

Measure Phase Tools

• Process Mapping– Macro Map

– Process Flow Diagram

– Detailed Process Map

• Cause and Effect Tools– Fishbone Diagrams

– C&E Diagrams

• Basic Statistics

• Capability Analysis

• Measurement System Analysis

41

Start With a Process Map

• Refer to a macro-map from an expense accounting example

Account Charge

Documentation Sent to Finance

Finance Personne

l Enter Charge

on System

Finance Distributes

Departmental Expense Reports

Departmental Heads

Request Change

Department Heads Review Report

42

• Create a simple fishbone from the Expense macro-process map.

Posting Corrections

error filling out fo

error reading form

error keypunching

computer clitch

bad forms

outdated guides

outdated procedures

different deptdefini

Personnel

Machines

Materials

Methods

Measurements

Environment

Cause-and-Effect Diagram

43

Analyze Phase Deliverables1) Describe Project

– Objective statement

– Metrics.xls charts

– Initial validated forecast2) FMEA

3) ID Variation: Graphical Methods

4) ID Variation: Statistical Methods

– Correlation & Regression

– Means testing

– Sigma testing

– Proportions testing

– Contingency tables5) Planning for DOE

6) Complete Phase Summary

– Conclusions, Issues, & Next Steps

Failure Modes & Effects Analysis

ID Variation: Graphical Analysis

Plan for DOE

Analyze

ID Variation: Statistical Analysis

44

The Analyze Phase

• What this phase delivers:– A list of input factors that significantly affect output

performance

– Evidence of the significance through the use of analytical tools on data

Analyze Phase tools:– Graphical Analysis

– Histograms, scatterplots, boxplots

– Hypothesis testing

– Tests for location, spread, and shape

– Failure Mode and Effects Analysis

45

Graphical Analysis - Example• Productivity seems to be consistent across Pullers

– Puller as a significant factor will not be considered further

• Productivity has changed across the months

– Time-related variables will be investigated

46

Did NotCommit Crime

Commited A Crime

Did

No

tC

om

mit

Cri

me

Correct Verdict

GuiltyGoesFree

Co

mm

ited

A

Cri

me

Innocent Person

Convicted

CorrectVerdict

True State of Nature

Ver

dict

Hypothesis Testing – An Overview

• Two hypotheses are offered:– Ho: Typically represents the status quo

–Assumed true unless the data

overwhelmingly shows otherwise

– Ha: Typically represents a change

–Proposes (posits) that an input

factor impacts an output factor

Example: – Ho: Defendant is Innocent

– Ha: Defendant is guilty

47

FMEA – An Example

Process Step with potentially critical inputs identified by process mapping and surviving the C&E filter

Risk Priority Number

Used to rank which process steps are

important

Process Step

Potential Failure Mode

Potential Failure Effects

SEV

Potential Causes

OCC

Current Controls

DET RPN

Make Calculations

Incorrect Calculations

Delayed Processing

Incorrect Refund 6 Math Error 7

Visual Check 9 378

Bad Inputs 4Visual Check 4 96

Severity x Occurrence x Detection = RPN

6 x 7 x 9 = 378

48

Improve Phase Deliverables1) Describe Project

– Objective statement

– Metrics.xls charts

– Review validated forecast2) Design & Execute an Experiment

– DOE

– Pilot Trials3) Define of Y = f (x)

– Main Effects

– Interactions

– Non-linearity4) Summary of Changes Recommended

5) Complete Phase Summary

– Conclusions, Issues, & Next Steps6) Present Next Project Description

Design & Exec1ute An Experiment

Define Y=f(x)

RecommendedChanges

Improve

49

Control Phase Deliverables1) Describe Project

– Objective statement

– Metrics.xls charts

– Review validated forecast2) Optimize the Outputs and Refine the Solution

– Implement Recommended Changes3) Control Xs, Monitor Ys

– Initiate Control Plan

– Develop Project Metrics Monitoring4) Close and Hand-off Project

– Execute Transition Plan

– Validate Final Financial Forecast

– Complete Final Report

Optimize & Refine

Solutions

Control X’s

& Monitor Y’s

Close & Hand-Off

Project

Control

50

Focus of Six Sigma Problem Solving

Y Dependent Output Effect Symptom Monitor

X1 . . . XN

Independent Input-Process Cause Problem Control

To get results, should we focus our behavior on the Y or X?

ff(X)(X)Y=Y=

51

Define

Measure

Analyze

Improve

Control

Realize

Recognize

Project Turnover and DMAIC

Project Turnover

52

Elements of successful turnover

• Pre-defined procedure is consistently followed

• Results are thoroughly communicated in impacted area

• Buy in is achieved and skepticism addressed

• The process owner is supported

• Two months or less in Control phase

• Vital inputs, Control Plan and Project Action Plan agreed upon

• Financial results communicated and clearly understood

53

Elements of Successful Turnover (continued)

• Clear plan and buy in for monitoring results

• Visibility for successful projects are provided quickly

• New project ideas are generated

• Black Belt is free to move on

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Questions?