The Six Sigma

Initiative at Engro
Change for the Best
Today’s Agenda
Six Sigma Overview

Engro Project Phases

n
Challenges

Future

Overview Project Challenges Future

Discussion Overview

• What is Six Sigma?

• Project Phases and project stakeholders
• Change management aspects of the project
• Managing project execution
• Maintaining buy-in and commitment for the goals of
the project
• Using the VOC – Voice of the Customers – for
sustainability of the project

Overview Project Challenges Future

Who is Engro?

Engro
Project: Energy
Largest Limited
single train
Fertilizer Engro
plant in Innovative
World Automation
Limited

Overview Projects Challenges Future

 Why Six Sigma?

‘To be the premier Pakistani

enterprise with a global
reach, passionately pursuing
value creation for all
stakeholders’

Overview Projects Challenges Future

Development Process
• Quality Team formed: February 2005, to study quality and business
improvement systems

• Research, case studies, overseas / local visits, crystallized and

presented to MC in June 2005

• Six Sigma recommendation made to MC - concept approved

• Permanent Business Improvement/ Six Sigma Quality Section formed

• Deployment plan presented to MC and approved

 Six Sigma is….
• Methodology
– driving and achieving transformational change
• Approach
– to identify and eliminate defects with a customer-centric, data-driven,
problem-solving method and statistical analysis
RECOGNIZE
DEFINE MEASURE ANALYZE IMPROVE CONTROL TRANSFER

•Organizational structure
–Champions: Functional leader, project ‘road-block’ remover, stewards
–Black Belts: Full-time resources, Six Sigma experts and trainers
–Green Belts: Project leaders, part-time, 10-day training
–Yellow Belts: Project members, 3-day training

Overview Projects Challenges Future

 The Definition of ‘Sigma’ is…..
The Definition of “Sigma” Is….
... a measure of “goodness”, using a universal
measurement scale.
Sigma

7
6
5
4
3
3.4
DPMO (Defects
233 Per Million
6210 Opportunities)

66810
Six Sigma in simple language….
• Business management process that eliminates defects from work processes

• As defects decrease, so do costs and customer satisfaction increases

• Six Sigma literally means 3.4 defects per every million occurrences
• The program provides a solid route to get to the control function, the hardest thing to do in
a corporation – Jack Welch
• Leverages the underutilized assets of the best-managed corporations – the intellectual
resources
• Benefits are quantified in $ terms, tangible and quantifiable increases in shareholder value

• Other systems focus on the cost of quality. Six Sigma principle is that quality is free – the
more 0-defect production, the more ROI

• Methodology allows us to reduce diverse processes and practices to a common

denominator – defects per unit and sigma
• Uses are as varied as the companies deploying it: sustainable culture improvement, fix
annoying problems, staying ahead of competition etc
6σ’s Culture of Defect Removal
3.4 DPMO
Process capability at an accuracy of 99.9997%

6σ
233 DPMO

5σ 6,210 DPMO

4σ 66,810 DPMO

3σ Typical Manufacturing

2σ
Typical Transactional

DPMO: Defects Per Million Opportunities

Defects: Anything that results in internal /external customer dissatisfaction

Overview Projects Challenges Future

Six Sigma in Our Daily Lives

Occurrences Prescription Writing

Tax Advice
1,000,000 Restaurant Bills
Payroll Processing
100,000

Baggage Handling
10,000

Best in
1,000
Class
100
Airline
Safety Rate
10

1 2 3 4 5 6 7 Sigma Level
Six Sigma Developed Over Last 20 Years
World-Class Companies Today…
Chemical Companies Quality/ Business Improvement Program
Dupont Six Sigma
Dow Chemicals Six Sigma
Esso Imperial Oil Operational Excellence based on Six Sigma
Exxon Best practices replication
FMC Six Sigma
LESCO Fertilizers Six Sigma
Sherwin-Williams Six Sigma
Eastman Chemical Six Sigma
Avery-Dennison Six Sigma
Pilkington Glass Six Sigma
Others
GE Lean Six Sigma
Motorola Six Sigma
Rolls Royce Six Sigma
Honeywell Lean Six Sigma
Wipro Six Sigma
Siemens Top Plus, Six Sigma
Vodafone Six Sigma
Monsanto Six Sigma
Success Abroad
• Dupont validated over $2 billion in savings from implementation of Six
Sigma

• GE realized over $1.8 billion in savings from Six Sigma during 1996 to
1999 (initial phase)
– $2.7 billion of improvements in working capital in 2003–04
– Committed to reducing cost by generating $4 billion of
productivity/ year

• Emerson launched Total Quality in 1992

– Reduced manufacturing cost by 50%, cycle time by 62%, scrap
and rework by 50% and cost of quality by 25%
Dupont: 6 Sigma complementing Strategy
Savings and Benefits

"Six Sigma continues to play a major role in

achieving all of our business objectives, both
productivity and growth. We are now finishing
our sixth year of Six Sigma at DuPont.

….over 25 % of our projects are aimed at

growing revenue. Six Sigma has become
the way we work at DuPont and is a key
approach to improving execution as we
enter 2005."
"We are also continuing our progress in productivity. Last year, DuPont Six
Sigma added more than $700 million in projects with hard, validated
benefits for the company.

…nearly 17,000 employees have taken Six Sigma training. We currently

have more than 2,500 top-line growth projects.

We are now evolving to more enterprise-wide projects and more “end-

to-end” projects that build our process capability."

Overview Projects Challenges Future

 GE journey to Six Sigma

2000 design for six sigma DMADV

1995 six sigma quality DMAIC

1992 making customer’s winners

1991 change acceleration process, productivity, NPI, QMI

1991 process improvement, CI, re-engineering

1990 productivity, best practices adoption, looking outside

1989 work-out sessions, empowerment, bureaucracy busting, actions

Overview Projects Challenges Future

 Typical Program Profile
Early Phase Developing Phase Mature Phase
•Introduction and •Belts grow in confidence •Fully sustainable change in place
start of program and competence
•Major problem areas tackled
•First Belt projects •Experienced belts
•Continuous improvement a ‘way
underway increase
of life’
•Infrastructure •Infrastructure in place
being developed and driving the program
•Tools become familiar
•DMAICT cycle shortens
•Project size and
complexity increases
•Solutions to key problem
areas deliver significant
benefits

Overview Projects Challenges Future

5 years
 Six Sigma and BPR
Similarities:
• Some tools in common: Process mapping, value-stream mapping, mind-maps etc
• Both have goals of improvement and driving bottom-line results
Differences:
• Standard benchmarking: 2 sigma means the same in manufacturing, marketing, HO
• BPR does not build in sustained management and leadership roles
• Project Definition: BPR projects often have very wide scope, ‘world hunger’
• Change management: Does not institutionally address resistance to change
• Rigor in methodology: Success rate if jump from ‘Define’ to ‘Improve’
• Dedicated resources: Black Belts are full-time – initially external, (also almost full-time)

Source:“Collaborative Business Engineering: A Decade of Lessons

from the Field.” Journal of Management Information.Systems (Spring 2004)
 Examples of Defects
• Poor process capability
• Low yield rate • Constrained capacity
• High operating costs • Measured with variable data vs.
• High customer failure attribute data
• High scrap/rework costs • High product volume
• High quality costs • Perceived poor quality
• High inventory/WIP • Emissions control
• Incoming product quality problems • High delinquency to customer
• Long cycle times • Frequent set up requirements
• Unpredictable quality • High maintenance costs
• Unpredictable product performance • Low machine utilization
• Inaccurate information • Effluent reduction
• Missing information • High set up costs
• Completeness • De-bottlenecking
• Equipment life
Overview Projects Challenges Future
Examples of Successful Six Sigma projects
ƒ Increase process throughput $400k
ƒ Reduce cycle time of assembly $420k
ƒ Reduce process downtime and scrap $320k
ƒ Reduce freight costs $700k
ƒ Reduce costs of waste disposal $1200k
ƒ Reduce bulk material transportation costs $270k
ƒ Reduce amount of account receivable $500k
ƒ Reduce caustic use of Process Z $2000k
ƒ Material loss: Reduce scrap & increase yield $150k
ƒ Reduce wet milling operations costs $300k
ƒ Reduce warranty costs 50% $500k
ƒ Reduce invoice to cash cycle time by 50%.
ƒ Reduce processing time of billing customers for 3rd party orders.
ƒ Reduce overpayment of benefits.
ƒ Improve mortgage center first call rate from 76% to 99%
ƒ Reduce document retention for legal cases.
ƒ Reduce cycle time of legal transcript transmittals

Overview Projects Challenges Future

 Deployment Plan 2005-2006
Domain: Engro Chemical only in 2006-2007 – JV’s in next phase

• Champions Workshop Sept 2005

• Building stake with key contributors Ongoing
• Infrastructure development Dec 2005
• Program launch Feb 2006
• Organizational awareness training Feb onwards
• Specialized training June onwards

Project focus areas:

• Improve efficiency of processes in Manufacturing, Marketing,
Corporate Services
Overview Projects Challenges Future
Benefits and Success Possible Only If
–Visibly demonstrate support in speech and actions

–Put best people on teams to ensure success

–Ensure organizational ‘critical mass’

–Acquire requisite technical knowledge to lead the initiative

–Participate actively through various phases of project

implementation

–Implement clear reward and recognition program to

reinforce the desired behavior and mindset
Overview Projects Challenges Future
 “If you don’t know where you’re
going any road will take you there.”
Successful Rollout path

Vision Strategy Structure Process People

Strategy Structure Process People Confusion

Vision Structure Process People False Starts

Vision Strategy Process People Interference

Vision Strategy Structure People Inefficiencies

Vision Strategy Structure Process Frustration

 Message for Each Employee
Six Sigma will help to
deliver:
The Brand Promise
6σ Meet or Exceed Customer 6σ
Expectations (CTQs) On
Time, Every Time

Overview Projects Challenges Future

JCB

KAIZEN
(CONTINUOUS IMPROVEMENT)

COMPANY STRENGTH •Implemented system for productivity,

SIMPLE & ROBUST SYSTEMS BUILT
simplicity, transferability of people.
AROUND OUR PEOPLE QOS
PULL
(FULL WORK •Hourly target board updated by

PE
E

SYSTEM supervisors on plant floor.

PL

SYSTEM)

O
O

PL
PE

E
•KPIs displayed at plant floors and
ONE ERROR each department – this was their

PEOPLE
PIECE PROOF Balanced Scorecard.
PEOPLE

FLOW (POKAYOKE)
•Large master plan of all improvement
STOP projects prominently displayed around
TAKT CALL organization to track progress and
TIME PE WAIT deadlines.
PE

O (ANDON)
O

PL •Started improvement program with

PL

E
JIT JIDOKA
E

Kaizen.
FOUNDATION
•Project results tracked and reported
MAINTENANCE STANDARDISATION VISUAL FACTORY
every quarter.
(TPM & QCO) (STANDARDISED WORK) (5S)
Training Progress

• Make implementation of learning part of the

appraisal
• Path to Project independence (Workout and 6σ)
and training independence
Self-Sufficient
Shadow deliver
Co-deliver
Training includes delivery of one project
 Project Selection approach
Customer Other Voices:
CTQs: of the Process, Situation SWOT
Voice of People and Analysis Analysis
the Customer Stakeholders

Engro’s Strategic
Objectives Assess severity,
urgency
and capability

High Impact Projects

Simplification
Simplification
Simplification==Cost
CostReduction
Reduction
Why Do Most Improvement Efforts Fail?

1. Poor change 2. Lack goals and

strategy metrics

7. Treated like a 3. Weak results

Panacea focus
Program Failure

6. Lack critical
4. Wrong scope of
mass of
effort
involvement 5. Gaps in problem
solving approach
Challenges We Are Facing
Application of
learning & tools
in daily work
- KISS
Train for deeper tools’ utilization. Require
analyses for all presentations/ business decisions

Lack of time for

Battle of Priorities – massive growth. Incorporate
value-added
Safety and Six Sigma into employee appraisals
project work

Lack of real- Electronic Application to track and steward

time stewarding progress of all projects across company
of projects

Managing the
change – Dept. ambassadors, reward and recognition,
sustaining buy-in implement CAP. Poster child projects

Projects not tied

to help achieve Initial Dashboard introduced – strategy map
existing objectives for the organization. Key focus areas

Overview Projects Challenges Future

John P. Kotter: 8 stage change Mgmt Process
First Three Stages
1. Establishing a sense of urgency
- Examining the market and competitive realities
- Identifying and discussing crises, potential crises, or major
opportunities

2. Creating the Guiding Coalition

- Putting together a group with enough power to lead the
change
- Getting the group to work together like a team

3. Developing a vision and strategy

- Creating a vision to help direct the change effort
- Developing strategies for achieving that vision
 Next Three Stages
4. Communicating the Change Vision
- Using every vehicle possible to constantly communicate the new vision
and strategies
- Having the guiding coalition role model the behavior expected of
employees

5. Empowering Broad-Based Action

- Getting rid of obstacles
- Changing systems or structures that undermine the change vision
- Encouraging risk taking and nontraditional ideas, activities, and
actions

6. Generating Short-Term Wins

- Planning for visible improvements in performance, or wins
- Creating those wins
- Visibly recognizing and rewarding people who made the wins possible
 Last Two Stages
7. Consolidating Gains and Producing More Change
- Using increased credibility to change all systems, structures, and
policies that don’t fit together and don’t fit the transformation vision
- Hiring, promoting, and developing people who can implement the
change vision
- Reinvigorating the process with new projects, themes, and change
agents

8. Anchoring New Approaches in the Culture

- Creating better performance through customer- and productivity-oriented
behavior, more and better leadership, and more effective management
- Articulating the connections between new behaviors and organizational
success
- Developing means to ensure leadership development and succession

Vision Into Action

One organization – one goal
CORPORATE OBJECTIVES

DEPARTMENTAL OBJECTIVES

INDIVIDUAL OBJECTIVES
• This methodology used where Six Sigma is implemented
• Benefit tracking and measurement is done primarily through use of
Balanced Score Card (BSC) or Strategy Maps
• BSC defines organizational focus and converts expected benefits
into hard numbers
• Recognizes important interdependencies with peers and colleagues
• Reflects objectives that are within your own sphere of influence
 “We want to make our quality so special, so
valuable to our customers, so important to
their success that our products become their
only real value choice.”

“Speed is one of the true competitive advantages

in today’s business environment. Speed
includes the pace at which management can
compose and implement plans.”

Overview Projects Challenges Future

 Forging Ahead….
Overview Projects Challenges Future
Overview Projects Challenges Future