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
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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

World Class Performance

With 99 % Quality
For every 300000 letters delivered For every week of TV broadcasting per channel Out of every 500,000 computer restarts 3,000 misdeliveries

With Six Sigma Quality

1 misdelivery

1.68 hours of dead air 1.8 seconds of dead air 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


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

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.

Sigma Defects Per Million Level Opportunities 690,000 1 2 3 308,000 66,800

Rate of Improvement 2 times 5 times

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5 6

6,210
230 3.4

11 times
27 times 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

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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
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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
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 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
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Six Sigma & EFQM/ DQA Framework Enablers

Personally actively Involved in improvement

Results
Recognizing People

People

Aligning Developing Individual & Team skills Organization Goals

Establishing Process management System to be used

People Results
Satisfaction Involvement

Competency Productivity

Key Perf Results

Gross margins Net profit Sales Market Share

Recognition

Encouraging & enabling people To participate in Improvement

Identifying & designing processes to deliver strategy

Implementing Process Measures

Customer Results
Delivery, Value, reliability Response Time to customers Process cycle time Process costs Defect rates Productivity

Policy & Strategy

Improving processes to satisfy and Generate value For customers

Repurchase satisfaction

Time to Market
Cash flow Maintenance cost Return on assets

Recognizing Individual & Team effort

Partnerships Resources
Leadership Processes

Society Results

Utility consumption Timeliness Inventory

Innovation and Learning

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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.
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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

Project Phases Define Measure Analyze Improve Control

Collect data Analyze data, Identify, on size of the establish and evaluate and selected confirm the select projects problem, vital few for determinants improvement identify key customer of the Set goals requirements, performance. Form teams. Determine key Validate product and hypothesis process characteristic.

Improvement Establish strategy standards to Develop ideas maintain to remove root process; causes Design the Design and controls, carry out implement and experiments, monitor. Optimize the Evaluate process. financial Final solutions impact of the project

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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/-. Improved delivery performance Timely delivery On time delivery to schedule Delivery within +/- 1 hour of scheduled delivery time

Customer needs Level 1 CTQ Level 2 CTQ Level 3 CTQ

Current process sigma level - 2.43 or 175889 DPMO

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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.

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Define - Performance Standards

Output unit Output characteristic Project Y measure A scheduled delivery of freight Timely delivery 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. LSL = -60 minutes USL= +60 minutes Scheduled time or zero minutes deviation Delivery earlier or later than 1 hour. 1 opportunity for a defect per scheduled delivery of freight.
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Specification limits Target Defect No. of defect opportunities per unit

Define - SIPOC Diagram

Supplier
Stores Manager

Input Process Steps

(high level)

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

Customer Detailed process maps drawn

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
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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
Q&A

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