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0 SIX SIGMA INTRODUCTION
With increasing competition and emerging global markets, the pressure to provide higher quality products and better customer satisfaction has increased, hence increasing workload but necessitating lower costs. Therefore, it is progressively difficult to be a competitive company as there are fewer resources available. Six Sigma can help organisations learn from and excel at the challenges they meet. It is a tactical methodology, which decides the best approach for a given situation or process.
The success of Six Sigma is linked to a set of functional metrics that lead to significant improvements in customer satisfaction and bottom-line benefits. Some employees of a future Six Sigma organisation can view Six Sigma quality as a rigorous application of basic and advanced statistical tools throughout an organisation. They can also believe that it is a group of statistical components of old Total Quality Management (TQM) programs with the name of “Six Sigma”. Others can regard Six Sigma as a refined version of TQM. Six Sigma emphasises the knowledge of the organisation with established statistical tools to improve both the efficiency and effectiveness of the organisation in order to meet customer needs and requirements. Organisations do not necessarily need to use all the measurements described in this project. It is most important to choose the best set of metrics for a situation, metrics that yield insight into a situation or process.
Six Sigma is a business process improvement strategy, which essentially checks that a business is doing what its customers require, that the process employed is the most effective known and that variation is removed from that process to provide significantly improved consistency. Much 1
of the initial success in the application of Six Sigma was based on manufacturing applications; however, Six Sigma can also be applied in the services and also banking industries.
As clients place a high value on consistent business processes, which have been proven to be efficient, Six Sigma would meet their requirements as it is a proven methodology for delivering consistent incremental improvement. By reducing process variation, Six Sigma allows the organisation to focus on improving process capability and as Sigma levels increase, the cost of poor quality decreases and profitability increases. The principal purpose of this project is to review the Six Sigma implementation process and emphasise the importance of this methodology in the quality area. For this reason, its main framework is based on the description of the Six Sigma process. The second chapter describes the significance of Six Sigma, its statistical interpretation, the team members and their responsibilities and some of the benefits and limitations of this methodology. The third chapter illustrates the implementation process and the tools, which can be used in order to achieve highquality results. The fourth chapter is centred on showing the benefits and difficulties that can occur in the implementation process in some published case studies. In order to show that Six Sigma can be used in different sectors, the last chapter presents the application of Six Sigma in the financial services industry, with a focus on banking
2.0 SIX SIGMA APPROACHING
2.1. THE ORIGINS OF THE SIX SIGMA METHODOLOGY Six Sigma started with Motorola when an engineer (Mikel Harry) began to influence the organisation by studying the variations in processes as a way to improve them. These variations are known in statistics as standard deviations and are represented by the Greek letter sigma ( σ ). This initiative became a focal point for improving Motorola’s quality. Bob Galvin, the company’s CEO, emphasised not only variation analysis but also the principie of continuous improvement and established the goal of reducing the company defect rate to 3.4 defects per million, which is near perfection. Lawrence Bossidy, who after a successful career in General Electric transformed Allied Signal, a failing enterprise, into a successful organisation, adopted this initiative. With Bossidy’s help, Allied Signal increased its sales and profits exponentially. This example was followed by Texas Instruments, which achieved the same level of success. During the summer of 1995 Jack Welch, GE’s CEO, discovered the success of this new strategy and initiated an enormous transformation in his firm. A drive for greater efficiency and the help of Jack Welch transformed GE into a “Six Sigma organisation” with dramatic results in all departments. For example, General Electric Medical Systems introduced a new diagnostic scanner developed with Six Sigma principies with a scan time of 17 seconds (the norm had been 180 seconds). In another division, General Electric Plastics improved one process for increasing production by almost 500 thousand tons, achieving not only a substantial profit but also an important contract with Apple.
the sigma capability is a metric. indicating that when sigma increases. obtained by dividing the difference between the USL and the LSL by Six Sigma. Figure 1(a) shows a line with negative slope representing the relationship between the standard deviation (sigma) and the number of sigmas between the specification limits.2. Figure 1(c) shows the relationship between the value of sigma and the number of defects per million.2. Sigma capability measures the capacity of a process to develop without defects. the number of defects per million also increases. The capability of a process for a Six Sigma Level is two. 4 . The quality scale of Six Sigma measures the number of sigmas between the interval defined by the specification limits. which indicates that the number of defects per million decreases. which indicates how well the process is performing. the number of sigmas reduces and vice versa. The difference between the Upper Specification Limit (USL) and the Lower Specification Limit (LSL) is divided by the standard deviation to give the Sigma Level. As the sigma value increases. when the yield (%) increases. The greater the number of Sigmas between the specification limits the smaller will be the value of Sigma and the lower the number of defects. The relationship between the number of sigmas and the yield (%) is shown in Figure 1(b). It also has a positive slope. z. Figure 1(d) displays a line with a negative slope. It has a positive slope indicating that as the sigma level increases the process yield also increases. SIX SIGMA DEFINED In order to introduce a Six Sigma definition it is necessary first to state the meaning of sigma: For a manufacturing process. A defect means an unsatisfied customer.
z z (a) DPM Sigma DPM (b) yield (%) (c) Sigma (d) yield (%) Figure 1. it shows that the number of defects decreases exponentially as the sigma level increases. Table 1 lists the sigma level against the number of defects per million of opportunities. Relationship between sigma. DPM. sigma measure can be used to analyse and compare different process inside an organisation or between organisations. Sigma measures demand a clear definition of what the customer requirements are. This helps the company to realise what is important and what need to be improved. Once that have been identified the opportunity area and the requirement. With their focus on defects and defect opportunities. 5 . the organisation can define the defect and the sigma level which wants to reach. yield and the number of sigma.
5σ which is an arbitrary value based on manufacturing experience. This means that the sigma level is smaller than the company expects. In practice it is devalued by 1.807 6. with a mean of zero and a standard deviation of one and represents the short term process sigma.4 Table 1.DEFECTS PER SIGMA LEVEL MILLION 1 2 3 4 5 6 690.5) sigma level in the long term. If a company has an X sigma level in the short term it will have an (X – 1.5σ and so part of the now falls beyond the LSL. The green one has exactly the same standard deviation of 1 but the mean has shifted to the left by 1.000 308. 6 .537 66.210 233 3. Six Sigma is not an exception to this rule. as Figure 2 shows. The blue curve is centred between the limits. The output from manufacturing processes is liable to change over time. The mean or setting of the process could shift or the standard deviation might change increasing the spread of the process. The result of this is that a part of the tail of the curve would extend beyond the sigma limits. Relation between sigma level-DPM.
Comparison between Six Sigma and 99% quality 7 . 99% Quality 20. No electricity for 1 hour every 34 years. Table 2. The table shows that it is necessary to implement Six Sigma as a tool for reducing defects and increasing customer satisfaction. 5.000 surgical operations per week. 1. The results show that 99% quality is not enough in some cases.1.7 surgical operations per week. However. No electricity almost 7 hours per month.5s LSL 6s USL Figure 2. Table 2 lists a comparison of some processes evaluated by Six Sigma and by 99% quality.000 pieces of mail lost per hour Unsafe drinking water 15 minutes per day. Difference between the long and the short term Many people think that 99% quality and therefore 1% defectives is a high level to obtain. Six Sigma 7 pieces of mail lost per hour Unsafe drinking water 1 minute every 7 months. the 1% can mean the failure of the company.
• The Six Sigma methodology not only enables errors to be detected and corrected. in contrast. design.The sigma level for airline company safety is 6. which ensure that the error does not occur again. People fly by plane because it is a safe transport medium but a piece of lost luggage is tolerated. • Six Sigma is an enterprise process. which enables companies to improve their final results. the different models which can be used and the team’s structure and responsibilities of the team members which is analysed in the next stage. which seeks to identify and eliminate causes of error or defects or failures in business processes by focusing on outputs which are critical to the customer. which means less than one-half of a failure per million flights. minimising waste and resources and increase costumer satisfaction.5 sigma. In order to understand better the significance of being a Six Sigma organisation it is necessary to analyse the connotation of Six Sigma. Once Six Sigma have been defined is necessary to understand the importance of implementing Six Sigma. • It allows enterprises to reduce the number of defects in all their outputs and eliminate quality error. but it also contributes methods to create new processes. airline baggage operations work at 3. 8 .5 Sigma. and supervise their usual activities. • The Six Sigma is a business strategy.
the individual employees and teams who will conduct the Six Sigma projects are chosen. This create a new. The second is based on total quality. The information obtained from these groups will help the organisation to determine a starting point and to eliminate obstacles to achieving the goals. The second phase is related to establishing good communication with customers. Due to a reduction in demand and an extraordinary increase in the level of cheap offers. employees. The first normally begins with leader awareness training and a few improvement projects. In the fourth concerns the development of a framework for continuous process improvement. Eckes  gives three reasons for implementing Six Sigma. Six Sigma quality is one way to achieve value for the enterprise’s expenditure in terms of both money and resources. because the company will limit itself to traditional quality improvement initiatives. Enterprises want to make more products rather than to make better ones and they prefer control and correct rather than prevent. but it is also necessary to recognise improvement opportunities in all key business processes. The third reason is generally to reduce the cost associated with poor quality. and suppliers. 9 . the first reason for implementing Six Sigma is the arrival of a global economy and new competitors.3.2. which began in the early 1980s in Japan and in the new industrial countries. The third phase is based on the training of the team to assure that adequate levels of numeracy are possessed by all employees. Lastly. Six Sigma projects are organised to improve business performance. These should not only focus on manufacturing. customers began to require more value for money. In the fifth phase is selected the business process to be improved. IMPLEMENTING SIX SIGMA There are six phases to implementing Six Sigma in an organisation. more competitive market and makes enterprises adopt the level of quality that the customer demands.
which describes the logic of data process improvement. which are used in order to reduce the number of defects and to meet with the customers requirements. A new methodology was necessary and Six Sigma is emerging as the new way. Measure. introduced by Shewhart and applied the first time for Edwards Deming. The DMADV methodology should be implemented when a service or product needs to be developed in a company where does not already exist or it does not reach the specific sigma level. Total Quality Management (TQM) was very popular but its impact has begun to wane. • • • Do: Drive to the planned solution.In the 1980s. The DMADV process is designed to remove variation between what the customer wants and what actually was designed.Define. Check: compare with the objective. Six Sigma focuses on reducing process variation and then on improving process capability and in order to achieve this uses two improvement models based on the PDCA cycle. 10 . Analyse. are DMAIC and DMADV. The PDCA cycle is based on the next phases: • Plan: Identify objectives. The two Six Sigma models. The phases of DMADV are: • • Define the project goals and customer deliverables. This process is generally used for product design before manufacturing. Measure and determine customer needs and requirements. The Design for Six Sigma process is known as DMADV . The DMAIC process is used to refine the manufacturing process through reduction of common cause variation. Design and Verify. choose possible solutions. and plan an implementation test. Act: Take necessary action to achieve the goals.
5. which is going to be involved in the Six Sigma initiative. Everyone involved in Six Sigma is a leader (Champions. MBBs. In order to achieve their desired goals.• • • Analyse the process to meet the customer needs.CONTROL 1. Verify the design performance and ability to meet customer needs.ANALYZE Figure 3. The function of the leadership team 11 . and Green Belts). A Six Sigma project requires a leader who work-guide the team from the old way of working to the Six Sigma way. The fundamental objective of the Six Sigma methodology is the implementation of a measurement strategy that focuses on process improvement and variation reduction through the application of the DMAIC process which as is shown in Figure 3 is based on five cycled phases. Managers should be trained in using Six Sigma to help run the organisation. DMAIC cycle Selecting the right people is one of the key aspects of the implementation process. Black Belts.MEASURE 3. the team may need to change the way in which they have been working and thinking.IMPROVE 2. It is necessary to realise the importance of finding the correct team.DEFINE 4. Design (detailed) the process to meet the customer needs.
depends on the size of the company and the project. In large companies, there is a leadership team at the corporate level and other leadership teams for each part of the project unit and function. Eckes indicates that a good team requires different people and abilities. • • • • • Experts who understand the current process. Workers who use the process and work closely with customers. Individuals who are completely objective with the process. Customers of the process and suppliers. People who are not familiar with the process.
Intelligent and dynamic people should form the team but they must work well together to achieve the goals of the organisation. In the process of selecting people for the team, it is necessary to keep in mind some of the characteristics that the members of the team should possess i.e. they should be: • • • Creative and open minded. Good team players Respect the Six Sigma’s hierarchy.
A team generally comprises between 3 and 12 members but smaller teams are preferred because generally they work faster and produce results more quickly. Larger ones tend to require additional time and sometimes it is necessary to form sub teams in order for them to operate more effectively. In large enterprises, it is more common to have a design team of 5 or fewer people as a subset of a larger team. This structure helps the design team to establish faster results. Having considered the size of the team, the next issue is its structure.
The leadership team is the responsible for identifying the improvement opportunities and leading the project to achieve the team’s goals. In the case of a manufacturing process, the leadership is the plant manager and the members of his or her department. In the case of the finance function, the leadership team would be the CFO. A champion, Master Black Belt, Black Belts and Green Belts, should form the team. Each team should have a champion who is the business and political leader of the Six Sigma effort. He or she uses to be a member of the unit leadership team and is the maximum responsible of the project. Some of the responsibilities which a champion should have, are: • • • • •
Select the project. Designate the initial project charter. Choose Black Belts. Eliminate barriers to achieve goals. Review the project with Black Belts to detect improvement areas.
The Master Black Belts are technical leaders of the team. They have strong leadership qualities and help the organisation to integrate Six Sigma within its operations. The MBB helps the Champion to select the projects and to review the progress, they also train Black Belts, and sometimes Green Belts. The MBB should help the champions in the improvement process and implement the changes around the organisation. The Project Champion has the responsibility to see that any problems or barriers identified are resolved. Black Belts are responsible for driving organisational vitality and process consolidation, for rationalising project activities, and improving service levels through quality leadership, mentorship, and application of the Six Sigma methodology. Black Belts will work closely with 13
champions and the leadership team to ensure devotion to the quality methodology and to the tools. This includes, but is not limited to, quality reviews, validation of adherence to quality methods, strategy, and objectives. A Green Belt sometimes leads a project with the supervision of a Champion or MBB. Green Belts work part-time, devoting typically 25 percent of their time to the project. Green Belt projects are more focused than are Black Belt projects. Since Green Belts work on improvement projects in addition to their existing job responsibilities. Some companies have an objective to form all professionals will be at least Green Belts such as GE. Some Green Belts will become Black Belts. The different departments of the organisation should: • • • •
Provide data as needed by the Black Belt . Provide expertise. Provide members for the Black Belt project team. Help identify improvement opportunities.
The team needs to include people who are familiar with the process, so that they can contribute to identifying the solution. They will be involved in the process implementation. The Black Belt, Project Champion, and managers are required to prepare the future team members report. The process of forming the team is: • • • •
Choose potential team members. Potential team members accept to be in the team. Identify any barrier, which do not help to achieve the team’s goals. Black Belt and the team work on the project.
and to re-prioritise how they utilise their resources. opinions In many organisations vary between enormous enthusiasm and scepticism. Some of these are described on the next section. During the implementation process the team needs to realise that they can find out some problems because the own Six Sigma methodology has its benefits but also its limitations. Some of the benefits of Six Sigma compared to other quality improvement initiatives are according to Anthony : Six Sigma strategy focuses on achieving financial benefits beginning from the bottom line of the business..It is important to inform the team about their role in the project and the benefit that they provide to it so that they can appreciate their importance within the organisation. A Six Sigma project can be accepted without the bottom line having been identified and defined.” “This will not work in our enterprise. It integrates the human and process elements for improve. The new Six Sigma organisation needs to realise the importance of re-evaluating existing work programmes.4. 2. Six Sigma needs a passionate leadership for its successful deployment. We are doing Six Sigma already. BENEFITS AND LIMITATIONS OF SIX SIGMA When Six Sigma is first introduced. Six Sigma is usually deployed using existing resources.” etc. 15 . At the beginning of its application there can be many disappointments. giving rise to adverse comments such as :”There is nothing really new in Six Sigma compared with TQM.
Green Belts (GBs ). Six Sigma establishes an internal structure within the business. on the one hand. One of the most important problems associated with implementing the Six Sigma methodology is determining the right selection and prioritisation of projects. 16 . The statistical definition of Six Sigma is 3. Each has its place and reason to be applied to obtain the final objective of the business.4 defects per million of opportunities. enterprise which leads. 3. Sometimes. 2. Six Sigma is based on tools and techniques that have to be followed to achieve the goals. tools. Master Black Belts (MBBs). In some enterprises. for an airline company a tragic accident is more serious than a cold meal. This could take most of the project time. there are many problems in applying the change and finding the data to begin with can be difficult. For instance. but on the other it cannot assume that all defects have the same level of severity. and techniques for reducing the number of defects based on variability reduction. this can result in dissatisfied customers. and implements the approach. Six Sigma utilises statistical concepts. Black Belts (BBs). Six Sigma is based on the importance of accurate data and decision making rather than on assumptions. the process of prioritisation is completely subjective. Six Sigma like any other quality improvement initiative has its limitations. This usually takes the form of: 1. deploys.
Black and Green Belts. Six Sigma can easily digress into a bureaucratic exercise between Master. A 1. to the tools and methods used during the implementation process. The principal objective of the next chapter is to approach.5 sigma shift cannot be assumed for all processes. In this chapter has been explained the necessity of implementing Six Sigma. in more detail. The relationship between Cost of Poor Quality (COPQ) and Process Sigma Quality Level requires more justification. 17 . the role of the different members of the team and some of the benefits and limitations that this methodology imply.
Six Sigma initiatives require a radical change within the organisation and a great deal of effort for achieving the fundamental goals. Within an organisation. it is necessary to understand both the organisation and the customer. and processes may be inappropriate. Increasing quality in products and services allows a company to enter newer and wider markets. it should consider its situation in the market is going to be and use its resources to achieve the required goals. Six Sigma is a methodology for improving existing processes and creating new ones and it provides an excellent opportunity to review and revise corporate strategy plans. it is necessary for the Managers to understand the meaning of a Six Sigma organisation and what is needed to achieve it. so they have to be competitive in the marketplace and for this reason should have a good quality-price relationship. the company has to be aware of how quality can be used as a key differentiator. Several products. ineffective. Before an organisation decides to implement the methodology. After understanding the products and the services offered.0 THE IMPLEMENTATION PROCESS 3. or even inefficient and should be analysed. services. to consolidate its existing market and to centre on customer satisfaction. 18 . and even the market.1 PROJECT SELECTION In order to make a good project selection for Six Sigma application. Enterprises produce different products and services all of which are going to be consumed. The success of a company in the marketplace depends on several factors one of which is quality.3. there are a lot of interconnected processes and functions to form the end product. If a company is to achieve its goals. Each organisation decides what it is going to produce but the product should be made to suit the needs and wishes of the customer. Organisations must be able to recognise the customer and their needs and expectations.
and aims of the team. and pass through different process steps with decision points and inefficient delays as shown in Figure 4. Projects teams. In some cases these steps are easy to recognise and sometimes there is an output . Process. Inputs. need extensive training. Rework STEP START DEL AY STEP DECI SION DECI SION Less efficient side process DEL AY STOP MOVE STEP MOVE Figure 4. for implementing Six Sigma. goals. Most of the employees of a business realise that a change is needed but are unable to carry out improvement. roles. Outputs. The Six Sigma Methodology is 19 . Process maps commence at a start point and finish at a stop point.When an organisation begins to grow and develop in size and structure a lot of inadequate and inefficient processes emerge. and Customers) demonstrates areas of inefficiency and waste. The best way to start a project is to define a dynamic document. which sets out the responsibilities. The high level of the process map is called SIPOC (Suppliers. Process map. Everything that is done in life follows a process with a series of steps.When a process map is constructed it is necessary to identify the inputs and the outputs at each step.
X2. there are other processes.focused in understanding the relationships between dependent and independent variables. supervisors and engineers. When Y is centred about the targeted (desired) value and the variation in the Ys is 33 percent of the spread of the upper and lower control limits. these are enabling processes. Now the emphasis is placed on understanding the vital inputs or Xs. process engineers. It is the foundation of measure. as well as added value and enabling process steps because customer are only interested in processes which add value to the product. maintainers. Six Sigma uses statistics. This is fundamentally different to what has been done in the past which was to focus on the outcomes or the Ys. A process map is fundamental to the Six Sigma method. and map well onto customer perceptions of the delivery of the product or service. Six Sigma is aimed at producing Ys within a specific range by reducing the variation in the key influential Xs. which from the point of view of the customer. a good process map can be facilitated only with a knowledgeable and participative team of operators. we have a Six Sigma process. The core processes are those for which the customer is prepared to pay. It can be quite difficult when there are interactions occurring among the multiple Xs that influence Y and when there is a system that cannot be measured. add value for the customer. Y (output) = function of (inputs X1. They can be divided into two or three more processes. which constitute essential operations. X3… Xn). do not add value to the product. Process mapping allows the identification of core and enabling processes. However. Controlling these parameters will bring success. 20 . It is necessary to use statistical tools to characterise the influence of the Xs on the Ys. In manufacturing. The main core processes are those.
Each class is important to an organisation but the most important are the last two. They are dissatisfied customers and the company needs to analyse which are the reason to be not customer. they have more to say about poor quality and added value. The customer can be classified as external and internal customer. the necessity of customer satisfaction. Not customer is existing or past customer who has gone elsewhere and now is not customer of the organisation. they are interested in the value and worth of the business and the return on 21 . The internal customer is of equal importance to the running and smooth operation of a company . These customers are important for the organisation because they were customers in the past and now they are not. 3. In the case of shareholders. In order to achieve a good project selection the team needs to understand the classification of the customer. in which case they have a terrific interest in the operation and success of the business. The team can identified three types of possible customers: 1. Customers are those who have been consuming the products or the services of an organisation during a determined period. A external customer is any person who is not related with the organisation and tastes the product or the service of the organisation is an external customer.Sometimes they are the stakeholders.The team needs to identify who is the customer and what are the customer’s requirements. The most direct customer is the one who consumes the product or service. Sometimes the output of one process is the input of another and so if is an output is a defect it could cause more defects in the final product or service. Non-customers are potential customers. 2. and the critical to quality characteristics.
On the other hand.1. The buying process involves recognising 22 . 3. Six Sigma is aimed at increasing the value of the employees because they become more engaged with the operation of a successful business. In terms of processes. As far as employees are concerned. are first of all identify customer needs and requirements. which should be followed.1 Customer satisfaction Customer satisfaction is a fundamental measure of quality. A satisfied customer usually results in repeat business and he/she tells others about their experience with the organisation. it is important to understand the customer and the different groups that can exist. It is the experience of the customer with a product or a service of the company. First. It is possible to measure customer satisfaction on a percentage scale. then core processes. and finally convert requirements into critical to quality characteristics.investment. In simple cases it is assumed that there is only one consumer however in other cases the decision making unit is more complex and the buying process is difficult to determine. a dissatisfied customer means not only that this customer cease to consume the product or service of the organisation but also relates to others the poor experience with the business. Six Sigma is related to defect reduction and this not only influences customer satisfaction but also improves the internal processes. The steps. Six Sigma quality is aimed tat satisfying the expectations of the customer and may include the profitability and corporate safety for the shareholder. Internal customers do not have too much influence over the control of a company but they help to achieve its objectives. It is also important to understand that the customer is directly related to the decision making unit which influences when the customer is going to purchase the goods or services.
The team needs to improve customer satisfaction and list these needs and requirements for each process.1. For example. The only way to identify core and enabling processes is to ask and study the costumer. The important customer information needs to be processed and analysed. Six Sigma initiative consists of quantifying customer satisfaction.2 Determining “critical to quality” characteristics First. 3. evaluating alternatives. The business definition is all these which add value to the customer. searching for information.a need. The customer definition is that it is all those which add value. it is necessary to begin with a definition of critical to quality. The result of this is a quantifiable ranking of such processes against customer judgement. It is necessary to realise what the characteristics of the products or service are. For this reason it is necessary to determine the things and the process which create unsatisfied customers. Neumann  defined it as follow : 23 . Customer satisfaction means that all the needs and requirements of the customer are achieved. making decisions and finally resulting in outcomes. affect satisfaction and quality of the product. determining a specification for solution. safety and accuracy are always vital to good service and a failure in any of these is a dramatic defect for the customer. Some studies based on the customer are extremely complex and it may take several months to understand. In most cases the customer does not realise that he/she is the most important part of a Six Sigma initiative and the customer information is the basis of Six Sigma. There are two definitions of core processes. This step is quite difficult because the own customers sometimes do not know what really expect of the product or service.
and becoming a customer and observing customers in 24 . Customer needs must be converted into CTQs. The team needs to analyse customer requirements and set targets. In order to do this the team should put their shelves in the position of an external customer. Only when this is achieved. At this stage. However. Customer research is often expensive and all too often ongoing research is required to find a solution to reduce costs as well as to provide continuous information.CTQs (Critical to Quality) as the key measurable characteristics of a product or process whose performance standards or specification limits must be met in order to satisfy the customer. Some of the steps that need analysing to determine critical to quality characteristics are the voice of the customer and customer requirements and needs analysis. They align improvement or design efforts with customer requirements. It is necessary to determine a list of CTQ characteristics for processes that are not only measurable but also actionable. A CTQ usually must be interpreted from a qualitative customer statement to an actionable. market research. which helps the business to act. it is necessary to determine what the customer requirements are for each individual process and to set specific target limits. this raw information can be quite useful even though it may not be complete. Customers often have difficulty in expressing what they want or expect from a service or product and forget the main things. The success of Six Sigma is based on a good conversion between CTQs and requirements. quantitative business specification. The methods for obtaining information about “the voice of the customer” include focus groups. CTQs represent the product or service characteristics that are defined by the customer (internal or external). interviews. the process of change is possible and the organisation is closer to its goals. They may include the upper and lower specification limits or any other factors related to the product or service.
discomfort. There is a need to be accepted by others. Social Needs Humans have a desire to belong to groups: clubs. etc. he/she may think about other things. In some cases. Safety Needs These needs are mostly psychological in nature. water. In this section. food. The most important for achieving the company goals is the ability to listen to customers’ requirements. In order to identify a key issue it is necessary to list one or more requirements. Security is essential in any purchase. work groups. but not a solution. etc. in pain. requirements are difficult to be expressed and sometimes they can be analysed from different points of view. One of the tools that can help to the team in this regard is Mallow’s hierarchy of needs which is a list of customer requirements from the basic to the abstract (see Figure 5) 1. Physiological Needs Physiological needs are the very basic ones such as air. When these are not satisfied a person may feel sick. family. the key issues will be determined. which would resolve the issue of the customer satisfaction. etc. irritate. it is necessary to work down from high level concepts of general customer needs. A good requirement should be measurable. 25 . Once they are satisfied.action. sleep. When new processes or products are designed. concise and complete. 2. religious groups. 3.
Note that the Kano model can be used to help identify customer segments. which 26 . the Kano model. SELF-ACTUATION SELF-ESTEEM SOCIAL SAFETY PHYSIOLOGICAL Figure 5. People. Not all identified requirements may be of equal importance to all customers. there is the attention and recognition that comes from others. Mallow’s Hierarchy. 5. People who have everything can maximise their potential. Kano Analysis is another tool used to determine customer requirements and needs. Kano analysis can help organisations to determine which requirements have the highest priority.4. often drive very expensive cars because doing so raises their level of esteem. Self-Actuation The need for self-actuation is the desire to become more and more what one is. to become everything that one is capable of becoming. who have all of their lower needs satisfied. This is useful because customer needs are not all of the same kind and they do not all have the same importance. It is a quality measurement tool used to prioritise customer requirements based on customer satisfaction and to determine which requirements are important. based on the relative priority of each segment's requirements. Esteem Needs There are two types of esteem needs. Second. First is self-esteem. Once segments have been defined. The results can be used to achieve customer satisfaction. which results from competence or the mastery of a task.
Another powerful tool used to design new products is Quality Function Deployment (QFD) which is used to define customer needs or requirements and convert them into specific plans to produce what the customer wishes. can be applied once again to each segment to further defined the segment's priorities. The dissatisfies. the things that cause customers not to like a product. 2. There are four types of customer needs: 1. The More is better.is shown in Figure 6. Without this. The must have things. 4. Satisfaction One dimensional Delighters Performance Lack of performance Must-haves Dissatisfaction Figure 6. the product is not sold. is a necessary 27 . The Surprise and Delight factors. 3. The voice of the customer. Kano diagram. as has been stated.
tool to reflect the requirements of the customer. The next step, once that the requirements and needs has been collected, is to build a product planning matrix with all the information about the customer requirements. This matrix is used to translate higher-level needs into lower level ones and determines how the needs are transformed into a satisfying product. The basic QFD methodology has four phases. During each phase, one or more matrices can be built to realise critical product and process planning and design information. Once the majority characteristics of the project have been defined, the team can begin to establish what they are going to measure and to establish the procedure to achieve a good measure of the process.
3.2 THE MEASUREMENT PHASE The most important purpose of the measure phase is to understand the current state of the process and collect reliable data on process speed, quality, and cost that will be used to realise causes of problems. Collecting measurements is necessary but can sometimes be difficult and could incur the majority of the project time and money; however, it adds facts and informed weight to the project. The team is therefore able to calculate an initial process metric and give important information for analysing the situation. It is important to notice that without this phase the DMAIC cycle cannot continue because only that which can be measured can be controlled and improved. One relevant measurement is the CTQ characteristics from which the process sigma metric is calculated. In order to evaluate the process it is necessary to determine a measure of the root cause variations of the defects and process problems. The team needs an appropriate data collection plan and a formal definition of what to collect. It is necessary to obtain sufficient sample points to ensure that all possible aspects of variation and customer satisfaction are included. Most things that happen in a business can be measured but the principal requirement for measurement is the ability to observe. It is important to understand the difference between continuous and discrete variables because this not only influences how the data is collected but also how the measure is defined. Sometimes the difference can seem confusing. Continuous measures can be defined as those factors that can be measured on an infinitely divisible scale or continuum such as weight, height, temperature, etc. An discrete variable is an attribute. Many factors can only be measured as discrete variables; e.g., customer satisfaction is often represented as a rating scale, which is a discrete measure.
Some of the problems associated with discrete variables are: It is necessary to make more observations to obtain good results. Discrete variables can hide certain information. There are more potential useful forms of analysis with continuous data than with discrete. Six Sigma measurements are about understanding the relationship between the X factors and the impact that they have on customer satisfaction and profitability, Y. There are two types of measures, output and input. Figure 7 shows a simplified process. (X) (X)
Figure 7. Simplified process
The goal of the team is to find the Xs that are the indicators of the critical output Y. For this purpose, it is necessary to use a SIPOC diagram and sub process map. The basic steps for implementing any measurement system in a project are select what to measure, develop operational definitions, identify data sources, prepare a collection and sampling plan, implement, and refine the measurement.
3.2.1 Select the possible measurements Enterprises do not always know exactly how the customer evaluates their product and services. If the voice of the customer of the enterprise is not good enough or not very sophisticated, a big risk exists of making no correct measures. It is necessary to select the optimal performance 30
An operational definition helps to ensure that the right data is corrected and that it is understood. no missing information. The team needs to evaluate what is more valuable for the customer and to determine the possible opportunity area. 3.2. when selecting the items to be measured. etc. If not the operational definitions will need to be redefined. 31 .2 Construct operational definitions An operational definition means a clear and understandable statement of what is to be measured or observed so that everybody can perform the task.measure of the product. This is important because without it different members of the team may not operate in the same way. 3. At this stage.). The team needs to use the following steps to create operational definitions: 1. the cost and the lead-time required of getting the data. the complexity. the team needs to check the operational definition with the people involved in the previous step and those who were not involved to evaluate and compare the results. The first is to understand the goal for collecting the data and what is actually required. It is necessary to create a clear data collection procedure that is understood by everyone concerned in the process thereby minimising mistakes in the data collection (correct units. which are the available data. 2. It is necessary that everyone obtains the same results. The team has to be trained to select the right measurements and needs to bear in mind.
learning about the input.3 Identify data sources The company has to be sure that the sources that are chosen have accurate data and represent the process that the team wants to measure. process. or output and being quicker and easier than gathering new data. Explain for what the date is to be used. Sometimes it is a good idea to give data collectors the opportunity to provide inputs on the process. There must be enough data for the team to draw conclusions. The team needs to know how the data were initially collected. In order to obtain complete and accurate data.3. The company needs to choose qualified people to collect the data.2. this has some advantages such as achieving data. the procedure may not be consistent with the operational definition. There are however cautions to remember: The data should be recent. The data should be representative of the process and the measurement system. the team needs to bear in mind: Why it is collecting the data. Another option is to use existing data. but often what is needed is not captured on the system. 32 . On the other hand. The required data is sometimes held on a computer. the data can be taken manually but is prone to human error.
which are to be included. Include the name of the data collector and comment columns. The following guidelines can help to construct an appropriate form. Testing the form design and making changes where necessary. Use a clear title. 2. Another tool which can help the team is the utilisation of check sheets which are employed for distinguishing between fact and opinion and also for gathering data about how often a problem is occurring and the type of problem occurring.Defect or cause Checksheet. measures. Standard forms can facilitate data collection. Select the data and factors. Often a company has to create its own forms.3. because they enable faster capture data and ensure consistency. Decide on the accuracy of the measuring system and indicate it on the form. Determine the period over which the form will be used. Captures readings. or counts quantities. 33 .Data sheet. Some of the most common check sheets are: 1.4 Prepare a collection and sampling plan At this stage.2. Develop the form: Review different form formats. stratification plans and a sampling procedure. the team needs to develop data collection forms.
4. 4. It is a check sheet that “travels” with the product through the process. Sampling means using some of the data in a group to represent the whole process. 5. Getting a valid sample is in some cases hard work and presents a significant challenge.3. which is related with the problem. The team can identify the strata by making a list of factors. Sometimes the team wants to know more about the data and stratification helps to clarify what is really happening. It is one good way of analysing data at each step of the process. Discussing if the specific measures help to analyse the output Y. or form. The item is observed and the data collectors mark where the defects are produced. Once the collection forms have been developed. Creating specific measures for each subgroup. Statistics is based on sampling and this discipline has the ability to draw conclusions about all items based on a part of them. The purpose of stratification technique is to obtain a baseline measure of performance against customer requirements. For this reason it is necessary to establish if the items change with time or not 34 . The data collection sheet is based on the physical representation of a product. If not it will need to apply the measurement system to other items. Different factors affect the number of samples and size of them that the company needs to collect. 3. Identifying output measure. workplace. After stratifications plans haves been designed. Identifying characteristics which define different subgroups. the team can begin the sampling procedure. Introducing the questions that the team has about the output measure. 2.Concentration Diagram Checksheet. it is necessary to establish stratification plans. Some of these include: 1.Traveller Checksheet.
needs to achieve accurate data. . The data can be precise but not accurate. The team. There are others concepts that it is important to define to understand the importance of collecting data: . This method is most commonly done with continuous data. which will be analysed in the next stage. The accuracy of data means that they due reflects the true one but it may be imprecise because the units used are not sufficiently discriminatory. Gage R&R is one of the most useful methods. Stability Analysis. Gage R&R involves: 35 . The most difficult aspect of sampling is to ensure that bias is kept occurs to a minimum.2. the data type (Continuous or discrete).Precision: The quality of being exact. There are several types of measurement system analysis Gage R&R. 3.(process or population).Confidence level: this concept is related to how certain that the company wants to be. the finality of this data and the confidence that the company put in the results.5 Implement and refine measurement In the manufacturing are there are several methods that can be used to assess accuracy. Bias occurs when the sample does not represent the whole. after developing the stratification plans and selecting the sampling population. Discriminate Analysis and Kappa Analysis. Measurements need to be accurate and precise.
3. Discrimination enables changes in the characteristics to be detected. 36 . person. 3. Comparability.1. The other measurements analyse methods discussed in this Section use continuous data for their calculations. The team can evaluate discrimination graphically with a ranges chart. 2. Defect measures can be used to compare processes in different areas of a business. Defect measures can be applied to any process.2.6 Output Measures The process measure Six Sigma is focused on reducing defects within a process. characteristic and under the same environmental conditions. there are some reasons that can produce a loss of stability due to either deterioration of the instrument or increasing in variability of operation actions. For this purpose output and total process performance measures have to be developed. thing. If the measurements do not change over time. Reproducibility. Nevertheless. Simplicity. Consistency. This is an indication of the variation that occurs when successive measurements are made under the same conditions. The calculations of the defects measures can be made using basic mathematics. At this point. When attribute data cannot be changed to continuous data it is necessary to use Kappa analysis. the instrument is said to be stable. Evaluating the stability of a system can be achieved by maintaining a control chart on the system. Repeatability. the objective is to determine how the process are working and establish baselines. This is the variation in the average of the measurements when the measure is made by different operators under the same conditions. 2. There are several ways to measure defects: 1.
regardless of the number of defects within the unit. An item or the final product or service that has been delivered to the customer. Defects per unit. A unit may be defective because of one or more defects. The team needs to measure internal defects to know how well the process is working otherwise a lot of information is hidden. An entire unit that fails to meet acceptance criteria. All the defect measures that have been described are based on results or measures at the end of a process. One is that they only look to see if one process is good or bad and in the case of continuous data the measure can hide information. It is the number of defects over the number of units sampled. these measure are not useful and give no real indication of how the whole process is working. Sometimes when the purpose is to determine what the customer requirements are or to evaluate the efficiency of the process. Defective. Some key concepts of defect measurement that need to be signed are: Unit. 37 . One product can have multiple customer requirements and for this reason there can be several opportunities for defects. The defects per million of opportunities indicates that how many defects would arise if there were a million of opportunities. Once the team has a clear definition and a guideline of what to measure and the procedure to do this. Sometimes it can be difficult to determine the number of opportunities that one product can have. which it is described in the next section. it is necessary to analyse the collected data.Some disadvantages or problems make defect measures less attractive. Defect opportunity. Internal yield measures are based on data collected from the process operation.
which describes the process. For this purpose. but sometimes it is not enough and the way can be difficult. The team needs to work to achieve the best equation. The equation that describes the customer CTQ is: Y=f(x1)+ f(x2)+ f(x3)+..3. the process can be changed and improved.. The team’s objective is to reduce the number of defects thereby eliminating unnecessary factors. which increase the final output Y. The tools used to lead to the identification of the main factors are inferential statistical analysis with the consideration and analysis of the process map. which can try to anticipate to the problem based on the team’s experience and intuition. it is necessary to have a dynamic and qualified team. it is necessary to identify the main factors. f(xi). and the order in which they will be applied depend on the problem and the process that requires improvement. because once this has been achieved.3 ANALYSIS PHASE The principal and essential requirement before beginning the analysis phase it is to have at least a clear measurement about the problem or the opportunity. For this purpose. In a process or a product that has many defects with a lot of variation. 38 . This phase focuses on facts and reality and is believed to be the most unpredictable because the tools that the team has to use. The principal objective of the analysis phase is to find the main cause of the problem that creates poor quality and defects for the customers.+ f(xn) Y is the CTQ characteristic which affects a customer’s satisfaction and is the addition of a series of factors.
The cycle diagram begins at point 1.The analysis phase can be represented as a cycle as shown in Figure 8. Use data from the measurement phase to create thinking about the cause of the problem. Process Analysis. 1 Analyse Data/proces s Refine or Reject Hypothesis Confirm and select vital causes 2 Develop causal hypothesis Analyse Data/proce ss Figure 8. 1. 39 . Investigate how the work is being done to identify problems during operation. 2. those for identifying and those for verifying potential causes. Analysis phase diagram There are two key sources to determine the true cause of the problem. if the objective is to identify defects. Data Analysis. or at point 2. if a hypothesis is to be validated. The tools that are going to be described in this Chapter can help the team to identify the root causes of problems and find new solutions. If the hypothesis that the team has chosen is not correct it is necessary to go back to the beginning of the process and redefine the problem. They can be divided into two groups.
or service and to prioritise the critical ones. product. defects or error and the vertical axis “y” represents a count or percent of defects. It is a tool that shows if a process is changing over time and depicts the data in the order in which they occur. They help to choose what kind of statistical test can be applied in each situation. A histogram is a bar diagram of a frequency distribution in which rectangles are constructed across the class internal. Data displays These tools are focus on creating ideas about potentials causes. Some of these are: Histograms. It is easy to construct manually and requires less data than other tools. Time series plot. There are many which the team could use in their investigative efforts.3.3. There are two types of tools to identify potential causes: data displays and caused-focused brainstorming tools.1 Tools for Identifying potential causes The tools for identifying potential causes can help to propose hypotheses about the factors f(xi) which are increasing the number of defects in a process. To create a Pareto chart it is necessary to follow the next steps: 40 . Histograms are a useful informative tool about the underlying distribution of the data. the areas of which are proportional to the class relative frequencies. Pareto chart. A Pareto charts is a type of bar diagram in which the “x” axis represent the categories of the problems.
4. 2. 41 1 Pr ob le m 2 Pr ob le m 3 Pr ob le m 4 Pr ob le m 5 O th er s Pr ob le m . Pareto analysis gives the team a visual interpretation of the data. Group the problems by frequency or by level of impact. Pareto chart representation. this means that these categories of the problem account for the most occurrences or impact. Cause-focused brainstorming tools. If there are one or more categories with a high percentage. Determine the total number of problems and the counts or impact in each category if there are categories with very small frequency they can be combined. A possible example of Pareto chart representation is shown in Figure 9. 5. 3. Draw the bars of each category. 120% 100% 80% 60% 40% 20% 0% Figure 9. This method is used to help to the team to think about root causes and not to be satisfied with supercilious solutions which do not resolve the problem in the long run. Brainstorming tools can produce many ideas or solutions in a short period of time. Some examples are given below: 5 whys.1. Represent a curve showing the cumulative percentage. Draw a vertical axis and divide into increments.
which is going to be analysed and write it in a rectangle placed on the right hand side of a piece of paper (at the head of the fishbone). 3. Cause and effect diagrams (fishbone or Ishikawa diagrams) The fishbone diagram is used to identify causes of problems or prevent future problems. Select any cause. 4. 5. Sometimes the team finds a root cause before the 5 whys are completed but not always. Based on the final diagram the team need to identify the causes that are most critical. Decide the major categories for causes and create the basic diagram (Figure 10).The procedure is simple and based on the following steps: 1. The team need to review the diagram and eliminate causes that do not apply. which needs to be analysed. 2. 5. Name/define the problem or the effect. Choose one reason for the why 2 and ask. 42 . Brainstorm for more detailed causes and create the diagram( for this step the team can use the 5 whys method). “Why does this outcome occur”? (Why 3). 4. Ask. The procedure to create and use a cause and effect diagram is as follows: 1. The team needs to continue this procedure until a potential root cause is found. (Why 1) 2. “Why does this outcome occur”? (Why 2) 3.
The team needs to list the possible consequences if a failure occurs. 2. 10 represented most likely occur. Use the RPNs to prioritise actions with highs RPNs or those that have a very high severity rating. Calculate a risk priority number (RPN) for each effect multiplying (severity*occurrence*detection). 3. Ranking the severity of failure: 1-10. 4. Brainstorm potential failure modes. 43 . 5. Basic cause and effect diagram Failure Mode and Effect Analysis (FMEA). Assign a detection rating to each failure: 1-10. 7. The team can perform an FMEA in the following way: 1. This technique is used to identify the ways in which a product or a process can fail and to prioritise the actions to reduce risk. 6. The first step is to review the process or product. 10 means most severe impact on customer and assign rating to likehood that a failure will occur: 1-10.cause cause cause Effect cause cause cause Figure 10. with 10 representing least likely to be detected using current control.
3. Develop the plan and recalculate RPN. and can be divided into three groups: basic hypothesis testing principles and techniques. This plan begins identifying the potential causes of the failures modes and then develop recommended actions (with timeplan. The team need to establish a plan to eliminate or reduce the risk associated with high-priority failure modes. t-test.3. specific cause and effect testing techniques. It is a tool that uses data of important variables to develop an equation Y=f(x). The team needs to evaluate which input variable have the biggest effect in the response variable and delete unimportant factors from the model. A common application of hypothesis testing is to determine if two means are equal. Regression Analysis. and design of experiments.8. It is necessary to calculate a t-statistic to determine probabilities comparing the statistics with a t-distribution. In the hypothesis test exist two hypothesis. This test is used in two situations: Specific cause and effect testing techniques. etc.2 Tools for verifying potential causes These tools are used to confirm if a potential cause contributes to the problem. Basic hypothesis testing principles and techniques An hypothesis test calculates if a particular value of interest is contained between a confidence interval it means the probability that the team’s conclusion is wrong. 9.). 44 . The t-test is statistical tests that permit to the team if the null hypothesis is likely to be true.
Based on the observation table develop an expected frequency table. Collect the data from the measure phase and summarise the results in an observations table. Compute the relative squared differences. based on the analysis of the data. Chi-square test. Determine and interpret the p-value. In this section have been described the tools and methods used in order to analyse and investigate the potential cause of the problems. This tool is used to analyse the relationship between categorical inputs and one continuous output. 45 . This is developed in the next section “improvement phase”. 5. 3. Now. Add together all the relative squared differences to get the chi-square. the team. ANOVA (Analysis Of Variance). has to begin to construct and develop solution for the problems. 4. 2. The steps that the team need to follow to calculate the chi-square: 1. The Chi-square test is a hypothesis testing method used when the contributing factor and the result are attribute data.
which can help the team such as brainstorming. which would provide new perspectives on the work and the processes. which comes from the measure and analyse phases. It is necessary that the team bears in mind the goal to be achieved.4 IMPROVEMENT PHASE The purpose of the improvement phase is to select solutions based on the data. It is necessary to know how much root causes affect the CTQ because this gives the team a quantifiable number of defects to rectify. select.3. and Failure Mode Effects Analysis. 46 . The team needs to develop potential solutions based on the confirmed cause and effect diagram or the others tools described in the previous chapter. The team needs to generate. The process of generating solutions can sometimes be difficult but there are several tools. will help the team to be sure that the solution will not have a bad impact on the final process. The team needs to start with a confirmed root cause verified by data collection. and finally implement a solution to eliminate or reduce the root causes of defects. The team needs the right training to produce good ideas. process observation. The use of piloting. The team has to brainstorm and develop solutions in relation to the objectives of the organisation and eliminate other solutions. The team will be able to create and identify smaller but effective solutions which should be implemented in a couple of weeks. and experimentation. It should then develop potential solutions. which will be described in this chapter.
1 Brainstorming Some of the keys to successful Brainstorming are: 1. The team then organised them into categories and finally the ideas are labelled. 3. the team needs a period of silence to think about how the process can be improved and to write down some ideas. Past assumptions sometimes prevent the team from developing good ideas. In order to generate good ideas. The brainstorming is necessary once the goal has been clarified. Clarify the objective of the brainstorming. 2. Everyone should agree on the purpose and work in the same direction to get good results.4. affinity diagrams. 3. to construct an affinity diagram. and benchmarking.Three tools. 5. Abandon assumptions. 47 .2 Affinity diagram The affinity diagram generates and collates ideas after they have been organised into groups. which would help the team in doing this. Then all ideas are written on post-it notes. It can provide important information for eradicating defects. Consolidate similar ideas. Discuss certain ideas with a view to consolidating them. 4. Listen to and build on the ideas of others. Understanding of the idea deployment process.4. are brainstorming. It is necessary to pay attention to other people’s ideas and develop them. is to give time to reflect and consider. 3. The first step.
3 Benchmarking Benchmarks are measures which a company compares its performance against other companies practice. The purpose of the solution selection matrix is to make sure that the solution selected for implementation is the best to achieve the objectives of the team and the organisation. what will be involved in the process. The Pugh matrix is a tool that uses decision-making that compares concepts. how long will the pilots run and how will the pilots be conducted.4. This tool determines how to use this information to improve company’s performance and can help the team to focus their objectives to get good solutions to problems. The team need to determine what needs to be piloted. Two tools use for this purpose are the Solution Selection Matrix and the Pugh Matrix. based on the requirements of the customer and functional criteria. selected. One of the tools that the team can use is Pilot testing which evaluates the solution and its implementation. need to be evaluated. To pilot a solution it is necessary to follow the next phases: Phase 1: Plan. Pilot test determine if the process is agree with the customer requirements and the design specifications. 48 . The objective is to work with potential solutions to converge to an optimal solution. The team has selected the solution and now needs to implement it. The potential solutions that have been developed in the last step. and optimised. It is used when it is necessary to choose one out of two or more solutions.3.
It is necessary to review the plans to ensure that all the elements of the design are completed. The team should use statistical tools to evaluate design predictions and improve on the pilot if there are any weaknesses. The team needs to find possible defects that can be tested at the pilot phase and review both the pilot and the implementation plans. the team has selected and finally implemented potential solutions. the team will implement design changes that have been found in phase 2 and will start the implementation. This is the last phase of pilot testing. Phase 3: Finalise design and implement. In this phase. Phase 4: Evaluate the test and verify results. 49 . During the improvement phase.Phase 2: Review design. which it is the control phase. the possible actions to apply in the pilot and changes in documentation. the team needs to begin the next step. At the end of this phase the team is able to list the key issues raised. Once these solutions have become effective.
defining responsibilities for process owner. At the end of the improvement phase and when the first gains are achieved. The documentation has to be simple. which are necessary to follow to complete the control phase. It is necessary for a company to have a clear documentation about the process which has been implemented. clear. During this phase the team needs to make a fully documentation of the project and the improvement changes which have been made. select and apply ongoing measures. the team needs to be able to justify why and how the applied solution has sense for the company. In order to achieve this. The steps. In order to maintain the improvement the team is required to document the changes. The project must be evaluated fully and the financial gains documented. A good documentation help the team to have a better vision of the changes and the new procedures. and understandable for everyone. The team will describe a plan to retain the gains after the conclusion of the project. 50 . and develop the response plan. driving the organisation to Six Sigma. the team needs to consolidate their goals. If someone use specific terms that someone new in the project is not able to understand it is necessary to include a definition or glossary. The team has to be dynamic and works to build a solid support for the solution. Document the changes.3.5 CONTROL PHASE This phase consists on identify the new behaviour of the CTQ characteristics. are maintaining the improvement. It is necessary to repeat some of the early measurements in order to recalculate the sigma process.
The team needs to review and follow the procedures that there are in the documentation in order to achieve good results. Balanced Scorecard emphasises that it is necessary to keep in 51 . which helps the team in this purpose. process or output. Select and apply ongoing measures In order to maintain the improvement the team needs to use well-chosen and implemented measures to track the process and solution. Two of the tools that can be applied are Pareto Charts and Histograms. The ongoing measures should include a balance among these parts. cost. There are several ways to presents the measurements perhaps the most useful one is using graphical measurements reports because they are quicker to read and make for easier comparisons. One way to show the efficiency of the new process is to document the possible behaviour and some procedures to be applied under various conditions. cycle time. the team needs to monitor results in their key areas. One tool. Once that the ongoing measurements have been selected the team begins to implement them. Other measures will be occasional. Finally the documentation must be handy and update. Another technique that ca be applied is Control Chart profiled at the end of the chapter. which experiment the greatest change and should go higher on the measurement list. Can be applied measures to any part of the project: Input.The team needs to make a good documentation and for this reason they can complete their written documentation with pictures and flowcharts for getting a clearer and more accessible documentation. The team must centre in the things. This tool displays key measure in an easy to read format. etc. Some measurements can be applied during a long period to observe things as defects. Once the data have been collected. is Balanced Scorecard.
A good response plan must to be a continuous improvement plan. It is necessary to establish clear standards in input. which can help the team to anticipate the problems. It is necessary to control the measuring and monitoring process performance. Response plan It is necessary for the team to have guidelines. 2. which can be improved. are FMEA and potential problem analysis. which indicate what to do and when do it in some circumstances. The process owner needs to collect background data on customer requirements. 3.5. Two of the tools. The team needs to know what actions have to be taken in each situation and when those actions are necessary. process and output of the process because if the key points are standardised and fully identified con help to the team to discover which are the actions to apply in each case. 52 . the team is able to establish common performance measures. Therefore.mind to measure the next areas: innovation. It should identify and prioritise ongoing or serious problems. Some of the responsibilities of the process owners are listed below: 1.1 Define responsibilities for the process owner The process owner is the responsible for process design and performance and needs to sustain the gain and identify future improvement opportunities on the process. The response plan must anticipate possible problems. The process owner is the person or persons responsible of maintaining process documentation and keeping them update. The process owner is the responsible that the measures are executed in the right way. process customer and financial.
Define the customer requirements. efficiency. However. and flexibility. 4. the company could achieve high Six Sigma levels of quality. Thus.3. 2. and they have the responsibility to maintain the gains. It is essential to provide feedback on results and key process factors. Process owner has to work with customer and supplier to reach the goal of the company at the highest level of performance. Measure current performance. The process owner should be the first person who discovers the problems before they arise and defines guidelines for long and short term solutions.2 Drive to Six Sigma Establishing process management is the last step in the implementation of Six Sigma and the beginning of becoming a real Six Sigma organisation. When projects to improve are identified. the process owner needs to select a team. Identify core processes. the principal purpose of the process owner is to lead the team in order to achieve a high sigma level. The process owner has to focus on gains and the customer and should be present where the core process are running for trying to identify weakness zones. 5. It is the principal step of the process management because can be used to define the process which is going to manage. This is an important step because the team can answer the next question: manage the process to do what? 3.5. 53 . which carries on the project. 3. The key elements of the process management can be formed following the next steps: 1.
All the efforts made for the team in the process improvement become the key elements that can help to the team to reach a high Six Sigma level and respond to the customer requirements and demands for new products. services. which can reach in the implementation process. Once the team has a clear definition of the tools and the procedure to achieve the required sigma level. 54 . or capabilities. it is necessary to find out how this methodology is applied in some real case studies and to know the difficulties.
Delivered quality in terms of defects. create the project charter and develop a high level process map. The team considered data from previous projects separately and so selected 55 . they identified the following characteristics: • • • Time to market. In order to achieve the team’s goal. Total development cost per size. Then.1 SIX SIGMA SOFTWARE DEVELOPMENT CASE STUDY BACKGROUND This published case study of Gack  centers on the use of the Six Sigma DMAIC process in an organisation which develops software packages. of the organisation was to improve the capability of its software which meant ensuring that the project was delivered on time.0 PUBLISHED CASE STUDIES 4. and with an acceptable number of released defects. the team would focus on the percentage of project commitments that were delivered on time. Y(s). The principal goal. 1. DEFINE PHASE The main purpose of the define phase was to determine the critical-to-quality characteristics. It achieved substantial reductions in costs within 6 to 12 months of the beginning of the implementation of the project and reached a 15 to 25% reduction in software development cost in two years. It was assumed that the organisation was decentralised with various divisions in different parts of the country.4. with predictable effort.
and the Director of Quality Assurance as team members. with the Director of the Project Office. the team began to build the project charter which should include the expected pay off if the team was able to improve the critical to quality characteristics. The financial opportunity was based on 10% of the potential service contract revenue which was lost due to late software deliveries which amounted to approximately $800. in the hope that the process could be replicated in other divisions. It was decided to investigate four controllable factors: • • • Short task durations Defined predecessor/successor relationships among tasks "Levelled" resources (ensuring an 80-hour week has been scheduled for the team) 56 . Black Belt was selected as project leader. the development of the project charter. Once the specifications had been identified. The fruits and nuts division was selected by the first team.the project that had more precedents. MEASUREMENT PHASE The first thing to be done was to determine the current state of the process and to collect reliable data.000 per year. One of the principal was to improve the on-time project percentage from the baseline value of 62% to 90% within the next year. The champion was the Vice President of Marketing." The next step. It was also necessary to provide a good definition of the problem: "Conversions that miss planned dates are causing unexpected budget increases that impact our profitability. three software Project Managers. was to define the goal statement. 2.
The team needed to be able to understand the quality of the data before making any conclusions and to convert attribute data into quantitative information. and X(s) for each project. which had been used to rate the X(s) in previous projects was presented. schedule performance defined as percentage of plan. The results are listed in Table 2. Table1. Scoring system.• Defined deliverables or end states for each task It was also necessary to evaluate the measurement system to be used. This would show if the high score of an X(s) high score was related to the high performance of Y(s). 57 . The four controllable factors selected were called potential Xs. Table 1 shows the score system used in some historical projects. which influence the behaviour of the outcome. Possible scoring system Using the score system the team collected the Y(s).
Figure 1 represents schedule versus score trend. X(s) and Y(s) data collection. 58 .Table 2. the straight line indicates that as the score increases. Figure 1. However. Schedule versus score trend In Figure 1. there are some points which are marked in Figure 1 that do not correspond to the general pattern and so perhaps it is necessary to consider more factors which influence Y. Y is improved ( percentage of plan) suggesting that the higher the attributes of a professional plan the higher is the improvement in Y.
predecessors and plan percentage. ANALYSIS PHASE From the measurement phase it was observed that only 20% or 4 projects were achieved on time. the team applied the multiple regression analysis and concluded that 78% in the variability of this sample was due to task duration. If the “Plan percentage” was less than 100 %. could be generated and added to Table 2. not the 62% as required by the software team. The Six Sigma team constructed an estimation model and a new column "Plan %" which is defined as: (actual planned duration) / (duration indicated by the estimating model). it is also necessary to identify which of the critical factors Xs have more influence in the determination of the schedule performance of the Y(s). Simulation model During the measurement phase. In order to achieve this. the planned schedule would be too optimistic.3. Table 3. If the company’s goal was to achieve 90% a 450% improvement would be needed. 59 . Table 3 shows the implementation of this in the case study. As can be observed the planned schedule was too optimistic because there were 15 projects which heir “Plan percentage” less than 100%.
The projects required 134% of the planned duration and they needed 5 months more than expected. it was necessary to redefine the financial benefit forecast.065. There was established that if any score was below 5 for any of the X(s). Train personnel responsible for project planning on best practices. In order to determine the best option in terms of cost and effectiveness. it was necessary to pilot two or more options and try to discover the best solution. Use a combination of these options.500 but the company had a target of 90% and a final profit of $956. The opportunity cost was 5/12 of $850. The team estimated that the opportunity cost associated with the 20 projects obtaining a profit of $1.Once the critical X(s) were determined.000 with an expected time of money of 15%. The following possible solutions were identified: 1. 4.250. CONTROL PHASE It was necessary to develop a control plan and define how the X(s) and Y(s) will be monitored. The team decided to implement the alternative of trying each one with different teams and comparing them after two or three months. IMPROVEMENT PHASE The principal purpose of the improvement phase is to generate. The average expected profit for the 20 projects was $850. 2. 3. 5. select and finally implement solutions. the team would try to 60 . Assign mentors or coaches from the Project Office to review the draft plans and help project managers bring them up to best practice standard.000 and the projects were scheduled to take 15 months.
Finally.reach that level and if the target for the Y(s) was not met. 61 . they would review the project. it was necessary to define responsibilities for the Six Sigma team project and to fully document of all the process records and data.
which was allocated the higher priority 62 . Medical Transcription involves writing the notes from doctors. transcribing them according to appropriate rules. rather than basic problems. Timeless. protecting them from errors. At the end of it. This is an important process because it avoids mistreatment of patients. The first category focused on customer satisfaction and the team.S. The Six Sigma team considered the results of the brainstorming session and generated approximately 20 problems were grouped into two categories: • • End result problems faced by external customers Internal problems that were causes of customer problems. some conclusions were obtained which will be described a long of Six Sigma improving process. The principal purpose of the business is to increase of their revenues.2 MEDICAL TRANSCRIPTION CASE STUDY BACKGROUND This published case study of Goyal  is based on a Medical Transcription company established in India with customers in the U.4. 1.A. and recording the final results.DEFINE AND MEASUREMENT PHASE The Six Sigma effort began with a meeting with the 20 most senior personnel of the organisation in order to drive the Six Sigma effort. put the fundamental CTQs as: 1. Consistency of quality 2. control the absenteeism and patients load. using a prioritisation system.
The turnround of a file was defined as the time taken from receipt to dispatch it. 2. This means that a customer who was received between 7. capacity per 63 . past and actual transcriptions. Variation: 82 minutes Average + 3σ= 335 The team defined the problem as: In order to achieve 99. they would need to reduce 335 minutes to 0. the team interviewed different customers and the following conclusions were made: The customer wanted to be dispatched before 5. the team realised that the problem was "meet the dispatch deadline of 24 hours" rather than "reduce turnaround of data".7% on time delivery. ANALYSIS PHASE In order to ascertain the vital causes of the problems. loads. The team designed a check sheet in order to collect the actual time of dispatch during two weeks including: • • Thus: Average delay: 89 minutes. Following on analysis of customer requirements.30 AM on Monday should have a turnaround of 24 hours and a file received at 7. The team suggested measuring the discrepancy between the time of dispatch and the customer's target.30 PM every day.In order to achieve a precise definition of the problem. the team developed a check sheet to collect the following data: starting time. This meant that a file received at 7.30 AM on day X and 7.30AM on day X+1 should be dispatched by 5.30 PM on day X+1.30 AM on Tuesday.
The initial expectation was that lower efficiencies would provide required results. Use one team at night. These data were collected over several days. the dispatches were achieved two hours earlier than expected. selected and finally implemented. the results from the data collected between 7. one team for an early morning shift. and one team for the day shift. however. who normally dedicate the end of the day to the dictation of the data and this time corresponds to the morning in India. Table 1 compares the results from the third week after the changes and the week before the project began.30 AM on day X+1 began to be processed at 8. 3. the team started the improvement phase in which ideas were generated. IMPROVEMENT PHASE There were two fundamental ideas: • • Use two teams during the night shift.S. In the first two days of testing.transcription and finishing time. Eventually the first idea was selected and put to the test. which was supported by the outcome of most of the cases. The principal reason for this was that the data came from doctors of U.30 AM on day X and 7. Based on this data.00 AM on day X+1. A group was selected to collect the data from the United States every hour for a week. 64 . one team during the day shift.A.
Finally. Now the team needs to improve their process in order to achieve the Six Sigma level. Project results. 4. The different responsibilities and operation procedures of the process were developed and documented. The improvement process is continuous and once the goals have been achieved higher expectations are required.Average plus 3 Week Average Maximum Average Sigma sigma -1 285 397 89 82 335 3 348 531 -134 43 -4 Table 1. it is necessary to recognise the team’s effort. CONTROL PHASE AND FUTURE ACTION A control chart was established in order to observe any deterioration in the process and resolve it. 65 . Load Delay time The results showed 22% higher load with an average dispatch time of 134 minutes early compared to 89 minutes late and compared to 335 minutes late at the same reliance level.
The champion.4. with the help of a Black Belt and after verifying the benchmarks and other data. INTRODUCTION This published case study of Hallowell  is based on an information technology (IT). In this published case study. Six Sigma was the initiative adopted by company to improve their service. A Champion was chosen for the new project. 66 . The team studied this and realised that the range of customer satisfaction ratings for the best competitors produced about 76 percent of the changes in new account growth.3 A SIX SIGMA CASE STUDY FOR AN INFORMATION TECHNOLOGY (IT) 1. the customer chooses the company which provides the best service. IT is a service used by companies as a means of providing call centre support to a variety of customers. benchmarking was used to show that the company was not competitive enough and needed a change. The team compared customer satisfaction against average and best class companies and found that their rate was a little below average (73 percent for the studied company against an average of 76 percent). The objective of the team was to reduce support costs while improving new account growth. IT services can be really important in a business because when prices are similar. was able to select the DMAIC project. The company was aware that customer satisfaction could be the driver of new account growth. and then he/she chose the leader of the project. The team also noticed that customer satisfaction and business growth do not have a direct relationship to support costs per call because those companies with the best customer satisfaction and business growth spend less money on support costs per call.
which were representative of the data gathered and are summarised in Table1. Get the required information. DEFINE PHASE The team needed to evaluate the elements of the project charter. Customer Requirements. The case study included some individual customer responses. The team discussed with the team leader the objectives of the project charter and then collected the customer satisfaction data.” The team’s goal was to increase their customer satisfaction level from 75% (90th percentile) to a target level of 85 percent (90th percentile). which would mean an augmentation of the company’s growth revenue of $3 million. How to prevent problems.2. The following situation was described: “The competitors of the study call centre are increasing their customer satisfaction levels by reducing support costs per call. Personal help. without increasing the support costs per call. Table 1. The team needs to increase the company’s growth from 1 percent to 4 percent. Requirements Connect with the right person. 67 .
68 . The team then needs documented the current baseline and the best estimate target as is shown in Table 2. Call moved to another extension. Calls in queue. Call answering and discussion Case research Call back time. Days to close Wait time Transfer Service Time Calls receive in closed days. The team prepared the data collection plan and identified all the parts of the project and the possible measurement areas. Y(s) Customer Satisfaction Support Cost Measurement By industry standard monthly survey. Can be require more customer satisfaction data. Time require for the staff.3. the team could focus on the measurement phase. MEASUREMENT PHASE Once the customer requirements had been identified.
At the end of the measurement phase the team had began to forecast what could be revealed in the analysis phase using the data collected to produce an Xbar-R control chart.:<0. When the principal objective is to discover the Y behaviour. Dev. Current baseline and target.5 Minutes Table 2. the team needs to focus on the Xs behaviour. ANALYSIS PHASE The team graphed and studied each Y data set. which represents the variation in customer wait times.MEASURE Customer Satisfaction Support cost Days to close Wait time Transfers Wait time CURRENT BASELINE 90th percentile/7085%satisfied 90th percentile/$40 Do not have good baseline data Do not have good baseline data Do not have good Baseline data Do not have good Baseline data TARGET 90th percentile/85% satisfied 90th percentile/ $32 90th percentile/ 3 days or less 90th percentile/ 4 minutes 90th percentile/2 Mean< 8 Minutes St. 69 . It was also necessary to identify the factors which drive the Y(s) and their behaviour. this offers the possibility of addressing the root cause. 4. Table 3 summarises and compares the capability checks to establish targets.
At this point. it was overstaffed. During the analysis phase. the team identified some improvement areas.5 Minutes StDev: 3 Minutes 90th Percentile = 4 Minutes 90th Percentile = 2 Mean:<= 8 Min StDev: <= 0. the team also observde the influence of callbacks on the call wait time.1 Mean: 10.05) 5. the team had to verify the previous Xs factors and discover others in order to make comparisons and an analysis based on the Xs identified in the last study.5Min Table 3. They developed an analysis of variance for wait time. but now alternative solutions are sought for some of the Xs identified in the last phase: 70 . transfer and callbacks). the company was often understaffed whilst on Sundays. (P<0.Measure Customer satisfaction Capability 90th Percentile = 75% Satisfaction Target 90th Percentile = 85% satisfaction Support Cost Per Call Days to Close 90th Percentile = $39 90th Percentile = 4 Days 90th Percentile = $32 90th Percentile = 3 Days or Less Wait Time Transfers Service Time 90th Percentile = 5. IMPROVEMENT PHASE At this stage. The team observed that on Mondays and Fridays.8 Minutes 90th Percentile = 3. Comparison between capability check to establish targets. the team needed to identify and select potential solutions in order to reduce the support cost (controlling staffing ratios. Based on the results of the ANOVA. During the measurement phase the team tried to identify some important Xs factors.
Based on the collected data. Transfers and callback * Reduce transfers and callbacks improving call centre processes. support cost and volume/staff (v/s) ratio. the team had to bear the following points in mind: The variables that affect the process wait time. it was necessary to evaluate and quantify the key relationship between the Xs and the Ys and the possible benefit. This was the objective of the team in the following steps of the improvement phase. Measure the benefit value of account growth minus the cost of additional staff. the team had to determine how to implement that improvement. a regression analysis was performed which. In this step. If the benefit appeared to be positive.Xs from Analyse phase Staff Solution alternatives * Additional staff on Monday and Friday and reduced on Sunday *Staffing model Web service percentage * Improve service on the web * Communicate the service to the customer * Some presents for using the service. The team had to consider how these solutions could improve the process compared with the current and the possible benefits. To evaluate the staffing option. showed the wait time was related to the v/s ratio and so the same technique was used to determine if the wait time 71 .
transfers. v/s ratio. A pilot programme was developed for the Monday staffing.037% new account growth 549 New Accounts $345. the addition of 14 people on Mondays would result in the following: • • • • • A 1. In this analysis 61 percent of the variation in account growth could be attributed to wait time. Before the team modified or improved any process. .Wait time. the team recommended that: • Changing staff levels should be the first step but in the future discover another solution which reduces costs. callbacks and service time. transfers and callbacks. • • Xs to adjust: Staffing level Y(s) to measure: .870 Incremental Annual Profit $177. • Reducing the number of transfers and callbacks in order to increase customer’s satisfaction.870 project net benefit to business After performing the same analysis for web service. customer satisfaction.affected to new accounts.Carry out a hypothesis test to compare new staff against old staff.18-Minute reduction in wait time 0. 72 . With reference to increasing the staff numbers on Mondays and Fridays. it needed to forecast what would happen theoretically.
the new staff took 6 minutes more than the old ones. To determine if the wait time had decreased with the staff increment. THE CONTROL PHASE In order to prepare the implementation process control. the team evaluated the goals that had been achieved. They were: • A wait time reduction of 5 minutes. During the first month.37) = 5. After preparing control charts. 6. the team needed to increase the current level of customer satisfaction sampling. the team created new processes or 73 . At the end of the improvement phase. • Customer Satisfaction had increased.37 ( as opposed to the previous 23 ). Volume/staff ratio was reduced to 1100/54 = 20. The team arranged to have 5 sets of data per day over 90 days using 80 percent of the current staff and 20 percent new staff. which only gave 1 set of data per month. The overall conclusion was that the Monday staffing pilot programme has been a success and the team recommended full implementation. which means there was a difference. • Initially new staff needed more time than the old but after three months both groups required almost the same time to do the same work. Predicted wait time = .In order to perform the pilot test. a two-sample t-test was performed.5 and then to 1 minute in the third month. this difference was reduced during the second month to 2.05. the team had to develop a data collection process. It was also necessary to create current documentation of the project and define responsibilities for each part. this resulted in a pvalue less than 0.0 (agrees with actual).214 x 20. All the staff had to have a clear understanding of what and how they were going to measure.63 + (.
It was necessary to establish responsibilities for each process. Moreover. The team should not forget that the new process was implemented in order to increase the benefits and they have to document it. 74 . 6. the final point is to celebrate the results.2 CLOSE PROJECT The team evaluated and reviewed all that they had done during the project and created a procedure to be followed for implementing the improvement process. and to train and inform everyone who was involved in the new change.modify old ones for determining the right solution to implement and try to eliminate defects in order to know if the variable was out of limits or not.
those who have done it have experienced substantial success. improving the design and operation of key processes to consistently meet customer needs.5. enhance customer satisfaction and catalyse the ‘bottom line’. Six Sigma scores much better than many other quality approaches. strictly 3. Six Sigma as a programme is probably best described as an improvement approach that seeks to improve processes to the point of near perfection. Many manufacturers have been slower to extend the approach to their key transaction processes and operations. Such a high performance level is an entry -level requirement when it is though of passenger safety in transportation services. but may more realistically be an aspiration when it comes to more mundane although equally vital activities such as processing payroll cheques or employee expenses. It has a rigorous approach to understanding customer requirements and translating them into specific and measurable outputs. This means that they consistently and profitably deliver outputs (goods. It aligns this ‘Voice of the Customer’ with the process. Indeed some manufacturers have experienced that there is more money to be saved and bigger opportunities for improved customer satisfaction in transactional improvements than in manufacturing ones. services and transactions) to customers’ requirements in all but a handful of cases in a million times.4 defects per million opportunities. However. Although the approach originated in manufacturing applications at Motorola. There is strong emphasis on management by 75 .0 SIX SIGMA IN THE SERVICE INDUSTRY The Six Sigma approach to improving the performance of business processes is enabling an ever-increasing number of organisations to transform service performance. General Electric through their financial services business GE Capital subsequently demonstrated how its could be applied to service and transaction.
which can be achieved: • • • Reduce company's service costs by 30-60% Improve service delivery time by 50% Expand capacity by 20% . Some of the results. Furthermore. and delivering customer wants and needs.fact and data. insurance subscribers. Six Sigma is focused on issues and problems important to both the business and the customer. etc). Six Sigma in the service industry attacks these costs by eliminating waste. Six Sigma is far more powerful in service operations than in manufacturing. and not merely relying on people’s opinions and experience which can be fallible. and is delivered through manageable sized projects prioritised in line with the business’s strategy. without adding staff Six Sigma can be applied in the following environments: • • • • • Advertising Banking Computer services and outsourcing Document management Energy and financial services • • • • • Hotels & hospitality Insurance Logistics and distribution services Professional services Sales and Marketing 76 . speeding up processes. savings or earnings are often replicable across a large volume of users (millions of banking customers. Approximately 30-50% of the cost in a service organisation is caused by costs related to slow speed or performing rework to satisfy customer needs. Not only is the average project value higher.
Six Sigma offers a disciplined approach to improve service effectiveness and service. The use of the Six Sigma methodology is more valuable in financial institutions now than it has ever been and some companies are achieving true savings and revenue growth. Six Sigma is not only merely a quality initiative but it is also a business initiative. Bank of America. Most importantly. there has been a steady increase in the take-up of Six Sigma within the Services Industry. Six Sigma is being introduced 77 . Six Sigma is the inexorable and rigorous pursuit of the reduction of non-value added activities and variation in core service processes in order to achieve continuous and advanced improvements in service performance that have an impact the results of an organisation.5. Since the late 90s. particularly in Financial Services. It is a positive sign for the longterm sustainability of Six Sigma as a management approach that many of the companies now practising this methodology in the UK and Europe are indigenous companies rather than subsidiaries of a US parent. Merrill Lynch and AIG have provided the interest and inspiration for others to follow. Traditionally Six Sigma has been used in the manufacturing industry. The popularity of Six Sigma as a means of improving the quality of service and customer satisfaction is growing exponentially. the US has led the way. Six Sigma is starting to play an important role as distinctive quality methodology. and Financial Services has become one of the highest growth sectors of the global Six Sigma market. in the new competitive world. Now. High profile initiatives at institutions such as Citigroup. the companies in this recent trend are not GE. where the financial industries need a distinction factor to increase their revenues. as one would expect. Naturally.1 Six Sigma in the financial service.
through the financial services. retaining good employees and boost shareholder value. they will go elsewhere. the need to respond to customer demands is increasing daily. where performance management is becoming critical for firms throughout the sector. cut cost-sand and increase capacity. leading financial services organisations have worked to reach the methodology’s aim of near error-free performance. from handling customers’ money. Six Sigma provides the connection that allows the company to improve and sustain performance. this goal is relevant to all processes. Customers expect faster and easier service and if they do not get it. to sending out bills. find out how to improve the cycle times of all their processes. or simply improve the way that the service is delivered. Whether the company goal is to improve customer experience. minimise errors. the organisation can rely on Six Sigma as the quality differentiation factor. Six Sigma is a methodology that helps to satisfy customers’ demands. The Six Sigma’s team needs to understand and to be centred on the next points: • Knowledge and experience in financial services industry • Change management expertise 78 . By using Six Sigma’s define-measure-analyse-improve-control process. From investment banking to credit cards. or answering the phone. Moreover. eliminate bottlenecks. rather than trying to acquire more transactions and keeping existing customers can be more important than finding new ones. This can be achieved reengineering processes for speed and flexibility. comply with the latest regulatory requirement. to closing a loan. to processing payments. The principal goal of the Six Sigma’s team should be improving service delivery and customer loyalty. It is necessary to provide more value per customer transaction.
• Remove non-value-add complexity that is invisible to customers. it is a tactical tool for business managers.• Service quality and speed • Understanding financial industry applications • Thought leadership in Six Sigma for services • Prove solutions in testing. • Generate returns of 10 times company’s investment in two years. • Attract. • Leading Software tools to support the implementation process. process and speed and return on investment. quality. • Provide valued new service offerings to customers quickly and efficiently. • Focus projects on the “critical few” problems. • Understand what the customer wants from the process. measurable. strategic results. Six Sigma is a methodology that maximises shareholder value by achieving the fastest rate of improvement in customer satisfaction. cost. • Improve the speed and quality of service delivery to strengthen customer relationships. 79 . retain and develop talent that provides excellent customer service. and return on assets. Tangible. • Improve total shareholder returns by driving revenue. Not only is it a powerful tool for executing the CEO’s strategy. profits.
Six Sigma methods sometimes cannot work really well. For years. it is being used in all sectors for different reasons. Nevertheless. companies need a new approach to service and operational improvement that will enable them better to serve their customers. Six Sigma was developed to provide a means of reducing common cause variation in business processes. A core theme of the Six Sigma concept is centred on the idea that all activities conducted in business are processes. what Six Sigma does give the company is a very neat and coherent ‘Management Pack’ for conducting the business activities in an improved and more sophisticated manner. Six Sigma has been used primarily in manufacturing. Six Sigma provides the organisation with a means of applying great management practice in a structured approach. Whilst it is easy to view a production line in a factory as a process. but when one breaks it down the underlying business is built on three core processes – risk placement. business is actually very simple. but actually. Since its emergence in the mid 80s. good management and of course. and if companies do the basics well and maintain a strong focus on their customers and core services. In many cases. claims and 80 . There is hardly a Financial Services business out there in the market today that is not suffering the effects of uncontrolled variation in one or more of their client facing processes. common sense. Yet the Financial Services industry is built on them and beneath all behaviour of the front offices in these organisations lays a maze of (often-manual) operational processes. they will always be successful. and every process has inherent variation. good leadership. its members have led everyone to believe that the industry is highly complex and shrouded in mystery. it is harder to identify discrete processes within a financial services business. but the company should never overlook the most powerful tools. The insurance sector is a good example. After all.
Front office Customer acquisition Bussiness Risk Identification &Verification Credit Know your customer &Money req. payments or any other function within a financial business they nearly always exist as a discrete vertical unit. Whilst this provides no shortage of ‘ladder climbing’ opportunities for management and staff. where the business is traditionally built around functions and departments. it does not necessarily represent the best model for client-centric service delivery. Figure1 illustrates a sample of a typical operational structure in a retail financial services company. aligned to the customer experience. Some companies have already moved to a model broken down into core processes. It is typical to find a financial services business structured hierarchically around operational departments and functions.rather than as an end-to-end process. cash operations. Hence. billing. Whether it is the underwriting department.settlement. the process will flow through 4 or 5 lines of management responsibility and each handoff in the workflow increases the cycle time and the chance of a service failure. Traditional Departmental Infrastructure. such as ‘Enquiry to Order’. Yet processes always flow horizontally from first point of customer contact through the sales process and onwards through service delivery to ongoing relationship management. a primary root cause of variation and subsequent customer dissatisfaction is the fact that the provider is delivering the service as a series of separate tasks – loosely linked . If this thinking were applied to the business 81 . This is an area of business thinking where the Six Sigma approach is offering Financial Services companies an opportunity to rethink their operating model to improve their capability in delivering end-to-end services to their customers. Operations Data Entry & Customer Set-up Operations Service Fulfilment Customer Service Account Management Figure 1. credit. ‘Order to Remittance’ and ‘Billing’. More than likely.
it would look considerably different from the status quo flutter. Most importantly. 82 . Whether a bank. Front office Customer acquisition New Customer Activation Service Delivery Account Management Customer Departures Figure 2. the customer will come on board with greater reliability and commitment. building society. the impact is far greater. If the process goes well and the human interaction with the provider is impressive. On this firm foundation. which is centred on the customer experience. but in reverse.described above. They will accept more service failures later on before they depart to another supplier. In order to understand better this point the following should be consider. They will tell their friends and colleagues about the experience. those interactions with the customer when they experience the service and make a judgement upon it. This position would have a significant impact on a company’s growth and profitability. insurer or investment manager. mortgage lender. and it goes without saying that if the experience is poor. The key point is that the business would be aligned to the decisive moments. the management structure of the business should be realigned also. Figure 2 represents the new possible alignment of the process. each new customer’s first experience with a financial services provider is the account opening process. the provider is more likely to achieve cross selling of additional financial products. End-to-end process alignment One of the most important and high profile management positions in any services company should be the end-to-end owner of the new customer activation process.
Listen to the Voice of the Customer Six Sigma is a method for improving quality by removing defects and their causes in business process activities. if the organisation wants to change the process it is necessary to persuade the people. It is rarely to hear of manufacturing companies who have failed spectacularly in their Six Sigma programmes. The principal Commandments for Six Sigma in Financial Services are: 1. there is a high likelihood of human error and customs within the transaction processing. Many companies are led to believe that Six Sigma is the answer before they have posed the question.Adopting Six Sigma methods within a Financial Services business. Yet it is common to hear of service businesses where the initiative has failed to get off the ground and achieve the commitment it requires to succeed. Firstly. and most importantly. Secondly. Then decide how the business is going to get there. People provide the inputs. but in the majority of cases these processes rely on people. the inputs to the process are often incomplete and inaccurate. it is never going to be simple. people conduct the processing and people produce the outputs. Financial Services companies may be built around processes. the so-called CTQs (Critical to Quality). In order to understand and define these requirements. it is necessary to listen to the Voice of the Customer. Then it is necessary to ensure that process performance meets or exceeds these requirements. The method concentrates on those outputs which are important to customers and translates these customer needs into measurable requirements. Lastly. This has caused a fair level of scepticism with senior executives in the Financial Services market and has deterred many companies from adopting the method. If Six Sigma is an 83 . This has a number of implications. It is imperative to start by defining what it is the business wants to achieve.
appropriate means. All projects must satisfy the strategy and priorities of the business In defining the operations strategy. and working on. it is a set of methods and tools. At this stage. the business should conduct a rigorous operations review. 3. This is because the head first approach into DMAIC does not allow for appropriate and deliberate project selection. a clear and meaningful operational strategy is the starting point and that drives everything that follows. not a strategy Six Sigma is not a strategy. identifying risks. the appropriate tools and training can then be properly deployed. Experience has shown that few companies have been successful when they simply launch into DMAIC projects as soon as a corporate decision has been made to implement Six Sigma. It is no substitute for a coherent business strategy and it does not matter whether all the organisation processes operate at six Sigma. opportunities and recommendations. 2. This drives priority in the selection of projects. problems. However. the wrong projects. Six Sigma is an approach to solving problems and encompasses three elements: a philosophy of putting the customer first and defining the service levels expected by the customer. and in the selection of appropriate methodologies and practices for each project. then use it as a great approach. a structured project management method (DMAIC) and a statistical means of measuring process capability. Many of the most successful recent case studies of Six Sigma deployments in Financial Services have achieved this success by adapting the approach to the cultural environment of the 84 . and assigning real cash values to them. The net result is that companies invest fortunes in training for. Six Sigma is a set of tools.
Training staff in only those specific elements of Six Sigma. which are sometimes more academic than practical. Whilst this statistical software plays an important role in data analysis and the production of high quality dashboards. This can be further supported as necessary with specific coaching during actual projects. A greater chance of success and cultural acceptance is achieved when launching by stealth. experienced and highly qualified service industry practitioners.company. which are relevant to their industry. 4. they should be very selective about any element included in their programmes and should not accept the conventional view that every aspect of Six Sigma is applicable or necessary in every circumstance. rather than weeks. it can be a supporting function provided by a team of business analysts. the soft skills make the difference. and which have been derived predominantly from non-service environments. should deliver training and coaching and industry sector expertise is both personal and current. service businesses. Then it is time to consider a wider role for Six Sigma across the business. whose business. can avoid the lengthy training programmes on the market. 85 . so that Black Belts learn from real experience. rather than expecting every project leader to be an advanced statistician. In this industry. Companies should select a few high profile and high impact projects. A primary reason for this is that not every Black Belt needs to be an expert in Statistical programmes. In Financial Services. initial Six Sigma training to get a Black Belt up and running can be successfully and effectively achieved in days. train only the required number of resources and focus on achieving tangible results and stakeholder support. Training Programme If Service companies do choose to implement Six Sigma. Finally.
5. relevant and accessible data.Consequently. In many cases managers use to look at spreadsheets with aggregated data. operational managers in Financial Services tend to be less familiar with statistical thinking. extracting and cleaning the data and designing client centric process management dashboards will prove invaluable in achieving operational excellence and meeting customer expectations. not the average. the case studies they present during training will be up-to-date. the customers feel the variation. which can skew the value significantly and produce a very inaccurate indicator of the 86 . is sensitive to outliers. or mean. has proven to be an extremely effective way of transferring appropriate levels of Six Sigma expertise in this sector. However hard the effort and determination required. such as customer account opening. It is never easy to access relevant data at a transactional level and often takes some moving of mountains to achieve. developing data collection plans. The lack of normal data is a fundamental difference in applying Six Sigma’s structured and data-driven approach to service businesses. producing operational definitions of the key measures. Therefore it is necessary to find other ways of coping with the existence of non-normal data. Following the Six Sigma approach of defining CTQs. especially in smaller volume situations. the end result is worth it. directly relevant and culturally appropriate. Measure what is necessary One of the many challenges faced in Financial Services companies is the availability of clean. offering measures that do not really offer much relevance to the underlying process capability or performance. Additionally. Looking at the end-to-end process and process variation is often a departure from the ubiquitous traffic light indicators and performance measures derived from aggregated data. The average. Training which is delivered around industry specific process simulations. However.
give them 5 weeks of Six Sigma training. based business. In a manufacturing process. It is not really possible to train and prepare someone for the organisational.customer experience. There is only one way to gain that knowledge. However obvious that change may be. With non-normal data sets. 87 . In a Financial Services environment. who has fought the cultural and political battles involved in implementing Six Sigma projects in a people. Alternatively a team may have spent months on a project and developed a process and organisational solution that will transform process capability and performance against customer expectations. If the mean is significantly different from the median. it is possible to hire a post-graduate with a technical background. it is necessary be concentrating on the median rather than the mean. there are often opportunities to make immediate common sense changes when the solution seems obvious. Even Manufacturing companies which are experienced in the successful deployment of Six Sigma in their production and design operations are not getting comparable results when they use the same approach to tackle their non-manufacturing transactional and administration areas. it is advisable to look at percentiles. To measure and manage the variation in a service process. this is a clear indication that there are big outliers within the data and/or that the distribution of the data values is skewed. A first step should be to define and monitor relatively simple indicators for the central tendency and the variation of the process. cultural and political challenges they will face as a Black Belt in a service business. Black Belts in this industry need a manager or coach with meaningful commercial experience. it is worth remembering that the implementation will involve new staff working practices and possibly the removal of age old habits.
supported by the growing number of successful case studies in this sector that have steered a different path to the traditional company-wide Six Sigma roll-out. but with the recent uplift in economic conditions. Six Sigma should simply be the way of working. The next stage is centred on the process of implementing Six Sigma in a bank. which should be integrated into business as usual. As was so often said at GE. with the economy and markets in a state of depression. there has been a shift in focus from cost cutting towards service enhancement and improving the customer experience. but in the context of a growing realisation that in service and transaction businesses. Companies deploying Six Sigma methods are becoming increasingly knowledgeable and thoughtful of how they should launch their improvement programmes. Six Sigma is destined to gain further traction in the Financial Services industry in Europe. many financial businesses have focussed actively on cost reduction programmes. how to implement it and the benefits that different banks have obtained by applying this methodology. it is truly a different ball game. Consequently. 88 .Over the last three years or so. In Financial Services. these are great management practices. There is likely to be a continuing change of mindset in the services industry towards process orientation and understanding processes end-to-end from the customer’s perspective.
In order to apply Six Sigma to customers wait time it is necessary to determine the activities that affect wait time. although not always. errors and inaccurate customer information are some of the factors that need to be analysed. Nevertheless.2. in order to improve customer satisfaction in bank branches. The first step is to define the factors that result in customer dissatisfaction such as wait times. such as investments and insurance. During the last few years. customers wait time normally. Liberation and the globalisation of financial services have produced a rapid expansion of new financial products and services. are almost the same as described in the other chapters of this project. For example. The tools and techniques that have worked in manufacturing industries cannot be simply adapted and applied to Financial Services businesses. The phases of implementing Six Sigma. Even those manufacturing companies which are experienced in the successful deployment of Six Sigma in their production and design operations often do not achieve comparable results when they use the same approach to begin their non-manufacturing service. 89 . All these new products. For this reason and in order to meet with customer requirements. finance and administration areas. have the most impact on customer satisfaction. it is necessary to implement Six Sigma as an idiosyncratic factor. not all factors can be measured in the same quality scale.5. need to be introduced into the new competitive market. banks have implemented numerous new technologies and marketing programs to improve service delivery and revenues. Six Sigma in Banking A new competitive scenario has become visible in banking. Banks offer an enormous range of financial new products through constantly expanding branch networks.
The next stage is to translate customer requirements into measurable characteristics of the process. Once the factors that affect wait time have been determined. First. Successfully implementing Six Sigma in banking requires a relentless focus on customers and on meeting their needs as efficiently as possible. call center results.such as the number of tellers and their activity. banks have reduced fraud using Six Sigma. the Six Sigma team needs to understand the full process in order to achieve the required goals. focus groups and whatever means allows the voice of the customer to be heard loudly and clearly. For this reason. For example. Once the team has a clear understanding of the customer requirements. For example. it is necessary to define what is critical to customers and confirm which core processes are based on those requirements. it is necessary to minimise their impact. find out potential solutions and implement them. Sometimes a process depends on different departments and each department probably has a clear understanding of the process in its area but a full map of the process does not exist. There are many ways to find out the customer requirements and needs such as surveys. it is able to measure process effectiveness and efficiency based on those requirements. It can be used to enable managers to make relevant decisions. This is probably the most unpredictable step because it is necessary to understand the full process from the beginning to the end. if delivery of the product or on time service is really relevant for the customer. Six Sigma can be used for much more than reducing customer-waiting time. The effectiveness of the process determines the problem or defects that the process can produce. then the metric 90 .
In order to understand the process of implementing Six Sigma better and having good approach to the real process. Once the team has defined the possible measurements. For example. long delays in producing a quote that cause prospects to drop out. The Six Sigma methodology includes powerful tools for analysing each of the gaps and quantifying what the poor quality is costing the company in each case. it is necessary to look at some Six Sigma banks such as Citi Bank and Bank of America. and numerous inaccurate credit reports. The team needs to ensure that they are investing in the right project and in the right order because the prioritisation of some projects against others could produce a different and unexpected output.would typically be on-time delivery as measured by the time from the promised date to the date of actual delivery. it is necessary to determine the cost of poor quality. a mortgage lender whose customers want prompt action on their applications might find that the process includes a high number of abandoned customer calls by . Having clearly understood what each process gap cost the organisation. 91 . the team can begin to prioritise the improvement efforts according to what is most critical to the customer and less expensive for the organisation. This means determining the cost of not reaching the required quality levels and quantifying the impact of particular gaps in the processes.
The Citibank Six Sigma team developed the process map and looked for defects in each step of the processes. This bank has achieved substantial performance in process timelines. can be applied here because a bank is a special case. cash management. the company had to acquire quality initiatives that satisfied customers quickly and differentiated them from other banks. Citibank's principal purpose is to reach a cycle time reduction by 10 times by the end of 2000 and another progressive defects reduction and cycle time by 10 times every two years from there on. which have been described in the previous chapters.5. In the case of banks. in order to achieve a cycle time reduction. and customer satisfaction. Citibank has discovered the benefits of cycle time reduction in financial areas such as customer banking and emerging banking. the Citibank team was able to correct the problems in the Six Sigma program. Not all the Six Sigma tools. These charts 92 . Customers used to complain because they always had to wait to the confirmation of their request. For example. In recent years Six Sigma quality has always been applied in the manufacturing area but Citibank selected this methodology to meet customer satisfaction. they had to call their banker and then phone. fax or mail in the requests of the transaction process. the team began to eliminate wasteful steps. applying methodologies such as cycle times helped with the detection of defects and organised teams of Six Sigma. Once the defects were located. the Six Sigma’s team usually uses easy tools such as Pareto charts.3 Citibank Citibank’s objective is to be the most important international financial company. In order to achieve this ambitious goal. when Citibank’s customers wanted to transfer money from their accounts. When the opportunity areas have been identified.
After finishing the process map. the team removes useless process and non-value steps and creates new ones. the reduction in return calls to people who had ordered fund transfers of the cut in-coming transactions by 73%. are: • The Private Bank has achieved a reduction of between 80 and 85 percent in internal and external callbacks. Citibank realised that one of the principal problems was the internal callback procedure. it defines the problem. respectively. which occur more often. which have been satisfied in two of the Citibank divisions. 93 . from three to two days. First of all. decide what needs to be corrected first. In this case. Citibank Six Sigma teams are usually made up of 30 to 50 people in each functional departments. the team tries to map all current steps and identify what is not working. The team then confirms the accuracy of the map with all the departments involve in the process and it can be modified if they think that are necessary or they find another new problem. and a 50% credit process time. Next. Some of the goals. Then the Citibank’s team. • Global Equipment Finance: This subdivision has improved all processes from the reception of customer orders to the delivery of the product. They have also reached a 67 % reduction in the credit decision. This required staff to return to call the person who had ordered the transfer of funds to make sure that all the data was correct. based on this data.show the problems. The last phase is the implementation of the change of items to reach the required goals. and the team. By using Pareto chart. in the implementation process. follows five phases.
94 .• Copeland Companies. They have also reduced the cycle time of processing statements from 28 to 15 days. They have improved the accuracy and timeliness of statements. Citibank has achieved great results applying Six Sigma in all its divisions. how the bank of America applies Six Sigma is described and the results which they have obtained implementing this methodology. In the next step.
introduced the Six Sigma philosophy in 2001. • Enhancement of enterprise e-mail governance to improve productivity. which after trying to establish other quality strategies and efforts without any improvements. some people were sceptical about it but now Six Sigma has become an integral part of the culture of the bank. Businesses and engineering teams were collaborating on projects to eliminate variation and errors in key processes.5. Based on the principie of spreading the discipline across all Bank of America businesses. • Improved ability to detect and prevent fraud at banking centers. • Increased productivity. • Elimination of significant numbers of electronic information subscriptions. The benefits of the implementation started rising quickly and the bank achieved an important cost reduction in several areas. • Reduction of credit risk assessment that are considered biased. Some of the results that the Bank of America has achieved applying Six Sigma are: • Control payments to suppliers. quality training was extended throughout the organisation. This discipline was implemented as a core process performance metric. With the enthusiasm and knowledge of the BBs and MBBs. Then Six Sigma tools were implemented and utilised across the Bank of America. business approach and a leadership philosophy. In the beginning. • Increased associate retention in key areas.4 Bank of America The Bank of America is one of the largest financial organisations. the Six Sigma team 95 .
These good results convinced leaders that Six Sigma works and they then desired to reach a better quality level.demonstrated that this methodology could work in financial services by focusing on customer issues and performance gaps. etc. this effort 96 . For example. some published case studies have been analysed. the Bank of America has established the objective to become a real Six Sigma organisation and this requires that all their processes reach a high Sigma level including the processes which involve suppliers. in some operational areas of the company. Thirty Six Sigma projects were concentrated on the root causes of these defects. Nevertheless. The reason to study the impact of Six Sigma in Banking is a way to show that Six Sigma is emerging and influencing in all the areas not only in manufacturing but also in the service industry and evidently in banking. reducing defects by 88% through the end of 2002. Another important aspect to achieve the required Six Sigma level is that not only the organisation needs to establish Six Sigma methodology but also all the vendors and suppliers have to be involved in this quality program. vendors. Six Sigma helped teams reduce system problems that occur in hardware and software systems. they achieved even greater gains. which can arise during the implementation process. The customer delight was increased by 25% across the company. This project has been developed in order to understand the Six Sigma implementation process. With the intention of approaching to this methodology and showing the possible difficulties. during the last two years. For this reason. and the benefits of Six Sigma.
97 .has not reached its leitmotif yet and needs to continue growing and improving in all aspects from the employed tools to the team training.
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