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Six Sigma

Six Sigma

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Published by: maherkamel on Sep 19, 2013
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  • 3.1.1 Customer satisfaction
  • 3.1.2 Determining “critical to quality” characteristics
  • 3.2.1 Select the possible measurements
  • 3.2.2 Construct operational definitions
  • 3.2.3 Identify data sources
  • 3.2.4 Prepare a collection and sampling plan
  • 3.2.5 Implement and refine measurement
  • 3.2.6 Output Measures
  • 3.3.1 Tools for Identifying potential causes
  • 3.3.2 Tools for verifying potential causes
  • 3.4.1 Brainstorming
  • 3.4.2 Affinity diagram
  • 3.4.3 Benchmarking
  • 3.5.1 Define responsibilities for the process owner
  • 3.5.2 Drive to Six Sigma
  • 5.1 Six Sigma in the financial service
  • 5.2. Six Sigma in Banking
  • 5.3 Citibank
  • 5.4 Bank of America



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



2.1. 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.


Figure 1(d) displays a line with a negative slope. 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. Figure 1(c) shows the relationship between the value of sigma and the number of defects per million. 4 . It also has a positive slope. 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. As the sigma value increases. indicating that when sigma 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.2. which indicates that the number of defects per million decreases. z. Sigma capability measures the capacity of a process to develop without defects. 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. It has a positive slope indicating that as the sigma level increases the process yield also increases. when the yield (%) increases. which indicates how well the process is performing. the number of defects per million also increases. obtained by dividing the difference between the USL and the LSL by Six Sigma. The capability of a process for a Six Sigma Level is two. The quality scale of Six Sigma measures the number of sigmas between the interval defined by the specification limits. the sigma capability is a metric. The relationship between the number of sigmas and the yield (%) is shown in Figure 1(b).

Relationship between sigma. Table 1 lists the sigma level against the number of defects per million of opportunities. 5 . With their focus on defects and defect opportunities. Once that have been identified the opportunity area and the requirement. it shows that the number of defects decreases exponentially as the sigma level increases. sigma measure can be used to analyse and compare different process inside an organisation or between organisations.z z (a) DPM Sigma DPM (b) yield (%) (c) Sigma (d) yield (%) Figure 1. yield and the number of sigma. the organisation can define the defect and the sigma level which wants to reach. This helps the company to realise what is important and what need to be improved. Sigma measures demand a clear definition of what the customer requirements are. DPM.

5) sigma level in the long term. The blue curve is centred between the limits. The mean or setting of the process could shift or the standard deviation might change increasing the spread of the process.210 233 3.537 66.807 6.5σ which is an arbitrary value based on manufacturing experience. The green one has exactly the same standard deviation of 1 but the mean has shifted to the left by 1. 6 . as Figure 2 shows.5σ and so part of the now falls beyond the LSL. If a company has an X sigma level in the short term it will have an (X – 1. with a mean of zero and a standard deviation of one and represents the short term process sigma. The result of this is that a part of the tail of the curve would extend beyond the sigma limits.DEFECTS PER SIGMA LEVEL MILLION 1 2 3 4 5 6 690. The output from manufacturing processes is liable to change over time. Six Sigma is not an exception to this rule. This means that the sigma level is smaller than the company expects. Relation between sigma level-DPM.000 308. In practice it is devalued by 1.4 Table 1.

Comparison between Six Sigma and 99% quality 7 . 99% Quality 20.7 surgical operations per week. Six Sigma 7 pieces of mail lost per hour Unsafe drinking water 1 minute every 7 months. Difference between the long and the short term Many people think that 99% quality and therefore 1% defectives is a high level to obtain.1. However.5s LSL 6s USL Figure 2.000 surgical operations per week. No electricity for 1 hour every 34 years. the 1% can mean the failure of the company. The table shows that it is necessary to implement Six Sigma as a tool for reducing defects and increasing customer satisfaction. 5. No electricity almost 7 hours per month. Table 2. 1.000 pieces of mail lost per hour Unsafe drinking water 15 minutes per day. The results show that 99% quality is not enough in some cases. Table 2 lists a comparison of some processes evaluated by Six Sigma and by 99% quality.

People fly by plane because it is a safe transport medium but a piece of lost luggage is tolerated. but it also contributes methods to create new processes.The sigma level for airline company safety is 6.5 Sigma. airline baggage operations work at 3. • Six Sigma is an enterprise process. Once Six Sigma have been defined is necessary to understand the importance of implementing Six Sigma. in contrast. which enables companies to improve their final results.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. which means less than one-half of a failure per million flights. • The Six Sigma is a business strategy. 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. • It allows enterprises to reduce the number of defects in all their outputs and eliminate quality error. minimising waste and resources and increase costumer satisfaction. design. which ensure that the error does not occur again. 8 . and supervise their usual activities. 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. • The Six Sigma methodology not only enables errors to be detected and corrected.

These should not only focus on manufacturing. but it is also necessary to recognise improvement opportunities in all key business processes. In the fifth phase is selected the business process to be improved. The second phase is related to establishing good communication with customers. This create a new. employees. which began in the early 1980s in Japan and in the new industrial countries. Eckes [2003] 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. Enterprises want to make more products rather than to make better ones and they prefer control and correct rather than prevent. IMPLEMENTING SIX SIGMA There are six phases to implementing Six Sigma in an organisation.2. Lastly. In the fourth concerns the development of a framework for continuous process improvement. 9 . The third phase is based on the training of the team to assure that adequate levels of numeracy are possessed by all employees. the first reason for implementing Six Sigma is the arrival of a global economy and new competitors. The third reason is generally to reduce the cost associated with poor quality. The second is based on total quality. the individual employees and teams who will conduct the Six Sigma projects are chosen.3. customers began to require more value for money. The first normally begins with leader awareness training and a few improvement projects. Due to a reduction in demand and an extraordinary increase in the level of cheap offers. because the company will limit itself to traditional quality improvement initiatives. The information obtained from these groups will help the organisation to determine a starting point and to eliminate obstacles to achieving the goals. more competitive market and makes enterprises adopt the level of quality that the customer demands. Six Sigma projects are organised to improve business performance. and suppliers.

Define. The DMADV process is designed to remove variation between what the customer wants and what actually was designed.In the 1980s. A new methodology was necessary and Six Sigma is emerging as the new way. This process is generally used for product design before manufacturing. Measure and determine customer needs and requirements. 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. • • • Do: Drive to the planned solution. choose possible solutions. The two Six Sigma models. Measure. are DMAIC and DMADV. Design and Verify. The phases of DMADV are: • • Define the project goals and customer deliverables. Total Quality Management (TQM) was very popular but its impact has begun to wane. 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. Analyse. The DMAIC process is used to refine the manufacturing process through reduction of common cause variation. 10 . The PDCA cycle is based on the next phases: • Plan: Identify objectives. The Design for Six Sigma process is known as DMADV . and plan an implementation test. which are used in order to reduce the number of defects and to meet with the customers requirements. introduced by Shewhart and applied the first time for Edwards Deming. Act: Take necessary action to achieve the goals. Check: compare with the objective. which describes the logic of data process improvement.

• • • Analyse the process to meet the customer needs. the team may need to change the way in which they have been working and thinking.CONTROL 1. Verify the design performance and ability to meet customer needs.ANALYZE Figure 3. A Six Sigma project requires a leader who work-guide the team from the old way of working to the Six Sigma way.MEASURE 3. DMAIC cycle Selecting the right people is one of the key aspects of the implementation process. Design (detailed) the process to meet the customer needs.DEFINE 4. Managers should be trained in using Six Sigma to help run the organisation. 5. It is necessary to realise the importance of finding the correct team. which is going to be involved in the Six Sigma initiative. In order to achieve their desired goals. 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. Black Belts. The function of the leadership team 11 . Everyone involved in Six Sigma is a leader (Champions.IMPROVE 2. MBBs. and Green Belts).

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[2003] 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.


” “This will not work in our enterprise. BENEFITS AND LIMITATIONS OF SIX SIGMA When Six Sigma is first introduced. opinions In many organisations vary between enormous enthusiasm and scepticism.4. We are doing Six Sigma already. and to re-prioritise how they utilise their resources. Some of these are described on the next section. A Six Sigma project can be accepted without the bottom line having been identified and defined. ƒ Six Sigma needs a passionate leadership for its successful deployment. ƒ It integrates the human and process elements for improve.. Six Sigma is usually deployed using existing resources. 2. giving rise to adverse comments such as :”There is nothing really new in Six Sigma compared with TQM.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. 15 . At the beginning of its application there can be many disappointments. 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. The new Six Sigma organisation needs to realise the importance of re-evaluating existing work programmes. Some of the benefits of Six Sigma compared to other quality improvement initiatives are according to Anthony [2001]: ƒ Six Sigma strategy focuses on achieving financial benefits beginning from the bottom line of the business.” etc.

ƒ Sometimes. Green Belts (GBs ). Six Sigma like any other quality improvement initiative has its limitations. there are many problems in applying the change and finding the data to begin with can be difficult.ƒ Six Sigma is based on tools and techniques that have to be followed to achieve the goals. and implements the approach. 2. on the one hand. the process of prioritisation is completely subjective. and techniques for reducing the number of defects based on variability reduction. Master Black Belts (MBBs). ƒ The statistical definition of Six Sigma is 3. For instance. this can result in dissatisfied customers. In some enterprises. tools. deploys. ƒ Six Sigma establishes an internal structure within the business. for an airline company a tragic accident is more serious than a cold meal. enterprise which leads. 16 . 3. This could take most of the project time. Black Belts (BBs).4 defects per million of opportunities. ƒ One of the most important problems associated with implementing the Six Sigma methodology is determining the right selection and prioritisation of projects. ƒ Six Sigma utilises statistical concepts. This usually takes the form of: 1. but on the other it cannot assume that all defects have the same level of severity. ƒ Six Sigma is based on the importance of accurate data and decision making rather than on assumptions. Each has its place and reason to be applied to obtain the final objective of the business.

in more detail.5 sigma shift cannot be assumed for all processes. 17 . Six Sigma can easily digress into a bureaucratic exercise between Master. ƒ The relationship between Cost of Poor Quality (COPQ) and Process Sigma Quality Level requires more justification. the role of the different members of the team and some of the benefits and limitations that this methodology imply. In this chapter has been explained the necessity of implementing Six Sigma. Black and Green Belts. The principal objective of the next chapter is to approach.ƒ ƒ A 1. to the tools and methods used during the implementation process.

or even inefficient and should be analysed. If a company is to achieve its goals. Increasing quality in products and services allows a company to enter newer and wider markets. After understanding the products and the services offered. services. 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.1 PROJECT SELECTION In order to make a good project selection for Six Sigma application. and even the market. Several products. the company has to be aware of how quality can be used as a key differentiator. Enterprises produce different products and services all of which are going to be consumed. there are a lot of interconnected processes and functions to form the end product. Six Sigma initiatives require a radical change within the organisation and a great deal of effort for achieving the fundamental 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. so they have to be competitive in the marketplace and for this reason should have a good quality-price relationship. and processes may be inappropriate. Organisations must be able to recognise the customer and their needs and expectations. it should consider its situation in the market is going to be and use its resources to achieve the required goals. The success of a company in the marketplace depends on several factors one of which is quality. ineffective. it is necessary for the Managers to understand the meaning of a Six Sigma organisation and what is needed to achieve it. it is necessary to understand both the organisation and the customer. Within an organisation. Before an organisation decides to implement the methodology.3. 18 . to consolidate its existing market and to centre on customer satisfaction.0 THE IMPLEMENTATION PROCESS 3.

When an organisation begins to grow and develop in size and structure a lot of inadequate and inefficient processes emerge. Process maps commence at a start point and finish at a stop point. and aims of the team. which sets out the responsibilities. need extensive training. The best way to start a project is to define a dynamic document. for implementing Six Sigma. Inputs.When a process map is constructed it is necessary to identify the inputs and the outputs at each step. Projects teams. and pass through different process steps with decision points and inefficient delays as shown in Figure 4. Rework STEP START DEL AY STEP DECI SION DECI SION Less efficient side process DEL AY STOP MOVE STEP MOVE Figure 4. and Customers) demonstrates areas of inefficiency and waste. Most of the employees of a business realise that a change is needed but are unable to carry out improvement. The Six Sigma Methodology is 19 . Process. The high level of the process map is called SIPOC (Suppliers. In some cases these steps are easy to recognise and sometimes there is an output . Outputs. Process map. goals. Everything that is done in life follows a process with a series of steps. roles.

It is necessary to use statistical tools to characterise the influence of the Xs on the Ys. However. maintainers. In manufacturing. do not add value to the product. supervisors and engineers. This is fundamentally different to what has been done in the past which was to focus on the outcomes or the Ys. The core processes are those for which the customer is prepared to pay. Now the emphasis is placed on understanding the vital inputs or Xs. a good process map can be facilitated only with a knowledgeable and participative team of operators. The main core processes are those. Y (output) = function of (inputs X1. It is the foundation of measure. 20 . these are enabling processes. as well as added value and enabling process steps because customer are only interested in processes which add value to the product. They can be divided into two or three more processes. we have a Six Sigma process. 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. 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.focused in understanding the relationships between dependent and independent variables. there are other processes. Controlling these parameters will bring success. Six Sigma uses statistics. X2. Six Sigma is aimed at producing Ys within a specific range by reducing the variation in the key influential Xs. X3… Xn). A process map is fundamental to the Six Sigma method. add value for the customer. process engineers. Process mapping allows the identification of core and enabling processes. and map well onto customer perceptions of the delivery of the product or service. which from the point of view of the customer. which constitute essential operations.

These customers are important for the organisation because they were customers in the past and now they are not. Customers are those who have been consuming the products or the services of an organisation during a determined period. and the critical to quality characteristics. In the case of shareholders. they have more to say about poor quality and added value. The customer can be classified as external and internal customer. Each class is important to an organisation but the most important are the last two. 3. the necessity of customer satisfaction.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. Non-customers are potential customers. 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. they are interested in the value and worth of the business and the return on 21 . The team can identified three types of possible customers: 1. in which case they have a terrific interest in the operation and success of the business. They are dissatisfied customers and the company needs to analyse which are the reason to be not customer. 2.Sometimes they are the stakeholders. In order to achieve a good project selection the team needs to understand the classification of the customer. Not customer is existing or past customer who has gone elsewhere and now is not customer of the organisation. 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. The internal customer is of equal importance to the running and smooth operation of a company .

which should be followed. Internal customers do not have too much influence over the control of a company but they help to achieve its objectives. As far as employees are concerned. it is important to understand the customer and the different groups that can exist. 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. are first of all identify customer needs and requirements.investment. First. 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. Six Sigma is related to defect reduction and this not only influences customer satisfaction but also improves the internal processes. On the other hand. A satisfied customer usually results in repeat business and he/she tells others about their experience with the organisation. The buying process involves recognising 22 . It is possible to measure customer satisfaction on a percentage scale. In terms of processes. 3. The steps. Six Sigma is aimed at increasing the value of the employees because they become more engaged with the operation of a successful business. Six Sigma quality is aimed tat satisfying the expectations of the customer and may include the profitability and corporate safety for the shareholder. It is the experience of the customer with a product or a service of the company.1.1 Customer satisfaction Customer satisfaction is a fundamental measure of quality. 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. and finally convert requirements into critical to quality characteristics. then core processes.

making decisions and finally resulting in outcomes. For this reason it is necessary to determine the things and the process which create unsatisfied customers. safety and accuracy are always vital to good service and a failure in any of these is a dramatic defect for the customer. Customer satisfaction means that all the needs and requirements of the customer are achieved. it is necessary to begin with a definition of critical to quality. evaluating alternatives. The important customer information needs to be processed and analysed. Neumann [2000] defined it as follow : 23 . There are two definitions of core processes. 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. The result of this is a quantifiable ranking of such processes against customer judgement. The only way to identify core and enabling processes is to ask and study the costumer.a need. It is necessary to realise what the characteristics of the products or service are. Some studies based on the customer are extremely complex and it may take several months to understand.2 Determining “critical to quality” characteristics First. The customer definition is that it is all those which add value. For example.1. determining a specification for solution. Six Sigma initiative consists of quantifying customer satisfaction. This step is quite difficult because the own customers sometimes do not know what really expect of the product or service. affect satisfaction and quality of the product. The business definition is all these which add value to the customer. 3. searching for information. The team needs to improve customer satisfaction and list these needs and requirements for each process.

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. It is necessary to determine a list of CTQ characteristics for processes that are not only measurable but also actionable. interviews. At this stage. The success of Six Sigma is based on a good conversion between CTQs and requirements. The team needs to analyse customer requirements and set targets. They align improvement or design efforts with customer requirements. Customers often have difficulty in expressing what they want or expect from a service or product and forget the main things. They may include the upper and lower specification limits or any other factors related to the product or service. market research. quantitative business specification. the process of change is possible and the organisation is closer to its goals. The methods for obtaining information about “the voice of the customer” include focus groups. it is necessary to determine what the customer requirements are for each individual process and to set specific target limits. and becoming a customer and observing customers in 24 . Only when this is achieved. 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. A CTQ usually must be interpreted from a qualitative customer statement to an actionable. Customer needs must be converted into CTQs. CTQs represent the product or service characteristics that are defined by the customer (internal or external).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. In order to do this the team should put their shelves in the position of an external customer. which helps the business to act. However. this raw information can be quite useful even though it may not be complete.

In this section. Security is essential in any purchase. etc. The most important for achieving the company goals is the ability to listen to customers’ requirements. requirements are difficult to be expressed and sometimes they can be analysed from different points of view. etc. Social Needs Humans have a desire to belong to groups: clubs. irritate. it is necessary to work down from high level concepts of general customer needs. 25 . he/she may think about other things. 3. 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. work groups. family. food. Physiological Needs Physiological needs are the very basic ones such as air.action. Once they are satisfied. etc. There is a need to be accepted by others. religious groups. but not a solution. water. concise and complete. the key issues will be determined. which would resolve the issue of the customer satisfaction. sleep. discomfort. In order to identify a key issue it is necessary to list one or more requirements. 2. When these are not satisfied a person may feel sick. When new processes or products are designed. in pain. A good requirement should be measurable. In some cases. Safety Needs These needs are mostly psychological in nature.

4. This is useful because customer needs are not all of the same kind and they do not all have the same importance. Not all identified requirements may be of equal importance to all customers. the Kano model. which results from competence or the mastery of a task. Once segments have been defined. First is self-esteem. The results can be used to achieve customer satisfaction. often drive very expensive cars because doing so raises their level of esteem. based on the relative priority of each segment's requirements. It is a quality measurement tool used to prioritise customer requirements based on customer satisfaction and to determine which requirements are important. which 26 . Kano analysis can help organisations to determine which requirements have the highest priority. Note that the Kano model can be used to help identify customer segments. Self-Actuation The need for self-actuation is the desire to become more and more what one is. SELF-ACTUATION SELF-ESTEEM SOCIAL SAFETY PHYSIOLOGICAL Figure 5. there is the attention and recognition that comes from others. Second. 5. People. who have all of their lower needs satisfied. Kano Analysis is another tool used to determine customer requirements and needs. Mallow’s Hierarchy. to become everything that one is capable of becoming. People who have everything can maximise their potential. Esteem Needs There are two types of esteem needs.

as has been stated. the things that cause customers not to like a product. Without this. The must have things. There are four types of customer needs: 1. 4. Kano diagram. 3. the product is not sold. Satisfaction One dimensional Delighters Performance Lack of performance Must-haves Dissatisfaction Figure 6. can be applied once again to each segment to further defined the segment's priorities. The voice of the customer. The dissatisfies. is a necessary 27 . The Surprise and Delight factors. 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. The More is better.is shown in Figure 6. 2.

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: ƒ ƒ ƒ 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

2. the complexity. At this stage. etc. The team has to be trained to select the right measurements and needs to bear in mind. The first is to understand the goal for collecting the data and what is actually required.measure of the product. which are the available data. This is important because without it different members of the team may not operate in the same way. 3. 2. when selecting the items to be measured. The team needs to use the following steps to create operational definitions: 1. An operational definition helps to ensure that the right data is corrected and that it is understood. It is necessary that everyone obtains the same results. The team needs to evaluate what is more valuable for the customer and to determine the possible opportunity area. no missing information. If not the operational definitions will need to be redefined. 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.). 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. 31 . 3. the cost and the lead-time required of getting the data.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.

The team needs to know how the data were initially collected. The company needs to choose qualified people to collect the data. In order to obtain complete and accurate data. Another option is to use existing data. The required data is sometimes held on a computer. There must be enough data for the team to draw conclusions.2. the data can be taken manually but is prone to human error. On the other hand. Explain for what the date is to be used. the team needs to bear in mind: ƒ ƒ ƒ ƒ Why it is collecting the data. There are however cautions to remember: The data should be recent.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. or output and being quicker and easier than gathering new data. learning about the input.3. 32 . this has some advantages such as achieving data. Sometimes it is a good idea to give data collectors the opportunity to provide inputs on the process. the procedure may not be consistent with the operational definition. The data should be representative of the process and the measurement system. but often what is needed is not captured on the system. process.

ƒ ƒ ƒ Select the data and factors.Defect or cause Checksheet.Data sheet.4 Prepare a collection and sampling plan At this stage. The following guidelines can help to construct an appropriate form. Often a company has to create its own forms. Decide on the accuracy of the measuring system and indicate it on the form. Include the name of the data collector and comment columns. Determine the period over which the form will be used. Standard forms can facilitate data collection.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. Captures readings. Some of the most common check sheets are: 1. stratification plans and a sampling procedure. Testing the form design and making changes where necessary. or counts quantities. Develop the form: Review different form formats. which are to be included. 33 . Use a clear title. 2. the team needs to develop data collection forms.3. because they enable faster capture data and ensure consistency. measures.

which is related with the problem. 5.Traveller Checksheet. Some of these include: 1. Sometimes the team wants to know more about the data and stratification helps to clarify what is really happening. Statistics is based on sampling and this discipline has the ability to draw conclusions about all items based on a part of them. it is necessary to establish stratification plans. The purpose of stratification technique is to obtain a baseline measure of performance against customer requirements. Introducing the questions that the team has about the output measure. The data collection sheet is based on the physical representation of a product. Once the collection forms have been developed. Identifying characteristics which define different subgroups. Getting a valid sample is in some cases hard work and presents a significant challenge. 4. 2. It is one good way of analysing data at each step of the process. workplace. the team can begin the sampling procedure. Discussing if the specific measures help to analyse the output Y. The team can identify the strata by making a list of factors. 3. Identifying output measure.Concentration Diagram Checksheet. 4. or form. Creating specific measures for each subgroup. It is a check sheet that “travels” with the product through the process. For this reason it is necessary to establish if the items change with time or not 34 . After stratifications plans haves been designed. If not it will need to apply the measurement system to other items.3. The item is observed and the data collectors mark where the defects are produced. Sampling means using some of the data in a group to represent the whole process. Different factors affect the number of samples and size of them that the company needs to collect.

Gage R&R involves: 35 . Gage R&R is one of the most useful methods. which will be analysed in the next stage.Confidence level: this concept is related to how certain that the company wants to be. after developing the stratification plans and selecting the sampling population. There are others concepts that it is important to define to understand the importance of collecting data: . 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. There are several types of measurement system analysis Gage R&R.(process or population).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. Stability Analysis.Precision: The quality of being exact. This method is most commonly done with continuous data. 3. . Discriminate Analysis and Kappa Analysis. The most difficult aspect of sampling is to ensure that bias is kept occurs to a minimum. Measurements need to be accurate and precise. the finality of this data and the confidence that the company put in the results.2. the data type (Continuous or discrete). The data can be precise but not accurate. needs to achieve accurate data. The team.

3. The calculations of the defects measures can be made using basic mathematics. Reproducibility. Defect measures can be used to compare processes in different areas of a business. For this purpose output and total process performance measures have to be developed. 2. If the measurements do not change over time. 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. the instrument is said to be stable. Comparability. This is an indication of the variation that occurs when successive measurements are made under the same conditions. This is the variation in the average of the measurements when the measure is made by different operators under the same conditions. Consistency. Simplicity. thing. When attribute data cannot be changed to continuous data it is necessary to use Kappa analysis. Nevertheless.1. Repeatability. person. 2.6 Output Measures The process measure Six Sigma is focused on reducing defects within a process.2. the objective is to determine how the process are working and establish baselines. The team can evaluate discrimination graphically with a ranges chart. 36 . 3. Defect measures can be applied to any process. characteristic and under the same environmental conditions. At this point. Evaluating the stability of a system can be achieved by maintaining a control chart on the system. There are several ways to measure defects: 1. Discrimination enables changes in the characteristics to be detected. The other measurements analyse methods discussed in this Section use continuous data for their calculations.

Some disadvantages or problems make defect measures less attractive. An item or the final product or service that has been delivered to the customer. Defect opportunity. Some key concepts of defect measurement that need to be signed are: ƒ ƒ Unit. A unit may be defective because of one or more defects. Defective. Internal yield measures are based on data collected from the process operation. One product can have multiple customer requirements and for this reason there can be several opportunities for defects. The team needs to measure internal defects to know how well the process is working otherwise a lot of information is hidden. these measure are not useful and give no real indication of how the whole process is working. 37 . regardless of the number of defects within the unit. which it is described in the next section. Sometimes when the purpose is to determine what the customer requirements are or to evaluate the efficiency of the process. Sometimes it can be difficult to determine the number of opportunities that one product can have. Once the team has a clear definition and a guideline of what to measure and the procedure to do this. ƒ ƒ Defects per unit. 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. All the defect measures that have been described are based on results or measures at the end of a process. It is the number of defects over the number of units sampled. The defects per million of opportunities indicates that how many defects would arise if there were a million of opportunities. An entire unit that fails to meet acceptance criteria. it is necessary to analyse the collected data.

which can try to anticipate to the problem based on the team’s experience and intuition. f(xi). it is necessary to have a dynamic and qualified team. because once this has been achieved. 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. but sometimes it is not enough and the way can be difficult.+ f(xn) Y is the CTQ characteristic which affects a customer’s satisfaction and is the addition of a series of factors. which describes the process. For this purpose.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. The equation that describes the customer CTQ is: Y=f(x1)+ f(x2)+ f(x3)+. 38 . 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. For this purpose. The team’s objective is to reduce the number of defects thereby eliminating unnecessary factors..3. the process can be changed and improved. which increase the final output Y. The team needs to work to achieve the best equation.. it is necessary to identify the main factors. In a process or a product that has many defects with a lot of variation. and the order in which they will be applied depend on the problem and the process that requires improvement. This phase focuses on facts and reality and is believed to be the most unpredictable because the tools that the team has to use.

1. or at point 2. if the objective is to identify defects. They can be divided into two groups. 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. Process Analysis. 2. Data Analysis. 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. The cycle diagram begins at point 1. those for identifying and those for verifying potential causes. if a hypothesis is to be validated. Use data from the measurement phase to create thinking about the cause of the problem. Analysis phase diagram There are two key sources to determine the true cause of the problem. 1 Analyse Data/proces s Refine or Reject Hypothesis Confirm and select vital causes 2 Develop causal hypothesis Analyse Data/proce ss Figure 8. 39 . Investigate how the work is being done to identify problems during operation.The analysis phase can be represented as a cycle as shown in Figure 8.

3. A Pareto charts is a type of bar diagram in which the “x” axis represent the categories of the problems. They help to choose what kind of statistical test can be applied in each situation. There are many which the team could use in their investigative efforts. the areas of which are proportional to the class relative frequencies. Data displays These tools are focus on creating ideas about potentials causes. or service and to prioritise the critical ones.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. It is easy to construct manually and requires less data than other tools.3. ƒ Time series plot. A histogram is a bar diagram of a frequency distribution in which rectangles are constructed across the class internal. defects or error and the vertical axis “y” represents a count or percent of defects. To create a Pareto chart it is necessary to follow the next steps: 40 . There are two types of tools to identify potential causes: data displays and caused-focused brainstorming tools. product. It is a tool that shows if a process is changing over time and depicts the data in the order in which they occur. ƒ Pareto chart. Histograms are a useful informative tool about the underlying distribution of the data. Some of these are: ƒ Histograms.

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 . Group the problems by frequency or by level of impact. Some examples are given below: ƒ 5 whys. Draw the bars of each category. this means that these categories of the problem account for the most occurrences or impact.1. Brainstorming tools can produce many ideas or solutions in a short period of time. Represent a curve showing the cumulative percentage. Draw a vertical axis and divide into increments. 4. Cause-focused brainstorming tools. If there are one or more categories with a high percentage. 3. 2. 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. 5. 120% 100% 80% 60% 40% 20% 0% Figure 9. A possible example of Pareto chart representation is shown in Figure 9. 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. Pareto chart representation. Pareto analysis gives the team a visual interpretation of the data.

which needs to be analysed. 5. (Why 1) 2. 42 . 4. The procedure to create and use a cause and effect diagram is as follows: 1. Name/define the problem or the effect. 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). The team needs to continue this procedure until a potential root cause is found. Select any cause. Sometimes the team finds a root cause before the 5 whys are completed but not always. “Why does this outcome occur”? (Why 2) 3. ƒ Cause and effect diagrams (fishbone or Ishikawa diagrams) The fishbone diagram is used to identify causes of problems or prevent future problems. “Why does this outcome occur”? (Why 3). Ask. 3. 5. The team need to review the diagram and eliminate causes that do not apply. Based on the final diagram the team need to identify the causes that are most critical.The procedure is simple and based on the following steps: 1. 4. Decide the major categories for causes and create the basic diagram (Figure 10). Brainstorm for more detailed causes and create the diagram( for this step the team can use the 5 whys method). 2. Choose one reason for the why 2 and ask.

Calculate a risk priority number (RPN) for each effect multiplying (severity*occurrence*detection). The team needs to list the possible consequences if a failure occurs. with 10 representing least likely to be detected using current control. 6. 7. 10 means most severe impact on customer and assign rating to likehood that a failure will occur: 1-10. 2. Ranking the severity of failure: 1-10. Use the RPNs to prioritise actions with highs RPNs or those that have a very high severity rating. Brainstorm potential failure modes. The first step is to review the process or product. The team can perform an FMEA in the following way: 1. Assign a detection rating to each failure: 1-10. 5.cause cause cause Effect cause cause cause Figure 10. 43 . Basic cause and effect diagram ƒ Failure Mode and Effect Analysis (FMEA). 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. 3. 10 represented most likely occur. 4.

A common application of hypothesis testing is to determine if two means are equal. This plan begins identifying the potential causes of the failures modes and then develop recommended actions (with timeplan. The team needs to evaluate which input variable have the biggest effect in the response variable and delete unimportant factors from the model. The team need to establish a plan to eliminate or reduce the risk associated with high-priority failure modes. and design of experiments. Develop the plan and recalculate RPN. It is necessary to calculate a t-statistic to determine probabilities comparing the statistics with a t-distribution. etc.). ƒ Regression Analysis.8. 3. Basic hypothesis testing principles and techniques ƒ 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.3. This test is used in two situations: Specific cause and effect testing techniques. In the hypothesis test exist two hypothesis. specific cause and effect testing techniques. The t-test is statistical tests that permit to the team if the null hypothesis is likely to be true. ƒ t-test. 44 . and can be divided into three groups: basic hypothesis testing principles and techniques. 9.2 Tools for verifying potential causes These tools are used to confirm if a potential cause contributes to the problem. It is a tool that uses data of important variables to develop an equation Y=f(x).

based on the analysis of the data. 2. The Chi-square test is a hypothesis testing method used when the contributing factor and the result are attribute data. Now. 45 . In this section have been described the tools and methods used in order to analyse and investigate the potential cause of the problems. 4. This tool is used to analyse the relationship between categorical inputs and one continuous output. Collect the data from the measure phase and summarise the results in an observations table. ƒ Chi-square test. 5. the team. Compute the relative squared differences. Add together all the relative squared differences to get the chi-square. The steps that the team need to follow to calculate the chi-square: 1. has to begin to construct and develop solution for the problems.ƒ ANOVA (Analysis Of Variance). Determine and interpret the p-value. Based on the observation table develop an expected frequency table. This is developed in the next section “improvement phase”. 3.

The use of piloting. and finally implement a solution to eliminate or reduce the root causes of defects. which will be described in this chapter. process observation. The team needs the right training to produce good ideas. and experimentation. The team will be able to create and identify smaller but effective solutions which should be implemented in a couple of weeks. The process of generating solutions can sometimes be difficult but there are several tools. The team needs to generate. The team needs to start with a confirmed root cause verified by data collection. The team needs to develop potential solutions based on the confirmed cause and effect diagram or the others tools described in the previous chapter. and Failure Mode Effects Analysis. 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. which comes from the measure and analyse phases. The team has to brainstorm and develop solutions in relation to the objectives of the organisation and eliminate other solutions. It should then develop potential solutions. It is necessary that the team bears in mind the goal to be achieved. which would provide new perspectives on the work and the processes.4 IMPROVEMENT PHASE The purpose of the improvement phase is to select solutions based on the data.3. will help the team to be sure that the solution will not have a bad impact on the final process. which can help the team such as brainstorming. 46 .

The brainstorming is necessary once the goal has been clarified.4. 5.1 Brainstorming Some of the keys to successful Brainstorming are: 1. 47 .4. Past assumptions sometimes prevent the team from developing good ideas. 3. 2. Then all ideas are written on post-it notes. 4. to construct an affinity diagram. 3. Listen to and build on the ideas of others.Three tools. Consolidate similar ideas. Abandon assumptions.2 Affinity diagram The affinity diagram generates and collates ideas after they have been organised into groups. are brainstorming. It is necessary to pay attention to other people’s ideas and develop them. The first step. and benchmarking. Clarify the objective of the brainstorming. Understanding of the idea deployment process. In order to generate good ideas. It can provide important information for eradicating defects. Discuss certain ideas with a view to consolidating them. Everyone should agree on the purpose and work in the same direction to get good results. which would help the team in doing this. is to give time to reflect and consider. affinity diagrams. the team needs a period of silence to think about how the process can be improved and to write down some ideas. The team then organised them into categories and finally the ideas are labelled. 3.

The team need to determine what needs to be piloted. One of the tools that the team can use is Pilot testing which evaluates the solution and its implementation.3 Benchmarking Benchmarks are measures which a company compares its performance against other companies practice. The team has selected the solution and now needs to implement it. based on the requirements of the customer and functional criteria. how long will the pilots run and how will the pilots be conducted. To pilot a solution it is necessary to follow the next phases: Phase 1: Plan.3. It is used when it is necessary to choose one out of two or more solutions. need to be evaluated. The Pugh matrix is a tool that uses decision-making that compares concepts. selected. Pilot test determine if the process is agree with the customer requirements and the design specifications. 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. 48 .4. The objective is to work with potential solutions to converge to an optimal solution. The potential solutions that have been developed in the last step. 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. Two tools use for this purpose are the Solution Selection Matrix and the Pugh Matrix. and optimised. what will be involved in the process.

Phase 3: Finalise design and implement. This is the last phase of pilot testing. which it is the control phase. In this phase. Once these solutions have become effective.Phase 2: Review design. During the improvement phase. 49 . It is necessary to review the plans to ensure that all the elements of the design are completed. Phase 4: Evaluate the test and verify results. At the end of this phase the team is able to list the key issues raised. the team needs to begin the next step. the team will implement design changes that have been found in phase 2 and will start the implementation. the team has selected and finally implemented potential solutions. 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 should use statistical tools to evaluate design predictions and improve on the pilot if there are any weaknesses. the possible actions to apply in the pilot and changes in documentation.

are maintaining the improvement. driving the organisation to Six Sigma. defining responsibilities for process owner. The project must be evaluated fully and the financial gains documented. It is necessary for a company to have a clear documentation about the process which has been implemented. 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.5 CONTROL PHASE This phase consists on identify the new behaviour of the CTQ characteristics. Document the changes. In order to achieve this. The team will describe a plan to retain the gains after the conclusion of the project.3. The documentation has to be simple. the team needs to be able to justify why and how the applied solution has sense for the company. During this phase the team needs to make a fully documentation of the project and the improvement changes which have been made. At the end of the improvement phase and when the first gains are achieved. In order to maintain the improvement the team is required to document the changes. A good documentation help the team to have a better vision of the changes and the new procedures. The team has to be dynamic and works to build a solid support for the solution. clear. select and apply ongoing measures. and develop the response plan. 50 . The steps. It is necessary to repeat some of the early measurements in order to recalculate the sigma process. the team needs to consolidate their goals. which are necessary to follow to complete the control phase. and understandable for everyone.

Once that the ongoing measurements have been selected the team begins to implement them. etc. One tool. is Balanced Scorecard. cost. process or output. Can be applied measures to any part of the project: Input. 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. The ongoing measures should include a balance among these parts. Balanced Scorecard emphasises that it is necessary to keep in 51 . which experiment the greatest change and should go higher on the measurement list. This tool displays key measure in an easy to read format. Finally the documentation must be handy and update. Other measures will be occasional. The team needs to review and follow the procedures that there are in the documentation in order to achieve good results. The team must centre in the things. Another technique that ca be applied is Control Chart profiled at the end of the chapter.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. cycle time. 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. which helps the team in this purpose. 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. Once the data have been collected. Some measurements can be applied during a long period to observe things as defects. Two of the tools that can be applied are Pareto Charts and Histograms. the team needs to monitor results in their key areas.

which indicate what to do and when do it in some circumstances. Two of the tools. The process owner is the person or persons responsible of maintaining process documentation and keeping them update. Response plan It is necessary for the team to have guidelines. 2. A good response plan must to be a continuous improvement plan. It is necessary to control the measuring and monitoring process performance. The response plan must anticipate possible problems.5. It should identify and prioritise ongoing or serious problems. process customer and financial. the team is able to establish common performance measures. 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. Therefore.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.mind to measure the next areas: innovation. The team needs to know what actions have to be taken in each situation and when those actions are necessary. It is necessary to establish clear standards in input. The process owner is the responsible that the measures are executed in the right way. which can help the team to anticipate the problems. The process owner needs to collect background data on customer requirements. which can be improved. 3. Some of the responsibilities of the process owners are listed below: 1. are FMEA and potential problem analysis. 52 .

and they have the responsibility to maintain the gains. which carries on the project. This is an important step because the team can answer the next question: manage the process to do what? 3. Thus. When projects to improve are identified. However. The process owner should be the first person who discovers the problems before they arise and defines guidelines for long and short term solutions. the company could achieve high Six Sigma levels of quality. 53 . 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.3. It is essential to provide feedback on results and key process factors. Measure current performance. the principal purpose of the process owner is to lead the team in order to achieve a high sigma level.5.2 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. 5. 3. 2. Define the customer requirements. The key elements of the process management can be formed following the next steps: 1. 4. Process owner has to work with customer and supplier to reach the goal of the company at the highest level of performance. efficiency. and flexibility. It is the principal step of the process management because can be used to define the process which is going to manage. Identify core processes. the process owner needs to select a team.

it is necessary to find out how this methodology is applied in some real case studies and to know the difficulties. 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. services. 54 . or capabilities.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.

the team would focus on the percentage of project commitments that were delivered on time. and with an acceptable number of released defects. create the project charter and develop a high level process map. of the organisation was to improve the capability of its software which meant ensuring that the project was delivered on time. The team considered data from previous projects separately and so selected 55 .1 SIX SIGMA SOFTWARE DEVELOPMENT CASE STUDY BACKGROUND This published case study of Gack [2002] centers on the use of the Six Sigma DMAIC process in an organisation which develops software packages. with predictable effort. Total development cost per size. DEFINE PHASE The main purpose of the define phase was to determine the critical-to-quality characteristics. Delivered quality in terms of defects. they identified the following characteristics: • • • Time to market. It was assumed that the organisation was decentralised with various divisions in different parts of the country. 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. Then.4. In order to achieve the team’s goal. 1. Y(s).0 PUBLISHED CASE STUDIES 4. The principal goal.

The fruits and nuts division was selected by the first team. in the hope that the process could be replicated in other divisions. 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 project that had more precedents. was to define the goal statement. 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. 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. Black Belt was selected as project leader.000 per year. 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. Once the specifications had been identified. with the Director of the Project Office. 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 . MEASUREMENT PHASE The first thing to be done was to determine the current state of the process and to collect reliable data. the development of the project charter. three software Project Managers. and the Director of Quality Assurance as team members." The next step. 2.

Table 1 shows the score system used in some historical projects. schedule performance defined as percentage of plan. 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. which influence the behaviour of the outcome. The results are listed in Table 2. 57 . This would show if the high score of an X(s) high score was related to the high performance of Y(s). Possible scoring system Using the score system the team collected the Y(s).• Defined deliverables or end states for each task It was also necessary to evaluate the measurement system to be used. The four controllable factors selected were called potential Xs. which had been used to rate the X(s) in previous projects was presented. and X(s) for each project. Table1. Scoring system.

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.Table 2. X(s) and Y(s) data collection. However. Figure 1. Figure 1 represents schedule versus score trend. the straight line indicates that as the score increases. 58 . Schedule versus score trend In Figure 1.

In order to achieve this. If the “Plan percentage” was less than 100 %. predecessors and plan percentage. could be generated and added to Table 2. If the company’s goal was to achieve 90% a 450% improvement would be needed. Table 3 shows the implementation of this in the case study.3. the planned schedule would be too optimistic. 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. ANALYSIS PHASE From the measurement phase it was observed that only 20% or 4 projects were achieved on time. not the 62% as required by the software team. As can be observed the planned schedule was too optimistic because there were 15 projects which heir “Plan percentage” less than 100%. Table 3. 59 . 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). the team applied the multiple regression analysis and concluded that 78% in the variability of this sample was due to task duration.

The following possible solutions were identified: 1. it was necessary to redefine the financial benefit forecast.500 but the company had a target of 90% and a final profit of $956. Assign mentors or coaches from the Project Office to review the draft plans and help project managers bring them up to best practice standard. In order to determine the best option in terms of cost and effectiveness. Use a combination of these options. 5. 3. The team decided to implement the alternative of trying each one with different teams and comparing them after two or three months.250. the team would try to 60 .000 and the projects were scheduled to take 15 months. 2. CONTROL PHASE It was necessary to develop a control plan and define how the X(s) and Y(s) will be monitored. 4. IMPROVEMENT PHASE The principal purpose of the improvement phase is to generate.000 with an expected time of money of 15%.Once the critical X(s) were determined. The projects required 134% of the planned duration and they needed 5 months more than expected. The average expected profit for the 20 projects was $850. 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. it was necessary to pilot two or more options and try to discover the best solution. The opportunity cost was 5/12 of $850. select and finally implement solutions. The team estimated that the opportunity cost associated with the 20 projects obtaining a profit of $1.065.

it was necessary to define responsibilities for the Six Sigma team project and to fully document of all the process records and data. Finally. 61 . they would review the project.reach that level and if the target for the Y(s) was not met.

S. The principal purpose of the business is to increase of their revenues. protecting them from errors. Medical Transcription involves writing the notes from doctors. and recording the final results.A. using a prioritisation system. 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. rather than basic problems.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.4. Timeless. The first category focused on customer satisfaction and the team.2 MEDICAL TRANSCRIPTION CASE STUDY BACKGROUND This published case study of Goyal [2004] is based on a Medical Transcription company established in India with customers in the U. 1. Consistency of quality 2. transcribing them according to appropriate rules. put the fundamental CTQs as: 1. At the end of it. control the absenteeism and patients load. which was allocated the higher priority 62 . some conclusions were obtained which will be described a long of Six Sigma improving process. This is an important process because it avoids mistreatment of patients.

they would need to reduce 335 minutes to 0.30AM on day X+1 should be dispatched by 5. This means that a customer who was received between 7. the team realised that the problem was "meet the dispatch deadline of 24 hours" rather than "reduce turnaround of data". The team suggested measuring the discrepancy between the time of dispatch and the customer's target. 2. The turnround of a file was defined as the time taken from receipt to dispatch it. capacity per 63 . loads. ANALYSIS PHASE In order to ascertain the vital causes of the problems.30 AM on Monday should have a turnaround of 24 hours and a file received at 7. Variation: 82 minutes Average + 3σ= 335 The team defined the problem as: In order to achieve 99.In order to achieve a precise definition of the problem.30 AM on day X and 7. the team developed a check sheet to collect the following data: starting time. past and actual transcriptions. Following on analysis of customer requirements.7% on time delivery. the team interviewed different customers and the following conclusions were made: The customer wanted to be dispatched before 5.30 PM on day X+1. This meant that a file received at 7. The team designed a check sheet in order to collect the actual time of dispatch during two weeks including: • • Thus: Average delay: 89 minutes.30 AM on Tuesday.30 PM every day.

In the first two days of testing. Use one team at night.30 AM on day X and 7. who normally dedicate the end of the day to the dictation of the data and this time corresponds to the morning in India. These data were collected over several days. the results from the data collected between 7. 3. Eventually the first idea was selected and put to the test. the dispatches were achieved two hours earlier than expected. Table 1 compares the results from the third week after the changes and the week before the project began. one team during the day shift. The initial expectation was that lower efficiencies would provide required results. and one team for the day shift. Based on this data. the team started the improvement phase in which ideas were generated. which was supported by the outcome of most of the cases.00 AM on day X+1.30 AM on day X+1 began to be processed at 8. A group was selected to collect the data from the United States every hour for a week. 64 . The principal reason for this was that the data came from doctors of U. IMPROVEMENT PHASE There were two fundamental ideas: • • Use two teams during the night shift.transcription and finishing time. however. selected and finally implemented.A.S. one team for an early morning shift.

The improvement process is continuous and once the goals have been achieved higher expectations are required. Project results. it is necessary to recognise the team’s effort. Now the team needs to improve their process in order to achieve the Six Sigma level. The different responsibilities and operation procedures of the process were developed and documented. 4. 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. CONTROL PHASE AND FUTURE ACTION A control chart was established in order to observe any deterioration in the process and resolve it.Average plus 3 Week Average Maximum Average Sigma sigma -1 285 397 89 82 335 3 348 531 -134 43 -4 Table 1. Finally.

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. In this published case study. The objective of the team was to reduce support costs while improving new account growth. The champion. Six Sigma was the initiative adopted by company to improve their service. 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). was able to select the DMAIC project.4. INTRODUCTION This published case study of Hallowell [2004] is based on an information technology (IT). IT services can be really important in a business because when prices are similar. 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. The company was aware that customer satisfaction could be the driver of new account growth. A Champion was chosen for the new project. 66 .3 A SIX SIGMA CASE STUDY FOR AN INFORMATION TECHNOLOGY (IT) 1. and then he/she chose the leader of the project. the customer chooses the company which provides the best service. with the help of a Black Belt and after verifying the benchmarks and other data. IT is a service used by companies as a means of providing call centre support to a variety of customers.

Customer Requirements. The team needs to increase the company’s growth from 1 percent to 4 percent. Personal help. The following situation was described: “The competitors of the study call centre are increasing their customer satisfaction levels by reducing support costs per call. which would mean an augmentation of the company’s growth revenue of $3 million. DEFINE PHASE The team needed to evaluate the elements of the project charter. Requirements Connect with the right person. Table 1. which were representative of the data gathered and are summarised in Table1. 67 . Get the required information. The case study included some individual customer responses. without increasing the support costs per call. 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).2. How to prevent problems.

3. Calls in queue. MEASUREMENT PHASE Once the customer requirements had been identified. Time require for the staff. Call moved to another extension. The team prepared the data collection plan and identified all the parts of the project and the possible measurement areas. Call answering and discussion Case research Call back time. Days to close Wait time Transfer Service Time Calls receive in closed days. The team then needs documented the current baseline and the best estimate target as is shown in Table 2. Can be require more customer satisfaction data. Y(s) Customer Satisfaction Support Cost Measurement By industry standard monthly survey. 68 . the team could focus on the measurement phase.

When the principal objective is to discover the Y behaviour. 69 . Dev. 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.5 Minutes Table 2. ANALYSIS PHASE The team graphed and studied each Y data set. which represents the variation in customer wait times.:<0.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. Table 3 summarises and compares the capability checks to establish targets. 4. Current baseline and target. this offers the possibility of addressing the root cause. the team needs to focus on the Xs behaviour. It was also necessary to identify the factors which drive the Y(s) and their behaviour.

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 .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.5 Minutes StDev: 3 Minutes 90th Percentile = 4 Minutes 90th Percentile = 2 Mean:<= 8 Min StDev: <= 0. 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. At this point. the team identified some improvement areas. the team needed to identify and select potential solutions in order to reduce the support cost (controlling staffing ratios. During the analysis phase. (P<0.1 Mean: 10. it was overstaffed. transfer and callbacks). the company was often understaffed whilst on Sundays. the team also observde the influence of callbacks on the call wait time.05) 5. Based on the results of the ANOVA. The team observed that on Mondays and Fridays.5Min Table 3. During the measurement phase the team tried to identify some important Xs factors.8 Minutes 90th Percentile = 3. Comparison between capability check to establish targets.

it was necessary to evaluate and quantify the key relationship between the Xs and the Ys and the possible benefit. a regression analysis was performed which. Based on the collected data. This was the objective of the team in the following steps of the improvement phase. support cost and volume/staff (v/s) ratio. If the benefit appeared to be positive. Transfers and callback * Reduce transfers and callbacks improving call centre processes. To evaluate the staffing option. Measure the benefit value of account growth minus the cost of additional staff. In this step.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. the team had to bear the following points in mind: The variables that affect the process wait time. the team had to determine how to implement that improvement. 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 .

18-Minute reduction in wait time 0.037% new account growth 549 New Accounts $345. customer satisfaction. A pilot programme was developed for the Monday staffing.870 project net benefit to business After performing the same analysis for web service. the team recommended that: • Changing staff levels should be the first step but in the future discover another solution which reduces costs. • Reducing the number of transfers and callbacks in order to increase customer’s satisfaction. transfers. In this analysis 61 percent of the variation in account growth could be attributed to wait time. . the addition of 14 people on Mondays would result in the following: • • • • • A 1. callbacks and service time.Carry out a hypothesis test to compare new staff against old staff.affected to new accounts. Before the team modified or improved any process. v/s ratio.870 Incremental Annual Profit $177. transfers and callbacks.Wait time. 72 . With reference to increasing the staff numbers on Mondays and Fridays. • • Xs to adjust: Staffing level Y(s) to measure: . it needed to forecast what would happen theoretically.

They were: • A wait time reduction of 5 minutes.0 (agrees with actual).214 x 20. At the end of the improvement phase. During the first month. 6. All the staff had to have a clear understanding of what and how they were going to measure. the new staff took 6 minutes more than the old ones. The overall conclusion was that the Monday staffing pilot programme has been a success and the team recommended full implementation. Predicted wait time = . It was also necessary to create current documentation of the project and define responsibilities for each part. the team created new processes or 73 . which only gave 1 set of data per month. THE CONTROL PHASE In order to prepare the implementation process control.37 ( as opposed to the previous 23 ). the team needed to increase the current level of customer satisfaction sampling. the team had to develop a data collection process. which means there was a difference. To determine if the wait time had decreased with the staff increment. 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. this difference was reduced during the second month to 2. this resulted in a pvalue less than 0. • Customer Satisfaction had increased. the team evaluated the goals that had been achieved. • 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.5 and then to 1 minute in the third month. Volume/staff ratio was reduced to 1100/54 = 20.In order to perform the pilot test.37) = 5.63 + (.05. a two-sample t-test was performed. After preparing control charts.

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. Moreover. the final point is to celebrate the results. It was necessary to establish responsibilities for each process. 6.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. The team should not forget that the new process was implemented in order to increase the benefits and they have to document it. 74 .

strictly 3. Such a high performance level is an entry -level requirement when it is though of passenger safety in transportation services. However. It aligns this ‘Voice of the Customer’ with the process. Many manufacturers have been slower to extend the approach to their key transaction processes and operations. Six Sigma as a programme is probably best described as an improvement approach that seeks to improve processes to the point of near perfection. Six Sigma scores much better than many other quality approaches. improving the design and operation of key processes to consistently meet customer needs. 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.4 defects per million opportunities.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. This means that they consistently and profitably deliver outputs (goods. enhance customer satisfaction and catalyse the ‘bottom line’. Although the approach originated in manufacturing applications at Motorola. services and transactions) to customers’ requirements in all but a handful of cases in a million times. those who have done it have experienced substantial success.5. 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. There is strong emphasis on management by 75 .

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.fact and data. which can be achieved: • • • Reduce company's service costs by 30-60% Improve service delivery time by 50% Expand capacity by 20% . and is delivered through manageable sized projects prioritised in line with the business’s strategy. Some of the results. 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 . savings or earnings are often replicable across a large volume of users (millions of banking customers. Six Sigma is focused on issues and problems important to both the business and the customer. speeding up processes. Six Sigma in the service industry attacks these costs by eliminating waste. and delivering customer wants and needs. etc). and not merely relying on people’s opinions and experience which can be fallible. Not only is the average project value higher. Six Sigma is far more powerful in service operations than in manufacturing. Furthermore. insurance subscribers.

Six Sigma offers a disciplined approach to improve service effectiveness and service. Six Sigma is being introduced 77 .5. Now. Six Sigma is starting to play an important role as distinctive quality methodology. 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. the US has led the way. as one would expect. Merrill Lynch and AIG have provided the interest and inspiration for others to follow. in the new competitive world. and Financial Services has become one of the highest growth sectors of the global Six Sigma market. Most importantly. The popularity of Six Sigma as a means of improving the quality of service and customer satisfaction is growing exponentially. 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. Six Sigma is not only merely a quality initiative but it is also a business initiative. there has been a steady increase in the take-up of Six Sigma within the Services Industry. Since the late 90s. particularly in Financial Services.1 Six Sigma in the financial service. High profile initiatives at institutions such as Citigroup. Naturally. where the financial industries need a distinction factor to increase their revenues. Traditionally Six Sigma has been used in the manufacturing industry. Bank of America. 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. the companies in this recent trend are not GE.

It is necessary to provide more value per customer transaction. to closing a loan. From investment banking to credit cards. Customers expect faster and easier service and if they do not get it. they will go elsewhere.through the financial services. This can be achieved reengineering processes for speed and flexibility. the organisation can rely on Six Sigma as the quality differentiation factor. The principal goal of the Six Sigma’s team should be improving service delivery and customer loyalty. comply with the latest regulatory requirement. find out how to improve the cycle times of all their processes. to processing payments. the need to respond to customer demands is increasing daily. By using Six Sigma’s define-measure-analyse-improve-control process. this goal is relevant to all processes. 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 . from handling customers’ money. Six Sigma is a methodology that helps to satisfy customers’ demands. retaining good employees and boost shareholder value. where performance management is becoming critical for firms throughout the sector. eliminate bottlenecks. Moreover. minimise errors. or simply improve the way that the service is delivered. rather than trying to acquire more transactions and keeping existing customers can be more important than finding new ones. to sending out bills. cut cost-sand and increase capacity. Six Sigma provides the connection that allows the company to improve and sustain performance. Whether the company goal is to improve customer experience. or answering the phone. leading financial services organisations have worked to reach the methodology’s aim of near error-free performance.

• Focus projects on the “critical few” problems. Not only is it a powerful tool for executing the CEO’s strategy. • Provide valued new service offerings to customers quickly and efficiently.• Service quality and speed • Understanding financial industry applications • Thought leadership in Six Sigma for services • Prove solutions in testing. Tangible. measurable. • Remove non-value-add complexity that is invisible to customers. Six Sigma is a methodology that maximises shareholder value by achieving the fastest rate of improvement in customer satisfaction. • Attract. quality. profits. cost. • Improve the speed and quality of service delivery to strengthen customer relationships. it is a tactical tool for business managers. retain and develop talent that provides excellent customer service. • Generate returns of 10 times company’s investment in two years. and return on assets. strategic results. • Leading Software tools to support the implementation process. process and speed and return on investment. • Improve total shareholder returns by driving revenue. 79 . • Understand what the customer wants from the process.

The insurance sector is a good example. 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. Nevertheless. 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. and if companies do the basics well and maintain a strong focus on their customers and core services. A core theme of the Six Sigma concept is centred on the idea that all activities conducted in business are processes. companies need a new approach to service and operational improvement that will enable them better to serve their customers. good management and of course. 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. Six Sigma has been used primarily in manufacturing. For years. common sense. Six Sigma provides the organisation with a means of applying great management practice in a structured approach. they will always be successful. but the company should never overlook the most powerful tools. good leadership. 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. it is being used in all sectors for different reasons. Since its emergence in the mid 80s. After all. In many cases. and every process has inherent variation. business is actually very simple. its members have led everyone to believe that the industry is highly complex and shrouded in mystery.Six Sigma methods sometimes cannot work really well. claims and 80 . it is harder to identify discrete processes within a financial services business. but actually. Six Sigma was developed to provide a means of reducing common cause variation in business processes.

Hence. such as ‘Enquiry to Order’. Figure1 illustrates a sample of a typical operational structure in a retail financial services company. Whether it is the underwriting department. cash operations. 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 .settlement. Some companies have already moved to a model broken down into core processes. Traditional Departmental Infrastructure. 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. Front office Customer acquisition Bussiness Risk Identification &Verification Credit Know your customer &Money req. billing. Yet processes always flow horizontally from first point of customer contact through the sales process and onwards through service delivery to ongoing relationship management. It is typical to find a financial services business structured hierarchically around operational departments and functions. 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. Whilst this provides no shortage of ‘ladder climbing’ opportunities for management and staff. payments or any other function within a financial business they nearly always exist as a discrete vertical unit. it does not necessarily represent the best model for client-centric service delivery.rather than as an end-to-end process. ‘Order to Remittance’ and ‘Billing’. Operations Data Entry & Customer Set-up Operations Service Fulfilment Customer Service Account Management Figure 1. If this thinking were applied to the business 81 . credit. where the business is traditionally built around functions and departments. aligned to the customer experience. More than likely.

the management structure of the business should be realigned also. each new customer’s first experience with a financial services provider is the account opening process. Whether a bank. the customer will come on board with greater reliability and commitment. On this firm foundation.described above. This position would have a significant impact on a company’s growth and profitability. The key point is that the business would be aligned to the decisive moments. the impact is far greater. mortgage lender. building society. If the process goes well and the human interaction with the provider is impressive. Most importantly. Figure 2 represents the new possible alignment of the process. They will accept more service failures later on before they depart to another supplier. Front office Customer acquisition New Customer Activation Service Delivery Account Management Customer Departures Figure 2. 82 . the provider is more likely to achieve cross selling of additional financial products. insurer or investment manager. 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. 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. but in reverse. which is centred on the customer experience. In order to understand better this point the following should be consider. it would look considerably different from the status quo flutter. and it goes without saying that if the experience is poor.

Adopting Six Sigma methods within a Financial Services business. Then it is necessary to ensure that process performance meets or exceeds these requirements. This has a number of implications. it is never going to be simple. In order to understand and define these requirements. It is rarely to hear of manufacturing companies who have failed spectacularly in their Six Sigma programmes. and most importantly. 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. there is a high likelihood of human error and customs within the transaction processing. it is necessary to listen to the Voice of the Customer. It is imperative to start by defining what it is the business wants to achieve. The principal Commandments for Six Sigma in Financial Services are: 1. the inputs to the process are often incomplete and inaccurate. The method concentrates on those outputs which are important to customers and translates these customer needs into measurable requirements. Lastly. Secondly. Financial Services companies may be built around processes. 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 the organisation wants to change the process it is necessary to persuade the people. Firstly. People provide the inputs. the so-called CTQs (Critical to Quality). people conduct the processing and people produce the outputs. but in the majority of cases these processes rely on people. Then decide how the business is going to get there. 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. Many companies are led to believe that Six Sigma is the answer before they have posed the question. If Six Sigma is an 83 .

and in the selection of appropriate methodologies and practices for each project. and assigning real cash values to them. 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 . it is a set of methods and tools. The net result is that companies invest fortunes in training for. problems.appropriate means. However. a structured project management method (DMAIC) and a statistical means of measuring process capability. This is because the head first approach into DMAIC does not allow for appropriate and deliberate project selection. opportunities and recommendations. identifying risks. not a strategy Six Sigma is not a strategy. Six Sigma is a set of tools. At this stage. 2. 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. All projects must satisfy the strategy and priorities of the business In defining the operations strategy. It is no substitute for a coherent business strategy and it does not matter whether all the organisation processes operate at six Sigma. This drives priority in the selection of projects. the business should conduct a rigorous operations review. and working on. a clear and meaningful operational strategy is the starting point and that drives everything that follows. 3. the appropriate tools and training can then be properly deployed. then use it as a great approach. 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.

whose business.company. 85 . A primary reason for this is that not every Black Belt needs to be an expert in Statistical programmes. and which have been derived predominantly from non-service environments. Then it is time to consider a wider role for Six Sigma across the business. Whilst this statistical software plays an important role in data analysis and the production of high quality dashboards. service businesses. In this industry. which are sometimes more academic than practical. train only the required number of resources and focus on achieving tangible results and stakeholder support. initial Six Sigma training to get a Black Belt up and running can be successfully and effectively achieved in days. the soft skills make the difference. 4. which are relevant to their industry. A greater chance of success and cultural acceptance is achieved when launching by stealth. 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. should deliver training and coaching and industry sector expertise is both personal and current. experienced and highly qualified service industry practitioners. Training staff in only those specific elements of Six Sigma. This can be further supported as necessary with specific coaching during actual projects. Finally. can avoid the lengthy training programmes on the market. rather than expecting every project leader to be an advanced statistician. Training Programme If Service companies do choose to implement Six Sigma. rather than weeks. so that Black Belts learn from real experience. In Financial Services. it can be a supporting function provided by a team of business analysts. Companies should select a few high profile and high impact projects.

not the average. offering measures that do not really offer much relevance to the underlying process capability or performance. operational managers in Financial Services tend to be less familiar with statistical thinking. Following the Six Sigma approach of defining CTQs. is sensitive to outliers. Therefore it is necessary to find other ways of coping with the existence of non-normal data. the case studies they present during training will be up-to-date. The lack of normal data is a fundamental difference in applying Six Sigma’s structured and data-driven approach to service businesses. relevant and accessible data. The average. especially in smaller volume situations. 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. It is never easy to access relevant data at a transactional level and often takes some moving of mountains to achieve. which can skew the value significantly and produce a very inaccurate indicator of the 86 . In many cases managers use to look at spreadsheets with aggregated data. or mean. Measure what is necessary One of the many challenges faced in Financial Services companies is the availability of clean. the customers feel the variation. Training which is delivered around industry specific process simulations. directly relevant and culturally appropriate. extracting and cleaning the data and designing client centric process management dashboards will prove invaluable in achieving operational excellence and meeting customer expectations. developing data collection plans.Consequently. has proven to be an extremely effective way of transferring appropriate levels of Six Sigma expertise in this sector. such as customer account opening. However. the end result is worth it. Additionally. producing operational definitions of the key measures. However hard the effort and determination required. 5.

There is only one way to gain that knowledge. give them 5 weeks of Six Sigma training. In a manufacturing process. it is possible to hire a post-graduate with a technical background. It is not really possible to train and prepare someone for the organisational. it is necessary be concentrating on the median rather than the mean. However obvious that change may be. With non-normal data sets. In a Financial Services environment. it is advisable to look at percentiles. 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. there are often opportunities to make immediate common sense changes when the solution seems obvious. If the mean is significantly different from the median. 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. based business.customer experience. 87 . To measure and manage the variation in a service process. 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. A first step should be to define and monitor relatively simple indicators for the central tendency and the variation of the 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. who has fought the cultural and political battles involved in implementing Six Sigma projects in a people.

Companies deploying Six Sigma methods are becoming increasingly knowledgeable and thoughtful of how they should launch their improvement programmes. 88 . As was so often said at GE. 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. but in the context of a growing realisation that in service and transaction businesses. Six Sigma should simply be the way of working. there has been a shift in focus from cost cutting towards service enhancement and improving the customer experience.Over the last three years or so. how to implement it and the benefits that different banks have obtained by applying this methodology. it is truly a different ball game. but with the recent uplift in economic conditions. Consequently. The next stage is centred on the process of implementing Six Sigma in a bank. Six Sigma is destined to gain further traction in the Financial Services industry in Europe. 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. with the economy and markets in a state of depression. many financial businesses have focussed actively on cost reduction programmes. which should be integrated into business as usual. In Financial Services.

5. For this reason and in order to meet with customer requirements. in order to improve customer satisfaction in bank branches. need to be introduced into the new competitive market. The first step is to define the factors that result in customer dissatisfaction such as wait times. 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. customers wait time normally. not all factors can be measured in the same quality scale. In order to apply Six Sigma to customers wait time it is necessary to determine the activities that affect wait time. Nevertheless. finance and administration areas. 89 . For example. although not always. such as investments and insurance. it is necessary to implement Six Sigma as an idiosyncratic factor. The phases of implementing Six Sigma. errors and inaccurate customer information are some of the factors that need to be analysed. Banks offer an enormous range of financial new products through constantly expanding branch networks. All these new products. During the last few years. Liberation and the globalisation of financial services have produced a rapid expansion of new financial products and services. 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. The tools and techniques that have worked in manufacturing industries cannot be simply adapted and applied to Financial Services businesses. are almost the same as described in the other chapters of this project. have the most impact on customer satisfaction.2.

For this reason. if delivery of the product or on time service is really relevant for the customer. banks have reduced fraud using Six Sigma. the Six Sigma team needs to understand the full process in order to achieve the required goals. Once the factors that affect wait time have been determined.such as the number of tellers and their activity. Six Sigma can be used for much more than reducing customer-waiting time. For example. The next stage is to translate customer requirements into measurable characteristics of the process. then the metric 90 . call center results. Once the team has a clear understanding of the customer requirements. 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. Successfully implementing Six Sigma in banking requires a relentless focus on customers and on meeting their needs as efficiently as possible. The effectiveness of the process determines the problem or defects that the process can produce. it is necessary to minimise their impact. find out potential solutions and implement them. 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 is necessary to define what is critical to customers and confirm which core processes are based on those requirements. For example. This is probably the most unpredictable step because it is necessary to understand the full process from the beginning to the end. First. It can be used to enable managers to make relevant decisions. focus groups and whatever means allows the voice of the customer to be heard loudly and clearly.

In order to understand the process of implementing Six Sigma better and having good approach to the real process. long delays in producing a quote that cause prospects to drop out. 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. 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. it is necessary to determine the cost of poor quality. it is necessary to look at some Six Sigma banks such as Citi Bank and Bank of America. Once the team has defined the possible measurements. Having clearly understood what each process gap cost the organisation. For example. 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 . and numerous inaccurate credit reports. 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.

The Citibank Six Sigma team developed the process map and looked for defects in each step of the processes. and customer satisfaction. Once the defects were located. when Citibank’s customers wanted to transfer money from their accounts. the company had to acquire quality initiatives that satisfied customers quickly and differentiated them from other banks. in order to achieve a cycle time reduction. In order to achieve this ambitious goal. 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. In the case of banks. applying methodologies such as cycle times helped with the detection of defects and organised teams of Six Sigma. When the opportunity areas have been identified. the team began to eliminate wasteful steps.5. the Citibank team was able to correct the problems in the Six Sigma program.3 Citibank Citibank’s objective is to be the most important international financial company. This bank has achieved substantial performance in process timelines. the Six Sigma’s team usually uses easy tools such as Pareto charts. For example. cash management. can be applied here because a bank is a special case. Citibank has discovered the benefits of cycle time reduction in financial areas such as customer banking and emerging banking. Customers used to complain because they always had to wait to the confirmation of their request. These charts 92 . fax or mail in the requests of the transaction process. In recent years Six Sigma quality has always been applied in the manufacturing area but Citibank selected this methodology to meet customer satisfaction. Not all the Six Sigma tools. they had to call their banker and then phone. which have been described in the previous chapters.

93 . in the implementation process. the reduction in return calls to people who had ordered fund transfers of the cut in-coming transactions by 73%. The last phase is the implementation of the change of items to reach the required goals. based on this data. are: • The Private Bank has achieved a reduction of between 80 and 85 percent in internal and external callbacks. After finishing the process map. 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. and the team. By using Pareto chart. from three to two days. and a 50% credit process time. Citibank realised that one of the principal problems was the internal callback procedure. the team removes useless process and non-value steps and creates new ones. Some of the goals. which have been satisfied in two of the Citibank divisions. Then the Citibank’s team. which occur more often. In this case. 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. decide what needs to be corrected first. respectively.show the problems. it defines the problem. Citibank Six Sigma teams are usually made up of 30 to 50 people in each functional departments. They have also reached a 67 % reduction in the credit decision. follows five phases. the team tries to map all current steps and identify what is not working. • Global Equipment Finance: This subdivision has improved all processes from the reception of customer orders to the delivery of the product. Next. First of all.

Citibank has achieved great results applying Six Sigma in all its divisions. They have improved the accuracy and timeliness of statements. In the next step.• Copeland Companies. how the bank of America applies Six Sigma is described and the results which they have obtained implementing this methodology. They have also reduced the cycle time of processing statements from 28 to 15 days. 94 .

The benefits of the implementation started rising quickly and the bank achieved an important cost reduction in several areas. the Six Sigma team 95 . quality training was extended throughout the organisation. This discipline was implemented as a core process performance metric. • Increased associate retention in key areas.4 Bank of America The Bank of America is one of the largest financial organisations. Based on the principie of spreading the discipline across all Bank of America businesses. business approach and a leadership philosophy. In the beginning. • Enhancement of enterprise e-mail governance to improve productivity. • Reduction of credit risk assessment that are considered biased. introduced the Six Sigma philosophy in 2001. which after trying to establish other quality strategies and efforts without any improvements. With the enthusiasm and knowledge of the BBs and MBBs.5. Some of the results that the Bank of America has achieved applying Six Sigma are: • Control payments to suppliers. • Improved ability to detect and prevent fraud at banking centers. Then Six Sigma tools were implemented and utilised across the Bank of America. some people were sceptical about it but now Six Sigma has become an integral part of the culture of the bank. • Increased productivity. • Elimination of significant numbers of electronic information subscriptions. Businesses and engineering teams were collaborating on projects to eliminate variation and errors in key processes.

which can arise during the implementation process. Thirty Six Sigma projects were concentrated on the root causes of these defects. 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. this effort 96 . 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. and the benefits of Six Sigma. reducing defects by 88% through the end of 2002. during the last two years. With the intention of approaching to this methodology and showing the possible difficulties. some published case studies have been analysed. in some operational areas of the company. they achieved even greater gains. This project has been developed in order to understand the Six Sigma implementation process. etc.demonstrated that this methodology could work in financial services by focusing on customer issues and performance gaps. These good results convinced leaders that Six Sigma works and they then desired to reach a better quality level. For example. The customer delight was increased by 25% across the company. For this reason. Nevertheless. 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. Six Sigma helped teams reduce system problems that occur in hardware and software systems.

has not reached its leitmotif yet and needs to continue growing and improving in all aspects from the employed tools to the team training. 97 .

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