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SIX SIGMA AND ITS APPLICATION IN BANKING SECTOR
SUBMITTED TO MS. GURJEET
SUBMITTED BY: CHARVI AHUJA 50047 DIVYA ARORA 50053 DIVYA WADHAWAN 50054 HULLAS ARORA 50069
Six Sigma is a systematical process of ―quality improvement through the disciplined data-analyzing approach, and by improving the organizational process by eliminating the defects or the obstacles which prevents the organizations to reach the perfection‖. Six sigma points out the total number of the defects that has come across in an organizational performance. Any type of defects, apart from the customer specification, is considered as the defect, according to Six Sigma. With the help of the statistical representation of the Six Sigma, it is easy to find out how a process is performing on quantitatively aspects. A Defect according to Six Sigma is nonconformity of the product or the service of an organization. Since the fundamental aim of the Six Sigma is the application of the improvement on the specified process, through a measurement-based strategy, Six Sigma is considered as a registered service mark or the trade mark. Six Sigma has its own rules and methodologies to be applied. In order to achieve this service mark, the process should not produce defects more than 3.4. These numbers of defects are considered as ―the rate of the defects in a process should not exceed beyond the rate 3.4 per million opportunities‖. The Six Sigma ensures the quality control, total quality management and zero defects. Through the implementation of the Six Sigma it is made sure that the goals are set on the improvement of all processes to reach the level of better quality. ―The Six Sigma‖ shows the organization‘s ability of highly capable processing in producing the outputs within the limited specifications. There fore it can be said that the processes that operates with the Six Sigma quality, is able to produce a quality products at a low rate of defects. When a process attains the certification of Six Sigma quality, it is clear that the organization has attained the standard deviations from the means of the production till the specific limitations, and so can make sure that there is no room for the items to fail to meet the specifications. Altogether we can consider the Six Sigma as the professionalizing of the quality management functions
A process that is centered has a normal distribution (or can be represented by a bell curve) with mean (μ) aligned with target (T).5 standard deviations. Center the process: Center the process mean on the center so that more and more of the process or product average (mean) falls on target (T). is called the process width. The process width. or USL. respectively. the difference between the upper and lower bounds of the customer specification (denoted by the Lower Specification Limit. The difference between the mean and target is referred to as accuracy. Likewise. its precision decreases. In the manufacturing world. The sigma level corresponds to where a process or product performance falls when compared to customer specifications. or the standard deviation of a distribution. In Six Sigma. or the process spread. and Upper Specification Limit. the further away the mean is from the target. Reduce spread: Reduce process width so that less and less of the product or process falls outside of the specification limit. in Figure 1. is also referred to as precision. with optimumdesign or target (T) at the center. The consequence of this drift is that a small portion of the distribution extends beyond the specification limits—3. it is observed that over time the process mean drifts from the target by as much as 1. asa process spreads. Another concept that is relevant to understanding variation is that of accuracy and precision. This range is called the design width.1) represents the range within which the product or service must fall in order to meet customer specifications.The Six Sigma Approach In order to eliminate defects. In other words. and the specifications placed six standard deviations to either side of the mean. such drift is typically due to tool wear and tear. In other words. 2. the quest to reduce variation consists of two primary goals to be achieved in the following sequence: 1. The actual range in which the developed product or service falls. or LSL. which in turn leads to dissatisfied customers. as shown in Figure 1. Six Sigma focuses on minimizing variation. Therefore. increase process precision (or reduce variation).1. In other words.4 parts in 1 million to be precise. while in the software world.the less accurate the process is. . Due to the natural drift that occurs in process execution. increase process accuracy. because variation results in inconsistency in meeting customer specifications (defects). it is due to reduced process adherence by humans over time changes in processes and tools.
indicate ―special cause‖ variation that. This is the reason why the UCL and LCL fall within the USL and LSL. a move from four sigma to five sigma requires 27 times improvement in performance. and lower control limit.9997 percent goodness. center the process and improve process accuracy.if breached . when the control chart for a process or product is plotted. and a move from five sigma to six sigma requires more than 60 times improvement in performance. the control chart uses additional safeguards (represented by upper control limit. Six Sigma (6_) represents the near elimination of defects at 99. In fact. or UCL. In other words. if left unchecked. which represent thresholds that. Indeed.3. and thus higher and higher levels of customer satisfaction. The next step is to look at the process average (or mean) to see how far from target it is in order to determine ways to improve the process average so that it falls on target.Another way to monitor whether or not a process or product is within specification limits is by plotting these data points using a control chart. or LCL). from a Six Sigma perspective. the first order of business is to look for any such ―out of control‖ data points representing special-cause variation and to bring them back within the UCL and LCL control limits. In addition to the customer specifications (USL and LSL).4 defects per million opportunities (DPMO)—a quality level that is synonymous with world-class quality . In other words. as shown in Figure 1. The Concept of Sigma Levels Higher levels of sigma correspond to fewer and fewer defects. For example. Such special-cause variation thus indicates the need for corrective action to bring the process back under control so that the customer specification limits are not breached and no defects result. will result in the customer specifications being breached (defect). each additional sigma level results in an exponential reduction in defects. reduce process spread and improve process precision. or only 3.
root cause validation. is a systematic methodology utilizing tools. On the other hand. and money are most likely to strive for Six Sigma quality. ▲ Quantitative tools include but are not limited to Kruskal-Wallis. Design of Experiments (DOE). five whys. Analyze. one. standard deviation (_). each appropriate for use for a specific purpose: ▲ DMAIC (Define. typically up to 50 percent improvement. Six Sigma Improvement Methodologies and Tools The suite of Six Sigma improvement methodologies comprises three key methodologies. and so on. the airline industry operates with less than one fatality per million travelers. As a rule of thumb. and so on. Generally. Lean) for improving process efficiency and speed. In other words. products and processes involving human safety. and identification and selection of improvements. failure mode effects analysis (FMEA). in DMAIC methodology. health. mean (μ). Cpk). which is better than the Six Sigma level of 3. and it may deliver as much as 100 percent or more improvement to a process or product. ▲ Qualitative tools include but are not limited to process mapping. ▲ DFSS (Design for Six Sigma) for designing new processes and products. analysis of variance.and two-proportion tests. a DMAIC project may result in anywhere from a modest to a significant improvement.7 Indeed. Control) for process improvement by reducing process variation and defects. regression. a DFSS or Lean Six Sigma project is more likely to result in a radical or breakthrough improvement. Improve. every process or product does not have to reflect Six Sigma quality. F-tests. the purpose of the: ▲ Define phase is to define the problem or improvement opportunity (Big Y) and translate it into critical customer requirements (CCRs) ▲ Measure phase is to gather data on current process performance ▲ Analyze phase is to analyze the data to gather information on the causes that are resulting in the problem(s). root cause analysis. Monte Carlo simulation. Key measurements used in Six Sigma include critical to quality (CTQ). DPMO.and two-sample T-test. and process capability (Cp. Tools used in Six Sigma include qualitative and quantitative (statistical) tools for data analysis. cause and effect matrix. one. Measure. DMAIC Overview Explained in simple terms. confidence intervals. or the factors that can be adjusted to improve performance (Small Xs) ▲ Improve phase is to identify the specific improvements to be implemented .It ultimately boils down to an organizational decision on what sigma level is the most appropriate from a cost-benefit perspective.4 fatalities per million travelers. fishbone diagram. training and measurements to enable us to design products and processes that meet customer expectations and can be produced at Six Sigma quality levels Lean Six Sigma (or simply.
▲ Validate root causes. and training material. . ▲ Map the current process. Key activities in the Define phase are: ▲ Define the problem statement or improvement opportunity in a way that effectively articulates why the Six Sigma project is necessary and why it is necessary right now. ▲ Deliver training. ▲ Develop the change implementation plan. including mechanisms for detection of deviation in process or product execution from desired levels. ▲ Develop and execute the measurements collection plan. Key activities in the Improve phase include the following: ▲ Identify potential solutions. Key activities in the Analyze phase are: ▲ Stratify data to identify the underlying problem(s). ▲ Gather the voice of the customer (VOC). ▲ Develop the control plan. ▲ Evaluate pilot results (if applicable). ▲ Implement improvements.The DMAIC phases are executed sequentially. Key activities in the Measure phase are: ▲ Identify the measurements to collect. ▲ Develop procedures. as well as feedback from subsequent phases to previous ones. ▲ Develop the project charter.▲ Control phase is to ensure that there is a plan in place to secure the gains and make them permanent. Key activities in Control phase include the following: ▲ Pilot potential solutions (if needed). ▲ Identify baseline performance measurements as Cp/Cpk or DPMO (and sigma level). although there may be some overlap and iterations between phases. ▲ Develop and validate the measurement system. ▲ Form the project team. ▲ Communicate improvements. ▲ Evaluate and select potential solutions. ▲ Identify root causes. standards.
and select a design approach ▲ Design phase is to identify design parameters. Now. Another view is that by eliminating nonvalue-added steps in the process. Measure. Optimize. other popular DFSS frameworks include: ▲ Identify. cycle time analysis. Principles of Lean include: ▲ Zero waiting time ▲ Zero inventory ▲ Scheduling (internal customer pull instead of a push system) ▲ Batch to flow (reduced batch sizes) ▲ Line balancing ▲ Reducing actual process cycle times Given that Lean Six Sigma is focused on improving process efficiency and speed. exercise the new design via pilots and prototypes. One view is to consider Lean and its tools such as value stream mapping. and improving sigma levels. flow down the CCRs to design parameters. and pull systems (kanban) as yet another toolkit that is part of the overall Six Sigma toolkit. or redesigning existing ones if incremental improvements are not sufficient and breakthrough improvements become necessary. where the Big Y is to reduce cycle time. Design. and identify corrective actions ▲ Verify phase is to identify potential design failure modes.768 percent! . Analyze. the purpose of the: ▲ Define phase is to define the design goal or improvement opportunity (Big Y) and translate it into CCRs ▲ Measure phase is to identify and gather data for key metrics that best quantify the VOC ▲ Analyze phase is to identify key design factors that influence the CCRs. Optimize. the percentage good improves from 88. Design.29 percent to 93. reducing defects. As an example. which in turn results in fewer defects and thus increases the ―percentage good‖ for the same sigma level. one can leverage Lean tools such as value stream mapping to map out thecurrent process and perform a cycle time analysis to identify improvement opportunities that help achieve the Big Y of the project. assess design gaps. Design. and thus help solve a problem or improve performance.DFSS Overview The DFSS methodology is appropriate for designing new products or processes.96 percent. Measure. Verify (IDOV) ▲ Concept. Let us consider a couple of different perspectives. and prepare for deployment of the new design Besides the DMADV framework. Verify (CDOV) ▲ Define. if one were to apply the traditional DMAIC methodology of Six Sigma to improve the process to five sigma. assess the impact of variability in design parameters on CCRs. if a 20-step process operating at four sigma is made lean by eliminating 10 steps. In this methodology. The most widely used framework for DFSS is DMADV (Define. Lean Six Sigma helps reduce the number of opportunities. identify design alternatives. improving performance. one may wonder what Lean Six Sigma has to do with solving problems. Design. Verify (DMADOV) Lean Six Sigma Overview Lean Six Sigma is focused on eliminating waste and reducing capital investment in an organization by focusing only on activities that create value. and Verify). the percentage good improvesdramatically—to 99. This means that within the scope of a traditional DMAIC project. Optimize. Analyze.
Defects – Sources of customer irritation. . It helps reduce cycle time and defects while recognizing the value of individual contributions. Defects are costly to both customers and to manufacturers or service providers. 2. Control – The state of stability. Based on the proven Pareto principle: 20% of the sources cause 80% of any problems. which enables participants to visualize an entire process and identify areas of strength and weaknesses.SIX SIGMA CORE CONCEPTS 1. improving and controlling key processes that influence customer satisfaction and/or productivity growth. It encourages team members to expand their thinking when creating solutions. Eliminating defects provides cost benefits. Quality Tools Control Chart – Monitors variance in a process over time and alerts the business to unexpected variance which may cause defects. Selection criteria for Master Black Belts are quantitative skills and the ability to teach and mentor. Pareto Diagram – Focuses on efforts or the problems that have the greatest potential for improvement by showing relative frequency and/or size in a descending bar graph. Process Mapping – Illustrated description of how things get done. Quality Terms Black Belt – Leaders of team responsible for measuring. analyzing. study and monitor process capability and performance. Root Cause Analysis – Study of original reason for nonconformance with a process. Green Belt – Similar to Black Belt but not a full-time position. the nonconformance will be eliminated. Process of regulating and guiding operations and processes using quantitative data. Defect Measurement – Accounting for the number or frequency of defects that cause lapses in product or service quality. When the root cause is removed or corrected. Tree Diagram – Graphically shows any broad goal broken into different levels of detailed actions. They also review and mentor Black Belts. CTQ: Critical to Quality (Critical "Y") – Element of a process or practice which has a direct impact on its perceived quality. normal variation and predictability. Master Black Belts are fulltime positions. Statistical Process Control – The application of statistical methods to analyze data. Black Belts are full-time positions. Master Black Belt – First and foremost teachers.
communicate and drive the overall business objectives. Examples of objectives might include: X% of employees through Six Sigma training by a certain date Y% reduction in defects for all customer visible processes by quarter end $Z in back-office projects savings by year end Six Sigma training for Senior Management should include a program overview. also known as 'C-Level Management' (CEO. real-world examples of successful deployments. CFO and peers). Following this approach. The International Quality Federation offers an online certification exam that organizations can use for their internal certification programs. it is statistically more demanding than the ASQ certification. One key innovation of Six Sigma involves the "professionalizing" of quality management functions. quality management in practice was largely relegated to the production floor and to statisticians in a separate quality department.Certification Corporations such as early Six Sigma pioneers General Electric and Motorola developed certification programs as part of their Six Sigma implementation. Black Belt training is also recommended. Senior Management Senior Management. are the individuals that set. This article will help identify who in your organization is required to be Six Sigma trained and what type of Six Sigma training they should receive. Six Sigma Qualtec. business and financial benefits of implementation. . and the required Six Sigma training and tools to ensure successful implementation. There is no standard certification body. and different certification services are offered by various quality associations and other providers against a fee. Air Academy Associates and others. Depending on Senior Management time availability and their desire to learn the details. Black Belt etc. Formal Six Sigma programs adopt a ranking terminology (similar to some martial arts systems) to define a hierarchy (and career path) that cuts across all business functions. They are also the individuals that are required to incorporate Six Sigma objectives into their operational plans. the Juran Institute. many organizations in the 1990s started offering Six Sigma certifications to their employees. Prior to Six Sigma. verifying individuals' command of the Six Sigma methods at the relevant skill level (Green Belt. or one project combined with three years' practical experience in the body of knowledge. Who and What Type of Training ? 1. Six Sigma Training Six Sigma Training is one of the most important factors that contributes to and helps modify and shape an organization's culture. The American Society for Quality for example requires Black Belt applicants to pass a written exam and to provide a signed affidavit stating that they have completed two projects.). Criteria for Green Belt and Black Belt certification vary. specific application to business/industry. CIO.Other providers offering certification services include the Institute of Industrial Engineers. some companies simply require participation in a course and a Six Sigma project.
Some organizations use additional belt colours. finance and training. . but typically does not include as much detail as that provided to Quality Leaders. such as Yellow Belts. Six Sigma training for Functional and Process Managers is more detailed than that provided to Senior Management. 3. methodology and tools. Quality Leaders Quality Leaders. and process managers from areas such as assembly. Project Leaders Project Leaders. implement the Six Sigma methodology and tools within the business. as well as detailed statistics training and computer analysis tool use.2. Depending on the instructor. they might include functional managers from areas such as human resources.and inter-function projects. may also take Six Sigma training courses developed specifically for part time Project Leaders. methodology. but shorter in duration because less detail on complex tools and statistics is provided. Black Belt training is also recommended. track business cost savings. ensure training goals are met. determine appropriate tool use. the duration is usually between two and four weeks. Six Sigma training for Quality Leaders includes detailed information about the concept. perform analyses. tools and requirements to ensure successful implementation within their organization. also known as Black Belts. and ensure appropriate use of tools and methodologies. production and call center. These managers are sometimes referred to as 'sponsors' and 'champions' because they are known to champion the cause within their business organization. Statistics is included in the agenda. Project Leaders and Employees. 4. Depending on Functional / Process Manager time availability and their desire to learn the details. Employees are instead told to ask their Black Belt for help in specific areas. methodology and tools. the duration is usually between three and four weeks. 5. Topics would include the Six Sigma concept. Six Sigma training for Green Belts is similar to Black Belt training. Depending on the instructor. Employees Employees. They maintain rolled up budgets. for employees that have basic training in Six Sigma tools and generally participate in projects and 'white belts' for those locally trained in the concepts but do not participate in the project team. They lead the intra. share best practices. Depending on the size of the organization. review projects at milestones. maintain time lines and budget. help Functional and Process Managers set and lead the Six Sigma vision within their specific areas. and may include one of more weeks in between sections. and act as the central point of contact for specific process improvement projects. coach Functional and Process Managers. also known as Green Belts. Functional / Process Managers Functional and Process Managers are the level of management directly reporting to the Senior Management. These champions translate Senior Management's strategic directions into tactical objectives and actions with the help of their Quality Leader and Project Leaders. also known as Quality Managers and Master Black Belts. Six Sigma training for Project Leaders includes detailed information about the concept.
Motorola says it has "documented over $17 billion in savings" in over 20 years of using Six Sigma. which increases the company's profit margin.Advantages of six sigma Financial Advantages Six Sigma reduces process-output variation. but customers also purchase products that work better and last longer. Employee Commitment Implementing Six Sigma affects the organizational culture of a company and requires employee buy-in from the entire organization. Six Sigma is prospective methodology as compared to other quality programs as it focuses on prevention on defects rather than fixing it. Quality Advantages While focusing on removing all causes of defects. Companies that successfully implement Six Sigma increase customer satisfaction and retention by providing higher-quality consumer products without raising prices. because the Six Sigma experts will be working closely with them on a daily basis to better understand the process and possible sources of defects . Six Sigma relies more heavily on this commitment than most other methods. employment growth and stock value growth. because of the cost-saving aspect of this quality-control strategy. which increases process efficiency and reduces operating costs. return on investment. ) Six Sigma is successfully implemented in virtually every business category including return on sales. The fundamental goal of Six Sigma is to eliminate the waste of resources. The lower-level employees also need to buy into the strategy. which can be costly but immediately shows commitment from the organization's upper management. Six Sigma's focus on process improvement saves money by removing the causes of defects. the Six Sigma approach improves the overall quality of the final product sold. the complex statistical methods and implementation process force many companies to hire outside Six Sigma experts.
like belts with different colors. However. many of which claim expertise in Six Sigma when they have only a rudimentary understanding of the tools and techniques involved. This phenomenon is further explored in the book Going Lean. which describes a related approach known as lean dynamics and provides data to show that Ford's "6 Sigma" program did little to change its fortunes Lack of evidence of its success In articles and especially on Internet sites and in text books.Criticisms of six sigma Lack of originality Noted quality expert Joseph M. Critics argue there is overselling of Six Sigma by too great a number of consulting firms. 91 percent have trailed the S&P 500 since"." The summary of the article is that Six Sigma is effective at what it is intended to do. such as for reliability engineers. more attention is paid to reducing variation and less attention is paid to developing robustness (which can altogether eliminate the need for reducing variation). Six Sigma seems to be a "silver bullet" method.."] 0Role of consultants The use of "Black Belts" as itinerant change agents has (controversially) fostered an industry of training and certification. claims are made about the huge successes and millions of dollars that Six Sigma has saved. there does not seem to be trustworthy evidence for this: . It cites two Wharton School professors who say that Six Sigma leads to incremental innovation at the expense of blue skies research. In most cases. It includes what we used to call facilitators. but that it is "narrowly designed to fix an existing process" and does not help in "coming up with new products or disruptive technologies. stating that "there is nothing new there. Potential negative effects A Fortune article stated that "of 58 large companies that have announced Six Sigma programs. The American Society for Quality long ago established certificates. Juran has described Six Sigma as "a basic version of quality improvement". A BusinessWeek article says that James McNerney's introduction of Six Sigma at 3M had the effect of stifling creativity and reports its removal from the research function." Advocates of Six Sigma have argued that many of these claims are in error or ill-informed A more direct criticism is the "rigid" nature of Six Sigma with its over-reliance on methods and tools. They've adopted more flamboyant terms. The statement was attributed to "an analysis by Charles Holland of consulting firm Qualpro (which espouses a competing quality-improvement process).
The accepted Six Sigma scoring system thus cannot be equated to actual normal distribution probabilities for the stated number of standard deviations. A pacemaker process might need higher standards. DIN and other (inter)national standardization organizations have not created standards for the Six Sigma process. However. . for example) as the number of standard deviations.The fact that it is rarely explained that a "6 sigma" process will have long-term defect rates corresponding to 4. This specially counts for reliability related defects and other not time invariant problems.[P]robably more to the Six Sigma literature than concepts. whereas any resulting improvement is accidental (Latzko 1995). it might not operate optimally or cost effectively for others. ARP. Criticism of the 1. Thus. EN-ISO.5 sigma shift is not clearly explained. most cases are not documented in a systemic or academic manner.5 sigma performance is. described as a "six sigma process. management is lulled into the idea that something is being done about quality. The basis and justification for choosing six (as opposed to five or seven.5 sigma performance rather than actual 6 sigma performance has led several commentators to express the opinion that Six Sigma is a confidence trick. at best. relates to the evidence for Six Sigma‘s success. by Six Sigma convention. In fact. In addition. It has been argued that by relying on the Six Sigma criteria. The IEC. the majority are case studies illustrated on websites. when looking at the evidence put forward for Six Sigma success. and are. and this has been a key bone of contention about how Six Sigma measures are defined. the Six Sigma model assumes that the process data always conform to the normal distribution. documented case studies using the Six Sigma methods are presented as the strongest evidence for its success. whereas a direct mail advertising campaign might need lower standards.4 defects per million opportunities might work well for certain products/processes. and apart from a few that are detailed from the experience of leading organizations like GE and Motorola. for example. Based on arbitrary standards While 3. together with the 1. This might be the reason that it became a dominant domain of consultants (see critics above). the question that begs to be asked is: are we making a true improvement with Six Sigma methods or just getting skilled at telling stories? Everyone seems to believe that we are making true improvements. sketchy.5 sigma shift has also become contentious because it results in stated "sigma levels" that reflect short-term rather than long-term performance: a process that has long-term defect levels corresponding to 4. but there is some way to go to document these empirically and clarify the causal relations. The calculation of defect rates for situations where the normal distribution model does not apply is not properly addressed in the current Six Sigma literature. looking at these documented cases. So far. mostly by consultants and people with vested interests. They provide no mention of any specific Six Sigma methods that were used to resolve the problems.5 sigma shift The 1.
Large organizations that have adopted six sigma These are some the large Indian and International organizations that have used Six Sigma. There are thousands more all over the world. 3M AB Dick Adolph Coors Advanced Micro Devices Allied Signal Alcoa Aeropspace Corp Abbotts Labs Apple Computer Bank of USA Beatrice Foods Bell Helicopter Boeing Bristol Myers Squibb City of Dallas Campbell Soup Chevron Citicorp Clorox Danon Dow Fidelity Intel Ford General Dynamics GE HP Honeywell Kaiser Aluminium Infosys Kraft General Foods Lear Astronics Lockheed martin McDonnell Douglas Microsoft Motorola NASA Northrop Corp Pentagon Parkview Hospital Rockwell Int Rohm and Haas ICICI HDFC Wipro Seagate Sony Star Quality Texaco Texas Instruments TRW US Army US Air Force United Technologies UPS Xerox Airtel Bharti TATA Reliance TCS .
accounts conversion operations and as vendor management. The Six Sigma methodology can help reduce the amount of wasted time and resources as well as reduce cycle time to create banking applications. Six sigma is a powerful system. With Six Sigma initiatives there can be efforts put in for reduction in check deposit defects. .Six sigma concept within banking system Six Sigma was developed in the 1980's to reduce defects that were quite common in the manufacturing industry. schedule overrun and development cost. Applying Six Sigma to Banks Six Sigma allows a banks to monitor and respond to: Number of consumer complaints How long to process a specific transaction (e. Six Sigma projects can be aimed to improve branch operations. Recently the banking giants Bank of America and Citicorp implemented Six Sigma into their cultures and the results have been astoundingly positive. funding and documentation delays. Six Sigma is now being used in the service sector as well. branch office profitability. client retention.g. with the development of new concepts and methodologies. It helps to improve the quality of the services rendered.. Even banks are applying the six sigma model to continuously improve quality and gain a competitive advantage. Bank officials recognize that the Six Sigma doctrine has not only helped them manage and control their operating procedures. Reducing customer complaints and reduction in the processing time of products such as loans and the time taken to take a call are just a few examples. payment failures. Finance industry is considerably applying six sigma quality process with the aim of eliminating defects. loan) Delivery of services to customers Benefits from Six Sigma Program Higher Shareholder Return Financial Benefits Improvement in Customer Satisfaction Process Orientation Change in Culture. but the additional benefits of increased customer support have also been realized. re-documentation and even trading failures. However. Result is lower maintenance.
are few examples of initial Six Sigma success in banks. It has benefited with billions of dollars of benefits since then. increased revenue and enhanced customer satisfaction. Measure 3.EXAMPLES OF SIX SIGMA IN BANKING INDUSTRY Suntrust Bank. Define • To identify • To determine requests • To set planned result • To confirm a problem / process • To purify the problem / planned result • To measure key steps / entrances • To develop hypothesis on samples • To identify "vital minority" of cause root • To confirm hypothesis • To identify specific or general problems • To define planned result/apply vision • Explain scope and requests of customers • To measure performances according to requests • To gather data on process efficiency 2. Bank of America started with Six Sigma in 2001 and has announced huge savings through increased savings. Analyze • To identify "the best practice" • To evaluate process design • Adding / not adding values • Bottlenecks/interruptions • Alternative ways • To purify requests • To design new process • To check assumptions • To apply creativity • Principles of work flow • To implement new process. method for analyses and improvement of business processes Adopting Six Sigma successfully in the banking industry can be implemented most successfully with the DMAIC approach . HDFC Bank and ICICI Bank. systems • To establish measurements and re-investigate in order to maintain performances • To correct problems when needed 4.improve-control). Control Core of six sigma is DMAIC (define-measure-analyze. With Six Sigma. American Express began with Six Sigma in 1998. Six sigma processes of improvement Improvement of processes Design/redesign of processes 1. JPMorgan Chase & Co is the second largest bank in the US. Improve • To develop ideas for removing the root of cause • To test solutions • To standardize solution / measure results • To establish standard measuring for performance maintenance • To correct problems when needed 5. DMAIC SIX SIGMA MODEL OF IMPROVEMENT Table 1. Few of them are ABN AMRO. structures. IDBI. Among Indian companies. revenue increase and enhanced customer satisfaction. DMAIC method for analyses and improvement of processes. Benchmark Six Sigma has had participation from good number of financial sector participants in recent training programs. it has generated wonderful results through expense reduction. Citigroup and JPMorgan Chase & Co.
All improvement measures are based on facts and statistics. For example. . the process is referred back to the ‗define‘ phase. Advanced simulation tools can also be employed to study the impact of the proposed improvement initiative on business processes. under different work conditions. Six Sigma professionals apply corrective measures to improve processes that cause problems in consultation with the bank staff and the branch manager. the teller receiving the customer‘s request and the teller seeking a manager‘s approval for processing the request. new account openings. control systems are put in place to monitor the impact of the improvement initiatives. However. single transactions need to be analyzed individually to ascertain which one has the maximum impact on the overall transaction time. in consultation with the em0ployees and senior management. It is financially not viable to improve every business process. In the banking industry. customer satisfaction is the main objective. In most banks. Control: In the control phase of DMAIC. Six Sigma professionals deploy quantitative procedures to collect statistical data in consultation with the business managers. Some of the processes that involve customer interaction include address change request processing. Measure:In the ‗measure‘ phase of DMAIC. Different processes have different impact on customer satisfaction. Six Sigma professionals analyze the collected data according to predefined parameters to identify the processes that can be improved at minimum costs. The measurement of impact of the individual processes helps the banks to concentrate on improving the processes that have the maximum impact on customer satisfaction. Six Sigma professionals define the objectives and boundaries of a particular business process. wait times are said to have the maximum impact on customer satisfaction. Banks can employ observers at their different branches to measure the average wait time. a check cashing transaction involves the customer coming to the teller window. teller window transactions and CD rollovers.Define:In the ‗define‘ phase of DMAIC. then corrective measures are taken and the whole process is not referred back. Improve: In the ‗improve‘ phase of DMAIC. Analyze: In the ‗analyze‘ phase of DMAIC. If a business process is still not performing in accordance to the desired Six Sigma levels. if a small problem is affecting the performance. making it necessary to define all the processes that involve customer interactions and directly affect customer satisfaction. These three different. Six Sigma methodology has been successfully implemented by banks in last few decades to improve service delivery and customer satisfaction. The analysis covers every aspect of a business process that directly affects customer satisfaction. The statistical data is then used for measuring the impact of the various business processes on customer satisfaction.
7. 3. Reducing Bank Statements Processing & Delivery time. 3. timeliness and completeness of customer communication. Reducing the errors in money transfer 4. Improving Market Share of existing banking products. Improving the Credit Evaluation Process 4. Developing new products (timeliness. Reducing the Credit Card Delivery time. Improving Productivity of loan processing agents Account Opening 1. Improving the Customer Information gathering processes. Improving accuracy. 2. business potential) 6. Improving the Branch Banking Processes . Reducing the cycle time to Process a Loan Application (both Mortgage & Personal loans). Reducing the time to open an account 2. 3. Reducing rework in processing customer applications Other Projects in Retail Banking 1. 2. Reducing errors in account opening process.Six sigma in different banking department Loan Department 1. 5.
has set a goal to be the premier international financial company in the next millennium. have resulted in significant improvements in process timelines. coupled with the detection of defects using Six Sigma methods and implemented globally by using empowered teams. CFPM involves developing "maps" of process flows by describing the functions involved in each step of a particular process. In the beginning. Six Sigma quality was always in the domain of the manufacturing arena--could it work in the service industry? Could it work worldwide for a financial organization? Citibank undertook this challenge to improve total customer satisfaction by investigating well-known manufacturing management theories and attempted to apply them to their own nonmanufacturing environment. Citibank established the Citibank Cross-Functional Performance Challenge within its banking divisions by using the Six Sigma methodology to identify defects. but Citibank found CTR to be extremely useful in financial areas. Methodologies like cycle time reduction (CTR).SIX SIGMA AT CITIBANK Citibank. CFPM involves eliminating wasteful steps. Most people think reducing cycle time applies only in the manufacturing sector. Maps are developed for both the way things are being done (called the "as is" map) and the ways things should be handled (the "should be" map). the global giant had to implement quality initiatives that satisfied customers quickly and flawlessly at every interaction anywhere in the world. To achieve CTR. Cycle time reduction In 1997. Motorola University (MU) developed the cross-functional process mapping (CFPM) methodology. Citibank hired Motorola University Consulting and Training Services to teach Six Sigma defect reduction and CTR to its employees. CFPM to map the steps for improvement and empowered teams to correct the defects. a Citigroup company. To achieve this clearly ambitious goal. At its core. such as consumer banking and emerging markets. cash management and customer loyalty and satisfaction. . which are defined as any activities that don't contribute to the goal of meeting customers' needs.
and it's been very successful with reduced cycle time. there were some people who chose not to relocate. "We've completed that project. Citibank's goal is to reduce in defects and cycle time by 10 times by December 2000 and reduce defects and cycle time by 10 times every two years thereafter. six sigma equals 3. neither they nor their supervisors knew how to fix them. A sigma is a statistical term that measures to what extent a process deviates from perfection. phone or mail in requests to have the transaction processed. Podkowsky's department implemented the Asset-Based Finance Cross-Functional Performance Challenge. tabulating defects and analyzing them using a Pareto chart. managing director and business head for Citibank's Asset-Based Finance division.office operation relocated from New York to Delaware. A team composed of bankers and operations people identified the entire funds transfer process.4 defects per million opportunities--virtual perfection. Most of the complaints lodged with the department dealt with the time it took to complete the process." Identifying defects using Six Sigma Customers who do business with Citibank's Private Bank sometimes initiate manual funds transfers. "Instead of getting complaints from customers. A crucial part of the Asset-Based Finance team's progress was vesting the authority to "sign off" on loan availment to his team. High on the chart of defects was the internal call-back . Three sigma equals 66." notes Podkowsky." he says. John Podkowsky. By reducing the number of "hand-offs" necessary to make funds available. Because the process was so complicated. It provides direct evidence of what should be corrected first." To address the problem. Six Sigma is achieved using simple tools such as the Pareto chart. faced a serious problem when his back. "The department went through a transition period. theorized that 20 percent of possible causes are responsible for 80 percent of any problem. the cycle time for this segment of the availment process was reduced by an average of 75 percent. customers complained. Once Citibank employees had identified the primary obstacles preventing them from achieving total customer satisfaction at Private Bank. the Italian economist for whom the chart is named. from two hours to 30 minutes. they call their banker and then fax. it would sit there for two or three hours before it even went to the back office.Relocating. The data on the chart identifies which problems occur most often or incur the highest cost. When problems came up. When they want to send money from their accounts. they were able to correct the problems with the Six Sigma program." explains Cherylann Munoz." to "When will my transaction be confirmed?" "If the request wasn't the banker's top priority for the day. we're now getting compliments. Vilfredo Pareto.807 defects per million opportunities. compliance director for Citibank's Private Bank in the United States and the Western Hemisphere. retraining and regaining A few years ago. "So it was left in the hands of the new people who were basically inexperienced in the job they were handling. and when that period was completed. from "I can't understand why you don't have my request.
these employees can offer valuable insight into daily business operations. Next." Munoz says. it's doing things better. MU consultants helped to define the management system around which the team was organized. develop maps. which required staff to call the person requesting the funds transfer to make sure that the instructions were correct and hadn't been altered. Citibank's CFPM has five phases. . a global process owner in the Global Cash and Trade Organization who is responsible for the endto-end customer experience.000 to 1. when the critical business processes to be mapped are identified and a team is selected. minimal hand-offs and metrics that reflect performance in the eyes of the customer. establish appropriate standards and monitor execution. The largest obstacle was enabling them to find time to participate while juggling daily job responsibilities. Management empowers the team to implement any changes they develop that will reduce the cycle time and improve customer satisfaction." com. "When implemented correctly." she continues. and we eliminated call backs for 73 percent of the transactions coming in. "The focus on cycle time and defects has made an impact on how we serve customers. These solutions required employees to form teams to solve the issues discovered. "It's not just a matter of doing things faster." "Team members worked well together." Working together The first step in process mapping is establishing a team. drawn from every unit that contributes to the process. quality increases customer satisfaction and leads to shorter reaction time and faster introduction of new products--providing a sustainable competitive advantage." says Andros. the team meets for four to five days to map all current steps and identify what is not working now--the "as is" process. In another example. because achieving the objectives would make their professional responsibilities easier and would benefit their customers--a win-win situation for everyone. "Introducing quality as a core strategy was viewed as a unique opportunity and differentiating feature not only vis-a-vis our customers. Cross-functional teams. determine a baseline. They include employees deep within the company--the "doers" of the current process. Employees were invited to participate based on their subject matter expertise and ability to assist with the solution. made up of representatives from each functional department. but also our staff. Citibank formed a cross-functional global team of 80 people. First there's planning. The team first identified sponsors and formed a steering committee to champion the effort. executive vice president for Citibank's Eastern European/Central Asia and Africa region (whose headquarters are in London)." Those sentiments are echoed by Dipak Rastogi. Because of their close vantage point. typically of 30 to 50 people. "We cut monthly call backs from 8.procedure. This means no redundancy. says CFPM "lets people get to know one another. Citibank's Global Cash and Trade Organization used Six Sigma methodology to help track defects and document the results by teaching team members to identify appropriate metrics. To reduce the time for opening an account.000. Sue Andros.ments Rastogi.
custodian banks and institutional investors. you don't know where the problems are. Until you map those processes out. division executive for WWSS. CFPM doesn't end. Motorola has driven down manufacturing time for pagers from 40 days to less than one hour. In fact. The tools help the team stay focused and understand the root cause of the problem. the team meets again to map out the desired. Team leaders spend at least three-fourths of their time for up to a year. we're able to understand what's wrong with the process endto-end. Ronnie Wackstein. is the implementation of the action items to achieve the "should be" process. This kind of improvement is an indication of why Citibank chose Motorola's mapping process. they become empowered to make improvements. this helps secure buy-in for sim. a vice president in the Private Bank observes: "The 'as is' mapping session is a very critical step in the process. which is probably the most difficult and can take several months. who heads Citibank's Private Bank in the company's Western Hemisphere region." says Sandy Jaffee.plifying the process. the team not only attained the goal. Citibank's Worldwide Securities Services (WWSS) is primarily in the business of clearing and settling crossborder securities for major broker dealers. but three team members have also gone on to initiate other programs to improve other processes in their area. People helping people For CFPM to work. "These staff members know what is wrong with their piece of the process. When the WWSS team was challenged to reduce the securities fail rate by 60 percent for eight large customers in six emerging markets. with everyone taking leadership roles.The team then takes the map back to colleagues throughout the organization to verify its accuracy and to see if there are any more problems or issues they want to add. the "should be. When these teams are challenged to reduce cycle times within their departments. key team members spend one-fourth of their time on the project. which improves the corporate culture. and has become pretty wellknown in the industry for reducing cycle time. design an improved process and give them time to implement it." which has removed nonvalue-added steps." The results are amazing Using process mapping. . Even after the process has been improved." After completing the "as is" map. "By bringing them together. The last phase. streamlined process. there must be a commitment at all levels. This step enables you to design a streamlined 'should be' process map." asserts Ed Montero. "Motorola has done a particularly good job of assessing its competitive position. and what a quality culture can accomplish--how cycle times can radically be reduced by a factor of 10 every two years.
Their commitment helps balance back. Global Equipment Finance.000 employees worldwide had been trained. By making innovative use of information technology and operations management through Six Sigma and CFPM. "Our senior country operations officer and our corporate bank head were our most active supporters of our CFPM projects. but Citibank has implemented quality initiatives to make certain that it satisfies customers flawlessly and quickly at the point of every interaction anywhere around the world. senior managers sponsored the quality initiatives or served on steering committees and kept an "open door" policy so that teams could gain access to them as needed. more than 650 senior managers were trained. According to Peter Klimes. another 7. Commitment is needed from the top Teams involved in the Citibank Quality Challenge needed to have full autonomy to make decisions about changes to the process. external call backs by 85 percent and the credit process time by 50 percent. Citibank's goal of becoming the premier international financial company in the next millennium will require a devotion to excellence on the part of every em. which are distributors and record keepers of financial service products. It also reduced the cycle time of processing statements from 28 days to 15 days. This division used CFPM methods to improve the accuracy and timeliness of statements. The goal is ambitious. From May 1997 to October 1997. The group also reduced the credit decision cycle by 67 percent. including the following: Private Bank--Western Hemisphere. which provides global financing and leasing services to Citibank customers. which serves wealthy individuals. The group achieved 100-percent accuracy within a four-month period. To champion the work. This group improved all steps' cycle times from when a customer places an order to product delivery.500 employees attended sessions as part of senior-manager-led teams. from three days to one day. quality director for Citibank in the Czech Republic. By early 1999. Between November 1997 and the end of 1998.ployee. . employees are working faster and creating high levels of customer satisfaction." Klimes says. This group reduced internal call backs by 80 percent. the involvement of senior sponsors is a continuous process all the way from setting critical business issues and objectives to making the final presentation. Copeland Companies. "We have had a well-balanced split between projects initiated by senior management and those initiated by staff. primarily through defined contributions such as 401(k) plans." The big picture Citibank began its quality training initiative in 1997.and front-office aspects of the projects.CTR has met the challenges of many Citibank groups. 92. subsidiaries of Travelers Life & Annuity.
As Six Sigma increased in popularity. creating an unfavorable image. Banks may not have a choice when it comes to many clerical steps or service offerings. a serviceoriented business. Manufacturing businesses rarely deal with customers directly and have the freedom to conduct many studies of value and production efficiency. These are easily quantifiable in manufacturing. Rigid Regulations and Forces Banks must deal with very rigid regulations in most of their services. errors and waste. its processes of analysis were adopted by more businesses across different industries. Many banks have difficulty adopting Six Sigma practices because banking employees and executives often don't believe that the same process can be transferred to the banking industry. Measurements If a bank does adopt Six Sigma processes. however. Strategic Differences Banks are service industries.What are the Problems With Six Sigma Use in the Banking Industry? Six Sigma is a popular business process used to increase efficiency in business practices. struggled to use Six Sigma effectively. but harder to measure in the banking industry. Some businesses. which means much of their focus is on their customers and customer relations. which are influenced by customer demand.This can make it very difficult for banks to make any widespread change in their processes. especially businesses that have a manufacturing component. . especially complicated products like cars. Skepticism Six Sigma was originally designed for factories that create products. specifically the financial service companies. In the banking industry. this constant recording and fact-checking can take away from time with customers and slow down bank processes. This skepticism can keep Six Sigma from being used effectively. which are designed to accurately measure the production levels. it may face issues with the measurement stages of Six Sigma.
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