23/09/2019

DMAIC Cycle – Business Process Improvement

TOOLS IN DEFINE & MEASURE

DMAIC Cycle: outline course

• What is
Define
Define phase?
• Tools used
Control Measure • What is
Measure
phase?
• Tools used
Improve Analyze

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 Recognize problematic area and choose the

right project

Identify the project's goal & scope

Ensure that the project gains acceptance
To gain acceptance:
1. Impact to customer, faster
2. Impact to employees, better productivity
3. Probability of success, easy to implement
4. Fit to strategy, better than competitor
5. Financial return, higher revenue

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Collect background information on current

process
 Determine VOC and CTQs
CTQ – the key measurable characteristics of a
product/process that satisfy customer

CTQ example in Services

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How to gather customer information?

• Formal survey
• Focus Group
• Direct Customer Contact
• Field intelligence
• Complaint analysis
• Internet and social media monitoring

Project Charter: Initial activity

A contract between the organization's
leadership and the team with the purpose of:
 Clarifying what is expected of the team.
 Keeping the team focused & aligned
with organizational priorities

WHAT WHO HOW

• Problem • Project • Goals
statement team • Schedules
• importance • Roles of • Milestones
team
member

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Project Charter - example

Initial Project Overview
Project Name: Trailer Utilization Optimization

Project Overview: In alignment with the company’s strategic goals, the Logistics Executive team has jointly set the
objective to reduce internal operating costs by 10%. This has translated to a 3.6% reduction of
operating costs in the Midwest Logistics Region. The Midwest Logistics Region’s Lean Six Sigma team has examined
multiple projects that may impact the breakthrough goal and has identified optimizing trailer utilization as a high
priority.

Problem Statement: The Midwest Logistics Region needs to reduce operating costs by 3.6% ($324 million).
Improving trailer utilization has been identified as the quickest way to reduce costs within their direct
control. The Lean Six Sigma team needs to analyze the current state of trailer utilization and then suggest improvements
based on an optimized process, within 4-6 months.
If the Midwest Logistics Region fails to show an opportunity to reduce operating costs as directed by the company’s
strategic plans within 4-6 months, the region would have to reduce operating costs by other means, such as labor
cutbacks, procurement freezes, and contract renegotiations. By staying in the current state the Midwest Logistics Region
would have to choose unfavorable cost cutting methods which typically impact the productivity of the operation and may
not meet the $324 million goal. If productivity is lost, shipments may not make it to the market on-time thus reducing
the total sales of the company. The final impact would be a devaluation of Wal-Mart's stock due to its inability to meet
the 10% profit increase projection.

Customer/Stakeholders: Transportation Personnel, Warehouse Receiving Personnel, Warehouse Shipping

Personnel, Driver, Store Receiving Personnel, Vendor Shipping Personnel

What is important to these customers – CTS: Up-to-date trailer status, optimized trailer dispatch plan,
open communication of critical or jeopardy events, realistic process time estimates
Module 1 - Define Phase 9

Project Charter - example

Initial Project Overview
Goal of the Project: Reduce trailer utilization costs by 10.3%

Scope Statement : The project is limited to the Midwest region which Anita Baker and Joe Thompson are
responsible. The Lean Six Sigma team will examine and recommend changes to the major process steps for the use of a
trailer: dispatch, load, transport, dispatch update, and unload. The investigation is limited to the two methods of trailer
use: live load/unload and drop’n hook. These methods of use may occur at a vendor, distribution center, or store.

Projected Financial Benefit (s): Based on an operating budget of $9 billion, this project will attempt to avoid
costs connected with trailer use in the Midwest region. The avoidance target is $324 million.

Project Resources: Milestones

Team Leader: Anita Smith PhaseEst. Completion Date
Division and Dept.: Midwest Logistics Region Define 2/2
Process Owner: Robert Quincy, Sr. Dispatch Manager
Measure 3/2
Project Champion: Joe Thompson
Analyze 4/6
CI Mentor/ MBB: Jim Pulls
Improve 4/15
Finance: Joe Thompson
Team Members/Support Resources: Midwest Transportation Office Control 4/27
Team Leaders (6) Seek Approval 5/5

Module 1 - Define Phase 10

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Tools
Tools usually used in Define phase:
1. SIPOC
2. Pareto
3. Cost of Quality
4. Severity-Urgency Matrix
5. Performance – Importance Matrix

Tools 1: SIPOC
• A process map that includes Suppliers,
Inputs, Process, Outputs and Customers.
• Quality of the output is improved by
analyzing input and process variables.
• SIPOC is an effective communication tool
ensuring that the team members are all
viewing the process in the same way.

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SIPOC Steps
a. Draw up a rough diagram of the process to be
optimized in five to seven process steps.
b. Place the single process steps in their correct
sequence – use a sentence with a noun and a
verb.
c. Identify the key inputs (what is put into the
process), suppliers (who delivers the input), and
outputs (the important results which the process
delivers).
d. Describe the key customers as receivers of the
essential output. This step forms the basis for the
next tool in the Define Phase.

SIPOC

Module 1 - Define Phase 14

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SIPOC
EXERCISE #1
• Create a SIPOC diagram for the key business
process of Universitas Prasetiya Mulya!

Module 1 - Define Phase 15

Tools 2: PARETO chart

• Helps a team focus on causes that have the greatest impact
• Displays the relative importance of problems in a simple visual
format
• Helps prevent “shifting the problem” where the solution
removes some causes but worsens others

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Pareto steps
a. Count your data (frequency)
b. Sort them out from the largest point to
smallest point
c. Make an accumulation of relative
percentage

Example of Pareto Analysis

Suppose there are Six month’s
data of electric stove problem
Sets of data
oven door = 193 Analysis of data
timer = 53
front burners = 460
Data Percent Cumulative
rear burners = 290
burner control = 135 front burners 460 30% 30.1%
drawer rollers = 46
rear burners 290 19% 49.1%
regulators = 265
regulators 265 17% 66.5%
others = 84
oven door 193 13% 79.2%

burner control 135 9% 88.0%

others 84 6% 93.5%

timer 53 3% 97.0%

drawer rollers 46 3% 100.0%

1.526

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Pareto Diagram
Frequency cumulative (%)
100
1400

1200 80

1000
60
800

600 40

400
20
200

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Tools 3: Cost of Quality

• COQ – the total cost incurred in a
business process in relation to level of
quality
• Translates defects, errors, etc. into the
“language of management” – $$$
• Provides a basis for identifying
improvement opportunities and
success of improvement programs

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Cost of Quality Classification

• Cost of Achieving Good Quality (CAGQ)

– Prevention cost Cost

– Appraisal cost

Total cost = CAGQ + CPQ

Level of Quality
• Cost of Poor Quality (CPQ)
– Internal failure cost Expert estimate 60-90% of total Quality
– External failure cost cost are internal and external failure cost!

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Costs of Quality – Winner Mindset

Total Cost =
Cost
Cost of Quality

External Failure

Internal Failure

Prevention

Appraisal
Level of Quality
Appraisal cost

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COQ in Manufacturing vs Services

Manufacturing
• Quality cost = product
oriented
Services
• Labor dependent almost
75% of the cost
• Internal failure tend to be
lower  direct correction
• Work measurement and
sampling can be used
•Focus on financial return
like cost reduction,
productivity, revenue
generation.
•The higher the sigma level
the cost of late delivery,
rework, downtime, etc. will
decrease

Tools 5:
Severity-Urgency Analysis
Clustering your problem into 4 quadrant : level of severity
(what will affect the customer) and level of urgency
Severity – affect to customer
Low High

High Priority 2 Priority 1

Urgency
Must improve now

Low Priority 3

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Severity-Urgency Analysis
EXERCISE #2
As a student, draw your own Severity-Urgency
matrix!

Class Project Mobile Legend Competition

Deadline: Desember 2019 Date: October 2019

Repair Laptop Business Case Competition

Deadline: November 2019
Find a Postgraduate School

Tools 6:
Performance-Importance Analysis
Clustering your problem into 4 quadrant : level of performance
and level of importance

Who cares? Overkill

Low
Importance
To customer
Vulnerable Strengths
High To competition

Low High
Performance – internal company

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EXERCISE #3
Our campus need to upgrade its
performance, which one you choose?

Summary for Define Phase

Pick the
• Survey, tools • Scope
• Focus Group • Goal
• Field Investigation • Quantitatif • Timeline of project
• etc • COQ, Pareto
• Qualitatif
• SIPOC, Severity,
Importance
Identify Project
CTQ Charter

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DMAIC Cycle: phase

1. What is measure?
2. SMART target
3. Six Sigma calculation

Measurement
• the act of quantifying the performance
dimensions of products, services,
processes, and other business activities
• Measures and indicators - numerical
information that results from measurement

If you can’t measure, you can’t control

If you can’t control, you can’t manage
If you can’t measure, you can’t improve

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Different types of measures

Discrete metric – something that is countable
Types of Metrics

Continuous metric – something concerned with

the degree of conformance to specifications

Binary (“yes” or “no” only)

Examples of binary measures Possible results

A set of standard documents exists for inviting suppliers to offer. YES NO

A training programme on value analysis undertaken for all buyers. YES NO

Different types of measures include:

Continuous (continuous range of possible values)

Examples of continuous measures Possible results

Percentage of change in costs. +/- any possible %
Number of active suppliers in the company’s supplier base From 1 to any number
Average number of complaints per month received from customers From 0 to any number
Percentage of purchase specifications developed through cross-
From 0% to 100%
functional teams

Restricted choice (often involve a high degree of

subjectivity)
Examples of restricted choice measures Possible results
Extent to which customers feel that purchasing & Mostly Always Sometimes Never
supply meets their expectations in providing
timely responses to queries.
High Moderate Low Negligible
Degree of supply market risk for item “X”.

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= well defined, clear to everyone in the project

Specific Usually answering the WHAT and HOW?

Measurable=Usually
quantifiable criteria, to help team stay on track
answering the HOW many?

Achievable= attainable, within the availability of team’s

resources, knowledge, and time

Relevant =Usually
important and matters, align with other goals
answering Is it the right time, people?

Time-bound=prevent
deadline, giving team sense of urgency to
goals overtaken by daily routine

Goal Example
I want to write a business book
Specific: I will write a book on social media that is a minimum of 150 pages.

Measurable: I will write one chapter per month, or 3-5 pages per week.

Attainable: I will work on the manuscript first, and once that is completed, I will
begin to search for a publisher or explore self-publishing.

Relevant: Writing a book on social media will help me establish myself as an

expert.

Time-Based: My manuscript will be completed and ready to be published in 10

month

SMART Goal: In order to establish myself as an expert, I will write a 150-

page book on social media by writing one chapter per month (3-5 pages
per week). The book will be completed in 10 months, and then I will
search for a publisher or explore self-publishing.

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Good measures…
Acquire 3 new supplier in the next 3 months, by
contacting 2 potential supplier each week.
By January 2016 will start working with the new supplier.

Accurately reflect the all of the performance areas to be evaluated

Are customer-orientated
Are not only quantitative, but also qualitative
Are clear and unambiguous : self explanatory
Require data that will be accurate, reliable, and easy and
inexpensive to collect

Six Sigma Calculation

VOICE OF VOICE OF
PROCESS CUSTOMER

PRODUCTION PROCESS PROCESS MARKETING

PERSPECTIVE MEASUREMENT PERSPECTIVE
SPECIFICATION
(UCL & LCL) (USL&LSL)

PROCESS
CAPABILITY
INDEX (Cpk)

Voice of Process is the SIGMA

actual capability of LEVEL Voice of Customer is the
a business process customer need

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Sigma level 6 if…

Gap between USL UCL Mean LCL LSL is the same
The smaller VOP (UCL LCL) -
the less process variation

USL
UCL
Mean
LCL
LSL

Process Performance Index (Cpk) & Sigma Level

USL - Mean
Cpu =
3σ
Cpl = Mean - LSL
3σ
Cpk = minimum value of (Cpl, Cpu)

Cpk ≥ 2  acceptable process

SIGMA Level = 3 * Cpk

Sigma level equal or more than 6  Excellence Business Process

Sigma level = 4.0  Industry Average
Sigma level less than 2.0  Bad Business Process

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Example of Process Performance Index (Cpk)

Doctors Schedules at 1 pm on a Hospital

Six sigma objective

Current experience

Voice of customer LSL USL

Assume current experience ontime mean is 1.05 with std 0.5

Cpk≥ 2 acceptable process

2 8.666

EXERCISE #4
1. Pelanggan sebuah produk sudah memiliki
persyaratan ketebalan bahan antara 32-36 gram.
Jika tidak memenuhi persyaratan tersebut, maka
produk akan ditolak. Hasil pengukuran dari 24
sampel bahan yang diambil menunjukkan rata-rata
ketebalan bahan 33.9 gram dengan standard
deviasi 3.48 gram. Apakah bisnis proses
perusahaan sudah kelas dunia? Jelaskan!

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