executive summit meeting. 2 executive summit agenda opening remarks demystifying six sigma...
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Executive Summit Meeting
2
Executive Summit Agenda
• Opening Remarks
• Demystifying Six Sigma
• Deployment Structure
• Timeline and Milestone Review
• Functional Roles
- Finance Strategy
- Human Resources Strategy
- Communications Strategy
Opening Remarks
4
Opening Remarks
• Knowledge…• Transfer Six Sigma DNA into COMPANY• Deliver Right Tools and Technique to Solve Business Problems… for the Last Timefor the Last Time• Train With, and Leave Behind Best-in-Class Intellectual Property as Reference
Material
• Self-Sustaining Organization
• Create Master Black Belt Trainers, Champions, Infrastructure• Build and Leave Proven COMPANY Deployment Strategy in Place• Establish Foundation of Black Belts for Project Execution & Mentoring
• Culture of Excellence…• Shape a Data-Driven Employee Base…Every Discussion, Meeting, Decision• Produce a Process-Focus Mentality…Everything is a Process• Institute a Common Language…
• p-value• “Statistically Significant”• Standard Deviation• CTQ…Critical to Quality
• Results…Results…Results
• Defect• VOC…Voice of the Customer• MSA…Measurement System Analysis• Control Plan
Demystifying Six SigmaIntegrated Methodologies
6
Demystifying Six Sigma
Provide a basic understanding of key Six Sigma concepts and terms
Describe the major disciplines of the Six Sigma® Breakthrough Strategy:
• Process for Six Sigma (DMAIC with LEAN principles)• Design for Six Sigma (DFSS)
Offer an overview of some of the Critical Concepts related to implementing Six Sigma principles and techniques
7
Six Sigma Defined
Term is used interchangeably to represent: • Vision, Management Philosophy, Management Strategy, Performance
Metric, Benchmark, Statistical Tool Suite, Measure of Variation and a Goal
In its most basic form, Six Sigma is a metric• Represents 3.4 defects per million opportunities for defects• A defect can be any missed target or nonconformance to standard• This perspective is related to a single opportunity for defect, or a single
“critical to quality” characteristic (CTQ)
In its most elevated form, Six Sigma is a management strategy
• A strategic and tactical system for managing the total business enterprise using customer data
• Enables an organization to improve to the highest possible level of quality
8
Why Six Sigma Is Different
IT IS NOT: Just a “quality” program
IT IS: A common improvement methodology to effect the business as a whole A business process improvement methodology that enables
breakthrough improvements Focused on strategic business priorities Fact-based decision making Focused on minimizing waste and variation Dedicated resources with clear accountability Narrowly scoped projects Quantified project benefits (>$250K) Demonstrated track record of success across industries
9
The Goal: Breakthrough
Time
De
fect
s a
nd U
nn
ece
ssar
y S
tep
s Six SigmaBreakthrough
Current State
Future State
Improvement Period
10
The Roles
• Provides executive oversight for all Six Sigma activities
• Controls resources within the functional group
• Drives the Six Sigma initiative
• Owns the Six Sigma Project• Leads Project Team• Reports progress to Project
Champion
• 3-5 Process Experts
• Time commitment as needed
• Supplemental on the ground project resources
• Deployment Support• DMAIC Instruction• DMAIC Mentoring
• Owns project cluster• Breaks down barriers that
prevent project progress• Review projects• Drives projects to
completion
Functional
Champion
Functional
ChampionTeam
Members
Team Members
Project Champion
Project Champion PSMGPSMG
BlackBelt
BlackBelt
11
Customer Centric: View all products, processes and services from customer’s perspective rather than operational efficiency.
COPQ: Total direct and indirect costs of all issues or problems associated with a process.
Critical To Quality (CTQ): Customer performance requirement for product or service.
Defect: Anything that fails to satisfy a customer requirement or internal standard.
Defect Opportunity: Measurable event that may not meet customer expectation or meet internal standard.
Six Sigma Terminology
“When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it,
when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind ….”
Lord Kelvin, British Physicist
Hidden Office: Ad hoc systems that are set up to correct errors made at steps in a process.
Minimize Variance: Reduce variations in process quality.
Process: Group of activities that take inputs, add value and provide an output to customers.
Rolled Throughput Yield: The product of the defect free yield percentage across all steps in a process.
Yield: The percentage of defect free units at single step in a process.
Voice Of Customer: Any feedback received, via formal or informal means, from customers regarding company processes.
12
Cost of Poor Quality & Sigma
Cost of Poor Quality PPM Sigma Level
30-40% revenue 308,537 2σ
20-30% revenue 66,807 3σ
15-20% revenue 6,210 4σ
10-15% revenue 233 5σ
less than 10% revenue 3.4 6σ
Non-competitive
Industry average
World class
13
Quality Changes Behaviors
3 4 5 6
Sigma Scale of Measure
Restaurant BillsDoctor Prescription WritingPayroll Processing
Order Write-up
Wire TransfersAirline Baggage Handling
IRS - Tax Advice (phone-in)
(140,000 PPM)
Best-in-Class
Average Company
Industry Six Sigma Levels
14
If you played 100 rounds of golf per year, and played at:
2 sigma - you'd miss 6 putts per round 3 sigma - you'd miss 1 putt per round 4 sigma - you'd miss 1 putt every 9 rounds 5 sigma - you'd miss 1 putt every 2.33 years 6 sigma - you'd miss 1 putt every 163 years!
Understanding the Differences
15
The Breakthrough Strategy
Executives
Managers
Employees
Improve market share, Improve market share, increase profitability, and increase profitability, and ensure the corporation’s ensure the corporation’s
long-term viabilitylong-term viability
Improve yield, eliminate Improve yield, eliminate rework, and reduce labor rework, and reduce labor
and technology costsand technology costs
Create Vision,Create Vision,Strategy andStrategy andCommitment Commitment
Reduce waste, Reduce waste, defects, variation and defects, variation and improve capabilitiesimprove capabilities
Prioritization - Focus - Accountability - Reward
Metrics developed to Metrics developed to manage key drivers manage key drivers
of the businessof the business
Empower A-Players Empower A-Players to “get the job done”to “get the job done”
Voice of the Customer Voice of the Customer
16
Six Sigma – Integration
EliminateUnnecessary
Steps
ReduceVariability
Design Variability
Out
• Operational Excellence
• Cost Management• Increased
Profitability• Superior
Customer Service• Growth
Results
Design to Customer
Requirements
DMAIC(with LEAN Principles)
Design For Six Sigma
(IDOV Methodology)
Voice Of The Customer (VOC) Data Is Fundamental To The Six Sigma Methodology
17
DMAIC – Lean Principles
Identifying Waste And Making It Visible Is The First Step
DMAIC/Lean techniques are used to reduce unnecessary steps, eliminate rework, save time, save cost and extend capacity of valuable resources
Elimination of Unnecessary Steps
18
DMAIC – Lean Principles
• Specify the value of the process
• Identify the value stream for each process
• Allow value to flow without interruptions
• Let the customer pull value from the process
• Continuously pursue perfection
19
DMAIC – Variation Reduction
Typically A Few Process Input Variables Have An Extraordinary Influence On The Process Output
The basic premise of variation reduction is that sources of variation can be:
• Identified
• Quantified
• Eliminated or controlled
Managing Process Inputs …
20
DMAIC – Variation Example
• Example 1: Average time to approve is 45, with high variation resulting in most policies approved between 35 and 55 days
• Example 2: Average time to approve is 45, with little variation resulting in policies approved in no more than 47 days
Average Tells Little About The Customer Experience
Output Variation
Application Approval Process Example
30 45 60
Mean
Example #1
Example #2
Days
* Represents fabricated example* Represents fabricated example
**
21
DMAIC – Process Entitlement
• Shift overall performance to Entitlement, driving dramatic short-term improvements in cost and quality with minimal investment
• Only after the Entitlement is achieved should investment be made to redesign the process
MeanEntitlementPerformance
Shift
Upper Specification Limit
Output Variation 30 45 60
Days
* * Represents fabricated exampleRepresents fabricated example* * Represents fabricated exampleRepresents fabricated example
Application Approval Process Example**
22
DMAIC Methodology
Obtain customer requirements Clearly scoped projects (aligned to
business strategy)Define
Mistake proof the solution Standardize process
Control
Validate the solution design Validate and pilot solution Implement improvement plan
Improve
Identify and quantify root causes Establish improvement targets
Analyze
Quantify process performance Calculate sigma level Measurement Systems Analysis
Measure
ANALYZE
MEASURE
DEFINE
CONTROL
IMPROVE
IDENTIFIED PROJECTS
STANDARDIZE / INSTITUTIONALIZE
DMAIC: Define, Measure, Analyze, Improve & Control
23
When DMAIC Becomes DFSS
AnalyzeMeasure Improve ControlDefine
DESIGN FOR SIX SIGMA
Doesprocess/ product exist?
No
Yes
No
Will entitlement accomplish
Customer goals?
Yes
Yes
Is improvemen
t a new process?
No
Transition Points …
24
Design For Six Sigma - Growth
Integrate Customer And Business Needs And Wants Before Launching Products And Services
• Approach for understanding and translating customer requirements for new products and services
• Customer is involved at each stage
• Avoid developing services with no market
Goal – design products, services, and processes that satisfy both customer and business needs at the highest level of quality possible
Design For Six Sigma …
25
DFSS Methodology
Identify• Obtain customers’ requirements• Conduct competitive benchmarking
Design• Define the functional requirements• Define the design requirements
• Confirm customers’ requirements are met• Implement new designValidate
• Develop detailed design• Predict design performance, Y=ƒ(x)Optimize
Demystifying Six SigmaCritical Concepts
27
Six Sigma Concepts
Six Sigma Alignment Approach
Measurement Systems
Problem Solving with Statistics
Instituting Process Controls
Six Sigma Alignment Approach
29
Alignment Approach
1. Confirm Strategic Goals
2. Determine Project Clusters (Key Drivers of Goals)
3. Define Y=f(x) Relationships
4. Cascade Relationship to a Project Level
5. Conduct Six Sigma Projects
6. Realize Project Results
7. Roll-up Process Metrics to Management Dashboards
8. Manage Business based on Dashboards
30
1. Confirm Strategic Goals
Revenue Growth
Operating Income
Cash
Customer Satisfaction
31
2. Determine Project Clusters
Project Clusters are large-scale issues within the organization that have:• Levels of complexity which allow the issue to be broken
into smaller pieces• A measurable financial impact• Potential for long-term customer and company benefit• Metrics which can roll up into dashboard-level measures
of process performance
32
3. Define Y=f(x) Relationships
Identify the key drivers of obtaining desired performance within the Project Cluster
Depict as Y=f(X)
Y=f(X1, X2, X3 … Xn)
Measurable Output
Key Performance Drivers
33
4. Cascade Relationships
Y= f(X1, X2, X3,...Xn)
y= f(x1, x2, x3,...xn)
y= f(x1, x2, x3,...xn)
“X’s” Become “Y’s” at the Next Level of Specificity
Project Clusters
Black Belt Projects
34
5. Conduct Six Sigma Projects
DMAIC – Improving Process Performance
Off-Target Variation
On-Target
CenterProcess
Reduce Spread
XX
XXXXX
XXX
XX X
X
X
X
XX
X
X
XXX
X
XXXXX
XXXXX
XXX
35
6. Realize Project Results
Closed Projects
Validated performance of process improvement
Control mechanisms in place for sustaining process improvements
Process Owners are accountable for controlling and sustaining process improvements
36
7. Roll-up Process Metrics
Performance metrics• Number of inaccuracies (defects)• Cycle time• Amount of re-work
Financial metrics• Hard savings • Soft savings • Revenue enhancements
37
8. Manage by Dashboards
Performance of all key sub-level processes are aligned to Project Clusters and rolled up to show performance against business goals
Process performance metrics are maintained and tracked continuously
Dashboards provide the managers of high performing companies line-of-sight visibility to performance against business goals, and the capability to drill down to process level performance as needed
Executives
Managers
Employees
Improve market share, Improve market share, increase profitability, and increase profitability, and ensure the corporationensure the corporation’’s s
longlong--term viabilityterm viability
Improve yield, eliminate Improve yield, eliminate rework, and reduce labor rework, and reduce labor
and technology costsand technology costs
Create Vision,Create Vision,Strategy andStrategy andCommitment Commitment
Reduce waste, Reduce waste, defects, variation and defects, variation and improve capabilitiesimprove capabilities
Prioritization - Focus - Accountability - Reward
Metrics developed to Metrics developed to manage key drivers manage key drivers
of the businessof the business
Empower AEmpower A--Players Players to to ““get the job doneget the job done””
Voice of the Customer Voice of the Customer
Executives
Managers
Employees
Improve market share, Improve market share, increase profitability, and increase profitability, and ensure the corporationensure the corporation’’s s
longlong--term viabilityterm viability
Improve yield, eliminate Improve yield, eliminate rework, and reduce labor rework, and reduce labor
and technology costsand technology costs
Create Vision,Create Vision,Strategy andStrategy andCommitment Commitment
Reduce waste, Reduce waste, defects, variation and defects, variation and improve capabilitiesimprove capabilities
Prioritization - Focus - Accountability - Reward
Metrics developed to Metrics developed to manage key drivers manage key drivers
of the businessof the business
Empower AEmpower A--Players Players to to ““get the job doneget the job done””
Voice of the Customer Voice of the Customer
Measurement Systems
39
Measurement Systems
+Actual(Par t)2
=
Process Variability(Actual variability)
Meas. System2
Observed(Total)
2
Process A
Process B
Total Variability(Observed variability)
MeasurementVariability
Observed process variation is made up of:• Variation in the process• Variation in the measurement system
40
Measurement Systems
Measurement data is flawed when:
• The right things are not being measured
• The right things are not being measured correctly
OR
41
Measurement Systems
How organizations typically view measurement systems:
• Our data does not show us the real picture― We measure “days outstanding” by invoice, but not by customer― We know how many people are in the process, but we don’t know
how the level of productivity― We know who is not paying their invoices, but we don’t know why
they are not paying
• We do not have confidence in the data we have― Order to delivery data does not account for the fours days that the
order sits in the sales person’s briefcase― Defect data shows customer complaints, but not the number of
times we fix the order before it reaches the customer― Call center data shows average wait time, but does not include time
spent on hold after a representative has answered the call
42
Measurement Systems
Applying Six Sigma to measurement systems:
• Getting the real picture― Ensuring measurements reflect Voice Of the Customer ― Measuring the Xs and monitoring the Ys― Aligning measurements to key business objectives― Establishing measurement systems to fill gaps in the data
• Validating the measurement data― Conducting a Measurement System Analysis
Ensuring a common definition of the defect Validating that measurements are taken the same way every time Determining the acceptable level of measurement system variation
― Establishing a process to maintain the measurement system over time
Problem Solving With Statistics
44
Problem Solving w/ Statistics
How organizations typically view problem solving:
• If we hire smart people and allow them institute some changes, our problems will be solved
• Every time we solve one problem a new one pops up and we are never able to get the whole thing right
• It seems like we solve the same problem every few years, but we never are able to sustain the improvement
• We have spent a fair amount over the years implementing one great idea after another and none have ever met their original expectations
45
Problem Solving w/ Statistics
Six Sigma techniques:
• Determine key drivers of process output at a task level
― Y=f(X1, X2, X3 …Xn) where the Xs are measurable process input and the Y is a measurable process output
• Develop and/or validate performance measurements for the key drivers of process output
• Use statistical tools to understand which of the drivers have a statistically significant impact on the process
• Optimize the performance of statistically significant drivers
• Apply process controls to ensure that performance remains at the optimal level
46
Project Example
1. Confirm Strategic Goals
For the current fiscal year, senior management has indicated the following goals:• Organic revenue growth
• Reduced costs
• Increased customer satisfaction
Interviews with functional leaders in the organization suggest the following as potential barriers to achieving corporate goals:• Sales closing ratios
• Equipment delivery times
• Back office inefficiencies
47
Project Example
2. Determine Project Clusters
Project Cluster = Late Deliveries
Description of Project Cluster Issue
• Customer feedback indicates that the amount of time it takes from ordering a piece of equipment until the equipment is installed in not acceptable.
• Available data suggests equipment deliver times are averaging 15 days from order to installation
• Management experience and intuition suggests that 15 days is not a good representation of true delivery times
48
Project Example
3. Define Y=f(X) Relationship
Late Deliveries Y= f(X, X , X,)
Sale
s O
rder
Del
ays
Fina
l Ass
embl
y
Del
ays
Ship
ping
Del
ays
Approximate annual costs associated with late deliveries:• Cancelled orders = $2.3mm• Expedited shipping = $0.8mm• Additional labor = $ ?
49
Project Example
3. Define Y=f(X) Relationship
Late Deliveries Y= f(X, X , X,)
Sale
s O
rder
Del
ays
Fina
l Ass
embl
y
Del
ays
Ship
ping
Del
ays
Does “Late Deliveries” align? Revenue Growth – Yes (constraint removal) Cost Saving – Yes ($3.1mm opportunity) Customer Satisfaction – Yes (significant dis-satisfier)
3 days = 20%
Order management data indicates: On average, final assembly begins 3 days after date on customer order On average, shipping is scheduled 5 days after final assembly begins On average, date on customer delivery receipt is 7 days after shipping is scheduled
5 days = 33%
7 days = 47%
50
Project Example
4. Cascade Relationships
Financial data suggests:• Black Belt project improvements
will produce benefits that represent a portion of the overall opportunity
• Project benefits will be approximated as part of the initial Project Charter and validated with greater specificity as project progresses
Fina
l Ass
embl
y
Del
ays
Ship
ping
Del
ays
Sale
s O
rder
Del
ays
Y = f(X, X , X,)Late Deliveries
Sele
ctin
g &
Sch
edul
ing
Logi
stic
s
Y = f(X, X , X,)Shipping Delays
3rd
Part
y
Logi
stic
s
Cus
tom
er
Ava
ilabi
lity
Pick
-up
Y = f(X, X , X,)3rd Party Logistics
Proc
essi
ngD
eliv
ery
Black Belt Project
½ day = 7%
½ day = 7%
6 days = 86%
1 day = 16%
1 day = 16%
4 days = 68%
3 days = 20%
7 days = 47%
5 days = 33%
51
Conduct Six Sigma Projects
Proj. No:
Name:
Problem Statement:
Project Objective:
Project Benefits:
Project Metric "Y":
Defect Definition:
Project Start Date (Signed-Off)
tmckinney@xample.com
The average time for a 3rd Party Logistics Provider to process outbound shipments to customers is four days. This contributes to an overall average time from order to installation of 15 days. The average of 15 days from order to installation is not meeting customer expectations which leads to expedited shipping cost, and cancelled orders. The total annual cost of Late Deliveries is estimated at $3.1mm.
To reduce 3rd Party Logisitics Provider's average processing time by 2.8 days from and average of 4 days to an average of 1.2 days without incurring additional costs.
Wednesday, June 11, 2003
Project Completion Date (Signed-Off)
Information Technology T. McKinney
Team Makeupe-Mail:
kvu@xample.comK. Vu
1) Estimated $840,000 in cancelled orders and expedited shipping costs; 2) Improved customer satisfaction
vlopez3@xample.com123-565-7729Financial Analyst
ddanford@xample.com
R. Stevenson
123-565-7714
Project Information Worksheet
Charter Creation Date
June 5,2003
Division / Loc./ Cost Ctr.:
Project Name: 0306-J-0037
Role:
111-555-1237D. DanfordMaster Black Belt
Phone:
Strategic Goals = Improved Customer Satisfaction, Reduced Costs; Big "Y" = Late Deliveries; 2nd Level "Y" = Shipping Delays; 3rd Level "Y" = 3rd Party Logistics
123-565-7801
123-565-7734
V. Lopez
rstevenson1@xample.comBlack Belt
Six Sigma Project Charter
3rd Party Logistics - Processing
Process Owner
123-565-7721 wstrauss@xample.com
3rd Party Logistics processing times in excess of 1.2 days.
Project Champion E. W. Strauss
X-ampleX-ampleX-ample
To begin the project the Black Belt needs an approved Project Charter
Proj. No./Name
ProjectBaseline Forecast Actual Forecast Actual
Baseline Period (Year, Qtr. Etc.) Jun-02
Cost Of Goods Sold:- Material - - - - - Direct Labor - - - - - Product Overhead - - - - Total COGS - - - - -
Salary & Benefits - Other than Direct Labor (detail):- Full-time Staff (#) - - - - - Full-time Staff ($) - - - - - Temporary Staff (#) - - - - - Temporary Staff ($) - - - - - Part-Time Staff Cost (#) - - - - - Part-Time Staff Cost ($) - - - - Total Salaries & Benefits - - - - -
Other Cost Categories: Project
Baseline Forecast Actual Forecast Actual- Scrap - - - - - Re-Work - - - - - Warranty - - - - - Freight/Shipping 240 168 - 168 - - Other COPQ - - - - Other Cost Category (List): - - - -
- - - - - - - - - - - - - -
Total Other Cost 240 168 - 168 -
Total Productivity Cost Savings 240 168 - 168 -
Project
Revenue Baseline Forecast Actual Forecast Actual- Increase from Volume 600 420 - 420 - - Increase from Price - - - - Total Revenue Increase 600 420 - 420 -
Profit (EBIT) Margin % 12% 0 - 0 - EBIT Impact 72 50 - 50 -
Project
Cash Flow Benefits Baseline Forecast Actual Forecast Actual- Accounts Receivable - - - - - Accounts Payable - - - - - Inventory - - - - - Payroll - - - - - Other (List):- ______________________ - - - - - ______________________ - - - - Total Cash Flow Increase - - - - - % EBIT Impact of Cash Flow 0% 0% 0% 0% 0%EBIT Impact (WACC) - - - - -
Year 1 Year 2
$(000's)
Year 1 Year 2
$(000's)
Year 1 Year 2
Cash Flow Benefits
Six Sigma Project Charter
$(000's)
Revenue Benefits
Year 1 Year 2
Productivity Benefits
0306-J-0037 / 3rd Party Logistics - Processing
X-ampleX-ampleX-ample
52
Conduct Six Sigma Projects
Tools & Techniques include:• Define
― Process Mapping, Cause & Effect Matrix, Cause & Effect Diagram
• Measure― Baseline Capability, Graphical Analysis Tools, Data Collection Tools
• Analyze― Hypothesis Testing Tools
• Improve― Design of Experiments, Process Simulation
• Control― Mistake Proofing, Visual Displays, Statistical Process Controls
53
Black Belt Project Example
Using Six Sigma
Tools
Instituting Process Controls
55
Instituting Process Controls
Process Control Methods ensure that
• What gets fixed stays fixed
• The opportunity for error is removed or controlled
• When process performance trends toward an out of control condition actions are taken at the process level to move performance back into control
• The Xs are controlled so that the Ys can be monitored
56
Rolling Up Process Controls
Ship
ping
Del
ays
Fina
l Ass
embl
y
Del
ays
Sale
s O
rder
Del
ays
Y = f(X, X , X,)Late Deliveries
Sele
ctin
g &
Sch
edul
ing
Logi
stic
s
Y = f(X, X , X,)Shipping Delays
3rd
Part
y
Logi
stic
s
Cus
tom
er
Ava
ilabi
lity
Pick
-up
Y = f(X, X , X,)3rd Party Logistics
Proc
essi
ngD
eliv
ery
Deployment Structure
Andrew TwadelleVice President, Six Sigma
58
COMPANY’s Six Sigma
Development of the Infrastructure
59
Deployment Infrastructure
Six Sigma Deployment
Leader
Six Sigma Deployment
Leader
Finance• Establishing and
tracking project financials
Finance• Establishing and
tracking project financials
Communications• COMPANY-wide support
Communications• COMPANY-wide support
Human Resources• Black Belt Profile• Black Belt Career
Development & Tracking• Training support
Human Resources• Black Belt Profile• Black Belt Career
Development & Tracking• Training support
Support infrastructurefor Six Sigma Initiative byproviding:• Initiative structure,
alignment, & support• Establish project selection
criteria• Project governance &
tracking process• Removing organizational
barriers• Financial measures &
tracking process• Channels for
communication• Training infrastructure• Black Belt profile and career
development plan• Establish Black Belt
selection criteria• Software support• Data support process• Vendor contract support
Information Technology• Software support• Data Mining Process• Project Retention
Information Technology• Software support• Data Mining Process• Project Retention
Initial Outside Provider• Ramp up• Training
Initial Outside Provider• Ramp up• Training
Law• Vendor contract support
Law• Vendor contract support
60
Finance
Members – NAMES HERE Role:
• Develop Six Sigma Policy for minimum project net savings threshold
• Define project financial measures that COMPANY values
• Establish mechanics and templates on how projects will be financially measured/stewarded
• Define specific phases in projects that financial measures will be validated
• Align Planning & Analysis Financial Analysts with each function to support the validation of Six Sigma project financial measures
• Support tracking of Six Sigma realized savings company-wide
61
Human Resources
Member: NAMES HERE
Role:• Develop Master Black Belt and Black Belt profile/competencies
• Establish Master Black Belt and Black Belt position― i.e. Grade-level, tenure, compensation
• Develop Master Black Belt and Black Belt certification program
• Establish guidelines for Master Black Belt and Black Belt selection process
• Develop reward and recognition program for Six Sigma efforts
• Establish expectations of a Black Belt career path at COMPANY
• Develop infrastructure to support Six Sigma training at COMPANY for
― Mgt, Master Black Belts, Black Belts, Green Belts, awareness― Materials and content that align with COMPANY values
62
Information Technology
Member: NAMES HERE Role:
• Development of data mining support process for Six Sigma projects ― i.e. Requests, reports, tracking, etc.
• Development of data discovery process to capture & report on data in COMPANY whether Oracle or legacy (OMD, BASS, etc.) environment
• Identifying Six Sigma software support & procurement, if necessary― i.e. Project tracking and management, flowcharting, statistical
calculating, spreadsheet analysis, presentations, etc.
• Develop for completed projects a documentation storage and access process
• Develop interface process with e-COMPANY initiative to ensure consistent alignment with any potential Six Sigma projects and recommended process changes.
63
PSMG
Members: Role:
• Support deployment and development of COMPANY Six Sigma infrastructure based on their experience
• Participate in initial project selection to ensure quality projects
• Participate in selection of initial Black Belts and future Master Black Belt candidates to ensure quality candidates
• Train Black Belts and future Master Black Belts in Six Sigma methodology
• Play a role in quality assurance governance structure regarding― Projects― Black Belt performance― Initiative governance activities
64
COMPANY’s Six Sigma
Ongoing Governance Structure
65
Ongoing Governance Structure
Senior Management Oversight CommitteeNAMES HERE
Senior Management Oversight CommitteeNAMES HERE
Six Sigma Steering Committee-NAMES HERE
Six Sigma Steering Committee-NAMES HERE
• Organizational alignment with goals and objectives
• Overall Six Sigma governance• Organizational support and
accountability• Initiative leadership
• Ensure proper project selection • Project governance, tracking, &
support• Remove organizational barriers• Project financial meas & tracking• Ensure proper Black Belt selection• Support Black Belt training• Monitor Black Belt career
development
• Identify potential projects & Black Belts
• Develop Black Belt career plan• Support projects and Black Belts• Support replication of project results• Sustain project benefits
Function’sSix Sigma Projects
Function’sSix Sigma Projects
Function’sSix Sigma Projects
Function’sSix Sigma Projects
Function’sSix Sigma Projects
Function’sSix Sigma Projects
Function’sSix Sigma Projects
Function’sSix Sigma Projects
Six Sigma governance structure to ensure strong project selection and benefit measures
Function’sSix Sigma Projects
Function’sSix Sigma Projects
66
Senior Management Oversight Committee
Members – NAMES HERE Role
• Ensure Six Sigma projects are aligned with COMPANY’s goals and objectives
• Breakdown any organizational barriers• Support project prioritization, as needed• Ensure functional project accountability• Review project measures and financial returns• Ensure Black Belt profile and career opportunities are
achieved• Ensure Black Belt projects are reviewed at Functional Ops
reviews• Ensure project benefits are controlled and sustained
67
Steering Committee
Members NAMES HERE Role
• Support Senior Staff Oversight Committee responsibilities• Interface and communicate with Functions as needed• Ensure quality projects are selected & meet project selection criteria• Monitor projects on an ongoing basis from an objective, quality, and
financial measurement viewpoint• Ensure quality Black Belt candidates are selected• Monitor Black Belt performance and provide feedback • Monitor and support Black Belt career opportunities after Black Belt
assignment completed• Track overall Six Sigma initiative relative to
― Projects, Black Belt performance, financial benefits & sustainability
68
Functional Management and Projects
Members – All Functional Leaders Role
• Work with Process Owners & Black Belts to identify quality projects
• Identify high potential candidates to become Black Belts
• Support and champion Black Belts efforts in working projects
• Leverage/replicate project results across organization, as appropriate
• Utilize project improvement metrics to sustain project benefits
• Utilize Ops reviews to review Black Belt projects and ensure― Project support― Project improvements are sustained
• Be a Six Sigma Champion― “Talk the talk” and― “Walk the talk”
69
COMPANY’s Six Sigma
Deployment
70
Deployment
Identify clusters of opportunities for initial deployment
Goal – spread Six Sigma throughout COMPANY so felt by all
Work with individual functions to breakdown applicable clusters into specific projects
Identify functional Black Belt candidates for assignment to projects
Establish Black Belt training waves• Wave equals training a new Black Belt on an identified project
Training waves will occur every two months• One wave equals 20-25 projects or 20-25 new Black Belts
being trained
71
Deployment
Goal is to have 300 Black Belts trained throughout COMPANY by the end of year 2
• Benchmark companies target 1%-3% of employees trained as Black Belts
Some Black Belts will eventually be trained as Master Black Belts (trainers of Black Belts)
After 12 months targeting to train Functional employees in DMAIC process at Green Belt level
• Master Black Belts and Black Belts will train employees to Green Belt capability
Working with COMPANY training organization:• To establish standard COMPANY training material
• To deliver training
• To track training effectiveness and progress
72
Six Sigma Deployment – Critical Success Factor
Leadership…….
Which means all of us!
Timeline and Milestones
74
Timeline & MilestonesMayApr JulJun Aug Sep Oct DecNov MarFeb MayApr Jun Jul Aug SepJan Oct Nov Dec Jan Feb Mar
Pre-planning
Pre-deployment Interviews
Executive Session
Functional Champion Workshop
Project Champion Workshop
FASTART Training
Black Belt Wave 1 – Week 1
Black Belt Wave 1 – Week 2
Black Belt Wave 1 – Week 3
Black Belt Wave 1 – Week 4
Black Belt Wave 2 – Week 1
Black Belt Wave 2 – Week 2
Black Belt Wave 2 – Week 3
Black Belt Wave 2 – Week 4
Ongoing Black Belt Training Waves
Ongoing Green Belt Training Waves
Master Black Belt Wave
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Functional Champion Workshop
A ½-day session with each of the Functional Champions that includes• A review of project clusters identified during the pre-
deployment interviews
• Point-of need, one-on-one coaching on Six Sigma principles
• Framing of the approach for applying Six Sigma within the functional Group
• Validation of project cluster financial impact
• Next-level cascade of validated project clusters
• Identify Project Champions and Black Belts
76
Project Champion Workshop
A 3-day educational work session designed to• Transfer mid-level knowledge regarding the application of
Six Sigma principles and tools
• Validate the expectations for Project Champions
• Communicate the Human Resource, IT, Finance and Communications support
• Verifying project clusters identified to date
• Cascade the project cluster to the level of an individual Black Belt project
• Create Project Charters for enrolled Black Belts
• Communicate requirements of project reviews
77
FASTART Black Belt Training
A 2-day Training Session that focuses on
• Applying MINITAB software to Six Sigma process analysis and improvement
• Using flowcharting software to map processes and conduct process simulations
• The approach used by the organization to implement Six Sigma
• Preparation for the first week of Black Belt training
78
Black Belt Training
4 Weeks of training taking place over 4 Months that transfers critical knowledge regarding
• Six Sigma principles
• Lean principles
• The DMAIC Methodology
• Statistical Analysis Tools
• Improvement methods and tools
• Process Control Strategies
• DFSS overview
79
Key Dates
What is the appropriate pace of Six Sigma Deployment?
• Executive Session –
• Functional Champion Training –
• Project Champion Training –
• Black Belt Training –
Finance
81
Benefits Measurement
Benefits measurement is integrated into Six Sigma methodology (not an afterthought)
Benefits must be aligned with company’s goals
Focused on significant improvement opportunities
Structured to ensure hard, realized benefits
Appropriate controls implemented up-front
Benefits Measurement Is A Critical Component Of A Successful Six Sigma Initiative
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Functional Champion
Functional Champion
FinanceFinance
Data Experts
Data Experts
Steering Committee
Steering Committee
InstructorInstructor
• Provide overall Project governance
• Provide specific project charters
• Assist in obtaining data for selection of project areas and individual projects
• Trains & Mentors Black Belts• Partner with Engagement Manager
and MBBs
• Assists Functional Deployment Leader with project strategy
• Validates financial benefits of projects
Finance – One of Many Partners
FunctionalChampion
FunctionalChampion
Team Members
Team Members
Project Champion
Project Champion
Six Sigma Academy
Six Sigma Academy
BlackBelt
BlackBelt
FunctionalChampion
FunctionalChampion
Team Members
Team Members
Project Champion
Project Champion
Six Sigma Academy
Six Sigma Academy
BlackBelt
BlackBelt
• Provides executive oversight for all Six Sigma activities • Controls resources within the functional group• Drives the Six Sigma initiative
83
Role of Finance
Define the Policies Driving Project Selection• Two Basic Selection Criteria
― Minimum $250k in Hard Savings in 1st year― Can be completed in 4 to 5 months
• Then Prioritization of Selected Projects― ROI contribution― Project Complexity
Initiative Financial Reporting• Initiative level costs and benefits• Project level data & reporting tools for Financial Analyst and
Black Belt• Utilization of a Project Charter Template for tracking each project
84
Role of Finance
During DMAIC Process:• Qualification of Project Opportunities• Review Black Belt’s Process Measurement Proposals• Validation of Projected Benefits as “Hard” Savings• Ongoing Project Financial Improvement Evaluation• Final End-of-Project Savings/Benefits validation
After Project Completion• Continual Review of Project Financial Results
Disciplined Financial Review Is Essential During And After Project Completion
85
Savings Defined
Definition of “project benefits” is grounded in P&L impact
“Hard” Savings• Must be measurable, controllable and contribute to earnings
• Sources― Margin improvements directly attributable to Six Sigma projects― Reduction of operating expenses― Lower carrying cost related to Working Capital (Inv / AR) reduction― OI contribution from revenue enhancement projects
Savings Must Be Directly Observed On The Bottom Line
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Black Belt vs. Financial Analyst
Black Belt’s role• Data collection• Original analysis of process measurements• Project cost/benefit analysis
Financial Analyst’s Role• Provide budget information by cost center• Validate process measurements• Validate cost/benefit analysis
Financial Analyst Validates The Black Belt’sOriginal Analysis
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DefineDefine MeasureMeasure
Black Belt/MBB
Finance
Steering
Committee
• Review assumptions,• High level estimates,• Consider
up-stream/down-stream effects
• Categorize as hard/cost benefits
• Review measurement proposals
• Identify appropriate sources & uses of financial data to measure, estimate & validate as project progresses
AnalyzeAnalyze ImproveImprove ControlControl
• Review
• Approve or re-direct
• Draft Charter
• High Level Problem statement, process definition, potential financial benefits & cost
• Engaged by Black Belt as needed to update measurements, financials
• Update Charter as necessary while progressing through project phases.
• Engage Finance, Process Owner as needed.
• Request Steering Committee Approval if Method of measuring benefits OR significant change to benefits forecast is required.
• Validate actual benefits with Black Belt/MBB
• Update forecast if necessary
• Sign-off Project
• Implements Control Plan
• Validates benefits with Finance
• Presents to Steering Committee for Sign-Off
• Review
• Approve or re-direct
Finance Champion ApprovesFinance Champion Approves
Functional Champion
DMAIC Process Map – Finance
• Insert Text Here • Insert Text Here • Insert Text Here • Insert Text Here • Insert Text Here
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Finance Role During DMAIC Process
Project Definition stage: high level “sanity check”• The Project Champion completes an evaluation model with
high level estimates of OI benefit.• Finance assists Black Belt in assessing and interpreting
financial data• Finance assists Black Belt in summarizing project costs and
benefits• Questions for Finance to ask
― Are these hard savings?― Are you measuring the Right factors in the business process?― Are there other possible sources of savings? Alternatives?
Additional Projects?― Does this opportunity meet the minimum savings requirements?
89
Finance Role During DMAIC Process
Measurement and Analysis stage: before the Process Improvement takes place
• The Black Belt reviews and updates the financial model
• Questions for Finance to ask:― How do these estimates compare with the previous estimates?
― Do these savings look realistic for the proposed improvement?
― Are there any errors in the data entry?
― How do the savings estimates compare with current budget numbers?
― Is the decision to proceed confirmed?
90
Finance Role During DMAIC Process
Improve and Control stage: at completion of the project
• Detailed “audit” of savings to confirm total targeted benefits― Finance works with Black Belt to validate & verify project results
• Questions to ask― Did the process improvement take place?
― Does the process improvement result in the reported level of savings?
― Are appropriate procedures in place to maintain the improvement?
Ongoing tracking of financial results• Provide support to Project Champion to monitor sustainability of
benefits
91
Long-term Tracking of Benefits
A system will be implemented to record all projects & report all project benefits:
• Track projects by Functional Area.
• Track through each of the DMAIC stages
• Forecast benefits stream and track actual (ongoing) benefits
• Report results by Function, Black Belt, Project Champion, Fiscal Periods, Benefits category, etc.
Changes to a project’s Benefits Measurement method requires Steering Committee approval
A Management Reporting Tool Will Allow Continual Results Tracking
92
Project Statement: • Hard copies of sales documents are used
for processing transactions. The “Order to Ship” process is not optimized resulting in delays in shipping product. Inefficient use of labor in making and distributing document copies.
Critical To Quality:.
Defect Definition:.
Project Objective:• Reduce labor costs. Reduce transaction
processing cycle time. Reducing “Order-to-Invoice” cycle time by 1 day will bring a one time increase in Gross Profit of 1 day’s revenue.
Timeline: • Complete initial implementation of project
in 4 months
Current/Goal/Stretch Goal________ current DPMO/DPU________ goal________ stretch goal
Target Benefits:• Reduce “Order to Book” cycle time 1 day.• This reduces the “Order-to-Invoice” cycle time
by 1 day.• Reduce document processor headcount by 30.
Progress to Date:• Existing business process defined • Completed measurement validation• New process flow being mapped• Leverage opportunities identifiedLeveraging: • Pilot process design will be replicated across
all Call Centers and Regions.
Example: Sales Document Imaging Project
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Imaging Project Benefit Summary
Sample data ($ mm)Before After
Revenue 1,732.0 1,736.7 Cost of Goods Sold 1,160.4 1,163.6 Gross Margin 571.6 573.1
Selling Expense 138.6 138.9 General & Admin. Exp. 346.4 346.1 Total Expense 485.0 485.0
Operating Income 86.6 88.1 5.0% 5.1%
One time benefit 1.2 Recurring benefit 0.3 Total 1st Yr Benefit 1.5
AnnualizedOne Time Benefit: 1 day reduction in “Order to Bill” process resulting in one time benefit of $1.5 mm in increased GP.
Offset by one time $300k increase in Commission Expense
Recurring benefit: Reduced labor costs of $4.3mm over 5 years. Avg annual savings of $870k.
Marginal Project Expense: $2.8mm total for hardware and software. $560k Avg annual expense increase.
Project Savings Impact To P&L
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Benefits Measurement Framework Summary
Structured Project identification & selection against Policy Standards
Clear definition of benefits established & communicated
Consistent application of Project Charter template to identify, monitor & manage project progress & benefits
“Stakeholders” involved at every stage of process
Operational & financial metrics baselined, monitored, measured and approved
95
Benefits Measurement Framework Summary
Steering Committee approval required:• To start project,
• At the end of each DMAIC phase
• At project completion (benefits must be demonstrated at Control Phase before project completed)
Process Owner continues to monitor process performance, owns Control Plan, assures benefits realization
Post-implementation benefits review/audit
Steering Committee And Stakeholder Involvement Are Key Process Controls
Human Resources
97
COMPANY’s Six Sigma
Black Belt
98
Black Belt Role
Black Belt profile developed, competencies identified
Remains solid line reporting to functional leadership team, matrixed to Six Sigma leadership
Qualities include:• Strong leadership and teaming capability
• Interpersonal and communication skills
• Ability to effect change across functional lines
• Strong project management and analytical skill set
• High performer, high potential
99
Black Belt Selection Process
Initial Black Belt Selection – Wave #1 High potential candidate selection using succession
planning tools• Management nomination• Meet with process owner/functional lead to generate
candidate list• Assess current staff for high performer and high potential• Leverage knowledge and insight of PSMG in selection process for
successful candidates• Make candidate selection and assign to identified project• Mobility for roles post initial Black Belt assignment – in line with
succession plan focus
Second wave identification within 2 months Consider posting for Black Belt position after 12 months
100
Black Belt Career Path
Black Belt assignment for 2 years Expectation – Black Belts emerge with increased value-
add skill set Commitment to redeployment of employees into lateral,
broader or promotional roles Should be on functional leader’s radar screen 6 months
prior to ending Black Belt assignment Evaluation opportunities for redeployment during
succession planning updates• Take advantage of succession planning to identify and add Black
Belts into projects Use COMPANY’s current processes for placement of
employees, e.g. approved openings
101
Black Belt Certification Process
Candidates successfully completes initial training program utilizing first assigned project (4-6 months)
Black Belt successfully completes 2 projects
• Evaluation of project success – COMPANY & PSMG― Utilization of Six Sigma tools, concepts, and project management
skills
• Measurable savings achieved – average of $250,000 for each of two projects
Expectation of certification within 1 year
102
Six Sigma Compensation
Black Belt compensation options:
• Enter role at their current compensation level (lateral)
• Receive $2,000 award for completion of Black Belt certification
• Incentive compensation :1. STI remains the same – Personal Achievement Factor
applies (0-120%) Recommend consideration of 50% function assigned
to, and 50% COMPANY plan
2. Use performance management and merit Consistent with COMPANY’s compensation/merit
policies, high performers should receive greater merit considerations
103
Six Sigma Recognition
Recognition needs to be a key factor of the Six Sigma Black Belt role:
• Highly visible success stories in Communicator, Six Sigma website, drive employees to want to be identified with Black Belt wins
• Certification completion dinner with senior management
• Functional recognition as well as company-wide
• May want functional lead & senior management letters of appreciation
• Award luncheons/dinners as appropriate at functional level
104
COMPANY’s Six Sigma
Training Logistics
105
Training Logistics for Six Sigma
Black Belt identified; assigned to curriculum via Training Server by COMPANY Training Coordinator
Pre-training packet sent to Black Belt – includes pre-reads, exercises and logistical information for training (travel, dates, etc.)
Pre-training assessments completed via Question mark and tracked in Training Server
Training progress (including assessment scores and results of required activities) tracked through Training Server
Communications
107
Role of Communications
Effective communication is critical to the success of Six Sigma
Communication must be consistent, balanced and relevant
Requires strong communications both company-wide and in each functional area
Our operating assumption: it’s better to over-communicate than leave people guessing
108
Ensuring Consistency
Standardized definition of Six Sigma at COMPANY:
“Six Sigma is a defined and disciplined business methodology to increase customer satisfaction and profitability by streamlining operations, improving quality and eliminating defects in every process company-wide.”
Alignment of Six Sigma projects to COMPANY’s goals and objectives
Six Sigma logo to establish continuitystamp of Six Sigma methodologythroughout COMPANY
109
Communication Plan
Communication Plan focus on timeline, message, audience, and channels
Initialize• Announce Six Sigma initiative• Explain and educate
Deploy• Further education• Discuss specific projects and results• Recognize Six Sigma teams and Black Belts
Sustain• Reiterate the long-term importance of Six Sigma• Continue to promote results and recognize teams
110
Senior Leaders
Senior leaders• Executive team (CEOand direct reports)• Regional VP/GMs, • European Country Presidents and Europe Staff• Functional management (Sales, Service, HR, IT, Marketing,
Finance, Operations, Legal)
Senior leaders play a critical role in the success and consistent communication around Six Sigma at COMPANY
My commitment:• Proactively keep you informed about what, where, when, and how
we are deploying Six Sigma• Provide you with the tools and information to communicate and
champion Six Sigma throughout COMPANY• Listen to your input
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Six Sigma Community
Six Sigma community• Black Belts
• Project teams
Develop specific communications vehicles to support Six Sigma community needs• Regular Andrew communications
• Regular communication from training
• Other possibilities: Six Sigma community “message board” for support and sharing of best practices; Black Belt Best Practice Forums; etc.
112
Employees
Company-wide• Regular updates through
“Six Sigma at COMPANY” bulletins
• Update articles in NEWSLETTER
• Six Sigma website on COMPANY.COM― General information on Six Sigma― Initiative timelines and milestones― Six Sigma projects and results― Recognize Black Belt accomplishments― Senior management quotes related to Six Sigma efforts― FAQs and contact information
• Road show
113
Employees
Project-specific communications• Functional leaders work with their Black Belts and
Communications team to provide regular updates to their organization on projects
• Goal - keep employees informed, and make them a part of the process
Departmental/Region/Country/Marketplace communications• Mention Six Sigma regularly in ongoing communications to
your team
• Recognize teams and promote results
114
Your Role
Understand, endorse and promote the value of Six Sigma within your team
• Presentation for your next all-employee meeting
• Work with your Black Belts to provide ongoing updates on projects in your area
• Identify opportunities for Deployment Leader to speak with employees during scheduled employee meetings, etc.
• Provide ongoing recognition for project teams
115
Summary
Communication and leadership is key to our success
Initiative team is committed to open communications with you, the Six Sigma community, and our employees
Functional leaders play a critical role in the communication process
Consistency is key
Working together, we’ll include all COMPANY employees in the Six Sigma journey through ongoing
communication
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