Measuring Current Performance

Posted by: meikah | 30 September 2005 | 9:23 am

One step in a Six Sigma roadmap involves measuring an organization’s current performance. This is a crucial step because having a long-term measurement “infrastructure” is a key building block for a full organization Six Sigma system.

One way to measure current performance is develop baseline defect measures and identify improvement opportunities. There are two ways of doing this.

First is to determine the fraction or percentage of item samples that had one or more defects. This is also called Proportion Defective. The second way is to determine the fraction of the total units produced and/or delivered that is defect-free, called Final Yield.

Six Sigma allows you to adjust measures according to the number of “opportunities” for defects. The main steps in defining the number of opportunities are:
a. develop a preliminary list of defect types
b. determine which are the actual, customer-critical, specific defects
c. check the proposed number of opportunities against other standard

There are several ways to calculate and express measures based on defect

1. Defect per Opportunity, or DPO – expresses the proportion of defects over the total number of opportunities in a group.

Formula: Number of Defects
# of Units x # of Opportunities
Service Example:
52 defects on applications = .052 DPO
250 apps. X 4 opportunity/app
*The service has a five-percent chance of having a defect in one category.

Manufacturing Example:
52 defects on microchips =.00046 DPO
750 chips x 150 opportunities/chip

2. Defects per Million Opportunities, or DPMO – indicates how many defects would arise if there were one million opportunities. In manufacturing, DPMO is often called PPM (parts per million).

Formula: DPO x 1,000,000 (10 to the 6th power)
Service Example: Loan applications –> .052 x 10 to the 6th power = 52,000 DPMO
Manufacturing Example: Microchips –> .00046 x 10 to the 6th power = 460 DPMO

3. Sigma Measure – translate your defect measure-usually by DPMO-by using a conversion table.

Sigma Measure Formula: Calculate DPMO, Consult Table
Service Example: Loan applications –> 52,000 DPMO = 3.1 Sigma
Manufacturing Example: Microchips –> 460 DPMO = 2.3 Sigma

The Six Sigma Way: How GE, Motorola, and Other Top Companies are Honing Their Performance

Yield to Sigma Conversion Table

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Getting Ready for a Six Sigma Deployment

Posted by: meikah | 29 September 2005 | 4:10 am

Organizations by now may have known that to adapt Six Sigma is not easy. No amount of preparation or training can anticipate all the issues surrounding a Six Sigma deployment. That’s why Forrest Breyfogle III of Smarter Solutions Inc. jotted down 21 issues that new Six Sigma practitioners should keep in mind.

1. Have a deployment system in which process owners solicit help that leads to the execution of Six Sigma projects, which help their business aligned performance metrics.

2. Create a system where process owner requires Six Sigma projects to improve their performance metrics based on current business needs.

3. Train best people to wisely apply Six Sigma and lean techniques to improve performance measures and better meet customer needs.

4. Measure managers by the number of employees trained and their validated financial savings.

5. Address both Lean and Six Sigma and create a high level operational metric system that pulls for the right tool at the right time.

6. Focus not only on training but also on executing projects that will improve the overall enterprise metrics.

7. Examine data that will help your business decide where it can best focus its efforts and resources, achieving lean operations along the way.

8. Use best lean or Six Sigma tools such as 5S to improve business metrics and synthesize voice of the customer inputs.

9. Conduct a pilot project to see whether Six Sigma works before considering a deployment.

10. Have a CEO buy-in, that is convince CEOs to actively take part in the Six Sigma deployment.

11. Determine the cost benefits for design for Six Sigma projects and those that address voice of the customer needs.

12. Examine your organization’s culture and metrics so that they can lead you to which tool or strategy is best for you. DMAIC may be or may not be it.

13. Be able to decide whether to use high level control charts, regression analysis, and design of experiments to the project or not.

14. You may hire Black Belts or Master Black Belts, but it is easier to develops BBs and MBBs within an organization who have the right personality profile, have already established internal relationships for getting things done, and understand the organization.

15. Select the best Six Sigma provider that can provide project execution roadmaps.

16. Build a skill set to answer predefined questions about specific, real-life issues.

17. Pick the Six Sigma deployment strategy and training that best fulfill an organization?s needs.

18. Assess the big picture and identify any constraints. The initial projects should focus on these constraints, no matter where they come from.

19. Focus on the creation of an infrastructure that pulls for the creation and completion of projects.

20. Have and use Six Sigma project execution roadmaps combined with effective coaching.

21. Avoid any confusing and misleading Six Sigma metrics.

21 Common Problems (And What To Do About Them)

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Six Sigma Yellow Belt

Posted by: meikah | 28 September 2005 | 3:50 am

We have heard about Green Belts, Black Belts, and Master Black Belts.

The Juran Institute is giving a Six Sigma Yellow Belt Training.

Corpedia/Juran has released a series entitled Six Sigma DMAIC Process?Production, the first of three Six Sigma Yellow Belt certificates. This five-course, six-hour series teaches individuals how to apply Six Sigma basics to manufacturing industries. Upon completion of the programs, individuals will receive a certificate of completion, a credential that corroborates the individual has attained a thorough understanding of the material.

According to isixsigma, a Yellow Belt typically has a basic knowledge of Six Sigma, but does not lead projects on their own, as does a Green Belt or Black Belt. It is often responsible for the development of process maps to support Six Sigma projects. A Yellow Belt participates as a core team member or subject matter expert (SME) on a project or projects. In addition, Yellow Belts may often be responsible for running smaller process improvement projects using the PDCA (Plan, Do, Check, Act) methodology. PDCA, often referred to as the Deming Wheel, enables Yellow Belts to identify processes that could benefit from improvement. These smaller Yellow Belt projects often get escalated to the Green Belt or Black Belt level where a DMAIC methodolgy is used to maximize cost savings using Statistical Process Control.

The Sigma Belts

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Common Themes of Six Sigma and Corporate Performance Management

Posted by: meikah | 27 September 2005 | 4:41 am

Six Sigma and Corporate Performance Management (CPM) share culture, management, and organizational themes.

First, they both encourage employee empowerment. They promote the concept of “information democracy” by making data available to all information consumers. As a result, every employee is responsible for quality and performance.

The CPM framework aligns organizational initiatives with strategic objectives, ensuring empowered individuals who can manage on their own. People can now monitor and measure individual key performance indicators or KPIs and performance target levels. Similarly in Six Sigma, the DMAIC and DMADV methodologies empower individuals to identify, understand, and control process inputs to improve performance levels.

Second, both Six Sigma and CPM focuses on the reliance on factual data rather than gut-feel management. In Six Sigma, data serves as the basis for making decisions. CPM also leverages data directly from operational measures to derive KPIs and target metrics to manage, monitor and improve business health. In both, decisions throughout the organization are based on a single source of shared data that is used for collaborative decision making.

Third, CPM and Six Sigma ensures alignment of organizational activities with business objectives. This results in better strategy execution.

In CPM, KPIs are cascaded from the organization’s mission, vision, strategies and objectives. This ensures that all individuals are pulling in the same direction and have insight into what effects their activities have on the entire organization. It helps them understand the relationship between business processes and erformance indicators. In Six Sigma, projects are selected based on consistency with organizational objectives and the potential effect on the bottom line. Project charters, business case analyses and executive sponsors ensure that the Six Sigma projects track with organizations’ strategies and objectives.

The Power of Metrics: CPM and Six Sigma

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Six Sigma’s Core Processes

Posted by: meikah | 26 September 2005 | 9:26 am

The success of a Six Sigma deployment depends on the foundation of its infrastructure, which comprises both the core and support processes. The organization therefore needs to identify these processes.

Core processes refer to the chain of tasks that deliver value, i.e. products, services, support, and information. Alongside these core processes are the support or enabling processes that provide vital resources or inputs to the value-producing activities.

To understand fully the concept of core processes, you need to look at the following concepts that work behind them:

1. Work is a process, and improved work processes spells business success.

2. Core processes involve a chain of tasks in various departments or functions, therefore they can only work with a sound cross-functional management.

3. To achieve a sound cross-functional management, you need to establish a value chain. Michael Porter in his book Competitive Advantage defines value chain as “a collection of activities that are performed to design, market, deliver, and support an organization’s product.” The value chain reinforces the key interconnectedness of business activities and corporate success.

Examples of core processes are:

a. customer acquisition
b. order administration
c. order fulfillment
d. customer service or support

Some of the support processes are:

a. capital acquisition
b. asset maximization
c. budgeting
d. recruitment and hiring

This grouping of processes however is just one way of doing it. How you will do it in your organization will depend on which way makes more sense for your organization. Just bear in mind the following issues when you go about defining your core processes.

1. The major activities that you do to provide value to customers.
2. The best way to define your processes.
3. The primary critical outputs of each process that you can use to evaluate them.

The Six Sigma Way: How GE, Motorola, and Other Top Companies Are Honing their Performance

Value Chain Framework of Michael Porter

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Auditing the Six Sigma

Posted by: meikah | 23 September 2005 | 4:19 am

“Improvement effort begins and ends with customers,” so goes the golden rule #1 of Six Sigma.

Among the processes and functions in an organization that should closely monitor this is the finance department. Although financial processes seem to influence less the external customers that the finance’s role in most Six Sigma initiatives is limited to the crucial signoff of project benefits. There is however another important group of customers in European business today–the shareholders. Focus is now on these shareholders’ “customer needs.” Foremost is the safety of their investments and insurance that they will go with whatever economic success. They needed to know the internal controls and procedures of these investments.

Because of this group, Six Sigma efforts are slowly veering in a direction that gives an eye on internal audit and controllership taking them as among the company’s core processes.

A Six Sigma Audit

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Six Sigma in the Hospitality Industry

Posted by: meikah | 22 September 2005 | 4:21 am

Mr. Goodie Minabo Ibru, Chairman of Ikeja Hotels PLC of Sheraton Lagos Hotel and Tower, has turned to Six Sigma in their operations.

Ibru said although that althought the model is relatively new in Nigeria, it has proved to be the key for survival in today’s corporate world where only the best survives.

Sheraton Lagos Hotel & Towers adopted Six Sigma about 2 years ago. In these two years, the company has improvements its processes from product delivery through service delivery to guest and employee satisfaction. All these have positive impact on the bottom line or profit.

What happened to Sheraton Lagos Hotel & Towers has also encouraged other organizations, such as City Bank and Cadbury Nigeria PLC, to practice Six Sigma.

“With mergers and acquisitions becoming commonplace in the Nigerian corporate world today, Six Sigma should become very useful in helping to model, measure, modify and improve companies’ business strategies for increased profitability.”

Dr. Obinna Muogboh, faculty member of Lagos Business School, Pan-African University, also said, “In many world-class organisations, Six Sigma has overshadowed techniques previously viewed as the continuous improvement tools of choice. This is as a result of the bottom-line effect — Six Sigma directly impacts financial results and customer satisfaction. However, even with the threat of globalisation, many Nigerian companies are still not aware of the tremendous power of Six Sigma as a competitive weapon and yet some are complacent and seem to be taking a “wait and see” attitude.”

Read more

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Ready for Six Sigma?

Posted by: meikah | 21 September 2005 | 8:49 am

Determining an organization’s readiness to embrace Six Sigma is crucial at the onset. Chapter 6 of the book The Six Sigma Way devotes on this assessing if your organization is ready for change. “The starting point in gearing up for Six Sigma is to verify that you’re ready to?or need to?embrace a change that says There’s a better way to run our organization.

Readiness means being capable to embrace change, a whole new way of doing things. To know your readiness, you need to consider the following:

1. know the voice of the customer, their needs, and develop some metrics for this
2. assess the result, output, yield, or the DPMO
3. evaluate if there?s still a room for improvement in the organization
4. determine which areas need to be improved

Readiness also considers the organization?s systems and its capacity for improvement. Timing is the key word here. Your organization may be ready for a Six Sigma initiative but is also undertaking other efforts or changes using another methodology. You must again, therefore, look at your cross-functional processes. Are they managed in such a way that everyone in your organization understands the whole process? In any case, it is only fair that the people are trained well.

Undoubtedly, Six Sigma efforts if undertaken well will yield amazing results for your organization. There are instances however that Six Sigma may not be right for you.

First, your organization is already a strong, effective performance and process improvement. Second, the changes are overwhelming to your organization, thus will impede their initiatives. Third, potential gains are simply not there.

If you think however that Six Sigma is right for your organization, your next focus will be on the cost and the kind of return you will get.

To know the exact rewards will be easy at the outset. But you can definitely make intelligent guesses by evaluating the rework, inefficiency, unhappy or lost customers and then estimate the amount by which you can reduce them.

Your assessment measure may not be perfect because you can only know the actual cost after you?ve started doing the real work of Six Sigma improvement. Still you need to establish some lead time. Plan your DMAIC from the first project to the next until finish.

Some of the most important Six Sigma budget items can include the following:

1. direct payroll – who will work full time on the project
2. indirect payroll – how long will the people devote on the project
3. training and consulting
4. improvement implementation cost – how much to install new solutions or process designs

Estimates of the cost will depend on your implementation speed, scale of your effort, and your general “risk profile.” These factors should not be compromised.

The Six Sigma Way: How GE, Motorola, and Other Top Companies Are Honing their Performance

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Six Sigma’s Bottomline

Posted by: meikah | 20 September 2005 | 10:55 am

Reality has it that Six Sigma deployments are quite expensive. Six Sigma trainings alone already command a high price. Still organizations adopt it because they know the advantages far outweigh the disadvantages. It wouldn’t hurt however if Six Sigma initiatives show positive good economics.

The economic effects of Six Sigma should then be evaluated against a company’s overall cost structure and revenues. This is done through a managerial accounting framework suited for a quality context. Such framework will help quality professionals, including greenbelts and black belts, speak the language of upper management.

Constructing this economic framework often starts with one criterion—the cost of poor quality (COPQ) criterion.

For example, Black Belt (BB) projects typically save $250,000 or more, and Green Belt (GB) projects frequently yield savings in the $50,000 to $75,000 range.2 Such figures are impressive when taken by themselves; their influence on a company?s overall profitability and economic health is even more impressive when they?re viewed in aggregate and in the wider context of the company’s other economic figures.

Six Sigma practitioners will find the article titled Six Sigma and Bottom Line very useful. The economic framework shows the direct significance of Six Sigma on the bottom line. Using this framework, they will be able to better communicate with upper management. Read more

Filed under: Benefits and Savings

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The Powerful Three: Lean, Six Sigma, and SCOR

Posted by: meikah | 19 September 2005 | 3:30 am

Lean Manufacturing, Six Sigma, and Supply Chain Operations Reference or SCOR are viewed as three of the strategies that can help an organization improve their processes.

We have talked about the effective combination of Lean and Six Sigma in previous posts. Now companies are starting to believe that incorporating SCOR with the other two is the way to go. From their experience, SCOR is an excellent prelude to a Lean Six Sigma approach for developing a portfolio of projects.

Termed as a cross-industry model, SCOR is designed to analyze a supply chain and identify improvement opportunities in both Material flow and Work & Information flow.

The SCOR model defines a supply chain as: “the integrated processes of Plan, Source, Make, Deliver and Return, spanning your supplier’s supplier to your customer’s customer, aligned with Operational Strategy, Material, Work & Information Flows.”

The SCOR model is carried out in phases from a high level (usually Enterprise or Supply Chain) to Material flow and Work & Information flow activities.

With SCOR, Lean and Six Sigma will pave the way for the organization’s competitiveness. Using SCOR as a prelude to Lean Six Sigma offers several advantages:

1. It aligns improvement efforts with the supply chain, not organizations.
2. It provides a comprehensive analysis of a supply chain, focusing on the customer as the end-point.
3. It enables the selection of projects, which will have the most impact on achieving strategic objectives and improving the P&L.

Using Lean, Six Sigma, and SCOR To Improve Competitiveness

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