6 Sigma BPChart 1103

Fort Worth ASQ
November 6th, 2003
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Day
Business Process Charting
Peter Peterka
Fort Worth ASQ – November 6, 2003
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1
Objectives
Define Business Process Charting

How to Determine the Proper Metrics
Statistical Thinking Basis of BPCharting
Differences of Charting Business Data
Road Map to Implement BPCharting
Business Process Charting
A graphical and numerical analysis method for any

type of business process data used for insight into
understanding and improvement of business results.
Based upon Statistical Thinking Theory
Directed toward identifying opportunities for

improving business results
Peter Peterka
4
2
Key Elements of Business Process Charts
1. Business Metric with an operational definition

2. Process Owner Labeled on Chart
3. Business Data Plotted over time often monthly
4. Business Goal Marker
5. Statistical Based Limits often based on Individual
and Moving Range to start
Peter Peterka
Key Elements of Business Process Chart

1. Name and
number of
Business Metric: 5. Statistical Limits
2. Process Owner Metric 1.42
4. Business
3. Business Data Plot Overview Goal
time often monthly
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3
Determine the Operational Definition for the Metric
Definitions that will be interpreted the same way by

different people in different situations.
Same method of calculation
Same method of counting
How to: Determine the Proper Metrics
Actual Process Map of Business Process

Cause and Effect Matrix approach relating metrics to
business goals
Affinity Brainstorming of Metrics
Have each business leader give their 10 “sweat”
metrics
Traditional Financial Measures
Customer Measures
Indicators or Predictors of Performance (Xs)
Peter Peterka
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4
High Level Outputs of
Business System
Customers
Cash
Supply Chain Excellence

Lab
Order entry
& demand
Product
management Distributor
data Plant
or
package Acceptable
Freight Carrier Customer
data package
received 6 SIGMA
Product Correct:
Supplier Specified mat’l
delivered -product (perf.)
received on-time
6 SIGMA on-time & -quality (consist.)
& complete
(RM’s & Comp’ts) complete -quantity
-product (perf.) Product shipped -on-time service
-quality (consist.) on-time &
-quantity complete
-on-time service
Customer Complaints
Sales Credits
-quality
Supplier Waste - Company error
Complaints Rework -Company policy
Target “Zero” Obs Inventory -2002: $??mm
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Business Indices
1. Economic Return
2. Sales & Operating Income
3. Total Delivered Costs “High Level’
4. Opportunity Costs Division/Group
5. Order Fulfillment Indices
6. Product Availability
7. Inventory/Service Indicators
8. Business Process Speed
9. Elements of Profitability
10. Supplier Performance
11. Improvement Assessment Matrix
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Performance Metric Drill Down

Customer
Economic Return 1.0

Revenue Operational
Growth Efficiency
Price % 9.3 Sales Volume 2.1 Service Operating Income 2.4 Asset Utilization
New Products On Time 5.1 &5.4 Factory Cost 2.2 Overhead 2.3 IMC 7.2 CEE
New Customers Cycle Time 5.2 &5.3

RM Price % 9.2
Excess Inv. 4.5
Complaints 4.2 Dead Inv. 4.5

Market Share Waste 4.3
Prod. Avail. 6.0 DSO 8.3
Customer Share Inv. Write-off 4.1
Backorders 7.1 Carrying Costs 3.2
Air Freight 7.3 & 7.4
Sales Credits 4.1 Supplier 10.0
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Mores Examples of Business Measures:
Customer Complaints % Waste

Economic Profit $$ Waste
Order Fulfillment Raw Material Costs
Product Availability Cycle Time
Customer Credits
Inventory Turns
Inventory Levels
Premium Freight
Delivery Costs
Number of New IMC Index
Products/Sales $$ DSO
Safety Market Share
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Metrics for Six Sigma Implementation
Percent Projects Completed

Savings from Projects
Percent Projects in Company Database
Percent Course Attendance
Consultant work days
Instructor Scores
Percent Courses with Correct Material
Six Sigma Billing Errors
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Understanding Variation
The “Variability Onion” of Metrics:
Region
Worldwide
Country
Data can be State

segmented
many ways
Line
Sector
Department
Plant
Division
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The Current Method of Business Analysis
Summarize business results with a table of numbers.

Compare to last period, same period last year or goal.
React to big percent changes; ignore small percent
changes.
Focus attention on those portions that are getting worse.
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Three Methods of Analysis
The Goal Approach

Current values are judged to be either acceptable
or not based on comparison with the goal, target,
budget limit, etc.
Alternate between “doing okay” and “in trouble”
When “doing okay” ignore it
When “in trouble” take action
On-again, off-again approach is the complete antithesis of
continual improvement.
Goals are useful as a means to improvement, but when
they become the end, to the degree of disrupting
improvement, they are a problem!
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The Average Approach

Compare actual results to average results
Above vs. Below average is not a meaningful
“break point” in performance
Below average months are inevitable
Creates internal comparisons that may not be
either fair or helpful
Other variations on this approach include:
Best/worst result (there will always be one!)
Best/worst result in X months
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The Business Process Chart Approach

Results are judged first on whether they represent
a real change in the underlying process (special
cause) or not (common cause)
The capability of the business process is
compared to any goals, targets, etc.
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“To Measure or Not to Measure”
9 Raw Monthly Number: $, Total, %

9 Aggregate Numbers
9 Percent to Sales or Similar Business Ratio
Mix of Monthly and Year to Date
Percent Change
% Change vs. Same Month Last Year
Year to Date Percent Increase
Take Care with Accounting Accruals/Adjustments
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Benefits of Business Process Charting
Improve Business Results

Make better predictions, improve credibility
Detecting real trends not “phantom”
Learn more about processes
Ask more helpful questions
Identify chronic opportunities for improvement
Engage Business Leaders and Champions
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Statistical Thinking is ....
A philosophy of learning and action based on the

following fundamental principles:
All work occurs in a system of interconnected
processes,
Variation exists in all processes, and
Understanding and reducing variation are keys to
success.
A Way of Thinking
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Benefits of Statistical Thinking
Strengthens the connection between improving the business

and improving the business process
Improve predictability and credibility
Defines the appropriate direction for action
Focuses scarce resources on the right issues
Learn faster about processes
Engaging Business Leaders and Champions
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What Action is Appropriate?

Something Important
Last Period This Period
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What Action is Appropriate?
Something Important
Last Period This Period
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It Depends!
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It Depends!
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It Depends!
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It Depends!
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It Depends!
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How Long does it take me to get to work?
A
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Day
Why 23 one day and the next 26 minutes?
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Common-Cause and Special-Cause

Variation
From Common Causes

Systemic, Chronic, Built-in Variation
From Special Causes

Sporadic, Exceptional, Atypical Variation
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The Special and Common Cause Spectrum
Massive
Special Common
Cause Causes Only
The Real World
It is important to know, at any point in time,

which type of variation is dominant.
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Appropriate Questions
If special causes dominant

What happened (in that period)?
Is it likely to continue or re-occur?
If common causes dominant

What is happening (throughout the whole time
span)?
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Appropriate Type of Action
If special causes dominant

Isolate and address the special cause(s)
Don’t over-fix
If common causes dominant

Make a permanent change to the system
Don’t tamper after at each data point
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Business Process Chart for Improvement
5
4.9
4.8
Mean Customer Score
4.7
Based on 1-5 Scale
4.6
4.5
4.4
4.3
4.2
4.1
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1
Week
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0
500
1000
1500
2000
2500
3000
Individual Value
May-99
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85
90
Jun-99 Nov-97
Jul-99
Jan-98
Aug-99
Mar-98
Sep-99
May-98
Oct-99
Nov-99 Jul-98
Dec-99 Sep-98
E
Jan-00 Nov-98
Feb-00
Jan-99
Mar-00
Mar-99
Apr-00
May-99
May-00
A
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Jun-00 Jul-99 ACE
Month
Special Cause Flag
Jul-00 Sep-99
Aug-00 Nov-99
Sep-00
Jan-00
Oct-00
CONTINENTAL AIRLINES
Mar-00
Nov-00
New Product Growth

Weather in Houston
May-00
Dec-00
Jan-01 Jul-00
Feb-01 Sep-00
Mar-01
Nov-00
Business Metric with Special Cause
Apr-01
Jan-01
May-01
Mar-01
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0
0
500
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May-99 May-99
Jun-99 Jun-99
Jul-99 Jul-99
Aug-99 Aug-99
Sep-99 Sep-99
Oct-99 Oct-99
Nov-99 Nov-99
Dec-99 Dec-99
Jan-00 Jan-00
Feb-00 Feb-00
Mar-00 Mar-00
Apr-00 Apr-00
May-00 May-00
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Jun-00 Jun-00
Jul-00 Jul-00
Aug-00 Aug-00
Sep-00 Sep-00
Oct-00 Oct-00
Nov-00 Nov-00
New Product Growth

New Product Growth
Dec-00 Dec-00
Jan-01 Jan-01
Feb-01 Feb-01
Mar-01 Mar-01
Growth Line
Growth Line
Apr-01 Apr-01
May-01 May-01
Forecast
Chart created in MTES www.mtes.com

Goal
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3 Up
3 Up
BPChart
Run Chart
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Nov-97 Nov-97 Nov-97 Nov-97 Nov-97 Nov-97
Jan-98 Jan-98 Jan-98 Jan-98 Jan-98 Jan-98
Mar-98 Mar-98 Mar-98 Mar-98 Mar-98 Mar-98
May-98 May-98 May-98 May-98 May-98 May-98
Jul-98 Jul-98 Jul-98 Jul-98 Jul-98 Jul-98
Sep-98 Sep-98 Sep-98 Sep-98 Sep-98 Sep-98
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AMERICAN
AMERICAN
SOUTHWEST
SOUTHWEST
CONTINENTAL
CONTINENTAL
Step Change
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9 Up
BPChart
Peter Peterka
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Nov-97 Nov-97 Nov-97
Feb-98 Feb-98 Feb-98
May-98 May-98 May-98
Aug-98 Aug-98 Aug-98
TWA
DELTA

AMERICA WEST
Often monthly
Trends often desired
Difficult to quantify error

Often individual values
Business
Often time correlated data

Collected Infrequently
More difficult to experiment

Lack operational definitions
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UNITED
AMERICAN

NORTHWEST
Frequent

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No trends desired
Manufacturing
By the hour or shift
Easy to experiment
Often clearly defined

Individual and subgroups


US AIR

SOUTHWEST
Houston

Weather in

CONTINENTAL AIRLINES
Data can be corrected correlation

Business Data versus Manufacturing Data
Easy to obtain measurement error

22
Types of Control Charts
There are many types of control charts

X-Bar & R, Individuals, p, c, u, cusum, etc.
Most control chart limits are mean +/- 3 Std Deviations
X-Bar charts will work for some Mfg Processes
Individuals chart will work in most instances for
Business Process Charts
Individuals charts are not perfect in all cases
Other charts will be technically more correct in some cases
But the simplicity of Individuals charts makes them a good
general tool for business process charts.
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Becoming an “Statistical Thinker”
Be able to explain to others the meaning of

performance within the process limits
Use data to understand the future rather than explain
the past
Get results by improving the process
Use thinking always with data
Learn how to apply in the absence of data in
situations that call for judgment
Control Chart your data
Avoid two point comparisons
Require and teach others to employ
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Roadmap to Implement
Business Process Charts
Determine Determine Refine

Obtain 24
Business Key Business Operational
Month History
Goals Metrics Definitions
During Process Owners with

Leadership
Workshop Improvement
2 Day Statistical
Refine Metrics Specialists support
Thinking Workshop
and Drill Downs establish initial limits
Business Leaders Meet Continue to Monitor

Quarterly to Select Improvement Business Metrics in Chart
Projects Identified on ”Chronic” Form – Make Sure to
Common Cause Opportunities Identify Special Causes
47 Peter Peterka
Closing Thoughts
“Being committed to the truth is far more powerful

than any technique”
Peter Senge
“The most important figures that one needs in management are

unknown or unknowable, but successful management must
nevertheless take account of them”.
Dr. W. Edwards Deming
“If we know how to manage with data, then we can learn

how better to manage without data”
Heero Hacquebord
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Contact Information and References
Peter Peterka - peter@sixsigma.us

Phone (512) 233-2721
Peter’s sites www.mtes.com or www.sixsigma.us
Books/Info www.asqstatdiv.org/aqc-thinking-title.html
Books/Info www.spcpress.com
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Fort Worth ASQ

November 6th, 2003

Business Process Charting

 Define Business Process Charting

Business Process Charting

 A graphical and numerical analysis method for any

 Based upon Statistical Thinking Theory

 Directed toward identifying opportunities for

1. Business Metric with an operational definition

Key Elements of Business Process Chart

 Definitions that will be interpreted the same way by

How to: Determine the Proper Metrics

 Actual Process Map of Business Process

Supply Chain Excellence

Performance Metric Drill Down

Economic Return 1.0

New Customers Cycle Time 5.2 &5.3

Complaints 4.2 Dead Inv. 4.5

Sales Credits 4.1 Supplier 10.0

 Customer Complaints  % Waste

Metrics for Six Sigma Implementation

 Percent Projects Completed

Data can be State

The Current Method of Business Analysis

 Summarize business results with a table of numbers.

The Goal Approach

Three Methods of Analysis

The Average Approach

The Business Process Chart Approach

“To Measure or Not to Measure”

9 Raw Monthly Number: $, Total, %

 Improve Business Results

Statistical Thinking is ....

 A philosophy of learning and action based on the

 Understanding and reducing variation are keys to

 Strengthens the connection between improving the business

What Action is Appropriate?

Last Period This Period

Last Period This Period

Why 23 one day and the next 26 minutes?

Common-Cause and Special-Cause

 From Common Causes

 From Special Causes

It is important to know, at any point in time,

 If special causes dominant

 Is it likely to continue or re-occur?

 If common causes dominant

 If special causes dominant

 If common causes dominant

 Don’t tamper after at each data point

Business Process Chart for Improvement

New Product Growth

New Product Growth

Chart created in MTES www.mtes.com

Nov-97 Nov-97 Nov-97 Nov-97 Nov-97 Nov-97

Jan-98 Jan-98 Jan-98 Jan-98 Jan-98 Jan-98

Mar-98 Mar-98 Mar-98 Mar-98 Mar-98 Mar-98

May-98 May-98 May-98 May-98 May-98 May-98

Jul-98 Jul-98 Jul-98 Jul-98 Jul-98 Jul-98

Sep-98 Sep-98 Sep-98 Sep-98 Sep-98 Sep-98

Nov-98 Nov-98 Nov-98 Nov-98 Nov-98 Nov-98

Jan-99 Jan-99 Jan-99 Jan-99 Jan-99 Jan-99

Mar-99 Mar-99 Mar-99 Mar-99 Mar-99 Mar-99

Define Business Process Charting

A graphical and numerical analysis method for any

Based upon Statistical Thinking Theory

Directed toward identifying opportunities for

Definitions that will be interpreted the same way by

Actual Process Map of Business Process

Customer Complaints % Waste

Percent Projects Completed

Summarize business results with a table of numbers.

Improve Business Results

A philosophy of learning and action based on the

Understanding and reducing variation are keys to

Strengthens the connection between improving the business

From Common Causes

From Special Causes

If special causes dominant

Is it likely to continue or re-occur?

If common causes dominant

If special causes dominant

If common causes dominant

Don’t tamper after at each data point

There are many types of control charts

Be able to explain to others the meaning of

Peter Peterka - peter@sixsigma.us