Six Sigma – A Strategy for

Achieving World Class

Performance

Prof. R. Jayakumar
B.Com, PGDM (IIM-B) CTM (USA)

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 Purpose of Presentation

 Share concepts and application of Six

Sigma with a case study;
 Deployment of Six Sigma as a strategy
to achieve World Class Performance;
 Integration of Six Sigma with EFQM
framework;
 Lessons Learnt

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 World Class Performance
With 99 % With Six Sigma
Quality Quality
For every 300000 3,000 misdeliveries 1 misdelivery
letters delivered
For every week of TV 1.68 hours of dead air 1.8 seconds of dead air
broadcasting per
channel
Out of every 500,000 4100 crashes Less than 2 crashes
computer restarts

Source: The Six Sigma Way by Peter Pande and Others

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 What is Six Sigma ?
• Based on teachings of Dr. Walter Shewhart,
Dr. W. E. Deming & Dr. J. Juran.
• Process Control;
• Plan Do Check Act;
• Common and Special Causes;
• Improvement can be done project by project
• Statistical tools
• Hawthorne Plant Experiences
• Developed by Bill Smith at Motorola in 1980s

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 Six Sigma Definitions

• Business Definition
 A break through strategy to significantly
improve customer satisfaction and
shareholder value by reducing variability in
every aspect of business.
• Technical Definition
 A statistical term signifying 3.4 defects per
million opportunities.

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Sigma Defects Per Million Rate of
Level Opportunities Improvement
1σ 690,000
2σ 308,000 2 times
3σ 66,800 5 times
4σ 6,210 11 times
5σ 230 27 times
6σ 3.4 68 times

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 Bank of America – SS Experience

 Goals
– # 1 in Customer Satisfaction
– Worlds’ most admired company
– Worlds’ largest bank
 Strategy - “ Develop business process excellence
by applying voice of the customer to identify and
engineer critical few business processes using Six
Sigma
 Created Quality & Productivity Division
Source: Best Practices Report

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 Bank of America – SS Experience

 Wanted results in 1 year;

 Hired more than 225 MBB & BBs from GE, Motorola, Allied
Signal for rapid deployment
 Developed 2 week Green Belt training programs
 Introduced computer simulation of processes
 Trained 3767 Green Belts, certified 1230 - Minimum value
target per GB project – $ 250K
 Trained 305 Black Belts, certified 61 - Minimum value target
per BB project – $ 1 million
 Trained 43 MBB,
 1017 in DFSS
 80 % of Executive Team trained in GB and 50 % Certified

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 Bank of America – SS Experience

Results of first 2 years:

 Reduced ATM withdrawal losses by 29.7 %
 Reduced counterfeit losses in nationwide cash
vaults by 54%
 Customer delight up 20%;
 Added 2.3 million customer households
 1.3 million fewer customer households
experienced problems
 Stock value up 52%
 Y 2002 – BOA named Best Bank in US & Euro
money's Worlds Most Improved Bank
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 • Revenue
• Quote Time • Capital Utilization
• Defect Rate • Return on Assets
• Waste • Profits
• On Time Delivery
• Inventory;
• Machine Utilization

Strategically: Used by Leadership as a vehicle to develop

sustainable culture of Customer, Quality, Value and Continuous
improvement.

Operationally: By Quality Managers to reduce cycle times, costs,

errors, rework, inventory, equipment downtime.

Deployment across all types of processes and industries -

worldwide
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 Six Sigma & EFQM/ DQA Framework
Enablers Results

Personally People Recognizing Establishing People Competency Key Perf

Productivity
actively People Process Results Results
Involved in management
improvement
Aligning System to be
Developing Individual & used Satisfaction Gross margins
Team skills Organization Involvement Recognition Net profit
Goals Sales
Market Share

Customer Results
Implementing
Identifying & Process Delivery, Response
Encouraging Process cycle time
& enabling people designing Measures Value, Time to
customers Process costs
To participate in processes to deliver reliability
Defect rates
Improvement strategy Productivity
Time to
Repurchase
satisfaction
Market
Policy & Strategy
Cash flow
Maintenance cost
Improving Return on assets
processes
Recognizing to satisfy and
Individual & Generate value
Team effort For customers
Partnerships Society Utility
consumption
Resources Results Timeliness
Inventory
Leadership Processes

Innovation and Learning 11

 Who is Implementing Six Sigma
 Atleast 25% of the fortune 200 claim to
have a serious six sigma program - Michael
Hammer.
 Financial - Bank of America, GE Capital,
Electronics - Allied Signal, Samsung,
Sony
 Chemicals - Dupont, Dow Chemicals
 Manufacturing - GE Plastics, Johnson
and Johnson, Motorola, Nokia,
Microsoft, Ford.
 Airline - Singapore, Lufthansa,
Bombardier
 And hundreds of others in Americas,
Europe, Sub Continent.
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 Six Sigma Results
Company Annual Savings
General Electric $2.0+ billion
JP Morgan Chase *$1.5 billion (*since inception in 1998)
Motorola $ 16 billion (*since inception in 1980s)
Johnson & Johnson $500 million
Honeywell $600 million

Six Sigma Savings as % of revenue vary from 1.2 to 4.5 %

For $ 30 million/yr sales – Savings potential $ 360,000 to $
1.35 million.
Investment: salary of in house experts, training, process
redesign. 13
 Six Sigma Project Methodology
Project Phases

Define Measure Analyze Improve Control

 Identify,  Collect  Analyze  Improveme  Establish

evaluate data on data, nt strategy standards
and select size of the establish  Develop to maintain
projects for selected and ideas to process;
improveme problem, confirm the remove  Design the
nt  identify “ vital few root causes controls,
 Set goals key “  Design and implement
 Form customer determinan carry out and
teams. requiremen ts of the experiment monitor.
ts, performanc s,  Evaluate
 Determine e.  Optimize financial
key  Validate the impact of
product hypothesis process. the project
and  Final
process solutions
characteris
tic.
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 Six Sigma – Case Study
Service Organisation
Background

 M/s Alpha Inc. manages out bound cargo from

a distribution centre to different stores.
 Deliveries made on trucks - owned and hired.
 Customers dissatisfied at delivery schedules.
 Leadership decision to deploy Six Sigma;
 Team of 1 Black Belt and 3 Green Belts
formed
 Sponsor of the project – Distribution Manager

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 Define - Critical to Quality (CTQ)
 Focus on customers generating annual
revenue of USD 400,000/-.

Customer Improved delivery

needs performance
Level 1 CTQ Timely delivery
Level 2 CTQ On time delivery to schedule
Level 3 CTQ Delivery within +/- 1 hour of
scheduled delivery time
Current process sigma level - 2.43 or 175889 DPMO

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 Define - Goal Statement

 Reduce number of delayed deliveries by

50 % by 31st December Y 2002 to
better meet customer requirement of
timely delivery defined as within +/- 1
hour of scheduled delivery.

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 Define - Performance Standards
Output unit A scheduled delivery of freight
Output characteristic Timely delivery

Project Y measure Process starts when an order is received

Ends when goods are received & signed
for at customers desk.
Process measurement – Deviation from
scheduled delivery time in minutes.
Specification limits LSL = -60 minutes
USL= +60 minutes
Target Scheduled time or zero minutes deviation

Defect Delivery earlier or later than 1 hour.

No. of defect 1 opportunity for a defect per scheduled
opportunities per unit delivery of freight.
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 Define - SIPOC Diagram
Supplier Stores Manager
Input Stores Order
Process Steps Receive order
(high level) Plan delivery
Dispatch Driver with goods
Deliver goods to stores
Receive delivery

Output Received freight with Documents

Customer Store Manager

• Detailed process maps drawn
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 Measure and Analyze

 Driver and Distance identified as key

factors influencing delivery performance.
 Driver selected for focus.
 Potential root causes as to why Driver
influenced the time:
– Size of the vehicle
– Type of engine
– Type of tyres
– Fuel capacity

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 Improve
 Experiments designed and conducted
using truck type and tyre size.
 Findings:
– Larger tyres took longer time at certain
routes where area was cramped and time
lost in maneuvering.
– High incidence of tyre failures since tight
turns led to stress on tyres thus increasing
number of flat tyres.
 Team modified planning of dispatch
process by routing smaller trucks at
more restrictive areas.
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 Control
 Test implementation.
 Process sigma level up from 2.43 or
175889 DPMO to 3.94 or 7353 DPMO.
 Performance still fell short of best in class
4.32 or 2400 DPMO.
 Improvement led to significant customer
satisfaction.
 Process continually monitored and data on
new cycle times, tyre failure collected as
per defined methods and frequency,
analysed and monitored.
 Customer satisfaction measured and
monitored.
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 Key Lessons Learnt
 Define
– Difficulty in identifying the right project and
defining the scope;
– Difficulty in applying statistical parameters
to Voice of the Customers;
– Trouble with setting the right goals;
 Measure
– Inefficient data gathering;
– Lack of measures;
– Lack of speed in execution;

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 Key Lessons Learnt
 Analyse
– Challenge of identifying best practices
– Overuse of statistical tools/ under use of practical
knowledge
– Challenge of developing hypotheses
 Improve
– Challenge of developing ideas to remove root
causes
– Difficulty of implementing solutions
 Control
– Lack of follow up by Managers/ Process Owners
– Lack of continuous Voice of the Customer
feedback
– Failure to institutionalize continuous improvement.

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 Key Lessons Learnt

“ Define “ ranked most important step but gets

the lowest resource allocation
 Project scoping and its definition is critical to
its success/ failure;
 “Measure” is considered most difficult step
and also gets the highest resources

Source: Greenwich Associates Study Y 2002

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 What Makes Six Sigma Different?
 Versatile
 Breakthrough improvements
 Financial results focus
 Process focus
 Structured & disciplined problem solving
methodology using scientific tools and techniques
 Customer centered
 Involvement of leadership is mandatory.
 Training is mandatory;
 Action learning (25% class room, 75 %
application)
 Creating a dedicated organisation for problem
solving (85/50 Rule).

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 Benefits of Six Sigma

 Generates sustained success

 Sets performance goal for everyone
 Enhances value for customers;
 Accelerates rate of improvement;
 Promotes learning across boundaries;
 Executes strategic change

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Thank you

Q&A

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