Six Things Contract Managers Need to Know About Six Sigma

2. Six Things Contract Managers Need to Know About Six Sigma Breakout Session #1708 Tom Reid Chief Problem Solver Certified Contracting Solutions, LLC www.certifiedcontractingsolutions.com Date: April 25, 2007 Time: 10:40 - 11:40

3. What is Six Sigma? • A statistical measure of standard deviation from an expected value. • A combination of people power and process power. • Represents a statistical measure and a management philosophy. • According to Jack Welch it is “the most important initiative GE has ever undertaken.”

4. What is a “Sigma”? • One “standard deviation” • What is a Standard Deviation? • The statistically expected variation in a series Average difference between any value in a series of values and the mean of all the values in that series. This statistic is a measure of the variation in a distribution of values.

5. Sigma Level (Process Capability) Defects Per Million Opportunities 2 308,537 3 66807 4 6210 5 233 6 3.4 Sigma Levels

6. Where did it originate? • Motorola • Allied Signal • General Electric • Sony, Honda, Maytag, Raytheon, Texas Instruments, Bombardier, Canon, Hitachi, Lockheed Martin, Polaroid, etc.

7. What Does a Contract Manager Need to Know About Six Sigma? • Six s has its own acronyms and jargon • Six s has a strategic component • Six s has a tactical component • Six s is a statistical process • Six s measures quality • Six s is NOT “quality fodder de jure”

8. Six s has its Own Acronyms and Jargon • Champion • Black Belt • Master Black Belt • Green Belt • DMAIC • DMADV • BPM • DPMO • COPQ • CTQ

9. Acronyms • DMAIC – Define, Measure, Analyze, Improve, Control • DMADV - Define, Measure, Analyze, Design, Verify (DFSS = Design for Six Sigma) • BPM – Business Process Management • DPMO – Defects per Million Opportunities • COPQ – Cost of Poor Quality • CTQ – Critical to Quality

10. Definitions • Champion – corporate level person who “owns” the process • Black Belt – full-time change-agent trained in the methodology who leads the process • Master Black Belt – Serves as trainer, mentor, and guide throughout company • Green Belt – Team members who understand 6s tools and techniques; “worker bees”

11. Six s is Strategic • There is no guarantee of success • It involves Business Process Management • The first step here is to clarify and communicate the strategic business objectives of the organization • Seeks both effectiveness and efficiency • All key BPMs must be measured in these terms • Involves customer input • Lowest performing, highest impact processes should be chosen as 6 s projects.

12. Traditional Costs Inspection Overtime Defects Idle Time Rework Real but Overlooked Long Cycle Time Cost of Capital Redundant Processes Expediting Costs Lost Sales Lost Customer Loyalty Missed Deadlines Excessive Planning Inaccurate Reports What does Poor Quality Cost?

13. Six s is Tactical • Similar to the scientific method you learned in elementary school • Define the problem, measure the impact, determine root cause, form and test hypotheses • It is continuous • It seeks out best practices from anywhere • It quantifies variances using various tools

14. Technical Tools • Process maps • Histograms • Pareto charts • Process summary • Scatter diagrams • Cause-effect diagrams • Affinity diagrams • Run charts • Control Charts

15. Other Management Tools • Stakeholder analysis chart • Planning for influence chart • SWOT Analysis • Pay-off matrix (ROI) • Agendas • Ground rules • Parking Lot • Failure Modes & Effects Analysis A 6s team is exactly that – a TEAM

16. Exploiting the Potential RECIPE FOR SUCCESSFUL TEAMS 1. Clarity in direction and goals. 2. Members selected based on skills and skill potential. 3. Clearly defined jobs and responsibilities. 4. Establish ground rules. 5. Urgency in setting and seizing upon a few immediate performance oriented tasks and goals. 6. Beneficial team behaviors (friendship, concern and interest in others). 7. Clear communication.

17. Exploiting the Potential RECIPE FOR SUCCESSFUL TEAMS (cont.) 8. Use of a disciplined approach. 9. Awareness of the group process. 10. Balanced participation. 11. Well defined decision-making procedures. 12. Exploit power of positive feedback, recognition and reward. 13. Challenged regularly with fresh facts and information. 14. Competent leadership. 15. Accountability. Source: Federal Market Group

18. Six s is a Statistical Process • But math is math – add, subtract, multiply, and divide • Most of us learned theoretical statistics • Six s lets you use practical statistics • It is the Black Belt who is responsible for the accuracy of the statistics relied on by the team

19. Six s Measures Quality • Quality must be measured from the customer’s perspective • Unless you ask, you will never know • It doesn’t help to say “The customer’s are always complaining.” • It does help to say, “Sixteen customers have complained about waiting longer than five minutes for customer service.”

20. How Does the Prime Control Quality? • In the average aerospace business 50% of the prime dollars flow to subcontractors • If 6s works at your company, what impact will it have on the other half of your business operations? • How many of you have required that your subs implement six sigma? • How many of you have offered 6s training to your subs?

21. Six s is NOT “Quality Fodder de Jure” Who Remembers: • Quality Circles • Process Re-engineering • TQM • ISO 9000 • Continuous Improvement • Statistical Process Control • Just in Time

22. Why is Six s Different? • Most in past were glorified pep talks • Generally had little or no senior management support • No strategic element • No widespread acceptance • None demonstrated the success of six s

23. Benefits of Six s • Greater management involvement • Management by Fact and Data • Fosters employee creativity • Not a re-engineering job-loss objective • Has a Control element • Drives out inefficiency

24. Current Trends • Companies seeking BB or MBB talent are ALSO now asking that these individuals have some experience in lean enterprises, based on the principles of the Toyota Business System. • MVT or Multivariable Testing attempts to expand on the possible solutions by polling entire organizations • Some research has suggested that the farther away from its manufacturing roots Six Sigma strays, the less effective it is.

25. What Does a Contract Manager Need to Know About Six Sigma? • Six s has its own acronyms and jargon • Six s has a strategic component • Six s has a tactical component • Six s is a statistical process • Six s measures quality • Six s is NOT “quality fodder de jure”

26. The Elevator Speech Six Sigma is a problem-solving technology that uses your human assets, data, measurements, and statistics to identify the vital few factors to decrease waste and defects while increasing customer satisfaction, profit, and shareholder value. Brue, Greg. Six Sigma for Managers, (McGraw-Hill: New York, 2002) p. 10.

27. Bibliography • Brue, Greg. Six Sigma for Managers. Madison, WI: CWL Publishing Enterprises, 2002. • Brue, Greg. Six Sigma for Small Business. Madison, WI: CWL Publishing Enterprises, 2006. • Chowdhury, Subir. The Power of Six Sigma. Chicago, IL: Dearborn Trade, 2001. • Eckes, George. Six Sigma for Everyone. Hoboken, NJ: John, Wiley & Sons, 2003. • Harry, Mikel. Schroeder, Richard. Six Sigma. New York, New York: Doubleday, 2000.