Chapter 4

1. Business Improvement Standard: Six Sigma, CMMI and ISO 9001:2000 standards References: Anthony, J. (2006). Six Sigma for Services Processes. Business Process Management Journal. 12(2), pp. 234-248. www.mja.com.au/public/issues/188_06_170308/glossary_170308_fm.html http://www.sei.cmu.edu/cmmi/tools/index.cfm’ . Chapter 4

2. Objectives • To understand the common business process improvement standards • To understand the need to apply certain standard in the current practices • To outline the challenges and issues involved.

3. Introduction to Six Sigma

4. Six Sigma • Definitions: “a highly structured strategy for acquiring, assessing, and applying customer, competitor, and enterprise intelligence for the purposes of product, system or enterprise innovation and design”. • a systematic method for improving the operational performance of an organization by eliminating variability and waste . • “sigma” - deviation in the performance characteristics of a service from its mean performance. • Exploited by many world class organizations – Motorola, Sony, Citibank and many more.

5. A Brief History of Six Sigma • The Six Sigma concept was developed by Bill Smith, a senior engineer at Motorola, in 1986 as a way to standardize the way defects were tallied. • Sigma is the Greek symbol used in statistics to refer to standard deviation which is a measure of variation. • Adding “six” to “sigma” combines a measure of process performance (sigma) with the goal of nearly perfect quality (six).

6. Six Sigma • Concept • Utilize the statistical tools and techniques to reduce defect rate in processes • Lead to improve productivity, customer satisfaction, quality of services, reduce operation cost , etc.

7. What Six Sigma Means “Past definitions of quality focused on conformance to standards, as companies strived to create products and services that fell within certain specification limits.”-MikelHarry and Richard Schroeder “...this Six Sigma journey will change the paradigm from fixing products so they are perfect to fixing processes that they produce nothing but perfection, or close to it.”-Jack Welchso

8. Six Sigma • Quality: a state in which value entitlement is realized for the customer and provider in every aspect of the business relationship. • Business Quality : is highest when the costs are at the absolute lowest for both the producer & consumer. • Six Sigma : provides maximum value to companies in the forms of increased profits and maximum value to consumers with high-quality products and services at the lowest possible cost.

9. Performance in Context 99.99966% Good (6 sigma) Seven articles lost per hour One unsafe minute every seven months 1.7 incorrect operations per week 6 Passengers with Misplaced luggage each month• 68 wrong prescriptions per year 99% good (3.8 sigma) • 20,000 lost articles of mail per hour • Unsafe drinking water for almost 15 minutes each day • 5,000 incorrect surgical operations per week • 340 Passengers with Misplaced Luggage every day • 200,000 wrong drug prescriptions each year

10. Six Sigma • Six Sigma Affects Six Areas Fundamental to Improving a Company’s Value: • Process Improvement • Product & Service Improvement • Investor Relations • Design Methodology • Supplier Improvement • Training & Recruitment

11. Six Sigma- Example (source: Anthony (2006) • Focus: to identify the number of opportunities that could cause the defect within a process. • Scenario: a call from customers to customer service center, the following opportunities may lead to customers dissatisfaction: • The manner when greeting customers • Information accuracy • Queuing time • Number of rings before picking up the call • Data entry accuracy • Time take to restore the services • The manner when call is ended • Timely arrival of any requested materials, etc.

12. THE SIX STEPS TO SIX SIGMA USING • Step #1 - Identify the product you create or the service you provide • In other words ... WHAT DO YOU DO? • Step #2 - Identify the Customer(s) for your product or service, and determine what they consider important i.e. Customer Requirements • In other words ... WHO USES YOUR PRODUCT AND SERVICES? • Step #3 - Identify your needs (to provide product/service so that it satisfies the Customer) • In other words ... WHAT DO YOU NEED TO DO YOUR WORK? • Step #4 - Define the process for doing your work • In other words ... HOW DO YOU DO YOUR WORK? • Step #5 - Mistake-proof the process and eliminate wasted efforts using... • In other words ... HOW CAN YOU DO YOUR WORK BETTER? • Step #6 - Ensure continuous improvement by measuring, analyzing and controlling the improved process usingDMAIC - (Define, Measure, Analyze, Improve, Contro/) – six sigma

13. Six Sigma- Example • Objective of Six Sigma strategy in this example: • to understand the process within the call center which creates the defects • To devise process improvement method to reduce defects • Focus on 4 issues: • What are the nature of the defects? • Why such defects are occurring and at what frequency? • What is the impact of defect on customers? • How to measure the defects and what strategies should be implemented to prevent these defects?

14. Why Six Sigma is required in service industry? • Principles: • All processes are interconnected • All processes exhibit variability • All processes create data that explains variability • Must understand the source of these variability • Devise an effective business strategy to eliminate or reduce variability.

15. Why Six Sigma is required in service industry? • Benefits to the organizations • Effective management decision • Increased understanding of customer needs and expectation • Efficient and reliable internal operations- lead to greater market share & satisfied shareholders. • Improved knowledge across the organizations on various tools and techniques -  productivity • Reduce number of non-value added processes • Reduce variability in service performance • Create proactive culture – thinking and mindset. • Improved cross functional teamwork across the organization

16. Why Six Sigma is required in service industry? • Example: • Citibank group • Reduce internal call back by 80%, external call back 85% and credit processing time by 50% • Reduce cycle time from customers placing orders and processing time by 67%

17. COPIS Model Six Sigma COPIS Model Process Steps Outputs Inputs Suppliers Customers How does Six Sigma Work?

18. Six Sigma: DMAIC Model Voice of the Customer Analyze Improve Measure Define Control Institutionalization Innovation

19. Six Sigma: DMAIC Model Define Six Sigma: How Do We Innovate? Define the problem and customer requirements. Measuredefect rates and document the process in its current incarnation. Analyzeprocess data and determine the capability of the process. Improvethe process and remove defect causes. Controlprocess performance and ensure that defects do not recur. Control Measure Improve Analyze

20. Design for Six Sigma (DFSS) Define Six Sigma: How Do We Design? Definecustomer requirements and goals for the process, product or service. Measureand match performance to customer requirements. Analyzeand assess the design for the process, product or service. Designand implement the array of new processes required for the new process, product or service. Verifyresults and maintain performance. Measure Verify Design Analyze

21. Six Sigma CSF • Strong leadership and management commitment • Organizational culture change • Aligning six sigma projects to corporate business objectives • Selection of team members & teamwork • Six Sigma training • Understanding of DMAIC methodology, tools, techniques and metrics • Selection of projects and management skills • Linking six sigma to customers • Accountability

22. Challenges & Limitations • To have quality data • Solutions driven by data are expensive • Issues in selecting projects • Statistical definition of six sigma may vary according to type of service industry • Dynamic market demand’ • Assumption of six sigma shift may not applicable to all • Non-standardization procedures in the certification process • Big investment for the start up cost.

23. Introduction to Capability Maturity Model Integration (CMMI)

24. CMMI • An approach that helps organizations improve their performance. • To guide process improvement across a project, a division, or an entire organization. • Provides organizations with the essential elements for effective process improvement. • a trademark owned by Software Engineering Institute of Carnegie Mellon University.

25. CMMI – Services (SVC) – released 2009 • A guide to help service provider organizations reduce costs, improve quality, and improve the predictability of schedules. • Provide best practice when service providers want to: • Decide type of services, define standard services, and let people know about them • Make sure they have everything they need to deliver a service, including people, processes, consumables, and equipment • Get new systems in place, change existing systems, retire obsolete systems, all while making sure nothing goes terribly wrong with the service • Set up agreements, take care of service requests, and operate service systems • Make sure they have the resources needed to deliver services and that services are available when needed—at an appropriate cost • Handle what goes wrong—and prevent it from going wrong in the first place if possible • Ensure they are ready to recover from potential disasters and get back to delivering services if the disaster occurs

26. CMMI – Acquisition (ACQ) – released 2007 • a best practices model that can help to improve relationships with the suppliers by helping you improve your own processes. • It can be used to : • increase the control of projects, • better manage global sourcing of products and services, and • acquire solutions that meet the organization's needs.

27. CMMI- Development (DEV)- released 2006 • Help to achieve on-time delivery and high quality, especially if the product or service relies heavily on software. • It is used for process improvement in development organizations • A model or collection of “best practices” that organizations follow to dramatically improve the effectiveness, efficiency, and quality of their product and service development work • It covers the lifecycles of products and services from conception through delivery and maintenance

28. CMMI- Development (DEV) • Benefits • Better customer satisfaction • Increased quality • More accurate schedules • Lower development costs • Substantial return on investment • Improved employee morale and reduced turnover • It includes identifying your organization’s process strengths and weaknesses and making process changes to turn weaknesses into strengths.

29. CMMI

30. CMMI – Overall Benefits • The organization's activities are explicitly linked to • the business objectives. • The visibility into the organization's activities is • increased to ensure that the product or service • meets the customer's expectations. • Opportunity to learn from new areas of best • practice (e.g., measurement, risk)

31. Difference between CMMI and Six-sigma • For example, if an auto maker is developing a new car, there is quite a bit of software in the car to support everything from basic driving functionality to state-of-the-art entertainment systems. To make that car, a manufacturer needs software systems engineers, mechanical and electrical engineers, as well as the manufacturing production line. Employees designing the software and systems engineering for that car might favor CMMI because it provides good guidance on the type of processes they should be executing. • Conversely, Six Sigma provides analytic tools such as control charts and evaluates the quality of measurement to determine if one process is better than another. Six Sigma provides tactical guidance to fit inside the CMMI process. Six Sigma prioritizes a project with specific improvements that need to be made in an engineering process. “Six Sigma will point out the biggest problem spots in the organization and states what will add value to the bottom line,” Siviy says.

32. Introduction to ISO 9001/2008- Quality Management System

33. ISO stands for International Standardizationfor Organization

34. ISO 9001/2008 • Specifies requirements for quality management system that require the organization to: • Demonstrates its ability to consistently provide products that meets customer needs, applicable statutory and regulatory requirements. • Enhance customer satisfaction through the system effectiveness that includes • processes for continuous improvement • customer conformity assurance and • applicable statutory and regulatory requirements

35. ISO 9000:2008- Requirements • A set of procedures for the key business processes • Monitoring processes for effectiveness • Keeping and tracking adequate records • Checking for defects, with appropriate and corrective action • Reviewing individual processes and the quality system for effectiveness and • Facilitating continual improvement

36. QUALITY MANAGEMENT PRINCIPLES • Customer focus • Leadership • Involvement of people • Process approach • System approach to management • Continual improvement • Factual approach to decision making • Mutually beneficial supplier relationships

37. ISO 9000 is about QUALITY Quality is: • defined by customer needs • defined in terms of fitness for purpose • achieved through continuous improvement • managed through prevention not detection • ‘getting it right at the first time’ • measurable

38. Self-manageableP-D-C-A • Plan what you do • Do what you planned & record what you did • Check the results • Act on the difference

39. ISO 9000 REQUIRES : PLAN, DO, CHECK & ACT with CONSISTENCY : • CUSTOMER SATISFACTION • MANAGEMENT SUPPORTS • RESOURCES MANAGEMENT • PROCESS MANAGEMENT • RESULTS ANALYSIS ONTINUOUS IMPROVEMENT

40. UNSATISFACTORY OUTCOME THE CONTINUOUS IMPROVEMENT MECHANISM

41. UNSATISFACTORY OUTCOME WORK IMPROVEMENT TEAM THE CONTINUOUS IMPROVEMENT MECHANISM

42. UNSATISFACTORY OUTCOME WORK IMPROVEMENT TEAM CAUSE INVESTIGATION THE CONTINUOUS IMPROVEMENT MECHANISM

43. UNSATISFACTORY OUTCOME WORK IMPROVEMENT TEAM CAUSE INVESTIGATION CORRECTIVE ACTION THE CONTINUOUS IMPROVEMENT MECHANISM

44. UNSATISFACTORY OUTCOME WORK IMPROVEMENT TEAM CAUSE INVESTIGATION CORRECTIVE ACTION PREVENTIVE ACTION THE CONTINUOUS IMPROVEMENT MECHANISM

45. UNSATISFACTORY OUTCOME WORK IMPROVEMENT TEAM CAUSE INVESTIGATION CORRECTIVE ACTION PREVENTIVE ACTION REVIEW THE CONTINUOUS IMPROVEMENT MECHANISM

46. UNSATISFACTORY OUTCOME WORK IMPROVEMENT TEAM CAUSE INVESTIGATION CORRECTIVE ACTION PREVENTIVE ACTION REVIEW THE CONTINUOUS IMPROVEMENT MECHANISM

47. UNSATISFACTORY OUTCOME WORK IMPROVEMENT TEAM CAUSE INVESTIGATION CORRECTIVE ACTION PREVENTIVE ACTION REVIEW THE CONTINUOUS IMPROVEMENT MECHANISM

48. UNSATISFACTORY OUTCOME WORK IMPROVEMENT TEAM CAUSE INVESTIGATION CORRECTIVE ACTION PREVENTIVE ACTION REVIEW THE CONTINUOUS IMPROVEMENT MECHANISM

49. ISO Stages • Setting up Steering Committee • Design of Management System • Training all Staff • Setting up documentation system • Implementation • Monitoring & Evaluation 27

50. ISO Stages • Internal Audit & Pre-assessment audit • Certification Audit • Registration • Maintenance of the system • Internal Q Audit • Surveillance Visit