Overview of Six Sigma

1. Overview of Six Sigma MGS 8020 Business Intelligence

2. What is Six Sigma • Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects in any process -- from manufacturing to transactional and from product to service. • To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. • A Six Sigma opportunity is then the total quantity of chances for a defect.

3. What is Six Sigma • This is accomplished through the use of two Six Sigma sub-methodologies: DMAIC and DMADV. • The Six Sigma DMAIC process (define, measure, analyze, improve, control) is an improvement system for existing processes falling below specification and looking for incremental improvement. • The Six Sigma DMADV process (define, measure, analyze, design, verify) is an improvement system used to develop new processes or products at Six Sigma quality levels. • Both Six Sigma processes are executed by Six Sigma Green Belts and Six Sigma Black Belts, and are overseen by Six Sigma Master Black Belts.

4. What is Six Sigma • According to the Six Sigma Academy, Black Belts save companies approximately $230,000 per project and can complete four to 6 projects per year. • General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits on the order of $10 billion during the first five years of implementation.

5. Six Sigma DMAIC • DMAIC • Define the project goals and customer (internal and external) deliverables • Measure the process to determine current performance • Analyze and determine the root cause(s) of the defects • Improve the process by eliminating defects • Control future process performance • When To Use DMAIC • The DMAIC methodology, instead of the DMADV methodology, should be used when a product or process is in existence at your company but is not meeting customer specification or is not performing adequately.

6. Six Sigma DMADV • DMADV • Define the project goals and customer (internal and external) deliverables • Measure and determine customer needs and specifications • Analyze the process options to meet the customer needs • Design (detailed) the process to meet the customer needs • Verify the design performance and ability to meet customer needs • When To Use DMADV • A product or process is not in existence at your company and one needs to be developed • The existing product or process exists and has been optimized (using either DMAIC or not) and still doesn't meet the level of customer specification or six sigma level

7. DMAIC Versus DMADV • The Similarities of DMAIC and DMADV • Six Sigma methodologies used to drive defects to less than 3.4 per million opportunities. • Data intensive solution approaches. Intuition has no place in Six Sigma -- only cold, hard facts. • Implemented by Green Belts, Black Belts and Master Black Belts. • Ways to help meet the business/financial bottom-line numbers. • Implemented with the support of a champion and process owner

8. Six Sigma DMAIC Roadmap • D - Define Phase: • Define Customers and Requirements (CTQs) • Develop Problem Statement, Goals and Benefits • Identify Champion, Process Owner and Team • Define Resources • Evaluate Key Organizational Support • Develop Project Plan and Milestones • Develop High Level Process Map

9. Six Sigma DMAIC Roadmap • M - Measure Phase: • Define Defect, Opportunity, Unit and Metrics • Detailed Process Map of Appropriate Areas • Develop Data Collection Plan • Validate the Measurement System • Collect the Data • Begin Developing Y=f(x) Relationship • Determine Process Capability and Sigma Baseline

10. Six Sigma DMAIC Roadmap • A - Analyze Phase: • Define Performance Objectives • Identify Value/Non-Value Added Process Steps • Identify Sources of Variation • Determine Root Cause(s) • Determine Vital Few x's, Y=f(x) Relationship

11. Six Sigma DMAIC Roadmap • I - Improve Phase: • Perform Design of Experiments • Develop Potential Solutions • Define Operating Tolerances of Potential System • Assess Failure Modes of Potential Solutions • Validate Potential Improvement by Pilot Studies • Correct/Re-Evaluate Potential Solution

12. Six Sigma DMAIC Roadmap • C - Control Phase: • Define and Validate Monitoring and Control System • Develop Standards and Procedures • Implement Statistical Process Control • Determine Process Capability • Develop Transfer Plan, Handoff to Process Owner • Verify Benefits, Cost Savings/Avoidance, Profit Growth • Close Project, Finalize Documentation • Communicate to Business, Celebrate

13. Six Sigma Deployment • For Define and Measurement phases: • Step 1: • Self-assessment of the organization and share the results with the top management and employees • Step 2: • Re-evaluate all of the strategies and strategic objectives of the organization and identify new strategic objectives • Step 3: • Identify all the organization’s core processes and support processes • Build strategy map to help communicate the strategy

14. Kaplan and Norton's Balanced score card • Building a strategy map encompassing Kaplan and Norton's Balanced score card spanning the four perspectives. • The four perspectives: • Financial • Customer • Internal • Learning

15. The Four Perspectives

16. A Six Sigma Case Study -Tutorial for IT Call Center • Benchmarking: • Industry data was purchased from a clearinghouse that gathers a number of measures about customer satisfaction and call center technical and business performance. • Comparing their company to the benchmark average and to a select best-in-class group. • We can find that customer satisfaction with their support services was just average or a bit below. (see the following slides.)

17. Figure 1: Customer Satisfaction for the Company, 2001-2003

18. Figure 2: Customer Satisfaction for Average Companies, 2001-2003

19. Figure 3: Customer Satisfaction for Best-in-Class Companies, 2001-2003

20. A Six Sigma Case Study -Tutorial for IT Call Center • By analyzing the customer satisfaction data, we can find that Customer Satisfaction has positive influence to New Account Growth.

21. A Six Sigma Case Study -Tutorial for IT Call Center • Transfer = Average number of transfers (to different agents and help systems) during a service call.Wait Time = Average wait time during a service call.Service = Average service time during the call (the time spent getting the answer to the question, problem solving advice, etc.). • From the regression model, we can find that the longer the wait time, transfer time and service, the lower the customer satisfaction.

22. A Six Sigma Case Study -Tutorial for IT Call Center • From the data that gathered from industry, we found that the call center’s waiting time is lower than industry average; thus, there is space for improvement and it will help reduce the cost and increase customer satisfaction. • From the data, we can find that the call center’s cost is higher than average, so this project is doable.

23. Define Phase • D1. Project Charter: • Problem Statement: "Competitors are growing their levels of satisfaction with support customers, and they are growing their businesses while reducing support costs per call. Our support costs per call have been level or rising over the past 18 months, and our customer satisfaction ratings are at or below average. Unless we stop – or better, reverse this trend – we are likely to see compounded business erosion over the next 18 months." • Business Case: "Increasing our new business growth from 1 percent to 4 percent (or better) would increase our gross revenues by about $3 million. If we can do this without increasing our support costs per call, we should be able to realize a net gain of at least $2 million." • Goal Statement: "Increase the call center's industry-measured customer satisfaction rating from its current level (90th percentile = 75 percent) to the target level (90th percentile = 85 percent) by end of the fourth quarter without increasing support costs."

24. Define Phase • D2. Customer Requirements • A SIPOC table (Suppliers, Inputs, Process, Outputs and Customers) develops a detailed view of all the important customers, their requirements, and the related process step and supplier dependencies. • Voice-of-Customer (VOC) Interviews: Group interview the representative samples of the company's customers. • Summarizing Customer Requirements

25. SIPOC / COPIS Table – Captures Important Information About Customer-Process Dependencies

26. Define Phase • D3. High Level Process Map: • The process map will be helpful during the Measure phase, as the project team considers how and where to gather data that will shed light on the root cause of the issues most pertinent to the project's goals.

27. Measure Phase • M1. Refine the Project Y(s) • During this step the team considered exactly how the project Y(s) would be defined and measured:

28. Measure Phase • M2. Define Performance Standards for the Y(s)

29. Measure Phase • M3. Identify Segmentation Factors for Data Collection Plan • How is Y naturally segmented • What factors may be driving the Y(s)? • Y-to-x tree • cause-and-effect diagrams • cause-and-effect matrices

30. Measure Phase • M4. Apply Measurement Systems Analysis (MSA) • Questions Usually Posed for Measurement Systems:

31. Measure Phase • M5. Collect the Data: A plan was formulated to gather data from the past year's database. • M6. Describe and Display Variation in Current Performance • How is the Y Distributed? • Variation above and below the chart's control limits suggested that there were "special causes" in play – worth understanding in more detail by the team in the Analyze phase.

32. Analyze Phase • A1. Measure Process Capability: Before segmenting the data and "peeling the onion" to look for root causes and drivers, the current performance is compared to standards (established in step M2 of the Measure phase). • A2. Refine Improvement Goals: If the capability assessment shows a significant departure from expectations, some adjustment to the project goals may need to be considered.

33. Analyze Phase • A3: Identify Significant Data Segments and Patterns: • By segmenting the Y data based on the factors (x's) identified during the Measure phase – the team looks for patterns that shed light on what may be causing or driving the observed Y variation.

34. Analyze Phase • A4: Identify (Refined/More Detailed List of) Possible x's • Collecting the findings that came out of A3, the team posed strongest in the form of "why" questions: • Why do Problems and Changes cost more than other call types? • Why are calls processed on Mondays and Fridays more expensive? • Why do transfer rates differ by call type? (higher on Problems and Changes, lower on others) • Why are wait times higher on Mondays and Fridays and on Week 13 of each quarter?

35. Analyze Phase • A5: Identify and Verify the Critical x's • To sort out the real drivers from the "likely suspects" list built in A4, there is generally a shift from graphical analysis to statistical analysis. • The figure shows that the influence of callbacks on a call's wait time

36. Analyze Phase • A6: Refine the Financial Benefit Forecast • Given the "short list" of the real driving x's, the financial model forecasting "how much improvement?" may need to be adjusted.

37. Improve Phase • I1. Identify Solution Alternatives to Address Critical x's: • Consider solution alternatives from the possibilities identified earlier and decide which ones are worth pursuing further.

38. Improve Phase • I2. Verify the Relationships Between x's and Y(s) • What are the dynamics connecting the process x's with the critical outputs • Use regression analysis to verify the relationships

39. Improve Phase • I3. Select and Tune the Solution • Using predicted performance and net value, decide what is the best solution alternative. • Based on everything the team had learned, it recommended: • Start with Staffing (the "quick fix"). It is the fastest and surest way to stem the erosion of business growth. ("We recognize it is costly and not highly scalable (to other centers, other languages, etc.). This should be a first step, with the hope that it can be supplanted as the solution elements in other recommendations reduce staff needs.) • Web Service Percent. Begin right away tracking the call volume and customer satisfaction with this service mode. • Transfer and Callback reduction. Start right away. This is a "no brainer" net benefit that should work well in parallel with the first two solution elements.

40. Improve Phase • I4. Pilot / Implement Solution: • If possible, pilot the solution to demonstrate results and to verify no unintended side effects. • Preparation and deployment steps for putting the pilot solution in place. • Measures in place to track results and to detect unintended side effects. • Awareness of people issues. • Measure and compare the improvement of the solution

41. Control Phase • C1. Develop Control Plan • The Control plans addressed two views • Management control: It often focus on the Y(s) or outcomes of the process and often some of the x's as well • Operational control: It concerned with the x's that are predictive of outcome Y(s). • Operational control information included both controllable and "noise" variables • Operational control information was provided more frequently than management control information

42. Control Phase • C2. Determine Improved Process Capability • Use the same measures from Define and Measure in order to provide comparability and monitor impact in a consistent way. • C3. Implement Process Control • Create, modify and use data collection systems and output reports or dashboards consistent with the control plan.

43. Control Phase • C4. Close Project • Prepare the implementation plan, transfer control to operations, conduct project post-mortem, and archive project results.