How Do You Measure Up

How Do You Measure Up?

Measurement for Business Success

NAPBA National Conference9/11/2008

© 2008 eflexgroup.com. All rights reserved.

3 quotations to remember

• “You can’t manage what you can’t measure.”

• “Lean gets rid of clutter. Six Sigma gets rid of variation, and variation is evil.”

• “Da hurrier I go, da behinder I get.”


Why do you need to measure?

“You can’t manage what you can’t measure”

- Dr. Edward Deming, attributed


How do you measure up?

• How many phone calls did your call center staff answer in the last week?

• What was the average time to answer those calls?• What was your abandoned call percentage last week?• What was the average claims per hour processed by your

claims processing staff last month?• What was the accuracy of your claims processing staff last

month?


“Lean gets rid of clutter. Six Sigma gets rid of variation, and variation is evil.”

Jack Welch, CEO of GE

Voice of the Customer

CTQ

Tatk time

Sigma level

Anderson-Darling result

FM

EA

CO

PQ


History

• Six Sigma began at Motorola in the 1980’s– They realized that measuring defects in 1000s of opportunities

did not provide enough resolution.– Chairman Bob Galvin

• Lean comes from Toyota Motor Company, came to fruition in the 1970’s.

• Leaders in industry include: Allied Signal (Honeywell), General Electric, DuPont, Lockheed-Martin, Boeing, Department of Defense, US Army, US Navy


What is Lean Six Sigma?

• A commitment to our customers.• A statistical measurement of our processes.• A framework we can use that lets us think about the

economics of our process, our quality and our customers simultaneously.



DMAIC – a structured approach to change.

• Define: Define the problem• Measure: Measure the process• Analyze: Analyze the data generated in measurement• Improve: Improve by implementing the changes

suggested by the analysis of your measurements.

• Control: Watch the process to be sure it remains stable. Make changes as dictated by

data. Review to be sure change accomplished its purpose.


What do we measure?

• Cycle Time: How much time it takes to complete a process, including

time spent waiting for the next step.– How do we reduce cycle time?

• Evaluate process steps. Map them and decide their worth/necessity.

• Eliminate variation (defect, errors)


Value

• Value Added: A process step for which the customer would be willing to pay if they knew it existed.

• Non-Value Added: A non-required step in a process, for which the customer would not be willing to pay.

• Business NVA: Step required either by statute or other business requirement, but for which a customer would

not be willing to pay.



Quality

• Defect - the definition is largely determined by the customer.

– Defect makes customer unhappy– Costs the company money (COPQ)– Measured in Defects per Million Opportunities (DPMO).

Correlates to the Sigma Level.– Example: Filing and paying a claim when the participant is

sending debit card substantiation.


Defects per Million Opportunities

308000

66800

690000

3.42306210

1 2 3 4 5 6

Sigma Level

Def

ects


How good is 99%?

• Consider the USPS. They deliver 200 billion pieces of mail every year.

• How many would be misdirected or lost every day if they operated at a 99% quality level?– 1,000 – 10,000

– 10,001 – 100,000

– 100,001 – 1,000,000

– More than 1 million?


More the 1 million pieces per day

• That is about 10,000 DPMO• Falls in the range of 3 – 4 sigma.• If they reach 6 sigma level, they reduce

it to between 1,000 and 10,000 pieces per day.

• From 10,000 DPMO to 3.4 DPMO is the difference from 1 million pieces per day to a couple thousand pieces per day.

• That is only improving from 99% up.


How good is good enough?


eflexgroup.com examples

• Claims – Initial project reduced phone calls from 2000/day to 300/day. Savings of $400,000.

• Debit card hold spreadsheet– Approximately $3500/year savings

Involved asking to add a field to a report.

• Reducing mail costs in Claims – restoring email addresses.– Approximately $10,000/year. Spent about $1000 in time.


Theory of Constraints

• Figure out where the bottlenecks are in your process.• Find out what it takes to open the bottleneck


“Da hurrier I go da behinder I get”

• It is easy to “fix” a process that is not moving quickly enough by throwing bodies at it.

• It is easy to see a symptom which is not a cause.• Project management slows down the process

– Time taken documenting the project at the beginning keeps you from rushing down blind alleys

– Planning timelines for a project will help prevent waiting for a crucial step because the resource is not available for another week.


How do you do it?

• Do it yourself– 2 minutes per day * 5 days * 50 weeks = $1000– Spend 10 seconds/day thinking about how you can improve how

you do your job.

• Formal Lean Six Sigma– www.isixsigma.com– www.isssp.com


Questions?

Jeffrey C. Cox LSSGBLean Six Sigma [email protected]

Documents

How Do You Measure Up