Sherman Consulting Inc. Driving End-to-End Process Improvement SM Applying Six Sigma in Your Operations November 2, 2007 Peter J. Sherman ASQ Certified

Sherman Consulting Inc.Driving End-to-End Process Improvement

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Applying Six Sigma in Your Operations

November 2, 2007

Peter J. ShermanASQ Certified Quality EngineerCertified Six Sigma Black Belt

Module 8 – Managing Operations and Growth

2 Sherman Consulting Inc.Driving End-to-End Process Improvement

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Biography

Peter J. Sherman is an ASQ Certified Quality Engineer and a Certified Six Sigma Black Belt. He has 20 years experience, including serving as Sr. Black Belt for AT&T’s Product Development Group. Mr. Sherman has led Six Sigma initiatives across Product Development, Sales, Fulfillment, Installation, Customer Support, and Billing. He began his career in quality management working in Japan as a visiting M.I.T. Scholar in 1986-87 and is currently lead Instructor at Emory University's Six Sigma Certification Program in Atlanta, Georgia. Mr. Sherman has been published in various journals including iSixSigma, Quality Progress, Solutions (part of Journal of Financial Planning), and Hospitals & Health Networks. Mr. Sherman was the recipient of the 2007 Quality Excellence for Suppliers of Telecommunications (QuEST) 8 th Annual Best Practices in the Six Sigma category. Mr. Sherman received his Master's in Engineering from M.I.T. and has an MBA from Georgia State University. Mr. Sherman is a member of the ASQ and ISSSP.


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Agenda

σ Your Operations

σ Six Sigma Overview

Define Analyze Measure Improve Implement Control

σ 6σ Operations Plan

σ Wrap Up


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Objectives

1. Discover the role and value of Six Sigma 2. Understand the Six Sigma process3. Develop and implement a 6σ Operations

Plan for your business


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Your Operations


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Your Operational Business Goals

As a business owner you want to optimize:σ Accelerate new product / service launchesσ Increase sales effectivenessσ Reduce inventory to free up cash flowσ Streamline productionσ Improve accuracy of orders / on-time deliveryσ Prevent customer service calls σ Reduce costs of billing mistakes / lower A/R to free-up cash

σ Increase customer loyalty / reduce churn Six Sigma can help you achieve these goals!

Product / Service

Development

Fulfillment Delivery

Sales Support BillingProductionInventory


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Your Comparative Advantage

σ Capital?σ No

σ Low-Cost Labor?σ No

σ Market shareσ Maybe

σ Technology?σ Maybe

It’s how you manage your operations and processes!


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Why Should You Care?

σ Poor quality costs money!σ 30% for service companiesσ 15% for manufacturing companies

σ Customers have lots of options σ Global competitionσ Your company’s reputation

Philip Crosby


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Count the F’s Exercise

THE NECESSITY OF TRAINING FARM HANDS FOR FIRST CLASS FARMS IN THE FATHERLY HANDLING OF FARM LIVESTOCK IS FOREMOST IN THE MINDS OF FARM OWNERS. SINCE THE FOREFATHERS OF THE FARM OWNERS TRAINED THE FARM HANDS FOR FIRST CLASS FARMS IN THE FATHERLY HANDLING OF FARM LIVESTOCK, THE FARM OWNERS FEEL THEY SHOULD CARRY ON WITH THE FAMILY TRADITION OF TRAINING FARM HANDS OF FIRST CLASS FARMS IN THE FATHERLY HANDLING OF FARM LIVESTOCK BECAUSE THEY BELIEVE IT FORMS THE BASIS OF GOOD FUNDAMENTAL FARM MANAGEMENT.


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Six Sigma Overview


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Evolution of Six Sigma

1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s

Control Charts

Six Sigma

Cus

tom

er V

alue

TQM

Just-in-Time (JIT)

Kaizen

Statistical Process Control

Walter Shewhart, Western Electric

W. Edwards Deming

Lean Six Sigma

Taiichi Ohno

PDCA

Toyota Production System

ISO 9000

BPR

Lean

Quality Circles

Kaoru Ishikawa

Ishikawa Diagram

Michael Hammer

Joseph Juran

“Juran Trilogy”

Deming’s 14 points

Philip Crosby

“4 Absolutes of Quality Management”


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What is Six Sigma Level Quality?

The reliability of getting a dial tone every time you pick up a telephone!


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Knowing your package will be delivered by 10am the next day, guaranteed!


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Whether you are in Athens, GA or Athens Greece, a Big Mac tastes the same!


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Six Sigma Defined

σ It’s an approach to managing a businessσ Focus on customers, data and measurement

σ It’s a process improvement methodologyσ Improve existing processesσ Build new processes

σ It’s ROI oriented

Six Sigma (σ) is a customer focused, well defined management methodology supported by powerful analytical tools.


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Six Sigma Defined

“Today's competitive environment leaves no room for error. This is why Six Sigma Quality has become a part of our culture. At its heart, Six Sigma is about understanding what your customers want and developing a game plan to deliver it.”

Jack Welch Retired Chairman, CEO General Electric

6 Sigma translates into 3.4 Defects per Million Opportunities…or 99.9997% accuracy!

Requirements are Six Standard Deviations on each side of the mean

Upper Customer Requirement

Six Sigma Quality

Lower Customer Requirement

-6σ +6σ


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Sigma Level Comparisons

3 σ 6 σ

93.3% Error Free 99.9997% Error Free

Unsafe drinking water for 10 minutes each day One unsafe minute every seven months!

No electricity for 5 hours each month One hour with no electricity every 34 years!

2.2M incorrect surgeries per year in the U.S. 111 incorrect surgeries per year!

137,000 pieces of mail lost per hour in the U.S. 7 pieces of mail lost per hour!

150M wrong drug prescriptions a year in the U.S. 10,200 wrong drug prescriptions a year!

Expect cold showers 2 days a month Cold showers are less than 2 min. a year!


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DMAIIC Methodology

MEASURE THE CURRENT PERFORMANCE

DEFINE THE OPPORTUNITY

IMPROVE PROCESS EFFICIENCY

ANALYZE THE CURRENT PROCESSES

CONTROL AND ADJUST NEW PROCESSES

IMPLEMENT IMPROVEMENTS

Customer FocusedData Driven

ROI Oriented








ROI Oriented

Courtesy IIE and Aft Systems © 2007

A rational decision making process for improving existing processes.


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DMAIIC Methodology

• Determine breakthroughs, design future state: new process, new “Sigma” level

• Create dashboards, scorecards and plans

• Execute plans, overcome barriers

• Transition to the new process







• Perform cause-effect analysis to determine reasons for gaps in performance

• Map the process, gather initial performance data and determine current “Sigma”level

• Obtain client input, factors Critical to Quality (CTQ)

• Improve on what matters most to the client

• Significantly impact the bottom line

• Measure improvements and breakthroughs

• Report dashboard, scorecard data and client feedback


ROI Oriented

• Determine breakthroughs, design future state: new process, new “Sigma” level

• Create dashboards, scorecards and plans

• Execute plans, overcome barriers

• Transition to the new process







• Perform cause-effect analysis to determine reasons for gaps in performance

• Map the process, gather initial performance data and determine current “Sigma”level

• Obtain client input, factors Critical to Quality (CTQ)

• Improve on what matters most to the client

• Significantly impact the bottom line

• Measure improvements and breakthroughs

• Report dashboard, scorecard data and client feedback


ROI Oriented

Courtesy of IIE and Aft Systems © 2007


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Keys to Successful Six Sigma Implementation

σ Top Management Support and Participation:

Senior management must drive the process through the organization. Elements of this include careful selection of projects, allocation of resources, and decisions based on the measurements.

σ Clearly Defined Projects: Well-defined scope with specific quantitative and measurable improvements.

σ Strong Project Leadership: By Black Belts and Green Belts alike.


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6σ Operations Plan


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6σ Operations Plan

Layout and understand your end-to-end business processσ Identify gaps, bottlenecks, redundancies

MarketingFulfill & Deliver

Sales Support Billing

1

Talk to your customers to understand their

needs!


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6σ Operations Plan

2

Category Description

Highly Customized Poor candidates for 6 Sigma campaigns (low ROI), i.e., Complex IT systems

Mass-Customized Good candidates for 6 Sigma campaigns if the volume of activity is high enough, i.e., Web-based marketing / customer accounts / fulfillment, customer support

Standardized Great candidates for 6 Sigma campaigns (high ROI); i.e., Account Processing / Maintenance, Billing, Accounts Payable, Payroll

Determine which parts of your service processes are the best candidates:


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6σ Operations Plan

Key Activities Application of Six Sigma

Marketing • Increase pipeline of prospective customers • Reduce time-to-market for product and service launches

Sales • Improve sales close rates• Reduce sales cycle times

Fulfillment and Delivery

• Improve on-time delivery of products• Improve accuracy of orders (i.e., reduce returns)• Reduce inventory levels to better manage cash flow

Support • Improve first-contact resolution• Lower handling time for contacts• Improve customer satisfaction

Billing • Improve accuracy of invoice• Shorten accounts receivable days outstanding


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6σ Operations Plan

Measure your key activities over time:

σ New sales cycle times / success rate

σ Account processing cycle times / defect rate

σ Delivery times / delays

σ Defect rates / customer complaints

3

W. Edwards Deming

“If you don’t measure it, you can’t manage it.”


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Six Sigma Plan


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Wrap Up

σ Q & A

σ Tools: www.sherman6sigma.com

Call or email me anytime!

(678) 595-7942 [email protected]

Documents

Sherman Consulting Inc. Driving End-to-End Process Improvement SM Applying Six Sigma in Your Operations November 2, 2007 Peter J. Sherman ASQ Certified