Achieving Operational

Excellence by Six Sigma

Six Sigma Methodology
 Goals and Objectives:
 Understand the difference between a sporadic
and a chronic quality problems.
 Enumerate the different phases of the six-sigma
methodology and understand their purpose.
 Comprehend some basic qualitative tools that
complement the six-sigma methodology.
You may start with Sporadic vs.
Chronic Problems
 Sporadic problems: adverse changes that
are sudden and that can be restored in the
short term.
 Chronic problems: need to be addressed
with a longer term perspective. They can
be very costly for the organizations.
 A structured and project approach is
needed to address chronic problems.
Generic Project Tasks
 Verifying the project need and mission.
 Diagnosing the causes.
 Providing a remedy (make the case of its
effectiveness).
 Dealing with resistance to change.
 Instituting controls to hold the gains.
Six-Sigma Methodology
 Statistical foundation: the process variations,
given the product specifications, allows only
3.4 defects by millions of parts.
 The six-sigma methodology is related to
projects that aim to improve processes
through disciplined and data driven analysis.
There are two Six Sigma Methodologies

 DMAIC to improve existing processes

 DMADV to develop new processes
DMAIC

 Define
 Measure
 Analyze
 Improve
 Control Performance
Process Power:
DMAIC—Five Step Process

Define

Control Measure

Improve Analyze
 Six Sigma - The Process

Define
Measure
Analyze
Improve
Control
• At GE, the DMAIC process is utilized for quality improvement
of existing products and processes.
• A modified version of the process (DMADV) is utilized
in new product and process design.
6 DMAIC Process

Institutionalize Improvement Develop Charter and

Control Deployment Business Case
Quantify Financial Results Map Existing Process
Present Final Project Results Collect Voice of the Customer
and Lessons Learned Specify CTQs / Requirements
Close Project
Control Define

Improve Measure Measure CTQs / Requirements

Select Solution (Including
Trade Studies, Cost/Benefit Determine Process Stability
Analysis) Analyze Determine Process Capability
Design Solution Calculate Baseline Sigma
Pilot Solution Refine Problem Statement
Implement Solution

Identify Root Causes

Quantify Root Causes
Verify Root Causes

DMAIC = Define, Measure, Analyze, Improve and Control

 “Cookbook” “Tools &
“Strategy”
—the steps Concepts”

Define •
•
•
Define the problem
Select cross-functional team
Define team charter
QFD
Measure 1 Select CTQ Characteristics
2 Define Performance Standards
3 Validate Measurement System
Process Mapping
Measurement Systems
Product
Benchmarking/Baselining
Analyze 4 Establish Product Capability
5 Define Performance Objectives
6 Identify Variation Sources
Yield & Sigma
Basic Quality Tools

or

Improve 7 Screen Potential Causes

8 Discover Variable Relationships
9 Establish Operating Tolerances
Design of Experiments
Brainstorm & Workout

Service
Control 10 Validate Measurement System
11 Determine Process Capability
12 Implement Process Controls
Control Charts
Procedures
Training
DMAIC—each step has a question
 Define
 What is important?

 Measure
 How are we doing?

 Analyze
 What is wrong?

 Improve
 Fix what’s wrong

 Control
 Ensure gains are maintained to
guarantee performance
Define:

 Clearly identify the problem

 Utilize numerical definition
 Focus on process that creates the problem
not on the outcome
Define—doing it with excellence
 Identify our internal and external customers
 Determine what our customers want
 Identify our suppliers
 Determine what we need from our suppliers
 Identify problems
 Identify the process that contributes to the problems
 Identify improvement opportunities
 Scope the improvement project
 Select the right players
 Set goals and objectives
Measure:

 Benchmark
 Capability of a given process
 Focus on CTQ
Measure—doing it with excellence
 Review the current process
 Identify key inputs and outputs
 Develop baseline and entitlement metrics
 Performance
 Cost

 Collect and organize data

 Evaluate the performance of the process
 Defects
 Cycle time

 Assess the amount of variation

 In the process
 In the measurement system
Analyze:

 Current process results

 What is possible compared to what the
competition is doing
Analyze—doing a great job here
 Identify issues that occur at each step in the process

 Assess customer impact of problems

 Prioritize most critical inputs

 Assess the effect on outputs or performance

 Determine root causes

 Generate solutions

 Select most likely solutions

Improve:

 Implement changes
 Be creative to find new ways to do things
better, cheaper, or faster
 Improve—this is most critical!
 Develop Action Items

 Prioritize improvements

 Test solutions

 Determine best combination of inputs

and controls

 Refine solutions

 Document solutions

 Implement solutions
Control:

 Lock in successes
 Implement measures to keep variables
within the new operating limits
Control—sustaining your gains
 Measure progress

 Capture and quantify benefits of the process improvements

 Document the project

 Communicate for organizational learning

 Recognize the team’s efforts and success

 Monitor and manage to hold gains

 Adjust for continuous improvement

Recall Evolution of QA Methods…

Six Sigma…

Quality
Mgmt
Systems

Taguchi

DOE

SPC

Inspection

1930 1940 … 1975 1985 1990 1995 2000

Six Sigma DMAIC Model is most
systematic!
1. IDENTIFY OPPORTUNITIES 2. FORM TEAM & SCOPE PROJECT 3. ANALYZE CURRENT PROCESS 4. DEFINE DESIRED OUTCOMES
Process Flow Analysis FOR IMPROVED PROCESS
Process Flow Analysis Identify Customers
and Requirements Establish Process Define Performance
Boundaries Measures
Benchmarking Agree on Goals
Analyze Available Check Sheet
SURVEY
Pareto Analysis Data GOAL
YES NO
A HISTORY CHECK SHEET
Tree Diagram
B REPORT

C
D

9. ACKNOWLEDGE TEAM AND 5. IDENTIFY ROOT CAUSES & PROPOSED SOLUTIONS

COMMUNICATE RESULTS Brainstorming Process Redesign
TEAM RESULTS
REPORT
Why-Why
Diagram
Nominal Group Technique
Cause & Effect
Diagram

EFFECT

6. PRIORITIZE, PLAN AND TEST

PROPOSED SOLUTIONS
RECYCLE IF NECESSARY Design of Level Loading
Experiments PRODUCTION DAYS
1 2 3 30
8. MEASURE PROGRESS & HOLD 7. REFINE AND IMPLEMENT 90.00
83.67
C+
A
GAINS SOLUTIONS
Brainstorming Force Field Analysis
77.33
71.00
C-
B
C Phase Step(s)
64.67 C- D
Trend Chart SPC 58.33
52.00 C+
A- A+
Pull System
NEXT Define 1&2
OPERATION
PRIOR
GANTT Chart Training & Procedures OPERATION
Measure 3&4
Analyze 5
Improve 6&7
Control 8&9
 Using Successive 6 Projects for
Cycle Time and Defect Reduction
Hi
Cycle Time and Defects

Low
Time
Six Sigma is really different!
A look into DMAIC:
 Problem Process Definition
 Measure to determine current Process
Capability and Control (Mean and Deviation)
 How / What Methodology do we apply to
Improve
 Implement Methodology / Action to Improve
 Action for continuous improvement and control
Six Sigma
Qualitative Tools
--soft, yet they are very useful!
 Brainstorming and affinity diagram.
 Pareto analysis.
 Cause-effect diagram.
 Process mapping
Six Sigma
Quantitative Tools

 Statistical testing.
 Design for experiment.

 Control chart .

 Process capability .

 Reliability analysis

... And there are others…

Tools & Templates by DMAIC Phase
Tool Define Measure Analyze Improve Control
Action Item/Implementation Plan X
Affinity Diagram X X X
Brainstorming X X X
Business Impact (ABM) X
Cause & Effect Matrix X
Check Sheet X
Control/Reaction Plan X X
Control Chart X X
Cycle Time Analysis
Design of Experiment (DOE) X
Decision Matrix X
DPMO to Sigma Conversion Table X X
Five Whys X
Failure Mode and Effects Analysis (FMEA) X
Force Field Analysis X
Four Up X X X X X
Histogram X

Note: The relationship between the specific tool and the DMAIC phase is based on most likely usage as opposed to possible usage.
Tools & Templates by DMAIC Phase continued
Tool Define Measure Analyze Improve Control
Ishikawa (Fishbone) X
Measurement System Evaluation (MSE) X
Multivoting X
Pareto Chart X
Process Capability X X X X
Process Costing Tool X
Process Maps X X X X
Problem Statement/Critical Business Issue (CBI) X
Requirements Analysis X
Run Chart X X
Scatter Diagram X
Sigma Calculator X X
SIPOC Chart X
Story Board X
SWOT Analysis X
Team Charter X
Thought Process Map X
Note: The relationship between the specific tool and the DMAIC phase is based on most likely usage as opposed to possible usage.
 Define - Team Charter
This is a project!
Service Impacted The timely and accurate Division & Function CitiStreet RSD
 What is the focus of the Black Belt
payment of commissions and
collection of carrier payments
Pete Ferlita Telephone Number(s)
Commissions, Finance
Ext 2566

team’s efforts? Green Belt

Executive Sponsor
John Cirillo
Bob Dughi
Bill Valentine
Telephone Number(s)
Ext 2477
Ext 2001
Ext 2014
Champion Andy Lovasz Ext 2179
Start Date 1/1/03 Target Completion Date 9/01/03

 What are the Element

1. Process:
Description
The process in which the
opportunity exists.
Team Charter
Carrier Billing, receipt of payments, and payment of AE
Commissions

boundaries (scope) 2. Problem Statement: Describe the critical business

issue that is being addressed.
Financial transactions are not being recorded in the Commission
Accounting System resulting in deferred or lost carriers payments
and incorrect payment of AE commission.
3. Objective: Unit of
of the effort?
What performance
improvements are targeted and Area of Target Measure
what impacts are expected on Improvement Baseline Goal Date (DPMO,%,$)
Revenue, Expense, Cost/Risk Revenue $2 M 7/1/03 $
Avoidance and Capacity
Rework (ABM)? PAEF 1,485,530 -50% 9/1/03 %

 What is the expected Records

PAEF
Premium
$72,964,70
4
-75% 7/1/03 %

Commissions, Account Executives

outcome? 4. Business Results:
5. Team members:
What functional areas of the
organization will realize the
benefits?
Who are the team members? Dawn Simpson, Chris Hsieh, Melissa Kopsco, Bob Mezier, Deon
Van Renburg, Andy Lovaz, Ralph Winnicker, Pete Ferlita
John Cirillo, Mike Bikofsky

 Why is this important? 6. Project Scope:

7. Benefit to Customers:
Which part of the process will
be investigated?
Who are the final customers,
what benefits will they see and
what are their most critical
requirements?
Determine why certain transactions are not bridging to CAS.
Eliminate records from entering the Premium Applied Error File.
Account Executives – will be paid on time and correctly.
Commissions Team – will take less inquiry calls from AE’s
questioning incorrect payments.
Citistreet – will recognize all revenue due from carriers in a timely

 Who are the key 8. Schedule of Key Milestone

Dates:
D – Define
manor.
Project Start January 2003

“M” Completion
players? M – Measurement
A – Analyze
I – Improve
“A” Completion
“I” Completion
February 2003
April 2003
September 2003
C – Control “C” Completion October 2003
Project Completion October 2003
9. Support Required: Do you anticipate the need for Possible IT support.
any special capabilities,
hardware, trials, etc?
Define - Thought Process Map
Problem Statement
Assets reflected on the Travelers and CitiStreet record keeping systems are not in balance on a
daily basis. This results in daily reconciliation issues, extensive manual effort and significant
exposure to market value adjustments.

1. What is the problem?

Information and Data with Respect to the Problem
. Approximately 10% of our accounts are out of balance on a daily basis (e.g. fixed cell issues).
. There are approximately 500-700 reconciling items per day (plans and funds).

2. Do we have any data .

.
Assets are out of balance by approximately $2MM Inception to Date .
There are approximately $120M of receivables > than 5 business days out of balance YTD 2002.

and information on the

problem? Processes to be Considered
Plan Setup, Product Definition, Fund and Case Translation, Trading/Transmission/Pricing, Cash
Settlement, Monthly Travelers Bill, Transaction Processing, Reconciliation.

3. What processes are Key Questions

. Why do we have rejects every day?

being considered? .
.
.
Are the systems functioning according to the latest specifications?
Will we have IT resources available to work on this project?
Do we need two record keeping systems?
. Do we need two transmissions (money in/money out)?
. Does Travelers need to be made aware of the daily reconciling items?

4. What are the key

questions that need to .
.
Actions and Tools to Address the Key Questions
Develop daily metrics and source of error for out of balance situations.
Develop daily metrics and source of error for manual adjustments being sent to Travelers.
. Perform root cause analysis on all sources of error .
be answered? .
.
.
Compile and review the complete set of systems specifications and perform a gap analysis.
Evaluate the need for two systems.
Evaluate the possibility of having one daily feed versus two.
. Develop a list of Subject Matter Experts for the "Processes to be Considered".

Action Plan
. Collect base line metrics.
. Conduct an As Is session in Hartford the week of 9/23/02.
. Conduct a Should Be session in E. Brunswick the week of 10/14/02.
. Implement process improvements.
. Implement a control plan.
Define - Top Level Process Map
Benefit Distributions - Top Level Map
 What is the starting point
of the process? Plan Participant
requests,completes and
mails a Distribution Request
Field Office/Outside Carrier
receives the request

- Office Manager Reviews

- Carrier Reviews

 What is the end point of - Mails request to National Office

the process?
Mail Room (N.O.)
Benefits Area sorts by plan

 What are the major steps in receives application

- Opens Mail - Opens Mail

the process? - Sorts Mail
- Delivers to Benefits Department
- Sorts by Plan
- Distributes to Processors

 Who is involved in the

process? Benefits Processor reviews
and processes applications
Benefits Processor
processes the check

- Review for good order - Reviews check to Distribution

- If not in good order, recycles Form
- If in good order, processes - If in good order, mails
- If not in good order, voids
check and reprocesses

Mailroom sends check to the Plan Participant receives

Plan Participant the check

- Places check in envelope

- Sends out the check
 Measure - DPMO and Sigma
 What is the output Time Period covered 12 months Participant Call Completion
TOTAL UNITS PRODUCED 319,366
volume of the process? parts / unit 1 total part defects 14,869
process step / unit 0 total process step defects 0
performance opportunity / unit 0 total performance defects 0
 What are the total opportunities / unit 1

opportunities for error? TOTAL OPPORTUNITIES

DPMO
319,366

46,558
TOTAL DEFECTS 14,869

SHORT TERM SIGMA = 3.18 LONG TERM SIGMA = 1.68

 How many defects
are produced? Time Period covered 12 months
TOTAL UNITS PRODUCED 66,651
Plan Call Completion

parts / unit 1 total part defects 1,253

 What is the process step / unit

performance opportunity / unit
0
0
total process step defects
total performance defects
0
0
total opportunities / unit 1
performance level of TOTAL OPPORTUNITIES 66,651 TOTAL DEFECTS 1,253

the process? DPMO 18,799

SHORT TERM SIGMA = 3.58 LONG TERM SIGMA = 2.08

(DPMO: Defects per million opportunities)

Measure – Use Descriptive Statistics
 Is our data normally
distributed?

 What are the confidence

intervals?

 Can we use our data for

further analysis?
 Measure - Control Charts
Percent of Transactions Rejected

 What are the

performance trends? 70 UCL=69.85

Individual Values
60
50
40 X=40.83
30
 Is variation within the 20
10 LCL=11.81

normal range? 0
J F M A M J J A S O N D

40

 Is the process stable? URL=35.64

Moving Range
30

20

mR=10.91
 Is the process capable? 10

0 LRL=0
Measure - Detailed Process Map
 Who are the suppliers
and customers?
 What are the inputs
and outputs?
 Which inputs are
controllable?
 Where do we have
issues?
 What impacts cycle time?
 Is there a hidden factory?
 What % of the steps
add value?
 ADP/ACP Testing - As Is Process

Create year-end
Get data to define
Generate a packages Mail year-end
Start the testing
hardcopy census customized by packages
population
market

ERISA ERISA - BP ERISA ERISA/Marketing/Vendor

BP via Mainframe Dump BP via Vendor
MM/SK via Excel DB CR/MM/SK via in-house
A Core via ERISA Lotus Notes DB
13 Through 17 27 18 Through 20 21 26 40

1 Through 12 22 Through 25 48 28 Through 36

No

Wait for Information Execute

Log receipt of
information received by No follow-up A
from plan follow-up date? information
letter process

ERISA 41 B ERISA ERISA

Marketing

28 37 38 39 43 Through 52

Yes

Note source of Image the census

Missing or
problem on cover and log image Resolvable by a
Review census unreadable Yes phone call?
information? sheet or check numbers on the
sheet Excel spreadsheet

ERISA ERISA ERISA - BP

54 55 56 53 57 Through 60 42 43 65 Through 70
C
No
No
Yes
Return original Image and send Data enter census',
information to client
the hardcopy send an electronic
Call client for with request for Information
Yes census to the copy via e-mail, and
information additional obtained?
vendor for data return the hardcopy
information or
entry to BP - ERISA
clarifications
BP - Account Management Team BP - Account Management Team 61 No 62 BP - ERISA Data Entry Vendor
CR - Case Managers CR - Case Managers
MM/SK - ERISA Specialists MM/SK - ERISA Specialists
B
64 71 Through 74 64 72 74 75 Through 79

Load P-Census to Log the hardcopy

the AS400 which census' and
Request the OMNI Extract data from Import data to
automatically distribute them to
data on the ERISA the ERISA Excel, review and
populates the the ERISA
Workstation Workstation scrub
AS400, OMNI and Specialists for
ERISA Workstation testing
IT Operations BP - ERISA BP/MM/SK - ERISA Specialists BP/MM/SK - ERISA Specialists MM/SK - ERISA Specialists
CR - Case Managers CR - Case Managers CR - Case Managers

80 81 82 83 84 85 Through 92 93 94

To
Import data to Review and scrub Data complete
Yes Page 2
ASC data in ASC and accurate?

BP/MM/SK - ERISA Specialists BP - ERISA Specialists No

CR - Case Managers

C
 Measure - Issues List
 What goes wrong Data and Year End
Issues Categories
Internal Client Education Quality Control

at each step in Data Entry Package and

Other Client
Communication
Education and QC Processes

the process? 1, 2, 3, 5, 6, 9, 10,

12, 16, 21, 22, 23,
25, 27, 32, 52, 53,
18, 19, 20, 33, 34,
35, 36, 38, 60,
124, 126, 128,
31, 36, 65, 73, 104,
110, 166
19, 38, 53, 54, 59,
60, 61, 94, 03, 111,
139, 143
53, 65, 80, 81, 90,
98, 99, 100, 101,
118, 135, 145, 148,
54, 55, 76, 77, 78 131, 132, 139, 150, 153, 154, 159,
79, 80, 81, 89, 90, 156 169
94, 97, 102, 115,

 Where are the 118, 132, 135, 143,

145, 150
Mailing and Printing Systems Software Process and Staffing and

majority of the Carriers

14, 26, 28, 29, 30,
31, 32, 118, 119,
13, 14, 15, 17, 109 91, 92, 95, 96, 104,
105, 106, 113
Standards
39, 40, 41, 42, 47,
54, 56, 57, 62, 63,
Scheduling
3, 17, 18, 23, 29,
43, 44, 83, 84, 101,
120, 121, 122, 123, 73, 86, 87, 93, 111, 103, 108, 128, 155,
problems? 130 131, 135, 141, 144,
147, 149, 151, 155,
169

157, 158, 159, 160,

162, 164, 165, 166,
167, 168

 What functional Imaging

68, 69, 70
ERISA
Workstation
81, 85, 86, 87, 88,
Tracking and
Sorting
1, 2, 4, 7, 10, 11,
Census and Plan
Connect
46, 48, 49, 50, 51,
Policy

8, 64, 112, 126,

93 12, 24, 25, 30, 31, 54, 74, 75, 81, 82 136, 137, 144, 146
areas are most 38, 41, 43, 44, 45,
52, 57, 58, 63, 66,
67, 70, 71, 72, 83,

affected? 107, 116, 117,127,

128, 129, 133,134,
140, 141, 149, 152,
154, 161, 162, 163
Analyze - Cause and Effect Matrix
Process: Recycled Paperwork - Benefits Distributions

 What are the most important Customer Requirements

Correct Payment
Make Request
customer requirements?

Fast Payment
Easy to Make

Return Instr.

Total Value
Assistance
Output
Inputs Weight 10 7 4 7 10 4

 What is the relationship Step

1 Request Form
Process

Contact 4
40
1
7
10
40
4
28
1
10
1
4
129
100 7 4 49 10 4

of major process steps 1

1
Request Form

Request Form
Phone Number

Address
10

4
40
1

1
7
1

1
4
10
7
70
1

1
10
1

1
4
174

135
100 28 28 28 70 16

and inputs to customer 2

2
Screen Request Guidelines

Screen Request Plan Information

10

10
100
4

1
7
7

7
28
4

7
49
7

7
70
4

4
16
270

270
100 7 4 7 10 4

requirements? 3

3
Send Form

Send Form
Contact

Address
10

10
100
1

1
7
1

1
4
1

1
7
1

1
10
1

1
4
132

132
10 49 4 7 40 16
4 Fill Out Form Form 1 7 1 1 4 4 126
10 70 40 28 100 28
4 Fill Out Form Instructions 1 10 10 4 10 7 276

 Where should we focus our 4 Fill Out Form Signatures 1

10

10
1
7

7
1
4

4
1
7

70
10
100

10
7
28

28
156

5 Return Form Return Envelope 1 1 1 10 1 7 129

improvement efforts? 5 Return Form Return Address 1

10

10
1
7

7
1
4

4
10
70

7
1
10

100
7
28

40
129

6 Process Form Correct Form 1 1 1 1 10 10 168

10 7 4 7 70 28
6 Process Form Procedures 1 1 1 1 7 7 126
10 7 4 7 40 16
6 Process Form Processor 1 1 1 1 4 4 84
10 7 4 7 100 40
6 Process Form Required Information 1 1 1 1 10 10 168
10 7 4 7 10 40
6 Process Form Required Signatures 1 1 1 1 1 10 78
10 7 4 7 100 16
7 Send Payment Check 1 1 1 1 10 4 144
10 7 4 7 10 40
7 Send Payment Address 1 700 1 1 1 1 10 78

259

196

469

880

400
Total

Note:
Rating scale 1, 4, 7, 10
Analyze - Ishikawa (Fishbone)
(I think this is the best QM tool ever!)
 Which of the process
inputs are likely to
contribute to the
problem?

 What are the categories

of root causes?

 What are the most

likely root causes within
each category?
Click on the boxes to enter your Cause & Effect

Material Methods Environment

Click to enter

click

Men Machine Measurement

 Major Cause Major Cause Major Cause
Forms Plan Participant Field Office/HELPLINE

Unaware of requirements Don’t instruct PP

Poorly Designed
Hard to Follow Not trained Too busy

Form Congested Don’t Re ad Instructi ons Not Trained

Don’t underst and instruct ions No Procedures

Contract/Legal Language Used Didn’t get instructions
Provide Wrong Instructions
Inconsistent use of title Call Carrier Directly Not trained
Provide Wrong Form
Not trained Problem Statement
No guidelines
Employer Signature missing
Inconsistent Across Products Legal Concerns on over 30% of forms
No return envelope
Hard to Follow Don’t want responsibility No return instructions
Not Sent Forget to Sign Provide wrong forms
Legal Language Turnover Provide generic or no
Not trained instructions
Missing
Unaware of Requirements

Major Cause Major Cause Major Cause

Instructions Employer Carriers
 Analyze - Pareto
 What is the frequency
of occurrence of each
Pareto by Reason Code
potential root cause?
1500 100

 Which root causes are 80

likely to contribute 1000

Percent
60

Count
most to our defects?
40
500
 Which root causes 20

should we focus 0 0
on first? Defect
Count 484 263 183 143 140 92 91 61 31 22 11 9 13
Percent 31 17 12 9 9 6 6 4 2 1 1 1 1
Cum% 31 48 60 70 79 85 90 94 96 98 99 99 100
 Analyze - FMEA
 How can our product,
service or process fail?

 What are the

consequences of
failure?

 How likely is the failure

to occur?

 How likely is the

customer to be
affected?
 Analyze - Components of Variation
Locate the key ―trouble-makers‖
Nested Hierarchy

 Where are the major Mutual Nationwide Travelers

sources of variation? Carrier
Form Type L S L S L S
 How much variation
Reason
is present at each Code 1234 1234 1234 1234 1234 1234
level of the
hierarchy? Dot Frequency Diagram

 Where should we
Reason Codes
3 .
focus our efforts to 2

reduce the variation? 1

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
ML MS NL NS TL TS
 Improve – Mean Sqr Error!!!
 How real is the
variation that
we observe in
our process?

 Does the
measurement
system contribute to
the variation?

 Is the measurement
system adequate?
1. Enter information (# More than two raters Yes
of questions, # of raters,
Two raters only No
category values) in
column below
2. Then enter data in 3. Once worksheet contains
indicated worksheet: data, appropriate calculations
RAW DATA will appear below
Multiple Raters (> 2)
2 n k
nm    x ij2
Number of questions n= 20 sum x ij = 180 2

Number of raters m= 3 sum p*q = 0.5 i 1 j 1

Koverall = 1
 overall  1  k

Categories 1 P nm ( m  1)  p j q j
j 1
2 R
3
4
5 Two Raters
P  Pchance
6 Pobserved =   observed
7 Pchance = 1  Pchance Koverall or individual =
8
9
10
11 Kappacategory for > 2 raters

 x m  x 
n
12 Category Kappa
ij ij
i 1
13  category  1  P 1
nm ( m  1) p j q j
14 R 1

15
 Improve – by using DOE
 Which of the
Hardship Withdrawals DOE Data Matrix
improvement ideas StdOrder RunOrder
12 1
Checklist
1
Instructions
1
Language
-1
Sample
1
C*I C*L C*S
1 -1 1
I*L
-1
I*S
1
L*S
-1
Complete Withdrawals
18

identified with 7

16
2

3
-1

1
1

1
1

1
-1

1
-1

1
-1

1
1

1
1

1
-1

1
-1

1
13

19

other tools 11

10
4

5
-1

1
1

-1
-1

-1
1

1
-1

-1
1

-1
-1

1
-1

1
1

-1
-1

-1
16

18

8 6 1 1 1 -1 1 1 -1 1 -1 -1 17

represent the 15

5
7

8
-1

-1
1

-1
1

1
1

-1
-1

1
-1

-1
-1

1
1

-1
1

1
1

-1
16

14

largest payback 4

1
9

10
1

-1
1

-1
-1

-1
-1

-1
1

1
-1

1
-1

1
-1

1
-1

1
1

1
16

11

13 11 -1 -1 1 1 1 -1 -1 -1 -1 1 14

with respect to the 3

14
12

13
-1

1
1

-1
-1

1
-1

1
-1

-1
1

1
1

1
-1

-1
-1

-1
1

1
11

18

CBI? 2

6
14

15
1

1
-1

-1
-1

1
-1

-1
-1

-1
-1

1
-1

-1
1

-1
1

1
1

-1
15

16

9 16 -1 -1 -1 1 1 1 -1 1 -1 -1 15

 Do multiple Pareto Chart of the Effects

(response is Complete Withdrawals, Alpha = .10)

improvements A
A:
B:
C:
Checklist
Instructions
Language
D

work in concert to CD
C
B
D: Sample

produce a better ACD

ABD
BD

result? BCD
AD
BC
AC
ABCD
ABC
AB

0 1 2 3
Improve - Action Items
Action Item Description: Develop and implement a process to establish product profitability expectations and to track
 Which of the and evaluate financial performance against the expectations.
Expected Benefits: Ensure that the profitability expectation is positive prior to committing to the product.
validated Key Deliverables: Standard unit costs; Data capture process; P&L Model.
Appraisal Criteria: P&L model is implemented that meets with the approval of Finance. P&L model serves the
needs of the Product Review Team, Product Review Board and Post Mortem Team.
improvements are Team Members
we going to Name (*-Action Item Owner, &-Backup, +-Mentor)
* Ralph Winnicker
Organization - Location
Operations Quality
Skill Set or Knowledge Expected

Theresa LaPlaca Finance

implement? Glenn Lovrich Finance

Interdependencies/Linkage to other Action Items:

 What is the AI#
5
Description of Dependency
P&L model will be used to assess financial benefits.
expected benefit? 6
7
P&L model will be used to review financial benefits.
Standard unit costs will be used for the detailed product specifications.
10, 15 P&L model will be used to assess the impact of rework due to performance issues.
 What are the 18 P&L model will be validated during the post mortem.
Implementation Plan:
key deliverables? Milestone Target Date Revised
Target Date
Actual
Completion Date
Status
Develop and publish standard unit costs. 10/31
 What is the Develop a data capture process with respect to
project activity so that standard unit costs can be
applied.
11/15 Contingent on target date of Action Item 8.

implementation Develop and implement a P&L model that

evaluates product profitability in conjunction with
the applied standard unit costs and the pricing
12/15 Contingent on the completion of milestone 2.

schedule?
model.
Recent Accomplishments:
Date Description
10/11 Reviewed data elements of the current Pricing Model with Glenn, and outlined a plan to develop a stripped-down version
 How will we know 10/22
for use with the Product Specification Template (AI 7).
Glenn developed a stripped-down version. We determined that too much “off template” detail was required to develop the
Product P&L. We decided to utilize the new Pricing Model (currently being developed), and to modify it to reflect Product-
that the Action Item 11/4
level versus Case-level data.
Reviewed the new Pricing Model, and scoped out changes required to make it Product-level.

was successfully 11/5

AIMS Review:
Next step is to review Model and proposed changes at 11/5 Action Item Review.

Date Prepared By Remarks

implemented? 11/5/02 Ralph Winnicker and Glenn Lovrich
Control - Control and Reaction Plan
 Do the key outputs
meet the
performance
standard?

 What are the most

likely causes of an
out-of-standard
condition?

 What actions need

to be taken?

 Who is responsible
to take the
actions?
 Control - Control Charts
 What are the
Percent of Transactions Rejected
performance
trends? 40

Individual Values
UCL=34.92
30

X=20.42
 Are we holding the 20

10
LCL=11.81
gains from our 0

process 20
URL=17.82
improvements?
Moving Range
10

mR=5.45

 Is any further action 0 LRL=0

required?
 Control/Reaction Plan for Distributions
Out of Control Measurement
Process step Condition Measurement Frequency Probable Cause What to Check Actions to Take Responsible When
1 Screen Reason Code Recycle Daily/Weekly  Screening  New hires/transfers  Train/retrain  Field Office and HELPLINE  New hires or transfers join the
Request for 1,3,5,6,11,12,14, Database, personnel not or changes made? personnel. Management. area or process changes are
Distribution 16,18,19 or 20 pareto and trained  Guidelines and  Update guidelines  Marketing. made
Form exceeds 10% DPMO chart  Screening checklists up to and checklists.  Field Office and HELPLINE  New plan introduced or plan
and DPMO target personnel do not date?  Enforce use of talk Management. changes made
exceeded by 5% have adequate  Talk sheets used? sheets.  Daily
guidelines.
2 Send Reason Code Recycle Daily/Weekly  Fulfillment  New hires/transfers  Train /retrain  Field Office and HELPLINE  New hires or transfers join the
Distribution 5,11, or 19 Database, personnel not or changes made? personnel. Management area or process changes are
Package exceeds 10% pareto and trained.  Procedures  Enforce use of  Field Office and HELPLINE made.
and DPMO target DPMO chart  Fulfillment distributed to all procedures. Management.  Daily
exceeded by 5% procedures not personnel?  Update procedures.  Field Administrative  New Plan introduced or Plan
understood or not  Procedures up to  Update address Services and HELPLINE changes made.
used. date? information on Management  Plan participant changes
 System address is  Address updates system.  Benefit Distributions residence.
incorrect. need to be Processors
processed?
3 Plan Reason Code Recycle Daily/Weekly  Instructions may be  Current instructions  Maintain current  Field Office and HELPLINE  New Plan introduced or Plan
Participant 2,4,5,8,9,10,13, Database, complex, unclear, or and forms sent? inventory of Management. changes made.
Completes 15, 17,19 or 20 pareto and may not have been  Instructions and instructions and  Marketing and Field  New Plan introduced or Plan
the exceeds 10% DPMO chart sent with the forms up to date? forms. Administrative Services changes made.
Distribution and DPMO target package.  Update instructions
Forms exceeded by 5% and forms.
4 Plan Reason Code 4, Recycle Daily/Weekly  Plan Participant was  Return envelope  Maintain current  Field Office and HELPLINE  New Plan introduced or Plan
Participant 11, or 19 Database, not provided with and instructions inventory of Management. changes made.
Returns the exceeds 10% pareto and return instructions. sent? envelopes and  Marketing and Field  New Plan introduced or Plan
Distribution and DPMO target DPMO chart  Plan participant was  Return envelope instructions. Administrative Services changes made.
Forms as exceeded by 5% provided incorrect and instructions up  Update envelopes
directed return instructions. to date? and instructions.

5 Benefits Kappa Score is MSE for 3 January, July  Benefit distribution  New hires/transfers  Train/retrain  Benefit Distributions  New hires or transfers join the
Distribution lower than .7 Raters and 20 processors not or changes made? Personnel. Management area or process changes are
Department Transactions trained.  Rating guidelines  Enforce use of rating  Benefit Distributions made
reviews and  Different processors being used? guidelines. Management  Daily
processes using different  Reason codes being  Enforce use of  Benefit Distributions  January and July, annually.
the request criteria. used? reason codes. Management
Control - Business Impact (ABM)
 What is the business ABM Cost Model Per Repair Non-Financial
Mail &
Phone Cost Market Risk
Rework
Manpower Cash Flow

impact of the process •Processing •10 Minutes

Cost Takeout $20,000

improvement? •Imaging •05 Minutes Cost Avoidance Market

Value
Adjustments
•Mailroom •05 Minutes
 How should the •Office Manager •10 Minutes
Reduce Non-
Value Added
$250,000

savings be reflected •Account Executive •30 Minutes

Cash Flow
in the current plan or •Help Desk •10 Minutes
Increased
Sales

forecast? •Benefit Load •17.4% Growth

Improved
Customer
Repeat Sales
and Revenue
Satisfaction Retention
•Supplies & Mail •$.80
 Does the •Long Distance •$1.00
$20,000 $250,000 $270,000
improvement free up
capacity to satisfy
new demand?
Some Final Thoughts About 6
Tools

 Select tools based on what you need to do

 Use of tools is a good way to share knowledge among
team members
 The sequence of tool use documents the team’s thought
process
 Never use a tool that’s more complex than the
problem that you’re trying to solve
 Use enough tools to guarantee the success
of the project
 But…Don’t become a slave to the tools
Designing Products for Six Sigma Performance
The DMADV Process is like DMAIC

• Select cross-functional team

Define • Define team charter
• Understand Customer needs
Measure • Specify CTQs

• Develop high level design

Analyze
• Develop detailed design
Design • Build test plan

• Test design
Validate • Scale-up
WHAT IS DESIGN FOR SIX SIGMA
(DFSS)?

Customer-driven design of Drives quality measurement

processes with 6 capability.
Predicting design quality up
front.
Top down requirements
flowdown (CTQ flowdown)
matched by capability flowup.
Cross-functional integrated
design involvement.
and predictability improvement
in early design phases.
Utilizes process capabilities to
make final design decisions.
Monitors process variances to
verify 6 customer
requirements are met.
New Product/Service Introduction
that Achieves Six Sigma Business
Performance— note the interactions

MARKET
RESEARCH
DESIGN

PRODUCTION

LOGISTICS
DISTRIBUTION
DMADV SERVICE

SALES

CUSTOMERS