LEAN in the Lab 6

8/9/2019 LEAN in the Lab 6

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Six Sigma Overview

October 13, 2003 Don CarlsonTechnology & Operations

Enterprise Solutions


2/23

What is Six Sigma?

Why Six Sigma? Why Six Sigma at Bank of America?

Connection to Strategy.

Agenda


3/23

Metric

Benchmark

Vision

Philosophy Method

Tool

Symbol

Goal

Value

The Many Facets of Six Sigma


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Six Sigma Was Developed at Motorola in the 1980sAs a Method to Improve Process Quality.

It Was First Used to Improve Manufacturing Process

Capability and Then Migrated to Business ProcessesCapability

Companies That Have Deployed Six Sigma: Bank of

America, Motorola, GE, IBM, Kodak and ManyMore

The Basic Premise Is, All Processes Have Variation.Variation Is the Enemy.

More About Six Sigma


5/23

SSciencecience

AArtrt

MMagicagic

SixSigma

We dont know what

we dont know.

If we cant measure

it, we really dont

know much about it.

If we dont know

much about it, we

cant control it.

If we cant control it,

we are at the mercy

of chance.

What is the Six Sigma Philosophy?

Focus on the Customer!

Focus on the Customer!


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Process Philosophy

Know Whats Importantto the Customer (CTQ)

Reduce Defects (DPMO)

Center Around Target

(Mean)

Reduce Variation

(Standard Deviation)

?

GE Company Proprietary

November 1998

What Is Six Sigma?


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2

3

4

5

6

308,537

66,807

6,210

Defects per

Million

opportunities

Defects perMillion

opportunities

233

3.4.

ProcessCapability

ProcessCapability Sigma is a statistical unit of measureReflects process capability.

Six Sigma as a Goal


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99.99966% Good (6 Sigma)

20,000 lost articles of mail perhour

Unsafe drinking water for

almost 15 minutes each day

5,000 incorrect surgicaloperations per week

Two short or long landings at

most major airports each day

200,000 wrong drugprescriptions each year

No electricity for almost seven

hours each month

Seven articles lost per hour

One unsafe minute every seven

months

1.7 incorrect operations per week

One short or long landing every

five years

68 wrong prescriptions per year

One hour without electricity

every 34 years

99% Good (3.8 Sigma)

Six Sigma -- Practical MeaningSix Sigma -- Practical Meaning


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Dissecting Process CapabilityDissecting Process Capability

Defects

Process Capability

InadequateDesignMargin

InadequateProcess

Capability

Unstable Parts &Materials

Defects Acceptable

Premise of 6 Sources of variation can

be:

Identified

Quantified

Eliminated or Controlled

LSL USL


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Characterize

Optimize

Breakthrough

USL

T

LSL

USL

T

LSL

T

USLLSL

USLLSL

The StrategyThe Strategy

Customer Focused - Both Internally & Externally


11/23

What is Six Sigma?

Why Six Sigma?

Why Six Sigma at Bank of America?


Agenda


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What is Cost of Poor Quality?What is Cost of Poor Quality?

In addition to the direct costs associated with finding andfixing defects, Cost of Poor Quality also includes: The hidden cost of failing to meet customer expectations the first

time

The hidden opportunity for increased efficiency

The hidden potential for higher profits

The hidden loss in market share

The hidden increase in production cycle time

The hidden labor associated with ordering replacement material

The hidden costs associated with disposing of defects For most companies today, the cost of poor quality is likely

to be 25 % of sales.

In almost every company where the COPQ is unknown, the

COPQ exceeds the profit margin.


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Which Business Function Needs It?Which Business Function Needs It?

As long as there is a process that produces an output, whether it isa manufactured product, data, an invoice, etc, we can apply the

Six Sigma Breakthrough Strategy. For these processes to perform

to a customer standard they require correct inputs!!!

6 Sigma

Methods

MFG.

DESIGNSERVICE

PURCH.

MAINT.

ADMIN.

QA

Marketing


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Why Six Sigma?

Six Sigma will enable Bank of America to make the

breakthrough improvements in customer satisfaction andshareholder value that we must achieve to reach our goal of

becoming one of the worlds most admired companies. Thats

why Im committed to using it as a performance management

discipline throughout our company.

Ken Lewis, Chairman and Chief Executive OfficerBank of America

Ken Lewis VisionKen Lewis Vision


15/23

What is Six Sigma?

Why Six Sigma? Why Six Sigma at Bank of America?


Agenda


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Prioritization &Root Cause Counter Measures& Activities Who When ProcessCapabilityExpected

Benefits/ImpactTarget Achieved?/Impact

1. Value for Money1. Decliningmarket perception compared to competit i o n. 1 . I nc re as e c u st o m erp e rc ep t ionof value p rovided CI, KPRO, EI , HI thru2. Inadequate margins, discounts, profitability,promotions,as

perceived by customers/cha nnel partners

2 . Of f er s im pl i fi e d/ c om p et i ti v e p r ic e/ p ay me n t p l an s C I , KP R O, E I, D I

3 . O ff er di ff er en ti at ed le ad er sh ip p ro du ct s K PR O, D& AI ,C I 1 2 p p.4. Improve effectiveness of promotions, advertising CI,DI

5. Improve operatingcosts and effi ciencies C&GS 2000

2. Customer Service/Technical Support1 . P roc e s s n o t c u st o m er-f o c us e d 1 . Re -st ru ct u re /re -e ng i n ee ro rg .to meet needs; customerfocused integratedprocessimprovementsKPRO,D&AI,DI,HI thru

2. Lack of closedloopprocess tocorrect customerproblems 2. Additional technicalsupport HI,D&AI,GCSS3 . U n s at i sf a ct o r yr e sp o ns e t im e ,p r ob l em r e so l ut i on 3 . C u s to m er e s ca l at i on p r oc e ss ; p r ob l em r es o lu t io n ; t e c hn i ca l tr a in i ng E I 2 0 00

3. ProductPerformance1. Products/servicesdonot performtoVOC require m e nt s 1 . I m p rov e p ro d u ct p e rf o rma n c e an d re liabilit y ; d r i ve t o s i x s i gm a q u al i t y s t a nd a rd s CI , KP RO, C&GS , D& A I ,

DI,EIon-going

2. Product/serviceperformance monitoringvs. VOCdoes not occur 2. Institutepost-launchmonitoring forallmajo rp ro du ct in tr od uc ti on s C I, KP RO t hr u2 00 0

3. Products/servicesperformanceare not easyto u se 3 . F oc us on ea se of us e a sp ec ts fo rpr od uct d es ig n D &A I, CI o n- goi ng

4. Sales/Marketing Support1 . I n su f fi ci e nt b u s in e ss g r o wt h su p po r t 1 . R e de si g n/re s t ruc t u re SF, t ra in i n g, t a rg et k e y, c u s to m e rrel a t i on s h ip m a n ag e me n t C I , EI , K PRO, D I , H I , t h ru

2. Inadequate contact-new product/program information,merchandising, IM

2 . Expan dal ter nat ive veh icl es of d el iver y C I,H I, KPRO 10 pp

3. Insufficient knowle dge : Bus.-Tech. 3. Custo mer training EI

4. Custo mer communications DI, EI,C&GS 2000

5. EaseofDoing Business1. Cuts across performance areas(Sales, O&D, Billing&Credit,Cust.

Svc., Tech. Support)

1 . I m pr o ve su p pl y c h ai n ma n ag e me nt ( s ee I S CM BF fo r de t ai l s) A l lB U 's (& Re g io n s) t h ru U S &C R o r de r t ra n sa c ti o n

surveys show ~9ppimprovement (1Q00)

2. Unresponsive,lack of follow-through, functionalsilos withlimited

scope

2 . Re sp o n si b i li t y / ac c o un t a bi l i t y, Tra i ni n g , Com m u ni c a ti o n s DI , C I, E I , GCS S

3 . Un s at i s f ac t o ry pro b l em re s o lu t i on 3 . Re -en g i ne e r, re -s t ruc t u re org a n iz a tiont o m ee t cu st om er n e ed s C I, KP RO ,U S& CR ,EAMER

11pp

4. Simplify/improve processes, includeproblemresolution, contracts, accountsmanagement HI,DI,US&CR,EAMER,G

CSS

2000

6. ProductAvailability1. Non-integrated supplychainresults insub-opti mal or de r/ de li ver y 1. See ISC MB F f or de ta il s Al lBU 's t hr u 20 00

PROBLEM STATEMENT: Kodak's aggregate corporate custome rsatisfaction is at 76%, which is lowerthan world class benchmarks of 90%+.This gap of15-20 pprepresents a $1B-2B revenue opportunityforthe company.

Benchmark: 90%+

72%69%

0%

50%

100%

YE991Q002Q003Q004Q00

%Satisfaction

81.0%

0%

50%

100%

YE991Q002Q003Q004Q00

%

Satisfaction

Not

Planned

Overall Customer Satisfaction (KeyDrivers)

0%

25%

50%

75%

100%

Va

l ue

/ Pr

i ce

Cus

t .

Svc.

/ Tec

h.

Supp.

Pr od.

Per

f .

Sa

l es

/ M

k t g.

Supp.

Ease

Do

i ng

Bus.

Pr o

d.

Ava

i l

( O&D)

PercentofBU's

78%

0%

50%

100%

YE991Q002Q003Q004Q00

%Satisfaction

NotPlanned

Overall ProductQual ity/Perf. Overall Service QualityOve ra llCu sto me r Sa t isfa ctio n

W t. 0.50 W t. 0.25

Customer Satisfaction Benchmark

69% 68%

76% 77%

50%

60%

70%

80%

90%

100%

E K 9 7* E K9 8* E K 9 9* * E K1 Q0 0

PercentSatisfaction

*Old Metr ic: O v e r a l l C u s t o m e r Sat

**New Metr ic: Customer Satisfacti onS c o r e

Opportunity Gap

Wt. 0.25

Benc hm ark Benchma rk Benchmark

79.7%71.3%

65.1%

93.2%

64.6%70.4%

81.6% 76.5%80.0%71.8%

65.5%

93.2%

64.9% 70.4%82.5% 76.9%

0%

50%

100%

CI HI KPRO EI DI D&AI C&GS EK Overall

%Satisfaction

Y E 99 1 Q 00Improvement

Nordstrom,Lexus 92%

BMW Mercedes 86%Coke84%

Customer Satisfaction Score

Customer Segment MBF

Prioritization & Root Cause Counter Measures & Activities Who Whe n ProcessCapabilityExpected

Benefits/ImpactTarget Achieved?/Impact

1.Val ue for M oney1 . De c li n in g ma r ke t pe r ce p ti o n c o mp a re d to c om pe t it i on . 1 . In c re a se c u st o me r pe r ce p ti o n of v al u e p r ov i de d C I , KP R O, E I ,H I t h ru

2. Inadequate margins, discounts, profitability,promotions,asperceived by customers/channel partners

2 . O f fe r s im p li f ie d/ c om p et i ti v e pr i ce / pa y me nt p l an s C I , KP R O, E I, D I

3. Offerdifferentiatedle adership products KPRO,D&AI,CI 12 pp.4 . Im pr ov e ef fe ct iv en es s of p r om ot io ns , ad ve rt is in g C I, DI

5. Imp rov e o pe ra ti ng co sts and ef fi ci enci es C &G S 20 00

2.C us tomer Service/Technical Support1 . P r oc e ss n o t cu s to m er - f oc us e d 1 . R e -s t ru c tu r e /re-engineer org. to meet needs; customerfocused integratedprocess improvementsKPRO,D&AI,DI,H I thru

2. Lack of closedloopprocess tocorrect customerproblems 2. Additional technicalsupport HI,D&AI,GCSS3 . U ns a ti s fa c to r y r es p on s e ti me , p r ob l em r e so l ut i on 3 . C us t om e r es c al a ti on p r o ce s s; p r o bl e m r es o lu t io n ; t ec h ni ca l t ra in i ng E I 2 0 00

3.Produ ctPerformance1. Products/services donot perform toVOCrequirements 1. Improve product performanceand reliability; driv e t o si x si g m a qu a l i ty s t an d a rds CI , K PRO, C& GS, D& A I,

DI,EIon-going

2. Product/serviceperformance monitoring vs. VOCdoes not occur 2. Institutepost-launchmonitoring for allmajorproductin trod uctions CI,KPRO t hru 2000

3. Products/services performanceare not easy to use 3. Focus oneaseof use aspects forproduct desig n D&AI ,CI o n-goi ng

4.Sales/ Marketing Support1 . In s u f fi c i en t b us i n e ss g ro wt h s up p o rt 1 . Re d e si g n / res t ru ct u re S F, t ra i n i ng , t arg e t k e y, c us t o me rre l at i o n s hi p ma n a ge m e n t C I , E I, K P RO, DI , H I , t h ru

2. Inadequate contact-new product/program information,merchandising, IM

2. E xpan dal ter nat ive veh ic les o f de liv er y C I,H I, KPR O 1 0 p p

3. Insuf ficien t know ledge : Bu s.-Te ch. 3. Customer trai ning EI

4. Customer communi catio ns DI, EI,C&GS 2000

5.Ease ofDoing Business1. Cuts across performance areas (Sales, O&D, Billing& Credit,Cust.

Svc., Tech. Support)

1. Improve supply ch ai n ma na ge me nt ( se e IS C MB F f or d et ai ls ) A ll BU ' s ( &R eg io ns ) t hr u U S& CR or de r tr an sa ct ion

surveys show ~9ppimprovement (1Q00)

2. Unresponsive,lack of follow-through, functionalsilos withlimited

scope

2. Responsib i li t y/ a cc o un t ab i li t y, T r ai n in g ,C o mm u ni ca t io n s D I ,C I ,E I ,G C SS

3 . Un s at i s fa c t o ry pro b l em re s o lu t i o n 3 . Re -e ng i n e er, re -s tru c t ure o rg a n iz a t i on to m ee t c us to me r n ee ds C I, KP RO ,U S& CR ,EAMER

11 pp

4. Simplify/improve processes, includeproblem resolution, contracts, accounts management HI,DI,US&CR,EAMER,G

CSS

2000

6.Pr oduc tAvailability1 . No n- i nt eg ra te d su pp ly ch ai n re su lt s in su b- op ti ma l or de r /d el iv er y 1 . Se eI SC MB F fo r de ta il s A ll BU ' s t hr u 20 00

PROBLEM STATEMENT: Kodak's aggregate corporate customers atisfactionis at 76%, which is lowerthan world class benchmarks of 90%+.This gap of 15-20 pprepresents a $1B-2B revenue opportunityfor the company.

Be nc hma rk : 9 0 %+

72%69%

0%

50%

100%

YE991Q002Q003Q00 4Q00

%

Satisfaction

81.0%

0%

50%

100%

YE991Q002Q003Q004Q00

%Satisfaction

NotPlanned

Overall CustomerSatisfaction (KeyDrivers)

0%

25%

50%

75%

100%

Va

l ue

/ Pr

i ce

Cus t .

Svc.

/ Tec

h.

Supp.

Pr o

d.

Per

f .

Sa

l es

/ M

k t g.

Supp.

Ease

Do

i ng

Bus.

Pr o

d.

Ava

i l

( O&D)

PercentofBU's

78%

0%

50%

100%

YE991Q002Q003Q004Q00

%Satisfaction

NotPlanned

Overall ProductQuality/Perf. OverallService QualityOverall Customer Satisfaction

W t. 0.50 W t. 0.25

Customer Satisfaction Benchmark

69% 68%

76% 77%

50%

60%

70%

80%

90%

100%

EK 97 * E K9 8* E K 9 9** E K1Q 00

PercentSatisfaction

*OldMetri c: Overall Customer Sat**New Metric: Customer Satisfaction Score

Opportunity Gap

Wt. 0.25

Benchmark Benchma rk Benchmark

79.7%71.3%

65.1%

93.2%

64.6%70.4%

81.6% 76.5%80.0%71.8%

65.5%

93.2%

64.9% 70.4%82.5% 76.9%

0%

50%

100%

CI HI KPRO EI DI D&AI C&GS EK Overall

%Satisfaction

Y E9 9 1 Q0 0Improvement

Nordstrom,Lexus 92%

BMW Mercedes 86%Coke84%

Customer Satisfaction Score

Deposits Golden Thread MBF

Green Belt Project Application

Problem Definition (What is the Defect? What is the magnitude of the defect? What is the improvement

goal (at least 50% improvement) and timeframe for this project?) :

Primary Metric (measure of defect): Secondary Metric(counterbalancing measure):

What willbethe impact oftheimprovement fromacustomersstandpoint?

What istheexpectedsavingsorrevenueincrease?

HighLevelProcessMapandMultilevelParetoareattached. _______

FinancialDirectorSignature: _____________________________________________________________ Date:(Agreesthatthepotentialfinancialbenefitscanbe achievedandmeasured)

CustomerSegmentLeaderSignature_______________________________________________________ Date:

ChampionsSignature: ___________________________________ _______________________________ Date:

Completeafterprojectisapprovedforclassenrollment

NameofGreenBelt Candidate:

Project TeamMembers:

Green Belt Project

Customer Segment Root Cause

1. Too many problems (error free banking)

Assigned to Payment and Deposits Golden Thread Teams

Deposit Golden Thread Root Cause

2.1 Complexity of Teller Processes

contributes to processing errors

Green Belt Project DefinitionImprove number of counter deposit slips

presented for processing but did not post in

time in _____________ (Mid-Atlantic, Kansas

City, or Tampa) from ________% to ______%.

Strategic Alignment - From Strategy to Action

Bank ofAmericaKen Lewis,Chairman andCEO

1.1Providea world-classcustomer/clientexperiencethrougheasy access andefficient,error-freeservice

C. Goslee / B. Desoer

1.2Attractandr etainprofitablecustomers/clientsandcontinuouslyreward themfor keepingand bringingmoreoftheir businesstous G .T aylo r /R. DeMar tini /A.Br in kley

E .Br o w n

1.3Becomethetrusted advisorfor financialsolutions R.DeMar tin iE .Br o w n

1.4Developand deliverinnovativenew productsandsolutionswhichmakefinancial servicesworkinways itnever hasbefore A. Brinkley /B.Desoer

E. Brown

BeRecognized As OneoftheWorlds Most

Admired Companies

VISION

Breakthrough StrategiesGOALS

ASSOCIATE

Provider ofChoice92% CustomerSati sfaction

Employer ofChoice90% AssociateSa tisfaction

2nd

Draft

CUSTOMER

2.1Attractand retainaworld-classworkforce S. Alphin2.2Define and alignAssociateroles, measuresand rewards

toourstrategy S. Alphin2.3Providethe supportandtools Associates needto excel

B.Deso er 2.4Enable Associatesto achieveprofessionalgrowth

balancedwithpersonal goals B.Desoer2.5Reflectthedi versityofthecommunitiesand customers

weservein our workforce S. Alphin

Hoshin Plan

Hoshin Strategy

1.1 Provide a world-class customer/client experiencethrough easyaccess and efficient, error-free service

Six Sigma Change Process


17/23

A Common Tollgate ApproachA Common Tollgate ApproachA Common Tollgate ApproachA Common Tollgate Approach

Project Management

Ownership & Commitment

Change Integration

DefineDefine

MeasureMeasure

AnalyzeAnalyze

ImproveImprove

ControlControl

Improvement (Current)

Development (New)

Two approaches to reaching the Six Sigma goal:

- Improving existing products and processes- Developing new products and processes

Different tools and steps, but focus and flow is the same

DFSSDFSS$ $

GB/BBGB/BB

Two Approaches


18/23

Master

BlackBelt

Black Belts

Green Belts

Team Members

Quality Fundamentals/ Kaizen Now

Ch

amp

ions

Mentor, trainer, and coach of Black Belts and otherin the organization.

Leader of teams implementing the six sigmamethodology on projects.

Delivers successful focused projects usithe six sigma methodology and tools.

Participates on and supports theproject teams, typically in thecontext of his or her existingresponsibilities.

Responsible for supporting the Deployment

Strategy within Line of Business/Customer

Segment or Golden Thread

Deployment

Champions

Education


19/23

Leadership Commitment, Competence, &

Involvement

Methodology & Tools

Data Driven Statistically Validated

Best People 100% Dedicated to Defect

Reduction

Project Focused Aligned to Strategic Goals (Hoshin, MBF)

High ROI Expectations

What Makes Six Sigma Different?


20/23

Six Sigma & LeadershipSix Sigma & Leadership

Six Sigma only works when Leadership ispassionate about excellence and willing to change.

Fundamentals of Leadership

Challenge the process

Inspire a shared vision

Enable others to act

Model the way

Encourage the heart Six Sigma is a catalyst for leaders


21/23

Bank of America Executive Officer team

Ken Lewis certified Green Belt

Jim Hance certified Green Belt

Amy Brinkley certified Green Belt

Ed Brown certified Green Belt

Rich DeMartini certified Green Belt

Barbara Desoer certified Green Belt

Gene Taylor certified Green Belt

The Bank of America executive officer team are all

certified Green Belts

Executive Commitment


22/23

Sustaining the intensity of our Six Sigma work is critical for Bank of

America to achieve its strategic goals. Six Sigma has enabled us

to generate more than $300MM in first-year productivity

gains for the company. It has also had a significant impact uponthe leadership team with our personal education and certification as

Six Sigma Green Belts. As we look to the future, our leadership charge

is to keep Six Sigma a top priority and use it to produce organic

customer revenue growth.

Ken Lewis (10/9/02)

Results


23/23

Questions?

LEAN in the Lab 6

Documents

Transcript of LEAN in the Lab 6