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Six Sigma InitiativeSix Sigma Initiative

Driver for Business Excellence

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AgendaAgenda Revenue & Cost & Profit

Hard & Soft Saving What is Six Sigma?

Background Basic Definitions

Strategic PerspectiveStatistic Perspective

Deployment StructureChampionBlack BeltGreen BeltOthers

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AgendaAgenda Tools for Six Sigma Six Sigma for Small & Medium

Enterprise (SME) and Large Enterprise in Thailand

Six Sigma & Other InitiativesStrategic ManagementBalanced Score CardFinancial RatiosBenchmarkingLean MeasuresQCC/Kaizen

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Revenue & Cost & Revenue & Cost & ProfitProfit

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Ideal SituationIdeal Situation

Year 1 Year 3Year 2 Year 4

Profit

Cost

Revenue

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Actual SituationActual Situation

Year 1 Year 3Year 2 Year 4

Profit

Cost

Revenue

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Worse SituationWorse Situation

Year 1 Year 3Year 2 Year 4

Profit

Cost

Revenue

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Strategy for Worse Strategy for Worse SituationSituation

Long Term Strategy: New Customers/Market (Local/Global) New Products/Services Etc.

Short Term Strategy: Cost Saving Improve Productivity Etc.

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Hard SavingHard Saving These savings must go to the bottom

line to increase profit Reduce Headcount –

Remove from payrollReplace someone, in another area,

that would have been hired anyway; More pieces –

Need the extra pieces Extra pieces can reduce overtime or

manpower;

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Soft SavingSoft Saving Any savings that are not Hard

savings Transfer Headcount –

A person’s time was saved on that process so that he/she could spend more time on another process

There is no reduction to payroll.

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Six SigmaSix SigmaStrategic Tool for

Cost ReductionProcess ImprovementCustomer Satisfaction

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BackgroundBackground

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Start at MotorolaStart at Motorola In 1980s, Six Sigma began at

Motorola As a statistical measures of process

performance “Six Sigma Quality Program” Target to achieve six sigma level in five

years.

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Adopted by OthersAdopted by Others In 1990s, Six Sigma approach was

broadened by General Electric (GE) and AlliedSignal

Then.. DuPont Dow Chemical 3M Ford American Express Companies in Europe and Pacific Rim

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Six Sigma at GESix Sigma at GE In 1997, the GE annual report states

that Six Sigma delivered more than $300 million

to its operating income This number increased to $750 million in

1998 Today, GE has

~ 3,900 Full-Time Black Belts and Master Black Belts

~ 60,000 Green Belts

$1 = 43 Baht $750 million = 32,250,000,000 Baht

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Six Sigma TodaySix Sigma Today Six Sigma is viewed as

A business strategy and methodology for Improving process performanceIncrease customer satisfactionImprove bottom line

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Why Six Sigma?Why Six Sigma?

Increasing PROFIT by Reducing COST

The Bottom Line Focus

Gets the attention and support of senior executives and financial controllers.

Makes Six Sigma different from other improvement approaches.

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Basic DefinitionsBasic Definitions

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Strategic PerspectiveStrategic Perspective Definition : It is a Process Improvement

Initiative It is Customer focused It is data driven - decisions are based

on facts Involves the use of statistical tools It must have a bottom-line impact Paying back all the training.

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Six Sigma ProcessSix Sigma Process

Define - Measure - Analysis - Improve - Control

D-M-A-I-C

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A Process for Improving A Process for Improving Other Processes.Other Processes.

Inp

ut

Product/ Business/ Support Process

Inte

rnal/

Ext

ern

al

Su

pp

liers

Ou

tpu

t

Inte

rnal/

Ext

ern

al

Cust

om

ers

Defects Measures/Indicators

Feedback/Information/Specification

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Statistic PerspectiveStatistic Perspective What is Sigma ?

The Greek letter A statistical unit of measurement Used to define the standard deviation of

a population Measures the variability or spread of

the data

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How good is my process?How good is my process? Sigma Level (n):

The number before “” indicates how much of the data falls within the customers’ requirements

The higher the process sigma, the more of the process outputs meet customers’ requirements (the fewer the defects).

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Defects Per Million UnitsDefects Per Million Unitsn (Sigma Level) & Defect Rate

PPM = (Defect) Part Per Million

Sigma Level% of Output that meet

Customer’s Requirement

Defect (PPM)

6 99.99966% 3.4 PPM

4 99.379% 6,210 PPM

2 69.146% 308,538 PPM

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Goal of Six Sigma Goal of Six Sigma MethodologyMethodologySix Sigma methodology focuses on shifting process

output average from A to B and reducing process output variation from B to C to achieve Six Sigma Level.

A B

C

Customer Requirement Zone Acceptable Output

Defect Zone Unacceptable Output

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Core ValuesCore Values The core values of Six Sigma

methodology is that.. if you look at your organization as an

integration of business processes and can measure the defects in those

processes, you can systematically figure out ways

to eliminate them to achieve zero-defect performance level and bottom-line profitability.

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How does the Six Sigma How does the Six Sigma Process work?Process work?

Work on Issues that will Transfer Money to the Bottom Line

Focus on Specific Area or Process Top-Down Work in 4-6 Month Time Segments Program/Project must be Sustainable in

the Future Changes will Effect Everyone in the

Organization

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Examples of Six Sigma Examples of Six Sigma ProjectsProjects

In manufacturing organization: Reducing inserts/tools costs in

machining process: Using t-Test or DOE to find the optimal

combination of feed, speed, coolant concentration, and coolant flow rate to reduce tools/inserts consumption.

In a service organization: Reducing overtime payment in

accounting month-end-closing process.Reducing lead-time of the contract

review process: more responsive to clients and reduce costs.

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Other benefits from Other benefits from deploying Six Sigma..deploying Six Sigma..

Improve capacity and output Improve overall customer satisfaction Increase productivity and efficiency Reduce total defects and cycle time Decrease work-in-process Improve process flow ROI for Black Belt training

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Deployment StructureDeployment Structure

c.

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Senior Management TeamSenior Management Team Strategy & Infrastructure Building

Set short and longer-term direction for Six Sigma implementation (now)

Identify Six Sigma objectives during Strategic Planning process (yearly)

Resource planning (yearly) Review Six Sigma results (monthly) Communication and Recognition

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ChampionChampion Priority & Deployment

Provide Project Management. Select projects that support business

strategy and achieving performance objectives.

Manage for results. Champion improvement projects. Communicate business needs. Review and mentor Black Belts. Reward success.

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Black BeltBlack Belt Deliver Improvement Results (Big

Projects) Full time Lead & Train Teams Responsible for the Six Sigma process of

Improving key processes that affect customer satisfaction and bottom line profitability

Utilizing the 6 Sigma tools (advanced tools)

Help Green Belts to analyze complex data Report results back to the Champions.

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Black Belt/Employee RatioBlack Belt/Employee Ratio In general, the minimum numbers

of Black Belt in your organization is:

1 Black Belt : 100 Employees

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Saving from Black Belt Saving from Black Belt ProjectsProjects

In USA$125,000 to $250,000

per year/Project

$1 = 43 baht 5,375,000 – 10,750,000 baht

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Green BeltGreen Belt Deliver Improvement Results (Small

Projects) Part-time Lead Teams Responsible for the Six Sigma process

of Improving key processes that affect

customer satisfaction and bottom line profitability

Utilizing the 6 Sigma tools (basic tools) Report results back to the Champions.

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Saving from Green Belt Saving from Green Belt ProjectsProjects

In USA$50,000 - $75,000per year/Project

$1 = 43 Baht 2,150,000 – 3,225,000 Baht

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OthersOthers Support Teams Master Black Belts Other Belts

Yellow Grey White

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Deployment StructureDeployment Structure

Senior Management

TeamChampions

SupportTeams

MasterBlack Belts

SupportTeams

Black Belts

Green Belts

IT

HR

Finance

CEO

Process Owners

Senior Management

TeamChampions

SupportTeams

MasterBlack Belts

SupportTeams

Black Belts

Green Belts

IT

HR

Finance

CEO

Process Owners

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Tools for Six SigmaTools for Six Sigma

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Examples of Key ToolsExamples of Key Tools Process Mapping & Value Analysis Failure Mode & Effect Analysis Pareto Analysis Measurement Systems Analysis Statistical Process Control t-Test, z-Test, Data Comparison Design of Experiment (DOE) Financial Analysis Risk Analysis Etc.

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Six SigmaSix Sigmafor

Small & Medium Enterprise (SME)

and Large Enterprise

in Thailand

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Large EnterpriseLarge EnterpriseCountry Manager

Plant A Manager Financial ControllerMkt Develop MgrPlant B Manager

Production Mgr Engineer Mgr

Line 1 Sup Line 2 Sup Maintenance

Quality Mgr

Product Eng

Process Eng

SQE

CQE

Production Mgr Engineer Mgr Quality Mgr

Sup 1

Sup 2

Sup 3

Product

Process

SQE

CQE

Accounting MKT

Sales

Senior Management Team

MasterBlack Belts

Champions

SupportTeams

SupportTeams

Black Belts

Green Belts

IT

HR

Finance

CEO

Process Owners

Champions

SupportTeams

SupportTeams

Black Belts

Green Belts

Champions

SupportTeamsBlack Belts

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SMESMEOwner

General Manager

Production Mgr Store Mgr.

Line Sup Maintenance

Accounting Mgr

Officer Officer

Officer

BusinessOwners

Account

Champion

Green BeltTeam

Black Belt

Process Owners

Green BeltTeam

Process Owners

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Six Sigma & Other Six Sigma & Other InitiativesInitiatives

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Six Sigma and Strategic Six Sigma and Strategic ManagementManagement

TriView National Bank’s Strategic Planning Process (2001 Baldrige Program’s Case study)

1 2

3

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TQ

M S

trate

gic

T

QM

Str

ate

gic

P

lan

nin

gP

lan

nin

gT

QM

Str

ate

gic

Pla

nn

ing

at

Sole

ctro

n –

Bald

rig

e W

inn

er

1

2

3

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Six Sigma and Balanced Six Sigma and Balanced Score CardScore Card

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Six Sigma Score CardSix Sigma Score Card

Reduce CostCustomer Satisfaction

Improve Process

Customer:Customer SatisfactionOn-Time DeliveryProduct Quality

Financial:Cost Saving (Hard)

Inventory LevelScrap Cost

Learning:Training Hrs/Person

Employee InvolvementImprovement Ideas/Person

Internal Process:Defect LevelSigma LevelCycle Time

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Six Sigma and Financial Six Sigma and Financial RatiosRatios

A standard of comparisons of items on the company's financial statements rather than a direct reading of the financial figures.

Why do you need the Financial Ratios? Information Sharing Benchmarking Comparison Data

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Examples of Financial Examples of Financial RatiosRatios

Sales Growth Definition: Percentage increase (or decrease)

in sales between two time periods. Formula: ( Current Year's sales - Last Year's

sales )Last Year's sales

Net Profit Margin Definition: Shows how much profit comes from

every dollar of sales. Formula: Net Profit/Total Sales

Inventory Turnover Definition: Number of times that you turn over

(or sell) inventory during the year. Formula: Cost of Goods Sold/Average

Inventory

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Six Sigma and Six Sigma and BenchmarkingBenchmarking

Benchmarking process and data are key requirements in Baldrige Program (Thailand Quality Award Program.)

They are very important inputs for the Strategic & Business Planning Process. How can you plan and set objectives

without the comparison/benchmark data? How can you ensure that the Six Sigma

objectives that you set are:Achievable within specific time-frame?Reasonable – not too easy?

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Six Sigma and Lean Six Sigma and Lean MeasuresMeasures

Lean Manufacturing focuses on: Waste Reduction Process Cycle-Time Reduction Line Balancing & WIP Material Flow/Kanban Single Minute Exchange of Dies

Lean Measures Evaluate/Monitor Entire Key Production

Processes. Foundation for Six Sigma

Project SelectionMeasure/Analyze Phases

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Six Sigma and QCC/Kaizen Six Sigma and QCC/Kaizen Quality Control Circle & Kaizen Teams

Continuous Improvement Activities Part of JIT/Lean Employee Involvement Use Basic Analytical Tools (7QC Tools) Bottom-Up PDCA

Support Six Sigma Support Teams for Green Belts/Black Belts Pre-requisite Program for Green

Belts/Black Belts

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R&A’s Business Excellence R&A’s Business Excellence ModelModel

Business Excellence

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What Training Do You What Training Do You Need?Need?

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Align Six Sigma Training Plan Align Six Sigma Training Plan with Organization Strategywith Organization Strategy

Black Belt Training

Strategic Objectives

Executive Overview

Project Selection

Champion Training

Official Project Charter

Champion/ Black Belt

Green Belt Training

Official Project Charter

Champion/ Green Belt

Organizational/Strategic Level

Operational/ Deployment Level

The 1st Wave of TrainingThe 1st Wave of Training

1

2

3

4

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Payback Period CalculationPayback Period Calculation

Payback Period of Black Belt Training Investment

-500,000

0

500,000

1,000,000

1,500,000

2,000,000

Q0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

Quarter

Cash

Flow

(Bah

t)

7th Project Saving6th Project Saving5th Project Saving4th Project Saving3rd Project Saving2nd Project Saving1st Project SavingBB's SalaryBB Training CostCumulative Cash Flow

Assumption: Monthly Hard Saving = 25,000 Baht/Month/Project

Payback Point

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R&A’s Training PackageR&A’s Training Package Objectives:

Develop Six Sigma OrganizationNot Individual Black Belt

Development Use Strategic Planning Process to Drive

and Maintain Six Sigma Process.Focus on Senior Management and

Champion Program Develop Six Sigma Infrastructure Project Selection, Management, and Review

Long-Term Strategic Partnership with Clients

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Questions?Questions?

Thank You