1 of 60

Six Sigma InitiativeSix Sigma Initiative

Driver for Business Excellence

2 of 60

AgendaAgenda Revenue & Cost & Profit

Hard & Soft Saving What is Six Sigma?

Background Basic Definitions

Strategic PerspectiveStatistic Perspective

Deployment StructureChampionBlack BeltGreen BeltOthers

3 of 60

AgendaAgenda Tools for Six Sigma Six Sigma for Small & Medium Enterprise

(SME) and Large Enterprise in Thailand Six Sigma & Other Initiatives

Strategic ManagementBalanced Score CardFinancial RatiosBenchmarkingLean MeasuresQCC/Kaizen

4 of 60

Revenue & Cost & ProfitRevenue & Cost & Profit

5 of 60

Ideal SituationIdeal Situation

Year 1 Year 3Year 2 Year 4

Profit

Cost

Revenue

6 of 60

Actual SituationActual Situation

Year 1 Year 3Year 2 Year 4

Profit

Cost

Revenue

7 of 60

Worse SituationWorse Situation

Year 1 Year 3Year 2 Year 4

Profit

Cost

Revenue

8 of 60

Strategy for Worse SituationStrategy for Worse Situation Long Term Strategy:

New Customers/Market (Local/Global) New Products/Services Etc.

Short Term Strategy: Cost Saving Improve Productivity Etc.

9 of 60

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;

10 of 60

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.

11 of 60

Six SigmaSix SigmaStrategic Tool for

Cost ReductionProcess Improvement

Customer Satisfaction

12 of 60

BackgroundBackground

13 of 60

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.

14 of 60

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

15 of 60

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

16 of 60

Six Sigma TodaySix Sigma Today Six Sigma is viewed as

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

17 of 60

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.

18 of 60

Basic DefinitionsBasic Definitions

19 of 60

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.

20 of 60

Six Sigma ProcessSix Sigma Process

Define - Measure - Analysis - Improve - Control

D-M-A-I-C

21 of 60

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

Inpu

t

Product/ Business/ Support Process

Inte

rnal

/Ext

erna

l Su

pplie

rs

Out

put

Inte

rnal

/Ext

erna

l C

usto

mer

s

Defects Measures/Indicators

Feedback/Information/Specification

22 of 60

Statistic PerspectiveStatistic Perspective What is Sigma α ?

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

23 of 60

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

The number before “σ” 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).

24 of 60

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

PPM = (Defect) Part Per Million

Sigma Level % of Output that meet Customer’s Requirement Defect (PPM)

6σ 99.99966% 3.4 PPM

4σ 99.379% 6,210 PPM

2σ 69.146% 308,538 PPM

25 of 60

Goal of Six Sigma MethodologyGoal of Six Sigma MethodologySix 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

26 of 60

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.

27 of 60

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

28 of 60

Examples of Six Sigma ProjectsExamples of Six Sigma Projects 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.

29 of 60

Other benefits from deploying Six Sigma..Other benefits from 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

30 of 60

Deployment StructureDeployment Structure

c.

31 of 60

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

32 of 60

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.

33 of 60

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.

34 of 60

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

in your organization is:

1 Black Belt : 100 Employees

35 of 60

Saving from Black Belt ProjectsSaving from Black Belt Projects In USA

$125,000 to $250,000 per year/Project

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

36 of 60

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.

37 of 60

Saving from Green Belt ProjectsSaving from Green Belt Projects In USA

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

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

38 of 60

OthersOthers Support Teams Master Black Belts Other Belts

Yellow Grey White

39 of 60

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

40 of 60

Tools for Six SigmaTools for Six Sigma

41 of 60

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.

42 of 60

Six SigmaSix Sigma

for Small & Medium Enterprise (SME)

and Large Enterprise

in Thailand

43 of 60

Large EnterpriseLarge EnterpriseCountry Manager

Plant A Manager Financial Controller Mkt 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

44 of 60

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

45 of 60

Six Sigma & Other InitiativesSix Sigma & Other Initiatives

46 of 60

Six Sigma and Strategic ManagementSix Sigma and Strategic Management

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

1 2

3

47 of 60

TQ

M S

trateg

ic Pl

anni

ngT

QM

Stra

tegic

Plan

ning

TQ

M S

trateg

ic Pl

anni

ng a

t Sol

ectro

n –

Bald

rige W

inne

r

1

2

3

48 of 60

Six Sigma and Balanced Score CardSix Sigma and Balanced Score Card

49 of 60

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

50 of 60

Six Sigma and Financial RatiosSix Sigma and Financial Ratios 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

51 of 60

Examples of Financial RatiosExamples of Financial Ratios 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

52 of 60

Six Sigma and BenchmarkingSix Sigma and Benchmarking 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?

53 of 60

Six Sigma and Lean MeasuresSix Sigma and Lean Measures 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

54 of 60

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

55 of 60

R&A’s Business Excellence ModelR&A’s Business Excellence Model

Business Excellence

56 of 60

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

57 of 60

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

58 of 60

Payback Period CalculationPayback Period Calculation

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

Payback Point

59 of 60

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

ProgramDevelop Six Sigma InfrastructureProject Selection, Management, and Review

Long-Term Strategic Partnership with Clients

60 of 60

Questions?Questions?

Thank You