ACKNOWLEDGEMENT

They say It takes a village to raise a child, similarly this project

would have been just a concept if it would not have been under the
able guidance of our respected dean and the head of the
department, Mr. S. L. Sharma who put in hours of tireless, good
natured and indispensable work to make this project a reality. We
would also like to thank our coordinator of the department, Mr.
Manvendre Yadav for his valuable support and suggestions
towards this project. It was his countless efforts that made us
complete this project well within time.
Our families deserves loving mention and sincere thanks, for
putting up with the hours of time spent in searching the project
material and funding it.
People whove offered special insights into this project whom we
would like to thank for their time, include Siddharth Yadav, Richa
Srivastava, Bhavya Arora who took out time to extend help in
searching the matter and countless other acts.
Finally, the most important acknowledgement would be to the
person who has been an epitome of continous support, love and
care over the years, Prof. D.K. Sengupta. Because of him, we are
what we are today. Thank you Sir!

ABSTRACT

Competition in todays higher education field is fierce. Technical colleges, Degree

colleges, Universities, and even higher education colleges that offer online distance
learning courses are all vying for the same studentsand the revenue they represent. To
find success, institutions of higher education must demonstrate that they can offer what
others can not. Naturally, providing a quality, affordable education is of the utmost
importance to students and their families. But colleges can also improve their chances of
attracting students by improving the levels of service they offer in every customer facing
interactionwhich often times necessitates improving internal work processes.
For instance, higher education institutions can become more responsive and offer better
service to students by providing real time status to application acceptance, implementing
an automated registration system that enables the integration of financial aid to support
payment requirements, and integrating a system to retrive and complete forms online.
Achieving these objectives is challenging and requires a disciplined and organized
approach to process improvement. With this in mind, many institutions look to implement
a robust document and content management solution to gain efficiencies and improve the
handling and processing of information, which ultimately reduces time, cost, and laborintensive paper based processes. As with any transformation of work process or
implementation of new technology, there is risk. As a result, leading institutions look to
maximize probability of success by managing variance through processes that are timetested and proven to repeatedly yield results.
This project validates how SIX SIGMA can be utilized to improve the ways higher
education institutions manage documentsand the information they contain.
It also proposes to apply process control analogy of Six Sigma, which is commonly used
in industry, within an academic setting, to achieve better quality.

THEORY
SIX SIGMA-A SASHAY FROM EVOLUTION TO REVOLUTION

As we all know, we are living in an era of competition where companies are striving hard
to operate in the dynamic and vibrant corporate world for making not only a place to
survive but also emerge out as a winner in the end. The economic reforms in 1990s have
totally changed the face of corporate world. Globalization and liberalization has resulted
in reducing the gaps between the business and its customers that has further molded the
ways of carrying out business activities. No business can afford to have even a small
loophole in its functioning. Customer is king, is not only just a statement but also stands
true in todays corporate world. I has been implemented by all business houses as it is
being actually practiced by some of the corporate striving to reach the acme of success.
The responsibility of a business organization is not only to meet the customer
requirements but also to satisfy the customers to the fullest extent leaving no place for
complaints. This can be possible only if the organizations business houses to function in
such a way that the chances of defects are totally eliminated or at most reduced as far as
possible. Keeping this in view, Six Sigma has emerged as a tool of quality assurance to
the customers. Six Sigma, a quality tool as generally accepted, has traveled a long way
from the stage of just improving the business key processes to a stage of managing the
entire business. Now Six Sigma is not a concept solely for a specific business activity,
rather it covers under its ambit the activities of the organization as a whole. Today, Six
Sigma stands for a comprehensive quality assurance approach which ensures the presence
of quality in each activity that the organization undertakes. This stands true when we talk
about companies like Motorola, General Electric and the like. The situation now has
changed, whereby it is recognized as a synonym of not only quality but also a tool for
cost reduction, meeting customer specifications and achieving business targets. Six
Sigma has moved from the stage of evolution to the stage of revolution.

What Is Six Sigma?

Globalization and instant access to information, products and services continue to change
the way our customers conduct business.
Today's competitive environment leaves no room for error. We must delight our
customers and relentlessly look for new ways to exceed their expectations. This is why
Six Sigma Quality has become a part of our culture.
Six Sigma is a highly disciplined process that helps us focus on developing and
delivering near-perfect products and services.
3

 It is a methodology for continuous improvement

It is a methodology for creating products/ processes that perform at high standards
It is a set of statistical and other quality tools arranged in unique way
It is a way of knowing where you are and where you could be!
It is a Quality Philosophy and a management technique
Six Sigma is not:
A standard
A certification
Another metric like percentage
Why "Sigma"? The word is a statistical term that measures how far a given process
deviates from perfection. The central idea behind Six Sigma is that if you can measure
how many "defects" you have in a process, you can systematically figure out how to
eliminate them and get as close to "zero defects" as possible. To achieve Six Sigma
Quality, a process must produce no more than 3.4 defects per million opportunities. An
"opportunity" is defined as a chance for nonconformance, or not meeting the required
specifications. This means we need to be nearly flawless in executing our key processes.

The term sigma is used to designate the distribution or spread about the mean
(average) of any process or procedure.

For a process, the sigma capability (z-value) is a metric that indicates how well
that process is performing. The higher the sigma capability, the better. Sigma
capability measures the capability of the process to produce defect-free outputs. A
defect is anything that results in customer dissatisfaction.

Path to Six Sigma

Sigma levels and

Defects per million
opportunities
(DPMO)

6 Sigma
5 Sigma

4 Sigma
3 Sigma
2 Sigma

3.4 Defects

233 Defects

233 Defects

66,807 Defects

308,537 Defects

Key Concepts of Six Sigma

At its core, Six Sigma revolves around a few key concepts.
Critical to Quality: Attributes most important to the customer

Defect :

Failing to deliver what the customer wants

Process
Capability:

What your process can deliver

Variation:

What the customer sees and feels

Stable Operations:
Design for Six
Sigma:

Ensuring consistent, predictable processes to improve what the

customer sees and feels
Designing to meet customer needs and process capability

Is 99% (3.8) good enough?

99.99966% Good At 6

20,000 lost mails per hour

7 lost mails per hour

Unsafe drinking water almost 15

minutes each day

One minute of unsafe drinking

water every seven months

5,000 incorrect surgical operations

per week

1.7 incorrect surgical operations

per week

2 short or long landings at most

major airports daily

One short or long landing at major

airports every five years

200,000 wrong drug prescriptions

each year

68 wrong drug prescriptions each

year

Methodology
Six Sigma has two key methodologies: DMAIC and DMADV. DMAIC is used to
improve an existing business process. DMADV is used to create new product designs or
process designs in such a way that it results in a more predictable, mature and defect free
performance.

The Similarities of DMAIC and DMADV

Let's first look at the DMAIC and DMADV methodologies and talk about how they're
alike. DMAIC and DMADV are both:

Six Sigma methodologies used to drive defects to less than 3.4 per million
opportunities.

Data intensive solution approaches. Intuition has no place in Six Sigma -- only
cold, hard facts.
Implemented by Green Belts, Black Belts and Master Black Belts.
Ways to help meet the business/financial bottom-line numbers.
Implemented with the support of a champion and process owner

The Differences of DMAIC and DMADV

DMAIC and DMADV sound very similar, don't they? The acronyms even share the first
three letters. But that's about where the similarities stop
DMAIC

Define
Measure
Analyze
Improve
Control

Define the project goals and customer (internal and

external) deliverables
Measure the process to determine current performance
Analyze and determine the root cause(s) of the defects
Improve the process by eliminating defects

Control future process performance

When To Use DMAIC

The DMAIC methodology, instead of the DMADV methodology, should be used when a
product or process is in existence at your company but is not meeting customer
specification or is not performing adequately.
DMADV

Define
Measure
Analyze
Design
Verify

Define the project goals and customer (internal and

external) deliverables
Measure and determine customer needs and specifications
Analyze the process options to meet the customer needs
Design (detailed) the process to meet the customer needs
Verify the design performance and ability to meet customer
needs

When To Use DMADV

The DMADV methodology, instead of the DMAIC methodology, should be used when:

A product or process is not in existence at your company and one needs to be

developed

Green
Belt

The existing product or process exists and has been optimized (using either
DMAIC or not) and still doesn't meet the level of customer specification or six
sigma level

Representing it all diagrammatically-

Map process
steps,
identify input/
output
measures
Define Process
Mission

Define
purpose of
the process,
its goal and
its
boundaries

MSA, DCP,
indicators
and monitors

Map Process

VOC and VOP

Identify
Critical to
Quality and
Critical to
process

Service
excellence
and process
excellence

Build PMS

Develop
Dashboards

Identify
Improvement
Opportunities

Visual
representatio
n of
performance

The
DMAIC
cycle

Six Sigma is a data driven business strategy that seeks to streamline production processes
to constantly generate quasi perfect products and services in order to achieve
Breakthrough ROI. One of the pillars of Six Sigma is the pursuit of the elimination of
production process variation. For a production process to generate perfect products, the
process itself has to be perfect, therefore, in the design phase of the production process,
the process engineers need to precisely and accurately determine all the Critical-ToQuality Characteristics of the products or services they are about to produce in order to
minimize the possibility for variations to occur. Variation is said to have occurred every
time a product does not exactly match its predetermined CTQ characteristics; therefore
the corrective actions require the identification of the sources of variation and their
elimination.
The strategy used by Six Sigma to improve production processes is called DMAIC
(Define, Measure, Analyze, Improve and Control) and very specific tools are used at
every step of the DMAIC Roadmap.

Define
Since it would be hard to fix what is not known, the first step in a Six Sigma project will
consist in defining the goals of the project, identifying the Ys (the problem being
addressed)
Define the purpose and the scope of the project.
Determine the resources needed
Determine who are the customer of the project
Map the SIPOC (Suppliers- inputs-Process-Customer Output-Customer)
Develop the project planning

Measure
Identify the Xs ( the factors that are thought to cause the problem being addressed) and
collect data
Identify the business processes that generate the Xs and the Y
Perform a regression analysis to measure the correlation between the Y and the Xs
Identify the Critical-To-Quality requirements (CTQ)
Define the metrics used to measure the CTQs
Measure the current process capabilities

Analyze
Identify what inputs affect the output and to what extent they do so
Identify the root causes of the problem
Using Pareto Analysis, determine the vital few factors that contribute to the problem
Determine the new metrics needed to monitor performance

10

Improve
Based on the results obtained from the Analyze phase; develop and implement plans for
process changes that lead to an improvement of the vital factors that impact the issue at
hand.

Control
Determine the standard process to be followed, monitor the process, communicate and
train the employees.

DMAIC Phases

Purpose Of The Phases

Tools Used

11

Define

Project planning

Define the KOPV

Project Charter

Define the Customer

Requirement

Force Field analysis

Stakeholder Analysis

SWOT Analysis

Work Breakdown Structure

Voice of the Customer

Voice of the Business

Process Flow Map

SIPOC Analysis

Baseline

Kano Analysis

Brainstorming

Data Collection

7 Basic Tools

Process Metrics

System Diagram

Process Capabilities

Benchmarking

Gage R&R

Cost Of Poor Quality

Regression analysis

Set up the cross functional team

Define the resources needed

Identify the customers of the

project

Measure

Define the Customer

Identify the Stakeholders

Collect data pertaining to the Y

and the Xs

Identify the Xs (the factors that

contribute to the problem)

Measure the current process

capabilities and performance

Measure the correlation

between the Xs and the Y

12

Analyze

Determine the root causes of

the process variations

Identify the non value added

steps

Identity the ideal process

Analysis Of Variance

Pareto Analysis

Cause and Effect Analysis

Fishbone diagram

Cause and Effect Matrix

o
Failure Mode and Effect Analysis
(FMEA)

Improve

Based on the FMEA performed

in the Analyze phase, develop
action plans to prevent variations

Reassess the process

Develop solutions

Hypothesis Testing

Decision And Risk Analysis

Process Capability Analysis

Process Performance Analysis

Reliability Analysis

5 Whys

Design Of Experiment

Failure Mode Effect and

Analysis

Taguchi Method

Quality Function deployment

Brainstorming

Poka Yoke

5S

Pugh Matrix

13

Control

Develop standardization plan

Manage the performance

Control Charts

Take preventive actions

Pre-Control Charts

Provide training

Statistical Process Control

Time Series

Standardization

Performance Management

Heres a few example of DMAIC techniques in the various projects-

Sigma project rail car cycle time

Define: Eliminate paying extra demurrage charges on rail cars.
Measure: Paying over four days demurrage on some rail cars. Any demurrage charge over
allowed is a defect.
Analyze: Rail car traffic, switch engine schedule, rail company operating rules, operating
company procedures, spotting procedures.
Improve: Changed sequences of handling empty and full cars. Modified loading times by
less than 2 hrs. Result is essentially no demurrage, over the allowed, for the entire site.
Control: Rail company changed procedures and operating company changed scheduling
practices.
six sigma project chemical plant bottleneck.
Define: Distillation tower has internal damage limiting production rates. Next outage is
scheduled in one year. If outage taken now to repair damage we will still have to take
outage in one year because of parts delivery for other essential projects.
Measure: At anything over 85% of capacity the distillation tower will not perform. With
six months of effort, Operations Engineers and Process Engineering could find no
solution other than to take an early outage. Anything less than 100% capacity is
considered a defect.
Analyze: Identified key operating variables, established allowable ranges for each, and
14

conducted a Designed Experiment.

Improve: A single set of conditions allowed operations at 102% of capacity without
problems. At that level another part of the plant became the bottleneck. Increased
capacity until scheduled outage worth $6million.
Control: All shift operators were trained for new conditions and the operations procedures
were modified.
six sigma project retail display.
Define: Marketing has designed a "fancy" display unit that they think will outperform the
"standard" display unit and they want to put one in every store. "Fancy" display is 10X
cost of a "standard" display and all stores already have "standard" units. Should the new
displays be purchased.
Measures: Have data for each store on sales of this product for every day.
Analyze: The stores identified at least three other factors besides display type that could
impact sales. Range for each factor was identified. Design of Experiments was
conducted.
Improve: "Fancy" display had no significant impact on sales. The "fancy" displays were
not ordered for any more stores, with considerable cost savings.
Control: Future changes will be tested and evaluated using statistical techniques.
six sigma project water treating.
Define: Water treating unit in 15 years had never been able to handle the nameplate
capacity. Treatment chemical costs were higher than other types of treatment units.
Measure: Confirmed flow rate through the system vs. nameplate.
Analyze: Measure system evaluation and found many measurements that were off by
over 100%. Hourly operations identified key variables in the operation of the unit and the
acceptable range of each. Conducted three different Designed Experiments.
Improve: Corrected the measurement problems. Found set of operating variables that
produced 107% of nameplate capacity at higher quality with lower chemical use.
Chemical use reduced by $180K per year.
Control: Hourly operations trained, procedures modified, process to check measurement
instituted. Model for changes in inlet water conditions.
six sigma project power distribution reliability.
Define: Large chemical site had significant losses due to power outages.
Measure: Dollar value determined for each failure and the total. Each failure was
assigned to a major component.
Analyze: Mapped the entire system by major component and identified failure rates for
each major component. Found areas with projects scheduled that were very unlikely to
fail and would add nothing to overall reliability. Other components were being ignored

15

and had a highly likelihood of causing an outage.

Improve: Developed plan for each component depending upon failure mode and
frequency for that component. Made a 10X reduction in the dollar losses due to power
failures on site.
Control: Track each major component and modify action plan based on failure mode if
needed. System shared with other locations.
six sigma project redundant analysis.
Define: Analysis is being conducted at two and three locations for the same product with
different results from each location. Capital requests from multiple area for the same
analysis for the same material.
Measure: For each analysis collected the corresponding results from each location.
Totaled the capital request for analysis where they were already being done or duplicate
requests for the same analysis.
Analyze: In some cases the methods were the same and the brand of instrument the same,
some had the same type of instrument but different brand and different procedures, in
others different types of instruments were being used. Found over calibration of most
instruments. Sources of variation for each type of analysis were investigated using nested
Design of Experiments.
Improve: Real time telemetry of data eliminated some redundancy. For other analysis
correlation curves had to be developed to show the equivalent values for different
methods and agreement was reached to use one analysis and share the results. Totally
eliminated the significant capital request for analysis.
Control: Modified capital authorization request procedure. Control charts for each
analysis to determine when to calibrate.

six sigma project new capacity justified.

Define: Contract to deliver product at a minimum rate on a daily basis. Severe penalties if
rate missed by even a small amount. Customer "good will" also an issue.
Measure: Capacity of units in the system more than the minimum rates. Collected failure
rate data for each unit and time to repair.
Analyze: Failure rate data combined with the time to repair data indicated that there were
significant periods of time when the minimum contract rates could not be met and
penalties would be paid.
Improve: Capital approved for an additional unit. Within the first year the new unit was
required at least four separate times for several weeks each time to meet the contract
minimums. Any one of the four times returned enough cash to pay for all of the capital
expended.
Control: System to tract and monitor failure data and repair time data.

16

six sigma project people selection.

Define: Why is there such a difference is the sales performance of people?
Measure: Top people have 10X volume of the bottom 25%. Failure to meet sales quotas
is a defect.
Analyze: Education, training, time in job, product line, sales area, profiles.
Improve: Able to identify by profile 72% of the top sales people. Use this tool to select
new people into this function.
Control: Use profiles for new hires and continue to monitor performance levels.
six sigma project parts failing after final machines.
Define: Inspection is rejecting a high number of parts after final machines.
Measure: Product yield was determined and number of defects in total to establish defect
yield and sigma value.
Analyze: Machine operators, engineers and vendor identified variables that could impact
the production of defects. Range of acceptable levels determined for each variable. Five
different Designed Experiments were conducted.
Improve: Operating instructions changed to the conditions with the lowest defect
production consistent with capacity limits. Final product yield increased 13%.
Control: Control charts installed for each machine. Decision tree corrective action plan
provided for known defects and known corrective actions.
six sigma project out of spec product.
Define: Amount of product out of spec and being automatically removed is high. No
recycle or salvage value.
Measure: Quantified the amount of out of spec product for each product grade.
Analyze: Operations and Engineers identified the variables that impact the production of
out of spec material. Several of these are preventive actions performed by operations.
Ranges for the levels and frequencies for the variables were determined. Designed
Experiments were run and acceptable levels and frequencies determined.
Improve: Levels for the variables and frequencies for operator preventive actions
established. Out of spec material dropped by 50%.
Control: Operating procedures were modified, schedules for operator corrective actions
instituted, and control charts for the amount of out spec material are being kept.

six sigma project engineering changes.

17

Define: Large number of changes from client after approving engineering design.
Schedule slipping.
Measure: Number of changes, time involved in changes, compliance to critical path
schedule.
Analyze: No clear authority on client team to establish scope, any of client team could
make changes, verbal communication of changes, conflicting changes by client team
members. Language issues between client and engineers.
Improve: Regular engineering/client meetings where topics included: scope for each
section and desired objective, known limitations defined, unclear requirements were
questioned and options discussed. Written plan signed by client representative and
engineering lead. Change requests in writing and signed by client representative. Changes
decrease by factor of 4.7 and schedule met.
Control: Change requests all in writing. Shared approach with other disciplines on
project.

six sigma project web design.

Define: Design a web site that ranks in the top ten (10) on all major search engines and
directories.
Measure: Enter "six sigma" and check ranking in search engines.
Analyze: URL name, title of pages, and other factors are major ranking criteria.
Reciprocal links and other routine activities aid in search engine ranking.
Improve: Purchase URL with six sigma included, optimize each page, develop reciprocal
links, and perform other regular activities required to maintain traffic and ranking.
Control: Monitor ranking on search engines weekly. You can check on the success of this
project by entering "six sigma" in the search field of your favorite search engine. Success
is a link to http://www.adamssixsigma.com in the top ten (10) listings. The titles and
descriptions may vary, the URL link is the performance measure.

18

Representing it through figure-

A Road Map for Six Sigma

Appoint a Champion
Select a Cross-functional team
Develop quantifiable goals
19

 Develop an implementation plan

Establish a training program
Address data collection requirements and issues
Develop a change control and maintenance program
Coordinate your road map

The Basic Tools For Six Sigma Areo Brainstorming

o Force Field Analysis
o Pareto Analysis
o Project Management
o Stakeholder Analysis
o Fishbone Diagram
o SWOT Analysis
o Project Charter
o The Theory Of Constraints (TOC)
o Process Mapping
o Value Stream Mapping
o Lean Manufacturing

Defining each of them in details-

20

BRAINSTORMING
Most project executions require a cross functional team effort because different creative
ideas at different levels of management are needed in the definition and shaping of a
project. These ideas are better generated through brainstorming sessions.
Brainstorming is a tool used at the initial steps of a project, it consists in encouraging a
voluntary generation of a large volume of creative, new and not necessarily traditional
ideas by all the participants. It is very beneficial because it helps prevent narrowing the
scope of the issue being addressed to the limited vision of a small dominant group of
managers
Since the participants come from different disciplines, the ideas that they bring forth are
very unlikely to be uniform in structure and in quintessence so the synergy of gist that
they yield needs to be organized for the purpose of the project. If the brainstorming
session is unstructured, the participants can give any idea that comes to their minds but
this might lead the session to stray away from its objectives.
A structured Brainstorming provides rules that make the collection of ideas
organized. A form of Brainstorming called Nominal Group Process (or Nominal
Technique) is an effective way of gathering and organizing ideas. At the end
Brainstorming, a matrix called Affinity Diagram helps arrange and make sense
many ideas and suggestions that were generated.

better
Group
of the
of the

Nominal Group Process

Nominal Group Process (or Technique) is a technique that provides a reflection group a
framework for a non-threatening and constraint free face-to-face discussion where the
participants aim at reaching an agreement on a given topic. The objective is to make it
easy for every participant to freely express his or her opinion and make suggestions
without any pressure and at the same time prevent a small group of more opinionated
participants from taking over the debate.
The first step in the process will consist in designating a facilitator. His role will be to
conduct the discussions and makes sure that the members fully understand the issues
being discussed without letting himself take a major part in the generation of substantive
ideas. He will have to give the chance to every participant to make a suggestion.
The suggestions can be made orally or in writing. Every participant is asked to give as
many ideas a possible in response to a given question.
The facilitator writes down all the ideas on a board for all the participants to see, and then
every one of them is discussed by the group in order to clarify some of the suggestions
made before a list of priorities is discussed to determine their merit.
At the end of the discussions, the team assesses the priorities and agrees on the next step.
21

The advantages attached to such a process are that:

A group of people of different horizons reach a consensus on a given issue

A high volume of suggestion is made in a short period of time
The ideas generated will usually go far beyond and will be way more creative and
original than what a meeting of a group of similar minded managers who meet
regularly would yield.
it helps uncover tacit knowledge (knowledge that reside in the employees that has
so far been untapped) of employees by eliminating psychological complexes and
freeing repressed ideas.
Gives a sense of belonging and motivates to all the participants to the endeavor

The disadvantages are:

Because the participants come from different areas and of a company and
therefore have a different background, the facilitator needs to be very competent
and knowledgeable and flexible.
The more vocal participants may end up having it their way.
If there are too many participants, the meetings will end up being too long and
hard to conduct.

Affinity Diagram
If the ideas generated by the participants to the brainstorming session are few (less than
15), it is easy to clarify, combine them, determine the most important suggestions and
make a decision. But when the suggestions are too many it becomes difficult to even
establish a relationship between them.
An Affinity Diagram or KJ method (named after its author Kawakita Jiro) is used to
diffuse confusion after a brainstorm by organizing the multiple ideas generated during the
session. It is a simple and cost effective method that consists in categorizing a large
amount of ideas, data or suggestions into logical groupings according to their natural
relatedness.
1. The first step in building the diagram is to sort the suggestions into groups based
on a consensus from the members
2. Make up a header for the listings of the different categories
3. An affinity must exist between the items on the same list and if some ideas need
to be on several list, let them be.

FORCE FIELD ANALYSIS

22

Qualitative change will always be opposed by restraining forces that are either too
comfortable with the status quo or are afraid of the unknown. In a competitive global
market where constant innovation and continuous improvement are the driving forces
that keep businesses running, identifying those forces in order to assess the risks involved
and to better weight the effectiveness of potential changes becomes an imperative.
The Force Field Analysis is a managerial tool used for that purpose. FFA is a technique
developed by Kurt Lewin, -a 20th century social scientist- as a tool for analyzing forces
opposed to change. It rests on the premise that change is the result of a conflict between
opposing forces, in order for it to take place, the driving forces must overcome the
restraining forces.
Whenever changes are necessary, FFA can be used to determine the forces that oppose or
stimulate the proposed changes. The opposing forces that are closely affected by the
changes must be associated with the risk assessment and the decision making. The two
groups are charted according to how important they can impact the changes, with the
objective of abating the repulsive forces and invigorating the proponents of changes.

To conduct a FFA, a certain number of steps should be taken:

The first of which should be the description of the current and the ideal states, to
analyze how they compare and what will happen if changes are not made.
Describe the problem to be solved and how to go about it. Brainstorming sessions
can be an effective tool for that purpose.
Identify and divide the stakeholders who are directly implicated in the decision
making in two groups: the proponents for the changes and the restraining forces
and then select a facilitator to mend the fences.
Each group should list the reasons why it is for or against the changes. The listing
can be based on questionnaires for or against changes.

The listing should classify the reasons according to their level of importance; a scale
value can be used as a weight for each reason. Some of the issues to be considered are:
Company's needs
Cost of the changes
Company's values
Social environment (Institutions, policies..)
Company's Resources

23

 How the company usually operates

Stakeholders' interests
Stakeholders' attitudes
The two lists are merged in the same chart to visualize the conflicting forces.

Question every item on the lists to test their validity and determine how critical
they are for the proposed changes.
Add the scores to determine the feasibility of the changes. If the reasons for a
change are overwhelming, take the appropriate course of action by strengthening
the forces for change.

An operation manager has suggested that all the operations of a fictitious company
should be consolidated in one facility. The following diagram depicts and example of a
Force Field Analysis.

24

Pareto Analysis
Pareto analysis is simple; it is based on the principle that 80% of problems find their roots
in 20% of causes. That principle was established by Vilfredo Pareto, a 19 th century
Italian economist who discovered that 80% of the land in Italy was owned by only 20%
of the population. Later empirical evidence showed that the 20/80 ratio was determined to
have a universal application.
80% of customer dissatisfaction stems from 20% defects
80% of the wealth is in the hands of 20% of the people
20% of customers account for 80% of a business
When applied to management, the Pareto rule becomes an invaluable tool. In the case of
a problem solving for instance, the objective should be to find and eliminate the
circumstances that make the 20% "vital few" possible so that 80% of the problems are
eliminated. It is worthy to note that Pareto Analysis is a better tool to detects and
eliminate sources of problems when the those sources are independent variables.
The first step will be to clearly define the goals of the analysis. What is it that we are
trying to achieve? What is the nature of the problem we are facing?
The next step in the Pareto Analysis is the data collection. All the data pertaining to
factors that can potentially affect the problem being addressed need to be quantified and
stratified. In most cases, a sophisticated statistical analysis is not necessary; a simple tally
of the numbers suffices to prioritize the different factors. But in some cases the
quantification might require statistical analysis to determine the level of correlation
between the causes and the effect. A regression analysis can be used for that purpose, a
coefficient of correlation or a coefficient of determination can be derived to estimate the
level of association of the different factors to the problem being analyzed.
Then a categorization can be made, the factors are arranged according to how much they
contribute to the problem. The data generated is used to build a cumulative frequency
distribution.
The next step will be to create a Pareto Diagram or Pareto Chart in order to visualize the
main factors that contribute to the problem, and therefore concentrate on the "vital few".
The Pareto Chart is a simple histogram; the horizontal axis shows the different factors
while the vertical line represents the frequencies.
Since all the different causes will be listed on the same diagram, it is necessary to
standardize the unit of measurement and set the time frame for the occurrences.

25

The building of the chart pre-requires a data organization. A four columns data summary
must be created to organize the information collected. The first column will list the
different factors that cause the problem, the second column will list the frequency of
occurrence of the problem during a given time frame, the third column records the
relative frequencies, in other words, the percentage of the total and the last column will
record the cumulative frequencies, bearing in mind that the data are listed from the most
important factor to the least.

The following data was gathered during a period of one month to analyze the reasons
behind a high volume of customer return of cellular phones ordered on line.
Factors

Frequency Relative Frequency Cumulative frequency

Misinformed about the contract 165

58%

58%

Wrong products shipped

37

13%

71%

Took too long to receive

30

11%

82%

Defective product

26

9.2%

91.2%

Changed my mind

13

4.6%

95.8%

Never received the phone

12

4.2%

100%

Totals

283

100%

The diagram itself will consist in three axes: The horizontal axis lists the factors, the left
vertical axis lists frequency of occurrence, and it is graded from 0 to at least the highest
frequency. The right vertical line is not always present on Pareto charts; it represents the
percentage of occurrences, it is graded from 0 to 100%.

26

The breaking point (the point on the cumulative frequency line at which the curve is no
longer steep) on this graph is at around "wrong product". Since the breaking point divides
the "vital few" from "the trivial many", the two first factors "misinformed about the
contract" and "Wrong products" are the factors that need more attention, by eliminating
the circumstances that make them possible, we will eliminate about 71% of our problems.

Project Management
The objective of a project is either to solve an existing problem or to start a new venture.
In either case a carefully planned and organized strategy is needed to accomplish the
specified objectives. The strategy includes developing a plan which will define the goals,
explicitly set the tasks to be accomplished, determine how they will be accomplished,
estimate time and the resources (both human and material) needed for their completion.
How projects are planned and managed will seriously impact on the profitability of the
ventures that they are intended for and the quality of the products or services they
generate.

27

Most project management plans are subdivided into four major phases: the feasibility
study, the project planning, the project implementation and the verification or evaluation.
Each one of these phases requires strategic planning.
Since all the tasks included in a project cannot be executed at the same time because of
their interdependence, a critical path needs to be determined when scheduling of the
activities.
The three major tools that are used for the purpose of planning and scheduling the
different tasks in project management are the Gantt chart, the Critical Path Analysis (or
Method) and the Program Evaluation and Review Technique.
But before any scheduling starts, it is essential to accurately estimate the time that every
task might require. A good scheduling must take into account the possible unexpected
events and the complexity involved in the tasks themselves.
This requires a thorough understanding of every aspect of the tasks before developing a
list.
One way of creating a list of tasks is a process known as the Work Breakdown Structure
(WBS). It consists in creating a tree of activities that take into account their lengths and
contingence. The WBS starts with the project to be achieved and goes down to the
different steps necessary for its completion. As the tree starts to grow, the list of the tasks
grows.
Once the list of all the tasks involved is known, based on experience or good wit, an
estimation of the time required can be made and milestones determined.
Knowing the milestones of a project with certainty is extremely important, because they
can affect the timeliness of the project completion as a whole, and delays in project
completions can have serious financial consequences and above all they can cost
companies market shares. In a global competitive market, innovation is the driving force
that keeps businesses alive, and this is more obvious in high tech industries. Most
companies have several lines of products and each one of them is required to put out a
new product every year or every six months. If for instance DELL's Inspiron or Latitude
fails to put out new products on time, it is likely to lose profit from the forgone sales (the
loss is proportional to the products' Time-To-Live) and market shares to its competitors.

The Gantt chart

Gantt charts (named after the American social scientist, Henry L. Gantt, its author) are
effective for scheduling complex tasks. They help arrange the different events in
synchronism and associate each task with its owner and its estimated beginning and
ending time.

28

The charts also allow the project's team to visualize the resources need to complete the
project and the timing for each task, it therefore shows where the task owners must be at
any given time in the execution of the projects. The team working on the project should
know whether it is on schedule or not by just looking at the chart.
The chart itself is divided in two parts. The first parts shows the different tasks, the tasks
owners, the timing and the resources needed for their completion; the second part
graphically visualizes the sequence of the events.
Some tasks cannot start until the preceding ones are finished. The main disadvantage of a
Gantt chart is that it does not take into account the interdependence between the tasks. It
shows the sequence and the beginning and the ends of the tasks but does not indicate
whether one task has to wait for the end of a preceding one.
The Critical Path Analysis is another tool used for complex projects and it does take into
account the interdependence of the tasks

Critical Path Analysis (CPA)

Not only does the CPA take into account the interdependence of the critical tasks, but in
addition it considers the possibility of performing different tasks in parallel, and the tasks
that can be performed at the same time or wait. It also helps monitor the execution of the
tasks as they are being implemented. The CPA identifies the tasks that need to be
completed on time and the ones that can wait for the whole project to meet its deadline. It
helps estimate the Critical Path, the project duration and the slack time for every activity.
The CPA resembles the tree in the Work Breakdown Structure (WBS) with the difference
that it takes into account the timing of the tasks. It is a web of activities linked by arrows
between every two nodes.
The first step in creating a CPA diagram is to list the tasks including their duration and
the order in which they have to be completed.
In some case, the project team might itself be in need to complete the project before the
time predicted by the CPA, which creates a need to reduce the time spent on some
activities.
The following table contains the information needed to create and display the Critical
Path for a fictitious project.
Activity Predecessor Duration
A

NONE

5
29

Based on this information, we can determine the Critical Path, the project duration and
the slack time for H.
Task A is the first on the list, no other task can start until it is completed. Tasks B and C
come next, they are contingent on task A. task E, G and H are on the same path as C,
while task D and F are on the same path and depend on B.
The letters on the diagram represent the different activities and the numbers beside them
represent the time it will take to accomplish the tasks.
The diagram shows that there are two paths to the project: ABDF and ACEGH. The
duration for ABDF is 20 day and the duration for ACEGH is 18 days. Since ABDF is the
longest path, it is also the Critical Path. The earliest that the task H can start is within 16
days.

The advantage of the Gantt chart over the CPA is the graphical visualization of the tasks
along with their timing, the task owners, the start time and end times. The advantage of
the CPA over the Gantt chart is the sequence of events that takes into account the
interdependence of the tasks.
The CPA is a deterministic model because it does not take into account the probability for
the tasks to be completed sooner or later than expected, the time variation is not
considered.

30

Program Evaluation and Review Technique (PERT)

The PERT is just a variation of the CPA with the difference that it follows a probabilistic
approach while the CPA is a deterministic model.
Once the critical tasks have been identified, their timing estimated, the sequence of
events determined and a list of activities established, we can evaluate the probability for
the different tasks to be accomplished on time and the shortest possible time for each of
them.
The completion of each task is said to follow a Beta distribution with the expected length
of the project being
E(p) =
Where
LgT stands for Longest time
ST Stands for Shortest time
lt Stands for likely time
The estimated standard deviation
The completion of the whole project follows a Normal distribution.
Based on the information bellow, find the critical path for the project, the project
completion time, the probability of finishing it on time and the probability of finishing it
at least 1 day earlier.
Activity Predecessor Most likely time Shortest time Longest time
A

NONE

Solution:

31

Most
Activity Predecessor likely
time

Shortest Longest Estimated Standard

Variance
time
time
mean
Deviation

NONE

.17

.029

.33

.11

.33

.11

4.8

.5

.25

5.83

.17

.029

6.83

.33

.11

3.83

.17

.029

.33

.33

The critical path has the longest duration. It is critical because any delay in any task will
cause a delay for the whole project. In this case, we have two paths ABDF which will last
20 days and ACEGH which will last 17 days. So the critical path is ABDF.

The estimated variance for the critical path is 0.029 + 0.11 + 0.25 + 0.11 = 0.499 with a
standard deviation of
.
Completing the project at least 1 day earlier means completing it in 19 days or less. The
probability for such an event to take place is found using Normal distribution

1.42 corresponds to 0.9222 on the Normal table. Since we have a negative sign, the area
we are looking for will be on the right side of 0.9222 under the normal curve which is
equal to 0.0778.
Stakeholder Analysis

32

The stakeholders are the people who can affect or can be affected by a project. They can
be department managers, customers, suppliers or anyone among the employees who will
contribute to its concretization.
But the importance of all the stakeholders in a project is not the same. So a stratification
of the stakeholders according to how they impact or are impacted by the project is very
important.
The techniques used to identify the stakeholders, determine their relative importance for a
project and stratify them are called the Stakeholder Analysis. The benefit of using this
technique is that it helps anticipate how the different groups will influence the project and
therefore develop the appropriate response strategies to remove obstacles and reduce
negative impacts.
The first step is to determine who the stakeholders are and how they affect the project.
This step is better achieved during a brainstorming session.
After the list of the stakeholders is agreed upon, they are subdivided into groups
according to their domain of interest and how they can benefit or hinder the project (a
special tool called Force Field Analysis deals with how to approach the negative forces
that might be opposed to changes).
The next step will consist into classifying them according to their importance for the
project and then assessing the responsibilities and expectations for all of them.

Assess every stakeholder's positive or negative impact for the project and grade
their impact (From 1 to 5 or from A to E for instance).
Determine what can be done to lessen their negative impacts and improve their
positive contribution to the project.

The following matrix is an example of a synthesis of a stakeholder analysis.

How do
they relate
Stakeholders
to the
project?

How does
How do
How to
How to
the
they
maximize the
minimize
project
impact the positive impacts negative impacts
impact
project? on stakeholders on stakeholders
them?

Customers

Program
managers

Operations

Inventory

Suppliers

Employees

33

Institutions
Outside the
Company

Fishbone Diagram

The cause-and-effect diagram also known as fishbone (because of its shape) or Ishikawa
diagram (after its creator) is used to synthesize the different causes of an outcome. It is an
analytical tool that provides a visual and systematic way of linking different causes
(input) to an effect (output). It can be used in the design phase of a production process as
well as in an attempt to identify the root causes of a problem. The effect is considered
positive when it is an objective to be reached as in the case of a manufacturing design, it
is negative when it addresses a problem being investigated
The building of the diagram is based on the sequence of events, "sub-causes" are
classified according to how they generate "sub-effects" and those "sub-effects" become
the causes of the outcome being addressed.
The Fishbone diagram does help visually identify the root causes of an outcome but it
does not quantify the level of correlation between the different causes and the outcome.
Further statistical analysis is needed to determine which factors contribute the most to
creating the effect. The Pareto Analysis is a good tool for that purpose but it still prerequires data gathering. Regression analysis allows the quantification and the
determination of the level of association between causes and effects. A combination of
Pareto and Regression Analysis can help not only determine the level of correlation but
also stratify the root causes. The causes are stratified hierarchically according to their
level of importance and their areas of occurrence
The first step in constructing a Fishbone diagram is to clearly define the effect being
analyzed.
The second step will consist into gathering all the data about the Key Process Input
Variables (the KPIV), the potential causes (in the case of a problem) or requirements (in
the case of the design of a production process) that can affect the outcome.
The third step will consist in categorizing the causes or requirements according to their
level of importance or areas of pertinence. The most frequently used categories are:

Manpower, Machine, Method, Measurement and Materials for manufacturing

34

Equipment, Policy, Procedure, Plant and People for services

Sub-categories are also classified accordingly; different kinds of machines and computers
for instance can be classified as sub categories of equipment.
The last step is the actual drawing of the diagram.

The following diagram is an example of a Cause-and-Effect diagram that explains why a

production plant is producing an excessive amount of defects.

35

SWOT Analysis
Any business that evolves in a competitive environment faces threats from its competitors
and its environment; what keep it in the market is the potential opportunities that can be
exploited.
The strength of a company depends on its ability to face the threats by better exploiting
these opportunities. So when starting a new project, a company needs to assess its
position in the market.
The SWOT (Strength- Weakness- Opportunity- Threat) Analysis is an effective tool that
can be used in project planning to assess a company's strategic position and gage its
ability to respond to the threats posed by its competitors or exploit the opportunities
offered by the market.
The SWOT Analysis is done at two levels: the first level will consist in assessing the
company's internal situation by analyzing its strength and weaknesses (how prepared is it
to engage in the planned project?): The external situation is contingent upon the level of
threats from the competitors and the opportunities offered by the market.
So SWOT analysis consists in analyzing information about a business and its
environment in order to determine how to overcome potential obstacles to a project.

Company's internal situation: Strength and Weakness

For a company that is customer satisfaction oriented, the first step in the SWOT analysis
will consist in assessing the company's ability to produce goods or services that meet or
exceed the customers expectations. Does the company have the financial, human and
material resources needed to satisfy its customers?
If it does, can it generate a cost effective process that yields the goods and services?
To better visualize the company's Strength and Weaknesses, a chart that lists both
conditions might be a good starting point.
The purpose of the chart is to oppose the strengths to the weaknesses. If the strengths
overcome the weaknesses, it would be easy for the project managers to address the next
level of the SWOT Analysis, which is the company's external position. But if the
company's weaknesses are overwhelming, the project managers will need to develop an
effective strategy to strengthen the company's internal position before addressing the
external factors.

36

The following chart is a synthesis of potential strengths and weakness that might be
addressed when analyzing a company's internal situation as it relates to a particular
project.

Strengths

Weaknesses

Resources:

Cash flow

Human

New to the field

Material

Inexperienced management

Financial

Bad physical location

Capabilities

Costly process

Managerial experience

Poor marketing

When the internal conditions are deemed to be favorable, the next step in the SWOT
Analysis will be the assessment of the threats and opportunities that come from the
environment in which the company evolves.

External Factors: Opportunities and Threats

A mistake that is often made in project planning is to ignore the external factors. The
assessment of the external factors starts with the PEST (Political, Economical, Social and
Technological) Analysis.

Opportunities

Threats

Market growth

Competitors' new discoveries

Weak competitors

Tougher legislations

Technological evolution

Weaker market demand

Loosened regulations

New unaffordable technologies

37

Favorable changes in the customers'

lifestyle
Availability of communication

Inability to access key materials

New competitors on the market

PROJECT CHARTER ANALYSIS

Any initiative aimed at generating qualitative changes in a work place requires a strategic
planning of the resources needed for its realization. The resources involved are human,
material, financial and also the time needed for both the planning and the execution of the
plans.
The strategy used to plan the resources needed for the changes is called project
management. It includes the specification of the tasks to be accomplished, how the
objectives are to be achieved, the planning of the resources to be allocated, the budgeting
and timing as well as the implementation of the project and the controls involved.
Since all the tasks cannot be executed at the same time because of their interdependence,
a methodic scheduling is necessary for a timely and cost effective outcome.
The human resources remain the most important aspect of any endeavor; therefore a clear
identification of the people who have a stake in the project as well as those who might
resist changes is vital to its success.
But before a project even starts, there are some pre requisites that must be fulfilled for its
success.

The management must be committed to the changes envisaged

The overall strategy must be defined and be in agreement with the company's
business vision
The project champion nominated
The key participants to the projects must be identified, their skills and abilities
assessed and their roles defined and well understood
The risk involved in the changes to be implemented must be evaluated and and
managed.

But the first step in a project management is its specification, the definition of its goals
and objectives. A lucid definition of a project provides a solid basis for not only its
prompt completion but also for the future Quality Assurance.

38

I. Project definition
Since most of the cost savings are contingent upon the planning and execution of
projects, before any action is taken, it is necessary to have a clear common understanding
of all the aspects of the project, its extent, the key stakeholders, its goals and its
objectives. A good definition provides a clear appreciation of every stakeholder's role and
what is expected from him, it also provides a tacit agreement between the parties. The
definition of the project is laid on a document called the project charter.

1. Project Charter
The project charter is written either by the project sponsor or by the project Champion
with the approval of the sponsor. It is issued by upper management to formally make the
project official and it gives the project Champion and his team the power to use the
organization's resources for its purpose. The charter is then made public and distributed to
all the stakeholders

A. The content of the project charter

The charter specifies the purpose, sets the orientations of the project, determines the
stakeholders, the resources needed for its realization, the deadlines and the constraints.

The following table summarizes the most common sections of a project charter and their
meaning.

Project Title
Project Champion
Project number
The project champion or manager who
ensures that the resources are available and
that the project is execute in a timely and
cost effective manner.

Depends on the organization's standards and

structures. It is just a document reference.

Project description
It defines the project and gives a clear reason for its purpose, what are the measurable
results expected. It includes the project background and relates it to our present
conditions. It makes clear the expectations from every stakeholder.
It also defines the success of the project and addresses the consequences of a failure.
The project description defines the constraints and the factors that can affect the project.
39

Value statement
Clearly set out the positive impact of the project on the company.
Stakeholders
It starts with the project sponsor, the team working on the project, the customers (who can
be the project sponsor), and the external customers.
It identifies the key people involved in the project and their role.
Risk Analysis

Timeframe

Project budget

Alternative plans
What to do if things to not go according to plans.
Documentation

Project Monitoring
How and when to conduct meetings, who participates and for what purpose. How to
measure the progress of the different aspects of the project.
Scheduling
Important events and dates that affect the project. Different deadlines for sub-parts of the

40

project.

THE THEORY OF CONSTRAINTS (TOC)

The Theory Of Constraints was first introduced in 1985 (just a few years before Six
Sigma) by Eliyahu Goldratt in his famous book the Goal and later developed in his
subsequent books such as The Critical Chain, Its Not Luck, the Haystack
Syndrome and The Theory Of Constraints.
It is founded on the notion that in any business structure, at any given time, one factor
tends to impede the companys ability to reach its full potential. All business operations
are structured like a chain of events, like linked processes with each process being a
dependent link and at any given time, one link on the chain tends to restrain the whole
chain and prevent it from reaching its Goal. Since the objective of a company is not to
maximize the efficiency of the different parts that compose it, but to maximize the overall
efficiency of the business as an entity, it becomes necessary to identify the constraint and
proceed with the needed improvements.
One of the first lessons that Goldratt gives in The Goals is an obvious one, even thought
some businesses fail to understand it: Companies do not exist for the sake of being
productive or for the sake of producing high quality goods and services or making their
customers happy. The reason why companies are set up, their raison detre, their Goal is
to make profit, to make money. Productivity, high quality products and services and
customer satisfaction are nothing but very necessary ways and means that companies
have to use to reach their Goal. So the cost of being productive, the cost of quality and
customer satisfaction must be contingent upon the Goal.
In his quest to show the ways and means to reach the Goal, Goldratt borrows some
commonly used business terms but he gives them a different meaning. Three of the most
important of which are the Throughput, Inventory and Operational Expenses which he
defines as follow.

Throughput: Money generated by a company through sales

Inventory: Money invested on purchasing things intended for sales

Operational Expenses: Money spent to turn Inventory into Throughput.

Some of the derivatives of these metrics are the Throughput per Unit and the Throughput
per Unit of the Constraining factor.

41

Throughput per Unit = Throughput / (units of Product)

Throughput per Unit of the Constraining Factor = (Throughput per Unit) /

(units of the constraining factor required to produce each unit of product).

To maximizing total Throughput, The Company must concentrate on improving the sales
of the products that provide the highest throughput per unit of the constraining factor.
This
is
because
the
bottleneck
determines
the
throughput.
The objective of a company must be to maximize the Throughput by minimizing the
Inventory and the Operational Expenses. To reach that objective, it must continuously
strive to identify the Constraints, the Bottlenecks and proceed with the necessary
changes. The bottleneck is defined as a resource whose capacity is equal to or is less than
the demand placed on it. The slowest performing area in a process determines the level of
output generated by that process.
To make the necessary changes, the company needs first, to answer the following three
questions:

What to change?

What to change to?

How to make the change happen?

The changes that need to be made must address the area of the business that constitutes
the bottleneck; Overlooking the interactions between the different departments in a
company and only improving on areas that are perceived to constitute constraints might
only address the symptoms and in some cases aggravate the problems.
To make the necessary changes, Goldratt suggests the 5 following steps:
1.

Identify the constraint

2.

Exploit the constraint

3.

Subordinate all other operations to the necessity to exploit the constraint

4.

Elevate the constraint if after exploiting it and subordinating all other operations
to it, more capacity is needed to meet market demand.

5.

Restart the process without letting inertia become the systems constraint. The
process needs to be restarted again and again until the current constraint is no
longer the constraint.

The way we can tell that the current constraint is no longer the constraint is that when
further changes are made on the current constraint, they do not positively impact the

42

bottom line of the company as a whole. Therefore another process, another department,
another link must have become the weakest link, the new constraint, and it needs
improvement.

PROCESS MAPPING

360 Degree Process Mapping with Causal Loop Diagrams

Historically the Lean tool of Process Mapping relied on a linear approach to illustrate the
sub process flow of activity. On paper this makes sense, but in real world production
environments every process step can effect and be effected by multiple inputs and
outputs. With this observation traditional process mapping is found lacking and
insufficient. An alternative and more effective tool to linear process mapping uses Causal
Loop Diagrams to generate a 360 Degree process map.
The primary objective of a Causal Loop Diagram is to tell the whole story. Causal
Loop Diagrams account for multiple effects on each process step or variable by
illustrating and tracking the positive or negative correlating effect. Using this
methodology on static processes will provide a greater perspective on the interaction and
variability of process steps. This is incredibly important when developing current or
futures state high level process maps.

Building a Causal Loop Process Map

Causal Loops have three main components. They are process variables, value directions
and directional flow arrows. The names of each Process Variables are defined as non
qualitative events (steps) in the process and should always be expressed in the noun
form. Value directions illustrate the effect one variable has on another variable that it is
connected to. The directional flow arrows illustrate the direction of the process between
the variables. Value directions should be located at the end point of each arrow as an s
for same or o for opposite. They will direct the reader to see how each variable
increases or decreases from the effect of the preceding variable.
All Causal Loop Diagrams are built on two basic types of loops, they are Reinforcing and
Balancing loops.

43

Reinforcing Loops illustrate the production of an opposing interaction

between variables. These loops are comprised of variables whose
interaction causes an increase or decrease the value of variables they
are connected to. Charting these actions reveal upward or downward
trends resulting from the interaction of the variables. These
occurrences are sometimes referred to as virtuous or vicious cycles as
they produce a nearly perpetual positive (virtuous) or negative (vicious)
results. In either case the value will eventually stabilize either at zero
or the point of diminished returns.
Balancing Loops illustrate the opposite behavior. Here the interaction
of the variables produces an offsetting value. The opposing or negative
interaction may cancel or limit the progression of the process. As such
the output of the interaction will remain relatively flat and constant
over time. This interaction produces an outcome that could be tracked
in a flat graphical chart.

One easy way to identify a loop's type as a balancing or reinforcing is by counting the
quantity of opposite interactions or o's in the loop. Whenever you have an odd number
of o's you can determine that the loop is a balancing. Conversely any loop with an
even number of o's automatically indicates your loop to be reinforcing.
You should always review your diagram before labeling it as a Balancing (B) or
Reinforcing (R) loop to ensure the story and data agree with the label.

Basic Examples
Let's use variables that represent quantities that can vary over time. A term
like Gross Profit will have variation.
For our example of a Balancing Loop, let's look at the interaction of
Production Errors and Gross Profit. In our hypothetical organization the data
tells us that as Production Errors increase, Gross Profit decreases and as
Production Errors decrease Gross profit increases. In the life of this
organization we learn that as the GP decreases management attention increases. This
temporary attention produces the Hawthorn Effect and we see a decrease in Production
Errors and GP begins to increase. But as GP increases the Hawthorne Effect expires and
Production Errors increase again. These two variables interact over time to produce a flat
GP and Production error rate. (Management Attention is not listed as a variable as it
is not a constant step or measurement in our process)
Now let's look at an example of a Reinforcing Loop. In this example the data shows that
as the Gross Profit increases the R&D Budget increases. As the R&D budget increases
new products are built, more automation in the production line is implemented and GP
44

increases. As the GP increases the budget for R&D increases and the organization
produces better products and reduces production costs. This interaction increases Gross
Profit. Here we can graph a reinforcing loop producing a Virtuous Cycle. Theoretically
this cycle will go on continuously, however eventually the Law of Diminishing Returns
comes into play.
Now that we have laid the foundation of causal loops let's illustrate a real life process
with a traditional process map and then illustrate the same process in a causal loop
diagram.
Scenario:
An IT network monitoring firm is tasked to grow its business by improving its accuracy
remotely monitoring servers. It is believed by the head of the organization that if the
remote server monitoring accuracy grows, new business can be won and the overall
business will grow. As such, Business Growth is the KPOV (Key Process Output
Variable). A linear high level process diagram would be illustrated as follows:

This linear approach is accurate but fails to examine and identify the interrelationships
between and across all process steps and effectively drive the KPOV. What is missing is
the correlation of the end of the linear process map to its starting point. By using a
simple Causal Loop Diagram to map this process we can see the process from a 360
degree perspective. This alternative view can help identify potential root causes and
potential solutions via process interventions.

45

The 360 Degree View

By converting the process steps into
process variables we can begin to
view this process from a non -linear
perspective and immediately identify
a process constraint that limits the
effective growth of the organization.
In the Causal Loop we can
immediately see the opposing
relationship between the New Server
Installs and Accurate Server
Configuration. This opposition balances the overall process cycle. The data actually
shows that as more servers are installed the accuracy of the installations decrease. Now
the process constraint limiting efficiency is easily identified. Once the data has validated
the observation, we can pilot a test to introduce an intervention at the point of process
constraint to change the direction of the relationship between the variables. Done
effectively this will produce a reinforcing effect on the loop and the process.
The intervention in this
process example is the
implementation of an
automated configuration tool
that configures the servers
with limited error and no
variation. This intervention
changes the relationship
between the New Server
Install variable and the
Accuracy of Server
Configuration producing a
positive or same interaction
between the variables.
Additionally the automation
tool allows for more servers to be installed with less labor time.
By using a Causal Loop as a Lean tool to diagram this process we were able to identify
the area of process constraint faster, introduce an intervention to improve the overall
process performance and achieve the project objective.

46

VALUE STREAM MAPPING

The purpose of business operations is to produce goods and/or services that are destined
to customers who determine the value of those goods and services through their desire to
buy or not them and through the prices that they are willing to pay for them. Businesses
respond to the customers' desires by putting in place a set of operations that enable them
to produce and deliver their output. The set of operations that they determine ranges
from how orders are received, to how products are bought from suppliers, to how those
products are transformed and delivered to the customers.
The transformation path that the products follow from raw materials to finished goods in
the hands of customers is called value stream. The analysis of a company's Value Stream
helps trace the flow of material transformation from when the customers place their
orders
to
when
they
receive
their
products.
For a Lean oriented organization, the production process should be set in such a way that
at every step of the process, value is expected to be added to the material being
transformed. Waste occurs every time the material goes through a step without having
value added to it and every time it is stored at a given stage of the process waiting to be
further transformed.
Even though it is more obvious in manufacturing settings, this concept also applies to
services. Business organizational structures are composed of several departments that put
in place distinct processes and those departments operate in contingent sequences with
different operations at different stages and areas of the organization being dependent on
each other. Because of this interdependence of the different operations, every time a
process at a given department fails to operate to its full potential or conflicts with other
departments, it becomes a constraint, a bottleneck for the business as an entity.
The good performance of each department only positively impacts the business as an
entity when every department performs to its full potential and does not constitute a
hindrance, a constraint for the rest of the company. The purpose of a six sigma project is
to address the big picture, to impact the performance of the company as a whole. It is
therefore necessary to select the right project when attempting to improve a company's
performance. Value stream mapping is a good starting point for that purpose.

The Theory Of Constraint (TOC) And Value Stream Analysis

Continuous improvement is a managerial concept that emphasizes the need to constantly
identify the areas of a company that require special attention and proceed with the
improvements required for the benefit of the business as an entity.
This concept is better embodied by the philosophy of the Theory Of Constraint (TOC)
developed in the mid 1980s by Eliyahu Goldratt in his book The Goal (and further
developed in his subsequent bestseller books such as The Critical Chain the Haystack
Syndrome and the Theory Of Constraint). The TOC is founded on the notion that

47

complex business operations are linked to one another like a chain and at any given time,
the poorest performing operation acts as the weakest link and constitutes a constraint, an
impediment that limits the ability of the system as an entity to achieve what it is meant
for. The improvement of the system requires the focus on the weakest link. Disregarding
the constraint, the weakest link and improving any other aspect of a business can
eventually lead to an aggravation of the problems.
The improvement process itself requires some steps, the first of which is the
identification of the constraint. Once the constraint is identified, it becomes necessary to
determine what changes need to take place and how they are to be brought about.
The ideal production process that would eliminate the waste that comes under the form of
excess inventory or idle machines would be the leveled production process based on the
idea of one-piece flow. A process that does not build inventory and that uses both labor
and machines to their full potential. In that case, every operation will take the same
amount of time to process a given quantity of material.
Yet in the real world, this seldom does happen. Because of the complexity of
manufacturing processes and the usually uneven process capabilities of the companies'
resources, a one-piece flow process will make it hard to use all the factors of production
to their full potential at the same time. The task of management becomes therefore to
determine the optimal combination of eliminating clutters and at the same time making
the best use of the resources.
For the sake of our argument let's consider the operations in a fictitious soap
manufacturing company. The operations are simplified to the following steps.

Reception and stocking of the raw materials

Mixing the raw materials to produce the soap
Cutting the bar soap and packing the pieces
Stocking the products at outbound inventory
Shipping the product to the customers

The time spent by the different operations to process 5 tons of material is:
1 hour for reception and inbound inventory, 4 hours for mixing, 5 hours for cutting and
packing, 2 hours for outbound stocking and 2 hours for shipping.
This scenario clearly shows the "cutting and packing" operations to be the critical
constraint for the company as a whole because no matter how well all the other
departments perform it will be impossible for the business to process 5 tons of soap in
less than 5 hours. The bottleneck caused by the "cutting and packing" operations appears

48

in two forms: overproduction generated by the upstream operations because the "cutting
and packing" operations cannot process all the output that comes from the "mixing"
operation (if it operates at its full potential) and underused resources downstream.
An improvement in any aspect of the company's operations other than the "cutting and
packing" operations will lead to an increase in either excessive idle inventory after the
mixing operations or more idle machines and higher cycle time.
This example applies to services as much as it does to manufacturing since bottlenecks do
not always come under the form of excess inventory or idle resources. In the service
industry, the materials are usually replaced by the flow of information which in our days,
is managed by the Information Technology. Let's suppose that cellular phone service
provider uses Oracle, Compass and a WMS (Warehouse Management System) as
channels to process information. If these three Software packages process the information
in a linear flow and one of them is slower than the other two, it will become a constraint
for the IT department and improving the performance of any software other than the
bottleneck will only lead to more problems.

How To Map Your Value Stream

Just as in the case of process mapping, the purpose of value stream mapping is to
visualize the chain of events that leads to the generation of a throughput in order to
pinpoint a bottleneck, a clutter or opportunities for improvement. Yet it is necessary to
distinguish Value Stream mapping from Process mapping since a value stream is a chain
of processes.
Mapping the Value Stream does not only help visualize the sequence of operations but it
also makes it easy to assess the process capabilities and performance.
A company has as many value streams as it has products, so the first step in Value Stream
Mapping should consist in separating the products before examining the chain of
processes that lead to their production.
A Lean oriented organization usually uses Pull techniques which consist in subordinating
production to the customers' actual orders, instead of a forecast driven production that
consists in the building of a high volume of outbound inventory that would wait for
probable customers. So the Value Stream Mapping of the current state for a Lean driven
company should start with the customers' demand. The three main players in the
production of the demanded products will be the Customer, the production operations and
the suppliers of the raw materials.

49

The first step therefore will be the assessment of a periodic (weekly, monthly...) volume
of orders from the customers that will later be subdivided to determine the daily
production requirement.
The next step will be to evaluate the demand for raw materials that will be required to
satisfy the customers' demand and last but not least the determination of the company's
resources abilities to meet the demand along with their productivity and performance.
How long does it take every operation to process a given number of orders?
The current state Value Stream Mapping is not intended to describe the ideal state of the
company but to visualize what is happening now.

The following map is a simplified map of the Value Stream of our soap manufacturer.

50

LEAN MANUFACTURING
We try to understand lean manufacturing through a case study as Improving
Turnaround in Back Office Processes: A Lean-Six Sigma case study
There are continuing questions about the relationship between Lean Manufacturing and
Six Sigma techniques. This relationship has been expressed as follows:

51

Stretch the process applying Lean techniques

Solve the problems of deviation from the standards
Ensure maintenance of the improved status using Six Sigma techniques
However, if the system and processes are too poor, stretching it could break it. In
this case Six Sigma techniques should be applied to solve some of the top line
problems before stretching it.

The case presented clearly demonstrates this relationship.

This work was carried out in a large company based in the US and India in the business
of converting printed paper from customers into electronic copies. It is a continuation of
the earlier case study entitled "Six Sigma Case Study: Converting Paper to Electronic
Documents." The paper material is quite heterogeneous in nature -- consisting of assorted
magazines and legal papers.
The results obtained have obvious applicability to the back rooms of industries
processing large amounts of data -- IT enabled services, banks, insurance companies,
hospitals, and computer based office processes. They are also applicable to most
organizational processes.
As emphasized in the earlier work, in the author's opinion and experience, success is a
function of techniques and more importantly a mindset change in the organisation. The
narrative unfolds in the same sequence as the project did pointing out the critical stages
where results were achieved and where mindset changes occurred.
1. Define And Measure The Problem
1.1) Selection of the problem: A meeting of the senior management of the company was
held
and a brainstorming session produced a list of over 30 problems. These were
affinitized into two categories:

"End result" problems faced by the external customers

Internal problems that were causes of customer problems rather than basic
problems themselves

The realization that the first category of problems was the one to be attacked (customer
focus) came spontaneously.
Then prioritization was done to select the most important problem using the weighted
voting system followed by a quick discussion to produce a consensus. The theme (CTQs)
selected was "Consistency of Quality and Timeliness."
The Consistency of Product Quality was resolved first and a 98% error reduction was
achieved.

52

The project described here was born out of a chance remark by one of the participants in
the group: "We are going to add new capacity." To my casual query, "Why?", came the
answer: "We need to improve the turnaround." Immediately I intervened stating that
turnaround is not dependent on capacity. The disbelief that stared back at me was but a
reflection of the mindset prevailing and the task at hand to change it.
A cross-functional team including the planning personnel, and the key representatives of
the operations from each stage of the process was formed to test the principles of Lean
Manufacturing in practice.
1.2) Definition of the problem: A second level of brainstorming generated a list of
problems which were affinitized into customer problems and internal problems. The
customer problems were expressed:
1. Delayed delivery -- frequent customer complaints
2. Peaking of incoming loads aggravates delays.
The other problems were set aside as they were causes of the customer problems rather
than intrinsic problems themselves.
The Project Charter was then set out as follows:
Problem = Customer desire - Current state
1.3) Measure the problem: A suitable data collection check sheet was designed and data
was collected two weeks on the turnaround time of documents to define the problem
quantitatively. The following results were obtained:
Customer Requirement Of Turnaround Time: <5 days
Current State Average Turnaround: 5 days
sigma: 1 day
3-sigma (99.7%) Delivery To Standard: <8 days
The interpretation of consistency of delivery (turnaround) using sigma created disbelief at
first as the group struggled to understand the concept. Gradually however it was grasped
-- the problem was not the average turnaround, which was within the customer limit but
the variability. This was the second major mindset change and led to the definition of the
goal: Reduce Turnaround time by 50% so that its (average + 3 sigma) < 4 days.
3. Analysis of the Problem
A flowchart was prepared outlining each activity in the process. Many gaps were
revealed that had to be filled up and thought through. Standard times of each process
per batch of 50 pages were tabulated in a specially designed check sheet. The team
was amazed when the time for the value adding steps added up to only 31 hours. The
most important mindset change had begun, asking, "Why do we take 5-8 days?"

53

The principles of Lean Manufacturing and turnaround time reduction were then
introduced:

Zero waiting time

Zero Inventory
Scheduling -- internal customer pull instead of push system
Batch to Flow -- cut batch sizes
Line Balancing
Cut actual process times

Finding the vital causes: Data was collected for three batches clocking the timing at each
stage and comparing it to the standard timings to find where time was being lost on a
specially designed data sheet.
With the data it took the group only a few minutes to draw a Pareto Diagram of delays
and conclude three vital reasons causing 70% of the delay was non-processing (waiting)
time due to:

Lack of awareness -- large waiting times for small items falling between
departments
Inventory
Unscheduled work patterns and therefore unavailability of personnel at the right
time

4. Idea Generation
The old mindsets were shattered but the group was struggling to understand the
concepts confidently enough to start applying them in regular production. An
experiential simulation classroom exercise in which the group members participated
was designed and carried out to experience the concepts first hand. Armed with this
conviction, the team proceeded to the next step to design a pilot test.
Planning the Pilot: A step-by-step implementation plan was drawn up. It was estimated
that cutting inventory and scheduling the production cycle to flow in the current batch
sizes would lead to the achievement of the goal. The whole chain was briefed about the
new method and agreed on a schedule. The team was ready to run the pilot.
4. Idea Modification
A pilot batch was run to test the scheme: It took 36 hours. Amazed jubilation followed by
an enthusiastic buy-in of the concepts -- demonstrating my belief that nothing works
better than results in accomplishing mindset change. From then on it was difficult to
restrain the group from pushing ahead too fast.

54

5. Implementing The Change

5.1) Scheduling: Production was carried out in a number of parallel lines in a 1-2-1-7-1
configuration. Careful scheduling and planning of the set up was done to convert each
stage to the new mode of running. Training was carried out, and the conversion begun
with data acquisition for further problem solving.
5.2) Implement the change: After eight weeks of a step-by-step introduction the new
schedule was running and established at all stages. Everyone was pleasantly surprised at
the ease of implementation and learned that involvement of all functions and effective
countermeasure design using data makes implementation of dramatic improvement easy
and quick.
6. Checking The Result
The turnaround achieved was as follows:
Average Turnaround Time: 3 days
sigma: 0.4 days
Average + 3 sigma: 4.2 days (i.e. < 5 days)
The goal had been achieved!
The Production line personnel reported tremendous benefits:
Ease of tracking production batches
Increased productivity (over 50%) and therefore reduced costs
Better quality
Ability to handle peaks of input data of up to 75% for 2 days per week within
customer specified turnaround limits
7. Standardization Of Control
Control charts were introduced and a special presentation on how to draw and interpret
them was made to the line personnel. A Standard Operating Procedure with a concise
reporting format was developed for regular review, management control and killing of
any new causes of variability. The team was left with the mindset of continuous
improvement -- "If you do not improve, you deteriorate".
Future Action: At the end of the project when asked what could be achieved in terms of
turnaround the team confidently asserted that they could cut it by half to a 3 sigma
performance of <1.5 days, or more than a six sigma performance for the customer. This
was estimated to yield a further 40% increase in productivity. The mindset change from
the pre project stage was an intangible gain but perhaps the most important one.

55

This Project is now in progress.

Conclusion -- Selling Quality
The combined effect of Lean Manufacturing and Six Sigma has led to improvements in
product quality (98% reduction in errors) and turnaround time (50% reduction). These
improvements have resulted not only in cost reduction, but also the possibility of
presenting these improvement stories to the customer, building the reputation of the
company as a leading supplier of quality, and thereby increasing the probability of getting
higher volumes of business.

FOLLOWING ARE EXAMPLES OF SIX SIGMA PROJECTS AND

COST SAVINGS FROM A VARIETY OF INDUSTRIES :
Industry: Oil exploration and drilling company.
Project
Response time to No
Fluid Detected wells

Results
ROI - annualized
1. Well downtime reduced $2,500,000
from 467 to 138 days/
month
2. Production increase of
377 Barrels of Oil per Day
(BOPD)
Soft water usage by
1. Reduced CGS by 65% $1,000,000
steam generators in oil through proper chemical
chemical savings
reclamation
mixture
$18,900,000
2. Increased soft water
increased oil
production by 30,000
production
barrels per day
3. Increased oil reclamation
Improving automatic well 1. Increased test accuracy $500,000
test process
by 25%
2. Improved % of
successful workovers
Oil content of injection 1. Reduced content from 40 $800,000
water
ppm to 25 ppm
2. Increased oil production
by over 100 BOPD
3. No increase in chemical
use
Periodic well test process 1. Increased accuracy by $400,000 well
25%
work decisions
56

2. Improved well work

decisions
3. Increased number of
tests per month by 423

$100,000 value of
extra tests.

Industry: Water Treatment

ROI annualized
Water Treatment total solids 1. The quality of the water was $854,000
were 7 times the
improved7 fold while the
specification; treatment costs operational costs were lowered
were $.14 per barrel
to $.08 per barrel.
2. Training on variation
reduction was instituted for all
operators. New SOPs were
accomplished.
Project

Results

Industry: Vehicle maintenance support unit (large company)

Project

Results

ROI annualized

1. Moved technical experts to the

Reduce the high cost of field
vehicle maintenance
2. Improved data collection
techniques
Lower no evidence of 1. Reduced NOEF rates from 30failure (NOEF) rate
40% to less than 5%
2. Improved training and awareness
of operators
Cut vehicle time out of 1. Implemented improved Control Total: $1.8
commission rate
Plan
million
2. Used Measurement System
Analysis to improve diagnostic
equipment
3. Implemented electronic technical
manuals

Industry: Transactional
Project

Results

ROI-

57

annualized
Human Resources:
1. Lost productivity due to failure $479,700
Employee productivity is of direct deposits, interrupted health
reduced when employees care, large out-of-pocket expenses,
transfer to different jobs as well as lot access to
within the company
computer/phone was calculated.
2. DMAIC process resulted in
improved process flows and SOPs
to include a transfer binder, use of
intranet, and pre-transfer training.
3. Annual survey instituted.

Industry: Large Electronics Company

ROIannualized

Project

Results

Upgrade
Monoblock
duplexer

1. Upgraded the product using VOC, IPO

$724,000
diagram, and DFSS tools

1. Upgraded the design using DFSS tools

Deflection yoke for
and improved the overall production
$240,000
TV
process

Industry: Automotive
Project
Crankshaft
production
failures

ROIannualized
1. Decreased the number of crankshaft failures $100,000
from 15,000/million to 1,000/million
2. Used Six Sigma tools to stratify the errors;
most were due to grinding failures. DMAIC
decreased the interference caused by design of
main axle pocket and flange area
3. Improved operator training
Results

Industry: Pharmaceutical

58

Project
Pharmacist Information
(PI) Outsert (shrink
wrapped on outside)

Results
1. PI Outsert bottleneck on
the drug secondary
packaging line was
eliminated.
2. New adhesion process
and automated cartoner
installed.
3. Eighteen FTE moved
from process to another
process within the business
4. A new, smaller, and less
expensive outsert created.

ROI- annualized
$4 million (after the
cost of capital
equipment)

Industry: Alumina Refinery

Project
Results
ROI- annualized
High variability in titration 1. The pooled
1. $180,000
measurement system
standard deviation of 2. Indirect savings
resulting in high variability the A/C Ratio for the increased productivity
in the process chemistry
four titration systems indue to less
(A/C ratio =g/l Alumina / g/l use reduced by 69%. maintenance problems
Sodium Hydroxide)
2. The variability of caused by poor ratio
the individual
control
components reduced
from 41% to 71%.
3. Improved plant A/C
Ratio control and
reduced lost production
due to not maintaining
target production
Ratios
4. Reduced
downstream problems
caused by high A/C
Ratios

Industry: Pharmaceutical Company

Project

Results

Packaging- downtime of machines on 1. SOPs were

the packing line was excessive
developed

ROIannualized
$90,000

59

causing lower than expected/desired 2. Training was

productivity.
improved
3. Variation in the
adjustments and
adjustment frequencies
was reduced

Industry: Chemical Production

ROIannualized
Methyl Ethyl Ketone (MEK) 1. Cpk was increased from . 1. $100million
and Ethanol Separation Unit 77 to 4.3
for MEK
improve production capacity 2. Normal production rates 2. $70 million
and reduce variability
for MEK and Ethanol
for Ethanol
improved more than 4%
3. Soft savings
above previous maximum - $25 million
rate
3. Ethanol losses reduced
Project

Results

Industry: Medical Device Company

Project

Results

Combine two existing

rejection systems used for
tracking defective materials.

1. The two systems were

combined, streamlined, and
placed on the web.
2. Process flow created for
new process

ROIannualized
$118,000

Industry: Machining, Tooling, and Assembly

Project

Results

Customer

1. New streamline process created

ROIannualized
$100,000

60

permitting better tracking of supplier

Service/Warranty claimsrelated warranty costs
the process too
2. SOPs
cumbersome and costly
developed(PF/CE/CNX/SOP)

Industry: Submersible Pump Repair

Project
Results
ROI- annualized
Process process to produce
1. Process streamlined 1. Reduced waste
submersible pumps was too slow and waste removed.
yielded $436,370
resulting in a large volume of
2. Cycle time reduced 2. Sales
lost sales
from 24 hours down to increased
19 hours.
$4.9million
3. Physical layout and
tool control
dramatically improved.
4. Number of
temporary storages
reduced from 24 to 6.

Other examples of project case study savings we have seen as a result of our Lean
Six Sigma training and consulting support:

On time drawing deliveries

Improved procurement system
Artificial knee joint polishing
Reduce audits and cost of audits
Improved water quality and handling
Reduced plastic part defectives
Improved accuracy of claim payments
Pick to Box process optimization
Part washing process improved
Improved water quality
Minimized claim liability
Coil winding process for spinal stimulation

$292,000
275,000
309,000
454,000
650,000
246,000
578,000
1,940,000
58,000
950,000
950,000
430,000

61

Corona fan test failure reduction

Leakage of seal reduced
Process induced damage reduction
Radiology set-up process
Reduced cost of former members
Sampling plan savings
Shutter spring optimization DOE
Reduced PCB test failures
Dimension PTB Box marking
Reduction in Loop mail/miss sent mail
Reduction in manual mail handling
Redefining the Change Mgt. Process during production (2
projects)
Photo cathode fabrication yield improvement
Reducing sick leave at 8 sites
GPS Nav System Breakout Box initiative proposal
HVAC refrigerant leak reduction
Turnover reduction

280,000
41,000
963,000
624,000
1,015,000
40,000
150,000
50,000
120,000
125,000
86,000
347,000
1,012,385
2,839,327
130,000
151,266
125,000

Basic Financial Metrics for Six Sigma

Because a Six Sigma project would be useless or even detrimental if it does not positively
impact the bottom line of a business, it is necessary for a Six Sigma Black Belt to be able
to accurately measure the financial results of her projects. For that reason, any Six Sigma
practitioner should have a certain level of understanding of financial analysis.
The purpose of this article is to briefly introduce some basic financial metrics that a
Black Belt should be acquainted with to properly execute her project.

Break-Even Analysis
In microeconomic theory, the cost of production of goods and services is generally
subdivided into two sub-costs, the fixed cost and the variable cost. While the variable
cost is proportional to the quantity of the output, the fixed cost would be incurred
regardless on whether production is made . In other words, even if the business does not
produce anything, it will be liable for the fixed costs.

62

The fixed cost in general would be the cost of the buildings, the machines, the electricity
and so on, while the variable cost would be composed of the labor cost and the cost of the
raw materials.
A Break-Even happens when the total revenue obtained from the sales of the goods or
services equals the total cost of production.
TR = TC
With TC = F + VN
And TR = PN
Where N is the quantity of output sold at P, F is the fixed costs, V is the variable cost per
unit, P is the price of N and TR is the total revenue
So
F + VN = PN
Therefore
N = F/(P V)
For profit to be made, the revenue must be greater than the total cost, therefore N must
be greater than the ratio of F/(P - V).

The following graph summarizes the discussion on Break even Analysis.

63

An increase in the fixed cost relative to the Total cost is risky because a small downward
shift in sales will result in a fall in profits.
Let us now consider the following example. The financial statement bellow summarizes a
computer repair company's accounting for the past quarter.
Revenue from sales

$450,000

Total Loss

($73,000)

Total

$523,000

Fixed cost

$80,000

Building space

$50,000

Equipment

$30,000

Variable Cost

$443,000

Labor

$360,000

Parts

$83,000

Utility Bills

$60,000

Total Cost

$523,000

The purpose of conducting a Break Even analysis is to generate actionable data, i.e. data
that can be used to improve management. In the previous example, if the fixed costs
cannot be altered, the actions that might be envisaged should affect the parts and /or the
64

labor. Labor cost can be cut through productivity improvement or overtime reduction.
One metric our computer repair company might consider would be the "cost per unit
repaired" since in this case it is what determines the profit level.

Interest Rate Evaluation

The interest paid on borrowed money can be defined as nothing but the price of acquiring
money. A higher interest rate translates into more expensive money.
Even if the financial capital needed to fulfill some investment is available, it is sometimes
more profitable to involve lenders in financial decisions. The analysis of the interest rate
is complex because it involves not only the evaluation of the time necessary to repay the
loans and the annuities but also the opportunity costs determination, that is, should the
company use available funds for a given project or should it borrow the money and use
the funds for other purposes?
The decision rules generally depend on the Interest Rates, the Annuities, the Present and
Future Values of the money and the Frequent Compounding.
The interest rates are nothing but the cost of borrowing, if it is high, borrowing becomes
less attractive and the opposite occurs when it is low.

Present and Future Values A mathematical formulation

To better understand the rationale behind the evaluation of the annuities and the interest
paid on loans, it is necessary to have a certain level of familiarity with Algebra.
For those who do not know their algebra, the formula obtained from the strenuous
algebraic manipulations are plug-and- play and MS Excel offers an easy way
out.
Let's first define some of the terms that will be used
P = the principal. It is the sum of money available for use. It may have been borrowed.
i = the interest rate. It is a percentage of the principal paid usually per annum
n = number of periods payments are made
F = future value of the present principal
A = annuity. The amount of money paid per period
If i is the interest rate, P the principal and F the future value, we can determine the
value of next year.

If after a year, no money is paid,

becomes:

becomes the principal for the next year therefore

65

If no payment is made for n periods, then

Example
What is the Future value of $15,000.00 in 5 years if the interest rate is 5%?
Answer:

We have four variables in the equation

which are F, P, i and n. If we know
the values of any three variables, we can, with a few algebraic manipulations determine
the fourth one.
If n is unknown, it can be obtained using the following formula

If P is unknown, the following formula can be used

If i is unknown, it can be found using

66

After defining the various tools and the case study of the utilization of lean six sigma
projects, now we study the various case studies of the companies that have made use of
six sigma for enhancing its productivity and minimizing the defects. The chief among
them being MOTOROLA and GENERAL ELECTRICS.

Strong Project Sponsorship and Chartering are Key to Successful Six

Sigma Projects
Having conducted internal corporate Lean and Six Sigma projects as well as external
client initiatives, I have concluded that strong project sponsorship and project chartering
are key components for a successful Six Sigma project. Regardless of how good the
Green or Black Belts skills are, if these components are not in place the projects cycle
time, goal attainment and acceptance will be limited.
Unfortunately many organizations have been sold on Six Sigma as a quick fix to internal
organizational issues. The real benefit that Six Sigma brings to an organization will only
be seen over time. Therefore, if corporate commitment to Six Sigma is not in place it
may pass away as the latest fad of business improvement strategies. In order to prevent
Six Sigmas demise it is essential for the methodology to be properly implemented,
practiced and supported. The quality of the methodology will only be maintained with
positive project results. Here are two key components to ensure the quality of the
methodology and deliver positive project results.

Strong Project Sponsorship

The first and most important stone to be laid for a successful Lean or Six Sigma project is
strong project sponsorship.
Sponsorship of any change initiative must come from leadership positioned high enough
in the organization to approve changes determined necessary by the data to meet the
projects objective.
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Example #1: Once conducted a project focused on reducing the cycle time to renew client
contracts. The project was sponsored by a Director of Operations who owned divisional
responsibility for account retention. This sounds good, but one key finding the project
team identified was the necessity for sales to change their process and behavior.
Unfortunately the sponsoring director had no authority over sales who contributed to 30%
of the cycle time. Needless to say this project stalled at the improve phase when the
sponsor was unable to get the support from sales.
The end result was that instead of saving the company $250,000 per year in unbilled
revenue we cost the company $18,000 in project team resources. This is a classic case of
sponsorship at a level too low to execute necessary change.
Project sponsors also need to have an honest interest in the problem being solved. In
many organization projects are commissioned at a senior management level and parsed
out to mid level managers to sponsor. In theory this sounds good, however this does not
ensure project acceptance. The problem results from sponsors not having ownership of
the problem or confidence in a methodology they are ignorant of. Without strong sponsor
support, the projects progress will suffer. With properly positioned and committed
sponsorship challenging projects can deliver significant benefits.
Example #2: While leading a Lean Six Sigma project for an external client with Senior
Leadership sponsorship, encountered a roadblock between two associate VPs. Each
Associate VP organization held resources capable of delivering the service required for
this account. The labor costs for the team who initially delivered the service was 25
times higher than the customer was willing to pay. Additionally travel was required for
them to meet with the client. Conversely, the local team possessed the capability to
deliver the work at half the cost and be onsite with the client without travel expense.
Having senior level sponsorship allowed the data to drive the decision on placement of
the work. Strong sponsorship produced a 90% reduction in the cost and cycle time to
produce each unit. This resulted in a $600,000.00 annual savings to the client and
$80,000.00 in annual revenue to my organization.

Clearly Written and Defined Charter

There is an old saying that youll never get any where if you dont know where youre
going. This remains true in process improvements efforts as well. All too often the
sponsor of a project comprehends the pain that needs to relieved, but has not received the
requisite training to properly author a clear and well written project charter.
There must be a clearly definitions of the following charter components:

Scope:
Project failure is inevitable if the breadth of the project is too big. It is imperative
to establish clear starts and stops to minimize misinterpretation or confusion in the

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mind of the stakeholders. If this step is not properly performed the scope of a
project can simply be too broad. We call this Boiling the Ocean.
A projects scope should be firmly established BEFORE the project is ever
launched. This will help avoid potential problems arising from out of scope
additions to the project. It also helps manage stakeholder expectations by clearly
communicating what will and won't be delivered. Many projects are completed
meeting or exceeding all goals and still be perceived as a failure by stakeholders.
This will occur if the scope of the project has been misunderstood. Hence the
stakeholders and/or sponsors benefit expectations were either unattainable or
never targeted in the project.
The project scope should only cover two to three Key Process Input or Output
Variables.
No one project can reasonable develop a process change with more than four Key
Process Output Variables. When the scope encompasses more than three KPOVs
the project needs to be either divided into multiple concurrent projects or into
sequential or multi-generational projects.

Project Team
Here is one of the most challenging and underappreciated areas in building the
framework for a successful project. Many projects either have too many, too few
or the wrong mix of representation on the team.
It is essential to have a good mix of skill sets, roles and personality types on the
project. Personality evaluation tools are excellent aids to gauge the cohesiveness
and synergy of a team. By using one of these tools, the prospective team
members from the projects stake-holding teams can be evaluated in advance. The
results can then be used to build the team with the best potential synergy. This
will improve the success of the team and the project.
The rank or position of the team members also plays a key part.Once led a project
with six team members all at the Director and Associate VP level. While this
sounded like a great mix of players to produce change, the team had little
availability to participate in meetings let alone perform the project tasks. Due to
the amount of responsibility held by the team our cycle time and meeting
attendance were both severely hampered.

Time Table
Timing is everything. This age old statement stands true in the Six Sigma
world today. When building a project team little things like vacation, holiday
schedules and peak work cycles must be taken into consideration. Launching a
project for the accounting department at then end of the fiscal year will have some

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obvious challenges. This may sound elementary, but when projects are identified
by leadership without local departmental visibility, these basic considerations are
often missed. Small issues can become great bottlenecks to minimizing the
projects cycle time.
By carefully and thoroughly executing these steps within the Lean and Six Sigma
methodology substantial improvement in the projects cycle time, goal attainment and
acceptance can be achieved.
Now we study the case studies of various companies-

Some Six Sigma Success Stories

Seeing the impact that Six Sigma is having on some leading companies
sets the stage for understanding how it can impact your business. As
we
relate some of these results, well also be reviewing the history that
has
brought Six Sigma to the forefront.

General Electric
Six Sigma has forever changed GE. Everyonefrom the Six Sigma
zealots emerging from their Black Belt tours, to the engineers, the auditors,
and the scientists, to the senior leadership that will take this Company into
the new millenniumis a true believer in Six Sigma, the way this Company
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now works. GE Chairman John F. Welch1

When a high-profile corporate leader* starts using words like
unbalanced or lunatics in connection with the future of the com* Since launching GEs effort in 1995, Jack Welch has urged his top
lieutenants to
become passionate lunatics about Six Sigma. He has described GEs
commitment to Six Sigma as unbalanced.
The hard numbers behind GEs Six Sigma initiative tell just part
of the story. From an initial year or so of break-even efforts, the payoff
has accelerated: $750 million by the end of 1998, a forecasted
$1.5 billion by the end of 1999, and expectations of more billions
down the road. Some Wall Street analysts have predicted $5 billion in
gains from the effort, early in the decade. GEs operating margins
for decades in the 10 percent rangecontinue to hit new records
quarter after quarter. The numbers are now consistently above 15
percent, and even higher in some periods. GE leaders cite this margin
expansion as the most visible evidence of the financial contribution
made by Six Sigma.

Improvements from Services to

Manufacturing
The financial big picture, though, is just a reflection of the many individual
successes GE has achieved through its Six Sigma initiative. For
example:
*A Six Sigma team at GEs Lighting unit repaired problems in its
billing to one of its top customersWal-Martcutting invoice
defects and disputes by 98 percent, speeding payment, and creating
better productivity for both companies.
*A group led by a staff attorneya Six Sigma team leaderat one of
GE Capitals service businesses streamlined the contract review
process, leading to faster completion of dealsin other words, more
responsive service to customersand annual savings of $1 million.
* GEs Power Systems group addressed a major irritant with its utility
company customers, simply by developing a better understanding
of their requirements and improving the documentation provided
along with new power equipment. The result: Utilities can respond
more effectively to their regulatory agencies, and both the utilities
and GE have saved hundreds of thousands of dollars a year.
*The Medical Systems businessGEMSused Six Sigma design
techniques to create a breakthrough in medical scanning technology.
Patients can now get a full-body scan in half a minute, versus
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three minutes minutes or more with previous technology. Hospitals can

increase their usage of the equipment and achieve a lower cost per
scan, as well.
* GE Capital Mortgage analyzed the processes at one of its top performing
branches andexpanding these best practices across its
other 42 branchesimproved the rate of a caller reaching a live
GE person from 76 to 99 percent. Beyond the much greater convenience
and responsiveness to customers, the improved process is
translating into millions of dollars in new business.

The Actions behind the Results

GEs successes are the result of a passionate commitment and effort.
Notes Welch: In nearly four decades with GE I have never seen a
Company initiative move so willingly and so rapidly in pursuit of a big
idea.2 Tens of thousands of GE managers and associates have been
trained in Six Sigma methodsa hefty investment in time and money
(which is appropriately deducted from the gains cited earlier). The
training has gone well beyond Black Belts and teams to include every
manager and professional at GEand many front-line people as well.
Theyve instilled a new vocabulary revolving around customers, processes,
and measurement.
While dollars and statistical tools seem to get the most publicity, the
emphasis on customers is probably the most remarkable element of Six
Sigma at GE. As Jack Welch explains it:
The best Six Sigma projects begin not inside the business but
outside it, focused on answering the questionhow can we make
the customer more competitive? What is critical to the customers
success? . . . One thing we have discovered with certainty
is that anything we do that makes the customer more
successful inevitably results in a financial return for us.

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Motorolaand Some Six Sigma History

Today, the very existence and success of electronics leader Motorola is
tied to Six Sigma. Its the company that invented the concepts that have
evolved into this comprehensive management system. And while GE
has used Six Sigma to strengthen an already thriving company, for
Motorola it was an answer to the question: How do we stay in business?
In the 1980s and early 1990s, Motorola was one of many U.S. and
European corporations whose lunch (along with all other meals and
snacks) was being eaten by Japanese competitors. Motorolas top leaders
conceded that the quality of its products was awful. They were, to quote
one Motorola Six Sigma veteran, In a world of hurt. Like many companies
at the time, Motorola didnt have one quality program, it had
several. But in 1987, a new approach came out of Motorolas Communications
Sectorat the time headed by George Fisher, later top exec at
Kodak. The innovative improvement concept was called Six Sigma.
What Six Sigma offered Motorolathough it involves much more
todaywas a simple, consistent way to track and compare performance
to customer requirements (the Sigma measure) and an ambitious target
of practically-perfect quality (the Six Sigma goal).
As it spread throughout the companywith the strong support of
chairman Bob GalvinSix Sigma gave Motorola extra muscle to
drive what at the time seemed like impossible improvement goals: An
initial target in the early 1980s of ten times improvement (noted as
10X, and pronounced ten-ex) over five years, was dwarfed by a goal of
10X improvement every two yearsor 100X in four years. While the
objective of Six Sigma was important, much more attention was paid
to the rate of improvement in processes and products.
Motorolas turnaround has been just as remarkable over the long
term as GEs results in just a few years. Only two years after launching
Six Sigma, Motorola was honored with the Malcolm Baldrige National
Quality Award. The companys total employment has risen from 71,000
employees in 1980 to over 130,000 today. Meanwhile, in the decade
between Six Sigmas beginning in 1987 and 1997, achievements have
included the following:
_ Five-fold growth in sales, with profits climbing nearly 20 percent
per year
- Cumulative savings based on Six Sigma efforts pegged at $14
billion
- Motorola stock price gains compounded to an annual rate of 21.3
percent.
All this, in a business whose future was in jeopardy in the early
1980s. All this, in a business whose future was in jeopardy in the early

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1980s. While the late 1990s presented some tough challenges for
Motorolabased largely on setbacks and competition in the cellular
and satellite telephone businessesthe company seems to be turning
the corner in late 1999, with most areas back in the black.)
The results Motorola has achieved at the corporate level again
have been the product of hundreds of individual improvement efforts
affecting product design, manufacturing, and services in all its business
units. Alan Larson, one of the early internal Six Sigma consultants
at Motorola who later helped spread the concept to GE and
AlliedSignal, says projects affected dozens of administrative and transactional
processes. In customer support and product delivery, for
example, improvements in measurement and a focus on better understanding
of customer needsalong with new process management
structuresmade possible big strides toward improved services and
on-time delivery.4
More than a set of tools, though, Motorola applied Six Sigma as a
way to transform the business, a way driven by communication, training,
leadership, teamwork, measurement, and a focus on customers.

AlliedSignal/Honeywell
AlliedSignalwith the new name of Honeywell following its 1999
mergeris a Six Sigma success story that connects Motorola and GE.
It was CEO Larry Bossidya longtime GE executive who took the
helm at Allied in 1991who convinced Jack Welch that Six Sigma was
an approach worth considering. (Welch had been one of the few top
managers not to become enamored of the TQM movement in the
1980s and early 1990s).
Allied began its own quality improvement activities in the early
1990s, and by 1999 was saving more than $600 million a year, thanks to
the widespread employee training in and application of Six Sigma
principles.5 Not only were Allieds Six Sigma teams reducing the costs
of reworking defects, they were applying the same principles to the
design of new products like aircraft engines, reducing the time from
design to certification from 42 to 33 months. The company credits Six
Sigma with a 6 percent productivity increase in 1998 and with its
record profit margins of 13 percent. Since the Six Sigma effort began,
the firms market value hadthrough fiscal year 1998climbed to a
compounded 27 percent per year.
Allieds leaders view Six Sigma as more than just numbersits a
statement of our determination to pursue a standard of excellence
using every tool at our disposal and never hesitating to reinvent the way

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we do things.
As one of Allieds Six Sigma directors puts it: Its changed the way
we think and the way we communicate. We never used to talk about the
process or the customer; now theyre part of our everyday conversation.
AlliedSignals Six Sigma leadership has helped it earn recognition
as the worlds best-diversified company (from Forbes global edition) and
the most admired global aerospace company (from Fortune).

The Six Sigma Wave

As weve noted, it might be easy to dismiss Six Sigma as a fadif it
werent for the caliber of the results its producing and the companies
adopting it. In almost an antifad mentality, in fact, a number of prominent
companies in industries from financial services to transportation
to high-tech are quietly embarking on Six Sigma efforts. Theyre joining
others who have been more vocal about their efforts, including Asea
Brown Boveri, Black & Decker, Bombardier, Dupont, Dow Chemical,
Federal Express, Johnson & Johnson, Kodak (which had taken in $85
million in savings as of early 2000), Navistar, Polaroid, Seagate Technologies,
Siebe Appliance Controls, Sony, Toshiba, and many others.
From these and other Six Sigma companies come a wide variety of
other impressive improvements, benefiting both customers and shareholders.
A sample from the hundreds of Six Sigma projects underway at
organizations around the world includes the following:

Developing New Products

A telecommunication products company used Six Sigma Design techniques
to enable greater flexibility and faster turnaround at a key manufacturing
facility. At the plant, several specialized products are built
on a single production line. Since each customers order may require
different circuit boards, the need to avoid retooling was critical. Working
through alignment of customer needs, product design, and process
specifications, retooling was dramatically reduced. The plant was also
able to institute parallel processing so that if one area of the line wasnt
functioning, work-in-process could be easily rerouted without adding
to cycle time.
Under the new plant design, customer orders are transmitted electronically,
where virtual design applied to speed quick response.
Altogether, these innovative changes improved overall cycle time from days to hours, as
well as improving productivity and resource management

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Sending the Message Faster and Cheaper

Customers of a telecommunications service company were dismayed
over the handling of their orders. Every requestfor a few minutes of
satellite time to a long-term, dedicated up-linkpassed through several
levels of legal and technical review before being approved. The
process not only upset customers, but wasted resources and money.
A Six Sigma team measured and analyzed the problem. While proposed
solutions were counter to the tried and true way of doing
things, the team was able to sway opinions from solid data and knowledge
of customer needs. After 6 months of effort the process was
streamlined and $1 million in savings was tallied.

Providing a Prompt Answer

A credit financing center used a Six Sigma team approach to analyze
and improve call center operations. The focus was on two objectives:
(1)
reducing average call answer time; and (2) increasing the percentage
of
customer issues and questions resolved in the initial call. The team
centralized and simplified the call answering system, cutting average
times from 54 seconds to 14 seconds. First Call Resolution jumped
from 63 percent to 83 percent.

Thinking outside the Box

The spare parts marketing and logistics group for an aerospace
manufacturing
company was looking for ways to take costs and time out of
their servic to customers. One major cost element was parts
packaging:
Bulk parts shipments from manufacturing plants were unpacked,
placed on warehouse shelves, then picked and repackaged for
shipment
to customers.
By focusing the process design on customer needs and value-adding
activities, the spare parts packaging operation was moved from the
warehouse to the plants. Packaging material cost savings alone were cut
by half-a-million dollars per year. The change also contributed to major
improvements in on-time-delivery, which have jumped from less than
80% to over 95% in about three years.

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Bharti Broadband saves with Six Sigma

Six Sigma helped the service provider improve its customer service
Bharti Broadband Networks (BBNL) is a leading integrated broadband service provider
operating in the broadband, Internet and VSAT markets.
It provides customised and integrated solutions to corporate customers. The company had
a goal of delivering error-free services to customers by doing the job right the first time,
every time.
Six Sigma ahoy
With the quality objective having been decided, an executive committee (EC) comprising
nine officials, including the CEO, was formed. The committee studied various other
quality tools and processes like ISO and TQM in addition to Six Sigma. The choice for
Six Sigma was made as it was closely aligned with the outlined quality objective.
According to Ashok Juneja, CEO, BBNL, "We realised that the telecom industry is
undergoing rapid change and so are customer requirements. Six Sigma met the
requirements of this changing environment." There were already several case studies of
successful Six Sigma implementations in large companies like GE, Motorola, Wipro,
TCS and Satyam.
Making the customer a priority
Having decided upon IGE as the consultant, the Six Sigma initiative was formally
launched in June 2003 with the tagline: 'Six Sigma-my customer, my priority'. The
company has outlined that improving customer satisfaction is the business objective for
first year of the initiative. The executive committee identified the processes that were in
conjunction with this focus area.
In the first phase, critical business processes were aligned with business objectives. The
critical objectives identified are customer satisfaction, employee satisfaction, improving
revenue and free cash. First, the projects with processes mapped against these objectives
were to be undertaken. And then the quality improvement projects for existing and new
products were to be undertaken. Almost 85 percent of Six Sigma projects at BBNL are
based on customer satisfaction.
A cross-functional team was formed to tackle each project. The team comprises a
sponsor, a leader and four to five team members. The leader, also called the 'Champion'
can be either a Green Belt or Black Belt. The duration for each project can range between
three to four months. For the first phase the team chose 15 critical projects that offered
substantial gains. Black Belts are involved full-time in the quality improvement process
while Green Belts spend around 8-10 percent of time on quality improvement. A Black
Belt can be engaged in two to three different projects simultaneously.
Each project follows a five-phase methodology. These include defining and quantifying
the problem, measuring the defect rate, i.e. the baseline. This is followed by the analysis
phase where analysis is done on when, where and how the defects occur. The fourth step
is improvement, finding probable solutions and applying them. The final step is control in

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terms of sustaining the improvements. BBNL is applying Six Sigma to processes for
timely complaint resolution, timely order implementation, timely invoice submission and
NOC complaint resolution.
When the teams started measuring critical business processes they found that the baseline
was not as per customer expectations. There were gaps of around 30-40 percent in some
processes. The baseline having been measured, targets were set for improving the
processes. After analysing defects, process improvement kicks in. Simplifying the
process instead of changing the entire process brings in the improvement. The tool
essentially requires fine-tuning the process and eliminating those that do not add value.
"When you are simplifying the projects productivity goes up within the same resources,
thereby leading to optimum utilisation of the resources," says Juneja. One of the ways of
simplifying processes is to use IT for automating processes.
The executive committee continuously monitors the projects. There are monthly reviews
carried out by the Champion, Sponsor and IGE. A quality dashboard has also been
created, wherein every month performance is reported. The CEO and the COO monitor
whether the objectives are being met.
Benefits
In six months BBNL had achieved timely complaint resolution 66 percent from the
baseline, timely order implementation up 70 percent from baseline, timely invoice
submission up 51 percent from baseline and NOC complaint resolution that was 49
percent from baseline. The Six Sigma process improvements have translated into
productivity enhancements, improved customer satisfaction and process effectiveness.
BBNL is targeting an estimated saving of around Rs 10 crore in the first year of
operation.
The target was to achieve 99 percent (i.e. approximately four Sigma level) ('First Time
Right') with respect to respective set norms by March 2004 on all key critical processes.
Since Six Sigma is a continuous improvement initiative, the company will be undertaking
another business objective for the next financial year. On the future roadmap are Six
Sigma for all processes and higher E-SAT (employee satisfaction) and C-SAT (customer
satisfaction) index. BBNL plans to get almost 90 percent of the employees to be Green
Belts by 2005, with almost 100 percent of the employees to be involved in the Six Sigma
journey by the same time.

SIX SIGMA IN IT
Eighty-five percent of the reasons for failure to meet customer expectations are related
to deficiencies in systems and process rather than the employee. The role of management
is to change the process rather than badgering individuals to do better Dr. Deming
Several process improvement methodologies like Six Sigma, Total Quality Management
(TQM), Quality Circles, Taguchi, Statistical process control, etc. are being successfully
implemented in the manufacturing industries sector. It was perceived that such

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improvement methodologies are ineffective in the IT services industry. GE, pioneers of

Six Sigma implementation in a non-manufacturing set-up, has estimated benefits of the
order of $10 billion during the first five years of implementation.
Some commonly made arguments against the effectiveness of Six Sigma in IT services
sector were

Software processes are difficult to measure.

Software development is people intensive work that needs creativity.

Software development is not a repeatable process.

Six Sigma theories are based on assumption of normal probability

distribution and Software processes cannot be included in this category.

Though these factors are true in some sense, the Six Sigma methodology can still be
applied to IT processes.
The software processes are definitely difficult to measure but its not an impossible task.
Industry leaders like IBM and institutions like Software Engineering Institute have
designed and published many metrics for software processes for the benefit of the entire
industry. Capability Maturity Models prescribe the quantitative management processes as
one of the Key Process Areas at level 4. Lot of books and other material is available
publicly to choose right metrics from. Six Sigma offers strong tools like Quality Function
Deployment (QFD), CTQ flow-down and other templates to convert high-level VOC into
measurable CTQs.
90% of the processes in a software services company are repeatable and can be improved
by the process improvement DMAIC methodology. The DFSS methodology can be
applied to the remaining
5-10 % of the processes, which involve creativity.
It is true that Six Sigma concepts evolved with normal distribution. But, Six Sigma tools
can be easily adapted to handle processes having non-normal distribution
Having discussed the arguments supporting the applicability of Six Sigma to IT
processes, let us make an attempt to understand the applicability of Six Sigma to the
processes that are an integral part of IT services.

CORE DELIVERY PROCESSES

The software development life cycle (SDLC) consists of four phases - Analysis, Design,
Coding and
Testing. Along with these core phases, processes like defect prevention, project
management,

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Software Quality Assurance (SQA), Reviews, etc. are an integral part of the Quality
Management System of any IT service provider. The effectiveness of these core processes
directly impact the
CTQ parameters. There is a large scope for improvement in these processes in most IT
companies. Six Sigma can be deployed to improve these processes.
One of the key factors in deploying Six Sigma is identifying the Y metrics
(dependants). But for core processes this becomes simpler since historical data for key
metrics such as review efficiency, review effectiveness, productivity, defect density,
schedule variance and effort variance are already available. After prioritization, critical
poor performing metrics can be taken as Six Sigma DMAIC projects.
Six Sigma DFSS methodology can be applied for software development projects. Six
Sigma in SDLC helps in making the software manufacturing process more predictable
and ensuring that all Customer CTQs are met. Some Sigma tools that can be applied in
this methodology are

Quality Function Deployment (QFD) helps in converting the high-level customer

requirements (VOC) into detailed program specifications. Use of QFD ensures
that no requirements are missed and it also helps in prioritizing the software
elements.

Failure Mode Effect Analysis (FMEA) is a tool that provides effective risk
management for the entire SDLC, and identifies the probable failure modes of
software at design phase. This initiates corrective action on the design.
Pugh matrix enables software developer / analyst to compare different concepts
with reference to customer CTQs and create strong alternative concepts from
weaker concepts Scorecard is a predictive tool used for:

Predicting final quality (Y metrics) based on process (X) metrics

Quantitative Risk Assessment Identification of High Defect Drivers Linkage from
Customer CTQs at lower levels in a flow down
Application of Design of Experiments in software testing is an emerging trend.
Software testing based on orthogonal array, detects most possible defects at a fractional
testing time.

DELIVERY SUPPORT PROCESSES

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The processes that are value enablers are equally important to consistently deliver best
quality service to the customers. These processes consist of infrastructure and network
services, Resource Management, HR processes, Finance and accounting, Training,
Central Quality organization etc.
Efficiency and effectiveness of delivery support processes directly or indirectly
contribute to the productivity of core delivery processes. Processes like infrastructure and
network maintenance are extremely important for offshore development / BPO models.
Six Sigma DMAIC projects can be forked to improve any or all the processes mentioned
above.
Some Y metrics for Delivery support processes are

Resource turnaround time

Cycle time for recruitment

Defects in payroll processing

On time invoicing

Accuracy of invoicing

Network response time

Network utilization

Training effectiveness

In effect, Six Sigma has a profound impact on the most critical resource in IT industry i.e.
human resources.

PRODUCT QUALITY ATTRIBUTES

It is of paramount importance to deliver a high quality software product. The application
of Six Sigma to the above two areas Core Delivery Processes and Delivery Support
Processes, directly or indirectly contributes to product quality. Metrics like response time,
resource usage (Memory / CPU), and resources availability are critical to the quality of a
software application. Six Sigma methodologies can be molded to optimize performance
in keeping with the required metrics.
The Six Sigma DFSS methodology enables us to predict product performance in the
initial design stage so that adequate control measures are in place. It has been proved that
time taken to fix a design or requirements defect during testing phase needs about 20
times of rework effort as compared to a defect fixed right at the induction phase. Here,
deployment of Six Sigma can play a major role to reduce or control the development
costs.

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The DFSS methodology as applicable for software processes cannot be directly mapped
to DFSS methodology as implemented in manufacturing processes. In manufacturing, a
product once designed is produced for years together. Whereas, in case of software
development, a software design is manufactured (coded, to be precise) only once. This
makes the application of DFSS in software development tougher. In a typical
manufacturing setup, the crux of DFSS lies in achieving manufacturability at Six Sigma
quality levels. For a manufactured product, the design budget might be flexible but in the
case of software solutions, the budget for design is very limited and all the CTQs must be
met in the given budget. The DFSS rigor ensures that the software is designed, coded and
approved with minimum rework.
The DMAIC methodology can be applied to improve the Product Quality Attributes of
existing applications, too. Many a times, as the user base increases or if the application is
deployed in a global environment, response time decreases. Round the clock availability
of application has also become a critical issue in todays global work culture and BPO
scenario. DMAIC projects can be implemented to tackle such issues and find a cost
effective fix. Improving reliability measures like MTBF (Mean time between failures)
and MTTR (Mean Time to Repair) can be other focus areas of DMAIC improvement
projects.

CUSTOMERS PROCESSES
Most IT companies provide End to End solutions to their clients and therefore enjoy a
long-term relationship with their customers. This has benefited the service providers in
acquiring significant domain knowledge. The consultants possess fairly good amount of
tacit knowledge about the clients core business processes in addition to IT skills. Six
Sigma tools and techniques provide an excellent channel to develop a basis for solution
based consulting.
Six Sigma methodologies can help core business processes as well as IT processes.
Owing to the consultants exposure to customers processes through IT support, they are
familiar with the best functioning processes, processes which are not operating efficiently
and those processes which have reached entitlement. This enables prioritization to tackle
the relevant processes and this prioritization of improvements makes implementation of
Six Sigma easier.

PATNIS APPROACH
Patnis Process Consulting Practice offers customers a complete range of process
improvement related solutions that covers the best of process/quality models and applied
proven methodology and practices. PCP facilitates IT organizations to move to newer
levels of business excellence through incremental process improvements that are either
benchmarked against established models

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(ISO/CMM) or focused on specific process areas of improvement.

With over 15 years of experience, Patnis consultants provide the customer the highquality and cost-effective solutions by offering the following services:

Process Diagnostics

Model Based Process Improvement Services

Focused Approach to Process Consultation

Six-Sigma Methodology for Process Improvement consultation

Quality Management Practices & Training

Customized solutions

SIX SIGMA METHODOLOGY FOR PROCESS IMPROVEMENT

Patni embarked upon its Six Sigma implementation initiative in 1998 in select software
project delivery areas. In the year 2000, Six Sigma was implemented in one strategic
business unit (SBU).
Eventually, it was implemented at the company level. As of June 2003, Patni has a team
of over 30 certified Black belts, over 300 certified Green belts and more than 1100
trained Green Belts.
Patni Green Belts executed over 350 projects spanning across all SDLC processes, which
resulted in benefit of more than $ 2mn to customers in addition to productivity gains and
quality improvement in all SDLC processes. The projects focused on areas such as
reduction in batch cycle time, testing time and time spent in resolving production abends.
It also focuses on improving On Time Delivery, automation of customers processes and
optimizing CPU utilization and so on.
Patnis Six-Sigma consultation services endeavor to improve customers quality
management processes and their returns on investment (ROI) by reducing operational
expenses.
Certified Six Sigma practitioners transfer critical knowledge and skills to the client
organization to lay the foundation for lasting improvements in the dynamic business
environment. Patni facilitates optimization of processes using the Six Sigma
methodologies (DMAIC/DMADV).

Patnis portfolio of Six Sigma consultancy services includes:

Performance Improvement

Process Improvement

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People Development

Patni has developed its own specific Six Sigma based methodology to execute
development projects and maintenance projects respectively.

CONCLUSION

Six Sigma can be successfully applied to the IT services industry where human
resources is a critical input

Availability of reliable data and metrics is crucial to successful implementation of

Six Sigma in IT arena

In IT services sector, benefits of Six Sigma can be accrued from

Internal process improvement

Product Quality improvement

Better predictability

Customer satisfaction improvement due to improved cycle time, waste reduction

Though some of the processes in IT industry may not fall under normal
probability distribution, other quantitative and qualitative tools could be used to
improve the process.

Focus of DFSS methodology on Analyze and design phase significantly reduces

the defects, rework during testing and hence productivity during the rollout phase

Six Sigma rigor is a key differentiator in solution based consulting

Applying Six Sigma to Improve Diagnostic

Imaging
Since the discovery of X-rays in 1895, the field of diagnostic imaging has undergone
dramatic changes. Within a year after its introduction, the application of X-rays to
diagnosis and therapy had already become an established part of medicine. The decades
to follow produced a steadily increasing stream of innovation including the advent of
nuclear medicine, magnetic resonance imaging, PET (positron emission tomography),
computed tomography and multi-slice CT scanners, Ultrasound, PACS (picture archival
communication systems), RIS (radiology information systems), digital mammography,
molecular imaging and speech recognition.
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Such advancements opened up life-saving possibilities for patients, allowing disease to be

detected and treated earlier and with greater accuracy. With the availability of faster,
smarter technologies, however, came a sharp rise in consumer demand, a growing need to
recruit and retain qualified technologists and a widening chasm between advancing
technologies and traditional workflow. It seemed that although the industry had continued
to evolve from a technological standpoint, the processes surrounding diagnostic imaging
services had not kept pace with the science delivering better equipment and information
systems.

Optimizing Technology Through Process Improvement

Todays imaging technologies provide greater speed and superior image quality.
However, when workflow is encumbered by inefficiencies, the benefit to the organization
and ultimately the patients may not be fully realized. Even with the latest equipment
installed, many organizations face delays in report-turnaround time and a backlog of
patients waiting for appointments. Diminished capacity and productivity can lead to a
variety of problems for diagnostic imaging facilities or departments, including:
Delay in diagnosis and treatment
Emergency department bottlenecks
Increased length of stay
Patient dissatisfaction
Referring physician dissatisfaction
Potential loss of outpatient business
Loss of revenue
To optimize performance, technology must not only be leading edge, it also must be
appropriately aligned with the people and process steps involved in the delivery of safe
and cost-effective patient care. One approach that has proven to be effective involves the
implementation of technical strategies such as Lean and Six Sigma, along with cultural
tools to accelerate change and build acceptance.
Applied in diagnostic imaging, this approach focuses on optimizing time, and human and
equipment resources; improving service delivery (for patients, staff, radiologists,
referring physicians); reducing costs while enhancing revenue. Lean and Six Sigma
strategies using the DMAIC methodology (Define, Measure, Analyze, Improve and
Control) eliminate non-value-added steps that cause delays, pinpoint root causes for
defects and variability, and remove inefficiencies and redundancies that can undermine
any organizations best efforts.
If a hospital or diagnostic imaging center decides that Six Sigma is the best way to
achieve their goals, a project team is assembled and trained in the methodology, often led
by experienced consultants or process improvement experts. To maximize the benefits to
the organization, its important for the team to examine the entire operation including
service quality, service cycle, service cost and market potential. Existing assets,

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resources, equipment, staff, scheduling and transport should all be considered for their
potential impact on departmental productivity.
Using the Six Sigma Methodology
With the general areas defined, the team then chooses one or more projects to focus on,
depending on the department size. Scoping is an important part of the process, since team
organization and effort can often become unmanageable when trying to coordinate more
than three project teams within a single imaging department. Projects are selected based
on initial findings and are chosen for their alignment with organizational goals and the
probability that they will produce results in terms of financial, quality and productivity
improvement.
During the Define and Measure phases, it is important to clearly identify critical
elements and obtain voice of the customer (VOC) information through stakeholder
interviews. Key performance indicators also are gathered, including exam volume, exam
duration and room utilization for all modalities; patient, referring physician and staff
satisfaction, and staffing to identify current operational performance relative to labor
expense, revenue and operational quality metrics. Financial data is pulled from existing
systems within the facility and cycle time data needs to be collected manually. Process
mapping and sub-process mapping with assigned indicators for selected modalities helps
to outline existing procedures within the department.
During the Analyze phase, the project team determines the most critical drivers that may
impact the process under examination. Analysis may reveal issues such as slow start-up
times in the mornings or scheduling conflicts with physicians. The information also may
indicate that a high volume of patients failing to show up for appointments is consuming
capacity, or that utilization fluctuates during the day due to bottlenecks in the system or
variability in patient arrival patterns. With analysis complete, the team then develops
action plans and recommends performance improvement opportunities that are aligned
with the organizations strategic objectives. Moving into the Improve phase often is the
most challenging, yet most rewarding part of the project. As process changes are actually
implemented, long-standing issues are finally addressed and better processes are put in
place changes that will ultimately improve the overall effectiveness of the facilitys
diagnostic imaging services.
The Control phase begins once process changes have been established and appear to be
working. The importance of monitoring results during this phase cannot be
underestimated. This is one of the most critical keys to long-term success and a
differentiating element for Six Sigma. During this phase, control tools are implemented
such as dashboards or balanced scorecards to monitor key indicators and ensure that
project gains remain on track. It also is important during the Control phase to
institutionalize the wins, celebrate success and instill ongoing change management
capabilities through change management tools.

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Two Project Examples in Diagnostic Imaging

Example No. 1: To increase capacity and raise patient satisfaction, Carle Clinic in
Illinois needed to improve cycle time for CT exams.
Solutions: Using Six Sigma and change management tools, Carle Clinic uncovered the
most critical factors impacting the exam scheduling process and implemented these
changes:
Administered contrast solution earlier so patient is prepared for exam on time

Used MRI IV start room to prep CT patients

Expanded tech availability with chart, requisition and file room

improvements
Results:

Increased CT capacity by six exams per day

Achieved better predictability in the process

Increased satisfaction

Financial potential approximately $390,000 annually

Example No. 2: Baptist Citizens Medical Center in Alabama applied Six Sigma methods
to reduce the cycle time from patient-out to next-patient-in to less than 15 minutes.
Solutions:
Optimize capacity and labor utilization
Improve service levels
Develop marketing plan to improve market share
Use radiology technician in CT to help transport
Rotate CT technicians in X-ray
Revisit protocols
Extend US technicians hours twice/week
Results:
Added 260 additional CT slots on annual basis
Added 780 additional US slots on annual basis
Financial potential $314,744 annually
Summary and Keys to Success
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Process improvement and workflow adjustments using Six Sigma and other tools can
have a measurable impact on cost and quality of services. Addressing additional areas
such as marketing and providing specialized training for technologists also helps the
diagnostic imaging department gain advantages in market share and accelerates their
return on investment for equipment such as CT scanners and MRI machines.
Diagnostic imaging departments must recognize and respond to new market realities. The
business of radiology in all its various forms is growing at a rate of 10 percent each year,
driven by an aging population and increasing demand for services. This growth is
continuing to strain the ability of healthcare organizations to maintain adequate services.
Reimbursement and compliance issues also present certain challenges, and the quest for
market share continues unabated. To survive and thrive in this environment, diagnostic
imaging departments and facilities must adopt strategies for increasing efficiency and
cost effectiveness.
Achieving optimal efficiency, service quality, customer satisfaction and financial success
in diagnostic imaging requires more than the installation of superior equipment and
information technologies. It also entails adopting a performance-improvement approach
that incorporates both a technical and cultural strategy to realize significant, long-term
results. Experience provides several additional recommendations for reaching and
maintaining Six Sigma levels of excellence in diagnostic imaging:
Develop a plan to accurately set and meet customer expectations
Focus adequate attention on project selection and scoping
Establish a clear understanding of current operations and direction
Determine and focus on key metrics and success indicators
Do not underestimate the importance of the Control phase
Just as the discovery of X-rays a century ago became the new light in medicine,
operational performance improvement continues to shed new light on opportunities for
streamlining and optimizing the services provided within diagnostic imaging.

THEMES OF SIX SIGMA

Well close out this introductory look at Six Sigma by distilling the critical
elements of this leadership system into six themes. These principles
supported by the many Six Sigma tools and methods well be
presenting throughout this bookwill give you a preview of how well
help you make Six Sigma work for your business

Theme One: Genuine Focus on the Customer

During the big Total Quality push of the 1980s and 1990s, dozens of
companies wrote policies and mission statements vowing to meet or
exceed customer expectations and requirements. Unfortunately, however,
few businesses tried very hard to improve their understanding of
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customers requirements or expectations. Even when they did, customer

data-gathering typically was a one-time or short-lived initiative
that ignored the dynamic nature of customer needs. (How many of
your customers want the same stuff today as five years ago? Two years
ago? Last month?)
In Six Sigma, customer focus becomes the top priority. For example,
the measures of Six Sigma performance begin with the customer. Six
Sigma improvements are defined by their impact on customer satisfaction
and value. Well look at why and how your business can define customer
requirements, measure performance against them, and stay on
top of new developments and unmet needs.

Theme Two: Data- and Fact-Driven Management

Six Sigma takes the concept of management by fact to a new, more
powerful level. Despite the attention paid in recent years to measures,
improved information systems, knowledge management, etc., it should
come as no shock to you to hear that many business decisions are still
being based on opinions and assumptions. Six Sigma discipline begins
by clarifying what measures are key to gauging business performance;
then it applies data and analysis so as to build an understanding of key
variables and optimize results.
At a more down-to-earth level, Six Sigma helps managers answer
two essential questions to support fact-driven decisions and solutions:
1. What data/information do I really need?
2. How do we use that data/information to maximum benefit?

Theme Three: Process Focus, Management, and Improvement

In Six Sigma, processes are where the action is. Whether designing
products and services, measuring performance, improving efficiency
and customer satisfactionor even running the businessSix Sigma
positions the process as the key vehicle of success.
One of the most remarkable breakthroughs in Six Sigma efforts todate
has been convincing leaders and managersparticularly in the
service-based functions and industriesthat mastering processes is not
just a necessary evil but actually a way to build competitive advantage
in delivering value to customers. There are many more people to convince
with huge dollar opportunities tied up in those activities.

Theme Four: Proactive Management

Most simply, being proactive signifies acting in advance of events
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the opposite of being reactive. In the real world, though, proactive

management means making habits out of what are, too often, neglected
business practices: defining ambitious goals and reviewing them frequently;
setting clear priorities; focusing on problem prevention versus
firefighting; questioning why we do things instead of blindly defending
them as how we do things here.
Being truly proactive, far from being boring or overly analytical, is
actually a starting point for creativity and effective change. Reactively
bouncing from crisis to crisis makes you very busygiving a false
impression that youre on top of things. In reality, its a sign of a manager
or an organization thats lost control.
Six Sigma, as well see, encompasses tools and practices that replace
reactive habits with a dynamic, responsive, proactive style of management.
Considering todays slim-margin-for-error competitive environment,
being proactive is (as the airline commercial said) the only way
to fly.

Theme Five: Boundaryless Collaboration

Boundarylessness is one of Jack Welchs mantras for business success.
Years before launching Six Sigma, GEs chairman was working to break
down barriers and improve teamwork, up, down, and across organizational
lines. The opportunities available through improved collaboration
within companies and with their vendors and customers are huge.
Billions of dollars are left on the table (or on the floor) every day,
because of disconnects and outright competition between groups that
should be working for a common cause: providing value to customers.
As noted above, Six Sigma expands opportunities for collaboration
as people learn how their roles fit into the big picture and can recognize
and measure the interdependence of activities in all parts of a
process. Boundaryless collaboration in Six Sigma does not mean selfless
sacrifice, but it does require an understanding of both the real
needs of end users and of the flow of work through a process or a supply
chain. Moreover, it demands an attitude that is committed to using
customer and process knowledge to benefit all parties. Thus, the Six
Sigma system can create an environment and management structures
that support true teamwork.

Theme Six: Drive for Perfection; Tolerance for Failure

This last theme may seem contradictory. How can you be driven to
achieve perfection and yet also tolerate failure? In essence, though, the
two ideas are complementary. No company will get anywhere close to

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Six Sigma without launching new ideas and approacheswhich always

involve some risk. If people who see a possible path to better service,
lower costs, new capabilities, etc. (i.e. ways to be closer-to-perfect) are
too afraid of the consequences of mistakes, theyll never try. The result:
stagnation, putrefaction, death.
Fortunately, the techniques well review for improving performance
include a significant dose of risk management (if youre gonna fail,
make it a safe failure). The bottom line, though, is that any company
that makes Six Sigma its goal will have to constantly push to be evermoreperfect (since the customers definition of perfect will always
be changing) while being willing to acceptand manageoccasional
setback

Software used for Six Sigma

There are generally two classes of software used to support Six Sigma: analysis tools,
which are used to perform statistical or process analysis, and program management tools,
used to manage and track a corporation's entire Six Sigma program. Analysis tools
include statistical software such as Minitab, JMP, SigmaXL, RapAnalyst or
Statgraphics as well as process analysis tools such as iGrafx. Some alternatives include
Microsoft Visio, Telelogic System Architect, IBM WebSphere Business Modeler, and
Proforma Corp. ProVision. For program management, tracking and reporting, the most
popular tools are Instantis, PowerSteering, iNexus and SixNet. Other Six Sigma for IT
Management tools includes Proxima Technology Centauri, HP Mercury, BMC
Remedy.
1. Six Sigma was industry specific
2. The average was very subjective in nature, it was very difficult to define average
3. There were problems in finding whether six sigma has been achieved or not

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Six Sigma Calculator

The STATGRAPHICS Six Sigma Calculator converts between various commonly used
quality metrics. After entering the value of any one metric, the equivalent values of the
others are calculated

The Benefits of Six Sigma

These stories by themselves may be appealing, but if your company is
doing okayas GE was in 1995, when Jack Welch launched their
effortwhy should you consider a Six Sigma initiative? Whats prompting
so many businesses, prominent and modest, to invest in this funny sounding
business approach? Drawing from these success stories and
those of other companiesand by looking behind the raw dollarswe
can define several benefits that are attracting companies to the Six
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Sigma Way. Six Sigma:

1.Generates sustained success. John Chambers, CEO of Cisco Systems,
the networking equipment powerhouse thats been one of the
fastest-growing companies of the past decade, recently commented
on the tenuous hold many companies have on their success: There
is the realization that you can be out of business in three years. 7
The only way to continue double-digit growth and retain a hold on
shifting markets is to constantly innovate and remake the organization.
Six Sigma creates the skills and culture for constant revival
what well describe in the next chapter as a closed-loop system.
2. Sets a performance goal for everyone. In a company of any sizelet
alone
a multibillion- -dollar global corporationgetting everyone working

in the same direction and focusing on a common goal is pretty tough.

Each function, business unit, and individual has different objectives
and targets. What everyone has in common, though, is the delivery of
products, services, or information to customers (inside or outside the
company). Six Sigma uses that common business frameworkthe
process and the customerto create a consistent goal: Six Sigma
performance, or a level of performance thats about as close to
perfect as most people can imagine. Anyone who understands their
customers requirements (and who shouldnt?) can assess their performance against the Six Sigma goal of 99.9997 percent perfecta
standard so high that it makes most businesses previous views of
excellent performance look pretty weak. Figure 1.1 contrasts the
number of problems that would be found with a goal of 99 percent
quality versus a goal of Six Sigma performance (99.9997 percent).
The difference is pretty startling.
3.

Enhances value to customers. When GE began its Six Sigma effort,

executives admitted that the quality of the companys products was

not what it should be. Though its quality was perhaps better than
that of its competitors, Jack Welch stated that We want to make our
quality so special, so valuable to our customers, so important to
their success that our products become their only real value
choice.8With tighter competition in every industry, delivering just
good or defect-free products and service wont guarantee success.
The focus on customers at the heart of Six Sigma means learning
what value means to customers (and prospective customers) and
planning how to deliver it to them profitably.
4. Accelerates the rate of improvement. Motorolas goal of 100X
improvement
in four years set an example for ambitious, driven organizations to emulate.

With information technology setting the pace by

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doubling its performance to cost ratio every 18 months, the customer

expectation for improvement gets ever more demanding. The
competitor who improves the fastest is likely to win the race. By
borrowing tools and ideas from many disciplines, Six Sigma helps a
company not only improve performance, but improve improvement.
5. Promotes learning and cross-pollination. The 1990s saw the birth of the
Learning Organization, a concept that appeals to many but seems
hard to put into action. AlliedSignal leaders have commented that
everyone talks about learning, but few succeed in weaving it into
the fabric of everyday life for so many employees.Six Sigma is an
approach that can increase and accelerate the development and
sharing of new ideas throughout an organization. Even in a company
as diverse as GE, the value of Six Sigma as a learning tool is
seen as critical. Skilled people with expertise in processes and how to
manage and improve them can be shifted from, say, GE Plastics to
GE Capital, not only with a shorter learning curve but actually
bringing with them better ideas and the ability to apply them more
quickly. Ideas can be shared and performance compared more readily.
GEs vice president for Six Sigma, Piet van Abeelen, has noted
that in the past, a manager in one part of the organization could discount
input from a counterpart in another area:Your ideas wont
work, because Im different. Van Abeelen says Six Sigma eliminates
those defenses: Well, cry me a river. The commonalities are
what matter. If you make the metrics the same, we can talk.
6. Executes strategic change. Introducing new products, launching new
ventures, entering new markets, acquiring new organizationswhat
were once occasional business activities are now daily events in
many companies. Better understanding of your companys
processes and procedures will give you a greater ability to carry out
both the minor adjustments and the major shifts that 21st-century
business success will demand.

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The Quality Team

- Thought Leadership
- Expert on Six Sigma
- Mentor Green and Black Belts

Master Black
Belt

Black
Belt

Black
Belt

Green
Belt

Green
Belt
Green
Belt

Backbone of Six Sigma Org

Mentor Green Belts
Full time resource
Deployed to complex or high
risk projects

- Part time or full time resource

- Deployed to less complex
projects in areas of functional
expertise

Yellow Belt
Six Sigma Online's Yellow Belt certification provides an overall insight to the
techniques of Six Sigma, its metrics, and basic improvement methodologies.

95

Students will learn how to integrate Six Sigma methodologies for

the improvement of production and transactional systems to better meet
customer expectations and bottom-line objectives of their organization. It
provides an introduction to process management and the basic tools of Six
Sigma, giving employees a stronger understanding of processes, enabling
each individual to provide meaningful assistance in achieving the
organizations overall objectives. They also:
- Improve effectiveness of employees in their support role of Six Sigma
- Improve personnel buy-in of Six Sigma
- Improve day-to-day workplace activities
A Yellow Belt is an individual who has received introductory training in the
fundamentals of Six Sigma. The Yellow Belt gathers data, participates in
problem-solving exercises and adds their personal experiences to the
exploration process. Not only do Yellow Belts gain the skills necessary to
identify, monitor and control profit-eating practices in their own processes,
but they are also prepared to feed that information to Black Belts and Green
Belts working on larger system projects.
Sometimes referred to as Green Belts (GB) -- varies from business to business. A Yellow
Belt typically has a basic knowledge of Six Sigma, but does not lead projects on their
own, as does a Green Belt or Black Belt. Is often responsible for the development of
process maps to support Six Sigma projects. A Yellow Belt participates as a core team
member or subject matter expert (SME) on a project or projects. In addition, Yellow Belts
may often be responsible for running smaller process improvement projects using the
PDCA (Plan, Do, Check, Act) methodology. PDCA, often referred to as the Deming
Wheel, enables Yellow Belts to identify processes that could benefit from improvement.
These smaller Yellow Belt projects often get escalated to the Green Belt or Black Belt
level where a DMAIC methodology is used to maximize cost savings using Statistical
Process Control.

Green Belts

A lot has changed in the last few years, and businesses are slowly but certainly starting to
live in this new possibility. Of late, businesses that have provided Green Belt training to
existing employees have reported phenomenal success with Six Sigma implementation
projects, something that validates the effectiveness of this new concept. These businesses
have also reported a substantial reduction in the overall project implementation costs, the
reason being that they no longer have to pay the high fee demanded by Six Sigma Black
Belts.
Using this new concept is beneficial for all types of organizations, but it is the small and
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medium sized enterprises that stand to gain the most - because they are the ones who
often complain about the lack adequate funds and resources, and as such find it very
difficult to hire the costly services of Black Belts.

Black Belts
In most organizations, Six Sigma implementations are no longer limited to just a few
processes; they are now carried out across all the functional departments that might be
there in an organization including sales, finance, production and inventory. The aim is to
improve the overall efficiency of the organization rather than just focusing on a single
product or process. As such, the conventional role played by Black Belts is constantly
being redefined to include new dimensions such as managerial skills and the ability to get
things done within the specified time and costs.
Black Belts are expected to take on the role of a manager, who shoulders all the
responsibility related to a particular project or plan of action. When Black Belts play the
role of organizational managers, they are required to display their expertise in handling
all the related responsibilities such as gathering all the resources that might be required,
making the best possible use of organizational resources, creating implementation teams,
selecting implementation team members, defining roles and responsibilities, allocating
resources and making sure that everything is being done as planned.

Master Black Belts

The Master Black Belt is the highest level of Six Sigma technical mastery. Because only
Master Black Belts can and are required to facilitate the training of Black Belts, they have
to know everything the black belts do. In addition, they need to understand how the
theory of mathematics is linked with statistical methods.
Six Sigma Master Black Belts must be able to help their lower-level counterparts (Black
and Green Belts) in applying the appropriate methods throughout the Six Sigma project
process.
Generally speaking, training in statistical methods should be done solely by Master Black
Belts. Due to the basis of the Master Black Belts work, communication skills, as well as
the aptitude to teach, should be deemed just as important as technical skill when
evaluating candidates.

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Future Of Six Sigma

Since its introduction in the 1990's, 6-Sigma has become the buzzword in both the
manufacturing and service industries. The various methodologies used in 6-Sigma are
based on a disciplined and data driven approach that help in eliminating defects and
achieving near perfection by restricting the number of possible defects to less than 3.4
defects per million. The methodologies are effective in managing business processes of
both the manufacturing and service industries. In manufacturing industries, the concepts
and methodologies are used for reducing the number of defects whereas in service
industries, they are used mainly for reducing transactional errors.
Although many companies have been successful in reducing the number of defects
through Six Sigma projects, the arguments raised against the efficacy of 6-Sigma in all
aspects of business processes still do not seem to die down. Some management experts
think that Six Sigma is inherently flawed, as it does not take into account the flaws that
might be present in the system itself. They are of the opinion that the analytical and
statistical tools used in 6-Sigma only expose flaws in the execution and do not account
for a process that itself is riddled with defects.
Supporters of Six Sigma offer a different viewpoint. According to them, quality
management tools such as Total Quality Management (TQM) and 6-Sigma are
conceptually quite similar except for their labels. Business organizations may use any of
these for improving overall quality. However, they often give preference to 6-Sigma as
they believe that Six Sigma is more than just a process improvement program and is
based on concepts that focus on continuous quality improvements. They have the opinion
that 6-Sigma concepts combine statistical measurement tools with contemporary
management techniques for achieving extraordinary results.
6-Sigma may appear similar to other quality management tools such as TQM or Kaizen
Events, but in reality, it is quite different. Other quality management programs often
reach a stage after which no further quality improvements can be made. 6-Sigma, on the
other hand, is different as it focuses on taking quality improvement processes to the next
level. This means that 6-Sigma has the potential to outlast other quality management
programs in the future.
The scope of 6-Sigma is also much broader than other quality management programs as it
can be applied to every business process of an organization. The future is bright for 6Sigma programs with the growing awareness in small and medium enterprises about the
potential benefits that can be derived from implementing such programs. In education,
Six Sigma pertains to improving the quality of matter taught, the character generated of
the pupils, and the quality of study and school life. With the revolutionary usage of audiovisual devices, like projectors, video conferencing, etc., the students can also be asked to
write papers on a particular subject and after the presentation of papers, a discussion can
take place on the respective subject. Under this method of imparting knowledge of
literacy with quality, the thinking, writing and presentation skills of the students can be
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kindled. In addition, the existing method of quality improvement through SQCC

(Students Quality Control Circles) have created the value based concept as a similie for
the Six Sigma standards. It infuses a spike of excellence, emotional development,
humaneness and self discipline.

The Limited Use Of Six Sigma

6-Sigma gained prominence as an effective quality improvement technique after it was
successfully implemented in Motorola. Since then, many large organizations have
implemented 6-Sigma programs and improved the quality of manufactured goods or
services rendered. However, the full potential of 6-Sigma has not been realized so far
because many competent small to medium level enterprises have still not implemented
Six Sigma programs. These enterprises have all the resources to implement such
programs, but are often wary of the final certification, as they believe that it is meant only
for large organizations. These companies often do not realize that 6-Sigma delivers the
same benefits to both large as well as small business enterprises. The only difference may
be in the volume of goods manufactured or services rendered.
.

Green Belt
(GB)

Black Belt
(BB)

Master Black Belt

(MBB)

Basic - Six Sigma Awareness

Green Belt Projects
Participate in Black Belt Projects
Assist business functions with day to day
activities
Mentor/Train Green Belts
Black Belt Projects
Change Agents
Work along with the business owners

Mentor/ Train Black Belts

Run Strategic projects
More Strategic than tactical role

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CASE STUDY
A case study is one of several ways of doing research. Rather than using large samples
and following a rigid protocol to examine a limited number of variables, case study
methods involve an in-depth, longitudinal examination of a single instance or event: a
case. They provide a systematic way of looking at events, collecting data, analyzing
information, and reporting the results. Case study should be defined as a research
strategy, an empirical inquiry that investigates a phenomenon within its real-life context.

CASE STUDIES ON SIX SIGMA

Six Sigma Case study : Processing of Insurance Returns
An EMC Lean Six Sigma Project
EMC Corporation is the world leader in systems, software, services, and solutions for
building and managing intelligent, flexible, and secure information infrastructures.
We help our customers maximize the value of their information assets by
implementing and accelerating powerful information lifecycle management (ILM)
strategies.
This article is an illustration of Lean Six Sigma principles applied successfully to an
operational issue involving inventory of damaged products that may have an
insurance claim.
DEFINE
The insurance returns process at EMC addresses EMC storage systems that are
suspected of being damaged in-transit, either outbound from or inbound to the
factory. Given the standard corporate contract terms, EMC normally takes liability
for product in-transit and if any suspicion of damage occurs during this period EMC
opens an insurance claim with our insurance broker. The liability for damage is held
between the freight forwarder and EMC. A third party such as an airline may also be
involved. A suspect product is returned to the factory and assessed for damages by
EMCs engineering team and in some cases, the material may require special
systems retest for the assessment to be completed. Suspicion on product damage
can result from many things including damaged packaging and tip & tell indicators,
to more serious visible product damage arising from mishandling.
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Insurance return inventory typically represents five percent of the factorys ending
inventory forecast and is a significant financial holding. Floor space and capital tied
up in this category of inventory constrain the factory from positioning good
available inventory in finished goods to meet unplanned customer demand.
A noticeable build up in field return inventory first led us to look at the insurance
returns process at EMC. Recognizing inventory accumulation as one of the seven
wastes of Lean, we formed a cross functional team, led by a green belt, to try to
eliminate this waste at one of our plants. The primary goal of this Lean Six Sigma project
was to review and understand the existing insurance returns process at a single
manufacturing plant and the extent of variation within the process.
The objective of the project was to reduce the dollar holding on insurance inventory
by 50%. A secondary measure was to improve the cycle time it takes to process the
material.
The team embarked on the define phase of the project by first completing an IPO
diagram, which indicated insurance inventory levels and time spent in the insurance area
were the key outputs. The key inputs were the number of insurance claims,
types of claims, capacity for re-test, and storage space, among others. The detailed
IPO is listed below for reference.
Since many contributors to the process had visibility only to their own input and
lacked an understanding of inputs from other functions, the IPO diagram was a
useful tool in clarifying the input factors across the entire cross-functional process.
The team then performed a stakeholder analysis, identifying key stakeholders and
their level of readiness to change the process.

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MEASURE
The first step in the Measure phase was to develop the current state process flow
which helped define the boundaries of what we were trying to improve. While
constructing the process flow, it became clear there were elements of the process
outside of manufacturing control, highlighted outside the red line in the process flow.
To facilitate progress of this project, we decided to treat these elements as out of
scope for this project.
The tools utilized up to this point in the project helped refine understanding, scope
and objectives of the initiative. However, at the measure phase it was also necessary
to gather some baseline quantifiable data around our primary and secondary
metrics.
We found that over the previous twelve month period the levels of insurance claim
inventory being held by the factory was consistently high. Throughput was evident
in this inventory pile, as the annual figures for insurance claims were much higher
than the residual inventory in the factory.
The team then looked at the secondary measure - the cycle time of insurance claims.
Baseline average cycle time was 330 days, with a standard deviation of 165 days, as
compared to an upper spec limit of 90 days. In fact, 75% of the insurance inventory
exceeded the 90-day goal for cycle time. The data also showed that our insurance
inventory was linked to 24 specific top level assembly units (TLAs), which in turn are

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the centre of each individual insurance claim.

At the conclusion of the Measure phase, the team had not only a clear understanding
of how the process worked, its dependencies across multiple groups and the
stakeholders within these groups, but also a vivid quantifiable picture of how poorly the
process was performing and how much improvement would be necessary.

ANALYZE
The first stage of the Analyze phase was to revisit the process flow with a view to
identifying all forms of waste in the process. From the data in the measure phase, it
was obvious that there was wide variation, contributing to the poor performance of
the process. We now sought to identify the causes for this variation. To carry out the
analysis effectively the team focused on a few specific insurance claims, tracking
them through the process steps and observing their cycle times through each step.
We also noted inventory levels at each step and the catalysts that prompted
movement from one step to the next.
As visible in the process flow, waiting time was evident throughout the process with
insurance inventory often sitting idle, waiting to move to the next step in the
process. This occurred when ownership for input to the process crossed functional or
departmental boundaries and that each possible delay introduced greater opportunity
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for variation in the cycle time of claims.

At this juncture a new aspect to the process became apparent to the team. While we
set out to address the physical buildup of inventory and documented the physical
transition of product through testing and inspection, equally important was the
associated administrative or office based process.
The information management required to effectively support the physical movement
of inventory was virtually non-existent. Consequently, when taking the concept of
FLOW into account, this process, from a physical movement or information
movement perspective, was not fluid and resulted in sub-optimal performance.
Having recognized this deficiency, the team now tried to identify cause and effect for
the prolonged cycle times on insurance claims by using a fish-bone diagram. The
team found multiple variables impacting each step in the process. The team decided
that the success of this project would center on narrowing our focus to address one
specific area (or bottleneck) or a critical path through which a high percentage of the
claims flowed. Of particular interest were issues relating to lack of communication
regarding dispositions and batch processing of audits. To help us in this endeavor
we performed a simple Pareto analysis on the type of claims we saw for the previous
twelve months. The results showed us that 73 percent of all claims processed went
through one particular routing and it was the improvement of this routing that we
choose to base our efforts on going forward.
The Analyze stage helped us identify areas of the process on which to focus our
improvements. The following observations were made:
The main sources of waste in the process are inventory and waiting, with
waiting evident in almost every step.
Through C&E diagram, it is apparent that communication and information flow
is extremely poor in the process.
Ultimate ownership within the process is an issue.
Service level agreements and standard operating procedures are not in
evidence, for even the most basic or fundamental steps in the cycle.
The process flow is being impacted by batch processing of audits and
scrapping.
Using a Pareto of previous claims, a high percent of claims are dispositioned
to be scrapped after initial engineering visual inspection. Therefore efforts to
optimise this area would have significant benefits in terms of the overall process
performance.

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IMPROVE
The charter for the improve phase was defined based on the outcome from the
Analyse phase, including:
Focus on the scrap routing where 73% of claims go.
Improve communication within the internal cycle to facilitate a better physical
flow and reduce waiting.
Avoid batch processing anywhere in the process.
Streamline hand-offs and clearly identify ownership throughout process.
Review or create service level agreements within each stage of the process.
Review the insurance assessors requirement to physically keep inventory
onsite following any audit recommendation to scrap.
Addressing the corrections to the information and process flow, we deployed a swim
lane approach to the process flow, clearly denoting where hand-offs occurred in the
process, both for information and physical product. This also enabled us to clearly
address the matter of ownership, as every stakeholder could now see the importance
of their input to the overall success of the process.
For most variable input, basic service level agreements were put in place to drive a
performance standard. For example, the initial inspection on claims was expected to
be completed and written up within fourteen days of receipt of goods. Metrics on all
the key gateways were also developed to ensure ongoing maintenance of standards.
Elements of the Lean principles were also introduced at this stage with the removal
of the batching of work in this process and an emphasis placed on one-piece flow.

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Among other things, testing and inspection had been handled in a batch manner but
it was now agreed that each claim would be processed individually thus ensuring
minimal delays, enhanced flow and constant throughput.
The final element we needed to address for the routing was to optimize the
requirement on us as a factory to hold inspected inventory on our books awaiting
closure of the claim. At this point in the process, we would have completed all
required evaluations on the product and had decisive recommendations on the next
course of action for the material, however nothing was done with product until the
insurance claim was completed.
After discussing with the insurance assessors they concurred that there was no real
value-add in us holding material indefinitely and that given a thirty day notice of our
intent the assessor was agreeable to let us process the material onwards with the
appropriate documentation. This meant that while the insurance claim could go on
for months, the inventory associated with it, once inspected and tested, could be
dispositioned without much delay (i.e. held for 30 days post inspection). While this
change in the process and some of the other general ownership and information flow
improvements benefited this focused routing specifically, it also would be
complementary to many of the other routings the remaining 27 percent of insurance
claims would go through.

CONTROL
Once the improvements were implemented the positive impact became very visible
in the primary and secondary metrics. Inventory holding was reduced by almost 55%
from levels before the project started.
For the secondary metric we used some box plots to illustrate the change in the
process. Three box plots are presented, the first being the baseline data, the second
shows the improved process with all claims considered and the third shows the
improved process with only claims that followed the routing we choose to improve.
Overall there was a shift in the process mean from 330 days to 56 days and the
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range was reduced and shifted downwards. P values from two sample t tests and F
tests for before and after data indicated that both the mean and standard deviation
had shifted significantly.
The initial control plan is largely based around a monthly meeting chaired by the
inventory management group. This group will also maintain a tracking sheet of all
the current insurance claims, detailing the cycle time of each process step and the
inventory holding in each. An automatic report has been set up from the
manufacturing system to gather this information, so as to avoid creating any extra
work and reduce manual dependencies in the improved process. In the mid to long
term, the monthly meeting remains in place to facilitate rotation of personnel,
general health check on the process, any new developments and customer
satisfaction. Once confidence is built in the process control, we are looking to deploy
control charts to track the performance of the main steps.
The results of this project were aptly summarized by Bill OConnell, Director of
International Supply Chain at EMC, who said, The gains made in this project by
freeing up monies from non-value adding inventory, will really service the business
well in terms of customer experience and in providing flexibility. This project really
proves the power and value in applying the basics of Lean Six Sigma, specifically
tools such as process mapping, cause and effect analysis and standard operating
procedures.

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Six Sigma Case Study : Shows Six Sigma Role in Financial Services

An international bank with 50 branches in Germany and approximately 300 employees

decided in 2003 to adopt Six Sigma in all its business units in Europe. It then set out to
use Six Sigma to implement one of its priority business strategies significantly grow its
car loan business in the next two years. The bank's goal was to increase car loans by 100
percent in the first year, and by another 70 percent in the second year.
Pre-Analysis Phase
In order to identify appropriate Six Sigma projects, a cross-functional team from sales,
marketing and operations was formed to investigate the key drivers of car loan business
and market share growth.
The team created a high-level process map and identified of the sub-processes and the
relevant influence factors. The indicators were identified through a series of interviews
with many process stakeholders. The process stakeholders did not know about process
indicators but they were able to explain what kind of "critical numbers" they looked each
month. Some of the numbers could easily be translated into indicators; others needed
more effort to become obvious (Table 1).
Table 1: Examples of Process Indicators

Sub-Process

Voice of the Process Owners

Communication "We need frequent contact with our car

with Car Dealers dealers"
"No misunderstanding and communication
errors"
"They should generate business"
Loan Collection

"Phone handling is important"

Process Indicator
Number of contacts per month
Number of complaints from car
dealers
Car dealer turnover per month
Percent abandoned calls;
speed of answer in seconds

A key success factor of this exercise was to have the respective sub-process owners
contributing to pinpoint the specific problem areas.
From this pre-analysis, the team identified two Black Belt and two Green Belt projects
(Table 2). The distinction between Black Belt and Green Belt was made depending on the
urgency of the task. The reasoning was that full-time Black Belts could deal with the
problem faster and more effectively than part-time Green Belts.

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Table 2: The Final Six Sigma Projects

Process: Car Loan Business Process

Find New
Car
Dealers

Contract
with
New
Dealers

Communication
with Car Dealers

Loan
Approval

Loan
Collection

Customer
Service

Process Indicators (Indicators in Project Scope in Bold)

> Number of > Number of > Frequency of
New
New Dealers Communication
Dealers
Contacted
> Communication
Errors
> Car Dealer
Activity
Black Belt
Project

> Approval
Cycle Time
> Application
Errors

> Customer
Complaints
> Phone
Handling
> Payment Issues
> Account
Reconcillation

> Inquiries
> Customer
Complaints
> Phone
Handling

Black Belt
Project

Green Belt
Project

Green Belt
Project

Car Loan Project's Define Phase

The final project definition (Table 3) for one of the Black Belt projects had a narrow
scope including only one sub-process communication with car dealers. After the
interviews and after pulling some data from the management information system, at least
one reason for starting this project was clear. More than half of the car dealers had not
turned over any loans to the bank during the last couple of months. In addition, marketing
data told the team that it was much more expensive (about five times more) to acquire
new car dealers than to work with existing ones.

Table 3: The Final Project Definition

Process: Car Loan Business Process

Sub-Process: Communication with Car Dealers
Find New Contract with Communication
Car Dealers New Dealers with Car Dealers

Loan
Loan
Approval Collection

Customer
Service

Start: Contract with Car Dealer Closed

End: Car Dealer Submits Loan Applications
Process Indicator: Car Dealer Activity Car Dealer Turnover
Unit of Measure: Car Dealer
Opportunity for Defects: One

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Defect Definition: Car Dealer with Turnover Within the Last Three Months (Inactive
Rate)
One of the biggest obstacles at this point was engaging the process owner in the project.
The car loan business process owner the sales director was one of the few managers
who were very skeptical of Six Sigma. Additionally, the team was not used to working as
a team: Different office locations for marketing/sales and operations led to a breakdown
of communication between these functions. The first team meeting was a very quiet
exercise with obvious and hidden finger-pointing.
However, the Black Belt did an excellent job in influencing the process owner, by helping
him to understand and see the benefit of Six Sigma.
Lessons Learned:
Make sure senior management buys in to Six Sigma first.
Show staff at all levels right from the start that Six Sigma is an imperative that
contributes to the strategy of the company.
Start Six Sigma implementation with needed projects rather than some "learning
and training projects."

Voice of the Customer Is Key

During the interviews performed to identify business indicators and to determine a
baseline, the team experienced a common opinion expressed by sales staff: "We could get
more 'turnovers' if we had better conditions." This is never a surprise in any business in
the world. However, the team decided as part of the Measure phase to explore the
voice of the customer even more. Supported by an external market research company, the
team developed a client satisfaction survey that was conducted by telephone with about
130 car dealers. The results (Figure 1) were a surprise:
About 60 percent of the dealers mentioned non-existing or poor communication
with the bank as the biggest driver for dissatisfaction.
About 20 percent indicated the interest rate for the car loans seemed too high.
Figure 1: Client Survey Results

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During the Analysis phase, the team focused on those two issues. The team first decided
to examine the communication process between the sales team and the clients.
Surprisingly, it found that there was no process. The sales representatives complained
about the workload they had to do every day. They were kept busy preparing reports,
making sales presentations and attending a lot of internal meetings. They did not really
focus on talking to their clients. One of the typical comments was: "If I have some time
left, I give my clients a call."
The analysis of the interest rate revealed an additional, even worse issue: Some of the
clients did not know the newly reduced interest rate of the bank.
The root cause for this serious fault was that the communication channel between
marketing and operations simply did not work well. Immediate action was taken to
inform all clients about the better rate.
Lessons Learned:
Do not assume the company knows what the customers want. Ask them.
Do not blame people for problems. It is the process which needs to be fixed.

Implementing Solutions and Sustaining the Gain

A couple of days after the market research company talked to the car dealer clients, the
contacts produced by the former "sleeping dealers" went up, even though the process had
not been touched (Figure 2).
Figure 2: Increase of Car Dealer Turnover from 'Sleeping Dealers'

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The customer satisfaction survey phone calls had created a positive impact on the car
dealers, who perceived that the bank did value them as priority clients. Another reason for
business growth was the communication of the new rates, which were more aggressive
and competitive.
The Six Sigma team developed solutions for addressing the main problem root causes:
Development of a communication process between sales representatives and
clients.
Development of a monitoring tool to alarm sales in case of inactivity of clients.
Refinement of the roles of marketing, sales and operations, resulting in less
administrative work for sales personnel in order to give them more time for their
first priority talking to clients.
Redefinition of internal interfaces to improve communication between
departments.
Production of a marketing handbook to support clients in selling the bank's
services.
Especially during the Improve phase, the presence and support of one of the car dealers
was essential. He gave the important input about how often and in what way he would
like to be contacted by the sales force.
The solutions required some financial investment. Getting approval was easier than the
team had thought it would be. The major factor was the data about the additional business
and about the decrease in the rate of inactive car dealers. The team used the data to
extrapolate the growth for a one-year period and compared that figure with the estimated
cost of the solutions. The sales director supported the solutions 100 percent.

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This phase also included:

Communicating the changes to the whole organization.
Describing the new process in the operational manual.
Training all people who were involved in the process.
The Control phase of the project was about putting mechanics in place to make sure the
process improvements would last. Part of control was to make the "dealer inactive rate"
part of the company's management information system. The objective was to show the
actual inactive rate monthly and to take action if it deviated from the "norm" (Figure 3)

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Figure 3: Inactive Rate of 'Sleeping Dealers'

To decide whether a deviation was critical or not, the team implemented a control chart.
This was built using the weekly inactive rate after the process had stabilized, a quarter
after implementing the changes.
Using a control chart for this purpose seemed to some to be questionable. At the
beginning, a lot of education in how to use control charts was needed. It was stressed that
the chart was just a measuring device; the importance was in what was done in reaction to
movements within or without the control limits.
Lessons Learned:
Measuring a process tends to change the behavior of people; measuring the right
indicators tends to change the behavior in the right direction.
Involving clients in project work normally builds a long-term relationship, with
benefits for both the clients and the business.
Understanding control charts means knowing they are primarily signals of when
changes in the process are significant enough to require action.

Business Improvements: Now and in the Futue

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After implementing the changes and after the results became obvious, Six Sigma gained
momentum within the bank. The start of further Six Sigma projects did not depend on a
push from senior management, but became more and more part of normal business. The
sales director showed his newly acquired commitment by proposing a Six Sigma team for
a reward-and-recognition event at company headquarters.
In addition to the increased profits, the results from this project included:
The bank gained valuable information about the voice of the clients and their
needs, and the impact of internal processes upon that.
The team experienced the power of teamwork, communication and process
analysis, not just the application of complex statistical tools.
Additional improvement opportunities were identified during the project work,
e.g., restructuring the client communication process in other business areas.

Six Sigma Case Study : A manufacturing example

A manufacturing company found it necessary to increase plant capacity in one of
their key divisions. In order to do this they had to increase throughput of the material
prep operation by 1MM pounds / month without negatively impacting energy usage.
Working with SAI Global, the manufacturing company formed a Six Sigma team
that included operators and supervisors.
Using the Six Sigma DMAIC improvement process, the team accomplished the
following:

The Define Phase outlined the scope of the project and the finance group
projected a savings of more than $45,000 per month ($540,000 per year).

The Measure Phase identified the current baseline data, as well as identified a
measurement system problem with one of the performance metrics. The
measurement system was corrected and several quick wins were also identified to
be implemented.

The Analyze Phase identified potential root causes utilizing the operator's
knowledge and then validated those that were preventing the process from a
higher output. Three validated root causes accounted for over 90% of the capacity
problem. The improvement tools used included a simple Cause and Effect
Diagram and several intermediate statistical tools, such as t-test and ANOVA.

In the Improve Phase, the team developed solutions for each validated root
cause, ranked the solutions and presented them to management, along with databased information on each solutions impact. Management then made the decision

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as to which of the solutions they wanted implemented. The team proceeded to

implement the selected solutions, utilizing project management techniques.

Finally, in the Control Phase, the team developed a control plan to help the team
and process owner hold the gains made. The plan used Statistical Process Control
and auditing techniques to check a variety of indicators on an ongoing basis.
The Results of Applying the Six Sigma DMAIC Process:

The team exceeded the pounds per month goal by more than 3%
(150,000lbs/month).

They also reduced energy usage by more than 17%.

Total savings to the company were in excess of $500,000 per year.

Six Sigma Case Study: Converting Paper to Electronic Documents

This work described below was carried out in a large company based in the US and India.
The project dealt with converting printed paper from US customers into electronic copies.
The material was quite heterogeneous in nature - consisting of assorted magazines and
legal papers. It is part of an ongoing operation that services several customers. The results
obtained have wide applicability in the back rooms of industries processing large
amounts of data - IT enabled services, banks, insurance companies, hospitals etc. - and
computer based office processes.
This project was taken up as a demonstration example within the framework of building a
Six Sigma mind-set in the organization, while training a core group in the use of the
techniques and the teamwork required. The problem solving methodology consisted of
seven steps, combined with quality tools to create a dramatic improvement in the quality
of the output far beyond the expectations of anyone in the organization.
The narrative unfolds in the same sequence as the project followed - through each of the
seven steps of problem solving accompanied by education in and application of the six
sigma techniques relevant to the problem.
1. Selection Of The Problem
1.1) A meeting of the senior management of the company was held and a brainstorming
session produced a list of over 30 problems. These were affinitized into two categories:
"End result" problems faced by the external customers
Internal problems that were causes of customer problems rather than basic
problems themselves.

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The realization that the first category of problems was the one to be attacked (customer
focus) came spontaneously.
Then prioritization was done to select the most important problem using the weighted
voting system followed by a quick discussion to produce a consensus. The theme (CTQs)
selected was "Consistency of Quality and Timeliness".
1.2) The problem area: Within the theme, intuitively the management recommended a
particular customer line. When asked to collect data for different customer lines and
present it, to their surprise they found that another major line had a bigger problem. This
was the line selected. The realization of the importance of data based had begun!
1.3) Definition of the problem: Data (including errors) was collected for 30 days. During
this exercise it was realized that different auditors were classifying the same error in two
different ways, leading to measurement system discrepancies. This led to a
reclassification of the errors, and training of the auditors.
From the data then collected and analysed the problem was defined as follows:
Customer requirement: <50 ppm errors
Current process average errors: 510 ppm
Variability (sigma): 710 ppm
(Average + 3 sigma): 2640 ppm
Note: Errors were collected before rework to ensure that the root causes would be
exposed.
Problem definition: Reduce error density to assure 3-sigma quality under 50 ppm from
the current 2640 ppm (i.e. 98%).
2. Finding The Vital Few To Attack
The errors collected were categorized using a Pareto diagram. Prioritization was required
at three levels:
Level 1: Four categories, C1 to C4 - one category (C1) constituted 85% of the errors
Level 2: C1 into 4 categories, C11 to C14 - one (C11) category constitutes 98% of the
errors
Level 3: C11 into 4 categories, C111 to C114 - one (C111) constituted 85% of the errors
Category C111 was attacked as it constituted approximately 65% of the total problem.
3. Idea Formulation For Countermeasures
Seven error types were found in C111 in two broad categories. They were examined to
determine why each one could have occurred, and a brainstorm for possible
countermeasures was done. The most likely measures to "Kill the Problems" were
selected for trial implementation.
4. Idea Testing And Modification
The selected countermeasures were analyzed and tested for each error type and the
successful countermeasure was short-listed for implementation.

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5. Implementation Of Countermeasures
Training instructions were prepared for the new procedures and all the operators were
trained. Implementation of all the countermeasures was done across the system from a
particular date.
6. Confirming The Results
The team was trained in control charts and the X bar-sigma charts were introduced to
monitor the results. A dramatic reduction occurred from the day of implementation ,and
the first three weeks confirmed that a drop of 90% in error density had been achieved
from 2640 ppm to around 300 ppm.
Tremendous enthusiasm was generated in the team as the result of this project far
exceeded their expectation.
7. Maintenance Of Improvement - Continuous Small Improvements
Standard operating procedures (SOP) were drawn up for the process changes. A special
session with the operating personnel emphasizing regular review, and killing any
abnormal peaks that may have occurred in the control chart was explained. An SOP
covered the frequency of review meetings for each level of supervision and management
and a review format was introduced. The line supervisor who was part of the team
became the enthusiastic owner of quality and the control chart, as well as the leader of the
team charged with maintaining quality and continuously improving it. The slogan "If you
do not improve, you deteriorate" was introduced.
This effort gradually brought down the (average + 3 sigma) error density further from
300 ppm to <50ppm.
The Quality Improvement (QI) Story
A QI Story was prepared for presentation to senior management detailing the
improvements that occurred:
Tangible
Customer delight: Customer reported 100% quality in his sampling consistently
over six months. He could not find errors at such a low density.
Productivity and Cost: Inspection and rework reduced to almost zero. 99.7% first
pass efficiency. Sampling sizes were reduced. These resulted in savings of US $
50000 per annum at Indian wage levels (in US equivalent US $ 300,000 per
annum).
Volume Increase: Approximately 50% by the customer. The production went
through without increased manpower.
Turnaround of the documents was improved dramatically due to no rework and
started meeting customer requirements.
Intangible
Senior management time saved
Motivation of the operations personnel very high

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Team work between Operations, Instruction and tool development and QA

personnel
Mind-set Changes
Producing quality saves money
The importance of data and six sigma techniques.
If you don't improve, you deteriorate

Future plans for improving the turnaround by 50% using just in time methods are being
implemented now.
Conclusion, Six Sigma - Techniques and Mind-set
The case here emphasizes the importance of Six Sigma techniques implementation being
accompanied by building a culture and mind-set of continuous improvement and change
in all employees. In the author's view and experience it is the creation of synergy between
people and techniques that ensures maximum and continuing benefits from a Six
Sigma/TQM initiative.

Six Sigma case study : Syndicate Bank saves its way to success
A centralised banking system has helped Syndicate Bank save crores of rupees
"WE were looking for a solution to improve the productivity of the bank and its
customers. It was never about an IT process," declares B S Murthy, general manager, IT,
Syndicate Bank.
The bank had two alternatives:

Implement core banking by carving out a small area in existing branches while
keeping the existing branch automation system intact so that only new customers
would get into the core banking set-up.
Go in for a wholly-centralised system.

Turnkey project
KPMG interacted with the bank's business council at this stage. The decision was taken
to go in for a core banking system (CBS) where the bank would totally migrate to the
new system as it was felt that splitting into two systems would pose too many accounting
issues.
"We had 72 vendors bidding for the contract," says Murthy. That number came down to a
dozen, and from that to six, then three. A detailed evaluation procedure was laid down
before selecting Flexcube from i-flex.
"From the start we were clear that only one consortium would be responsible for the
entire project." The IBM-i-flex consortium was picked for the CBS deployment. "It was a
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turnkey project, including core banking, ATM, telebanking, Internet banking and cash
management. We worked with i-flex, HMA, Servion and CashTech on this project," says
Sriram. At the peak of the project, between IBM and i-flex, there were 25 project
executives interacting with the bank.
Multicity pilots
The project began in August 2001. The first branch went live on December 15, 2001.
"The first branch went live in three-and-a-half months. We had to go live in that time with
all the basics. We identified seven critical bits of customisation and went live with i-flex
core banking. Time was the biggest challenge, as it normally takes six to eight months,"
says S Sriram, associate partner at IBM Business Consulting Services.
Pilots were undertaken at six branches in six weeks by January 2002. The first was in
Mumbai, which accounted for two of the six pilots; Delhi accounted for another two
while Bangalore and Manipal had one each. "Branches from different cities were picked
out deliberately to ensure uniform technology adoption across the country, while WAN
issues were ironed out in the pilot itself. Normally, pilots are undertaken in a single city,"
says R Narasimhan, senior relationship manager, i-flex solutions.
After this came the launches of new delivery channels. ATMs were launched in February
2002. The telebanking launch went live in July 2002, followed by Internet banking in
January/February 2003.
The core team consisted of 20 to 30 people. The core team was trained by i-flex and
IBM-the training included product training and IBM AIX training. The bank organised
training on Oracle. The core team began training end-users and so the acceptance level
was higher. Training in setting up servers and other similar tasks is being given to bank
employees; Syndicate Bank is keeping all these functions in-house. There are plans to
decentralise the helpdesk operations by setting up a helpdesk in Delhi, in addition to the
Bangalore operation. "The biggest challenge is to retrain 3,000 officers. We have a 45seat set-up in Manipal that is dedicated to CBS training. We run 42 programmes in a year,
accounting for 1,800 officers," adds Murthy. There is a second training set-up in Delhi.
Single window
For customers, the big boost has been the introduction of ATMs. Murthy cites the
example of an ATM that was installed at the Central Railway Workshop in Matunga,
Mumbai. 4,000-plus employees at the railway workshop now use this ATM, and thanks to
it they no longer spend an hour or two visiting the nearest branch.
The bank also captures a greater amount of information about its customers today. "Data
enrichment has been done to enable cross-selling. We collect more details about a
customer than we used to," says S R Vijayakumar, the bank's deputy general manager, IT.
Existing business processes were revamped through a BPR (business process
engineering) exercise that involved doing away with the 'Maker Checker' concept that
was part and parcel of the old branch automation set-up.
The bank is now in a position to offer a single-window facility to its customers. Staffing
requirement went down by as much as 40 percent, driving down space requirements. The
deployment of a CBS has helped the bank launch a number of new products. Its global
debit card has been a smash hit, with the bank signing up 1,50,000 customers in 11
weeks. Other new products and features introduced include any-branch banking and
telebanking.
The bank's helpdesk generates a branch- and zone-wise report of the number of new

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accounts at all the branches every fortnight. This is then faxed to zonal heads. "Earlier,
there was a lag in this process, it used to take a month for the information to reach the
head office for consolidation. Today we are in a position to send the July statement on
August 3," says Murthy.
The system also returns a list of non performing assets (NPAs), and the credit department
is the first to know of these. This makes monitoring and response a lot faster.

Six Sigma case study : A Black Belt Case Study for Bank Deposits
In early 2000, dot-coms were all the rage. Any idea even remotely related to the ability to
transact online was immediately funded. Consequently, many decisions were made
quickly and without supporting data. And many of these decisions were made in error -but could Six Sigma have made a difference? This case study will review how a Black
Belt entered a dot-com transactional business, reviewed a process, and came to his own
conclusions about process performance.
Case Study: Online Banking
The Black Belt began working at online bank, and his first project involved the process of
how deposits were made to this bank. Since it was an "online" bank, there were no
branches for customers to use. Instead, deposits were mailed using the United States
Postal Service (USPS). Savings resulting from the lack of branches and tellers were
passed along to the customer in the form of higher rates, free services, etc.
Customer focus groups and surveys indicated that the process of making a deposit is of
critical importance to a customer. The process from the customer's viewpoint is very
straightforward -- they sign a check, fill out a deposit slip, and mail both to the bank.
Deposits were the second largest driver of inquiries to the customer call center (13% of
all calls). Customers expressed frustration in mailing delays and couldn't understand why
their checks took so long to post to their account.
The Deposit Process
The bank's mission was to receive the deposits as quickly as possible and begin the
deposit and check clearing cycle. When the bank originally set up the processes, a
decision was made to establish 'local' deposit locations around the United States. These
local deposit locations received the deposits and overnight express reshipped them to a
central processing location daily.
This local receipt and express reshipment to a central location was done for two main
reasons:
1. A deposit being mailed to a local location would take less time than mailing to a
centralized, national location.

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2. Customer input indicated that mailing within a state or to a neighboring state

would make customers more comfortable than mailing to a centralized, national
location somewhere across the United States.
The DMAIC Project
The Black Belt hit the ground running. A project charter was created identifying exactly
what the process entailed. The business case was written, the problem statement crafted
and the scope clearly identified. The team was formed and quickly moved into the
measurement phase. Data surrounding the deposits was collected and the analyze phase
began to yield some alarming results.
I
Intuition led the leaders of the business to set up a system that locally collected deposits
for express reshipment to a centralized, national location for processing. How could
mailing to a centralized, national location be quicker than mailing locally and express
reshipping? Why wouldn't customers feel more comfortable mailing locally than to a
centralized, national location?

Data and Root Causes

Data collection, however, revealed a few flaws that weren't originally identified:

The express reshipment process was manual. Manual processes that are not
reinforced daily and that do not have adequate control plans tend to break down.
That is exactly what occurred with the local deposit locations. Some locations
wouldn't receive deposits on a daily basis. When deposits were received, they
sometimes wouldn't be express reshipped that night because of a lack of
engrained process.

For deposits that were received during the week, the express reshipment process
functioned properly. On the weekend, however, express reshipment wasn't
possible, so deposits arriving on Saturday were not express reshipped until
Monday evening.
Because of USPS processes, some deposit mailings to 'local' deposit locations
took as long as three days. Tack on a weekend stay for the above listed bullet, and
you can see how a deposit made via mail to a 'local' deposit location may take
longer than five days just to be received by the bank.

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Additional Findings
An additional analysis of deposits made to a 'local' deposit location with express
reshipment to a national location versus mailing directly to a centralized, national
location yielded the following results:

The 'local' process operates at a 2.1 sigma level, while the centralized, national
process operates at a 2.5 sigma.

A 2 sample t-test indicated that there is a statistically significant difference

between the two process means (p=0.0013).
The centralized, national process is faster (2.6 average days) than the local
express reshipment process (4.6 average days).
An additional survey conducted with focus groups indicated that the deposit
mailing location is not a significant factor for a majority of respondents. As an
aside, the original data indicating that customers were more comfortable mailing
deposits within their state could not be found.
A benchmarking analysis of direct competitors indicated that all utilized a
centralized, national deposit process.

Conclusions
It didn't take further data collection to convince the leaders of the business to modify
their deposit process and move to a centralized, national process. The facts spoke for
themselves. Cost savings resulting from only printing one address envelopes (instead
of numerous local), reduced overhead associated with processing, fewer customer
inquiry calls and investigations, and a more stable process resulted in savings of
$4MM per year. Not bad for a six month Black Belt project.

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PROJECT CONCLUSION
Six Sigma is a philosophy, the application of which results in break through
improvements. The use of Six Sigma help us in controlling the input and process
variations, which yield a predictable product. The basic process involved in six sigma are
measure, analyze, improve and control, the use of these processes lead us to solutions
which are highly predictable. Six Sigma is therefore tool of quality assurance to the
customers. The use of Six Sigma is not only a tool to provide great quality to customers
but also a tool for cost reduction, meeting customer specifications and achieving business
targets. Six Sigma helps us in developing and delivering near-perfect products and
services.
Six Sigma has been used in many manufacturing and business organizations for
manufacturing defect reduction, cycle time reduction, cost reduction, inventory reduction
and labor reduction. Besides all this it also leads to increased utilization of resources,
product sales improvement, capacity improvements and delivery improvement. Six
Sigma is thus a very efficient tool for product development and minimizing its defects.
Not only its implementation yield to better quality products for the customers and provide
customer satisfaction but also its leads to increased employment in a company.
The use of Six Sigma can also lead to development of new products besides increasing
the quality of the of the existing products. Six Sigma design techniques provides greater
flexibility for product development and faster turnaround at a key manufacturing facility.
Therefore Six Sigma can be very well be used by a company to improve its services for
the customers. It helps the company to deliver error-free services to customers by doing
the job right the first time, every time. It provides accompany with better effectiveness
any efficiency.
Through the various case studies we came to know that the implementation of Six Sigma
enhance productivity and thus results in large amount of savings for the company. Hence,
the usage Six Sigma results in increased profit for a company and provides much better
financial returns. It is thus a comprehensive management system which helps in
strengthening the position of a company in the market, enhancing its profitability. It is a
innovative improvement concept which in a consistent way track and compare
performance to customer requirements and an ambitious target of practically-perfect
quality. Six Sigma thus generates sustained success for a company. Six Sigma creates
the skills and culture for constant revival for an organization. Six Sigma sets a
performance goal for a organization and also provides a methodology for
achieving it. Six Sigma accelerates the rate of improvement and also provide
value to the customers. Six Sigma makes monitoring and response a lot faster.

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REFERENCES
The following books and references helped us during the development of the project.

Breyfogle, Forrest W. Implementing Six Sigma. New York: John Wiley & Sons,
1999.
Complete reference for advanced Six Sigma statistical tools. Uses Minitab for examples.

Grant, Eugene L.and Richard S. Leavenworth. Statistical Quality Control. New

York: McGraw-Hill, 1988.
Classic text for Control Charting techniques

Juran, J.M. and Frank M. Gryna. Quality Planning and Analysis. New York.
McGraw-Hill, 1993.
Excellent concise summary of statistical tools for analyzing data

Harry, Mikel J. The Vision of Six Sigma. Phoenix: Sigma Publishing Company,
1994.
Presentation slides used for training by Mikel Harry.
Kiemele, Mark J. Basic Statistics. Colorado Springs: Air Academy Press, 1993.
Excellent general statistics text with a large number of case studies

Kume, Hitoshi. Statistical Methods for Quality Improvement. Tokyo: The

Association for Overseas Technical Scholarship, 1985.
Excellent concise summary of basic statistical tools and techniques.

Luftig, Jeffrey and Victoria S. Jordan. Design of Experiments in Quality

Engineering. New York: McGraw-Hill, 1998.
Design of Experiments
Maguire, Miles. "Cowboy Quality." Quality Progress October 1999: 27-34.
Interview with Mikel Harry on Six Sigma

Womack, James P. and Daniel T. Jones. Lean Thinking. New York: Simon &
Schuster, 1996
Case studies for lean principles and techniques.

Schmidt, Stephen R. Understanding Industrial Designed Experiments. Colorado

Springs: Air Academy Press, 1998.
Design of Experiments and a large number of case studies.

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