Business Process Reengineering Using SIX SIGMA

Abella, Vanessa Balanag, Julie Anne Mojal-Amarillo, Mary Leonite MGT 201

Outline:
Overview of Business Process Reengineering (BPR) Six Sigma Fundamentals The Lean Six Sigma Improvement Process Tools for Improvement that are used within the DMAIC process Case Study and Other Success Stories Conclusion

BPR Using Six Sigma Overview and Fundamentals

JULIE ANNE BALANAG

BPR Overview
BPR is a process improvement approach. Business Processes - a set of activities that transform a set of outputs (goods and services) for another person or process using people and tools.
INPUTS Supplier Process OUTPUTS
Customer

BPR Overview
Continuous Improvement Model - This model attempts to understand and measure the current process, and make performance improvements accordingly.

Document As-Is Process

Establish Measures

Follow Process

Measure
Performance

Identify & Implement

Improvements

BPR Overview
BPR is a management practice that aims to improve the efficiency of the business process.

The current process is irrelevant. It doesnt work! Its broke! Forget it! START OVER

BPR Overview
Breakthrough Reengineering Model

Scope Project

Learn from Others

Create Tobe Process

Plan Transition

Implement

BPR Overview
The key to BPR is for organizations to look at their business processes from a clean slate perspective and determine how they can best construct these processes to improve how they conduct business. It started in the early 1990s, when Michael Hammer and James Champy authored a best-selling book Reengineering the Corporation, in which they promoted that sometimes radical redesign and reorganization of a process by wiping the slate clean was necessary to lower costs and increase quality of service.

BPR Overview
7 Principles of Reengineering:
1. Organize around outcomes, not tasks. 2. Identify all the processes in an organization and prioritize them in order of redesign urgency. 3. Integrate information processing work into the real work that produces the information. 4. Treat geographically dispersed resources as though they were centralized. 5. Link parallel activities in the workflow instead of just integrating their results. 6. Put the decision point where the work is performed, and build control into the process. 7. Capture information once and at the source.

BPR Overview
Business Process Reengineering Cycle
Identify Processes

Test & Implement To-Be

Review, Update, Analyze As-Is

Design To-Be

Six Sigma Fundamentals

Raising the Standards The goal of Lean Six Sigma is to design products and processes that do what they are supposed to do with very high reliability. The term Six Sigma refers to a product or process that produces only three defects (or errors) out of every million opportunities. Why Sigma? the word is a statistical term that measures how far a given process deviates from perfection.

Six Sigma Fundamentals

What is Six Sigma?

(Lean) Six Sigma is a comprehensive and flexible system for achieving, sustaining and maximizing business success. Six Sigma is uniquely driven by close understanding of customer needs, disciplined use of facts, data, and statistical analysis, and diligent attention to managing, improving, and reinventing business process.

Six Sigma Fundamentals

Business success may be defined in different terms, such as: Reduced cost Increased market share Improved customer satisfaction Faster time to market Increased revenue and profits

Six Sigma Fundamentals

Input determines Output The basic philosophy behind Lean Six Sigma is the idea that removing variability from upstream operations that are inputs to a process will yield defect-free outputs. The output that we are concerned about is called a Critical To Quality Characteristic (CTQC).

Six Sigma Fundamentals

Input determines Output
X Input X Input X Input X Input

PROCESS

Y Output

X Input

X Input

X Input

X Input

Six Sigma Fundamentals

The Sigma Level The measurement of success in achieving defect-free output is the Sigma Level. Sigma, or , is actually a Greek term that represents variability, called the standard deviation. Sigma Level refers to the number of Sigma, or process standard deviations, between the mean and the closest specification for a process output.

Six Sigma Fundamentals

Maximum Temperature Specification 120F

Minimum Temperature Specification 110F

105 110 Degree Fahrenheit

115

120

125

Six Sigma Fundamentals

X X X XXXX X XXXXX XXXXXXX X XXXXXXXXXX X X XX X XXXXXXXXXX X XXX
Minimum Temperature Specification 110F 105 110 Degree Fahrenheit 115 120 125 Maximum Temperature Specification 120F

Six Sigma Fundamentals

X X X XXXX Too Hot! Too Cold! X XXXXX XXXXXXX X XXXXXXXXXX X X XX X XXXXXXXXXX X XXX
Minimum Temperature Specification 110F 105 110 Degree Fahrenheit 115 120 125 Maximum Temperature Specification 120F

Six Sigma Fundamentals

Minimum Temperature Specification 110F

Too Cold!

XX XXX Maximum XXXXX Temperature Specification XXXXX 120F XXXXX Too Hot! XXXXXX XXXXXXX XXXXXXXX XXXXXXXXX
115 120 125

105 110 Degree Fahrenheit

Six Sigma Fundamentals

Cost of Poor Quality An organization can incur costs due to poor quality throughout the value stream. In general, the cost of poor quality increases exponentially as a product or service moves along the value stream from creation to consumption.

Six Sigma Fundamentals

Cost of Poor Quality
1:10:100 Rule
100

10

1
Base Operation End of Process Customer

Six Sigma Fundamentals

4 Categories of Cost of Poor Quality 1. Prevention Cost Cost (investment) to do it right the first time. Training, error-proofing, pre-production pilots, design for capability (DFSS Design for Six Sigma). 2. Appraisal Cost Cost of testing and inspection to detect defects internally. 3. Internal Failure Cost Defects detected internally: Scrap, rework, and Seconds sold off-price. 4. External Failure Cost Defects detected by customers, including warranty, replacements, allowances, product liability, customer dissatisfaction, and lost revenue.

Six Sigma Fundamentals

Cost of Poor Quality Model
Cost Per Good Unit
Failure Cost -Internal & -External

Total Quality Cost

Prevention & Appraisal Cost

Six Sigma Fundamentals

History of Lean Six Sigma Lean Six Sigma was born at Motorola in th mid-1980s. Motorola was spending between 10% and 20% of revenues on poor quality directly and indirectly. The true, total cost of quality is rarely measured because it shows up in so many areas.

Six Sigma Fundamentals

History of Lean Six Sigma By studying the linkage between external failure experience at customers, and internal defect experience in its factories, Motorola began to understand that poor quality had a significant impact on its bottom line profitability.

Six Sigma Fundamentals

History of Lean Six Sigma The first phase of Motorolas effort to improve quality focused on finding and fixing defects. Four Sigma performance Motorola realized that the only way to be error free was to remove defects (and production time and costs) by focusing on how products were designed and produced a proactive approach.

Six Sigma Fundamentals

History of Lean Six Sigma The developing Six Sigma process focused on the whole system of producing a product or service, not just individual operations. Lean Six Sigma took a big step forward with Motorolas redesign of a pager product line. Six sigma concepts were employed from the outset, borrowing concepts from the Toyota Production System and Design for Manufacturability and Assembly (DFMA) Design for Six Sigma

Six Sigma Fundamentals

History of Lean Six Sigma Higher customer satisfaction and lower cost Motorola reportedly saved over $2B in the first 4 years as many operations achieved Six Sigma performance levels by the early 1990s.

Six Sigma Fundamentals

The belt association with six sigma ranks an employees experience with Six Sigma projects. These are people who are trained in Six Sigma using DMAIC typically using statistical process control techniques with a control plan to monitor process management goals.

Six Sigma Fundamentals

Green Belt Typically an apprentice in training to become a Black Belt. This level utilizes statistical and quality control techniques 2% to 5% of time (about 1-2hrs/week) and does in house consulting and training. On average completing a minimum of 2 projects per year.

Six Sigma Fundamentals

Black Belt A team leader. Accountable for project improvements to the completion of the process. He is a mentor for a Green Belt. Typically operates 5% to 10% of time (about 24hrs/week) and provides consulting and training. About 4 projects per year on average.

Six Sigma Fundamentals

Master Black belt A mentor for Green and Black Belts. Typically accountable for initiating project or process improvement plans and monitors those plans to the completion of the process. Will do six Sigma projects 80% to 100% of the time. Also will do consulting, mentoring, and training with 2 to 10 projects a year.

BPR Using Six Sigma Process and Tools

VANESSA ABELLA

2 Six Sigma Sub-Methodologies

1. Six Sigma DMAIC

2.Six Sigma DMADV

(also referred to as DFSS )

1. Six Sigma DMAIC

1. Define

5. Control

2. Measure

4. Improve

3. Analyze

2. Six Sigma DMADV

1. Define
5.

Verify

2. Measure

4. Design

3. Analyze

Similarities Between DMAIC and DMADV

Talks about reduction of DPMO (defects per million opportunities

Use the same kind of six sigma tools

Customers needs are the basic driving parameters for both six sigma methodologies

Six sigma BB (black belt) and MBB (master black belt) play important roles in implementation for both the cases.

Usage COMPARISON Between DMAIC and DMADV

When to Use DMAIC
Used when a product or process is in existence but is not meeting customer specification or is not performing adequately.

When to Use DMADV

A product or process is not in existence and one needs to be developed.

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

Improvement Process COMPARISON OF DMAIC and DMADV

Define the project goals and customer (internal and external) deliverables

Define the project goals and customer (internal and external) deliverables

Improvement Process COMPARISON OF DMAIC and DMADV

Measure the process to determine current performance

Measure and determine customer needs and specifications

Improvement Process COMPARISON OF DMAIC and DMADV

Analyze and determine the root cause(s) of the defects

Analyze the process options to meet the customer needs

Improvement Process COMPARISON OF DMAIC and DMADV

Improve the process by eliminating defects

Design (detailed) the process to meet the customer needs

Improvement Process COMPARISON OF DMAIC and DMADV

Control future process performance

Verify the design performance and ability to meet customer needs

THE DMAIC TOOL KIT

TOOLS Balanced Score Card Cost Of Quality COQ Or COPQ Pareto - Chart In - Out Matrix Role Matrix or Responsibility Matrix Stakeholder Analysis Project Score card Cross - Tabulation Paired Comparison Project Charter Process Flow Chart SIPOC Diagram VOC Gathering CTQ Definitions(Operational) Cause - and - Effect Matrix Blank Graph Base Line Performance Affinity Diagram CTQ Tree Value Stream Map Project Priority Matrx DEFINE & PROPOSAL STAGE TOOLS QFD Value Added flow chart Project Priority Calculations FMEA TOOLS Team Start - up Worksheet Boundaries of Freedom Agenda & M.O.M. Worksheet Problem - Statement Worksheet Enhanced SIPOC DMAIC Work Break Down Stucture Estimate EVA What is - What Isn't Analysis Project Schedule Comparitive Analysis Risk/Return Analysis Defining CTQ Characteristics Communications plan Process Mapping

MEASUREMENT TOOLS TOOLS Kano Model & CT Tree Trend Charts Process Mapping X - Bar & R - Charts Enhanced SIPOC X Bar & s Charts GR&R Customer Definition Matrix(CDM) Visual R&R Requirement Definition Matrix(RDM) Process Capability Affinity Diagram/ Matrix Process Flow Chart Requirement Tree CT Tree Data Collection "As Is" Process Map Benchmarking Input Definition Matrix(IDM) Process Sigma Calculation Output Definition Matrix ODM VOC Gathering Updating the Project Chatrter Trend Charts SPC Discriptive Statistics Six Sigma Graph Summary Mising & Out Of Range Data Box & Whisker Plots Power Analysis Distribution Fitting Frequency Tables Time Series Plot Histogram Narmality Test

TOOLS Check Sheet Concentration Diagram Interviews and Reenactments Cause & Effect Diagram Five Why's Timeline Analysis Scatter Diagram Correlation Regression Fault Tree Analysis(FTA) Comparitive Analysis Work Flow Diagram Multivariate Analysis DOE ANOVA Hypothesis Testing Force Field Analysis Surveys Check Lists

Analysis Stage TOOLS Control Charts Histograms Pareto Charts Cross - Tabulation Cause & Effect Diagram Paired Comparison Hypothesis Testing ANOVA Regression Analysis DOE Scatter Plot Five Why's Process Map Review Covariance & Variance Friedman Kruokal Wallis Test Levene Modified Test Man Whitney Test Wilcoxon Sign Wilcoxon Signed test Normality Test Non Normal Data Analysis Stratification Analysis Binomial Chi Squared Test TOOLS Architecture Importance Matrix (AIM) Fault Tree Analysis(FTA) FMEA Risk Vs. Importance Plot Input Importance Matrix(IIM) Variable Selection Matrix(VSM) Data Collection Plan(DLP) Update The Project Charter TOOLS Special Testing Interviews Failure Analysis Finite Element Analysis Concentration Diagrams Statistical Analysis Fault Tree Analysis(FTA) Root Cause Analysis Multivariate Analysis Advanced Statistics Simulations Computer Modeling Accelarated Testing Time Line Analysis Comparitive Analysis Work Flow Diagram Cpk Analysis Force Field Analysis Surveys Check Lists

IMPROVEMENT STAGE TOOLS TOOLS Cp; Cpk; Process Sigma Corrective Action Matrix Throughput Yield Check Process Rolled Throughput Yield Simulations Normalized Yield Concept Selection Matrix Multi - Vari Chart "Should - Be - Process" Map DOE Output Definition Matrix DFMEA DFMEA Hypothesis Testing Architecture Importance Matrix (AIM) Pugh's Concept Matrix Risk Vs. Importance Plot Pareto Analysis Input Importance Matrix(IIM) Brainstormig Variable Selection Matrix(VSM) SPC - Quality Control Charts Data Collection Plan(DLP) Six Sigma Summary Update The Project Charter Histograms Update "Should - Be - Process" Map Stratification Analysis Cause & Effect Diagram Corrective Action DFMES Solution Selection Matrix Syatem Dynamices System Approach Syatem Diagram Mistake - Proofing

TOOLS Run Charts Concentration Diagrams Musts and Wants Boundaries Of Freedom Activity Planning Work Flow Diagram Affinity Grouping Nominal Group Technique Voting and Ranking PERT Chart GANTT Chart Just In Time Theory Analysis Of Wants ROI & Payback

CONTROL STAGE TOOLS TOOLS PFMEA Hoshin Planner Mistake - Proofing Tests Of Significance Control Charts Histograms Pareto Analysis Cross - Tabulation Cause & Effect Diagram PRE - Control Probability Distributions Contrl Plan Action Plans Risk Mitigation Plan Process Sigma Calculations Cp;Cpk Test Plans DPMO Yield (All Three Kinds) % Out Of Spec. Cost Saving Calculculation Test Plans Check Lists Project Management Tools

FUNDAMENTAL TOOLS FOR IMPROVEMENT UNDER THE DMAIC

1. Process Maps
2. Value Added Flowcharts

3. Pareto Charts
4. Cause and Effect Diagrams

5. Brainstorming
6. Control Plans

PROCESS MAPS
Visual tool to capture and communicate the elements of a process or system Useful tool in developing and communicating knowledge of a process Help identify and focus project activity at the point of greatest leverage to improve results Employed during the DEFINE Stage of DMAIC Examples includes: Value Stream Maps or SIPOC Maps and Flowcharts

TYPES OF PROCESS MAPS

SIPOC Maps; (Supplier-Input-Process-OutputCustomer) - five useful categories for identifying and organizing process elements. Flowcharts or Diagrams-used to augment the process maps; useful in charting procedures and decision processes

System Diagrams-useful tool to map the behavior of a system

Process maps is constructed for: 1. Identifying waste and prioritize Lean Six Sigma projects 2. Understanding relationship between input (Xs) and output( Ys)
Two critical aspects of process mapping are: 1. Draw the process map exactly as it exists. If you create the map at your desk, you are likely to miss key elements of the process, such as any redundant work or rework loops. 2. Always walk the process to validate the correctness of your process map.

Hierarchy of Processes
New Product Development

Demand Generation

Demand Fulfillment

Customer Service

Ordering Materials

Producing

Picking

Shipping

Mixing

Filling

Sealing

Packing

1 2 3

SIPOC MAP
SIPOC MAP or Flowchart

Flowchart

VALUE ADDED FLOWCHARTS

Used when Lean Six Sigma Project is focused on reducing cycle time or improving productivity Mechanism to improve cycle times and productivity by visually separating value-adding from non-value adding activities Example: 7 Forms of Waste as identified in the development of Toyota Production System : Defects; Overproduction, Transportation; Waiting; Unnecessary Inventory; Unnecessary Motion and Excessive Processing

Pareto Charts
Shows the relative frequency of defects in rank-order and provides prioritization tool so that process improvement activities can be organized Originated in 1897 thru an Italian Economist named Vilfredo Pareto Useful in the DEFINE Stage when you need to sort data and set priorities and also often used in the MEASURE and ANALYZE stage of the DMAIC

Pareto Charts can be used to Answer the ff. questions:

Which defects occur most frequently? What is the relative frequency or relative value of the items or categories? How should improvement process be categorized?

Returned Software Reasons

Problem Not c ompatible Does not perform as expec ted Found at a c heaper pric e Changed mind Too c omplic ated Missing manual Missing disk Totals Count 23 15 11 10 7 5 4 75 Percent of Total 30.67 20.00 14.67 13.33 9.33 6.67 5.33 100.00 Cumulative Percent 30.67 50.67 65.34 78.67 88.00 94.67 100.00 100.00

Brainstorming
commonly used to generate an abundance of potential s Identification of improvement opportunities for existing products or services, new products or services, and problem resolution are among the reasons to use this tool Useful in the ANALYZE Stage

Steps in conducting brainstorming:

1.

2.
3.

4.

5. 6.

Determine the session facilitator; generally the team leader facilitates the session Determine prior to the session who will be writing down the teams responses. Have flip-chart paper available- use of a dry erase board isnt prohibited, but flip-chart paper is permanent. Dry erase boards, yes, can be erased losing all your important ideas if you cant finish the session within the allotted time. Gather your team in a conference room. This is preferred to a classroom setting. A classroom can be used by arranging the tables and chairs in a U-Shape. This encourages participation. State the issue to be considered. Solicit responses from the team.

Control plan
Centralized document used to keep track of the status of all significant characteristics Referred to as the Road Map for the identification of the output Generally created under the operational level rather than on a company wide level (ISO purposes)

BPR Using Six Sigma Case Study

MARY LEONITE MOJAL-AMARILLO

KEY CONCEPTS OF SIX SIGMA

Critical to Quality

Design for Six Sigma

Defect

6
Stable Operations Variation Process Capability

KEY CONCEPTS OF SIX SIGMA

Attributes most important to the customer
Designing to meet customer needs and process capability

Failing to deliver what the customer wants

6
Ensuring consistent, predictable processes to improve what the customer sees and feels

What your process can deliver

What the customer sees and feels

THE IMPACT OF SIX SIGMA IMPLEMENTATION AT GENERAL ELECTRIC (GE)

GE We bring good things to life

Quality Management: Six Sigma

GEs Toughest Stretch Goal: We want to be not just better in quality, but a company 10,000 times better than its competitors. We want to change the competitive landscape by being not just better than our competitors, but by taking quality to a whole new level. We want to make our quality to special, so valuable to our customers, so important to their success that our products become the only real value choice. - Jack Welch
GE Chairman

The Biggest Opportunity for Growth

January 1996 - GEs annual gathering of 500 top managers Official announcement: Launching the quality initiative program described as, the biggest opportunity for growth, increased profitability, and individual employee satisfaction in the history of the company. GOAL: Becoming a six sigma quality companyproducing nearly defect-free products, services, and transactions- by the year 2000.

Making Customers Feel Six Sigma Quality

What is Six Sigma? Six Sigma (6) is a highly disciplined process that helps us focus on developing and delivering near-perfect products and services. For GE, it is a vision of quality which equates with only 3.4 defects/million opportunities for each product or service transaction. Strives for perfection. The central idea 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. Sigma () is a statistical term that measures how far a given process deviates from perfection.

GEs Evolution Towards Quality

High
Six Sigma Quality: The Road to Customer Impact Key Strategy Initiatives: QMI, NPI, OTR, SM, Productivity, Globalization

INTENSITY

Change Acceleration Process: Increase Success and Acceleration Change Process Improvement: Continuous Improvement, Reengineering Productivity/Best Practices: Looking Outside GE

Low

Work-Out/Town Meetings: Empowerment, Bureaucracy Busting

1990

TIME

Key Elements of Quality

1. The Customer

2. The Process

3. The Employee

THE CUSTOMER
Delighting Customers Customers are the center of GEs universe: they define quality. They expect performance, reliability, competitive prices, on-time delivery, service, clear and correct transaction processing and more.

Delighting our customers is a necessity because if we dont do it, someone else will!

THE PROCESS
Outside-In Thinking
Quality requires us to look at our business from the customers perspective, not ours. In other words, we must look at our processes from the outside-in. By understanding the transaction lifecycle from the customers needs and processes, we can discover what they are seeing and feeling. With this knowledge, we can identify areas where we can add significant value or improvement from their perspective.

THE EMPLOYEE
Leadership Commitment Involving all employees is essential to GEs quality approach. It is committed to providing opportunities and incentives for employees to focus their talents and energies on satisfying customers. All GE employees are trained in the strategy, statistical tools and techniques of Six Sigma quality.

Quality is the responsibility of every employee. Every employee must be involved, motivated and knowledgeable if we are to succeed.

Results achieved over the first two years (1996-1998) of 6 implementation at GE

Results achieved over the first two years (1996-1998) of 6 implementation at GE Revenues have risen to $100 billion, up 11% Earnings have increased to $9.3 billion, up 13% Earnings per share have grown to $2.80, up 14% Operating margin has risen to a record 16.7% Working capital turns have risen sharply to 9.2%, up from 1997s record of 7.4

 In 2006, GE claimed to have saved more than $1.5 billion beyond its initial investment in a period of 4 years. In addition, its impact is seen not just in terms of cost savings but also in rates of customer satisfaction.

TACO BELL In 1993, initiated re-engineering efforts and resulted to 22 % growth in revenues by rethinking who the customer is and by focusing on enhancing activities that bring value to the customer.

THANK YOU!