Overview of Six Sigma


                            Brian Kocher, CPA
        VP - Controller & Chief Accounting Officer
 ...
Agenda

 What are we Learning today?

    Six Sigma Overview
    Six Sigma Tools
       VOC
       SIPOC

    Common Quali...
Six Sigma

  What is Six Sigma?
    A Vision
                                                     V E
    A Philosophy
   ...
Six Sigma
                                                –“Six Sigma will be the biggest, the most
                      ...
Six Sigma

  The most significant characteristic of Six Sigma
      is the thorough and unending focus on
           under...
Six Sigma

  COPQ Benefits are Categorized as Hard Dollar or Soft Dollar
  Hard $ Benefit                           Soft $...
Six Sigma

 What is Six Sigma?                                                   Defects Per Million
      Statistically  ...
Six Sigma
 How is Six Sigma applied?
     How does it work?


        X1     X3   Input                  Output
          ...
Six Sigma

              Measurable Results?
                                        Six Sigma
                           ...
Six Sigma
                         Phase Steps                                          Tools Used
           Define the c...
Six Sigma
How is Six Sigma applied?
    Project Phase Strategy



     Define Phase                     4-5 Y’s

     Meas...
Six Sigma
Goal: Center Process                                    Goal: Reduce Spread
           xxx                      ...
Six Sigma
 Why Six Sigma?
        Companies implementing

                          •   Textron                           ...
Voice of the Customer
What is the VOC?

 Voice of the Customer is the sum total of the needs expressed by all
 customer groups.


 Confirming th...
VOC - Steps
Steps to conducting a VOC process.

  1.   Define the purpose for the VOC

  2.   Confirm the customers and th...
VOC – Step 1
Define the purpose for the VOC

     Confirm the problem to be solved
     Create a statement of purpose
    ...
VOC – Step 2
Confirm the Customers and their Voices

        Customer                                      Customer
      ...
VOC – Step 3
Confirm the Customer Requirements

  Types of Customer Requirements

        Basic: Unspoken, but expected
  ...
Team Exercise – VOC

                   Break into Teams
                   Break into Teams

Purpose:   Practice identify...
What are your Requirements?
                                        Customer Requirements
                                ...
VOC Summary

 Voice of the Customer (VOC) will enable you to
  focus on what your customers value most.
     Identify your...
Process
What is a Process?


•   A process is a group of steps, tasks, or activities
    that has a beginning and an end.
•   A pr...
Process Examples

Making coffee                             Distributing mail
Brushing your teeth                       An...
View of the Process

               At Least Three Versions Exist

 How we think it is      How it really is      How it s...
SIPOC High-Level Process Map

               Stay as high as you can for as long as you can!


              Voice of Proc...
SIPOC Summary


   C        Step 1
                     Determine the boundaries (start and stop) of the process

Customer...
Team Exercise – SIPOC

                  Break into Teams
                  Break into Teams

  Purpose:   Practice creati...
Team Exercise –SIPOC
Supplier   Inputs           Process               Outputs   Customer
                    Start
      ...
Process Map
What is the right level of detail?
Macro                                                                      ...
Common Quality Myths
Myth: Averages Are Misleading
This room is
 freezing!

                    50°

                                        Th...
Myth: Inspection

Purpose:        To illustrate that inspection is not only Non-Value Added
but also an ineffective means ...
Myth: Customer’s Viewpoint

            Business Lead Time




            Order                                          ...
Overview of Six Sigma

 Benefits of Six Sigma:
     Reduce variation in our processes/products
     Reduce defects
     In...
Wrap Up

 What did we learn today?

      Customer Centric


      Six Sigma Tools


      Quality Myths




             ...
Questions
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Microsoft PowerPoint - Brain Kocher-6sigma

  1. 1. Overview of Six Sigma Brian Kocher, CPA VP - Controller & Chief Accounting Officer Chiquita Brands International November 9th, 2006
  2. 2. Agenda What are we Learning today? Six Sigma Overview Six Sigma Tools VOC SIPOC Common Quality Myths Questions 2
  3. 3. Six Sigma What is Six Sigma? A Vision V E A Philosophy BO A An Aggressive goal e A Metric (standard of measurement) h A Benchmark A Methodology f t L o A L A vehicle for aligning Operations, Metrics and Processes that is Customer Focused, Fact Based, and Data Driven! 3
  4. 4. Six Sigma –“Six Sigma will be the biggest, the most personally rewarding and, in the end, the most Why Six Sigma? profitable undertaking in our history.” Jack Welch, Former Chairman and CEO, GE History Motorola created in early 1990’s AlliedSignal, GE successes in mid 90’s Business processes Encouraged others to utilize 6σ to improve business performance –“2,400 process improvements were made, reducing defects by 61 percent - yielding $350 million in annualized cost savings.” Larry Bossidy, Former Chairman and CEO, AlliedSignal The Six Sigma methodology provides an overall strategy and methodology for improving organizational performance. 4
  5. 5. Six Sigma The most significant characteristic of Six Sigma is the thorough and unending focus on understanding our Customer. CTS Critical to Satisfaction How does my Customer What does my want our process to Customer need from perform? Chiquita’s process? How does my What can Customer view we do my process? better? How does my From the Customer perspective, Customer measure my how is our process performance? process? 5
  6. 6. Six Sigma COPQ Benefits are Categorized as Hard Dollar or Soft Dollar Hard $ Benefit Soft $ Benefit Increased Production volume Increased Customer satisfaction Increased Sales or Revenue Avoidance of FTE reduction Balance Sheet growth Fractional reduction of FTE Hours Customer Retention Avoidance of Capacity Reduction in FTE enhancements Reduction in transaction cost Conformation of regulation Reduction in overhead cost changes Increased Employee satisfaction Hard $ Benefits have an Hard $ Benefits have an observable //quantifiable observable quantifiable impact on the Financial impact on the Financial Statements. Statements. 6
  7. 7. Six Sigma What is Six Sigma? Defects Per Million Statistically Opportunities The Six Sigma Goal Represents 3.4 DPMO σ DPMO Process Capability 2 308,537 3 66,807 4 6,210 5 233 Functionally 6 3.4 Six Sigma is a management system that profitably improves customer satisfaction. Proper business wide deployment creates a cultural and managerial transformation that delivers increasing financial returns to the business. Provides a common problem solving approach and Provides a common problem solving approach and language that is data driven and establishes the truth as language that is data driven and establishes the truth as to what affects your business to what affects your business 7
  8. 8. Six Sigma How is Six Sigma applied? How does it work? X1 X3 Input Output Xk Process Y X2 Y = f ( X 1 , X 2 , X 3 ,..., X k ) Our Outputs (Y’s) are determined by our Inputs (X’s). If we know enough about our X’s we can accurately predict Y without having to measure it If we don’t know much about our X’s, then we have to resort to inspection and test (non value added operations) By knowing which X’s are Critical to the Y, we can reduce the variability in Y 8
  9. 9. Six Sigma Measurable Results? Six Sigma Six Sigma Improvement Improvement Improved Sigma Performance Good Breakthrough Improvement Typical Sigma Bad Time The Goal is to improve the Sigma level on metrics that tie to the business’s Bottom line. 9
  10. 10. Six Sigma Phase Steps Tools Used Define the customer CTQ’s Charter; CTQ tree; QFD; Customer surveys; Define Form team and develop team charter SIPOC; C&E diagram; Fishbone; Kano analysis; Map the as-is process Gantt chart; Gap analysis; Cost/benefit Identify project Y and performance standard Control charts; Checksheets; MSA; Histogram; Collect data on Y and related measures Pareto; Process map; Sigma level; Run chart; Measure Determine baseline performance DPMO; FMEA; KPIV; Capability analysis Set the improvement goal Prioritize list of vital X’s by analyzing data & Regression; Correlation; FMEA; Multi-vari process analysis; hypothesis testing; statistical testing; Analyze Correlation and regression to determine ANOVA; DOE; NVAA; VS Mapping; PICK relationships and root cause Determine variable relationships DOE; Regression; ANOVA; 5S’s; Process Generate and test possible solutions capability; Cost/benefit analysis; T/B process Improve Select best solution to address vital X’s maps; MSA; Control charts; Simulation Implement chosen solution Documents, monitors and assigns accountability SPC; Capability analysis; SOP’s; Descriptive for sustaining gains made in the Improve stage statistics; Audits; FMEA; DPMO; Scorecards; Control Implement process controls Control charts; Training DMAIC seeks to translate business problems into practical business solutions through the use of data and statistical tools. 10
  11. 11. Six Sigma How is Six Sigma applied? Project Phase Strategy Define Phase 4-5 Y’s Measure Phase 1Y Analyze Phase 10-20 X’s Improve Phase 4-8 Critical X’s Control Phase 4-8 Critical X’s Optimized Process 11
  12. 12. Six Sigma Goal: Center Process Goal: Reduce Spread xxx xx x xx x x x x x xx x x x LSL USL x x x x x LSL USL Large Off - Target Variation LSL USL Shift the Mean xx x Smaller Std. Dev. x xxx x x LSL = Lower Specification Limit (minimum customer requirement) USL = Upper Specification Limit On Target (maximum customer requirement) 12
  13. 13. Six Sigma Why Six Sigma? Companies implementing • Textron • Motorola Health care • • Tyco Lear Corp. • • Texas Instruments ABB (Asea Brown Boveri LTD.) • Cintas • AlliedSignal Government • • Visteon Anthem Blue Cross-Blue Shield • • GE Bombardier • CIGNA • Nokia Academic • • United Health Care Charleston Medical Center • • Toshiba DuPont • Good Samaritan Hospital, Kearny, NE • Ford Non-profit • • Mt. Carmel Health Systems, OH Park Nicolette, Minneapolis • • Dow Chemical Johnson & Johnson • Suncorp-Metway • Chiquita Manufacturing • • NCR Bank of America • • Noranda Johnson Controls • Provident Bank • JP Morgan Chase Financial institutions • • BankOne Merrill Lynch • • Sun Trust American Express Six Sigma has been implemented in small to Six Sigma has been implemented in small to mid-size companies, as well as larger ones. mid-size companies, as well as larger ones. 13
  14. 14. Voice of the Customer
  15. 15. What is the VOC? Voice of the Customer is the sum total of the needs expressed by all customer groups. Confirming the VOC is a critical step in a successful project. Lean Six Sigma is all about meeting or exceeding customer needs or CTSs Quality Cost Delivery Many projects fail because the VOC is not correctly captured or confirmed. 15
  16. 16. VOC - Steps Steps to conducting a VOC process. 1. Define the purpose for the VOC 2. Confirm the customers and their voices 3. Confirm the customer requirements 4. Rank the customer requirements 5. Quantify Customer requirements 6. Prioritize project activities 16
  17. 17. VOC – Step 1 Define the purpose for the VOC Confirm the problem to be solved Create a statement of purpose Do not imply a solution Define what you want to understand from the Customers Define the benefit for collecting the VOC Examples: To discover how customers use our support services in order to eliminate unused features or add new ones. To understand our reporting needs in order to improve our current reporting database. What is would be an example of your VOC purpose statement for your business? 17
  18. 18. VOC – Step 2 Confirm the Customers and their Voices Customer Customer Relation and Type Internal or External Direct or Indirect or Secondary Customers Customers Customers that Regulatory Customers that within outside receive your and policy receive your Chiquita. Chiquita. product or setting product in its service directly agencies that original or from you. speak on modified form behalf of the through another customer. party. The boundary between internal and external customers depends on the boundaries/scope of your project. 18
  19. 19. VOC – Step 3 Confirm the Customer Requirements Types of Customer Requirements Basic: Unspoken, but expected Performance: Spoken by the Customer Excitement: Pleasant Surprises that are generally unspoken or difficult to verbalize Excitement Performance KANO Degree of Model Achievement Basic Customer Dissatisfaction What are your customers’ basic, performance or excitement needs? 19
  20. 20. Team Exercise – VOC Break into Teams Break into Teams Purpose: Practice identifying your customer requirements for your Spring Break Trip. Agenda: Identify the different Customer Requirements and then use the Kano Model to categorize them. Limit: Exercise: 10 minutes Discussion: 5 minutes Total: 15 minutes 20
  21. 21. What are your Requirements? Customer Requirements Spring Break Trip BASIC Unspoken, but expected Performance Spoken by the Customer Excitement Pleasant Surprises that are generally unspoken or difficult to verbalize 21
  22. 22. VOC Summary Voice of the Customer (VOC) will enable you to focus on what your customers value most. Identify your customers. Define the value your customers want - CTSs. Identify critical attributes that contribute to that value. Make sure internal processes are designed to provide that value. Analyze how process outcomes contribute to customer satisfaction. VOC = Customer Satisfaction! VOC = Customer Satisfaction! 22
  23. 23. Process
  24. 24. What is a Process? • A process is a group of steps, tasks, or activities that has a beginning and an end. • A process takes inputs—materials, information, people, etc.—and in some way changes them to produce an output. • Simplistically, it can be seen as: Input Activity Output 24
  25. 25. Process Examples Making coffee Distributing mail Brushing your teeth Answering telephones Traveling to your job Communicating Repairing or maintaining a product Coaching or teaching Billing Budgeting Preparing an annual report Entering orders Making a sales call Preparing a sales presentation Going on Spring Break Every organization has hundreds, if not thousands, of work processes. To understand the organization, you must understand its processes. Before you can change a process, you need to understand how it works! Before you can change a process, you need to understand how it works! 25
  26. 26. View of the Process At Least Three Versions Exist How we think it is How it really is How it should be A Process Map will provide clarity! 26
  27. 27. SIPOC High-Level Process Map Stay as high as you can for as long as you can! Voice of Process Voice of Customer (Defects, Expenses, Cycle Time) (Quality, Cost, Delivery) Requirements Requirements S I P O C X’s X’s X’s Y Supplier Inputs Process Outputs Customers Start Stop A SIPOC allows you to gain a high-level understanding of a process. A SIPOC allows you to gain a high-level understanding of a process. 27
  28. 28. SIPOC Summary C Step 1 Determine the boundaries (start and stop) of the process Customer Identify the Customers List the primary customers who receive outputs. O Step 2 Identify the Outputs of the Process Outputs List the major Outputs of the process. P Step 3 Map out the Process Process Map the four or five steps that describe a process at a very high level. I Step 4 Identify the Inputs Inputs List the major Inputs to the process. S Step 5 Identify the Suppliers Suppliers List the Suppliers who provide inputs to the process. 28
  29. 29. Team Exercise – SIPOC Break into Teams Break into Teams Purpose: Practice creating a SIPOC for Spring Break Agenda: 1. Break into groups and create a SIPOC for your process 2. Use your provided template to create your SIPOC 3. Report your results to the group. Limit: Exercise: 15 minutes Discussion: 10 minutes Total: 25 minutes 29
  30. 30. Team Exercise –SIPOC Supplier Inputs Process Outputs Customer Start Spring Break calendar Financial Needs Travel Plans Hotel Plans Spring Break Return to School Stop 30
  31. 31. Process Map What is the right level of detail? Macro SIPOC Manager’s hGeneral Activities viewpoint Take orders, prepare pizza, bake pizza, deliver pizza Micro Functional Worker’s hSpecific Components Process Answer phone; listen and write order; capture customer Map viewpoint delivery information; confirm delivery time and thank customer; give order to cook How low should you go? In reality, several types of G ro u p E x e rc is e – T h e P iz z a P la c e R e q u ire m e n ts L S S – Y e l l o w B e lt M o d u l e 1 R e q u ir e m e n t s Macro process maps exist. These two S u p p li e r In p u t s Process O u tp u ts C u s to m e r • C u s to m e r • C u s to m e r In fo C a l l in • P iz z a ( H o t, • C u s to m e r ( A c c u ra t e ) C o rr e c t, Q u ic k ) • P iz z a O rder In g re d ie n t • C u s to m e r Com pany O rd e r ( A c c u ra t e ) • In g r e d ie n t s Take ( F re s h , O rd er D e liv e re d o n T im e ) The Pizza Place Functional Process Map • O v e n (C o rre c t T e m p e r a tu re ) M ake & B ake Customer Hungry! Call in Order Pay Driver D e liv e r versions are the most useful. 5 /3 P ro p rie t a ry – In te r n a l U s e O n l y Y B -1 v 1 .1 25 Cashier Take Order The Pizza Parlor - Functional Process Map for the Pizza Maker Cooks Make Pizza Bake Pizza Correct? Cashier Provide Order to Cook No Yes Delivery Man Deliver Pizza Read Customer All ingredients Toss and roll Yes Spread sauce Add ingredients Accurate? Yes Bake Pizza Order available? dough Pizza Maker No Micro Go to walk-in cooler to get ingredients 31
  32. 32. Common Quality Myths
  33. 33. Myth: Averages Are Misleading This room is freezing! 50° The average temperature is 70 °. Everyone must be fine! 90° I’m Busted: Customers feel roasting in here! variation, not averages! 33
  34. 34. Myth: Inspection Purpose: To illustrate that inspection is not only Non-Value Added but also an ineffective means to achieve quality. Exercise: You have 60 seconds to count the letter “S” in the paragraph below. Document your answer on a scrap note. Six Sigma Black Belts are assigned to Six Sigma projects. These projects are solved by identifying, measuring, analyzing, improving, and finally controlling the measure of interest. Six Sigma Champions help stomp out barriers to ensure success. Ad hoc teams lend their process and product skills. As the defect levels fall, so does the associated cost of poor quality. Six Sigma projects deliver measurable business results. The Black Belt resource ensures program success. Busted: You can not Answer: _______________ Inspect quality in! 34
  35. 35. Myth: Customer’s Viewpoint Business Lead Time Order Delivery Lead-Time 2 weeks 11 weeks 12 weeks Order Production Shipment Customer Lead Time Busted: How we measure time is not always how the Customer measures time! 35
  36. 36. Overview of Six Sigma Benefits of Six Sigma: Reduce variation in our processes/products Reduce defects Increase first time yields Reduce the costs of poor quality (COPQ) Eliminate waste and improve Flow Improve Growth and profitability Improve capacity Provide scalability Reduce costs Differentiate ourselves from our competitors Improve employee morale and pride Etc., etc., etc. Improve Customer Satisfaction!! 36
  37. 37. Wrap Up What did we learn today? Customer Centric Six Sigma Tools Quality Myths 37
  38. 38. Questions
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