FREQUENTLY ASKED QUESTIONS ON SIX SIGMA

Operational Risk - The finance institution I work for competes with JP Morgan, which uses Six Sigma in its business. Under Basel II regulations it appears there is a chance to free up cash tied up in “Operational Risk”. How does Six Sigma help our business succeed?

Banks and other Institutions have regulations that have impeded the normal driving forces to improve waste control and efficiency of their internal processes. With Basel II the door has opened up for the better businesses to cash in on robust design and control of internal work functions. Six Sigma is the tool that enables companies to eliminate defects and seek perfection in repetitive processes by identification of the causes of the defects. The defects are prevented in operation by good design. Creating a model for risk for customers and the ability to accurately predict risk will allow Financial Institutions to provide tiered products for customers with different levels of risk. Sensible levels of risk may be taken on those people and business that were formerly turned away. Cash to do so is freed up from customer accounts with genuinely lower risk of default, and from ineffective or inefficient internal processes. Profound knowledge of customers and the processes to handle the information on their financial transactions is the key, and Six Sigma and Lean tools apply very well.



Lean Six Sigma for Service - I know about Lean manufacturing from Toyota. How would you suggest I use Lean tools and Six Sigma in my Service business? I take telephone orders for Insurance.

Lean and Six Sigma were tools that were first used in businesses that had manufacturing bases. They apply to every type of business. Service businesses need them just as greatly to cut out waste and achieve high levels of customer satisfaction.
Taking customer orders over the phone is an example of a transactional process. The 7 wastes of Lean all may apply:
a. Over-processing. Recording the information received in 2 separate locations.
b. Transportation. Hand-offs from the receiver to a second person to locate the customers’ files and records.
c. Motion. The customer is asked to retrieve information not to-hand at the start of the call from bank accounts or existing insurance details during the call.
d. Inventory. Orders are assembled into a batch so that each customer must wait longer than necessary for the Underwriters to be called about their particular enquiry or application.
e. Waiting. The next step may be a call to the under-writers. This is delayed by an hour to attend a staff meeting on relocation.
f. Defect. The customer’s phone number or e-mail address has been entered wrongly with no back-up check, and the enquiry is stalled while a search is made for the number/address.
g. Over-production. The order is placed and an invoice arrives. The process is repeated by mistake by another operator, and a second invoice is sent out. If these sort of things do not happen in your transactional processes, then all the Companies I have visited over the years in manufacturing and supply must be very unlucky. Six Sigma helps address the root causes of the defects and process elapsed time that is the mirror of any inventory in every process.
Reliable, high quality-every time processes lend themselves to reduction of inventory and using human resources where it is most needed rather than accommodating errors in a poorly designed system. Customers and clients will not pay for inefficiency, and nor will they return if you make a critical error. Lean and Six Sigma will protect and serve you well.



Getting Started with Designed Experiments - I have a couple of green belts in a small business of 50 employees. We have made excellent progress on improving Quality with the 7 basic tools. They are saying we must use Taguchi or DoE to find the key process variables to go to the next stage. How do we start?

Your Green Belts are very wise. Please accept my congratulations if you have made excellent progress with the first 20% of the tools found in the Six Sigma toolbox. A great many companies try to run before they know how to walk, and miss the easy gains by making it too difficult for their workforce to succeed with some easy to succeed, early wins.
Now it is time to learn to run. Use the same approach and starts with an easy win, if you are able to do so. In my experience, those green and black belts that learn on a fairly simple 2 by 2 or 3 by 3 factorial designed experiment, with a known outcome are likely to succeed in the long run. It is tempting, but foolish to start on the critical-to-company success 15-factor screening, interaction, and optimisation experiment that tempted them to learn the technique. Be prepared to budget the time as an investment.
A failed screening experiment may cost £200 to £1000, and you may still gain a great deal of information on how to run the next attempt, or about the process boundaries.
By contrast asking the Operations or Production Manager for permission to run a two-day trial of the Company’s most vital asset may not be successful until you have a proven record of successfully yielding cash as the return on these investments.
It is an experiment. It therefore has an uncertain outcome, which may be seen as “failure”. For all my experiments I carefully write up and get agreement to a more certain outcome. For example: Designed Experiment to determine the factors affecting Fresh Light Integrity of a Light-Lock Material Outcomes
· The process owner will receive a report of the findings.
· This will document the experimental method and results.
· These results will show whether the experiment was executed as agreed and planned, and an action plan to prevent any further errors of execution.
· The 8 factors which were identified as the most likely causes of improving or decreasing the ability of light-lock material to resist penetration by light (fresh light integrity) will be classified as “Strong, Low, Very Low”.
· The Strong factors are significant in this most important customer characteristic and demand further study.
· The Very Low factors are not important enough to concern your operations until control of the strong factors has been achieved and the process placed in a state of statistical control. That is, it is predicable, and measurable, and you know what to adjust or how to react to any unusual variation in these factors.
· Low factors will be studied in combination with the Strong factors at a later date in a further experiment. This is likely to last a working day, and we will need to adopt the same experimental conditions, with normal production suspended until the experiment has been successfully concluded.
· I estimate that control of strong factors will reduce variance in Fresh Light Integrity by 40% based on initial studies by your Green Belt Quality Technician. This translates to a reduction of 10% reworked cloth, and cost reduction of £10,000 per week.
· The experiment will cost 2 hours, and this equates to £500. To summarise, turn experimental objectives into business ones.



People Processes - I work in People Development. How can Six Sigma be applied to the training and education of staff?

The principles of Six Sigma can be applied to any form of work, since all work is a process.
People are more resistant than materials and equipment to change, so this presents different challenges to the change agent. Perhaps it is best to begin with a Goal for your “project”. Is it a group that has low skills in a critical business activity, or are you preparing people for redundancy or retirement? The following model has always stood me in good stead, and I would suggest that it is applied to the people development Goal as well. Let us suppose the issue is “SAP training so as to reduce errors in goods inwards materials. The Goal is reduce errors by 50% in 12 months.
The group is 2 clerical staff on a loading bay, plus forklift truck operators moving the materials. The voice of the customer is the manager who demands accurate data in SAP to work with and the training delivered and monitored inside 3 working days.

Success is attribute (3 or less days = OK)
and variable (lost hours due to inaccurate information entered by clerks).

Devise a data collection system for both. The second is going to be hard to make objective and free of political bias. Who is really responsible for the lost time in production?
Plot the data and begin to improve the process to reduce the time to train and the accuracy of the SAP data entry as a result.
Make sure that the customer requirements have not changed by asking for feedback. Have we got the right balance of output measures? What about the success criteria for the clerks and forklift operators as customers?
Are we working hard to improve the wrong thing?



What about non-manufacturing processes?

Nowadays, there are many more people working in service organisations than in manufacturing; and even in manufacturing companies, many people work in transactional support activities. A process is any combination of factors that produce an output. In manufacturing, most quality characteristics are dimensional. Quality in service usually boils down to two very simple ideas: do it fast, and do it right. Empirical evidence suggests that failure costs in service processes are typically far higher than those for manufacturing processes. Six Sigma methods apply just as well to transactional processes. We have extensive experience in the application of Six Sigma to transactional processes and have helped our clients win prestigious business excellence awards.



Do I need to be a statistician?

No. If you are a senior management champion, you should appreciate what statistical methods can do for you and how to interpret the results. We train green belts and black belts in statistical techniques as appropriate for their roles. They need to understand what techniques are available and be able to apply them, perhaps with reference to support materials and guidance from specialists. However, it would be misleading to believe that Six Sigma comprises only soft tools; we at Services Limited give full weight to hard statistical tools too.



What about computers?

There are some excellent computer packages available. At Services Limited we use Minitab extensively. However, we are aware of the danger of slavishly entering information into a computer package without understanding what the software is assuming. We therefore make extensive use of Excel in our training courses, developing spreadsheets from scratch so that trainees understand exactly what analysis is taking place. We then reproduce the results on Minitab. Many of our trainees subsequently choose to adapt these spreadsheets to their own applications rather than depend on packages. A side-effect of this is that trainees Excel skills are dramatically improved.



Isn't Six Sigma just another passing fad?

Even Services Limited can’t predict the future! But just as Six Sigma has drawn on many of the successful elements of its predecessors, any successor to Six Sigma is sure to retain the most effective tools and methods in use today.



What's in it for me personally?

A skill for life. The principles of Six Sigma apply to any process in any organization. So wherever you work, a knowledge of Six Sigma tools and methods will always help you to be effective. Additionally, being a Six Sigma practitioner is inherently challenging and never boring; it offers opportunities to be creative and since each project is different, there is minimal repetition.



Why should I use Services Ltd?

Well, apart from the fact that we are nice to deal with, we do have a proven track record of successful Six Sigma implementation and can supply references from well-known organizations on request. Our team of experts are all hugely experienced and recognized in their fields. We also promise not to blind you with unnecessary science and long words! We pride ourselves on adapting our training materials to suit your organization, and feature fun, interactive exercises in our courses rather than “Death by PowerPoint”!