Six sigma: need to know

News source: University of Toronto

Quality management

Jack Welch is a fan, sol Trujillo is not. But Six Sigma is stamping itself on business culture

When P.O. Mak, the head of GE in China, spoke in Sydney recently he told the audience that when the company was run by the legendary Jack Welch, managers were told that if they didn't sign up for Six Sigma training they could kiss goodbye to their promotions. It was tough, but like any change program, Six Sigma is unlikely to last unless the passion and commitment starts at the top.

GE is the poster child of the Six Sigma movement - a structured way of sorting processes so as to achieve zero defects in the product. In fact, the goal is a 99.9998 per cent perfection rate, but who's counting?

The success of the program at GE, where it moved from manufacturing to the financial end of the conglomerate, has made it a popular technique in many multinationals, as well as in companies such as BHP Billiton, Telstra and the banks. (The new head of Telstra, Sol Trujillo, has implied he is no great fan of the system, so it will be interesting to see what happens there.)

Six Sigma is expensive and intense, and it can be as much about efficiencies and cutting costs (including people) as it is about improvement of products and services. But it is also creative, inclusive and effective.

So what's it all about?

One of the best definitions comes from Business: The Ultimate Resource (Bloomsbury, 2002). Six Sigma, it says "is both a technique and a philosophy based on the desire to eliminate waste and improve performance as far as is technically possible". It uses statistical analysis to reduce defects in products and services and parallels this with an organisational culture focused on customers. It is a registered trademark of Motorola and is based on the work of Joseph Juran. (See When did Six Sigma start?)

Six Sigma looks at the number of errors that are occurring in a process and the extent to which some work is done twice (known as rework) because of mistakes or omissions the first time around, and attempts to eliminate these. It is a way to focus employees on quality, a method of implementing cultural change and establishing a common language across the company. It also creates clearly defined performance goals.

Why Sigma?

The Greek letter sigma is used in maths to denote standard deviation from the mean. Six Sigma uses levels of sigma to mark the number of defects occurring in a process. A 6 Sigma company has a performance target of only 3.4 defects per million opportunities; a 2 Sigma company produces 308,537 defects; a 3 Sigma, 66,807; a 4 Sigma, 6210; and a 5 Sigma just 233 defects per million.

How does it work?

Definition: The first step is to identify customer value and define optimum processes to achieve this. Existing processes are benchmarked against this so that defects can be defined. The knowledge base of employees is important to Six Sigma because the people on the floor invariably know how processes can be improved. Staff with a working knowledge of the process are included in the project teams that lead change.

Measurement: The second step is to measure the number of defects occurring per unit.

Analysis: Statistics are used to identify the variation between the perfect process and your process: the goal is a continuous reduction of variation.

Improvements: Changes are then introduced so that processes and results improve.

Control: Any future variations that may develop are monitored and controlled. Risks are assessed. New products and processes are designed to be subject to as little variance as possible.

Who runs the program?

The system needs to be introduced by consultants trained in the technique, but because overhauling a business is invariably expensive, such people are often only employed at the start. Employees are trained in Six Sigma and progress through three levels denoted by martial arts terminology, reflecting the technique's Japanese roots. Green belts are generally earned when employees have undergone a short course and are familiar with Six Sigma methodology. Green belts are allowed to assist on projects. Black belts are essentially project managers with responsibility for teaching the technique and advising management. Master black belts are experts and are responsible for integrating the technique into the strategic plans of the firm.

When did Six Sigma start?

Go back to the quality movement of the post-World War II era and the influence on Japanese manufacturing of two Americans, W. Edwards Deming and Joseph Juran. Juran's work in particular was seen as highly important in building the quality culture in Japan which led to that country's staggering industrial transformation. Total Quality Management, "quality circles" and the Toyota Production System all came from this beginning, and in turn led to "lean production" methods and the Six Sigma system developed by Motorola from 1987. That was when Mikel Harry started to study variations in processes and realised that too much of it would result in inefficiencies and reduced customer satisfaction. He recognised the importance of measuring variations in a particular process and applied methods to reduce these in order to improve efficiency.

In the early 1990s, AlliedSignal, through its chief executive, Lawrence Bossidy, began to apply Six Sigma. Within three years the company was saving dollars and improving efficiency without layoffs. At the end of 1995, the chief executive of General Electric, Jack Welch introduced Six Sigma as a corporate-wide initiative.

What else looks, feels and sounds like Six Sigma?

Lean theory also focuses upon the customer. It refers to the removal of waste in manufacturing processes across the organisation. This includes the waste of time, raw materials, unused equipment and inventory. Key proponents are James Womack and Daniel Jones, who have focused on the manufacturing and automotive industry but are now advocating the application of these ideas for services.

In a landmark essay published in Harvard Business Review this year (reprinted in AFR BOSS in May), the pair argued for a theory of "lean consumption" for intangible products. The idea is that a lean company should be responsive to customer needs and flexible enough to respond to changes in demand. It challenges traditional thinking about economies of scale: lean systems prefer to use shorter series of runs of different products, allowing companies to respond to the market and preventing capital from being tied up. A company's leanness is measured by the number of inventory turns it has each year. The idea is that the faster inventory can be turned around, the less time raw materials or parts sit unused.

The Toyota Production System, developed by Taiichi Ohno and Shigeo Shingo at the auto giant, includes concepts such as just-in-time production, whereby materials are delivered to the factory floor when required; standardisation of parts; cellular manufacturing, or breaking up manufacturing to each part of the car; quick changeovers achieved by ensuring machines are used for only one process; and continuous improvement.

Total Quality Management is a pre-emptive tool that anticipates errors or variations in quality before they occur. The idea is to reduce supervision by removing variations that occur in repetitive processes. Product quality is therefore maintained. TQM was reinvented by Motorola as Six Sigma.

Who has used Six Sigma?

General Electric is by far the best-known client. After Motorola's work on Six Sigma, it was also used by Allied Signal and a host of organisations followed. In the 1990s, financial institutions in the US, among them JP Morgan, Citibank and American Express, picked up the technique for transactions.

Other companies to adopt the program include Boeing Satellite Systems, DuPont, Dow Chemical, Caterpillar and Bombardier Transportation. In Australia, Telstra was introduced to the technique through its then finance director, David Moffatt (now group managing director, consumer marketing), who became enamoured of the system as chief executive of GE's Australasian operations. Telstra hired five black belts, including Christine Hawkins from WMC and Greg Kilbey from Suncorp Metway, to introduce the program. Telstra argues it has achieved around $300 million in direct savings over three and a half years. The company has trained 20 per cent of staff in Six Sigma and has 25 black belts.

Suncorp Metway started using Six Sigma in 2001, and BHP Billiton and WMC are also users. The major Australian banks, except for ANZ, have all used the process and Westpac, for example, has a team of three people (Rod Jackson, Glenys Cooper and Annalisa Armitage) who train people at the bank.

Why is Jack Welch so important?

The conglomerate nature of General Electric showed the versatility of Six Sigma. But a key reason the GE story is so important to Six Sigma is that GE was already a well respected and successful company when it implemented the technique in 1995. It showed that Six Sigma was not a tool to be used only when there were obvious problems.

A key feature of the method is that it requires top-down commitment from management: Jack Welch's public commitment to the technique and the success he attributed to it made Six Sigma famous. When it was launched, he famously stated that the initiative would be the most important priority of the company for the following five years.

At GE, some top executives and stars put aside normal duties to focus entirely on Six Sigma. The "revolution" at GE began with master black belt training for executives, led by Mikel Harry of the Six Sigma Academy. In the first year of its implementation, $170 million was saved for a $200 million investment. In year two, this increased to $700 million in savings for a $400 million investment.

And it was not a stagnant process. In the second year, Welch announced that 40 per cent of the bonuses paid would be tied to Six Sigma results. As well, there was a focus on green belts: employees did their normal duties part time but also worked on Six Sigma projects, so that more employees could be involved in the movement.

Although the initial application of Six Sigma at GE was concentrated in the manufacturing businesses, it was also applied to GE Capital, which accounted for 40 per cent of the company's profits. GE discovered good improvements could be achieved in accounts payable and receivables, inventory management and pricing processes. In 1998, Six Sigma was refocused towards customers, with a concentration on product delivery. It was also used in areas of e-commerce, currency hedging and auditing.

But isn't it really about manufacturing?

As General Electric proved, Six Sigma is not just reserved for manufacturers. Although it may be more difficult to assess defects in a service industry, the organisation still needs to define what constitutes a defect - such as service being provided an hour late.

Although the definition and analysis of the processes may be more difficult for services, the technique is based on facts and decision making that emphasis quantification to improve quality. In fact it is arguable that Six Sigma is most suited to service industries, as it revolves around the customer experience. For banks this can mean cutting costs and improving customer relations through reducing time to process loan and credit card applications.

The system has been used by banks as the competition ante has been stepped up, so that cost control is central to growth and remaining competitive.

Six Sigma has also been used in IT outsourcing. An Indian subsidiary of General Electric, Birlasoft, uses the technique in its governance framework to increase efficiency, reduce costs and improve customer satisfaction. The monthly defect rate since Six Sigma has been implemented has reportedly decreased from 11 to 3 per cent. Also, Six Sigma does not have to be used across an organisation. BT Funds uses it in its back office processing and some companies implement it in a limited way, such as for their engineering or manufacturing processes.

What about the costs?

Six Sigma and lean production techniques are increasingly popular as companies compete with low-labour-cost overseas manufacturing. But the method itself is not cheap to roll out. The biggest cost is the reworking of processes that appear, by normal evaluations, to be working well. This can make it difficult for employees to initially understand the technique. Statistical analysis may also put others off, while the collection and interpretation of data can be time consuming.

The high level of training of employees is another cost - especially if they are then poached by other companies keen on using their Six Sigma skills. Telstra's executive manager George Potamianakis left to take charge of Six Sigma operations at CBA, and Annalisa Armitage left the telco to join Westpac.

Six Sigma is a long-term process and needs constant re-evaluation and assessment in order to be successful. Processes need to be constantly monitored to ensure that defects remain out of systems. Telstra has spent $62 million on Six Sigma. But the rewards can be high, not just in cost savings but in improved customer and employee satisfaction.

What's the downside?

Some critics say the relatively rigid approach of Six Sigma can discourage innovation and forward thinking, even as it produces very consistent results.

The dean of the Rotman School of Management at the University of Toronto, Roger L. Martin, writes in the February 2005 issue of Harvard Business Review that "Firms have adopted Six Sigma programs to improve the quality of their manufacturing processes, but those initiatives haven't made employees feel that their work is more meaningful."

He argues that the reliability-oriented process that is intended to produce consistent results under all circumstances through analysing past objective data may not be accurate or desirable. This is because to make the process reliable, measurements must be standardised and variables reduced.

"Adding squishy variables and using gut feel allows for outcomes that are more accurate, even though the processes may not be able to deliver accurate results consistently."

Best Practices for Best-in-class Performance Highlighted

News source: Supply & Demand Chain Executive

By Editorial Staff

Metrics, strategy alignment, balancing needs, executive sponsorship key to reaching world-class, Hackett reports

Atlanta — July 29, 2005 — Achieving world-class performance in sales, general and administrative (SG&A) functions is no simple matter, yet the rewards are exceptional and can include reduced cost and staffing, improved strategic alignment and other benefits that enable finance, information technology (IT), human resources (HR) and procurement operations to have a significant impact on a company's bottom line, according to speakers at the 15th annual best practices conference of business process advisory firm The Hackett Group.

Speakers at Hackett's conference, dubbed "Enterprise Performance Management: Building Harmony in Purpose and Execution," shared practical insights into how they have enhanced the value their organizations deliver to the business and shareholders. Several common themes were discussed by the speakers.

For example, executives described how they relied on metrics to focus and drive continuous improvement, and they stressed the value of aligning SG&A activities with the strategic priorities of the business. Several described how they balanced the competing needs for cost reduction and improved value delivery, particularly in the context of business process sourcing decisions. Executive sponsorship to drive successful process transformation was clearly articulated, as was the importance of attracting talent to enable changes in the operating environment.

Nearly 400 executives from many of the world's largest companies attended the two-day conference in Atlanta. They heard from CEOs, chief information and financial officers, and other senior executives from 12 top companies, including Alcoa, Georgia-Pacific, Honeywell, InterContinental Hotels Group and Nextel Communications, among others. In addition, The Hackett Group provided an overview of its recent findings into world-class performance metrics and best practices.


Using Metrics to Drive Continuous Improvement

Richard T. Roth, chief research officer at Hackett, set the stage with his presentation of preview findings from The Hackett Group's 2005 Book of Numbers research. Hackett's research quantified the performance gap in efficiency and effectiveness between world-class and typical companies in finance, information technology (IT), human resources (HR) and procurement. For 2005 finance costs rose at both typical and world-class companies for the first time since Hackett began capturing this data 13 years ago, in part due to increased spending on compliance as a direct result of regulations related to Sarbanes-Oxley. World-class companies also focus on reducing complexity and lowering error rates across the board.

Using metrics to drive continuous improvement was a theme that carried through many of the speaker presentations. At Georgia-Pacific Corp., benchmarking has played a key role in helping the $20 billion company take $100 million out of its IT budget over the past few years, and the company is using metrics to tee up another $33 million in savings. "Benchmarking can uncover opportunities where you simply don't expect to find them," said James Dallas, Georgia-Pacific vice president and chief information officer. "They're also an exceptional catalyst for galvanizing an organization for change. They get people's attention."

InterContinental Hotels Group Americas President Stevan Porter also found that benchmarking and its resulting metrics helped his company confront the "burning platform" of reducing costs and increasing shareholder value in the face of a hostile takeover bid. "We had a powerful balance sheet, cash, global distribution and a solid portfolio of brands," Porter said. "We truly didn't think we had too many issues. But we suddenly found ourselves getting some pretty harsh criticism. Metrics played a key role in helping us determine where, when and how to achieve our goal of taking out $100 million in overhead over a 12-month period."


The Value of Business Alignment

Several speakers stressed the value of aligning SG&A activities with the needs and strategic priorities of the business. In IT, where world-class executives bring in major projects on time 30 percent more often than typical companies, and also meet specs and come in on budget significantly more frequently, service-level agreements (SLAs) are a common tool for helping to accomplish strategic alignment. Hackett's 2005 Book of Numbers research found that world-class IT organizations are 61 percent more likely than typical companies to have formal SLAs in place.

In procure-to-pay, Mary Stubbs, a Six Sigma Black Belt for Honeywell's Global Business Services, made a similar point. "We use SLAs with both penalties and rewards, to incentivize the right behaviors and get people excited," Stubbs said. "We also take a very customer-centric approach, by understanding how we can add value, managing expectations, and focusing on communications, education, and relationship-building."


Balancing Priorities

Balancing between the need for efficiency and effectiveness, particularly in the context of outsourcing, is another key success strategy that speakers discussed. While world-class companies generate superior results in both areas, speakers pointed out that the focus should be on evaluating processes individually to determine how best to approach them.

Outsourcing is not always the best solution, according to Roth. "Highly transactional areas like HR administration, payroll or technology infrastructure can be strong candidates for outsourcing, if you begin by optimizing processes and reducing complexity," said Roth. "But for activities that provide real competitive advantage, companies may choose to hold onto these within their organization areas. You want people handling them who are close to the business."

InterContinental Hotel Group's Porter said that this type of prioritization was a key element in his company's effort to improve shareholder value. The company evaluated activities based on their strategic value to the company and created three categories. In areas which directly impact profit generation, the company determined that world-class performance levels were required. For areas deemed as strategic support, the decision was made to target performance levels that were superior to the competition, but not necessarily world-class. Finally, for areas deemed as business necessities, the focus was almost exclusively on efficiency, standardization and cost reduction. A key part of the strategy for this last category was the establishment of finance shared service centers around the globe.


Executive Sponsorship

Many speakers stressed that getting buy-in from senior leadership, then using it to drive participation in process transformation efforts, is another key strategy for success.

At Georgia-Pacific, building support for transformation efforts was critical. The CEO, chief operating officer and other members of the senior leadership team set the tone for their transformation efforts, and this helped ensure that functional leaders understood why this plan was right for them.

In addition, senior leadership was actively engaged in coordinating efforts through an executive steering committee. This helped ensure a focus on end-to-end process improvement. "You've got to expect resistance, and leadership from the top is one way to deal with it," Dallas said. "It plays a major role in helping get the front line people engaged."


Right People in the Right Places at the Right Time

Fostering and managing talent also is critical as companies make major changes across SG&A functions, according to several speakers. Hackett's 2005 Book of Numbers research showed that in most cases, world-class organizations are willing to pay their staff more, as a result of the greater business acumen and experience. This is of course only possible once the routine transactional activities have been minimized.

In procurement, for example, world-class pay staff 41 percent more and dedicate 74 percent more hours of training per employee than typical companies. In HR, world-class companies are five times more likely to have formal retention plans in place.

Leaders also need to examine the mix of talent within their organization in the context of business process transformation efforts ensuring that as changes are made to business processes and sourcing, they assess whether staff has the right skills, the ability to make change and are empowered to make decisions.

Caterpillar Hits Record Second-Quarter Sales

News source: Lawn & Landscape Magazine

PEORIA, Ill. – Bolstered by continued global strength in the markets and industries it serves, Caterpillar today reported record second quarter sales and revenues of $9.360 billion and record profit of $760 million, or $1.08 per share. First half of the year results were also records, with company sales and revenues of $17.699 billion and profit of $1.341 billion, or $1.89 per share.

"Our global markets continue to exhibit the fundamental strengths needed for further growth, and Team Caterpillar remains well positioned to leverage this unprecedented opportunity now and in the years ahead," says Caterpillar Chairman and Chief Executive Officer Jim Owens. "We're aggressively pursuing improvement - utilizing our leadership position, strong cash flow and global capabilities in engineering, purchasing, sales and manufacturing to enhance the value customers and stockholders receive from an investment in
Caterpillar."

SALES FIGURES. Sales and revenues of $9.360 billion were up $1.777 billion, or 23 percent, compared to $7.583 billion in the second quarter of 2004. Improving sales volume and price realization drove the increase in sales and revenues.

Profit of $760 million, or $1.08 a share, was up 34 percent compared to profit of $566 million in the second quarter of 2004. The main contributors were improved price realization and sales volume, partially offset by higher core operating costs, about half of which were material costs.

"We're very pleased that this quarter marks another improvement in our profitability as measured by return on sales – 8.1 percent this quarter compared to 7.5 percent a year ago," Owens added. "Somewhat better prices were a positive factor in the profit improvement, and for the most part, we expect the price increases announced earlier this year to hold in the marketplace. That said, we are closely monitoring the competitive landscape and are determined to hold our market position. Further, our results continue to be positively driven by literally hundreds of 6 Sigma projects which are being completed every month."

OUTLOOK. The outlook for 2005 has been increased over previously reported levels. Sales and revenues are now expected to be up 18 to 20 percent from 2004. The profit outlook for 2005 has also been improved to reflect an estimated profit range of $4.00 to $4.20 per share.

The previous outlook reflected sales and revenues up 16 to 18 percent, and profit per share of $3.89 to $4.03, up 35 to 40 percent from 2004.

"The strength of our markets is clearly not a blip on the radar," Owens says. "Key indicators such as low interest rates, robust commodity prices and needed investment for capacity in electric power and energy production point to continued growth. While this growth is expected to continue in the near term, we're laying a solid foundation for our future by staying focused on prudently managing our cost structure and margins while continuing to invest in new products and production capacity to meet strong customer demand."

Thursday, July 21, 2005

Easter Seals takes new approach to doing business

News source: Business Record

By Erin Morain
erinmorain@bpcdm.com

The passage of the Sarbanes-Oxley Act in 2002 left many publicly traded companies scratching their heads and scrambling to find the resources needed to comply with the act’s numerous provisions.

Though non-profit organizations escaped those regulations, Easter Seals Iowa has established an approach to adopting “best practice” techniques that could serve as an example to other Easter Seals affiliates and non-profit organizations nationwide that struggle to manage limited resources.

The organization has partnered with Pioneer Hi-Bred International Inc. and adopted the Six Sigma methodology in order to streamline its processes and thereby be a more responsible steward of donors’ money.

“I think in the long run it is going to help us show people that we run ourselves like a business,” said Easter Seals Iowa President and CEO Donna Elbrecht. “When we can borrow best business practices from the business community, we need to make sure we can do that and shoulder that responsibility. And it really has changed how we do business now.”

Six Sigma was designed for the manufacturing sector, has since been adopted by service companies and has rarely, if ever, been used by non-profit organizations. Pioneer began its work with Six Sigma in 2000 to address issues related to production and supply management, sales, research and administrative procedures. Dan Hoi, director of business improvement systems, said the company has been able to measure its success in using the methodology as it improves the effectiveness of its processes and measures the financial benefits that result.

Through initial discussions with Elbrecht, who had initially approached Pioneer to request funding for an Easter Seals rural solutions program, Hoi and others at the company found the organization had a foundation in place to support Six Sigma. Jason Nielsen, vice president of strategic management at Easter Seals, completed Six Sigma’s five-week training course through funds provided by Pioneer. Through the training, he examined one of the charity’s chronic problems, billing denials, in which bills are not paid when they are initially submitted, and developed a workable solution.

Pioneer worked with Easter Seals’ board of directors to explain the company’s experience with Six Sigma and what its methodology could bring to the organization. Two Pioneer employees worked with Nielsen as volunteer mentors. Elbrecht, who has worked with others at Pioneer to share the information with other Easter Seals affiliates, said the organization could not have successfully implemented Six Sigma without the company’s guidance.

“Like with anything, we could have gotten the books and tried to figure this out, or tried to scrape up the dollars to send someone to the Six Sigma academy,” she said. “I think we probably would have gotten there, but probably much slower.”

Nielsen said the Six Sigma approach, which stresses the elimination of variation, is at least as applicable to non-profit organizations as to for-profit ventures, largely because of their limited resources. Easter Seals faced $440,000 in billing denials in 2004, a sizable sum for an organization its size. But the newly devised approach allowed the organization to save $68,000 in its first project.

“We are forced by our funding, by our staffing structure, to make sure that our processes are as efficient as possible,” Nielsen said.

Elbrecht said a similar partnership and the use of the Six Sigma methodology would be “a nice cultural change” for other non-profit organizations, enabling them to work with teams, identify chronic problems, gather facts and evaluate processes statistically. But she believes Easter Seals’ ability to adopt Six Sigma gives the organization an unmatched level of credibility.

“When you start talking about what differentiates us from other non-profits that are doing good work as well, Six Sigma is one of those things that I’ve been able to say makes us different,” she said. “Not only are we doing good things, but I can show you measurable results, I can show you best-practice tools of Six Sigma that show you we’re taking our work seriously, and that if you invest with Easter Seals, you have more assurance that we’re going to make sure those dollars get results.”


Non-profit fallout
Though the Sarbanes-Oxley Act, passed in response to the corporate and accounting scandals at several corporations, applies only to publicly traded companies, some non-profit organizations believe the act should serve as a wake-up call.

BoardSource, a resource for non-profit board members, said non-profit leaders must demonstrate that they’re governing their organizations effectively or face similar regulations. As a result, they should consider voluntarily adopting some of the act’s governance practices.

“I think for us as a non-profit, we really felt it was better for us to take the lead and come into compliance with what the for-profit sector has to do anyway,” said Donna Elbrecht, president and CEO of Easter Seals Iowa.

Easter Seals, both nationally and in Iowa, has adopted most of the act’s provisions, which Elbrecht said allows the organization to achieve its mission and manage funds responsibly.

Six Sigma and business continuity

In October 2004 Continuity Central published an article, posing the question “Is Six Sigma a useful business continuity aid?”. Jack Freson, a Certified Black Belt in Six Sigma, answers the question with an unequivocal “Yes, why not?”

In this article Mr Freson explains his response:

Six Sigma
The first thing we must understand is that Six Sigma does nothing until the organisation wanting to use it makes a commitment to the methodology. Once this happens, the process is simply one of using the methodology to achieve improvement. The one part often overlooked is that Six Sigma is focused on continuous improvement, so the process is never ending. It is the constant striving to take what you are doing today and improve it. Can Six Sigma be used for improving business continuity, security and emergency management? Yes it can. One must start with the DMAIC process taught within Six Sigma as a disciplined approach to project management. DMAIC stands for, Define, Measure, Analyse, Improve, and Control.

Six Sigma combined with a proven vulnerability assessment method
In the area of business continuity, we don’t just employ the Six Sigma DMAIC process, it needs to link into a proven vulnerability assessment method, but such linking brings definite advantages. Since Six Sigma looks to include all knowledge, the result is a well disciplined project incorporating the latest knowledge in the business continuity area which together is designed to give you a well-rounded business continuity plan. The plan will include how to improve security, how to keep the business operating in an emergency, and a method to achieve continuous improvement.

The quest for data
It has been mentioned in other articles that Six Sigma is customer focused and uses the DMAIC project management process. Both of these are an essential part of the Six Sigma methodology. Also, important are management commitment to the process, team work, and statistical analysis of information. The last will be the most important part of a good business continuity plan, a plan that is in constant flux as it pushes towards improvement and the elimination of defects. The use of statistics has one important role and that is to allow us to get more and better information about our data. It will be the driver to guide us towards our improvement goals.

The chart below shows the merging of the DMAIC process with a proven security vulnerability assessment format. The assessment format seeks to know who the adversary is and what scenarios may be used to interrupt the business or harm the people. It bases improvement on achieving a balanced and layered security plan. Most importantly, it uses internal and external data. The initial assessment and plan development will use both sources of data. After the initial assessment and development of the security plan, the “continuous improvement loop” provides for analysis of how we are doing and gives us the basis for making changes to improve. However, we are only improving based on the external data used in the initial assessment. External factors may, and will change. Maybe some new adversaries, maybe new information from Homeland Security. Whatever the change, we must bring that information, the data, into our improvement loop. The new information is combined with existing data and an assessment is made as to the impact on our plan.



Conclusion
While Six Sigma will enhance the vulnerability assessment to provide a state of the art business continuity plan, one must always realise that the plan cannot be a fixed document. It must not be allowed to become obsolete and any emergency response must be practiced. How often it must change is hard to say, but, if you continuously bring in new information, continuously analyse how your plan is performing, and update it, you will be improving the security and business continuity of your organisation. While most Six Sigma work has been towards physical security, the process is easily applied to the world of business continuity. In fact, a smart company would see the advantages of creating one system; one plan to handle both physical and IT security and contingency planning.

$300K Typical Gain From Design for Six Sigma Projects

SEATTLE, WA -- (MARKET WIRE) -- 07/18/2005 -- Companies applying the innovation and design techniques of Six Sigma (called Design for Six Sigma, or DFSS) report median "hard" gains (direct tie to financial statement) of $200,000 per project with $100,000 in "soft" benefits, according to the latest research by iSixSigma Magazine. (http://www.isixsigma.com/dfss_research).

"The numbers for larger companies are even more impressive," added Michael Cyger, CEO and publisher of iSixSigma Magazine and iSixSigma.com. "Companies near or over $1 billion in annual revenue reported median 'hard' gains of $500,000 and 'soft' gains of $200,000."

But even small companies benefited from DFSS, Cyger continued. "The smallest companies in our survey reported combined gains ranging from $10,000 to $300,000. That's a big impact when you have a small budget."

Cyger said these numbers should convince more companies to use DFSS techniques. "All of the 1,112 respondents in our survey are using Six Sigma, but only 41 percent are using DFSS methods." That is because most companies which say they use Six Sigma really mean they use the process improvement methodology of Six Sigma, or what is termed DMAIC, according to Cyger.

DFSS is the innovation arm of Six Sigma, Cyger said. "It is a rigorous roadmap and toolset for understanding exactly what customers want and translating that knowledge into nearly perfect new products and services, with reduced delivery time and lower development costs."

The survey asked companies which did not use DFSS why they did not. "Most said they either didn't know much about it or didn't think there was a need for it," Cyger explained.

He thinks these companies are missing out. "Survey respondents used DFSS for both improving process capability and developing new products," Cyger said. "These kind of uses apply to any company, no matter what sector, size or geography. And a person or company can learn Design for Six Sigma without having to learn the traditional Six Sigma DMAIC methodology."

In the wake of the survey showing the financial value of DFSS, perhaps more companies will consider learning and using DFSS, he concluded.

Lean Manufacturing with Six Sigma Implementation

Source: Surface Mount Technology (SMT) Magazine

To remain competitive in the electronics manufacturing arena, it is essential to implement a lean manufacturing mindset - reacting and conducting business from the top down.

By Li Guo Chun
The electronics manufacturing community, especially in North America, must look for ways to reduce waste and cost from the moment materials are procured to the time products are shipped. This article introduces six sigma methods, discussing how they can be applied within an organization to achieve a lean production goal.

SMT manufacturers find it increasingly challenging to maintain their competitiveness and profitability. Reasons for this include increasing complexity of SMT processes, higher customer demands on quality and shorter lead times matched by cost reduction. This pushes companies to seek solutions to counter them. There are many solutions to face this challenge, however. One of the effective, proven strategies is the implementation of a six sigma initiative.

Overview of Six Sigma
Six sigma is a management philosophy targeting the creation of world-class quality standards and quality culture. It relies on the understanding of the processes of the supplier-manufacturer-customer value chain to derive a systematic methodology that optimizes the processes by using powerful problem-solving tools.

Six Sigma Philosophy
The six sigma management philosophy can be summarized as:

Measurement - Specify quality and value in the eyes of customers, and measure customer requirement and process performance;

Transparency - Management decision is based on data and fact, as well as understanding the gap through benchmarking;

Optimization - Adopting a proactive approach to optimizing processes;

Systemizing - An inherent focus to eliminate waste and variation throughout the entire value chain, and then standardizing the process;

Consistency - Involve and empower all employees to cooperate without boundaries, and the existence of a mechanism to ensure the implementation and operation of optimized processes;

Quality Culture - Continuous improvement in pursuit of perfection.


Six Sigma Methodology
Six sigma involves a cycle of progressive-project activity integrated with daily operation, during which the Define - Measure - Analyze - Improve - Control (DMAIC) methodology is applied. The DMAIC methodology allows the ability to have both a “macro” and “micro” perspective. It allows users to adopt a bird’s eye view of the entire system, as well as an in-depth view toward understanding the process (Figure 1). DMAIC helps project teams and employees take systematic steps to achieve tangible results.



Figure 1. DMAIC methodology.

First, at the Define Phase, adopt a bird’s eye view of the organization and customers’ critical issues. Based on this evaluation, prioritize them and finalize the high-potential improvement opportunities. Second, at the Measure Phase, enter the identified field or system to measure current performance by using suitable metrics to discover the focused problems. Third, at the Analyze Phase, the focused problem will be analyzed in-depth to identify the root cause. Fourth, at the Improve Phase, based on these new insights, brainstorm and evaluate creative solutions to make processes more productive and efficient. Finally, at the Control Phase, institutionalize the new process and implement a control system to keep it consistent.

Implementing Six Sigma: Two-fold Approach with Three Phases
The implementation of six sigma focuses on quality culture building, methodology, tools training and key project application. Six sigma is implemented through a two-fold approach. The first approach is fostering an excellent quality culture in the entire value chain, from supplier operation to customer service, to improve fundamental levels by using “common language and behavior” for standardization. The second approach is using nurturing experts on six sigma implementation to provide leadership for executing key business projects with breakthrough improvements. The implementation process is divided into three phases:

Phase One: Communication/Planning

Communicate six sigma initiative as a common language;
Plan goal targets and setup a measurement system to evaluate the performance;
Create training and project plans.

Phase Two: Action and Monitor

Track the progress of the training course and trained people;
Track the progress of the project number and status.

Phase Three: Review and Recognition

Review performance with matrix and document lessons learned;
Recognize successful teams.

Successful Factors for Implementation
The six sigma initiative involves all employees within the organization, from top-level executives and shop-floor-level operators, as it covers both top-down and bottom-up activities (Figure 2). It will not be successful without commitment from the entire team. The critical factors for successful six sigma include commitment from all levels of employees; alignment of six sigma infrastructure and projects with organization goals; and training all levels of people through appropriate course designs and case-study sharing. Successful projects also should be recognized and transmitted as knowledge sharing.



Figure 2. Support structure for implementation.

Six Sigma Methodology/Tools: Applications in SMT
To understand the application of six sigma methodology/tools in the SMT line, several examples using the DMAIC methodology are used. In one case study, the manufacturer was encountering a high SMT defect rate, resulting in unnecessary rework after the reflow process. A certain percentage of the defects escaped into the assembly line, and were distributed to field customers. This affected the company’s reputation and deteriorated customer satisfaction. Realizing the seriousness of the problem, the organization adopted the six sigma methodology.

Define Phase
To identify the main issues, a production total-defects-breakdown diagram was derived for analysis. By using the diagram, the team realized that the major issues affecting process quality were component soldering and placement quality. Therefore, a project team was developed.

Measure Phase
A stratified Pareto chart categorized by different production lines (or components) was created to identify the defects (Figure 3). Soldering and placement defects remain the top concerns for all lines, affirming the accuracy of the identified problems. Proceeding, Line A was studied as a model line to retrieve a more detailed analysis.


Figure 3. SMT defect breakdown by line.


Analyze and Improve Phase
The focus is on the analysis of placing misalignment defects. In this example, the placement machine was configured with two revolver heads equipped with 12 nozzles, respectively. To analyze the root cause of part misalignment, a multiple-variation study was conducted to investigate head, nozzle and placement-angle variation. A multiple-variation chart and a main-effects-plot chart were used to show that the largest variations came from different head and nozzle variations: head-to-head placement varies about 30 µm average while nozzle 3, for example, varies about 20 µm. Upon further investigation, these root causes were identified and counter actions taken. These details were noted:

Nozzle design: Not suitable for component shape. The solution is to design a special nozzle for these types of components.

Nozzle vacuum: Nozzle is worn and dirty. The solution is to implement a new method to clean the nozzle and setup a schedule to check and change the nozzle regularly.

Feeder operation: Daily procedures executed on feeders are not suitable, trouble-shooting methods are not correct and maintenance quality is not controlled.

Solution: Standardize feeder-maintenance items, time interval, checklist and operation instructions to control feeder quality.

Head calibration: Head variation is not monitored during maintenance. The solution is to update the maintenance checklist and methods to control maintenance quality.

Based on these recommendations, action tasks were implemented and maintained in a Placement Process Control Plan for daily operation controls (Table 1).



Click here to enlarge image
Next, the printing process was analyzed to rectify solder bridges and open defects. Because solder volume is one of critical output for reflecting soldering defects, a design of experiment (DoE) was conducted to optimize the process settings and obtain the desired solder-volume specification. In this experiment, the outputs are printing-volume measurements, which reflect soldering quality, and component pull force measured after reflow process, which reflect process reliability. From this overlaid plot, the desired process window for input settings was obtained, which means setting printing speed at the 0.5 level and pressure at the 0 level, meeting both solder volume and pull-force specification requirements. A robust process-design window was achieved.

Control Phase
The Process Control Plan and parameters settings were finalized based on experiment results and analysis. The checklist was updated and the standardized process was implemented and monitored daily. After implementing the process for a month, the defects Pareto chart (Figure 4) was updated and reported to compare before-and-after results. Data show that soldering and placement defects were reduced significantly with the new processes.


Figure 4. SMT defects breakdown after project.


Conclusion
The DMAIC methodology and related tool applications enabled project teams to adopt a step-by-step process to systematically understand process characterization. The DMAIC practice can help employees develop good problem-solving habits to discover the root cause of problems, avoiding guesswork that may be derived from subjective personal experience. This methodology also can serve as a guide for teams to achieve robust process performance. Six sigma fosters a solution-oriented culture that focuses on improving processes directed at eradicating current problems permanently, while streamlining them to achieve targets through DMAIC.

DMAIC methodology and tools help companies achieve quality improvements in their manufacturing processes. Through this continuous improvement, new processes make it easier for companies to achieve higher quality, shorter lead times and reduced costs in these challenging times.

For a complete list of figures, please contact the author.

For a lean manufacturing study from Libra Industries, view this article at www.smtmag.com.

Li Guo Chun, black belt program manager for quality project improvement, Siemens L&A EA Singapore, may be contacted at guochun.li@siemens.com.

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Lean Manufacturing - The Human Element
During 2003 and 2004, one EMS provider* embarked on a lean manufacturing business structure. While not without challenge, the company experienced a high level of acceptance for the transition because they recognized and cultivated the personnel factor throughout the process. Once the decision to transition to lean manufacturing was made, the Operations Management team studied literature and attended training sessions. They also began benchmarking best practices in the industry with competitors and customers. Resistance to change and the lack of buy-in at the lower levels were observed in the failings of these initiatives. An effort to foster acceptance of lean manufacturing throughout the organization became a key factor in a successful conversion.

The management team reviewed execution strategies and determined that a concurrent demonstration and training program would be most effective. Between 2003 and 2004, the plant work floor was converted into cell-based processes, and the full implementation occurred.

The company used the services of a local community college’s business center** to develop a custom training program. With the help of job-training grants from the state of Ohio, the provider leveraged internal resources. The course was given to ten successive groups of associates attending a series of eight one-hour sessions. About 1,200 hours of training time was conducted prior to the full conversion to lean. The program consisted of theory, case studies and hands-on demonstrations, as well as on-the-job projects.

Participants for the first session were selected based on their history of team orientation. When the first team had completed half of their training, they were allowed to revise a cellbased workspace anchored by one of the company’s four automated circuit board assembly lines. The cell included all operations from start to finish. To establish a smooth workflow, the traditional approach of moving batches of partially complete product from one department to the next was eliminated.

Benefits of this were two-fold: Associates not selected for the demonstration team began requesting the schedule for their training sessions; and new processes were “piloted” in a controlled environment, allowing the company to develop a tested solution for the balance of their operations. Upon completion of the training, the demonstration cell had operated for five months, and all associates had been trained.

In January 2004, the entire company began operations in cell-based lean manufacturing techniques. To date, it has experienced increases in inventory turns (from four per year to over ten), in-process yields, reduced changeover time, reduced downtime, reductions in returned materials to less than 1% and lower associate turnover. The buy-in and enthusiasm of the associates has been a significant factor in that success.

The Six Sigma Primer

News source: Domain-B



Communications consultant Stephen Manallack* looks at the technique and philosophy of the Six Sigma process to build a customer focused culture…

Since the first step of Six Sigma is to identify what is value for customers, implementing it should take emotion and guesswork out of your decision making.

This view is reflected by Glenn Abercrombie, an Australian who has become a Six Sigma leader at global financial services giant, AXA. "By eliminating all the emotive statements people tend to attach to problems, you can create a statistical solution and turn that into a practical reality," he says.

Abercrombie is a "master black belt" and his aim is to do himself out of a job; his view is that your Six Sigma specialist should identify the problem, design and implement a solution and then get out.

How do you implement Six Sigma?
Step one is getting the Six Sigma expertise right at the top of the enterprise, and you will need access to pretty substantial budgets to follow this process. For example, it seems that everywhere the Six Sigma process really begins with the hiring of consultants. Either that, or a combination of consultants and training of your senior people, but both ways involve high costs, at least initially.

The most famous advocate of this approach is Jack Welch, The legendary former CEO of GE. The first step at GE was to train executives to "master black belt" stage. In the second year, GE trained lots of "green belts" people at the workplace level who carried process change through. Interestingly, GE proved that Six Sigma was not just for manufacturing, also applying it with success to GE Capital.

In the first year, Six Sigma saved GE $170 million for a $200 million investment; in year two savings were $700 million for a $400 million investment.

Demonstrating how far the "top down" commitment to Six Sigma needs to be, P O Mak, the head of General Electric in China, recently told an Australian audience that in the days Jack Welch led GE, managers were told that if they did not sign up for Six Sigma training they could "kiss goodbye" to promotion.

In Australia, sixth ranking banking and finance company, Suncorp Metway, started on the Six Sigma path by sending senior executives to the Six Sigma Academy in Arizona. Now it claims to be "way ahead" of other banks in customer satisfaction due to Six Sigma. Says John Mulcahy, CEO, Suncorp Metway, "It's more than a process. It's a way of understanding the needs and voice of customers." The bank has 60 black belts and 200 green belts delivering 120 projects.

What are the results for Suncorp? A decrease in the amount of time waiting in line, faster credit approvals via one phone call and tighter commercial lending practices; all customer focused.

Step two is to define what customers want and what processes will deliver that for them. This then creates a benchmark for measurement of existing processes and defects become obvious.

In step two it is vital to involve staff because the person "on the shop floor" often knows both the problem and the solution. But it takes some training at this stage to get senior management capable of getting this feedback, as well as training workplace staff to "green belt" status. This staff involvement might be in the form of Six Sigma teams, creating their own program.

As described by the Six Sigma Academy in the USA: "Focus on eliminating non-value activities from processes (manufacturing or services) by applying a robust set of performance change tools, and emphasise excellence in operations to deliver superior customer service".

Step three is measurement; the number of defects happening per unit. This applies to services and to manufacturing. Putting these measurement processes in place can be costly, and it is vital to make sure all staff understand what's going on; otherwise Six Sigma can create hostility.

But in step three the focus has to remain on the customer. As Abercrombie says, "It is important to get data from the customers' perspective, measuring every process and collecting statistical data about the process."

In step three this can drill down as far as measuring customer satisfaction, even in terms of how long does it take a worker to answer the phone and resolve customer queries.

Step four is analysis of all the new data being collected, identifying the difference between "perfection" and your process, with an aim to continuously reduce the variation between the two.

But there is a warning here — the dean of the Rotman School of Management at the University of Toronto, Roger L Martin, has said, "Firms have adopted Six Sigma programmes to improve the quality of their manufacturing processes, but those initiatives haven not made employees feel that their work is more meaningful." Others see Six Sigma as a creative process that can be inclusive.

Step five is improvement, with the implementation of changes so that processes and results improve. This is best driven by a combination of your top sigma practitioners (black belt) and people in the workplace teams. This step is also a major cost area of Six Sigma, but as AXA's Abercrombie points out: "They should translate customer voice into process, have good analytical skills, be able to collect the right data from a variety of sources, and have a good appreciation of how to assess risk and perform cost-benefit analysis."

Step six is ongoing control, putting in place monitoring of future variations. This step also has input into new product and service design, so that the experience and data collected here is applied to new developments too.

Birlasoft, one of India's leading commercial houses, with equity participation by GE Capital, uses the technique in its governance framework to increase efficiency, reduce costs and improve customer satisfaction. Monthly defects have decreased from 11 per cent to 3 per cent.

A Birlasoft executive points out, "Six Sigma methodology have been used extensively to design new processes and upgrade the current ones as required in this continuous assessment." Birlasoft has development centres in India, the US and Australia.

In the US, the Chief Executive Officer of Dow Chemical, William Savropoulos, is a Six Sigma fan, "Six Sigma is elevating our company to entirely new levels of operational performance".

So, what is Six Sigma? It claims to be a technique and philosophy that grew out of Total Quality Management and aims to eliminate waste and improve performance, using statistical analysis and a customer focused culture. The Greek letter sigma is used in maths to denote standard deviation from the mean.

It has been used to challenge traditional thinking on economies of scale, instead using lean systems to produce shorter runs, allowing the company greater flexibility to change with the market.

Six Sigma aims to analyse and change processes to reduce defects in service delivery. To reach Six Sigma status, an organisation must aim for only 3.4 defects per million opportunities. Getting there involves training management to various levels of sigma: called black, green and master black belts.

Other companies to use Six Sigma include financial institutions such as JP Morgan, Citibank, American Express as well as Australia's Suncorp. It has spread through Boeing, DuPont, Caterpillar and Telstra.

Telstra, for example, claims it has direct savings of around $300 million in over three years and has trained 20 per cent of staff in the approach.

"By eliminating all the emotive statements people tend to attach to problems, you can create a statistical solution and turn that into a practical reality," Telstra's Abercrombie says.

*The author, a member of the committee of management of the Australia India Business Council, is a communications consultant, trainer and author of You Can Communicate (Pearson 2002).

BofA praises workers for achievements

News source: Timesleader

Bank recognizes success of projects in cutting costs, growing revenue
RICK ROTHACKER
Staff Writer

In matching red shirts and black pants, 80 Bank of America Corp. employees Tuesday crowded a darkened stage in an uptown hotel, waiting to hear their achievements called out.

As a spotlight flashed on 15 teams of employees, an announcer highlighted projects with catchy titles like "E-Invoice Reconciliation Process" and "Reduce Unassigned Balances in Central Region."

This was how Bank of America praised employees who last year carried out its 15 best "Six Sigma" projects, designed to increase revenue and cut costs at the No. 2 U.S. bank by assets.

Four years ago, Bank of America embraced a process typically used by manufacturing companies to improve quality control. Now lingo like "Hoshin" and "black belt" is common at the Charlotte company.

At its third annual "Best of Six Sigma Expo," Bank of America gave a glimpse of how it used the technique in the past year and how it could be applied to future projects such as its proposed MBNA Corp. acquisition.

So far, Six Sigma has helped Bank of America reap about $2 billion in revenue gains and cost savings, said Milton Jones, quality and productivity executive. The goal is to contribute about $1 billion per year toward the company's revenue growth and expense reduction efforts.

Besides contributing to a record $14.1 billion profits in 2004, Six Sigma is increasingly a must for employees to get ahead. When managers are filling positions, they will sometimes request candidates have Six Sigma experience, Jones said. More than 5,000 employees have earned green belt, black belt and other certifications.

"If you talk to those who are certified, they would say it made a difference in their performance and that leads to advancement," Jones said.

The bank expected as many as 1,500 employees, vendors and others to attend the one-day expo at the Charlotte Marriott Center City. The event's goal is to reward employees as well as spark ideas.

The projects ranged from improvements to behind-the-scenes processes to changes in the way bankers greet customers in branch lobbies. Three of the projects focused on fraud.

Bank of America lost $24 million in 2003 from fraudulent transactions using PIN numbers. A Six Sigma team found some of those losses came from customers making invalid claims and developed a way to challenge them. The project is expected to save about $3.5 million a year.

Another booth underscored the use of Six Sigma during the company's integration with FleetBoston Financial Corp. Bank of America announced the acquisition in October 2003 and is completing the last major account conversion in the Northeast later this month.

Shortly after the merger announcement, the company developed a plan for 600 projects needed to merge the two banks, said Brad Dalton, quality and productivity executive for the transition. One of the first steps was to survey thousands of Fleet customers in the Northeast.

One finding was that they wanted longer branch hours, a change that could be made quickly to win over customers, Dalton said. Since 2003, the percentage of customers who have a highly positive view of the acquisition has increased to 44 percent from 15 percent, he said.

Now Bank of America is embarking on a proposed merger with Wilmington, Del.-based credit card giant MBNA, which isn't a Six Sigma user.

"We look forward to taking this to other opportunities," Dalton said.

Six Sigma at BofA

• In 2001, Bank of America Chairman Ken Lewis turned to Six Sigma as a way to promote revenue growth and improve deteriorating customer service scores.

• Six Sigma, pioneered at companies such as General Electric Co. and Motorola Inc., is a regimented process for analyzing problems and fixing them.

• Its disciples start with action plans called "Hoshin" -- Japanese for "compass" -- and implement them step-by-step. Measuring performance is a big part of the process.

• Employees can earn "green belts" and "black belts" for successful projects.

Attaining Sigma - A revolutionary move for power sectors across India

Energy Pulse

There has been tremendous rush towards inclusion of quality standards at the same time which makes it quite difficult to measure and quantify the standards that the power distribution sectors might have set for themselves after the de – regulation. The only viable standard as of now in India is to benchmark and adopt the Six – Sigma measure of Quality.

Six – Sigma is a registered trademark and service mark of Motorola, Inc. In the mid 80’s Motorola created this model and become a benchmark in the industry for measurement of quality. With de- regulation setting in and open access threatening inclusion of competitors, its high time that power sectors took some initiatives in ensuring quality in the distribution sector.

Six – Sigma is a measure of excellence to improve quality & efficiency. It means measuring processes using statistical tools and defining controllable inputs, rather than inspecting for defects at the end of the process. It means maximizing equipment uptime and optimizing cycle time. Six-Sigma is a way to improve our process by measuring the potential of process in a specified limit. Implementation of Six – Sigma in a power distribution utility would mean eliminating all defects; rework & scrap and helping various processes across the power distribution sector achieve high standards of quality.

There can be many definitions of Six – Sigma depending upon the business. But Six – Sigma can be defined in general for all businesses with three arching themes – Customer Focus, Data Driven & Robust Methodology

A WAVE TO CHANGE THOUGHTS

Indian power sector is right now in the transition phase, just like human mind, fluctuating from one end to another with no defined approach to solve a particular problem. It is worthwhile mentioning here that organizations like GE have achieved a high level of satisfaction among its both internal and external consumers by adopting the six – sigma methodology

SIX – SIGMA APPROACH – DMAIC

DMAIC is a six – sigma approach which in itself means data driven quality strategy for improving various processes in the organization.

DEFINE - This usually means to define the strategic direction of the organization. Power distribution sectors after de – regulation are on a fire – fighting mode trying to fix all the problems created by the regulated environment. Fine enough but there is a need to ensure quality even while fixing a problem. But, it has been seen that even after a particular problem is being fixed, it recurs back after a short period of time in most of the cases.

Power distribution sectors need to define its customers and their expectations to achieve quality in their various processes along with the potential risks that they might face. The processes need to be defined first based on the consumers’ expectations.

These power distribution utilities need to identify the core area of operation and map those areas with the expectations of the consumers which should be handled when devising organization – wide strategy. The gap between the strategy defined and the customers’ expectations is the opportunity that the organization needs to work on. To improve upon these opportunities, many times organizations do not really understand the difference between values-add and cost-add.

There are two ways to do this – either increase price of the product or to reduce cost to organization. The mind set of the top level management needs to be flexible and adaptive to change. The catch comes in when it comes to execution. Most of the companies are desperate to improve and they forget there most valuable asset i.e. their employees.

An example in view would prove the above mentioned point. Let us consider the Operations and Maintenance department of a typical power distribution sector, where in this department has to ensure the continuous supply of electricity from power plant to the households, commercial users and last but not the least the industrial consumers. This department has to ensure the proper health of the equipment in grids. The opportunities to improve must be in tune with organizational objectives. This area of O&M is very sensitive in nature. People have to work there 24x7. The grid operation cannot be neglected. This is the area, where people need to concentrate more on output because the work tends to get monotonous and people tend to lose interest in their work. This process needs to be worked upon and people working their need to enjoy their job. In India, where the grids are on the process of automation, the process and its activity needs to be redefined and help the employees want to do what they are doing. There is a definite need to rotate them in other areas, so that they don’t lose the faith the sector.

MEASURE - This usually means to set measures for the strategic objectives of the organization. Measures can be set only if the customers’ expectations are met. Typically in a power distribution organization, when it was a regulated environment, consumers were treated as if they didn’t exist and in many places across India, the same procedure continues.

Going along with the above example of Operations & Maintenance department of a power distribution sector, we need to identify the measure of performance of the core processes. The performance of the process is measured by identifying customer problems by focus groups, survey or word of mouth. The period of downtime of electricity/power to the consumers stands as the measure in an O&M department. The metrics therefore should be prepared to map the defects in the process with respect to the key parameters based on the results of focus groups, surveys etc as identified by the organization.

This type of technique would a typical power distribution sector identify the gaps in the process and also help to prioritize the activities in a better manner. This will enable not to lose the grip on any process and would ensure continuous improvement in each area. Again, it would enable the power distribution sector to identify the opportunity area in each department separately and can link the activity with the processes existing in different departments. Power sector in India does not sensitively think on keeping the uninterrupted power supply and people in India are now used to power cuts. The area of analyzing the “no power condition” will help us in doing better planning, monitoring and executing the jobs. In power sector, especially in distribution sector, concern toward customer is more important, so as to reduce their extra burden of buying alternative power supply like generators.

The objectives of the Define and Measure phase of for any power distribution sector across India and the world are defined as below:

1. Building up a set of metrics for the organization that give definition to the Organization’s Vision
2. Metrics that are Integrated with the Strategic direction and objectives of the organization
3. Metrics that align people and work with their strategic objectives
4. Metrics that serve as effective means of communication for the organization both horizontally and vertically.
5. Metrics that provide insight needed for making decisions, setting direction and correcting course.
6. Metrics which will serve as a continuous source for identifying gaps in the organization and plugging them with various Six Sigma Projects.

The problem most organizations face in the phases of Define and Measure is how to build such an organizational dashboard, which will help achieve the objectives cited above which need be taken care of by the senior management while planning strategy and making the plan available to each and every employee of the organization.

ANALYZE – This usually means to collect data on the measures set on a continual basis and analyze using six – sigma tools and techniques. Sigma is a process measure of variability in any given process. In manufacturing, it is the number of defects in a product and in service; it is the delay in meeting the customer requirement. This can be defined better from the table below:

In the consideration mentioned above i.e., when the downtime is being considered, lots of work needs to be done in order to effect quality. A cause and effect diagram will not only help the power distribution utilities prioritize on the ongoing work but also will help to concentrate on the defined problem. In this, power distribution utilities across India need to identify the sigma level of the processes, in order to fix the priority. In power industry, especially in distribution sector, many companies are thinking on achieving six sigma levels. Analyzing in case of services, it is the reduction in the cycle time, rapid response to customer query and accuracy in managing supply chain which will ensure achieve six – sigma levels that is currently being dreamt of and a lot of work has to be done in the process.

IMPROVE – This usually would mean to identify the opportunities for improvement and convert them to six sigma projects for betterment.

In the example, power distribution utilities across India need to improve upon the cause of defects by assigning acceptable range to key variables & system to measure deviation of the variable. In order to improve upon the no power condition, these utilities need to identify the gaps in the process. Once, the gap stands identified, it would seem easier to work upon the solution. In India, since generation & transmission lies with the government, a fault in transmission lines or even for that reason a frequency drop in the generating station might lead to darkness all around and a power distribution utility has its hands tied unless the lines get changed or the frequency gets corrected.

Power distribution utilities now need to consider power generation of their own so as to reduce the effect of technical faults on its consumers. With open access looming large, these utilities must consider something known as backward integration. This will help broaden the distribution sector’s horizon. The definitive process of improving the condition of power supply in a six – sigma project would also help streamline the process of generation in its stride if these utilities consider on the backward integration in India.

CONTROL – This would mean setting up of a management control action of continuous reviews on the improvements made which had been set in the “define and measure” phase.

The power distribution organization needs to ensure that these process are being monitored regularly on the sigma level and any variation in this might lead to change in the work instructions or procedure and if the variation is due to any other reason, these utilities need to identify the root cause of the problem and share it with all the employees, so that repetition of that particular event can be avoided by taking necessary corrective and preventive action.

Excerpted from The Complete Guide to the CQE by Thomas Pyzdek. 1996. Tucson: Quality Publishing Inc

The bell curve helps keep track of the sigma capability as a process. Variation in the process is caused due to the number of defects or delay in resolution of service to the customer. The approach appears to be similar to other quality improvement approaches. The key difference is the emphasis on customer requirement & aggressive use of advanced statistical tools & methodology.

THOUGHT DIARY FOR PRIVATE POWER PLAYERS IN THE DISTRIBUTION SECTOR

Opportunity to explore six – sigma across power sectors in India is tremendous. With de – regulation and privatization of power sectors, these private players are striving to provide better services and quality power to its share of consumers. Again, as mentioned with open access looming large, it has become a necessity to provide value added services with no cost attached. In India, about 70% of the people live in rural village, so increasing the tariff would simply mean losing their grip. Six-sigma is just like “Aspirin” for these power distribution utilities. The six - sigma will help power distribution companies to enjoy the power of tangible & intangible benefits by:

* Reaching System Stability Index of 99.9998%
* Reducing Customer Dissatisfaction
* Improved Image
* Zero Breakdowns
* Increased Life of Equipments
* Increase in Company Revenue

The drive to supply power interruptedly to the customer should be driven from Top Management. The Top Level Management needs to redefine the strategy and set the objectives and targets accordingly. The revolution of six-sigma in India has yet to establish itself and there stand lots and lots of opportunities to bring change in the way the power distribution utilities function.


SIX ESSENTIAL ELEMENTS FOR PROPER IMPLEMENTATION OF SIX – SIGMA

Deployment of six – sigma projects is no child’s play. All said and done, proper deployment is necessary and is the vital part to ensure the power distribution utilities to the reach up to the sigma level of quality.

A) Management Commitment – Management needs to be committed after taking the initiative of implementing six – sigma projects. The concept is basically understood mainly by the senior people in the organization and is not driven to the people working at ground level and this creates the huge gap when performance results come to the fore. The management must reinforce the importance of six-sigma in their organization regularly so as to tune meet the targets set in the “define and measure” phase.

B) Synchronization with Organizational Strategy – In most cases, the six – sigma projects are not clearly linked with the organizational strategy. This has to be addressed in order to remain competitive. Linkage of initiative with the quality policy of the organization along with the mission and vision is very much important. The best way is to practice Balance Scorecard. This will help in identifying the improvement projects, which have greatest impact on strategic objectives to derive better business results both in terms of consumer satisfaction and revenue maximization.

C) Tracking Performance & Accountability – Six – Sigma initiatives tend to fail if there is no proper tracking of projects and the persons involved in these projects are not rewarded suitably. Organization must keep a close eye on the progress and performance of employees and identify the key responsible people, who are willing and able to drive the force of six – sigma.

D) Linkage with Ground Staff – A common mistake that is committed when a six – sigma project is initiated or handled without keeping in mind the financial gain aspect. The ground staff normally thinks that six – sigma would mean to improve quality of a particular process and they try their best but the effect becomes null and void because the end result is not conveyed to them. To avoid this problem, it is better to convey the estimated result with the price associated with the particular activity and what the ground staff stands to gain on completion of the project.

E) Human Resource - Identification of people, who are process oriented, drive decision making through data analysis and posses a willingness to learn and relearn. The team must constitute of persons, who posses in – depth knowledge of the business and the processes in hand. Proper training should be imparted to all employees to ensure proper functioning of the projects.

F) Flexible Approach – Six – Sigma is an approach and not a dish. People should be well adaptive. People, who are involved in this type of organization, must be prone to change and ready to adapt. Flexibility is the key to adapt to the changing environment. Employees should not be rigid or robust in his/her approach.


CONCLUSION

Six – Sigma has definitely made a difference across various organizations. People in these organizations are more dynamic and transparent as comparison to organizations which are managed like a proprietorship owned company. The methodology has encouraged teamwork and helped the company’s management to focus and refine its methods in achieving efficiency.

The power distribution companies must really think on these terms in order to enable better services to the customer. On the contrary, this business in India is monopolistic but as the new reforms and policies are made in this sector, this monopolistic market is going to die and people are going to enjoy the free market culture, where they will be able to buy power from any player in the market. Companies should prepare their employees from now onwards in order to gain competitive advantage and more market share once open access stands tall.

The players in the power distribution sector, which are already established and in the fluorescent stage must align their strategy with the current scenario in order to meet the customers’ requirement and delight its customers with better services.

The need for six – sigma for any power distribution company would prove a boon in the future. Six – Sigma would help these private players to adopt and not adapt and be reactive to situations. It would help them be proactive and this proactive attitude would ultimately help not only to quantify the expected results for any improvement project but also help these organizations ensure better quality in its process of operation thus leading to customer retention, satisfaction, earning revenue and finally remaining ahead in the competition.

Six-Sigma can be a big boon to power distribution utilities in India, as these private players are poised to go global. India is now marking its presence in the world globe as one of the best provider of services, so can’t power distribution utilities join the bandwagon. This approach will help the Indian Power sector to grow and unleash its potential globally and can compete in global market with other players like GE, Siemens etc.

Meet the Best Little House Builder in Texas

Source: Fast Company

Doyle Wilson rebuilt his company around the teachings of Deming and Toyota. Now he's the one doing the teaching.

Doyle Wilson believes you can build a fast company in a slow industry. He should know: his company changed the game in an industry that's neither glamorous nor high-tech, but that touches millions of lives -- and that most people associate with missed deadlines, broken promises, and cost overruns.

Wilson is president and CEO of Doyle Wilson Homebuilder, Inc., a privately owned company in Austin, Texas. Last year, Wilson's operation built and sold 404 homes worth more than $56 million. This year he'll sell 430 homes at prices ranging from $70,000 to $300,000, generating gross revenues of nearly $60 million.

Doyle Wilson is not the biggest home builder in Texas, or even the biggest in Austin, but he's one of the most innovative -- in Texas or anywhere else. Two things distinguish his operation from the competition. First, he actually builds homes fast. His company is obsessed with finding ways to shave time off the construction process. Nine months ago, the average construction time for a Wilson home (from the moment the permit process begins to the day it's ready for occupancy) was 165 days. Today it's down to 124 days -- a reduction of 25% -- and still declining. Faster means cheaper: Wilson offers homes at a discount of as much as 10% off prevailing prices.

Second, Wilson takes management ideas seriously. He has rebuilt his entire company around the quality precepts of W. Edwards Deming and the lean-manufacturing principles developed at Toyota. Wilson's Web site (Editor's Note, May 2000: This site no longer exists.) is more than just a marketing tool; it's a primer on new business thinking.

All of which has made Wilson, 44, a minicelebrity. Last year, his company won the National Housing Quality Award, the Malcolm Baldrige Award for home builders. This spring, the Lean Enterprise Summit, a prestigious gathering of experts on world-class manufacturing, invited him to explain his company's transformation.

"Once you see what your limited vision has created, you understand there are huge opportunities," Wilson says.

Doyle Wilson got a quick start as a fast builder. As a student at the University of Texas in 1971, he formed his own roofing company. By the time he was a senior, the company had become one of the largest roofing contractors in Austin. After leaving school in 1972, he made the leap into home-building.

But Wilson's big breakthrough occurred in 1991 -- and it involved cars, not homes. Shopping for a new car, he ended up at an Austin dealership that practiced customer- satisfaction techniques based on Deming's principles of quality. Wilson signed up for a seminar led by Deming himself. Soon after, he discovered The Machine That Changed the World, the best-seller by an MIT research team that explained Toyota's "lean-production" system. Wilson saw the power of both approaches, adopted them, and reinvented his operation.

Wilson vividly remembers the day he sprung his agenda on the company: "I called a meeting of the management team and said, 'This is what has to be done. You guys lead the charge.'"

The reaction? "They said I was crazy, that I was throwing the company away. I just wanted to speed things up and drive out defects."

The transition wasn't easy. "I'd walk around the construction sites trying to drum up enthusiasm," Wilson recalls. "The workers would say, 'We can't do this, we can't do that.' I'd say, 'I like your can-do attitude. Let me know when it's done.'"

To move the change program forward, Wilson imported a number of techniques straight from the quality movement. Throughout the company's offices, he implemented the well-known "flag system." People responsible for certain aspects of the process -- architects, auditors, loan applicants -- hoist a flag as they deal with a specific step -- a red flag for a delay, a green one for a step that's going smoothly. He's now experimenting with flags on the building sites themselves.

Wilson also broadened the scope of his thinking. He realized that many construction delays happen long before the first nail gets hammered. So he went to Austin's building department to identify ways to speed up the permitting process. The result was more constructive relations with the city -- and a staggering decrease in permit-issue time, from 7-21 days to 24-48 hours.

Then Wilson tackled his supplier base. He reduced the number of suppliers and subcontractors from more than 100 to about 40, and worked closely with those who made the cut to slice lead times.

Doyle Wilson is pleased with his progress so far, but he knows there's a long way to go. "We operate under the principles of continual improvement," he says. "And continual improvement is all about continuing."

Sidebar: Can't You Hammer any Faster?
If speed were all that mattered, how fast could you build a home? Some years ago, the Building Industry Association of San Diego County sponsored a competition among builders to answer that question. The home had three bedrooms, two bathrooms, and was made from standard materials.

The fastest time: 2 hours and 45 minutes. How do you build a house in less than 3 hours? By forgetting everything you thought you knew about building a house. The winning team used 700 people divided into subgroups of carpenters, plumbers, electricians, and other tradespeople. For weeks, the teams practiced to find ways to accelerate the process. During the competition, the winners managed to complete the rough plumbing in 8 minutes and set the main roof in just over 9 minutes.

It was fun -- and the experience also generated useful insights. Which is why Professor Tom Malone, of MIT's Sloan School of Management, shows a video of the competition to his students and executive audiences. "I use it to illustrate the power of speed," Malone says. "Not just as a way of satisfying customers but of inventing whole new industries. It helps people free up their minds to think about how to build organizations for the 21st century."

Six Sigma at National Semiconductor

Source: Quality Digest


National Semiconductor's corporate Six Sigma director, Mark Seay (left), with his team: Lorena Dudman, Winnie Alvarez, Blaise Gomes and Andy Lutz


by Dirk Dusharme

Semiconductor fabrication is one of the most complex single-part manufacturing processes. From raw silica to packaged integrated circuit (IC), semiconductor fabrication involves more than 200 steps on 75 pieces of equipment, many taking place in a class-one clean room where no more than one particle of dust greater than 0.5 µm is allowed per one cubic foot of air. Yields, the amount of product that passes all tests and makes it into the field, can range from 40 percent for microprocessors to nearly 100 percent for mature, less complex parts. With all of these processes, isolating and reducing variables is a Herculean task--one that is perfect for Six Sigma.

Six Sigma at National Semiconductor
Odds are a National Semiconductor IC is within inches of you. It could be in your cell phone, your laptop, your display or any of a dozen electronic devices on your desk or in your briefcase. The Silicon Valley-based chip maker is a leader in analog integrated circuit technology--chips that translate real-world stimuli into digital information.

While National has always prided itself on the quality of its products--its field defective rate is less than 20 defective parts per million--like any company it saw room for improvement, particularly in the area of internal yield. This is why Kamal Aggarwal, executive vice president of National’s Central Technology and Manufacturing Group, mandated last year that all CTMG units would deploy Six Sigma.

“When Aggarwal became executive vice president of CTMG in 1996, his first effort was to improve CTMG’s top metrics: yield, cycle time and cost,” recalls Mark Seay, director of quality and corporate Six Sigma process director. “For the first four to five years that was the focus,” Seay explains. “We made huge progress and got to what would be considered world class in those three areas.”

The next big push came in 2000, with a large CTMG-wide continuous improvement (CI) effort. While the effort yielded good results, it suffered from inconsistency. Each unit--three wafer fabs in Texas, Maine and the United Kingdom; three assembly sites in Singapore, Malaysia and China; and the CTMG headquarters in Santa Clara, California--used its own methods to improve quality. “Everyone was kind of left to their own ways to figure out what [continuous improvement] meant,” recalls Seay. “Certainly there were a lot of improvements made. But it was hard to compare one site to another as far as CI activities were concerned.”

So in 2001, National Semiconductor invited GE Consulting to pitch the Six Sigma concept. The idea met the type of resistance encountered by many companies. All the employees felt that they were “already doing that,” Seay explains. From SPC to FMEA, National Semiconductor process engineers and quality personnel were already using Six Sigma tools and believed that they were “quite good at it,” says Seay. The consensus was that a Six Sigma program would bring nothing new to the table.

Six Sigma was put on the back burner for another year until, at the bi-annual CTMG Summit, Aggarwal brought in another consulting firm to reintroduce Six Sigma. Thomas A. Little Consulting had experience in high-tech processes (disk drive manufacturing) that had a lot in common with semiconductor fabrication and presented a compelling argument for Six Sigma when applied to the semiconductor industry’s highly process-driven manufacturing methods. This was enough to convince C.S. Liu, the senior vice president of National’s plant in Melaka, Malaysia, at the time, to launch a pilot Six Sigma program with 10 projects.

Nine months later at the next CTMG Summit, a key National Semiconductor supplier, DuPont Electronic Technologies, made a presentation on how to quantify Six Sigma. This, coupled with the results of the 10 Melaka pilot projects (initial savings of nearly $900,000 and projected annual savings of nearly $2.3 million) convinced Aggarwal to implement Six Sigma across CTMG. The first wave of projects began in June 2003. Since then, 52 projects have been completed with an 84-percent success rate, resulting in tens of millions of dollars in both hard and soft savings.

In March 2004, CTMG launched its second wave of Six Sigma programs, targeting similar savings from 44 projects. Four of these projects target issues that exist on multiple sites, while nine are aimed at customer satisfaction, quality or safety improvement.

Six Sigma in action
An example of one such wave two project was at National Semiconductor’s South Portland, Maine, facility, which produces advanced CMOS devices for such customers as Samsung, Motorola and Nokia.

The site saw an opportunity to improve yields on a 0.35 µm fabrication process (the smallest feature on the wafers is 0.35 µm) by finding and eliminating sources of variation in the manufacturing flow.

CTMG followed Six Sigma’s DMAIC protocol by taking the following actions. Some of the information is sensitive, so these figures are deliberately fuzzy.

Define
Problem--The fab was experiencing losses at the final electrical test (ET) operation that appeared to be related to excessive current leakage and gate oxide breakdown at the transistors level. A baseline study of this ET yield for an 18-week period at the start of the project showed that there was an opportunity for approximately 1.5 percent additional yield for all wafers in this technology.

Through experience with other technologies, the engineers at National’s South Portland plant knew that their fab was capable of world-class performance for this type of IC, and this yield gap meant that they were leaving more than $1 million in profit on the table.

Goals--Once the team, led by Stephen Swan, senior process engineering manager, and Burcay Gurcan, senior product engineer, had established the yield baseline, the site champion set the goal of eliminating the systematic yield loss caused by transistor leakage and gate oxide breakdown. In addition, the team was challenged with establishing a statistical process control plan for measurement of “critical-to-function parameters” in the process flow that could be used to prevent failing wafers from getting to the final ET step.



Measure
A Pareto chart of the reasons for failed wafers at electrical test identified three process modules that showed excessive variation in the fabrication process. These modules included the spacer formation, channel implants and post-implant acid cleaning steps. Other suspect areas, identified during the team’s brainstorming sessions, were eliminated by performing commonality studies on past events, discussing the issue with industry experts, and re-evaluating experiments that had been previously run.

Analyze
During the analysis phase, seven factors were determined to have an effect on the three key failure modes. Utilizing the design of experiments (DOE) function of JMP statistical software, the team developed three experiments to determine which interactions had the greatest effect on yield.

DOE 1--Transistor leakage between drain and source

Failure Modes: Silicon impurities, threshold voltage control, physical damage

Factors: VTN implant, spacer dep, spacer clean, spacer etch

DOE 2--P channel contact leakage

Failure Modes: Fixed charge, silicon impurities

Factors:

DOE 3--Gate breakdown voltage

Failure Modes: Plasma budget, silicon impurities

Factors: Alloy, spacer dep, spacer etch

Improve
Prior to running the DOEs, the team had already collected enough information to know that tighter controls were needed on certain in-fab process parameters in the transistor modules. By taking early action to put these controls in place, the team was able to realize some yield improvements after only two months. Once the DOE results came out, the team was able to validate the earlier actions and fully characterize the process window for these critical steps. In the improve step, the team leveraged the results of the DOE’s performed during the previous (analyze) step to make necessary changes to specs, procedures and equipment. These changes ensured that variation during the spacer, implant and acid cleaning steps wouldn’t affect yield at electrical test.

Control
To ensure that the process improvements developed by the team became permanent, a control plan was created and transferred to the manufacturing group. This control plan defined the requirements for every critical-to-function parameter in terms of control charts, control limits, sampling plans, gage capability and out-of-control action plans.

By implementing improved process control methods, the team was able to surpass the initial goal. Moreover, the higher level of performance generated by these process improvements has provided National’s designers with a competitive advantage in their efforts to develop new products for the analog marketplace.

Within six months of starting this project, actions taken increased yield by more than 1.5 percent, with a projected annual savings of $1.1 million. The project lasted about nine months.

The journey continues
CTMG isn’t finished with its Six Sigma journey; wave three was launched at the beginning of this year. The major emphasis will be in design for Six Sigma (DFSS). Pilot programs are underway to enhance the new product phase review system (NPPRS) with DFSS tools/methods in the audio product line. Lessons from that pilot will be used to drive NPPRS improvement across the entire company.

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Software Selection

Even with a company as large as National Semiconductor, which has more than 9,000 employees, resources aren’t unlimited. Choosing the right software to meet your needs can make Six Sigma projects run more smoothly and with less wasted time and manpower. During our interviews with National Semiconductor, we noted three software packages that helped CTMG’s Six Sigma projects. These aren’t necessarily the only packages capable of assisting a Six Sigma process, but they are what National Semiconductor considered the best fit for their applications.

Project tracking--Being able to track the progress of multiple Six Sigma projects across multiple sites worldwide would be a huge task without a bit of help. To keep abreast of project status, National Semiconductor utilizes ProjX from Breakthrough Management Group. The software provides CTMG immediate access to project status across all sites with real time dashboards and summary reports. The Web-based application helps centralize project information and make it available to all users via personalized user pages.

Process flo