LEAN SIX SIGMA

The Secret of Success behind

Fortune-500 Companies

Asian Institute of Quality Management

(AIQM)

* India * Kuwait * Malaysia * Oman

* Saudi Arabia * UAE

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TYPES OF ORGANIZATIONS WHO USE
LEAN SIX SIGMA TODAY

 AIRLINES
 ARMY, NAVY, POLICE
 AUTOMOBILE
 BANKING, INSURANCE, OTHER FINANCIAL SERVICES
 CALL CENTERS, BPO, KPO
 CONSTRUCTION
 ELECTRONICS
 ENGINEERING
 IT / SOFTWARE
 FOOD AND BEVERAGE
 HEALTHCARE / MEDICAL DEVICES
 LOGISTICS
 PETROLEUM / PETROCHEMICALS
 PLASTICS AND CHEMICALS
 TELECOMMUNICATIONS
 AND MANY OTHERS.
 WHAT IS SIX SIGMA?
A PROCESS-IMPROVEMENT METHODOLOGY
DEVELOPED BY MOTOROLA (IN 1986) TO REDUCE DEFECTS
IN THE ORGANIZATION’S ACTIVITIES – THEREBY
INCREASING SATISFACTION OF ITS CUSTOMERS.

 WHAT IS LEAN SIX SIGMA?

A MODIFIED FORM OF SIX SIGMA WHERE THE

ORGANIZATION NOT ONLY REDUCES DEFECTS BUT ALSO
ELIMINATES VARIOUS TYPES OF WASTES IN ITS
PROCESSES.

TODAY, LEAN SIX SIGMA IS USED AS A BUSINESS

MANAGEMENT STRATEGY TO:
* INCREASE CUSTOMER SATISFACTION
* IMPROVE PROFITS
* STAY AHEAD OF COMPETITION.
WHY LEAN SIX SIGMA?

IN CURRENT SCENARIO OF GLOBAL

COMPETITION CUSTOMERS HAVE VERY HIGH
EXPECTATIONS.

LEAN SIX SIGMA HELPS US TO:

* REDUCE DEFECTS

* ELIMINATE WASTE

* ACHIEVE ON-TIME DELIVERIES

* INCREASE SATISFACTION OF CUSTOMERS

* REDUCE COSTS.
 SIX SIGMA HISTORY
 MOTOROLA – 1986: FIRST IN THE WORLD TO
 USE SIX SIGMA APPROACH

 ESTABLISHED A WAY TO MEASURE QUALITY

– TO IMPROVE QUALITY OF ANY PROCESS,
WE MUST BE ABLE TO MEASURE IT.

 DEVELOPED A SIGMA LEVEL SCALE WHERE

1.0 SIGMA REPRESENTS 69% DEFECTS AND
 6.0 SIGMA REPRESENTS 0.00034 % DEFECTS.

 ORGANIZATION’S GOAL IS TO ACHIEVE

A 6.0 SIGMA LEVEL FOR ALL ITS IMPORTANT
PROCESSES.
WHAT IS GOOD ENOUGH?

 A FOOD MANUFACTURING IS PRODUCING AT A

SPEED OF 200 BOTTLES PER MINUTE
 THIS LINE IS RUNNING FOR 12 HRS A DAY,
FOR 300 DAYS A YEAR
 TOTAL PRODUCTION WILL BE 43,200,000
BOTTLES
 AT 99.9% DEFECT-FREE OPERATION, YOU WILL
PRODUCE

43,200 43,200 POTENTIAL

DEFECTIVE = LOST CUSTOMERS
PRODUCTS PER YEAR
 :SIGMA LEVELS & DPMO:

DEFECTS PER % DEFECTS SIGMA LEVEL

MILLION
OPPORTUNITIES
FOR ERROR

6,90,000 69.00 1.0

3,08,000 30.80 2.0
66,800 6.68 3.0
6,210 0.62 4.0
230 0.023 5.0
3.4 0.00034 6.0
TYPICAL SIGMA LEVELS IN INDUSTRY –
MOST BUSINESSES ARE AROUND 3.0 SIGMA

Sigma Quality Level with various services

IRS – Tax Advice(Phone-In)
PPM
Restaurant Doctor Prescription Writing
1,000,000 Bills
Payroll Processing
100,000
Wire Transfers
10,000
Airline Baggage Handling
1,000 Purchased
Material
100 Lot Reject Rate Best-in-Class
10
Average Domestic
Company Airline Flight
1 Fatality Rate
1 2 3 4 5 6 7 (0.43 PPM)
Sigma Scale of Measure

A Sigma rating indicates the ability of a process to perform without

defects
WORLDWIDE SPREAD OF SIX SIGMA:

1986 - Motorola
1989 - IBM
1991 - Kodak, DEC
1993 - ABB
1995 - GE Financial Services, Allied Signal
1997 - Dow Chemical, Dupont, NEC, Samsung,
LG Electronics, Sony, Toshiba, Whirlpool
1999 - American Express, J&J, Ericsson, NCR,
Nokia, Philips, US Postal Service
 MORE THAN 53% FORTUNE-500 COMPANIES AND
ABOVE 82% FORTUNE-100 COMPANIES ARE THERE
TODAY BECAUSE THEY RELY ON SIX SIGMA.
COST OF POORLY
PERFORMINGPROCESSES:

 Consider a company operating at 3.3 sigma level:

* Annual sales are $100 million

* Operating income is $10 million
* Cost of quality for such a company is seen to be
roughly 25% of the annual sales i.e. $25 million.

 If this same company could reduce its cost of

achieving quality by 20%, the operating revenue will
increase by $5 million i.e. 50% of the current
operating income.
FINANCIAL IMPACT OF SIX SIGMA
/ LEAN SIX SIGMA

GENERALLY IT IS SEEN THAT IF ORGANZATION INVESTS

RS. ‘X’ TOWARDS REDUCING DEFECTS / MISTAKES AND
ELIMINATING WASTE & RE-WORK …….

IT WILL GAIN RS. 20X TO 50X IN TERMS OF

SAVINGS DUE TO:

* PREVENTION OF SCRAP & RE-WORK

* ON-TIME DELIVERIES
* HIGHER CUSTOMER SATISFACTION
* HIGHER SATISFACTION OF OTHER
STAKEHOLDERS
Financial impact of Six Sigma

•$1.5 Billion in 1999

•Average of $600M/year since 1995

•$3 Billion in savings since 1995

•$1.5 Billion in 1999

•$85M early 2000

•$2.5 Billion in 1999

HOW LEAN SIX SIGMA IMPLEMENTATION
BENEFITS MFG. & SERVICE BUSINESSES

 DEFECTS AT CUSTOMER LEVEL ARE REDUCED

SUBSTANTIALLY – INCREASES SATISFACTION OF
BOTH EXTERNAL & INTERNAL CUSTOMERS.

 FOCUS CHANGES FROM “PRODUCT EXCELLENCE’

TO “PROCESS EXCELLENCE”.

 PEOPLE STOP HIDING MISTAKES AND WORK TOWARDS

PREVENTING MISTAKES IN FUTURE.

 PROCESS-MAPPING AND VALUE ANALYSIS HELPS TO

REDUCE WASTAGES IN THE ORGANIZATION.

 SUBSTANTIAL IMPROVEMENT IN PROFITABILITY

FOR THE ORGANIZATION.
HOW KNOWLEDGE OF LEAN SIX SIGMA
BENEFITS MANAGEMENT STUDENTS

 CHANGE IN MINDSET – A NEW WAY OF LOOKING AT

PROBLEM SOLVING AND PROCESS IMPROVEMENT

 TODAY MANY ORGANIZATIONS PREFER TO HIRE GREEN

BELT CERTIFIED MBAs
(E.G: PATNI, SKF, GE, MARICO)

 OPPORTUNITY TO BE INVOLVED IN LEAN SIX SIGMA

PROJECT DURING SUMMER PLACEMENT

 OPPORTUNITY TO BE INCLUDED IN LEAN SIX SIGMA

PROJECT ON JOINING A JOB

 HIGHER VISIBILITY IN THE EYES OF SENIOR

MANAGEMENT

 FAST TRACK GROWTH IN CAREER & EMOLUMENTS

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 Some Myths About Lean Six Sigma:

 Myth –1:
It is only for people in the role
of Quality and Operations (Production) ….
FACT:
Defects (Mistakes) & Wastages occur in every department
of an organization - Sales, Marketing, Retail, Finance, HR,
Purchase, Administration, etc.

 Therefore, everyone in the organization has a role to play

in terms of reducing defects and eliminating waste.

 IT MEANS THAT:
LEAN SIX SIGMA APPLIES TO ALL FUNCTIONS

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 Some Myths About Lean Six Sigma:

 Myth –2:
It is another technique for improving quality

FACT:
Lean Six Sigma is a new way of managing the
Organization and Consistently Improving
Profitability despite growing competition and
recessionary trends.

TODAY MANY AMERICAN UNIVERSITIES HAVE

INCLUDED LEAN SIX SIGMA IN THE MBA
CURRICULUM

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 Some Myths About Lean Six Sigma:

Myth –3:
Six Sigma is only for very large organizations

FACT:

Six Sigma uses “people-power” and “data-based”

decision making.

EVEN SMALL ORGANIZATIONS CAN BENEFIT GREATLY

BY USING THE TOOLS AND TECHNIQUES OF LEAN SIX
SIGMA.


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HOW WILL LEAN SIX SIGMA GET IMPLEMENTED?

• TRAINED BLACK BELTS AND GREEN BELTS

WILL FORM PROJECT TEAMS LED BY
A CHAMPION (PROCESS-OWNER)

THEY WILL WORK ON PROBLEMS THAT CAUSE

PAIN TO OUR ORGANIZATION AND CUSTOMERS.

THESE TEAMS WILL USE DMAIC METHODOLOGY

TO FIND PERMANENT SOLUTIONS FOR SUCH
PROBLEMS
WHAT IS DMAIC?

DMAIC IS A STRUCTURED APPROACH TO SOLVE

PROBLEMS & IMPROVE PROCESSES.

THE STEPS ARE:

 DEFINE
 MEASURE
 ANALYZE
 IMPROVE
 CONTROL
DMAIC – AT A GLANCE
Define Measure Analyze Improve Control

Voice of Identify the Analysis of the data Finalize Best Standardize

Critical X’s collected using tools Solution – Documentation
Customer
like: Actions for for improved
(V.O.C)
Improvement process
Prepare the * Fishbone
(Breakthrough
Data Collection * Pareto Chart
Benchmarking & Continual)
Plan * Histogram
Train people as
to measure the * Check Sheet
per the new
Kano Model Critical Y’s and * Scatter Plot FMEA for Risk
Documentation
the Critical X’s * Box Plot Assessment &
* Correlation Risk Reduction
Identify the
Analysis
Calibrate the Develop
Critical Y’s * Regression
measurement Monitoring
Analysis Pilot Trial of the
system Systems
Solution –
Project Charter (Dashboards)
Analysis of Flow Verification
Collect the Charts & Process
SIRPORC baseline data Maps
Prepare Audit
to know Full Scale
Plans
‘current’ Implementation
Find Root causes
performance of - Validation
the process
Handover the
Generate Multiple
new process to
Solutions Authentication
Champion
of Savings
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EXAMPLES OF LEAN SIX SIGMA PROJECTS:

MARKETING
 Reducing cycle-time of the sales process
 Increasing revenue from sales of maintenance /
repair services
 Reducing internal delays in handling customer
orders / requests
 Reducing cycle time for collections
 Reducing variation in sales-forecasts.
 Reducing errors in KYC (Know Your Customer)
process for banks, insurance companies, stock-
brokers, etc.
EXAMPLES OF LEAN SIX SIGMA PROJECTS:

HR:

 Reducing Time taken to Resolve Complaints of

Internal Customers
 Reducing time taken to Recruit manpower
 Reducing cost of Recruitment and Induction
 Increasing Effectiveness of Induction Training
 Reducing employee attrition
 Improving effectiveness of specialized training
programs
EXAMPLES OF LEAN SIX SIGMA PROJECTS:

FINANCE:

 Reduction in time taken to close books

 Reducing errors in data entry processes
 Improving the reconciliation processes
 Time taken to Resolve Customer Complaints
 Reducing delays / errors in submission of
financial reports to top management
 Effective implementation of performance
measurements
 Reducing cost of electronic financial
transactions
EXAMPLES OF LEAN SIX SIGMA PROJECTS:

PRODUCTION / OPERATIONS:

 Eliminating Accidents / Increasing Safety

during operations
 Reducing Rejections / Rework during operations
/ production
 Improving Accuracy of Production Output
 Reducing Production / Operational cycle times
 Optimizing Manpower Utilization
 Optimizing Machine Utilization
 Reducing Downtime of machines / equipment
EXAMPLES OF LEAN SIX SIGMA PROJECTS:

SUPPLY CHAIN MANAGEMENT:

 Increasing Safety during operations

 Reducing errors related to shipments
 Reducing inventory turns
 Optimizing number of shipments
 Reducing supplier lead times
 Reducing obsolete inventory
 Improving accuracy of forecasts
 Optimizing maintenance of rolling equipment
 Reducing freight charges
 Reducing product transfers between facilities
GENERAL GUIDELINE FOR
PROJECT SELECTION:

EVERY LEAN SIX SIGMA BLACK BELT

PROJECT MUST RESULT IN
PROFITS / COST SAVINGS OF
MINIMUM RS. 2.0 MILLION PER YEAR.
SUMMARIZING THE POWER OF LEAN SIX SIGMA
• Provides a world class business strategy
• Encourages a common vision and common
language shared by all
• Promotes teamwork and rewards measurables
• Combines breakthrough goals with a method
and a set of tools
• Creates better knowledge leading to:
- Improved cycle times
- Reduced defects
- Lower costs.

Better products and services

delivered faster and at lower cost
=
Improved Customer Value