1. OPERATIONS MANAGEMENT for MBAs Fourth Edition
Meredith and Shafer
Prepared by:
Al Ansari
Seattle University
John Wiley and Sons, Inc.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

2. Process Improvement: Minimizing Variation Through Six Sigma
Chapter 4
Process Improvement: Minimizing Variation Through Six Sigma
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

3. Business Process Design (BPD)
Nynex
Analyzed company in terms of four core processes
customer operations
customer support
customer contact
customer provisioning
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

4. Nynex continue Obtained services of Boston Consulting Group
Visited 152 companies to document best practices
Estimated savings are $1.5 to $1.7 billion
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

5. Business Process Design (BPD)
The fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance
Hammer, M. and Stanton, S. The Reengineering Revolution, Harper Business, 1995.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

6. Radical Profoundly change the way work performed
Not concerned with making superficial changes
Get to root
Get rid of old
Reinventing, not improving
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

7. Redesign BPD is about designing how work is done
Smart, capable, well trained, highly motivated employees mean little if the way work is performed is poorly designed
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

8. Process All organizations perform processes
Customers not interested in individual activities but rather overall results
Few of them are organized on the basis of processes
Thus, processes tend to go unmanaged
Team approach one way this addressed
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

9. Dramatic
Quantum leaps in performance, not marginal or incremental improvements
Breakthroughs in performance
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

10. IBM Credit Example
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

11. IBM Credit Example continue
Order logged by 1 of 14 people in conference room
Carted upstairs to credit department
Information entered into computer to check borrower’s creditworthiness
Results written on piece of paper
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

12. IBM Credit Example continue
Business practices department modified standard loan covenant in response to customer requests
Used its own computer system
Pricer keyed data into PC to determine appropriate interest rate
Administrator converted to quote letter and Fedexed to field sales rep.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

13. IBM Credit Example continue
Average time to process a request was 6 days
Could take as long as 2 weeks
Actual processing time 90 minutes
Deal Structurer
Turnaround time 4 hours
Number of deals processed increased 100 times with small reduction in head count
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

14. Six Sigma and the DMAIC Improvement Process
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

15. A Brief History of Six Sigma
The Six Sigma concept was developed by Bill Smith, a senior engineer at Motorola, in as a way to standardize the way defects were tallied.
Sigma is the Greek symbol used in statistics to refer to standard deviation which is a measure of variation.
Adding “six” to “sigma” combines a measure of process performance (sigma) with the goal of nearly perfect quality (six).
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

16. A Brief History of Six Sigma continue
In the popular book The Six Sigma Way, Six Sigma is defined as:
a comprehensive and flexible system for achieving, sustaining and maximizing business success. Six Sigma is uniquely driven by close understanding of customer needs, disciplined use of facts, data, and statistical analysis, and diligent attention to managing, improving, and reinventing business processes. (p. xi)
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

17. The DMAIC Improvement Process
Six Sigma projects generally follow a well defined process consisting of five phases.
define
measure
analyze
improve
control
pronounced dey-MAY-ihk
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

18. The DMAIC Improvement Process
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

19. Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

20. The Define Phase
The define phase of a DMAIC project focuses on clearly specifying the problem or opportunity, what the goals are for the process improvement project, and what the scope of the project is. Identifying who the customer is and their requirements is also critical given that the overarching goal for all Six Sigma projects is improving the organization’s ability to meet the needs of its customers.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

21. Benchmarking
Benchmarking involves comparing an organization's processes with the best practices to be found. Benchmarking is used for a variety of purposes, including:
Comparing an organization's processes with the best organization's processes.
Comparing an organization's products and services with those of other organizations.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

22. Benchmarking continue
Identifying the best practices to implement.
Projecting trends in order to be able to respond proactively to future challenges and opportunities.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

23. Quality Function Deployment (QFD)
Two key drivers of an organization’s long-term competitive success are the extent to which its new products or services meet customers’ needs, and having the organizational capabilities to develop and deliver such new products and services.
Tools for helping translate customer desires directly into product service attributes.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

24. Four Houses of Quality Customer requirements Technical requirements
Component requirements
Process deployment requirements
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

25. House of Quality Details
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

26. The Measure Phase
The measure phase begins with the identification of the key process performance metrics.
Once the key process performance metrics have been specified, related process and customer data is collected.
Two commonly used process performance measures, namely, Defects per Million Opportunities (DPMO) and Process Sigma.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

27. Defects Per Million Opportunities
Earlier it was noted that a literal interpretation of Six Sigma is 3.4 defects per million opportunities (DPMO). This may have caused some confusion for more statistically inclined readers, which we shall now attempt to reconcile.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

28. Defects Per Million Opportunities
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

29. Process Sigma
How sigma itself can be used to measure the performance of a process.
One way to measure the performance of a process is to calculate the number of standard deviations the customer requirements are from the process mean or target value.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

30. DPMO for Alternative Process Sigma Levels
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

31. Motorola’s Assumption the Process Mean Can Shift by as Much as 1
Motorola’s Assumption the Process Mean Can Shift by as Much as 1.5 Standard Deviations
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

32. Comparison of 3 Sigma Process and 6 Sigma Process
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

33. The Analyze Phase
In this phase our objective is to utilize the data that has been collected to develop and test theories related to the root causes of existing gaps between the process’ current performance and its desired performance.
See next slide Table 4.3 Common tools and methodologies in the Six Sigma toolset.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

34. Brainstorming The brainstorming approach:
Do not criticize ideas during the brainstorming session.
Express all ideas no matter how radical, bizarre, unconventional, ridiculous, or impractical they may seem.
Generate as many ideas as possible.
Combine, extend, and/or improve on one another’s ideas.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

35. Brainstorming: Actions to Enhance Team Creativity
Create diversified teams.
Use analogical reasoning.
Use brain writing.
Use the Nominal Group Technique.
Record team ideas.
Use trained facilitators to run the brainstorming session.
Set high standards.
Change the composition of the team.
Use electronic brainstorming.
Make the workplace a playground.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

36. Cause and Effect Diagrams
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

37. Process Capability Analysis
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

38. Process Capability Analysis continue
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

39. The Improve Phase: Design of Experiments (DOE)
OFAT and 1FAT - one factor at a time.
Shortcomings
Not typically possible to test one factor at a time and hold all the other factors constant.
Not possible to account for interactions or joint variation between variables (Figure 4.16).
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

40. Design of Experiments (DOE)
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

41. DOE: continue
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

42. DOE: continue
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

43. DOE continue
Some of the major considerations associated with DOE include:
Determining which factors to include in the experiment.
Specifying the levels for each factor.
Determining how much data to collect.
Determining the type of experimental design.
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

44. Taguchi Methods Design for Manufacturability (DFM)
Procedure for statistical testing to determine best combination of product and transformation system design that will make output relatively independent of normal fluctuations in the production system
Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma

45. Copyright
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Chapter 4: Process Improvement: Minimizing Variation Through Six Sigma