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Strategic Six Sigma

Business Improvement using


Strategic Six Sigma

2002 by Business Strategies, All rights reserved.

Goals

At the end of this presentation the audience


should be able to:

Explain how Six Sigma can be used to improve


business results
Explain how Strategic Six Sigma can help
implement a strategic or operational plan
Explain how Strategic Six Sigma incorporates
other management initiatives

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 2

Six Sigma

Six Sigma is a methodology for pursuing continuous


improvement in customer satisfaction and profit

Six Sigma is about putting Results


on Financial Statements
2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 3

Six Sigma
Input

KPIV

Process

KPOV

Output

CTQ

Customer

All work we perform is a process

The important outputs are called Key Process Output Variables or


KPOVs

The important inputs are called Key Process Input Variables or


KPIVs

Six Sigma is a Process for identifying factors, KPIVs, that drive


KPOVs

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 4

Six Sigma
D Define

Project

Define

KPOV

M Measure

KPOVs

Passive
A Analysis

Collect

Proactive
I Testing

Establish

C Control

are known
Organizational Wisdom connects KPIVs to KPOVs
observational data to connect KPIVs to KPOVs
Cause and Effect not established
Cause and Effect relationship between KPIVs and KPOVs
Learn to control KPOVs with KPIVs
KPIVs

are understood
Control KPIVs to give desired values for KPOVs

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 5

Design for Six Sigma

Business
Case

Ideas

Product/
Process
Development

Mfg. ScaleUp

Production

Customer

Design for Six Sigma (DFSS)

New Product/Process Development

Deliver a product that is right the first time

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 6

Project
Teams

Champions

Steering

Executive

Six Sigma
Define
Operational
Goals

Select
Champions
and BB's

Allocate
Resources

Define a project
selection process

Select key projects


with Leadership
buy-in

Define

Measure

2002 by Business Strategies, All rights reserved.

Identify
Team
Members

Analyze

Develop
Incentive Plans

Facilitate
Culture
Change

Define
Communication
Plan

Support BB
and Team

Improve

david@mbb.us

Establish
accountability

Share Best
Practices

Motivate and
Sustain Change

Control

Report

Strategic Six Sigma - 8

Six Sigma
High Level Business Metrics
Operational Metrics

High Level Business Metrics

2002 by Business Strategies, All rights reserved.

david@mbb.us

Capital Utilization
Growth
Revenue
Profit
Return on Assets

Strategic Six Sigma - 9

Six Sigma
High Level Business Metrics

Operational Metrics

Operational Metrics

2002 by Business Strategies, All rights reserved.

david@mbb.us

Quote Time
Quoting Margin
Close Rate
Defect Rates
Cycle Time
Waste
Days Sales Outstanding
On-Time Delivery
Product Dimensional
Inventory
Head Count
Etc.

Strategic Six Sigma - 10

Strategic Six Sigma

The use of Business, Lean, TOC, Six Sigma and


DFSS tools to develop and implement a strategic plan
to achieve the goals of the company

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 11

Strategic Six Sigma

Operational Metric

Thousands

Product Yield Loss

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 12

Strategic Six Sigma

High Level Business Metric


Economic Profit

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 13

Strategic Six Sigma


Business Goals

Strategies

High Potential Areas

Projects

50%
Reduce Costs

30%
Inc. Qtrly
Profits 15%

Inc Revenue
Streams from
Existing
Customers

20%

Executives set
business goals and
identify appropriate
strategy
High level managers
can overlap with
Executives when
identifying strategies

New Markets

Executive Planning and Process Identification


Management and BB Prj Selection
2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 15

Strategic Six Sigma

Use Corporate Supply Chain map to identify:

High Potential areas for strategies


Lean Enterprise can be used as a high potential way to satisfy

strategies; reduce cost, retain and gain new customers


Lab

Product
data
package

Supplier
(RMs & Compts)
-product (perf.)
-quality (consist.)
-quantity
-on-time service
-pricing
2002 by Business Strategies, All rights reserved.

Mfg. Plant
Acceptable
data package
received
Specified matl
received on-time
& complete
Product shipped
on-time &
complete

Order entry
& demand
management

Freight Carrier
Product
delivered
on-time &
complete

david@mbb.us

Distributor
or
Customer
Correct:
-product (perf.)
-quality (consist.)
-quantity
-on-time service
-pricing

Strategic Six Sigma - 16

Strategic Six Sigma

More detailed Supply Chain map to identify logistical issues


between plants and customers
Warehouse
Plant
C1 wks

Supplier
A wks

Plant
B wks

Plant
C2 wks

Plant
C3 wks

D1 wks

Customer
or Market

Warehouse
D2 wks

Customer
or Market

Warehouse
D3 wks
Warehouse
D4 wks

Warehouse
D5 wks

Customer
or Market

Customer
or Market

TimeTime
from
Raw
Customer
from
RawMaterial
Material to to
Customer:
A+ B+ C2 + C3 + D5
2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 17

Bottom Up Operational Forecasting


B u s in e s s G o a ls

S t ra t e g ie s

H i g h P o t e n t i a l A re a s

P ro je c t s

50%
C u s to m e r
Loss es

C re d it s : W ro n g
P ric in g / P ro d u c t

$130 K

L a t e D e l i ve r i e s

$72 k

R e d uc e C o s ts

In c . Q t r ly
P ro fi t s 1 5 %

W a rr a n t y

Executives can
overlap with managers
and BBs when
selecting HP areas
Managers and BBs
identify and select
projects

C us tom er
C o m p la in t s :
Q u a lit y

R e d u c e P la n t
O p e r a t in g
E xpens e

W a re h o u s e
In ve n t o r y

Reduc e R aw
M a t e ria l C o s t

2002 by Business Strategies, All rights reserved.

$110 K

david@mbb.us

A /R : D S O

$320 K

Reduc e Labor
Cost

$400 K

R e d u c e E n e rg y
E x pense

$120 K

R e d u c e Y ie ld
Loss

$200 K

C o n s o lid a t e
W a re h o u s e s

$550 K

S m o o th
C us tom er
O rd e rs

$175 K

R e -a s s e s s
S pec s

$610 K

S e c o n d S o u rc e

$180 K

Strategic Six Sigma - 18

Bottom Up Operational Forecasting

Reduce Raw
Material Cost

Smooth
Customer
Orders

$175 K

Re-assess
Specs

$610 K

Second Source

$180 K

30%
Inc Revenue
Streams from
Existing
Customers

Marketing
New Products
New Solutions

20%

Merger

New Markets

Distribution
Develop New
Capabilities or
Products

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 19

Strategic Six Sigma

Define

Measure

Analyze

Design

Verify

Define

Measure

Analyze

Improve

Control

Verify Impact

Strategic Six Sigma develops a business plan, executes and


provides feedback to the planning process

Strategic Planning

Work using DMAIC philosophy

2002 by Business Strategies, All rights reserved.

Return Results to
Strategic Planning
david@mbb.us

Strategic Six Sigma - 20

Summary

Six Sigma focuses on putting results on financial statements

Strategic Six Sigma can help implement a strategic or


operational plan

Metrics customer and internal


Infrastructure

Control Charts for Business metrics


BUOF

Strategic Six Sigma incorporates other management initiatives

BUOF
Use Six Sigma methods to implement

2002 by Business Strategies, All rights reserved.

david@mbb.us

Strategic Six Sigma - 21