Strategic Six Sigma
Business Improvement using
Strategic Six Sigma
©2002 by Business Strategies, All rights reserved.
Goals
f& 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
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©2002 by Business Strategies, All rights reserved.
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
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 3
Six Sigma
Input Process Output
KPIV KPOV CTQ
Customer
f& All work we perform is a process
f& The important outputs are called Key Process Output Variables or
KPOVs
f& The important inputs are called Key Process Input Variables or
KPIVs
f& Six Sigma is a Process for identifying factors, KPIVs, that drive
KPOVs
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 4
Six Sigma
Define
Define KPOV
D
Project
KPOV s are known
M
Measure
Organizational Wisdom connects KPIV s to KPOV s
Collect observational data to connect KPIV s to KPOV s
Passive
A
Cause and Effect not established
Analysis
Establish Cause and Effect relationship between KPIV s and KPOV s
Proactive
I
Learn to control KPOV s with KPIV s
Testing
KPIV s are understood
Control
C
Control KPIV s to give desired values for KPOV s
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 5
Design for Six Sigma
Product/
Business Mfg. Scale-
Process
Ideas Production
Case Up
Development
Customer
f& Design for Six Sigma (DFSS)
New Product/Process Development
Deliver a product that is right the first time
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 6
Six Sigma
Define
Allocate Develop Establish
Operational
Resources Incentive Plans accountability
Goals
Select Facilitate Define
Define a project Share Best
Champions Culture Communication
selection process Practices
and BB's Change Plan
Select key projects Identify
Support BB Motivate and
with Leadership Team
and Team Sustain Change
buy-in Members
Define Measure Analyze Improve Control Report
[e-mail]
©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 8
Executive
Steering
Champions
Teams
Project
Six Sigma
High Level Business Metrics
Operational Metrics f& High Level Business Metrics
Capital Utilization
Growth
Revenue
Profit
Return on Assets
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 9
Six Sigma
High Level Business Metrics
Operational Metrics
Quote Time
Operational Metrics
Quoting Margin
Close Rate
Defect Rates
Cycle Time
Waste
Days Sales Outstanding
On-Time Delivery
Product Dimensional
Inventory
Head Count
Etc.
[e-mail]
©2002 by Business Strategies, All rights reserved.
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
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 11
Strategic Six Sigma
f& Operational Metric
Product Yield Loss
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 12
Thousands
Strategic Six Sigma
f& High Level Business Metric
Economic Profit
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 13
Strategic Six Sigma
Business Goals Strategies High Potential Areas Projects
50%
Executives set
Reduce Costs
business goals and
identify appropriate
strategy
30%
Inc Revenue
Inc. Qtrly Streams from
High level managers
Profits 15% Existing
Customers can overlap with
Executives when
identifying strategies
20%
New Markets
Executive Planning and Process Identification
Management and BB Prj Selection
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 15
Strategic Six Sigma
f& 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
Order entry
& demand
Product
Mfg. Plant management
Distributor
data
Acceptable
or
Freight Carrier
package
data package
Customer
received
Correct:
Product
Supplier
Specified mat l
-product (perf.)
delivered
(RM s & Comp ts)
received on-time
-quality (consist.)
on-time &
-product (perf.)
& complete
-quantity
complete
Product shipped
-quality (consist.)
-on-time service
on-time &
-quantity
-pricing
complete
-on-time service
-pricing
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 16
Strategic Six Sigma
f& More detailed Supply Chain map to identify logistical issues
between plants and customers
Warehouse
Customer
D1 wks
or Market
Plant
C1 wks
Warehouse Customer
D2 wks or Market
Supplier Plant Plant Warehouse
A wks B wks C2 wks D3 wks
Customer
or Market
Warehouse
D4 wks
Plant
C3 wks
Warehouse Customer
D5 wks or Market
Time from Raw Material to Customer
Time from Raw Material to Customer:
A + B + C2 + C3 + D5
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 17
Bottom Up Operational Forecasting
B usiness G oals S t r at egies Hi gh P ot ent ial A reas P roject s
50%
Cust om er Credi t s: W r ong
$ 130 K
Losses P ricing/ P roduc t
Reduce Cost s
In c . Qt rly
L a t e D e live rie s
$ 7 2 k
P rofit s 15%
W a rr a n t y
$ 1 1 0 K
C us t om er
C o m p la in t s :
Q u a lit y
Executives can
A / R: DS O
$ 3 2 0 K
overlap with managers
and BB s when
Reduce P lant
Reduce Labor
O perat ing
$ 4 0 0 K
Co s t
E xpense
selecting HP areas
Reduc e E nergy
$ 1 2 0 K
E xpense
Reduce Y ield
$ 2 0 0 K
Loss
Managers and BB s
identify and select
W ar ehouse C ons olidat e
$ 5 5 0 K
Invent ory W arehous es
projects
S m oot h
C us t om er
$ 1 7 5 K
Ord e rs
Re d u c e Ra w Re -a s s e s s
$ 6 1 0 K
M a t erial C os t S p e c s
S econd S our ce
$ 1 8 0 K
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 18
Bottom Up Operational Forecasting
Smooth
Customer
$175 K
Orders
Reduce Raw Re-assess
$610 K
Material Cost Specs
Second Source
$180 K
30%
Marketing
Inc Revenue
Streams from
New Products
Existing
Customers
New Solutions
20%
Merger
New Markets Distribution
Develop New
Capabilities or
Products
[e-mail]
©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 19
Strategic Six Sigma
f& Strategic Six Sigma develops a business plan, executes and
provides feedback to the planning process
Define Measure Analyze Design Verify
Define Measure Analyze Improve Control
Work using DMAIC philosophy
Return Results to
Strategic Planning
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©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 20
Verify Impact
Strategic Planning
Summary
f& Six Sigma focuses on putting results on financial statements
Metrics  customer and internal
Infrastructure
f& Strategic Six Sigma can help implement a strategic or
operational plan
Control Charts for Business metrics
BUOF
f& Strategic Six Sigma incorporates other management initiatives
BUOF
Use Six Sigma methods to implement
[e-mail]
©2002 by Business Strategies, All rights reserved.
Strategic Six Sigma - 21