Lean Six Sigma Define Phase - Breakthrough Performance ...

1

Opportunity Identification/Project Selection

Project Charter Preparation

Team Selection

Project Leadership Roles & Responsibilities

High Level Process Mapping

Voice of the Customer Identification and Analysis

Cost of Poor Quality Analysis

2

Champion Define Phase:◦ Value Stream Map

◦ Project Selection Matrix

◦ Project Charter

◦ Stakeholder Analysis

◦ High level process map

◦ Project plan

3

Team Define Phase:◦ SIPOC

◦ Voice of the Customer Plan

◦ SWOT Analysis

◦ Critical to Quality Tree

◦ Cost of Poor Quality Analysis

4

Phase Objectives Key Activities Possible Tools and Techniques Key Deliverables Document the problem statement and establish the charter. Demonstrate alignment with the Business metrics and strategies. Determine Customer requirements and performance standards.

▪ Select Team with Champion

▪ Develop problem statement

▪ Develop Charter ▪ Create SIPOC ▪ Address gap between VOC

and process ▪ Estimate financial benefits

▪ Problem Statements ▪ Project Charter ▪ SIPOC map ▪ COPQ or CODND ▪ Communication Plan

Develop a reliable and valid measurement system of the business process to effectively evaluate the success of meeting customer requirements.

▪ Obtain Customer requirements

▪ Create overall project plan ▪ Develop measurement

plan & compile project metrics

▪ Determine defect tracking requirements

▪ Assess baseline performance-estimate process capability

▪ Measurement Systems Analysis

▪ Process Description ▪ Project Plan & Timeline ▪ Metrics and collection plan ▪ Baseline Performance results ▪ Process capability analysis ▪ Lean Tools Assessment ▪ Measurement Systems

Analysis ▪ Process model – ‘as is’

Utilization of data techniques to gain insight into process. Divide data into groups based on key characteristics and assess the root causes of errors and poor performance. Determine where to focus efforts for improvement.

▪ Statistical tests / tools ▪ FMEA ▪ Pareto chart ▪ Correlation/Regression ▪ Fishbone Diagram ▪ Box plot ▪ Hypothesis Testing

▪ Describe findings – identify potential root causes RCA

▪ Validate findings

▪ Data relationships ▪ Validated Key Input Variables

(KPIVs) & Key Output Variables (KPOVs)

▪ Prioritize sources of variation ▪ root causes

▪ Identify & communicate potential improvements

▪ Summarize benefits & annualized financial benefits

Identify key change opportunities and proactively test for optimization. Develop implementation and communication plan including a change management approach to assist the organization in adaptation of the improvements.

▪ Design of Experiments – describe purpose & build test/ analysis strategy

▪ Evaluate and Confirm results

▪ Analyze KPIVs ▪ Create action plan for

implementation including change management and communication needs

▪ Buy-in assessment

▪ Quantified relationship between key

input and key output variables ▪ Defined process improvements

including impacts and benefits ▪ Implementation Plan ▪ Process model – ‘Should be’ ▪ Impacted Employees are Trained

Definition of optimal process settings and conditions with specified metrics. Implementation of improvements with a control plan to assess & maintain gains.

▪ Implement improvements ▪ Evaluate results ▪ Integrate & manage

improvements in work processes

▪ Complete closure activities

▪ Document process change ▪ Control plan ▪ Determine new process capability ▪ Leverage opportunities for replication ▪ Communicate results ▪ Financial audit ▪ Hand-off to process owner

1.0 Define

Opportunity

2.0 Measure

performance

3.0 Analyze

Opportunity

4.0 Improve

Performance

5.0 Control

Performance

5

Six Sigma Process Improvement Road Map

1

Migration e-Pro Process ImprovementProject Charter

Project Description Error corrections and clarification of benefits are generatingrework throughout the migration and case installationprocesses, accounting for 20% of the total number of e-Prochange transactions. It is estimated that the volume of errorand rework will grow proportionally as the number ofaccounts migrating by 1/1/2004 increases, driving aproportionate increase in cost and potentially dissatisfyingcustomers.

Start Date April 1, 2003

Completion DateScheduled to be completed by September 5, 2003

Baseline Metrics For 1/1/03 migrated accounts:National Accounts- Average number of change transactions: 14.3, of which

2.9 are due to error and rework- Average hours of rework: 309 hoursRegional Accounts- Average number of change transactions: 8.0, of which

1.6 are due to error and rework- Average hours of rework: 137 hours

Primary Metrics 1. Total e-Pro change transactions2. Percentage of change transactions due to error and

benefits clarification3. Average rework hours per error and benefits clarification

Secondary Metrics none

Goal Reduce error and rework in the migration process by 50%starting with 1/1/04 migrating accounts

Customer Customer migration survey results

Financial CODND (Cost of Doing Nothing Differently)4

th Qtr 2003: $500K

Year 2004: $2.5M

Ben

efits

Internal Productivity Estimated cycle time reduction of 18,868 hours (assuming195 accounts migrating 1/1/04).

Define April 1 – April 21, 2003

Plan Projects & Metrics April 14 – April 18, 2003

Baseline Project April 21 – May 2

Consider Lean Tools May12 – May 16, 2003

MSA May 19 – June 2, 2003

Wisdom of the Org. June 2 – June 6, 2003

Passive Analysis June 9 – June 20, 2003

Proactive Testing June 23 – August 4, 2003

Ph

as

e M

ilesto

nes

Control August 4 – September 5, 2003

SUPPLIER INPUT PROCESS OUTPUT CUSTOMER

Sales

Client / Policy HolderHR BenefitsCoordinator

Client Consultant

Third Party BenefitsVendor

Member

GO Decision

Policy Renewal Date

Summary of Benefits

AdministrativeRequirements

AccountOrganizational

Structure

Detail Benefits

Account DataLoaded in System

Member andDependentEligibilityInformationLoaded in System

Member ID Card

Client / PolicyHolder

Third Party BenefitsVendor

Member andDependent

Providers

Claim

Call

1. Conduct migration analysis

2. Complete account profile

3. Load account structure in system

4. Set up and validate account benefits in system

5. Produce account eligibility record

6. Load account data in product claim engines

0Subgroup 10 20 30 40

0

10

20

30

Ind

ivid

ua

l V

alu

e

Mean=10.98

UCL=26.81

LCL=-4.854

0

10

20

Mo

vin

g R

an

ge

1

R=5.952

UCL=19.45

LCL=0

Total e-Pro Change Transactions by Account from Sep 2002 thru Mar 2003Conduct

Analysis

Create Implementation

Guide

Expert Team

Meeting

Draft

EPRO

Draft

e-

PRO

Release e-PRO

Record

e-

PRO

Impl.

Guid

e

Update

EPRO

OK For

Release

to Vendor

Track

Systems

Loads

IMPLEMENTATION

ERW

From

Eligibilit

y

GO

Decisio

n

SALE

S

Set Up Client ID in

End State

Structure

Request

Codes

STRUCTURE

Complete

Structure

Inspection/Verify

with e-PRO

Get

Underwriting

Approval

Yes

No OK? Yes

No

Go back to

Rates

Structur

e in

CDB

No

Yes

Release

ATC

To Vendor

OK?

Review

Draft e-

PRORequest/Receive

Codes

Enrollmen

t File

CLIENT /CUSTOMERClient

Input

To Sales

Run Legislative

Tool

Check vs. e-

PRO

e-PRO

Redo?

Yes

No

YesOK?

Review

Draft

e-PROCreate

Codes

Legislative Tool

Review

BPC &

Class

Codes

To

Structure

BENEFITS

TS

ID Claim

Scenarios

Load Data into

Downstream

Systems

OK?Yes

No

Data

Engines

Loaded

(e.g ATC,

DocGen,

etc)

Test Scenarios

Check vs. e-

PRO

OK?No

Yes

Fix Claim

Errors

No

No

VOB

Yes

EPRO

Rework

CDB

From

Vendor

Member

cancelle

d

in

Legacy

Reformat

Client

Eligibility DataReview

Draft

EPRO

ELIGIBILITY

Receive Enrollment

Data

Match &

Merge

Load data in

CEO

Are

errors

resolve

d?

Fix Errors

YesNo Cancel

Member in

Legacy

Create

ERW

ERW

Eligibility

In CED

VENDO

R(ID

CARDS)

ID

Card

s

From

Benefit

s

Get

Underwriting

Approval

ERW To

Implementatio

n

ERW To

Implementatio

n

Create Client IDClient

ID

To

Structure,

Benefits,

and

Eligibility

Migration

Structure

Mapping Job

Aid

GO

Decision

To

Structure,

Benefits,

and

Eligibility

e-PRO

Rework

EPRO

Rework?

SMT linking

legacy

structure to

end state

To

Eligibility

CAIP

Processes shaded in green are specific to

migration

Processes out of scope, but critical to

Employer Services

Employer Services functional areas

OUT OF SCOPE

PROCESS STEPS

Production

Migration

Support

Cancel

Legacy

Structure

Elig.

Rework

e-Pro

Rework

Rework Loops highlighted in Red

10

100

50

0

Contracting

T4

-T1

PMHS

Overpayment

Process Data / Materials

PeopleTechnology

Ÿ Auth / Referral Info missing/incomplete/incorrect

Ÿ OI Info missing/incomplete/incorrect

Ÿ Member Eligibility Info missing/incomplete/

incorrect

Ÿ Benefit Info missing/incomplete/incorrect

Ÿ Provider Fee Schedule Info missing/incomplete/

incorrect

Ÿ Provider/Vendor TIN/SSN Info missing/

incomplete/incorrect

Ÿ Additional Information Necessary to Process

Claim

Ÿ Transaction/Codeset data excluded at gateway

Ÿ Standard Operating Procedures (SOPs)

Ÿ Claim Audit Process >$5K

Ÿ Second/Third Party Internal Review

(Medical Management, Claim Benefit

Build)

Ÿ iTrack - drives usage of paper reports to

sort older claims

Ÿ Skill Level of Processor

Ÿ Accessiblity of Site Coach/Training Staff

Ÿ Aggressive Productivity goals conflict with low

quality requirements

Ÿ Rushed Training Schedule

Ÿ Lack of up-training / reinforcement training

Ÿ Best Practice / Skill Training not conducted

Ÿ OJT training on SOP usage

Ÿ System Error During Processing

Ÿ Data Fallout

Ÿ Aurhorization Mis-Match

Ÿ System Restrictions - LPI Manual Calc

Ÿ Data Set Up Issues (eligibility, provider, benefits)

Ÿ Timeliness of Batch Processing

Ÿ Bank Acct Set-Up Delays

Ÿ Customer Touchpoints Delays

Ÿ Inappropriate assignment or missing hold codes

Ÿ Provider Mis-Match

Ÿ Transaction Limitations on data collected at

gateway

Manual Adjudication &

PMHS Provider Selection

- Manual

End

Manually check

provider/ vendor

on claim system

Check provider

data and claim

data against iView

image

Mismatch?Manually try to find

correct data

Found data

Correct data &

verify COB

Service request to

appropriate area

YES

NO

YES

iTrack

Verify in claim

screen and follow

COB Checklist

Attempt to

adjudicate claim

NO

Claim processed

Hold codes that

require further

research

NO

Re-open the claim

YES

Process will

depend on Hold

Code & SOP/ Job

Aid

CIRF

Attempt to resolve

all Hold Codes at a

line level

Resolve service

requests

Adjudicate claim

(manual or

systematic)

End

ID Task Name

1 DEFINE PHASE

12 MEASURE PHASE

13 Plan Project and Metrics

22 Baseline the Project

23 Select KPOV metric to track process output

24 Estimate process capability/performance at the 30,000-foot-level

25 Categorical failures

26 Create pareto chart

27 Rescope project to a large Pareto category

28 Repeat Baseline the Project steps 23 through 27

29 Non categorical failures

30 Revise estimate for COPQ/CODND

31 Project status update w ith executive sponsor

32 Consider Lean Tools

39 Conduct Measurement Systems Analysis (MSA)

40 Ensure data integrity

41 Perform Gauge R&R

42 Improve gauge


44 Wisdom of the Organization

55 ANALYZE PHASE

56 Use visualization of data techniques to gain insight to processes

57 Conduct inferential statistical tests and confidence interval calculations on individual KPOVs

58 Conduct appropriate sample size calculations

59 Conduct hypothesis tests

60 Describe statistical f indings to others using visualization of data techniques

61 Implement agreed-to process improvement findings


63 IMPROVE PHASE

65 d13 d

18 d

18 d

18 d

20 d

20 d

20 d

23 d

23 d

23 d

27 d

76 d33 d

69 d38 d

38 d

40 d

43 d

69 d48 d

61 d48 d

53 d

60 d53 d

60 d53 d

60 d53 d

60 d53 d

53 d

58 d

62 d

63 d

02 09 16 23 30 06 13 20 27 04 11 18 25 01 08 15 22 29 06 13 20 27 03 10 17 24 31 07 14 21 28 05

March April May June July August September Octob

PMHS

# of Audits

7,321

04/05/2003

# $'s

Under 300 4% Under 1,030,680$

Over 676 9% Over 2,303,562$

No $ Error 914 12% No $ Error -$

No Error 5,431 74% No Error -$

7,321 3,334,243$

A)SEVERITY B)OCCURRENCE

Probability

C)DETECTION

Probability

RISK

PRIORITY

NUMBER ACTION TO IMPROVE

Rate 1-10 Rate 1-10 Rate 1-10 RPN

10=Most

Severe

10=Highest

Probability

10=Lowest

Probability AxBxC A B C

Provider Mis-Match 10 8 9 720

Provider Data Incorrect/Incomplete 9 8 9 648

Data Fallout 9 6 10 540

Data Set Up Issues 9 6 10 540

Provider Fee Schedule Unclear 9 6 9 486

OI Information Needed 9 6 6 324

System Restrictions 6 6 9 324

Hold Codes 9 3 10 270

FAILURE MODE

Process Name: PMHS Claim Processing

Date: 6/30/2003 Revision Level: 3

REVISED VALUES

0Subgroup 10 20 30 40

0

10

20

30

In

div

idu

al

Valu

e

Mean=10.98

UCL=26.81

LCL=-4.854

0

10

20

Mo

vin

g R

an

ge

1

R=5.952

UCL=19.45

LCL=0

Total e-Pro Change Transactions by Account from Sep 2002 thru Mar 2003

Gage R&R http://www.aiag.org/ Part Number http://www.qimacros.com/free-lean-six-sigma-tips/aiag-msa-gage-r&r.html

Average & Range Method 1 2 3 4 5 6 7 8 9 10 Sum

Appraiser 1 Trial 1 0.65 1 3.250

Enter your data here-> Trial2 0.6 1

Trial3

Trial4

Trial 5

Total 1.25 2

Average-Appraiser 10.625 1 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

Range1 0.05 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

Appraiser 2 Trial 1 0.55 1.05 3.100

Enter your data here-> Trial2 0.55 0.95

Trial3

Trial4

Trial 5

Total 1.1 2

Average-Appraiser 20.55 1 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

Range2 0 0.1 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

Appraiser Trial 1

Enter your data here-> Trial2

Trial3

Trial4

Trial 5

Total

Average-Appraiser 3#N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

Range3 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A

EV (Equipment Variation)0.0332 Equipment Variation (EV)

%EV 11.3% 39.9% # Parts #Trials #Ops % of Total Variation (TV)

AV: (Appraiser Variation)0.02066 2 2 2 Appraiser Variation(AV)

%AV 7.0% 24.8% % of Total Variation (TV)

R&R (Gage Capability) 0.0391 Repeatability and Reproducibility (R&R)

%R&R 13.3% 47.0% NDC 11 % of Total Variation (TV)

PV (Part Variation) 0.2917 Part Variation (PV)

%PV 99.1% 350% % of Total Variation (TV)

Skewness0.41Stdev1.670.20Max6.20

The files for each phase are on your zip drive

The list of files for each phase is contained in the Excel file designated as [Phase] 0 – File List for Phases

6

7

Some files to help identify and prioritize projects◦ Define 13 - Generating Six Sigma Project Ideas

◦ Define 1 - Project Selection Matrix or Define 20 -Project Prioritizer

◦ Generic Define 14 - Project Selection Process

8

Develop a project charter around a problem or opportunity that aligns with organizational ◦ priorities

◦ critical performance metrics

◦ strategies

9

Determine customer requirements and performance standards

Living document utilized by the team

Utilize a format which works for your organization

10

Problem Statement ◦ including pain to the organization

Goal Statement ◦ including key improvement measurement and

date

Project Scope

Deliverables

Business Case

Team Members

11

Problem Statement◦ The problem and pain with the current process

A difficulty in writing the problem statement is what is often called supposition of cause.◦ Example: My car wouldn’t start because the battery is dead

and I was late to work.

◦ Problem with that above statement: If an improvement team were assembled, they would start with the battery as the major variable due to the problem statement.

12

A better problem statement is:◦ My car wouldn’t start causing me to be late for work by 2

hours.

Breaking down the above problem statement:◦ Problem: My car wouldn’t start

◦ Pain: causing me to be late for work by 2 hours

◦ If an improvement team were assembled, they would start with the car as a whole and gather some data and do analysis to figure out which component is the critical variable.

13

Be sure you can measure the problem – this

will be the primary measurement to assess the

impact of the improvement!

What is the problem?◦ My car wouldn’t start…

Where does the problem occur?◦ …in my garage… (a clue?)

When does the problem occur?◦ …in the morning… (a clue?)

How big is the problem?◦ …at least twice a week causing me to be 2 hours late to

work.

How do I know it is a problem?◦ My car has started for the last 3.5 years with no

problem. (past reliability record)

14

Goal Statement◦ Describes the teams improvement objective

◦ Begins with words like “reduce”, “eliminate”, “improve” or “control”

◦ Example: Reduce rework in print shop orders by 25% by December 31, 2014.

15

Specific◦ What we want to improve

Measurable ◦ What metric are we using?

Aggressive and Achievable ◦ Is this a stretch goal? Can we realistically

accomplish this?

Relevant ◦ To the problem at hand?

Time-bound◦ By what date?

16

Project Scope◦ Answers the following questions for the team:

Where does the process under investigation start? (List a specific step)

Where does the process stop? (A specific step)

What is inside of the project scope?

What is outside of the project scope?

17

Project Scope Examples:◦ Process Start: When print shop receives a hard copy of

order in hand

◦ Process Stop: When shipping ticket for order is

completed

◦ In-Scope: All internal customer orders

◦ Out of Scope: All external customer orders

18

Project Deliverables◦ Describes the teams long term, end results for

the project

◦ Are “works in progress” and may change over the course of the project

◦ Are not solutions for improvement

19

Ask these questions when developing the Project Deliverables◦ What end result(s) do you expect to achieve from

this project?

◦ What end result(s) does your steering committee and/or champion expect the team to achieve from this project?

◦ How do these expectations match your goal statement?

◦ Example: Documented improved process map for communication tool

20

Business Case◦ A good business case will answer the following

questions:➢ Why is the project worth doing?

➢ Why is it important to do now?

➢ What are the consequences of not doing this project?

➢ What activities have higher or equal priority?

21

Business Case◦ Connects the project to the Strategic Objectives

of the Organization➢ How will this project drive business initiatives and goals?

➢ Impact internal customers? external customers?

shareholders?

➢ What are the expected financial benefits?

• Example: By reducing our rework by 20%, customer satisfaction will increase by an estimated 85%. This will result in increased project demand and an additional $ 1.2 million of margin for 2014.

22

Project CharterProject Name:

Business Case:

Problem/Opportunity: Scope, Constraints, Assumptions:

Goal: Team Members:

Deliverables:

Preliminary Project Plan Target Date - Actual Date -

Define

Measure

Analyze

Improve

Control

Prepared by: Approved by:

23

Define 2 – Project Charter

Project CharterProject Name:

Date Chartered Start Date: Target Completion Date:

Project Team Phone & email Title

Process Owner Phone & email Title

Problem Statement & Business Case

(Problem & Pain)

Goal Statement

Decrease/improve __________ by x % by x timeframe

Project Scope

Process Start:

Process Stop:

In Scope:

Out of Scope:

Deliverables

- baseline current processes

-

-

-

24

Define 15 - Project Charter Template

25

Graphical representation of the major steps of the process to be improved

Generally no more than 3 to 6 steps

Helps to determine who is involved in executing the process

Helps to determine who should be on the team as process front-liners

26

Printing is scheduled

Team associate prepares needed

documentation

Client projectrequires

Printing and binders

Binderare ready for Client

Binders are

prepared with newly

printed materials

Printing is completed

27

Your boss is a stickler for being on time to work and wants you to arrive a few minutes before 8am so that you can get a good start (if you arrive too early then he would have to get there early to unlock the door). You have been working this job for 7 months and thought your arrival time would stabilize, but no matter what you do, your time varies seemingly each day and you need to do something about it before you get in to trouble (you are already being reprimanded for being late and don’t want to be let go). Being late also disrupts your co-workers jobs (you work on an assembly line where everyone starts at the same time). It takes about 45 minutes for you to drive to work. You could just get up earlier but you know that the traffic is heavier at that time so that doesn’t often help, plus if you are too early you would have to wait for your boss to unlock the door. You have tracked your arrival time over the past month and found that it varies from 13 minutes early to 8 minutes late. You have no idea why and have to correct it.

This scenario will be built on as we go through training; each successive tool will relate to previous tools

28

As a class, develop a 3-6 step Macro Map for the class exercise◦ Be sure to identify the start and finish steps of the

process

◦ This Macro Map will be used later when developing the “SIPOC” to help scope the process and understand the suppliers and customers of the process

◦ Take 5 minutes for this exercise and use sticky notes on the wall or a white board

29

30

Utilizing the high-level process map the Six Sigma Black Belt and the project Champion should select front-liners doing the steps of the process.

Remember team variation: ◦ Day, night, weekend shifts

◦ More and less tenure

◦ Experience level

◦ Positions

◦ Negative perceptions of the process to be improved

31

Define 16 - Team Member Selection

Team selection invitations should be delivered by the Project Champion to the team members director and receive their approval of the team members participation

Team members should be invited personally by the Project Champion or Black Belt

Have meeting dates and times readily available for the team member

32

Team Dynamics will be a major factor throughout the project

Team Stages will occur throughout Forming

Storming

Norming

Performing

33

➢ Be sure to identify the Process Owner when selecting team members.

➢ The process owner is responsible for maintaining the improved process once in the control phase.

➢ Start the team with the end in mind with every project

34

From your completed pre-work: Utilize either a paper or Excel version of the Project Charter to list the following critical project components:

1. Problem Statement

2. Goal Statement

3. Scope

4. Business Case

5. Deliverables

6. Team Member Roles

35

We will report out. Don’t be concerned if you don’t have a project

yet – this is a listen and learn exercise

Use the Define 2 – Project Charter Template in your Define Phase Files to complete the Charter on the Class Project Scenario

1. Problem Statement

2. Goal Statement

3. Scope

4. Business Case

5. Deliverables

6. Team Member Roles

Take 10 minutes for this exercise; be prepared to spend 5 minutes in class discussion

36

37

1. Attendance:

What are the attendance requirements for team members?

2. Participation:

What are the team member expectations for participation?

3. Interruptions:

How will interruptions during the team meetings be handled?

4. Preparation:

What level of preparation is expected for team meetings?

5. Timeliness:

What are the expectations for meeting start times, what type of

preparation is expected?

6. Conflict:

How will conflict between team members be resolved?

38

39

Review the Champion prepared Project Charter with the Team

Discuss the purpose of the Project Charter with the team

Allow time to discuss the project charter to make sure everyone is comfortable with the project problem & pain, goal statement, parameters and deliverables

40

Confirm with the team that the project parameters: ◦ process to be improved start step & stop step

◦ in-scope and out of scope variables

Discuss the purpose and that the Project Charter is a living document to be utilized by the team throughout the project

41

Vote on any amendments and communicate changes back to Project Champion for their approval (utilize consensus decision making)

Normally any project changes will involve scoping the process

Be prepared if you scope the project down to address the scoped out items in the full scale implementation

42

43

Customer of the process to be improved may include:◦ Internal and External customers

◦ Current, happy customers

◦ Current, unhappy customers

◦ Lost customers

◦ Competitor’s customers

◦ Prospective customers

44

A tool typically used to help indentify customers of the process to be improved is the SIPOC.◦ S ~ Suppliers

◦ I ~ Inputs

◦ P ~ Process

◦ O ~ Outputs

◦ C ~ Customers

45

S I P O C

Suppliers Inputs Process Outputs Customers

Provider

Input requirements

and measures Start:

Output requirements

and measures Receiver

High-Level Process Description:

End:

46

Define 6 – SIPOC Template

Steps and Questions to ask when completing a SIPOC:1. Begin with filling in the process to be improved

– utilizing the Champion Phase high level process map

2. Brainstorm all of the outputs of the process once it is performed

3. From each individual output, ask who is the customer of the output (who does the output affect)?

47

4. Switch to the other side of the SIPOC and ask: What do you need to complete the process?

think of supplies, equipment, resources,

technology, manpower, and information

5. Once you have identified the inputs needed to perform the process ask: Who supplies these

48

S I P O C

Suppliers Inputs Process Outputs Customers

Veteran

Presentation of

veteran's condition Provider initiates prosthetic consult Electronic consult Purchasing agent

Purchasing agent Electronic consult Review the request

Approved clinic for

appointment Clerk

Clerk

Open appointment

slots Scheduler creates appointment Booked appointment Mailroom

Mailroom Letter Appointment letter sent to veteran Mailed letter Veteran

PCAS Department "call document" veteran receives automated phone call Call/message Veteran

Veteran Appointment data Veteran is a show or no-show

49

Additionally you can add columns to the bottom of the SIPOC to identify:◦ Input, Process & Output Key Metrics in the area of:

Quality

Time

Cost

Identification of these metrics will lead to the data collection plan later in the Measure Phase

Input QualityMetric

Process QualityMetric

Output QualityMetric

Input Time Metric

Process Time Metric

Output Time Metric

Input Cost Metric

Process Cost Metric

Output Cost Metric

50

Stakeholders consist of any customer or supplier of the process that may be impacted by the improved project implementation

For non-team stakeholders it is recommended that:◦ Communicate with them early and often

◦ Work to get early buy-in on results

◦ Request regular input

51

List Project Stakeholders

Identify stakeholder relationship to project

Determine StakeholderCommunication Strategy

Assign a team memberto communicate withstakeholder

Project Stakeholder Analysis

Project Relationship Communication Strategy

Stakeholder:

Imp

acte

d b

y P

roje

ct

Can

in

flu

en

ce

pro

ject

Ou

tco

me

Con

ten

t/P

roce

ss E

xp

ert

Has d

ecis

ion

Au

tho

rity

Me

et

with

Reg

ula

rly

Invite

to

Me

etin

gs

Cop

y o

f m

inu

tes

No c

om

mu

nic

atio

n n

ee

de

d

Responsible for

Communication

52

Define 3 – Stakeholder Analysis Template

Use the stakeholder template (Define 3) as a guide to develop an analysis for the Class Project Scenario as a class (5 minutes)◦ Remember that there are project AND

communication relationships on any improvement effort

53

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Why?◦ We need to understand how our customers feel or

look at the current process.

◦ It’s strengths, weaknesses, opportunities for improvements and threats to the organization if we don’t improve the process

55

Surveys

Focus Groups

Interviews

Complaint systems

Market research

Shopper programs

56

Customer scorecards

Data warehousing

Customer audits

Quality function deployment

57

Focus

Group

Strengths

• Find out what works

• High customer interaction

• Clarify understanding

• Find out a group of customers needs

• Find out how a group of customers

focus on quality

• Good control over what you want to

find out

• Focused time allows more depth to the

questions

• Information directly from who you think

is important

• Can expand & clarify questions

• Can discuss new product ideas

Weaknesses

• Costly

• Participation could be

limited

• Sample size small

• No Randomness

• Long timeline to organize

• Feedback required to

attendees

58

Interview Strengths

• Immediate feedback

• Targeted information

• Opportunity to be thorough

• Real time data response

Weaknesses

• Customer is not anonymous

• There may be time constraints

• There could be no consistency

• Interviewed inconsistency

• Environment should be right

• Long time line for multiple

customers

59

Customer

Observation

Strengths

• Real time

• Leads to new information

• Identify process weaknesses

• Customer part of process

Weaknesses

• Customer time commitment

• May be intrusive to customer

• Observer Biasness

• You could interfere with customer

• Long time line for multiple customers

60

What do you feel are the strengths of the current ____________ process?

What do you feel are the weaknesses of the current _________ process?

What ideas do you have for improving the current ________ process?

What threats are there to the organization if we do not improve the current ________ process?

61

An analysis tool to gather all Voice of the Customer feedback in one place

Allows the team to see trends in Voice of the Customer feedback

Will drive information to the Critical to Quality (CTQ) Tree

62

Characteristics of the business that give it

an advantage

Characteristics that place the business at a disadvantage relative

to others

Elements that can be exploited to an

advantage

Elements in the environment that

could potentially cause trouble

63

Define 7 – SWOT Analysis Template

100% Sample if possible

Sample to include variation◦ example: night, day, weekend,

more and less tenure

Internal & External Customers

Long term customers who refer you business

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65

Customer Requirements are those things which the customers demand◦ Product (specs)

◦ Service/Experience (how they are treated)

Obtained in the Voice of the Customer processes

66

Once the team has conducted the Voice of the Customer (VOC) activities and obtained Voice of the Customer it is critical to analyze the VOC to determine customer requirements.

This can be done by utilizing the:◦ Core Process Drilldown Worksheet

◦ CTQ Analysis Tool

◦ CTQ Tree

67

Complaint Requirement Impacted Processes to review

You are taking too long to delivery

my materials and it impacts my

business’s cycle time

Customer wants delivery

within 15 days from date of

order

• Order entry

• Order processing

• Vendor delivery

• Manufacturing

Your prices are too high already

so I don’t like your latest price

increase. You are crippling my

profit margin

Customer wants special

pricing

• Vendor costs

• Operating costs

• Manufacturing costs

3rd Complaint

4th Complaint

Look at Customer Complaints68

Used to link the Customer CTQs from the SIPOC diagram to the KPOVs and KPIVs that will be measured in the process

◦ CTQ = Critical to Quality

◦ KPOV = Key Process Output Variable

◦ KPIV = Key Process Input Variable

69

BrakeRepairService

ServiceDelivery

Price

Convenience

Speed Service Time

Economical

Don'thave

to wait

Same day

Service

AverageUnder$300

ProvideRental

Car

CTQ Analysis Tree Example

Service or Product

Customer Focus

Needed Attribute

CustomerCTQ

70

Define 8 – CTQ Tree WorksheetDefine 21 – CTQ Tree Instructions

▪ Once the Critical to Quality Requirements are Identified use a KPOV Selection Matrix to Identify Appropriate KPOVs for each CTQ.

KPOV Selection Matrix:

Output Measures:

Coff

ee

Ord

er

to A

rriv

al T

ime

Coff

ee

Ord

er

Te

mp

era

ture

Coff

ee

Ord

er

Ta

ste

Ran

ge

Coff

ee

Ord

er

Vo

lum

e

Defe

ct R

ate

Customer Requirements (CTQs)

Quality Coffee in less than 3 minutes

Quality product at right temperature

Quality product at the right taste

Overall Customer Satisfaction

X - Strong relationship

M - Moderate relationship

O = No Relationship

71

Define 9 - KPOV Selection Matrix

Utilize a Core Process Drill Down Worksheet to help identify:◦ Customer Requirements

◦ Business Targets/Goals

Unmet Requirements and Target/Goals suggest specific, tactical improvement opportunities for immediate investigation.

72

Core Process Drill Down Worksheet

Customer Customer NeedCustomer

Requirements (CTQ)

Type of

RequirementMeasured By: Met or Unmet

73

Define 10 – Core Process Drill Down Worksheet

Quality Function Deployment (QFD) is used to link customer requirements to processes

It is also to integrate customer requirements into product and process design

74

Process Functions Order

Availability

Order

Entry

Part

Validation

Vendor

Ordering

Processing

Vendor

picks/

packs

Vendor

Ships

Order

CTQ

Rating

Customer Needs

Performance - Parts delivery

5 On-time delivery 9 45 9 45 9 45 9 45 9 45 3 15

4 Delivery requirements met 9 36 9 36 9 36 9 36 9 36 9 36

3 Reliability 9 27 9 27 9 45 9 27 9 27 9 27

5 Order Accuracy 0 0 9 45 0 0 9 45 9 45 9 45

Perceived Quality

3 No transportation damage 0 0 0 0 0 0 0 0 9 27 0 0

5 Correct Parts in Shipment 3 15 9 45 0 0 3 15 9 45 9 45

Convenience - customer service

5 Order status availability 9 45 3 15 0 0 9 45 0 0 0 0

Importance Totals 168 213 126 213 225 168

Control over suppliers is keyCTQ: 1= lowest; 5 = highest Relationship Strength: 0 = none; 1 = low; 3 = medium; 9 = high

Quality Function Deployment (QFD) –Type One

75

CTQ Customer Requirements

Process Requirements Order Entry Order Processing Ship order Invoicing

Performance

H On-time delivery 9 9 9 3

H Accuracy 3 9 3 9

Quality

H Specifications 3 9 3 3

15 151527

Quality Function Deployment (QFD) – Type Two

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77

Delighters – things that differentiate you from the competition

Satisfiers – things that make the customer happy as you do them better

Must Be – things that are expected

Customer Response Over Time

ExpectedBasic Desired Unexpected

. . ..

To Stay

Competitive you

must get to this

point ASAP !

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79

• Poor Quality affects many parts of the business• Productivity

• Waste

• Defects

• Purchased services, materials, and equipment

• Revenue

• Risk

80

Define 17 - Benefits Toolkit

• Poor Quality has 2nd and 3rd order effects on the Cost of Poor Quality• Example: Starbucks Coffee received customer

complaints about the quality of their coffee in regards to it tasting burnt

• 1st order of Poor Quality and subsequent cost was lost customers

• After Root Cause Analysis it was determined that retraining was a critical factor to preventing the failure mode in the future

81

• 2nd and 3rd order effects example (cont’d)• During retraining, a customer comes to

Starbucks during the 3 hours that they were closed for retraining across the nation and decides to visit a neighborhood coffee shop for the first time (2nd order effect)

• During the first-time neighborhood coffee shop visit the customer decides they like it better and now are a customer of the neighborhood coffee shop in lieu of Starbucks (3rd order effect)

82

Addit

ional C

ash D

iscounts

on

Accounts

Payable

Adm

in (C

&B)

Costs

of

Cla

ims /

C

redit

/ D

ebit

Tra

nsacti

ons

Benefi

ts N

ot

Easily Q

uanti

fied

Com

pensati

on a

nd B

enefi

ts

Dis

posal C

osts

on S

cra

p M

ate

rial

Expedit

ed F

reig

ht

Headcount

Cost

Avoid

ance

Impro

ved C

ash F

low

fro

m

Reducti

on in S

cra

p /

Rew

ork

In

vento

ry a

nd P

ast

Due R

eceiv

able

Bala

nce

Incre

ased S

ale

s f

rom

Im

pro

ved

Quoti

ng /

Lead G

enera

tion

Incre

ased S

ellin

g P

rice o

n

Corr

ecte

d B

illing

Incre

menta

l C

osts

to E

xecute

Incre

menta

l Revenue f

rom

C

apacit

y

Mate

rial Scra

p o

r Rew

ork

Cost

Oth

er

Manpow

er

Costs

Associa

ted

wit

h D

efe

ct

Resolu

tion

Oth

er

Opera

ting E

xpenses

Additional Cash Discounts on Accounts Payable

Admin (C&B) Costs of Claims / Credit / Debit Transactions x x

Benefits Not Easily Quantified

Compensation and Benefits

Disposal Costs on Scrap Material x xExpedited Freight

Headcount Cost Avoidance

Cost Avoidance from capacity creation (don't have to buy new

equipment)x

Headcount Reduction x

83

Define 18 - Secondary Cost Saving Matrix

Example in the relationship between a primary and a

secondary cost

• Poor Quality is reflected in:

• Operating & Capital Budgets

• Operating budget :

• Spent on operations to generate revenue

• Employee Wages & Benefits, Supplies and Utilities

• Capital budget:

• Useful life of greater than 1 Year*

• Land, Buildings & Major Equipment

• * organizationally specific

84

• The financial aspects of poor quality are often not investigated as thoroughly as one would think

• The process of understand the “true” cost of poor quality will come after data collection on the Key Process Output Variable and the Key Process Input Variables

• Early in the project we are able to take a “swag” at what we think is the current cost of poor quality

•85

• To take our “swag” we will need to understand the impacts to the organization based on the current process, then annualize it.

• Examples:

• Does the current process poor quality affect profit margins?

• Did we experience lost customers, resulting in lost market share and revenue?

• Did we have employee turnover, hiring costs and training costs due to turnover?

86

• Keep in mind: this early in the project we are simply trying to understand the financial aspects of our processes poor quality.

• Once we collect additional data in the Measure Phase we will fine tune our Cost of Poor Quality (COPQ) estimates and dig much deeper

• The COPQ quantification is a refining process as the project progresses and the team learns more

87

Poor Quality Area Affected Budget Affected

Customer Dissatisfaction

RevenueMarket Share

Operating BudgetCapital Budget

Lost time in the processor redoing work

Productivity Operating Budget

Outstanding Accounts Receivables due to errors in invoicing

Revenue Operating & Capital Budget

Time spent searching for equipment or supplies

ProductivityPotential Revenue if you lose

customers due to customer dissatisfaction

Operating Budget

Hold time on phone calls

Customer Dissatisfaction Operating & Capital Budget

Employee Dissatisfaction

ProductivityRevenueEmployee TurnoverHiring & Training

Operating

Others ?? ?? ??

88

•Known baseline data:•Average company is about 3.5-4 sigma•Defects per million at 3.5 is 22,700

•Example•Cost of defects - $20 each defects - $454,000•Profit margin 10% - Need about $4.5 MILLION in sales to cover the defects•If Sales overhead is an additional 10% - What is the added costs?•What is the cumulative costs? 1, 5 and 10 years•What is the NPV?•What is the FV? •What are the Opportunity Costs?•Based on the Opportunity Costs, what are the opportunities lost?

• What could you do with that in building your company?

89

Define Phase Cost of Poor Quality

COPQ Impact Areas

Known Failure Modes

within the Current

Process

Pro

du

ctivity I

mp

act

Pu

rcha

se

d

Ma

teria

ls

Ren

ted

or

Pu

rcha

se

d

Equ

ipm

ent

Pu

rcha

se

d

Se

rvic

es

Reve

nu

e Im

pa

ct

Ris

k

Em

plo

ye

e

Tu

rno

ve

r

Custo

me

r L

oss

1 $ $ $ $ $ $ $ $ $

2 $ $ $ $ $ $ $ $ $

3 $ $ $ $ $ $ $ $ $

4 $ $ $ $ $ $ $ $ $

5 $ $ $ $ $ $ $ $ $

6 $ $ $ $ $ $ $ $ $

7 $ $ $ $ $ $ $ $ $

8 $ $ $ $ $ $ $ $ $

9 $ $ $ $ $ $ $ $ $

10 $ $ $ $ $ $ $ $ $

11 $ $ $ $ $ $ $ $ $

Totals

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

$

-

90

Define 11 – Define COPQ Worksheet

As an example; on your project your team is aware that there is approximately 40 minutes lost each day spent searching for a tool. In addition, because that tool is not found your organization will rent one on an expedited basis.

◦ Productivity Impact lost 40 mins per day x 180 workable days (if 5 days/wk, 50 wks/year)

= 7200 minutes spent per year for one personmultiplied by 20 people utilizing the tool

= 144,000 minutes or 2,400 hours spent searchingmultiplied by $ 20 per hour = $ 48,000

91

In addition, because that tool is not found your organization will rent one on an expedited basis.

◦ Purchased Services Impact:

◦ from business case data in the project charter we know that:

= $ 62,000 is spent on this specific tools expedited delivery

and tool rental costs

92

From the basic information presented in the project charter before we even gather any measure data here’s what we know:

1. Annual Productivity loss of approximately $ 48,000

◦ due to this particular tool not being in the correct location or available when it is needed in the process

2. Annual Operating Expense of $ 62,000

◦ due to this particular tool not being in the correct location or available when it is needed in the process and an expedited tool rental occurs

93

From the perspective of Hard and Soft Savings and which budgets are affected:

1. Annual Productivity loss of approximately $ 48,000

◦ organizational specific but typically a soft savings

◦ more than likely it is multiple people and only small increments of time spread out over a year

◦ Only hard savings if a person (FTE) is eliminated

2. Annual Operating Expense of $ 62,000

◦ this is a hard savings because you can see a reduction in this item in the operating budget

◦ we will tie this metric to the budget line item number

94

Define 19 - Report Out Template◦ An example of a report out template for the DMAIC

Process

Define 4 – Ground Rules Worksheet◦ A list of ground rules for holding team meetings

Define 5 – Project Schedule Template◦ A Gantt Chart for helping you schedule the phases

of the project

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Champion Define Phase Checklist

97

Define 12 – Tollgate and Approval

Define Phase Comments

Have you made sure that the project aligned with the business goals/objectives?

Have you formulated a problem and goal statement? What are the process metrics (PPM,

DPMO, RTY, etc.)?

Have you scoped the project by identifying the process boundaries, supplier inputs, customer

inputs/requirements, constraints, and resource requirements?

Have you developed the business case for the project?

Have you completed a high level process map?

Have you selected the key players associated with the project (process owners, team members,

etc.)?

Have you identified the customer(s) - SIPOC, Stakeholder Analysis

Do you understand the Voice of the Customer (VOC) - SWOT, Customer Requirements?

Have you prepared a project timelines?

Developed a preliminary financial valuation?

Have reviews been conducted with the team and leadership?

Obtained the applicable authorization to begin the project (Champion, Process Owner, etc.)?

Project Team Define Phase Checklist

98

Define Tollgate Approval

Champion Approval Signature/Date:

Tollgate review approved unconditionally:

Tollgate review approved with the following contingencies:

Tollgate review dis-approved, list issues for resolution:

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Lean Six Sigma Define Phase - Breakthrough Performance ...

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