Lean Six Sigma Green Belt

Certification Program for Services

DEFINE & MEASURE MODULES

Rex Tuozo “The Six Sigma Guy”

Certified Six Sigma Master Black Belt
Certified Industrial Engineer
Certified PROSCI Change Management Practitioner
 Introduction

• Write down (1 ONLY each) what you think

you and your department could gain from
applying the concepts of this workshop

Time: 1 minute
WHAT’S IN IT FOR ME?
PERSONAL GAINS MY DEPARTMENT’s GAINS
1. 1.

2. 2.

3. 3.

2
 Training Objectives
As a result of this session, you shall:

1. Learn the key concepts of Lean Six Sigma.

2. Understand the flow and focus areas of the DMAIC

methodology.

3. Learn process improvement tools used on each phase of

DMAIC with hands-on exercises.

4. Practice some of the tools available on your assigned

projects and learn when to use them.

5. Have fun!

3
 SIX SIGMA GREEN BELT
CERTIFICATION

4
 Green Belt Certification

1. Complete the Training Course (100% Attendance).

2. Pass the evaluation tests (at least 60%):

– Practical group work- Simulation- 40 pts
– Written examinations (3 exams: 60 pts total)

3. Successfully Complete 1 Green Belt project.

– Achieve goal statement.
– Facilitate the “Six Sigma Circuit” & show proper use of DMAIC
methodology and tools.

4. Present in a Certification Review & Submit Storyboard.

5
 Why pursue Six Sigma certification?

1. Comparable to an advance business degree.

2. To display proficiency in Six Sigma be a key

change agent of the company.

3. Credibility indicator that can boost your career.

Juan de la Cruz, CSSYB

Juan de la Cruz, CSSGB
Juan de la Cruz, CSSBB
Juan de la Cruz, MBB

6
 Why pursue Six Sigma certification?

Six Sigma PH: Philippine Salary Survey 2017

Green Black MBB

Average P 81,749.00 P 135,373.00 P 226,333.00
Median 80,000.00 120,000.00 230,500.00
Minimum 30,000.00 65,000.00 200,000.00
Maximum 140,000.00 292,000.00 239,500.00
n 37 44 3

7
 ROI of Six Sigma Projects

What’s in it for your Company?

Green Belt vs Black Belt Project ANNUALIZED Cost Savings
*Projects without cost savings were excluded
*2008-2015
*Banking, Telco, IT, BPO, Call Center, Health Care, Services, Finance, etc.

Green Black
AVERAGE P2,660,624 P4,193,263
Median 652,884 2,101,818
MIN 13,462 32,220
MAX 21,054,600 22,873,104
n 163 44

8
 WHAT IS SIX SIGMA?

9
 Six Sigma Philosophy

• We don’t know what we don’t know.

• If we can’t measure it, we really don’t know much about it.

• If we don’t know much about it, we can’t control it.

• If we can’t control it, we are at the mercy of chance.

Metri, B.A. (2007), “Measuring corporate performance with the Six Sigma business scorecard”,
Journal of Business Perspective, Vol. 11 No. 3, pp. 59-65.

10
 Six Sigma Philosophy

Statistical Thinking

A philosophy of learning and action based on

the following fundamental principles:
Science
• All work occurs in a system of
interconnected processes.
• Variation exists in all processes,
and;
• Understanding and reducing Art
variation are keys to success.

Magic

11
Quality = Process Discipline + Common Sense

Process Discipline
Yes No
Common Sense

Yes Quality Creative

Chaos

Senseless Senseless
No
Bureaucracy Chaos

12
 What is Six Sigma?

Scientific
Customer
Data Driven
Focus
Problem Solving
(VOC / CTQ)
methodology

eliminate/ reduce
Delays, Defects,
Management and Variations
Philosophy DMAIC

Business 3.4 Defects Per

Process Million
Focus Opportunities

13
 What is Six Sigma?

Six Sigma is…

Scientific, data-driven, process improvement

methodology that uses DMAIC, and its ultimate
goal is to have a process that produces no more
than 3.4 defects per million opportunities based on
the needs of the customer.

14
 What is Six Sigma?

• Literally, it is 3.4 defects for every 1,000,000 units

15
 Some Companies that Uses Six Sigma:

16
 Six Sigma Improvement Strategy

• Know what is Important to the

Customer and to the Business.

Important to Important to
Customer? Business?

17
 Importance of Reducing Variation
Less variation provides:
In Six Sigma, we’re after two things:
– Greater predictability
1. Centering in thethe
around process.
target: Mean (Average)
– Less waste and rework,
2. Reducing which
Variation: lowers costs.
Standard Deviation
– Product and services that perform better and last longer.
– Happier customers.
TIME TO FALL IN LINE AND ORDER
Average

Average
Target

Jollibee

Target
McDo

σ
σ
1 2 3Hours
4 to 5Approve
6 7 8 9 1 2 3 4 5 7 8 9 10 11
Minutes Minutes
18
 HISTORY OF SIX SIGMA

19
 4 Phases of Quality Development

• 1920s: Quality Control

• 1960s: Quality Assurance

• 1980s: Quality Management

• 1990s: Quality Improvement

20
 Evolution of Quality Practices

2016 Google Design Sprint

(Design Thinking v2.0)

2000’s Design Thinking

Six Sigma, DFSS, Lean Six Sigma

1980’s Business Process Re-engineering

ISO 9000

1960’s Total Quality Management

Just in Time
Lean Manufacturing

TQC (Total Quality Control)

1930’s
SQC (Statistical Quality Control)

Testing & Inspection

21
 Evolution of Six Sigma
• Originator of Six Sigma- Bill Smith, Father of Six Sigma.
Motorola • Discovered that products with high first pass yield seldom failed
(mid 1980’s) in use.
• MAIC + Statistical Tools + Mindset.
• Manufacturing Process.
• Won Baldrige award 1988.

• Motorola joined forces with IBM, ABB, Texas Instrument, Allied

Six Sigma Research Signal & Kodak to found Six Sigma Research Institute.
Institute (1990’s) • Extended Six Sigma to Non-manufacturing Processes.
• Began commercializing process of achieving Six Sigma led by
Mikel Harry and GE Capital.

• Added DEFINE to MAIC.

Gen Electric • Current popularity in part due to publicity about former GE CEO
(1995) Jack Welch’s commitment to achieving Six Sigma capability.
• Applied Six Sigma in Product/ Service Development (DFSS) &
Lean Production.
• Six Sigma seen as Leadership Development Program.

22
 SIX SIGMA STORIES

23
 GE’s Journey to Six Sigma Quality

Six Sigma Quality:

The Road to Customer Impact
High
Key Strategic Initiatives:
QMI, NPI, OTR, SM, Productivity, Globalization

Change Acceleration Process:

Increase Success and Accelerate Change

Process Improvement:
Continuous Improvement, Reengineering

Productivity/Best Practices:
Looking Outside GE

Work-Out Town Meetings:

Empowerment, Bureaucracy Busting
Low

1990 2000
Time
24
 GE’s Business Results

• Net Income Impact ($MM) $750

1,130
Goal at GE Capital
✓ In 1998 GE improved its operating margin to
16.7% (from 1997’s 15.7%).
$150
✓ They attribute this increase directly to their Six
Sigma program. 240

Revenue/Cost $0
Reduction
(53)
Investment In (90)
Quality
(380)

0.0 2.7 3.0

Payback Ratio 1996 1997 1998

25
 AlliedSignal’s Journey to Six Sigma

Strategic Core
Competency Six Sigma Quality

Integrated World
Class Processes Supply Chain Management
Customer
Focus/Strategic
Improvements Customer Excellence/Breakthrough

Activities
Aligned TQL II & Operational Excellence

Assessment
Capability TQ Maturity Path

Cycle Time
Reduction TQ Speed - Core Processes

Awareness/
Commitment Total Quality Leadership (TQL) I

1992 1993 1994 1995 1996 1997

26
 Allied Signal’s Business Results

Since 1991 In 1995 alone

✓ Earnings per share have ✓ Sales rose 12% to a record

grown at a compound
$14.3 billion.
average annual rate of 25%.

✓ Productivity has increased ✓ 2,400 process improvements

at an average annual rate were made, reducing defects
of 5.7 %. by 61%, yielding $350 million
in annualized cost savings.
✓ Market value of AlliedSignal
shares has risen from $3.5
billion to $16 billion.

27
 American Express’ Journey to Six Sigma

Company Wide
International Deployment
Commitment/Results

Breakthrough
Six Sigma Design Teams
Innovation

Breakthrough
Six Sigma Improvement/ Change Management
Improvement

Process Driven/
Process Management/ CTQ Measurement
Linked to Customers

Customer Driven/
Customer Satisfaction Measurement/Chairman Awards
Celebration & Reward

Commitment/
Health of Franchise Measurement/ Baldrige Assessment/ TQM
Assessment

1990 2001

28
 American Express’ Business Results
$100m
Financial Results

Return
Cost
Number of
Black Belts $35m

$6m $2m
$0m

$0.5m $4m $2m $2m

1998 1999 2000 2001
300
Number of Black Belts
200
130
30

29
 SIX SIGMA METHODOLOGIES

30
 Process Life Cycle
•Process Metrics Monitoring (BSC)
•Ops & Financial Risks Audits
•Business Continuity Plan
•Career Lattice/ Succession Plan
•5S Program
•Process management control system

2. Process Management
1. Process Design
•Policies and Procedures Management
•Process Mapping
3. Process Improvement
•Resource Planning
•Metrics Development (VOC->CTQ)- BSC
•Setting up of Ops and Financial Risks/
Control 1. Kaizen (Quick improvements)
2. LEAN SIX SIGMA- DMAIC (recurring
problems)
3. Project Management- IT Systems
Enhancements (Systems/ Business
Analysis)

31
 Process Focus

L1 A B C
C D
D E

L2 DA DB DC DD DE

L3 Customer Customer

32
 Overview of Process Improvement (DMAIC)

5 1
CONTROL DEFINE

IMPROVE MEASURE

4 2
ANALYZE
3

33
 Overview of Process Design DFSS (DMADV)

5 1
Verify Define

Design
Measure

4 2
Analyze
3

34
 SIX SIGMA ROLES & RESPONSIBILITIES

35
 Typical Six Sigma Structure

SIX SIGMA STEERING COMMITTEE

(HEADS)

SIX SIGMA PROJECT SPONSOR SIX SIGMA PROJECT SPONSOR SIX SIGMA
(6sigma steering (6sigma Steering SUPPORT INFRASTRUCTURE
committee member) Committee Member) (HR, IT, FINANCE, ETC.)

SIX SIGMA
DEPLOYMENT CHAMPION

6 sigma
SIX SIGMA Master Black Belt
BLACK BELT (Consultant)

Managers, 6 sigma Green Belt 6 sigma Green Belt 6 sigma Green Belt
Officers (Project Manager) (Project Manager) (Project Manager)

Process Owners Process Owners Process Owners

Everyone
(Project Members) (Project Members) (Project Members)

36
 Six Sigma Roles

Six Sigma Steering Committee

Sponsor / Champion
Master Black Belt
Black Belt
Green Belt
Process Owner
Team Member / SME

37
37
 Six Sigma Steering Committee

Align Lean Six Sigma initiative to Organizational Strategies:

• Establish strategic direction.
• Select key improvement areas.
• Select improvement projects linked to
business needs.
• Ensure that the management systems can
maintain the gains across the business.
• Recognize and communicates efforts.

38
 Sponsor/ Champion
Before the project
• Select Green Belt candidate to attend 5-day training.
• Draft team charter (with Green Belt and Black Belt).
• Orient team members to the project (with Green Belt).
• Identify other resources as needed.

During the project

• Review team progress with Green Belt frequently.
• Provide guidance, direction, and support.
• When necessary, intervene to remove barriers to success.
• Monitors other initiatives for potential overlap or conflicts.
• Inform business leadership team and others of progress and
learning.
• Help transition responsibility from sigma team to organization
during implementation and ongoing monitoring.
39
 Sponsor/ Champion

After the project

• Lead celebration to recognize improvements made.
• Ensure that recommended changes are continually
implemented.
• Ensure project results are quantified and documented.
• Ensure continued monitoring of key processes,
measures, and solutions.
• Preserve and use lessons learned.

40
 Master Black Belt

• The primary activity for the MBB is being a leader and

teacher.

• As a leader, the MBB will have responsibility for

overseeing projects with multiple Black Belts and
Green Belts participation that will significantly change
the way the organization does business.

• As a teacher, the MBB is responsible for the on-going

development of existing Black Belts, Green Belts and
Yellow Belts and the training for new participants.

41
 Six Sigma Black Belt

• The Black Belt is a key change agent for the Six Sigma
process.

• Typically from among the best performers, these

individuals lead teams working on chronic issues that are
negatively impacting the company’s performance.

• The Black Belt is usually assigned to a two-year

dedicated position responsible for executing the Six
Sigma process on selected projects.

42
 Six Sigma Green Belt

 Green Belts serve as specially trained team members

within a function-specific area of the organization.

 This focus allows the Green Belt to work on small

carefully defined Six Sigma projects, requiring less than
a Black Belt’s full-time commitment to Six Sigma
throughout the business.

43
 Process Owner
• The Process Owner owns the process that is being
improved in the Six Sigma project. He or she
maximizes high level process performance.

• The PM assign responsibility for the control plan:

✓ Maintain process documentation
✓ Measure/ monitor process performance
✓ Track financial performance

• Regularly report to Project Sponsor/ Champion.

• The Process Owner Is the key driver to achieve Six

Sigma levels of quality, efficiency and flexibility.

44
 Subject Matter Expert (SME)/ Team Member
Tips for Team Selection
• Ideal core team size: 5 to 7 people.
• Involve a combination of employees from the outset to gain
commitment and buy-in at all levels.
• Select team members and team leader prior to basic training and
have all attend the training at the same time.
• Champions for some of the first projects should come from the
business leadership team; this will greatly enhance
communication and learning.
• Time commitment for team members could be as much as twenty
hours per week for three to six months:
✓ Two to four hours per week for team meetings.
✓ Eight to sixteen hours per week for project work.

45
 Role Contracting

• It is important to discuss who will be responsible for

what and how people expect to work together before
the team gets underway.

• These conversations:
✓Set clear expectations
✓Prevent misunderstandings and conflicts

46
 Six Sigma Training

Type of Training Minimum Executive Managers Project Team Other

Training Days Team Members Employees

Executive
1 X
Overview
Sponsor/
Champion 2 X

Black Belt 14 X

Green Belt 5 X

Yellow Belt 1 X X
* Black Belts usually hold managerial positions.

47
 How This Work Gets Done

48
 DEFINE PHASE

49
 Define Phase
DMAIC

Goal
▪ Define the project’s purpose and scope and get background
on the process and customer.

Output
▪ A clear project charter.
▪ A high-level map of the process.
▪ A list of what is important to the customer (Voice of the
Customer).

Understand
Develop Map the
the Voice of
Charter Process the Customer

50
 Purpose of Define Phase
The Define Phase focuses on identifying the product
and/or the process to be improved and ensures that
resources are in place for the improvement project.

WHY is the Define phase important?

The Define phase sets the expectations of the improvement
project.

WHAT are the inputs to the Define phase?

The Customer
The Define phase uses feedback from the
customer or marketplace to identify potential
opportunities for improvement.
• Surveys
• Dashboards
• Process maps
• Competitive business environment
51
 DEFINE- Project CTQs

Voice Of the Customer (VOC) – what customers say about my process.

1. Review existing VOC data to determine whether any additional data needs
to be collected.

2. Determine the appropriate VOC Research Method:

• Be a customer
• Customer observation
• Interviews
• Focus Group Discussion
• Surveys
• Competitive comparison

Critical To Quality (CTQ):

Key measurable characteristics of a product or process whose
performance standards must be met in order to satisfy the customer.

52
 Sample Problem Statement

Go back to your charter, review your problem statement (project Y). See if you
could improve the focus of your problem statement by answering who, what,
when, where and which.

Problem Statement Sample # 1

Poor service at The Shangri-La BGC What: Poor Service

What: Poor Service

Late room service at The Shangri-La BGC What type of service: Room Service
What about the service: It is late

50% of room service were late between What: Poor Service

What type of service: Room Service
6 a.m. and 8 a.m. on weekdays at What about the service: 50% were late
The Shangri-La BGC When: Between 6am and 8am on weekdays

53
 Sample Problem Statement

Problem Statement Sample # 2

Poor service at BDO What: Poor Service

What: Poor Service

Long waiting time to deposit at BDO What type of service: Deposit
What about the service: Long time to wait

Long average waiting time of 45 minutes to What: Poor Service

What type of service: Deposit
deposit at BDO Mall of Asia Branch What about the service: Long Time to Wait- 45 mins
every Friday From 1 to 3 p.m. Where: BDO Mall of Asia Bank
When: Between 1pm and 3pm Fridays

FOLLOW ALONG: INDIVIDUAL PROJECT

TIME: 3 minutes

54
 Project Charter
3. Goal Statement
How do we set our goal?
• Benchmarking
• VOC data
• Business Requirement
• Compliance/Legal
• Entitlement (the best performance of the process, based on historical data)

PROBLEM STATEMENT GOAL STATEMENT

50% of room services were late between To reduce the number of late room services between
6 a.m. and 8 a.m. on weekdays at 6am-8am on weekdays from 50% to 5%.
The Manila Pen Hotel

Long average waiting time of 45 minutes to To reduce the average waiting time to deposit from
deposit at Maybank Legaspi Towers Branch 45 to 10 minutes at Maybank Legaspi Towers
every Friday From 1 to 3 p.m. Branch every Friday from 1 to 3pm.

55
 PROJECT CHARTER
Reduction of Cash SAMPLE
Card Enrollment Processing Time
Project Charter

Problem Statement #1 Project Timeline

From January to June 2011, the average processing time of D M A I C
Cash Card Enrollment of 8 days which resulted to the
following:
Target Dates: 7/11 8/11 9/11 9/11 1/12
1. Failure to meet the SLA of 5 days
2. Contractual employees are required to render overtime Importance
NON FINANCIAL BENEFITS FINANCIAL IMPACT
Goal Statement
1. To meet SLA of 5 days 1. To eliminate OT expenses of
To reduce the average processing time of Cash Card 2. To reduce customer contractual employees.
Enrollment from 8 to 3 days by January 2012 complaints from 15 to 3 per
month.

Project Scope
Process Start: Date when branches receive Cash Card Project Team
enrollment form from customer
Sponsor: Jason Kidd
Champion: Russell Westbrook
Process End: Date when Cash Card is ready for customer Green Belt: Lebron James
pick-up at the branch of account Black Belt: Stephen Curry
Team Members/ Subject Matter Experts:
IN OUT
1. James Harden 7. Demar Derozan
•Metro Manila Customers •Provincial customers
•Personalized Name Cards 2. John Wall 8. Marc Gasol
•Generic Cash Cards
•Corporate accounts •Individual accounts 3. Paul George 9. Blake Griffin
4. Chris Paul 10. Klay Thompson
5. Isiah Thomas 11. Tony Parker
6. Kyrie Irving
 Communication Plan
Project Worksheet: Preliminary Communication Plan
Instructions: Identify some of the people who will be involved in or affected by your project. Ask them or
guess what their main concerns are and make some preliminary decisions about how you will keep them
informed throughout the project.

57
 SIPOC Diagram (High Level Process Map)

Shareholders Feasibility Study Business Planning Business Plan Shareholders

Corporate Planning Department
Shareholders Business Plan R&D
Acquisition New Client New Clients
Managers Strategic Plan Sales & Marketing

Client Reqts. R&D Product Specs Operations

Sales
R&D Group

R&D Product Specs Production Finished Goods Logistics

Operations Department
Ops Finished Goods DR C&C
Logistics & Delivery
Supply Chain Group

DR Credit & Collection Sales/ Cash Accounting

Logistics
Billing & Collection
Requests Resolved
Customers
Customers Support & After Sales Complaints/ Requests
Complaints Customer Care Group

58
 SIPOC Diagram (High Level Process Map)

What is a SIPOC?
▪A SIPOC is a high-level representation of the process that is used to
understand the process under study as well as to understand the
upstream and downstream links.

59
 Voice of the Customer

The term Voice of the Customer (VOC) is used to

describe customer’s needs and their perceptions of your
product or service.

60
 Why is VOC Critical?

VOC data helps an organization:

• Decide what products and service to offer.
• Identify critical features for those products & services.
• Get a baseline measure of customer satisfaction to
measure improvement against.
• Identify key drivers of customer satisfaction.
• Decide where to focus improvement efforts.

61
 VOC Process

2. Collect & 3. Analyze

1. Identify analyze data to
4. Translate
customers & reactive generate a 5. Set
the customer
determine system data, key list of specifications
language into
what you then fill gaps customer for CTQs
CTQs
need to know w/proactive needs in their
approaches language

OUTCOMES of VOC Process:

• A list of customers and customer segments.
• Identification of relevant reactive and proactive sources of data.
• Verbal or numerical data that identify customer needs
• Defined CTQs.
• Specifications for each CTQs.

62
 KANO Analysis

• Which will have the greatest positive impact on the customer?

• Which are within scope or process area of focus?
• Which of the Kano’s Must Be characteristics are unaddressed?

Kano, Noriaki; Nobuhiku Seraku; Fumio Takahashi; Shinichi Tsuji (April 1984). "Attractive quality and must-be quality". Journal of the
Japanese Society for Quality Control (in Japanese). 14 (2): 39–48. ISSN 0386-8230. Archived from the original on 13 August 2011.

63
 KANO Analysis
MUST BE MORE IS BETTER DELIGHTERS
Credit Card •Always online •Higher credit limit •Rebates
Product •Free 1st annual fee •Lower interest •Freebies
rates •Waived
succeeding annual
fees
Delivery of •Deliver billing •Time of delivery (at •Bills w/ inserts
monthly billing statements every least 1 week before (e.g. Discount
statements month the due date) coupons, promo
•Accurate amount flyers, etc.)
of charges

64
 If you leave with something…

• DEFINE Phase Sets the Direction for the Project.

• Discuss Your Project with Your Executive Sponsor, BB/MBB.
• Key Deliverables / Objectives:
1) Know Your Customers . . . really know your customers (Kano analysis).
2) Identify Project CTQ/s.
3) High Level Process Map (SIPOC).
4) Team Charter . . . it’s a living document (Project Charter).
5) Project Sponsor Sign-Off / Approval

Don’t Try to Boil-the-Ocean on your 1st Six Sigma Project

65
 MEASURE PHASE

66
 Measure
DMAIC

Goal
▪Focus the improvement effort by gathering information on the
current situation.

Output
▪Baseline data, current process sigma.
▪Understanding of how current process operates.
▪A more focused problem statement.

Plot defect Create &

Collect data over Create
baseline data
stratify Calculate
time and frequency plots detailed
on defects
analyze and do Pareto process
and possible process
causal factors for special analysis sigma
(if appropriate) maps
causes

67
 Why Translate to Statistical Problem?
Goal: Find the Relationship
Y = f(X1, …, Xn)

Process - A Process - B

s
s

Mean Mean
Shape of the Curves CHARACTERIZES the Process * Assume same scale
Process B is Better than Process A*

Practical Statistical Statistical Practical

Problem Problem Solution Solution

68
 Sample CTQ Tree (from VOC to CTQ)

Need Driver Measurement

W2W TAT
Speed of
Processing
TAT of
release
Get a loan of proceeds

Interest
Rate
Loan Term

Term

General Specific
Hard to Measure Easy to Measure

69
 What are Performance Standards
Package
Unit (Average Cycle Time/ Round)

A performance standard
translates customer needs Output Quality OR Processing
Characteristic Time
into quantified requirements
for our product or process Project Y
Operational From courier pick-up up to
definition courier delivery

CTQ Target 4 minutes

Cycle Time of Specification

limit(s) USL = 2 minutes
Process Delivery

Defect Package delivered

beyond 2 minutes

No of Defect
Opportunities 1
70 Per Unit
 Performance Standard Examples
Example 1–Pizza
CTQ: Temperature of pizza
Need = Project Y: Temperature (Deg C.) of Pizza at customer door step
Hot Pizza Target: 160 degrees
Specification: LSL= 140 degrees and USL 180 degrees
Defect: Any pizza temperature falling outside of the specs.

Example 2–Customer Service

CTQ: Agent answer my question.
Need = Project Y: Complete answer to my question on one call.
Problem Solved Target: 90% first time resolution
on First Call Specification: LSL= 85% points
Defect: Customer has to call back with same issue within 7
days.
Example 3–Information
CTQ: Time to find information
Need =
Project Y: maximum time to find any piece of data
I want to find all Target: 1 minute
info without Specification: USL=1.5 minutes
effort Defect: any time greater than 1.5 minutes

71
 Types of Data
Anything that results from being measured on a continuum or scale.
Continuous
Example:
Continuous measure (Time to Process)

Anything that can be categorized or designated as either / or.

Discrete
Examples:
▪Male / Female ▪Accept / reject
▪Off/On ▪Yes / No
▪Defect / No Defect ▪Democrat/Republican
▪Day of the Week ( M/T/W/Th/F)

Data

Discrete Continuous

Attribute Count Ordered

(%) (#) Categories
72
 Discrete vs Continuous Data

Continuous Discrete

Values Can Be Measured To Any Degree of Values Can Only Be Zero or One, e.g., Good or
Precision. Bad.
Specification
Limit
Problems Not Resolved
5 or 14%
Within 5 Days

“Defects” Problems Resolved

(x > 5 Days) Within 5 Days 30 or 86%
“Non-Defects”
(x£ 5 Days)

-¥ +¥

Time to Resolve Problem

Defect rates can be calculated using either

Discrete or continuous data, how?

73
 Why is Data Type Important?

▪Choice of data display and analysis tools.

▪Sample size : Continuous data requires a

smaller sample size than discrete data.

▪More information : Continuous data tells

you whether or not there has been a change
and by how much.

74
 Data Types and Examples
DATA TYPE/ HOW OBTAINED EXAMPLES
Continuous: Service: Elapsed time to complete transaction, ave. length of
Measuring instrument or a phone calls.
Manufacturing: Metal purity, gauge production rates, weight,
calculation length, speed.
Both: Budget vs. actual (dollars), ave. customer satisfaction
score.
Discrete: Percentage Service: Proportion of late applications, incorrect invoices.
Count occurrences & Manufacturing: Proportion of defective items, damaged items,
late shipment.
non-occurrences Both: Proportion of employees absent.
Discrete: Count Service: # of applications, # of errors.
Count occurrences in an area of Manufacturing: # of computer malfunctions, machine
breakdowns.
opportunity
Discrete: Attribute/ Category Service: Type of app, type of request.
Observation Manufacturing: Type of product.
Both: Type of customer, type of method used.
Discrete: Ordinal Both: Customer rating, day of the week, date, time order.
Observation or Ranking

75
 Exercise on Types of Data

Data Type
Lateness of a delivery
Defective slabs
Overdue accounts
Amount of steel melted
Equipment breakdowns
Cycle time of production
Lost Customers
Errors on reports
Changes to a schedule or plan
Percent of a report that needs to be
reworked

76
 Review: Descriptive Statistics

Basic Terms of Statistics

▪ Population – entire set of measurements of interest.
▪ Parameter – computed values (ex. mean, std. deviation) using all the
data of a population.
▪ Sample – subset of data from a population.
▪ Statistic – computed values (ex. mean or std. deviation) using all the
data of a sample.

X X XX X X X X X X X X XXX
X X XXXXXXXX X X X XXX
XXX X X X X X X X X X X X XX
X X XX X X X X X X X X X X X X
Population XXXXXXXXXXXXXXXXXXXXX
XXXXXX XXXXXXXX
x

Sample

77
 Measures of Central Tendency
Measure Definition When to use
Represents the Data is symmetric.
Mean (average) arithmetic average of all
observations in a data
set.
Middle value in an There are extremely
Median ordered set of large or small
observations. observations.
The value with the most When the observations
Mode frequent number of are categorical in nature.
occurrence.
When an ordered set of When data is skewed.
Quartile data is divided into four
equal parts, the division
points are called
quartiles.

78
 Measures of Dispersion

Measure Definition When to use

The difference between When n < = 10
Range the largest and the
smallest observations in
the sample.
The average deviation of When n > = 2, data is
Standard the individual symmetric
Deviation observations from the
mean.
The squared average N>=2, data is symmetric
Variance deviation of the
individual observation
from the mean.
Measure of spread that Data is skewed
Inter-quartile is obtained by
range subtracting Q1 from Q3.

79
 Sampling

Sampling is the process of

▪ Collecting only a portion of the data that is
available or could be available.
▪ Using the data in the sample to draw
conclusions (Statistical Inference).

Why Sample ?
▪ It is often impractical or too costly to collect all
data.
▪ Sometimes data collection is a destructive process
(e.g. taste testing).
▪ Small samples some times yield sound
conclusions.

80
 Sampling Approaches

Sampling Approach Situation

Random Sampling Population
Stratified Random Sampling Population
Systematic Sampling Population or process
Subgroup Sampling Process

For conclusions to be valid, samples must be representative:

• Data should fairly represent the population or process.
• No systematic differences should exist between the data you collect
and the data you do not collect.

81
 Sample Size

Depends on:

1. Type of Data:
- Discrete vs. Continuous

2. What you want to do

- Describe a characteristic for a whole group (mean or proportion)
within a certain precision (+ - units).
- Compare group characteristics, find differences between group
means or group proportions, at what power the probability you
want of detecting a certain difference.

3. What you guess the standard deviation (or proportion) will be.

4. How confident you want to be (usually 95%).

82
 Sample Size Formula Depend on Purpose
Purpose of Sample Formula / Minitab Commands
Estimate Average (ex. determine baseline
for cycle time) n= 2s 2
Type of data: continuous d

Estimate Proportion (ex. Determine n= 2 2

baseline % defective) d (p)(1-p)
Type of data: discrete
Compare 2 group averages & detect a Stat>Power & Sample Size> 2-Sample T
difference
Type of data: continuous
Compare > 2 group averages & detect a Stat>Power & Sample Size> One-way
difference (ANOVA) ANOVA
Type of data: continuous
Compare 2 (or more) group proportions & Stat>Power & Sample Size> One-way
detect a difference ANOVA
Type of data: discrete

83
 How Data is Used in DMAIC

Define To collect facts about a problem or opportunity.

Measure To have a baseline, to create a common language.

To collect facts about a problem or opportunity; learn why a

Analyze problem is happening; develop knowledge key to solving
the problem.

To quantify the impact of a solution, to measure the degree

Improve and direction of change, to compare before and after
pictures of the process.

To measure the degree and direction of change, to

Control communicate in an objective manner, to take action to
maintain improvement gains.

84
 Road Map : 5-Step Data Collection Process

Clarify Develop Plan for Continue

operational
Data data Begin data improving
Definitions
collection consistency collection measurement
and
and stability consistency
goals Procedures

▪ Clarify ▪ Write and ▪ Test and ▪ Train data

purpose of pilot validate collectors.
data operational measureme ▪ Pilot process
collection. definitions. nt systems. and make
▪ Identify what ▪ Develop and adjustments.
data to pilot data ▪ Collect data.
collect. collection ▪ Monitor data
forms and accuracy and
procedures. consistency.
▪ Establish a
sampling
plan.
85
 Data Collection Plan

Performance Operational Source of Data Data Sheet Sample Size Who will When will data
Metric Definition collect the be collected
Data
What to How to Where the data Forms, data, How much
measure? measure? will come from? worksheets, etc. data will be
collected?
Softcopy data
Number of Extract data
and printed OCS Staff-
branches and receive Internal
Statement of All Juan de La Every month
with volume SOA from System
Account from Cruz
5k and below PCHC
PCHC
Softcopy data
Number of Extract data
Internal and printed OCS Staff-
branches and receive
System Statement of All Juan de La Every month
with volume SOA from
Account from Cruz
above 5k PCHC
PCHC
Softcopy data
Extract data
Number of Internal and printed OCS Staff-
and receive
checks per System Statement of All Juan de La Every month
SOA from
month Account from Cruz
PCHC
PCHC

86
 Measure Review

Did you …
• Select the appropriate process characteristics to measure?
• Quantify how these characteristics will be measured?
• Check there is reliable data to measure?
• Collect data?

Measure … are you ready to move on?

If you are now confident that you know what to measure related
to the customer’s CTQ, how to measure it and that the data
you measure is true, you are ready to move on. If not, go back
and obtain clarity.

87
 SIX SIGMA PROJECT BENEFITS

88
 Points to Consider in Choosing a Project

Long term benefits

Can induce further improvements on other projects

Target goals should be measurable

Do a cost benefit analysis
Sub-divide the projects to smaller projects to get the
best results

Choose the best person to be part of the team

Regular monitoring of the projects

Lean Six Sigma projects should be in line with the company’s strategic
direction, impacts the bottom-line and customer satisfaction.

89
 Why Quantify Project Benefits

Management want
to know the return
on investment

For
comparison of Helpful for
the actual project
results to selection
projected process
claims

In calculating the business impact of the Lean Six Sigma projects, there
must be guidelines and must be agreed to by the finance department.

90
 Types of Project Benefits

Financial Quantitative

Hard
Savings or
Qualitative
Soft Savings
Operational
Quantitative

Hard Savings Soft Savings

Those that directly affect the These are intangible benefits
P&L Statement of the and may have no definite
company price tag attached to it

Examples: Examples:
▪Reduction in overtime ▪Increased employee &
▪Reducing inventory levels customer satisfaction
▪Reduction on overhead costs ▪Cost avoidance
▪Improved safety standards

91
 Benefit Levels
Think of savings as a spectrum not as a separate entities. . .

• Hard savings that goes directly to P&L in the current period

Level 1 • Part of the budget

• Example: increased sales, lower overhead costs, manpower
reduction

• May also be a hard savings but more of a projection

• It may be savings in the balance sheet, cash flow or working
Level 2 capital.
• Examples: Decreased write-offs, reduction in risk provision, higher
sales volume

• This is when things begin to shift to soft savings; will occur softly
Level 3 • Savings will occur but there is no hard and fast documentation
• Examples: cost avoidance, capacity enhancement

• More of a complete intangible

Level 4 • It has no measurable proofs and no quantifiers

• Examples; safety improvements, conformation to changes in law,
building company’s reputation

92
 Areas to be Analyzed and Measured

Areas common to
all businesses . . .

REVENUE COSTS

CUSTOMER
RISKS
SATISFACTION

Technical rules on how to calculate the financial impact can

vary depending on the business.

93
 Revenues

Revenue improvement can be through:

✓Sales Volume ✓Launch of a new product

or service
May be due to the following: ▪ These are projects that are more
▪ Increased customer satisfaction focused on revenue
▪ Better product proposition
▪ Improved distribution channel ▪ Benefit will be the revenue
▪ Reduction in cost generated by a completely (or
▪ Reduction in price significantly) new product or
service.
To calculate for the financial impact :
Compare the sales volume after the
successful closure of the project and the
sales volume before the project started

94
 Costs

• measure time needed for a process before and after improvement to get the time
saved
• Formula Net time savings X hourly rate of the personnel X the number of
Time personnel doing the process X number of times being done in a day/month / year.

• If a new or improved process needs one person rather than 2 or 10, then the annual
wages can be claimed as the project benefit.
• Or the person (s) may be transferred to another department in the company
• Formula: Number of personnel to be reduced or transferred X Monthly Rate X 12
Manpower months

• If a project leads to reduction or elimination of materials used in the process

• Get how many materials will no longer be needed in the new process and multiply by
the cost per unit (annualized the cost)
Inventory • Formula: No. Of materials to be reduced in a year X cost per unit

95
 Costs

• Improving the quality of a process will lead to a reduction of customer complaints and
rework
• Formula for rework No. of rework eliminated in the process X number of
minutes spent on each rework X salary per minute of the employee(s) doing the
Error process X no. Of transactions per month x 12 months

• Refers to the increased amount of output per unit (minutes, hours, days, etc) of labor
• Usually calculated in terms of time saved to perform a specific action or to obtain a
specific output
Productivity • Result of simplification, automation or elimination of non-value added activities
/ Capacity

• Benefit measured as a result of realistic cost avoided as a result of the implementation

of a new process
Cost • Examples: avoiding late fees, rework or customer complaints
Avoidance

96
 Customer Satisfaction

Can be measured through the following:

▪ Customer satisfaction index

▪ Customer survey
▪ Customer attrition/turn over
▪ Customer penetration
▪ Increased number of products availed by the
customer
▪ Customer Retention (customer loyalty)
▪ Can be measured through repeat purchases /
loan acquisition, renewal

97
 Risk

▪ Savings that can lead to a lower provision set aside

by the company for any future losses.

Example:
Project that would result to a better collection
performance leading to a lower provision for bad debts

98
 Qualitative Benefits

What are some intangible project benefits?

Employee /
Process Communications Others
Workplace
• Reduced • Simplified and • Improved • Reputational
workload standardized internal gains
• Increased process communication • Systematic
satisfaction • Elimination of within the problem solving
level due to non-value organization • Data based
improvements adding decision
in workflow activities
• Team spirit is
increased
• Develop
leadership skills
• Increased
safety in the
workplace

99
 Sample Project with Time Savings
Project Name: Credit Card Promo Training
Data for benefit computation
Number of Agents : 174 Cost for in house trainer:
# of calls per agent : 72 calls for 8 hrs. Per hour : 486
Average time spent per call : 6.67 mins Per minute : 7.75

Cost for outsourced agent : Number of training per month : 3

Per hour : 315
Per minute: 5.25

CLASSROOM
E-LEARNING SAVINGS PHP SAVINGS
TRAINING
PER AGENT PER
1. TRAINING DURATION – for
60 mins 12 mins 48 mins 252 TRAINING
outsourced Personnel
MODULE
N o t e : S a v ings ( 4 8 m ins ) / A v e . t im e s pe nt pe r c a ll ( 6 .6 7 m ins ) 7.20 calls
PER MODULE FOR
N o t e : S a v ings ( 7 .2 0 c a lls ) * N um be r o f A ge nt s ( 14 3 ) 1,030 calls 36,036
143 AGENTS
1,297,296 ANNUAL SAVINGS
PER TRAINER PER
2. TRAINING DURATION – for in-
60 mins 0 mins 60 mins 465 TRAINING
house Trainer
MODULE
16,735 ANNUAL SAVINGS

ESTIMATED FULL YEAR SAVINGS 1,314,031

100
 Sample Project with Inventory Savings
Project Name: Hot ATM Card after Call Work
Data for benefit computation
Ave processing Time / txn : 10.95 mins Photocopying cost / doc 0.40
Ave txn per day : 183.8 Average no. Of docs per day 19
Ave manpower cost:
Per hour : 270
Per minute : 4.50

PRIOR IMPLEM AFTER IMPLEM SAVINGS PHP SAVINGS

1. Processing Time Reduction – CCC 2,012.6 496.3 1516.4 1,721,290

2. Cost of Printing 551.4047619 551.4047619 138,954

PHP SAVINGS PER DAY 7,382

ESTIMATED FULL YEAR SAVINGS 1,860,244

101
 Sample Project with Cost Avoidance/Elimination
Project Name: Reduction of Number of Branches Paying a Minimum of
P500 monthly as Inward Data File Creation Fee to
PCHC

102