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 Six Sigma Process Improvement Road Map
Phase Objectives Key Activities Possible Tools and Techniques Key Deliverables ▪ Select Team with 1.0 Document the problem Champion Migration e-Pro Process Improvement SUPPLIER INPUT PROCESS OUTPUT CUSTOMER ▪ Problem Statements Project Charter Project Description Error corrections and clarification of benefits are generating GO Decision rework throughout the migration and case installation Sales 1. Conduct migration statement and establish the ▪ Develop problem analysis Client / Policy ▪ Project Charter Define Account Data processes, accounting for 20% of the total number of e-Pro change transactions. It is estimated that the volume of error Policy Renewal Date Loaded in System Holder and rework will grow proportionally as the number of 2. Complete account profile accounts migrating by 1/1/2004 increases, driving a Client / Policy Holder charter. Demonstrate statement HR Benefits Summary of Benefits Third Party Benefits ▪ SIPOC map proportionate increase in cost and potentially dissatisfying Coordinator 3. Load account Vendor Opportunity structure in system customers. Member and Start Date April 1, 2003 Administrative Dependent 4. Set up and validate Member and Requirements Eligibility alignment with the Business ▪ Develop Charter account benefits in Dependent ▪ COPQ or CODND Client Consultant system Information Completion Date Loaded in System Scheduled to be completed by September 5, 2003 Account Organizational 5. Produce account Providers eligibility record metrics and strategies. ▪ Create SIPOC Baseline Metrics For 1/1/03 migrated accounts: Structure ▪ Communication Plan Third Party Benefits National Accounts Vendor 6. Load account data Member ID Card Claim - Average number of change transactions: 14.3, of which Detail Benefits in product claim 2.9 are due to error and rework engines Determine Customer ▪ Address gap between VOC - Average hours of rework: 309 hours Call Regional Accounts Member - Average number of change transactions: 8.0, of which 1.6 are due to error and rework requirements and and process - Average hours of rework: 137 hours Primary Metrics 1. Total e-Pro change transactions 2. Percentage of change transactions due to error and benefits clarification performance standards. ▪ Estimate financial benefits 3. Average rework hours per error and benefits clarification Secondary Metrics none
▪ Obtain Customer Goal Reduce error and rework in the migration process by 50% starting with 1/1/04 migrating accounts Rework Loops highlighted in Red GO Decision
Customer Customer migration survey results IMPLEMENTATION STRUCTURE BENEFITS ELIGIBILITY Total e-Pro Change Transactions by Account from Sep 2002 thru Mar 2003 Migration Run Legislative Legislative Tool Set Up Client ID in Review Conduct Structure TS Tool Review Mapping Job End State Draft Analysis To Review Reformat Aid Structure e-PRO BPC & Structure, Draft e- Create Client Create Implementation Impl. PRO Class Review Benefits, Request/ReceiveRequest Codes Codes Eligibility Data 30 Benefits Guid Draft Guide ID Claim requirements e and CodesCodes EPRO ▪ Process Description Scenarios 2.0 Eligibility CDB SMT linking EPRO Receive Enrollment UCL=26.81 Draft legacy Yes No CODND (Cost of Doing Nothing Differently) Draft Data Financial To Rework structure to Load Data into EPRO e- Structure, PRO end state Test Scenarios Downstream e th Benefits, Match & Expert Team Complete Systems No 4 Qtr 2003: $500K and Structure Merge Meeting Go back to e-PRO Eligibility Eligibility Load data in u Rates Redo? In CED Track Client Inspection/Verify No CEO l Create Client ID Fix Claim OK? Systems ID with e-PRO Yes Year 2004: $2.5M Errors Check vs. e- Loads Yes Fix Errors 20 No No
PRO a Yes e- EPRO No OK? OK? Structur Check vs. e- Member Release e-PRO PRO Develop a reliable and valid ▪ Create overall project plan Internal Productivity Estimated cycle time reduction of 18,868 hours (assuming Rework? e in PRO Yes Data Are cancelle ▪ Project Plan & Timeline Record Yes OK? No Yes Cancel V OK For CDB Engines errors d Member in Release Update From Yes Loaded resolve in
No Yes Legacy 195 accounts migrating 1/1/04). to Vendor EPRO Benefit Get Release OK? No (e.g ATC, d? Legacy l s Underwriting ATC CAIP DocGen, Measure Approval To Vendor etc) ERW Create
a ERW VOB Mean=10.98 ERW From u 10 April 1 – April 21, 2003 Define Eligibilit y e-PRO e-Pro Rework Rework d To measurement system of the ▪ Develop measurement i Structure ▪ Metrics and collection plan OUT OF SCOPE v Elig.
i PROCESS STEPS Rework SALE VENDO Plan Projects & Metrics April 14 – April 18, 2003 Get
d S 0 Underwriting R Approval CLIENT / From (ID Client Vendor performance n CUSTOMER Input CARDS) I LCL=-4.854 To Sales business process to plan & compile project To ERW To ▪ Baseline Performance results Baseline Project April 21 – May 2 Enrollmen Eligibility ID Implementatio t File Card n GO s Decisio n Production Cancel Migration Legacy Subgroup 0 10 20 30 40 Support Structure
Phase Milestones Phase Consider Lean Tools May12 – May 16, 2003 ERW To Implementatio effectively evaluate the metrics n ▪ Process capability analysis
Employer Services functional areas Processes shaded in green are specific to Processes out of scope, but critical to MSA May 19 – June 2, 2003 migration Employer Services Gage R&R http://www.aiag.org/ Part1 Number http://www.qimacros.com/free-lean-six-sigma-tips/aiag-msa-gage-r&r.html success of meeting ▪ Determine defect tracking Average & Range Method 1 2 3 4 5 6 7 8 9 10 Sum ▪ Lean Tools Assessment Appraiser20 1 Trial 1 0.65 1 3.250 Entere your data here->WisdomTrial2 of the0.6 Org. 1 June 2 – June 6, 2003 UCL=19.45
g Trial3
n Trial4
a PassiveTrial 5 Analysis June 9 – June 20, 2003 Total 1.25 2 customer requirements. requirements R Skewness▪ Measurement Systems Average-Appraiser0.625 1 1 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A Stdev0.41 g 10 Range1 0.05 0 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A 1.67
n Appraiser 2 ProactiveTrial 1 Testing0.55 1.05 June 23 – August 4, 2003 3.100 0.20 i Max Enter your data here-> Trial2 0.55 0.95 6.20 v Trial3 1 R=5.952
▪ Assess baseline o Analysis ControlTrial4 August 4 – September 5, 2003
M Trial 5 Total 1.1 2 0 Average-Appraiser0.55 2 1 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A LCL=0 performance-estimate Range2 0 0.1 #N/A #N/A #N/A #N/A #N/A #N/A #N/A #N/A ▪ Process model – ‘as is’ Appraiser Trial 1 Enter your data here-> Trial2 Trial3 Trial4 Trial 5 process capability Total Average-Appraiser#N/A 3#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) ▪ Measurement Systems 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) Analysis %PV 99.1% 350% % of Total Variation (TV) ▪ Statistical tests / tools 3.0 Utilization of data ▪ FMEA ▪ Data relationships Technology People
Analyze techniques to gain insight ▪ Pareto chart Ÿ System Error During Processing Ÿ Skill Level of Processor ▪ Validated Key Input Variables Ÿ Data Fallout Ÿ Accessiblity of Site Coach/Training Staff Ÿ Aurhorization Mis-Match Ÿ Aggressive Productivity goals conflict with low Ÿ System Restrictions - LPI Manual Calc quality requirements Ÿ Data Set Up Issues (eligibility, provider, benefits) Ÿ Rushed Training Schedule into process. Divide data ▪ Correlation/Regression Ÿ Timeliness of Batch Processing Ÿ Lack of up-training / reinforcement training (KPIVs) & Key Output Variables Opportunity Ÿ Bank Acct Set-Up Delays Ÿ Best Practice / Skill Training not conducted Ÿ Customer Touchpoints Delays Ÿ OJT training on SOP usage Ÿ Inappropriate assignment or missing hold codes into groups based on key ▪ Fishbone Diagram Ÿ Provider Mis-Match (KPOVs) Ÿ Transaction Limitations on data collected at gateway characteristics and assess ▪ Box plot ▪ Prioritize sources of variation PMHS 100 Overpayment
the root causes of errors ▪ Hypothesis Testing Ÿ Auth / Referral Info missing/incomplete/incorrect ▪ root causes
1 Ÿ OI Info missing/incomplete/incorrect T
- Ÿ Member Eligibility Info missing/incomplete/ 4 incorrect T 50 Ÿ Standard Operating Procedures (SOPs) Ÿ Benefit Info missing/incomplete/incorrect and poor performance. ▪ Describe findings – identify Ÿ Claim Audit Process >$5K Ÿ Provider Fee Schedule Info missing/incomplete/ ▪ Identify & communicate potential Ÿ Second/Third Party Internal Review incorrect (Medical Management, Claim Benefit Ÿ Provider/Vendor TIN/SSN Info missing/ Build) incomplete/incorrect Ÿ iTrack - drives usage of paper reports to Ÿ Additional Information Necessary to Process Determine where to focus potential root causes RCA 0 Claim improvements sort older claims Ÿ Transaction/Codeset data excluded at gateway 0 1 Contracting efforts for improvement. ▪ Validate findings Process Data / Materials ▪ Summarize benefits & annualized financial benefits
Identify key change ▪ Design of Experiments – March April May June July August September Octob ID Task Name 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 1 DEFINE PHASE
12 MEASURE PHASE 13 d 65 d 4.0 13 Plan Project and Metrics 22 Baseline the Project 18 d End 23 Select KPOV metric to track process output 18 d opportunities and describe purpose & build 24 Estimate process capability/performance at the 30,000-foot-level ▪ Quantified relationship between key Manual Adjudication & 18 d 25 Categorical failures 20 d Manually check PMHS Provider Selection 26 Create pareto chart provider/ vendor - Manual 20 d 27 Rescope project to a large Pareto category on claim system 20 d 28 Repeat Baseline the Project steps 23 through 27 Improve 23 d 29 proactively test for test/ analysis strategy Check provider Non categorical failures 23 d input and key output variables data and claim 30 Revise estimate for COPQ/CODND 23 d data against iView 31 Project status update w ith executive sponsor image 27 d 32 Consider Lean Tools 33 d 76 d 39 Conduct Measurement Systems Analysis (MSA) 38 d 69 d 40 Ensure data integrity 38 d Manually try to find YES Mismatch? 41 Perform Gauge R&R Performance optimization. Develop ▪ Evaluate and Confirm correct data 40 d ▪ Defined process improvements 42 Improve gauge 43 d 43 Project status update w ith executive sponsor iTrack 48 d 69 d 44 Wisdom of the Organization 48 d 61 d Service request to NO Found data 55 ANALYZE PHASE appropriate area 53 d 56 Use visualization of data techniques to gain insight to processes 53 d 60 d 57 Conduct inferential statistical tests and confidence interval calculations on individual KPOVs implementation and results 53 d 60 d including impacts and benefits YES NO 58 Conduct appropriate sample size calculations 53 d 60 d 59 Conduct hypothesis tests Correct data & 53 d 60 d 60 Describe statistical findings to others using visualization of data techniques verify COB 53 d 61 Implement agreed-to process improvement findings 58 d 62 Project status update w ith executive sponsor communication plan ▪ Analyze KPIVs 62 d ▪ Implementation Plan 63 Verify in claim IMPROVE PHASE 63 d Attempt to screen and follow adjudicate claim including a change ▪ Create action plan for COB Checklist ▪ Process model – ‘Should be’
Hold codes that require further NO Claim processed research PMHS
management approach to implementation including YES # of Audits ▪ Impacted Employees are Trained
Re-open the claim 7,321
CIRF assist the organization in change management and Process will depend on Hold 04/05/2003 Code & SOP/ Job Aid # $'s Attempt to resolve Under 300 4% Under $ 1,030,680 adaptation of the communication needs all Hold Codes at a line level Over 676 9% Over $ 2,303,562 Resolve service requests No $ Error 914 12% No $ Error $ - improvements. ▪ Buy-in assessment No Error 5,431 74% No Error $ - Adjudicate claim (manual or End systematic) 7,321 $ 3,334,243 ▪ Implement improvements 5.0 Definition of optimal process ▪ Evaluate results Process Name: PMHS Claim Processing ▪ Document process change Date: 6/30/2003 Revision Level: 3 RISK Control settings and conditions with ▪ Integrate & manage A)SEVERITY B)OCCURRENCE C)DETECTION PRIORITY ▪ Control plan Probability Probability NUMBER ACTION TO IMPROVE FAILURE MODE Rate 1-10 Rate 1-10 Rate 1-10 RPN REVISED VALUES Performance specified metrics. improvements in work 10=Most 10=Highest 10=Lowest ▪ Determine new process capability Severe Probability Probability AxBxC A B C Provider Mis-Match 10 8 9 720 Implementation of processes Provider Data Incorrect/Incomplete 9 8 9 648 ▪ Leverage opportunities for replication Data Fallout 9 6 10 540 improvements with a control ▪ Complete closure activities Data Set Up Issues 9 6 10 540 ▪ Communicate results Provider Fee Schedule Unclear 9 6 9 486 OI Information Needed 9 6 6 324 plan to assess & maintain System Restrictions 6 6 9 324 ▪ Financial audit Hold Codes 9 3 10 270 gains. ▪ Hand-off to process owner
5 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. Be sure you can measure the problem – this will be the primary measurement to assess the impact of the improvement!
13 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 Define 2 – Project Charter
Project Charter Project 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 15 - Project Charter Template
Project Charter Project 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 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 Binders Team Client project are associate Binder requires Printing is Printing is prepared prepares are ready Printing and scheduled completed with newly needed for Client binders printed documentation materials
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 Define 16 - Team Member Selection
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 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
We will report out. Don’t be concerned if you don’t have a project yet – this is a listen and learn exercise
35 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 Define 6 – SIPOC Template
S I P O C Suppliers Inputs Process Outputs Customers Input requirements Output requirements Provider and measures Start: and measures Receiver
High-Level Process Description:
End:
46 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
Presentation of Veteran veteran's condition Provider initiates prosthetic consult Electronic consult Purchasing agent
Approved clinic for Purchasing agent Electronic consult Review the request appointment Clerk
Open appointment Clerk 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 Quality Process Output Metric Quality Quality Metric Metric Input Time Process Output Metric Time Metric Time Metric Input Cost Process Output Cost Metric Cost Metric 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 Define 3 – Stakeholder Analysis Template
Project Stakeholder Analysis
Project Relationship Communication Strategy Outcome
Stakeholder: Assign a team Copy of minutesof Copy
Invite to Meetings toInvite member
Meet with with RegularlyMeet Impacted by Project by Impacted
Can influence projectinfluenceCan to Has decision AuthoritydecisionHas Content/Process Expert Content/Process Responsible for communicate No communication needed No communication Communication with stakeholder
List Project Identify stakeholder Determine Stakeholder Stakeholders relationship to project Communication Strategy
52 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 54 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 Strengths Weaknesses Group
• Find out what works • Costly • High customer interaction • Participation could be limited • Clarify understanding • Sample size small • Find out a group of customers needs • No Randomness • Find out how a group of customers focus on quality • Long timeline to organize • Good control over what you want to • Feedback required to find out attendees • 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
58 Interview Strengths Weaknesses
• Immediate feedback • Customer is not anonymous • Targeted information • There may be time constraints • Opportunity to be thorough • There could be no consistency • Real time data response • Interviewed inconsistency • Environment should be right • Long time line for multiple customers
59 Customer Strengths Weaknesses Observation • Real time • Customer time commitment • Leads to new information • May be intrusive to customer • Identify process weaknesses • Observer Biasness • Customer part of process • 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 Define 7 – SWOT Analysis Template
Characteristics of the Characteristics that business that give it place the business at a an advantage disadvantage relative to others
Elements that can be Elements in the exploited to an environment that advantage could potentially cause trouble
63 100% 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
64 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 Customer wants delivery • Order entry my materials and it impacts my within 15 days from date of • Order processing business’s cycle time order • Vendor delivery • Manufacturing
Your prices are too high already Customer wants special • Vendor costs so I don’t like your latest price pricing • Operating costs increase. You are crippling my profit margin • Manufacturing costs
3rd Complaint
4th Complaint
Look at Customer Complaints
68 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 Define 21 – CTQ Tree Instructions Define 8 – CTQ Tree Worksheet CTQ Analysis Tree Example
Customer Needed Customer Focus Attribute CTQ Same Speed Service day Service Time Delivery Service Service or Product Average Brake Under Repair Price Economical Service $300
Don't Provide Convenience have Rental to wait Car
70 Define 9 - KPOV Selection Matrix
▪ Once the Critical to KPOV Selection Matrix: Quality Output Measures: Requirements are Identified use a Rate Defect
KPOV Selection VolumeOrderCoffee
Coffee Order Taste Range Taste OrderCoffee Coffee Order TemperatureOrderCoffee Matrix to Identify ArrivalTime to OrderCoffee Appropriate KPOVs Customer Requirements (CTQs) Quality Coffee in less than 3 minutes for each CTQ. Quality product at right temperature
Quality product at the right taste
Overall Customer Satisfaction
X - Strong relationship M - Moderate relationship
O = No Relationship
71 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 Define 10 – Core Process Drill Down Worksheet
Core Process Drill Down Worksheet
Customer Type of Customer Customer Need Measured By: Met or Unmet Requirements (CTQ) Requirement
73 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 Quality Function Deployment (QFD) – Type One
Process Functions Order Order Part Vendor Vendor Vendor Availability Entry Validation Ordering picks/ Ships Processing packs Order
CTQ Customer Needs Rating
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
CTQ: 1= lowest; 5 = highest Control over suppliers is key Relationship Strength: 0 = none; 1 = low; 3 = medium; 9 = high
75 Quality Function Deployment (QFD) – Type Two
Process Requirements Order Entry Order Processing Ship order Invoicing
CTQ Customer Requirements Performance H On-time delivery 9 9 9 3 H Accuracy 3 9 3 9 Quality H Specifications 3 9 3 3
15 27 15 15
76 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
77 Basic Expected Desired Unexpected
To Stay . Competitive you must get to this . point ASAP ! . .
Customer Response Over Time
78 79 Define 17 - Benefits Toolkit
• Poor Quality affects many parts of the business • Productivity • Waste • Defects • Purchased services, materials, and equipment • Revenue • Risk
80 • 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 Disposal Costs on Scrap Material Scrap on CostsDisposal creation (don't have to buy new (don't new creation to buy have Admin / Admin (C&B)of Claims Costs Additional Cash Discounts on on Discounts Cash Additional Cost Avoidance Avoidance from Cost capacity Quantified Benefits Easily Not Compensationand Benefits Credit TransactionsCredit /Debit Headcount CostAvoidance Headcount Headcount Reduction Headcount Expedited Expedited Freight Accounts PayableAccounts equipment) secondary cost secondary Examplein
Additional Cash Discounts on Accounts Payable Admin (C&B) Costs of Claims / Credit / Debit Transactions Benefits Not Easily Quantified the relationshipbetweena primaryand a x Compensation and Benefits
Disposal Costs on Scrap Material
Expedited Freight Headcount Cost Avoidance
Improved Cash Flow from 18 Define
x x Reduction in Scrap / Rework Inventory and Past Due Receivable Balance
Increased Sales from Improved Quoting / Lead Generation - x Increased Selling Price on Matrix Saving Cost Secondary Corrected Billing Incremental Costs to Execute
x Incremental Revenue from Capacity x Material Scrap or Rework Cost
Other Manpower Costs Associated with Defect Resolution
Other Operating Expenses 83 • 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 Revenue Operating Budget Dissatisfaction Market Share Capital Budget Lost time in the process Productivity Operating Budget or redoing work Outstanding Accounts Revenue Operating & Capital Receivables due to Budget errors in invoicing Time spent searching Productivity Operating Budget for equipment or Potential Revenue if you lose supplies customers due to customer dissatisfaction Hold time on phone Customer Dissatisfaction Operating & Capital calls Budget Employee Productivity Operating Dissatisfaction Revenue Employee Turnover Hiring & Training 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 11 – Define COPQ Worksheet
Define Phase Cost of Poor Quality COPQ Impact Areas
Known Failure Modes
within the Current
Risk
Services
Turnover
Materials Rented or Rented
Process Employee
Purchased Purchased Equipment Purchased
Customer Loss Customer
Revenue Impact Revenue Productivity Impact Productivity 1 $ $ $ $ $ $ $ $ $ 2 $ $ $ $ $ $ $ $ $ 3 $ $ $ $ $ $ $ $ $ 4 $ $ $ $ $ $ $ $ $ 5 $ $ $ $ $ $ $ $ $ 6 $ $ $ $ $ $ $ $ $ 7 $ $ $ $ $ $ $ $ $ 8 $ $ $ $ $ $ $ $ $ 9 $ $ $ $ $ $ $ $ $ 10 $ $ $ $ $ $ $ $ $ 11 $ $ $ $ $ $ $ $ $
$ $ $ $ $ $ $ $ $ Totals------
90 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 person multiplied by 20 people utilizing the tool = 144,000 minutes or 2,400 hours spent searching multiplied 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
95 96 Define 12 – Tollgate and Approval
Champion Define Phase Checklist 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.)?
97 Project Team Define Phase Checklist 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:
98 99