McKinseySix Sigma& Lean.ppt

0,Six Sigma&Lean,MMP Global ConferenceVienna,July 23,2003,030602MVA_he_ZZT_786,1,GE has become the poster child of the Six Sigma movement,1987,88,90,92,94,95,96,98,99,01,2002,Cumulative Fortune 500 program launchesEstimates,Era 1(1987)Quality,Era 2(1994)Financial performance,Era 3(1996)Performance Improvement Umbrella,Era 4(2000)Strategic issues,Why did GE adopt Six Sigma?Intense pressure on margins and no room for price increases premium on productivityMediocre quality and disappointed customersBillions of dollars lost in cost of poor qualityReenergize GEs productivity machineEngine for cultural transformation,Evolution of Six Sigma,GE,Source:McKinsey,030602MVA_he_ZZT_786,2,Delivery example,Six Sigma has its roots in statistical process control,Before,Average delivery time:45 minutes,55 minutes(Commitment to customer),Before:2(i.e.,30.85%delivered outside target times),After:6(i.e.,only 0.0003%delivered outside target times),35 minutes,Source:McKinsey,Critical-to-quality metric:on-time delivery,7 articles lost per hour1.7 incorrect operations per week1 short or long landing every 5 years68 wrong prescriptions per year,99.99966%Good(6 Sigma),99%Good(3.8 Sigma),Other process capability examples,20,000 lost articles of mail per hour5,000 incorrect surgical operations per week2 short or long landings at most major airports each day200,000 wrong drug prescriptions each year,After,20,000 lost articles of mail per hour5,000 incorrect surgical operations per week2 short or long landings at most major airports each day200,000 wrong drug prescriptions each year,030602MVA_he_ZZT_786,3,The Six Sigma program has three key elements,BrainstormingAffinity diagramsMulti-votingHypothesis testingPareto chartsFishboneProcess mappingRoot cause problem solving,Master Black Belts(full time),Support key line executivesResponsible for project selection,training/coaching of Black Belts and reporting progress,Black Belts(full time),Lead improvement projects through DMAIC cycleReceive 4 weeks of up-front training,Green belts(part time),Provide Black Belts with support to get projects doneReceive less intensive training,Statistically-focused problem solving tools,Dedicated and certified resources,3.Focuses on reduction in variation of key metrics,2.Drives measurement and data-driven analysis of metrics that are critical to customers,1.Creates standardized,disciplined problem solving approach used across company,All Six Sigma improvement efforts optimize processes by reducing variation,Define the problem,Measure the problem,Define,Measure,Analyze,Improve,Control,Analyze and identify the gap,Identify and implement solutions,Track and review progress,D,M,A,I,C,Prescriptive Problem Solving Process DMAIC,Design of experimentVoice of the customerQuality function deploymentANOVAEtc.,030602MVA_he_ZZT_786,4,Improvement infrastructure,GEs Six Sigma success is based on a thoughtful understanding of the drivers of large-scale change,Set aspirations,Architect program,Implement change,Build momentum,Effective,well-orchestrated launch,Train top leaders and set aspirationsArchitect program and begin massive communication drive Select and deploy high-potential resourcesExecute high profile projects and make teams heroesRelentlessly communicate successes and changes to come,GE used several core elements of successful transformation programs,Organizational enablers,1996,1996,1996-97,1997,Source:McKinsey,030602MVA_he_ZZT_786,5,Six Sigma projects follow a disciplined approach to root-cause problem solving,Define,Measure,Analyze,Improve,Control,What is the problem?Goal?Customers?Process to improve?,What is the ex-tent of the pro-blem?EfficiencyEffectivenessWhat data do we need to get to the root causes?,Range of optionsSolutionsBest pragmatic solutions,Full range of solutionsThe select fewThe optimal and pragmatic solu-tionSmall scale pilotFull scale implementation,Tactical levelProcess standardizationProcess through-putStrategic levelDisciplined use of business pro-cess manage-ment by steering committee,Key elements,Deliver-ables,Clarity on what is in scope and what is out of scope,In-depth under-standing of how big the problem is and data to get to the bottom of it,Data driven rigorous con-clusions on the vital root causes for the problem,Fully imple-mented solu-tion based on lessons from pilot,Stable processSystem to keep it stableFully integrated into business goalsExecutives fully involved,Source:McKinsey,DMAIC,030602MVA_he_ZZT_786,6,Six Sigma has had high impact on service businesses,Problem definitionReduce accounts receivables tobest-practice levels in 24 weeks Organizational enablers and improvement infrastructureCFO sponsor with division heads present at project launchCFO and division heads attend key status reviewsBlack Belt coach and guide but led by finance managerProject tracked by Six Sigma staff and through steering committee meetingsProblem solving methodologyand toolsDMAICTools used on project brain-storming,fishbone,pareto,histo-grams,scatter plots,check sheets,control charts is-is not,force field analysis,simple FMEA,poke-yokeResultsReduced AR by 90%for annual benefits exceeding USD 4 million,Sample tools used,Fishbone defective invoice,Pareto,Recommendations,Control chart,PO,T&C,Deli-very,Other,Improve invoice quality by following actionsMandatory check of PO against invoice5-day training of personnel by experienced gurus with best practicesOne invoice per PO with itemized list of all itemsImplement segment based control system for customers.Set target goal into annual MBO to ensure accountability Set guidelines for action,red,yellow,green flags for escalating actions Observe strict$penalties for late payment Monitore control chart of key metrics,Days,(USD delin-quency days)=USD invoice x days late,Upper control limit,Upper spec.limit,Lower spec.limit,Lower control limit,Special causes,Source:McKinsey,PROJECT REDUCE DELINQUENT ACCOUNTS RECEIVABLES,030602MVA_he_ZZT_786,7,Green belt,Black belt,Executive sponsor/division manager,Part-time-position leading Six Sigma.Continues fulfilling current job responsibilities Trained in Six Sigma tools,provides functional/divisional knowledge and expertiseMentored by a black belt Communicates Six Sigma methodology to others in the organization,Full-time dedication to Six Sigma;Leads projects and shares responsibility for deliverablesApplies right Six Sigma methodology and tools to ensure quality of process Escalate issues to managementTrains and coaches team members,Proposes Six Sigma improvement projects and responsible for deliverablesResolves issues Promotes Six Sigma strategy and methodologyUnderstands Six Sigma strategy,discipline and tools,Six Sigma roles,Source:McKinsey,030602MVA_he_ZZT_786,8,Although the impact from Six Sigma has been significant for GE.,Percent of sales,Six Sigma net financial impact*USD m,GE total revenuesUSD bn,-20,550,760,1,490,2,000,79,90,100,112,130,Single performance improvement themeCustomer perspective Common languageFact based problem solvingEnhanced capabilitiesPowerful engine for cultural changeFacilitated success of other initiatives,Hard dollar benefits for GE,Soft benefits for GE,Source:McKinsey,030602MVA_he_ZZT_786,9,Weaknesses,Project-centricQuick wins remove focus on strategic movesContent neutral process prescriptive Needs strong organizational element to succeed Disconnects possible between quality and savings,.Six Sigma is not a panacea for all ills it has its own set of strengths and weaknesses,Source:McKinsey,Lean can complement Six Sigma to overcome many of its major weaknesses,Strengths,Common languageCustomer focusBottom-line resultsReal line management involvementFact-based problem solving methodologyComprehensive set of toolsBuilds new generation of leadersTakes capability of organization to next levelStrong infrastructure helps other initiatives,030602MVA_he_ZZT_786,10,More over,few companies are able to use Six Sigma effectively due to a small number of root causes,Source:McKinsey,Lack of real involvement by top and line management Six Sigma is a program run by a staff organizationRewards and incentives are not aligned with Six Sigma program no breakdown and assignment of targets for line management with accountability tied to incentivesStaffing Six Sigma with deadwood instead of top talentIneffective project selection systemIneffective project management with no drop dead dates for projectsNo effective system for best practice replicationRapid training of large numbers of people who have no projects to work onProcess measures,such as number of people trained,number of projects launched only assess progress and not resultsLack of understanding of the difficulties inherent in change management,Typical root causes for ineffective Six Sigma implementation,030602MVA_he_ZZT_786,11,Six Sigma space and our capabilities,Source:McKinsey,Client needs,Our capabilities,Considering Six Sigma and need an objective assessment of pros and consSix Sigma is not delivering expected results and need a rapid assessment and recommendations to fix itNeed help in accelerating existing and under-performing Six Sigma initiativeNeed deep subject matter expertise and prescriptive solutions to move to the next level of performance,Six Sigma Executive Awareness Training objective view of Six Sigma for executivesSix Sigma Diagnostic 3-5 day Six Sigma diagnostic of Six Sigma companies Six Sigma Acceleration for comatose programs by building an effective transformation engine to complement their problem solving and tools already in placeInfusion of deep prescriptive functional knowledge into companies with robust Six Sigma programs Lean Six SigmaPricingSourcingSupply chain management,030602MVA_he_ZZT_786,12,Lean Six Sigma integration,030602MVA_he_ZZT_786,13,Many companies wish to build on their Six Sigma programs,The company has launched a company wide Six Sigma program in response to external pressures several years agoA sizeable investment and efforts have been put into resource infrastructure building,and trainingAfter showing early returns,the rate of improvement has begun to slowThere is interest in further content addition specifically around embracing lean manufacturingManagement acceptance and commitment to continuing the Six Sigma program remains highThe company would like to continue improvements by seamlessly integrating Lean into the Six Sigma program,030602MVA_he_ZZT_786,14,Despite some common elements lean and Six Sigma have significant differences,What is.,.an integrated operating system of principles,practices,tools and techniques,.a structured improvement methodology using a standard approach and statistical tools,Driving principle,Reduce wasteSynchronize flowsManage variability,Reduce variation,Operational KPIs cascaded to front line,Project metrics,Performancemanagement,Lean expertsTeam leadersNatural teams,Infrastructure&involvement,Black belts,MBBs,GBsSix Sigma project supportAd hoc teams,Prescriptive solutionsOne piece flowPull SystemSMEDStandardized work,Prescriptive processesDMAICDMADV/DFSSStatistical approachesDOEGauge R&R,Problemsolving,Systematic value stream mapping Current state and future state,Driven by key issues and problems in current processes,Project selection,Root cause analysisProcess mappingBasic analytic tools,Lean,Six Sigma,030602MVA_he_ZZT_786,15,Synergies between Lean and Six Sigma,Six Sigma Shortfalls Project centric Elitist Rigid process KPI disconnect No prescriptive solutions,However Lean and Six Sigma can be highly complementary,030602MVA_he_ZZT_786,16,Synergies between Lean and Six Sigma,Six Sigma Shortfalls Project centric Elitist Rigid process KPI disconnect No prescriptive solutions,However Lean and Six Sigma can be highly complementary,030602MVA_he_ZZT_786,17,However Lean and Six Sigma can be highly complementary,Synergies between Lean and Six Sigma,Lean PositivesHolistic and systems orientedFront line involvementStandard practicesKPI deployed to all levelsEnd state driven project selectionPrescriptive solutions,Six Sigma Shortfalls Project centric Elitist Rigid process KPI disconnect No prescriptive solutions,030602MVA_he_ZZT_786,18,Synergies between Lean and Six Sigma,Six Sigma Shortfalls Project centric Elitist Rigid process KPI disconnect No prescriptive solutions,However Lean and Six Sigma can be highly complementary,Lean PositivesHolistic and systems orientedFront line involvementStandard practicesKPI deployed to all levelsEnd state driven project selectionPrescriptive solutions,Lean ShortfallsDifficult to understandDifficult to scaleRigor can sufferWeak tie to bottom lineTop management understanding superficial,030602MVA_he_ZZT_786,19,The typical integration approaches are too narrow,Do not understand fundamental differences between Lean and Six Sigma:view Lean as toolkit vs.total system approach Do not incorporate Leans systemic value stream mapping and end state view in project selection processDo not take advantage of Lean prescriptive solutions to avoid reinventing the wheelDo not ensure front line involvement Do not provide required breadth and depth in capability building:front line,top management,practitionersDo not alter performance management system to cascade KPIs to front line,030602MVA_he_ZZT_786,20,Also,they do not address the typical implementation issues,Lean pitfalls,Six Sigma pitfalls,Lacks vision,Top management,Lacks involvement,Resources,Inadequate critical mass,Elite resource model,Project selection,Not driven by end state,Not connected to line managements real priorities,Performance management,KPIs not defined or cascaded,Project metrics disconnected from CTQs,Middle management support and ownership,Weak,Weak,Deployment,Tool centric,Project centric,030602MVA_he_ZZT_786,21,We recommend a five building block approach to integration,Assess whether current Six Sigma program provides a robust enough platform for integration,Drive project selection from a systemic end state value stream viewDelineate best problem solving approach for each class of problem,Trigger demand by defining KPI cascadeMatch and pace capability building to proposed roles&action plans and augment with Lean experts,Enhance by Lean KPIs cascade and real time dialogue down to front lines,Plan the multi-year journey on a timeline,Program readiness,Project selection and solution methodology decision roadmap,Organizational acceptance and capability building,Performance management,Implementation plans,1,2,3,4,5,030602MVA_he_ZZT_786,22,Integration of Lean and Six SigmaKnowledge Session C,030602MVA_he_ZZT_786,23,We recommend a five building block approach to integration,Assess whether current Six Sigma program provides a robust enough platform for integration,Drive project selection from a systemic end state value stream viewDelineate best problem solving approach for each class of problem,Trigger demand by defining KPI cascadeMatch and pace capability building to proposed roles&action plans and augment with Lean experts,Enhance by Lean KPIs cas