Six Sigma Best Practices Improve Revenue: A Case Study

Six Sigma was developed in 1986 by Motorola and later, gained popularity with companies when Jack Welch implemented the business practices in General Electric. These best practices will reduce the number of defective products produced by companies and improve the efficiency of business practices. Six Sigma has increased the revenue of many companies.

Here is one case study example that can help companies learn how Six Sigma best practice can be applied:

One unnamed cellular service provider was experiencing a problem with their DMAIC process and online top-up system. The service provider was also experiencing low registration rates and top-up rates. Before Six Sigma was implemented, the registration success rate was approximately 80 per cent, and the top-up success rates were approximately 60 per cent.

The customer service centre did not operate efficiently. The company invested a significant amount of time and money into the company because of the inefficiencies. The company found that many customers switched to providers with efficient online top-up systems.

A team worked together to increase and improve registration rates. Hypothesis tests were conducted to find significance. The Chi-Squared test is commonly used for this purpose. Studies showed factors that traditionally do not have an effect on output actually had a strong correlation. Without conducting this test, the company would have never revealed this information. This information indicated to the Six Sigma Black Belts that there was an inconsistency in the current system that should be modified for improved efficiency.

New rules were created to follow logical decisions regarding accepting and rejecting a simple transaction. The criteria for defining a fraudulent transaction were updated. IP addresses were reviewed to determine which were blacklisted and how to prevent the common practice.

When the evaluation was complete, Six Sigma leaders noticed that the success rate of registration increased by 11 per cent to 91 per cent. The success rate for Top-Up increased to 90 per cent. The company increased revenue by $300,000 by following and implementing Six Sigma best practices.

This is just one example of how Six Sigma helps companies improve. Other companies have used Six Sigma processes and got different results than expected. Some companies have increased revenue and savings beyond $400,000. This is proof that Six Sigma can help companies and organizations improve in significant ways.

Six Sigma Helps Companies Improve Business Practices

Businesses with an understanding of Six Sigma will improve significantly. Every company should consider Six Sigma training for their employees. Companies most often use Six Sigma black belt leaders to lead the projects. Six Sigma green belt leaders and Six Sigma yellow belt leaders are also effective in improving companies’ business processes. Businesses should consider integrating Six Sigma best practices in their organization to improve revenue and efficiency.

 

Lean consulting, what your consultant should not do?

Increasing numbers of companies are calling in Lean consulting firms to help them manage their work processes better and increase profitability and customer satisfaction. Lean management is widely appreciated for its ability to transform a company’s fortunes for the better.

The problem is that many companies that offer Lean consulting do not do a very good job because they have merely jumped on the bandwagon. If you hire one of these companies then you are unlikely to get the results that you have paid for. You need to ensure that the company you hire is a good one; be sure to watch out that the companies do not do the following things:

  1. Do a superficial assessment of your company. A really good consulting firm will take the trouble to study your company’s current style of operation before it offers you any suggestions. Anything less than this will be completely useless and the results it offers will be short-lived.
  2. Hand you a Lean plan and expect you to do the rest. Keep in mind that one Kaizen event will definitely spark interest but will not be able to help your company make the necessary changes that will ensure success. The consultant ought to work with your people in order to chalk out a detailed plan for change.
  3. Limit interaction with a few people in the organization only. Your business cannot become Lean only on the efforts of certain people; say senior or middle-level management. This concept will only succeed if all levels of people in your organization participate willingly in it.
  4. Keeps you dependent on it for guidance. If the Lean consultant does not work to develop Lean teams in your organization then you’ll have to keep going back to it for consultancy. A good consultancy firm will mentor your company and provide sufficient training so that you can manage this independently.

The right consulting firm will ensure that your organization is well on its way to becoming Lean. You will find a significant improvement in the way your company functions and also in the way that customers respond to your products and services. The changes will be gradual and in small increments but will have a long-lasting impact on your company. Not only will your company be able to save a great deal of money this way but it will also be able to stay well ahead of the competition.

 

How Six Sigma gets bottom line business result?

Many companies have gone down the path of continuous improvement only to be discouraged by the lack of “breakthrough” results. All of the texts on Total Quality harp on the need for strong commitment from senior management for these initiatives to be successful. What is it that motivates these business leaders? The answer is straightforward; Business Leaders are motivated and driven to achieve bottom-line results and increase value to shareholders. Six Sigma provides a structured and rigorous approach with a customer focus that drives benefits to the bottom line.

What is Six Sigma?

Six Sigma is a program that follows a structured and rigorous approach to process improvement and is applicable to all Business Processes. Projects are identified and prioritized based upon “Bang for the Buck.” The key drivers for selecting projects are customer focus and potential for bottom line impact. The prioritization process facilitates allocation of a business’s “scarce” resources to the projects with significant business importance, thus separating the “Vital Few” from the “Trivial Many.”

Specific targets for improvement are baselined and then monitored over the project’s life to demonstrate the achievement of goals. Tracking may include Cost (hard, soft, and cash flow), Cycle Time, Non-Value Adding Activities, Rework, Failures, and Defects.

Teams utilizing the five DMAIC (Define, Measure, Analyze, Improve, and Control) Phases of the Six Sigma Improvement Process can deliver breakthrough improvements to a business’s processes.

How Do Six Sigma Efforts Impact the Bottom Line?

Income Statement Elements affected:

Reduces Cost of Goods Sold (COGS)

Increases Gross Margin

Reduces Operating Expenses (OE)

Increases Net Income

Positive Impact on Profitability Ratios

Increases Return on Sales

Increases Return on Investment

Balance Sheet Elements affected:

Inventory Reductions Become Possible

Impacts Activity and Efficiency Ratios

Increases Asset Turnover

Increases Inventory Turnover

Decreases Inventory on Hand

Reductions of 10%-30% in both COGS and OE are common, with most companies averaging 20% reductions.

Consider this example:

$200M Sales

$100M COGS

$90M OE

$5M Depreciation and Interest

Return on Sales ratio of 2.5%

$100M Total Assets

Asset Turnover Ratio is 2.0

Given a conservative reduction of 10% in both COGS and OE from a Six Sigma implementation the Return on Sales increases from 2.5% to 12%.

Without any balance sheet improvements, the Return on Investment Ratio increases from 5% to 24%.

Inventory is generally addressed after processes have been improved and the need to carry excess inventory to meet customer demand has been reduced. A project to reduce the cycle time on the accounts receivable process is often addressed early on in Six Sigma implementations.

The key to Six Sigma success at achieving bottom-line results is following the Structured and Rigorous Improvement Process that is Customer Focused. Six Sigma is not just another “Quality” program like Total Quality Management or Quality Circles, but one that has teeth rooted in the financials of the business.

Analyse phase criteria for the DMAIC improvement process

The DMAIC Improvement Process comprises five phases namely, Define, Measure, Analyze, Improve, and Control. The Analyze Phase is where the data collected is analyzed to determine root causes of problems being addressed. In this phase we are going to answer the question, “Which variables in the process make a difference, or not?” The key is to identify and validate root causes of issues and determine their impact on the process performance metrics that were established during the Measure Phase. The following article outlines Analyze Phase Objectives, Tools to Apply, and Deliverables to be achieved.

The overall objective of Analyze is to test and evaluate all of the process inputs to determine if changing from their current levels, or settings, will have a positive, negative, or no impact on the process key performance metrics. Process inputs include tools, materials, work instructions, policies, measurements, process settings and controls, software and systems, and even communication methods.

The point is to determine the best set-up for the process so we can predict what the outcomes will be. Analyze Phase aims to determine what causes the variation in the process outcomes. Outcomes, or performance metrics, include cycle time, lead time, processing time, inventory levels, quality of products and services, and customer requirements. The process comprises both Internal and External Customers along with your Suppliers, all of whom have requirements that must be met.

Objectives:

  1. Develop theories or hypotheses about the root causes of the process problems.
  2. Test the hypotheses with data to determine if there is a difference.
  3. Answer the question, “Which variables in the process make a difference, or not?”
  4. Identify and verify the root causes of the process problems.
  5. Determine the best Set-Up for the process that makes all outcomes predictable.

Tools to Apply:

  1. Brainstorming
  2. Affinity Diagrams
  3. Tree Diagrams
  4. Cause & Effect, or Fishbone Diagrams
  5. Process Control Charts
  6. Histograms and Pareto Analysis
  7. Data Collection Plans, Sampling Plans, Check Sheets, and Forms
  8. Detailed Process Maps with Current State Cycle Times, Yield, Processing Times, and Inventory
  9. Process Activity Analysis of Value Adding and Non-Value Adding
  10. Statistical Analyses such as Hypothesis Tests, Correlation Studies, Regression Analysis, and Design of Experiments

Deliverables that Signify Phase Completion:

  1. The complete list of the Identified Potential Causes.
  2. Details about the criteria used to narrow the focus of the causes for further investigation.
  3. Data and Results from Statistical Analysis used to Verify the Root Causes of the issues.
  4. Documentation of how Analyses were Interpreted.
  5. List of Verified Root Causes and How they Impact the Process Performance Metrics.

At the conclusion of Analyze phase, the team has a thorough understanding based upon data analysis of what makes the process tick. Many solutions for improvement have been uncovered and the team is prepared for the Improve Phase where the pilot testing is conducted to validate the achievement of the project goals outlined in the Define Phase.

 

Why Six Sigma is essential to reducing your aircraft maintenance cost?

You and I can agree that accurately forecasting aircraft maintenance cost is a job for a mathematician. From statistical analysis and exponential smoothing to extrapolation and the econometric forecasting, it’s a world of its own. While focusing on your aircraft maintenance cost, there is one proven method that can help regain control of cost variation and waste.

The method which I am talking about is Lean Six Sigma.

This methodology is known all over the world so I can be safe to say that I don’t have to define it here. Instead, let’s discuss its implication and how it can help you control your maintenance activities.

Key Principles of Lean Six Sigma And Your Aircraft Maintenance Cost

Lean Six Sigma is a proven method for improving your maintenance efficiency and effectiveness. Here are 6 principles to follow when implementing Lean Six Sigma:

-Identify your value stream and how the work gets done.
-Manage, improve and smooth the process flow.
-Remove waste. Non-Value-Added steps increase cost.
-Reduce variation by managing by fact.
-Involve the right people in the process who are fully equipped.
-Engage in improvement activities in an organized way.

These 6 principles are vital to a successful Lean Six Sigma team. The key is to reduce waste and focus on value-added activities. If a technician is running around to multiple projects, there is a possibility they may miss an important aspect of the inspection. In order to accomplish this, you must also implement a framework that can help with this process.

For improving activities in your maintenance processes, you’ll need to employ the useful framework of DMAIC.

Use DMAIC In Lean Six Sigma

To undergo improvements in regards to your aircraft maintenance processes utilizing Lean Six Sigma, you will need to use the framework of DMAIC.

Define: All projects start with a problem. This problem needs to be defined and everyone involved knows their role. Think about why you’re doing this project and what you’re trying to achieve.

Measure: The Define stage is what you “think” the problem is. Through the measure stage, you’ll need to be clear by coming up with how the work gets done and how well once finished.

Analyze: Now that you have an understanding of what is happening, it’s imperative to find out why. Never jump to any conclusions. Manage by fact and narrow down to the best possible causes. Once the possible causes are identified you can pinpoint the root cause.

Improve: Now that you’ve identified the process and the problem, here is where you identify a solution to the root cause. Come up with various ideas and select the best one. Once the best one is selected, test it out.

Control: You need to control the gain you’re trying to achieve. Come up with a control plan so the process is carried out consistently.

Utilizing DMAIC is imperative to the success of your Lean Six Sigma and cost control endeavours. Here is an easy way to identify your wastes.

By utilizing Lean Six Sigma within your aircraft maintenance process you’ll ensure that the varying cost can be reduced in one aspect or another. Don’t let the wasteful process deplete your bottom line. I encourage you to implement the Lean Six Sigma way and to reduce aircraft maintenance costs throughout your organization.

 

Dashboards and scorecards in Six Sigma

Monitoring the critical Key Performance Indicators are vital to Continuous Improvement sustainability. This article describes how dashboards and scorecards differ and how they can be used for the effective and ongoing monitoring of the health of a process.

Dashboards, as they relate to Six Sigma, are brief summaries illustrating the health of a process or operation at a glance. Just like the dashboard in your vehicle, the viewer can quickly determine if the indicated values are within the targeted operating range. The indicators that are displayed on a dashboard are fed by a roll-up from the detailed scorecard.

A dashboard should not be confused with the more detailed scorecard. A typical scorecard will present all the critical measurements of day to day operations and is the mechanism that drives the dashboard. Both tools serve a viable function in our process measurement and the resulting reporting. They inherently have a degree of overlap but are not the same tool.

Dashboards that are laden with all the reporting of a scorecard can easily become too cumbersome for upper management and customer use. A scorecard presented as a dashboard will likely display too much information and hinder a quick review. Scorecards are more commonly internal management tools, whereas the dashboard reporting tool is frequently shared with the external customer. Most often, it is a version of a dashboard that upper management and our customers prefer to see during their high-level reviews of the operation.

During the course of a Six Sigma project, the team will identify the critical few root causes that are influencing the objective (y) of the project. In the analyze and improve stages, the team gains clear insight into the drivers known to influence the performance of the objective. Finally, in the control stage, it is possible to measure the success of the implemented changes. These key influencing drivers are the critical process measurements to be monitored through the effective scorecard and later rolled up into the dashboard. A vital component in our Six Sigma process is the identification of the critical measurements and the established means in which to capture and report them in the scorecard. Once the correct measurements are in place, a dashboard can then be added with little effort and will report the successes and/or issues of the process to management and customers.

Scorecards function as early warning systems in depicting the real-time measurement of the critical drivers. The real-time nature of the scorecard tool will enhance the process manager’s ability to monitor the process performance and intervene quickly if necessary. The detailed nature of the scorecard will facilitate his ability to identify in what areas he first should focus his attention. Scorecards enable a fast response to process related failures if designed properly and monitored frequently. Process owners often utilize their scorecard as the guiding light for the implementation of focused and successful process adjustments as the operating environment evolves following the Six Sigma project conclusion. They can then use the dashboard to report the overall progress and the health of the business to their internal or external customer.

 

Lean Six Sigma training for a better inventory

One of the most common reasons that lead to piling up of outdated and excessive inventory is the wrong forecasting of requirements. The other important factors are bad quality and extended lead time. On ordering large-sized lots, there is an increase in lead time also. It can also go up when the schedules are not met with. If there is a mismatch of demand and supply due to inaccurate sales projections, the inventory is bound to go up.

Reducing waste

Lean Six Sigma is useful for reducing the waste or redoing the job, continued processing for reducing inventory and piling up of outdated stock. It is also possible to use this for improving the quality of production, which eventually leads to a reduction of rejections, and thus wastage.

How Lean Six Sigma can be applied at root levels

On making use of the DMAIC method, teams using Lean Six Sigma can know the basic reasons responsible for causing the pile-up of extra and outdated inventory. Taking a cue from an Excel-based inventory model, the team should not find it difficult to assess the main causes on following the Six Sigma root cause philosophy of Y=f (x) to scrutinize and recognize the fields having problems. These may also be employed to indicate marketing, sales, manufacturing and such functions in the supply line that can cause high lead-time, and therefore develop demand management practices.

Improve projects

When looking to improve projects, the team starts by studying the stocks and defining the goals of that project. The team uses the defined goal as a guideline for system operations. Input data is derived from the questions, and IT systems are employed to fabricate an inventory model for locating the main reason for piling inventory.

Data collection and measurement

The subsequent phase involves the designing of plans for data collection and a measurement system. It also involves taking a physical counting off on the spot inventory and making an analytic report for the management to find out the correctness of supply chain metrics, like lot size and lead time. The significant input variables, which could affect the management of inventory, are identified during the Analyze phase.

Inventory balance

A usual inventory balance can also be employed to work out lead time, service levels and demand variation. This proves helpful in identifying the items and locations that have too large or too small inventory. This kind of input helps to establish the main causes of trouble.

Improve phase

In the Improve phase, the steps needed for overcoming such difficulties are recognized and used to introduce modifications in the system. During the course of identifying and executing such projects, others problems too get identified. Tools like 5S are found helpful during the Control phase for the continued development over a phase of time.

Supply chain

Inventory models may also be exploited to reveal the function of the supply chain and illustrate the effect of demand management practices on the surplus and out-of-date stocks.

Companies can utilize Lean Six Sigma to decrease and remove waste in inventory and reorganize their entire operations.

 

 

Lean can bring growth, profit, happy customers, and employees

This article provides a high-level overview of the three pillars for a successful implementation of Lean. It also provides the first step in getting started. It will be followed by a series of articles on Lean, People-Centered Leadership and MIS.

LEAN manufacturing reduces waste and increases profits. It is a system for minimizing waste without eliminating productivity. There are three Japanese words that describe the process. Muda – which means uselessness, wastefulness or futility. Muda refers to any resource that uses more resources than needed and causes waste. This can include a waste of employee talent or a waste of space, money, and other resources based on overproduction. The second word is Muri – which means waste created through the overburden. This waste refers to unreasonable work. When a company is poorly organized it creates several types of Muri waste. It imposes unreasonable workloads on employees. It can also push employees and machines beyond their natural limits. Muri can result in errors, accidents, and lost or disgruntled employees. The third word is Mura – which refers to waste caused by unevenness or inconsistency. An example of Mura is the end of the month rush to fill and ship orders, while the beginning of the month is slow due to lack of parts and lack of focus on the month-end target.

Many incorrectly believe that implementation of LEAN means elimination of jobs and employees. This is definitely not the case. It is the elimination of waste and the improvement of the workflow. Many others incorrectly believe that Lean is the tools that assist in the identification and elimination of waste. But tools alone do not solve the problems and eliminate waste.

PCL (People Centered Leadership)

Around the globe, companies have found that the most difficult challenge of all is changing the company to a LEAN culture that values the employee and their contribution. LEAN can fail to deliver results if the company does not educate, include, and value the employee. A Gallup survey found that 87% of C suite executives recognize that disengaged employees are a threat to the success of their business. They also found that only 30% of the population is inspired and engaged in the workplace. 50% are not engaged and the other 20% are actively disengaged. Disengagement costs the US alone $450K to $550K annually. Companies with engaged teams have higher productivity, profitability, and customer satisfaction scores. They also have fewer accidents, quality defects, less turnover, less absenteeism, and lower healthcare costs. These inspired and engaged employees come up with the most innovative ideas and help acquire most of the company’s new customers. LEAN eliminates waste, increases profits, and develops and nurtures employees

Therefore, before you invest any money, it is important to get the entire executive suite onboard with a commitment to LEAN and to a People-Centered Leadership style. Not only must they be committed, but they must also remain committed, and they must actively exhibit the characteristics and processes associated with LEAN. Then you can take the next step of convincing the employees that LEAN will not only be a value to the company and the customer but to them as well. They will have the opportunity to participate in the process changes, submit ideas, learn new skills, and they can earn more money and grow in roles and responsibilities.

MIS (Management Information System)

Management Information Systems provides a method to track business and production processes from estimating and quoting through job tracking on the floor or outsourced all the way through to delivery and billing. The system can be on a workstation, the web, or cloud-based. MIS systems help to manage the flow of information and keep your customers informed. It is important to select a product that not only helps you track and eliminate waste but also integrates with your current systems. It must be flexible and scalable for the future business as well. You want a system that will help you manage your workflows and help you make informed decisions. But before you invest in a system and someone to install and work with it, remember the advice provide in the previous paragraph. It is critical to your success to get the executives and the employees committed to LEAN, Continuous Improvement and People-Centered Leadership before tracking waste. If the team is not committed, they will not do the work and some may sabotage the effort.

Now that you have an adequate idea of the big picture, you can take help from the internet and can know more about the same.

Get master black belt certification and learn skills to solve business problems

A master black belt professional is supposed to possess the key skills in regard to process improvement. He or she is required to have learned six sigma and Lean so that can implement their merits to serve the industry well. All this is possible with online master black belt certification as the training is developed for job-focused individuals.

Good jobs happen to only those having specialized skills. The market receives knowledgeable professionals with open arms purely for the ability they possess to create the difference. If you are capable of helping businesses with day to day operations, you can then be sure of great prospects. This is where online master black belt certification helps as it imparts you a superior understanding of process improvement. You enrol in the training and learn how to work in improving processes and systems to organizations you are part of. You will be trained as a competent master black belt and involve in devising plans and strategies for process improvement. This is how you can make the difference to the business.

Similarly, the training is a good step forward towards becoming familiar with the all-important concepts of lean, six sigma and change management and implement their virtues to businesses across industries. An enrolment in online master black belt certification means an opportunity to gain insight about implementing process improvement strategies with ease. In doing so, professionals can help in solving some of the most complex problems related to processes at different levels. The certification is also very beneficial to those looking to understand Six Sigma methodology in a complete manner together with the ways to use it to create the difference to organizations. All this skill helps trainees become a change agent and serve the industry well.

Similarly, the certification is a meaning investment in being at the forefront of utilizing lean and implementing process improvement initiatives in a hassle-free manner. By enrolling in online master black belt certification, professionals can leverage unique methodologies in a given framework of the business and make the due difference. They can use the knowledge about tools and concepts with the strategic goals of the business and help it realize its true potential. With such specialized skills and knowledge, it becomes easy to guide black belts and green belts within the organization and add value through collective accountability. This is how trained professionals are entrusted with the task of leading the change initiative.

Once certified, you will become an expert in Six Sigma strategies and by adopting those strategies, you will help your company to accentuate its growth and profit. Six Sigma master black belt certification program is worthwhile for those looking to polish their skills further and take their career ahead. So, add a new dimension to career and become the asset for the industry.

 

Six Sigma employment advice from the industry leaders

There are a few key points of advice that industry leaders will give to new business members. These are things like getting a good education, follow extra achievements, accomplish as much as you can. Having a good deal of knowledge and skill to offer potential employees is a great way of getting your foot in the door. You should always know what you want and be motivated to reach that goal.

When someone is a recent graduate intent on getting a lucrative position in the industry they have chosen, they are already well on their way toward reaching that goal. In the corporate world, knowing the ins and outs of the basic business functions is a way to climb the ladder and gain better positions. One of the ways that some people have used to give themselves an extra edge in the corporate office is learning and applying the methods of Six Sigma. It is a business strategy used by many successful corporations around to world to increase the quality of their products and services offered while also decreasing their expenditures.

Six Sigma business professionals work on the quality of products and services offered by corporations. When someone works for one of these corporations or is seeking a job with one, understanding how to apply these methods is an added bonus. Six Sigma professionals are experts in their field and have the knowledge needed to analyze corporations from the inside out, looking for issues and problems, collecting necessary data and formulating plans of action in order to improve the quality of the company overall. There are several levels in the Six Sigma belt tier that signify how experienced the individual is with using the methods. The Black Belt signifies that the employee is well trained in the methods and is able to lead a team on any project proposed to them by the company executives. They will choose a team of Green and Yellow Belt professionals for the project. These professionals will be chosen based on their skills and qualifications, as well as their personalities and talents.

Company executives do not mind seeing a Green or Yellow Belt certification on a resume. Green Belt professionals are not as experienced as Black Belts but are sometimes put in the leadership position for a project because they have proven their skills in the industry and with using the appropriate methods. Both Black and Green Belt professionals are qualified to give advice to potential employees on what they need to know to be successful in their chosen field. In order to become a Six Sigma ‘Belt’ at a particular level, one needs to enrol in training. Once this training has been passed, they will become Six Sigma Certified in their level of study.

Employment advice sometimes comes from the instructors of higher learning courses who have retired from the particular subject they are teaching. Whether it is someone new looking for advice or someone who has been in the industry for some time and is seeking updated information, the best advice always comes from those who have the most experience. Six Sigma certification is something that is beneficial for both the employer and the employee, which is often why an employer will enrol an employee in training.