Six Sigma Project: Midwest Bank Dr. Ron Lembke Managing for Quality

Cash Problems Commercial Processing Department (CPD) Project team 4.26 sigma already One error lost $280k last year Project team Project coordinator – from project office Operations financial manager – financial impact analysis, equipment purchasing Assistant VP – subject matter expert from CPD Team supervisor – subject matter expert from CPD Project coordinator with bank-wide knowledge CPD project analyst – Six Sigma analyst Data integrity, graphical analysis, data stratification Champions: Senior VP, VP over CPD Created problem definition statement Responsible for processes involved Week-long six sigma training

Define Stage Two largest sources of errors: Cash Strapping Deposit processing Don’t affect each other, separate causes for errors Problem Statement: 150 internal and external errors, lead to bank losses of $400,000, and significant risk exposure. Goal of $0 losses from CDP operations Objective to reduce internal error ratio by 50% and losses by 50% in 12 months. Projects will reduce loss expense, and risk exposure, and increase customer satisfaction

Project Goals Risk mitigation – difficult to quantify Dollar losses – easy to measure Number of errors – easy to measure Approved project launch, moved to Measure stage

Measure Stage XY matrix – Cause & Effect p. 533 Agree on CTQs that impact customers Ys: risk mitigation, error reduction, reducing dollar Studied workflows, look for root causes Subject Matter experts- “tribal knowledge” XY matrix – Cause & Effect p. 533 Rank factors for potential error causes Xs Potential customer outputs Ys Rate importance of Y’s 1-10 “Output Rating” Association Table: Impact of the X’s on each Y: 1-10 Rank = 9*9 + 10*10 + 10*10

Analysis Stage Gathered data to assess impact of Xs on Ys. 48 hours of team time! Many, many graphs Indications of problems with manual strapping process (putting bands around money) Tribal knowledge: Insufficient staffing? Look for more longitudinal data 100 graphs created Data in single strands Paired interactions

Analysis, Continued Correlations between human factors and manual processes Many manual steps in handling cash cash strapping - 100 errors per year Deposits –larger dollar loss per manual error Concerned about # errors, not size

Failure Modes and Effects Analysis Laid out steps from process map Concentrated on inputs Figure out effects of each possible error Each process step ranked on Risk Product Number(RPN) : SEV - Severity of error OCC - Occurrence – how often DET - Detection – how likely to figure out SEV*OCC*DET Know what we have to look at

Improve Phase Countermeasures – how to fix? Countermeasures Tree For each problem, find root causes Each root cause, list countermeasures Practical ways to implement coutermeasures Effectiveness x Feasibility (1to 5 scale)

Five Major Countermeasures Cash strapping machine $5 charge for clients with incorrect deposits Benchmarking – will customers accept? Eliminate double keying of deposits Vacation schedules to reduce errors by subs Dollar loss corrective actions

Control Phase Implementation left to subject matter experts Minor suggestions implemented immediately Pilot study $5 charge reduced errors 44% by corporate clients $280,000 loss was from an incorrect deposit Dollar loss corrective action hardest to impelement Overall errors down 30% Dollar losses down 57%