Six Sigma Introduction Supply Chain Leadership Committee Nashville, TN November 4, 2005 Steve Freudenthal Milliken & Company

Six Sigma Introduction Six Sigma Definition Evolution of Six Sigma The Six Sigma Process Today The DMAIC Process Consultant Selection

Key Principles of Six Sigma at Xerox ØEverything starts with the customer.  ØThe infrastructure for cultural change is the most powerful contribution of Six Sigma.  ØDecisions about which projects to pursue must be based at least in part on the potential impact on net present value.  ØSustained improvement is possible only with management engagement.  ØCEO goals are translated to frontline projects and coordinated through an organization of people and technical resources.  ØA standard problem-solving process and associated tool set provides the means for basing decisions on data.

Quality Initiatives ? Six Sigma Quality Lean Manufacturing Statistical Quality Control Continuous Improvement/Kaizen Malcolm Baldrige National Quality Award Total Productive Maintenance Supply Chain Management Quality Circles ISO 9000 Standards Reengineering Theory of Constraints Lean Manufacturing Six Sigma Quality ? ISO 9000:2000

What does “Six Sigma” mean?   Phase I Early 1980’s Pioneered at Motorola Statistical approach Measured DPMO Variation is the enemy Focused on: Elimination of defects Improving product and service quality Reducing cost Continuous process improvement

What does “Six Sigma” mean?   Phase II Mid 1990’s Revised by Jack Welch at General Electric Linked Six Sigma to business strategy and customer needs Strong measurement on bringing dollars to the bottom line Strong financial community involvement Project driven High potentials selected to be Black Belts Black Belts expected to deliver $250,000/year to bottom line (hard dollars) Black Belts promoted up after two years All senior leaders trained (Green Belt) Projects are sponsored by business leadership (Top Down) 2% of management committed full-time

What does “Six Sigma” mean?   Phase III 2000’s Lean Six Sigma Caterpillar, Xerox, DuPont Combined lean manufacturing techniques and Six Sigma Benefit: High speed, low cost

Six Sigma Savings Averages by Area $500K $480K $450K $180K $100K $35K

Roles and Responsibility Deployment Manager Champions/ Sponsors Black Belts Master Black Belts Green Belts Identification and Prioritization of Projects by Division Assign and Review Activities of Black Belts Facilitate Project Implementation Key Stakeholder in Project Success Lead 4-6 strategic improvement projects each year Expert in Six Sigma techniques Help local organization in Six Sigma disciplines Full-Time Position Mentor/coach Black Belts Teach Six Sigma techniques Full-time Corporate Position Domain Experts 20-30% on one Project

Six Sigma Project Prioritize/ Select Scoring Rules Johnson Controls Inc. Six Sigma Project Prioritize/ Select Scoring Rules Score $ Savings (Hard/Annual Time (Duration) Effort (# people & $; Expense $; Cap $) Success factor (1 – risk) 9 >$250 K (High) < 4 months (short) < 3 (Small) High No capital; No IT; No Suppliers Small work group affected; Short Duration; Small Project Team 7 $100 – $250 K (Moderate) 4 - 8 months (moderate) 4 – 6 Moderate No capital; No IT; Some Suppliers Multiple work groups affected; Moderate Duration; Small Project Team 3 $50 - $100 K (Okay) 8 – 12 months (long) 6 – 10 (large) Small Some capital; Some IT; Numerous Suppliers; Many work groups; Long Duration; Moderate Project Team Size 1 <$50K > 12 months (very long) > 10 (very large) Low Significant capital; Significant IT; Very many Suppliers Very Many work groups Very Long Duration; Large Project Team Size Example Total Score Project A 9 7 3 22 $300 K 7 months 8 person team Some capital, some IT, many work groups affected, moderate duration Project B 30 $ 75K 4 months 2 person team No capital, no IT, small project team

Prioritized by Management Team Improvements Start with High Value Projects Customer Issues / Opportunities Business Strategy Goals / Objectives Priorities Project Selection Structured Process Links Business Strategy & Priorities Led by Deployment Managers Based on Benefit / Effort Analysis Leadership Accountable for Prioritization Project Candidates Prioritized by Management Team Structured approach to project selection Low Med High BENEFIT EFFORT Low Med High Xerox

Six Sigma Improvement Model “DMAIC” Process Define – describe the process, problem, opportunity Measure – gather data Analyze – listen to the data Improve – develop solutions, design processes Control – plan for stability

Six Sigma Design Model “DMADV” Process Define – describe the process, problem, opportunity Measure – gather data Analyze – listen to the data Develop – create the solution Verify – does the solution work?

Potential Tools and Techniques Define 1.0 Define Opportunities 2.0 Measure Performance 3.0 Analyze Opportunity 4.0 Improve Performance 5.0 Control Performance Main Activities Potential Tools and Techniques Objective Validate/ Identify Business Opportunity Validate/ Develop Team Charter Identify and Map Processes Identify Quick Win and Refine Process Translate VOC Develop Team Guidelines & Ground Rules Sigma Goal (CCR) Gap To identify and/or validate the improvement opportunity, develop the business processes, define critical customer requirements, and prepare themselves to be an effective project team. Project Focus $$ CCRs TASKS ACTIVITIES RESP. START DUE STATUS &ACTIONS Action Plan Business Case Goal Statement Project Plan Opportunity Statement Project Scope Team Selection Team Charter

, but Not Sufficient Tools* are Essential Xerox Define Measure Analyze Value Stream Map Various Financial Analysis Charter Form Multi-Generational Plan Stakeholder Analysis Communication Plan SIPOC Map High-Level Process Map Non-Value Added Analysis VOC and Kano Analysis Lean Quality Function Deploy-ment (QFD) RACI & Quad Charts Define Measure Operational Definitions Data Collection Plan Pareto Chart Histogram Box Plot Statistical Sampling Measurement System Analysis Setup Reduction Generic Pull Kaizen Control Charts Process Capability, Cp & Cpk Analyze Pareto Charts C&E Matrix Fishbone Diagrams Brainstorming Detailed ‘As-Is’ Process Maps Basic Statistical Tools SupplyChainAccelerator Analysis Non Value-Added Analysis Hypothesis Testing Confidence Intervals FMEA Simple & Multiple Regression ANOVA Queuing Therory Analytical Batch Size Improve Brainstorming Benchmarking Process Improvement Techniques Line Balancing Process Flow Improvement Constraint Identification Replenishment Pull Sales & Operations Planning Poka-Yoke FMEA Solution Selection Matrix ‘To-Be’ Process Maps Piloting and Simulation Control Control Charts Standard Operating Procedures (SOP’s) Training Plan Communication Plan Implementation Plan Visual Process Control Mistake-Proofing Process Control Plans Project Commissioning Project Replication Plan-Do-Check-Act Cycle * Tool array adapted from Lean Six Sigma for Service by Michael George Xerox

Potential Tools and Techniques Measure 2.0 Measure Performance 1.0 Define Opportunities 3.0 Analyze Opportunity 4.0 Improve Performance 5.0 Control Performance Objective Main Activities Potential Tools and Techniques To identify critical measures that are necessary to evaluate the success, meeting critical customer requirements and begin developing a methodology to effectively collect data to measure process performance. To understand the elements of the six sigma calculation and establish baseline sigma for the processes the team is analyzing. Identify Input, Process, and Output Indicators Develop Operational Definition & Measurement Plan Plot and Analyze Data Determine if Special Cause Exists Determine Sigma Performance Collect Other Baseline Performance Data Checksheets Input Process Output CCR Process Indicator Output Indicator Input Indicator UCL LCL Sigma= X CCR Gap Sigma= X

Potential Tools and Techniques Analyze 3.0 Analyze Opportunity 1.0 Define Opportunities 2.0 Measure Performance 4.0 Improve Performance 5.0 Control Performance Objective Main Activities Potential Tools and Techniques To stratify and analyze the opportunity to identify a specific problem and define an easily understood problem statement. To identify and validate the root causes that assure the elimination of “real” root causes and thus the problem the team is focused on. To determine true sources of variation and potential failure modes that lead to customer dissatisfaction. Stratify Process Stratify Data & Identify Specific Problem Develop Problem Statement Identify Root Causes Design Root Cause Verification Analysis Validate Root Causes Comparative Analysis Sources of Variation Studies Failure Modes & Effects Analysis Regression Analysis Process Control Process Capability Design of Experiments Problem Statement Quantified Root Causes 25% 50% Indicators & Problem Statement (effect)

Potential Tools and Techniques 4.0 Improve Performance 4.0 Improve Performance 1.0 Define Opportunities 2.0 Measure Performance 3.0 Analyze Opportunity 5.0 Control Performance Objective Main Activities Potential Tools and Techniques To identify, evaluate, and select the right improvement solutions. To develop a change management approach to assist the organization in adapting to the changes introduced through solution implementation. Response Surface Methods Generate Solution Ideas Determine Solution Impacts: Benefits Evaluate and Select Solutions Develop Process Maps & High Level Plan Develop and Present Storyboard Communicate Solutions to all Stakeholders

Potential Tools and Techniques Control 5.0 Control Performance 1.0 Define Opportunities 2.0 Measure Performance 3.0 Analyze Opportunity 4.0 Improve Performance Objective Potential Tools and Techniques Main Activities To understand the importance of planning and executing against the plan and determine the approach to be taken to assure achievement of the targeted results. To understand how to disseminate lessons learned, identify replication and standardization opportunities/ processes, and develop related plans. Error Modes and Effects Analysis Process Control System Develop Pilot Plan & Pilot Solution Verify Reduction in Root Cause Sigma Improvement Resulted from Solution Identify if Additional Solutions are Necessary to Achieve Goal Identify and Develop Replication & Standardization Opportunities Integrate and Manage Solutions in Daily Work Processes Integrate Lessons Learned Identify Teams Next Steps & Plans for Remaining Opportunities Implemented Solution Project Workplan Sigma Goal (CCR) Gap CCR CCR Gap X

Six Sigma DMAIC Projects 5.0 Control Performance 1.0 Define Opportunities 2.0 Measure Performance 3.0 Analyze Opportunity 4.0 Improve Performance 5.0 Control Performance 5.0 Control Performance 1.0 Define Opportunities 2.0 Measure Performance 3.0 Analyze Opportunity 4.0 Improve Performance 5.0 Control Performance Process cannot be improved: Abort project Recharter as Design Project

“ENERGY & WILL” Room to Inject New Energy Build on Energy Manufacturing Performance is here Deployed Fully Room to Inject New Energy D E P L O Y M N T No Major Gaps Business Processes are here Build on Energy Deployed Well Major Gaps Nothing Nothing Buzz (10+) Push (5) Skeptics (50%) Pilots are Positive (80%) Some Momentum Balance of Push/Pull Not at Tipping Point More Pull Than Push Internal & External Positioning Past the Tipping Point Thriving PULL! Drives the Way We Work Ubiquitous “ENERGY & WILL”

Key Learnings 50% of all companies attempting to implement Six Sigma failed after the first two years of implementation.

Long Term Goal – Sustained Commitment & Results Key factors differentiating “A” curve from “F” curve Sustained Commitment C A Business integration into “how we work” Project selection link to business strategies Project selection link to Customer Value Ability to change Culture & Leadership Behavior Full Value-Chain engagement Ability to track results Integrating DfLSS Six Sigma Net Business Benefit F As many as 50% end up here at “F” 1 2 3 4 Year Initial Leadership Commitment * * Chart adapted from Strategic Six Sigma: Best Practices from the Executive Suite by Dick Smith and Jerry Blakeslee Xerox

Reasons Six Sigma Deployments Fail Apathy from senior leadership Training not connected to projects Projects not connected to strategy Projects only focused internally Selecting “available” people Part time Black Belts No financial validation to bottom line People not recognized for their contributions

A Six Sigma Deployment Cannot Be Done Without Consultants Training Materials Testing Materials Professional Educators Six Sigma Project Management Expertise (Master Black Belts) Credibility With Top Management Can “Jump Start” The Deployment

on a company’s culture and how it aligns itself with its customers If properly driven by Top Management, Six Sigma can have a dramatic impact on a company’s culture and how it aligns itself with its customers

Thank You!!