A Potent Mix for Process Improvement

February 27, 2008 by Sandeep Sethi

Many global corporations have already made Six Sigma and business software complementary ingredients of their corporate strategies. As a data-driven, systematic approach to the design of business processes that help address customer requirements, Six Sigma can be supplemented by technology that supports the processes.

The benefits to be derived are not limited to large corporations in the manufacturing sector. Companies of many sizes and in diverse sectors – services, retail, and software development – can interweave the Six Sigma approach with the inherent capabilities of business software to handle large-volume data processing and analysis to enhance the value delivered to the customer.

DMADV methodology is a key element of the Six Sigma approach. It not only provides the framework for setting up new business processes, but also for redesigning processes that have reached their inherent performance limits. The DMADV model includes the project phases of define, measure, analyze, design, and verify.

A Six Sigma project begins with the definition of the project charter, scope, and plan. External and internal customer requirements, key performance indicators (KPIs), and critical-to-quality (CTQ) variables are identified and defined during the measure phase. The high-level design is completed in the analyze phase, and the detailed design is finalized in the design stage. Testing and full-scale deployment are undertaken in the verify phase.

The DMADV methodology is based on building defect prevention into new designs, so it is a predictive rather than a reactive approach to design quality. DMADV enables the new design of a product or process that helps address customer needs and meets the internal CTQ variables that are derived from those needs. The process can then be implemented and delivered by utilizing the vast array of functionalities available in a business software technology platform.

For example, if the CTQ variable consists of offering a larger number of features in different car models, the variant configuration tool available in the SAP ERP application can provide the required flexibility in the design and assembly processes. In other areas, such as production planning, inventory management, and order fulfillment, the flexibility offered by SAP functionalities can also be a key enabler for a process design that is keenly aligned with the identified customer requirements.

Improvements beyond manufacturing

Six Sigma was originally developed as a methodology for measuring, improving, and controlling quality in a company’s processes, with the significant aim of virtually eliminating manufacturing defects. It provided a set of statistical tools, like analysis of variance, to reduce process variation – the root cause of defects and costs.

However, the scope of Six Sigma projects is no longer limited to manufacturing operations. Corporations with long-term Six Sigma experience are increasingly realizing that on an incremental basis, larger benefits are trapped in inefficient processes undertaken far away from the shop floor.

The tools of Six Sigma and business software can help companies address and tap into processes like supply chain management, inventory management, supplier relationship management, accounts receivable, and claims and warranties. An example illustrates how SAP software and Six Sigma can be interwoven to achieve a higher level of efficiency in non-manufacturing processes.

Streamlining payment processes

Consider the material sourcing activities of a large company, which are performed in a decentralized manner in about fifteen different countries. The accounts payable departments of each local entity process vendor payments. Although functions in the SAP ERP application fully automate payment processing, the sourcing departments increasingly demand improvements in the process of providing payment information to vendors. A Six Sigma project to address this issue can be part of an initiative aimed at improving supplier relationships.

Typically, automatic provision of detailed and accurate payment information – about amount, payment method, or value date – to every vendor for each invoice paid would emerge as a requirement of the finance and sourcing departments. If the corporation is moving toward centralizing its payment processing, it can identify scalability, accuracy, and minimal time-lag between payment processing and transmission of payment information to vendors as CTQ variables.

In this example, the process map is then defined by a supplier, input, process, output, and customer (SIPOC) analysis, which identifies the supplier and customer, inputs, and outputs of the process. The detailed design is finalized with the functionality for automatic generation of payment advice that is available in the accounts payable component of SAP ERP. These payment advices can be further processed by electronic data interchange (EDI) for immediate faxing or e-mailing to vendors in their own language.

The vendor master data in the SAP system includes payment data and the vendors’ fax numbers and e-mail addresses. The Six Sigma project can involve an initial pilot created for one country and then rolled out to others. In this scenario, tangible benefits are achieved from a considerable reduction in the time that executives spend on responding to vendor queries about payments and payment reconciliation, improvement in delivery schedules by vendors because of better cash planning, and overall improvement in supplier relationships.

Mentorship is the key

Numerous Six Sigma projects can be handled – often in parallel – by teams that implement the processes in the enterprise’s business systems. This approach requires corporate sponsorship of a Six Sigma infrastructure that is well-nurtured by an IT support system. The two can collaborate well only when executive management emphasizes both equally.

The infrastructure contains different key roles for the project’s implementation – the champions, master black belts (MBB), black belts, and green belts. To develop this infrastructure, top management must take the lead. The role of the Six Sigma executive sponsor must be undertaken at the CxO suite level.

The next step identifies the champions, which are usually the heads of strategic business units (SBU), who report to the CEO in large corporations, so that all levels of the enterprise can appreciate the importance of the Six Sigma projects. The champion is responsible for the identification of projects, overseeing the results, and selecting individuals for the roles of MBB and black belts.

Once Six Sigma has been identified as a key influencer of corporate strategy, the MBBs, black belts, and green belts benefit from an enterprise-wide change management and training effort. Sponsored by executive management, this effort can run for a few months before real-time execution of Six Sigma projects can begin. To kick-start the process, midsize companies can initially outsource a few MBB and black belt positions to experienced and trained Six Sigma professionals.

The MBB usually possesses extensive business strategy and process insights, in-depth Six Sigma concept knowledge, and a comprehensive understanding of the business software and its capabilities. The MBB typically guides, monitors, and addresses risks and issues for a number of projects led by the black belts and acts as their consultant. The role must be performed on a full-time basis.

The black belt leads the project and is responsible for the day-to-day management, monitoring, and execution of project tasks, including time and resource planning and oversight of design, testing, and infrastructure. In corporations with mature experience with their business software, the black belt is invariably an experienced technology practitioner. The selection of the right black belt can often be the difference between success and failure.

In large projects, green belts who typically lead a module, component, or phase of the project, or a function like testing, support the black belt. Green belts also lead smaller projects independently, under the mentorship of a black belt. In fact, the concept of mentorship is the cornerstone of the Six Sigma infrastructure: The MBBs mentor the black belts, who in turn guide the green belts to step up into the role of project leader.

After a strong Six Sigma infrastructure has been put in place to capitalize on the business system’s inherent capabilities to enhance business process efficacy, it is time to reap the cost savings. Six Sigma and a company’s business software should work in tandem for sustained progress in the company’s journey towards a higher level of sigma – which should mean fewer defects and improved quality of its business processes.

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