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Organization and project management approach to production . This approach became popular in the military/industrial sector to ensure that quality, cost and delivery targets could be met. Sometimes this may mean intentional sub-optimization of a local function in order to improve the overall business outcome. For example, an extra setup or changeover in one operation may increase local costs or cycle times, but reduce overall WIP inventory and provide much higher customer value. Clearly, the business process management role is critical to overall business success. A few years earlier, project management became very popular and project management training courses were offered by many providers.
Six Sigma Black Belt methods played a crucial role in overall development of the business. These methods bridged many gaps, eliminated confusion and helped organizations in differentiating between global business improvement opportunities and local functional ones. When process flow charts are used with the SIPOC model, it enhances business process monitoring, control, understanding and improvement. To complete the picture, however, it is helpful to consider one additional factor: the levels of the business process.
Processes can be viewed as being both comprised of smaller micro- or sub-processes and constituents of larger macro-processes. It is often convenient to think of at least three levels of the overall process because six sigma methods and procedures change somewhat from level to level. Process problems are hierarchical and inter-connected to the operational issues, which in turn, are tied to support systems ultimately linked to business issues such as customer satisfaction, profitability and shareholder value.
The three main levels may be described as:
1. The Business Level:
High level problems often relate to the enterprise information and financial systems used to “steer” the business. These represent strategic sigma projects. Some examples include systems that measure customer feedback and supplier quality systems.
Michael Harry’s six sigma breakthrough strategy at the business level is:
Recognize the true states of your business
Define what plans must be in place to realize improvement of each state
Measure the business systems that support the plans
Analyze the gaps in system performance benchmark
Improve system elements to achieve performance goals
Control system-level characteristics that are critical to value
Standardize the systems that prove to be best in class
Integrate best-in-class systems into the strategic planning framework
2. The Operations Level:
The issues of managing operations and making products or producing services are the focus at this level. It is important to recognize operational issues that link to key business systems. Issues of product cost, quality, inventory,throughput and availability are often important at this level. Six sigma projects at this level may take a year or more to complete because of the complex combination of factors involved. Required improvements at this level may be derived from the business level needs.
Michael Harry’s six sigma breakthrough strategy, at the operations level, is:
Recognize operational issues that link to key business systems
Define six sigma projects to resolve operational issues
Measure performance of the six sigma projects
Analyze project performance in relation to operational goals
Improve six sigma project management system
Control inputs to project management system
Standardize best-in-class management system practices
Integrate standardized six sigma practices into policies and procedures
3. The Process Level:
The process level deals with process elements that may be contributing locally to the cost of poor quality (COPQ). The objective is to recognize process problems that link to important operational issues.
Michael Harry’s six sigma breakthrough strategy, at the process level, is:
Recognize functional problems that link to operational issues
Define the processes that contribute to the functional problems
Measure the capability of each process that offers operational leverage
Analyze the data to assess prevalent patterns and trends
Improve the key product/service characteristics created by key processes
Control the process variables that exert important influence
Standardize the methods and processes producing best-in-class performance
Integrate standard methods and processes into the design cycle
The six sigma business improvement process moves up and down the vertical levels of the organization as well as across the functional elements. Using the SIPOC process model and understanding the differences in process levels, will make it easier to manage the process of business improvement. Businesses have many stakeholders. Each stakeholder has unique relationships with the business:
Employees and their families
The black belt serves as a business process improvement project manager, working across multiple processes to identify the process stakeholders, understand their requirements and process inter-dependencies and improve the individual process configurations and settings to improve the overall outcome for all stakeholders. This involves all stakeholders in a variety of ways. Communication within the entire stakeholder community is channelized through internal company processes. Stockholders choose to invest based on expected returns in the near-term (dividends or increased stock price) or longer-term (growth). If the business produces the revenues and profits expected, they may choose to invest further in the business. If not, they may sell and reduce the company’s financial resources. When customers choose to purchase goods or services, they provide financial resources to the process.
If the delivered goods or services provide the desired value, the customer may be motivated to provide reinforcing feedback in the form of additional orders, positive word-of-mouth, new product ideas, referrals, etc. that help build the business. However, if the perceived value is not up to par, negative feedback to the process can retard the business. In each case, the supplier/customer determines whether the value was received. In this way, the customer sets the final specifications for each transaction.
Perceived value is a function of the cost,quality, features and availability of the total product (goods and services). For example, a car may have reasonable cost, quality and availability, but if service is inadequate, the customer may choose to buy from another source next time. Even worse, the customer may tell others about their bad experience. Activities which fail to meet their stated objectives have negative effects on the stakeholders. To the stockholders, the net worth of the company will be reduced. Suppliers may have payments delayed or never paid in full.
Management and employees may see wage levels frozen or diminished and the number of employees may be reduced. Customers may react to unsuccessful activities by seeking other companies with which to deal, or they may impose penalties stated in the contract and/or find restitution through legal action. The customer makes the order, which gets processed and the customer receives goods and services. The supplier provides materials and machines, which are used by the business and additional orders are sent to the supplier. The employees provide a commitment of work, they continue to work and receive a pay for all they have worked. The managers provide Leadership which leads them to career growth.
The community provides tax incentives which they in return earn as Tax Revenues. The society provides the infrastructure which in-turn gives them the Quality of Life. Organizational performance and the related strategic goals and objectives may be determined for:
Short-term or long-term emphasis
Goals may be set for either short-term or long-term results .
American managers, educated by the business schools in financial matters, have stressed ever increasing quarterly stockholder dividends. Because of that, American managers have been criticized for their short-term outlook. The Japanese and European managers have been willing to take smaller short-term profits to ensure the long-term growth of their companies. The proﬁt margin required to operate a business should be optimized for all stakeholder requirements. Projects and programs initiated by the company usually require a return on investment (ROI). The maximum profits are usually not taken because of internal stakeholder interests. If stockholder returns are maximized, then items such as re-investment in the company, purchases of new machinery and equipment, wages and salary increases must be turned down. An optimal level of stockholder dividends, investments, personnel costs and such, must be maintained.
For maintaining competitiveness, a reduced product cycle time must be emphasized. This applies to both new product development and existing product lines. Reduced cycle times will affect such things as the company’s inventory, WIP, waste and operational efficiency. The marketplace response is an organizational performance measure. The ability to respond quickly to the competition with regard to quality, technology, product designs, safety features, or field service is collectively very important. As a performance measure, proper resource utilization will result in reduced waste, reduced costs and a more effective organization.