Process Life Cycle: 6 SigmaProcess Life Cycle: 6 Sigma

ELAELAJune 20, 2003June 20, 2003

What is 6 Sigma?What is 6 Sigma?

Near Perfection Goal in Meeting Customer Requirements

Unifying Framework to Achieve, Sustain & Maximize Business Success

Cultural Change to Align Processes, Customer Satisfaction & Profitability

Sigma is a Measure of Process Variation

Goal of 6 Sigma = 3.4 Defects per 1 Million Opportunities

Critical Customer Requirement

Product or Service Output

Mean

Defects: Service

unacceptable to customer

Variation

Variation

Near Perfection GoalNear Perfection Goal

Most Transactional Organizations Operate at 3.5 Sigma or 22,750 Defects per 1 Million Opportunities

Why is 99.5% Defects not Good Enough?(4.1 Sigma/4,600 Defects)

2 Accidents/day at Major Airports210 Minutes/month Without Electricity20,000 Pieces of Mail Lost Every Hour100,000 Wrong Drug Prescriptions Dispensed each Year

Near Perfection Goal, Con’t.Near Perfection Goal, Con’t.

Unifying Framework GoalUnifying Framework Goal

Turn S

trategy into Action

Mea

sure

& D

rive

Acc

ount

abili

ty

Enterprise Strategy / Goals

Global Processes

BU Strategy / Goals

BU Processes

BU 6 Sigma Projects

Personal SMART Goals

Daily Work

Profit

Good Processes

Cultural Chance to Align ProcessesCultural Chance to Align ProcessesCustomer Satisfaction & ProfitabilityCustomer Satisfaction & Profitability

Happy Customers

Of What does the 6 Sigma Of What does the 6 Sigma Deployment Consist?Deployment Consist?

Getting Leadership Commitment

Full Time 6 Sigma Leaders

Deployment Champions (Full Time)Master Black Belts (Full Time)Black Belts (Full Time)Green Belts (Part Time)Yellow Belts (Part Time)

Incentives & Accountability

Measurement

Customer / Market Focused

6 Sigma’s Two Types of Methodologies6 Sigma’s Two Types of Methodologies

Define CharterStakeholder AnalysisVoice of the CustomerProcess Map “As Is”Risk Analysis

Measure Critical Customer RequirementsBaselineMeasurement Plan

Analyze Statistical Analysis of DataProblem StatementRoot Cause

Improve Develop SolutionsEvaluate & Select SolutionsCommunicateNew Process Development

Control Control PlanTransfer to Process Owner

“Think of Yourself as a Navy Seal Parachuted in the Middle of a Conflict.”

DMAIC:

Define CharterStakeholder AnalysisVoice of the CustomerRisk Analysis

Measure Critical Customer RequirementsPerformance CapabilityQuality Function Deployment

Explore Best Fit ConceptsCapability AssessmentProcess Design

Develop Detail DesignProduction DesignValidationsPilot

Implement Complete TestingFull ImplementationTransfer Ownership to OwnerControl Plan

DMEDI

6 Sigma’s Two Types of Methodologies, Con’t.6 Sigma’s Two Types of Methodologies, Con’t.

6 Sigma Benefits to Cat Financial6 Sigma Benefits to Cat Financial

20,000K

15,000K

10,000K

5,000K

0

Comply Commitment Embrace2001 2002 2003

Application ExampleApplication Example

In 2002 Cat Financial acquired FCC Equipment Finance, a small non-captive lender, specializing in constructionequipment. Most of the FCC processes were manual,while Cat Financial had integrated a front-end applicationby Thoughtworks, called “FinancExpress.” A 6 Sigma teamwas chartered to assess FCC’s ability to handle expectedvolume growth. The solution would involve either processchanges, a shift in resources (people) or automation.

FCC Business Platform

Objective: Develop a platform to process business at FCC based upon growth projections.

BRM = 19

High Risk

- Reduce Credit Turnaround to 1 day- Automate Document Processing- Reduce SM administration time- Improve cost/transaction ratio- GROW BUSINESS

Currently• 4-5 days turnaround• $4.6 Million per FTE• 50 total FTE

• $200 Mil Increase in 2 yr• Reduce 5 FTE in 2002

- People- Technology- Processes

Implement FE Front-End – App, Credit, DocsPend FE Back-End Eliminate Credit Approving PurchaseUtilize CFSC DocsAutomate UCCEliminate Renewal Insurance follow-up

Recommendations

1. FE IT Charter2. Training Plan

6 Sigma Challenges6 Sigma Challenges

Managing Resources including Information Technology

Maintaining Active Project Pipeline

Keeping Organization Engaged

Changing Business Needs

QuestionsQuestions