Six Sigma and Kepner-Tregoe Manufacturing Excellence Event in Krefeld, 25th of March 2004 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 1 DMAIC Methodology + KT Tools Strategy Formulation Gatekeeper Situation Appraisal Performance System Design Project Selection 5 Control Project Management Potential Problem Analysis Decision Analysis Potential Opportunity Analysis 4 Improve 1 Define 2 Measure 3 Analyze True Cost Analysis Statistical Process Control Managing Involvement Problem Analysis Performance System Analysis 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 2 DMAIC Methodology + Strategy Use KT Strategy Formulation to identify critical products and customer groups for future emphasis Helps ensure that Six Sigma projects are targeted at strategically critical facets of the business 03/25/04 Strategy Formulation 5 Control 4 Improve 1 Define 2 Measure 3 Analyze Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 3 DMAIC Methodology + Situation Appraisal Use KT Situation Appraisal to help quickly identify and prioritize problems or areas of concern to charter potential Six Sigma projects Use KT Potential Opportunity Analysis to focus on where the most significant benefits might be, and on how to promote them and capitalize on them 03/25/04 Potential Opportunity Analysis Situation Appraisal 5 Control 4 Improve 1 Define 2 Measure 3 Analyze Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 4 DMAIC Methodology + Project Selection Use KT Project Selection to identify which projects working on which processes have the greatest benefit Helps allow you to build an “Optimal Project Portfolio” that you can manage to fit your capacity and your needs 03/25/04 5 Control 4 Improve 1 Define Project Selection and Definition 2 Measure 3 Analyze Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 5 DMAIC Methodology + True Cost Use KT True Cost Analysis to measure the financial impacts of performance deviations Understanding True Cost puts focus on financial impact of variations SPC measures can fill in data about the “What, Where, When, and Extent” of the issue 03/25/04 5 Control 4 Improve 1 Define 2 Measure 3 Analyze Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. True Cost Analysis Statistical Process Control 700-20-P564403A 6 DMAIC Methodology + Performance System Analysis Use KT Performance System Analysis to understand the “people” implications of current processes and systems Analyze the Performance System to find “the cause of the cause” around human factors 5 Control 4 Improve 1 Define 2 Measure 3 Analyze Performance System Analysis 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 7 DMAIC Methodology + Problem Analysis Use KT Problem Analysis to identify the root cause of Special Cause variation. PA pinpoints differences, causation Use Problem Analysis thinking in Common Cause situations to clarify the “Actual,” the “Should,” and the desired “Could” 5 Control 4 Improve 1 Define 2 Measure 3 Analyze Problem Analysis 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 8 DMAIC Methodology + Managing Involvement® Use KT Managing Involvement to ensure appropriate participation in solution design 5 Control 4 Improve 1 Define 2 Measure 3 Analyze Managing Involvement 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 9 DMAIC Methodology + Decision Analysis Use KT Decision Analysis when choosing a course of action or solution to ensure best choice, and effective risk management 5 Control 4 Improve Decision Analysis 03/25/04 1 Define 2 Measure 3 Analyze Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 10 DMAIC Methodology + Potential Problem Analysis Use KT Potential Problem Analysis to manage possible threats to the project or plan. (Can be used in place of or in conjunction with FMEA in many situations) Potential Problem Analysis 03/25/04 5 Control 4 Improve 1 Define 2 Measure 3 Analyze Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 11 DMAIC Methodology + Project Management Use KT Project Management to manage the project, once the solution has been decided. Full tool set and methodology for managing all phases of the project Project Management 5 Control 1 Define 2 Measure 4 Improve 3 Analyze 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 12 DMAIC Methodology + The Performance System Use KT Performance Performance System Design System Design. New processes 1 5 require new Define Control behavior, and it needs to take root 2 in a foundation of 4 Measure Improve clear signals, visible 3 consequences, and Analyze effective feedback 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 13 DMAIC Methodology + Gatekeeper Use KT Gatekeeper to monitor performance, control reintroduction of variation in both your Product Portfolio and your Project Portfolio Gatekeeper 5 Control 1 Define 2 Measure 4 Improve 3 Analyze 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 14 Summary Six Sigma provides a proven framework for improving performance Kepner-Tregoe provides a set of tools to implement Six Sigma more effectively through … - a clear improvement focus - a better understanding of the performance environment - clearly structured decision making and problem analysis processes - more effectively managed improvement projects 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 15 Appendix A The Path to Profitable Six Sigma 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 16 Senior Management The Path to Profitable Six Sigma Goals, Objectives Benefits/Costs/Risks Goals, Objectives Updated Projects Selected Operations Priorities Guidance True Costs Process Variations Measured Improvements Implemented Variation Reduced Operations Improved Improvement Projects Quantified ($) Opportunities True Cost of Variations Measured Finance Results True Costs Gains Controlled Priorities Project Goals/Scope Change Team Financial Impacts Variations Analyzed 03/25/04 High Value Opportunities Improvement Projects Defined Variation Reduced Improvements Implemented Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. True Costs 700-20-P564403A 17 The Path to Profitable Six Sigma Formulate strategy (leadership) Link expectations/goals to strategy (leadership) Measure sources of variation in the process • special cause variation • common cause variation Measure True Costs of process variation Analyze causes of variation (technical/human performance) Define improvement projects • objectives • scope of work • resources Select highest impact improvement projects (“the critical few”) • eliminate special cause variation to establish stability and control • attack common cause variation for performance breakthroughs Implement improvements Control gains, prevent reintroduction of variation Performance System Design for sustained success Review expectations/goals Repeat cycle Measure project benefits/ costs/risks 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 18 KT Integrated with Six Sigma Use KT to formulate strategy Use KT to select high impact projects Use KT to increase process stability and capability by attacking Causes Use KT to select best solutions/improvements Use KT to address human performance issues When Stability and Control are established, use Six Sigma to attack Common Cause variation Use Six Sigma to achieve breakthroughs 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 19 Appendix B Kepner-Tregoe Rational Processes 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 20 A Brief History of Kepner-Tregoe Founded in 1958 based upon the RAND research of Drs. Kepner and Tregoe Pioneers in the use of rational process-based thinking skills Expanding portfolio of industry and functionspecific applications Dedicated to the belief that “effective action follows clear thinking” 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 21 Strategy Formulation and Implementation 1. Strategic Intelligence Gathered and Analyzed 2. Strategy Formulated 3. Strategy Implementation Planned 4. Strategy Implemented 5. Strategy Monitored and Updated 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 22 Problem Solving and Decision Making 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 23 Project Management 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 24 Performance System Design Feedback How appropriate is the Feedback and how well is it used to influence performance? Situation Fb How clear are the performance expectations and how well are they understood? How clear is the signal to perform? How well does the work environment support expected performance? S 03/25/04 Consequences How well do the Consequences encourage expected performance? P R Performer Response How capable is the Performer to meet the performance expectations? What is the observed performance? How does it compare with expectations? C+ Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 25 True Cost Analysis How Overhead Rate is Applied Overhead $ (x 1,000) 900% $750 $600 $450 Variable 500% $300 Fixed 400% ($300,000) $150 A 03/25/04 20 40 60 75 80 Direct Labor $ (x 1,000) Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 100 700-20-P564403A 26 Project Selection Score projects using weighted objectives/criteria Min. Legal Exposure Prioritiz ation C rite ria Criteria Weight 3 Max. Qualit y Image 8 Max. Operating Margin 7 Max. Market Share 10 Score Score x Weight Score Score x Weight Score Score x Weight Score Score x Weight Complete “ xyz” installat ion by Sept ember 15 for less than $100K 10 30 8 64 7 49 9 90 233 Hire and develop five new programmers by August 15 for less than $300K 6 18 7 56 5 35 10 100 209 Fix network problem “ efg” by July 30 for less than $10K 2 6 4 32 4 28 10 100 166 T est market “ abc” protot ype by August 1 for less than $20K 10 30 5 40 4 28 4 40 138 Launch promotion “ m” July 15 for less than $100K 4 12 3 24 10 70 3 30 136 Complete “ hij” by September 10 for less t han $30K 3 9 10 80 2 14 2 20 123 Complete “ mfg” by September 11 for less t han $200K 3 9 2 16 10 70 2 20 115 Proje ct State me nts 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. Total wt. Score 700-20-P564403A 27 Managing Involvement® Commitment Without Participation Superior Solution Information Structure Does it make a big difference which course of action is adopted? Do you now have enough information to find a superior solution? Do you know exactly what information is missing and how to get it? yes no yes no Commitment Is the commitment of others critical to effective implementation? yes no yes no no yes no ye s no yes yes Goal Agreement Will the group commit to a conclusion made by you without their active participation? Is there general agreement about goals between the group and the organization in this situation? yes no yes yes no A1, A2, C1, C2, G2 s ye no G2 yes no A1, A2, C1, C2, G2 A1, A2, C1, C2 yes G2 no yes C2 no C1, C2 yes yes no A2, C1, C2, G2 A2, C1, C2 yes no 03/25/04 yes no yes no no no yes Is there likely to be conflict about alternatives within the group? yes no no no Conflict About Alternatives yes no no yes Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. C2, G2 C2 G2 700-20-P564403A 28 Volume/Margin Matrix 03/25/04 Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. 700-20-P564403A 29 A Profile of Strategies for Complexity Reduction Low Volume, High Margin Low Volume, Low Margin 03/25/04 • • • • • • • • Customer Review Re-price Inventory Substitute Spec. Inventory Alternate Source Do Nothing Drop SKU • Strategic Customer Review • Re-price • Change Manufacturing Process • Do Nothing • Drop SKU High Volume, High Margin + • Customer Review • Redesign Product • Process Improvement • Redesign Application • Do Nothing • Drop SKU Copyright © 2004 Kepner-Tregoe, Inc. All Rights Reserved. High Volume, Low Margin 700-20-P564403A 30