Improving Process - Assignment Example

Improvement Methodology The process improvement methodology to be chosen for improving the bank transaction process and reduce the transaction errors would be “Six Sigma” process improvement methodology. Six Sigma is a quantitatively or statistically focused process improvement methodology which aims to reduce defects in a process to the level of 3 defects per million opportunities. This is a powerful technique which was pioneered by Motorola and used effectively by GE and many other organizations to carry out process improvements in their organizations. As per the leading Six Sigma reference website www.isixsigma.com – “Six Sigma at many organizations simply means a measure of quality that strives for near perfection. Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving towards six standard deviations between the mean and the nearest specification limit) in any process -- from manufacturing to transactional and from product to service.” The statistical representation of Six Sigma describes quantitatively how a process is performing. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity of chances for a defect. Process sigma can easily be calculated using a Six Sigma calculator.” Six Sigma Methodology in Brief The Six Sigma process improvement methodology has two types of improvement cycles – DMAIC (used for process improvement) and DMADV (used for process design). DMAIC stands for Define, Measure, Analyze, Improve and Control – which are various phases in the Six Sigma DMAIC process improvement project. Similarly, DMADV stands for Define, Measure, Analyze, Design and Validate – which are the phases in a Six Sigma DMADV process design project. Each phase of a Six Sigma project has its defined set of activities, tools, work products and exit criteria. There are specific trainings provided to individuals to train them on the Six Sigma methodology and the various activities, tools, techniques, work products and exit criteria with important guidelines on how to execute a Six Sigma process improvement project. Benefits of Six Sigma Methodology for the Banking Process Improvement Project Six Sigma process improvement methodology provides a strong quantitative on process improvements which includes figures for budgets for the process improvement, expected & actual results / ROI of the process improvement project and data based statistical analysis of information which provides a very strong impact in terms of business benefits and value provided. This is a structured process improvement methodology which can be applied to any process or multiple processes at a time to identify improvement opportunities and implement them in a controlled manner. The tools and techniques defined in Six Sigma Methodology are very comprehensive as well as general purpose and greatly assist in ensuring that all the key aspects of the problem are appropriately analyzed and considered before suggesting a process improvement solution. Stringent gateways or exit criteria for each phase of the Six Sigma Methodology ensure that all the steps are correctly performed and are adequately justified. Applying Six Sigma Tools to Banking Process Improvement In case of the banking process improvements scenario, there are two process improvement opportunities for which Six Sigma DMAIC methodology can be applied – Project 1 – To reduce major incidents in banking transactions Project 2 – To improve the customer satisfaction for better service levels In both these cases, following the Six Sigma terminologies we have to define what is an “Opportunity” and “Defect” in each case. Accordingly – Opportunity 1 – Banking Transaction and Defect 1 – Major Incident Opportunity 2 – Customer Service Level and Defect 2 – Service Level < 90% For each project, in the “Define” phase, we have to specify the following details related to each of the process improvement projects – Project Objective Project Scope Project Budget Project Team Project Schedule Expected Project Benefits / ROI In the next phase, “Measure”, we will define what are the measures that we need to consider and collect. We will also specify the definitions of these measures and how will they be collected. For example – Measures for Project 1 – No. of Transactions, No. of Major Incidents, Amount of money lost due to transaction errors, etc. All these measures will be collected from banking system which contains records of all these details either directly or data may need to be processed. Measures for Project 2 – Service Level Specification for queue time – 30 Minutes (collected through customer survey and actual observation records) Service Level Specification for Staff Helpfulness – Average 4.5 on a scale of 5 as rated by customers (collected through customer survey) Service Level Specification for maximum responsive time for mortgage applications – 2 days (collected through customer survey and actual records) In the third phase “Analyze” of the Six Sigma process improvement project, the data collected is analyzed to draw meaningful conclusions which can assist in coming up with the correct solution. For project 1 on banking transaction errors, first a “Fish Bone Analysis” (Ishikawa Diagram) is conducted identify potential root causes for the transaction errors. A Fish Bone diagram (figure 1) is used such that the problem statement is on the main middle bone of the fish and branching out from this middle bone are different bones and sub bones which are the potential causes and sub causes of the problem. Typically, at the first level, the causes are categorized as Man, Machine, Method and System. Further, under each cause, various sub causes are discussed and represented. For example, following could be sub causes – Man – erroneous data entry, limited system understanding, incorrect calculation, lack of policy changes awareness, etc. Machine – faulty keyboard, incorrect system programming, data unavailable, etc. Method – faulty transaction process, insufficient reviews, etc. System – software version mismatch, virus attack, etc. Based on the causes identified for project 1 and the data collected for project 2, a Paretto chart (or histogram) is plotted to find out the data points which represent the maximum number of cases belonging to the identified root causes. The top 3 causes are typically taken for focused improvements. This will ensure that the causes behind the most “opportunities” are eliminated or minimized. Under “Improve”, the fourth phase of a Six Sigma process improvement project, based on the top causes identified in the “Analyze” phase, potential solutions to eliminate or minimize the causes are identified through “Brainstorming” among key stakeholders. The suggested potential solutions are analyzed for feasibility and effectiveness of achieving the project objectives. A “FMEA – Failure Mode Effect Analysis” is also conducted to find out the risks associated with each solution options. The benefits of each potential solution are also sufficiently represented in depth. Based on all these details the solution for each project is determined and decision is taken to implement the solution. This solution along with the benefits, risks and costs are presented to the senior management and approval is taken to proceed with the implementation. In the fifth and last phase “Control” of the Six Sigma process improvement project, the chosen solution for the problems are implemented as a pilot in a selected area or sample space of the entire domain. Within this pilot, the implemented solution is observed for a specified duration of time to find out impact of the solution. It is also ascertained if the solution is indeed seen to bring about the expected process improvement in the selected sample. Once it is observed that the solution is working in the sample space and provides the necessary process improvement, the same solution is applied to the entire domain or area. Here again the impact of the solution is observed for a limited period of time and checked if the desired process improvement objectives are satisfied for both the projects. With this, the Six Sigma project is completed; a storyboard is created to represent the summary of the process improvement project and is presented to the senior management. After satisfactory acceptance of all the project suggested solutions, the Six Sigma project is closed and approval is taken. Thus, Six Sigma is used effectively to carry out process improvements to reduce major incidents and money loss in banking transactions and also to maintain the customer service levels to a satisfactory level. Challenges in Implementation of the Six Sigma Process Improvement Projects and Means to tackle these challenges 1. Knowledge of Six Sigma – Six Sigma is a process improvement methodology with specific terminology, tools, statistical techniques and manner in which the process improvements are conducted. Most people are unaware of these nuances and hence it will be difficult to get people to carry out these process improvements. To take care of this challenge, Six Sigma training should be provided to the people conducting and involved in the Six Sigma process improvement project. 2. Availability of Data – Since Six Sigma is a data driven methodology, if data is unavailable then it is difficult to carry out process improvements using Six Sigma. Many times due to organization or system constraints it is not possible to collect all the data needed for process improvements. In such cases, alternative measures need to be determined which can be used in place of the data unavailable and utilized to achieve the project objectives. 3. Lack of Management Commitment to implement the suggested solutions – Even after coming up with the optimal solution to solve the problem and improve the process, sometimes there is a risk that it may lack sufficient commitment from senior management to implement the solution. To ensure that this does not happen, care should be taken to keep management involved right from the start of the project so that it takes the direction aligned to the senior management views (without being biased). Also it is essential to build a strong business case and project significant ROI of the solution being recommended so that senior management is convinced of its effectiveness. References 1. http://www.isixsigma.com/sixsigma/six_sigma.asp Read More