Selecting Lean Six Sigma Projects

A critical element in the establishment of an improvement team is the development and acceptance of a charter. A charter is a written document that defines the team’s mission, scope of operation, objectives, time frames, and consequences. Charters can be developed by top management and presented to teams or teams can create their own charters and present them to top management. Either way, top management’s endorsement of a team’s charter is a critical factor in giving the team the direction and support it needs to succeed. The charter begins with a purpose statement. This is a one or two line statement explaining why the team is being formed. The purpose statement should align with, and support, the organization’s vision and mission statements.

The charter should also identify the objectives the team is expected to achieve. Objectives should always be stated in measurable terms. The charter should also define the operating scope. This is an opportunity to identify the organizational or operational boundaries within which the team is expected and permitted to operate. Defining boundaries is crucial to avoid energy draining and time delaying turf wars. Teams need to know what top management expects of them. The team has the authority, permission, and blessing from the necessary levels of management to operate, conduct research, consider and implement any changes needed to achieve the expected project results.

A charter provides the following advantages:

• Eliminates any confusion.

• Defines the subject boundaries.

• Identifies areas which should not be addressed.

• Identifies the deliverable product.

• Provides a basis for team goal setting.

• Authorizes the team to collect relevant data.

• Provides access to necessary resources.

• Approves time for team members to address problems.

A team project charter should contain the following key points:

• Business case (financial impact): The business case is a short summary of the strategic reasons for the project.

• Problem statement: A problem statement details the issue that the team wants to improve.

• Project scope (boundaries): The project scope refers to the boundaries of the project.

• Goal statement: The goal statement is created and agreed to by the team and team champion.

• Role of team members: Description of various six sigma roles are included in the description.

• Milestones/ deliverables (end products of the project): A set of milestones are used to keep the project on track and to help bring a project to completion.

• Resources required: Calculation of resource requirement is done at the start of the project.

Business Case

The business case is a short summary of the strategic reasons for the project. The general rationale for a business case would normally involve quality, cost, for delivery of a product with a financial justification.

There are four basic activities:

• Design of a new product.

• Redesign of an existing product.

• Design of a new process.

• Redesign of an existing process

A common problem for many projects is the lack of a company impact measurement. For example, if the existing quality defective rate is at 5,000 defectives per million opportunities; the possible justification is a reduction to 250 defectives per million opportunities with a cost savings of $1,000,000. Another example would be reduction of product cycle time from 6 weeks to 5 days for an additional 10,000 units of production, resulting in an additional $1,000,000 of revenues. A project improvement team should follow typical financial department justification guidelines.

The advantages and disadvantages of a project should be researched. Other individuals or departments should be involved, if necessary, to examine the key costs and resources for a successful project. Projects which do not show a significant financial impact to the company should be stopped or eliminated as soon as possible.

Problem Statement.

A problem statement details the issue that the team wants to improve. The problem statement should be crafted to be as descriptive as possible. That is, how long has the problem existed, what measurable item is affected, what is the business impact, and what is the performance gap. The problem statement should be neutral, to avoid jumping to conclusions. A sample problem statement might be:

“The ABC Company, in 2007, has experienced a 25% drop in sales, with a 40% drop in net profits.”

The problem statement should include a reference to a baseline measure for guidance. A baseline measure is the level of performance of the particular metric at the initial start of a project. The collection of good data and process performance measurements will provide a picture of the areas in the company that are in greatest need of improvement. In addition, the measurement system will provide a foundation for other teams to use to pursue other projects. If the baseline measures differ from the assumptions of the team or company, more clarification may be necessary.

Project Scope

The project scope refers to the boundaries of the project. It is an attempt to outline the range of the team’s activities. In the area of product development, the team may decide to limit itself to the launching of a new product at a single manufacturing site. Issues or problems regarding market research, prototype development, or financial investments would be outside the scope of the team activities. Each team needs to work very hard in its first meetings to clarify the project scope. The team champion, the team leader, and the team -all need to be involved in this process.

The Lateral Scope

Longitudinal scope refers to a clear articulation of “Start” and “End” of the process. It describes the Length of the process.

For example, let’s say we have to work on reducing the Average Handle Time of a call (transaction) for a given call center. The longitudinal scope will be referred to:

Start: The time when the call center agent receives the call.

End: The time when the call is closed.

Similarly, the lateral scope refers to the width of the process.

For example, the Average Handle Time Reduction project for the call center is only applicable for Pittsburgh, Virginia and New York locations in the United States and is not applicable in any other location across the country.

Goal Statement

The goal statement needs to be created and agreed to by the team and team champion. Hopefully, the goals will be achievable within a 120 to 160 day period. A typical “rule of thumb” for six sigma goals is a requirement of a 50% reduction in some initial metric (or improvement of 50%). For example, reduce the collectibles from 120 days to 60 days; reduce the scrap from 5% to 2.5%. Another example could be, “Goal is to reduce the average handle time from 7.16 minutes to less than 6 minutes in the next 3 months.”

Milestones/Deliverables

For any well-managed project, a set of stages or milestones are used to keep the project on track and to help bring a project to completion. Initial team projects should be at the 120-day length. Only half of the project would be allocated to the define and measure stages. Assigning teams an initial project with lengths of more than 160 days will lower the anticipated success rate.

Resources Required:

The resources required for a project must be detailed. Typical resources required for a project could include:

Qualified people: Individuals who are subject matter experts help in ensuring the right feedback and right work is done for the project.

Machine time: Machine time is required for certain projects. We need to ensure that machine time is captured appropriately and is used in the project.

Equipment: There are several equipments’s used in the project for measurement, execution and other purposes. These equipments should be captured and articulated in the project charter.

Phones and faxes: Phones and faxes are also required and need to be articulated as per their usage in the project.

Machinery: There are several machines that are required during the course of the project. We need to ensure that these machines are captured and their use is articulated in the course of the project.

Computer equipment: Computer equipment is an important part of every project. We need to articulate the software’s, different possible usage of applications in the project charter.

Lab or office space and Utilities: We should also list out the usage of different labs, office spaces, and utilities during the course of the projects.

The six sigma define phase should provide the following information for the team champion, team leader, and team members:

Importance of the project: How important is the project? What if it is not done now?

Goals of the project: What are the critical goals and objectives that the project will achieve?

Knowledge of the team champion, leader and members: Is the project team comprised of subject matter experts?

The scope of the project in terms of time and budget resources: What is in-scope and what is out-of-scope?

The key process involved: What are the different key processes involved in the project?

Current baseline metrics: Where are we in terms of current performance of the project?

Customer requirements: What is the customer wanting out of the project?