Cycle 3: System

Improvements
 Contents
1 Why System
Improvements?
What is System
Improvements? 2
3 Process in System
Improvements
(DMAIC) + tools
Do’s and Don’ts 4
5 Experiences
Why System Improvements?

Bad Quality Lost Customer Sales Decrease

1
QUALITY was born from COMPETITION

Production Disturbed Cost Cut

Why System Improvements?

1 2
QUALITY was born from COMPETITION QUALITY = SURVIVAL

Bad Quality Lost Customer Sales Decrease

Production Disturbed Cost Cut

What is System Improvements?
The whole system

HIGH/LOW QUALITY?
“TOTAL QUALITY MANAGEMENT”
1. Transcendent Approach
2. Product-Based Approach
3. User-Based Approach Quality
4. Manufacturing Based Approach
Customer Continuous Total
5. The Value Based Approach Focus Improvement Participation

● 7 Steps of QI
Value means customer ● QFD ● Hoshin
● 7 Tools
oriented, therefore make ● Product Kanri
● 7 New Tools
sure that the customer Design ● QCC
● Taguchi, DOE
gets what they want, not ● Standards ● SS
● 5S/5R
what the company ● ServQUAL ● Six Sigma
● ISO
wants.
The Six Sigma Way
the purpose of Six Sigma is to reduce variation to
achieve very small standard deviations so that
almost all of your products or services meet or
exceed customer expectations. What are the steps?
Process
Process Redesign
Improvement
How?
D
Define the problem Define customer
and what the requirements and
customers require. goals for the process
1 2 /product/service.

M
Measure the defects Measure and match
and process performance to
operation. customer
requirements.

A
Analyze the data and Analyze and assess
discover causes of the process/product/
problem. service design.

I
Improve the process Design and
to remove causes of implement new
defects processes/products
/services.

X
(Process)
Y
(Outcome
C Control the process to
make sure defects
don’t recur
Verify results and
maintain
performance
Define
Define Phase
Refines initial project-related information and writes the plan of how to complete the project. Necessary for
accomplice, within and beyond the project team, to ensure that the project is
aligned with business goals, priorities, and expectations.

1 2 3
Set Expectations Clearly Quantify the quality Focusing the case

Develop project charter that

Identify who are the customers and
includes business case, problem Identify product or process needed
how their needs are
Objectives and goal statement, team roles,
translated into Critical To Quality
to improve
and milestones.

● SIPOC
● SIPOC
Tools ● Project Charter ● Voice of Customer (VOC)
● Process Map
● Critical to Quality (CTQ)

Develop business case Map the business process Map the business process

Formulate problem statement Connect the CTQs to the process Connect the CTQs to the process

Phases Formulate a goal statement Set processes need to improve Set processes need to improve

Define project scope Connect the CTQs to the process

Assign roles and responsibilities

Why System Improvements?

Bad Quality Lost Customer Sales Decrease

Production Disturbed Cost Cut

Set the expectation clearly
Develop project charter that includes business case, problem and goal statement, team roles, and
milestones.
Develop business
case
Try to answer these Qs :
● Why is the project
important to do?
● Why does this project
need to be done now?
● What are the
consequences if this
project is not done?
● What activities have the
same priority or even
more?
You can use the dimensions
of QCTSM
and Morale) / (Quality, Cost,
Time, Safety and Morale)
Formulate problem
statement
The purpose of the
problem statement is to
explain what is wrong
Wrong example:
Our customers are angry so
they are late paying our bills.
Better Example:
In the past 6 months (when),
20% of our repeat customers
are over 60 days late (what) in
paying our invoices.
Currently the payment late
figure reaches 10% and shows
30% of our Account Receivables
(the amount).
This will have a negative effect
on cash flow (consequences or
magnitude of problems).
Formulate a goal Define project Assign roles and
statement scope responsibilities
The goal statement Try to answer these Qs : Try to answer these Qs :
explains the objectives
of improvement. ● What process will be ● Who / what
the focus of the Team? departments will be
● What is the purpose of involved?
improvement that will ● What are the
be completed by the limitations of the ● What are the roles /
Team? process that we will responsibilities ?
improve? Starting
● Starting with verbs point? Endpoint? ● What are the expected
(eliminating, reducing, deliverables of each
increasing, etc.) ● What resources are roles?
available?
● The beginnings tend to
be global, but still state ● What (if any) is beyond
measurable results and the ability of the Team?
time targets.
● What (if any) does not
● Must not include what include teamwork.
the error is, the alleged
cause or the estimated
solution
Quantify the Quality
Identify who are the customers and how their needs are translated into CTQ (Critical To Quality)

1 2 3 4
Identify customers and Analyse voice of
Translate into CTQs Identify Project CTQs
gather data customer

1 3 4
S I P O C Need Driver CTQ 1 CTQ 2

Farmers Cof’ Beans

Coffee-to-sugar
The Cup of Sweetness ratio
Coffee
Mayestik Packaging Making & Manusia
(product)
delivering Haus di
and the Taste Boldness
Process, roasting
the Coffee rumah time
Gojek The order delivery
(service)
“Kopi yang
... ... enak” Inventory time of
Freshness beans

(S)upplier : any parties providing inputs to our process Speed Delivery time
(I)nput : material or data needed to perform the process
(P)rocess : activities required to perform in order to satisfy Gue mau kopi
customers yang enak.
(O)utput : material or data produced from our process Cost Price / cup
(C)ustomer : any parties receiving our products - Via review Gofood

2
Hard to measure Easy to measure
Focusing the Case
Develop a high level process map and set the processes needed to improve

1 2 3
Set processes needed to
Map the business processes Connect those with the CTQs
improve

S I P O C Customer
order from
gojek
Farmers Cof’ Beans
The Cup of
Coffee Application
Cafe receive Barista prepare Barista brew
Mayestik Packaging Making & Manusia process the
(product) order
order the order the coffee
delivering Haus di
and the
the Coffee rumah
Gojek The order delivery
(service) Driver Barista pack
receive the coffee
... ... order

Driver go to Driver receives

(S)upplier : any parties providing inputs to our process the cafe the coffee
(I)nput : material or data needed to perform the process
(P)rocess : activities required to perform in order to satisfy
customers
(O)utput : material or data produced from our process High-level process map of coffee making & delivery. Driver go to Customer get the
(C)ustomer : any parties receiving our products destination coffee
The required process map will need to be adjusted
according to the CTQ and problem scope
Measure
Measure
Definition Key metrics should be SMART

On the measure phase, we need to decide and Easy to understand for

calculate the outcome indicators or baseline
metrics for the project.
Specific everyone.

Measurable Input data is available and

Objectives practicable
On the measure phase, we will get one or more
performance metrics to be compared before and Achievable Process-based oriented.
after improvement or strategy implementation by
the time of the project. By determining standard
Align with the corporate
calculation, we will have a better understanding the Relevant strategy and KPI
impact of the improvement or strategy
implementation to the current condition.
Have standard time span
Time-bound for measurement (yearly,
weekly, daily)

1
Strategic Tools: Financial Model
In order to measure company profitability to analyze strategic direction, the impactful tools is
using income statement and cash flow statement.

Net earnings from the income statement indicates the

profitability of the company before the debt payment.

Cash available at the end of period indicates the

profitability of the company after debt payment.

1
Financial Metrics for Project or Solution
Implementation
For project or solution implementation, we only use cash flow from operating and financing activity or
discounted cash flow.

NPV Net Present Value is sums all of the positive net cash flow subtracted by the
sums all of the negative net cash flow during the project period and
discounted using discount rate or WACC. Therefore, if the NPV is negative
or less than 0, the project is not valuable in the future.

Project IRR If the WACC is known on the NPV, project IRR is the discount rate or
WACC which will make the NPV equal by 0. Higher IRR means higher
return of the project in the future.

Debt Service If the project requires external loan from the bank, Debt Service Coverage
Coverage Ratio Ratio is very helpful to analyze whether our operating income can cover the
yearly debt payment. The acceptable DSCR is more than 1.

1
Financial Metrics for Business Valuation
Valuing company can be measured by Free Cash Flow or available cash for all of the shareholders.

Free Cash Flow to Firm Free Cash Flow to Equity

FCFF = Net Income + Depreciation & Amortization – CapEx –
FCFE = FCFF + Net Borrowing – Interest Expense (1 – t)
ΔWorking Capital + Interest Expense (1 – t).

Free cash flow received by the firm before the Free cash flow excluded yearly repayment that
yearly loan repayment to the bank (loan principal). received by the shareholder.

1
Analyze
Analyze Stage
Analyze phase is intended to identify, investigate the causes of defects, and verify suspected root causes of the
problem. Two main categories of approaches* used in this phase explained below

*Both can be done simultaneously,

not sequentially. Data Analysis Process Analysis

Find patterns, trends, or differences that Discover any non-added value from the
Principle can suggest, support, or oppose the baseline processes for the customer
suspected cause of defects

Exploring Examine the data or process provided to get clued up about the causes of defects.

Tools Pareto chart, Run chart, Histogram Basic flow chart

Generating Pin down the most likely causes of defects based on new-found knowledge acquired from
Phases

hypothesis the prior phase.

Tools Brainstorming, Cause-and-effect diagram Brainstorming

Verifying Utilize data as a of further analysis to attest which of the possible causes significantly
causes come up to the problem.

Tools Scatter diagram Process maps

1
Analyze Stage: Power Tools
Tools in analyze stage are clustered in three phases for both approaches including data and process analysis.

Phases Tools Overview Output

● Pareto chart → help to focus on the few causes that have Condition where the defect
vital impact occurred, both in terms of time,
● Run chart → applied if there are patterns over time in the place, and description of the
Exploring
problem defect (what caused it to happen,
● Histogram → used to count the number of occurrences of when it occurs, or other detailed
the causes information)

● Brainstorming → used within team as a whole to observe the

Isolated underlying causes of a
Generating list of potential causes
problem by thinking logically
hypothesis ● Cause-and-effect diagram → structured tool to think of
about potential causes
many possibilities of potential causes

Potential causes that responsible

● Scatter diagram → used to understand potential
Verifying for the observed effect and
cause-and-effect relationships (test the correlation between
causes supported by the relationship
X variables and Y outcomes)
between two variables
Improve
Improve Phase
The Improve Phase is where the team refines their countermeasure ideas, pilots process changes, implements
solutions and lastly, collects data to confirm there is measurable improvement. A structured improvement
effort can lead to innovative and elegant changes that improve the baseline measure and the customer experience.

1 2 3
Gather the Ideas for the Select the Practical
Implement the Solution
Solutions Solutions
Considering the limitations of Making sure solutions are
resource and effort, we should successful requires careful
Find the opportunity of ways to planning. It is important to help
solve the root causes of the make good choices between
Objectives problem options and prioritize the
the participants to successfully
accept and adapt to the
solutions solutions.

● Analytical Hierarchy
Tools ● Brainstorming Process (AHP) ● Implementation Plan
● Benchmarking ● Decision Matrix ● Gantt Chart
● Impact-Effort Diagram
Tools You May Use in the Improve Phase
These are the example of tools in the Improve Phase which you may use to decide the options for solutions to be
implemented.

Strategic Tools: Decision Matrix Strategic Tools: Impact-Effort Diagram

1. Generate some improvement solutions

2. Identify the criterias for evaluation
3. Give weight to the criterias.
note: sum of the weight must be 1. the higher the
weight, the more important the criteria should be.
4. Give score to each options based on the criteria
5. Calculate the weighted score & total score
6. Pick the best solution! Map each options based on the estimated calculation of
impact that may be received and effort that must be spent
Tools You May Use in the Improve Phase
These are the example of tools in the Improve Phase which you may use to build the action plan and walk the talk!

Strategic Tools: Implementation Plan Strategic Tools: Gantt Chart

This would help us to identify what should we do, who is

responsible for each action, and the due date Help us to map the implementation actions based on the due
dates, and control the timeline of the solution implementation
Control
Control Phase
The process has been improved, but how do you sustain it? This phase is intended to keep an eye on the
updated process, to make sure everything is going well and things won’t go south.

1 2
Identify the Risk Measure & Monitor the Improvements

We should consider the unintended After the team has implemented their
consequences of making changes to the changes, they can collect data to check
process. Any changes, even good ones, whether or not they have improved the
introduce an element of risk. baseline.

● Failure Mode & Effect Analysis (FMEA)

● Control Chart
● Risk Heat Map
Tools You May Use in the Control Phase
These are the example of tools in the Control Phase which you may use to identify the risk that may occur and
mitigate the risk.

Strategic Tools: Failure Mode & Effect Analysis

FMEA is a risk management tool that identifies the influence of potential failures Strategic Tools: Risk Heatmap
in a process in order to prevent them or create contingency plans

How could it go How bad would How often could

wrong? it be? it happen?
failure mode severity likelihood

Would we know How big of a risk What can we do

about it in time? is this to prevent it?
detection risk priority # actions
Tools You May Use in the Control Phase
These are the example of tools in the Control Phase which you may use to monitor how the process is going after
the improvements are being held

Strategic Tools: Control Chart Strategic Tools for Business

A control chart plots data in time order and displayed how a process changes
Cases: Financial Projection
overtime

compare the financial metrics before

and after we implement the solution
(or at least the assumed financial
projection)
Consist of a center line, upper and lower control limits which outline the natural ● Sales
boundaries of the data. ● Revenue
● Opex
Allows users to determine whether the process variation is common (in control) ● Capex
or unpredictable (out of control) ● Other financial indicators
Do’s & Don'ts
Sharing &
Q&A
ありがとうござい
ました
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System Improvements Tips
DOs DONTs

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