1

Sun Life Financial Waterloo

Aizad Ahmad, MBA, MSc, PMP, Six Sigma

Senior Process Consultant,

Sun Life Financial

Application of Lean Six Sigma

Methodology

in Financial Services

2

AGENDA

• Lean Six Sigma Introduction

• ASQ definition

• DMAIC Methodology

• Pre-requisites for DMAIC projects

• Tools used in each phase

• Scope and project objectives

• Lean concepts and TIMWOODS

• Projects generation & pipeline

• Define Phase

• Measure Phase

• Analyze Phase

• Improve Phase

• Control Phase

• Information about Six Sigma Certification

6σ

Disclaimer: Examples and information provided in the presentation is not relevant to any one financial company. Not intended to disclose any proprietary information. Please do not share with others without the approval of the author.

3

The Basic Six Sigma Metrics

• Better: DPU (defect per unit), DPMO (defects per million

opportunities), variation reduction (less standard deviation)

• Faster: Cycle Time (reduce process time or product development

time)

• Cheaper: COPQ (cost of product quality)

In any process improvement endeavor, the ultimate

objective is to make the process:

The metrics for all Six Sigma projects fall into one of these three

categories

4

Lean Six Sigma Introduction

Six Sigma is a method for reducing variation in business processes, improving

performance, and reducing costs. It was originally used in manufacturing, but

now used in the service industry, especially banking and healthcare. Six Sigma

projects measure the cost benefit of improving processes that are producing

substandard products or services. Whether in manufacturing or service

industries, such projects quantify the effect of process changes on delays or

rework.

A six sigma process means a

process efficiency of 99.9997%

The goal of each successful Six

Sigma project is to produce

statistically significant improvements

in the target process; over time,

multiple Six Sigma projects produce

end results that meet the objectives of

excellent performance.

Sigma

Level

Defects per

Million

Opportunities

Percent

Defects

Percent

Correct

Six 3.4 0.00% 100.00%

Five 230 0.02% 99.98%

Four 6,210 0.62% 99.38%

Three 66,800 6.68% 93.32%

Two 308,500 30.85% 69.62%

One 690,000 69.00% 31.00%

ASQ Definition and Objectives

5

DMAIC and Tools

Define Measure Analyze Improve Control

•Identify the

important

problems and

select the

project and

scope

•Define non-

value added

and determine

the present

status, the goal,

and the gap

•Data collection

plan

•Measure as-is

process

capability

through direct

observations

•Define the

value stream

map and

identify factors

such as

process

hurdles, touch

points,

approvals, and

system issues

•Identify root

causes

•Identify vital

few initial

variables which

are causing the

problem, such

as training,

documentation,

and system

•Develop

solutions

•Implement

improvement

plan

•Redesign the

value stream

map and

identify the new

process

capability

through process

flow chart.

•In the control

phase, a robust

control plan of

risk

management to

prevent system

failure is

implemented,

together with

use of a control

chart

•Define the

governance and

sustainment of

the

improvement

Six Sigma System

6

Six Sigma Deployment Process

7

8

Organizational Structure for Process improvement

• Decentralized Structure

Negative: • Small teams • Working in isolation • Lack of cross

functional coordination

Positive: • More focused on a

certain area • Easy to get

approvals • Less cost

• Centralized Structure

Negative: • More cost • More hierarchy • More difficult to get approvals for stage gating

Positive: • Very large team (100-200 persons) • Working in cohesion • Cross functional coordination • More focused on a certain business area (eg Canadian Operations)

•

SVP Operations

VP Business Excellence

Analytics Training,

Knowledge, Quality

Lean Solutions

Directors

Process Consultants

BW Management

System

BW Business Partners

9

Six Sigma - Projects idea generation and pipeline

Operational Maturity

Assessment

Demand

Delivery

Capacity

Knowledge

Performance

Problem Solving

Continuous Improvement

Process

Just Do It

Quick Win

A3

Business Partners Project ideas

Intake Tool / Tracker

Project ideas

Kaizen Events Project ideas

• Idea evaluation • Prioritize Projects • Resources Allocation • Consultant Skill Rating • Governance • KickOff • Sharepoint Site • Working Group Meetings

Idea Generation sources

DMAIC

Benefits Evaluation

10

Potential benefits from Six Sigma E2E projects

Time saving for

retail branches

Increased number of appointments – leading to higher

sales figures

Faster Turn Around Time (TAT) for applications

Less time handling/processing

a claim

Improved back office operations

Faster TAT, leads to less claim cost

Better understanding of

demand and delivery of incoming

requests

Improved capacity & staff planning

Cost saving

Reduced documentation, reduced paper &

postage cost

Reduced idle resources

Reduced cost to process an application

Customer Experience

Reduced visits to branches (especially

for mortgage and loans)

Reduced wait times, faster turnaround of

application

Reduced documentation and

signatures for approval

Higher loyalty of customers

Better quality of

output

Less defects in processing of

requests

Reduce re-work and fixing of errors

Less resubmission % of incomplete applications

Less calls to the call centers

11

Cost Of Poor Quality - Iceberg

Rework

Inspection Warranty

Rejects

Lost sales

Late delivery

Engineering change orders

Long cycle times

Expediting costs

Excess inventory

Hidden Costs

Visible Costs

Lost Customer Loyalty

More Set-ups

Time value of money

Working Capital allocations

Excessive Material

Orders/Planning

Recode

(less obvious)

12

COPQ – Hard and Soft Savings

• Labor Savings

• Cycle Time Improvements

• Scrap Reductions

• Hidden Factory Costs

• Inventory Carrying Cost

COPQ – Soft Savings

• Gaining Lost Sales

• Missed Opportunities

• Customer Loyalty

• Strategic Savings

• Preventing Regulatory Fines

COPQ – Hard Savings

While hard savings are always more desirable because

they are easier to quantify, it is also necessary to think

about soft savings.

13

Lean Concepts: How can we use TIMWOODS to understand

inefficiency in our processes?

14

Lean Six Sigma

Lean Six Sigma combines the strengths of each system:

• Lean

– Guiding principles based

operating system

– Relentless elimination of all

waste

– Creation of process flow and

demand pull

– Resource optimization

– Simple and visual

Strength: Efficiency

• Six Sigma

– Focus on voice of the

customer

– Data and fact based decision

making

– Variation reduction to near

perfection levels

– Analytical and statistical rigor

Strength: Effectiveness

An Extremely Powerful Combination!

15

COPQ and Lean

Lean Enterprise

Seven Elements of Waste *

Correction

Processing

Conveyance

Motion

Waiting

Overproduction

Inventory

Waste does not add, subtract or otherwise modify the throughput

in a way that is perceived by the customer to add value.

• In some cases, waste may be necessary, but should be recognized and explored:

– Inspection, Correction, Waiting in suspense

– Decision diamonds, by definition, are non-value added

• Often, waste can provide opportunities for additional defects to occur.

*Womack, J. P., & Jones, D. T. (1996). Lean Thinking. New York, NY: Simon & Schuster

16

Overproduction

Overproduction is producing more than the next step needs or more than the

customer buys.

• It may be the worst form of waste because it contributes to all the others.

Examples are:

Preparing extra reports

Reports not acted upon or

even read

Multiple copies in data storage

Over-ordering materials

Duplication of effort/reports

Waste of Overproduction relates to the excessive

accumulation of work-in-process (WIP) or finished goods

inventory.

17

Correction

Correction or defects are as obvious as they sound.

Examples are:

Incorrect data entry

Paying the wrong vendor

Wrong information in

reports

Making bad product

Materials or labor

discarded during

production

Eliminate erors!! Waste of Correction includes the waste of handling

and fixing mistakes. This is common in both

manufacturing and transactional settings.

18

Inventory

Inventory is the liability of materials that are bought, invested in and not immediately

sold or used.

Examples are:

Transactions not

processed

Bigger “in box” than

“out box”

Over-ordering materials

consumed in-house

Over-ordering raw

materials – just in case

Waste of Inventory is identical to overproduction except

that it refers to the waste of acquiring raw material before

the exact moment that it is needed.

19

Motion

Motion is the unnecessary movement of people and equipment.

• This includes looking for things like documents or parts as well as

movement that is straining.

Examples are:

Extra steps

Multiple Touchpoints

Extra data entry

Having to look for

something

Waste of Motion examines how people move to

ensure that value is added.

20

Overprocessing

Overprocessing is tasks, activities and materials that don’t add value.

• Can be caused by poor product or tool design as well as from not

understanding what the customer wants.

Examples are:

Sign-offs

Reports that contain more

information than the

customer wants or needs

Communications, reports,

emails, contracts, etc that

contain more than the

necessary points (briefer is

better)

Identification of Non-Value

Added activities and

removal of them

Waste of Overprocessing relates to over-

processing anything that may not be adding value

in the eyes of the customer.

21

Conveyance

Conveyance is the unnecessary movement of material and goods.

• Steps in a process should be located close to each other so movement is

minimized.

Examples are:

Extra steps in the process

Distance traveled

Moving paper from place

to place, eg Postal mail

delivery inefficiency

Waste of Conveyance is the movement of material.

22

Waiting

Waiting is nonproductive time due to lack of material, people, or equipment.

• Can be due to slow or broken machines, material not arriving on time, etc.

Examples are:

Processing once each

month instead of as the

work comes in

Showing up on time for a

meeting that starts late

Delayed work due to lack

of communication from

another internal group

Waste of Waiting is the cost of an idle resource.

23

TIMWOODS Summary

24

Define Phase: What is the scope of the project;

What is the objective?

25

What is a Project Charter?

The Project Charter expands on the Business Case, it

clarifies the projects focus and measures of project

performance and is completed by the Six Sigma Belt.

Components:

• The Problem

• Project Scope

• Project Metrics

• Primary & Secondary

• Graphical Display of Project Metrics

• Primary & Secondary

• Standard project information

• Project, Belt & Process Owner

names

• Start date & desired End date

• Division or Business Unit

• Supporting Master Black Belt

(Mentor)

• Team Members

26

Measure Phase: What is the present status of the process?

27

Cause and Effect Diagram

A commonly used tool to

solicit ideas by using

categories to stimulate

cause and effect

relationship with a

problem. It uses verbal

inputs in a team

environment.

Products

– Measurement

– People

– Method

– Materials

– Equipment

– Environment

Transactional

– People

– Policy

– Procedure

– Place

– Measurement

– Environment

Categories for the legs of the

diagram can use templates for

products or transactional

symptoms. Or you can select the

categories by process step or

what you deem appropriate for

the situation.

Problem or

Condition

The Y

The X’s

(Causes)

l Categories Material Measurement Environment

People Machine Method

The

Problem

Cause and Effect Diagram

Problem or

Condition

The Y

The X’s

(Causes)

l Categories Material Measurement Environment

People Machine Method

The

Problem

Cause and Effect Diagram

Failure Mode Effects Analysis – Example from banking

28

29

Process Maps

• The purpose of Process Maps is to:

– Identify the complexity of the process

– Communicate the focus of problem solving

• Process Maps are living documents and must be changed as the process

is changed

– They represent what is currently happening, not what you think is

happening.

– They should be created by the people who are closest to the process

Step A Start Finish Step B Step C Step D

Process Map

30

Cross Functional Process Map

When multiple departments or functional groups are involved in a complex process

it is often useful to use cross functional Process Maps. • Draw in either vertical or horizontal swim lanes and label the functional groups and draw the

Process Map

Genera

l

Accounting

Bank

Fin

ancia

l

Accounting

Vendor

Depart

ment

Start Request

transfer

Attach ACH

form to

Invoice

Produce an

Invoice

Fill out ACH

enrollment

form

Receive

payment End

Vendor

info in

FRS?

Input info into

web interface

Match against

bank batch

and daily cash

batch

Accepts transactions,

transfer money, and

provide batch total

Review and

Process

transfer in

FRS

3.0

Journey Entry

21.0

Bank

Reconciliation

Maintain database

to balance ACH

transfers

ACH – Automated

Clearing House.

No

Yes

Sending Fund Transfers

31

Analyze Phase: What are the factors that can

improve the process?

32

Pareto Chart - Tool

Multi level Pareto charts are used in a drill down fashion to get to root cause of the

tallest bar.

Co

st

Pe

rce

nt

ScrapCount

73.2 87.8 100.0

150000 30000 25000

Percent 73.2 14.6 12.2

Cum %

CBA

200000

150000

100000

50000

0

100

80

60

40

20

0

Scrap

Co

st

Pe

rce

nt

DepartmentCount

11.9 11.0 3.1

Cum % 59.6 74.0 85.9 96.9 100.0

95000 23000 19000 17500 5000

Percent 59.6 14.4

OtherWFMJ

180000

160000

140000

120000

100000

80000

60000

40000

20000

0

100

80

60

40

20

0

Department

Co

st

Pe

rce

nt

PartCount

78.9 94.7 100.0

75000 15000 5000

Percent 78.9 15.8 5.3

Cum %

X492Z876Z101

100000

80000

60000

40000

20000

0

100

80

60

40

20

0

Part

Level 1

Level 2

Level 3

Pareto Chart - Tool

Interpretation:

Level 1:

• Department J Makes up 60% of the

Scrap

Level 2:

• Part Z101 Makes up 80% of

Department J’s Scrap

Co

st

Pe

rce

nt

ScrapCount

73.2 87.8 100.0

150000 30000 25000

Percent 73.2 14.6 12.2

Cum %

CBA

200000

150000

100000

50000

0

100

80

60

40

20

0

Scrap

Co

st

Pe

rce

nt

DepartmentCount

11.9 11.0 3.1

Cum % 59.6 74.0 85.9 96.9 100.0

95000 23000 19000 17500 5000

Percent 59.6 14.4

OtherWFMJ

180000

160000

140000

120000

100000

80000

60000

40000

20000

0

100

80

60

40

20

0

Department

Co

st

Pe

rce

nt

PartCount

78.9 94.7 100.0

75000 15000 5000

Percent 78.9 15.8 5.3

Cum %

X492Z876Z101

100000

80000

60000

40000

20000

0

100

80

60

40

20

0

Part

Level 1

Level 2

Level 3

Co

st

Pe

rce

nt

DepartmentCount

11.9 11.0 3.1

Cum % 59.6 74.0 85.9 96.9 100.0

95000 23000 19000 17500 5000

Percent 59.6 14.4

OtherWFMJ

180000

160000

140000

120000

100000

80000

60000

40000

20000

0

100

80

60

40

20

0

Department

Level 2

Co

st

Pe

rce

nt

PartCount

78.9 94.7 100.0

75000 15000 5000

Percent 78.9 15.8 5.3

Cum %

X492Z876Z101

100000

80000

60000

40000

20000

0

100

80

60

40

20

0

Part

Level 3

33

Example of Process Improvement in banking

34

35

High Level Value Stream Map with Estimated New Timings Account Opening

Act

ivit

ies

to b

e co

nsi

der

ed a

t ev

ery

sta

ge.

N

ot

all

are

per

form

ed c

on

sist

entl

y

•Includes 3 minutes of Triage time

•Establishing relationship and identifying needs

•Discussing Solutions

•Resolving concerns

•Cross-selling effort

•Obtaining card from working supply

•Setting up PIN •Embossing card •Giving client

buck slip & brochures

•Updating Counselor to record sale

•Scanning documents and sending to PSC

•Preparing file for take over by the AMPB or SPBO

•Giving CSR documents

•Wait time •Copies & printing

•Validating IDs •Validating KYC •Checking that

references were contacted

•Checking to see if cross sell took place

•Checking source of funds for initial deposit

•Validating that appropriate fees are received

•If appropriate, preparing list of errors for PBO

•Initialing file •Passing files off to

SOOSS

•PBO walks customer to teller to make his/her deposit

•Schedule follow up with customer

•Use of special deposit line

•Collecting Information

•Querying system/database

•Obtaining copies of ID •Entering information

into the system •Printing and

photocopying of documents

•Contacting references (New customers)

•Obtaining customer signature

Data collected from 144 observations of Account Opening

PBA 2:00 min PBA 21:50 min PBA 7:50 min PBA 13:48 min

PBO 19:54 min PBO 21:50 min PBO 7:50 min PBO 13:48 min

Time at the branch for take over:

Total E2E Account Opening Time:

Total time at the branch:

Customer time at the branch: Time at the branch review/approval:

PBA/PBO

9 min

1 hr 45 min

1 hr 36 min

1 hr 14 min 21 min

Country A

8 min

1 hr 15 min

1 hr 07 min

0 hr 57 min 10 min

Country B

3 min

1 hr 16 min

1 hr 13 min

0 hr 56 min 17 min

Country C

0 min

0 hr 45 min

0 hr 45 min

0 hr 45 min 0 min

PBA New Time

0 min

1 hr 03 min

1 hr 03 min

1 hr 03 min 0 min

PBO New Time

Customer visits branch

to open account

Issuance of Scotia Card, cross sell & asking for

referral

Preparation of documents

and file for Takeover

Complete the new account application & specify record keeping option

Initial deposit for savings &

wrap up

*19:49 min

*22:19 min

*7:30 min

*10:11 min *11:33 min

*25:49 min

*25:49 min

*9:14 min

*9:14 min

PBA/PBO

File Take Over

Filing

* Average time between the three countries

Branch activities

Take Over activities

Total time of the activity

Total estimate new times with new process flow

Total time of the customer

36

Improve Phase: What can we implement, and what is the impact?

LSL USL Average

Target

Capable and on target

Improve Phase - Process Output Categories

LSL USL Average

Target

Off target

LSL USL Average

Target

Incapable

37

38 38

Types and Magnitude of Correlation

1 2 0 1 1 0 1 0 0 9 0 8 0 7 0 6 0 5 0 4 0

1 1 0

1 0 0

9 0

8 0

7 0

6 0

5 0

4 0

3 0

Strong Positive Correlation

Outp

ut

Input

1 0 0 9 0 8 0 7 0 6 0 5 0

1 1 0

1 0 0

9 0

8 0

7 0

6 0

5 0

4 0

Moderate Positive Correlation

Outp

ut

Input

9 0 8 0 7 0 6 0 5 0 4 0

8 5

7 5

6 5

5 5

Weak Positive Correlation

Outp

ut

Input

6 0 5 0 4 0 3 0 2 0 1 0

8 5

7 5

6 5

5 5

Outp

ut

Input

Weak Negative Correlation

5 0 4 0 3 0 2 0 1 0 0

1 1 0

1 0 0

9 0

8 0

7 0

6 0

5 0

4 0

Moderate Negative Correlation O

utp

ut

Input

Outp

ut

8 0 7 0 6 0 5 0 4 0 3 0 2 0 1 0 0

1 1 0

1 0 0

9 0

8 0

7 0

6 0

5 0

4 0

3 0

Input

Strong Negative Correlation

Account Opening process

39

Key Initiatives implemented

• New integrated process flow: Client time has been reduced from 59 min to 42 min however this includes an addition 10 min for a preferred Sales conversation following a standard flow which matches the Sales Conversation Roadmap

• Approval reductions from 11 to 4

• Improved account opening kit: from 11 customer signatures to 2

40

Control Phase: How can we ensure the process does not go back

to its original status?

41

Observation

Ind

ivid

ua

l V

alu

e

28252219161310741

60

50

40

30

20

10

0

_X=29.06

UCL=55.24

LCL=2.87

1

Control Chart of Recycle

Elements of Control Charts

Developed by Dr Walter A. Shewhart of Bell Laboratories from 1924

Graphical and visual plot of changes in the data over time

• This is necessary for visual management of your process.

Control Charts were designed as a methodology for indicating change in

performance, either variation or Mean/Median.

Charts have a Central Line and Control Limits to detect Special Cause variation.

Process Center (usually the Mean)

Special Cause

Variation Detected

Control Limits

42

Information about Six Sigma Certification

43

Six Sigma Hierarchy of Belts

Master Black Belt

• Coaches and trains Black belts

• Has over 5 years experience

Black Belt

• Certified to lead a Six Sigma project

• Has high level of statistical analysis and determines project scope & flow

Green Belt

• Certified to work on Six Sigma Projects

• Works on data analysis and provides support to determine outcome of the project

Yellow Belt

• Is Aware of Six Sigma concepts

• Plays a key role as a six sigma project team member

Lean and Kaizen

• Elimination of waste and non-value added activities

44

How to Get Certified

Decide your exam provider: Online or paper-based (min. $99 - $9000)

www.asq.org http://www.villanovau.com/online-certificates/six-sigma.aspx www.pmi.org www.expertrating.com

Sources of hard copy resources

Library – books, DVD, case studies Local Library

Sources of digital information

http://www.free-six-sigma.com/six-sigma-tools.html

http://adaptivebms.com/tools/

iSix Sigma.com

www.khanacademy.com/statistics

Body of Knowledge – American Society of Quality

http://cert.asq.org/certification/control/six-sigma-green-belt/index

45

Thank you for your attention

•QUESTIONS? •FEEDBACK? Aizad Ahmad aizad423@yahoo.ca Cell # 519-404-0783