Saturday, January 5, 2008

Developing an Enterprise Resource Planning system using Six Sigma

Six Sigma is characterized by DMAIC (Define, Measure, Analyze, Improve and Control) approach. DMAIC refers to a data-driven quality strategy for improving processes. The steps defined by DMAIC can also serve as a guideline for developing an effective ERP system of an organization. As organizations are big in terms of their processes and sub-processes so it is important to realize that improvements will not come overnight and it require vision, and active top down leadership, to maximize their impact.

The process steps can be further elaborated as:

I) Define primary stakeholders, their Critical to Quality (CTQ) issues, and the core business processes and sub processes involved. It requires capturing the requirements and expectations of these stakeholders from an ERP system. Prioritizing activities is important as resource limitations might restrict the team to work on all the core business processes in parallel. It is also important to define the processes to be improved by mapping the process flow so that As Is scenario can be captured.

II) Measure the performance of the core business processes and sub processes involved. Here process priorities established in the Define phase must be observed. This phase requires developing a data collection plan for each individual process and sub process. We may have to collect data from different sources to determine types of defects. A good starting point would be to identify the Key Performance Indicators (KPI) for each process with respect to its primary stakeholders. Finally we can compare our findings with the primary stakeholder requirements and expectations to determine the shortfall.

III) Analyze the data collected and process map to determine root causes of defects and opportunities for improvement. By doing this we can Identify gaps between current performance and goal performance. Many a times we can identify more than one area for improvement so it is important to prioritize opportunities. Those opportunities which are not selected for improvement in the 1st phase can be selected at a later stage. During this phase we should also identify sources of variation.

IV) Improve the target processes and sub processes by designing and implementing creative solutions to fix and prevent problems. This can be achieved by adding a new module(s)/sub module(s) or changing existing module(s)/sub module(s) in the ERP system. At times there is no need to introduce technology as the desired results can be achieved by only altering the flow within a particular process or sub process. So it is important to get to the root cause of the problem and then identify ways to fix that problem.

V) Control the improvements to keep the processes and sub processes on the new course. It will also prevent the concerned staff reverting back to the "old way" of doing things. It requires the development, documentation and implementation of an ongoing monitoring plan. We also need to institutionalize the improvements through the modification of systems and structures (staffing, training, incentives).

In the end it is important to realize that our goal should be to achieve results not to implement any technology or software.