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Six Sigma Project: Midwest Bank. Dr. Ron Lembke Managing for Quality. Cash Problems. Commercial Processing Department (CPD) 4.26 sigma already One error lost $280k last year Project team Project coordinator – from project office

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six sigma project midwest bank

Six Sigma Project:Midwest Bank

Dr. Ron Lembke

Managing for Quality

cash problems
Cash Problems
  • Commercial Processing Department (CPD)
    • 4.26 sigma already
    • One error lost $280k last year
  • Project team
    • Project coordinator – from project office
    • Operations financial manager – financial impact analysis, equipment purchasing
    • Assistant VP – subject matter expert from CPD
    • Team supervisor – subject matter expert from CPD
    • Project coordinator with bank-wide knowledge
    • CPD project analyst – Six Sigma analyst
      • Data integrity, graphical analysis, data stratification
  • Champions: Senior VP, VP over CPD
    • Created problem definition statement
    • Responsible for processes involved
  • Week-long six sigma training
define stage
Define Stage
  • Two largest sources of errors:
    • Cash Strapping
    • Deposit processing
  • Don’t affect each other, separate causes for errors
  • Problem Statement:
    • 150 internal and external errors, lead to bank losses of $400,000, and significant risk exposure.
    • Goal of $0 losses from CDP operations
    • Objective to reduce internal error ratio by 50% and losses by 50% in 12 months.
    • Projects will reduce loss expense, and risk exposure, and increase customer satisfaction
project goals
Project Goals
  • Risk mitigation – difficult to quantify
  • Dollar losses – easy to measure
  • Number of errors – easy to measure
  • Approved project launch, moved to Measure stage
measure stage
Measure Stage
  • Agree on CTQs that impact customers
    • Ys: risk mitigation, error reduction, reducing dollar
    • Studied workflows, look for root causes
    • Subject Matter experts- “tribal knowledge”
  • XY matrix – Cause & Effect p. 533
    • Rank factors for potential error causes Xs
    • Potential customer outputs Ys
    • Rate importance of Y’s 1-10 “Output Rating”
    • Association Table: Impact of the X’s on each Y: 1-10
    • Rank = 9*9 + 10*10 + 10*10
analysis stage
Analysis Stage
  • Gathered data to assess impact of Xs on Ys.
    • 48 hours of team time!
    • Many, many graphs
    • Indications of problems with manual strapping process (putting bands around money)
    • Tribal knowledge: Insufficient staffing?
  • Look for more longitudinal data
    • 100 graphs created
    • Data in single strands
    • Paired interactions
analysis continued
Analysis, Continued
  • Correlations between human factors and manual processes
  • Many manual steps in handling cash
  • cash strapping - 100 errors per year
  • Deposits –larger dollar loss per manual error
    • Concerned about # errors, not size
failure modes and effects analysis
Failure Modes and Effects Analysis
  • Laid out steps from process map
  • Concentrated on inputs
  • Figure out effects of each possible error
  • Each process step ranked on Risk Product Number(RPN) :
    • SEV - Severity of error
    • OCC - Occurrence – how often
    • DET - Detection – how likely to figure out
    • SEV*OCC*DET
  • Know what we have to look at
improve phase
Improve Phase
  • Countermeasures – how to fix?
    • Countermeasures Tree
    • For each problem, find root causes
      • Each root cause, list countermeasures
      • Practical ways to implement coutermeasures
      • Effectiveness x Feasibility (1to 5 scale)
five major countermeasures
Five Major Countermeasures
  • Cash strapping machine
  • $5 charge for clients with incorrect deposits
    • Benchmarking – will customers accept?
  • Eliminate double keying of deposits
  • Vacation schedules to reduce errors by subs
  • Dollar loss corrective actions
control phase
Control Phase
  • Implementation left to subject matter experts
  • Minor suggestions implemented immediately
  • Pilot study
    • $5 charge reduced errors 44% by corporate clients
    • $280,000 loss was from an incorrect deposit
  • Dollar loss corrective action hardest to impelement
  • Overall errors down 30%
  • Dollar losses down 57%