Six Sigma is a term companies equate to resource overload, too much money, and time consumption, which can certainly act as a deterrent for companies focused on the bottom line. However, because ERP software is often used to improve business processes, it can be of great functional and financial benefit to use Six Sigma to understand where the business processes are inefficient as well as the pain points associated with them. This will lead to a better understanding of the overall improvements and business benefits enabled by the software package.
Six Sigma principles can be applied to ERP implementations without the investment of additional resources, training or extended timelines. Using a Six Sigma quick hit approach throughout an ERP project can provide all of the benefits of Six Sigma and ensure your ERP system is designed with the highest level of efficiency. It also will capture overall cost savings and help create the business case for the project.
The Six Sigma ERP Project Quick Hit Approach
Six Sigma is a methodology that consists of five basic elements: Define – D; Measure – M; Analyze – A, Improve –I and Control – C. Each phase contains specific tasks, or steps, be completed to move into the next phase of the methodology. By performing the simple tasks outlined within each phase below, you can incorporate Six Sigma into your ERP project and realize the benefits of using the methodology.
During the define phase, it is critical to identify the problem statement and project overview. The problem statement describes the current state of the project and is an overall summary of the problem. One must identify a specific metric that is observable, measurable and manageable. Similarly, it is important to identify the project goal. What is the desired performance for the identified metric? Again, this should be a SMART goal – specific, measurable, attainable, relevant and time-bound. Once key metrics are identified, a baseline must be established to measure the success of the ERP software. Similar to all projects, a timeline must also be established. This measures the performance of the team and allows management to understand the time commitment associated with the ERP implementation. It also is critical to calculate the ROI for the project. Although specific data points may not be known, making a conservative, educated guess will help obtain executive support and buy-in for the project. These costs and savings can be used to develop the ERP business case.
Measure and Analyze
To appropriately measure and analyze a process, the ‘as is’ process must be mapped using generic flowchart shapes and symbols. The mapping phase is when pain points within a process or processes are identified. Pain points can be anything within a process that causes pain for the individuals performing the tasks, or bottlenecks within a system that result in inefficiencies. Once pain points are identified, it is critical to understand their root causes. This will help put the appropriate ERP solution in place to reduce the pain and improve process efficiencies. There are many Six Sigma tools that can help identify root cause including, cause and effect diagrams, fishbone diagrams and regression analysis. A personal favorite is the 5-Why Analysis. This approach asks the question ‘why’ five times to help uncover the true root cause of a problem. Once root cause is determined, recommended actions can be discussed and put in place. Often, ERP projects have multiple processes that require improvement; these processes are typically critical to the business and provide the business with its competitive edge in the market place. The mapping step can facilitate the ERP business blueprinting process to ensure there are no areas of the business, which if lost during ERP software implementation, could result in a catastrophic business disruption.
When solutions have been identified and put in place, it is important to revisit the original ‘as is’ process map and redesign it with the revised actions put in place; this becomes the ‘desired’ process state. The desired process will no longer display the original pain points and will represent a more efficient process. A new ROI calculation can be completed putting in actual data to realize and confirm actual financial impact and savings of the improvements. This data can be used for the ERP business case.
When improvements are in place and have been measured, it is necessary to complete a control plan. A control plan tracks the targeted metric goals and identifies the actions to take place if the metric falls below its goal. A chart that tracks metric performance daily, weekly or monthly should be put in place to validate and continue to measure ERP project success.
Six Sigma is a simple method companies can use in conjunction with their ERP selection and implementation projects. Not only can the business apply Six Sigma principles throughout a project and gain process improvement efficiencies, but it also allows the business to measure the overall success of the project at both the business metric and financial levels. Learn more about how Panorama’s Six Sigma and Value Stream Analysis service offering can help your organization achieve ERP success.
Written by January Paulk, Senior ERP Consultant at Panorama Consulting Solutions.