Project selection is a critical part of the Six Sigma quality improvement process. Just like other Six Sigma tools, project selection is quantifiable and based on objective data rather than subjective guesswork.
A project is a problem that is scheduled for solution. A good Six Sigma project is connected to a company’s strategic goals and will solve customers’ problems. A successful project will lead to improvements in schedule, quality or cost and can be used to meet the needs of external customers, internal customers or shareholders. Because an organization only has so many Black Belts and Green Belts, only the projects with the greatest benefit to the company and the greatest probability for success are implemented.
The rigors of Six Sigma require that project selection be based on quantifiable metrics. Choosing a project based on quantifiable data helps the organization identify the project that provides the greatest savings relative to the time expended and cost of deployment.
Pareto priority index
A cost-benefit analysis can be performed on the potential project to determine its estimated benefit to the organization. This analysis is known as the Pareto priority index (PPI). The index takes account of the following elements:
Savings – This a dollar amount, determined by the accounting department, that reflects savings that result from increased sales, decreased labor costs, decreased carrying costs, and reduced maintenance and material costs.
Probability of success – Not all projects will be successful. This figure is expressed as a percentage and indicates how likely the project is to achieve its stated goal.
Cost – This dollar amount, determined by the accounting department, illustrates the price of implementing a project. This figure includes costs such as materials, work stoppage for data collection and labor costs.
Completion time – This is the time required for the project team to complete the DMAIC process and implement the solution.
The PPI weighs the dollar savings and the probability of success of a project against the cost of deployment and the time required for project completion. The result is illustrated in an index number.
The index number helps organizations compare a several different potential projects at a glance. Potential projects with greater dollar savings and a higher probability of success will have a higher PPI number than those with greater cost and longer completion time.
While the cost-benefit analysis of the Pareto prioritization index has the advantages of being based on objective and quantitative factors that provide a metric that is useful for comparing different projects, it lacks the benefit of customer input. Because the best projects are those that solve a customer’s problem, the PPI must be balanced with a prioritization matrix that captures the customer’s needs.
The project selection committee draws upon customer surveys, interviews and focus groups to gain the voice of the customer. The potential project recommendations provided by customers are then placed into a matrix where every potential project is compared to every other potential project. The project selection committee then rates each project and the one with the greatest benefit to the company is chosen.
When Six Sigma projects are selected based the quantitative rigor of the Pareto Priority Index and a prioritization matrix that displays customer needs, it helps to insure that the Six Sigma project benefits both to the company and the customer.