Case Study: How to Reduce Your Family's Expenses with Six Sigma!

The Six Sigma program is gaining more and more space in corporate and institutional environments, isn’t it?

This quick growth was mainly due to the billion-dollar gains from General Electric's adoption of the methodology at the end of the 2000s.

This is unlikely to change. Through its structured and systemic methodology - the DMAIC, this revolutionary quality program has revealed that its application can cover different management scenarios for solving problems, such as family expenses.

Even if you initially disliked this topic, in this article, you will find that the Six Sigma program is not intended for large organizations only. On the opposite, its robust and efficient structure allows it to be adopted even within a familiar context.

That is why now you can check out in detail a well-didactic and nice case study that shows the whole operation of a Six Sigma project, where through the phases of DMAIC methodology manages to achieve Silva family goals of reducing the value of the expenses.

Let’s go?

Case Study: A Six Sigma Project to Reduce Silva Family Expenditures

Before entering into the DMAIC methodology itself, it is essential to have in hands a sufficient amount of information that reveals the context of the problem involved and to indicate the ways and the decisions more timely than they should be put into practice.

To meet this condition, we have below the main information about the project:

• The Silva family has as its members the father André, the mother Renata and the two teenage sons Felipe and Marina;
• André is a production engineer and recently acquired Green Belt training in Lean Six Sigma to assist in the process of implementing this program in your company;
• They live in a rented apartment in a prime neighborhood of the city of Juiz de Fora (Brazil) that has one of the highest condominium values ​​in the region;
• They have two cars to use, and moving to Andre's work, to the teenager's school, to the supermarket, and to other places is usually done with only one car at a time;
• André has a hobby to watch pay-TV channels connected to sports, such as: UFC and football;
• Renata, currently left the job to study for her doctorate and she is graduated in psychology. Besides, he loves to read and every week she goes to the bookstore and buys three new books;
• The kids couple take English classes and go to gym, and usually renew their electronic devices in commemorative dates, such as: birthdays and Christmas;
• The Silva family has the habit of having lunch in restaurants every weekend.

With the goal of also applying the knowledge acquired through the course in Lean Six Sigma, Mr. Silva has raised the monthly financial data generated by his family in the last 3 years - from Sep / 2014 to Sep / 2017. From them, he and his family then began the development of the project that we will see below.

Lean Six Sigma is a methodology that seeks to increase the profitability of companies through the improvement of their processes.

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(D) Define the scope: the first step!

1. State the theme and purpose of the project: this part was not difficult; André had only as task to list the general objective of his project: to reduce the monthly expenses of his family.

2. Evaluate the behavior of the process: based on all financial data collected in the last 3 years, he decided to evaluate in Minitab if the behavior of the process was due to a Normal Distribution. After performing this activity, it found that it did not obey and therefore restricted the use of data only considering the last 12 months for analysis, from September 2016 to September 2017.

3. Determine the project goal: according to a Benchmarking, while his family consumed about $ 6,500, he found that the average value consumed by a middle-class family with 2 children was only $ 3,500.00.

Thus, the goal it stipulated was to reduce monthly expenses in up to 4 months by at least 30%, reaching the new rate of $ 4,500.00.

4. Identify customer needs: To continue with the project, Andre had to take into account the needs and desires of all the other members of his family - the clients of the project. Therefore, the face-to-face interview technique of the Voice of the Customer (VOC) was very inviting to move forward.

5. Define the scope of the project: according to the needs raised in the previous activity, it can then define the Project Scope, recording what could be cut and mitigated - personal expenses, physical assets and change of residence - than could not - education of the children and family health plan.

6. Illustrate the key process involved: considering that the key process is the payment of expenses, Mr. Silva has filled out a Matrix SIPOC involving 3 steps in particular: the entry of his salary, payment of scheduled bills and payment of unscheduled expenses.

7. Elaborate and validate the contract: drawn up by the project leader - André - and signed by the other members - the family, the themes Project Charter were: objective, justification, goal, baseline, schedule, team, scope and signatures.

(M)  Measure the problem: the second phase!

8. Raise all root causes of the process: In order to facilitate the identification of the main root causes that caused the high value of their expenses, André's family debunked in a Fishbone Diagram several options presented in general topics such as gasoline, sports, leisure, housing, electronic services and food.

9. Prioritize the main root causes: as a way of prioritizing the causes listed above, a Cause and Effect Matrix was filled considering as correlation factors the frequency of each cause and the impact of each of them on the budget.

10.  To illustrate the vital causes: through the data contained in the Matrix of Cause and Effect, a Pareto Diagram was generated, and the vital items were identified, being: education, rent, gasoline, food and health. But as we saw back there, the scope of the project prevented the fight against items related to education and health, did not it?

Therefore, only the other causes were considered to the next stage.

(A) Analyse root causes: the third step!

11. Analyze each root cause in a quantitative way: in order to prove through facts and data each of the root causes found in the previous phase, André used the ANOVA tool to evaluate the average rent in three different noble neighborhoods , and found that its neighborhood held the highest rental value; and used the Regression Analysis to prove that the high value of gasoline was due to the large distance traveled monthly.

(I) implement improvement actions: the fourth step!

12. Propose solutions for each root cause: according to the main causes prioritized and proven in the previous phase - high rent, expense with 2 cars, gasoline and purchases in the bookstore; solutions to combat them were proposed by the team in a Brainstorming session.

Considering this, they were then prioritized in a Matrix of Cause and Effect that had as factors of correlation speed and low cost.

13. Develop an action plan: weighted the solutions with the most effective value, 5 of them were chosen and recorded in an action plan illustrated according to tool 5W2H, containing the necessary activity for accomplishment (what), the responsible (who), time limit for completion and / or evaluation (when), the destination (where), the procedure for execution (how) and how much investment was necessary (how much).

(C) Control the new performance: the last task!

14. Prepare Control Charts: After the actions were implemented, Andrew developed a Control chart to reveal month by month progress in reducing his family's monthly expenses.

He confirmed that after 6 months of project, the new monthly average of family expenses was at $ 4,100.00 - this value even below the project goal.

15. Calculate the new capacity of the process: after confirming the new performance achieved - exceeding the project goal, he raised and presented to his family the Process Capacity to remain within the previously stipulated limit of $ 4,500: a Sigma level equal to 4.

16. Develop the Project Control Plan: to ensure that this performance remains stable and sustainable in the medium and long term, Mr. Silva has finally: developed an OCAP to be activated whenever 80% of the ceiling is reached ; he established the need for periodic and biweekly meetings to encourage the adoption of cost reduction practices; and stipulated the use of Audit Processes every 3 months to ensure compliance in the process.

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