INTRODUCTION TO

SIX SIGMA

Institute Of Management K0lhapur

04-08-08

The big myth is that Six Sigma is about Quality Control and Statistics. It is that but much more.

Ultimately it drives leadership to be better by providing tools to think through tough issues. At Six Sigma’s core is an idea that can turn company inside out, focusing organization outward on the customer.

Jack Welch from “Straight From the gut”

Purpose of six sigma : Purpose of six sigma : To make customer happier and increase To make customer happier and increase

profitsprofits

Introduction to Six Sigma

Current Leadership Challenges

• Delighting Customers.• Reducing Cycle Times.• Retaining People.• Reducing Costs.• Responding More Quickly.• Structuring for Flexibility. • Growing Overseas Markets.

Six Sigma

Six Sigma provides: maximum value to companies in

the forms of increased profits and maximum value to consumers with

high-quality products and services at the lowest possible cost.

SIX SIGMA• Six Sigma is a highly disciplined

process that helps a company focus on developing and delivering near-perfect products and services.

• Why “sigma”? The word is a statistical term that measures how far a given process deviates from perfection.

© TreMyn 2004

What is Six Sigma?

•It is a methodology for continuous improvement

•It is a methodology for creating products/ processes that perform at high standards

•It is a set of statistical and other quality tools arranged in unique way

•It is a way of knowing where you are and where you could be!

•It is a Quality Philosophy and a management technique

What is 6-Sigma?• Six-Sigma is an integrated quality

improvement framework, which aims at ensuring no more than 3.4 defects per million opportunities.

• At the heart of the Six-Sigma methodology lies a process improvement framework known as DMAIC (Define, Measure, Analyse, Implement, Control).

Six Sigma is not

• A standard

• A certification

• Another metric like percentage

SIX SIGMA

• The central idea behind Six Sigma is that if you can measure how many" defects” you have in a process, you can systematically determine how to eliminate those and approach “zero defects”.

Origin of Six Sigma

• 1987 Motorola Develops Six Sigma– Raised Quality Standards

• Other Companies Adopt Six Sigma– GE

•Promotions, Profit Sharing (Stock Options), etc. directly tied to Six Sigma training.

– Dow Chemical, DuPont, Honeywell, Whirlpool

Time Line

2002200219951995199219921987198719851985

Dr Mikel J Harry wrote aPaper relating early failures to quality

Motorola

Allied Signal

General Electric

Johnson & Johnson,Ford, Nissan,Honeywell

Six Sigma

It is a Philosophy– Anything less than

ideal is an opportunity for improvement

– Defects costs money– Understanding

processes and improving them is the most efficient way to achieve lasting results

It is a Process– To achieve this level of

performance you need to:

Define, Measure, Analyse, Improve and Control

It is Statistics– 6 Sigma processes will

produce less than 3.4 defects per million opportunities

PAIN, URGENCY, SURVIVAL

COSTS OUT

GROWTH

TRANSFORM THE ORGANIZATION

CHANGE THE

WORLD

6 SIGMA AS ASTATISTICAL

TOOL

6 SIGMA AS APHILOSOPHY

6 SIGMA ASA PROCESS

Overview of Six Sigma

TheVillain

Cost of Poorly Performing Processes level DPMO CP3

2 308,537 Not Applicable3 66,807 25%-40% of sales4 6,210 15%-25% of sales5 233 5%-15% of sales6 3.4 < 1% of sales

Each sigma shift provides a 10% net income improvement

Cost of Poorly Performing Processes (CP3)

Sigma () is a measure of “perfection” relating to process performance capability … the “bigger the better.” A processoperating at a “Six Sigma” level produces only 3.4 defects per million opportunities (DPMO) for a defect. Without dedication of significant and appropriate attention to a process, most processes in leading companies operate at a level between 3 and 4 sigma.

Why is Six Sigma Important?

Cost of Poorly Performing Processes

The cost to deliver a quality product can account for as much as 40% of the sales price.

For example, a laser jet printer purchased for $1,000 may have cost the manufacturer $400 in rework just to make sure that you took home an average-quality product.

For a company whose annual revenues are $100 million and whose operating income is $10 million, the cost of quality is roughly 25% of the operating revenue, or $25 million.

If this same company could reduce its cost of achieving quality by 20%, it would increase its operating revenue by $5 million – or 50% of the current operating income.

… and the Hero • We don’t know what we don’t know.• We can’t do what we don’t know.• We won’t know until we measure.• We don’t measure what we don’t value.• We don’t value what we don’t measure.

• Typical Results: companies that properly implement Six Sigma have seen profit margins grow 20% year after year for each sigma shift (up to about 4.8s to 5.0s. Since most companies start at about 3s, virtually each employee trained in Six Sigma will return on average $230,000 per project to the bottom line until the company reaches 4.7s. After that, the cost savings are not as dramatic.

• However, improved profit margins allow companies to create products & services with added features and functions that result in greater market share.

What Does Six Sigma Tell Us?

© TreMyn 2004

What it means to be @ Six SigmaIs 99% (3.8) good enough? 99.99966% Good – At 6

20,000 lost mails per hour 7 lost mails per hour

Unsafe drinking water almost 15 minutes each day

One minute of unsafe drinking water every seven months

5,000 incorrect surgical operations per week

1.7 incorrect surgical operations per week

2 short or long landings at most major airports daily

One short or long landing at major airports every five years

200,000 wrong drug prescriptions each year

68 wrong drug prescriptions each year

Example quoted from GE Book of Knowledge - copyright GE

Jack

Jill

Who is the better shooter?

Have you ever…

• Shot a rifle?

More about limits

Good quality: defects are rare (Cpk>1)

Poor quality: defects are common (Cpk<1)

Cpk measuresmeasures “Process Capability”

If process limits and control limits are at the same location, Cpk = 1. Cpk ≥ 2 is exceptional.

μtarget

μtarget

Six Sigma Measurement

34

5

6

7

66810

6210

233

3.4

Sigma

DPMO

On one condition :

Calculate the defects and estimate the opportunities in the same way...

Six Sigma Measurement

0

100,000

200,000

300,000

400,000

500,000

600,000

1.5 2.5 3.5 4.5 5.5

# of Sigmas

# of

Def

ect p

er M

illio

n

Sigma Defects numbers per million

1.5s 500,000 2.0s 308,300 2.5s 158,650 3.0s 67,000 3.5s 22,700 4.0s 6,220 4.5s 1,350 5.0s 233 5.5s 32 6.0s 3.4

Philosophy

• Know What’s Important to the Customer (CTQ)

• Reduce Defects (DPMO)

• Center Around Target (Mean)

• Reduce Variation (Standard Deviation)

Six Sigma - Three Dimensions

ToolsOrganization

Methodology

Process variation

LSL USL

Upper/Lower specification

limits

Regression•••••••• •••• •••

••••

•••• •• ••

••• ••••

••••• ••

•••••

Driven by

customer

needs

Enabled by quality team.

Led by Senior Mgmt

Define Measure

Analyze Improve ControlVendorVendorProcess BProcess BProcess AProcess ACustomerCustomer VendorVendorProcess BProcess BProcess AProcess ACustomerCustomer

VendorVendorProcess BProcess BProcess AProcess ACustomerCustomer VendorVendorProcess BProcess BProcess AProcess ACustomerCustomer

Process Map Analysis

0

5

10

15

20

25

30

35

L K A F B C G R D

0%

20%

40%

60%

80%

100%

Frequency Cumulative Frequency

Pareto Chart

What can it do?Motorola:

– 5-Fold growth in Sales– Profits climbing by 20% pa– Cumulative savings of $14 billion over 11

years

General Electric:– $2 billion savings in just 3 years– The no.1 company in the USA

Bechtel Corporation:– $200 million savings with investment of

$30 million

Critical Elements

• Genuine Focus on the Customer• Data and Fact Driven Management• Process Focus• Proactive management• Drive for Perfection;

Management involvement?

• Executives and upper management drive the effort through:– Understanding Six Sigma– Significant financial commitments– Actively selecting projects tied to strategy– Setting up formal review process– Selecting Champions– Determining strategic measures

Six Sigma— Benefits?• Generated sustained success• Project selection tied to organizational

strategy – Customer focused– Profits

• Project outcomes / benefits tied to financial reporting system.

• Full-time Black Belts in a rigorous, project-oriented method.

• Recognition and reward system established to provide motivation.

GE Six Sigma Economics

1996 1998 20002002

0

500

1000

1500

2000

2500

1996

Cost

Benefit

(in millions)

Source: 1998 GE Annual Report, Jack Welch Letter to Share Owners and Employees - progress based upon total corporation cost/benefits attributable to Six Sigma.

6 Sigma Project Progress

Key Concepts

COPQ (Cost of Poor Quality)

- Lost Opportunities

- The Hidden Factory

- More Setups- Expediting Costs- Lost Sales- Late Delivery- Lost Customer Loyalty- Excess Inventory- Long Cycle Times- Costly Engineering Changes

Average COPQ approximately 15% of Sales

Hidden Costs:- Intangible- Difficult to Measure

Traditional Quality Costs:- Tangible- Easy to Measure

- Inspection- Warranty- Scrap- Rework- Rejects

0%5%

10%15%20%25%30%35%40%45%50%

2 3 4 5 6

Co

st

of

Qu

alit

y %

Sa

les

Sigma Level

COPQ v/s Sigma Level

CTQ (Critical-To-Quality)

• CTQ characteristics for the process, service or process• Measure of “What is important to Customer”• 6 Sigma projects are designed to improve CTQ• Examples:

– Waiting time in clinic– Spelling mistakes in letter– % of valves leaking in operation

Defect Opportunity

• Number of defect opportunities relate to complexity of unit.

• Complex units – Greater opportunities of defect than simple units

• Examples:– A units has 5 parts, and in each part there are 3

opportunities of defects – Total defect opportunities are 5 x 3 = 15

DPO (Defect Per Opportunity)

• Number of defects divided by number of defect opportunities

• Examples:– In previous case (15 defect opportunities), if 10 units

have 2 defects.– Defects per unit = 2 / 10 = 0.2– DPO = 2 / (15 x 10) = 0.0133333

DPMO (Defect Per Million Opportunities)

• DPO multiplies by one million

• Examples:– In previous case (15 defect opportunities), if 10 units

have 2 defects.– Defects per unit = 2 / 10 = 0.2– DPO = 2 / (15 x 10) = 0.0133333– DPMO = 0.013333333 x 1,000,000 = 13,333

Six Sigma performance is 3.4 DPMO

13,333 DPMO is 3.7 Sigma

Components of Six Sigma

The DMAIC Model

Define Control

Measure ImproveAnalyze

Voice of the Customer

Institutionalization

DMAIC - simplified

• Define– What is important?

• Measure– How are we doing?

• Analyze– What is wrong?

• Improve– Fix what’s wrong

• Control– Ensure gains are

maintained to guarantee performance

DMAIC approach

DDefine

MMeasure

AAnalyze

IImprove

CControl

Identify and state the practical problem

Validate the practical problem by collecting data

Convert the practical problem to a statistical one, define statistical goal and identify potential statistical solution

Confirm and test the statistical solution

Convert the statistical solution to a practical solution

Define

DDefine

MMeasure

AAnalyze

IImprove

CControl

VoCVoC - Who wants the project and why ?

The scope of project / improvement (SMART Objective)

Key team members / resources for the project

Critical milestones and stakeholder review

Budget allocation

Measure

Ensure measurement system reliability

Prepare data collection plan

Collect data

- Is tool used to measure the output variable flawed ?

- How many data points do you need to collect ?- How many days do you need to collect data for ?- What is the sampling strategy ?- Who will collect data and how will data get stored ? - What could the potential drivers of variation be ?

DDefine

MMeasure

AAnalyze

IImprove

CControl

Analyze

How well or poorly processes are working compared with- Best possible (Benchmarking)- Competitor’s

Shows you maximum possible result

Don’t focus on symptoms, find the root cause

DDefine

MMeasure

AAnalyze

IImprove

CControl

Improve

Present recommendations to process owner.

Pilot run- Formulate Pilot run.

- Test improved process (run pilot).

- Analyze pilot and results.

Develop implementation plan.

- Prepare final presentation.

- Present final recommendation to Management Team.

DDefine

MMeasure

AAnalyze

IImprove

CControl

Control

Don’t be too hasty to declare victory.

How will you maintain to gains made?

- Change policy & procedures

- Change drawings- Change planning- Revise budget- Training

DDefine

MMeasure

AAnalyze

IImprove

CControl

Benchmark Baseline Contract / CharterVoice of the Customer Quality Function Deployment Process Flow Map Project Management

7 Basic Tools Defect Metrics Data Collection, Forms, Plan, Logistics Sampling Techniques

Cause & Effect Diagrams Failure Models & Effect Analysis Decision & Risk Analysis Statistical Inference Control Charts Capability Reliability Analysis Root Cause Analysis

Design of Experiments Modelling Tolerancing Robust Design Process Map

Statistical Controls Control Charts Time Series Methods Non Statistical Controls Procedure adherence Performance Mgmt Preventive activities Poke yoke

DefineWhat is wrong?Define

What is wrong?MeasureData & Process

capability

MeasureData & Process

capability

Analyze When and whereare the defects

Analyze When and whereare the defects

ImproveHow to get to six sigma

ImproveHow to get to six sigma

ControlDisplay

key measures

ControlDisplay

key measures

Tools for DMAIC

Design for Six Sigma Applications of Six Sigma that focus on the design or significant

redesign of products and services and their enabling processes so thatfrom the beginning customer needs and expectations are fulfilled

are known as Design for Six Sigma or DFSS.

The focal aim of DFSS is to create designs that are resource efficient,capable of exceptionally high yields, and are robust to process

variations. This aim leads to the DFSS algorithm

Define-Measure-Analyze-Design-Verify (DMADV).

Define

Verify

Design Analyze

Measure

Design for Six Sigma (DFSS)

All new products at GE are designed using a DFSS algorithm.

Define customer requirements andgoals for the process, product or service.

Measure and match performance to customer requirements.

Analyze and assess the design for the process, product or service.

Design and implement the array of new processes required for the new process, product or service.

Verify results and maintain performance.

Six Sigma: How Do We Design?

DFSS is changing GE. With it GE can build on all of its Capabilities and take all of its product and process designs to a new level of world-class performance and quality.

The essence of DFSS is predicting design quality up front and driving quality measurement and predictability improvement during the early design phases-a much more effective and less expensive way to get to Six Sigma quality than trying to fix problems further down the road.

What We Do. GE Corporate Research and Development

Design for Six Sigma at GE:

Sources of Projects

• External Sources:– Voice of Customer

• What are we falling short of meeting customer needs?

• What are the new needs of customers?

– Voice of Market• What are market trends, and are we ready to

adapt?

– Voice of Competitors• What are we behind our competitors?

Sources of Projects

• Internal Sources:– Voice of Process

• Where are the defects, repairs, reworks?• What are the major delays?• What are the major wastes?

– Voice of Employee• What concerns or ideas have employees or

managers raised?• What are we behind our competitors?

• As a team List down at least 20 improvement projects related to your work areas …….

A Problem Statement should be SMART: Specific - It does not solve world hunger Measurable - It has a way to measure success Achievable - It is possible to be successful Relevant - It has an impact that can be

quantified Timely - It is near term not off in the future

Project Selection

Harvesting the Fruit of Six Sigma

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Sweet FruitSweet Fruit Design for Repeatability

Bulk of FruitBulk of FruitProcess Characterization and Optimization

Low Hanging FruitLow Hanging FruitSeven Basic Tools

Ground FruitGround FruitLogic and Intuition

Process Enhancement

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Types of Savings

• Hard Savings:– Cost Reduction

• Energy Saving• Raw Material saving• Reduced Rejection, Waste, Repair

– Revenue Enhancement• Increased production• Yield Improvement• Quality Improvement

• Hard Savings:– Cash flow improvement

• Reduced cash tied up in inventory• Reduced late receivables, early payables• Reduced cycle time

– Cost and Capital avoidance• Optimizing the current system / resources• Reduced maintenance costs

Types of Savings

• Soft Savings:– Customer Satisfaction / Loyalty– Employee Satisfaction

Types of Savings

Cost of implementing• Direct Payroll

– Full time (Black Belts, Master Black Belts)

• Indirect Payroll– Time by executives, team members, data

collection

• Training and Consulting– Black Belt course, Overview for Mgmt etc.

• Improvement Implementation Costs– Installing new solution, IT driven solutions etc.

What Qualifies as a Six Sigma Project

• Three basic qualifications:– -There is a gap between current and

desired / needed performance.– The cause of problem is not clearly

understood.– The solution is not pre-determined, nor is

the optimal solution apparent.

How many projects out of 20 now qualify as Six sigma projects?

PREREQUISITES FOR SUCCESSFUL SIX SIGMA IMPLEMENTATION

• A visible commitment from the top leadership.

• Using the language of six-sigma throughout the organisation

• Relentless goals that force process re-engineering.

PREREQUISITES FOR SUCCESSFUL SIX SIGMA IMPLEMENTATION

• The use of innovative ideas to improve processes.

• Use of data and not emotion to make decisions.

• Maintaining six-sigma as a topic of interest.

• Engaging and empowering the employees

Way forward

• Get Started

• Look for low hanging fruits

• Even poor usage of these tools will get results

• Learn more about Six Sigma

Six Sigma Organizations

• GE … All 300,000+ GE employees must be Six Sigma certified. All new GE products developed using the “Design for Six Sigma” (DFSS) approach.

• 3M … New CEO (from GE) requires all 3M employees to become Six Sigma certified.

• Dupont• AlliedSignal• Sun Microsystems• Raytheon• Motorola• Boeing• Lockheed-Martin• Bank-of-America• American Express• HSBC• SAS Institute

Rapidly Increasing Areas of Application.

– Healthcare – GE Heathcare - SLC– Financial,– Military – NSWC, Pentagon, etc.

• Fueled by:• Strategic Contexts.• Notorious bottom-line orientation & results. • Adaptable to multiple bottom lines.• Process orientation: rigorous and systematic

approaches to innovation and design.• Focus on the customer.• Successful track record elsewhere.• “Industry Buzz”.

While Six Sigma is new at, for example, 3M – its benefits at others ofthese organizations is measured in the multi-billions of US dollars.

© TreMyn 2004

The Growth of Six Sigma

Six Sigma has changed the DNA at GE – it is the way that GE works – in Everything that GE does and -in every product GE designs.

Six Sigma from the GE Perspective

• With Six Sigma embedding itself deeper into GE’s processes, they achieved the previously “impossible” operating margin of 16.7% in 1998 – up from 13.6% in 1995.

• In dollar amounts, Six Sigma delivered more than $300 million to GE’s 1997 operating income and more than $600 million in 1998.

• GE in 2002

• Spending 600 million on 6 sigma projects

• 4000 experts and 10000 trained employees

• Target savings 2.5 billion dollars

• Helping suppliers like Dell Computers, wal- Mart,

© TreMyn 2004

Six Sigma OrganizationSix Sigma OrganizationSix Sigma OrganizationSix Sigma Organization

Six Sigma Organization

Champion

BlackBelt

BlackBelt

BlackBelt

GreenBelt

GreenBelt

GreenBelt

GreenBelt

GreenBelt

YellowBelt

YellowBelt

YellowBelt

YellowBelt

MasterBlackBelt

The Quality Team

Master Black BeltMaster Black Belt

Black BeltBlack Belt Black BeltBlack Belt

Green BeltGreen Belt

Green BeltGreen Belt

Green BeltGreen Belt

- Thought Leadership- Expert on Six Sigma- Mentor Green and Black Belts

- Thought Leadership- Expert on Six Sigma- Mentor Green and Black Belts

- Backbone of Six Sigma Org- Mentor Green Belts- Full time resource- Deployed to complex or

“high risk” projects

- Backbone of Six Sigma Org- Mentor Green Belts- Full time resource- Deployed to complex or

“high risk” projects

- Part time or full time resource

- Deployed to less complex projects in areas of functional expertise

- Part time or full time resource

- Deployed to less complex projects in areas of functional expertise

Master Black Belt

Black Belts

Green Belts

Team Members / Yellow Belts

Ch

amp

ion

s

Mentor, trainer, and coach of Black Belts and others in the organization.

Leader of teams implementing the six sigma methodology on projects.

Delivers successful focused projects using the six sigma methodology and tools.

Participates on and supports the project teams, typically in the context of his or her existing responsibilities.

6 Training

Champion

• Identifies and removes organizational and cultural barriers to Six Sigma success.

• Rewards and recognizes team and individual accomplishments (formally and informally)

• Communicates leadership vision

• Monitors and reports Six Sigma progress

• Validates Six Sigma project results

• Nominates highly qualified Black Belt and/or Green Belt candidates

Champion

• Plans improvement projects

• Charters or champions chartering process

• Identifies, sponsors and directs Six Sigma projects

• Holds regular project reviews in accordance with project charters

• Includes Six Sigma requirements in expense and capital budgets

Master Black BeltRoles Responsibilities

- Enterprise Six Sigma expert

- Permanent full-time change agent

- Certified Black Belt with additional specialized skills or experience especially useful in deployment of Six Sigma across the enterprise

- Highly proficient in using Six Sigma methodology to achieve tangible business results.

- Technical expert beyond Black Belt level on one or more aspects of process improvement (e.g., advanced statistical analysis, project management, communications, program administration, teaching, project coaching)

- Identifies high-leverage opportunities for applying the Six Sigma approach across the enterprise

- Basic Black Belt training

- Green Belt training

- Coach / Mentor Black Belts

Roles Responsibilities

- Six Sigma technical expert

- Temporary, full-time change agent (will return to other duties after completing a two to three year tour of duty as a Black Belt)

- Leads business process improvement projects where Six Sigma approach is indicated.

- Successfully completes high-impact projects that result in tangible benefits to the enterprise

- Demonstrated mastery of Black Belt body of knowledge

- Demonstrated proficiency at achieving results through the application of the Six Sigma approach

- Coach / Mentor Green Belts

- Recommends Green Belts for Certification

Black Belt

Yellow Belt

Roles Responsibilities

- Learns and applies Six Sigma tools to projects

- Actively participates in team tasks

- Communicates well with other team members

- Demonstrates basic improvement tool knowledge

- Accepts and executes assignments as determined by team

Green Belt

Roles Responsibilities

- Six Sigma Project originator

- Part-time Six Sigma change agent. Continues to perform normal duties while participating on Six Sigma project teams

- Six Sigma champion in local area

- Recommends Six Sigma projects

- Participates on Six Sigma project teams

- Leads Six Sigma teams in local improvement projects

Financial Analyst

• Validates the baseline status for each project.

• Validates the sustained results / savings after completion of the project.

• Compiles overall investment vs. benefits on Six Sigma for management reporting.

• Will usually be the part of Senior Leadership Team.

Project Selection

The first step to implement Six Sigma

Six Sigma – Career Option!• Basic - Six Sigma Awareness• Green Belt Projects• Participate in Black Belt Projects• Assist business functions with day to day

activities

• Mentor/Train Green Belts• Black Belt Projects• Change Agents• Work along with the business owners

• Mentor/ Train Black Belts• Run Strategic projects• More Strategic than tactical role

Green Belt (GB)Green Belt (GB)

Black Belt (BB)Black Belt (BB)

Master Black Belt (MBB)Master Black Belt (MBB)

Highly paid!Highly paid!Work like a Consultant!Work like a Consultant!

Huge demand in the industry!Huge demand in the industry!

Overall…A high flying Career!!Overall…A high flying Career!!

© TreMyn 2004

Thank YouThank YouThank YouThank You