01 - Introduction to Six Sigma

Session 1b - Six Sigma Overview

Pat Hammett - University of Michigan 1

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Six Sigma Overview

For more in-depth background, please read:What is Six Sigma?, Donald P. Lynch

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Topics

1. Six Sigma Overview2. Business Case for Six Sigma 3. Integration of Lean and Six Sigma4. Six Sigma Players5. Six Sigma Quality Level



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1. What is Six Sigma?

Six Sigma is: a systematic methodology utilizing data analysis techniques, to measure and improve a company's business performance measures (Ys), by identifying and preventing 'defects and inefficiencies' in

manufacturing and service-related processes, to meet and exceed customer needs

Industry Implementations Successfully applied in numerous industries

automotive, discrete parts, aerospace, financial, health systems, etc. Within manufacturers, successfully applied to:

manufacturing Manufacturing Six Sigma operations/business processes Transactional Six Sigma

Nearly all systems involve an underlying process and benefit from reducing variation and/or improving flow

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Process-Driven Approach

Find and Fix (focus: existing problems) Apply DMAIC Problem Solving Method

Define, Measure, Analyze, Improve and Control

Prevention (focus: designing quality into new products) Apply Design for Six Sigma (DFSS)

e.g., IDDOV or DMADV Methods (not covered in this course)

Which do you suspect is more commonly applied? Which likely has a greater impact? WHY?

Process Outputs/ Metrics (Ys)Inputs (Xs)Key Product/Process

Output Variables (KPOV)Key Process

Input Variables (KPIV)



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Performance Measures, Ys

Gaps between customer expectations/ desires and what you provide. External Critical-to-Quality Measures (CTQ):

customer satisfaction, perceived value ratings, warranty Internal CTQ Measures:

scrap, rework, repeated tasks;

Processing inefficiencies and waste. Critical-to-Delivery (C-T-Delivery or CT-Time):

cycle time, lead time, overtime, service time, etc.

Of course, all of these are Cost Surrogates.

So, Six Sigma is about improving: Quality, Cost, Delivery (Q.C.D.) or Q.C.T. (T-time)

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The Six Sigma Way: Y=f(X) Sigma () - Greek letter used to represent standard

deviation which measures variation Six Sigma Approach: improve Ys by:

minimizing variation in inputs, or finding best settings for control factors, or managing noise factors

P-Diagram

ProcessInput Variables(e.g., supplier)

Controllable ProcessFactors (settings)

UncontrollableFactors

Outputs (Ys)

Xs



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Six Sigma Is it Anything New?

Grab any old Quality or TQM book and you will find: Most quality philosophies are the same as Six Sigma

e.g., customer defines quality, design quality in, etc. And many (but not all) tools / techniques are the same.

From an implementation standpoint, however, Six Sigma has been more successful through: greater emphasis on solving problems that result in savings

(bottom-line improvements, $$), common language and metrics (defect per million opportunity), common problem solving methods (Six Sigma DMAIC Method) integrating tools/methods into everyday job function, better training, more effective implementation.

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2. Business Case: Driver for Six Sigma Deployment

Core Belief: highest quality producer should be the lowest cost producer

Six Sigma aimed at reducing costs of poor quality

Many companies with large publicized savings* General Electric, Honeywell, Bank of America, ..

Note: Many companies have successful continuous improvement efforts that do not use Six Sigma (it is not the only way)

*Harry, M. and Schroeder, S. (2000). Six Sigma: The Breakthrough Management Strategy, Currency.*Smith, D, and Blakeslee, J. (2002). Strategic Six Sigma, Best Practices from the Executive Suite.*Six Sigma: A Methodology for Manufacturers, Not a Strategy. Gartner Report, September 2002.



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Costs of Poor Quality

Savings reported in large Six Sigma Deployment include traditional costs of poor quality and those below the surface (known as Hidden Factory)

Scrap Warranty Overtime Downtime

Rework

UnnecessaryInspection

EngineeringChanges

Rejected RawMaterial Costs

ResolvingCustomer

Complaints

Lost CustomerReplacement

Cost

ExcessInventory

ExtraCommunication

InformationLookup Costs

Clean-up/ Housekeeping

LongSetup Costs

ResourceImbalance

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Cost of Poor Quality (COPQ) Research

Link between quality defect levels and total costs of poor quality as % of sales*

*Harry and Schroeder (2000), Six Sigma Breakthrough Strategy, Currency

SIGMA LEVEL DEFECTS PER MILLION OPPORTUNITIES COST OF QUALITY

2 308,537 (Noncompetitive companies) Not applicable3 66,807 25 - 40% of sales4 6,210 (Industry average) 15 - 25% of sales5 230 5 - 15% of sales6 3.4 (World class) < 1% of sales

Each sigma shift provides a 10 percent net income improvement.

DPMO Defects per million opportunitySigma Level non-linear quality index related to yield (or % Ok)



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Why is Six Sigma working for some?

Strong Leadership Commitment Effective Deployment Strategies (Training, Organization,

and Management). And, because successful companies: take top employees, train them in the use of proven analytical tools, motivate them with greater recognition for their

efforts, give them projects to work on that matter, AND give them the necessary support to solve problems.

(such as time, software, resources).

Organization wants it to succeed!

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Why is it not working for others?

leadership offers marginal to limited support, egos get in the way (not-my-idea), managers dont give employees necessary

time/resources to complete projects, participants are pushed through training

programs, and do not develop the necessary skills to be effective,

Participants do not effectively communicate project savings / quantify impact.

Lack of organizational commitment!



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3. Lean and Six Sigma IntegrationCommon Theme: Continuous Improvement

Lean Tools/Methods

Organized and Documented Processes (e.g., 5S Workplace)

Create Flow Leveled Production Takt time planning Continuous flow Pull system Effective

Layout Quick changeover JIT supply chain 5 Whys

Visual Management and Standardized Work

Best Quality - Lowest Cost - Shortest Lead Time - Best Safety - High Moralethrough exceeding customer requirements and elimination of waste

Six Sigma Tools/Methods

Create Stable/Capable Process DMAIC Problem Solving and

Statistical Data Analysis Pareto Analysis (Prioritization) Cause-effect Analysis Measurement System Analysis Stratification Analysis Experimental Design Control Plans

Process Analysis Value Stream Map

Process Maps Eliminate Waste

Poka-Yoke

Right part, right amount,right time

Predictable, on-target, low variation, error-free processes.

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Different Paradigms for Lean and Six Sigma Integration

Six Sigma and Lean as Conflicting Six Sigma as a Sub-Set of Lean (Lean Bias) Lean as a Sub-Set of Six Sigma (Six Sigma Bias) Separate but Equals

- Most experienced with both strategies view Lean as an excellentprerequisite to Six Sigma, but not a standalone solution

- Six Sigma Complementary Strengths- Characterizing/decomposing process variation

(Strong link between smooth flow and low variation)- Techniques for Process optimization and robustness

Integrated/Complementary



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4. Six Sigma RolesManagerial/

Organizational

Problem Solving/ Execution

Executive Leadership: Set performance expectations

Champion:Deployment Leaders

Master Black Belts (MBB):In-House ExpertsTeach and Mentor BB, GB Figure out what to do

Black Belts (BB):Advanced Statistical SkillsSolve Impact Problems(e.g., $100-250K per project)

Green Belts (GB):Moderate Data Analysis Skills Work on simpler projects, orSubtasks of larger projectsMore GBs More Savings

They Do

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Applying the Six Sigma Tools

Green Belt and Black Belt Training focuses on: Structured approach to problem solving (DMAIC method) and data

analysis skills (statistical analysis tools)

Still, being an effective Green or Black Belt involves more than simply knowing statistics. It involves: Selecting right projects (with quantifiable savings) Project management skills (able to execute projects) Data collection skills (knowing what/how to collect) Data analysis skills (finding critical Xs) Data presentation skills (influencing decisions)



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5. Six Sigma Quality Level

Six Sigma Quality derives from a goal of % in-specification (or % On-Time) greater than 99.99966%, OR Less than 3.4 defects per million

opportunities (DPMO)

Note: 99% OK = 1% Defective = 10,000 defects per million (DPM).

Six Sigma seeks to do better!

*Based on assumption of stable process with low variation (Cp > 2) following normal distribution with a mean deviation within 1.5*process standard deviation of nominal

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Metrics used in Six Sigma

Use Historical Capability Measures: Yield, % defective, Cp/Cpk Example: % On-Time Delivery

DPM -- Defects per million (% Defective x 1M) where each unit is defective/not defective DPM = PPM (parts per million defective)

DPMO -- Defects per million opportunity where each unit may have 1 or more types of errors/defects

Paint Shop: dirt, craters, thin, sags, misapplied sealer Six Sigma Quality < 3.4 defects per million opportunity Note: if unit has only one defect opportunity, DPM = DPMO

Sigma Level index related to DPM/DPMO Non-linear Scale: ~ where a score of 6 equates to 3.4 DPM0)

Some common metrics used to evaluate performance:



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Conflicting Objective?

Suppose a Six Sigma project reduces defects from 40,000 to 1000 DPM (from 96% to 99.9%)

Should a Company: continuously apply six sigma resources (BBs / GBs)

toward reducing variation to less than 3.4 DPM, Or shift resources to another project with a greater cost (or

time) savings?

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Six Sigma Impact Problems

In the end, Six Sigma is about applying a data-driven systematic methodology to solve impact problems linked to: bottom line savings cost avoidance revenue growth

Documents

01 - Introduction to Six Sigma