Arko Six Sigma

8/7/2019 Arko Six Sigma

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6Six Sigma is a management framework that, in the past 15 years, has evolved from a focus on

process improvement using statistical tools to a comprehensive framework for managing a

business. The results that world-class companies such as General Electric, Johnson & Johnson,

Honeywell, Motorola, and many others have accomplished speak for themselves. Six Sigma has

become a synonym for improving quality, reducing cost, improving customer loyalty, and

achieving bottom-line results.

Six Sigma seeks to improve the quality of process outputs by identifying and removing the

causes of defects (errors) and minimizing variability in manufacturing and business processes. It

uses a set of quality management methods, including statistical methods, and creates a special

infrastructure of people within the organization ("Black Belts", "Green Belts", etc.) who are

experts in these methods. Each Six Sigma project carried out within an organization follows a

defined sequence of steps and has quantified financial targets (cost reduction or profit increase).

Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects

(driving toward six standard deviations between the mean and the nearest specification limit) in

any process -- from manufacturing to transactional and from product to service

Defects per million chances/opportunities

2 sigma = 308,537

3 sigma = 67,000

4 sigma = 6,200

5 sigma = 233

6 sigma = 3.4



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A six sigma process is one in which 99.99966% of the products manufactured are statistically

expected to be free of defects (3.4 defects per million). Motorola set a goal of "six sigma" for all

of its manufacturing operations, and this goal became a byword for the management and

engineering practices used to achieve it.

Two perspectives of six sigma processes:

Statistical viewpoint:

Six sigma method has two major perspectives. The origin of six sigma comes from statistics and

statisticians. Hahn etal. (1999), Hoerl and Snee (2002), and Montgomery (2001) discuss the six

sigma method from a statistical, probabilistic, and quantitative point of view. From the statistical

point of view, the term six sigma is defined as having less than 3.4 defects per million

opportunities or a success rate of 99.9997% where sigma is a term used to represent the variation

about the process average (Antony and Banuelas, 2002). If an organization is operating at three

sigma level for quality control, this is interpreted as achieving a success rate of 93% or 66,800

defects per million opportunities. Therefore, the six sigma method is a very rigorous quality

control concept where many organizations still performs at three sigma level (McClusky, 2000).

Business viewpoint:

In the business world, six sigma is defined as a µbusiness strategy used to improve business

profitability, to improve the effectiveness and efficiency of all operations to meet or exceed

customer¶s needs and expectations (Antony and Banuelas, 2001). The six sigma approach wasfirst applied in manufacturing operations and rapidly expanded to different functional areas such

as marketing, engineering, purchasing, servicing, and administrative support, once organizations

realized the benefits. Particularly, the widespread applications of six sigma were possible due to

the fact that organizations were able to articulate the benefits of six sigma presented in financial

returns by linking process improvement with cost savings.



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History of Six Sigma

Six Sigma has evolved over time. The concepts behind Six Sigma can be traced through the

centuries as the method took shape into what it is today.

The roots of Six Sigma as a measurement standard can be traced back to Carl Frederick Gauss

(1777-1855) who introduced the concept of the normal curve. Six Sigma as a measurement

standard in product variation can be traced back to the 1920's when Walter Shewhart showed that

three sigma from the mean is the point where a process requires correction. Many measurement

standards (Cpk, Zero Defects, etc.) later came on the scene but credit for coining the term "Six

Sigma" goes to a Motorola engineer named Bill Smith. (Incidentally, "Six Sigma" is a federally

registered trademark of Motorola).

The idea of Six Sigma was actually ³born´ at Motorola in the 1970s, when senior executive Art

Sundry was criticizing Motorola¶s bad quality. Through this criticism, the company discovered

the connection between increasing quality and decreasing costs in the production process.

Before, everybody thought that quality would cost extra money. In fact, it was reducing costs, as



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costs for repair or control sank. Then, Bill Smith first formulated the particulars of the

methodology at Motorola in 1986. Six Sigma was heavily inspired by six preceding decades of

quality improvement methodologies such as quality control, TQM, and Zero Defects, based on

the work of pioneers such as Shewhart, Deming, Juran, Ishikawa, Taguchi and others.

Six Sigma Evolutions

The roots of six sigma as a measurement standard can be traced back to Carl Frederick Gauss

(1777-1855) who introduced the concept of the normal curve. Six sigma as a measurement

standard in product variation can be traced back to the 1920's when Walter Shewhart showed that

three sigma from the mean is the point where a process requires correction. Many measurement

standards (Cpk, Zero Defects, and so on) later came on the scene but credit for coining the term

"six sigma" goes to a Motorola engineer named Bill Smith (six sigma is a federally registered

trademark of Motorola).

In the late 1970's, Dr. Mikel Harry, a senior staff engineer at Motorola's Government Electronics

Group (GEG), began to experiment with problem solving through statistical analysis. Using his

methodology, GEG began to show dramatic results ± GEG's products were being designed and

produced faster and more cheaply. Subsequently, Dr. Harry began to formulate a method for

applying six sigma throughout Motorola. His work culminated in a paper titled "The Strategic

Vision for Accelerating Six Sigma within Motorola." He was later appointed head of the

Motorola Six Sigma Research Institute and became the driving force behind six sigma.

Dr. Mikel Harry and Richard Schroeder, an ex-Motorola executive, were responsible for creating

the unique combination of change management and data-driven methodologies that transformed

six sigma from a simple quality measurement tool to the breakthrough business excellence

philosophy it is today. They had the charisma and the ability to educate and engage businessleaders such as Bob Galvin of Motorola, Larry Bossidy of AlliedSignal (now Honeywell), and

Jack Welch of GE. Together, Harry and Schroeder elevated six sigma from the shop floor to the

boardroom with their drive and innovative ideas regarding entitlement, breakthrough strategy,

sigma levels, and the roles for deployment of Black Belts, Master Black Belts, and Champions.

In effect, they created a business revolution that continues to challenge the thinking of



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executives, managers and employees alike. Their strategies and tools have been perfected

through the years by Six Sigma Academy. In brief, we believe our contribution was the unique

combination of business leadership plus quality and process improvement tools and techniques

which made it possible for leaders to recognize the value of six sigma, not just as a tool for

operational efficiency, but as an enterprise wide business strategy with direct bottom line impact.

Pros and Cons of using Six Sigma

There are several benefits of applying Six Sigma:

Six Sigma strategy places a clear focus on achieving measurable and quantifiable

financial returns to the bottom-line of an organization. No Six Sigma project is approved

unless the bottom-line impact has been clearly identified and defined.

Six Sigma strategy places an unprecedented importance on strong and passionate

leadership and the support required for its successful deployment.

Six Sigma methodology of problem solving integrates the human elements (culture

change, customer focus, belt system infrastructure, etc.) and process elements (process

management, statistical analysis of process data, measurement system analysis, etc.) of

improvement.

Six Sigma methodologies utilize the tools and techniques for fixing problems in business

processes in a sequential and disciplined fashion. Each tool and technique within the Six

Sigma methodology has a role to play and when, where, why and how these tools or

techniques should be applied is the difference between success and failure of a Six Sigma

project.

Six Sigma creates an infrastructure of champions, master black belts (MBBs), black belts

(BBs) and green belts (GBs) that lead, deploy and implement the approach. Six Sigma emphasizes the importance of data and decision making based on facts and

data rather than assumptions and hunches! Six Sigma forces people to put measurements

in place. Measurement must be considered as a part of the culture change.



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Six Sigma utilizes the concept of statistical thinking and encourages the application of

well-proven statistical tools and techniques for defect reduction through process

variability reduction methods (e.g. statistical process control and design of experiments).

The disadvantages of using six sigma are:

The challenge of having quality data available, especially in processes where no data is

available to begin with (sometimes this task could take the largest proportion of the

project time).

In some cases, there is frustration as the solutions driven by the data are expensive and

only a small part of the solution is implemented at the end. The right selection and prioritization of projects is one of the critical success factors of a

Six Sigma program. The prioritization of projects in many organizations is still based on

pure subjective judgments. Very few powerful tools are available for prioritizing

projects and this should be major thrust for research in the future.

The statistical definition of Six Sigma is 3.4 defects or failures per million opportunities.

In service processes, a defect may be defined as anything which does not meet customer

needs or expectations. It would be illogical to assume that all defects are equally good

when we calculate the sigma capability level of a process. For instance, a defect in a

hospital could be a wrong admission procedure, lack of training required by a staff

member, misbehavior of staff members, unwillingness to help patients when they have

specific queries, etc.

The calculation of defect rates or error rates is based on the assumption of normality.

The calculation of defect rates for non-normal situations is not yet properly addressed in

the current literature of Six Sigma.

Due to dynamic market demands, the critical-to-quality characteristics (CTQs) of today

would not necessarily be meaningful tomorrow. All CTQs should be critically examined

at all times and refined as necessary (Goh, 2002).

Very little research has been done on the optimization of multiple CTQs in Six Sigma

projects.



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Assumption of 1.5 sigma shift for all service processes does not make much sense. This

particular issue should be the major thrust for future research, as a small shift in sigma

could lead to erroneous defect calculations.

Non-standardization procedures in the certification process of black belts and green belts

are another limitation. This means not all black belts or green belts are equally capable.

Research has shown that the skills and expertise developed by black belts are

inconsistent across companies and are dependent to a great extent on the certifying body.

The start-up cost for institutionalizing Six Sigma into a corporate culture can be a

significant investment. This particular feature would discourage many small and

medium size enterprises from the introduction, development and implementation of Six

Sigma strategy.

Six Sigma can easily digress into a bureaucratic exercise if the focus is on such things as

the number of trained black belts and green belts, number of projects completed, etc.

instead of bottom-line savings.

The relationship between cost of poor quality (COPQ) and process sigma quality level

requires more justification.



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Six Sigma Costs and Savings

"Companies of all types and sizes are in the midst of a quality revolution. GE saved $12 billion

over five years and added $1 to its earnings per share. Honeywell (AlliedSignal) recorded more

than $800 million in savings."

"GE produces annual benefits of over $2.5 billion across the organization from Six Sigma."

"Motorola reduced manufacturing costs by $1.4 billion from 1987-1994."

"Six Sigma reportedly saved Motorola $15 billion over the last 11 years."

These four companies, Motorola, Allied Signal, GE and Honeywell are the companies that

invented and refined Six Sigma -- they are the most mature in their deployments and culture

changes. As the Motorola website says, they invented it in 1986. Allied Signal deployed SixSigma in 1994, GE in 1995. Honeywell was included because Allied Signal merged with

Honeywell in 1999 (they launched their own initiative in 1998). Many companies have deployed

Six Sigma between the years of GE and Honeywell -- we'll leave those companies for another

article.

Table 1: Companies And The Year They Implemented Six Sigma

Company Name Year Began Six Sigma

Motorola (NYSE:MOT) 1986

Allied Signal (Merged With Honeywell in 1999) 1994

GE (NYSE:GE) 1995

Honeywell (NYSE:HON) 1998

Ford (NYSE:F) 2000

Table 2 identifies by company, the yearly revenues, the Six Sigma costs (investment) per year,

where available, and the financial benefits (savings).



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Table 2: Six Sigma Cost And Savings By Company

Year Revenue ($B) Invested ($B) % Revenue

Invested Savings ($B)

% Revenue

Savings

Motorola

1986-2001 356.9(e) ND - 16 1 4.5

Allied Signal

1998 15.1 ND - 0.5 2 3.3

GE

1996 79.2 0.2 0.3 0.2 0.2

1997 90.8 0.4 0.4 1 1.1

1998 100.5 0.5 0.4 1.3 1.2

1999 111.6 0.6 0.5 2 1.8

1996-1999 382.1 1.6 0.4 4.4 3 1.2

Honeywell

1998 23.6 ND - 0.5 2.2

1999 23.7 ND - 0.6 2.5

2000 25.0 ND - 0.7 2.6

1998-2000 72.3 ND - 1.8 4 2.4

Ford

2000-2002 43.9 ND - 1 6 2.3

Key:

$B = $ Billions, United States

(e) = Estimated, Yearly Revenue 1986-1992 Could Not Be Found

ND = Not

Note: Numbers Are Rounded To The Nearest Tenth



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Although the complete picture of investment and savings by year is not present, Six Sigma

savings can clearly be significant to a company. The savings as a percentage of revenue vary

from 1.2% to 4.5%. And what we can see from the GE deployment is that a company shouldn't

expect more than a breakeven the first year of implementation. Six Sigma is not a "get rich

quick" methodology.

As GE's 1996 annual report states, "It has been estimated that less than Six Sigma quality, i.e.,

the three-to-four Sigma levels that are average for most U.S. companies, can cost a company as

much as 10-15% of its revenues. For GE, that would mean $8-12 billion." With GE's 2001

revenue of $111.6 billion, this would translate into $11.2-16.7 billion of savings. Although $2

billion worth of savings in 1999 is impressive, it appears that even GE hasn't been able to yet

capture the losses due to poor quality -- or maybe they're above the three-to-four Sigma levels

that are the average for most U.S. companies?

In either case, 1.2-4.5% of revenue is significant and should catch the eye of any CEO or CFO.

For a $30 million a year company, that can translate into between $360,000 and $1,350,000 in

bottom-line-impacting savings per year

METHODS

Six Sigma projects follow two project methodologies inspired by Deming's Plan-Do-Check-Act

Cycle. These methodologies, composed of five phases each, bear the acronyms DMAIC (defines,

measure, analyze, improve, control) and DMADV (define, measure, analyze, design, verify).

DMAIC and DMADV are two Six Sigma methodologies that eliminate defects from a process or

product. Learn about DMAIC and DMADV and when it is most appropriate to use each

methodology.

We know that everything in business is a process, right? Sales people have a list of companies

and contacts that they work in a certain fashion to produce a sale, production receives an order

and schedules the manufacturing, and the product is built, packaged, shipped and invoiced.



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When the packing department has a problem with their process, though, should they fix it with a

DMAIC or DMADV (also referred to as DFSS) type project?

y DMAIC is used for projects aimed at improving an existing business process. DMAIC is

pronounced as "duh-may-ick".

y DMADV is used for projects aimed at creating new product or process designs. DMADV

is pronounced as "duh-mad-vee".

The DMAIC project methodology has five phases:

y Define the problem, the voice of the customer, and the project goals, specifically.

y M easure key aspects of the current process and collect relevant data.

y Analyze the data to investigate and verify cause-and-effect relationships. Determine what

the relationships are, and attempt to ensure that all factors have been considered. Seek out

root cause of the defect under investigation.

y Improve or optimize the current process based upon data analysis using techniques such

as design of experiments, poka yoke or mistake proofing, and standard work to create a

new, future state process. Set up pilot runs to establish process capability.

y C ontrol the future state process to ensure that any deviations from target are corrected

before they result in defects. Implement control systems such as statistical process

control, production boards, and visual workplaces, and continuously monitor the process.



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When to Use DMAIC

The DMAIC methodology, instead of the DMADV methodology, should be used when a product

or process is in existence at your company but is not meeting customer specification or is not

performing adequately.

DMADV

The DMADV project methodology, also known as DFSS ("Design For Six Sigma"), features

five phases:

y Define design goals that are consistent with customer demands and the enterprisestrategy.

y M easure and identify CTQs (characteristics that are Critical to Quality), product

capabilities, production process capability, and risks.

y Analyze to develop and design alternatives, create a high-level design and evaluate design

capability to select the best design.

y Design details, optimize the design, and plan for design verification. This phase may

require simulations.

y V erify the design, set up pilot runs, implement the production process and hand it over to

the process owner(s).



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When to Use DMADV

The DMADV methodology, instead of the DMAIC methodology, should be used when:

y A product or process is not in existence at your company and one needs to be developed

y The existing product or process exists and has been optimized (using either DMAIC or not)

and still doesn't meet the level of customer specification or six sigma level

Quality management tools and methods used in Six Sigma

Within the individual phases of a DMAIC or DMADV project, Six Sigma utilizes many

established quality-management tools that are also used outside of Six Sigma. The following

table shows an overview of the main methods used.

y 5 Whys

y Analysis of variance

y ANOVA Gauge R&R

y Axiomatic design

y Business Process Mapping

y Cause & effects diagram (also known as

fishbone or Ishikawa diagram)

y Chi-square test of independence and fits

y Control chart

y Correlation

y Cost-benefit analysis

y CTQ tree

y Design of experiments

y Failure mode and effects analysis

(FMEA)

y General linear model

y Histograms

y Quality Function Deployment (QFD)

y Pareto chart

y Pick chart

y Process capability

y Quantitative marketing research through

use of Enterprise Feedback Management

(EFM) systems

y Regression analysis

y Root cause analysis

y Run charts

y SIPOC analysis (Suppliers, Inputs,

Process, Outputs, Customers)

y Taguchi methods

y Taguchi Loss Function

y TRIZ



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How to implement

Six Sigma is a powerful tool for solving business problems and driving excellence in

organizations. Its benefits can include breakthrough improvements, cost savings, defect

reduction, greater customer satisfaction, and higher productivity and efficiency. To reap these

benefits, however, organizations must pay close attention to six key factors that can make or

break a Six Sigma deployment.

1. Senior Management Involvement

Top management team members must show their support for the deployment. Simply sending

emails is not enough; they must take the responsibility of leading from the front, through

involvement in the following areas:

y Selecting projects and teams

y Reviewing project milestones

y Approving improvement ideas

y Resolving conflicts

y Recognizing teams

For example, if an organization¶s chief operating officer (COO) oversees support functions, such

as HR, administration, training and finance, etc., the COO, as the sponsor, needs to be involved

in projects from selection to closure.

Another important role for the top management is to resolve conflicts between Green Belts,

Black Belts or process owners who are working on Six Sigma projects. Because of the power of

their position, senior management team members should step in to diffuse situations.

2. Selection of Six Sigma Projects

When selecting a project, organizations need to make sure that the project has a manageable

scope. If the perspective is too wide, the project will demand too many resources and take a long



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time to complete. As the project drags on, team members may lose interest mid-way through,

thus reducing the chances of the project¶s survival. By selecting projects with manageable scope,

the organization will be able to demonstrate early wins, and the Six Sigma program will gain

momentum and appreciation.

Another important factor that must be considered while selecting a Six Sigma project is the

operational stability of the process. Consider this scenario: A team starts a project to reduce

recruitment cycle time. The current process is influenced by the people doing the recruitment.

However, the management team has decided to roll out a highly automated recruitment process

within the next couple of months. Because of the drastic changes involved, it is easy to imagine

that the project will be scrapped mid-way.

3. Selection of Project Teams

Many organizations find success by selecting a project leader who belongs to the operational

process being improved and has a stake in that process. For example, appointing a member of the

HR team to lead a project to bring improvements to a finance process simply because the HR

team member is available can easily backfire. Sometimes it is worth appointing a co-project lead

as a backup. This is especially helpful if the project is focused on a process or function where the

roles and responsibilities of team members change dynamically due to their customers¶ needs.

4. Inclusion of Six Sigma Projects in Performance Appraisals

Another significant success factor is the inclusion of project efforts in the performance objectives

of all team members working on a project. The objectives should be measurable and have clear

deadlines. Communicating these objectives to all the team members and their managers at the

beginning of the project will bring accountability and apply positive pressure on the team to

deliver as planned.

5. Customization of Six Sigma to the Organization¶s Culture

Sometimes organizations use help from an external consultant in deploying Six Sigma. Others

may designate a leader from within the organization to act as Champion of the deployment. It is

extremely important for an organization to make sure that the consultant or internal Champion

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