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Introduction to Six Sigma

Agenda

• Introduction• A Six Sigma Vision of Business Leadership• Six Sigma Improvement and Management

Strategies• The D.M.A.I.C. Process Improvement Model• Applying Six Sigma to Manufacturing and

Services• The Six Sigma Roadmap• Roles in a Six Sigma Organisation• Implementation costs and Tangible Savings

Introduction

• Definition and benefits• Is Six Sigma Really Different?• Potential Payoff• Six Themes• “We’ve seen it all before”

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Definition and Benefits

• What is “Six Sigma”?– “A comprehensive and flexible system for

achieving, sustaining and maximising business success. Six sigma is uniquely driven by a close understanding of customer needs, disciplined use of facts, data, and statistical analysis combined with a diligent attention to managing, improving and reinventing business processes.”

Six Sigma is a structured application of the tools and techniques of Total Quality Management on a Project

Basis to achieve strategic business results.

Some of the benefits

• Cost reduction• Productivity improvement• Market Share growth• Customer retention• Cycle time reduction• Defect reduction• Culture change• Product development• Service development• Etc….

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Is Six Sigma Really Different?

• Some will say it sounds a lot like Total Quality Management (TQM)– Origins in teachings of W. Edwards Deming,

Joseph Juran, et al.• Many other influences:

– Work Study (Gilbreth and Ann Shaw)– Manufacturing Systems Engineering– Business Process Re-Engineering– Etc…

Disadvantages of TQM

• TQM focuses on quality and ignores other critical business issues.

• Quality takes preference to everything else.

• This makes no business sense and often leads to organizations that fail despite improved quality.

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• TQM creates a quality specialty that suffers from all of the same sub-optimization problems as other functions within the organization.

• Despite talk about a systems perspective, this leads to arguments within the organization (budget etc).

• In the typical organization this results in other departments considering "quality" to be the turf of the quality department.

• Thus, they back off—or never start—efforts of their own.

• TQM often emphasizes minimum acceptance requirements and standards, rather than striving for ever increasing levels of performance

• TQM does not develop an infrastructure for freeing up resources to improve business processes.

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• TQM develops a career path in quality.

• Quality professionals tended to lack subject matter expertise in other areas of the company.

• This division of labour, combined with a functionally specialized organization, makes it difficult to improve quality beyond a certain level. (probably this type of organization tops out at about 3.5 sigma.)

The CEOs are able to see what the problems were, and to create

an approach that fixed them.

Six Sigma addresses all of these issues…………

Advantages of Six Sigma

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• Six Sigma extends the use of the improvement tools to cost, cycle time, and other business issues.

• Six Sigma discards the majority of the quality toolkit.

• It keeps a subset of tools that range from the basic to the advanced.

• Six Sigma discards esoteric statistical tools and completely ignores such staples of the quality professional as ISO 9000 and the Malcolm Baldrige criteria.

• Training focuses on using the tools to achieve tangible business results, not on theory.

• Six Sigma integrates the goals of the organization as a whole into the improvement effort.

• Quality is good.

• But not independent of other business goals.

• Six Sigma creates top-level oversight to assure that the interests of the entire organization are considered.

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• Six Sigma strives for world-class performance.

• The Six Sigma standard is 3.4 PPM failures per million opportunities.

• It goes beyond looking at errors. The best of the Six Sigma firms try to meet or exceed their customer's expectations 999,996.4 times out of every million encounters.

• Six Sigma creates an infrastructure of change agents who are not employed in the quality department.

• These people work full and part-time on projects in their areas or in other areas.

• Six Sigma Black Belts do not make careers in Six Sigma.

• Instead, they focus on Six Sigma for two years and then continue their careers elsewhere.

• Green Belts work on Six Sigma projects while holding down other jobs.

• These subject matter experts are provided with training to give the skills they need to improve processes.

• Six Sigma "belts" are not certified unless they can demonstrate that they have effectively used the approach to benefit customers, shareholders, and employees.

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Hidden Truths – Potential payoff

• Broad array of best practices, can apply to many business activities

• Following a “one size fits all” prescription will almost always fail

• Gains may be even greater in service organisations than in manufacturing

• As much about people as technical issues• Done properly, Six Sigma changes are

thrilling

The “Genius of the And”

Make a lot of moneyMake customers extremely happy

Apply creative solutionsMeasure and analyse what we do

Maintain control of how work gets done

Engage people in understanding and improving their processes and procedures

Get things done fasterReduce errors almost to zero

AND WE CAN…WE CAN…

Six Themes of Six Sigma

1. Genuine focus on the customer• Customer focus becomes the top priority

2. Data and Fact Driven Management• Replace assumptions and opinions with facts and data

3. Process Focus, Management and Improvement• Mastering processes is essential to success

4. Proactive Management• Act in advance of events

5. Collaboration Without Boundaries• Understand the big picture

6. Drive for Perfection; tolerate failure• Be prepared to accept and manage occasional setbacks

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A Six Sigma Vision of Business Leadership

• Learning to ride a bike analogy• Business seen as a process

– X = Inputs– Process– Y = Outputs– Y = f[X]

• Tricks:– Which “Xs” have the biggest influences on “Ys”?– Use the changes in overall performance to adjust the

business

A Six Sigma Vision of Business Leadership

• Language of Xs and Ys becomes routineY can mean:

– Strategic goal– Customer requirement– Customer satisfaction– Profits– Overall business efficiency

X can mean:– Essential actions to achieve strategic goals– Quality of work done– Key specification points– Process variables (staffing, cycle time, technology, etc.)– Quality of the inputs to the process

Sigma, Standard Deviation and Variation

• Sigma – O = “standard deviation” = an indicator of the variation of a population

• Everything varies to some degree• Examples

– Shirts– Airport luggage waiting times– Food portion size

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The Evils of Variation

• Variation has previously been accepted– Tolerances

• Commuting analogy– Start time 8:30am +/- 2 minutes– Leave home 8:12am– Observed Std dev = 2.7 minutesWill you be on time?– Std dev = 0.33 minutes99.997% chance of being on time

That’s Six Sigma performance!

Customers, Defects and Sigma Levels

6.03.4

5.0320

4.06,210

3.066,800

2.0308,000

1.0690,000

SIGMA LEVELDEFECTS IN PARTS PER MILLION

What 2% defective means

• Companies claim “good quality” with 2% rejects• Would you fly with an airline with a 2% crash

rate?• Would you throw £20 of every £1000 you earned

down the drain?• DPPM or Sigma measurement provides

advantages:– For the customer– A constant measure to compare processes– Links to an ambitious goal

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Sigma Measures

• Using the Sigma scale is not mandatory• Several alternatives such as process capability

indicators (Cp, Cpk) or DPpMO• Logistical issues around Six Sigma measures:

– Consistent calculation guidelines are necessary– Measures may not be static – customer requirements

will change– Rolling Six Sigma measures out takes time – prioritise

• Measuring will not improve performance, but will provide the data necessary

Six Sigma Improvement and Management Strategies

• Knowing the customers and effective measures are the fuel and oxygen of a Six Sigma system

• The engine they propel is made up of 3 elements:– Process Improvement – Process Design/Redesign– Process Management

• Linking these is one of Six Sigma’s most important innovations

Process Improvement – Finding Targeted Solutions

• Process improvement refers to a strategy of eliminating root cause problems.

• Other terms in use include:– Incremental Improvement– Continuous Improvement– Never Ending Improvement– Kaizen

• These aim to fix a problem but leave the basic process intact

• Address the “vital few” Xs that cause the problem Y• Most Six Sigma projects are Process Improvement

efforts

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Sigma Shores Transportation Company

Process Design/Redesign

• Businesses lost patience with TQM in the late 1980s due to slow pace of change

• Reengineering boom in early/mid 1990s– Led to its own disappointments– Gave perspective on driving business performance– Showed PI on its own may not be enough

• Six Sigma brings Process Improvement and Design/Redesign together

• Regular redesign of process is necessary to keep on top of the business world

• Process Improvement refines the process between redesigns

Major Redesign at Sigma Shores Transportation

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Process Management• The third key strategy of Six Sigma• The most evolutionary• Focus on understanding and facilitating the process• Themes and methods of Six Sigma become integral to running the

business– Processes are managed “end to end”– Customer requirements are clearly defined and regularly updated– Measurements of inputs, outputs and process activities are meaningful– Measures and process knowledge are used to control the process– Process Improvement and Process Design/Redesign are used to raise

performance, competitiveness and profitability• Described as “evolutionary” because organisations learn and

develop it slowly• Parallels expansion of Six Sigma into a complete management

system

Sigma Shores Institutes Process Management

Measures include: arrival times, service factors, turnaround time,customer boarding, boat efficiency (via fuel economy, etc.)

The D.M.A.I.C. Model

• Improvement models usually based on Deming’s PDCA cycle– Plan– Do– Check– Act

• Good for Process Improvement, but not for Process Design/Redesign

• Six Sigma usually uses 5 phases – Define, Measure, Analyse, Improve, Control

• Useful for Process Improvement and also for Process Design/Redesign

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Defining the “Six Sigma Organisation”

“An organisation that is actively working to build the themes and practices of Six Sigma into its daily management activities, and is showing significant improvements in process performance and customer satisfaction.”

• You don’t need Six Sigma levels of performance to qualify

• Simply using some of the tools doesn’t mean you’ll qualify

• You don’t have to call it Six Sigma to qualify

Applying Six Sigma to Service and Manufacturing

• It is of no value to discuss a new management system without an in depth understanding of the implementation process

• In other words “How can we get the forecast advantage?”

Clarification of Basic Terms

• It is important to understand our terminology– “Service and Support” functions

• Not directly involved in designing or producing tangible products

– Sales, finance, marketing, procurement, customer support, logistics, human resources, etc.

– “Manufacturing” processes• Those activities relating to the development and production

of tangible products• What the customer pays us to do

• These are broad, and you’ll find variations on them

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The Changing Role of Manufacturing

• Pure manufacturing is rare• Many design, manufacture and/or sell

manufactured products• Manufacturing businesses need to manage

many competencies, including:– Tracking new technologies and exploiting them

quickly– Understanding customer needs and meeting them

with improved processes or products– Managing supplier networks– Taking, processing, fulfilling customer orders– Adapting to shifting market conditions

The Changing Role of Manufacturing (2)

• Many businesses give responsibility for manufacture to a vendor/partner

• Some have formed separate companies –Delphi used to be part of GM

• Even contract manufacturers must be able to plan, manage order flow and capacity, and build a “service” relationship with their customers

• Move from manufacturing- to service- based economies in western world

Service Process Opportunities

• As service becomes more important to business competitiveness, the opportunities become more apparent:– CoPQ in service businesses is typically 50%

vs 10% to 20% in manufacturing– This equates to 1.5 to 3 sigma performance– Analysis of processes shows “real work” takes

less than 10% of the cycle time– Rest of time is waiting, rework, moving stuff

around, inspection, non-essential activities

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Six Sigma Services are more challenging

• Are people outside of manufacturing out of touch with reality or less competent?

• There are important reasons why service organisations have more “opportunity for improvement”– Invisible work processes– Evolving workflows and processes– Lack of facts and data– Lack of a “head start”

• Service Process Improvement is not unknown, but not many companies have explored the possibilities

Making Six Sigma Work in Services

• Some suggestions:– Start with the process– Fine tune the problem– Make good use of facts and data to reduce

ambiguity– Do not over-emphasise statistics

Manufacturing Challenges

• It’s not easy in manufacturing either. Some of the more common challenges are:– Adopting a broader perspective

• Most problems are not manufacturing problems• Manufacturing needs to be an active participant in

the entire process– Moving past “Certification” to Improvement– Adapting tools to your Manufacturing

Environment

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The Six Sigma Roadmap

• Just like a physical journey, we need a route to follow to get us to our destination.

• The purpose of the roadmap

• The roadmap, step by step

The Purpose of the Roadmap

• Understand the business as an interconnected system of processes and customers

• Improve decisions and use of resources• Shorter improvement cycle times• More accurate validation of improvements• Infrastructure to support change and

sustain gains

The Roadmap, step by step

• Identify core processes and key customers• Define customer requirements• Measure current performance• Prioritise, analyse and implement

improvements• Expand and integrate the Six Sigma

system

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1 Identify Core Processes and Key Customers

A “map” of inventory of value-delivering activities in the company, driven by three questions:

1) What are your core or value-adding processes?

2) What products and/or services does the company provide for customers?

3) How do processes “flow” across the organisation?

To create a clear “big picture” understanding of the most critical cross-functional activities in the organisation, and how they interface with external customers.

DELIVERABLESOBJECTIVES

2 Define Customer Requirements

A clear, complete description of the factors that drive customer satisfaction for each output and process – “requirements” or “specifications” in two key categories:

1) “Output Requirements” tied to the end product or service that make it work for the customer – in quality jargon “fitness for use”

2) “Service Requirements” describing how the organisation should interact with the customer

1) To establish standards for performance that are based on actual customer input, so that process effectiveness / capability can be accurately measured and customer satisfaction predicted.

2) To develop or enhance systems and strategies devoted to ongoing “Voice of the Customer” data gathering

DELIVERABLESOBJECTIVES

3 Measure Current Performance

1) Baseline measures – quantified evaluations of current / recent process performance

2) Capability measures –assessment of the ability of the current process / output to deliver on requirements. These include “Sigma” scores for each process that allow comparison of very different processes

3) Measurement systems – new or enhanced methods and resources for ongoing measurement against customer-focused performance standards

To accurately evaluate each process’s performance against definable customer requirements, and to establish a system for measuring key outputs and service features.

DELIVERABLESOBJECTIVES

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4 Prioritise, Analyse and Implement Improvements

1) Improvement priorities. Potential Six Sigma projects assessed on their impact and feasibility

2) Process improvements. Solutions targeted to specific root causes

3) New or redesigned processes. New activities or workflows created to meet new demands incorporate new technologies, or dramatic increases in speed, accuracy, cost performance, etc.

To identify high-potential improvement opportunities and develop process oriented solutions supported by factual analysis and creative thinking. Also, to effectively implement new solutions and processes, providing measurable, sustainable gains.

DELIVERABLESOBJECTIVES

5 Expand and Integrate the Six Sigma System

1) Process controls. Measures and monitoring to sustain process improvement

2) Process ownership and management. Cross-functional oversight of support processes, with customer input, also input from marketing and employees

3) Response plans. Mechanisms to act based on key information so as to adapt strategies, products / services and processes

4) Six Sigma “Culture”. An organisation positioned for continuous renewal, with Six Sigma Themes and tools an essential part of the everyday business environment

To initiate ongoing business practices that drive improved performance and ensures constant measurement, re-examination and renewal of products, services, processes and procedures. It is at step 5 that you achieve the vision of a Six Sigma Organisation

DELIVERABLESOBJECTIVES

The Six Sigma Roadmap diagram

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Roles in a Six Sigma Organisation

• The Leadership Group (or Council)• The Sponsor or Champion• The Implementation Leader• The Six Sigma Coach• The Team- or Project- Leader• The Team Members• The Process Owner• The “Belts”

The Leadership Group or Council

• A forum to discuss, plan, guide and learn from the initiative– Establish the roles and infrastructure– Project selection and resource allocation– Project reviews and support– Individuals “sponsor” projects– Quantify the impact– Assess progress, identify strengths and weaknesses– Share best practice both internally and externally– Remove “roadblocks”– Apply the lessons learned to their own management

styles

The Sponsor or Champion

• Senior manager “overseeing” a project• Critical role balancing guidance and team

freedom• Duties include:

– Setting goals and ensuring they are in line with business strategy

– Coaching on the project direction– Finding / negotiating resources for projects– Representing the team at council meetings– Helping to smooth inter- team and external issues– Ensuring smooth handoff of project at conclusion– Applying the gained knowledge to management tasks

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The Implementation Leader

• May be an existing executive, or a specifically hired Six Sigma Director

• Duties include:– Supporting the leadership group– Identifying / recommending individuals / groups for

key roles– Preparing and executing training plans– Supporting Sponsors– Documenting progress and highlighting problems– Executing an internal “Marketing Plan”

The Six Sigma Coach

• Provides expert advice to Process Owners and improvement teams

• The technical expert• Provides guidance on:

– Communicating with the Sponsor and Leadership Group

– Establishing and sticking to a project schedule– Dealing with resistance– Estimating potential and validating results– Resolving team member conflicts– Gathering and analysing data– Promoting and celebrating success

The Team- or Project- Leader

• Takes prime responsibility for a project• Critical to keeping progress on track• Duties include:

– Reviewing / clarifying project with the sponsor– Developing and maintaining Project Charter and Implementation

Plan– Selecting team members– Identifying and selecting resources and information– Defining and helping others in the use of Six Sigma tools and

management techniques– Maintaining the project schedule– Keeping progress going towards solution and results– Supporting the transfer of new solutions or processes to ongoing

operations– Documenting final results and creating the project “storyboard”

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The Team Members

• Provide the brains and muscle behind the measurement, analysis and improvement of a process

• Help “spread the word” about Six Sigma tools and processes

• Become part of the “core strength” for future projects

The Process Owner

• Takes on a new, cross functional responsibility to manage an “end to end” process

• Receives the “hand-off” from the improvement team or becomes the owner of newly designed processes

• The Sponsor and the Process Owner can not be the same person

The “Belts”

• Green Belts - Six Sigma specialists trained to a basic level

• Black Belts – Six Sigma experts who have successfully completed a recognised training course and completed a number of projects

• Master Black Belts – Black Belts with more experience and experts in statistical tools or managing change

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Implementation Costs and Tangible Savings

Example General Electric (GE):• Introduced Six Sigma in January 1996, in the first year:

– Trained 30,000 employees– Invested $200million– Saved $150million with 3,000 projects– Gross revenue $34,000million– Operating margins 14.8%

• In 1997:– Saved $320million from 6,000 projects

• By the end of 1998:– Saved $900million– Gross turnover $100,000million

• During 2000:– Operating margins reached 18.9%

• Also large intangible savings in issues such as customer satisfaction