Six sigma

INDEX

S CONTENTS P.G.NO
.NO

1 Six sigma History 2

2 What is six sigma 7

3 Why is six sigma fascinating 10

4 What is DPO & DPMO in six sigma? 14

5 Six Sigma Quality Level 16

6 Six Sigma Statistics 18

7 Six Sigma Calculation 19

8 Case Study on Defect Rate 21

9 Six Sigma capability Improvement 22

10 Methodology of Six Sigma 25

11 Six Sigma in Business 27

12 Six Sigma Implementation 29

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Six Sigma History

Six Sigma stands for Six Standard Deviations (Sigma is the

Greek letter used to represent standard deviation in
statistics) from mean. Six Sigma methodology provides the
techniques and tools to improve the capability and reduce
the defects in any process.

It was started in Motorola, in its manufacturing

division, where millions of parts are made using the same
process repeatedly. Eventually Six Sigma evolved and
applied to other non manufacturing processes. Today you
can apply Six Sigma to many fields. Six Sigma methodologies
improve any existing business process by constantly
reviewing and re-tuning the process Six Sigma
methodologies can also be used to create a brand new
business process from ground up using DFSS (Design For Six
Sigma) principles Six Sigma Strives for perfection. It allows
for only 3.4 defects per million opportunities for each
product or service transaction. Six Sigma relies heavily on
statistical techniques to reduce defects and measure quality.
Six Sigma incorporates the basic principles and techniques
used in Business, Statistics, and Engineering. These three
form the core elements of Six Sigma. Six Sigma improves the
process performance, decreases variation and maintains
consistent quality of the process output. This leads to
defect reduction and improvement in profits, product quality
and customer satisfaction.

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Motorola claims that its people
invented Six Sigma, but the principles behind the
methodology date back to 1809. 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 bell curve. 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). In the early and mid-1980s with
Chairman Bob Galvin at the helm, Motorola engineers
decided that the traditional quality levels -- measuring
defects in thousands of opportunities -- didn't provide
enough granularity. Instead, they wanted to measure the
defects per million opportunities. Motorola developed this
new standard and created the methodology and needed
cultural change associated with it. Six Sigma helped Motorola
realize powerful bottom-line results in their organization - in
fact, they documented more than $16 Billion in savings as a
result of our Six Sigma efforts. 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

Before we dive into the statistics of the bell curve, let's talk a
moment about variation. Variation is defined as deviation
from expectation. Every process and activity has inherent
variation. If you're making widgets, every widget will vary

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slightly. If you're swinging a baseball bat, every swing will be
different from the swing before it. And if you're signing your
name, every signature will contain subtle differences that no
other signature will possess. Variation is inevitable and
unavoidable. The trick, of course, is to limit it. Some variation
is probably OK. Too much leads to the kind of defects we
described in the last section.

When data is collected from a typical process and

plotted on an x-y axis, the nature of the variation starts to
become clear. For example, say you're an employer with an 8
a.m. start time for your business. You want to find out how
many employees actually arrive at 8 o'clock. So, you collect
the data below:

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If you were to plot the data in a bar chart that depicts the
frequency of occurrence for each employee start time, you
would end up with the chart below. This kind of bar chart is
known as a histogram.

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The histogram provides a visual representation of your

variation. Notice that the variation is spread out evenly
across a range of values. This is called a normal distribution,
and the result is a bell-shaped curve. The diagram below
shows the same distribution with the bell curve
superimposed over it.

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Now let's look at a bell curve without any underlying data.

Such a curve is shown below so that you can clearly see two
important measurements -- the mean and the specification
limit. The mean is the peak of the curve. The specification
limit is the value designating acceptable from unacceptable
performance. There usually is an upper and lower
specification limit for a process -- and the areas on the
outside of the limits are called the tails.

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What is six sigma?

♦ Statistical Measurement :

“We measure defect rates in all the Processes through an

expanding statistical concept, and we use‘s ’in measuring
process capability.”
♦ Business Strategy :

“We gain competitive edges in Quality, Cost, and Customer

Satisfaction.”
♦ Philosophy :

“We should work smarter, not harder”

Motorola quality engineer Bill Smith dubbed the quality

improvement process Six Sigma. It was a catchy name, and
the results were even more striking. In 1988, Motorola won
the Malcolm Baldridge National Quality Award based on the
results it had obtained in just two years. Now, more than two
decades later, thousands of companies use Six Sigma to

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optimize business processes and increase profitability. In
fact, an entire industry has grown up around Six Sigma:
Motorola offers extensive training through Motorola
University, an army of experts called Black Belts travels the
globe helping organizations set up and run Six Sigma
projects, and hundreds of books about Six Sigma have been
published.

One might think that, given the time and resources

dedicated to it, Six Sigma would be too complicated for the
layperson to understand. Not true. At its core, Six Sigma is a
relatively simple concept to grasp -- which we'll demonstrate
by answering the following basic questions:

♦ What is Six Sigma?

♦ When was it developed?

♦ How is it implemented?

♦ Where is it used?

♦ And why do companies embrace it so fervently?

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Key Elements of Six Sigma

Customer requirements, design quality, metrics and

measures, employee involvement and continuous
improvement are main elements of Six Sigma Process
Improvement.

The three key elements of Six Sigma are:

♦ Customer Satisfaction

♦ Defining Processes and defining Metrics and Measures

for Processes

♦ Using and understanding Data and Systems

♦ Setting Goals for Improvement

♦ Team Building and Involving Employees

Involving all employees is very important to Six Sigma. The

company must involve all employees. Company must
provide opportunities and incentives for employees to focus
their talents and ability to satisfy customers.

Defining Roles: This is important to six sigma. All team

members should have a well defined role with measurable
objectives.

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Why is Six Sigma Fascinating?

Six Sigma has become very popular throughout the whole
world. There are several reasons for this popularity. First, it is
regarded as a fresh quality management strategy which can
replace TQC, TQM and others. In a sense, we can view the
development process of Six Sigma. Many companies, which
were not quite successful in implementing previous
management strategies such as TQC and TQM, are eager to
introduce Six Sigma.

Six Sigma is viewed as a systematic, scientific, statistical and

smarter (4S) approach for management innovation which is
quite suitable for use in a knowledge-based information
society. The essence of Six Sigma is the integration of four
elements (customer, process, manpower and strategy) to
provide management innovation

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Six Sigma provides a scientific and statistical basis for quality

assessment for all processes through measurement of
quality levels. The Six Sigma method allows us to draw
comparisons among all processes, and tells how good a
process is. Through this information, top-level management
learns what path to follow to achieve process innovation and
customer satisfaction. Second, Six Sigma provides efficient
manpower cultivation and utilization. It employs a “belt
system” in which the levels of mastery are classified as
green belt, black belt, master black belt and champion. As a
person in a company obtains certain training, he acquires a
belt. Usually, a black belt is the leader of a project team and
several green belts work together for the project team.
Lastly, Six Sigma provides flexibility in the new millennium of
3Cs, which are:
• Change: Changing society
• Customer: Power is shifted to customer and customer
demand is high
• Competition: Competition in quality and productivity
The pace of change during the last decade has been
unprecedented, and the speed of change in this new
millennium is perhaps faster than ever before. Most notably,

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the power has shifted from producer to customer. The
producer-oriented industrial society is over, and the
customer-oriented information society has arrived. The
customer has all the rights to order, select and buy goods
and services. Especially, in e-business, the customer has all-
mighty power. Competition in quality and productivity has
been ever-increasing. Second-rate quality goods cannot
survive anymore in the market. Six Sigma with its 4S
(systematic, scientific, statistical and smarter) approaches
provides flexibility in managing a business unit.
Key Concepts of Management
The core objective of Six Sigma is to improve the
performance of processes. By improving processes, it
attempts to achieve three things: the first is to reduce costs,
the second is to improve customer satisfaction, and the third
is to increase revenue, thereby, increasing profits.
What exactly is Six Sigma?

In its most fundamental form, Six Sigma is a measure of the

number of defects in a specific process or operation -- for
example, a manufacturing process used to make a specific
part. In Six Sigma, not worried about defective parts as a
whole, but something called defect opportunities. A defect
opportunity takes into account three important variables:

♦ All of the different defects that occur on an assembled

part

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♦ The number of places on that part where the defects
can occur

♦ And every production step that could cause one or

more of the defects on the part

As an example, let's say, Firm manufacturing small metal

cubes. Two major defects are typically found on the cubes: a
crack and a dent. The crack is one defect; the dent is a
second. Now let's say those defects are found only on three
of the cube's six faces. Finally, let's assume there are three
steps in the manufacturing process where those defects are
typically introduced.

Clearly, there are several opportunities for a defect to occur.

To calculate how many, you simply multiply: 2 x 3 x 3, for a
total of 18 opportunities. Now, if you see cracks or dents in 5
percent of the metal cubes that come off the production line,
the number of defects per opportunity is .00278 (.05 divided
by 18). To find the number of defects per thousand
opportunities, multiply .00278 by 1,000 to get 2.78.

Motorola engineers decided that the defects-per-thousand

metric wasn't sensitive enough for their new Six Sigma
initiative. They decided that defects per million
opportunities (DPMO) eliminated errors due to small
sample size and made for a more accurate determination of
quality. To find the number of defects per million
opportunities in our example above, you multiply .00278 by
1,000,000 to get 2,780 DPMO.

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What Is DPO? What Is DPMO?

A unit of product can be defective if it contains one or more

defects. A unit of product can have more than one
opportunity to have a defect.

Determine all the possible opportunities for problems

Pare the list down by excluding rare events, grouping similar

defect types, and avoiding the trivial

Define opportunities consistently between different locations

Proportion Defective (p):

p = Number Of Defective Units / Total Number of Product

Units

Yield ( Y1st-pass or Yfinal or RTY)

Y=1-p

The Yield proportion can convert to a sigma value using the

Z tables

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Defects per Unit - DPU, or u in SPC

DPU = Number Of Defects / Total Number Of Product Units

The probability of getting 'r' defects in a sample having a
given dpu rate can be predicted with the Poisson Distribution

Defects per Opportunity - DPO

DPO = no. of defects / (no. of units X no. of defect

opportunities per unit)

Defects Per Million Opportunities (DPMO, or PPM)

DPMO = dpo x 1,000,000

Defects Per Million Opportunities or DPMO can be then

converted to sigma & equivalent Cp values

In reality, there is more than one characteristic and we are

faced with having to compute a unified quality level for multi
characteristics.

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Six Sigma quality level

Specification limits are the tolerances or performance ranges

that customer’s demand of the products or processes they
are purchasing. The sigma quality level (in short, sigma
level) is the distance from the process mean (μ) to the closer
specification limit. In practice, we desire that the process
mean to be kept at the target value. However, the process
mean during one time period is usually different from that of
another time period for various reasons. This means that the
process mean constantly shifts around the target value. To
address typical maximum shifts of the process mean,
Motorola added the shift value ±1.5σ to the process mean.
This shift of the mean is used when computing a process
sigma level as shown below from the below figure, we note
that a 6σ quality level corresponds to a 3.4ppm rate.

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Sigma Quality level of 6σ

Sigma Quality level of 3σ

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Effects of a 1.5σ shift of process mean when 6σ

quality level is achieved

PPM changes when sigma quality level changes

Six Sigma Statistics

Six Sigma uses a variety of statistics to determine the best

practices for any given process.

Statisticians and Six Sigma consultants study the existing

processes and determine the methods that produce the best
overall results.

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Combinations of these methods will be tested and upon
determining that a given combination can improve the
process, it will be implemented.

Six Sigma stands for "Six Standard deviations from the

arithmetic mean".

Six Sigma statistically ensures that 99.9997% of all products

produced in a process are of acceptable quality.

Six Sigma allows only 3.4 defects per million opportunities.

If a given process fails to meet these criteria, it is re-

analyzed, altered and tested to find out if there are any
improvements.

If no improvement is found, the process is re-analyzed,

altered and tested again.

This cycle is repeated until Firm see an improvement.

Once an improvement is found, its documented and the

knowledge is spread across other units in the company so
they can implement this new process and reduce their
defects per million opportunities.

Six Sigma Calculations

To give such numbers meaning, the engineers at Motorola

set up a scale to evaluate the quality of a process based on
these defect calculations. At the top of the scale is Six
Sigma, which equates to 3.4 DPMO, or 99.9997% defect-free.
In other words, if you have a process running at Six Sigma,

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you've almost eliminated all defects -- it's nearly perfect. Of
course, most processes don't run at Six Sigma. They run at
Five Sigma, Four Sigma or worse. Here's the full scale to get
an appreciation of the numbers involved:

Five Sigma = 233 DPMO, or 99.98% defect-free

Four Sigma = 6,210 DPMO, or 99.4% defect-free

Three Sigma = 66,807 DPMO, or 93.3% defect-free

Two Sigma = 308,538 DPMO, or 69.1% defect-free

One Sigma = 691,462 DPMO, or 30.9% defect-free

As you might expect, performing these calculations in a

modern manufacturing environment is not a simple matter of
counting up a few defects and punching numbers into a
calculator. Careful planning and a methodical approach are
essential. So, at the same time that Motorola's engineers
were developing the mathematics, they established a
problem-solving methodology that enabled them to
consistently duplicate these calculations regardless of the
process or environment. This methodology is as much a part
of Six Sigma today as the mathematical concepts it is based
on. Indeed, as Six Sigma has evolved, it has become closely
associated with other business strategy methodologies, such
as Balanced Scorecard.

That means different people at different times will define Six

Sigma quite differently. Some will describe it as a metric, or
a measurement of defects. Others will describe it as a
methodology, a way to solve problems. And still others call

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it a business management system. In the next section,
we'll take a closer look at Six Sigma history to give more
context to all of its various meanings.

CASE STUDY ON DEFECT RATE

If r products, whose measured quality characteristics are

outside the specifications, have been classified to be
defective out of n products investigated, the defect rate is p
= r/n, and the yield is y = 1 – p. Then we can find the sigma
level Z from the relationship (1.22). For example, suppose
two products out of 100 products have a quality
characteristic which is outside of specification limits. Then
the defect rate is 2 percent, and the yield is 98 percent. Then
the sigma level is approximately Z = 2.05 from (1.22). If this

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result is based on a long-term investigation, then the short-
term sigma level is Zs = 2.05 + 1.5 = 3.55

Defect
Sigma level Z value from rate Yield
(considering standard normal
1.5σ shift) distribution (ppm) (%)
2σ 0.5 38770 69.10%
3σ 1.5 66811 93.31%
4σ 2.5 6210 99.37%
5σ 3.5 233 99.97%
6σ 4.5 3.4 99.99%

Six Sigma Capability Improvements

Defect Based Six Sigma Metrics - Example

If there are 9 defects among 150 invoices, and there are 8

opportunities for errors for every invoice, what is the dpmo?
Dpu = no. of defects / total no. of product units = 9/150 =
.06 dpu
Dpo = no. of defects / (no. of units X no. of defect
opportunities per unit)

= 9/(150 X 8) = .0075 dpo

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Dmpo = dpo x 1,000,000 = .0075 X 1,000,000 = 7,500
dpmo

What are the equivalent Sigma and CP values?

Converting Yield to sigma & Cp Metrics - Example

Given: a proportion defective of 1%

Yield = 1 - p = .990

Z Table value for .990 = 2.32σ

Estimate process capability by adding 1.5 σ to reflect the

'real-world' shift in the process mean

2.32σ + 1.5σ = 3.82σ

This σ value can be converted to an equivalent CP by dividing

it by 3σ: CP = 3.82σ/3σ = 1.27
Note: Cpk cannot be estimated by this method

Why Six Sigma is Important

Most companies operate at three or Four Sigma. That means

the losses they incur as a result of poor quality cost them 10
to 15 percent of their revenue. A company operating at Six
Sigma, however, can generate considerable savings.
According to one source, the savings as a percentage of
revenue vary from 1.2 percent to 4.5 percent [source:
ISixSigma]. That means a company with revenues of $1

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million could save up to $45,000, and a company with
revenues of $1 billion could save up to $45,000,000.

Like its predecessors, Six Sigma asserts that:

• Continuous efforts to achieve stable and predictable

process results (i.e. reduce process variation) are of vital
importance to business success.

• Manufacturing and business processes have characteristics

that can be measured, analyzed, improved and controlled.

• Achieving sustained quality improvement requires

commitment from the entire organization, particularly from
top-level management.

Features that set Six Sigma apart from previous

quality improvement initiatives include:

• A clear focus on achieving measurable and quantifiable

financial returns from any Six Sigma project

• An increased emphasis on strong and passionate

management leadership and support.

• A special infrastructure of "Champions", "Master Black

Belts", "Black Belts" etc. to lead and implement the Six
Sigma approach.

• A clear commitment to making decisions on the basis of

verifiable data, rather than assumptions and guesswork

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The term "Six Sigma" derives from a field of statistics known
as process capability studies. Originally, it referred to the
ability of manufacturing processes to produce a very high
proportion of output within specification. Processes that
operate with "six sigma quality" are assumed to produce
defect levels below 3.4 defects per million opportunities
(DPMO). Six Sigma's implicit goal is to improve all processes
to that level of quality or better

Methodology

Six Sigma has two key methodologies: DMAIC and DMADV

both inspired by Deming's Plan-Do-Check-Act Cycle. DMAIC is
used to improve an existing business process; DMADV is
used to create new product or process designs

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DMAIC

The basic methodology consists of the following five steps:

• Define process improvement goals that are consistent with

customer demands and the enterprise strategy.

• Measure key aspects of the current process and collect

relevant data.

• Analyze the data to verify cause-and-effect relationships.

Determine what the relationships are, and attempt to ensure
that all factors have been considered

• Improve or optimize the process based upon data analysis

using techniques like Design of Experiments.

• Control to ensure that any deviations from target are

corrected before they result in defects. Set up pilot runs to
establish process capability, move on to production, set up
control mechanisms and continuously monitor the process

DMADV

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The basic methodology consists of the following five steps:

• Define design goals that are consistent with customer

demands and the enterprise strategy.

• Measure and identify CTQs (characteristics that are Critical

To Quality), product capabilities, production process
capability, and risks.

• Analyze to develop and design alternatives, create a high-

level design and evaluate design capability to select the best
design.

• Design details, optimize the design, and plan for design

verification. This phase may require simulations.

• Verify the design, set up pilot runs, implement the

production process and hand it over

to the process owners.

DMADV is also known as DFSS, an abbreviation of "Design

For Six Sigma"..

Six Sigma methodology is also used in many Business

Process Management initiatives these days. These Business
Process Management initiatives are not necessarily related to
manufacturing. Many of the BPM's that use Six Sigma in
today's world include call centers, customer support, supply
chain management and project management.

Six Sigma in Business

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Even though Six Sigma was initially implemented at Motorola
to improve the manufacturing process, all types of
businesses can profit from implementing Six Sigma.

Businesses in various industry segments such as Services

industry (Example: Call Centers, Insurance,
Financial/Investment Services), Ecommerce industry
(Example: B2B/B2C websites), Education can definitely use
Six Sigma principles to achieve higher quality. Many big
businesses such as GE and Motorola have successfully
implemented Six Sigma but the adaptation by smaller
businesses has been very slow.

GE is a pioneer in using Six Sigma. This article on Six Sigma

GE Experiences explains how various GE divisions adopted
and benefited from Six Sigma.

Here are some of the reasons to consider:

Bigger companies have resources internally who are trained
in Six Sigma and also have 'Train the Trainer' programs using
which they churn out many more Six Sigma instructors. Also
many bigger companies encourage the employees to learn
Six Sigma process by providing Green Belts/Black Belts as
mentors.

Effectively applying the Six Sigma techniques is difficult

compared to actually learning the techniques in a class.

Big companies make Six Sigma as part of the Goals for

employees and provide incentives for employees who
undergo training and mentor colleagues.

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Many assume that that Six Sigma works for bigger
companies only as they produce in volumes and have
thousands of employees. This notion is not true and Six
Sigma can be effectively applied for small businesses and
even companies with fewer than 10 employees.

Six Sigma Implementation

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In large companies with global supply and manufacturing
operations, implementing Six Sigma is no small feat. There
are generally two ways it happens. One way is through a
separate organization that provides Six Sigma services to the
main business. In this model, all Six Sigma projects run
through the independent organization, making it easy to
measure the impact of the changes. However, this
arrangement can create a "we versus them" mentality that
can undermine the effectiveness of the Six Sigma initiatives.

To avoid this tension, other companies take a more

integrated approach. In this model, Six Sigma is incorporated
into every employee's job, with a few highly trained experts
acting as facilitators. This makes it more challenging to
measure the impact of Six Sigma, but it helps create a
culture in which a commitment to quality and excellence is
pervasive.

Image courtesy William Harris

Either way, Six Sigma relies heavily on teams of people

working together, not on individual effort. A team can vary,
but it will often include Six Sigma experts, process experts,
data specialists, communicators and customers. A customer,
in this case, refers to any person, internal or external, who is

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affected by a process or product change. This could be a
person on the production line, someone in sales or
marketing, a distributor or the ultimate end-user of a product
or service. In fact, the customer may be the most important
person on the team, because it is the customer who defines
quality. It is his or her expectation of performance, reliability,
competitive prices or on-time delivery that sets the bar.

Another critical role is that of team leader. The leader of a

Six Sigma project must be extremely proficient in the
technical aspects of Six Sigma statistics and process. If a
project requires a high degree of Six Sigma expertise, it will
be led by a Black Belt, a term borrowed from martial arts.
Black Belts possess deep knowledge of all Six Sigma
methods and tools and are assigned to lead projects that
return a bottom-line value of $150,000 to an organization. If
a project isn't as complex, it will be led by a Green Belt.
Green Belts are qualified to solve the majority of process
problems that arise in manufacturing environments and can
always consult with Black Belts if they come up against a
particularly challenging problem.

Yellow Belts represent everyone else on the team. They're

not immersed in the details of the project and therefore don't
require the same level of Six Sigma training or skill. That
said, though, Yellow Belts are essential. They do apply some
elements of the Six Sigma methodology as they help the
Green Belt meet project goals and objectives. Yellow Belts

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are staff members, administrators, operations personnel and
anyone else who might play a role.

Practical Questions in Implementing Six Sigma

Is Six Sigma Right to the firm?
Many commercial firms are wondering whether Six Sigma is
right for them now. Embarking on a Six Sigma initiative
begins with a decision to change – specifically, to learn and
adopt methods that can boost the performance of your
organization. The starting point in gearing up for Six Sigma is
to verify that an organization is ready to – or needs to –
embrace a big change. There are several essential questions
and facts an organization has to consider in making its
readiness assessment:
1. Is change a critical business need now, based on bottom-
line, cultural, or competitive needs?
2. Can we come up with a strong strategic rationale for
applying Six Sigma to our business?
3. Will our existing improvement systems and methods be
capable of achieving the degree of change needed to keep
us a successful, competitive organization?
If the answers are “Yes,” “Yes,” and “No,” an
organization may well be ready to explore further how to
adopt Six Sigma in its organization. However, if an
organization is in one or more of the following situations, it
probably would be best to say “No thanks for now” to Six
Sigma adoption:

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1. The organization already has a strong, effective
performance and process improvement effort
2. Recent changes are already overwhelming employees and
resources;

Reference:

Books

♦ Sisodiya Singh Amit six sigma concepts 2nd edition

Published by ICFAI

♦ Penelope Przekop Six Sigma for business excellence

Published by McGraw-Hill Professional,

INTERNET

♦ www.qualitygurus.com- article six sigma basics

♦ www.sixsigmaIQ.com – introduction to six sigma

management

♦ www.sixsigmatutorial.com – six sigma implementation

♦ www.isixsigma.com – what is six sigma

♦ www.wikipedia.com – definition of six sigma

♦ www.sixsigmaonline.org –

♦ www.induction.to/six-sigma/

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