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 Sigmas core is an idea that can turn company inside out, focusing organization outward on the customer. Jack Welch from Straight From the gut

Introduction to Six Sigma

To make customer happier and increase profits

Purpose of six sigma :

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

Current Leadership Challenges

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.

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

TreMyn 2004

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

Allied Signal
Motorola

General Electric

Johnson & Johnson, Ford, Nissan, Honeywell

1985

1987

1992

1995

2002

Dr Mikel J Harry wrote a Paper relating early failures to quality

Six Sigma
It is a Process To achieve this level of performance you need to: Define, Measure, Analyse, Improve and Control

It is a Philosophy Anything less than ideal is an opportunity for improvement Defects costs money Understanding processes and improving them is the It is Statistics most efficient way to achieve lasting results 6 Sigma processes will produce less than 3.4 defects per million opportunities

Overview of Six Sigma

6 SIGMA AS A PHILOSOPHY CHANGE THE WORLD TRANSFORM THE ORGANIZATION 6 SIGMA AS A PROCESS GROWTH

COSTS OUT
6 SIGMA AS A STATISTICAL TOOL PAIN, URGENCY, SURVIVAL

Why is Six Sigma Important?

The Villain
Cost of Poorly Performing Processes s level DPMO CP3
2 3 4 5 6 308,537 66,807 6,210 233 3.4 Not Applicable 25%-40% of sales 15%-25% of sales 5%-15% of sales < 1% of sales

Each sigma shift provides a 10% net income improvement

Sigma (s) is a measure of perfection relating to process performance capability the bigger the better. A process operating 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.

Cost of Poorly Performing Processes (CP3)

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.

What Does Six Sigma Tell Us?

and the Hero
We dont know what we dont know. We cant do what we dont know. We wont know until we measure. We dont measure what we dont value. We dont value what we dont 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 it means to be @ Six Sigma

Is 99% (3.8s) good enough? 99.99966% Good At 6s

20,000 lost mails per hour

7 lost mails per hour

Unsafe drinking water almost 15 minutes each day

5,000 incorrect surgical operations per week 2 short or long landings at most major airports daily 200,000 wrong drug prescriptions each year

One minute of unsafe drinking water every seven months

1.7 incorrect surgical operations per week One short or long landing at major airports every five years 68 wrong drug prescriptions each year

Example quoted from GE Book of Knowledge - copyright GE

TreMyn 2004

Have you ever

Shot a rifle?

Jack

Jill

Who is the better shooter?

More about limits

Poor quality: defects are common (Cpk<1) Good quality: defects are rare (Cpk>1)
target target

Cpk measures Process Capability

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

Six Sigma Measurement

Sigma

7
6

5
4 3
On one condition :
Calculate the defects and estimate the opportunities in the same way...
233 6210 66810 3.4 0.02

DPMO

Six Sigma Measurement

600,000 500,000 400,000 300,000 200,000 100,000 0 1.5 2.5 3.5 # of Sigmas 4.5 5.5

1.5s 2.0s 2.5s 3.0s 3.5s 4.0s 4.5s 5.0s 5.5s 6.0s

500,000 308,300 158,650 67,000 22,700 6,220 1,350 233 32 3.4

# of Defect per Million

Sigma numbers

Defects per million

Philosophy
Know Whats Important to the Customer (CTQ) Reduce Defects (DPMO) Center Around Target (Mean) Reduce Variation (Standard Deviation)

Six Sigma - Three Dimensions

Customer Process A Process B Vendor

Define

Measure

Analyze

Improve

Control

Driven by customer needs

Process Map Analysis
LSL US L

Led by Senior Mgmt

Methodology

Organization

Tools

Upper/Lower specification limits

35 30 25 20 15 10 5 0 L K A F B C G R

Regression

100% 80% 60% 40% 20% 0% D

Enabled by quality team.

Process variation

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

(in millions) 2500 2000 1500 Cost 1000 500 0 1996 1998 2000 2002
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

Benefit

Key Concepts

COPQ (Cost of Poor Quality)

- Inspection - Warranty - Scrap - Rework - Rejects

Traditional Quality Costs: - Tangible - Easy to Measure

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

Lost Opportunities

Hidden Costs: - Intangible - Difficult to Measure

The Hidden Factory

Average COPQ approximately 15% of Sales

COPQ v/s Sigma Level

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2 3 4 5 6

Cost of Quality % Sales

Sigma Level

CTQ (Critical-ToQuality)
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

 DPO multiplies by one million Examples:

DPMO (Defect Per Million Opportunities)

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

Voice of the Customer Measure Analyze Improve

Define

Control

Institutionalization

The DMAIC Model

DMAIC - simplified
Define
What is important?

Measure
How are we doing?

Analyze
What is wrong?

Improve
Fix whats wrong

Control
Ensure gains are maintained to guarantee performance

DMAIC approach
D Define

Identify and state the practical problem

M Measure A Analyze I Improve C Control

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
D Define VoC - Who wants the project and why ?

M Measure A Analyze I Improve

The scope of project / improvement (SMART Objective)

Key team members / resources for the project

Critical milestones and stakeholder review

C Control

Budget allocation

Measure
D Define Ensure measurement system reliability
- Is tool used to measure the output variable flawed ?

M Measure A Analyze Prepare data collection plan

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 ?

I Improve
C Control

Collect data

Analyze
D Define How well or poorly processes are working compared with - Best possible (Benchmarking) - Competitors Shows you maximum possible result Dont focus on symptoms, find the root cause

M Measure
A Analyze I Improve C Control

Improve
D Define 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. C Control

M Measure A Analyze I Improve

Control
D Define

Dont be too hasty to declare victory.

M Measure A Analyze I Improve

How will you maintain to gains made?

- Change policy & procedures - Change drawings - Change planning - Revise budget - Training

C Control

Tools for DMAIC

Define
What is wrong?

Measure
Data & Process capability

Analyze
When and where are the defects

Improve
How to get to six sigma

Control
Display key measures

Benchmark Baseline Contract / Charter Voice 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

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 that from 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

Six Sigma: How Do We Design?

Define customer requirements and

goals for the process, product or service.

Verify

and match performance Measure Measurerequirements. to customer

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.

Design

Analyze

Verify results and maintain

performance.

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

Design for Six Sigma (DFSS)

Design for Six Sigma at GE:

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

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?

Project Selection
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

Harvesting the Fruit of Six Sigma

Sweet Fruit Design for Repeatability Process Enhancement

Bulk of Fruit Process Characterization and Optimization -----------------------------------Low Hanging Fruit

Seven Basic Tools

-----------------------------------Ground Fruit
Logic and Intuition

Types of Savings
Hard Savings:
Cost Reduction
Energy Saving Raw Material saving Reduced Rejection, Waste, Repair

Revenue Enhancement
Increased production Yield Improvement Quality Improvement

Types of Savings
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

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 reengineering.

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.

The Growth of Six Sigma

TreMyn 2004

Six Sigma from the GE Perspective

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.

 With Six Sigma embedding itself deeper into GEs 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 GEs 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,

Six Sigma Organization

TreMyn 2004

Six Sigma Organization

Champion Black Belt Green Belt Green Belt Yellow Belt Yellow Belt Black Belt Green Belt Green Belt

Master Black Belt Black Belt Green Belt Yellow Belt Yellow Belt

The Quality Team

Master Black Belt

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

Black Belt

Black Belt

Backbone of Six Sigma Org Mentor Green Belts Full time resource Deployed to complex or high risk projects

Green Belt

Green Belt Green Belt

- Part time or full time resource - Deployed to less complex projects in areas of functional expertise

6 s Training
Master Black Belt
Mentor, trainer, and coach of Black Belts and others in the organization.

Champions

Black Belts

Leader of teams implementing the six sigma methodology on projects.

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

Green Belts

Team Members / Yellow Belts

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

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 Belt

Roles Responsibilities - Enterprise Six Sigma expert - Highly proficient in using Six Sigma - Permanent full-time change methodology to achieve tangible business results. agent - Certified Black Belt with - Technical expert beyond Black Belt level additional specialized skills or on one or more aspects of process experience especially useful in improvement (e.g., advanced statistical project management, deployment of Six Sigma analysis, communications, program administration, across the enterprise 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

Black Belt
Roles Responsibilities - Six Sigma technical expert - Leads business process improvement projects where Six - Temporary, full-time change Sigma approach is indicated. agent (will return to other duties after completing a two to three - Successfully completes high-impact year tour of duty as a Black projects that result in tangible benefits Belt) 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

Yellow Belt
Roles Responsibilities - Learns and applies Six Sigma - Actively participates in team tasks tools to projects - 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 - Recommends Six Sigma projects - Part-time Six Sigma change - Participates on Six Sigma project agent. Continues to perform teams normal duties while participating - Leads Six Sigma teams in local on Six Sigma project teams improvement projects - Six Sigma champion in local area

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!

Green Belt (GB)
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

Black Belt (BB)

Master Black Belt (MBB)

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

Highly paid! Work like a Consultant! Huge demand in the industry!

OverallA high flying Career!!

Thank You

TreMyn 2004