1. Introduction to Six Sigma (458 k ppt)

© Max Zornada (2005) Slide 1

Introduction to Six SigmaIntroduction to Six Sigma

Business Process Improvement through Six Sigma


What is Six Sigma?What is Six Sigma? Six Sigma is a statistical measure of quality:

It is based on rigourous process based performance measures. A Process for Continuous Improvement:

Six Sigma is a “generic” structured methodology for continuous improvement, that can be used to improve any process in any business.

An Enabler of Cultural Change: Six Sigma changes the way organisations work and the way they think.

A disciplined process focussed on delivering near perfect products and services.


Six SigmaSix Sigma: A Definition: A Definition

“A comprehensive and flexible system for achieving, sustaining and maximising business success. Six Sigma is uniquely driven by close understanding of customer needs, disciplined use of facts, data and statistical analysis, and diligent attention to managing, improving and reinventing business processes.”

The Six Sigma Way, by Pande, Newman and Cavanaugh


Six Sigma is a measure of excellenceSix Sigma is a measure of excellence

Six Sigma is a statistical measure of quality, which reflects process capability;

It set the goal of achieving capability levels of 3.4 defects per million opportunities.

Focuses on driving out variation in business processes - this is what the customer feels!

Sigma is the Greek symbol used for Standard Deviation of a population. Why Six Sigma?


A 6 Sigma ProcessA 6 Sigma ProcessCustomer target

Lower Specification Limit Upper Specification Limit

66

0.00034% of points will be outside of the specification limits ie. defects(= 3.4 parts per million out of spec.)

= 99.7966% of data inside the limits (Cp = 2)

0.00017%1.7 ppm

0.00017%1.7 ppm


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Relating Sigma to Defect LevelsRelating Sigma to Defect Levels

Six SigmaSix Sigma 3.43.4 99.9997%99.9997%

Five Sigma Five Sigma 233233 99.977%99.977%

Four SigmaFour Sigma 6,210 6,210 99.4%99.4%

Three Sigma Three Sigma 66,81066,810 93%93%

Two SigmaTwo Sigma 308,500308,500 69%69%

One SigmaOne Sigma 691,500691,500 31%31%

DPMO (Defects Per DPMO (Defects Per Million Opportunities)Million Opportunities) Error Free RateError Free Rate


Putting Six Sigma in Perspective!Putting Six Sigma in Perspective!

If you played 100 rounds of golf per year, and played at:

• 2 sigma - you'd miss 6 putts per round• 3 sigma - you'd miss 1 putt per round• 4 sigma - you'd miss 1 putt every 9 rounds• 5 sigma - you'd miss 1 putt every 2.33 years• 6 sigma - you'd miss 1 putt every 163 years!


History of Six SigmaHistory of Six Sigma

1985 1990 1995 2000

Motorola launches its Six Sigma program

Allied Signal introduces its Six Sigma program

GE introduces its Six Sigma program and adds the “D” in DMAIC

1987

Dupont, 3M, Sun Microsystems, Raytheon, Boeing, Lockheed-Martin, Bank-of-America, American Express, HSBC, SAS Institute … the list keeps growing every day.

Who Else? GE - All 300,000+ GE employees must be Six Sigma certified. All new GE products developed using the “Design for Six Sigma” approach.

3M - CEO (from GE) requires all employees to become Six Sigma certified.


Six Sigma at DupontSix Sigma at Dupont

Many companies consider productivity to be a cost-saving operational issue. We at DuPont have elevated productivity to the strategic level because we believe that it is central to our efforts in sustainability. As a sign of our commitment in this area, we have adopted six-sigma methodology, a stringent approach that strives to reduce manufacturing defects to just several per million. At the end of last year, we had 1,100 black belts and 1,700 green belts (employees who have undergone weeks of training in the six-sigma methodology) working on 4,200 projects.

In one of them, DuPont was able to increase the production rate of its plant in Buffalo, New York, by 10% –without any capital investments. … The result: $26 million in additional revenue last year. This number might not seem huge for a company with $30 billion in sales, but DuPont has thousands of such projects, and we are adding 200 new ones each month. Altogether, our projects using six-sigma methodology are responsible for savings of more than $1 billion a year.

Source: Holliday, C. (2001). Sustainable growth the DuPont way. Harvard Business Review, Sept, pp 132


Bottom Line Impact of Six SigmaBottom Line Impact of Six Sigma

In dollar amounts, Six Sigma delivered more than $300 million to GE’s 1997 operating income and more than $600 million in 1998;

Raytheon - Six Sigma has generated a net benefit of $776 million for 1999-2003;

Honeywell: 1998--$500 Million 1999--$600 Million 2000--$700 Million+


Six Sigma in the Services SectorSix Sigma in the Services Sector

“Sustaining the intensity of our Six Sigma work is critical for Bank of America to achieve its strategic goals. Six Sigma has enabled us to generate more than $300MM in first-year productivity gains for the company. It has also had a significant impact upon the leadership team with our personal education and certification as Six Sigma Green Belts. As we look to the future, our leadership charge is to keep Six Sigma a top priority and use it to produce organic customer revenue growth.” - Ken Lewis (10/9/02)

Failing to implement Six Sigma in commercial areas with the same force that the company implemented it in its industrial sectors cost Motorola $5 billion over a four-year period.


A Timeline of Key Events leading up to Six SigmaA Timeline of Key Events leading up to Six Sigma

19941920's 1931 1940's 1943 1950 1960 1970 1980 1990 2000

Shewhart's studies into variation at Bell Telephone LabsShewhart publishes book, "Economic Control of Quality of Manufactured Product

Widespread adoption of Shewhart's principles for War-time Production in the US

Ishikawa develops Ishikawa diagram and pioneers use of 7-toolsWidespread abandonment of Shewhart's principles in Post-War US.

Deming teaches Shewhart principles to Japanese

Deming develops management philosophy based on Shewhart concepts own ideasJapanese extend Deming's teachings, develop the "Total Quality” concept

USA starts to copy Japan, called TQC (Total Quality Control) eventually the term TQM (Total Quality Management) is used as the label.

US discovers DemingRapid spread TQM principles to US service industries

Pacific basin countries, excluding Australia commence adopting TQMWestern Europe discovers TQM

Developing countries rapidly adopting TQM

Australian services sector copies US with adoption of TQMAustralian manufacturing commences with TQM

Benchmarking emerges as a supporting practiceBusiness Process Reengineering

Team based approaches to work gaining broad acceptance in industry

Organisational learning emerging as a key competitive issue

1996

Renewed focus on Process Management

Widespread emergence of Balanced Scorecard

6-sigma goes mainstream

2002


Key Elements of Six SigmaKey Elements of Six Sigma Process Orientation Customer Focus Y = f(X) Data and Measurement Driven Focus on Variation Reduction Statistical Rigour Project Orientation The DMAIC Process Improvement/Problem Solving Process Dedicated Personnel Bottom Line Results Focussed Data Driven Culture (In God we trust, all others bring Data)


The Six Sigma ApproachThe Six Sigma ApproachDMAICDMAIC

Define the problem or opportunity.

Measure the current performance and capability

Analyse to identify root causes.

Improve by implementing potential

solutions.

Control by standardising solution and monitoring

performance. Define

Measure

Analyse

Improve

Control

6


The Role of Statistics in Six SigmaThe Role of Statistics in Six Sigma

Define

Measure

Analyse

Improve

Control

6

Practical Problem

Statistical Problem

Statistical Solution

Statistical Control

Practical Solution


Six Sigma Support StructureSix Sigma Support Structure

Champions: Business leaders who lead the implementation of Six Sigma within the business;

Sponsors/Process Owners: Business leaders responsible for the implementation of process improvements and monitoring process performance;

Master Black Belts: Fully trained quality leaders responsible for Six Sigma strategy, training, mentoring, deployment and results;

Black Belts: Fully trained Six Sigma experts who lead improvement teams, work on Six Sigma projects and mentor Green belts;

Green Belts: Fully trained individuals who apply Six Sigma skills to improvement projects;

Team Members: (Yellow Belts) Individuals who support projects in their areas.


Implementing Six SigmaImplementing Six Sigma

Strategic Level

Tactical Level

Operational Level

Executive Steering CommitteeMaster Black Belts

ChampionsBlack Belts

Team MembersStakeholders

Green BeltsYellow Belts


Relationship between Quality, Market Share Relationship between Quality, Market Share and ROI - and ROI - The Business Case for Six SigmaThe Business Case for Six Sigma

Relative Market Share

Relative Quality

Low 25% 60% High Inferior

Superior

33 %

67%

Return on Investment (ROI) %

21

38

2029

27

20

13

7

14

Source: Buzzell, R.D. & Gales, B.T. (1987) The PIMS Principles


Six Sigma Competitive Advantage

ImproveQuality

External Quality

Customer Satisfaction

Market Share

Revenue

Internal Quality

Operating Costs

Capital Costs

Economies of Scale

Higher Profit

Higher ROI

Products & Services

Processes & People


How did leaders become leaders ……How did leaders become leaders ……A accumulation of competenciesA accumulation of competencies

Quality

Delivery

Cost

Flexibility

Nakane and Hall (1994)

Define

Measure

Analyse

Improve

Control

6

Six Sigma provides the on-ramp and the mechanism to progress up the steps.


In god we trust, all others bring data.In god we trust, all others bring data.Grade your organisation on its use of dataGrade your organisation on its use of data

Our organisation uses only tribal knowledge i.e. people experience and “the way we do things around here”. We do not use data.

Our organisation collects data so as to say “we collect data” but the data is not used.

Our organisation collects data and we sometimes look at the numbers and use them to support problem solving and decision making.

Our organisation logically groups the data. We report it in the form of charts. Our organisation uses sample data along with basic statistics. Our organisation uses sample data along with inferential statistics. Our organisation quantifies processes via predictive equations.

F

E

D

C

BAA +


Conclusion of introductionConclusion of introduction

1. Introduction to Six Sigma (458 k ppt)

Documents

organisation

continuous

miss 1 putt

sigma methodology

bring data

sample data

sigma certified

statistical