1Six Sigma Intro

Pakistan Institute of Management

Six Sigma- A Breakthrough

Management Strategy


What is Six Sigma?

• Six Sigma is about profitability.

• Six Sigma is a comprehensive strategy

for:

– Achieving

– Sustaining, and

– Maximizing business success.


How GE Defines Six Sigma?

A disciplined process that helps us focus on

developing and delivering near-perfect

products and services… The central idea

behind Six Sigma is that if you can measure

how many “defects” you have in a process,

you can systematically figure out how to

eliminate them and get as close to “zero

defects” as possible. Six Sigma has

changed the DNA of GE in everything we do

and in every product we design.”


What is Six Sigma?Six Sigma achieves its objectives by:

•Focusing on customer.

•Active and visible senior management involvement.

•Defining mission, objectives, strategies & action

plan.

•Measuring things that matter. Being data based.

•Setting ambitious goals to reduce defects.

•Project by project improvement.

•Team based improvement.

•Clearly defining roles.

•Rigorous TrainingIt provides specific methods to recreate the process so that

defects and errors never arise in the first place.


Six Sigma Vision

The Vision of Six Sigma is to

delight customers by delivering

world-class quality products

through the achievement of Six

Sigma levels of performance in

everything you do.


Six Sigma

Philosophy

The philosophy of Six Sigma is

to apply a structured,

systematic approach to achieve

breakthrough improvement

across all areas of business.


What Six Sigma

is Not?

• It is not another quality program

• It is not theory. It is action-oriented.

• It is not a training program.

• It is not a „magic pill‟.

• It is not a one time effort. A constant effort

is needed to track changes in external

environment.


Six Sigma History

1986: Bill Smith, a senior engineer at Motorola,

introduced concept of Six Sigma.

Six Sigma provides Motorola key to addressing quality

concerns throughout organization, from manufacturing to

support functions.

1987: Motorola CEO, Bob Galvin declares Motorola will

be at 6σ within 5 year – 1992.

1988: Motorola wins Malcolm Baldrige National Quality

Award.

1988: Original Six Sigma consortium is formed

1989/1990: IBM, DEC try Six Sigma -- and fail


Six Sigma History

1993: AlliedSignal adds a new level to Six Sigma -dedicated Black Belts with a supporting infrastructure.

1995: Jack Welch of General Electric adopts Six Sigma;

Promotions, Profit Sharing directly tied to Six Sigma training.

1996-1998: Six Sigma implementation expands as companies observe success of Allied and GE.

1999: Six Sigma starts to see exponential growth.

1999: Formal Six Sigma training begins at ASQ


Some Results…Motorola10 years; $11 bn+ savings

Allied Signal$2 bn+ estimated savings in direct costs in 5 yr.

Boosted Operating Margins from 12% to 14.1% in 1 yr

Polariod6% cost reduction every year.

Bank of America$2 bn+ benefits. 25% increase in customer delight.

Cummins$1 bn+ saving through 5000+ projects

General ElectricBoosted Operating Margins from 13.6% to 16.7% in 3 yr

1998: $750 Million savings

1999: $2 bn+ net benefits

2001: 6,000 projects completed; $3 bn+ savings


What are Rewards of

Six Sigma?• Generates sustained success.

• Enhances value to customer.

• Increased value to owners.

• Improved reliability and predictability of products and

services.

• Improvements in organizational morale.

• Organizational recognition.

• Sets a performance goal for everyone.

• Significant reduction in defects.

• Institutionalization of a “process” mindset.

• Accelerates the rate of improvement.

• Promotes learning and „cross-learning‟.

• Executes strategic change.


Traditional View

Sales GrowthMarket Share

Profitability

Manage the outputs


Manage inputs; respond to outputs

Non-traditional View

Product QualityOn-Time Delivery

RelationshipsCustomer Training

Sales GrowthMarket Share

Profitability

Customer Satisfaction

Output Variables

Input Variables


The Customer -

Supplier Interaction

Delivery

Price

Quality

CustomerSupplier

NeedNeed

Cycle Time

Cost

Defects

DoDo We strive for Six Sigma

capability on

Cycle Time, Cost, and

Conformance to meet

customer expectations on

Delivery, Price, and Quality.


Target Specification

Freq.

XTarget USLLSL

A study found U.S. consumers preferred Sony TV’s made in

Japan to those made in the U.S. Both factories used the

same designs & specifications. The difference in quality

goals made the difference in consumer preferences.

Japanese factory (Target-oriented)

U.S. factory (Conformance-oriented)


Standard Deviationm

1s

T USL1 2 3 4 5 6

s

3s

This is a 6 Sigma Process


Yield DPMO

30.9% 690,000

69.2% 308,000

93.3% 66,800

99.94% 6,210

99.98% 320

99.9997% 3.4

Capability

Non-competitive

Non-competitive

Industry Average

Industry Average

World Class

World Class

Sigma

1

2

3

4

5

6

COPQ

N/A

N/A

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 Levels


Six Sigma – Practical Meaning99.99966% Good (6 Sigma)

20,000 lost articles of mail

per hour

Unsafe drinking water for

almost 15 minutes each day

5,000 incorrect surgical

operations per week

Two short or long landings

at most major airports each

day

200,000 wrong drug

prescriptions each year

No electricity for almost

seven hours each month

Seven articles lost per hour

One unsafe minute every

seven months

1.7 incorrect surgical

operations per week

One short or long landing

every five years

68 wrong prescriptions per

year

One hour without electricity

every 34 years

99% Good (2.8 Sigma)


The Roadmap to

Six Sigma

North

South

East West

Usually has many twists and turns!


What are Challenges of Six Sigma?

• Cultural change.

• Consultants can‟t make it happen.

• Training – especially management level

• Takes careful preparation and a commitment.

• Emphasis on Data Analysis.

• Implementation tends to be uneven and lapses

occur.


• Not everything has to be Six Sigma; this was our downfall on reengineering efforts!

• Lack of discipline and accountability.

• Reliability of data from field.

• People must not fear giving “bad news”.

• Understanding Design for Six Sigma (DFSS).

• It is not a quick fix nor a recipe.


12 Requirements for Successful

Six Sigma Implementation

1. Proactive Management

2. Development of strategy to introduce Six Sigma

3. Genuine focus on Customer

4. Treatment of Six Sigma as a Holistic Concept.

Boundary less Collaboration

5. Investment of adequate resources

6. Focus on results. Data and fact driven.


7. Focus on Processes

8. Focus on Training

9. Prioritization and selection of projects

10. Development of uniform language and

terminology

11. Follow-up and communication of success stories

12. Drive for Perfection; Tolerate Failure


Six Sigma Quote

„Six Sigma has spread like wildfire across the company and it‟s

transforming everything we do.‟

Jack Welch, Ex-CEO, GE


Customer:• Someone who makes use of or receives products. External or internal.Product:• Anything that satisfies customer needs. • Output of any process. • Both goods and services.Product Feature:• A property possessed by goods or services that is intended to meet customer needs.Deficiency:• Any fault that impairs a product‟s fitness for use.– Examples: Office errors, factory scrap,

power outages, failures to meet delivery dates, and inoperable goods.

Terms I


Customer Satisfaction:

• A state of affairs in which customers feel that their expectations have been met by product features.

Customer dissatisfaction:

• A state of affairs in which deficiencies result in customer annoyance, complaints, claims, and so on.

Satisfaction and Dissatisfaction Are Not Opposites

Terms II


Terms IIIQuality & Grade:

• Grade is a category assigned to products or

services having same functional use but

different technical characteristics. Low grade

may not be a problem.

– For example, a software product can be of

high quality (no defects, readable manual)

and low grade (limited # of features), or of

low quality (many defects, poorly organized

documentation) and high grade (numerous

features).


Terms IIIPrecision & Accuracy:

• Precision is consistency that value of

repeated measurements are clustered and

have little scatter.

• Accuracy is correctness that measured

value is very close to true value.

• Precise measurements are not necessarily

accurate. A very accurate measurement is

not necessarily precise.


Terms IVProcess: • Any repetitive action. Input+VA+Output

Sigma:• A term used in statistics to represent standard

deviation, an indicator of the degree of variation

in a set of measurements or a process.

Defect:• A measureable characteristic of process or its

output not within acceptable limits.

• Source of customer irritation.

Variation:• A change in a process or business practice that

may alter its expected outcome, or any

quantifiable difference between a specified

measurement or standard and measurement or

output of a process.


Terms V

Critical to Quality (CTQ):

• The attributes most important to customer.

• Elements that significantly affect output of process.

Process Capability:

• A statistical measure of inherent variation for a given

event in a stable process.

• Usually defined as Capability Index (Cp).

Cp = Process Width / 6σ

Stable Operations:

Consistent, predictable processes to improve what customer sees and feels.

DMAIC:

Define, Measure, Analyze, Improve and Control


Six Sigma Quote

„We did not invent Six Sigma,

we learned it. The cumulative impact on

the company‟s numbers is not

anecdotal, nor a product of charts. It is

the product of 276,000 people executing

and delivering the result of Six Sigma to

our bottom-line‟.

Jack Welch - 1997


What is Quality?

• „Those features of products, which meet customer needs and thereby provide customer satisfaction‟

• „Freedom from deficiencies‟

• „Conformance to Specification‟

• „Degree to which product fulfills requirements‟

• „Degree to which a set of inherent characteristics fulfill requirements‟.


Quality and

Management

Quality is ultimately defined by customer,

and represents how close project and

deliverables come to meeting customer's

requirements and expectations.

• Quality is in the eyes of the beholder (customer).

• Does not mean best or zero defects – meeting

mutually agreed upon expectations.


Two Aspects of

Quality

Actual

Performance

Design

Specifications

Customer

Satisfaction

Design

Quality

Failure

Conformance

Quality

Failure


Costs of

Detecting Defects

Process Final testing CustomerWhere defect is detected

Co

st

of

de

tec

tio

n a

nd

co

rre

cti

on


COPQ –

Cost of Poor Quality Costs incurred due to any situation in which there is

not 100% confidence that product or process quality

is perfect all the time.

Incurred to keep failure and appraisal

costs to a minimum.

Incurred to determine the degree of

conformance to customer needs.

Incurred by defects internal to system

or after shipment to customer.

Driven by inefficiencies which add no

value to product delivered to customer.

Cost of

Quality

Prevention

Costs

Appraisal

Costs

Failure

Costs

Waste

Costs


Failure costs are directly incurred by defects internal

to system or after shipment to customer

Examples•Lost Customers

•Returned Material

•Rework Labor

•Scrap Material

•Retest Costs

•Failure Analysis and Autopsies

•Excess Inventory

•Line Shutdowns

COPQ –

Failure Costs

Cost of

Quality

Prevention

Costs

Appraisal

Costs

Failure

Costs

Waste

Costs


Waste costs are driven by inefficiencies which add

no value to product delivered to customer.

Examples•Distance traveled during

manufacture

•Unnecessary handling labor

•Unnecessary floor space

•Unnecessary cycle time

•Unnecessary assembly labor

•Labor spent waiting for parts

•Unnecessary process operations

•Product introduction delays

•Unnecessary overhead costs

COPQ –

Waste Costs

Cost of

Quality

Prevention

Costs

Appraisal

Costs

Failure

Costs

Waste

Costs


Effect on Costs

Cost of Quality

Prevention Costs Appraisal Costs

Internal Failure Costs External Failure Costs

Total cost of all efforts

related to quality.


Quality and Costs:

Traditional View

Traditional

• Worker is at fault

• Inspect in quality

• Quality control staff

• Boss management

• Multiple sources

• Functional depts.

• Quality costs more

TQM

• Everyone responsible

• Build-in quality

• Small staff facilitates

• Workers are experts

• Single source supply

• Cross functional teams

• Quality is free


Costs of Quality

Quality Level 100% Good

TQM View

Co

st

Traditional

View


Time

Perf

orm

an

ce

GOOD

BAD 3 Sigma

6 Sigma

What Drives

Breakthrough Improvement?

Six SigmaBreakthrough

Zone


Defects per Unit

DPU: Average number of defects per unit produced

DPU: 7 Defects / 5 Units = 1.4 Defects per Unit

1 2 3 4 5

1. OD Dimension x

2. ID Dimension x

3. Flatness

4. Roughness x x

5. Coercivity

6. Carbon Thickness x x

7. Lube Thickness

8. Glide Height x

Total Defects per Disc 3 1 2 1 0

Disc Number


1. OD Dimension

2. ID Dimension

3. Flatness

4. Roughness

5. Coercivity

6. Carbon Thickness

7. Lube Thickness

8. Glide Height

Opportunities: The number of possibilities for defect creation in

any unit of product, process or sequence of processes.

8 x 5 = 40 Opportunities

1Six Sigma Intro

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