Six Sigma An Overview The Pennsylvania State University Smeal College of Business Frank L. Chelko March 8, 2007.

Six SigmaAn Overview

The Pennsylvania State University

Smeal College of Business

Frank L. Chelko

March 8, 2007

Six Sigma Statistical Definition

The Statistical Definition of Six Sigma is +/- 6 Standard Deviations of a Normal Distribution. This is equivalent to < 3.4 Defects per Million

Opportunities.

Sigma Defects per Million Quality Cost % Sales Benchmark1 700,000 HIGH Noncompetitive2 310,000 15%-25% Noncompetitive3 67,000 10%-15% Noncompetitive4 6,200 5%-10% Industry Average5 230 2%-5% Best in Class6 3.4 < 2% World Class

Hospital 5000 incorrect 2 incorrect Surgery procedures per week procedures per week

Air 2 abnormal landings 1 abnormal landing Travel at most airports each day every 5 years

As A Measure of Quality

Mail 20,000 lost articles 7 lost articles Delivery of mail per hour of mail per hour

Drinking Unsafe drinking water Unsafe drinking water Water for 15 minutes per day for 2 minutes per year

Activity Defects @ 99% Defects @ 99.9997% ( +/- 3.8 Sigma ) (+/- 6 Sigma )

As An Improvement Strategy

It is however much more than a statistical term. Six Sigma as an improvement strategy is:– A rigorous, focused and highly effective

implementation of proven quality principles and techniques that aims for virtually error free business performance.

– The near elimination of defects from any process, product, or service far beyond where virtually all companies are currently operating.

– A highly structured and disciplined improvement process.

Comments from BusinessSix Sigma is……..

• A statistical approach to problem solving• A management culture• A way of thinking• A set of new behaviors• Synonymous with:

– Improving quality– Reducing cost– Improving customer loyalty/customer

satisfaction– Achieving bottom-line results

Six Sigma’s Modern Evolution1980

– Established by Motorola in response to foreign competition and Baldridge Quality Award goal.

1990’s– Focus on process improvement using

statistical tools.2005

– “Lean Six Sigma” combines the structured management methodology and problem solving tools of Six Sigma with the business strategy, objectives and goals of “Lean Enterprise”.

The Business Experience

• Reduced cycle times, defects and costs• Reduction/elimination of waste• Improved productivity and efficiency • Measurable financial results • Increased product quality and reliability • Significant improvement in customer

satisfaction!• Directly supports World Class performance

goals.

$600$500$450$380$200

$2.5B

$1.2B

$700

$170

Cost Benefit

1996

Cost Benefit

1997

Cost Benefit

1998

Cost Benefit

1999

Cost Benefit

2000

6 Sigma Cost6 Sigma ProductivityDelighting Customers

GE Results from 6 Sigma

$3.5B

$500$500

$3.0B$3.0B

$600

$2.5B$2.5B

$900$900

$3.4B

Cost Benefit

2001

$3.4 Billion in 2001 … Customers & Shareholders Love It!$ in Millions Unless Otherwise Stated

Champions (Part-Time) All Business Leaders

Master Black Belts (MBB) 500

Black Belts (BB) 5,000

Green Belts (GB) 100,000

Six Sigma Associates 100%

Six Sigma Functions Resource Deployment @ GE ( # employees )

Enabler for Change

The Business Experience

*Six Sigma is currently active in over 80% of Fortune 500 companies.

* Masset, LLC Consulting

• Motorola• Johnson & Johnson• Honeywell• TRW• Merrill Lynch• Xerox• McKesson• Sony

Management andProject Support

Executives

Senior Deployment Champion

Deployment Champion

Project Champion

ProcessOwner

FinanceChampion

InformationTechnologyChampion Human

ResourcesChampion

Management and Project Support• Executives

– Create the Six Sigma vision and company environment.

– Define strategic and business goals.

• Senior Deployment Champions– Day-to-Day management of Six Sigma throughout the business.

– Reports to and updates the executives on the progress of deployment.

– Liaison between the executives and deployment champions.

• Deployment Champions or Sponsors– Responsible for the deployment of Six Sigma within the division or

business unit.

– Facilitates the identification and prioritization of projects assuring alignment with the business goals.

– Establishes and executes training plans.

– Selects the project champions.

– Removes barriers for the project team.

Management and Project Support• Project Champion

– Selects and mentors the Black Belts– Leads in project identification, prioritization, and defining the project scope.– Removes barriers for Black Belts and aligns resources.

• Process Owner– Is a team member– Takes ownership of a project when it is complete– Responsible for maintaining the project’s gain

• Finance Champion– Estimates and certifies project savings– Works with deployment champions to identify potential project opportunities.– Assigns a finance representative on to each project team.

• Information Technology Champion– Insures computer and software resourcing. – Works with project teams to access data from existing databases

• HR Champion– Works with Black Belts to develop a MBB, BB, and GB selection process.

Six SigmaRoles and Responsibilities

Yellow Belt

Green Belt

Black Belt

MBB

• Data Collection Experts• Assist in Measure & Control.

• Part-Time 6 Sigma Leaders• Run Mini 6 Sigma Projects

• Full or Part Time 6 Sigma Leaders• Manage 6 Sigma Projects• Instruct & Train GBs & YBs

• Full Time 6 Sigma Leaders• Manage BB Projects & Plant 6 Sigma• Run 6 Sigma Projects• Instruct & Train BB, GBs, & YBs

Six SigmaProjectTeams

define

Measure

Analyze Improve

Control

Belt Structure

Green Belts: Lead and execute process-level improvement projects.

Yellow Belts: Entry Level team member. Understands the fundamentals of Six Sigma. Data collection.

Belt Structure

Master Black Belts: Successfully completed 20 or more Six Sigma projects.

Black Belts: Implement the principles, practices, and techniques of Six Sigma for maximum cost reductions. (Lead the project teams)

The Methodologies

Six Sigma Methodologies

Define Measure Analyze Improve Control

DMAIC (dee-may-ic)Improvement Model:

Define Measure Analyze Design Verify

DMADV (dee-mad-v) (Re)Design Model:

The DMAIC Model

At the heart of Six Sigma is a systematic method for analyzing and improving business processes called DMAIC. The model includes five elements: 

Define opportunities  Measure performance  Analyze opportunity 

Improve performance  Control performance

Define

What is the business case for the project?

Identify the customer Current state map Future state map What is the scope of this project? Deliverables Due date

Measure

What are the key metrics for this business process?

Are metrics valid and reliable? Do we have adequate data on this

process? How will I measure progress? How will I measure project success?

Analyze

Current state analysis Is the current state as good as the

process can do? Who will help make the changes? Resource requirements What could cause this change effort to

fail? What major obstacles do I face in

completing this project?

Improve

What is the work breakdown structure?

What specific activities are necessary to meet the project's goals?

How will I re- integrate the various subprojects?

Control

During the project, how will I control risk, quality, cost, schedule, scope, and changes to the plan?

What types of progress reports should I create?

How will I assure that the business goals of the project were accomplished?

How will I keep the gains made?

Next Project

 Next Project

Project Phase Candidate Six Sigma Tools

Define       Project charter      VOC tools (surveys, focus groups, letters, comment cards)      Process map      QFD, SIPOC (suppliers, inputs, process, outputs, customers)      Benchmarking

Measure       Measurement systems analysis      Exploratory data analysis      Descriptive statistics      Data mining      Run charts      Pareto analysis

Analyze       Cause-and-effect diagrams      Tree diagrams      Brainstorming      Process behavior charts (SPC)      Process Maps      Design of Experiments      Enumerative statistics (hypothesis tests)      Inferential statistics (Xs and Ys)      FMEA (failure mode effects analysis)      Simulation

Improve       Force field diagrams      7M tools      Project planning and management tools      Prototype and pilot studies

Control       SPC      FMEA      ISO 900x      Change budgets, bid models, cost estimating models      Reporting system

Six Sigma Methodologies

Define Measure Analyze Improve Control

DMAIC (dee-may-ic)Improvement Model:

Define Measure Analyze Design Verify

DMADV (dee-mad-v)(Re)Design Model:

The DMADV ModelSystematic method for creating or reinventing business processes is DMADV. Typically use:

• New designs • Existing product or process was optimized however continues not to meet Six Sigma objectives.

The model also includes five elements: Define opportunities Measure performance Analyze opportunity 

(Re) Design opportunity Verify performance

DMADV vs. DMAIC

Define

MeasureExisting Process

Verify

Design

Analyze

Develop Measurement

Criteria

RemoveSpecialCauses

Improve

Control

Capable?

InControl?

Does a process exist?

NO YES

Analyze

NO

DMADV DMAIC

Tollgate Reviews• Another component of DMADV and DMAIC that helps

to ensure that the requirements of all customers are met is the tollgate review.

• At the end of each phase of the DMADV or DMAIC process, all stakeholders meet to ensure that:

1) The requirements have not changed2) What is being designed still addresses the requirements. 3) The measurements really address the requirements.

The tollgate review is an excellent tool for keeping all customers on the same page, involved in the process and communicating requirements.

The Six Sigma Project

Typical “Project” Examples

Thermal insulator pad improvement $207,000

Laser test time cycle reduction $500,000

Reduce past due orders, delivery $1,040,000

Reduction of forge cracks $635,046

Reduction of job change down time $900,000

Reduce cycle time of paint batches $119,000

Wash water generation reduction $83,690

Reducing dppm of cell phone mfg. $408,000

Reduce brazing costs of tail cone assy. $194,000

Computer storage component test $1,100,000

Six Sigma Pitfalls1. Companies that adopt Six Sigma as there quality

improvement strategy believe that every problem should be resolved by a Six Sigma project team.

2. Insufficient cross-functional team representation.3. Inadequate participation by executive management.4. Initially a part-time BB requires significant start-up

time to achieve success and may conflict with other duties.

5. Unrealistic Goals. 3.4 parts per million on Every Process, Excessive Time and Cost to Gather Performance Data, etc.

Questions???

Six Sigma Process and the Statistical Tools

AnalyzeA

MeasureM

DefineD

ImproveI

ControlC

• Voice of the Customer (VOC) - QFD

• XY Matrix• Process Analysis and FMEA• Data Collection Methods• Data Integrity and Accuracy• Basic Statistics - Common Distributions - Central Limit Theorem - Sampling Distribution of Mean - Basic Probability Concepts• Decision-Making• Non-Normal Data Graphical• Short vs. Long Term Capability• Data Analysis (B7) - Cause and Effect Diagram - Check Sheets - Control Charts - Flowcharts - Histogram - Pareto Chart - Scatter Diagram• Measurement System (Gage) Analysis• Process Capability Assessment

• Graphic Data Analysis• Multi-Vari Analysis• Inferential Statistics - Confidence Intervals - Sample Size• Hypothesis Tests - Means, Variances and Proportions - ANOVA - T-Tests - Test for Equal Variance - Paired Comparison Tests - Chi-Square - Proportion - Contingency Tables - Point and Interval Estimation - Non-Parametric Tests• Simple Linear Correlation• Regression-Simple and Multiple - Measure and Model Relationships Between Variables - Binary Logistics • Process Modeling and Simulation

• Hypothesis Tests - ANOVA - Non-Parametric tests - Contingency Tables• Design of Experiments - Terminology - Plan and Organize Experiments - Design Principles - One Factor - Full-Factorial - Two Level Fractional - Mixture Experiments - Taguchi Robustness Concepts• Response Surface Methodology - Steepest Ascent/Decent - High Order Experiments• Evolutionary Optimization (EVOP)

• Control Charts - Theory, Objectives, Benefits - Variable Selection - Rational Sub-grouping - Selection/Application - Analysis - Moving Average - Exponentially Weighted Moving Average (EWMA) - CuSum• Process Capability Assessment

Design for Six Sigma• Quality Function Deployment (QFD)• Robust Design and Process - Functional Requirements - Noise Strategies - Tolerance Design - Tolerance and Process Capability• Design Analysis and FMEA• Reliability Fundamentals

Six Sigma Process and the Management Tools

• Business Case• Problem/Objective Statement• Project Scope• Project Goals• Project Definition• Project Charter• Identify Owners and Stakeholders• Identify Customers• Financial Benefits• Benchmarking• Team Leadership• Team Dynamics and Performance• Change Agent• Performance Measurements• Gap Analysis• High Level Process Mapping/ SIPOC(Suppliers, Inputs, Process, Output, and Customers) Design for Six Sigma

• Design for (X) - Manufacturing (DFM) - Cost (DFC) - Test (DFT) - Maintainability (DFMA) - Quality/Reliability (DFQ)• Special Design Tools - Inventive Problem Solving - Axiomatic Design

• Lean Enterprise - Lean Thinking - Theory of Constraints - Continuous Flow Manufacturing - Non-Value Added Activities - Cycle Time Reduction - Cost of Quality - Tools Visual Factory, Kanban, Poka-Yoke • Solution Implementation - Mistake-Proofing (Poka-Yoke) - Visible Enterprise

The Six Sigma Journey• Enterprise View• Leadership• Business Strategy• Organizational Goals/Objectives• Project Management Tools (N7) - Activity Network Diagram - Affinity Diagram - Interrelationship Digraph - Matrix Diagram - Prioritization Matrix/Grid - Tree Diagram - Process Decision Program Chart• What’s Next-Six Sigma Evolution

AnalyzeA

MeasureM

DefineD

ImproveI

ControlC

• Control Plans - Training - Documentation - Monitoring - Response - Systems and Structures• Total Productive Maintenance (TPM)• Best Practice Sharing/Translation