six sigma management operations strategy

An Introduction to

Six Sigma

Problem to opportunityP

ER

FO

RM

AN

CE

TIME

Continuous Improvement

A

B

Valley of Despair

Change is Implemented

InitialEuphoria

New Levels of Performance

8depth of drop-off (A)

8 time of drop-off (B)

8“Valley of Despair”

We Discuss….

1. What is Six Sigma Quality ?

2. Why would a company adopt Six Sigma ?

3. Is there a roadmap to Six Sigma ?

4. What are the challenges ?

5. What are the rewards ?

What is Six Sigma?

Originated at Motorola in the early 80’s

Is a methodology for disciplined quality improvement

Term ‘Sigma’ a Greek alphabet, designates the distribution or

spread about mean of any parameter of product, process or

procedure.

Process variation can be described by how many sigma’s (i.e how

many multiples of standard deviation or SD ) fit within the

specification limits

Sigma is a statistical measure of the quality consistency for a

particular process / product.

What is Six Sigma Quality?

Six Sigma’s goal is the near elimination of defects from any process, product, or service.

The numerical goal is 3.467 defects per million opportunities.

Juran once concluded that in the US, close to 1/3 of the work done consisted of redoing what had already been done.

Depending on the industry, this Cost of Poor Quality (COPQ) could be 20 to 40% of total effort!

Logic and intuition

Quick hits-Kaizen

Low hanging fruits

Simple QC tools

Bulk of fruits

Process characterization

and optimization

Process

limitationsSweet fruits

DFSS

Increase of sigma rating requires an exponential decrease in

defect reduction

Six Sigma Process Analysis

SIGMA DPMO COPQ CAPABILITY

6 sigma 3.4 < 10% of sales World Class

5 sigma 230 10 to 15% of sales

4 sigma 6200 15 to 20% of sales Industry average

3 sigma 67,000 20 to 30% of sales

2 sigma 310,000 30 to 40% of sales Noncompetitive

1 sigma 700,000

The implications of ignoring

non-technical aspects during

change. High 5

Low 0The likely outcome

With acknowledgements to EAI

Score 1 or less; change will fail; costs

of training & consultancy will be lost

Score 1-2; some tactical results ; 6 Sigma will probably die; we only get our costs back.

Score 2-3; significant tactical results, but 6 Sigma remains just a “programme” but “normal” payback

Score 3-4; cultural transformation beginning but may take longer; payback significant

Score 4-5; world-class; 6 Sigma is in the DNA; it’s the way we work; “order of magnitude” payback

1

2

3

4The degree

towhich

positive conditions

for 6 Sigmasuccess

exist in anorganisation

What is Six Sigma Quality?

Strategy includes

Define Measure Analyze Improve Control

Improvement projects must be integrated with the goals of

organization

Implementation is top-down

CEO drives, and executive management provides the Champion

for each project

Uses concept of “belts” for levels of competency in

implementation

MBB = Master Black Belt BB = Black Belt GB = Green Belt

Suppliers CustomersManufacturing and service processes

OutputsInputs

Six Sigma Model

ExistingBusiness Processes

Six Sigma Methodology

DMAIC

Measure

Analyze

Define

Improve

Control

Improved Business Performance Quality Productivity Cost Profitability

An Example

Six Sigma Project: Engineering Changes

Define: Large number of changes from client after approving engineering design.

Measure: Number of changes, time involved in changes,compliance to critical path schedule.

Analyze: No clear authority on client team to establish scope, any of client team could make changes, verbal communication of changes, conflicting changes by client team members.

Improve: Regular engineering/client meetings conducted topics include: scope for each section and desired objective, known limitations, unclear requirements were questioned and options discussed. Written plan signed by client representative and engineering lead. Change requests in writing and signed by client representative.

Changes decrease by a factor of 4.7 and schedule met.

Control: Change requests all in writing. Shared approach with other disciplines on project

GE Proprietary

1 /

GE C&I Asia

Concept: Accident Story !!

Ques: 1 Kya Hua?

Ques: 2 Kitna laga (ORKuch laga to nahi)?

Ques: 3 Kaise Hua?

Ques: 4 Aise Avoid kar Sakta tha?

Ques: 5 Fir nahi hoega !!

DEFINE

MEASURE

ANALYZE

IMPROVE

CONTROL

A

Complexity of projects

low high

Monitory benefits

low

highSix SigmaMethodology

Some Results…

• Motorola – 10 years; $11 Billion Savings

• Allied Signal - $1.5 Billion estimated savings

• General Electric – started efforts in 1995

– 1998: $1.2 Billion less $450 Million in costs… net

benefits = $750 Million

– 1999 Annual Report: more than $2 Billion net benefits

– 2001: 6,000 projects completed; $3 Billion in savings

Six Sigma according to GE

• A highly disciplined process that helps us focus on

developing & delivering near-perfect products & services

• The word Six Sigma is a statistical term that measures how far a

given process deviates from perfection

• 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 at GE – it is the way we

work – in everything we do and in every product we design

A Road Map for Six Sigma

� Appoint a Champion

� Select a Cross-functional team

� Develop quantifiable goals

� Develop an implementation plan

�Establish a training program

�Address data collection requirements and issues

�Develop a change control and maintenance program

� Coordinate your road map

Drivers of Business Performance

What goals do we have for our business efficiency?

How do we know how well we are doing?

Manufacturing

and Assembly

Demand

Forecasting

Production

Planning

Sourcing &

PurchasingWarehousing Order Entry Shipping

Order FulfillmentCTB (critical to business) –

inventory turns(lagging indicator)

WIP

Cycle time

material waste

and yields1

line uptimetest set up time

Yield & Capacity

material waste

and yields2

material waste

and yields3

Receive

raw

material

Sub-

Assembly 1

Sub-

Assembly 2

Final

AssemblyPackagingTest

in-process timeliness(predictive indicators)

What are the Challenges of Six Sigma?

• Culture change

• Understanding the DFSS (Design For Six Sigma)

• It is not a quick fix nor a recipe

• Consultants can’t make it happen. Training – especially management level

• Takes careful preparation and a commitment to the foundational change efforts required

• Statistical analysis is not generally part of the engineering discipline in most IT shops

• Implementation tends to be uneven and lapses occur frequently

Rewards of Six Sigma

• Improved reliability and predictability of software products and services

• Increased value to the customers and shareholders

• Improvements in organizational morale

• Increased marketplace viability

• Organizational recognition

• Significant reduction in defects

• Institutionalization of a “process” mindset

THE “DEFINE” PHASE

Before Define Phase

Dashboard

A tool used by management to clarify and assign accountability

for the critical few key objective, indicators and projects needed

to steer the organizationMission Statement

President Direct reports

Key

objectives

Objectives

that need to

be achieved

to attain the

mission

statement

Key

indicators

Indicators

showing

progress

towards

attaining the

goal

Key

objectives

Objectives

established to

move the

presidents

key

indicators in

proper

direction

Key

indicators

One or more

indicator

shows

progress

towards each

key objective

Potential six

sigma

projects

Six sigma

projects used

to improve

or innovate

process to

move

indicators in

proper

direction.

Business Objectives

Four types

a. Financial objectives:

Include the management or stakeholders objective to make more profit,

market share, dominance of growth, and desire for high turnover,

less financial Loss

b. Process improvement objectives:

Management desire for consistency and uniformity in the output,

high productivity, products services and

process that exceed the needs & wants of current & future stake holder.

Produce products that incur less warranty costs, ease in distribution

c. Customer satisfaction:

Desired outcome ( joy security, personal time, belonging),

Undesired outcome (avoidance or elimination of death, taxes,

discomfort, wasted time, frustration.

c. Customer Satisfaction:

Desired product/ service outcome: ease of use,

accessibility, low cost of ownership, durability and

appeal.

Desired process characteristics: timely arrival of the

product , no waiting time, ease of acquisition.

d. Employee growth and development of key objectives:

Improving leadership skills

Providing training opportunities

Providing educational opportunities

Leading and lagging indicators:

Financial objectives are the result of customer satisfaction, Customer satisfaction is the

result of process improvement and process improvement is a function of employee

growth and development objectives.

Key indicators

Measurement that monitors the status of the key objective

a. Attribute indicators

Monitored by the attribute data such as count over time,

ex: customer complaints over week, percentage of defects etc…

b. Measurement indicators

Need to actually measure the data, ex: cycle time to file a report,

waiting time in a bank, diameter of the ball bearing, etc..

c. Binary indicators

Action being accomplished on the said date. Etc.. Yes/ No type of

situations

d. List by time period indicators

List of employees not trained in safety standards etc..

e. Gantt chart indicators: deadlines

Tasks and projects:

Task is a process improvement activity in which necessary process

change is known by the process owner.

But he/she has not had enough opportunity to effect the process change.

The need is determined by existing gap between real and ideal value

of indicator

Project:

Project is a process improvement activity, where the necessary process

changes are unknown to the process owner, generally process owner

forms a team to identify the gap between real and ideal (required)

values between the key indicators.

There are three categories of tasks/ projects

a. zero project or task: the purpose of zero project or task is to get

the current value of the zero.

Examples: Zero defects, or to reduce the unit to unit variation

from the normal golden ornaments.

b. Increase project or task: aim is to increase:

example increase the revenue or profit

c. Decrease project or task:

Reduce the cost, reduce the cycle time

Big Business (Y s)

Process Ys

Y

Y

Y

Y

Project Y

X1X2

X3

Voice of CustomerVoice of Employee Voice of Share holder

Key output matrices aligned

with strategic goals/objectives

of business. Big Ys provide a

direct measure of business

performance

Key out put metric that

summarize process

performance

Key out put metric that

defined from the

customers perspective

The overall business…

Orders received by phone

Orders received by email

Average orders Received per hour Orders received in person

Orders received by fax

Timely processing of orders Orders received by snail mail

Time to enter the order

Average time to process an order Time to check the inventory

Time to process payment

Time to arrange shipment

CTQ Drill down….. CTQ Tree

President Direct reports

Business objectives

Business indicators

Area objectives

Area indicators

Potential six sigma projects

Increase the number of order

Number of order per month

Increase the number of orders for the department

Number of orders per month

New customer or promotion project

Increase the number of services

Average number of services utilized by the customer Std deviation of the services utilized by the customer

Increase the number of services utilized by each customer

a. average and Std deviation of the customer services

Existing customer promotion projects

Minimize the production cost

Production cost per month

Minimize the production cost in the division

Production cost in the dept

Quality project

Eliminate employee complaints

Number of employee complaints

Eliminate the employee complaints in the dept

Employee complaint per month in dept

Employee moral project.

Project Prioritization Matrix

The Define Phase1. Determine the project CTQs (VoC analysis)

a. Identify customersb. Gather VOCc. Organize and Prioritize VOCd. Translate VOC to CTQs

2. Define the Project

3. Project Chartera. Business Caseb. Problem and Goal Statementc. Project Scoped. Miles stones and responsibilities

4. Map the processa. Process operational Definitionb. benefits of process planningc. SIPOC Modeld. Mapping guidelines

VoC analysis

a. Reactive data analysis

b. Proactive data analysis

Procative data analysis (KANO model)

Step 1: Collect the voice of customer data

a. Identify the heavy and lead users.

Heavy users: Actual users of the product

Lead users: are the customers/users of the product years

ahead of the regular users.

Example: washing machine/ hair dryer/ hairdryer

used as portable body warmer.

b. collect the data:

Step 2: Analyse the data:

a.classify the data obtained into product/ service specific and

Circumstantial data.

Circumstantial data gives idea of which products are used by customer

Product/ service data describes about expectations from customer.

Develop the features: Determine the key or group of circumstantial

parameters. This can be done using an affinity diagram.

Has an access to

expertise

Calls if problem

arises

Easy process

Can apply over phone Responsive to phone calls Make me feel comfortable

Advice Consulting

Knows the business

Graps my financial

status quickly

Makes finance

Cares about my

Availability when I need to talk

Personal Interface

Knowledgeable

representatives

Professional

Friendly

Know the status of loan

during application

Preference if having a

Savings/ current Account

Easy application

Easy Acess to capital

Quick decisionAll charges clearly stated

Pay back when needed

NO Prepayment Penalities

Pre-approved Credit

Flexible product

Low interest rate

Variable terms

Credit card example

Availability

Will come to my facilty

Availability after business hours

Affinity Diagram….

Affinity Diagram

Tool that gathers large amount of data and organizes them into groupings based on the natural relationships

Steps:Step 1: Generate Ideas (brain storming)

Step 2: Display the Ideas

Step 3: Sort ideas into groups

Step 4: Create header cards

Step 5: Draw finished diagram

Step 3:

Development of cognitive image of the product:

a. Team members restate each focus point into one or more

operationally definable CTQs.

b. The engineers/ developers use the technical know how or

restate the focus point into one or more operationally definable CTQs

c. Experts restudy the use of product and restate focus point if required.

Carry out Kano Analysis for the desired point

Determine the Project CTQs (recap)

• Identify customers

• Gather VOCThe "voice of the customer" captures the

requirements/feedback from the customer (internal or external) to provide the customers with the best in class service/product quality.

Captured in a variety of ways: Direct discussion or interviews, surveys, focus groups, customer specifications, observation, warranty data, field reports, complaint logs, etc.

CTQs (recap)

• Measurable characteristics that must be met in order to satisfy the customer.

• Defined by the customer (Internal or External).

• Interpreted from a qualitative customer statement to

an actionable, quantitative business specification.

• CTQs are what the customer expects of a product... the spoken needs of the customer.

The Kano Model*

Developed in the 80's by Professor Noriaki Kano,

Based on the concepts of customer quality

Provides a simple ranking scheme which differentiates

Basic and Attractive attributes.

Basic attributes (must be):

Attributes which must be present in order for the product to be successful

One dimensional attributes (Performance / Linear)

These characteristics are directly correlated to customer satisfaction.

Attractive attributes (Exciters / Delighters/ Attractive)

Customers get great satisfaction from a feature –

and are willing to pay a price premium.

Satisfaction will not decrease (below neutral) if product lacks feature

Companies carry out QFD or Pareto analysis or Affinity diagram in lieu of Kano Model Analysis

High Satisfaction

(delighted) Performance

( linear)

Basic

Low Satisfaction

(disgusted)

High quality performance

Quality of performance

not achieved

Exciters or

delighters

Pictorial form of Kano model

Time

Determine main features, which need to be classified

Firstly, the features of interest need to be determined

Devise questionnaire

Aims to understand how potential customers would feel if a feature was either present or not present.

Achieved by asking two questions for each feature –

A functional question (ie - the feature is present) and

A dys-functional question (ie the feature is not present),

Methodology of carrying out Kano model

If you have a blue tooth facilty in a mobile phone, how would you feel? 1. Like it

2. Must be

3. Neutral

4. Live with

5. Dislike

If you do not have a blue tooth facilty in a mobile phone, how would you feel? 1. Like it

2. Must be

3. Neutral

4. Live with

5. Dislike

One way (O) user satisfaction is proportional to

performance of this feature. Lesser the user satisfaction,

more is the performance

Must Be (M) User satisfaction is not proportional to the performance

less performance, less user satisfaction, but high

performance creates feeling of indifference to the feature.

Attractive (A) User satisfaction is not proportional to performance

Low levels of the performance creates the feeling of

indifference to the feature, but high level of performance

create feeling of delight

Indifferent (I): User does not care about the feature

Questionable (Q) Users response does not make any sense

Reverse (R ) User offers response opposite to the responses

expected by individuals.

• Identify classificationBased upon the responses, the type of feature can be determined from a simple look-up table,

Indifferent responses:

These are attributes to which the customer pays

no attention "If they are present, it is nice.

If they are not present, it does not matter"

Questionable responses and reversals:

Responses which contradict each other

1. Like 2. Must be 3. Neutral 4. Live with 5. Dislike

1. Like Questionable Attractive Attractive Attractive One dimentional

2. Must be Reverse Indifferent Indifferent Indifferent Must be

3. Neutral Reverse Indifferent Indifferent Indifferent Must be

4. Live with Reverse Indifferent Indifferent Indifferent Must be

5. Dislike Reverse Reverse Reverse Reverse Questionable

Customers

Requirements

Functional (positive)

question

Dysfunctional (negative) Question

Sum responses*

As with any interview method, sufficient responses must be sought.

Plot features onto the Kano graph

Ideally, the features should be mapped onto the graph to provide avisual guide to the relative importance from a user perspective of different aspects of functionality; We compute customer satisfaction coefficient.

Product requirement A O M I R Q Total

Battery Life >3 days 7 32.3 49.3 9.5 0.4 1.5 100

Camera 10.4 45.1 30.5 11.5 1.2 1.3 100

Bluetooth 63.8 21.6 2.9 8.5 0.7 2.5 100

*As per the survey carried in the year 2004

Customer Satisfaction Coefficient

Extent of satisfaction =IMOA

OA

+++

+

Extent of dis-satisfaction =IMOA

MO

+++

+− )(

Product requirement Dissatisfaction index Satisfaction Index

Battery Life >3 days -0.831804281 7.329255861

Camera -0.775384615 10.8625641

Bluetooth -0.253099174 64.0231405

Definition of the Project and Project Charter

An Agreement between the organization providing the product or service, and

the customer organization requesting and receiving project

It defines• Partners and external stakeholders;

• The project management framework to be used on project;

• Roles, responsibilities, accountabilities, and activities of team members;

• Management commitments (specifically in terms of communications and control);

and,• The empowerment framework.

Effective project planning tool

A communication vehicle that can be referenced

throughout the project.

It is a quick reference and overview of what the project

is about, why it is being conducted, who is involved and in what capacity, and the general approach and timeline

that exists for the project.

Business case/

Benifits

Problem/

opportunity

statement

Goal

statement

Project

Scope

Milestone/

Project

plan

Resources/

Team

Members

Roles

Does project Y linkwith Business Ys

What is the improvementteam seeking to achieve

Start with a verb ( reduce, eliminate, increase)

Focus on the project ( cycle time, accuracy etc.)

Target (by 50%)

Deadline

What is included /not included

What are boundaries? Scope/out of scope

Who are the key resources?

Roles of GBs/ BBs

The Scope

Following needs to be answered in details:

Project PurposeA brief description of the project.

Describe in business terms the reason for project and overall

timing and expectations.

Some background information about how and why the project was initiated should also be included.

Describe who will use final outcome of the project and identify any other stakeholders who will be impacted by results of project.

The Business Case document may already contain

information to be included in section and should be

referenced as appropriate.

Project Scope

Defines the spectrum of features and functionality that will be

delivered and limits that have been imposed in order to controlthe release or delivery of the product or service

(what project will accomplish)

The project scope defines the work that is required to deliver the

project product or service to meet the project objectives (how the project will be accomplished).

Project Objectives

Identify the overall objectives for the project. Identify what the

project is intended to achieve, in business and technical

terms.

Outstanding Issues

Identify any outstanding issues that need to be resolved

within the scope of the Project. These are issues that have been identified during the Business Case creation

and approval process and/or through project initiation process.

R

e

f

e

r

e

n

c

e

s

I

d

e

n

ReferencesIdentify any other documents, that relate to project at the time of development of project Charter.

Include the current revision number, issue date, author, location

of the document and method of access for each document or

reference.

Rather, enough information should be provided to explain how document relates to the project, what it contains that

is pertinent to the project, and how it can be located.

MAP the Process

Supplier(s) Customer(s)

The Business Process

outputsInputs

The SIPOC Model

The SIPOC Model

S I P O CSuppliers Inputs Outputs CustomersProcess

The Process Map

List a. CTQs

b. Boundry

Supplier: The provider of inputs to the process

Inputs: Materials, resources, or data required to execute process

Process: A collection of activities that takes one or more inputs and creates and output that is of

value to the customer

Output: The products or services that results from the process

Customer: The recipient of the process output

CTQ: Critical to Quality characteristics

Boundry: Limits of a particular process that defines

start and stop of the process

The SIPOC Model…. continued

GRPI: Goals Roles Process Interpersonal

GRPI is a check list to see how well the personal in the team

have understood the project and

cope up with other persons in the team

Steps to be followed:1. Distribute the copies of the check list to all

the team members prior to the team meeting

(after the first meeting). 2. Ask each team member to submit

the copies by the next meeting.3. The team members discuss and resolve the

issues related to the check list.4. Share difficulties if any with the leader.

Goals Comfortable Uneasy

How clear and in agreement are you on the mission

and the goals of our team/ projects?

Purpose and Outcome

Have you understood and agree on your project 5 4 3 2 1

mission and the desired oct come

Cutomer and needs

Do you know who the project stake holders are and 5 4 3 2 1

what they require and what this projct is relly needed.

Goals and Deliverabes

Have you identified specific, measurable and prioritized 5 4 3 2 1

project goals and deliverables linked to the business goals

Project Scope and definition 5 4 3 2 1

Do you understand and agree on what in/out of our

project scope and tasks.

Rating

GRPI Check List

Roles Comfortable Uneasy

How well do we understand, agree on and fulfill the

roles and responsibilities for our team

Roles and responsibilities

Have you defined and agreed on our roles, responsibilites, 5 4 3 2 1

requiredskills and resources for our project team

Authority and Autonomy

Are you clear on the degree of authority/empowerment 5 4 3 2 1

we have to meet our project mission

GRPI Check ListRating

Process Comfortable Uneasy

Critical Success factors

Do you know and focus on the key factors needed 5 4 3 2 1

to meet the project goals and mission

Plans and Activities

Do you have a effective game plan to folloe that 5 4 3 2 1

includes the righttasks; clearly defined / assigned

Monitoring and measures

Do you have an effective monitoring process and 5 4 3 2 1

specific metrics linked to process and goals

Schedule/ Milestones

Have you defined the project schedule and know 5 4 3 2 1

what the key phases and milestones are

GRPI Check ListRating

Interpersonal Comfortable Uneasy

Team Operating Agreement

Do you have shared expectations, agreed and 5 4 3 2 1

followed guidelinesfor how our team works together

Interpersonal / team

We have necessary relationships, trust, openness, 5 4 3 2 1

participationand behaviours for a healthyand productive team

GRPI Check ListRating

If the total score by everybody is greater than “36”

means that the team members are ready for the project

to be executed.