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Oct 31, 2014
SIX SIGMAInstitute 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 SigmaSix 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 GEPromotions, Profit Sharing (Stock Options), etc. directly tied to Six Sigma training.
Dow Chemical, DuPont, Honeywell, Whirlpool
Johnson & Johnson, Ford, Nissan, Honeywell
Dr Mikel J Harry wrote a Paper relating early failures to quality
Six SigmaIt 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 Sigma6 SIGMA AS A PHILOSOPHY CHANGE THE WORLD TRANSFORM THE ORGANIZATION 6 SIGMA AS A PROCESS GROWTH
COSTS OUT6 SIGMA AS A STATISTICAL TOOL PAIN, URGENCY, SURVIVAL
Why is Six Sigma Important?The VillainCost of Poorly Performing Processes s level DPMO CP32 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 companiesto create products & services with added features and functions that result in greater market share.
What it means to be @ Six SigmaIs 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 day5,000 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 months1.7 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
Have you ever Shot a rifle?
Who is the better shooter?
More about limitsPoor quality: defects are common (Cpk1) target target
Cpk measures Process CapabilityIf process limits and control limits are at the same location, Cpk = 1. Cpk 2 is exceptional.
Six Sigma MeasurementSigma
54 3On one condition :Calculate the defects and estimate the opportunities in the same way...233 6210 66810 3.4 0.02
Six Sigma Measurement600,000 500,000 400,000 300,000 200,000 100,000 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
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 DimensionsCustomer Process A Process B Vendor
Driven by customer needsProcess Map AnalysisLSL US L
Led by Senior Mgmt
Upper/Lower specification limits
35 30 25 20 15 10 5 0 L K A F B C G R
100% 80% 60% 40% 20% 0% D
Enabled by quality team.
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 2002Source: 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
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
Hidden Costs: - Intangible - Difficult to Measure
The Hidden Factory
Average COPQ approximately 15% of Sales
COPQ v/s Sigma Level50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2 3 4 5 6
Cost of Quality % Sales
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. Comple