Purpose of six sigma : Purpose of six sigma : To make customer happier and increase To make customer happier and increase

profitsprofits

Introduction To Six Sigma

Origin of Six Sigma

• 1987 Motorola Develops Six Sigma– Raised Quality Standards

• Other Companies Adopt Six Sigma– GE

•Promotions, Profit Sharing (Stock Options), etc. directly tied to Six Sigma training.

– Dow Chemical, DuPont, Honeywell, Whirlpool

Time Line

20021995199219871985

Dr Mikel J Harry wrote aPaper relating early failures to quality

Motorola

Allied Signal

General Electric

Johnson & Johnson,Ford, Nissan,Honeywell

Current Leadership Challenges

• Delighting Customers.• Reducing Cycle Times.• Keeping up with Technology Advances.• Retaining People.• Reducing Costs.• Responding More Quickly.• Structuring for Flexibility. • Growing Overseas Markets.

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.

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

• Key issues for Leadership:– How will leadership organize to support Six

Sigma ? (6 council, Director 6 , etc)– Transition rate to achieve 6 .– Level of resource commitment.– Centralized or decentralized approach.– Integration with current initiatives e.g. QMS– How will the progress be monitored?

Management Involvement?

What can it do?Motorola:

– 5-Fold growth in Sales– Profits climbing by 20% pa– Cumulative savings of $14 billion

over 11 yearsGeneral 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

GE Six Sigma Economics

1996 1998 20002002

0

500

1000

1500

2000

2500

1996

CostBenefit

(in millions)

Source: 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

PAIN, URGENCY, SURVIVAL

COSTS OUT

GROWTH

TRANSFORM THE ORGANIZATION

CHANGE THE

WORLD

6 SIGMA AS ASTATISTICAL

TOOL

6 SIGMA AS APHILOSOPHY

6 SIGMA ASA PROCESS

Overview of Six Sigma

Overview of Six Sigma

It is a Philosophy– Anything less than

ideal is an opportunity for improvement

– Defects costs money– Understanding

processes and improving them is the most efficient way to achieve lasting results

It is a Process– To achieve this level of

performance you need to:

Define, Measure, Analyse, Improve and Control

It is Statistics– 6 Sigma processes will

produce less than 3.4 defects per million opportunities

Philosophy• Know What’s Important

to the Customer (CTQ)• Reduce Defects

(DPMO) • Center Around Target

(Mean) • Reduce Variation

(Standard Deviation)

Critical Elements

• Genuine Focus on the Customer• Data and Fact Driven Management• Process Focus• Proactive management• Boundary-less Collaboration• Drive for Perfection; Tolerance for failure

Data Driven Decision

• Y• Dependent• Output• Effect• Symptom• Monitor

• X1 . . . XnX1 . . . Xn• IndependentIndependent• Input-ProcessInput-Process• CauseCause• ProblemProblem• ControlControl

f(X)f(X)Y=Y=

The focus of Six sigma is to identify and control XsThe focus of Six sigma is to identify and control Xs

Two Processes

• Define• Measure• Analyze• Improve• Control

• DefineDefine• MeasureMeasure• AnalyzeAnalyze• DesignDesign• VerifyVerify

DMAICDMAIC DMADVDMADV

• Existing Processes • New ProcessesNew Processes• DFSSDFSS

Key Concepts

COPQ (Cost of Poor Quality)

- Lost Opportunities

- The Hidden Factory

- More Setups- Expediting Costs- Lost Sales- Late Delivery- Lost Customer Loyalty- Excess Inventory- Long Cycle Times- Costly Engineering Changes

Average COPQ approximately 15% of Sales

Hidden Costs:- Intangible- Difficult to Measure

Traditional Quality Costs:- Tangible- Easy to Measure

- Inspection- Warranty- Scrap- Rework- Rejects

0%5%

10%15%20%25%30%35%40%45%50%

2 3 4 5 6

Cos

t of Q

ualit

y %

Sal

es

Sigma Level

COPQ v/s Sigma Level

CTQ (Critical-To-Quality)

• 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

Defective and Defect• A nonconforming unit is a defective unit• Defect is nonconformance on one of many

possible quality characteristics of a unit that causes customer dissatisfaction.

• A defect does not necessarily make the unit defective

• Examples:– Scratch on water bottle – (However if customer wants a scratch free bottle, then

this will be defective bottle)

Defect Opportunity• Circumstances in which CTQ can fail to

meet.• Number of defect opportunities relate to

complexity of unit.• Complex units – Greater opportunities of

defect than simple units• Examples:

– A units has 5 parts, and in each part there are 3 opportunities of defects – Total defect opportunities are 5 x 3 = 15

DPO (Defect Per Opportunity)• Number of defects divided by number of

defect opportunities• Examples:

– In previous case (15 defect opportunities), if 10 units have 2 defects.

– Defects per unit = 2 / 10 = 0.2– DPO = 2 / (15 x 10) = 0.0133333

DPMO (Defect Per Million Opportunities)

• DPO multiplies by one million• Examples:

– In previous case (15 defect opportunities), if 10 units have 2 defects.

– Defects per unit = 2 / 10 = 0.2– DPO = 2 / (15 x 10) = 0.0133333– DPMO = 0.013333333 x 1,000,000 = 13,333

Six Sigma performance is 3.4 DPMO

13,333 DPMO is 3.7 Sigma

Yield• Proportion of units within specification

divided by the total number of units.• Examples:

– If 10 units have 2 defectives– Yield = (10 – 2) x 100 /10 = 80 %

• Rolled Through Yield (RTY)– Y1 x Y2 x Y3 x ……. x Yn– E.g 0.90 x 0.99 x 0.76 x 0.80 = 0.54

Forms of Waste

What are the forms of waste?

1. Waste of Correction2. Waste of Overproduction3. Waste of processing4. Waste of conveyance (or transport)5. Waste of inventory6. Waste of motion7. Waste of waiting

1. Waste of correction• Repairing a defect wastes time and

resources (Hidden factory)

Operation Operation 11 TestTest TestTest ProductProductOperation Operation

22

FailureFailureInvestigationInvestigation

ReworkRework

FailureFailureInvestigationInvestigation

ReworkRework

HiddenHiddenFactoryFactory

2. Waste of Overproduction

• Producing more than necessary or producing at faster rate than required– Excess labor, space, money, handling

3. Waste of processing• Processing that does not provide value to

the product– Excess level of approvals– Tying memos that could be handwritten– Cosmetic painting on internals of equipment– Paint thickness more than specific values

4. Waste of conveyance• Unnecessary movement of material from

one place to other to be minimized because -– It adds to process time– Goods might get damaged

• Convey material and information ONLY when and where it is needed.

5. Waste of inventory• Any excess inventory is drain on an

organization.– Impact on cash flow– Increased overheads– Covers Quality and process issues

• Examples– Spares, brochures, stationary, …

6. Waste of Motion• Any movement of people, equipment,

information that does not contribute value to product or service

7. Waste of Waiting• Idle time between operations• Period of inactivity in a downstream

process because an upstream activity does not deliver on time.

• Downstream resources are then often used in activities that do not add value, or worst result in overproduction.

Some more sources of Waste

• Waste of untapped human potential.• Waste of inappropriate systems• Wasted energy and water• Wasted materials• Waste of customer time• Waste of defecting customers

What is Sigma?

Have you ever…• Shot a rifle?• Played darts?

What is the point of these sports?What makes them hard?

Jack

Jill

Who is the better shooter?

Have you ever…• Shot a rifle?• Played darts?

Variability

• Deviation = distance between observations and the mean (or average)

Observations Deviations

10 10 - 8.4 = 1.6

9 9 - 8.4 = 0.6

8 8 - 8.4 = -0.4

8 8 - 8.4 = -0.4

7 7 - 8.4 = -1.4

averages 8.4 0.0

Jack

871089

Jill

• Deviation = distance between observations and the mean (or average)

Observations Deviations

7 7 - 6.6 = 0.4

7 7 - 6.6 = 0.4

7 7 - 6.6 = 0.4

6 6 - 6.6 = -0.6

6 6 - 6.6 = -0.6

averages 6.6 0.0

Jack

Jill

76776

Variability

• Variance = average distance between observations and the mean squared

Observations Deviations

10 10 - 8.4 = 1.6

9 9 – 8.4 = 0.6

8 8 – 8.4 = -0.4

8 8 – 8.4 = -0.4

7 7 – 8.4 = -1.4

averages 8.4 0.0

Squared Deviations

2.56

0.36

0.16

0.16

1.96

1.0

Variance

Jack

871089

Jill

Variability

• Variance = average distance between observations and the mean squared

Observations Deviations

7 7 - 6.6 = 0.4

7 7 - 6.6 = 0.4

7 7 - 6.6 = 0.4

6 6 – 6.6 = -0.6

6 6 – 6.6 = -0.6

averages 6.6 0.0

Squared Deviations

0.16

0.16

0.16

0.36

0.36

0.24

Variance

Jack

Jill

76776

Variability

Variability• Standard deviation =

square root of variance

Jack

Jill

Average Variance Standard Deviation

Jack 8.4 1.0 1.0Jill 6.6 0.24 0.4898979

But what good is a standard deviation

The world tends to be bell-shaped

Most outcomes

occur in the middle

Fewer in the “tails”

(lower)

Fewer in the “tails” (upper)

Even very rare outcomes are

possible

Even very rare outcomes are

possible

Variability

Add up the dots on the dice

0

0.05

0.1

0.15

0.2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Sum of dots

Prob

abili

ty 1 die

2 dice

3 dice

Here is why: Here is why: Even outcomes that are equally Even outcomes that are equally likely (like dice), when you add likely (like dice), when you add them up, become bell shapedthem up, become bell shaped

Variability

Normal distributions are divide upinto 3 standard deviations on each side of the mean

Once your that, you know a lot about what is going on

And that is what a standard deviation is good for

“Normal” bell shaped curve

Causes of Variability

• Common Causes:– Random variation within predictable range (usual)– No pattern– Inherent in process– Adjusting the process increases its variation

• Special Causes– Non-random variation (unusual)– May exhibit a pattern– Assignable, explainable, controllable– Adjusting the process decreases its variation

Limits• Process and Control limits:

– Statistical– Process limits are used for individual items– Control limits are used with averages– Limits = μ ± 3σ– Define usual (common causes) & unusual (special

causes)• Specification limits:

– Engineered– Limits = target ± tolerance– Define acceptable & unacceptable

Usual v/s Unusual, Acceptable v/s Defective

Another View

LSL USL USLLSL

Off-Target Large Variation

On-Target

CenterProcess

Reduce Spread

The statistical view of a problem

USLLSL LSL = Lower spec limit

USL = Upper spec limit

More about limits

Good quality: defects are rare (Cpk>1)

Poor quality: defects are common (Cpk<1)

Cpk measuresmeasures “Process Capability”

If process limits and control limits are at the same location, Cpk = 1. Cpk ≥ 2 is exceptional.

μtarget

μtarget

Process capability

Good quality: defects are rare (Cpk>1)Poor quality: defects are common (Cpk<1)

Cpk = min

USL – x3σ

=

x - LSL3σ

=

3σ = (UPL – x, or x – LPL) = =14 20 26 15 24

24 – 203(2)

= =.667

20 – 153(2)

= =.833

1 122 3 4 5 6 7 8 9 10 11

1 1 1 1 116

LSL USL

A Six Sigma Process –

Predictably twice as good as what the customer wants

3 v/s 6

2 3 4 5 6 7 8 9 1210 16151413111

LSL USL

6 Sigma curve

3 Sigma curve

Process shift allowed

2 3 4 5 6 7 8 9 1210 16151413111

LSL USL

SD = 1

1.5 SD 1.5 SD

Six Sigma Measurement

34

56

7

66810

6210

233

3.4

Sigma

DPMOOn one condition :Calculate the defects and estimate the opportunities in the same way...

Six Sigma Measurement

0

100,000

200,000

300,000

400,000

500,000

600,000

1.5 2.5 3.5 4.5 5.5

# of Sigmas

# of

Def

ect p

er M

illio

n

Sigma Defects numbers per million 1.5s 500,000 2.0s 308,300 2.5s 158,650 3.0s 67,000 3.5s 22,700 4.0s 6,220 4.5s 1,350 5.0s 233 5.5s 32 6.0s 3.4

Components of Six Sigma

ComponentsTwo components of Six

Sigma

1. Process Power

2. People Power

Process Power

P-D-C-A

P

DC

APlan

DoCheck

ActAct on what was learned

Check the results

Plan the change

Implement the change on a small scale.

Approach

Practical Problem

StatisticalProblem

Statistical Solution

Practical Solution

DMAIC - simplified

• Define– What is important?

• Measure– How are we doing?

• Analyze– What is wrong?

• Improve– Fix what’s wrong

• Control– Ensure gains are maintained

to guarantee performance

DMAIC approach

DDefine

MMeasure

AAnalyze

IImprove

CControl

Identify and state the practical problem

Validate the practical problem by collecting data

Convert the practical problem to a statistical one, define statistical goal and identify potential statistical solution

Confirm and test the statistical solution

Convert the statistical solution to a practical solution

Define

DDefine

MMeasure

AAnalyze

IImprove

CControl

VoCVoC - Who wants the project and why ?

The scope of project / improvement (SMART Objective)

Key team members / resources for the project

Critical milestones and stakeholder review

Budget allocation

Measure

Ensure measurement system reliability

Prepare data collection plan

Collect data

- Is tool used to measure the output variable flawed ?

- How many data points do you need to collect ?- How many days do you need to collect data for ?- What is the sampling strategy ?- Who will collect data and how will data get stored ? - What could the potential drivers of variation be ?

DDefine

MMeasure

AAnalyze

IImprove

CControl

Analyze

How well or poorly processes are working compared with- Best possible (Benchmarking)- Competitor’s

Shows you maximum possible result

Don’t focus on symptoms, find the root cause

DDefine

MMeasure

AAnalyze

IImprove

CControl

Improve

Present recommendations to process owner.

Pilot run- Formulate Pilot run.

- Test improved process (run pilot).

- Analyze pilot and results.

Develop implementation plan.

- Prepare final presentation.

- Present final recommendation to Management Team.

DDefine

MMeasure

AAnalyze

IImprove

CControl

Control

Don’t be too hasty to declare victory.

How will you maintain to gains made?- Change policy & procedures- Change drawings- Change planning- Revise budget- Training

DDefine

MMeasure

AAnalyze

IImprove

CControl

Omitting a step in DMAIC?

Step Consequences if the step is omitted 1. Define2. Measure3. Analyze4. Improve5. Control

Benchmark Baseline Contract / Charter Kano Model Voice of the Customer Quality Function Deployment Process Flow Map Project Management “Management by Fact” – 4 What’s

7 Basic Tools Defect Metrics Data Collection, Forms, Plan, Logistics Sampling Techniques

Cause & Effect Diagrams Failure Models & Effect Analysis Decision & Risk Analysis Statistical Inference Control Charts Capability Reliability Analysis Root Cause Analysis 5 Why’s Systems Thinking

Design of Experiments Modelling Tolerancing Robust Design Process Map

Statistical Controls Control Charts Time Series Methods Non Statistical Controls Procedure adherence Performance Mgmt Preventive activities Poke yoke

DefineWhat is wrong?

MeasureData & Process

capability

Analyze When and whereare the defects

ImproveHow to get to six sigma

ControlDisplay

key measures

Tools for DMAIC

ComponentsTwo components of Six

Sigma

1. Process Power

2. People PowerTell me, I forget. Show me , I remember. Involve me, I understand.

Master Black Belt

Black Belts

Green Belts

Team Members / Yellow Belts

Cha

mpi

ons

Mentor, trainer, and coach of Black Belts and others in the organization.

Leader of teams implementing the six sigma methodology on projects.

Delivers successful focused projects using the six sigma methodology and tools.

Participates on and supports the project teams, typically in the context of his or her existing responsibilities.

6 Training

Six Sigma Organization

Champion

BlackBelt

BlackBelt

BlackBelt

GreenBelt

GreenBelt

GreenBelt

GreenBelt

GreenBelt

YellowBelt

YellowBelt

YellowBelt

YellowBelt

MasterBlackBelt

SeniorExecutives

Champions /Process owners

Black-Belt

Green Belt

Employees(Yellow-Belt)

Executive overview2/3 Days Provide Leadership

Champions Training - I

2 days

Champions Training –II

3 days

Process Mgmt. & Project champion

Week 2

Week 3

Week 4

Training /Facilitation

skills

Project-work

Master Black-Belt-As Trainer-Coach teams-Facilitateimprovement projects

1 Week Green-Belt Training

- Part of project teams- Sometime lead the

teams

1 / 2 Days core training on Six-Sigma

- General process control &

improvement- Project Team

Member

Black-Belt

Project work

Position in Six Sigma Organisation Typical

TrainingExpected Role Post Training

+

(Total 5 days)

6 Training

Week 1

Champion

• Plans improvement projects• Charters or champions chartering process• Identifies, sponsors and directs Six Sigma

projects• Holds regular project reviews in

accordance with project charters• Includes Six Sigma requirements in

expense and capital budgets

Champion• Identifies and removes organizational and

cultural barriers to Six Sigma success.• Rewards and recognizes team and

individual accomplishments (formally and informally)

• Communicates leadership vision• Monitors and reports Six Sigma progress• Validates Six Sigma project results• Nominates highly qualified Black Belt

and/or Green Belt candidates

Master Black BeltRoles Responsibilities

- Enterprise Six Sigma expert- Permanent full-time change agent

- Certified Black Belt with additional specialized skills or experience especially useful in deployment of Six Sigma across the enterprise

- Highly proficient in using Six Sigma methodology to achieve tangible business results.

- Technical expert beyond Black Belt level on one or more aspects of process improvement (e.g., advanced statistical analysis, project management, communications, program administration, teaching, project coaching)

- Identifies high-leverage opportunities for applying the Six Sigma approach across the enterprise

- Basic Black Belt training- Green Belt training- Coach / Mentor Black Belts

Roles Responsibilities- Six Sigma technical expert- Temporary, full-time change

agent (will return to other duties after completing a two to three year tour of duty as a Black Belt)

- Leads business process improvement projects where Six Sigma approach is indicated.

- Successfully completes high-impact projects that result in tangible benefits to the enterprise

- Demonstrated mastery of Black Belt body of knowledge

- Demonstrated proficiency at achieving results through the application of the Six Sigma approach

- Coach / Mentor Green Belts- Recommends Green Belts for

Certification

Black Belt

Green Belt

Roles Responsibilities- Six Sigma Project originator- Part-time Six Sigma change

agent. Continues to perform normal duties while participating on Six Sigma project teams

- Six Sigma champion in local area

- Recommends Six Sigma projects- Participates on Six Sigma project

teams- Leads Six Sigma teams in local

improvement projects

Yellow BeltRoles Responsibilities

- Learns and applies Six Sigma tools to projects

- Actively participates in team tasks- Communicates well with other team

members- Demonstrates basic improvement tool

knowledge- Accepts and executes assignments as

determined by team

Financial Analyst

• Validates the baseline status for each project.

• Validates the sustained results / savings after completion of the project.

• Compiles overall investment vs. benefits on Six Sigma for management reporting.

• Will usually be the part of Senior Leadership Team.

Thought of the day

• We don't know what we don't know• We can't act on what we don't know• We won't know until we search• We won't search for what we don't

question• We don't question what we don't measure• Hence, We just don't know

Project Selection

The first step to implement Six Sigma

Sources of Projects

• External Sources:– Voice of Customer

• What are we falling short of meeting customer needs?

• What are the new needs of customers?– Voice of Market

• What are market trends, and are we ready to adapt?

– Voice of Competitors• What are we behind our competitors?

Sources of Projects

• Internal Sources:– Voice of Process

• Where are the defects, repairs, reworks?• What are the major delays?• What are the major wastes?

– Voice of Employee• What concerns or ideas have employees or

managers raised?• What are we behind our competitors?

• As a team List down at least 20 improvement projects related to your work areas …….

A Problem Statement should be SMART: Specific - It does not solve world hunger Measurable - It has a way to measure success Achievable - It is possible to be successful Relevant - It has an impact that can be

quantified Timely - It is near term not off in the future

Project Selection

Harvesting the Fruit of Six Sigma

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Sweet FruitSweet Fruit Design for Repeatability

Bulk of FruitBulk of FruitProcess Characterization and Optimization

Low Hanging FruitLow Hanging FruitSeven Basic Tools

Ground FruitGround FruitLogic and Intuition

Process Enhancement

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Types of Savings

• Hard Savings:– Cost Reduction

• Energy Saving• Raw Material saving• Reduced Rejection, Waste, Repair

– Revenue Enhancement• Increased production• Yield Improvement• Quality Improvement

• Hard Savings:– Cash flow improvement

• Reduced cash tied up in inventory• Reduced late receivables, early payables• Reduced cycle time

– Cost and Capital avoidance• Optimizing the current system / resources• Reduced maintenance costs

Types of Savings

• Soft Savings:– Customer Satisfaction / Loyalty– Employee Satisfaction

Types of Savings

Cost of implementing• Direct Payroll

– Full time (Black Belts, Master Black Belts)• Indirect Payroll

– Time by executives, team members, data collection

• Training and Consulting– Black Belt course, Overview for Mgmt etc.

• Improvement Implementation Costs– Installing new solution, IT driven solutions etc.

What Qualifies as a Six Sigma Project

• Three basic qualifications:– -There is a gap between current and

desired / needed performance.– The cause of problem is not clearly

understood.– The solution is not pre-determined, nor is

the optimal solution apparent.

How many projects out of 20 now qualify as Six sigma projects?

Way forward

• Get Started• Look for low hanging fruits• Even poor usage of these tools will get

results• Learn more about Six Sigma