Elliott Six-sigma is a business process improvement strategy that seeks to improve the quality of process outputs by reducing variation to achieve very small standard deviations so that almost all products or services meet or exceed customer expectations. It provides that: continuous efforts to achieve stable and predictable process results are of vital importance to business success; manufacturing and business processes have characteristics that can be measured, analyzed, improved and controlled; and achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management. The Six Sigma methodology is driven by a number of things including but not limited to: proactive management, formal tollgates, goal of 3.4 defects per million, genuine focus on customer, quality at the source, and a culture for quality and change.
Elliott The Lean methodology is a process improvement methodology focusing on time improvements. It is driven by the goal to identify each process step as value added or non-value added. Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS). It is renowned for its focus on reducing costs through the elimination of seven types of waste (muda): overproduction, excessive inventories (in process or finished goods), unnecessary processing, unnecessary motion of people, unnecessary transport of goods, waiting time, and product defects. Thus, lean manufacturing centers around on getting the right things to the right place at the right time and in the right quantity to achieve perfect work flow while minimizing waste and being flexible and adaptable to change.
Elliott Total quality management is an integrative philosophy of management for continuously improving the quality of products and processes. The main difference between TQM and Six Sigma lies in the approach. TQM attempts to improve quality by ensuring conformance to internal requirements, while Six Sigma focuses on improving quality by reducing the number of defects and impurities. Six-Sigma is a more structured approach that forces data-driven decision making in order to avoid: fixing what isn’t broken by using intuition, guessing, or jumping to conclusions. The worst project mistake an organization can make is to invest in fixing the wrong problem. TQM and Six Sigma may be most useful when a product or process is in existence at your company but is not meeting expectations in terms of customer specification or performance.
Brad DMAIC is a step-by-step approach for improving existing business processes. The Six Sigma methodology, DMAIC (Define, Measure, Analyze, Improve, Control), is used when a product or process is in existence but is not meeting customer specifications or is not performing adequately. The Six Sigma DMAIC approach combines statistical and quality management tools to ensure that processes exhibit peak performance, resulting in a dramatic increase in customer satisfaction, productivity, and shareholder value. The successful deployment of Six Sigma DMAIC requires the application of a wide range of tools, from simple quality tools (e.g., brainstorming or Pareto analysis) to advanced statistical modeling (e.g., regression analysis or designed experiments). The goal is to boost performance, drive better solutions and drastically reduce or eliminate nonconformities (defects) and problems to exceed customer requirements. There are other methodologies as well, most notable DMADV or DFSS (Design for Six Sigma), which is mainly used when designing a new process from scratch. But by far DMAIC is the most commonly one followed. They are all ‘inspired’ by Edward Deming’s Plan-Do-Check-Act Cycle, who is considered the father of modern Six Sigma (and process improvement in general) techniques.
Brad When going into the Define phase, the first phase of the DMAIC process, executive management has an idea of which processes are not producing the results their customers expect and have a vague problem statement. However, this is not enough to begin a Six Sigma project. Since Six Sigma calls for measurable results, the goal of the Define phase is to clearly identify and articulate the problem in a clear and measurable way. The basic steps to the Define phase of DMAIC are as follow: Identify or refine the problems in your process that must be solved in order to meet or exceed the customer's specifications or expectations. Identify and quantify customer requirements. Identify and quantify the process output and defects that fall short of these requirements and create a problem statement. State the project goal, which also must be a clear and measurable goal, and include a time limit for the project's completion. Determine the few vital factors that are Critical to Quality, which need to be measured, analyzed, improved and controlled. And finally, create a project charter, which will contain the problem definition, goal, business case, project scope, team members, and high level project plan for the M, A, I and C phases.
Brad The measure phase of DMAIC is dedicated to assembling a data collection plan, executing that plan and verifying the data collection is performed properly. In order to do this, the team must: Select the Critical To Quality characteristics in your process. These are the outputs of the given process that are important to the customer. Define what that process output should be, which is done by looking at the customer requirements and the project goal. Define the defect for the process. Remember, a defect is an output that falls outside the limits of customer's requirements or expectations and must be measurable. Find the inputs to the process that contribute to defects. Define the exact dollar impact of eliminating the defects in terms of increased profitability and/or cost savings. Measure the defects that affect the Critical To Quality characteristics as well as any related factors. Incorporate Measurement Systems Analysis - a method to make sure the defects are being measured properly. And refine data collection procedures, if needed. Once the defects have been measured, the Sigma Level for the process may be calculated and used as a baseline to compare against the improved process. Once the defects have been measured and all critical data collected, it is time to figure out what is causing the problems - that is, what inputs to the process, as well as parts of the process itself, are affecting the output. That leads to the next phase:
Matt At this point of the DMAIC process, the team will: Develop hypotheses about the causes of the defects. Analyze the data and process by statistical and non-statistical methods. Prove or disprove the hypothesis. If the hypothesis is correct, add it to the short-list of causes. If not, refine it.
Matt The Improve phase is the fourth step of the DMAIC process and is the point where the hard work of defining, measuring and analyzing pays off - the point where the ideas for process improvement are formulated and implemented. In this phase of DMAIC, the team will: Confirm the key process inputs that affect the process outputs, causing defects. Identify the acceptable range of each input so the Critical To Quality output stays within the specified limits. Adjust the process as needed. Plan any special measures that are needed for improvements - for example, implementation of a new or modified software system. Implement the changes. Install and validate a measurement system for the improved process. Verify the new process is working.
Matt The final phase of the DMAIC process is control. Six Sigma calls for this step which goes beyond improvement and includes the control of your improved process. There are many factors that could affect the adjusted inputs and, thus, the output, so ongoing monitoring of the process to make sure it stays &quot;in control&quot; is critical. In most cases, this is done for a limited amount of time by the Six Sigma team or the Black Belt and then handed off to the process owner. The Control process involves quality and statistical concepts that have existed for decades. However, the advent of quality control software makes the process simple enough for anyone to perform.
Matt So in summary, the deliverables for each of the 5 DMAIC phases are: Define - Team is trained and committed, customers are identified, problem identified, charter developed, current process mapped Measure - Data collection complete, current process measured, all inputs and outputs defined, performance / quality level calculated Analyze - Process analysis, input / output relationships, root cause analysis (what needs to be improved), current / future state gap identified and quantified Improve - Generate (and test) possible solutions, cost/benefit analysis, best solution selected, future-state process developed, implement change or produce implementation plan Control - New procedures documented, process monitors / dashboard in place, transfer of ownership back to business management (project closure)
Denzil We can think of Six Sigma belts in terms of martial arts belts. Beginning Six Sigma students start out with a yellow belt and upon mastery of the skill set can achieve the Six Sigma Master black belt. Attaining each belt requires the participant to exhibit a certain skill level and possess a specific set of knowledge. Many companies require a minimum belt level for employees to participate on Six Sigma project teams. The following are the different types of belts: Yellow Belt: Upon successful completion of a quality project, the Six Sigma yellow belt gets awarded to beginning students of this quality philosophy. Six Sigma yellow belts typically work on quality and process improvement projects but do not lead these projects. The yellow belts have a basic knowledge of Six Sigma DMAIC as well Pareto analysis, statistics and creating cause and effect diagrams. Green Belt: Many companies require a green belt as a minimum requirement of its Six Sigma team members. Six Sigma green belts do not work exclusively on Six Sigma projects. They may have other duties but fully participate in Six Sigma projects, lead project initiatives and implement Six Sigma methodology throughout the company. Six Sigma green belts have a solid knowledge of DMAIC, statistical analysis, value stream mapping, flow and pull systems, and types of control charts. Black Belt: The person that possesses the Six Sigma black belt typically works full-time on Six Sigma projects. They have the skill set and authority to train and certify lower belt classifications. The Six Sigma black belt trains and leads teams, implements Six Sigma methodology at all levels of an organization, and instructs others on Six Sigma practices. Master Black Belt: The master black belt represents the highest level of Six Sigma achievement. Master Black belts usually oversee the process improvement operations within an organization. They have the responsibility for directing quality projects and creating and implementing the company's quality policies. Master Black belts also train and certify Six Sigma black belts. Certifications for both green belts and black belts are offered by the Institute for Industrial Engineers and the American Society for Quality as well as by most organizations using Six Sigma .
Denzil Companies operating at three or four sigma typically spend between 25 and 40 percent of their revenues fixing problems. This is known as the cost of quality, or more accurately the cost of poor quality. Companies operating at Six Sigma typically spend less than 5 percent of their revenues fixing problems. The dollar cost of this gap can be huge. The following are examples of costs savings and benefits that various companies have achieved through practicing Six Sigma: Motorola: Motorola reported, through their Six Sigma briefings, that savings for the 10-year period from 1985 to 1995 were $11 billion. GE: GE in 1999 reported $2 billion in savings attributable to Six Sigma, and in their 2001 annual report discussed the completion of over 6,000 Six Sigma projects probably yielding over $3 billion in savings by conservative estimates. Posco: After decades of government ownership, the Korean steel company POSCO was privatized in 2000. Through its Six Sigma efforts, POSCO has produced over $1 billion in financial gains to date, including strong savings and record sales volumes. Even in 2001, the first year of its Six Sigma initiative, when twenty-five-year lows in prices hit other steelmakers and their investors hard, POSCO achieved double-digit profitability. By 2005, in less than four years, the company had transformed itself from a regional, low-cost producer to a global, value-added provider of high-quality steel. POSCO is now the third largest steelmaker worldwide. It also ranks high in terms of efficiency and profitability and has been selected as “the world’s most competitive steel firm” and competes with China to gain regional stronghold. Scottish Power: The Six Sigma approach helped Scottish Power expand from 3.2 million to 5.1 million customers in just four years, or an average of about 40,000 new customers per month during that period. This contrasts sharply with the trend of declining numbers of customers for many of Scottish Power’s competitors. These gains are even more remarkable given that all of these companies are competing in the same market for a relatively stable number of households. To date, Scottish Power has realized a total of $170 million in additional revenue and cost savings through its Six Sigma initiatives. U.S Army: Since the U.S. Army deployed Six Sigma in 2005, nearly 2,000 personnel have been trained, more than 1,000 projects have been completed, and more than 1,600 remain active. The Army credits these projects with achieving nearly $2 billion in savings so far. Caterpillar: In early September 2004, Caterpillar announced that it planned to achieve $30 billion in sales and revenues by the end of that decade. Ford: Ford held the number one position in sales for several years in American history. Part of their success was attributed to adopting Six Sigma processes in their company. In 2000, nearly $52 million was added to their bottom line. In 2001, the company reported a $300 million increase. By adopting Six Sigma standards, the company eliminated wasteful spending and reported a savings of $350 million in 2002.
Denzil There are a number of benefits that businesses can achieve by using these tools, a number of which are listed below: Increased Employee Involvement: One of the big benefits of Six Sigma is an increase in employee involvement through their participation on process improvement teams designed to help them improve processes and increase value for their customers, internal and external. By doing so, they gain a greater appreciation for business results as well as an appreciation from co-workers and departments that contribute to success. Reduced Costs: For businesses engaged in Six Sigma activities, one of the primary desired benefits is a reduction in costs associated with improvements to processes to require less time (and employee resources) and to decrease defects or errors that can result in rework. By examining the various steps involved in a process, understanding what customers value and then taking steps to eliminate unnecessary steps while increasing value, companies using Six Sigma methodologies find that they can significantly decrease costs while maintaining, and often increasing, customer value. Increased Customer Satisfaction: Since Six Sigma methodology involves a strong focus on customer needs and requirements and delivering high value to customers, one of the benefits of using these techniques is an increase in customer satisfaction. Also, Six Sigma focuses not only on product improvements, but also improvements to product delivery methods and other customer service activities that can impact customer satisfaction. Ultimately, increased customer satisfaction will lead to repeat business, increased positive word-of-mouth, and, with successful implementation, increased sales and overall business success. Although popular with many companies, Six Sigma is not without criticism. Some criticisms of Six Sigma include: Training Expenses: Most of the employees will have to be trained in the specific Six Sigma methods. Training levels follow the martial arts &quot;belts,&quot; with employees being yellow belts, green belts, black belts and master black belts, according to their status and responsibilities in the company. In addition, hiring a consulting company to help apply the Six Sigma concepts to a specific business model is beneficial. Hiring New Employees: If an employee decides to leave the company it may have a hard time replacing their skill set, especially if the employee was a Six Sigma black belt or master black belt. The company will need to hire another person who has the Six Sigma black belt training or spend the money to train a new hire which can be risky. This significantly limits the pool of applicants who may be the best person for the job. Lack of Innovation: The main purpose of Six Sigma DMAIC is to analyze the processes that are already in place to make adjustments and improvements. This can lead to a lack of innovation because employees are not motivated to think of new ideas and ways of doing things for the company. Support and Acceptance: While it is always best to have everyone in the company support and follow their methods, this is especially true for following Six Sigma. The method relies on each person giving their all to complete tasks and if even one person doesn't have faith in the process, it won't be very effective. Marketing Ploy: Overall, you can find many of the ideas in the Six Sigma program elsewhere in business management theory. You could put together a program that looks similar to the Six Sigma program without the training. The extensive training and certification programs that are required to follow Six Sigma could be viewed as just a marketing ploy. Negative effects and arbitrary standards: When large companies started to hear about the success of the Six Sigma program, they started to make changes to their organizational structure to implement the program. Unfortunately, not all companies experienced great results. In fact, &quot;Fortune&quot; magazine reports that of 58 companies that made the switch, 91% of them had stock prices that trailed the S&P 500. Six Sigma is argued as being too narrowly designed to fix an existing process and does not help in coming up with new products or disruptive technologies. Also the basis for choosing six as the number of average standard deviations is not clearly explained. Finally, some claim that 3.4 defects per million opportunities are not flexible enough to allow for peak efficiency and cost effectiveness of certain products/processes. For example, a pacemaker process might need higher standards, whereas a direct mail advertising campaign might need lower standards
Denzil Companies competing in a complex global marketplace face enormous pressure to maintain Companies competing in a complex global marketplace face enormous pressure to maintain operational excellence. By applying Six Sigma, the quality management technique used to reduce waste, eliminate product defects and improve customer satisfaction, a focus on customer needs and detailed data analysis is needed to meet that challenge. This helps in transforming the company to utilize more efficient processes and depends on executive sponsorship and trained personnel. Also, Six Sigma techniques can produce results not only to the company’s manufacturing operations but also to customer service and other business functions. The following recommendations are given for implementing Six Sigma: Training: Train staff on Six Sigma concepts so that all employees can recognize that Six Sigma techniques improve customer satisfaction rates by reducing defects to no more than 3.4 per million. Lean manufacturing techniques reduce wasteful activities in order to improve product development. Together, they help run a more efficient and productive business. Business Analysis: Identify processes needing improvement based on nonperforming operational metrics. For example, if customer satisfaction rates for a particular product consistently fall, examine the customer support logs to isolate the problem, such as raw material used in manufacturing or a flaw in the initial design. Conduct focus groups or interviews with customers, production specialists, and other personnel to gather data. Tools: Use process improvement tools, such as a fishbone diagram, to show the cause and effect of people, methods, equipment, materials, data and the environment on the development of your product or service. Costs Reduction: Focus on reducing costs by optimizing processes. Control process inputs to eliminate defects. Monitor and track your progress achieving these goals. For example, to apply Six Sigma techniques to Human Resources activities, adjust processes to reduce the time it takes to recruit, interview, hire and orient a new employee by standardizing and training personnel effectively. Apply Six Sigma to your finance organization by eliminating unnecessary approval workflows, and reducing the time it takes to complete transactions, such as paying vendors or processing your payroll. Reduce Errors: Focus on reducing errors by streamlining and automating the processes for completing work. For example, centralize your database operations so that when the sales staff enters orders, forms pre-populate with existing customer information, available inventory, and the customer's approved credit line. Capture knowledge for troubleshooting customer support calls into a database accessible by all support personnel so your support teams can reduce the time it takes to solve customer problems. Auditing: Inspect and audit processes regularly, such as on an annual basis, to maintain a high level of systems quality.
Six Sigma Process Improvement
Process Improvement using Six Sigma MBA 8125 April 14 th , 2011 ______ Team 6 ______ Elliott Wienstroer Brad Thielemann Matt Tinaglia Denzil Tauro
Agenda <ul><li>Lean/Six Sigma Methodologies </li></ul><ul><li>TQM and Six Sigma </li></ul><ul><li>DMAIC </li></ul><ul><li>Belts and Certifications </li></ul><ul><li>Pro-Six Sigma Companies </li></ul><ul><li>Benefits/Criticism </li></ul><ul><li>Recommendations </li></ul><ul><li>Questions </li></ul>
Six Sigma Methodology <ul><li>This methodology is driven by: </li></ul>A methodology used to reduce variation to achieve very small standard deviations so that almost all products or services meet or exceed customer expectations Proactive Management Formal Tollgates (DMAIC) Genuine Focus on the Customer <ul><ul><li>Culture for Quality and Change </li></ul></ul>Analytics Driven Management Comprehensive Management Philosophy Goal of 3.4 defects per million opportunities (DPMO) Quality at the Source
Lean Methodology <ul><li>Process improvement methodology focusing on time improvements </li></ul><ul><li>Identify each process step as Value Added or Non-Value Added </li></ul><ul><li>Mgmt philosophy derived from the Toyota Production System </li></ul><ul><li>Seeks to reduce costs by eliminating 7 </li></ul><ul><li>types of waste (muda): </li></ul><ul><ul><li>Overproduction </li></ul></ul><ul><ul><li>Excessive Inventory </li></ul></ul><ul><ul><li>Processing </li></ul></ul><ul><ul><li>Transportation </li></ul></ul><ul><ul><li>Motion </li></ul></ul><ul><ul><li>Waiting time </li></ul></ul><ul><ul><li>Product Defects </li></ul></ul>
TQM and Six Sigma <ul><li>TQM is an integrative philosophy of management for continuously improving the quality of products and processes </li></ul><ul><li>Main difference lies in the approach: </li></ul><ul><ul><li>TQM attempts to improve quality by ensuring conformance to internal requirements, while Six Sigma focuses on improving quality by reducing the number of defects and impurities </li></ul></ul><ul><ul><li>Six Sigma is a more structured approach that forces data-driven decision making in order to avoid: fixing what isn’t broken, using intuition or guessing, or jumping to conclusions </li></ul></ul><ul><ul><li>Worst projects mistake: Invest in fixing the wrong problem! </li></ul></ul>
DMAIC Overview <ul><li>DMAIC Objective: Collect and analyze data for the purpose of making decisions </li></ul>Process x x x x x x x x x y DEFINE 1 ANALYZE ANALYZE 3 MEASURE 2 Determine the optimal solution, and what settings will yield the very best process in the future IMPROVE 4 CONTROL Defined, has an owner Documented Standardized Controlled World class Process Maturity 5
The DEFINE Phase “ For some clients, many of their transactions have processed slower lately” From: To: “ For Client A and Client B, their website transactions took two days longer (on average) to process this month than they did last month” Typical Problem Statement: Objectives <ul><li>Clearly define and measure the problem </li></ul><ul><li>Understand the process </li></ul>Tasks & Deliverables <ul><li>Identify project team members </li></ul><ul><li>Train team on Process Improvement tools </li></ul><ul><li>Define and measure problem statement </li></ul><ul><li>Map current process (high level) </li></ul><ul><li>Write and approve project charter </li></ul>
The MEASURE Phase “ If you can’t measure it, you can’t manage it!” Objectives <ul><li>Identify inputs / process factors </li></ul><ul><li>Measure process capability </li></ul>Tasks & Deliverables <ul><li>Identify and measure process inputs </li></ul><ul><li>Measure process capability </li></ul><ul><li>Map and measure current process (detailed) </li></ul><ul><li>Calculate Performance / Quality level </li></ul>400 420 440 460 480 500 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 LCL UCL
The ANALYZE Phase Objectives <ul><li>Identify the root cause(s) of the issue </li></ul><ul><li>Identify potential solution </li></ul>Tasks & Deliverables <ul><li>Identify and prioritize input / output relationships </li></ul><ul><li>Identify root cause / improvement opportunity </li></ul><ul><li>Identify optimum settings for process inputs (X’s) </li></ul><ul><li>Current / future state gap identified </li></ul>
The IMPROVE Phase Objectives <ul><li>Develop and test potential solutions (future state) </li></ul><ul><li>Evaluate risk </li></ul>Tasks & Deliverables <ul><li>Generate possible solutions </li></ul><ul><li>Perform cost/benefit analysis </li></ul><ul><li>Develop future-state process map </li></ul><ul><li>Implement the improvement </li></ul><ul><li>Measure new process </li></ul>
The CONTROL Phase Objectives <ul><li>Implement controls and standardize </li></ul><ul><li>Evaluate benefits </li></ul>Tasks & Deliverables <ul><li>Assign ownership of the process </li></ul><ul><li>Implement visual controls </li></ul><ul><li>Perform periodic reviews </li></ul><ul><li>Measure actual financial gain </li></ul>
DMAIC Deliverables Define Team is trained and committed, customers are identified, problem identified, charter developed, current process mapped Measure Data collection complete, current process measured, all inputs and outputs defined, performance / quality level calculated Analyze Process analysis, input / output relationships, root cause analysis (what needs to be improved), current / future state gap identified and quantified Improve Generate (and test) possible solutions, cost/benefit analysis, best solution selected, future-state process developed, implement change or produce implementation plan Control New procedures documented, process monitors / dashboard in place, transfer of ownership back to business management (project closure)
Belts and Certifications <ul><li>Yellow Belt </li></ul><ul><li>Green Belt </li></ul><ul><li>Black Belt </li></ul><ul><li>Master Black Belt </li></ul><ul><li>Certifications for both green belts and black belts are offered by the Institute for Industrial Engineers and the American Society for Quality as well as by most organizations using Six Sigma </li></ul>
Benefits & Criticism <ul><li>Benefits </li></ul><ul><li>Increased Employee Involvement </li></ul><ul><li>Reduced Costs & Greater Profits </li></ul><ul><li>Increased Customer & Employee Satisfaction </li></ul><ul><li>Competitive Advantage </li></ul><ul><li>Processes are Simplified & Improved </li></ul><ul><li>Criticism </li></ul><ul><li>Expenses </li></ul><ul><li>Hiring New Employees </li></ul><ul><li>Lack of Innovation </li></ul><ul><li>Support and Acceptance </li></ul><ul><li>Marketing Ploy </li></ul><ul><li>Negative Effects and Arbitrary Standards </li></ul>
Recommendations <ul><li>Provide Training </li></ul><ul><li>Start Slow </li></ul><ul><li>Perform Adequate Business Analysis </li></ul><ul><li>Use Analytical/Software Tools </li></ul><ul><li>Reduce Errors </li></ul><ul><li>Reduce Costs </li></ul><ul><li>Perform Periodic Auditing </li></ul><ul><li>Select the Right Team </li></ul><ul><li>Subdivide Projects into Smaller Six Sigma Projects </li></ul><ul><li>Suggest Improvements in Projects for Long Term Benefits </li></ul>