Introduction To Six Sigma - Institute Of Management Kolhapur - 04 08 08

INTRODUCTION TO SIX SIGMA Institute 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 Sigma’s 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 Purpose of six sigma : To make customer happier and increase profits

Current Leadership Challenges
Delighting Customers.
Reducing Cycle Times.
Retaining People.
Reducing Costs.
Responding More Quickly.
Structuring for Flexibility.
Growing Overseas Markets.

Six Sigma
Six 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

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 ( D efine, M easure, A nalyse, I mplement, C ontrol).

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
GE
Promotions, Profit Sharing (Stock Options), etc. directly tied to Six Sigma training.
Dow Chemical, DuPont, Honeywell, Whirlpool

Time Line 2002 1995 1992 1987 1985 Dr Mikel J Harry wrote a Paper relating early failures to quality Motorola Allied Signal General Electric Johnson & Johnson, Ford, Nissan, Honeywell

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:
D efine, M easure, A nalyse, I mprove and C ontrol
It is Statistics
6 Sigma processes will produce less than 3.4 defects per million opportunities

Overview of Six Sigma PAIN, URGENCY, SURVIVAL COSTS OUT GROWTH TRANSFORM THE ORGANIZATION CHANGE THE WORLD 6 SIGMA AS A STATISTICAL TOOL 6 SIGMA AS A PHILOSOPHY 6 SIGMA AS A PROCESS

The Villain Cost of Poorly Performing Processes  level DPMO CP 3 2 308,537 Not Applicable 3 66,807 25%-40% of sales 4 6,210 15%-25% of sales 5 233 5%-15% of sales 6 3.4 < 1% of sales Each sigma shift provides a 10% net income improvement Cost of Poorly Performing Processes (CP 3 ) Sigma (  ) 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. Why is Six Sigma Important?

C ost 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.

… and the Hero
We don’t know what we don’t know.
We can’t do what we don’t know.
We won’t know until we measure.
We don’t measure what we don’t value.
We don’t value what we don’t 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 companies to create products & services with added features and functions that result in greater market share.
What Does Six Sigma Tell Us?

What it means to be @ Six Sigma Example quoted from GE Book of Knowledge - copyright GE Is 99% (3.8  ) good enough? 99.99966% Good – At 6  20,000 lost mails per hour 7 lost mails per hour Unsafe drinking water almost 15 minutes each day One minute of unsafe drinking water every seven months 5,000 incorrect surgical operations per week 1.7 incorrect surgical operations per week 2 short or long landings at most major airports daily One short or long landing at major airports every five years 200,000 wrong drug prescriptions each year 68 wrong drug prescriptions each year

Have you ever…
Shot a rifle?
Who is the better shooter? Jack Jill

More about limits Good quality: defects are rare (C pk >1) Poor quality: defects are common (C pk <1) C pk measures “Process Capability” If process limits and control limits are at the same location, C pk = 1. C pk ≥ 2 is exceptional. μ target μ target

Six Sigma Measurement On one condition : Calculate the defects and estimate the opportunities in the same way... 3 4 5 6 7 66810 6210 233 3.4  Sigma DPMO

Six Sigma Measurement 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

Philosophy
Know What’s Important to the Customer (CTQ)
Reduce Defects (DPMO)
Center Around Target (Mean)
Reduce Variation (Standard Deviation)

Six Sigma - Three Dimensions Tools Organization Methodology Driven by customer needs Enabled by quality team. Led by Senior Mgmt Define Measure Analyze Improve Control Process Map Analysis Pareto Chart Process variation LSL USL Upper/Lower specification limits Regression • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

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 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 1996 1998 2000 2002 0 500 1000 1500 2000 2500 1996 Cost Benefit (in millions)

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

COPQ v/s Sigma Level Cost of Quality % Sales 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

Defect Opportunity
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

Components of Six Sigma

The DMAIC Model Define Control Measure Improve Analyze Voice of the Customer Institutionalization

DMAIC - simplified
D efine
What is important?
M easure
How are we doing?
A nalyze
What is wrong?
I mprove
Fix what’s wrong
C ontrol
Ensure gains are maintained to guarantee performance

DMAIC approach D Define M Measure A Analyze I Improve C Control 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 D Define M Measure A Analyze I Improve C Control VoC - 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 ?
D Define M Measure A Analyze I Improve C Control

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 D Define M Measure A Analyze I Improve C Control

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.

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

Tools for DMAIC Define What is wrong? Measure Data & Process capability Analyze When and where are the defects Improve How to get to six sigma Control Display key measures
Statistical Controls
Control Charts
Time Series
Methods
Non Statistical
Controls
Procedure
adherence
Performance
Mgmt
Preventive activities
Poke yoke
Design of
Experiments
Modelling
Tolerancing
Robust Design
Process Map
Cause & Effect
Diagrams
Failure Models &
Effect Analysis
Decision & Risk
Analysis
Statistical Inference
Control Charts
Capability
Reliability Analysis
Root Cause Analysis
7 Basic Tools
Defect Metrics
Data Collection,
Forms, Plan,
Logistics
Sampling
Techniques
Benchmark
Baseline
Contract / Charter
Voice of the
Customer
Quality Function
Deployment
Process Flow Map
Project
Management

Design for Six Sigma Applications of Six Sigma that focus on the design or significant redesign of products and services and their enabling processes so that from the beginning customer needs and expectations are fulfilled are known as Design for Six Sigma or DFSS . The focal aim of DFSS is to create designs that are resource efficient, capable of exceptionally high yields, and are robust to process variations. This aim leads to the DFSS algorithm D efine- M easure- A nalyze- D esign- V erify (DMADV).

D efine V erify D esign A nalyze M easure D esign for S ix S igma (DFSS) All new products at GE are designed using a DFSS algorithm. D efine customer requirements and goals for the process, product or service. M easure and match performance to customer requirements. A nalyze and assess the design for the process, product or service. D esign and implement the array of new processes required for the new process, product or service. V erify results and maintain performance. Six Sigma: How Do We Design?

DFSS is changing GE. With it GE can build on all of its Capabilities and take all of its product and process designs to a new level of world-class performance and quality. The essence of DFSS is predicting design quality up front and driving quality measurement and predictability improvement during the early design phases-a much more effective and less expensive way to get to Six Sigma quality than trying to fix problems further down the road. What We Do . GE Corporate Research and Development Design for Six Sigma at GE:

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 …….
Project Selection A Problem Statement should be SMART :
S pecific - It does not solve world hunger
M easurable - It has a way to measure success
A chievable - It is possible to be successful
R elevant - It has an impact that can be quantified
T imely - It is near term not off in the future

Harvesting the Fruit of Six Sigma - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Sweet Fruit Design for Repeatability Bulk of Fruit Process Characterization and Optimization Low Hanging Fruit Seven Basic Tools Ground Fruit Logic 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?

PREREQUISITES FOR SUCCESSFUL SIX SIGMA IMPLEMENTATION
A visible commitment from the top leadership.
Using the language of six-sigma throughout the organisation
Relentless goals that force process re-engineering.

PREREQUISITES FOR SUCCESSFUL SIX SIGMA IMPLEMENTATION
The use of innovative ideas to improve processes.
Use of data and not emotion to make decisions.
Maintaining six-sigma as a topic of interest.
Engaging and empowering the employees

Way forward
Get Started
Look for low hanging fruits
Even poor usage of these tools will get results
Learn more about Six Sigma

Six Sigma Organizations
GE … All 300,000+ GE employees must be Six Sigma certified. All new GE products developed using the “Design for Six Sigma” (DFSS) approach .
3M … New CEO (from GE) requires all 3M employees to become Six Sigma certified.
Dupont
AlliedSignal
Sun Microsystems
Raytheon
Motorola
Boeing
Lockheed-Martin
Bank-of-America
American Express
HSBC
SAS Institute
Rapidly Increasing Areas of Application.
Healthcare – GE Heathcare - SLC
Financial,
Military – NSWC, Pentagon, etc.
Fueled by :
Strategic Contexts.
Notorious bottom-line orientation & results.
Adaptable to multiple bottom lines.
Process orientation: rigorous and systematic approaches to innovation and design.
Focus on the customer.
Successful track record elsewhere.
“ Industry Buzz”.
While Six Sigma is new at, for example, 3M – its benefits at others of these organizations is measured in the multi-billions of US dollars.

The Growth of Six Sigma

Six Sigma from the GE Perspective Six Sigma has changed the DNA at GE – it is the way that GE works – in Everything that GE does and -in every product GE designs.

General Electric CEO, Jack Welch, describes Six Sigma as “the most important initiative GE has ever undertaken.” GE’s operating income, a critical measure of business efficiency and profitability, hovered around 10% for decades.
In 1995 Welch mandated that each GE operation from credit card services to aircraft engine plants to NBC-TV work toward achieving Six Sigma. GE was averaging about 3.5  when it introduced the program.
Six Sigma and General Electric

With Six Sigma embedding itself deeper into GE’s processes, they achieved the previously “impossible” operating margin of 16.7% in 1998 – up from 13.6% in 1995.
In dollar amounts, Six Sigma delivered more than $300 million to GE’s 1997 operating income and more than $600 million in 1998.

GE in 2002
Spending 600 million on 6 sigma projects
4000 experts and 10000 trained employees
Target savings 2.5 billion dollars
Helping suppliers like Dell Computers, wal- Mart,

Six Sigma and Raytheon
Former AlliedSignal executive Daniel P. Burnham, who became Raytheon’s CEO in 1998, has made Six Sigma a cornerstone of the company’s strategic plan.
By pursuing Six Sigma quality levels throughout the company, Burnham expects Raytheon to improve its cost of doing business by more than $1 billion annually by 2001.

Six Sigma and the Service Sector Robert Galvin: Former Motorola CEO
Failing to implement Six Sigma in commercial areas with the same force that the company implemented it in its industrial sectors cost Motorola $5 billion over a four-year period.

AlliedSignal
70,000 Employees
Chemicals, Fibers, Plastics, Aerospace Products, Automotive Products.
Larry Bossidy came from GE to become CEO in 1991
Market Value = $4 billion in 1991
Market Value = $29 billion by the end of 1998
Market Value = $38 billion by 2000.

AlliedSignal
TODAY’S GOALS :
6% productivity increase
Reduced Inventory
Full-Capacity Utilization
Little or no Overtime
Reliable Products
5s Manufacturing
5s Designs
Predictable Cash Flow
5s Suppliers
BY END OF 1998 :
Total Impact of Six Sigma Within AlliedSignal Reached $2 Billion.
Six Sigma Profits in Service Areas including:
Order Processing
Shipping
Procurement
Product Innovation

Six Sigma Changed the Company Culture and
One of the flaws at Allied is that we had too much vertical mobility . Managers inch up the same smokestack, learning more and more about less and less. But companies that train promising individuals as Black Belts circumvent the vertical flow and move people around horizontally, having them serve time in as many major businesses or divisions as possible to give them a kaleidoscopic view of the organization and the benefit of being mentored by a variety of new blood.
Linked AlliedSignal’s Goals, Vision & Activities.

Hindrances to Six Sigma Success
Working on too many improvements at the same time.
Not having someone accountable for the problem.
Not being a process-based company.
A lack of trained and experienced people.
Middle managers who fear uncertainty about future roles.
Lack of metrics focused on customer value-added processes.
Lack of integrated information and financial systems.
Fragmented, staff-driven approaches.

Six Sigma Organization

Six Sigma Organization Champion Black Belt Black Belt Black Belt Green Belt Green Belt Green Belt Green Belt Green Belt Yellow Belt Yellow Belt Yellow Belt Yellow Belt Master Black Belt

The Quality Team Master Black Belt Black Belt Black Belt Green Belt Green Belt Green Belt - Thought Leadership - Expert on Six Sigma - Mentor Green and Black Belts
Backbone of Six Sigma Org
Mentor Green Belts
- Full time resource
- Deployed to complex or “high risk” projects
- Part time or full time resource
Deployed to less complex projects in areas of functional expertise

6  Training Master Black Belt Black Belts Green Belts Team Members / Yellow Belts Champions 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.

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

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

Master Black Belt
- 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
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
Responsibilities Roles

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
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)

Yellow Belt
Actively participates in team tasks
Communicates well with other team members
Demonstrates basic improvement tool knowledge
Accepts and executes assignments as determined by team
Learns and applies Six Sigma tools to projects

Green Belt
Recommends Six Sigma projects
Participates on Six Sigma project teams
Leads Six Sigma teams in local improvement projects
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

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.

Project Selection
The first step to implement Six Sigma

Six Sigma – Career Option!
Basic - Six Sigma Awareness
Green Belt Projects
Participate in Black Belt Projects
Assist business functions with day to day activities
Mentor/Train Green Belts
Black Belt Projects
Change Agents
Work along with the business owners
Mentor/ Train Black Belts
Run Strategic projects
More Strategic than tactical role
Green Belt (GB) Black Belt (BB) Master Black Belt (MBB) Highly paid! Work like a Consultant! Huge demand in the industry! Overall…A high flying Career!!

Thank You

Introduction To Six Sigma - Institute Of Management Kolhapur - 04 08 08

by Siddharth Nath on Feb 04, 2009

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Introduction To Six Sigma - Institute Of Management Kolhapur - 04 08 08 Presentation Transcript