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 ”

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.

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 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.

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

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 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

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 ”.

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

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

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.

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?

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 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

Shot a rifle?

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)

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

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;

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

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.

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

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

Hidden Costs:

Intangible

Difficult to Measure

Traditional Quality Costs:

Tangible

Easy to Measure

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

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

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

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

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

Components of Six 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

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

- 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 ?

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. D Define M Measure A Analyze I Improve C Control

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 D Define M Measure A Analyze I Improve C Control

- 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

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?

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?

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

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

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:

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

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

Soft Savings: Customer Satisfaction / Loyalty Employee Satisfaction Types of Savings

Soft Savings:

Customer Satisfaction / Loyalty

Employee Satisfaction

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.

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?

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.

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.

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

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

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.

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”.

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

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.

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.

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,

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.

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.

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.

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

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.

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.

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.

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

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

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

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

- 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

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) Responsibilities Roles

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 Responsibilities Roles

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 Responsibilities Roles

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.

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

Project Selection

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!!

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

Thank You