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1. Subject: Operations Management-II (M-207)
II Semester, MBA
Lecture 11: Six Sigma, Acceptance Sampling, Taguchi Loss
Function, House of Quality & Robustness
By:
Dr. Achin Srivastav
Associate Professor, SKIT Jaipur

2. Topics to be Covered
Six Sigma
Acceptance Sampling
Taguchi Loss Function
House of Quality
Robustness

3. Six Sigma
Six Sigma - A business process for improving quality, reducing costs,
and increasing customer satisfaction.
Statistically, six sigma means having no more than 3.4 defects per
million opportunities in any process, product, or service.
Conceptually, the term is much broader, referring to a program
designed to reduce the occurrence of defects to achieve lower costs
and improved customer satisfaction

4. Six Sigma (cont.)

5. 5
+4 +5 +6
+1 +2 +3
-2 -1
-4 -3
-6 -5 0
WASTE
Determined by
the customer
Lower
Specification
Limit
Upper
Specification
Limit
Determined by
the customer
3  Process
3  Process Centered
• We make more than
customer needs because
some of what we make
is waste
• Process is WIDER than
the specifications
Sigma Capability
The number of Sigmas between the center of a process and the nearest
specification limit
+4+5+6
+1+2+3
-2 -1
-4 -3
-6 -5 0
6  Process
6  Process Centered
• We make as much as
the customer needs
and have very little
waste
• Process FITS within
the specifications
3  Process has 66,807
dpm vs 3.4 from a 6 
process

6. Six Sigma (contd.)
Motorola pioneered the concept of a six-sigma program in the 1980s and
actually trademarked the term. Today, six sigma concepts are widely used by
businesses, governments, consultants, and even the military as a business
performance methodology.
• Bill Smith introduces the concept of six sigma at Motorola in 1986
• Motorola has achieved 80% reduction on the cost of quality per unit shipped
after using Six sigma
• Wipro, Maruti , Modi Xerox, GE,Bajaj Autos & Hero Honda are implementing
Six sigma technique in India
• ICICI Pru is the first company in India to implement six sigma
• Maruti Udyog has been implementing six sigma in spares department since
1999
• Companies who have successfully used the six sigma methodology to achieve
process excellence include American Express, General Electric, Johnson &
Johnson, Lockheed Martin, Dupont

7. Six Sigma Programs
• Six Sigma programs
• Improve quality
• Save time
• Cut costs
• Employed in
• Design
• Production
• Service
• Inventory management
• Delivery

8. Six Sigma Management
• Providing strong leadership
• Defining performance merits
• Selecting projects likely to succeed
• Selecting and training appropriate people

9. Six Sigma Technical
• Improving process performance
• Reducing variation
• Utilizing statistical models
• Designing a structured improvement strategy

10. Six Sigma in an Organisation
• Top management -Top management must formulate and communicate the
company’s overall objectives and lead the program for a successful
deployment.
• Champions - Champions identify and rank potential projects, help select and
evaluate candidates, manage program resources, and serve as advocates for
the program.
• Master “black belts”- Master black belts have extensive training in statistics
and use of quality tools. They are teachers and mentors of black belts.
• “Black belts”-Black belts are project team leaders responsible for
implementing process improvement projects. They have typically completed
four weeks of six-sigma training and have demonstrated mastery of the
subject matter through an exam and successful completion of one or more
projects.
• “Green belts”- Green belts are members of project teams.

11. Principles of Six Sigma
Six sigma is based on these guiding principles:
1. Reduction of variation is an important goal.
2. The methodology is data driven; it requires valid measurements.
3. Outputs are determined by inputs; focus on modifying and/or
controlling inputs to improve outputs.
4. Only a critical few inputs have a significant impact on outputs (the
Pareto effect); concentrate on those.

12. Six Sigma Methodology
DMAIC (define-measure-analyze-improve-control) is a formalized problem-
solving process of six sigma. It is composed of five steps that can be applied to
any process to improve its effectiveness.
The steps are:
1. Define: Set the context and objectives for improvement.
2. Measure: Determine the baseline performance and capability of the process.
3. Analyze: Use data and tools to understand the cause-and-effect relationships
of the process.
4. Improve: Develop the modifications that lead to a validated improvement in
the process.
5. Control: Establish plans and procedures to ensure that improvements are
sustained.

13. Acceptance Sampling
• Acceptance sampling uses statistical sampling to determine whether
to accept or reject a production lot of material.
• Most often a producer supplies a consumer a number of items and a
decision to accept or reject the items is made by determining the
number of defective items in a sample from the lot. The lot is
accepted if the number of defects falls below where the acceptance
number or otherwise the lot is rejected.

14. Why Acceptance sampling is employed?
• Testing is destructive
• The cost of 100% inspection is very high
• 100% inspection takes too long

15. Acceptance Sampling Plans
• Single Sampling Plan
• Double Sampling Plan

16. Operating Characteristic (OC) Curve for Single Sampling Plan

17. Type I and Type II Error

18. Taguchi Loss Function
Gnocchi Taguchi, a Japanese quality expert, holds a nontraditional view of what
constitutes poor quality, and hence the cost of poor quality. The traditional view is that
as long as output is within specifications, there is no cost. Taguchi believes that any
deviation from the target value represents poor quality, and that the farther away from
target a deviation is, the greater the cost.
The implication for Taguchi is that reducing the variation inherent in a process (i.e.,
increasing its capability ratio) will result in lowering the cost of poor quality, and
consequently, the loss to society.

19. Numerical 1 on Taguchi Loss Function

20. Numerical 2 on Taguchi Loss Function

21. Quality Function Deployment (QFD) or The House of Quality
QFD integrates the “voice of the customer” into the product and service development process.

22. Quality Function Deployment (QFD)

23. Procedure for QFD
1. Add customer needs and ratings
On the left side of the House of Quality, you’ll enter the most important customer needs based on your
research. For instance, in this House of Quality example, customers care about the following qualities when
shopping for a smartphone:
• Size
• Lightweight
• Easy to use
• Reliable
• Cheap
• Big screen
• Long-lasting battery
• High-quality camera
Next to the customer needs you have listed, rate how important each of the requirements are on a scale of 1 to
5. Customers may rate several traits of high importance, so it’s okay to have multiple 5s or multiple 4s. Ratings
don’t have to be whole numbers either.
To the right, you’ll calculate the percent of customer importance rating for each requirement. Take the rating
given to a requirement (1 to 5) divided by the total of all ratings.

24. Procedure for QFD (cont.)
2. List design requirements
Horizontally above the relationship matrix, you’ll add design requirements for the
product, such as weight, cost of production, and operating system.
3. Weigh the relationship between customer needs and design requirements
In the relationship matrix, you’ll identify how strongly each of the design parameters
affects the customer need. Use the following symbols:

25. Procedure for QFD (cont.)
4. Complete the correlation matrix
The correlation matrix will determine how design requirements help and hinder
each other.

26. Procedure for QFD (cont.)
5. Add competitor research
Finally, the competitive assessment shows how companies currently rank for each of
your customers’ needs so you can determine what has been overlooked and how
you can gain the advantage of your competition.
The correlation matrix and competitor research do not affect the importance
ratings, but they do provide additional insight to help you weigh which customer
needs and design requirements matter most.
House of Quality is now complete. This will be your guiding matrix for determining
what your product absolutely must have to appeal to your customers’ needs and
wants. It will also be a useful tool in documenting the Voice of the Customer and
keeping all processes on track throughout production.

27. Why to use QFD
QFD is a good option if any of the following apply to your business:
• Customer satisfaction is a main goal for your organization.
• There have been delays in development.
• There is poor interdepartmental communication about customer needs.
• Product and process decisions have not had clear guidelines.
• There is no clear, documented product definition.
• You are entering into a new market.
• The product is not performing as well as it had been expected to.
• The product is becoming a commodity or people already view it as a
commodity.
• There are more than one customer with differing needs.

28. Robust Design
Design that results in products or services that can function over a broad range
of conditions.
Example 1:
• Consider a pair of heavy rubber boots—just the thing for mud or snow. The rubber boots
have a design that is more robust than that of the fine leather boots.
• The more robust a product or service, the less likely it will fail due to a change in the
environment in which it is used or in which it is performed. Hence, the more designers can
build robustness into the product or service, the better it should hold up, resulting in a
higher level of customer satisfaction.

29. Robust Design
Example 2

30. References
[1 ]Stevenson, W.J. Operations Management, 11e, Tata McGraw-Hill.
[2 ]Russell & Taylor, III. Operations Management. Prentice Hall of India.
[3] Chase, R. B. et al., Operations and Supply Management, Tata McGraw-Hill, 2010.
[4] Reid & Sanders, Operations Management, 4e, Wiley, 2010.