Session 1b - Six Sigma Overview

Six Sigma Overview

For more in-depth background, please read:
What is Six Sigma?, Donald P. Lynch

Topics
1.
2.
3.
4.
5.

Six Sigma Overview

Business Case for Six Sigma
Integration of Lean and Six Sigma
Six Sigma Players
Six Sigma Quality Level

Pat Hammett - University of Michigan

Session 1b - Six Sigma Overview

1. What is Six Sigma?

Six Sigma is:

a systematic methodology utilizing data analysis techniques,

to measure and improve a company's business performance measures (Ys),
by identifying and preventing 'defects and inefficiencies' in
manufacturing and service-related processes,
to meet and exceed customer needs

Industry Implementations

Successfully applied in numerous industries

automotive, discrete parts, aerospace, financial, health systems, etc.
Within manufacturers, successfully applied to:
manufacturing Manufacturing Six Sigma
operations/business processes Transactional Six Sigma

Nearly all systems involve an underlying process and benefit

from reducing variation and/or improving flow

Process-Driven Approach
Inputs (Xs)
Key Process
Input Variables (KPIV)

Key Product/Process
Output Variables (KPOV)

Apply DMAIC Problem Solving Method

Define, Measure, Analyze, Improve and Control

Prevention (focus: designing quality into new products)

Outputs/ Metrics (Ys)

Find and Fix (focus: existing problems)

Process

Apply Design for Six Sigma (DFSS)

e.g., IDDOV or DMADV Methods (not covered in this course)

Which do you suspect is more commonly applied?

Which likely has a greater impact? WHY?
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Pat Hammett - University of Michigan

Session 1b - Six Sigma Overview

Performance Measures, Ys

Gaps between customer expectations/ desires and

what you provide.

External Critical-to-Quality Measures (CTQ):

Internal CTQ Measures:

customer satisfaction, perceived value ratings, warranty

scrap, rework, repeated tasks;

Processing inefficiencies and waste.

Critical-to-Delivery (C-T-Delivery or CT-Time):

cycle time, lead time, overtime, service time, etc.

Of course, all of these are Cost Surrogates.

So, Six Sigma is about improving:

Quality, Cost, Delivery (Q.C.D.) or Q.C.T. (T-time)

The Six Sigma Way: Y=f(X)

Sigma () - Greek letter used to represent standard

deviation which measures variation

Six Sigma Approach: improve Ys by:

minimizing variation in inputs, or

finding best settings for control factors, or
managing noise factors

Xs
Input Variables
(e.g., supplier)

Controllable Process
Factors (settings)

P-Diagram

Process

Outputs (Ys)

Uncontrollable
Factors

Pat Hammett - University of Michigan

Session 1b - Six Sigma Overview

Six Sigma Is it Anything New?

Grab any old Quality or TQM book and you will find:

Most quality philosophies are the same as Six Sigma

And many (but not all) tools / techniques are the same.

e.g., customer defines quality, design quality in, etc.

From an implementation standpoint, however,

Six Sigma has been more successful through:

greater emphasis on solving problems that result in savings

(bottom-line improvements, $$),
common language and metrics (defect per million opportunity),
common problem solving methods (Six Sigma DMAIC Method)
integrating tools/methods into everyday job function,
better training,
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more effective implementation.

2. Business Case:
Driver for Six Sigma Deployment

Core Belief:

highest quality producer should be the lowest cost producer

Six Sigma aimed at reducing costs of poor quality

Many companies with large publicized savings*

General Electric, Honeywell, Bank of America, ..

Note: Many companies have successful continuous improvement

efforts that do not use Six Sigma (it is not the only way)

*Harry, M. and Schroeder, S. (2000). Six Sigma: The Breakthrough Management Strategy, Currency.
*Smith, D, and Blakeslee, J. (2002). Strategic Six Sigma, Best Practices from the Executive Suite.
*Six Sigma: A Methodology for Manufacturers, Not a Strategy. Gartner Report, September 2002.
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Pat Hammett - University of Michigan

Session 1b - Six Sigma Overview

Costs of Poor Quality

Savings reported in large Six Sigma Deployment include traditional costs

of poor quality and those below the surface (known as Hidden Factory)

Scrap

Rejected Raw
Material Costs
Unnecessary
Inspection

Warranty

Rework

Excess
Inventory

Extra
Communication

Clean-up/
Housekeeping

Overtime

Long
Setup Costs

Resource
Imbalance

Information
Lookup Costs

Downtime

Resolving
Customer
Complaints
Engineering
Changes

Lost Customer
Replacement
Cost

Cost of Poor Quality (COPQ)

Research

Link between quality defect levels and total

costs of poor quality as % of sales*

SIGMA LEVEL DEFECTS PER MILLION OPPORTUNITIES

COST OF QUALITY

2
3
4
5

308,537(Noncompetitive companies)
66,807
6,210(Industry average)
230

Not applicable
25 - 40% of sales
15 - 25% of sales
5 - 15% of sales

3.4 (World class)

< 1% of sales

Each sigma shift provides a 10 percent net income improvement.

*Harry and Schroeder (2000), Six Sigma Breakthrough Strategy, Currency

DPMO Defects per million opportunity

Sigma Level non-linear quality index related to yield (or % Ok)

Pat Hammett - University of Michigan

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Session 1b - Six Sigma Overview

Why is Six Sigma

working for some?

Strong Leadership Commitment

Effective Deployment Strategies (Training, Organization,
and Management).
And, because successful companies:
take top employees,
train them in the use of proven analytical tools,
motivate them with greater recognition for their
efforts,
give them projects to work on that matter, AND
give them the necessary support to solve problems.
(such as time, software, resources).
Organization wants it to succeed!
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Why is it not working for others?

leadership offers marginal to limited support,

egos get in the way (not-my-idea),
managers dont give employees necessary
time/resources to complete projects,
participants are pushed through training
programs, and do not develop the necessary skills
to be effective,

Participants do not effectively communicate

project savings / quantify impact.

Lack of organizational commitment!

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Pat Hammett - University of Michigan

Session 1b - Six Sigma Overview

3. Lean and Six Sigma Integration

Common Theme: Continuous Improvement

Best Quality - Lowest Cost - Shortest Lead Time - Best Safety - High Morale
through exceeding customer requirements and elimination of waste

Lean Tools/Methods
Right part, right amount,
right time
Create Flow
Leveled Production
Takt time planning
Continuous flow
Pull system Effective
Layout
Quick changeover
JIT supply chain
5 Whys

Six Sigma Tools/Methods

Predictable, on-target, low

variation, error-free processes.

Process Analysis
Value Stream Map
Process Maps
Eliminate Waste
Poka-Yoke

Create Stable/Capable Process

DMAIC Problem Solving and
Statistical Data Analysis
Pareto Analysis (Prioritization)
Cause-effect Analysis
Measurement System Analysis
Stratification Analysis
Experimental Design
Control Plans

Visual Management and Standardized Work

Organized and Documented Processes (e.g., 5S Workplace)1313

Different Paradigms for Lean

and Six Sigma Integration

Six Sigma and Lean as Conflicting

Six Sigma as a Sub-Set of Lean (Lean Bias)
Lean as a Sub-Set of Six Sigma (Six Sigma Bias)
Separate but Equals
Integrated/Complementary

- Most experienced with both strategies view Lean as an excellent

prerequisite to Six Sigma, but not a standalone solution

- Six Sigma Complementary Strengths

- Characterizing/decomposing process variation

(Strong link between smooth flow and low variation)

- Techniques for Process optimization and robustness

Pat Hammett - University of Michigan

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Session 1b - Six Sigma Overview

4. Six Sigma Roles

Managerial/
Organizational
Executive Leadership:
Set performance expectations
Champion:
Deployment Leaders
Master Black Belts (MBB):
In-House Experts
Teach and Mentor BB, GB
Figure out what to do

Problem Solving/
Execution
Black Belts (BB):
Advanced Statistical Skills
Solve Impact Problems
(e.g., $100-250K per project)
Green Belts (GB):
Moderate Data Analysis Skills
Work on simpler projects, or
Subtasks of larger projects

More GBs More Savings

They Do

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Applying the Six Sigma Tools

Green Belt and Black Belt Training focuses on:

Structured approach to problem solving (DMAIC method) and data

analysis skills (statistical analysis tools)

Still, being an effective Green or Black Belt involves more

than simply knowing statistics. It involves:

Selecting right projects (with quantifiable savings)

Project management skills (able to execute projects)
Data collection skills (knowing what/how to collect)
Data analysis skills (finding critical Xs)
Data presentation skills (influencing decisions)

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Pat Hammett - University of Michigan

Session 1b - Six Sigma Overview

5. Six Sigma Quality Level

Six Sigma Quality derives from a

goal of % in-specification (or %
On-Time) greater than

99.99966%, OR
Less than 3.4 defects per million
opportunities (DPMO)

Note: 99% OK = 1% Defective =

10,000 defects per million (DPM).

Six Sigma seeks to do better!

*Based on assumption of stable process with

low variation (Cp > 2) following normal
distribution with a mean deviation within
1.5*process standard deviation of nominal

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Metrics used in Six Sigma

Some common metrics used to evaluate performance:

Use Historical Capability Measures: Yield, % defective, Cp/Cpk

Example: % On-Time Delivery

DPM -- Defects per million (% Defective x 1M)

where each unit is defective/not defective
DPM = PPM (parts per million defective)

DPMO -- Defects per million opportunity

where each unit may have 1 or more types of errors/defects
Paint Shop: dirt, craters, thin, sags, misapplied sealer
Six Sigma Quality < 3.4 defects per million opportunity
Note: if unit has only one defect opportunity, DPM = DPMO

Sigma Level index related to DPM/DPMO

Non-linear Scale: ~ where a score of 6 equates to 3.4 DPM0)

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Pat Hammett - University of Michigan

Session 1b - Six Sigma Overview

Conflicting Objective?

Suppose a Six Sigma project reduces defects from

40,000 to 1000 DPM (from 96% to 99.9%)

Should a Company:

continuously apply six sigma resources (BBs / GBs)

toward reducing variation to less than 3.4 DPM, Or
shift resources to another project with a greater cost (or
time) savings?

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Six Sigma Impact Problems

In

the end, Six Sigma is about applying a

data-driven systematic methodology to solve
impact problems linked to:
bottom line savings
cost avoidance
revenue growth

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Pat Hammett - University of Michigan

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