Six Sigma

1. Six Sigma Dr. Ron Tibben-Lembke SCM 462

2. What is it? • “It is the relentless and rigorous pursuit of the reduction of variation in all critical processes to achieve continuous and breakthrough improvements that impact the bottom line of the organization and increase customer satisfaction.” (p. 723)

3. LTL UTL LTL UTL 6 3 Process Capability • A “capable” process has UTL and LTL 3 standard deviations away from the mean, or 3σ.

4. 3 6 6  (6 sigma) 3 sigma: Probability outside range = (1 – 0.99865) * 2 = 0.0027 Defect rate = 2,699 defects per million opportunities 6 sigma: Probability part outside range = 0.00000000198024 Defect rate = 0.00197 dpm 1.97 defects per BILLION

5. Defect Rates - 1 • 3 sigma: 1/.0027 = 1 every 370 parts • 6 sigma: 1/ 0.00000000198024 • = 1 every 504.9 million parts • If we make a million parts per year, we have: • 3σ: 2,699 defectives • 6σ: 0.0019732 defectives

6. 6 Shifts in mean • Motorola, GE, Allied Signal say mean can shift 1.5 σ during early stages of 6σ implementation • A 6σ process then becomes 4.5σ. • If this happens to a 3σ process, it becomes 1.5σ 7.5 4.5

7. Defects - 2 • With a 1.5σ shift, defect rates become: • 3σ 66,807 dpm • 6σ 3.4 dpm • The commonly accepted definition of 6σ quality is having a defect rate <= 3.4 dpm

8. History at Motorola • 1986 began efforts • 1987 plan to get to 3.4 dpmo by 1992 • 1988 Malcolm Baldridge Quality Award • 1991 Black Belt (2nd generation) initiative • 1992 10x defect reduction every 2 years, cycle time every 4 • 1998 Corporate renewal • 1999 Rules of engagement, Performance Excellence, Balanced Scorecard • 2002 six sigma business improvement • 2003-05 Digital six sigma (3rd generation)

9. Six Sigma at GE • Popularized by GE in 1996 major initiative by Jack Welch • Better focus on customers • Data-driven decisions • Improved design & mfg capabilities • Individual rewards for process improvements

10. Brought to you by: • Champions: Upper executives who will back up the proposals the black belts come up with • Responsible for financial & political well-being • Selects projects to be worked on • Understands discipline and tools of 6σ • Promotes the methodology throughout the organization • Serve as coach, mentor, supports teams • Owns the process – monitoring process and measuring the savings realized • Allocates resources • 20%-30% of time on 6 sigma

11. Black Belts: Stars of the Show • Coach or lead 6 sigma improvement teams • Full-time work on defining, measuring, analyzing, improving, controlling processes A “thoroughly trained agent of improvement” Avg project saves $175k? Works on 4-6 projects per year Make sure what gets improved stays improved

12. Master Black Belts • Have in-depth statistical training, serve as Black Belts for more teams • Help companies get started, choose team and projects • Teacher, mentor, lead agent of change • Skillfully facilitate change without taking over • Pass certification exam, supervise two black belts on successful projects

13. Green Belts • Some 6 sigma training • Work on projects part-time, in a specific area • Solve chronic problems in their regular area • Take part in teams, small solo work • “Worker bees” critical to success • Must pass an exam, and participate in at least one project

14. Selection Considerations • Financial return • Impact on customers and organizational effectiveness • Probability of success • Impact on employees • Fit to strategy and competitive advantage

15. Selecting Projects • Conformance Projects • Unstructured Performance Projects • Problems because system poorly specified • Efficiency Projects • Acceptable products, not meeting internal goals • Product Design • Not meeting customer CTQ • Process design

16. DMAIC • Define • Measure • Analyze • Improve • Control • (Alternate meaning: Dumb Managers Always Ignore Customers)

17. Define • Charter / rationale for the project • Why this, not others, need for project, costs, benefits • Developing a project charter (statement of the project) • Scoping: • Improve motor reliability • Most problems from brush wear • Problem with brush hardness • Reduce variability of brush hardness

18. Define • Gather voice of the customer data to identify critical-to-quality (CTQ) characteristics important to customers • Select performance metrics • What are current levels • Expected improvements • What will need to be done, by whom

19. Define • SIPOC Understand the relationships between • Suppliers • Inputs • Process • Outputs • Customers

20. Measure Phase • Develop operational definitions for each CTQ characteristic • Figure out how to measure internal processes affecting each CTQ • Figure 10.3 • Figure out what data we need to collect • Easy to collect correctly • Interrupt process as little as possible • Collectors understand why collecting • “gage study” to determine the validity (repeatability and reproducibility) of the measurement procedure for each CTQ • Baseline data • Collect baseline capabilities for each CTQ • Determine the process capability for each CTQ

21. Analyze Phase • Understand why defects and variation occur • Find the root causes • 5W = 1H • Identify key causes • Experiments to verify impact • Formulate hypothesis, collect data

22. Analys • Identify upstream variables (x’s) for each CTQ • Process mapping • Operationally define each x • Collect baseline data for each x • Perform studies to determine the validity (repeatability and reproducibility) of the measurement process for each x • Establish baseline capabilities for each x • Understand the effect of each x on each CTQ

23. Improve Phase • Brainstorm ideas of how to improve • Determine optimal levels of critical x’s to optimize the spread, shape and center of the CTQ’s • Action plans to implement the optimal level of the x’s • Conduct pilot test of the revised process

24. Control Phase • Risk abatement planning and mistake-proofing to avoid potential problems with the revised settings of the x’s • Standardize successful process revisions in training manuals • Control revised settings of the critical x’s • Turn revised process over to the process owner for continuous improvement using the PDSA cycle

25. Report Phase • Tell everyone what you did, so they can learn from it

26. Six Sigma Training Programs • Black belt: 5 day sessions: 4 of them, with three weeks in-between • 1: Define &Measure • 2: Analyze • 3: Analyze & Improve • 4: Control & future steps • Green belt: 2 5-day sessions, three weeks in-between

27. Training Schedule Week 1 Overview Process improvement planning Process mapping Quality Function Deployment Failure mode and effects analysis Organizational effectiveness concepts Basic statistics Process capability Measurement systems analysis Week 2 Statistical thinking Hypothesis testing Correlation Simple regression Team assessment Week 3 Design of experiments Analysis of variance Multiple regression Facilitation tools Week 4 Control plans Statistical process control Mistake-proofing Team development

28. Costs of Training Programs Training time costs Material costs Training manual development costs Administrative and operating costs for DMAIC projects Infrastructure costs such as the sots of constructing and using organizational metric tracking systems Monitoring DMAIC project costs Anecdotal evidence strongly indicates that he benefits of a Six Sigma process far outweigh the costs. This book suggests benefits of $250k per project

29. Benefits of Six Sigma • Improved communication through six sigma terminology (for example, DPMO and process sigma) • Enhanced knowledge and enhanced ability to manage knowledge • Higher levels of customer and employee satisfaction • Increased Productivity • Reduced total defects • Improved process flows • Decreased work-in-progress (WIP), inventory, increased liquid capital • Improved capacity and output • Increased quality and reliability • Decreased unit costs • Increased price flexibility • Decreased time to market, faster delivery time