Six Sigma

What is Six Sigma?? A statistical concept that represents amount of variation in a process relative to a specification 99.9997% defect free A business philosophy focused on continuous improvement of key processes through the use of thorough process analysis to achieve operational excellence

What’s So Bad About Variation? In world-class organizations, working to improve quality is not an extracurricular activity. It is a minimum requirement. - Chang, Labovitz, and Rosansky Ask students and have them list the problems with variation – Less variation is good because: greater predictability in the process less waste, less rework; lowered costs products and service that perform better and last longer happier customers who value your company as a suppler Bottom line is the bottom line – less variation saves the company MONEY!

DPMO 1 sigma = 68.27% = 697,700 dpmo 3 sigma = 99.73% = 66,810 dpmo And let’s learn some other SS lingo: CTQ = key feature by which the customer evaluates quality of product or service. A CTQ or more is needed for each project, so you have a measurable against which to post progress. 3 key features to a CTQ – --critical to the customer’s perception of quality --can be measured --a specification can be set to measure against. Unit – item you produce or process Defect– unit that does not meet customer requirements Defective – a unit with one or more defects Defect opportunity – a measurable chance for a defect to occur Sigma – expression of process yield based on DPMO Is Six Sigma possible?? Ryan says IF normal distribution were real, this would be 2 defects in one billion. .002 DPMO In reality 3.4 dpmo is 4.5 sigma, or a shift of about 1.5 sigma for process to be off center (believed to be “natural variation” Note: estimates of long-term sigma values

Where did Six Sigma Come From? Motorola started it GE made Six Sigma famous Based on the QI tools learned in this course, plus other tools Need for companies to become more competitive Motorola – Bill Smith in mid-1980’s. The company discovered that products made with a high first pass yield (no rework, repair) rarely failed in actual use. So, Motorola focused it efforts to create strategies to reduce defects in products. In 1988, among the first to win the MBNQA. Today – go to their website and see what has happened after 15 years. GE: Jack Welch decided to do SS in a big way. Discuss his influence and his books. Competitive: many large, well-known companies are “doing SS”. (Planning to have one of those large companies come here.) Larger companies can afford to do it the “six sigma way”. Many are seeing as much as 5% increases in net profit. Typical project nets somewhere between $40K and $250K. Also significant improvement in product quality – GE Med saw 10X increase in life of CT scanner tubes; plastic division increased capacity to an extra plant. Smaller companies need to evaluate its efficacy. Or use FIT Sigma from Basu and Wright. Comment on the Quality Beyond Six Sigma book.

www.motorola.com Motorola has been implementing Six Sigma throughout the organization now for over 15 years, extending the practice beyond manufacturing into transactional, support, and service functions. As a result, we have documented over $16 billion in savings to our own organization!

SS is not Continuous QI SS has an increased focus on quality as defined by the customer and uses a “sigma score” SS uses rigorous statistical techniques SS prioritizes improvement projects and resources based on the company’s strategic initiatives It is TQM with a stats focus – quantitative and qualitative From Six Sigma Memory Jogger II Also see B&W, page 38 and figure 3.3 on page 39

How to Do SS Management commitment Focus on the Customer Structured Training Encourage open discussion about processes and defects Gather data, analyze it, make improvements (DMAIC) on a project basis Create a team-based, cooperative environment Management – this is the most critical first step. Must be 100% committed. Tell the story about R. Hruby and TQM/Zero Defects. Focus on customer – using tools to gather information Structured training – which we will talk about next. Critical to develop a diverse group of well-trained people from all over the company. Accounting, HR, operations, quality, etc. Open discussion – everyone has a common goal – to reduce variation. DMAIC – more later Team-based cooperative environment -- TQM

The Training Black Belt Green Belt (Yellow Belt) Master Black Belt Champion Executive Sponsors BB – up to $30K GB -- $10-$20K MBB – up to $40K plus must learn to teach Yellow – less than green belt; not part of original Champion – few days training, needs to be senior management Execs – one day overview; approve the money to be spent MBB pay – over $100K. Do only this. BB pay – all over, but I have heard $60-$150K. Do only this…………. GB – in addition to other duties. ROI: typical BB can work on projects worth $500-$1MM per year

Typical Structure for SS at GE

SS Deployment (from B&W) Business alignment planning First wave of BB training Second wave of BB and GB training Infrastructure development to deliver results and sustain culture (a QMS is always best)

SS Method 1 Define 2 Measure 5 Control 4 Improve 3 Analyze pp. 47-48 in B&W 4 Improve 3 Analyze

Financial Tool: COPQ Cost of Poor Quality Internal Failure External Failure Appraisal Prevention (Lost Opportunity) COPQ is derived from the non-value-added activities of waste in a process, and is made up of the costs listed………………..

Internal Failure Costs Design corrective action Production rework Material losses (scrap) Machine down time Overtime

Appraisal Costs Measuring/inspecting product Receiving inspection Testing External and internal auditors

External Failure Costs Cost of recall/warranty Liability claims Customer complaint investigations Loss of customer loyalty Effects on reputation/marketplace perception

Prevention Costs Customer satisfaction surveys Supplier reviews and ratings Process validation SPC Education/training

Lost Opportunity Costs Lost sales Lost customers Delayed market entry Environmental and safety issues

Total Cost of Quality Add up all costs COPQ Ratio = Total Cost of Quality $ Monthly Cost of Sales $ Examples COPQ is important! In an average company, COPQ are 25-30% of the cost of sales; in a SS company, COPQ is at 1% of the cost of sales.