Operations Management Dr. Ron Lembke Six Sigma Operations Management Dr. Ron Lembke

6 sigma DPMO: Defects Per Million Opportunities DMAIC: Define, Measure, Analyze, Improve, and Control (Alternate meaning: Dumb Managers Always Ignore Customers) DCDA: Plan, Do, Check, Act

6  (6 sigma) The goal is to ensure that no unacceptable parts are ever passed on to a customer. A defect is anything that does not fall within the customer’s tolerance limits Through continuous process improvement, Lower the process variability so low that the upper and lower specifications are 6 standard deviations above and below the mean

6  (6 sigma) 3 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 6

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

Defects - 2 With a 1.5σ shift, defect rates become: 3σ 66,807 dpmo The commonly accepted definition of 6σ quality is having a defect rate <= 3.4 dpmo 1.5 4.5 3 6

Black Belts Green Belts: some 6 sigma training, take part in teams, small solo work Black Belts: Coach or lead 6 sigma improvement teams Master Black Belts: have in-depth statistical training, serve as Black Belts for more teams Champions: Executives who will back up the proposals the black belts come up with

Pareto Chart - ranked histogram Invented by Joseph Juran Beer defects

Wilfredo Pareto 1848-1923 Italian Economist “80/20” rule: 80% of the wealth is controlled by 20% of the people Cours d'économie politique (1896-7) 80/20 rule believed to apply much more widely 1906- “Pareto Optimality” – not possible to make anyone better off (in his own estimation) without making someone else worse off

Cause & Effect Diagram Example Method Manpower Over Time Drill Tired Too Many Defects Slow Wood Not maintained Not dried Steel Lathe Material Machinery

Control Chart Example UCL LCL

Dilbert’s View

Fortune Story 58 large companies have announced Six Sigma efforts 91% trailed S&P 500 since then, according to Qualpro, (which has its own competing system) July 11, 2006

Qualpro’s “Six Problems with Six Sigma” Six sigma novices get “low hanging fruit” “Without years of experience under the guidance of an expert, they will not develop the needed competence” Green belts get advice from people who don’t have experience implementing it Loosely organized methodology doesn’t guarantee results (and they do?) Six Sigma uses simple math – not “Multivariable Testing” (MVT) Six Sigma training for all is expensive, time-consuming Pressure to “do something” – low value projects

Qualpro Errors DuPont: MVT saved us $23 million Correlation is not causality “Six Sigma is merely an overpriced set of low-level statistics courses” Charles Holland, CEO, ChiefExecutive.net 1/29/07 Stock price is the only important measurement? How were 58 companies selected? What was date of starting Six Sigma? Comparing 12 MVT vs 12 Six Sigma: 84% vs 95% since 9/17/01 DuPont: MVT saved us $23 million Six Sigma saved us $3 billion 3/07

Six Sigma Narrow focus on improving existing processes Best and Brightest not focused on developing new products Fortune July 11, 2006 Can be overly bureaucratic

Summary What is Quality? Pioneers of Quality ISO 9000, and Malcolm Baldrige National Quality Award Six Sigma Much in common with TQM DMAIC, Green and Black Belts Six Sigma isn’t perfect, but very useful