Six Sigma Methodologies: Overview and Application to Supply Management Kimball Bullington, Ph.D., P.E. Associate Professor Middle Tennessee State University Copyright 2003, Kimball E. Bullington

Where are we going? A Brief History of Quality Six Sigma Six Sigma Revival Applying Six Sigma to Supply

America Re-discovers Deming

… and Juran

Rediscovering the Gurus Deming Emphasis on Statistical Control 14 Points for Management Juran Quality Planning and Analysis Managerial Breakthrough Quality Control Handbook

Standards and Awards ISO 9000 Minimum standards Does your system conform to the standard? Does your practice conform to your system? Malcolm Baldrige National Quality Award Provides some guidance Examples for others to follow Motorola – an early winner

The Process Over time, the output of any process shows a certain amount of natural or inherent variability This is also referred to as random variability It is due to countless minor factors and is assumed to be out of management’s control in the short run, i.e., you have to live with it

Process distribution Mean The Process The distribution of a process’ output has a mean, , and a standard deviation,  ; it can have a wide variety of shapes

Process Capability When selecting a process to perform an operation, the inherent variability of process output should be compared to the range or tolerances allowed by the designer’s specifications

Process Capability Lower Specification Upper Specification A significant portion of the process output falls outside of the specification width In other words, is the process capable of producing the item within specifications? Much of the process output fits within specification width Almost all of the process output fits within the specification width process distribution

Statistics

Where are we going? A Brief History of Quality Six Sigma Six Sigma Revival Applying Six Sigma to Supply

Statistics Lite Centered    Process LSLUSL

Statistics Lite Centered    Process LSLUSL 

Statistics Lite Centered    Process LSLUSL  Non-conforming Product 1,300 DPMO

Statistics Lite Centered    Process LSLUSL  Non-conforming Product 2,600 DPMO

Statistics Lite Shifted    Process LSLUSL  1.5  mean shift

Statistics Lite Shifted    Process LSLUSL  Non-conforming Product 66,800 DPMO 1.5  mean shift

Statistics Lite Shifted    Process Cost to your company – 15-30% of sales LSLUSL  Non-conforming Product 66,800 DPMO 1.5  mean shift

Cost of Poor Quality Lost Opportunity Downtime Rework Inspection Overtime Rejects Lost sales Late delivery Long cycle times Expediting costs Inaccurate Reports (less obvious) Lost Customer Loyalty Redundant Operations Cost of Capital Excessive Planning 5-8% of Sales 15-22% of Sales

Statistics Lite Centered 6   Process LSLUSL 

Statistics Lite Shifted 6   Process LSLUSL  1.5  mean shift

Statistics Lite Shifted 6   Process LSLUSL  1.5  mean shift Non-conforming Product 3.4 DPMO

Where are we going? A Brief History of Quality Six Sigma Six Sigma Revival Applying Six Sigma to Supply

Six Sigma Breakthrough Strategy Define Measure Analyze Improve Control

Define - Selecting Projects The project must relate to customer satisfaction The project’s results must reduce defects by some threshold amount The project should achieve some threshold of cost savings.

Criteria for Project Selection Does it involve recurring events? Is the scope narrow? Do measures exist? Do you have control of the process?

Define Phase, Continued If these criteria are met then: 1)Identify the customers involved, both internal and external to the function. 2)Find out what the customer’s CT’s are (Critical to Quality, Critical to Delivery, Critical to Cost, etc). 3)Define the project scope and goals. 4)Map the process to be improved.

Define Phase - Tools Project Charter Stakeholder Analysis Affinity Diagram SIPOC Voice of the Customer CT Tree Kano Model SWOT Analysis Cause-and-Effect Diagrams Supplier Segmentation Project Management

Charter Problem statement Business case Goals, milestones, success criteria, & deliverables Project scope / boundaries Roles & responsibilities Stakeholder support / approval needed

Business Case Potential ImprovementPotential Impact Improve qualityReduce cost, inventory Improve OTDShortages , inventory  Select better suppliersQ, $, LT, reduce inventory Implement rating systemImprove supply efficiency, better suppliers Reduce priceReduce cost

Define Phase - Tools Project Charter Stakeholder Analysis Affinity Diagram SIPOC Voice of the Customer CT Tree Kano Model SWOT Analysis Cause-and-Effect Diagrams Supplier Segmentation Project Management

Define Outputs Once completed, the Define Phase should answer the following questions: 1)Who is the customer? 2)What matters? 3)What is the scope? 4)What defect am I trying to reduce? 5)What are the improvement targets?

The Measure Phase Purpose To collect current performance of the process identified in the Define phase This data is used to determine sources of variation and serve as a benchmark to validate improvements

Measurements Benefits of having good data need to outweigh the costs of getting it What does this measure do for the Project?

The Measure Phase Upon completion of the measure phase, Project Teams will have: A plan for collecting data that specifies the type of data needed and techniques for collecting the data A validated measurement system that ensures the accuracy and consistency of the data collected A sufficient data set for problem analysis

Measure - Key Concepts Measurement Variation Exists naturally in any process and is the reason Six Sigma projects are undertaken Data Data Collection Plan Measurement System Analysis Ensures measurement techniques are reproducible and repeatable

Recording Measurements 3 stages The output stage These tell how well customer needs are being met Parts of the process These are taken at critical points in the process The input stage These evaluate contributions to the process that are turned into value for the customer

Recording Measurements Output Stage Shortages Line shutdowns Quality – discrepant material Material price variances Internal customer survey

Recording Measurements Parts of the process Project milestones Supplier ship on time performance Supplier OTD Supplier internal throughput yield Supplier suggested cost reductions

Recording Measurements The input stage Supplier base size % Buyers with degrees % of spend covered by LTC’s % of spend from reverse auction Supplier FMEA’s

Determining Data Type What do we want to know? Review materials developed during design phase What characteristics do we need to learn more about?

Data Collection Plan What data will be collected? Why is it needed? Who is responsible? How will it be collected? When will it be collected? Where will it be collected?

Measurement System Analysis After Data Collection Plan is complete, it needs to be verified before actual data is collected MSA is performed on a regular basis MSA ends when a high level of confidence is reached that the data collected accurately depicts the variation in the process

Analyze Phase The analyze phase allows the Project Team to target improvement opportunities by taking a closer look at the data.

Analyze Phase Capability Analysis - establishing current performance level Graphical Analysis - a visual indication of performance using graphs Root Cause Analysis – developing a hypothesis about the causes of variation Root Cause Verification – verifying that the planned action will generate the desired improvement

Elements of Improve Phase  Generate Improvement Alternatives  Create a “Should Be” Process Map  Conduct FMEA  Perform Cost/Benefit Analysis  Pilot  Validate Improvement

FMEA (Failure Mode Effects Analysis) Recognizes potential failure and the effects of that failure Identifies actions that would reduce chance of failure Documents the process

Generating Improvement Alternatives  Define Improvement Criteria  Generate Possible Improvements  Evaluate Improvements and Make Best Choice

Pilot Benefits of Pilot Determine best way to implement the improvement Lowers risk of failure Increases opportunity for feedback Obtain buy-in from affected personnel Provides opportunity to revise the improvement before full implementation

Review of Improve Phase Generate Improvement Alternatives Create a “Should Be” Process Map Conduct FMEA Perform Cost/Benefit Analysis Pilot Validate Improvement

Control Phase Why is it important? The Control Phase begins as the project team tries to eliminate errors by “Mistake Proofing” their improvement alternative. Mistake Proofing attempts to eliminate the opportunities for error.

Control Phase Why is it important? Mistake Proofing tries to make it impossible for an operation to be performed incorrectly, and/or correct errors before they are passed to the next worker, where they might become a defect.

Control Phase #2 During the Control Phase the Project team will: 1)Develop a plan to make sure the measurement system will remain relevant over the long term. 2)Establish Control Charts the process owner will use to manage the process. 3)Create a Reaction Plan to address situations that might cause the process to move out of control.

Control Phase #3 The Control Phase ends when: 1) Standard Operating Procedures have been updated. 2) Process Operators, the people who do the job, have been trained for the new process. Once completed, the Control Phase should sustain the gains the project made while implementing ongoing process controls.

Control Phase #4 When is a project complete? 1) When other Black Belts can see the ongoing controls work 2) When the customer sees the results 3) When the business sees the money.

Six Sigma Six Sigma People Executives Champions (deployment, project) Master Black Belts Black Belts Green Belts

Where are we going? A Brief History of Quality Six Sigma Six Sigma Revival Applying Six Sigma to Supply

Six Sigma Supply Chain DMAIC Using Six Sigma momentum Cost – The Business Case for Supply Black Belts for Supply

Stakeholder Analysis People or Groups Level of Commitment BuyMfgEng Enthusiastic Support Help it work Compliant HesitantX Indifferent UncooperativeX Opposed HostileX

SIPOC Example SuppliersInputsProcessesOutputsCustomers Ops Mgt Supplier Perf. Supplier Evaluation SurveyOps Mgt Buyers ComplaintsRating system Buyers Engrg. Tech ReqtsImproved Supplier Perform. Engineering Mfg. Rating system Commit. to suppliers Mfg. Suppliers Supplier Complaints Suppliers

SWOT Analysis PositiveNegative InternalStrengthsWeaknesses ExternalOpportunitiesThreats

Critical 2: Special Situations Critical 1: Long-term Relationship Non-Critical 1: Contractual High Low High Risk Annual Spend Supply Base Characterization Non-Critical 2: Transactional

Six Sigma Supply Chain Training DMAIC – Supply Strategy Commitment

References Books: Six Sigma Pocket Guide (Rath & Strong’s) The Black Belt Memory Jogger (GOAL / QPC) Six Sigma (Harry and Schroeder) Implementing Six Sigma (Breyfogle) The Six Sigma Way Team Fieldbook (Pande, et al) The Vision of Six Sigma: A roadmap for breakthrough (Harry) Web sites: