1. Six Sigma

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

3. 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!

4. 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 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

6. 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.

7.
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!

8. 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

9. 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

10. 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

11. Typical Structure for SS at GE

12. 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)

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

14. 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………………..

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

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

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

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

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

20. 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.