2. Six Sigma 66 66 Sam Tomas, CFPIM, CRM, C.P.M. Kokopelli

3. 2 What is Six Sigma? Sigma is the Greek letter “  ” that represents the “standard deviation” or variability of a group of items from their average value. A Six Sigma program is therefore a variability reducing program. – The key objectives include improved processes, product performance, and reliability Six Sigma is a reference to a particular goal of reducing defects to near zero.

4. 3 What Else is Six Sigma? A concept that provides a relatively new way to measure how good a product is. It relates to a manufacturing or service failure rate of only 3.4 rejects per million operations, or a yield of 99.99 99 99 8%. When a product is six sigma, it tells us that the quality level is excellent.

5. 4 Why Six Sigma? The inadequacy of 99.9% accuracy can be illustrated as follows: – 22,000 checks will be deducted from the wrong bank accounts in the next 60 minutes – 880,000 credit cards in circulation will have incorrect cardholder information on their magnetic strips – 268,500 defective tires will be shipped this year – 18,322 pieces of mail will be mishandled the next hour – 14,208 defective computers will be shipped this year Why spend money to achieve six sigma quality when perhaps 99% or 98% perfect would be totally adequate?

6. 5 But With Six Sigma Quality - Drug prescriptions – One incorrect drug prescriptions every 25 years. Surgical operations – One incorrect surgical operation every 20 years Mail Delivery – Only one article of mail lost every 35 years

7. 6 The Bathtub Curve Shows reliability of a product in terms of failure rate per month The curve presents two shaded areas – Latent defect rate Causes early failure after a product is delivered – Inherent failure rate Function of product design, materials, processes, and technologies used in manufacturing. Defects in manufacturing are caused by: – Narrow design margins for the product – Insufficient manufacturing process controls – Poor incoming materials/parts quality

8. 7 The Bathtub Curve Design-Related (Inherent) Failures Quality Failures due to Process & Material Wear out Failures Time Failure Rate I Infant Mortality II Useful Life III Wear out Overall Life Characteristic curve Latent Defects Inherent Failure Area Time

9. 8 6 Sigma Versus 4 Sigma Even well controlled processes experience shifts in the mean as great as ± 1-1/2 standard deviations. A normal 4 sigma process plus a 1-1/2 sigma shift in the process average would result in 4 sigma variations of 6,210 defects per million operations. Why attempt to achieve 6 sigma when 4 sigma (99.9937%) may be adequate?

10. 9 Yield Rates of Six Sigma Products It is possible to build a product in which each component is a six sigma component and yet have the product exhibit yields of only 90%, 80%, 70%, 60% etc. What we are talking about is rolled- throughput yield or the probability that all product, process and material characteristics will simultaneously conform to their respective standards.

11. 10 Improvement Efforts Required to Reach Six Sigma 44 33 10 X Improvement 66,810 dpm 6,210 dpm 55 30 X Improvement 223 dpm 66 70 X Improvement 3.4 dpm Dpm = defects per million 10

12. 11 Where are Average Companies in Quality? Approximately 2 Sigma – IRS – Tax advice over the phone Approximately 4 Sigma (Average) – Restaurant bills – Doctor prescription writing – Payroll processing – Order write-ups Approximately 6 Sigma – Best in class – Seiko, HP Inc., etc. 6.5 Sigma – Domestic flight fatality rate (0.43 ppm) 22 44 66 6.5 

13. 12 Relationship of Defects to Other Factors The 6 sigma concept indicates there are strong relationships between product “defects” and such factors as: – Reliability – Product yields – Cycle times – Inventories – Schedules The higher the sigma value, the more reliable the process being monitored and the higher the improvement in all areas.

14. 13 Financial Implications of Low Sigma The lower the sigma level, the higher the repair costs A 4 sigma company spends more than 15% of its sales dollars for internal and external repairs A 6 sigma company spends about 1% Over the long run, a 4 sigma company will not be able to compete with a 6 sigma company.

15. 14 What is the Cost of Quality? Goal: Improve cost, quality, and schedule performance via process improvement and reduction of process variations. Sigma LevelDefects Per Million OpportunitiesCost of Quality 2308,537 (Noncompetitive companies)N/A 366,80725-40% of sales 46,210 (Industry average)15-25% of sales 52335-15% of sales 63.4 (World Class)1% of sales Note: Each sigma improvement represents a 10% net improvement in income.

16. 15 The Tools of Six Sigma Design to standard parts/ materials Design to standard processes Design to known capabilities Design for assembly Design for simplicity Parts standardization Supplier SPC (SSPC) Supplier certification ERP/MRP Process optimization Process characterization Process standardization Short-cycle manufacturing Statistical process control Region of Six Sigma Synergy Design ProcessMaterial

17. 16 Overcome Process Variation: First Strategy Anticipate problems – develop controls during the design cycle for both the product and the manufacturing process steps to include the following: – Define 6 sigma tolerances on all critical product and process parameters – Minimize the total number of parts in the product – Minimize the number of process steps – Standardize on parts and procedures – Use SPC during initial design and prototype design phases

18. 17 Overcome Process Variation: Second Strategy Use statistical process control (SPC) on the process to continually isolate, control and eliminate variation resulting from people, machines and the environment.

19. 18 Overcome Process Variation: Third Strategy The third strategy addresses suppliers – Institute a supplier qualification program using SSPC techniques – Require suppliers to provide process control plans and process control charts – Minimize the number of suppliers used – Work towards a long term “win-win” partnership with all selected suppliers

20. 19 Five Steps to Six Sigma for Manufacturing 1. Identify product characteristics necessary to satisfy customers (Use QFD) 2. Determine if characteristics are controlled by part, process or both 3. Decide max allowed tolerance for correct performance 4. Determine existing process variations 5. Change product design, process, or both to attain the correct characteristics

21. 20 What Are Some Possible Applications for Six Sigma? In the stockroom – Used to reduce parts counts that are found to be inaccurate In personnel – Used to reduce the number of requisitions unfilled after 30 days In customer service – Used to measure number of calls unanswered on the 2 nd or 3rd ring In sales – Used to track errors in completing order forms In order fulfillment – Used to eliminate returns because of wrong product being shipped In finance – Used to reduce the instances of accounts being paid after a specified time limit has elapsed

22. Six Sigma Dilbert