1. McGraw-Hill/Irwin © 2011 The McGraw-Hill Companies, All Rights Reserved Six-Sigma Quality Chapter 9

2. 9-2 Learning Objectives  Understand total quality management.  Describe how quality is measured and be aware of the different dimensions of quality.  Explain the define, measure, analyze, improve, and control (DMAIC) quality improvement process.  Understand what ISO certification means.  Explain Benchmarking

3. 9-3 Key Six Sigma Concepts  Critical to quality: attributes most important to the customer  Defect: failing to deliver what customer wants  Process capability: what your process can deliver  Variation: what customer sees and feels  Stable operations: ensuring consistent, predictable processes to improve what the customer sees and feels  Design for six-sigma: designing to meet customer needs and process capability LO 1

4. 9-4 Total Quality Management (TQM)  Total quality management: managing the entire organization so that it excels on all dimensions of products and services that are important to the customer  Two fundamental operational goals:  Careful design of the product or service  Ensuring that the organization’s systems can consistently produce the design LO 1

5. 9-5 Total Quality Management (TQM)   The TQM culture follows the Deming approach:   Cultural environment for SPC   Training employees in the TQM concept   Problem solving   Design of experiments   TQM is customer (external/internal) driven   TQM is company-wide not QC departments only

6. 9-6 Culture of TQM   Participative management:   Create proper cultural environment   Promote team concepts   Change of attitude (management and labor)   Company versus individual goals   Have a long-term focus   TQM is based on an integrated whole   All departments   All functions   All people in the company

7. 9-7 TQM Concepts   Interest mostly due to:   Consumer interest in quality—more for their money   Foreign competition   The trade deficit   The goal is customer satisfaction   TQM integrates all function/processes in the company

8. 9-8 Malcolm Baldridge National Quality Award  Established in 1987 by Department of Commerce—national standard for quality  Goal is to help companies review and structure their quality programs— enable them compete  Has requirement that suppliers demonstrate they are measuring and documenting their quality practices LO 1

9. 9-9 The Quality Gurus Compared LO 1

10. 9-10 The Quality Gurus Compared Continued LO 1

11. 9-11 Quality Specifications and Quality Costs  Design quality: inherent value of the product in the marketplace  Conformance quality: degree to which the product or service design specifications are met  Quality at the source: the person who does the work takes responsibility for making sure it meets specifications LO 1

12. 9-12 The Dimensions of Design Quality  Performance: primary product or service characteristics  Features: added touches, bells and whistles, secondary characteristics  Reliability/durability: consistency of performance over time  Serviceability: ease of repair  Aesthetics: sensory characteristics  Perceived quality: past performance and reputation LO 2

13. 9-13 Cost of Quality  Basic cost assumptions  Failures are caused  Prevention is cheaper  Performance can be measured  Cost of quality  Appraisal cost  Inspection & testing of purchased materials  Inspection & testing of products  Prevention cost  Training of employees in quality  Quality planning activities  Internal failure cost  Costs of scrap and rework  Costs of analyzing failures  External failure cost  Costs of warrantees  Costs of liabilities LO 2

14. 9-14 Six-Sigma Quality  Six-sigma is a philosophy and methods used to eliminate defects  Seeks to reduce variation in the processes  One metric is defects per million opportunities (DPMO) LO 2

15. 9-15 Six-Sigma Methodology  Uses many of the same statistical tools as other quality movements  Used in a systematic project-oriented fashion through define, measure, analyze, improve, and control (DMAIC) cycle  More detailed version of Deming PDCA cycle  Continuous improvement: seeks continual improvement in all aspects of operations  Also uses scientific method LO 2

16. 9-16 Six Sigma Quality 1 Sigma= = 317,400/Million Rejects 2 Sigma= = 45,400/Million Rejects 3 Sigma= = 2,700/Million Rejects (Normal) 6 Sigma= 99.99966% Accepted. = 4 ppm ~ process std deviation no more than 1/12 of total allowable spread Strategy for Achieving 6-Sigma:   Robust Design   Variability Reduction Or 99.73% Or 68.3% Or 95.5%

17. 9-17 Six Sigma Quality Reduced Variation High Variation

18. 9-18 DMAIC Methodology  Define  Identify customers and their priorities  Identify a project  Identify critical-to-quality characteristics  Measure  Determine how to measure the process  Identify key internal processes  Analyze  Determine most likely causes of defects  Understand why key defects are generated LO 3

19. 9-19 DMAIC Methodology Continued  Improve  Identify means to remove causes of defects  Confirm the key variables  Identify the maximum acceptance ranges  Modify process to stay within acceptable range  Control  Determine how to maintain improvements  Put tools in place to track key variables LO 3

20. 9-20 DMAIC Example   Suppose we are the maker of a 16 oz brand of cereal. Consumer Reports has just published an article that shows that we frequently have less than 16 ounces of cereal in a box.   What should we do?

21. 9-21 Step 1 - Define   What is the critical-to-quality (CTQ) characteristic?   The CTQ (critical-to-quality) characteristic in this case is the weight of the cereal in the box. Other CTQs could be:   Number of broken flakes/scoop   Raisins per scoop   Time to sogginess

22. 9-22 2 - Measure   How would we measure to evaluate the extent of the problem?   What are acceptable limits on this measure?   Assume the government says we must be within ± 5 percent of the weight advertised on the box

23. 9-23 2 – Measure (continued)   Then,   Upper Tolerance Limit = 16 +.05(16) = 16.8 ounces   Lower Tolerance Limit = 16 –.05(16) = 15.2 ounces   We buy 1,000 boxes of cereal and find that they weigh an average of 15.875 ounces with a standard deviation of 0.529 ounces   What percentage of boxes are outside the tolerance limits?

24. 9-24 Upper Tolerance = 16.8 Lower Tolerance = 15.2 Process Mean = 15.875 Std. Dev. =0.529 What percentage of boxes are defective (i.e. less than 15.2 oz)? From Appendix G, page 765, approximately 10%, of the boxes have less than 15.2 oz of cereal in them! 2 – Measure (continued)

25. 9-25 Step 3 - Analyze   How can we improve the capability of our cereal box filling process?   Decrease Variation   Center Process   Increase Specifications   Maintain machines

26. 9-26 Step 4 – Improve   How good is good enough?   Better equipment   Trained employees   “Six Sigma” and beyond   6 minimum from process center to nearest specification

27. 9-27 Step 5 – Control   Statistical Process Control (SPC)   Use data from the actual process   Estimate distributions   Look at capability - is good quality possible   Statistically monitor the process over time

28. 9-28 Analytical Tools for Six Sigma and Continuous Improvement  Flowcharts  Run charts  Pareto charts  Checksheets  Cause-and-effect diagrams  Opportunity flow diagrams  Control charts LO 2

29. 9-29 Example: Flowchart LO 2

30. 9-30 Example: Run Chart LO 2

31. 9-31 Example: Pareto Chart LO 2

32. 9-32 Example: Checksheet LO 2

33. 9-33 Example: Cause-and-Effect Diagram LO 2

34. 9-34 Cause-and-Effect Chart for Flight Departure Delay (Fishbone Chart) Equipment Procedure Material Other Aircraft late to gate Late arrival Gate occupied Mechanical failures Late pushback tug Weather Air traffic Late food service Late fuel Late baggage to aircraft Gate agents cannot process passengers quickly enough Too few agents Agents undertrained Agents undermotivated Agents arrive at gate late Late cabin cleaners Late or unavailable cockpit crews Late or unavailable cabin crews Poor announcement of departures Weight and balance sheet late Delayed checkin procedure Confused seat selection Passengers bypass checkin counter Checking oversize baggage Issuance of boarding pass Acceptance of late passengers Cutoff too close to departure time Desire to protect late passengers Desire to help company’s income Poor gate locations Delayed Flight Departure Personnel Courtesy: Fitzsimmons & Fitzsimmons: Service Management, 6 th Ed., McGraw-Hill, 2008.

35. 9-35 Example: Opportunity Flow Diagram LO 2

36. 9-36 Example: Control Chart LO 2

37. 9-37 Other Six Sigma Tools  Failure mode and effect analysis (DMEA): a structured approach to identify, estimate, prioritize, and evaluate risk of possible failures at each stage in the process  Design of experiments (DOE): a statistical test to determine cause-and- effect relationships between process variables and output LO 3

38. 9-38 Six Sigma Roles and Responsibilities  Executive leaders must champion the process of improvement  Corporation-wide training in Six Sigma concepts and tools  Setting stretch objectives for improvement  Continuous reinforcement and rewards LO 3

39. 9-39 Green BeltsChampion Black Belts Master Black Belt Project MemberExecutive   Full time   Train and coach Black/Green Belts   Statistical problem solving experts   Devote 50%-100% of time to Black Belt activities   Facilitate/practice problem solving   Train and coach Green Belts/project teams   Part-time   Help Black Belts   Part-time   Project-specific   Own vision, direction, integration, results   Lead change   Project owner   Implement solutions   Black Belt managers   Understand vision   Apply concepts Six Sigma Organization: Roles & Responsibilities All Employees Courtesy: Fitzsimmons & Fitzsimmons: Service Management, 6 th Ed., McGraw-Hill, 2008.

40. 9-40 Six-Sigma In Practice 100 Rounds of Golf a Year   2< 6 missed putts per round   31 missed putt per round   41 missed putt every 9 th round   51 missed putt in 2.33 years   61 missed putt in 163 years

41. 9-41 The Shingo System: Fail- Safe Design  Shingo’s argument:  SQC methods do not prevent defects  Defects arise when people make errors  Defects can be prevented by providing workers with feedback on errors  Successive check  Self-check  Source inspection  Poka-Yoke includes:  Checklists  Special tooling that prevents workers from making errors LO 3

42. 9-42 ISO 9000 and ISO 14000  Series of standards agreed upon by the International Organization for Standardization (ISO)  Adopted in 1987  More than 160 countries  A prerequisite for global competition?  ISO 9000 an international reference for quality—”document what you do and do as you documented”  ISO 14000 is primarily concerned with environmental management LO 4

43. 9-43 ISO 9000 Series   Standards:   9001: Model for Quality Assurance in Design, Production Installation, and Servicing   9002: Model for Quality Assurance in Production and Installation   9003: Model for Quality Assurance in Final Inspection and Test   Guidelines:   9000: Quality Management and Quality Assurance Standards: Guidelines for Selection and Use   9004: Quality Management and Quality Systems Elements—Guidelines

44. 9-44 Three Forms of ISO Certification  First party: A firm audits itself against ISO 9000 standards  Second party: A customer audits its supplier  Third party: A "qualified" national or international standards or certifying agency serves as auditor LO 4

45. 9-45 More About ISO 9000   They are not award programs   They just provide criteria for measuring quality systems   They are quite flexible   Applies to all industries   It is a worldwide standard   Offers opportunity for global competition

46. 9-46 External Benchmarking Steps  Identify those processes needing improvement  Identify a firm that is the world leader in performing the process  Contact the managers of that company and make a personal visit to interview managers and workers  Analyze data LO 4

47. 9-47 Steps to Benchmarking   Align benchmark goals to organizational goals   Develop methods of measuring performance   Undertake benchmark improvement activities   Measure performance   Repeat the process and continue to improve

48. 9-48 Benefits of Benchmarking   Cultural change   Allows firm to set realistic goals   Engenders cultural change: compare oneself   Performance improvement   Forces firm to define and identify gaps   Provides way for improvement   Human resource benefits   Recognizes the importance of people   Provides for training and make them part of problem-solving process

49. 9-49 Pitfalls of Benchmarking   It is not a panacea   Will not work if the culture is lacking   Could be counterproductive   Potential pitfalls   Failure to involve/empower employees   Failure to define/understand own process first   Failure to take action on results   Failure to set realistic goals