1 Six Sigma-An Introduction

Six Sigma An Introduction

Quality
o According to managers of 86 firms in US:
Perfection; consistency; eliminating waste; speed of delivery; compliance
with policies and procedures; providing a good, usable product; doing it
right the first time; pleasing customers; total customer service and
satisfaction
o It relates to product design (product attribute), customer satisfaction (fitness for
intended use), and operations performance (conformance to specifications)
Quality principles in Six Sigma
o A focus on customers
o Participation and teamwork by everybody in the organization
o A process focus supported by continuous improvement and learning
Metric
o A verifiable measurement of some particular characteristic, stated either
numerically (e.g., percentage of defects) or in qualitative terms (e.g. poor or
excellent level of satisfaction)
o Allow managers to evaluate performance and make decisions
o Six Sigma uses a common measure for quality (defect per million opportunities
(dpmo))
Defect (nonconformance): any mistake or error that is passed on to the
customer
A unit of work: the output of a process or an individual process step
Defect per unit (DPU)= number of defects discovered / number of units
produced
DPU focuses on the final product, not the process that produces the
product
Defect per million opportunities (dpmo)= (number of defects discovered /
opportunities for error) 1,000,000
Example: measuring effectiveness of baggage handling system of an
airline
DPU= lost bags per customer
dpmo= (number of lost bags/[number of passengers average
number of bags per passenger]) 1,000,000
dpmo provides a more comprehensive measure of potential failures

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The concept of variation

o Every repeatable process exhibits variation

Performance and defects

LSL USL

Defects Defects

What Six Sigma means?

o Six Sigma is a quality initiative which aims for virtually error-free business
performance: a standard of 3.4 problems (defects) per million
o It focuses on helping the organization make more money by improving
effectiveness (customer value) and efficiency (the amount of resources consumed
in being effective)
o A new definition of quality versus the traditional definition (the value added by a
productive endeavor versus conformance to internal requirements)

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o Unlike mindless cost-cutting programs (such as putting pressure on work force

and layoffs) which also reduce value and quality, six sigma identifies and
eliminates costs which provide no value to customers (waste costs)
o ...this Six Sigma journey will change the paradigm from fixing products so they
are perfect to fixing processes that they produce nothing but perfection, or close
to it. - Jack Welch
o Six Sigma is a business improvement approach that seeks to find and eliminate
causes of defects and errors, reduce cycle time and cost of operations, improve
productivity, better meet customer expectations, and achieve higher asset
utilization and return in investment in manufacturing and service processes.

Six Sigma history

What is Six Sigma?

o A response to the increasing expectation of customers and the increased
complexity of modern products and processes
o A companys performance is measured by the sigma level of their business
processes
o Traditionally, companies accepted 3 to 4 sigma: 6,200 to 67,000 defects per
million

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o Cost of poor quality: 25-40% in 3-4 sigma, less than 5% in six sigma

Comparison between Six Sigma and traditional quality models (e.g., TQM)
o The traditional model: applied only to manufacturing processes
o Six Sigma: applied to all important business processes and is cross-functional
Price, service, financing terms, style, availability, frequency of updates
and enhancements, technical support are also important
It provides benefits to all stakeholders in the enterprise (employees,
owners and investors)
o TQM was usually viewed as a collection of tools applied at low levels of the
organization rather than a strategic point of view
o Six Sigma is a disciplined fact-based approach that focuses on a structured
problem-solving methodology DMAIC (Define, Measure, Analyze, Improve,
Control)
o TQM is based largely on worker empowerment and teams; Six Sigma is owned by
business leader champions

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o TQM is focused on improvement with little financial accountability

o Six Sigma is a data-driven quality initiative that requires a verifiable return on
investment and focus on the bottom line
o TQM training is generally limited to simple improvement tools and concepts
o Six Sigma focuses on a more rigorous and advanced set of statistical methods
o Traditional model: a capable process had a process standard deviation of no
more than one-sixth of the total allowable spread
o Six Sigma: the process standard deviation no more than one-twelfth of the total
allowable spread
A 3 Sigma quality level: a process yield of 99.73% or 2,700 defects per
million
Six sigma: 3.4 defects per million

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99.73%

Statistical basis of Six Sigma

o 3.4 defects per million opportunities stems from the notion of design
specifications in manufacturing and the ability of a process to achieve the
specifications
o A Six Sigma quality level corresponds to a process variation equal to half of the
design tolerance while allowing the mean to shift as much as 1.5 standard
deviations from the target. If the process mean is held exactly on the target, only
one defect per billion will be expected beyond the Sigma range in either tail.
o If shifts can occur in both directions, then the defect rate at a six sigma level, the
defect rate would be at most 6.8 per million

o An easier way to measure the sigma level of a process is to think of the distance
from the target to the upper or lower specification (half the tolerance), measured
in terms of standard deviation of the inherent variation

k* process standard deviation=Tolerance/2

o Sigma level can also be calculated on an Excel spreadsheet using the following
formula:

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= NORMSINV(1 - Number of Defects / Number of Opportunities) + SHIFT

Or equivalently,
= NORMSINV(1 - dpmo / 1,000,000) + SHIFT
o Example:
3 lost bags per 12,800 opportunities, by considering 1.5 sigma shift (drift)
Sigma level = NORMSINV (1- 3/12800) +1.5 = 4.998 or about 5-sigma
Why Six Sigma?
o Eliminated defects
o Reduced production and development costs
o Reduced cycle times and inventory levels
o Increased profit margin and improve customer satisfaction
o Well-designed management systems and business processes operated by happy
employees
o Satisfied customers and owners
Lean Six sigma
o Combining Six Sigma quality with Lean speed

o Achieving the Six Sigma quality level while minimizing the time delays in the
processes

o Principle of Lean Six Sigma (M. L., George):

The activities that cause the customers critical-to-quality issues and

create the longest time delays in any process offer the greatest opportunity
for improvement in cost, quality, capital, and lead time

Six Sigma methodology

o Six Sigma work begins with management
o Strategy of Six sigma
Business process management
To identify 20 or 30 most important processes (e.g., by
brainstorming) based on business strategic objectives (such as
revenue, profit margin, customer satisfaction, growth, employee
satisfaction)
o Process: a series of steps that take input, add value, and
produce an output

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To measure (roughly) the current Sigma performance of each

process
To identify the lowest performing processes that has the most
important impact on companys objectives
Forming project teams to improve the Sigma performance

o Tactics of how to improve a broken process

Quality improvement via the DMAIC model
Development of a new or radically redesigned product via the DMADV
model

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Six Sigma infrastructure

o An organizational infrastructure to manage and support various activities is
required
o Six Sigma is a top-down affair that must be embraced and actively led by top
management
o Education and training are important means of changing individual perceptions
and behavior
o Six Sigma roles and responsibilities on the part of individuals in the organization

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Introduction to Six Sigma INDU 441/INDU 6321