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An Introduction to Six SigmaJeffrey T. Gotro, Ph.D. 2008 InnoCentrix, LLC

Agenda What is Six Sigma?Why would a company adopt Six Sigma?What are the challenges?What are the rewards?How is Six Sigma implemented?Summary and Questions 2008 InnoCentrix, LLC2

Six Sigma has many meanings A SymbolA MeasureA Benchmark or GoalA PhilosophyA Method 2008 InnoCentrix, LLC3

Six Sigma: A Symbol σ is a Statistical Symbol forStandard DeviationStandard Deviation is a Measureof Variability 2008 InnoCentrix, LLC4

Six Sigma: A Measure The “Sigma Level” of a process can beused to express its capability How well it performs with respect to customerrequirements.Percent Defects, Cp, Cpk, ppm 2008 InnoCentrix, LLC5

Doing the math6 Sigma 3.4 defects per million5 Sigma 230 defects per million4 Sigma 6,210 defects per million3 Sigma 66,800 defects per million2 Sigma 308,000 defects per million1 Sigma 690,000 defects per million 2008 InnoCentrix, LLC6

Six Sigma: A Benchmark or Goal The specific value of 6 Sigma (as opposedto 4 or 5 Sigma) is a benchmark for processexcellence.Adopted by leading organizations as a goalfor process capability. 2008 InnoCentrix, LLC7

Some Examples to Illustrate Typical Defect RatesIRS - Tax Advice (phone-in)100K(66,800 ppm)AverageCompany(6,210 ppm)10KDefects per MillionOpportunitiesRestaurant BillsDoctor Prescription WritingPayroll ProcessingOrder Write-upJournal VouchersWire Transfers1KPurchased MaterialLot Reject Rate Air Line BaggageHandling(230 ppm)10010Best in ClassDomestic AirlineFlight Fatality Rate(3.4 ppm)12 2008 InnoCentrix, LLC34SIGMA56(0.43 ppm)7(with 1.5 Sigma Shift)8

Six Sigma: A Philosophy A vision of process performanceDelivering nearly defect-free productsand servicesFocus on variation reductionA Guiding Management Principle 2008 InnoCentrix, LLC9

Six Sigma: A Method A well defined process and toolkitused for: Product/Service Design Quality Control Quality Improvement Strategic Planning 2008 InnoCentrix, LLC10

Six Essential ThemesA genuine focus on the customer Data and fact-driven management (using effectivemeasurement systems) Process focus [Y f (x)] Proactive management drives improvement efforts Boundaryless* collaboration (including customers,suppliers, and supply chain partners) A drive for perfection with a tolerance for failure(freedom to take risks, learning from mistakes, driveto try new approaches)* Termed by Jack Welch, CEO of GE 2008 InnoCentrix, LLC11

DMAIC radic Spike (Special Cause)Defect Rate302520Common Cause Variation15Chronic Waste105Chronic Waste 2008 InnoCentrix, 00Time12

Six Sigma DMAIC ProcessDefineMeasure Project Scope Process Map Project Charter Data Collection Business Impact Control Charts Voice of theCustomer (VOC) Pareto Charts Affinity Diagram Kano Model CTQ Treediagram Prioritization Matrix MeasurementSystem Analysis Process Capability Yields (RTY)AnalyzeControl MultivariAnalysis Brainstorming &Creativity tools Statistical ProcessControl (SPC) Cause & EffectMatrix Design ofExperiments(DOE) Standard Operatingprocedures (SOP) FMEA Hypothesistesting ANOVA Noise Variables Scatter plots Design ofExperiments 2008 InnoCentrix, LLCImprove Full Factorial FractionalFactorial ResponseSurface Pilot Trials ImplementationPlan Data Collection &sampling plans Control Plans MeasurementSystems Analysis(recheck) Project summary &lessons learned13

All Work is a ssValue-addedtasksFeedbackS. 2008 InnoCentrix, LLCOutputCustomerFeedbackI.P.O.C.14

What is a process?ControllableInputs(X’s)ProcessKey ProcessOutputs(Y’s)Noise InputsY f (X) 2008 InnoCentrix, LLC15

Process itCapable Process 2008 InnoCentrix, pperSpecificationLimitUpperSpecificationLimitThis process is not capable16

Visualizing Process CapabilityLowerSpec.0.4LimitUpperSpec.LimitCust. erSpec.LimitCust. Tolerance0.0-4-3-2-101234-8-6-4-202Process CapabilityProcessCapabilityCp 1Cp 2 2008 InnoCentrix, LLC46817

Process Drift0.4Cp 1.33Cpk 1.33LowerSpec.LimitCust. ToleranceUpperSpec.Limit0.30.20.10.0-5.330.4Cp 1.33Cpk 0.83-4.0LowerSpec.Limit-2.67 -1.3301.332.674.05.33UpperSpec.LimitCust. Tolerance0.30.20.10.0-5.33 2008 InnoCentrix, LLC-4.0-2.67 -1.3301.332.674.05.3318

Unstable ProcessUnstable Process Mean shifts present Excess variation (σchanges) Special causes ofvariation are present, Process output is notstable over time andis not predictableLSLFriUSLTimeThurWedTueMon 2008 InnoCentrix, LLC19

Stable ProcessLSLStable process: Variation reduced (lower σ) Process is centered in spec window Mean shifts reduced Only common cause variationis present Process output is stable/predictable The process is termed “in statisticalcontrol.” 2008 InnoCentrix, LLCUSLTime20

History of Six Sigma Originated at Motorola in the early 80’sDoesn’t use “Quality” in the nameUses a modification of the Deming Plan-DoCheck-Act (PDCA) cycleAdopted widely in the 90’s by majorcorporations including AlliedSignal (nowHoneywell), GE, Kodak, and a growing list. 2008 InnoCentrix, LLC21

Six Sigma Strategy Implementation is top-down. CEO driven withexecutive management and Champions (processowners) leading the initiative.Improvement projects must be integrated with thegoals of the organization.Six Sigma uses a “divide and conquer” approach. Findand work on the most important key customer relatedprojects.Uses several levels of competency in Six Sigmaimplementation: ChampionsMaster Black BeltBlack BeltGreen Belt 2008 InnoCentrix, LLC22

Roles & Responsibilities Executive Team: Champion: Provide continuous support to drive for results. Setsstrategic direction, identify core business process issues,prioritizeIdentifies high impact projects by combining the strategicvision of the executive team & the key customer andprocess needs of the business.Facilitates successful project completion, coaches teamsMaster Black Belt: Highly skilled & experienced in all aspects of Six SigmaCoach and mentor to Black Belts, works with Champion onproject selection 2008 InnoCentrix, LLC23

Roles & Responsibilities Black Belt: Project LeaderHighly trained in Six Sigma methods and toolsInfluencer, team facilitator, project managerGreen Belt: Project team memberTrained in Six Sigma methods and tools 2008 InnoCentrix, LLC24

Training for Six Sigma Executives Champion 8 hour Six Sigma overview and implementation roadmapdevelopment.30 hour course, overview of DMAIC, Tools overviewFocus on developing project selection skillsBlack Belt 160 hours of classroomRequired to have a projectClass for 1 week (40 hours) and project work for 3-4 weeksTotal of 4 months to trainGreen Belt 30-80 hours depending on training philosophyMay or may not have to complete a project 2008 InnoCentrix, LLC25

Projects Drive Six Sigma SuccessTypes of Six Sigma Projects Manufacturing Quality Improvement (origin of Six Sigmainitiatives)Design for Six Sigma (DFSS) for product developmentBusiness process improvement (transactional Six Sigma)Some companies find much larger impact in transactional typeprojects: One company: 150-250K for manufacturing improvement projects 500K for transactional projectsProcess management methods rarely used for business processimprovementsTransactional Six Sigma is a Huge Opportunity 2008 InnoCentrix, LLC26

Identifying Six Sigma ProjectsBasic Project Criteria Problem in key business activity Large financial impact Can measure and quantify performanceQuick HitnoEasy to Fix?yesnoSolutionAvailable?Six Sigma Project 2008 InnoCentrix, LLCyesOther Initiative Process focusAnalyze Y f(x)Reduce variation & defectsComplex relationships27

Project Focus Projects are chartered by Champions and businessleadersLed by Black BeltsAssisted by Green BeltsEach experienced Black Belt can typically handlebetween 4-6 projects per yearTypical financial impact is approximately 175,000per projectExperienced Black Belt can generate about 1M insavings per year 2008 InnoCentrix, LLC28

Why adopt Six Sigma? Concept has been around for 16 years, proventrack record at big companies.Has shown the most endurance and return oninvestment of any improvement initiative.Starting to be implemented in small and mediumsized corporations.Provides a comprehensive set of philosophies,tools, methods, and fundamental concepts leadingto quantifiable business results.Involves the entire organization; from CEO, CFO,Champions, Black Belts, Green Belts, and workers. 2008 InnoCentrix, LLC29

What are the Challenges? Takes careful preparation and a commitment tofundamental change efforts required.Training – key for all levels in the organizationIt is not a quick fix nor a “one-size-fits-all” approach.Implementation tends to be uneven and lapsesoccur frequently.Tendency to work on too many projects at once.Resource limitations are real!Need to manage expectations on payback time,typically takes 9-12 months from roll-out to startseeing quantifiable financial gains. 2008 InnoCentrix, LLC30

What are the Challenges Not everything has to be Six Sigma; this was thedownfall of reengineering efforts! Choose yourprojects carefully.Statistical analysis is not generally part of theengineering discipline in most companies.Determine the role of DFSS and transactional SixSigma in your organizationNeeds to focus on people issues and changemanagementPeople must not fear giving “bad news” andcontinually require data-driven decision making. 2008 InnoCentrix, LLC31

What are the Rewards Increased value to the customers andshareholders.Improved reliability and predictability of productsand services.Significant reduction in defects.Institutionalization of a “process” mindset.Increased competitive advantage. 2008 InnoCentrix, LLC32

Some Results Motorola – 10 years; 11 Billion Savings AlliedSignal - 1.5 Billion estimated savings General Electric – started efforts in 1995 1998: 1.2 Billion less 450 Million in costs netbenefits 750 Million 1999 Annual Report: more than 2 Billion netbenefits 2001: 6,000 projects completed; 3 Billion insavings 2008 InnoCentrix, LLC33

The Road to Six SigmaUsually has many twists and turns! 2008 InnoCentrix, LLC34

Six Sigma ImplementationCharterTrainImplementationExecs &TeamChampionsDevelopDevelopRoadmap Project& GoalsPortfolioImplementBB & GBTrainingProjectReviews &Support Appoint an implementation team leader Use a multifunctional team to lead roll-out Work with Execs & Champions to develop a Six Sigma Roadmap Establish quantifiable goals Formulate an implementation plan Develop a mechanism to coach black belts & teams Implement project review and metrics tracking mechanism 2008 InnoCentrix, LLC35

Six Sigma Roadmap Identify core processes & key customersDefine key customer drivers Voice of the Customer (VOC)Critical to Quality (CTQ’s)Measure and baseline current performancePrioritize, analyze, charter and kick-off keyimprovement projectsDevelop a diversified project portfolio (short andlong term projects)Expand and integrate the Six Sigma system acrossthe enterprise as experience grows 2008 InnoCentrix, LLC36

Costs to Implement Direct payroll (individuals dedicated full-time to SixSigma)Indirect payroll (executives, champions, processowners, etc.)Training and consulting costs (Champion, black andgreen belt, implementation and project reviews)Improvement implementation costs (cost toimplement solutions found in BB projects) 2008 InnoCentrix, LLC37

Where Do You Start? Business Transformation Strategic Improvement Full scale change initiativeAddress a strategic weaknessUsed to build a core competency that is missing(such as VOC, or measurement systems)Problem Solving Most popular starting pointFocus on key short-term and long-termimprovement projects to get maximum impact 2008 InnoCentrix, LLC38

What are your core processes? Product Development ProcessOrder fulfillment processCustomer service processSupport Processes Finance Administration (HR, legal, etc.) Information technology 2008 InnoCentrix, LLC39

Customer centric core processProduct Development ProcessUnderstandCustomerNeeds 2008 InnoCentrix, 40

Customer centric core processOrder Fulfillment ProcessDevelopCustomerRelationship 2008 InnoCentrix, 41