An Introduction to Six Sigma

Jeffrey 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, LLC 2

Six Sigma has many meanings

A Symbol
A Measure
A Benchmark or Goal
A Philosophy
A Method

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Six Sigma: A Symbol

σ is a Statistical Symbol for

Standard Deviation
Standard Deviation is a Measure
of Variability

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Six Sigma: A Measure

The “Sigma Level” of a process can be

used to express its capability
How well it performs with respect to customer
requirements.
Percent Defects, Cp, Cpk, ppm

© 2008 InnoCentrix, LLC 5

Doing the math

6 Sigma = 3.4 defects per million

5 Sigma = 230 defects per million
4 Sigma = 6,210 defects per million
3 Sigma = 66,800 defects per million
2 Sigma = 308,000 defects per million
1 Sigma = 690,000 defects per million

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Six Sigma: A Benchmark or Goal

The specific value of 6 Sigma (as opposed

to 4 or 5 Sigma) is a benchmark for process
excellence.
Adopted by leading organizations as a goal
for process capability.

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Some Examples to Illustrate Typical Defect Rates
IRS - Tax Advice (phone-in)
100K
(66,800 ppm)
Restaurant Bills
Doctor Prescription Writing
10K Average Payroll Processing
Order Write-up
Company(6,210 ppm) Journal Vouchers
Defects per Million

Wire Transfers

1K
Opportunities

Purchased Material
Lot Reject Rate Air Line Baggage
Handling
(230 ppm)
100

10
Best in Class
Domestic Airline
Flight Fatality Rate
(3.4 ppm)
1
2 3 4 5 6 7
(0.43 ppm)
SIGMA (with ±1.5 Sigma Shift)
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Six Sigma: A Philosophy

A vision of process performance

Delivering nearly defect-free products
and services
Focus on variation reduction
A Guiding Management Principle

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Six Sigma: A Method

A well defined process and toolkit

used for:
Product/Service Design

Quality Control

Quality Improvement

Strategic Planning

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Six Essential Themes

A genuine focus on the customer

Data and fact-driven management (using effective
measurement 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, drive
to try new approaches)
* Termed by Jack Welch, CEO of GE

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DMAIC Approach

Define 40
Measure/Analyze Improve Control

35
Sporadic Spike (Special Cause)
30
Defect Rate

25

20

15
Common Cause Variation
10
Chronic Waste

Chronic Waste
0
0

8
-8

-6

-4

-2

10

12

14

16

18

20

22

24

26

28

30

32

34

36

38

40
-1

Time

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Six Sigma DMAIC Process

Define Measure Analyze Improve Control

• Project Scope • Process Map • Multivari • Brainstorming & • Statistical Process

Analysis Creativity tools Control (SPC)
• Project Charter • Data Collection
• Cause & Effect • Design of • Standard Operating
• Business Impact • Control Charts
Matrix Experiments procedures (SOP)
• Voice of the • Pareto Charts (DOE)
• FMEA • Data Collection &
Customer (VOC)
• Prioritization Matrix • Full Factorial sampling plans
• Hypothesis
• Affinity Diagram
• Measurement testing • Fractional • Control Plans
• Kano Model System Analysis Factorial
• ANOVA • Measurement
• CTQ Tree • Process Capability • Response Systems Analysis
• Noise Variables
diagram Surface (recheck)
• Yields (RTY)
• Scatter plots
• Pilot Trials • Project summary &
• Design of lessons learned
• Implementation
Experiments
Plan

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All Work is a Process

Requirements Requirements

Process
Supplier Inputs Output Customer
Value-added
tasks

Feedback Feedback

S. I. P. O. C.

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What is a process?

Controllable Key Process

Inputs Process Outputs
(X’s) (Y’s)

Noise Inputs

Y = f (X)

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Process Capability

Lower Upper Lower Upper

Specification Specification Specification Specification
Limit Limit Limit Limit

Lower Upper Lower Upper

Specification Specification Specification Specification
Limit Limit Limit Limit

Capable Process This process is not capable

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Visualizing Process Capability
Lower Upper Lower Upper
Spec. Cust. Tolerance Spec. Cust. Tolerance
Spec Spec.
Limit
0.4 Limit 0.4
Limit Limit
0.3 0.3

0.2 0.2

0.1 0.1

0.0 0.0
-4 -3 -2 -1 0 1 2 3 4 -8 -6 -4 -2 0 2 4 6 8

Process
Process Capability Capability

Cp=1 Cp=2
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Process Drift

Lower Cust. Tolerance Upper

Spec. Spec.
0.4
Limit Limit
0.3
Cp = 1.33
0.2

Cpk = 1.33 0.1

0.0
-5.33 -4.0 -2.67 -1.33 0 1.33 2.67 4.0 5.33

Lower Upper
Cust. Tolerance
Spec. Spec.
0.4
Limit Limit
0.3
Cp = 1.33
0.2

Cpk = 0.83 0.1

0.0
-5.33 -4.0 -2.67 -1.33 0 1.33 2.67 4.0 5.33

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Unstable Process

LSL USL
Unstable Process
• Mean shifts present Fri Time
• Excess variation (σ
changes) Thur
• Special causes of
variation are present, Wed
• Process output is not
stable over time and
is not predictable Tue

Mon

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Stable Process

LSL USL
Stable process:
• Variation reduced (lower σ) Time
• Process is centered in spec window
• Mean shifts reduced
• Only common cause variation
is present
• Process output is stable/predictable
• The process is termed “in statistical
control.”

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History of Six Sigma

Originated at Motorola in the early 80’s

Doesn’t use “Quality” in the name
Uses a modification of the Deming Plan-Do-
Check-Act (PDCA) cycle
Adopted widely in the 90’s by major
corporations including AlliedSignal (now
Honeywell), GE, Kodak, and a growing list.

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Six Sigma Strategy

Implementation is top-down. CEO driven with

executive management and Champions (process
owners) leading the initiative.
Improvement projects must be integrated with the
goals of the organization.
Six Sigma uses a “divide and conquer” approach. Find
and work on the most important key customer related
projects.
Uses several levels of competency in Six Sigma
implementation:
Champions
Master Black Belt
Black Belt
Green Belt

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Roles & Responsibilities

Executive Team:
Provide continuous support to drive for results. Sets
strategic direction, identify core business process issues,
prioritize
Champion:
Identifies high impact projects by combining the strategic
vision of the executive team & the key customer and
process needs of the business.
Facilitates successful project completion, coaches teams
Master Black Belt:
Highly skilled & experienced in all aspects of Six Sigma
Coach and mentor to Black Belts, works with Champion on
project selection

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Roles & Responsibilities

Black Belt:
Project Leader
Highly trained in Six Sigma methods and tools
Influencer, team facilitator, project manager
Green Belt:
Project team member
Trained in Six Sigma methods and tools

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Training for Six Sigma

Executives
8 hour Six Sigma overview and implementation roadmap
development.
Champion
30 hour course, overview of DMAIC, Tools overview
Focus on developing project selection skills
Black Belt
160 hours of classroom
Required to have a project
Class for 1 week (40 hours) and project work for 3-4 weeks
Total of 4 months to train
Green Belt
30-80 hours depending on training philosophy
May or may not have to complete a project

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Projects Drive Six Sigma Success

Types of Six Sigma Projects

Manufacturing Quality Improvement (origin of Six Sigma
initiatives)
Design for Six Sigma (DFSS) for product development
Business process improvement (transactional Six Sigma)

Some companies find much larger impact in transactional type

projects:
One company:
$150-250K for manufacturing improvement projects
> $500K for transactional projects
Process management methods rarely used for business process
improvements

Transactional Six Sigma is a Huge Opportunity

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Identifying Six Sigma Projects
Basic Project Criteria
• Problem in key business activity
• Large financial impact
• Can measure and quantify performance

yes
Easy to Fix? Quick Hit
no

Solution yes
Available? Other Initiative
no

• Process focus
• Analyze Y = f(x)
• Reduce variation & defects
Six Sigma Project
• Complex relationships
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Project Focus

Projects are chartered by Champions and business

leaders
Led by Black Belts
Assisted by Green Belts
Each experienced Black Belt can typically handle
between 4-6 projects per year
Typical financial impact is approximately $175,000
per project
Experienced Black Belt can generate about $1M in
savings per year

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Why adopt Six Sigma?

Concept has been around for 16 years, proven

track record at big companies.
Has shown the most endurance and return on
investment of any improvement initiative.
Starting to be implemented in small and medium-
sized corporations.
Provides a comprehensive set of philosophies,
tools, methods, and fundamental concepts leading
to quantifiable business results.
Involves the entire organization; from CEO, CFO,
Champions, Black Belts, Green Belts, and workers.

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What are the Challenges?

Takes careful preparation and a commitment to

fundamental change efforts required.
Training – key for all levels in the organization
It is not a quick fix nor a “one-size-fits-all” approach.
Implementation tends to be uneven and lapses
occur 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 start
seeing quantifiable financial gains.

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What are the Challenges

Not everything has to be Six Sigma; this was the

downfall of reengineering efforts! Choose your
projects carefully.
Statistical analysis is not generally part of the
engineering discipline in most companies.
Determine the role of DFSS and transactional Six
Sigma in your organization
Needs to focus on people issues and change
management
People must not fear giving “bad news” and
continually require data-driven decision making.

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What are the Rewards

Increased value to the customers and

shareholders.
Improved reliability and predictability of products
and services.
Significant reduction in defects.
Institutionalization of a “process” mindset.
Increased competitive advantage.

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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… net
benefits = $750 Million
1999 Annual Report: more than $2 Billion net
benefits
2001: 6,000 projects completed; $3 Billion in
savings

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The Road to Six Sigma

Usually has many twists and turns!

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Six Sigma Implementation

Charter Train Develop Develop Implement Project

Implementation Execs & Roadmap Project BB & GB Reviews &
Team Champions & Goals Portfolio Training 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

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Six Sigma Roadmap

Identify core processes & key customers

Define key customer drivers
Voice of the Customer (VOC)
Critical to Quality (CTQ’s)
Measure and baseline current performance
Prioritize, analyze, charter and kick-off key
improvement projects
Develop a diversified project portfolio (short and
long term projects)
Expand and integrate the Six Sigma system across
the enterprise as experience grows

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Costs to Implement

Direct payroll (individuals dedicated full-time to Six

Sigma)
Indirect payroll (executives, champions, process
owners, etc.)
Training and consulting costs (Champion, black and
green belt, implementation and project reviews)
Improvement implementation costs (cost to
implement solutions found in BB projects)

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Where Do You Start?

Business Transformation
Full scale change initiative
Strategic Improvement
Address a strategic weakness
Used to build a core competency that is missing
(such as VOC, or measurement systems)
Problem Solving
Most popular starting point
Focus on key short-term and long-term
improvement projects to get maximum impact

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What are your core processes?

Product Development Process

Order fulfillment process
Customer service process
Support Processes
Finance

Administration (HR, legal, etc.)

Information technology

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Customer centric core process

Product Development Process

Understand
Design Build Test Sell
Customer
Product Product Product Product
Needs

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Customer centric core process

Order Fulfillment Process

Develop
Take Build Service Bill
Customer
Order Product Product Customer
Relationship

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Six Sigma Summary

Disciplined & Systematic Approach

Process orientation, drive for variation reduction
Focus on quantitative methods and tools
Focus on control to hold the gains
Uses a new metric for defects (sigma, DPMO, ppm)
Results oriented management leadership, using
data-driven decision making
Significant training & organizational learning

© 2008 InnoCentrix, LLC 42

Six Sigma Summary

Success happens “one project at a time”

Good project selection leads to large financial
impact
Implementation is hard work, not magic. Expect
bumps in the road, stay the course, results will
happen
Six Sigma is “A journey not a destination”

© 2008 InnoCentrix, LLC 43

InnoCentrix, LLC

Jeffrey Gotro, Ph.D.

949-635-6916
www.innocentrix.com
[email protected]

© 2008 InnoCentrix, LLC 44