Six Sigma

Six Sigma

What Is It, How Is It Different, and Why Are Project Managers Ahead of the Pack?

Terry [email protected]

February 25, 2003

©2002, TRW. All Rights Reserved

2 ©2002, TRW. All Rights Reserved

What Is Six Sigma?

Six Sigma means many things to many people

A statistical measurement

A quality improvement program

A management philosophy

A project

A goal

A waste of time and money


What Is Six Sigma?

Six Sigma has many definitions

The goose that laid the golden egg

Not good enough

A pain in the ________

3.4 defects per million opportunities

A tool that may have saved many organizations


What Is Six Sigma?

A disciplined process using customer requirements, data, and facts to improve business performance by consistently meeting customer expectations.


Virtual PerfectionThe Metric — As A GoalA Statistical Measure of a Process’s Ability to Meet Customer Requirements

Process Sigma % Accuracy Defects Per Million6 99.9997% 3.45 99.98% 2334 99.4% 62103 93.3% 66,8072 69.1% 308,537

A “Stretch” Goal6 Sigma = 3.4 DPMO


Is 99% Good Enough?

6 Sigma (99.99966% Good)3.8 Sigma (99% Good)50 newborn babies dropped at birth by doctors each day

Toxic drinking water for 4.6 hours each month

5,000 incorrect surgical operations per week

Two unsafe landings at Cleveland Hopkins Airport each day

1,240,200 wrong drug prescriptions each year

No electricity for almost seven hours each month

3 newborn babies dropped in 100 years

Unsafe water for one second every sixteen years

1.7 incorrect operations per week

One short or long landing every five years

1 wrong prescription in 25 years

One hour without electricity every 34 years

Six Sigma performance is not only possible, but we expect it in many areas of life


How is Six Sigma Different

Disciplined methodologyFact based, data drivenProcess centeredFocused on customer requirementsEmphasizes ensuring permanent changeApplicable to all business processesConsistent approach across business functionsLeadership involved throughoutChanges how management operates


A Rigorous Methodology

Data driven, breakthrough process improvement methodology

Customer-derived requirements and specifications drive everything to establish the right focus

Measurement rigor to characterize process performance

Sophisticated statistical tool set to validate root cause

Back-end implementation of process control to maintain gains

Financial analysis rigor to validate business benefits


Importance of Reducing Variation

Every process/procedure has an expected outcome/ measurement: the mean

Every outcome/measurement has some variability

The measure of that variability is the standarddeviation, or “ “

Reducing variability and defects is good …

… and is the essence of Six Sigma

σ


Importance of Reducing Variation

To increase a process performance, you have to decrease variation.

Less variation provides

Greater predictability in the processLess waste and rework, which lowers costsProducts and services that perform better and last longerHappier customers

Defects Defects

Too early Too late

Delivery Time

Reduce variation

Delivery Time

Too early Too late

Spread of variation too wide compared

to specifications

Spread of variation narrow compared to

specifications


Examples of Measured Process Improvement

A/R “Reduced cycle time from 11.4 to 3.01 days”

HSE “MSDS retrieval time reduced by 71%”

IS “Reduced time to setup a new PC from 4 hrs to 30 min.”

Purchasing “Reduced errors from 1.62 to 0.81 per requisition”

Shipping “Reduced hours per truckload from 7.9 to 3.6”

HR “Reduced the processing time for new

employees from 3.34 to 1.04 hrs”

Maintenance “Reduced downtime from 17% to 8.5%”


Six Sigma Delivers Business Results

YIELD: Since 1988, Texas Instruments yield has improved from 84.3% to 99.8 %.Allied Signal used six sigma methods to reduce defects by over 68% in 4 months

COST SAVINGS: Motorola saved $2.2 billion using six sigma from 1987–1991.At GE plant & equipment expense/ depreciation has fallen from 1.2x to .8x

REVENUE GROWTH: At GE Capital, over 50% of six sigma benefit is revenue growth versus cost reduction

NET INCOME: At GE margins have risen from 13.6% to 16.7%.In 1998, GE Capital Invested $82 million for $250 million In incremental net income


DMAIC Process

Process Improvement — DMAIC

Charter Team, Map Process & Specify CTQ’s

Measure Process Performance

Identify & Quantify Root Causes

IMPROVEDEFINE MEASURE ANALYZE CONTROLInstitutionalize Improvement, Ongoing Control

Select, Design & Implement Solution

• Define Charter

• Voice of customer

• SIPOC• Customer

CTQsderived and documented

• CTQsMeasured

• Process Capability

• Process Stability

• Baseline Sigma Calculated

• Identify, Quantify and Verify Root Causes

• Benefits Estimated

• Cost/Benefit Analysis

• Ongoing Measurement & Monitoring Plan Implemented

• Process Standardized

• Benefits Validated


The Design For Six Sigma Process

Measure Analyze Design VerifyDefine

Critical aspects of the process

• Business case

• Team composition

• Determining the specs – Customer focus

• Optimizing the design

• Assessing risks

• Duration Non-linear process … Iterative.


Identifying the Key Players

There are six major roles that need to be filled for a successful project.


Key Roles in Six Sigma

Process Owner – responsible for the business process

Black Belt – full time project leader

Green Belt – part time project participant; trained in Six Sigma

Master Black Belt – expert; counsels Black Belts; trainer

Money Belt – validates financial benefits and costs

Leader or Champion – senior management


DMAIC Project Selection

Project selection is a critical activity

Develop criteria to be used in project selection and prioritization

If solution is apparent or known, just do itCauses of the problems should be unknownProject should be meaningful and manageableProjects should be very focused; don’t attempt to “boil the ocean”


DMAIC Project Selection Criteria

The problem is related to a key business issue

The problem is linked to a clearly defined process (you can identify the starting and ending points)

You can identify the internal or external customerswho use or receive the output from this processYou can clearly identify what a defect is and count its occurrence

You can demonstrate how improvements could enhance financial performance

There is appropriate organizational support


Step 1: DEFINE

GoalDefine the project’s purpose and scope and get background on the process and customer

OutputA clear statement of the intended improvement and how it is to be measuredA high level map of the processA list of what isimportant to thecustomer

IMPROVE


Project Definition

Create a detailed project charter with business caseMost projects evolve. Few are cast in stone from the beginning.In each step, you’ll learn more about what is really going on.

Be open to revisiting the scope, definition, and purpose of the project.


Project Lifecycle

Target Identified“Bid” Decision MadeProject Awarded

• Plan the Project (Project Start-Up)Develop the Project Plan

• Manage the ProjectWork the PlanStatus the Project Manage ChangeCommunicateManage Risk

• Successfully Complete the Project

Project Management Disciplines

ScopeTimeCostQualityHRCommunicationRiskProcurement


Six Sigma Project Plan

The project plan should clearly defineWhat is to be done?Who will do it?When it will be done?How much will it cost?How you will KNOW when you are done?


Completion Criteria

The Project Charter and your plan should be updated to reflect your completion criteria

When is the project over?Six Sigma projects are generally 4-6 monthsSix Sigma projects may spawn follow-on projectsProjects have a defined business case in terms of expected savings


Stakeholder Analysis

Commitment Analysis: A table that helps you understand how much work needs to be done to achieve desired levels of commitment.

Level of Commitment Sales Mgmt. Cust.

Enthusiastic support Will work hard to make it happenHelp it work Will lend appropriate support to implement solutionCompliant Will do minimal acceptable and will try to erode the standardHesitant Holds some reservations; won't volunteerIndifferent Won't help; won't hurt XUncooperative Will have to be prodded XOpposed Will openly act on and state opposition to the solution XHostile Will block implementation of the solution at all costs

People or Groups


Team Development Model

Forming

Norming

Storming

PerformingTuckman, 1965

Studying the Process


SIPOC – A High Level View of Process

Suppliers Outputs CustomersProcessInputsPublic Resources

HR PoliciesHiring Manager

Project Manager

Sub contractors Staffing Needs

Internal Resources

Job Rqmts.

Candidates Qualified Hire

HiringProgram

Staff

Project Manager

Human ResourcesClosed Requisition

Qualified HireDecision to Hire

Process Steps

DevelopProject

Staffing needs

DevelopProject

Staffing needsCreate

RequisitionsCreate

RequisitionsRecruitStaff

RecruitStaff

SelectStaff

SelectStaff

HireStaffHireStaff


Understanding a Process

To better understand the process:

Create a flowchart of your process.Identify which of your process steps are value-added and which are nonvalue-added.

Determine cycle time and identify bottlenecks.Look for errors or inefficiencies that contribute to defects.


Types of Flowcharts Useful for Understanding Process Flow

Deployment flowcharts

Activity flowcharts

Sales Technical Shipping Coordinator


Value-Added and Nonvalue-Added Steps

Value-Added Step:Customers are willing to pay for it.It physically changes the product/the information as regard to content.It’s done right the first time.

Nonvalue-Added Step:Is not essential to produce output.Does not add value to the output.Includes:• Defects, errors, omissions. • Preparation/setup, control/inspection.• Over-production, processing, inventory.• Transporting, motion, waiting, delays.

The Voice of the Customer


What Is theVoice of the Customer?

The term Voice of the Customer (VOC) is used to describe customers’ needs and their perceptions of your product or service.


Why VOC Is Critical

VOC data helps an organization

Decide what products and services to offer

Identify critical features and specification for those products and services (Critical to Quality – CTQ)

Decide where to focus improvement efforts

Get a baseline measure of customer satisfaction to measure improvement against

Identify key drivers of customer satisfaction


VOC Process, cont.Affinity DiagramVOC Plan

C U S T O M E R S

OUTPUTS

Prob

lem

/Def

ects SIPOC Map

Need 1 2

3 4

5

6

REACTIVE PROACTIVE

WHO , WHAT & WHY

SOURCES

SUMMARY

Delighters

Must Be

Kano Model

More Is Better

Tree DiagramVOC Key Issue CTQ

What To Measure(CTQ Performance)

VOC to CTQs – Translating the Business Problem to a Statistical Problem


Example: CTQ Tree

Need Drivers CTQs

Operator training time (hrs.)

General Specific

Hard to measure Easy to measure

Ease of Operationand Maintenance

Ease of Operation Setup time (minutes)

Operation Accuracy (errors/1000 ops)

Ease of Maintenance

Mean Time to Restore (MTTR)

# Special Tools Required

Maintenance training time (hrs.)


Step 2: MEASURE

GoalFocus the effort by gathering information on the current situation

OutputBaseline data on current process performanceData that pinpoints problem location or occurrenceA more focused problem statement

IMPROVE


How Can Data Help You?


By Showing What Really Is


Data Helps Us . . .

Separate what we think is happening from what is reallyhappening

Confirm or disprove preconceived ideas and theories

Establish a baseline of performance

See the history of the problem over time

Measure the impact of changes on a process

Identify and understand relationships that might help explain variation

Control a process (monitor process performance)

Avoid “solutions” that don’t solve the real problem


Preparation for the Analyze Step

Y = f(x1, x2, x3,…,xn)

Y relates to the process output

X relates to the various input and process variables

Understanding the variation in the output variables requires data about the Xs


What Is Variation?

No two anythings are exactly alike• How a process is

done will vary from day to day

• Measurements or counts collected on process output will vary over time

65

Process data shows how the processvaries over time60

55

50

45

401 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41

Quantifying the amount of variation in a process is a critical step towards improvementUnderstanding what causes that variation helps us decide what kinds of actions are most likely to lead to lasting improvement


Variation vs. Specifications

The amount of variation in a process tells us what that process is actually capable of achieving

Specifications tell us what we want a process to be able to achieve


Goal: Minimize Variation

There will always be some variation in a processBut we can work to minimize variation around a target

40

45

50

55

60

65

70

GOAL= reduce variation

Target

1 11 21 31 41 51 61 71 81


Time Plots (Run Charts)

A time plot is a graph of data in time order.

302010070

80

90

100

110

120

130

140Time Plot of Number of Web Site Hits

June 1–30

Num

ber o

f hits

10)

(/


Control Charts

Time ordered plot of results (just like time plots)Calculated control limits are drawn on the plot.Centerline calculation uses the mean not the median.

UCL100

90

80

70

60

50

40

30LCL20

10

0J A S O N D J F M A M J J A S O N D J F M


Frequency Plots (Histograms)

A frequency plot shows the shape or distribution of the data by showing how often different values occur.

Creates a picture of variation.

0

1

2

3

4

5

6

7

8

9

10

4:00

4:05

4:10

4:15

4:20

4:25

4:30

4:35

4:40

4:45

4:50

4:55

4:60

4:65

TargetWeight

Fill Weight (kg.)

Num

ber o

f occ

urre

nces

Ordinance Fill Weightfor JPJ 5” Naval Projectile


What Is Six Sigma?

Sigma (or σ) is a statistical concept that represents how much variation there is in a process relative to customer specifications

Too much variation Hard to produce output within customer requirements (specifications)

Low sigma values (0–2)

Moderate variation Most output meets customer requirements

Middle sigma values (3–5)

Very little variation Virtually all output meets customer requirements (less than 4ppm outside specifications)

High sigma values (6)


Where Are Businesses Today?

Experts think most businesses would fall within the 3 to 4 Sigma range today.

DPMO

0

1

10

100

1000

10000

100000

1000000

0 1 2 3 4 5 6 7Process Sigma

IRS an

swers

21% of

calls

Ontime f

light

arriva

ls (al

l carr

iers)

Mishan

dled b

agga

ge (a

ll carr

iers)

Overni

ght d

elive

ry of

1st C

lass M

ail

Correc

t lega

l adv

ice fro

m IRS

Wire tra

nsfer

s

Restau

rant b

ills

Payrol

l proc

essin

g

Domes

tic ai

rline f

atality

rate

(0.43

ppm)


The Normal Curve and Process Sigma

When continuous data are normally distributed, calculating process sigma is equivalent to finding the area under the normal (or bell-shaped) curve that is outside the spec limits, as depicted in the diagram below.

LSL USL


Why Use Six Sigma as a Metric?

More sensitive indicator than percentage

Focuses on defectsEven one defect reflects a failure in your customer’s eyes.Common metric makes comparisons easier For instance, which of the following processes performed best?

Percent DPMO σ

93% 66,807 3.0 98% 22,750 3.5 99% 6,210 4.0 99.87% 1,350 4.5 99.977% 233 5.0 99.9997% 3.4 6.0

Process # of Transactions per month

Performance

Calls handled 14,000 10% require transfers

Service calls processed 75 Avg. cycle time of 3 days

Installation of new service 2500 94% first-time through rate

Daily reports 28-31 9 errors per day


Calculating Process Sigma

1. Determine number of defect opportunities O = ______ per unit

2. Determine number of units processed N = ______

3. Determine total number of defects D = ______ made (include defects made and later fixed)

4. Calculate Defects Per Opportunity ______

5. Calculate Yield ______

6. Look up Sigma in the Process Sigma Table Process Sigma = ______

5

100

7

.014

98.6

3.7

Yield = (1–DPO) x 100 =

DPO = =D

N x O


The Sigma Scale

DPMO σ

308,537 2 66,807 3 6,210 4

233 5 3.4 6

ProcessCapability

Defects perMillion

Opportunities

(distribution shifted ±1.5σ)

Increase in Sigmarequires exponential

defect reduction


Step 3: ANALYZE

DoE Data Analysis

IM PRO VE

GoalIdentify deep causes and confirm them with data

OutputA theory that has been tested and confirmed


Analyze

Develop a focused problem statementOrganize your theories using graphical toolsIdentify potential root causes using process and data analysisTest differences to verify causesUse scatter diagrams to explore relationships between variables


The Five Whys

To push for root causes, start with your focused problem and then ask WHY five times.Example:Focused Problem: Customers complain about waiting too long to get connected to help desk during lunch hours.

Why does this problem happen?Backup help desk operators take longer to connect callers.

Why does it take backup operators longer? Backup operators don’t know the job as well as the regular operators do.

Why don’t operators know the job as well? There is no special training, no job aids to make up for the gapin experience and on-the-job learning for the backups.

Why don’t they have special training or job aids? In the past, the organization has not recognized this need.

Why hasn’t the organization recognized the need? The organization has no system to identify training needs.


Looking for Relationships

Graphic displays can help you structure possible causes in orderto find relationships that will shed new light on your problem.

Cause-and-Effect Diagram Tree Diagram

Affinity Diagram

Problem Statement Objective

Means/Objective

Means/Objective

Means/Objective

Means/Objective

Means/Objective

Means

Means

Means

Means

Means

Means

Means

Means

Means/Objective

Verifying Causes


Analyzing Cause-Effect Data

The type of data you have or will collect determines what tools you can use.

Scatter PlotsFrequency PlotsParetoTables of Results

4 11

19 22

yes no

yes

no

Factor A present?

Fact

or B

pre

sent

?

Continuous Discrete

Con

tinuo

usD

iscr

ete

X data (Potential Cause)

Y da

ta (E

ffect

)

Scatter Plot

Pareto, Table of Results

Experimentation can be used in all cases.

Stratified Frequency Plots

X1

X2

X3

Y Data

Stratified Frequency Plots

Ya

Yb

X Data


Pareto of Causes

Pareto Analysis may be used to identify the causes that are most often present when the defect occurs:

Computer Downtime August 1–31

20

30

40

50

Percent of total

10070 90

8060

7050

60

30

40

Hou

rs

20

10 10

00

Sche

dM

ntn

Har

dwar

e Fa

il

Upg

rade

s

Softw

are

Bugs

Pow

er O

uta

Une

xpla

i

Reason

ned

urec

ges

Implement Solutions


Step 4: IMPROVE

GoalDevelop, try out, and implement solutions that address root causes

OutputPlanned, tested actions that should eliminate or reduce the impact of the identified root causes

Solutions

FMEA

Pilot

Implemen-

tation

IMPROVE


Generating Solution Ideas

Use what you know about the process and the verified cause(s)Generated ideasCombine and develop ideas into solutions


Solution Prioritization Matrix

The Solution Prioritization Matrix evaluates each option against a set of weighted criteria:

Solution

A

B

C

D

0.2 1.25 0.3 1.65 0.6Easy Quick Tech Hi Impact Customers

SUM

2.6

3.0 2.4

2.7

19.8

8.25

8.4

4.8

10

13.75

43.6

1.2 2.7 19.8 5.47.5 36.6

32.1

4.2 18.15 5.418.75 47.71.2

Criteria and Weights


Cost/Benefit Analysis

At this stage, the team has invested a lot of emotional energy into the project, however the merits of their solution may not be obvious to those outside the team.The team might have selected a solution which does not meet the requirements of the business.A formal cost/benefit analysis expresses in financial terms the implications of your solution and helps to mobilize commitment and create buy-in.


Reducing or Eliminating Risk

By anticipating potential problems, you can often take countermeasures to reduce or eliminate the risks.A common tool for this analysis is Failure Modes and EffectsAnalysis (FMEA).Pilot testing


The Implementation Plan

A project plan clearly definesWhat is to be done?Who will do it?When it will be done?How much will it cost?How you will KNOW when you are done?

Project Management Disciplines

ScopeTimeCostQualityHRCommunicationRiskProcurement


Elements of The Plan

Tasks & Timeline Budget & Resources Stakeholders

PERSONor GROUP

Communication& Participation

Finance

Sales

IS

Potential Problems

Aug. Sept. Oct. Nov. Dec. Jan. Feb.Step

How to Check

PLAN ACTUALSChange made

Step Pot.Failure

Pot.Cause

Counter-measures

Expenses

Staff time

xxxxx 00.00 xxxxx 00.00 xxxxx 00.00

Ted 5 hrs


Stakeholder Commitment

Enthusiastic support Will work hard to make it happen

Help it work Will lend appropriate support

Hesitant Holds some reservations; won’t volunteer

Indifferent Won’t help; won’t hurt

Uncooperative Will have to be prodded

Opposed Will openly act on and state opposition

Hostile Will block at all costs

People or Groups

Sales Mgmt. Cust.Level of CommitmentA table that helps you understand how much work needs to be done to achieve desired levels of commitment.


Step 5: CONTROLGoal

Use data to evaluate both the solutions and the plans

Validate that all changes adhere to all operating company change control, and compliance requirements

Maintain the gains by standardizing processes

Outline next steps for on-going improvement including opportunities for replication

OutputBefore and After analysisMonitoring systemCompleted documentation of results, learnings, and recommendations

Control

Standardize

DocumentMonitorEvaluate

Closure

IMPROVE


Standardization & Documentation

Making sure that important elements of a process are performed consistently in the best possible way

Changes are made only when data shows that a new alternative is better

Documentation is key• Making sure documentation is up to date and used

encourages ongoing use of standardized methods


Monitoring Results

Add more data to an existing run chart or control chart.

Prepare new Pareto charts. Make scale and dimensions the same so you can more accurately judge degree of improvement.

Draw new frequency plotson the same scale as the original plots.

Step 4 changesim plem ented

Before After G ood

}Im provem ent

Target

}Rem aining G ap

AfterBefore

}Im provem ent

A2 A3 A4A1 A2 A1A3 A4

Before After

Project Closure


Importance of Closure

• About the problem or process being studied• About the improvement process itself

Hand over responsibilities for standardization and monitoring to the appropriate peopleRecognition

Capture the learnings from the initiative

Six Sigma in Summary


Six Sigma Intangibles

New Ways of Thinking...Customer Thinking (customer specs)Process Thinking (leading indicators)Statistical Thinking (variation)Causal Thinking: Y = ƒ(x1, x2, x3 … xn)Experimental Thinking (data-driven hypothesis testing)Control ThinkingStretch ThinkingCommon language/way of thinking about problemsAccountability Thinking

The real Six Sigma advantage…the transformation of the culture.The real Six Sigma advantage…The real Six Sigma advantage…

the transformation of the culture.the transformation of the culture.


Six Sigma Hidden Truths

Six Sigma encompasses a broad array of business improvement best practices, some advanced, some common sense

There are many ways to implement Six SigmaPotential gains are just as great in service organizations

as in manufacturing organizationsSix Sigma is as much about PEOPLE excellence as

technical excellenceDone well, Six Sigma can be a very rewarding

experience

Source: The Six Sigma Way; Pande


Six Sigma is About Business

Six Sigma is not the solution for everything, nor is it appropriate for all organizationsSix Sigma is a framework to improve performance

Six Sigma does not apply to manufacturing onlySix Sigma does apply to every function and business

Six Sigma is not just about statisticsSix Sigma is about Business Performance


Six Sigma & Project Managers –A Natural Fit

Disciplined, but flexible, methodologyProject focusedProcess focusedRequires the skills in which Project Manager’s

are already proficientCenters on business transformationLeads to greater opportunities in the

organization


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