Six Sigma Application

7/29/2019 Six Sigma Application

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TERM PAPER

OF

OPERATION

MANAGEMENTTOPIC: - SIX SIGMA AND APPLICATION

DEPARTMENT OF MANAGEMENT

LOVELY PROFESSIONAL UNIVERSITY

PHAGWARA

Table of content:

Introduction of six sigma

SIX SIGMA AND APPLICATION 1


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3-8

Historical overview9-10

Methods

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Six sigma and its benefits13

Six sigma approach13-14

Six sigma methodology 14-17

INTRODUCTION TO SIX SIGMA

Six Sigma is usually related to the magic number of 3.4 defects per million opportunities. People

often view Six Sigma as yet another rigorous statistical quality control mechanism.

Pioneered at Motorola in the mid-1980s, Six Sigma was initially targeted to quantify the defects

occurred during manufacturing processes, and to reduce those defects to a very small level.



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Motorola claimed to have saved several million dollars. Another very popular success was at GE.

Six Sigma contributed over US $ 300 million to GE's 1997 operating income.

Today Six Sigma is delivering business excellence, higher customer satisfaction, and superior

profits by dramatically improving every process in an enterprise from financial to operational to

production. Six Sigma has become a darling of a wide spectrum of industries, from health care to

insurance to telecommunications to software.

Six Sigma is abusiness management strategy originally developed by Motorola.[1] As of 2009, it

enjoys widespread application in many sectors of industry, although its application is not without

controversy.

Six Sigma seeks to improve the quality of process outputs by identifying and removing thecauses of defects (errors) and minimizing variability in manufacturing and business processes. It

uses a set ofquality management methods, including statistical methods, and creates a special

infrastructure of people within the organization ("Black Belts, Green Belts", etc.) who are

experts in these methods. Each Six Sigma project carried out within an organization follows a

defined sequence of steps and has quantified targets. These targets can be financial (cost

reduction or profit increase) or whatever is critical to the customer of that process (cycle time,

safety, delivery, etc.).

What is Six Sigma?

It is important to recall that every customer always values consistent and predicable services

and/or products with near zero defects. Therefore they experience the variation and not the mean.

Mean is their expectation or our target.

If we can measure process variations that cause defects i.e. unacceptable deviation from the

mean or target, we can work towards systematically managing the variation to eliminate defects.

Six Sigma is a methodology focused on creating breakthrough improvements by managing

variation and reducing defects in processes across the enterprise.

Sigma is a Greek symbol represented by "".

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Why do we call Six Sigma as Six Sigma and not Four or Five Sigma or Eight Alpha (another

Greek symbol)? Sigma is a statistical term that measures process deviation from process mean or

target. Mean is also referred as average in common language. The figure of six was arrived

statistically by looking at the current average maturity of most business enterprises. We would

like to revise this figure to 8 or may be 9 provided the world becomes a more orderly and

predictable (even with increasing entropy or chaos) place to live!

We have a detailed discussion on keywords "breakthrough improvement" and "variation" apart

from the "methodology" in later sections.

Example:

Let us take an example to bring a breakthrough improvement in our current understanding of the

concept of Six Sigma. This requires us to have basic knowledge of statistics. We have a detailed

discussion on required statistical concepts later.Consider a pizza delivery shop that guarantees

the order delivery with 30 minutes from the time of accepting an order. In the event of a delivery

time miss, the customer is refunded 100% money. The management took a target (read mean) of

delivering every pizza order within 15 minutes and aligned its processes to meet this goal.

If we collect data of delivery times over a large number of the delivery made by the pizza shop

and make a frequency distribution graph, we discover that it resembles a "bell shaped curve". A

frequency distribution graph is constructed from the frequency table; a frequency table lists

different time intervals (called classes) like 0 to 2 minute, 2 to 4 minutes, to 14 to 16 minutes to

28 to 30 minutes and the count of the deliveries made in each interval. The mean is found to be

16 minutes and standard deviation (measure of deviation or dispersion in data i.e. ) is found as



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2.5 minutes. A graph drawn from the data of over 5000 deliveries made is given below. Note,

this not a real graph and is used only for illustration purposes.

This bell shape curved is called "normal distribution" in statistical terms. In real life, a lot of

frequency distributions follow normal distribution, as is the case in the pizza delivery times.

Natural variations cause such a distribution or deviation. One of the characteristics of this

distribution is that 68% of area (i.e. the data points) falls within the area of -1 and +1 on either

side of the mean. Similarly, 2 on either side will cover approximately 95.5% area. 3 on either

side from mean covers almost 99.7% area. A more peaked curve (e.g. more and more deliveries

were made on target) indicates lower variation or more mature and capable process. Whereas a

flatter bell curve indicates higher variation or less mature or capable process.

After this statistical detour let us come back to our pizza example. If the pizza shop delivers 68%

of pizza orders in time, we call it a "One Sigma shop". Similarly, if the pizza shop makes 95.5%

deliveries on time, we call it a "Two Sigma shop". In our example, data suggests that it is almost

a "Three Sigma shop".

We should now be able to appreciate why management took a delivery time target of 15 minutes

and not 30 minutes. Imagine what would have happened with a 30 minutes delivery time target!



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The "delivery time" is a critical-to-quality parameter from the customer perspective and has a

significant impact on profits. In addition, it is an entry barrier for the competition. Such a

parameter is called a CTQ and its definition in context of our pizza shop is given below:

CTQ Name: Timely Pizza delivery

CTQ Measure: Time in Minutes

CTQ Specification: Delivery with 30 minutes from the order acceptance time

Now we can easily define a defect:

Defect: Delivery that takes longer than 30 minutes

Unit: Order

Opportunity: 1 per order i.e. only "1" defect can occur in "1" order

Technical Note: This discussion on the example did not include 1.5 process shift during the

above analysis. The concept is discussed later. The Six Sigma conversion graph including a 1.5

shift in process is given below:

This graph is on a logarithmic scale. Notice the increasing rate of improvement. For example, 1

sigma to 3 sigma is only 10 times improvement; 3 sigma to 4 sigma is a big 10 times

improvement; whereas 5 sigma to 6 sigma is a whooping 1825 times change. That is why we are

talking about breakthrough improvements in a journey to Six Sigma.



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How does Six Sigma work?

The driving force behind any Six Sigma project comes from its primary focus - "bringing

breakthrough improvements in a systematic manner by managing variation and reducing

defects". This requires us to ask tougher questions, raise the bar significantly, and force people to

think out of the box and to be innovative. The objective is to stretch, stretch mentally and not

physically. To make this journey successful there is a methodology(s) to support Six Sigma

implementations.

There are 2 potential scenarios - (a) there is already an existing process(s) that is working

"reasonably" well and (b) there is no process at all. A bad process is as good as no process.

Scenario (a) focuses on significant process improvements and requires use of DMAIC:

1. Define process goals in terms of key critical parameters (i.e. critical to quality or critical to

production) on the basis of customer requirements or Voice Of Customer (VOC)

2. Measure the current process performance in context of goals

3. Analyze the current scenario in terms of causes of variations and defects

4. Improve the process by systematically reducing variation and eliminating defects

5. Control future performance of the process

Scenario (b) focuses on process design using Design for Six Sigma (DFSS) approach. DFSS

typically requires IDOV:

1. Identify process goals in terms of critical parameters, industry & competitor benchmarks,

VOC



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2. Design involves enumeration of potential solutions and selection of the best

3. Optimize performance by using advanced statistical modeling and simulation techniques

and design refinements

4. Validate that design works in accordance to the process goals

Note, sometimes a DMAIC project may turn into a DFSS project because the process in question

requires complete re-design to bring about the desired degree of improvement. Such a discovery

usually occurs during improvement phase of DMAIC.In addition to the methodology, what

counts in this journey is being smart and innovative.

Historical overview

Six Sigma originated as a set of practices designed to improve manufacturing processes and

eliminate defects, but its application was subsequently extended to other types of business

processes as well. In Six Sigma, a defect is defined as any process output that does not meet

customer specifications, or that could lead to creating an output that does not meet customer

specifications.

Bill Smith first formulated the particulars of the methodology at Motorola in 1986. Six Sigma

was heavily inspired by six preceding decades of quality improvement methodologies such as

quality control, TQM, and Zero Defects,based on the work of pioneers such

as Shewhart, Deming, Juran, Ishikawa, Taguchi and others.

Like its predecessors, Six Sigma doctrine asserts that:

Continuous efforts to achieve stable and predictable process results (i.e. reduce process variation)

are of vital importance to business success.

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Manufacturing and business processes have characteristics that can be measured, analyzed,

improved and controlled.

Achieving sustained quality improvement requires commitment from the entire organization,

particularly from top-level management.

Features that set Six Sigma apart from previous quality improvement initiatives include:

A clear focus on achieving measurable and quantifiable financial returns from any Six Sigma

project.

An increased emphasis on strong and passionate management leadership and support.

A special infrastructure of "Champions," "Master Black Belts," "Black Belts," etc. to lead and

implement the Six Sigma approach.

A clear commitment to making decisions on the basis of verifiable data, rather than assumptions

and guesswork.

The term "Six Sigma" comes from a field of statistics known asprocess capability studies.

Originally, it referred to the ability of manufacturing processes to produce a very high proportion

of output within specification.

Processes that operate with "six sigma quality" over the short term are assumed to produce long-

term defect levels below 3.4 defects per million opportunities (DPMO). Six Sigma's implicit goal

is to improve all processes to that level of quality or better.

Six Sigma is a registered service markand trademark ofMotorola Inc.

[9]

As of 2006 Motorolareported over US$17 billion in savings from Six Sigma.

Other early adopters of Six Sigma who achieved well-publicized success

include Honeywell (previously known as AlliedSignal) and General Electric, where Jack

Welch introduced the method. By the late 1990s, about two-thirds of the Fortune

500 organizations had begun Six Sigma initiatives with the aim of reducing costs and improving

quality.

In recent years, some practitioners have combined Six Sigma ideas with lean manufacturing to

yield a methodology named Lean Six Sigma.

Methods

Six Sigma projects follow two project methodologies inspired by Deming's Plan-Do-Check-Act

Cycle. These methodologies, comprising five phases each, bear the acronyms DMAIC and

DMADV.

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DMAIC is used for projects aimed at improving an existing business process.

DMADV is used for projects aimed at creating new product or process designs.

DMAIC

The DMAIC project methodology has five phases:

Define the problem, the voice of the customer, and the project goals, specifically.

Measure key aspects of the current process and collect relevant data.

Analyze the data to investigate and verify cause-and-effect relationships. Determine what the

relationships are, and attempt to ensure that all factors have been considered. Seek out root cause

of the defect under investigation.

Improve or optimize the current process based upon data analysis using techniques such

as design of experiments, poka yoke or mistake proofing, and standard work to create a new,

future state process. Set up pilot runs to establish process capability.

Controlthe future state process to ensure that any deviations from target are corrected before

they result in defects. Control systems are implemented such as statistical process control,

production boards, and visual workplaces and the process is continuously monitored.

DMADV

The DMADV project methodology, also known as DFSS ("Design for Six Sigma"), features five

phases:Define design goals that are consistent with customer demands and the enterprise strategy.

Measure and identify CTQs (characteristics that are Critical to Quality), product capabilities,

production process capability, and risks.

Analyze to develop and design alternatives, create a high-level design and evaluate design

capability to select the best design.

Design details, optimize the design, and plan for design verification. This phase may require

simulations.

Verify the design, set up pilot runs, implement the production process and hand it over to the

process owners.

Quality management tools and methods used in Six Sigma

Within the individual phases of a DMAIC or DMADV project, Six Sigma utilizes many

established quality-management tools that are also used outside of Six Sigma.

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Origin and meaning of the term "six sigma process"

Graph of the normal distribution, which underlies the statistical assumptions of the Six Sigma

model. The Greek letter (sigma) marks the distance on the horizontal axis between the mean,

, and the curve's inflection point. The greater this distance, the greater is the spread of values

encountered. For the curve shown above, = 0 and = 1. The upper and lower specification

limits (USL, LSL) are at a distance of 6 from the mean. Due to the properties of the normal

distribution, values lying that far away from the mean are extremely unlikely.

Even if the mean were to move right or left by 1.5 at some point in the future (1.5 sigma shift),

there is still a good safety cushion. This is why Six Sigma aims to have processes where the

mean is at least 6 away from the nearest specification limit.

The term "six sigma process" comes from the notion that if one has six standard deviations

between the process mean and the nearest specification limit, as shown in the graph, practically

no items will fail to meet specifications.[8] This is based on the calculation method employed

inprocess capability studies.

Capability studies measure the number of standard deviations between the process mean and the

nearest specification limit in sigma units. As process standard deviation goes up, or the mean of

the process moves away from the center of the tolerance, fewer standard deviations will fit

between the mean and the nearest specification limit, decreasing the sigma number and

increasing the likelihood of items outside specification

Role of the 1.5 sigma shift

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Experience has shown that in the long term, processes usually do not perform as well as they do

in the short. As a result, the number of sigmas that will fit between the processes mean and the

nearest specification limit may well drop over time, compared to an initial short-term study. To

account for this real-life increase in process variation over time, an empirically-based 1.5 sigma

shift is introduced into the calculation. According to this idea, a process that fits six sigmas

between the process mean and the nearest specification limit in a short-term study will in the

long term only fit 4.5 sigmas either because the process mean will move over time, or because

the long-term standard deviation of the process will be greater than that observed in the short

term, or both.

Hence the widely accepted definition of a six sigma process as one that produces 3.4 defective

parts per million opportunities (DPMO). This is based on the fact that a process that isnormally

distributed will have 3.4 parts per million beyond a point that is 4.5 standard deviations above or

below the mean (one-sided capability study). So the 3.4 DPMO of a "Six Sigma" process in fact

corresponds to 4.5 sigmas, namely 6 sigmas minus the 1.5 sigma shift introduced to account for

long-term variation. This is designed to prevent underestimation of the defect levels likely to be

encountered in real-life operation.

Six Sigma And Its Benefits

Before starting about how to have a positive approach to Six Sigma or rather what is a positive

approach towards Six Sigma lets discuss what a Six Sigma initiative is. To put in laymansterms, Six Sigma is all about improving the capabilities of the business processes by reducing the

defect margin to zero, so that there is no scope for poor quality.

Today customers are enlightened and they know that they have lots of options - therefore they

value only those products or services that are very high on quality and have consistent and

predictable quality. However, most businesses measure their performance or quality on the

average of the recent past.

This problem was solved by Six Sigma because it ensures that business dont have to present

customers with a variant experience of their performance. In other words, Six Sigma aims at

reducing the variation thus improving the business processes to an extent where the customers

will be satisfied with the product or services quality.

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The Six Sigma Approach

The Six Sigma uses an approach which recognizes and eliminates defects through a problem

solving method that is both structured and data driven. The Six Sigma approach has to collect all

the data, which is then passed on to a statistical analysis unit for further quantitative calculation.

Quantitatively, the standard defects ratio is estimated to be 3.4 in a million opportunities where

the opportunities mean a chance for non-conformance. If we look at the cost of poor quality in a

business process, then for most businesses it is an astounding 20% to 30% of total revenue. The

Six Sigma approaches to reduce these defects and achieve world-class quality levels.

A Six Sigma approach is different from other performance improvement approach because it

tackles the problem at its root level, thus eliminating the need for any inspection or reworking.

This is unlike other performance improvement programs that first measures the output variation

and then puts a check on the problem area (like an inspection program) to reduce organizational

defects.

The Six Sigma approach starts its work by first making a note about what is critical to the

customer. Once the goal is set, a rigorous analysis is done for each and every business process to

assess the perfection, which the customer demands, and to which extend the business is able todeliver. Next it is matched with the data collected to reveal what are the core causes of the

defects in the organizational process. The statistical and financial analysis done earlier will then

lead to making of an improvement strategy that will aim at improved customer satisfaction,

increased profit margin, reduced cycle times and cut costs.

Six Sigma strategies aim at minimizing variations among all critical processes. These processes

need not be only manufacturing processes - they can be even billing or new product development

related or budgeting or human resource related by which an organization manages its overall

operations.

Here an important thing to note is that the implementation part is the most important part of

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the Six Sigma Strategy . And for ensuring that the strategy is a success monetary commitment as

well as wholehearted involvement from the employees is very necessary.

Six Sigma Training funds must be utilized in an effective manner. A new working culture will

have to be adopted and the Six Sigma leaders need to make sure that the transition is smooth.

However, considering the past successes this approach has made the little inconvenience with the

new approach is worth the awards that everyone will reap after the business attains success.

Steps in Six Sigma Methodology

Six Sigma is a philosophy and methodology for managing processes and performance. It goes

beyond just isolated improvement projects, and is best implemented using a system of

components designed to clarify an organization's goals, stakeholders, and needs. All these steps

contribute to its success.

Establish Roles

Six Sigma is most successful when leadership is truly committed to the philosophy and

methodology it entails. In larger companies, a Director or other high-level employee takes the

lead role in creating and guiding Six Sigma efforts. Also for large-scale efforts, Black

Belts should be trained up front as they will be responsible for leading improvement projects and

in some cases for advising process owners on establishing appropriate metrics and procedures.

Within each operational area of an organization, the Process Owners need to be identified. These

are the individuals who will be responsible for tracking their group's processes and performance

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need to determine whether and how to act. Typically there will be quite a few opportunities for

improvement at any given time, so decisions will be necessary regarding which hold greatest

priority. The Six Sigma leadership team should establish a standard method of prioritizing

potential improvement opportunities, and of determining what type of methodolgy is best for

each case.

Determine Improvement Approaches

In many cases, the reasons for inadequate performance are fairly obvious, and the solution is

equally obvious. In those cases, a Six Sigma project should not be chartered, instead the business

manager should "just do it" and address the problem. In other cases, the details of a problem are

not known, or the causes of a problem are not clear. For those situations the DMAIC process is

ideal, and chartering a DMAIC project would be the best move.

In some cases, usually in organizations further along with their Six Sigma implementation, a

design project (DMADV or DFE) can be initiated to create a new process or product or to

completely re-create a process that is fundamentally not working.

Follow Improvement Methodology

For any process improvement projects that are established, the methodology should be followed

closely. For instance for a DMAIC project, a project team is created, and the team works through

the standard DMAIC phases: Define, Measure, Analyze, Improve and Control. Similarly, a

design project should follow the standard methodology chosen.

Once the improvement goal has been achieved, the project is closed out, and the dashboard is

updated to reflect the new performance level. Additional improvement initiatives may then be

chartered based on new findings uncovered during the original project, or based on priorities

established earlier for potential projects.

Maintain the Framework

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Improvement projects have built-in steps to ensure that the gains established by each project are

maintained. At a higher level, a successful Six Sigma initiative requires continuous attention to

ensure that the established procedures, culture, and responsibilities are maintained. On an

ongoing basis, leadership should be training employees, updating the dashboard with current

performance levels and changes to key metrics, and revisiting priorities and procedures for

selecting projects. Documenting these high-level procedures will also prove beneficial as

employee turnover occurs and the individuals involved change.

References:

www.6-sigma.com

www.sixsigma.co.uk

www.sixsigmasystems.com

www.isixsigma.com

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