01 - Introduction to Six Sigma

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Introduction to six sigma

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<ul><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 1</p><p>1</p><p>Six Sigma Overview</p><p>For more in-depth background, please read:What is Six Sigma?, Donald P. Lynch</p><p>2</p><p>Topics</p><p>1. Six Sigma Overview2. Business Case for Six Sigma 3. Integration of Lean and Six Sigma4. Six Sigma Players5. Six Sigma Quality Level</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 2</p><p>3</p><p>1. What is Six Sigma?</p><p> Six Sigma is: a systematic methodology utilizing data analysis techniques, to measure and improve a company's business performance measures (Ys), by identifying and preventing 'defects and inefficiencies' in </p><p>manufacturing and service-related processes, to meet and exceed customer needs</p><p> Industry Implementations Successfully applied in numerous industries</p><p> automotive, discrete parts, aerospace, financial, health systems, etc. Within manufacturers, successfully applied to:</p><p> manufacturing Manufacturing Six Sigma operations/business processes Transactional Six Sigma</p><p> Nearly all systems involve an underlying process and benefit from reducing variation and/or improving flow</p><p>4</p><p>Process-Driven Approach</p><p> Find and Fix (focus: existing problems) Apply DMAIC Problem Solving Method</p><p> Define, Measure, Analyze, Improve and Control</p><p> Prevention (focus: designing quality into new products) Apply Design for Six Sigma (DFSS)</p><p> e.g., IDDOV or DMADV Methods (not covered in this course)</p><p> Which do you suspect is more commonly applied? Which likely has a greater impact? WHY?</p><p>Process Outputs/ Metrics (Ys)Inputs (Xs)Key Product/Process</p><p>Output Variables (KPOV)Key Process</p><p>Input Variables (KPIV)</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 3</p><p>5</p><p>Performance Measures, Ys</p><p> Gaps between customer expectations/ desires and what you provide. External Critical-to-Quality Measures (CTQ): </p><p> customer satisfaction, perceived value ratings, warranty Internal CTQ Measures: </p><p> scrap, rework, repeated tasks; </p><p> Processing inefficiencies and waste. Critical-to-Delivery (C-T-Delivery or CT-Time):</p><p> cycle time, lead time, overtime, service time, etc. </p><p> Of course, all of these are Cost Surrogates.</p><p> So, Six Sigma is about improving: Quality, Cost, Delivery (Q.C.D.) or Q.C.T. (T-time)</p><p>6</p><p>The Six Sigma Way: Y=f(X) Sigma () - Greek letter used to represent standard </p><p>deviation which measures variation Six Sigma Approach: improve Ys by:</p><p> minimizing variation in inputs, or finding best settings for control factors, or managing noise factors</p><p>P-Diagram</p><p>ProcessInput Variables(e.g., supplier)</p><p>Controllable ProcessFactors (settings)</p><p>UncontrollableFactors</p><p>Outputs (Ys)</p><p>Xs</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 4</p><p>7</p><p>Six Sigma Is it Anything New?</p><p> Grab any old Quality or TQM book and you will find: Most quality philosophies are the same as Six Sigma</p><p> e.g., customer defines quality, design quality in, etc. And many (but not all) tools / techniques are the same.</p><p> From an implementation standpoint, however, Six Sigma has been more successful through: greater emphasis on solving problems that result in savings </p><p>(bottom-line improvements, $$), common language and metrics (defect per million opportunity), common problem solving methods (Six Sigma DMAIC Method) integrating tools/methods into everyday job function, better training, more effective implementation.</p><p>8</p><p>2. Business Case: Driver for Six Sigma Deployment</p><p> Core Belief: highest quality producer should be the lowest cost producer</p><p> Six Sigma aimed at reducing costs of poor quality</p><p> Many companies with large publicized savings* General Electric, Honeywell, Bank of America, ..</p><p> Note: Many companies have successful continuous improvement efforts that do not use Six Sigma (it is not the only way)</p><p>*Harry, M. and Schroeder, S. (2000). Six Sigma: The Breakthrough Management Strategy, Currency.*Smith, D, and Blakeslee, J. (2002). Strategic Six Sigma, Best Practices from the Executive Suite.*Six Sigma: A Methodology for Manufacturers, Not a Strategy. Gartner Report, September 2002.</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 5</p><p>9</p><p>Costs of Poor Quality</p><p> Savings reported in large Six Sigma Deployment include traditional costs of poor quality and those below the surface (known as Hidden Factory)</p><p>Scrap Warranty Overtime Downtime</p><p>Rework</p><p>UnnecessaryInspection</p><p>EngineeringChanges</p><p>Rejected RawMaterial Costs</p><p>ResolvingCustomer</p><p>Complaints</p><p>Lost CustomerReplacement</p><p>Cost</p><p>ExcessInventory</p><p>ExtraCommunication</p><p>InformationLookup Costs</p><p>Clean-up/ Housekeeping</p><p>LongSetup Costs</p><p>ResourceImbalance</p><p>10</p><p>Cost of Poor Quality (COPQ) Research</p><p> Link between quality defect levels and total costs of poor quality as % of sales*</p><p>*Harry and Schroeder (2000), Six Sigma Breakthrough Strategy, Currency</p><p>SIGMA LEVEL DEFECTS PER MILLION OPPORTUNITIES COST OF QUALITY</p><p>2 308,537 (Noncompetitive companies) Not applicable3 66,807 25 - 40% of sales4 6,210 (Industry average) 15 - 25% of sales5 230 5 - 15% of sales6 3.4 (World class) &lt; 1% of sales</p><p>Each sigma shift provides a 10 percent net income improvement.</p><p>DPMO Defects per million opportunitySigma Level non-linear quality index related to yield (or % Ok)</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 6</p><p>11</p><p>Why is Six Sigma working for some?</p><p> Strong Leadership Commitment Effective Deployment Strategies (Training, Organization, </p><p>and Management). And, because successful companies: take top employees, train them in the use of proven analytical tools, motivate them with greater recognition for their </p><p>efforts, give them projects to work on that matter, AND give them the necessary support to solve problems. </p><p>(such as time, software, resources).</p><p> Organization wants it to succeed!</p><p>12</p><p>Why is it not working for others?</p><p> leadership offers marginal to limited support, egos get in the way (not-my-idea), managers dont give employees necessary </p><p>time/resources to complete projects, participants are pushed through training </p><p>programs, and do not develop the necessary skills to be effective,</p><p> Participants do not effectively communicate project savings / quantify impact.</p><p> Lack of organizational commitment!</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 7</p><p>1313</p><p>3. Lean and Six Sigma IntegrationCommon Theme: Continuous Improvement</p><p>Lean Tools/Methods</p><p>Organized and Documented Processes (e.g., 5S Workplace)</p><p> Create Flow Leveled Production Takt time planning Continuous flow Pull system Effective </p><p>Layout Quick changeover JIT supply chain 5 Whys</p><p>Visual Management and Standardized Work</p><p>Best Quality - Lowest Cost - Shortest Lead Time - Best Safety - High Moralethrough exceeding customer requirements and elimination of waste</p><p>Six Sigma Tools/Methods</p><p> Create Stable/Capable Process DMAIC Problem Solving and </p><p>Statistical Data Analysis Pareto Analysis (Prioritization) Cause-effect Analysis Measurement System Analysis Stratification Analysis Experimental Design Control Plans</p><p>Process Analysis Value Stream Map</p><p>Process Maps Eliminate Waste</p><p>Poka-Yoke</p><p>Right part, right amount,right time</p><p>Predictable, on-target, low variation, error-free processes.</p><p>14</p><p>Different Paradigms for Lean and Six Sigma Integration</p><p> Six Sigma and Lean as Conflicting Six Sigma as a Sub-Set of Lean (Lean Bias) Lean as a Sub-Set of Six Sigma (Six Sigma Bias) Separate but Equals</p><p>- Most experienced with both strategies view Lean as an excellentprerequisite to Six Sigma, but not a standalone solution</p><p>- Six Sigma Complementary Strengths- Characterizing/decomposing process variation</p><p>(Strong link between smooth flow and low variation)- Techniques for Process optimization and robustness</p><p>Integrated/Complementary</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 8</p><p>15</p><p>4. Six Sigma RolesManagerial/</p><p>Organizational</p><p>Problem Solving/ Execution</p><p>Executive Leadership: Set performance expectations</p><p>Champion:Deployment Leaders</p><p>Master Black Belts (MBB):In-House ExpertsTeach and Mentor BB, GB Figure out what to do</p><p>Black Belts (BB):Advanced Statistical SkillsSolve Impact Problems(e.g., $100-250K per project)</p><p>Green Belts (GB):Moderate Data Analysis Skills Work on simpler projects, orSubtasks of larger projectsMore GBs More Savings</p><p>They Do</p><p>16</p><p>Applying the Six Sigma Tools</p><p> Green Belt and Black Belt Training focuses on: Structured approach to problem solving (DMAIC method) and data </p><p>analysis skills (statistical analysis tools)</p><p> Still, being an effective Green or Black Belt involves more than simply knowing statistics. It involves: Selecting right projects (with quantifiable savings) Project management skills (able to execute projects) Data collection skills (knowing what/how to collect) Data analysis skills (finding critical Xs) Data presentation skills (influencing decisions)</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 9</p><p>17</p><p>5. Six Sigma Quality Level</p><p> Six Sigma Quality derives from a goal of % in-specification (or % On-Time) greater than 99.99966%, OR Less than 3.4 defects per million </p><p>opportunities (DPMO)</p><p> Note: 99% OK = 1% Defective = 10,000 defects per million (DPM).</p><p> Six Sigma seeks to do better!</p><p>*Based on assumption of stable process with low variation (Cp &gt; 2) following normal distribution with a mean deviation within 1.5*process standard deviation of nominal</p><p>18</p><p>Metrics used in Six Sigma</p><p> Use Historical Capability Measures: Yield, % defective, Cp/Cpk Example: % On-Time Delivery</p><p> DPM -- Defects per million (% Defective x 1M) where each unit is defective/not defective DPM = PPM (parts per million defective)</p><p> DPMO -- Defects per million opportunity where each unit may have 1 or more types of errors/defects </p><p> Paint Shop: dirt, craters, thin, sags, misapplied sealer Six Sigma Quality &lt; 3.4 defects per million opportunity Note: if unit has only one defect opportunity, DPM = DPMO</p><p> Sigma Level index related to DPM/DPMO Non-linear Scale: ~ where a score of 6 equates to 3.4 DPM0)</p><p>Some common metrics used to evaluate performance:</p></li><li><p>Session 1b - Six Sigma Overview</p><p>Pat Hammett - University of Michigan 10</p><p>19</p><p>Conflicting Objective?</p><p> Suppose a Six Sigma project reduces defects from 40,000 to 1000 DPM (from 96% to 99.9%) </p><p> Should a Company: continuously apply six sigma resources (BBs / GBs) </p><p>toward reducing variation to less than 3.4 DPM, Or shift resources to another project with a greater cost (or </p><p>time) savings?</p><p>20</p><p>Six Sigma Impact Problems</p><p> In the end, Six Sigma is about applying a data-driven systematic methodology to solve impact problems linked to: bottom line savings cost avoidance revenue growth</p></li></ul>