Lecture Material

Six Sigma - past, present and future

Six Sigma Past, present and future 1 Introduction

Although most have heard the phrase Six Sigma, which has been an industry term ever since Motorola introduced the concept in 19 !, many still do not "now #ust what Six Sigma really is$ %or many business organi&ations and by general definition Six Sigma is the measure of 'uality that strives for near perfection$ (t is a disciplined, data-driven methodology focused on eliminating defects$ A Six Sigma defect is defined as anything that falls outside of a customer)s specifications$ *he results reported below by Six Sigma companies are convincing about its contribution to industry$ +Source, Motorola website http,--www$motorola$com. Motorola Saved /10 1illion from 19 ! to 2334, reflecting hundreds of individual successes in all Motorola business areas including, Sales and Mar"eting 5roduct design Manufacturing 6ustomer service *ransactional processes Supply chain management$ GE Saved /073 million by the end of 199 6ut invoice defects and disputes by 9 percent, speeding payment, and creating better productivity Streamlined contract review process, leading to faster completion of deals and annual savings of /1 million$ Allied Signal/Honey ell (nitiated Six Sigma efforts in 1992 and saved more then /!33 million a year by 1999 8educed time from design to certification of new pro#ects li"e aircraft engines from 42 to 99 months (ncreased mar"et value by a compounded 20: per year through fiscal year 199 $

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Lecture Material

Six Sigma - past, present and future

<eneral >lectric, a world class company and practitioner of Six Sigma defines 'uality as, +source, <> website http,--www$ge$com. ?@uality re'uires us to loo" at our business from the customer)s perspective, not ours$ (n other words, we must loo" at our processes from the outside-in$ 1y understanding the transaction lifecycle from the customer)s needs and processes, we can discover what they are seeing and feeling$ Aith this "nowledge, we can identify areas where we can add significant value or improvement from their perspective$B

*he Six Sigma methodology and fundamental ob#ective is to implement a measurementbased strategy that focuses on process improvement and variation reduction$ (t may surprise those who have come to "now Motorola for its cool cell phones, but the company)s more lasting contribution to the world is the 'uality-improvement process called Six Sigma$ (n 19 ! an engineer named 1ill Smith, sold then-6hief >xecutive 8obert <alvin on a plan to strive for error-free products 99$9990: of the time$ 1y Six Sigma)s 23th anniversary, the exacting, metrics-driven process has become corporate gospel, infiltrating functions from human resources to mar"eting, and industries from manufacturing to financial services$ Six Sigma is a term used in manufacturing process improvement methodologies and it refers to the variability of a process$ Say, for example a company is manufacturing steel rods of 1m length$ 1ecause the process is not perfect, the lengths of some steel rods will be 3$99 m, some 3$999m length and so on$ As far as the customer is concerned, this is C= as long as the length of each steel rod is between 3$990m and 1$339m$ (f the process is a ?Six SigmaB process, it will produce only 9$4 bad rods D rods shorter than 3$990m and longer than 1$339m D for every million rods made$ *he table given below maps the Sigma and :accuracy$ ;efects per Million Cpportunities +;5MC. !91,733 93 ,733 !!, 13 !,213 299 9$4 3$323 : Accuracy 93$ 7: !9$17: 99$92: 99$9 : 99$900: 99$9990: 99$99999 :

Cne Sigma *wo Sigma *hree Sigma %our Sigma %ive Sigma Six Sigma Seven Sigma

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Lecture Material

Six Sigma - past, present and future

Six Sigma is still paying off for Motorola (nc$ *he hot-selling, super-slim 8a&r phone, a creative, innovative design, sure$ Eet FSix Sigma)s stamp is all over the 8a&r,F says Michael S$ 5otos"y, Motorola)s corporate director of Six Sigma$ >ngineers, for instance, applied the process to the phone)s antenna, helping "eep it hidden while maintaining call clarity$ Aith hits li"e the 8a&r, the company has climbed from a 17$4: mar"et share in mobile phones to 22$4:$ %or non-Six Sigma companies, companies operating at three or four sigma typically spend between 27: and 43: of their revenues fixing problems$ *his is "nown as the cost of 'uality, or more accurately the cost of poor 'uality$ 6ompanies operating at Six Sigma typically spend less than 7: of their revenues fixing problems +%ig$ 1.$ *he dollar cost of this gap can be huge$ <eneral >lectric estimates that the gap between three or four sigma and Six Sigma was costing them between / billion and /12 billion per year$

!ig" 1 #ost of poor $uality %ersus Sigma le%el

#ost of poor $uality as ' of earnings

93: 23: 13: 3: 9 4 7 ! 0

Sigma &e%el

About 97: of G$S$ companies have a Six Sigma programme in place, according to a Hanuary, 233!, 1ain I 6o$ study$ F*he past 23 years are evidence of how many companies have pic"ed up that JitK wor"s,F says 5otos"y$ 1ut even a disciple li"e him stresses that in this era of the 1ig (dea, Six Sigma)s success will only come in a culture that not only welcomes creative types and the metrics-obsessed, but one that ma"es them both better

)*e congruence of )+M and Six Sigma

Six Sigma has roots bac" to the teachings of ;r$ Hoseph Huran and ;r$ A$ >dwards ;eming +*hawani, 2334.$ Six Sigma is a high performance, data driven method for improving 'uality by removing defects and their causes in business process activities$ *he higher the number of sigmas, the more consistent is the process output or the smaller the variation$ (t is particularly powerful when measuring the performance of a process with a high volume of outputs$ Six Sigma lin"s customer re'uirements and process improvements with financial results while simultaneously providing the desired speed, accuracy and agility in todayBs eage$ Lucas +2332. asserts that Six Sigma is essentially a methodology within D not alternative to D *@M$ 1ecause this 'uality improvement is a prime ingredient of *@M, many firms have found that adding a Six Sigma programme to their current business gives them all, or almost all, of the elements of a *@M programme$ Lucas has thus concluded that, L6urrent 1usiness System M Six Sigma N *otal @uality ManagementO

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Lecture Material

Six Sigma - past, present and future

Six Sigma uses a pro#ect based structured problem solving method lin"ing customer re'uirements with processes and tangible results$ (t selects the appropriate tools from a wide variety of statistical tools$ Cne of the most common methodologies used is ;efine, Measure, Analy&e, (mprove, and 6ontrol +;MA(6.$ Eang +2334. developed an integrated model of *@M and <>-Six Sigma based on 12 dimensions, development, principles, features, operation, focus, practices, techni'ues, leadership, rewards, training, change and culture$ *he author concluded that although management principles of *@M and <>-Six Sigma are somewhat different, there is congruence among their 'uality principles, techni'ues, and culture$ Pence the integration of *@M and <>-Six Sigma is not difficult$

Ho

#ompanies -efine Six Sigma

(t is enlightening to compare how various world-class companiesQincluding leading proponents of Six SigmaQdefine it for their employees and their customers$ General Electric: What Is Six Sigma? L%irst, what it is not$ (t is not a secret society, a slogan, or a clichR$ Six Sigma is a highly disciplined process that helps us focus on developing and delivering near-perfect products and services$ Ahy ?SigmaBS *he word is a statistical term that measures how far a given process deviates from perfection$ *he central idea behind Six Sigma is that if you can measure how many ?defectsB you have in a process, you can systematically figure out how to eliminate them and get as close to ?&ero defectsB as possible$ Six Sigma has changed the ;TA at <>Qit is now the way we wor"Qin everything we do and in every product we designO$ Honeywell: Six Sigma Plus LSix Sigma is one of the most potent strategies ever developed to accelerate improvements in processes, products, and services, and to radically reduce manufacturing and-or administrative costs and improve 'uality$ (t achieves this by relentlessly focusing on eliminating waste and reducing defects and variationsO$ LLeading-edge companies are applying this bottom-line enhancing strategy to every function in their organi&ationsQfrom design and engineering to manufacturing to sales and mar"eting to supply managementQfor dramatic savingsO$ LTow, Poneywell has developed a new generation of Six Sigma $ $ $ Six Sigma Plus is Morris *ownship, THDhead'uartered PoneywellBs principal engine for driving growth and productivity across all its businesses, including aerospace, performance polymers, chemicals, automation and control, transportation, and power systems, among others$ (n addition to manufacturing, Poneywell applies Six Sigma Plus to all of its administrative functionsO$

Six Sigma Met*odology

*his strategy is supported by two Six Sigma sub-methodologies called ;MA(6 +define, measure, analyse, improve and control., and ;MA;U +define, measure, analyse, design, verify.$ ;MA(6 shown in %ig$2 is an improvement system for existing processes which fall below specifications and need to be improved incrementally$ ;MA;U is also an improvement system which is designed to develop new processes and- or products at Six Sigma 'uality levels$ (n both sub-methodologies and Six Sigma in general, the ob#ective is to continually find ways to improve and refine processes, reduce defects and increase savings +;edhia, 2337.$

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Lecture Material

Six Sigma - past, present and future

*his ?problem-solvingB phase is called ;MA(6$ %irst pro#ects are defined from the perspective of customers or regarding process +;efine.$ Second based on the defined pro#ects, the current level of the product 'uality is measured into sigma level +Measure.$ *hird causes of the problems are detected through the analysis so as to improve the sigma level +Analyse.$ %ourth efforts are made to improve the situation by wor"ing with the causes of the problems +(mprove.$ %inally the optimal condition generated by the above mentioned phases are controlled, maintained and monitored +6ontrol. +Snee, 2339.$ !ig (" -MAI# #ycle
#ontrol 1$ >nsure that the result is sustained 2$ Share the lessons learnt -efine 1$ (dentify pro#ect that is measurable 2$ ;evelop team charter 9$ ;efine process map

-efine

Measure #ontrol
Measure 1$ ;efine performance standards 2$ Measure current level of 'uality into Sigma level

Impro%e 1$ Screen potential causes 2$ ;iscover variable relationships 9$ >stablish operating tolerances

Analyse Impro%e

Analyse 1$ >stablish process capability 2$ ;efine performance ob#ectives 9$ (dentify variation sources

Step 1/ -efine (dentify the pro#ects that are measurable$ 5ro#ects are defined including the demands of the customer and process$ (t is the initial stage of starting the pro#ect and the most significant step$

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Lecture Material

Six Sigma - past, present and future

Step (/ Measure *he current level of 'uality is measured into Sigma level (t precisely pinpoints the area causing problems$ (t forms the basis of the problemsolving$ 5ro#ect defects must be precisely defined and all possible and potential causes for such problems must be identified in this step$ Subse'uently such problems are analysed statistically$

Step ,/ Analysis (n this step, when and where the defect occurs is investigated$ 5ro#ects are statistically analysed and the problems are documented$ Ma#or elements to be performed in the ?AnalysisB step are as follows, 5ro#ects must be statistically and precisely defined in terms of Sigma$ *he gap between the target and the actual state is clearly defined in statistical terms li"e mean and moving average$ A comprehensive list of the potential causes of the problems is created$ Statistical analysis is carried out to reduce the potential causes into few causes$ %inally based on above steps, the financial implication of the pro#ect is calculated and further review is carried out if necessary$ 5rocess Mapping %ailure Mode I >ffect Analysis Statistical *ests ;esign of >xperiments 6ontrol charts @uality %unction ;eployment +@%;.$

)ools for analysis Step ./ Impro%e (mprovements for the potential causes identified in the ?AnalysisB step are carried out in this step$ Solutions to all the potentials problems must be found$ *he choices are how to change, fix and modify the process$ A trial run must be carried out for a planned period of time to ensure the revisions and improvements implemented in the process result in achieving the targeted values$ *he steps are repeated if necessary$

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Lecture Material

Six Sigma - past, present and future

Step 0/ #ontrol 5roper control and maintenance of the improved states are established in this step$ (t is also a step to regularise the new method$ *he results and accomplishments of all the improvement activities are documented$ *here is continuous monitoring of whether the improved process is well maintained$

)*e Six Sigma team

*hese are the team members of Six Sigma implementation$ +%ig 9. >xecutive Leadership 5ro#ect 6hampions Master 1lac" belts 1lac" 1elts <reen 1elts

Executi%e &eaders*ip Six Sigma involves changing ma#or business value streams that cut across organi&ational barriers$ (t is the means by which the organi&ation)s strategic goals are to be achieved$ *his effort cannot be led by anyone other than the 6>C, who is responsible for the performance of the organi&ation as a whole$ Six Sigma must be implemented from the top down$

!ig", )*e Six Sigma team

V Cwn vision, direction, (ntegration, results V Lead change V 5art-time V Pelp 1lac" 1elts

Executi"e #ea$ershi
V 5ro#ect owner V (mplement solutions V 1lac" 1elt managers

Project Cham ions

Green Belts

!aster Black Belts

V %ull time V *rain and coach 1lac" and <reen 1elts V Statistical problem solving experts

Black Belts
V ;evote 73: - 133: of time to 1lac" 1elt activities V %acilitate and practice problem solving V *rain and coach <reen 1elts and pro#ect teams

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Lecture Material

Six Sigma - past, present and future

Pro1ect #*ampions *a"e their company)s vision, missions, goals, and metrics and translate them into individual unit tas"s$ Additionally, 6hampions must remove any roadbloc"s to the programme)s success$ 5ro#ect 6hampions are involved in selecting pro#ects and identifying 1lac" and <reen 1elt candidates$ *hey set improvement targets, provide resources, and review the pro#ects on a regular basis so that they can transfer "nowledge gained throughout the organisation$

Master 2lac3 2elt *his is the highest level of technical and organisational proficiency$ 1ecause master blac" belts train blac" belts, they must "now everything the blac" belts "now, as well as understand the mathematical theory on which the statistical methods are based$ Masters must be able to assist blac" belts in applying the methods correctly in unusual situations$ Ahenever possible, statistical training should be conducted only by master blac" belts$ 1ecause of the nature of the master)s duties, communications and teaching s"ills should be #udged as important as technical competence in selecting candidates$

4lac3 2elt 5)ec*nical leader6 1lac" belts are technically oriented individuals held in high regard by their peers$ *hey are the doers$ *hey should be actively involved in the organisational change and development process$ 6andidates may come from a wide range of disciplines and need not be formally trained statisticians or engineers$ Six Sigma technical leaders wor" to extract actionable "nowledge from an organisation)s information warehouse$ <ood computer s"ills are vital$ 5robably more important that their technical s"ills is their people management s"ills$ (mplementing change successfully demands the ability to involve people and persuade the necessity for change$

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Lecture Material

Six Sigma - past, present and future

Green 4elts 5rovide internal team support to 1lac" 1elts$ Ahile they are not trained to the same depth of "nowledge as 1lac" 1elts, they are able to assist in data collection, computer data input, analysis of data using the software, and preparation of reports for management$ *ypically, a <reen 1elt will be a respected wor"er who can manage the team in the absence of the 1lac" 1elt$ <reen 1elts are part-time wor"ers on a team and may migrate to this position because of their s"ills using basic 'uality analysis tools and methods and their ability to facilitate team activities$ Many become 1lac" 1elts over time as they build a personal base of experience that boosts them into a more technical role$

#ase study +Source, http,--www$mydabbawala$com accessed on 23-%eb-2330.

A dabbawala is a person in the (ndian city of Mumbai whose #ob is to carry and deliver freshly made food from home in lunch boxes to office wor"ers$ ;abbawalas pic"s up 107,333 lunches from homes and delivers them to harried students, managers and wor"ers on every wor"ing day, at their des", 12$93 pm on the dot$ 6ustomers can even order through the (nternet$ After the customer leaves for wor", his-her lunch is pac"ed into a lunchbox by his family members$ A color-coded notation on the handle of the lunchbox identifies its owner and destination$ *he dabbawala pic"s up the lunchbox and he moves fast using a combination of bicycles, trains and his two feet$ (n a 9 hour period, through a 27-=m of public transportation involving multiple transfer points he delivers to his customers$ (n 199 , %orbes <lobal maga&ine conducted a 'uality assurance study on the ;abbawalas) operations and gave it an accuracy rating of 99$999999, more than Six Sigma$ *he ;abbawalas made one error in six million transactions$ *hat put them on the list of Six Sigma rated companies, along with multinationals li"e Motorola and <>$ *here was only one mista"e in every !,333,333 deliveries$ *he 116 has produced a documentary on dabbawalas, and 5rince 6harles, during his visit to (ndia, visited them +he had to fit in with their schedule, since their timing was too precise to permit any flexibility.$ Although the service remains essentially low-tech, with the barefoot delivery boys as the prime movers, the dabbawalas have started to embrace modern information technology, and now allow boo"ing for delivery through SMS$ A web site, mydabbawala.com, has also been added to allow for online boo"ing, in order to "eep up with the times$ An online poll on the website ensures that customer feedbac" is given pride of place$ *he success of the system depends on teamwor" and time management$ Such is the dedication and commitment of the barely literate and barefoot delivery boys who form lin"s in the extensive delivery chain, that there is no system of documentation at all$ A simple colour coding system doubles as an (; system for the destination and recipient$ *here are no multiple elaborate layers of management either Q #ust three layers$ *he local dabbawalas at the receiving and the sending ends are "nown to the customers personally, so that there is no 'uestion of lac" of trust$ Also, they are well accustomed to the local areas they cater to, which allows them to access any destination with ease$

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Lecture Material

Six Sigma - past, present and future

Past, present and future of Six Sigma

Although Six Sigma is usually associated with large companies, midsi&e companies are reaping greater financial rewards from the program$ *hey are achieving greater savings from Six Sigma pro#ects and better growth$ Six Sigma is a reference to a statistical measuring system, e'uivalent to #ust 9$4 defects in every million possible defects in production$ *his is seen as the acceptable standard for world-class manufacturing$ 1y comparison, two sigma represents 93 $733 defects in every million possible defects$ *he average level in modern industrial applications is between three and four sigma, which means somewhere between !,333 and !0,333 defects in every million$ Six Sigma uses facts and data from measured processes inside an organi&ation, not comparisons with some external standard$ (n other words, it precisely measures what is actually happening and determines how it can be improved$ *he era ?19 ! to 1993B is often loosely referred to as the first generation of Six Sigma, or SS<1 for short$ *hen, in the 1993s, <eneral >lectric 6orp$ ushered in the second generation of Six Sigma, or SS<2 as it is now "nown$ *he focus of Six Sigma shifted from product 'uality to business 'uality$ (n this sense, Six Sigma became a business-centric system of management$ *he results that world-class companies such as <eneral >lectric, Hohnson I Hohnson, Poneywell, Motorola, and many others have accomplished spea" for themselves$ Six Sigma has become a synonym for improving 'uality, reducing cost, improving customer loyalty, and achieving bottom-line results$ *he original goal of Six Sigma was to focus on manufacturing processesW however, mar"eting, purchasing, billing, and invoicing functions were also involved SS<2 +Parry, 2337.$ *here is a new brand of Six Sigma emerging now that promises to deliver even more powerful results than before$ ;ubbed *hird <eneration Six Sigma, or #ust <en (((, it can show companies how to deliver products or services that, in the eyes of customers, have real value +Parry, 2337.$ =orean steel ma"er 5osco is implementing <en ((( techni'ues corporation wide$ 5osco is the third-largest steel ma"er in the world$ Moreover, the =orean Standards Association has adopted <en ((( techni'ues and is trying to propagate these methods throughout that country$ >lectronics ma"er Samsung, also in =orea, has begun a <en ((( programme $ And the government of (ndia has bought into the idea and has begun promoting it both in private and government-owned industries there$ *he word Lvalue,O in the context of <en (((, needs some explanation$ (t is perhaps best understood by analogy to previous Six Sigma efforts$ As practiced in the 19 3s and B93s, Six Sigma focused first on reducing defects$ Later, the emphasis was on minimi&ing costs$ Six Sigma efforts at such companies as Motorola, <>, and ;u5ont were successful at reaching both goals$ Cne difficulty with both first and second-generation efforts is that they didnBt address some of the larger issues that ma"e for commercial success$ (t is possible to field defect-free products using lowest cost production that is world class and earn profit$ *he ingredient that is missing is the concept of value, and that is what <en ((( addresses$ (t broadens the scope of improvement pro#ects to encompass such ideas as product utility and customer access$ 1ut there was another problem with past Six Sigma programmes, (t too" a lot of expertise on the part of practitioners to run pro#ects effectively$ *he training necessary to do anything meaningful was extensive$ (mprovement efforts typically were conceived and executed by high-level managers and could consume a lot of company resources$ 6onse'uently, only large firms tac"led Six Sigma endeavors though the benefits could be substantial for firms of any si&e$ <en ((( changes this scenario drastically$

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Lecture Material

Six Sigma - past, present and future

%or one thing, the training and infrastructure needed to get useful results from a <en ((( pro#ect are much less than previously has been the case$ <en ((( introduces the concept of the Ahite 1elt Six Sigma practitioner$ *his is an individual who facilitates use of Six Sigma in wor" cells or similar settings$ Pigher-level Ahite 1elts typically ferret out small benefits from applying Six Sigma to problems that would not #ustify the time and attention of a Six Sigma 1lac" 1elt$ 9 #onclusion

Six Sigma, as developed by Motorola, was an extension of many existing 'uality tools and techni'ues, but with the addition of business accountability$ *his resulted in process improvement gains that increased productivity and profitability$ Six Sigma and Lean enterprise methodologies are both systematic and both have evolved from separate paths$ Lean was developed by *oyota$ Lean is mainly focused on eliminating waste$ (n manufacturing, the lean principle includes &ero waiting time, pull instead of push scheduling, smaller batch si&es, line balancing and shorter process times$ Six Sigma organi&ations become forward moving organi&ations by adapting new tools and techni'ues and overcoming learning disabilities +;edhia, 2337.$ A gauge of 'uality and efficiency, Six Sigma is also a measure of excellence$ >mbar"ing on a Six Sigma programme means delivering top-'uality service and products while virtually eliminating all internal inefficiencies$ A true Six Sigma organi&ation produces not only excellent product but also maintains highly efficient production and administrative systems that wor" effectively with the company)s other service processes$ (n administrative processes, Six Sigma may mean not only the obvious reduction of cycle time during production but, more importantly, optimi&ing response time to in'uiries, maximi&ing the speed and accuracy with which inventory and materials are supplied, and fool proofing such support processes from errors, inaccuracies and inefficiency +*hawani, 2334.$ $ Much can be achieved from programmes li"e Six Sigma with the active, consistent, innovative, continuous and widely apparent participation by top management$ Ahen implemented strategically, Six Sigma can help companies turn over wor"ing capital faster, reduce capital spending, ma"e existing capacity available, produce better results from the design and 8I; functions$ Such outcomes also foster a wor"ing environment that stimulates employee development, motivation, morale empowerment and commitment$ *he primary factor in the successful implementation of a Six Sigma pro#ect is to have the necessary resources, the support and leadership of top management, customer re'uirements identified explicitly, and a comprehensive training programme$ Six SigmaBs ;MA(6 structure of problem solving is its ability to analyse, improve and control processes with an emphasis on the ability to measure the performance$ ;eployment of Six Sigma is best achieved through the defined pro#ects$ Success of a Six Sigma pro#ect depends on buyin by the entire organi&ation, deployment of the process, effective training and "ey measurements$

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Lecture Material

Six Sigma - past, present and future

)as3 Aor"ing within groups, form a Six Sigma team consisting of, 5ro#ect 6hampions Master 1lac" 1elts 1lac" 1elts <reen 1elts And discuss the application of Six Sigma methodology to achieve improved performance at your business school$ %ollowing activities are suggested for discussionW StudentsB pass percentage StudentsB class attendance 5unctuality in starting the classes at scheduled time

:E!E:E;#ES 1$ 2$ 9$ 4$ 7$ !$ 0$ $ 9$ ;edhia, T$S$ +2337., LSix Sigma 1asicsO, Total Quality Management, Uol$1!, To$7, pp$ 7!0-704$ <> website http,--www$ge$com +accessed on 23-%eb-2330. Parry, M$, and 6rawford$ ;$ +2337., LSix Sigma D *he next generationO, Machine Design, %ebruary (ssue, pp$ 12!-192 Lucas, H$M$ +2332., L*he essential Six SigmaO, Quality Progress, Hanuary, pp$ 20-91 Motorola website http,--www$motorola$com +accessed on 23-%eb-2330. Aeb source http,--www$mydabbawala$com +accessed on 23-%eb-2330. Snee, 8$ ;$ and Poerl, 8$A$ +2339., Leading Six Sigma: A Ste by Ste !uide "ased on #x erience at !# and $ther Six Sigma %om anies, 5rentice-Pall, Tew Hersey$ *hawani, S$ +2334., LSix Sigma D Strategy for organi&ational excellenceO, Total Quality Management, Uol$17 To$7-!, pp$ !77-!!4$ Eang, 6$6$ +2334., LAn integrated model of *@M and <>-Six SigmaO, &nternational 'ournal o( Six Sigma and %om etiti)e Ad)antage, Uol$1 To$1, pp$ 90-111$

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