Six Sigma Literally Speaking

Six Sigma Literally Speaking
Section 1: Basic Concepts of Capability

Section 2: Practical Meaning
Section 3: Variation Concepts
Section 4: The Cost of Quality
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Module Objectives
In this module, we are going to explore at a deeper level the meaning behind the phrase “Six Sigma.”
 First, we will explore the fundamental concepts of variation

 Second, the practical meaning of Six Sigma will be illustrated.
 Third, we will study the sources of variation and how they can be quantified short-term and long-term
 Lastly, cost of quality concepts will be explored.
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Section 1: Basic Concepts of Capability

Sigma – A Unit of Measure
Let’s begin our exploration of fundamental concepts of Six Sigma by first looking at sigma itself.
The letter sigma is actually the 18th letter of the Greek alphabet.
Sigma is used in mathematics to represent the standard deviation of some performance characteristic.
Sigma is also associated with the measure of variation. For example, if you time how long it takes you to drive to
the office everyday, after a month, you could estimate how much variability is associated with your drive time to
work. This variation can be quantified through the Greek letter, sigma.
Sigma is also used as a measure of process capability. You should not confuse the lower case letter sigma, which
is used to express variation and deviation, with the upper case letter Sigma, which is used to express the
summation of numbers.
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Sigma is a Measure of Variation
Let’s take a look at sigma as a measure of variation.
In a normal distribution, at some point there is an inflection of the curve. At that exact point, the distance
horizontally to the mu, or the mean, of the characteristic, is the value of the standard deviation.
This is what we will use to estimate and quantify variability for different performance characteristics.
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The Standard Deviation
We will now explore fundamental concepts behind a three-sigma process.
On the X-axis, we measure a performance characteristic. The Y-axis is the frequency with which that performance
characteristic occurs.
We have a lower specification limit and an upper specification limit associated with this performance characteristic.
In the middle of the distribution, we have the mean, or mu.
The inflection point in the curve can be used to visually measure the standard deviation. This characterizes the
dispersion of the measured performance characteristic.
T, which is known as the target, is where we would like the mean to run, if at all possible.
In a traditional three-sigma process, we can fit three units of standard deviation between the mean and the
nearest specification limit. So if you notice on the graph, the inflection point is one sigma away from the mean.
And the three-sigma process can fit three of those distances in between the mean and the upper spec limit.
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The Specification Limits
Let’s talk about specification limits. At the left and right end of the distribution curve appear the lower specification
limit and the upper specification limit. These limits indicate at which values this characteristic is no longer
acceptable, as defined by our customers.
But does it mean that there’s a guarantee that all values for this characteristic within the limits will result in a
positive experience for the customer, while values outside of these limits will result in a negative experience? Is
there generally a step function change in performance? Of course not. So let’s talk about what’s really happening
as we approach and pass these limits.
What we see is an increasing probability that the customer will have an unpleasant experience. Observe that in a
three-sigma process, there is a noticeable area visible underneath the curve beyond the specification limits. This
tells us that there is some real possibility that our customers will have a negative experience since there are
instances where this characteristic falls close or beyond the limits. In general, our customers, either directly or
indirectly, specify these limits, and we do not control their value. All we can do is improve our process to shrink
the distribution curve between the limits.
In a Six Sigma process, the curve around the limits is virtually flat and very close to zero. Meaning that the odds
that our customers will have a negative experience due to this characteristic is extremely low.
Can we guarantee that our customers will never have a bad experience? No. We can only decrease the
probability of this happening by staying clear of the limits. In Six Sigma we are training ourselves to think in terms
of probabilities; not certainties. Very few things in life are certain.
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A Six Sigma Process
Let’s look at a Six Sigma process now. In a Six Sigma process, we can fit six units of standard deviation in
between the mean and the nearest spec limit. One point of confusion when people refer to a Six Sigma process is
that sometimes they think you can fit six sigmas in between the upper spec limit and the lower spec limit.
Actually, a Six Sigma process allows you to fit twelve units of standard deviation in between the upper spec limit
and the lower spec limit.
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Sigma Level Explorer – Activity
To familiarize yourself with the various sigma levels, please click on one of the sigma levels at the left to modify
the distribution curve to show that sigma level.
You can also move your mouse over the various elements in the illustration to learn more about them.
When you’re done, please click on the “Continue” button at the lower right corner.
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Guess the Sigma Level – Activity
In this exercise, we’ll test how good you are at visually recognizing the sigma level of a distribution curve. If you
need help on how to visually determine the sigma level of a distribution curve, please review the previous sections.
Your goal is to make the meter on the right light up all the way to the top by guessing the sigma level represented
by the curve. The closer you are to the true value, the higher the meter lights up. Begin by clicking the orange
button on the left to generate a random distribution curve. Visually guess the distribution of the curve, and type it
in the field below. Then, press “Submit” to see how close you are to the actual value.
See how close you can get!
When you’re done with this screen, please click the “Continue” button in the right-hand corner to continue with the
lesson.
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Section 2: Practical Meaning

Six Sigma – An Aggressive Goal
Six Sigma is an aggressive goal.
This table shows how each sigma level corresponds to an organization’s defects per million opportunities (DPMO).
Let’s take a look at what this means. The area in blue represents one million opportunities to create a defect. The
purple area represents the number of mistakes, or defects, per million.
For a two-sigma company, or a two-sigma level process, this is about 30% of mistakes or errors.
As the sigma level increases to three, the number of defects drops to only 66,807 per million opportunities.
As the sigma level increases, notice that it is not a linear function. That is, one unit of increment of sigma level
corresponds with a dramatic decrease in defects per million.
Finally, as we reach Six Sigma, notice that we only have 3.4 defects per million opportunities to create a defect.
This quality level is so high that our customers will virtually never see defects.
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Six Sigma – Practical Meaning – Examples
In this screen, you will begin to have a feeling for what Six Sigma quality represents and why 99 percent quality is
simply just not good enough anymore.
Click on each of the six photos to compare 99 percent good with Six Sigma.
Example 99% Good 99.99966% Good

Mail 20,000 lost articles of mail per hour. Seven articles of lost mail per hour.
Unsafe drinking water for almost 15 One minute of unsafe drinking water every
Drinking Water
minutes each day. seven months.
5,000 incorrect surgical operations per
Operations 2 incorrect surgical operations per week.
week.
Two short or long landings at most major One short or long landing at most major
Air Travel
airports each day. airports every five years.
Drug Prescriptions 200,000 wrong drug prescriptions per year. 68 wrong drug prescriptions per year.
No electricity for almost seven hours each
Electricity One hour without electricity every 34 years.
month.
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Continuous Improvement is Not Enough
In a world of continually evolving standards of quality and productivity, the survival of any company depends on
continuous improvement. But your company wants to do more than just survive. It wants to dominate its market.
With Six Sigma, you can achieve breakthrough levels of quality, not just continuous improvement levels of quality.
With Six Sigma you can get better, faster. This is your competitive advantage!
And of course, having an advantage over the competition means higher profits.
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Section 3: Variation Concepts

The Primary Sources of Variation
There are three primary sources of variation.
 First, there is variation due to poor design. That is, what we’re making wasn’t well-designed to begin with.
 Second, variation can come from poor parts and materials.
 Third, there’s variation due to our own internal processes.
We may be tempted to think that if only the designers could get it right to begin with, and if only our suppliers
would stop shipping us bad materials, all of our problems would go away. So why are we putting so much
emphasis on our own processes?
The reason is that adjustments to our own internal processes can often yield results in as little as a few weeks to
months; while changes to design takes from many months to years to produce results. We also have substantial
control and data on our internal processes, and little, if any, data regarding our suppliers’ processes.
So in Six Sigma, we focus on our own processes first. This, in turn, will affect positively the other two categories.
Changes in design are difficult and slow to implement. By analyzing our processes, we can better prioritize what
aspects of our products should change. Change first that which cannot be handled through adjustments to our
processes. And by understanding our processes, we can also narrow down the most critical variables coming
from our materials, increasing the odds of being able to positively affect changes being made by our suppliers.
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Impact of Variation on Cost
For any given quality distribution, there are lower and upper specification limits.
Traditional philosophy follows a goal post mentality. According to traditional philosophy, the cost associated with
quality loss between the specification limits is very low, almost negligible, but jumps dramatically to a high cost at
the specification limits, almost as a step function. This is the goal post mentality of quality losses.
In the new way of thinking about quality loss, Genichi Taguchi, a Japanese engineer, suggests that your costs are
minimized when you can run as close as possible to your target value. However, for any deviation from your
target, the quality loss for your organization and your customers will tend to go up quadratically.
This means that any small deviation from the target results in a large deviation in quality costs associated with the
delivery of that particular performance characteristic.
According to Taguchi, variation is evil.
It is not enough to be within specifications. Any small deviation or variation off the target will be costly to the
organization.
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Short-term vs. Long-term Variation
When a process is considered to be Six Sigma, it is considered to be Six Sigma in a short time period. In the long-
term, this process will be something less than Six Sigma.
As time passes, a short-term distribution may experience shifting and drifting. Even though at any point in time the
distribution fairly very low variability, over the long-term, these distributions add up to the yellow distribution at the
top, which is considered a long-term distribution.
By convention, it is suggested that the short-term distribution shifts approximately one and a half sigma over time.
So, a Six Sigma process short term actually translates into a 4.5 sigma process in the long term. This shift of one
and a half sigma is only an estimate. Your process could actually shift more than one and a half sigma, or less
than one and a half sigma.
When data is collected, it is really difficult to get truly short-term or truly long-term data. Therefore, process data is
typically somewhere in between long-term and short-term. So we need to be somewhat careful in our estimation
and calculation of sigma level.
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Short-term vs. Long-term – The Bakery – Part 1
Narrated by David Silverstein, Master Black Belt
Here’s an example of how things might vary from one day to the next.
Let’s assume you have a factory that makes cookies; you’re a bakery. The temperature setting on your oven
should be between 440 degrees Fahrenheit and 460 degrees Fahrenheit. In other words, 450 plus or minus 10
degrees.
Your operator on the first shift comes in, and that operator knows from her experience that over the course of the
day, the temperature of her ovens tends to drift up a little bit. That’s because things get busier in the plant. The
ambient temperature tends to go up as the sun comes up. So what that operator does, because she’s trying to do
a good job, is in the morning, dial the temperature down to about 442 to 443 degrees. That way, as it tends to drift
up during the day, we’re going to stay in our range of 440 to 460. So we’ll see the temperature move around and
slowly drift up over the course of the day. But there’s variation over the course of the day. The variation comes
from things like opening the oven every hour or two to take out some cookies and put more in.
The baker or the operator on the second shift comes in. That operator knows, from his experience, that over the
course of the evening shift, the temperature tends to drift down because the ambient temperature around the
oven has gone down. Of course, it’s going to vary as we take cookies in and out; every time we open the oven the
temperature will drop by five degrees. But in general, the average temperature drifts down over the course of the
shift. That operator does a good job. He comes in to start his shift and dials the temperature up to 458 degrees so
that over the course of the day, he will tend to stay in his range.
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Short-term vs. Long-term – The Bakery – Part 2
The operator on the third shift comes in. During her shift, the temperature stays pretty constant. She happens to
have had some training as a Six Sigma Green Belt in a previous job, and she knows that she wants to keep
temperature in the middle. So every 30 minutes when she’s walking by her oven, she tweaks the temperature to
450. If it drifts up a couple of degrees, she’ll dial it back to 450. If it drifts down a couple of degrees, she’ll dial it to
450.
So what do we get? Over the course of the day, the first shift gets some variation because we’re opening and
closing the oven. The second shift looks kind of like this, and the third shift looks like that. All of these in a very
short period of time have a relatively narrow standard variation. But over a long period of time, when we’ve
collected lots of data and aggregated it, we would see something that looks like that.
This is the concept of short-term versus long-term variation. It’s an important concept. It’s what explains where
our one and a half sigma shift comes from. It is an important concept if we’re to get at the sources of the variation;
we have to understand how things change over time.
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Process Baseline
There are several terms that help us to define our process capability.
The process baseline is the average, long-term performance level of a process when all input variables in the
process are running in an unconstrained fashion.
What does that mean? It doesn’t mean that we let our processes run out of control. Instead, it means that we let
all input variables vary across their entire range of expected values.
For example, if there are three operators for a machine, we must consider all three operators, because each one
interprets the same instructions a little differently. We must consider materials from all vendors. Even though they
all provide materials within specification, materials from each vendor will vary somewhat from one to another. We
must take into account the various machines must be adjusted or calibrated slightly different.
The result of allowing all possible variables to vary across their full range helps us determine our average, long-
term performance.
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Process Entitlement
Entitlement is effectively the opposite of the process baseline.
Entitlement is the best case, short-term performance level of a process when all input variables in the process
are centered and in control. What is the best that we’ve ever done in a short period of time?
This is very important, because it helps us determine what we’re really capable of. This allows us to set realistic
goals, not wishes.
We can look at our history, for example, and see that at some point in time many months ago, we actually hit 90
percent yield for three consecutive days. While today, we have an 80 percent yield. We have hard data that 90
percent is achievable. That is to say, we know that some set of conditions, some combination of supplier
materials, machine settings and operator actions, allowed us to reach 90 percent yield for a sustainable period of
time. It may not be easy to replicate that set of conditions, but we know it can be done.
This should establish our minimum expectation because we have shown that it has been done before.
By analyzing the process in depth, we should be able to do even better.
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Process Benchmark
The process benchmark is the performance level of the process deemed by comparison to be the best process
possible.
By comparison, the process entitlement is the best that we have ever done. The benchmark takes us a step
further, to the best that anyone has ever done.
In practical terms, this means researching and finding the best that has ever been done industry-wide.
 What has our competition achieved?

 What do the industry trade journals say is possible?
 What are our own other business units accomplishing?
Like entitlement, this is also very important, because it helps us determine what levels are possible. Finding out
the process benchmark involves some research. Asking customers, vendors and studying the competition.
Knowing the benchmark is very valuable, because it allows us to establish competitive and realistic objectives.
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Baseline, Entitlement, and Benchmark - Transactional
To illustrate the concepts of baseline, entitlement and benchmark, let’s introduce the Sunnyside branch of Sigma
Bank and its car loan approval process.
The car loan process begins with an applicant filling out a car loan application. The applicant then meets with a
car loan officer at the bank, and the application is reviewed for completeness and accuracy. Supporting data,
such as a credit check and work history, are then collected. The application, plus the supporting documents, are
then used to score the application. Based on the score, the application is either approved or rejected. When an
application is rejected, the applicant is then sent a rejection letter. An approved application is forwarded on to the
funding department, and the applicant is informed of their approval by phone.
An important measure of customer satisfaction is the decision cycle time: the time from when the application is
reviewed to the time when it is either approved or rejected. For the last twelve months, the branch manager has
been monitoring decision cycle time. Every month, she posts the average decision cycle time on a run chart. Over
this twelve month period, the average decision cycle time has been 5.5 days. 5.5 days is considered the baseline.
The best one week performance during this period was 2.1 days. This performance was seen during the third
week of February. Two point one days is considered to be the entitlement for decision cycle time at the Sunnyside
branch.
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The Sunnyside branch is just one of many banks within the Sigma Bank network. In reviewing the decision cycle
time data at other branches, the best performance the branch manager sees is an average of 1.5 days during the
month of March at the Winter Park branch. 1.5 days is considered the benchmark performance.
Having defined the baseline, entitlement and benchmark for decision cycle time, we have a good picture of our
current performance and indication of just how good our process could be, if improved.
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Identifying Baseline, Entitlement and Benchmark - Activity
In this exercise, your goal is to find values for the baseline, the entitlement and the benchmark by reading a
number of documents.
You can read any of the documents you see on the desk by clicking on them. When you think you have identified
these values correctly, please type them into the fields below and click on “Submit.”
If you don’t remember how to assess these numbers, please review the preceding sections.
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Section 4: The Cost of Quality

The Cost/Benefit Ratio
The red line in this graph shows the cost to a company due to internal and external failures. This line is related to
the yellow line, which indicates the company’s investment into appraisal and prevention.
Beyond a certain point, the cost of quality control exceeds its benefit in defect reduction. Traditionally, it was not
considered practical to continue improving quality beyond four sigma, as the cost exceeded the benefit. But this
was because improvement increases came from testing and inspection, which were very costly.
Today we see quality improvement through defect prevention and elimination, resulting in costs that actually go
down relative to our quality costs. Due to the change in approach to quality improvement, this new cost-to-benefit
ratio allows us to reach a higher degree of quality and to do it cost effectively.
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The Cost of Poor Quality – Example
Let’s say that I make a product, and on that product I paint a coating. My painted coating is expected to be 25 mils
thick. A mil is about one-thousandth of an inch. My specification is 25 plus or minus 5, so I can range from 20 to
30. If I make many measurements of the thickness of my coating, and I were to put the probability distribution on
its side, let’s say I get something that looks like that.
I’ve never had a customer complaint about the thickness of my paint being too thin or too fat. I’ve never had a
defect; I’ve never had a warranty claim; I’ve never had a problem. If this is currently running at 25, with a standard
deviation of 1.5, that means about 99 percent of the time, I’m in this range. Sometimes I may be slightly out, but
it’s never been a problem, so who cares? Why would I waste my time fixing this process?
I go back to my historical data, and I find out that eight months ago for 3 weeks straight, I was able to do that:
mean of 25 with a standard deviation of 0.3. Much less variation, much more consistency. Once again, you have
to ask yourself, so what? The average paint thickness is still 25 mils. I’m using the same amount of paint. It takes
me the same time to put it on. Why would I care?
The reason I care is that if I can control my process to 25 with a standard deviation of 0.3, I have options. I can
reduce my average and shift this whole thing down to here. Let’s say 25 to an average of 21. So that means I’ll be
in the range of 20.1 to 21.9. So what? What did I just accomplish? I just went from an average of 25 to 21, which
is approximately 15 percent. What this would mean is that I now use 15 percent less of my coating material. And if
the cycle time to apply the coating is a function of the thickness of the coating, I also reduce my cycle time by 15
Page 25 of 27
percent. That can add up to a lot of money. And, because I have less variation, my customers are going to see a
product that is much more consistent. My customers are going to be as happy as ever, and I reduce my costs.
When we talk about the cost of poor quality, we include this in the cost of poor quality, because our process is
unoptimized and we’re spending money that we don’t have to spend.
The cost of poor quality has tremendous ramifications. The hidden factory has tremendous ramifications. When
we have poor quality we have lots of hidden costs.
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The Cost of Poor Quality – Iceberg
A compelling reason for going through the challenges of Six Sigma lies in understanding the true cost of poor
quality. Most companies estimate that their cost of poor quality is from 4 to 10 percent of sales.
Many items are easily identified as being responsible for this cost: from scrap and rework, to dealing with
inspection, warranties and rejects.
But lurking deeper, underneath, are hidden costs that actually raise the true cost of poor quality to a much more
staggering 20 to 35 percent of sales. The aspects ignored include many items that are much more difficult or
impossible to measure and that are not often considered the result of poor quality. These include items such as:
Frequent machine setups, because the process of changing from production of one product to another is not
optimized.
Maybe deliveries have to be expedited, because we’re running behind schedule, adding to transportation costs.
Late deliveries may incur penalties.
There may be changes due to improper specifications.
Changes to customer orders due to mistakes in invoices.
And one of the biggest costs, the cost of lost customers, or unattained new customers, is the most costly and
the hardest to measure.
Costs such as these are typically not included in the calculations of the cost of poor quality; the part of the iceberg
that we usually do not see. Once the individuals in an organization learn to measure variation and can tie these
measures to the cost of poor quality, the journey toward achieving Six Sigma quality can begin.
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Six Sigma Literally Speaking

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Six Sigma Literally Speaking

Section 1: Basic Concepts of Capability

 First, we will explore the fundamental concepts of variation

Section 1: Basic Concepts of Capability

Sigma is a Measure of Variation

Let’s take a look at sigma as a measure of variation.

The Standard Deviation

We will now explore fundamental concepts behind a three-sigma process.

The Specification Limits

A Six Sigma Process

Sigma Level Explorer – Activity

Guess the Sigma Level – Activity

See how close you can get!

Section 2: Practical Meaning

Six Sigma is an aggressive goal.

Six Sigma – Practical Meaning – Examples

Example 99% Good 99.99966% Good

Continuous Improvement is Not Enough

Section 3: Variation Concepts

There are three primary sources of variation.

Impact of Variation on Cost

According to Taguchi, variation is evil.

Short-term vs. Long-term Variation

Short-term vs. Long-term – The Bakery – Part 1

Narrated by David Silverstein, Master Black Belt

Short-term vs. Long-term – The Bakery – Part 2

Narrated by David Silverstein, Master Black Belt

Entitlement is effectively the opposite of the process baseline.

By analyzing the process in depth, we should be able to do even better.

 What has our competition achieved?

Baseline, Entitlement, and Benchmark - Transactional

Identifying Baseline, Entitlement and Benchmark - Activity

Section 4: The Cost of Quality

The Cost of Poor Quality – Example

Narrated by David Silverstein, Master Black Belt

The Cost of Poor Quality – Iceberg

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