What is Six Sigma?

Franck Strub – Equable 13 July 2004
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Agenda
> What is Six Sigma? > Six Sigma crash course > Six Sigma steps (DMAIC) > Six Sigma financial impact > Six Sigma business contribution > Six Sigma deployment > What could do Six Sigma for you?

> Six Sigma project effort
> Six Sigma history
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What is 6 sigma?
6 sigma is a management methodology of which the goal is to improve dramatically the performance and the quality of all your processes, services and products. It is: > Customer centric

> Based on data/measurements/statistics
> A pragmatic & disciplined approach

> Business oriented, providing high returns
> Focused on reducing variability & defects
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6 sigma crash course
> If there is an output, there is a process! > If there is a process there is a performance variation

> If there is variation there is a probability of defect (missing our customer specifications or our contractual obligations!) > The customer feels always the output process variation. This is how he perceives your quality! > A 6 sigma process produces only 3.4 defects per million of operations > A process operating at 3 sigma produces 66807 defects per million of opportunities > A 3 sigma process cost you up to 20 % of your sales revenue > A 6 sigma process cost you less than 1% of your sales revenue
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6 sigma crash course
Lets take an example:
> The cycle time of a distribution company, from customer order to customer delivery should not exceed 3 days (our contractual terms & conditions) > Customers complain. > Competitors are better than us. They never exceed 3 days > Management says “we are loosing money” > Team in place says “we despatch in average the same day we receive the order and we always use a 24 hours delivery carrier”
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6 sigma steps (DMAIC)

Define

Define your business problem
Measure your process (Y) performance Find the root causes (X’s) of the problem

Measure
Analyze Improve Control

Improve, implement new solution
Deliver Y performance over time

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Define
Pb statement: we miss our contractual obligations of delivering in less than 3 days Process in which we have a business problem:

Supplier = My Company

process as felt by the customer
Collect Order & Forward to delivery deptmnt Procurement
Output Ship Unit delivery to Customer & Bill

My Customer

Receipt of Input order Order from Customer

Consumes

Lead time is the measurement
Definition Specification limit Performance Targets/goal

CTQ*
*Critical To Quality

Lead time

3 days

99.99% < 3 days

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Measure
Measure your problem and your defects
Lead time distribution
nb of occurences

50

Trend Contractual/Customer Specification Limit Observed probability of defects=12.03%

26/216 10
Variation defects Time from order to delivery in days

0
1 day 2 days Histogram 3 days

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Measure conclusion
I observed a probability of defect of 12.03%! My performance is 2.67 σ. We have a problem! 6 sigma goal is to reach 0.00034% of probability of defect!
σ value*
Defects per million of opportunities

% defects 30.8537%
12.03%

2.67 σ

2σ 4σ 5σ 6σ

308537

66807
6210 233 3.4

6.6807%

0.6210%
0.0233% 0.00034%
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* For short term data

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Analyze
Analysis – finding the root causes (Xs)! > Pareto chart of the 26 defects
20
77%

Miss 3 pm carrier for outside Paris region

4
15%

Incomplete shipping address

2
8%

Other

> 2 causes represent 92% of my defects
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Improve
2 actions taken:
> Process “Outside Paris region” orders first & organize an earlier transfer to shipping department > Change address format and control at order taking time

New Cycle time from order to delivery distribution μ nb of
occurences

50

Contractual/Customer Specification Limit Observed probability σ of defects=0% Expected performance: 6 σ I can place 6 σ between μ and the spec. limit and the distribution is normal!

10 0

6xσ
1 day 2 days Histogram

defects Time from order to delivery in days 3 days

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Control
2003 Delivery time performance
Control chart of Delivery P99 over one year
3,4 3,2
Delivery P99 in days

3,0 2,8 2,6 2,4 2,2 2,0

3 days

1

2

3

4

5

6 7 Month

8

9

10

11

12

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6 sigma financial impact
Cost of Failure (% Sales) 40%
35% 30% Business/Case •I sell 10€ every units • My operating margin is 25% • Every defect costs me 24€! • at 2.67 σ I was loosing 38 cents for every unit I sold!!

€!!

20%
15% 10% 5% DPMO Sigma
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3.4 6

233 5

6210 4

66807 3

308537 2

500000 1
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Six Sigma business contribution
> Contribution to growth through:
– Customer satisfaction increase – Introduction of quality products & services

> Productivity gains: – Product quality improvement
– Higher service performance – Process efficiency

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Six Sigma deployment process
Continuous quality

Market /Customer expectations Company strategy 6 Sigma initiatives Select 6 Sigma projects Select, train & coach people Demonstrate financial results
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Design
CTQ*
Product Service Process

Improve/Fix
*Critical To Quality

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Six Sigma deployment - People
Top Management Quality Manager/ Champion Master Black Belt Black Belt Green Belt
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Engage/promote 6 sigma

Select initiatives aligned with the Company strategy
Drive one big initiative. Train and coach. Change agent. Deliver main projects. Full time project leader. Deliver contributing projects
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What could do 6 sigma for you?
Variable Costs
Nb of Manual Human Interactions* After Before orders 4 1

Web Order Book project

Take orders offline (laptop)

Sales Repr.

Synchronize orders by email connection

eBook
Update orders on Intranet

6
Production orders
Total

1

Coordi nator

Submit order to Manufacturing

10
st dev 1.6

2
st dev 1

520 K€ of saving

* averages

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What could do 6 sigma for you?
Base Costs
% of time spent by 8of before and after Boxplots persons doing financial manual entries before and after FPA project implementation (means are indicated by solid circles)
1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 before after

> 140 K€ saving
> Overtime reduced > Interim reduced > More time for analysis
(added value task)

27% reduction of time spent by 8 financial analysts …gives 1.75 Full Time Employee proven benefit!
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6 sigma project effort
DFSS*
6σ DPMO** 3.4 5σ Effort

DFSS*
characterization basic tools logic & intuition *DFSS Design For Six Sigma **DPMO Defect per Million of opportunities

CTQ
Product Service Process

233
6210 66807 308537


3σ 2σ

DMAIC

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6 sigma history
> 6 sigma started at Motorola in 1989 – manufacturing only > 6 sigma was applied successfully at TI and Allied Signal > 6 sigma started at GE in 1995 > 6 sigma expanded to all functions at GE in 1996 – Touch all people and all processes – DFSS successful product introductions – 6 sigma concept sold to customers – Contributed to raise by 2 points the profit/sales ratio in 5 years
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