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Introduction to Six Sigma

Business Process Improvement through Six Sigma

© Max Zornada (2005)

Slide 1

What is Six Sigma?

Six Sigma is a statistical measure of quality:

It is based on rigourous process based performance measures. Six Sigma is a “generic” structured methodology for continuous improvement, that can be used to improve any process in any business. Six Sigma changes the way organisations work and the way they think.

A Process for Continuous Improvement:

An Enabler of Cultural Change:

A disciplined process focussed on delivering near perfect products and services.
© Max Zornada (2005) Slide 2

Newman and Cavanaugh © Max Zornada (2005) Slide 3 . and diligent attention to managing.Six Sigma: A Definition “A comprehensive and flexible system for achieving. data and statistical analysis. disciplined use of facts.” The Six Sigma Way. Six Sigma is uniquely driven by close understanding of customer needs. improving and reinventing business processes. by Pande. sustaining and maximising business success.

It set the goal of achieving capability levels of 3.Six Sigma is a measure of excellence      Six Sigma is a statistical measure of quality. Why Six Sigma? s © Max Zornada (2005) Slide 4 . which reflects process capability. Focuses on driving out variation in business processes .this is what the customer feels! Sigma is the Greek symbol used for Standard Deviation of a population.4 defects per million opportunities.

00017% 1. defects (= 3.7 ppm 6s 6s = 99.7 ppm 0.00017% 1.00034% of points will be outside of the specification limits ie.4 parts per million out of spec.7966% of data inside the limits (Cp = 2) 0.A 6 Sigma Process Customer target Lower Specification Limit Upper Specification Limit 0.) © Max Zornada (2005) Slide 5 .

977% 99.Relating Sigma to Defect Levels DPMO (Defects Per Million Opportunities) Six Sigma Five Sigma Four Sigma Three Sigma 3.500 © Max Zornada (2005) 69% 31% Slide 6 9 .210 66.810 Error Free Rate 99.9997% 99.4 233 6.4% 93% Two Sigma One Sigma 308.500 691.

you'd miss 1 putt every 163 years! © Max Zornada (2005) Slide 7 .33 years • 6 sigma .you'd miss 1 putt per round • 4 sigma .you'd miss 1 putt every 9 rounds • 5 sigma . and played at: • 2 sigma .you'd miss 1 putt every 2.Putting Six Sigma in Perspective! If you played 100 rounds of golf per year.you'd miss 6 putts per round • 3 sigma .

000+ GE employees must be Six Sigma certified. SAS Institute … the list keeps growing every day. American Express. 3M.History of Six Sigma 1985 1987 1990 Allied Signal introduces its Six Sigma program 1995 2000 Motorola launches its Six Sigma program  GE introduces its Six Sigma program and adds the “D” in DMAIC   GE . HSBC. Sun Microsystems. Slide 8 © Max Zornada (2005) . Boeing. All new GE products developed using the “Design for Six Sigma” approach. LockheedMartin. 3M . Raytheon.All 300. Bank-of-America.CEO (from GE) requires all employees to become Six Sigma certified. Who Else? Dupont.

700 green belts (employees who have undergone weeks of training in the six-sigma methodology) working on 4.200 projects. by 10% –without any capital investments. New York. our projects using six-sigma methodology are responsible for savings of more than $1 billion a year. a stringent approach that strives to reduce manufacturing defects to just several per million. we have adopted six-sigma methodology. Sustainable growth the DuPont way. Source: Holliday. (2001). DuPont was able to increase the production rate of its plant in Buffalo. … The result: $26 million in additional revenue last year.100 black belts and 1. We at DuPont have elevated productivity to the strategic level because we believe that it is central to our efforts in sustainability. This number might not seem huge for a company with $30 billion in sales. As a sign of our commitment in this area. but DuPont has thousands of such projects. Sept. pp 132 © Max Zornada (2005) Slide 9 . At the end of last year. and we are adding 200 new ones each month. Altogether. Harvard Business Review. we had 1.Six Sigma at Dupont Many companies consider productivity to be a cost-saving operational issue. C. In one of them.

Honeywell:    1998--$500 Million 1999--$600 Million 2000--$700 Million+ © Max Zornada (2005) Slide 10 .Six Sigma has generated a net benefit of $776 million for 1999-2003. Six Sigma delivered more than $300 million to GE’s 1997 operating income and more than $600 million in 1998.Bottom Line Impact of Six Sigma    In dollar amounts. Raytheon .

As we look to the future. our leadership charge is to keep Six Sigma a top priority and use it to produce organic customer revenue growth. © Max Zornada (2005) Slide 11 . It has also had a significant impact upon the leadership team with our personal education and certification as Six Sigma Green Belts. Six Sigma has enabled us to generate more than $300MM in first-year productivity gains for the company.Ken Lewis (10/9/02) Failing to implement Six Sigma in commercial areas with the same force that the company implemented it in its industrial sectors cost Motorola $5 billion over a four-year period.Six Sigma in the Services Sector   “Sustaining the intensity of our Six Sigma work is critical for Bank of America to achieve its strategic goals.” .

develop the "Total Quality” concept USA starts to copy Japan. excluding Australia commence adopting TQM Western Europe discovers TQM Australian services sector copies US with adoption of TQM Australian manufacturing commences with TQM Developing countries rapidly adopting TQM 6-sigma goes mainstream Widespread emergence of Balanced Scorecard Organisational learning emerging as a key competitive issue Team based approaches to work gaining broad acceptance in industry Business Process Reengineering Benchmarking emerges as a supporting practice © Max Zornada (2005) Slide 12 . Renewed focus on Process Management 1920's 1931 1940's 1943 1950 1960 1970 1980 1990 1994 1996 2000 2002 US discovers Deming Rapid spread TQM principles to US service industries Pacific basin countries. called TQC (Total Quality Control) eventually the term TQM (Total Quality Management) is used as the label.A Timeline of Key Events leading up to Six Sigma Shewhart's studies into variation at Bell Telephone Labs Shewhart publishes book. "Economic Control of Quality of Manufactured Product Widespread adoption of Shewhart's principles for War-time Production in the US Ishikawa develops Ishikawa diagram and pioneers use of 7-tools Widespread abandonment of Shewhart's principles in Post-War US. Deming teaches Shewhart principles to Japanese Deming develops management philosophy based on Shewhart concepts own ideas Japanese extend Deming's teachings.

Key Elements of Six Sigma            Process Orientation Customer Focus Y = f(X) Data and Measurement Driven Focus on Variation Reduction Statistical Rigour Project Orientation The DMAIC Process Improvement/Problem Solving Process Dedicated Personnel Bottom Line Results Focussed Data Driven Culture (In God we trust. all others bring Data) © Max Zornada (2005) Slide 13 .

The Six Sigma Approach DMAIC Control by standardising solution and monitoring performance. © Max Zornada (2005) Slide 14 . Improve 6s Measure Analyse Measure the current performance and capability Analyse to identify root causes. Control Define Improve by implementing potential solutions. Define the problem or opportunity.

The Role of Statistics in Six Sigma Statistical Control Control Define Practical Problem Improve 6s Measure Statistical Problem Statistical Solution Analyse Practical Solution © Max Zornada (2005) Slide 15 .

Sponsors/Process Owners: Business leaders responsible for the implementation of process improvements and monitoring process performance. training.Six Sigma Support Structure       Champions: Business leaders who lead the implementation of Six Sigma within the business. mentoring. © Max Zornada (2005) Slide 16 . Team Members: (Yellow Belts) Individuals who support projects in their areas. Green Belts: Fully trained individuals who apply Six Sigma skills to improvement projects. work on Six Sigma projects and mentor Green belts. Master Black Belts: Fully trained quality leaders responsible for Six Sigma strategy. deployment and results. Black Belts: Fully trained Six Sigma experts who lead improvement teams.

Implementing Six Sigma Strategic Level Executive Steering Committee Master Black Belts Tactical Level Champions Black Belts Team Members Stakeholders Operational Level Green Belts Yellow Belts © Max Zornada (2005) Slide 17 .

T. Market Share and ROI .The Business Case for Six Sigma 38 Return on Investment (ROI) % 27 20 29 20 21 13 14 Superior 7 Low 25% 60% High 33 % Inferior 67% Relative Quality Relative Market Share Source: Buzzell. (1987) The PIMS Principles © Max Zornada (2005) Slide 18 .D. B. R. & Gales.Relationship between Quality.

Six Sigma Competitive Advantage Revenue Products & Services External Quality Internal Quality Processes & People Operating Costs Market Share Customer Satisfaction Economies of Scale Improve Quality Capital Costs Higher Profit Higher ROI © Max Zornada (2005) Slide 19 .

How did leaders become leaders …… A accumulation of competencies Flexibility Cost Delivery Control Improve Define 6s Measure Quality Six Sigma provides the on-ramp and the mechanism to progress up the steps. Nakane and Hall (1994) © Max Zornada (2005) Slide 20 Analyse .

Our organisation collects data and we sometimes look at the numbers and use them to support problem solving and decision making.In god we trust. people experience and “the way we do things around here”. Our organisation uses sample data along with basic statistics. Our organisation logically groups the data. F E D C B A A+ © Max Zornada (2005) Slide 21 . We do not use data. Our organisation collects data so as to say “we collect data” but the data is not used. Our organisation uses sample data along with inferential statistics. We report it in the form of charts. Our organisation quantifies processes via predictive equations. Grade your organisation on its use of data        Our organisation uses only tribal knowledge i. all others bring data.e.

Conclusion of introduction © Max Zornada (2005) Slide 22 .