Define Phase: Six Sigma Fundamentals

Define Phase
Six Sigma Fundamentals
M# 22
Understanding Six Sigma
Process Maps
Voice of the Customer
Cost of Poor Quality
Process Metrics
Selecting Projects
Elements of Waste
Wrap Up & Action Items
M# 23
OSSS LSS Black Belt v10.3 - Define Phase 2 © Open Source Six Sigma, LLC
What is a Process?
Why have a process focus?

– So we can understand how and why work gets done
– To characterize customer & supplier relationships
– To manage for maximum customer satisfaction while utilizing
minimum resources
– To see the process from start to finish as it is currently being
performed
– Blame the process, not the people
proc•ess (pros′es) n. – A repetitive and systematic

series of steps or activities where inputs are
modified to achieve a value-added output
M# 23
Examples of Processes
We go through processes everyday. Below are some

examples of those processes. Can you think of other
processes within your daily environment?
• Injection molding • Recruiting staff

• Decanting solutions • Processing invoices
• Filling vial/bottles • Conducting research
• Crushing ore • Opening accounts
• Refining oil • Reconciling accounts
• Turning screws • Filling out a timesheet
• Building custom homes • Distributing mail
• Paving roads • Backing up files
• Changing a tire • Issuing purchase orders
M# 24
Process Maps
• The purpose of Process Maps is to:

– Identify the complexity of the process
– Communicate the focus of problem solving
• Process Maps are living documents and must be changed as

the process is changed
– They represent what is currently happening, not what you think is
happening.
– They should be created by the people who are closest to the process
Process Map
Start Step A Step B Step C Step D Finish
M# 24
Process Map Symbols
Standard symbols for Process Mapping (available in Microsoft

Office™, Visio™, iGrafx™, SigmaFlow™ and other products):
A RECTANGLE indicates A PARALLELAGRAM

an activity. Statements shows that there are
within the rectangle data
should begin with a verb
A DIAMOND signifies a decision An ELLIPSE shows the

point. Only two paths emerge start and end of the
from a decision point: No and process
Yes
An ARROW shows the A CIRCLE WITH A LETTER
1 OR NUMBER INSIDE
connection and
direction of flow symbolizes the
continuation of a
flowchart to another page
M# 25
High Level Process Map
One of the deliverables from the Define Phase is a high

level Process Map, which at a minimum must include:
– Start and stop points
– All process steps
– All decision points
– Directional flow
– Value categories as defined below
• Value Added:
– Physically transforms the “thing” going through the process
– Must be done right the first time
– Meaningful from the customer’s perspective (is the customer
willing to pay for it?)
• Value Enabling:
– Satisfies requirements of non-paying external stakeholders
(government regulations)
• Non-Value Added
– Everything else
M# 25
Process Map Example
A Detailed Process Map for a Call Center -

START B Z
REVIEW CASE LOGOFF PHONE, CHECK

LOGON TO PC &
TOOL HISTORY & MAIL,E-MAIL,VOICE MAIL
APPLICATIONS TAKE NOTES
E
C Y
SCHEDULED
N PHONE TIME?
A
SCHEDULED
PHONE TIME? Z TRANSFER Y
TRANSFER
APPROPRIATE?
CALL
D N
Y
A EXAMINE NEXT NOTE
N OR RESEARCH ITEM
LOGON
TO PHONE IMMEDIATE PROVIDE
Y RESPONSE Y RESPONSE
ACCESS CASE TOOL F
D PHONE
TIME AVAILABLE? PHONE&
N WALK-IN NOTE
CALL or DATA ENDS ENTER APPROPRIATE
WALK-IN? N SSAN (#,9s,0s)
Z CALL PUT ON HOLD,
REFER TO IF EMP DATA NOT
PHONE DATA REFERENCES POPULATED, ENTER
CAPTURE BEGINS
CREATE A CASE
Y INCL CASE TYPE
ANSWER? OLD N
DETERMINE WHO DATE/TIME, &
CASE
IS INQUIRING N NEEDED BY
Y
QUERY INTERNAL UPDATE ENTRIES
ACCESS CASE TOOL HRSC SME(S) INCL OPEN DATE/TIME AUTO Y
ROUTE
ROUTE
DETERMINE NATURE N
OF CALL & CONFIRM Y
ANSWER?
UNDERSTANDING
CASE Y CLOSE CASE
N CLOSED W/ E
DATE/TIME
CASE TOOL N OFF HOLD AND ADD TO N
RECORD? C ARRANGE CALL RESEARCH
BACK PHONE DATA LIST
TAKE ACTION
Y ENDS End
or
DO RESEARCH
B
M# 26
Cross Functional Process Map
When multiple departments or functional groups are involved in a

complex process it is often useful to use cross functional Process Maps.
– Draw in either vertical or horizontal Swim Lanes and label the functional
groups and draw the Process Map
Sending Fund Transfers
Department
Attach ACH ACH – Automated

Request
Start transfer
form to Clearing House.
Invoice
Fill out ACH

Vendor
Produce an No Receive
Invoice
enrollment payment End
form
Accounting
Match against Maintain database

Financial
Vendor Yes Input info into bank batch to balance ACH

info in web interface and daily cash transfers
FRS? batch
Accepts transactions,
Bank
transfer money and

provide batch total
Accounting
Review and
General
21.0
Process 3.0
Bank
transfer in Journey Entry
Reconciliation
FRS
M# 26
Process Map Exercise
Exercise objective: Using your favorite Process

Mapping tool create a High Level Process Map of
your project or functional area.
1. Create a high level Process Map, use enough

detail to make it useful.
• It is helpful to use rectangular post-it’s for process
steps and square ones turned to a diamond for
decision points.
2. Color code the value added (green) and non-value
added (red) steps.
3. Be prepared to discuss this with your mentor.
M# 27
Do you know your Customer?
Knowing your customer is more than just a handshake. It is

necessary to clearly understand their needs. In Six Sigma
we call this “understanding the CTQ’s” or Critical To
Customer characteristics.
Voice Of the Customer Critical to Customer

Characteristics
M# 28
Voice of the Customer
Voice of the Customer or VOC seems obvious; after all, we

all know what the customer wants. Or do we??
The customer’s perspective has to be foremost in the mind of
the Six Sigma Black Belt throughout the project cycle.
1. Features
• Does the process provide what the customers expect and
need?
• How do you know?
2. Integrity
• Is the relationship with the customer centered on trust?
3. Delivery
• Does the process meet the customer’s time frame?
4. Expense
• Does the customer perceive value for cost?
M# 28
What is a Customer?
There are different types of customers which dictates how

we interact with them in the process. In order to identify
customer and supplier requirements we must first define
who the customers are:
External
– Direct: those who receive the output of your services, they
generally are the source of your revenue
– Indirect: those who do not receive or pay for the output of your
services but have a vested interest in what you do (government
agencies)
Internal
– Those within your organization
who receive the output of your
work
M# 29
Value Chain
The relationship from one process to the next in an organization

creates a “Value Chain” of suppliers and receivers of process outputs.
Each process has a contribution and accountability to the next to satisfy
the external customer.
External customers needs and requirements are best met when all
process owners work cooperatively in the Value Chain.
Careful –
each move
has many
impacts!
M# 29
What is a CTQ?
• Critical to Quality (CTQ’s) are measures that we use to capture VOC

properly (also referred to in some literature as CTC’s – Critical to
Customer)
• CTQ’s can be vague and difficult to define.
– The customer may identify a requirement that is difficult to measure
directly so it will be necessary to break down what is meant by the
customer into identifiable and measurable terms
Product: Service:
• Performance • Competence
• Features • Reliability
• Conformance • Accuracy
• Timeliness • Timeliness
• Responsiveness
• Reliability
• Access
• Serviceability
• Courtesy
• Durability
• Communication
• Aesthetics
• Credibility
• Reputation
• Security
• Completeness M# 30
• Understanding
Developing CTQ’s
Identify Customers
• Listing
Step 1 • Segmentation
• Prioritization
Capture VOC
• Review existing performance
Step 2 • Determine gaps in what you need to know
• Select tools that provide data on gaps
• Collect data on the gaps
Validate CTQ’s
• Translate VOC to CTQ’s
Step 3 • Prioritize the CTQ’s
• Set Specified Requirements
• Confirm CTQ’s with customer
M# 30
Cost of Poor Quality (COPQ)
• COPQ stands for Cost of Poor Quality
• As a Six Sigma Black Belt, one of your tasks will be to estimate

COPQ for your process
• Through your process exploration and project definition work you

will develop a refined estimate of the COPQ in your project
• This project COPQ represents the financial opportunity of your

team’s improvement effort (VOB)
• Calculating COPQ is iterative and will change as you learn more

about the process
No, not that kind

of cop queue! M# 31
The Essence of COPQ
• COPQ helps us understand the financial impact of

problems created by defects.
• COPQ is a symptom, not a defect
– Projects fix defects with the intent of improving
symptoms.
• The concepts of traditional Quality Cost are the

foundation for COPQ.
– External, Internal, Prevention, Appraisal
• A significant portion of COPQ from any defect comes

from effects that are difficult to quantify and must be
estimated.
M# 31
COPQ - Categories
Internal COPQ Prevention

• Quality Control • Error Proofing Devices
Department • Supplier Certification
• Inspection • Design for Six Sigma
• Quarantined Inventory • Etc…
• Etc…
External COPQ Detection

• Warranty • Supplier Audits
• Customer Complaint Related • Sorting Incoming Parts
Travel • Repaired Material
• Customer Charge Back Costs • Etc…
• Etc…
M# 32
COPQ - Iceberg
Inspection
Warranty Recode
Rework
Rejects
Visible Costs
Engineering
Lost sales
change orders
Late delivery
Time value of money (less obvious)
Expediting costs
More Set-ups Excess inventory
Working Capital Long cycle times
allocations
Excessive Material
Orders/Planning
Hidden Costs Lost Customer Loyalty
M# 32
COPQ and Lean
Waste does not add, subtract or otherwise modify the

throughput in a way that is perceived by the customer to
add value.
• In some cases, waste may be

necessary, but should be Lean Enterprise
recognized and explored: Seven Elements of Waste *
– Inspection, Correction, Waiting in  Correction
suspense  Processing
– Decision diamonds, by definition,  Conveyance
are non-value added  Motion
• Often, waste can provide  Waiting
opportunities for additional defects  Overproduction
to occur.  Inventory
• We will discuss Lean in more detail *Womack, J. P., & Jones, D. T. (1996). Lean
later in the course. Thinking. New York, NY: Simon & Schuster
M# 33
COPQ – Hard and Soft Savings
While hard savings are always more desirable because

they are easier to quantify, it is also necessary to think
about soft savings.
COPQ – Hard Savings COPQ – Soft Savings
• Labor Savings • Gaining Lost Sales

• Cycle Time Improvements • Missed Opportunities
• Scrap Reductions • Customer Loyalty
• Hidden Factory Costs • Strategic Savings
• Inventory Carrying Cost • Preventing Regulatory Fines
M# 33
COPQ Exercise
Exercise objective: Identify current COPQ

opportunities in your direct area.
1. Brainstorm a list of COPQ opportunities.
2. Categorize the top 3 sources of COPQ for

the four classifications:
• Internal
• External
• Prevention
• Detection
M# 34
The Basic Six Sigma Metrics
In any process improvement endeavor, the ultimate

objective is to make the process:
• Better: DPU, DPMO, YRT (there are others, but they derive
from these basic three)
• Faster: Cycle Time
• Cheaper: COPQ
If you make the process better by eliminating defects you will make it
faster.
If you choose to make the process faster, you will have to eliminate
defects to be as fast as you can be.
If you make the process better or faster, you will necessarily make it
cheaper.
The metrics for all Six Sigma projects fall into

one of these three categories.
M# 35
Cycle Time Defined
Think of Cycle Time in terms of your product or

transaction in the eyes of the customer of the process:
– It is the time required for the product or transaction to go
through the entire process, from beginning to end
– It is not simply the “touch time” of the value-added portion of
the process
What is the cycle time of the process you mapped?

Is there any variation in the cycle time? Why?
M# 35
Defects Per Unit (DPU)
Six Sigma methods quantify individual defects and not just defectives
– Defects account for all errors on a unit
• A unit may have multiple defects
• An incorrect invoice may have the wrong amount due and the
wrong due date
– Defectives simply classifies the unit bad
• Doesn’t matter how many defects there are
• The invoice is wrong, causes are unknown
– A Unit:
• Is the measure of volume of output from your area.
• Is observable and countable. It has a discrete start and stop point.
• It is an individual measurement and not an average of
measurements.
Two Defects One Defective
M# 36
Final Yield (YF)
Final Yield (YF) is the traditional quality metric for yield

– Unfortunately, it does not account for any necessary rework
Total Units Passed
YF = Total Units Tested
Units in = 100 Units in = 100 Units in = 100 Units Passed = 100
Units Out = 100 Units Out = 100 Units Out = 100 Units Tested = 100
Process A Process B Process C Final Product
(Grips*) (Shafts*) (Club Heads*) (Set of Irons*)
Defects Repaired Defects Repaired Defects Repaired

40 30 20 YF = 100 %
*None of the data used herein is associated with the products shown herein. Pictures are no more than illustration
to make a point to teach the concept.
M# 36
Rolled Throughput Yield (YRT)
Rolled Throughput Yield (YRT) is a more appropriate metric

for problem solving
– It accounts for losses due to rework steps
YRT = YT1 * YT2 * YT3
Units in = 100 Units in = 100 Units in = 100 Units Passed = 100
Units W/O Rework = 60 Units W/O Rework = 70 Units W/O Rework = 80 Units Tested = 100
YT1 = 0.6 YT2 = 0.7 YT3 = 0.8
Process A Process B Process C Final Product
(Grips*) (Shafts*) (Club Heads*) (Set of Irons*)
Defects Repaired Defects Repaired Defects Repaired

40 30 20
YRT = 33.6 %
*None of the data used herein is associated with the products shown herein. Pictures are no more than illustration
to make a point to teach the concept.
M# 37
YRT Estimate
• In many organizations the long term data required to

calculate YRT is not available, we can however estimate
YRT using a known DPU as long as certain conditions
are met.
• The Poisson distribution generally holds true for the
random distribution of defects in a unit of product and is
the basis for the estimation.
– The best estimate of the proportion of units
containing no defects, or YRT is:
YRT = e-dpu
The mathematical constant e is the base of the natural logarithm.
e ≈ 2.71828 18284 59045 23536 02874 7135
M# 37
Deriving YRT from DPU
The Binomial distribution is the true model for defect data, but the Poisson is the
convenient model for defect data. The Poisson does a good job of predicting
when the defect rates are low.
120%
Poisson VS Binomial (r=0,n=1) Probability Yield Yield % Over
of a defect (Binomial) (Poisson) Estimated
0.0 100% 100% 0%
100%
Yield (Binomial) 0.1 90% 90% 0%
80% Yield (Poisson) 0.2 80% 82% 2%
Yield (YRT)
0.3 70% 74% 4%

60% 0.4 60% 67% 7%
0.5 50% 61% 11%
40% 0.6 40% 55% 15%
0.7 30% 50% 20%
20% 0.8 20% 45% 25%
0.9 10% 41% 31%
0% 1.0 0% 37% 37%
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Probability of a defect
Binomial Poisson
n = number of units For low defect
r = number of predicted rates (p < 0.1),
defects the Poisson
p = probability of a defect approximates
occurrence the Binomial
q=1-p fairly well.
M# 38
Deriving YRT from DPU - Modeling
Unit
Basic Question: What is the likelihood of
Opportunity producing a unit with zero defects?
• For the unit shown above the following

data was gathered:
– 60 defects observed
RTY for DPU = 1
– 60 units processed 0.368
• What is the DPU? 0.364
0.36
Yield
0.356
0.352
• What is probability that any given 0.348
opportunity will be a defect? 10 100 1000 10000 100000 1000000
Chances Per Unit
• What is the probability that any given Opportunities P(defect) P(no defect) RTY (Prob defect free unit)
opportunity will NOT be a defect is: 10 0.1 0.9 0.34867844
100 0.01 0.99 0.366032341
1000 0.001 0.999 0.367695425
10000 0.0001 0.9999 0.367861046
• The probability that all 10 opportunities 100000 0.00001 0.99999 0.367877602
1000000 0.000001 0.999999 0.367879257
on single unit will be defect-free is:
If we extend the concept to an infinite number
of opportunities, all at a DPU of 1.0, we will
approach the value of 0.368. M# 38
YRT Prediction — Poisson Model
• Use the Poison Model to estimate the probability of a discrete

event (good/bad) when sampling from a relatively large
population, (dpu)r e – dpu
n > 16, & p < 0.1. YRT =
r!
• When r=0, we compute the probability of finding zero defects
per unit (called “Rolled Throughput Yield” or YRT ).
r p[r]
0 0.3679
• The table to the right shows the proportion of product which will
have
1 0.3679
– 0 defects (r=0) 2 0.1839
– 1 defect (r=1) When DPU=1
3 0.0613
– 2 defects (r=2), etc…
• When, on average, we have a process, with 1 defect per unit, 4 0.0153
then we say there is a 36.79% chance of finding a unit with 5 0.0031
zero defects. There is only a 1.53% chance of finding a unit
with 4 defects. 6 0.0005
• When r=1, this equation simplifies to: (dpu)*e-dpu
7 0.0001
• To predict the % of units with zero defect (i.e., YRT): 8 0.0000
– count the number of defects found
– count the number of units produced
– compute the dpu and enter it in the dpu equation:
M# 39
Six Sigma Metrics – Calculating DPU
The DPU for a given operation can be calculated by dividing the

number of defects found in the operation by the number of units
entering the operational step.
– 100 parts built
– 2 defects identified and corrected
– dpu = 0.02
– So YT for this step would be e-.02 = 0.980199, or 98.02%.
If the process had only 5 process steps with the same yield, the process YRT
would be: 0.98 * 0.98 * 0.98 * 0.98 * 0.98 = 0.904 or 90.4%. Since our metric
of primary concern is the COPQ of this process, we can say that in less than
10% of the time we will be spending dollars in excess of the pre-determined
standard or value added amount to which this process is entitled.
YT1=0.98 YT2=0.98 YT3=0.98 YT4=0.98 YT5=0.98 YRT =0.904
dpu1 = .02 dpu2 = .02 dpu3 = .02 dpu4 = .02 dpu5 = .02 dpuTOT = .1
Note: YRT’s must be multiplied across a process,

DPU’s are added across a process. M# 39
Focusing our Effort – YF vs. YRT
Assume we are creating two products in our organization

that use similar processes.
Product A*
YF = 80%
Product B*
YF = 80%
How do you know what to work on?
* None of the data used herein is associated with the products shown herein. Pictures are no more than
illustration to make a point to teach the concept.
M# 40
Focusing our Effort – YF vs. YRT
Let’s look at the DPU of each product assuming equal opportunities

and margin…
Product A*
Product B*
200 defects / 100 units = 2 dpu
100 defects / 100 units = 1 dpu
Now, can you tell which to work on?

“the product with the highest DPU?” …think again!
How much more time and/or raw material are required?

How much extra floor space do we need?
How much extra staff or hours are required to perform the rework?
How many extra shipments are we paying for from our suppliers?
How much testing have we built in to capture our defects?
* None of the data used herein is associated with the products shown herein. Pictures are no more than
illustration to make a point to teach the concept. M# 40
Summary
At this point, you should be able to:
• Describe what is meant by “Process Focus”
• Generate a high level Process Map
• Describe the importance of VOC, VOB and VOE, and CTQ’s
• Explain COPQ
• Describe the Basic Six Sigma metrics
• Explain the difference between YF and YRT
• Explain how to calculate “Defects per Unit” DPU
M# 41

Define Phase: Six Sigma Fundamentals

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Define Phase

Six Sigma Fundamentals

Understanding Six Sigma

Six Sigma Fundamentals

Voice of the Customer

Cost of Poor Quality

Wrap Up & Action Items

Why have a process focus?

proc•ess (pros′es) n. – A repetitive and systematic

We go through processes everyday. Below are some

• Injection molding • Recruiting staff

• The purpose of Process Maps is to:

• Process Maps are living documents and must be changed as

Start Step A Step B Step C Step D Finish

Standard symbols for Process Mapping (available in Microsoft

A RECTANGLE indicates A PARALLELAGRAM

A DIAMOND signifies a decision An ELLIPSE shows the

One of the deliverables from the Define Phase is a high

A Detailed Process Map for a Call Center -

REVIEW CASE LOGOFF PHONE, CHECK

When multiple departments or functional groups are involved in a

Attach ACH ACH – Automated

Fill out ACH

Match against Maintain database

Vendor Yes Input info into bank batch to balance ACH

transfer money and

Exercise objective: Using your favorite Process

1. Create a high level Process Map, use enough

Knowing your customer is more than just a handshake. It is

Voice Of the Customer Critical to Customer

Voice of the Customer or VOC seems obvious; after all, we

There are different types of customers which dictates how

The relationship from one process to the next in an organization

• Critical to Quality (CTQ’s) are measures that we use to capture VOC

• COPQ stands for Cost of Poor Quality

• As a Six Sigma Black Belt, one of your tasks will be to estimate

• Through your process exploration and project definition work you

• This project COPQ represents the financial opportunity of your

• Calculating COPQ is iterative and will change as you learn more

No, not that kind

• COPQ helps us understand the financial impact of

• The concepts of traditional Quality Cost are the

• A significant portion of COPQ from any defect comes

Internal COPQ Prevention

External COPQ Detection

Waste does not add, subtract or otherwise modify the

• In some cases, waste may be

While hard savings are always more desirable because

COPQ – Hard Savings COPQ – Soft Savings

• Labor Savings • Gaining Lost Sales

Exercise objective: Identify current COPQ

1. Brainstorm a list of COPQ opportunities.

2. Categorize the top 3 sources of COPQ for

In any process improvement endeavor, the ultimate

The metrics for all Six Sigma projects fall into

Think of Cycle Time in terms of your product or

What is the cycle time of the process you mapped?

Final Yield (YF) is the traditional quality metric for yield

Defects Repaired Defects Repaired Defects Repaired

Rolled Throughput Yield (YRT) is a more appropriate metric

Defects Repaired Defects Repaired Defects Repaired

• In many organizations the long term data required to

0.3 70% 74% 4%