Six Sigma Notes

Six Sigma: Concepts and Implementation

Core Concepts

• Definition: Six Sigma is a business improvement approach focused on eliminating defects and errors in processes.
  • It emphasizes outputs critical to customers and a clear financial return for the organization.
• Statistical Basis: The term "six sigma" is based on a statistical measure equating to 3.4 or fewer errors or defects per million opportunities (dpmo).
• Goal: The ultimate goal is to have all critical processes at a six-sigma level of capability.
• Scope: Six Sigma includes concepts, tools, and techniques from business, statistics, engineering, and practical experience.
• Practitioner Skills: Practitioners need both technical and management skills to implement Six Sigma effectively.

Motorola's Six Sigma Goal (1987)

• Improve product and service quality tenfold by 1989 and at least one hundredfold by 1991.
• Achieve six-sigma capability by 1992.
• Spread dedication to quality throughout the corporation.
• Achieve a culture of continual improvement for total customer satisfaction.
• The ultimate goal: zero defects in everything.

Core Philosophy

1. Key Business Processes and Customer Requirements: Think in terms of key business processes and customer requirements with a clear focus on overall strategic objectives.
2. Corporate Sponsors: Focus on corporate sponsors who champion projects, support team activities, overcome resistance to change, and obtain resources.
3. Quantifiable Measures: Emphasize quantifiable measures like dpmo that can be applied across the organization.
4. Appropriate Metrics: Ensure that appropriate metrics are identified early and focus on business results, providing incentives and accountability.
5. Extensive Training: Provide extensive training followed by project team deployment to improve profitability, reduce non-value-added activities, and achieve cycle time reduction.
6. Process Improvement Experts: Create highly qualified process improvement experts (“Green Belts,” “Black Belts,” and “Master Black Belts”) who can apply improvement tools and lead teams.
7. Stretch Objectives: Set stretch objectives for improvement.

Six Sigma vs. TQM

• Ownership: Six Sigma is owned by business leader champions, whereas TQM is based largely on worker empowerment and teams.
• Scope: Six Sigma projects are cross-functional, while TQM activities generally occur within a function, process, or individual workplace.
• Training: Six Sigma focuses on a more rigorous and advanced set of statistical methods and DMAIC methodology, whereas TQM training is generally limited to simple improvement tools and concepts.
• Accountability: Six Sigma requires a verifiable return on investment and focus on the bottom line, whereas TQM is focused on improvement with little financial accountability.

Key Characteristics of Six Sigma Projects

1. A problem to be solved
2. A process in which the problem exists
3. One or more measures that quantify the gap to be closed and can be used to monitor progress

• Application: Six Sigma can be applied to various transactional, administrative, and service areas.
• Transactional Six Sigma: Within the service sector, Six Sigma is often called Transactional Six Sigma.

Key Measures of Performance in Services

1. Accuracy: Measured by correct financial figures, completeness of information, or freedom from data errors.
2. Cycle Time: Measures how long it takes to do something, such as pay an invoice.
3. Cost: Internal cost of process activities, largely determined by accuracy and/or cycle time.
4. Customer Satisfaction: Typically the primary measure of success.

Theoretical Basis and Formulas

• A “six-sigma quality level” corresponds to a process variation equal to half of the design tolerance while allowing the mean to shift as much as 1.5 standard deviations from the target.
• k \times \text{Process standard deviation} = \frac{\text{Tolerance range}}{2}
• Excel function to calculate dpmo:
  =(1-\text{NORM.DIST}(\text{sigma level}, 1.5, 1, \text{TRUE}))*1000000
• Excel function to compute the exact sigma level for a given value of dpmo:
  =\text{NORM.S.INV}(1 – \frac{\text{dpmo}}{1000000}) + 1.5

Project Management

• Projects are used to organize and implement Six Sigma.
• Managing a large portfolio of projects is vital to organizational success.
• PMBOK: The Project Management Body of Knowledge defines 69 tools that every project manager should master.
• Professional certification in project management can significantly assist Six Sigma efforts.

Six Sigma Team Roles

1. Champions: Senior-level managers who promote and lead Six Sigma deployment.
2. Master Black Belts: Full-time Six Sigma experts responsible for strategy, training, mentoring, deployment, and results.
3. Black Belts: Fully trained Six Sigma experts who perform technical analysis full-time.
4. Green Belts: Functional employees trained in introductory Six Sigma tools, working on projects part-time.
5. Team Members: Individuals from various functional areas supporting specific projects.

Generating Six Sigma Projects

• Top-Down: Projects tied to business strategy and aligned with customer needs.
• Bottom-Up: Black Belts (or Master Black Belts) choose projects suited to team capabilities.

Factors for Selecting Six Sigma Projects

1. Financial impact (cost savings, increased revenues, or return on investment)
2. Impacts on customers and organizational effectiveness
3. Probability of success
4. Impact on employees
5. Fit to strategy and competitive advantage

• ROI: Return on investment is a common financial metric to evaluate Six Sigma projects.
• Choose projects with a high likelihood of success.
• Start with "low-hanging fruit" to show early successes and build momentum. Visible success helps build support for future projects.
• Six Sigma projects should support the organization’s vision and competitive strategy. Simple scoring models may be used to evaluate and prioritize potential projects.

Employee Training Content

• Employee training is essential for Six Sigma.
• To use the DMAIC process, one needs the ability to think critically about the goals and objectives of the Six Sigma project, ask pertinent questions, and apply various tools and techniques.
• These tools are integrated into standard Six Sigma curricula, which include a blend of technical topics and project management and leadership topics.
• Typical Black Belt Training Curriculum:
  • Elementary statistical tools (basic statistics, statistical thinking, hypothesis testing, correlation, simple regression)
  • Advanced statistical tools (design of experiments, analysis of variance, multiple regression)
  • Product design and reliability (quality function deployment, failure mode and effects analysis)
  • Measurement (process capability, measurement systems analysis)
  • Process control (control plans, statistical process control)
  • Process improvement (process improvement planning, process mapping, mistake proofing)
  • Implementation and teamwork (organizational effectiveness, team assessment, facilitation tools, team development)

Project Management Activities and Stages

• Project management involves planning, scheduling, and controlling projects.

• Key leadership role: Project Manager.

• Project managers lead activities, plan and track progress, and manage relationships and communication.

• Project Life Cycle Stages:

  1. Project Initiation: Define directions, priorities, limitations, and constraints.
  2. Project Planning: Create a blueprint for the scope of the project and resources needed.
  3. Project Assurance: Use appropriate, qualified processes to meet technical project design specifications.
  4. Project Control: Use management tools to track managerial performance, process improvements, and customer satisfaction.
  5. Project Closure: Evaluate customer satisfaction and assess successes/failures for future learning.

• Project Charter: Create a formal project mission statement (project charter) that defines the project, its objectives, and deliverables. The charter represents a contract between the project team and the sponsor that sets expectations, goals, and resources. Six Sigma project charters should:

  • Clearly define the problem to be addressed
  • Focus on the (internal or external) customer requirements
  • Include existing measures and performance benchmarks
  • Detail the expected benefits of the project in terms of performance measures and financial justification
  • Set a project timeline and key milestones
  • List the resources needed to carry out the project

• Project Management Decisions: Involve four factors: time, resources, costs, and performance.

• Software packages like Microsoft Project® are helpful.

• Common project management tools include Gantt charts, critical path method (CPM), and program evaluation and review technique (PERT).

Project Assurance and Control

• Project Assurance: Can be thought of as “customer relationship management” during the project.
• Requires communication, interpersonal, and diplomacy skills from the project manager.
• He or she must manage upward to the project champion and out to the client, while keeping a firm, but participative, hand on the pulse of team members and others who are actually doing the “hands- on” project work.
• Project assurance allows the project manager to estimate how successfully the final “deliverable” will perform, not just whether it will be on time and below budgeted cost.
• Project Control System:
  1. A project plan covering expected scope, schedule, cost, and performance goals or requirements
  2. A continuous monitoring system that measures the current results or status against the project plan through the use of monitoring tools
  3. A reporting system that identifies deviations from the project plan by means of trends and forecasts
  4. Timely actions to take advantage of beneficial trends or to correct deviations

Project Reviews and Closure

• Project Reviews: Status checks that evaluate progress toward achieving the project plan.
• They include consideration of timelines, proper use of Six Sigma tools, and key deliverables.
• Reviews may be informal or formal.
• Project Closure:
  1. Ensuring that the project has been signed off by those who must do so
  2. Ensuring that all bills have been paid and all financial records have been completed
  3. Ensuring that team members have not only been thanked, but provided for, which may involve following up with recommendations for reassignment to new projects or departments
  4. Ensuring that “lessons learned” are examined and documented, often by performing a final project audit
  5. Ensuring that project successes and best practices are communicated and disseminated to other parts of the organization

Key Principles for Effective Implementation of Six Sigma

1. Committed leadership from top management.
2. Integration with existing initiatives, business strategy, and performance measurement.
3. Process thinking.
4. Disciplined customer and market intelligence gathering.
5. A bottom-line orientation.
6. Leadership in the trenches.
7. Training.
8. Continuous reinforcement and rewards.