Six Sigma

Six Sigma

In 1999, M. Harry and R. Schroeder, published Six Sigma: The Breakthrough Management Strategy Revolutionizing the Worlds Top Corporations Six-Sigma is a structured problem solving methodology for solving chronic issues facing a business. It is breakthrough management process to improve companys performance by variation reduction i. e. reduction of defects. It uses process capability analysis as a way of measuring progress. Sigma is the Greek symbol for the statistical measurement of dispersion called standard deviation. It is the best measurement of process variability, because the smaller the deviation value; the less variability in the process.

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A process which is normally distributed and centered with the upper and lower specification limits (USL & LSL) established at + & - 6 sigma, 99.9999998% of the product or service will be between specifications, and the nonconformance rate will be 0.002 parts per million or 2.0 per billion. This situation represents a process capability index (Cp) of 2.0. A Cp of 1.33 has been a de-facto standard. Table shows the percent between specifications, the nonconformance rate, and process capability for different specification limit locations.

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Specification Limit +/- 1sigma +/- 2sigma +/- 3sigma +/- 4sigma +/- 5sigma +/- 6sigma

Percent Conformance 68.7 95.45 99.73 99.9937 99.999943 99.9999998

Nonconformance Rate (ppm) 317300 485500 2700 63 0.57 0.002

Process Capability (Cp) 0.33 0.67 1.00 1.33 1.67 2.00

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According to the six-sigma philosophy, processes rarely stay centered the center tends to shift above and below the target u. A process that is normally distributed, but has shifted within a range of 1.5 sigma above and 1.5 sigma below the target, 99.9996600 % of the product or service will be between specifications and the nonconformance rate will be 3.4 ppm. This off-center situation gives a process capability index (Cpk) of 1.5 with 1.0 being the de-facto standard

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Nonconformance Rate & Process Capability when the Process is OffCenter +/- 1.5 sigma Specification Limit +/- 1sigma +/- 2sigma +/- 3sigma +/- 4sigma +/- 5sigma +/- 6sigma Percent Conformance 30.23 69.13 93.32 99.3790 99.97670 99.9996600 Nonconformance Rate (ppm) 697700 308700 66810 6210 2330 3.4 Process Capability (Cp) - 0.167 0.167 0.500 0.834 1.167 1.500

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It uses a methodology called DMAIC, which stands for define, measure, analyze, improve, and control. It introduces an infrastructure of trained personnel to ensure that projects have the necessary resources to make improvements.

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A small group of individuals in the organization have the full-time job of making improvements. Competency levels of these individuals use the full-time job of making improvements. Competency levels of these individuals use the Karate designations of Green belts, Black Belts, and Master Black Belts.

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Green Belts are the project leaders and have five days of classroom training. Black Belts help Green Belts define their projects, attend training with their Green Belts, and assist them with their projects after the training.

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Black Belts receive 160 hours of classroom instruction and one-on-one project coaching from Master Black Belts.

Master Black Belts provide the technical leadership and much of the training for the program.

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Six Sigma is a structured problem solving methodology, which is a powerful lever for business improvement. It is data driven, structured problem solving methodology for solving chaotic issues facing a business. It is breakthrough management process to improve companys performance by variation reduction i. e. reduction of defects.

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It has essentially two elements:

Voice of the customer, and Voice of the process

It can be leveraged to address issues beyond the domain of quality e. g. in areas like revenue generation, cost avoidance/reduction, productivity improvement, customer satisfaction, customer retention etc.

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It uses handful of powerful tools of statistics. These tools are used in the model DMAIC (define, measure, analysis, improve, & control). It has strong financial accountability through focus on measurement and monitoring of results. It has taken quality out of the domain of quality professionals to others in the organization.

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It puts a stop to gut based solutions by looking at the variables affecting a process, solutions are validated statistically thus chances of a wrong solution goes down. It is used in both manufacturing and service industries. It focuses individuals to define customer satisfaction, measures and then uses teams to improve it. It uses customer-focused goals & measurements and drives continuous improvement at al levels and makes both the internal and external customer heard.

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Six sigma should be treated as a business strategy and not just another quality program having a connection to the strategic objectives. Setting shortterm yet attainable goals while striving for long-range objectives can leverage the power of six sigma.

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With all its pluses, six sigma cannot solve all ills plaguing the organization i. e. it is not a panacea for all ills e. g. an economic crisis affecting the company can not be rectified/solved by six sigma.

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Thus six sigma, as a business strategy, increases customer responsiveness, builds customer relationships, improves organizational resilience to respond to market conditions and aligns people and processes behind agreed objectives.

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Improvement with six sigma entails finding and working with critical Xs in a process.
Y = ( X1, X2, X3, , Xn), where Y is dependent output variable or the process output X1, X2, ., Xn are the independent variable or process predictors. 6 is all about finding the critical Xs which affect the Y or the output of a process. Xs are also called the key Process Input Variables, while Ys are called the Process Output Variables.

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Variables (controlled)

Process Input

PROCESS

Process output

Variables (un-controlled or noise)

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In 6, we discover both the controllable and uncontrollable Xs, which affect the output Y. the focus is not on all the Xs but to use the various tools to identify the few critical Xs and work with them.

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Understand the key terms and steps involved in Defects Per Million Opportunities (DPMO) calculations. Defects: Anything that does not meet the requirements of a customer, laid down product or process standards. Opportunity: A chance or an event that a product or service may not meet the laid down performance standard or customer requirement. Unit: Refers to the object on which a measurement or observation is made. A unit could be a scooter, a van, a home loan, an account opening form in a bank, an airline travel, a bank statement and so on. Defect Per Million Opportunities (DPMO): Expected number of defects found per million opportunities.

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To calculate DPMO, the steps are: Which process are you working on? ----------------. What is the principal output of the process, also called unit or the object, on which a measurement is being made (U)? ------------------. What are the defects that you will be looking at in a single unit? ----------------. What is the number of defects that you find on one single unit (these are opportunities OP)? ---------. At the end of the process what are the total number of defects (D)? ------. What is the total number of opportunities (TOP = U * OP)? -----------. What are the defects per unit or DPU (D/U)? -------. What are the total defects per total opportunities (DPO = D/TOP)? ------. What are the defects per million opportunities (DPMO = DPO * 1000000)? -----.

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Example: Which process -----? Process of filing an account opening form in a bank. What is the principal output of the process also called Unit or the object on which a measurement is being made? - Correctly filled account opening form. What are the defects you will be looking at in a single unit? - (a) Incorrect address, (b) incorrect name, (c) availability of PAN for tax. What are the number of defects that you can find on one single unit (these are the opportunities OP)? - 3 At the end of the process, how many units were counted (U)? 250 account opening forms. At the end of the process, what are the total numbers of defects (D)? 50 (by actual finding and counting the defects). What are the total numbers of opportunities (TOP = U * OP)? - 3 * 250 = 750 What are the defects per unit or DPU (D / U) 50 / 250 = 0.20 What are the defects per total opportunities (DPO + D / TOP) - 50/750 = 0.06666667 What are the defects per million opportunities (DPMO = DPO * 1000000) 0.06666667 * 1000000 = 66666.7 What is the Sigma level corresponding to the above DPMO levels? - (Use the DPMO Sigma conversion table) 3 sigma approx.

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DPMO 933200 894400 841300 773400 691500 598700 500000 401300 308500 226600 158700 66800 40100 22700 12200 6200 3000 1300 600 230 130 30 16.7 3.4

Yield (%) 6.68 10.56 15.87 22.66 30.85 40.13 50 59.87 69.15 77.34 84.13 93.32 95.99 97.73 98.78 99.38 99.7 99.87 99.94 99.977 99.987 99.997 99.99833 99.99966

Sigma
0 .25 .50 .75 1 1.25 1.50 1.75 2 2.25 2.5 3 3.25 3.5 3.75 4 4.25 4.5 4.75 5 5.5 5.5 5.75 6

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Note: the defects per million opportunities (DPMO) given in the above table pertain to a process that, over time, shifts from its target or mean by up-to 1.5 sigma. Otherwise in a six-sigma process, without a shift, there shall be 2 defects in one billion and not 3.4 defects in one million opportunities. Some experts and practitioners do not believe in the concept of process shift. They say that a shift of 1.5 sigma results in the defect adulteration of 1700: 1. They also say that it is relatively easy to correct this shift from the target value by a minor adjustment. We should, however, not get lost in the methodology war; let us only use the rigor of six sigma for improvement.

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Quality costs? The costs of those activities which an organization or process possess over and above the minimum cost that is required to do the job well. Quality costs are:
Investing in the prevention of nonconformities to requirements, plus Appraisal of a product or service for conformance to requirements, and plus Failure to meet requirements.

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Prevention costs What we spend to prevent defective work from being made in the first place which includes cost of quality management, setting up & operating quality control and quality assurance systems, provision of fool proof methods, suppliers quality assurance, vendor appraisal, calibration of measuring, equipment etc.

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Appraisal costs These are the costs of inspection and tests in its direct sense including checks done by people who are not titled inspectors e. g. setters, supervisors etc. The appraisal cost could be divided into two groups (a) cost of test and inspection to identify and eliminate defective work and (b) cost of test and inspection to monitor processes & keep them right.

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Failure costs These are the costs incurred due to design failure or the inability to make or provide the quality of product or service it is demanded by the customer. Failure costs easily tend to be the largest of the three quality costs and can be divided into internal & external costs.
Internal Failure costs are costs within the manufacturing organization up to the moment when the product is transferred to the customer. They include scrap, rework, corrective operations, downgrading, seconds and associated costs i. e. loss of production capacity, cost of investigating the cause etc. External failure costs are costs incurred after the product has been handed over to the customer e. g. costs of products/service rejected by the customer or recalled because of some defect, product liability, warranty costs, costs of placating irate customers, loss of future orders from tat customer etc.

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All organizations must put in place a mechanism for quality cost measurement so as to know if six sigma is delivering value.

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Relationship between Sigma level & Costs of Poor Quality

Sigma 6 5 4 3 2 1 Defects per Million 3.4 230 6200 67000 310000 700000 Cost of Poor Quality < 10% of Sales 10 15 % of sales 15 20 % of Sales 20 30 % of Sales 30 40 % of Sales Above 40 % of sales

Use Quality Costs to find out Potential Improvement Projects

Six Sigma

Relationship between Sigma level & Costs of Poor Quality

Sigma 6 5 4 3 2 1 Defects per Million 3.4 230 6200 67000 310000 700000 Cost of Poor Quality < 10% of Sales 10 15 % of sales 15 20 % of Sales 20 30 % of Sales 30 40 % of Sales Above 40 % of sales

Use Quality Costs to find out Potential Improvement Projects

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EXAMPLES OF SIX SIGMA SAFETY CALCULATIONS

OSHA Recordable Injuries Unit = Employee Defect = Employee Recordable Injury or Illness Opportunity for Error in a Unit = One per Workday Segment (250/year or 62.5 /quarter) Sample Calculation Given 1386 Employees and 113 Recordable Injuries and Illness in the year Defects per Unit (DPU):
DPU = total # defects/ total # units = 113 employees/year/ 1386 employees = 0.082/year

Defects Parts per Million (PPM):

DPU/year X 1,000,000/ opportunities for error in one unit = 0.082/year X 1,000,000/ 250/year = 326 PPM/day

326 PPM = 4.91 Sigma OSHA Recordable defects

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Lost/Restricted Workdays Unit = Productive Workday Defect = Lost or Restricted Workday due to Injury or illness Opportunities for Error in One Unit = One per Workday Segment (250/year or 62.5 /quarter)
Sample Calculation
Units = 346,500 Workdays/year (1386 Employees X 250 Workdays/year) Lost/Restricted Workdays = 3218 Workdays/year DPU = total # defects/ total # units = 3218 lost/restricted workdays/year/ 346,500 workdays/year = 0.009287

Defects Parts per million (PPM):

DPU 0.009287 X 1,000,000 DPU X 1,000,000/ opportunities for error in one unit = 9287/1 = 9287 PPM

9287 PPM = 3.85 Sigma in Lost/Restricted Workday defects