six sigma case study?

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lecture2020120-20introduction20to20six20sigma.ppt

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Lecture 1

Introduction to

Six Sigma

History & experiences with Six Sigma

Motorola is a birthplace of Six Sigma and launched the program in January 15, 1987.
GE expanded the application of Six Sigma from manufacturing to service and increased the operating income to $750 million in 1998.
Other successes of Six Sigma in GE:

a) Produced a 10-fold increase in the life of CT scanner.

b) Quadrupled the ROI in Industrial Diamond business.

c) 62% reduction in turnaround time at repair shop in railcar leasing process.

d) Added 300 million pounds of new capacity in plastic business.

Since their success, many other fortune 500 companies have implemented Six Sigma with significant financial benefits.

Pioneers of Six Sigma quality revolution

1) Dr. Edward Deming (USA): Introduced basic quality philosophy, that productivity improves as variability decreases.

2) William Convey (USA): Introduced the tools to eliminating waste in processes in order to improve quality.

3) Joseph Juran (USA): Introduced the concept of Total Quality Management (TQM) by adding “human dimension” to quality.

4) Philip Crosby (USA): Introduced the role of management in quality improvement by using simple tools & statistical quality control.

5) Dr. Genichi Taguchi (Japan): Introduced the philosophy of “design of experiments” to improve quality by introducing variance-reduction strategies and robust design techniques.

6) Shugeo Shingo (Japan): Introduced the idea of improving process design so that mistakes are impossible to make or at least easily detected and corrected (Poka-yoke).

Comments by Jack Welch who started Six Sigma at GE

“In just three years, Six Sigma had saved the company more than $2 billion”.

“At GE, it’s almost an obsession to keep external customer’s need in plain sight, driving the improvement effort”.

“We did not invent Six Sigma, but we learned it and applied it effectively to manufacturing and service departments”.

“The cumulative impact on the company’s numbers is not anecdotal, nor a product of charts. It is the product of all employees executing & delivering the results of Six Sigma to our bottom line”.

Comment by Juran (1988) about “Cost of poor quality” (COPQ)

Quality-related cost is about 20% - 40% of sales in an organization.
Quality costs are incurred not only in manufacturing but also in support areas (service).
There is no person or department in an organization which is directly responsible for reducing quality cost.
Most of the functions of the quality department are involved with measuring quality but not reducing it.

The hidden cost of quality

Examples of Quality costs

1) Prevention 3) Internal Failure

Training Scrap & Rework

Capability Studies Design Changes

Vendor Survey Retyping Letters

Quality Design Excess Inventory Cost

2) Appraisal 4) External Failure

Inspection & Test Warranty cost

Test Equipment & Maintenance Customer Complaints

Inspection & Test Reporting Returns & Recalls

Other Expense Reviews Liability Suits

Two critical components of Six Sigma

Reduces dependency on “Tribal Knowledge”

- Decisions based on facts and data rather than opinion

Attacks the high-hanging fruit (the hard stuff)

- Eliminates chronic problems (common cause variation)

- Improves customer satisfaction

Provides a disciplined approach to problem solving

- Changes the company culture

Creates a competitive advantage (or disadvantage)

Improves profits!

Why Companies Need Six Sigma

Six Sigma is not another quality program

Six Sigma is a technique which fixes identifiable, chronic problems that directly impacts the bottom line.
Six Sigma projects are selected to reduce or eliminate waste, which improves productivity.
Six Sigma is not a theory but a tool which defines, measures, analyzes, improves, and controls the processes that matter most, to tie quality improvement directly to the bottom-line results.

Motorola ROI
1987-1994

• Reduced in-process defect levels by a factor of 200.

• Reduced manufacturing costs by $1.4 billion.

• Increased employee production on a dollar basis by 126%.

• Increased stockholders share value fourfold.

AlliedSignal ROI
1992-1996

• $1.4 Billion cost reduction.

• 14% growth per quarter.

• 520% price/share growth.

• Reduced new product introduction time by 16%.

• 24% bill/cycle reduction.

Six Sigma ROI

Six Sigma as a Philosophy

Internal &

External

Failure

Costs

Prevention &

Appraisal

Costs

Old Belief

Costs

Internal &

External

Failure Costs

Prevention &

Appraisal

Costs

New Belief

Costs

Quality

Old Belief

High Quality = High Cost

New Belief

High Quality = Low Cost

s is a measure of how much variation exists in a process

Input-output of the process

Key Process Output Variables (Y)

Profits
Customer satisfaction
Expense
Production cycle time
Defect rate
Critical dimension on the part

Key Process Input Variables (X)

Actions taken
Out of stock items
Amount of WIP inventory
Amount of internal rework
Inspection procedure
Process temperature

Principles of Six Sigma

1) Focus on the customer

2) Collect data and facts about the processes

3) Continue to improve the performance of the process

4) Act in advance of events rather than reacting to them

5) Collaborate across organizational lines

6) Drive for perfection & tolerate failure

POSITIONING SIX SIGMA
THE FRUIT OF SIX SIGMA

Ground Fruit

Logic and Intuition

Low Hanging Fruit

Seven Basic Tools

Bulk of Fruit

Process Characterization and Optimization

Process Entitlement

Sweet Fruit

Design for Manufacturability

Definition of Six Sigma

“Six Sigma is a strategic business improvement approach that seeks to increase both customer satisfaction and an organization’s financial health”
“Six Sigma puts customer first and uses facts and data to drive better solutions”.
“Six Sigma is about making every area of the organization better able to meet the changing needs of customer, markets, and technologies”.
Six Sigma efforts target three main areas:

a) Improving customer satisfaction

b) Reduce cycle time

c) Reducing defects

Key characteristics of Normal Distribution

The normal curve is totally independent of the LSL and USL.
This curve summarize the empirical quantification for the variability that exists within the manufacturing process.
The normal distribution in science, engineering & manufacturing is typically used when the measuring characteristic falls outside the range of + 3 standard deviation about the target mean.
The process outside of the customer specification limits are defined as defects, failures, or nonconformities.
+ 3s unit of standard deviation represents 99.73% of the total area under the normal distribution curve. This corresponds to 0.27% outside the curve or 2700 defects per million. For 6s the defective rate is 0.002 ppm.

What is a defect?

Six Sigma is a statistical concept that measures a process in terms of defects.
A defect is a measurable characteristic of the process or its output that is not within the acceptable process specifications.
Six Sigma is about practices that help you eliminate defects.
Sigma level is calculated in terms of number of defects in ratio to the number of opportunities for defects.

The statistical definition of Six Sigma

Specification limits are the tolerances or performance ranges that customers demand of the products or processes they are purchasing.
It falls within the range between customer-specified lower specification limit (LSL) and upper specification limit (USL).

Definition of Sigma Quality level

To address “typical” shifts of a process mean from a specification centered value, Motorola added a shift value + 1.5s to the mean. This shift of the mean is used when computing a process “sigma level” or “sigma quality level”. 3.4 ppm rate corresponds to 6s quality level.

Defective ppm with & without shift

Spec limit without shift with shift (Defective ppm) (Defective ppm)

+ 1 sigma 317,300 697,700

+ 2 sigma 45,500 308,700

+ 3 sigma 2,700 66,800

+ 4 sigma 63 6,210

+ 5 sigma 0.57 233

+ 6 sigma 0.002 3.4

What is the sigma level for on-time delivery

2 sigma = 68% on-time delivery
3 sigma = 93% on-time delivery
4 sigma = 99.4% on-time delivery
5 sigma = 99.98% on-time delivery
6 sigma = 99.9997% on-time delivery

Keep in mind that the sigma level measures how well you are meeting customer requirements.

3 Sigma vs. 6 Sigma
parameter conformance

How good is good enough?

99.9% is already VERY GOOD

4.6)?

But what could happen at a quality level of 99.9% (i.e., 1000 ppm),

in our everyday lives (about

•

4000 wrong medical prescriptions each year

More than 3000 newborns accidentally falling

from the hands of nurses or doctors each year

•

400 letters per hour which never arrive at their destination

•

Two long or short landings at American airports each day

Measurements are critical...

If we can’t accurately measure something, we really don’t know much about it.
If we don’t know much about it, we can’t control it.
If we can’t control it, we are at the mercy of chance.

THE ROLE OF STATISTICS IN SIX SIGMA..

WE DON’T KNOW WHAT WE DON’T KNOW

IF WE DON’T HAVE DATA, WE DON’T KNOW

IF WE DON’T KNOW, WE CAN NOT ACT

IF WE CAN NOT ACT, THE RISK IS HIGH

IF WE DO KNOW AND ACT, THE RISK IS MANAGED

IF WE DO KNOW AND DO NOT ACT, WE DESERVE THE LOSS.

TO GET DATA WE MUST MEASURE

DATA MUST BE CONVERTED TO INFORMATION

INFORMATION IS DERIVED FROM DATA THROUGH STATISTICS

Learning Objectives

Have a broad understanding of statistical concepts and tools.

Understand how statistical concepts can be used to improve business processes.

Understand the relationship between the course and the four step six sigma problem solving process (Measure, Analyze, Improve and Control).

Three key characteristics of
Six Sigma projects at GE.

1) It must be customer focused.

2) It must produce major returns on investment (ROI).

3) It changes how management operates.

How to identify Six Sigma projects?

1) Projects which have potential for significant monetary savings.

2) Projects which are of strategic importance.

3) Projects which involve key output issues.

4) Projects which are of vital concern to the customer.

5) Projects which can be quantified with poor quality within strategic area of business.

Key focus areas for Six Sigma program

1) Measurement: It should focus on statistical measure of the performance of a process or a product.

2) Goal: It should focus on the goal that reaches near perfection for performance improvement.

3) System of management: It should focus on a system of management to achieve lasting business leadership and World class performance.

Six Sigma Tools

Process Mapping	Tolerance Analysis
Structure Tree	Components Search
Pareto Analysis	Hypothesis Testing
Gauge R & R	Regression
Rational Subgrouping	DOE
Baselining	SPC

Problem Solving Methodology

Breakthrough Strategy

Characterization

Phase 2:

Measure

Phase 3:

Analyze

Optimization

Phase 4:

Improve

Phase 5:

Control

Projects are worked through these 5 main

phases of the Six Sigma methodology.

Phase 1:

Define

Unlocking the hidden factory

VALUE STREAM TO THE CUSTOMER

PROCESSES WHICH PROVIDE PRODUCT VALUE IN THE CUSTOMER’S EYES

FEATURES OR CHARACTERISTICS THE CUSTOMER WOULD PAY FOR….

WASTE DUE TO INCAPABLE PROCESSES

WASTE SCATTERED THROUGHOUT THE VALUE STREAM

EXCESS INVENTORY
REWORK
WAIT TIME
EXCESS HANDLING
EXCESS TRAVEL DISTANCES
TEST AND INSPECTION

Waste is a significant cost driver and has a major impact on the bottom line...

Common Six Sigma Project Areas

Manufacturing Defect Reduction
Cycle Time Reduction
Cost Reduction
Inventory Reduction
Product Development and Introduction
Labor Reduction
Increased Utilization of Resources
Product Sales Improvement
Capacity Improvements
Delivery Improvements

Six Sigma scorecard

FINANCIAL

Inventory levels
Cost per unit
Hidden factory
Activity-based costing
Cost of poor quality
Cost of doing nothing different
Overall project savings

INTERNAL PROCESS

Defects: inspection data, DPMO, Sigma quality level
On-time shipping
Rolled throughput yield
Supplier quality
Cycle time
Volume hours
Baseline measurements
KPIVs

CUSTOMER

Customer satisfaction (CTW)
On-time delivery
Product quality (KPOV)
Safety
Communications

LEARNING AND GROWTH

Six Sigma tool utilization
Quality of training
Meeting effectiveness
Lessons learned
Number of employees trained in Six Sigma dates
Number of project completed
Total dollars saved on Six Sigma projects to date

Six Sigma application

Manufacturing
Services
Engineering and R&D
Sales and marketing
Health care
Government
Corporate functions

Typical Six Sigma projects in Manufacturing

Increasing manufacturing yield
Reducing assembly cycle-time
Minimizing changeover time
Reducing variations in machining process
Eliminating need for regular testing

Typical Six Sigma projects in Services

Reducing time to open a new account
Eliminating statement errors
Minimize wait time for customer
Reducing cycle time for check-in
Reducing invoice errors

Typical Six Sigma projects in Engineering and R&D

Reducing time for engineering drawing change
Reducing the time for approval and changes
Reduce the time to procure test materials
Increasing the utilization of test equipment

Typical Six Sigma projects in Sales and Marketing

Optimizing sales force allocation
Minimizing promotion time
Improving response rate from customer
Improving communication rate of proposals
Reducing time to prepare for complex bids

Typical Six Sigma projects in Health care

Reducing inpatient length of stay
Reducing ER wait time
Reducing outstanding accounts receivable
Reducing fall and injury claims
Improve and streamline medical procedure

Typical Six Sigma projects in Government

Reducing the amount of waste activities
Increasing the number of inspections
Streamlining the permit process
Reducing the number of change orders in contracts

Typical Six Sigma projects in Corporate functions

Reducing time for monthly closing
Decreasing patent-filing time
Reducing time for hiring process
Increasing response rate of employee survey
Increasing the accuracy of tracking of assets

Characteristics of Six Sigma success

Very successful program

Committed leadership
Use of top talent
Formal project selection and review process
Dedicated resources
Financial system integration

Mediocre program

Supportive leadership
Use of whoever was available
No formal project selection and review process
Part-time resources
No financial system integration

Following two approaches are used in the market- place to improve manufacturing operations

1) Lean Manufacturing

2) Six Sigma

They are dependent upon each other for success.
They both battle “variation” from two different point of views.
Generally Lean manufacturing program is implemented before Six Sigma program.
Lean manufacturing strategy builds a strong foundation for the effective use of Six Sigma tools.
Lean manufacturing focuses on the entire operation of a factory to reduce “variation” while Six Sigma focuses on a specific part number or a specific process to reduce “variation“.

Lean Manufacturing Versus Six Sigma

Lean Manufacturing

Focuses on the product flow & on the operator
Standardization of operator method
Reduce communication barriers through flow-focused cells
Focuses on process speed & feedback of information

Six Sigma

Uses data driven technique for problem solving
It is a method to measure deviation from the standard
Focuses on part variation & overall process variation
Addresses process variations which builds up over time

Lean manufacturing creates the standard and Six Sigma analyzes variations from the standard

What is DMAIC?

Define the projects and the goals of internal and external customers.
Measure the current performance of the process.
Analyze and determine the root cause(s) of the defects.
Improve the process to eliminate defects.
Control the performance of the process.

USL

LSL