Six Sigma Overview

-6 -4 -2 0 2 4 6 Six Sigma Overview - What is Six Sigma?

What is Six Sigma? • What is it? • How does it work? • What are the Benefits? • What are the Main Challenges? • What will it take?

Six Sigma Includes… Master Black Belts, Black Belts, Green Belts Training Business Process Council Teams Sponsors/Champions DFSS Sigma Calcs DMAIEC Strategy Processes Projects DASHBOARDS that Drive to Achieve Strategy Change Acceleration ACTIVELeadership Rewards, Recognition, Promotions, Bonuses:NOT OPTIONAL! DOE Lean Sigma Six Sigma can seem overwhelming! What IS 6?

Sigma Is a Measure of Process Capability... …that focuses on the average and variation of the output. Customer Requirement 6 5 Sigma 1 2 3 4 5 6 DPMO 4 680,000 298,000 67,000 6,000 400 3.4 3 2 1 DPMO – Defects per Million Opportunities

To increase a process performance, you have to decrease variation Less variation provides Greater predictability in the process Less waste and rework, which lowers costs Products and services that perform better and last longer Happier customers Importance of Reducing Variation

What Is the Goal? Six Sigma is about satisfying customer needs profitably From GE Capital’s Six Sigma Vision

Six Sigma’s Methodologies Alignment & Linkage to Business Strategy & Transformation Objectives Improve existing processes so that their outputs meet customer requirements Design new products and processes that meet customer needs Six Sigma DMAIEC Design For Six Sigma Process Management Control and Manage cross-functional processes to meet business goals

How Can Six Sigma Help Us? • Provides a standard toolkit to improve business processes • Makes processes transparent, manageable • Enables fact-based decision making • Provides a platform for profitable growth • Aligns organizational and process goals • Helps establish customer focus • Establishes a common language

What Is Sigma? Sigma is the scale that compares the output of a process to customer or design specifications. Customerspec Customerspec FREQUENCY FREQUENCY 70 80 90 95 100 70 80 90 95 100 Dimension Dimension Getting better requires reducing the variation andmoving the average away from the spec limit.

Sigma Advantages Which process is performing best? PROCESSPERFORMANCE Call servicing 32 seconds vs goal of 35 Manufacturing Cable 98% defect free Accounts Receivable 33 days average aging vs goal of 40 Customer Service 82% rated 4 or 5 on responsiveness The Sigma Scale provides a common metric for comparison.

Sigma Advantages Percent 93% 3.0 98% 3.5 99% 4.0 99.87% 4.5 99.9997% 6.0 DPMO 66,800 22,700 6,210 1,350 3.4 99% seems outstanding; but 6,210 DPMO reveals significant room for improvement.

Calculating the “Sigma Level” “Counting Defects” Approach: • A packaging process is required to put at least 5 kg. of fertilizer in each bag. In addition, the fill date must be stamped on the bag. • Last weeks performance: • Bags produced (units) – 10,000 • Under-filled bags – 62 • Fill dates missing – 21 • Number of defect opportunities - 2 • Sigma Calculation: From Sigma Table: Sigma Level ~ 4.1

Sigma Conversion Table

Calculating the “Sigma Level” When Process Data is Continuous: • A packaging process is required to put at least 5 kg. of fertilizer in each bag. • Last weeks performance: • Bags produced (units) – 10,000 • Mean Fill Weight: 5.1 kg. • Standard Deviation of Fill Weight: 0.03 kg. • Sigma Calculation: “Short-Term Sigma Level

Attacking Problems—Pre-Six Sigma PRACTICALPROBLEM PRACTICALSOLUTION NEXT PROBLEM In some cases, effective . . . But can result in fire fighting and in recurring problems.

The Six Sigma Way to Attack Problems Define Measure PRACTICALPROBLEM STATISTICALPROBLEM Control Execute Analyze PRACTICALSOLUTION STATISTICALSOLUTION Identify What Factors Drive Performance? How Can We Prevent Problem Reoccurrence? NEXT PROBLEM

Control • QC Chart • Documentation • Monitoring Analyze • DoE • Regression • ANOVA • t-tests • Process Analysis Improve • Select Solutions • Risk Analysis Define Measure • Data Collection Plan • Gage R&R • Control Chart • Capability Analysis • Charter • VOC • SIPOC • CE Matrix Execute • Planning • Piloting • Planning • Implementation The Power of the DMAIEC . . . Not just an assortment of tools, but what to do at each step of the improvement process. Common language and synergy of employing a standard improvement approach

The DMAIEC Way to Attack Problems DEFINE:We are not consistently achieving “Ready for Control” (Y). PRACTICALPROBLEM MEASURE:There was a lot of variation in “Y” - poor performance (RFC = 35%, 1.1). Determined RFC was a function of (1) boiler tube failures, (2) excessive cooldown (previous shutdown), (3) turbine first-stage metal temperature control, and (4) operator errors. The boiler tube failures and temperature control were major contributors STATISTICALPROBLEM ANALYZE:Pareto Analysis & Weibull Analysis of boiler tube failures revealed inadequate water/steam flow in the ends of the waterwall tubesheet STATISTICALSOLUTION IDENTIFY/EXECUTE AND CONTROL:Design changes improving flow distribution were implemented and process is currently achieving RFC 91% of the time (2.7) (other countermeasures also contributing). PRACTICALSOLUTION

Design For Six Sigma (DFSS)…What is it?? • A process - a more structured approach to design • A tool set • An enhancement to our current design process • A tool for assessing and mitigating risk • Teamwork • Customer focused • A culture change “…a continuation of the six sigma tool set being applied specifically to process, product, or service design.”

DFSS – “50,000 foot” View Define Measure Explore Design Validate Implement • Identify Customers • Define State of Current Customer Knowledge • Develop & Implement Customer Research Plan • Translate Customer Needs to Product/ Service CTQ’s • Specify Targets, Tolerance Limits & Sigma Targets • Develop Product/ Service Necessary Functions • Develop Conceptual Product/ Service Designs • Develop High-Level Production Processes • Predict Capability & Evaluate Gaps • Develop Detailed Product & Service Designs • Develop Detailed Production Processes • Refine Capability & Gap Evaluation, Perform Tradeoffs • Develop Process Control & Validation Plans • Build Pilot Processes • Validate Pilot Readiness • Perform Pilot Testing • Analyze Gaps, Determine Root Causes • Evaluate Scale-up Potential • Develop Implementation & Transition Plans • Build Full-Scale Processes, Train Staff • Perform Start-up Testing • Analyze Gaps, Determine Root Causes • Transition to Process Owners • Evaluate & Close Design Project • Launch The • Project • Define • Outcomes • Scope Project • Identify Stakeholders • Select Team • Determine Project • Approach • Create Project Plan • Define Project Controls - Design Review

Six Sigma’s Broad Application • J&J over $1 Billion in 2 years • GE Capital over $1 Billion in value in 1996. • JP Morgan created $510 Million in value in year one • AIG found $38 million in revenue from one of first nine projects • Sigma often reveals that less than 10% of total service process time is devoted to value-added work. • Measuring the “soft stuff” becomes not only possible but profitable. • Quality of Deal teams. VOC says experience in industry and size of deal were the decisive factors in which firm to engage for an IPO. Quantified & easily measured. • Quality of Communications in a leasing business. Do you notify me of changes in schedule, do I have a designated rep, do you return calls, emails etc within 8 hours? Quantified & easily measured. • Quality of Customer Contact. “10, 5, firstand last” teller measures. Quantified & easily measured Six Sigma Results

Six Sigma Challenges New (?) Ways of Thinking... • Customer Thinking (customer specs) • Process Thinking (leading indicators) • Statistical Thinking (variation) • Causal Thinking [y = (x1, x2, x3 … xn)] • Experimental Thinking (data-driven hypothesis testing) • Control Thinking • Stretch Thinking • Adopting Common language/way of thinking about problems • Accountability Thinking The real Six Sigma advantage…the transformation of the culture.

General Electric – The Benchmark! “Senior leadership, especially Jack Welch, provided unyielding commitment to get the initiative going and ensure its continued success. This will not be easy for other companies to copy.” Hoerl, Roger (2002), “An Inside Look at Six Sigma at GE,” Six Sigma Forum Magazine, Vol. 1, No. 3, May, pages 35-44.

General Electric – The Benchmark! “Six Sigma was directed toward specific, tangible objectives, including financial objectives. The culture changed as a result of delivering tangible benefits, not because of a focus on the culture itself.” Hoerl, Roger (2002), “An Inside Look at Six Sigma at GE,” Six Sigma Forum Magazine, Vol. 1, No. 3, May, pages 35-44.

500 Black Belts and Master Black Belts “for ever and ever” Each has a two-year assignment. All 28,000 salaried and technical people trained at least at Green Belt level. Many hourly people selected also for Green Belt training. Major goal is to have for first time common approach to problem solving, new product development, and measurement across entire company. W. James McNerney, Jr. CEO, 3M Company, 25 June 2002 Six Sigma At 3M

Twenty Key Lessons Learned • The time is right. • The enthusiastic commitment of top management is critical. • Develop an infrastructure. • Commit top people. • Invest in relevant hands-on training. • Select initial projects to build credibility quickly. • Make it all pervasive, and involve everybody. • Emphasize DFSS. • Don’t forget design for reliability. • Focus on the entire system. Gerald J. Hahn, “20 Key Lessons Learned,” Six Sigma Forum Magazine, May 2002, pages 28-34.

Twenty Key Lessons Learned • Emphasize customer CTQs (critical to quality). • Include commercial quality improvement. • Recognize all savings. • Customize to meet business needs. • Consider the variability as well as the mean. • Plan to get the right data. • Beware of dogmatism. • Avoid nonessential bureaucracy. • Keep the tool box vital. • Expect Six Sigma to become a more silent partner. Gerald J. Hahn, “20 Key Lessons Learned,” Six Sigma Forum Magazine, May 2002, pages 28-34.

Business Dashboards Process Management Change Management Shareholder Value Customer Loyalty/Revenue Growth Cost/Working Capital Reduction Voice of the Customer Six Sigma Methodologies & Tools The Essential Role of Leadership

The Strategic Process-Management Approach 1. Identify Core Business Processes and Strategic Opportunities 2. Define Process Goals that lead to Competitive Advantage 3. Determine the Process Measures needed to evaluate Process Performance 5. Project Selection 4. Process Management Identify & Prioritize Performance Gaps Develop Process Goals & Dashboards Validate Measurement & Causal Relationships Identify Priority Projects Charter, Launch and Support Projects Assign and Build Accountabilities

Six Sigma Companies - Characteristics • Start with a prioritized list of customer and business requirements and specifications • Have a clear sense of process owners • Track performance over time • Analyze causes of process and output variation with statistical and process analysis tools • Think systematically about solutions and determine financial return (the ROI may not be there to move from 4.5 to 6.0 Sigma) • Standardize processes to hold the gains Six Sigma is prioritized, disciplined problem solving to deliver on-target performance with minimum variation.

Six Sigma IS’s: A Framework to Improve Performance Applicable to Every Function and Business About Business Performance Six Sigma NOT’s: The Solution for Everything Applicable Only to Manufacturing It’s Just About Statistics Six Sigma Summary

Using 6 to Achieve Your Co’s Objectives • Large Group Discussion: What are the Your Company Business Objectives/Opportunities? • As a small group, discuss how the Six Sigma Approach can help Your Company Achieve the Business Objectives. • What will Six Sigma not achieve, relative to the Objectives? • Summarize your team conclusions on a flipchart and be prepared to discuss your list with the large group.

Six Sigma Overview - What is Six Sigma?