Supplying Six Sigma

1. Supplying Six Sigma February 13, 2004 Kimball E. Bullington, Ph.D.

2. Learning Six SigmaObjectives • Learn how Six Sigma can be applied to supply. • Learn which Six Sigma tools are most applicable to supply. • Learn the terminology of Six Sigma so you can supply to a Six Sigma company. • Learn additional resources for more in-depth application of Six Sigma.

3. Learning Six Sigma • What is Six Sigma? • Why apply Six Sigma to the Supply Chain? • Six Sigma People • Breakthrough Strategy

4. What is Six Sigma? • Customer Focus • Data Driven • Robust Methodology

5. What is Six Sigma?Key Concepts • Critical to Quality: What attributes are most important to the customer? (CTQ, CTC, CTD) • Defect: Failing to deliver what the customer wants / expects (DPMO) • Variation: The level of unpredictability the customer experiences

6. What is Six Sigma?Key Concepts • Process Capability: What your process can deliver – consistently • Stable Operations: Stable ops are predictable • Design for Six Sigma: Designing to meet customer needs and process capability

7. Why Use Six Sigma?

8. 7 Quality Tools Empowerment Re-engineering Deming Juran Crosby Feigenbaum Shewhart Shingo Ishikawa Taguchi Shainin TQC TQI JIT II Kaizen Six Sigma DOE DFX SPC 7 New Quality Tools CWQI Business Process Redesign Quality Circles Just In Time

9. Why TQM FailsStartup Commitment Up Front • Lack of Top Management Commitment • Poor Timing & Pace • No burning platform • Competing change efforts • Overlapping efforts • Wasted Education & Training • Lack of Short-Term, Bottom-Line Results Business Case Single Process Appropriate Training Results Threshold Brown, Hitchcock, and Willard - 1994

10. Why TQM FailsAlignment • Divergent Strategies (Lack of integration of quality improvement into all functions) • Outdated Appraisal Methods • Inappropriate Measures • Inappropriate Rewards Integrated Strategy Measurement Focus Team-based Brown, Hitchcock, and Willard - 1994

11. Why TQM FailsIntegration Charter BB’s • Failure to Transfer power to employees • Mandating Outmoded Management Practices (integrity) • Poor Organizational and Job Design • Outdated Business System • Failure to Manage Learning & Innovation Process Map Q-Tools ? DFSS Toll Gate Brown, Hitchcock, and Willard - 1994

12. Supply Make Sell Feedback Why Apply Six Sigma to the Supply Chain? • Materials represent 55% of COGS. • Outsourcing trends make the SC even more important. • It is consistent with a process focus to include the supply chain.

13. Why Apply Six Sigma to the Supply Chain? • If you are in a 6 company or serving 6 customers, they will understand (and support) this process.

14. Why Apply Six Sigma to the Supply Chain? • Customer Focus • Data Driven • Robust Methodology

15. Applying Six Sigma to SCCaveat The Six Sigma process should be mastered in your company before requiring it of your suppliers. Your team leaders could use the process before requiring that suppliers invest in it. Warning

16. Six Sigma Six Sigma People • Executives • Champions (deployment, project) • Master Black Belts • Black Belts • Green Belts

17. Existing Processes Define Measure Analyze Improve Control New Processes Define Measure Analyze Design Verify Six Sigma Breakthrough Strategy Which one do I use?

18. DMADV - DMAIC

19. Define - Process Flow Develop Charter Map Processes Understand Voice Of Customer Feedback

20. Defining Six Sigma • Charter Development • Pareto of Current Supply Performance • Supply Base Segmentation • CT-Trees: Defining What is Important to Supply • Business Case • Communication Plan

21. Project Charter Stakeholder Analysis Affinity Diagram SIPOC Voice of the Customer CT Tree Kano Model SWOT Analysis Cause-and-Effect Diagrams Supplier Segmentation Project Management Defining Six SigmaTools

22. Defining Six SigmaCharter Development Charter – An agreement between management and project team members about what the team will accomplish.

23. Defining Six SigmaCharter – What it does • Clarifies expectations (what and why) • Keeps team focused • Reduces tampering • Reduces wandering • Reduces goal creep • Transfers ownership from management to team

24. Defining Six SigmaCharter – What it does • Provides overview of purpose • Describes why you are working on this project (business case) • Defines scope of project • Determines deliverables • Defines measures of success • Determines resources available

25. Charter • Problem statement • Business case • Goals, milestones, success criteria, & deliverables • Project scope / boundaries • Roles & responsibilities • Stakeholder support / approval needed

28. Defining Six SigmaCharter – Business Case What is the financial impact of a successful project?

29. Business Case

30. Defining Six SigmaBusiness Case Screens • What will be the impact on the customer and the business? • How will this project affect functional (e.g., supply management or supplier operations) goals? • Is it feasible? Are we likely to succeed?

31. Defining Six SigmaCharter – Boundaries • Commodity • Supplier • Project • Are we there yet?

32. Defining Six SigmaCharter – Measures (examples) • A defect is a late delivery from a supplier. The cost is estimated to be $1500. • A defect is a line shutdown due to a late delivery from a supplier. The cost is estimated at $100,000. • A defect is a rejected part. The cost is estimated at $5,000.

33. Defining Six SigmaCharter – Deliverables • Completion date • Savings • Reduced defect levels • Reduced number of suppliers • Increase in inventory turns

34. Defining Six SigmaCharter – Deliverables • New supplier approved for critical item • Training program for new buyers • New process for supplier certification • or selection • or survey • FMEA complete for key commodity or supplier

35. Defining Six SigmaSelecting Projects • The project must relate to customer satisfaction • The project’s results must reduce defects by some threshold amount • The project should achieve some threshold of cost savings.

36. Criteria for Project Selection • Does it involve recurring events? • Is the scope narrow? • Do measures exist? • Do you have control of the process?

37. Defining Six SigmaContinued • If these criteria are met then: 1) Identify the customers involved, both internal and external to the function. 2) Find out what the customer’s CT’s are (Critical to Quality, Critical to Delivery, Critical to Cost, etc). 3) Define the project scope and goals. 4) Map the process to be improved.

38. Define Outputs • Once completed, the Define Phase should answer the following questions: 1) Who is the customer? 2) What matters? 3) What is the scope? 4) What defect am I trying to reduce? 5) What are the improvement targets?

39. Defining Six Sigma Supply • Defining Priority • Pareto Diagrams • Prioritization Matrix • Defining Risk – FMEA • Defining Commitment • Commitment Scale • Involvement Matrix • Defining Capability – Process Sigma

40. Stakeholder Analysis

41. SIPOC Example

42. SWOT Analysis

44. Assess risk to customers if a key process input fails Document processes Document process improvements Ranks processes or products by risk Failure Modes Effects Analysis

45. Identify failure modes – How can this product or process fail? Identify failure effects – What happens when this failure occurs? Identify potential causes of the effects & their probability of occurring. Rate the likelihood of detecting the occurrence. Failure Modes Effects Analysis

46. Multiply the severity number times the occurrence probability time the detection probability to create a Risk Priority Number. Identify ways to reduce or manage risk of high RPN’s. Revise occurrence and detection numbers as control actions dictate. Failure Modes Effects Analysis

47. FMEA - Risk Assessment

48. FMEA – Risk Management

49. Ranked list of products that contribute to risk List of actions and persons responsible for addressing the risk Revised ranked priority list FMEA - Output

50. Control Plans • Structured approach for designing value added control methods • Control actions necessary to ensure output quality • May include controls anywhere in the process