Chapter 1

1. Chapter 1 Foundations of Six Sigma: Principles of Quality Management

2. What is Six Sigma? Six Sigmais a performance improvement approach that seeks to find and eliminate causes of defects and errors, reduce cycle times and cost of operations, improve productivity, better meet customer expectations, and achieve higher asset utilization and returns on investment in manufacturing and service processes. Six Sigma focuses on outputs that are critical to customers and justifies improvements by demonstrating a clear financial return for the organization.

3. Business Case for Six Sigma “The first job we have is to turn out quality merchandise that consumers will buy and keep on buying. If we produce it efficiently and economically, we will earn a profit, in which you will share.” - William Cooper Procter, 1887

4. Six Sigma Methodology • DMAIC • Define • Measure • Analyze • Improve • Control • Incorporates a wide variety of statistical and process improvement tools

5. Existing ExistingBusiness Processes Manufacturing and service processes Suppliers Inputs Outputs Customers Define Measure DMAIC Control Analyze Improve Six Sigma and Process Improvement Six Sigma Methodology Improved Business Performance Quality Productivity Cost Profitability

6. Key Concepts of Six Sigma (1 of 2) • Think in terms of key business processes, customer requirements, and overall strategic objectives. • Focus on corporate sponsors responsible for championing projects, support team activities, help to overcome resistance to change, and obtaining resources. • Emphasize such quantifiable measures as defects per million opportunities (dpmo)that can be applied to all parts of an organization

7. Key Concepts of Six Sigma (2 of 2) • Ensure that appropriate metrics are identified early and focus on business results, thereby providing incentives and accountability. • Provide extensive training followed by project team deployment • Create highly qualified process improvement experts (“green belts,”“black belts,” and “master black belts”) who can apply improvement tools and lead teams. • Set stretch objectives for improvement.

8. Terminology • “Six Sigma” is the overall approach and philosophy; “six sigma” is a defect- or error-based metric that equates to 3.4 or fewer defects or errors per million opportunities.

9. Quality Management and the Evolution of Six Sigma (1 of 2) • Quality in ancient Egypt and China • Skilled craftsmanship during Middle Ages • Industrial Revolution: rise of inspection and separate quality departments • Early 20thCentury quality assurance: statistical methods at Bell System • Quality control during World War II

10. Quality Management and the Evolution of Six Sigma (2 of 2) • Post-war Japan: evolution of quality management • Quality awareness in U.S. manufacturing industry during 1980s: from “Little Q” to “Big Q” - Total Quality Management • Malcolm Baldrige National Quality Award (1987) • Six Sigma at Motorola and General Electric

11. Six Sigma Owned by business leader champions Cross functional projects Rigorous and advanced statistical tools Requires verifiable return on investment TQM Based on worker empowerment and teams Department or workplace focus Simple improvement tools Little financial accountability Six Sigma vs. TQM

12. Defining Quality Perfection Fast delivery Providing a good, usable product Compliance with policies and procedures Consistency Eliminating waste Doing it right the first time Delighting or pleasing customers Total customer service and satisfaction

13. Formal Definitions of Quality • Design perspective: quantities of product attributes • Operations perspective: conformance to specifications • Customer perspective: fitness for intended use

14. Customer-Driven Quality • “Meeting and exceeding customer expectations” • Customers • Consumers • External customers • Internal customers

15. Quality Management Principles* • Customer focus • Leadership • Involvement of people • Process approach • System approach to management • Continual improvement • Factual approach to decision making • Mutually beneficial supplier relationships *These principles are the basis for ISO 9000:2000

16. Principle 1: Customer Focus • Organizations depend on their customers and therefore should understand current and future customer needs, should meet customer requirements, and strive to exceed customer expectations.

17. Customer Focus Practices • Researching and understanding customer needs and expectations. • Ensuring that the objectives of the organization are linked to customer needs and expectations. • Communicating customer needs and expectations throughout the organization. • Measuring customer satisfaction and acting on the results. • Systematically managing customer relationships. • Ensuring a balanced approach between satisfying customers and other interested parties (such as owners, employees, suppliers, financiers, local communities and society as a whole).

18. Principle 2: Leadership • Leaders establish unity of purpose and direction of the organization. They should create and maintain the internal environment in which people can become fully involved in achieving the organization’s objectives.

19. Leadership Practices • Considering the needs of all interested parties including customers, owners, employees, suppliers, financiers, local communities and society as a whole. • Establishing a clear vision of the organization’s future. • Setting challenging goals and targets. • Creating and sustaining shared values, fairness and ethical role models at all levels of the organization. • Establishing trust and eliminating fear. • Providing people with the required resources, training and freedom to act with responsibility and accountability. • Inspiring, encouraging, and recognizing people’s contributions.

20. Principle 3: Involvement of People • People at all levels are the essence of an organization, and their full involvement enables their abilities to be used for the organization’s benefit.

21. Involvement of People Practices • People understanding the importance of their contribution and role in the organization. • People identifying constraints to their performance. • People accepting ownership of problems and their responsibility for solving them. • People evaluating their performance against their personal goals and objectives. • People actively seeking opportunities to enhance their competence, knowledge, and experience. • People freely sharing knowledge and experience. • People openly discussing problems and issues.

22. Principle 4: Process Approach • A desired result is achieved more efficiently when activities and related resources are managed as a process.

23. Processes • A process is a sequence of activities that is intended to achieve some result

24. Process vs. Function

25. Process Approach Practices • Systematically defining the activities necessary to obtain a desired result. • Establishing clear responsibility and accountability for managing key activities. • Analyzing and measuring of the capability of key activities. • Identifying the interfaces of key activities within and between the functions of the organization. • Focusing on the factors such as resources, methods, and materials that will improve key activities of the organization. • Evaluating risks, consequences, and impacts of activities on customers, suppliers, and other interested parties.

26. Principle 5: System Approach to Management • Identifying, understanding, and managing interrelated processes as a system contributes to the organization’s effectiveness and efficiency in achieving its objectives.

27. System Approach to Management Practices • Structuring a system to achieve the organization’s objectives in the most effective and efficient way. • Understanding the interdependencies between the processes. • Structured approaches that harmonize and integrate processes. • Providing a better understanding of the roles and responsibilities necessary for achieving common objectives and thereby reducing cross-functional barriers. • Understanding organizational capabilities and establishing resource constraints prior to action. • Targeting and defining how specific activities within a system should operate. • Continually improving the system through measurement and evaluation.

28. Principle 6: Continual Improvement • Continual improvement of the organization’s overall performance should be a permanent objective of the organization.

29. Continual Improvement • Enhancing value through new products and services • Reducing errors, defects, waste, and costs • Increasing productivity and effectiveness • Improving responsiveness and cycle time performance

30. Continual Improvement Practices • Employing a consistent organization-wide approach to continual improvement of the organization’s performance. • Providing people with training in the methods and tools of continual improvement. • Making continual improvement of products, processes, and systems an objective for every individual in the organization. • Establishing goals to guide, and measures to track, continual improvement. • Recognizing and acknowledging improvements.

31. Principle 7: Factual Approach to Decision Making • Effective decisions are based on the analysis of data and information.

32. Factual Approach to Decision Making Practices • Ensuring that data and information are sufficiently accurate and reliable. • Making data accessible to those who need it. • Analyzing data and information using valid methods. • Making decisions and taking action based on factual analysis, balanced with experience and intuition.

33. Learning Cycle • Planning • Execution of plans • Assessment of progress • Revision of plans based on assessment findings

34. Principle 8: Mutually Beneficial Supplier Relationships • An organization and its suppliers are interdependent, and a mutually beneficial relationship enhances the ability of both to create value.

35. Mutually Beneficial Supplier Relationships Practices • Establishing relationships that balance short-term gains with long-term considerations. • Pooling of expertise and resources with partners. • Identifying and selecting key suppliers. • Clear and open communication. • Sharing information and future plans. • Establishing joint development and improvement activities. • Inspiring, encouraging, and recognizing improvements and achievements by suppliers.

36. Six Sigma and Competitive Advantage • Product quality is an important determinant of profitability. • Businesses that offer premium-quality products and services usually have large market shares and were early entrants into their markets. • Quality is positively and significantly related to a higher return on investment for almost all kinds of products and market situations. • Instituting a strategy of quality improvement usually leads to increased market share, but at the cost of reduced short-run profitability. • High-quality producers can usually charge premium prices.

37. Quality and Profitability Improved quality of design Improved quality of conformance Higher perceived value Higher prices Lower manufacturing and service costs Increased market share Increased revenues Higher profitability

38. Six Sigma and Business Results Considerable evidence exists that Six Sigma initiatives positively impact bottom-line results from companies such as GE, Allied Signal, 3M, Xerox, Raytheon, Citibank, and many others.

39. Six Sigma Works for Everyone • Plant managers – reduce waste, improve product consistency, solve equipment problems, create capacity • Human resource managers – reduce cycle time for hiring processes • Sales managers – improve forecast reliability, pricing strategies, pricing variation • Anyone – better understand customer needs and tailor service offerings to meet them