An Introduction to Six Sigma - Innocentrix

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  • An Introduction to Six Sigma

    2008 InnoCentrix, LLC

    Jeffrey T. Gotro, Ph.D.

  • Agenda

    What is Six Sigma?

    Why would a company adopt Six Sigma?

    What are the challenges?

    2008 InnoCentrix, LLC 2 2008 InnoCentrix, LLC 2

    What are the challenges?

    What are the rewards?

    How is Six Sigma implemented?

    Summary and Questions

  • Six Sigma has many meanings

    A Symbol

    A Measure

    A Benchmark or Goal

    2008 InnoCentrix, LLC 3 2008 InnoCentrix, LLC 3

    A Benchmark or Goal

    A Philosophy

    A Method

  • Six Sigma: A Symbol

    is a Statistical Symbol for Standard Deviation

    Standard Deviation is a Measure

    2008 InnoCentrix, LLC 4 2008 InnoCentrix, LLC 4

    Standard Deviation is a Measure of Variability

  • Six Sigma: A Measure

    The Sigma Level of a process can be used to express its capability How well it performs with respect to customer

    2008 InnoCentrix, LLC 5 2008 InnoCentrix, LLC 5

    How well it performs with respect to customer requirements.

    Percent Defects, Cp, Cpk, ppm

  • Doing the math

    6 Sigma = 3.4 defects per million5 Sigma = 230 defects per million 4 Sigma = 6,210 defects per million

    2008 InnoCentrix, LLC 6

    4 Sigma = 6,210 defects per million3 Sigma = 66,800 defects per million 2 Sigma = 308,000 defects per million 1 Sigma = 690,000 defects per million

  • Six Sigma: A Benchmark or Goal

    The specific value of 6 Sigma (as opposed to 4 or 5 Sigma) is a benchmark for process excellence.

    Adopted by leading organizations as a goal

    2008 InnoCentrix, LLC 7 2008 InnoCentrix, LLC 7

    Adopted by leading organizations as a goal for process capability.

  • 100K

    10K

    1K Purchased Material Lot Reject Rate

    Payroll Processing

    Journal Vouchers

    Wire Transfers

    Air Line Baggage

    Order Write-up

    IRS - Tax Advice (phone-in)

    AverageCompany

    Restaurant Bills

    Doctor Prescription Writing

    (6,210 ppm)

    (66,800 ppm)

    Defe

    cts

    per

    Mil

    lio

    n

    Op

    po

    rtu

    nit

    ies

    Some Examples to Illustrate Typical Defect Rates

    2008 InnoCentrix, LLC 8 2008 InnoCentrix, LLC 8SIGMA (with 1.5 Sigma Shift)

    2 3 4 5 6 7

    100

    10

    1

    (230 ppm)

    Lot Reject Rate

    (0.43 ppm)

    Air Line BaggageHandling

    Best in ClassDomestic Airline

    Flight Fatality Rate(3.4 ppm)

    Defe

    cts

    per

    Mil

    lio

    n

    Op

    po

    rtu

    nit

    ies

  • Six Sigma: A Philosophy

    A vision of process performance

    Delivering nearly defect-free products and services

    Focus on variation reduction

    2008 InnoCentrix, LLC 9 2008 InnoCentrix, LLC 9

    Focus on variation reduction

    A Guiding Management Principle

  • Six Sigma: A Method

    A well defined process and toolkit used for:

    Product/Service Design

    Quality Control

    2008 InnoCentrix, LLC 10 2008 InnoCentrix, LLC 10

    Quality Control

    Quality Improvement

    Strategic Planning

  • Six Essential Themes

    A genuine focus on the customer

    Data and fact-driven management (using effective measurement systems)

    Process focus [Y = f (x)]

    2008 InnoCentrix, LLC 11 2008 InnoCentrix, LLC 11

    Process focus [Y = f (x)]

    Proactive management drives improvement efforts

    Boundaryless* collaboration (including customers, suppliers, and supply chain partners)

    A drive for perfection with a tolerance for failure (freedom to take risks, learning from mistakes, drive to try new approaches)

    * Termed by Jack Welch, CEO of GE

  • DMAIC Approach

    30

    35

    40

    Sporadic Spike (Special Cause)

    Define Measure/Analyze ControlImprove

    De

    fect R

    ate

    2008 InnoCentrix, LLC 12

    0

    5

    10

    15

    20

    25

    -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40

    Chronic Waste

    Chronic Waste

    De

    fect R

    ate

    Time

    Common Cause Variation

  • Define Measure Improve ControlAnalyze

    Project Scope

    Project Charter

    Business Impact

    Process Map

    Data Collection

    Control Charts

    Multivari Analysis

    Cause & Effect

    Brainstorming & Creativity tools

    Design of

    Statistical Process Control (SPC)

    Standard Operating

    Six Sigma DMAIC Process

    2008 InnoCentrix, LLC 13

    Business Impact

    Voice of the Customer (VOC)

    Affinity Diagram

    Kano Model

    CTQ Tree diagram

    Control Charts

    Pareto Charts

    Prioritization Matrix

    Measurement System Analysis

    Process Capability

    Yields (RTY)

    Cause & Effect Matrix

    FMEA

    Hypothesis testing

    ANOVA

    Noise Variables

    Scatter plots

    Design of Experiments

    Design of Experiments (DOE)

    Full Factorial

    Fractional Factorial

    Response Surface

    Pilot Trials

    Implementation Plan

    Standard Operating procedures (SOP)

    Data Collection & sampling plans

    Control Plans

    Measurement Systems Analysis (recheck)

    Project summary & lessons learned

  • All Work is a Process

    SupplierProcess

    Value-added Customer

    Requirements Requirements

    Inputs Output

    2008 InnoCentrix, LLC 14

    Value-added tasks

    Feedback Feedback

    S. I. P. O. C.

  • What is a process?

    ControllableInputs(Xs)

    Key ProcessOutputs

    (Ys)

    Process

    2008 InnoCentrix, LLC 15 2008 InnoCentrix, LLC 15

    (Xs) (Ys)

    Noise Inputs

    Y = f (X)

  • Process Capability

    LowerSpecification

    Limit

    UpperSpecificationLimit

    LowerSpecification

    Limit

    UpperSpecificationLimit

    2008 InnoCentrix, LLC 16

    LowerSpecification

    Limit

    UpperSpecificationLimit

    Capable Process

    LowerSpecification

    Limit

    UpperSpecificationLimit

    This process is not capable

  • Visualizing Process Capability

    43210-1-2-3-4

    0.4

    0.3

    0.2

    0.1

    0.0

    Lower Spec. Limit

    Upper Spec. Limit

    Cust. Tolerance

    86420-2-4-6-8

    0.4

    0.3

    0.2

    0.1

    0.0

    Lower SpecLimit

    Upper Spec.Limit

    Cust. Tolerance

    2008 InnoCentrix, LLC 17Cp=1 Cp=2

    Process CapabilityProcess

    Capability

  • Process Drift

    Cp = 1.33

    Cpk = 1.331.33

    0.4

    0.3

    0.2

    0.1

    Lower Spec. Limit

    Upper Spec. Limit

    Cust. Tolerance

    2008 InnoCentrix, LLC 18

    5.334.02.671.33-1.33-2.67-4.0-5.33 0

    0.0

    0

    0.4

    0.3

    0.2

    0.1

    0.0

    5.334.02.671.33-1.33-2.67-4.0-5.33

    Lower Spec. Limit

    Upper Spec. Limit

    Cust. Tolerance

    Cp = 1.33

    Cpk = 0.830.83

  • Unstable Process

    Mean shifts present

    Excess variation (changes)

    TimeFri

    Unstable Process

    LSL USL

    2008 InnoCentrix, LLC 19

    changes)

    Special causes of variation are present,

    Process output is not stable over time and is not predictable

    Mon

    Tue

    Wed

    Thur

  • Stable process: Variation reduced (lower ) Process is centered in spec window Mean shifts reduced

    Stable Process

    Time

    LSL USL

    2008 InnoCentrix, LLC 20 2008 InnoCentrix, LLC 20

    Only common cause variationis present

    Process output is stable/predictable The process is termed in statisticalcontrol.

  • History of Six Sigma

    Originated at Motorola in the early 80s

    Doesnt use Quality in the name

    Uses a modification of the Deming Plan-Do-

    2008 InnoCentrix, LLC 21

    Uses a modification of the Deming Plan-Do-Check-Act (PDCA) cycle

    Adopted widely in the 90s by major corporations including AlliedSignal (now Honeywell), GE, Kodak, and a growing list.

  • Six Sigma Strategy

    Implementation is top-down. CEO driven with executive management and Champions (process owners) leading the initiative.

    Improvement projects must be integrated with the goals of the organization.

    Six Sigma uses a divide and conquer approach. Find

    2008 InnoCentrix, LLC 22

    Six Sigma uses a divide and conquer approach. Find and work on the most important key customer related projects.

    Uses several levels of competency in Six Sigma implementation: Champions Master Black Belt Black Belt Green Belt

  • Roles & Responsibilities

    Executive Team: Provide continuous support to drive for results. Sets

    strategic direction, identify core business process issues, prioritize

    Champion:

    2008 InnoCentrix, LLC 23 2008 InnoCentrix, LLC 23

    Champion: Identifies high impact projects by combining the strategic

    vision of the executive team & the key customer and process needs of the business.

    Facilitates successful project completion, coaches teams

    Master Black Belt: Highly skilled & experienced in all aspects of Six Sigma

    Coach and mentor to Black Belts, works with Champion on project selection

  • Roles & Responsibilities

    Black Belt: Project Leader

    Highly trained in Six Sigma methods and tools

    Influencer, team facilitator, project manager

    2008 InnoCentrix, LLC 24 2008 InnoCentrix, LLC 24

    Influencer, team facilitator, project manager

    Green Belt:

    Project team member

    Trained in Six Sigma methods and tools

  • Training for Six Sigma

    Executives 8 hour Six Sigma overview and implementation roadmap

    development.

    Champion 30 hour course, overview of DMAIC, Tools overview Focus on developing project selection skills

    2008 InnoCentrix, LLC 25 2008 InnoCentrix, LLC 25

    Black Belt 160 hours of classroom Required to have a project

    Class for 1 week (40 hours) and project work for 3-4 weeks Total of 4 months to train

    Green Belt 30-80 hours depending on training philosophy May or may not have to complete a project

  • Projects Drive Six Sigma Success

    Types of Six Sigma Projects Manufacturing Quality Improvement (origin of Six Sigma

    initiatives) Design for Six Sigma (DFSS) for product development Business process improvement (transactional Six Sigma)

    2008 InnoCentrix, LLC 26 2008 InnoCentrix, LLC 26

    Some companies find much larger impact in transactional type projects:

    One company: $150-250K for manufacturing improvement projects > $500K for transactional projects

    Process management methods rarely used for business process improvements

    Transactional Six Sigma is a Huge Opportunity

  • Identifying Six Sigma Projects

    Basic Project Criteria

    Problem in key business activity

    Large financial impact

    Can measure and quantify performance

    Easy to Fix?yes

    Quick Hit

    2008 InnoCentrix, LLC 27

    Solution Available?

    Easy to Fix?

    no

    yes

    no

    Quick Hit

    Other Initiative

    Six Sigma Project

    Process focus

    Analyze Y = f(x)

    Reduce variation & defects

    Complex relationships

  • Project Focus

    Projects are chartered by Champions and business leaders

    Led by Black Belts

    Assisted by Green Belts

    2008 InnoCentrix, LLC 28 2008 InnoCentrix, LLC 28

    Each experienced Black Belt can typically handle between 4-6 projects per year

    Typical financial impact is approximately $175,000 per project

    Experienced Black Belt can generate about $1M in savings per year

  • Why adopt Six Sigma?

    Concept has been around for 16 years, proven track record at big companies.

    Has shown the most endurance and return on investment of any improvement initiative.

    2008 InnoCentrix, LLC 29

    Starting to be implemented in small and medium-sized corporations.

    Provides a comprehensive set of philosophies, tools, methods, and fundamental concepts leading to quantifiable business results.

    Involves the entire organization; from CEO, CFO, Champions, Black Belts, Green Belts, and workers.

  • What are the Challenges?

    Takes careful preparation and a commitment to fundamental change efforts required.

    Training key for all levels in the organization

    It is not a quick fix nor a one-size-fits-all approach.

    2008 InnoCentrix, LLC 30

    Implementation tends to be uneven and lapses occur frequently.

    Tendency to work on too many projects at once. Resource limitations are real!

    Need to manage expectations on payback time, typically takes 9-12 months from roll-out to start seeing quantifiable financial gains.

  • What are the Challenges

    Not everything has to be Six Sigma; this was the downfall of reengineering efforts! Choose your projects carefully.

    Statistical analysis is not generally part of the engineering discipline in most companies.

    2008 InnoCentrix, LLC 31

    engineering discipline in most companies.

    Determine the role of DFSS and transactional Six Sigma in your organization

    Needs to focus on people issues and change management

    People must not fear giving bad news and continually require data-driven decision making.

  • What are the Rewards

    Increased value to the customers and shareholders.

    Improved reliability and predictability of products and services.

    2008 InnoCentrix, LLC 32

    and services.

    Significant reduction in defects.

    Institutionalization of a process mindset.

    Increased competitive advantage.

  • Some Results

    Motorola 10 years; $11 Billion Savings

    AlliedSignal - $1.5 Billion estimated savings

    General Electric started efforts in 1995

    1998: $1.2 Billion less $450 Million in costs net

    2008 InnoCentrix, LLC 33

    1998: $1.2 Billion less $450 Million in costs net benefits = $750 Million

    1999 Annual Report: more than $2 Billion net benefits

    2001: 6,000 projects completed; $3 Billion in savings

  • The Road to Six Sigma

    2008 InnoCentrix, LLC 34

    Usually has many twists and turns!

  • Six Sigma Implementation

    CharterImplementation

    Team

    DevelopRoadmap

    & Goals

    Train Execs &

    Champions

    Develop Project Portfolio

    ImplementBB & GB

    Training

    ProjectReviews &Support

    2008 InnoCentrix, LLC 35 2008 InnoCentrix, LLC 35

    Appoint an implementation team leader Use a multifunctional team to lead roll-out Work with Execs & Champions to develop a Six Sigma Roadmap Establish quantifiable goals Formulate an implementation plan Develop a mechanism to coach black belts & teams Implement project review and metrics tracking mechanism

  • Six Sigma Roadmap

    Identify core processes & key customers

    Define key customer drivers Voice of the Customer (VOC)

    Critical to Quality (CTQs)

    2008 InnoCentrix, LLC 36 2008 InnoCentrix, LLC 36

    Measure and baseline current performance

    Prioritize, analyze, charter and kick-off key improvement projects

    Develop a diversified project portfolio (short and long term projects)

    Expand and integrate the Six Sigma system across the enterprise as experience grows

  • Costs to Implement

    Direct payroll (individuals dedicated full-time to Six Sigma)

    Indirect payroll (executives, champions, process owners, etc.)

    2008 InnoCentrix, LLC 37 2008 InnoCentrix, LLC 37

    Training and consulting costs (Champion, black and green belt, implementation and project reviews)

    Improvement implementation costs (cost to implement solutions found in BB projects)

  • Where Do You Start?

    Business Transformation Full scale change initiative

    Strategic Improvement Address a strategic weakness

    2008 InnoCentrix, LLC 38 2008 InnoCentrix, LLC 38

    Address a strategic weakness

    Used to build a core competency that is missing (such as VOC, or measurement systems)

    Problem Solving Most popular starting point

    Focus on key short-term and long-term improvement projects to get maximum impact

  • What are your core processes?

    Product Development Process

    Order fulfillment process

    Customer service process

    Support Processes

    2008 InnoCentrix, LLC 39 2008 InnoCentrix, LLC 39

    Support Processes

    Finance

    Administration (HR, legal, etc.)

    Information technology

  • Customer centric core process

    Understand

    Product Development Process

    2008 InnoCentrix, LLC 40 2008 InnoCentrix, LLC 40

    UnderstandCustomer

    Needs

    DesignProduct

    BuildProduct

    Test Product

    Sell Product

  • Customer centric core process

    Develop

    Order Fulfillment Process

    2008 InnoCentrix, LLC 41 2008 InnoCentrix, LLC 41

    DevelopCustomer

    Relationship

    TakeOrder

    BuildProduct

    ServiceProduct

    Bill Customer

  • Six Sigma Summary

    Disciplined & Systematic Approach Process orientation, drive for variation reduction

    Focus on quantitative methods and tools

    Focus on control to hold the gains

    Uses a new metric for defects (sigma, DPMO, ppm)

    2008 InnoCentrix, LLC 42 2008 InnoCentrix, LLC 42

    Uses a new metric for defects (sigma, DPMO, ppm)

    Results oriented management leadership, using data-driven decision making

    Significant training & organizational learning

  • Six Sigma Summary

    Success happens one project at a time

    Good project selection leads to large financial impact

    Implementation is hard work, not magic. Expect

    2008 InnoCentrix, LLC 43 2008 InnoCentrix, LLC 43

    Implementation is hard work, not magic. Expect bumps in the road, stay the course, results will happen

    Six Sigma is A journey not a destination

  • InnoCentrix, LLC

    Jeffrey Gotro, Ph.D.

    2008 InnoCentrix, LLC 44 2008 InnoCentrix, LLC 44

    Jeffrey Gotro, Ph.D.

    949-635-6916

    www.innocentrix.com

    info@innocentrix.com

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