INDEX

1. What is Six Sigma? 2. What is Sigma? 3. Historical Overview 4. How the term six sigma has been derived? 5. Six Sigma Capability Improvement 6. Key elements of six sigma 7. Methodology 8. Six Sigma Training Levels 9. Six Sigma in Business 10. Which Business Function Needs It? 11. Why to adopt six sigma? 12. Which Business Function Needs It? 13. When to use Six Sigma? 14. Why to adopt six sigma? 15. What Makes Six Sigma Different? 16. Benefits of Six Sigma 17. Criticism of six sigma 18. Some Results 19. Improving quality using Six-Sigma 20. Conclusion 21. Bibliography

PREPARED BY: ABDURREHMAN PATEL,G.E.C.BHARUCH

WHAT IS SIX SIGMA?

Six Sigma is a business management strategy, originally developed by Motorola, that today enjoys wide-spread application in many sectors of industry. Six Sigma is a statistical concept that measures a process in terms of defects. At the Six Sigma level, there are only 3.4 defects / errors per million opportunities for error. But it does not end there. Six Sigma is also about improving practices, systems, processes and establishing a mindset of continuous improvement throughout the company. Above all, Six Sigma is a methodology to improve business performance by meeting and exceeding customer requirements. Six Sigma seeks to identify and remove the causes of defects and errors in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization

("Black Belts" etc.) who are experts in these methods. Each Six Sigma project carried out within an organization follows a defined sequence of steps and has quantified financial targets (cost reduction or profit increase).

What is Sigma?

Sigma - the lower case Greek letter is used to represent Standard deviation, a measure of variation. The term "six sigma" comes from the notion that if you have six standard deviations between the mean of a process and the nearest specification limit, you will make practically no items that exceed the specifications.

Historical Overview
The methodology of six sigma was first formulated by Bill smith at Motorola in 1986.It was originally Developed as a set of practices designed to Improve manufacturing process and eliminate Defects.

It includes the following:- Continuous efforts to achieve stable and predictable results.

- Manufacturing and business process have characteristics that can be measured, analyzed, improved And controlled. -achieving sustained quality improvement requires commitment from the entire organization . Features that make six sigma apart-: - A clear focus on achieving measurable and quantifiable financial returns from any six sigma project. - An increased emphasis on strong and passionate management, leadership and support. - A special infrastructure of champions, master black belts, black belts, etc to lead and implement six sigma approach. Six Sigma is a registered service mark and trademark of Motorola, Inc. Motorola has reported over US$17 billion in savings from Six Sigma as of 2006. Six Sigma was heavily inspired by six preceding decades of quality improvement methodologies such as quality control, TQM, and Zero Defects, based on the work of pioneers such as Shewhart, Deming, Juran, Ishikawa, Taguchi and others. In recent years, Six Sigma has sometimes been combined with lean manufacturing to yield a methodology named Lean Six Sigma.

How the term six sigma has been derived?

The term six sigma is derived from a field of statistics known as process capability studies. Originally it referred to the ability of manufacturing Process to produce a very high proportion of output within specifications. Process that operate with Six sigma Quality over the short term period are assumed to produce long-term defect level below 3.4 defects per million opportunities (DMPO). Six sigmas implicit goal is to improve all processes to that level of quality or better.

DPO, DPMO, PPM, DPU Definitions - Six Sigma Defect Metrics:What Is DPO? What Is DPMO?
A unit of product can be defective if it contains one or more defects. A unit of product can have more than one opportunity to have a defect. Determine all the possible opportunities for problems . Pare the list down by excluding rare events, grouping similar defect types, and avoiding the trivial . Define opportunities consistently between different locations.

Proportion Defective (p):p = Number Of Defective Units / Total Number of Product Units

Yeald = 1 - p The Yield proportion can converted to a sigma value using the Z tables

Defects Per Unit - DPU, or u in SPC

DPU = Number Of Defects / Total Number Of Product Units

The probability of getting 'r' defects in a sample having a given dpu rate can be predicted with the Poisson Distribution

Defects Per Opportunity - DPO

DPO = no. of defects / (no. of units X no. of defect opportunities per unit) Defects Per Million Opportunities (DPMO, or PPM) DPMO = dpo x 1,000,000 Defects Per Million Opportunities or DPMO can be then converted to sigma & equivalent Cp values.

Six Sigma Capability Improvement:Defect Based Six Sigma Metrics Example

If there are 9 defects among 150 invoices, and there are 8 opportunities for errors for every invoice, what is the dpmo? dpu = no. of defects / total no. of product units = 9/150 = .06 dpu dpo = no. of defects / (no. of units X no. of defect oppurtunities per unit) = 9/(150 X 8) = .0075 dpo dmpo = dpo x 1,000,000 = .0075 X 1,000,000 = 7,500 dpmo What are the equivalent Sigma and CP values? See Sigma Table.

Converting Yield to sigma & Cp Metrics Example Given: a proportion defective of 1% Yield = 1 - p = .990 Z Table value for .990 = 2.32 Estimate process capability by adding 1.5 to reflect the 'real-world' shift in the process mean 2.32 + 1.5 = 3.82

 This value can be converted to an equivalent CP by

dividing it by 3 : CP = 3.82/3 = 1.27

Sigma Table:-

Yield

Sigma () .840 160,000 2.50 .870 130,000 2.63 .900 100,000 2.78 .930 70,000 2.97 .935 65,000 3.01 .940 60,000 3.05 .945 55,000 3.10 .950 50,000 3.14 .955 45,000 3.20 .960 40,000 3.25 .965 35,000 3.31 .970 30,000 3.38 .975 25,000 3.46 .980 20,000 3.55 .985 15,000 3.67 .990 10,000 3.82 .995 5,000 4.07 .998 2,000 4.37 .999 1,000 4.60 .9995 500 4.79 .99975 250 4.98 .9999 100 5.22 .99998 20 5.61 .9999966 3.4 6.00

dpmo

Cp Equiv. 0.83 0.88 0.93 0.99 1.00 1.02 1.03 1.05 1.06 1.08 1.10 1.13 1.15 1.18 1.22 1.27 1.36 1.46 1.53 1.60 1.66 1.74 1.87 2.00

COPQ (Cost of Poor Quality) 40%

30%

20%

10% 5%

Sigma Capabilities:-

Defects per Million Yield (no defects) Capability Opportunities (DPMO) 1 2 3 4 5 6 690000 308,537 66,807 6,210 233 3.4 31% 69.1% 93.3% 99.4% 99.97% 99.99966%

Key elements of Six Sigma

There are three main key elements of six sigma.which are given below:-

Customer Satisfaction:Customers are the center of market, they define quality. They expect performance, reliability, competitive prices, ontime delivery, service, clear and correct transaction processing and more.

Defining Processes and defining Metrics and Measures for Processes:

Using and understanding Data and Systems.

Setting Goals for Improvement.

Team Building and Involving Employees:Involving all employees is very important to Six Sigma. The company must involve all employees. Company must provide opportunities and incentives for employees to focus their talents and ability to satisfy customers. Defining Roles: This is important to six sigma. All team members should have a well defined role with measurable objectives.

Methodology
Six Sigma has three key methodologies:
1. DMAIC 2. DMADV 3. IDOV

DMAIC & DMADV inspired by Deming's Plan-DoCheck-Act Cycle. DMAIC is used to improve an existing business process; DMADV is used to create new product or process designs. A Six Sigma Engineer develops efficient and cost effective processes to improve the quality and reduce the number of defects per million parts in a Manufacturing/Production environment. Six Sigma Engineers determine and fine tune manufacturing process. Once a process is improved, they go

back and re-tune the process and reduce the defects. This cycle is continued till they reach 3.4 or less defects per million parts. Six Sigma is all about knowledge sharing. If a company has more than one manufacturing unit/plant, its more than likely that one of the plants produces better quality than others. The Six Sigma team should visit this higher quality plant and learn why its performing better than others and implement the techniques learned across all other units. Research/Design department within a company can use the above techniques to learn from another R&D departments in the same company or affiliate companies and implement those techniques. Motorola developed a five phase approach to the Six Sigma process called DMAIC.

DMAIC:-

DEFINE MEASURE

CONTROL

ANALYSIS

IMPROVEM ENT

The basic methodology consists of the following five steps: Define process improvement goals that are consistent with customer demands and the enterprise strategy.

Measure key aspects of the current process and collect relevant data.

Analyze the data to verify cause-and-effect relationships. Determine what the relationships are, and attempt to ensure that all factors have been considered.

Improve or optimize the process based upon data analysis using techniques like Design of Experiments.

Control to ensure that any deviations from target are corrected before they result in defects. Set up pilot runs to establish process capability, move on to production, set up control mechanisms and continuously monitor the process.

IDOV:-

IDENTIFY

DESIGN

VALIDATE

OPTIMISE

IDOV is one of the Six-Sigma approaches to design new products or processes.

Identify - Involves understanding customer needs and converting them into new product requirements.

Design - Converts customer requirements into product specifications.

Optimise - Optimises the design using various statistical and simulation tools. The design is optimised in terms of feasibility, costs, time to manufacture and ability to be manufacture at SixSigma levels.

Validate - Involves testing to check if the product meets its purpose while maintaining quality, costs and ease of manufacturing. Another approach to new product design is DMADV.

DMADV:-

VERIFY

DEFINE

DESIGN

MEASURE

ANALYZE

The basic methodology consists of the following five steps:

Define design goals that are consistent with customer demands and the enterprise strategy. Measure and identify CTQs (characteristics that are Critical To Quality), product capabilities, production process capability, and risks. Analyze to develop and design alternatives, create a high-level design and evaluate design capability to select the best design. Design details, optimize the design, and plan for design verification. This phase may require simulations. Verify the design, set up pilot runs, implement the production process and hand it over to the process owners. DMADV is also known as DFSS, an abbreviation of "Design For Six Sigma".

Six Sigma Training Levels:-

Once committed to Six Sigma methodology, learning can be organized by degree of employee involvement: Executive Leadership(C.E.O) Champion Master Black Belt (Quality Leaders) Black Belt (Project Leaders) Green Belt( Employees) Yellow Belt

Executive Leadership includes the CEO and other members of top management. They are responsible for setting up a vision for Six Sigma implementation. They also empower the other role holders with the freedom and resources to explore new ideas for breakthrough improvements.

Champions take responsibility for Six Sigma implementation across the organization in an integrated manner. The Executive Leadership draws them from upper management. Champions also act as mentors to Black Belts.

Master Black Belts, identified by champions, act as inhouse coaches on Six Sigma. They devote 100% of their time to Six Sigma. They assist champions and guide Black Belts and Green Belts. Apart from statistical tasks, they

spend their time on ensuring consistent application of Six Sigma across various functions and departments.

Black Belts operate under Master Black Belts to apply Six Sigma methodology to specific projects. They primarily focus on Six Sigma project execution, whereas Champions and Master Black Belts focus on identifying projects/functions for Six Sigma. A Black Belt is a managerial level or technical specialist who is assigned complete responsibility for implementing Six- Sigma throughout the business unit. Master Black Belts were hired into full-time positions and Black Belts on a part-time basis. Within nine months, the role of Black Belts was redefined and they were also hired on a full-time basis.

Green Belts, the employees who take up Six Sigma implementation along with their other job responsibilities, operate under the guidance of Black Belts. . Green Belts (employee who participates in Six-Sigma programmes) were taken on a part time basis

Yellow Belts, trained in the basic application of Six Sigma management tools, work with the Black Belt throughout the project stages and are often the closest to the work.

The Six Steps To Six Sigma Using: STEP 1. Identify the product you create or the service you provide. STEP 2. Identify the costumers for your product or service and identify costumer requirement. STEP 3.Identify your need STEP 4.Define the process for doing your work. STEP 5.Mistake proof the process STEP 6.Ensure continuous improvement by D-M-A-I-C.

Six Sigma in Business

Even though Six Sigma was initially implemented at Motorola to improve the manufacturing process, all types of businesses can profit from implementing Six Sigma. Businesses in various industry segments such as Services industry (Example: Call Centers, Insurance, Financial/Investment Services), Ecommerce industry (Example: B2B/B2C websites), Education can definitely use Six Sigma principles to achieve higher quality. Many big businesses such as GE and Motorola have successfully implemented Six Sigma but the adaptation by smaller businesses has been very slow.

Here are some of the reasons to consider:-

Bigger companies have resources internally who are trained in Six Sigma and also have 'Train the Trainer' programs using which they churn out many more Six Segma instructors. Also many bigger companies encourage the employees to learn Six Sigma process by providing Green Belts/Black Belts as mentors.

Effectively applying the Six Sigma techniques is difficult compared to actually learning the techniques in a class.

Big companies make Six Sigma as part of the Goals for employees and provide incentive for employees who undergo training and mentor colleagues.

Many assume that Six Sigma works for bigger companies only as they produce in volumes and have thousands of employees. This notion is not true and Six Sigma can be effectively applied for small businesses and even companies with fewer than 10 employees.

Which Business Function Needs It?

DESIGN SERVICE
ADMINIST -RATION

PURCHASE

6 SIGMA METHODS

MARKET -ING

MAINT. QA

MFG.

Who else is using Six Sigma?

Avery Dennison Dow DuPont

 Foxboro Sony Deere & Co. (John Deere) Delphi Allied Signal Ford Johnson & Johnson Caterpillar Lockheed Martin IBM Citi Group (Visa/MasterCard) G.E. J.P. Morgan

Why to adopt six sigma?

Defined process for problem solving. Proven methodology to solve problem. Consistency with result. Focus on the bottom line which encourages credibility/support from the top of the organization. Focus around target.

When to use Six Sigma?

Unknown causes/situations. Problem at common place and not well defined. When broad spectrum approach is inappropriate. When problem solving method failed.

In a complex situation with many variable.

What Makes Six Sigma Different?

Leadership Commitment, Competence, & Involvement Methodology & Tools Data Driven Statistically Validated Best People 100% Dedicated to Defect reductions. Project Focused Aligned to Strategic Goals High ROI Expectations

Benefits of Six Sigma: Focus on customers. Improved customer loyalty. Reduced cycle time. Less waste. Data based decisions. Time management. Sustained gains and improvements. Systematic problem solving. Employee motivation. Data analysis before decision making. Faster to market. Team building. Improved customer relations

Criticism of six sigma: lack of originality role of consultants based on arbitrary standards. Several studies indicates negative effects caused by Six Sigma. Is to the great extent based on arbitrary standards.

- Six Sigma does not include specific integration of ISO9000 or National Quality Award criteria. - Six Sigma raises the expectation from 3-sigma performance to 6-sigma. Yet, it does not promote "Zero Defects" which many people dismiss as "impossible."

Some Results
Motorola 10 years; $11 Billion Savings Allied Signal - $1.5 Billion estimated savings General Electric started efforts in 1995 o 1998: $1.2 Billion less i.e., $450 Million in costs(savings), thus net benefits = $750 Million o 1999 Annual Report: more than $2 Billion net benefits o 2001: 6,000 projects completed; $3 Billion in savings

Improving quality using Six-Sigma FOR EXAMPALE:ABC Company Ltd. was engaged in a capital-raising
programme. The company spent 180 staff hours on budget revisions,and 600 staff hours of rework to ensure accurate internal financial analysis. The company thus spent 780 unbudgeted staff hours, amounting to 16% of budgeted staff hours on rework of the primary processes. A staff time of 16% on rework activities is by no means ideal for any process. Hence, to enhance efficiency, the company implemented the Six-Sigma concept in its finance division.

How ABC implemented Six-Sigma?

- It grouped the primary processes under those requiring frequent rework. - On the basis of the primary processes, which required rework, the company gathered all the concerned staff members and reviewed the actual matrices of time and work. - The company realised that to prepare the financial statements of the company large volumes of information had to be reviewed. This led to excess staff hours. - The company changed the type of information required for the corporate planning and budgeting processes to reduce time for rework. It consolidated financial reports, and presented

information such that the company would need to focus only on 20% of data. - The need to focus efforts on only 20% of relevant data, helped in reducing staff hours on reworking primary processes significantly.

CONCLUSION:Six-Sigma is an effective way to increase the efficiency and accuracy of the finance function for any company. It helps in improving existing processes and in reducing the high percentage of unbudgeted staff hours spent on reworking. six sigma a concept evolved which involves the best part of previous improvement methodologies such as quality control, tqm, and zero effects and new techniques of the modern business world which makes it unique.This is the reason why other companies are adopting it.

Bibliography. www.Google.com www.wickpidia.com www.scribd.com www.sixsigmatutorial.com