By:

Arslan Ahmed
Date:
20th March, 2012

Time:

20 Minutes
1-61

Agenda
What is Sigma? What is a Bell Curve? Why Six Sigma? Define Six Sigma Six Sigma Methodology Tools for Six Sigma Six Sigma in Supply Chain Q&A

Have you ever

Shot a rifle?
Jack

Jill

Who is the BETTER shooter?

What is SIGMA?
Sigma is the Greek letter representing

the standard deviation of a population of data. Sigma is a measure of variation Variation directly affects customer experiences.

Two classes took a recent quiz. There were 10 students in each class, and each class had an average score of 81.5

Here are the scores on the math quiz for Teams A & B

A 72 76 80 80 81 83 84 85 85 89

B 57 65 83 94 95 96 98 93 71 63

Average: 81.5

Since the averages are the same, can we assume that the students in both classes all did pretty much the same on the exam?

Mean

The

answer

is

No.

The average (mean) does not tell us anything about the variation in the grades.

So, we need to come up with some way of measuring not just the average, but also the variation of our data.

In a set of data, the Standard Deviation is a number that measures how far away each number is from their mean.
VARIATION

If the Standard Deviation is large, large, it means the numbers are spread out from their mean. If the Standard Deviation is small, it means the numbers are close to their mean.

Here are the scores on the math quiz for Teams A & B

A 72 76 80 80 81 83 84 85 85 89

B 57 65 83 94 95 96 98 93 71 63

Average: 81.5

The Standard Deviation measures how far away each number in a set of data is from their mean.
For example, start with the lowest score, 72. How far away is 72 from the mean of 81.5? 72 - 81.5 = - 9.5

- 9.5

Or, start with the highest score, 89. How far away is 89 from the mean of 81.5? 89 - 81.5 = 7.5

- 9.5

7.5

So, the first step to finding the Standard Deviation is to find all the distances from the mean.

Distance from Mean

72 76 80 80 81 83 84 85 85 89

-9.5

7.5

So, the first step to finding the Standard Deviation is to find all the distances from the mean.

Distance from Mean

72 76 80 80 81 83 84 85 85 89

- 9.5 - 5.5 - 1.5 - 1.5 - 0.5 1.5 2.5 3.5 3.5 7.5

Distance from Mean

Distances Squared

Next, you need to square each of the distances to turn them all into positive numbers

72 76 80 80 81 83 84 85 85 89

- 9.5 - 5.5 - 1.5 - 1.5 - 0.5 1.5 2.5 3.5 3.5 7.5

90.25 30.25

Distance from Mean

Distances Squared

Next, you need to square each of the distances to turn them all into positive numbers

72 76 80 80 81 83 84 85 85 89

- 9.5 - 5.5 - 1.5 - 1.5 - 0.5 1.5 2.5 3.5 3.5 7.5

90.25 30.25 2.25 2.25 0.25 2.25 6.25 12.25 12.25 56.25

Distance from Mean

Distances Squared

Add up all of the distances

72 76 80 80 81 83 84 85 85 89

- 9.5 - 5.5 - 1.5 - 1.5 - 0.5 1.5 2.5 3.5 3.5 7.5

90.25 30.25 2.25 2.25 0.25 2.25 6.25 12.25 12.25 56.25

Sum: 214.5

Distance from Mean

Distances Squared

Divide by (n 1) where n represents the amount of numbers you have.

72 76 80 80 81 83 84 85 85 89

- 9.5 - 5.5 - 1.5 - 1.5 - 0.5 1.5 2.5 3.5 3.5 7.5

90.25 30.25 2.25 2.25 0.25 2.25 6.25 12.25 12.25 56.25

Sum: 214.5 (10 - 1)

= 23.8

Distance from Mean

Distances Squared

Finally, take the Square Root of the average distance

72 76 80 80 81 83 84 85 85 89

- 9.5 - 5.5 - 1.5 - 1.5 - 0.5 1.5 2.5 3.5 3.5 7.5

90.25 30.25 2.25 2.25 0.25 2.25 6.25 12.25 12.25 56.25

Sum: 214.5 (10 - 1)

= 23.8
= 4.88

Distance from Mean

Distances Squared

This is the Standard Deviation

72 76 80 80 81 83 84 85 85 89

- 9.5 - 5.5 - 1.5 - 1.5 - 0.5 1.5 2.5 3.5 3.5 7.5

90.25 30.25 2.25 2.25 0.25 2.25 6.25 12.25 12.25 56.25

Sum: 214.5 (10 - 1)

= 23.8
= 4.88

Distance from Mean

Distances Squared

Now find the Standard Deviation for the other class grades

57 65 83 94 95 96 98 93 71 63

- 24.5 - 16.5 1.5 12.5 13.5 14.5 16.5 11.5 - 10.5 -18.5

600.25 272.25 2.25 156.25 182.25 210.25 272.25 132.25 110.25 342.25

Sum: 2280.5 (10 - 1)

= 253.4
= 15.91

Now, lets compare the two classes again Team A

Average on the Quiz Standard Deviation

Team B

81.5
4.88

81.5
15.91

Customers do not feel averages!

Managing by the average doesnt tell the whole story. The average and the variation together show whats happening.

Customers remember variation only!

What is a Normal Distribution?

27

Suppose we recorded the marks of 30 students in a certain test and graphed the results. Assume the first student obtained 6 marks. We could create a bar graph and plot that student on the graph. If our second student scored 5 marks, we would add him to the graph. 8 7 6 5 4 3 2 1 As we continued to plot test scores, a pattern would begin to emerge.

Number of students

10

Marks

Notice how there are more students with 6 marks than any other score. Notice also how as the score becomes larger or smaller, there are fewer and fewer students with that measurement. This is a characteristics of many variables that we measure. There is a tendency to have most measurements in the middle, and fewer as we approach the high and low extremes. 8 7 6 5 4 3 2 1 If we were to connect the top of each bar, we would create a frequency polygon.

Number of Students

5
Marks

10

You will notice that if we smooth the lines, our data almost creates a bell shaped curve.

8 7 6 5 4 3 2 1

Number of Students

6
Marks

10

You will notice that if we smooth the lines, our data almost creates a bell shaped curve. This bell shaped curve is known as the Bell Curve or the Normal Curve.

8 7 6 5 4 3 2 1

Number of Students

6
Marks

10

Whenever you see a normal curve, you should imagine the bar graph within it.

9 8 7 6 5 4 3 2 1 12 13 14 15 16 17 18 19 20 21 22 Points on a Quiz

Number of Students

Normal distributions (bell shaped) are a family of distributions that have the same general shape. They are symmetric (the left side is an exact mirror of the right side) with scores more concentrated in the middle than in the tails. Examples of normal distributions are shown to the right. Notice that they differ in how spread out they are. The area under each curve is the same.

The mean and standard deviation are useful ways to describe a set of scores. If the scores are grouped closely together, they will have a smaller standard deviation than if they are spread farther apart.

Small Standard Deviation

Large Standard Deviation

Same Means Different Standard Deviations

Different Means Same Standard Deviations

Different Means Different Standard Deviations

35

If your data fits a normal distribution, approximately 68% of your data will fall within one standard deviation of the mean. Approximately 95% of your data will fall within two standard deviations of the mean. Over 99% of your data will fall within three standard deviations of the mean.

When you have a subjects raw score, you can use the mean and standard deviation to calculate his or her standardized score if the distribution of scores is normal. Standardized scores are useful when comparing a students performance across different tests, or when comparing students with each other. Your assignment for this unit involves calculating and using standardized scores.

z-score
T-score IQ-score

-3
20 65

-2
30 70 300

-1
40 85 400

0
50 100 500

1
60 115 600

2
70 130 700

3
80 145 800

SAT-score 200

The number of points that one standard deviations equals varies from distribution to distribution. On one math test, a standard deviation may be 7 points. If the mean were 45, then we would know that 68% of the students scored from 38 to 52. On another test, a standard deviation may equal 5 points. If the mean were 45, then 68% of the students would score from 40 to 50 points.

24

31

38 45 52 Points on Math Test

59

63

30

35

40 45 50 55 Points on a Different Test

60

WHAT IS SIX SIGMA?

39

Change Management: Two Alternative Approaches

Activity Centered Programs
Change Management Result Oriented Programs
Reference: Schaffer and Thomson, HBR, Jan-Feb. 1992

Activity Centered Programs

Activity Centered Programs: The pursuit of activities that sound good, but contribute little

to the bottom line Assumption: If we carry out enough of the right activities, performance improvements will follow
This many people have been trained This many companies have been certified

Bias: Weak or no empirical evidence to assess

the relationship between efforts and results

An Alternative: Result-Driven Improvement Programs

Result-Driven Programs: Focus on achieving specific, measurable, operational improvements within a few months
Examples of specific measurable goals:
Increase yield Reduce delivery time Increase inventory turns

Improved customer satisfaction

Reduce product development time

Six Sigma
The precise definition of Six Sigma is not important;

the content of the program is A disciplined quantitative approach for improvement of defined metrics Can be applied to all business processes, manufacturing, finance and services

What is 6 sigma?
6 sigma is a management methodology of which the goal is to improve dramatically the performance and the quality of all your processes, services and products. It is: > Customer centric

> Based on data/measurements/statistics

> A disciplined approach

> Result oriented, providing high returns

> Focused on reducing variability & defects

6 sigma
> If there is an output, there is a process! > If there is a process there is a performance variation > If there is variation there is a probability of defect (missing

our customer specifications or our contractual obligations!) > The customer feels always the output process variation. This is how he perceives your quality! > A 6 sigma process produces only 3.4 defects per million of operations > A process operating at 3 sigma produces 66807 defects per million of opportunities

SIX SIGMA
The central idea behind Six Sigma is

that if you can measure how many" defects you have in a process, you can systematically determine how to eliminate those and approach zero defects.

WHY SIX SIGMA

Intense competitive pressures especially from rapid

globalization. Greater consumer demand for high quality products and services, little tolerance for failures of any type. Top management (and stockholder) recognition of the high costs of poor quality. The availability and accessibility of large data bases and the increasing ability to explore, understand, and use the data.
47

COPQ (Cost of Poor Quality)

- Inspection - Warranty - Scrap - Rework - Rejects

Traditional Quality Costs: - Tangible - Easy to Measure Hidden Costs: - Intangible - Difficult to Measure

- Lost Sales - Late Delivery - Lost Customer Loyalty - Excess Inventory - Long Cycle Times - Costly Engineering Changes

- Lost Opportunities

- The Hidden Factory

Average COPQ approximately 15% of Sales

Managing Up the Sigma Scale

Sigma % Good % Bad 30.9 69.1 1 69.1 30.9 2 93.3 6.7 3 99.38 0.62 4 99.977 0.023 5 99.9997 0.00034 6 DPMO
691,462 308,538

66,807 6,210
233 3.4

WHAT IS DMAIC?
(Define, Measure, Analyze, Improve, Control)

A logical and structured approach to problem solving and process improvement.

An iterative process (continuous improvement) A quality tool which focus on change management style.
50

DMAIC approach
D Define M Measure A Analyze I Improve C Control

Identify and state the practical problem

Validate the practical problem by collecting data Convert the practical problem to a statistical one, define statistical goal and identify potential statistical solution Confirm and test the statistical solution

Convert the statistical solution to a practical solution

The Approach
Practical Problem

Statistical Problem Statistical Solution Practical Solution

Tools for DMAIC

Define
What is wrong?

Measure
Data & Process capability

Analyze
When and where are the defects

Improve
How to get to six sigma

Control
Display key measures

Benchmark Baseline Contract / Charter Voice of the Customer Quality Function Deployment Process Flow Map Project Management

7 Basic Tools Defect Metrics Data Collection, Forms, Plan, Logistics Sampling Techniques

Cause & Effect Diagrams Failure Models & Effect Analysis Decision & Risk Analysis Statistical Inference Control Charts Capability Reliability Analysis Root Cause Analysis

Design of Experiments Modeling Tolerancing Robust Design Process Map

Statistical Controls Control Charts Time Series Methods Non Statistical Controls Procedure adherence Performance Mgmt Preventive activities Poke yoke

WHEN SHOULD SIX SIGMA BE USED?

If there are processes that generate a lot of negative customer feedback, whether that customer is internal or external, the components of Six Sigma should be considered as a means to study and rectify the problem.

54

BENEFITS OF SIX SIGMA

Generates sustained success
Sets performance goal for everyone Enhances value for customers

Accelerates rate of improvement

Promotes learning across boundaries Executes strategic change

55

Application of Six Sigma in Supply Chain

Application of Six Sigma in Supply Chain Supplier Distributor

Improved Responsiveness Reduce No. of Damaged shipments Improved Inventory Management to reduce Perfect Order Fulfillment
No. of Stockouts Carrying Excess Inventory Perfect Order Fulfillment Delivery of Right Product at Right Time in Right Quantity with Right Documents Reduce Waste

Delivery of Right Product at Right Time in Right Quantity with Right Documents

Manufacturer
Reduced number of Defective Products
Improved Inventory Management to reduce Work Stoppages for want of Materials Carrying Excess Inventory Enhance Productivity Reduce Cycle Times Reduce Warranty Costs
57

Six Sigma Organizations

GE All 300,000

(Management Employees) GE employees must be Six Sigma certified within first year of service. All new GE products developed using the Design for Six Sigma (DFSS) approach. 3M New CEO (from GE) requires all 3M employees to become Six Sigma certified.

Motorolla Boeing Lockheed-Martin Bank-of-America American Express HSBC SAS Institute Allied Signal Sun Microsystems Raytheon

TRAININGS & CERTIFICATIONS

If you want to make yourself more valuable and attractive to employers then get training and certification Option I Certification as Six Sigma Green Belt Option II Certification as Six Sigma Black Belt

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Way Forward
Get Started Even poor usage of these tools will get results Learn more about Six Sigma

Q&A

61

THANKS

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