Six Sigma:

Production & Operations Management

Jonathan Butt
Greg Cake
Subir Roy

July 26, 2005

What is Six Sigma?

Statistically-based process improvement methodology which aims

to reduce defects to a rate of 3.4 per million opportunities.
This reduction is achieved by identifying & eliminating variation in
process.
Through defining defects the Six Sigma process focuses on
customer requirements, and thus is very customer orientated.
Fundamental methodology of Six Sigma is based on DMAIC an
acronym: Define, Measure, Analyze, Improve, & Control.
Six Sigma is not a quality management system, or quality
certification system like ISO-9001.
The focus on defects is shifted from checking products for defects
to improving the process so that defects do not occur.

Key Concepts of Six Sigma

At its core, Six Sigma revolves around a few key concepts:

Critical to Quality (CTQ): The attributes most important to the
customer.
Defect: Failing to deliver what the customer wants.
Process Capability: What your process can deliver.
Variation: What the customer sees & feels.
Stable Operations: Ensuring consistent, predictable processes to
improve variation.
Design for Six Sigma (DFSS): Designing to meet customer needs
and process capability.

Origins of Six Sigma

Credited to Bill Smith a reliability engineer at Motorola, who noted

system failure rates were quite higher than predicted by final
product testing.

Smith blamed dramatic increases in system complexity & the

resulting opportunities for failure as well as a fundamental flaw in
traditional quality thinking.

However many other quality gurus also made presentations to

upper management at Motorola around the same time, and
conflicting information arises about who actually developed this
philosophy first.

Why Sigma?

The concept of Six Sigma relates to the fundamental statistical

concept of deviation, which is noted by the Greek letter sigma ().

The deviation by which a products quality could fluctuate during

production and still be of acceptable quality at the time was 3, or
just over 66 000 defects per million (6.68%)

At Motorola during this period the design margin for quality had
been 4, which was considerably better at 0.621%.

Sometime in 1986 Smith realized that actual quality figures at

Motorola did not match the 4 deviation for quality, and theorized
that the real mean value could be differing by as much as 1.5
because of increasing complexity in systems and the higher
probability of one of these many components to be substandard.

All these deviation values basically led to a goal of 6 or 3.4

defects per million opportunities.

With a four sigma standard for quality

Hospital: 5,000 incorrect surgical procedures per week.
Air travel: Two short or long landings at every major airport every day.
Drug Prescriptions: 200 000 wrong prescriptions every year.
Downtime: 54 hours of system downtime per year.
Golf: One missed putt every nine rounds.

Lets compare with six sigma quality standards

Hospital: 1.7 incorrect surgical procedures per week.
Air travel: a short or long landing at every major airport once every five years.
Drug Prescriptions: 68 wrong prescriptions every year.
Downtime: 2 minutes of system downtime per year.
Golf: One missed putt every 163 years.

Because of this increased focus on reliability, Motorola received the

Malcolm Baldrige Award shortly after the rollout of Six Sigma in 1988.

Receiving this award required Motorola to share its methods with

colleagues, and showed Motorolas quality professionals how far ahead
they were with respect to their competitors.

At this point Mikel Harry developed the strategic vision for Six Sigma.
His basic ideals were:
A change in company focus towards preventing defects, not inspecting for
them.
Anchoring quality by dollars (increased spending).
Finally seeking a whole business transformation.

This vision included the description of difference competence levels in Six

Sigma and based on the traditions of karate, were designated by belts:
Green Belt
Black Belt
Master Black Belt

Six Sigma & Belts

Developed as a core initiative of the Six Sigma program, the

concept shows the skills and dedication to the methodology of
quality, and is designed to instill pride in the six sigma workforce.
The six sigma workforce is broken down into different
organizational groups.

Champion: These individuals are high-level executives with great

understanding of the methodology and are committed to the success of the
program. In all organizations the program will be led by a full time
champion who uses six sigma in everyday work & communicates the
merits of six sigma at every opportunity.

Sponsor: The owner of the process who helps to initiate and coordinate
improvement activities in their area of responsibility.

Master Black Belt: Highest level of technical & organizational proficiency.

These individuals provide technical leadership to the program, as well as
provide most of the training. Because of this communications & teaching
skills are as important as technical competence.

Black Belt: A technically minded individual with a strong background in

college level mathematics & statistics. The Black Belt provides much of the
quantitative analysis involved in the daily six sigma project.

Green Belt: Six Sigma project leader, capable of facilitating six sigma
teams & projects from conception to completion. Training for green belts in
much less than Black, with emphasis on project management, and quality
control. These individuals are not employed full time on six sigma projects.

A mature six sigma program has around 1 Master Black Belt for every 1000
employees, a Black Belt completes from 5 to 7 projects a year.

Themes
In order for a company to be successful in Six Sigma
development the following themes must become second
nature:

Continuous focus on customer requirements.

Use of measurements & statistics to identify and measure
variation in the process of interest.
Identifying root causes of problems.
Process improvements to remove variation and thus lower defects.
Pro-active management focusing on problem prevention,
continuous improvement & ever constant strive for perfection.
Cross-functional collaboration within the organization.
Setting very high goals.

Who uses Six Sigma?

Surveys undertaken in the US in the first half of this decade by a

number of firms show larger use of six sigma than one might imagine.
Also, company size is not a determining factor in six sigma use. The
highest percentage of surveyd respondents with six sigma programs
in use, were those with 1000 or less employees
Company Size and Percentages with Six Sigma

# Employees

QD

Dyncorp

0 - 1000

19.4%

32.6%

1001 - 5000

23.7%

20.5%

5001 - 10 000

9.9%

6.3%

10 001 - 20 000

7.9%

7.6%

39.3%

24.1%

> 20 000

Note: QD Quality Digest Magazine, The Dyncorp percentages do not add to 100 because all respondents
were used in tabulating results, QD numbers are only respondents who have a six sigma program in
place. QD refers to the number of employees as all persons in the employ of the company, Dyncorp
does not specify how the number of employee values were determined.

Along with the wide variety in the size of companies with six sigma
programs, there are also many companies who have been on board
the six sigma philosophy for a number of years.

Length of Time Six Sigma Has Been in Place

QD%
Number of Years

QD%

2003

Number of Years

QD%
2002

2003

Dyncorp%

0-1

21.3%

0-1

30.4%

21.3%

21.0%

1-2

28.0%

1-2

31.9%

28.0%

35.3%

2-3

23.2%

2-3

17.4%

23.2%

13.4%

3-4

10.9%

3-4

7.3%

10.9%

7.1%

4-5

6.4%

4-5

2.9%

6.4%

3.3%

5-10

7.2%

5+

10.1%

10.2%

10.3%

10-15

1.1%

15+

1.9%

Note: QD Quality Digest. QD numbers total 100%, The Dyncorp percentages do not add to
100 because all respondents were used in tabulating results, QD numbers are only
respondents who have a six sigma program in place.

While six sigma is most commonly used in manufacturing

processes, the same methodology can be used to improve other
business processes. It can be used to:

Identify ways to increase production capacities in equipment.

Improve on time delivery.
Reduce cycle time for hiring & training new employees.
Reduce quality or delivery problems with suppliers.
Improve logistics.

Improve quality of customer service.

Almost 50% of all American manufacturing companies have a six

sigma program in place, while just under 40% of service companies
have implemented a program.

Also, within a business different functional groups also use six

sigma, the following chart shows results from the same Quality
Digest survey

Manufacturing

15.64%

Plant Operations

10.74%

Engineering

10.50%

Customer Service

9.36%

Test/Inspection

9.06%

Administration

9.03%

Purchasing

7.70%

Shipping Receiving

7.22%

Sales

6.23%

R&D

5.81%

Document Control

5.72%

Pollution Prevention

3.01%

Why use Six Sigma?

Since the Six Sigma philosophy focuses on defects, it would be
obvious that it can reduce production times, but six sigma can be
used for much more
Through reduction in defects, a six sigma program can reduce
overhead costs. Since nearly every product produced is of
prescribed quality, inventories can be reduced.
WIP and cycle times can be reduced.
Managers are freed from the process. With vastly improved product
quality managers no longer have to spend time problem solving
Six Sigma will increase customer satisfaction, less defects means
more people who get what they wanted the first time.
Six Sigma companies have shown greater ease of expansion.
Because of the emphasis placed on quality and the problem solving
skills required to achieve that quality, these companies recover
from the initial setbacks of a new process quicker.

Six Sigma transforms the way a company thinks and works

on major business issues
- Process design: Designed to have the best and most consistent

outcome from the beginning.

- Analysis & reasoning: Using facts to find root cause, instead of
educated guesses & intuition.
- Focus on process improvement as a key to excellence in quality.
- Broader participation in problem solving.
- Goal setting: aiming at stretch goals, not good enough targets.
This ensures the company is always striving for improvement.
- Suppliers are no longer evaluated on cost, instead evaluated on
relative capability to consistently provide quality materials with
short lead times.

DMAIC Roadmap

DMAIC methodology is central to Six Sigma process improvement

projects. Each phase provides a problem solving process where-by
specific tools are employed to turn a practical problem into a
statistical problem, then generate a statistical solution and turn it
back into a practical solution.

Each letter represents a phase in six sigma implementation, from

the initial project design to ensuring the benefits gained using this
system stay implemented.
The DMAIC roadmap is usually implemented for a process that is
underperforming, not a process in the design stage.

D: Define

The purpose of the define phase is to clearly identify the problem,

the requirements of the project, or its objectives. These should be
critical issues and aligned with the company business strategy,
and the customer requirements.

This phase includes:

Development of defect definitions
Development of a team charter and a champion
Estimate the financial impact of the project
Senior management approval

Key Questions for the Define phase

What matters to the customer?

What defect are we trying to reduce?
By how much?
By when?
How much are defects costing right now?
Who will be in the project team?
Who is going to support this project implementation?
At this point in implementation, visual charts (pareto, trend,
process flow,) are useful to see the development of defects.

M: Measure

The purpose of the measure phase is to fully understand the

process and its current performance by identifying how to
best measure performance. These measurements must be
realistic as well as useful, in order to provide help in reducing
defects.

This phase includes

Identifying specific performance requirements of relevant critical-toquality (CTQ) characteristics
Mapping of relevant processes, with all inputs that effect a particular
output identified.
Analyze measurement system capability & establish relevant baseline
for process capacity
Collect data (ensuring opportunities for error are evaluated)
Verify the problem actually exists

Key Questions for the Measure phase

What is the process? How does it function?

Which outputs effect CTQ the most?
Which inputs effect outputs the most?
Is the ability to measure/detect sufficient?
How is the current process performing?
What is the best the process was designed to do?
At this point fishbone diagrams, process mapping and cause and
effect analysis are useful tools.

A: Analyze

In the analyze phase, the information collected in the measure

phase is analyzed. Hypotheses on root cause of variations in
measured values are developed. Statistical analysis is undertaken
to validate these hypotheses.

This phase includes:

Generation of hypotheses about possible root causes of
variation & potential critical inputs.
Identify the vital root causes and critical inputs that have the
most significant impact.
Validate these hypotheses by performing multivariable
statistical analysis.

Key Questions for the Analyze phase

Which inputs actually affect CTQs most (based on actual data)?

By how much?
Do combinations of variables affect inputs?
If an input is changed, does the output really change in the
desired way?
How many observations are required to draw conclusions?
What is the level of confidence?
At this point in the process, statistical analysis, as well as the five
whys are useful tools.

I: Improve

The improve phase focuses on developing ideas to remove

root causes of variation, testing & standardizing these
solutions.

This phase includes:

Identifying ways of removing causes of variation.

Verify critical inputs.
Discover relationships between variables.
Establish operating tolerances which are upper and lower
specifications. of the process, and if followed precisely will
ensure defect free products.
Optimize critical inputs or reconfigure the current process.

Key Questions for the Improve phase

Once it is known which inputs affect the outputs most, how can
they be controlled?
How many trials do we need to ensure optimal settings have been
achieved?
Should the old process be improved, or should a new process be
designed?
By how much has the defects per million opportunities decreased?

The most applicable tool at this phase is process mapping to show

new & improved processes.

C: Control

The control phase aims to establish standard measures to

maintain performance & to correct problems as needed, including
those with the measurement system.

This phase includes:

The validation of measuring systems.
Validation of long term capability.
Implementation of process control with a plan to ensure
problems dont reoccur.

Key Questions for the Control phase

Once defects have been reduced, how to ensure the improvement

is sustained?
What systems need to be in place to check that the improved
procedures stay implemented?
How can these improvements be shared with the rest of the
company?

During the control phase, a standardized set of documents for

procedures, as well as a means to record data and check it against
historical values are important tools.

So you want to implement Six

Sigma?

Although the results of a six sigma project are highly

desirable by most companies, the implementation process
must be carefully considered. Six Sigma is a long term
commitment, and will not produce results overnight.
To build six sigma capacity requires the following steps:
Discover: recognize the need for six sigma & explore the impact it may
have on the company.
Decide: management approves the initiative, then defines purpose &
scope.
Initialize: create detailed deployment plans for numbers of Black Belts,
as well as other human resources needed, training requirements,
proposals for 6 projects and the financial impact of each.
Deploy: train project Champions & Black Belts. Meanwhile select and
implement improvement projects:
Sustain: train 6 Green Belts & process improvement team leaders to
speed up improvements & maintain acheivements.

Factors Critical to Six Sigma

Success

Senior management must be committed: without this six sigma

projects are doomed to failure. GEs success with the program is due
to the role Jack Welch (former CEO) played in advocating the program
and integrating it into the core of business strategy at GE.

Training the right people: The methods of analysis often used for six
sigma projects are technical by nature, and training programs focused
on analytical problem solving skills as well as leadership are critical to
initial momentum. People selected for a six sigma initiative should be
motivated by compensation, rewards, recognition & promotion.

Selecting the right project: Initial six sigma projects should be focused
on key problem areas with impact to critical aspects of business
success. Not all business problems need a six sigma solution.