Chapter-II

PRINCIPLES OF SIX SIGMA

 PROCESS CONCEPTS
• In general there are two types of processes,

1. Value creation process: to run the business & to

maintain or achieve competitive advantage.

2. Support process: contribute to the successful

performance of the value- creation process,
employees & daily operations.
 Value creation process
• Design process: all activities that are performed
to incorporate customer requirements, new
technology and past learning into the functional
specifications of the product.
• Production or delivery process: create or
deliver the actual product.
• Support process do not add value directly to
the product.
 Systems thinking
• The management should focus on the interaction
of parts and of the system with other systems
rather than the actions of parts taken separately.
• Metrics and measurements:
• A metric is a verifiable measurement of some
particular characteristic, stated either numerically
or in quantitative terms.
• It provides information on performance & it is
vital in six sigma since they facilitate fact based
decisions.
• In six sigma terminology,
dpmo= (no.of defects discovered/opportunities
of error)x 1,000,000.
Eg) an airline wishes to measure the effectiveness
of its baggage handling system. A dpu (defects
per unit) measure will be lost bag per customer.
If the average no. of bags per customer is 1.6
and the airline recorded 3 lost bags for 8000
passengers in one month, than calculate the
opportunities for error.
dpmo= 3/(8000)(1.6)x 1000000=234.375.
Statistical basis of six sigma:
Six sigma quality level corresponds to a process
variation equal to half of the design tolerance
while allowing the mean to shift as much as
1.5 standard deviations from the target.
 Six sigma problem solving
• Common themes of all methodologies:
• Redefining and analyzing the problem- for new
perspectives to achieve a workable problem
definition.
• Generating ideas- brain storm – potential
solutions
• Evaluating and selecting ideas:
• Implementing the ideas.
 DMAIC methodology
• Define: describe the problem in very specific
operational terms
• Measure: how to measure the internal processes
that impact CTQs which requires understanding of
casual relationship between process performance
and customer value.
• Analyze: why defects, error or excessive variation
occur.
• Improve: the proposed solution should positively
impact the key process variables & the CTQs and
identifying the maximum acceptable ranges of these
variables.
• Control: how to maintain the improvements.
 Six sigma in services
• All six sigma projects have 3 characteristics:
• A problem to be solved
• Process in which the problem exists
• One or more measures that quantify the gap
to be closed & can be used to monitor
progress.
• In services, 4 key measures,
• Accuracy, cycle time, cost, customer
satisfaction.
 Organizing for six sigma projects
• Six sigma project management:
• It involves all activities associated with planning,
scheduling and controlling projects.
• The life cycle of or stages of a typical project are,
• Project initiation: define directions, priorities.
Limitations and constraints.
• Project planning: create a blue print for the scope of
the project & resources needed to accomplish it.
• Project assurance: use appropriate, qualified
processes to meet technical project design
specifications.
• Project control: use appropriate communication
and management tools to ensure that
managerial performance , process improvements
and customer satisfaction are tracked.
• Project closure: evaluate customer satisfaction
with project deliverables & assess success and
failures that provide learning for future projects
& referrals from satisfied customers.
 Project initiation
• Clearly define the goals and when & how they
may be accomplished.
• Includes identifying a project champion ,
project manager & other team members.
• The customer must be a vital participant in the
in all stages of process , not just at the
beginning or at the end.
 Project planning
• Time, resources, cost and performance are the
4 factors – project management decisions.
• Steps in planning are,
• Project definition
• Resource planning
• Project scheduling
• Project tracking and control
 Project assurance
• Allows the project manager to estimate how
successfully the final “ deliverable” will perform,
not just whether it will be on time and below
budgeted cost.
• Project control: comprises of ,
• Project plan covering expected scope, schedule,
cost, performance goal or requirements.
• A continuous monitoring system & reporting
system
• Timely actions to correct deviations
 Project closure
• Ensure the following,
• Signing off –of members
• Bills have been paid & financial records
completed
• Follow-up actions
• Final project audit
• Best practices are communicated to other parts
of organization.
 Project reviews
• Are status checks to evaluate the progress
toward achieving the project plan.
• Benefits are,
• Monitoring, providing guidance, check focus &
alignment, display support , knock down
barriers, share best practices and recognize &
reward.
 Review for DMAIC after every phase
• Introduction by project champion or sponsor
• Project team presentation
• Evaluation and closing by project champion or
sponsor.
 Six sigma project teams
• Six sigma teams not only addresses immediate
problems but also provide an environment for
individual learning, management
development & career advancement.
• Champions: senior-level managers who
promote and lead the development of six
sigma in a significant area of business. They
work toward removing barriers that might
inhibit the successful implementation of six
sigma project.
• Master black belts: full-time six sigma experts
who are responsible for six sigma strategy,
training, mentoring, deployment and results.
Work across to develop & coach teams, conduct
training and lead change.
• Black belts: fully trained six sigma experts with
up to 160 hrs of training who perform much of
the technical analysis required for projects
usually on a full time basis. They are the future
business leaders.
• Green belts: functional employees who are
trained in introductory six sigma tools &
methodology & work on projects on a part-
time basis assisting black belts.
• Team members: individuals from various
functional areas who supports specific projects.
 Skills for team leaders
• Conflict management & resolution
• Team management
• Leadership skills
• Decision making
• communication
• Negotiation
• Cross-cultural training.
• Team dynamics : forming, storming, norming,
performing & adjourning
 10 ingredients for a successful team:
1. Clarity in team goals
2. An improvement plan
3. Clearly defined roles
4. Clear communication
5. Beneficial team behaviors
6. Well defined decision procedures
7. Balanced participation
8. Established ground rules
9. Awareness of group process
10.Use of scientific approach.
 Mess management: a system of external
conditions that produces dissatisfaction
• Lack of knowledge about how the project works,
• How it should work?
• Lack of control on materials &equipment
• Inadvertent errors in work
• Unnecessary steps in process & excess inventory
• Hasty design & production of parts
• Lack of training, poor instrument calibration &
testing, poor light, temperature, noise etc
• Failure to understand the capability of the
process.
 Categories of quality problem solving
• Conformance problems
• Unstructured performance problems
• Efficiency problems
• Product design problems
• Process design problems.
 Factors in project selection:
• Impact on customers & organizational
effectiveness
• Probability of success
• Impact on employees
• Fit to strategy & competitive advantage
• Financial return
 Cost of quality (COQ)
• The objective is to translate quality
problems in the language of money
• More specifically called as cost of poor
quality
• To establish a cost of quality approach, one
must identify the activities that generate
cost, measure them, report them in a way
that is meaningful to the managers and
analyze them to identify the areas of
improvement
 Quality Cost Classification
• Appraisal cost – those associated with efforts to
ensure conformance to requirements , generally
through measurement and analysis of data to
detect nonconformance
• Internal failure cost – incurred as a result of
unsatisfactory quality found before the delivery
a product to the customer
• External failure cost – occur after poor quality
product reach the customer
 Prevention cost
• Quality planning cost such as salaries of
individuals involved in planning and problem
solving teams
• Process control cost such as cost spent on
analyzing production process and implementing
process control plans
• Information systems cost such as develop data
requirements and measurements
• Training and general management cost
including internal and external training
programs, clerical staff expenses and
miscellaneous supplies
 Cost of Quality Matrix
Design Purchasing … Production finance accounting Totals
Engineering

Prevention Costs
Quality
Planning
Training
…
Appraisal Costs
Test and
inspection
Instruments
…
Internal Failure
Costs
Scrap
Rework
…
External Failure
Costs
Returns
Recall Costs
…
Totals
 Return on Quality
• Balancing quality costs against expected
revenue gains is known as Return on Quality
(ROQ)
• Principles of ROQ
– Quality is an investment
– Quality efforts must be made functionally
accountable
– It is possible to spend too much on quality
– Not all expenditures are equally valid
 PARETO ANLYSIS
• Pareto diagrams
• Joseph Juran popularized the Pareto principle in
1950 after observing that a high proportion of
quality issues resulted from only a few causes.
• He named this technique after Vilfredo Pareto, an
Italian economist who determined that 85% of
wealth in Milan is owned by 15% of the people
– A Pareto distribution is one in which the
characteristics observed are ordered from
largest frequency to smallest
– A Pareto diagram is a histogram from the
largest frequency to the smallest
– PARETO analysis can easily be applied to cost
of quality data.
– If we rank internal failure costs from largest to
smallest, we can find 70-80% of internal failure
cost is due to one or two manufacturing
problems.
 Pareto Diagram

60

50

40
Incom plete
Surface Scars
Number

30 Cracks
Others
Misshapen
20

10

0
Defects
 Models for project selections
• Based on impact of results,
• Level-1: directly affects an organization’s profit
margin
• Level-2: results in redeployment of resources
inside an organization to increase operational
efficiency or productivity
• Level-3: directly affect operations by avoiding
expenditures or increasing the chances of
obtaining higher future revenues.
 Project definition: High level process maps
• Defines the boundaries of six sigma projects by
identifying the process being investigated , its
inputs, its outputs & its suppliers & customers.
• SIPOC- a block diagram or flow chart.
Supplier INPUTS PROCESS OUTPUTS
customer
• SIPOC maps should not have more than six or
seven major activities.
• Provides a broader view of the key elements to
explain who is the process owner, how inputs are
acquired, who the process serves and how it
adds value.
 Simple SIPOC process map for automobile
manufacturing process

body fabrication

Metal stamped painting finished automobiles

Fabricators parts
assembly Dealers
Component parts &
Suppliers subassemblies
 Understanding customer needs
• Performance product characteristics
• Features
• Reliability
• Conformance
• Durability
• Serviceability
• aesthetics
 Dimensions of service quality
• Reliability: ability to provide what was promised.
• Assurance: knowledge, courtesy and ability of
employees to convey trust and confidence.
• Tangibles: physical facilities, equipments &
appearance of personnel.
• Empathy: degree of caring and individual
attention provided to customers.
• Responsiveness: willingness to help customers &
provide prompt service.
 Three classes of customer
requirements:
• Dissatisfiers: requirements that are expected.
• Satisfiers: requirements, say they want.
• Exciters/ delighters: new features not
expected.
 GATHERING & ANALYSE CUSTOMER INFORMATION
• Companies use a variety of methods or
“listening posts” to collect information about
customer needs & expectations and customer
satisfaction with the company’s performance
on these measures.
• Key approaches for gathering information:
1. Comment cards & formal surveys
2. Focus groups
3. Direct customer contact
4. Field intelligence
5. Complaint analysis
6.Internet monitoring.
• The collected information needs to be sorted
& consolidated into logical groups so that
managers can understand key issues.
• One useful tool for organizing large volumes of
information efficiently & identifying natural
patterns & groupings in the information is the
affinity diagram.
 Discussion question
• Which of the five dimensions of service quality –
reliability, assurance, tangibles, empathy or
responsiveness- would the following items from a retail
banking customer survey address?
• Following through on promises.
• Offering convenient banking hours.
• Providing prompt customer service.
• Properly handling any problems that arise.
• Maintaining clean and pleasant branch office facilities.
• Demonstrating knowledge of bank products and
services
• Giving undivided attention to the customer.
• Never being too busy to respond to customer
requests.
• Charging reasonable service fees
• Maintaining a professional appearance.
• Providing error free bank statements.
• Keeping customer transactions confidential.
 Classify dissatisfiers, satisfiers and exciters
( fast food restaurant)
• Special prices on certain days.
• Food is safe to eat.
• Hot food is served hot.
• Service is friendly.
• Background music.
• Play land for children.
• Restaurant is clean inside.
• Food is fresh
• A ‘one-bite’ money back guarantee
• Orders can be phoned in for pickup at a separate
window.
 Question-1
• The GM of an elevator company was frustrated
with the lack of cooperation between the
mechanical engineers who designed the new
elevators and the manufacturing engineers who
determined how to produce them.
• The mech. Engineers would often completely
design a new elevator without consulting with the
manufacturing enggrs. And then expect the factory
to somehow figure out how to build it.
• Often the new products were difficult and nearly
impossible to build and their quality and cost
suffered as a result.
• The designs were sent back to the mech. Enggrs.
(often more than once) for engineering changes
to improve the manufacturability , and
customers sometimes waited for months for
deliveries.
• The GM believed that if the two groups of
enggrs. would communicate early in the design
process many of the problems would be solved.
• At his wits’ end, he found a large empty room in
the plant and had both groups moved into it.
• The manager relaxed a bit, but a few weeks
later he returned to a surprise.
• The two group of engineers had finally learned
to cooperate –by building a wall of book cases
and file cabinets right down the middle of the
room, separating them from each other.
• What would you do in this situation? Relate
this to six sigma and systems thinking.