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Six Sigma Overview
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Origins of Six Sigma
1987 Motorola Develops Six Sigma
Raised Quality Standards
Other Companies Adopt Six Sigma
GE
Promotions, Profit Sharing (Stock Options), etc.
directly tied to Six Sigma training
Dow Chemical, DuPont, Honeywell,
Whirlpool
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What is Six Sigma?
Normal distribution
Mean ()
Standard deviation ()
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What is Six Sigma?
Standard Normal distribution

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What is Six Sigma?
Standard
Normal
distribution

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What is Six Sigma?
Assumes 1.5 sigma process drift
Defect levels decrease exponentially
as sigma levels increase from one
value to the next
Six sigma is 3.4 defects per million


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Sigma Significance
Sigma Defects
numbers per million
1.5o 500,000
2.0o 308,300
2.5o 158,650
3.0o 67,000
3.5o 22,700
4.0o 6,220
4.5o 1,350
5.0o 233
5.5o 32
6.0o 3.4
0
100,000
200,000
300,000
400,000
500,000
600,000
1.5 2.5 3.5 4.5 5.5
# of Sigmas
#
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Costs/Benefits to GE
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Commitment Required
Example: GE Incentives
GE ties 40% of executive incentives to Six
Sigma achievements
GE requires Black Belt training to be
considered for promotion
GE puts Master Black Belts in variable
incentive compensation plans
Resources
Black Belt project leaders are assigned full
time to improvement efforts

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Why do 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 figure out how to
eliminate them and get as close to zero defects
as possible. Six Sigma has changed the DNA of GE
in everything we do and in every product we
design.
GE
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How to implement Six Sigma?
Where is it applied?
Improving customer satisfaction
Reducing cycle time
Reducing defects
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How to implement Six Sigma?
Who is involved?
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How to implement Six Sigma?
How to do?
Identify customer-driven critical-to-
quality (CTQ) characteristics.
Identify key processes that cause
defects in a CTQ characteristic.
Create the opportunity for project.
For each process project DMAIC

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How to implement Six Sigma?
DMAIC
Define numerical definition of project scope,
objectives, resources and constraints
Measure capability of current process performance,
comparing with the benchmark --critical customer
requirements
Analyze the problems to find out root causes
Improve identify potential solutions and begin to
implement them
Control the performance to continue to achieve higher
results

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Example: Shipping Logistics
Situation:
GE Appliance products, such as microwave ovens and air
conditioners, are being produced in Asia and shipped to US
customers, such as Wal-Mart
Delivery performance is very erratic and the average on-
time delivery is about 85%

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Success story: Shipping Logistics
Situation:
Product arrives in the US
at Los Angeles
From the port, the product is
taken either to a GE
distribution center or to a
customer designated
forwarder
Product is then cross docked
and sent on to final
distribution centers via rail,
truck-on-rail, or truck

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Example: Shipping Logistics
Process Mapping
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Example: Shipping Logistics
DMAIC Steps

Define Phase:

Ateam is assembled to attack this problem. The team includes suppliers, 3rd party
vendors, GE logistics people, finance, sales, and customers
Tthe supply chain process is mapped from the supplier to the end customer

Measure Phase:

- The current performance is measured by looking at data from the previous 6
months. Capability of this process is 1.5 sigma currently

Analyze Phase:

- All of the many inputs are examined and it appears that 2 areas are the vital inputs,
the shipping decision by the supplier and getting the product through the port of LA

Improve Phase:

- Further investigation by the team yields some changes in procedure that reduces
the problem

Control Phase:

- Documentation and procedures are updated

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Procedure improvement

Old Procedure



New Procedure

GE specifies when products produced and
shipped

GE specifies when products produced and
delivered to US

Supplier would comply by selecting first ship
going to the US

Supplier complies by selecting the right
ship

Shipping time 8 to 18 days

Shipping time 8 days

Supplier notifies GE system (often delayed) and
freight forwarder with paperwork

Supplier notifies freight forwarder with
paperwork, and freight forwarder
communicates through GE system

Example: Shipping Logistics
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Results:
On time delivery increased to 97%
Transportation costs reduced by $300,000
Inventory (cash flow) reduced by $1,000,000
Capability Raised to 3.5 Sigma


Example: Shipping Logistics