SIX SIGMA BASICS

Joe Kurian

Definition of a Process

A process is a collection of
interacting components that
transform inputs into outputs toward
a common aim, called a mission
statement.

Transformation
The transformation, involves the addition
or creation of value in one of three aspects:
time, place, or form.
An output has "time value" if it is available
when needed by a user.
For example, you have food when you are
hungry, or material inputs are ready on
schedule.
An output has "place value" if it is available
where needed by a user.

Variation in a Process
The outputs from all processes and their
component parts may be measured; the
measurements invariably vary over time
and create a distribution of measurements.
The distribution of measurements of the
outputs from a process over time is called
the Voice of the Process (VoP).
Variation is well understood by Process
Capability.

Feedback Loops

1. No feedback loop:
2. Special cause only feedback loop:
3. Special and common cause
feedback loop:

DEFINITION OF QUALITY (VOICE OF

THE CUSTOMER)
Goalpost View of Quality
Quality meant "conformance to valid customer
requirements."
That is, as long as an output fell within acceptable
limits, called specification limits, around a desired value,
called the nominal value (denoted by m), or target
value, it was deemed conforming, good, or acceptable.
We refer to this as the "goalpost" definition of quality.
The nominal value and specification limits are set based
on the perceived needs and wants of customers.
Specification limits are called the Voice of the Customer
(VoC).

USL = upper specification limit = nominal + tolerance and

LSL = lower specification limit = nominal tolerance

A service example
A monthly accounting report that
must be completed in 7 days
(nominal) but no earlier than 4 days
(LSLnot all the necessary data will
be available) and no later than 10
days (USLthe due date for the
report in the board meeting).

Continuous Improvement View of

Quality

 Quality is a predictable degree of

uniformity and dependability, at low cost
and suited to the market.
The Taguchi Loss Function, called the
Loss curve in figure, expresses the loss
of deviating from nominal within
specifications: the left hand vertical axis
is "loss," and the horizontal axis is the
measure, y, of a quality characteristic.

Taguchi Loss Function

L(y) = k(y m) = Taguchi Loss Function
y = the value of the quality characteristic for a
particular item of product or service,
m = the nominal value for the quality
characteristic, and
k = a constant, A/d
A = the loss (cost) of exceeding specification limits
(e.g., the cost to scrap a unit of output), and
d = the allowable tolerance from the nominal value
that is used to determine specification limits

Diameter of ball bearing

(y)
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

Value of Taguchi Loss Function (L[y])

1.00
1.00
1.00
0.64
0.36
0.16
0.04
0.00
0.04
0.16
0.36
0.64
1.00
1.00
1.00

DEFINITIONS OF SIX SIGMA

MANAGEMENT
Six Sigma management is the
relentless and rigorous pursuit of the
reduction of variation in all critical
processes to achieve continuous and
breakthrough improvements that
impact the bottom line and/or top
line of the organization and increase
customer satisfaction.

An Example
For example, a bank takes 60 days on
average to process a loan with a 10%
rework rate in 2000.
In a Six Sigma organization, the bank
should take no longer than 30 days
on average to process a loan with a
1% error rate in 2002 and no more
than 15 days on average to process a
loan with a 0.10% error rate by 2004.

 The Normal Distribution. The term

Six Sigma is derived from the normal
distribution used in statistics.

2 sigma
In a normal distribution, the interval
created by the mean plus or minus 2
standard deviations contains 95.44%
of the data points, or 45,600 data
points per million (sometimes called
parts per million, denoted ppm) are
outside of the area created by the
mean plus or minus 2 standard
deviations [(1.00 0.9544 = 0.0456)
1,000,000 = 45,600]

3 sigma
In a normal distribution, the interval
created by the mean plus or minus 3
standard deviations contains 99.73%
of the data, or 2,700 ppm are outside
of the area created by the mean plus
or minus 3 standard deviations [(1.00
0.9973 = 0.0027) 1,000,000 =
2,700].

6 sigma
In a normal distribution, the interval
created by the mean plus or minus 6
standard deviations contains
99.9999998% of the data, or 2 data
points per billion data points (ppb)
outside of the area created by the
mean plus or minus 6 standard
deviations.

Relationship Between VoP

and VoC
Six Sigma promotes the idea that the
distribution of output for a stable
normally distributed process (Voice of
the Process) should be designed to
take up no more than half of the
tolerance allowed by the
specification limits (Voice of the
Customer).

Relationship Between VoP

and VoC
If a process is originally designed to be twice as good
as a customer demands (i.e., the specifications
representing the customer requirements are 6 standard
deviations from the process target), then even with a
shift, the customer demands are likely to be met.
In fact, even if the process shifted off target by 1.5
standard deviations, there are 4.5 standard deviations
between the process mean ( + 1.5) and closest
specification ( + 6.0), which results in at worst 3.4
ppm at the time the process has shifted or the variation
has increased to have similar impact as a 1.5 standard
deviation shift.

The three sigma process

"Voice of the Process" for an
accounting function with an average
of 7 days, a standard deviation of 1
day, and a stable normal distribution.
It also shows a nominal value of 7
days, a lower specification limit of 4
days, and an upper specification limit
of 10 days.

Three Sigma Process with 0.0 Shift in the Mean

USL = + 3 and LSL 3. This

scenario will yield 1,350 defects per
million opportunities at either
specification limit or one early or late
monthly report in 61.73 years
[(1/0.00135)/12].

Three Sigma Process with a 1.5

Sigma Shift in the Mean

The 1.5 standard deviation shift in the mean results in

66,807 defects per million opportunities at the nearest
specification limit or one early or late monthly report in
1.25 years ([1/0.066807]/12)

Six Sigma Process with 0.0 Shift in

the Mean

The process mean remains the same as in Figure 1,

but the process standard deviation has been reduced
to a half-day through application of process
improvement. In this case, the resulting output will
exhibit 1 defect per billion opportunities at either
specification limit or one early or late monthly report
in 83,333,333 years ([1/0.000000001]/12).

Six Sigma Process with a 1.5 Sigma

Shift in the Mean

The 1.5 standard deviation shift in the mean results

in 3.4 defects per million at the nearest specification
limit or one early or late monthly report in 24,510
years [(1/.0000034/12]. This is the definition of Six
Sigma level of quality.