SIX SIGMA

Prof. B. S. Guha
IIDEA – Brain Gain
Dec 2010

12/28/2010 Brain Gain/BSG _ Six Sigma 1

Why is it called ‘Six Sigma’?
 ‘Sigma’ (σ ) is the symbol used to denote ‘Standard
Deviation’
 which is a metric to define dispersion of data,
(measurements, occurrences ,etc.) in a given set of
observations (‘population’);
 Data is distributed around a central tendency (‘mean
or mode or median’) and to define this spread of
data (‘deviations’ from central tendency), the ‘root
mean square’ of the sum of all deviations is
calculated to give an unique value.
 Generally, data is assumed to be ‘normally
distributed’ i.e.:
 the central tendency is such that mean/mode/ median
are the same value
 Almost all data are contained within the values defined
by the interval: Mean +/- 3 σ .

12/28/2010 Brain Gain/BSG _ Six Sigma 2

 Why is it called ‘Six
Sigma’?
Upper
Lower If we can achieve a +/- 3 σ Specif.
Specif. Limit
Limit ‘spread’ with our output,
within the ‘range’ of specs.,
we are on target !
Thus the name ‘six sigma’.

-3σ +3σ

Graphically Normal Distribution is represented in a ’histogram’

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 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 pragmatic & disciplined approach
•Business oriented, providing high returns
•Focused on reducing variability & defects
12/28/2010 Brain Gain/BSG _ Six Sigma 4
 6 sig m a Ba sics
qIf there is an output, there is a process!
qIf there is a process there is a performance variation
qIf there is variation there is a probability of defect
qThe customer always feels the output process variation.
qA 6 sigma process produces only 3.4 defects per million of
opportunities (operations)
qA process operating at 3 sigma produces 66807
defects per million of opportunities
qA 3 sigma process cost you up to 20 % of your sales
revenue
qA 6 sigma process cost you less than 1% of your sales
revenue

12/28/2010 Brain Gain/BSG _ Six Sigma 5

 6 sigma Basics
Sources of variation
Material Methods Environment
•Assemblies •Procedures •Noise level
•Components •Policies •Humidity
•Suppliers •Accounting •Temperature
•Consumables •Lighting

Variation

People Machine Measurement

•Training •Technology •Counting
•Experience •Variability •Instruments
•Skill •Tooling •Gauging
•Attitude •Fixtures •Tests

12/28/2010 Brain Gain/BSG _ Six Sigma 6

 6 sigma Basics
Lower Result of variation Upper
Specif. Specif.
Limit Limit
“Spread”
6 Sigma curve

3 Sigma curve

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
In a 3 sigma process the values are widely spread
along the center line, showing the higher
variation of the process.
In a 6 Sigma process, the values are closer to the
center line showing less variation in the process.
12/28/2010 Brain Gain/BSG _ Six Sigma 7
 6 sigma Basics
Result of variation
“process shift”
1.5 σ 1.5 σ

: 3σ +/- 1 . 5σ = 4 . 5 σ x2 = 9σ ; since R = 12 σ
LSL 2 x +/- 1 . 5σ ( 3 σ ) for shift in spread
urther USL

6σ
1 2 3 4 5 6 7 8 R9 10 11 12 13 14 15 16

12/28/2010 Brain Gain/BSG _ Six Sigma 8

 6 sigma Basics
Result of variation
Cost of quality at various levels of Sigma
Sigma Defect rate(PPM) Cost of qualityCompetitive level

6 3.4 <10%
 World
233 10-15% Class
5
4 6210 15-20%
 Industry
3 66807 20-30% Average


2 308537 30-40%
Non
 Competitive
1 6,90000 >40%

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 Six Sigma Methodology
(DMAIC)
Define

Measure
Control

Analyse
Improve

12/28/2010 Brain Gain/BSG _ Six Sigma 10

 DMAIC Steps
1. Define
2.
1. Define Measu 3. Analyze 4. Improve 5. Control
re

Identify
 projects that are measurable
Define projects including the demands of
the customer and the content of the
internal process. (CTQ)
Develop team charter

Define process map

12/28/2010 Brain Gain/BSG _ Six Sigma 11

 DMAIC Steps
2. Measure
5.0
Control

2.
1. Define Measur 3. Analyze 4. Improve 5. Control
 e
Define performance standards
Measure current level of quality into Sigma.
It precisely pinpoints the area causing
problems.
Identify all potential causes for such
problems.

12/28/2010 Brain Gain/BSG _ Six Sigma 12

 DMAIC Steps
3. Analyse
2.
1. Define Measu 3. Analyse 4. Improve 5. Control
re
Establishprocess capability
Define performance objectives

Identify variation sources

Tools for analysis

lProcess Mapping
lFailure Mode & Effect Analysis
lStatistical Tests
lDesign of Experiments
lControl charts
lQuality Function Deployment
(QFD)

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 DMAIC Steps
4. Improve
2. 3. 4. 5.
1. Define Meas Analy Improv Contr
ure se ol
e
Screen potential causes
Discover variable relationships among causes and
effects
Establish operating tolerances

Pursue a method to resolve and ultimately eliminate

problems. It is also a phase to explore the solution how
to change, fix and modify the process.
Carryout a trial run for a planned period of time to
ensure the revisions and improvements14implemented
in the process result in achieving the targeted values.

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 DMAIC Steps
5. Control

1. Define 2. Measure 3. Analyse 4. Improve 5. Control

Monitor the improved process continuously to

ensure long term sustainability of the new
developments.
Share the lessons learnt

Document the results and accomplishments of

all the improvement activities for future
reference.
15

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 6 sigma Basics
An example:
The ‘cycle time’ of a distribution company, from
customer order to customer delivery should not
exceed 3 days (contractual terms & conditions)
Customers complain “delays; competitors are
better: they never exceed 3 days”
Management says “We are loosing money”
Team in place says “We dispatch on average the
same day we receive the order and we always
use a 24 hours delivery carrier”


12/28/2010 Brain Gain/BSG _ Six Sigma 16

 6 sigma steps (DMAIC)

Define the business problem

Measure the process (Y) performance

Find the root causes (X’s) of the problem (Analyse)

Improve, implement new solution

Deliver (Y) performance over time (Control)

12/28/2010 Brain Gain/BSG _ Six Sigma 17

 Define
Problem statement : we miss our contractual obligations
of delivering in less than 3 days ( Process in which we
have a business problem )

Supplier
My
=
My
process as felt by the customer Custome
Company r
Receipt Collect
of Order & Ship
order
Input Procureme Output Consume
Forward to Customer
Unit delivery rs
Order nt
from to delivery & Bill
Customer deptmnt

Lead time is the measurement

Definition
SpecificationP erformance
Targets
CTQ * Lead time3 days 99 . 99 % < 3 days

*Critical To Quality

12/28/2010 Brain Gain/BSG _ Six Sigma 18

 Measure
 Measure the problem and defects:
Lead time (distribution)
No of
occurrences
TrendContractual / Customer
Specification
50 Limit

Observed
probability
of
defects = 12 . 03 %
defect
s 26/216
10
Variation Time from
order to delivery
0 in days
1 day 2 days 3 days

Histogram

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 Measure conclusion
observed a probability of defect of 12.03%!
performance is 2.67 σ (‘Z’ value) We have a problem!
6 sigma goal is to reach 0.00034% of probability of
defect!
Defects per million of
σ value* opportunities % defects
2σ 308537 30.8537%
2.67 σ 12.03%
3σ 66807 6.6807%
4σ 6210 0.6210%
5σ 233 0.0233%
6σ 3.4 0.00034%
* For short term data

12/28/2010 Brain Gain/BSG _ Six Sigma 20

 Analyze
Analysis – finding the root causes
(Xs)!
>Pareto chart of the 26 defects
20 =
77 %

Miss 3
pm
carrie
r for
outsid
e
Pune 4= 15%
region Incom
plete
shipp 2= 8%
ing
addre Other
ss

>2 causes represent 92% of defects

12/28/2010 Brain Gain/BSG _ Six Sigma 21
 Improve
2 actions
New Cycle time from order
taken: to delivery distr
>Process
no of μContractual / Customer
“Outside occurences
Pune region” Specification
orders first 50 Limit
& organize
an earlier σ Observed probability
transfer to of defects = 0 %
shipping Expected performance:
department 6 σ
>Change address 6 σ is between μ
and the spec. limit and
format and the distribution is
control at 10 normal!
order taking 6xσ defects
Time from
time order to delivery
0 in days

1 day 2 days 3 days

Histogram
12/28/2010 Brain Gain/BSG _ Six Sigma 22
 Control
Delivery time performance for the year

Control chart of Delivery P99 over one year

3,4

3,2
Delivery P99 in days

3,0 3 days

2,8

2,6

2,4

2,2

2,0
1 2 3 4 5 6 7 8 9 10 11 12
Month

12/28/2010 Brain Gain/BSG _ Six Sigma 23

 6 sigma financial impact
Business/Case
40% •Sales: Rs.10 every unit
•Operating margin : 25%
35% •Every defect costs : Rs. 24
•
Cost of Failure (%

30% •at 2 . 67 σ loss was 38 paisa

for every sale
20%
Sales )

15%

10%
Six Sigma
Route Rs.!!
5%

3.4 233 6210 66807 308537 500000

a 6 5 4 3 2

DPMO = Defective per Million Opportunities

12/28/2010 Brain Gain/BSG _ Six Sigma 24
 Six Sigma business contribution

Contribution to growth through:

Customer satisfaction increase
Introduction of quality products &
services

Productivity gains:
Product quality improvement
Higher service performance
Process efficiency

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