Six Sigma Introduction

and Overview

1996-1999 Six Sigma Qualtec

SSQ 385

01_Intro & Overview

Version 1.1.0

Agenda

Quick exercise
Companies today
Definitions for sigma and sigma level
Benchmarking standard
The Six Sigma approach

The goal
The 1.5 shift
Opportunities
Business metrics

Cost of Poor Quality (COPQ)

Sources of Variation

Application strategy (components)

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ExerciseHow Do You Use Data?

Please grade your organization based on the

following:
F

Our organization uses only tribal knowledge. We do not use

data.

Our organization collects data simply to say, We collect data.

D Our organization collects data and we sometimes look at the

numbers.
C Our organization logically groups the data. We form charts.
B Our organization uses sample data along with basic statistics.
A Our organization uses sample data along with inferential
statistics.
A+ Our organization quantifies processes via prediction equations.
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Does Your Company...

Continually implement price reductions for current products?

Have an increased number of competitors?

Spend 10 to 25% of sales dollars on repairing or re-working a

product before it ships?

Not know that best-in-class companies have similar processes

that run 100 times more defect-free?

Believe zero-defect goals are neither realistic nor achievable?

Have more suppliers required to run the business?

Have 5 to 10% of its clients dissatisfied with the product, the

sales organization, or the service it has provided?

Have customers who will not recommend that others purchase

its goods or services?

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What Is a Sigma?

What is a sigma ( )?
What is a 4 organization?

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Definition of Sigma

Sigma:

The value of the process standard deviation for a

given characteristic. This quantity is used to quantify
the spread (around a mean) of some process or
product characteristic.

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Definition of Sigma Level

Sigma level: The business

metric used to indicate the
performance of a process to
some specification

The number of standard

deviations we can fit between
the mean and the nearest spec

LSL

USL

What is the sigma level of

the characteristic above?

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Six Sigma Objectives

The Vision: Drive industries to design and produce

products/services to Six Sigma standards

The Goal: Produce goods and services at a Six Sigma level.

As your organization moves toward Six Sigma quality, you will:

Eliminate defects

Reduce production and development costs

Reduce cycle times and inventory levels

Increase profit margin

Improve customer satisfaction

The Strategy: Use a data-driven structured approach to attack

defects to improve the sigma level of your goods and services

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Benchmarking Standards

1
10
80
100
150
300
1,200
3,000
150,000

3 Sigma
93.319%
50.086%
0.396%
0.099%
0.003%
0.000%
0.000%
0.000%
0.000%

4 Sigma
99.379%
93.961%
60.755%
53.638%
39.284%
15.432%
0.057%
0.000%
0.000%

5 Sigma
99.977%
99.768%
98.156%
97.700%
96.570%
93.257%
75.636%
49.753%
0.000%

(Distribution
Shifted 1.5)

6 Sigma
100.000%
99.997%
99.973%
99.966%
99.949%
99.898%
99.593%
98.985%
60.042% Long-Term

Rolled Throughput
Yield (RTY)

Product Complexity
(# of Opportunities)

Short-Term

Process Capability (Sigma Level)

4 toothpick manufacturer (assume one opportunity for a defect): Has an RTY of 0.99379 (1) = 99.379%
4 mechanical pencil manufacturer (assume 10 opportunities for a defect): Has an RTY of 0.99379 (10) = 93.961%

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What Is 1% Defective?

3.5 hours of no cable television per month

15,000 lost overnight packages per week

25 incorrect car rental reservations per company per

day

Todays Standard
3 Capability

Automotive Standard
4 Capability

Six Sigma Standard

6 Capability

93.319 %

99.379 %

99.99966 %

Long-Term Yield
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The Six Sigma Approach

Organizational Issue

Traditional Approach

Six Sigma Approach

Problem Resolution

Fixing (Symptoms)

Preventing (Causes)

Behavior

Reactive

Proactive

Decision-Making

Experience-Based

Data-Based

Process Adjustment

Tweaking

Controlling

Supplier Selection

Cost (Piece Price)

Capability

Planning

Short-Term

Long-Term

Design

Performance

Producibility

Employee Training

If Time Permits

Mandated

Chain of Command

Hierarchy

Empowered Teams

Direction

Seat of Pants

Benchmarking and Metrics

Manpower

Cost

Asset

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The Goal of Six Sigma

Short-term distribution shifted by
1.5to obtain long-term PPM

Sigma
Level
1
2
3
4
5
6

Defects per Million Opportunities

Note: Industry standard has defined

a sigma level to imply short term.
800000
700000
600000
500000
400000
300000

Short-Term Long-Term
PPM
PPM
158655.3
691462.5
22750.1
308537.5
1350.0
66807.2
31.7
6209.7
0.3
232.7
0.0
3.4

200000

Short-Term PPM

100000
0

Long-Term PPM

Short-Term PPM

158655.3

22750.1

1350.0

31.7

0.3

0.0

Long-Term PPM

691462.5

308537.5

66807.2

6209.7

232.7

3.4

Sigma Level
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Understanding the Shift

The short-term distribution is shifted 1.5 to calculate long-term PPM.

Why?

In the short term, we have less process

variability. Our short-term capability is
always better than our long-term capability.

In the long term, we will make products

across many machines, by several
operators, with many different lots of
incoming material, and across various
environmental conditions. This variability
will induce shift and drift in the process and
product performance characteristics.

Past manufacturing data says that on

average, a process mean will tend to shift
1.5 standard deviations (or sigmas) over
time. The 1.5 shift provides a realistic
estimate of true process capability over
many cycles of manufacturing.
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Sigma
Level
1
2
3
4
5
6

Short-Term Long-Term
PPM
PPM
158655.3
691462.5
22750.1
308537.5
1350.0
66807.2
31.7
6209.7
0.3
232.7
0.0
3.4

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Understanding the Shift

Can you think of any real-world examples?

Does your coffee always taste the same?

Do you always park your car in the same spot in the

garage? Why not?

Do your chocolate chip cookies always taste the

same? Why not?

Do you always get the same quality of service at any

given restaurant? Why not?

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Understanding Opportunities

Which product is performing better, the pencil or the

blender?
Pentel Pencil
Defects per Unit (DPU)
Rolled Throughput
Yield (RTY)

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0.030
97.04 %

Blender

0.189
87.37 %

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Understanding Opportunities

Which product is performing better, the pencil or the

blender?
Pentel Pencil

Defects per Unit (DPU)

Rolled Throughput
Yield (RTY)
Opportunities
DPU/Opp
DPMO
Product Sigma Level

Blender

0.030
97.04 %

0.189
87.37 %

15
0.00195
1948
4.405

97
0.00195
1948
4.405

RTY = e - dpu
ln(RTY) = - dpu
dpu = - ln(RTY)

Note: Assumes the defects were collected in the long term.

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Business Performance Charts

Traditional Metrics
Equipment Util. vs. COPQ

$120,000

$120,000

$110,000

$110,000

$100,000
$90,000

$100,000
$90,000

$80,000

$80,000

$70,000

$70,000

$60,000

$60,000

0.825 0.85 0.875 0.9 0.925 0.95 0.975

Test Yield vs. COPQ

$130,000

COPQ

COPQ

$130,000

80.0%

82.5%

Equipment Utilization

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85.0%

87.5%

90.0% 92.5%

Test Yield

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Business Performance Charts

Six Sigma Metrics

Cycle Time vs. COPQ
$ 45 0, 0 00

$ 375 ,000

$ 37 5, 0 00

$ 300 ,000

$ 30 0, 0 00

COPQ

COPQ

Sigma Level vs. COPQ

$ 450 ,000

$ 225 ,000

$ 22 5, 0 00

$ 150 ,000

$ 15 0, 0 00

$75 ,000

$7 5, 0 00

$-

$1 .00

1.75

2. 50

3 .25

4.0 0

4.75

5. 50

0. 0 0

3 0. 0 0

9 0. 0 0

1 2 0.00

Cycle Time (Minutes)

Sigma Level

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6 0.00

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What Is Cost of Poor Quality (COPQ)?

Beyond the direct costs associated with finding and fixing defects,
COPQ also includes:

The hidden cost of failing to meet customer expectations the first time

The hidden opportunity for increased efficiency

The hidden potential for higher profits

The hidden loss in market share

The hidden increase in production cycle time

The hidden labor associated with ordering replacement material

The hidden costs associated with disposing of defects

For an average company, the COPQ can be as high as 25% of

sales.

In almost every company where the COPQ is unknown, the

COPQ exceeds the profit margin.

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Total COPQ
Waste, Spoilage, Rejects, and Re-Work As a Percent of Sales
Manufacturing Industry

Aluminum Die Castings

Aluminum Extruded Products
Bolts, Nuts, Rivets, and Washers
Foundries, Aluminum
Forgings, Non-Ferrous
Metal Stampings
Steel Wire and Related Products
Automotive Stampings
Electronic Components
Industrial Machinery
Metal-Cutting Machine Tools
Motor Vehicles, Parts
Plastics Products
Screw Machine Products

Poor Quality Cost

As a
Percent of Sales
Low
High
4.3
7.1
4.4
7.0
5.2
7.1
5.2
7.3
5.9
6.9
5.9
7.2
5.9
7.2
4.3
7.0
6.3
8.2
7.0
8.2
6.1
7.2
6.1
8.1
6.9
7.8
5.3
7.0

Median Profits
As a
Percent of Sales
2.3
1.2
2.2
2.9
1.6
3.0
2.9
2.1
4.1
3.6
3.3
2.7
1.5
2.2

Source: Journal for Tooling & Production. December, 1994.

Is All The COPQ Captured?

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COPQ As a Function of DPU

COPQ

DPU vs. COPQ

Low

DPU

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The Cost Perspective of Y= f(X)

$=f(

Customer
Satisfaction

Inventory
Turns

Rolled Yield

PPM-defects

Delivery

Productivity

Operations dollars

PPM: Internal defects, test rejects, re-work, warranty costs,etc.

Delivery delinquency rate: Units shipped late divided by total units

shipped
Supplier dollars

Raw goods received late, forcing production planning changes

Raw goods received defective

Design dollars

Zperformance: Estimate of functionality

Zparts: Estimate of supplier quality

Zprocess: Estimate of manufacturing quality

Design to unit production cost: Material cost plus labor cost plus rework cost plus warranty cost
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Attacking the Sources of Variability

Sources
Sourcesof
ofVariability
Variability

Design
Design

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Incoming
IncomingParts
Parts
and
andMaterials
Materials

Process
Process
Capability
Capability

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Attacking the Sources of Variability

What tool(s) should we use?

6
5
4

Tools

Product Scorecard

Design for Manufacturability Discrete Event Simulation

6Tolerancing

Tools

Designed Experiments

Process Mapping

Failure Modes and Effects

Measurement Systems Analysis

Multi-Vari Analysis

Capability Studies

Tools

Fishbone Diagrams

Brainstorming

Pareto Diagrams

SPC Charts

Tribal Knowledge

Tools

1-2

Common Sense

Where Is Your Organization? What Kind Of Tools Should You Be Using?

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Six Sigma Success Strategy

Measure
Measure
Analyze
Analyze

Improve
Improve

Control
Control
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Reasons for Harvesting the Fruit

2,400 process improvements were made, reducing defects by 61

percentyielding $350 million in annualized cost savings.

Larry Bossidy, Chairman and Chief Executive Officer,

AlliedSignal

Six SigmaGE Quality 2000will be the biggest, the most personally

rewarding and, in the end, the most profitable undertaking in our history.

Jack Welch, Chairman and Chief Executive Officer,

General Electric Co.

There simply arent many skeptics of Jack Welch or Larry Bossidy.

While both companies have mentioned Six Sigma, we believe investors
have not fully appreciated the power or the potential of this process to
generate low-risk earnings growth and share gains.

Jennifer Pokrzywinski, First Call Report,

Morgan Stanley Analyst

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