The Six Sigma Approach

1
The Six Sigma Approach
2
Changes in the Business Environment

• Pace of Market maturity Increasing exponentially
  
• Shorter product life cycle
• Balance between technological advancements and
  market needs (direct/latent)

New Products and Services
Market
Technology
3
Changes in the Business Environment

• Speed of technological evolutions greater than
  speed of consumer adaptation/acceptance
• New technology applications cannot be evaluated
  in terms of acceptance and diffusion
• prior to market availability
• Customer needs time to create expectations for
  new goods
• Product/service reliability can be improved
  drastically (See number of recalls during the
• previous two years (2000-2001))
• Organizational structure/procedures must be
  flexible enough to follow new products and
• services offered
• Cost control is a fundamental need in order to
  exist in a quickly changing market
• 
  Cash Burn Rate

Costs
Revenues
Bankruptcy
4
Six Sigma Key Features

• Six Sigma is a business strategy which translates
  external and internal priorities into improvement
  programs and products/services/processes
  reengineering
• Six Sigma approach allows resources to move
  forward the mission and priorities of the
  companies to drastically improve their bottom
  line.
• Improved profit margins allow companies to create
  products and services with added features and
  functions that result in greater market share.

5
Six Sigma Key Features
An objective of six sigma is to reduce variation
and move product or service outputs permanently
inside customer requirements. (Curve A to B)
Critical Customer Requirement
B
A
Defects Service unacceptable to customer
Produce or Service Output
6
Six Sigma Key Features
A Critical Delivery Process is Measured at 2.5
Sigma
Critical Customer Requirement 10 days or less
Delivery Process Output
Frequency
Defects
0
10
Distribution of delivery times for most recent
month in days
7
Six Sigma Key Features
Six Sigma Teams Improve Deliveries to 6.0 Sigma

Critical Customer Requirement 10 days or less
Delivery Process Output
Frequency
Defects
0
10
Distribution of delivery times for most recent
month in days
8
How Close Are You to Consistently Meeting Your
Customers Needs?
Six Sigma Key Features
2 sigma 69.146 of products and/or services meet
customer requirements with 308,538 defects per
million opportunities. 4 sigma 99.379 of
products and/or services meet customer
requirements ... but there are still 6,210
defects per million opportunities. 6
sigma 99.99966 As close to flaw-free as a
business can get, with just 3.4 defects per
million opportunities in your product or service.
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Six Sigma Applies to the Whole Business
Six Sigma Key Features
Six sigma has the greatest impact when it is
applied across all core processes. A core
business process is a set of interrelated,
cross-functional processes that have a profound
impact on customer satisfaction - either positive
or negative Right are some core processes that
are common to many businesses.
10
Six Sigma Focus
Six Sigma Key Features
Culture

•  Statistical Thinking 
•  Focus  on the market
• actual and potential clients
• actual and hidden needs
• Continuous training

Strategy
Capability

•  Focus  on the value for the client and not on
  the product
• Continuous Reengineering /Re-shaping

• Understand when continuous improvement is needed
  and when to look for a breakthrough
• Spread innovation results
• Design processes and products able to assure
  results in every condition

Results profit - cost
11
Six Sigma Key Features
What differentiates Six Sigma Methods from TQM?

• The hard tie to business strategy and business
  results
• The required commitment of top leadership up
  front and continuously through years of
  implementation
• The extensive focus on continuous definition of
  customer and market requirements
• Each project delivers bottom line results in a
  relatively short time
• The rigorous methods based on measurement and
  analysis.
• Full time six sigma team leaders (black belts)
  who are extensively trained in statistical
  thinking as well as team and project skills
• The integration of six sigma thinking into the
  business infrastructure through regular project
  reviews by senior leaders, incentives, and
  rewards
• The exponential nature of the improvement
  required - from 3 sigma to 6 sigma is a 20,000
  times improvement

12
Six Sigma Key Features
What differentiates Six Sigma Methods from
Business Process Redesign?

• Six sigma is applied to continuous improvement of
  existing processes as well as to the design of
  completely new processes
• A rigorous definition of measurable customer
  requirements as a prerequisite to the design of a
  new process
• The benefits from redesign are sustainable It
  requires process control measures, process
  ownership, and continuous improvement after the
  redesign is implemented
• Transformational change It changes the way the
  company does business. How it thinks about its
  customers

13
Six Sigma Key Features
Relationship Between Six Sigma and Lean
Manufacturing

• Six Sigma and Lean Manufacturing can be
  considered as complementary in three basic areas.
  
• To achieve an efficient lean manufacturing
  state, the manufacturer must focus on reduction
  of waste and defects. From this perspective, Six
  Sigma may be viewed as an enabler of lean
  manufacturing. Projects aimed at understanding
  root causes of process failures and defects will
  support the transition from traditional to lean
  manufacturing. Since lean manufacturing attempts
  to minimize inventory, it relies on defect free
  parts and components. Six Sigma is a systematic
  statistically based method of eliminating
  defects.
• Through its focus on designing products and
  services that meet customer needs, Six Sigma
  supports the Specify Value element of lean
  manufacturing. Six Sigmas design method
  includes the development of Critical to Customer
  Requirements (CCRs) that represent the
  translation of customer needs to product or
  service requirements.
• The Six Sigma model develops Belts with skills
  in process analysis. With these core skills and
  associated project experience, the Black Belts
  skills can be easily extended to include the lean
  manufacturing concepts. For example, GE has
  trained Black Belts to implement lean
  manufacturing techniques in their own production
  plants and is currently expanding this
  application to their suppliers and customers.
  

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Six Sigma Key Features
Typical Improvement Areas

• Defects and rework reduction (both in
  manufacturing and in transactional environment)
• Down time reduction and efficiency enhancement
• Internal procedures development
• New products and services development
• Complete re-engineering of the organization
• New business model definition

15
Six Sigma Applications
Organizations Already Using the Six Sigma
Approach

• General Electric
• Johnson Johnson
• Dow Chemical
• Caterpillar

• Ford Motor Company
• Allied Signal (Honeywell)
• Philips

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Six Sigma Applications
- General Electric
Results
3.0
2.6B
2.0B
2.0
Annual Net Benefit from Six Sigma in Billions
1.0
750M
400M
-30M
0
1999
1996
1997
1998
2000 (est.)
Annual Net Benefit
Source 1998 and 1999 GE Annual Report
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G.E. Six Sigma Program Evolutions

• 95-96
• Incremental improvement
• Campaign
• Internal focus
• 5 of personnel involved
• 97-98
• Incremental and breakthrough improvements
• Focus on priorities
• From customers to suppliers
• Structured management of the program
• 99-00
• Focus on value
• Reactivity and proactivity
• Innovation
• On the job Six Sigma

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• Six Sigma Applications

• - Johnson Johnson

• Worldwide program diffused throughout all
  business processes
• Main focus on technical areas, specifically new
  product platform development
• Consistent application of DFSS(Design
  Excellence) in product development
• Quality Function Deployment
• Benchmarking (Both internal knowledge sharing and
  other industry best practices)
• Design of Experiment(DOE)
• Reliability Techniques
• Cross-Functional Teams
• Main Focus on Process Streamlining and
  Standardization reduction in time to market,
  defects and in-field problem prevention

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Six Sigma Applications
- Dow Chemical Results

• Dow expects to achieve 1.5 Billion (EBIT) by
  2003.
• Dow is achieving over 250,000 in net results per
  project.
• Why did Dow adopt Six Sigma?
• To accelerate implementation of their global
  business strategies.
• Dow has targeted 3 of its employee population as
  full time black belts
• Over 1000 Six Sigma Black Belts are
  currently delivering
• project results across all parts of Dows
  business.

20

Six Sigma Applications
- Caterpillar

• Worldwide consistency in co-ordination efforts
  and initiatives
• Challenging objectives, in the following areas
• Quality and Reliability Improvement (50
  reduction in defect rate)
• Cost Reduction (10 reduction)
• Increase in Sales Growth
• Immediate deployment of DFSS methodology
• Highly effective human resource allocation
• Highly diffused in corporate culture, a change in
  mentality
• Co-ordination between sites in order to maximize
  project results

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Six Sigma Applications
- Ford Motor Company
We now have more than 1,800 full-time,
trained problem-solvers called Black Belts
leading customer satisfaction team projects. The
215 projects they completed last year have
already saved us 52 million, and will save us
more than 200 million in the next two years.
More importantly, these projects made a real
difference to our customers by eliminating high
priority concerns and increasing
satisfaction. Jacques NasserFord Motor Company
Source 2000 Annual Report
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Six Sigma Applications
- Allied Signal

• Has accumulated savings of 1.5 Billion since
  1994
• Achieved annual savings of 32 million while
  avoiding capitaloutlays of 35 million in one
  plant
• Past-due bills have been reduced by 20,
  resulting in a substantialimprovement in
  cash-flow
• Shorter turnaround times have led to more
  satisfied customersand more business
• Application of Six Sigma has liberated phantom
  capacity,eliminating costly investments for
  additional capacity

The fact is, there is more reality with this
than anything that has come down in a long time
in business. - Larry Bossidy, CEO,
AlliedSignal
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Six Sigma Applications
- Allied Signal

• Actual focus
• Success rate improvement in new product
  development
• Time to market reduction and wide improvement
  of cycle time for the relevant processes
• Overhead reduction
• Suppliers capability (critical to the success of
  the six sigma breakthrough strategy)

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Six Sigma Applications
- Allied Signal
Annual TQ Focus Area

Six Sigma Breakthrough Mgmt
Breakthru Mgmt.
97
Assessment to Baldrige Award
Baldrige
Customer Focus
Customer Excell.
96
Technical Excell.
Six Sigma Product Development
BKTH Pilotson value drivers
Operational Excell.
Six Sigma, Lean Mfg.
95
Goal Alignment High Performance Teams
TQL II
94
Manage by Fact Baseline Assessment
TQMP
93
TQ Speed
Cycle Time Process Focus
92
TQL
Foundation
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Six Sigma Applications - Philips
STAKEHOLDERS NEEDS ANALYSIS
IMPROVEMENT PLAN
PRIORITIES SELECTION
APPROACH CONFIGURATION
Six Sigma Approach
PROCESS APPROACH
PERFORMANCEIMPROVEMENT (Line Management) (Day
to day improvement)
PROCESSBREAKTHROUGH (DFSS)
PROCESSIMPROVEMENT(DMAIC)
STANDARDISATION
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DMAIC/DFSS Methodologies
Two Approaches

• Process Improvement (DMAIC)
• Process Redesign (DFSS)

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Six Sigma Methodologies

• DMAIC (Define, Measure, Analyze, Improve,
  Control)
• Analytical approach to eliminate weaknesses of
  the current processes, products and services
  (Incremental improvement).
• DFSS (Design For Six Sigma)
• Creative approach to design new robust
  processes,products and services and to obtain
  competitive advantages (Quantum leap).

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Determining Whether to Improve or Redesign
Six Sigma Improvement Process
Design for Six Sigma
Define Business Improvement Opportunity
Does Process Currently Exist?
No
Yes
Measure Current Performance
Measure Market Requirements
Analyze Root Cause of Current Performance
Explore Design Alternatives
Develop Detailed Design
Is Current Process Capable of Meeting Customer
Reqts?
No
Implement New Design
Yes
Control Performance
Improve Performance
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1.0 Define Opportunities
DMAIC Methodology
1.0 Define Opportunities
5.0 Control Performance
2.0 Measure Performance
3.0 Analyze Opportunity
4.0 Improve Performance
To identify and validate the improvement
opportunity, develop the business processes,
define critical customer requirements, and
prepare themselves to be an effective project
team.

• Introduction to Six Sigma
• Introduction to software tools
• Develop Project Charter
• Incorporate Business Risk Management (BRM)
  framework into project
• Develop team guidelines and ground rules
• Develop project tracking and scheduling

• Project Charter
• Action Plan
• Process Maps
• "Quick-Win" Opportunities
• Critical Requirements (CR)
• BRM CRs
• Prepared Team

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2.0 Measure Performance
DMAIC Methodology
2.0 Measure Performance
5.0 Control Performance
1.0 Define Opportunities
3.0 Analyze Opportunity
4.0 Improve Performance

• As-Is Process Map
• Operational Definitions
• Data Collection Formats and Plans
• Validate Measurement System
• Qualified Measurement System
• Baseline Performance
• Productive Team Atmosphere

To identify critical measures necessary to
evaluate success meeting critical customer
requirements. To begin developing a methodology
to collect data to measure process
performance. To understand the elements of the
six-sigma calculation and establish baseline
sigma for the processes the team is analyzing.

• Collect baseline performance data
• Identify VOC
• Develop measurement plan
• Determine if special cause exists
• Introduction to Quality Loss Function
• Complete BRM checkpoint

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3.0 Analyze Opportunity
DMAIC Methodology
3.0 Analyze Opportunity
2.0 Measure Performance
1.0 Define Opportunities
4.0 Improve Performance
5.0 Control Performance

• Data Analysis
• To-Be Process Map
• Validated Root Causes
• Refine Problem Statement

• Stratify Process
• Stratify Data Identify Specific Problem
• Determine common vs special cause
• Understand probability
• Hypothesis testing
• Components of variation
• Develop Problem Statement
• Identify Root Causes
• Design Root Cause Verification Analysis
• Validate Root Causes
• Application of Design of Experiments
• Enhance Team Creativity Prevent Group-Think

To stratify and analyze the opportunity to
identify a specific problem and define an easily
understood problem statement. To identify and
validate the root causes that assure the
elimination of real root causes and thus the
problem the team is focused on.
Indicators Problem Statement (effect)
Shanin Tools
Product Type
Consumer
Manufacturer
32
DMAIC Methodology
4.0 Improve Performance
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5.0 Control Performance
DMAIC Methodology
5.0 Control Performance
1.0 Define Opportunities
2.0 Measure Performance
3.0 Analyze Opportunity
4.0 Improve Performance
Objective
Main Activities
Potential Tools and Techniques
Key Deliverables

• Process Control Systems
• Standards and Procedures
• Training
• Team Evaluation
• Change Implementation Plans
• Potential Problem Analysis
• Pilot and Solution Results
• Success Stories
• Trained Team Members (Black Belts, Green Belts)
• Replication Opportunities
• Standardization Opportunities
• Project Completion

To understand the importance of planning and
executing against the plan. To determine the
approach to be taken to achievement of the
targeted results. To understand how to
disseminate lessons learned, identify replication
and standardization opportunities/ processes, and
develop related plans.

• Develop Pilot Plan Pilot Solution
• Verify Reduction in Root Cause Sigma Improvement
  Resulted from Solution
• Identify if Additional Solutions are Necessary to
  Achieve the Goal
• Identify and Develop Replication
  Standardization Opportunities
• Integrate and Manage Solutions in Daily Work
  Processes
• Integrate Lessons Learned
• Identify Teams Next Steps Plans for Remaining
  Opportunities

34
DMEDI Methodology
1.0 Define
35
DMEDI Methodology
2.0 Measure
36
DMEDI Methodology
3.0 Explore
3.0 Explore
5.0 Implement
2.0 Measure
4.0 Develop
1.0 Define
37
DMEDI Methodology
4.0 Develop
Objective
Main Activities
Potential Tools and Techniques
Key Deliverables

• Translate High Level Design Elements into
  Detailed Design Elements
• Develop Detailed Designs
• Optimize design using parameter/tolerance design
• Perform Capability Assessments
• Revise design based on Capability Assessment
• Perform / Improve FMEA EMEA on design
• Develop PCP
• Develop Pilot and Validation Plans
• Project Review

• Understand the purpose and outputs of Develop
• Begin work on planning detailed design step
  activities
• Develop a detailed product, service, or process
  design
• Refine capability predictions begun in the
  Explore step
• Develop process control methods for the
  production process
• Develop pre-pilot and pilot test plans for the
  new product/service

• Detailed Product/Service/Process/ Plant Design
• Refined Functional Capability Assessment
• Refined Performance (Sigma) Capability Assessment
• Pilot and Validation Plans
• Process Control Plan
• Scorecards

Tolerance Design
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DMEDI Methodology
5.0 Implement
Potential Tools and Techniques
Objective
Main Activities
Key Deliverables

• Execute the Pilot and Validation Plans
• Analyze Results
• Revise/Confirm Design
• Scale Up Decision
• Develop Detail Implementation Plans
• Develop Communications Plans
• Transition Design
• Develop Process Owner Transition Plan
• Develop Communications Plans
• Complete Project Documentation
• Document Lessons Learned
• Rewards and Recognition
• Project Review and Closure

• Understand the purpose and the outputs of
  Implement
• Develop and execute the pilot and analyze the
  results
• Develop full-scale implementation plans and
  transition to process owners
• Evaluate the design process and make improvements

• Validation Testing Complete
• Gap Analysis/Redesign
• Scale-Up Decision
• Full-Scale Implementation Plan
• Process Owner Transition Plan
• Build Control Documentation
• Design Transitioned
• Team Lessons Learned
• Reward Recognition
• Score Card

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Six Sigma - How Do I Incorporate It Into My
Organization?
40
Approach -Overall Overview
Black Belt Training and Projects Implementation
with Coaching
Business Alignment Planning
Infrastructure Development to Sustain the
Continuous Improvement Culture
41
Business Alignment Planning and Projects
Implementation
Six Sigma guides you from strategy..through
implementation..to results
I. ANALYZE(situation assessment) Conduct business
diagnostics to assess overall readiness,
potential rewards, and identify gaps. II.
PLAN Discover opportunities and develop a plan to
close gaps and integrate PwCs SIGMA Breakaway
Performance. III. FOCUS Close gaps and
collaborate on the best opportunities to drive
out costs and increase revenues. IV.
BUILD(projects implementation) Enable and
motivate an organization to sustain and multiply
improvements.
42
Business Alignment Planning - ANALYZE
ANALYZE
Business Strategy
Key Performance Indicators
Marketplace
Leadership Processes
Core Business Processes
Process Output Measures
Critical To Satisfaction
Gap Analysis
Support Processes

• Business Alignment Planning
• Evaluate position in the marketplace
• Estimate breakthrough potential
• Evaluate the readiness of organization
• Profile the organization alignment with the
  marketplace

• Establish benchmarks
• Executive Ownership of Findings
• Identification of barriers to implementation

43
Business Alignment Planning - PLAN-FOCUS
PLAN-FOCUS
Business Strategy
Key Performance Indicators
Marketplace
Leadership Processes
Core Business Processes
Process Output Measures
Critical To Satisfaction
Gap Analysis
Support Processes
Deploy Key Improvement Areas into potential
projects
Key Improvement Areas
B
E
C
D
A
PotentialProjects________ ________ ________
Prioritize potential projects

• Select projects that will have the greatest
  impact on driving the businesses key performance
  indicators, strategy, and critical customer
  requirements.

Active Projects
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Infrastructure Development
BUSINESS STRATEGY
SIGMA Implementation linkage to strategy
CHANGE MANAGEMENT
45
Infrastructure Development -Articulate Vision,
Strategy, and Desired Culture

• Leaders must develop strategies and focus
  resources on work which contributes the most to
  the achievement of the vision, then communicate
  their expectations clearly
• Identify business strategies and measures
• Identify priority improvement focus areas

• Identify how six sigma strategy integrates with
  other business strategies
• Identify desired leadership behaviors
• Communicate

Vision
Business Alignment
Culture Alignment
Strategies
Values
Desired Leadership Behaviors
Improvement Focus Areas
46
Accelerating Results through Infrastructure
Development

• Six Sigma project selection is the responsibility
  of the business unit leadership team
• Regular project gate or milestone reviews are
  conducted by the business unit leadership teams
  at each phase of the project
• Developing and retaining qualified black belt
  through incentives and advancement opportunities
• Setting six sigma business targets and
  establishing executive incentives to deliver
  results
• Establishing six sigma as part of the corporate
  and business unit scorecard
• Establishing routine reviews by key customers of
  product and service performance
• Establishing routine assessments of the overall
  implementation for continuous improvement of the
  six sigma process

47
Six Sigma - Organizational Structure and typical
Program
48
Typical Six Sigma Leadership Structure (Corporate)
Six Sigma - Organizational Structure
Executive Leadership Quality Council

CEO
Six Sigma Office

• Strategic Direction
• Communication

• Key Improvement Area Identification
• Black Belt Selection and Development
• Project Selection and Review
• Sponsor Projects

Divisional Quality Councils
Master Black Belts
49
Typical Six Sigma Deployment Timeline
HR Infrastructure Development
Communication
Change Management
Process Management
Assessment
50
Typical Mistakes

• Projects chosen are not congruent with corporate
  strategy and goals
• Employees view six sigma as a second class
  initiative
• Employees question the programs importance
• Six Sigma Program lacks appropriate leadership
• Best and Brightest are not involved in six sigma
  program
• Six Sigma viewed and managed as a classic quality
  program

51
Typical Mistakes

• Management system becomes to bureaucratic
• Fail to identify correct level of formalization
• Fail to use correct mix of theory and practical
  application in training
• Excessive use of statistical theory
• Six Sigma viewed as a cost reduction program
• Must be used to cut costs WHILE boosting revenues

PROFITS
REVENUES
COSTS

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The Never Ending Story...

• Create sustainable business model
• Profitability
• Market focus
• Flexibility
• Robust design for processes, products, and
  services
• Remember, the main focus is on business
  processes, the real source of added value!