Six Sigma Overview in detail

1. 1/16/2012
Origins of Six Sigma
Six Sigma Overview  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? What is Six Sigma?
 Normal distribution
 Standard Normal distribution
 Mean (m)
X m
z
 Standard deviation (σ) 1
1 X m
 ( )2  1
1  2 ( z )2
Y  f ( x)  e 2 
Y e
 2 2
1
1  2 ( z )2
Pr n  z  n    Ydz  
n n
e dz
n n
2
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What is Six Sigma? What is Six Sigma?
 Standard
Normal  Assumes 1.5 sigma process drift
distribution  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 600,000
500,000
# of Defect per Million
1.5 500,000
2.0 308,300 400,000
2.5 158,650 300,000
3.0 67,000 200,000
3.5 22,700 100,000
4.0 6,220 0
4.5 1,350 1.5 2.5 3.5 4.5 5.5
5.0 233 # of Sigmas
5.5 32
6.0 3.4
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Costs/Benefits to GE
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? How to implement Six Sigma?
 Who is involved?
 Where is it applied?
 Improving customer satisfaction
 Reducing cycle time
 Reducing defects
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How to implement Six Sigma? How to implement Six Sigma?
 DMAIC
 How to do?  Define numerical definition of project scope,
 Identify customer-driven critical-to- objectives, resources and constraints
quality (CTQ) characteristics.  Measure capability of current process performance,
comparing with the benchmark --critical customer
 Identify key processes that cause requirements
defects in a CTQ characteristic.  Analyze the problems to find out root causes
Create the opportunity for project.  Improve… identify potential solutions and begin to
 For each process project – DMAIC implement them
 Control the performance to continue to achieve higher
results
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Example: Shipping Logistics
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
 Situation: customer designated
 GE Appliance products, such as microwave ovens and air forwarder
conditioners, are being produced in Asia and shipped to US  Product is then cross docked
customers, such as Wal-Mart and sent on to final
distribution centers via rail,
 Delivery performance is very erratic and the average on- truck-on-rail, or truck
time delivery is about 85%
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Example: Shipping Logistics Example: Shipping Logistics
 Process Mapping  DMAIC Steps
Define Phase: • A team 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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Example: Shipping Logistics Example: Shipping Logistics
 Procedure improvement
Old Procedure New Procedure
GE specifies when products produced and GE specifies when products produced and
 Results:
shipped delivered to US
 On time delivery increased to 97%
Supplier would comply by selecting first ship
going to the US
Supplier complies by selecting the “right”
ship
 Transportation costs reduced by $300,000
 Inventory (cash flow) reduced by $1,000,000
Shipping time 8 to 18 days Shipping time 8 days
 Capability Raised to 3.5 Sigma
Supplier notifies GE system (often delayed) and Supplier notifies freight forwarder with
freight forwarder with paperwork paperwork, and freight forwarder
communicates through GE system
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