Six Sigma Demystified Dan Sommers Paul Gillard

2 Objectives Provide a basic understanding of key Six Sigma concepts and terms Describe the major disciplines of the Six Sigma ® Breakthrough Strategy

3 What Is Six Sigma? Measure of Quality Process To Ensure Operational Excellence Enabler to Achieve Organizational Goals

4 How Is It Different From Other Initiatives? IT IS NOT: Just a “quality” program IT IS: A business process improvement methodology that enables breakthrough improvements Focused on strategic business priorities Fact-based decision making Focused on minimizing waste and variation Dedicated resources with clear accountability Narrowly scoped projects Quantified project benefits (>$250K) Demonstrated track record of success across industries

5 What Do We Know About Our Processes? “When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind ….” Lord Kelvin, British Physicist

6 Client Centric: View all products, processes and services from client’s perspective rather than operational efficiency. COPQ: Total direct and indirect costs of all issues or problems associated with a process. Critical To Quality (CTQ): Client performance requirement for product or service. Defect: Anything that fails to satisfy a client requirement or internal standard. Defect Opportunity: Measurable event that may not meet client expectation or meet internal standard. Key Six Sigma Definitions Hidden Factory: Ad hoc systems that are set up to correct errors made at steps in a process. Minimize Variance: Reduce variations in process quality. Process: Group of activities that take inputs, add value and provide an output to clients. Rolled Throughput Yield: The product of the defect free yield percentage across all steps in a process. Yield: The percentage of defect free units at single step in a process. Voice Of Customer: Any feedback received, via formal or informal means, from clients regarding company processes.

7 Key Six Sigma Statistics Non Competitive Industry Average World Class Sigma Level Defect FreeDefects Per Million % 93% 99.4% % % 308,537 66,807 6, Key Six Sigma Statistics Company Status

8 Poor Quality Changes Behavior Sigma Scale of Measure Restaurant Bills Doctor Prescription Writing Payroll Processing Order Write-up Wire Transfers Airline Baggage Handling IRS - Tax Advice (phone-in) (140,000 PPM) Best-in-Class Average Company Industry Six Sigma Levels

9 How Much Does Poor Quality Cost Annually? Non Competitive Industry Average World Class % of Annual Revenues >40% % % % <1% ? Money Left On Table Sigma Level Defect Free Defects Per Million % 93% 99.4% % % 308,537 66,807 6, Cost of Poor Quality Key Six Sigma Statistics Company Status

10 The Goal: Breakthrough Improvements Time Defects and Unnecessary Steps Six Sigma Breakthrough Current State Future State Improvement Period

11 Executives Managers Employees Improve market share, increase profitability, ensure long-term viability Improve output, eliminate rework, reduce labor and technology costs Create Vision, Strategy, Commitment Reduce waste, errors, cycle time… improve capabilities Prioritization - Focus - Accountability - Reward Metrics developed to manage key business drivers Empower A-Players to “get the job done” The SSA Strategic Approach “Another beauty about this whole Six Sigma training is it starts at the top, so now you have a way to align the company objectives, align the way the company is driving forward with one simple methodology. People speak the same language.” Phong Vu, Ford Motor Company

12 Deployment Success Factors Prioritization – Six Sigma projects are aligned with strategic business objectives. Focus - Resources are applied to projects aligned with strategic business goals. Accountability – All involved are held accountable for meeting objectives and delivering results. Reward – Desired behaviors and results are celebrated and rewarded.

13 Process Focus of Six Sigma Inputs (X 1, X 2... X n ) Independent Cause Control Output Dependent on Input Effect Monitor Process Y = f(x s ) Y Determining the Critical Xs and Controlling These Xs to Assure the Ys Client’s Needs & Expectations (VOC) X1X1 X2X2 XnXn X3X3

14 Variation... Results in Customer Dissatisfaction Average vs Variation Average tells little about customer satisfaction. To drive dramatic improvements in performance, the variation in a process must be minimized. Days Process 1 Process 2 Product Delivery Process. Customers Remember Variation, Not Means

15 Entitlement... Doing the best  The focus should be to shift the overall performance to the Entitlement level. This drives dramatic short- term improvements in cost and quality with minimal investment in technology.  Only after the Entitlement level is achieved should an investment be made to redesign / reengineer the systems or infrastructure. The optimum level that a process currently performs is the Entitlement. This can be replicated once the variables are truly understood. Days Current Entitlement Delivery of Client Orders Upper Limit Avoid Capital Investment Until Entitlement is Reached

16 SSA Breakthrough Strategy “We are pursuing a ‘knowledge intensity’ business model, which leverages the value of our market knowledge, our brands, our technology and know-how. This is being accomplished while also using Six Sigma to enhance productivity, build marketplace competitiveness and grow revenues.” Chad Holliday, Chairman DuPont

17 Lean - Elimination of Unnecessary Steps Reduce Rework, Save Time, Save Cost, and Extend Capacity of Valuable Resources DEFINITION: A systematic approach to any process which is based on the premise that anywhere work is being done, waste is being generated GOAL: Total elimination of waste by:  Defining Waste  Identifying the sources of Waste  Planning for Waste Elimination  Removing Waste in targeted processes  Establishing PERMENANT controls to prevent the reoccurrence of Waste

18 Overview of Lean Process Value Stream Mapping The Seven Types of Waste 1.Overproduction 2.Inventory 3.Waiting 4.Transportation 5.Motion 6.Waste in the work itself (complexity) 7.Defects Tools to Make Waste Visible Workplace Organization 5S Visual Workplace Spaghetti Chart Process Flow Diagram Pareto Chart Cause and Effect Diagram Five Whys Process Reports and Assessments Process Blitz or Kaizen Document procedures Standardized Operations Control Phase

19 Breakthrough Strategy Characterization Optimization Phase 1: Measure Phase 2: Analyze Phase 3: Improve Phase 4: Control determination of improvement opportunities Process Characterization is concerned with the identification and benchmarking of key process characteristics, and the and goals. Process Optimization is aimed at identifying, improving and controlling the key process variables which exert undesirable influence over the key process characteristics. Phase 0: Define Phase 0: Define Define the problem and agree on the objective. Define the metrics. Map Process. Validate measurement systems. Collect relevant data and begin basic analysis Identify the few key factors which are directly influencing the problem. Determine optimum values for the few key factors which resolve the problem. Determine long term control measures which will ensure that improvements are sustained. DMAIC Phases of Six Sigma Projects

20 The Twelve Step Breakthrough Strategy - the Six Sigma Method 1)Select Output Characteristics 2)Define Performance Standards 3)Validate Measurement System 4)Establish Process Capability 5)Define Performance Objectives 6)Identify Variation Sources 7)Screen Potential Causes 8)Discover Variable Relationships 9)Establish Operating Tolerances 10)Validate Measurement System 11)Determine Process Capability 12)Implement Process Controls

21 Five Phases and Key Tools Advanced Tools Yield Accelerated Results Measure Metrics Process Map C&E Diagram FMEA Gage R&R Capability Analysis Analyze Graphs Hypothesis Tests ANOVA DoE Plan Improve DOE: Full Factorials 2 K Factorials Fractional Factorials RSM Optimization Control Control Plan SPC Error Proofing Automated Control Define Determine Customer Select Project Determine Scope Estimate Savings

22 Integrating all the Pieces of 6 Sigma BB and PO Monitor Project Performance Over Time Apply Work Organization & Balancing Techniques Implement Process Controls Take Actions Map Future State Complete 5S Process (Get Organized) Create Value Stream and/or Process Map Reduce Variation via MAIC format Create Project Definition Kaizen Process Blitz Appropriate Yes Project Goals Attained Yes No Make Waste Visible Project Goals Attained Project Completion Yes Implement Design For Six Sigma No Measurement System Analysis & Baseline Process Do Work Organization and Balancing Techniques Apply? Yes No Eliminate NVA Improve Capability of VA steps Continue to remove waste in pursuit of the ‘Future State’ If Entitlement is not enough or their exists no process begin DFSS

23 Critical Success Factors Driven Business Unit Leadership Team Clear Prioritization, Focus, Accountability & Reward Carefully Scoped Projects With Clearly Defined Beginning and End Points Superior Planning and Flawless Execution Dedicated “A-players” (Champions and Black Belts) Relentless Customer Focus Cross Business-unit Collaboration Focus on Significant Business Processes With Quantifiable Financial Impact No Science Projects! Visible Metrics