Six Sigma :By Lee Olson Presentation to INFORMS Six Sigma Six Sigma: DMAIC; Y=f(x) Is it a Goal, a Measure, a Process, a Tool or an expletive deleted?


Objectives :Operational Excellence Training Objectives Understand the Basics of the Six Sigma Program Understand How Six Sigma Relates to Lean, TOC, TQM (Theory Of Constraints; Total Quality Management) Ability to Define a Strategy and Roadmap for Success


Define :Operational Excellence Training Define Is it a Goal, a Measure, a Process, a Tool or an expletive deleted? Yes


Define :Operational Excellence Training Define Six Sigma Is a management methodology Customer focused Data driven decisions Breakthrough performance gains Validated bottom line results


Customer Focused :Operational Excellence Training Customer Focused Our Performance Compared to Competitors Importance to Customers We’re Better They’re Better High Moderate- to-’Low’ Price Complaints OTD Quality Training Complete Shared Goals


Data Driven Decisions :Operational Excellence Training Data Driven Decisions Why should we test or inspect Y, if we know this relationship? Y Dependent Output Effect Symptom Monitor Response X1 . . . XN Independent Input-Process Cause Problem Control Factor To get results, should we focus our behavior on the Y or X ?


Breakthrough performance gains :Operational Excellence Training Breakthrough performance gains Sigma is a statistical unit of measure which reflects process capability. The sigma scale of measure is perfectly correlated to such characteristics as defects-per-unit, parts-per million defective, and the probability of a failure/error. (Distribution Shifted ± 1.5?) Process Capability Defects per Million Opportunities


Validated bottom line results :Operational Excellence Training Validated bottom line results Impact on Bottom Line Assuming a 10% change in the factor Factors


Define :Operational Excellence Training Define Methodology Define Measure Analyze Improve Control


Roadmap Example :Operational Excellence Training Roadmap Example Next Project Celebrate Project $


Slide 11:PERFECTION


DefineKey Items :Operational Excellence Training DefineKey Items Customers, Value, Problem Statement Scope, Timeline, Team Primary/Secondary & OpEx Metrics Current Value Stream Map Voice Of Customer (QFD) (Quality Function Deployment)


Project SelectionImpact :Operational Excellence Training Project SelectionImpact Business Impact Revenue Growth Cost Reduction Capital Reduction Key Business Objectives On Time Delivery Lead Time Quality Customer Satisfaction Impact on Operational Excellence Metrics


Evaluate and Rank SuggestionsEffort and Risk :Operational Excellence Training Evaluate and Rank SuggestionsEffort and Risk Effort required People Resources Capital Resources Duration of Project Probability of success Technical Risk Data available Knowledge of process Management Risk Aligned with objectives Support by value stream manager Impact vs. Risk vs. Effort Assess ROI (Return On Investment) Assign priorities to projects


Evaluate and Rank Suggestions :Operational Excellence Training Evaluate and Rank Suggestions Example tool to rank projects 0106-01 Project Rating.xls


Slide 16:Example chart to rank projects 0106-01 Project Rating.xls


Measure :Operational Excellence Training Measure Establish measurement capability Validate the database (transactional) Gage R&R (Repeatability & Reproducibility) Calibration is not enough Many (or most) measurement systems are not capable How good is the data you are using to make decisions? Fix the measurement system Enables calculation of process capability Enables calculation of alpha & beta risks This step is often skipped


Analyze(and fix the obvious) :Operational Excellence Training Analyze(and fix the obvious) Find all KPOVs & KPIVs (Key Process Output Variables; Key Process Input Variables) FMEA, DOE, critical Xs, VA/NVA (Failure Modes Effects Analysis; Design Of Experiment) Graphical Analysis, ANOVA (Analysis Of Variance) Future Value Stream Map


Improve :Operational Excellence Training Improve Optimize KPOVs & test the KPIVs (Key Process Output Variables; Key Process Input Variables) Redesign process, set pacemaker 5S, Cell design, MRS (Material Replenishment System) Visual controls Value Stream Plan


Control :Operational Excellence Training Control Management of Change Owned by project champion and value stream manager Critical to long term success of project Physical and cultural changes Measurement controls On-going metrics Visual Controls Enable workers to self-manage the process


Basic ImplementationRoadmap :Operational Excellence Training Basic ImplementationRoadmap Understand and Define Entire Value Streams Deploy Key Business Objectives - Measure and target (metrics) - Align and involve all employees - Develop and motivate Define, Measure, Analyze, Improve Identify root causes, prioritize, eliminate waste, make things flow and pulled by customers Control -Sustain Improvement -Drive Towards Perfection Identify Customer Requirements Vision (Strategic Business Plan) Continuous Improvement (DMAIC) Identify Customer Requirements


Hoshin :Operational Excellence Training Hoshin


Does it work?. :Operational Excellence Training Does it work?. Source: American Customer Satisfaction Index, U Michigan, HBR, 2001 1999 73 companies Ralston Purina Quaker Oats Hilton Hotels Coca-Cola Unilever etc. The top companies in Customer Satisfaction grow MVA at nearly twice the rate of their poor-performing counterparts. In Billions $


What about Lean, TOC, TQM :Operational Excellence Training What about Lean, TOC, TQM Six Sigma Remove defects, minimize variance Lean Remove waste, shorten the flow TOC Remove and manage constraints TQM Continuous Improvement


Value Stream Map - Current State :Value Stream Map - Current State


Customer DataOn-Time Delivery :Competitive LT = 3 days Takt Time = 18.2 min Customer DataOn-Time Delivery Demand = 45/day


Inventory :Raw = 5 days WIP = 12.1 days FG = 6.5 days Inventory


Flow of ValueLead Time :Touch Time = 89 min Flow of ValueLead Time Lead Time = 23.6 days


ConstraintsOTD, Lead Time :CT (67) > Takt Time (18) ConstraintsOTD, Lead Time Max Wip = 7.6 days


Setup TimesOP Margin, Lead Time :CO = 23 min CO = Changeover Setup TimesOP Margin, Lead Time CO = 1 hour


MaintenanceOTD, Lead Time :MaintenanceOTD, Lead Time Uptime = 70%


Quality :Quality FTY = 67%


Flow of ValueOTD, Lead Time :What is the pitch time? Flow of ValueOTD, Lead Time Who is setting the pace?


Making it happen :Operational Excellence Training Making it happen Three major roles Implementer Learns the tools Works the process Solves day to day problems Manager Learns the methodology Manages a value stream Reviews project teams Leader Establishes the vision for the future Sets priorities Encourages Where do you need to focus?


What Is a Sigma? :Operational Excellence Training What Is a Sigma? A metric that indicates how well a process is performing. Higher is better Measures the capability of the process to perform defect-free work Also known as “z”, it is based on standard deviation for continuous data For discrete data it is calculated from DPMO


Slide 37:Operational Excellence Training The Normal Curve and Capability Low Sigma High Sigma