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Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

IXCUSTOMER & COMPETITIVE INTELLIGENCE

FOR SYSTEMS INNOVATION & DESIGN

S IGMAS DEPARTMENT OF

STATISTICSDR. RICK EDGEMAN, PROFESSOR & CHAIR – SIX SIGMA BLACK BELT

[email protected] OFFICE: +1-208-885-4410

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

IXS IGMAS DEPARTMENT OF

STATISTICS

Introduction to Six Sigma

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

IXS IGMAS

DEPARTMENT OF

STATISTICS

a highly structured strategy for acquiring, assessing, and applying customer, competitor, and enterprise intelligence for the purposes of product, system or enterprise innovation and

design.

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

“Often, problems are knots with many strands, and

looking at those strands can make a problem seem

different.”

Mr. Rogers

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

a highly structured strategy for acquiring, assessing, and applying customer, competitor, and enterprise

intelligence for the purposes of product, system or enterprise innovation and design.

Innovation AlgorithmDMAIC (Define-Measure-Analyze-Improve-Control)

Design for Six Sigma AlgorithmDMADV (Define-Measure-Analyze-Design-Verify)

Makes Integrative Use Of:Various strategies and tools from Statistics, Quality,

Business, Engineering and … ???

is …

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Six Sigma Organizations

• GE … All 300,000+ GE employees must be Six Sigma certified. All new GE products developed using the “Design for Six Sigma” (DFSS) approach.

• 3M … New CEO (from GE) requires all 3M employees to become Six Sigma certified.

• Dupont• AlliedSignal• Sun Microsystems• Raytheon• Motorola• Boeing• Lockheed-Martin• Bank-of-America• American Express• HSBC• SAS Institute

Rapidly Increasing Areas of Application.

– Healthcare – GE Heathcare - SLC– Financial,– Military – NSWC, Pentagon, etc.

• Fueled by:• Strategic Contexts.• Notorious bottom-line orientation &

results. • Adaptable to multiple bottom lines.• Process orientation: rigorous and

systematic approaches to innovation and design.

• Focus on the customer.• Successful track record elsewhere.• “Industry Buzz”.

While Six Sigma is new at, for example, 3M – its benefits at others ofthese organizations is measured in the multi-billions of US dollars.

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Quality is a state in which value entitlement is realized for the customer and provider in every aspect of the business relationship.

Business Quality is highest when the costs are at the absolute lowest for both the producer & consumer.

Six Sigma provides maximum value to companies in the forms of increased profits and maximum value to consumers with high-quality products and services at the lowest possible cost.

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

TheVillain

Cost of Poorly Performing Processes level DPMO CP3

2 308,537 Not Applicable3 66,807 25%-40% of sales4 6,210 15%-25% of sales5 233 5%-15% of sales6 3.4 < 1% of sales

Each sigma shift provides a 10% net income improvement

Cost of Poorly Performing Processes (CP3)

Sigma () is a measure of “perfection” relating to process performance capability … the “bigger the better.” A processoperating at a “Six Sigma” level produces only 3.4 defects per million opportunities (DPMO) for a defect. Without dedication of significant and appropriate attention to a process, most processes in leading companies operate at a level between 3 and 4 sigma.

Why is Six Sigma Important?

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Cost of Poorly Performing Processes The cost to deliver a quality product can account for as

much as 40% of the sales price. For example, a laser jet printer purchased for $1,000

may have cost the manufacturer $400 in rework just to make sure that you took home an average-quality product.

For a company whose annual revenues are $100 million and whose operating income is $10 million, the cost of quality is roughly 25% of the operating revenue, or $25 million.

If this same company could reduce its cost of achieving quality by 20%, it would increase its operating revenue by $5 million – or 50% of the current operating income.

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

… and the Hero • We don’t know what we don’t know.• We can’t do what we don’t know.• We won’t know until we measure.• We don’t measure what we don’t value.• We don’t value what we don’t measure.

• Typical Results: companies that properly implement Six Sigma have seen profit margins grow 20% year after year for each sigma shift (up to about 4.8s to 5.0s. Since most companies start at about 3s, virtually each employee trained in Six Sigma will return on average $230,000 per project to the bottom line until the company reaches 4.7s. After that, the cost savings are not as dramatic.

• However, improved profit margins allow companies to create products & services with added features and functions that result in greater market share.

What Does Six Sigma Tell Us?

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Six Sigma Affects Six Areas Fundamental to Improving a Company’s Value:

1. Process Improvement2. Product & Service Improvement3. Investor Relations4. Design Methodology5. Supplier Improvement6. Training & Recruitment

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Six Sigma vs. TQM TQM Terminology Six Sigma Improvement

Terminology

•Identify the Project•Establish the Cause

•Define

•Diagnose the Cause •Measure•Analyze

•Remedy the Cause •Improve

•Hold the Gains •Control

•Replicate Results•Nominate New Projects

•Replicate

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Values of Six Sigma OrganizationsIssue Classical Focus Six Sigma

Focus

Analytical Perspective point estimate variabilityManagement cost & time quality & timeManufacturability trial & error robust designVariable Search one-factor-at-a-time design of experimentsProcess Adjustment tweaking process control chartsProblems fixing preventionProblem solving expert based system basedAnalysis experience dataFocus product processBehavior reactive proactiveSuppliers cost relative capabilityReasoning experience based statistically basedOutlook short-term long-termDecision Making intuition probabilityApproach symptomatic problematicDesign performance producibility

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Values of Six Sigma Organizations

Issue Classical Focus Six Sigma Focus

Aim company customerOrganization authority learningTraining luxury necessityChain-of-command hierarchy empowered teamsDirection seat-of-the-pants benchmarking/ metricsGoal setting realistic perception reach out & stretchPeople cost assetControl centralized localizedImprovement automation optimization

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

The SIPOC Model

Suppliers Customers

Inputs OutputsProcess

Steps

Inform Loop

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Six Sigma COPIS Model

Customers Suppliers

Outputs InputsProcess

Steps

The Voice of the Customer (VOC) is aggressively sought and rigorously evaluated and used to determine needed outputs and hence the optimal process configuration needed to yield those outputs and their necessary inputs for which the best suppliers

are identified and allied with.

From Concept to Market: the Voice of the Customer

How does Six Sigma Work?

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

The DMAIC Model

Define Control

Measure ImproveAnalyze

Voice of the Customer

Institutionalization

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Kano Customer Need Model

Dissatisfiers Those needs that are EXPECTED in a product or service. These are generally not stated by customers but are assumed as given. If they are not present, the customer is dissatisfied.

Satisfiers Needs that customers SAY THEY WANT. Fulfilling these needs creates satisfaction.

Exciters /Delighters

New or Innovative features that customers do not expect. The presence of such unexpected features leads to high perceptions of quality.

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Kano Customer Need ModelDelighted

Disgusted

AbsentFullyImplemented

Stakeholder Satisfaction

TIME

Degree ofExecution

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Dimensions of Quality- Garvin’s

Eight• Quality is usually a bundle of characteristics • We need to disaggregate this composite notion• This decomposition will help us to

– make our notion of quality more precise– make comparisons possible– facilitate measurement

• Only the customer determines the relative importance of these dimensions

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Garvin’s Eight

Dimensions• Performance • Features• Conformance• Aesthetics

• Reliability• Durability• Serviceability• Perceived

Quality

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

What the Terms Mean (1)• PERFORMANCE

– Primary operating characteristics of a product

• FEATURES – bells & whistles– secondary characteristics that supplement the basic

functioning

• CONFORMANCE– degree to which product meets pre-established

standards (meeting specs)

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

What the Terms Mean (2)• RELIABILITY

– Probability of product remaining functional over a specified period of time

• DURABILITY – amount of use one gets out of a product

before it physically deteriorates

• SERVICEABILITY– speed and ease of repairs (or resolution of

problems)

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

What the Terms Mean (3)• ASTHETICS

– look, feel, and sound of a product – reflects individual preferences

• PERCEIVED QUALITY – perceptions of quality based on other cues and

indirect measures– reputation or affiliation often key

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Competing on Quality• It is not often feasible to pursue all 8

dimensions • Trade-offs are necessary• Quality niches can be defined and defended• A firm can define what quality means for its

product• Must focus on the right quality measure:

those one(s) that matter to the consumer

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Dimensions of Service Quality• RELIABILITY: consistency, error-free dependability

• RESPONSIVENESS: willingness to help the customer

• TANGIBLES: environment for the service presented

• COMPETENCE: the right skills and knowledge required

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Service Quality (cont.)• COURTESY: supplier’s behavior

• SECURITY: freedom from danger or risk

• ACCESS: ease of making contact

• COMMUNICATION: understandable to the customer

• EMPATHY: adopting the customer’s viewpoint

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Aggregation• Often need to reduce the number of

dimensions. Reduced list is:– Reliability– Responsiveness– Empathy– Tangibles– Assurance

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Six Sigma Road Map: R DMAIC SI

Breakthrough Stage Strategy Phase Objective

Identification Recognize Identify Key Business

Define Issues

Characterization Measure Understand Current

Analyze Performance Levels

Optimization Improve Achieve Breakthrough

Control Improvement

Institutionalization Standardize Transform How Day-to

Integrate Day Business is Conducted

Bre

akth

rou

Str

ate

Bla

ck B

elt

Pro

jects

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Define

Control

Improve Analyze

Measure

Six Sigma Innovation & the DMAIC

Algorithm

Define the problem and customerrequirements.

Measure defect rates and documentthe process in its current incarnation.

Analyze process data and determinethe capability of the process.

Improve the process and removedefect causes.

Control process performance andensure that defects do not recur.

“Common sense” doesn’t mean “commonly done” or when done, done well.

Six Sigma: How Do We Innovate?

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Six Sigma from the GE PerspectiveSix Sigma is a highly disciplined process that helps a company focus on developing

and delivering near-perfect products and services. Why “sigma”? The word is astatistical term that measures how far a given process deviates from perfection.

The central idea behind Six Sigma is that if you can measure how many“defects” you have in a process, you can systematically determine how to

eliminate those and approach “zero defects”.

Six Sigma has changed the DNA at GE – it is the way that GE works – inEverything that GE does and in every product GE designs.

“What is Six Sigma? The Roadmap to Customer Improvement”www.ge.com/sixsigma/makingcustomers.html

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Design for Six Sigma Applications of Six Sigma that focus on the design or significant

redesign of products and services and their enabling processes so thatfrom the beginning customer needs and expectations are fulfilled

are known as Design for Six Sigma or DFSS.

The focal aim of DFSS is to create designs that are resource efficient,capable of exceptionally high yields, and are robust to process

variations. This aim leads to the DFSS algorithm

Define-Measure-Analyze-Design-Verify (DMADV).

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Define

Verify

Design Analyze

Measure

Design for Six Sigma (DFSS)

All new products at GE are designed using a DFSS algorithm.

Define customer requirements andgoals for the process, product or service.

Measure and match performance to customer requirements.

Analyze and assess the design for the process, product or service.

Design and implement the array of new processes required for the new process, product or service.

Verify results and maintain performance.

Six Sigma: How Do We Design?

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Design for Six Sigma at GE:DFSS is changing GE. With it GE can build on all of its capabilities and take

all of its product and process designs to a new level of world-classperformance and quality.

The essence of DFSS is predicting design quality up front and driving qualitymeasurement and predictability improvement during the early design phases-

a much more effective and less expensive way to get to Six Sigma qualitythan trying to fix problems further down the road.

What We Do. GE Corporate Research and DevelopmentFormerly posted at: www.crd.ge.com/whatwedo/sixsigma.html

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Another View of Design for Six Sigma:DFSS is the change in the product design organization from a deterministic to a

probabilistic culture. Our people were trained to incorporate statistical analysis offailure modes, both in products and processes. They began to incorporate design

changes that modify & eliminate design features with a probability of failure within apredefined range of operating environments and conditions. The design organizationchanged from a “factor-of-safety” mentality to one in which there was a quantitative

assessment of design risk. Four elements of design are most critical to the effort:

•Design for producibility (design for manufacturing and assembly);•Design for Reliability;

•Design for Performance (technical requirements); and•Design for Maintainability.

“Design for Six Sigma: 15 Lessons Learned”, Quality Progress, Vol. 35, No. 1, pp. 33-42, January 2002.

Six Sigma

Client, Enterprise & Competitive Intelligence for Product, Process & Systems Innovation & Design

Dr. Rick L. Edgeman, University of Idaho

Improvement & Innovation – Focuses on high priority problems in business processes. This uses the DMAIC methodology: Define, Measure, Analyze, Improve, and Control.

Design–Design For Six Sigma (DFSS) addresses new or fundamentally poor processes. The methodology is called the DMADV or DMADOV model: Define, Measure, Analyze, Design, Optimize, and Verify.

Business Process Management –aids in definition and management of operations and activities in terms of core and enabling processes. The resulting process management systems provide a foundation of process definition and baseline data for all process design and improvement activities.