Six_Sigma

Executive Summary Six Sigma is a trend which is achieving a global recognition among big industry players and has been implemented by many organizations successfully. This report gives an understanding of the Six Sigma strategy and the methods used to implement it. It shows how Six Sigma as a statistical tool helps in reducing defects in different processes of an organization helping them in achieving financial goals. Though Six Sigma has shown wide improvement in many organizations it has few drawbacks which would also be discussed in this report. Contents Page No. 1. Introduction 3 2. Six Sigma and its origin 4 3. Methods of Six Sigma 5 4. Advantages and Disadvantages of Six Sigma 7 5. Conclusion 8 6. References 9 7. Appendices 11 7.1 Appendix 1 11 7.2 Appendix 2 12 7.3 Appendix 3 14 7.4 Appendix 4 15 1. Introduction. Quality is now ever increasingly playing a huge role in corporate strategy, in multinational organizations as companies try to meet customers demand more efficiently, improving in-house efficiency and cutting costs. Companies which don’t become accustomed to ever changing market place, which is becoming smaller and more aggressive with ever demanding customer expectations and increasing product complexity while maintaining brilliant quality control standards will lag behind by the companies which do. There is a no fix standard of quality, which differs from the industry sectors like manufacturing to services. Six Sigma is a quality standard adopted in many organizations to improve their bottom lines and efficiency and which this report will give a brief view about it. 2. Six Sigma and its origin. “Six Sigma is a business strategy that seeks to identify and eliminate causes of errors or defects or failures in business processes by focusing on outputs that are critical to customers.” Snee (1999). Bill Smith was the person who defined all the methodologies of Six Sigma at Motorola in 1986. Motorola (2009). Six Sigma follows many aspects of its other quality standards from previous years like Quality Management, Total Quality Management and Zero Defect. 3. Methods of Six Sigma. The Six Sigma strategy gives various organizations a series of interventions and statistical tools that can lead to substantial increase in the levels of profit and immense increase of quality, irrespective if a company manufacture products or are involved in providing services. Measurement of the degree to which any organization’s processes fluctuates from its defined quality standards is the main aim of Six Sigma strategy. Six Sigma strategies emphasize on attaining measurable financial gains and returns to the bottom line of an organization. “The term "six sigma process" comes from the notion that if one has six standard deviations between the process mean and the nearest specification limit, as shown in the graph, (Appendix 1) practically no items will fail to meet specifications.” Geoff (2001). The average product, regardless of how simple or complex, has a quality performance value of four sigma, for example. The best products however, are valued at six sigma, a level of excellence in performance that is truly world class. The philosophy of six sigma recognizes that there is a direct correlation between the number of product defects, wasted operating costs, and the level of customer satisfaction. Harry (1998). The measurement index used in six sigma is defects per unit, which can comprise of a product itself, or its raw material, a code in software, to a memo in the office or time frame. The value of sigma shows the likelihood of the defects to occur in a process or an operation. As the sigma value increases the likeliness of a process or an operation producing defects decreases. In a six sigma process 3.4 defects per million opportunities (DMPO) are widely accepted. Richardson (2007). Appendix 2 shows different DPMO values relating long-term as well as short-term sigma levels. Thus, the increase in sigma value adds value to the product which in turn decreases the need for checks and inspection, inventory levels decreases reducing the costs, decreases the cycle time and in turn makes the customer happy. The data produced by six sigma is to measure the capability of a process to produce a defect free product. Appendix 3 shows the sigma process and how it a higher sigma value produces a defect free product or service. 4. Advantages and Disadvantages of Six Sigma. Six Sigma strategy has been widely adopted by many organizations after it was implemented in the Motorola. One of the well known organization who implemented this strategy was General Electric and was backed by its then CEO Jack Welch. He defined this six sigma initiative as a “highly disciplined process that helps us focus on developing and delivering near-perfect products and services.” Gourishankar, et,al., (1999). Six Sigma uses the idea of statistical thinking and also the use of highly proven statistical tools and methods for identification of defect and with the ultimate aim of cutting it (defect) following the process variability reduction methods. The main disadvantage of implementing Six Sigma is the cost. The initial cost for bringing in the Six Sigma into a company culture demands a high investment. This may hinder many small and medium sized organizations to implement this system into the company. The other big drawback of this strategy is the availability of the data. The non availability of quality data, especially in processes where no data is available to begin with (sometimes this task could take the largest proportion of the project time). Antony (2008). Another setback while implementing six sigma is the goal that it sets is very hard to attain. Appendix 4 shows the relationship between six sigma goals and performance level of the employees in an organization. 5. Conclusion. Six Sigma has attained a worldwide recognition as a strong business strategy for reaching and maintaining a high level of service and operational excellence. Although initially the main focus of this strategy was on manufacturing sector, it has been widely implemented in other sector such as service and transactional processes. 6. References. Antony,J., (2008). Pros and cons of Six Sigma: an academic perspective. Accessed on 20/10/2009, Available from http://www.improvementandinnovation.com/features/articles/pros-and-cons-six-sigma-academic-perspective'page=1 Bryan, J.F., Locke, E.A. (1967). Goal Setting as a means of increasing motivation. Journal of Applied Psychology. Vol. 51. pp. 274–277. El-Haik, B., Suh, N. P., Axiomatic Quality. John Wiley and Sons. p.10. Geoff, T. (2001). Six Sigma: SPC and TQM in Manufacturing and Services. Aldershot, Hampshire. Gower Publishing Ltd. Gourishankar, T., Subramaniam, S., (1999). Six Sigma – Does it Really Add Up' Financial Times Limited. Gygi, C., DeCarlo, N., Williams, B. (2005). Six Sigma for Dummies. Hoboken, NJ: Wiley Publishing, Inc... Harry, M.J. (1998). Six sigma: A breakthrough strategy for profitability. Vol. 31, Iss. 5; pg. 60. Linderman, K., Schroeder, G.R., et al... Six Sigma: a goal-theoretic perspective. Journal of operations management. Vol. 21 Issue 2. pp 193-203. Motorola (2009), About Motorola University, The Inventors of Six Sigma. Accessed on 26/10/2009, Available from http://www.motorola.com/content.jsp'globalObjectId=3079 Richardson, K. (2007). The 'Six Sigma' Factor for Home Depot. Wall Street Journal. Snee, R.D. (1999). Why should statisticians pay attention to Six Sigma' Quality Progress, September, pp. 100-3. 7. Appendices. 8.1 Appendix 1 Normal Distribution Graph of the normal distribution, which underlies the statistical assumptions of the Six Sigma model. The Greek letter σ (sigma) marks the distance on the horizontal axis between the mean, µ, and the curve's inflection point. The greater this distance, the greater is the spread of values encountered. For the curve shown above, µ = 0 and σ = 1. The upper and lower specification limits (USL, LSL) are at a distance of 6σ from the mean. Due to the properties of the normal distribution, values lying that far away from the mean are extremely unlikely. Even if the mean were to move right or left by 1.5σ at some point in the future (1.5 sigma shift), there is still a good safety cushion. This is why Six Sigma aims to have processes where the mean is at least 6σ away from the nearest specification limit. Source: Geoff, T. (2001), Six Sigma: SPC and TQM in Manufacturing and Services. 8.2 Appendix 2 Long –term to short-term sigma values. Sigma level | DPMO | Percent defective | Percentage yield | Short-term Cpk | Long-term Cpk | 1 | 691,462 | 69% | 31% | 0.33 | –0.17 | 2 | 308,538 | 31% | 69% | 0.67 | 0.17 | 3 | 66,807 | 6.7% | 93.3% | 1.00 | 0.5 | 4 | 6,210 | 0.62% | 99.38% | 1.33 | 0.83 | 5 | 233 | 0.023% | 99.977% | 1.67 | 1.17 | 6 | 3.4 | 0.00034% | 99.99966% | 2.00 | 1.5 | 7 | 0.019 | 0.0000019% | 99.9999981% | 2.33 | 1.83 | The table gives long-term DPMO values corresponding to various short-term sigma levels. These figures assume that the process mean will shift by 1.5 sigma towards the side with the critical specification limit. In other words, they assume that after the initial study determining the short-term sigma level, the long-term Cpk value will turn out to be 0.5 less than the short-term Cpk value. So, for example, the DPMO figure given for 1 sigma assumes that the long-term process mean will be 0.5 sigma beyond the specification limit (Cpk = –0.17), rather than 1 sigma within it, as it was in the short-term study (Cpk = 0.33). Note that the defect percentages only indicate defects exceeding the specification limit that the process mean is nearest to. Defects beyond the far specification limit are not included in the percentages. Source: Gygi, C., DeCarlo, N., Williams, B. (2005). Six Sigma for Dummies. El-Haik, B., Suh, N. P., Axiomatic Quality. John Wiley and Sons. p. 10. 8.3 Appendix 3 Process Sigma 3 sigma results in a 66,810 DPMO or 93.3% process yield, while Six Sigma is only 3.4 DPMO and 99.99966% process yield (these computations assume a 1.5 S.D. shift in the process mean). The figure shows the relationship between DPMO and Process Sigma assuming the normal distribution. Source: Linderman, K., Schroeder, G.R., et al. (2003). Six Sigma: a goal-theoretic perspective. Journal of operations management. 8.4 Appendix 4 Explicit Six Sigma goals and performance Figure above illustrates the relationship between specific challenging goals employed in Six Sigma and performance. Six Sigma sets very challenging goals, which may run the risk of being viewed as unattainable. The extent of Six Sigma training reduces the uncertainty associated with improvement projects and increases the commitment of the organizational members. Source: Bryan, J.F., Locke, E.A. (1967). Goal Setting as a means of increasing motivation. Journal of Applied Psychology.