Chapter 4
Process Improvement: Minimizing
Variation Through Six Sigma
Copyright 2013 John Wiley & Sons, Inc.
Overview
4-2
Introduction
• Six Sigma is applicable to a wide variety of
organizations
• Six Sigma can yield significant gains by
improving processes
• Six Sigma improvements translate directly into
helping organization become more competitive
• People with a background in Six Sigma are in
high demand
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Examples of Six Sigma Training
and Benefits
Table 4.1
4-4
Approaches for Process
Improvement
Figure 4.1
4-5
Business Process Design
(Reengineering)
• Appropriate strategy for processes that
require improvements beyond
incremental enhancements
• Also useful in new processes
• Often needed when there is a major
advance in technology or customer
requirements
• Often called reengineering
4-6
BPD Themes
• Primary objective is improved customer
service
• A concern with making quantum
improvements in performance
• The central role of technology
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BPD Keywords
•
•
•
•
Radical
Redesign
Process
Dramatic
Slide on each of these
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Radical
• Profoundly change the way work
performed
• Not concerned with making superficial
changes
• Get to root
• Get rid of old
• Reinventing, not improving
4-9
Redesign
• BPD is about designing how work is
done
• The way work is accomplished can be
designed
• Smart, capable, well trained, highly
motivated employees mean little if the
way work is performed is poorly
designed
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Process
• All organizations perform processes
• Customers not interested in individual
activities but rather overall results
• Few of them are organized on the basis
of processes
• Thus, processes tend to go unmanaged
• Team approach one way this addressed
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Dramatic
• Quantum leaps in performance
• Not marginal or incremental
improvements
• Breakthroughs in performance
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BPD
• Business Process Analysis
– Focus on processes that cross functional
boundaries and transitions between
departments
– Identified nonvalue-adding activities
4-13
IBM Credit Example
• Order logged by 1 of 14 people in
conference room
• Carted upstairs to credit department
• Information entered into computer
to check borrower’s
creditworthiness
• Results written on piece of paper
Figure 4.2
4-14
IBM Credit Example (Continued)
• Business practices department modified
standard loan covenant in response to
customer requests
• Used its own computer system
• Pricing department keyed data into PC to
determine appropriate interest rate
• Administrator produced a quote letter for
field sales rep
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IBM Credit Example (Continued)
•
•
•
•
Average time to process a request was six days
Could take as long as two weeks
Actual processing time 90 minutes
Combined all steps into one job called a deal
structurer
– Turnaround time reduced to four hours
– Number of deals processed increased 100 times
with small reduction in head count
4-16
Six Sigma and the DMAIC
Improvement Process
• The Six Sigma concept was developed by Bill
Smith, a senior engineer at Motorola, in 1986
as a way to standardize the way defects were
tallied
• Sigma is the Greek symbol used in statistics to
refer to standard deviation which is a measure
of variation
• Adding “six” to “sigma” combines a measure
of process performance (sigma) with the goal
of nearly perfect quality (six)
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Six Sigma Quality
Figure 5.6
4-18
Six Sigma
• A philosophy and set of methods companies
use to eliminate defects in their products and
processes
• Seeks to reduce variation in the processes that
lead to product defects
• The name, “Six Sigma,” refers to the goal of
no more than four defects per million units
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Six Sigma Defined
A comprehensive and flexible system for
achieving, sustaining and maximizing
business success. Six Sigma is uniquely
driven by close understanding of
customer needs, disciplined use of facts,
data, and statistical analysis, and diligent
attention to managing, improving, and
reinventing business processes
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Six Sigma Quality
To achieve Six Sigma quality, the
variability of a process must be reduced to
the point that the process capability ratio is
greater than or equal to 2.
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Six Sigma Quality level
Process Capability Ratio (Cp) – Measures whether or not a process is potentially capable of
meeting certain quality standards
Cp =
Upper Tolerance Limit – Lower Tolerance Limit >= 2
6σ
Where σ is the estimated
standard deviation
for the individual observations
4-22
Six Sigma Quality
• Adopted by General Electric, Motorola, etc., as a
means of focusing effort on quality using a
methodological approach
• Overall focus of the methodology is to understand
and achieve what the customer wants
• Seeks to reduce variation in the processes that
lead to product defects
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The Six Sigma DMAIC Approach
for Process Improvement
•
•
•
•
•
Define
Measure
Analyze
Improve
Control
Slide on each of these
4-24
Six Sigma Quality: DMAIC Cycle for
existing process/product improvement
• Define, Measure, Analyze, Improve, and
Control (DMAIC)
1. Define (D)
Customers and their priorities
2. Measure (M)
Process and its performance
3. Analyze (A)
Causes of defects
4. Improve (I)
Remove causes of defects
5. Control (C)
Maintain quality
6-25
4-25
DMAIC Cycle
Define - identify customers and their
priorities
Measure - determine how to measure the
process and how it is performing
Analyze - determine the most likely causes
of defects
Improve - identify means to remove the
causes of defects
Control - determine how to maintain the
improvements
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Define
•
•
•
•
Goals for process improvement
The customer
Project scope
The problem/opportunity
4-27
Measure
• Identify appropriate performance
measures
• Collect data
• Evaluate current process performance
4-28
Analyze and Improve
• Analyze
– Develop and test theories related to root
causes of problems
– Identify cause-and-effect relationships
• Improve
– Develop, evaluate, and implement solutions
to reduce gap between desired process
performance and current performance
4-29
Control
• Monitor process to sustain improved
performance
• Ensure that problems do not resurface
4-30
Six Sigma Quality: DMADV Cycle for
new service/product design
• Define, Measure, Analyze, Design, and Verify
(DMADV)
1. Define (D)
Customers and their priorities
2. Measure (M)
Process and its performance
3. Analyze (A)
Causes of defects
4. Design (D)
Design the New Product or Service
5. Verify (V)
Determine whether new design is
effective
6-31
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Six Sigma Methodology
Define, measure,
analyze, improve, and
control (DMAIC)
Developed by General
Electric as a means of
focusing effort on quality
using a methodological
approach
Overall focus of the
methodology is to
understand and achieve
what the customer wants
Seeks to reduce the
variation in the processes
that lead to these defects
12-32
4-32
Six Sigma Analytical Tools
Flowchart - a diagram
of the sequence of
operations
Run chart - depict
trends in data over
time
Pareto chart - help to
break down a problem
into components
Checksheet - basic
form to standardize
data collection
Cause-and-effect
diagram - show
relationships between
causes and problems
Opportunity flow
diagram - used to
separate value-added
from non-value-added
Process control chart used to assure that
processes are in
statistical control
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4-33
Process Improvement Tools
(continued)
• Service Blueprints
4-34
4-35
Other Process
Improvement Tools
• Poka-Yoke
– Mistake-proofing products and services
– Preventing errors, reducing costs and
improving quality
– Design to prevent doing it any but the
correct way
• McDonald’s wrapping of burger
• Car won’t start unless transmission is in “Park”
• “Deadman switch” on lawn mower
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Common Six Sigma Tools and
Methodologies
Table 4.2
4-37
Common Six Sigma Tools and
Methodologies (Continued)
Table 4.2 Continued
4-38
The Define Phase
•
•
•
•
•
Clearly specifying the problem or goal
Determining the goals for the process
improvement project
Identifying the scope of the project
Identifying the customers and their
requirements
Two common tools in this phase:
1. Benchmarking
2. Quality function deployment (QFD)
4-39
Benchmarking
• Benchmarking involves comparing an
organization's processes with best practices
• Used for a variety of purposes:
– Comparing an organization's processes with the
best
– Comparing an organization's products and services
with those of other organizations
– Identifying the best practices
– Projecting trends in order to be able to respond
proactively
4-40
Benchmarking
• Industry-focused benchmarking is the
identification of the best practices among
competitors.
• Process-focused benchmarking focuses on similar
processes of other companies, even if they are not
competitors.
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Benchmarking
Industry
Focused
Process
Focused
4-42
External Benchmarking Steps
1. Identify those processes needing
improvement.
2. Identify a firm that is the world leader in
performing the process.
3. Contact the managers of that company and
make a personal visit to interview managers
and workers.
4. Analyze data.
12-43
4-43
Quality Function Deployment
(QFD)
• Two key drivers of an organization’s longterm competitive success are the extent to
which its new products or services meet
customers’ needs, and having the
organizational capabilities to develop and
deliver such new products and services
• Tools for helping translate customer desires
directly into product service attributes
4-44
Quality Function Deployment
Process
Figure 4.4
4-45
Example Output Planning Matrix
for Fast Food Restaurant Chain
Figure 4.6
4-46
The Measure Phase
• The measure phase begins with the
identification of the key process performance
metrics
• Once the key process performance metrics
have been specified, related process and
customer data is collected
• Two commonly used process performance
measures, namely, Defects per Million
Opportunities (DPMO) and Process Sigma
4-47
Defects Per Million Opportunities
• Earlier it was noted that a literal
interpretation of Six Sigma is 3.4 defects
per million opportunities (DPMO)
• This may have caused some confusion
for more statistically inclined readers
• Motorola assumed that the means of the
process can shift
4-48
The Analyze Phase
• Objective is to utilize the data that has been
collected to develop and test theories related to
the root causes of existing gaps between the
process’ current performance and its desired
performance
• Ultimately, wish to identify key cause-andeffect relationships that can be leveraged to
improve the overall performance of the
process
4-49
Mean Distribution
4-50
Control Chart with Limits Set
at Three Standard Deviations
Figure 3.2
4-51
Process Capability
Answers the Question:
Can the process provide
acceptable quality consistently?
4-52
Natural Variation in a Production
System Versus Specifications
A. Well matched
B. Natural variation
greater than design
requirements
Figure 4.13
C. Wider design
specifications than
natural variation
D. Means out of sync
4-53
Process Capability Ratio (Cp)
Process Capability Ratio (Cp) – Measures whether or not a process is potentially
capable of
meeting certain quality standards
Cp =
Upper Tolerance Limit – Lower Tolerance Limit
6σ
Where σ is the estimated
standard deviation
for the individual observations
4-54
Six Sigma Quality
To achieve Six Sigma quality, the
variability
of a process must be reduced to the point
that the process capability ratio is greater
than or equal to 2.
4-55
Six Sigma Quality level
Process Capability Ratio (Cp) – Measures whether or not a process is potentially
capable of
meeting certain quality standards
Cp =
Upper Tolerance Limit – Lower Tolerance Limit >= 2
6σ
Where σ is the estimated
standard deviation
for the individual observations
4-56
One-Sided Process Capability
Index Cpk
4-57
Problem
• Royal Corporation, a manufacturer of ice skates and
a supplier of Brentwood Skating Rink, wishes to
know if the company is able to make a new type of
skate blade. The blades need to be 0.48 inch from
top to bottom without varying more than +/-0.02
inch. The company machine responsible for
producing the blades currently offers a standard
deviation of 0.005 inch. Compute the CP for the
process. Will Royal Corporation be able to
consistently manufacture the new skate blades to
specification?
4-58
Tools
•
•
There are a number of tools that are
useful in the analysis phase
The three biggest are:
1. Brainstorming
2. Cause-and-effect diagrams
3. Process capability analysis
Slide on each of these
4-59
Brainstorming
1. Do not criticize ideas during the
brainstorming session
2. Express all ideas no matter how radical,
bizarre, unconventional, ridiculous, or
impractical they may seem
3. Generate as many ideas as possible
4. Combine, extend, and/or improve on one
another’s ideas
4-60
Four Threats to Team Creativity
1. Social loafing
–
People working less hard in a team
2. Conformity
–
Being overly conservative due to concerns they
have about reaction of others
3. Production blocking
–
Physical limitations that can restrict productivity
4. Downward norm setting
–
Teams tend to match productivity of least
productive member
4-61
Actions to Enhance Team
Creativity
•
•
•
•
•
Create diversified teams
Use analogical reasoning
Use brainwriting
Use the nominal group technique
Record team ideas
4-62
Actions to Enhance Team
Creativity (Continued)
• Use trained facilitators to run the
brainstorming session
• Set high standards
• Change the composition of the team
• Use electronic brainstorming
• Make the workplace a playground
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Six Sigma Roles
• Master black belts
– Combine an advanced knowledge of Six Sigma
tools with deep understanding of business
• Black belts
– Solid background in the Six Sigma tools
– Training and leading improvement projects
• Green belts
– Less knowledge than black belts
• Yellow belts
– Completed awareness training
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Cause and Effect Diagrams
Figure 4.12
4-65
China’s High-Speed Building
Boom
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Decision Trees for Capacity Analysis
• A decision tree is a schematic model of the
sequence of steps in a problem – including the
conditions and consequences of each step.
• Decision trees help analysts understand the
problem and assist in identifying the best
solution.
• Decision tree components include the
following:
– Decision nodes – represented with squares
– Chance nodes – represented with circles
– Paths – links between nodes
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4-67
Example 5.2: Decision Trees
• The owner of Hackers Computer Store is evaluating three
options – expand at current site, expand to a new site, do
nothing.
• The decision process includes the following assumptions
and conditions.
– Strong growth has a 55% probability
– New site cost is $210,000
• Payoffs: strong growth = $195,000; weak growth = $115,000
– Expanding current site cost is $87,000 (in either year 1 or 2)
• Payoffs: strong growth = $190,000; weak growth = $100,000
– Do nothing
• Payoffs: strong growth = $170,000; weak growth = $105,000
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Example 5.2: Decision Trees
• Calculate the value of each alternative
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4-69
Example 5.2: Decision Trees
• Diagram the problem chronologically
Events
Decision
Decision
5-70
4-70
Example 5.2: Decision Trees
• Calculate value of each branch
$765,000
$365,000
$863,000
$413,000
$843,000
$850,000
$525,000
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4-71
Example 5.2
 Work backwards to calculate the value of each decision/event
$765,000
$365,000
Do nothing has
higher$863,000
value than
$660,500
expand, so choose
$413,000
to do nothing
Do nothing = $703,750
$843,00
Do nothing has
$703,750 Do nothing = $850,000
$850,000
higher value than
expand or move,
so choose to do
$525,000
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Service Quality
• Rate of service utilization and service quality
are directly linked.
Arrivals exceed
services – many
customers are never
served
Service quality
declines –
disruptions or high
arrival levels lead
to long wait times
Sufficient
capacity to
provide quality
service
5-26
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