Six Sigma Methodologies:Overview and Application to Supply Management

Kimball Bullington, Ph.D., P.E.Associate Professor

Middle Tennessee State University

Copyright 2003, Kimball E. Bullington

Where are we going? A Brief History of Quality Six Sigma Six Sigma Revival Applying Six Sigma to Supply

America Re-discovers Deming

… and Juran

Rediscovering the Gurus Deming

Emphasis on Statistical Control 14 Points for Management

Juran Quality Planning and Analysis Managerial Breakthrough Quality Control Handbook

Standards and Awards ISO 9000

Minimum standards Does your system conform to the standard? Does your practice conform to your system?

Malcolm Baldrige National Quality Award Provides some guidance Examples for others to follow Motorola – an early winner

The Process Over time, the output of any process

shows a certain amount of natural or inherent variability

This is also referred to as random variability

It is due to countless minor factors and is assumed to be out of management’s control in the short run, i.e., you have to live with it

Processdistribution

Mean

The Process The distribution of a process’

output has a mean, , and a standard deviation, ; it can have a wide variety of shapes

Process Capability When selecting a process to

perform an operation, the inherent variability of process output should be compared to the range or tolerances allowed by the designer’s specifications

Process Capability Lower

SpecificationUpper

Specification

A significant portion of the process output falls outside of the specification width

In other words, is the process capable of producing the itemwithin specifications?

Much of the process output fits within specification width

Almost all of the process output fits within the specification width

process distribution

Statistics

Where are we going? A Brief History of Quality Six Sigma Six Sigma Revival Applying Six Sigma to Supply

Statistics LiteCentered Process

LSL USL

Statistics Lite Centered Process

LSL USL

Statistics Lite Centered Process

LSL USL

Non-conformingProduct

1,300 DPMO

Statistics Lite Centered Process

LSL USL

Non-conformingProduct

2,600 DPMO

Statistics Lite Shifted Process

LSL USL

1.5 mean shift

Statistics Lite Shifted Process

LSL USL

Non-conformingProduct

66,800 DPMO

1.5 mean shift

Statistics Lite Shifted ProcessCost to your company – 15-30% of

sales

LSL USL

Non-conformingProduct

66,800 DPMO

1.5 mean shift

Cost of Poor Quality

Lost Opportunity

DowntimeRework

InspectionOvertime

Rejects

Lost sales

Late delivery

Long cycle times

Expediting costs Inaccurate Reports

(less obvious)

Lost Customer Loyalty

Redundant Operations

Cost of Capital

Excessive Planning

5-8% ofSales

15-22%of Sales

Statistics Lite Centered 6Process

LSL USL

Statistics Lite Shifted 6Process

LSL USL

1.5 mean shift

Statistics Lite Shifted 6Process

LSL USL

1.5 mean shift

Non-conformingProduct

3.4 DPMO

Where are we going? A Brief History of Quality Six Sigma Six Sigma Revival Applying Six Sigma to Supply

Six Sigma Breakthrough Strategy Define Measure Analyze Improve Control

Define - Selecting Projects The project must relate to

customer satisfaction The project’s results must reduce

defects by some threshold amount The project should achieve some

threshold of cost savings.

Criteria for Project Selection Does it involve recurring

events? Is the scope narrow? Do measures exist? Do you have control of the

process?

Define Phase, Continued If these criteria are met then:

1) Identify the customers involved, both internal and external to the function.2) Find out what the customer’s CT’s are (Critical to Quality, Critical to Delivery, Critical to Cost, etc). 3) Define the project scope and goals.4) Map the process to be improved.

Define Phase - Tools Project Charter Stakeholder

Analysis Affinity Diagram SIPOC Voice of the

Customer CT Tree

Kano Model SWOT Analysis Cause-and-Effect

Diagrams Supplier

Segmentation Project

Management

Charter Problem statement Business case Goals, milestones,

success criteria, & deliverables

Project scope / boundaries

Roles & responsibilities

Stakeholder support / approval needed

Business Case

Potential Improvement

Potential Impact

Improve quality Reduce cost, inventory

Improve OTD Shortages , inventory Select better suppliers Q, $, LT, reduce

inventory

Implement rating system

Improve supply efficiency, better suppliers

Reduce price Reduce cost

Define Phase - Tools Project Charter Stakeholder

Analysis Affinity Diagram SIPOC Voice of the

Customer CT Tree

Kano Model SWOT Analysis Cause-and-Effect

Diagrams Supplier

Segmentation Project

Management

Define Outputs Once completed, the Define Phase

should answer the following questions:1) Who is the customer?2) What matters?3) What is the scope?4) What defect am I trying to reduce?5) What are the improvement targets?

The Measure Phase Purpose

To collect current performance of the process identified in the Define phase

This data is used to determine sources of variation and serve as a benchmark to validate improvements

Measurements Benefits of having good data need

to outweigh the costs of getting it

What does this measure do for the Project?

The Measure Phase Upon completion of the measure phase,

Project Teams will have: A plan for collecting data that specifies

the type of data needed and techniques for collecting the data

A validated measurement system that ensures the accuracy and consistency of the data collected

A sufficient data set for problem analysis

Measure - Key Concepts Measurement Variation

Exists naturally in any process and is the reason Six Sigma projects are undertaken

Data Data Collection Plan Measurement System Analysis

Ensures measurement techniques are reproducible and repeatable

Recording Measurements 3 stages

The output stage These tell how well customer needs are

being met Parts of the process

These are taken at critical points in the process

The input stage These evaluate contributions to the process

that are turned into value for the customer

Recording Measurements Output Stage

Shortages Line shutdowns Quality – discrepant material Material price variances Internal customer survey

Recording Measurements Parts of the process

Project milestones Supplier ship on time performance Supplier OTD Supplier internal throughput yield Supplier suggested cost reductions

Recording Measurements The input stage

Supplier base size % Buyers with degrees % of spend covered by LTC’s % of spend from reverse auction Supplier FMEA’s

Determining Data Type What do we want to know?

Review materials developed during design phase

What characteristics do we need to learn more about?

Data Collection Plan

What data will be collected? Why is it needed? Who is responsible? How will it be collected? When will it be collected? Where will it be collected?

Measurement System Analysis After Data Collection Plan is

complete, it needs to be verified before actual data is collected

MSA is performed on a regular basis

MSA ends when a high level of confidence is reached that the data collected accurately depicts the variation in the process

Analyze Phase

The analyze phase allows the Project Team to target improvement opportunities by taking a closer look at the data.

Analyze Phase Capability Analysis - establishing

current performance level Graphical Analysis - a visual indication

of performance using graphs Root Cause Analysis – developing a

hypothesis about the causes of variation Root Cause Verification – verifying that

the planned action will generate the desired improvement

Elements of Improve Phase Generate Improvement

Alternatives Create a “Should Be” Process Map Conduct FMEA Perform Cost/Benefit Analysis Pilot Validate Improvement

FMEA(Failure Mode Effects Analysis)

Recognizes potential failure and the effects of that failure

Identifies actions that would reduce chance of failure

Documents the process

Generating Improvement Alternatives

Define Improvement Criteria Generate Possible Improvements Evaluate Improvements and Make

Best Choice

PilotBenefits of Pilot Determine best way to implement the

improvement Lowers risk of failure Increases opportunity for feedback Obtain buy-in from affected personnel Provides opportunity to revise the

improvement before full implementation

Review of Improve Phase Generate Improvement

Alternatives Create a “Should Be” Process Map Conduct FMEA Perform Cost/Benefit Analysis Pilot Validate Improvement

Control PhaseWhy is it important? The Control Phase begins as the

project team tries to eliminate errors by “Mistake Proofing” their improvement alternative.

Mistake Proofing attempts to eliminate the opportunities for error.

Control PhaseWhy is it important? Mistake Proofing tries to make it

impossible for an operation to be performed incorrectly, and/or correct errors before they are passed to the next worker, where they might become a defect.

Control Phase #2 During the Control Phase the Project

team will:1) Develop a plan to make sure the measurement system will remain relevant over the long term.2) Establish Control Charts the process owner will use to manage the process.3) Create a Reaction Plan to address situations that might cause the process to move out of control.

Control Phase #3 The Control Phase ends when:

1) Standard Operating Procedures have been updated.2) Process Operators, the people who do the job, have been trained for the new process.

Once completed, the Control Phase should sustain the gains the project made while implementing ongoing process controls.

Control Phase #4 When is a project complete?

1) When other Black Belts can see the ongoing controls work2) When the customer sees the results3) When the business sees the money.

Six Sigma Six Sigma People Executives Champions (deployment, project) Master Black Belts Black Belts Green Belts

Where are we going? A Brief History of Quality Six Sigma Six Sigma Revival Applying Six Sigma to Supply

Six Sigma Supply Chain DMAIC Using Six Sigma momentum Cost – The Business Case for

Supply Black Belts for Supply

Stakeholder AnalysisPeople or Groups

Level of Commitment

Buy Mfg Eng

Enthusiastic Support

Help it work

Compliant

Hesitant X

Indifferent

Uncooperative X

Opposed

Hostile X

SIPOC ExampleSuppliers Inputs Processes Outputs Customer

s

Ops Mgt Supplier Perf.

SupplierEvaluation

Survey Ops Mgt

Buyers Complaints

Rating system

Buyers

Engrg. Tech Reqts

Improved Supplier Perform.

Engineering

Mfg. Rating system

Commit. to suppliers

Mfg.

Suppliers Supplier Complaints

Suppliers

SWOT Analysis

Positive Negative

Internal Strengths Weaknesses

External Opportunities

Threats

Critical 2: Special Situations

Critical 1:Long-term Relationship

Non-Critical 1:Contractual

High

Low High

Ris

k

Annual Spend

Supply Base Characterization

Non-Critical 2:Transactional

Six Sigma Supply Chain Training DMAIC – Supply Strategy Commitment

ReferencesBooks: Six Sigma Pocket Guide (Rath & Strong’s) The Black Belt Memory Jogger (GOAL / QPC) Six Sigma (Harry and Schroeder) Implementing Six Sigma (Breyfogle) The Six Sigma Way Team Fieldbook (Pande, et al) The Vision of Six Sigma: A roadmap for breakthrough

(Harry)Web sites: www.isixsigma.com www.ge.com/sixsigma www.asq.org