Six Sigma - A Business Process Improvement Methodology

Six Sigma is a methodology that provides businesses with the tools to improve the capability of their business processes. This increase in performance and decrease in process variation leads to defect reduction and vast improvement in profits, employee morale and quality of product

“It’s the only program I’ve ever seen where customers win, employees are engaged and satisfied, and shareholders are rewarded.” – Jack Welch

Historical Background of Six Sigma

Around 1980 Robert Galvin, at that time CEO at Motorola, realized the importance of working systematically with variance reduction as the Japanese had done for a prolonged period. Together with Bill Smith, Mikel Harry and Richard Schroeder, he created an improvement program that was given the name Six Sigma. Bill Smith came up with the idea of “inserting hard-nosed statistics into the blurred philosophy of quality”. The program was inspired by Japanese work, but also strongly influenced by Juran’s thoughts. Due to Six Sigma, Motorola managed to reduce their costs and variation in many processes and were an inaugural winner of America’s Malcolm Baldrige National Quality Award in 1988. They reported a profit from the program of USD 700 million for 1991 alone.

“We quickly learned if we could control variation, we could get all the parts and processes to work and get to an end result of 3.4 defects per 1 million opportunities, or a Six Sigma level. Our people coined the term and it stuck. It was shorthand for people to understand that if you can control the variation, you can achieve remarkable results.” – Robert W. Galvin, Chairman Emeritus of Motorola, Inc.

The Six Sigma results by Motorola impressed Jack Welch, then CEO at General Electric (GE), and Welch launched Six Sigma in late 1995 as one of four strategic initiatives. After 200 projects and intensive training GE moved to 3,000 projects and more training in 1996 and undertook 6,000 projects and still more training in 1997. Six Sigma delivered USD 320 million in productivity gains and profits in 1997, more than double Welsh’s goal of USD 150 million. In the annual report of 1999 GE was able to report savings of USD 2 billion for that year alone. The success of Six Sigma at GE under Welch’s leadership is undisputed. In the 2000 GE Annual Report Welch said: “Six Sigma has galvanized our company with an intensity the likes of which I have never seen in my 40 years at GE”. The enormous savings reported from Six Sigma in GE certainly interested many leaders, who had difficulties to get TQM working in their organisations. As a result the interest in Six Sigma accelerated during the late 1990s.

“Six Sigma is a highly disciplined process that helps us focus on developing and delivering near-perfect products and services. The central idea behind Six Sigma is that you can measure how many defects you have in a process, you can systematically figure out how to eliminate them and get as close to ‘zero defects’ as possible. Six Sigma has changed the DNA of GE — it is the way we work – in everything we do in every product we design.” (General Electric)

What is Six Sigma?

Six Sigma is a well structured, data-driven methodology for eliminating defects, waste, or quality control problems of all kinds in manufacturing, service delivery, management, and other business activities. Six Sigma methodology is based on the combination of well established statistical quality control techniques, simple and advanced data analysis methods, and the systematic training of all personnel at every level in the organization involved in the activity or process targeted by Six Sigma.

Six Sigma Principle

The term Six Sigma reflects the statistical objective of the approach, namely striving to achieve a negligible number of defects, corresponding to the probability associated with a six sigma value for the normal curve. Applying the normal curve, Six Sigma attempts to relegate defects and quality problems to the very tails of the distribution, making such problems literally rare exceptions in a process that operates almost without defects. To achieve this Six Sigma objective, a process must not produce more than 3.4 defects per million opportunities to produce such defects (where a defect is defined as any kind of unacceptable outcome produced by the process under scrutiny). Note that the 3.4 defects per million criterion actually corresponds to a normal z value of 4.5 because the Six Sigma approach allows for 1.5 times sigma worth of so-called drift or process slop. Hence, the most basic statistical tool for the Six Sigma effort is the Six Sigma calculator that will compute the number of defects given the respective one, two, .., six sigma process.

Experimental data show that most processes that are in control still drift about 1.5 sigma on either side of their center point over time. This means that the real probability of a process with tolerance limits at four sigma, producing acceptable material is actually more like 98.76%, not 99.994%. To reach near-perfect process output, the process capability curve must fit inside the tolerances such that the tolerances are at or beyond six standard deviations, or Six Sigma, on the distribution curve.

Six Sigma Methodologies

Six Sigma has two key methodologies DMAIC and DFSS. DMAIC is used to improve an existing business process and DFSS is used to create new product designs or process designs in such a way that it results in a more predictable, mature and defect free performance.

DMAIC

DMAIC stands for Define, Measure, Analyze, Improve and Control. DMAIC is a Six Sigma methodology which is used to improve work processes by eliminating defects. It is defined as a set of practices that improve efficiency of a process. DMAIC generally is used for projects aimed at improving an existing business process. Therefore it can be safely said that when considering continuous improvement programs the DMAIC approach is more applicable to the projects focusing on incremental change than to projects focusing on radical change. A DMAIC methodology is used when a product or process is in existence at a company but it is not meeting customer specification or is not performing adequately. This methodology is also referred to as ‘improve for Six Sigma’. It succeeds by measuring defective processes and then improving them. As long as there is no challenge of new products and services, the DMAIC approach is acceptable. This methodology of Six Sigma is a list of process steps which when executed in sequence helps in achieving an end goal of reduction in the number of process defects. DMAIC is a closed-loop process that eliminates unproductive steps, often focuses on new measurements, and applies technology for continuous improvement.

Define: A process is identified to be in need of improvement and the goals of the improvement activity are stated based on the needs of the customer, which are obtained through various forms of communication. The project goals are aligned with the strategic objectives of the company.
Measure: To define baseline measurements on current process for future comparison. Map and measure process in question and collect required process data.
Analyze: To verify relationship and causality of factors. What is the relationship? Are there other factors that have not been considered?
Improve: To optimize the process based upon the analysis using techniques like Design of experiments (DOE) and poka yoke.
Control: Setup pilot runs to establish process capability, transition to production and thereafter continuously measure the process and institute control mechanisms to ensure that variances are corrected before they result in defects.

DFSS or DMADV

DMADV stands for Define, Measure, Analyze, Design and Verify. DMADV comes into play if DMAIC has been used fully to optimize the existing process and still the process doesn’t meet the level of customer specification. Whenever the improvement anticipated is considerably more, there is a pressing need for DMADV, which is also referred to as ‘design for Six Sigma’. For brand new processes or services that are being designed to meet the quality standards of Six Sigma, a different method called Design for Six Sigma (DFSS), has been developed. It is a generic term used to define the approach of different individual methods that try to achieve the Six Sigma level of quality.

Basic DMADV methodology consists of the following five phases:

Define: Formally define the goals of the design activity that are consistent with customer demands and enterprise strategy.
Measures: To identify CTQs (characteristics that are Critical To Quality), product capabilities, production process capability,risk assessment, etc.
Analyze: To develop and design alternatives, create high-level design and evaluate design capability to select the best design.
Design: To develop detail design, optimize design, and plan for design verification.This phase may require simulations.
Verify: To design, setup pilot runs, implement production process and handover to process owners. This phase may also require simulations.

DMAIC and DMADV sound very similar. The acronyms even share the first three letters. But that’s about where the similarities stop.

DMAIC	Define		Define the project goals and customer (internal and external) deliverables
	Measure		Measure the process to determine current performance
	Analyze		Analyze and determine the root cause(s) of the defects
	Improve		Improve the process by eliminating defects
	Control		Control future process performance
DMADV		Define		Define the project goals and customer (internal and external) deliverables
		Measure		Measure and determine customer needs and specifications
		Analyze		Analyze the process options to meet the customer needs
		Design		Design (detailed) the process to meet the customer needs
		Verify		Verify the design performance and ability to meet customer needs

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Six Sigma – A Business Process Improvement Methodology