Posted by: Susan Hendrich | April 21, 2010

Six Sigma 101

Six Sigma

Six Sigma is the most effective methodology available for improving the performance of any organization by minimizing the defects in its products or services. Every error committed has a cost associated to it in form of losing customers, redoing a task, replacing a part, waste time/material or losing efficiency.

Understanding the Sigma Scale: The Sigma scale is a universal measure of the performance of any business or organization. Sigma (σ) is a statistical term to represent standard deviation which is a measure of variation in a dataset. Higher sigma score indicates better performance or more precise results. In other words, if the output is defective sixty-nine percent of the time, it implies that the performance is One Sigma compliant. On the other hand if it is defective thirty-one percent of the time, it means that the performance is demonstrating Two Sigma compliance.

Table: The Sigma Scale
Sigma Percent Defective Defects per Million
1 69% 691,462
2 31% 308,538
3 6.70% 66,807
4 0.62% 6,210
Six Sigma

5

0.02% 233
6 0.00% 3.4
7 0.00% 0.019

 

As mentioned in the table above, Six Sigma implies almost perfect output resulting in only 3.4 defects per million opportunities (DPMO).

DPMO: The term ‘defect’ can be explained as the non-conformities present in the output that falls beyond the satisfactory customer limits. The number of defects present per million opportunities (DPMO) is used to determine as to which Sigma scale a particular process corresponds to. Most of the organizations around the world deliver results in the Three to Four Sigma band, which implies that they are losing around a quarter of total revenue due to the presence of defects in their organizations.

Six Sigma Programs

There are several levels of Six Sigma programs and numerous private institutes offer them. Motorola University is one of the best institutes providing versatile Six Sigma programs to the aspiring management professionals.

Basic features of Six Sigma programs:

First of all, the Six Sigma program educates the professionals about the basics of Six Sigma which includes all tools, applications and statistical approaches. The general Six Sigma program includes:

  • Basic mathematical concepts of probability, factorial and exponential terms.
  • The details of various diagrams used in Six Sigma like Ishikawa diagrams, fishbone diagrams, Pareto charts, histograms etc.
  • The methods of analysis like root-cause analysis, Kano model etc.
  • Practical applications of the statistical tools in problem situations.

 

DMAIC Model

The DMAIC model stands for Define, Measure, Analysis, Improve and Control. These are subsequent steps which allow an organization to reach the ultimate goals without failing any of the quality parameters. After identifying the problem areas of a company the objectives are defined. Then the scopes and existing problems are measured skillfully and the probable output of the strategies analyzed. Finally it is all about improving and controlling the process until the desired results are obtained. Here’s how it works:

  • Define the goals for process improvement in coherence with the customer’s demand and the organization’s strategies. Includes scope, the available resources, the possible expectations and the timelines.
  • Measure the current performance and amass relevant data for future. This part of the approach applies a heavy use of advanced mathematical and statistical methods, and actually quantifies the customer’s need and requirements, the company’s goals and objectives, and the present stand of the project. 
  • Analyze the current setting and observe the relationship between key parameters and performance. Involves breaking down the process into details and analyzing it thoroughly to get into the root causes of the problems that may arise.
  • Improve the process based on the analysis to further optimize the process. This is the phase where after understanding the root causes of the problems or defects in the system, the search for the most innovative and fruitful solution is carried out.
  • Control the parameters before they affect the outcome. This is the one of the most important parts and the last one of the approach. It makes sure that the improvement generated is consistent, and sets a new standard for the future.

Selecting A Project for Six Sigma
This is an important part of the whole process. The right project should be chosen for the maximum benefits in the long run. For this reason, it is best to do some research on the current market practices and policies. But such research may not always bring out clear cut guiding rules and tips to choosing a project. So, the Six Sigma Project Selection Criteria Matrix was brought out by the Supply Chain that provides an approximate idea of the project that is supposed to fetch highest gains in the future. It comprises of five selection criteria and on the basis of these criteria, each project is measured and a rough estimate of the highest promising project is drawn. Some of the general tips to remember before selecting a project are as follows:

  • Don’t just think about monetary gains while selecting a project because certain projects are indirectly related to the other processes running in the company and application of the six sigma tactics might not directly result in monetary gains. It can affect the motivation and efficiency of the human labor, the reputation of the company in the market, better functional basis for other processes or such, resulting in better performance of the company in the future.
  • A careful concern is required for the organization and functioning of the six sigma consultants for the project. It is very important how to use the resources properly for the effective application of the six sigma strategy, which results in highest long term investment returns of the company.
  • A project should always be divided into different phases like operational, tactical, and strategic, that will utilize the available tools and methodologies of six sigma program, and will bring a better coordination in the company.

A good six sigma project should have three characteristics:

  • The project must be positively related to the company’s policies and objectives. It must achieve the goals and expectations of the company. It can be either the project itself that brings maximum profits for the company or related to other projects so that its improvement in turn causes significant improvement in the other dependant processes.
  • The project must meet the customer’s needs and requirements. It should aid in the improvement of the processes so that ultimately, it comes out profitable to both the organization and the customers or the consumers. After all, a competent company depends on its level of customer satisfaction.
  • The project must contribute significantly to the Bottom Line, by reducing the expenditure, reallocation of assets to higher value-added projects, strengthening the company’s base for utilizing the market opportunities that might come up in the future.

Once the project is selected, it is the time for the senior management to create a project charter. A project charter is a typical brief but detailed description of the company’s goals and objectives regarding the project. It analyses the project and lists down all the scopes of the project. It lists down all the needs of the project and its effect on the other prospective projects as well. It charts down the trends in the market, the customer’s variable needs and requirements and draws a model of how the project should be. In other words, it chalks out a strict guidance and direction for the six sigma team to work at. These are the basics of a six sigma project which are very important for consultants to know.

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