McGraw-Hill - Briefcase Books - Six Sigma Managers.pdf - SIX SIGMA - mirkamil

What Is

Six Sigma?

organization? The assertion that knowledge is power rings

as true today as it did four centuries ago. In any industry, organ-

ization, or daily process, when you don’t know what you don’t

know, it’s going to cost you. For too many organizations the

costs (often hidden) of defects and waste in the way they oper-

ate are huge.

Having processes in which errors occasionally occur may

not seem such a big deal. But when you consider how many

errors may be lurking in company-wide processes, the mone-

tary impact on overall productivity, customer satisfaction, and

profitability multiplies dramatically! The Six Sigma approach to

managing is all about helping you identify what you don’t know

as well as emphasizing what you should know, and taking

action to reduce the errors and rework that cost you time,

money, opportunities, and customers. Six Sigma translates that

knowledge into opportunities for business growth.

Knowledge is power.

—Francis Bacon (1561-1626)

D o you know, do you really know, what’s going on in your

Six Sigma for Managers

Process Any repetitive

action—be it in a transac-

tional, manufacturing, or

services environment.The Six Sigma

methodology collects data on varia-

tions in outputs associated with each

process, so that it can be improved

and those variations reduced.

Many companies

believe that dealing with

errors is just part of the

cost of doing business. But

you don’t have to accept

that faulty logic. With Six

Sigma, you can eliminate

most errors, reduce your

costs, and better satisfy

your customers.

) is a term in statistics that measures

somet h ing called standard deviation. In its business use, it indi-

cates defects in the out-

puts of a process, and

helps us to understand

how far the process devi-

ates from perfection.

(We’ll get into the statistics

in later chapters.)

A sigma represents

691462.5 defects per mil-

lion opportunities, which

translates to a percentage

of nondefective outputs of

only 30.854%. That’s obvi-

ously really poor perform-

ance. If we have processes

functioning at a three sigma level, this means we’re allowing

66807.2 errors per million opportunities, or delivering 93.319%

nondefective outputs. That’s much better, but we’re still wasting

Sigma A term used in sta-

tistics to represent stan-

dard deviation, an indicator

of the degree of variation in a set of

measurements or a process.

Six sigma A statistical concept that

measures a process in terms of

defects—at the six sigma level, there

are only 3.4 defects per million

opportunities. Six Sigma is also a phi-

losophy of managing that focuses on

eliminating defects through practices

that emphasize understanding, meas-

uring, and improving processes.

Six Sigma Defined and Explained

Six sigma is a statistical concept that measures a process in

terms of defects. Achieving six sigma means your processes

are delivering only 3.4 defects per million opportunities

(DPMO)—in other words, they are working nearly perfectly.

Sigma (the Greek letter

What Is Six Sigma?

money and disappointing

our customers.

How well are your

processes operating? Are

they three sigma? Four

sigma? Five?

Most organizations in

the U.S. are operating at

three to four sigma quality

levels. That means they

could be losing up to 25%

of their total revenue due

to processes that deliver too many defects—defects that take up

time and effort to repair as well as creating unhappy customers.

Is that good enough? The answer is simple. No it’s not when

you could be doing a lot better. Helping you do that is what this

book is about.

The central idea of Six Sigma management is that if you

can measure the defects in a process, you can systematically

figure out ways to eliminate them, to approach a quality level of

zero defects.

So, in short, Six Sigma is several things:

• A statistical basis of measurement: 3.4 defects per mil-

lion opportunities

• A philosophy and a goal: as perfect as practically possible

• A methodology

• A symbol of quality

Six Sigma in Context

Let’s take an example, an all-too-familiar scenario: lost luggage

at the airport. Many of us have experienced the frustration of

watching the baggage carousel slowly revolve while waiting for

luggage that never arrives. The system is far from perfect. But

just how far, in sigma measurement terms?

In general terms, the baggage handling capability of many

airlines is performing at around the three sigma level. That means

Defect A measurable char-

acteristic of the process or

its output that is not within

the acceptable customer limits, i.e.,

not conforming to specifications. Six

Sigma is about practices that help you

eliminate defects and always deliver

products and services that meet cus-

tomer specifications.The sigma level

of a process is calculated in terms of

the number of defects in ratio to the

number of opportunities for defects.

Six Sigma for Managers

there are about 66,000 “defects” for every one million luggage

transactions, which equates to an approximate 94% probability

that you’ll get your luggage. Is that good enough? Certainly not

for the customers whose bags are among the “defects.” The

“defects” increase costs for the airlines, because employees must

deal with misplaced luggage and unhappy passengers. And those

“defects” can result in lost business in the future.

If the airline moves to six sigma in luggage handling, it

clearly pays off in terms of lower costs and happy passengers,

who are then more likely to fly with that airline again.

As Figure 1-1 indicates, operating at anything less than six

sigma levels means your processes have higher probabilities of

delivering defects.

It may seem like three sigma is good enough. After all, if

Sigma Level

(Process Capability)

Defects per Million

Opportunities

308,537

66,807

6,210

233

3.4

Figure 1-1. Probability of defects of different sigma levels

there are 66,807 defects out of a million, that means that

933,193 things went well—93.319% perfection.

But if the airline is taking comfort in those statistics, it’s los-

ing money and losing customers. Consider this three sigma

level from another perspective.

For customers , three sigma represents highly unsatisfactory

performance. The airline is not meeting their most basic expec-

tation—that their luggage will be put on the same flight, to trav-

el with them to the same destination. So the airline is likely to

be losing many of those frustrated customers.

What Is Six Sigma?

Three sigma is also costing money. Variations—time, waste,

and errors—abound in the baggage-handling process: misrouting

the baggage, reporting the problem, processing the report,

searching, retrieving, and finally delivering the lost luggage.

When you translate the 6% probability gap of missing luggage

into monetary terms, the hard cost of this defect can be much

higher than 6% of the overall cost of handling luggage—perhaps

several million dollars per year. If the baggage-routing process

were improved, the margin for error would be reduced and the

allocation of resources, both human and monetary, could be

much more profitably used.

How many customers can your business afford to lose?

How much money can

your company afford to

lose because of mistakes?

Why accept it as normal

to be running processes at

only three sigma or four

sigma when, by changing

the way you manage your

processes, you could get a

lot closer to six sigma and

all the resulting benefits.

Six Sigma uncovers the

layers of process variables—in data terms—that you must

understand and control to eliminate defects and wasteful costs.

It’s a management approach that aims to achieve the apex of

quality by measuring, analyzing, improving, and controlling

processes to root out defects and boost bottom-line results.

A Little History of Quality

Many people associate Six Sigma with the quality movement.

So, it seems logical at this point to start from that perspective.

How does Six Sigma differ from the “quality” programs you

may have already experienced? To answer that question, let’s

briefly recap the history of the quality movement.

Variation Any quantifiable

difference between a speci-

fied measurement or standard

and the deviation from such measure-

ment or standard in the output of a

process. Variation in outputs can result

from many causes in the functioning

and management of processes. An

important goal of process improve-

ment is to reduce variation in outputs.

McGraw-Hill - Briefcase Books - Six Sigma Managers.pdf

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