The nature and application of the six sigma approach to quality

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Business & Mgmt

Published on March 15, 2014

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The nature and application of the Six Sigma approach to Quality (an organisation operational excellence wide approach to quality). A Research Investigation By: CONROY EMMANUEL, IWHIWHU (094833414) In partial fulfillment for the award of B.Eng (Hons) Manufacturing Engineering Presented to The department of Manufacturing Engineering Faculty of Applied Science Gateway, St Peter’s Campus University Of Sunderland 7th March 2011

1.0 Explanation of the nature of the Six Sigma approach to Quality Organizations must make it a point to delight their customers by fulfilling their expectations, it may become very important and mandatory to bring some critical changes, in the ways by which a company conducts or carries its various business activities. To help this cause, Six Sigma plays a very critical role as it lays a lot of emphasis on “Quality must become a part of the culture” Arguably, Six Sigma has become one of the most popular continuous improvement methods since Motorola introduced it in 1986 with the aim of reducing quality cost, i.e. cost of not doing things right the first time, cost of not meeting customer requirements, etc (Jiju Antony et al, 2002) to as low as 3.4 parts per million opportunities. Today, the term Six Sigma is used as an all-encompassing business performance method all over the world in all types of organizations, institutions and corporations. In a Bain & Co. global survey of executives on management trends earlier this year, about one-third of executives reported their companies use Six Sigma. (Darrell Rigby et al, 2009). Six Sigma is a business strategy and systematic methodology, use of which leads to breakthrough in profitability through quantum gains in product/service quality, customer satisfaction and productivity (Jiju Antony et al, 2002). Six Sigma is an organized, fact-based, data-driven, and strategic process improvement and new product and service deployment; it is much about improving customer satisfaction as saving money by trying to accomplish greater effectiveness and efficiency. Definitions of Six Sigma Six Sigma is a philosophy— this perspective views all work as processes that can be defined, measured, analyzed, improved and controlled. Processes require inputs (x) and produce outputs (y). If you control the inputs, you will control the outputs: This is generally expressed as y = f(x). Six Sigma is a set of tools— The Six Sigma uses qualitative and quantitative techniques to drive process improvement. A few such tools include statistical process control (SPC), control charts, failure mode and effects analysis and flowcharting, et cetra. (W. Benbow et al, 2005) In business, Six Sigma can be defined more holistically as the total process an organization follows to achieve this near-perfection level with respect to defects, opportunities or some other measurable quantity. For some organizations, Six Sigma is simply an effort to streamline business processes. Many organizations in the past 30

years have embraced this broader notion of Six Sigma as a way to improve quality and reduce costs. The core common themes of Six Sigma are:  Use of teams that are assigned well-defined projects that have direct impact on the organization's bottom line.  Training in "statistical thinking" at all levels and providing key people with extensive training in advanced statistics and project management. These key people are designated with different Six Sigma belts, levels and roles.  Emphasis on the DMAIC approach (define, measure, analyze, improve and control) to problem solving.  A management environment that supports these initiatives as a business strategy. Six Sigma's heroic goal: The word ‘sigma’ is a statistical term used to represent the variation about the process average knowing, while Six Sigma refers to defects per 3.4 million opportunities. The numerical goal is 3.4 defects per million opportunities (DPMO) or being 99.997% correct (or defect-free) while higher levels of defects are associated with lower sigma - far beyond where virtually all companies are currently operating (see Table 1). (James M. Lucas, 2002) Table 1 THE SIX SIGMA APPROACH The statement that "all quality improvement occurs on a project-by-project basis and in no other way" can be considered an essential element in the foundation of Six Sigma (Joseph M. Juran, 1964). (I. Elaine Allen and Thomas H. Davenport, 2009) argues that the techniques implemented within the Six Sigma process are neither statistically

sophisticated nor necessarily high tech; rather they are consistent measures applied within the DMAIC rubric. Figure 1: DMAIC Improvement Methodology The definition phase entails the definition of the problem critical to quality features important to the customers. In measure phase, select the most appropriate output quality characteristics to be improved and select and establish what is an unacceptable performance or defect. In the analysis phase, we need to analysis the root cause of defects or errors (the Xs or input variables). In improvement phase, we need to reduce the defect rate using simple but powerful statistical tools/techniques; in some processes several rounds of may be required to achieve a desired process performance or capability. In the control phase, we need to sustain the improvement that has been achieved from the improvement phase. Buy-in from the top of the organization and education of the entire organization is however essential for a Six Sigma project to succeed. (Jiju Antony et al, 2002) also highlight that organisations must invest in training Black Belts in process improvement tools, leadership tools, and team tools. Simple statistical tools are enough for simple projects, however for greater breakthrough improvement in processes, certain advanced statistical tools and techniques (such as design of experiments, statistical process control, regression analysis, analysis of variance, etc) will be needed. DMAIC was designed as a method for leaders to prioritize potential improvement projects based on the probability that such projects would result in financial benefit to

the organization (S. Thomas Foster Jr, 2007), making it a top-down approach to continuous improvement. The DMAIC process is deemed a success if, when implemented, it identifies and eliminates waste in an organization. It generally results in incremental (1% to 10%) improvements in the business processes (usually relatively small) where it is applied.

2.0 Case Study: a review of the application of the Six Sigma approach at MWM International Motores, Brazil About MWM International Fully owned subsidiary of Navistar; a worldwide leader in diesel engine technology and manufacturing in South America (Brazil & Argentina). Engine product ranges from 2.5 to 9.5 liters serving agricultural, vehicular, industrial, and marine sectors (Janet Jacobsen, 2009). Customers include Ford, GM. Volvo, and Volkswagen. Situation Analysis As an engine maker, the company uses more than 400 different bolts in its manufacturing operations, which led to inefficient purchasing strategies for this commodity. Leaders surmised that finding a way to optimize the organization’s purchasing processes for engine bolts would reduce the LPP (linear price performance) index which is a price/weight ratio, thus lowering costs and reducing waste. Quality Solutions The group applied a wide variety of quality tools to reduce the price/weight ratio for bolts, a key component for the company’s diesel engine products. (www.lssclub.com). With the two actions planned were concerns about the impact a supplier change could have on product quality and about potential restrictions on parts development. Throughout the course of this improvement project the team was diligent about involving stakeholders to increase buy-in and reduce resistance. Brainstorming, process mapping, benchmarking, stakeholder interviews, and process waste assessment exercises helped the group pinpoint the most positive and negative impacts on various activities in the overall process and identify improvements. Ultimately, to effectively address the root cause, they identified two separate initiatives to streamline the purchasing process: 1. Design a new commodity strategy: Establish guidelines for quotation and development that take into account the differing annual volumes needed for each type of bolt. 2. Negotiate with the current supplier: Revise all current contracts to reduce the gap between market prices and the current price paid to the supplier. Based on the solutions, the team pursued the actions with the greatest support from the main stakeholders and those solutions that showed the greatest potential impact on organizational performance metrics. The team started with small-scale implementation of its solution to alleviate concerns.

Results Improvement strategy resulted in very significant reduction in LPP mean and standard deviations, cost reduction of 13.6 percent of the annual purchase price for bolts, which represented a savings of nearly $1 million to easily meet the primary project goal. In addition, quality metrics improved through an almost 90-percent reduction in process variability. As a means of measuring and monitoring the project’s results, the team created a performance metric panel that shows the correlation graph between weight and price, process capacity ratio, and a comparison between previous and current conditions. In addition, the team implemented a quotation assessment form to use as monitoring chart for every LPP. As a continuous improvement mechanism, the team created a system that periodically reassesses quotes to help maintain bolt purchasing costs as close as possible to market value.

3.0 Areas of Use: summary about whether, where and how the Six Sigma approach to Quality might best be applied The fundamental idea behind Six sigma philosophy is to continuously reduce variation in processes aimed elimination of defects or failures from every product, service and transactional process (Jiju Antony, et al, 2002) and can be applied to organization that deals with processes, variation and customer complaints. Manufacturing In a manufacturing environment, quality improves reliability and increases production. Fewer defects translate to fewer warranty claims and increased customer satisfaction. Process improvements also eliminate waste, improve flow and enhance workplace safety, all contributing to the bottom line. Government Today the general public wants the best quality services possible and both elected officials and taxpayers want as much value from the tax that finances these services as can be squeezed. Everyone is forced to interact with government. Whether you are receiving some kind of assistance, getting a drivers’ license, filling your taxes….it is difficult to look at government office and not ask question, ‘What if they did six sigma to correct their errors’. In today’s economic and political climate, government must find ways to trim costs and manage cash-flow while continuing to deliver excellent customer service. Education We are all interested in quality in education. The future of our country and the world depends on our children and college students receiving the best instruction. Continuous improvement techniques and tools can raise student achievement, enhance accountability and help administrators and teachers meet legislated requirements. Schools can also achieve and document increases in teacher, parent and student satisfaction. Healthcare Healthcare providers can use quality-improvement techniques and tools to reduce medical errors and help ensure patient safety. Eliminating waste and rework also increases patient-handling capacity and flow, which decreases wait times and potentially harmful delays in care. The result is a safer, more efficient, cost-effective system that better satisfies patients and healthcare workers.

Services Quality techniques and tools help lower the costs of people-intensive service processes and improve customer satisfaction. A process approach enables service organizations to standardize the ways they work, achieving improved consistency, faster cycle times and fewer errors. And employees are empowered to provide individualized customer service when it counts most. Transactional Commerce Monetary service organizations are constantly striving to improve intricate business processes with significant savings in process timeliness, improvements in cash management, increased customer loyalty and satisfaction.

4.0 Relevance of Six Sigma approach to Quality to the role and objectives of operations management. Six Sigma is has critical link between process improvements and business results and cannot be treated as yet another stand-alone activity as it require s adherence to a whole philosophy rather than usage of just a few tools and techniques of quality improvement (Dale, 2000). It has to be clear how Six Sigma projects and other activities link to customers, core processes and competitiveness ( Pande et al, 2000) that makes business profitable while attacking variability, which leads to high scrap practice, rate, high rework rate, low productivity, etc. It increase strategic impact and operational capabilities by focusing on correcting the worst problems, adopting best practice, linking strategy with operations and giving an operations advantage. Six Sigma Achieves operations strategic role of: Implementing: is dependable and can be used to explain practicalities and operation strategies. Contributing: appropriate and project specific, sheds light on current state and its tools help in the decision making. Driving: a source of innovation providing foundation for long term capabilities and benefits. Six Sigma Achieves operations performance objectives of: Quality: targets error free products and processes Speed: means you can stay in business with fast throughput and quick delivery Dependability: is used to create reliable operation and dependable delivery. Flexibility: tells you of thinned to change while creating change in itself with frequent new products, and maximum choice. Cost: productive in achieving minimum price, highest value.

REFRENCES Stamatis, Dean H, 2003, "Six Sigma Fundamentals: A Complete Guide to the System, Methods and Tools”, Productivity Press, Chapter 1 Eckes, George, 2003, The Tactics of Six Sigma: Define, Measure, Analyze, Improve, and Control", Six Sigma for Everyone. John Wiley & Sons, Chapter3 M. M. Kapadia, S. Hemanth, B. Sharda (2003), “Six Sigma: The Critical Link between Process Improvements and Business Results”, www.sixsigmaforum.com. Janet Jacobsen, (2009),” Optimizing Purchase Processes Saves $1 Million”, Making the case for quality” July 2009, www.asq.org, pp4 <http://common.books24x7.com/book/id_5404/book.asp> (accessed March 4, 2011) www.bain.com/management_tools/mt_detail.asp?groupcode=4&id=27075&menu_url= home.asp. Jiju Antony 2007, “Is six sigma a management fad or fact?” -Strategy, Operations and Leadership Group, Caledonian Business School, Glasgow, Scotland, UK, Volume 27 · Number 1 · 2007 Elaine Allen and Thomas H. Davenport, 2009: ‘’Tune Up”’, Quality progress, September 2009 B. Tjahjono, P. Ball, V.I. Vitanov, C. Scorzafave, J. Nogueira, J. Calleja, M. Minguet, L. Narasimha, A. Rivas, A. Srivastava, S. Srivastava, A. Yadav, (2010) "Six Sigma: a literature review", International Journal of Lean Six Sigma, Vol. 1 Iss: 3, pp.216 - 233”. Darrell Rigby and Barbara Bilodeau, "Management Tools and Trends 2009,"

S. Thomas Foster Jr, "Does Six Sigma Improve Performance?" Quality Management Journal, Vol. 14, No. 4, 2007, pp. 4-20. James M Lucas, (2002) "The Essential Six Sigma", How Successful Six Sigma Implementation Can Improve Bottom Line, Quality Progress, January, 2002. Joseph M. Juran (1964), “Managerial Breakthrough”, New York: McGraw-Hill, 1964). W. Edwards Deming, “Out of the Crisis”, MIT Press, 1986. Jiju Antony, Ricardo Banuelas, (2002) "Key ingredients for the effective implementation of Six Sigma program", Measuring Business Excellence, Vol. 6 Iss: 4, pp.20 – 27 W. Benbow and T. M. Kubiak, 2005, “The Certified Six Sigma Black Belt Handbook”, ASQ Quality Press, 2005, pages 1-2

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