Introduction of Six Sigma Belton Group Rex Wong

Scope of Module n n n What is Six Sigma Why the need for Six Sigma How to apply Six Sigma Belton Confidential: For training only 2

What is Six Sigma? n Six Sigma is a comprehensive and flexible system for achieving, sustaining and maximizing business success. It is uniquely driven by close understanding of customer needs, disciplined use of facts, data and statistical analysis, with diligent attention to managing, improving and reinventing business processes. Peter S Pande, Robert P Neuman, Roland R Cavanagh The Six Sigma Way (Mc. Graw Hill, © 2000) Belton Confidential: For training only 3

Six Sigma Is Three Things ¬ A statistical measurement A business strategy ® Belton Confidential: For training only A philosophy 4

1) Six Sigma — A Statistical Measurement n n n It provides a quantitative performance assessment of our products, services and processes. It allows for comparisons against other similar or dissimilar products, services and processes. It provides feedback on how far ahead or behind we are. Six Sigma helps to establish our course and to gauge our pace in the race for total customer satisfaction. Belton Confidential: For training only 5

Six Sigma – A business strategy Improved Sigma-Rating of Process Improved Product or Process Quality Reduced Cost of Operations Greater Customer Satisfaction Belton Confidential: For training only 6

Cost Of Poor Quality (COPQ) Inspection Warranty Scrap Rework Rejects More Setups Expediting Costs Lost sales Late Delivery Lost Customer Loyalty Excess Inventory Long Cycle-Times Engineering Change Orders Traditional Quality Costs (tangible) Additional Costs of Poor Quality Lost Opportunity (intangible) Hidden Factory (Difficult or impossible to measure) COPQ is a function of Sigma Capability Belton Confidential: For training only 7

Cost Of Poor Quality (COPQ) Profit Total Cost to Manufacture and Deliver Products Price Erosion Profit Cost of Poor Quality COPQ Theoretical Costs Belton Confidential: For training only 8 Profit COPQ Theoretical Costs

3) Six Sigma – A philosophy n n n Six Sigma is about working smarter, not harder. Discover and neutralize harmful sources of variation Mistakes are reduced (or eliminated) Improved process capability Sigma rating goes up Belton Confidential: For training only 9

Quality Breakthrough Special Variation Natural Variation under 0 Historical Level ( 0) Reject Rate (± 3 0) Optimum Level ( 1) Natural Variation under 1 (± 3 1) Time Belton Confidential: For training only 10

Why needs of Six Sigma? n The goal of Six Sigma is not to achieve six sigma levels of quality (i. e. 3. 4 dpmo). Six Sigma is about improving profitability; improved quality and efficiency are immediate by-products. Belton Confidential: For training only 11

Six Sigma – aggressive goal PPM Process Capability Defects per Million Opp. Sigma is a statistical unit of measure that reflects process capability. The sigma scale of measure is perfectly correlated to such characteristics as defects-per-unit, parts-per million defective, and the probability of a failure/error. Belton Confidential: For training only 12

Six Sigma Process Point of Inflection 1 T 1 p(d) 2 3 4 3 This is a 6 Sigma Process Belton Confidential: For training only 13 5 6 USL

Benefit of Six Sigma n Cost reduction n Productivity improvement n Market-share growth n Customer retention n Cycle-time reduction n Defect reduction n Culture change n Product/service development Belton Confidential: For training only 14

Customers’ Needs Internal Metrics Delivery Supplier Customer Cycle Time Price Do Cost Quality Defects Belton Confidential: For training only 15 Need

How to apply Six Sigma? Input n n Process Output Unlike conventional improvement programs which focuses on improving the defects on the “output”, Six Sigma focuses on the “process” that creates or eliminates the defects. Six Sigma seeks to reduce variability in a process by means of a systematic approach called the Breakthrough Strategy. Belton Confidential: For training only 16

Six Sigma approach • Identify the Customer’s Need • Center around the Target • Reduce Variation • Reduce Defects Belton Confidential: For training only 17

Focus of Six Sigma? Input Process Output The output (Y) is perceived as a function of the input (X). Belton Confidential: For training only 18

Breakthrough Strategy Belton Confidential: For training only 19

Define n The Define phase sets the stage for a successful Six Sigma project by addressing the following questions: • What is the problem of our focus? • What’s our goal? And by when? • Who’s the customer impacted? • What are the CTX’s in-concern? • What’s the process under investigation? Belton Confidential: For training only 20

Project Definition Improve time to market for all products n Lead the industry in key technologies n Create world-class manufacturing processes n Develop strategic supplier relationships n Provide best-in-class product and process quality n Develop strategic relationships with key customers n Become an employer of choice n Belton Confidential: For training only 21

Baseline Metric Data n n n Baseline The average long-term defect level of a process when all input variables in the process are running in an unconstrained fashion. Entitlement The best-case shortterm defect level of a process when all input variables in the process are centered and incontrol. Benchmark. The defect level of the process deemed by comparison to be the best process possible. Belton Confidential: For training only 22

Breakthrough Improvement Special Variation Baseline ~ NID( 0, 0²) Reject Rate Natural Variation (± 3 0) 0. 7 Goal ~ NID( 1, 1²) Natural Variation (± 3 1) Entitlement Time Belton Confidential: For training only 23 Opportunity for Improvement ( )

Cost of Quality Hard Savings Potential Savings Belton Confidential: For training only 24 Soft Savings

Measure The Measure phase serves to validate or refine the problem, and to begin the search for root causes. It addresses l • the focus and extent of the problem, based on measures of the process, • the key data required to narrow the problem to its major factors or vital few root causes. Belton Confidential: For training only 25

Capability Analysis — Conventional Metrics n n Reject Rate n in percent n in ratio (e. g. 0. 074) n in parts per million (e. g. 74, 000 DPPM) (e. g. 7. 4%) Yield n in first-time yield n in final yield Belton Confidential: For training only 26

Capability Analysis Conventional Metrics 　 Six Sigma Metrics Reject rate In precent (eg, 7. 4%) In defects per Unit (DPU) 　 In Ratio (eg, . . 074) In defects per million opportunities (DPMO) 　 In parts per million (eg, 74, 000 dppm) In throughput yield Yield In first-time yield 　 In rolled throughput yield 　 In final yield 　 In normalized yield Belton Confidential: For training only 27

Defect per unit (DPU) n Defects Per Unit : The average number of defects per unit produced. Defect Rate = # Defects / # Units = 7 / 5 = 1. 4 dpu Belton Confidential: For training only 28

Defects Per Million Opportunities (DPMO) n Opportunities : The number of possibilities for defect creation in any unit of product process or sequence of processes. 1. 2. 3. 4. 5. 6. 7. 8. Number of Opportunities Defect Rate Belton Confidential: For training only Arm Height Arm thickness Bore hole Dia Swgae hole Dia Roughness Teardrop profile Roll Pitch = = Opportunities per Unit = 8 Opportunities per Unit Number of Units 8 5 = 40 # Defects / # Opportunities = (7 / 40 ) 106 175, 000 dpmo 29

DPMO vs Sigma Capability Belton Confidential: For training only 30

First-time yield (Yft) n First-Time Yield is the number of units that pass a particular inspection, compared with the total number of units that pass through that point in the process. Input 1, 000 Process 32 968 Accept Reject First-Time Yield, Yft = 968 / 1000 = 0. 968 Belton Confidential: For training only 31

Throughput yield (Ytp) n n Throughput Yield is the probability that a unit of product or service will pass through a given process step error-free. Throughput Yield, Ytp = e–DPU Input 1, 000 Process 32 968 Accept Reject (40 Defects) Throughput Yield, Ytp = e-(40/1000) = 0. 961 Belton Confidential: For training only 32

Final Yield (Yf) 1, 000 Process A 950 Process B Input 50 Scrap 925 Process C 800 Ship Input 25 Scrap 125 Scrap Final Yield, Yf = Quantity Shipped / Quantity Built = 800 / 1, 000 = 0. 80 A shortcoming of final yield is that it fails to consider the “hidden factory” or rework. Hidden Factory : ad hoc systems and processes set up to correct errors made during the mainstream process. Belton Confidential: For training only 33

Rolled Throughput Yield (Yrp) Input(925) Input (950) Process A 1, 000 Process B 800 Process C 650 675 Ship Input 200 Defects= 300 150 300 250 Rework 50 275 Scrap Defects = 300 25 Rework Scrap Defects = 425 Ytp(A) = e– 300/1, 000 = 0. 7408 125 Ytp(B) = e– 425/950 = 0. 6393 125 Scrap Defects = 500 Ytp(C) = e– 500/925 = 0. 5824 Rolled Throughput Yield = Ytp(A) Ytp(B) Ytp(C) = 0. 7408 × 0. 6393 × 0. 5824 = 0. 2758 Belton Confidential: For training only 34

Rolled Throughput Yield (Yrp) The rolled throughput yield is the probability that a unit of product or service is able to pass through the entire process defect-free. It is a function of the defect rate, and hence provides a better estimate of the amount of rework required. Rolled throughput yield can be improved by — having higher throughput yields at each process step — reducing the number of process steps Belton Confidential: For training only 35

Sigma Value (Z- Score): The sigma value is derived from the probability of a defect in a process and is used to compare performance across products or processes n z-Score is most accurately determined by using the equation of z = e(-DPU) n Belton Confidential: For training only 36

Analyze n In the Analyze phase, practical business problems are turned into statistical problems. The statistical tools and the order in which they are applied will depend on the problem and process, and the approach to the problem. Analyze Develop Causal Hypothesis Data/Process Confirm & Select Vital Few Causes Refine or Reject Hypothesis Belton Confidential: For training only Analyze Data/Process 37

Improve n The Improve phase seeks to address the following: • What possible actions or ideas required to address the root cause of the problem, and to achieve the goal? • Which of the ideas are workable potential solutions? • Which solution will most likely achieve the goal with the least cost or disruption? • How can the chosen solution be tested for effectiveness, and then implemented permanently Belton Confidential: For training only 38

Control n In the Control phase, actions are established to ensure that the process is monitored continuously for consistency in quality of the product or service. Implement ongoing measures and actions to sustain improvement Define responsibility for process ownership and management Execute “closed-loop” management and drive towards Six Sigma Belton Confidential: For training only 39

Realization In the Realize phase, ownership of the project is transferred to the finance representative, for tracking of financial benefits of the project. l Belton Confidential: For training only 40

Champion n n n Define the path for Six Sigma implementation across the organization. Careful selection of high-impact projects. Support development of “statistical thinking”. Realize the gains by supporting Six Sigma projects through allocation of resources and removal of roadblocks. Implementation of Black Belt recommendations. Ensure that project opportunities are acted upon by the organization’s leadership and the finance department. Recognition of efforts and contributions by the people. Belton Confidential: For training only 41

Black Belt n n n n Act as Breakthrough Strategy experts and enthusiasts. Identify the barriers. Management of project: from planning, through execution, to realization. Report progress to appropriate leadership levels. Determine the most effective tools to apply. Gather input from knowledgeable sources, from operators to managers. Green Belt Training Monitor & provide guidance of Green Belt projects. Belton Confidential: For training only 42

Green Belt n n Function as Green Belts on a part-time basis, while performing their regular operational duties. Participate in Black Belt teams in the context of their existing responsibilities. Learn the Six Sigma methodology as it applies to a particular project. Continue to learn and practice the six Sigma methods and tools after project completion. Belton Confidential: For training only 43

Six Sigma Process Flow Management Black Belt Champion Team 1. Measure Define 2. Analyze Employees Finance 3. Improve Realize 4. Control Belton Confidential: For training only 44

Six Sigma Roadmap Process Map C&E Matrix and FMEA 30 - 50 Inputs Variables Key Process Input Variables (KPIVs) Gage R&R, Capability Measure 10 - 15 Multi-Vari Studies, Correlations Analyze 8 - 10 KPIVs T-Test, ANOM, ANOVA Screening DOE’s, RSM Improve Quality Systems SPC, Control Plans Control Optimized Process Belton Confidential: For training only 45 4 -8 Critical KPIVs 3 -6 Key Leverage KPIVs

What you have learnt? n What is Six Sigma? n n n A statistical measurement A business strategy A philosophy Why the needs of Six Sigma? How to apply Six Sigma? n n Measure, Analyze, Improve & Control (MAIC) Six Sigma Term (DPU, DPMO, Yrp, Ytp) Champion, Black Belt & Green Belt Narrow down KPIVs Belton Confidential: For training only 46

End of Presentation Rev 1 23 Apr 02