Six Sigma Methodologies: Overview and Application to Supply Management

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Six Sigma MethodologiesOverview and Application
to Supply Management

• Kimball Bullington, Ph.D.
• Professor
• Middle Tennessee State University

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Where are we going?

• A Brief History of Quality
• Six Sigma
• Six Sigma Revival
• Applying Six Sigma to Supply

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America Re-discovers Deming
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and Juran
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Rediscovering the Gurus

• Deming
• Emphasis on Statistical Control
• 14 Points for Management
• Juran
• Quality Planning and Analysis
• Managerial Breakthrough
• Quality Control Handbook

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Standards and Awards

• ISO 9000
• Minimum standards
• Does your system conform to the standard?
• Does your practice conform to your system?
• Malcolm Baldrige National Quality Award
• Provides some guidance
• Examples for others to follow
• Motorola an early winner

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The Process

• Over time, the output of any process shows a
  certain amount of natural or inherent variability
• This is also referred to as random variability
• It is due to countless minor factors and is
  assumed to be out of managements control in the
  short run, i.e., you have to live with it

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The Process

• The distribution of a process output has a mean,
  ?, and a standard deviation, ? it can have a
  wide variety of shapes

Processdistribution
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Process Capability

• When selecting a process to perform an operation,
  the inherent variability of process output should
  be compared to the range or tolerances allowed by
  the designers specifications

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Process Capability
process distribution
In other words, is the process capable of
producing the item within specifications?
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Statistics
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Where are we going?

• A Brief History of Quality
• Six Sigma
• Six Sigma Revival
• Applying Six Sigma to Supply

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Statistics LiteCentered 3s Process
LSL
USL
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Statistics Lite Centered 3s Process
LSL
USL
s
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Statistics Lite Centered 3s Process
Non-conforming Product 1,300 DPMO
LSL
USL
s
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Statistics Lite Centered 3s Process
Non-conforming Product 2,600 DPMO
LSL
USL
s
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Statistics Lite Shifted 3s Process
LSL
USL
s
1.5 s mean shift
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Statistics Lite Shifted 3s Process
Non-conforming Product 66,800 DPMO
LSL
USL
s
1.5 s mean shift
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Statistics Lite Shifted 3s Process

• Cost to your company 15-30 of sales

Non-conforming Product 66,800 DPMO
LSL
USL
s
1.5 s mean shift
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Cost of Poor Quality
5-8 of Sales
Inspection
Overtime
Downtime
Rework
Rejects
15-22 of Sales
Lost sales
Long cycle times
Cost of Capital
Late delivery
(less obvious)
Redundant Operations
Lost Opportunity
Inaccurate Reports
Expediting costs
Excessive Planning
Lost Customer Loyalty
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Statistics Lite Centered 6s Process
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Statistics Lite Shifted 6s Process
LSL
USL
s
1.5 s mean shift
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Statistics Lite Shifted 6s Process
Non-conforming Product 3.4 DPMO
LSL
USL
s
1.5 s mean shift
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Where are we going?

• A Brief History of Quality
• Six Sigma
• Six Sigma Revival
• Applying Six Sigma to Supply

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Six Sigma Breakthrough Strategy

• Define
• Measure
• Analyze
• Improve
• Control

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Define - Selecting Projects

• The project must relate to customer satisfaction
• The projects results must reduce defects by some
  threshold amount
• The project should achieve some threshold of cost
  savings.

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Criteria for Project Selection

• Does it involve recurring events?
• Is the scope narrow?
• Do measures exist?
• Do you have control of the process?

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Define Phase, Continued

• If these criteria are met then
• 1) Identify the customers involved, both
  internal and external to the function.
• 2) Find out what the customers CTs are
  (Critical to Quality, Critical to Delivery,
  Critical to Cost, etc).
• 3) Define the project scope and goals.
• 4) Map the process to be improved.

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Define Phase - Tools

• Project Charter
• Stakeholder Analysis
• Affinity Diagram
• SIPOC
• Voice of the Customer
• CT Tree

• Kano Model
• SWOT Analysis
• Cause-and-Effect Diagrams
• Supplier Segmentation
• Project Management

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Charter

• Problem statement
• Business case
• Goals, milestones, success criteria,
  deliverables
• Project scope / boundaries
• Roles responsibilities
• Stakeholder support / approval needed

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Business Case
Potential Improvement Potential Impact
Improve quality Reduce cost, inventory
Improve OTD Shortages ?, inventory ?
Select better suppliers Q, , LT, reduce inventory
Implement rating system Improve supply efficiency, better suppliers
Reduce price Reduce cost
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Define Phase - Tools

• Project Charter
• Stakeholder Analysis
• Affinity Diagram
• SIPOC
• Voice of the Customer
• CT Tree

• Kano Model
• SWOT Analysis
• Cause-and-Effect Diagrams
• Supplier Segmentation
• Project Management

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Define Outputs

• Once completed, the Define Phase should answer
  the following questions
• 1) Who is the customer?
• 2) What matters?
• 3) What is the scope?
• 4) What defect am I trying to reduce?
• 5) What are the improvement targets?

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The Measure Phase

• Purpose
• To collect current performance of the process
  identified in the Define phase
• This data is used to determine sources of
  variation and serve as a benchmark to validate
  improvements

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Measurements

• Benefits of having good data need to outweigh the
  costs of getting it
• What does this measure do for the Project?

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The Measure Phase

• Upon completion of the measure phase, Project
  Teams will have
• A plan for collecting data that specifies the
  type of data needed and techniques for collecting
  the data
• A validated measurement system that ensures the
  accuracy and consistency of the data collected
• A sufficient data set for problem analysis

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Measure - Key Concepts

• Measurement
• Variation
• Exists naturally in any process and is the reason
  Six Sigma projects are undertaken
• Data
• Data Collection Plan
• Measurement System Analysis
• Ensures measurement techniques are reproducible
  and repeatable

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Recording Measurements

• 3 stages
• The output stage
• These tell how well customer needs are being met
• Parts of the process
• These are taken at critical points in the process
• The input stage
• These evaluate contributions to the process that
  are turned into value for the customer

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Recording Measurements

• Output Stage
• Shortages
• Line shutdowns
• Quality discrepant material
• Material price variances
• Internal customer survey

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Recording Measurements

• Parts of the process
• Project milestones
• Supplier ship on time performance
• Supplier OTD
• Supplier internal throughput yield
• Supplier suggested cost reductions

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Recording Measurements

• The input stage
• Supplier base size
• Buyers with degrees
• of spend covered by LTCs
• of spend from reverse auction
• Supplier FMEAs

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Determining Data Type

• What do we want to know?
• Review materials developed during design phase
• What characteristics do we need to learn more
  about?

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Data Collection Plan

• What data will be collected?
• Why is it needed?
• Who is responsible?
• How will it be collected?
• When will it be collected?
• Where will it be collected?

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Measurement System Analysis

• After Data Collection Plan is complete, it needs
  to be verified before actual data is collected
• MSA is performed on a regular basis
• MSA ends when a high level of confidence is
  reached that the data collected accurately
  depicts the variation in the process

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Analyze Phase

• The analyze phase allows the Project Team to
  target improvement opportunities by taking a
  closer look at the data.

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Analyze Phase

• Capability Analysis - establishing current
  performance level
• Graphical Analysis - a visual indication of
  performance using graphs
• Root Cause Analysis developing a hypothesis
  about the causes of variation
• Root Cause Verification verifying that the
  planned action will generate the desired
  improvement

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Elements of Improve Phase

• Generate Improvement Alternatives
• Create a Should Be Process Map
• Conduct FMEA
• Perform Cost/Benefit Analysis
• Pilot
• Validate Improvement

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FMEA(Failure Mode Effects Analysis)

• Recognizes potential failure and the effects of
  that failure
• Identifies actions that would reduce chance of
  failure
• Documents the process

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Generating Improvement Alternatives

• Define Improvement Criteria
• Generate Possible Improvements
• Evaluate Improvements and Make Best Choice

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Pilot

• Benefits of Pilot
• Determine best way to implement the improvement
• Lowers risk of failure
• Increases opportunity for feedback
• Obtain buy-in from affected personnel
• Provides opportunity to revise the improvement
  before full implementation

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Review of Implementation Phase

• Generate Improvement Alternatives
• Create a Should Be Process Map
• Conduct FMEA
• Perform Cost/Benefit Analysis
• Pilot
• Validate Improvement

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Control PhaseWhy is it important?

• The Control Phase begins as the project team
  tries to eliminate errors by Mistake Proofing
  their improvement alternative.
• Mistake Proofing attempts to eliminate the
  opportunities for error.

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Control PhaseWhy is it important?

• Mistake Proofing tries to make it impossible for
  an operation to be performed incorrectly, and/or
  correct errors before they are passed to the next
  worker, where they might become a defect.

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Control Phase 2

• During the Control Phase the Project team will
• 1) Develop a plan to make sure the measurement
  system will remain relevant over the long term.
• 2) Establish Control Charts the process owner
  will use to manage the process.
• 3) Create a Reaction Plan to address situations
  that might cause the process to move out of
  control.

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Control Phase 3

• The Control Phase ends when
• 1) Standard Operating Procedures have been
  updated.
• 2) Process Operators, the people who do the
  job, have been trained for the new process.
• Once completed, the Control Phase should sustain
  the gains the project made while implementing
  ongoing process controls.

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Control Phase 4

• When is a project complete?
• 1) When other Black Belts can see the ongoing
  controls work
• 2) When the customer sees the results
• 3) When the business sees the money.

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Six Sigma Six Sigma People

• Executives
• Champions (deployment, project)
• Master Black Belts
• Black Belts
• Green Belts

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Where are we going?

• A Brief History of Quality
• Six Sigma
• Six Sigma Revival
• Applying Six Sigma to Supply

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Six Sigma Supply Chain

• DMAIC
• Using Six Sigma momentum
• Cost The Business Case for Supply
• Black Belts for Supply

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Stakeholder Analysis
People or Groups People or Groups People or Groups
Level of Commitment Buy Mfg Eng
Enthusiastic Support
Help it work
Compliant
Hesitant X
Indifferent
Uncooperative X
Opposed
Hostile X
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SIPOC Example
Suppliers Inputs Processes Outputs Customers
Ops Mgt Supplier Perf. Supplier Evaluation Survey Ops Mgt
Buyers Complaints Supplier Evaluation Rating system Buyers
Engrg. Tech Reqts Supplier Evaluation Improved Supplier Perform. Engineering
Mfg. Rating system Supplier Evaluation Commit. to suppliers Mfg.
Suppliers Supplier Complaints Supplier Evaluation Commit. to suppliers Suppliers
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SWOT Analysis
Positive Negative
Internal Strengths Weaknesses
External Opportunities Threats
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Supply Base Characterization
High
Critical 2 Special Situations
Critical 1 Long-term Relationship
Risk
Non-Critical 2 Transactional
Non-Critical 1 Contractual
Low
High
Annual Spend
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Six Sigma Supply Chain

• Training
• DMAIC Supply Strategy
• Commitment

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References

• Books
• Six Sigma Pocket Guide (Rath Strongs)
• The Black Belt Memory Jogger (GOAL / QPC)
• Six Sigma (Harry and Schroeder)
• Implementing Six Sigma (Breyfogle)
• The Six Sigma Way Team Fieldbook (Pande, et al)
• The Vision of Six Sigma A roadmap for
  breakthrough (Harry)
• Web sites
• www.isixsigma.com
• www.ge.com/sixsigma
• www.asq.org