An Overview

After Motorola's creation of Six Sigma, AlliedSignal and GE popularized it in the 1990s. Today it has become widely recognized as an effective method for improving business performance. These successes have encouraged many other companies such as Ford, DuPont, 3M, Dow Chemical, and American Express, as well as companies in the Pacific Rim and in Europe to undertake Six Sigma initiatives. Many small and mid-size companies such as W. R. Grace, Crompton, Cummins and Lincoln Electric are also using the Six Sigma approach. Six Sigma has been found to be effective in all types of companies including manufacturing, service, financial, and health care. Six Sigma also applies in all parts of the organization, including manufacturing, new product development, and transactional and administrative processes. In short, Six Sigma provides an overall strategy and methodology for improving the performance of the organization. As such, it is also applicable to government, academic, and not-for-profit organizations.

Staying Power

Executives of AlliedSignal and GE who have left to become CEOs of other companies, including 3M, Home Depot, Raytheon, W. R. Grace, Great Lakes Chemical, Huber Chemical, and American Standard, have started Six Sigma improvement initiatives shortly after taking over their new companies. It is unlikely that these CEOs would have initiated the use of Six Sigma if they saw it only as a management fad with a short life.

Six Sigma helps employees grow into effective and knowledgeable managers having the ability to understand the business from a cost, quality, and delivery point of view as well as understand the role of improvement from a practical perspective.

The meaning of Six Sigma has evolved since Motorola introduced the concept in the 1980's. From a statistical viewpoint, a Six Sigma process has a defect level of 3.4 per million opportunities. Six Sigma is also used to define a philosophy of improvement focused on reducing defects and improving customer satisfaction. Most companies today, however, view Six Sigma as a business strategy and methodology for improving process performance in such a way that customer satisfaction is increased and the bottom line ($$) is improved. The bottom line focus attracts the attention and support of corporate executives and financial analysts, and makes Six Sigma different from many earlier improvement approaches, such as statistical process control (SPC), total quality management (TQM), and ISO 9000, none of which have the explicit bottom line focus.

The Essence of Six Sigma

Table 1-1 summarizes the key elements of Six Sigma. The approach can be broken into two key aspects: a managerial initiative and a set of methods and tools. Let us discuss the mangement initiative first.

Breakthrough Improvement. Six Sigma is about business improvement; it is not about culture change per se, although it will radically change culture. The strategy is to get the improvements, then create the infrastructure and systems (culture) that will grow and maintain the gains. Six Sigma is not about quality—at least not in the traditional sense of the word—although it results in improved quality. It is not about training, although training is used to build the skills needed to deploy it. Viewing Six Sigma as a massive training initiative is a low-yield strategy. Six Sigma is about breakthrough business improvement, not incremental improvement. Six Sigma projects are defined to produce major improvements (30%, 40%, 50%, 60% and more) in process performance in less than 4-6 months with a significant bottom line impact. Such changes greatly change how business is conducted day-to-day.

Table 1-1. Two Key Aspects of Six Sigma

Initiative	Methods and Tools
Improvement Breakthrough Systematic, Focused Approach Right Projects - Linked to Business Goals Right People - Selected and Trained Project Management - Management Reviews Sustain the Gains - New Projects Results - Process and Financial ($$)	Process Thinking Process Variation Facts, Figures, Data Define, Measure, Analyze, Improve, Control 8 Key Tools - Sequenced and Linked Statistical Tools Statistical Software Critical Few Variables

Six Sigma Uses a Systematic and Focused Approach. Not all executives are used to the discipline that such an approach requires. There are road maps and step-by-step procedures for the managerial and technical aspects of Six Sigma. These processes and systems enable the key players in the initiative, such as Champions, Black Belts, and Green Belts to move up the learning curve more quickly and keep the organization focused on rapid improvement. (These and other titles are defined in the “Roles of Six Sigma Leaders” section later in this chapter.) Six Sigma is not an art, although experience, good judgment, and creativity are certainly required.

Right Projects. Six Sigma is about working on the right projects; those that support the business strategy. Six Sigma projects are linked to the goals of the business and to key problems that must be solved if the organization is to be successful (e.g., critical customer complaints, process downtime producing stock outs, major accounts receivables issues, etc.). As you will see in later chapters, project selection is often where the battle is won or lost. Even top talent cannot salvage a poorly selected project. Black Belts and Green Belts work on important projects during as well as after the training. The specific roles of the Black Belts and Green Belts, who lead the improvement projects and are the primary “doers” in Six Sigma, will be discussed later in this chapter and in Chapter 4. Working on the right projects obviously requires careful business planning and coordination. Having Black Belts and Green Belts pick their own project is not a good strategy in our experience. It is important, however, that the goals of the Black Belt and Green Belt projects are realistic and achievable so that the projects will be successful and the Black Belts and Green Belts—and organization as a whole—will build confidence that Six Sigma will work “here.”

Right People. Six Sigma is about selecting and training the right people to fill the key roles. Successful organizations select their best people to fill the key Six Sigma positions (Champions, Master Black Belts (MBBs), Black Belts, and Green Belts). Most companies consider these people to be their future leaders. After those selected complete their Six Sigma assignments they move into leadership positions and utilize their Six Sigma experience to guide others in improving the organization using the same approach. In this way, the cycle of continuous improvement is ingrained into the culture of the organization, and the company is assured of having “enlightened” leaders in the future.

Project Management and Reviews. Six Sigma is about effective project management, including project selection, planning, and management reviews. Proper planning is important to ensure success. Such planning helps to avoid “scope creep” (project size and definition slowly growing beyond what is reasonable to accomplish considering the allotted time and resources), misalignment with management, resource issues, projects that move at glacial speed, and other common project pitfalls. Management reviews are critical to success. Projects should be reviewed weekly and monthly (different types of reviews), and the overall Six Sigma system should be reviewed quarterly and annually. Management reviews are critical to success. The lack of management reviews significantly reduces the impact of the Six Sigma effort. The reviews keep the Black Belt and managers focused on the project and emphasize the long-term commitment of management to improve the performance of the organization ensuring it will be a long-term source of products, services, and employment.

Sustaining the Gains. A methodology for sustaining the gains is an integral part of the Six Sigma approach. This methodology is usually called the “control plan,” and is one of the unique aspects of Six Sigma. The control plan can be viewed at both a tactical and strategic level. At the tactical level it sustains the gains of individual projects, and at the strategic level it sustains and broadens the gains of the Six Sigma initiative overall. A key element of the strategic control plan is the continual identification of new projects and the placing of those projects in the project hopper. As the Black Belts complete their projects they are assigned new projects that have been taken from the hopper.

Right Results. Six Sigma is about getting the right results—improvements in process performance that are linked to the bottom line. The team estimates what a project is worth, typically with the help of the finance organization, before work is initiated. After the project has been completed, the team calculates the bottom line savings. Many organizations, such as GE, require a sign-off from the finance organization verifying the financial impact, and identifying where in the income statement it will show up. In this way you will know exactly what the bottom line impact of the project has been. Surprisingly, many previous improvement initiatives discouraged focus on the financials when identifying or evaluating projects.

Six Sigma Methods and Tools

Now let us turn to the methods and tools of Six Sigma.

Process Thinking. The first key method is process thinking—taking the view that all work is a process. All work in all parts of the organization, whether it is in manufacturing, new product development, finance, logistics, or procurement, is accomplished by a series of interconnected steps. When you view problems from the framework of a process with inputs, processing steps, and outputs, a common approach to improving processes and solving problems can be applied. Since Six Sigma had its roots in electronics manufacturing, there is a common misunderstanding that Six Sigma can only help in this one activity. This mistake is analogous to assuming that the Internet can only be useful in the defense industry (where it originated).

A schematic of a generic process is shown in Figure 1-1. Examples of the process inputs, controlled variables, uncontrolled variables, and process outputs for manufacturing and non-manufacturing processes are shown in Tables 1-2 and 1-3, respectively. These tables illustrate that the process inputs include those things that are used to produce the process outputs. The controlled variables are those that run the process and, as the name implies, can be controlled (“knobs” on the process). The uncontrolled variables are those that affect the output of the process but that there is limited control over. Obviously, the inputs come from suppliers, which could be the person down the hall or another process or raw material supplier, and the outputs go to customers, either internal or external to the organization. Viewing processes this way produces the SIPOC model (suppliers, inputs, process, outputs, customers). In the SIPOC model, all processes, no matter the source, begin to look similar in nature.

Table 1-2. Manufacturing Process Variables

Process Input Variables Raw materials Water Energy Controlled Process Variables Temperature Pressure Flow rate Catalyst concentration Uncontrolled (Noise) Process Variables Ambient conditions—temperature and humidity Shift Team Operators Machines Raw material lot Process Output Variables Yield Waste Capacity Downtime Production rate

Process Variation. Variation is present in all processes and every aspect of the workday. It reduces process performance, decreases customer satisfaction, and has a negative impact on the bottom line. Customers want a consistent product or service—one that they can count on to provide the same value all the time. Products need to work as anticipated, and be delivered and serviced on time, just as financial transactions need to proceed smoothly with minimal disruptions. Six Sigma is focused on reducing the negative effects of process variation in two major ways: (1) it shifts the process average to the desired target level and (2) it reduces the variation around the process average. This results in a process performing at the right average level with minimal variation from product to product or transaction to transaction. The need to address variation is the primary reason for including so many statistical tools in the Six Sigma toolkit. Statistics is the only science focused on identifying, measuring, and understanding variation, thereby being able to adjust process variables to reduce variation.

Facts, Figures and Data. Six Sigma is about facts, figures, and data—in other words, data-based decision making versus reliance on gut feel and intuition. The approach requires that data are available on all key process and input variables (see Tables 1-2 and 1-3). The project doesn't proceed until adequate data are available. The focus on the use of data along with process thinking and variation helps integrate the scientific method into the Six Sigma methodology. The integration of process thinking, understanding of variation, and data-based decision making is often referred to as statistical thinking (see Hoerl and Snee [2002]).

DMAIC Improvement Methodology. The primary improvement methodology of Six Sigma is a standard improvement process that has five key phases: define, measure, analyze, improve, and control (DMAIC). All improvement projects touch on these phases in one way or another (new design projects use a different process called Design for Six Sigma). The tools of Six Sigma are integrated into these phases. This is a strength and uniqueness of Six Sigma. All projects utilize the same improvement process, although the individual applications may be quite different. In contrast to most statistics training that throws a lot of tools on the table and lets practitioners fend for themselves, the DMAIC framework shows practitioners how to integrate and sequence the tools into an overall improvement strategy. This enables practitioners to attack virtually any problem in a systematic manner.

Eight Key Tools. Six Sigma utilizes many individual tools, but eight are most frequently applied. These eight key tools are linked and sequenced in the DMAIC framework. This relatively small number of improvement tools helps the Black Belts and Green Belts move up the learning curve more quickly. They learn the order in which to use the tools and how the output of one tool becomes the input for another tool. You will learn how to think about the tools in Chapter 8, but this book is not a reference book on the tools. For such a tools reference, we recommend Breyfogle (1999).

Table 1-3. Customer Order (Non-Manufacturing) Process Variables

Process Inputs Email, fax, phone, and postal service reliability Completeness of customer orders Accuracy of customer orders Controlled Process Variables Customer service representative training Inventory level Shipment method Promise date Uncontrolled (Noise) Process Variables Customer service representative attitude Day of week Season of year Customer required date Shift Team Process Output Variables Order correctness Delivery time Package quality

Statistical Tools. Some, but not all, of these tools are statistical tools. As noted earlier, statistical tools are required so that process variation can be effectively dealt with. Six Sigma has effectively integrated statistical tools with those from other disciplines, such as industrial engineering, quality management, operations research, mechanical and electrical design, and reliability. The result is a toolkit much broader and more powerful than available within any one discipline. Because the toolkit is diverse and flexible, and because the focus is on a limited set of core tools, Black Belts and Green Belts do not need to become professional statisticians to be successful. Black Belts and Green Belts are trained to use statistical thinking and methods and data to improve processes

User-Friendly Statistical Software. Another reason Six Sigma has been effective is the general availability of user-friendly statistical software that enables effective and broad utilization of the statistical tools. The statistical software package most widely used in Six Sigma is probably Minitab™. Prior to the availability of such user-friendly software, statistical methods were often the domain of professional statisticians, who had access to, and specialized training in, proprietary statistical software. Specialists in statistical methods have an important role to play in Six Sigma, but practitioners who are not professional statisticians do the vast majority of statistical applications.

Critical Few Variables. The final key methodology of Six Sigma is its focus on the identification of the critical few input and process variables. Most processes, from extruding a plastic to closing the books for a global conglomerate, involve a large number of potentially important input and process variables. Studying each in-depth, and then managing them on an ongoing basis would be time consuming and prohibitively expensive. Fortunately, there are often three to six critical input and process variables that drive the process output variables. Identification of these variables can lead to effective ways to optimize and control the process in a parsimonious and cost-effective way. Six Sigma finds, and then focuses attention on, these few key variables. This principle of focusing attention on a few key things is consistent with general principles of good management. The ultimate goal is to move from measuring outputs and making process adjustments as the primary way to control the process to measuring and then adjusting process inputs to control the process and achieve the desired process performance.