Variation Reduction (DMAIC) Fundamentals

Module Objective
By the end of this module, the participant should be able to: Discuss the fundamentals of DMAIC in Variation Reduction Explain the benefits of DMAIC in Reducing Variation

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Merrill Lynch Six Sigma is a System of Proven Methodologies

DFSS

Growth

Service
Growth Engines Eliminate Redundancies

Eliminate Waste
LEAN
2002 ConceptFlow

Develop Talent

Reduce Variability
DMAIC
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Lets look at the second of these 3 Key Components . . .

Premise
The basic premise of DMAIC is that sources of variation can be: Identified Quantified Eliminated or Controlled Focused on strategic or core processes Data driven Measurements focused on right things

Variation Is The Enemy!

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The Goal: Breakthrough Performance

Six Sigma Breakthrough Defects and Waste

Current State

Improvement Period

Breakthrough State

Time

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Process Capability Sigma Level 2 3 4 5 6

Defects per Million Opportunities

Long Term Yield

308,537 66,807 6,210 233 3.4

69.15% 93.32% 99.38% 99.98% 99.99966%

If you played 100 rounds of golf per year, and played at:

2 sigma - you'd miss 6 putts per round 3 sigma - you'd miss 1 putt per round 4 sigma - you'd miss 1 putt every 9 rounds 5 sigma - you'd miss 1 putt every 2.33 years 6 sigma - you'd miss 1 putt every 163 years!

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Simple Definition of Variation

Accuracy = Centering Precision = Spread

Defects Defects

Client target

Client target

Reduce spread

Center on target

Off center and spread = process variation = Defects

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Voice of the Process Versus Voice of the Client

LSL USL

Defects

Acceptable

Defects

Voice of the Client Voice of the Process

Inadequate Process Capability Inadequate Design Margin

Unstable

Voice of the Process is independent of the Voice of the Client

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Goals of Six Sigma

LSL USL LSL USL

Defects

Defects

Client target

Client target

Eliminate Defects Reduce Variation

LSL USL

Center Process on Target Reduce Variation

GOAL
Client target

Meet Client Target and Specifications

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Six Sigma As a Statistical Measure

3 Sigma Process
Average = 0 St.Dev. = 2 Tolerance = 12

Shift the average 1.5

By shifting a 3 sigma process 1.5 we create 66,807 defects per million opportunities
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

6 Sigma Process
Average = 0 St.Dev. = 1 Tolerance = 12

LSL

USL

Shift the average 1.5

By shifting a 6 sigma process 1.5 we create 3.4 defects per million opportunities
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

In a six sigma process, Client Satisfaction and Business Objectives are robust to shifts due to process or product variation!
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Can We Tolerate Variability?

There will always be variability present in any process We can tolerate variability if: The process is on target The total variability is relatively small compared to the process specifications The process is stable over time
LSL Nom USL

Cost

Acceptable

Traditional View

LSL

Nom

USL

Taguchi Loss Function Cost (New View)

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Is 99% Good Enough?

99% Good (3.8 Sigma) 20,000 lost articles of mail per hour 99.99966% Good (6 Sigma) Seven articles lost per hour

Unsafe drinking water for almost 15 minutes each day

5,000 incorrect surgical operations per week Two short or long landings at most major airports each day 200,000 wrong drug prescriptions each year No electricity for almost seven hours each month
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One unsafe minute every seven months

1.7 incorrect operations per week One short or long landing every five years 68 wrong prescriptions per year One hour without electricity every 34 years
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The Magnitude of Six Sigma

Sigma Area Spelling
1.5 misspelled words per page in a book 1 misspelled word per 30 pages in a book

Money
$2.7 million indebtedness per $1 billion in assets $63,000 indebtedness per $1 billion in assets

Time
3 1/2 months per century

Distance
Coast-to-coast trip

3 4

Floor space of a small hardware store Floor space of a typical living room

2 1/2 days per century

45 minutes of freeway driving(in any direction A trip to the local gas station 4 steps in any direction

5 6

Size of the bottom of your telephone Size of a typical diamond

1 misspelled word in a set of encyclopedias 1 misspelled word in all of the books contained in a small library

$570 indebtedness per $1 billion in assets $2 indebtedness per $1 billion assets

30 minutes per century

6 seconds per century

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Six Sigma... Todays Performance

How does your industry rank?
1,000,000

DPMO PPM
100,000 10,000 1,000 100 10 1

Phone In Tax Advice (140,000 PPM)

Restaurant Bills Doctor Prescription Writing Payroll Processing Order Writeup Journal Vouchers Wire Transfers Airline Baggage Handling

Purchased Material Lot Reject Rate

Average Company
1 2 3 4 5 6

Best-in-Class
Domestic Airline Flight Fatality Rate (0.43 PPM)

Sigma Scale of Measure

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Can We Inspect Our Way to Six Sigma?

st

PPMlt
308,537 66,807 6,210 233 3.4
Defects Per Million Opportunities

2 3 4 5 6
Process Capability

Inspection can only get us so far

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The Inspection Exercise

Task: Count the number of times the 6th letter of the alphabet appears in the following text: The necessity of training farm hands for first class farms in the fatherly handling of farm live stock is foremost in the eyes of farm owners. Since the forefathers of the farm owners trained the farm hands for first class farms in the fatherly handling of farm live stock, the farm owners feel they should carry on with the family tradition of training farm hands of first class farmers in the fatherly handling of farm live stock because they believe it is the basis of good fundamental farm management

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DMAIC... The Analytical Toolset to Drive Data-driven Decisions

Some DMAIC Tools CT Tree Process Mapping Graphical Techniques, i.e., Pareto Analysis Measurement Systems Analysis Rational Sub-grouping Capability Analysis Hypothesis Testing ANOVA (Analysis of Variance) Regression DOE (Design of Experiments) Response Surface Design SPC (Statistical Process Control) MINITAB statistical software is the tool box for most of these tools
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Overall Problem Solving Approach

Measure Practical Problem

Analyze Statistical Problem

y f ( x1 , x 2 ,..., x k )
Practical Solution Control Statistical Solution Improve

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Process Focus of Six Sigma Process Y = f(x)

Inputs (X1, X2 . . . Xn) Independent Cause Control

Output Dependent on Input Effect Monitor

Determining the critical Xs & controlling the Xs to guarantee the Ys

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How Y=f(x) Relates to a Process

Correct (In-Spec.)

X1 X2 X3 Xn
Process Input Variables (PIV) Process Output Variables (POV) Critical To Satisfaction (CTS)
Cost Quality Delivery

Process

Y
(VOP)

Clients Needs & Expectations (VOC)

Control the INPUTS to achieve the desired OUTPUTS that satisfies our Clients Expectations
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Dynamics of Execution Strategy - The Funnel Effect

Define Phase
Measure Phase Analyze Phase Improve Phase Control Phase

30-50 Inputs (X) 10-15 Xs 8-10 KPIVs 4-8 Key KPIVs 3-6 Key KPIVs

Optimized Process
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Leaders Need to Speak a New Language, Ask Relevant Questions

To better understand our process, Leaders need to ask questions Same questions same answers Changing the result means we have to change the question As questions arise, visions emerge, direction becomes apparent To lead change, Black Belts have to be able to ask critical questions Of the organization Of process experts Of process authority Questions may often drive behavior Our Process Owners, Managers and Black Belts will work on what you are interested in . . . What gets measured, gets done
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Purpose of the Define Phase

Identify product and/or process to be improved Identify the clients, their needs and requirements Quantify the gap(s) between process outputs and client requirements Define the performance standards or measures Establish project objectives Ensure resources are in place for the improvement project

Primary responsibility of Project Champion and Black Belt

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Define Phase Deliverables

Product or process balanced against strategic business requirements Client, critical-to-satisfaction requirements Linkage of client requirements to process outputs Team formed with charter describing purpose, goals and benefits of the six sigma project Financial benefits approved by Finance Department A high-level process map of major processing events occurring in the process Project plan with milestones and deliverables

States the need of the client (CTS) and the problem

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The Funnel Effect - Measure Phase

Key Tools Process Map C&E Matrix FMEA Measurement System Analysis Data Collection Plan Baseline Control Charts Process Capability Analysis Graphic Techniques Eliminate Waste 30 - 50 Inputs (X) 10 - 15 Xs

Optimized Process
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Measure Phase Deliverables

Validated project definition Detailed process map with outputs and labeled inputs Clearly defined process output measures (Ys) Measurement System Analyses on the Ys Control charts on baseline, process performance Process capability and entitlement Assessment of current control plan C&E Matrix to determine focus within process FMEA to assess and prioritize process risk Low hanging fruit actions assigned to team Valid data in accordance with the data collection plan Graphical interpretation of data

Determines baseline process performance

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The Funnel Effect - Analyze Phase

Key Tools Hypothesis Testing Multi-Vari Studies Variance Components ANOVA Correlation Regression

Eliminate Waste

30 - 50 Inputs (X) 10 - 15 Xs

8 - 10 KPIVs

Optimized Process
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Analyze Phase Deliverables

A prioritized list of potential sources of variation Variation Component Studies Measurement Analysis on the xs Data collected to validate sources Graphical and statistical analysis of data p-value establishing level of significance and probability Correlation and regression analysis to determine variable relationships Reduced list of potential key input variables that affect the output(s) Updated control charts, process map & FMEA Results to data (compared to baseline)
Statistically links key input variables with key output variable
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The Funnel Effect - Improve Phase

Key Tools Screening DOEs DOEs Historical DOEs Modeling DOEs

Eliminate Waste 30 - 50 Inputs

10 - 15 Xs
8 - 10 KPIVs

4-8 Key KPIVs 3-6 Key KPIVs

Optimized Process
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Improve Phase Deliverables

Systematically experiment with KPIVs Determine optimum conditions of KPIVs to result in optimum KPOV to meet CTQ Proposed optimum operating conditions and solution Proposed operating tolerances Continue to lean process A new (improved) process performance baseline and capability Validated significance of improvements Confirmation plan or results

Statistically validates optimum process operation conditions

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The Funnel Effect - Control Phase

Key Tools Control Plan SPC Mistake Proofing Standard Operations

Eliminate Waste 30 - 50 Inputs (X) 10 - 15 Xs 8 - 10 KPIVs 4-8 Key KPIVs 3-6 Key KPIVs

Optimized Process
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Control Phase Deliverables

Approved Control Plan encompassing documentation required to maintain improvements Lock in optimum KPIVs Monitor and control KPIVs to generate optimum KPOV Continue to lean process Meet CTQ consistently; sustainable results Documented project and process improvements Statistically validated process performance monitoring vehicle

Keep the Process Owner involved throughout the project!

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Dynamics of Execution Strategy - The Funnel Effect

Define Phase Measure Phase

30-50 Inputs (X) 10-15 Xs 8-10 KPIVs 4-8 Key KPIVs 3-6 Key KPIVs

Analyze Phase
Improve Phase

Control Phase

Optimized Process
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Module Objective
By the end of this module, the participant should be able to: Discuss the fundamentals of DMAIC in Variation Reduction Explain the benefits of DMAIC in Reducing Variation

2002 ConceptFlow

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Reference Material Variation Reduction Cheat Sheet and Key Questions to Ask

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D
DEFINE PHASE
Identify the problem Define client requirements

M
MEASURE PHASE
Quantify process performance Calculate Sigma level Measure key steps / inputs
For the measure stage of your project: Have you determined what type of data (KPOVs) is available and how has it been collected? Baseline control charts over time of the KPOVs? Have you completed a process map (flowchart) and who was involved in its development? Have you determined the categories of defects as shown in your Pareto analysis? Have you determined if a technology problem is indicated? If yes, what do you think it will take to improve it? Are there any other alternatives? What did you learn when you verified the measurement system on this project? How did you employ measurement system analysis to your project and what were your takeaways? Did you identify your next steps? Are you satisfied with the level of cooperation and support that you are getting? Have you determined the Entitlement of the Process? What process did you use to determine the Entitlement? Have you finalized performance objectives and project scope? Update project in Tracking System?

For the define stage of your project: Who are your key clients and their critical requirements (CTSs)? What are your key process metrics (KPOVs or Ys) and key deliverables objectives and milestones? Have you created a high-level process map? Has team been initiated (kick-off)? Have you identified areas where you need to collect data? What is your plan for getting started with your project? What steps will you take first? Have you selected the key players associated with the project? Has Finance been involved (approved) in the project? What is the objective of the project . . . Vision of the area management team? Review with process owner, IT and Finance? Project definition refined? Project entered in Tracking System?

Six Sigma Key Concepts Average vs. Variation Average tells little about client experience. The average is hidden within the variation of the data. Within the variation of a process are the defects, which prevent you from consistently achieving your Entitlement.
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Six Sigma Key Concepts

Entitlement Demonstrated examples of superior performance represent your Entitlement. Entitlement is a statistical term that refers to the short-term capability of a process . . . That is referred to the best you have been in the process
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A
ANALYZE PHASE
Identify, verify and quantify root causes Establish improvement targets Validate hypothesis
For the analyze stage of your project: What tools have you used in this phase and how were they helpful? What interim actions have you taken to contain defects until a final solution can be developed and implemented? Has an FMEA (Failure Modes and Effects Analysis) been completed? What are your improvement plans and next steps to get there (including timing, responsibility and expected results)? Are you satisfied with the level of cooperation and support that you are getting? What other support actions or activities do you need to accelerate your progress? Is your project statistically a Mean issue, a Variation issue or both? Update project in Tracking System?

I
IMPROVE PHASE
Create the solution design Validate and pilot the solution Implement improvement plan Test solutions
For the improve stage of your project: What new tools have you used in this phase and how were they helpful? What are the possible root causes of defects? What product or process design changes are required to achieve your improvement goals? What are your next steps toward achieving your improvement targets? Has Finance been involved in the project to fully understand the cost implications of your improvement plans? Are you satisfied with the level of cooperation and support that you are getting? What other support actions or activities do you need to accelerate your progress?

Six Sigma Key Concepts

Six Sigma Key Concepts Defects Various statistical models uncover the critical factors, which prevent the majority from performing at the Entitlement. Process change removes the defects and allows performance to shift to the Entitlement.

Rolled Throughput Yield Typically, we measure the equality of a given process by calculating the number of transactions that pass the final step in the process. However, Rolled Throughput Yield accurately measures the cumulative defect rate across all critical steps in a process.

2002 ConceptFlow

Y=f(X1 ,X2 ,X3 ,X4 ,X5 )

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C
CONTROL PHASE
Document procedures Standardize Process Growth

For the control stage of your project: What process controls are being implemented to ensure we sustain the gains? Who is the process owner? Is he or she present? Are they fully aware that they are responsible for maintaining the process after your team has completed its project? Is there a plan to revisit this process in the future to ensure the new capability level is maintained? What is the expected improvement in terms of cost reduction? Has finance been involved in the project? What new tools have you learned that were used in the phase of the project? Are you satisfied with the level of cooperation and support that you received during the project? What should we do differently to better support the next project?

Eliminate Waste

Reduce Variability

Six Sigma Elements

Six Sigma is a business philosophy that employs a client-centric, fact-based approach to reducing variation in order to dramatically improve quality by eliminating defects and, as a result, reducing cost.

Six Sigma Key Concepts

Putting it in Perspective

Sigma Level % Defect Free DPMO* 3 Sigma 93% 66,807 4 Sigma 99.4% 6,210 5 Sigma 99.976% 233 6 Sigma 99.9997% 3.4
*Defects Per Million Opportunities
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Variation Reduction Report-Out Questions and Key Concepts

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