Overview of Six Sigma and Organizational Goals Tutorial

1.1 Overview of Six Sigma and Organizational Goals

Hello and welcome to the first lesson of the Certified Six Sigma Green Belt Course offered by Simplilearn. This lesson provides an overview of Six Sigma and the organizational goals. Let us look at the objectives of this lesson in the next screen.

1.2 Objectives

After completing this lesson, you will be able to describe the basics of Six Sigma and organizational goals. You will also be able to explain lean principles in the organization and design for Six Sigma. Let us start with the first topic in the following screen.

1.3 Topic 1 Six Sigma And Organizational Goals

In this topic, we will discuss the basics of six sigma and organizational goals. Let us start with an introduction to Six Sigma in the following screen.

1.4 Introduction To Six Sigma

Six Sigma is a highly disciplined process that focuses on delivering near-perfect products and services consistently. Its strength is that it is a continuous improvement process with an unwavering focus on change empowerment, seamless training of resources and continuous top management support. These three are known as the Pillars of Six Sigma. If Six Sigma is implemented methodically, it will give sustained results for any process. Now the question arises as to what is a process. This will be explained in the next screen.

1.5 What Is A Process

A process is a series of steps designed to produce a product and or service according to the requirement of the customer. A process mainly consists of four parts, Input, Process steps, Output, and Feedback. Input is something put into a process or expended in its operation to achieve an output or a result. For example, Man, Material, Machine, and Management. Output is the final product delivered to an internal or external customer. For example, product or services. It is important to understand that if the output of a process is an input for another process, the latter process is the internal customer. Each Input can be classified as Controllable (represented as C), Non-Controllable (represented as NC), Noise (represented as N), and Critical (represented as X). The most important aspect of the process is the feedback. As can be inferred from the image, any change in the inputs causes changes in the output. Therefore, y equals f of x. Feedback helps in process control, because it suggests changes to the inputs. Let us learn about the process of Six Sigma in the next screen.

1.6 Process of Six Sigma

Six Sigma follows a process named DMAIC (Pronounced as D-MAC) DMAIC stands for Define, Measure, Analyze, Improve, and Control. Click each tab to know more. In the Define phase, define the problem statement and plan the improvement initiative. Consider a typical problem in an Organization. A particular organization’s customers are not satisfied with the current support process of the organization. You can define the problem as the support process of the organization is at 20% satisfaction. In Six Sigma, the projects are always defined objectively. In addition to defining the problem, the Six Sigma project team is also formed in this phase. The Measure phase collects the data from the process and understands the current quality or operational performance levels. Additionally, the measurement criteria such as how to measure, when to measure, and who will measure are established. In the Analyze phase, the business process and the data generated from the measurement phase are studied to understand the root causes of the problem. In the Improvement phase, possible improvement actions are identified and prioritized. These are then tested and the improvement action plan is finalized. In the last phase, which is the Control phase, the Six Sigma team goes for a full-scale implementation of the improvement action plan and sets up controls to monitor the system in order to sustain the gains.

1.7 List of DMAIC Tools

The list of DMAIC tools is discussed in this screen. There are some tools used in each phase of the Define, Measure, Analyze, Improve, and Control process. We will discuss some of the important tools of each phase in the later part of this course. Click each phase to view the list of tools. The define phase uses tools such as Supply, Input, Process, Output, Customer or SIPOC (Pronounce as: sye-poc) Diagram, Voice of Customer or VOC (Pronounce as: v-o-c), Critical to Quality or CTQ Trees, Quality Function Deployment or QFD, Failure Mode and Effects Analysis or FMEA, Cause and Effect or CE Matrix, and Project Charter. The measure phase uses tools such as GAGE R and R Variables, Run Charts or Control Charts, Cp, Cpk, Sigma level (Z Level) and Defects per Million Opportunity or DPMO, and Anderson Darling Test. The tools used in the analyze phase are Simple Linear Regression or SLR, Pareto Charts, Fishbone Diagram, FMEA, and Multi-Vari Charts or Hypothesis Tests. In the improve phase, the tools that can be used are Brainstorming, Piloting and FMEA, and Design of Experiments or DOE (Pronounce as: d-o-e) (If needed). The control phase uses tools such as Control Charts, Control Plan, and Measurement System Analysis or MSA Re-analysis. Note that some of these tools can be used interchangeably between the phases.

1.8 How Does Six Sigma Work

Let us understand how Six Sigma works in this screen. Six Sigma is successful because of the following reasons: Six Sigma is a management strategy. It creates an environment where the management supports Six Sigma as a business strategy and not as a stand-alone approach or a program to satisfy some public relations need. Six Sigma mainly emphasizes the DMAIC method of problem solving. Focused teams are assigned well-defined projects that directly influence the organization’s bottom line with customer satisfaction and increased quality being by-products. Six Sigma also requires extensive use of statistical methods. The next screen will focus on some key terms used in six sigma.

1.9 Six Sigma Terms

Some of the basic terms used in Six Sigma are Sigma, Opportunity, Defect, Specification limits, Rolled Throughput Yield (RTY), and Defects per Million Opportunity (DPMO). Click each tab to learn their definitions. Sigma is a Greek letter used as a standard notation for standard deviation of a process metric. The Six Sigma quality means 3.4 defects in 1 million opportunities or a process with 99.99966% yield. An opportunity is defined as every chance for a process to deliver an output that is either “right “ or “wrong”, as perceived by the customers. A defect is defined as every result of an opportunity that does not meet customerspecifications and does not fall within Upper Specification Limit or USL and Lower Specification Limit (LSL). Limits set by a customer representing the range of a product deviation the customer can tolerate or accept is termed as a specification limit. Upper specification limit is the highest acceptable limit and lower specification limit is the lowest acceptable limit set by a customer. Rolled Throughput Yield (RTY) is a measure of process efficiency expressed as percentage. Defects per Million Opportunities (DPMO) is also known as Non-Defect per Million Opportunities (NPMO) and is a measure of process performance.

1.10 Sigma Level Chart

Let us look at the sigma level chart in this screen. As discussed earlier, the Six Sigma quality means 3.4 defects in one million opportunities or a process with 99.99966% yield. The sigma level chart given on the screen shows the values for other sigma levels. Please take a look at the values carefully. Let us understand the benefits of Six Sigma in the next screen.

1.11 Benefits Of Six Sigma

The organizational benefits of Six Sigma are as follows: A Six Sigma process eliminates the root cause of problems and defects in a process. Sometimes the solution is creating robust products and services that mitigate the impact of a variable input or output on a customer’s experience. For example, many electrical utility systems have voltage variability up to and sometimes exceeding a 10% deviation from nominal value. Thus, most electrical products are built to tolerate the variability, drawing more amperage without damage to any components or the unit itself. Using Six Sigma reduces variation in a process and thereby reduces wastes in a process. It ensures customer satisfaction and provides process standardization. Rework is substantially reduced because one gets it right the very first time. Further, Six Sigma addresses the key business requirement. Six Sigma can also be used by organizations to gain advantage and become world leaders in their respective fields. Ultimately, the whole Six Sigma process is to satisfy customers and achieve organizational goals. In the next screen, let us understand Six Sigma and quality.

1.12 Six Sigma And Quality

Taking a process to Six Sigma level ensures that the Quality of the product is maintained. The primary goal of improved quality is increased profits for the organization. In very simple terms, Quality is defined as the Degree of excellence of a product or a service provided to the customer. It is conformance to customer requirement. If the customer is satisfied with the product or service, then the product or service is of the required quality. Let us look at the history of quality in the next screen.

1.13 History Of Quality

In the mid 1930s, Statistical Process Control (SPC) was developed by Walter Shewhart and used extensively during World War II to quickly expand the US’s industrial capabilities. SPC is the application of statistical techniques to control any process. Walter Shewhart’s work on Common Cause of Variation and Special Cause of Variation (Assignable) has been used proactively in all Six Sigma projects. The approach to quality has varied from time to time. In the 1960s, there were Quality Circles which originated in Japan. It was started by Kaoru Ishikawa. Quality circles were self-improvement groups composed of small number of employees belonging to a single department. Quality circles brought in improvements with little or no help from the top management. In 1987, ISO 9000 was introduced. ISO stands for International Organization for Standardization. ISO 9000 is a set of international standards on quality management and quality assurance to help organizations implement quality management systems. ISO 9000 is still in effect. Baldrige award, now known as Malcolm Baldridge National Quality Award, was developed by U.S. Congress in 1987 to raise awareness of quality management system as well as “recognize and award” U.S. companies that have successfully implemented quality management systems. In 1988, another quality approach was developed, known as Benchmarking. In this approach, an organization measures its performance against the best organizations in its field, determines how such performance levels were achieved and the information is used by the organization to improve itself. Then in the 1990s, there was the Balanced Scorecard approach. It is a management tool that helps mangers of all levels to monitor their results in their key areas so that one metric is not optimized while another is ignored. During the year 1996 – 1997, an approach known as Re-engineering was developed. This approach involved the restructuring of an entire organization and its processes. Integrating various functional tasks into cross-functional processes is one of the examples of Re-engineering. In the next screen, let us find out about the quality gurus and their contribution to the field of quality.

1.14 Quality Gurus

The prominent quality gurus are W Edwards Deming, Walter A. Shewhart, Joseph M. Juran, Kaoru Ishikawa, Genichi Taguchi, and Philip Crosby. Click each name to know more about these quality gurus. The first prominent quality guru is W Edwards Deming. He wrote the 14 key principles for management for transforming business effectiveness. He also wrote about the Seven Deadly Diseases known as the “seven wastes”. He developed the PDSA cycle i.e., (Pronounced as "that is") Plan–Do–Study–Act cycle, and made the industry realize the role of top management in bringing quality improvement. He also concentrated on system improvement as opposed to process improvement. Out of all the gurus, W Edwards Deming’s contribution to research of quality is by far the biggest. Walter A. Shewhart developed SPC i.e., ( Pronounced as "that is") Statistical Process Control charts. He also conducted a study on the advantages and disadvantages of assignable cause vs. ( Pronounced as "versus") chance cause. He implemented the use of statistics for quality management and modified the PDSA cycle to the PDCA cycle i.e., ( Pronounced as "that is") Plan–Do–Check–Act cycle. Joseph M Juran applied Pareto Analysis in quality management. He introduced the concept of quality trilogy, which is quality planning, quality control and quality improvement. He promoted top management involvement in quality initiative and the quality cost measurement. Kaoru Ishikawa developed the Cause and effect diagram. He implemented company-wide quality control and added the human dimension to quality management. He started the Quality Circle concept mentioned in the history of quality initiatives. Genichi Taguchi developed the Loss Function concepts, Signal-to-Noise ratio, concept of design robustness, and the experimental design methods. The Loss function introduced by Taguchi approximately calculates the financial losses, to both the organization and society, occurring due to the deviation in the process. Philip Crosby developed the Crosby’s fourteen steps to quality improvement and propagated the theme of “Do it right, first time“ and “Zero defect“. Crosby also developed the four absolutes of quality management and quality costs measurements and talked extensively on the role of senior management in quality improvement initiatives.

1.15 History of Six Sigma

Let us now look at the history of Six Sigma. The most important part in the history of Six Sigma is Motorola initiating Six Sigma for process improvement and thereby reducing defects to negligible levels, and GE using Six Sigma to improve the entire business system. Click each button to know more. Motorola first introduced Six Sigma in the year 1986. Bill Smith and Mikel Harry were the pioneers of the Motorola Six Sigma movement. In the year 1995, Jack Welch, then CEO of GE, initiated Six Sigma at GE to improve the entire business system. By the year 1998, Allied Signal had saved $0.5 billion by using Six Sigma. By the year 2000, GE had saved $2 billion annually with the help of Six Sigma. By 2001, Motorola saves $16 billion cumulatively by using Six Sigma.

1.16 Six Sigma And The Business System

Let us focus on Six Sigma and the business system in this screen. Business systems are designed to implement a process or a set of processes. A business system ensures that process inputs are at the right place and at the right time so that each step of the process has the resource it needs. A business system design should be responsible for collecting and analyzing data so that continual improvement of its processes, products, and services is ensured. A business system has processes, sub processes, and steps as its subsets. Human resources, manufacturing, and marketing are some examples of processes in a business system. Six Sigma improves a business system by continuously removing the defects in its processes and also by sustaining the changes. A defective item is any product or service that a customer would reject. A customer can be the user of the ultimate product or service or can be the next process downstream in the business system. Let us learn about Six Sigma projects and organizational goals in the following screen.

1.17 Six Sigma Projects and Organizational Goals

Six Sigma projects are initiated to address present or future requirements in alignment with organizational goals. There are four key aspects to keep in mind during project selection. First, the project selection group consisting of Master Black Belts, Black Belts, Champions, and key executives should establish a set of criteria for project selection and team assignments. Next, team selection for the project should be done based on the nature of the project. Ideally, the team should have a mix of skills and expertise. Next, only projects that have a positive impact on the profits should be selected. Any project that does not impact the profits of the company is not a good Six Sigma project. Finally, the selected projects should optimize the results to the whole system. The effect of proposed changes on other processes within the system should be considered because improvement in any one process of a business system should not reduce optimization of the other processes in the system. Calculating the profit expected out of the project helps in further selection of the project. Click the button given on the screen to view the formula for calculating the expected profit of a Six Sigma project. Expected profit of a Six Sigma project can be calculated by multiplying profit forecast by Probability of success of the project. If the project brings in improvement to many areas, then to calculate expected profit, we add the expected profit of all those areas. For example, if a project can bring in a profit of $2 million and has 0.7 probability of being successful, then the expected profit out of this project is 2 multiplied by 0.7, which equals to $1.4 million.

1.18 Six Sigma Team

Let us understand the structure of the Six Sigma team in this screen. There are totally five levels in the Six Sigma Team. The first level consists of the top executives of the organization. These people lead change and provide direction, as they own the vision of the organization. For any improvement initiative to work, it is important that top management of the organization be actively involved in its propagation. The top executives own the Six Sigma initiatives. Next in the level are Six Sigma Champions. They identify and scope projects, develop deployment and strategy, and support cultural change. They also identify and coach Master Black Belts. 3-4 Master Black Belts work under every Champion. Six Sigma Master Black Belts train and coach Black Belts, Green Belts, and various Functional Leaders of the organization. They usually have at least 3-4 Black Belts under them. The Fourth level in Six Sigma structure is Six Sigma Black Belts. They apply strategies to specific projects, and lead and direct teams to execute projects. Finally, there are Six Sigma Green Belts. They support the Black Belt employees by participating in project teams. Green belts play a dual role. They work on the project and perform day-to-day jobs related to their work area. In the next screen, we will understand the drivers and metrics of organizational strategy.

1.19 Organizational Drivers And Metrics

While financial accounting is useful to track physical assets, the Balanced Score Card or BSC offers a more holistic approach to strategy implementation and performance measurement by taking into account perspectives other than the financial one. For an organization, traditional strategic activities that concentrate only on financial metrics are not sufficient to predict future performance. They are not sufficient to implement and control the strategic plan either. BSC translates the organizational strategy into actionable objectives that can be met on an everyday basis and provides a framework for performance measurement. The balanced scorecard helps clarify the organizational vision and mission to workable action items to be carried out and measured. It also provides feedback on both internal business processes and external outcomes. By doing so, it enables continuous improvement in strategic performance toward achieving organizational goals. The Balanced Scorecard achieves all this by integrating the organizational strategy with a limited number of key metrics from four major areas of performance – finance, customer relations, internal processes, and learning and growth. Many organizations in the world use Balanced Scorecard approaches and the number is increasing every day. In the next screen, we will describe the balanced scorecard framework.

1.20 Balanced Scorecard Framework

Using the BSC, an organization maps its vision and strategic objectives to specific metrics of performance in four perspectives – the financial perspective, the learning and growth perspective, the internal processes perspective, and the customer perspective. Click each perspective to know more. The financial perspective comprises the organization’s financial objectives and allows tracking of financial success. The learning and growth perspective takes into consideration the intangible drivers of an organization’s success including human capital, skills, organizational culture and leadership among others. It also covers the learning gained over time. The internal processes perspective looks at operational goals for internal processes necessary to meet customer objectives. The customer perspective talks about customer-facing objectives, including customer satisfaction, desired attributes in a product or service, and market share.

1.21 Developing A Balanced Scorcard

We will learn about developing a Balanced Scorecard in this screen. While applying the balanced scorecard in an organization, care must be taken to account for interactions between different perspectives or strategic business units and avoid optimizing the results of one at the expense of another. To outline the strategy, a top-down approach is followed by determining the strategic objectives, measures, targets, and initiatives for each perspective. The strategic objectives refer to the strategy to be achieved in that perspective. Three or four leading objectives are agreed upon. The progress toward strategic objectives is assessed using specific measures. These measures should be closely related to the actual performance drivers. This enables effectively evaluating progress. High-level metrics are linked to lower level operational measures. The target values for each measure are set. The initiatives required to achieve the target value are identified. As already mentioned, this exercise is carried out for all the perspectives. Finally, the scorecard is integrated into the management system. In the next screen, let us understand the change in the approach to the balance scorecard from the Four-box model of BSC to Strategy Maps.

1.22 Four Box Model Of Bsc Vs Strategy Maps

In earlier approaches to the balanced scorecard, the perspectives were presented in a four-box model. This kind of scorecard was more a comprehensive glance at the key performance indicators or metrics in different perspectives. However, the key performance indicators or metrics of different perspectives were viewed independent of each other, which led to a silo-based approach and lack of integration. However, modern scorecards place the focus on the inter-relations between the objectives and metrics of different perspectives and how they support each other. A well-designed balanced scorecard recognizes the influence of one perspective on another and the effect of these interactions on organizational strategy. To achieve the objectives in one perspective, it is necessary to achieve the objectives in another perspective. In short, the four perspectives form a chain of cause-and-effect relationships. A map of inter-linked objectives from each perspective is created. These objectives represent the performance drivers, which determine the effectiveness of strategy implementation. This is called a strategy map. The function of a strategy map is to outline what the organization wants to accomplish and how it plans to accomplish it. The strategy map is one-page view of how the organization can create value. For example, financial success is dependent on giving customers what they want, which in turn depends on the internal processes and learning and growth at an individual level. In the next screen, we will look at the impact of the balanced scorecard on the organization.

1.23 Impact On The Organization

The balanced scorecard and strategy map force managers to consider cause-and-effect relationships, which leads to better identification of key drivers and a more rounded approach to strategic planning. The BSC enables the organization to improve in the following ways: Being a one-page document, a strategy map can be easily communicated and facilitates understanding at all levels of the organization. An organization is successful in meeting its objectives only when everyone understands the strategy. The balanced scorecard also forces an organization to measure what really matters and manage information better so that quality of decision-making is higher. Creating performance reports against a balanced scorecard allows for a structured approach to reporting progress. It also enables organizations to create reports and dashboards to communicate performance transparently and meaningfully. As expected, a balanced scorecard helps an organization to better align itself and its processes to the strategic goals outlined in the BSC. The overall objectives of the BSC can be cascaded into each business unit to enable that unit to work toward the common organizational goal. All the activities of the organization, such as budgeting or risk management, are automatically aligned to the strategic objectives. To conclude, the Balanced Scorecard is a simple and powerful tool that when implemented correctly, equips an organization to perform better. Let us proceed to the next topic of this lesson in the following screen.

1.24 Topic 2 Lean Principles

In this topic, we will look at what Lean is and how Lean is applied to a process. Let us start with the lean concepts in the next screen.

1.25 Lean Concepts

Lean is a continuous process to eliminate or reduce non-value added activities or NVA and waste from a process. When Lean is applied to a process, it increases the continuous flow and minimizes instances of stop-flow and unbalanced production. Before applying Six Sigma to a process, it is important to check the waste status of the process. If there are waste and NVAs present, they should be eliminated before applying Six Sigma. Click the button given on the screen to view an example for Lean concepts. In this example, we will understand how Lean can be applied to a process to reduce waste. Consider an operation with defects in the welding process. A welding technician observes that he is sometimes welding rusty components together. One approach to this problem could be to use an oil coating to prevent components from rusting. However, this could create additional tasks of cleaning the components before welding to prevent the oil from causing further problems. This is a traditional solution. Another approach to this problem is the Lean approach, where ways to reduce inventory can be identified and hence waiting or storage time could be minimized. A shorter waiting time would prevent rust from forming on the steel components.

1.26 Lean Concepts Process Issues

Let us look at the process issues in this screen. Lean focuses on three major issues in a process, known by their Japanese names, Muda, Mura, and Muri. Muda refers to non-value adding work, Mura represents unevenness, and Muri represents overburden. Together, they represent the key aspects in Lean. Let us look at the types of waste in the next screen.

1.27 Types Of Waste

There are seven types of Muda or waste as per Lean Principles. Let us understand these seven types of Muda. Overproduction: This refers to producing more than is required. For Example, a customer needed 10 products and 12 were delivered. Inventory: In simple words, this refers to stock. The term inventory includes finished goods, semi-finished goods, raw materials, supplies kept in waiting, and some of the work in progress. For example, test scripts waiting to be executed by the testing team. Defects, Repairs, Rejects: Any product or service deemed unusable by the customer or any effort to make it usable to the original customer or a new customer. For example, errors found in the source code of a payroll module by quality control team. Motion: A waste due to poor ergonomics of the workplace. For example, Finance and accounts team sit on the first floor, but invoices to customers are printed on the ground floor causing unnecessary personnel movement. Over-processing: Additional process on a product or service to remove unnecessary attribute or feature is over-processing. For Example: a customer needs a bottle and you deliver a bottle with extra plastic casing; a customer needs ABEC 3 bearing and your process is tuned to produced more precise ABEC 7 bearings, taking more time for something the customer doesn’t need. Waiting: When a part waits for processing, or the operator waits for work, the wastage of waiting occurs. For example, Improper scheduling of staff members. Transport: When the product moves unnecessarily in the process without adding value. For Example: a product is finished and yet it travels 10 kilometers to the warehouse before it gets shipped to the customer. Another example: an electronic form is transferred to 12 people, some of them seeing the form more than once (i.e., the form is traveling over the same ‘space’ multiple times). Next, we will look at LEAN wastes other than the 7 types of waste discussed in this screen.

1.28 Other Lean Wastes

Some Lean experts talk about additional areas of waste: Underutilized skills: Skills are underutilized when the workforce has capabilities that are not being fully used toward productive efforts; people are assigned to jobs in which they do not fit. Underperforming processes: Automation of a poorly performing process. Improving a process that should be eliminated if possible (for example, the product returns department or product discounts process). Asymmetry in processes that should be eliminated (for example, two signatures to approve a cost reduction and six signatures to reverse a cost reduction that created higher costs in other areas). In the next screen, we will look at an exercise on identifying the waste type.

1.29 Identifying the Waste Type Exercise

Let us identify the types of waste from the following examples. Materials are air-freighted into a company for the Materials Requirement Planning (MRP) deadline on the first day of the month. The materials then sit in the warehouse for three weeks before they are used. Click the button to know the answer. This is an example of Inventory. Payment from the customer is not received on-time because the customer claims the information on the bill-of-lading, invoice, and order do not match. Click the button to know the answer. This is an example of a Defect or Reject. An inspector rejects blemished parts observed under a microscope, when the specification allows for blemishes not visible from three feet away. Click the button to know the answer. This is an example of Over-Processing. By the time the work-in-process piles on the shelves and carts reduce, some assemblies done according to the previous revision become unusable. Click the button to know the answer. This is an example of Overproduction.

1.30 Lean Process

We will learn about the Lean Process in this screen. There are five steps in the process of lean implementation. They are: Identify value, Value Stream Mapping, Create Flow, Pull, and Perfection. Click each step to know more. The first step is to identify value from the customer’s perspective. The second step is to perform value stream mapping. This helps you in mapping the path and identifying all the activities involved in the product or service. The third step is to make the value stream steps flow to ensure a continuous flow of products or services. The fourth step is to let the customer pull the products. The last step is to seek perfection, which is complete elimination of Muda.

1.31 Lean Process Identify Value

We will cover each step of the Lean process in the next few screens. In this screen, we will learn about the first step, Identify value. To implement Lean to a process, it is important to find out what the customer wants. Once this is done, the process should be evaluated to identify what it needs to possess to meet customer requirements. The next screen will focus on the next step of the lean process, value stream mapping.

1.32 Lean Process Value Stream Mapping

Value stream mapping is a visualization tool to map the path and hence identify all the activities involved in the product or service. All the activities of a product or service are mapped on a paper using flowcharts. This helps in identifying and eliminating or reducing non-value-added activities. Any organizational activity can be classified into three types, Value added activities (VA), Non-value added activities (NVA), and Necessary, but Non-Value Added Activities Click each type to know more. Value-added activities add value to the process and the customers are willing to pay for them. They add value in the making of a product and hence add value to the customer who will use the final product. For example, printing is the activity that provides manufacturing details to the customers, which in turn helps in the decision making of purchasing the unit. Non-value-added activities are activities that do not add any value to the product as perceived by the customer, and for which the customer is not willing to pay. For example, any delay in the raw material procurement. Workers waiting for the raw materials to begin the production does not add value to the process. Necessary, but Non-Value Added Activities are the activities required by the process. however they do not add value to the customer’s perceived value. For example, quality check or inspection does not contribute to the product directly, however it is necessary until the process can be improved to the point where inspection can be eliminated.

1.33 Lean Process Flow Pull and Perfection

This screen will focus on the last three steps of the Lean process, Create Flow, Pull and Perfection. Click each step to know more. Create Flow—It is essential that a product or service moves through a business system in a continuous flow. Any process, which stops or reduces the flow is a non-value-adding activity and hence is a waste. Pull—Instead of making the product or sales based on an estimated sales forecast, the business system makes the product or service as the customer demands for it. This has many advantages such as decrease in cycle time, reduced finished inventory, reduced work-in-progress, stability in price, and smooth flow of the process. Perfection—Perfection is the complete elimination of Muda or waste so that all the activities along a value chain add value to the process. This also means that an organization should stop looking at the competitor market and should establish a perfect system.

1.34 Pull Vs Push

In this screen, we will discuss the differences between Push and Pull processes. An organization can adopt either of these processes depending on the requirement: Contrary to a Pull process, in a Push process, the first step is to forecast the demand for a product or service. The production line then begins to fill this demand and produced parts are stocked in anticipation of customer demand. For example, a garments manufacturer produces 200 shirts based on expected demand and then waits for customer orders for them. Note that the demand is expected and not actual. Discounts offered to customers by big retailers are examples of the Push process. If the garment company adopts a Pull process instead, it would start making the shirts only after receiving a confirmed demand from customers. Note that although the Pull approach seems better, it is not applicable to all situations. For example, a pharmacy uses a Push process. In the next screen, we will learn about theory of constraints.

1.35 Theory of Constraints

Every process has a limiting constraint or bottleneck. The Theory of Constraints or TOC (pronounce as T-O-C) is a tool to remove bottlenecks in a process that limits production or throughput. Once the process value stream is mapped, follow the five steps of the TOC methodology. These five steps form a continuous improvement cycle. Click each step to know more. The first step is to identify the constraints in the system or process. A constraint limits the rate at which the business achieves its goals. The second step is to exploit the system’s constraint. This refers to deciding how to exploit the constraint. It also involves deciding how to make improvements to the throughput of the constraint so that it works to its full capacity. In the third step, subordinate the rest of the process to the decisions taken in Step 2. In other words, align the whole process or systems support the decisions made in Step 2. In the fourth step, you must elevate the system's constraint and if the constraint still exists, consider further actions to resolve it. In the last step, if the constraint is broken or resolved, go to Step 1 and find a new constraint.

1.36 Theory Of Constraints Example

Let us look at an example for the TOC methodology in this screen. The three sub-processes in the packing process are coding or printing, filling, and sealing. The data for the 3 sub-processes are observed and collected as number of units produced in an hour. The data is as follows: Coding or Printing is 900 units per hour. Filling is 720 units per hour and Sealing is 780 units per hour. How can you implement the TOC methodology in this example? Let us build the TOC map for this example. The first step in the TOC methodology is to identify the constraint. Looking at the data, the output per hour from the filling process is 720. This is the constraint in the system. In the second step, the constraint is exploited by analyzing the performance using data. To break the constraint, a repair and maintenance personnel can be assigned to maintain the filling machine on a daily basis. In the third step, the other fixes in the repair and maintenance function are made as subordinate decisions to the one taken in Step 2. In this example, carry out the maintenance of the filling machine. In the fourth step, the constraint is elevated by implementing the decisions. In this example, remove the damages from the filling machine. The next step is to go back to step one and identify the next system constraint. As per the data collected after implementation of the first cycle of the TOC, sealing can be identified as the next system constraint.

1.37 Theory Of Constraints Example

Let us now analyze the data before and after TOC implementation in this example. The number of units produced per hour before implementing the TOC in coding or printing process was 900 units, filling process was 720 units, and sealing process was 780 units. After implementing the TOC, the number of units produced per hour for the filling process increased to 840 from 720 units.

1.38 Topic 3 Design For Six Sigma

Let us proceed to the next topic of this lesson. In this topic, we will discuss the concepts in Design for Six Sigma or DFSS. Let us first understand DFSS in the next screen.

1.39 Design For Six Sigma

DFSS or Design for Six Sigma is a business process methodology that ensures that any new product or service meets customer requirements and the process for that product or service is already at Six Sigma level. DFSS uses tools such as Quality Function Deployment or QFD and Failure Mode and Effects Analysis or FMEA. DFSS can help a business system to introduce an entirely new product or service for the customer. It can also be used to introduce a new category of product or service for the business system. For example, an FMCG company plans to make a new brand of hair oil, a type of product already in the market. DFSS also improves the product or service and adds to the current product or service lines. To implement DFSS, a business system has to know its customer requirements. DFSS can be used to design a new product or service, a new process for a new product or service, or redesign of an existing product or service to meet customer requirements. Let us learn about processes for DFSS in the next screen.

1.40 Processes for DFSS

The two major processes for DFSS are IDOV and DMADV. IDOV stands for Identify, Design, Optimize, and Verify. DMADV stands for Define, Measure, Analyze, Design, and Verify. In the IDOV process, the first step involves identifying specific customer needs based on which the new product and business process will be designed. The next step involves Design, which involves identifying functional requirements, developing alternate concepts, evaluating the alternatives, selecting a best-fit concept, and predicting sigma capability. Tools such as FMEA are used here. The third step, Optimize, uses a statistical approach to calculate tolerance, with respect to the desired output. When IDOV is implemented to design a process expected to work at Six Sigma level, this is checked in the Optimize phase. If the process does not meet expectations, the optimize phase helps in developing detailed design elements, predicting performances and optimizing design. The last stage of IDOV is to verify, that is, to test and validate the design and finally to check conformance to Six Sigma standards. The other process, DMADV, has five stages. The first stage is to define the customer requirements and goals for the process, product, or service. Next, measure and match performance to customer requirements. The third stage involves analysis and assessment of the design for the process, product or service. The next step is to design and implement the array of latest processes required for the new process, product or service. The final stage is to verify results and maintain performance. In the next screen, we will look at the differences between IDOV and DMADV.

1.41 IDOV Vs DMADV

The primary difference between IDOV and DMADV is that while IDOV is used only to design a new product or service, DMADV can be used to design either a new product or service, or redesign an existing product or service. IDOV involves design of a new process, while DMADV involves redesigning an existing process. In IDOV, no analysis or measurement of existing process is done and the whole development is new. The design step immediately follows the identification of customer requirements. In contrast, in DMADV, the existing product, service, or process is examined thoroughly before moving to the design phase. The design stage comes only after defining requirements and analyzing the existing product, service, or process. In the following screen, we will learn about tool Quality Function Deployment or QFD, which is one of the DFSS tools.

1.42 DFSS Tools Quality Function Deployment

QFD, also called Voice of Customer or VOC or House of Quality, is a predefined method of identifying customer requirements. It is a systematic process to understand the needs of the customer and convert them into a set of design and manufacturing requirements. QFD motivates business to focus on its customers and design products that are competitive in lesser time and at lesser cost. The primary learning from QFD includes which customer requirements are most important, what the organization’s strengths and weaknesses are, where an organization should focus their efforts, and where most of the work needs to be done. To learn from QFD, the organization should ask relevant questions to customers and tabulate them to bring out a set of parameters critical to the design of the product. Apart from understanding customer requirements, it is also important to know what would happen if a particular product or service fails when being used by a customer. It is necessary to understand the effects of failure on the customer to ensure preventive actions are taken and to be able to answer the customers in the event of failure. In the next screen, we will look at another DFSS tool, Failure Modes and Effects Analysis or FMEA.

1.43 DFSS Tools Failure Modes And Effects Analysis

Failure Modes and Effects Analysis or FMEA is a preemptive tool that helps any system to identify potential pitfalls at all levels of a business system. It helps the organization to identify and prioritize the different failure modes of its product or service and what effect the failure would have on the customer. It helps in identifying the critical areas in a system on which the organization’s efforts can be focused. Note that while FMEA enables identification of critical areas, it does not offer solutions to the identified problems. We will look at the varieties of FMEA such as DFMEA and PFMEA, in the next screen.

1.44 PFMEA And DFMEA

PFMEA stands for Process Failure Mode and Effects Analysis and DFMEA stands for Design Failure Mode and Effects Analysis. PFMEA is used on a new or existing process to uncover potential failures. It is done in the quality planning phase to act as an aid during production. A process FMEA can involve fabrication, assembly, transactions, or services. DFMEA is used in the design of a new product, service, or process to uncover potential failures. The purpose is to find out how failure modes affect the system and to reduce the effect of failure on the system. This is done before the product is sent to manufacturing. All design deficiencies are sorted out at the end of this process. In the following screen, we will understand FMEA Risk Priority Number.

1.45 FMEA Risk Priority Number

FMEA Risk Priority Number or RPN is a measure used to quantify or assess risk associated with a design or process. Assessing risk helps identify critical failure modes. Higher the RPN, higher the priority the product or process receives. RPN is a product of three numbers, Severity of a failure, Occurrence of a failure, and the Detectability of a failure. All these numbers are given a value on a scale of one to ten. The minimum value of RPN is 1 and the maximum value is 1,000. A failure mode with a high occurrence rating means the failure mode occurs very frequently. A mode with a high severity rating means that the mode is really critical to ensure safety of operations. A mode with a high detection rating means that the current controls are not sufficient. In the next screen, we will look at the FMEA table.

1.46 FMEA Table

The FMEA table helps plan improvement initiatives by underlining why and how failure modes occur and helps organizations plan for their prevention. Typically, FMEA is applied on the output of root cause analysis, and is a better tool for focus or prioritization as compared to multivoting. One important aspect of FMEA is that it does not need data. Experts in a particular area can form the FMEA table without having to look at data from any source. In functions such as Human Resources, the FMEA table is very useful as there might not be much data available to the problem solving team. The sample FMEA table is given on the screen. Please go through the contents for better understanding. In the following screen, we will discuss severity of risk priority number and scale criteria.

1.47 RPN And Scale Criteria Severity

Let us first discuss Severity. Severity refers to the seriousness of the effect of the failure mode or how critical the failure mode is to the customer or the process. The severity of a failure mode is rated on a scale of 1 to 10 using a severity table. Different industries follow different structures for the severity table. Shown here is a generalized table of severity. A high severity rating indicates a mode is critical to operational safety. For example, a team working on FMEA of a radioactive plant may insert “fatal” as the effect with rating 10. Another example is the Severity table for a sports team. The team manager wants to rate the severity of failure of the team in an upcoming game. She might rate it at 9 given that the team would lose a big sponsorship should they face defeat, which could in turn be hazardous to the teams’ future. Shown here is a generalized table of severity. The Severity rating can never be changed. For example, if a mode has a rating of 9 before improvement, it will continue to have a rating of 9 after improvement too. Let us next look at occurrence of RPN and scale criteria.

1.48 RPN And Scale Criteria Occurrence

Occurrence is the probability that a specific cause will result in the particular failure mode. As with severity, occurrence is rated on a scale of 1 to 10 based on a table. Like the severity table, higher the occurrence of a failure, higher is its rating. Again, this table might vary depending on the industry and scenario. Sometimes, the project team can use data here if available. Based on past data, the probability of occurrence of a failure can easily be rated. Shown here is a generalized table. Let us next look at detection of RPN and scale criteria.

1.49 RPN And Scale Criteria Detection

Detection is the probability that a particular failure will be detected. The table shown here is again a generalized one. The rating here is bit different from severity or occurrence. Higher the detectability of a failure, lower is its rating. This is because if the failure can easily be detected, then everyone would know of it and therefore there would be less or no damage. For example, if detection is impossible, the failure is given a rating of 10. Please note that at the start of a Six Sigma project, the failure mode is given a relatively high detection rating. Let us look at an example of FMEA and RPN in the next screen.

1.50 Example Of FMEA And RPN

In this example, a bank wants to recognize and prioritize the risks involved in the process of withdrawing cash from an ATM. It can be observed from the table that not having a control in place for network issues has the highest RPN. This is due to the detectability for a network issue being very low. The next set of information in the table shows the action taken by the bank’s management to address the failure modes. Following the implementation, the new RPN is calculated retaining the severity level at 9. This is because the actions were not directed at reducing the severity but at the causes of failure. It can be seen that the new RPN is much lower, and the risk for both causes has been mitigated.

1.51 Quiz

Following is the quiz section to check your understanding of the lesson.

1.52 Summary

Let us summarize what we have learned in this lesson. Six Sigma follows the DMAIC process that focuses on developing and delivering near-perfect products and services consistently. Taking a process to Six Sigma level ensures that quality of the product is maintained, with the primary goal being increased profits. Lean is a continuous process to eliminate or reduce waste and NVAs from a process. DFSS ensures that a new product or service meets customer requirements and a process is at Six Sigma level using tools such as QFD and FMEA.

1.53 Thank You

With this, we have come to the end of this lesson. Let us learn about Define phase in the next lesson.

  • Disclaimer
  • PMP, PMI, PMBOK, CAPM, PgMP, PfMP, ACP, PBA, RMP, SP, and OPM3 are registered marks of the Project Management Institute, Inc.

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