Practitioner's Guide to Statistics and Lean Six Sigma for Process Improvements

Mikel J. Harry, Prem S. Mann, Ofelia C. De Hodgins, Richard L. Hulbert, Christopher J. Lacke

• Publisher: Wiley
• Year: 2011
• ISBN:
  9781118210215
• Edition: 1
• Topic: Tecnología e ingeniería
• Subtopic: Control de calidad en ingeniería

This hands-on book presents a complete understanding of Six Sigma and Lean Six Sigma through data analysis and statistical concepts

In today's business world, Six Sigma, or Lean Six Sigma, is a crucial tool utilized by companies to improve customer satisfaction, increase profitability, and enhance productivity. Practitioner's Guide to Statistics and Lean Six Sigma for Process Improvements provides a balanced approach to quantitative and qualitative statistics using Six Sigma and Lean Six Sigma methodologies.

Emphasizing applications and the implementation of data analyses as they relate to this strategy for business management, this book introduces readers to the concepts and techniques for solving problems and improving managerial processes using Six Sigma and Lean Six Sigma. Written by knowledgeable professionals working in the field today, the book offers thorough coverage of the statistical topics related to effective Six Sigma and Lean Six Sigma practices, including:

• Discrete random variables and continuous random variables
  
  

• Sampling distributions
  
  

• Estimation and hypothesis tests
  
  

• Chi-square tests
  
  

• Analysis of variance
  
  

• Linear and multiple regression
  
  

• Measurement analysis
  
  

• Survey methods and sampling techniques
  
  

The authors provide numerous opportunities for readers to test their understanding of the presented material, as the real data sets, which are incorporated into the treatment of each topic, can be easily worked with using Microsoft Office Excel, Minitab, MindPro, or Oracle's Crystal Ball software packages. Examples of successful, complete Six Sigma and Lean Six Sigma projects are supplied in many chapters along with extensive exercises that range in level of complexity. The book is accompanied by an extensive FTP site that features manuals for working with the discussed software packages along with additional exercises and data sets. In addition, numerous screenshots and figures guide readers through the functional and visual methods of learning Six Sigma and Lean Six Sigma.

Practitioner's Guide to Statistics and Lean Six Sigma for Process Improvements is an excellent book for courses on Six Sigma and statistical quality control at the upper-undergraduate and graduate levels. It is also a valuable reference for professionals in the fields of engineering, business, physics, management, and finance.

1 Principles of Six Sigma

1.1 OVERVIEW

A Closer Link to Executive Thinking. Within a business, Six Sigma has different meanings for different groups; this difference depends on one’s level and respective job role in an organization. At the enterprise level, Six Sigma is often deployed as a strategic business initiative. In this context, it focuses on making significant improvements in areas such as business growth, capacity, investor relationships, and customer satisfaction. At the operations level, Six Sigma is tactical in nature and is most often directed toward improving delivery time, cost of poor quality (COPQ), defects per unit (DPU), and a host of other critical measures of operational effectiveness and efficiency. At the process level, Six Sigma is used to reduce process variability. Reducing variability minimizes the number of defects, shortens process cycle times, and decreases direct costs. At this level, the motto is simple—if you make an improvement, then on a timely basis the gains should be verifiable. In this context, the elimination of a defect, mistake, fault, or error within the “system” must directly translate into a measurable benefit such as reduced headcount, less material, and lower overhead cost. In other words, Six Sigma is a strategic and tactical system for managing total business enterprises. From this perspective, Six Sigma has the capacity and capability to deliver customer and provider satisfaction, which are key ingredients for business success. In short, Six Sigma epitomizes the ideals of business success and optimizes the control function of an enterprise. In its most elemental form, Six Sigma represents 3.4 defects per million opportunities for defect. This perspective of Six Sigma is related to a single opportunity for defect for a single critical-to-quality (CTQ) characteristic. The fundamental idea of Six Sigma is that as performance is improved, quality, capacity, cycle time, inventory levels, and other key factors are also improved. Thus, when these factors are improved, both the provider and the customer experience greater satisfaction in performing business transactions.

1.2 SIX SIGMA ESSENTIALS

The abatement of business risk is essential to Six Sigma. In this text we will explore many of the key concepts underpinning a new definition of quality. We will describe quality as the state in which value is realized for the customer and provider in every aspect of the business relationship. Simply stated, performance meets expectations; in doing so, we will demonstrate that Six Sigma is far more than a simple quality target. The fundamental tenets of Six Sigma are as follows:

Thinking Six Sigma. Explore the big ideas that power the realization of breakthrough performance and then gain insight into how these ideas create value for any type of enterprise.

Applying Six Sigma. Profile the vital improvement tools that Six Sigma players use when executing their application projects and then grasp how such “mind tools” can be used to solve virtually any problem.

Targeting Six Sigma. Identify, scale, define, empower, and execute Six Sigma projects that achieve higher organizational goals and then learn how to track and validate progress in these projects.

Leading Six Sigma. Identify, select, and train Six Sigma leaders at all levels of an organization without backfilling the vacated positions, and then effectively motivate and retain those leaders to continually achieve forward momentum.

Enabling Six Sigma. Understand the information and reporting needs that underlie the global deployment of Six Sigma and then effectively integrate and fulfill those needs at the local level of the enterprise.

Deploying Six Sigma. Study the essential guidelines for scaling and creating a global Six Sigma deployment plan that will create a critical mass of focused management activity and then put momentum behind that mass at the local level of an enterprise.

Initializing Six Sigma. Interrogate the top programs that support the rapid initialization, deployment, and implementation of Six Sigma and then fully leverage such programs at all levels of an enterprise.

1.2.1 Driving Need

From a layperson’s viewpoint, the world appears to be quite predictable at times but unpredictable at other times, although it appears that little has changed. From this perspective, we can appreciate why the human species has been obsessed with the idea of control. Perhaps this driving need for understanding and repeatability of results led to the idea of science. In some cases, we seek to enhance our ability to replicate some object, situation, or phenomenon. We recognize that to replicate a successful business transaction, the provider must establish processes that are capable of yielding high-quality outcomes that are both efficient and effective in terms of cost and time. Today, many businesses deploy such processes both vertically and horizontally throughout their organizations, often interfacing with their customers and suppliers. To this end, the provider must minimize average transactional costs, as well as that of time, while concurrently seeking to maximize quality and volume. At least so goes the theory in the executive mind. Senior executives are always on the lookout for innovative ways to reduce their cost and expand market share. Doing so creates value for all stakeholders. To achieve this, business leaders aspire to increase their organization’s capability and capacity with minimal resource investment. They understand that quality and customer satisfaction must be continually improved.

1.2.2 Customer Focus

What is the nature of a customer–provider relationship? Most businesses claim to be customer-focused; however, these same businesses show little or no evidence to support this claim. An organization that is honestly committed to customer satisfaction will implement multiple customer feedback channels and a structured methodology for integrating data into their service delivery processes. The dictionary defines the term customer as a person who buys something. Simply stated, this implies that the customer is a person (or perhaps an organization) that receives some form of value in exchange for another form of value, held or originated (fully or partially), by the provider. Obviously, the customer and provider both seek to maximize their respective benefits. The dictionary definition provides us with a fairly large keyhole for viewing satisfaction. Such a state of being is related to the idea of conducting a successful business transaction. The customer has a sense of the extent to which her/his standards have been met by a business transaction, as does the provider. In other words, they both seek a quality transaction. Essentially, customer and provider expectations form the basis on which the idea of quality is based. It is precisely this interaction between the customer and provider that governs the “quality” of the business relationship. For every aspect of producing and consuming a product or service, there are rightful levels of expectation that can be identified and improved only through careful and detailed analysis. A company can meet or exceed these expectations only by deploying performance metrics to guide and manage each key aspect of the business relationship, whether that aspect is making a product on an assembly line or broadcasting a news show.

Here quality is not an absolute standard but rather a relative measure of the gap between rightful expectation and actual performance. As the gap diminishes, the quality of interaction improves in all aspects of the business relationship. In this sense, the Six Sigma definition of quality serves as a management framework for focusing a business and launching actions that yield consistent and dramatic results for the customer and provider. It is a divergence from tradition in that the pursuit of value entitlement, not blind conformance to standards, drives the business relationship.

1.2.3 Core Beliefs

What is the fuel that propels the success of six sigma? We must all remember that Six Sigma is the epitome and embodiment of “hope” that fuels the collective will. It is hope that moves people to align their values, aims, and goals in a common direction. This is what leaders do; where it exists they sustain it; where it does not exist, they create it. Leaders create and energize hope by realizing visible and measurable success, not just one project at a time, but by achieving many simultaneous successes. Hope drives the human spirit to accomplish great things, and thus hope is the muscle of leadership. Without hope, leaders have nothing to sell. Without something to sell, they are just another player on the field of mediocrity. The collective “shock and awe” of Six Sigma projects is one way to ignite the stove of executive hope. It is the sudden, collective, decisive, and repeatable successes of Six Sigma that cause employees to believe their company is the best. When this attitude pervades an organization, it becomes boundaryless. As this occurs, innovation takes hold. Essentially, the Six Sigma initiative was designed to raise the bar so high that employees would be forced to individually and collectively reexamine the way in which work was done, not just tweak the existing work processes. Given this inaugural aim, it should be apparent that Six Sigma is about innovating new ways of doing things, not just making incremental gains to existing processes.

How is Six Sigma superior to other improvement programs? Simply stated, Six Sigma has produced astounding economic benefits that have hit the proverbial bottom line of many fine corporations in a verifiable and consistent way, year after year. We have a saying in Six Sigma work, “let the data do the talking.” In this spirit, the financial performance achieved by Six Sigma says it all, not to mention the quantum gains in customer satisfaction. Unlike the philosophical and prophetic nature of total quality management (TQM), Six Sigma is a repeatable management process based on the idea of measurement. It is a goal-driven, result-oriented, fact-based management system based on scientific principles. Thus, Six Sigma requires that any type or form of business improvement must be verifiable through measurement in everything that a company does or seeks to do every day in every way. Today, few corporate executives believe that TQM is a viable system of business management. The conclusions were quite apparent in a 1996 study, “Measuring performance after meeting award criteria,” published in Quality Progress magazine, that TQM practices had less impact than most thought. After examining data from Baldrige and state quality award winners, applicants and nonapplicants, the study’s authors concluded that they could not conclusively determine whether quality award-winning companies perform better than others.

Even before this, TQM skepticism was already building. Consider the April 1994 article, “Is TQM dead?” featured in Quality Digest magazine. Editor Scott Madison Patton cited study after study that brought the viability of TQM into serious question. Only 20% of Fortune 500 companies are satisfied with the results of their TQM processes, according to a 1992 Rath & Strong survey. Florida Power &Light remains the only US company to have won Japan’s coveted Deming Prize. Its winning strategy was largely dismantled after complaints of excessive bureaucracy and red tape. Patton continued, stating that a survey of 300 electronics companies by the American Electronics Association found that 73% had quality programs in place, but of these, 63% said they had failed to improve quality by even as much as 10%. A study of 30 quality programs by McKinsey & Co. found that two-thirds of them had stalled or fallen short of yielding real improvements. Unlike TQM, Six Sigma is a management tool that astute leaders can employ to masterfully intertwine their personal destiny with that of the corporation. Only when this happens does the potential for business magic begin to surface. Not the smoke-and-mirrors variety of magic, but the kind of real stuff from which dreams are made.

The creation of operational magic is what sound business is all about. When this magic begins to unfold, good leaders suddenly edge toward greatness, followers begin to consciously work smarter and harder, and the world (at large) takes notice. This is the magic of Six Sigma; it can transform good corporations into exemplars. As great leaders wield the power of Six Sigma and begin to lever age the tools of breakthrough, they cross the threshold of destiny. At this point the corporation, its employees, shareholders, and all of those so connected prosper. Employees across the corporation rise to the challenge. When this occurs, an unstoppable revolution begins.

What are the boundaries of Six Sigma? First, a host of well-respected global corporations have directly experienced the promised benefits of Six Sigma. Most of these highly diverse corporations have carefully documented their Six Sigma journey and published their notable successes. Many of their senior executives are outspoken on the merits of Six Sigma and corroborate its power as a management system. In fact, Mr. Jack Welch (former CEO of General Electric) stated that Six Sigma was the most significant undertaking in GE history. He also said that Six Sigma, as a management tool, reaches the control function of a corporation. These facts speak volumes about the power and reach of Six Sigma. At any level of an enterprise, a mix of resources are required to fix a defect or error. If the given defect is eliminated (or otherwise prevented by process or product design), then the improvement is verifiable. In other words, the improvement is real. If an improvement is verifiable, we should see a corresponding savings in labor, material, and/or overhead. If such a savings does not materialize or cannot be verified, then the improvement was not real. Such is the way of Six Sigma. In a nutshell, Six Sigma is about the creation of global value, whereas TQM was generally limited to local quality improvements. In this sense, Six Sigma is about sudden and quantum breakthroughs in business performance (vertically and horizontally), whereas TQM was concerned mostly with achieving gradual improvements in product defect rates (at the local level of an enterprise). Six Sigma is a top—down business imperative (based on cascading performance expectations), whereas TQM is a bottom—up quality program (based on disconnected quality improvements). Again, it is easy to see that TQM is mostly constrained to the business of quality, whereas Six Sigma is concerned with the quality of business.

1.2.4 Deterministic Reasoning

The Nature of Determinism and How It Fits with Six Sigma. In a purely deterministic world we recognize that at any moment in time, a change in some object, event, or phenomenon is dependent on a change in one or more of its underlying determinants. In its simplest form, we can express this idea by the relation Y = f (X), where Y is the dependent (outcome) variable, X is the independent (causal) variable, and f is the function that defines the relationship between Y and X. For example, a sonic boom (Y) is a function of an airplane’s speed (X). Physics and mathematics are based on this simple concept. In the real world, life is not that simple; we recognize that other factors exert an influence on Y. Coming back to our analogy, in addition to speed, most of us realize that the existence and strength of a sonic boom depends on other contributing factors such as altitude, wing design, and atmospheric conditions. Simply knowing the airplane’s speed is not enough, by itself, to fully explain the boom effect. Hence, we must extend the relationship Y = f(X) in such a way that Y = f (x₁,..., x_n), where x₁,..., x_n becomes a set of determinants. The world of Six Sigma has been built around this simple belief; without the idea of determinism, the practice of Six Sigma could not exist.

1.2.5 Leverage Principle

What is the leverage principle, and how is it used in the practice of Six Sigma? Not all variables are created equal; some exert more influence than others. This idea is exemplified by the relation (transfer function)Y = f(x₁,x₂,...,x_n).Given such a deterministic model, we understand that a certain amount of change in a particular x may not induce or otherwise cause the same amount of change in Y as some other X. Thus, it can be said that every X may have a different influence on Y. Those x’s (x values) that exert a large influence are said to have leverage. Similar to a lever that is used to move a large rock, an “X” with leverage can cause a significant change in Y when compared to the influence of other x’s within the same set of causative factors. Those x’s that exert a disproportionately large amount of influence on Y are often called the “vital few” variables. These vital few variables stand in stark contrast to the less influential factors, often called the “trivial many” variables.

1.3 QUALITY DEFINITION

Quality and How It Fits in Six Sigma. In general, quality is defined as conformance to standards; however, some authors define quality as a subjective term for which each person has his/her own definition, based on the perceived degree to which the product or service meets customer’s expectations. Quality has no specific meaning unless related to a specific function or object. Quality is a perceptual, conditional, and subjective attribute. On the other hand, the Six Sigma view of quality differs from this perception–definition. For Six Sigma, quality is a state in which value entitlement is realized for the customer and provider in every aspect of the relationship. Therefore, the central question for the practitioners regarding quality is: Is my organization in the business of quality? Or, is my organization in the quality of the business? A guide for the practitioner is to determine whether his/her organization is in the business of quality. If the organization is in the business of quality, the key determinant for c...