Lean Production & Six Sigma 1

ASA UNIVERSITY BANGLADESH

Course Title: Cost Accounting

Course Code: ACC-201
Individual Assignment- 1 On
Cost Accounting.

Submitted to:

Mohammad Nazrul Islam

Lecturer, Accounting
Faculty of Business,
ASA University Bangladesh.

Submitted by:

Abdullah Al Arefin. ID: 081-

12-0145

BBA 3rd Batch, Section-D

Date: February 1st, 2009.

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Lean Production & Six Sigma 2

Table of Contents

Lean Production
3-13
Lean Enterprise 3
A Brief History of Lean
3-5
Principles of Lean
6-8
Common Lean Questions 9-13

Lean services 13

Six Sigma 14-

22
Six Sigma 14
Historical overview 15
Six Sigma Methodologies 16-17
Role of the 1.5 sigma shift 17
Origin and meaning of the term "six sigma process"
17-18
Sigma levels 18
Methods 18-
19
Reception 19-
20

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Criticism of the 1.5 sigma shift 21

Bibliography 22

Lean Production

Lean Enterprise
A business system for organizing and managing product development,
operations, suppliers, and customer relations. Business and other organizations
use lean principles, practices, and tools to create precise customer value—goods
and services with higher quality and fewer defects—with less human effort, less
space, less capital, and less time than the traditional system of mass production.

Many of the key principles were pioneered by Henry Ford, who was the first
person to integrate an entire production system, under what he termed “flow
production." Following World War II, the Toyota Motor Company adapted Ford’s
principles as a means of compensating for its challenge of limited human,
financial, and material resources. The Toyota Production System (or TPS), which
evolved from this need, was one of the first managerial systems using lean
principles throughout the enterprise to produce a wide variety of products at
lower volumes and many fewer defects than competitors.

Leaders today in a wide range of industries, nonprofit organizations, government

agencies, healthcare, and other areas are finding ways to apply the principles of
lean as a means of producing goods and delivering services that creates value
for the customer with the minimum amount of waste and the maximum degree of
quality.

A Brief History of Lean

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Although there are instances of rigorous process thinking in

manufacturing all the way back to the Arsenal in Venice in the
1450s, the first person to truly integrate an entire production
process was Henry Ford. At Highland Park, MI, in 1913 he
married consistently interchangeable parts with standard work and
moving conveyance to create what he called flow production. The
public grasped this in the dramatic form of the moving assembly
line, but from the standpoint of the manufacturing engineer the
breakthroughs actually went much further.

Ford lined up fabrication steps in process sequence wherever possible using

special-purpose machines and go/no-go gauges to fabricate and assemble the
components going into the vehicle within a few minutes, and deliver perfectly
fitting components directly to line-side. This was a truly revolutionary break from
the shop practices of the American System that consisted of general-purpose
machines grouped by process, which made parts that eventually found their way
into finished products after a good bit of tinkering (fitting) in subassembly and
final assembly.

The problem with Ford’s system was not the

flow: He was able to turn the inventories of
the entire company every few days. Rather it
was his inability to provide variety. The
Model T was not just limited to one color. It
was also limited to one specification so that
all Model T chassis were essentially identical
up through the end of production in 1926.
(The customer did have a choice of four or
five body styles, a drop-on feature from
outside suppliers added at the very end of
the production line.) Indeed, it appears that
practically every machine in the Ford Motor
Company worked on a single part number,
and there were essentially no changeovers.

When the world wanted variety, including

model cycles shorter than the 19 years for the Model T, Ford seemed to lose his
way. Other automakers responded to the need for many models, each with many
options, but with production systems whose design and fabrication steps
regressed toward process areas with much longer throughput times. Over time

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they populated their fabrication shops with larger and larger machines that ran
faster and faster, apparently lowering costs per process step, but continually
increasing throughput times and inventories except in the rare case—like engine
machining lines—where all of the process steps could be linked and automated.
Even worse, the time lags between process steps and the complex part routings
required ever more sophisticated information management systems culminating
in computerized Materials Requirements Planning (MRP) systems.

As Kiichiro Toyoda, Taiichi Ohno, and others at Toyota looked at

this situation in the 1930s, and more intensely just after World War
II, it occurred to them that a series of simple innovations might
make it more possible to provide both continuity in process flow
and a wide variety in product offerings. They therefore revisited
Ford’s original thinking, and invented the Toyota Production
System.

This system in essence shifted the focus of the manufacturing engineer from
individual machines and their utilization, to the flow of the product through the
total process. Toyota concluded that by right-sizing machines for the actual
volume needed, introducing self-monitoring machines to ensure quality, lining the
machines up in process sequence, pioneering quick setups so each machine
could make small volumes of many part numbers, and having each process step
notify the previous step of its current needs for materials, it would be possible to
obtain low cost, high variety, high quality, and very rapid throughput times to
respond to changing customer desires. Also, information management could be
made much simpler and more accurate.

The thought process of lean was thoroughly described in the book The Machine
That Changed the World (1990) by James P. Womack, Daniel Roos, and Daniel
T. Jones. In a subsequent volume, Lean Thinking (1996), James P. Womack and
Daniel T. Jones distilled these lean principles even further to five:

 Specify the value desired by the customer

 Identify the value stream for each product providing that value and challenge
all of the wasted steps (generally nine out of ten) currently necessary to
provide it
 Make the product flow continuously through the remaining, value-added steps

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 Introduce pull between all steps where continuous flow is possible

 Manage toward perfection so that the number of steps and the amount of time
and information needed to serve the customer continually falls

Principles of Lean
In their 1996 book Lean Thinking, James P. Womack and Daniel T. Jones
defined a set of five basic principles that characterize a lean enterprise:

As Womack and Jones note in Lean Thinking,

"The critical starting point for lean thinking is value. Value can only be defined by
the ultimate customer. And it's only meaningful when expressed in terms of a
specific product (a good or a service, and often both at once), which meets the
customer's needs at a specific price at a specific time."

Above all, lean practitioners must be relentlessly focused on the customer when
specifying and creating value. Neither shareholder needs, nor senior
management¹s financial mind-set, nor political exigencies, nor any other
consideration should distract from this critical first step in lean thinking. Once
more, here¹s another passage from Womack and Jones on how managers can
start off on the wrong path:

"Why is it so hard to start at the right place, to correctly define value?

Partly because most producers want to make what they are already making and
partly because many customers only know how to ask for some variant of what
they are already getting. They simply start in the wrong place and end up at the

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wrong destination. Then, when providers or customers do decide to rethink

value, they often fall back on simply formulas‹lower cost, increased product
variety through customization, instant delivery‹rather than jointly analyzing value
and challenging old definitions to see what¹s really needed."

The value stream is the set of all the specific actions required to bring a specific
product through the critical management tasks of any business: the problem-
solving task running from concept through detailed design and engineering to
production launch, the information management task running from order-taking
through detailed scheduling to delivery, and the physical transformation task
proceeding from raw materials to a finished product in the hands of the customer.
Identifying the entire value stream for each product is the next step in lean
thinking, a step which firms have rarely attempted but which almost always
exposes enormous, indeed staggering, amounts of waste.

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Only after specifying value and mapping the stream can lean thinkers implement
the third principle of making the remaining, value-creating steps flow. Such a shift
often requires a fundamental shift in thinking for everyone involved, as functions
and departments that once served as the categories for organizing work must
give way to specific products; and a "batch and queue" production mentality must
get used to small lots produced in continuous flow. Interesting, "flow" production
was an even more valuable innovation of Henry Ford¹s than his better-known
"mass" production model.

As a result of the first three principles, lean enterprises can now make a
revolutionary shift: instead of scheduling production to operate by a sales
forecast, they can now simply make what the customer tells them to make. As
Womack and Jones state, "You can let the customer pull the product from you as
needed rather than pushing products, often unwanted, onto the customer." In
other words, no one upstream function or department should produce a good or
service until the customer downstream asks for it.

Of course following this principle is a bit more complicated than that. A good
place to start with implementation is the LEI workbook Creating Level Pull, which
also has an excellent Library section with many resources to help with this
principle.

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After having implemented the prior lean principles, it "dawns on those involved
that there is no end to the process of reducing effort, time, space, cost, and
mistakes while offering a product which is ever more nearly what the customer
actually wants," write Womack and Jones. "Suddenly perfection, the fifth and
final principle, doesn¹t seem like a crazy idea.

Common Lean Questions

 How do I get started?
 Is there an essential implementation sequence and if so, what is it?
 Does lean apply to non-manufacturing settings?
 What are the most common mistakes in implementing lean?
 How does lean compare to other improvement processes such as Six Sigma?
 How does lean compare with the Theory of Constraints, or TOC?
 How do I convince my leaders and associates to practice lean?

How do I get started?

While every individual or company embarking on a lean journey will have
different challenges based on their particular set of circumstances, there are
several crucial steps that can help reduce resistance, spread the right learning,
and engender the type of commitment necessary for lean enterprise. Here are
the key steps as they are elaborated:

 Find a change agent. This could be you—or anyone of the organization: the
key is that this must be a leader who will take personal responsibility for the
lean transformation.
 Get the lean knowledge. It’s important to draw from a true and thorough
source of lean, whether from an ex-Toyota sensei or some other reputable
source, so your internal change agents master lean thinking to the point
where it becomes second nature. And always implement lean techniques as
part of a system, not as isolated programs.
 Find or create a crisis. Unfortunately, few if any firms will take the necessary
steps to adopt lean thinking across the board unless they are facing a crisis.

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 Forget grand strategy for the moment. Start by simply eliminating waste
everywhere possible.
 Begin as soon as possible with an important and visible activity.
 As soon as you’ve got momentum, expand your scope. Link
improvements in the value streams and move beyond the shop floor to office
processes. Practice kaizen, or constant improvement, relentlessly!

For beginners seeking an overview of the entire lean system, as well as a sense
of the types of human challenges which lean leaders encounter, The Gold Mine:
A Novel of Lean Transformation represents an excellent starting point. Moreover,
explore the Gold Mine Library page for a wealth of information about the book,
including excerpts, author interviews, and supplementary resources.

Is there an essential implementation sequence and if so, what is it?

Yes, there is. The five steps of lean implementation are as follows: specify value,
map the value stream, and make the remaining steps flow, let the customer pull,
and then pursue perfection relentlessly.

When it comes down to the actual nitty-gritty of lean implementation, veterans

may use these principles as mere guidelines for proceeding, as opposed to a
fixed sequence. For example, as illustrated in the novel The Gold Mine, the first
step that the sensei takes is a simple walk along the factory floor, paying close
attention to the facts of how people work. Moreover, some lean experts differ
over when to start creating value-stream maps. And so we recommend as a key
first step that we familiarize our self with key books such as Lean Thinking and
The Gold Mine, and then select the appropriate tools to guide your journey.

Does lean apply to non-manufacturing settings?

Absolutely every core lean principle applies just as strongly, if not more so,
beyond the shop floor. In fact, many of the most exciting breakthroughs are
taking place in areas such as services, health care and government.

As John Shook LEI senior advisor and co-author of learning to see, says, "TPS is
described as a manufacturing system, but the thinking of TPS or lean applies to

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any function. Whether you¹re dealing with 15,000 parts, 15 parts, or just
providing a service, lean works. It works because it is a way of thinking, a whole
systems philosophy. Techniques aside, lean thinking gives you a broad
perspective on providing goods and services that goes beyond the bottom line,
beyond the stodgy principles of mass-producing capitalism. It is a human system,
customer focused, customer driven; wherein employees within and outside the
workplace are also customers."

On the LEI site you can find a wealth of articles and resources documenting lean
breakthroughs. Perhaps the best place to start is Lean Beyond Production by
George Taninecz, which provides detailed examples of successful lean practice
in various settings.

In addition, Steven J. Spear has been at the forefront of illustrating how lean can
be applied to health care with articles such as The Health Factory and Fixing
Health Care from the Inside, Today.

What are the most common mistakes in implementing lean?

First of all, if we are taking on the challenge on lean practice, you are to be
congratulated for getting started. That said, there are some of the most common
pitfalls to be aware of.

To start with, lean must never be seen as a tool for head cut reduction or
mindless cost-cutting. This fundamentally misses the purpose of lean, which is to
create value through eliminating waste. As companies improve their processes
they should be able to reallocate their productive resources to new value-creating
work.

Another important attitude to avoid from the beginning is the impulse to

implement individual lean tools without seeking to understand the system in
which they fit. This is hard to avoid, since many tools, like 5S, deliver immediate
payoffs. But ultimately all lean workers must understand the why behind the
tools, or their value will be lost.

Lean beginners should also limit the scope of their initial project so as to better
insure success, be sure that they have a leader with deep knowledge and a
gemba attitude i.e. always base one's thinking on a close observation of the work
itself, and never relax in their efforts. Indeed, one of the hardest challenges they
will face is the degree to which individual lean successes will invariably uncover
new problems and greater challenges. So in this regard, simply be aware of how
difficult this work will be.

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How does lean compare to other improvement processes such as Six

Sigma?

While there are many specific differences among the different schools of thought,
Jim Womack cautions against getting lost in the competing schools. For veterans
of each practice often get lost in finely detailed arguments over technical or even
philosophical differences. In an e-letter outlining the key differences, he
nonetheless grounds the discussion by saying, “At the end of the day we are all
trying to achieve the same thing: The perfect value stream.” His letter gives a
nice overview of how to view each approach.

Quality Progress magazine published an article How To Compare Six Sigma,

Lean and the Theory of Constraints which offers a very good overview that can
help us choose the best framework for your organization.

How does lean compare with the Theory of Constraints, or TOC?

This school of thought is an organizational change method focused on profit

improvement, arguing that every organization faces a constraint, or bottleneck,
limiting performance. Popularized by Eliyahu Goldratt in his book The Goal, this
is one of the most well-known systems. The article What is the Theory of
Constraints, and How Does it Compare to Lean Thinking? Is an excellent
overview and comparison of the two systems?

How do I convince my leaders and associates to practice lean?

This paramount challenge transcends lean itself. Here’s how authors Michael
and Freddy Balle respond to this question.

“We find it hard to distinguish “technical” issues from “people” issues. Indeed, the
two cannot be separated. And so the real question that matters is this: what does
it take for lean to become part of the company's culture? The answer is: a critical
mass of people who both think lean and act lean. Regardless of how much has
been published about the topic, thinking lean is not that obvious. Most people
who observe their operations conclude that while they might understand this lean

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concept very well, it just doesn't apply to their particular circumstance. They need
help in seeing the connection."

“One of the most powerful insights from Womack and Jones is that lean is not
simply a toolbox, but a total perspective. In other words, you must trust people to
solve their problems, regardless of the way the problem has been defined. A
plant manager, for example, typically defines a problem as, Hit your numbers,
keep the factory loaded, and avoid too much union or vendor problems. This
effectively forces him to stay in his office, manage by the numbers, run large
batches and so on. A lean approach redefines the problem completely. His new
goals would be: produce only what has been consumed (or ordered), never by-
pass a problem or let an operator face a problem alone and continuously improve
all processes. This has dramatic implications for the work of the same plant
manager. The only way to solve problems in this lean perspective is to spend
most of his or her time on the shop floor trying to understand what goes on, and
challenging teams to be more precise and to improve their operations."

Developing this discipline remains an extraordinary challenge for all individuals,

regardless of their background or the lean level of the plant. This is what folks
call a moving target. Consider a plant that has managed to achieve pull, flow,
with a supermarket after the cell, a truck preparation area, kanban, and so on.
All's well. Right? Now, imagine that the material handler comes to pick up a
container from the supermarket with a kanban card, but the box isn't there. The
truck still needs to be prepared, so the system now tells her to get the container
from the safety stock. This choice, however, would not be using the principle of
pull correctly. The properly operating pull system would in fact create the right
tension that forces the individual to solve the root cause-in this case, to
determine what caused the container not to be there in the first place.

Lean services
Lean, as a concept or brand, has captured the imagination of many in different
spheres of activity. Examples of these from many sectors are listed below.

Lean principles have been successfully applied to call center services to improve
live agent call handling. By combining Agent-assisted Voice Solutions and Lean's

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waste reduction practices, a company reduced handle time, reduced between

agent variability, reduced accent barriers, and attained near perfect process
adherence.

A study conducted on behalf of the Scottish Executive, by Warwick University, in

2005/06 found that Lean methods were applicable to the public sector, but that
most results had been achieved using a much more restricted range of
techniques than Lean provides.

The challenge in moving Lean to services is the lack of widely available

reference implementations to allow people to see how it can work and the impact
it does have. This makes it more difficult to build the level of belief seen as
necessary for strong implementation. It is also the case that the manufacturing
examples of 'techniques' or 'tools' need to be 'translated' into a service context
which has not yet received the level of work or publicity that would give starting
points for implementors. The upshot of this is that each implementation often
'feels its way' along as must the early industrial engineers of Toyota. This places
huge importance upon sponsorship to encourage and protect these experimental
developments.

Six Sigma

Six Sigma at many organizations simply means a measure of quality that strives
for near perfection. Six Sigma is a disciplined, data-driven approach and
methodology for eliminating defects (driving towards six standard deviations
between the mean and the nearest specification limit) in any process -- from
manufacturing to transactional and from product to service.

The statistical representation of Six Sigma describes quantitatively how a

process is performing. To achieve Six Sigma, a process must not produce more
than 3.4 defects per million opportunities. A Six Sigma defect is defined as
anything outside of customer specifications. A Six Sigma opportunity is then the
total quantity of chances for a defect. Process sigma can easily be calculated
using a Six Sigma calculator.

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The fundamental objective of the Six Sigma methodology is the implementation

of a measurement-based strategy that focuses on process improvement and
variation reduction through the application of Six Sigma improvement projects.
This is accomplished through the use of two Six Sigma sub-methodologies:
DMAIC and DMADV. The Six Sigma DMAIC process (defines, measure, analyze,
improve, control) is an improvement system for existing processes falling below
specification and looking for incremental improvement. The Six Sigma DMADV
process (define, measure, analyze, design, verify) is an improvement system
used to develop new processes or products at Six Sigma quality levels. It can
also be employed if a current process requires more than just incremental
improvement. Both Six Sigma processes are executed by Six Sigma Green Belts
and Six Sigma Black Belts, and are overseen by Six Sigma Master Black Belts.

Historical overview

Six Sigma was originally developed as a set of practices designed to improve

manufacturing processes and eliminate defects, but its application was
subsequently extended to other types of business processes as well. In Six
Sigma, a defect is defined as anything that could lead to customer
dissatisfaction.

The particulars of the methodology were first formulated by Bill Smith at Motorola
in 1986. Six Sigma was heavily inspired by six preceding decades of quality
improvement methodologies such as quality control, TQM, and Zero Defects,
based on the work of pioneers such as Shewhart, Deming, Juran, Ishikawa,
Taguchi and others.

Like its predecessors, Six Sigma asserts that –

 Continuous efforts to achieve stable and predictable process results (i.e.

reduce process variation) are of vital importance to business success.
 Manufacturing and business processes have characteristics that can be
measured, analyzed, improved and controlled.
 Achieving sustained quality improvement requires commitment from the entire
organization, particularly from top-level management.

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Features that set Six Sigma apart from previous quality improvement initiatives
include –

 A clear focus on achieving measurable and quantifiable financial returns from

any Six Sigma project.
 An increased emphasis on strong and passionate management leadership
and support.
 A special infrastructure of "Champions," "Master Black Belts," "Black Belts,"
etc. to lead and implement the Six Sigma approach.
 A clear commitment to making decisions on the basis of verifiable data, rather
than assumptions and guesswork.

Other early adopters of Six Sigma who achieved well-publicized success include
Honeywell (previously known as AlliedSignal) and General Electric, where the
method was introduced by Jack Welch. By the late 1990s, about two-thirds of the
Fortune 500 organizations had begun Six Sigma initiatives with the aim of
reducing costs and improving quality.

In recent years, Six Sigma has sometimes been combined with lean
manufacturing to yield a methodology named Lean Six Sigma.

Six Sigma Methodology

The Six Sigma methodology can be defined as a series of systems of metrics
that are used to measure defects and improve the quality of the processes by
reducing the defect level to 3.4 in a million opportunities. Motorola was the first
corporation to invent and implement it in their business and saved $17 billion.

The Central Theme of Six Sigma

It is generally observed that customers judge a product by what benefits they get
out of using that particular product. So it can be safely said that overall customer
satisfaction rests heavily on the consistency of the product. And to achieve this,
there has to be a combination of improved process capability and reduced
process variation.

As it has been mentioned, Six Sigma mainly concentrates on defects and

process variation - so now let's find out more about defects. Defects are
measured by a standard metric known as DPMO (defects per million
opportunities) and they can be explained as being offset from the standard
process. While evaluating the defects, the team should know that everything is
quantifiable and that the basic measurable dimensions are time/delivery, quality,
cost/price etc. In Six Sigma jargon, these dimensions are known as Critical to
Delivery, Critical to Quality and Critical to Price, respectively. Each of these
dimensions has different significance to different industries in some way or the
other and they need to be identified before commencing with this implementation.

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One of the most important concepts of it is the measurement system. It is a well-

known fact that a little bit of subjectivity creeps up in all measurement processes
due to different capacity and capability level. For instance, some athletes are
considered better than others, even when the performance evaluation criteria for
everyone are same. It is this way because first human performance levels differ
and also because in a group of observers no two observers will evaluate two
performers in the same way because of their different mindsets. Thus, we can
conclude that an individual's passing and failing is subjective and that there are
gaps in the measurement system. It is noticeable that companies also share the
same relationship with the customers.

The next Six Sigma concept is the variation in process or process variability.
Process variability and defects are inter-linked and it can be said that the more is
the process variation the bigger the probability of the occurrence of defects is. On
the surface, this may not seem such a big threat but in reality, it is a lot more than
can be anticipated. For instance, a truck transporting a 5-ton load to a distance of
10 miles takes 40 minutes will deliver 99.9997% defect free if supervised by Six
Sigma; on the contrary, if four sigma is implemented then the same truck with
same load will take 45 minutes. Although this may seem a small deviation, the
defect free level comes down to 99.94% which is a good 20% defect that is being
passed on to customers.

The core concept of it concentrates on improving the existing methodology and

creates a new defect-free strategy for production. This designing of defect-free
methodology is done using DMAIC (define, measure, analyze, improve and
control performances). The design is known as DFSS design for Six Sigma
principles and it is implemented and supervised by Green and Black Belt
professionals.

Role of the 1.5 sigma shift

Experience has shown that in the long term, processes usually do not perform as
well as they do in the short. As a result, the number of sigmas that will fit
between the process mean and the nearest specification limit is likely to drop
over time, compared to an initial short-term study. To account for this real-life
increase in process variation over time, an empirically-based 1.5 sigma shift is
introduced into the calculation. According to this idea, a process that fits six
sigmas between the process mean and the nearest specification limit in a short-
term study will in the long term only fit 4.5 sigmas – either because the process
mean will move over time, or because the long-term standard deviation of the
process will be greater than that observed in the short term, or both.

Hence the widely accepted definition of a six sigma process is one that produces
3.4 defective parts per million opportunities (DPMO). This is based on the fact

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that a process that is normally distributed will have 3.4 parts per million beyond a
point that is 4.5 standard deviations above or below the mean (one-sided
capability study). So the 3.4 DPMO of a "Six Sigma" process in fact corresponds
to 4.5 sigmas, namely 6 sigmas minus the 1.5 sigma shift introduced to account
for long-term variation. This is designed to prevent underestimation of the defect
levels likely to be encountered in real-life operation.

Origin and meaning of the term "six sigma process"

Graph of the normal distribution, which underlies the statistical assumptions of
the Six Sigma model. The Greek letter σ marks the distance on the horizontal
axis between the mean, µ, and the curve's inflection point. The greater this
distance is, the greater is the spread of values encountered. For the curve shown
in red above, µ = 0 and σ = 1. The other curves illustrate different values of µ and
σ.

The following outlines the statistical background of the term Six Sigma: Sigma
(the lower-case Greek letter σ) is used to represent the standard deviation (a
measure of variation) of a statistical population. The term "six sigma process,"
comes from the notion that if one has six standard deviations between the mean
of a process and the nearest specification limit, there will be practically no items
that fail to meet the specifications. This is based on the calculation method
employed in a process capability study.

In a capability study, the number of standard deviations between the process

mean and the nearest specification limit is given in sigma units. As process
standard deviation goes up, or the mean of the process moves away from the
center of the tolerance, fewer standard deviations will fit between the mean and
the nearest specification limit, decreasing the sigma number.

Sigma levels
Taking the 1.5 sigma shift into account, short-term sigma levels correspond to
the following long-term DPMO values (one-sided):

 One Sigma = 690,000 DPMO = 31% efficiency

 Two Sigma = 308,000 DPMO = 69.2% efficiency
 Three Sigma = 66,800 DPMO = 93.32% efficiency
 Four Sigma = 6,210 DPMO = 99.379% efficiency
 Five Sigma = 230 DPMO = 99.977% efficiency
 Six Sigma = 3.4 DPMO = 99.9997% efficiency

Methods

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Six Sigma has two key methods: DMAIC and DMADV, both inspired by Deming’s
Plan-Do-Check-Act Cycle. DMAIC is used to improve an existing business
process; DMADV is used to create new product or process designs.

DMAIC

The basic method consists of the following five steps:

 Define high-level project goals and the current process.

 Measure key aspects of the current process and collect relevant data.
 Analyze the data to verify cause-and-effect relationships. Determine what the
relationships are, and attempt to ensure that all factors have been
considered.
 Improve or optimize the process based upon data analysis using techniques
like Design of experiments.
 Control to ensure that any deviations from target are corrected before they
result in defects. Set up pilot runs to establish process capability, move on
 to production, set up control mechanisms and continuously monitor the
process.

DMADV

The basic method consists of the following five steps:

 Define design goals that are consistent with customer demands and the
enterprise strategy.
 Measure and identify CTQs (characteristics that are Critical To Quality),
product capabilities, production process capability, and risks.
 Analyze to develop and design alternatives, create a high-level design and
evaluate design capability to select the best design.
 Design details, optimize the design, and plan for design verification. This
phase may require simulations.
 Verify the design, set up pilot runs, implement the production process and
hand it over to the process owners.

DMADV is also known as DFSS, an abbreviation of "Design For Six Sigma".

Reception

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Six Sigma has made a huge impact on industry and is widely employed as a
business strategy for achieving and sustaining operational and service
excellence. However, there have also been various criticisms of Six Sigma.

Lack of originality

Noted quality expert, Joseph M. Juran, has described Six Sigma as "a basic
version of quality improvement," stating that "[t]here is nothing new there. It
includes what we used to call facilitators. They've adopted more flamboyant
terms, like belts with different colors. I think that concept has merit to set apart, to
create specialists who can be very helpful. Again, that's not a new idea. The
American Society for Quality long ago established certificates, such as for
reliability engineers.

Role of consultants

The use of "Black Belts" as itinerant change agents is controversial as it has

created a cottage industry of training and certification. Critics argue there is
overselling of Six Sigma by too great a number of consulting firms, many of
which claim expertise in Six Sigma when they only have a rudimentary
understanding of the tools and techniques involved.

The expansion of the various "Belts" to include "Green Belts," "Master Black
Belts" and "Gold Belts" is commonly seen as a parallel to the various "belt
factories" that exist in martial arts.

Potential negative effects

A Fortune article stated that "of 58 large companies that have announced Six
Sigma programs, 91 percent have trailed the S&P 500 since." The statement is
attributed to "an analysis by Charles Holland of consulting firm Qualpro (which
espouses a competing quality-improvement process). The gist of the article is
that Six Sigma is effective at what it is intended to do, but that it is "narrowly
designed to fix an existing process" and does not help in "coming up with new
products or disruptive technologies." Many of these claims have been argued as
being in error or ill-informed.

A Business Week article says that James McNerney's introduction of Six Sigma
at 3M may have had the effect of stifling creativity. It cites two Wharton School
professors who say that Six Sigma leads to incremental innovation at the
expense of blue-sky work.

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Based on arbitrary standards

While 3.4 defects per million opportunities might work well for certain
products/processes, it might not be ideal or cost-effective for others. A
pacemaker process might need higher standards, for example, whereas a direct
mail advertising campaign might need lower ones. The basis and justification for
choosing 6 as the number of standard deviations is not clearly explained. In
addition, the Six Sigma model assumes that the process data always conform to
the normal distribution. The calculation of defect rates for situations where the
normal distribution model does not apply is not properly addressed in the current
Six Sigma literature.

Criticism of the 1.5 sigma shift

Because of its arbitrary nature, the 1.5 sigma shift has been dismissed as "goofy"
by the statistician Donald J. Wheeler. Its universal applicability is seen as
doubtful.

The 1.5 sigma shift has also been contentious because it results in stated "sigma
levels" that reflect short-term rather than long-term performance: a process that
has long-term defect levels corresponding to 4.5 sigma performance is, by Six
Sigma convention, described as a "6 sigma process. The accepted Six Sigma
scoring system thus cannot be equated to actual normal distribution probabilities
for the stated number of standard deviations, and this has been a key bone of
contention about how Six Sigma measures are defined. The fact that it is rarely
explained that a "6 sigma" process will have long-term defect rates
corresponding to 4.5 sigma performance rather than actual 6 sigma performance
has led several commentators to express the opinion that Six Sigma is a
confidence trick.

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Bibliography:

I took help to prepare this term paper from_

The class lecturer of Mohammad Nazrul

Islam
I.
Google search:-
 Lean Production
 Six Sigma

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