Executive Management Teams often look at their critical business processes from the vantage point from the outside inward as would their customers. Placing themselves in the shoes of their customers, the Executive Management Team members explore and examine key business processes as they regard the cost of poor quality (COPQ), critical to quality (CTQ), critical to cost (CTC), critical to delivery (CTD), and critical to responsiveness (CTR) in relationship to the customer’s critical criteria requirements and expectations.

By reducing your processes product, service or transaction variation; the defects, scrap, rework, waste, cycle time, etc., Six Sigma methodology allows the organization to focus on improving process capabilities. As defects, defectives, scrap, rework, waste, and cycle times are reduced, the cost of poor quality decreases and the organizations profitability increases. It is for these reasons that Six Sigma methodology is linked with the organizations strategic plans and provides the achievement of consistent world-class quality performances.

One way to measure the variation of a product or process is to use a mathematical term called “sigma”. Sigma is a measure of the data spread (variation). It is the amount of inconsistency in any group of items or processes. Examining Variation helps to more fully understand the true performance of a business and its processes.

Ideally, the sigma value is low in comparison with the allowable tolerance on a part or process. If so, the process variation will be small as compared with the part or product tolerance your customer requires. When this is the case, the process is “tight” enough that, even if the process is somewhat off – centered, the process produces product well within the customer’s critical criteria.

Once you have created specifications you next need to understand how well you are meeting those customer specifications through your processes and characteristics. Yield of a characteristic or process relates to how performances within specifications make it to “good output” of products, services, or transactions.

Traditional measurement of yield is Yield = Output/Input. Yield = Output/Input = 360/365 = 0.9863. 0.9863 x 100 = 98.6% we converted it to a percentage scale by multiplying 0.9863 by 100 to get 98.6%. We should perform mathematical operations on proportions and not on percentages.

Six sigma methodology suggests a different and more accurate method of calculating yield -- called “First Time Yield”.  In this example of FTY of our 365 inputs, 105 products, services, or transactions did not comply with the customer specifications. These were inspected and 100 were reworked (corrected), leaving 5 that were unable to comply and resulted in scrap. This detailed information reveals the proportion of products, services, or transactions going through the process correctly the first time to be: Output/Input = 260/365 = 0.7123 or 71.2%.

This calculation is called the First Time Yield (FTY). FTY captures the true effectiveness of the process which includes inspection and scrap and is considered to be defects. They reveal the processes “hidden factory”.

The hidden factory is a natural outgrowth of the inability to correctly comply with the customer’s critical criteria required specifications the first time through the process.

Measuring processes yield using the FTY forces you to “objectively” review and analyze the effectiveness of your processes. In this example, we have discovered that inspection and rework accounts for 27.4% of production, services or transactions. (98.6% - 71.2% = 27.4%)

Rolled Throughput Yield

We understand that a chain is only as strong as its weakest link; rolled throughput yield can never be greater than the lowest First Time Yield within the system we are measuring.

RTY = all steps in the process (in our example Steps or departments of A, B, C, D, E.)

RTY = 0.77 x 0.97 x 0.84 x 0.95 x 0.93

RTY = 0.554 x 100 = 55.4%

Chances of the product, service, or transaction going through this process the first time without rework, defect, or scrap is only 55.4% -- a lot of hidden factory to be found here! To immediately improve this performance, focus first on the process step with the lowest FTY. Needed is a very high individual FTY to be achieved for each process step in order to gain acceptable RTY.

Traditional Yield is often a misleading perspective as it obscures the impact of inspection or rework. First Time Yield indicates the likelihood of an item passing through a process successfully the first time. This measurement includes considerations for inspection, rework and scrap.

RTY is the combined FTY of an entire process stream and indicates the likelihood of a product, service or transaction passing through all process steps successfully the first time.

Considering that the complexity of modern processes usually far greater than five to ten process steps, it is easy to see that Six Sigma quality isn't optional; it's required if the organization is to remain viable.

Sigma levels of performance can be expressed in “Defects per Million Opportunities” or DPMO, which indicates how many errors, would show up given a million chances.

Yield is another way of communicating the same information. Six Sigma defines customer requirements clearly and these measures can be used to measure and compare very different processes throughout an organization. This allows improvement efforts focused on the largest or most costly defects.

After you clearly define a defect, you can measure any type of business activity or process. These measures are applied across an organization with established guidelines. Measures do not remain “static”.  Customer requirements change and so will your performance measures.

The customer makes the ultimate determination if there is a defect (and they may not tell you they have changed their mind on what is a defect). Process improvements find targeted solutions to eliminate “root causes” of performance problems. The emphasis is on finding and targeting solutions to address the “vital few” factors that cause the problem (s).

Most businesses operate between a 3 and 4 sigma level or 66,800 to 6,200 defects per million opportunities. Six Sigma is a quality improvement methodology that is structured to reduce product, service, or transaction defect rates to a level of 3.4 defects per million opportunities.

From a 3 to a 4 Sigma would eliminate 60,000 + defects.  What could this type of performance do for your profitability?

The standard normal distribution table is used in calculating process sigma. 6 sigma actually translates to about 2 defects per million opportunities, and 3.4 defects per million opportunities, which we normally defined as 6 sigma, really corresponds to a sigma value of 4.5. It has been determined, through years of process and data collection that processes vary and drift over time - which is referred to as the Long-Term Dynamic Mean Variation. This variation typically falls between 1.4 and 1.6.

After a process has been improved the process standard deviation and sigma value are again calculated. These are considered to be short-term values because the data only contains common cause variation.

Long-term data, on the other hand, contains common cause variation and special (or assignable) cause variation (processes tend to exhibit instability over time). Because short-term data does not contain this special cause variation, it will typically be of a higher process capability than the long-term data. This difference is the 1.5 sigma shift.

Six Sigma breakthrough performance improvement processes have the task of translating a Business Opportunity into a Statistical Problem and then in finding a Statistical Solution. That statistical solution (numbers) then must be translated into a language of meaning – and then into a Business Solution that sustains lasting success.

The basic steps of the Six Sigma project execution process are DMAIC:

• Define
• Measure
• Analyze
• Improve
• Control

Six Sigma Training and Deployment

Management and Champion training is to gain an understanding of the over all importance, align with the strategic plan; support the changes and improvements that result from the execution of six sigma projects.

Green Belt Team Members (Subject Matter Experts) understand the steps in the project execution process (Define, Measure, Analyze, Improve and Control). Green Belt Team Members serve on the project teams part time and can come from any place in the organization where subject matter expertise is needed for a project.

Green Belt Project Managers complete the Green Belt Team Member Training. Next, they receive a series of modules regarding fundamental statistical tools, team work, leadership skills, and understanding of interpersonal relationship behaviors so they can more effectively lead six sigma projects requiring less technical and statistical training.

It is felt that the vast majority of small to mid sized business organizations require this level of project manager as opposed to the more heavily technical and statistically trained Black Belt Project Manager. This creates a huge savings and return on investment for many smaller organizations that clearly do not need the competencies of a Black Belt Project Manager.

Black Belt Project Managers are the full time project leaders for execution of Six Sigma projects. These are the best and brightest members of the organization who are given additional technical and statistical training and tools. Most Black Belt Project Managers will complete 3-6 projects in a year and work full time as project managers for 2-4 years. Typically, these project managers are groomed for elevated leadership roles as they complete their assignment of project management and are returned to a line duty function.

Each component of your Business System is an integrating factor on every other within the system. A focus of six sigma methodology is on gaining desired Business Results. Customer Satisfaction is a key determinate of Business Results. Impacting the Customer Satisfaction process are Competitors -- your Products, Services, Work Processes, Distribution Systems, and of course you’re Suppliers.

Development and Involvement of Employees directly influence of your processes. Vision Values and Strategic Direction -- impact Employee Development and Involvement and Customer Satisfaction. Vision Values and Strategic Direction are a direct function of the Executive Management Team and Senior Leadership of your organization.

From the levels of Customer Satisfaction you can measure the Value of your Products, Services, and Transactions which will determine the need for re-design and quality performance improvements.

Success is gained with ongoing, timely, appropriate Information and Analysis of the entire system. You should explore the discipline of your “Systems” thinking, viewing your business world as a whole, a framework of patterns and inter-relationships, in order to successful achieve your organizations desired business results.

We have found some of the greatest opportunities to reduce defects are where processes cross boundaries between functions and/or departments. Six Sigma methodology encompasses all aspects of a business, including management, service, delivery, design, production, human resources, IT, sales, marketing, research, safety, environmental, health, community relations, government relations, governing agency compliances, and customer satisfaction to name a few.