Six Sigma a Way to Reach Operational Excellence and Get out of the Crisis

Six Sigma a way to reach Operational Excellence and get Out of the Crisis

Alessandro Brun – Politecnico di Milano [email protected] About Myself

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Concorde One of the 20th century's great symbols of technological achievement…

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Concorde

• One of the 20th century's great symbols of technological achievement… • … perhaps the most famous passenger jetliner in history.

• But it was also commercially flawed. Its engines were dirty and painfully noisy. It was banned from flying supersonic over the United States because of the sonic boom.

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Concorde

• Concorde was effectively blocked from entering the crucial U.S. market when airlines in this country, including TWA and Pan American, canceled orders. • "Looking back at the entire program, from beginning to end, if you knew then what you know now, then Concorde would never have been built," Bannister.

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Concorde

• On 25 July 2000, Air France Flight 4590 crashed in Gonesse, France, killing all 100 passengers and 9 crew members. • According to the official investigation conducted by the French accident investigation bureau (BEA), the crash was caused by a titanium strip that fell from a Continental Airlines DC-10 that had taken off minutes earlier. The metal fragment punctured a tyre on Concorde’s left main wheel bogie during takeoff. • Prior to the accident, Concorde had been arguably the safest operational passenger airliner in the world in terms of passenger deaths-per-kilometres travelled with zero.

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Operations and Supply Chain Excellence

Today, competition is Supply Chain vs Supply Chain, no longer firm vs firm. Supply Chain Strategy should identify Critical Success factors to gain a competitive edge.

EFFECTIVENESS EFFICIENCY

In addressing In resources market needs utilization

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Out of the Crisis! “A product, or service, possesses quality if it helps somebody and enjoys a good and sustainable market.”

“We have learned to live in a world of mistakes and defective products as if they were necessary to life. It is time to adopt a new philosophy in America.”

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Noteworthy approaches to solve the “Efficiency-vs-effectiveness” trade-off?

SIX SIGMA10 – a way to reach Operational Excellence and get Out of the Crisis Noteworthy approaches to solve the “Efficiency-vs-effectiveness” trade-off?

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Noteworthy approaches to solve the “Efficiency-vs-effectiveness” trade-off?

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis In search of new paradigms?

“Quality – Cheap Prices – Service”

In this service centre we offer • … While-U-Wait service … • … High quality repairs … • … at the best price in town!

Please pick two out of three.

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis

What about the market?

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis The times they are a-changing

Supply Chain performances are even more critical, due to some recent trends:

• Customer centric approaches – Variety increases (explodes!)

• Shorter product life-cycles

• Shorter delivery Lead Times

• “Trading Up” – lower sostituibility (cfr. “Trading Up: The New American Luxury”, di M.Silverstein e N.Fiske)

• Low Labour Cost Countries competition

• Increasing regulations

• Growing ethical/social responsibility

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis

Six Sigma

• WHAT IS SIX SIGMA? Six Sigma is a managerial approach aimed to create processes capable of delivering what the customer wants. It was developed by Motorola in the 80’s as a way to improve quality of manufacturing processes. A decade later, GE transformed Six Sigma into a powerful and pragmatic company-wide process improvement program, to obtain drastic improvements in both operations and business (“transactional”) processes.

• Basically, Six Sigma consists in:  focusing characteristics of the product/service that are critical to customers (CTQ)  defining adequate technical specifications for CTQs in order to achieve customer satisfaction  improving capability of the processes whose output is a CTQ reducing their variability and other causes of errors or defects in order to meet technical specifications

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Six Sigma and the quest for more capable processes

18 SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Six Sigma and the quest for more capable processes

Process out-of-Target Excess variability

Low-variability, Centered process

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Six Sigma quality levels – an analogy

Sigma Level of a DPMO process (Defects per Million Opportunities)

6 3.4 Sweet Fruits Process Redesign 5 233 “Process Entitlement” Bulk Fruits 4 6,210 Process characterization and improvement 3 66,800 Low-hanging Fruits Seven basic tools 2 308,000 Ground Fruits Logic and intuition

Increasing the s level of a process requires exponential improvements in terms of quality

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Costs of Poor Quality (COPQ)

- Inspection - Warranty Traditional Quality Costs: - Scrap - Tangible - Rework - Easy to Measure - Rejects

- More Setups Hidden Costs: - Expediting Costs - Lost Sales - Intangible - Late Delivery - Lost Opportunities - Difficult to Measure - Lost Customer Loyalty - The Hidden Factory - Excess Inventory - Long Cycle Times - Costly Engineering Changes

For most companies, COPQ can be as high as 15% of total sales

SIX21 SIGMA – a way to reach Operational Excellence and get Out of the Crisis Costs of Poor Quality (COPQ) vs Sigma Level

50%

45% 40% 35% 30% 25% 20% 15%

10% Cost of Quality % Sales % Quality ofCost 5% 0% 2 3 4 5 6 Sigma Level

SIX SIGMA22 – a way to reach Operational Excellence and get Out of the Crisis Six Sigma dimensions

Customer Process A Process B Vendor

Define Measur Analyze Improve Control e Driven by custom er needs Process Map Analysis

LSL US L Led by Methodology Senior Mgmt Upper/Lower • specification • •• •• • limits •• • •• • • Organization Tools •••• • • • • • Regression

35 100% 30 80% 25 20 60% 15 40% 10 20% 5 Process variation 0 0% Enabled by quality L K A F B C G R D Frequency Cumulative Frequency team Pareto Chart

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis Roles of Six Sigma expert

They identify key business issues and assist Executive the champions in identifying critical projects sponsorships that are tied to the key business issues

They define the projects and keep track of Champions the team's progress

They provide coaching, training and statistical Master Black expertise to Black Belts Belts

They are responsible for implementing the Six Sigma projects Black Belts They are team members who maintain their regular jobs but are assigned to one or more Green Belts teams given their know-how or background on the selected projects

Quality Management 24 SIX SIGMAMario – a way Cappetta to reach Operational Excellence and get Out of the Crisis Project Phases

D Focusing the process object of improving Define

Measuring current process’s performances M Measure

Identifying the causes of the problem A Analyze

I Removing the causes of the problem Improve

C Verifying that the results of the project have been realized Control

SIX SIGMA25 – a way to reach Operational Excellence and get Out of the Crisis Six Sigma and Lean are two complementary approaches

• Lean and Six Sigma integrate each other, making Lean Six Sigma a powerful general purpose process improvement methodology to reach Operational Excellence

SIX SIGMA LEAN THINKING Main focus of the methodology Improving process quality - create Improving process quality – processes capable of delivering what the the “right” process will bring to the “right” customer wants. results Goal Reducing variation and aligning Reducing variation, eliminating wastes processes to target and avoiding overburden Cultural context in which it was Western (USA) Eastern (Japan) originated Type of improvements sought after Project-by-Project Day-by-Day

Organization and roles Strongly formalised hierarchy of highly Informal organization – everybody qualified improvement experts (GB, BB, should contribute MBB, …) Approach to improvement actions Top-Down Bottom-Up identification and implementation Tools Abundant use of sophisticated statistical Mainly relies on simple visual tools tools

SIX SIGMA – a way to reach Operational Excellence and get Out of the Crisis