Overview: Six Sigma and the Organization · 3 min read
Overview: Six Sigma and the Organization · Six Sigma and Organizational Goals
This section covers the foundations the rest of the Body of Knowledge builds on: what Six Sigma is and the value it delivers, how projects connect to organizational goals and metrics, the lean principles that complement Six Sigma, and the Design for Six Sigma road maps and FMEA used when a product or process is being designed rather than improved. Expect conceptual questions plus short calculations such as RPN and DPMO.
Understanding Six Sigma Fundamentals
Six Sigma is a data-driven methodology for eliminating defects and reducing variation in processes. The term refers to a level of process performance equal to 3.4 defects per million opportunities (DPMO). Organizations implement Six Sigma to improve quality, reduce costs, increase customer satisfaction, and drive operational excellence.
The methodology originated at Motorola in the 1980s and gained widespread adoption after General Electric's implementation in the 1990s. Six Sigma combines statistical tools with structured project management to achieve measurable business results. It is used as a philosophy (all work is a process that can be measured and improved), a set of tools, and a methodology built on DMAIC.
The DMAIC Methodology
DMAIC names the five phases of a Six Sigma improvement project. Each phase has specific deliverables and ends with a tollgate review, in which the sponsor confirms the phase is complete before the team proceeds.
➜
➜
➜
➜
Scope, goals, charter,
Baseline performance
Root causes of defects
Develop, test, and
Monitor and standardize
and team
and valid measurement
and variation
implement solutions
to sustain gains
DMAIC applies to existing processes that need improvement. For new products or processes, organizations use Design for Six Sigma road maps such as DMADV (Define, Measure, Analyze, Design, Verify), covered in Section 1.3.
Value of Six Sigma
Organizational Goals and Six Sigma Projects
Six Sigma projects should be linked to the organization's strategic plan. Leadership deploys goals downward (sometimes through hoshin kanri, or policy deployment), and projects are chosen because improving a specific process metric moves a strategic goal. Projects aligned with organizational goals receive stronger sponsorship and resources and are more likely to be sustained. A project that is interesting to the team but not linked to a business goal is a poor candidate.
Organizational Drivers and Metrics
Organizations track performance through key performance indicators (KPIs): a small set of measures tied to strategic objectives. Leading indicators (such as on-time preventive maintenance or training completion) predict future results; lagging indicators (such as profit, warranty cost, or customer churn) report results after the fact. The balanced scorecard organizes KPIs into four perspectives so that financial results are not pursued at the expense of customers, processes, or people.
| BalancedScorecardPerspective | CentralQuestion | ExampleMetrics |
|---|---|---|
| Financial | Howdowelooktoshareholders? | Revenuegrowth operatingmargin costof , , |
| poorquality | ||
| Customer | Howdocustomersseeus? | Satisfaction retention on-time delivery , , , |
| complaints | ||
| Internalbusinessprocess | Whatmustweexcelat? | Cycle time yield DPMO first-pass yield , , , |
| Learningandgrowth | Canwecontinuetoimproveandcreatevalue? | Employeeskills certifications improvement , , |
| ideasimplemented |
Cost of Quality
The cost of quality (COQ) shows management the financial impact of quality. The cost of poor quality (COPQ) is the failure portion; it is often large and partly hidden, which is why Six Sigma projects report savings in these terms.
| Category | Defi nition | Examples |
|---|---|---|
| Prevention | Costsofkeepingdefectsfromoccurring | Training processplanning errorproofing , , , |
| supplierqualification | ||
| Appraisal | Costsofmeasuringandcheckingfordefects | Inspection testing audits calibration , , , |
| Internalfailure | Costsofdefectsfoundbeforethecustomerreceives | Scrap rework re-inspection downtime , , , |
| theproduct | ||
| Externalfailure | Costsofdefectsfoundafterdelivery | Warrantyclaims returns complaints lost , , , |
| customers |
Investing in prevention usually lowers total cost of quality, because each defect prevented avoids appraisal and failure costs later. Warranty and returns are always external failure; scrap and rework found in-house are internal failure.
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