K. Muralidharan Six Sigma for Organizational Excellence A Statistical Approach Six Sigma for Organizational Excellence K. Muralidharan Six Sigma for Organizational Excellence A Statistical Approach 123 K.Muralidharan Department of Statistics Faculty ofScience M.S. Universityof Baroda Vadodara, Gujarat India ISBN 978-81-322-2324-5 ISBN 978-81-322-2325-2 (eBook) DOI 10.1007/978-81-322-2325-2 LibraryofCongressControlNumber:2015932236 SpringerNewDelhiHeidelbergNewYorkDordrechtLondon ©SpringerIndia2015 Thisworkissubjecttocopyright.AllrightsarereservedbythePublisher,whetherthewholeorpart of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilarmethodologynowknownorhereafterdeveloped. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publicationdoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesareexempt fromtherelevantprotectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformationinthis book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained hereinorforanyerrorsoromissionsthatmayhavebeenmade. Printedonacid-freepaper Springer(India)Pvt.Ltd.ispartofSpringerScience+BusinessMedia(www.springer.com) Preface Organizations run successful business only when they provide satisfaction to consumers. Competitiveness in quality is not only central to profitability, but also crucial to business survival. Consumer should not be required to make a choice between price and quality of products. Manufacturing and service organizations existiftheylearnhowtomanagequality.Intoday’stoughandchallengingbusiness environment, the development and implementation of a comprehensive quality policy is not merely desirable, it is essential. Six Sigma is a business process improvement tool to achieve customer satisfaction through a systematic problem- solving approach. It is uniquely driven by close understanding of customer requirements and reinventingbusinessprocesses. Itfacilitates people excellenceas well as technical excellence in terms of creativity, collaboration, communication, dedication and above all increases the accountability of what one does in an organization. The Six Sigma philosophy works under a five-phase improvement cycle, called DMAIC,whereDfordefine,Mformeasure,Aforanalysis,Iforimprovementand C for control. It can apply to both process improvement and product improvement orevendesignredesign efforts. ASixSigmainitiative includes enterpriseresource planning (ERP), e-commerce and services, lean manufacturing, customer relation- shipmanagementsystems,strategicbusinesspartnerships,knowledgemanagement, activity-based management, just-in-time inventory and globalization. Organiza- tional excellence is a result of continuous improvement, which can attain only throughsystematicreductionofdefectsandvariationsintheprocessactivities.Here comes the importance of Six Sigma methodology. Who Will Read? This book serves three main purposes: first, an academic book for students and teachers; second, this book can be used as a reference material for engineers and managers working as Six Sigma professionals and Black Belt trainers; third, this v vi Preface bookcouldbeausermanualforpractitionersandprojectconsultants.Theemphasis is laid on understanding and applying the concepts of quality through project management and technical analysis by using statistical methods. The contents are prepared in a ready-to-use form with continuity established for each phases of Six Sigma project. This will help practitioners to implement the Six Sigma projects without any hurdles. Three most important aspects of Six Sigma project—Sigma estimation, sample size calculation and Sigma-level estimation—are separately treated in different chapters. Necessary tables, graphs, descriptions and checklists are provided to ease the referencing of tools and techniques. The concepts are critically assessed, reasoned and explained to enable their uses in managerial decisionmaking.Theobjectivesofeachchapteranditscontinuitywithsubsequent chapters are also clearly established for a smooth reading. Charts and plots, a numberofworked-outexamples,casestudiesandnecessarytablesareprovidedfor better understanding of the concepts. Students of undergraduate, postgraduate and research students can make opti- mumuseoftheintegratedconceptsofqualityengineeringandmanagementtoolsof statistics. The science of Six Sigma project management, integrated through engi- neeringconcepts,isexplainedthroughstatisticaltoolsandthatistheuniquenessof this book. The book could also serve as a concise book for Six Sigma Green Belt, Black Belt and Master Black Belt training. Inspiration The content is based on the author’s own teaching experience, lecture notes, research publications, private communications, book references, article citations and training and consulting materials. The content is highly inspired with some available books: The Six Sigma Way by Peter S. Pande et al. (2003), Juran’s Quality Planning and Analysis for Enterprise Quality by Frank M. Gryna et al. (2008),LeanSixSigmaStatisticsbyAlastairMuir(2005),TheCertifiedSixSigma Black Belt Handbook by T.M. Kubiak and Donald W. Benbow (2009), Introduc- tion to Statistical Quality Control by Douglas C. Montgomery (2009), and Statis- tical Process Control by John S. Oakland (2012). The author has consulted a number of other books on Six Sigma, lean, management, engineering and general statistical books for integrating the things, as required by Six Sigma professionals. About the book Thisbookintegratesthreemaindisciplines:Science,EngineeringandManagement. The author has tried to maintain a balance of these three disciplines from a prac- titioner’s point of view. Chapter 1 is like an introduction to various Six Sigma concepts practiced by professionals and organizations, globally. Various Preface vii perceptions and their implementation styles are critically examined in this chapter. Chapter 2 details the importance of Six Sigma project management concepts. The necessity of model-based projects is statistically emphasized. Apart from this, the importance of quantitative project management and its risk assessment and critical evaluation are also discussed in this chapter. The importance of process-based projectsandmodelsareincludedinChap.3.Thisisfollowedbytheunderstanding of the process variation, which is an essential part of a Six Sigma project. The sources of identifying variation and possible identification of variations are dis- cussed in Chap. 4. Since Sigma is being considered as a measure of variation, the estimationofSigmaisavitalissueinastatisticalstudy.Thisisconsideredindetail in Chap. 5. A number of methods of estimation of Sigma is considered in the chapter. Chapter 6 details one of the important issues of project management, and that is the sample size determination. From a practitioner’s point of view, many simpleandeasy-to-implementmethodsofsamplesizecalculationsarepresentedin the chapter. Chapters 7–11 discuss the Six Sigma philosophy, systematically, detailing with the necessary tools and techniques of statistics to execute a project. The management quality improvement topics covered in these phases are SIPOC, voice of customer, value stream mapping, brainstorming, root-cause analysis, failure-mode effect analysis, seven quality tools, Kaizen, 5S, designed for Six Sigma, quality function deployment, understanding of defect per unit (DPU) and defect per million opportunities (DPMO), Sigma-level estimation, cost of poor quality, etc. Statistical topics include descriptive statistics, the basic notions on probability and probability distributions, point and interval estimation of parameters, para- metric and nonparametric testing, correlation and regression techniques, design of experiments including factorial experiments, control charts, etc. A care has been taken to show every method in a simple and practical way without involving any rigorous theoretical steps involved. The SQC/SPC part of the project management is given the maximum emphasis, as they naturally become the essential tools to improve andcontrolthephase ofthephilosophy. Mostofthetoolsandtechniques are explained through numerical and illustrative examples. The performance of a SixSigmaprojectisevaluatedthroughitsSigmalevel.TheunderstandingofDPU/ DPMO and short-term and long-term variability of a process, etc., are the requirements for the Sigma-level estimation. This is carried out in Chap. 12. One can also refer to this chapter in the beginning of the actual project execution for setting up the goal and can be used to baseline the performance evaluation. This chapterwillbehandyforthoseinvolvedwithprojectevaluationandtargetsettingat any time during the project. The methods for continuous improvement is presented in Chap. 13, where the author has discussed various quality improvement programs offered by Deming, Juran, Feigenbaum, Crosby, Ishikawa, Taguchi, etc. Chapter 14 offers the impor- tance of Six Sigma marketing, which is a growing area of research in Six Sigma philosophy.ASixSigmamarketingisafact-baseddata-drivendisciplinedapproach togrowingmarketsharebyprovidingtargetedproduct/marketswithsuperiorvalue. Various issues associated with Six Sigma marketing, like strategic, tactical, and viii Preface operational processes of marketing, are discussed in the chapter. The chapter on Green Six Sigma emphasizes the importance of Six Sigma projects from a sus- tainable business practices. Green Six Sigma is nothing but the qualitative and quantitative assessment of the direct and eventual environmental effects of all processes and products of an organization. The activities involve the systematic usage of infrastructure and manpower, optimum use of technology and account- ability of sustainable business practices. The benefits of Green Six Sigma are also detailed in the chapter. TheprosandconsofSixSigmaarepresentedinChap.16.Adetaileddiscussion on advantages and disadvantage; various limitations, dos and don’ts of Six Sigma arealsodiscussedinthechapter.TheconcernaboutthefutureofSixSigmaisalso given at the end of the chapter. Chapter 17 is allotted to the discussion of case studies. Apartfromthis,aseparatesessionon“RelevanceforManagers”isalsoaddedat the end of each chapter to increase the usefulness of each tools and methods. The citations and references for each chapter are given at the end of each chapter. Although Microsoft® Excel®, Minitab® and R® software have been used in the book for preparing charts and plots, this is not a prerequisite for using this book. Vadodara, Gujarat, India K. Muralidharan Acknowledgments This book has come to fruition because of the generosity shown by many profes- sional colleagues, friends and well-wishers. I express my deep sense of gratitude and regards to all of them. I sincerely acknowledge Prof. Subha Chakraborthy (University of Alabama), Prof. W.H. Woodall (Virginia Tech University), Prof. D.C. Montgomery (Arizona State University) and Prof. Jiju Antony (Heriot-Watt University) for their helpful contributions to the content of the book. I sincerely thank the head, Department of Statistics, University of Pune, for permitting me to usethestatisticaltables.Inputtingtogethertheprofessionalperspectives,Iplaceon record many university department heads, colleagues and librarians for their assistance in materials and academic collaborations. MycolleaguesattheMaharajah Sayajirao UniversityofBaroda havebeenvery supportive and cooperative in rendering their assistance towards this project. Two of my colleagues Dr. (Mrs.) Khimiya Tinani and Dr. (Mrs.) Rupal Shah need special mention as they have done an excellent job of verifying and correcting the problems and their solutions in the book. I sincerely acknowledge Prof. Ven- kateswarluandProf.J.P.ParikhattheDepartmentofEnglish,MaharajahSayajirao UniversityofBaroda,fortheirassistancetowardsreadingthematerialforlanguage, grammar and syntax. I also place on record Dr. Aarti Mujumdar and Dr. Milan Sagar of Cambridge Education for providing their professional editorial service. IalsothankProf.B.K.Kale(UniversityofPune)andProf.AshokShanubhogue (Sardar Patel University), asthey remain asa constant inspiration tometotake up thetaskandassignmentsthroughoutmyprofessionalcareer.Thanksarealsodueto my industry friends Mr. Rakesh Singh (from Trendz Process Consulting, Hydera- bad), Mr. Rajesh Nambiar (Panacea Software, Baroda) and Mr. Vimal Vyas (Sie- mens, Vadodara) for enlightening me on the importance of Six Sigma concepts in industries and manufacturing industries. I thank my wife Lathika and sons Vivek and Varun for their patience and silence, rendered throughout the writing of the book. If the readers find that proper acknowledgement has not made to any particular individuals, authors, references, citations, etc., kindly treat this it is not intentional and request that you bring the same to my notice for future mention. ix Contents 1 Six Sigma Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Six Sigma Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.3 Six Sigma Tools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.4 Six Sigma Tasks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.5 Six Sigma Deliverables . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.6 Lean Six Sigma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 1.7 Six Sigma: The Belt Systems. . . . . . . . . . . . . . . . . . . . . . . 14 1.8 Relevance for Managers. . . . . . . . . . . . . . . . . . . . . . . . . . . 16 References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2 Six Sigma Project Management. . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.1 Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2.2 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 2.3 Project Phases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.4 Alignment with the Business Strategy . . . . . . . . . . . . . . . . . 22 2.5 Project Stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2.6 Managing the Stakeholders. . . . . . . . . . . . . . . . . . . . . . . . . 24 2.7 A Six Sigma Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 2.7.1 Probability Model-Based Project. . . . . . . . . . . . . . . 27 2.7.2 Regression Model-Based Project. . . . . . . . . . . . . . . 27 2.8 Quantitative Project Management . . . . . . . . . . . . . . . . . . . . 28 2.9 Project Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2.9.1 Quantifying the Risk. . . . . . . . . . . . . . . . . . . . . . . 30 2.10 Critical Evaluation of a Project. . . . . . . . . . . . . . . . . . . . . . 31 2.11 Role of Computing Technology in Project Management. . . . . 33 2.12 Launch and Execution Process . . . . . . . . . . . . . . . . . . . . . . 34 2.13 Closure of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 xi