Six Sigma Introduction

WHAT IS SIX SIGMA?

Six Sigma is a defined and disciplined business methodology to increase customer satisfaction and profitability by streamlining operations, improving quality and eliminating defects in every organization-wide process.

Six Sigma and DMAIC Methodology Overview

What is Six Sigma?

Six Sigma is:

• A Business Strategy: Using Six Sigma Methodology, a business can strategize its plan of action and drive revenue increase, cost reduction and process improvements in all parts of the organization.
• A Vision: Six Sigma Methodology helps the Senior Management create a vision to provide defect free, positive environment to the organization.
• A Benchmark: Six Sigma Methodology helps in improving process metrics. Once the improved process metrics achieve stability; we can use Six Sigma methodology again to improve the newly stabilized process metrics. For example: The Cycle Time of Pizza Delivery is improved from 60 minutes to 45 minutes in a Pizza Delivery process by using Six Sigma methodology. Once the Pizza Delivery process stabilizes at 45 minutes, we could carry out another Six Sigma project to improve its cycle time from 45 minutes to 30 minutes. Thus, it is a benchmark.
• A Goal: Using Six Sigma methodology, organizations can keep a stringent goal for themselves and work towards achieving them during the course of the year. Right use of the methodology often leads these organizations to achieve these goals.
• A Statistical Measure: Six Sigma is a data driven methodology. Statistical Analysis is used to identify root-causes of the problem. Additionally, Six Sigma methodology calculates the process performance using its own unit known as Sigma unit.
• A Robust Methodology: Six Sigma is the only methodology available in the market today which is a documented methodology for problem solving. If used in the right manner, Six Sigma improvements are bullet-proof and they give high yielding returns.

WHAT IS QUALITY?

Different individuals and organizations have given different definitions for Quality. Let’s study some of those definitions:

• Deming: “Quality is defined from the customer’s point of view as anything that enhances their satisfaction”.
• Juran: “Fitness for use. Those product features which meet the needs of customers and thereby provide product satisfaction. Freedom from deficiencies”.
• ASQC: “The totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs”.
• COPC: “Quality is defined as knowledge of agents that would enable them to provide accurate and consistent solution to the customer at the very first attempt”.
• ISO: “Degree to which a set of inherent characteristics, of a product or service, fulfill requirements”.

Simply stated, quality comes from meeting customer expectations. This occurs as a result of four activities:

• Understanding customer requirements.
• Designing products and services that satisfy those requirements.
• Developing processes that are capable of producing those products and services.
• Controlling and managing those processes so they consistently deliver to their capabilities.

WHAT IS THE HIDDEN FACTORY?

The Hidden Factory is the set of activity (or activities) in the process that result in reduction of quality or efficiency of a business process or manufacturing department, and is not known to managers or others seeking to improve the process. Six Sigma focuses on identifying “hidden factory” activities to eliminate the root-causes.

One of the examples of Hidden Factory will be creating multiple versions of a status update presentation by the Project Management team because all of the requested information was not received by the due date from all the departments.

Six Sigma works effectively to identify the hidden factory situations, questions the status quo, removes it and thus it improves business profits and reduces wastes.

SIX SIGMA PROCESS EXCELLENCE DISCIPLINES

Process Excellence/Process Documentation:
Process Excellence and Process Documentation helps the project team to define, measure and control the business processes. Six Sigma and Lean tools are used for both Process Excellence and Process Documentation.

Process Excellence and Process Documentation ensures:

• Standardization across different processes in the same organization/department.
• Allows business continuity in case of non-availability of Key Subject Matter Experts (SME’s).
• Helps to understand the current state of the process and also to measure the performance of the future state of the project.

Six Sigma Process Excellence Disciplines

Process Improvement (DMAIC):
Process Improvement is an effort to identify high priority problems in business processes and to train teams to tackle those problems. The methodology used is called DMAIC. It is an acronym for Define-Measure-Analyze-Improve-Control.

In the Define phase, the project is defined. In Measure phase, data is collected, Measurement System is validated and current performance is identified. In Analyze phase, root causes are identified. In Improve, solutions are created and implemented and in Control phase, new performance is sustained).

Lean tools such as Value Stream Map (VSM), Pull and Kaizen are leveraged too.

Process Improvement (Lean):
“Lean” is the set of management practices based on the Toyota Production System (TPS). This methodology is deployed in selected processes to identify and eliminate Non-value added activities and hence increase the operational efficiency. Lean is quick and avoids rigorous data analysis.

There are two critical factors of Lean – Value Added and Non-Value Added. Value is what the customer cares for. It is doing the right things the first time. When we say Value Added, our product or service should add value to the process. Similarly, we should focus on removing non-value added activities from the process.

HISTORY OF SIX SIGMA

• Developed by Mikel Harry and Bill Smith, Motorola.
• Motorola was amongst the first recipients of the Malcolm Baldrige Award.
• National Quality Award in 1988.

Six Sigma History

Throughout its history and evolution, Six Sigma turned into a business driven, multi-dimensional structured approach to reinforce Business Strategies into various aspects such as:

1. Improving Processes
2. Lowering Defects
3. Reducing Process Variability
4. Reducing Costs
5. Increasing Customer Satisfaction
6. Increasing Profit

HOW DOES SIX SIGMA WORK?

At the beginning of a Six Sigma project, the Business Problem is defined. Questions such as What, When, Where are addressed in a problem statement. Magnitude and Consequence of the problem is also discussed. Project Scope is identified.

Root causes for the business problems are identified. Those root causes are converted into statistical problems using Hypothesis testing methods.
Trivial Many Causes: These are all the possible causes of the given problem. They may cause impact to the problem.
Vital Few Causes: These are the few critical causes which cause maximum impact over the problem.

Identification of only 3-4 vital root causes using statistical analysis is achieved. These root causes are vital because they have maximum impact on the problem. Any given problem follows a Pareto principle which states that 80% of the problems are caused due to 20% of the root-causes. Solutions to these root causes are studied and an optimal value for each solution is identified.

These statistical solutions are then converted to implementable practical solutions. Implementation of these business solutions is carried out in the process. Improvements are observed and sustained.

Six Sigma applies statistical tools to business problems. The key is data-driven decision making.

WHAT IS SIGMA AND WHY IS IT SIX SIGMA?

Mean is the arithmetic average of a process data set.
Central tendency is the tendency of data to be around this mean.
Standard Deviation (also known as Sigma or σ) determines the spread around this mean/central tendency.

The more number of standard deviations between process average and acceptable process limits fits, the less likely that the process performs beyond the acceptable process limits, and it causes a defect. This is the reason why a 6σ (Six Sigma) process performs better than 1σ, 2σ, 3σ, 4σ, 5σ processes.

Obviously 7 or more σ processes are even better than a 6σ (Six Sigma) process, and yet throughout the evaluation and history of Six Sigma process, the practitioners gained the belief that a 6σ process is good enough to be reliable in almost all major situations except some systems whose defects can cause unrepairable consequences.

Six Sigma stands for 6 standard deviations (6σ) between avarage and acceptable limits

LSL and USL stand for “Lower Specification Limit” and “Upper Specification Limit” respectively. Specification Limits are derived from the customer requirements, and they specify the minimum and maximum acceptable limits of a process.

For instance in a car manufacturing system the desired average length (Mean length) of car door can be 1.37185 meter. In order to smoothly assemble the door into the car, LSL can be 1.37179 meter, and USL can be 1.37191 meter. To reach a 6σ quality level in such a process, the standard deviation of car door length must be at most 0.00001 meter around the mean length.

Sigma is also the capability of the process to produce defect free work. Higher the capability, lower the defects.

Processes in various Sigma Levels

In the above figure, the red curve indicates a 2σ level of performance where we observe that its peak is very low (fewer outputs are around the desired average) and the variation is from extreme left to extreme right of the figure. If the process improves from 2σ to 3σ (green curve), you will observe that the process variation reduces and the process has a larger peak (more outputs are around the desired average, but a different average than red curve). As the process performance increases from 3σ to 6σ (blue curve), the process becomes centered between the upper and lower specification limits and does not have much variation. Here with blue curve the majority of process outputs are around the desired average. This is why it is good and it causes less defects beyond the lower and upper specification limits.

Sigma Level vs DPMO Defects per Million Opportunities

In the above table, you will observe that as the Sigma level increase the Defects decrease. For example, for a 2σ process the Defects are as high as 308,537 in one million opportunities. Similarly, for a 6σ process the Defects is as low as 3.4 in one million opportunities. The 2σ performance level will have more defects than a system in 6σ performance level as the standard deviation for a 2σ process is much larger than the standard deviation for a 6σ process.

Can we have any process which has 6σ level of performance?
The answer is yes. Pharmaceutical Companies, Airline Manufacturing Organizations, Automobile Manufacturers, among others are bound to work at a sigma level which is either 6σ or more than that. If they are not able to perform at this efficiency, the organization cannot exist. Think about it, you are in the air, 5000 feet above the ground, flying in a Boeing 777 Aircraft and suddenly a nut-bolt in the wing of the plane loosens (probably due to manufacturing defect) making it difficult for the pilot to steer the flight! This is the only reason why defects are not welcome and organizations try to achieve higher Sigma levels.

Six Sigma vs DPMO Examples

In the above examples,

• Sigma indicates the Sigma level.
• Spelling indicates the total spelling errors.
• Money indicates the amount of fine/indebtedness that can occur due to the misspellings.
• Time indicates the total time it takes to correct those misspellings.
• DPMO indicates the total Defects in One Million Opportunities.

We can clearly observe that as the Sigma Level increase, the defects (misspellings) decrease, the indebtedness reduce and the time for rework also reduces, thus it reduces the DPMO-Defects per Million Opportunities.

WHAT IS THE FOCUS OF SIX SIGMA?

Focus of Six Sigma

Y is outcome(s) or result(s) you desire and need from a process. This is a dependent factor and it depends on the X’s.
X represents the input factors that could result in Y. There could be multiple X’s. These are independent factors.
Ɛ represents the presence of error, or uncertainty surrounding how accurately the X’s are transformed to create the outcome.

In other words, the input variable(s) are transformed by a function (or process) and combined with error to form the output. The Y results from, or is a function of the Xs. To determine a desired outcome, you apply a transformation process or function, f, on the inputs.

For example, the formation of a thin sheet of iron undergoes several processes. The input variables are Iron Ore (Wrought Iron), charcoal, other chemicals and a furnace. This wrought iron is transformed through use of all of the input raw materials in the right proportion and heating in the furnace into a desired outcome. The raw materials and furnace is the X’s, the mixing of raw materials and heating are the transformation process function f, and the resulting Iron sheet is the Y. Ɛ can be the varying degree of temperature throughout the furnace resulting in non-uniform sheet of metal (errors in the process).

In the Pizza delivery example, some of the reasons for not meeting the pizza delivery time of 30 minutes could be Heavy Traffic, Delivery Driver did not know the delivery address, Pizza was not prepared in-time, among others. Thus, in this example, Delivery time of Pizza is “Y” and the reasons for not delivering the pizza on-time are “X’s”.

After understanding the two examples described above, in order to get results, should we focus on “Y” or “X”?

Focus the Causes (X) and NOT the Result (Y): Whenever you do a Six Sigma project, the focus of the project team needs to be on identifying of causes and mitigating them. The Result will automatically improve if the causes are dealt correctly. In the above example, formation of an iron sheet is the result and all the input materials are the causes. Thus, focus on the Causes and NOT the Result.

HOW DOES SIX SIGMA DMAIC PROCESS WORK?

Let us now understand how the DMAIC process works. DMAIC is an acronym for its five phases – Define, Measure, Analyze, Improve and Control. DMAIC is a Six Sigma methodology which helps in achieving process improvements by reducing variation. Each phase of has its own significance and we will understand how DMAIC process reduces many root causes to only a few vital root causes. Let’s look at the below diagram:

Six Sigma DMAIC Process

As we see above, the Define phase looks at all the X’s (here X is an independent variable as discussed in the previous section). In the Measure phase, we get the 1st “Hit List” where the root causes (X’s) are reduced to just 10 – 15. In Analyze phase, we screen the available list and reduce the root causes to 8 – 10. In Improve phase, we identify just 4 – 8 critical X’s and in Control phase, we are controlling only 3 – 6 root causes (X’s). Thus, by controlling just 3 – 6 root causes we are able to positively impact the project Y.

Characteristics of a successful project:

• Should be related to your day to day work
• Should be manageable in terms of time-frame
• Should be aligned with business goals and results
• Should preferably address only one CTQ (Critical To Quality) parameter
• Should address issues which are important to the customer
• The improvements that you do should be locally actionable

In the above characteristics, we have a CTQ parameter. Here, CTQ stands for Critical To Quality. In layman’s language, CTQ is nothing but a metric that helps in measuring the extent of performance. CTQ can be of various types such as CTD (Critical to Delivery), CTP (Critical to Process), among others. Some of the examples of CTQ’s are Cycle Time in a process, Quality Scores, Yield%, among others.

Projects must be tightly bound and must not focus on solving broad issue such as global warming or world’s pollution.

When a Six Sigma project is initiated, it generally happens that we do not scope the project appropriately. During the course of the project, we keep adding additional parts to the project and the team has to manage these additional items which were not considered earlier. This phenomenon of including additions to the project is termed as “scope creep” and leads to challenges in project execution at a later stage. Projects which lead to scope creep are termed as projects which are trying to solve “global warming”. In order for the projects to achieve the desired results, they must be tightly bound and must not focus on solving broad issues.

A process-focused business constantly realigns processes to remain capable of meeting changing market demands. Only by gaining predictability can an enterprise truly maintain capable processes to changing customer demands.

Here, we should focus on getting the Voice of Process to understand the real nuances that it may face during the course of its operations. Voice of Process helps in understanding the metrics and the inherent fluctuations of these metrics. Three key terms that help us define process capability are:

• Process Baseline
• Process Entitlement
• Process Benchmark

Six Sigma facilitates in understanding variation in our business processes!

Let’s understand the three key terms:

Process Baseline:
Process baseline is the average long-term performance level of a process when all the input variables in the process are running in an unconstrained fashion. Long term performance is the performance of the process over a period of time.

Process Entitlement:
Process entitlement is the best case short-term performance level of a process when all the input variables in the process are centered and in control. Short term performance is the performance of the process at any given point of time.

Process Benchmark:
Process benchmark is the performance level of the process deemed by comparison to the best process possible. It takes us to the best that anyone has ever done. In practical terms this means researching and finding the best that has ever been done in the industry.

SIX SIGMA ROLES AND RESPONSIBILITIES

Six Sigma roles are primarily divided into two segments:

1. Initiative Leadership
2. Project Leadership

Apart from the above two segments, the overall Six Sigma methodology require the following roles:

1. Six Sigma Deployment Leader
2. Six Sigma Champion
3. Six Sigma Master Black Belt (MBB)
4. Six Sigma Black Belt (BB)
5. Six Sigma Green Belt (GB)
6. Six Sigma Yellow Belt (YB)

Let’s look at how Six Sigma roles are bifurcated into the required segments:

Six Sigma Project Roles

SIX SIGMA DEPLOYMENT LEADER:

As a group, business leaders must own and drive Six Sigma by doing the following:

• Establish business objectives and the role of Six Sigma to achieve those goals.
• Create an environment which enables success including goals, measures, coaching, and communication, among others.
• Actively participate in Six Sigma activities and projects.

Success of the effort is very highly correlated to the interest and time invested by business leaders.

Deliverables of a Six Sigma Deployment Leader:

• Six sigma strategy and roll-out plan for the overall organization
• Hire team of Master Black Belt, Black Belts, among others
• Work with MBB to identify organization vision and mission
• Provide a goal for the organization to drive Six Sigma at all levels

Benefits of being a Six Sigma Deployment Leader for Organization and for self-career:

• Six Sigma Deployment Leader helps the organization to develop the Six Sigma culture and helps nurture a culture of continuous process improvement.
• Driving Six Sigma in the organization allows the deployment leader to run the company to its full potential, thus, leveraging him/her the additional budget for taking more initiatives.

SIX SIGMA CHAMPION:

Project Champions (Sponsors) are the managers of the business, function, or value stream which has been identified as high priority for a Six Sigma team. They play a pivotal role in that they own the processes of the business and, therefore, must ensure process improvements are captured and sustained.

They typically also manage Six Sigma Green Belts (GB’s) and must understand the challenges faced by GB associates (for example, removing roadblocks). They also must work with BB’s and MBB’s to ensure that their business area has developed, and is implementing, a long-term vision of a Six Sigma operating environment across the entire operative base.

Some more details and associated deliverables on the role of Six Sigma Champion (Sponsor):

• Training: Sponsors must participate in available Six Sigma trainings.
• Support: Provide visible support for Six Sigma MBB, BB and GB’s and provide access to resources needed to conduct the project.
• Scope: Set very clear scope for all Six Sigma projects. Ensure that the project is clearly defined, has a scope which can be managed within 4-6 months, and which has high likelihood of success. Watch the project as it progresses to ensure that the scope stays strictly within the bounds originally set.
• Expectations: Set high expectations on the value of the results. Ensure the goals are not sub-optimized. The Six Sigma process has proven in many cases to deliver value far beyond initial estimates. Less-than-aggressive goals will yield less-than-aggressive results.
• Facts: Challenge Experts on their Knowledge of facts and the basis of their conclusions.
• Involvement: Sponsors are expected to interact with project teams on a regular basis to participate in problem solving, make decisions, and allocate resources. Plan to spend at least 2 hours every other week with the project team.
• Hand-over: Sponsors will be responsible for ensuring that the business takes ownership of the implementation and delivers the value indicated in the Control phase. This requires a specific individual who will own the delivery of the project metrics.
• Results: Sponsors, as well as 6sigma mentors and business controllers, are responsible for ensuring that project results hit the bottom line of the organization.

Benefits of being a Six Sigma Champion (Sponsor) for Organization and for self-career:

• Champions set the direction of process improvements in the organization. They link the benefits of the project to organizational priorities.
• Champions can create a portfolio of projects which could range from projects in Customer Satisfaction, Service, Cost and Quality. It provides the Champions the visibility in the process and also showcases his abilities to top-management to manage varied portfolio of projects.

Six Sigma Interacting Roles

SIX SIGMA MASTER BLACK BELT (MBB):

These individuals are responsible for translating the high level business goals into a Six Sigma strategy for the division and the supporting tactics. They work with the deployment leader to achieve the former. They also lead the development of the Six Sigma skills in the organization, for Black Belts, Green Belts, and the general associate base. MBB’s have ultimate responsibility to ensure the quality, value, and sustainability of Six Sigma projects under their guidance.

MBB’s are responsible, together, for the success of the overall Division’s Six Sigma effort. They coordinate and lead activity on key cross-division value streams (e.g. Customer Service, Cycle Time, Research, etc). They also ensure that a culture that values openness, creativity and challenging the status quo develops in the organization.

Deliverables of a Master Black Belt:

• Six sigma strategy and roll-out plan in the organization/function
• Manage Project of the function
• Mentor Teams
• Achieve Lean Six Sigma Results
• Cross-Functional Leadership
• Project Execution and Removing Roadblocks

Benefits of being a Master Black Belt for Organization and for self-career:

• MBB helps to set the culture of Six Sigma right from the grass-root level in the organization.
• Black Belts are benefited due to the mentoring and statistical skills of MBB.
• MBB can grow up the ladder and become the Chief Quality Officer as he gains experience and expertise in the field of Six Sigma.

SIX SIGMA BLACK BELT (BB):

Six Sigma BB’s are full-time/part time project leaders and mentors of the business, including Green Belts and other associates. They have tactical responsibility for executing specific projects and ensuring that the results are captured, the changes are owned by the Champions (Sponsors), and the changes are sustained. They will also lead Six Sigma knowledge transfer to both full- and part-time participants.

BB’s are expected to create an environment of open, honest debate of facts. They challenge the status quo where appropriate and share (and seek) ideas across boundaries.

Deliverables of a Black Belt:

• Six sigma strategy and roll-out plan for the given process/area
• Execute Projects
• Help and guide Project Resources/ Help remove project level Barriers
• Team and Project Structuring
• 6 sigma Project Results
• Mentor Green Belts
• Share Best Practices

Benefits of being a Black Belt for Organization and for self-career:

• BB’s are responsible for taking the process improvements to the next level in the organization.
• BB’s are highly trained on improving results for the organization using statistical analysis and Six Sigma tools. Hence, they have a very lucrative career path ranging from Business Analysts to Process Improvement experts.

SIX SIGMA GREEN BELT (GB):

Six Sigma Green Belts are the engine of Six Sigma projects. Black Belt’s support the efforts of the broader business teams to identify and implement change. The GB’s are part-time Six Sigma Project Leaders. They are responsible for scoping the projects, leading the project team, calling for help when needed, managing interfaces with business leaders, and ensuring sustainable results.

The goal of GB’s is to translate the value of Six Sigma to the specific work environment and problems.

Deliverables of a Green Belt:

• Project Execution
• Team and Project Structuring
• Six Sigma Project Results
• Share Best Practices

Benefits of being a Green Belt for Organization and for self-career:

• GB’s have authority in their respective processes and can get the work done effectively. This is a very critical aspect for the organization as it builds its process improvement structure within each process.
• For self-career, GB’s receive exposure to senior management directly by virtue of the projects and get the opportunity to make a difference in the organization.

SIX SIGMA YELLOW BELT (YB):

These are the project-specific, full-or part-time resources that provide process and cross-functional knowledge, as well as help to sustain the gains. They have co-ownership of the project with the Six Sigma Experts and are responsible for the quality of the work and results.

This team also plays the critical role of translating the process gains from Six Sigma to other areas of the business after the specific project has been completed. This is the true leverage of Six Sigma methodology!

Deliverables of a Yellow Belt:

• A Yellow Belt has basic knowledge of Six Sigma
• They do not lead projects on their own, as does a Green Belt or Black Belt.
• YB participates as a core team member or subject matter expert (SME) on DMAIC project or projects. Supports Green Belt or Black Belt in developing process maps, helping with data capture, facilitating simulation, and improvements.
• YBs may often be responsible for driving smaller process improvement projects using Lean tools or best practice sharing in their processes.

Benefits of being a Yellow Belt for Organization and for self-career:

• For any project, Yellow Belts are those individuals who are the Subject Matter Experts (SME’s) of their respective processes and also have the basic know-how of Six Sigma. They are the spokes of a wheel and can help drive any Six Sigma process to closure by using their process expertise. Organizations can greatly benefit by choosing the right YB’s for the right projects.
• For self-career, YB’s get exposure of channelizing their Subject knowledge to process improvement opportunities yielding tremendous benefits for self understanding.

Example of a Mobile Phone factory which intends to transition to Six Sigma methodology in a mobile phone factory:

Functional Roles vs Six Sigma Roles

SIX SIGMA VS BUSINESS PROCESS REENGINEERING (BPR) – A COMPARISON

What is Business Process Reengineering (BPR)?
BPR is process of streamlining the processes by challenging the each step of the current process. The classic example of BPR is from the banking industry. In the late 1980’s and late 1990’s, if we wanted to withdraw money from our bank account, following steps were involved:

• Go to the bank during banking operation hours
• Fill in the withdrawal requisition slip
• Submit the slip and receive a token number
• Wait until our token number is announced by the Cash Teller
• Then receive the money

The above process had a lot of drawbacks. We could go to the bank only during their operational hours. Certain banks did not have many branches and thus, we had to go to the location of the bank. We had to fill the withdrawal requisition slip. We had to wait in a queue where others are also waiting to withdraw money and so on.

What did the banking industry do? They radically changed the entire process and in the early 2000’s got in the ATM machines. Do we now need to go to our banks? Do we have to wait in queues? Do we need to fill any withdrawal slips? Everything’s changed. This kind of a process improvement is called as Business Process Reengineering.

In contrast to BPR, Six Sigma is an approach which focuses on variation (or uncertainty) reduction in processes. It is the only methodology available which is a documented process improvement methodology. Unlike BPR, Six Sigma uses a five step method to identify root causes and provide world-class solutions. Six Sigma does not involve a complete overhaul of the process like BPR. However, it requires out-of-the-box thinking and questioning status-quo to identify and implement solutions. An example of a banking process will be as follows:

Consider that you are applying for an account opening process in a bank. You will need to go through the following steps:

• Meet the banks representative and fill out Account Opening Form
• Provide KYC (Know Your Customer) details and submit identification proofs
• Telephonic verification takes place
• Physical Home Address verification takes place
• Account is created and check book and ATM card is sent to customer address

The above process may have an Account Opening timeline target of 48 hours and the mean performance of the process may be 40 hours, however, the variation may be as high as 8 days. There may be multiple instances where the account opening took place as late as 8 days. That’s a long time which is good enough to have angry customer!. And the customer does not look at the mean performance but looks at this specific variation just happened to him. When a Six Sigma project is applied to above process, it focuses on reducing this variation and streamlining the processes to achieve customer satisfaction. It may not necessarily change the entire process flow like it takes place in BPR. This is the key difference between Six Sigma and BPR.

Below is a brief comparison of BPR and Six Sigma:

Six Sigma vs Business Process Reengineering – A Comparison

WHAT IS STATISTICS?

In today’s world, we are constantly being bombarded with statistics and statistical information.
For example: Customer Surveys, Transactional Data, Marketing Information, Personal Information, among others.

Key questions to answer are:
How can we make sense out of all this data?
How do we differentiate valid from flawed claims?

Let’s take a scenario where you are working with a computer manufacturing organization and want to measure customer’s satisfaction score for the purchased product. You have kept the target for satisfaction as 80%, and the result of the first thousand surveys is 82%. Have you really achieve customer satisfaction with this result? On doing statistical analysis, you may find your mean survey performance may be 82%, however, the variation within the survey questions is very high i.e. there are many customers who may have rated low on the survey questions (specifically for the product) and would have also not liked the product. Thus, even if you considered 82% as an achieved score for customer satisfaction, your product may not likely survive in the market for long.

Thus, knowing only some arbitrary measurements within or outside Specification Limits doesn’t prove much about the real performance and quality. However, only statistics can reveal here the performance and quality and this is why Six Sigma is great, powerful and better than other gut-feeling oriented improvement methodologies.

So, what is statistics then? Statistics is a way to get reliable information from data.

What is Statistics?

Statistics is a tool for creating new understanding from a set of numbers. Statistics can be better understood under two branches:

1. Descriptive Statistics
2. Inferential Statistics

WHAT IS DESCRIPTIVE STATISTICS?

Descriptive Statistics is a method of organizing, summarizing, and presenting data in a convenient and informative way.
The actual method used depends on what information we would like to extract.

Areas of Interest for Descriptive Statistics

MEASURES OF CENTRAL TENDENCY

MEAN (Arithmetic Average):
Mean is the arithmetic average computed by summing all the values in the dataset and dividing the sum by the number of data values. For a finite set of dataset with measurement values X1, X2, …., Xn (a set of n numbers), it is defined by the formula:

Mean Formula

The sample mean is represented by x-bar.
The population mean is represented by Greek letter µ.

For a given data set: 12, 14, 11, 12, 12, 12, 15, 17, 22, 15, 12
Sum of data points = (12+14+11+12+12+12+15+17+22+15+12) = 154
Number of data points = (take a total count of observations) = 11
Mean = (Divide sum of data points into total number of data points) = 154/11 = 14

MEDIAN:
The middle number in the data set (n/2), when arranged in ascending order (small to large). If there are odd numbers of observations then median is the (n+1)/2th ordered value. If there are even numbers of observations then median is average of the two middle values.

For a given data set: 12, 14, 11, 12, 12, 12, 15, 17, 22, 15, 12
Ascending Order: 11, 12, 12, 12, 12, 12, 14, 15, 15, 17, 22
Thus, the middle number in the data set Median = 12

MODE:
Mode is the data point having the highest frequency (maximum occurrences).

For a given data set: 12, 14, 11, 12, 12, 12, 15, 17, 22, 15, 12
Maximum occurring data point, Mode = 12

QUARTILES:
A quartile is any of the three values which divide the sorted data set into four equal parts, so that each part represents one fourth of the sampled population.

• First quartile (designated Q1) = lower quartile = cuts off lowest 25% of data = 25th percentile
• Second quartile (designated Q2) = median = cuts data set in half = 50th percentile
• Third quartile (designated Q3) = upper quartile = cuts off highest 25% of data, or lowest 75% = 75th percentile
• The difference between the upper and lower quartiles is called the interquartile range.

MEASURES OF CENTRAL DISPERSION/VARIATION

STANDARD DEVIATION:
It can be interpreted as the average distance of the individual observations from the mean. Standard deviation of the population is represented as “σ”. Standard deviation of the sample is represented as “s”.

Standard Deviation Formula

In the above formula,
Sx stands for standard deviation of the sample.
xi is the value of each variable in the data set.
x bar represents the mean.
n is the total sample size.
And Σ stands for summation i.e. it says that we need to take the sum of “xi – x bar” for all values of x.

VARIANCE:
Variance is defined as the square of standard deviation. Variance of the population is represented as σ times σ. Variance for the sample is represented as “s times s”.

Variance Formula

In the above formula,
Sx stands for standard deviation of the sample.
xi is the value of each variable in the data set.
x bar represents the mean.
n is the total sample size.
And Σ stands for summation i.e. it says that we need to take the sum of “xi – x bar” for all values of x.

RANGE:
Range is defined as the difference between largest value in a data set and the smallest value in a data set.

Range Formula

ValueMax stands for the highest (maximum) value in the data set and ValueMin stands for the lowest (minimum) value in the data set.

In a given data-set like 12, 13, 11, 12, 12
Range: 13 – 11 = 2
Mean: (12+13+11+12+12) / 5 = 12
Variance: Sum of [(X – mean) times (X – mean)] / (n – 1) = [0+1+1+0+0] / (5 – 1) = 2 / 4 = 0.50
Standard Deviation: Square Root of 0.50 = 0.7071

WHAT IS INFERENTIAL STATISTICS?

Inferential statistics is also a set of methods used to draw conclusions or inferences about characteristics of populations based on data from a sample.

µ – The mean calculated for a population
σ – The standard deviation calculated for a population

Inferential Statistics

Population : A complete set of data “N”
Samples : A subset of data representing the population “n”

We do Sampling all the time. Whenever we execute a project, it has to be managed under many constraints such as time, cost, resources, among others. Thus, it may not be always feasible for the project to study 100% of the population to derive its inferences. For example, if we are improving the quality of ammunition manufactured in an ammunition factory, we may not be able to do quality test of 100% of the products. This is mainly because the product will get destroyed after testing. Thus, sampling is used in these cases where only a sample of products is taken in for quality testing and inferences are made for the population basis the result of this sampling.

Some other examples of sampling include manufacturing of cars in specific lots i.e. a car manufacturing company manufactures its cars in lots. If it is a lot of 400 cars, they will only test 10 – 15 cars and make an inference of whether to accept the lot or reject it.

Sampling helps in managing the project by utilizing lesser resources and is still effective in getting results. Sampling by and large is done by all of the organizations and thus, it is an important topic for our discussion.

ACCURACY VS PRECISION

Processes may have a problem of Low Accuracy and/or Low Precision. The processes and their associated measurements need to have High Precision and High Accuracy in order produce the expected business outcomes.

Accuracy vs Precision

As we see in the above picture on the top-left corner, all the darts are concentrated in one corner of the board instead of being concentrated at the center of the dart board. This is an example of High Precision and Low Accuracy. Processes which have high precision and low accuracy need to work towards improving their accuracy so that they start achieving the target.

Similarly, the picture on the top-right corner indicates that all the darts are around the internal blue line of the dart-board but are not exactly on target. This is an example of a situation with High Accuracy and Low Precision. Processes with High Accuracy and Low Precision need to focus on improving their precision so that they start achieving the target.