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SCRC Article Library: Definitions: What Should the Professional Supply Chain Manager Know about Six Sigma?

Definitions: What Should the Professional Supply Chain Manager Know about Six Sigma?

Published on: Jan, 18, 2011

by: Zach Breitenbach, MBA ‘03 Manuela Eilert, MBA ‘03

Definitions

Critical-to-Quality (CTQs)

Methodologies

p. Six Sigma is a business process that allows companies to achieve drastic financial improvements by “designing and monitoring everyday business activities in ways that minimize waste and resources while increasing customer satisfaction”. Traditionally, quality control programs have focused on detecting and correcting manufacturing and design defects. However, the Six Sigma methodology focuses on techniques that prevent defects and errors from occurring at any stage of the process. (1)

Statistically speaking, the phrase “six sigma” means six standard deviations. For a process to be six sigma it must have six standard deviations between the mean and the nearest specification limit. This allows only 3.4 defects per million opportunities (DPMO). A process’s sigma value is raised by lowering the variation around the mean. When a process reaches the level of six sigma, it is often said to have zero variation and therefore ‘zero defects.’ (2)

Critical-to-Quality (CTQs)

The performance target Six Sigma does not refer to individual products as wholes. Instead, it refers to critical-to-quality characteristics (CTQs). CTQs are defined as “the key measurable characteristics of a product or process whose performance standards or specification limits must be met in order to satisfy the customer.” (1) In a simple product, such as a screwdriver, there may be only two or three CTQs. However, complicated products such as electronics or personal computers could have thousands.

The distinction between a product and the CTQs within a product is important because it allows for comparisons between different products or processes based upon complexity. In general, a component has at least three opportunities for defects: form, fit, and function. (2) Because of the distinction between products and CTQs, it is more appropriate to say that that “the average opportunity for nonconformance within a product is six sigma,” rather than stating that the product itself is six sigma. (1)

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p. Methodologies

The Six Sigma methodology is implemented using two sub-methodologies: DMAIC and DMADV.

DMAIC is an acronym that stands for define, measure, analyze, improve, and control. This process is usually implemented when a product or process is already in place, but not meeting customer specifications.

DMADV stands for define, measure, analyze, design, verify, and is used when a new product or process needs to be implemented or when the current process has already been optimized using DMAIC. DMADV is also known as DFSS which stands for Design for Six Sigma. Six Sigma Black Belts and Green Belts normally perform these implementations. (2) Companies operating at the three sigma level that pursue Six Sigma can expect to make a one sigma improvement in their first year. This would result in a 20 percent increase in profit margin, a 12 to 18 percent increase in capacity, a 12 percent reduction in headcount, and a 10 to 30 percent reduction in capital. In the second year of Six Sigma, a company can expect to improve to 4.7 sigma and the financial benefits continue to increase exponentially. From 4.7 sigma, the improvement is more difficult and requires redesigning processes. A company can expect to move from 4.7 sigma to 5 sigma in its third year and from 5 sigma to 5.1 sigma in its fourth year. (1)

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SCM TopicsSix Sigma

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