Six Sigma Overview Archives - 6sigma

Capability Analysis: The Power in Variables

OpEx Learning Team — Fri, 28 Feb 2025 06:04:56 +0000

The capability analysis is a valuable tool for Lean Six Sigma professionals. Every process has performance limits and variables. There is power in understanding those variables and variances that customers will tolerate. It offers a method of understanding these variables or limitations, and aligns them with customer expectations.

Understanding the Value of Capability Analysis

Understanding the true value of the variables in a process can be defined by the capability analysis. The capabilities and value of a process can be determined by comparing the width of the process spread to the width of the specification spread. When a process is capable, the process spread is smaller than the specification spread. When the process is centered and within the specifications, it is more capable of consistently producing product that meets customer expectations. The benefits is that it offers a key measure of performance that is easily translated in a visual representation that is applicable across all industries. Further value of the capability analysis is that it estimates the proportion of product that does not meet specifications. It provides calculations for the percentage of the time your process will fall above the upper specification, or below the lower specification. This can be compared to the yield, to determine how many failures are due to variation (common cause), and how many are due to outliers and mistakes (special cause). It also provides a summary number that explains how capable the process is of staying within the specification limits (known as Cpk and Ppk).

Here is an example:

If we are collecting data on the weight of cereal boxes, and we have to meet specifications between 85 and 92, then you can see below that we will not always meet those specifications. Sometimes the data falls below 85 (about 2.45%), and sometimes the data goes above 92 (about 7.1%). Therefore, this process is not capable. It will fail to meet specifications about 9.55% of the time. We should expect a yield of only 90% unless we reduce variation, shift the average, or work with our customers to define new specification limits.

If the process specifications were 80 and 100, then you can see below that the process would be capable. There is no chance that we will have data outside the specifications. This is performing close to a Six Sigma level (if the nearest specification is at least six standard deviations away).

Bottom line, it summarizes a significant amount of information in one chart.

Finding Value for Customers

Statistically speaking, you are assessing the capability to make this highest quality product by comparing the width of the variation in your process with the width of the specification limits. The capability analysis is crucial to achieve this with your project. By using this tool, you will be able turn your efforts from just meeting established requirements to applying change that reaps true quality improvements that are consistent. Ultimately, you will be able to offer the highest amount of quality and customer satisfaction from your process with the lowest amount of variation.

Capability Analysis is a valuable tool across the Lean Six Sigma practice. If you would like to learn more about Capability Analysis, consider the following items we offer: Histogram Generator (free), Process Capability (Intro and Advanced) eBook (Shmula Pro members), and Six Sigma training videos (Shmula Pro members). You can also attend a Green Belt or Black Belt training program, or Minitab training class.

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Statistical Process Control (SPC): Are You Monitoring the Behavior?

OpEx Learning Team — Fri, 28 Feb 2025 06:04:50 +0000

Are you monitoring vital behavior using Statistical Process Control (SPC)? Operating a business is is all about knowing what is going on across all of your platforms. For many who hear that statement, there are objections to the concept. Some feel it is micro-management. Others feel that monitoring that level of detail is just not reasonable, within the numbers of hours available during a work week. Not paying attention to details and trends can lead to some nasty surprises. Quality of product and process can slip, leaving customers disgruntled and unhappy. Using the right tools, with the right practices, businesses can keep a finger on the pulse of their operations.

Statistical Process Control (SPC) Monitors Behavior

The concept of using a control chart to monitoring statistical behaviors was introduced by Walter A. Shewhart while working for Bell Labs in the 1920’s. Shewhart and his staff at Bell Labs understood the importance of reducing variations in the manufacturing process and being able to closely monitor statistical behavior. Today, the process of Statistical Process Control (SPC) control charting allows a business to record data, then monitor the statistical behavior to see if trends or shifts are starting to occur. It creates an understanding of what an unusual event is (spikes of data either high or low) as compared to what typical process performance looks like (common cause or natural variation). This gives the Lean Six Sigma professional the opportunity to analyze and understand unusual behaviors, determine the cause of those outliers, and understand their importance. The statistical behaviors then become more clear and give Lean Six Sigma professionals the ability to more accurately control what is really important to the business.

Controlling Success

Leading up to and during the intense manufacturing period of WWII, control charts were a crucial part of our manufacturing success. Afterwards, the use of the tools slipped in the US, but took on another life in post-war Japan. In recent years, the use of SPC has significantly grown with the growth of quality and continuous improvement initiatives, especially with the broad acceptance of Lean Six Sigma practices. The use of these control methods have been greatly enhanced by digital software statistical and data collection systems.

For the Lean Six Sigma professional, the SPC is a crucial tool in their everyday practice.

If you would like some free SPC Excel templates to download, the following charts are available:

Variable Data
- Individuals and Moving Range (X and MR or I and MR)
- Average and Range or Average and Standard Deviation (X-bar and R or X-bar and S)
- Estimated Weighted Moving Average (EWMA)
- Cumulative Sum (CUSUM)
Attribute Data
- Proportions (P and NP)
- Defect Count (C and U)

What success have you experienced with SPC charts?

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Voice of The Customer: What They Really Think of You!

OpEx Learning Team — Fri, 28 Feb 2025 06:04:43 +0000

Living the Fantasy

Voice of the Customer programs are crucial to the success of your business. The problem is so many think they know exactly what their customers think and feel. You have been in business for 30 years and do things the same way, that’s what your customers want. Are you sure about that? For many businesses, they are either disconnected from their customers or they live with rose colored glasses when it comes to the voice of the customer. Those same businesses are very quick to deal with a vocal, disgruntled customer. Immediately, they are showered with attention, promises and apologies, then a discount to make up for the upset. The customer walks out and everyone breathes a sigh of relief and pats each other on the back, thinking they have saved another customer. Truth be told, what you think just happened is probably not what the customer thinks just happened. This begs the question: do you really know what your customer thinks about you?

What They Really Think of You

Using a solid Voice of the Customer program, you are going to get to the core of what your customers really think of you. For some, it might just be a bit unsettling. Here are some facts you should keep in mind as you begin your journey down the road of truth:

78% of customers have walked out on a transaction because of a poor service.
On average, loyal customers are worth more then 10 times as much as their first purchase.
It takes up to 12 positive experiences to make up for one negative experience.
91% of frustrated customers will not continue to do business with you.
40% of customers expressed that if they could improve one thing, they would improve the human element of the service.

These facts are both enlightening and staggering to some. They should disturb organizations enough to happily engage in a viable Voice of the Customer program that is effective. The days of reactive customer service experiences are over. Your customers expect you to be proactive and anticipate their needs and exceed them!

Listening to the Voice of the Customer

The Voice of the Customer is a process used to capture customer expectations and opinions, then provide world class services and products. The key to a successful Voice of the Customer program is to be extremely proactive, not reactive. This will allow your business to grow with your customer base, anticipating their expectations. These expectations are both stated and unstated. A vibrant program will instill a sense of loyalty and satisfaction towards your brand, in a consistent manner.

Resources

Consider downloading our eBook titled Voice of the Customer and Critical to Quality. Shmula Pro membership provides access to 34 other eBooks and reference guides

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GE and Six Sigma: The Beginning of a Beautiful Relationship

OpEx Learning Team — Fri, 28 Feb 2025 06:03:51 +0000

There has been a lot of discussion around the implementation of the Six Sigma methodology at General Electric back in the 1990’s. While the methodology actually got its start in the company in the late 1980’s, it wasn’t until CEO Jack Welch made it a central focus in 1995 that significant change began to take place.

Leadership was required to support the initiative 100 percent. At the time, leaders were required to take a 13-day, 100 hour training program, with completion of a project by the end of 1998.

The primary focus at the time was improvement on the manufacturing side. It was at GE that MAIC (Measure, Analyze, Improve, and Control) actually started; but since GE Capital, the financial services side of the company, accounted for nearly 40 percent of the profits of the company, it didn’t make sense to just focus on improving the manufacturing aspect. So consequently, GE Capital got on board with Six Sigma, and through their processes eventually added the Define stage, creating the acronym DMAIC as we know it today.

When Six Sigma was officially implemented at GE in 1996, there wasn’t any money saved: the company invested $200 million, and only saw a cost savings of $170 million. This would change in 1997, when CEO Jack Welch made the choice to tie in leadership bonuses to Six Sigma results. It proved to work: that year, $400 million was invested in Six Sigma, with an overall savings incurred of $700 million.

That year also saw some significant changes in the methodology at GE. Three different initiatives started to become a stronger focus at the company:

CQ (Commercial Quality) Applications: focusing on areas outside of manufacturing, such as inventory management processes and pricing
Creation of Green Belts: This role was created primarily to support the Black Belts and Master Black Belts, helping to support and analyze problems involved in quality improvement projects. It also ensured that Six Sigma would be fully implemented and everyone would get into the methodology.
Creation of Design for Six Sigma (DFSS): the objective was to determine the needs of customers and the business, in order to design a product or service, as opposed to improving an existing product or service.

The focus the first few years of implementation at GE was on internal cost savings; this began to change in 1998, where the attention changed to focus on the customer and issues impacting them, such as delivery and customer service.

So why was the Six Sigma program so immensely successful? Many attribute it to the focused, hands-on implementation by Welch and upper management. From surprise work floor visits from management, to consistent monthly reviews and reports, the Six Sigma team was all in in order to ensure a successful implementation. It certainly worked: over the course of five years, GE realized an overall cost savings of $12 billion.

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How to Manage Variation

admin — Fri, 28 Feb 2025 06:02:11 +0000

“How to manage variation” may be a question you’ve pondered. To answer that question, however, it’s first important to understand variation and variability first.

Most organizations collect and report on metrics that are not descriptive of their processes. Some of you may have noticed that most metrics that are reported are the average and some organization also use the median. Most people do not understand elementary statistics and their application to business. Here is the truth of the matter: Your customers do not feel the average ” they feel the variation.

An inside-out view of the business is based on average or mean-based measures of our recent past. Customers don’t judge us on averages, they feel the variability in each transaction, each product we ship, each user interface we build, each online process we create, each interaction we have on the phone, each corresondence we have through email or a letter or a phone, and every other process that touches the customer in some way or form ” online or offline.

Customers value consistent, predictable business processes that deliver world-class levels of quality. They feel the difference, not the average.

What is an Average?

The first measure we would arrive at is the mean, or the average, which is described below:

The averages takes a series of discrete units and is divided by the sum count of all those units. This is the Mean or the Average.

What is a Standard Deviation?

To get the standard deviation, which is the measure of the average variation from the Mean or the Average, then, we would calculate the standard deviation like below:

Understanding the mean and the distribution from the mean is important ” because our customer’s feel the variation, not the average.

Examples of Variation and Customer Experience

For qualitative measures, such as taste or texture of a consumer good, we do not think in terms of an average taste. Instead, we as customers, think in terms of oh, that tasted sweeter the last time I bought it or dish #2 from restaurant x tasted creamier this time than last. We feel the difference, not the average. Yet, even qualitative measure rolled-up in company meetings report on the average or mean.
For quantitative measures, we feel the variation, not the average. For example, (a) “The last time I ordered from Amazon, I received that package in 4 business days; but, on other times I receive my order usually after 6 days on standard shipping or (b) “Yesterday when I went to Taco Bell during lunch hour, I was in and out of there within 10 minutes, but on other days I’m there for my whole lunch hour or (c) “Since web x.0 company changed their user interface, it now takes me at least 3 more minutes to do what I used to do with the old user interface.”

These are some examples of quantitative measures. Yet, most likely, these types of metrics are reported as an average to upper management. Example (a) is a time-based measure, where an expectation was made from prior experience on deliver times; example (b) was also a time-based measure based on prior experience on server times; and example (c) is an example of a task-based usability test based on time, yet this metric will most likely be reported as an average such as 80% of of our population that follow this path complete this task with an average time of 245 seconds. It is a problem when our measures do not reflect how our customers are really feeling. Here’s a real-world example:

I was in charge of a click-to-ship process where the Marketing group made a customer promise that orders would be delivered within 10 business days. This is a great marketing tactic, but what did the data say about the current process capability?

Why is this Important?

The image above shows a data set that fits a normal distribution; the mean is calculated and so is the standard deviation. Given that the data fits the normal distribution, we can conclude that the data shows delivery times to be between ~3 and 12 days.

It’s important in several ways: (1), knowing this will help us better understand the customer experience ” that is, when do they typically receive their stuff. The range of ~3 to 12 days is arguably a bad customer experience ” there’s no smoothing effect here, but highly variable. The goal is to reduce variability so that the customer can have confidence in the company’s delivery estimates; (2) this empirical data can help the company pin-point where improvement opportunities might be; (3) this data might provide insight into product or lead to new product or shipment types.

*NOTE: The above is relevant in any process where there is a vendor-partner relationship or build-to-order process.

Basic Process Flow

Let’s back-up a little bit. All processes involve inputs, a server, and outputs. This flow of events can be approximated with the picture below:

The picture above is simplified, but several points of variability can enter this simple system. Below is a Variability Tree, showing Predictable and Unpredictable Variability. This distinction is important because managing either type of variability will be different.

For processes where arrivals are bursty or unpredictable, then the tools of Queueing Theory makes sense to apply; but for processes where the arrivals are predictable or seasonal, then it might make sense to apply the tools of Build-Up Diagrams.Most systems will show evidence of variability, as explained in the picture above; some will show both types, but typically one type will dominate.

How To Manage Variability

Below is a simple table that shows the impact of variability on a system. I built this quickly, but you can modify this table for your particular process; I’ve made it general enough so that you can apply it to your particular situation:

It’s About the Customer

I’m using the term Inventory in a generic way here ” it can mean people (patients) or actual things. For example, when the Waiting Room Size is bigger, then output can increase but there’s also an increase in the amount of patients in the room (patients = inventory). Use this trade-off table as it applies to your process.

Again, Variability is what people feel, not the average. Managing the variability in your process takes work and some knowledge of tools that are pragmatic and helpful. The average is an inadequate measure and is not descriptive of what the customer is feeling. There are other measures that basic business statistics makes available to us that will help us (1) understand the customer better, (2) understand better where we can improve (3) identify ways in which we can further delight the customer.

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Six Sigma Crash Course: Understanding the Six Sigma Belts

OpEx Learning Team — Thu, 29 Sep 2022 12:29:34 +0000

If you’ve been managing a business, you might have come across the term ‘Six Sigma Belts’ at some point in time. What are Six Sigma belts and why are they important? Let’s understand the fundamentals of Six Sigma certification.

Six Sigma Certification Levels

The Six Sigma Belts each signify a certification level, much like martial arts. The certifications end in the Master Black Belt — the highest certification level. A colored tier system has been adopted for Six Sigma certification.

Six Sigma White Belt

The White Belt indicates that the awardee has completed basic training in Six Sigma methodology and is familiar with the fundamental tools and techniques of Six Sigma.

Six Sigma Yellow Belt

The Yellow Belt is awarded to those who delve deeper into the working of Six Sigma and other specifics, including statistical analysis. You also get to learn how to apply Six Sigma principles to your projects and understand which processes to focus on. The Yellow Belt is typically for project team members and those seeking to improve the processes in their projects.

Six Sigma Green Belt

The Green Belt is experienced with data acquisition and analysis. Awardees support Black Belts with data analysis. Green Belts learn problem resolution for the improvement of process quality.

Six Sigma Black Belt

The Black Belt is awarded to an expert in Six Sigma principles. Such individuals are project leaders and initiate change which sets things going. They will also typically train, lead, and coach teams. Black Belts are excellent leaders and obtain a thorough understanding of team and business dynamics to assign roles to different members.

Six Sigma Master Black Belt

This is the highest certification level for Six Sigma. These individuals coach and train Green and Black Belts. They will decide which metrics to you and provide strategic directions to their team.

The Benefits of Six Sigma Belts

Managers often complete Six Sigma certifications and acquire the necessary belts based on the certification level. They will become key resource points for the business to maneuver operations in the right direction so as to minimize defects and improve quality.
A key advantage of gaining a Six Sigma Belt is that you get to expand your skills for use across sectors, as Six Sigma is an industry-independent methodology that applies equally well from banking to marketing.
Master Black Belts interact with key business leaders and management.
Black Belts are often hired as strategists, mentors, and leaders to guide entire teams.
Six Sigma Belts help their businesses stay compliant with national and international standards while maintaining profitability in their respective competitive spaces

Summary

Six Sigma Belts have been designed to recognize a professional’s command of the Six Sigma principles to lead process improvements. The belts model martial arts certifications, starting at the Six Sigma White Belt and going up to the Six Sigma Master Black Belt.

Professionals acquire the belts with practical experience, examinations, and training. The belts are certification levels that help individuals climb the ladder of success in their own careers and in ensuring the success of the businesses they work for.

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Six Sigma: A Step-by-Step Guide

OpEx Learning Team — Wed, 14 Sep 2022 23:26:24 +0000

Six Sigma has taken the world by storm. Businesses the world over have been using the technique to optimize their processes and workflows. Six Sigma was introduced by Bill Smith while he worked at Motorola in the late 80s.

Six Sigma provides businesses with a set of tools that help them improve their performance and product quality resulting in greater customer satisfaction. Let’s try to understand the fundamentals of Six Sigma in greater detail.

The Goal of Six Sigma Practices

Six Sigma aims to reduce the probability of defects occurring in a process. ‘Defects’ refer to errors, poor quality, poor productivity, and the like.

The term ‘Six Sigma’ refers to sigma, i.e., the standard deviation in a dataset. The objective is to create six sigmas to have very low defect rates, precisely 3.4 errors in a million. In other words, error-free products are produced 99.99966% of the time. While this might appear to be an unrealistic objective, it can be attained with the right tools and approach. Six Sigma provides exactly that framework for businesses to rely on.

Define

The Six Sigma process begins with a manager identifying the business goals and challenges. A process map will be created and customer requirements will be documented in a bid to understand them better.

Measure

Before beginning the optimizations, it is imperative to first study the current state of the processes deployed at various levels. To measure performance, data is collected pertaining to process performance from across touchpoints. It is important to ensure the data acquired is reliable and accurate as this forms the foundation for the next steps.

Analyze

This involves analyzing the data collected in the previous step to identify current challenges and what’s causing them.

Improve

At this stage, solutions are proposed to tackle the problems identified. Managers will implement the new solutions and continue measuring performance. Creative ideas are encouraged to propose ways to overcome challenges.

Control

The Control step involves adding controls to the processes to keep them moving in the right direction. Managers will still continue monitoring the data. The successes will be learned from and applied elsewhere in other processes.

Shortcomings of Six Sigma

Six Sigma might sometimes become too methodological leaving little room for a flexible and innovative approach. The approach can be a little rigid at times, especially for certain organizations that extensively harness creativity.

Six Sigma also does not allow for the use of new tools even though they might be useful for the organization. The approach requires strict adherence from across all teams so it usually becomes difficult to introduce new experiments.

In a Nutshell

Six Sigma combines both quantitative and qualitative measures to improve business processes. The goal is to minimize errors or defects as much as possible. This results in improved product quality, reduced costs, and greater customer satisfaction.

Implementing Six Sigma in practice requires a comprehensive understanding of the issues causing defects and wastes.

Six Sigma can also be blended with Lean practices, which results in the Lean Six Sigma approach. Lean Six Sigma reduces waste and cuts the cycle time short in addition to reducing errors.

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How to Use Analysis of Variance (ANOVA)

OpEx Learning Team — Fri, 20 Jul 2018 14:00:03 +0000

The total variation (orange) is broken up into 4 different factors using Analysis of Variance (ANOVA)

If you take a Six Sigma Green Belt or Black Belt training class, Analysis of Variance (ANOVA) is a core analysis tool that is taught. It is used to split variability from a data set into two key groupings: random factors (noise) and systemic factors (significant).

The ANOVA test is a useful tool that helps you establish what impact independent variables (inputs) have on dependent variables (outputs) within a regression model, experimental design or multi-variable study. For instance, ANOVA can be used to determine differences in the average Intelligence Quotient (IQ) scores of people from different countries (e.g. Spain vs. US vs. Italy vs. Canada).

In this example, the IQ scores would be considered the dependent variable, and countries would be an independent variable.

ANOVA provides a statistical test of whether the averages of several groups are equal, and therefore generalizes the traditional t-test to more than two groups, referred to as an F-test. If there were statistical differences between the average IQ scores within each country, then we would conclude that country is a systemic (significant) factor in explaining variation in IQ scores.

Many statistical packages can perform ANOVA analysis and help you determine which of your independent variables are significant, which makes the calculations much easier these days.

The History and Purpose of ANOVA

For the purpose of this type of comparison test, which was developed during the 20^th century, t-tests were the primary analysis tools available to analysts until 1918, the year when Ronald Fisher created ANOVA.

However, the term only became a buzzword in 1925 after it appeared in his book, Statistical Methods for Research Workers.’ Initially, the method found application in experimental psychology, but was later employed to wider applications such as farming and manufacturing. As a nod to its creator, the test is also known as the Fisher Analysis of Variance.

The ANOVA test is the first step when analyzing the factors that affect a data set, after assumptions have been validated. After the test has been completed, you can perform further tests on the factors which contribute to the variability, or discover that there are more factors not captured in your data that are missing from your analysis.

From the ANOVA analysis, a percentage of explained variation can be calculated (called an R-squared value), which is a number between 0% and 100%. If your analysis shows a percentage of only 33%, likely you are missing some important variables from your data set, and should find ways to gather additional data and re-run your analysis.

Types of ANOVA

Analysis of variance comes in two distinct forms: one-way and multiple. In a one-way ANOVA, the evaluation carried out is with regard to the impact of a single factor on only one dependent variable. This analysis helps to determine if all categories or groups studied are the same within that variable (such as each country). The purpose of the one-way ANOVA is to establish if there are statistically significant differences in the average of two or more unrelated groups within your dependent variable.

The multiple ANOVA extends the one-way ANOVA to two or more dependent variables. An example of a multiple ANOVA is where a company seeks to compare productivity of its workers on the basis of four independent variables…

Dependent: Productivity (average number of quality documents produced per hour)

Independent:

Age (Under 30, 30-50 years old, over 50)
Job experience in company (less than 5 years, 5-10 years, over 10 years)
Previous related work experience or education (no or yes)
Education Level (no high school degree, high school educated, college educated)

In addition to determining which of the 4 variables influence the productivity, it can also identify if any of the variables interact with each other, creating a more complicated relationship. An interaction in this example might be where previous related work experience does not matter for workers with over 10 years experience in the company, but makes a big difference for workers who are under 30 years old and with the company less than 5 years. The impact on productivity changes when you look at the groups of another variable (it’s not consistent across the board).

How Is ANOVA Used?

You will find ANOVA tables displayed in the these 3 popular Six Sigma tools: Regression Analysis, Gage Repeatability and Reproducibility (R&R) studies, and Design of Experiments (DOE).

For instance, a researcher could test students from different colleges in order to find out if the students attending one college are consistently outperforming those from the rest of the colleges. Another example of the applications of the ANOVA test is a researcher testing two different manufacturing processes to find out if one process used to create a product is more cost effective than the other.

You could even compare the beer consumption between regions of the world to see if they are similar or different.

Here is an example of an ANOVA analysis. The bottom section represents the ANOVA table, showing the Region, Error and Total terms. We will not go into the details of this calculation in this article.

Conclusion

If you are familiar with the traditional t-test, you will be excited to learn that the ANOVA test can replace the t-test, as it can handle more complex analyses that are difficult or impossible to perform with the t-test alone. Due to the increase in computing speed over the last few decades, ANOVA has become one of the most popular techniques used to compare group averages, which is needed to understand many research reports and conduct successful Six Sigma projects.

If you would like to learn more about t-tests, F-tests and ANOVA, sign up for Six Sigma Green Belt training with 6sigma.US >>>

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The Spread of Lean Six Sigma from Its Original Inception to Today

OpEx Learning Team — Mon, 03 Jul 2017 07:00:28 +0000

The Spread of Lean Six Sigma from Its Original Inception to Today

Lean is a popular concept in many organizations today, but its presence in industry is actually relatively recent, dating only a few decades back. It originates in Japan, and has close ties to the Kaizen philosophy, and today, it’s growing at a fast pace and enjoying a lot of recognition in many parts of the world.

Roots of lean methodologies

The fact that lean is popular on a global scale today owes mostly to the impression Japan made on the rest of the world with their exceptional manufacturing quality, after rebuilding the empire following the end of World War II. The country managed to implement successful reforms in its industry, and those innovative approaches to manufacturing, and overall organizational philosophy, were primarily responsible for the spread of lean to the rest of the world.

If you want to learn more about the history of Lean, check out our infographic on Lean history >>>

Six Sigma takes America by storm

About the time when lean was making an impact in the US, another methodology was gaining momentum, called Six Sigma. It was developed by Motorola to improve quality, using the concepts of Total Quality Management (TQM), packaged in an easier to learn approach.

The methodology was easier to embrace for American companies for two reasons:

There was limited knowledge and some cultural push back of the lean approach
The focus on data and the training regimen was new and exciting

As the growth in Six Sigma took off, especially after General Electric (GE) reported savings in the billions of dollars, there was still continued interest in the lean methodology. The tools and methodology seemed to fill a gap that Six Sigma could not address, the people side of improvement.

The boom of lean adoption occurred around this time as well, with the methodologies spreading across many sectors, from private to public ones, and it can now be seen in pretty much any industry and type of organization.

Lean Six Sigma is born

Lean Six Sigma in particular didn’t exist as a separate entity until the beginning of the 2000’s, when it broke out from its parent group of philosophies. Lean methodologies still exist on their own as well, but the relationship between all these members of the family are becoming more and more apparent in recent years, and it will be interesting to see where we end up in a decade or so. Will they become synonymous with each other, or start to pull apart back into their purest forms.

Is it completely blended together? Not really. How they blend together is still being tested and experimented with. Most companies still slightly favor one approach over the other (usually the one they started with). But rarely do companies today just subscribe to only lean or only Six Sigma.

Specific differences

The main difference between lean and Six Sigma and the factors combined in Lean Six Sigma are in the focus of each methodology. Lean is mostly concerned with the reduction/elimination of waste in order to increase value, while Six Sigma attempts to quantify the problem and turn it into a statistical equation to be solved.

Lean is focused on small improvements that can be implemented by all employees, whereas Six Sigma invests time into training key employees on the methodology so they can learn to improve processes as they move up the company.

Regardless of what approaches are used, it’s important that the process is guided by someone experienced enough to know which aspects of Lean Six Sigma work best for that particular organization. Think of the change agent as a contractor for building a house, and he/she must have good knowledge of both Lean and Six Sigma, in order to be able to apply the correct approach for the situation.

What can we expect in the future?

As the concepts are taking hold in more areas, we’re likely going to see them transformed in interesting and creative ways, leading to the discovery of even more tools for efficient resolution of problems and elimination of waste.

Some sectors are contributing a lot to the development of Lean Six Sigma, and the US government has been a major entity in the growth of the methodology. And the more eyes we have focused on the problem, the better results we’re going to see in the near future.

It’ll be particularly interesting to follow the tech industry in this regard, as the combination of lean methodologies with modern technology, AI, machine learning and similar tools, can potentially lead to a revolution in the area. Computers are much better than us at parsing large volumes of data and looking for interesting patterns in them, so it’s not unlikely that the next major development in the area of Six Sigma could come from that area exactly.

When the analysis can be uncovered through machine learning, will there still be a need for a Black Belt? We foresee some continued improvements in automation, but ultimately there will still be process improvement consultants needed to interpret the results, and work with the process experts and workers to interpret the results, and implement improvements in a way that can be embraced.

Conclusion

The next few years are probably going to be the most active period in the lifetime of Lean Six Sigma so far, and we expect to see plenty of interesting developments in the field from the various organizations that have adopted these methodologies.

Where do you think Lean Six Sigma is headed in the future? Add your comments below…

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Green and Black Belt Certification Salaries

OpEx Learning Team — Wed, 31 May 2017 03:39:14 +0000

Green and Black Belt Certification Salaries

Progressing in the Six Sigma hierarchy carries many benefits, and it’s a good idea to familiarize oneself with the requirements behind each level. A common question that arises among beginners concerns the viability of those higher levels:

Are there reasons to obtain a Black Belt (BB) level, after getting to the Green Belt (GB) level?
What will it do for my career, my job skills and my salary?

The question most people want to know is how it will impact their salary. That is not completely affected by certification level, as it will depend on education level, industry, years of experience, and professional qualifications of the job as well. However, there are some average numbers we can provide, to give you a sense of value for the training and certification.

According to the 2016 Quality Progress Salary Survey,

…U.S. respondents who’ve completed any level of Six Sigma training earned $17,357 (17,357 USD) more on average than those without Six Sigma training. For Canadian respondents, that difference is $12,475.

If we look at average salaries by specific belt level, we can see the impact each level adds to the salary

None = $83,000
Green Belt = $93,500 (+$10,500)
Black Belt = $105,000 (+$11,500)
Master Black Belt = $129,000 (+$24,000)

Let’s look a little closer at Green, Black Belts and Master Black Belts (MBB), since they are the most common ones.

Green Belt

The place to start with Six Sigma certification is the Green Belt. It requires 1-2 weeks of training, and completion of at least one project. You will learn many of the core improvement tools, that can help you address 80-90% of the problems you will face in your job. This is often a part-time role, focused in the area you are currently working, and you keep your current job title.

On average Green Belts will see a $10,000 (USD) increase in salary compared to those without a certification.

Obtaining a GB is just the beginning, as it can take years for a Green Belt to truly understand the tools and methodologies to be most effective on their own (without Black Belt oversight). Since everything is new, there is a lot of information being provided to the Green Belt that may or may not be used in their job and project work. Sorting out what is most relevant can be frustrating for some, and discourage them from moving to the next level (Black Belt).

However, once the Green Belt has completed 2-3 projects, their confidence will increase, the tools and methodology will make more sense, and they will know whether pursuing Black Belt is worthwhile. Not everyone will proceed past Green Belt. It is challenging, and it separates those only interested in a salary increase from those interested in becoming an improvement expert and helping others.

Black Belt

A Black Belt in Six Sigma is the target for many people. It increases your visibility to many external companies, which can bring some very attractive salary figures. It is quite common to see people leave their current company after the achieve a BB certification, as they realize that other companies value it more than their current company.

Again, we reference the salary survey:

The BB itself is a high-value investment, adding $21,970 for those U.S. respondents with that level of training versus U.S. respondents without Six Sigma training ($104,974 vs. $83,004). In Canada, the largest premium comes for those with BB training”who earn $17,894 more than those with Green Belt training ($104,710 vs. $86,816).

BB’s are expected to stay up to date with the latest Six Sigma concepts and approaches, making it even more important to carry a good portfolio, and keep it developed and updated as best as possible. They are also expected to expand into different parts of the organization, such as finance, sales/marketing, information technology, human resources, etc. They are also expected to teach classes, and mentor Green Belts through their initial projects, which could be a new skill set they will need to develop.

Recertification is also required, to prove that the knowledge hasn’t been lost over time, and they are continually growing their skills, which can happen to those not in a full-time improvement role.

Master Black Belts

Moving up in the hierarchy to MBB comes with even more benefits (both financial and non-financial), prompting others to keep evolving their skills and knowledge about Six Sigma practices to get to this level.

The Master Black Belt level is the highest of all, as it comes with the most challenging requirements. They are expected to be able to teach and mentor Black Belts, successfully run large/complex projects across the organization, implement a successful improvement program, and speak to all levels of the organization, from the value-added worker to the CEO.

On average Master Black Belts will see a $46,000 (USD) increase in salary compared to those without a certification.

MBB’s are often passionate about Six Sigma, as they really see the value through a deep knowledge of the tools and approach. This intrinsic motivation is what drives them to put in the extra practice and education.

MBB certification is no easy feat, as it can take 5-10 years to achieve in a full-time improvement role, or 10-20 years in a part-time improvement role. MBB certification requires 10+ documented successful projects, teaching of GB and BB level classes, and proof of coaching and mentoring GB’s and BB’s to help them achieve certification.

Conclusion

It’s important to stay sharp and advance up in the ranks as quickly as possible, if one is motivated by compensation, as the different belts can change the situation in terms of finances significantly (as we showed above).

There is a hefty investment behind reaching the higher ranks of Six Sigma. However, the potential for salary increase becomes less important as one progresses up the hierarchy of belt levels. The desire to help others solve problems, and the opportunities that can open up outside of your current role end up becoming even more important motivators.

When one considers all the benefits that come with Six Sigma certification, there’s really no doubt whether it’s worth pursuing it! We recommend reaching out to a Black Belt or Master Black Belt, if you are interested in learning more about the job and expectations.

Ready to obtain a Six Sigma certification, or advance to the next belt level?

Check out online and classroom training near you >>>

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The Roles of Different Belt Colors in Six Sigma

OpEx Learning Team — Thu, 09 Mar 2017 07:44:53 +0000

The Roles of Different Belt Colors in Six Sigma

Six Sigma is a complex process improvement methodology developed by Motorola. Due to its complexity, it requires the presence and participation of certified professionals for it to be implemented properly and successfully. Similar to martial arts, Six Sigma employs different belt colors to signify different levels of certification and experience. The belts also signify what kind of roles in the Six Sigma implementation the individuals holding are qualified to fill.

There are three main belt colors:

Black Belt
Green Belt
Yellow Belt

Additionally, it’s very common to also have Master Black Belt with some additional variations and colors also being used to a varying extent.

Black Belts

Certified Six Sigma Black Belts are professionals who are qualified to lead Six Sigma improvement projects usually in a full-time capacity. They have a thorough understating of the methodology, and the necessary skills and experience to implement the DMAIC process improvement strategy with all its steps. Black Belts need to be well versed in both the underlying philosophy and principles of Six Sigma, and all of its statistical tools and support systems. A proper Six Sigma implementation is not possible without the presence of a certified Black Belt. Black Belts teach classes, work with management on the deployment strategy, and help Green Belts complete their projects.

Green Belts

Certified Six Sigma Green Belts are also professionals who fully understand the Six Sigma methodology and all of its methods and principles, but unlike Black Belts, are not full-time change agents in their organizations (part-time). Most managers (champions) in a Six Sigma organization tend to be Green Belts, because they have other responsibilities besides improvement projects, but their understanding of the methodology still needs to be thorough. The main difference lies in the time they devote to it. Green Belts are usually team members in larger projects led by Black Belts, but can also lead projects of their own if the size of the particular project does not require full-time involvement, or the expected completion time frame is allowed to exceed 6 months or more.

Yellow Belts

Certified Six Sigma Yellow Belts are not expected to have the same depth of knowledge about the Six Sigma methodology as Black and Green Belts, but they still have a certain level of familiarity and understanding of all Six Sigma concepts. Yellow Belts are always part-time participants who understand the basics of the methodology, and can serve as team members on improvement projects, but aren’t experienced enough to lead significant projects of their own.

White Belts

The Six Sigma methodology does not actually include certification requirements for While Belts, but this is a term commonly used in many Six Sigma organizations. Those are individuals who become familiar with the Six Sigma methodology and concepts at their local organization at a high level, and who do not participate in the main project team. White Belts can support Six Sigma projects locally and can be part of problem-solving teams.

Master Black Belts

Certified Six Sigma Master Black Belts are highly trained Six Sigma professionals whose main job is to coach Black Belts and Green Belts. A Master Black Belt is highly experienced in applying the Six Sigma methodology, and has an absolutely thorough understanding of the methodology as the whole, and how to implement it at a scale that goes beyond a single improvement project. Master Black Belts are Six Sigma leaders that devote all their time to overseeing all the Six Sigma projects, ensuring consistency and direction. Additionally, their in-depth understating of the statistical tools used by the methodology might have them devote time to crucial statistical analysis as well. They have to carry out two distinct and different skills: providing strong technical and statistical knowledge, and coaching and mentoring executive leadership.

The Importance of Certification

The Six Sigma methodology has strict certification standards, which mean that certified professional with specific belts colors are the only ones that should perform important improvement projects. This means that when organizations implement Six Sigma, they can produce reliable results and consistency can be maintained at a very high level. Additionally, this makes Six Sigma experience transferable between organizations of different kinds. Unfortunately, this can also be a negative with Six Sigma, as it takes a while to develop enough Black and Green Belts in the company to spread throughout the company. Often times, external consultants are used to bridge the short term gap.

Are you interested in increasing your salary with a Six Sigma certification, and helping your company improve? Check out upcoming classes in your area through 6sigma.US >>>

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The 8 Forms of Deadly Waste in Lean Six Sigma

OpEx Learning Team — Thu, 09 Mar 2017 07:25:55 +0000

The 8 Forms of Deadly Waste in Lean Six Sigma

Lean Six Sigma is one of the most advanced and effective methodologies available for business process improvement and optimization. It is especially adept in battling a wide range of problems and inefficiencies. To help better understand and deal with waste, this approach classifies them into the 8 Forms of Deadly Waste. This classification is important because it makes waste much easier to uncover and then eradicate. It also helps you identify environmental improvement opportunities.

The 8 Forms of Deadly Waste can be easily remembered with the mnemonic DOWNTIME:

Defects
Overproduction
Waiting
Non-value added processing
Transportation
Inventory
Motion
Employee skills underutilized

Let’s examine each one individually:

Defects

Whenever a business process ends up with an outcome that was not the desired one, all the effort and resources that had gone into producing it would have been wasted. This is why defects and errors of any sort are always undesirable, and are always a major source of waste. This does not just apply to manufacturing, but to providing services to clients and especially processes internal to the company.

Overproduction

We all know that overdoing anything in our personal life is something to be avoided, but this is a type of waste that often goes completely unnoticed in the business world. Whenever something is produced in a higher amount that was necessary, it’s a type of waste, Worst of all, it also multiplies all the other wastes through the rest of the processes. Overproduction often stems from the inability to estimate and forecast business correctly, and from fear of being late with deliveries. However, it is an expensive and risky way to protect against late deliveries to the customer.

Waiting

Any idle time that is part of a business process is actually time wasted. If a step in the process has to be delayed while waiting for raw materials, parts, equipment, instructions or information, it is always going to lead to waste, since the organization’s potential productivity is going to be squandered. That time cannot easily be made up except through overtime and delayed shipments. Every time work stops, it’s a waste, and an opportunity to improve.

Non-value added processing

When trying to standardize an activity, many businesses experience the pitfall of adding steps to a process that are not actually adding value. This means that all the resources and time that go into those steps are wasted, and could have been used to produce value instead. Examples of this type of waste might vary from having the same thing reported twice in the same spreadsheet or report, to having an unneeded layer of packaging to a product that does not add any value to the customer or protect the product from damage while being transported.

Transportation

Most businesses processes tend to include transporting materials, people, products, equipment, tools or even information and very often at least some of that turns out to be unneeded. This is really an activity that doesn’t add any real value to a process and is a common point of possible failure. This means that excess transportation leads to a lot of waste and could have adverse effects on the reliability of the outcome on top of that.

Inventory

Inventory waste is especially dangerous despite the fact that it sounds quite benign at first glance. Whenever there is an excess supply of materials, information or products, it is often a sign of deeper inefficiency or inadequacy of the current state of the process involved. Everything that stays in inventory instead of being utilized has required an input of resources to get to where it is and all of those resources have been used quite inefficiently. Additionally, while something is in inventory it is always subject to deterioration, so its value will always decrease while the cost of having it around will steadily become higher.

Motion

Motion requires both time and energy and no matter if the motion is physical or virtual, an excess of it is bound to slow a process down and create significant waste. This is a very intuitive concept, it’s just essential that one applies it to everything from physical movement of people and machines to unnecessary movement of files on virtual systems.

Employee skills underutilized

The workforce available to a business is one of its most important assets and resources, and forms a significant part of the cost of providing the customer with the product or service sold. As with any other resource, not using it to its full potential is a waste. But humans are creative and are natural problem-solvers, which means that allowing them to apply their abilities, skills and experience would always lead to unpredictable positive benefits to the business.

Connection to the Environment

In addition, these 8 forms of waste have an environmental impact as well.

Environmental Impacts of the Deadly Wastes

Defects and overproduction can lead to items needing to be disposed of. Inventory requires extra floor space, lighting, heating and cooling. Waiting pushes out the work, requiring overtime and more energy to keep the lights on. Transportation requires fuel and extra packaging. If you’d like to learn more about the environmental impact of these wastes, check out the EPA Lean and the Environment toolkit >>>

Next time you are evaluating a process, look for DOWNTIME opportunities to reduce time and reduce your environmental impact.

To learn more about Lean, download the Toyota training slides >>>

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When to use Lean, Six Sigma, and Kaizen

OpEx Learning Team — Thu, 02 Mar 2017 07:50:26 +0000

When to use Lean, Six Sigma, and Kaizen

There are some managers and consultants that are religious about using a particular methodology, and too often stick to just what it has to offer. But as you probably know, everything in life comes with its own strengths and weaknesses. More importantly, there is nothing in the world that is absolutely suitable to every situation and problem. If that is true for everything else, it is quite logical to assume it is going to be true about business improvement and quality assurance methodologies. This is why the best managers realize that each methodology might be uniquely suited to given situations.

Because of those reasons, when looking into Lean, Six Sigma, and Kaizen, it would be a very good idea to not disqualify any of them, but to take the best of each approach, and adopt it to your company or organization.

Before you do this, you must have a good understanding of each methodology in order to be able to successfully determine when to use what. While this article will surely give you some basic guidelines to help you choose between Lean, Six Sigma, and Kaizen for a particular initiative, project or a problem, you should always seek out advice from experienced practitioners.

Level of Importance

The three improvement methodology that we are looking into in this article can all lead to significant improvements, but they require different levels of effort, time and resources, and each can produce different kinds of results and improve different types of metrics, as we discussed in our last post. Because of this fact knowing the business case or “burning platform” for the company will help you decide how much effort we can expend on improving it.

Kaizen is the approach that requires the least amount of effort, and is something that can be applied to absolutely everything. When non-essential processes require improvement, the best solution is often to apply Kaizen, which will allow the people involved in the process to start making changes for the better, without anybody being overly occupied with the task or risking a customer issue if an improvement doesn’t work. Incremental improvements will lead to satisfactory and measurable results over a longer period of time.

If the process is of higher importance to the business and its competitiveness, it might be a better idea to start involving more time-consuming methods like Lean and Six Sigma. Unlike the gradual improvement that Kaizen provides, both Lean and Six Sigma can lead to more rapid and more significant innovation, but require more involvement and more effort for them to be effective.

Level of Complexity

Another important factor that can help you decide between the three methodologies is how complex the process that needs to be improved or the problem that needs to be solved. More complex problems require more complex analysis and solutions. If the complexity seems to be of the highest order, Six Sigma is usually a fitting solution, because it employs more advanced statistical tools and problem solving structure that allows for the team to make sense of the complexity they are facing. Six Sigma is a data-driven methodology that can really drill down to the core of a problem, and the solutions can lead to significant impacts.

Lean can also deal with complexity, but it provides solutions on a more practical level, so it can provide improvement a bit faster but with a bit less depth.

Lastly, Kaizen doesn’t deal with complexity that well and it’s more suited to simpler problems that require simpler solutions.

It’s very important to notice that this doesn’t meant that Kaizen or Lean are a less valuable approach. They can’t deal with the level of complexity that Six Sigma does because they don’t require the same amount of effort. Often, a manager could go through all of the methodologies while solving a single problem. They could start with Kaizen and get some results quickly, then go through Lean to address a bit more complexity, and finally using Six Sigma to identify interactions and even more complex relationships within the process.

At Shmula, we suggest the following approach:

Teach Kaizen to all employees to build up a problem solving culture, and increase employee engagement
Identify an important area, and apply Lean to that focused area, then spread Lean to the rest of the organization
When encountering difficult problems, implement Six Sigma on that specific problem, and then deploy Six Sigma concepts and thinking across the organization, but only after Lean is implemented

What do you think? Would this approach work for your organization?

The post When to use Lean, Six Sigma, and Kaizen appeared first on 6sigma.

What is the difference between Kaizen, Lean and Six Sigma

OpEx Learning Team — Thu, 02 Mar 2017 06:48:25 +0000

What is the difference between Kaizen, Lean and Six Sigma

When looking at business process improvement methodologies like Kaizen, Lean and Six Sigma, it’s very easy to see a lot of similarities. After all, these frameworks aim to make a business as competitive as possible, while striving for top-notch performance, efficiency, effectiveness and reliability. Additionally, all of the three methods employ cycles of gathering data, evaluating it, making practical and quantifiable optimization, and tracking the results. This means that even if you have a previous familiarity with each methodology, it’s easy to spot a lot of similarities and apparent overlaps, especially as one gets buried under an avalanche of buzzwords. On top of this, many of the professionals implementing each methodology might also draw additional inspiration for refinements from other frameworks, which blurs the lines another step further.

While many methods might sound analogous in theory, Kaizen, Lean and Six Sigma have some significant differences that stem from their core values and assumptions about business and improvement in general. To put this in practical terms, the most influential differences between these three methodologies lie in the exact type of metrics each one values the most, and devotes effort to improving. It should come as no surprise that even the slightest changes to the particular metric that importance is placed upon would certainly lead to decisively divergent outcomes and results.

Because of these facts, comparing Kaizen, Lean and Six Sigma can be of great value to a business and its management team, and is an integral part of selecting the best methodology to implement in any given situation.

What is Kaizen

The first of the three approaches to examine is Kaizen. Its name comes from Japanese, and loosely translates to change for the better. Broadly speaking, it’s not just a management and business process optimization methodology, but a general philosophy that could be applied to both one’s personal life and a business organization.

The two core beliefs that inform how Kaizen operates are:

Everything can be improved
Small gradual changes can lead to significant overall and long term improvements

This means that Kaizen can be applied to absolutely anything, and it doesn’t really have a specific type of metric that it favors. It doesn’t usually produce rapid results (unless you conduct a kaizen burst event). However, when applied over a long period of time, it creates a mentality where problems are fixed without a committee or leadership approval for every little change. This leads to more employee engagement and involvement in the process.

Learn more about Kaizen >>>

What is Lean

While Kaizen is a very general approach to improvement, Lean is a methodology with a background in manufacturing that focuses on a very specific type of metrics. It’s a framework that is already older than a century, and it was a pivotal part for Henry Ford’s Model T’s success. Obviously, the Lean methodology has evolved over the years, but its main focus has remained the same eliminating waste in order to free up time to increase value to your customer. The main target of this approach is efficiency across the system (value stream). It has proven quite successful in improving or removing all the inefficient steps of a process that waste time, energy, finance or raw materials. Lean provides a competitive edge since it allows a business to manufacture products or provide services faster and at lower costs. It also is easy to learn, which makes it easy for all employees to be involved in improvements.

Check out other lean topics such as Andon, SMED, Takt time, and Kata >>>

What is Six Sigma

While Kaizen and Lean both look at resources and ways to optimize a process, the core goal of Six Sigma is achieving consistent and reliable results. It is primarily focused on improving the quality of the result or outcome of the process. This is why it’s sometimes referred to as a quality assurance methodology, despite the fact that it has been successfully applied beyond just quality improvements.

As far as results go, Six Sigma strives for near perfection, where the process succeeds 99.99966% of the time. To achieve this seemingly impossible result, training and coaching is required in order to learn the tools and framework, modeled after the martial arts belt system. These results lead to lower costs, improved customer satisfaction, and helps drive continuous improvement in order to achieve higher and higher sigma levels.

Check out our Six Sigma training videos >>>

Which one do I use in my organization, or what order should I implement them? We answer these questions in our next blog titled “When to use Lean , Six Sigma and Kaizen“

The post What is the difference between Kaizen, Lean and Six Sigma appeared first on 6sigma.

What is the Taguchi Loss Function

OpEx Learning Team — Mon, 27 Feb 2017 01:53:00 +0000

One crucial and highly beneficial aspect of Six Sigma is all the statistical and analytical tools it comes with. All of them can help a business and its management gain deeper and more complete understanding of the business processes implemented, so they can be optimized and adjusted for a higher standard of results and outcomes.

One such curious and powerful concept is the Taguchi Loss Function (named for Genichi Taguchi), which is used to assess the financial impact of deviating from the target or optimal performance level, usually set by the customer.

What does the Taguchi Loss Function measure exactly

One of the core assumptions of Six Sigma is that not allowing the outcomes of business processes to deviate from the target is bound to create value for the particular organization. As you drift away from the target, the performance of the process, product or service starts to degrade in the eyes of your customer.

When examining this concept, one can intuitively incur that there is going to be a correlation between not meeting the quality target and waste of resources. Of course, whenever resources are wasted and whenever the quality of the results from a business process is low, this is going to have some financial ramifications that can be interpreted as a loss. This is exactly what the Taguchi Loss Function measures and what it is used to represent graphically.

When the outcome of a business process is exactly as targeted with zero deviation, the Taguchi Loss Function also has a value of zero. As deviation increases, the loss incurred and measured by the function increases in a quadratic manner. Even deviation within the Six Sigma range incurs some nominal loss, and that loss does not appear suddenly at its boundary, but increases gradually with the increase in deviation.

If we use the image above, we see that the ideal orange has ripened at Day 5. This is where the customer is most satisfied (or least dissatisfied). If we move one day earlier or later, we start to incur some dissatisfaction, as it is no longer the best orange possible. Even if it is acceptable to sell an orange on Day 3 or Day 7, those oranges are not as good as Day 5 oranges.

Learn more about this example of the Taguchi Loss Function with oranges >>>

When is the Taguchi Loss Function useful

When a business decides to optimize a particular process, or when optimization is already in progress, it’s often easy to lose focus and strive for lowering deviation from the target as an end goal of its own. But whenever we are talking about business, the most important and the most fundamental metric is always the profit. In that sense, the Taguchi Loss Function can be extremely valuable, as it is a tool that can transform deviation from target to a value with a financial representation, which affects the bottom line directly. Going back to the orange example, the customer would be getting an orange with less value on Day 3 or Day 7, yet paying the same price as Day 5 oranges. This may lead to financial impacts of lost future sales or more customer returns.

This is why this tool is widely used when selecting business processes to optimize first. Applying the function allows for the managers and consultants to measure the financial impact that the planned process improvement would have for the organization. This means that every project can be evaluated with a specific value for its potential financial impact. which makes prioritization a much easier and more informed decision.

The most famous case of this concept in practice was Ford’s study of similar transmission parts manufactured by an overseas supplier (likely Mazda). They found that they had superior performing parts due to less variation, even though all parts were within specification limits. Note: you can skip ahead to 5:08 where they discuss the specific study.

A more general usage

Despite the fact that the Taguchi Loss Function in the context of Six Sigma is generally used to measure the correlation between process performance and financial loss, it actually doesn’t have to be limited at that. It can be used to measure and predict the resulting losses in a wide variety of other metrics like customer satisfaction, product quality and employee time utilization efficiency.

The Taguchi Loss Function is an invaluable resource when planning and strategizing. This is why it is not a tool that is utilized just by Six Sigma alone, but by a wide variety of other business process optimization methodologies like Lean and Lean Six Sigma.

What we find most valuable with Taguchi Loss Function is the concept and change in mindset that it brings. It helps people realize that variation has a financial impact, and a company should not be complacent with quality just because they are meeting the specification limits. As the video showed, reduced variation can be a competitive advantage in your industry!

How does the Taguchi Loss Function apply to your work? Add your comment below…

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