INSE6210—Winter 2017 (Week3)

Total Quality Methodologies in Engineering

Project Organization, Selection, and

Definition
The whole employee involvement process springs from asking all your
workers the simple question, “What do you think?”. Donald Peterson,
Former Chairman of Ford Motor Co.
How do you eat an elephant? One bite at a time. Unknown
If you don’t drive your business, you will be driven out of business. B. C.
Forbes

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Dr. Nizar Bouguila Concordia University
 Summary: Last Lecture
n  What DPMO is
n  Six Sigma problem solving methodology:
DMAIC
n  Design for Six Sigma (DFSS) problem solving
methodology: DMADV
n  How to describe Six Sigma and DFSS in a
short and clear statement
Have you ever been lost? What is the first thing you need to do before
proceeding? If you answered “find out where you are,” then you realize the
importance of knowing your current status in order to get to your desired
destination. Six Sigma is about knowing where you are and where you are going.
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 In this lecture you will

•  Learn how to define a project

•  Learn Critical to Quality (CTQ)

•  Learn Pareto analysis

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First Step in DMAIC: Define
•  Selecting the problem to address
•  Clearly define the improvement opportunity
•  Building commitment among all the
stakeholders.
•  Understanding the process and customer
requirement from a high-level perspective
•  Before the Define step – creation of an
effective structure to carry out the effort
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 Organizing for Six Sigma

•  Project – a temporary work structure that

starts up, produces some output or outcome,
and then shuts down.
•  Project management – all activities associated
with planning, scheduling and controlling
projects.

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 Project life cycle
•  Project initiation
•  Project planning
•  Project assurance
•  Project control
•  Project closure

•  Don’t forget customer involvement in all

stages!!
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We are living, once and for all, in the Age of the Customer. Did
you hear what we said? There has never been a better time to be a
customer— or a tougher time to be a supplier. Customers have
higher expectations and more choices than ever. Which means
that you have to listen more closely than ever. Forget building a
learning organization. You first have to build a listening
organization—a company whose people have their ears to the
ground.
—Rekha Balu, Senior Writer
Fast Company
May 2000

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 Project Initiation
•  Clearly define the goals, directions,
priorities, limitations, and constraints of the
project
–  When and how they can be accomplished

•  Identify a project champion, project

manager, and other team members

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 Project Planning
•  Project definition: Define the project, its objectives,
and deliverables. Determine the activities that must be
completed and the sequence required to perform them.
•  Resource planning: Determine the resources needed
for each activity: personnel, time, money, equipment,
materials, etc.
•  Project scheduling: time scheduled for each activity.
•  Project tracking and control plan: track the progress,
anticipate the problems and develop alternative plans.

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 Project Assurance
•  “Customer relationship management”
while the project is in process

•  Interface: customer, project champion,

team members

•  Estimate how successful the “deliverable”

will perform
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 Project Control
•  Systematically review the time, resource, cost, and
performance measures invested in the project
•  A typical control system
–  Project plan: schedule, cost, performance goals or
requirements
–  Continuous monitoring system: measures the current
results or status
–  Reporting system: identifies deviation from the project
plan.
–  Timely action: correct variations.

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 Project Closure
•  Ensure that
–  The project has been signed off by those who must do
so
–  All bills have been paid
–  Team members have been thanked and properly
recommended for future positions
–  “Lessons learned” are examined and documented
–  Project success and best practices are communicated
and disseminated

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 Six Sigma Project Teams
•  Champions - senior-level managers who promote
and lead Six Sigma deployment
•  Master Black Belts – Full-time Six Sigma experts
•  Black Belts – Six Sigma technical analysts
•  Green Belts – Functional employees who work on
projects on a part-time basis
•  Team Members – Individuals from functional
areas who support specific projects
•  Don’t forget customer!
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 People Skills
•  Technical skills
–  Not what things people need to know.
–  What things do they need, to know how to do.
•  Soft skills
–  Shared vision: can unify a team and provide
motivation (discussion)
–  Behavioral skills require both knowledge and
practice
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 Skills for Team Leaders
•  Conflict management and resolution
•  Team management
•  Leadership skills
•  Decision making
•  Communication
•  Negotiation
•  Cross-cultural training
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 Skills for Team Members
•  Communication: for gathering data and
information from others and sharing their findings
among the team
•  Meetings
•  Shared decision making

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 Team Dynamics
•  Team life cycle
–  Forming
–  Storming: challenge the way that the team will
function.
–  Norming: team members agree on roles and ground
rules.
–  Performing: productive phase, the team members
cooperate to solve problems and complete the goals of
their assigned work.
–  Adjourning: move on to other project.

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 Ingredients for Successful
Teams (1 of 2 )
•  Clarity in team goals
•  Improvement plan
•  Clearly defined roles
•  Clear communication
•  Beneficial team behaviors

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Ingredients for Successful Teams
(2 of 2)

•  Well-defined decision procedures: use the

data
•  Balanced participation: everyone should
participate.
•  Established ground rules: outline acceptable
and unacceptable behaviors.
•  Awareness of group process
•  Use of scientific approach
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 Problems and Opportunities for
Six Sigma Projects
•  High costs
•  Excessive defects
•  Customer complaints
•  Low customer satisfaction

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 Six Sigma Problem Types

1.  Conformance problems: users are not happy with

system outputs.
2.  Unstructured performance problems: poor sales for
example
3.  Efficiency problems: cost and productivity issues
4.  Product design problems: design new products that
better satisfy user needs
5.  Process design problems: design new processes or
revising existing processes.

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Key Factors in Six Sigma Project
Selection
•  Impacts on customers and organizational
effectiveness
•  Probability of success
•  Impact on employees
•  Fit to strategy and competitive advantage
•  Financial return, as measured by costs associated
with quality and process performance, and impacts
on revenues and market share
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 The Cost of Quality (COQ)
•  COQ – the cost of avoiding poor quality,
or incurred as a result of poor quality
•  Translates defects, errors, etc. into the
“language of management” – $$$
•  Provides a basis for identifying
improvement opportunities and success
of improvement programs
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 Quality Cost Classification

•  Prevention
•  Appraisal
•  Internal failure
•  External failure

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 Prevention Costs
•  Quality planning costs: salaries, new equipments,
studies.
•  Process control costs: costs spent on analyzing
production processes and implementing process
control plans
•  Information system costs: develop data requirement
and measurement
•  Training and general management costs: internal and
external training, staff expenses

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 Appraisal Costs
•  To ensure conformance through
measurement and analysis of data:
– Test and inspection costs
– Instrument maintenance costs
– Process measurement and control costs

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 Internal failure costs
•  Result of unsatisfactory quality found before
the delivery of a product:
–  rework cost
–  Cost of correction actions
–  Downgrading cost: selling a product at a lower
prize because it does not met specification
–  Process failure: unplanned equipment repair

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 External failure costs
•  Poor quality products reaches the
customer:
–  Costs due to customer complaints and
returns
–  Product recall costs: cost of repair or
replacement
–  Product liability costs: legal actions

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 Pareto Analysis

n Pareto analysis – technique to identify the

“vital few” from the “trivial many” (because a
high proportion of quality issues resulted
from only a few causes)
n  Pareto chart
A bar chart that plots frequencies of
occurrences of problem types in decreasing
order
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 Pareto Analysis
•  Separating vital few from the trivial many
•  The process of ranking opportunities to determine which of
many potential opportunities should be pursued first
•  Should be used at various stages in a quality improvement
program to determine which step to take next
•  Especially useful in defining and selecting a project
•  Example:
–  On what type of defect should we concentrate our
efforts?
–  On what type of complaint should we concentrate our
efforts?

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 Pareto Chart
•  Helps a team focus on causes that have the
greatest impact
•  Displays the relative importance of problems in
a simple visual format
•  Helps prevent “shifting the problem” where the
solution removes some causes but worsens
others

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 Pareto Analysis Procedure
1.  Determine the classifications (categories) for the Pareto
chart
2.  Select a time interval for analysis
3.  Determine the total occurrences for each category
(categorize categories with small occurrences as “other”)
4.  Compute the percentage for each category
5.  Rank-order the categories from the largest total
occurrences to the smallest
6.  Draw Pareto chart
7.  For the category with the highest rank, repeat 1-6

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 Process Definition
(1/2)

•  Poor performance is often a symptom

of a design or operations flaw in a
process.
•  One approach to identify good Six
Sigma projects is to find work
processes having poor performance
and analyze them.
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 Process Definition
(2/2)

•  Define the process: its start, end, and what it does using a
high-level process map (ex. SIPOC diagram)
•  Describe the process: key tasks and sequence, people,
equipment, methods, materials
•  Describe the players: customers, suppliers, process
operators
•  Define customer expectations: what the customer wants,
when, and where
•  Determine what data are available or need be collected
•  Describe the perceived problems: failure to meet customer
expectations, excessive variation 34
 Models for Project Selection
•  Categorization into different levels based on impacts on results:
–  Level1: projects directly affect an organization’s profit margin.
–  Level2: projects results in redeployment of resources inside an
organization to increase operating efficiency or productivity
–  Level3: projects affects operations by avoiding expenditures or
increasing the chances of obtaining higher future revenues.
•  Scoring models
–  Project selection matrix (W. M. Kelly: "Three steps To Project
Selection", Six Sigma Forum Magazine, November 2002).

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 Project Definition
(1/3)

•  Formal mission statement (charter) that defines the

project, its objectives, and deliverables.
•  The charter represents a contract between the project
team and the sponsors.
•  Six Sigma project charter should clearly define the
problem to be addressed, the (internal, external)
customers requirements on which the project focuses,
existing measures, the project benefits, a project
timeline, the resources and the data needed to carry
out the project.
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 Project Definition
(2/3)

•  Project charter is a document that provides purpose

and goals for the Six Sigma project to the team

•  A simple project charter example from the previous

week
–  Reduce (goal) the variability in the cycle time (measure) to
produce an error-free accounting report (process) from the
current level of 66,811 DPMO (current status) to 3.4
DPMO (target) by January 10, 2006 (deadline)

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 Project Definition
(3/3)

•  Two important parts of a project definition

are:
–  High-level process map (SIPOC)
–  Customer requirements identifications and
validation.

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 SIPOC Diagrams
•  SIPOC - Suppliers, Inputs, Process, Outputs, and
Customers

Suppliers Inputs Process Outputs Customers

•  Provides a broad view of a process and who is

the process owner, how inputs are acquired, who
the process serves, and how it adds value

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 Example: SIPOC Process Map

Metal Stamped Body

Fabricators Parts Fabrication

Painting Finished
Dealers
Automobiles

Component Parts &

Assembly
Suppliers Sub-assemblies

S I P O C
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Example of Business Processes
Process Flow Unit Input-Output transformation

Order fulfillment Orders Receipt of order - delivery of product

Production Products Receipt of materials - completion of the finished

product
Shipping Products Shipment of the product – delivery to the customer

Customer service Customers Arrival of customer – departure of customer

New product Projects Recognition of a need – launching a product

development
Cash cycle Cash Expenditure of funds – collection of revenues

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 Voice of the Customer (VOC)
•  Customer requirements expressed in the
customer’s own terms
•  Methods for gathering:
–  Comment cards and formal surveys
–  Focus groups
–  Direct customer contact
–  Complaint analysis
–  Internet monitoring

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 Performance-Importance Analysis,
Identifying Key CTQ’s from VOC
Performance
Low High

Low Who cares? Overkill

Importance

High Vulnerable Strengths

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Kano Model of Customer Needs
(CTQs)
•  Dissatisfiers: expected requirements,
Basic quality
•  Satisfiers: expressed requirements,
Requirements that customers say they want
•  Exciters/delighters: unexpected features

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 Creating a Customer Focus
From a Customer’s standpoint, neither quality, cost
nor schedule always comes first. When customers
evaluate the products and services they receive, they
make trade-offs between all three key factors in
order to maximize value. The challenge that
suppliers face is to provide their customers with the
maximum value, which often is a balancing act
between quality, cost and schedule.
The First Among Equals, Quality Digest, June 1999

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 Project Review – Define (1 of 2)
•  The team has reached agreement on and has clearly
defined the problem or opportunity to address
•  The project charter is developed and agreed upon
•  The team understands the strategic and financial impact of
the project
•  The team agrees that the project can be completed
successfully
•  A project plan and timeline have been developed to guide
the entire Six Sigma project
•  The right mix of people are on the team
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 Project Review – Define (2 of 2)
•  Key stakeholders outside of the team have been identified
•  All team members have consistent expectations
•  Team members have received any necessary “just-in-time”
training
•  Appropriate resources – financial and human – have been
committed to conduct the project
•  The voice of the customer and CTQs are fully understood
and documented
•  The team has developed a high-level process map.
•  Key performance measures have been identified for
measuring success of the project
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 Break-Even Analysis
•  Common tool for analyzing the relationship between sales
volume and profitability
•  Break-Even: Sales volume where net income = 0
•  There are two types of costs that are important in breakeven
analysis: variable and fixed
–  Total variable costs = quantity(Q) * cost per unit(V)
–  Fixed costs(FC) are constant, regardless of output, over
some time period (e.g. salary, rents, utility)
–  Total costs = fixed + variable = FC + VQ
•  Break-even (Q*)
–  PQ – (VQ + FC) = 0
–  Q* = FC/(P-V)
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 Cost Example
•  ABC firm has the following cost structure
–  Price: $1000/unit
–  Variable cost: $600/unit
–  Fixed cost (per quarter): $350,000

–  What is the break-even quantity?

•  350,000/400 = 875

–  The company sells 1000 units in the quarter. What is

the quarterly profit if?
•  1000,000 – 600,000 – 350,000 = 50,000
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Income Statement and
Break-Even Diagram

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 Benefits of Six Sigma:
Cost Saving
•  Assume the ABC firm has been suffering from 10% defect
which can not be reworked
•  (For simplicity) assume the Six Sigma project can completely
eliminate the defect
•  How would you calculate the cost saving?

•  When the defect rate is 10%, in order to produce 1000, the

company needs to produce 1000/0.9 = 1111 units.
•  Because the cost is reflected in the variable cost already, the
unit cost of producing a unit is 600000/1111 = $540.054 (and
not 600000/1000=600.000)
•  The total variable cost of producing 1000 units is thus
$540,054
•  The total profits becomes $109,946 (the profit is increased51 by
109.964-50,000=$59,946)
 Income Statement and
Break-Even Diagram (after Six Sigma)

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 Cost of Six Sigma
•  Example
–  Assume the Six Sigma project for ABC
company costs $150,000 and the benefit from
improvement lasts 10 quarters
–  $15,000 can be spread over 10 quarters
–  The fixed cost becomes $365,000

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 Income Statement and
Break-Even Diagram (After counting Six
Sigma Project as an Asset)

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 Six Sigma Project as
an Investment not a Cost
•  Return on Investment:
ROI = Return / Investment

–  ROI of the Six Sigma Project in the previous example

–  100(Operating advantage – Amortization) /Investment=
100(44,946-150,000/10)/150,000 ≈ 20%/quarter
Operating advantage=94,946-50,000

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 After this lecture you should
•  Be able to define a project
•  Be able to explain CTQ and Kano’s quality
model
•  Be able to perform Pareto analysis
•  Be able to calculate ROI of Six Sigma projects
•  Read Chapter 3 from the Textbook.

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