Design for Six Sigma and Value Creation

Design for Six Sigma and Value Creation

Abstract
The essence of Six Sigma can be summarized in two sentences, (1) Do the right things;
and (2) Do things right. ‘Do the right things’ means creating superb designs for the
product or service. ‘Do things right’ means creating and maintaining highly consistent
performances for both products/services, as well as the process. Six Sigma is not only the
strategy for variation and cost reduction, but should also be a strategy for creating value
for customers and businesses. In this paper, we will illustrate that many tools, such as
value engineering, TRIZ, and process management, can be integrated into Design for Six
Sigma practice to create high value products and services.
Keywords
Design for Six Sigma, Value, Customer Value.
1. Introduction
Six Sigma is a very successful business strategy that has transformed many world-leading
multinational corporations. The Six Sigma movement has created tremendous benefits in
terms of cost savings, defect reductions and improved customer satisfaction. The term
‘Six Sigma’ indicates a very low level of variation and defect rate compared with
specifications and requirements. In the early years of the Six Sigma movement, the goal
of Six Sigma was to reduce the defect level in order to reduce the ‘cost of poor quality’.
In recent years, there are several new initiatives brought up to the Six Sigma movement.
The noticeable initiatives include Design for Six Sigma (DFSS) (Chowdhury 2002, Yang
and El-Haik 2003); and Lean Six Sigma (George 2003). Currently, the one popular
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slogan for the Six Sigma movement is ‘the last wave of Six Sigma is defect reduction, the
next wave of Six Sigma is value creation’. However, there is little in the literature that
gives a clear explanation of how this new wave of Six Sigma can create value. Though
there are plenty of books and papers that explain what Design for Six Sigma is, and what
Lean Six Sigma is, there is a lack of literature that gives clear explanations about when
should we choose ‘regular’ Six Sigma process improvement strategy characterized by
DMAIC, when we should choose Design for Six Sigma and when should we choose Lean
Six Sigma. There is also scant literature that discusses how to integrate all these new
initiatives to form a comprehensive Six Sigma strategy for business excellence.
This paper is intended to give a clear explanation on how various Six Sigma initiatives
can create values for customers and businesses and how to integrate these Six Sigma
initiatives to form a comprehensive Six Sigma strategy.
This paper has 5 sections. Section 2 will give an overview of customer value, business
profit, and the essence of Six Sigma. Section 3 will discuss how Design for Six Sigma for
product can be deployed to create customer value. Section 4 discusses the role of process
management in customer value, business profit and Lean Six Sigma. Section 5 gives the
conclusion and summary of this paper.
2. Customer value, business profit and Six Sigma
2.1 Customer Value and Business Profit
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Profitability is one of the most important factors for any successful business enterprise.
High profitability is determined by strong sales and low overall cost in the whole
enterprise operation. It is common sense that:
Business profit = Revenue – Cost
In addition:
Revenue = Sales volume x Price
Here the ‘price’ means ‘sustainable price’, that is, the price level that customers are
willing to pay with satisfaction. Many researchers (Sheridan 1994, Gale 1994) have
found that both sales volume and sustainable price are mostly determined by ‘customer
value’. As a matter of fact, it is customers’ opinions that will determine a product’s fate.
Customers’ opinions will decide the price level, the size of the market and the future
trend of this product family. A product that has high customer values is often
characterized by increasing market share, increasing customer enthusiasm towards the
product, word of mouth praise, reasonable price, a healthy profit margin for the company
that produces it, and increasing name recognition.
Sherden (Sherden 1994) and Gale (Gale 1994) provided a good definition for customer
value. In their terms, customer value is defined as perceived benefit (benefits) minus
perceived cost (liabilities), specifically:
Definition 1: Customer Value
Customer Value = Benefits – Liabilities
The benefits include the following categories:
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1. Functional benefits
• Product functions, functional performance levels,
• Economic benefits, revenues ( for investment services )
• Reliability and durability
2. Psychological benefits
• Prestige and emotional factors, such as brand name reputation, .
• Perceived dependability. (For example, people prefer a known brand product
other than unknown brand product)
• Social and ethical reasons. ( For example, environmentally-friendly brands).
• Psychological awe: many first-in-market products not only may provide
unique functions but also give customers a tremendous psychological thrill,
for example, the first photocopying machine would have really impressed
customers).
• Psychological effects of competition.
3. Service and convenience benefit
• Availability (easiness to access the product or service)
• Easiness to get service support in case of product problems or failure
The liabilities include the following categories:
1. Economical liabilities
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• Price
• Acquisition cost: such as transportation cost, shipping cost, time and effort spent
to obtain the service
• Usage cost: additional cost to use the product/service in addition to purchase price,
such as installation
• Maintenance costs
• Ownership costs
• Disposal costs
2. Psychological liabilities
• Uncertainty about product/service dependability
• Self esteem liability of using unknown brand product
• Psychological liability of low performance product/service
3. Service and convenience liability
• Liability due to lack of service
• Liability due to poor service
• Liability due to poor availability (Such as delivery time, distance to shop)
(End of Definition)
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It is clear that this definition of customer value is comprehensive and it characterizes
what types of product or services that customers are willing to pay a premium price to
buy. Here we give two examples in understanding this customer value definition:
Example 1: Brand name and customer value
There are numerous cases where customers are willing to pay a higher price to buy a
product with better brand name image, because brand name image is a psychological
benefit for the customer. Toyota and General Motors have a joint venture in California
that produce an identical car model,. Some of the units have a Toyota brand, and some of
the units have a GM brand,. However, the units with Toyota brand can sell a few hundred
dollars more than the identical cars with the GM brand. Brand name image is important
aspect of customer value.
Example 2: Convenience versus price
For identical retailing items, the neighborhood store will sell them at higher prices than
those in discount chain stores. It is because of the perceived convenience in obtaining
these items in neighborhood stores. This is a part of service and convenience benefit
defined in customer value.
Based on the research by Sherden (Sherden 1994) and Gale (Gale 1994),
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higher customer value is directly linked to higher revenue. Therefore, business success
can be achieved by having operational parameters which
• Maximize customer value
• Minimize cost
We can see clearly that in order to gain business profit, creating products with high
customer values with low cost is a must. Many business enterprises often fail to see the
multiple aspects of customer values. They may create a product with tremendous
functionality, but very poor in customer service, accessibility and psychological aspects
of the product.
2.2 Six Sigma in a Nutshell
Six Sigma is not just statistical jargon; it is a comprehensive business strategy with
multiple aspects. Figure 1 illustrates the various aspects of Six Sigma.
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Figure 1 Six Sigma as a Business Strategy
2.2.1. Six Sigma Fundamental Beliefs
In the category of ‘Six Sigma fundamental beliefs’, there are several important
philosophical aspects as follows:
1. Do the right things, and do things right.
Do the right thing means that we have to design absolutely the best
product/service/process in terms of customer value. Do things right means that not only
do we have good design, but also have products, services or processes that perform
consistently so that all customers will be satisfied at all times.
2. Process is every thing.
Process is one of the most important concepts in Six Sigma. (Yang and El-Haik 2003)
Six Sigma is a process-focused approach to business improvement. The key feature is
‘improving one process at a time’. The process here could be a production system, a
business process, or a product usage process.
What is a process? Caulkin (1989) defines it as being a "continuous and regular action or
succession of actions, taking place or carried on in a definite manner, and leading to the
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accomplishment of some result; a continuous operation or series of operations". Figure 2
depicts the key elements of a process.
Figure 2 Processes
Figure 3 shows a generic business operation model. In this model, there is always a core
operation inside any business enterprise together with many internal business processes.
For a manufacturing-oriented company; the core operation will be product development
and production. For service-oriented companies, we can still conceptually think of
‘services’ that are delivered to the customers as ‘service products’, then a serviceoriented
company will have similar model as that of manufacturing-oriented company.
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Figure 3 Business Operation Model
3. The objective of Six Sigma is to deploy ‘Do the right thing, and do things right’ into
every process.
Here the processes include all internal business processes, such as core operation,
accounting, and so on. All processes should include the products/services that are
delivered to customers. We can see clearly that by optimizing all these using ‘do the right
thing and do things right’, we will produce the products that have the highest customer
value, and we will run the business with optimized processes. The optimized business
BUSINESS PROCESSES
BUSINESS MANAGEMENT
SUPPLIER MANAGEMENT
INFORMATION TECHNOLOGY
Core Operation
Im pet us
Ideat ion
Concept
develo p -
ment
Design P roduct ion Sale/
Service
Products
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processes will give us the lowest cost, highest efficiency and highest reliability, so we
will have excellent revenue and lowest cost; that will ensure business excellence.
2.2.2 Organizational Infrastructure
In order to achieve perfect products and processes in a business enterprise, Six Sigma
needs to build an organization infrastructure to manage and execute Six Sigma
improvement activities. A typical Six Sigma organizational infrastructure is illustrated by
Figure 4
Figure 4 Six Sigma Organizational Infrastucture
Leader/
Champion
Master Black Belt
(MBB)
Black Belts (BB)
Green Belts
(GB)
Project Team Members
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Champion: A Champion is a responsible person for coordinating a business roadmap to
achieve the Six Sigma quality goal. He/she will select Six Sigma projects, execute control,
and alleviate roadblocks for the Six Sigma projects in his or her area of responsibility.
Master Black Belt: A Master Black Belt is a mentor, trainer, and coach of Black Belts
and others in the organization. He/she will bring the organization up to the required Six
Sigma professional competency level.
Black Belt: A Black Belt is a team leader implementing the Six Sigma methodology on
projects. He/she will introduce the methodology and tools to team members and the
broader organization.
Green Belt: A Green belt is either an important team member that helps black belt, or a
Green Belt can take the lead in successful small, focused departmental projects.
Project Team Members: Project team members will participate in the project teams,
support the goals of the project, typically in the context of his or her existing
responsibilities. Each team member is expected to continue to utilize learned Six Sigma
methodology and tools as part of his or her normal job.
2.2.3. Training
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All Six Sigma professionals will undergo various training dependent on their duties. For
example, Black Belt training usually takes 4 weeks. Black Belt candidates will learn
some basics of business processes, project management, team leadership skills, process
mapping and many statistical methods, .In order to get Black Belt certification, the Black
Belt Candidate needs to complete at least one project and these projects should show
verifiable financial benefits to the company.
2.2.4 Six Sigma Projects
Six Sigma activities are featured by doing many projects. The goal for each project is
usually “improving one process at a time” . Not necessarily; Six sigma projects will often
attack various aspects of a large process simultaneously. I think you should say
“improving one aspect of a process at a time”.
Six Sigma developed sophisticated operational procedures for the following aspects of
projects:
•Projection Selection
•Projection Flowchart
•Project Management
•Project Evaluation
Project Selection
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Six Sigma leadership team will select the projects with the following characteristics:
1) Strong tie to business bottom lines:
The projects should have substantial positive impact on profit, the projects should have
strategic importance, and the projects usually enhance customer satisfaction and loyalty.
2) Visible and measurable results:
For regular Six Sigma process improvements projects (DMAIC), it is desirable to see
meaningful results within 6 months,. The project goals can be quantified and measured.
3) Feasibility:
The project scope should not be too big, the project tasks should not be too difficult to be handled
by the current Six Sigma project team members, and the potential solutions should be relatively
low cost.
Project Flowchart
A typical Six Sigma process improvement project usually follows ‘DMAIC’ project
flowchart. The DMAIC means the following 5 project steps: Define-Measure-Analyze-
Improve-Control. Specifically:
• Define the problem and customer requirements
• Measure the defects and process operation.
• Analyze the data and discover causes of the problem
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• Improve the process to remove causes of defects
• Control the process to make sure defects don’t reocur
Project Management
During each project execution, periodic reviews are conducted to examine project
progress, identify the project bottlenecks and resolve problems. Many details in the
project, such as time, resource, manpower and task completion are recorded and
monitored carefully.
Project Evaluation
On completion of each Six Sigma project, the real financial benefits will be tracked and
verified by financial accounting personnel within the company.
2.2.5. Six Sigma Methods and Tools
Many methods and tools are used in the regular Six Sigma process improvement
(DMAIC) activities. Six Sigma Green Belts and Black Belts will go through rigorous
training to learn these methods and tools and apply them in the projects. The commonly
used methods and tools include:
Business process mapping: Process flow charts
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Project management: Critical Path Method (CPM), Project Evaluation and Review
Techniques (PERT), Microsoft Project Management
Team and leadership: Team working, Team Communication and Facilitation
Probability and statistics: Probability distributions, Mean, Variance, Hypothesis testing,
Confidence Intervals and so on.
Simple graphic tools: Histogram, Scatter Plot, Pareto Charts and so on.
Advanced statistical tools: Linear Regression, Design of Experiments, Multi-vari Charts,
Control Charts, Process Capability, Measurement System Analysis and so on.
Basic Lean Manufacturing: 7 wastes, Kaizen and so on.
In this section, we have discussed the key elements of Six Sigma implementation with
business enterprises. We can see that Six Sigma is an agile business strategy that is open
to new initiatives and new methods. For example, Design for Six Sigma (DFSS) (Yang
and El-Haik 2003) is a new trend in the Six Sigma movement that focuses on the
product development process and it brings with it a new DFSS project flowchart and
many new methodologies. However, under the framework of Six Sigma illustrated in
Figure 1, DFSS can be easily introduced into a company with existing Six Sigma
program, because only the “ Training” and the “Methods and Tools” modules need to be
re-addressed. A Six Sigma company can simply launch some new training programs for
its existing Six Sigma professionals. After training of key professional, DFSS program
can get rolling by launching DFSS projects based on DFSS project flowchart.
In next section, I am going to show that customer value of the product can be improved
by Design for Six Sigma and other Six Sigma activities. In Section 4, I will show that
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‘lower cost’ can be achieved by applying process management and lean operation
principles.
3. Create Customer Value by Design for Six Sigma for Product
Design for Six Sigma (DFSS) is a systematic methodology that uses tools, training, and
project management discipline to optimize the design of products, services and processes,
in order to maximize customer value at Six Sigma quality levels.
The key difference between the regular Six Sigma featured by DMAIC and DFSS is that
DFSS involves either a creative new design of a product or a process, or a redesign;. The
regular Six Sigma methodology is usually focused on making a process improvement -
with little design change.
In the manufacturing industry, Design for Six Sigma is needed because:
•The design decisions made during the early stages of the design life cycle have the
largest impact on total cost and quality of the system. It is often claimed that up to 80%
of the total cost is committed in the concept development phase (Fredrikson, 1994).
• Poor design concepts adopted at early design stage are easy to correct during the early
stage of product development cycle, but are very costly to correct at a later stage.
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• Superior customer value, creative concept, robust performance of the products are
intrinsically determined in the early design stage
Design for Six Sigma can accomplish:
• Designing the product with maximum customer value
• Doing the design activities correctly first time, which avoids costly design-build-test-fix
cycles
• Bringing creativity to the design
• Reducing design vulnerabilities
• Making the design robust
• Shortening lead-times, cutting development and manufacturing costs, lowering total life
cycle cost and improving the quality of the design.
Design for Six Sigma (DFSS) is also a project based activity. DFSS projects usually take
a longer time to finish but they also have greater impacts. The most popular DFSS project
methodologies are:
1) IDOV (Identify, Design, Optimize and Verify): IDOV project procedure is
usually used for a new design.
2) DMADV (Define,Measure, Analyze, Design and Verify), DMADV procedure is
usually used for a redesign project.
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Based upon the DFSS objectives, any successful DFSS strategy should include the
following categories of tools in its toolbox:
1. The tools that deploy customer value into products:
They include customer surveys; quality function deployment, customer value analysis
(Gale 1994), Value Engineering and so on.
2. The tools that bring creativity, reduce design vulnerability and ensure product
manufacturability and robustness
They include the theory of inventive problem solving, axiomatic design, quality function
deployment, Pugh concept selection, design target cascading, Taguchi methodology,
design of experiment methods, response surface method, and computer simulation.
The second set of tools are needed because only knowing what customer value is, is not
sufficient to deliver sound design concepts and entities that are deliverable with low cost,
and high reliability under given technological conditions.
A sound DFSS strategy (Yang and El-Haik 2003) that has these two categories of tools
should be able to deliver customer value into product designs.
Unfortunately, there are many in-house versions of DFSS that are featured by QFD plus
an upgraded version of DMAIC tools; most of them are statistical based. The fact is that
at early stage of design, there is very little data and traditional statistical based quality
methods are not very useful in developing sound design concepts.
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Design for Six Sigma (DFSS) strategy can also be applied to processes, because in many
cases the original design of the process is fundamentally flawed, merely patching the
holes in the process will not yield satisfactory performance for this kind of process.
Design for Six Sigma for Process is a Six Sigma approach which will involve changing
or redesigning of the fundamental structure of the underline process. The goal of DFSS
for Process is to design or restructure the process in order for the process to intrinsically
achieve maximum process performance.
A Design for Six Sigma for Process is needed:
• When a business chooses to replace, rather than repair, one or more core
processes.
• When a leadership or Six Sigma team discovers that simply improving an existing
process will never deliver the level of quality customers are demanding.
• When the business identifies an opportunity to offer an entirely new product or
service.
4. Process Management and Lean Six Sigma
Process management is a body of knowledge for process improvement. By enhancing
efficiency and effectiveness, Process Management offers the potential to improve
customer satisfaction and, ultimately, to offer increased profits, high growth and long
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term business. Most organizations are motivated to manage their processes through one
of several dimensions. Fuglseth et al (1997) proposes these dimensions as being quality,
throughput, efficiency, response speed/time, work-in-progress and process cost. In order
to maximize profits, an organization will need to reduce process cost, increase throughput
and at the same time improve quality.
Process Management involves five phases, these being (1) process mapping, (2) process
diagnosis, (3) process design, (4) process implementation, (5) process maintenance. The
process-mapping element of this, as mentioned above, involves a definition of the process
and captures the issues that will drive the process design and improvement activities.
Once the documentation of the objectives and the process has been completed, diagnosis
can proceed.
Process management shares many common goals with Six Sigma. However, process
management does not apply a vast array of quality methods for process improvement.
Process management focuses mainly on such measures as cost, efficiency, cycle time and
so on, but it does not pay enough attention to process performance consistency or process
capability. Process capability is actually the starting point for Six Sigma.
Lean Six Sigma (George, M. 2003) is actually an initiative that integrates lean
manufacturing practices and Six Sigma practices to improve process performance and
process capability. Essentially, Lean Six Sigma is an attempt to integrate process
management with Six Sigma. Its goal is to deploy ‘do the right things, and do things
right’ into business processes. Lean Six Sigma improves business profit by reducing the
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cost and increasing the efficiency of business processes. Overall, Lean Six Sigma is
trying to accomplish ‘Design for Six Sigma’ for processes.
Lean Six Sigma is a combination of Lean Manufacturing (Womack 2000, Liker 2004)
and regular Six Sigma process improvement strategy featured by DMAIC. Lean
manufacturing practice is based on the Toyota Production System. The Toyota
Production System is featured by the following principles:
1) There are many wastes (muda) in production process. Wastes are activities that
do not add value to the products. They are:
• Over-production
• Unnecessary Inventory
• Unnecessary transportation
• Unnecessary movement
• Waiting
• Defective Product
• Over-processing
The muda should be eliminated from process steps. Value stream mapping is an effective
way to find muda and guide process improvement.
2) The ideal production process should be a continuous one piece flow
3) A “pull” system should be used to avoid over-production
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4) “Quick set up time” techniques should be used to ensure smooth process flow and
handle multiple product lines.
5) Cellular manufacturing should be used to reduce transportation distance and
ensure the shortest cycle times.
The Lean Six Sigma approach is purely a process-based approach; it does not involve
product design activities. In Lean Six Sigma implementation practice, usually “Lean”
goes first, that is, lean manufacturing principles are used first to eliminate unnecessary
process steps and even unnecessary processes. Clearly, the roles of ‘lean’ include
reducing process cost (by eliminating non-value-added steps), and improving process
efficiency (by reducing process lead time and increasing throughput). Then DMAIC
activities will follow to reduce variation in the process and improve process capability.
5. The Roles of DMAIC, DFSS and Lean in Business Excellence
Based on the earlier discussion, the two key success factors for business success are:
• Maximize customer value
• Minimize cost
Customer value is defined as the total benefits minus the total liabilities from the products
to customers. The benefits include functional, psychological and convenience benefits,.
Most of, if not all, of these benefits have to be designed into the products. Therefore,
DFSS is the most important activity in increasing the total benefits portion of customer
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value. DMAIC relates to variation and defect reduction,; it relates to the functional
benefit of the product to customers. DMAIC also relates to reducing the cost of poor
quality. Lean manufacturing practice is mostly a cost reduction and efficiency
improvement practice, it does not relate to product design. In summary, Table 1 lists the
relative importance of various Six Sigma activities in improving customer value and
reducing cost.
Table 1 Six Sigma Activity, Customer value and cost
Maximize Customer Value DFSS (1), DMAIC(2), Lean(2)
Minimize Cost Lean (1), DFSS (2), DMAIC (2)
Where (1), (2) indicate the relative importance, (1) means most important.
Summary and Conclusions
1. Understanding and deploying customer value into products is the key for value
creation in products, . A sound Design for Six Sigma strategy can accomplish this
objective.
2. The integration of process management with Six Sigma practice can reduce the
cost, and increase the performance for all business processes, so creating value by
improving business profit.
3. A successful Six Sigma strategy should integrate all advantages of employing
DMAIC, DFSS and process management methodologies.
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References
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Company, 2002
Fredriksson, B., (1994), “Holistic Systems Engineering in Product Development”, The
Saab-Scania Griffin, 1994, Saab-Scania, AB, Linkoping, Sweden, Nov.
Fuglseth, A. & Gronhaug, K. (1997) IT-enabled redesign of complex and dynamic
business processes; the case of bank credit evaluation. OMEGA International Journal of
Management Science. vol 25, pp93-106Gale, B. 1994, Managing Customer Value, Free
Press, 1994
George, M., (2003) Lean Six Sigma for Service, McGraw-Hill, New York, 2003
Liker, J.K., (2004) The Toyota Way, McGraw-Hill, New York, 2004
Sheriden, W., (1994), Market Ownership, American Management Association, 1994
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