Crystal Ball Six Sigma

Partner Program

Crystal Ball for Six Sigma

(DMAIC) Module
Simulation and Optimization
in Six Sigma Projects
Crystal Ball for Six Sigma

What Is Included in Six Sigma Training Module?

The module includes:

• Training module notes
(Six Sigma Training Module Notes.doc)
• PowerPoint slides for teaching the basics and the Simulation with DoE case study
(Crystal Ball Module for Six Sigma.ppt)
• Simulation with DoE case study model without Crystal Ball enhancements
(Simulation with DoE and Cost Exercise.xls)
• Simulation with DoE case study model with Crystal Ball enhancements
(Simulation with DoE and Cost Sim Solution.xls)
• Simulation with DoE case study model with Crystal Ball and OptQuest enhancements
(Simulation with DoE and Cost Opt Solution.xls)
• Optimization settings file for Simulation with DoE case study
(Simulation with DoE and Cost Sim Solution.opt)
• Step-by-step class exercise for Simulation with DoE case study
(Simulation with DoE and Cost Solution.doc)
• Overview of Crystal Ball handout
(Common Questions about Crystal Ball.doc)

2 www.crystalball.com
Crystal Ball for Six Sigma

How Best to Start?

• The best way to begin is to review the slides to see what is covered.
You are free to edit these slides as necessary. They feature basic Crystal
Ball information, application details of Crystal Ball for Six Sigma (DMAIC),
and a review of the Simulation with DoE case study.
• Next, we suggest that you open the Simulation with DoE and Cost
Exercise.xls model and walk through the step-by-step final solution
described in Simulation with DoE and Cost Solution.doc . You can use
the Simulation with DoE and Cost Sim Solution.opt file to import the
optimization settings into OptQuest, but it is not mandatory for the
exercise.
• Once you are familiar with the model, you can apply your own
teaching methods to this case study. In particular, you will need to
determine whether or not you want the students to run through the
exercise on their own or as a group.
• The handout Common Questions about Crystal Ball.doc is an
additional reference meant to answer common questions concerning the
software.

3 www.crystalball.com
Crystal Ball for Six Sigma

Simulation and Optimization

in Six Sigma Projects
Crystal Ball for Six Sigma

Topics Covered in This Module

• Defining Simulation Models

• Monte Carlo Simulation
• What Is Crystal Ball?
• Benefits of Simulation and Optimization for Six
Sigma

• DoE Example – Simulation

• DoE Example – Optimization
• Additional Resources

5 www.crystalball.com
Introductory Concepts
Crystal Ball for Six Sigma

Models and Simulation

• Models are an attempt to capture behavior and performance
of business processes and products.

• Simulation is the application of models to predict future

outcomes with known and uncertain inputs.

MODELS SIMULATION
2 LO HI
1 3

Control Noise
Inputs Variables
F  ma
Y = f (x)

Y = f (x)

Outcome
Predictions
7 www.crystalball.com
Crystal Ball for Six Sigma

What is a Mathematical Model?

• Models come in many different forms

– Mathematical relationships based on established
physical principles
– Regression equations derived from historical
data
– Design of Experiments (DOE) response equations
from measured observations
– General knowledge of business system or
product

16d 0T


 d0 4  di 4 
Y = β0 + β1x1 + β2x2 + β12x1x2 + β11x12 + β22x22
8 www.crystalball.com
Crystal Ball for Six Sigma

Models and Simulation

• Once the business process or product behavior is

captured with mathematical and logical statements:
– Place the model into Excel
– Apply Crystal Ball probabilistic methods

Y = f (x)
A B C

1 $ $ $

2 $ $ $

9 www.crystalball.com
Crystal Ball for Six Sigma

What Is Monte Carlo Simulation?

• A system that uses random numbers to measure the

effects of uncertainty.

• A computer simulation of N trials where

– Each trial samples input values from defined probability
distribution functions (PDFs)
– Applies the input values to the model and records the output
– Sampling statistics then utilized to characterize output
variation (mean, standard deviation, fitted probability
distributions)

• Outputs:
– Prediction of Output Variation (DPU, Cpk, PPM, Z-score)
– Identification of Primary Variation Drivers (Sensitivity Analysis)

10 www.crystalball.com
Crystal Ball for Six Sigma

Probability Distributions As Inputs

 Simulation requires probabilistic inputs.
 Distributions use ranges of values and assign a likelihood of
occurrence for values (e.g., a normal distribution could represent
variation of the part dimensions).

Probability

Range

Parameters

11 www.crystalball.com
Crystal Ball for Six Sigma

Monte Carlo Simulation Results As Outputs

Explore the range of possible outcomes
AND the probability of their occurrence

Number of
simulation trials
performed

Parts within the

spec limits are
shown in blue,
parts outside
spec limits are
shown red

Lower Spec Upper Spec

Limit (LSL) Limit (USL) Quality Metrics
Certainty (probability) such as Cpk, ZST,
that the forecast lies
p(N/C), etc....
between LSL and USL
12 www.crystalball.com
Crystal Ball for Six Sigma

Sensitivity Analysis: A Critical Tool

• Examine which few

critical factors (X’s) in
your analysis cause the
predominance of
variation in the response
variable of interest (Y)
• Operates during the
simulation, calculating
the relationships between
all X’s and Y’s
• Similar to Pareto Chart in
interpretation but is not a
Main Effects plot

13 www.crystalball.com
Crystal Ball for Six Sigma

Sensitivity Analysis: Using the Results

• Acts as communication tool to

help team understand what’s
driving defects

• Generally see a few factors

having strongest impact on
forecast variation

• Shows where to focus your

energies (and where not to
focus them)

• After reducing the variation for

these few critical X’s, you can
rerun the simulation and
examine the effects on the
output

14 www.crystalball.com
Crystal Ball for Six Sigma

Next Step: Stochastic Optimization

Simulation can help you to understand and reduce

variation but does not by itself offer the best solution.

An optimization model answers the question "What's

best?" rather than "What happened?" (statistics), "What if?"
(simulation) or "What will happen?" (forecasting).

The combination of simulation and optimization lets you

make the best (optimal) decisions while accounting for
the variability or uncertainty inherent within a process.
You will see this at work in the DoE with Simulation
Example.

15 www.crystalball.com
Crystal Ball for Six Sigma

What is Stochastic Optimization?

• Stochastic optimization finds

the best solution while using ? ? ?
the results of simulation.
Y1-max Y2-target Y3-min
• Goal: Determine a set of
input values that will
influence multiple outputs to Y2 = f2(X1,X3,X4)
target values.

• Example: Decrease Process Y1 = f1(X1,X2,X3) Y3 = f3(X2,X3,X4)

Cost and Cycle Time while
meeting quality
requirements

X1 X2 X3 X4

16 www.crystalball.com
Crystal Ball for Six Sigma

Stochastic Optimization
• X contains natural variation (x)
• Y required to be between YR1 and YR2 (LSL & USL) with an acceptable defect
rate of 3 sigma

Acceptable GOOD Unacceptable BAD

Defect Rate Defect Rate
Y Y

YR2 YR2

Yopt Yopt
YR1 YR1

x x
Xgood including x Xbad including x
17 www.crystalball.com
What Is Crystal Ball?
Crystal Ball for Six Sigma

is a suite of software
for Microsoft® Excel
Professional Edition includes:
• Crystal Ball
Excel-based Monte Carlo simulation tool, includes plug-in
tools for setup and analysis (CB Tools), distribution fitting,
sensitivity analysis, and output charts and reports

• OptQuest
Global optimization for uncertain models

• CB Predictor
Time-series forecasting and multiple linear regression

• Crystal Ball and CB Predictor Developer Kits

VBA customization tools

19 www.crystalball.com
Crystal Ball for Six Sigma

How Does Crystal Ball Appear in Excel?

Toolbar

Define Menu Run Menu Analyze Menu

20 www.crystalball.com
Crystal Ball for Six Sigma

How Does Crystal Ball Work

(in Six Sigma terminology)?

Here’s another way to describe

how simulation works:

• Describe the Effect (Y) as a

function of the causal Factors (X’s)
• Describe Factors using probability
distributions (e.g., Normal,
Uniform, Binomial, etc.)
• Repeatedly Sample the Input
Factors (X’s) and Compute the
Effect (Y)
• Describe the Distribution of the
Effect (Y) and plot in a histogram

21 www.crystalball.com
Crystal Ball for Six Sigma

Typical Crystal Ball Roles in Six Sigma Projects

6 PHASES
• Monte Carlo Simulation and
Optimization can be used in variety
of Six Sigma phases
DEFINE

Project Selection
– DEFINE: Project Selection
FISHBONE
– ALL PHASES: Service Process
MEASURE

MSA
– ANALYZE/DESIGN: Process
Transactional Service Process Simulation

DoE Simulation and Optimization

(Strongest Application)
ANALYZE

Process
Simulation • Crystal Ball does not replace other
and
Stochastic statistical packages (Minitab or JMP)
CONTROL IMPROVE

Optimization
– It complements other codes by
incorporating their outputs (input
variable characterization and
response models) into simulations
and optimizations
22 www.crystalball.com
Crystal Ball for Six Sigma

Benefits of Simulation in Six Sigma Projects

• Reduce the Uncertainty Around Project Success

– Account for uncertainty of costs and success in initial stages
– Understand impacts on customer satisfaction and profitability
and prioritize opportunities

• Improve Your Understanding of the Critical X’s

– Discover and validate underlying causes of variation and waste
– Use simulation to predict variation where data is minimal or
non-existent

• Evaluate Effects of Process Changes Prior to

Implementation
– Save on expenses and resources by experimenting first
– Build team consensus and gain early approval of process owners

23 www.crystalball.com
 Case Study:
DoE with Simulation
Crystal Ball for Six Sigma

Problem Statement

• An Injection Mold Process has resulted in

Define incomplete filling of the mold or different part
lengths. A Six Sigma Project team has been
assigned to reduce the variation not meeting
Measure length requirements.

• Customer: Part Buyers

Analyze • Approach:
– Perform 23 Full Factorial DoE (5 replicates) to
determine Response Surface model of Part Length

Improve – Use Crystal Ball Capability features to predict

current quality metrics
– Use OptQuest Optimization techniques to determine

Control
process settings that minimize process cost while
meeting minimum quality targets.

25 www.crystalball.com
Crystal Ball for Six Sigma

Case Study Overview by Phase

Define - Review problem statement

Measure - Measure current parameter capability

- Perform Design of Experiments

Analyze -
-
Characterize current process state with simulation
Determine variation drivers w/ Sensitivity Analysis
- Address drivers and reiterate simulation

Improve - Optimize design for cost and performance

Control - Run capability study on proposed process settings

to confirm quality
26 www.crystalball.com
Crystal Ball for Six Sigma

Step 1: Measure Current Parameter Capability

• As part of the Measure Phase, the variation of the

Define Control Parameters (Inputs, Factors) is
characterized during Capability Studies
– Input Factors are Mold Temp, Cycle Time, and Hold
Measure Pressure
– 30 samples of each are made during the studies
and Factors are assumed to behave normally
Analyze  Each set of samples passes Normality Test
 Means and Standard Deviations are recorded

Improve

Control
27 www.crystalball.com
Crystal Ball for Six Sigma

Step 2: Perform Design of Experiments

• 23 Full Factorial DOE with 5 replicates is

Define performed (40 runs)
– RESPONSE: Part Length

Measure – FACTORS :
 Mold Temperature (x1) 100
LO
200
HI

 Cycle Time (x2) 60 140

Analyze  Hold Pressure (x3) 120 140

• Response polynomial equation developed

(R2adj = 92.5%)
Improve – 3 Main Effects
– 1 Interaction Term
Control Y = β0 + β1x1 + β2x2 + β3x3 + β23x2x3

28 www.crystalball.com
Crystal Ball for Six Sigma

Step 3: Characterize Current Process State

• Define the Inputs (Factors) as Normal

Define Assumptions (Cells E5:E7)
– Cell Reference Assumption Name from Column B

Measure – Cell Reference Assumption Mean from Column F

– Cell Reference Assumption StDev from Column G

• Define the Response (Length in Cell E9) as a

Analyze Forecast
– Cell Reference the LSL from Cell F9

Improve – Cell Reference the USL from Cell G9

• Run Simulation

Control
29 www.crystalball.com
Crystal Ball for Six Sigma

Monte Carlo Simulation to Predict Variation

Nominal Response of 64.59 mm close to target but

Define 2% will fall out of the spec limits! → Sigma Level
of ~ 2.0

Measure

Analyze

Improve

Control
30 www.crystalball.com
Crystal Ball for Six Sigma

Step 4: Review Sensitivity Analysis

• Run Sensitivity Analysis to determine major
Define driver of variation.

Measure

Analyze
• Can anything be done to reduce standard deviation of Mold
Improve Temperature?
– Assume standard deviation can be reduced by 50% in Cell G5.
– Run simulation.

Control
31 www.crystalball.com
Crystal Ball for Six Sigma

Step 5: Reiterate Monte Carlo Analysis

• Run Monte Carlo again → ~ 1% are out of specification → Sigma

Define
Level of ~ 2.5

• The Part Length quality has been improved

– Can it be improved even more while minimizing cost to run the
process?

Measure

Analyze

Improve

Control
32 www.crystalball.com
Crystal Ball for Six Sigma

Step 6: Optimize Design for Cost & Performance

Define How can the process settings be configured

so that a minimum quality goal is reached
while reducing the process cost per part?
Measure

Analyze

Improve

Control
33 www.crystalball.com
Crystal Ball for Six Sigma

Optimize Design for Cost & Performance

• Must consider relationship between process

Define parameters and cost.
– Energy consumed by molding equipment is
proportional to product of Cycle Time and Mold
Measure Temperature ($ ∞ Temp * Time)
– Labor Cost to run molding equipment proportional
to Cycle Time ($ ∞ Time)

Analyze • Create Cost Response as a function of

– Cycle Time

Improve – Mold Temperature

$PROCESS = K1*Temp*Time + K2*Time

Control • Define Process Cost Forecast (Cell E10)
34 www.crystalball.com
Crystal Ball for Six Sigma

Exercise: Process DoE Optimization

• Characterize Current Quality Levels (Cpk & ZST)

Define – Enable Capability Metrics in Run Preferences
– In Define Forecast, use cell references for LSL &
Measure USL and auto-extract Capability Metrics

• Assuming you can control the nominal process

settings but not the variation, use Optimization
Analyze to determine the settings that results in the best
quality (maximum Z-score)

• Process Parameters
Improve – Mold Temp → LO (100) to HI (200), Step = 10
– Cycle Time → LO (60) to HI (140), Step = 1

Control – Hold Pressure → LO (120) to HI (140), Step = 2.5

35 www.crystalball.com
Crystal Ball for Six Sigma

Helping You Optimize: Decision Variables

Decision variables are Crystal Ball model elements for

quantities over which you have control (e.g., percentage
of dollars to allocate in a project, amount of product to
produce, man-hours required for a project, unit cost for
a given product, go/no-go decision).

36 www.crystalball.com
Crystal Ball for Six Sigma

Define Decision Variables

• Define Decision Variable Lower and Upper Bounds of

Define all Factor means (Cells E5:E7) by cell referencing
corresponding adjacent cells:
 Cell reference Name from Column B

Measure  Cell reference Upper Bound from Column C (LO)

 Cell reference Lower Bound from Column E (HI)

• Ensure the correct Discrete Step Size is used within

Analyze each Decision Variable as listed below

Decision Lower Bound Upper Bound Discrete Step

Improve
Variables Size
Mold Temp 100 200 10
Cycle Time 60 140 1
Hold Pressure 120 140 2

Control
37 www.crystalball.com
Crystal Ball for Six Sigma

OptQuest: A Blend of Approaches

OptQuest excels at stochastic optimization because it:

• Uses several optimization techniques (Scatter Search and
Advanced Tabu Search) vs. relying on a single method or
genetic algorithm,
• Employs heuristics (problem solving techniques that use self-
education to improve performance),
• Has both short-term and long-term Adaptive Memory,
• Can escape local optimal solutions to find global optimal
solution,
• Uses neural network technology that predicts performance
after only running 10% of simulation and typically reduces
number of required simulations by 50%, and
• Features a wizard tool that makes setup easy.

38 www.crystalball.com
Crystal Ball for Six Sigma

Optimize Design for Cost & 4 Performance

• Run OptQuest and Define Forecast Selections

Define Optimization Goals:
– Primary is to Minimize Cost

Measure – Requirement is to Reduce Variation of Part Length

to 4 levels
 Zst required to have a lower bound of 4

Analyze

Improve

Control
39 www.crystalball.com
Crystal Ball for Six Sigma

Optimize Design for Cost & 4 Performance

Define New Design results in a Process Cost of $1.16 per

part and increase to 4 quality!

Measure

Analyze

Improve

Control
40 www.crystalball.com
Crystal Ball for Six Sigma

Comparison of Design Performance & Cost

Where have we been, and where are we going?

Define
Iter- Sigma
Mold Mold Cycle Cycle Hold Hold
Level Process
ation Temp Temp Time Time Press Press

Measure
of Flow Cost
# Mean StDev Mean StDdev Mean StDev
Rate

1 160 10 100 10 130 5 1.94 $2.03

Analyze 2 160 5 100 10 130 5 2.53 $2.03

3 150 5 61 10 140 5 4.01 $1.16

Improve
Six Sigma team proceeds to run Capability Study
on proposed process settings to confirm quality
Control during Control phase.

41 www.crystalball.com
Crystal Ball for Six Sigma

Case Study Conclusions

• Quality Levels will be increased by decreasing

Define variation on driving input variables.
– Monte Carlo analysis predicts quality levels.

Measure – Sensitivity analysis identified Mold Temperature

as most influential design variable.

• Process Cost decreases with decreasing Mold

Analyze Temperature and Cycle Time.
– Simply reducing the Temp and Time to their
lowest allowed value would result in unacceptable
Improve Part Length quality.

• Stochastic Optimization of input variable (Factor)

means will increase Part Length quality levels
Control while minimizing Process Cost impact.

42 www.crystalball.com
Crystal Ball for Six Sigma

Summary
Crystal Ball for Six Sigma

Benefits of Simulation in Six Sigma

• Use insights into what drives variation to improve process
or product

• Little or no customer exposure to a “bad” process,

product, or service

• Easy to “change design” — can perform “what-if” analysis

with only a mouse click — prior to implementation

• Virtual implementation of process

changes means little or no waste
of materials or staff resources

• Instant feedback of results

44 www.crystalball.com
Crystal Ball for Six Sigma

Additional Crystal Ball Resources

• Other Six Sigma Example Models with Crystal Ball 7.2

– In Excel/CB: Help > Crystal Ball > Examples Guide

• Process Capability Guide

– Start > All Programs > Crystal Ball 7 > Documentation >
Process Capability Guide

• Crystal Ball Website (www.crystalball.com)

– Risk Resources > Case Studies
– Risk Resources > Example Models
– Training > Course List
– Six Sigma - Articles, Papers & Success Stories (
www.crystalball.com/sixsigma/papers.html)

45 www.crystalball.com