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Overview The most challenging question facing business leaders and managers in the new millennium is “How do we stay successful”. The business environment has become increasingly complex and competitive and the clamour for ideas which give you an edge or anticipate the next change gets louder and Louder. Hot new ideas are as common as hot new companies. Six Sigma can seem like another “hot new answer”. But looking closer, there is a significant difference: Six Sigma is not a business fad tied to a single method or strategy, but rather a flexible system for improved business leadership and performance. It builds on many of the most important management ideas and best practices of the past century, creating a new formula for the 21st century business success. Seeing the impact that Six Sigma is having on process quality in leading companies like Motorola, GE, Allied Signal/Honeywell and many more sets the stage for understanding how it can impact your business.  Fig. 1 Value Business With Performance Track’s “Value Business” proposition having 3 major cornerstones, Benchmarking, Balanced Scorecard and Six Sigma methodology to undertake the actions required, provides a business of any size with the techniques up until now has only benefited the few. For the smaller company Six Sigma’s method of concentrating on key processes as seen from the view point of the customer will enable these businesses to concentrate on what’s important in an incremental way and not be confused/consumed by an enterprise wide system. For the larger company the same applies but the adoption of Six Sigma “Black Belts” (full time Six Sigma project managers) may bring multiple concurrent benefits in all areas. Because the Six Sigma methodology looks at business processes it is applicable to all company types and all areas within these businesses. It would be a mistake to think that Six Sigma is about quality in the traditional sense. Quality, defined traditionally as conformance to internal requirements, has little to do with Six Sigma. Six Sigma is about helping the organization make more money. To link this objective of Six Sigma with quality requires a new definition of quality. For Six Sigma purposes, lets define quality as the value added by a productive endeavor. Quality comes in two flavors: potential quality and actual quality. Potential quality is the known maximum possible value added per unit of input. Actual quality is the current value added per unit of input. The difference between potential and actual quality is waste. Six Sigma focuses on improving quality (i.e., reduce waste) by helping organizations produce products and services better, faster and cheaper. In more traditional terms, Six Sigma focuses on defect prevention, cycle time reduction, and cost savings. Unlike mindless cost-cutting programs that reduce value and quality, Six Sigma identifies and eliminates costs, which provide no value to customers, waste costs. For non-Six Sigma companies, these costs are often extremely high. Companies operating at three or four sigma typically spend between 25 and 40 percent of their revenues fixing problems. This is known as the cost of quality, or more accurately the cost of poor quality. Companies operating at Six Sigma typically spend less than 5 percent of their revenues fixing problems (Figure 2). The dollar cost of this gap can be huge. General Electric estimates that the gap between three or four sigma and Six Sigma was costing them between $8 billion and $12 billion per year.  Fig. 2 Cost of Poor Quality versus Sigma Level Like most great inventions, Six Sigma is not “all new”. While some of the themes of Six Sigma arise out of fairly recent breakthroughs in management thinking, others have their foundation in common sense. From a “tools” perspective, Six Sigma is a vast array it includes Statistical Process Control, Continuous Improvement, Process Design/Redesign, Variance Analysis, Balanced Scorecard, Voice of the Customer, Creative Thinking, Design of Experiments, Process Management and much more. Six Sigma can be seen as a way to link together and even implement many otherwise disconnected ideas, trends and tools in business today. Some of the “hot topics” that have direct application or can complement a Six Sigma initiative include:
The Six Sigma leadership system can be distilled into six elements:
Six Sigma starts with an understanding of customers’ requirements (on a continuous basis), with improvements defined by their impact on customer satisfaction and value. Clarifies what measures are key to gauging business performance. Six Sigma positions the process as the key vehicle of success and a way to build competitive advantage in delivering value to customers. Acting in advance of events. The opportunities available through improved collaboration within companies and with their vendors and customers are huge. People learn how their roles fit the “big picture” and can recognise and measure the interdependence of activities in all parts of a process. An understanding of both the real needs of end users and of the flow of work through a process or a supply chain is required. It demands an attitude that is committed to using customer and process knowledge to the benefit of all parties. Any company that makes Six Sigma its goal will have to constantly push to be ever more perfect (since the customer’s definition of “ perfect” will always be changing) while being willing to accept and manage occasional setbacks. History Six Sigma’s genesis lies in a classic stretch-target set in 1981 by Motorola's CEO, Bob Galvin, to his people: effect a ten-fold improvement in product-failure levels over a 5-year period. Bill Smith, an engineer at the company, realised that such results could not be achieved without going into the core of what caused defects in the first place. So, he conducted a statistical correlation between the field-life of a product and the number of flaws that had been spotted--and corrected--while the product was being manufactured. The correlations, arrived at in 1985, turned out to be positive. In other words, if a product had been found defective and corrected during the production-process, chances were high that other defects had been missed, and would show up later during usage. On the other hand, error-free products rarely failed in the first 3 years of customer-usage. Evidently, the simplest way to prevent product-breakdowns was to ensure that the process prevented defects of any kind, making detection and repair redundant. External support for this argument came from the best-in-class benchmarking that Motorola had been conducting simultaneously. It showed that total quality companies were turning out products that had not been reworked at all. The question: how could Motorola minimise--and, ideally, eliminate--defects from the manufacturing process? That was when another engineer, Mikel J. Harry, introduced the concept of Six Sigma to Motorola. The idea was to set a steep quantitative target for all processes--and then, parse each process into smaller and smaller sequences, each of which could be examined for their potential for errors, and changed to eliminate that potential. One of Motorola’s most significant contributions was to change the discussion of quality from one where quality levels were measured in percent (parts-per-hundred), to a discussion of parts-per-million or even parts-per-billion. Until 1994, Six Sigma remained a closely guarded secret at Motorola. The outside world knew about it, but not how to use it. In 1995, however, CEO Gary L. Tooker decided to throw open the source-code. One of the earliest to pick it up was AlliedSignal, where CEO Lawrence Bossidy led the conversion. But it wasn't until GE's CEO, Jack Welch, introduced Six Sigma across the length and breadth of his organisation that the tool grabbed the limelight--and stayed put. Four years after `Neutron' Jack pushed Six Sigma hard into the innards at GE, it contributes 20 per cent to the conglomerate's earnings. That has spurred many others to follow suit. Details The explanation--drawing on the original work in statistical process control theorised by the grandfather of quality, Walter Shewhart--is deceptively simple. The mathematical translation states that a process that operates at six sigma allows only 3.40 defects per million parts of output. The Six, of course, is the culmination of a progression that starts, for all practical purposes, at Three Sigma (66,807 defects per million), and traverses Four (6,210) and Five (233). But there is much more to Six Sigma than merely lowering the number of defects. The Greek letter, Sigma (s ), is the statistical shorthand for standard deviation--and what the metric really refers to is the extent to which a process is capable of deviating from pre-set specifications without causing errors. The higher the sigma rating, the greater is this capability, with Six Sigma allowing variations of up to 6 times the standard deviation without causing flaws. The mathematical interpretation of Six Sigma is crucial to implementing the tool. The output of any process in your company--the products rolling off your assembly-lines, the bills created by your accounts people, the pay-cheques delivered--can be analysed in terms of the number of errors in it. What Six Sigma analysis does is to measure every process on each of the CTQ (critical to quality) factors. By addressing all business processes, Six Sigma removes the narrow, inward focus of the traditional manufacturing quality approach. Customers care about more than just how well a product is manufactured. Price, service, financing terms, style, availability, frequency of updates and enhancements, technical support, and a host of other items are also important. Also, Six Sigma benefits others besides customers. When operations become more cost-effective and the product design cycle shortens, owners or investors benefit too. When employees become more productive their pay can be increased. Six Sigma’s broad scope means that it provides benefits to all stakeholders in the organization. Six Sigma is, basically, a process quality goal, where sigma is a statistical measure of variability in a process. As such it falls into the category of a process capability technique. The traditional quality paradigm defined a process as capable if the process natural spread, plus and minus Three Sigma, was less than the engineering tolerance. Under the assumption of normality, this Three Sigma quality level translates to a process yield of 99.73%. A later refinement considered the process location as well as its spread and tightened the minimum acceptance criterion so that the process mean was at least four sigma from the nearest engineering requirement. Six Sigma requires that processes operate such that the nearest engineering requirement is at least Six Sigma from the process mean. Six Sigma also applies to attribute data, such as counts of things gone wrong. This is accomplished by converting the Six Sigma requirement to equivalent conformance levels, as illustrated in Figure 3.  Fig. 3 Consider, for instance, a process, which, every hour, produces 100 units of a particular component, which should measure 100 mm in length. Measurements may show that while 95 out of the 100 units produced are, indeed, 100-mm long, the remaining 5 deviate from that ideal, each to a different extent. This data can be used to calculate the standard deviation, or sigma--the likelihood and extent of deviations from the norm--of the process. Assume that the value of sigma for this process turns out to be 0.01. The question, of course, is whether these deviations will be counted as flaws under the given CTQ. This is determined by the upper and lower specification limits of the product. If they allow those deviations--that is, if the upper and lower control limits of the process fall beyond the upper and lower specification-levels--the customer won't have a problem. What if they don't? That's when the capability of the process has to be changed. Six Sigma offers 2 approaches. One is to change the design of the product in which this component is used so that it can accommodate some of the variations in the length without malfunctioning. Thus, for instance, the so-called design-width could be Three Sigma--accommodating components with 3 times the standard deviation of the process. In other words, components that measure between 99.07 mm and 100.03 mm will also be acceptable. Of course, that will still mean eliminating those units whose sigma exceeds 3, but this will, at least, lessen the number of defects in every sample. The second approach is to make improvements in the process itself so that the chances of defects are lowered. That will reduce the value of the standard deviation, or sigma, of the process. If, say, the value of the sigma can be halved through this method to 0.005, the acceptable specification-limits--99.07 mm and 100.03 mm, respectively--will automatically become 6 times--and not 3 times--the standard deviation (See Figure 3). A Six Sigma process will be yours. The implication? To take a process to Six Sigma level, you must, ideally, adopt both approaches: changing the design to increase the range of acceptability in the CTQ; and improving the process to reduce its chances of variance. In practical terms, this means that Six Sigma is a tool that must be wielded both at the design stage and at the process stage. As a matter of fact, a Six Sigma rating, in ideal conditions, should produce no errors at all. If it does lead to those 3.40 defects out of every million parts, that's because even the best processes, over a period of time, tend to generate deviations of up to 1.50 sigma.
Wondering whether 3.40 defects per million isn't too high to aim for? Why aren’t 6,210 (Three Sigma) flaws per million parts--the upper end of the corporate average in the US--also good enough, particularly since it can be achieved with less effort? Just a minute. The average product rolling off your assembly lines today could consist of as many as 10,000 different parts, components, and designs--any of which runs the risk of being defective. Thus, 3.40 flaws per million parts actually amounts to 34 defective products out of every 1,000. In other words, an average of 34 out of 1,000 customers will still be unhappy about your product--explaining why even Six Sigma is not the ceiling. Want to know what Four Sigma could mean? Here's a horrifying shortlist: 124,200 wrong prescriptions a year; 4.60 hours of toxic water supply a month; 62.10 minutes of telephone services shutdown a week. At Four Sigma levels, the cost of poor quality is estimated to be between 15 and 20 per cent of your sales--compared to less than 10 per cent in a Six Sigma company.
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