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Six Sigma

Definition of Six Sigma

Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving toward six standard deviations between the mean and the nearest specification limit) in any process – from manufacturing to transactional and from product to service. Six Sigma at many organizations simply means a measure of quality that strives for near perfection.[1]

Six Sigma is:[2]

  • A Business Strategy: Using Six Sigma Methodology, a business can strategize its plan of action and drive revenue increase, cost reduction and process improvements in all parts of the organization.
  • A Vision: Six Sigma Methodology helps the Senior Management create a vision to provide defect free, positive environment to the organization.
  • A Benchmark: Six Sigma Methodology helps in improving process metrics. Once the improved process metrics achieve stability; we can use Six Sigma methodology again to improve the newly stabilized process metrics. For example: The Cycle Time of Pizza Delivery is improved from 60 minutes to 45 minutes in a Pizza Delivery process by using Six Sigma methodology. Once the Pizza Delivery process stabilizes at 45 minutes, we could carry out another Six Sigma project to improve its cycle time from 45 minutes to 30 minutes. Thus, it is a benchmark.
  • A Goal: Using Six Sigma methodology, organizations can keep a stringent goal for themselves and work towards achieving them during the course of the year. Right use of the methodology often leads these organizations to achieve these goals.
  • A Statistical Measure: Six Sigma is a data driven methodology. Statistical Analysis is used to identify root-causes of the problem. Additionally, Six Sigma methodology calculates the process performance using its own unit known as Sigma unit.
  • A Robust Methodology: Six Sigma is the only methodology available in the market today which is a documented methodology for problem solving. If used in the right manner, Six Sigma improvements are bullet-proof and they give high yielding returns.


Six Sigma
source: Six Sigma Institute


Key Concepts of Six Sigma[3]

At its core, Six Sigma revolves around a few key concepts.

  • Critical to Quality: Attributes most important to the customer
  • Defect: Failing to deliver what the customer wants
  • Process Capability: What your process can deliver
  • Variation: What the customer sees and feels
  • Stable Operations: Ensuring consistent, predictable processes to improve what the customer sees and feels
  • Design for Six Sigma: Designing to meet customer needs and process capability


The Evolution of Six Sigma[4]

Since its origins, there have been three generations of Six Sigma implementations.

  • Generation I Six Sigma focused on defect elimination and basic variability reduction, primarily in manufacturing. Motorola is a classic exemplar of Generation I Six Sigma.
  • In Generation II Six Sigma, the emphasis on variability reduction and defect elimination remained, but now there was a strong effort to tie these efforts to projects and activities that improved business performance through improved product design and cost reduction. General Electric is often cited as the leader of the Generation II phase of Six Sigma.
  • In Generation III, Six Sigma has the additional focus of creating value throughout the organization and for its stakeholders (owners, employees, customers, suppliers, and society at large).


Six Sigma Concept
source: Douglas C. Montgomery and William H. Woodall


Creating value can take many forms, such as increasing stock prices and dividends, job retention or expansion, expanding markets for company products/services, developing new products/ services that reach new and broader markets, and increasing the levels of customer satisfaction (perhaps by reducing cycle time or increasing throughput) throughout the range of products and services offered. See Hahn et al. (2000) for a good discussion of the evolution of Six Sigma.


Implementing Six Sigma[5]

Six Sigma implementation strategies can vary significantly between organizations, depending on their distinct culture and strategic business goals. After deciding to implement Six Sigma, an organization has two basic options:

  • Option 1: Implement a Six Sigma Program or Initiative: With this approach, certain employees (practitioners) are taught the statistical tools from time to time and asked to apply a tool on the job when needed. The practitioners might then consult a statistician if they need help. Successes within an organization might occur; however, these successes do not build upon each other to encourage additional and better use of the tools and overall methodology. When organizations implement Six Sigma as a program or initiative, it often appears that they only have added, in an unstructured fashion, a few new tools to their toolbox through training classes. One extension of this approach is to apply the tools as needed to assigned projects. It’s important to note, however, that the selection, management, and execution of projects are not typically an integral part of the organization. Implementing a Six Sigma program or initiative can present unique challenges. Because these projects are often created at a low level within the organization, they may not have buy-in from upper management, which may lead to resistance from other groups affected by the initiative. In addition, there typically is no one assigned to champion projects across organizational boundaries and facilitate change. A Six Sigma program or initiative does not usually create an infrastructure that leads to bottom-line benefits through projects tied to the strategic goals of the organization. Therefore, it may not capture the buy-in necessary to reap a large return on the investment in training. For true success, executive-level support and management buy-in is necessary. This can help lead to the application of statistical tools and other Six Sigma methodologies across organizational boundaries.
  • Option 2: Create a Six Sigma Infrastructure: Instead of focusing on the individual tools, it is best when Six Sigma training provides a process-oriented approach that teaches practitioners a methodology to select the right tool, at the right time, for a predefined project. Six Sigma training for practitioners (Black Belts) using this approach typically consists of four weeks of instruction over four months, where students work on their projects during the three weeks between sessions. Deploying Six Sigma as a business strategy through projects instead of tools is the more effective way to benefit from the time and money invested in Six Sigma training. Consider the following Six Sigma deployment benefits via projects that have executive management support:
    • Offers bigger impact through projects tied to bottom-line results
    • Utilizes the tools in a more focused and productive way
    • Provides a process/strategy for project management that can be studied and improved
    • Increases communications between management and practitioners via project presentations
    • Facilitates the detailed understanding of critical business processes
    • Gives employees and management views of how statistical tools can be of significant value to organizations
    • Allows Black Belts to receive feedback on their project approach during training
    • Deploys Six Sigma with a closed-loop approach, creating time for auditing and incorporating lessons learned into an overall business strategy

A project-based approach relies heavily on a sound project selection process. Projects should be selected that meet the goals of an organization’s business strategy. Six Sigma can then be utilized as a road map to effectively meet those goals. Initially, companies might have projects that are too large or perhaps are not chosen because of their strategic impact to the bottom line. Frustration with the first set of projects can be vital experience that motivates improvement in the second phase. Six Sigma is a long-term commitment. Treating deployment as a process allows objective analysis of all aspects of the process, including project selection and scoping. Utilizing lessons learned and incorporating them into subsequent waves of an implementation plan creates a closed feedback loop and real dramatic bottom-line benefits if the organization invests the time and executive energy necessary to implement Six Sigma as a business strategy.


Methodologies of Six Sigma[6]

There are two major methodologies used within Six Sigma, both of which are composed of five sections, according to the 2005 book “JURAN Institute Six Sigma Breakthrough and Beyond” by Joseph A. De Feo and William Barnard.

DMAIC: The DMAIC method is used primarily for improving existing business processes. The letters stand for:

  • Define the problem and the project goals
  • Measure in detail the various aspects of the current process
  • Analyze data to, among other things, find the root defects in a process
  • Improve the process
  • Control how the process is done in the future

DMADV: The DMADV method is typically used to create new processes and new products or services. The letters stand for:

  • Define the project goals
  • Measure critical components of the process and the product capabilities
  • Analyze the data and develop various designs for the process, eventually picking the best one
  • Design and test details of the process
  • Verify the design by running simulations and a pilot program, and then handing over the process to the client

There are also many management tools used within Six Sigma. Some examples include the following.

Five Whys This is a method that uses questions (typically five) to get to the root cause of a problem. The method is simple: simply state the final problem (the car wouldn’t start, I was late to work again today) and then ask the question “why,” breaking down the issue to its root cause. In these two cases, it might be: because I didn’t maintain the car properly and because I need to leave my house earlier to get to work on time.

CTQ Tree The Critical to Quality (CTQ) Tree diagram breaks down the components of a process that produces the features needed in your product and service if you wish to have satisfied customers.

Root Cause Analysis Much like the Five Whys, this is a process by which a business attempts to identify the root cause of a defect and then correct it, rather than simply correcting the surface “symptoms.”

All the Six Sigma tools and methodologies serve one purpose: to streamline business processes to produce the best products and services possible with the smallest number of defects. Its adoption by corporations around the globe is an indicator of its remarkable success in today’s business environment.


Six Sigma Levels and Roles[7]

  • Six Sigma Champions Are:
    • Those who implement and back the introduction of Six Sigma within the firm.
    • Company executives who lead Six Sigma by backing projects.
    • Leaders responsible for choosing employees to be “Belts” and mentoring project leaders.
    • Individuals who receive instruction regarding the basic principles of Six Sigma and its methodology.
  • Six Sigma Master Black Belts Are:
    • Masters of Six Sigma Methodologies with proven track records.
    • Individuals with an advanced understanding of the Statistical Tools used within Six Sigma.
    • Aligned with a Champion to offer support and provide Project Descriptions.
    • Experts who will advise and instruct Green Belts and Black Belts.
    • Professionals with widespread project management knowledge.
    • Prospective leaders of a corporation.
  • Six Sigma Black Belts:
    • Individuals who obtain instruction concerning the road map of Six Sigma.
    • Receive four weeks of instruction that focus on the Six Sigma road map. This training will include an extensive look at statistical methodologies.
    • Successful Black Belts are project leaders whose job requires at least 75% of their time dedicated to completing four to six month Six Sigma Projects.
    • Individuals who successfully complete all required training, exams, and a live project.
    • Learn More About Six Sigma Black Belt
  • Six Sigma Green Belts:
    • Receive two weeks of class time which will cover the important aspects of the statistical methods needed to complete Six Sigma projects while learning the Six Sigma road map.
    • Green Belts spend up to 50% of their time working on Six Sigma projects that last for four to six months each.
    • Individuals who successfully complete all required training, exams, and a live project.
    • Learn More About Six Sigma Green Belt


Applications of Six Sigma[8]

Six Sigma mostly finds application in large organizations. An important factor in the spread of Six Sigma was GE's 1998 announcement of $350 million in savings thanks to Six Sigma, a figure that later grew to more than $1 billion. According to industry consultants like Thomas Pyzdek and John Kullmann, companies with fewer than 500 employees are less suited to Six Sigma implementation or need to adapt the standard approach to make it work for them. Six Sigma however contains a large number of tools and techniques that work well in small to mid-size organizations. The fact that an organization is not big enough to be able to afford black belts does not diminish its abilities to make improvements using this set of tools and techniques. The infrastructure described as necessary to support Six Sigma is a result of the size of the organization rather than a requirement of Six Sigma itself. Although the scope of Six Sigma differs depending on where it is implemented, it can successfully deliver its benefits to different applications.

  • Manufacturing: After its first application at Motorola in the late 1980s, other internationally recognized firms currently recorded high number of savings after applying Six Sigma. Examples of these are Johnson and Johnson, with $600 million of reported savings, Texas Instruments, which saved over $500 million as well as Telefónica de Espana, which reported €30 million in savings in the first 10 months. On top of this, other organizations like Sony and Boeing achieved large percentages in waste reduction.
  • Engineering and construction: Although companies have considered common quality control and process improvement strategies, there’s still a need for more reasonable and effective methods as all the desired standards and client satisfaction have not always been reached. There is still a need for an essential analysis that can control the factors affecting concrete cracks and slippage between concrete and steel. After conducting a case study on Tinjin Xianyi Construction Technology Co, Ltd., it was found that construction time and construction waste were reduced by 26.2% and 67% accordingly after adopting Six Sigma. Similarly, Six Sigma implementation was studied at one of the largest engineering and construction companies in the world: Bechtel Corporation, where after an initial investment of $30 million in a Six Sigma program that included identifying and preventing rework and defects, over $200 million were saved.
  • Finance: Six Sigma has played an important role by improving accuracy of allocation of cash to reduce bank charges, automatic payments, improving accuracy of reporting, reducing documentary credits defects, reducing check collection defects, and reducing variation in collector performance. Two of the financial institutions that have reported considerable improvements in their operations are Bank of America and American Express. By 2004 Bank of America increased customer satisfaction by 10.4% and decreased customer issues by 24% by applying Six Sigma tools in their streamline operations. Similarly, American Express successfully eliminated non-received renewal credit cards and improved their overall processes by applying Six Sigma principles. This strategy is also currently being applied by other financial institutions like GE Capital Corp., JP Morgan Chase, and SunTrust Bank, with customer satisfaction being their main objective.
  • Supply chain: In this field, it is important to ensure that products are delivered to clients at the right time while preserving high-quality standards from the beginning to the end of the supply chain. By changing the schematic diagram for the supply chain, Six Sigma can ensure quality control on products (defect free) and guarantee delivery deadlines, which are the two major issues involved in the supply chain.
  • Healthcare: This is a sector that has been highly matched with this doctrine for many years because of the nature of zero tolerance for mistakes and potential for reducing medical errors involved in healthcare. The goal of Six Sigma in healthcare is broad and includes reducing the inventory of equipment that brings extra costs, altering the process of healthcare delivery in order to make more efficient and refining reimbursements. A study at the University of Texas MD Anderson Cancer Center, which recorded an increase in examinations with no additional machines of 45% and reduction in patients' preparation time of 40 minutes; from 45 minutes to 5 minutes in multiple cases


Six Sigma Benefits[9]

Six Sigma enables organizations to improve their processes, making them more capable of delivering what the customer wants right first time. The resulting benefits to the organization can be substantial:

  • Greater Productivity
  • Greater Throughput
  • Improved Quality
  • Reduced Cycle Times
  • Less Fire Fighting
  • Smoother Operation
  • Reduced Operating Costs

Since its conception in 1985, Six Sigma has realised significant tangible cost savings to those organizations that have embraced it. General Electric, who started Six Sigma in 1995, reported $12bn of savings in their first 5 years. They are not alone in their success – the list of organizations reaping the benefits continues to grow.


Six Sigma Disadvantages[10]

It is difficult to imagine that a methodology created to improve can actually bring problems to an organization.

  • Six Sigma can create amazing bureaucracy and rigidity because the methodology covers all the process of the company and this, in turn, leads to delays and problems in creativity. Furthermore, when Six Sigma is taken to the extreme problems can arise because companies tend to favor policies that follow the Six Sigma methodologies and forget about policies or approaches that can only apply to their company. So, for example, a company can prefer to follow the Six Sigma methodology and apply a very expensive measure rather than trying a very inexpensive measure that evidently is needed in the business.
  • Six Sigma can be very expensive to implement. The main cause of this cost is training. Companies have to find certified Six Sigma institutes to get their training or do their training in-house without formal certification. Either way, the cost for small business is too high and a lot of training is needed to really get the grasp of the system and to apply it to each and every process.
  • Six Sigma focuses on a strict and rigid process that goes against new trends that favor creativity and innovation because the innovative approach focuses on redundancy, unusual solutions, and deviations in production, and all these things clearly go against the Six Sigma principles.
  • Lack of trust in Six Sigma as a methodology in itself. Six Sigma is perceived as a methodology that is just a continuation of the continued improvement techniques that were applied in Toyota but now companies are shifting to other approaches or strategies that require outsourcing of projects that bring big problems with accountability. With this in mind, it is clear that Six Sigma also requires many trained staff that needs to be motivated in time and well trained for long periods.

Although Six Sigma is an approach that has been around for a while, it is now being challenged by new innovative approaches but it still remains a good way to improve processes.


See Also

Lean Six Sigma
TAKT Time
Lean Manufacturing
Lean Management
Lean Production
DMAIC Framework
DMADV Framework
Root Cause Analysis


References

  1. Defining Six Sigma isixsigma.com
  2. What is Six Sigma? Six Sigma Institute
  3. Key Concepts of Six Sigma GE
  4. The Evolution of Six Sigma Douglas C. Montgomery and William H. Woodall
  5. Implementing Six Sigma ASQ
  6. Methodologies of Six Sigma Six Sigma Daily
  7. Six Sigma Levels and Roles 6Sigma.US
  8. Applications of Six Sigma Wikipedia
  9. What are the Benefits of Six Sigma Burge Hughes Walsh
  10. Disadvantages of Six Sigma David Kiger


Further Reading