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6/24/03
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Six
Sigma:
Where is it now?
by
Scott Frahm, SCRC Staff
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Six
sigma is a statistical level that represents 3.4
defects per million. Six Sigma is a process that
has been around since the late 1970s and mid-1980s.
It was developed by Mikel Harry at Motorola in
an effort to minimize costs attributed to poor
quality for the company. Though Harry is credited
with creating the modern day Six Sigma, its roots
can be traced to Philip Crosby’s 1979 book
Quality is Free (1).
Harry formed a team to investigate the effectiveness
of the six sigma methodology because Motorola
was experiencing serious quality issues. Then,
Harry and Richard Schroeder began applying this
methodology within the company and witnessed dramatic
results. The results of the six sigma projects
included “a 58 percent reduction in the cost
of quality, a 40 percent reduction in errors,
and a 60 percent reduction in the time it took
to design a new product (1).”
Implementing a six sigma program can dramatically
reduce errors and poor quality for an organization
representing impressive savings. Yet, it is believed
that most organizations operate at three sigma,
which translates to 66,000 errors per million
(2)! General Electric openly embraced six sigma
with the backing of its former CEO Jack Welch
and defines its six sigma initiative as a “highly
disciplined process that helps us focus on developing
and delivering near-perfect products and services
(3).”
With Jack Welch singing the praises of the benefits
of six sigma, the interest was strong initially.
After all the fanfare generated by media coverage
in the mid-1990s, interest has seemingly waned.
Though the hype behind the six sigma machine has
subsided, many companies are still utilizing six
sigma. Trends in six sigma these days include:
| • |
Organizations
sharing their six sigma knowledge with suppliers |
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Shift
from discrete manufacturing to other businesses
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| • |
New
Product Development |
Knowledge
Sharing with Suppliers
Some organizations have run the gamut with six
sigma inside their organization and are now looking
outside the organization. Companies are now teaching
their suppliers about the benefits of six sigma.
This represents an untapped opportunity for both
organizations to improve their performance by
reducing errors throughout the supply chain.
No organization better utilizes six sigma than
General Electric. One of the first to implement
six sigma, General Electric claimed that its six
sigma initiative saved the organization $2 billion
in 1999 (4). Having identified the lion’s
share of savings within the organization, General
Electric has moved on to its suppliers to help
them implement six sigma programs. In its effort
to reduce its supply base, General Electric favors
companies that have adopted six sigma programs.
For example, faced with 30 printed circuit board
producers, GE Medical plans to reduce that number
to three and will favor organizations that have
made a commitment to six sigma (5).
Discrete manufacturing to other businesses
Six sigma was initially seen as benefiting large
manufacturing companies because “factory
processes tend to be both repetitive and easy
to track as goods move along the line (2).”
Motorola, General Electric, and Allied Signal
(now Honeywell), all involved in manufacturing,
were the first organizations to implement six
sigma and realize significant savings. However,
the tide has turned and companies in other lines
of business have recognized that implementing
six sigma can improve their businesses. Industries
that have recently implemented six sigma include
chemical, financial, healthcare, and retail.
Transaction-based services stand to benefit the
most. To put the significance of six sigma into
perspective, the imperative of employing six sigma
in healthcare, financial institutions, and other
areas can be illustrated by the following quote
from Thomas Pyzdek’s 1999 book, The Complete
Guide to Six Sigma:
| |
"Virtually
no modern computer would function. 10,800,000
healthcare claims would be mishandled each
year. 18,900 U.S. Savings Bonds would be lost
every month lost every month. 54,000 checks
would be lost each night by a single bank.
4,050 invoices would be sent out incorrectly
each month by a modest-sized telecommunications
company. 540,000 erroneous call details would
be recorded each day from regional telecommunications
company. 270 million erroneous credit card
transactions would be recorded each year in
the United States (6)." |
In
the chemical industry, Dow Chemical Co. is an organization
that has recently adopted six sigma. Since implementing
its six sigma program Dow has identified major improvements.
Dow claims that each six sigma project has saved
approximately $500,000 a year. For example, on one
of its projects Dow discovered “that an additive
was causing imperfections in packaging materials
enabled Dow to reduce defective items on that line
by 70 percent (2).”
New Product Development
One of the latest developments with six sigma is
its integration into new product development. Employing
six sigma during new product or service design has
the potential to save an organization a considerable
amount of money. For example, according to Lean
Sigma Technologies, LLC, an international consultancy,
“70 to 80 percent of all quality problems are
design related and not manufacturing caused (7).”
If these quality issues are addressed during design,
an organization can eliminate costly quality issues
once the product is released.
The term used when six sigma is utilized in new
product development is Design For Six Sigma. This
methodology strives to design processes and products
from inception whereas six sigma tackles problems
on existing processes or products.
According to Subir Chowdhury, author of the book
“Design For Six Sigma: The Revolutionary Process
for Achieving Extraordinary Profits”, “Companies
that correctly employ Design for Six Sigma will
do less and less Six Sigma because the product is
designed right the first time (8).” The drawback
however, is that it more difficult to quantify the
savings involved with new product development than
it is to attack an existing process where waste
has already been identified (8). Yet, ignoring it
could negatively impact an organization’s future
performance.
References:
(1) Philips, E. (Dec, 2002). Six Sigma: The Breakthrough
Management Strategy Revolutionizing the World’s
Top Corporation. (Book Review) Consulting to Management,
57-59.
(2) Arndt, Michael. (Jul, 2002). Quality Isn’t
Just for Widgets. Business Week, .
(3) Gourishankar, T. and Subramaniam, S. (Jan.
1999). Six
Sigma- Does it Really Add Up? Financial Times
Limited.
(4) Schmitt, B. (Apr, 2000). Moving Ahead with Six
Sigma. Chemical Week.
(5) Anonymous. (Jan, 1999). Using Six Sigma to manage
suppliers. Purchasing.
(6) Pyzdek, Thomas. (1999). The Complete Guide to
Six Sigma.
(7) Retrieved from Lean
Sigma web site 2-25-03.
(8) Jusko, J. (Dec, 2002). Best Practices –
Prevention is the Cure. Industry Week.
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