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Six Sigma is a business management strategy, originally developed by Motorola that today enjoys wide-spread application in many sectors of industry. Six Sigma seeks to identify and remove the causes of defects and errors in manufacturing and/or service delivery and business processes. It uses a set of management methods, including statistical methods, and creates a dedicated infrastructure of people within the organization who are experts in these methods. Six Sigma aims to deliver "Breakthrough Performance Improvement" from current levels) in business and customer relevant operational and performance measures. Six sigma is a statistical concept that measures a process in terms of defects. Achieving six sigma means your processes are delivering only 3.4 defects per million .
The central idea of Six Sigma management is that if you can measure the defects in a process, you can systematically figure out ways to eliminate them, to approach a quality level of zero defects. So, in short, Six Sigma is several things:
- A statistical basis of measurement: 3.4 defects per mil- lion opportunities
- A philosophy and a goal: as perfect as practically possible
- A methodology
- A symbol of quality
Having processes in which errors occasionally occur may not seem such a big deal. But when you consider how many errors may be lurking in company-wide processes, the mone- tary impact on overall productivity, customer satisfaction, and profitability multiplies dramatically! The Six Sigma approach to managing is all about helping you identify what you don't know as well as emphasizing what you should know, and taking action to reduce the errors and rework that cost you time, money, opportunities, and customers. Six Sigma translates that knowledge into opportunities for business growth. Many companies believe that dealing with errors is just part of the cost of doing business. But you don't have to accept that faulty logic. With Six Sigma, you can eliminate most errors, reduce your costs, and better satisfy your customers.
Most organizations in the U.S. are operating at three to four sigma quality levels. That means they could be losing up to 25% of their total revenue due to processes that deliver too many defects-defects that take up time and effort to repair as well as creating unhappy customers.
Is that good enough? The answer is simple. No it's not when you could be doing a lot better. Helping you do that is what this book is about.
Six Sigma in Context
Let's take an example, an all-too-familiar scenario: lost luggage at the airport. Many of us have experienced the frustration of watching the baggage carousel slowly revolve while waiting for luggage that never arrives. The system is far from perfect. But just how far, in sigma measurement terms?
In general terms, the baggage handling capability of many airlines is performing at around the three sigma level. That means there are about 66,000 "defects" for every one million luggage transactions, which equates to an approximate 94% probability that you'll get your luggage. Is that good enough? Certainly not for the customers whose bags are among the "defects." The "defects" increase costs for the airlines, because employees must deal with misplaced luggage and unhappy passengers. And those "defects" can result in lost business in the future.
If the airline moves to six sigma in luggage handling, it clearly pays off in terms of lower costs and happy passengers, who are then more likely to fly with that airline again.
Six Sigma uncovers the layers of process variables-in data terms-that you must understand and control to eliminate defects and wasteful costs. It's a management approach that aims to achieve the apex of quality by measuring, analyzing, improving, and controlling processes to root out defects and boost bottom-line results.
- There are numerous benefits of six sigma as a way to address issues and problems. Among the benefits of six sigma is the decrease in defects that are allowed to reach the customer. You can get some sense of the benefits of six sigma by reviewing some six sigma projects. Other benefits of six sigma include:
- Focus on customers.
- Improved customer loyalty.
- Reduced cycle time.
- Less waste.
- Data based decisions.
- Time management.
- Sustained gains and improvements.
- Systematic problem solving.
- Employee motivation.
- Data analysis before decision making.
- Faster to market.
- Team building.
- Improved customer relations.
- Assure strategic planning..
- Reductions of incidents.
- Measure value according to the customer.
- Better safety performance.
- Understanding of processes.
- Effective supply chain management.
- Design and redesign products/services.
- Knowledge of competition, competitors .
- Develop leadership skills.
- Breakdown barriers between departments and functions.
- Management training.
- Improve presentation skills.
- Integration of products, services and distribution.
- Use of standard operating procedures.
- Better decision making.
- Improving project management skills.
- Sustained improvements.
- Alignment with strategy vision, and values.
- Increased margins.
- Greater market share.
- Supervisor training.
- Lower costs to provide goods and services.
- Fewer customer complaints.
A Little History of Quality
Many people associate Six Sigma with the quality movement. So, it seems logical at this point to start from that perspective. How does Six Sigma differ from the "quality" programs.
Deming's management approach, which came to be known as Total Quality Management or TQM (though Deming didn't like that term), has changed the way thousands of companies conduct their operations. By the mid-1980s, the extent to which corporate management was focusing on quality was significant:
businesses adopting TQM underwent a major paradigm shift, a transformation of "unlearning" everything previously believed about business to create better products and services. They began to understand that quality did not require higher costs but more efficient and reliable processes that delivered defect-free outputs and that they had to focus on process improvement and customer satisfaction. TQM is an excellent foundation from which to build toward the next level of quality management, represented by the Six Sigma approach.
But Six Sigma is far more than the latest "quality" trend.
The proof? Companies that have implemented Six Sigma have achieved outstanding financial results and developed a disciplined, pragmatic plan for improved financial performance and growth. Companies such as Motorola, Texas Instruments, IBM,AlliedSignal, and General Electric have successfully implemented Six Sigma and reduced costs literally by billions of dollars.
More recently Ford, DuPont, Dow Chemical, Microsoft, and American Express have started working on instituting the Six Sigma methodology. But it's about more than money. Jack Welch, the CEO who started Six Sigma at General Electric, called it "the most important initiative GE has ever undertaken," and said that Six Sigma is "part of the genetic code of our future leadership."
Essentials of the Six Sigma Methodology
The Six Sigma methodology uses statistical tools to identify the vital few factors, the factors that matter most for improving the quality of processes and generating bottom-line results. It consists of four or five phases:
- Define the projects, the goals, and the deliverables to customers (internal and external).
- Measure the current performance of the process.
- Analyze and determine the root cause(s) of the defects.
- Improve the process to eliminate defects.
- Control the performance of the process.
We should note that Six Sigma methodology is not rigid. Approaches vary, sometimes significantly. One of the variations is in the phases: some approaches use all five of the phases listed above, while others do not include the Define phase. Six Sigma focuses on defects and variations. It begins by identifying the critical-to-quality (CTQ) elements of a process the attributes most important to the customer. It analyzes the capability of the process and aims at stabilizing it by reducing or eliminating variations. Simply put, Six Sigma management is about tying quality improvement directly to financial results. The Six Sigma goal is to link internal processes and systems management to end consumer requirements. Six Sigma is a scientific approach to management, driven entirely by data. The Six Sigma methodology eliminates the use of opinion-"I think," "I feel," or "I believe." Six Sigma drives the organization to a more scientific means of decision making by basing everything on measurable data.
Focus on Engaging People and Changing Processes
The first thing to know about Six Sigma is that it doesn't rely on the latest program fads or "magic pills" to fix organizations. It relies on old-fashioned hard work coupled with factual data and a disciplined problem-solving approach. It affects every aspect and level of an organization-from line workers to middle managers to CEOs-to transform your people and your processes.
As the first step in that transformation, the Six Sigma mindset considers you and your people as assets, rather than as costs (liabilities). That's right-you are as much an asset as any piece of capital equipment, and you represent an investment with extraordinary potential for return.
Shifting the perspective on people from liabilities to assets (or investments) is fundamental to Six Sigma.
Not Just Statistics, but Cultural Changes
Because it uses statistical terminology, Six Sigma is frequently perceived as a statistics and measurement program. This is not the case. The Six Sigma approach to management uses statistics solely as tools for interpreting and clarifying data. You focus on tool selection and the use and interpretation of data to drive decisions. Six Sigma practitioners also use computers and statistical software to take advantage of knowledge and speed the improvement process. The ultimate goal is to create Six Sigma companies-companies whose systems and processes are as perfect as possible, functioning at their best performance level. To achieve that level of quality requires not just statistics, but changes in the culture of the organization. The Six Sigma approach is rigorous, requiring a deep commitment from the highest levels of management that permeates the entire organization. It requires a tolerance for endlessly questioning the validity of sacred company beliefs and the traditional ways "things are done around here." It also requires a sense of urgency-an understanding that, in order to solve the problems that undermine profitability and customer satisfaction, you need to involve your key people in actively implementing the Six Sigma methodology.
The Magic of DMAIC
Six Sigma statistical tools work like magic to uncover what you don't know. Yet you don't have to be a statistician to use them:
you focus on selecting tools, using them, and analyzing data and let the specific software do the calculations. The five-phase process of DMAIC, described earlier in this chapter, uses a collection of tools and is a logic filter to lead you to the vital few factors affecting your process outcomes:
- Define-Determines the project goals and deliverables to customers (internal and external).
- Measure-Identifies one or more product or service characteristics, maps the process, evaluates measure ment systems, and estimates baseline capability.
- Analyze-Evaluates and reduces the variables with graphical analysis and hypothesis testing and identifies the vital few factors for process improvement.
- Improve-Discovers variable relationships among the vital few, establishes operating tolerances, and validates measurements.
- Control-Determines the ability to control the vital few factors and implements process control systems.
What Six Sigma Is Not Six Sigma is not another quality program.
That's an important point to emphasize. Businesses exist for one purpose-to profitably serve customers. So it follows that any problem-solving initiative should do the same. Six Sigma uses your resources to fix identifiable,chronic problems. It proves its value by connecting outcomes t your bottom line. Quality programs lay a valuable foundation in creating a quality mindset. But ask yourself if any you've experienced have generated specific financial results like Six Sigma. It's possible you'll answer, "No," since a primary criterion for selecting Six Sigma projects is to return money to your balance sheet as the result of full-time efforts by dedicated resources.
Six Sigma is not theory. It's a practice of discovering the vital few processes that matter most. It defines, measures, analyzes, improves, and controls them to tie quality improvement directly to bottom-line results. Six Sigma is an active, involved effort that puts practical tools to work to root defects at all levels of your organization.
Six Sigma is not a training program. Of course, practitioners are trained in the methodology to ensure correct implementations and results. But Six Sigma is a business strategy that fosters a cultural shift at all levels. Permeating departments, functional groups, and all levels of management, Six Sigma changes the outlook and practices of everyone in the organization.
From workers on assembly lines and bookkeepers in accounting to operations managers and human resource personnel, training exists only to instill the method, facilitate transformation, and get financial results by attacking chronic defects with proven statistical tools.