Six Sigma

Six Sigma is a quality improvement methodology developed by Motorola to systematically improve processes by eliminating defects [nonconformity of a product or service to its specifications]. Motorola has reported over US$17 billion in savings from Six Sigma as of 2006.

Based on founding improvement tools such as quality control, TQM, and Zero Defects, Six Sigma is founded upon:

1. Continuous efforts to reduce variation in process outputs is key to business success
2. Manufacturing and business processes can be measured, analyzed, improved and controlled
3. Succeeding at achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management

The term "Six Sigma" refers to the ability of highly capable processes to produce output within specification. In particular, processes that operate with six sigma quality produce at defect levels below 3.4 defects per one million opportunities (DPMO). Six Sigma's implicit goal is to improve all processes to that level of quality or better.

Other companies that have adopted Six Sigma methodologies include:

• Bank of America,
• Caterpillar,
• Honeywell International (previously known as Allied Signal),
• Raytheon,
• Merrill Lynch
• General Electric (introduced by Jack Welch)

What Gets Measured, Gets Managed

The Six Sigma approach incorporates key performance indicators [KPI's] over a broad range of elements of business strategy. Not only do these business metrics act as a measurement system, but also as a way of capturing the systems of the business, and providing improvement measures. In this way, Six Sigma has moved beyond Quality Management to become a basis for Operational Design.

Adopting this approach, many organisations now regard a balanced measurement system as a key element for long term competitveness.

The Six Sigma approach can be applied across both manufacturing and service based industries.

Six Sigma Methodologies

There are two key Six Sigma methodologies:

1. DMAIC - used to improve an existing business process
2. DMADV - used to create new product or process designs for predictable, defect-free performance.

Both were inspired by W. Edwards Deming's Plan-Do-Check-Act Cycle.

DMAIC

The five steps of this methodology consist of:

1. Define - the process improvement goals that are consistent with customer demands and enterprise strategy.
2. Measure - the current process and collect relevant data for future comparison.
3. Analyze - to verify relationship and causality of factors. Determine what the relationship is, and attempt to ensure that all factors have been considered.
4. Improve or optimize - the process based upon the analysis using techniques like Design of Experiments.
5. Control - to ensure that any variances are corrected before they result in defects. Set up pilot runs to establish process capability, transition to production and thereafter continuously measure the process and institute control mechanisms.

DMADV

DMADV methodology also consists of five steps:

Define - the goals of the design activity that are consistent with customer demands and enterprise strategy.

Measure and identify CTQs - (critical to qualities), product capabilities, production process capability, and risk assessments.

Analyze - to develop and design alternatives, create high-level design and evaluate design capability to select the best design.

Design - details, optimize the design, and plan for design verification. This phase may require simulations.

Verify - the design, set up pilot runs, implement production process and handover to process owners.

Success In Six Sigma

To gain the greatest benefits from Six Sigma it is important for companies NOT to focus on financial gains. Focusing on the financial gains realized through Six Sigma is counter-productive; as financial gains are simply by products of a good process improvement.

Building business objectives on purely financial targets has little value to supporting a long-term strategic vision.

A Six Sigma strategy instead uses a measurement system based on robust capability, using both financial and non-financial measures to measure corporate performance. This has lead to the wide acceptance of Balanced Scorecard.

Applying Six Sigma In Retail

Six Sigma works best when defects are related to processes and products, rather than people. For this reason, few retail companies have attempted this methodology due to the problem of applying defects to people.

Retail=people, Six Sigma=defects

Applying six sigma to the human factor takes a lot of staff time; leading to frustration from both the employees and from the customers due to the lack of salespeople on the floor at any one time.

Next: Implementing Six Sigma

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