six sigma
Content
Six Sigma Methodology
by James G. Barr Copyright 2010, Faulkner Information Services. All Rights Reserved.
Docid: 00018968
Publication Date: 1012 Report Type: TUTORIAL
Preview
Six Sigma is a program, a methodology, and an ideal. In any of these three meanings, it offers the enterprise the opportunity to improve product quality at often significant financial savings. Its implementation requires major management buy-in and initial investment, but the results can more than justify the cost. Report Contents:
G G G G G G
Executive Summary Description Current View Outlook Recommendations Web Links
Executive Summary
[return to top of this report] "We believed then and we are convinced today ... that there is an 'infinite capacity to improve everything' - but there was no methodology or disciple attached to that belief. There is now. It's Six Sigma quality, along with a culture of learning, sharing, and unending excitement." -- former GE CEO Jack Welch1 Six Sigma began in the 1980s as a statistical measure of quality for manufacturing processes.
Six Sigma now has three meanings. First, it can represent a quality level of fewer than 3.4 defects per million opportunities. Second, Six Sigma can represent a systematic, data-driven approach and methodology for designing, evaluating, or improving any business process. The methodology for process improvement is called DMAIC, for the five steps - Define, Measure, Analyze, Improve, and Control - that help a business align business processes to achieve customer requirements; minimize variation; and achieve rapid and sustainable business process improvement. The methodology for new process or product design is called DFSS, for Design for Six Sigma, or DMADV, for the five steps: Define, Measure, Analyze, Design, and Verify. Third, Six Sigma can represent an integrated, top-down management system for executing business strategy and prioritizing resources. Designed to ensure that application of the above metrics and methodology is directly linked to enterprise strategy, it integrates development of strategic objectives and measurement with project prioritization and governance, and performance management. Six Sigma is executed within an enterprise by a hierarchy of full- and part-time specialists with various levels of instructional and hands-on training: Executive Leaders, Project Champions, Master Black Belts, Black Belts, Green Belts, and Yellow Belts. Although it was first applied in manufacturing processes, Six Sigma has since been applied to diverse functions in diverse industries, including transactional, support, and service functions such as supply chain management; sales and marketing; shipping and receiving; document control; and research and development. Software packages are available to help enterprises with Six Sigma-related data analysis, project management, resource management, and reporting. High start-up costs generally limit implementation to large enterprises (with more than 500 employees), although smaller enterprises may implement a more limited version of Six Sigma. Enterprises that implement Six Sigma report numerous benefits, including fewer defects, improved cycle times, higher customer focus, increased customer satisfaction, lower costs, higher employee focus, better (data-driven) decision-making, and more effective management vision. Motorola, the founder of Six Sigma, reports over $17 billion USD in Six Sigma-related savings from 1986 to 2004. After breaking even the first year, most enterprises can expect to save from 1.2 to 4.5 percent of revenue annually. But these gains can be expected only if an enterprise first makes significant investments in training, enterprise infrastructure, and cultural evolution. Six Sigma is being used by more than 80 percent of all global enterprises.
Description
[return to top of this report] Six Sigma was developed at Motorola in the 1980s as a quantitative, statistical measure of quality to help identify and prevent defects in manufacturing processes. It offered a new method for standardizing how defects are counted, as well as a new quality goal: near perfection. Since then, Six Sigma has grown to represent either: (1) this rigorous measure of quality; (2) an overall business improvement methodology; or (3) a full management system.
Metric
As a metric, Six Sigma is a measure of quality in terms of defects per million opportunities (earlier metrics measured defects per thousand opportunities). Whatever doesn't fall between the lower and upper tolerance limits of customer specifications is a defect. Each standard deviation above and below the mean is a sigma. The goal is for the process to reach the quality level where there are six sigmas (six standard deviations) between the mean and the nearest specification limit, which means that all but 3.4 out of the million opportunities fall inside the specification limits. Thus, Six Sigma represents the nearly perfect quality level of fewer than 3.4 defects per million opportunities, or 99.99966 percent quality.
Methodology
Six Sigma also refers to a systematic, data-driven approach and methodology for evaluating and improving any business process - manufacturing or transactional, product or service - through process improvement and variation reduction. Six Sigma helps a business focus on understanding and managing customer requirements; aligning business processes to achieve those requirements; minimizing variation in those processes via rigorous data analysis; and achieving rapid and sustainable business process improvement. The methodology is designed to help an enterprise capture the customer's voice, then maintain a focus on the end result to deliver consistent, reliable output to the customer. Training and certification are an important part of the Six Sigma methodology: Six Sigma aims at equipping and empowering employees to make decisions and improve their enterprise. While the intention is still to achieve near-perfection in every product, process, and transaction, Six Sigma methodology in this sense is more a process than a goal.
Management System
More recently, Six Sigma has been expanded by Motorola into a top-down management system for executing business strategy and prioritizing resources. The Six Sigma management system is designed to ensure that the above metrics and methodology are applied to improvement opportunities that are directly linked to enterprise strategy. It integrates development of strategic objectives and measurement with project prioritization and governance, and performance management. Some enterprises, notably General Electric, have made Six Sigma certification an important requirement for advancement.
Current View
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Process Improvement
Six Sigma uses separate methodologies for process improvement, and for process and product design. The Six Sigma methodology for improving an existing process is called DMAIC, an acronym for the five steps of process improvement: Define, Measure, Analyze, Improve, and Control.
1.
Define the opportunity for improvement: the business problem to be solved or the customer
2. 3. 4. 5.
requirement to be met. Measure the current performance of the process, and compare it against the desired state. Analyze and determine the root cause or causes of whatever defects or variations there are, and prioritize among the opportunities for improvement. Improve the process by eliminating defects. Control future process performance and the long-term sustainability of improvements by developing, documenting, and implementing an ongoing monitoring plan.
Process and Product Design
Using Six Sigma methodology to develop a new process or product, or to make large-scale changes in an existing process, is known as Design for Six Sigma (DFSS). DFSS is a methodology for extracting the voice of the customer and converting it into quantitative design requirements. This forces product designers to meet real customer requirements and stimulates top-line growth, not just bottom-line savings. Numerous enterprises have defined different sequences of steps for DFSS. The most popular version of DFSS uses five steps: Define, Measure, Analyze, Design, and Verify (DMADV).
1. Define project goals and customer requirements and deliverables. 2. Measure and determine customer needs and specifications. 3. Analyze process options to meet customer needs. 4. Design the process in detail to meet customer needs. 5. Verify design performance and functionality (ability to meet customer needs).
Some versions of DFSS add a sixth step - optimize - before the verify step, so the acronym is DMADOV. Other versions use Identify, Design, Optimize, and Validate (IDOV), or Define, Measure, Explore, Develop, and Implement (DMEDI).
Management System
One of the latest innovations in Six Sigma is Motorola's integrated Six Sigma management system, known as the New Six Sigma, or second-generation Six Sigma. It is also referred to by the acronym AMAG, for its four leadership principles: Align, Mobilize, Accelerate, and Govern. AMAG is designed to enhance the effectiveness of Six Sigma outside of manufacturing and engineering environments, and to yield faster and more sustainable results. Like the Six Sigma methodologies, it provides a framework for understanding customer requirements, continuously driving process improvement, and using statistical analysis to drive fact-based decision-making. It goes beyond DMAIC and DFSS, however, by offering a broader, integrated approach for executing full business strategies. AMAG is designed to help an enterprise simultaneously achieve short-term financial gains through fast business improvement, and build future capability in key talent and critical processes. Note that process refers not just to classic product and service domains, but also to goals such as market share improvements, better cash flow,
and better HR processes. The four leadership principles of AMAG are summarized below.
1.
Align executives with the right objectives and targets. Link business strategy and core business processes with critical improvement efforts that address customer requirements. Create a balanced scorecard of strategic goals, metrics, and initiatives to identify the improvement points with the greatest benefit to the bottom line. Mobilize and focus teams by providing clear charters and success criteria, and rigorous reviews. Organize team efforts and focus projects on the customer. Accelerate improvement in business results by implementing shorter deadlines, rigorous reviews, and an action-learning methodology (which combines structured education with realtime project work and coaching.) Take advantage of employees' motivation to act before it perishes. Govern efforts with visible sponsorship by top management to ensure sustained improvements and bottom-line results that drive business goal achievement. The need for management doesn't stop after improvement opportunities are selected and teams are assigned. Continue rigorous, structured review of projects; knowledge sharing; proactive communication; and management of scorecard metrics.
2. 3.
4.
Six Sigma Hierarchy
Six Sigma is executed within an enterprise by a hierarchy of full- and part-time specialists with various levels of training. Training and certification are available from Motorola University and independent consultants. Each level of certification generally involves passing a written proficiency exam, plus displaying competency in a hands-on environment by completing one or more projects. Certification requirements have not yet been standardized. There is no accepted definition of competency at a given level, and different certification programs require different numbers of projects for certification at each level. Executive Leader:
G G
G
Senior management at the CEO, CIO, CFO level. Sets, communicates, and drives overall business objectives. Incorporates Six Sigma objectives into operational plans. Establishes enterprise goals and business targets (e.g. percent of employees trained or percent reduction in defects by target date). Plans and spearheads Six Sigma program rollout. Establishes compensation/reward structure to promote commitment. Executive Leaders may also receive Black Belt training.
Project Champion (Sponsor):
G
G
Senior-level executive/manager (reporting to senior management). There is usually one project champion per business unit, manufacturing site, or service facility. In a large enterprise, functional or process managers (e.g. of human resources, call center, etc.) may also serve as project champions. Champions the cause within the enterprise. Translates senior management's strategic directions
G G
into tactical objectives and actions (with Master Black Belt and Black Belt). Selects Six Sigma projects (with Master Black Belt). Has day-to-day responsibility for the process being improved, ensures the team has the necessary resources, and is accountable for the project's results. Uses advanced statistical tools and Six Sigma concepts. Project Champions may also receive Black Belt training.
Master Black Belt (Quality Leader):
G G
G
Has demonstrated experience. Works full-time overseeing a Six Sigma project, including the most complex projects. Trains, coaches, and monitors Black Belts and Green Belts. Works with the Project Champion to develop the enterprise training program and to pick projects and people. Reviews projects at milestones, tracks cost savings, and ensures appropriate use of tools and methodologies. Must be expert in statistical techniques and Six Sigma methodology, with leadership, communication, teaching, and mentoring skills.
Black Belt (Project Leader, Technical Leader):
G
G
Agent of change who works full-time implementing and executing a Six Sigma project. Creates, facilitates, trains, and leads teams. Maintains time lines and budget. Serves as central point of contact for specific process improvement projects. Uses management, communication, presentation, and training skills. Must be expert skilled in application of rigorous statistical tools and methodologies to drive business process improvement and significantly improve bottom line.
Green Belt (Employee):
G G
G G
Team member under Black Belt. Works 25 percent of time executing Six Sigma project and assisting Black Belt in collecting and analyzing data. May be project leader on small, department-sized project. Uses basic statistical tools and process knowledge. Asks Black Belts for help on questions involving complex tools and statistics.
Yellow Belts (Administrators, Operations Personnel, and other Six Sigma Support Personnel):
G
Apply some elements of the Six Sigma methodology as they help Green Belts meet project goals and objectives.
Six Sigma Just Looks Good
Apart from its quality improvement benefits - which are considerable - Six Sigma has a particular pubic relations (PR) appeal. Enterprises can leverage their investment in Six Sigma to improve their image and reputation as quality leaders - a vital component in improving enterprise business prospects. From a personnel perspective, Six Sigma experience - and especially Sig Sigma certification - look good on a resume, thus encouraging employees to enlist in Six Sigma projects. On the flip side, Six
Sigma specialists are highly mobile, and enterprises that invest in Six Sigma education may find it difficult to retain those individuals they train.
Six Sigma Has Competition
While popular, Six Sigma is only one of many highly-regarded quality management disciplines, including:
G
G
G
G
Total Quality Management (TQM) - TQM is a strategic approach to management aimed at embedding quality awareness into all enterprise processes. TQM evolved during the mid-1980s into the first generation of Six Sigma at Motorola. Business Process Reengineering (BPR) - Introduced in the early 90s in Michael Hammer and James Champy's Reengineering the Corporation, BPR was welcomed by an audience disenchanted with TQM, and ready to improve quality by streamlining processes, eliminating unnecessary and redundant steps. Just-in-Time Manufacturing (JIT) - Pioneered by Ford Motor Company, JIT is an inventory strategy that strives to improve an enterprise's return on investment by reducing in-process inventory and associated carrying costs. Lean Six Sigma - Lean Six Sigma is a process improvement methodology that merges tools from both Lean Manufacturing and Six Sigma. Lean manufacturing focuses on speed; traditional Six Sigma focuses on quality. By combining the two, the result is better quality faster.
Outlook
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Industries
Six Sigma began in manufacturing industries, with a focus on cost reduction and productivity improvement. It then spread to the chemical and continuous process industries, still with a focus on production. As it has gained popularity, it has been adopted in diverse industries, including financial services, telecommunications, information technology, healthcare, education, and government. Enterprises that have implemented Six Sigma include Black & Decker, Dupont, Federal Express, GM, IBM, Johnson & Johnson, Kodak, NBC, Polaroid, Sony, Texas Instruments, and Toshiba. It is likely that this spread into other industries will continue. However, the rigor of the Six Sigma process to some extent limits its growth, since it requires significant capital investment (particularly for startup), dedicated staff, and a major learning curve. For enterprises with fewer than approximately 500 employees, these factors can significantly reduce the possibilities for implementation.
Functions
Motorola first applied Six Sigma in its manufacturing processes, but eventually included transactional, support, and service functions including supply chain management and sales and marketing. This is true at many enterprises that use Six Sigma. A Quality Digest survey found that 30 to 50 percent of
respondents use Six Sigma for non-manufacturing functions such as plant operations; engineering; test/inspection; administration; shipping and receiving; and document control. The use of Six Sigma in research and development is somewhat controversial, since creative operations must be allowed to fail as well as to succeed, and failure definitely is not a part of the Six Sigma approach. It is likely that Six Sigma can best be used in the later stages of research and development, when the creative team has passed the project on to implementers. Six Sigma has also been applied in areas such as product design; customer service; transaction processing; purchasing; and pollution prevention. It is likely that this spread into non-manufacturing functions will continue.
Software Tools
Several vendors now offer software that helps enterprises with data analysis, project management, resource management, and reporting for Six Sigma projects and implementations. For example, MINITAB Statistical Software offers a software package for Six Sigma and other quality improvement projects that provides data analysis, graphical data presentations, and simple to advanced statistical procedures.
Size of Enterprise
Because the training and other start-up costs for Six Sigma are fairly high, it has generally been implemented by large corporations with large consulting budgets. Smaller enterprises would also have trouble with the expense of assigning one or more employees to work full-time just on Six Sigma. In a Quality Digest survey of enterprises using Six Sigma, only 16 percent of respondents were in enterprises with fewer than 500 employees, and in two thirds of those cases, the "small enterprise" was really part of a larger enterprise. Many consultants, however, have developed training materials or off-site courses to enable smaller enterprises to implement Six Sigma, too. On-line training, offered by Motorola, is another cost-effective way for a smaller enterprise to train its employees. Six Sigma software can also aid a smaller enterprise by reducing the burden of processing Six Sigma analysis. Even so, it is unlikely that the full Six Sigma program with a full-time Six Sigma practitioner will be practical for most smaller enterprise. It will probably be necessary for smaller enterprises to adapt the program to fit their situations, so that employees could be trained and use Six Sigma skills as part of their existing jobs, instead of the enterprise dedicating a full-time Six Sigma employee.
How About Four or Five Sigma Instead?
Voltaire once observed that: "The perfect is the enemy of the good." "Not all [enterprises] need to achieve [or have the resources to achieve] six sigmas. Four or five sigmas might be enough, and six can be something to strive for over time."2 The inability to achieve "near-perfection" (six sigmas) should not be an excuse for failing to pursue the "good' (four or five sigmas).
Recommendations
[return to top of this report] Businesses that implement Six Sigma report numerous benefits, including fewer defects, improved cycle time, higher customer focus, increased customer satisfaction, lower costs, higher employee focus, better (data-driven) decision-making, and a more effective management vision. In short, processes run better, faster, and at lower cost. The Six Sigma success stories are famous, although they must be carefully evaluated to make sure that similar metrics are being used. Motorola has documented over $17 billion in Six Sigma-related savings from 1986 to 2004 by applying the program throughout the enterprise in areas such as product design; manufacturing; supply chain management; sales and marketing; customer service; and transaction processing. GE saved $750 million by end of 1998, cutting invoice defects and disputes by 98 percent. Ford added $300 million to the bottom line in 2001, and realized savings of $350 million through waste elimination in 2002. In 2008 Cigna reported that it had saved nearly $100 million over five years through its Six Sigma methodology. But these gains can be expected only if an enterprise first makes significant investments in training, enterprise infrastructure, and cultural evolution (all employees thinking about how their actions impact the customer; all communicating with consistent language). Six Sigma is not a get-rich-quick scheme. In fact, enterprises should expect only to break even in the first year of implementation, although one implementer claims that costs savings of between $300 thousand and $400 thousand are possible the first year. In the long run, enterprises can expect to save from 1.2 to 4.5 percent of revenue annually by implementing Six Sigma.
Five Steps to Six Sigma Success
MetricStream, provider of enterprise quality and compliance management solutions, has identified five key steps to Six Sigma success:
1. Assembling Your Team - Top management must have an expanded role and demonstrate
leadership in directing and supporting the Six Sigma initiative through a variety of methods from establishing and monitoring achievement of programs to communicating customer requirements to the work force. Top management must be involved during the implementation driving from the top and at the same time empowering a multidisciplinary team of individuals from within the enterprise who understand the critical processes involved, and take ownership of solutions, controls and procedures. Aligning Six Sigma Activities with Enterprise Goals and Objectives - It is absolutely critical that all Six Sigma activities contribute to enterprise goals and objectives and are aligned with the enterprise's mission, responsibilities and policies. Providing Training, Certification and Infrastructure - To ensure effective Six Sigma implementation, it is essential that employees are trained and certified in their various roles: Champion, Black Belt and Master Black Belt. Pursuing Continual Improvement - Identifying opportunities for continuous improvement by constantly tracking critical customer complaints and feedback, finding areas that can be detrimental to improvement and removing blocks towards achieving the goals and objectives of enterprise improvement. Ensuring Meticulous Execution and Complete Accountability - Meticulous execution and
2. 3. 4.
5.
complete accountability is critical to Six Sigma success and can be achieved by communicating the process across the enterprise. Six Sigma deliverables need to be incorporated into every employee's performance objectives and training/certification must be prerequisites for advancement in the enterprise.3
References
1
Daniel L. Quinn. "What Is Six Sigma?" Rath & Strong's six sigma leadership handbook." John Wiley and Sons. 2003.
2
"FAQ: How does the Six Sigma methodology benefit IT?" SearchCIO.com. June 25, 2009. "Enterprise Quality and Compliance Management Solution." MetricStream, Inc.
3
Web Links
[return to top of this report] International Society of Six Sigma Professionals: http://www.isssp.com/ iSixSigma: http://www.isixsigma.com/ MetricStream: http://www.metricstream.com/ MINITAB Statistical Software: http://www.minitab.com/ Motorola: http://www.motorola.com/ SigmaXL: http://www.sigmaxl.com/
About the Author
[return to top of this report] James G. Barr is a leading business continuity analyst and business writer with more than 30 years' IT experience. A member of "Who’s Who in Finance and Industry," Mr. Barr has designed, developed, and deployed business continuity plans for a number of Fortune 500 firms. He is the author of several books, including How to Succeed in Business BY Really Trying, a member of Faulkner's Advisory Panel, and a senior editor for Faulkner's Security Management Practices. Mr. Barr can be reached via e-mail at [email protected]. [return to top of this report]
by James G. Barr Copyright 2010, Faulkner Information Services. All Rights Reserved.
Docid: 00018968
Publication Date: 1012 Report Type: TUTORIAL
Preview
Six Sigma is a program, a methodology, and an ideal. In any of these three meanings, it offers the enterprise the opportunity to improve product quality at often significant financial savings. Its implementation requires major management buy-in and initial investment, but the results can more than justify the cost. Report Contents:
G G G G G G
Executive Summary Description Current View Outlook Recommendations Web Links
Executive Summary
[return to top of this report] "We believed then and we are convinced today ... that there is an 'infinite capacity to improve everything' - but there was no methodology or disciple attached to that belief. There is now. It's Six Sigma quality, along with a culture of learning, sharing, and unending excitement." -- former GE CEO Jack Welch1 Six Sigma began in the 1980s as a statistical measure of quality for manufacturing processes.
Six Sigma now has three meanings. First, it can represent a quality level of fewer than 3.4 defects per million opportunities. Second, Six Sigma can represent a systematic, data-driven approach and methodology for designing, evaluating, or improving any business process. The methodology for process improvement is called DMAIC, for the five steps - Define, Measure, Analyze, Improve, and Control - that help a business align business processes to achieve customer requirements; minimize variation; and achieve rapid and sustainable business process improvement. The methodology for new process or product design is called DFSS, for Design for Six Sigma, or DMADV, for the five steps: Define, Measure, Analyze, Design, and Verify. Third, Six Sigma can represent an integrated, top-down management system for executing business strategy and prioritizing resources. Designed to ensure that application of the above metrics and methodology is directly linked to enterprise strategy, it integrates development of strategic objectives and measurement with project prioritization and governance, and performance management. Six Sigma is executed within an enterprise by a hierarchy of full- and part-time specialists with various levels of instructional and hands-on training: Executive Leaders, Project Champions, Master Black Belts, Black Belts, Green Belts, and Yellow Belts. Although it was first applied in manufacturing processes, Six Sigma has since been applied to diverse functions in diverse industries, including transactional, support, and service functions such as supply chain management; sales and marketing; shipping and receiving; document control; and research and development. Software packages are available to help enterprises with Six Sigma-related data analysis, project management, resource management, and reporting. High start-up costs generally limit implementation to large enterprises (with more than 500 employees), although smaller enterprises may implement a more limited version of Six Sigma. Enterprises that implement Six Sigma report numerous benefits, including fewer defects, improved cycle times, higher customer focus, increased customer satisfaction, lower costs, higher employee focus, better (data-driven) decision-making, and more effective management vision. Motorola, the founder of Six Sigma, reports over $17 billion USD in Six Sigma-related savings from 1986 to 2004. After breaking even the first year, most enterprises can expect to save from 1.2 to 4.5 percent of revenue annually. But these gains can be expected only if an enterprise first makes significant investments in training, enterprise infrastructure, and cultural evolution. Six Sigma is being used by more than 80 percent of all global enterprises.
Description
[return to top of this report] Six Sigma was developed at Motorola in the 1980s as a quantitative, statistical measure of quality to help identify and prevent defects in manufacturing processes. It offered a new method for standardizing how defects are counted, as well as a new quality goal: near perfection. Since then, Six Sigma has grown to represent either: (1) this rigorous measure of quality; (2) an overall business improvement methodology; or (3) a full management system.
Metric
As a metric, Six Sigma is a measure of quality in terms of defects per million opportunities (earlier metrics measured defects per thousand opportunities). Whatever doesn't fall between the lower and upper tolerance limits of customer specifications is a defect. Each standard deviation above and below the mean is a sigma. The goal is for the process to reach the quality level where there are six sigmas (six standard deviations) between the mean and the nearest specification limit, which means that all but 3.4 out of the million opportunities fall inside the specification limits. Thus, Six Sigma represents the nearly perfect quality level of fewer than 3.4 defects per million opportunities, or 99.99966 percent quality.
Methodology
Six Sigma also refers to a systematic, data-driven approach and methodology for evaluating and improving any business process - manufacturing or transactional, product or service - through process improvement and variation reduction. Six Sigma helps a business focus on understanding and managing customer requirements; aligning business processes to achieve those requirements; minimizing variation in those processes via rigorous data analysis; and achieving rapid and sustainable business process improvement. The methodology is designed to help an enterprise capture the customer's voice, then maintain a focus on the end result to deliver consistent, reliable output to the customer. Training and certification are an important part of the Six Sigma methodology: Six Sigma aims at equipping and empowering employees to make decisions and improve their enterprise. While the intention is still to achieve near-perfection in every product, process, and transaction, Six Sigma methodology in this sense is more a process than a goal.
Management System
More recently, Six Sigma has been expanded by Motorola into a top-down management system for executing business strategy and prioritizing resources. The Six Sigma management system is designed to ensure that the above metrics and methodology are applied to improvement opportunities that are directly linked to enterprise strategy. It integrates development of strategic objectives and measurement with project prioritization and governance, and performance management. Some enterprises, notably General Electric, have made Six Sigma certification an important requirement for advancement.
Current View
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Process Improvement
Six Sigma uses separate methodologies for process improvement, and for process and product design. The Six Sigma methodology for improving an existing process is called DMAIC, an acronym for the five steps of process improvement: Define, Measure, Analyze, Improve, and Control.
1.
Define the opportunity for improvement: the business problem to be solved or the customer
2. 3. 4. 5.
requirement to be met. Measure the current performance of the process, and compare it against the desired state. Analyze and determine the root cause or causes of whatever defects or variations there are, and prioritize among the opportunities for improvement. Improve the process by eliminating defects. Control future process performance and the long-term sustainability of improvements by developing, documenting, and implementing an ongoing monitoring plan.
Process and Product Design
Using Six Sigma methodology to develop a new process or product, or to make large-scale changes in an existing process, is known as Design for Six Sigma (DFSS). DFSS is a methodology for extracting the voice of the customer and converting it into quantitative design requirements. This forces product designers to meet real customer requirements and stimulates top-line growth, not just bottom-line savings. Numerous enterprises have defined different sequences of steps for DFSS. The most popular version of DFSS uses five steps: Define, Measure, Analyze, Design, and Verify (DMADV).
1. Define project goals and customer requirements and deliverables. 2. Measure and determine customer needs and specifications. 3. Analyze process options to meet customer needs. 4. Design the process in detail to meet customer needs. 5. Verify design performance and functionality (ability to meet customer needs).
Some versions of DFSS add a sixth step - optimize - before the verify step, so the acronym is DMADOV. Other versions use Identify, Design, Optimize, and Validate (IDOV), or Define, Measure, Explore, Develop, and Implement (DMEDI).
Management System
One of the latest innovations in Six Sigma is Motorola's integrated Six Sigma management system, known as the New Six Sigma, or second-generation Six Sigma. It is also referred to by the acronym AMAG, for its four leadership principles: Align, Mobilize, Accelerate, and Govern. AMAG is designed to enhance the effectiveness of Six Sigma outside of manufacturing and engineering environments, and to yield faster and more sustainable results. Like the Six Sigma methodologies, it provides a framework for understanding customer requirements, continuously driving process improvement, and using statistical analysis to drive fact-based decision-making. It goes beyond DMAIC and DFSS, however, by offering a broader, integrated approach for executing full business strategies. AMAG is designed to help an enterprise simultaneously achieve short-term financial gains through fast business improvement, and build future capability in key talent and critical processes. Note that process refers not just to classic product and service domains, but also to goals such as market share improvements, better cash flow,
and better HR processes. The four leadership principles of AMAG are summarized below.
1.
Align executives with the right objectives and targets. Link business strategy and core business processes with critical improvement efforts that address customer requirements. Create a balanced scorecard of strategic goals, metrics, and initiatives to identify the improvement points with the greatest benefit to the bottom line. Mobilize and focus teams by providing clear charters and success criteria, and rigorous reviews. Organize team efforts and focus projects on the customer. Accelerate improvement in business results by implementing shorter deadlines, rigorous reviews, and an action-learning methodology (which combines structured education with realtime project work and coaching.) Take advantage of employees' motivation to act before it perishes. Govern efforts with visible sponsorship by top management to ensure sustained improvements and bottom-line results that drive business goal achievement. The need for management doesn't stop after improvement opportunities are selected and teams are assigned. Continue rigorous, structured review of projects; knowledge sharing; proactive communication; and management of scorecard metrics.
2. 3.
4.
Six Sigma Hierarchy
Six Sigma is executed within an enterprise by a hierarchy of full- and part-time specialists with various levels of training. Training and certification are available from Motorola University and independent consultants. Each level of certification generally involves passing a written proficiency exam, plus displaying competency in a hands-on environment by completing one or more projects. Certification requirements have not yet been standardized. There is no accepted definition of competency at a given level, and different certification programs require different numbers of projects for certification at each level. Executive Leader:
G G
G
Senior management at the CEO, CIO, CFO level. Sets, communicates, and drives overall business objectives. Incorporates Six Sigma objectives into operational plans. Establishes enterprise goals and business targets (e.g. percent of employees trained or percent reduction in defects by target date). Plans and spearheads Six Sigma program rollout. Establishes compensation/reward structure to promote commitment. Executive Leaders may also receive Black Belt training.
Project Champion (Sponsor):
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G
Senior-level executive/manager (reporting to senior management). There is usually one project champion per business unit, manufacturing site, or service facility. In a large enterprise, functional or process managers (e.g. of human resources, call center, etc.) may also serve as project champions. Champions the cause within the enterprise. Translates senior management's strategic directions
G G
into tactical objectives and actions (with Master Black Belt and Black Belt). Selects Six Sigma projects (with Master Black Belt). Has day-to-day responsibility for the process being improved, ensures the team has the necessary resources, and is accountable for the project's results. Uses advanced statistical tools and Six Sigma concepts. Project Champions may also receive Black Belt training.
Master Black Belt (Quality Leader):
G G
G
Has demonstrated experience. Works full-time overseeing a Six Sigma project, including the most complex projects. Trains, coaches, and monitors Black Belts and Green Belts. Works with the Project Champion to develop the enterprise training program and to pick projects and people. Reviews projects at milestones, tracks cost savings, and ensures appropriate use of tools and methodologies. Must be expert in statistical techniques and Six Sigma methodology, with leadership, communication, teaching, and mentoring skills.
Black Belt (Project Leader, Technical Leader):
G
G
Agent of change who works full-time implementing and executing a Six Sigma project. Creates, facilitates, trains, and leads teams. Maintains time lines and budget. Serves as central point of contact for specific process improvement projects. Uses management, communication, presentation, and training skills. Must be expert skilled in application of rigorous statistical tools and methodologies to drive business process improvement and significantly improve bottom line.
Green Belt (Employee):
G G
G G
Team member under Black Belt. Works 25 percent of time executing Six Sigma project and assisting Black Belt in collecting and analyzing data. May be project leader on small, department-sized project. Uses basic statistical tools and process knowledge. Asks Black Belts for help on questions involving complex tools and statistics.
Yellow Belts (Administrators, Operations Personnel, and other Six Sigma Support Personnel):
G
Apply some elements of the Six Sigma methodology as they help Green Belts meet project goals and objectives.
Six Sigma Just Looks Good
Apart from its quality improvement benefits - which are considerable - Six Sigma has a particular pubic relations (PR) appeal. Enterprises can leverage their investment in Six Sigma to improve their image and reputation as quality leaders - a vital component in improving enterprise business prospects. From a personnel perspective, Six Sigma experience - and especially Sig Sigma certification - look good on a resume, thus encouraging employees to enlist in Six Sigma projects. On the flip side, Six
Sigma specialists are highly mobile, and enterprises that invest in Six Sigma education may find it difficult to retain those individuals they train.
Six Sigma Has Competition
While popular, Six Sigma is only one of many highly-regarded quality management disciplines, including:
G
G
G
G
Total Quality Management (TQM) - TQM is a strategic approach to management aimed at embedding quality awareness into all enterprise processes. TQM evolved during the mid-1980s into the first generation of Six Sigma at Motorola. Business Process Reengineering (BPR) - Introduced in the early 90s in Michael Hammer and James Champy's Reengineering the Corporation, BPR was welcomed by an audience disenchanted with TQM, and ready to improve quality by streamlining processes, eliminating unnecessary and redundant steps. Just-in-Time Manufacturing (JIT) - Pioneered by Ford Motor Company, JIT is an inventory strategy that strives to improve an enterprise's return on investment by reducing in-process inventory and associated carrying costs. Lean Six Sigma - Lean Six Sigma is a process improvement methodology that merges tools from both Lean Manufacturing and Six Sigma. Lean manufacturing focuses on speed; traditional Six Sigma focuses on quality. By combining the two, the result is better quality faster.
Outlook
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Industries
Six Sigma began in manufacturing industries, with a focus on cost reduction and productivity improvement. It then spread to the chemical and continuous process industries, still with a focus on production. As it has gained popularity, it has been adopted in diverse industries, including financial services, telecommunications, information technology, healthcare, education, and government. Enterprises that have implemented Six Sigma include Black & Decker, Dupont, Federal Express, GM, IBM, Johnson & Johnson, Kodak, NBC, Polaroid, Sony, Texas Instruments, and Toshiba. It is likely that this spread into other industries will continue. However, the rigor of the Six Sigma process to some extent limits its growth, since it requires significant capital investment (particularly for startup), dedicated staff, and a major learning curve. For enterprises with fewer than approximately 500 employees, these factors can significantly reduce the possibilities for implementation.
Functions
Motorola first applied Six Sigma in its manufacturing processes, but eventually included transactional, support, and service functions including supply chain management and sales and marketing. This is true at many enterprises that use Six Sigma. A Quality Digest survey found that 30 to 50 percent of
respondents use Six Sigma for non-manufacturing functions such as plant operations; engineering; test/inspection; administration; shipping and receiving; and document control. The use of Six Sigma in research and development is somewhat controversial, since creative operations must be allowed to fail as well as to succeed, and failure definitely is not a part of the Six Sigma approach. It is likely that Six Sigma can best be used in the later stages of research and development, when the creative team has passed the project on to implementers. Six Sigma has also been applied in areas such as product design; customer service; transaction processing; purchasing; and pollution prevention. It is likely that this spread into non-manufacturing functions will continue.
Software Tools
Several vendors now offer software that helps enterprises with data analysis, project management, resource management, and reporting for Six Sigma projects and implementations. For example, MINITAB Statistical Software offers a software package for Six Sigma and other quality improvement projects that provides data analysis, graphical data presentations, and simple to advanced statistical procedures.
Size of Enterprise
Because the training and other start-up costs for Six Sigma are fairly high, it has generally been implemented by large corporations with large consulting budgets. Smaller enterprises would also have trouble with the expense of assigning one or more employees to work full-time just on Six Sigma. In a Quality Digest survey of enterprises using Six Sigma, only 16 percent of respondents were in enterprises with fewer than 500 employees, and in two thirds of those cases, the "small enterprise" was really part of a larger enterprise. Many consultants, however, have developed training materials or off-site courses to enable smaller enterprises to implement Six Sigma, too. On-line training, offered by Motorola, is another cost-effective way for a smaller enterprise to train its employees. Six Sigma software can also aid a smaller enterprise by reducing the burden of processing Six Sigma analysis. Even so, it is unlikely that the full Six Sigma program with a full-time Six Sigma practitioner will be practical for most smaller enterprise. It will probably be necessary for smaller enterprises to adapt the program to fit their situations, so that employees could be trained and use Six Sigma skills as part of their existing jobs, instead of the enterprise dedicating a full-time Six Sigma employee.
How About Four or Five Sigma Instead?
Voltaire once observed that: "The perfect is the enemy of the good." "Not all [enterprises] need to achieve [or have the resources to achieve] six sigmas. Four or five sigmas might be enough, and six can be something to strive for over time."2 The inability to achieve "near-perfection" (six sigmas) should not be an excuse for failing to pursue the "good' (four or five sigmas).
Recommendations
[return to top of this report] Businesses that implement Six Sigma report numerous benefits, including fewer defects, improved cycle time, higher customer focus, increased customer satisfaction, lower costs, higher employee focus, better (data-driven) decision-making, and a more effective management vision. In short, processes run better, faster, and at lower cost. The Six Sigma success stories are famous, although they must be carefully evaluated to make sure that similar metrics are being used. Motorola has documented over $17 billion in Six Sigma-related savings from 1986 to 2004 by applying the program throughout the enterprise in areas such as product design; manufacturing; supply chain management; sales and marketing; customer service; and transaction processing. GE saved $750 million by end of 1998, cutting invoice defects and disputes by 98 percent. Ford added $300 million to the bottom line in 2001, and realized savings of $350 million through waste elimination in 2002. In 2008 Cigna reported that it had saved nearly $100 million over five years through its Six Sigma methodology. But these gains can be expected only if an enterprise first makes significant investments in training, enterprise infrastructure, and cultural evolution (all employees thinking about how their actions impact the customer; all communicating with consistent language). Six Sigma is not a get-rich-quick scheme. In fact, enterprises should expect only to break even in the first year of implementation, although one implementer claims that costs savings of between $300 thousand and $400 thousand are possible the first year. In the long run, enterprises can expect to save from 1.2 to 4.5 percent of revenue annually by implementing Six Sigma.
Five Steps to Six Sigma Success
MetricStream, provider of enterprise quality and compliance management solutions, has identified five key steps to Six Sigma success:
1. Assembling Your Team - Top management must have an expanded role and demonstrate
leadership in directing and supporting the Six Sigma initiative through a variety of methods from establishing and monitoring achievement of programs to communicating customer requirements to the work force. Top management must be involved during the implementation driving from the top and at the same time empowering a multidisciplinary team of individuals from within the enterprise who understand the critical processes involved, and take ownership of solutions, controls and procedures. Aligning Six Sigma Activities with Enterprise Goals and Objectives - It is absolutely critical that all Six Sigma activities contribute to enterprise goals and objectives and are aligned with the enterprise's mission, responsibilities and policies. Providing Training, Certification and Infrastructure - To ensure effective Six Sigma implementation, it is essential that employees are trained and certified in their various roles: Champion, Black Belt and Master Black Belt. Pursuing Continual Improvement - Identifying opportunities for continuous improvement by constantly tracking critical customer complaints and feedback, finding areas that can be detrimental to improvement and removing blocks towards achieving the goals and objectives of enterprise improvement. Ensuring Meticulous Execution and Complete Accountability - Meticulous execution and
2. 3. 4.
5.
complete accountability is critical to Six Sigma success and can be achieved by communicating the process across the enterprise. Six Sigma deliverables need to be incorporated into every employee's performance objectives and training/certification must be prerequisites for advancement in the enterprise.3
References
1
Daniel L. Quinn. "What Is Six Sigma?" Rath & Strong's six sigma leadership handbook." John Wiley and Sons. 2003.
2
"FAQ: How does the Six Sigma methodology benefit IT?" SearchCIO.com. June 25, 2009. "Enterprise Quality and Compliance Management Solution." MetricStream, Inc.
3
Web Links
[return to top of this report] International Society of Six Sigma Professionals: http://www.isssp.com/ iSixSigma: http://www.isixsigma.com/ MetricStream: http://www.metricstream.com/ MINITAB Statistical Software: http://www.minitab.com/ Motorola: http://www.motorola.com/ SigmaXL: http://www.sigmaxl.com/
About the Author
[return to top of this report] James G. Barr is a leading business continuity analyst and business writer with more than 30 years' IT experience. A member of "Who’s Who in Finance and Industry," Mr. Barr has designed, developed, and deployed business continuity plans for a number of Fortune 500 firms. He is the author of several books, including How to Succeed in Business BY Really Trying, a member of Faulkner's Advisory Panel, and a senior editor for Faulkner's Security Management Practices. Mr. Barr can be reached via e-mail at [email protected]. [return to top of this report]
