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Costs and Savings of Six Sigma Programs: An Empirical Study

Venkateswarlu Pulakanam University of Canterbury


2012, ASQ

Since the early 1990s several empirical studies have been undertaken linking quality efforts such as total quality management (TQM) and Six Sigma to organizational performance. In the majority of these studies the organizational performance indicators typically include sales growth, operating income, profits, employee turnover, employee satisfaction, and customer satisfaction. Direct costs and savings of implementing quality management programs have seldom been studied, and many of these studies lack statistical rigor and objectivity. For example, sales growth could be affected by a number of other business environmental factors, so how can one isolate the effect of quality improvement programs on sales growth? Due to these limitations, the results of these studies are mixed, with some showing significant relationships between quality constructs and organizational performance measures and others not. This study also attempts to quantify the financial impact of Six Sigma programs. It differs, however, from previous studies in two ways. First, it evaluates the direct costs and direct operational savings of implementing Six Sigma programs, which, to the authors knowledge, was never done before. Second, it differs in terms of the research methodology used. The author undertook an extensive search of organizational annual reports and other published materials on Six Sigma organizations that provided the actual costs and savings related to implementing Six Sigma in 28 organizations. The main finding of this research is that effective implementation of Six Sigma led to an average savings of 1.7 percent of revenues over the period of implementation and an average return of more than $2 in direct savings for every dollar invested on Six Sigma. The findings of this research are useful for organizations implementing Six Sigma to have realistic expectations of the program and to monitor and benchmark the progress of their programs. Key words: cost-benefit, payback, ROI, Six Sigma, TQM

INTRODUCTION
Organizations are increasingly adopting Six Sigma in a bid to improve the quality of their processes and products, and thus achieve competitive advantage. Six Sigma was developed by Motorola in the 1980s, but gained enormous momentum after its adoption by General Electric (GE) in the mid-1990s. For example, in 2006, 35 percent of organizations in the United States had a Six Sigma program in place, and in 2007, 82 of the 100 largest organizations in the United States had embraced Six Sigma (Crockett and McGregor 2006; Hindo and Grow 2007). Six Sigma is a disciplined approach for dramatically reducing defects and producing measurable financial results (Anand 2006; Goh et al. 2003; Linderman, Schroeder, and Choo 2006). It provides an organizational structure in which improvement projects are led by so-called Black Belts and Green Belts. To guide Black Belts and Green Belts through the execution of an improvement project, the program provides a collection of long-standing management and statistical tools and a problem-solving methodology known as define, measure, analyze, improve, and control (DMAIC). Many authors claim that Six Sigma is a superior program, as it eliminates the weaknesses of total quality management (TQM) (Antony 2004; Pande, Neuman, and Cavanagh 2000; Pfeifer, Reissiger, and Canales 2004; Revere and Black 2003). For example, according to Pande, Neuman, and Cavanagh (2000), Six Sigma is revealing a potential for success that goes beyond the levels of improvement achieved through the many TQM efforts. Unlike previous quality improvement
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Costs and Savings of Six Sigma Programs: An Empirical Study


initiatives, Six Sigma has been publicized in terms of explicit financial gains (Anand 2006; Goh et al. 2003). According to Harry (1998), an average Black Belt project will save an organization $175,000. Also, according to Harry, Black belts, with 100 percent of their time allocated to black belt projects, can execute five or six projects during a 12-month period, adding approximately $1 million to annual profits. In fact, Motorola saved $16 billion from 1986 to 2001, GE saved $4.4 billion from 1996 to 1999, and Honeywell saved $1.8 billion from 1998 to 2000 (Waxer n.d.). No doubt, these are huge savings, but these three companies are large multinational organizations. Relative to their revenues, are these savings substantial? What is the return on investment (ROI)? The literature on Six Sigma successes provides only absolute savings, which does not tell much about the bottom-line impact of Six Sigma. Savings as a percentage of revenues, ROI, or benefits-to-costs ratios are some financial measures that provide a better understanding of the impact of Six Sigma. For example, if Motorolas revenues during 1986 to 2001 were $160 billion, the savings would be 10 percent of revenues. On the other hand, if the revenues during this 16-year period were $16,000 billion, the savings would only be 0.1 percent of revenues very negligible savings indeed. Also, during this period, if they had invested $1.6 billion on Six Sigma, then the benefits-to-costs ratio would be 10 to 1. On the other hand, if they had invested $160 billion, the benefits-to-costs ratio would only be 0.1 to 1. Most of the literature on quality management programs has been descriptive in nature and lacks well-defined linkages between practice and outcome (Ayeni 2003). This is also the case with Six Sigma. Since the early 1990s, there have been a number of empirical research studies (Barker and Emery 2006; Easton and Jarrell 1998; Foster Jr. 2007; Grandzol and Gershon 1997; Hendricks and Singhal 1997; Kaynak 2003; Madu, Kuei, and Lin 1995; Samson and Terziovski 1999; Wisener and Eakins 1994) linking quality improvement programs (such as TQM or Six Sigma) to business performance (scrap rates, productivity, cycle time, net income, return on assets, profits, market share, stock price, and so on) but, to the authors knowledge, no research has been reported on measuring direct savings as a percentage of revenues or benefits-to-costs ratios of these programs. This research attempts to fill this gap. Through an extensive search of Six Sigma organizational annual reports and existing published material, this research will attempt to provide an estimate of relative savings and benefits-to-costs ratio of Six Sigma. This research will be useful for organizations that are still considering implementing Six Sigma. It will be particularly useful to small to medium enterprises (SMEs), as they are resource poor and cannot afford to spend money or other resources on such programs unless the payback is quick and substantial. Atkinson, Hamberg, and Ittner (1994) argue that when the link between a quality initiative and performance cannot be determined definitively, top management may eventually become unwilling to devote the time and resources necessary to continue the program. This paper specifically evaluates cost savings and benefits-to-costs ratio, so top management can indeed make an informed decision to implement Six Sigma. The results obtained in this paper will provide a benchmark of what can be expected from implementing Six Sigma programs. In the context of TQM, Hendricks and Singhal (1997) comment: Managers often pass judgement on the success and failure of their TQM implementations by comparing actual performance against prior expectations. When these expectations are not met, managers can get disillusioned and view TQM as a failure. The author believes that this would be the case with Six Sigma as well, and thus this paper will help to set realistic expectations about the magnitude of value Six Sigma can deliver. Scepticism also surrounds Six Sigma. Some people think its a passing fad and therefore it is not worth implementing (Clifford 2001). Schaffer and Thomson (1992) summarize the negativity toward performance improvement programs such as TQM: The performance improvement efforts of many companies have as much impact on operational and financial results as a ceremonial dance has on the weather. Is Six Sigma, as Schaffer and Thomson put it, only a sounds good, looks good, and feels good program or does it really contribute to bottomline performance? This research will attempt to answer this question.

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Costs and Savings of Six Sigma Programs: An Empirical Study

THE IMPACT OF QUALITY IMPROVEMENT PROGRAMS ON ORGANIZATIONAL PERFORMANCE


The conceptual link between improved quality and business performance is well established. According to quality gurus W. Edwards Deming and Philip Crosby, Producing high-quality products is always less costly per unit of good output than producing low quality products (Fine 1986). They argue that zero defects is the optimal conformance level. Deming argued that quality improvement programs would improve organizational processes that would eventually lead to competitive advantage. Once this advantage was leveraged in the marketplace, he believed the competitive advantage would ultimately lead to improved performance (Wayhan 2004). Since the early 1990s a number of empirical studies have also been undertaken to study the impact of quality efforts (specifically TQM) on business performance (Barker and Emery 2006; Easton and Jarrell 1998; Foster Jr. 2007; Grandzol and Gershon 1997; Hendricks and Singhal 1997; Kaynak 2003; Madu, Kuei, and Lin 1995; Samson and Terziovski 1999; Wisener and Eakins 1994). To the best of the authors knowledge, to date, only two such studies have been on Six Sigma (Foster Jr. 2007; Goh et al. 2003). The aim of these empirical studies is to analyze and establish relationships between quality practices and organizational performances. Studies also include the reaction of stock prices on the day when quality improvement activities have been announced publicly (Goh et al. 2003; Ramasesh 1998). In these empirical studies quality practices have been operationalized as a single construct (Easton and Jarrell 1998; Hendricks and Singhal 1997) or as multiple constructs (Grandzol and Gershon 1997; Madu, Kuei and Lin 1995). A single construct, for example, refers to an organization practicing Six Sigma or not. Multiple constructs include top management support, employee empowerment, customer focus, and so on. Organizational performance includes operational (scrap/defect rates, cycle times, productivity, and so on) and financial measures (income, profits, ROI, stock prices, earnings growth, and so on). The

methodologies used to measure quality practices and performance measures varied. Quality practices have been assessed/measured in three different ways. The first methodand the most commonis the use of questionnaire surveys of managers and employees of their perceptions of quality practices (Madu, Kuei, and Lin 1995). The second method, often used for a single construct, is the use of quality award-winning criteria as a proxy for quality management practices (Hendricks and Singhal 1997). The third method is the use of secondary sources and subjective assessment of TQM practices through interviews (Easton and Jarrell 1998). Two methods are used to measure organizational performance: the first is perceptions of managers and employees using questionnaire surveys (Madu, Kuei, and Lin 1995), and the second is the use of publicly available financial data (Easton and Jarrell 1998). In general, most experts agree that properly implemented quality systems improve organizational performance (Easton and Jarrell 1998; Hendricks and Singhal 1997; Reger et al. 1994; Wayhan 2004). The improvement is stronger for advanced quality improvement programs. However, implementing a quality improvement program does not guarantee improved performance. It is possible that there are enabling factors that would make a quality improvement program effective in some organizations and ineffective in others (Hendricks and Singhal 1997; Easton and Jarrell 1998). The methodologies used to measure quality practices and performance measures have limitations because many of the research findings on the impact of quality efforts are mixed. Most questionnaire-based surveys are flawed and are superficial, as they allow self-selection of respondents and they rely on the managers perceptions without critical evaluation (Easton and Jarrell 1998; Haim 1993). On the other hand, tying quality improvement programs to financial indicators (revenues, profits, and so on) is a daunting task. There are many ways to measure financial results, and each one comes with complex factors to be aware of or to adjust for (Schonberger 2008). Financial results may also be influenced by events like 9/11 (Foster Jr. 2007) and other industry- and economy-wide influences (Hendricks and Singhal 1997).

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Costs and Savings of Six Sigma Programs: An Empirical Study


A completely different approach was taken by economists Link and Scott (2011) in a National Institute of Standards and Technology (NIST) sponsored study of the economic evaluation of the Baldrige Performance Excellence Program. The authors of this study attempted to estimate the net social value of the Baldrige Performance Excellence Program by undertaking a survey of 273 award applicants (since 2006) using a method known as the counterfactual evaluation method. Based on 45 responses, counterfactual implementation cost savings are 1.3 to 1 (based on the 45 responses) and 3 to 1 for all Baldrige applicants. Considering other gains from customer satisfaction and increased value of sales in excess of resource costs, they conclude that the overall benefits to Baldrige Award applicants outweigh the costs by a ratio of 820 to 1. The counterfactual evaluation method asks what if questions such as What would have happened in the absence of such a program? This method has its own weakness. According to Cummings (2006): The fundamental difficulty in using the counterfactual in impact evaluation is that whereas the outcomes of the program being evaluated are observable (although not always easily identified or measured), the outcomes in the absence of the program, at least in principle, are counterfactual and not observable. While this is interesting and provides another approach in evaluating a quality management program, the conclusions drawn using this method could be speculative and are not based on empirical evidence. Nevertheless, this study supports the conceptual link between quality improvement and business performance. None of the available research actually evaluated the costs and the corresponding savings of implementing TQM, Six Sigma programs, or any other quality improvement programs. TQM is loosely defined, and is a holistic set of principles and tools aimed at, among other things, encouraging continuous improvement and prevention of defects. The degree of TQM implementation is difficult to assess objectively (Corbett, Montes-Sancho, and Kirsch 2005) and it is difficult to precisely estimate the direct costs and savings associated with TQM. Even if some organizations kept track of the costs and savings, they rarely made them publicly available. The author has done an extensive search on the direct annual costs and savings due to
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TQM, but did not succeed in obtaining any reliable data on annualized costs and savings. However, unlike TQM, a Six Sigma program has a better structure for organizational and operational level implementation (Anand 2006). It is results oriented, and every project is executed using the DMAIC framework. Costs and savings are often documented internally and even audited by financial departments. For example, at GE all costs and savings due to Six Sigma are rigorously audited (Hoerl 2002). At Starwood Hotels, a proprietary Web-based system known as E-Tool is used to monitor performance metrics to gauge the success or failure of a new project (Ante 2007). At Floyd Medical Center, a community hospital in the United States, changes and resulting savings from Lean Six Sigma are validated by the accounting department (Stuenkel and Faulkner 2009). Due to these reasons, the author contends that it should now be possible to capture costs and savings data for at least some organizations. The methodology used to collect these data and the results obtained are discussed in the next two sections. The author found one Web article that discusses costs and savings of quality improvement programs. The Web article by Waxer (n.d.) provides a summary of costs and savings (as a percentage of revenues) collected from organization annual reports, for five organizations, namely, Motorola, Allied Signal, GE, Honeywell, and Ford. Waxer estimates Six Sigma savings as a percentage of revenues to be between 1.2 percent and 4.5 percent. This work by Waxer provided impetus for the research discussed in this paper.

DATA COLLECTION METHODOLOGY


Six Sigma program costs include consultant costs, training costs, other incidental and administrative costs related to training (travel and accommodation costs, costs of books, and so on), and costs associated with employees time away on training and working on quality improvement project-related activities. Savings are the direct result of working and implementing improvement projects. Tangible savings that can be relatively easy to measure in dollars are cost savings due to reduction of defects, scrap and rework, productivity improvements,

Costs and Savings of Six Sigma Programs: An Empirical Study


and so on. Indirect benefits include reduction in cycle time, employee satisfaction improvement, customer satisfaction improvement, and increased market share. Pyzdek (2003) argues that costs are claims on resources the organization already has and in general, it is easier to accurately estimate costs than benefits. In contrast, benefits, in particular indirect benefits, are merely predictions of future events, which may or may not actually occur. For example, any increase in customer satisfaction is likely to increase sales and revenues in the future, but it will be difficult to estimate the increase in sales and revenues that are the direct result of increased customer satisfaction. However, as mentioned earlier, the focus of this paper is estimating the payback of implementing Six Sigma using direct costs and savings. Hence, no attempt will be made to estimate the indirect benefits of implementing Six Sigma programs. The author did not consider a questionnaire survey to be a reliable method of collecting costs and savings data for the reasons discussed in the previous section. As several organizations such as Motorola and GE have been reporting Six Sigma-related costs and savings in their annual reports and in other published articles, it is thought that enough reliable costs and savings data could be collected from these sources. The information that is quoted in the annual reports and published articles is likely more reliable, as these data are mostly the official communiqu of the respective organizations. Specifically, the following methodology was used to collect data. For the purpose of this research, only organizations that are currently implementing or have implemented Six Sigma (or Lean Six Sigma) were included. As this research required names along with costs and savings data of organizations that have implemented or are implementing Six Sigma, databases such as ABI/INFORM, Emerald Journals, ProQuest, ScienceDirect, Web of Science, and Compendex were searched using key search words: Six Sigma, cost, benefit, and return (for return on investment). In addition, Google Search and the Internet were also searched for the aforementioned data. In particular, the website SixSigmaCompanies.Com was extensively used, as it is a good source of information on Six Sigma organizations. This website has extracts from annual reports and other sources for several Six Sigma organizations. For each organization the author collected industry category, period of implementation, and revenues, costs, and savings for the years the program was implemented. These data are sourced from several places: annual reports, published articles, Web pages, DataStream database, Buck Master Annual Stockholder Reports (Buck.com), Wikipedia, and Wikinvest (wikinvest.com). Results of the data collected are discussed in the next section. The author tried to collect costs and savings data on as many organizations as possible that are available publicly. It is possible that only organizations that have successfully implemented Six Sigma and have achieved good results actually publicize their achievements. Therefore, the sample included in this study may be biased toward those organizations that implemented the programs effectively and achieved significant results. Thus, it could be argued that the results reported in this paper are for Six Sigma programs that have been implemented effectively. This and other limitations of this research are discussed in the last section of this paper.

RESULTS
Through an extensive search, the author initially identified more than 120 Six Sigma organizations, spread over several countries, for which some data on costs and savings of Six Sigma are available. However, only 28 of these organizations are included in this study, that is, those for which cumulative savings (from start of implementation) and revenues are available for at least one year of implementation (see Tables 1, 2, and 3). For the remaining organizations, savings could be obtained at the most for specific projects or for only odd years (nonconsecutive), which is of no value for the proposed analysis in this research. For example, JP Morgan and Chase launched Six Sigma in 1998, but data on savings are available for 2001 to 2003 only. Savings as a percentage of revenues could be computed for the period 2001 to 2003, but what about the period from 1998 to 2000? Did they actively implement Six Sigma during

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Costs and Savings of Six Sigma Programs: An Empirical Study


Table 1 Study sample Six Sigma organizationspresented in the increasing order of revenues.
#
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Year Six Sigma launched


1998 2005 2001 1998 2005 1999 2002 2001 1998 1999 1994 1997 1999 1997 2002 1998 2001 2001 1999 1986 2001 1998 2001 1999 1999

Organization
Commonwealth Health Corp. Transplace Inc. Red Cross Hospital Iomega Crown Equip. Corporation WR Grace Newell Rubbermaid CSX Seagate Technology Cummins Inc. Allied Signal Paccar Johnson Controls Whirlpool Cigna Raytheon Countrywide3 3M DuPont Motorola Bechtel Honeywell Caterpillar Dow Chemicals McKesson

Type of business
Health-related business Logistics management Hospital Manf. of CD and DVD drives Manf. of forklift trucks Chemical manf. industry Marketer of consumer and commercial products Rail and other transport company Computer hardware manf. Manf. of diesel engines Aerospace, automotive, and engineering company Manf. of heavy-duty trucks Car parts manf. Manf. of white ware Health insurance Defense electronics Financial Inst. Diversified global manf. Global chemical and technology conglomerate Mobile phone manf. Engg. construction and project mgmt. Diversified technology and manf. Manf. of construction and mining equipment Chemical manf. Healthcare

Country
USA USA Netherlands USA USA USA USA USA Cayman Islands USA

Revenues (millions # of employees of US$ for 2008)1 (for 2008)1


$52 $66 $1012 $337 $1,820 $2,260 $6,410 $9,566 $9,805 $14,342 $14,472 Unavailable 600 9302 Unavailable 7,200 6,500 22,500 36,000 54,000 39,800 Unavailable 21,800 136,000 70,000 30,000 73,000 Unavailable 79,183 58,000 64,000 44,000 128,000 112,887 46,102 Unavailable
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USA USA USA USA USA USA USA USA USA USA USA USA USA USA

$14,973 $18,400 $18,907 $19,101 $23,174 $24,445 $25,269 $26,100 $30,146 $31,400 $36,556 $51,324 $57,514 $106,600

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Costs and Savings of Six Sigma Programs: An Empirical Study


Table 1 Study sample Six Sigma organizationspresented in the increasing order of revenues (continued).
#
26 27 28
1 2

Year Six Sigma launched


2001 2000 1995

Organization
Bank of America Ford Motor Co. General Electric

Type of business
Financial inst. Motor industry Manf. of aircraft engines, appliances, etc.

Country
USA USA USA

Revenues (millions # of employees of US$ for 2008)1 (for 2008)1


$119,643 $146,277 $182,515 243,000 213,000 323,000
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Revenues and number of employees for the latest year available to indicate the size of the Six Sigma organizations in the study sample. Estimated number of employees and budget in 2004 (Heuvel 2006). 3 Acquired by Bank of America in 2008.

this period? If so, what were the savings? This information could not be obtained despite extensive search, and hence this organization was excluded from the study sample. It is considered that cumulative savings over several years of implementation should provide a more robust estimate of savings (as a percentage of revenues) due to Six Sigma. The data collected for Motorola (shown in Table 4) illustrate the type of data that could be collected for each of the 28 selected organizations. Motorola launched Six Sigma in 1986. From an extensive search of published articles, cumulative savings could only be obtained for the following years: 1986 (year 1), 1992 (year 7), 2001 (year 16), and 2004 (year 19). As can be seen from Table 2, for the majority of the 28 organizations in the study sample, cumulative savings could be collected for only some of the years in which they implemented Six Sigma. As can be seen from Table 1, Allied Signal and General Electric launched their Six Sigma programs nearly a decade after Motorola pioneered the program in 1986. The rest of the organizations in the authors sample started implementing Six Sigma subsequently from 1997. The Six Sigma organizations in the study sample represent a wide variety of industry sectors: manufacturing (18), healthcare (4), banking and finance (2), logistics management (2), construction and project management (1), and marketing and distribution (1). The majority of the organizations in the study sample are large American multinationals. The annual revenues (for year 2008) of 24 out of the 28 (86 percent) organizations in the study sample ranged from $1.8 billion to $183 billion (see Table 1), with employee sizes ranging from more than

6,500 to 323,000. The four smaller organizations in the study sample are Commonwealth Health ($52 million in revenues), Transplace ($66 million in revenues), Red Cross Hospital (approximately $101 million annual budget), and Iomega ($337 million in revenues).

Savings as a Percentage of Revenues


The cumulative savings as a percentage of revenues ranged from 0.02 percent to 6.8 percent, with an average of 1.7 percent (see Table 3 and Figure 1). These savings can be potentially as high as 4 to 7 percent, as was the case with Motorola (4.2 percent over a period of 19 years), Iomega (6.3 percent over a period of three years), and Commonwealth Health Corp (6.8 percent over a period of four years). With effective implementation of Six Sigma, a $100 million organization can expect a direct savings of $1 million to $2 million a year for the period of implementation, with a best-case scenario of $6.8 million a year. It is important to note that the cumulative savings for the study organizations are based on a different number of years of implementation for different organizations. For example, for CSX Corporation, the cumulative savings were just based on one year of implementation, while for Motorola it was based on 19 years of implementation. Most available data are for years two to four of implementation, while less data are available for year one and even less for year five and subsequent years (see Table 3). Change management programs such as Six Sigma must be first understood and accepted by senior management before lower-level managers and employees can become

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Costs and Savings of Six Sigma Programs: An Empirical Study


Table 2 Savings as a percentage of revenues for study organizations.
#
5

Organization
Crown Equip. Corp.

Year Six Sigma Period for which Total revenues for the period Total savings Savings as launched data collected of data collection ($M) ($M) % revenues
2005 1999 2002 2001 2000 2005-08 1999-2002 2002-06 2001 2000-03 2001-04 1997-99 2001-02 2002-05 1999-2004 1995-2002 1997-2008 2001-04 1999-2002 2001-03 2001-03 1999-2003 2001-04 2005-08 1999-2007 1998-2006 1999-2004 1994-97 1998-2001 1998-2000 1986-2004 1998-2000 1998-2001 $6,590 $158,773 $89,610 $8,110 $ 658,970 $403 $29,451 $20,450 $27,716 $117,209 $839,599 $124,918 $ 158,267 $ 111,613 $41,359 $15,661 $132,810 $70,856 $264 $72,130 $61,323 $10,931 $52,961 $73,091 $72,300 $400,695 $4,325 $102 $1.5 $40.0 $100.0 $20.0 $1,700.0 $1.8 $175.0 $138.0 $210.0 $1,000.0 $8,000.0 $1,200.0 $2,000.0 $1,500.0 $625.0 $244.0 $2,200.0 $1,200.0 $5.0 $1,400.0 $1,200.0 $228.0 $1,200.0 $1,800.0 $1,800.0 $17,000.0 $273.0 $7.0 0.02% 0.03% 0.1% 0.2% 0.3% 0.4% 0.6% 0.7% 0.8% 0.9% 1.0% 1.0% 1.3% 1.3% 1.5% 1.6% 1.7% 1.7% 1.9% 1.9% 2.0% 2.1% 2.3% 2.5% 2.5% 4.2% 6.3% 6.8%
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25 McKesson 15 Cigna 8 CSX

27 Ford 3

Red Cross Hospital, Beverwijk 2001 1997 2001 2002 1999 1995 1997 2001 1999 2001 2001 1999 2001 2005 1999 1998 1999 1994 1998 1998 1986 1998 1998

14 Whirlpool 23 Caterpillar 12 Newell Rubbermaid 28 Johnson Controls 26 GE 24 Paccar 13 Bank of America 21 Dow Chemicals 17 Bechtel 19 Countrywide 18 DuPont 2 3M

10 Transplace Inc. 9 6 Cummins Inc. Seagate

11 W R Grace & Co. 16 Allied Signal 22 Raytheon 7 Honeywell

20 Motorola 4 1 Iomega Commonwealth Health

involved (Singh and Shoura 2006). Further, a Black Belt training typically takes 200 to 400 hours, and completing a Six Sigma project takes three to six months and sometimes up to 12 months (Feng and Manuel 2008;
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Miguel and Andrietta 2009). This gap between initiating a Six Sigma program and actually realizing the benefits explains why the data consist of fewer observations for year one and more observations for years two to four.

Costs and Savings of Six Sigma Programs: An Empirical Study


Table 3  Cumulative savings as a percent of revenues since launching Six Sigma for the study sample organizations. See Appendix 1 for data sources.
#
5 25 15 8 27 3 14 23 12 28 26 24 13 21 17 19 18 2 10 9 6 11 16 22 7 20 4 1

Year Organization launched


2005 1999 2002 2000 2001 2001 1997 2001 2002 1999 1995 1997 1999 2001 2001 2001 1999 2001 2005 1999 1998 1999 1994 1998 1998 1986 1998 1998 Crown Equip. Corp McKesson Cigna Ford CSX

Year Year Year Year Year Year Year Year Year .. Year Year .. Year .. Year Overall 1 2 3 4 5 6 7 8 9 11 12 16 19
0.02% 0.03% 0.1% 0.0% 0.1% 0.1% 0.3% 0.4% 0.3% 0.02% 0.03% 0.1% 0.3% 0.3% 0.4% 0.6% 0.7% 0.6% 0.8% 0.9% 0.1% 0.5% 0.7% 1.0% 1.0% 0.9% 1.0% 1.3% 1.3% 0.1% 0.9% 1.5% 1.6% 3.7% 1.5% 1.6% 1.7% 1.9% 0.2% 0.7% 2.1% 2.4% 0.8% 1.6% 1.7% 2.3% 2.5% 2.1% 2.3% 2.5% 4.2% 3.3% 4.1% 6.3% 3.2% 4.9% 1.7% 1.3% 1.7% 8 10 12 6.8% 1.6% 14 1.4% 1.5% 6.1% 1.0% 2.0% 5 2 1 1 2 0 0.9% 1.0% 1 1 5.1% 4.2% 1 6.1% 5.1% 4.2% 1.7% 2.1% 1.9% 2.0% 1.7% 0.8% 0.9% 1.0% 1.0% 1.3% 1.3% 1.5% 1.6% 1.7% 1.7% 1.9% 1.9% 2.0% 2.1% 2.3% 2.5% 2.5% 4.2% 6.3% 6.8% 1.7% 0
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Red Cross Hospital 0.0% 0.0% 0.0% Whirlpool Caterpillar Newell Rubbermaid Johnson Controls GE Paccar Dow Chemicals Bank of America Bechtel Countrywide DuPont 3M Transplace Inc. Cummins Inc. Seagate WR Grace Allied Signal Raytheon Honeywell Motorola Iomega Commonwealth Health Average Count 0.7% 0.6%

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Costs and Savings of Six Sigma Programs: An Empirical Study


Table 4 Yearly revenues and Six Sigma savings at Motorola1.
Yearly revenues and savings in millions of $ Revenues
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
1

Cumulative revenues and savings in millions of $ Revenues


$5,888 $12,595 $20,845 $30,465 $41,350 $52,691 $65,994 $82,957 $105,202 $132,239 $160,212 $190,006 $219,404 $250,335 $287,915 $315,635 $342,314 $369,372 $400,695 $437,538 $480,417 $517,039 $547,185
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Savings
$250

Savings as a percentage of revenues


4.2%

Savings
$250

Savings as a percentage of revenues


4.2%

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 Year 21 Year 22 Year 23

$5,888 $6,707 $8,250 $9,620 $10,885 $11,341 $13,303 $16,963 $22,245 $27,037 $27,973 $29,794 $29,398 $30,931 $37,580 $27,720 $26,679 $27,058 $31,323 $36,843 $42,879 $36,622 $30,146

$4,000

6.1%

$16,000

5.1%

$17,000

4.2%

Cumulative savings were available for only certain years.

Very few organizations reported Six Sigma savings after year four, likely indicating a slowing down of the program or that there was less need to promote the program and hence the savings were no longer reported. Lack of high-impact projects (projects with high financial gains) or the inability of organizations to continue employing Black Belts on a full-time basis

could also be the reasons for lack of data after year four. Typically, Six Sigma Belts work full time for two years and thereafter return to their normal jobs (Harry 1998). Those Black Belts who are recruited in year one work on Six Sigma projects in years one and two. Those who are recruited in year two work in years two and three, and so on. By the end of year

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Costs and Savings of Six Sigma Programs: An Empirical Study


Figure 1 Costs and savings of GE Six Sigma program.
GE: Costs and Savings
$2,500 $ in Millions $2,000 $1,500 $1,000 $500 $0 1996 1997 Investment 1998 1999 Savings
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three or four, organizations may be running out of potential Black Belts as well as projects. Some companies continue their improvement efforts incorporating other programs such as lean. For example, in the early 2000s GE launched its At the Customer, For the Customer program, which involves working on specific Six Sigma projects with the customers at their sites (GE Annual Report 2001). This three- to four-year life-cycle theory of Six Sigma programs is not unusual and in fact is a predictable pattern with quality programs. This happened with quality circle programs in the early 1980s and with TQM in the late 1980s and 1990s. For example, based on a survey of 13 organizations that
Table 5 Savings-to-costs ratio of Six Sigma.
Organization
GE

implemented quality circle programs in the 1980s, Hill (1991) observed that quality circles ceased to exist after three years in all of the organizations. In the context of TQM, Peters (1994) says The physical laws of entropy suggest that systems degrade over time unless acted on otherwise. Theoretically, total quality can become an organizations overriding culture, suggesting that it generates its own momentum, but in practice this does not seem to have been realized. In reality, in dynamic environments, it is reasonable to suggest that a never-ending series of initiatives aimed at a constant readjustment and realignment with the marketplace is necessary. This is equally true with Six Sigma. Some organizations continue their improvement efforts by incorporating other programs such as lean, which do not require belts.

Savings-to-Costs Ratio
Despite an extensive search, cumulative costs (that is, the amount invested since the start of their programs) on Six Sigma are available only for two organizations, namely GE and Commonwealth Corporation (see Table 5, and Figures 1 and 2). GE invested $1.6 billion (0.42 percent of revenues) on Six Sigma from 1996 to 1999 and saved $4.4 billion during the same period with a savings-to-costs ratio of 2.6 to 1. Commonwealth invested $2.85 million (0.81 percent

Year (in which savings are referred to)


1996 1997 1998 1999 1996-1999

Revenue ($M)
79,200 90,800 100,500 111,600 382,100

Investment
200 400 500 600 1,700 0.60 0.75 0.60

% revenue invested
0.25% 0.44% 0.50% 0.54% 0.44%

Savings
200 1,000 1,300 2,000 4,500 1.20 2.10 2.80

Savings as % of revenues
0.3% 1.1% 1.3% 1.8% 1.2%

Savings/ costs ratio


1.0 2.5 2.6 3.3 2.6 2.0 2.8 4.7
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Commonwealth Health Corp

1999 2000 2001 1998-2001 350

2.85

0.81%

6.10

1.7%

2.1

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Costs and Savings of Six Sigma Programs: An Empirical Study


Figure 2 Costs and savings of Commonwealth Corporation.
Commonwealth Corp: Costs and Savings
$3.0 $2.5 $ in Millions $2.0 $1.5 $1.0 $0.5 $0 1999 2000 2001 Investment Savings
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of revenues) on Six Sigma from 1998 to 2001 and saved $6.1 million during the same period, with a savings-to-costs ratio of 2.1. For every dollar invested on Six Sigma, the return (direct savings) was $2.6 for GE and $2.1 for Commonwealth Health, suggesting that Six Sigma is indeed a profitable investment. However, caution must be exercised in interpreting these ratios with only a sample size of only two. The findings of this research on costs (as a percentage of revenues), savings (as a percentage of revenues), and savings-to-costs ratios are consistent with that of Waxer (n.d.) and the opinions of other industry experts. For example, according to Ellen Bovarnick, vice president of Lean Six Sigma and Global Quality, Nortel Networks, Fortune 500 companies implementing Lean Six Sigma spent about 0.6 percent of revenues on Six Sigma and get $8 return for every dollar they spend on the program (that is, a direct savings of 5 percent of revenues) (Bovarnick 2006). Snee and Hoerl (2004) observe that Six Sigma initiatives typically return 2 percent to 4 percent of sales to the bottom line in the second and third years for small companies and 1 percent to 2 percent of sales in the second and third years for large companies. Harry (1998) claims that Six Sigma can save about 6 percent cost reduction each year.

DISCUSSIONS AND CONCLUSIONS


This study differs from previous studies on the impact of quality improvement programs on organizational performance. First, it attempts to estimate direct
50 QMJ VOL. 19, no. 4/ 2012, ASQ

savings as a percent of revenues and the savingsto-costs ratio of implementing Six Sigma. With the exception of one recent study (Link and Scott 2011), no previous studies on Six Sigma or any other quality improvement programs have attempted to estimate such operational performance figures. Second, it differs in terms of the research methodology used. This research undertook an extensive search of annual reports and other published material on Six Sigma organizations that provided the actual costs and savings related to implementing Six Sigma. This method is new, simple, more accurate, and apparently has never been used before in studies that examined the financial impact of quality improvement programs including Six Sigma. However, this research yielded only sparse data on 28 Six Sigma implementations. This makes it difficult to generalize the findings. Nevertheless, this research provides some interesting results that will be useful to managers, Six Sigma practitioners, and researchers. The author has done an extensive search of published material for similar financial data for TQM programs going back to the 1990s, but could not uncover any organization that shared these data. Overall, the results provide some evidence that Six Sigma is a good investment if it is implemented effectively. The cumulative savings over the period of implementation typically ranged from 1 percent to 2 percent of revenues, but can be as high as 6.8 percent. With Six Sigma, therefore, a $100 million organization can expect to save $4 million to $8 million over a four-year period of implementation. The savingsto-costs ratios of implementing Six Sigma were 2.6 and 2.1 to 1, respectively, for GE and Commonwealth Health. Caution should be exercised in generalizing the results on savings-to-costs ratios, as these results are based on just two Six Sigma implementations. In interpreting these results it should be noted that the data sample is not a random sample of organizations from the Unites States or any other country. They are selected from journals and magazines that reported Six Sigma success stories. It is likely that only the organizations that made significant savings from Six Sigma would have reported in their annual reports and publicized their savings. Conversely,

Costs and Savings of Six Sigma Programs: An Empirical Study


organizations that implemented Six Sigma but made no impact to their bottom line, are unlikely to publicize their Six Sigma costs and savings. It is therefore safe to assume that the results obtained are on the higher end of what is possible with Six Sigma. Realizing hard savings and other benefits from Six Sigma takes time, as is the case with any change management program. During the first year of implementation, the savings will be minimal, if any. However, as more Black Belts and Green Belts are recruited and more projects are completed, the savings continue to accrue the following years. Based on the findings of this research, it is hypothesized that Six Sigma programs have a life cycle of about three to four years. By end of this period, organizations run out of improvement projects and possibly run out of belts able to spend significant time on the projects. It is likely that some Six Sigma programs come to a complete stop after the initial few years of implementation, while others extend their programs to include other continuous improvement activities such as lean or Design for Six Sigma. This life-cycle pattern of Six Sigma is consistent with that of other quality management programs such as quality circles and TQM. Another surprising finding of this research is that 25 out of the 28 organizations in the study sample are American organizations and are among the worlds largest organizations in their respective industries. For example, Raytheon is the worlds largest producer of guided missiles, DuPont is the worlds third largest chemical company, and Crown Equipment Corporation is worlds fourth largest manufacturer of powered industrial forklift trucks. What does this say? Six Sigma is primarily implemented in large organizations, or it could be that among the organizations implementing Six Sigma, only the larger organizations reported the financial savings. Both are likely to be true. While the majority of the organizations in this study are manufacturing organizations, the sample also includes organizations from healthcare, banking and finance, and logistics sectors. This suggests that there is potential for substantial savings through Six Sigma over a wide variety of industry sectors. The results obtained in this research could be used by organizations intending to implement or currently implementing Six Sigma to monitor and benchmark the progress of their programs. While the focus of this research is to estimate direct operational cost savings, one should not lose sight of the fact that as with other quality improvement programs, there are many other tangible, intangible, and long-term benefits of Six Sigma. These include improved employee and customer satisfaction, low employee turnover, improved product and service quality, increased sales, increased stock price, and so on. The overall benefits of pursuing quality, be it TQM or Six Sigma, far outweigh the costs.

LIMITATIONS
Every effort has been made to ensure that the data collected are as accurate as possible by verifying the data from various sources such as annual reports, journal articles, and Web pages. Even so, there may be errors in estimating costs and savings as a percentage of revenues, as the periods for which costs, savings, and revenues reported are not always matched. Quality improvement programs do not necessarily start at the beginning of a financial year; the estimates of savings are therefore likely to be more robust for organizations for which the data have been reported over several years (such as Motorola, Paccar, Cummins Inc., and Seagate). The term savings is not well defined in the articles from where the data were collected. It is assumed that these savings are direct annualized savings, but savings from an improvement project often continue for several years. It is assumed that future savings are not accounted for when calculating savings for a given year. Also, it is assumed that project implementation costs, if any, have been deducted before calculating the savings; this may or may not be the case for all of the data collected for this study. Sometimes organizations may start with another program, such as lean, and then implement Six Sigma or vice versa. Or, they may have several change programs going on at the same time. The author tried his best to make sure the costs and savings data collected correspond to Six Sigma or Lean Six Sigma only. However, this may or may not be the case with all data collected for this study.

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Costs and Savings of Six Sigma Programs: An Empirical Study


REFERENCES Anand, G. 2006. Continuous improvement and operations strategy: Focus on Six Sigma programs, Ph.D. diss., retrieved from ABI/INFORM Global (publication no. AAT 3226385). Ante, S. E. 2007. Rubbing customers the right way: Massages and other unlikely Six Sigma ventures are winners at Starwood Hotels. Business Week (October) 8:88. Antony, J. 2004. Some pros and cons of Six Sigma: An academic perspective. The TQM Magazine 16, no. 4:303-306. Atkinson, H., J. Hamburg, and C. Ittner. 1994. Linking quality to profits: Quality-based cost management. Milwaukee: ASQ Quality Press. Ayeni, F. O. 2003. An empirical study of the impact of Six Sigma methodology on organization financial performance in the U.S. Ph.D. diss., retrieved from ABI/INFORM Global (UMI no. 3117960). Barker, K. J., and C. R. Emery. 2006. The effect of TQM factors on financial and strategic performance: An empirical test using manufacturing firms. Academy of Strategic Management Journal 5:39-60. Bovarnick, E. 2006. The power of Lean Six Sigma: The Nortel journey. Available at: http://www.nortel.com/corporate/investor/ events/investorconf/collateral/breakout_leansixsigma_nov16.pdf Clifford, L. 2001. Why you can safely ignore Six Sigma. Fortune 143, no. 2:140. Corbett, C. J., M. J. Montes-Sancho, and D. A. Kirsch. 2005. The financial impact of ISO 9000 certification in the United States: An empirical analysis. Management Science 51, no. 7:1046-1059. Crockett, R. O., and J. McGregor. 2006. Six Sigma still pays off at Motorola. Business Week (December 4):50. Cummings, R. 2006. What if: The counterfactual in program evaluation. Evaluation Journal of Australia 6, no. 2:6-15. Easton, G. S., and S. L. Jarrell. 1998. The effects of total quality management on corporate performance: An empirical investigation. The Journal of Business 71, no. 2:253-307. Feng, Q., and C. M. Manuel. 2008. Under the knife: A national survey of Six Sigma programs in US healthcare organizations. International Journal of Health Care Quality Assurance 21, no. 6:535-547. Fine, C. H. 1986. Quality Improvement and learning in productive systems. Management Science 32, no. 10:1301-1315. Foster Jr., S. T. 2007. Does Six Sigma improve performance? Quality Management Journal 14, no. 4:7-20. GE Annual Report. 2001. Available at: http://www.ge.com/ annual01/. Goh, T. N., P. C. Low, K. L. Tsui, and M. Xie. 2003. Impact of Six Sigma implementation on stock price performance. Total Quality Management & Business Excellence 14, no. 7:753-763. Grandzol, J. R., and M. Gershon. 1997. Which TQM practices really matter: An empirical investigation. Quality Management Journal 4, no. 4:43-59. Haim, A. 1993. Does quality work? A review of relevant studies (report no. 1043). New York: The Conference Board Inc. Harry, M. J. 1998. Six Sigma: A breakthrough strategy for profitability. Quality Progress 31, no. 5:60-64. Hendricks, K. B., and V. R. Singhal. 1997. Does implementing an effective TQM program actually improve operating performance? Empirical evidence from firms that have won quality awards. Management Science 43, no. 9:1258-1274. Heuvel, J. 2006. ISO 9001 and Six Sigma in healthcare. Available at: http://publishing.eur.nl/ir/repub/ asset/8465/070126_Heuvel,%20Jaap%20van%20den.pdf Hill, S. 1991. Why quality circles failed but total quality management might succeed, British Journal of Industrial Relations 29, no. 4:541-568. Hindo, B., and B. Grow. 2007. Six Sigma so yesterday: In an innovation economy, its no longer a cure-all. Business Week (June 11):11. Hoerl, R. 2002. An inside look at Six Sigma at GE: the story of the companys Six Sigma experiences, from the beginning. Six Sigma Forum Magazine 1, no. 3:35-44. Kaynak, H. 2003. The relationship between total quality management practices and their effects on firm performance. Journal of Operations Management 21:405-435. Linderman, K., R. G. Schroeder, and A. S. Choo. 2006. 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The TQM Magazine 16, no. 4:241-249. Pyzdek, T. 2003. Six Sigma Handbook: The complete guide for greenbelts, blackbelts, and managers at all levels. New York: McGraw-Hill.

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Costs and Savings of Six Sigma Programs: An Empirical Study


Ramasesh, R. V. 1998. Baldrige Award announcement and shareholder wealth. International Journal of Quality & Reliability Management 3, no. 2:114-25. Reger, R. K., L. T. Gustafson, S. M. Demarie, and J. V. Mullane. 1994. Reframing the organization: Why implementing total quality is easier said than done. The Academy of Management Review 19, no. 3:565-584. Revere, L., and K. Black. 2003. Integrating Six Sigma with total quality management: A case example for measuring medication errors. Journal of Healthcare Management 48, no. 6:377-91. Samson, D., and M. Terziovski. 1999. The relationship between total quality management practices and operational performance. Journal of Operations Management 17:393-409. Schaffer, R. H., and H. A. Thomson. 1992. Successful change programs begin with results. Harvard Business Review 70, no. 1:80-89. Schonberger, R. J. 2008. Best practices in lean Six Sigma process improvement: A deeper look. New York: John Wiley & Sons, Inc. Singh, A., and M. M. Shoura. 2006. A life cycle evaluation of change in an engineering organization: A case study. International Journal of Project Management 24, no. 4:337-348. Snee, R. D., and R. W. Hoerl. 2004. Six Sigma beyond the factory floor: Deployment strategies for financial services, health care, and the rest of the real economy. Upper Saddle River, NJ: FT Press. Stuenkel, K., and T. Faulkner. 2009. A community hospitals journey into Lean Six Sigma. Frontiers of Health Services Management 26, no. 1:5-13. Wayhan, V. B. 2004. Supplier quality awards and competitive advantage: An empirical test of Demings chain reaction model. Ph.D. diss. Retrieved from ABI/INFORM Global (publication no. AAT 3108832). Wellburn, J. 1996. A TQM life cycle case study. The TQM Magazine 8, no. 3:35-45. Waxer, C. Six Sigma costs and savings. Available at: http:// www.isixsigma.com/library/content/c020729a.asp. Wisener, J. D., and S. G. Eakins. 1994. A performance assessment of the U.S. Baldrige quality award winners. International Journal of Quality & Reliability Management 11, no. 2:8-25. BIOGRAPHY Venkateswarlu Pulakanam has more than 30 years of academic and industry experience. He is currently a senior lecturer in the College of Business and Economics at the University of Canterbury, Christchurch, New Zealand. Prior to moving to New Zealand, he was a member of the academic staff at the University of Stirling, Scotland, and National Institute of Industrial Engineering, Mumbai, India. His teaching and research interests include quality, operations, and project management. Pulakanam has more than 40 peer-reviewed research publications. He was MBA director for three years at the University of Canterbury and has worked in industry as a process improvement manager and as a management consultant. He is a Senior member of ASQ and an ASQ certified Six Sigma Black Belt. He can be reached by email at venkat.pulakanam@canterbury.ac.nz.

Appendix 1
Data sources for the data collected in Tables 1, 2 and 3.
Organization
3M Allied Signal Bechtel

References1
Marx, M. 2005. 3MSix Sigma. Available at: http://www.sixsigmacompanies.com/archive/3m_six_sigma.html. Harry (1998) and Waxer (n.d.) Moreton, M. 2003. Featured company: Bechtel. Six Sigma Forum Magazine 3, no. 1:44. Bechtel Company Annual Report 2003. Available at: http://www.bechtel.com/assets/files/PDF/2003bechtelreport.pdf. Keim, E. M. 2006. Power surge. Electric Light and Power. Tulsa: 84, no. 6:14-15. Business Editors and High Tech Writers. 2001. Bechtel standardizes on Micrografx Six Sigma solutions. Business Wire (July 30):1. Owens, J. W. 2005. Featured company: Caterpillar Inc. Six Sigma Forum Magazine 4, no. 4:56. Hanway, H. E. 2006. Final thoughts: CIGNA Healthcare. Six Sigma Forum Magazine 5, no. 4:48. http://www.guidestar.org/pqShowGsReport.do?partner=iwave&npoId=98312. http://www.asq.org/members/news/aqc/56_2002/18161.pdf http://www.sixsigmazone.com/assets/Schoen_Countrywide_Presentation.pdf. http://blogs.isixsigma.com/index.asp?ci=20&s=category Countrywide Annual Report 2003
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Bank of America Jones Jr., M. H. 2004. Six Sigma ... at a Bank? Six Sigma Forum Magazine 3, no. 2:13-17.

Caterpillar CIGNA Commonwealth Health Countrywide

Crown http://www.privco.com/private-company/crown-equipment-corp Equipment Corp. http://www.heliamericas.com/press.html CSX CSX Annual Report 2001

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Costs and Savings of Six Sigma Programs: An Empirical Study


Data sources for the data collected in Tables 1, 2 and 3 (continued).
Organization
Cummins Inc. Dow Chemicals

References1
Marx, M. 2005. Cummins Inc.Six Sigma. Available at: http://blogs.isixsigma.com/index.asp?ci=20&s=category. Solso, T. 2007. Featured company: Cummins Inc. Six Sigma Forum Magazine 7, no. 1:44. Stavropoulos, W. S. 2004. Dow Chemical Co. Six Sigma Forum Magazine 4, no. 1:56. Motwani, J., A. Kumar, and J. Antony. 2004. A business process change framework for examining the implementation of Six Sigma: A case study of Dow Chemicals. The TQM Magazine 16, no. 4:273-83. http://www.dow.com/financial/2002ann/. http://pubs.acs.org/cen/coverstory/7925/7925dowchemical.html#Anchor-26087. http://www2.dupont.com/Our_Company/en_US/executives/linsenmann.html. http://www.sixsigmacompanies.com/archive/dupont_six_sigma.html. Waxer, C. Six Sigma costs and savings. Available at: http://www.isixsigma.com/library/content/c020729a.asp. http://www.sixsigmacompanies.com/archive/ford_motor_company_consumer_driven_6_sigma.html http://www.motorola. com/content.jsp?globalObjectId=3081 Waxer, C. Six Sigma costs and savings. Available at: http://www.isixsigma.com/library/content/c020729a.asp General Electric annual reports, 1996 to 1999. Business Week, 22 July 2002. Waxer, C. n.d. Six Sigma costs and savings. Available at: http://www.isixsigma.com/library/content/c020729a.asp. Hill, W. J. and W. Kearney. 2003. The Honeywell experience. Six Sigma Forum Magazine 2, no. 2:34-38. Snee, R. D., and R. W. Hoerl. 2004. Six Sigma beyond the factory floor: Deployment strategies for financial services, health care, and the rest of the real economy, PH Professional Business. Barth, J. M. 2005. Featured company: Johnson Controls. Six Sigma Forum Magazine 4, no. 2:48. Johnson Controls Annual report 2004. http://www.johnsoncontrols.com/publish/etc/medialib/jci/Suppliers/be/training.Par.98241.File.tmp/Continuous%20 Improvement%20Supplier%20Program.pdf. http://www.mckesson.com/en_us/McKesson.com/About%2BUs/Our%2BCompany/Six%2BSigma.html. Kumar, M., J. Antony, C. N. Madu, D. C. Montgomery, and S. H. Park. 2008. Common myths of Six Sigma demystified. The International Journal of Quality & Reliability Management 25, no. 8:878-895. Waxer, C. n.d. Six Sigma costs and savings. Available at: http://www.isixsigma.com/library/content/c020729a.asp http://www.motorola.com/content.jsp?globalObjectId=3081. http://6sigmaexperts.com/presentations/Six_Sigma_Through_the_Years.pdf. http://www.scribd.com/doc/11344109/Lecture-Material-Six-Sigma. http://europe.isixsigma.com/index.php?option=com_k2&view=item&id=1228:&Itemid=187&tmpl=component&print=1. Newell Rubbermaid Annual report 2004 and 2005. http://ir.newellrubbermaid.com/annuals.cfm PACCAR Annual Reports 2007 and 2008. http://findarticles.com/p/articles/mi_m0SVI/is_2004_August-Nov/ai_n15862597/. http://www.sixsigmacompanies.com/archive/raytheon_six_sigma.html. Company annual reports 2001 and 2002. Heuvel, J. 2006. ISO 9001 and Six Sigma in healthcare. Available at: http://publishing.eur.nl/ir/repub/ asset/8465/070126_Heuvel,%20Jaap%20van%20den.pdf download.microsoft.com/download/a/1/b/a1b38fdf.../sixsigma.pdf. http://www.transplace.com/media/LSS_Release_Final_12_9_08.pdf. http://symposium.transplace.com/past/2008/Presentations/Apr24/Managing%20Complexity%20and%20Change%20 in%20the%20Food%20Industry.pdf Whirlpool annual report 1999. http://phx.corporate-ir.net/phoenix.zhtml?c=97140&p=irol-reportsannual.
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Dupont Ford Motor Co.

General Electric

Honeywell Iomega Johnson Controls

McKesson Motorola

Newell Rubbermaid PACCAR Raytheon

Red Cross Hospital Seagate Technology Transplace

Whirlpool WR Grace
1

W. R. Grace Annual reports 2002-04.

Company annual reports are accessed using a number of sources: The respective company Web pages, DataStream database, and Buck Master Annual Stockholder Reports (Buck.com).

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