WHY SIX SIGMA ?

& THE YELLOW BRICK ROAD

BY: SNEHAL WANERE & PRIYANKA SULE

Six Sigma is about improving profitability, as it improves quality and efficiency. Companies implement Six Sigma with the goal of improving their margins. Organizations that cannot track the effect of quality improvements, does not know what changes needs to be made to improve their profit margins.

Six Sigma is a long term, forward thinking initiative designed to change the way corporations do business. Instead of projecting three or more years into future, Six Sigma focuses on achieving financial targets in twelve months increments.

Once those targets are met, companies will find that changes in the market and Six Sigma impact on their own financial landscape.
Changes in the companies: A 20% margin improvement A 12 to 18 % increase in capacity A 12% reduction in the number of employees

As the business world is aware, six sigma has helped some of the nations best-run Fortune 100 companies to achieve their financial results.
EX: GENERAL ELECTRIC

- GE is not about numbers; its about values. These values include employee satisfaction, customer satisfaction and cash flow. -GEs values clearly show its determination to maintain a reality-based, customer-focused company. -Commercial finance, a division within GE capital services, uses Six Sigma to better understand customer requirements and thereby win more deals. The result has a 160% increase in new transactions. -GE Capital Services knows what it means to value customer satisfaction, and it works steadily to measure how well it satisfies that value.

Six Sigma was first used at Motorola in 1979 when executive Art Sundry stood up at a management meeting and proclaimed, The real problem at Motorola is that the quality stinks! Sundrys proclamation sparked a new era within Motorola and led to the discovery of the crucial correlation between higher quality and lower development costs in manufacturing products of all kinds. Motorola realized that improving quality would actually reduce costs. Motorola was spending 5-10% of annual revenues, and in some cases as much as 20% of revenues, correcting poor quality.

Contd

In 1985, Smith an engineer at Motorola presented a paper that concluded , if the product is found defective during the production process, other defects were bound to be missed and found later during the use of the product. However, when the product was manufactured error-free, it rarely failed.

Six Sigma allowed a business leader to be proactive, rather than reactive, to quality issues.
The Six Sigma architects at Motorola focused on making improvements in all operations within a process, producing results far more rapidly and effectively. Motorola applied Six Sigma to the development of its bandit pager.

Within 18 months, for a price tag of less than $10 million, Motorola's 23 bandit engineers had designed a pager that could be produced in its automated factory. Bandits superior design and manufacturing process resulted in an average life expectancy for its pager of 150 years. The company began to reap financial rewards from the Six Sigma. The company had higher-quality products and happier customers at a cheaper cost. Within 4 years Six Sigma had saved the companys $2.2 billion. By 1993, Motorola was operating six sigma in many of its manufacturing operations.

A process is any activity or group of activities that takes an input, adds value to it, and provides an output to an internal or external customer.

An industrial process is any process that depends on machinery for its creation and comes contact with materials that will be delivered to an external customer.

Taking Quality Personally

Former Motorola CEO Bob Galvin says, that if a leader is to create true and lasting improvement, he or she must take quality to a personal level. Building a New Bottom Line: At 3 sigma , the cost of quality is roughly 25-40% of sales revenue. At 6 sigma, the cost of quality declines to less than one percent of sales revenue. Increasing profits by 20-30% of sales revenues creates massive savings.

Taking Quality Personally

The Cost Of Quality:

Sigma Level

Cost of Quality

2
3 4 5 6

Not Applicable
25-40% of sales 15-25% of sales 5-15% of sales <1% of sales

 Mikel Harry , a senior staff engineer at Motorola's Government Electronics (GEG), created a detailed road map for improving product design and reducing production time costs. This represent the Yellow Brick Road to Six Sigma.

Schroeder used Six Sigma to achieve a 58% reduction in cost of quality within the division , a 40% reduction in errors, and a 60% reduction in the time it took to design a product.

Breakthrough Strategy
There are 4 core phases of the breakthrough strategy : Measure Phase: It includes a review of the types of measurement systems and their key features. Companies must think about where errors in measurements can occur, as well as the faulty measurements on a projects success. Analyze phase: The breakthrough strategy offers a specific statistical methods and tools to isolate key pieces of information that are critical to explaining the number of defects. In the analyze phase, practical business problem are turned into statistical problems.

Breakthrough Strategy
Improve phase:

The breakthrough strategy focuses on discovering the key variables that cause the problem. The improve phase encompasses the process known as design for six sigma. E.g. Motorola designed a process to produce a virtually defect-free pager. Control phase:
The breakthrough strategy ensures that the same problems dont reoccur by continually monitoring the processes that create the product or service.

Six Sigmas Breakthrough Strategy

The Six Sigma Breakthrough Strategy is a discipline method of using extremely rigorous data-gathering and statistical analysis to pinpoint sources of errors and ways of eliminating them. Six Sigma is about pursuing quality only if it adds value for the customer and the company. The Breakthrough Strategys methodology uses specific tools to reduce operating costs, improve capacity, improve margins, shorten the length of time it takes to bring a new product to market, reduce inventory, and process transactions in shorter time period with fewer errors.