The Origin of Six Sigma
Six Sigma was developed by Mikel Harry and Bill Smith at Motorola in the late 80’s but has roots stemming back to Deming and the principles of Zero Defects and Total Quality Management. Over several years that followed the initiation of its efforts, Motorola achieved a 200 fold improvement in production quality from 4 Sigma to about 5.5 Sigma and saved a reported $2.2 billion in the process.
Another early adopter was Allied Signal as they implemented the methods in the early 90s so that it became more than just a system to measure production quality.
Six Sigma became well known after Jack Welch made it a central focus of his business strategy at General Electric in 1995 to drive growth and cost reduction and in GE’s 1999 annual report they attributed benefits of $2 billion net income to Six Sigma.
Six Sigma is a compilation of statistical concepts and other tools and techniques put together in a systematic way to get results.
So what is Six Sigma? Six Sigma is a method for improving quality by removing defects and their root causes in business process activities. It concentrates on those process outputs which are important to customers and translates these customer needs into measurable requirements, the so called CTQ’s (Critical To Quality) or the customer requirements.
When we talk about a product we don’t think in just manufacturing terms we can think in service terms also.
For example, if you think of your end product as the invoice produced for the customer then any variation in the quality of the invoice be it the wrong date, incorrect address, price etc can be put down to variation in the quality of a process that is used to produce that invoice.
An indicator for the CTQs is identified and a robust measurement system is established to obtain clear and precise data relating to the process. Once this is in place improvement activity is planned to drive process behaviour to meet and exceed customer specifications.
A measure of process capability is calculated by identifying opportunities for defects in a given product or process. Typically, business processes generate approximately 35,000 defects per million. This equates to about 3.5 Sigma.
Concept of Process Variation
At the heart of Six Sigma is the principle of Variation. Six Sigma assumes that everything is a result of some process, therefore, if your product quality varies then this is the result of variation in the process that creates that product. To understand Six Sigma means that you first have to accept that variation exists in everything. Sometimes the variation may be too small to detect but it is still there.
Sigma, the eighteenth letter of the Greek alphabet is also the mathematical symbol for Standard Deviation, a measure of variation and defects in a business process or the spread.
Let’s look at an example to put this concept of variation into perspective.
Imagine you are at a shooting range – you try to hit the target
You can be:
- off-target, but consistent, no spread (precise)
- on target, but a high degree of variability/spread (accurate)
- off-target & high variability (not accurate or precise)
- on target & low variability (accurate & precise)
Things that cause a process to be off-target (i.e, not accurate) are easier to identify than things that cause it to be variable (i.e, not precise)
Accuracy problems are easier to solve than precision problems
If you have the right knowledge, though, you can look at accuracy & precision. In business terms, precision is a useful indicator of process Efficiency which is calculated by applying various statistical principles to the concept of Sigma or Standard deviation.
Six Sigma performance is equal to 3.4 Defect Per Million Opportunities or 99.9997% Efficiency.
Is this realistic!, consider this. A 99% level of efficiency would mean:
–2,000 lost articles of mail per hour
–5,000 incorrect surgical operations/week
–2 short or long landing at most major airports each day
–No electricity for almost 7 hours each month
–Telephone would not work for 4 hours each month
–Unsafe drinking water for almost 15 minutes each day
–Your car wouldn’t run for about one hour each week
Six Sigma is a benchmark quality level and not the aim.
An average company operating at around 3.5 Sigma will typically spend around 20– 30% % of its revenues resolving and fixing internally generated problems.
A Six Sigma service company’s Cost of Poor Quality is less than 5%.
What is your organization’s Cost of Poor Quality?
