SIX SIGMA: BREAKING THROUGH THE QUALITY HYPE TERM PAPER SUBMITTED TO XXXXXXXXXXXXX IN PARTIAL FULMILLMENTOF THE REQUIREMENTS FOR OPERATIONS AND PROJECT MANAGEMENT BUSH 6110 BYXXXXXXXXXXXXXXNOV 21 2001 ABSTRACT Writer: XXXXXXXXXXXXXXXXXTitle: Six Sigma: Breaking through the Quality Hype Institution: XXXXXXXXXXXXXXXXXXXxDegree: Master of Business Administration Year: 2001 Motorola's Robert Galvin came up with it and breathed life back into the company, snagging a Baldrige Award in the process. Larry Bossily rebooted Allied Signal with it and then sold General Electric's Jack Welch on it. GE then made Six Sigma front-page news. Notwithstanding its 15-year history and the usual hype that comes with any concept promising organizations huge bottom-line benefits, the number of companies actually using Six Sigma appears to be quite small.

Moreover, the perceptions within the quality industry of Six Sigma methodology vary greatly. So what's the story behind the hype? Is there really some muscle in the methodology, or is Six Sigma simply, as many believe, PR-enhanced total quality management? TABLE OF CONTENTSPageABSTRACT iiChapterI INTRODUCTION 1 II TOOLS AND TECHNIQUES 3 III BENEFITS MULTIPLY 8 IV SUMMARY 10 REFERENCES 11 AUTOBIOGRAPHY 12 CHAPTER I INTRODUCTION The year is 1976. The USA was celebrating its 200 th birthday. According to the Juran Institute, there was an emerging interest in this country for training in quality matters. Manufacturing companies were eager to implement quality improvement within their organizations. They were motivated by a very real competitive threat from overseas.

Japanese industries had swallowed up a number of our companies and were threatening others. It turned out that quality was dramatically changing the way many organizations were conducting business. There was a new buzzword being used by managers: 'Total Quality Management', or 'TQM' (Blackiston, 1996, p. 1). What emerged as some of the key motivators... the drivers? The Juran Institute believes at first sheer terror motivated many American businesses.

These companies realized that quality was a matter of life and death. Indeed, many American manufacturers of consumer electronics died before they could react (Blackiston, 1996, p. 1). The Juran Institute states: ... another important motivator for quality initiatives was the concept of 'the costs of poor quality'.

This relates to all of those costs that would disappear in an organization, if everything were done correctly right from the start. We saw early on that most companies were simply throwing away about 25% of their sales revenues on scrap, repairs, warranties and other costs of quality (Blackiston, 1996, p. 1). As the years went by, the reasons for implementing TQM piled up; however, the Juran Institute figured that 80% of the companies that tackled TQM in the 1980 s failed (Blackiston, 1996, p.

1). Although quality improved, TQM seemed to be mired in "find and fix" the problem and not worry about the cost. Joseph Defeo of the Juran Institute believes it wasn't until the 1990 s when General Electric popularized Six Sigma that companies realized quality and cost reduction can go hand-in-hand (Defeo, 2000, p. 1).

Defeo (1999) states: Six Sigma is a lot more structured and profit-oriented than Total Quality Management. Each project has to improve processes 70 percent and produce $250, 000 in cost savings. It is a data-driven method for achieving near-perfect quality [... ]what makes Six Sigma different from other quality efforts is that it catches mistakes before they happen. More specifically, it is a disciplined effort that closely examines a company's repetitive processes for product designs, production, suppliers, services and organizations (p.

1). Don Redinius at the International Society of Six Sigma Professionals (IS SSP) defines Six Sigma as a statistical method of translating a customer's needs into separate tasks and defining the optimum specification for each depending on how all of the tasks interact. Six Sigma can reduce defects in products and services to unprecedented levels because of its strong emphasis on statistical analysis and measurement in design, manufacturing and the entire area of customer-oriented activities (Redinius, 2001, p. 1). CHAPTER II TOOLS AND TECHNIQUES According to the Juran Institute, in the 1980 s, everyone had a different problem-solving method for improving quality.

One of the most universally used was Juran's six-step method that provided a standardized way of achieving Six Sigma results (Blackiston, 1996, p. 1). Today, (Redinius 2001), the five-step approach to Six Sigma has become a standardized process. It is different from other quality efforts because it targets higher standards of quality and lower defects, which the customer defines. It catches mistakes before they happen. More specifically, it is a disciplined effort that examines a company's processes for product designs, production, suppliers, services and organizations very precisely (p.

1). Redinius (2001) referred to the Six Sigma as being a five-step process: 1. Define by identifying, prioritizing and selecting the right project (s). 2. Measure key product characteristics, process parameters and performance. 3.

Analyze by identifying key causes and process determinants. 4. Improve by changing the process and optimizing performance. 5. Control by holding the gains (p. 1).

The tools and techniques Six Sigma's process uses are the basic fundamentals of quality management documented by Dr. Juran. Dirk Dusharme (2001) of quality Digest Magazine says: Motorola gave the Six Sigma name to the process. Sigma is usually written as a small sigma () in the Greek alphabet and used as a symbol to denote the standard deviation or the measure of variation in a process.

The term also refers to a philosophy, goal or methodology to drive out waste and improve quality, cost and the time performance of any business. The greater number of sigmas within specifications, the fewer the defects. The smaller the variation, the lower the cost (p. 1). Defeo states the best of organizations are at about 3 to 4 sigma, which is about 6, 200 defects per million. Six Sigma means defects occur in only 3.

4 per million which can translate into millions in dollars of savings after the investment of a fraction of that amount (Defeo, 2000, p. 1). Management at the Ford Motor Company claims it is vital that commitment starts and remains in the strongest of terms with direct and well-publicized involvement from the chief executive officer down throughout the process. Their experience shows it is a waste of valuable resources if the CEO does not express his or her personal vision, provide steady and enthusiastic encouragement, assess results and reward the participants. He or she must articulate what it means to the company's bottom line and make clear that full participation is the only choice. They also believe that, once involved, employees become its biggest boosters (Management: Ford, n.

d, p. 1). To explain the Six Sigma Process in detail, Defeo (1999) states: Six Sigma begins with the selection of employees whom outside specialists will train as leaders. Many of them will devote full time in carrying out each project. Next, briefings will help executives gain a common understanding of the Six Sigma approach. Following this is a two-day "champion" workshop that generates excitement among the management ranks.

He claims the training today is very extensive (p. 1). Defeo (1999) further states: ... first, four days of training enables participants to learn methods of achieving Six Sigma levels of quality, using a problem-solving and improvement methodology in addressing chronic situations through root-cause analysis.

Completion of these sessions certifies employees with what is called Green Belt status (p. 1). Defeo (1999) further explains the process by saying: Second, four interactive sessions of four days each over about sixteen weeks will certify a small number of employees as Black Belts. The company selects projects after the first week, and candidates must apply what they learn to their project during the three to four weeks before the next session. They must demonstrate results to graduate. Candidates typically are at managerial or technical specialist level and will have responsibility to implement Six Sigma in a business unit.

They develop, coach and lead process improvement teams; mentor and advise management on prioritizing, planning and launching projects; and use, teach and disseminate tools and methods to Green Belt associates and team members (p. 1). Defeo (1999) finishes his process explanation by stating: ... the third and top level of experience is Master Black Belt status. Employees with this responsibility are experts on the theory and implementation of Six Sigma and must teach the process. They are company-wide quality experts on the methodologies, tools and applications in all functions and levels of the company.

Also, they provide leadership in integrating the Six Sigma approach into the company's business strategy and operational plans. A Master Black Belt candidate must lead several successful project teams to become certified (p. 1). Defeo (1999) discusses how Black Belts launch and support project teams that deploy Six Sigma. Projects can be of different size and duration, are highly structured and take a very systematic approach within three categories: 1. Transactional business process projects - large scale improvement of a business process, such as order taking, that extends across an organization.

2. Traditional improvement projects aimed at solving chronic problems crossing multiple functions of an organization. 3. Work team project within one department (p. 1). Defeo further claims that once the company has selected one or more repetitive processes and has chosen and trained teams, the discipline identifies natural and unnatural patterns of variation in each process.

In making revolutionary improvements, the process reveals unnatural sources of variation and removes them (Defeo, 1999, p. 1). He states "Six Sigma provides the means of reducing that variation and then controls the process so variations will not return. If variations do return, a 'statistical' warning detects them quickly" (Defeo, 1999, p. 1). The Juran institute claim organizations that have embraced Six Sigma widely use their training and techniques, in addition to its textbooks on quality, performance and productivity (Blackiston, 1996, p.

1). Dusharme sees a trend that seems to be gaining momentum in that companies are using their Black and Master Black Belt employees full time in these assignments, instead of part time in addition to their regular responsibilities (Dusharme, 2001, p. 1). Defeo (1999) claims everything a company does is a candidate for the Six Sigma process, whether it is design, yield, communications, paper work, training, production, inspection, testing, returns, recalls, rejects, response time, attitude, waste, or organizational structure. The disciplined processes Six Sigma uses also apply to high-level knowledge work, e. g...

finance, law and engineering, but the procedural steps are specialized (p. 1). Defeo claims the possibilities in quality improvements, cost savings, customer satisfaction and loyalty, and employee development are enormous, but the Six Sigma process requires a commitment of time, talent, dedication, disciplined persistence and an investment in company funding. He believes it is a quality or productivity program with many lessons learned from the 1980 s and that it must become a central, pervasive effort that demands unprecedented focus and teamwork (Defeo, 1999, p.

1). Redinius (2001) believes that, depending on the circumstances, it is not always necessary to achieve Six Sigma, but a company should aim for the levels that will significantly improve quality and reduce defects. Using the basic Six Sigma set of tools, he states an organization can pursue the process step by step to achieve the necessary results for its purposes and not have to reach the ultimate potential. Companies must build around their capabilities and proceed at a level consistent with their resources. He states the following example: ... train and use the number of Black Belts best assimilated in your organization.

In other words, if your target, for example, is to get $50 million in improvements, then you need up to 1, 000 employees qualified as Black Belts. Do not expect to get from here to there with only 10 if that is your goal (p. 1). CHAPTER III BENEFITS MULTIPLY Defeo (2000) claims that, done properly, Six Sigma's benefits multiply quickly: employee motivation, morale, pride, promotions, career development, and major increases in productivity and profitability. The typical cost of poor quality - hardware defects and process wastes, for example - is 20 to 30 percent of revenues (p. 1).

Defeo (1999) further states Six Sigma can also help companies and their business units turn over working capital faster, reduce capital spending and free up or make new capacity unnecessary. It can produce better results from R&D spending, expedite product development and improve customer satisfaction (p. 1). Dusharme (2001) addressed the multiplication of benefits by quoting General Electric's 1998 Annual Report where, Chairman and CEO, Jack Welch, wrote: ... the financial returns have now entered the exponential phase - more than three quarters of a billion dollars in savings beyond our investment in 1998, with a billion and a half in sight for 1999. The savings are impressive, but it is the radical change in the overall measures of operating efficiency that excite us most.

When Six Sigma began in 1995, our margins were in the 13. 6 percent range and turns at 5. 8. At the end of 1998, margins hit 16.

7 percent and turns were at 9. 2. Ratio of plant and equipment expenditures to depreciation is another measure of asset efficiency. This number dropped to 1. 2 and will be in the. 7-.

8 range in the future as 'hidden factory' - literally 'free capacity' is uncovered by Six Sigma processes. Every new GE product and service in the future will be 'Designed For Six Sigma'. If a company is not a large company like General Electric or Allied Signal, they still will benefit from Six Sigma - although not at the same magnitude. Smaller organizations should use the Six Sigma process, but at a level that fits the organization. Instead of a $50 million improvement goal, the appropriate target may be $5 million.

Instead of 1, 000 Black Belts, they may need only 10" (p. 1). CHAPTER VSUMMARYThe Juran Institute claims today's challenge is to measure and manage our resources (Blackiston, 1996, p. 1). Six Sigma is a methodology whereby almost immediate quality can result from the effective use of technology and investment in intellectual capital. Defeo (1999) states significant benefits are possible in two important areas: repetitive processes in manufacturing, such as in a foundry and printed circuit board assembly and production.

Another area where major improvements are possible is in transitional processes, like completing an invoice or writing an insurance policy (p. 1). Defeo (1999) believes our future success, indeed survival, as a nation of leaders will depend increasingly not just on technology, but also on the realization that there is no other way to go than to embrace a process like Six Sigma - unless the company wants to risk continuity and success (p. 1). In conclusion, Defeo (2000) further claims people, companies, industries, economies and nations will maintain leadership and a competitive edge only if they have a consistent mental attitude and a thirst for more effective ways to produce state-of-the-art products and services. The use of technologies, creative techniques, and innovative ways of accomplishment will put not only themselves, but also their customers in a more efficient and better environment.

The human element is finally taking advantage of an era of technological development to create a discipline based on the reality that higher levels of quality at lower cost are necessary to compete in a challenging global economy. Six Sigma is a road map not only for survival, but also for growth (p. 1). REFERENCESBlackiston, H.

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(2001). Six Sigma Overview and History. [Online] Available: web overview. html.