Six Sigma can help a business lower costs or increase revenues and simultaneously improve the quality of the products or services that it provides to its customers. For a Six Sigma implementation to be truly effective and make a strong business case to business leaders, savings produced by Six Sigma projects should, at the very least, offset the costs of conducting such projects. Generally, Six Sigma projects should aim to achieve breakthrough results. Many training programs require Six Sigma Black Belt students to complete projects that result in savings or increased revenues of $250,000 to $500,000.
Even if a company does not implement a full Six Sigma program, Six Sigma training for employees can help a company realize cost savings and other benefits. In theory, a company employs personnel to make improvements to business processes and the company’s profits. Thus, any improvements made using Six Sigma principles and practices can help. It is important, however, to ensure that investments made in process improvements do not cost the company more than the improvements add to the bottom line. It may not make sense, for example, to send the the personnel from an entire department to Six Sigma training if there is not a committment from the business leadership to implement Six Sigma practices.
The following is a very brief history of Six Sigma as a formal process improvement methodology used in business. As a source, we used Motorola’s online article, “Six Things to Know About the History of Six Sigma”.
Six Sigma, as a process improvement metric and not necessarily as a methodology, was first described and articulated in 1986 by several engineers at Motorola. The term “Six Sigma” was coined by Quality Engineer Bill Smith. In 1987, CEO Bob Galvin and Sales Vice President Art Sundry set the very aggressive goal of reaching six sigma success in their manufacturing production business. In practical terms, this meant that their manufacturing processes would produce no more than 3.4 defects per million products. The following year, Motorola received the Malcolm Baldridge National Quality award for their efforts at quality improvement. In 1991, Motorola officially introduced the concept of Six Sigma Black Belts, highly trained process improvement professionals.
Up until about 1992, Six Sigma principles were used primarily in manufacturing environments. As other companies learned of Motorola’s success with Six Sigma practices, they began to apply Six Sigma principles to non-manufacturing businesses such as financial services and technology.
By about 2002, Six Sigma evolved from a metric and loose set of principles to a formalized process improvement methodology. As Six Sigma infiltrated the culture of several companies, it further evolved into a management strategy. Six Sigma continues to evolve as companies apply the core principles in more comprehensive ways. For example, Six Sigma originally focused on decreasing defects and improving cycle times. More recently, companies apply the same methods with the goal of increasing market share, improving customer retention, and managing customer requirements.
To illustrate the potential power of applying Six Sigma to the management of a large production company, Motorola reported in 2004 that as a result of Six Sigma, they experienced 42% revenue growth and an increase of 257% in earnings per share from the previous year’s first quarter earnings.
Six Sigma continues to evolve as many companies implement Six Sigma strategies and invest in their employees with Six Sigma training.
In the Control phase the project team ensures that the changes made to process provide sustained benefits. This is accomplished by the use of documentation, monitoring, and assigning business owners for the process.
The Improve phase identifies ways to decrease process defects or failures and can also improve the output variable in other ways (e.g., optimize production.) The team also conducts statistical tests to validate that the changes to the process actually improve process yield and/or reduce defects.
The primary task of the Analyze phase is to use data to determine which process inputs impact the process output or “Y”. In this phase, the project team first identifies the sources of variation in their process by using analytical methods including fishbone diagrams, process input measurement systems, detailed process mapping, and detailed FMEA.
Once the potential sources of variation are identified, the team then narrows down the list of inputs so that their efforts are more focused. This screening is accomplished primarily by conducting graphical analysis, hypothesis testing, and multi-vari analysis.
In the Measure phase the project team obtains baseline performance measures of the process in question. Based on these and the work completed in the Design phase, the team also solidifies the target performance measures. The team creates a more detailed process map including clear definition of the input and output variables of the process. Finally, the team validates the measurement methods or systems that they use to monitor the process, specifically, the system used to measure the process output variable. Process mapping is a key output of this phase of the Six Sigma methodology. The goal of mapping is to understand the process in greater detail which will allow the team to identify the possible places in the process where they risk defects or process failure.
To identify these potential risk factors, the team then completes a Failure Mode Effects Analysis (FMEA). This clearly identifies the potential risk points in the process including a ranking of the risk and the extent to which the current process detects or prevents such risks.
Finally, the team conducts a process capability study where they formally test the extent to which the current process meets the expected performance measures. This becomes a baseline comparison once the team has implemented the new process or changes to the current process.
In this step, the Six Sigma Master Black Belt, Black or Green Belt, Champion, and any other project team members define the scope of the project and write a project charter. To help define the scope of the project, the team first creates a problem statement. This forces the project team to identify the output variable that they want to improve. This could be any sort of metric that their business cares about and that can be measured.
In defining such a variable, it is vital that the team also define a reasonable scope. Many business metrics are too broad to “fix” in a single project and defining an appropriate scope will increase the chances for success. On the other hand, the project should provide opportunity for substantial business savings to make the team’s efforts worthwhile and cost effective.
The project’s output variable, or project “Y”, must be something that is measurable. Because Six Sigma is based on improving processes by quantitative analysis and testing, the Y variable must be reliably quantifiable. Some examples include lost sales, high average call handle times, manufacturing waste, and rework. Each of these can be clearly defined and measured.
At this point in the process, the team also considers what input variables feed the process they are attempting to improve. Identification of these inputs will help the team know whether they have the means to manipulate such variables–a key to deciding which project to pursue.
The team then sets their initial expected performance measures–often referred to as tolerances or specification limits. This provides the business and the project team with a clear goal. These performance measures should be based on logical, often financial, reasoning.