Is Six Sigma the Right Tool for the Job?

CIDM

December 2002


Is Six Sigma the Right Tool for the Job?


CIDMIconNewsletter Derrick Pope, Consultant, Comtech Services, Inc.

Six Sigma, a process-improvement methodology, is experiencing major growth in the corporate world. In fact, Six Sigma was a major theme at this year’s CIDM Best Practices conference. In his article, “Sick Sigma?” in the September 2002 issue of Context, Christian Northeast examines the resurgence of Six Sigma and the effects it may have on different types of companies. Northeast credits the reappearance of Six Sigma to several large manufacturing companies who claim that Six Sigma has saved their organizations billions of dollars. The General Electric Company claimed that a Six Sigma program saved them $1.5 billion last year. Northeast estimates that nearly one quarter of the Fortune 200 companies have Six Sigma projects under way.

Six Sigma got its start in 1984 when Mikel Harry, an engineer at Motorola, used statistical analysis to examine Motorola’s manufacturing process. After discovering that the average company operates at what statisticians call three sigma or 66,800 errors per million, he set a new goal for Motorola. That lofty goal was six sigma, which meant the company would operate with only 3.4 defects per million units produced.

Because making such a huge change in his organization wouldn’t be easy, Harry developed a process that went beyond current practices. This new process became the structure of the Six Sigma program. Calling it DMAIC (define, measure, analyze, improve, and control), he implemented the program with key personnel, giving them the titles of master black, black, and green belts.

The DMAIC process begins by quantifying variables in a process. Then, it outlines a demanding series of statistical analyses to understand how the organization can make improvements to drive down costs. A company might have anywhere from a handful to a few hundred Six Sigma projects in operation at one time, each running four to six months and saving up to $500,000 each.

Major manufacturing companies, such as Ford and Dow Chemical, have seen major cost reduction from implementing these programs. Ford claims a savings of $325 million from last year, and Dow executives claim that their program is halfway to its goal of saving $1.5 billion by 2005. Because of these successes, both of these companies are applying the DMAIC process to areas outside manufacturing and logistics. Focusing on internal parts of the business, from legal departments to customer call centers, these companies have decreased costs.

One key proponent of Six Sigma, Daniel Laux of the Six Sigma Academy, says that the recent expansion of Six Sigma programs can now successfully include “all industries and functions.” He also believes that the practice can even be used to find innovative products. Laux believes that many companies view Six Sigma as “an enterprise-wide business strategy.”

Critics of Six Sigma disagree wholeheartedly. They claim that, although Six Sigma can be good for redefining processes that are, for the most part, fundamentally sound, it offers little help in developing new internal processes, creating cutting edge products, or setting business strategies. Many critics feel that the application of Six Sigma to areas outside its original intent is absurd. Some blame the expansion of the process to the adaptive instincts of modern consulting.

Debate rages about what may cause some Six Sigma projects to fail. Those supporting Six Sigma say that problems may occur but are often caused by poor implementation or lack of upper management support. They argue that upper management needs to understand that Six Sigma can mean a five-year commitment with bottom-line results realized only near the end. Critics argue that proponents simply “gloss over the fundamental limits of the methodology.” Citing the business difficulties of Six Sigma-practicing companies, including Eastman Kodak Company, Xerox Corporation, and Polaroid Corporation, critics claim that Six Sigma success does not directly relate to business success.

Critics point to IBM as they argue against Six Sigma. While focusing solely on successful implementation of Six Sigma projects, IBM failed to notice that, in many cases, they were building the wrong products. While IBM focused on reducing defects in their current networking systems and disk drives, competitors were developing and introducing innovative products. Companies, such as Cisco and EMC, “tapped into explosive growth and took the leading position in their markets away from IBM.”

Some critics also claim that IBM’s use of the Six Sigma methodology to develop forecasts for consumer demand in the personal computing market led to disaster. IBM would have been better off focusing on developing a new strategy instead of making small changes to the wrong approach.

IBM vice president, Fred Dewald, claims IBM’s turnaround since 1993 was accomplished without Six Sigma. IBM decided instead to focus on business process re-engineering. Dewald said, “Six Sigma operates at too low a level to supply answers to macro problems.”

The expansion of Six Sigma into areas outside statistical process-control may not always support a company’s goals. Some companies introducing Six Sigma have seen their projects improve processes and increase customer satisfaction but not lower costs. Many claim that Six Sigma projects are very training intensive, increasing training costs more than they reduce other costs.

Northeast concludes that as Six Sigma becomes more popular, management needs to ensure that they are using the right tool for the job. CIDMIconNewsletter

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