Six Sigma

Six Sigma (6σ) is a set of techniques and tools for process improvement. It was introduced by American engineer Bill Smith while working at Motorola in 1986. Jack Welch made it central to his business strategy at General Electric in 1995. A six sigma process is one in which 99.99966% of all opportunities to produce some feature of a part are statistically expected to be free of defects.

The method uses a data-driven review to limit mistakes or defects in a corporate or business process. Six Sigma emphasizes cycle-time improvement while at the same time reducing manufacturing defects to a level of no more than 3.4 occurrences per million units or events. In other words, the system is a method to work faster with fewer mistakes.

Six Sigma points to the fact that, mathematically, it would take a six-standard-deviation event from the mean for an error to happen. Because only 3.4 out of a million randomly (and normally) distributed, events along a bell curve would fall outside of six-standard-deviations (where sigma stands in for “standard deviation”).

Six Sigma strategies seek to improve the quality of the output of a process by identifying and removing the causes of defects and minimizing impact variability in manufacturing and business processes. It uses a set of quality management methods, mainly empirical, statistical methods, and creates a special infrastructure of people within the organization who are experts in these methods.

Each Six Sigma project carried out within an organization follows a defined sequence of steps and has specific value targets, for example:

1) Reduce process cycle time

2) Reduce pollution

3) Reduce costs

4) Increase customer satisfaction

5) Increase profits.

The term Six Sigma (capitalized because it was written that way when registered as a Motorola trademark on December 28, 1993) originated from terminology associated with statistical modeling of manufacturing processes. The maturity of a manufacturing process can be described by a sigma rating indicating its yield or the percentage of defect-free products it creates specifically, to within how many standard deviations of a normal distribution the fraction of defect-free outcomes corresponds. Motorola set a goal of “six sigma” for all of its manufacturing.

The DMAIC project methodology has five phases:

• Define the system, the voice of the customer and their requirements, and the project goals, specifically.
• Measure key aspects of the current process and collect relevant data; calculate the ‘as-is’ Process Capability.
• Analyze the data to investigate and verify cause-and-effect relationships. Determine what the relationships are, and attempt to ensure that all factors have been considered. Seek out root cause of the defect under investigation.
• Improve or optimize the current process based upon data analysis using techniques such as design of experiments, poka yoke or mistake proofing, and standard work to create a new, future state process. Set up pilot runs to establish process capability.
• Control the future state process to ensure that any deviations from the target are corrected before they result in defects. Implement control systems such as statistical process control, production boards, visual workplaces, and continuously monitor the process. This process is repeated until the desired quality level is obtained.

DMADV

The DMADV project methodology, known as DFSS (“Design For Six Sigma”), features five phases:

• Define design goals that are consistent with customer demands and the enterprise strategy.
• Measure and identify CTQs, measure product capabilities, production process capability, and measure risks.
• Analyze to develop and design alternatives
• Design an improved alternative, best suited per analysis in the previous step
• Verify the design, set up pilot runs, implement the production process and hand it over to the process owners.

Six Sigma identifies several key roles for its successful implementation.

• Executive Leadership includes the CEO and other members of top management. They are responsible for setting up a vision for Six Sigma implementation. They also empower the other role holders with the freedom and resources to explore new ideas for breakthrough improvements by transcending departmental barriers and overcoming inherent resistance to change.
• Champions take responsibility for Six Sigma implementation across the organization in an integrated manner. The Executive Leadership draws them from upper management. Champions also act as mentors to Black Belts.
• Master Black Belts, identified by Champions, act as in-house coaches on Six Sigma. They devote 100% of their time to Six Sigma. They assist Champions and guide Black Belts and Green Belts. Apart from statistical tasks, they spend their time on ensuring consistent application of Six Sigma across various functions and departments.
• Black Belts operate under Master Black Belts to apply Six Sigma methodology to specific projects. They also devote 100% of their time to Six Sigma. They primarily focus on Six Sigma project execution and special leadership with special tasks, whereas Champions and Master Black Belts focus on identifying projects/functions for Six Sigma.
• Green Belts are the employees who take up Six Sigma implementation along with their other job responsibilities, operating under the guidance of Black Belts.

Finance

Six Sigma has played an important role by improving accuracy of allocation of cash to reduce bank charges, automatic payments, improving accuracy of reporting, reducing documentary credits defects, reducing check collection defects, and reducing variation in collector performance. Two of the financial institutions that have reported considerable improvements in their operations are Bank of America and American Express. By 2004 Bank of America increased customer satisfaction by 10.4% and decreased customer issues by 24% by applying Six Sigma tools in their streamline operations. Similarly, American Express successfully eliminated non-received renewal credit cards and improved their overall processes by applying Six Sigma principles. This strategy is also currently being applied by other financial institutions like GE Capital Corp., JP Morgan Chase, and SunTrust Bank, with customer satisfaction being their main objective.