Six Sigma: The Path to Global Competitiveness - Example

Six Sigma: The Path to Global Competitiveness Texas A&M-Commerce In partial fulfillment of the requirements for MGT 590 Lloyd M. Basham May 18, 2012 Table of Contents Abstract……….………………………………………………………………………………...3 Introduction….…………………………………………………………………………………4 Definition……….…..…………………………………………………………………………..4 DMAIC Process….……………………………………………………………………………..5 Lean Method…………………………………………………………………………………….6 Six Sigma a Fad? ……………………………………………………………………………… 7 Course of Action…..……………………………………………………………………………8 Conclusion….…………………………………………………………………………………..11 References……………………………………………………………………………………...12 Abstract Six Sigma is a process that has much potential in making a company globally competitive. It aims to improve existing processes and maximize profitability. Statistically, it aims to achieve only 3.4 defects per million opportunities. When implemented by the company, training will be done to top management and employees. The course of action to be done is a slow but sure program of implementation of the six sigma process and the DMAIC phases because errors and wastes must be in minimum-doing it right the first time. Success may also be attributed to leadership and proper implementation based on the company’s aim and needs. Evaluation will then be carried out and proper compensation will be given to each one in the company. Keywords: Six Sigma, Lean Method, Global Competitiveness, DMAIC Introduction The CEO of the company wants to implement the Six Sigma program. Managers and executives, including me are required to undergo training for that program. After the training, for sure it will then be implemented. To have a grasp of Six Sigma, its definition, origin, phases, pros and cons related to it will be discussed in this report. Also, a plan of action for the organization after the implementation of the program is laid out in the latter part. Definition Six Sigma is a measure of process performance with the goal of nearly perfect quality. Meredith and Shafer (2010) cited Motorola (2004) which defined Six Sigma as the process that focuses an organization on customer requirements, process alignment, analytical rigor and timely execution. According to Ramberg (2000), Bill Smith, a reliability engineer at Motorola, is widely credited with originating Six Sigma. He noted that system failure rates were substantially higher than predicted by final product test. He then suggested a number of possible causes for this phenomenon, including a dramatic increase in system complexity and a flaw in traditional quality thinking. He concluded that a much higher level of internal quality was required and Six Sigma was set as a quality goal. In the narrow statistical sense, Six Sigma is a quality objective that gives specifications to the variability required of a process in terms of the product so that product quality and reliability meets and exceeds todays demanding customer requirements (Ramberg, 2000). From the latter definition, customer satisfaction and quality are the aim of this process which in turns translates into global competitiveness. Known companies who adapted the Six Sigma program include General Electric (GE), Nynex, Air Canada, American Express, Cummins, Merrill Lynch, Sun Microsystems and Tyco International (Meredith and Shafer, 2010). DMAIC Process The Six Sigma process generally follows a five phase program. The said five phase includes define, measure, analyze, improve and control (DMAIC) (Meredith and Shafer, 2010). The define phase includes the goals for process improvement, customer, project scope and the problem/opportunity. In this phase, benchmarking and quality function deployments are needed. In benchmarking, an organization’s process is compared to the process of some best companies or organizations. Products and services are also compared. Best practices are identified and emulated then trends are projected. Quality function deployment on the other hand deals with the organization activities to deliver new products and services. The measure phase deals with performance metrics. In here we have performance measures namely process sigma and defects per million opportunities (DPMO). Six Sigma deals with just 3.4 defects in one million opportunities. Meredith and Shafer (2010) cited that Motorola assumed that the mean of a process can shift or drift over time by as much as 1.5 times deviation. The next figure illustrates the difference between a Three Sigma and a Six Sigma process with 1.5 sigma shift under the assumption of normality. On the other hand, process sigma is said to be measure of performance. A high process sigma means a high performance. Figure 1. Three Sigma process versus Six Sigma process with 1.5 sigma shift (Ramberg, 2000) In the analyze phase, brainstorming, cause-and-effect diagrams and process capability analysis are usually done (Meredith and Shafer, 2010). Brainstorming is a known technique to squeeze out creative juices. Cause and effect diagrams are representations showing the cause and effect of certain problems and or solutions. Process capability analysis depends on variables such as process mean, variability in the process, stability of the process and the design of product requirements. In-depth analysis is most likely to be required in this phase involving top management plus the subordinates. In the improve phase, certain experiment are done as process improvement tools. Factors, data and experimental design must be taken into consideration. The last phase, which is the control phase, shifts to the development of new procedures to again monitor the process. It must be made sure that high level of performance is maintained and past problems do not resurface (Meredith and Shafer, 2010). Lean Method The lean method is a philosophy which aims to eliminate all types of waste whether it be excessive delays in treating patients, excessive lead times, carrying excessive levels of inventory, workers or parts traveling excessive distances, too much time spent in setting up, unneeded space, reworking defective products, idle facilities and scrap (Meredith and Shafer, 2010). It was conceptualized by the Toyota production system which follows the tenets of minimizing waste in all forms, continually improving process systems and maintaining respect to all workers. Unlike Six Sigma, this method focuses on the process improvement itself. Manpower, resources and time are fully utilized in this philosophy. This is worth emulating because waste minimization would lead to increased in savings. Meredith and Shafer (2010) enumerated several advantages of lean. These include cost savings, revenue increases, investment savings, workforce improvements and uncovering problems. They also gave examples of companies using the combined lean and Six Sigma method, the Lean Six Sigma or Six Sigma Plus. Companies such as Honeywell and Xerox already adapted the combined methods which translated into doubling the capacity while reducing the cost and in turn, increased in revenue. Six Sigma a Fad? After discussing the pros of the Six Sigma method, this part will discuss the cons of Six Sigma and some claims of it being a fad. According to Ramberg (2000), common critics of Six Sigma say that it has little to offer that can’t be found elsewhere which considers it as a marketing ploy. According to the same author, critics say that Six Sigma is more of an appraisal system or corrective action system; it is not a preventive, proactive approach. Six Sigma also requires additional investment cost like training, infrastructure creation and time. Also, although it may be preferable to design a whole system, all too often that cure ignores the original problems. Some have made the argument that the success of quality programs, whether they have a corrective or a preventive approach, depends more on the establishment of the right organizational culture than on the program. No quality program will result in improvement if it cant be internalized (Ramberg, 2000). With these technicalities in management style and process models, some consider Six Sigma as a no-no. Course of action In this proposed plan of action, activities after the implementation will be discussed. As stated by Meredith and Shafer (2010), organizations that have succeeded with their Six Sigma program also recognize the need to tailor the Six Sigma approach to their unique needs. Of course, our training on Six Sigma must emphasize the need of our organization for process improvement. Implementation will also focus on the process improvement of the company. According to Ramberg (2000), leadership is the key to success of any plan that attempts to change the way an organization does business. Top and middle management participation and support is needed. Of course that will be me and the board of directors. Having known the concept plus the many advantages of Six Sigma, I would adapt the CEO’s step towards it. I also know that there are some criticisms of Six Sigma, however, those are minimal compared to its promises. According to Michael Feuer as cited by Josh Cable (2011) in his article, communication is the key to motivating the employees for this change. We would talk to employees regarding the changes on the processes. I would also urge some managers to be also trained regarding Six Sigma for better implementation. This would be new and would entail additional skills and knowledge to employees but the advantages would be emphasized to them. In terms of global competitiveness, quality and customer satisfaction are the key words. According to Meredith and Shafer (2010), customer satisfaction in terms of customer and management service are critical these days to achieve global competitiveness. As of now, I can say that our organization can produce topnotch goods to achieve customer satisfaction but this is not enough. As an illustration, I would use a certain product that our organization produces and supplies customers. Let’s say each time, after shipping, inspectors find that the component, while functional, isnt quite ready for deployment. Its removed from their system, returned back to us, repaired, shipped back, installed and retested. Customer satisfaction may be achieved, however, there are wasted steps translating to wasted time and resources. Using Six Sigma, we can use the DMAIC phase. Problem will be defined, defects per million will be measured, cause and effects will be analyzed and then and improvement will be implemented. Then, control will be done to avoid problem resurfacing and to verify the success of the improvement. Of course, this improvement and DMAIC phase can’t be done in a few weeks time. The directors and management plus essential employees need to take part in every step. Of course, they need to be trained first especially when it comes to learning and practicing statistics. Discussions and system analysis will be held regularly to assess the completion of every step in the DMAIC phase. This may sound tedious but I believe that proper implementation would lead to success, reducing wasted steps, resources and time at the same time satisfying the customers. A slow but sure attitude must always be followed because errors and wastes must always in minimum. The above plan of action may be considered parallel to what Gupta (2001) has stated in his article. According to him, to successfully implement the Six Sigma initiative, one should first understand a company’s performance. Six Sigma initiatives focus on improving profitability, rather than simply improving quality. However, knowing the cost of poor quality is a starting point. Knowing how much money is wasted in a company can be surprising to many executives. Most companies do not even have measurements for tracking cost of poor quality (COPQ). The components of COPQ are internal failures (scrap, rework and lost capacity), external failures (field failures, warranty cost, complaints, returned material and lost business), appraisal (inspection, testing and audit) and prevention (quality planning, process control, improvement and training). After the plan of action of the mother company, employees and managers in the first place should receive champion training to ensure successful implementation. Those who can apply statistics , who are keen observers and experimenters, inquisitive, who have a curiosity to investigate and solve problems and who could be trainers and facilitators should be selected for additional training to achieve Black Belt or Green Belt levels of competency. Black Belts will eventually become team leaders and messengers to implement Six Sigma methodology. Green Belts work as team members, under the guidance of Black Belts, to learn advanced skills and to expand the care of in-house Six Sigma experts. (Gupta, 2001) To overcome such bottlenecks to higher profitability, a company must establish focus, a business initiative and implement measurements (Gupta, 2001). Focus on profitability while maintaining quality must always be inculcated to the employees. They must have the passion to achieve improve results and become committed to improved performance. After implementation, evaluation must always be done to assess the success of Six Sigma. When successfully implemented, rewards and compensations will be given to the employees. Profit sharing and promotions must be done. Additional benefits and training must be given to them and many must be given the chance to be trained in Six Sigma. Conclusion Six Sigma is a performance process in achieving quality. It focuses on focuses an organization on customer requirements, process alignment, analytical rigor and timely execution. To improve a process it may be used alone or with conjunction to the lean method. Proper leadership and execution is needed for the successful implementation of Six Sigma. Training to the management and selected employees must first be done. Inculcating profitability and quality to employees must be constantly done. Upon implementation, a slow but sure approach is needed in each step of the DMAIC phase. Success will be evaluated and lastly, rewards are given. References Cable, J. (2011).Why Your Employees Should Have Skin in the Game. Retrieved May 16,2012 from http://www.industryweek.com/readarticle.aspx?ArticleID=25123 Gupta, P. (2001). Six Sigma:Implementation. Retrived May 17, 2012 from Quality Technology Company http://www.accelper.com/PDFs/SS_Implementation.pdf Kotler, P. & Keller, K. (2009). Marketing Management (13th ed) (pp 385-413). Pearson/Prentice Hall. Meredith, J.R., & Shafer, S.M. (2010). Operations Management for MBA’s (4th ed) (pp 123-169). John Wiley and Sons. Meredith, J.R., & Shafer, S.M. (2010). Operations Management for MBA’s (4th ed) (pp 171-205). John Wiley and Sons. Noble, T. (2005). Is the Six Sigma Fad Dead? Retrieved May 17,2012 from the Avery Group Company http://chapters.sme.org/327/ReferenceDocs/Is%20the%20Six%20Sigma%20Fad%20Dead.pdf Ramberg, J.S. (2000). Six Sigma: Fad or Fundamental. Retrieved May 16, 2012 from http://www.qualitydigest.com/may00/html/sixsigmapro.html Appendix Appendix A Diagram of the DMAIC process of Six Sigma Source: Meredith and Shafer (2010) Read More