Six Sigma Improvement - Case Study Example

I. Introduction Contemporary organizations are continually on the pursuit of gaining a competitive leverage, applying the several mechanisms that have been even long before publicized as a technique to surpass competition successfully. However, even though the heart on ground-breaking techniques of creating products and providing services, there lingers a singular variable, which is, organizations that manufacture highly quality goods and services that their competitors thrash the competition repeatedly. Six Sigma Improvement is a proven mechanism that has been valuable in facilitating businesses to prevail upon their competition (Larson 2003). Organizations are established to be profitable. Successful and profitable organizations provide employments and pay taxes that consequently do good to the community, state and nation where they manufacture their products or provide their services. Generating a profit is dependent on the number of customers who want an organization’s products and/or services. Customers’ wanting of an organization’s products and/or services is merely the initial step. Every customer has their own qualifications concerning the product or service. Effectiveness through addressing and advisably surpassing requirements is merely half the challenge since to be a profitable business enterprise an organization must too be efficient. Efficiency implies the quantity of resources consumed in order to become or maintain effectiveness. Aspects such as time, cost, labour, or value are good measuring tools of efficiency. Since business enterprises are established to generate profit, concentrating on the customer without also concentrating on efficiency will not be an excellent business decision. Six Sigma, as its elementary stage, is endeavouring to develop enhance both effectiveness and efficiency simultaneously (Larson 2003). A practical gauge of the quantity of unsatisfied customer experiences for every million opportunities is the framework underlying Six Sigma. Six Sigma is a determinant of customer satisfaction that is almost to excellence. Majority of organizations are situated at the two to three sigma stages of performance which implies “between 308,538 and 66,807 customer dissatisfaction occurrences per million customer contacts” (Eckes 2003, 4). Organizations that possess a two to three sigma stage of performance undergo business dilemmas. They are unable to generate as much profit as they are obliged to do for their shareholders. Shareholders usually get frustrated and out of focus and initiate to take their investment elsewhere. Management exists to boost profitability. They are anxious of their jobs and yearn to enhance the bottom line. Frequently, they deliberate excessively in the short term and instigate to lay off workers. Temporarily, the bottom line appears enhanced. Obviously, the focus here is on the short run (ibid). With insignificant number of people in the organization, there is a lot of task and work for those who stay and remain. The thing that management sets aside by ‘downsizing’ is that if they manage a business enterprise that is in no way effective or efficient, things will merely become worse with minimal number of people expected to work double time. Decisively, businesses that function through putting emphasis on brief periods of profitability will lead in long-term inefficiency or unproductiveness (Bhote 2002). Six Sigma was initiated in the middle of the 1980s. It was an innovative move that had a remarkable purpose for management in its operation. Initiated at Motorola but made known in the 1990s by AlliedSignal and General Electric, Six Sigma was dissimilar from previous frameworks to quality enhancement (Lowe 2001). “With other quality approaches, management played little if any role other than approval of bringing in external consultants to train the workforce. With Six Sigma, the work begins with management. First, executives create the Process Management system. Before work is done that affects the average worker, management has already spent several months working on identifying and measuring the processes of their organization” (Eckes 2003, 5). A process is identified as the sequence of procedures and programs that take inputs given by suppliers, increase value and give outputs for their customers. Six Sigma as defined as a philosophy of management facilitates management to initially recognize the 20 or 30 most valuable steps in their business. Afterwards, management appraises the present sigma operation of each of these procedures. The moment management has pinpointed their processes and personally been contributing in evaluation of their present operation, they then recognize the most inferior operating processes that have the greatest influence on the organization’s mission and vision (ibid). II. The Strategic Aspect of Six Sigma A strategy is most of the time defined as a plan or mechanism for acquiring a number of objective or result. Dissimilar from other quality frameworks, Six Sigma has a strategic aspect intended at not merely enhancing management’s dedication to Six Sigma, but their dynamic participation and contribution. One of the setbacks with earlier quality frameworks is that the labour force eventually was able to perceive the quality programs as nothing more than a means for them to labour double time (Eckes 2001). They observed how they must alter the manner they functioned and worked and how they must be involved in teams, gaining knowledge of new ideas and frameworks, yet they weren’t able to observe management improving. As a matter of fact, with a number of quality attempts the labour force eventually observed that management would employ the amplified labour to downsize the organization. When the analysts would evaluate the outcomes of an ineffective quality attempt, top on the roll of reasons underlying the shortcoming was the unsatisfactory management support. Six Sigma is unique since the work primarily starts with management. Management of any organization is accountable for the techniques of the process work are accomplished (ibid). As a management mechanism, Six Sigma is the program or procedure for acquiring the objectives or outcomes of the business. In order for Six Sigma to be effective in an organization, the initial wave of projects should be successful. Effective projects assist the people in the organization observe that Six Sigma works for their own benefit. Primarily, there will always be individuals who will doubt the effectiveness of Six Sigma. These people will not be persuaded of the relevance and value of Six Sigma through citing success stories somewhere else (Smith & Blakeslee 2002). They will be persuaded that Six Sigma functions only if they observe it with their own eyes. Hence, those people selected to participate in the initial wave of projects of Six Sigma have an added expectation, facilitating to persuade those in the organization that Six Sigma will be successful (ibid). Six Sigma techniques at the project stage necessitate people to contribute and actively participate on a team for a span of four to six months. It demands people to devote 20 percent of their time to labour on the projects. People in the organization will still be anticipated to accomplish their commonplace tasks. Those people should not protest regarding the obvious added work to be accomplished being part of a team of Six Sigma (Larson 2003). Those people have been selected to enhance a process that is disorganized, which is, where these people undergo the dilemmas of being ineffective and inefficient. Management is committing substantial valuable resources to the improvement of the employees’ work areas (ibid). These employees then should see this as a prospect to build things better in their workplace, not as something additional burden to accomplish. Training members of an organization have a significant opportunity to be involved in guiding and instructing their organizational leaders on the process of instigating Six Sigma effectively and in assisting to revolutionize the culture and functioning structures of their organizations. The training necessitated providing leaders Six Sigma capabilities in comprehensive, yet the returns are tremendous (Eckes 2001). Companies that have initiated strategic Six Sigma such as Caterpillar, Bombardier, and Dow, have completely and immediately, enhanced business performance across an expansive range of performance markers, from internal business markers such as return-on-assets to external performance gauge such as customer satisfaction and on-time delivery or order fulfilment (ibid). The paramount means to help an organization and senior leadership imply an implementation of Six Sigma on a massive scale through primarily making sure that people in the organization understand the seven most important steps to setting up Six Sigma in any organization. The following steps are (Smith & Blakeslee 2004, 46): “1. Develop a committed team of leaders to support Six Sigma initiatives. 2. Integrate Strategic Six Sigma thinking and best practices into strategy planning and deployment. 3. Emphasize establishing close connections with customers and the larger marketplace in which the company operates. 4. Ensure that leaders view the company nor as a set of isolated functions or independent silos, but as a family of closely related business processes that support the business’s value chain. 5. Develop quantifiable measures and demand tangible results from people in their work. 6. Develop incentives, create accountability, and reward performance based on customer requirements and the ability to bring a strong, data-driven approach to business goals and work objectives. 7. Commit full-time to all of the above” (Smith & Blakeslee 2002, 46). Six Sigma is tested and proven by many organizations. It is great in performance and it possesses an effective data-driven framework to evaluate and eliminate the root causes of business setbacks. The outputs of the business are bonded directly by Six Sigma to the requirements set about by the marketplace. In terms of strategic or transformational approaches, the objective of Six Sigma is to bring into line an organization to its marketplace and generate actual improvements and profits to the bottom line (ibid). Strategic Six Sigma gives out an approach that can be employed to drive major integration of an organization’s mechanisms, procedures, culture and customers to attain and maintain breakaway business outcomes (Lowe 2001). In terms of operational approach, Six Sigma’s objectives is to transfer business good or service features within the boundary of customer requirements and remarkably minimize process differences which are the root of flaws that depressingly affect customers. It provides particular mechanisms and frameworks such as process analysis and lean tactics that can be made use of to decrease flaws and significantly enhance processes to boost customer satisfaction and reduce costs (Smith & Blakeslee 2002). III. Lean Six Sigma and General Electric Company: A Case Analysis In the summer of 1995, the CEO of General Electric’s (GE) Jack Welch approached Lawrence Bossidy to inquire about his remarkable success. Welch’s administration at GE has been characterized by chains of ingenious and resourceful approaches toward development since assuming in 1980 the reins of the corporation. Conversing with Bossidy that summer, he turned out to be a quick convert to perceiving how transforming a Six Sigma company could leave an enduring legacy when in April 2001 he finally retires (Eckes 2001). General Electric’s commitment to Six Sigma has previously led to dramatic improvements. Jack Welch acknowledges the Six Sigma initiative with increasing the company’s operating profit. GE became rich with success stories. Recently, GE Medical Systems launched a $1.25 million diagnostic scanner which is a product designed overall using the principles of Six Sigma; ff before the chest scan consumes 3 minutes now it only consumes 17 seconds (ibid, 8). On the other hand, at GE Plastics, a Six Sigma team developed a process to boost production of plastic by billion pounds. This move did not merely add to large-scale increase in revenue, but the boost in production affected acquisition of the agreement for the inclusions of the recent Apple product, iMac (ibid). GE has accounted a multitude of benefits and advantages to Six Sigma. Inventory turnover remarkably improved from 5.8 to 9.2 and still getting better. At the heart of Six Sigma is progress in effectiveness and efficiency. One gauge of efficiency is the ratio of plant and equipment costs to depreciation. This ratio decreased by 1.2 at GE and is expected to be below 1 as long as Six Sigma projects find out and eliminate the concealed factory of processes that needs to revise components and services (Lowe 2001, 119). Six Sigma is helping GE enhance their position as the most booming corporation in the history of the business world. The step-by-step mechanism GE and other organizations employed to enhance processes is summed up by the acronym DMAIC which means (Eckes 2001, 10): “Define. Defining the team to work on improvement, defining the customers of the process, their needs and requirements, and creating a map of the process to be improved. Measure. Identifying key measures of effectiveness and efficiency and translating them into the concept of Sigma. Analyze. Through analysis, the team can determine the causes of the problem that needs improvement. Improve. The sum of activities that relate to generating, selecting and implementing solutions. Control. Ensuring that improvement sustains over time” (Eckes 2001, 10). In spite of its record and its entrenchment in the industrial history of the American nation, GE was burdened by a character for bland and uninspiring quality, particularly in its small and most important appliances. However, when Jack Welch tossed his contagious interest in the underlying Six Sigma quality regulation process, it was not situated in the sake of quality. That was certainly an advantage, yet he was inspired by efficiency and the prospect of significant expenditure savings (Lowe 2001). In the middle of the 1990s, Jack Welch gained knowledge from his friend Larry Bossidy, who was at the time at the controls of Allied Signal Corp, regarding Six Sigma. When he analyzed it, Welch identified an idea that moved the engineer in him. Six Sigma is a statistical concept and nowadays a slogan for products that possess a near perfection rate (ibid). Six Sigma at GE: The Process Welch borrowed the idea at GE with such enthusiasm that he virtually set GE, and the multitudes of suppliers for whom the process turned out to be compulsory, on fire. At GE, an imperfection or defect could be anything such as the inaccurate billing of an NBC marketer to defective wiring in a steam engine. GE analysts discovered in 1995 that the corporation was incurring 35,000 defects per million operations on the average or approximately 3.5 sigma. GE’s initial performance was higher than average, yet not that sufficiently better to satisfy Welch. His objective was 2.4 defects per million, or Six Sigma (Lowe 2001, 120). Six Sigma has been flourishing at GE since it has flat-out, unrepressed maintenance from the top level of management, and the strategies were analyzed across the organization. Definitely a small number of people debated the idea that going for perfection in the novel generation of a product makes brilliant logic; doing it appropriately at first significantly reduce costs than repairing it eventually and paying for the damage and other incurred costs of defects (Eckes 2001). When Six Sigma was put into practice at GE Medical, the department found out it could save costs through generating X-ray tube bolts out of aluminium and steel, rather than the very expensive titanium and tungsten that are second-hand. The Medical Systems department alone reached a savings of $40 million by 1997. All over the company, savings were anticipated to be roughly $6.6 billion, or 5.5 percent of sales (Lowe 2001, 120). One of the benefits of the GE acquisition of Honeywell is that the process of Six Sigma is previously embedded there, even though GE sets up its own resources on the management mechanism, which Honeywell employees will require to be aware of and take on board (ibid). Welch mentioned, “The methodologies of Six Sigma were learned from other companies, but the cultural obsessiveness and all-encompassing for it is pure GE” (Lowe 2001, 122). IV. Conclusion Even though GE’s commitment to innovation may be occasionally put into question, majority of GE’s internal progress has developed from old-line businesses such as its medical systems, financial services and airliner engines. With regard to that progress, financial service has functioned both as a means and an end. Not merely has it surpassed other products and services, it developed to become one of the most important proprietors and renters of goods equipment as capital. Medical services have gained benefit from advanced technological innovations and the prospect to create planned acquisitions (Eckes 2001). Airline engines, primarily, has lingered on a traditional, internalized business sphere which provided 9 percent of GE’s revenues yet 13 percent of its profits. Airline engines are greatly competitive and capital-intensive wherein Welch motivated innovative frameworks to the culture of business (ibid, 12). As a matter of fact, as Welch confronts retirement, he abandoned GE a major competitor in the aircraft industry. Even prior to acquiring Honeywell, Welch had held a build-up of engine business that, if it competes as anticipated, should endure for decades (Eckes 2001). Nevertheless, GE successfully tapped the magic hidden behind the power of the Six Sigma. It has been a risk for the CEO of GE to adopt such a comprehensive management approach yet the returns made all the difference. GE has been one of the most successful corporations throughout the globe and one of the most alive proofs of the power of Six Sigma. References Bhote, K. R., (2002), The Ultimate Six Sigma: Beyond Quality Excellence to Total Business Excellence, New York: AMACOM. Eckes, G., (2001), The Six Sigma Revolution: How General Electric and Others Turned Process into Profits, New York: Wiley. Larson, A., (2003), Demystifying Six Sigma: A Company-Wide Approach to Continuous Improvemen, New York: AMACOM. Lowe, J., (2001), Welch: An American Icon, New York: Wiley. Offstein, E. H. et al., (2007), Mentoring Programs and Jobs: A Contingency Approach, Review of Business , 32+. Smith, D. (2002), The New Strategic Six Sigma: The Old Standby Quality Approach, Six Sigma, Can Change Your Organizations Culture to Drive Strategy Deployment and Business Transformation, T&D , 45+. Read More