Locally, we’re hearing more and more about 6 Sigma. So what is it and how do we make it more effective in our organization? First things first. It’s a quality management concept based on the statistical measurement term, 6 Sigma. 6 Sigma is the sixth standard deviation on a normal distribution curve and signifies the ability to catch defects 99.9999998 percent of the time. The theory is that the closer you design and measure the quality of your product or process to 6 Sigma standards, the easier it becomes to dramatically reduce errors. 6 Sigma is 3.2 defects per 1 million.
Currently, typical or industry standard is roughly 2 to 3 Sigma. While this might seem like successful performance, in reality it would be as if 308,000 pieces of mail were lost daily or more than 30,000 newborn babies were dropped at delivery every year. This is completely unacceptable in today’s global economy.
Originally utilized in manufacturing at GE and Motorola, the firms found that by significantly improving the quality of the products, the firm could enjoy dramatic savings by reducing the warranty costs, lost customers, customer service centers, and paperwork involved in the return process. The program has become so successful that millions of dollars of waste have been eliminated. Now, other industries-such as retail, insurance, distribution, and health care-are looking deeper into the 6 Sigma processes and techniques.
To get started, identify and train your best and brightest business people from any discipline. Bring in training firms that specialize in 6 Sigma and develop your own Black Belts (6 Sigma designation is like karate). Identify some major areas of your business that could use a very extensive due diligence. Also, you’ll need to involve some technology-savvy business users. The most important but overlooked part of the technique is in identifying the key metrics or data points to gain a perspective of the problem and the cost/benefit to the organization to make improvements. Document the metrics and processes and compare to industry metrics. Much of the metrics will be derived by pulling data from many of your company’s databases and applications.
Currently, we’re working with a $300 million distributor on one 6 Sigma project and have found a well-run 6 Sigma organization that will receive a five-fold return on investment this year and roughly eight- to 10-fold next year on a procurement process that can be brought up above industry standard. Part of the implementation is new processes, reduced human interaction, collaboration with their largest suppliers, and some new technology. This is a really powerful tool, but you have to spend money to save money. If done well and with aggressive implementation of the new processes, 6 Sigma is an investment that should pay for itself within 12 months. IBI