6 Sigma Approach is actually rotting in statistical analysis, as well transforms enterprise across various sections. It enables improvement of processes, achieve higher productivity, and quality.
Revolution is necessary, How?.
(1) How to increase the productivity of the newly purchased packaging line so that it at least comes close to the one stated in the specification?.
(2) How to increase the effectiveness of sales managers and simultaneously get rid of gnawing suspicions that they only spend corporate money, having fun with customers at restaurants or trembling with family on the company’s phone?.
(3) How to achieve a high level of quality of components for a car without having to manually bring half of what is produced to the required level?
These and similar questions are by no means exclusive to just Indian and similar emerging markets. By the way, it was one of the first of my illusions, crushing to dust by the realities of what is happening in the largest and most successful multinational corporations. I saw the whole inner kitchen, when he was transferred from Bangalore to the headquarters of one of these “transnationals” – for obvious reasons, I will keep silent about its name.
After months of “digging into” what was going on there, my first question was: “How do they make money?”
The answer, of course, is obvious: they made so many of them that all the internal costs of strange body movements and inefficiency were more than covered.
They made money, but those days are almost over or counting down the last days, at least for most non-exclusive products. Therefore, the trend of the present is efficiency in a broad sense. To the credit of the company, I worked for, they were among the first to understand this.
Understood and began a radical restructuring of the whole approach to measuring and improving efficiency in those blessed times, “when the profits were big”. Given the costs of an internal revolution, in the current situation this would be much more difficult, especially convincing. “stubborn” shareholders in its necessity.
Similar steps have since been taken (and are being taken) by many companies. Some have revolutionized “velvet”, reducing the initial costs and the inevitable shock of breaking the old system. But the essence of the changes did not change from this.
Companies leading in ratings and stock quotes introduced a qualitatively new, based on statistical analysis approach to assessing and improving the efficiency of the business as a whole, which was called (perhaps not quite successful) 6 Sigma.
What is Sigma and why there are six.
The very fact of using statistics in the decision-making process, analyzing market trends, testing the effectiveness of a new drug, etc. is as old as the world. What was new was the totality of the use of statistics in areas hitherto uncovered by it.
At the same time, it became possible to compare the effectiveness of, for example, the marketing department and the delivery department – and the business as a whole.
This is measured in the same “sigma”. Perhaps this is where it is necessary to explain what Sigma is and why there are six of them.
6 Sigma Approach is the standard deviation of a certain set of quantities.
For example, you produce wheels for cars. In order for this wheel to be worn on an axle – preferably without sledgehammers and magic passes – the diameter of the hub must be, say, 50 mm.
If you take and measure this diameter from 30 wheels, it will not always (but rather almost never) be exactly 50 mm.
Plot 1, a histogram, shows how often the measured wheel fell within a particular range of diameters. In particular, from it you can see that in 2 cases the diameter was about 51.0 mm – perhaps these wheels will be rejected.
For simplicity’s sake, let’s assume that the wheel can be worn – and will not dangle – if the diameter is 50 + 1 mm. Anything that lies beyond 49 and 51 mm is a defect.
Values and ratios
This histogram is quite accurately described by two values – the average size of the diameter and the standard deviation. The average value will not cause difficulties for any of the readers. A standard deviation is a statistical quantity that describes the distribution or spread of diameters.
Knowing our diameter deviation limits according to the specification – from 49 to 51 mm, the average diameter value for our 30 wheels – 50.3 mm and the average deviation – 0.5 mm, we have everything necessary to evaluate the Sigma value of our wheel manufacturing process. For clarity – all values and their ratios are present.
The process sigma
Process sigma (simplified) can be estimated as the distance from the mean to the nearest bom/standard deviation boundary. The value of the sigma process = |51 – 50.3|/0.5 = 1.4. Knowing this value, it is possible to predict the percentage of rejects – wheels with a hub diameter greater than 51 mm (and, using the same approach, with a diameter of less than 49 mm).
For the above number of sigma – 1.4 – the expected number of marriages lies within 8%. (By the way, “6 Sigma Approach” – by the name of the process – is understood by all companies as 3.4 cases of marriage per million, which in reality is 4.5, not 6 sigma).
I foresee the question:
All this is great, but we do not produce wheels and generally represent a transport company (software manufacturer, airline, etc.). But the fact is that the approach in all cases will be absolutely the same. Only for the transport company, the time of delivery of the goods to the client will be measured – the difference between the expected and the actual.
For Software Developer – the time of response of the program to the “click”. In other words, what is most Important to the consumer of this product and will be measured and improved. But it’s only half the battle.
Any of us who have been in the role of consumer of “branded” products from well-known companies knows that in general there are not so many complaints about the quality of products. This was facilitated by the introduction of standards such as ISO/ QS, when any defect can be traced down to the raw material.
It would seem, why run from the good and on your own money in addition to ISO to start another quality program?
The answer is simple:
ISO will help document the existing type of business, but not improve it. And this type is by no means optimal. According to existing statistics, in an average company, the amount of unproductive costs is up to 15% of turnover and often exceeds profit.
And we’re not talking about outsiders here, we’re talking about global industry leaders. Therefore, in order to increase the company’s revenues, it is possible either to increase the volume and profit margins, which is naturally limited by competition, or to reduce the cost part with the same success, which is easier and completely within the control of the company itself.
6 Sigma has been successfully coping with this task for more than 15 years.
Discussing for 6 Sigma Approach
Another feature that has brought popularity to the “6 Sigma Approach” method is the way of implementation. Consulting companies that trade it (and the most successful in this segment of the consulting market are companies specializing in Sigma 6, rather than the classic “monsters” of the Big Five (or how many are there still?), don’t optimize processes for their customers. They train future quality specialists from among the employees of client firms.
Everything is logical: who knows the company’s internal mechanisms better – a third-party consultant or “local”?
Of course, at the first stage to novice quality specialists (traditionally they are called Black Belts, BB, or “Black Belts” – a possible concession to the romanticism of the Americans at the origins of the movement) require the support of a coach consultant (Master Black Belt, MVV, or “Black Belt Teacher”).
But after a certain period of time – it usually takes about a year – the company becomes completely independent of consultants.
Initial investments in explosive training can range from $500 million. (e.g., costs for General Electric’s 6 Sigma were $1997 million in 400 and $1998 million in 500.
In 1999 – 600 million (Millions of United States dollars) – up to several tens of thousands of dollars – the cost of one group of explosives.
Of course, the degree of overall impact on the company will be incommensurable, but it is possible to improve the most neglected processes to begin with a small initial investment.
As practice shows, on average, in the second year, initial investments, including large-scale ones, fully pay off, and each BB begins to bring a cost reduction of about $ 100, <>. per year.
Where do the cost reductions come from?
Each BB completes a certain number of projects per year. Projects can be in almost any field – production, supply, finance, marketing. The main requirements for projects are statistical probability of improvements and financial confirmation of cost reductions. At the same time, explosives are often used as an internal ambulance.
If the manager feels that there are problems with efficiency in the area under his jurisdiction, he can “write” yourself a BB, explain the problem to him, set a task and do other urgent things. CENTURIES create a team from among those involved in the process, determine, and measure the degree problems, organize data collection, and analyze the results.
Then on the basis of this statistical analysis, he will make recommendations for improvement and conduct a “pilot” test of these recommendations. In case of a positive effect, the recommendations will be fix in the new process and the site manager will have no choice but to enjoy this process. Which is controlled from “sliding” to the previous state through statistical control.
All of this, of course, is a naked scheme. Reality is much more interesting and, of course, more complicated. Very often, the work of explosives is compared with the investigation of a crime, and in general it resembles the “deductive” method of S. Holmes – except, perhaps, the use of special software such as Minitab, which the well-known detective did not possess.
This auxiliary element allows almost any experienced explosive to achieve positive results where only the genius of Holmes would have previously helped.
Projects : 6 Sigma Approach
Let’s talk only about some projects completed under the direct supervision of the author of the article, and without describing how solutions were found.
Example 1.
The company that produces industrial packaging – multilayer paper bags, faced the problem of unreasonably high costs for ink used for color printing. Applying analytical methods “6 Sigma”, the company has achieved a reduction in the level of waste from 12 to 7%, which gives 500 thousand euros per year at one enterprise.
In total, the company includes more than 60 enterprises, and the solutions find can be transferring to them without the cost of repeat research.
Example 2.
One of the largest oil companies decided to optimize the delivery of cylinders with liquefied gas to small and medium-sized wholesale customers.
Using methods “6 Sigma”, they calculated the optimal duration of a day trip and number of stops to unload one machine.
Transfer of all transportation to the optimal level allowed to reduce costs by 200 thousand euros per year by one Enterprise.
Implementation of this solution at other enterprises of the company – that are now being implement – will save millions.
Example 3.
As a result, of an aggressive pricing policy on the part of competitors and inefficiency of the process control over its own retail prices, a company that is part of one of the largest “transnationals” began to lose profits.
Using 6 Sigma approaches specifically designed for commercial processes. They achieve an increase in profit margins as a result of streamlining the calculation and control processes of retail prices.
As a result, an additional profit of 2-3% of sales volume without loss of market segments.
Example 4.
As a result of the expansion of the customer base and, as a consequence, the product range, the company producing structural plastics faced the problem that the available capacities could not cope with customer requests.
Using “6 Sigma”, the company has achieved optimization of the sequence of extrusion of various varieties and colors of plastics according to the received orders.
This resulted in a reduction in costs of €50,70 to €<>, <> for a single extrusion line plus a shorter time between a customer request and the delivery of goods, which improve customer relations.
We can talk for a long time about individual solutions and projects.
But I would like, base on my own experience, to note everything can be improve well. There would be a desire and a little data for analysis.