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Why Six Sigma? PDF Print E-mail

For Motorola, the originator of Six Sigma, the answer to the question "Why Six Sigma?" was simple: survival. Motorola came to Six Sigma because it was being consistently beaten in the competitive marketplace by foreign firms that were able to produce higher quality products at a lower cost. When a Japanese firm took over a Motorola factory that manufactured Quasar television sets in the United States in the 1970s, they promptly set about making drastic changes in the way the factory operated.  Under Japanese management, the factory was soon producing TV sets with 1/20th the number of defects they had produced under Motorola management. They did this using the same workforce, technology, and designs, making it clear that the problem was Motorola's management. Eventually, even Motorola’s own executives had to admit our quality stinks.

Finally, in the mid 1980s, Motorola decided to take quality seriously.  Motorola’s CEO at the time, Bob Galvin, started the company on the quality path known as Six Sigma and became a business icon largely as a result of what he accomplished in quality at Motorola. Today, Motorola is known worldwide as a quality leader and a profit leader. After Motorola won the Malcolm Baldrige National Quality Award in 1988 the secret of their success became public knowledge and the Six Sigma revolution was on. Today it's hotter than ever.

It would be a mistake to think that Six Sigma is about quality in the traditional sense. Quality, defined traditionally as conformance to internal requirements, has little to do with Six Sigma. Six Sigma is about helping the organization make more money. To link this objective of Six Sigma with quality requires a new definition of quality. For Six Sigma purposes I define quality as the value added by a productive endeavor. Quality comes in two flavors:  potential quality and actual quality. Potential quality is the known maximum possible value added per unit of input. Actual quality is the current value added per unit of input. The difference between potential and actual quality is waste. Six Sigma focuses on improving quality (i.e., reduce waste) by helping organizations produce products and services better, faster and cheaper. In more traditional terms, Six Sigma focuses on defect prevention, cycle time reduction, and cost savings. Unlike mindless cost-cutting programs which reduce value and quality, Six Sigma identifies and eliminates costs which provide no value to customers, waste costs.

For non-Six Sigma companies, these costs are often extremely high. Companies operating at three or four sigma typically spend between 25 and 40 percent of their revenues fixing problems. This is known as the cost of quality, or more accurately the cost of poor quality. Companies operating at Six Sigma typically spend less than 5 percent of their revenues fixing problems (Figure 1). The dollar cost of this gap can be huge. General Electric estimates that the gap between three or four sigma and Six Sigma was costing them between $8 billion and $12 billion per year.

Figure 1: Cost of Poor Quality versus Sigma Level





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