Six Sigma As a Strategy In Business
Six Sigma As a Strategy In Business
Six Sigma As a Strategy In Business
Six Sigma is a strategy in business management introduced by Motorola in 1987. It was developed after Motorola had received a number of complains from its customers concerning defective products and tough competition. This system was developed so as to help improve the performance in an organization and cut down the defects that exist in the organization. The term Sigma is used as a way of measuring how a process is far or near to perfection. The grand objective of Six Sigma is to know the defects after which an individual can find ways of eliminating them. It is a strategy that can effectively help an organization get real improvement in its performance and better customer service thus leading to great profits. Many companies these days have taken it into account and are using it to bring change and better performance in their organizations. (Marco, 2006).
Goals of Six Sigma
Improving Customer Loyalty
Six Sigma has various goals in organizations. The greatest goal is to make an organization make more money. Six Sigma focuses on bettering, customer service, and cutting down the number of errors in any organization that embraces it. In order to improve customer loyalty, the six sigma strategy has measures to deal with it. In any company, every customer is unique for instance; there are those who are price sensitive.. These kinds of customers attach more value to price and forget about other attributes like, the quantity, or the quality. This kind of customers demand that the manager or the executive look into ways of reaching the target market. There are others who are sensitive to cycle time and may not mind so much on the prices. Customer requirements that Six Sigma emphasizes to be looked into involves: features, designs, good customer care, reasonable prices among others. To obtain customer loyalty, there are changes that ought to occur in three special areas namely, customer, process and the employee. There is need to understand the customer, his needs, and preferences. The business normal processes have to be changed or modified to fit the needs of the target market then. The processes will change through the efforts of the employees. It therefore calls for training of employees to ensure quality service is provided (Tennant, 2001, p. 10) .The kind of treatment that customers get also determines the profitability of an organization. Some organizations in Japan go as far as employing personnel to greet customers and usher them in. This courtesy motivates customers to keep coming back (Tennant, 2001).
Cutting down of costs
Another goal is the elimination or reduction of costs by doing away with activities that are non valuable. Motorola itself as a company gained a lot from its use of Six Sigma (Pande et al. 2001). Its products' quality and the company's processes improved a great deal. This eventually led to the company saving more than $15 billion after 10 years of using Six Sigma. They discovered that high quality leads to low cost and more income (Pande et al, 2001).Currently, organizations which have embraced Six Sigma approach have come up with a methodology called a Money Belt. This enables them to evaluate the financial implications of their organizations. This also helps them project if the goals laid down by Six Sigma are being achieved. It helps organizations come up with costs that are of no value then the organization lay down strategies do away with them. Money Belts assist organizations in maintaining good relations with their stakeholders and the target market. It summarizes the financial status and publicizes it. It also has goals of improving the satisfaction of customers, reducing cycle times and cutting down on defects. Six Sigma's goal of cutting down cost involves identification of costs which are of no or minimal value to the customers. For the companies that have not adopted Six Sigma they have lots of costs that could be dealt with easily. In fact, for the companies which operate on three or four sigma, they spend around 25 to 40 percent of their income to cater for such non valuable costs. On the other hand, organizations that use Six Sigma use only 5 percent of their revenues to cater for the non-valuable costs (Gacks, 2009).
The goals can be summed up into two, customer quality and engineered quality (Phadnis, 2009).Customer quality refers to the aspects that a customer expects to find in a product while on the other hand, engineered quality refers to the attributes that customers do not want in a product.
Reducing Errors
To deal with defects is another goal of Six Sigma. For example defects such as constant customer complains poor packaging, quality of services, defects as noise failures and other attributes of the products. To improve on products, many companies use DMAIC (Define, Measure, Analyze, Improve, and Control) methodology. Define entails defining the target market and their requirements. It also involves finding out the problems, and resources to deal with those problems. Measuring is all about finding out the defects through collection of data and using the collected data to come up with solutions. A good example of accompany that embraced the methodology of Six Sigma is AlliedSignal. The CEO used the tactics given by this strategy and as a result got tremendous results; he invited Jack Welch to try the same in 1995. This enabled Jack Welch to make the methodology a corporate requirement to every one in the General electric. (Marco, 2006). The supermarket chain of Tesco is another example of an organization that has used Six Sigma to cut down defects such as customer complains. Earlier on it used to focus so much at lowering of prices with an aim of making profits but unfortunately it was not performing. Currently, it changed its focus from lowering of prices to focus on customer management and has been very successful. The company was able to detect the attributes that customers were not satisfied with; the defects. It therefore came up with a strategy to deal with the same. The ability to earn customer loyalty is very important because in any case of problem with the product, they can always be free to come back and express their grievances (Tennant, 2001, p. 8). They will then be loyal to the company basing on the kind of treatment they receive from an organization. GE is another company that has succeeded as a result of having embraced, Six Sigma strategy. It is portrayed through the payment they gave to one of their customers. Wal-Mart. The disputes and defects were cut down by 98 percent which was a great improvement from what used to happen in the past. Total quality management under Six Sigma has a goal of cutting down the defects or to eliminate it by all means.
Reduce effects of variation
Another goal is to reduce the negative effects brought about by process variation. When abrupt changes occur it reduces the satisfaction of customers who might have been loyal before. Most customers tend to withdraw due to these abrupt changes. There are many statistical tools in Six Sigma used to deal with variation. The tools are integrated in DMAIC. Six Sigma then focuses on using the right people. It entails picking the right people, train them and allow them to fill positions where their skills are required. After they have been trained, they then move into their leadership positions and exercise the skills they have learnt. They also go a head to teach others within the organization and the cycle continues. The trained personnel are expected to help in explaining to customers the reason behind any changes that have occurred in an organization. It also focuses on reducing variations in the products that are produced as well as coming up with new methodologies and procedures in carrying out various processes (Gack, 2009).
It emphasizes on the improvement of quality of a product. According to Six Sigma, the difference that comes about as a result of the deviation between potential and actual quality is waste. It works at reducing waste by improving on the quality of the products.
The Medical system used six sigma to create a way out in handling medical scanning technology. Currently, patients can receive full body scan in a very short time. Unlike previously it used to take three or more minutes. It is also encouraging to learn that Motorola ever since it used Six Sigma has had an increment of 20 % in its profits. A part from that, it has also saved six billion and there is an increment in sales in the organization (Pande, 2006).
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