General Electrics Quality Gamble

.. . Six Sigma offers two approaches to changing a process. One approach is to change the design of the product in which this component is used so that it can accommodate some of the variations in the length without malfunctioning. Thus, for instance, the so-called design-length could be three sigma, accommodating components with 3 times the standard deviation of the process.

In other words, components that measure between 99.07 mm and 100.03 mm will also be acceptable. Units that exceed three sigma are still eliminated, but the number of defects in every sample is decreased. The second approach is to make improvements in the process itself so the chances of defects are lowered. That will reduce the value of the standard deviation, or sigma, of the process. If, say, the value of the sigma can be halved through this method to 0.005, the acceptable specification limits 99 07 mm and 100.03 mm, will automatically become 6 times and not 3 times the standard deviation. To take a process to a Six Sigma level, you must, ideally, adopt both approaches: changing the design to increase the range of acceptability in the CTQ, and improving the process to reduce its chances of variance.

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You can also expect your Six Sigma analysis to show up faults you were not even aware of Recalls Anand Outta, 40, President, GE Motors We thought there was a bias against us when our parent began insisting on a Pareto rating of our products before shipment. But, when we quantified our defects using Six Sigma tools, we realized that we were generating 20,000 faults per million spares, and the faults weren’t even major; most of them were just the results of carelessness. Adds V. Rama Kumar, 45, Corporate Vice-President, Wipro: In addition to the quantitative gains, Six Sigma has helped us streamline our processes. That will help us in future too.

Some may argue is 3.40 defects per million too high of a standard. Why isn’t 6,210 (Three Sigma) defects per million parts, which is the upper end of the corporate average in the US not good enough? The average product rolling off your assembly lines today could consist of as many as 10,000 different parts, which all have risk of being defective. Therefore, 3.4 defects per million parts actually amount to 34 defective products out of every 1,000. In other words, an average of 34 out of 1,000 customers will still be unhappy about their product. In terms of quality of everyday life, Four Sigma would mean 1,24,200 wrong prescriptions a year, 4 60 hours of toxic water supply a month, 62 10 minutes of telephone services shutdown a week, which most people would find unacceptable.

Therefore Six Sigma is not the ceiling; it is a direction in which quality should be delivered. Six Sigma Improves Your Score If you played 100 rounds of golf per year, and played at: Two sigma You would miss 6 putts per round Three sigma You would miss 1 putt per round Four sigma You would miss 1 putt every 9 rounds Five sigma You would miss 1 putt every 2.33 rounds Six sigma You would miss 1 putt every 163 years What Makes Six Sigma Different Six Sigma share some characteristics with the classic quality initiative Total Quality Management (TQM). Its philosophy is the same as that of TQM reducing defects, and the tools that are used to reach this philosophy are even similar. Six Sigma can be plugged into such initiatives as TQM and add power to its punch. Six sigma’s metrics of performance are more sharply-defined than most quality initiatives, which have a multiplicity of objectives, ranging from broad operational goals, like reducing cycle-times, to micro-level ones, like reducing waste.

The difference between Six Sigma and other quality approaches are that the others measure your abilities to meet some quality. Six sigma actually measures the output of your processes, therefore it’s less theoretical and more real world, points out Scott Bayman, CEO GE India. One way six sigma is different from other quality drives because it relies on the customer to define what a defect is, then uses rigorous data gathering and statistical analysis to drive out defects. Six Sigma is so attractive because it quantitative instead of anecdotal, therefore you know whether you are making progress. Six Sigma Implementation Issues.

Some organizations get too involved in how to count defects and report defect rates that they lose sight of the real value of Six Sigma. The real value creates process improvement and re-engineering (and bottom-line benefits) through the implementation of statistical techniques. If an organization does not apply Six Sigma techniques wisely, it will fail. When this occurs there is the tendency to believe that the statistical techniques are ineffective, when in fact the real problem is how the program was implemented and/or how the techniques were not effectively applied. A good Six Sigma business strategy involves the measurement of how well business processes meet their objectives and offers strategies to make needed improvements.

The application of techniques to all functions result in a very high level of quality at reduced costs with a reduction in cycle time, resulting in improved profitability and a competitive advantage. It needs to be emphasized that organizations do not need to use all the measurement units that might be associated with Six Sigma. It is most important to choose the best set of measurements for their situation and focus their emphasis on the wise integration of statistical and other improvement tools. Some companies how tried Six Sigma and have not shares the success as GE and Motorola. GE’s success is due largely to the fact that it under went a culture change before implementing Six Sigma.

An effort to focus the company, get good employees, a company wide change in thinking (boundaryless), and a change in the management processes, all took place before Six Sigma was inserted into the GE culture. The Benefits of Six Sigma. Corporations implementing Six Sigma experience a breakthrough in profitability. Breakthrough is achieved by reducing direct cost. Direct costs are driven down through Six Sigma projects, which are performed by Black Belts.

(quality leaders) Having Black Belts in an organization will produce on an average $230,000 in cost reduction per project. In addition to the material and labor savings which flow directly to the bottom line, a company engaged in Six Sigma can expect to see: reduced cycle times, increased productivity, improved capacity and output, decreased work-in-progress, and improved process flow. Companies operating at 3 to 4 sigma generally loses up to 10-15% of their total revenue due to defects, on the contrast a company that operates at 6 sigma generally loses less than 10%. Six Sigma stars Motorola has reported savings of $2 billion over 10 years of implementation while GE shaved off 750 million of cost in 1998. In 1999, GE has projected a 1.5 billion in savings due to Six Sigma, and if they reach their goal of six sigma in the year 2000 they will add between 8 to 12 added to the bottom line.

In conclusion, GE has decided to ride Six Sigma into the next century. The year 2000 is the deadline for reaching Six Sigma, which is also around the time its CEO Jack Welch plans to retire. If GE’s quality gamble pays off, Jack Welch will go out a winner, leaving behind his most admired company on top. Business.