EVEN now, almost 15 years after it was invented, Six Sigma is not completely understood. It's not a fraternity or some catchy marketing slogan. It is a highly disciplined process that helps companies to focus on developing and delivering near-perfect products and services.
Sigma is a statistical term that measures how far a given process deviates from perfection. The idea behind Six Sigma is that if a company can measure how many “defects” it has in a process, it can systematically figure out how to eliminate them and get as close to “zero defects” as possible.
To achieve Six Sigma quality, a process must produce no more than 3.4 defects per million opportunities. An “opportunity” is defined as a chance for nonconformance, or not meeting the required specifications.
To illustrate the importance of Six Sigma, the NTEA scheduled an appearance by Jim Palin of GE Capital's Fleet Services. Palin set the groundwork for the Six Sigma model by emphasizing the importance of quality.
“Our customers' quality expectations as far as upfitting vehicles has gone up,” Palin said. “And as our customers implement their own quality programs, they expect the suppliers to do the same. They expect Cadillac quality at Chevrolet prices. Would a lack of quality cost us in reduced profit margins? Absolutely. It also results in lost opportunities in existing customers. Or, worst of all, lost customers. A lack of quality is easy for a prospective customer to spot.
“There's a disturbing trend we all experience: As a new crop of young decision-makers enters the scene, they come less often from fleet and more often from other parts of the company: supply, finance, facilities, etc. These people have absolutely no brand loyalty and no history to fall back on. They may never have heard of Reading or Adrian. They may never understand the importance of GVWR or CA dimensions on weight distribution. But they probably have some quality training.”
Sense of urgency
Palin said that out of necessity, most companies are striving for better quality because they feel a sense of urgency. If they stand still for a minute, they are passed by.
Jack Welch, who was chairman and CEO of GE from 1981 to 2001, instituted Six Sigma in 1996 because he saw it as a differentiator. The philosophy at GE is embodied by the words of Hall of Fame football coach Vince Lombardi: “Perfection is unattainable, but if we chase it, we can catch excellence!”
All 340,000 GE employees are provided with training in the use of the Six Sigma tools and actively take part in internal and external improvement projects to ensure that products and services meet, if not exceed, customer requirements. All divisions of GE have Black Belts, who are leaders of a team responsible for measuring, analyzing, improving, and controlling key processes that influence customer satisfaction and/or productivity growth. Black Belts are full-time positions. Green Belts have similar responsibilities and go through a three-week training session, but they are not full-time positions.
Three Sigma is 93.3% accuracy. Four Sigma is 99%. Five Sigma is 99.7% and Six Sigma is 99.99%.
Three Sigma is 1.5 misspelled words per page in a book. Six Sigma is one misspelled word in all the books in a small library.
“Is Six Sigma unattainable?” Palin asked. “Many would say yes. But Frederick W Smith (chairman and CEO of FedEx) does not agree. According to him, their service goal is 100%-plus.”
Palin said GE's Fleet services looks for suppliers who have two-way communication and CAD and CAM systems, who share a need for speed, have ship-through codes, bailment pools for multiple manufacturers, new vehicle prep certificates for multiple manufacturers, and timely and accurate billing, who provide discounts for quick payments and quality application of customer graphics on vehicles, and the ability to deliver license and title to new vehicles.
Focus on the customer
Six Sigma “thinking” transforms abstract business scenarios into tangible, fact-based situations. GE believes that by focusing on the customer and utilizing Six Sigma tools and techniques, business leaders make more informed decisions, develop practical solutions, and have a framework to ensure that the decisions they make are right.
GE Capital's process improvement methodology has five steps: Define, Measure, Analyze, Improve and Control (DMAIC). These steps are designed to guide teams through a rigorous process of clearly understanding the situation and capturing information, enabling teams to look past the symptoms of a problem and identify the true root causes. After verification of the suspected root causes, the Improve and Control phases of the DMAIC process are used to develop solutions, organize and execute implementation plans, and monitor the results closely to ensure the realization of expected benefits.
GE believes the Six Sigma idea is “very powerful in its ability to transform abstract business scenarios into tangible, fact-based situations, thus minimizing the guesswork of solving many of today's business issues.” By focusing on the customer and utilizing Six Sigma's techniques, informed decisions can be made, practical solutions can be developed, and leaders can use its framework to ensure that the decisions they make are right.