The answer is Six Sigma.
Many companies are looking lean and competitive these days because Six Sigma is transforming the way processes are aligned with customer needs and expectations. "Sigma" refers to the extent of variation or deviation from an ideal operating target. One example is the number of days it takes for product delivery from the date of an order. If the company is delivering at an average of 35 days from date of customer order, when customers are expecting deliveries in 15 days, the probability is high that many customers will go to a competitor for the same product and service next time. Whereas, in a Six Sigma focused organization, the customer requirement of 15 days is considered up front, and internal business processes are streamlined to meet that ideal operating target.
Although process capability techniques have been used extensively in both manufacturing and service sectors for more than 50 years, a major breakthrough occurred when Motorola applied a common bar of excellence (3.4 defects per million opportunities) to manufacturing and service processes alike in the late '80s.
As a result, improvements of 10 to 100 times in Motorola's business processes were realized in as little as two years. Word spread quickly. Before long, manufacturing powerhouses such as General Electric, Honeywell, Allied Signal and Eastman Kodak were saving hundreds of millions of dollars across their international operations.
Once General Electric Capital began applying the methodology to its 28 service businesses, the results proved without a shadow of a doubt that companies of all types could successfully apply Six Sigma and count on its fact-based, objective application of continuous improvement to not only eliminate errors but to also focus on isolating and rectifying the root causes of errors.
There are operating costs associated with bad quality. Those are due to the quantifiable factors associated with rework, lost customers, extended cycle time and increased work force demands. Many companies operate at an efficiency of a little above Two Sigma, which is approximately 45,600 errors per every million opportunities.
An opportunity is the number of times a mistake can happen with an item under investigation. Operating at an accuracy of Two Sigma, the cost of rework could be very high. That level of inefficiency destroys an organization's attempts to be profitable, presenting a bottleneck to both current operations and new business growth. Six Sigma has a perfection target of 99.99967 percent, meaning there is very little room for error.
These days, if you want General Electric or other true believers as customers, you will be asked if you use Six Sigma. If your company does not, chances are that you will not land the order. Six Sigma-focused companies have so improved their processes that they do not want to introduce an outside margin of error. In fact, Six Sigma has improved the bottom line of companies to the extent that Wall Street analysts are considering the methodology as part of a company's value equation.
So what is the best way to introduce Six Sigma into your company? The answer is to focus on your customers, Six Sigma training and driving improvement into your business.
Chuck Rumford is director of corporate programs for West Chester University's College of Business and Public Affairs. For more information on corporate programs visit training.btcwcu.org or call (610) 425-2695. Thomas Mc Nellis, Ph.D., PMP, CQM, CMPI, is a certified Six Sigma Master Black Belt trainer and consultant with the Harrington Institute and a trainer for West Chester University's Six Sigma training efforts. He has extensive international experience in the development and implementation of quality programs for major corporations. Reach him at email@example.com