Project Management - Six Sigma (Summary).doc

Six SIGMA: The Breakthrough Management Strategy Revolutionizing the World's Top Corporations
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Mikel J. Harry,Richard Schroeder / Hardcover / Doubleday & Company, Incorporated / December 1999
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Excerpt
The Six Sigma Phenomenon

We believe that Six Sigma is the most powerful breakthrough management tool ever devised.

What is Six Sigma? It is a business process that allows companies to drastically improve their bottom line by designing and monitoring everyday business activities in ways that minimize waste and resources while increasing customer satisfaction. Six Sigma guides companies into making fewer mistakes in everything they do-from filling out a purchase order to manufacturing airplane engines-eliminating lapses in quality at the earliest possible occurrence. Quality-control programs have focused on detecting and correcting commercial, industrial, and design defects. Six Sigma encompasses something broader: It provides specific methods to re-create the process so that defects and errors never arise in the first place.

Throughout this book, you will encounter new ideas and principles-some of which will run contrary to what managers have learned in school or professional practice. Six Sigma represents extraordinary sense, not ordinary or common sense; common sense rarely produces extraordinary results. It is our belief that once managers and their companies understand what Six Sigma is and how it works, they will begin to see that many well-accepted past management practices and quality-control methods are less than optimal, or are even wrong.

Industries are desperate to find new ways to buoy profitability. That is why companies as diverse as AlliedSignal, General Electric, Sony, Honda, Maytag, Raytheon, Texas Instruments, Bombardier, Canon, Hitachi, Lockheed Martin, and Polaroid have adopted Six Sigma. Many of these companies are averse to management fads. But they have embraced Six Sigma because they believe the initiative will help them increase market share, decrease costs, and grow profit margins. As a result, they are beginning to tie quality directly to their bottom line.

Six Sigma produces superior financial results, using business strategies that not only revive companies but help them leapfrog ahead of their competition in terms of market share and profitability. By reaching for the seemingly impossible, companies achieve the impossible.

But the biggest reason for the incredible buzz about Six Sigma throughout the business community has been its astonishing success at dramatically improving a company's bottom-line profitability. As a result, Six Sigma has become the darling of Wall Street. Jennifer Murphy, an analyst with Morgan Stanley, Dean Witter, Discover & Co., spent three days at our ranch in Payson and at our Six Sigma Academy in Scottsdale, Arizona, a teaching facility we designed to educate and train executives in the principles of Six Sigma so that they can transform their companies into world-class organizations. Impatient with the negligible effect quality programs have had on the bottom line, Murphy was astonished by what she learned. "Six Sigma companies . . . achieve faster working capital turns; lower capital spending as capacity is freed up; more productive R&D spending; faster new product development; and greater customer satisfaction," she wrote upon her return. She estimates that by the year 2000, GE's gross annual benefit from Six Sigma could be as high as $6.6 billion, or 5.5 percent of sales.

Here are just a few reasons for the enthusiasm so many analysts on Wall Street voice:

General Electric's Jack Welch, a self-proclaimed cynic when it comes to quality programs, describes Six Sigma as "the most important initiative GE has ever undertaken." GE's operating income, a critical measure of business efficiency and profitability, hovered around the 10 percent level for decades. In 1995, Welch mandated that each GE operation, from credit card services to aircraft engine plants to NBC-TV, work toward achieving Six Sigma. GE averaged about 3.5 sigma when it introduced the program. With Six Sigma embedding itself deeper into the organization's processes, GE achieved the previously "impossible" operating margin of 16.7 percent in 1998, up from 13.6 percent in 1995 when GE implemented Six Sigma. In dollar amounts, Six Sigma delivered more than $300 million to GE's 1997 operating income, and in 1998, the financial benefits of Six Sigma more than doubled, to over $600 million.

Larry Bossidy, CEO of AlliedSignal Inc., brought the $14.5 billion industrial giant back from the verge of bankruptcy by implementing the Six Sigma Breakthrough Strategy. The company has now trained thousands of employees from every business unit and staff function in Six Sigma and the Breakthrough Strategy, with the goal of increasing productivity 6 percent each year in its industrial sectors. Broad-base Six Sigma initiatives allowed operating margin in the first quarter of 1999 to grow to a record 14.1 percent from 12 percent one year earlier. Since Bossidy implemented the program in 1994, the cumulative impact of Six Sigma has been a savings in excess of $2 billion in direct costs.

Former AlliedSignal executive Daniel P. Burnham, who became Raytheon's CEO in 1998, has made Six Sigma a cornerstone of the company's strategic plan. By pursuing Six Sigma quality levels throughout the company, Burnham expects Raytheon to improve its cost of doing business by more than $1 billion annually by 2001.

Since taking over GE's industrial diamonds business in Worthington, Ohio, in 1994, William Woodburn has increased the operation's return on investment fourfold and cut the operation's costs in half by employing the Six Sigma Breakthrough Strategy. He and his team have made their existing facilities so efficient that they have eliminated the need for new plants and equipment for at least another ten years. Woodburn and GE's industrial diamond business exemplify how Six Sigma can enable a company to cut costs, enhance productivity, and eliminate the need for new plant and equipment investments.

Polaroid Corporation's Joseph J. Kasabula, quality strategy manager for product development and worldwide manufacturing, believes that the most compelling reason companies embrace Six Sigma is its impact on the bottom line. While other programs may improve quality, Kasabula believes they do not focus on increasing a company's profits. With Six Sigma, companies focus on the processes that affect quality and profit margins on a project-by-project basis. Six Sigma is helping Polaroid to add 6 percent to its bottom line each year.

Asea Brown Boveri (ABB), which successfully applied the Six Sigma Breakthrough Strategy to its power transformer facility in Muncie, Indiana, has reduced measurement equipment error by 83 percent; piece count error from 8.3 percent to 1.3 percent; and no-load loss to within 2 percent. ABB also improved material handling, resulting in an annual estimated cost savings of $775,000 for a single process within a single plant.


We believe the Six Sigma Breakthrough Strategy should be of paramount interest to any forward-thinking executive, manager, and public administrator who wants to make his or her organization more competitive and profitable, and enhance its ability to drive change. Six Sigma principles apply to any business of any size. It applies to far more than just industrial processes-it applies to engineering, product design, and any commercial process, from processing mortgage applications, to credit card transactions, to customer service call centers. By attacking "variation" during the design of products and services, it's possible for any organization to achieve unprecedented profitability.

How does Six Sigma work? The first step in the Breakthrough Strategy is to ask a new set of questions, questions that take you out of your comfort zone, that force you to query what you have taken for granted, and that ultimately provide you with new direction. Six Sigma forces businesses to let go of bad habits. Bureaucracy becomes delayered. Those employees closest to the actual work and to the customer become motivated to meet or exceed consumer requirements. By questioning the speed with which products are produced and services are rendered, people begin to think about new systems that can be put into place to produce a higher-quality product or service in a shorter amount of time. As those closest to the work discover more effective and profitable ways of working, they are able to inform senior management about what changes need to be made, and as a result, push those higher in the organization to reexamine the ways in which they do business.

Six Sigma is about asking tougher and tougher questions until we receive quantifiable answers that change behavior. Through Six Sigma, companies relentlessly question every process, every number, every step along the way to creating a final product. Managers, employees, and customers ask different kinds of questions of each other than they've asked before. As Six Sigma takes hold across an organization, it creates an internal infrastructure that includes executives, managers, engineers, and operations and service personnel. When 50 percent or more of an organization's staff embrace Six Sigma, those individuals are able to mobilize massive changes in the way business is done, dramatically increasing profitability.

Questions, of course, are not meant to exist in a vacuum. The methodology behind Six Sigma is designed to pave the way to find the right answers for your company. In the classic children's story "The Wizard of Oz", Dorothy's persistent questions about what she sees and where she is going lead her down the Yellow Brick Road and into the Land of Oz. Similarly, when an organization starts to question what it does and why it does it, it too can begin to lay a Yellow Brick Road that will lead to its own long-term goals.

The fact is, organizations need ways of measuring what they claim to value. Measurements, or "metrics" as we prefer to call them, carry relevance to every member, for every activity, of an organization. You can't change what you can't measure. The foundation of Six Sigma uses metrics to calculate the success of everything an organization does. Enthusiastic speeches, colorful posters, and corporate mandates will not produce quantum change-only measuring the things a company values can do this. Without measuring a company's processes-and its changes to these processes-it's impossible to know where you are or where you are going. Six Sigma tells us:

We don't know what we don't know.
We can't do what we don't know.
We won't know until we measure.
We don't measure what we don't value.
We don't value what we don't measure.

So, in a general way, Six Sigma is a process of asking questions that lead to tangible, quantifiable answers that ultimately produce profitable results. This book will share what Six Sigma is, how it is applied, and what it can do for your company, business, or organization. It will be your guide for transforming knowledge into a living vision.

To date, every company that has followed our Six Sigma methodology has achieved breakthrough profitability. Our intention in these pages is to pass on to you the knowledge that has taken us nearly two decades to learn.

We wish you well in your journey toward breakthrough profitability.
 

Implementing Six Sigma: Smarter Solutions Using Statistical Methods
Forrest W. Breyfogle
 

From The Publisher
Implementing Six Sigma demystifies Six Sigma methods for today's users and offers invaluable guidance on how to choose and use Six Sigma tools effectively. Through the use of the Six Sigma implementation road map the book describes basic methods such as FMEA, QFD, process flowcharting, and continuous improvement tools (e.g., Pareto chart and cause-and-effect diagram) with a full range of powerful statistical techniques and concepts -- crucial knowledge for implementation practitioners and managers.

The Smarter Six Sigma Solutions program guides the user through:

·         Incorporating the organization's strategic vision into the aim of the Six Sigma project charter

·         Planning for and kicking off the project by attaining executive sponsorship and selecting the proper project team "champions"

·         Conducting executive, management, and team education and training

·         Developing the proper organizational infrastructure along with committed management and employee participation

·         Implementing the project charter using measurement, analysis, improvement, and control phases.

Reviews
From John Wiley & Sons Publishing - Booknews
A business initiative first espoused by Motorola in the early 1990s, the Six Sigma strategy has become a standard statistical technique for quality improvement. Breyfogle, founder and president of a quality consulting firm, explains the implementation of Six Sigma. The text is divided into five sections centered on using his "Smarter Six Sigma Solutions" -- deployment, measurement, analysis, improvement, and control -- and includes examples that describe the mechanics of implementation as well as application possibilities. Annotation c. Book News, Inc., Portland, OR (booknews.com)

"I have seen many Six Sigma approaches, but Breyfogle's Implementing Six Sigma is the most comprehensive of them all." --Frank Shines, Principal, IBM Global Services, Measurement Methods Consulting

"The key to business success is doing the right thing faster and better and more efficiently than your competition. The Six Sigma approach aims at achieving this and Forrest Breyfogle has written the most systematic and comprehensive manual available on the subject." --Paul Tobias, Manager, Statistical Methods Group, SEMATECH

"[This book] illustrates how most organizations can become more competitive, reduce defect levels, and improve cycle times. It consolidates not only the traditional Six Sigma process measurements and improvement tools, but also many other useful methodologies into one easy-to-understand text." --Bill Wiggenhorn, Senior Vice President of Motorola Training and Education; President, Motorola University
 

FROM THE BOOK

Table of Contents
 

ABOUT THE AUTHOR

Affiliation
FORREST W. BREYFOGLE III is founder and President of Smarter Solutions, a company specializing in training and consulting in Six Sigma methodologies. He is the author of Statistical Methods for Testing, Development, and Manufacturing (Wiley) and his articles have been published in Quality Engineering, Quality and Reliability Engineering International, and other publications.
 

The Six SIGMA Way: How GE, Motorola, and Other Top Companies Are Honing Their Performance
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Peter S. Pande,Roland R. Cavanagh,Robert P. Neuman / Hardcover / McGraw-Hill Companies, The / May 2000
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Annotation
Six Sigma is a system for improving the quality of organizational processes. It was originally developed at Motorola in the 1980's and has become one of the most widely discussed and reported trends in business over the past two years, thanks largely to the phenomenal successes of the Six Sigma program at one of the world's most successful companies, GE. GE CEO Jack Welch, has been preaching about and implementing the Six Sigma philosophy throughout GE, and credits the program with millions of dollars in annual cost savings and product quality improvements.

From The Publisher
Six Sigma-the organizational quality system made famous by GE's legendary Jack Welch-has set new standards for process improvement. The Six Sigma Way is the first book to provide basic, non-technical information on understanding and implementing Six Sigma. Eye-opening success stories show how companies including GE, Motorola, Allied Signal, and others have used Six Sigma to produce millions in cost-savings and quality improvements.

Written to give managers a basic overview of what Six Sigma is and how to implement it, The Six Sigma Way covers the application of Six Sigma across all industries.

FROM THE BOOK

Table of Contents
 

TABLE OF CONTENTS _Toc468501689

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Six Sigma: Changing Business Habits _Toc468501691

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