Six Sigma as Operation Management

Sigma is the Greek letter that statisticians use to define a standard deviation from a bell
curve. Six Sigma is a term used in manufacturing process improvement methodologies
and it refers to the variability of a process. Six Sigma seeks to improve the quality of
process outputs by identifying and removing the causes of defects (errors) and
minimizing variability in manufacturing and business processes. The term Six Sigma
originated from terminology associated with manufacturing, specifically terms associated
with statistical modeling of manufacturing processes. The maturity of a manufacturing
process can be described by a sigma rating indicating its yield, or the percentage of
defect-free products it creates.

Table 1: Sigma and %accuracy

Sigma Defects per Million % Accuracy

Opportunities (DPMO)
One Sigma 691,500 30.85%
Two Sigma 308,500 69.15%
Three Sigma 66,810 93.32%
Four Sigma 6,210 99.38%
Five Sigma 233 99.977%
Six Sigma 3.4 99.9997%
Seven Sigma 0.020 99.999998%

Six Sigma Methodology

This strategy is supported by two Six Sigma sub-methodologies called DMAIC (define,
measure, analyse, improve and control), and DMADV (define, measure, analyse, design,
verify). DMAIC shown in Fig.2 is an improvement system for existing processes which
fall below specifications and need to be improved incrementally. DMADV is also an
improvement system which is designed to develop new processes and/ or products at Six
Sigma quality levels. In both sub-methodologies and Six Sigma in general, the objective
is to continually find ways to improve and refine processes, reduce defects and increase
savings (Dedhia, 2005).

This ‘problem-solving’ phase is called DMAIC. First projects are defined from the
perspective of customers or regarding process (Define). Second based on the defined
projects, the current level of the product quality is measured into sigma level (Measure).
Third causes of the problems are detected through the analysis so as to improve the sigma
level (Analyse). Fourth efforts are made to improve the situation by working with the
causes of the problems (Improve). Finally the optimal condition generated by the above
mentioned phases are controlled, maintained and monitored (Control).
 Define
Control Identify project that is measurable
Ensure that the result is Develop team charter
sustained Define process map
Share the lessons learnt Define

Measure

Control

Measure
Define performance
standards
Analyse Measure current level of
Improve quality into Sigma level
Screen potential causes Improve
Discover variable
relationships
Establish operating
tolerances

Analyse
Establish process capability
Define performance objectives
Identify variation sources

Figure 1: DMAIC Cycle

The following part of the study discovers how six sigma as a part of operation
management can be successful for a company. Here, the selected company is
Motorola Inc.
 Six Sigma at Motorola Inc.
Motorola learned about quality the hard way: by being consistently beaten in the
competitive marketplace. When a Japanese firm took over a Motorola factory that
manufactured television sets in the United States, they promptly set about making drastic
changes in the way the factory operated. Under Japanese management, the factory was
soon producing TV sets with 1/20th the number of defects they had produced under
Motorola management. In the late 1970s and early 1980s the company responded to the
competitive pressure by engaging in a publicity campaign decrying "unfair" competition
and calling for political protection solutions. Finally, even Motorola's own executives had
to admit "our quality stinks," (Main, 1994) and Motorola decided to take quality
seriously. Motorola's CEO at the time, Bob Galvin, started the company on the quality
path and became a business icon largely as a result of what he accomplished in quality at
Motorola.

Thrust on quality:

Today, Motorola is known worldwide as a quality leader. To accomplish its quality and
total customer satisfaction goals, Motorola concentrates on several key operational
initiatives. At the top of the list is "Six Sigma Quality," a statistical measure of variation
from a desired result. In concrete terms, Six Sigma translates into a target of no more than
3.4 defects per million products, customer services included. At the manufacturing end,
this requires "robust designs" that accommodate reasonable variation in component parts
while providing consistently uniform final products. Motorola employees record the
defects found in every function of the business, and statistical technologies are made a
part of each and every employee's job. Motorola's Six Sigma program also applies to
attribute data. This is accomplished by converting the Six Sigma requirement to
equivalent conformance levels (see Figure 1).

Figure 2: Motorola Six Sigma Conformance Level

One of Motorola's most significant contributions was to change the discussion of quality
from one where quality levels were measured in percentages (parts per hundred) to a
discussion of parts per million or even parts per billion. Motorola correctly pointed out
that modern technology was so complex that old ideas about acceptable quality levels
were no longer acceptable.

One puzzling aspect of the "official" Six Sigma literature is that it states that a process
operating at Six Sigma levels will produce 3.4 parts-per-million nonconformances.
However, if a normal distribution table is consulted (very few go out to six sigma), one
finds that the expected nonconformances are 0.002 parts per million (two parts per
billion). The difference occurs because Motorola presumes that the process mean can
drift 1.5 sigma in either direction. The area of a normal distribution beyond 4.5 sigma
from the mean is indeed 3.4 parts per million. Because control charts will easily detect
any process shift of this magnitude in a single sample, the 3.4 parts per million represents
a very conservative upper bound on the nonconformance rate.

Efficient use of time

Reducing the "total cycle time"-the time from when a Motorola customer places an order
until it is delivered-is another vital part of the company's quality initiatives. In fact, in the
case of new products, Motorola's cycle-time reduction is even more ambitious; the clock
starts ticking the moment the product is conceived. This calls for an examination of the
total system, including design, manufacturing, marketing, and administration.

Motorola management demonstrates its quality leadership in a variety of ways, including

top-level meetings to review quality programs with results passed on through the
organization. But all levels of the company are involved. Non-executive employees
contribute directly through Motorola's Participative Management Program (PMP).
Composed of employees who work in the same area or are assigned to achieve a specific
aim, PMP teams meet often to assess progress toward meeting quality goals, to identify
new initiatives, and to work on problems. To reward high-quality work, savings that stem
from team recommendations are shared.

Reduce labor costs

Assigning value to the time it takes to fix a default can result in a significant illustration
on just how real cost savings can be if even the smallest of imperfections can be avoided.
Many times defaults are corrected by employees who therefore increase labor costs. Even
if you have a manufacturing process that is highly computerized, overusing your
machines for default corrections is still costing you money as the machines will wear out
more quickly or may be poor judges of defaults if the monitoring computers themselves
fall into disrepair. If a company is able to be successful at sustaining a high quality of
production, not only are costs reduced for that company but the cost savings combined
with the increase in perceived quality by the consumer lead to significant earnings.
Motorola, Inc. has reported over $17 billion dollars in savings as of 2006 from using the
Six Sigma method.

Table 2: Six Sigma Cost and Savings by Motorola

Year Revenue ($B) Invested ($B) % Revenue Savings % Revenue

Invested ($B) Savings
Motorola
1986-2001 356.9 (e) ND - 161 4.5

• (e)- Estimated
• ND- Not Disclosed

Motorola Six Sigma Team

To ensure that employees have the skills necessary to achieve company objectives,
Motorola spent in excess of $170 million on worker education between 1983 and 1987.
About 40 percent of the worker training provided by the company is devoted to quality
matters, ranging from general principles of quality improvement to designing for
manufacturability.

Motorola knows what levels of quality its products must achieve to top its competitors.
Each of the firm's six major groups and sectors has benchmarking programs that analyze
all aspects of a competitor's products to assess their manufacturability, reliability,
manufacturing cost, and performance. Motorola has measured the products of some 125
companies against its own standards, verifying that many Motorola products rank as best
in their class.

Motorola acknowledges that they made many mistakes. One of the most serious was to
start the training for quality at the bottom of the company. Many workers were unable to
understand statistical process controls and other techniques without remedial education,
and they couldn't turn to their untrained bosses for help. Even those who understood the
concepts completely were not able to apply them in the unreceptive workplace.
Motorola's director of training and education estimates that Motorola wasted $7 million
trying to train from the bottom up. Recognizing their mistake, the company established
"Motorola University" and put thousands of Motorola executives through executive
training. Bob Galvin himself spent time in the classroom. By 1992 the company was
spending $110 million per year on instruction.

As a result of these efforts, Motorola can now perform such feats as building pagers and
cell phones in lots ranging from one unit to 100,000. Through mass customization the
factory can fill a precise order within minutes of receiving it. Thanks in large part to its
six sigma activities, the company dominates such key high-tech industries as pagers, cell
phones, and mobile communications, and is a significant force in many others.
 Conclusion
Six Sigma, as developed by Motorola, was an extension of many existing quality tools
and techniques, but with the addition of business accountability. This resulted in process
improvement gains that increased productivity and profitability. Six Sigma is both
systematic and both have evolved from separate paths. Six Sigma organizations become
forward moving organizations by adapting new tools and techniques and overcoming
learning disabilities.

A gauge of quality and efficiency, Six Sigma is also a measure of excellence. Embarking
on a Six Sigma programme means delivering top-quality service and products while
virtually eliminating all internal inefficiencies. A true Six Sigma organization produces
not only excellent product but also maintains highly efficient production and
administrative systems that work effectively with the company's other service processes.
In administrative processes, Six Sigma may mean not only the obvious reduction of cycle
time during production but, more importantly, optimizing response time to inquiries,
maximizing the speed and accuracy with which inventory and materials are supplied, and
fool proofing such support processes from errors, inaccuracies and inefficiency.