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Understanding the Value
of Six Sigma
Steve Palagyi, Mature companies use Six Sigma as a management approach, not just
PRTM, Texas Office a toolset. To understand the benefits of Six Sigma and the key success
Andrew Hamelynch, factors of implementation, PRTM conducted a survey of 18 leading
PRTM companies in the U.S. aerospace and defense industry
Sandeep Mehta,
PRTM
PRTM In the mid-1980s, Motorola set a Statisticians use the Greek letter
Joseph Roussel new quality standard of Six Sigma sigma to measure the variability of
jroussel@prtm.com and began developing the means to any process. As shown in the table
55 avenue Hoche achieve it. Soon after, several other below, a process that is operating
75008 Paris corporations, such as AlliedSignal at six sigma will be nearly defect-
Tel : 01 56 68 30 30 and General Electric, adopted free, with a yield of over 99.99%.
Fax 01 56 68 30 31 Six Sigma, turning it into a
www.prtm.fr complete system for continuous Six Sigma applies a number of
improvement. Since then, Six statistical and other proven
Sigma has become a widespread problem-solving tools such as
management initiative among many Design of Experiments (DOE),
of the top companies in the world. process maps, and Failure Mode
The incredible success of Six Sigma and Effects Analysis (FMEA) within
at General Electric has prompted a the framework known as DMAIC, for
number of other companies to Define, Measure, Analyze, Improve,
spend millions of dollars adopting Control. DMAIC can be described as
it. Yet today, the true benefits of Six follows:
Sigma implementations remain • Define internal and external
unclear. PRTM recently conducted customer requirements, project
a survey in order to assess Six goals, expected outcomes, and
Sigma benefits as well as determine the business case.
what might be done to accelerate • Measure the existing system to
those improvements. Before we determine current performance.
analyze the details of the survey • Analyze the process and determine
and the results, we will examine the root causes of defects.
several elements of Six Sigma in • Improve the process by designing
more detail. and implementing new processes
and systems.
Stated simply, Six Sigma is a • Control process performance by
fact-based or data-based approach establishing continuous measures
to improving a process or function and reviews.
for the purpose of increasing
customer satisfaction, and thereby There are several different
achieving significant business functions within a Six Sigma
benefits. One can define Six Sigma program that are key to its
as: deployment and ongoing success.
The “X-Belt” label is drawn from the
“A comprehensive and flexible martial arts and each level suggests
system for achieving, sustaining a degree of training and proficiency
and maximizing business success. in Six Sigma:
Six Sigma is uniquely driven by a
close understanding of customer • Master Black Belts (MBBs) play a
Reprinted with permission from PRTM. needs, disciplined use of facts,
data, and statistical analysis, and
A version of this article first appeared in the
diligent attention to managing, 1. “The Six Sigma Way, How GE, Motorola and
September 30, 2002 issue of other Top Companies are honing their perfor-
improving and reinventing business mance”, Pande, Neuman, Cavanagh, McGraw-
Aviation Week & Space Technology. processes.”1 Hill 2000
Supply Chain Forum An International Journal Vol. 4 - N°1 - 2003 48 www.supplychain-forum.com
critical role and have attained the a key part of the company culture factors of implementation, PRTM
highest level of proficiency in Six at many of the early adopters such conducted a survey of 18 leading
Sigma. MBBs are usually full-time as GE, Honeywell, and Motorola. companies (all over $1 billion in
resources who focus on setting There are likely a number of annual revenues) in the aerospace
strategic direction and priorities different reasons why Six Sigma is and defense industry. We received
for the Six Sigma program and succeeding where TQM failed, but 32 responses from business units
maintaining the momentum of some of the key differentiators of ranging in size from $100 million to
change; selecting Six Sigma Six Sigma include the role of senior well over $1 billion. Of the
projects; and mentoring and management in the improvement respondents, 72% were “X-belt
coaching teams, especially process, and a genuine focus on the qualified” and 35% were industry
black belts, in the Six Sigma customer and on employee training executives or general managers.
methodology. and involvement. Six Sigma engages PRTM analyzed the responses
all levels of management, including along two axes—those respondents
• Black Belts are Six Sigma experts the executive leaders of an who were satisfied and those who
who act as consultants or organization. Senior managers are were not. Our findings showed that
coaches to drive an improvement directly involved in monitoring the “satisfied” companies had been
project to achieve results. A project performance and key doing Six Sigma longer and tended
Black Belt is dedicated to driving decision-making. In many cases, to provide more training. They
critical change opportunities and management bonuses and relied more on balanced teams of
achieving results; and leads, promotions are tied to their five to ten members, and they used
coaches, rallies, and provides involvement in Six Sigma Six Sigma on a wider basis across
expertise to a Six Sigma team. implementations and projects. their companies. We also sought to
Where past quality initiatives understand whether Six Sigma is
• Green Belts are typically Six Sigma focused mostly on internal effective, and what’s needed to
practitioners who have gone improve overall results. Our
through some Six Sigma training analysis revealed five critical
and play a functional role in success factors, or what we call Six
support of Six Sigma efforts.
Six Sigma keeps Sigma Boosters. These boosters are
relevant to all companies—
• Six Sigma Sponsors or Champions customer needs at the from those just beginning
are usually senior managers who an implementation to active
help oversee the Six Sigma forefront and uses practitioners.
program and play a key role in
helping to ensure that any them to drive Booster #1
improvement program is linked Remember the Customer
to larger business objectives. improvement
Sponsors/champions also coach Keep your Six Sigma efforts focused
teams and help to break down on the customer, not on internal
barriers to success when improvement projects. Many improvement. Our survey showed
necessary. successful Six Sigma projects that 73% of respondents tracked
involve customers and suppliers Six Sigma cost savings, while
When implementing a Six Sigma who often share in the leadership 44% measured on-time delivery
program, most companies engage and success. Another key aspect of performance and only 28% tracked
an external organization with the Six Sigma is the level of training customer lead-time reductions. Of
expertise to train senior that practitioners receive. A typical the 26 projects reported, all but two
management, master black belts, black belt program involves a were internally focused, leading to
and the first series of black belts. minimum of 160 hours of classroom reductions in touch labor time,
The length of this initial training training, in addition to countless inventory levels, freight costs,
phase depends on the size of the hours of on-the-job training order processing times, and
company, and can take anywhere working on projects. The high level various installations/assemblies.
from 18 months to five years. Once of commitment to training and The two externally focused
the internal expertise has been project success that is required to projects addressed field-service
developed, the master black belts achieve the title of black belt improvement and a management
continue to train management and contributes significantly to the process designed to retain
black belts, who in turn train green prestige and desire for continued customer loyalty.
belts. success, and helps sustain
the momentum of the program. The aim of Six Sigma is to
Why does Six Sigma continue to drive practitioners to focus
gain momentum while other Six Sigma in the Aerospace on customer-centric, “Critical
improvement programs seem to and Defense Industry to Quality” (CTQ) factors. An
fail? Unlike TQM and other emphasis on cost reduction may
management fads of the past that To understand the benefits of cause managers to lose focus on
simply faded away, Six Sigma is still Six Sigma and the key success the customer. While an “internal
Supply Chain Forum An International Journal Vol. 4 - N°1 - 2003 49 www.supplychain-forum.com
customer” exists for cost reduction objectives—often because the high charters, and escalation protocols.
efforts, these efforts rarely volume of projects makes this a Moreover, companies must select
generate the type of value that challenge. Some of the most the right people from within their
encourages customers to buy successful enterprise-wide Six organizations to provide both
more, become more loyal, or bring Sigma efforts add less than a single subject matter expertise and the
other sales opportunities to the margin point in terms of annual political clout needed to get things
company. To deliver real customer savings, largely due to a large done. Study respondents agreed
value, Six Sigma efforts must move number of small improvements. that a standard framework for Six
beyond operations and include Study respondents averaged Sigma would benefit inter-company
improvements in marketing, sales, $235,000 per year in savings for exchanges.
order administration, and other each project. To achieve an
customer touch points. For best improvement of two margin Booster #5
results, companies should use a points, the typical $20 billion
Use Advanced Tools
balanced scorecard with both company would need to drive
internal, asset-centric metrics such over 2,500 projects each year.
Six Sigma’s DMAIC process can
as inventory levels, and external, Keeping such a high number of
be enhanced through
customer-centric metrics such as projects aligned with a company’s
the application of industry
lead-time and on-time delivery objectives is extremely difficult. A
benchmarking and broader
performance. portfolio management approach
frameworks, such as the Supply
can help, although very few
Chain Operations Reference-model
Booster #2 respondents (31%) use one. Those
(SCOR). Now overseen by the
that do tend to see better
Maintain a Process Focus Supply-Chain Council, SCOR
results. They rely on cross-
functional steering committees 71% links macro- and micro-processes,
More than 60% of our respondents consistently defined metrics, best
of the time, hold phase reviews
viewed Six Sigma as a statistical practices, and enabling technology.
versus status reviews 57% of the
tool as opposed to a complete Companies that benchmark their
time, and rely more heavily on
process for continuous improvement. measured performance against
benchmarking 86% of the time.
The myopic view of Six Sigma as When companies tackle larger peers or comparable companies in
merely a statistical toolset limits programs, apply the Six Sigma other industries better understand
its real potential, and causes philosophy to those programs, where they need to make
practitioners to lose sight of the big and use best practices for decision- improvements. They prioritize
picture in favor of smaller, more making, they can achieve their performance gaps based on
opportunistic problems. By taking improvements of two margin points which attributes they need to be
a broader, process view, companies or more. best-in- class to win or keep the
can uncover and resolve larger, customer. This analysis can then
more crippling business issues. Booster #4 drive the selection of appropriate
PRTM has found that mature Six Sigma programs and projects.
Go Beyond Your Company
companies that achieve Six Sigma While 86% of respondents who
success use it as a management achieved satisfactory results from
Interestingly enough, less than 25%
approach for comprehensive Six Sigma claim to benchmark
of the companies that responded
improvement, and apply it to their performance, they do
have significant supplier and
virtually all areas of the business, not participate in standardized,
customer participation in their
from manufacturing, operations, quantitative benchmarks. Instead,
Six Sigma programs. Given the
quality, and engineering to complexity of today’s products and they “benchmark” by contacting
marketing, sales, and administration. value chains, trading partners need competitors and asking for specific
to align their processes, product information or agree to share
Booster #3 lines, and overall improvement practices. While this creates better
Drive a Meaningful Result efforts. The end-customer’s needs “coopetition,” it does not create
won’t be consistently met unless competitive advantage.
29% of “satisfied” respondents and the value chain players are in
63% of “dissatisfied” respondents step, with shared expectations By combining SCOR, standardized
reported a lack of focus in their for quality, delivery, cost, and benchmarking, and Six Sigma,
companies’ Six Sigma efforts. Sixty performance. Without this type of companies gain a much stronger
percent of respondents identify alignment, companies interact for front-end to the DMAIC process.
improvement opportunities on three primary purposes—focused This, in turn, better enables them
an ad-hoc basis or within cost reduction, specific design to find that extra one to two margin
specific functions, such as the efforts, or corrective action. PRTM points. In today’s tough economic
purchasing department or has found that inter-company Six times, an extra margin point—
manufacturing. Many respondents Sigma efforts require a more combined with more satisfied
also noted that Six Sigma standard approach. One company customers—can make the
implementation objectives do must take the lead in difference between the leader…
not link to overall business establishing ground rules, program and the rest of the pack.
Supply Chain Forum An International Journal Vol. 4 - N°1 - 2003 50 www.supplychain-forum.com
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