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Abstract

Topic – Six Sigma and its formulation

Authors
Robin Singla (142/2010)
A student of BFCMT and pursuing M.B.A. under Punjabi University, Patiala.

Sahil Garg (145/2010)


A student of BFCMT and pursuing M.B.A. under Punjabi University, Patiala.

Introduction about the topic

Six Sigma is a business management strategy originally developed by Motorola, USA in


1986.As of 2010, it is widely used in many sectors of industry, although its use is not
without controversy.

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. It uses a set of quality management methods, including statistical methods, and
creates a special infrastructure of people within the organization ("Black Belts", "Green
Belts", etc.) who are experts in these methods. Each Six Sigma project carried out within
an organization follows a defined sequence of steps and has quantified financial targets
(cost reduction or profit increase).
Another common definition of Six Sigma management is that it is an organizational
initiative designed to create manufacturing, service and administrative processes that
produce a high rate of sustained improvement in both defect reduction and cycle time.

Objectives of the study


To know about the history of six sigma.

To know from where the name six sigma came from.

To know the history of the Six Sigma Black Belt naming convention.

To know Six sigma clarifications.

To Remember Bill Smith the father of Six Sigma.

To know Six Sigma costs and savings.

Methodology
Six Sigma is most successful when leadership is truly committed to the philosophy and
methodology it entails. In larger companies, a Director or other high-level employee
takes the lead role in creating and guiding Six Sigma efforts. The main roles in guiding
under Six Sigma are:

Establish Performance Expectations

Identify Improvement Needs

Determine Improvement Approaches

Follow Improvement Methodology

Maintain the Framework


Title

Six Sigma and its formulation

Introduction
The term “sigma” is used to designate the distribution or spread about the mean
(average) of any process or procedure.

The Six Sigma defines as the ideal measurement of the quality, known as 3.4
defects per 1 million occurrences.

For a process, the sigma capability (z-value) is a metric that


indicates how well that process is performing. The higher the sigma
capability, the better. Sigma capability measures the capability of
the process to produce defect-free outputs. A defect is anything that
results in customer dissatisfaction.

• The term “Six Sigma” was coined by Bill Smith, an engineer with
Motorola.
• Late 1970s - Motorola started experimenting with problem solving
through statistical analysis.
• 1987 - Motorola officially launched it’s Six Sigma program.
• Jack Welch launched Six Sigma at GE in Jan,1996.
• 1998/99 - Green Belt exam certification became the criteria for
management promotions.
• 2002/03 - Green Belt certification became the criteria for promotion
to management roles.
History

Six Sigma has evolved over time. The concepts behind Six Sigma can be traced through
the centuries as the method took shape into what it is today.

The roots of Six Sigma as a measurement standard can be traced back to Carl Frederick
Gauss (1777-1855) who introduced the concept of the normal curve. Six Sigma as a
measurement standard in product variation can be traced back to the 1920's when Walter
Shewhart showed that three sigma from the mean is the point where a process requires
correction. Many measurement standards (Cpk, Zero Defects, etc.) later came on the
scene but credit for coining the term "Six Sigma" goes to a Motorola engineer named Bill
Smith. (Incidentally, "Six Sigma" is a federally registered trademark of Motorola).

In the early and mid-1980s with Chairman Bob Galvin at the helm, Motorola engineers
decided that the traditional quality levels -- measuring defects in thousands of
opportunities -- didn't provide enough granularity. Instead, they wanted to measure the
defects per million opportunities. Motorola developed this new standard and created the
methodology and needed cultural change associated with it. Six Sigma helped Motorola
realize powerful bottom-line results in their organization - in fact, they documented more
than $16 Billion in savings as a result of our Six Sigma efforts

Since then, hundreds of companies around the world have adopted Six Sigma as a way of
doing business. This is a direct result of many of America's leaders openly praising the
benefits of Six Sigma. Leaders such as Larry Bossidy of Allied Signal (now Honeywell),
and Jack Welch of General Electric Company. Rumor has it that Larry and Jack were
playing golf one day and Jack bet Larry that he could implement Six Sigma faster and
with greater results at GE than Larry did at Allied Signal. The results speak for
themselves.

Where Did the Name "Six Sigma" Come From?


In my recollection, two recurring questions have dominated the field of six sigma. The
first inquiry can be described by the global question:

“Why 6s and not some other level of capability?”

The second inquiry is more molecular. It can be summarized by the question:

“Where does the 1.5s shift factor come from – and why 1.5 versus some other
magnitude?”
For details on this subject, reference: “Harry, M. J. “Resolving the Mysteries of Six
Sigma: Statistical Constructs and Engineering Rationale.” First Edition 2003.
Palladyne Publishing. Phoenix, Arizona. (Note: this particular publication will be
available by October 2003). But until then, we will consider the following thumbnail
sketch.

At the onset of six sigma in 1985, this writer was working as an engineer for the
Government Electronics Group of Motorola. Bill Smith (originator of the six sigma
concept in 1984). At that time, he suggested Motorola should require 50 percent design
margins for all of its key product performance specifications. Statistically speaking, such
a "safety margin" is equivalent to a 6 sigma level of capability.

History of the Six Sigma Black Belt Naming Convention


Not surprisingly, the term Black Belt has its roots in the exotic realm of martial arts. Like
a person skilled in the Oriental sport of karate, the Six Sigma Black Belt is self-assured
and knowledgeable, the result of intensive training and real-world experience.

Motorola, the company that holds the Six Sigma trademark, says the data-driven defect-
reduction process has saved the company more than $16 billion over the past 15 years.
Six Sigma has generated similarly stunning results at companies here and abroad in the
manufacturing, transactional, and service sectors. All businesses -- regardless of sector,
size, or project - link their success to one factor. In Six Sigma parlance, it's the Black
Belt.

The term Black Belt refers to project leaders, skilled in the use of statistical methods and
interpersonal communication, and dedicated to using Six Sigma methods to ensure
customer satisfaction. Green Belts require less training than Black Belts and take
responsibility for leading fewer projects, while Master Black Belts spend nearly all of
their time consulting, mentoring, and training Green Belts and Black Belts.

Six Sigma Evolution Clarified


Daniel T. Laux writes on behalf of Six Sigma Academy to clarify the roots
and evolution of Six Sigma.

By Daniel T. Laux

On behalf of Six Sigma Academy, I would like to take this opportunity to clarify the
evolution of six sigma since this seems to be a lively topic of conversation among many
practitioners (even cartoonists!) these days.

The roots of six sigma as a measurement standard can be traced back to Carl Frederick
Gauss (1777-1855) who introduced the concept of the normal curve. Six sigma as a
measurement standard in product variation can be traced back to the 1920's when Walter
Shewhart showed that three sigma from the mean is the point where a process requires
correction. Many measurement standards (Cpk, Zero Defects, and so on) later came on
the scene but credit for coining the term "six sigma" goes to a Motorola engineer named
Bill Smith (six sigma is a federally registered trademark of Motorola).

In the late 1970's, Dr. Mikel Harry, a senior staff engineer at Motorola's Government
Electronics Group (GEG), began to experiment with problem solving through statistical
analysis. Using his methodology, GEG began to show dramatic results – GEG's products
were being designed and produced faster and more cheaply. Subsequently, Dr. Harry
began to formulate a method for applying six sigma throughout Motorola. His work
culminated in a paper titled "The Strategic Vision for Accelerating Six Sigma Within
Motorola." He was later appointed head of the Motorola Six Sigma Research Institute and
became the driving force behind six sigma.

Remembering Bill Smith, Father of Six Sigma


Bill Smith, the Father of Six Sigma, introduced the statistical approach while working at
Motorola, where it garnered the company financial benefits and numerous awards.

Bill Smith spent years convincing higher-ups that he really had invented a better
mousetrap. Then he spent the rest of his life spreading the word to business professionals,
government leaders and educators.

Smith's mousetrap? It was Six Sigma, the TQM spin off that has generated billions of
dollars for Motorola, the company where Smith introduced his statistical approach aimed
at increasing profitability by reducing defects. Smith, who earned the appellation, Father
of Six Sigma, would probably be tickled to know Six Sigma has become so mainstream
that it even appears periodically in the widely syndicated comic strip, Dilbert.

As a Motorola employee, Smith did not share directly in the profits generated by the
company's Six Sigma applications. However, over the years, he and Motorola garnered
numerous awards and recognition for his vital work to improve profitability in America's
manufacturing sector. He was especially proud of his role in Motorola's winning the
prestigious Malcolm Baldrige National Quality Award. The Baldrige Award came in
1988, two years after Motorola implemented Smith's Six Sigma principles.

Smith's death, only five years later, caught everyone by surprise. He died of a heart attack
at work.

Daughter Marjorie Hook, now 37 and president of Clarksville Consulting Group in


Austin, Texas, developed an affinity for Six Sigma and occasionally collaborated with
her father for a few years after college. Hook said winning the Baldrige Award stands out
as a career high point in her father's life.
Six Sigma Costs And Savings

In the world of Six Sigma quality, the saying holds true: it takes money to save money
using the Six Sigma quality methodology. You can't expect to significantly reduce costs
and increase sales using Six Sigma without investing in training, organizational
infrastructure and culture evolution.

Many people say that it takes money to make money. In the world of Six Sigma quality,
the saying also holds true: it takes money to save money using the Six Sigma quality
methodology. You can't expect to significantly reduce costs and increase sales using Six
Sigma without investing in training, organizational infrastructure and culture evolution.

Sure you can reduce costs and increase sales in a localized area of a business using the
Six Sigma quality methodology -- and you can probably do it inexpensively by hiring an
ex-Motorola or GE Black Belt. I like to think of that scenario as a "get rich quick"
application of Six Sigma. But is it going to last when a manager is promoted to a different
area or leaves the company? Probably not. If you want to produce a culture shift within
your organization, a shift that causes every employee to think about how their actions
impact the customer and to communicate within the business using a consistent language,
it's going to require a resource commitment. It takes money to save money.

How much financial commitment does Six Sigma require and what magnitude of
financial benefit can you expect to receive? We all have people that we must answer to --
and rhetoric doesn't pay the bills or keep the stockholders happy (anymore). I was tired of
reading web pages or hearing people say:

"Companies of all types and sizes are in the midst of a quality revolution. GE saved $12
billion over five years and added $1 to its earnings per share. Honeywell (AlliedSignal)
recorded more than $800 million in savings."

"GE produces annual benefits of over $2.5 billion across the organization from Six
Sigma."

"Motorola reduced manufacturing costs by $1.4 billion from 1987-1994."

"Six Sigma reportedly saved Motorola $15 billion over the last 11 years."

The above quotations may in fact be true, but pulling the numbers out of the context of
the organization's revenues does nothing to help a company figure out if Six Sigma is
right for them. For example, how much can a $10 million or $100 million company
expect to save?

As the Motorola website says, they invented it in 1986. Allied Signal deployed Six Sigma
in 1994, GE in 1995. Honeywell was included because Allied Signal merged with
Honeywell in 1999 (they launched their own initiative in 1998). Many companies have
deployed Six Sigma between the years of GE and Honeywell -- we'll leave those
companies for another article.

Table 1: Companies And The Year They Implemented Six Sigma

Company Name Year Began Six Sigma

Motorola (NYSE:MOT) 1986

Allied Signal (Merged With Honeywell in 1999) 1994

GE (NYSE:GE) 1995

Honeywell (NYSE:HON) 1998

Ford (NYSE:F) 2000

Table 2 identifies by company, the yearly revenues, the Six Sigma costs (investment) per
year, where available, and the financial benefits (savings). There are many blanks,
especially where the investment is concerned. I've presented as much information as the
companies have publicly disclosed.

Table 2: Six Sigma Cost And Savings By Company

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

Motorola

1986-2001 356.9(e) ND - 16 1 4.5

Allied Signal

1998 15.1 ND - 0.5 2 3.3

GE

1996 79.2 0.2 0.3 0.2 0.2

1997 90.8 0.4 0.4 1 1.1


1998 100.5 0.5 0.4 1.3 1.2

1999 111.6 0.6 0.5 2 1.8

1996-1999 382.1 1.6 0.4 4.4 3 1.2

Honeywell

1998 23.6 ND - 0.5 2.2

1999 23.7 ND - 0.6 2.5

2000 25.0 ND - 0.7 2.6

1998-2000 72.3 ND - 1.8 4 2.4

Ford

2000-2002 43.9 ND - 16 2.3

Key:
$B = $ Billions, United States
(e) = Estimated, Yearly Revenue 1986-1992 Could Not Be Found
ND = Not Disclosed
Note: Numbers Are Rounded To The Nearest Tenth

Advantages & Disadvantages of Six Sigma


Six Sigma is a popular process improvement methodology that started in the
manufacturing sector and has spread to other areas as well. Some companies have seen
tremendous success, while others have abandoned the methodology or found it too
overwhelming to support.
Based on Data
In Six Sigma, decisions are made based on empirical evidence, not just on assumptions
and anecdotal evidence. This includes determining the need for a project, determining the
cause of the problem being addressed, and deciding what improvements will be made. In
all these cases, data is required for decision making.
Proven Success
Beginning with Motorola, many large companies have successfully rolled out Six Sigma
initiatives and driven positive change in their organizations. The results have benefited
customers, employees, and shareholders.
Sustainable Solutions
The DMAIC and DMADV processes are specifically designed for sustainable solutions.
In DMAIC, the improvements to a process are confirmed with data, and an entire phase is
devoted to ensuring that the gains are sustained. In DMADV, which is used for creating
new products and processes, a similar mindset holds.
Timeframe
As the saying goes, "Do you want it fast or do you want it right?" In order to effectively
use the Six Sigma methodology, a substantial amount of time must be allowed for a
project. It does not provide simple fixes, and at times the people involved can become
frustrated with the time required to systematically follow the improvement model.
Training Requirements
In traditional Six Sigma implementations, employees go through extensive training to
become Six Sigma project leaders (Black Belts and Green Belts) and sponsors
(Champions and Process Owners). For the Black Belt role in particular, training can take
several weeks or more, and occur over a period of months. This is not feasible in some
environments.
Corporate Focus
Although the principles underlying Six Sigma could certainly be made applicable
to small business and organizations, it is primarily an option for larger corporate
organizations.

Sources
Sources used for this research paper are all secondary sources like different author books
and from search engines on internet . We have to use the secondary sources because the
topic “Six Sigma”.

References

Harry, M. J. “Resolving the Mysteries of Six Sigma: Statistical Constructs and


Engineering Rationale.” First Edition 2003

www.scribd.com

www.isixsigma.com

Conclusion
Business Continuity, security and emergency management all are process driven
activity. As such, it makes sense to ensure that processes are constantly being reviewed
and improved. Six Sigma is a process that ought to be considered for these discipline,
as it deals with process improvement, the above article describe Six Sigma and
considering its use in business continuity, security and emergency management
professions.