There is a lot of talk about Six Sigma today, as there has always been, and many time companies fail in implementing Six Sigma because they just do not believe enough to make that commitment up front. They do not understand what “Six Sigma” means to their bottom line. Or even how to translate what they currently do into Six Sigma savings.

So lets talk about Six Sigma the metric. What does it really mean in terms of your business? The average company out there that has not embraced Six Sigma is running just below four sigma. If you took that average company and created a Six Sigma Culture in it you would see[i]:

• 20% margin improvement
• 12-18% capacity improvement
• 10-30% capitol reduction

Can not believe these numbers? They are true, over an over I see these types of impact in companies that embrace a true Six Sigma culture. Lets look at some numbers, although they maybe not be what is really happening out there. Let’s look at four areas that most everyone has to deal with on a regular basis; the mail system, drinking water, electrical service and prescription drugs. If you were in the United States here is what these services would look like at a 3 sigma level:

A 3 Sigma World
Service	Defect Rate
Postal System	20,000 lost pieces per hour
Drinking Water System	Unsafe water for 15 minutes per day
Electrical Service	No electrical service available for 7 hours a month
Prescription Drug Services	8 wrong prescriptions per minute

Where you live maybe better or worse than what you see above. In the US I do believe it is better than this in all cases. How would these services look in a 6 Sigma World?

A 6 Sigma World
Service	Defect Rate
Postal System	2.5 lost pieces per week
Drinking Water System	Unsafe water for .2 seconds per year
Electrical Service	No electrical service available for 1.1 seconds every 5 years.
Prescription Drug Services	3 wrong prescriptions per year

I’d guess that in most everyone’s case most of these service would not be today at this level. So how bad are things out there. Well that depends on what you are talking about. Below is a chart[ii] that show how the average company in several areas are performing. These areas are:

• In the US, getting tax advice from the Internal Revenue Service. – They are better in collecting taxes then giving you or I advice on doing our taxes.
• Order write-ups – This is when you go into a store or even on-line an place an order.
• Doctor Prescription Writing – This is the actual process of your doctor writing your prescriptions. We, in the US, are lucky that there are Nurses, Pharmacy techs, and Pharmacists that check these and correct them before you get them. But this is one reason medical cost are so high.
• Restaurant Bills – Ever gone to a restaurant and got the bill only to find it was wrong. Hmmmmm!
• Airline Baggage Handling – Ever traveled and found your luggage damaged or lost totally? Even if they find it later and return it this is what this level of Sigma feels like.
• Domestic Airline Fatality Rate – This rate is lower than the rate of deaths due to mistakes made in hospitals. Hmmmm

How does this happen? It is due to variations that happen all the time in everything we do. A Six Sigma approach (culture) make you work at understanding and addressing the day to day variations in your processes that you now compensate for, which costs you money. It looks at the variations and looks for patterns to discover and interpret the errors (variations) seen.

Lets take a simple task (a step in a process) that almost everyone can understand because at one time you have tried this; shooting free throws (step)  in basketball (a process). Now to make a free throw there are a lot more factors or thing that can make one miss ( I know because I miss all the time). But for this example we will look at only five; Vision, Grip, Stance, Reflex, and Rotation. Lets say for everyone of these factors 95% of the time you do any one of them right. That means that 5% of the time you get any one of them wrong. BUT to make the shot you have to get them all right at the same time. So if making a shot only required these five factors and you feel you are at that “95%” level that means that you will make it, get all 5 factors right at the same time, only 77% of the time. By the way this is about a 2 sigma task or step (2 sigma would give each factor 95.45% and an overall result of 79.23%). If you were 99.73% (3 sigma) you would make the shot 98.66% of the times you tried. IF you were a 6 sigma shooter (99.99999998%) you would make it 99.99999990% of the time.

But this is for each time you step on the line to shot a free throw. In the NBA during an average game there are 26 free throw shots attempted. This means the total number of opportunities for nonconformance ( or missed shots) is 5factor X 26 shots = 130 opportunities to make it or not. That changes things a bit. This means that making every shot in the game is as follows for the sigma level you are shooting at:

• 2 Sigma = .2%
• 3 Sigma = 70.08%
• 6 Sigma = 99.99997%

Now that puts me at about a 2 sigma level and a definitely not an NBA level player. Where are the best professionals? Where are the worst  professionals?

As you can see by these number failure rates increase at a very high rate as the number of products (shots) and factors (vision, grip, stance, reflex, and rotation) increase. This is why it is so important to use Six Sigma to keep the competitive edge in your company. Most companies processes have more than 1 step (just as basketball is more than just shooting free throws) and each step has several factors where you can make a mistake. All of these steps and factors drive the defect rate up. Just think every time you touch the thing you are working on you can do it right or wrong. For example picking up a glass, you can grip it firm or not and drop the glass. This is were those improvement come from.

Well there you have my short summary of the impact of Six Sigma on a company. If you have questions or comments please leave them or send me an Email.

Bersbach Consulting
Peter Bersbach
Six Sigma Master Black Belt
http://sixsigmatrainingconsulting.com
peter@bersbach.com
1.520.829.0090

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[i] Tom Pyzdek Presentation Managing for Success; ASQ QMD 2000

[ii] Source: Milt Williams, Freudenberg Non-wovens, presentation to management May 6, 1999

Tags: Leadership, Six Sigma Impact, Six Sigma Success

This entry was posted on Tuesday, April 20th, 2010 at 10:16 am and is filed under Introduction to Six Sigma, Leading Six Sigma. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.