What is Six Sigma

May 27th, 2009

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Six Sigma is a process improvement methodology that has been proven to make step function improvement in any business environment. I define Six Sigma as a 5 step process based on facts and data focused on your customer’s values to grow your business.

It is not a one time project to fix a problem. It is not a topic that you can talk to your customers about without applying it to your business. It is not a “Flash in the Pan”, “Flavor of the month” program that will go away. Six Sigma is a new way to approach your business issues. Let’s look at the three major elements of the definition.


Business Growth:

Business growth is a shift from a business without Six Sigma to one that has made Six Sigma a part of their business culture.  If Six Sigma is embraced and implemented into one’s culture you can achieve about a 20% margin improvement, 15% capacity improvement and/or a 20% capital reduction. Hard to believe?

  • The Motor Vehicle Department of the State of California reduced its check processing from 77 days to 23 days using Six Sigma methods. That means getting their money in the bank 54 days earlier than before[1].
  • Technimark Packaging, a company that packages other companies’ products for retail, was taking 3 hours to change the tooling over from one customer to another. Applying Six Sigma they got the time down to 30 minutes. Remember every minute they are not packaging customer product is a loss.[2]
  • General Electric applied Six Sigma across their company in 1997 and it delivered more than $300 million dollars in savings that year.[3]


So How Does it Work?

It uses facts and data focused on customer value.


Customer Value:

Six Sigma defines customer value as a product or service that is received by a customer at the right:

  • Location
  • Cost
  • Point in Time
  • and Functions

All of these as defined by the customer, not you. Many time we see customer value as the “functions” part only — that the product worked or the service did what is was suppose to do. But we forget that Customer value INCLUDES the delivery process that is made up of the other three items above; location, cost, and point in time.

Does the customer always know what they want? Many companies will say no but I believe that they do. An associate of mine felt that they do not know and used himself as an example. He stated that he needed to get his wife a birthday gift but had no idea what to get her. I asked him where he would go to look for this gift and he replied Target. I asked why Target and he replied because they carry a variety of things at a good cost and that his wife shops there a lot. HHHmmmm – so he had a vague idea. His basic need was a gift. But he did not know in detail what the gift should be. He also knew where she liked to shop.

Just like my associate, the customer may be not know in detail   what they want,  but they came to your company because they thought it could fill their basic need, that it had something of value that they wanted.   He walked in there vs.  a hardware store because he felt his success would be better there. If you were the Target employee you need to LISTEN to what he needs and help him find it by asking questions about his wife. You will  find out if you have something that will meet his need (customer value) or not. If you can not fill his need, you want to send him on his way and maybe help him to the right store that can fill it.

In the example above did you notice that we were talking mainly about function? But he was implying that he needed it NOW from this STORE and at a GOOD PRICE (the delivery process). What if you do not meet those other three? He’s gone most likely. Below is a Customer Value Loyalty Grid that has on the left side the product or service “Functionality” and at the bottom the delivery process.

Customer Value Loyalty Grid


If you look at your business you want it to be in the green area otherwise you are at risk of loosing your customer.


So how do I define Customer Values? There are three criteria that define Customer value an everything that is performed that adds value to the customer meets all three of these criteria. The are:

  1. Does the customer care about it? (Is the customer willing to pay for it to be done)
  2. Does the activity physically change the item? (in a service environment it could be that a form is filled in)
  3. Is it done right the first time? Customers are not willing to pay for “redo’s”.



Based on Facts and Data

Six Sigma uses facts and data to understand, reduce and control variation in your business processes, variation that you now compensate for which cost you money. An Experienced employee, even you, can look at simple problems and solve them 80% of the time but when the problem gets to be complex your experience will only solve it about 20% of the time. In Six Sigma we say “GEMBA” (Go See) go out on the floor (office business, or production) and collect real data on how things are done. You will be amazed as to the difference between what you thought and what is really happening. There is variation everywhere. To reduce it or eliminate it your first have to understand it. Understanding and addressing variation helps you predict outcomes that you had to compensate for before; outcomes that impact your customer needs. In Six Sigma we collect these facts and data on the variation to come up with conclusions by seeing the patterns in the shifting (variability) of the process.



[1] 56th AQC – Ron Bane Leading Edge Quality Approaches in Service, Education, Shipping, Government Non Manufacturing Organizations


[2] 56th AQC – Ron Bane Leading Edge Quality Approaches in Service, Education, Shipping, Government Non Manufacturing Organizations


[3] General Electric 1997 Annual Report


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

1.520.829.0090

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