Quality 101: Understanding Six Sigma

March 1, 2004
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The quality management process helps achieve, sustain and maximize business success.

As the economic recession continues to bite, business leaders are responding by getting back to business basics. They take fewer risks, focus on profitability, control and reduce costs, and stress customer satisfaction and retention. Organizations have found success using Six Sigma to address these business imperatives.

Six Sigma is a quality management process for achieving, sustaining and maximizing business success. Its

customer-driven approach and focus on defect elimination has a measurable impact on a company's bottom line. A close understanding of customer needs, rigorous measurement and statistical analysis drives the process. Six Sigma improves quality and cuts costs throughout an enterprise, from manufacturing to sales and customer service. It provides a measure of quality that allows comparisons to be made between radically different business activities. As a result, executives can see where money is being wasted because of errors, where improvement is required, where quality problems are constraining revenue growth and where breakthroughs in improvement are being achieved.

Six Sigma is a generic quality management method that can be applied to any business process. It provides both a measure of and a target for quality, together with a set of techniques that help practitioners remove the defects that inhibit service quality.

The premise of Six Sigma is that companies need consistently higher levels of quality and lower levels of cost and that a disciplined, organized approach will root out the variance, waste and errors that plague operations. It does not address problems at a superficial level. Rather, it attacks the root causes of problems.

Six Sigma is a process of management that encourages businesses to stop what they are doing, examine how well they have done it and then implement improvements to iron out defects. Most organizations focus only on the operational aspects of their business, seldom stopping to ask themselves, "What went wrong? What can be done better next time?" Six Sigma forces people to continually evaluate critical processes.

Six Sigma helps practitioners prioritize resources based on an understanding of what is critical to quality (CTQ). CTQ functions are those that have the greatest impact on the customer. The return on improvement will be the greatest with activities that focus on CTQ applications. Related to this is the cost of poor quality (COPQ)-the cost to the business when things go wrong. Understanding CTQ processes and their associated COPQ is an important aspect of the initial stages of a quality improvement project. Eliminating COPQ is the goal of the project. The cost of poor quality includes both the visible and invisible costs of dealing with defects.

Examples of the visible cost of poor quality are employee overtime and the actual time spent repairing a problem. The invisible cost-the ultimate consequences of the problem-are more severe. They include lost sales, late delivery penalties, long cycle times and handling customer complaints.



Finding shortfalls

Having understood where to focus improvement activities and how much this will save the business, the next step is to locate quality shortfalls. Research has been conducted on the effort expended as a result of defects and rework.

The Six Sigma quality management method rates quality on a numerical scale that corresponds to the amount of variation that exists in the execution of a process. This measure of variation is called standard deviation. The greater the variation, the more effort and money that are spent dealing with it. In Six Sigma terms, 1 indicates high variation and 6 or more is low.

Studies of organizations using Six Sigma show measurable increases in their bottom-line profitability when the quality reaches 6-sigma, or the equivalent of 3.4 defects per million opportunities. Analysis of organizations that have reached 6-sigma in their critical-to-quality business operations shows that less than 1% of their revenue is spent dealing with problems.

Process sigma, the measure of quality, can be calculated for any activity from which measurements can be taken. This provides additional insight into service quality over the metrics more commonly associated with service management, such as throughput and availability, because process sigma gives an indication of defects over time. The process sigma value allows practitioners to more easily identify where improvement projects need to be initiated, compare the progress of different improvement projects, and even evaluate the quality provided by internal and external service providers.



Tools

Two other Six Sigma techniques are of significance-failure modes and effect analysis (FMEA) and Pareto charts. FMEA is a technique that identifies and then eliminates the risks inherent in the execution of a process. Failure modes are analyzed to determine the potential effects on the process and its causes for failure. Potential problems are prioritized by multiplying together values for severity, probability of occurrence and detectability before developing an action plan to reduce this risk.

Pareto charts rank failure modes by number of defects. That is, identifying the small amount of failure modes that give rise to the greatest number of defects. Focusing on ways to resolve these problems will provide the greatest payback from the quality improvement project.

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