22-01-2013, 10:43 AM
Six Sigma Success Story: GE
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INTRODUCTION
GE consistently ranks among industry leaders in Six Sigma experience and success. An early adopter of the philosophy, GE launched its initial Six Sigma efforts in 1995. In its 1996 Annual Report, the company stated: "It has been estimated that less than Six Sigma quality, i.e., the three-to-four Sigma levels that are average for most U.S. companies, can cost a company as much as 10-15% of its revenues. For GE, that would mean $8-12 billion."
At the January 1996 gathering of GE's top managers, CEO Jack Welch called the program "the biggest opportunity for growth, increased profitability, and individual employee satisfaction in the history of our company." Within four years, he continued, "we want to be not just better in quality, but a company 10,000 times better than its competitors."
Welch made quality the job of every GE employee: senior bonuses and promotions at all levels would be tied to Six Sigma performance and certification. Welch described it as "changing the DNA of the company."
Welch's profit-impact predictions turned out to be particularly insightful, as indicated by the following statistics on the financial impact of Six Sigma implementation at GE from 1996 to 1998:
Revenues have risen to $100 billion, up 11%
Earnings have increased to $9.3 billion, up 13%
Earnings per share have grown to $2.80, up 14%
Operating margin has risen to a record 16.7%
Working capital turns have risen sharply to 9.2%, up from 1997's record of 7.4
Welch recognized that the program was not just for engineers and technical minds. He found it can be used in a variety of situations in which a company's best and brightest are engaged in this quality program, such as:
Plant managers, who can use Six Sigma to reduce waste, improve product consistency, solve equipment problems or create capacity.
Human resources managers, who can use it to reduce the cycle time for hiring employees.
Regional sales managers, who can use it to improve forecast reliability, pricing strategies or pricing variation.
Welch and his management team discovered that virtually anyone from executive to administrative or janitorial staff can use Six Sigma to better understand their customers' needs and tailor their service offerings to customers' needs.
Welch did admit, though, that he wasn't able think of a way in which Six Sigma could be successfully used by lawyers, because they make a living off variance the very thing Six Sigma is designed to eliminate.
Six Sigma Project Introduction
Six Sigma, pioneered by Motorola and popularized by General Electric, is one of the primary quality initiatives of the time. Six Sigma has been billed as a critical business tool for the 21st century. In a fast changing business environment, companies have used Six Sigma initiatives to gain improvements in process and product quality. The success that companies have enjoyed lies in the ability to tie project results directly to improved customer satisfaction ratings and bottom line savings.
The name, Six Sigma, is taken from the approach's statistical roots. If a product or process has a six sigma level of consistency, then it is experiencing only 3.4 defects per million. In other words, six sigma products and processes are 99.99966% consistent. In order to reach these results, Six Sigma efforts pursue the following five objectives:
Define the problem area in objective terms
Measure the performance of products and processes
Analyze the problems to identify root causes
Improve the results by redesigning processes and reducing variation
Control the processes to ensure the improvements are permanent
Business modeling provides for a concise structure and definition of all aspects of the business. Statistical analysis aids in pinpointing current process problems, and verifies the expected level of performance improvements a redesigned process should realize. This paper is intended to show how the Provision Modeling Suite supports Six Sigma efforts. Some basic familiarity with the Provision software and Six Sigma is assumed.
Six Sigma Project Overview
A classical Six Sigma project consists of 5 phases: Define Measure, Analyze, Improve and Control (DMAIC):
Define: In the Define phase, project objectives and boundaries are set. These project objectives are based on the organization's business goals, customer needs and knowledge of processes that must be improved in order to reach a higher sigma level. The primary outputs of the Define phase are:
Project Scope visually related in a Business Interaction Model
Critical Goal Model based upon "the Voice of the Customer"
Association matrices of critical goals to business deliverables and business processes
Supplier-Input-Process-Output-Customer (SIPOC) Model for each business process
Impacted roles optionally structured in an Organization Model
Measure: In the Measure phase, the goal is to pinpoint the location or source of problems by building an understanding of existing process conditions and problems. An important output of this phase, built within Provision, is the "As-Is" Workflow Model. This model aids in understanding the business process, and identifies where measurements should be taken.
Conclusion
Application of Six Sigma at General Electric brought a marked culture change in the attitude of individual employees toward quality, translating into dramatically lower service-call rates, and improved product reliability. The Six Sigma effort at GE contributed $700 million in corporate benefits in 1997, just two years into the program.
From a small beginning to improving product quality by reducing defects at the workplace, the scope of Six Sigma at GE has expanded over the years, and today Six Sigma’s customer focused, data driven philosophy defines how GE works.