Cost reduction strategies
6-sigma
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SIX SIGMA
6-Sigma refers to a quality improvement and business strategy concept started by Motorola in the
United States in 1987. In statistical terms, 6-Sigma is the abbreviated form of 6 standard
deviations from the mean, which mathematically translates to about 2 defects per billion. Thus,
strictly speaking, your process is said to have achieved 6-sigma if it is producing no more than 2
defects per billion parts produced.
No company is probably nearly perfect enough to achieve this quality level. Consequently, the
term 6-Sigma in the industry has somehow taken on the equivalent defect rate of 3.4 ppm, which
in reality corresponds to roughly 4.5 sigmas. Thus, in the industry today, a person speaking of
6-sigma is most likely referring to a quality level equivalent to 3.4 defects per million.
Regardless of how one wishes to use the term 6-sigma, though, it is apparent that its purpose
when its concept was first incepted is to make processes as consistent as possible in order to
reduce the defect rates of their outputs. Consistency of meeting customer specifications as well as
the probability of meeting them consistently in the future is the essence of 6-sigma.
6-Sigma has evolved into a continuous, disciplined, and structured process of improving
operations to make products that are consistently meeting customer requirements. In effect,
6-Sigma no longer simply means excellent finished products, but more importantly, excellent
processes, servicesand administration. When Motorola started 6-Sigma in the 80's, it was applied
to repetitive manufacturing processes. Presently, however, the use of 6-Sigma is well-established
in almost all aspects of doing business in a wide range of industries.
6-Sigma encourages leanness, simplicity, and doing things right the first time, so that wastes and
corresponding costs are avoided. Statistics-based problem solving, results-orientation, and
quantifiable top and bottom-line returns are also ingredients of 6-Sigma. Lastly, 6-Sigma is driven
by the voice of the customer.
6-Sigma has spawned several Project Management methods, the most widely-used of which are
discussed below.
Define, Measure, Analyze, Improve, and Control (DMAIC)
'DMAIC' stands for the following:
1) Define opportunities, i.e., project goals in relation to customer requirements;
2) Measure the current performance of the process;
3) Analyze the weakness of the process (such as sources of defects); this process weakness is
also the opportunity for its improvement;
4) Improve the performance of the process by addressing its weaknesses; and
5) Control the performance of the improved process to sustain its gains.
The DMAIC method is employed in situations wherein a product or process already exists but it is
not meeting customer specifications.
Tools -Process Improvement
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