General Electric, one of the most successful companies implementing Six Sigma, has estimated benefits on the order of $10 billion during the first five years of implementation. GE first began Six Sigma in 1995 Six Sigma translates into a target of no more than 3. 4 defects per million products, customer services included Welch called six sigma the most difficult stretch goal GE had ever undertaken It was pointed out that the gap between three sigma and six sigma was costing GE between $7 and $10 billion annually in scrap, rework, transactional errors and lost productivity What is Six Sigma ?
Business world often describes Six Sigma as a highly technical method used by engineers and statisticians to fine-tune products and services. Another school defines Six Sigma as pursuing a goal near-perfection in meeting customer requirements by achieving 3. 4 parts per million potential defects. Cultural change is also a valid way to describe Six Sigma. GE puts a lot of emphasis on cultural change such as breaking down the white space between departments, employee empowerment, etc. Specific reasons for initiating Six Sigma?
World-class companies such as GE have recognized that quality assurance initiatives are synonymous with profit enhancement. ? The reason why does companies decide to emphasis in quality program could be much easier to justify because there are researches have proven that this cost are much cheaper than cost of quality. ? The CEO of Company stated – Within four years, “we want to be not just better in quality, but a company 10,000 times better than its competitors,” he announced.
“We want to change the competitive landscape by being not just better than our competitors, but by taking quality to a whole new level ? GE has successfully been applying Six Sigma for a number of years. GE identified four specific reasons for implementing it: ? Cost reduction ? Customer satisfaction improvement ? Wall Street recognition ? Corporate synergies. The Six Sigma program was launched in 1995 with 200 separate projects supported by a massive training effort. In the following two years a further 9000 projects were successfully undertaken, and the reported savings were $600 million. The training investment for the first five years of the program was close to $1 billion.
GE also instituted a personnel recruitment plan to augment the cadre of dedicated full-time Six Sigma staff. One Method they used for FIRM implementation was – Setting Individual Performance Standards ? Enormous energy and passion for the job – a real leader – sees it operationally, not as a “staffer. ” ? Ability to excite, energize, and mobilize organization around six sigma benefits – not a bureaucrat. ? Understands six sigma is all about customers winning in their marketplace and GE bottom line. ? Has technical grasp of six sigma, which is equal to or bettered by strong financial background and capability.
The Implementation was done in Phases ? Phase one : Business units select champions and Master Black Belts. The Six Sigma academy recommends one Champion per business group and one Master Black Belt for every 30 Black Belts ? Phase two : Champions and Master Black Belts undergo training. The overriding deployment plan is developed ? Phase three: Champions and Master Black Belts, with the assistance of Black Belts, begin identifying potential projects ? Phase four :Master Black Belts receive additional training, focusing on how to train other staff
? Phase five :Black Belts undergo training and the first projects are officially launched ? Phase six :Black Belts begin training Green Belts The GE program revolved around the following few key concepts, all focused on the customer and internal processes: ? Critical to Quality – the determination of and development of attributes most important to the customer ? Defect – the identification of failure to meet customer wants ? Process capability – what the process can deliver ? Variation – what the customer sees and feels, as against what the customer Wants
? Stable operation – ensuring consistent and predicable processes to improve what the customer sees and feels ? Design for Six Sigma – designing to meet customer needs and process capability. Cost to saving ratio The tools of the Six Sigma initiative are not new, but as they have been implemented at General Electric (GE), they have produced extraordinary productivity gains that have helped fuel double-digit sales and profit growth throughout GE’s diverse operating companies • 20 per cent margin improvement • 12–18 per cent capacity increase • 12 per cent reduction in headcount • 10 per cent to 30 per cent capital expenditure reduction.
Benefits GE Medical Systems – in the introductory year there were 200 successful projects GE Capital – invested $6 million over four years to train just 5 per cent of the work force who worked full time on quality projects, and 28 000 quality projects were successfully completed GE Aircraft Engines – the time taken to overhaul engines reduced by an average of 65 days GE Plastics – in just one project, a European polycarbonate unit increased capacity by 30 per cent in eight months.
GE saved $12 billion over five years and added $1 to its earnings per share. The Six Sigma methodology has become more deeply ingrained in GE’s corporate culture than any other company. Throughout the development and deployment of the program, GE has benchmarked the Six Sigma methodology from other companies, including Motorola and AlliedSignal, to ensure that the process is implemented for maximum benefit. On 8 May 2002 GE announced that it will deliver record earnings in 2002of more than $16. 5 billion, and it comfortably forecast double-digit earnings growth for 2003. ———————– AQM Case study