SIX
SIGMA
PRESENTED BY,
GAURAV H. NANJANI
PGDBM. BATCH 0911
RIZVI MANAGEMENT INSTITUTE.
BANDRA (w) MUMBAI
What is Sigma
qSigma is a letter in the Greek Alphabet.
qSigma is defined as "a statistical unit of
measurement that describes the distribution
about the mean of any process or
procedure" .
qAs the sigma value is raised, the variation
around the mean value decreases,
eventually approaching zero variation,
mythically known as "zero defects".
WHAT IS SIX SIGMA?
Six Sigma is defined as a type of business
improvement methodology.
Its main objective is to implement a vigorous
process to systematically eliminate defects
and inefficiency.
It was originally developed by Motorola in the
early 1980's .
Six Sigma's main purpose or objective is to
deliver high performance, value and
reliability to the customer.
Six Sigma Definitions
Business Definition
ü A break through strategy to significantly improve
customer satisfaction and shareholder value by
reducing variability in every aspect of business.
Technical Definition
ü A statistical term signifying 3.4 defects per million
opportunities.
QUALITY LEVELS
Sigma Defects Per Million Rate of
Level Opportunities Improvement
1 690,000 NIL
2 308,000 2 times
3 66,800 5 times
4 6,210 11 times
5 230 27 times
6 3.4 68 times
5
ABSTRACT
The case examines the initiatives taken by GE,
one of the world's largest diversified
companies to implement the Six Sigma
quality tool in the 1990s.
The case discusses in detail the concept of Six
Sigma, its implementation procedure and its
benefits.
It also explores the implementation procedure
at GE and the benefits reaped by the
company on account of adopting Six Sigma.
AN OVERVIEW OF GE.
Ø General Electric businesses listed in fortune 500.
Ø It operated in more than 100 countries and had
over 250 manufacturing plants in 26 countries.
Ø It had a strong presence in the financial services,
consumer durable goods and entertainment
business.
Ø G E had strong focus on R&D and quality since its
inception.
Ø GE’s products ranged from small compact discs to
powerful locomotives.
SIX SIGMA AT GENERAL ELECTRIC
The groundwork for the implementation of Six
Sigma at GE had begun in 1988 in the form
of an initiative known as the 'WorkOut'
program.
Jack Welch, Chief Executive Officer of GE, has
set a company-wide goal to have all
processes reach Six Sigma Quality by the
year 2000.
Welch and GE realize that attaining Six Sigma
Quality will require retraining their entire
workforce to think and act like engineers --
an enormous feat with remarkable benefits.
IMPLEMENTATION
qBefore 6 sigma GE operations were carried out
between 3-4 sigma.
qThe company realized that employees were an
important source of intellectual power for
new & creative ideas.
qThe program had set 4 major goal:
üBUILD TRUST.
üEMPOWER EMPLOYEES.
üELIMINATE UNNECESSARY WORK.
üCREATE A NEW PARADIGM FOR GE.
OUTCOME
qRevenues have risen to $100 billion, up 11%
Earnings have increased to $9.3 billion, up
13%
qEarnings per share have grown to $2.80, up
14%
qOperating margin has risen to a record 16.7%
qWorking capital turns have risen sharply to
9.2%, up from 1997's record
q
Who is Implementing Six
Sigma
At least 25% of the fortune 200 claim to have a
serious six sigma program.
Financial - Bank of America, GE Capital,
Electronics - Allied Signal, Samsung, Sony.
Chemicals - Dupont, Dow Chemicals.
Manufacturing - GE Plastics, Johnson and
Johnson, Motorola, Nokia, Microsoft, Ford.
Airline - Singapore, Lufthansa, Bombardier
And hundreds of others in Americas, Europe, Sub
Continent.
Six Sigma Results
Company Annual Savings
General Electric $2.0+ billion
JP Morgan Chase *$1.5 billion (*since inception in 1998)
Motorola $ 16 billion (*since inception in 1980s)
Johnson & Johnson $500 million
Honeywell $600 million
ØSix Sigma Savings as % of revenue vary from 1.2 to 4.5 %
Ø
ØFor $ 30 million/yr sales – Savings potential $ 360,000 to $ 1.35 million.
Ø
ØInvestment: salary of in house experts, training, process redesign. 12
Six Sigma Companies in India
THANK YOU
