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Blog : Six Sigma

Six Sigma (6σ) is a set of techniques and tools for process improvement. It was introduced by engineer Bill Smith while working at Motorola in 1980. Jack Welch made it central to his business strategy at General Electric in 1995. A six-sigma process is one in which 99.99966% of all opportunities to produce some feature of a part are statistically expected to be free of defects.

Six Sigma strategies seek to improve the quality of the output of a process by identifying and removing the causes of defects and minimizing variability in manufacturing and business processes. It uses a set of quality management methods, mainly empirical, statistical methods, and creates a special infrastructure of people within the organization who are experts in these methods. Each Six Sigma project carried out within an organization follows a defined sequence of steps and has specific value targets, for example: reduce process cycle time, reduce pollution, reduce costs, increase customer satisfaction, and increase profits.

The term Six Sigma (capitalized because it was written that way when registered as a Motorola trademark on December 28, 1993) originated from terminology associated with statistical modelling of manufacturing processes. The maturity of a manufacturing process can be described by a sigma rating indicating its yield or the percentage of defect-free products it creates—specifically, within how many standard deviations of a normal distribution the fraction of defect-free outcomes corresponds to. Motorola set a goal of “six sigma” for all its manufacturing.

The term “six sigma” comes from statistics and is used in statistical quality control, which evaluates process capability. Originally, it referred to the ability of manufacturing processes to produce a very high proportion of output within specification. Processes that operate with “six sigma quality” over the short term are assumed to produce long-term defect levels below 3.4 defects per million opportunities (DPMO). The 3.4 dpmo is based on a “shift” of +/- 1.5 sigma created by the psychologist Dr Mikel Harry. He created this figure based on the tolerance in the height of a stack of discs. Six Sigma’s implicit goal is to improve all processes, but not to the 3.4 DPMO level necessarily. Organizations need to determine an appropriate sigma level for each of their most important processes and strive to achieve these. Because of this goal, it is incumbent on management of the organization to prioritize areas of improvement.

“Six Sigma” was registered June 11, 1991 as U.S. Service Mark 1,647,704. In 2005 Motorola attributed over US$17 billion in savings to Six Sigma.
Other early adopters of Six Sigma include Honeywell and General Electric, where Jack Welch introduced the method. By the late 1990s, about two-thirds of the Fortune 500 organizations had begun Six Sigma initiatives with the aim of reducing costs and improving quality.

By Fabian Gracias.
Fabian has 15+ years of experience in Finance & Accounts.

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