How is your Quality?

Does the executive management of your organization really know why they are suffering on the bottom line? Why there are consistent operational problems which reduce productivity, lower profits and leads to poor customer satisfaction?

Forward looking companies have experienced a paradigm shift. They realize that its easier to move into a higher state of awareness about what is needed to improve productivity, profitability and customer satisfaction to meet the intense challenges of the 21st century.

The saying "If you can't measure it, then you can't manage it" has never been a more relevant statement than in today's business environment. So, if this statement is true, how many organizations are in actual control of their operations to a point where they make crucial business decisions based on real time data?

Knowledge is Power - Francis Bacon

Before you can improve anything you must know where you're starting from and develop a baseline. Next, you use this baseline data to create a plan to define where you want to end up. Check out our page on Strategy Deployment.

If what you know is allowing you to see opportunities for improvement and moving your organization ahead of your competitors, then you're business is growing and increasing it's market share.

If what you don't know is hiding the opportunities for improvement and dragging your organization back to always be behind your competitors, then you're business is shrinking and loosing market share.

One of the best systems to help your organization develop knowledge to determine where you are now and create a better understanding of how and where your business needs to go next is called "Six Sigma."

What is Six Sigma?

Six Sigma was introduced by Motorola in the late 1980's and then developed into what it is today by General Electric. Several major companies including General Motors, Ford, Bank of America are using the Six Sigma process as a business improvement tool which has resulted in savings of billions of dollars by uncovering waste and the costs associated with it.

Six Sigma is a method for understanding and then controlling variation in order to improve the capability of a process. The term "sigma" is derived from a statistical measure of variation known as "standard deviation."

Most companies operate in between 3 to 4 sigma and as you can see in the table below this range has more variation because of the reduced yield and increased number of potential defects. When you follow this through to the bottom line, companies are loosing money because hidden waste has become deeply rooted inside their processes. This ultimately results in lower yields, increased variation creating inconsistent quality, poor customer satisfaction and reduced profits.

In their book, Mikel Harry and Richard Schroeder make a statement: "At three sigma, the cost of quality is roughly 25 to 40 percent of sales revenue." (from Six Sigma, The Breakthrough Management Strategy, Published by Doubleday, a division of Random House in 2000).

The impact of cost of quality to the bottom line is huge, yet most companies accept it as a necessary evil.

If an organization can perform at 6 sigma, they have a yield of 99.9997% with only 3.4 defects per million opportunities (DPMO). This means they can operate at 0.0003% less than perfection which is why many companies are now implementing programs with a goal of achieving 6 sigma as a standard for their business operations.

Six Sigma has a specific process of application known as the DMAIC model and this is why it is very different from any other quality program. DMAIC is an acronym for:

Define - Measure - Analyze - Improve - Control