Six Sigma: Productivity and Efficiency, Sustained Continuous Improvement, and Sustainable Competitive Advantage

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Executive Summary

Many claim that the Six Sigma methodology for process improvement can support dramatic impacts for businesses and organizations in the service sector and the manufacturing sector. The reported positive impacts include: i) improvements in productivity and efficiency, ii) sustained continuous improvement, and iii) sustainable competitive advantage. Yet, critics of Six Sigma report that more than half of Six Sigma initiatives result fall short of the goals of the project. With these claims in mind, the current report provided an analytical treatment of the following research questions:

Q1: Does productivity and efficiency increase with the implementation of Six Sigma strategies? Q2: Do Six Sigma strategies correlate to sustained continuous improvement?

Q3: Are organizations able to sustain their competitive advantage with the implementation of Six Sigma strategies?

It was postulated that that successful implementation of Six Sigma (i.e., an implementation that yields affirmative responses to all three research questions) is contingent upon the commitment and support of executives and members of upper management. For the purpose of testing the basic research questions of the current study, four case studies were analyzed: i) paper manufacturing company, ii) defense contractor (Six Sigma implementation for financial function), iii) Seagate, and iv) General Electric. Findings of the current report indicate that implementation of the Six Sigma role structures represents a cultural paradigm shift for many organizations. Given this fact, a key finding is that organizational behavior is always a function of top-down direction and influence. Even further, it is the responsibility of top executives in any organization to provide role definitions, performance expectations, and project oversight. Thus, Six Sigma initiatives can be successful only when executives are committed to the Six Sigma initiative. Most critically, top executives must ensure that Six Sigma role structures are integrated into the human infrastructure of the organization. Summarily, this requires a virtual culture shift in the organization.

Six Sigma: Productivity and Efficiency, Sustained Continuous Improvement, and Sustainable Competitive Advantage

For more than two decades, Six Sigma has garnered much attention in business and academic circles for its far-reaching claims. Specifically, proponents of Six Sigma contend that this method for strategic process improvement can support dramatic impacts for businesses and organizations in the service sector and the manufacturing sector. The impacts include: i) improve productivity and efficiency, ii) enable sustained continuous improvement, and iii) help companies achieve sustainable competitive advantage. In this respect, numerous case studies appear to support these broad sweeping claims about the power of Six Sigma. At the same time, however, critics of Six Sigma point out that more than half of Six Sigma initiatives fail. Summarily stated, the debate over whether Six Sigma can deliver as advertised is far from settled.

Research Questions

Q1: Does productivity and efficiency increase with the implementation of Six Sigma strategies?

Q2: Do Six Sigma strategies correlate to sustained continuous improvement?

Q3: Are organizations able to sustain their competitive advantage with the implementation of Six Sigma strategies?

Initial Response/Thesis

As for initial responses to the research questions, it is hypothesized that each question will be answered in the affirmative. Qualifications are, however, necessary for providing such validations of the effectiveness of Six Sigma in relation to improving productivity and efficiency, enabling sustained continuous improvement, and helping companies achieve sustainable competitive advantage. In the Six Sigma implementation process, moderating factors concern how well/effectively human resource practices (i.e., the Six Sigma black and green belt system) is “integrated into the organization's human infrastructure” (GE, n.d., p. 33). The current study will demonstrate that successful implementation of Six Sigma (i.e., an implementation that yields affirmative responses to all three research questions) is contingent upon the commitment and support of executives and members of upper management.

Literature Review

Six Sigma is defined as “an organized and systematic method for strategic process improvement and new product and service development that relies on statistical methods and the scientific method to make dramatic reductions in customer defined defect rates” (Fursule, Bansod & Fursule, 2012, p. 5). Six Sigma consists of two fundamental methodological components: DMADV and DMAIC. The acronym DMADV stands for five phases of product methodology: define, measure, analyze, design, and verify. Phase descriptions of DMADV are summarized as follows:

Define: The define phase concerns problem identification and articulation of design goals.

Measure: The measure phase calls for the identification of four parameters: “CTQs (characteristics critical to quality), product capabilities, production process capability, and risks” (Mandahawi, Al Hadeethi & Obeidat, n.d.).

Analyze: The analyze phase involves the design of solution options and the choice of the best option.

Design: The design phase involves the optimization of the design.

Verify: The verify phase calls for three actions: i) verify the design, ii) testing, and iii) implementation (Mandahawi, Al Hadeethi & Obeidat, n.d.).

DMAIC stands for define, measure, analyze, improve, and control. Phase descriptions of DMAIC read as follows:

Define: The define phase concerns problem identification and definition in terms of the basic objects of the initiative: Target processes, goals, and objectives.

Measure: The measure phase calls for the operationalizing of key performance metrics that will be used as benchmarks for initiative success.

Analyze: The analyze phase takes aim at identifying and prioritizing the root causes of the process performance gap(s) which is always expressed in Six Sigma terminology as waste.

Improve: The improve phase calls for the creation of innovative solutions to address the causes of the process performance gap(s) identified in the previous phase.

Control: The control phase involves the development and implementation of methods for monitoring system improvements.

Belt Roles

To support total involvement by company employees, Six Sigma designates roles including steering team, champion, master black belt, and black belt/green belt. The "executive steering team" (headed by the CEO of the company) consists of the senior team members who oversee and facilitate the sustainability of the Six Sigma goals (Knowles, 2011, pp 55-56; Barone & Lo Franco, 2012, p. xxvii). Champions take responsibility for keeping employees focused on the Six Sigma objectives. In this respect, champions propagate a vision for the organization and help maintain morale. Finally, black belt or green belt roles give workers the opportunity for "job enrichment and career enhancement" (Harris Ehrlich, 2002, p. 33).

Six Sigma Success Cases

Since being first created and introduced by Motorola in the late 1980s, Six Sigma methodologies have been used widely and successfully in both the service sector and manufacturing sector. In manufacturing, some of the high profile Six Sigma success stories include: General Electric (GE), Allied Signal (now Honeywell), Samsung, Lockheed Martin, Dell Computers, and Boeing, to name just a few (Huesing, 2008). In the service sector, some of the high profile Six Sigma success stories include Bank of America and Citigroup, CIGNA, Starwood Hotels and Resorts, and healthcare providers like United Health Group (Huesing, 2008). According to proponents of Six Sigma, these major case studies (and numerous others like them) provide evidence that Six Sigma can live up to the high expectations of some of the top CEOs and executives in the world. The cases supposedly demonstrate, more exactly, that with the implementation of Six Sigma strategies: productivity and efficiency increase; sustained continuous improvement is supported; and, sustainable competitive advantage is supported.

Six Sigma Limitations and Criticisms

Despite all the Six Sigma implementation success stories of high profile corporations in the manufacturing and service sectors, researchers report that close to “60% of all corporate Six Sigma initiatives fail to yield desired results” (Fursule, Bansod & Fursule, 2012, p. 2). For many researchers and business experts, this high rate of failure raises red flags and questions about Six Sigma. Most notably, researchers are concerned with identifying the reasons/causes of Six Sigma implementation failures. Further, researchers are focusing more and more attention on potential Six Sigma implementation moderating variables (i.e., factors that affect the relationship between Six Sigma dependent and independent variables). Summarily, substantial evidence exists to suggest that high profile Six Sigma success stories may not provide sufficient support for the claim that Six Sigma strategies increase productivity and efficiency, resulting in sustained continuous improvement, and/or support sustainable competitive advantage.

Analysis of Findings

As indicated above, the debate over Six Sigma and whether it can deliver as advertised is anything but settled. With a nearly 60% failure rate, one must ask whether large companies like GE, Samsung, Bank of America, and others are simply using Six Sigma as some type of public relations ploy. Along these lines, some researchers point out “the objective of Six Sigma programs is to create higher perceived value of the company's products and services in the eyes of the customer” (Fursule, Bansod & Fursule, 2012, p. 2). Most likely, large corporations also use Six Sigma to posture themselves favorably in the eyes of investors and stock market players from Wall Street. A more detailed analysis is, therefore, in order. For the purpose of testing the basic research questions of the current study, the following section analyzes four case studies: i) paper manufacturing company, ii) defense contractor (Six Sigma implementation for financial function), iii) Seagate, and iv) GE.

Case Study 1: Paper Company

Mandahawi, Al Hadeethi, and Obeidat, (n.d.) investigated a local paper manufacturing company facing the challenge of trying to improve productivity and efficiency without increasing resources. In turning to a Six Sigma implementation strategy to eliminate process performance gaps (i.e., waste), executives of the paper manufacturing company identified problems related to on-time deliveries. Specifically, it was found that “only 77% of customer orders were delivered on time” (Mandahawi, Al Hadeethi & Obeidat, n.d.). Using the DMAIC cycle, executives, therefore, established the goal of improving target processes related to printing and cutting. The targets are summarized as follows:

Targets are set to increase the production rate for the cutting machines from 4400 sheets/hour to 4700sheets/hour, to minimize cutting wastes from 0.25% to 0.15%, to increase the production rate for the printing machines from 6500 sheets/hour to 6750 sheets/hour, and to minimize printing wastes from 3.07% to 2.00%. (Mandahawi, Al Hadeethi & Obeidat, n.d.)

During the analysis phase, team members identified a dozen types of waste in printing and cutting. With waste variables like machine jams, machine entropy, and mechanical problems having been identified and prioritized, creative solutions (based on Six Sigma phases: improvement and control) were developed and implemented. The results of the study revealed that “the production rate increment for printing machines [improved] by 5% and for the cutting machines by 10%. Moreover, the OEE [Overall Equipment Effectiveness] for the printing and cutting machines increased by 21.6% and 48.45% respectively” (Mandahawi, Al Hadeethi & Obeidat, n.d.).

The local paper manufacturer case study provides empirical support for research question number one of the current study. Specifically, the case study shows that Six Sigma implementations can increase productivity and efficiency. Support was also found for research question two. By implementing targeted solutions to prioritized root causes of waste and implementing monitors and controls, the company demonstrated sustained continuous improvement. Company executives insisted, however, that the entire culture of the company would be adapted to conform to the Six Sigma model. In other words, the key caveat of this case study is that executives of the paper manufacturing company were strongly committed to the Six Sigma initiative. Thus, this case study provides support for the thesis of the current report: that ‘successful implementation of Six Sigma (i.e., an implementation that yields affirmative responses to all three questions) is contingent upon the commitment and support of executives and members of upper management.’

Case Study 2: Defense Contractor Six Sigma implementation for financial function

Ansari, et al. (n.d.) investigated a major defense contractor confronting challenges inefficiencies in the financial function of the organization. This was a special Six Sigma initiative because the major defense contractor worked under a number of tight constraints imposed on the company by the Department of Defense (DOD). Specifically, DOD imposed strict security standards, limited data privileges, government reporting standards, and other restrictions that posed potential stumbling blocks at key stages of the DMAIC cycle. The project was also quite ambitious in attempting to apply Six Sigma to 40 different projects in the financial function of the defense contractor. Overall, the common goal of the projects, nonetheless, was to improve efficiency in costing and planning across the entire enterprise. The findings of the study revealed that the Six Sigma implementation for the defense contractor yielded statistically significant improvements for the following variables: average cycle time, average cycle cost, and per unit of activity required for producing financial reports. Most impressively, the Six Sigma implementation yielded “100 hours reduction in cycle time, resulting in cost savings of $130,000 per year or roughly a 64 percent reduction” (Ansari, et al., n.d.).

The defense contractor case study provides empirical research support for research question number one of the current study. Productivity and efficiency were improved in rather dramatic fashion - again, close to a 64% reduction in cycle time. The Six Sigma project at the defense contractor company was supported by a strong commitment of senior executives. As such, the company attended carefully to Six Sigma role structures and team compositions. A complete buy-in was, thereby, advanced in the organization such that a Six Sigma culture was achieved during the implementation. Thus, this case study provides additional support for the thesis of the current study which holds that successful implementation of Six Sigma is contingent upon the commitment and support of executives and members of upper management.

Case Study 3: Seagate Technology International

Basu (2011) investigated Seagate Technology International’s Six Sigma implementation. Seagate is one of the world’s largest manufacturers of computer storage devices. The company used Six Sigma DMAIC and DMADV methodologies to try to strengthen their competitive advantage. Specifically, Seagate utilized process owner, master black belt, champion roles, and project reviews provided by master black belts; instruction was also provided by advanced technology groups (Basu, 2011). Notably, at the beginning of the Six Sigma initiative, the majority of employees had little or no understanding of Six Sigma concepts and processes. This did not, however, prevent the organization from supporting a successful Six Sigma implementation, nonetheless.

The findings of the study showed that Seagate’s Six Sigma implementation saved the company nearly $700 million during the 1990s - figures that have been validated by independent auditing teams (Basu, 2011, p. 114). Six Sigma also resulted in significant improvements in productivity and efficiency. As an outgrowth of the Six Sigma program, Seagate improved its market share to the top position in the industry. The key take away from the Seagate case study concerns the fact that the Six Sigma philosophy was integrated to the point of being “embedded within the organization” (Basu, 2011, p. 115). Thus, this case study provides additional support for the thesis of the current study which holds that successful implementation of Six Sigma is contingent upon the commitment and support of executives and members of upper management.

Case Study 4: General Electric

General Electric implementation of Six Sigma represents one of the highest-profile cases. Martin (2011) reviewed the results from GE’s Six Sigma initiatives; the researcher also investigated the key factors in GE’s successful implementation of Six Sigma. In the late 1980s, GE CEO Jack Welch was committed to creating a culture of high quality in the organization. After a year of struggling on his own to find ways to improve quality at GE, Welch decided to give Motorola’s Six Sigma system a try. In the end, the improvements at GE were numerous and widespread - characterized even as world-class Six Sigma achievements. As an example, Six Sigma implementation helped improve the operating margin from 14.4% to 18.4%; this improvement translated to $2.4 billion in savings for the year 2000 (Martin, 2011; Huesing, 2008).

Overall, the GE Six Sigma program consisted of 130 active Six Sigma teams led by employees who obtained green, black, and master black belt Six Sigma certification (Martin, 2011). As the 1990s progressed, the entire GE organization was transformed into a Six Sigma culture. By 1996, for example, GE had 200 Master Black Belts and 800 Black Belts with 3000 projects in progress; these numbers nearly tripled by 1997 (Huesing, 2008). Ultimately, the researcher found that strong senior leadership support and employee engagement were the key factors that contributed to GE’s successful Six Sigma implementation. Thus, once again, this case study provides additional support for the thesis of the current study which holds that successful implementation of Six Sigma is contingent on the commitment and support of executives and members of upper management.

Summation of Section

Many factors weigh into the success or failure of a Six Sigma implementation. However, the key success factor concerns how the Six Sigma role structures are implemented and managed. Most critically, the implementation of the Six Sigma role structures represents a cultural paradigm shift for many organizations. Given this fact, it must be kept in mind that organizational behavior is always a function of top-down direction and influence. Even further, it is the responsibility of top executives in any organization to provide role definitions, performance expectations, and project oversight.

Summarily, all four case studies demonstrate that Six Sigma initiatives can be successful only when executives exert “their authority and power to integrate the Six Sigma black and green belt system into the organization's human infrastructure” (Fursule, Bansod & Fursule, 2012). Six Sigma should never be construed as a model to support quick fixes to problems related to performance and efficiency, the need for continuous improvement, and/or the goal of achieving sources of sustainable competitive advantage. Six Sigma must be understood, more exactly, as a long-term undertaking that requires the full commitment from upper management (Fursule, Bansod & Fursule, 2012). Without such, organizations attempting to implement a Six Sigma initiative are likely to become just another casualty amidst the nearly 60% failure rate of Six Sigma implementations.

Conclusion

In conclusion, Six Sigma is best understood as a methodology that is designed to support strategic process improvement on the basis of statistical methods and the scientific method. Many claim that the Six Sigma methodology for process improvement can support dramatic impacts for businesses and organizations in the service sector and the manufacturing sector. The reported positive impacts include: i) improvements in productivity and efficiency, ii) sustained continuous improvement, and iii) sustainable competitive advantage. Yet, critics of Six Sigma report that nearly 60% of Six Sigma initiatives fall short of the goals of the project.

Overall, the current study has demonstrated that successful implementation of Six Sigma (i.e., an implementation that yields affirmative responses to all three research questions) is contingent upon the commitment and support of executives and members of upper management. At its most basic level, Six Sigma is all about mobilizing the human resources and talent in an organization. In other words, the advent of well-defined and tightly knit teams helps the organization achieve synergistic results. Yet, as organizational behavior goes in any company, top executives exert a critical/significant influence on culture. Therein, the thesis of the current study has been supported as “the success of Six Sigma methodology implementation ultimately depends on executives’ continuing commitment to the program” (Ansari, et al, n.d.).

The current study has not, of course, settled the debate concerning whether or not Six Sigma initiatives increase productivity and efficiency, correlate to sustained continuous improvement, and/or enable sustainable competitive advantage. The current report was, in fact, limited to a small sample of case studies: i) paper manufacturing company, ii) defense contractor (Six Sigma implementation for financial function), iii) Seagate, and iv) General Electric. For the sake of supporting the cumulative case for Six Sigma, future research should, therefore, continue to examine other Six Sigma cases as they relate to three basic (and highly important) research questions of the current study. The cases should be qualified on the basis of the real intentions of the corporations. In other words, attention must be given to the possibility that some organizations may use Six Sigma as a public relations ploy to gain the favor of investors and/or other stakeholders. Carefully designed case studies can help differentiate between authentic Six Sigma success stories and cases of corporate hype.

References

Ansari, A., Lockwood, D., Thies, E., Modarress, B. & Nino, J. (n.d.). Application of Six-Sigma in finance: a case study. Journal of Case Research in Business and Economics, 1-13. Retrieved from <http://www.aabri.com/manuscripts/10630.pdf.

Barone, S. & Lo Franco, E. (2012, 17 January). Statistical and Managerial Techniques for Six Sigma Methodology: Theory and Application. ebook: John Wiley & Sons.

Basu, R. (2011). Fit Sigma: A Lean Approach to Building Sustainable Quality Beyond Six Sigma. United Kingdom: John Wiley & Sons Ltd.

Fursule, N.V., Bansod, S.V. & Fursule, S.N. (2012 January). Understanding the Benefits and Limitations of Six Sigma Methodology. International Journal of Scientific and Research Publication, 2(1).

GE. (n.d.). What is Six Sigma? The roadmap to customer impact. Retrieved from <http://www.ge.com/sixsigma/SixSigma.pdf

Harris Ehrlich, B. (2002). Transactional Six Sigma and Lean Servicing: Leveraging Manufacturing Concepts to Achieve World-Class Service. Boca Raton, FL: St. Lucie Press/CRC Press LLC.

Huesing, T. (2008). Six Sigma Through the Years. Seminar presentation by Motorola. Retrieved from <http://6sigmaexperts.com/presentations/Six_Sigma_Through_the_Years.pdf.

Knowles, G. (2011). Six Sigma. ebook: Ventus Publishing.

Mandahawi, N., Al Hadeethi, R., & Obeidat, S. (n.d.). An Application of Customized Lean Six Sigma to Enhance Productivity at a Paper Manufacturing Company. Retrieved from <https://eis.hu.edu.jo/deanshipfiles/pub107021102.pdf.

Martin, T. (2011, 16 January). Six Sigma and Lean at General Electric: A Case Study. Sustainable Business. Retrieved from <http://www.sus-bus.com/six-sigma-and-lean-at-general-electric-a-case-study/