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MANAGING BUSINESS

Six Sigma & Benchmarking

Learning Outcomes
At the end of this chapter, you should be able to:
Understand the principles of Six Sigma

Compare TQM and Six Sigma


Understand the principles of Benchmarking Identify various types of benchmarking
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Six Sigma

Six Sigma can be described as a business improvement approach that seeks to find and eliminate causes of defects and errors in manufacturing and service processes by focusing on outputs that are critical to customers and a clear financial return to the organisation.

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Six Sigma - Overview

1. Six Sigma is a business management strategy, originally developed by Motorola. 2. Six Sigma seeks to identify and remove the causes of defects and errors in manufacturing and business processes.

3. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization ("Black Belts" etc.) who are experts in these methods.

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Examples of Quality Management Tools used in Six Sigma


Chi-square test Control chart Ishikawa Diagram Correlation Cost-benefit analysis Histograms Homoscedasticity Pareto chart Pick chart Process capability Regression analysis

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Six Sigma
The core philosophy and key concepts: 1. Continuous efforts to achieve stable and predictable process results (i.e. reduce process variation) are of vital importance to business success. 2. Manufacturing and business processes have characteristics that can be measured, analysed, improved and controlled.

3. Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management.

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Six Sigma Implementation Roles


Six Sigma borrows martial arts ranking terminology to define a hierarchy.
1. Executive Leadership
includes the CEO and other members of top management. They are responsible for setting up a vision for Six Sigma implementation. They also empower the other role holders with the freedom and resources to explore new ideas for breakthrough improvements.

2. Champions
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responsible for Six Sigma implementation organization in an integrated manner. Champions also act as mentors to Black Belts.
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across

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Six Sigma Implementation Roles


3. Master Black Belts
identified by champions, act as in-house coaches on Six Sigma. They devote 100% of their time to Six Sigma. They assist champions and guide Black Belts and Green Belts. Apart from statistical tasks, their time is spent on ensuring consistent application of Six Sigma across various functions and departments.

4. Black Belts
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operate under Master Black Belts to apply Six Sigma methodology to specific projects. They primarily focus on Six Sigma project execution, whereas Champions and Master Black Belts focus on identifying projects/functions for Six Sigma.

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Six Sigma Implementation Roles


5. Green Belts
are the employees who take up Six Sigma implementation. They operate under the guidance of Black Belts.

6. Yellow Belts
participates on and supports the project teams, typically in the context of his or her existing responsibilities.

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6 s Training
Master Black Belt
Mentor, trainer, and coach of Black Belts and others in the organization.

Champions

Black Belts

Leader of teams implementing the six sigma methodology on projects.

Delivers successful focused projects using the six sigma methodology and tools.

Green Belts

Team Members / Yellow Belts

Participates on and supports the project teams, typically in the context of his or her existing responsibilities.

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Six Sigma Organization


Champion Black Belt Green Belt Green Belt Yellow Belt Yellow Belt Black Belt Green Belt Green Belt Master Black Belt Black Belt Green Belt Yellow Belt Yellow Belt

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TQM & Six Sigma


TQM
Based largely on empowerment and teams.

Six Sigma
workers Owned by champions. business leader

Training limited to simple Focuses on a more rigorous and improvement tools and concepts. advanced set of statistical methods and a structured problem solving methodology DMAIC[ define, measure, analyze, improve and control]. Focused on improvement with little Requires a verifiable return on financial accountability. investment and focus on the bottom line.

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Six Sigma Companies


3M[1] Agilent Technologies Air Canada Amazon.com[3] AXA Bank of America[4] Boeing[6] Caterpillar Inc.[7] Ford Motor Company[13] General Electric[10] GlaxoSmithKline Honeywell[14] HSBC Group
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Motorola[10] Nortel Networks Northrop Grumman[10] Raytheon[10] Samsung Group Siemens AG United States Air Force[19] United States Army[20] United States Marine Corps[21] United States Navy[22] Vodafone Whirlpool Xerox

Benchmarking

Benchmarking is the process of comparing the cost, cycle time, productivity, or quality of a specific process or method to another that is widely considered to be an industry standard or best practice.

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Cost of Benchmarking
The three main types of costs are:
Visit Costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labour time.

Time Costs - Costs incurred in compensating for time invested in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.
Benchmarking Database Costs - Organisations that institutionalise benchmarking into their daily procedures find it useful to create and maintain a database of best practices and the companies associated with each best practice now.
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Types of Benchmarking
Process benchmarking - the initiating firm focuses in identifying and observing the best practices in business processes with one or more benchmark firms. Process benchmarking involves activity analysis where the objective is to benchmark cost and efficiency. Financial benchmarking - performing a financial analysis (costs and incomes) and comparing the results in an effort to assess your overall competitiveness.

Performance benchmarking - allows the initiator firm to assess their competitive position by comparing the performance of their products and services with those of target firms.

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Types of Benchmarking
Product benchmarking - the process of designing new products or upgrades to current ones. This process can sometimes involve reverse engineering which is taking apart competitors products to find strengths and weaknesses. Strategic benchmarking - involves observing how others compete (what strategies being utilised). This type is usually not industry specific meaning it is best to look at other industries.

Functional benchmarking - a company will focus its benchmarking on a single function in order to improve the operation of that particular function.
- Complex functions such as Human Resources, Finance & Accounting and Information & Communication Technology are unlikely to be directly comparable in cost and efficiency terms and may need to be disaggregated into processes to make valid comparison.
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Q&A

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