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