Relevance & Application of Six Sigma in Services Sector

^-A ⁺A

Relevance & Application of Six Sigma in Services Sector

Apr 09,2010

Six Sigma was traditionally developed to improve the quality standards in manufacturing sector, and it achieved a huge amount of success in the same. But now the focus is shifting from manufacturing to services.

Many service sector companies as well as the service functions within every sector are adopting it as a tool to boost their efficiencies. But there is a lot more to achieve for Six Sigma in the services sector and loads of hurdles exist in the way to success.

General Electric, AlliedSignal, and many other manufacturing firms have saved billions of dollars due to the implementation of Six Sigma. But now its scope is not limited to manufacturing only. Companies are finding its use in non-manufacturing processes as well such as sales, accounts receivables, and R&D. For instance, Dow Chemical estimates that the application of Six Sigma to environmental, safety and health services has helped the company save $ 130 Million in the past two years. No surprise that the financial institutions, consumer product and healthcare firms are also jumping on to Six Sigma.

But different customers have different perspectives. Some bankers and doctors might immediately warn that standardizing processes will lead to inferior services. And their worries are valid too to some extent. Six Sigma won't work for every service and adjustments may be required even for the services for which it does apply. Nevertheless, many lessons learned from production lines are relevant to service processes as well.

Whether the adoption of the Six Sigma ethos by service businesses is a response to increasing expectations from customers, or whether this is an opportunistic strategy determined as an innovative means of achieving competitive advantage by a small number of pioneering firms, is still unclear. However, there are now clear indications that some substantial service-based, or service-dependent organizations like Citibank, Motorola, American Express, see commercial possibilities in the pursuit of perfection.

As Jack Welch, one of the best CEOs of all times, has said, "Six Sigma is the most important initiative we have ever undertaken." Welch indicated that those who aspire for top-level positions in the GE management must have both knowledge and experience with Six Sigma to ensure that its values become ingrained throughout the company.

For a long time, quality control and improvement has been considered an important means for acquiring competitive advantage. Quality-control methodologies like statistical quality control, zero defects, and total quality management, are some of the key methodologies undertaken for many years. Six Sigma can be considered as the latest quality improvement methodology in this series, that has gained popularity and acceptance in many industries across the globe.

Evolving continuously over the past few years, today, it has acquired the status of a business management strategy rather than mere quality assurance methodology. Moreover, the strategy has been utilised by many world class organisations such as General Electric (GE), Motorola, Honeywell, Bombardier, ABB, and Sony, to name a few from the long list.

The concept of Six Sigma was introduced by Bill Smith in 1986, a senior engineer and scientist within Motorola’s Communication Division. Mikel Harry formerly at Motorola is accredited with the development of the Six Sigma concept in the late 1980s. Following this, for three consecutive years, Motorola spent $ 170 Million on workers' education and training, thus, saving $ 2.2 Billion in terms of cost incurred as a result of poor quality, and was honoured with the Malcom Baldridge Award in 1988.

Instrument of Quality Control

The main aim of Six Sigma methodology is to reduce the drawbacks in any process and improve its capability, thus, bringing the defects in the output within tolerance limits. In a way, it strives for perfection allowing only 3.4 defects per million opportunities. The methodology strives on assertions that, first of all, continuous efforts to reduce variation in process outputs is key to business success; secondly, manufacturing and business processes can be measured, analyzed, improved and controlled, and finally, successful achievement of sustained quality improvement requires commitment from the entire organization, particularly from top-level management.

Initially applied to manufacturing sector, Six Sigma methodology has evolved over a number of years allowing its application in many fields such as Services, Medical & Insurance Procedures, Call Centers, etc. In current scenario, Six Sigma has evolved into a tool for overall business improvement and not just measurement of quality.

.