Six Sigma at GE


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Case Details:

Case Code : OPER015
Case Length : 12 Pages
Period : 1995 - 2002
Organization : GE
Pub Date : 2002
Teaching Note : Available
Countries : USA
Industry : Varied

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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About Six Sigma

Six Sigma is a well-structured, data-driven methodology for eliminating defects, waste, or quality control problems in all kinds of business activities. It is based on a combination of well-established statistical quality control techniques, simple and advanced data analysis methods and the systematic training of all personnel at every level in the organization involved in the targeted activity or process. It is based on the statistical concept that the output of most of the physical processes follows a normal distribution,2 with the processes centered at the mean (Refer Exhibit II). Theoretically, any process would have a natural spread of 3 Sigma (standard deviation) from the normal distribution mean on either side of the center.

This spread contains 99.9999998% of the process output. Thus, only 0.002 parts per million are out of the design specification. However, in practice, it is difficult to control the processes and any typical physical process would deviate from the natural centre by up to 1.5 standard deviation. Thus, Six Sigma in real life denotes a defect rate of 3.4 parts per million (Refer Table I).

Six Sigma is a sophisticated quality program that is designed to reduce defects to 3.4 per million opportunities. The program focuses on streamlining all the processes in the organization to improve productivity and reduce capital outlays while increasing the quality, speed and efficiency of the operations. The concept was pioneered by Motorola in the early 1980s. Motorola's initiative stemmed from its belief that improving quality would reduce costs and that the highest-quality producer should be the lowest-cost producer. Six Sigma enabled Motorola to achieve defect-free performance in its manufacturing, designing, engineering, and business processes. Six Sigma was originally developed to be used for 'physical process' - those performed in manufacturing and easy to observe, record, analyze and measure.

However, in the years to come, it was extended to processes that were not as explicit as the physical processes. It encompassed some business areas like bid and proposal, and procurement and contract management. While Six Sigma comprised strict measurements for physical processes, it involved identifying waste in the form of delays for other processes. The primary objective of Six Sigma was to increase customer satisfaction through continuous improvement in quality...

Excerpts >>

2] The normal distribution is one of the most important distributions used in probability. It is useful for describing a variety of random processes. A normal distribution is fully described with just two parameters: its mean and standard deviation. The distribution is a continuous, bell-shaped distribution, which is symmetric about its mean and can take on values from negative infinity to positive infinity.

 

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