World Class Applications of Six Sigma

Jiju Antony, Ashok Kumar, Ricardo Banuelas

• Publisher: Routledge
• Year: 2006
• ISBN:
  9781136348020
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

World Class Applications shows what real organisations have done to implement Six Sigma, the methodology used, and the results delivered. The book provides details of how these organisations overcame issues with the statistical tools of Six Sigma and provides valuable lessons by explaining what went wrong when implementation failed. Cases cover topics including: Six Sigma in HR; Implementing Six Sigma in the Dow Chemical company; Six Sigma in IT; and Six Sigma to improve reporting quality.

Part 1

Applications of Six Sigma in Manufacturing Sector

1

Six Sigma Implementation at Dow Chemical Company: a Comprehensive Review

Ashok Kumar, Jaideep Motwani and Jiju Antony

A combination of a mindset, a set of methodologies, and a tool set which is positioned to accelerate the implementation of business strategies

Dow Chemical Company

1.1 Introduction

The quality of a company’s products and processes has an intrinsic relationship with its financial and strategic performance. A US General Accounting Office study of the 20 highest-scoring Malcolm Baldrige National Quality Award applicants suggested that these organizations achieved better quality, lower cost, greater customer satisfaction, improved market share, and higher profitability compared to their competitors (GAO, 1991). Using a database of 3000 companies representing over 16,000 years of data, the Profit Impact of Market Strategy study (W-13)¹ concludes that, ‘In the long run, the most important single factor affecting a business unit’s performance is the quality of its products and services relative to those of its competitors.’

Yet, quality remained the Cinderella of the competitive weapons available to American and West European businesses up until the mid-1980s. Indeed, the contemporaneous operations strategy literature is replete with strategic formulations which focused solely on a single variable, overly simplistic dynamic of competition (lower-the-price, higher-the-profits) to obtain competitive advantage. Unfortunately, this paradigm failed in the face of newer paradigms which called for strategy formulations that drew from a richer and more exhaustive set of variables, such as quality, flexibility, and agility (Fine and Hax, 1985; Swamidass, 1986; Skinner, 1996a,b) to gain higher market share, and hence, higher profitability.

Many corporate (Fine and Hax, 1985; Skinner, 1996a,b) strategists ascribe the erosion of American leadership of auto and electronic industries in the 1980s to this failure of strategic vision, especially the ignorance of the potential of quality as a formidable competitive weapon between the 1960s and 1980s. Conversely, the Japanese companies who actually demonstrated a greater grasp of changing strategic paradigms, gained market share in the automobile industry from 4% in the 1960s to 36% in the 1980s, much to the chagrin of American manufacturers.

It was in this context that American businesses began to perforce expand their strategic vision and examine the quality of their products, processes, practices, and programs in earnest. In 1984, Motorola, a cell phone manufacturer, embarked on a Six Sigma journey under the leadership of Michael Harry, who set forth the goal of improving the quality of products in the Government Electronic Group (GEG) from Three Sigma (66,800 defects per million opportunities) level to Six Sigma level (3.4 defects per million opportunities). Breaking away from traditional methodologies of problem-solving that have shown, quite often, limited success, Harry devised his own methodology that is known as DMAIC (Define–Measure–Analyze–Implement–Control). While DMAIC works best for existing product and process improvements, Design For Six Sigma (DFSS) works best when an entirely new product or process has to be designed or a new concept operationalized. Motorola’s Six Sigma program was characterized by the following key ingredients:

1. a primary goal of total customer satisfaction;
2. common uniform quality metrics for all areas of the business;
3. identical improvement rates for all areas of the business measured on one scale;
4. goal-directed incentive for managers and employees;
5. coordinated training in reasons for these goals and ways to achieve them (Kumar and Gupta, 1993).

They defined the Six Sigma quality system as collective plans, activities, and events designed to ensure that the products, processes, and services satisfy customer needs. In summary, Six Sigma is a customer-focused approach to business that provides an overall framework for quality management.

Since its inception at Motorola, Six Sigma has been adopted by many companies with significant financial gains. The following chart (Table 1.1) provides the year in which the Six Sigma program began in certain companies and Table 1.2 summarizes the financial gains from Six Sigma implementation at certain well-known companies (W-11) (see footnote 1 on p. 3).

Table 1.1 Year of inception of Six Sigma at pioneering companies

Company name	Year of Six Sigma inception
Motorola	1986
AlliedSignal (merged with Honeywell in 1999)	1994
GE (NYSE: GE)	1995
Honeywell (NYSE: HON)	1998
Ford (NYSE: F)	2000
Dow Chemical Company	1999

Table 1.2 Savings from well-known Six Sigma programs

Due to Six Sigma’s rigorous problem-solving prowess, the program is well suited to bring about targeted improvements in all strategic priorities and not just cost and quality. Indeed, in customer-focused analyses, Six Sigma has registered a record of commendable results for the companies listed in Table 1.2, and many others such as Sony, ABB, Texas Instruments, Citicorp, Chase Manhattan, Caterpillar, Raytheon, and Bombardier Transportation. Well-executed Six Sigma projects have consistently delivered sizeable improvements in customer-related performance characteristics: critical-to-quality (CTQ), critical-to-cost (CTC), critical-to-delivery (CTD), and critical-to-responsiveness (CTR) (W-2). For this reason, Six Sigma is no longer just a quality program; it is considered a powerful strategic tool that can deliver performance improvements in all areas of strategic priorities (cost, quality, flexibility, and delivery). Due to its pervasive application potential, it has also become a philosophy, an approach in all the undertakings of a company rather than just a tool or technique for specific applications. R. Balu of Fast Company explains why Six Sigma has emerged as a methodology for driving business strategy (W-3). According to her, the following three critical components of Six Sigma philosophy constitute essential characteristics of Strategic Six Sigma Initiative (SSSI):

• DFSS generates new processes, products, and/or plants.
• DMAIC improves existing products and processes.
• Process management enables leverage and sustains gains achieved.

In this chapter, we describe the implementation of Six Sigma at Dow. We begin at the very beginning when Dow had started searching for a catalytic program to accelerate its quest for improvement in its strategic position and attainment of core corporate values. We discuss the preparatory work done to ensure smooth launching of Six Sigma through the Staircase model. We specifically identify the unique features of Dow’s Six Sigma, such as its singularly dedicated customer focus, leverage, and customer loyalty. We then provide summary of approaches and results of several Six Sigma case studies conducted by Dow. The studies show the breadth of scope of Six Sigma implementation; it encompasses all aspects of the business functions and processes at Dow (manufacturing, service, and staff) and the impressive contributions resulting from these studies reflect the strategic success of Dow’s Six Sigma effort.

1.2 Dow Chemical Company

The Dow Chemical Company is one of the world’s largest science and technology companies. It serves nearly 70,000 customers worldwide in 180 countries, supplying 3,200 distinct products to a host of domestic and international markets, including the food, transportation, health and medicine, personal homecare, and building and construction markets. With an annual sale of approximately $33 billion, Dow is currently organized into 15 major businesses and is engaged in more than 40 joint ventures. It employs approximately 50,000 employees in 208 manufacturing sites in 38 countries.

Dow produces and markets an impressive range of products: pharmaceuticals, automotive, adhesives and sealants, agricultural, building and construction, imaging/photography, paints and coatings, paper, plastic and rubber products, textiles, chemical processing, electronics and telecommunication, textiles, and medical. Dealing in such a wide range of products, markets, cultures, and regions is truly a challenging task that requires a culture of doing things right and improving on the status quo constantly.

Dow’s mission is to ‘constantly improve what is essential to human progress by mastering science and technology.’ Given the mission, commitment to the triple bottom line of economic prosperity, environmental stewardship, and corporate social responsibility, and a vast scope of products and markets, Dow is in perpetual need of a result-oriented program that can effectively respond in real time to its dynamically evolving customer needs and competitors’ capabilities. Fueled by such a need, and after virtually year-long deliberations, Dow embarked on its Six Sigma journey in 1999.

1.3 The Six Sigma program at Dow

1.3.1 Preamble and Preparation

Process change typically begins with strategic ini...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Dedication
• Contents
• List of editors and contributors
• Acknowledgments
• Introduction
• Part I: Applications of Six Sigma in Manufacturing Sector
• Part II: Applications of Six Sigma in Service Sector
• Part III: Applications of Six Sigma in Transactional Environments
• Index