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Six Sigma

By Dawne Shand
March 5, 2001 12:00 PM ET

Computerworld - The quality movement, once rooted in manufacturing centers, has branched into a wide swath of vertical industries and all parts of the organization, thanks to Six Sigma. Once known as an initiative that was limited to eliminating product defects, Six Sigma has grown into a full-fledged management discipline.

General Electric Co. CEO Jack Welch has been a staunch evangelist for the program, claiming that GE's organizationwide adoption of Six Sigma, begun in the mid-1990s, added $600 million to GE's bottom line in 1998 alone.

Fairfield, Conn.-based GE brings more than just products to life. It's a highly diversified organization with a huge services arm, and everyone at GE breathes, eats and sleeps Six Sigma. A look at how the program has been used outside the manufacturing plant demonstrates why Six Sigma hasn't become passe.

Beyond Manufacturing

"Six Sigma is every bit as applicable to service processes as it is to manufacturing," says Dan Mailick, vice president of Six Sigma sustainability at J.P. Morgan Chase & Co. in New York. Three years ago, the firm began adopting Six Sigma techniques.

Within J.P. Morgan's foreign exchange banking department, a team asked its customers what they valued and what made them choose one investment bank over another when conducting foreign exchange deals. Once these issues were understood, the team was able to define and measure the activities that most impact customers' needs.

The analysis aided the bank in understanding why performance varied among different branches. These lessons helped yield higher margins for the foreign exchange group, as well as best practices for individual traders.

Sigma is a Greek term for variation. Six Sigma is defined as 3.4 defects per million products. The program's objective, at least in the beginning, was to minimize variations or defects during the production of products.

Motorola Inc. created the concept in the 1980s. Engineers had concluded that new products, which often failed to meet customer expectations, could be produced error-free from the start. This represented a fairly radical idea in manufacturing: measuring customer requirements and performance against these targets during production, rather than after a product's completion.

According to Tom McCarty, director of Six Sigma business improvements at Motorola University in Schaumburg, Ill., Six Sigma differs substantially from quality initiatives that were prominent in the '70s and '80s, such as continuous improvement and total quality management.

"Quality programs . . . focused on defect elimination for the sake of defect elimination," he explains. In other words, it was quality for perfection's sake, not for the customers'.

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