by Dirk Dusharme
Despite its success, Six Sigma
is often scorned as just the latest management fad, a repackaging
of what has already been done, a rose by some other name.
Even within Quality Digest, there have been articles and
editorials critical of the process improvement methodology
championed by industry giants like Motorola since the mid-1980s.
But there is no arguing with success, and “success”
seems to be the word among the majority of Six Sigma practitioners.
As this year’s survey shows, Six Sigma is still going
strong, even inching its way into smaller businesses and
nonmanufacturing environments.
This year, our Six Sigma Survey was sent via e-mail to
nearly 65,000 quality professionals--either Quality Digest
subscribers, InsideQuality members or ISO 9000 certificate
holders. Of those, 25,000 received the request to participate
in the survey and 2,577 took part in the survey.
Most of the survey results can be seen on the tables throughout
this article, but we will provide more detailed analysis
of some of the more interesting survey results.
This year Quality Digest added three basic questions related
to the amount of training devoted to Six Sigma and the yearly
cost of maintaining a Six Sigma program. Not surprisingly,
both the time set aside for training and the financial commitment
to training and implementation are substantial. The vast
majority of respondents report that it’s time and
money well spent, however.
In our past two Six Sigma surveys, our panel of Six Sigma
experts have pointed out that Six Sigma is generally most
successful in larger companies because of the cost of implementation;
most experts believe that a successful implementation requires
at least one full-time Six Sigma practitioner. Add training
or consulting costs and employee hours lost to training,
and the money-meter gets whirling pretty fast. Although
evidence indicates an almost guaranteed return on investment,
the start-up costs may be beyond the reach of small companies.
This year’s survey corroborates that possibility.
About 250 of the 935 respondents who have implemented
Six Sigma shared with us how much their company spends on
the program per year. This includes training, consulting
and the salaries of full-time Six Sigma employees. We broke
the responses down into two sets: one for stand-alone businesses--those
not part of a larger organization--and one for those that
are part of a larger organization. The number of responses
for the first set is small (a clue in and of itself), but
the data point to an average of about $75,000 per year.
This figure could be smaller if you subtract the two or
three companies that spent considerably more on Six Sigma
than the others. Although this might be a reasonable figure
for companies with several hundred employees, it’s
a bit of a financial reach for smaller companies.
It’s interesting to note that these figures are
roughly equivalent for companies that are part of larger
organizations. Because training costs are based on the number
of participants and Six Sigma generally requires a percentage
of employees be directly involved, there’s a direct
correlation between the number of employees and the cost
of implementation. Roughly speaking, for companies with
100 to 50,000 employees, the cost of Six Sigma implementation
is between $100 and $200 per employee, according to these
figures.
To afford these costs, there must be a good return on
investment--and according to our respondents, there is.
This year, 400 of the 935 respondents who reported they
have a Six Sigma program in place gave specific details
on cost savings, productivity improvements and other outcomes
of their Six Sigma initiatives. Only about 20 respondents
indicated that Six Sigma had not helped them at all or was
“a waste of time.”
At
the bottom of this article we show randomly selected Six
Sigma testimonials from companies with fewer than 500 employees
and companies with greater than 500 employees.
Because training plays a key role in the success of Six
Sigma, we asked companies that have a Six Sigma program
whether Six Sigma training was mandatory for all employees.
Of the 912 respondents, 24 percent indicated that Six Sigma
training was mandatory.
We also asked about the minimum amount of Six Sigma training
of any employee for whom training was required. This generic
question did not ask the minimum time required for each
level of Six Sigma (e.g., Black Belt, Green Belt, etc.)
training, although in most cases the respondent provided
comments accordingly. Next year’s survey will ask
this question specific to each level. The response distribution
has several peaks, centered around one- or two-day overview
or awareness courses, and peaks at the various levels of
practitioner training: Green Belt, Black Belt etc. As can
be seen in the table on page 28, about 25 percent of companies
that use Six Sigma have some sort of one- to three-day introductory
Six Sigma course for employees who will be only indirectly
involved in the process. The next peak was in the five-
to 10-day range, ostensibly due to Green Belt training.
The next peak was for more than 10 days of training, which
comments indicated were largely for Black Belts and higher.
Most of the executive overview or Champion courses last
only one or two days, in many cases only two to four hours.
Only a few companies required management to take more extensive
(five-day or greater) courses.
Since our first survey, Six Sigma has made some progress
into small businesses, which we defined as organizations
with 500 or fewer employees. In 2002, only about 11 percent
of companies that had a Six Sigma program in place had 500
or fewer employees; today the portion is 18 percent. The
majority of these sites, however, are part of larger organizations,
indicating deeper pockets and the ability to support the
program.
That said, many consultants are developing training materials
or off-site courses that are more cost-effective for small
companies. In addition, some small companies are implementing
Six Sigma without using a full-time Six Sigma practitioner--one
of the major ongoing costs for implementation.
Six Sigma programs are also making their way into their
organizations’ nonmanufacturing functional areas.
Although the percentage of respondents reporting that manufacturing
use of Six Sigma has remained the same, at about 82 percent,
almost every other functional area has shown a 3 to 5 percent
increase in Six Sigma use.
Distribution of Six Sigma Programs by Functional Area
As in previous surveys, we continue to see a dramatic
drop-off of companies using Six Sigma around year three.
Last year we postulated that this could be because after
three years, companies had reaped the predominate benefits
from Six Sigma by picking the low-hanging fruit--obvious
waste or productivity issues--and then lost momentum later
when the dramatic savings of earlier projects failed to
appear. But with only data from two surveys to consider,
it was difficult to make a solid conclusion that this is
the case. With this survey showing the same drop at year
three, it’s becoming more apparent that many companies
are abandoning the process at that point for some reason.
Strangely,
although we see Six Sigma making it’s way into small
companies and nonmanufacturing areas, as a whole, there
are fewer companies starting Six Sigma initiatives. We define
a Six Sigma start-up as a company that reports its Six Sigma
initiative to be less than 1 year old. In 2002, 30 percent
of respondents reported using Six Sigma for less than one
year. In January of 2003 the percentage dropped to 21 percent,
followed by 18 percent this year.
In addition, there is an interesting trend developing
with respect to the percentage of companies within each
year range across the three surveys. The percentage of companies
in years one through three of implementation have dwindled
each year, while the percentage in years four and higher
have increased. This trend suggests that the Six Sigma market
may be peaking or has peaked. However, as with last year,
about 50 percent of respondents who haven’t already
implemented Six Sigma said that their companies plan to
start the program within the next 18 months. Next year’s
survey will give us a better indication of how the Six Sigma
market is progressing.
Distribution of Company Size for Sites With Six Sigma
Survey
scores intended to measure Six Sigma’s effect improved
from last year.
Respondents continued to acknowledge that Six Sigma has
improved their companies’ profitability, with 72 percent
agreeing that this was the case. This is up from 64 percent
in last year’s survey.
Respondents also indicated that job satisfaction has improved
due to Six Sigma. About 53 percent agreed that this was
the case, 23 percent disagreed and 24 percent were neutral.
This compares to slightly lower scores from last year, in
which 43 percent agreed that job satisfaction had improved,
30 percent disagreed and 27 percent were neutral.
The effect of Six Sigma on customer satisfaction changed
little, with 54 percent of respondents agreeing that Six
Sigma had improved customer satisfaction, 27 percent disagreeing
and 19 percent being neutral.
As any Six Sigma practitioner will attest, for the process
to work it must have complete buy-in from the top down.
For the most part, our survey reflects this.
Nearly 80 percent of respondents agreed with the statement
that “Management fully supports our Six Sigma program,”
with 40 percent saying that they strongly agreed.
Respondents also indicated that the goal of Six Sigma
projects is well-understood prior to commencement, with
87 percent agreeing that was the case and 7 percent disagreeing.
Because Six Sigma projects are bottom line-driven, this
is a significant figure and indicates that management and
practitioners are doing a good job of identifying and communicating
project goals and parameters.
The scores lag somewhat, however, when it comes to the
nuts and bolts of support (e.g., training, time and resources).
Nearly 41 percent of respondents indicated that they could
have used more Six Sigma training prior to starting Six
Sigma projects; about 45 percent indicated training was
adequate.
The score was also split when it came to the amount of time
allowed for Six Sigma projects: 51 percent responded that
they were given enough time, 37 percent said they weren’t
and 11 percent were neutral. Availability of resources showed
an almost even split, with 45 percent agreeing they had
enough resources to implement projects and 43 percent indicating
they did not.
In the two years we have been tracking Six Sigma usage
and perceptions, the predominant finding of survey responses
is the overwhelming agreement on this methodology as a means
to drastically reduce waste and improve productivity. Six
Sigma practitioners are a zealous lot, and with good reason;
when properly implemented and supported by management, the
process yields huge results. Very few of those who utilize
Six Sigma have anything negative to say about it.
Of course, there is always a downside, and with Six Sigma,
the downside is the difficulty of implementing it within
small companies. In the past, experts have explained that
Six Sigma is most easily implemented in companies with more
than 500 employees. And, although some inroads have been
made in reducing costs to make it more viable for small
companies, our surveys still support that idea. It takes
money to make money; with Six Sigma, this is definitely
the case. It also takes dedicated people-power. Larger companies
have the resources to spend on Six Sigma training and rollout
without worrying about an immediate return on investment,
which incidentally, respondents tell us there almost always
is.
Finally, although a little early to tell, some trends
in the past three survey data might indicate that Six Sigma
is on the wane. Decreasing Six Sigma start-ups and a shift
in the distribution of how long companies have been employing
Six Sigma seem to point in that direction. Next year’s
survey will give us a better picture of whether this is
the case.
- Our overall cost of quality system failure was
less than 0.5% of sales. We were bench- marked as
the top quality supplier for 90% of our customers.
- Reduced machine cycle time by 20%, scrap reduction
by 25%, increased production rate by 15%
- Waste reduction saves $340,000 annually at one
facility
- Various projects--$5,000 to $1.2 million
- Overall business results--$250,000 annually
- Waste reduction saves $15,000 per month. Customer
satisfaction increased from 10% to 91% within three
months
- We utilized lean to re-create the entire factory,
building a whole new plant. Then we went into the
plant that was fairly well run and pulled out another
$271,000, representing about 23% of net revenues
for that year.
These responses were randomly selected from those
companies with fewer than 500 employees that answered
this question.
- $2.3 million in savings since 2002
- Reduced downtime by 40%. Increased output by 15%
- Cost reduction--5%
- Over nine-month period: 21 completed projects,
$1 million in savings, increased accurate forecasting
and production planning by 60%.
- $2 billion savings
- $25,000 per month savings
- It has been more of an expense at this stage.
A lot of talk of it and not much follow-through.
- Reduced scrap by 30%/month reduced rework on one
product from 39% average
- to 12%.
- $55 million in hard savings, $120 million in soft
savings
- Greater than $1.5 billion in benefits
- Overall cost reduction of 10% in first year
- Greater than $4 million in first year
- First-year cost savings or potential savings of
about $1.5 million.
- Reduced utility costs $300,000, reduced shipping
claims 20%, reduced manufacturing costs $500,000
- $1 million to bottom-line profit first year
- $1.1 million last year
- Reduced waste $150 million
- $5 million corporatewide
- The project was to save $250,000. It failed, and
cost in scrap and lost production-resource people
was $300,000.
- $900,000 for 2003
- Waste reduction of 40%, saving $120,000 per year
- Customer complaints reduced by 75%. Productivity
increased by 5%.
- Reduced scrap by $800,000. Reduced customer complaints
by 15%. Added $400,000 incremental revenue
- $3-5 million annually
- $200,000 per month
- Our local site: savings of greater than $2 million
over last 2 years
- Approximately $8 million per year for our location
- Savings of $5 million. Production increase, utilities
reduction
- Increase some aspects of production by 30%, and
increase billing and collection by 35%
- Reduced manufacturing cycle time by 75%, decreased
resource costs to process received goods by 57%,
reduced ECO process cycle time by 97%, reduced manufacturing
errors by 82%
These responses were randomly selected from those
companies with greater than 500 employees that answered
this question.
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Dirk Dusharme is Quality Digest’s technology
editor.
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