Mistakes happen.
As a manufacturer, you might keep track of the number of defective parts per million produced in your factory. As a service provider, it’s the number of flawed transactions. However you track them, mistakes are simply part of the process, something you have to live with.
But mistakes dump money into the trash bin.
At least that’s the philosophy put forth by proponents of Six Sigma, a customer-focused statistical approach to measuring and eliminating mistakes. In case you’ve forgotten your college mathematics, Six Sigma means six standard deviation from the mean. For practical purposes, it means fewer than two defects for every billion opportunities.
Today, most companies operate between four and three sigma, or between 6,200 and 67,000 defective products or transactions per million. That translates into a loss of 10 to 15 percent of total revenue. In other industries, four sigma — 99 percent defect free — means 20,000 lost articles of mail an hour, 5,000 incorrect surgical procedures per week, 200,000 wrong drug prescriptions each year or no electricity for almost seven hours each month.
Developed by Motorola Inc. in the mid-1980s, Six Sigma has captured the attention of a number of high-profile businesses, including Avery Dennison. But the company wasn’t always such a strong proponent.
“When it starts, it’s real painful,” says Joe Kolb, Director of North American Operations of Fasson Roll, a division of Avery Dennison and the Six Sigma initiatives leader. The company had the why-spend-money-on-something-that-isn’t-really-a-problem attitude, he says.
The company quickly learned that there were a great many things to improve. In one of its manufacturing processes, huge rolls of paper, traveling at a rate 1,500 feet per minute, speed along a press nearly 100 yards long. As one roll ends, another must be spliced seamlessly, or time and money are lost. Reloading the press can take 30 to 60 minutes, and that doesn’t include the loss due to scrapped material, Kolb says.
The company was forced to reload the machine several times a week, or about 3.5 sigma. After implementing the project, it achieved 4.5 sigma. That translates into missing a splice only once every few months and a savings of about $100,000 each year. If it could reach Six Sigma, the company would miss a splice only once in 70 years.
Dean A. Scarborough, group vice president of Fasson Roll Worldwide, a division of Avery Dennison, let Kolb implement the Six Sigma philosophy in the division.
“Dean took the chance and it reaped tremendous benefits in helping turn the company around,” Kolb says. “We are changing the way that we think.”
Kolb had been working at Allied Signal (now Honeywell) when he learned about the Six Sigma philosophy and methodology. Generally, only the best employees are chosen to take part in the training. At Fasson, they were pulled from their regular roles and those vacancies were not filled, Kolb says.
They are asked to make a two-year commitment to the program and focus their full attention on their projects. That is one of the reasons initiating a Six Sigma program is costly, both in terms of money and time. It tends, therefore, to be an approach adopted by larger companies, although smaller ones can hire consultants.
At Avery Dennison, the cost to implement the program topped out at around $10 million, with at least that much more expected this year.
Briefly, the system problem solving approach involves five specific areas:
- Identify the internal/external customers for your product or service and determine what they consider important.
- Identify your needs to achieve the improvement objectives through the use of the Six Sigma metrics you impact with your work.
- Define the process for attaining the goal.
- Make the process mistake-proof while eliminating wasted effort and time.
- Make the improvement continuous by measuring, analyzing, controlling and refining various parts of the process.
Those who go through the five weeks of training it takes to understand the 23 subject areas within the Six Sigma discipline are called black belts. Each black belt can save a company as much as $1 million each year.
Black belts at Avery Dennison are expected to implement and complete projects on a three or four month basis.
One of the first projects was to turn the order entry process from a 36-minute ordeal into a 1-minute operation. After defining the 52-step process, the company was able to remove 15 steps. That 35 minutes per order freed up three people in customer service and allowed them to be redeployed. They now work the phones, developing the company’s customer base.
Optimally, each project should save the company $200,000. It hopes to utilize 100 black belts around the world and seven master black belts, those capable of training others. It also employs 350 green belts, workers who receive a lesser degree of training but can assist on projects. Avery Dennison expects to have another 350 green belts certified and trained by the end of the year, Kolb says.
Detractors argue that Six Sigma is only the latest management fad. Kolb suggests that those who have a problem with the philosophy are those who haven’t committed themselves to its principles. It’s hard to argue with the numbers.
“Every company’s been through flavor of the month,” Kolb says. “This can be a very expensive flavor of the month and you only get one shot. It works, but it’s not easy, and you have to have faith that the benefits are there.”
How to reach: Avery Dennison, (440) 358-6588
Daniel G. Jacobs ([email protected]) is senior editor of SBN.
What Six Sigma represents
The historical standard for businesses was three sigma, while the current standard is four sigma. How big a difference is that, and what does it mean to be able to achieve Six Sigma? Here is a representation:
Sigma Area
3 floor space of a small hardware store
4 floor space of a typical living room
5 size of the bottom of a telephone
6 size of a typical diamond
Sigma Spelling
3 1.5 misspelled words per page in a book
4 1 misspelled word per 30 pages in a book
5 1 misspelled word in a set of encyclopedia
6 1 misspelled word in all of the books contained in a small library
Sigma Money
3 $2.7 million indebtedness per $1 billion in assets
4 $63,000 indebtedness per $1 billion in assets
5 $570 indebtedness per $1 billion in assets
6 $2 indebtedness per $1 billion in assets
Sigma Time
3 3-1/2 months per century
4 2-1/2 days per century
5 30 minutes per century
6 6 seconds per century
Sigma Distance
3 coast-to-coast trip
4 45 minutes of freeway driving (in any direction)
5 a trip to the local gas station
6 4 steps in any direction
