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The Neglected Law of 6-Sigma

September 18, 2010 Leave a comment

I have just come back from a consulting engagement at a manufacturing plant. This plant is the most successful plant of a global enterprise. In the past 6 years they have been exceeding improvement targets in productivity and order fulfillment. Even in this economy, they have been turning out record profit. Marketing department loves to promote their product because of their high profit margin. Success has brought them more pressure because any improvement would impact the company performance. I can’t held to ask “Why would such a successful operation need any sort of consulting and not just continue to do what have made them successful?”

This turns out to have something to do with the natural law of business process.

Take the example of order fulfillment which is their most important metric. They were at 70% 6 years ago. A yearly target of 5% improvement has taken them to around 96%. But then, they are hitting a wall. Well why should the last 5 % be more difficult than the others? The basics of 6-sigma would cast light on this problem.

Going from 70% to 96% is the journey of going from 1 sigma to 2 sigma. The natural law of business processes says that it will require the same level or more effort to increase every sigma level. Frequently it is a totally different ball game that requires significant resource investment, skill acquisition, technology advancement and cultural transformation to ramp up each sigma level.

They have been relying on automation and Lean methodology in the past 6 years and have succeeded in the journey from  1 to 2 sigma. In order to get to 3 sigma, I have suggested them to start applying scientific and statistical tools to business processes. Without taking more detail measurements and applying appropriate quantitative methods along with Lean, there is a limitation on how far that they can further improve. It is indeed a different ball game that they are more than ever in need of enabling information technology to get them the data and visibility required for scientific management. Years of neglect in IT investment at manufacturing may come to a point to limit further growth of the operation.

Does your operation set key improvement targets, the associated resource and infrastructure investment based on target 6-sigma level? How far can you go down the 6-sigma journey without implementation of enabling information technologies?