Impact of six sigma on the performance of a manufacturing organization
In the contemporary corporate world, Six Sigma has transformed many things in the way companies used to manufacture products. Most of the entities that have installed the strategy have significantly reduced production costs, increased turnover and improved customer satisfaction. However, the strategy is not widely used, since it is considered rather costly and also requires strict financial policies when it comes to engineering. However, with the right strategic planning, this strategy can give firms an opportunity to attain the six distinct Sigma techniques. In this research paper, the history of this technique is analyzed through examining the current databases regarding the Six Sigma strategy, although such discussion is rather deep and broad to be covered intensively in a single discussion. The process of evaluating the topic will involve a primary flow from the analysis of the background of the study to the examination of the existing literature regarding the topic. The paper will also examine the theory in practice by studying the implications of Six Sigma strategy in real life, and finally, the conclusion will wrap up the discussion. The current study is rather topical, as Six Sigma is the best contemporary mechanism of improving industrial production, since it enhances all the aspects of the firm's activities.
Background of the Study
In the production arena, according to Garza-Reyes (2015), Six Sigma technique is primarily associated with the uniqueness of a firms strategy in manufacturing. However, this should not be taken to mean that the strategy did not have its distinct origin. The brand shows diverse aspects of the technique that have been under constant study over years. The idea of Six Sigma technique began by the standardization of quality for services and products and expanded to the cost implication in production. The cost-quality coefficient in production triggered a moment of alertness to the managers due to the past issues with products quality and customer satisfaction.
Most people understand Six Sigma as a radical and probably the most modern and advanced system of quality improvement. However, the strategy has been under gradual and constant evolution to get as far as it has reached. According to Pande, Neuman, and Cavanagh (2000), the Six Sigma idea emerged in the 80s, when the telecommunication firm Motorola was struggling to improve the quality of the electronics. During this time, the company had most of its products made within a complex structure and improving or adjusting their quality was an uphill task. Garza-Reyes (2015) asserts that the Six Sigma technique became an influential mechanism for handling the complex issues of products quality.
However, even after having seen the tremendous change in the way Motorola handled its production, other firms were reluctant to adopt the strategy, since they had to be sure of its sustainability in the market, as well as its long-term effects. Initially, the idea emerged as a statistical approach towards the measurement of quality and later became a well-structured process that relates to an improvement technique. Currently, the idea is also known as a breakthrough system for businesses. Some business analysts have gone ahead to name it a holistic quality philosophy in manufacturing. Moreover, during the last decade, most firms have adopted the strategy as a quality enhancement philosophy. It is also should be put into consideration that the evolution of the technique is still taking place, and in future, it is expected to be more effective.
According to Garza-Reyes (2015), it is important to understand that the definition of Six Sigma is a fundamental basis for its applicability. It might be a challenge to define the technique using the contemporary issues in manufacturing, but its effects are evident in all the aspects of its use. However, it is possible to define Six Sigma as a procedure of building up a well-structured objective system for enhancing the efficiency of firms. The operational mechanism of Six Sigma involves both contemporary and traditional techniques. The modern techniques make sure that the corporate goals are attained within the stipulated time, with maximum productivity and without chances for a delay or loses. Gupta (2004) explains DMAIC (Define, measure, analyze, improve and lastly control) as a basic model, which is paramount during the implementation of the Six Sigma philosophy, since it takes into account the PPS (product, processes and services).
According to Gupta (2004), the second fundamental model is the DMADV (Define, measure, analyze, design and verify), which is mostly applied where PPS is absent. However, it is important to note that the applications of these two models differ from one entity to the other, but the expected outcome is usually the same. Six Sigma philosophy has three primary components, according to Nicoletti (2013). The first element is the measure that involves the statistical capturing of the different variables that affect productivity. The second component of the philosophy, according to Nicoletti (2013), is the favorable outcome to the organizations productivity. The last one is the strategically structured and well-thought procedure for the firm. The primary objective of this philosophy is the reduction of operational cost through adjusting the production variability in different sectors.
Six Sigma and Company Performance
There are usually six ways in which the six sigma philosophy affects the performance of the company. The theory assists clients in relating to the firms positively through enhancing the relationship and developing loyalty. Ray and Das (2010) assert that most firms that have invested in the implementation of the Six Sigma philosophy have experienced magnificent outcomes. The researches confirm that most customers fail to return for re-purchase if they do not feel satisfied, or have a bad experience with client relations officers. In contrast, Six Sigma philosophy has enabled firms to enhance customer relations, where value is equated to the results attained less the expectations. The formula is the following: Value = Results- Expectations
According to Nicoletti (2013), this means that the firm should focus more on delivering what the clients expects. If this is the case, the entity will be able to get more new customers and retain the old ones for the sake of sustainability (Gupta, 2004). The theory was put to a successful test when two motor vehicle manufacturers, Ford and Mazda, came together to make a car Batavia. According to Pande, Neuman, and Cavanagh (2000), most car customers were attracted to Ford models, but had an issue with the gearbox, and therefore had an option of taking the Japanese models from Mazda. When this integration happened, the two firms were able to improve customer satisfaction through a car that brought together the advantages of the two firms. Moreover, the firms were able to raise maximum revenue from the car, as compared to individual models.
The Six Sigma philosophy will also help the firm to increase the output through motivating its employees. According to Gupta (2004), the research has showed that whenever employees feel motivated, the outcome is usually positive. The model strengthens the framework in which employees feel motivated, hence increasing the productivity. The employees feel appreciated when their employer takes the time to motivate them, and their outcome increases significantly with limited chances of making obvious mistakes. Thus, the Six Sigma philosophy allows the employees to come together and be more involved in the current projects and technology. Many companies, for example Boeing, an aircraft maker, have experienced a tremendous growth in business since the implementation of the philosophy. However, there are firms that have not yet taken up the methodology, terming their fears of sustainability. The challenging part of the implementation, according to Gupta (2004) is how to link the motivation with productivity. Motivation is one thing, while the willingness to respond to the employees is a totally different phenomenon. According to Gupta (2004), the motivation of employees by the firm cannot be tied with certainty to the production.
The rate of the philosophy aim asserts that a firm ought to have a defect rate that is less than 3.4 in every million recorded. The entity also must keep a well-thought and structured supply chain management, which will help in achieving the objectives. The Six Sigma model makes sure that every entity has a well-structured and effective supply chain, which delivers the products to the clients when the time is right to maintain trust and satisfaction, which yields loyalty in the long run. According to Pande, Neuman, and Cavanagh (2000), some firms such as Caterpillar had challenges developing their supply chains, but things turned for better when they adopted the Six Sigma model. Supply was equated to demand, while order time was aligned successfully with the delivery time. Certainly, when a firm manages the supply chain in a manner that makes the sales go up while the production costs are going down, the revenue increases. However, for the revenue to increase, there must be a well-structured customer-producer relationship that is managed by the supply chain management system.
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Furthermore, the Six Sigma philosophy ensures that the firm has a stable method of detecting problems and weaknesses for them to be rectified before they can negatively affect the production and sales. The model goes ahead to strengthen the SWOT, making sure that all the strengths are capitalized upon, while the weaknesses are addressed before they can affect the strengths. Every firm has its opportunities and threats, but without a structured way of addressing and detecting them, it might not be possible to maintain loyalty from the customers, at the same time competing successfully in the market. According to Pande, Neuman, and Cavanagh (2000), firms such as General Electric (GE) have managed to improve their revenue through adopting the strategy. The Six Sigma mechanism has helped GE in implementing the objectives and maintaining loyalty from clients, hence increasing the revenue. Moreover, using the strategy, the firm has been able to keep a close check on the objectives (Ray & Das 2010).
Most firms lose their revenue through the unnecessary extension of projects, hence consuming more than the initial budgets. This is a lack of focus on the goals and the time frames, which takes time along the lime, making the necessary activities get late. The Six Sigma method comes to ensure that it does not happen, since every activity has its allocated time and budget in which it has to be fulfilled without taking chances. Employee motivation is one cause of adherence to time frames, as well as minimizing the chances of delay and mistakes. When employees are not working under a motivation system, they tend to waste time, which eventually leads to delayed projects and lost revenue. According to Gupta (2004), the more workers waste time during the working hours, the more likely it is to fail on maintaining time frames, which leads to the loss of revenue. The best way to reduce the cost of running a company is simply to maximize the skills and maintain motivation systems for the employees.
Labor cost is one of the most significant expenses in a firm, according to Ray and Das (2010). The process of bringing down the labor costs is by ensuring skilled manpower is in place, and people are motivated to work so that they can complete projects within the set time limits and even earlier if possible to save some running costs associated with the time spent. The Six Sigma method ensures that companies have a well-structured way of meeting deadlines, which in turn reduces the variable costs associated with the time spent at every stage.
The Six Sigma philosophy has enhanced production in numerous entities across the world of manufacturing. The model focuses mostly on structuring a supply chain that ensures that clients receive their merchandise soon after ordering it. It also works on improving the employee motivation, which ensures that workers perform their duties with willingness and within the set time limits. The cost of production is also enhanced by ensuring that skills are improved, and deployment of workers is done following the merits. On the adverse side, the model is considered expensive for small and medium-sized firms, hence locking most of the companies out of the benefits. In addition, the process is considered bureaucratic, since it has a set flow of events, thus making the process of policy implementation lengthy and discouraging to some employees, especially the junior ones.
However, those who have adopted the philosophy have a testimony to make changes in production. The method is quite flexible in its application and relates positively to any form of business entity which has a structured plan of activities. Nowadays, several large global corporations have adopted the idea, and some of them have been able to double their previous activities within few years of its application. Others are still struggling with the idea that the philosophy might not be suitable for the firms of their category. This shows that resistance to change is still evident in the field of business, and that a lot of sensitization is required for people to understand the objectives and the means of achieving them.