Cleo S.

Villanueva DITCC111 Advanced IT Project Management

SIX SIGMA

Samsung Electronics Co. (SEC) of Seoul, Korea, is perfecting its fundamental approach to product, process
and personnel development by using Six Sigma as a tool for innovation, efficiency and quality. SEC was
founded in 1969 and sold its first product, a television receiver, in 1971. Since that time, the company has
used tools and techniques such as total quality control, total process management, product data
management, enterprise resource management, supply chain management and customer relationship
management. Six Sigma was added to upgrade these existing innovations and improve SECs competitive
position in world markets. The financial benefits made possible by Six Sigma, including cost savings and
increased profits from sales and new product development, are expected to approach $1.5 billion by the end
of 2002. (By Jong-Yong Yun, Samsung Electronics Co., and Richard C.H. Chua, Juran Institute Inc.)
SEC completed 3,290 Six Sigma projects in 2000 and 2001; 1,512 of these were BB projects. In 2002, 4,720
projects are expected to be completed, 1,640 of them by BBs. SECs Six Sigma projects have also contributed
to an average of 50% reduction in defects between 1999 and 2001. There is no thought of improvement in
quality and productivity without Six Sigma. These impressive numbers have certainly played a major role in
Samsungs recent growth. Some indications of this include the following:
By 2001, SEC had earned net income of $2.2 billion on total revenues of $24.4 billion. Market
capitalization stood at $43.6 billion.
According to SECs 2001 annual report, SEC now is one of the top 10 electronic and electrical
equipment manufacturing companies in the world, with the best operating profit ratios and superior
fiscal soundness.
The report also says debt to equity ratio is lower than that of any top ranking company, and the
shareholders equity to net assets ratio surpasses the average.
SEC says its technological strengths, Six Sigma quality initiatives and product marketability helped
increase its share of the memory chip market in 2001 to 29%, monitors to 21% and microwave ovens
to 25% of those sold worldwide.
Despite a downturn in the world economy and a reduction in exports to the United States, credit for
SECs current operating profit margin of 8.5% is due mostly to quality improvements and Six Sigma
deployment. SECs quality and innovative strategy helped it reach the number one position in the
BusinessWeek 2002 information technology guide.

General Electric (GE) former CEO Jack Welch stated, Six Sigma must permeate every part of a business to be
successful. It applies to how well you close your books as well as to how a company does appraisals (Welch,
2005). GE embraced quality improvement as a way of doing business, necessitated by increasing competitive
pressures, globalization, and the need to reduce costs due to poor quality. By implementing numerous
quality improvement initiatives, GE benefited from improved financial performance while benefiting
customers, shareholders, employees, and the environment. These efforts transformed GE and enabled the
company to act as a role model for other companies pursuing a zero-defect quality environment.In todays
world where globalization, competition, environmental regulation, and increasing customer demands drive
companies to pursue error-free products and services, GE is a role model for the successful implementation
of quality improvement techniques such as Six Sigma and Lean manufacturing, while maintaining innovation
and creativity. GE has successfully created a culture of quality that permeates the fabric of the company and
touches every part of the operation and every employee. GE has succeeded in this endeavor through the
vision of its past and current CEOs, who recognized the economic, social, and environmental value of Six
Sigma and Lean manufacturing. (Six Sigma and Lean at General Electric: A Case Study, Theresa Martin)
 Benefits to the Company, Stockholders, and Customers
The cost of poor quality is significantly higher than most companies realize. At three sigma levels,
poor quality accounts for 25-40% of sales. Once a company achieves Six Sigma levels, this cost drops
to less than 1% of sales (Box, 2006). Because quality has a major impact on a companys financial
performance and is a key determinant of customer satisfaction, Ravichandran (2006) investigated the
implications of Six Sigma levels on a companys ability to compete.

Benefits to Employees
Not only do customers, stockholders and the company benefit from Six Sigma implementation, but
employees benefit as well. To ensure all employees had the skills necessary to identify and resolve
quality problems, every employee attended Six Sigma training and had a portion of compensation
tied to demonstrated use of Six Sigma practices (LePree, 2000). Welch (2005) explains that the
advantage for employees included not only training and compensation but also job security, as better
products means happier customers, which means more market share for GE and more security for
employees.

Benefits to the Environment

GE also adopted quality improvement techniques to reduce its environmental impact and carbon
footprint. At GE-owned NBC Universal Studios in Hollywood, Lean manufacturing tools such as
energy treasure hunts have been very successful in reducing waste, CO2 and greenhouse gas
emissions. The EPA defines an energy treasure hunt as a three-day plant assessment event in which
a cross-functional team of employees identifies opportunities to reduce unnecessary energy use.
Project teams then implement the ideas that are likely to yield the greatest benefits through kaizen
events (EPA Lean and Energy Toolkit, 2011, para 3). Aligning with the GE company strategy of
reduced energy consumption, NBC created 10 teams focused on different energy components such
as electricity, natural gas, steam, and compressed air. NBC set a target to reduce energy consumption
by 20% and save $1.4 million, while creating a culture of energy savings and eliminating wasteful
usage. GE has implemented over 200 energy treasure hunts worldwide, resulting in more than 5,000
energy savings initiatives that reduced 250,000 metric tons of green house gas emissions. In 2008, GE
further expanded its application of Lean techniques to water usage with a target of a 20% reduction
by 2012 (EPA GE & Universal Studios, 2011).

SUMMARY AND OPINION

1. Improved Customer Loyalty

Any business wants to retain its customers. Indeed, this is a significant factor in determining the success of a
firm. But, of course, customer loyalty and retention only ever come as a result of high levels of customer
satisfaction. Surveys suggest the reasons given by most customers for not returning to a business are
dissatisfaction with the experience and employee attitude. Often a company will not even know they have a
dissatisfied customer as they will simply take their businesses elsewhere.
Implementing Six Sigma reduces the risk of your company having dissatisfied customers, for once training is
complete, so few experiences should be outside of their specifications. To achieve this you may want to
consider running a voice of the customer study which helps your business understand which of your products
attributes are critical to the customer's perception of satisfaction.
2. Time Management
Employing a Six Sigma methodology at your business can help employees manage their time effectively,
resulting in a more a efficient business and more productive employees. Users are asked to set SMART goals
and then apply the data principles of Six Sigma to those goals. This is done by looking at three key areas;
learning, performance and fulfilment.
For instance, under learning, a practitioner of Six Sigma might ask themselves; how often do interruptions
take me away from my task and how many of these interruptions require my attention? Similarly, under
performance, they might consider how their practices are helping them reach their professional goals. Users
can then create an action plan, the result of which can be employees who are up to 30 per cent more
efficient and who are happier in themselves, having achieved a better work-life balance.

3. Reduced Cycle Time

Unfortunately, most projects firms embark on end up extending beyond their original deadline often because
there are changes in project scope or there is a shift in management policy. By using Six Sigma, a business can
set up a team of experienced employees from all levels within the organisation and from every functional
department. This team are then given the task of identifying factors that could negatively affect the project
leading to long cycle times. They can then be tasked to find solutions to these potential problems. This
method allows business to create shorter cycle times for projects and stick to those schedules, with many
firms reporting reductions in cycle times of up to 35 per cent.

4. Employee Motivation
Every business, if destined to succeed, needs its employees to act in the right way - but for employees to do
so there must be sufficient motivation. Indeed, organisations who are willing to fully engage with employees
have consistently demonstrated 25 50 per cent increases in productivity. Sharing Six Sigma problem solving
tools and techniques will allow for employee development and help create a climate and systems for
employee motivation.

5. Strategic Planning
Six Sigma can play an integral part in any strategic vision. Once your business has used a created a mission
statement and carried out a SWOT analysis, then Six Sigma can help you focus on areas for improvement.
For instance, if your business strategy is based on being a cost leader in the market, then Six Sigma can be
used to improve internal processes, increase yields, eliminate unnecessary complexity and gain or maintain
lowest cost supplier agreements. In fact, whatever your strategy happens to be, Six Sigma can help make
your company the best at what it does.

6. Supply Chain Management

As previously mentioned, the aim of Six Sigma is to have a defect rate of less than 3.4 per million, and your
suppliers have a major influence on whether this target is met. One of the possible ways to reduce the risk of
defect is to use Six Sigma to drive down the number of suppliers your businesses has, as this in turn reduces
the risk of defects.
Its also important to understand if your supplier is planning to implement any changes. For instance, a
change in machinery can have an effect like the ripples from a rock thrown into a pond. The most successful
firms drive their Six Sigma improvements as far up the supply chain as possible.