Save $250,000 on Each Six Sigma Project

Let's look at ways to slash defects and costs by 50% or more.

Every company has two "factories:"

  • A main factory that delivers your product or service and, like it or not,
  • A hidden "Fix-it" factory that cleans up all of the mistakes and delays that occur in the main factory.

If you're a 3-Sigma company (and let's face it, most companies are no better than 3-Sigma, because that's as far as you can get on good old common sense alone), then the Fix-it Factory and those 30,000 defects per million (PPM) are probably costing you $25-40 of every $100 you spend. If you're a $10 million company, that's $2.5-$4 million that could be added back to your bottom line. If you're a $100 million company, that's $25-40 million. If you're a $1 billion company, that's $250-$400 million. Just think what saving a fraction of that waste could do for your productivity and profitability!

We know that there are wave lengths of light that we cannot see with our eyes. And low pitched and high pitched sounds that only our dogs can hear. The same is true in business, there are levels of defects that we can't detect, or if we can detect them we have trouble making sense of them. This level is around 1-3% defects or 3-4 Sigma.

When I worked in the phone company, managers used to say "Well it's just common sense," but what I've learned is that common sense will only get you to a 3% defect rate. In the hospitals I've worked with, most of them get to a 1% error rate on things like infection rates and medication errors, but that's where they reach the edges of human perception, the end of common sense.

The good news is that you don't need a bunch of complex tools to go from 3-5 Sigma (0.03% defects or 300 defects per million). For the eyes, we invented telescopes to see into space and microscopes to see into the invisible. For companies, we invented a businesscope of quality tools. All you really need is a line graph, a pareto chart or two, and a fishbone diagram. If you don't already have the QI Macros, you can get all of these charts in the QI Macros Evaluation copy.

In a hospital, all you need is:

  1. a line graph of infections per month or patient falls per month
  2. a pareto chart identifying where most of these infections or falls occur (is it after surgery or in the patient's room? Is it a certain kind of patient?) This data is readily available in all hospitals.
  3. Root cause analysis and a fishbone diagram to display the results.

In a computer operations environment, you might need:

  1. a line graph of computer downtime
  2. a pareto chart or two of the "trouble tickets" reported for each system outage to narrow the focus to either the operating system, application software, computer hardware or network.
  3. Root cause analysis and a fishbone diagram to display the results.

So think about your own environment. What data do you already have to develop:

  1. a line graph of the defect rate?
  2. pareto charts of the various elements that contribute to these defects?

Draw these charts using the QI Macros, choose the most promising pareto chart (the one with a few big bars at the front and lots of little ones at the end). Schedule and conduct a series of half-day root cause analysis meetings with in-house experts on each of the "big bars" of the pareto chart. Tip: Don't try to combine them; do each bar separately.

Invariably, this results in finding and fixing some here-to-fore undetectable root causes and results in dramatic reductions in defect rates and the associated costs. Working with one operations group, we were able to reduce computer downtime by 74% in just six months which saved 1,200 hours per week of service representative time. At a loaded cost of $50/hour, that meant $60,000/week or $240,000/month in savings.

Using just these few tools, you can go from 3-to-5 sigma in 18-24 months. For more detail, download our FREE Money Belt Starter Kit.

Rights to reprint this article in company periodicals is freely given with the inclusion of the following tag line: "© 2008 Jay Arthur, the KnowWare® Man, (888) 468-1537,"

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