Six Sigma is a business strategy that is used to maximize output and profit by minimizing costs in the form of wasted resources caused by poor quality and inconsistent production.
The program is an expression derived from manufacturing processes, specifically those that have to do with representation of the processes in statistics. A sigma score is an indicator of the yield of the manufacturing process. The score is given as a percentage of products manufactured that had absolutely no flaw.
If the process goes as it should, the yield is 99.99966 percent free of deficiencies. This is equal to just 3.4 flawed products in every 1 million products manufactured. This is referred to as 3.4 defects per million opportunities (DPMO). The expression ‘Six Sigma’ therefore stands for near perfect yield from a manufacturing process.
Motorola Inc holds the registered service mark and the trade mark to Six Sigma. In 2006, the company listed savings of billions of dollars that came directly from employing Six Sigma principles. The method also spread widely when another company, GE, announced that it has also saved millions after applying these principles. The same firm went on to make 1 billion dollars in savings.
Companies take huge losses when customers demanded cash refunds, product replacement and repairs when low quality products or services are produced. A realization was made that quality has to be raised for the sake of customer satisfaction and therefore, company success.
Some believed that this process would cost more money, but reanalyzing and reorganizing the reducing the waste and streamlining the business processes actually raised the quality of products. This, then, raised the profits as the company was not throwing out so many defective products or having to repair or otherwise compensate customers for faulty products.
Impressed by the significant improvement seen in Motorola, other companies went on to adopt the Six Sigma Process, as well. By the later part of the 1990s, almost two-thirds of organizations listed under Fortune 500 were using this method and with similar improved results in terms of higher margins and reduced costs. In more recent years, some companies merged the traditional “Six Sigma” program principles with another notion, one of lean manufacturing, which led to the tactic called Lean Six Sigma.
This program is used mainly by large organizations with at least 500 employees. This is because of its hierarchical team-based structure where there are levels like Six Sigma Black Belts, Green Belts, and Yellow Belts. However, every organization can apply the principles of this particular program to ensure their operations are lean, with little or no waste of resources and maximum returns or results.