SiX SIGMA
Originally intended for manufacturing,
this management approach can help pinpoint the obstacles to taking your business to the next level.

When Juan Semente was charged with lowering the cost of goods at Johnson & Johnson, he turned to Six Sigma principles to drill down into company practices—and make improvements.
Six Sigma, a set of practices developed at Motorola, originally was used in manufacturing, But the process is bigger than that. Six Sigma is now used on a wide range of businesses and industries to improve profit margins, minimize waste and defects, and keep customers and employees happy.
It worked for Semente.
“We didn’t have a process in place to prevent the suppliers from sending more material that we needed,” explains Semente, Johnson & Johnson’s global vice president of supply chain and distribution. “In establishing a process, we found three concepts for managing inventory. We were able to reduce our inventory by $67 million, and that allowed us to lower the cost of goods.”
Like peeling an onion, Six Sigma uncovers the layers of process variables and defects that you need to understand in order to control to eliminate the wasted time, effort, and materials that add to your costs but don’t add value for your customers. No longer just for manufacturing, you can apply Six Sigma principles to any business and potentially save millions of dollars in the process.
“Six Sigma is a problem-solving technology, but it’s also a management methodology that ties process improvement directly to lowered costs, improved customer satisfaction, and higher returns on your investment of time and money in your business,” says Greg Brue, a Six Sigma pioneer who implemented the principles at General Electric with Jack Welch. He is the currently CEO and president of Six Sigma Consultants in Albuquerque.
Motorola reportedly saved more than $15 billion in the first 10 years of using the program. DuPont started Six Sigma in 1998 and realized more than $1.6 billion in cost savings in four years—in addition to reducing environmental impact and increasing safety. Allied Signal (Honeywell) not only reduced costs by $1.4 billion from 1992 through 1996, it also reduced new product introduction time by 16 percent.

Eliminating defects
and cutting costs
How does this apply to the average business?
When it comes to the bottom line, there are there are typically two ways to increase profit in your business: increase the price of the services or product you are selling, or decrease the cost of goods and services. To decrease the cost of goods and services you must identify and fix the defects that raise your costs. This was Semente’s challenge, and it is the challenge of many who oversee the supply chain.
Ask yourself this question: In your business, do you ever have to spend time and money to send overnight packages via FedEx? How many times could you have avoided the overnight rush charges by avoiding poor planning or some other related defect your internal process causes?
The Six Sigma methodology can identify and correct this type of defective process.
“Six Sigma helps you rank your top 10 defects and start to measure their impact so you can eliminate the most costly ones first, or bring them close to zero,” says Alexis Goncalves, principal of Innovation Insight, an innovation management consultancy in Wilton, Connecticut. “You decide what the standard is and apply the methodology to bring operations to that standard.”
Of course, once you’ve eliminated the defects, it is possible that you have added cost to the equation. That’s when you apply the Six Sigma methodology to identify waste and costs. Think of it this way: if you look back through two years of your check register, do you think you might find some waste? Could it be possible you would find hidden or natural spending patterns that don’t need to exist? Six Sigma identifies them.

Focusing on customer,
employee satisfaction
For the small- to mid-sized business owner, increasing customer satisfaction is paramount. After all, says Brue, your main function is to make your customers happy so they will keep doing business with you. Companies exist for one purpose: to profitably serve customers. So it follows that any problem-solving initiative should help you do just that.
“The customer is a person, not an organization, business, or corporation. Your customer is a human being with needs, wants, and problems, just like you,” says Brue, author of Six Sigma For Small Business. “Satisfaction is the extent of certainty a person has that their standards will be met by the product or service you provide. As certainty increases, the likelihood of satisfaction increases as well.”
Customers have what are termed “critical-to-quality,” or CTQ, expectations. CTQ is an important Six Sigma concept. These CTQ expectations are important to understand and help ensure that you will satisfy your customers. For example, what are the CTQs for a customer at McDonald’s? First, to be waited on quickly. Second to have your order taken in a courteous manner. Third, to get the right food delivered fresh.
Right behind customer satisfaction, Six Sigma can help increase employee satisfaction and commitment level. You and your employees can enjoy solving a problem that costs you time and money. Employees feel like owners when they have the tools and are allowed to fix costly problems in the business, Brue says. It provides a great sense of accomplishment for everyone.
Grow and expand
your business
Finally, Six Sigma helps tackle the growth challenges. Growth, like any other issue, is a problem to solve. So what are the market factors to grow and expand? Is your business ignoring a distribution channel? Perhaps you are not effectively leveraging the Internet. What are the most important factors for growth? What is your growth objective for this year? Six Sigma is about asking new questions and then systematically finding answers.
“You use Six Sigma to generate new ideas, to innovate, to develop new products and services that appeal to your customers,” Goncalves says. “You can apply what you learned in the stages of eliminating defects and cutting costs to design and deliver better goods and services to clients. This gets into the realm of customer experience management.”
Customer experience management is a customer-centric business strategy that aims to maximize profitability, revenue and customer satisfaction, and Six Sigma plays an important role.
Johnson Controls started its Six Sigma initiative in 2000. Changes in the design and drawing processes saved an estimated $1.7 million per year in tooling costs and $943,000 per year through greater engineering productivity
Of course, before you dive into Six Sigma head first, it’s important to assess the potential benefits of investing in the personnel and processes required to apply this methodology to your business, according to Joe DeFeo, president and executive coach at Juran Institute, a Six Sigma consultancy based in Southbury, Connecticut., and author of Six Sigma Breakthrough and Beyond.
“You must define the proof of need to really embrace Six Sigma. That proof needs to come from estimating the cost or loss due to poor quality, customer dissatisfaction with your product or service, and the cost structure or low margins in your industry,” DeFeo says. “Don’t embrace the methodology just because it’s a trend. Embrace it because it will make you more profitable.”