August 2006

Q:  One of my customers keeps talking about Six-Sigma and wanting me to implement it in my plant, although they have backed off some, lately.  Can you help me implement Six-Sigma – in case they come back and want it again in the future – without costing me an arm and a leg to do it?  I mean, if big companies like that are doing it, it must be pretty good, right?  Keep in mind that we’re a CNC shop with about 30 machines and sales of about $15 million.

A:  No, I have to admit that’s one goal that I can’t help you achieve.  Or rather, I won’t even try.

While there are plenty of websites and consultants out there loaded with ideas about how you can implement Six-Sigma in your plant - and more than happy to suck you into trying - you need to know that, in reality, it is not possible to ‘implement’ Six-Sigma regardless if it’s your plant or any other plant in the world.  Anyone selling a ‘Six-Sigma’ program – especially on the cheap, or quick – is only looking to separate your company from the resources you’ve provided to it, and the fact is, you’ve got better things to do with your money.  The fact is, those people are not vested in helping your business achieve its goals at all; they’re vested in selling you something.  Personally, I think you should have all the facts before you make any decisions to spend money.

“Six sigma” is a statistical term, as most sources will tell you right up front.  What they fail to point out is that neither is your plant a mathematics university (if you are, you got the wrong web address here) nor do you get paid for being statistical wizards.  If you’re truly the kind of company that I’m trying to help in McHenry county and the surrounding communities, you get paid for making products that make the world a better place.  So right away, that should help put some perspective on the notion of ‘six sigma’ and its role in your company.

The second ‘fact’ I’d point out for bearing on your perspective is that Six Sigma is based on two primary ideologies:  failure and perfection.  Not surprising, since the term is mathematically / statistically based.  Six Sigma is not based on the real world – and you should be careful not to get so caught up in all the hype that you forget that your plant operates in a very real world.  Six sigma philosophies focus your concentration on the volume of failure in your operations; anecdotally, I’d ask you to ask Lance Armstrong how much of his training was focused on failure.  Then, Six Sigma has you put that failure perspective in contrast to the impossible, ergo impractical, notion of ‘perfection’.

As your consultant, I’d much rather have you focusing your plant’s resources and attention on things like profit, sales growth, customer/employee/supplier satisfaction and retention, and the like.  I’d rather have you focus on whatever goals you set for your company – which are achievable – instead of focusing on failure and impracticalities.

What I would have you do as the owner and/or executive management of your plant/business, is just (3) things:

1.      Define the goal(s) you want your business to achieve (e.g. profit, sales, etc.)

2.      Work with your staff to establish objectives to be accomplished toward those goals and make plans for reviewing performance to those objectives periodically

3.      Assign responsibilities and authorities necessary for fulfilling those objectives

Then let your staff succeed in every way you just defined.

We may need to teach some continual improvement techniques to some of your staff along the way.  That is, we may need to give your staff the tools they need to be successful.  Those techniques will facilitate achievement of your objectives in the following ways:

1.      focus on the goals / objectives that *you* defined for the plant

2.      identify barriers to fulfillment of those objectives

3.      provide a framework for actions to eliminate those barriers

4.      repeat the cycle until objectives are achieved and, ultimately, goals are fulfilled

And then, of course, you can go back and repeat your thee steps, again.

Along the way, some of the techniques we’ll teach your staff may include some statistical analysis.  Statistics can provide perspective and insights that are clouded over in the day-to-day operations; proverbially, they can help you see the forest in spite of the trees.  Certainly, the techniques we teach will have your staff listening to their ‘gut’; whenever statistical tools are applied, your staff will learn to automatically reconcile the statistical data with their gut instincts in order to verify the statistics don’t contain subversive ‘flaws’ – like excessive emphasis on failure (i.e. “We can’t do it!”) or perfection (i.e. “That’s the only way it can be done!”).

Ultimately, achieving your goals for your plant is what should be important – not statistical methodologies that are based on applications proven effective for very specific organizations (Motorola or GE, depending on who’s taking credit for it) whose real life data was very different from that of your plant.  Ultimately, I want your plant to be successful, and you don’t have to buy the latest marketing gimmick to make that happen.

When you’re ready, give me a call and we can schedule a time to talk about your specific needs.  (815-728-1710, or email dmarsh@bcsbydm.com).

HIGHLIGHTS of Six Sigma considerations

 ·    Black Belts, Green Belts, and Dress Belts

Concept: specially train a small group of staff who then train and lead the rest of your staff according to your specific needs and availability.

Positives: low training cost, utilizes ‘lesser’ staff personalities, customized approach

Negatives: inflates egos and related conflicts;  unhealthy dependencies; unrealistic expectations; individualistic nature detracts from team-building strategies

 ·    Six-Sigma (aka “Black Belt”) Projects / Presentations

Concept:  involves and demonstrates improvement to the organization

Positives:  can be empowering to employees; can energize employee morale w/ demonstrable contribution recognized by top management; provides unified focus

Negatives:  often misguided, focusing on tactical data and misdiagnosed opportunities; significant drain on resources (i.e. energy, time, focus, etc.); detracts from non-related priorities; focuses attention on ‘project’ results rather than global / corporate opportunities and impact; a Six-Sigma project could increase productivity in one process and create increased WIP levels staged for subsequent, non-affected processes (i.e. creates a “Herbie” – 0 net improvement)

 ·    3~4 DPPM (defective parts per million)

Concept:  nearly eliminates defects

Positives:  theoretically reduces operating costs, contributes to lean activities, reduces customer – quality complaints, improves efficiency

Negatives:  creates the perception of acceptable numbers (rather than cost) of defects; does not consider cost/profit rationalization – creates an environment where more money can be put into solving a problem than is consumed by problem, itself

 ·    Statistical measurement and analysis of process performance

Concept:  replaces frailties of human emotion with ‘objective’ data

Positives:  creates an infrastructure oriented toward facts rather than assumptions; definitively demonstrates effectiveness; improves communication (universality of numbers)

Negatives:  can create false securities; data has to be interpreted and can be misinterpreted; data can be corrupted or manipulated to create false perceptions; data should be verified and/or independently audited

 ·    Quotable:

“There are lies.  There are damn lies.  And there are statistics.”  - Mark Twain

“Management by numbers alone will result in the loss of both numbers and company.”  - Edward Deming

“You can make statistically perfect life jackets out of concrete.”  - Anonymous

Personally, I’ve seen dozens of plants ‘implement’ Six Sigma (i.e. projects) in one year and completely abandon the program the next year and thereafter for ineffectiveness to overall operational performance.  Like all improvement initiatives, Six Sigma philosophies and techniques can make positive contributions in a plant when focused by and in support of top management directives (e.g. goals and objectives).

ps – We need to talk about increasing your annual return per machine!

Currently @ $500k/machine sales on $500k (avg.-est.) unit-investment.

At 7% net profit or ~$35,000/machine, your relative P:E is ~14:1 not including facilities, inventory, and intellectual property - you could beat that in the general stock market!

Set a strategy to push your machine billing rates to $75/hour (currently $70/hr @ 85%eff.) by targeting higher profit markets / opportunities and you more than double your profit to a respectable 15%.  Now that’s a start down the road toward real wealth!