"Six Sigma" is a statistical term that equates to 3.4 defects (errors) per one million opportunities (process cycles). Unfortunately, many organizations today operate around three sigma. This means that the average company produces roughly 67,000 defects per million opportunities in each of its business processes. That equates to lost customers, lost revenue and ultimately lost profits. A Six Sigma program achieves a dramatic increase in business performance by the elimination of defects from existing processes, products and services.

The Six Sigma Approach

Developed in 1983 by Motorola and later made famous by Jack Welch at General Electric, the Six Sigma approach is a structured, data-driven, problem solving methodology consisting of five phases: Define, Measure, Analyze, Improve and Control (DMAIC). Through the application of data-collection and statistical analysis, the Six Sigma approach identifies and eliminates process errors to:

• Increase customer satisfaction
• Decrease process cost
• Increase profit margins
• Increase the Sigma level of processes, products and services

Since customers desire to pay a price that reflects the value of the benefits received and not necessarily what they may cost to produce, a Six Sigma project begins by defining what the customer indicates is Critical to Quality and ends with a process that produces superior value for the customer.

For most companies, the Cost of Poor Quality (COPQ) is as much as 30% of total revenue. The Six Sigma approach utilizes a proven and acclaimed methodology for stripping these costs from the process and focuses on breakthrough ideas that lead to improvements of 50% or more to achieve and maintain world-class performance levels.

Cultural Affects of Six Sigma

Employing a Six Sigma program will have a profound affect on the organization. First, commitment to a World-Class program by top executives will display a desire shared by all to be the best. Second, traditional methods of managing decisions based on experience or "gut-feel" will give way to those based on facts as discovered through the analysis of data. Third, breakthrough ways of thinking, communicating and operating will permeate the entire organization with employees discovering new ways to, not only look at their jobs, but to also perform them. Finally, the elimination of defects will leave your customers ecstatic to do business with you again and again, and the affect this will have on revenue, profits and employee moral is priceless.

Six Sigma at Work in the Utility Industry

During excavation projects, gas and electric lines are often damaged. To guard against such unplanned expense, contractors purchase insurance. The expense to the utility company is the associated repair cost. However, because insurance companies can not settle any claims made by utilities until the utilities complete their investigations, often taking months, receipt of funds against these claims are long delayed and may even go uncollected. To an insurance company, this affects its customer service record, which is extremely valuable in a highly competitive industry.

To improve the process, a utility company assigned a small team to go through Six Sigma training with the project defined to improve collection rates and reduce cycle time. Within four months, the team began efforts to correct the factors that were leading to the collection defects involving claim funds. At the forefront of the project, the team identified the causes and quantified the impacts for the most responsible assignable causes for recovering claim funds: high number of unknown damages, unknown costs to repair damages and long periods before repairs are made.

"Although the project started out with an excellent business case, the final results more than doubled what the project expected to deliver. With this knowledge integrated into a revised process, we can now address this root cause issue and get complete information to the insurance company in a timely manner."

To rid the underlying cause, a communication plan to review the damage recovery process and individual action was developed and discussed with operational groups. Division groups required to process facility damages are now brought together to provide a forum to resolve ongoing damage recovery issues in an efficient system. As a result, correct and complete information is now able to pass quickly to the insurance companies for timely processing.

"By engaging in a Six Sigma initiative to resolve the costs occurring from excavation damage to gas and electric lines, both the utility and insurance companies significantly improved their "Critical to Quality" performance metrics."

The Green Belt project demonstrated substantial cost savings and helped to establish additional measures enabling future improvements. Further, the project has helped the insurance companies dramatically improve their response time as the information required to process claims is delivered faster. "With Six Sigma, everybody wins!" In addition, the complete picture of the Cost of Poor Quality associated with facility damages can now capture liability claims for contractors' downtime, as well as financial recovery.

To solidify the progress in facility damage recovery made by involving the Six Sigma discipline, strong controls were implemented to ensure sustained performance while this team moves on to another project opportunity.