Case Study: Six Sigma for Small Business

Case Study: Six Sigma for Small Business

By Discovery Lean Six Sigma

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Case Study: Six Sigma for Small Business

Six Sigma has proven to work for huge companies like Motorola and GE, which accumulate a lot of waste and redundancy because of their sheer size. But what about smaller organizations? What about local businesses?

What about your company?

Is Six Sigma worthwhile for smaller institutions who don’t have hundred-man teams, or thousand-step processes?

Well, in October 2017, three people asked that same question. They conducted a study, and they published their findings in the Advances of Mechanic Engineering section of SAGE Journals.

Two of the authors – Murilo Riyuzo Vendrame Takao and Iris Bento da Silva – work in mechanical engineering at the University of São Paulo, in São Carlos Brazil. The other author, Jason Woldt, teaches management classes at the University of Wisconsin-Platteville. They put their heads together to create a comprehensive study on the effects of Six Sigma, as it applied to one specific small-to-medium-sized enterprise…

A plumbing product distribution business.

Spoilers: Six Sigma works.

It has worked for huge businesses like General Electric, and it still works for small- and medium-sized enterprises (SMEs) like your neighborhood lemonade stand.

“This article uses a case study highlighting the implementation of Six Sigma methodology in a North American manufacturer of plumbing products (SME). Each step of the process is properly described, and the results are also presented,” the authors said.

“We conclude that it is possible to identify the improvements and benefits achieved by the implementation of the Six Sigma quality program in an SME environment.”

How did they reach this conclusion? What did they find?

The Six Sigma Difference

They discovered that Six Sigma is different from other quality management programs because of the structured application of its tools and procedures (and, specifically, how those tools integrate with the goals of an organization).

These tools are used to facilitate each step of DMAIC – a project development framework, and a tent-pole of Six Sigma. It stands for…

Define: Figure out the scope and importance of your project, identify the needs of your consumers, and then assemble the team responsible for the project’s execution.

Measure: Pinpoint the problem you’re trying to solve, gather all the data you need, determine priority problems, and establish goals.

Analyze: Discover the cause of the priority problems and figure out where the problems start.

Improve: Propose, evaluate, and implement solutions to priority problems.

Control: Maintain the scope of the long-term goal, monitor performance, and take corrective action to keep on track.

Video: What is Six Sigma?

Levels of Six Sigma

DMAIC works across all levels and scopes of Six Sigma projects and practitioners. And for your reference, Six Sigma features a hierarchy of six components:

White and Yellow Belts: those practitioners who are trained in the basic tools of Six Sigma.

Green Belts: those practitioners dedicated to improvements within a project.

Black Belts: those practitioners who lead projects and train staff.

Master Black Belts: those practitioners who connect the general management of Six Sigma projects to the people responsible for the improvement projects.

Champions: members of the executive committee.

Sponsors: those who promote and define the guidelines for Six Sigma implementation.

The Case Study

There are dozens of tools that can be used during DMAIC, and the research dives into their case study to show a few tools in action.

The case study covers a period of about 18 months, following (as previously mentioned) a plumbing product distributor. The company wasn’t being well-received by its customers, and it endeavored to find out why.

Enter the Define phase. One of the tools they used was called voice of the customer (VoC), which defines the needs and requirements of your customer base. It’s a very important tool for a company that’s not getting a lot of positive reviews. For the case study, VoC showed that customers expected prompt delivery, correct product selection, and a knowledgeable distribution team.

Moving into the Measure phase, the company wanted to describe their problem – but not with words. They wanted to use data. So, they did a little data collection, and what did they find? Their order fulfillment cycle was out of whack with the rest of the industry. It took them 46% longer to deliver products than their competitors. They were violating one of the VoC principles defined in the first phase: prompt delivery. That’s why customers were upset. After this discovery, they committed to lowering their OFCT – the time from the order entry to the final delivery of a product – in hopes that it would improve their reputation with customers.Six Sigma DMAIC

So, with their problem discovered, they ventured into the Analyze phase, where they worked to answer one question – why was their delivery so slow, compared to their competitors? They brainstormed causes, and came up with four potential causes: (1) the accuracy of the sales plans, (2) safety stock issues, (3) vendor delivery performance, and (4) falling behind the manufacturing schedule. They conducted regression analysis on all potential causes, to see which one would cause the most trouble. And they found it. After creating a Pareto diagram, they realized that 74% of their sales came from only 21% of their products – and there wasn’t enough safety stock to get those in-demand products to all the customers who wanted them.

That led to the Improve phase, where they aimed to solve the problem. They started by implementing a monthly demand review, to make sure the in-demand products stayed in-demand, and it wasn’t a one-time fluke. The second measure was to actually order and provide the customers with the products they wanted.

The Control phase was simple. They wanted to make sure their solutions worked for as long as possible, so they created plans to monitor sales on their bestselling 21% of products (to make sure they weren’t exceeding or under-supplying demand). And every year, they’d review how well those products sold; if a product started following out of high demand, they could replace it with a product that was coming into high demand.

The Results

After 18 months with the plumbing product distributor, the researchers came to a confident conclusion.

“This case study illustrates that quality management and its tools should be increasingly adopted regardless of whether they are SMEs or large companies. Thus, in order to achieve competitiveness, the Six Sigma methodology should be much more applied in the SMEs, due to the interrelationship with the stakeholders and limited use of consultancies.”

Using Six Sigma principles, the company in the case study increased their annual sales by $248,034. They reduced delivery time by more than four full days.

The Takeaway

This research is another point in favor of process improvement methodologies. It doesn’t matter how big your company is, how many employees you have, or how much revenue you gross every year.

All. Companies. Have. Processes.

Whether you’re distributing plumbing supplies, making billion-dollar acquisitions, or selling lemonade on the street corner, Six Sigma is absolutely worth looking into.

The post Case Study: Six Sigma for Small Business appeared first on Six Sigma Daily.

By: James LoPresti
Posted: February 12, 2018, 2:32 pm

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