©© JIEM, 2009 – 2(3): 517-538 - ISSN: 2013-0953
Impact
of Six Sigma in a developing economy: analysis on benefits drawn by Indian
industries
Darshak A. Desai, Mulchand B. Patel
Received September 2009 ,Accepted
December 2009
·
Introduction
Six Sigma has emerged as
one of the most effective business improvement strategies over the years. This
quantitative approach aims at improving efficiency and effectiveness of the organization.
It is the methodology having statistical base focusing on removing causes of
variations or defects in the product or core business processes. The
improvement focus is on business outputs which are of critical importance to
the customers.
Indian industries have
experienced periodic impacts of transformation, both, before and after
industrial reforms. Initially, the focus was on large-scale public and private
sectors, mainly in the core infrastructural production. The main thrust was on
productivity based on Taylor’s principles of Scientific Management. After
globalization and liberalization, quality surfaced as one of the major area of
concern along with productivity. With opening up of the geographical barriers
and the pressure of competing in the global market, overall operational
excellence becomes the necessity for the Indian industries to remain globally
competitive. .
Six Sigma - A brief overview
As per Park (2002) Six
Sigma implies three things: statistical measurement, management strategy and
quality culture. It tells us how good products, services and processes really
are, through statistical measuring of quality level. It is new management
strategy under leadership of the top management to create quality innovation
and total customer satisfaction. It is also a quality culture. It provides the
way to do things right the first time and to work smarter by using data
information. Antony, Kumar and Madu (2005) stated that Six Sigma provides
business leaders and executives with the strategy, methods, tools and
techniques to change their organizations. As per them, there are four aspects
of the Six Sigma strategy that are not emphasized in other business improvement
methodologies and total quality management (TQM). First of all, Six Sigma
places a clear focus on bottom-line savings. Second, Six Sigma has been very
successful in integrating both human aspects (culture change, training,
customer focus etc.) and process aspects (process stability, variation
reduction, capability etc.) of continuous improvement. Third, Six Sigma
methodology (DMAIC) links the tools and techniques in a sequential manner. Finally,
Six Sigma creates a powerful infrastructure for training of champions, master
black belts, black belts, green belts, and yellow belts.
In statistical terms, Sigma (σ), as we know, is a letter in the Greek alphabet that has become the statistical symbol and metric of process variation. The sigma scale
of measure is perfectly
correlated to such characteristics as defects-per-unit, parts-per-million
defectives, and the probability of a failure. Six is the number of sigma
measured in a process, when the variation around the target is such that only
3.4 outputs out of one million are defects under the assumption that the
process average may drift over the long term by as much as 1.5 standard
deviations.
The Six Sigma methodology
DMAIC offers a structured and disciplined process for solving business
problems. Six Sigma uses tools designed to identify root causes for the defects
in processes that keep an organization from providing its customers with the
consistent quality of products the customers require on time and at the most
reasonable cost. The Six Sigma work is normally done through cross-function
teams that manage the project (Zucker, 2007).
Six Sigma in Indian
industries
Six
Sigma has been utilized considerably by Indian industries during last decade.
Especially large concerns have successfully tried this breakthrough improvement
strategy to get solutions in many of their chronic problems. But small and
medium enterprises are still ignorant regarding strengths of this improvement
drive, of course there may be few exceptions.
Some studies targeting on
quality engineering and management scenario in Indian industries as a whole did
provided a glimpse on status of Six Sigma in Indian industries. But that is not
enough to draw a comprehensive conclusion regarding experience of Indian
industries with Six Sigma as a whole (Khanna, Vrat, Sahay, & Shankar, 2002;
Kumar, Garg, & Mehta, 2002).
Research objectives and
methodology
The
basic objective of this study was to explore the benefits drawn by Indian
industries as a whole by implementing Six Sigma improvement drive at their
organizations. To make the study exhaustive, entire spectrum of Indian
industries were considered as population for the study. Thus, a specific
questionnaire was sent out to all size and type of the Indian industries.
The specific objectives of the study
are listed as below.
•
To know the overall benefits drawn by Indian industries as a whole by
implementing Six Sigma.
•
To find out whether Six Sigma is bringing similar benefits to large as well as
small and medium sized Indian industries.
•
To find out whether Six Sigma is bringing similar benefits to different sectors
of Indian industries.
•
To know the benefiting criteria of Six Sigma implementation where large as well
as small and medium scale Indian industries have similar and totally different
experiences.
• To know the benefiting criteria of
Six Sigma implementation where different sectors of Indian industries have
similar as well as totally different experiences.
Population and samples
To make the study
exhaustive entire Indian industries were considered as population of the
research study. For sampling general stratification was done with an aim to
include samples from all the types, capacities and sectors of the Indian
industries. As such In India, the small and medium enterprises are not well
defined. The internal group set up by the Reserve Bank of India has recently
recommended that the units with investment in plant and machinery in excess of
Small scale industries (SSI) limit and up to Rs. 100 million may be treated as
medium enterprises (EXIM Bank, 2005). In India, the cut off investment limit
for defining a SSI at present is Rs.10 million (Verma, 2005).
A comprehensive survey
questionnaire was prepared covering total 17 key benefiting criteria of Six
Sigma implementation as listed in table 1. The respondents were asked to
indicate their size and sector in the questionnaire so as to group them
accordingly. The respondents were asked to rate each criteria with respect to
their experience of benefits gained from Six Sigma programme in the scale of 1
to 5 (1 = no benefit, 2 = some benefit, 3 =
significant benefit, 4 = very significant benefit and 5 = crucial benefit). The questionnaire was sent out to all variety of
industries across the country. The companies were randomly selected covering
different sectors and size. The questionnaire was sent to 600 concerns across
the country and the valid rate of response was around 16% which is considered
as fairly good enough. The data were then tested for normality and found
suitable for further statistical analysis.
Methodology
The
responses obtained were analyzed in general as well as in specific and detail
for different sizes and sectors of Indian industries. The preliminary analysis
contains the average ranking of all the benefiting criteria as experienced by
the Indian industries as a whole.
To get detailed insight
separate analysis were made for the different size as well as sectors of the
Indian industries. The data were examined through one way ANOVA as well as
Chi-square analysis for similarities or otherwise in these two separate
categories, that is scale and sector of Indian industries. One –way ANOVA was
selected here because unlike t-test, which uses sample standard deviations,
ANOVA uses squared deviations of the variance so computations of distances of
the individual data points from their own mean or from the grand mean can be
summed. In ANOVA model, each group has its own mean and values that deviates
from that mean. Similarly, all the data points from all of the groups produce
an overall grand mean. To be precise, the total deviation of any particular
data point can be partitioned into between –group variance and within –group
variance.
Results
and analysis
1.Industry responses
Figure 1 illustrates the
response rate of the different size of the Indian industries. It is evident
from the figure that large scale industries where Six Sigma is implemented are
greater in number compared to medium scale enterprises.
Figure 2 illustrates the
rate of response from different key sectors of the Indian industries. As
appears from the figure that manufacturing sector is on the top in implementing
Six Sigma with 69% contribution. IT (Information Technology) industries are
second to manufacturing sector in implementing Six Sigma with 15% contribution.
Manufacturing and service combined and others are equal in implementing Six
Sigma, both at a low contribution of mere 8%.
Preliminary analysis
Preliminary
analysis illustrates an overall result regarding benefits drawn by Indian
industries as a whole. The respondents were asked to rate their experience of
benefits gained from Six Sigma programme in the scale of 1 to 5 (1 = no
benefit, 2 = some benefit, 3 = significant benefit, 4 = very significant
benefit and 5 = crucial benefit). Table 1 illustrates these benefiting criteria
with average rating by Indian industries.
The top five benefiting criteria as
experienced by Indian industries are listed as below with their descending
order of importance.
•
Reduction of costs
•
Reduction of variability of process
•
Increase in profitability
• Reduction of cycle time and
Reduction of customer complaints (both with equal rating of importance)
Detailed analysis
Hypothesis testing (One –way ANOVA –
F Ratio Analysis) for different scales of the industries
In this case, we have null and
alternative hypotheses:
• Null Hypothesis (HO): There is no difference in benefits obtained
from Six Sigma implementation by large and medium scale industries.
• Alternative Hypothesis (HA): There is difference in benefits
obtained from Six Sigma implementation by large and medium scale industries.
Following inferences were drawn
based on the ANOVA calculations.
• For the two benefits, “increase in
productivity” and “increase in profitability”, calculated F ratio is greater
than critical F value of 4.26 with degree of freedom (1, 24) and hence null
hypothesis for them is rejected. Further, since p-value for all of them is also
less than the significance level (0.05), with this also the null hypothesis is
rejected.
• For rest of the benefits,
calculated F ratio is less than critical value of 4.26 with degree of freedom
(1, 24) and hence null hypothesis for them is accepted. Further, since p-value
for all of them is also greater than the significance level (0.05), with this
also the null hypothesis is accepted.
The ANOVA calculations reveal that
for the two benefiting criteria, “increase in productivity” and “increase in
profitability”, large and medium scale industries are differing. And for rest
of the criteria, benefits obtained by large and medium scale industries are the
same. But as evident from the mean rating tables 2 and 3, the factor “increase
in productivity” is having mean rating of 3.5 for large scale industries and
4.33 for medium scale industries respectively. That means large and medium
scale industries are more or less equally benefited by Six Sigma programme on
productivity improvement aspect. So, based on mean rating on benefits obtained,
even though the null hypothesis is rejected, it is accepted that the benefits
obtained by Six Sigma implementation on productivity improvement is same for
the large and medium scale industries.
Analysis on benefits drawn
from Six Sigma implementation by large and medium scale industries
The largest benefit drawn from Six Sigma implementation by large scale industries is “reduction in costs”, whereas it is “increase in profitability” for medium scale industries
Concluding remarks
1.Theoretical implications
Six
Sigma has already emerged as one of the most effective business strategies in
the large organizations, worldwide. After its conception at Motorola, many
success stories were charted by a number of multinationals. Indian industries
have already started recognizing the strengths of Six Sigma as a breakthrough
improvements strategy, which can bring overall operational excellence for
global competence.
The criteria where the benefits
drawn from Six Sigma programme is not the same for large and medium scale
industries as well as for different industrial sectors are listed as below.
•
Reduction of scrap rate
•
Improved sales
• Improvement in company image
2.Managerial and practical
implications
As a whole, this study
provided a comprehensive picture regarding benefits being drawn by Indian
industries through Six Sigma improvement drive till date. The study provided an
insight into what kind of benefits Indian industries are gaining from Six
Sigma. This can help other industries, who have yet not experimented with Six
Sigma, to become more focused regarding their expectations from this
improvement drive. Based on the analysis of this study, individual industry
based on their size and type of operations can expect some specific benefits
from Six Sigma implementation. The Six Sigma programme can be initiated with
some specific benefits in view based on industry operations.
Limitations of the study
and future scope of research
References
Antony,
J., Kumar, M., & Madu, C. N. (2005). Six Sigma in small and medium sized UK
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Management, 22(8), 860-874.
Carey,
B. (2007). Business
Process Reengineering in a Six Sigma World. Retrieved May, 2007 from
www.iSixSigma.com/library/content/.
Desai, D. A. (2006). Improving customer delivery
commitments the Six Sigma way: case study of an Indian small scale industry. International Journal of Six Sigma and
Competitive Advantage, 2(1), 23–47.
Desai, D. A. (2008). Improving productivity and
profitability through Six Sigma: experience of a Small-scale jobbing industry. International Journal of Productivity and
Quality Management, 3(3), 290–310.
Eckes, G. (2001). The Six Sigma Revolution, How General Electric and Others Turned
Process Into Profits. USA: John Wiley & Sons, Inc.
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