Six Sigma implementation by Indian manufacturing SMES--an empirical study.

Author:Raghunath, A.
Position:Small and medium-sized enterprises
 
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INTRODUCTION

Six Sigma is a business strategy that helps organizations to improve their operations, enhance quality, eliminate defects and thus increase profits. Many of the well-known companies all over the world doing business in different sectors have benefited enormously by adopting Six Sigma business approach. Six Sigma identifies and resolves chronic problems that directly impact the bottom line of an organization. Embarking on a Six Sigma program means delivering top-quality products and service while virtually eliminating all internal deficiencies (Thawani S, 2004).

Six Sigma is not just about statistics but rather based on the scientific method, utilizing statistical thinking (Snee, R D and R W Hoerl, 2003). It is an overall business improvement initiative rather than just a quality initiative. The main theme of Six Sigma is identifying defects and eliminating them to less than 3.4 defects per million opportunities (DPMO). It defines, measures, analyses, improves and controls the vital few processes linking the improvement of quality directly to the bottom-line results. Up till now, Six Sigma approach has been usually associated with large OEM companies because of their financial strength and manpower resources, because of which, there is a perception that Six Sigma is applicable only for large companies possessing better resources.

The component suppliers should respond to the market-driven issues quickly and effectively and also be cost effective. A supplier with poor quality becomes a weak link. Large companies should help their suppliers to improve the quality of the supplied parts, materials, assemblies or services so that they could in turn supply superior products or services to their customers. Thus, suppliers are really strategic partners in Six Sigma implementation endeavours of the companies. But, the literature says that, still a large chunk of the small and medium enterprises have some misconceptions or myths about Six Sigma approach like:

  1. Six Sigma is applicable to only to large companies

  2. Six Sigma is a complicated, statistical methodology that is difficult to understand

  3. An outside consultant must be hired

  4. Experts are needed to make it work

  5. Six Sigma is repackaged Total Quality Management

  6. Six Sigma is only statistics without real savings

  7. Six Sigma is just training the people

  8. Six Sigma is a "magic pill" to fix problems with little effort

    In the course of our long industrial association with some of the small scale manufacturing companies, we also have experienced that the SMEs feel intimidated by the idea of adopting the methodologies like Six Sigma and it was mainly due to the lack of clear understanding or general misconception about these methodologies. The managements had apathy towards them and hence were not keen on knowing even the benefits of these methodologies. At the same time we used to hear about success stories of Six Sigma implementation by SMEs in some parts of the world. Through the literature review we tried to understand the global situation with regard to implementation of Six Sigma by SMEs in manufacturing and service sectors. Most of these articles articulate that achieving success in Six Sigma implementation by SMEs is possible, but the first thing needed is changing the mind-set of the companies.

    UNDERLYING CONCEPTS AND OBJECTIVES OF THE STUDY

    As far as government, industrial associations and other formal bodies are concerned the support for the SMEs would be at a higher level i.e. in the area of finance, infrastructure, power, taxing, administrative regulations, etc. As far as accreditation to quality management systems like ISO 9000, ISO/TS 16949, AS9100, etc. is concerned, all the required help and support are readily available through a number of consulting firms and the agencies. Since these certifications are almost mandatory requirements for the companies to do business in national and international level most of the companies big or small would go for them voluntarily. It would also be very easy to get a list of these accredited companies region wise, sector wise, businesswise, etc. But, for implementation of the methodologies like TQM, Lean Manufacturing and Six Sigma there will not be any compulsion from anybody for the companies. These are left to the choice of the individual companies as these methodologies are not just concerned only with the quality but mainly concerned with increasing the productivity and effectiveness, increasing the profits, improving the overall bottom-line of the companies, etc. As far as Six Sigma is concerned, right now in India, the general perception is that it is about training and certifying some of the staff members as MBB, BB, GB, etc. and these certified staff members are supposed to take up some six sigma projects with certain financial targets like cost reduction, revenue enhancement, etc. The staff members selected for this purpose, in general, is supposed to be adequately qualified and earmarked for the specific Six Sigma projects only. The cost involved in training these people is quite exorbitant and also they are considered as special resources. So, though the companies are reporting the financial and other gains by the Six Sigma projects the cost incurred by the companies for the Six Sigma implementation is also substantial.

    Our view was that the situation prevalent in bigger companies should not be a deterrent factor for SMEs for the implementation of Six Sigma. The basic theory for application of Six Sigma by SMEs was that the core methodology of Six Sigma is scalable and SMEs could benefit significantly even relatively small scale and simple Six Sigma projects are carried out. Implementation of Six Sigma is dependent upon characteristics inherent in any business. So, even if there are some difficulties in implementing Six Sigma in a small company rather than a large business, it should be applicable for companies of any size. Our supposition is that the breakthrough improvements in bottom-line profitability come from the quality and the intelligence with which the resources are employed and not the quantity. The extension of our supposition is that smaller organizations can change and adapt more quickly than the large organizations and building a culture congenial towards embarking upon on sustainable Six Sigma development should be relatively easy for the small and medium companies. Hence, smaller organizations should be able to establish Six Sigma effectively and faster than large businesses if deployment is properly managed. Smaller organizations may have constraints on resources and expertise, but they have some advantages like shorter decision-making chain. Within the available resources if a small but committed force of the right people with proper training and authority is built for moving the things in a systematic way breakthrough could be accomplished equally well even in a small organization.

    The ongoing industrial changes signal that SMEs also have gradually started showing interest in Lean and Six Sigma approaches for improving bottom-line of their businesses. But, the picture was not clear regarding certain of the questions like: Do our SMEs also still have the general misconceptions about the Six Sigma methodology? Have at least few of them implemented or tried to implement Six Sigma? How many have succeeded in implementation and to what extent they have got benefitted? If some of them had failed what were their problems? Etc. We wanted to do a reality check regarding this ground situation in SMEs. We selected the auto component manufacturing small and medium companies (SME) sector in Karnataka state of India, as this is a vibrant and fast growing SME sector in this region, for thoroughly studying their status of implementation of Six Sigma.

  9. To find out the present state of affairs of the Six Sigma implementation by auto component manufacturing industries

  10. To study the impact of Six Sigma implementation in auto component manufacturing industries and their effectiveness in comparison to the global situation

  11. To study the inter-relationships of the factors that are very essential for proper implementation and management of Six Sigma by SMEs

  12. Bring out the difference between successful and not so successful managements in auto component manufacturing sector of Karnataka in their Six Sigma implementation drive.

  13. To arrive at proper six sigma implementation Model for SME's in Auto component Manufacturing industries

    LITERATURE REVIEW

    Opinions of some of the experts regarding the applicability of Six Sigma for SMEs are:

    Six Sigma is very appropriate for smaller companies too. The Six Sigma strategy works well in billion dollar corporations as well as $50 million privately held companies. In fact, it has been our experience that the results are usually quicker and more visible in smaller companies (Dr Matthew Hu, Vice President of Technology and Innovation, ASI, USA). It does not matter what type or size of business Six Sigma methodology is applied to--no matter whether it is a 300 employee company or a 10 employee family business, Six Sigma will work as long as you follow the process effectively (Brue2006). We have reviewed the available literature on studies undertaken regarding the Six Sigma implementation efforts by the SMEs in different parts of the world. But, for the acceptability of Six Sigma by SMEs, we should provide them enough proof of successful implementations by this sector elsewhere. For this purpose we have attempted to collect information regarding the empirical case studies at global level and thus tried to make our study to stand on a good practical pedestal.

    Jiju Antony (2004) has presented the results of a pilot survey of the service organizations based in the UK to understand status of Six Sigma. The paper reports the essential ingredients required for the successful deployment of Six Sigma in the service sector. Pulakanam & Voges (2010) have...

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