General Electric's Quality Gamble
The Implementation of Six Sigma
General Electric (GE) is among the most profitable companies and, according to Fortune magazine, the most admired. It stock is the most highly valued in the world. Some critics would argue, if it's not broke, why fix it? Jack Welch, CEO of GE, believes in the "infinite capacity to improve everything." Why does a company that has experienced so much success recently invests over a billion dollars in a quality initiative? Increased competition has GE adopting the attitude that businesses that stand still become obsolete as businesses that continue to grow pass them by. Also by implementing Six Sigma, GE is preparing itself for future profitability opportunities. Finally, research indicated a need for improvement in the way GE does business. GE had been straining for years to increase operating margin and six sigma is a way to do that.
What is Six Sigma?
Six sigma, the mother of all quality efforts, can mean different things to different organizations. The Six Sigma Academy defines it as tactics and tools to improve profitability through focusing on improving the sigma capability of an organization's processes. GE defines six sigma as first as a management philosophy; a never ending to competitive leadership by satisfying customer requirements profitability. Second they define it as a measurement system; a measure of a processes inherent ability to meet customer requirements. In general six sigma is a statistical non-financial performance measurement at which you should design, operate, and control every process in your company in such a way that none of yield more than 3.4 defects per million units of output. Six Sigma is a tool that measures in a clear, accurate, mathematical terms how good or bad their quality levels are, how much they can improve, and what progress they are making along the journey.
On a global perspective, companies that have not begun their quality journey are around one or two sigma. The worldwide average is around three sigma. The majority of the companies utilizing six sigma in India are at a low two sigma. An average domestic company is at three sigma, while a good company is at three and a half. Today GE is around three and a half with goals of reaching six sigma by the year 2000. Companies operating at three to four sigma lo...
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...reduced cycle times, increased productivity, improved capacity and output, decreased work-in-progress, and improved process flow. Companies operating at 3 to 4 sigma generally loses up to 10-15% of their total revenue due to defects, on the contrast a company that operates at 6 sigma generally loses less than 10%.
Six Sigma stars Motorola has reported savings of $2 billion over 10 years of implementation while GE shaved off 750 million of cost in 1998. In 1999, GE has projected a 1.5 billion in savings due to Six Sigma, and if they reach their goal of six sigma in the year 2000 they will add between 8 to 12 added to the bottom line.
In conclusion, GE has decided to ride Six Sigma into the next century. The year 2000 is the deadline for reaching Six Sigma, which is also around the time its CEO Jack Welch plans to retire. If GE's quality gamble pays off, Jack Welch will go out a winner, leaving behind his most admired company on top.
Reference
"The Enigma of Six Sigma." (1999, May). Business Today. Online
Romeo, Mary. Six Sigma Quality. GE Capital FMP Conference, Stamford, 1999.
Curran, John. "GE CAPITAL: JACK WELCH'S SECRET WEAPON." Fortune July 1999.
According to what we have learned in class, six sigma, statistically, is interpreted as having no more than 3.4 defects per million. However, they dump 10-12 dough balls per week, while 5-6 is more reasonable, which illustrates the quality mismanagement. So, the food cost there is way higher when it accounts for 38%, while industry ideal is 30%. In order to streamline the entire process of making pizza, it is an imperative for Pizza My Heart to exhaustively put six sigma in action.
Before commencing the study all participants were briefed on the roles pertaining to the experiment without actually being assigned roles. Once roles were determined and assigned each participant was given specific instruction to their roles whether it be the role of the Guard or Prisoner. The group assigned to the prisoner role were greater in number and were instructed to be available at a predetermined time, this was done to maintain the reality of the simulation. The prisoners were arrested and escorted by real-life law enforcement officials and processed as any detainee would be in a real situation. Upon completing the processing part of the experiment the students were then transferred to the simulated prison, which was housed in the basement of the university, and assigned identifying numbers, given demeaning clothing as uniform and placed in barren cells with no personalized
These occurrences can be analyzed using social psychology because the environment, the situation, and those holding the authority influenced the behavior of others. Due to these influences, prisoners and guards acted on the roles they were given, in the way that society sees them. The description, in itself, is the definition of social psychology.
In order for a company to push its improvement and create a balanced plant, it is necessary to increase the throughput, while reducing inventory an operating expense. But, what is most important is to identify the bottlenecks to be able to focus on them. After focusing and solving the constraints, everything else is going to be less powerful but important at the same time.
As we learn from the case study, the Lincoln Electric Company is the largest global manufacturer of machines for welding, which are used in all kinds of construction projects. This means that the company has a large global presence and many employees, so its culture affects thousands of its workers. Even though it is now 2014, the company still has a large market share and very satisfied employees, so clearly the culture leaves employees satisfied and motivates them to work hard for the company.
When put into an authoritative position over others, is it possible to claim that with this new power individual(s) would be fair and ethical or could it be said that ones true colors would show? A group of researchers, headed by Stanford University psychologist Philip G. Zimbardo, designed and executed an unusual experiment that used a mock prison setting, with college students role-playing either as prisoners or guards to test the power of the social situation to determine psychological effects and behavior (1971). The experiment simulated a real life scenario of William Golding’s novel, “Lord of the Flies” showing a decay and failure of traditional rules and morals; distracting exactly how people should behave toward one another. This research, known more commonly now as the Stanford prison experiment, has become a classic demonstration of situational power to influence individualistic perspectives, ethics, and behavior. Later it is discovered that the results presented from the research became so extreme, instantaneous and unanticipated were the transformations of character in many of the subjects that this study, planned originally to last two-weeks, had to be discontinued by the sixth day. The results of this experiment were far more cataclysmic and startling than anyone involved could have imagined. The purpose of this paper is to compare and contrast the discoveries from Philip Zimbardo’s Stanford prison experiment and of Burrhus Frederic “B.F.” Skinner’s study regarding the importance of environment.
Sitnikov, C. (2012). Six sigma as a strategic tool for companies. Young Economists Journal / Revista Tinerilor Economisti, 94-102.
The idea of experimentation of prison life achieved by the Stanford University students was intriguing and the results were interesting. Haney, Banks, and Zimbardo’s study due to a result of their curiosity of the reactions of subjects when placed in prisoner or prison guard roles. Their inspiration for the study was somewhat unclear; however, hypothetically reasoning was placed on determining aspects of the actual reality of incarceration. The experimenters also strived to test the theory on whether prisoners face abhorrent conditions due to their interpersonal evils, or do to the aggressive and deviant behaviors of prison guards (Haney, Banks, Zimbardo, 1973).
The newly appointed district sales manager, Larry Barr, faces the problem of allocating sales quotas among his various sales representatives. This decision will affect everyone's earnings including his own. This problem is compounded by the fact that different territories have, for a variety of reasons, different potentials. In addition, the territory that is known to be the toughest will soon require a new sales rep.
Other possibly meaningful factors that cannot be forgotten include: higher yields (due to process quality and use of more efficient, larger silicon wafers), use of common core design for different products supported by the flexibility of production lines (which enabled cost-efficient production of a wide variety of different semiconductors), and – reportedly – 12 per cent lower investment in capital assets related to the aforementioned strategic decision on fab collocation.
The Six Sigma approach was designed by Motorola in 1986. The primary objective of the concept was to develop a tool for tallying the process defects and, as the result, improving business operations. The foundations of the approach are the customer needs, statistical analysis of data and facts, and timely execution. The method promises numerous benefits such as increasing performance and profitability of an organization, improving product or service quality and employee morale, decreasing costs, the growth of market share, the higher level of satisfying customer needs, etc. (Meredith & Shafer, 2013). The primary advantage
Organizational changes that reduce cost. The M&S reduced its management levels to reduce the cost.
SEC was mainly focused in manufacturing; therefore, it’s no surprise that the executives themselves were also focused on their manufacturing plants. Profits that SEC received were soon reinvested into Research & Development, manufacturing, and supply chain activities. Unexpectedly, in 1997, a financial crisis hit the Asian market. Even though SEC’s sales were $16 billion, they still had a negative net profit. SEC executives exercised major restructuring efforts that resulted in the dismissal of 29,000 workers and the sale of billions in corporate assets. SEC was able to ride the Asian Financial Crisis and was able to reduce its debt dramatically to $4.6 billion, from $15 billion, over a 5 year period. Furthermore, SEC was able to increase its net margins from -3% to 13% (Quelch & Harrington, 2008).
In Kyle Patrick Alvarez’s 2015 film The Stanford Prison Experiment, he illustrates Stanford professor Philip Zimbardo’s 1971 study of the psychological effects of becoming a prisoner or prison guard. In Zimbardo’s experiment, he had his subjects adopt roles as either prisoners or prison guards and set up a mock prison in the basement of Jordan Hall, Stanford’s psychology building. In psychology, a role is a set of expectations concerning the ways in which people are supposed to behave in certain situations. Generally, the prison guards were psychologically abusive to the prisoners, making prisoners endlessly repeat menial tasks and attempted to make them turn against each other. Although some of the guards felt bad about doing these things,
The second way is to achieve low direct and indirect operating costs is gained by offering high volumes of standard products and offering basic no-frills products. Production costs are kept low by using less parts and using standard components. Limiting the number of models produced to ensure larger producti...