QUESTION 1

A) Six Sigma (6σ) is a set of techniques and tools for process improvement. It was
introduced by American engineer Bill Smith while working at Motorola in 1986 Jack
Welch made it central to his business strategy at General Electric in 1995. A six sigma
process is one in which 99.99966% of all opportunities to produce some feature of a part
are statistically expected to be free of defects. Six Sigma strategies seek to improve the
quality of the output of a process by identifying and removing the causes of defects and
minimizing impact variability in manufacturing and business processes. It uses a set of
quality management methods, mainly empirical, statistical methods, and creates a special
infrastructure of people within the organization who are experts in these methods. Each
Six Sigma project carried out within an organization follows a defined sequence of steps
and has specific value targets, for example: reduce process cycle time, reduce pollution,
reduce costs, increase customer satisfaction, and increase profits.

Its benefits to organizations.

1. Reduce Operational Costs

2. improve Efficiency or Timeliness

3. Improve Accuracy, Controls, and Policy Compliance

4. Improve Customer Service

5. Improve Cash Flow

6. Improve Regulatory Compliance.

1. Reduce Operational Costs

For most of the companies operating globally, operational cost & risks are significant factors.
These factors contribute to low profits or even losses. Some risks cannot be eliminated, and
operational cost is always omnipresent. Six Sigma methodology can provide a road map that can
drastically reduce an organization’s exposure to risks. Also making organizations more efficient &
effective at delivering its product or service.
2. Improve Efficiency or Timeliness

Six Sigma projects help improve the efficiency of the overall process. Moreover; improving the
timelines in delivering the process output or improving the on-time delivery of products or
service every time can be the focus areas for Six Sigma projects.

3. Improve Accuracy, Controls, and Policy Compliance

Six Sigma projects help improve accuracy by reducing Defects-Per-Million-Opportunities (DPMO)

across the value stream in the process. The word ‘opportunity’ means the chance to commit an
error. DPMO is a probabilistic measure of error rate or capability of a business or manufacturing
process. This measure takes into account both actual defects & number of probable defects in
every opportunity. 

4. Improve Customer Service

The image of the company is created in large part by its interaction with customers. Any
company would want this interaction to be as stable as possible. The reason being disappointed
customers are vocal critics. Six Sigma projects can help identify the number of variations
customers are experiencing, what is driving that variation, and ultimately, how the number of
dissatisfied customers can be minimized. Such Six Sigma projects can also be aimed at improving
customer & vendor satisfaction. 

5. Improve Cash Flow

Six Sigma projects can also be targeted towards improving DSO i.e. Days Sales Outstanding in the
business. If DSO improves, then cash flow improves as well. The higher the DSO, the lesser the
ability of the company to convert credit sales into cash. Six Sigma projects can be aimed at
reducing variation in Invoicing Process, Accounts Payable Process, Accounts Receivable process,
Inventory Management Process, etc. 

Multiple critical defects, which are measurable, will have to be identified across all the aforesaid
processes to improve cash flow. It is a must to narrow-down the scope of improvement too.