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Chapter 5: Six Sigma for Services

Aim

This chapter aims to demonstrate how Six Sigma can be successfully linked to a
service industry or to a service function like finance and stores within a
manufacturing organization. It will help you find out DPMO levels and also the
present Sigma level of a company

Measuring Services

Six Sigma concepts learnt earlier are easy to visualize in a manufacturing

environment simply because the process here involves data that is measurable. For
example, the thickness of a pen, the width of Steel plate etc.

The business world follows Darwin’s Theory of Natural Selection: Survival of the
fittest. So organizations that do not improve do not survive.

Continuous improvement requires clearly defined goals or targets. How does one set
progressive targets without measuring the state of the present setup? Any
organization has to learn to measure its process. So even in the Service industry,
management should look at quantifying or measuring the process.

Take for example a call center. The customer call handling process can be quantified
in terms of the time taken to answer a call, the time taken to provide a solution, the
waiting time, the number of calls attended per day, etc.

Setting Six Sigma targets

In product related industry for example, the customer or buyer can define certain
specifications, which help identify and quantify parameters for Six Sigma
implementation.

In the service industry however, output being intangible, the company has to set its
own targets by identifying all the key characteristics of their service and identifying
the process measures that have a direct impact on these key characteristics.

Once these targets are achieved, the organization can continuously improve by
benchmarking itself with better companies. These Benchmark data can be used for
defining newer targets and the cycle goes on.

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Six Sigma in the Accounts department

As a part of its services, Actix manages the accounts related functions for its clients.
The management notices that most of the customer complaints are related to
vouchers handled by the company. To reduce the number of customer complaints,
the company should aim to reduce the number of errors in the vouchers.

The first step would be to identify the errors that are Critical to Quality (CTQ). The
CTQs identified in the accounts department, are errors pertaining to Amount, Tax,
Code and Date.

Next the team needs to find out the Defects per million opportunities. For this they
have to analyze sample vouchers. These should be selected randomly.

Let us say that the team inspected 1000 vouchers. And found a total of 120 defects.

Therefore, defects per invoice = 120/1000 = 0.12

And Defect per CTQ = 0.12/4 = 0.03

This value is then expressed in terms of Defects per million opportunities. It thus
becomes 30,000 ppm.
The Defects per Million Opportunities helps find out the present sigma level of the
company.
To find out the sigma level, we calculate DPMO and then use the Sigma Chart to find
out the Sigma level that relates to this defect density.
Chart below shows that 30,000 defects would amount to approximately 3.35 Sigma.
That means that the process is at present at 3.35 sigma. With this as the starting
point, the company can now plan for improvements.

To improve the Sigma level in the accounts department, the numbers of errors need
to be reduced. How would the department go about bringing up the sigma level?

Typically, the Six Sigma implementation strategy would suggest that the company
takes the following steps:

• Identify the CTQ that is the most significant

• Identify the root cause
• Design a solution that would address this root cause
• Implement this solution
• Verify the effect of the solution by conducting audits at regular intervals
• Improve the process if needed

Improvement is a continuous process. It is important that the organization conducts

regular checks, identifies possible areas for improvement, implements the
improvements plans and verifies that the desired results have been obtained.

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Summary

1. Implementing Six Sigma in a service industry requires creativity and lateral

thinking
2. Every process can be measured
3. The information from the process can be used to improve the process

© Copyright 2004, All Rights Reserved. Edutech Dimensions Pvt. Ltd.