The term “six sigma” comes from statistics and is used in statistical quality control, which evaluates process capability. Originally, it referred to the ability of manufacturing processes to produce a very high proportion of output within specification. Processes that operate with “six sigma quality” over the short term are assumed to produce long-term defect levels below 3.4 defects per million opportunities (DPMO). The 3.4 dpmo is based on a “shift” of +/- 1.5 sigma created by the psychologist Dr Mikel Harry. He created this figure based on the tolerance in the height of a stack of discs. Six Sigma’s implicit goal is to improve all processes, but not to the 3.4 DPMO level necessarily. Organizations need to determine an appropriate sigma level for each of their most important processes and strive to achieve these. Because of this goal, it is incumbent on management of the organization to prioritize areas of improvement.
“Six Sigma” was registered June 11, 1991 as U.S. Service Mark 1,647,704. In 2005 Motorola attributed over US$17 billion in savings to Six Sigma.
Other early adopters of Six Sigma include Honeywell and General Electric, where Jack Welch introduced the method. By the late 1990s, about two-thirds of the Fortune 500 organizations had begun Six Sigma initiatives with the aim of reducing costs and improving quality.
By Fabian Gracias.
Fabian has 15+ years of experience in Finance & Accounts.
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