Market Structure: Critical Thinking Samples

Six Sigma Processes as Exemplified by Amazon

Introduction
Six Sigma is a generic business term which pertains to a business performance method. It is applied across organizations from both the public and the private sectors. While its applications seem universal, the name “Six Sigma” itself is actually a registered trademark of Motorola Inc. (George, et. al., 2004). The latter pioneered Six Sigma practices in the United States during the 1980's.
As a historical background, “sigma” was a word used by engineers and Math experts since the 1920’s. It has symbolized a “unit of measurement in product quality variation” (George, et. al., 2004). During the 1980’s, Motorola professionals used it as an “informal term for their company’s internal initiative to lessen defects in their production lines. Hence, “six sigma” became a notation for optimal quality. It has become “Sig Sigma” as trademarked by Motorola.
After the success of Motorola with the “Six Sigma” methodology, it was also applied to the company’s crucial business processes. It then became a general brand name for performance improvement method. This means that it was not just used to reduce defects as it has been originally used. The Six Sigma methods have been formally accredited through the Six Sigma Belt in the 1990’s (Borror, 2009). During the same time, a large avionics company called Allied Signal also used the Six Sigma method and claimed enormous improvements for their company in a period of six months. In 1995, another most popular brand which applied and successfully harvested the Six Sigma benefits was General Electric (Borror, 2009). After three years, GE claimed that it has secured more than three-quarters of a billion dollars in cost reduction (Borror, 2009). In 2000, Six Sigma has already become an industry, which has its own variety of training, consultancy and applications in various types of organizations worldwide.

What is Six Sigma?

According to Chapman (2011), the Six Sigma is not just a universal method for improvement but a “disciplined, data-driven means and process for reducing defects. In mathematical terms, this means that it is a drive towards “six standard deviations between the mean and the nearest specification limit in any process” such as in product and service deliveries and operations. The statistical indicator of Six Sigma quantitatively show a process performance (Chapman, 2011). To attain Six Sigma, a process must not generate over 3.4 defects per million chances. A Six Sigma defect means any shortcoming or external outcome against what is specified by the customers (Chapman, 2011). Likewise, a “Six Sigma opportunity” sums up all the numbers of chances for a defect (Chpaman, 2011).

SIX SIGMA DMAIC

In order to improve performance and reduce variations in the process, Six Sigma utilizes its main process called DMAIC. The Six Sigma DMAIC process means define, measure, analyze, improve, control (Chapman, 2011). It is an improvement system for current processes that fail below specification and require incremental improvement. Borror (2009) defines DMAIC as an “information-driven quality approach utilized to greatly enhance methods.” It is a vital aspect of a Six Sigma effort. However, this can be applied as an independent quality enhancement procedure or as an aspect of other process enhancement efforts like lean manufacturing/management (Chapman, 2011).

DMAIC is an acronym for the 5 stages that constitute the Six Sigma methods:

Define the failure, enhancement effort, chances for improvement, the project goals, and internal and outside stakeholders’ expectations.
Measure process operations.
Analyze the methods to know the basic causes of variations and defects.
Improve methods improvisations by focusing on it and reducing the failure.
Control the enhanced process and the next process operations.
The DMAIC process easily lends itself to the project approach to quality enhancement. This is a subset of the Six Sigma methodologies and can only be accomplished by Six Sigma Green Belts/Black Belts and supervised by Six Sigma Master Black Belts (Chapman, 2011).
As such, Six Sigma is applied by teams and team leaders who initiated the Six Sigma process (DMAIC). They are the crucial personnel at the helm of the improvements at their company’s delivery chains (Chapman, 2011). They must be sufficiently trained, particularly in the utilization of the Six Sigma indicators and enhancement instruments. They must also be equipped with the highest level of communications and leadership skills. These are inherent in the delivery of the crucial outcomes as expected by both the internal and external customers.
In this regard, training is an utmost criterion of the ways and principles of Six Sigma. Teams and team leaders involved in Six Sigma must be continuously trained (Connor, 2009). As likened to the Japanese Martial Arts’ way of developing “belters,” Six Sigma experts are classified as “Black Belts” or “Green Belts” that reflect the various categories of excellence and accountabilities for applying the Six Sigma methods (Connor, 2009). Their expertise is qualified by the different tools at each level of Six Sigma implementation through DMAIC.
Initially, a company or organization determines if it will apply the Six Sigma way. Then, their management decides on their strategy, usually considered as an improvement effort and this foundational strategy must target the vital processes needed to fulfill the requirements of their external customers (Connor, 2009). An improvement effort can average between 20 – 30 business steps or processes. The highest category of these improvements are the major processes that allow the structure to enhance their value chain services and/or manufacturing processes and direct them towards the external customers. Inherent to these intiatives are the familiarity with the needs and preferences of both the inside and the outside stakeholders (Connor, 2009).
Team managers or Black Belts best know these processes and they are the ones who determine and know the details of the processes. They know the quality levels (like the consideration of the defects or variation) that inside and outside customers expect. They quantify the best results of each process performance as termed “Sigma” performance or the quantity of variations in the expected outcomes per million performances (Connor, 2009). The theoretical baseline is very rational. Basically, team leaders must comprehend and improve the most significant stages of delivering the outcomes as a value chain process as these will automatically lead to better custmer service, more gains and less costs, competitive advantage, and overall operational efficiency (Connor, 2009).
Six Sigma team leaders or Black/ Green Belts function with their teams to evaluate and determine the effectiveness and defects of the indicated critical component. The quantification is usually geared on very technical interpretations of the number of defects as mentioned above. It also entails a thorough evaluation of processes, including systems and structures representations and maps/charts (Connor, 2009). Exampled of these indicators which Six Sigma utilizes include the following: the balance scroecard method and the process mapping. All of these needs rely on the steps and the methods preferred by the Black or Green Belts and their project statisticians (Connor, 2009). It also depends on the things which must be quantified and assessed. The Six Sigma methods do not particularly indicate the ideal analytical methods to be utilized. These are decided by the Black Belts or Green Belts.
Amazon at the Six Sigma
Sources say that Six Sigma is not very much acknowledged in the corporate reports and media releases of Amazon, Inc. Being a global company, Amazon utilized the methodology early on. According to Onetto (2014), Six Sigma methods have been an integral part of the company’s “Operational Excellence” program way back 1999. This was when Jeff Wilke was the Vice President of Operations at the global company (Onetto, 2014). He came from Allied Signal, one of the initial implementors of Six Sigma after Motorola.
Being a technology company, Amazon first relied on technology to improve their operations. Its staff were then concentrated at the fulfillment centers and customer-service lines as compared to its computer-science engineers. Hence, the company figured that it required the commitment and total performances of these people since they are the ones who are really receiving, lining, selecting, packaging, and delivering goods. They are also the ones attending to customer services functions via telephone, emails, and the likes. Hence, they initiated to address the problems at their fulfillment centers through automation (Onetto, 2014).
While it addressed some of the common problems, new issues were coming out since the company was also expanding its operations. For instance, automation was not able to address the new kinds of goods, like shoes (Onetto, 2014). Hence, when the shoebox had to undergo the “flipping” process in the automated machine (which was intended to gatehr the shoes and lead them to the packaging stage), the shoes started “flying out” from where it was supposed to be boxed (Onetto, 2014). Hence, Amazon’s first approach was restricted to specific goods in their fulfillment centers. This was understandable since the nature of the goods delivered inside the fulfillment centers were plainly books before.
Intelligently, Amazon resorted to lean management by reinventing automation. It kept the people for high-value, complex work and utilize automation to back up the said tasks. They managed the operations from a Six Sigma orientation (Onetto, 2014). They considered the people at the fulfillment centers at the Three Sigma level, which meant that they perform a job with about 93% accuracy and 7% defects. Autonomation aided them to complete tasks in a defect-free and safe method by only automating the fundamental, repetitive, low-value stages of a process. The result gained the most effective outcomes. Amazon’s operations were improved from Three Sigma to Six Sigma (Onetto, 2014).
Past or present project that Applied the Six Sigma Process
This project that applied Six Sigma exemplifies the best applications of the Six Sigma methodology for a computer systems. Roy Bynum, a Technical Solutions Advisor at CompuCom Systems, Inc. applied various formal practices of the Six Sigma in an informal way and has been aply to replicate it in other projects. However, instead of following the “top-down” management directed process of Six Sigma, he utilized the “bottom-up.” By using Six Sigma methods, the company was able to implement successful projects which entailed technology migration. Normally, this is difficult to implement.
Six Sigma enabled Bynum to determine the needs, establish working relationships with internal and extenal clients, leverage influence of other organizations and people, source out resources, and abide by the financial requirements of the technological projects. He was also able to maintain sight of the project directions regardless of its users (Onetto, 2014). When he was using Six Sigma, he had task requirements that the accepted or generally used technologies could not fulfill, hence, the shortcomings in the performances. meet, which was one of the primary reasons why the task had not be achieved before.
As an example, Bynum narrated that he started with the company in 1990. They were just using the local area networking. They had various vice presidents that had their own local area network and Network Operating System. The Vice President used their Network Operating System, and other proprietary technology networks which they deemed fit for the company. Sadly, they were not sharing data as the different Network Operating Systems each had its own structures. His group united and decided for an independent protocol to address the problem. Since their management each had their own personal choices in vendor technology, each with their specific protocol, they decided to use Transmission Control Protocol/Internet Protocol. This was because it was independent on any one third party supplier.
Bynum also sourced out a Host Master (the office in charge of the utility of the Internet Protocol addresses) to get several addresses to utilize. He talked with Vent Cerf, only to find out that their company had never deployed any officially registered Internet Protocol addresses. With Vent's help, Bynum also became the first Host Master at their company. He initiated installing the routers in each of their buildings. Bynum linked all of the networks’ fiber. He also rerouted the original set up of the Transmission Control Protocol on their specific local area network numbers. After six months, he pushed this “secret” project, he presented it to their management.
It showed that everyone can then share the system and link information data. Various excellent applications of the Six Sigma were applied in his secret project. Hence, it allowed for the success of the project. The problems which the process has overcome included politics inside the organization, the inherent propriety of the vendor systems and the financial constraints of such undertaking. Hence, Bynum believed that as an inherent group of methods and processes, the Six Sigma proved to be very helpful and effective.
Learning from DMAIC
In the illustration, there is some political and organizational management issues involved before implementing a Six Sigma process or step. Hence, a significant deal of work is done before completing a Six Sigma project. In other settings, however, affirming that a project fits the Six Sigma model is also a vital component of the Define phase. Hence, the author realizes that the two most important steps in any Six Sigma or problem solving matter is the definition of the problem (DEFINE in DMAIC) and then deciding whether or not Six Sigma is a suitable solution.
Some important pointers for these are the following: 1. The availability of data or its easy procurement or collection; 2. The political leadership or the management support to enhance the present condition with the new process to be implemented; 3. The decision and the finality that the best solution involves the use of the Six Sigma methods; 4. The feasibility of the applicatios of the Six Sigma compared to the scope of the problem. In other words, there is the question of the DMAIC process as capable of overcoming each aspect of the problem; 5. The relationship of the intended Six Sigma process to a major expected outcome like reduced costs, more income, higher customer satisfaction, and the likes.
The important tool for Define is the Six Sigma project charter (Onetto, 2014). It has the complete information for a project management charter, like the project goals, scope, functions, financial resources, and expected results. Also, it is also a general practice with DMAIC projects to round off the timeline for each phase and to supply basic statistics that are already available and required by the project. This data may include the fundamental cycle time or fulfillment rate, or just the basic process sigma, if it is supplied already.
Another major understanding after this project is completed is the major principle of the Six Sigma philosophy that “it is often the process that must be improved instead of improving the workers.” Usually, the understanding of the process, armed with full information, enable workers to work best and deliver without mistakes. Hence, it must also be emphasized that there must be a high-level understanding of the process. The team must be clear on what the process was intended to attain and what outcomes are expected. Also, the communications lines must also be clear and open. There should be clarity on the start and stop stages of the process, so that workers will be able to absorb changes in the goals and the expected outcomes.
According to Onetto (2014), a tool called a SIPOC is usually needed in this regard. The name is actually an acronym for Suppliers, Inputs, Process, Outputs and Customers and it is a graphical image of each of these items. This decreases the chances for errors as assumptions about the involved parties’ knowledge, roles, and expectations are constantly managed and clarified.
Staff and managerial functions and the availability and actual use of resources are also important. This shall reduce the communication gaps in the process of enhancing the method or operations. Hence, the Black Belt or Green Belt (or the Team Leaders) must know their responsibilities the same way that the staff and the internal customers know what they also have to do to complete the process and gain the outcomes. This way, there would be no communication problems and more effective decision making can be made. For one, complete information leads to better functioning of the employees since they will know exactly what they have to deliver to contribute to the success of the undertaking.
References:
Borror, Connie M. ed. (2009). The Certified Quality Engineer Handbook, Third Edition. New York: ASQ Quality Press.
Brohan, Mark. (January 29, 2013). Amazon Sales Top $61 Billion in 2012. Internet Retailer Website. Retrieved on February 11, 2015 from, http://www.internetretailer.com/2013/01/29/amazon-sales-top-61-billion-2012.
Chapman, Alan. (2011). Six Sigma. Businessballs Website. Retrieved on February 11, 2015 from, http://www.businessballs.com/sixsigma.htm.
George, Michael, et. al. (2004). The Lean Six Sigma Pocket Toolbook: A Quick Reference Guide to 100 Tools for Improving Quality and Speed. New York: McGraw Hill.
Onetto, Marc. (February, 2014). When Toyota Meet E-Commerce: Lean at Amazon. McKinsey Quarterly. Retrieved on February 11, 2015 from, http://www.mckinsey.com/insights/operations/when_toyota_met_e-commerce_lean_at_amazon.