Australia’s mining fraternity is cutting through the jargon and hype surrounding Six Sigma and discovering at its core a sound quality improvement methodology delivering significant annual savings to some of the world’s largest corporations.
Since its development in the late 1980s, Six Sigma has become a magnet for major companies. Motorola, General Electric, Dupont, Caterpillar, Cummins and many others have embraced the process improvement doctrine originally laid down by Motorola executive Bill Smith.
These companies have used Six Sigma processes, based on collating data and information to make informed decisions about improving products or the methods used to manufacture them.
In the late 1990s, thanks to feedback from customer surveys, GE's plastics division saw an opportunity to increase its competitive edge by improving key features of its customer service operation. Some of the key customer requirements identified included new colour matching lead-time, correct order documentation and faster delivery of products. GE decided to make this a Six Sigma project, using the DMAIC (define, measure, analyse, improve and control) improvement process to successfully increase service levels and lower defect levels.
The company was able to further refine its delivery process within the plastics business by applying Six Sigma to track the date and time of customer receipt for each shipment compared to request. With these and other improvements throughout its numerous business divisions, GE claims to now save in the order of $2.5 billion a year.
Despite the immediate and substantial cost cutting gained from Six Sigma, the likes of GE and Motorola have discovered many other benefits from making the methodology a way of life. Try reading through GE’s annual reports and counting the number of times you see the words Six Sigma.
Other major companies soon joined the Six Sigma path including heavy equipment supplier Caterpillar. Caterpillar adopted Six Sigma four years ago and today has roughly 2000 “black belts”, 200 “master black belts” and 20 deployment champions throughout its company management.
Just as in martial arts, the use of the term black belt signifies a person's mastery of the required skills and their status as a Six Sigma expert.
One man who was there to see the Six Sigma explosion within Caterpillar was Brian Adams. Now general manager of business improvement for Australian consulting firm Snowden MAX, Adams has 14 years of international industry experience, eight of which were spent with Caterpillar in Singapore, Switzerland and Britain.
Caterpillar claims to now save in the order of $1 billion a year from its Six Sigma processes, a result that has not gone unnoticed by some of Australia's largest mining companies.
"I certainly think Six Sigma is becoming more widely known within the Australian business sector as a whole with companies like Caterpillar and BHP Billiton openly sharing more about Six Sigma," Adams said.
"We have found that some companies have actually been using Six Sigma for sometime but were very quiet about it because it still wasn't a widely known methodology here in Australia."
BHP Billiton was one such company, initially deciding to bury its Six Sigma program under the moniker of "operating excellence". The company's global practice leader for Six Sigma, Gary Warden said Six Sigma was originally implemented within the BHP minerals businesses during 2000 when they were managed by Bob Kirkby.
"At the time the decision was made the company was looking for ways to improve its competitive position, so a team was put together to benchmark international organisations that were seen to be leaders in business improvement,” he said.
“This benchmarking identified Six Sigma as a program that was being used by a number of these companies to improve their businesses.”
Warden said deployment of Six Sigma had delivered significant benefits to BHP Billiton, including aiding in the achievement of the company’s strategic objective to reduce operating costs by 2% per annum. A secondary goal of Six Sigma was to build the capability of the people within the company to make better decisions faster, based on analysis of business data.
“Not only has this goal been achieved, but Six Sigma concepts and tools are now being used on a daily basis within the company, not necessarily just in the execution of Six Sigma projects, and not necessarily just by those people that have been through the formal training program,” he said.
“You can now go anywhere within the company and see people using Six Sigma tools and rigour in their daily work.”
WMC Resources has also enjoyed success using Six Sigma in similar fashion to BHP Billiton. Since 1999, the prominent Australian miner has made extensive use of Six Sigma, particularly at its mines and processing plants and in administration.
Last year the company saved $124,000 in employee relocation costs and has reached annual savings of $800,000 by changing the way it pays suppliers.
This year the company said it planned to save close to $400,000 through smarter use of technology to access company information and decrease software licence fees.
Adams said with results achieved by WMC Resources and BHP Billiton out in the public arena, Six Sigma was more likely to take a greater foothold in the Australian mining industry.
"When we talk about Six Sigma I like to use the terms high tide and low tide," he said. "If you call high tide 12 o'clock then you would say the US is probably at 1 o'clock or 2 o'clock, they have gone over high tide with Six Sigma.
"Europe is a different picture, it is probably at 10 or 11 o'clock, it is coming up to high tide and people are starting to become more aware of it, while in Australia it is probably at about eight or nine o'clock because it is just really starting to hit these shores."
Adams admits Six Sigma has been slow to make its way into the Australian mainstream as a result of a general lack of awareness, leaving companies with little idea where to start. "The true cost of Six Sigma is the infrastructure you need to...