Internal Audit Indonesia's

Desember 21, 2010

Six Sigma evolves into effectiveness and efficiency measurement tool

Filed under: Artikel seputar Internal Audit — internalauditindonesia @ 12:00 am

Nearly 20 years ago, Motorola Corp. developed a quality improvement methodology based on customer focus and statistical analysis called Six Sigma, which the company applied to its manufacturing processes and has been evolving to be applied elsewhere.

One of the key aspects of the COSO Framework includes assessing the effectiveness and efficiency of operations. Elements of Six Sigma can be applied by internal auditors to measure their company’s operational effectiveness and efficiency, says Jon Harper, Senior Manager at Protiviti.

“Knowledge of Six Sigma can be important to internal auditors because they know, in detail, their company’s processes. Internal auditors are skilled consultants who have the ability to recognize potential performance issues. That ability, combined with the rigorous and disciplined methodology of Six Sigma, gives them a powerful way to use data and statistical analysis to measure and improve a company’s operational performance,” Harper said.

Six Sigma describes a nearly perfect process: no more than 3.4 defects per million opportunities. Its evolution over the past 20 years has created a method of process improvement that aims for virtually error-free business performance, says Harper, who holds a Six Sigma certification from Motorola.

Six Sigma is based on a five-step process methodology Define, Measure, Analyze, Improve and Control (DMAIC). It is the application of problem solving, root cause and statistical analysis techniques in working through the DMAIC cycle of process improvement with the aim of mitigating process defects and process variation.

How Six Sigma is evolving

An advantage of using a Six Sigma approach is the ability to scale it to the organization’s needs. There are multiple Sigma levels (1-6). Each level increase in Sigma is an exponential change in defect reduction. It is important that internal auditors, and the Six Sigma consultants they work with, understand these levels and the cost-benefit associated with them. Six Sigma projects should be implemented only by a certified practitioner and with management involvement. However, tools of the methodology can be applied to everyday projects now.

“Although Six Sigma refers to a virtually perfect process, often organizations can get by with less than perfection,” Harper says. “The cost to achieve true Six Sigma level can outweigh whatever gains the organization might realize. Three Sigma equates to 54,000 wrong drug prescriptions per year, whereas Six Sigma is only 1 wrong prescription every 25 years. Dixie cup manufacturing doesn’t experience high cost of waste due to defects in relation to the cost of being perfect, where as, airplane landings demand this level of quality. This should show the cost benefit evaluations that must be considered.”

Recent business trends are further shaping the evolution of Six Sigma, according to Harper. Lean processing and Six Sigma are melding.

“We’re starting to see a lot of lean processing/Six Sigma nomenclature,” he says. “Lean focuses on the optimization of process speed and efficiency. The emphasis is on increasing speed and reducing lead time. By combining Lean with Six Sigma, organizations end up with a methodology more powerful than separate Lean processing or Six Sigma.”

When is Six Sigma appropriate?

Six Sigma is typically implemented after an executive-level determination that the company should change its internal methodologies to strive for continuous quality improvement.

Harper cautions against automatically turning to Six Sigma to improve quality, despite his enthusiasm for it.

“You don’t want internal audit consultants who are always recommending Six Sigma,” he says. “It’s a powerful tool. If a button on an elevator is stuck, it doesn’t require Six Sigma to fix. It must be properly applied, in those situations where a rigorous and disciplined approach to using data to measure and improve performance would clearly be of benefit.”

Often, though, the Six Sigma methodologies will help internal auditors find control gaps and where controls will provide sustained coverage, even when a company does not implement a full-blown program.

“The key is sustainability,” Harper says. “If you understand Six Sigma principles, you can develop proposals incorporating Six Sigma methods to address potential defects.”

Technology can provide a smooth path or be a major roadblock to Six Sigma. This methodology uses technological tools to evaluate data and perform statistical analysis. Applying the correct technological tools provides effective process controls. Sometimes, though, technology is a source of a company’s problems, in which case it can be a hindrance.

Necessary tools start at basic mathematics to calculate throughput yields, Harper says, and can progress to sophisticated statistical software such as SigmaXL or MiniTab.

Management’s support is crucial

More important than technology tools to the success of a Six Sigma project is management support, backed up by a clear strategic objective.

“Any company that has problems with product defects or inefficient processes that are affecting internal or external customers could benefit,” Harper says. “It can be implemented into nearly any facet of a company. It doesn’t require a lot of planning in the organization; Six Sigma is the process. It just requires commitment and a high-level understanding of what it is.”

Long-term benefits, says Harper, include the development of a core methodology for sustained and quantifiable quality improvement. Short-term benefits include quick solutions to nagging problems and the development of more efficient processes.

Ultimately it is the Six Sigma concepts that matter, according to Harper.

“Internal audit can implement Six Sigma tools in work they’re doing today without calling it a Six Sigma project,” he says. “That’s extremely powerful.”

For more information, Harper recommends reading “The Six Sigma Way,” by Peter S. Pande and Robert P. Neuman. Also “Lean Six Sigma for Service” by Michael George. A good Web site is www.isixsigma.com.

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