Six Sigma: The Service Sector Persective

Relevance
Research has shown that most of the service processes are performing at less than 3.5 sigma quality level with a defect rate of over 23,000 ppm or yield of 97.7 per cent. If we improve the sigma quality level of service processes to four sigma quality level, the defect rate will be dropped significantly to 6,210 ppm.
This clearly indicates a 3.5-fold improvement in process performance. The process yield will be increased to 99.38 per cent. This would bring significant financial returns to the bottom-line of any organisations (due to reduced defect rate, reduced number of customer complaints, improved customer satisfaction, etc.).
Most developed countries no longer have a manufacturing based economy. The real economy in these countries involves such fields as financial services, health care, e-commerce, and logistics, but less manufacturing, which has tended to move offshore to low-cost locations. Six Sigma can be used in this case to reduce the costs of poor quality so that a more consistent process for service delivery may be achieved. Another important reason for the introduction of the Six Sigma strategy in many service companies is that customers of today feel “process variability” in the delivery of the service provided and not just on “process average or mean”. The objective of a six sigma strategy is to reduce “process variability” around the acceptable target service performance.

Applications
With the growth in application of Six Sigma in Service areas, there are certain areas that require emphasis in order to ensure proper and fruitful application of the methodology to the sector. The required focus areas include identifying the areas of processes that are the best candidates for improvement and categorizing them as highly customized, mass customized and standardized service processes depending on the nature of tasks. Apart from this a proper method of definition of process defect along with defect measurement is also required in order to design an effective method to remove those defects. Defect definition and measurement is followed by delving into the root causes of the problem and prioritizing them for determining their solutions. Finally, it should be noted that the scope of project covers a wider area and focuses on long term benefits rather than short term benefits, thus, stressing on a long-term commitment for quality and service.

Common Myths In Service Oriented Organizations
Six sigma applications in the services sector are still limited in spite of being embraced by many big service oriented companies such as J. P. Morgan, American Express, Lloyds TSB, Egg, City Bank, Zurich Financial Services, BT, etc. A key argument here is that many service processes are unseen, intangible, and even immeasurable. As such, they are not amendable to improvement using a six sigma approach.
The most common reason why service-oriented organisations stay away from Six Sigma is their notion about it being a manufacturing solution. One of the major hurdles service-oriented organisations must overcome is their mind-set that because their company is human-driven, there are no defects to measure. Moreover, it is a quite common view among many people engaged in service organisations that Six Sigma requires complicated statistical tools and techniques. The truth is that Six Sigma is not about a collection of statistical tools and techniques, and service organisations simply do not need many of the tools and techniques of the six sigma toolbox. The majority of the problems in service organisations can readily be tackled using the simple problem-solving tools of Six Sigma.
“Six sigma demands massive training costs and additional effort,” has become another misconception among many employees in the service sector. However, it is already a proven fact that the benefits obtained from Six Sigma implementation outweigh the investment costs.

Advantages
As already mentioned, the major benefit of Six Sigma is in the form of considerable improvement in the bottom-line result for service oriented organizations. Other benefits include:
• Effective management decisions due to heavy reliance on data and facts instead of gut-feelings and hunches. Hence, costs associated with fire-fighting and misdirected problem solving efforts with no structured or disciplined methodology could be significantly reduced.
• Increased understanding of customer needs and expectations, especially the critical-to-quality (CTQ) service performance characteristics, which will have the greatest impact on customer satisfaction and loyalty.
• Improved knowledge across the organisation on various tools and techniques for problem solving, leading to greater job satisfaction for employees.
• Reduced number of non-value added operations through systematic elimination, leading to faster delivery of service.
• Reduced variability in service performance, leading to more predictable and consistent level of service.
• Improved cross-functional teamwork across the entire organisation.
Most important of all, Six Sigma is a means for process improvement. It is a business strategy along with a systematic approach, which helps in financial benefits, productivity, and customer satisfaction.