THE APPLICATION OF SIX SIGMA STRATEGY IN SELECTED MANUFACTURING AND SERVICE FIRMS IN NIGERIA

ABSTRACT

The study investigated the application of six sigma strategy in selected manufacturing and service firms in Nigeria. As the global economy continues to face significant challenges, there is an increasing pressure on organizations to cut  cost  and  reduce  operational defects,  while  maintaining a  high  level  of customer satisfaction. The six sigma strategy, now a popular deployment tool in many organizations world wide was developed as a concept by Motorola in

1980’s. The study examined the  challenges of the  application of six sigma strategy in Nigeria. The survey method was adopted. Three hundred and eighty randomly selected staff of the organizations from a population of four thousand and sixty one participated in the study. The instrument for data collection was built on a likert-scale system. It was a 24 items questionnaire which has a reliability coefficient (r) value tested with Cronbach’s alpha statistics. Based on the findings of the study, it is discovered that six sigma adds significant value to the organization that adopt the strategy. The study also revealed that the successful application of six sigma largely depends on the infrastructural level of the organizations. Consequently, the impacts of the process on quality of product and services have been felt. The study recommends that Government should

create a conducive business environment in relations to infrastructure development and guided monetary and fiscal policy. This will enable managers in the sectors to prepare and faced the global challenges facing them. The study concludes that the application of six sigma is highly beneficial to organizations that adopt it.

CHAPTER ONE

INTRODUCTION

1.1      Background of the study

As the global economy continues to face significant challenges, there is an increasing pressure on organizations to  cut  cost  and  reduce operational defects,  while  maintaining a  high  level of customer satisfaction. In today’s marketplace, continuous quality improvement is one of the key answers to business problems. Organizations need to improve the quality of all product and services, cost reduction, improved resource utilization, and improved process efficiency (Waege 2004:18-19).

Six   sigma   is   a   project-driven   method   aimed   at   sustainable   business   performance improvement. It focuses on better understanding of changing customers requirements, improving processes throughout the organization, and enhancing the organization’s performance. It is used to improve the organization’s products, services and processes across various disciplines, including innovation, research, new product development, production, marketing, sales, finance, information systems, and administration. It is achieved through profound understanding of the underlying processes, and reducing or eliminating defects and waste, (Anbari, 2002:108)

While it is the core products and services that will drive the future success of companies, the infrastructure and business processes behind these solutions made the difference between success and excellence. In other words, to remain competitive, they have to be maintained and updated. It is necessary not only to enable them to perform at  a very high efficiency level,  but also to help organizations reposition for new challenges. Organizational and process improvement continues to evolve, with many practitioners finding new ways to achieve each. Although many quality improvement programs have come and gone over the past century, Six Sigma has continued to be enhanced and utilized for the past two decades.

Continuous process improvement programs such as total quality management and just-in time management is prevalent in organizations (Voss, 2005:62). The main purpose of such programs is maintaining a sustained effort at improving the efficiency and effectiveness of work-processes (Liker and Choi, 1995:607). These programs consist of combinations of practices that aim to encourage and enable  the  participation of  frontline  personnel  in  process  improvement  (MacDuffie, 1995:197). Different combinations of work practices emerge from time to time as new continuous process improvement programs (Cole, 1999:11).  Six Sigma is one such continuous improvement program that has captured the interest of several organizations (Linderman et al., 2003:193).

Six Sigma, which was developed by engineers at Motorola in the 1980s in order to improve product quality, has many similarities to other quality improvement initiatives used in the past. For instance, the turn of the 20th century brought Frederick Taylor’s scientific management theory, which identified standards and measures for work products and tasks (Brandy, 2005:68). Taylor’s theory enhanced productivity and was utilized in the automotive industry in the 1950s and continues to be used today. Also, in the 1950s, Toyota’s lean production system used just in time and the Kanban flow system to eliminate wasteful activities that used resources without creating value (Antony,

2004:303-306). Around the same time, the American statistician W. Edwards Deming “pioneered the use  of statistical techniques to  understand  and  improve processes”. Utilizing  the  work  of Bell laboratory’s Walter Shewart, Deming improved upon statistical process control (SPC), suggesting that variation was not random or by chance and should be located and eliminated (Pyzdek, 2003:55). SPC and quality circles, where groups of employees worked to continuously improve the processes within  their  control for  the  betterment  of the  organization were  also  successfully used  by  the Japanese. Many of these theories and systems have evolved into quality improvement initiatives and continue to be used today on a global scale.

It was not until the U.S.’s economic climate started to change in the late 1970s and early

1980s, including decreased inflation and a strong dollar that U.S. firms began to experience intense foreign competition. This “resulted in a need for revisiting expenditures and cost calculations, and developing management initiatives. During the same period, the international organization for standardization (ISO) standards were being developed and adopted throughout the world. As organizations looked to become more competitive and meet ISO standards, quality improvement initiatives were heavily sought. It should also be noted that “military standards played a significant role improving manufacturing in the United States because contractors had to meet certain quality standards to earn military contracts” (Antony, 2006:20).

According to (Cole 2005) one of the  many initiatives used is total quality management (TQM). TQM was developed as a holistic approach to quality, driving it throughout all levels of an organization through training empowerment, and ownership of processes. TQM strives toward continuous improvement through all activities of an organization, while looking to control costs and meet customer requirements, however, at one point, “there were over 400 TQM tools and techniques” (Pyzdek, 2003:54). This, alone, made it difficult to sustain results in many organizations. Thus, TQM’s popularity has faded among many U.S. firms. Several U.S. organizations also had difficulty adopting quality circles, which were working well for Japanese organizations. Therefore, new quality initiatives needed to be developed to resolve the quality dilemma.

With continuous process improvement goals, similar to TQM and quality circles, two new developments emerged, the theory of constraints and process reengineering. Both focused on process improvement. A superimposed structure specifically for coordinating long-term organizational deployment and daily operational implementations of quality practices can go a long way in creating a sustained quality culture. This is empirically supported in the context of TQM; (Douglas and Judge

Jr. 2001:158) found structural elements to have significant moderating effects on the success of TQM. Six Sigma introduces structures for organizational and operational level implementation of practices and addresses this deficiency in TQM implementations (Antony, 2004:303-306).

The theory of constraints (TOC), developed by George in 2002, primarily sought to identify and maximize constraints in any given process. Once the identified constraint was maximized and controlled,  it  would  theoretically  no  longer  be  a  bottleneck.  Next,  process  reengineering  was developed later in the 1990s to enhance process productivity and efficiency. Eventually, the new processes created through the reengineering program typically led to workforce reduction, which caused process reengineering to lose its popularity. Six Sigma not only fulfills gap of TQM, it also adds incremental features that represent an evolution toward better process improvement. Some of the innovative features of Six Sigma add useful elements to the three existing percepts of TQM – customer satisfaction, continuous improvement and system view (Pyzdek, 2003).

While consumers focus on quality of products (goods and services), organizations focus on the quality of processes involved in conceptualizing, making and delivering those products. These processes must create value for the company while catering to end-customer satisfaction. In six sigma,  customer-focused improvement  is  targeted  without  losing  sight  of the  wellbeing  of the investors in the company (Hoerl 2001:33). The six sigma strategy was thus the result of an internal discovery of a combination of practices for process improvement. For companies to remain competitive and stable new improved business strategy must be adopted (Bharadwaj and Menon,

2000:424-434).

Process improvements are actions taken for improving organizational processes, the need for making process improvements continually is imperative for the survival of organizations because of the need to respond rapidly to ever-changing environments in the face of stiff competition (Hayes and

Pisano, 1994:77-86).  Six sigma can be considered both a business strategy and a science that has the aim of reducing manufacturing and service costs, and creating significant improvements in customer satisfaction   and   bottom-line   savings   through   combining   statistical   and   business   process methodologies into an integrated model of process, product and service improvement.

In six sigma, customer focus becomes the top priority and any improvements are defined by their impact on customer satisfaction and value (Pande and Neumann, 2002:76). From an internal perspective, six  sigma provides a  way of improving processes so  that  the  company can  more efficiently and predictably produce world-class products and services.

Conceptually, Six Sigma is focused on variation reduction. If companies can understand and reduce variation in their process, then they can implement improvement initiatives that will stabilize the process and ensure accuracy and reliability according to the expectation (Goeke and Offodile,

2005:34-36) While defect reduction is an element of the Six Sigma approach, Six Sigma has evolved from a statistical quality-control method to a customer-focused philosophy that challenges organizations to change strategies, focus, internal procedures, and business models.

Basu (2004:24) asserts that, Six Sigma strategies can yield tremendous cost savings while reducing defects, enhancing customer satisfaction, and increasing customer retention at many companies. It has been perceived as a performance improvement strategy available only to the largest companies in the world; however, Six Sigma is now providing improved levels of productivity and financial performance to corporations. As organizations worked to regain or hold onto their competitive advantages through lower  costs and  better technology and  superior quality,  quality improvement initiatives were brought to the forefront of many organizations at a strategic level, he added.

Thomas (2009:34) opines that Six Sigma program has gained tremendous popularity as a process improve program in all types of organizations – manufacturing, service and non-profit. Pande et al., 2000:84) believes that Six Sigma is “A comprehensive and flexible system for achieving, sustaining and  maximizing  business success .  .  .  uniquely driven by  a  close  understanding of customer  needs,  disciplined use  of facts,  data  and  statistical  analysis,  and  diligent  attention  to managing, improving and reinventing business processes”. Six Sigma has process-variance reduction as its predominant focus with project goals tied to overall organizational strategic goals (Linderman and Schoeder 2003:193-203). All in all six sigma certified companies are the most respected brands among their peers and have set various benchmarks for their respective industries. Embracing six sigma has almost become the order of the day and no one wants to be left behind.

Organizations are increasingly adopting Six Sigma in a bid to improve the quality of their processes and products, and thus achieve competitive advantage. Six Sigma is a disciplined approach for dramatically reducing defects and producing measurable financial results (Goh et al., 2002:403-

410). However, despite the apparent popularity of Six Sigma, very little is known about the extent to which Six Sigma has actually been adopted by business firms in  Nigeria, the patterns of adoption across industrial sectors and occupational groups, and the factors that differentiate firms that heavily adopt Six Sigma from those that do not (Ibru 2005:3).

The Six Sigma program, now a popular deployment tool in many organizations worldwide, was developed as a concept by Motorola in the 1980s. The Motorola success story has inspired several entrepreneurs through decades, including Goodie Minabo Ibru, chairman of Ikeja Hotels PLC, owners of Sheraton Hotel and Tower in Nigeria. Ibru (2005:2) has called on the manufacturing and service industries to utilize the Six Sigma concepts to maximize their savings. Quoting the successful deployment of Six Sigma by Sheraton Lagos Hotel & Towers over the last two years, the program

has led to all-round improvement in product and service quality and customer satisfaction. He argue that although the model is relatively new in Nigeria, it has proved to be the key for survival in today’s corporate world where only the best survives. Six Sigma also caters to two vital cogs in the modern- day competitive business world; better packages for the customers and higher returns of the shareholders, according to AllAfrica.com reports:

Many organizations in the Nigeria are operating below three sigma quality levels. That means they could be losing up to 25-40 percent of their total revenue due to processes that deliver too many defects that take up time and effort to repair as well as creating unhappy customer (Ibru, 2005:3). That, what happened to Sheraton Lagos Hotel & Towers has also encouraged other organizations, such as City Bank and Cadbury Nigeria PLC, to practice Six Sigma. With mergers and acquisitions becoming commonplace in the Nigerian corporate world today, Six Sigma should become very useful in helping to model, measure, modify and improve companies’ business strategies for increased profitability, He concludes.

Obinna (2005:43) also said, “In many world-class organizations, Six Sigma has overshadowed techniques previously viewed as the continuous improvement tools of choice. This is as a result of the bottom-line  effect  —  Six  Sigma  directly  impacts  financial  results  and  customer  satisfaction. However, even with the threat of globalization, many Nigerian companies are still not aware of the tremendous power of Six Sigma as a competitive weapon and yet some are complacent and seem to be taking a “wait and see” attitude.”

Thomas (2009:34) opines that Six Sigma program has gained tremendous popularity as a process improve program in all types of organizations – manufacturing, service and non-profit. Pande et al., 2000:84) believes that Six Sigma is “A comprehensive and flexible system for achieving, sustaining and  maximizing  business success .  .  .  uniquely driven by  a  close  understanding of

customer  needs,  disciplined use  of facts,  data  and  statistical  analysis,  and  diligent  attention  to managing, improving and reinventing business processes”. Six Sigma has process-variance reduction as its predominant focus with project goals tied to overall organizational strategic goals (Linderman et al., 2003:193-203). All in all six sigma certified companies are the most respected brands among their peers and have set various benchmarks for their respective industries. Embracing six sigma has almost become the order of the day and no one wants to be left behind.

1.2      Statement of the Problem

The need for the continuous process improvement by companies cannot be over emphasized. Six Sigma strategies is believe to yield tremendous cost savings while reducing defects, enhancing customer  satisfaction,  and  increasing  customer  retention at  many  companies.  Organizations are increasingly adopting Six Sigma in a bid to improve the quality of their processes and products, and thus achieve competitive advantage.

Many organizations in Nigerian are operating below three-sigma quality levels. That means they could be losing up to 25-40 per cent of their total revenue due to processes that deliver too many defects-defects that take up time and effort to repair as well as creating unhappy customers.

Six Sigma has emerged as a metaphor for the way managers focus on achieving excellence in all aspects of the organization in highly competitive environments. However, despite the apparent popularity of Six Sigma, very little is known about the extent to which Six Sigma has actually been adopted by business firms in Nigeria. Therefore, it has become compelling to investigate the challenges and prospects of the application of six sigma strategy in Nigeria.

1.3      Objectives of the Study

This study is designed to ascertain the challenges and prospects of Six Sigma strategy in deploying effective process improvement and thereby producing products to meet customer’s requirement. In particular, the study will attempt to satisfy the following objectives:

1.        To examine the challenges of the application of six sigma strategy in Nigerian companies.

2.        To examine the organizational level of infrastructure that is critical for implementing the Six

Sigma in Nigeria.

3.        To find out how the environmental factors influence the application of Six Sigma in Nigeria.

4.        To ascertain whether the benefits of Six Sigma outweigh the cost of implementing Six Sigma.

5.         To evaluate the prospects for the application of six sigma strategy as quality improvement initiative in Nigerian companies.

1.4      Research Questions

To facilitate the conduct of the study the following questions have been   formulated to guide the researcher in collection of data.

1     What     are     the     challenges    of    the     application    of    six     sigma     strategy    in

Nigerian companies?

2.         What is the organizational level of infrastructure that is critical for implementing the six sigma programme in Nigeria?

3.        How do environmental factors influence the application of six sigma strategy in Nigeria?

4.        Do the benefits of six sigma outweigh the cost of implementing it?

5.         What are the prospects for the application of six sigma strategy as a quality improvement initiative in Nigeria?

1.5      Research Hypotheses

To facilitate the conduct of the study the following hypotheses have been formulated to guide the researcher in collection of data.

:

H0:    Six Sigma strategy does not  add significant value to organizations that adopt the strategy.

H1:    Six Sigma strategy adds significant value to organizations that adopt the strategy.

H0:    The infrastructural level of the organization is not critical for implementing the Six Sigma strategy in Nigeria.

H2:    The infrastructural level of the organization is critical for implementing the

Six Sigma strategy in Nigeria.

H0:    The environmental factors do not positively affect the Six Sigma strategy in

Nigeria.

H3:    The  environmental  factors  positively  affect  the  Six  Sigma  strategy  in

Nigeria.

H0:    The   benefits  of  Six   Sigma   strategy  do   not  outweigh  the   cost  of implementing it.

H4:    The benefits of Six Sigma strategy outweigh the cost of implementing it.

H0:    The application of Six Sigma strategy does not create quality improvement initiative in Nigeria.

H5:    The application of Six Sigma strategy creates quality improvement initiative in Nigeria.

1.6      Significance of the Study

The study is important because it will help in determining the challenges and prospects for the application of Six Sigma programme in Nigerian companies. The study will also show how the Six Sigma programme influenced effective process improvement in Nigeria companies. It is hoped that

after this study is successfully carried out, the suggestions and recommendations given therein will serve as a guide to companies and cause them to take the issue of Six Sigma strategy very seriously.

This study is also important to managers in the sector because it will highlight the need for continues improvement effort in product and service quality and customer satisfaction. The study will also be useful as reference for further studies. The organisations will also learn that change is a very important factor for success in business.

1.7      Scope of the Study

This work is on the challenges and prospects of the application of Six Sigma strategy in Sheraton   Hotel   and   towers,   Cadbury   Nigeria   Plc,   Crown   Flour   Mills   Nigeria   Plc   and GlaxoSmithKline Plc in Nigeria. It covers the concept and process of the extent of the application of Six Sigma strategy in these selected firms in Nigeria. Due to the nature of the topic, the research focused mainly on senior executive, middle management and operational staff of the companies.

1.8     Limitation

The study covers the application of six sigma strategy in selected manufacturing and service firms in Nigeria. During the research period (between 2008 to 2012) certain constraints were encountered by the researcher.

Time was a major constraint, bearing in mind that the work had to be handled along side with other work in the office. Finance was also another major constraint; this is because the organizations under study are scattered all over the federation. The cost of transport, accommodation and other expenses were enormous. Lack of adequate cooperation from some of these firms at the initial stage

of the study was of great concern to the researcher. Despite these limitations the researcher was able to accomplish the work.

1.9      Definition of Terms

For the purpose of this study the operational definition of key terms are given below:

Six Sigma Roles: These are personnel who are directly responsible for   the six sigma programme. Training: The course work and education necessary for some one to become a six sigma black belt. Attributes: These are traits of a person in charge of a team or group of people that are responsible for accomplishing certain goals and objectives.

Champions:  These  are  fully  trained  business  leaders  promoting  and  leading  the  Six  Sigma deployment in significant or critical areas of the business.

Master Black Belts (MBBs): These are fully trained quality leaders responsible for Six Sigma strategy, training, mentoring, deployment and results.

Black Belts (BBs): These are fully trained experts leading improvement teams across the business.

Green Belts (GBs): These are individuals trained in supporting Six Sigma projects.Team members: These are individuals supporting specific projects in their areas.

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