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01 November 2004  
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Home - Management - Article

Project Log

How Six Sigma saved seven crores

Tata Honeywell, a provider of integrated automation and software solutions, saved substantially by adopting Six Sigma processes. Better still, the company succeeded in creating a culture of innovation in its product development activities, says Ravi Bagaitkar

While Six Sigma is often seen as a mechanism for reducing costs, few organisations realise its power in driving product innovation. The Six Sigma initiative at Tata Honeywell was driven by Honeywell, which provided guidance, training materials, methodology updates and handholding (wherever required).

The business need was clear: most of our processes were based on perception rather than actual facts. To give a hypothetical example, consider travel expenses. In some seasons, travel costs are high as employees have to travel by air to meet customers in their offices. But looking at the project cost, if the company decided that there would be no further travel by air, it would be wrong as the frequency of air travel has to be looked at before arriving at a conclusion. Today, due to Six Sigma, we have arrived at a process where for any particular project half the meetings are held at the customer end and half in our premises.

In the new scheme of things, business units and work centres identify projects based upon their needs, and form strategies to meet the stated objectives. Such projects or initiatives are scrutinised through a prioritisation process. For selected projects, the first step is to identify a team and team leader, which is followed by preparation and training. Currently, Six Sigma methodology is institutionalised in our organisation, and we follow it for all major initiatives.

Methodologies chosen

We have chosen four Six Sigma methodologies for achieving business objectives. The DMAIC (Define, Measure, Analyse, Improve, Control) approach is used for reducing variation, attaining process excellence, reducing costs to serve, and streamlining existing processes. Cost to serve is the cost an organisation has to allocate for servicing products which do not function according to customer requirements. The GBFG (green belt for growth) approach was used for achieving business growth through segmentation, market research, strategic risk evaluation and value proposition. The DFSS (design for Six Sigma) approach was used for new product development, primarily to achieve business growth. Finally, the lean enterprise implementation methodology was chosen for waste elimination and improvement of the speed of operations.

While there were challenges faced with respect to change management, this was overcome by a strong focus from the top management, training by qualified Six Sigma experts, and rewards and recognition. Challenges in the areas of project tracking, MIS and the setting-up of relevant measurements were taken care of by digitisation of processes.

We started our Six Sigma implementation in 2000. Since then it has progressed through different levels of maturity. We can say that an effective implementation process providing desirable gains got installed in the first two years.


Due to Six Sigma, we now follow a toll gate process for executing projects. Each toll gate is cleared based upon certain criteria and the way the project progresses towards completion. The major changes we have brought about in our processes for adopting Six Sigma are actions based on data rather than perception, setting the right measurements for assessing process performance, and taking a process-centric rather than person-centric approach.

The DFSS approach is perhaps the most important as it has helped us bring innovative products to the market. Earlier, most of the industrial automation products we used to import had features which had no use in the domestic market. Due to these features, the pricing of the machines used to be on the higher side. With the Six Sigma process, we could identify the need for a machine customised to Indian needs. This approach is similar to Japanese players who do a thorough survey before they even start developing a product. When we did a survey in the local market, we could clearly see the need for a machine that did not have all the features of machines abroad. We also found that a large number of small companies could be potential customers for such a product. After feedback from a huge number of customers, we released a machine that measured the thickness and moisture of paper. We have already bagged two huge orders for this product. Due to the Six Sigma processes, we have been able to identify new markets. Today, seven products are being developed in our R&D labs using this methodology.

Additionally, we have been able to identify around seven different types of waste. We have made significant savings by reducing the general and administrative costs related to travel, electricity and stationery. The process of buying and sourcing is more streamlined today. Because most of our current products are built by knowing customer requirements, there is a huge cost advantage with respect to customisation and service. Apart from the intangible benefits, we have achieved cost savings of Rs 7 crore, and a strong foundation based on delivering innovative products for achieving Rs 100 crore growth.

  • Ability to take decisions based on data rather than perception
  • Has helped the company drive innovation and bring new products to the market
  • Today, seven products are being developed in the company’s R&D labs using the Six Sigma methodology
  • Significant savings have resulted by reducing general and administration costs in travel, electricity and stationery. Apart from the intangible benefits, the company has derived cost savings of Rs 7 crore

Methodologies & Purpose
Six Sigma methodologies chosen Purpose
DMAIC Variation reduction and process excellence for achieving cost to serve reduction and streamlining processes
GBFG For achieving business growth through segmentation, market research, strategic risk evaluation, value proposition, capability building for supporting value propositions, and defining the business model
DFSS New product development primarily to achieve business growth
Lean Enterprise For waste elimination and improvement of the speed of operations

Ravi Bagaitkar is a Six Sigma Master Black Belt with Tata Honeywell India
As told to Srikanth RP


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