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
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
- Today, seven products are being developed in the companys 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
|Six Sigma methodologies chosen
||Variation reduction and process excellence for achieving
cost to serve reduction and streamlining processes
||For achieving business growth through segmentation,
market research, strategic risk evaluation, value proposition, capability
building for supporting value propositions, and defining the business model
||New product development primarily to achieve business
||For waste elimination and improvement
of the speed of operations
Ravi Bagaitkar is a Six Sigma Master Black Belt with Tata
As told to Srikanth RP