The talk these days at GE Aircraft Engines is about CTQ, dashboards and DPMOs.
The discussions aren't necessarily led by vice presidents or general managers. Rather it is "Black Belts" and "Master Black Belts" that talk about defects per million opportunities -- DPMO for short -- and those issues that are CTQ, or critical to quality.
The Evendale-based aircraft jet engine business of General Electric Co. is embracing in a big way the gospel of Six Sigma, a quality improvement effort initiated by Motorola Inc. more than a decade ago.
By the end of this year nearly all of GEAE's 6,000 salaried employees in Cincinnati, and many hourly workers as well, will have received some training in the statistical tools of Six Sigma.
Ken Meyer, a former Air Force general who oversees GEAE's Six Sigma effort, said nearly all the business' 33,000 employees worldwide will be touched by it in some fashion.
Over the last two years, GEAE has invested $37 million in Six Sigma training and expects to invest another $50 million this year. GEAE says Six Sigma has already generated $79 million in savings and it expects it will produce another $170 million to $200 million in savings this year.
GE Chairman Jack Welch's devotion to Six Sigma has been the focus of articles in major business journals. It has fueled higher earnings expectations for GE among Wall Streeters and will be a major topic at the company's annual shareholders meeting Wednesday at the Aronoff Performing Arts Center in Cincinnati.
What is Six Sigma?
"It means a lot of different things to a lot of different people," said Mr. Meyer. "At the macro-level, it's a way to manage excellence. To become the world class business.
"At the tactical level, down at the project level, Six Sigma applies statistical tools to get variation out of a process." Sigma, the 18th letter of the Greek alphabet, is a measurement that describes a standard deviation on a bell curve. The higher the sigma, the fewer the defects being measured.
Six Sigma, considered world-class quality, represents 3.4 defects per million opportunities. Most companies, including GE, operate in the range of about three sigma, or about 60,000 defects per million opportunities.
Mr. Welch said he wants GE to achieve Six Sigma by 2000.
GEAE managers are quick to point out that GE engines are already at the six sigma level of quality. But to get there now requires a lot of rework, testing and other waste that the Six Sigma program is designed to eliminate by doing it right the first time.
"Green Belts," GEAE's name for Six Sigma newcomers, get 10 days of training on using statistical tools to measure a process -- anything from drilling holes in metal to distributing engine manuals. They are taught how to analyze the data they collect for defects, improve the process by removing the defects, and maintain that improvement in the future.
To complete the training, each Green Belt has to finish a project, usually as part of a team, to put what has been learned into practice.
Last year GEAE undertook more than 2,000 Six Sigma projects. Some examples:
- Cut the time it takes to prepare CFM56 engines for shipment from 2 1/2 days to about 10 hours by deploying so-called parallel work teams.
- Reduced assembly time on CFM56 engines from 5.8 days to just under 3 days by implementing a transfer bridge that moves engines between work stations, thereby creating a smoother work flow. "Our goal is a two-day engine," said James Holbrook, a cell leader on CFM56-7 assembly.
- Cut the faults by a robot used to assemble engine cores from 16 to under two per engine through a series of hardware and process changes identified by a Black Belt project.
Bob McEwan, general manager of Evendale engine assembly, said his target this year is to cut $8.7 million out of his costs. Over half of that will come from Six Sigma projects, he said.
A number of corporations have implemented programs to achieve Six Sigma quality in their manufacturing or engineering operations. But under Mr. Welch, GE has taken the concept to a new level.
"Six Sigma was researched and chosen by Jack Welch as a mechanism to ensure his legacy lives on," said Nicholas Heymann, Prudential Securities analyst.
Six Sigma could save GE as much as $5 billion annually by the end of 2000, when Mr. Welch, 62, is expected to retire, analysts estimate.
"We are feverish on the subject of Six Sigma quality as it relates to products, services and people -- maybe a bit unbalanced -- because we see it as the ultimate way to make real our dreams of what this great company could become," Mr. Welch writes in his widely read Letter to Shareholders in the 1997 GE annual report.
GEAE employees say it's a strain to keep up with their jobs and the Six Sigma training.
"It's very intense," said one engineer in the midst of Green Belt training who declined to disclose her name. "It's difficult to do both your job and the training. During breaks you run to the phone to check your messages."
Mr. Meyer acknowledged Six Sigma is a challenge for employees. "Some are wondering why they are there, because this is new to them," he said. "Applying quality in finance or marketing processes is a new idea. But the point is speed and quality in everything you do."
Not everyone, of course is enthralled by Six Sigma.
Jim Smith, who heads Cambridge Management Sciences, a St. Petersburg, Fla., consulting firm, has been a frequent critic of the Six Sigma movement.
"I don't disagree with the concept that statistics can help you get ahead," Mr. Smith said. "But if you know statistics, you know enough to run your business without all this nonsense."
He questions whether statistics alone can be used to manage an enterprise.
"During the Vietnam War, (Secretary of Defense Robert) McNamara wanted results and asked for numbers -- and he got them. This is the same game," Mr. Smith said.
Mr. Meyer said GEAE is careful that its statistics measure things that are important to its customers.
"We don't want our people working on any project," he said. "We don't want them removing variation that doesn't help the customer directly or doesn't help the shareholder."
For example, early on GEAE said it wanted to achieve Six Sigma levels in customer deliveries. But even shipping 1,500 engines a year, it would take more than 600 years to achieve Six Sigma levels based on 1 million opportunities, Mr. Meyer said.
"One thing that we tried very hard to do here is tie our metrics back to the customer," he said.
One key to that are customer "dashboards," devices that measure GEAE's performance on issues that each airline customer agrees is important -- that is, "critical to quality."
So far GEAE has negotiated 94 dashboards, each with a number of different dials measuring different performance characteristics with some of its largest commercial airline customers around the globe. The color-coded dials, maintained in a computer data base, are updated monthly with information supplied by the customers.
Each of the dials is tied back to a specific Six Sigma project through Microsoft computer software, so that with a couple clicks of a computer mouse GEAE managers and their customers can see how a specific project is contributing to their operation.
"If you're the chairman of Federal Express and Jim (McNerney, GEAE president) stops by, the first thing he'll do is open up the dashboard. He'll say, "Here's the dashboard you gave us, and here's how you say we're doing,' " Mr. Meyer said.
"It immediately focuses you on data. . . . It keeps you focused on data instead of just the last event," he said.
GEAE is also extending its Six Sigma drive to its suppliers. "Eighty percent of our parts and 60 percent of our costs come from suppliers," Mr. Meyer said. "If they're giving us Three Sigma stuff, it's hard for us to build a Six Sigma engine."
Mr. Smith, the consultant, says Six Sigma puts an unnecessary burden on suppliers.
But Mr. Meyer said GEAE isn't trying to force suppliers into its training system.
"We're careful. We don't tell them: You have to do it the way we do it. We want you at Six Sigma, but if you find a better way to do it, tell us, we'll use that."
About half of GEAE's top 150 suppliers have had employees trained as Black Belts, and 16 companies have so far committed to achieving Six Sigma quality.
To further focus GE managers on the drive to achieve Six Sigma quality, the company has tied managers' stock bonuses to Six Sigma goals.
"Six Sigma is quickly becoming part of the genetic code of our future leadership," Mr. Welch writes in the 1997 annual report. "Six Sigma training is now an ironclad prerequisite for promotion to any professional or managerial position in the company -- and a requirement for any award of stock options."
Along the way, Mr. Meyer said, Six Sigma is changing how GE employees think about their work.
"I think in future, GE employees will approach their jobs differently than in the past," he said.
"We will all be trained in this new language and these new tools. We will search for variation. We'll realize variation is the enemy. As you get rid of variation, you get your processes more controlled and predictable. They can be faster and produce less defects," Mr. Meyer said. "I see that as an ongoing way that GE will work."
