ICFAI

The Icfai Univel'sity .JoIlI'nal of

OperationsManagelllent

Vol. VII No.3 August 2008

The Idei University Presst www.iupindia.org,

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Six Sigma in Indian AutomotiveComponents Sector: A Survey

Prabhushankar G v· r S R Devadasan'" and P R Shalij···

•This paper examines the status and issues of Six Sigma program in Indian

automotive components sector. Using an empirical approach, the paper traces

improvements in sigma level, savings achieved, metrics used for measuring the

performance of Six Sigma project and the methodologies adopted. The result

from .a survey of 25 companies suggests that financial constraint is thesignificant barrier for implementing Six Sigma. Increase in profitability and

reduction in the cost of poor quality are the significant benefits. Critical Success

Factors (CSFs) were analyzed and compared with earlier researches. Except

'linkihg Six Sigma to employees' and 'linking Six Sigma to suppliers' all other

CSFs:were.tuond to be significant. The study finds that only a small percentage

of automobile components sector has implemented Six Sigma. 'Not a statutory

requirement' and 'not insisted by customers' are the prominent reasons for not

implementing Six Sigma. This papersuggests that Indian automotive components

sector implement Six Sigma along with. ISO/TS 16949, in an integrated

manner, in order to gain access to the global market.

•

IntroductionMany developing countries have liberalized their economies (Balasubrahmanya, 2005)and opened automotive and other sectors for private players, which has turned theentire globe into a single industrial market resulting in unprecedented competition(Hwang and Lee, 2000). Due to this, the business environment surrounding theautomobile industry has changed rapidly and has become turbulent, complex andeven chaotic (Haikonen et al., 2004). Tobeat the competition, new products are beingdeveloped more frequently and product life cycle is getting shrunk. Customers'expectations have started increasing, and they expect higher quality products at lowerprices (Adam and Ebert, 2002; and Haikonen et al., 2004). This has necessitated

Research Scholar, Department of Production Engineering, PSG College of Technology, Coimbatore,India; and the corresponding author. E-mail: [email protected]

Professor, Department of Production Engineering, PSG College of Thchnology, Coimbatore,India. E-mail: [email protected]

••• Lecturer, Department of Production Engineering, Government Engineering College, Thrissuz India.E-mail: [email protected]

© 2008 The Icfai University Press; All Rights Reserved.

eempanies.tobe'proactive and innovative not only in product design, but also in thewaythey· manage issues like quality, cost and delivery (Makrymichalos et al., 2005).

'I~dianautomotive sector contributes only 5% to the country's industrial output,comp~ed to 8~10% in developing countries like 'Mexico and Brazil and 15-17% indeveloped countries like USA and Germany (Khanna etql., 2002; www.unescap.orq) ,~~factux:ingcQmpet~nce of the Indian automotive sector is much higher than thatofelectronic~,machinery, and.process industries (Dangayacha and Deshmukh, 2003),In spite of this, its contribution to GDP (Gross Domestic Product) is still,.hoverinqaround 5%.With Indian GDP expected to grow ata-10% for the next few years. (Kant,2006).Indian economy requires a major contribution from the automotive sector. ThiskiDdl~ the interest to study th~ competitive strategies adopted by Indian automotiveset;tor to meet th~challengesin quality frontier. 'The study isrestricted to automobilecomponents manufacturinq sectoras tt has'emerged as one of the fastest growing(15%) sectorsin the Indian industrial scenario (Kant, 2006).

:qrganizations have been adopting different. models for quality improvement.Th~Plan-Do-Cheek-Act (PDCA)model for quality unprovement and quality movement,started for post war reconstruction in Japan-by Deming, Ishikawa and Juran, pavedthe,w,ay torthe developmentof these quality improvement models (Raisingh,ani, 2005).During the past half of the century, more'than 69 quality related models have comeinto existence. Statistical Process Control (SPC), Quality Circles (QC), Total QualityManaqement (TQ~)"Bench Marking, ISO 9000 Ql,laij.ty Management SYstem (QM:S)Standard, Six Sigma and other such models.have created a visible impact in the businessworld (Dedhia, 2005)'.As a recent methodology of process improvement, SixSiqmahas permeated business life (Haikonen et al., 2004).

Six sigma programs, which encompass established statistical approaches with asystematic and quantifiable project-based improvement methodology, are proving tobe extremely effective in tracking down the real causes of variation (Mortimer, 2Q06).Byadopting this new approach, an ever increasing.number of companies of all sizes,are now establishing a far betterunderstandinq and gaining much tighter control oftheir processes. This has resulted in generating significant cost savings along withincreased customersetlsfactlon and improved. profitability (Mortimer, 2006).As companies embark on their problem-solving journey,' they need to be aware of themultitude of programs, -tools, and approaches to organize their methodology.

" .. ~ .I:,~· .~~.,~, r'\;'~~ , I.

Hence the research was undertaken to explore the status ofawareness and adaptationofQMS,!siX:Sigma and' inhovation'in'th~ autotiiohil~'c8mponents manutacttirinq sectorof India. The scope of this paper is restricted to reporting the findings on Six Sigmaonly..

Indian Sc~nariQ

After, 44 yearsof cOl}.trolledaJ;lcl .protected e<;onR~y, but, with. ~ I9E:!ag~e 3.5~o Go.Pgrowth till 1980, the Government of India started ref~mniIlgits economic policy from

. , -', ", ,.; - 'j" ' ,

Six Sigma/in'IJldiaJr Aatom,«?tiYtl1(';omponents. Sector., A Survey H. 19

1991 in a phased manner. The average growth in GDP in the first decade of postreforms was 6.1%,which is 0.4% higher than the a.verage of the 1980s, which was 5.7%(www.unescap.orq). The GDP has made an impressive growth of 7.5,9.0 and 9.4% inthe last three y~ars and is expected to touch 10% in the year 2007-08 (TOI, 2007).

Indian Automottve SectorAutomotive industry, one of the Important and largest industries in India,is witnessinqan impressive growth since economic reforms were initiated, and is aprominent driver of the Indian economy. As mentioned earlier, it accounts for about 5%of GDP and has created 10.5 million jobs throuqh direct and indirect employment(Kant, 2006). I~dian automotive industry today boests of being the largest three-whe~lerand second largest two-wheeler manufacturer, second largest tractor manufacturer

Thble ·,1: Production and, Export Trend

2005-06 (Numbers) 2006-07 (Numbers)CatelJoiy Total Total Export

Production Eqx»rt Production:

Passenqer Cars ' 10,46,133 1,69,990 12,38,032 1,92,745

Utility Vehicl~s 1,96,506 4,489 2,22,111 4,403

MPVs 66,661 1,093 84,707 1,330

Total Passenger Vehicles 13.09.300 1.75.572 15.44.850 1.98.418

M&HCVs 2,19,295 14,078 2,94,266 18,838

LCVs 1,71,788 26,522 2,25,734 30,928

'IOtal Commercial Vehicles 3.91.083 40.600 5.20.000 49.766

Three-Wheelers 4,34,423 76,881 5,56,124 1,43,896

Scooters 10,21,013 83,934 9,43,974 35,685

Motorcycles 62,07,690 3,86,054 71,12,225 5,45,887

Mopeds 3,79,994 43,181 3,79,987 37,566

Electric Thro-Wheelers - - 7,982 -

Total '!'wo-Wheelers 76.08.697 5.13.169 84.44.168 6.19.138

Grand Total 97.43.503 8.tJ6.222 1.10.65.142 10.11.278

Source: Www.indiabusiness.nic; www.unescape.org, accessed on July 3, 2007.

and fifth largest commercial vehicle manufacturer in the world.(www.indianbusiness.nic.in). According to estimates, India will overtake Germany intotal sales volume by 20.10and Japan by 2012 (Bhupta, 2007). Table 1 shows the totalproduction and export of the various types ofvehicles in the last two years. Table 2shows the main export destinations.

20 The Ida! VIIi_Ity Journal 'otoperatlonl Management; Vol. VII. No. 3.2008

Table 2: Main Export Destinations

Cars Egypt, Kenya, Nigeria, Somalia, Tanzania, Afghanistan, Nepal,Hungary, Greece, Italy, Netherlands, Spain, Austria

CVs Egypt, African Countries, Nepal, Sri Lanka, Jordan, Kuwait, Hungary,Russian Federation, France, Brazil

1\vo-Wheelers African Countries, Bangladesh, Sri Lanka, Turkey, United ArabEmirates, Paraguay, United Kingdom, Germany, Mexico, Australia,Hong Kong, China

Source: www.unescape.org, accessed on July 3, 2007.

Indian Automotive Components SectorIn tandem with the industry trends, the Indian automobile components sector hasshown enormous progress in recent years in terms ot growth, spread, absorption of

I

new technologies and flexibility. The arrival of global vehicle manufacturers from Japan,Korea, USA and Europe gave impetus to the Indian automobile component industry.Today, India is emerging as one of the key automobile components centers in Asia andis expected to play a significant role in the global automotive supply chain in the near

: future (www.indiainbusiness.nic).

This sector has around 500 firms in the organized sector, which contribute to morethan 85% of production, and over 10,000 in the small sector, which account for theremaining 15% of production (Kant, 2006). India has also emerged as an olitsourcinghub for automobile components for international companies such as Ford, GeneralMotors, Daimler Chrysler, Fiat, Volkswagen and Toyota.

Indian automobile components sector has been exporting around 18% of its output

and growing at the rate of 2.8%. The principal export items include engine parts,transmission parts, suspension and braking parts, electrical parts, and body and chassisparts (www.ibef.org). The total export of automotive components in the year 2004-05and 2005-06 was INR 6.237 bn and INR 9.127 bn respectively. Growth apart, what hasbeen remarkable is the quality standard and scale achieved by this sector. Internationalspread, reputation of cost competitiveness and delivery adherence epitomize theseachievements (www.indiabusiness.nic; Kant, 2006).

Overview of Six StgmaSix Sigma was started at Motorola in 1987 to improve the quality of their products.However, this concept gained popularity only after GE implemented it in 1995 (Park;2003). Ever since GE's success, Six Sigma spread like wildfire and proliferated totransactional and service activities and also to SMEs (Antony, 2006). Thi~ createdinterest among the academicians and they started showing interest from 2000 onwards(Nonthaleerak and Hendry, 2005).

Six Sigma in Indian A.tomoUve Components Sector: A Survey 21

Views on Six Sigma i " •

Six Sigma has been defined in,diffe~entwaysby variousauthors. Pande et al. (2003)have defined Six Siqme asa comprehensive and. flexible system for achieving,sustaining and maximizing business success. Six Sigma is uniquely driven by a closeunderstandinq of customer needs, disciplined use of fads', data, 'statistical analysisand by paying diligentattention to ~anag~g,jmp~oving, and reinventing businessprocess (Hensleyand Dobie, 2005; and Mahanti and Antony, 2005).

According to Siviy et a1. (2005), Six Sigma is a holistic .approach to businessimprovement that includesphilos~phy,performancemeasurements, improvementframeworks, and a tool kit, all of which are intended. to complement and enhanceexisting engineering, service, and manufacturing processes and-can serve as both.anenterprise qovernance model and.a tacticalimprovement engine. Yetanother defi-nitionproposed by O'Neilland P\,l;vall(20Q-5} views Six ?igIIla (is an approach forimprovinqthe,quqlitY'ofp~odU;ctsorservices, which strivesfor near perfection, i.e., not morethan 3.4 Defects Per Million Opportunities, (DPMO). It is a disciplined, data-drivenap'pro~~.h~nd' a'.method~lo~W for, eliminatinq detects in any process, an~i tlms. i,s ~Prhdllctof;that pro~e~s. .., . . '

six Sigma Improvement Model

There.havepeen many.models for process. Improvementand process desiqnzredesiqn,Most of.these models are based,On PDCAcyde introduced by Deminq (Pande,et 91.,

2(03). Ap'i;iradigfIlo~.statistical thinkinq is .embodied ~Six .Siqma's methodoloqies,wp.icP.areusedas the basis fo~ e:x;e~utiIlg iIllPro~e)ll~n.t,projects (~iviyet, al., 29~~)'The following frameworks currentlyprevail: .

Define, Measure.Analyze, Improve, Control (DMAIC) a five-phase improvementcyci~'~hidiwas ~dvocatedby dE' (Park, 2003). This 'frame~orki~ u~edto improve andoPtiinizeth~exi~tingprocess~s~ndprbdu~ts·(Si~ye(al.~2d05).,,': ',' ','"

,.: ; ..~ , t •• ; : ., .,. , .. ' ,~. > _..! •.• • •

pesigq.Jor Six S~gma (DFSS)is used to desiqn new products endprocesses, endtoredesign e~~ting.pW,ductsand processesthat have.been optimj~ed,bij.thaye,fQ,iled.t9

meet tit,Ef performance g,oal~.Tbe lattercase )J.q.s sqm~ti;me!i ,l¥;!e;q.op~.ery~.d wh~~moyingfrom Five S~g.male~el'o.f performance to' aSix ~ig~~.~eve~' (HaT!)' .i;l~d .~chJ;o,e~:~~,2000). Define, Measure, Analyze, Design, Verify (DMADV) ,is the most widely used

·~l.~':' ._,~ ,t , ....)·'r.j.~' .•• ~ • .'~.'!\' .,: ~" r,~.,I".~'!'

framework (Park, 2003).

Research Design, ; \ J. -~';:" ! ' t • -. ..'. I .,'" '. I ...'. ~. .' ".', . .' _ :

In the .qlobal sCen~ri~, the automobile componentsmanufacturinq companiesareclassified as Tier-I and Tier~II suppliers (Bennett and O'Kane, 2006). The Tier-Isuppliers are those which supply components to the Original Equipment Manufacturers(GEMs). Ti~r-li suppliersare thb~e whi~h supplycomponents to Tie~~I sup~liets[Pickernell, 1997; and Aghatadeh, 20(3). The survey reported here was conductedfrom May 16, 2007 to June 30, 2007 and was restricted to companies located in and

22 The Ictai University;Journal-of'.Qpuations Management; vei. VII, No.~;2008

around Bangalore city of-Iadia. A\.ltogether25 .compenies were surveyed, 9lJ.1l of which20belong.t(),Tier-.I.category all,d,th~"remaining to the Tier-II category. ThepersonnelInterviewedwerequality engineers and managers. The number of respondents ineach company differed, which had resulted ina total of 49 respondents. Whereverthere was more than one respondent, a consensus opinion was sought, which wasarrived at after having a discussion among them.

Design of Questionnaire i'. "Ji'.;.,.4 _ .. ,",") .••

A questionnaire was framed based on the literature and the inputs qrvenbyacademidh~s~nd 'practitioners arid was used to conduct a stru~tured and direct'form dfinterview to"collect data: ThequestionnaJre consisted of four sections.The' first" section: of the questionnaire"~asdesignedto collect fundamentalinformation 'aboutthe company such' as its' name, year of inception, "numberof' employee's currently working, major products produced, sales income, etc.the second section of the »questionnaireconsisted of questions related to ISO9001:2000 and TS 16949 QMS standards. Questions pertaininqto SiXSigrila,~uch

~snumber ofprojectscompleted.financial benefits obtained, improvement in sigma level,methodology adopted, and difficulties eIicour'ItEired while implemeritingSix Sigma, wereinduded in section three and are shown in'Appendix. Ouestions aiminq to gather thedata on the perceived meaning and enablers of innovation and innovation performancemeasures were 'included in the fourth section.

Backgrou,ndof 'n~r~I.SuppliersThe major.components produced by the 20 suppliers surveyed under this categoryincluded forged .and .machined components, radiators, air-conditioners, bearings,automotiveseats" accelerator and: clutch cables, window regulators, speedometers,fuel injection pumps" le engine valves, wiring harness,andinjectionmouldedautomotive .intertor and exterior, parts. Five companies were-MultinationalCompanies(MNCs)" four companies were listed on the stock exchange, and one wasa 100%export-oriented unit. The number of employees employed in these companiesvaried from 110 to 3,000. The sales incomewas inthe ranqe.ot 40H,800,nmINR.1'wocompaniesdid not disclose theirsales income. All the 20 companies are certified to TS1,6949 standards. Table 3 shows the summary of the year of first QMS certification andTable 4 shows the summary of standards adopted by Tier-I suppliers.surveyed.

Table" 3: Ye~r of Obtalninq QMS Certification

Year of First Certification Number of Companies' . ' "" ";" Percep.tage ,"

Before 1995 -'.', :4' 20

.:» .. '"

'" ..1,!}~6-20~O , ,,",'10

"50.. ' . "' " ,

; 2001-,2005 '",'" ) .' ,~ .~ . "" .. 5 2S

2005" onwards :1 5,

" , " 'i, .1" t " ," .. ... , ,c. ..

Sb;·Sigma·in:.lndian AutomqtiveComponents Sector: A Survey", " 23

'Iable 4: Summary of Companies Certified to System Standards

System Number of Companies Percentage

TS 16949 20 100

ISO 14001 13 69

OHSAS 18001 '3 15

Background of Tier-II Suppliers

As mentioned earlier, five companies were surveyed under this category. In total.eight members from five companies participated inthe interview. All the companiesbecame operational between 1987 and 1991. The major products produced by thesecompanies included seat belt accessories, brake assembly accessories, electrical parts,and window regu,lator components. The number of employees in the companies variedfrom 10 to 50. The sales income was in the range from 8-50 mn INR. All the fivecompanies were certified to ISO 9001:2000 and none of them were certified to any ofthe other systems such as TS 16949, ISO 14001 and QHSAS 18001. All the companiesmanufactured products according to the design and drawing provided by the Tier-Isuppliers. In a majority of the cases, the tooling and raw materials were also providedby the Tier-I suppliers.

Although, organizations in the industrialized countries have progressed wellin the application of quality systems, organizations in the developing countries havebeen latecomers (Bayati and Taghavi, 2007). The same has been observed in thissurvey with Indian automotive components manufacturers too. It is clearly evidentfrom Table 3 that a majorityof the companies obtained their first QMS certificationonly after 1996. For developing countries such as India, there may be greater urgencyin terms of addressing environmental and societal problems (Puay et al., 1998). In thisdirection, 69% of Tier-I companies have been certified to Environmental ManagementSystem (EMS) but none of the Tier-II companies have been certified to EMS.

Data Analysis, Results and DiscussionThe details of the analysis of data gathered are presented in the following subsections.The results are SUbjected to discussion. The responses'for barriers, benefits and CriticalSuccess Factors (CSFs) of Six Sigma were analyzed by computing three statisticalparameters namely mean, Standard Deviation (SD) and t-value.

Six Sigma Implementation

Out of the 20 Tier-I companies surveyed, only six have implemented Six Sigma. Onecompany implemented Six Sigma program in the year 2005, two in the year 2006, and.the remainingthree in 2007. Three companies have hired the services of the professionalconsultant in training and implementing Six Sigma. The other three companies deputedtheir personnel for external traiIling and'they in turn trained others and monitored theimplementation. Annual savings reported by five companies from Six Sigma projects

, . _',_,;,h.·· ',.

24 The Ictai University Journal of Operations Management. Vol. VII, No. 3, 2008

vcuiedbetween 1.5mn INR and 3.5 mn INR for the year 2006-07. One company didn'tdi4clQse the savings gained. Improvement in sigma level for the various projects carriedout by the six companies range between 0.2 and 1. Five companies have rated theirSix Sigma project as 'partially successful' and one as 'successful' on a scale of­highlysuccessful; successful; partially successful; failure; total failure. Three companies

~ '. . . - .

aril using Minitab in the implementation of Six Sigma, and the other three are using~p,eadsheet packages like Microseft Excel, for data storing and making simplec~Culations.None of the Tier-Il sup~liershave implemented Six Sigma.

S~ Sigma Organization'lable 5 shows the number of Six SigIlia trained employees (Belts) and their ratio in thesPt·SixSigma companies surveyed. Considering the total number of trained personnel~4 employees in all the six organiutions put together, it is observed that for everyM~ster Black Belt (MBB), there areten Black Belts (BBs). For every BB, there areonly four Green Belts (GBs).and one BB for every 124 employees. These ratios arecontrary to the one mentioned in literature. A common guideline is to have one BBforevery too employees, around 20 GB$ for every BB, and 20 BBs for every MBB (Park,2003). :Once Six Sigma program spreads to the depth and breadth of these companies~(fmjituresover a period of time, tl~se ratios may come closer to that mentioned inliterAture.

I:" •,: ~ ..Table S, Number of Belts

ComJliUWNumber of

MBB liBRatios

Employees GB BB: E* BB : GB MBB: BB

Cl 400 1 5 20 1 : 80 1 : 4 1 : 5

.C2 345 0 1 4 1 : 345 1 : 4 -

C3 ~,OOO 3 ~O 100 1 : 100 1 : 3 1 : 10

C4 350 0 1 8 1 : 350 1 : 8 -

C5 354 0 0 5 - - -

ce 280 0 1 8 1 : 280 1 : 8 -

T~t~1 4',729 4 38 145 1: 124 1 : 4 1 : 10

St~ndat1f"~~o 1 : 100 1 : 20 1 : 20•...,

Note: W ~ Number of employees. ..

Sa Sigma ProjectsThe different types of Six Sigma projects embarked by six companies are ~ummarizedin 'lable 6. Interestingly; all thesix companies concentrated Onlean projects such asredueinq the cycle time and work in process, in addition to reducing defect rates. Thisis mainlybecause of the high volume and repetitive nature of production, which istypical of automobile 'components sector. Six' sigma is a generic improvenient

3,

Six S.gQJ!l.i~ Indian AutoQJolive Components Sector: A Survey 25

methodology and one can choose waste or cycle time as, CTQs (Critical to QualityMetrics). as physical properties of products (Hoed, 2004). The present studyconfirmsthis fact

Six, Sigma Me~odology, ,TablEi,,7 shows various.methodologies adopted by-the Six Sigma companies. All the sixcompanies have adopted DMAIC methodology, whereas only one company has usedDFSS in addition to DMAIC. Interestingly, all the six companies have used DMAICand lean. This espouses the factsthatSix Sigma projects aim for both waste eliminationas well as defect reduction.

Table:6: Performance Measures of Six Sigma Projects

Performance Measures Nu~ber of 'Percentage, Comlla.nies

Reducing Number of Customer- Complaints 4 67

Reducing Scarp 1 17

Cost Reduction 5' ,

, 83-

(R~ducing,!lefect rate);

Improving Yield 6 100

Process .Capability 4 67

Reducing :Cycle Time...

.1006

Reducin.g WIP: 6 100,

" .

'-

,

Table '7: Six Sigma Methodologies Adopted

MethQd,ology Number of PercentageCompanies

DMAlC 6 100

DFSS (DMADV/IDOV) 1 17

DMAlC 4- Lean'"

6 100

{)FSS methodology is used basically for,designilW new products and processes.DFSS is also applied when achieving improvement is difficult, using DMAIC.For most of the automobile components manufacturers, product design; specificationsand process parameters ate provided by OEMs. Further,there exist a lot of opportunitiesfor improvements using DMAIC methodology. Hence, very little application of DFSSis found.

Barriers to Effective Implementation of Six SigmaTable 8 shows the barriers to the.effective implementation .of, Six Sigma. Companies

. • .'.,' ." I ": "." . ; . _. "

have been .asked to rate the following factors that were felt.to be the barriers forimplementing Six ~~gma program on a Likert scaleof 1 to 5..The results of the analysisshow that the six ~espondU;gcompanies felt onlyfulqncicil coPstJ.'aiIl.t to be significant

26 The Idai University .JournalotOperations Managemeat; VoL VII, No. 3, 2008

at 0;1 level of significance.:This indicates the fact that it is easy to implement SixSigma program in the Indianautomobile components sector, as only one barrier isfound to be significant out of 'the eight.

lable 6: Barriers for ,.m.,leJllel1ti~g Six Sigma Program

.B..mers , Mean SD !,value I

Financial Constraint. .- l, 3,.33 0.52 ~.58

Time Constraint, " " 3.00 1.10 0.00Difficulty in .Understanding ComplicatedStatistical Tools ., 3.00

~LlO 0.00

Lack of Management·Exposure ' - 2.00 : 1.10 -2.24

Work }:;orceIUnioIl Resistance" 1.83 0.75 ':"-3.80'

imprope~' Training",

(83 0.75 -3~80,Expensive Consultation Charges 2.00 0.Q3 __3.87

D~eu1ty in UnderstandingSbt Sigma .Methodology ... " 1:83' O.4'~

.. ;' -7.00 i J

, ..

Note: '~~. Not at all a ,barrier tQ '5' Highly signif;i~ant.barrier; r-value = 1.476 for 5deqrees qf .freedom.

,.

Benefits 0' Six SigmtJ,Program ."'Dt.ble 9 shows the various benefits of the SixSiqma program. Companies have beenasked to rate benefits on a Likert scale of 1 to 5. The results of the analysis-show that,

,. ,·lable ;9:,Beaefits of. Six .Sigma , ,

Benefi.ts '.1 • Mean ,SD, t-value

.lteduction in COPQ 4.17 0.41 7.00

Increase in •profitability 4.33 .. 0.52 6.32;

Improved pioductquality 3.83 9.41 5.00

Improved companr image 3.83 ,0.4~ 5.()O

Reduction in .process variability, 4.00 0.63 3.87

Increase in productivity 4.00 0.63 I, 3.87

Reduction. in customer complaints 4.00 0.89 2.7A

Reduction of cycle time [ . 3.83 1.17 ,1.75"

Improved work culture '3.17 0;75 .. 0.54 •

Improved employee 'morale! motivation 3.00 ... 0.63 1 0.00

Improved sales , 2.33 , 0.52 -3.16

Reduction in inspeetion " 2.33 , 0.52 -3.16- ..

Note: '1' No benefit to'S' exnellent.or maximum benefit; ·t·value = 1.476 for 5 degreesof freedom. ,

.-..• -

27

in line with the Six Sigma philosophy ofbottom line results, these Six Sigma companieshave also derived significant financial benefits through reduced Cost of Poor Quality(COPQ). Increase in profitability, a second siqnificant benefit, is a natural outcome ofthe reduction in COPQ. Improved product quality has helped companies to improvetheir imaqe and both these benefits come out as third significant benefit. Reduction inprocess variability and an increase in the productivity findthe fourth place, Reductionin customer complaints and cycle time are the two other significant benefits. Six Sigmaproqram did not result in improved work culture. This can be attributed to the reasonthat three companies have not hired the services of a professional consultant.No significant benefit in terms of improved employee motivation! morale has beenachieved. This may be due to the fact that five out of the six companies have not tiedthe incentives or bonus to the success of Six Sigma projects. Six Sigma is basicallyused for the improvement of internal process and efficiency. To achieve the externalbenefits s~ch as improved sales or market share, they are required to travel a long wayin their Six Siqma journey.

Critical Success Factors (CSFs) for Six SigmaThe Six Siqma companies were asked to rank the 11 CSFs on a scale of 1 to 5.The CSFs used in this study were derived from the existing literature of Six Sigma(Antony et al., 2005). The aim was to prioritize the CSFs, which the Indian automobilecomponents sector felt to be significant, and make a comparative study with the CSFs,identified from previous studies. The practitioners of the Six Sigma companies surveyed,have agreed to most of the CSFs mentioned by Antony et al. (2005). The data gatheredare summarized in Table 10.

Table 10: Critical Success Paetors for Six Sigma

Critical Success Factors Mean SD t-value

Trainlng 4.67 0.52 7.91

linking Six Sigma to customers 4.67 0.52 7.91

Project Prioritization and Selection 4.67 0.52 7.91

Project Management Skills 4.33 0.52 6.32

Cultural change 3.83 0.41 5.00

Management Involvement and Participation(Leadership) 4.00 0.63 3.87

Understanding of Six Sigma Methodology 4.00 0.63 3.87

linking Six Sigma to Business Strategy 3.67 0.52 3.16

Organizational Infrastructure 3.33 0.52 1".58

linking Six Sigma to Employees 3.17 0.41 LOO.

linking Six Sigma to Suppliers 2.67 0.82 -1.00

Note: l=Least important; 2::::Less important; 3= Important; 4=Very important; &l1d5::::Crucial; t-value :::: 1.476 for 5 degrees of freedom.

28 The Idai University Journal of Operations Management. Vol. VII. No. a. 2008

As shown in Table 7, training, linking Six Sigma to customers, project prioritizationand selection topped the list of CSFs, followed by project management skills. Culturalchanqe camenext. Management involvement and participation, and understandinqSixStgma ,tn@thodology stood at the fourth level. linking Six Sigma to business strategy

- .',.' .:,. '.and organizational infrastructure are also rated as significant. Linking Six Sigma to~mplpyees and suppliers were rated as not significant. This shows that companiesl,lav4i not linked their Six Siqma program to their. employees and suppliers. This isevident from the benefits discussed in tile previous section that there is no improvedVlork culture, or employee morale/motivation and no reduction in inward goodsinspection.

Industries in developed countries are mature and place stronger emphasis onsuppliers through longer-term strategic plan involving supplier management andtraining, compared to developing countries (Puay et al., 1998). Automobile componentssector in a developing country like India too has failed in strategic supplier management.

As employee motivation is extremely important in the successful implementation ofSix Sigma, the management should link-Six Sigma program to its employees, throughincentive-based compensation, an employee ownership plan and the implementationpf work-based teams (Motwani et al., 2004). This sector failed to .understand the~portance of this particular CSF, and presumably this may be the reasonjor the~eagreimprovement in sigma level (0.2 to 1), for the projects embarked by the companiessurveyed,

These findings were quite contrary to the findings from the previous studies carriedout by Antony et al. (2005) in small and medium-sized UK manufacturing enterprises.Results ofthat particular study show that management involvement and participation,linking Six Sigma to customers and linkinq Six Sigma to the business strateqy of theorQanization are the most important factors for the successful implementation of SixSigma, followed by organizational infrastructure, understanding of Six Sigman;u~~odology,training on Six Sigma, and project prioritization and selection. Thble 11gives th~ comparison of the present and.previous study. This difference in the priority,tl:ached to CS,Fs can be to due to the fact that India is a developing economy and the4ll1ulltrialculture and environment surrounding India are different from that of UK.

Ileasoqs ,tQJ' Not Implementmq Six Sigma'tl1ble 12 shows the summarized data gathered to examine the reasons for not[mplementinq Six Sigma.

The reasons for not implementing Six Sigma among the remaining 14 Tier-Icompanies were analyzed. All the companies have agreed that 'not a statutoryrequirement' as the main reason for not implementing Six Sigma. 'Not insisted byOEMs~.is the second main reason for Tier-I companies for not implementing Six Sigma.-Followedby this is the opinion that TS 16949 standard adopted by them is sufficient to

"achieve the required quality level. Only 50% of the companies agreed that lack of

Six SiU'ma in Indian Automotive Components Sector: A Survey 29

,lable' '11: Comparison" of CSFs :with·;the· .Previous , Study. !

P~~sentStiJdy Previous Study,. '. :(Antony et et; 2005)

: ,

1taining'

LiriIqng Six Sigma to Cusio~e~s

.. 'Rank "

I. ~

,,I , .

.Rank·

VI

Management InvolvemenLand Participation

'Understa,nding:Of Six SigmaMethodology,

Project Prioritization .and ,S~lectio~

.Project .Manaqement ' Skills: ..

Cultural Change

Orqanizational Infrastructure

Linkinq Six Sigma to Employ~es .

, ' ' .... I .,

" IV\ I

...

V

VI , ;

VI

VIII'

IX

X

XI

.

VII

VIII .

VIII

I

V

III

IV

XI

X

'.' lable U; J,lea,fi9ns 19r Not, Implementing, SPc. ~igma

, . Tier-I Suppliers, : 'Tier-II Suppliers

CNUmber .of Percentage Number of Percentage

ompames Companies

.'Top management 'is not. interested 4

~ '.' '! ,; ••••. :. i.;. ~ . I : -' ~ , . ~ ; '. I ; • ".'

High cost of training MBBs, BBs ana· l t" < 2' .,~ •

GBs, "... I

40

80

80

60

60

80

1005

4

)

3 , ., ,.

3"

,.,.--'-'-

2..

4, I " ',

4

4 " , , :

, ..

21

7

29

'., , "

100

\ 50

..86

,', 1

1

9

12

14

High cost of consultants 3

It ,. - " . • ~ .. ' - -,.' - ;.. ' - :

Not insisted by c~stomers~OEMs

Not a statutory requirement 'likeISO' 90'01 and TS 16949 .

In~uffici~nt manpower who .can be,trained as MBBs,' BBs .and' GBs '

Difficult to understand high endstatistical tools

Reason

,Quality. system presently adopted byorganization' (sPC!rQM/ISO . ,9001;2000) is sulftclent: ,',

,Not. aware of;S~.§igma,

. No; perceived.benefits

: -.,

,,' ,"

•. ,,0 ..

" 0-

( ,-

o ....

20

o

sufficient-manpower tobe trained as full ,time S~ Sigma professionals was one of thereasons.for hot, implementing SiX Siqma. Vert few 'of the Tier-I' companies have

30 .The Idai Unive1l5ity,Jo'lIm:ahof Operatlons- Management. Vo);!VII" No. 3, 2008

\tr

regarded high cost associated with Six Sigma training, high: fees of consultants anddifficulty in understanding.qomplicated high end statistical.:rp.ethodologyassociatedwith Six Sigma as reasons for not implementinq Six,Siqma, '

A majority of Tier-II suppliers are aware of Six Sigma and its benefits' and areinterested in implementing it, However..theyhave.not implemented.it becauseit is nota statutory requirement. .Notinsistedbyc~tolfiers/QElv1sihigh. cost of consultants,high cost of traini,ng .rvf8B~" BBs .and, OB~, difficulty in understanding. ,high endstatistical tools, and expensivenessare the otherimportant reasonsfor:Tier-Il companiesfor not embarkinq on. Six SigTIla program. Lack of qualified personneland existingQMS being sufficientto achieve :the required quality level are otherimportant reasonsfor not implementing Six 5igma.. Tier-II suppliers widely held that top managementnot being interested or aware of Six Sigma, and no p~f~~v:eq J:~n~.nt~ ~~r~. not tllrreasons for not implementing Six Sigma. . '

',:,!-,'

Conclusion .There is'little research carriedout specifically in automotive components manufacturingsector to explore its journey in achieving competitiveness, Thepresent survey makesa contribution to tiHs'arena. ~nteJ.'!llsof:esearth data and a~~¥,si~. tp,efinctJ,ngs shouldnot only help further research agEHidas but also inform automobile components

. manufacturinq companies located in developing co~nhiesiik~ India' to plan andstrategize on quality continuum. r : ','0 , ) ••

As a global,hub for eutomobile components.Tndian automobile.components sector

~oa~:c~~~;I~~~C;~~~;=~~~e~::~:~~:rl~io~~~~~~~~~:~~!::·i:~~~~~QMS. Nevertheless; 'except 'for a Jew\many have 'norry-et adoptededvancedbreakthrough quality improvement-strateqiesItke Six'Sigro:a and other-continuousprocess improvement techniques; Presumably; thisean-beone.ofthe important reasonsfor companies not being ,able to gain access to the international market and contributesignificantly't6thE!Indiarii!c~no'my.,., , .: .. ' .... ' " I'" ".".: •

In this context, this sector needs to adopt Six Sigma vigorously in order to reap thebenefits. 'As compames needto be TSl6949 c'ertifi~d to bea globa1 supplier, andinnovative in 'process imprdvemeilt'to'be"a'niaiket'Iea:dei,' there' isia:need for anintegratedmodel whidi lJnngs under its'uIIlbieua""FS16949,' Six Signia'and innovation.

Usinq diffe~en~:'1u~ty~~W)l:QV~We,I!t~groilch~fslwillup;irnatel¥,~a9JQ be~~,r :q\taliw,operating, al1d,fin,an~~aJ..Rerfpr,mallce(Leeet ai., ,2QQH., further research.needs to be

'. '.' • . "'1 ;'.' .'.":, (',: ••<:; ) -: , : ,,:.j i ',' " ", '" ',. .'

done in this ,\:Iir~~(ionto p.ev.~lop and iIl?-p~~IP~ntacomprehensive framework, whichintegrates breaIctfuOl;gh qu~ty' ~i>rove~ent .strategy like SiX Siqma, and continuousprocessimprovement-tools SUCh aslean anddnnovative problem-solvmq.rrrethodofoqy.

The survey results Sh~wtl1~t.orily a srli:dii'Petcen.t~ge (24%)'of brganizatibris haveimplemented SixSigma. The top management needs to be proactive ~'impl~mentingSix Sigma and focus on integrating Six Sigma with TS 16949. The findings imply that

Sb' Sigowr.iqi IlId~'A~:COQlP(uu~nts I Sector:, A. Survey, ", , ,. ' 31

orgartizations in the Indian automobile components sector has to embrace more DFSS

projects, expand Six Sigma projects -to the entire organization, hire the servicesof g06d consultants, connect incentive schemes to tile success of Six Sigma projects,

and utilize software like Minitab for data analysis.

Linkinq Six Sigma program to employees will help in getting better cooperation,

improved work culture and morale. Linkinq Six Sigma tosuppliers will help in improving

collabbration, which shall result in the effective implementation of Six Sigma.

Orgahizations can gain much by volunteering to implement Six Sigma rather than

waiting for it to be imposed. Evaluation and comparison of CSFs of Six Siqma help

organizations in the sector to attach the requited importance to various CSFs.

Limit~tions of the StudyFollowing are some of the limitations of this study:

:. Sample size of 25 appears to be small. Study tin some more companies canbe taken up to make the results more representative.

• The survey is limited to automobile component manufacturing industries.located in the state of Kamataka.It can be extended to companieslocated.inother parts of India too.•

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6. Bayati A and Taghavi A (2007), "The Impacts of Acquiring ISO 9000 Certificationon the Performance of SMEs in Tehran", The TQM Magazine, Vol. 19, No. 2,pp. 140-149.

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7. Bennett D and O'Kane J (2006), 'Achievinq Business Excellence ThrouqhSynchronous Supply in the Automotive Sector", Benchmarking: An InternationalJournal, Vol. 13, No.s 1/2, pp. 12~22.

B. Bhupta M (2007), "Dream Run", India Today, Vol.32, No.1B, pp. 40-46.

9. Dangayacha G Sand Deshmukh S G (2003), "Evidence of ManufactUringStrategies in Indian Industry: A Survey", International Journal of ProductionEconomics, Vol. B3, pp. 279-298.

10. Dedhia N S (2005), "Six.Sigma Basics", Total Quality Management and BusinessBxcellence, Vol. 16, No. 5, pp. 567-574.

11. Haikonen A, Savolainen T and Jarvinen P (2004), "Exploring Six.Sigma and ClCapability Development: Preliminary Case Study Findings on Management Role",Journal of Manufacturing Technology Management, Vol. 15, No. 4, pp. 369-378.

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13.. fiensley R Land Dobie K (2005), 'Assessinq Readiness for Six.Sigma in a Service$.etting", Managing Service Quality, Vo!. 15, No. 1, pp. 82-101.

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14.' Hoerl R (2004), "One Perspective on the Future of Six.-Sigma", InternationalJournal ofSix Sigma and Competitive Advantage, Vol. 1, No. 1, pp. 112-119.

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16.http://acm a i n f 0 . c 0 m / d 0 c m g r / S tat u s _ 0 f _ Aut 0 _ I n d u s try /Status_Indian_Auto_lndustry.pdf (accessed onJuly 3,2007).

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ul Kant R(2?06), 'An Excitinq Road Ahead", The Week, December 31.

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84

, ,""I"·f;·-, '"1

, ,,

ne Idal·UJl1venIityt:.Jo'tlrBal '01 Operations.Mu.-eat. Vol,· VII" ,No.' a. '2088

Appendix

Excerpts of the Questionnaire on Six SlgmaSection III Six S~gma

l.jn which year did you start your Six SigtDil program?

(~. NaJDe your Six Sigma consultant:

3. How many Six Sigma projects have youcompleted till date?

4. What financial benefits/year you got from these projects for the past three years?

Pbiancial Year . Benefit in Indian Rupees

2003-2004

2004-2005

',2005-2006

5. Total cumulative financial benefits obtained till date after implementing Six Siqmaprogram

6. How many GB; BB; MBB are there in your company?

GB BB MBB

7. What was Sigma level before Six Sigma implementation and after implementation?

Major Six Sigma Projects .SigIDa Lewl Before Six SlgmaLevel Alter SixSjgma Implementation Sigma Impiementation

;'

8. Which metrics did you. use to measure the performance of Six Sigma Project?

Metric Yes No

Number of Complaints

Percentage Scrap

COPQ

Defect. Rate

Process Capability

Yield/RTY(Rolled through yield)

OEE (Overall equipment efficiency)

Cycle TimelLead Time .'.. WIP (Work in Process)

(Contd ...)

35

10. Followinq difficulties might have, been encountered by your compa:qy whileimplementinq Six Sigma, rate them on a scale of 1 to 5.

Rating

11. Rate the following benefits obtained by implementing Six Sigma

5

5

No

(...contd)

4

Yes

Rating

2 3 4

2 3

1Benefits

Lack of management exposure

Expensive consultation charges

Difficulty in understanding complicated statistical tools

. .'~ . .Im:p~oWf4'ainmg

Barriers

Note: '1" Not at all a barrier to '5' Highly significant barrier

1

Difficulty in Understanding SS methodology

Financial Constraint

Reduction in process variability

Increase in profitability

Improved product quality

Time Constraint

,Work Force/Union Resistance

DMAIC - Continuous improvement method

Appendix

DMADV/IDOV(DFSS) - Break through improvement method

Lean Six Sigma - Integrated approach to improve quality andeliminate waste

9. Six Sigma methodologies us~d,

- Methodology

Reduction in COPQ

Increase in productivity

Reduction of cycle· time

Reduction in customer complaints Improved sales

Reductiontn inspection'

Improved, work culture

Improved employee, morale/motivation

Improved company image

Note: '1' No benefit to '5' excellent or maximum benefit)

36

(Contd...)

'1be Idai UniversttyJoiU'Dalof OperatioBSMaiIageRleDt. Vol. VII, No. 3, 2008

J., at

(...contd)

12. Rate the succes,s .of S~ ~igIIla at.yo~(~company'", .. " , " ' ... > :' ','" ' ,-

~rr~~~~ess,r:u,Q,~~lcce~sfuIQ~=fulD FaiIur~D ~~~Ie.Dia If you feel Six Sigma is a failure, rate the following factors leading to failure of

, '~"". ~gIJla , ..'.,

Factors

Lack of man().gem~t involvemeIlt and participation

,Rating

r 2'3' ." 5

I Lack of teSouroes(Finanoo, human resource and' time)

:Poor"training/coaching

Internal resistance

~r project selection

14. Which of the folloWing software is used in the effective implementation of Six Sigma?

~ !-,§~~t~ffil--Q1?jectives

~: ri' Not SO significant to failure to '5' Highly significant to failure

"Minitab -SPC-IV Six SigDla Suite Systat If different, PI specify

15. Following factors have been identified as critical to successful implementation of'SixSigma. Rank them on a scale of 1 to 5

53 •

Rating

21Critical Success Factors

..\------------------------+--+--+--+--+---{

•L .. Management involvement and participation (Leadership)

•i ".. '~zational infrastructure .

Cultural change

i'iU'o~g

I~i:,~ Six Sig-ma-to customers

v , linking Six Sigma to'business strategy

Linking Six Sigma to employeesI . .: . _: ... ',.... '. ~.. .- ',' ' .

,

0' , understanding, of Six'Signia methodology

i'r J'rt)fect IIiaO.ag$entSkills

Project prloritiiation and' selection

N~te: ~=Least iInportan.t; 2=Less important; 3=Important; 4=Very important; and~ -'.. "5=C:rilciaI - .

Reference # 07J-2oo8-08-02-01

S.. S.... mIndian Automotive Components Sector: A Survey 37