Six Sigma is a management technique that has revolutionized different industries over the past several decades. Developed by Motorola in the 1980s, the technique came to prominence among the industry professionals in the mid-1990s after Jack Welch, former CEO of General Electric, had publicly preached about its benefits.
The quality management technique was seen as the missing link in his strategy to improve the fortune of the company. As a result, the technique later came to be known as the GE way of doing business. Companies that had adopted the then revolutionary quality improvement program experienced a remarkable improvement in prices. The remarkable result of the technique further sparked the interest of the academicians and corporate professionals and subsequently became a mainstream quality control technique all over the world.
However, compared to other industries, the FMCG sector has been slow to embrace Six Sigma technique despite its evident benefits. Here we will look at the benefits that FMCG companies can gain by adopting these quality management techniques to revamp their operations.
Why FMCG Firms Should Focus on Six Sigma
Six Sigma is a quality management technique that can help in significantly reducing operational costs and wastages. When implemented correctly, firms can gain remarkable quality control that can make their operations up to 99.9999% defect free.
In reality, most firms are able to operate at 3 and 4 sigma that represents a defect-free percentage of 99.37% and 99.937%, respectively, which is remarkably good. A company that experiences a loss of $1.5 million each month will be able to reduce the loss to just $864 by achieving 4 sigma. This represents the tremendous advantage of using six sigma approach for the company.
Successful adoption of the six sigma approach by using quality initiatives will allow an FMCG company to significantly reduce its operational costs. A number of companies in this sector have successfully applied six sigma approach in distribution by implementing such strategies as increasing products-per-delivered-pallet thereby reduce the off-invoice deductions, fines, and returns.
There is a huge opportunity for FMCG companies to revamp their distribution strategy through implementing six sigma approach. Implementing the technique can offer a company with $1 million in annual sales and improvement in the bottom line ranging from $40,000 to $70,000. This figure can be even higher for large FMCG companies having annual revenues amounting to billions of dollars.
Companies in the FMCG sector have been mostly shy in adopting six sigma quality improvement techniques. This does not mean that the technique is not applicable in the field. The only reason for this statistic is that most companies have been slow in realizing the benefits of the technique.
The reality is that six sigma is an extremely effective quality management approach that can be used in any industry and sector by both large and small companies. The initial investment of implementing the quality management approach may be high but it will offer benefits to the company in terms of reduced costs and improved profitability for a long time to come.
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