Six Sigma in Service Industries

Six Sigma is usually seen as applicable to manufacturing, but not to service industries. Can Six Sigma relate to services rather than products? Is there any value in doing so?

This article will introduce the Six Sigma concept of measuring defects, then relate this to several potentially valuable metrics for service industries.

Measuring Defects in Six Sigma

Based on its roots in quality control, Six Sigma sees defects as unacceptable variations in output. In the course of delivering a service, both the process and the delivered service may suffer from any number of defects.

A customer’s needs and wants define acceptable services. The business may also set its own standards for satisfactory service. Anything that causes an unacceptable service is a defect.

For example, should a Wal-Mart greeter present a smile and cheery “Hello” to each customer? Should a customer service representative always include “Is there anything else?” and then wait for the customer to say “No” to terminate the call? A failure to follow an established procedure is a process defect.

One service task may present many “opportunities” for defects. Here are four opportunities in a call-centre scenario, where we assume the steps should have been documented:

Forgetting to verify the caller’s identity, if the automated procedure had been bypassed
Forgetting to verify the caller’s current address
Forgetting to verify the caller’s current method of payment
Assuming the caller wanted a feature, rather than asking explicitly

Six Sigma’s goal is to reduce the process defect rate to below “six sigmas”, or about 3.4 defects per million opportunities.

The use of “metrics” requires gathering the data, performing statistical analysis, and also determining what the results mean.

Usage Metrics

Time and money are significant concerns for all service organizations, whether private companies or government agencies. They are also important to customers and tax-payers.

Usage metrics deal with how many services are requested and how much they cost. For example:

One retail store has higher inventory turnover than most. Do they advertise differently?
One district receives more requests for cancellations or refunds, per thousand customers, than other districts. Are there problems in their marketing or service delivery practices?
Some customer service representatives spend more time per caller. Do they have fewer referrals to their supervisors per call? Do their callers make fewer call-backs than others?
One branch office’s installers take 15% less time than the national average. Is their error rate better than average, or are they just slow?

Process Metrics

Examples of process metrics were given earlier on this page. The main question is whether the proper procedures are being followed.

Outcome Metrics

This is often the most visible area of concern. Was the final service acceptable, or did we have dissatisfied clients? Did the government re-assess “too many” of our clients’ tax returns? Did membership cancellations rise in the last quarter?

Poor outcomes, such as those mentioned above, might trigger an executive response when nothing else could.

A Six Sigma project would seek the root cause of these poor outcomes. Often there were problems with the processes or with the initial requirements.

For example, was the tax-return goal defined as minimizing tax owing, or as minimizing the likelihood of being re-assessed? Perhaps the clients had an implicit goal to not be re-assessed, but this was never identified as a “Critical to Quality” (CTQ) factor.

Did members cancel because the sales pitch did not explain some terms or conditions? .

Benefits of Six Sigma for Service Industries

Often, however, a poor outcome metric is just the starting point for a Six Sigma project to determine the root cause(s) and determine a long-term solution. The Six Sigma approach also incorporates ongoing process measurements to catch problems as they begin, rather than waiting for dissatisfied customers to raise the alarm.

Oskar Olofsson, 2011

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I am a Swedish-based Lean consultant, and the owner of the World-Class-Manufacturing.com web site.

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