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  • #30603

    Rj
    Member

    Hi!  I wanted to know if Six Sigma can be used the following way:
    Under market research (traditional), I have a break-even point of 5,000 units needed to B/E.  Six standard deviations below (for example) is 4,500; a lower break even point.
    OK.  Now the question: can I also think that 6 standard deviation on the right side of the mean break even point (for example, not calculated) is 7,500 – a higher break even. 
    Is it correct to say that if product market can satisfy the upper bound of 7,500 that I have less  chances to fail (3.4 chances out of 1 million). 
    ???
    appreciate any guidance.  thanks!
     

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    #79877

    Hemanth
    Participant

    Hi
    Six Sigma is an improvement approach, so donot just link it with 3.4 ppm. Unfortunately, I am not a market research guy, so could not understand your metric. If your benchmark is 5000 and you want to be absolutely sure that you dont go below the 5000 mark, then yes an higher average would take you towards the 3.4 ppm level.

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    #79921

    Rj
    Member

    Thanks for your reply.  I’m a novice to the Six Sigma approach; I’m taking it for a MBA class. 
    But the question for me is if I set a higher Break Even target (7500), say six standard deviations above my real threshold (5000) …. this, I believe will make profits more difficult to come by.  Thus, if my market research satisfies the new higher 7,500 then isn’t here only a 3.4 chance out of 1 million that the new product introduction will fail ??
    I understand that Six Sigma is more of customer satisfaction and operations management.  However, do you think it could be properly applied in this scenario??
    Raj
     
     

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    #79922

    Rj
    Member

    ???

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    #79925

    abeerwart
    Participant

    rj,
    Six Sigma methodology can help you assess risk taken when you make a decision.  People sometimes get hooked on “six sigma”s as a means to reducing risk and that every process must be at a six sigma level.  You must decide how much of a risk are you willing to take – and there are two types of risks, alpha (the risk of doing something when it is not needed) and beta risk (the risk of not doing something when a change is needed).  Depending on the impact on making the wrong decision and the quantity of product at risk, will help determine at what sigma level you need.  For instance, in the medical field, six sigma level is not adequate enough, but for the making animal cookies always the “correct” shape, a two sigma process might be sufficient.

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    #79932

    Mike Carnell
    Participant

    RJ,
    I think you have an application issue. If 5000 units is your B/E point you treat it as a hard limit unless there is some type of variation associated with it.
    Good luck.

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    #79937

    Hemanth
    Participant

    Hi Raj,
    Well, you are right. See there are two options
    one is you could move the mean up and dont worry about variation.
    Another is you could reduce the variation without changing the mean much.
    what is this 5000 (is it the number of people sampled?), if you feel increasing your metric from 5000 to 7500 will cost you more than it would save, then you should try reducing variation in your process. I know I am a bit delinked. May be we can get specific if you could explain me the process and the metric. email me at [email protected]
    bye
    Hemanth
     

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    #79970

    Rj
    Member

    what if you move your B/E hard limit up to 7500 from 5000.  if your test market can satisfy the new break even @ 7500, does that statistically equate to 3.4 chance in 1 million that you will not succeed ?
    or am i stretching the six sigma out of its applicability?
    RJ

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