How Caterpillar Uses to Execute Strategy
By John Gillett, CPA; Ross Fink; and Nick Bevington
6 SIGMA
In 2001, Caterpillar launched its 6 Sigma program to drive change to achieve the company’s long-term strategic goals (Caterpillar uses 6 Sigma to identify its Six Sigma initiatives). This 6 Sigma process was, and continues to be, extremely successful. Some of the results include first-year benefits that exceeded implementation cost and achievement of the revenue goal two years earlier than planned. We’ll briefly discuss Six Sigma in general, describe Caterpillar, and show the entrenchment of 6 Sigma within the company’s strategic planning process.
April 2010
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C OVE R S TO R Y What Is Six Sigma?
Six Sigma is a total quality management (TQM) technique pioneered by and applied to Motorola processes in the 1980s by Bill Smith, a Motorola engineer who became known as “the father of Six Sigma.” Since then, other companies, such as Bank of America, Honeywell International, Raytheon, and General Electric, have taken these learned processes and expanded them. Even though many people have reservations about the potential savings from Six Sigma, a story by Charles Waxer (“Six Sigma Costs and Savings: The financial benefits of implementing Six Sigma at your company can be Significant,” www.isixsigma.com/index.php?option=com_k2&view= item&id=1228<emid=187) reports that GE saved more than $12 billion over five years, Honeywell saved $800 million, and Motorola saved $15 billion over 11 years. Each company takes the Six Sigma process and best practices and makes the technique its own. The methodology, which was created in the 1920s, comes from mathematician Walter Shewhart’s introduction of how processes could be corrected. It uses the Greek symbol “sigma” to represent a standard deviation away from the
