Case – Implementing Six Sigma at GE Fanuc
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GE Fanuc Automation in Charlottesville, Virginia, is a joint venture between General Electric
and Fanuc Ltd. of Japan, a company that specializes in computer numerical control (CNC) and
robotic technology. The division has annual sales of about $700 million from the manufacture
The Six Sigma way of thinking is ingrained in everything the company and its employees
do. “From our corporate decisions all the way out to the factory floor, Six Sigma has raised our
employees’ mindset to look at data instead of emotion,” says Sheila O’Donnell-Good, GE
Fanuc’s Six Sigma business leader. “If you go out on the floor and visit each line, you’re going
“At one time, GE was a Three-Sigma company and the cost of failure was estimated at 15
percent of sales. But achieving Six Sigma represents a $4 billion cost reduction opportunity
through reduced cost of failure,” says O’Donnell–Good. She adds that the savings are “really
greater if you think about it because there have been significant improvements through this
program other than the cost-of-failure reduction.”
Six Sigma teams are established to improve or correct processes. Don Splaun, manager of
advanced manufacturing technology, headed a Six Sigma team that wanted to eliminate the
Environmental Stress Screen (ESS) test on circuit boards. Splaun felt the test was costly and
Initially, Splaun estimated that GE Fanuc was paying about $12,000 to $18,000 in
electricity plus $2,000 to $70,000 a year in maintenance costs per oven and labor costs for
loading and unloading the oven. Concentrating on the field-control product line, team members
collected and analyzed data to determine whether the final test was as effective as the ESS.
Operators filled out data sheets with information such as board name, date, and whether the
board passed or failed the ESS test and subsequent tests. These data helped team members
This analysis indicated that the final test captured the same failures as the ESS in a more
time– and cost-effective manner, so the ESS and the ovens used for the test could be eliminated.
To control the improvement, the company began to track the number of failures and defective
boards on the line to ensure that product quality remains high after elimination of ESS. The
actual benefits that resulted from the project are summarized here.
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Direct Labor & Materials Savings $84,742
1. Inventory Reduction $48,400
Removing the test from the manufacturing process also reduced the cycle time by a day.
GE Fanuc is only one example of the application of Six Sigma within General Electric. The
impact of Six Sigma across the GE corporation is clearly described in the company’s 1999
Annual Report:
In 1999, the Six Sigma initiative was in its fifth year—its fifth trip through the
operating system. From a standing start in 1996, with no financial benefit to the
Jack Welch, then CEO of GE stated: “We want being a product/services customer of GE to be
analogous to bringing your car in for a 50,000-mile check and driving out with 100 more
horsepower, better gas mileage and lower emissions.”
In the initial stages of Six Sigma, the company’s effort consisted of training more than
100,000 people in its science and methodology and focusing thousands of “projects” on
improving efficiency and reducing variance in internal operations—from industrial factories to
financial services back rooms. From there, the firm’s operating system steered the initiative into
Welch concluded: “Today, Six Sigma is focused squarely where it must be—on helping
our customers win. A growing proportion of Six Sigma projects now under way are done on
DISCUSSION QUESTIONS
1. How was GE’s corporate-level vision of Six Sigma put into practice at the GE Fanuc
manufacturing site?
2. What is the difference between direct labor savings and labor cost avoidance savings from a
managerial perspective?
3. Verify that the number of defective boards found in the test (one) gives a dpmo of 130.
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Adapted from an article in Industrial Maintenance and Plant Operations, Copyright © 2000
Cahners Business Information, A Division of Reed Elsevier, Inc., as available at