Toshiba Adopts Six Sigma After decades of leading the world in productivity. Ja-pan's giant companies began to lose momentum in the late 1990s. Cost-consciousness, recession, and fierce competition had taken hold. Toshiba had needed a makeover for years. Taizo Nishimuro, then director and chairman of the board, was faced with the challenge of getting control of the company without reducing quality. if we do not change, the final destination is the collapse of the company," he told management and employees (Guth). He proposed that Toshiba adopt the Six Sigma method of measuring performance. "Six Sigma was devised by U.S. firm Motorola Inc. to slash the rate of inferior goods produced to less than three or four in a million" (Industry Search). Some managers at Toshiba argued that Six Sigma was a "U.S. version of Japanese quality control? Gradually, managers began to believe Nishimuro's warning. "In March 1998,Toshiba reported an 89 per-cent plunge in net income for the fiscal year" (Guth). Efforts at gaining control began by the reexamination of everything. The relative performances of Toshiba's businesses were assessed. After careful analysis of each business, some were kept, and others were modified or eliminated. Toshiba's most valuable sectors included information and Internet services, semiconductors, electronic components, and information technology goods like PCs and DVDs. In late 1998, all upper-management personnel began training in Six Sigma methodology, with a directive for all employees to apply Six Sigma to their everyday job functions. Toshiba cut costs and boosted productivity and profits by introducing Six Sigma into its culture. The measures contributed to saving the company 130 billion yen in 2000 (Industry Search). Toshiba also helped its suppliers get control. Da-vid Tronnes, vice president of Manufacturing (Toner Products Division), explains the Partners Plus program that began in May 1998: "The Partners Plus program
is a re-engineering initiative launched between Toshiba and 19 suppliers responsible for 80 percent of the Toner Division's annual purchases? Teams from Toshiba make on-sire partner visits and recommend improvements. 'The recommendations for change (proposals that can effectively be implemented for mutual benefit) can originate from either Toshiba or its partners. A partner's assessment committee determines the feasibility of a recommendation, assigns in-house responsibility, and begins the investigation process. The recommendations are evaluated and either approved or denied by Toshiba and its appropriate partner' (Tronnes). Recommendations include attention to or improvements in the following areas: cost, quality and delivery; lead-time parameters; productivity and design system improvements; materials handling and sourcing as a factor in purchasing; business practices; logistics and transportation; accounting practices; and electronic data interchanges and electronic commerce. Tronnes reports that Partners Plus has led to a direct bottom-line improvement.
Questions
- What caused the general lack of control at Toshiba and who do you think was primarily responsible for it?
- What kinds of controls did the new Toshiba institute?
- What characteristics of effective controls did the new Toshiba have? What controls did the company lack?