In order to analyze the financial benefits of Six Sigma
projects, Net present Value i.e. NPV of the project is measured. After
measuring the NPV, the following gains are accrued to an organization.
1. Increased Revenue
Increased revenue is the most common and obvious benefit of
any Six Sigma Project. With processes going more efficient and optimized, the
organization is able to produce quality driven products at much cheaper rates
and hence are able to generate more revenue and profit. By improving the
quality of the products, customer loyalty is boosted which in turn again adds
to the revenue.
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Six Sigma?
2. Avoided Costs
The Six Sigma helps to eliminate the unnecessary costs which
are incurred in the form of rework, expansion or regulatory penalties. For
example: Suppose a factory manufactures 100 bikes in a year. By using
Six Sigma tools and methodologies, the efficiency of the processes is boosted
which makes the factory produce 120 bikes in a year. This means that the
additional cost of those 20 bikes can be avoided.
Example 2: Governments of many nations penalize
the organizations following inefficient behavior. Suppose, if an organization
does not pay the taxes on time, then it has to pay penalties. By embedding Six
Sigma methodologies, these processes can be made more efficient and thus, extra
costs can be avoided by the management.
3. Reduced Costs
Six Sigma projects significantly reduce the operational
costs of the firm. What could be a better example than Motorola? In the era of
pagers, Motorola ruled the market as it was able to offer pagers with
additional features and at a much lower price as compared to its competitors.
That was the power of Six Sigma.
4. Non-Monetary Benefits
Apart from cost reduction, there are several non-monetary
benefits which are also associated with firms. In most of the cases,
these benefits get converted into indirect monetary benefits. But, as these
benefits cannot be measured precisely, these are classified into
non-monetary. Some of the examples are:
- Increase in customer satisfaction
- Increase in employee satisfaction and retention
- Lowered attrition rate
- Improved customer loyalty
- Increase in brand value and reputation of the organization
As per quality management trends 2018, following figures say
the success story itself:
- Allied Signal- Cost savings exceeded $800M past 12 years. The company was later merged with Honeywell in1999.
- General Electric (GE) – The company has been delivering exceptional performance with increasing profit and growth every year. The cost savings exceeded $2 M.
- US Army- The Lean Six Sigma techniques implemented throughout the US Army have proved to be brilliant and continue to stay successful. The cost savings as anticipated by the leaders is expected to touch $2B this year.
The Lean Six
Sigma Green Belt and Black belters are trained in analyzing the data
which will help the top management and the strategic decision makers in
understanding the root cause of the problem and in developing
solutions.
The belters attain full confidence after Six Sigma training
which enables them to challenge the traditional approach with new and
innovative ideas and solutions. These professionals aim for lean six sigma
workflow optimization and act as change agents for the business. With
everything going streamlined, the organization can offer better service, better
quality and better delivery of products and services.
Read Also: Six
Sigma and Improving Healthcare
Winding Up
The Six Sigma boosts a company performance in all the
dimensions such as financial, strategic, planning etc which is clearly visible
after applying the Six Sigma methodologies. These benefits can be used by the
organizations to pitch their marketing and sales strategies. If the
organizations won’t start implementing Six Sigma, then they can’t be sure that
the competitors won’t implement too. And if Six Sigma is implemented by the
competitors first, then it may cost the organizations- their business and
ultimately will leave the organizations trailing long behind.
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