How Internet of Things (IoT) Will Impact Our Daily Lives?
Internet of Things (IoT) is often thought of as being a high-tech concept. It is a common belief that such high tech concepts are only used by mega-corporations and that they have no place in the life of a common person. This is not the case as far as the Internet of Things (IoT) is […]
Components of Commercial Value Chain
Introduction The concept of the value chain was introduced by Michael Porter. The concept helps categories’ activities undertaken by enterprise to deliver a successful product to a customer. The concept since its introduction in 1980s has become a forefront in developing strategies around customer delight and commercial success. The value chain is series of activities […]
Finished Goods Inventory Classifications and Terminologies
While inventory classification of raw materials for Inventory Management purposes follows ABC Classification, Finished Goods inventory is classified under additional categories based on various attributes including sales volumes/patterns, functional attributes and operational requirements. Stock Category depending upon Sales Channels Finished Goods at the very basic level is manufactured and stocked separately depending upon the Business […]
Why Some Pharmaceutical Drugs are Very Expensive?
The price of drugs is going through the roof in America. This is also the case in many developing nations. In general, people are simply unable to afford healthcare if they do not have insurance. In developing nations, having insurance is not the norm. Hence, when patients are faced with high medical bills, some of […]
Creating a SIPOC Chart
The SIPOC Chart, being one of the fundamental documents of any process improvement project must be developed in such a manner that it is easy to understand. It must also be coherent with the logic inbuilt in the process. There is a method which has been described to ensure the proper development of the SIPOC […]
Six Sigma Project initiatives help the organization in a wide variety of ways and at very different levels. This article describes the immediate operational benefits that an organization derives as the result of implementing a Six Sigma project.
Six-Sigma efficiency is impossible to achieve if the mode of production used by the organization is craft production. To be efficient enough to run processes that have less than 3.4 defects per million, organizations need to be systems dependant. Thus Six Sigma mind set helps transform a people driven organization into a process driven one!
Six Sigma results in massive cost savings to the organization involved. These cost savings are highlighted by the fact that after a Six Sigma project any organization has considerably less requirement for labour hours. Also the requirement of skilled labourers is also reduced. Hence, both these factors combined have an effect of drastically reducing the labour bill of the organization.
Six Sigma projects realise a large amount of their financial value from their ability to eliminate or at least reduce wastage. Since the process is critically analysed for costs and corresponding value addition, measures are taken to eliminate wastage to a large extent.
An ancillary benefit of Six Sigma projects is that it creates a system which is much more efficient than the earlier one. Hence the organization can implement systems like Just In Time Inventory practices and cut still more costs.
Organizations are plagued with defective processes which result in the manufacturing of defective products. Each defect has costs attached. The costs include material, time, overheads and loss of reputation for the firm. Implementing Six Sigma projects often pays for itself in the long run by providing the financial benefits of near zero defects to the firm that implements it.
Customers do not like unreliable products or organizations. This can be verified by the fact that many companies that have implemented Six Sigma have not only found their costs reduced but their market share increased considerably. Hence, Six Sigma is also capable of positively impacting the marketing of the firm.
All of the sources mentioned above can be seen as the revenue model of the Six Sigma project. In the financial evaluation of a project, the revenue (cost reduction) from various sources must be considered before deciding whether the project is worth the effort or not. The idea is to find scenarios that the firm will be in with the project and without it.
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The Cost of Poorly Performing Processes – Need for Six Sigma
February 12, 2025
