iSixSigma

Financial Analysis

Reap a Return on Investment

Return on investment (ROI) measures/evaluates an investment. It can be thought of in general terms as: (gain from investment) (cost of investment) / cost of investment The specifics of a calculation will vary depending upon the type of investment being assessed. The best ROI references on iSixSigma can be found at the following links: Ask…

Calculating ROI to Realize Project Value

Businesses are in business to make money. But calculating the true value of any project (Lean Six Sigma or otherwise) with respect to its impact on margin has always been challenging, mainly due to the ambiguity of turning notions into dollar values. For instance, it is clear that training employees will improve expertise and productivity,…

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Monitoring Return on Investment for Internet Initiatives

During the past four years the Internet channel has seen the migration from an exploratory revolution of new functionality to creating a viable profitable business. It is no longer feasible to place additional technological enhancements on the web without considering the payback model in which returns and/or cost savings can be generated. This young Internet…

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Managing COPQ by Analyzing and Optimizing Thresholds

At the core of Six Sigma lies the continuous drive to reduce the cost of poor quality (COPQ), and it often takes center stage when making the business case for continuous improvement projects. Its components include aspects of operations such as scrap, rework and costly customer returns. In the wake of the current global economic…

Cost of Quality: Not Only Failure Costs

When calculating the business case for a Six Sigma project, the cost of poor quality (COPQ), which is the cost caused through producing defects, is a commonly used concept. Within the total amount of quality cost, however, COPQ represents only a certain proportion. Costs do not result from only producing and fixing failures; a high…

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Involve Finance in Project Selection, Not Just Validation

Most companies using Six Sigma have grown used to including financial staff at the back-end of project completion to validate the project results. But the most savvy organizations are learning to get their finance department involved up front, helping to pick what projects to work on in the first place. Here is what can happen…

Green Belt, Black Belt, Now the Six Sigma ‘Money Belt’

In addition to the more familiar Green Belt and Black Belt, some Six Sigma organizations have defined another role – a “Money Belt.” The function of the Money Belt is to provide an independent and objective evaluation of the financial benefits projections and the actual results achieved by Six Sigma projects. Chosen by the chief…

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How to Explain Six Sigma by Using the Profit Triangle

Once a person becomes a Master Black Belt or deployment leader within an organization, they may spend a lot of time explaining to other people what Six Sigma is and how it can help the company. They may have to convince many skeptical people, who always see the deployment costs but not the benefits. Two…

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Involving Finance in Six Sigma – Do It Early and Fully

It is common to hear great claims of monetary benefits from various improvement initiatives. But how confident can a company be that those “benefits” – both cost saving and generation of additional revenue – actually impacted the bottom line? BHP Billiton Base Metals considered this question and found an answer through the involvement of its finance department…

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Hard and Soft Savings: What Counts Can Be Counted

Six Sigma is all about what can be quantified and measured. So it is not surprising that organizations which utilize Six Sigma often prefer to measure success in terms of hard savings – dollars to the bottom line now – and are less impressed with soft savings – the possibility of dollars to the bottom line in the…

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