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How 6 sigma reduces cost?

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  • #53116

    Goldy
    Participant

    Dear All,I am relatively new to 6 sigma.I have read that using 6sigma methodology leds to reduction in cost.My contention is that if we are focusing on improving the quality of a product/service, then time involved will increase which in-turn leds to increased man-power/operating cost.So, this seems to be opposite to which i have read.Feel glad if anyone can explain this.

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    #188131

    Mikel
    Member

    Haven’t read much, have you? Sounds more like you have ben
    listening to opinions.

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    #188133

    Vallee
    Participant

    So apply the process to your problem (your question). By not spending time, money, and resources on researching the
    question, defining the scope, measuring and analyzing so that you
    can get a good answer that can be sustained and validated with
    facts, any additional time spent on this question will waste your
    time, resources, and whoever is paying you to get this answer (if
    any). It will also develop scope creep and waste other people’s time and
    resources. The end product will not be defined and your will have
    quality issues. So you did not spend focused time on the right
    issue which cost you and me more or less money than doing it
    right?garbage in- garbage out

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    #188147

    Rao
    Participant

    Goldy,Think it optimal.
    There are 2 sorts of quality cost. Have their slopes in x-cordinate=QUALITY and y-cordinate=COST:
    1) Cost of service/output defect: low cost if high quality (less scrap), a curve of negative slope,
    2) Cost of quality management: high cost if high quality (more control, reporting…), a curve of positive slope.
    Their intersection defines the optimal (lowest) cost.

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    #188149

    Mikel
    Member

    Nonsense

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    #188151

    Goldy
    Participant

    Thanks everyone who have responded to my query.

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    #188152

    Don Strayer
    Participant

    Philip Crosby’s premise in his book Quality is Free is that the reduction in COPQ (Cost of Poor Quality) nearly always exceeds the cost of quality management.  But that’s only if you do it right.  Rely on inspection, testing, and scrapping or reworking defective outputs and high quality is expensive.  Prevent defects from occurring in the first place and the quality management effort tends toward “free”.  Since high quality increases value to the customer we can even say that it pays.  Six sigma is is a well defined and proven methodology for reducing and preventing defects.  So it doesn’t cost.  It pays.  If you do it right.

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    #188158

    MBBinWI
    Participant

    There are many more than just those two costs of quality (or poor quality).  Think of the costs incurred by lost customers due to dissatisfaction with prior purchase, just to name one.
    In reality, it seldom costs anymore to design the item to have high robustness to the variation.  It takes a different mindset to design for six sigma, and actually costs less once you have transfer functions for system behavior based on physics/chemistry/electronics/etc.

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    #188211

    Bode
    Participant

    Several good points have been made in the other posts. I want to take a slightly different approach.  Since you are new to Six Sigma, I’m not sure if you were asking specifically about six sigma or if you were speaking generally and therefore a brief discussion of Lean (which is often paired with six sigma) might be appropriate. 
    Lean is about eliminating wasteful steps.  If I have a process that takes 50 steps and each step yields a  quality product 99% of the time then my overall yield is 0.99 ^50 or 61% so I’m losing 39% of my product to poor quality.  If I lean the process and eliminate half the steps (not an uncommon result), then my overall yield is 0.99^25 or 78%.  So my quality has gone up.   I’m scrapping half as much material and I’ve saved the labor asssociated with those 25 eliminated steps.  

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    #188213

    Carol Stotts
    Participant

    Looking at the recommendations you have already received, I have one more for you to keep in mind.  Put quality into a product in direct relationship to the preceived value the customer places on it.  Creating a HIGH quality product that the customer is not willing to pay for (it over performs for their needs) is indeed creating cost without value.

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    #188214

    Kluttz
    Member

    Rao’s post explains perfectly why most Toyotas cost more than $250k – they spend a lot of time on quality, therefore their cars are expensive. 
    It also explains why Land Rovers are so cheap.  Since Land Rover is the lowest rated brand for quality (by JD Power) most of their cars cost less than $5k.

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    #188216

    TonyBo
    Member

    Your contention is wrong. 
    This is a relatively simple concept to grasp…be more efficient, waste less time…will yield you cost savings, capacity and possibly more revenue. 

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    #188217

    n patel
    Participant

    Not really. The COPQ (Cost of Poor Quality) which
    includes time & material wasted, as well as the
    product/service that has to be reworked, bites into
    about 30% of the turnover. Doing things right, the
    first time, & on time; by analyzing process data &
    taking focussed action is the most cost effective &
    value adding activity in any business.

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    #188219

    Mike Carnell
    Participant

    Goldy,
    The first thing you need to do is understand what you are talking about. If you read a book called Relevance Lost it will be a good start.
    I am not sure why anyone wants to throw SS into the same bucket as a lot of other quality initiatives. It has always seemed to be more Process Engineering for me. Regardless of what you choose to call it SS will not just automatically make money fall on the ground. The money you will save is a function of the projects you choose to work on. If you get crap projects that are worth $100 each then you will lose money. How you pick projects should be a function of what you want to accomplish.
    If you look at the projects (Best new Deployment) that are listed in the iSixSigma Live Awards in Miami the minimum ROI was 5:1. How many capital projects did you do this last year that yeilded 5:1? Now if the range of companies in the finals can do it you should be asking yourself 1. if I am not getting at least that what am I doing wrong 2. if I am getting that why did I ask this question? That could be your first project – attend the conference and ask these guys first hand how to do it. There is even a government deployment – Erie County that figured it out. They do have a guy named Jojn Lupiensky up to help which probably makes a difference. EMCON – an automotive supplier in the recession figured it out.
    A simple guideline. If you are capacity constrained you run throughput projects (I know all the Lean guys think this is their territory but it isn’t – if you don’t believe it I can give you adata set on a bottleneck and you can 5S this thing for the next 10 years and won’t figure it out). If you are not capacity constrained you run a mix of throughput and cost reduction. Nothing bad happens if you increase throughput. Even when you are not capacity constrained you can increse material velocity and increase turns.
    The most difficult part in the whole deal is to get accounting to understand how to value a throughput project. They pretend to understand cost which they generally don’t because they have it so mired in allocated costs. If you get into a decent ABC system you will see how much easier project selection becomes.
    This really isn’t all that complicated. You need to take the time to understand the business. There a lot of BB that understand technology and have no clue about the business.
    BTW your hypothesis on incresed quality and increased cost – that puts your thinking about 15 years behind current thinking.
    Just my opinion.

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