Improving Profitability
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Benchmark Your Deployment With Something
That is Easy to Measure: Money.
A truly successful Lean Sigma initiative starts with a focus on “Where is the money?”. The cost of goods, the cost of poor quality, the value-added and non-value added items in the process, the margins in the market; these and other indicators of where money is spent, saved and left uncounted must be identified and benchmarked. Though seen as improving quality and reducing waste, Lean and Six Sigma initiatives’ true focus is on improving the overall profitability of the organization.
Determining the cost of poor quality (COPQ) is a great place to start. The components of COPQ are internal failures (scrap, rework and lost capacity), external failures (field failures, warranty cost, complaints, returned material and lost business), appraisal (inspection, testing and audit) and prevention (quality planning, process control, improvement and training).
Attaching a price tag to the amount of waste in an organization can be startling. Understanding waste streams in the system can help identify areas that have direct bearing on profitability. By eliminating or dramatically reducing waste streams you will recognize significant savings and added competitive advantages.
For more on how SBTI approaches a deployment read: Integrated Lean Six Sigma – A Phased Approach(pdf)
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