Operational Benefits of Six Sigma
Six Sigma Project initiatives help the organization in a wide variety of ways and at very different levels. The immediate operational benefits that an organization derives as the result of implementing a Six Sigma project.
- Makes the Organization Systems Driven
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 with less than 3.4 defects per million, organizations need to be systems dependent. Thus Six Sigma mindset helps transform a people driven organization into a process driven one!
- Reduces Personnel Time and Skill Required
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 labor hours. Also, the requirement of skilled laborers is also reduced. Hence, both these factors combined have an effect of drastically reducing the labor bill of the organization.
- Reduces Wastage
Six Sigma projects realize a large amount of their financial value from their ability to eliminate or at least reduce wastage. Since the process is critically analyzed for costs and corresponding value addition, measures are taken to eliminate wastage to a large extent.
- Reduces Inventory Needs
An ancillary benefit of Six Sigma projects is that it creates a system that is much more efficient than the earlier one. Hence the organization can implement strategies like Just in Time Inventory practices and cut still more costs.
- Reduces Reworks and Defects
Organizations are plagued with defective processes that 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.
- Increases Customer Satisfaction
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.