The benefits of Six Sigma include:
- Focus on what the customer really wants and deliver it cost effectively
- Focus on improving business processes to benchmark
- Projects are fully aligned with achieving the business plan
- Deliver stepwise improvements as opposed to incremental improvements
- Standardised approach to managing processes and projects
Key Business Metrics that Six Sigma are aligned to include:
- Eliminate customer returns and product recalls
- Reduce cost of poor quality (scrap and rework cost)
- Reduce cost of quality (total cost of managing scrap, rework, customer returns, product recalls, inspection)
- Increase knowledge and skillset of employees to deliver results systematically
- Reduce cost per product/service provided
From a cost perspective, Table 1 is a summary of an analysis completed by Charles Waxer from isixsigma to confirm actual revenue savings from the leading organisations of six sigma. He has found that the financial benefits from 5 companies range from 1.2% to 4.5% revenue savings. Typically, if an organisation has revenue of €30 million, this can then result in a range of €360,000 to €1.35 million euro savings annually.
|
Company Name
|
Years
|
Revenue $billion
|
Savings
$ billion
|
% Revenue Savings
|
|
Motorola
|
1986-2001
|
356.9 (e)
|
16
|
4.5
|
|
AlliedSignal
|
1998
|
15.1
|
0.5
|
3.3
|
|
Honeywell
|
1998-2000
|
72.3
|
1.8
|
2.4
|
|
GE
|
1996 -1999
|
382.1
|
4.4
|
1.2
|
|
Ford
|
2000-2002
|
43.9
|
1
|
2.3
|
Table 1 % Revenue Savings for Leading Six Sigma Organisations Source: Six Sigma Costs and Savings Charles Waxer at http://www.isixsigma.com/library/content/c020729a.asp
From this analysis, it is also evident that yielding results from six sigma deployment takes time. Companies will see pockets of improvements on a yearly basis, but true deployment may take 5 years with management commitment.