Customs Clearance Agency and Process
Any Organization that is engaged in Imports or Exports would require the services of third party Customs Clearance Agent as well as a Freight Forwarder. While freight forward manages the transportation part of the exports and imports, customs clearance and the approval and co-ordination with the rest of the regulatory authorities to affect the imports […]
The Effect of Rising Oil Prices on the Indian Economy
The prices of oil have once again started going through the roof. In the past few years, the prices of oil have seen a steady downturn. This can be largely attributed to the supply gut that was created as a result of a new technology called “fracking.” The world has changed immensely since then. Geopolitical […]
What is Custo Brazil
Brazil is the most expensive country to live in Latin America. The real problem is that Brazil has become more expensive than most countries in Europe and maybe it is expensive when compared to America as well. The real problem is that people in these developed countries make three times the income of an average […]
Business Intelligence Architecture and Tools
Introduction Business intelligence is an important to ensure the following: Various decision-makers and analyst have a direct and un-interrupted access to data. The data been used across the organization should be non-disputable. Decision makers spend their time analyzing the data rather than collecting and formatting them. Decision makers are able to focus their energy in […]
Continuous Improvement and Business Process Re-Engineering
Polar opposite to the concept of Business Process Re-Engineering is the concept of continuous improvement. It was developed by the Japanese after World War-2. Whilst BPR relies on radical change, lean management relies on small incremental change. It stems from Japanese term called “Kaizen” which means small improvement. The concept relies on successive small improvements […]
The final step in the metrics is to measure the financial benefits that are accruing to the firm because of the Six Sigma project being undertaken. This is important and is also an area of concern. Most criticisms of Six Sigma say that the benefits that are presented in such analysis are incorrect and actually do not accrue to the firm. They claim that the true picture of the projects is often different.
However, to get the resources sanctioned from the finance department, it is essential that the Net Present Value (NPV) of the project be presented to them. The most common category of gains that accrue to an organization because of six sigma projects is as follows:
Increased Revenue: The most obvious benefits of the six sigma project would be an increase in revenue. This could be driven by many factors.
With more efficient processes, the firm may be able to produce goods more cheaply than others and hence sell more increasing revenues. Or with the help of six sigma projects, the firm could increase the quality of its products increasing customer loyalty and adding to revenues.
Avoided Costs: The firm can avoid many costs in the form of regulatory penalties, expansion costs etc, if its processes are efficient.
Let’s assume that a factory manufactures 100 cars. If by efficiently redesigning the processes, the factory can now manufacture 120 cars, then the fixed costs of manufacturing those 20 cars have been avoided. Governments sometimes penalise inefficient behaviour in companies.
For instance if the company does not pay its taxes on time, it has to pay penalties. Six sigma projects can make these processes efficient and avoid such costs for the management.
Reduced Costs: The operational costs of the firm can be drastically reduced with the help of six sigma projects. With the help of Six Sigma, Motorola was able to offer pagers which were much better in features than the competitors at a price which was much less than that of the competitors.
Non-Monetary Benefits: There are several non-monetary benefits that accrue to the firms as well. In many cases these translate into indirect monetary benefits. However since they cannot be precisely measured they must be called non-monetary. Common examples of such benefits are as follows:
Critics of six sigma say that analysts use fuzzy numbers and double counting to increase the NPV of the projects in question. However there is no doubt about the fact that efficiency has never harmed an organization.
Undertaking six sigma projects and completing them efficiently will only make the organization better off.
Your email address will not be published. Required fields are marked *
