Table of Contents
|What is the concept of Six Sigma Finance?|
What is the concept of Six Sigma?
The introduction to six sigma
And then we would be talking about the normal distribution curve and the related values which would make you understand a little bit better,
Where the six sigma comes from, then the six sigma and its related importance in the field of finance how you could correct the boat, then various methodologies being used in this process,
The organization structure is created and the benefits that are reaped after implementation of six sigma in the business, then analytical tools being used under this.
Let’s move forward to our first content, slide, which is an introduction to six sigma what do you understand by sigma, you must have read in the statistic that sigma indicates deviation from your mean level.
Exactly that Here we are talking about, we are talking about deviation in terms of errors being occurred in terms of defects being occurred, if you are manufacturing any product, or if your processes are inefficient.
Six sigma works with the help of a set of techniques and tools, which would help in improving the overall quality, which would help in improving the overall quality and how it will do that, it will do that by eliminating by reducing the.
To make a continuous improvement six sigma concepts are covered under total quality management,
This ensures a continuous evaluation to figure out the customer-centred preferences, which then is worked with an integrated process to do the continuous improvement and in turn, increasing the quality of the product or the man,
Or the services being rendered, and thus bringing efficiency to your company to your business. The importance of six sigma is that it ensures 99.99966% of accuracy in the output.
If you are producing 1 million subprojects in a year, you are. This, the importance of six sigma is that it ensures 99.99966% of accuracy in the output.
If you are producing one million products in a year. You are allowed the six sigma would allow only 3.4 defects out there.
This is the accuracy level we are talking about when you are doing a business because the accuracy level would still help you in bringing quality to your product.
This would create consistency and this would satisfy the customer in terms it would bring a reputation for your company and would increase the revenue and the market share of your business.
Well, seeing that the importance of six sigma we can, we can figure out that these projects are led by individuals who are specially trained, who especially feel equipped with the application of this method.
Just have a look at the normal distribution curve from here you would get to know what to expect, is indicating,
We have read this before also that sigma indicates deviation from the main level, where mine was negative funds sigma to the positive one sigma is indicating the 68% of deviation.
In a similar way from if we are considering negative six sigma to positive six sigma, it is, it would be covering about 99.999666% of the accuracy level.
See, here you can have a look at the related values the defect status allowed, and the accuracy level. When we talked about one sigma level that is from a negative one to a positive one sigma. It allows about 268 68.27% of accuracy,
Why because 1 million products would be having a defect of about three lakh 17,300 parts per million.
Now after comparing one sigma to six sigma you can observe that six sigma allows only 3.4 defect parts per million.
As I already told it indicates that if you’re manufacturing 1 million of products. Only 3.4 defects would be there in the product.
Arrest all will be accurate rest all would be consistent and up to the quality marks. Fixing mind finance you must be thinking that six sigma is related to process improvement, it is related to bringing out efficiency in the business.
How it is related to finance, you can figure out various benefits, which it would be producing in the final speed,
How it helps in reducing the cost by improving the efficiency level one when you talk about finance you talk about two major aspects that are reducing the cost and maximizing the revenue,
Because the difference between both differences between the booth would bring out the profitability for you.
Six sigma helps in reducing the cost, it would help in figuring out what are the processes which are taking which are maximizing your cost level and they are inefficient,
They are nonvalue adding so it would work on removing those nonvalue adding processes to minimize the cost and does it would bring efficiency and would put an impact on your revenue levels that you can generate profit out there,
You can generate profit in a way also that you are meeting the customer’s demand you’re providing quality products.
Your customers are satisfied your customers would come back to you to purchase the products because they are dependent.
They are gaining that trust in your product now to make six sigma successful in financial management, it should be guided through a quantitative approach to measure
The KPIs rather than the qualitative approach. If we are talking in terms of finance, we figure out to have some key performance indicators that are the revenue the cost,
The profit and the market share the market value, all these things, we will try to implement our six sigma process, and then we will try to measure it in terms of quantity,
Like the numbers which we are gaining the increased percentage, the ratio, we will talk in these terms rather than talking in qualitative terms, then only the implementation of six sigma in financial terms would be useful.
It acts as a simulation and financial decisions. Six Sigma provides you with so much information about the causes the effects that are being occurred because of those causes.
You could make better financial decisions if you are all. If you are all well aware of aware about the defects being occurred defects being occurred in the process you are working on eliminating that,
You can take better financial decisions as to where to control the cost to how to increase the revenue, how to make the business profitable.
What is the main objective of Six Sigma?
It also reduces financial risk and helps you keep control over your spending. It reduces auditing invoicing and documentation errors.
As you know, six sigma works on quality improvement so quality could be improved in any terms in any terms that ensure that you are having control over the measures you are keeping track of whatever you are doing
That you would be able to realize how to, how to improve what you are doing, how to improve the overall process of how to improve to gain some percentage of revenue to increase the level of revenue in the business.
Now the six sigma methodology six sigma works on the methodology of demarking that are defining measuring analyzing improving and then keeping control over that.
What is defined means it denotes the identification of customers’ needs and defining the expectations and priorities, based on the quality of the product.
First of all, when you are implementing this process what is the what it does is it tried to identify what customers want in the market.
And are you able to do that? Are you able to meet that demand if you are not able to meet that demand? What variations are occurring?
It also involves the identification of a business objective, where your objective is matching with customers’ objective.
And if we are implementing six sigma, how to make, how to achieve that objective more of this.
It starts with defining all these measures and then we go to measure it denotes measuring of the existing process.
First, it has defined its objective to be achieved its expectations from the customer’s expectations from the business.
Now it measures the existing process, the existing process that is being used, and it tries to figure out whether the process is lacking, whether the process is lacking something which is raising the inefficiency level in the business.
Then it analyzes, analyzes, analysis parties with figuring out the causes of defects the causes of errors, why those causes are occurring, and if it’s the causes.
Just think of it if we can identify the causes we could work on the record work on that causes and try to remove that
Six Sigma follows the same manner, it figured out various causes of defects and then tries to eliminate that removing it and what steps to be taken to remove the defects.
To remove the defects and improve the performance of the system six sigma works on involving many steps to be followed to improve the performance consistently by removing the errors by removing the defects.
It helps in keeping control over the improvements are one. Once all these things, all these things have been done.
You also have to maintain that so in further when you are producing any other product when you are, again, rendering the service you don’t feel the same problem and again you don’t have to implement six sigma.
It works on ensuring control of maintaining the improvements throughout the level. Six sigma organization structure. There are various aspects we will see one by one.
The quality leader is that these are the executives of managers who guide the direction of six sigma professionals in the direction of organizations objective.
These are the people involved in the implementation of the six sigma project in your business. One there would be a quality leader,
That would be the manager or the top-level executives of the business who would define that see our organization want to achieve this, and this is the expectation of our customer.
Now, how you could implement six sigma to make us achieve this more efficiently to make our customers satisfied to improve the quality of products.
Quality leaders, what do they do, they specify their objectives to be achieved. Then some people are known as master black belt.
These are the six sigma professionals trained in. Six Sigma tools and techniques for process improvement.
They are having in-depth knowledge of what six sigma is what are the various processes involved, how to implement them in various scenarios.
Master black belt professionals are involved in taking strategic decisions. They are involved in making strategies to implement six sigma at various levels,
And then turning out to bring some efficiency in the business. We also are responsible for training the black belt and the green belt members, like Beth Israel, at a lower level than the master black belt.
These are the professional books, professional workers that lead the projects on quality improvement if any project is being carried out to maintain the quality to improve the quality level
These black belt people would lead that project they would train and they would train and provide coaching to the other team members because they are also having quite a relevant knowledge about six sigma’s implementation process.
Then there are greenbelt professionals who assist in completing the project by doing data analysis.
Then there are yellow belt professional who is provided on completion of the basic foundational course on six sigma
These are having a basic knowledge of six sigma, how it works, and how, what are the terms related to how to implement that they’re very basic, very foundational knowledge about it.
You can see like, it is going from top-down a the top-down approach, the one the quality leader sets the objective and there is a master black belt who is having in-depth knowledge as,
Who is responsible for controlling the overall process then there is a black belt, who works under the master black belts and they work on sorted projects,
And there are greenbelt professionals who have seen, who helps them who helps in assisting the project.
And there are yellow belt people who are somewhat involved because they know a basic foundation on this. This is how the organization structure if we are using six sigma, goes about.
Now the benefits of six sigma. Now you must have been aware of all the benefits so just let me give a gist of all these,
It helps in improving the quality of the product with minimal defects, right at all. It helps in removing the defects so if the defects are being removed there your process would be improved,
And thus your cycle time would be less. The cycle time is the time from the beginning to the end. That is from right from the suppliers to the customers.
Right from the product being manufactured to the product being sold in the market so that is the cycle time being involved.
It helps in reducing that cycle time how it would reduce because it would bring efficiency in the process, it would remove the nonvalue adding activities.
Does it would do to bring profit will bring productivity to the company and in turn would bring profitability,
It would help in increasing customer satisfaction because six sigma works on quality, and if the quality is the better customer would be satisfied.
And if the quality is consistent like you are consistently making that quality at that level of accuracy.
You would keep somewhat customer equity, which means that the customer would be attached to you for a longer period. Gain reputation for reliable product and services, obviously,
You would do your company or business would be gaining some reputation because you are providing a good quality product,
And thus you will gain some competitive advantage when it comes to your competitors you are performing better you are performing at a higher accuracy level.
Now the analytical tools used in six sigma. Some of the analytical tools used in six sigma are flowcharts run charts Pareto charts,
Check sheets, cause and effect diagram process control charts, and failure mode and effect analysis.
Flowcharts depict the whole process that involves right from the supplier to the customer. It helps in analyzing the process from input to output defining each stage involved.
A flowchart is created to figure out every activity involved in that process right from where you are obtaining the raw material for your business,
Till it is being manufactured and supplied to the customer, you are observing this chart is helping you observe all the processes so that you can analyze and figure out whether taking the most time. There it is.
There are other activities which are not, which are not adding much value to your process, and then there come the run charts,
These charts are used to observe the data patterns to figure out the trend. It does help in making predictions.
Run charts will be used to observe the data patterns from the previous data you can analyze some figures some patterns some trend line going.
And as you can take decisions and make predictions according to that. Run charts are being used in six sigma to help you identify the data patterns and figured out what could be done,
What could be done to make the predictions and what could be done according to those predictions to bring that efficiency?
And there are Pareto charts, these charts are based on the Pareto principle. What is Pareto’s principle says shows that about 80% of problems occur due to 20% of causes?
These charts help us to figure out if we are having 80% of defects, what are the main causes of that defect.
Working on working on those causes to remove those causes so that we can gain 80% of accuracy at the same time by removing only 20% of causes.
This works on that principle. For example, you can see like 80% of customer complaints are due to the bad quality of the product so we could work on improving the quality of the product.
At the same time, we would be able to satisfy about 80% of our customers. And there are checks sheets, check sheets help and systematically collect and store data,
How this is used, is done by using the tally or frequency distribution to keep a check on the data you are collecting and storing to help you out with that data and not get confused while you are,
While you are going through your process of manufacturing, then there is cause and effect diagram diagrams are used which shows various causes and related effects so that you can figure out which causes are,
Which causes are providing a strong effect on the product quality or the service, and then you can work on those causes
And try to remove that process control charts, these are the time sequence chart to keep control over the activities completion time in the project.
The process control charts depict you, what would be the time involved in doing one activity see the overall process is combined with many activities right
From the right from ordering the raw material to the procurement of raw material to put it in the manufacturing process which would be,
In turn, covering many dependent activities, and then getting to the packaging level the delivery the providing of services to the customers.
All these processes how much time should be involved in all those activities, and if the time. If the time is.
If the time is getting over from the standard level you must keep control over that. You must keep control to keep control over time
That you don’t miss out on the efficiency level of your process. Failure mode and effect analysis is the analysis process trying to figure out what would be the impact level for various failures.
If the failure is happening in the project if some errors are occurring what would be the impact if in practice getting very serious you must work on that failure first,
Guys, in this video, recovered. All about six sigma its importance its benefit, what does it means
And then we had a look at the various analytical tools used in it, the various methodologies, how statistically six sigma is related, and what are its benefits in the finance field.