Lean Six Sigma Return on Investment (ROI)
Lean Six Sigma presents a very high, and highly specific, benchmark for the achievement of quality. For some, the benefit of achieving Six Sigma performance represents an existential requirement. For all organizations, the process leading to the achievement of Six Sigma is itself a set of exercises in assuring excellence. While specifying a financial return on investment, the return is pervasive reaching every facet of any operation.
Lean Six Sigma combines two very powerful improvement initiatives into one that is “greater than the sum of its parts.”
Lean methodologies seek to create and increase customer value by minimizing or eliminating waste, which is defined as any activity not required to complete a process.
Six Sigma reduces defects by solving problems most effectively. Its goal and its name are derived from a statistical conception of a process that only produces 3.4 defects per million instances. That means the process is successful 99.99966% of the time. An impressive goal.
Put the two together and you find yourself increasing customer value by minimizing waste and solving problems.
Benefits of Lean Six Sigma
These should be considered simple and direct solutions to sometimes very complex problems.
For example, there are only two ways to increase profit. One is to increase revenue production. The other is to reduce costs. Simple enough concept. Lean Six Sigma helps companies accomplish both while improving efficiency and effectiveness and helping to further develop people and their skills.
The processes involved in Lean Six Sigma are simple enough that any company, no matter how small or large, can incorporate them into their business. The components of Lean Six Sigma are:
Define – Define the problem
Measure – To quantify the problem and its impact
Analyze – to determine the cause of the problem
Improve – Create, implement, and verify the results of the solution
Control – Provide ongoing maintenance and support for the solution
Many companies leverage learning Lean Six Sigma as an excellent vehicle for fostering improvement at every level of their organization. This leverages the increased process familiarity of employees who are closest to problems in helping to identify and resolve them. Some companies determine to win quality-focused awards such as The Malcolm Baldrige Award for Excellence as a vehicle for imbuing greater application of best practices to achieve higher levels of quality in their organization.
Baldrige advertises itself as “America’s Best Investment” suggesting there is a high return on investment available here, and indeed there is.
Lean Six Sigma Return on Investment
ROI measures how much you gain from making any investment. Improvements in quality are often difficult to quantify as they can be somewhat subjective.
Instead we focus on applying Lean Six Sigma processes to specific projects, measuring the subject of the project before and after Lean Six Sigma implementation. Great care should be exercised when selecting a project for the evaluation of Lean Six Sigma ROI. Often, failure can be caused simply by poor project selection.
Select a product or process that produces revenue and incurs costs. Determine how it could be improved, and then apply Lean Six Sigma processes to a specific increase in revenue and decrease in costs. This will provide the most useful evaluation of the ROI and value of the application of Lean Six Sigma.
Then multiply that by the sheer number of products and processes in your organization that would benefit from Lean Six Sigma processes. The potential ROI is tremendous.
Begin Your Lean Six Sigma Journey
New Horizons Computer Learning Centers provides a selection of courses leading to certification in Lean Six Sigma processes. Talk to your Career Counselor about the opportunities awaiting anyone who masters Lean Six Sigma.