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Training Lean Six Sigma

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Enterprise Cost Reduction



Companies should conduct a thorough check of the costs involved, in the same way that they view revenue generation and market expansion.

Enterprise cost reduction is a wider approach towards controlling the company's expenses and leading the organization towards improvement. It does not only imply focusing on specific operational processes. Enterprise cost reduction addresses a number of key cost-aspects that span the enterprise, such as the business configuration, organizational structure and design, business and process complexity, external expenses and the benefits.

Addressing any one of these cost aspects produces an impressive cost flow understanding. Cost reduction offers the opportunity to examine all the business areas and identify the savings, both within and between those areas. These aspects or 'drivers' determine how far the organization can stretch to reduce costs, without it having a negative impact on the organization's culture and strategy and targets.

The cost reduction achieved in one area of the business through such a program can be identified within another area. There will be a visible shift in the amount and nature of work in the applied area of the business.

External Spending

It is essential to identify the large and small costs incurred by the business. The savings on the purchase of the raw material and on the business trips add up to a considerable amount of money. This could be utilized for the promotional campaigns of the product. This in turn affects the sales and again the business turnover. Improved product sourcing and the controlled expenses can generate dramatic cost reduction.

It pays to investigate the raw materials being purchased and the source. The company must indulge in the products of more than one supplier, to ensure the availability of reasonably priced and quality goods, whenever required.

Most companies spend a lot of time focusing on improvements in sales only. Their most common indulgence is to negotiate with buyers for a greater unit price.

Any organization can benefit from dramatic cost savings by indulging in the Enterprise cost reduction effort. Cost reduction needs a strategic and methodical approach. Six sigma and other similar techniques make important contributions to the business, particularly by helping them to adapt to and monitor the effects of change that is necessary. The Enterprise cost reduction concept ensures fundamental and sustainable improvement to the company. Six Sigma helps the enterprise and its employees equally and can be understood as a vision, a philosophy, a symbol, a metric, a goal and a profitable methodology.
Training Lean Six Sigma
The above question ?should six sigma metrics be different from other industry metrics? arises from surprising sources. If you look at any quality management tool, be it ISO, Lean Management Techniques or even cGMP (current Good Manufacturing Practice, the industry standard for pharmaceutical and healthcare product manufacturers), what meets the eye is the parity of all these tools. The foundation of any quality tool, in its simplest form, is total customer satisfaction.

Six Sigma Versus cGMP

No one can over emphasize the importance of adhering to quality manufacturing procedures when it comes to the manufacturing of sterile medicinal products (medicines manufactured in sterile conditions for admission directly into the blood stream). The implication of this is that nothing short of the best is accepted in terms of quality.

cGMP stresses standardization and compliance to processes verified through qualitative and analytical metrics. The analytical tools are scientifically evolved and are validated through market regulators which are also statutory bodies in their respective countries. Unlike Six Sigma, quantitative tools such as the ones provided by statistics don't find much application here. Even customer concerns are reflected by directives set by regulatory bodies.

If Six Sigma is any different, it is only in how it deals with various aspects of doing business. It does not vary in the goal or end result. Fundamental metrics like DPMO speak to customer satisfaction levels. In the pharmaceutical industry, as opposed to other manufacturing industries, a totally different set of metrics is used. Product efficacies are measured by curative qualities, absence offside effects.

The Big Question

Should metrics be different for different industries? To a certain extent, yes - in certain areas you can accept different metrics. As far as the minimizing of process variation is concerned, the goal should guide the tools. But having said that, is there still a need for different metrics?

Using The Wisdom; The Best Judge

As a wise man said, ?the end result justifies the means?, it should not bother anyone who wants to use a specific set tools for measuring certain process criteria. Six Sigma does not restrict the use of differing implementation procedures. As it is evolved specifically to each project with different criteria being used, measurement tools invariably vary within the framework of defined goals. Moreover, choosing a specific metric from among the available choices is an act akin to adopting an outside metric.

General Rules That Govern the Choice of Metrics

Metrics are chosen specifically for each activity or processes based on various considerations. However, here are a set of general rules that applies to choice of metrics.

1.Decision making processes critically depend on the choice of metric

2.Contribution to reduction in errors

3.Value addition through ability to categorize measurement for easy interpretation

4.Contribution of each individual and a set of metrics geared towards aligning customer requirements and management vision with processes.

Is it the metric or the end result that you should be more concerned with? It is how you use a tool that is important rather than what you use.
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Tony Jacowski has sinced written about articles on various topics from University, Six Sigma and Information Technology. Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution's Six Sigma Online offers online and certification classes for lean six sigm. Tony Jacowski's top article generates over 90500 views. to your Favourites.
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