Page 147 - Design for Six Sigma a Roadmap for Product Development

122 Chapter Four

This distinction is made to gain momentum before embarking on
more challenging DFSS projects and to provide projects to the black
belts that is paced with the training. Training projects offer data to
exercise the plethora of DFSS tools available in the DFSS algorithm
(Chap. 5).

4.6 Six Sigma Project Financial
Management
In general, DFSS project financial savings can be categorized as hard or
soft savings and are mutually calculated or assessed by the black belt and
the assigned financial analyst (FA) to the project. The FA assigned to a
DFSS team should act as the lead in quantifying the savings related to
the project “actions” at the initiation and closure phases, assist in identi-
fication of “hidden factory” savings, support the black belt (BB) on an
ongoing basis, and if financial information is required from areas outside
the BB’s area of expertise, the FA should direct the BB to the appropriate
contacts, follow up, and ensure that the BB receives the appropriate data.
The analyst, at project closure, should ensure that the appropriate offices
concur with the savings. This primarily affects manufacturing costs, engi-
neering expense, and nonrevenue items for rejects not directly led by
black belts from those organizations. In essence, the analyst needs to pro-
vide more than an audit function.
“Hard savings” are defined as measurable savings associated with
improvements in repairs, rework, scrap, inspection, material cost, war-
ranty, labor savings (achievable or collectable through work rebal-
ances), revenue associated with reductions in customer dissatisfaction,
cash flow savings (i.e., inventory), and other values of lost customer
satisfaction. Hard savings are calculated against present operating
levels, not against a budget or a plan. They represent the bottom-line
saving that directly affects the company’s income statement and cash
flow and are the result of measurable product, service, and process
improvements. The effect on company financial statements will be
determined off line by the appropriate company office.
“Soft” savings are less direct in nature and include projects that
open plant floor space (as a side benefit), which may allow for the loca-
tion of future operations; projects that reduce vehicle weight, which
may enable other design actions to delete expensive lightweight mate-
rials; and cost avoidance. Cost avoidance is usually confused with cost
savings; for example, employing robot welding instead of manual weld-
ing is an avoidance of costs, whereas reducing scrap is avoidance
rather than saving.
The finance analyst should work with the black belt to assess the
projected annual financial savings on the basis of the information