Page 236 - Lean six sigma demystified

214 Lean Six Sigma DemystifieD

defects and fallout. Mistake-proof the user interfaces to ensure the correct deci-
sions are made automatically at each step of the process.
Although most software developers rely on testing and debugging to exter-
minate the bugs, delivered systems invariably reject transactions they should
accept. The cost of fixing these rejects is often hidden and ridiculously expen-
sive. Most people think these bugs infest the entire system, but they’re actually
clustered just in a few hives.
Here’s the good news. I’ve discovered a simple, yet highly effective and eco-
nomical way to solve these problems, but it requires measurement, improve-
ment, and process—three things that software engineers loathe.

Transactional Six Sigma

Although most traditional improvement methods focus on manufacturing, the
value in the marketplace has shifted away from manufacturing to transactions.
Airline reservation systems are more valuable than the airlines themselves. To
maximize the benefit of Transactional Six Sigma, you’ll want to find ways to
use Six Sigma on your transaction processes and errors.

Transaction Costs

Larry Downes and Chunka Mui identified six types of transaction costs in their
book, Unleashing the Killer App, to which I’ll add one.

1. Search costs. How much does it cost you in time and money to find new
suppliers and customers?
2. Information costs. Buyers have to learn about your product or service. Sell-

ers have to identify and qualify the customer.
3. Bargaining costs. How much does it cost to negotiate the terms of a sale?
For a CD, not much; for a fleet of airplanes, probably much more.
4. Decision costs. How much does it cost in time and money to make the
decision to buy one thing or another? How many sign-offs are required?
Meetings? How many alternatives need to be evaluated?

5. Policing costs. What does it cost to ensure the terms of sale and service
are met?

6. Enforcement costs. What does it cost to resolve unmet terms?
7. IT costs. And I’ll add the Information Technologies’ cost of ordering, invoic-
ing, purchasing, and payment processing.