Page 38 - Lean six sigma demystified

Chapter 1 What iS Lean Six Sigm a ? 17

only problem is that this elusive edge is constantly in peril from competitors
and the fickle perceptions of customers. You can never fully control this
aspect of your cash flow.
You do, however, have complete control of the processes and technology
inside the walls of your facility. Every process leaks cash. Even if you only make
one mistake in every 100 transactions—orders, bills, purchase orders, payments,
products, or services—that 1% error rate can add up to 6% to 12% or up to 18%
across the facility or business.
The Juran Institute has found that the cumulative cost of delays, mistakes,
rework, and scrap will add up to 25% to 40% of your total expenses (Fig. 1-3).
Don’t believe it’s that much? Spend a day tracking every mistake, glitch, and
customer complaint in your facility or department. Then calculate the cost of
finding and fixing each one. How much time, energy, and money does that take
away from doing your real business? What does it cost? If you weren’t fixing
the mistakes, what could you be doing instead? Multiply this by the number of
days in the week, month, or year. Ouch!
These errors aren’t your fault, and they’re not the fault of your people. It’s
your systems and processes that are at fault; they let people make mistakes that
could be prevented.

HINt Blame your processes, not your people.

Three Sigma costs of poor quality Four Sigma costs of poor quality
Cost of Cost of
waste and waste and
rework Expenses
Expenses rework

Profit
Profit

Five Sigma costs of poor quality Six Sigma costs of poor quality

Cost of
waste and
rework
Expenses Expenses Profit
Profit

FIGURE 1-3 • Three to Six Sigma costs of poor quality.