How Six Sigma Costs Create Savings
There are many components of Six Sigma costs. When a manufacturer is trying to implement improvements in their quality, it may be necessary to invest a lot of capital in new machinery, buildings, and people to affect change. The startup may be costly at the beginning, but over time, the business will see a savings resulting from a more streamlined production. Many benefits that companies see are less waste and retention of customers. Eventually, a great profit will be seen from the changes that were made.
Companies do not realize the amount of money that is wasted on poor quality products. If customers feel that the quality of certain products and services do not meet their standards, they will not purchase the items. You can end up with excessive inventory that you may end up selling for less than what it took to make it. Improvements in how items are made through the Six Sigma Process will change this.
There is a loss of time that can never be recouped when production must be shut down for damaged goods or faulty equipment. You still have to pay employees whether or not the items that are made are considered decent. This eats away at your budget. You may end up paying for overtime to meet a deadline or to set things back up.
You can eventually lose customers if you cannot make your items in the deadline that you promised. If the quality is not up to their standards, they can also decide to no longer buy your items and switch to one of your competitors. It is easier to keep an existing customer than to try and find a new one. If you make too many promises but do not make good on them, customers will undoubtedly start to walk away, one by one.
When you manufacture goods, you have scrap costs that are built into your budget. If many of the items you make end up being scrapped, your expenses will raise. You will also need to buy more items from your supplier. If they are necessary right away, your shipping costs will also raise due to rushed shipments.
What you do not want to do is to go over your budget. In doing so, your expenses get out of hand and you cannot control them. There is no way to determine how you can make a profit. You will use money that is allocated for another project or another bill to correct problems in manufacturing. If this deadly snowballing process continues, executives and stockholders will demand answers.
To be successful in Six Sigma, you will need to retrain your staff to put quality first. You may be forced to buy new equipment, computers, electronics, even a new building. You might need to consult with advisers and professionals to get your company back on track. However, doing so will allow you to reap savings from investments made.
There are many costs that are associated with Six Sigma when manufacturers intend to improve their quality standards. However, you may already be experiencing many of these costs from poor workmanship, labor expenses, loss of customers, loss of time, and scrap expenses. Once your program is in place, you will see a substantial savings as you will no longer go over budget and slowly become more productive.
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