Every step in the Six Sigma methodology pursues a solution that improves the organization’s processes and the quality of its product or service. In some projects, the DMAIC methodology will clearly lead to one solution that stands above the rest as being the most beneficial to the process. However, in other instances project teams will arrive at the improve stage with several different proposed solutions. Determining the best possible solution is critical to quality efforts.
As with all other steps in the Six Sigma methodology, choosing the best of several possible solutions is an objective and data-driven procedure. Potential solutions can be compared based on the criteria determined in the define stage or based on the financial impact of each project.
During the define stage the project team invested time and energy in painstakingly identifying the measures of success and the anticipated benefits of implementing the project. This work becomes critical later in the process when trying to decide between several good solutions.
The information from the define stage that will be used to choose between potential projects includes the business needs addressed by the project and the deliverables.
- Business needs – These solve a customer problem and they are directly linked with the organization’s strategic goals. These metrics can include financial benefit, reduced cycle time, and decreasing the defects per million opportunities.
- Deliverables – These include all of the measurable benefits from implementing the project and focus on how the organization defines success and project completion.
The rigors of the Six Sigma process require that the benefits of the projects under consideration be placed in a prioritization matrix to ensure that the evaluation is conducted as objectively as possible. By using the full analytical method approach to applying the prioritization matrix, the proposed solutions can be compared to one another by using the business needs and the deliverables that were identified in the define stage. The degree to which the proposed solution meets the business needs of the organization and the deliverables that it requires can then be assigned a numeric score to make quantitative evaluation possible.
Financial Evaluation
Another form using quantitative information to choose between different proposed solutions is through financial analysis. This financial analysis of proposed projects requires an understanding of the projects from a cost accounting perspective. The profitability of a particular solution can be calculated by determining the price per unit subtracting the variable cost per unit, multiplying the result by the volume and subtracting the fixed cost. The result is a quantifiable financial value of each project that can be easily obtained and compared to other projects.
This financial analysis can be refined even further by adjusting the project profitability projections for the time value of money. Because the financial benefits of a proposed project may arrive at increments during different stages of the project rather than lump sums at the beginning or the end of a project it is helpful to calculate the project’s net present value (NPV). This analysis allows the organization to calculate the current benefit of the project over a particular period of time.
The thorough and meticulous nature of the Six Sigma process requires that the characteristics of the best potential solution be identified early in the planning process to prevent the project team from settling for a lesser solution. The objective and data-based tools of Six Sigma ensure that a solution is selected based on quantitative measures rather than personal preference and guesswork.
