In the manufacturing sector, any methodology that is geared towards reducing product failures and service breakdowns is one that should be taken seriously. Quality issues can make or break a company’s reputation and influence repeat customer purchases. Among automobile manufacturers, quality is particularly important since vehicle purchases represent a significant financial commitment for the customer. In addition, quality can influence passenger safety, dramatically raising the stakes of manufacturing defects. Quality can also significantly affect overall consumer perception of particular vehicle makers.
The Six Sigma Methodology
Six Sigma is a production methodology that focuses on increasing quality and decreasing costs. Six Sigma takes its name from the Greek letter, sigma. Sigma is used to designate standard deviation, which is a measure of variation within a process. Lower sigma values mean a greater possibility of defects, and higher sigma values mean a smaller possibility of defects within a process. The goal of Six Sigma is to produce goods at six standard deviations, which means making only 3.4 mistakes per million opportunities. Achieving Six Sigma means that goods are produced without defects 99.99966 percent of the time. While this goal might seem impossible, there are companies out there who are consistently achieving Six Sigma quality.
Benefits of Implementing Six Sigma
The automotive industry was an early adopter of Six Sigma and continues to lead the way in showing other manufacturers the difference that Six Sigma can make. Companies like Toyota and Ford have shown that Six Sigma can dramatically cut costs and reduce mistakes all of which are benefits for manufacturers and their staff accountants as this frees up finances for other areas of business necessity. They have demonstrated that improved quality saves money. Fewer discarded products, fewer warranty repairs and replacements, and much higher rates of customer satisfaction and retention has resulted in increased profits for both companies.
Incorporating Six Sigma training and encouraging Six Sigma certification among employees improves the way they perform their jobs and helps them to maintain a higher performance level for years to come. Having employees play a key role in overall product quality builds pride in their work and boosts morale, which in turn also results in profit gains. It is here where staff accountants or Certified Public Accountants (CPA) take notice.
Cost, Quality, and Six Sigma
Many companies think that improving quality results in increased costs. They view quality and profitability as trade-offs, where one negatively impacts the other. Their processes focus on striking a balance between maximizing profits and achieving an acceptable level of quality.
Companies like Toyota and General Electric that implement quality methodologies like Six Sigma understand that quality drives profitability. Both of these companies have seen a tremendous cost savings as a result of their Six Sigma implementation. They see the benefit in spending the time and money to provide Six Sigma training to their employees and they clearly see the link between the quality of their products and their reputation. Manufacturers who fail to implement a robust quality assurance program are taking a significant risk with their reputation and customer satisfaction. Negative customer experiences can have a significant impact on sales and profitability, and some companies are never able to fully restore their reputation.
Implementing a quality assurance program, such as the Six Sigma methodology, is a smart move for manufacturers as well as having the executive accountants track savings. Though tracking savings is not an integral aspect of every manufacturer’s processes, it is the focus of many CPA classes that manufacturers require their accountants to attend. The main goal of this approach is reaching level of quality and reliability that will exceed the expectations of today’s demanding customer. As the automotive industry has shown, there is a strong correlation between quality, customer satisfaction, and profitability. Six Sigma can provide long term benefits to both consumers and the companies themselves.
