Ask yourself, do you want to deliver faster Six Sigma projects that don’t overstep your budgeting parameters? Then it’s essential for you to outline a detailed plan in your project charter. Your plan will act as your guide through the rough waters of process improvement.

Key performance indicators are highly useful tools here, enabling you to identify precisely which actions benefit you as a company. As such, there are numerous KPIs to help you on your Six Sigma journey, one of which we look at today: Project Cost Variance (PCV). Join us and learn how you can use PCV to deliver Six Sigma projects on time and on budget.

Stay Focused with Project Cost Variance

It’s important to know that Six Sigma relies on the measurement and analysis of process issues. Controlling problems allows you to create solutions that prevent them from recurring, benefitting the business in the long- and short-term. Without a strong plan to follow, you’re likely to lose sight of your goals and business needs. Losing track of your priorities will only send you veering off budget towards slow delivery times. Moreover, this doesn’t just impact you, but also your customers, who depend on you for quality products and services. If customers don’t see any value in your services, or if they see you as unreliable, they’ll take their business elsewhere. For you, this is detrimental, but Six Sigma can help. First, however, we must define cost variance.

What is a Cost Variance?

A cost variance is the amount by which your project exceeds or falls under your maximum budget. Cost variance is one of two key areas that you should monitor throughout your project, the other being schedule variance, i.e., how early or late you are to meet project deadlines. You can use the following equations to calculate both cost and schedule variance:

• Cost Variance = BCWP (budgeted cost of work performed) – ACWP (actual cost of work performed)
• Schedule Variance = BCWP – BCWS (budgeted cost of work scheduled)

What is Project Cost Variance?

PCV is the process of evaluating your project’s financial performance. You should compare the budget you agreed before starting the project with the actual amount you spend. You can calculate PCV by finding the difference between BCWP and ACWP. Your ideal project cost variance should be when your BCWP equals the same as your ACWP. Your project cost variance provides otherwise unavailable insight into your finances throughout the scope of your project. Using it to your advantage allows you to monitor when and where you breach your budget. When you use PCV together with DMAIC, you can actively control your finances, targeting areas for improvement, like overspending. The result is a more focused, efficient, and successful project.

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Artificial Intelligence (AI) has been a game-changer in several industries, and the education sector is no exception. AI can help businesses in the education sector provide better products and services, ultimately benefiting students and educators alike. 

In this article, we will discuss the impact of AI on education and how businesses can leverage this technology to deliver greater value with their products and services. We aim to provide insights that can help businesses stay ahead of the curve and meet the evolving needs of their customers by exploring the potential of AI in education.

Disrupting Education: How Businesses Can Harness the Power of AI

Artificial Intelligence (AI) has emerged as a disruptive force in the education sector, transforming the way students learn and educators teach. AI has the potential to revolutionize the traditional education system and improve learning outcomes by delivering personalized and adaptive learning experiences. As businesses in the education sector, it is crucial to understand the impact of AI and how it can be leveraged to provide better products and services.

Personalized Learning

Businesses can create powerful AI algorithms to understand and analyze learning styles, preferences, and performance to generate content and recommendations that are highly personalized. This approach ensures that students learn at their own pace, which can significantly improve learning outcomes. Personalized learning also helps educators tailor their teaching methods to individual students, allowing them to identify and address learning gaps more effectively.

Learning Evaluation

AI can also help businesses in the education sector to enhance their learning evaluation processes. AI-powered tools can generate high-quality educational materials, including quizzes, exams, and study materials, reducing the time and resources required to develop these resources. Additionally, AI can be used to automate grading processes, freeing up educators’ time to focus on providing more personalized feedback and instruction.

Immersive Learning

Another way AI is impacting education is through the integration of virtual and augmented reality (VR/AR) technologies. These technologies can create immersive learning experiences that make complex concepts more accessible and engaging for students. For instance, students can explore historical sites or scientific phenomena in virtual reality, giving them a deeper understanding of these subjects. VR/AR can also be used to create simulations and scenarios that help students develop problem-solving and critical-thinking skills.

Automation

AI can be used to automate administrative tasks, freeing up educators’ time to focus on providing more personalized instruction and feedback to students. For instance, AI-powered chatbots can provide instant support to students, answering common questions about coursework and providing guidance on academic matters. 

AI-Powered Evaluations

AI-powered grading systems can automate the grading process, reducing the time and resources required to grade assignments and exams.

Predictive Analytics

AI can help businesses in the education sector to use predictive analytics to identify trends and patterns in student data, allowing educators to make informed decisions about their teaching methods. 

The AI Revolution in Education: Opportunities for Businesses

Education sector businesses can stay ahead of the competition and deliver greater value to their customers by embracing AI and harnessing its power to create a better future for education.

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As we move further into the 21st century, the education sector is undergoing rapid transformation. With advancements in technology and changing global circumstances, the future of education is more uncertain than ever before. 

However, one thing is certain — technology will play a key role in shaping the future of education. In this article, we will explore the new frontiers in education, from personalized learning to virtual and augmented reality, and how technology will impact them. 

We will also talk about how businesses in the education sector can stay on top of these trends and deliver the best possible products and services to their customers. Join us as we explore the exciting and rapidly changing landscape of education in the 21st century.

Tech-driven Education is Here to Stay

Technology will revolutionize traditional learning spaces, and enable remote learning from anywhere in the world. Data analytics and AI are poised to play a significant role in the education sector, allowing for personalized and adaptive learning experiences. With these technologies, educators can assess student progress and adjust curriculum in real-time, making learning more efficient and effective.

As students increasingly rely on technology, education businesses must stay on top of the latest trends to remain competitive. Adopting emerging technologies, such as virtual and augmented reality, will provide students with immersive and engaging learning experiences. Utilizing digital learning platforms and incorporating gamification elements into curriculum can also enhance student engagement and retention.

New Learning Methodologies for the Future

Gamification will be a major driving force in the future of education. By applying game mechanics to the learning process, students can become more engaged and motivated, which leads to better learning outcomes. 

With the advancement of technology, gamification has become more accessible and can be integrated into traditional learning methodologies. The use of gamification in education can also provide valuable data and analytics that can be used to personalize learning and track progress. For businesses in the education space, incorporating gamification can be a great way to differentiate their products and services and provide a more engaging learning experience for students.

Blended learning, personalized learning, and adaptive learning are three key trends that are transforming the future of education. Blended learning, which combines online learning with traditional classroom instruction, allows for a more flexible and personalized learning experience. 

Personalized learning, which tailors the learning experience to the needs and interests of each student, enables greater engagement and better outcomes. Adaptive learning, which uses technology to adjust the learning experience in real-time based on the student’s progress and needs, allows for a more efficient and effective learning process. 

As businesses in the education space, it is important to understand and embrace these trends to stay competitive and deliver better value to students.

Technology is Transforming Education: Are You Ready?

The future of education will be driven by technology and personalized learning. Blended learning and adaptive learning models will continue to revolutionize the industry, and gamification will play an increasingly important role in engaging students. Data analytics and AI will enable educators to personalize learning experiences and track student progress in real-time. Education businesses need to adapt to these changes and invest in technology-enabled learning products to stay ahead of the curve.

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Technology has brought about numerous changes in various sectors, and the education sector is no exception. The integration of technology has transformed the way education is imparted and received. 

In today’s digital age, technology has become a vital part of the education sector, and it has opened up new opportunities for learning and development. From online courses to digital textbooks and interactive classrooms, technology has transformed the way we learn. 

In this article, we will delve into how technology is changing the education sector and how businesses operating in this sector can harness the power of technology to provide better learning experiences.

Technology and Education: Embrace Personalized Learning

One of the most significant advantages that technology offers is the ability to enable personalized learning. Personalized learning involves the customization of the student’s conventional learning experience. This is done according to the individual student’s needs, learning pace, and interests.

Technology plays a vital role in adaptive learning, which is an essential aspect of personalized learning. With the help of adaptive learning, the system can automatically adjust the learning materials and pace to match the student’s unique needs, interests, and skill level. This results in a more engaging and effective learning experience for the student, leading to better retention and higher academic performance.

The use of technology in education has made it possible to collect and analyze vast amounts of data about students’ learning patterns and behaviors. This data can be used to create personalized learning paths for each student, based on their individual needs and progress. Adaptive learning technology also allows for real-time feedback and monitoring, enabling teachers to track student progress and identify areas that need improvement.

The personalized learning approach made possible by technology has significant benefits for businesses in the education sector. It enables them to create unique and tailored learning experiences that meet the individual needs of students, leading to higher student satisfaction, better academic performance, and improved retention rates. This, in turn, can lead to increased profitability and growth for educational businesses.

How Education Businesses Can Harness Technology

Incorporating technology into the education sector can improve products and services for customers by enhancing the learning experience. To start, businesses in the education sector can utilize technology to facilitate communication and collaboration among students and teachers. Technology such as video conferencing, messaging apps, and online forums can bring together students and teachers from different locations.

A startup in the education sector can start investing in technology-enabled learning products by first identifying the areas where technology can improve the learning experience. This can be done through market research, surveys, and feedback from students and teachers. Once the areas have been identified, the startup can begin exploring various technology options that can be incorporated into their products and services.

Startups should start small and focus on one area at a time. For example, they can begin by creating an online platform for students to access educational resources and materials. As the startup grows, they can explore more advanced technology such as adaptive learning software and virtual reality tools.

The Era of Tech-enabled Education

When businesses utilize technology in the education sector, they can improve the quality of education and attract more customers. Additionally, technology-enabled learning can offer more flexibility and convenience for students who may have different learning styles or schedules.

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The impact Six Sigma has made outside manufacturing – in industries and sectors such as construction, health, hospitality, service, management, human resources and more – has not gone unnoticed. This leads us to the question: what about the education sector?

There is so much potential, diversity and significance attributed to the education sector. However, it is one field that seems to have the most problems and inconsistency. Traditional methods of trying to generate consistent and quality output in all areas of the education sector have proven to be difficult (borderline impossible).

Six Sigma could be the methodology the education sector needs to succeed where traditional methods have failed, even though it has been around since 1986. It is a methodology that can work in this field, despite what many people believe. 

The Importance of Six Sigma in the education sector

From a glance, Six Sigma and education may look incompatible. Six Sigma needs outputs, stock, physical inputs and outputs, equipment and other targets to succeed. These are missing from the education field. The sector is famous for being largely influenced by human factors, which are unpredictable and hard to control.

Besides that, the stringent, data-driven and statistical approach of Six Sigma seems ill-suited for education’s softer side, such as individual learning outcomes and student satisfaction.

However, all hope is not lost since there are some parts of education that mesh well with the methodology. Education, like any other industry and sector, still has processes that are identifiable and repeatable. These are what place education in the realm of Six Sigma’s influence. These processes can be improved, which will, in turn, also improve the learning outcomes of students, as well as their satisfaction.

Greater efficiency is a trend that is sweeping through the educational world, making it more aligned with the goals of Six Sigma. There are several factors contributing to this trend, including:

• Academic excellence is becoming critical due to the intensifying competition on a global scale.
• Secondary and elementary schools are receiving increased pressure from the government to improve the performance of students.
• Tertiary institutions are expected to provide high-quality coursework by students and their guardians due to the rising tuition costs.

Increased efficiency can be achieved through the elimination of waste. And waste can be eliminated by shedding more light onto the root causes of waste. Six Sigma has tools, such as the Five Whys and Fishbone diagrams, that can help institutions identify root causes and remove anything that doesn’t add value to their processes (waste).

Six Sigma tools and techniques can also increase the efficiency of school districts in a number of areas. These include teaching techniques, safety, absenteeism, textbook purchasing, supply cost reduction, energy costs reduction and many more.

Conclusion

Many people will say that Six Sigma and education don’t work well together, but this is just a myth. There is so much pressure being placed on the education sector to improve its processes. The pressure comes from students, guardians and government, as well as global social-economical factors. Moving forward, the educational sector will rely more on Six Sigma.

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6Sigma.com was the first Six Sigma education providers to offer the first two weeks of the Green Belt and Black Belt together. We are one of the few organizations to provide a Master Black Belt program. One can start with our White, Yellow, Green, or four week Black Belt and eventually be Master Black Belt certified. Our instructors are Master Black Belts with real world experience, sharing their knowledge and top skills that students can apply and use in their organizations.

Did you know our Lean training classes are available as a Lean Introduction or as a Lean Agent program? The Lean Agent provides the ability to be Lean certified. In addition, students have the option to add our Lean Agent program to any of our Six Sigma options to achieve a Lean Six Sigma training or certification option. Our Lean programs are conducted by true Lean experts with proven knowledge. We have been running our Lean programs since 2005. Like our Six Sigma training, our Lean training is geared toward real world scenarios and learning situations.

From Design for Six Sigma programs conducted online to Minitab training at introductory and advanced levels, we offer specialized programs at all levels. These Six Sigma education programs are also customizable to fit the needs of your company:

• DFSS
• Champion
• Minitab
• Green Process Management

For more information on our courses and services, please visit 6sigma.com. 

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Six Sigma has many great tools that can help with that. In fact, the tools are so easy that they can be used in such a way that it seems that like the class is playing a game. First, let’s fill in the DMAIC template in a very simplified matter.

Define and Measure the Issue: Students are disinterested in learning, they aren’t retaining what is taught to them. The goal is to boost interest in the classroom and have students get excited and motivated about learning. The measurement is shown on their test scores and overall classroom performance, which is very low.

Analyze and Improve: Look at the previously used teaching processes that the school considers the standard. What are the test scores at the end? Since we will assume they aren’t good, let’s see how using the VOC tool we can find out what the students deem as an interesting teaching style that would help them remember what is being taught.

Once the teacher gauges on how to motivate the class, try out the new and improved teaching process and see the results. Keep a line of communication open with the students and this alone will begin to motivate the class.

Control: Once the new teaching process is established, keep monitoring it and adjust as needed. Since teaching is fluid, it must keep its spontaneity. So the monitoring is to keep it spontaneous and interesting.

For more information on our Lean Six Sigma courses and services, please visit 6sigma.com.

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This opens up the topic of what would happen if Six Sigma were allowed to fix the educational system. We’ll use the example of charter schools.

Charter schools usually receive much less government funding, so they don’t have to adhere to government regulations set by lawmakers whose main interest is that their laws are obeyed. The standards at the charter schools must meet the outlined standards put forth by their charter to secure funding on a state level. This is usually based on student needs with parents being heavily involved.

So how could the DMAIC template help repair the educational system?

Define: Both parents and teachers work as a team to provide a clearly outlined day-to-day process to meet students’ needs.

Measure: Baseline measurement is taken to see what exactly is needed. The data are test scores, reading comprehension, math skills and a general understanding of learning.

Analyze: The Analyze phase helps identify the issues with the use of Lean Six Sigma tools.

Improve: Once the issues have been explored with the tools and it’s agreed on, try to see there has been an improvement.

Control: Monitor the new improved teaching curriculum.

The charter schools are based on the needs of the students with accountability needing to be met. Overall, on an average students perform 17% better in charter schools. This includes better grades and more motivation, with the focus being on the student needs. Parents and teachers working together for the greater good. This is very Six Sigma!

For more information on our Six Sigma courses and services, please visit 6sigma.com.

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We understand that Six Sigma implementation within a company requires that everyone’s goal be:

1. Increase customer satisfaction
2. Increase efficiency of the processes
3. Lower costs
4. Increase profits

Now remember, the Six Sigma concept of quality has to apply to every process within the company, so everyone has the same high standard.

In the Six Sigma culture, the VOC (Voice of the Customer) is extremely important, as that tells us what exactly is our customer’s needs and requirements. So in our schools, the parents could not only be considered the customers, but could also be considered the shareholders, as they are either paying the fees if it is a private school, or the taxes if it is a public school. The teachers are the employees, or the team who produces the service, which in this case would be educating the students.

Using DMAIC 

Define: In this phase, write down the purpose of the project or assignment, the complete definition, using a process map, what area it will be applied, and the exact goal (desired improvement, benefits). Be as specific as possible. In this definition, you could define the problems such as noise or distractions in the classroom, high absentee rates, etc.

Measure: Conduct data on current condition of the project in which you are trying to improve. This data should be on the emphasis of this project.

Analyze: Here, the analysis is conducted for identifying where in the process is the quality being affected, or where the issue or problem is situated.

Improve: Here you find a permanent solution to the problem.

Control: Maintain the new improved process with the solution by creating protocol and management procedures to be kept and maintained.

One can implement Six Sigma at several levels — both at the professional level within the school system, and at the learning level to teach children how to achieve their goals and maintain high standards.

For more information on our Six Sigma training courses or services, please visit 6sigma.com.

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Well believe it or not, it can be obtained, just so long as you are aware of what is needed. The magic is “people training skills.” You see, teaching is much more than producing information overload. The information has to be given in a casual, simplistic manner and in a particular order so it paints a picture. The best way to start is by using Six Sigma methodologies of DMAIC.

Define-Measure-Analyze-Improve-Control

Breaking up what is required to achieve people teaching skills is easy using the DMAIC template. It will be different for everyone because your audience has different needs and requirements.

In order to obtain people training skills, you need to know your audience and be able to not only know your subject matter very well, but also cater to their sense of adventure. That is what inspires people to learn. The DMAIC template will keep you on track as to what is needed to engage your classroom and in what order of priority.

Using the DMAIC Methodology to Improve Teaching Techniques

Define: The goal is to inspire learning the subject matter so that the class will be more engaged in the aspect of learning.

Measure: The current state as a baseline and use it as a starting point for improvement. Exactly where is the class right now, look at their grades, class participation, etc.

Analyze: The root cause, identify with data-driven tools and validate as to why said issue is happening. Using tools like 5 whys, Fishbone diagram, and the Pareto chart to find out the root cause of lack of interest in the class.

Improve: Here you need to identify some creative solutions to get rid of the major root causes, so the problem will be fixed and prevent future similar issues. This is a cause for brainstorming creative solutions.

Control: Here you want to maintain the improvements and sustain the success of those new improvements.
Interested in learning how DMAIC can help you with your organization? For more information on our Six Sigma training courses or services, please visit 6sigma.com.

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Moreover, forecasting can also affect your business’s growth and market potential, which is why accuracy is important. There’s no use expanding into a specific market if there’s no profit there! Think of it this way: if you have fewer competitors, you can price higher, but only when demand is also high.

When entering a new market, forecasting can provide essential insights to help you make the best decisions. Much of this comes down to estimation, but all predictions come from raw facts. You can’t refute facts. So listen to them.  You’ll be an astounding success for it. Learn how you can accurately forecast your company’s demand with Six Sigma.

Useful Forecasting Techniques

There are multiple different methods you can utilize when forecasting demand. In any business, it is typically the management and business owners that perform this role. Using historical data allows your higher-ups to identify demand for specific products and services. If demand points to something already in existence, simply take that product and deliver it to the customer. You can also use forecasting to recognize potential demand for new, different products. All you need to do then is use your findings to produce what customers want.

Similarly, test markets can prove highly beneficial when it comes to forecasting demand. Test markets are simply a type of micro-market, generally found in cities, that reflect the demands of larger markets. Look at your test market. Is the demand high? If so, this tends to suggest a similar demand in larger markets where your product will almost certainly perform well. The only way to know for sure is to try. And with strong forecasting to back up your decisions, you’ve nothing to worry about.

Why Forecasting Is Essential

For those new to forecasting demand, we can understand you may be skeptical. All we can say is, don’t be. The key to using Six Sigma to great effect is to open your mind to new ideas. Not every business responds well to Six Sigma ideas at first but is their resistance that causes such friction in the first place.  Demand forecasting and estimation are key tools in Six Sigma businesses, both of which are integral to effective inventory management.

Remember, businesses like yours purchase inventory based on information gleaned from demand forecasts. Imagine you have a chain of grocery stores that increase their stock of items like ice cream in summer because past data tells them demand increases then. By neglecting to utilize accurate demand forecasting, you run the risk of failing to satisfy, if not exceeding, your inventory needs. More is not always better, and too much inventory can lead to significant losses. You will lose some items, particularly perishables, as their expiration dates pass by.

Moreover, too little inventory will have customers in uproar, leading to missed revenue opportunities. They may even turn away from you completely, losing value in the customers’ eyes. Once that happens, you’ll find it difficult to recover.

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Ask yourself, do you want to deliver faster Six Sigma projects that don’t overstep your budgeting parameters? Then it’s essential for you to outline a detailed plan in your project charter. Your plan will act as your guide through the rough waters of process improvement.

Key performance indicators are highly useful tools here, enabling you to identify precisely which actions benefit you as a company. As such, there are numerous KPIs to help you on your Six Sigma journey, one of which we look at today: Project Cost Variance (PCV). Join us and learn how you can use PCV to deliver Six Sigma projects on time and on budget.

Stay Focused with Project Cost Variance

It’s important to know that Six Sigma relies on the measurement and analysis of process issues. Controlling problems allows you to create solutions that prevent them from recurring, benefitting the business in the long- and short-term. Without a strong plan to follow, you’re likely to lose sight of your goals and business needs. Losing track of your priorities will only send you veering off budget towards slow delivery times. Moreover, this doesn’t just impact you, but also your customers, who depend on you for quality products and services. If customers don’t see any value in your services, or if they see you as unreliable, they’ll take their business elsewhere. For you, this is detrimental, but Six Sigma can help. First, however, we must define cost variance.

What is Does Cost Variance Mean?

A cost variance is the amount by which your project exceeds or falls under your maximum budget. Cost variance is one of two key areas that you should monitor throughout your project, the other being schedule variance, i.e., how early or late you are to meet project deadlines. You can use the following equations to calculate both cost and schedule variance:

• Cost Variance = BCWP (budgeted cost of work performed) – ACWP (actual cost of work performed)
• Schedule Variance = BCWP – BCWS (budgeted cost of work scheduled)

What is Project Cost Variance?

PCV is the process of evaluating your project’s financial performance. You should compare the budget you agreed before starting the project with the actual amount you spend. You can calculate PCV by finding the difference between BCWP and ACWP. Your ideal project cost variance should be when your BCWP equals the same as your ACWP. Your project cost variance provides otherwise unavailable insight into your finances throughout the scope of your project. Using it to your advantage allows you to monitor when and where you breach your budget. When you use PCV together with DMAIC, you can actively control your finances, targeting areas for improvement, like overspending. The result is a more focused, efficient, and successful project.

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Staying Aware and Accepting the Inevitable

It’s an unavoidable fact. If you’ve built a successful Six Sigma organization, sooner or later, someone will try to copy your success. While this is somewhat inevitable, you don’t have to sit back and accept it. Take an active hand in deterring fraudulent practitioners from stealing your business. Just look at companies like Coca Cola and Apple. There are countless rip-offs, knock-offs, fakes, and counterfeits floating around. The same is true of Six Sigma.

Countless Counterfeits, Frequent Fraud

Some companies try to pass their services off as the real deal via a flimsy copycat name, e.g., China’s Sunbucks, Wu Mart, and HiPhone. But Six Sigma fraudsters have the audacity to use the Six Sigma name while offering up sub-standard training services. Even more disturbing, some fake practitioners use Six Sigma as a ploy to clean out your wallets, promising the world and giving you nothing. They may recognize your success and try to piggyback off it with a similar-sounding name and list of services.

Moreover, it’s not uncommon for criminals to send phishing emails claiming to represent your organization. We’ve even heard of fraudulent websites, whose only purpose is to draw in customers to exploit, that are virtually indistinguishable from their legitimate counterparts. As such, accepting and building an awareness of these risks is the first step to deterring fraud in the Six Sigma industry.

Innovation is the Key to Success

Our advice? Keep innovating in every way possible, as quickly as you can. Use Six Sigma techniques to improve your training services. Employ Lean principles and continuous improvement culture for an added triple-effect solution. Outpacing your fake competitors through sheer innovation will put you at the top of the leader board, making it clear to customers why you deserve their custom. Once they realize their bait isn’t catching, fraudulent practitioners will throw it somewhere else.

Maintain Strong Company-Customer Relationships

Six Sigma stresses strong reliance on data which practitioners use to make improvements. Customer satisfaction is a key driving factor behind business success and one that Six Sigma aims to improve by proxy. It’s difficult to improve customer satisfaction directly. There’s more to it than simple hocus-pocus. Six Sigma streamlines processes for added efficiency while improving quality through systematic elimination of defect. All this adds up to greater quality products delivered quickly into customers’ hands, driving up customer satisfaction rates. The key to deterring fraud is to demonstrate to customers why your business is the one they need.

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What is Capacity Analytics?

Remember, your capacity utilization is inextricably linked to efficiency and productivity. These two keystones enable your business to move along at a rapid pace, making prompt, proactive decisions on the go. As such, both have a large impact on profit. You can use capacity utilization analytics to measure your capacity, providing insight into how you’re currently doing. This is extremely helpful when trying to find solutions to low revenue, as you never know how much more you could be doing.

While there are similarities between customer utilization analytics and employee capacity analytics, they focus on different things. The key difference is that the former focuses on machinery and equipment as opposed to employees. Modern production machinery feature sensors which collect information on their usage. You can then analyze this data to gain useful insights into your efficiency. Moreover, you can then apply Six Sigma techniques to devise improvement solutions.

Your Guide to Capacity Analysis

First off, decide what area you wish to assess, be it admin, production, or another sector of your business. You should lay out a plan for analyzing the data before commencing the analysis. Consider your current capacity levels. Take a holistic approach, and you will gain a holistic understanding of the issues affecting performance and inhibiting change. You can then act on this information to change your operations for the better. Moreover, the capacity types you find may vary from business to business. Don’t forget to zero-in on hard and soft capacities, as well as factors like power distribution and leadership.

You should also lay out which tools and approach you wish to use. You could take an incremental approach which begins by identifying your current capacity, allowing you to build on this information, to create viable solutions. On the other hand, a gap analysis may benefit you more. This technique begins by defining the optimal conditions for your business, i.e., how they should be, so you can identify what’s missing. All you have to do then is fill in the gap.

Remember, each entity within your business progresses at a different rate. Paying attention to past analyses will help you track the entity’s course from then to now, allowing you to make decisions that will affect your future capacity. Moreover, don’t fall prey to generalization, as your conclusions will suffer from inaccuracies. Pragmatism is important here as too much information can be redundant. You’ll never need to perform analysis down to the smallest detail, so don’t waste valuable time. Instead, develop strategies to expand your capacity using Six Sigma process improvement. Use business analytics well, and you can transform your organization for the better.

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Calculate Your Customer Profitability Score

To calculate your customer profitability score, simply subtract the cost of supporting a customer from the revenues they generate for you. CPS is a highly useful decision-making tool, one that is pivotal when customer-company value exchanges are in flux. The company-customer relationship is often volatile, fluctuating in response to new information. Customers don’t always value the same things, with changing needs affecting profitability. Monitoring your value stream with Six Sigma provides insight into how you can manage changes to CPS. Moreover, it can also shed light on the value of new business versus the cost of lost business. Using Six Sigma techniques like root cause analysis, affinity diagrams, DMAIC, and hypothesis testing, you can do the following:

• Select customers to target that would benefit the company.
• Separate customers to retain from customers to drop.
• Decide which customers to cross-sell, plus what products to sell to them.
• Set prices for products and services.
• Set sales compensation rates and reward program entitlements.
• Recognize customer behaviors that generate or destroy value.

Multiple types of value determine customer profitability. If you are to make the most of CPS, we recommend getting to know each one.

Historical Value

Historical value derives from long-term company-customer relationships. It is most useful when ranking your customers regarding value, plus when selecting targeted marketing groups. Similarly, historical value also impacts on your assessment of pricing and budgeting.

Current Value

Current value comes from short periods of time, usually the current or previous month, as this coincides with reporting cycles. It tends to be highly volatile, as cyclical relationship factors don’t always register within such specific time frames. The benefit of current value is that it underscores the effects of changes in the customer relationship compared to previous values.

Present Value

Present value looks to the future, specifically at revenue and cost streams of current customer business. It projects future revenues and costs, helping to model the impact of price and service decisions before you implement them. Using it effectively requires patience, but the payoff is worth the effort.

Lifetime Value

Lifetime value also focuses on the future, while acknowledging projected revenue and cost streams from existing business and prospective customers. Implementing lifetime value requires insight into your customers’ repurchase behavior. Similarly, it also entails the likelihood of the customer increasing or reducing their future business with you. Lifetime value is the optimal customer value measurement and is appropriate for just about any decision-making situation. If you can use it effectively, you can maximize profit and increase customer exposure.

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