By combining Six Sigma practices with business analytics, you can gain greater insight into organizational processes, drive business planning, and increase revenue. But more often than not, it’s essential to have a strong reserve of funds at hand when you need them. Cash flow is a crucial data set for any organization. Without it, you cannot expand and invest when you choose. By applying cash flow analytics and Six Sigma, you can improve cash reserves while increasing efficiency. Keep reading to learn more about how you can use Six Sigma methodologies to monitor and improve your cash flow.
Applying Six Sigma to Increase Cash Flow
Thanks to Six Sigma, companies around the world now operate at optimum efficiency. Six Sigma is a goldmine of innovative and effective strategies for continuous improvement and global market share. Evolving technologies and new markets mean there are plentiful opportunities to create innovative and customer-focused products. But, as with all businesses, issues like waste and variation slip through the cracks. None-value adding processes and over-processing are two of the main culprits of inefficiency. Consequently, they also increase costs, sapping your cash reserves. It’s important to maintain a strong cash flow for everything from the day-to-day running of your business to corporate expansion. If you wish to maximize profits and save money, you must first improve quality. Six Sigma can help.
Take Care in Selecting Projects
Simply applying a bit of Root Cause Analysis or some DMAIC won’t see any drastic improvements. If any. Improving processes, quality, cash flow, and so on, takes time. If you don’t put the effort in, you won’t see the results. Improvement projects are a cornerstone of Six Sigma work. It’s important to consider them carefully. Firstly, make sure you can link any potential cost savings to Six Sigma implementation. Secondly, be sure to analyze any potential projects for their financial benefits before pursuing them. Thirdly, techniques like Pareto analysis can help shed light on greater opportunities for investment return and cost savings.
Six Sigma tools allow you to analyze your current processes to see where inefficiencies and defect are holding you back. Factors like defect affect the quality of the products you produce, leading to losses further down the line. Similarly, over-processing (a Lean problem) and others wastes create unnecessary costs, bleeding your cash reserves. Once you remove these negative factors, however, you will start to see great increases in efficiency, profit, and overall cash flow.
Defining Your Project Selection Measures
It’s important to define, confirm, and observe strict financial guidelines throughout Six Sigma improvement efforts. This will help lay down any expectations you may have, as well as verify whether your plans are appropriate for an improvement project. Setting out your priorities early on will help allocate resources, maintaining strong cash reserves, while only spending when and where necessary.
Moreover, you could use financial guidelines if a manufacturer discontinues a low-cost part. The fact that the part is no longer available poses a problem. How are you to deliver a quality product, and generate high revenue, if you can’t replace the missing parts? You could launch an improvement project here to locate a new provider for the part, without affecting your gross margins or lead time. Six Sigma is a useful tool that can help you maintain strong cash flow for all your activities. Don’t underestimate what it can do for you!
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