Six Sigma and Cost Containment

Even the healthcare sector is finding its going touch with an overall decline in revenue due to increasing competition and ever-increasing costs.

The Contribution Of Six Sigma To Cost Containment

Without specific development as a cost containment tool, Six Sigma has enabled savings in all industries where it has been implemented.

Six Sigma has helped with containing costs in a very unique manner. If you consider that the approach to improvement is one of listening to the voice of customer to define the appropriate measure of expected quality, then this acts as a cost containment measure.

This is because by creating products and services that meet the requirements of the customer, which are done from VOC data, the chances of wastage are minimal. When products are not produced according to customer specifications, they may reject them, which in turn mean costs have to be incurred on the creation of products which may be acceptable - in short, rework costs.

Similarly, the reduction in variations in the process is also a factor, as any material conversion which results in improved productivity and quality of product leads to reduction in cost of rework and rejection.

In the ongoing process improvement, even moving from 3 sigma level to 4 sigma level can make a major difference with reduction in COPQ which is a huge leap towards almost no rejection.

Consider an example of Six Sigma implementation in a hospital cardiology department.

There may be two advantages achieved here with speeding up of the processing leading to reduction in labor costs. A major benefit would be that the hospital will be able to accommodate more patients with the increase in productivity.

Six Sigma was never been developed as a quality system, which often is seen to result in increasing costs and expenditures for the new quality system.

A rational approach, and some practical efforts to save costs by Master Black Belts and Black Belts, can lead to a lot of cost savings. The Six Sigma methodology has a solid foundation for such a approach based on increased ROI and Total customer satisfaction.

Implementation teams works toward utilizing Six Sigma for better risk management with early identification of risk factors with tools like FMEA, which are useful in devising risk mitigation plans.

There is a systematic innovation to generate ideas for cost control. With better tools and data in hand the yield from project portfolios helps increase resources to resolve matters of risk.

The big challenge for medium and small businesses is one of containing costs with efficient utilization of capital.

As much as Six Sigma proves to be helpful to big companies to bring costs under control, it is equally beneficial to the smaller business with improved ROI.