0 Six Sigma Project Guidance

1 Roles and Responsibilities of the Finance Support Team Define Savings/Benefits Provide Financial Support – Project Selection and Review – Project Evaluation – Track Savings/Benefits Validate/Audit Financial Results Management Reporting

2 Finance Team Being Developed

3 Roles and Responsibilities Black Belt vs. Financial Analyst Black Belt – Data Collection – Original Analysis – Cost Analysis Financial Analyst – Provide Budget Information by Cost Center – Cost/Benefit Analysis – Review / Validation – Budget Adjustment

4 Project Process Map Project Consideration Close Project Finance Sign-Off Project Assignment Project Champion Enters High Level Estimate of Cost Savings Measure & Analyze Establish Budget and Savings. Enter Data into Tracking Model Finance Sign-Off by Project Team Financial Analyst. Sign-Off by Functional Deployment Champion - Finance Improve & Control Sign-Off by Project Team Financial Analyst Sign-Off by Director- Level Deployment Champion - Finance. Sign-Off by Functional Deployment Champion - Finance. Appropriate Budgets Adjusted.

5 Finance Sign-Off 1.Before an Opportunity becomes a Project – High-level “sanity check” – The Project Champion should have already entered numbers and attached the model spreadsheet – The spreadsheet should contain values, in thousands of dollars – Questions to ask: – Are hard, realized, net benefits recorded correctly? – Are there any other possible sources of savings? – Is there an opportunity to save $250,000 or more? 2.Before the Process Improvement Takes Place –The Black Belt should have already reviewed and updated the benefits spreadsheet –The spreadsheet should contain values, in thousands of dollars –Questions to ask: –How do these estimates compare with the previous estimates? –Do these savings look realistic for the proposed improvement? –Are there any errors in the data entry? –How do the savings estimates compare with current budget numbers?

6 Finance Sign-Off 3.After the “Cooling-Off” Period –Detailed audit of savings –Questions to ask: – Did the process improvement take place? – Does the process improvement result in the reported level of savings? 4.Verify Financial results –Time required to validate financial benefits 5.Budget Adjustment –Adjust budgets to realize financial benefits

7 Savings Definition “Hard” Savings – Measurable, controllable and contribute to earnings – Sources Reduction of operating expenses Lower carrying cost related to Capital Expenditure reduction Margin improvements directly attributable to Six Sigma projects EBIT contribution from Revenue enhancement projects “Soft” Savings – Difficult to measure or not tied directly to earnings – Examples Customer satisfaction Safety or regulatory compliance Cash impact of reduced Capital Expenditure

8 Savings Definition- Examples Hard Savings Reduction in Cost OF Goods Sold EBIT contribution from Increased Revenue Decrease in Office Supply Expense Decrease in Overtime Paid Decrease in Postage Expense Decrease in Travel Expense Decrease in Late Payment Fees Decrease in Rent/Lease Expense Decrease in Utilities Expense Decrease in Repair Costs Soft Savings Increase in Customer Service Increase in Customer Satisfaction Increase in customer/employee Safety Aid in Regulatory Compliance

9 Tracking Benefits System will be implemented to record & report project benefits: Record approved projects Track through DMAIC stages Forecast Benefits stream, track actual benefits Report results by Business, BB, Champion, Fiscal Periods, Benefits category, etc. Changes to a project’s Benefits Measurement method requires Steering Committee approval

10 Project Benefits Template Needs To Be Tailored To Client & Tracking System And Environment

11 Sample List of Deliverables