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PAT, Cash Flow and ROI
Vishwadeep Khatri posted a question in We ask and you answer! The best answer wins!
Q 513. PAT (Profit After Tax), Free Cash Flow and ROI (Return on Investment) are the 3 more common metrics to check the financial health of the organization. If Free Cash Flow is the top priority for the business, will this mean that the Lean Six Sigma projects will need to be different from a scenario where PAT is the top priority? Explain with examples. Note for website visitors - Two questions are asked every week on this platform. One on Tuesday and the other on Friday. All questions so far can be seen here - https://www.benchmarksixsigma.com/forum/lean-six-sigma-business-excellence-questions/ Please visit the forum home page at https://www.benchmarksixsigma.com/forum/ to respond to the latest question open till the next Tuesday/ Friday evening 5 PM as per Indian Standard Time. Questions launched on Tuesdays are open till Friday and questions launched on Friday are open till Tuesday. When you respond to this question, your answer will not be visible till it is reviewed. Only non-plagiarised (plagiarism below 5-10%) responses will be approved. If you have doubts about plagiarism, please check your answer with a plagiarism checker tool like https://smallseotools.com/plagiarism-checker/ before submitting. The best answer is always shown at the top among responses and the author finds honorable mention in our Business Excellence dictionary at https://www.benchmarksixsigma.com/forum/business-excellence-dictionary-glossary/ along with the related term -
There are several places from which ideas for Six Sigma projects can be obtained. VOC (Voice of the Customer) We can listen to the "pain" the customers are experiencing and then launch Six Sigma project to attack these pain areas. The "pain" areas can usually be classified as related to product/service features, quality, timeliness, cost, and service. By solving these problems our customers will be more satisfied with our products / services. It is a lot easier and cheaper to sell products / services to existing customers than to constantly seek out new customers. VOB (Voice of the Business) We can talk to senior managers in the company about what problems / issues keep them awake at night! These "pain" areas are usually related to growth, cost of products / services, cost of quality (rework / scrap / warranty), financial issues such as profitability, cost of capital, carrying cost of inventory, accounts receivables, payables, employee retention issues, new product introduction times, and a host of other issues! By focusing Six Sigma project on these issues, we will enable the company to effectively compete in the global marketplace. VOP (Voice of the Process) We can also get Six Sigma project ideas by mapping the current business processes and looking for areas which are clearly non value added from either the customer's or business's point of view. Sometimes, there is no point asking customers or business managers what is the problem, when it is clear what the issues are just by mapping the process. Hopefully, when we use the above sources, we get several ideas to pursue. We need some mechanism to rank and prioritize the projects so that only the best projects are selected for launch. In one of the subsequent posts, we will discuss a project selection matrix.
