copyright © 2001-2005 six sigma academy international, llc all rights reserved voith financial...

Copyright © 2001-2005Six Sigma Academy International, LLCAll Rights Reserved

Voith

Financial Workshop

May 11, 2006

http://www.voith.com/index.html


Voith Finance Workshop Pg 2

Workshop Goals

• An introduction to the Finance Role in a typical Lean Sigma deployment

• An understanding of the Roles and Responsibilities in our deployment

• Sharing of ideas and examples from other Six Sigma deployments

- Financial policies

- Templates

- Benefits calculations

- Benefits measurement

- Project identification, scoping and chartering

- Roles & responsibilities

- Reporting

- Etc.



Introductions

• Welcome

• Please tell us . . .

- Your Name

- Location Represented

- Expectations for this session



Agenda

• Morning:- Introductions & Opening Comments

- Finance Policies:• Finance Champion Workshop

• Considerations / applicability at Voith

• Financial Policy breakout session – applicability / considerations at Voith

- Project Chartering:• Introduction to advanced project chartering techniques / considerations

• Afternoon:- Project Chartering:

• Review Voith project examples

• Breakout session – how to improve examples

- Review Financial Analyst Training module

- Introduction to Benefits Calculator Template tool

- Questions & Answers

- Wrap-up



Finance Overview

Finance Guidebook

Finance Champion & SSA Finance Manager• Workshop – engage Businesses & Deployment team• Establish principals, standards & guidelines

Charter TemplateFinancial GuidelinesAssumptions, rates, standardsSoft BenefitsCost avoidanceCap. Ex. ProjectsLong-term benefitsWACC/Cash Flow projectsBenefits measurement period (start/stop)Budget adjustmentsBenefits validation – auditReporting

Financial Analyst Training

Finance Champion & SSA Finance Manager

• Workshop – FAs bring projects

Black Belt Projects


Finance Champion Workshop

(Finance Policies and Processes)


Note – This module begins with a one-on-one face-to-face workshop between the Client Finance Champion and the assigned SSA Finance Manager. It continues throughout the deployment planning period with a series of discussions. The final output is a collection of financial guidelines and processes. These outputs are captured in a customer-specific LSS Finance Handbook that is written by the Customer Finance Champion or designee with input from SSA Finance. This Handbook is written for the audience of Belts, Financial Analysts, and the Deployment Team.

The content of this module addresses those policies and processes which must be defined. The specific content of each section is an example of one way that it can be done. Each client will customize their policies and processes.



Finance Policies and ProcessesModule Content

• Finance Roles and Responsibilities

• SigmaLean Project Benefit Policies- What Counts?

- What Doesn’t Count?

- How to Calculate Certain Project Benefits

- Company Financial Standards

• SigmaLean Financial Processes- Project Closure

- Benefit Recording and Auditing Results

- SSA Payment

• Benefits Measurement and Monitoring- Data Base Requirements

- Project-related Decisions

• Deployment Reporting

• Project financial documentation- Charter

- Amendment

- Closure

• Financial Guidebook

• Financial Analyst Training



Roles and ResponsibilitiesFinance

• Finance serves as the financial advisor to SigmaLean project teams and supports

Black Belts, Green Belts, Champions, and Process Owners in their efforts to

identify, prioritize, select and drive projects that will provide maximum value for

COMPANY

• Finance must establish an ongoing communication process with Black Belts, Green

Belts, Champions, and Process Owners to ensure that any significant changes in

the status and or assumptions of SigmaLean projects is promptly reported to

management and reflected in the latest plans and forecasts.



Roles and ResponsibilitiesRole Of Finance Champion

• The Finance Champion is a member of the Client Deployment Team and is responsible for overall coordination of the program from a financial perspective

- Establish SigmaLean Financial Policies and Document in Financial Handbook

- Establish Financial Processes and Document in Financial Handbook

- Establish and manage a community of Financial Analysts to support the Deployment

- Develop and Deliver Financial Analyst Training

- Monitor Project Financials and Anticipated Close Dates

- Prepare Deployment Forecast for Closed, Active and Future Projects

- Report Consolidated Benefits for Closed Projects

- Audit Project Benefit templates as necessary

• The Finance Champion also works with the Belts and with the Financial Analysts at a project level (as needed) to

- Estimate Benefits Prior to Project Approval

- Understand and report any significant changes in benefits or anticipated end dates throughout the project cycle

- Approve project for closure after MBB and Process Owner



Roles and ResponsibilitiesRole Of Financial Analysts

• During charter development and as project progresses through DMAIC stages- Assist Belts in accessing and interpreting source financial data (G/L, Budgets, etc.)

- Assist Belts in summarizing project benefits and cost

- Approve charter and forward to the Finance Champion

- Review project benefit estimates and anticipated close date with the Finance Champion as necessary

• During the Control phase- Work with Belts to verify and validate project results

- Approve closing documentation and forward to the Finance Champion

- Review with the Finance Champion as necessary

• After project completion - Provide support to Process Owner or the Belt to monitor and validate ongoing benefits



DefineDefine MeasureMeasure

Black Belt/MasterBlack Belt

Finance

SteeringCommittee

• Review assumptions and high level estimates,

• Consider up-stream/down-stream effects

• Categorize as hard/soft benefits

• Review measurement methodologies

• Identify appropriate sources and uses of financial data to measure, estimate and validate as project progresses

AnalyzeAnalyze ImproveImprove ControlControl

• Review

• Approve or re-direct

• Draft Charter

• High Level Problem statement, process definition, potential financial benefits and cost

• Engaged by Black Belt as needed to update measurements, financials, completion dates

• Update Charter as necessary while progressing through project phases.

• Engage Finance, Project Owner as needed.

• Request Steering Committee Approval if Method of measuring benefits OR significant change to benefits forecast is required.

• Validate actual benefits with Black Belt/Master Black Belt

• Update forecastif necessary

• Sign-off Project

• Implements Control Plan

• Validates benefitswith Finance

• Presents to Steering Committee for Sign-Off

• Review

• Approve or re-direct

Charter Originator

DMAIC Process Map – Finance

• Project Selection

• Draft Charter

Process Owner

• Sustain Long Term Project Benefits

• Utilize Ops reviews

Finance Champion Approves as Steering Committee Member



Connecting Dollars to Defects …

Sigma Lean will help you find and eliminate defects.

Y

By eliminating defects the company’s bottom line will improve.

DefectsDefectsDollarsDollars



Dollars to Defects

DefectDefect DollarsDollars• 3rd Party Logistics processing times in

excess of 1.2 days• Increased sales (customers not canceling

orders because of delays)

• Reduced expedited shipping costs

• Non Value Added activity in manufacturing process

• Overtime cost

• Leased computer equipment not recovered at end of lease

• Lease buy-out cost of un-recovered PCs & LapTops

• Customer accidents (slips, trips & falls) • Cost of associated accident claims

• Sales Rep. Effectiveness (close rate) below 12%

• Increased sales



Quality engineering and administration

Inspection/test (materials, equipment, labor)

Expediting

Scrap

ReworkRejects Warranty claims

Maintenance and service

Cost to customer

Excess inventory

Additional labor hours

Longer Cycle Times

Quality auditsVendor control

Lost customer loyalty

Improvement program costs

Process control

Opportunity cost if salesgreater than capacity

Classical Cost Of Poor Quality CategoriesMost Losses Not Readily Seen

Retrofits

DowntimeService recalls

Redesign Brand reputation

Lost Sales

Poor product availability



SigmaLean Project Benefit PoliciesWhat Counts?

• It is the responsibility of the Finance Champion to establish and document the

policies to be followed when determining the net financial benefit of the individual

SigmaLean projects.

• Company’s generally place value on “Hard Benefits” (P&L impact) and Cost

Avoidance.

• “Soft Benefits” are often noted on the Project Charter but are generally not

quantified.

• Project implementation costs are netted against project savings to determine net

project benefits.

– The Belts salary, benefits, travel, etc. to complete the project are not deducted to

determine net project benefits, nor is any fee paid to SSA.




• Hard Benefits- Hard benefits flow to Operating Income (OI) and the impact can be traced to specific

Financial Statement line items.

- Hard benefits result from such things as a reduction in headcount, labor rate reductions, reductions in material usage or cost, or an identifiable increase in revenue.

• Examples of Hard Benefits- The elimination of a position in department XYZ previously dedicated to correcting errors

in a particular process once the defects have been eliminated or reduced.

- An improvement in customer retention rate within the XYZ area resulting from the implementation of a simpler process, which allows more competitive rates to be offered to this specific customer segment driving an identifiable increase in revenue.

- A reduction in the amount paid to a vendor supplying COMPANY with transportation services resulting from a decrease in the number of collection and delivery runs.




• Examples of Hard Benefits

- A reduction in the number of manual reconciliations performed in department XYZ, requiring fewer temporary employees.

- A productivity improvement in the process that allows for fewer overtime hours within the department.

- Process Improvements of 70% in the XYZ Department result in the need for 6.2 fewer FTE. There are no part time employees and no overtime. The project benefit is calculated based on the salary and benefit savings of the 6 redeployed or severed

copyright © 2001-2005 six sigma academy international, llc all rights reserved voith financial...

Documents