Assignment of O.P.C Topic- “application of six sigma in finance ”

SUBMITTED TO:-

Mr. Bhupendra gehlot

ASSISTANT Prof. Of ME DEPARTMENT

SUBMITTED BY:- Hariom UID k-10655 BRANCH-

MECHANICAL

TABLE OF CONTENTS Introduction

Purpose of six sigma in finance

Types of six sigma finance

application

Benefit of six sigma in finance

most finance operation

Conclusions

introduction Today, all major finance operations are highly

regulated and dealing with substantial financial risks. Whether you are running a finance department , working in banking operations, or providing credit card statements , mortgage applications and insurance policies , Six Sigma is the indispensable toolbox that makes “real-world”savings possible. Never before has there been a stronger demand for client retention than in today’s hyper-competitive market. Six Sigma in Finance provides the answer!

purpose of six sigma The vast majority of Six Sigma applications have been in

manufacturing/engineering

For example, according to Dusharme* (2003), the top three application areas for Six Sigma have been: Manufacturing

Plant Operations

Engineering

Research as far back as the 70’s & 80’s has shown that rework and waste costs are higher in service than in manufacturing

Finance is literally “where the money is”

types of six sigma in finance Conceptual Differences

Lack of tangible output or “product”

Lack of a process view of work

Lack of an improvement mindset

Technical Differences

Lack of measurement systems for data*

Lack of standardized work processes

Lack of “engineers”

Application of six sigma in finance Accounts receivable

Accounts payable

Factoring inventories

Closing the books

Financial auditing

Manual account reconciliation

Acquisitions

Realizing revenue

Hedging foreign currencies

Cash flow

Credit scoring

Journal entry accuracy

Forecast accuracy

Financial reporting

Filing taxes

Managing pension funds

Payroll accuracy

Benefits of six sigma

Six Sigma like any other improvement initiative is not the final

answer to all quality problems that might arise in manufacturing and

in transaction. Other gains can be achieved when sophisticated

Merged Models are applied. TRIZ is a systematic creativity method

that is finding a growing audience in Six Sigma, complementing the

most finance operatation The majority of operations in the financial sector fail to

realise the full potential of Six Sigma tools. Despite declining product prices and growing competition, business-as-usual continues.

Classical barriers to change:

Reliance on trial and error

Rewarding fire-fighting behavior

Functional silos that inhibit collaboration

Can ‘Low Hanging Fruits’ convince top-management of Six

Sigma implementation?

conclusion Project focus – “Skip Tracing” in consumer

credit – finding people for whom we had invalid contact information

About half in increased cash, half in reduced write-offs

Senior management did not believe the estimated savings, asked for a 6 month trial

After 6 months, about $1.45MM in actual savings had been documented - $2.9MM annually