Six Sigma[1]

TOPIC

SIX SIGMA Quality management.

AGENDA What is Six Sigma? Six Sigma Methodology. Why adopt Six Sigma? Different Six Sigma Belts. Why Six Sigma and not TQM?

WHAT IS SIX SIGMA ? Six Sigma is a rigorous and a systematic

methodology that utilizes information (management by facts) and statistical analysis to measure and improve a company’s operational performance ,practices and systems by identifying and preventing ‘DEFECTS’ in manufacturing and service processes .

Six Sigma scale of Defects.Sigma Defects

(per million)

Product Optima

(%)

3

4

5

6

66,807

621

233

3.4

93.32

99.379

99.9767

99.999966

Defects values in the above tables suggests that as sigma level goes up defect rate reduces which means product quality improves.

Six Sigma Methodology Six Sigma has two key methodologies.

1) DMAIC – Define , Measure ,Analyze , Improve ,Control.

2)DMADV – Define , Measure , Analyze, Design, Verify.

Why companies Implement Six Sigma? Quality Improvement.

Improved Process Flow.

Employee Skills.

Improve Market Shares.

Earnings and Profitability.

Customer Satisfaction.

Different Six Sigma Belts

Can Six Sigma Fail ? Leaders Involvement.

Clearly Defined Strategy.

No Accountability.

Resource Allocation.

Does Organization adopt or adapt.

YES

Example: Dabbawalas.

“IF THE LOCAL TRAINS ARE THE LIFELINE OF THE CITY,DABBAWALAS ARE THE FOOD LINE.”

Why Six Sigma and not TQM?

Total Quality

Management

Six Sigma

Customer Driven

Focuses on processes

Prevents defects

Improves overall efficiency

Driven internally

Focuses on outcomes

Fixes defects

Improves bottom line

Conclusion

Six Sigma means data driven decision making

TOPIC

ALTMAN Z-ScoreDeveloped by Edward Altman.

What is Altman Z –Score? A Guide to failure prediction.

Z-Score for predicting Bankruptcy /Insolvency.

Measurement of financial health of a company.

Who will use it ? Investor’s ,broker’s.

Bankers.

Anyone related with company.

Data Required. Earnings before taxes. Total assets. Net sales. Market value of equity. Total liabilities. Working capital. Retained earnings.

Five Ratios. Return On Total Assets.

(EBIT/total assets) * 3.3 Sales To Total Assets.

(Net sales /assets) * 0.999 Equity To Debt.

(Mkt value of equity/Book value of liabilities) * 0.6 Working Capital To Total Assets.

(working capital/ total assets) * 1.2 Retained Earnings To Total Assets.

(Retained earning /total assets) * 1.4

Ratio Formula Weight Factor

Weighted Ratio.

Return On Total Asset

EBIT/Assets 3.3 -4 to 8

Sales To Total Assets

Sales/Assets 0.999 = 1 -4 to 8

Equity To Debt Ratio

M.V Equity /Liabilities

0.6 -4 to 8

Working Capital To Total Assets.

Working capital /Assets

1.2 -4 to 8

R. Earnings To Assets

R Earnings / Assets

1.4 -4 to 8

Example – XYZ public co. LTD. EBIT : 1600 Total Assets : 23350 Net Sales : 4000 Market value of Equity : 3900 Total liabilities : 15000 Current Assets : 19000 Current liabilities: 9600 Retained Earnings: 2350

FORMULA Calculation Weight

Factor

EBIT/Assets 1600/23350 0.068 *3.3 0.2261

Sales /Assets 4000/23350 0.171* 0.99 0.1711

M.V of Equity/Liabilities

3900/15000 0.26*0.6 0.156

W. capital/Assets 9400/23350 0.402*1.2 0.483

Retained Earnings/Assets

2350/23350 0.1006*1.4 0.140

Z-score = 0.2261+0.1711+0.156+0.429+0.140 = 1.1762

Interpretation of Z-Score. Above 3.0 = The company is safe based on their financial figure.

Between 2.7 and 2.99 = On alert. Insolvency is possible ,but not likely in near future.

Between 1.8 and 2.7 = Good chances of the company going bankrupt within 2 years.

Below 1.80 = Probability of Financial Bankruptcy is very high.

XYZ Co Ltd - Z-Score = 1.1762.

Z Score of Indian companies Tata Motors Limited -- 3.48

Dr.Reddy’s -- 8.25

Honeywell International -- 2.25

Points To Remember A score greater than 3.0, or an increasing Altman's Z-Score is

usually a positive sign. 

The higher the score, the better the company's chances of avoiding bankruptcy, but this score should be checked against other companies and industry standards.

Large economic events, like an entire industry slowdown, would render this scoring method less accurate. 

The individual components of this formula should be monitored, as they are the key to understanding how the score was calculated.

TOPIC

VIRTUOUS & VICIOUS

BUSINESS CYCLE.

What Does it mean? VIRTUOUS : Excellent.

VICIOUS: Harmful.

Example of Virtuous Business Cycle.

Example Of Vicious Business Cycle

BIBLIOGRAPHY Total Quality Management Book

Motorola site

www.12manage.com

Managing Radical Change