A System for Making Probability-Based Estimates of 6 Sigma Project Savings 2004-01-1754

Managers and Continuous Improvement Champions frequently use dollar savings resulting from continuous improvement projects as justification for making full-time allocation of Six Sigma personnel, project experimentation costs, and manufacturing interruptions caused by improvement efforts. Improvement projects which are aimed at avoiding failures carry great, but tacit, savings. When used to justify continuous improvement project costs, these savings are frequently challenged, labeled as “soft,” and ignored while performing Return on Investment (ROI) computations. This paper describes and demonstrates a system for making probabilistic estimates of problem avoidance savings. A calculation spreadsheet and the author's experiences using this procedure in a global product development organization are related.