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Thursday, August 04, 2005

Six Sigma

I've been in the company for more than a year... celebrating my second year this coming September. I can say in that span of time there is a need for change in a manner that can enhance the business process of the company. I'm not saying that the current process doesn't work but there is still room for a better one. When I came here there is already one discipline being implemented called 5S. It's a Japanese way of discipline in your working environment. For me it's good because it makes you organized and disciplined in your work. I'm sure that a Six Sigma methodology can really makes things happen especially in the present economic situation.

So what is Six Sigma all about? It is a tool for advancement of the business processes, customer service and over-all way of life. Enabling the company to improve it's performance in all aspects of its service-oriented institution where their beloved clients and partners gets all the benefits of a fast, efficient and friendly service.

It is a methodology that provides businesses with the tools to improve the capability of their business processes. This increase in performance and decrease in process variation leads to defect reduction and vast improvement in profits, employee morale and quality of product.

Six Sigma at many organizations simply means a measure of quality that strives for near perfection. Six Sigma is a disciplined, data-driven approach and methodology for eliminating defects (driving towards six standard deviations between the mean and the nearest specification limit) in any process -- from manufacturing to transactional and from product to service.

The statistical representation of Six Sigma describes quantitatively how a process is performing. To achieve Six Sigma, a process must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity of chances for a defect. Process sigma can easily be calculated using a Six Sigma calculator.

The fundamental objective of the Six Sigma methodology is the implementation of a measurement-based strategy that focuses on process improvement and variation reduction through the application of Six Sigma improvement projects. This is accomplished through the use of two Six Sigma sub-methodologies: DMAIC and DMADV. The Six Sigma DMAIC process (define, measure, analyze, improve, control) is an improvement system for existing processes falling below specification and looking for incremental improvement. The Six Sigma DMADV process (define, measure, analyze, design, verify) is an improvement system used to develop new processes or products at Six Sigma quality levels. It can also be employed if a current process requires more than just incremental improvement. Both Six Sigma processes are executed by Six Sigma Green Belts and Six Sigma Black Belts, and are overseen by Six Sigma Master Black Belts.

Thursday, July 28, 2005

Planning For Profits

Having my own business is one of my satisfaction in life. Even though I belong to a management level in the field of IT which I'm really interested into, I don't see myself being an employee in a long time. Present issues and situations on economics and political crisis, business is really unpredictable. I've came across in one of the articles I read about having your own business and these tips could benefit in planning your own business. Just keep in mind that no matter how small or large your business, you've got to aggressively plan the work and then work the plan!

How To Really Jump Ahead

On a discussion panel, I was recently asked, "Was there a particular turning point when your small business really jumped ahead?" Absolutely. I always made up plans and budgets, but it was about five years into my business before I really began to proactively use them.

Before this point in time, my sales projections were miles off and, more importantly, I was always thinking up excuses for making unplanned expenditures, often for advertising that seldom matched my expectations. I'd finish the year way over budget, with profit margins a fraction of what my plan called for.

I learned that a lot of expenditures seem like a great decision if you look at them in isolation-but when you look at them in the context of the whole budget, they often look a lot less enticing.

Sharply Focus Your Plan

Too many people equate annual planning with budgeting. Worse, when they budget, they simply extrapolate last year's numbers into next year's plan, perhaps increasing by 5 percent here and 6 percent there.

Big mistake! The annual planning process is your best chance to really manage the business-and to get key people to "buy into" the total plan by actively participating.

Even if you're running a one-person business you want to get a few words into your annual plans, not just numbers. You don't need a full-fledged 100-page business plan-in fact, a big, detailed plan takes focus away from what matters. What matters is the few big things that the business is going to strive to do better or different next year. The annual planning process should be focused around these few, important changes.

Don't Jump Into Budget Numbers

Before you start doing any nitty-gritty budgeting for your annual plan, here are the crucial first steps:

1. Review the company's business strategy. Do changing market conditions or heightened competition mean that it's ready for an overhaul?

2. Establish just a few major goals for the next year. These are usually quantitative goals such as to increase sales by 18 percent or to increase profit margins by 15 percent-but they may be qualitative goals such as to improve the quality of a product or customer service. It is very important to have very few major goals-otherwise, with too many goals, the company will lose focus and be less likely to hit any of them.

3. If your company is big enough to have departments, have one or several specific goals for each department. To take this one step further, you may want to have specific goals for individual people within each department.

Sales Projections Need Extra Attention

Once you've reviewed the company's strategy and set up company-wide, as well as department, strategies for the next year, then it's time to start cranking out budget numbers.

I always begin with sales, because sales numbers will drive many of the other numbers. Unfortunately, sales numbers, particularly of new products, are difficult to project. So I try to have at least three people, typically a project manager, the sales manager, and myself, work up new-product sales projections together. If you're really unsure of sales projections, consider multiple scenarios based on "weak," "likely," and "good" sales projections.

After we've got the sales numbers, each department works up its budget numbers. Once they're tentatively approved, the controller puts them all together into one big happy plan! But more often than not, I'm not completely satisfied with the overall profit margin, so I'll work with the different department heads to cut costs and drive up the projected earnings.

Benchmark Your Costs

One of the best ways to establish cost goals for annual planning is to benchmark your costs with other firms in your industry. Don't get too wrapped up in the details; focus on the total picture for major categories. For example, if your marketing costs are 23 percent of sales and the industry average is 16 percent, it's time for some cost-cutting. Benchmarking is a great way to get department managers to understand why they need to control costs.

Often industry associations provide standard industry costs, and occasionally they might be mentioned in articles in trade magazines.

You may want to consider hiring a consultant to put together a study of a half-dozen or more firms very similar to yours. Being a third party, the consultant will keep each firm's individual numbers confidential by providing only average and median cost information to each company as an incentive for participating. What's worked best for me is when another publisher foots the bill for the consultant, but shares the results with us in exchange for our agreeing toshare our numbers.

Friday, June 10, 2005

Tlury Amzanig!

The phaomnneil pweor of the hmuan mnid. Aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it deosn't mttaer in waht oredr the ltteers in a wrod are, the olny iprmoetnt tihng is taht the frist and lsat ltteer be at the rghit pclae. The rset can be a tatol mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe. Amzanig huh?