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Selecting & Implementing Countermeasures

Learn how to identify, evaluate, and implement countermeasures for process improvement. Utilize cost/benefit analysis, cash flow valuation, and action planning. Track results, standardize, and replicate successful strategies.

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Selecting & Implementing Countermeasures

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  1. Sigma Quality Management -6 -4 -2 0 2 4 6 Selecting & Implementing Countermeasures

  2. Analyze Root Causes/Process Variables Identify the possible countermeasures Evaluate and select the best countermeasures Plan to implement the countermeasures To: Execute the Countermeasures Selecting Countermeasures - Roadmap

  3. Generating Countermeasures • Attacking the Causes • Long Lasting Improvements • Temporary Fixes • Don’t Reinvent the Wheel • Phased Implementation • Error proofing vice Inspection

  4. Cost/Benefit Analysis • Quantifying Benefits • Quantifying Costs

  5. “Gozzinta’s & Goesoutta’s” Sources of Cash Benefits: • Cash received as a result of sales, • Cost reductions (when a more efficient process replaces a less efficient one, or from tax benefits), • Cash received when replaced equipment is sold, and • Cash received from salvage value of equipment, plant or facility at end-of-life. Sources of Cash Payments: • Initial cost of the investment (capital cost), • Capital improvements made during the life of the equipment/plant/facility, • Operating costs, such as wages, materials, energy, taxes and maintenance.

  6. Time Period (Years) 0 1 2 3 4 5 Income Statement Changes: Sales (A) 0 $7500 $8000 $8000 $7500 $7500 O perating Expenses (B) (416) (6972) (6972) (6972) (6972) (6972) Depreciation (C) 0 (560) (336) (202) (151) (151) Pretax Profit (D = A+ B + C) (416) (32) 692 826 377 377 Taxes (F = D x E) (E =tax rate = 0.34) 141 11 235 281 128 128 Profit after Taxes (G = D + F) (275) (21) 457 545 249 249 Non cash Charges: Depreciation ( - C) 0 560 336 202 151 151 Capital Investments: Property, facility, equipment (H) (1400) 0 0 0 0 0 Working Capital Changes (I) (940) 0 0 0 0 900 Residual Net Cash Flow (J = G + H + I) $(2615) $539 $793 $747 $400 $1300 Cash Flow

  7. Valuing Different Proposals Benefit Cost Ratio: Calculate the Ratio of Net Benefits to the Investment: Benefit Cost Ratio = ($539 + 793 + 747 + 400 + 1300)/$2615 = $3779/2615 = 1.45 Payback Period: Calculate the time required for the annual net benefits exceed the initial investment cost: Payback Period = Investment/Average Yearly Net Benefit = $2615/756 = 3.5 Years Annual Worth Present Worth Rate of Return

  8. Cost Types

  9. Countermeasure Matrix

  10. Selling the Countermeasures

  11. Barriers Aids Cost to implement Savings Fear of change Fixing old problems Lack of experience Learning something new Barriers & Aids Analysis

  12. Action Planning

  13. Implement the Action Plan Monitor Progress of Implementation Check Results – Plan and Performance To Standardize/ Replicate Countermeasures Executing Countermeasures - Roadmap

  14. Tracking Results # Defects Time Countermeasures Implemented Your Factor’s Effect: Results Change (Process Output): “External” Factor’s Change Effect:

  15. Before/After Pareto

  16. Standardization/Replication • Standardization Methods • Replication of Improvements – Leveraging Your Work

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