TOPIC

SIX SIGMA
Quality management.
By
M. Ali Hassan
alimba@live.com
 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 Product Optima
(per million) (%)
3 66,807 93.32
4 621 99.379
5 233 99.9767
6 3.4 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 ? YES
 Leaders Involvement.

 Clearly Defined Strategy.

 No Accountability.

 Resource Allocation.

 Does Organization adopt or adapt.

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 Six Sigma
Management
Customer Driven Driven internally

Focuses on processes Focuses on outcomes

Prevents defects Fixes defects

Improves overall efficiency Improves bottom line

 Conclusion

Six Sigma means data driven decision making

 TOPIC

ALTMAN Z-Score
Developed by M. Ali Hassan.
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 Weighted
Factor Ratio.
Return On EBIT/Assets 3.3 -4 to 8
Total Asset
Sales To Total Sales/Assets 0.999 = 1 -4 to 8
Assets

Equity To M.V Equity 0.6 -4 to 8

Debt Ratio /Liabilities
Working Working capital 1.2 -4 to 8
Capital To /Assets
Total Assets.
R. Earnings R Earnings / 1.4 -4 to 8
To Assets Assets
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 3900/15000 0.26*0.6 0.156

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

Retained 2350/23350 0.1006*1.4 0.140

Earnings/Assets
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